This morning, the European Court of Justice has decided that the investor-state dispute resolution mechanism in CETA is legal, but this has serious consequences and citizens will not accept them.

This morning, the European Court of Justice has issued its decision that the controversial investor-state dispute resolution mechanism in the EU-Canada trade agreement is compatible with EU law.

Known as ISDS or ICS, the mechanism enables multinational investors to sue states for compensation if their investments in that country do not return as much profit as they expected following the introduction of a new law or policy, for example to protect labour rights or the environment.

The Court’s opinion on the mechanism’s compatibility with EU law was requested by Belgium in 2017, following serious concerns raised by citizens over its implications for democracy and the rule of law.

Dutch MEP, Anne-Marie Mineur, comments on the decision:

“It is regrettable that the European Court of Justice has decided to allow this system of VIP rights for multinational investors which damages and denies the full functioning of our national and EU legal systems.”

“The fact that multinational investors can still question decisions taken by democratically elected parliaments is seriously concerning. States must have the right to regulate in the best interests of their citizens without the fear of an extremely expensive ISDS claim.

The Court’s decision did entail some positive aspects, for example that the tribunals established under CETA cannot make awards that could prevent the EU institutions from operating in accordance with EU law and that the powers of the tribunals would not extend to enabling them to dispute the protection of democratic decisions to protect the public interest.

However, Mineur highlights that “the positive aspects remain limited in comparison to the wider scope of the decision, and it remains to be seen in practice whether these words will have any real mitigating impact.”

“It may be the Court’s decision, but European citizens still do not want the possible consequences. We in the political left will continue to denounce any form of ISDS arbitration alongside the millions of citizens who have protested against it.

“This decision adds to the list of increasingly political decisions made by the European Court of Justice which have negative consequences for human rights and environmental sustainability in the EU.”

“In the interest of democracy and equal treatment – as well as its own legitimacy and stability – the European Union must still reconsider better options for investment dispute resolution such as the domestic legal systems of the member states,” Mineur concludes.

A range of alternatives to the ISDS and ICS mechanisms in EU trade agreements, as well as ways to mitigate their worst impacts, are outlined in this GUE/NGL position paper.