A hitch in the negotiations for the potentially lucrative Canada-Europe Comprehensive Economic and Trade Agreement – or CETA – has pushed investor rights back into the spotlight.
Word leaked this week that a finalized deal between Canada and Europe is being held up over German concerns that the deal would grant too much power to investors to challenge the country’s policy decisions.
German officials have promised their concerns won’t scuttle the deal. However it would appear the issue will need to be dealt with before CETA can be finalized.
The Macdonald-Laurier Institute has for years been pushing reform of investor-state arbitration.
The problem for investors
In 2011, MLI published a commentary calling for changes to the system. The piece, titled “Towards a Rules-based System of Trade and Investment”, argues that Canada’s record on dispute resolution shows the system isn’t working.
Author Gus Van Harten, a professor at the Osgoode Hall Law School at York University, said when the commentary was released that “Canadian investors have an abysmal record in investor-state arbitration”.
As a result, he warned that CETA risks perpetuating a flaw in Canada’s trade model.
Fixing CETA: The way forward
The solution, says Van Harten, resides in the document that governs trade within Canada. The Agreement on Internal Trade may be lacking when it comes to the ability to break down interprovincial trade barriers, but he believes it serves as a useful model for resolving the shortcomings of CETA.
Van Harten offers several recommendations:
- A pre-set roster from which all arbitrators would be appointed;
- An objective method to select tribunal chairs where the parties do not agree;
- Rigorous checks on outside remunerative activities by arbitrators;
- A binding code of conduct for arbitrators;
- A duty to resort to reasonably-available local remedies, especially in the case of states with mature domestic court systems; and
- An independent screening process to weed out claims that are frivolous, harassing, or unlikely to succeed.
“These adjustments would remove apparent conflicts of interest among investor-state arbitrators”, concluded Van Harten. “They would support a fair and neutral process of dispute settlement, as an integral part of a rules-based system of trade and investment. And they fit closely with the values and interests of Canada as a trading nation committed to the rule of law”.
Van Harten also published an op-ed on the subject in October 2011.
