Investment Court System a sticking point for CETA critics

ICS essentially acts as a permanent tribunal to handle complaints brought by businesses.Sean Kilpatrick

The Canada-European Union trade deal has bogged down over a dispute resolution section that critics say gives too much power to corporations over national governments.

Most trade deals have some kind of mechanism for resolving disputes, mainly because legal systems in countries vary. The Canada-EU deal, known as the Comprehensive Economic and Trade Agreement, has gone farther than other treaties by setting up a new process called the Investment Court System or ICS. The ICS essentially acts as a permanent tribunal to handle complaints brought by businesses.

Canada and the EU have hailed the ICS as a breakthrough offering "a high level of protection for investors while fully preserving the right of governments to regulate and pursue legitimate public policy objectives such as the protection of health, safety or the environment." But critics say the ICS gives too much power to corporations and will allow them to sue governments for compensation if they change policies.

CETA's negative-list approach also gives companies an edge, critics claim. The negative list means the treaty applies to all goods and services unless they have been explicitly excluded. That differs from a positive list which would specifically outline areas where the treaty applies. Some argue it will be harder for governments to regulate future types of activity because they have not been included in CETA.

"For us it's a very tough issue," said Hamza Fassi-Fihri a member of parliament in the Brussels city government, one of Belgium's regional parliaments that has opposed the deal. "We would prefer this kind of conflict to be resolved by public justice and not by company-led courts."

Mr. Fassi-Fihri cited the case of a chemical company that has introduced a new pesticide which the government is trying to ban. "With this kind of ICS system, tomorrow a company that produced this chemical would be allowed to sue our government on the basis that because of this ban they would lose some future profits and the government would be compelled by the court's decision to pay compensation to this company," he said. "This is a loss of sovereignty. This is just the situation where private interests go above the general interest. We cannot accept this."

And it's not just in Belgium where the ICS has raised concerns.

Britain has been a strong backer of CETA, but the government refused to allow the ICS to be adopted by the EU on a provisional basis and demanded that the British Parliament vote on whether to accept the system. Under EU requirements, the entire agreement has to be ratified by each of the 28 member states, but much of it could go into effect on a provisional basis once the deal is signed by Prime Minister Justin Trudeau and EU officials. However, Britain's International Trade Minister Liam Fox made it clear on Wednesday that the ICS section is not among the sections that can go into effect provisionally.

"In terms of provisional, it does not apply because in the U.K. government's view this was an element that the U.K. Parliament would want to be satisfied with before the U.K. ratified the agreement finally," Mr. Fox told a parliamentary committee. He added that Britain raised several concerns about the ICS and that while many changes have been made, "it is controversial." Mr. Fox noted that "there is not cross party support [in Parliament] and it was only appropriate that [approval of ICS] was retained [by] the national Parliament."

Some Labour MPs have expressed concerns similar to those raised in Belgium. For example, they noted that the Conservative government in Britain supports fracking and allowed some projects to proceed. But the opposition Labour Party opposes fracking. If Labour wins the next election and blocks fracking, many MPs wonder if companies that have already started drilling would be able to sue for compensation under CETA. When that was put to Mr. Fox, he replied: "This part of the agreement has not yet been ratified. That is up for the U.K. Parliament to decide."