A new global corporate court system isn’t the answer. Time for Europe to find alternatives

2 October 2017

Over the last few years, many issues have brought people into the streets in their thousands to demonstrate against the dodgy transatlantic trade deals TTIP and CETA. But perhaps the most contentious has been the issue of ‘corporate courts’ proposed for the frozen EU-US trade deal, TTIP – in trade jargon, known as an Investor-State-Dispute-Settlement (ISDS) mechanism.

This parallel legal system would allow corporations to circumvent national courts and sue governments directly in tribunals run by investment lawyers and claim large sums of compensation, and has been roundly rejected by civil society, academics, judges and a number of political parties.

As a reaction the Commission promised to reform the system by making it more transparent and pre-selecting the arbitrators who can rule on such cases. The new system, included in the EU’s trade agreements with Canada (CETA) and Vietnam, is called the Investment Court System (ICS).

However, with ICS multiplying with each new trade agreement the EU signs, the Commission is looking for a way to fuse these investment tribunals into a permanent court with full time judges. The project is called the Multilateral Investment Court (MIC) and just a few weeks ago the Commission has asked to receive a mandate from the EU member starts to start negotiations on the MIC. All countries who sign up would have their mutual investment disputes handled by this new, global court instead of ad-hoc tribunals as it is currently the case. An improvement?

Friends of the Earth Europe together with other civil society organisations brought together trade experts from around the world at a conference to put the project in the public spotlight and discuss its merits and perils.

How was the proposal received?

During the discussion, most panellists recommended starting the project of reforming ISDS from scratch. Pia Eberhardt from Corporate European Observatory remarked that nothing about the fundamental problems of ISDS has changed.

The Canadian law professor Gus van Harten was similarly sceptical:

One element that was strongly criticised was the imbalance between the far-reaching rights that investors can enforce with the MIC, while communities affected by investor misconduct are not able to hold them accountable at the international level.

Another highly contentious issue was the fact that the EU is planning to expand the investor rights system in new trade agreements with Japan, Mexico, Indonesia and many other countries. The MIC is supposed to restore acceptance into the system and thereby legitimise its inclusion in future trade agreements, which would lock in VIP investor rights for decades to come.

If not the MIC, then what?

In a second session, alternatives to the current approach by the European Commission were discussed. Representatives from South Africa and Ecuador explained why their countries decided to terminate investment treaties rather than reforming the system.

 The ensuing debate emphasised that investment agreements neither support sustainable development nor increase foreign direct investment in a country.

Taken together, the discussions highlighted the weaknesses of the Commission’s approach: it would institutionalise a system that gives investors enormous power over our democracies to claim compensation for laws and regulations that harm their profits. Nothing in the Commission proposal would change these fundamental problems. All the while it became clear that investment treaties are not needed for countries to develop sustainably, while their termination does not seem to entail any downsides.


What’s next?

The Commission needs the mandate from all European governments to negotiate the MIC. But instead of creating a global court for corporations, the EU should start reversing the imbalances created by economic globalisation and ensure that multinational corporations can be held accountable for their actions, rather than enshrining their unjustified privileges.

You can support these demands by signing this petition against a global corporate court.