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‘Tiny’ but Mighty Wallonia Sets Stage for Big Changes to CETA

If controversial investor-state dispute settlement system stays, trade deal doomed.

Craig Scott 31 Oct

Craig Scott is a law professor at Osgoode Hall Law School of York University; former NDP Member of Parliament for Toronto-Danforth.

Last Thursday, Belgium’s different legislatures — including that of the Belgian federal region that journalists loved to characterize as “tiny” Wallonia — agreed to sign the Canada-EU Comprehensive Economic Trade Agreement (CETA).

But exactly what did that signature mean?

A lot less than you would think from all the dramatic rhetoric surrounding Wallonia’s resistance during the week leading up to the signing. Indeed, note how Canada’s Trade Minister Chrystia Freeland immediately shifted on Thursday to signalling there was still a tough road ahead for the deal.

And, at the same time, a lot more than the Trudeau government cares to acknowledge. Because Wallonia and other Belgian regions agreed to sign CETA only on the condition that the controversial investor-state dispute settlement (ISDS) provisions are sidelined.

Let’s start with “a lot less” by noting the limited, even if symbolically important, nature of the hurdle that was cleared last week.

Many Canadians were likely confused by Freeland’s cautious tone on Thursday, especially after her emotional reaction Oct. 21 in Belgium when it appeared Wallonia would block the deal. Many people would assume (reasonably) that the deal is now done.

It’s not.

First, note that the European Union is a supranational grouping of states, and that, under EU law, each of its 28 member states has to authorize the EU to enter into CETA.

As a result, CETA will not enter into full force as a binding international agreement until, in accordance with their individual constitutional processes, member states consent to the EU entering into the treaty.

Under CETA’s own terms, Belgium’s signing — as the last of the 28 EU member states to do so — only allows the trade agreement to enter into “provisional application” status once the EU and Canada sign at the ceremony taking place today.

However, a second-step confirmation of EU member states’ intent to be bound by its terms must still take place.

Second, few European states have Canada’s shaky constitutional rule, inherited 150 years ago from the U.K., that allows the federal government to consent to a treaty without first getting legislative approval. (That said, even in Canada, government usually ensures any new laws needed to implement a treaty are passed by Parliament and, as necessary, provincial legislatures before the agreement is ratified.)

As such, the key thing to note is that in at least some EU states — like Belgium — the relevant legislatures will need to vote on the treaty again before the EU is authorized to finally ratify it.

There is still a very long way to go, especially if we look harder at what Belgium and its federal regions actually signed last week.

Belgium’s signing came with four pages of conditions that have been incorporated as a formal declaration (along with declarations from the EU and other states) into the EU’s confirmation that all European parties have signed.

Consider these five elements of the Belgian declaration.

First, Belgium notes that it is signing CETA knowing that the agreement’s provisional application does not include the investor-state dispute settlement (ISDS) provisions, which would come into effect only after full ratification. The ISDS provisions remove legal disputes over the trade deal’s effects and implementation from national courts and the European Court of Justice to a new process which now is also being called a “court” but which critics charge unduly favours corporate interests and undermines the sovereignty of participating countries.

Second, Belgium serves notice that four of its six federal divisions — not only Wallonia — “do not intend to ratify CETA” if the current provisions for investor-state dispute settlement remain in the agreement. And it notes that if any of the federal units decide not to ratify, then Belgium too will not be able to ratify CETA.

Third, the Belgian declaration notes that three of its federal regions and communities commend a joint statement (the statement is Item 36 in the linked document) on investment protection and CETA’s Investment Court adopted by the European Commission and the European Council. Initially, an earlier version of this statement was used to get some reluctant political parties on board in countries like Germany and Austria, and then it was tweaked to try to assuage continuing concerns as Wallonia was holding out.

The joint statement sets out EU aspirations to improve the ISDS provisions to address concerns about there not being a truly independent and uncompromised Investment Court to adjudicate disputes under CETA. Note that this statement can be read as saying that these changes will occur before ratification. “The Commission is committed to further review, without delay, of the dispute settlement mechanism (ICS), and allowing sufficient time so that Member States can consider it in their ratification processes,” it reads.

Approval of the joint statement in Belgium’s declaration shows some Belgian federal regions expect a renegotiation of the ISDS provisions. CETA’s text is very far from final.

Even then, it’s important to note that Wallonia didn’t join in commending the Council-Commission statement. This suggests that Walloon politicians have less confidence the ISDS provisions can be fixed before ratification or that they wanted to send the message that they will accept only a true court and tweaks will not make the grade — or both.

Fourth, Belgium declares that it will seek an opinion from the EU’s European Court of Justice on whether the ISDS provisions are compatible with the EU’s governing treaties — in relation, one assumes, to the treaties’ provisions about both the rule of law and democratic governance.

Fifth, Belgium draws attention to three inter-related facts: every federal region in Belgium has the constitutional jurisdiction to refuse assent to CETA; all Belgian constitutional partners will evaluate the socio-economic and environmental effects during CETA’s provisional phase; and all states, including Belgium, have the right under a CETA clause to terminate the agreement’s provisional application even before any decision on ratification.

The road ahead

All of this rather suggests that the ISDS provisions of CETA may not be long for this world.

Under Belgium’s democracy-protecting federal structures, “tiny” Wallonia — as it has so often been portrayed by business leaders and politicians trying to pressure it to cave — has turned out to pack a mighty wallop.

Wallonia’s political leadership prevailed in a fight on behalf of all Europeans and Canadians who want to see the end of takeovers of public policy and democratic sovereignty by corporate-rights investment charters smuggled into trade agreements.

But this must continue to be a transnational effort.

Wallonia, Belgium as a whole, and those social democrats and environmentalists of Europe who understand the danger of CETA need ongoing solidarity from Canadian civil society, the NDP, and the Green Party. A nice bonus would be some internal dissent from a slowly awakening group of Liberal MPs who are coming to think, more and more with each passing month, that “progressive” is a much over-used and often empty word in the mouths of Justin Trudeau and his cabinet.

Future efforts by Liberal-Conservative elites in Canada and their neo-liberal partners in Europe to force CETA through will be made even more challenging once Europeans, and hopefully also Canadians, wake up to regressive elements of CETA that go beyond the ISDS provisions.

In particular, once people are alerted to political bamboozling going on in a document entered into by the EU and Canada called the “Joint Interpretive Declaration on CETA,” I predict a rough road ahead for the Liberal-Conservative neo-liberal vision of economic globalization.

Exposure of the misleading (and even misrepresenting) aspects of that interpretive declaration will need to wait for another day. Stay tuned.

* This article was amended Dec. 1, 2016 to clarify the process some European Union member states will go through before final ratification of CETA.  [Tyee]

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