The leaked text of an EU-Canada free trade deal confirms fears that multinationals may sue EU states in special tribunals for enacting laws that upset their profit forecasts, and now campaigners question the public consultation on a free trade deal with the US.

The leaked EU-Canada Trade Agreement (CETA), signed last November and due to be unveiled on 25 September, contains a controversial chapter on Investor-State Disputes Settlement (ISDS) that is substantially unchanged from previous drafts.

These were used by the EU in March to get stakeholder responses to negotiations for a similar TransAtlantic Trade and Investment Partnership (TTIP) with the US. At the time, the Commission said that it would seriously consider all 150,000 responses.

But the use of the draft’s unamended wording in the final CETA treaty - before the results of the public consultation have even been analysed - show that it was little more than a PR stunt, according to Kenneth Haar, a spokesman for Corporate Europe Observatory.  

“The Commission is not really serious about its own consultation,” he told EurActiv. “It's more about image than substance. Though they [CETA and TTIP] are two separate agreements, I think those who chose to respond to the Commission's consultation are being ridiculed.”

The ISDS chapter was “an outright danger to democracy” he argued, because it enabled a mechanism to block attempts by national governments to legislate in the public interest.  

US officials routinely play down the likelihood of companies actually bringing ISDS-based lawsuits - or winning substantial damages if they do - while Commission officials stress the advantages a TTIP deal could offer to European businesses, whose lobbies have pressed hard for it. 

Looking after the investors

Speaking at the European Policy Centre in June, Rupert Schlegelmilch, the services and investment director at the Commission's trade directorate, argued that an ISDS chapter was needed because legislation designed to protect foreign investors in not always embedded in national statute.

"Because today's world is so integrated, in order for governments to support the competitiveness of their companies and protect their investors, it is necessary for them to look after their investors' international agenda," he said.

But TTIP-sceptics point to a raft of cases like the $250-million (€191-million) lawsuit launched by the US oil and gas firm Lone Pine Resources challenging a shale drilling moratorium in Quebec under similar Chapter 11 provisions of the North American Free Trade Agreement (NAFTA).

Lone Pine argues that the shale ban was “arbitrary, capricious and illegal,” as it had invested millions of dollars in obtaining permits to drill in Quebec before it was announced.

Such cases have darkened prospects for a TTIP agreement, with reports that Germany is restive over ISDS, and the incoming EU president, Jean Claude-Juncker, revealing that he too is uneasy about its implications.

Juncker speaks out on TTIP

“I don’t understand why great democracies would not have faith in the judiciary,” Juncker told Green MEPs. “We have courts which are able to deal with cases that are brought to them, and so I’m not really in favour of what one could call ‘private courts’ or arbitration bodies which may sometimes reach good decisions but don’t always have to justify their decisions.”

Lawmakers in the new European Parliament may also throw chairs in the way of any agreement, while the European ombudsman has opened two investigations into a lack of transparency in the EU’s conduct of the talks.

Canadian media reports anticipate a change to the current ISDS text to reflect European concerns, as the treaty completes a two-year slog through the EU institutions before gaining approval.

 “The clause on investor-state dispute settlement is by now completely obsolete,” said Jos Dings, the director of the Brussels-based environmental think tank Transport and Environment. “People all over Europe have woken up to how this will make them have to pay for litigation by foreign investors.”

“The only right thing to do is to take the clause out of CETA,” he told EurActiv. “It is an excellent opportunity for Juncker to match his fine words on this issue with action.”