How CETA’s investor protection rules could result in a boom of investor claims against Canada and the EU 17 PR SPEAK: WHAT’S WRITTEN IN CETA72 REALITY CHECK: WHY IT PROVIDES ONLY FALSE COMFORT Final award: A tribunal can award “only” mon- etary damages or restitution of property (Chapter 8, Article 39). According to the EU, this means that an order of a tribunal “cannot lead to the repeal of a measure adopted by Parliaments in the Union, a Member State or Canada.”75 This won’t stop government from “voluntarily” repealing measures when a major lawsuit has been filed or threatened by a deep-pocketed company. Examples of such regulatory chill include the watering down of environmental controls for a coal-fired power plant when Germany settled a claim by Swedish energy company Vattenfall (see page 6) and New Zealand’s announcement that it will delay its plain-tobacco- packaging legislation until after Philip Morris’ claim against Australia’s anti-smoking rules has been resolved.76 This chilling effect on government regulation is arguably the main function of the global investment regime. Appeal mechanism: An Appellate Tribunal is hereby established to review awards […] The Appellate Tribunal may uphold, modify or reverse a Tribunal’s award based on (a) errors in the application or interpretation of applicable law; (b) manifest errors in the appreciation of the facts […] (c) the grounds set out in Article 52 (1) (a) through (e) of the ICSID Convention” (Chapter 8, Article 28) This could potentially contribute to more coherent decisions but does not fix any of the fundamental problems mentioned above (privileging of foreign investors, not fully independent tribunals, one-sidedness of the system … etc). It should also be noted that the mandate of the Appellate Tribunal would be very limited, and would fall short of a juridical revision proce- dure as known under national law. For example, collection of new evidence or hearing of additional experts and witnesses would be excluded. Binding interpretations: “Where serious con- cerns arise as regards matters of interpretation that may affect investment, the Committee on Services and Investment may […] recommend to the CETA Joint Committee the adoption of inter- pretations of this Agreement. An interpretation adopted by the CETA Joint Committee shall be binding on a Tribunal.” (Chapter 8, Article 31) In practice, it is very difficult to get consensus on binding interpretations. In the 20-year history of NAFTA, which has a similar clause, agreement has been reached for only two such interpretations, despite a wave of investor claims. Also, arbi- trators have often been unwilling to accept the “binding” inter- pretations and annexes intended to rein in their discretion.77 CETA contains a number of exceptions scat- tered across the deal, such as for “reasonable measures for prudential reasons” in the financial sector, for example, to ensure “the integrity and stability of a Party’s financial system” (Chapter 13, Article 16) or “to protect human, animal or plant life or health” (Chapter 28, Article 3.2) The exceptions are usually limited to a few sectors and to only some investor rights. They are also formulated in nar- row terms, putting the burden of proof on governments. For example, safeguard measures to ensure financial stability have to be “strictly necessary” and may only be taken “in exceptional circumstances” with “serious difficulties for the operation of the economic and monetary union”. For policies to tackle “serious balance-of-payments or external financial difficulties,” CETA even states that they should “avoid unnecessary damage to the commercial, economic and financial interests of any other Party” (Chapter 28, Articles 4 and 5). It will be up to arbitrators to decide whether a policy was “strictly necessary” or whether it caused “unnecessary” costs for the investor. This is an easy hurdle to clear for an arbitrator intent on getting public compensation for a bank or other investor. Reservations: CETA’s investment rules are subject to state-specific reservations relating to specific economic sectors or types of measures listed in special annexes. Annex I lists “existing measures” that are not in conformity with CETA rules but can be maintained. Annex II lists “res- ervations for future measures” that governments will be able to introduce in the future that would otherwise not be possible under CETA. All sectors and measures that governments have not explic- itly excluded them by listing them in the annexes are automatically covered. (Annexes I and II) The reservations have severe limitations: Annex I reservations are subject to a legal ratchet, meaning they can only be changed in the future if they are made more consistent with CETA. Also, neither the Annex I nor the Annex II reservations apply to the most dangerous investor standard, fair and equitable treatment. Moreover, European member states have little experience with CETA’s “negative listing” approach where the state has to list all of its exceptions up front rather than indicating the sectors it wants covered by CETA. The reservations scheduled by European governments vary widely and are often inconsistent. For example, Bulgaria has reserved its ban on fracking but France, which has a similar ban, has taken no such reservation.