Top German Judges Tear To Shreds EU's Proposed TAFTA/TTIP Investment Court System

from the wrong-way-forward dept

As Techdirt has repeatedly pointed out, one of the most problematic aspects of the TAFTA/TTIP deal being negotiated between the US and the EU is the inclusion of a corporate sovereignty chapter -- officially known as "investor-state dispute settlement" (ISDS). Techdirt isn't the only one worried about it: no less a person than the EU's Trade Commissioner, Cecilia Malmström, said last year that she "shares" the concerns here. Her response was to draw up the new "ICS" -- "Investor Court System -- as an alternative. US interest in ICS is conspicuous by its absence, but Malmström keeps plugging away at the idea, evidently hoping to defuse European opposition to TTIP by getting rid of old-style corporate sovereignty.

That plan has just received a huge setback in the form of an "Opinion on the establishment of an investment tribunal in TTIP". It comes from the German Magistrates Association, which Wikipedia describes as "the largest professional organization of judges and public prosecutors in Germany." So these are not a bunch of know-nothing hippie activists, but serious establishment figures with a deep knowledge of the law. Here's their basic position on Malmström's ICS, translated from the original German by TNI:

The German Magistrates Association [DRB] rejects the proposal of the European Commission to establish an investment court within the framework of the Transatlantic Trade and Investment Partnership (TTIP). The DRB sees neither a legal basis nor a need for such a court.

The clearly implied assumption in the proposal for an International Investment Court that the courts of the EU Member States fail to grant foreign investors effective judicial protection, lacks factual basis. Should the negotiating partners have identified weaknesses in this area in individual EU Member States, these should be taken up with the national legislature and clearly defined. It would then be up to the legislators and those responsible for the judiciary to provide remedy within the proven system of national and European legal protection. Only in this way can the full legal rights to which any law-seeking party in Germany and the European Union is entitled, be guaranteed. The creation of special courts for certain groups of litigants is the wrong way forward.
The judges then spell out in more detail what they see as the problems with the idea, and they are pretty damning. First, they point out that the ICS would have power over the entire European Union and its member states, and that its decisions would be binding:
The establishment of an ICS would oblige the European Union and the Member States, upon the conclusion of an agreement, to submit to the jurisdiction of an ICS and the application of certain international procedures chosen by the plaintiff.
Presumably, the same would be true of the US and its state governments, which may be why the USTR is not hugely keen on the idea. Not content with undermining the EU's political system, ICS would do the same to the EU's judiciary too:
an ICS would "deprive courts of Member States of their powers in relation to the interpretation and application of European Union law and the Court of its powers to reply, by preliminary ruling, to questions referred by those courts and, consequently, would alter the essential character of the powers which the Treaties confer on the institutions of the European Union and on the Member States and which are indispensable to the preservation of the very nature of European Union law"
The German judges go on to repeat a point many others have made: that there is simply no need for any kind of ISDS or ICS system. Here's why:
The Member States are all constitutional states, which provide and guarantee access to justice in all areas where the state has jurisdiction to all law-seeking parties. It is for the Member States to ensure access to justice for all and to ensure feasible access for foreign investors, by providing the courts with the relevant resources. Hence, the establishment of an ICS is the wrong way to guarantee legal certainty.
Finally, the judges note that one of the claimed advantages of the ICS system over the current corporate sovereignty approach, judicial independence, is illusory:
Neither the proposed procedure for the appointment of judges of the ICS nor their position meet the international requirements for the independence of courts. As such, the ICS emerges not as an international court, but rather as a permanent court of arbitration.
In other words, Malmström is simply re-branding ISDS, and trying to put lipstick on a pig.

This attack from a very unexpected quarter is a really devastating blow for the ICS idea. It will be hard for Malmström to claim with a straight face that, unlike the current corporate sovereignty system, ICS is a real court, with all the protections that ISDS lacks, because a large number of EU experts in this area have just stated unequivocally that it isn't. The judges' opinion makes it even more likely that the US will reject the ICS idea out of hand, not least because it can now simply point to the German Magistrates Association's analysis as proof that ICS doesn't do what Malmström says it does.

That leaves the really interesting question: where does the EU's Trade Commissioner go from here? She can hardly return to the old-style ISDS for TAFTA/TTIP, since she has been busy rubbishing it in order to promote her new ICS idea. Moreover, this latest rejection comes at just the wrong time, since it is widely expected that corporate sovereignty will be one of the main items on the agenda for the next round of TAFTA/TTIP negotiations. Awkward.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: corporate sovereignty, courts, eu, germany, isds, judicial system, tafta, ttip


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  1. identicon
    Anonymous Coward, 9 Feb 2016 @ 5:02am

    Re: Re: Re: Re: Solving a termite infestation by buying a new house next door

    And then there's what will happen to political rights in the EU, where presently there's a vibrant array of different and varied political parties, many of them on the bona fide left.

    First, people will become accustomed to their governments being increasingly powerless to stop the carcinogenic purple well-water and the contaminated meat.

    Meanwhile, ISDS challenges will be raised to national laws limiting concentration of media ownership, and will be successful. National broadcasters will be attacked in ISDS tribunals on the grounds that "this heavily subsidized 'public broadcaster' is unfair competition that unnecessarily hinders good honest profit-seeking private entrepreneurship", and will, one by one, be shut down or privatized to stem the financial hemmorhage from mounting steep ISDS fines.

    Rupert Murdoch will then quietly buy out most of the media, and starting from early in this process, suppress the story of the media being quietly taken over. Gradually, over many years, the media will all start to sound the same, and it will be the familiar, odious sound of Fox News.

    Sometime after that, the power of the political left in the EU will be broken, and you will see lots of dismal alternatives resembling the US Republican Party and the (non-Sanders wing of the) US Democratic Party replace the formerly vibrant multi-vendor marketplace.

    And then come voting restrictions limiting the ability of the poor to actually use the franchise, and the immigration changes that nominally are restrictive but result in fact in floods of cheap labor, and the ag-gag laws, and stringent "anti-industrial-espionage" laws affecting anyone sampling river water near a fracking well, and ...

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