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.

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


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  1. identicon
    Wendy Cockcroft, 9 Feb 2016 @ 7:45am

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

    Well most of us are too savvy to fall for it and I'm quick to call it out whenever I see it because the last thing we need is to become as polarised as people are in the States.

    That said, the Left over here is largely noisy and ineffectual because they're always bleating on about class, which annoys me intensely because none of it involves challenging the neoliberal consensus and that's what we need.

    Getting TTIP and CETA onto the table in Parliament instead of just waving it through was a big victory for us and the best thing is that it was a cross-party thing, not a left or a right wing thing. I was most encouraged to see certain Conservative MPs come out on our side because they believe in democracy.

    I remember they tried to invoke the terrorist boogeyman over ACTA and that fell flat (wasn't that a Dutch chap?) but don't be surprised to see anyone who is flat out against CETA and TTIP being labelled "terrorist" and having that used to try to shove it through. E.g. "If you don't support this, you're not only an anti-American commie pinko tree-hugging hippie, you're a terrorist, too!"

    Damn, I'm still shocked that a Labour MP called up the commie boogeyman. He's in the wrong party!

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