The lobby of large companies pushes to create an arbitration court to protect their investments in the EU

The lobby of large companies is pushing to create an arbitration court in the EU. This is the conclusion of a report by Corporate Europe Observatory (CEO) to which has had access, which confirms that the European Commission is preparing a proposal to protect cross-border investments in the EU that will be published in autumn 2021.

According to the CEO, "There are worrying signs that the new proposal could include new legal privileges for corporations, something that big banks, law firms and big business lobbyists have been pushing for." The entity's fears is that a new EU court exclusively for corporations "could make European governments pay huge sums of money to big companies as compensation for regulations introduced to protect workers, consumers and the environment. ", in line with what happens with the arbitrations of the Energy Charter Treaty. "The serious financial risk that such a court would create, of having to pay considerable damages, could ultimately discourage governments from regulating in the public interest," states the Corporate Europe Observatory.

According to the documents to which the CEO has had access, "the lobbying campaign for new legal privileges began after a landmark ruling by the EU Court of Justice (CJEU) in March 2018." In that ruling on the Achmea case, the Luxembourg-based court ended dozens of bilateral investment treaties (BIT) between EU Member States by considering arbitrations in treaties between countries or investors of the European Union illegal.

These treaties allowed investors to bypass national courts when state decisions impeded their investments and thus sue member states in courts created by three private lawyers. The CJEU held that this type of dispute resolution mechanism (known as Investor-State Dispute Resolution or ISDS) was illegal as it bypassed EU courts. As a result, approximately 130 bilateral treaties are currently being resolved within the EU.

"The court's ruling shook the business and legal community, given the risk it posed to the considerable profits they had made from the ISDS processes," the report states: "Business lobbyists quickly mobilized and began to pressure the European Commission to create a new parallel justice system, similar to the old BITs within the EU, but compatible with EU law. "

The new report from the Corporate Europe Observatory reveals details of its lobbying campaign. For example, that in "in 2019 and 2020, the pressure groups of large companies held at least a dozen meetings with the department responsible for the European Commission, the general direction of FISMA (Financial Stability, Financial Services and Market Union Capital), according to internal documents published through the EU freedom of information rules ".

Large companies "also flooded the European Commission inboxes with letters and documents calling for a new corporate court. At high-profile events, company executives repeated the message that there is now not enough legal protection for corporations. in the EU, "explains the CEO's report.

"Large banks, such as Germany's second-largest bank, Commerzbank, financial associations, including the European Banking Federation and the Deutsches Aktieninstitut shareholder lobby, and other relevant large-company lobby groups, such as BusinessEurope and the Association of Large French Companies -AFEP), were particularly active in the lobbying campaign, "says the report, which highlights that" company lawyers and, more recently, lobby consultants were also hired. "

According to the documentation, the message from large companies and their lobby groups was always the same: the resolution of bilateral treaties within the EU would "leave investors without adequate legal protection" in the EU internal market ( as the German lobbyists wrote in a June 2019 letter to the Community Executive).

In addition, they warn: "This lack of protection may induce EU companies to invest outside the EU", with the effect of "lower capital inflows into the EU and fall in tax revenue", as a document from European Banking Federation of July 2019 citing the Corporate Europe Observatory report It is therefore imperative, in the eyes of large companies, that the European Commission create a new legal framework to protect EU companies.

On the other hand, the alarmist claim by the industry that the end of bilateral treaties within the EU leaves investors without adequate legal protection has loopholes. For starters, because within the EU investors can rely on a long list of rights and protections, including the right to property, non-discrimination, to be heard before an authority, to an effective remedy and to a fair trial. Furthermore, no audit on the quality of the EU justice systems shows any evidence of systematic abuse of foreign investors in EU Member States. "This lack of evidence means that it would be very difficult to justify special legal protections for corporations, as opposed to, for example, journalists or human rights defenders," the document states.

Therefore, "the key demand of large companies is the creation of a new system for resolving investor-state disputes within the EU that allows the industry to bypass the national courts of the EU Member States." To do this, several options are proposed, including the hypothesis of a new EU investment court that only companies could access.

The corporations argue that only "the risk of legal proceedings is an incentive for states to engage in dialogue with investors," according to a letter from German lobbyists to the European Commission in June 2019. Thus, "they seek to change the legislation of the EU to reflect wildly speculative damage calculation methods so common in international investment law. " Indeed, provisions such as fair and equitable treatment should "be codified, specified and further developed in the new EU legislation", according to Commerzbank and Deutsches Akieninstitut, explains the Corporate Europe Observatory: "This would run the risk of increasing the costs of the public interest regulations in the EU, making it easier for companies to obtain large amounts of compensation paid by the treasury. "

A European Commission document from September 2020 outlines options "concerning both for investor rights and for the new system for resolving investor-state disputes within the EU, including the creation of a specialized investment court at the EU level. the EU ", while" the Commission also seems interested in establishing new privileges for companies to intervene even more and earlier in political processes ".

Introducing new investment law rules and a community-based system to enforce them could ultimately "discourage and prevent governments from regulating in the public interest when their proposals are opposed by powerful economic players," the report states. This is how clear was made by EuroChambres, the Association of European Chambers of Commerce: "Companies are not against measures that protect common interests that are important to society in general, however, they cannot be detrimental to investments of the companies".

Trade unions, consumer and environmental organizations are vehemently opposed to new special rights for foreign investors. As noted by the Austrian Chamber of Labor: "While the Commission has long ignored requests from workers to create minimum social standards for the EU, complaints about a lack of protection for investors, on the other hand, have led to immediately to the European Commission to carry out a consultation on the subject ".

"Despite having been defeated previously, it seems that the super rights of ISDS investors are making a comeback once again, "the report states:" If the business lobbying campaign is successful, a new EU-wide system of business privileges could drive a long-term strategy by large companies to undermine democracy and favor corporate profits, at a substantial cost to the public. But if this proposal is rejected, it could mean the end of companies using their own parallel justice system to sue governments for having the audacity to legislate in the public interest. "


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