In February 2016 the European Commission and Canadian government published the final draft text of the EU – Canada trade agreement (CETA). This final draft includes an investment chapter with investor-to-state dispute settlement (ISDS). ISDS is one of the most controversial elements of proposed EU trade agreements as it gives foreign investors the right to challenge government decisions outside local courts. The ISDS section in CETA is based on the 12 November 2015 ISDS proposal for TTIP. According to Germany’s largest association of judges and public prosecutors (original in German) and the European association of judges the adjudicators would not be independent.
This is the third in a series of blogs on the EU-Canada trade agreement (CETA) and data protection. (Prior blogs: CETA and mass surveillance, CETA places itself above EU Charter of Fundamental Rights)
In this blog I will show CETA provides less data projection than the EU Charter of fundamental rights. Under CETA article 13.15 the EU has to allow cross border data transfers to Canada; the related data protection standard is not compatible with the Court of Justice of the EU (CJEU) Safe Harbour ruling. Chapter 13 Financial Services, article 13.15 Transfer and processing of information, page 103, reads:
“1. Each Party shall permit a financial institution or a cross-border financial service supplier of the other Party to transfer information in electronic or other form, into and out of its territory, for data processing if processing is required in the ordinary course of business of the financial institution or the cross-border financial service supplier.
This is the second in a series of blogs on CETA and privacy. (blog one: CETA and mass surveillance)
The draft EU-Canada trade agreement CETA contains a general exception that is supposed to be a safeguard for policy space. However, this safeguard places CETA above the Charter of Fundamental Rights of the EU. CETA final draft Chapter 28 Exceptions, article 28.3 (2), page 212, reads:
“For the purposes of Chapters Nine (Cross-Border Trade in Services), Ten (Temporary Entry and Stay of Natural Persons for Business Purposes), Twelve (Domestic Regulations), Thirteen (Financial Services), Fourteen (International Maritime Transport Services), Fifteen (Telecommunications), Sixteen (Electronic Commerce), and Sections B (Establishment of investments) and C (Non- discriminatory treatment) of Chapter Eight (Investment), subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary:
(a) to protect public security or public morals or to maintain public order; 31
(b) to protect human, animal or plant life or health; 32 or
(c) to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to:
(i) the prevention of deceptive and fraudulent practices or to deal with the
effects of a default on contracts;
(ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; or
(iii) safety.” (emphasis added)
Measures the EU would take to protect the public interest can go against CETA (“nothing in this Agreement”).
In February 2016 the European Commission and Canadian government published the final draft text of the EU – Canada trade agreement (CETA). Before that the Court of Justice of the EU in October 2015 invalidated the Safe Harbour framework that allowed the transfer of European citizens’ data to the United States. The Court confirmed that cross border data transfer frameworks need robust privacy safeguards. However, during the legal scrub the European Commission did not make the CETA text compatible with the Court’s Safe Harbour ruling. This incompatibility exposes our privacy to interference.
The European Commission has launched a consultation on the intellectual property rights enforcement directive (IPRED). The European Digital Rights initiative (EDRi) explains:
“Injunctions, internet blocking, blackmailing of individuals accused of unauthorised peer-to-peer filesharing — the so-called IPRED Directive has been very controversial. Now, the European Commission has launched a consultation on the Directive (…) The consultation is of great importance not only to those working on copyright or ‘intellectual property rights’ in general, but in fact crucial to anyone using the Internet.” Indeed! EDRi has prepared a very helpful answering tool.
The European Commission published the text of the draft EU-Canada trade agreement (CETA), which includes an investor-to state dispute settlement (ISDS) section. According to an Inside U.S. Trade’s World Trade Online article Canada succeeded in “changing the language from the EU’s TTIP proposal in a way that sources on both sides of the debate agreed would provide less protection for governments against challenges by investors.” The article reports that U.S. Chamber of Commerce’s Sean Heather argued that the CETA changes to the right to regulate show that the Canadian government rejected the EU’s previous approach. However, an alternative explanation is possible. A few weeks earlier the commission published the text of the EU-Vietnam agreement.
Companies could use investor-to-state dispute settlement (ISDS) in trade agreements to challenge refusals to grant software patents, FFII’s Benjamin Henrion argued during the 24 February 2016 TTIP stakeholder’s presentations. Successful challenges could undermine the European Patent Convention’s exclusion of software, the recent US Supreme Court’s limits on patentability, and Congressional patent reform. Henrion noted that the SME where he worked had to fire ten software developers after a major customer was attacked by a patent troll and discontinued a project. US research shows that patent trolls cost defendant firms $29 billion per year in direct out-of-pocket costs; in aggregate, patent litigation destroys over $60 billion in firm wealth each year. In 2005 the European Parliament overwhelmingly rejected the software patents directive proposal.
The European Commission today published the negotiated text of the EU – Vietnam FTA. The investment and investor-to-state dispute settlement (ISDS) chapter is not conform the European Parliament 8 July 2015 resolution. ISDS gives foreign investors the right to challenge state decisions outside local courts. The draft FTA does not meet the conditions the European Parliament formulated in its resolution, paragraph 2 (d) (xv); it
– does not provide for independent professional judges as the proposal lacks various institutional safeguards for independence, such as fixed salary and prohibition of outside remuneration; 
– does not ensure that foreign investors will not benefit from greater rights than domestic investors; 
– is not subject to democratic principles and scrutiny, as the Parliament will not be able to change the rules later on; 
– undermines the jurisdiction of courts of the EU and of the Member States, as foreign investors can by-pass them;
– does not ensure that private interests cannot undermine public policy objectives. 
In a crucial aspect the proposal is worse than the current practice of the member states’ stand-alone investment treaties from which it is possible to withdraw: we can not expect the EU to withdraw from trade agreements.
Bernd Lange, chair of the European Parliament international trade committee, has sent a letter to EU trade commissioner Cecilia Malmström regarding the EU commission’s investor-to-state dispute settlement (ISDS) reform proposal. His letter shows that he overlooks many deficiencies in the commission’s proposal, among them perverse incentives. The proposed system lacks integrity and would undermine our values. I will go through his letter line by line. “Dear Commissioner, dear Cecilia,
On the 8th of July 2015 the European Parliament adopted a resolution with the European Parliament’s position on the TTIP negotiations.
New Zealand has published the text of the Trans-Pacific Partnership (TPP). Ongoing analysis, subject to updates:
Investor-to-state dispute settlement (ISDS) places investment tribunals above states, above democracies. This places the development of law beyond democratic scrutiny. At a national level, parliaments can change laws that do not work out well. This is not possible at the supranational level.