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Academic Paper – CETA ICS Reforms Unconvincing

Academic analysis: ICS Presents No Reform, Labour/Climate Provisions Not Legally Enforceable

In their chapter, ‘The Reform of Investment Protection Rules in CETA, TTIP, and Other Recent EU FTA’s: Convincing?’, in this international economic law book, Christian Tietje and Kevin Crow present a dismantling of much of the contemporary political rhetoric around the CETA and its ‘reforms’, its newness and the enforceability of its labour, sustainability and environmental chapters. Read on for some excellent referenced quotes from this peer-reviewed academic book from Oxford University Press.

Reference: Tietje, C. & Crow, K. (2017)  in in Griller, S., Obwexer, W., & Vranes, E. (eds), Mega-Regional Trade Agreements: CETA, TTIP, and TiSA: New Orientations for EU External Economic Relations. Pp: 87-110. Oxford: Oxford University Press. DOI:10.1093/oso/9780198808893.003.0004 

List of the “Reform Elements”

Examining the EU’s contemporary free trade agreements, including the CETA, Tietje and Crow write that, “one can identify the following reform elements: reaffirmation efforts on the right to regulate, greater specificity in enumerating situations that amount to indirect expropriation, the inclusion of full protection and security clauses, the inclusion of so-called umbrella clauses, greater specificity in defining fair and equitable treatment, and efforts to enumerate specific exceptions to investment treaty provisions” (Pg. 95).

Right to Regulate Is Nothing New

On this issue they say: “A ‘reaffirmation’ of the right to regulate has taken a prominent role in reform language, and at least form a political perspective, it is a highly important reform” (pg. 95).

[…] “Nevertheless, it is questionable whether such reform provisions, including similar provisions in CETA, really carry any legal significance. For one thing, it is already well established in arbitral practice that investment treaty standards that favour the investor must be balanced against the legitimate regulatory interests of the host state. […] Thus, the new provisions on the right to regulate that appear in CETA and EU-Vietnam [trade agreements] have at east the potential of being tautologies.”

One Item That EU Cannot Be Sued On: State Subsidies

Tietje and Crow tell us that, “However, it can be said that the new CETA provisions would restrict the flexibility of tribunals in related subsidy disputes” (pg. 97).

Climate Law: Case For ICS Case Payouts

The Irish state has sought tenders for oil and gas exploration licences all around the coast. Most of the areas off the Irish coast that might have oil and gas already have a form of exploration or extraction licence applying to them which has been given to a private investor. If the Irish government seeks to reduce our oil and gas production and consumption by adhering to the Paris Climate change agreement and thus informs these oil and gas exploration and extraction investors that they cannot do any more exploring nor extracting, then this can be interpreted as a form of “indirect expropriation” or a denial of the investor’s right to receive “fair and equitable treatment” (FET) by the state.

In this regard, Article 8.10(2) of the CETA says:

“When applying the above fair and equitable treatment obligation, a Tribunal may take into account whether a Party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the covered investment, but that the Party subsequently frustrated.”

In other words, the state in announcing that it was disbursing fossil fuel exploration and extraction licences can easily be understood by arbitrators  at the ‘investment court’ as making “a specific representation to an investor to induce a covered investment”.

Indeed, as Tietje and Crow explain in their chapter in the international economic law book, Mega-Regional Trade Agreements: CETA, TTIP and TiSA:

“The Tribunal is also accorded interpretative power in determining what constitutes a ‘legitimate expectation’ on the part of the investor in light of those representations. 

[…] Indeed, in actual practice, there are no arbitral cases indicating that the FET [fair and equitable treatment] standard undermines a government’s legitimate right to regulate in the public interest” (pg. 103-104).

In other words, Ireland will regulate legitimately to reduce our fossil fuel emissions, then we will order the fossil fuel licence holders to keep it in the ground, and then the arbitrators on the ‘investment court’ will instruct the government to pay financial compensation to the investor as a result of them losing all their future unearned profit which they plainly had a “legitimate expectation” of earning as a result of the state inducing them to get involved in fossil fuels in the first place by issues them an exploration / extraction licence.

ICS: Only Powers For Investors Not Governments

Tietje and Crow tell us that, “International investment law provides a cause for action by investors against states to protect investments in a host state, but does not provide a cause for action for host states against investors” (pg. 93).

“ … the current asymmetrical system provides rights only for investors and imposes obligations only on states …” (pg 107).

Conclusion: No Reform

Tietje and Crow conclude their research thus: “Moreover, the reforms do not appear to actually reform anything about how the system functions: interpretative powers for arbitrators remain vast, and as can be seen especially through existing right-to-regulate and FET reforms, most of the language bringing greater specificity to investment treaties merely codifies established arbitral practice.”

Reference: Tietje, C. & Crow, K. (2017) ‘The Reform of Investment Protection Rules in CETA, TTIP, and Other Recent EU FTA’s: Convincing?’, in in Griller, S., Obwexer, W., & Vranes, E. (eds), Mega-Regional Trade Agreements: CETA, TTIP, and TiSA: New Orientations for EU External Economic Relations. Pp: 87-110. Oxford: Oxford University Press. DOI:10.1093/oso/9780198808893.003.0004