Rescuing CETA – Yes, It’s Possible

By | October 26, 2016

The investor-State dispute settlement (ISDS) part of the CETA is the focus of Wallonia’s objections to the deal. We can actually solve that roadblock.

ISDS was never a sine qua non for Canada. We replicated the NAFTA model (making some later improvements) without any real thought or analysis of whether the Canadian investment community saw ISDS as an essential part of the agreement – they don’t.

Why would they? There is no concern in the Canadian business community about risks of investing in France, Spain, Germany, Italy, Ireland or the UK (as long as it remains in the EU). There are significant Canadian investments in each of these countries and there’s never been an issue requiring investment protection.

The fact is that Canadian business doesn’t need, and never pressed for, foreign investment protection in any of these major EU economies.

And Canada already has bilateral foreign investment protection agreements (FIPAs) with many of the smaller EU members: the Czech and Slovak Republics, Hungary, Poland, Romania and Croatia. For those other EU countries where Canada doesn’t have these bilateral agreements, they can be negotiated (in my view, without much difficulty).

And I dare say, European companies never insisted on ISDS when it comes to investing in Canada.

Taking all of this on board, there’s definitely a way to rescue the CETA.  If the EU can do their bit and get their act together and get the Germans and Belgians to agree, we could remove the ISDS provisions with an agreed protocol that calls for its further review of those articles. Both sides could then agree to provisionally implement the critical parts of CETA, most importantly the tariff reductions that Brussels alone has control over.

Full ratification (with or without ISDS) could come later when all 28 EU members approve it under internal EU procedures. In the meantime, forward progress would be made in opening trans-Atlantic markets.

Some might argue that it’s too dangerous to open up an agreed treaty text because the consequences are unforeseen and could lead to the entire structure crumbling. But this really isn’t a renegotiation of the agreement. It’s a matter of removing a part of it for further study. And without embarking on some kind of rescue mission like this, the whole CETA venture could die anyway.

CETA is too important for both sides to have it go down in flames over a particular part of the agreement that neither side considers essential.


Addendum: This proposal would side-track the ISDS part only but keep intact the other provisions in the CETA investment chapter, including the obligations on both Parties (meaning Canada and the EU member States) to ensure that foreign investors and their investments are treated in a non-discriminatory manner and on an equal footing with national investors.

The result would that Canada or the EU could still bring a Party-to-Party dispute to arbitration if these treaty obligations were not complied with. The proposal would also keep intact the proposed investment court which would handle these Canada-EU disputes.