March 18, 2015

Commissioner Malmström defends rigged ISDS in CETA

Print More

Today EU commissioner Malmström gave a speech in the European Parliament trade committee on investor-to-state dispute settlement (ISDS). ISDS gives foreign investors the right to use arbitration against states, instead of using local courts.

Malmström made clear that she does not want to change the trade agreement with Canada (CETA), which contains a highly controversial ISDS section. The CETA text was used for the ISDS consultation.

If CETA is ratified, multinationals from the US and other countries will be able to use the ISDS mechanism in CETA against the EU and its member states. (The same is true for ISDS in the agreement with Singapore, EUSFTA)

The flaws in CETA and EUSFTA include:

– giving investors equal standing to states;
– giving foreign investors greater rights than local investors;
– no separation of powers;
– no institutional safeguards for independence;
– perverse incentives;
– investment protections that are ripe for exploitation by creative lawyers.

And, completely incomprehensible, the procedural rules give the US an unfair advantage.

To give an example of the procedural rules that favour the US. The President of the World Bank has up till now always been the candidate of the US. This president appoints all three the arbitrators in annulment cases under the ICSID rules. There have already been 72 cases in which this president appointed all three the arbitrators. (press search) That is more than 10% of all known ISDS cases.

How on earth could the commission negotiate rules that favour the US, in an agreement that is a model for the agreement with the US?

Moreover, the commission is aware of the problem. And still they choose to not solve this strategic issue.

Given that the commission does not want to renegotiate CETA, the only option now to avoid a rigged ISDS system, is to reject CETA. To protect the EU, rejecting CETA and EUSFTA is necessary.

See also the statement of concern signed by over 110 scholars.