Comhlámh > CETA > Not in Modern Deals > No ICS in Modern Trade Deals

No ICS in Modern Trade Deals

The trend globally in recent years is to not include ICS in trade deals 

Here are four modern, comprehensive, trade and investment agreements which do NOT have an investor court system (ICS) or an investor-state dispute settlement (ISDS) mechanism. These trade and investment agreements force foreign investors to be treated the same as domestic investors by making them use the normal courts of the land, the same as everyone else, if they feel their “legitimate expectation” to the right to make profit has been impinged on by government laws, regulations or licencing decisions. You’ll find further details on each deal below.

1. No ICS: The Brexit trade deal between the EU and Britain, which entered into force on Jan. 1st 2021. See: https://www.ft.com/content/bd71fda3-0a34-4b52-ae98-4769848cb628

2. No ICS: The EU-China Comprehensive Agreement on Investment (CAI), the text of which was agreed on by China and the European Commission on December 30th, 2020. See:  https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2542

3. No ICS: Canada choose to be, not, subject to ICS or ISDS in the renegotiated North American Free Trade Agreement (NAFTA) agreement called the United States-Mexico-Canada Agreement (USMCA), which entered into force on July 1, 2020: https://www.nortonrosefulbright.com/en/knowledge/publications/91d41adf/major-changes-for-investor-state-dispute-settlement-in-new-united-states-mexico-canada-agreement

4. No ICS: The largest ever free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), the text of which was signed by its 15 countries on November 15th 2020: http://arbitrationblog.kluwerarbitration.com/2020/12/08/the-rcep-investment-chapter-a-state-to-state-wto-style-system-for-now/

And here’s the detail: CETA is the ‘Comprehensive Economic & Trade Agreement’ between the European Union and Canada. Unlike these four modern trade and investment agreements discussed below, the proposal in CETA is to establish a parallel quasi-judicial, ad hoc, arbitration mechanism, where part-time arbitrators working for $3,000 a day, would adjudicate over cases taken by Canadian investor’s who feel their “legitimate expectation” to the right to make profit has been impinged on by government laws, regulations or licencing decisions. 

#One. Unlike the CETA, the Brexit trade deal has no arbitration mechanism for companies. 

The full text of the Brexit trade deal, or to give it its full title, the ‘Trade And Cooperation Agreement Between The European Union And The European Atomic Energy Community, Of The One Part, And The United Kingdom Of Great Britain And Northern Ireland, Of The Other Part’ is available here: https://ec.europa.eu/transparency/regdoc/rep/1/2020/EN/COM-2020-857-F1-EN-ANNEX-1-PART-1.PDF 

There is a totally different arbitration mechanism in EU-UK trade deal when compared to CETA. First of all, there is no arbitration system or mechanism allowing private companies or individuals to sue governments. 

It only allows for sovereign states, as in, governments, to sue each other in arbitration: only the EU and the UK can take each other to arbitration over disagreements in implementing the terms of the agreement. Private companies stay where they are, they are not elevated to the status of a sovereign government, and they must seek justice in the courts of the UK or the EU like everyone else. 

The Financial Times newspaper has provided a useful summary as follows:

“The UK and Brussels painstakingly negotiated a system that will leave the UK free to set its own standards in areas such as environmental standards and labour law but with the risk of having access to the European market restricted if it strays too far. A “rebalancing mechanism”, governed by arbitration, will allow either side to impose tariffs should it be determined that their businesses were at an unfair disadvantage. Crucially for the UK, the system does not rely on EU law or the European Court of Justice. 

[…]

Companies in the EU will be able to challenge state aid awarded to UK rivals in Britain’s national courts if they feel it violates common principles set out in the trade deal. British companies will enjoy equivalent rights in the EU.”(1)

Reference (1): FT Reporters (2020). ‘Brexit trade deal explained: the key parts of the landmark agreement’, in The Financial Times. Available at: https://www.ft.com/content/bd71fda3-0a34-4b52-ae98-4769848cb628 [08-01-21].

#Two. Unlike CETA, the EU-China Comprehensive Agreement on Investment (CAI) has NO arbitration mechanism for private companies.

The full-text of the deal is available here: https://ec.europa.eu/commission/presscorner/detail/en/FS_20_2544 

The European Commission is very clear, there is no means through which a private investor can use the arbitration mechanism of the CAI. It is only the two governments, the two states, China and the EU who can take each other to arbitration to resolve a dispute about the implementation of the terms of the EU-China Comprehensive Agreement on Investment (CAI). As the Commission states on its website: 

The CAI “allows the EU to resort to the dispute resolution mechanism in CAI in case of breach of commitments”, and, “In the CAI, China agrees to an enforcement mechanism (state-to-state dispute settlement)”. (2)

The ICS (or ISDS) mechanism proposed in the CETA is not state-to-state dispute settlement, it is investor-to-state- dispute-settlement … hence the acronym ISDS.

Additionally, the acronym ‘ICS’ stands for ‘Investment Court System’ or ‘investor court system’  and this phrase appears nowhere in the CETA document. Try a Ctrl F (find) search for yourself in the 1,598 page PDF of the CETA here: http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf  

Reference (2): European Commission (2020). ‘Key elements of the EU-China Comprehensive Agreement on Investment’. Available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2542 [06-01-21].

#Three. The United States-Mexico-Canada Agreement (USMCA), which replaced the 1994 NAFTA trade deal.

To view the full text of the agreement between the United States, Mexico and Canada, click here (3): https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between 

The USMCA free trade deal “entered into force on July 1, 2020” (3). Norton Rose Fulbright, the global law firm with 3,700 lawyers and other legal staff, have stated that:

“The USMCA is intended to replace the North American Free Trade Agreement (NAFTA).

[ … ] The most significant development for users of investor-state dispute settlement (ISDS) is Canada’s withdrawal from ISDS entirely under the new treaty.

[…] investors may need to turn to the domestic courts of the host party for resolution of their disputes or seek the intervention of their home state government” (4).

So what is it about the Irish, EU and EU member states’ courts that TDs in Fianna Fáil, Fine Gael and the Green Party distrust?

Why is it that the Canadian government doesn’t trust our courts to protect the interests of Canadian companies?

Why is it that Canada is not willing to allow American and Mexican companies to sue their government in a private arbitration under the auspices of a free trade deal?

Reference (3): Office of the United States Trade Representative (2020). ‘United States-Mexico-Canada Agreement’. Available at: https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement [08-01-21].

Reference (4): Valasek, M. J., FitzGerald, A. G., & de Jong, J. A (2018). ‘Major changes for investor-state dispute settlement in new United States-Mexico-Canada Agreement’. Norton Rose Fulbright – a global law firm. Available at https://www.nortonrosefulbright.com/en/knowledge/publications/91d41adf/major-changes-for-investor-state-dispute-settlement-in-new-united-states-mexico-canada-agreement [08-01-21].

#Four. The largest ever free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), the text of which was signed by its 15 countries on November 15th 2020, has NO ICS: 

Including Japan, Australia and China, 

According to the Kluwer Arbitration Blog, this:

“is the largest free trade agreement in history in terms of the Parties’ combined GDP.

[ … ] The RCEP Investment Chapter does not contain an investor-state dispute settlement (ISDS) mechanism. 

[…] The RCEP further removes the capacity for investors to attempt to access ISDS in other investment agreements through the RCEP’s most-favoured nation (MFN) clause.”(5)

Reference (5): Ewing-Chow, M. (National University of Singapore) & Losari, J. J., (UMBRA Strategic Legal Solutions) (2020) ‘The RCEP Investment Chapter: A State-to-State WTO Style System For Now’, December 8. Available at: http://arbitrationblog.kluwerarbitration.com/2020/12/08/the-rcep-investment-chapter-a-state-to-state-wto-style-system-for-now/ [08-01-21].

See also:

BBC News (2020) ‘RCEP: Asia-Pacific countries form world’s largest trading bloc’, 16 November. Available at: https://www.bbc.com/news/world-asia-54949260 [08-01-21].