‘Beginning of the end’ for secret corporate courts

Transparency campaigners are celebrating after the highest court in Europe ruled that shadowy offshore courts allowing multinational corporations to sue governments under little-known trade rules are not legal.

These courts, known as investor-state dispute settlement (ISDS) tribunals, exist outside national or European legal systems. They usually meet in secret, give no right of appeal and, in the majority of cases, rule in favour of the corporations. It might sound like the stuff of dystopian nightmares but they have been around for two decades.

Found in the small print of most international trade deals, ISDS rules give big business the right to use these courts to sue over any measure that adversely affects their profits – including bringing in laws to protect public health and the environment.

“Dead in the water”

The rules have already been successfully used by businesses to sue countries countless times. Notable cases include French corporation Veolia suing the Egyptian government for raising the minimum wage, and US tobacco giant Philip Morris suing Australia after its government brought in plain cigarette packaging.

As these ISDS tribunals exist outside normal court system, including Europe’s judicial system, the European Court of Justice ruled that they are incompatible with EU law.

ISDS is best known as being part of the controversial Transatlantic Trade and Investment Partnership (TTIP), a planned EU-US agreement that sparked protests on both sides of the Atlantic. The rule is also found in the Comprehensive Economic and Trade Agreement (CETA), a similarly controversial deal between the EU and Canada, which has not been fully implemented yet because of disagreements over ISDS.

The ruling means TTIP is now “dead in the water”, campaigners say, and it’s also hoped to “spell the end of CETA as we know it”.

“ISDS not only violates EU law, it is also dangerous for democracy, taxpayer money and much needed policies, for example, to combat climate change. Now is the time to stamp out the excessive corporate privileges once and for all,” Pia Eberhardt, CEO of Corporate Europe Observatory, told Big Issue North.

“EU member states should terminate existing investment treaties and withdraw from the Energy Charter Treaty.”

The ECJ’s ruling came after one such court ordered the Slovakian government to pay €22 million (£19.4 million) in damages to Achmea, a Dutch healthcare company. The company sued using ISDS rules within a Netherlands-Slovakia trade agreement when the Slovak government decided to place limits on healthcare privatisation, which Achmea said harmed its potential future profits. When Slovakia refused to pay, Achmea then started proceedings against it in the German courts, which asked the ECJ to check whether this was compatible with European law.

ISDS is found in hundreds of similar international trade and investment deals already in effect worldwide. In European member states at least, these agreements will now no longer be viable.

Brexit effect

Eberhardt said ISDS-like parallel legal systems for corporations should now be scrapped from all EU trade deals, whether with Canada, Japan or the many other countries with which they are currently negotiated.

“The decision marks the beginning of the end of ISDS in Europe,” stated Laurens Ankersmit of environmental activist lawyers ClientEarth, adding that they were looking at legal options to force EU member states to end trade agreements containing ISDS if they did not do so voluntarily.

One country that is not expected to give up such agreements easily is the UK.

“As it’s leaving the EU, Britain might think it can avoid terminating its investment treaties with EU member states,” Nick Dearden, director of Global Justice Now, told Big Issue North.

The UK’s post-Brexit trade talks are the most secretive yet, Dearden added. This lack of transparency means any future UK-US deal is widely expected to contain many of the worst parts of the stalled TTIP deal, including ISDS.

“Transparency is much worse than with TTIP,” said Dearden. “At the moment our MPs have no ability to know what’s going on.”

He added that British MPs have “essentially no rights at all” when it comes to trade deals – they can’t stop them, amend them or even scrutinise trade minister Liam Fox.

While trade experts say the UK government is very likely to want ISDS in any future UK-US trade deal, the US might actually change its position.

Although the US has long been a proponent of corporate courts, there is now growing scepticism. US trade representative Robert Lightizer is not a fan, and the US has already proposed to partially scrap ISDS in its NAFTA trade deal renegotiations after it has caused endless hold-ups.

As public awareness and anger over the corporate court system continues to grow, Dearden says ISDS is now “coming under pressure globally” and points out it has been rejected in trade negotiations by countries from South Africa to Ecuador. If the US turns against ISDS too, the UK could be left struggling to find any trade partners willing to accept it.

Photo: “MPs have no ability to know what’s going on,” says Global Justice Now’s Dearden who delivered a petition against TTIP to the European Commission