A poison pill...with vitamins

Pia Eberhardt on the EU-backed Multilateral Investment Court
January 2, 2018

Pia Eberhardt

Pia Eberhardt, of the Brussels-based Corporate Europe Observatory, has played an outsized role in the campaign to educate Europeans about the corporate bias inherent in investor-state dispute settlement and deals like CETA. Her organization’s reports with the Transnational Institute (and other groups), including Profiting from Injustice and The Zombie ISDS, helped mobilize a new generation of trade justice activists and have convinced governments on the need to reform or kill the ISDS regime. Eberhardt is now grappling with the EU proposal for a multilateral investment court, an MAI reboot of sorts that has the potential, at least in theory, to dial back some of the worst corporate “rights” in deals like NAFTA. But as she told the Monitor, the MIC could just as easily entrench a more anti-democratic ISDS regime.

The Monitor: In a nutshell, what is the EU proposing for this multilateral investment court?

Eberhardt: The EU proposal would mean that investor lawsuits against states, such as the many filed against Canada under NAFTA’s Chapter 11, would no longer be decided by three for-profit lawyers, but by a proper international court. If, for example, Mexico, Canada and the U.S. signed the convention, which would establish the court, all future NAFTA investor claims would automatically be decided by this new global court for corporations.

It sounds a bit like the failed MAI (Multilateral Agreement on Investment), but you say there are important differences?

The key difference is that the multilateral investment court is a purely procedural initiative. It would not give a company like Lone Pine the right to sue Canada over the Quebec fracking moratorium. It would just mean that a NAFTA lawsuit like Lone Pine’s versus Canada would be handled by the court, under the court’s procedural rules. The MAI, on the other hand, would have given a company like Lone Pine new substantive rights and the respective procedures to claim them outside of Canada's legal system. The MAI was about dramatically expanding the ISDS system, the global corporate court would institutionalise it further but without expanding that system.

You’ve called this court a “poison pill with vitamins.” What do you mean by that? Are there legitimate improvements on ISDS?

Yes, there are. The most significant one is that the people deciding the cases would be more independent. Today’s ISDS cases are decided by for-profit arbitrators who earn more money the longer a case takes, the more cases they accept, and the more cases get filed. That creates huge conflicts of interest and is an enormous incentive to rule in favour of the investor—because this keeps the system lucrative for them and a money-making machine for the arbitrators. Replacing this crooked system with an independent court would be an improvement. However, it would come at the high price of further institutionalizing and thereby locking in a system that has already proven dangerous for taxpayers, decisions in the public interest, and our democracies. We should get out of ISDS by cancelling existing investment treaties, and not give the system even greater authority through a court. Just like we wouldn’t swallow a poison pill just because there are a couple of vitamins in there.

Why is the EU pursuing the initiative? And what does the debate look like in Europe?

The European Commission is pretty open about its intentions: the proposed court should re-legitimize the ISDS system, which is being questioned around the world. Without this re-legitimization, the commission will have a hard time expanding ISDS further. And this is exactly what it is planning to do through new treaties like CETA. Unfortunately, this agenda is supported by a large majority of EU member states and the European Parliament. But there is also a lot of resistance. Already, 420,000 citizens have signed a petition against the court. And the German judges association has just come out with a pretty strong statement against it, while questioning the need for ISDS generally.

Are other, non-EU countries supportive of this court? What are the next steps for the EU?

In their recent trade deals with the EU, Canada and Vietnam have committed to work towards the court. South Korea and Argentina have reportedly also expressed support. But others have raised reservations, including Bolivia, India, Indonesia, Japan, the U.S., South Africa and Ecuador. So it is really hard to tell at this moment if the initiative will ever get enough support outside of the EU. In any case, the EU will push the proposal in the context of the broader discussions about reforming ISDS, which are happening in the United Nations Commission on International Trade Law (UNCITRAL). It’s important that civil society accompanies these discussions with strong campaigning against ISDS in all its disguises. Because the global investment regime, or global regime of corporate impunity as others would call it, is deeply wounded. Preventing its further expansion and lock-in and even steps towards its dismantlement are absolutely possible. But we have to get active to make that happen.