Interpretation is toothless and incomplete
In its trade policy agenda, the German government agreed at the end of June to ratify the EU trade agreement with Canada (CETA) as soon as possible, on one condition: A declaration of interpretation is intended to ensure in advance that investment protection is limited and that its ‘abuse’ is prevented. In the view of the Federal Government, actions against climate protection should no longer be possible.
But a current report, which the legal scholars Alessandra Arcuri and Federica Violi produced by the University of Rotterdam on behalf of PowerShift, shows: The federal government's plan is doomed to failure. The CETA Declaration of Interpretation would not prevent litigation against climate action or against other measures necessary to address the ecological crisis.
Because On the one hand, the declaration does not go far enough. It explicitly only addresses climate protection measures and does not mention measures on other pressing problems such as water protection or pesticides. On the other hand, It still contains many very indefinite terms.. For example, climate action can continue to be considered ‘indirect expropriation’ if its effects appear ‘totally disproportionate’ and ‘clearly inappropriate’. It is up to the arbitrators of the CETA arbitral tribunal to decide on the measures to be taken, which thus continue to have a very large margin of interpretation. Examples from the history of investment arbitration show that the legal standards of investment protection are applied and interpreted quite differently. For example, in the Rockhopper v. Italy case, an arbitral tribunal recently ruled that failing to grant a permit for a planned oil production project would amount to expropriation of the investor. The arbitral tribunal awarded Rockhopper $250 million in compensation. The legal basis was the Energy Charter Treaty. Despite the explanation of interpretation, it cannot be ruled out that the CETA arbitral tribunal would also reach a similar judgment in the future. Furthermore, the adoption of a binding declaration of interpretation does not necessarily mean that it is also applied consistently by the arbitral tribunals. In the North American Free Trade Agreement, for example, a similar interpretative instrument was challenged in several arbitration proceedings.
Moreover, the declaration of interpretation does not change the structural and fundamental problems of CETA investment protection.: It continues to cover all investments, not just sustainable investments, it continues to include only rights but no obligations for corporations, and it does not require national legal remedies to be exhausted first.
The only way to completely eliminate the risk of climate-related lawsuits under CETA is therefore to remove investment protection from the agreement. This could be achieved through a treaty amendment, an implementation agreement or an application protocol, without creating new obligations or affecting the other parts of the agreement. Canada could be open to such a proposal as it is already pursuing more advanced investment protection standards than CETA.
