EU, Canada change ISDS clause, get closer to ‘gold-plated trade deal’

EU Trade Commissioner Cecilia Malmström [European Commission]

The European Commission announced on Monday (29 February) that  it has agreed with the Canadian government to amend the controversial investment protection clause to pulverise the risk of defeat  on a ratification vote of the trade agreement in the European Parliament.

The two partners have aligned the EU-Canada Comprehensive Economic and Trade Agreement (CETA) with the EU’s TTIP proposal of November 2015 and contained in the recently concluded EU-Vietnam free trade agreement.

Malmström: TTIP could follow Vietnam model

The EU Trade Commissioner has prioritised more transparency and a greater focus on sustainability and development, citing the new Vietnam deal as a potential model for TTIP. EURACTIV Germany reports.

“CETA takes on board our new approach on investment and its dispute settlement,” said EU Trade Commissioner Cecilia Malmström.

The revised CETA text includes a new article which preserves governments’ right to regulate and ensures that investment disputes will be adjudicated in full accordance with the rule of law.

The new deal does not feature any longer ad-hoc arbitration, but a permanent, institutionalised dispute settlement tribunal where members will be appointed in advance and that would abide by a very strict code of conduct.

“By making the system work like an international court, these changes will ensure that citizens can trust it to deliver fair and objective judgements. We can confidently say that we’ve met the expectations of both the Member States and the European Parliament,” she added.

Last week, however, the German Association of Judges voiced its concerns  against TTIP’s proposed public investment courts.  The judges believe that “creating special courts for certain groups of litigants” is a mistake.

German judges oppose proposed TTIP courts

The German Association of Judges has come out against TTIP’s proposed public investment courts. As a result, it has put itself on a collision course with the European Commission. EURACTIV Germany reports.

The agreement between the EU and Canada marks the end to legal scrubbing and it will now be sent to the European Council and the European Parliament for their assent.

CETA is expected to remove custom duties and save European exporters  around €470 million a year for industrial goods and €42 million a year for agricultural goods. The EU and Canada have also agreed to accept each other’s conformity assessment certificates in areas such as electrical goods, electronic and radio equipment, toys, machinery or measuring equipment.

“This is really a gold-plated trade deal. It is going to bring tremendous benefit to Canadians and to Europeans, we are going to feel it all in a real increase in prosperity,” said International Trade Minister Chrystia Freeland said in Ottawa on Monday.

The original CETA agreement, initially concluded in August 2014, was already the most advanced system for investors’ protection and the settlement of disputes.

The EU quietly asked newly elected Justin Trudeau’s government last fall to revisit the deal and redraft the investment protection clause, taking into account the changes made in the framework of trade talks with the United States. They feared that without aligning the two deals anti-CETA campaigners would use it as a weapon to derail ratification.

For watchdog NGO Corporate Europe Observatory, the old and the new CETA are equally risky as they give foreign investors greater – substantive and procedural rights.

However, the European Parliament seems happy with the agreement. MEPs on both sides of the political spectrum have greeted the new deal.

Dutch Liberal MEP Marietje Schaake said that the agreement with Canada is a step in that direction.

“We do not want secret courts that allow companies to put pressure on European rules and regulations . The biggest problem is that EU member states do have 1,300 other treaties with the outdated ISDS in it. Those need to be reformed. Together with the Canadians and other international players, we need to work on an international court modelled on the World Trade Organisation as a solution,” she said.

Centre-left MEP David Martin, S&D spokesperson on trade, greeted the news as a ‘first step to renew and modernise investment protection in trade agreements between democratic states with a well-functioning legal system.”


Romanian MEP Sorin Moisa (S&D), who is shadow rapporteur for CETA in the International Trade Committee, greeted the EU trade Commission and Canadian minister for having removed the last thorn in the side of CETA by genuinely heeding civil society concerns and doing away with ISDS.

Commenting on the proposal, Greens/EFA vice-president and international investment spokesperson Ska Keller said: “The final text maintains the undemocratic investor-state arbitration tribunals for foreign investors, which are inaccessible to citizens and national companies."

"The Commission has proposed only procedural changes, for example, in the selection of judges. However, unilateral private actions against democratic decisions will still be possible, which jeopardises core democratic values. At the same time, unprecedented rights for foreign investors will be set in stone. The codification of the principle of investors’ “legitimate expectations” gives investors the right to take action against any change in legislation. This flies in the face of democratic principles," she added, stressing that the proposals set up a parallel legal system.

EPP MEP Artis Pabriks MEP noted that with today's announcement, the European Commission has fulfilled the mandate previously given by the European Parliament. "On top of that, it delivered the most modern and ambitious agreement on the Investment Chapter reached so far in EU trade negotiations. As Standing Rapporteur for CETA, I am ready to do everything necessary to start the ratification process from the European Parliament's side as soon as possible," he said.

Natacha Cingotti, trade campaigner for Friends of the Earth Europe, said that the new proposals for CETA "offer no significant improvement to the dangerous agreement and should fool no-one. The Investment Court System is nothing but private arbitration under another name, keeping VIP rights for foreign investors fully alive and allowing them to sideline the legal system in Europe."

“We urge governments to listen to the millions of people across Europe who are calling for a full rejection of TTIP and CETA. In its current form, CETA should not be signed.”

In August 2014, the European Union and Canada concluded negotiations on a modern and comprehensive trade agreement which should bolster economies on both sides of the Atlantic.

CETA can be considered one of the most advanced and modern trade agreements proposed for ratification in the EU – and Canada. When ratified, CETA is expected to increase bilateral trade in goods and services by 22.9%. It is estimated that the EU-Canada trade deal will lead to GDP gains for the EU of up to €11.6 billion per year.

Benefits of CETA include market access that will eliminate customs duties on nearly 99% of tariff lines; public procurement access also at the provincial level; strengthened intellectual property rights and the protection of more than 140 specific European high-quality agricultural products through geographical indications. And while most of the agricultural tariffs will be liberalised, special safeguards will be kept for the most sensitive sectors on both sides.

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