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Germany seeks to limit investor protection to save trade deal

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Berlin is unlikely to reject the investment protection clauses wholesale, as this would sink the entire deal. Instead, negotiations are likely to focus on areas of particular concern to the German public, such as environmental protection.

Financial Times | 4 August 2014

Germany seeks to limit investor protection to save trade deal

By Jeevan Vasagar in Berlin and Christian Oliver in Brussels

Germany is pushing for curbs on the ability of investors to sue governments in the EU’s imminent trade accord with Canada, widely seen as a forerunner to a bigger transatlantic agreement with the US.

The EU struck a political agreement on a trade accord with Ottawa last year but the deal has become mired in negotiations over investors’ rights. Berlin fears that German standards of environmental and consumer protection could be undermined by investor protection clauses in the agreement with Canada.

Berlin could still reject the entire trade deal – which requires the approval of all 28 EU governments – if no compromise is reached. Sigmar Gabriel, Germany’s powerful economics minister, has led opposition to the clauses that give foreign companies access to arbitration proceedings that are a legal alternative to national courts.

Mr Gabriel warned earlier this year: “Many people in Germany fear that through such arbitration, individual states could be pressurised and policy objectives circumvented by the threat of damages.”

European politicians are especially wary of investor-state dispute settlement (ISDS) clauses in the Canadian deal because they will be seen as a blueprint for the EU’s Transatlantic Trade and Investment Partnership with the US, potentially the world’s biggest trade accord, due for conclusion next year.

The German government expects the Canadian deal will be agreed at an EU-Canada summit in late September but believes that some changes could be ultimately needed in the final wording.

According to a German official familiar with the deal, Berlin is unlikely to reject the investment protection clauses wholesale, as this would sink the entire deal. Instead, negotiations are likely to focus on areas of particular concern to the German public, such as environmental protection.

Advocates of ISDS say such clauses offer security to investors and note that companies rarely defeat governments in important cases. But critics argue that countries will be vulnerable to legal action in politically explosive areas such as environment, food and health.

Tanja Alemany, a spokeswoman for Germany’s economy ministry, said Berlin would only make a final decision on whether to approve in September when the final text has been agreed.

“That’s when we’ll say: ‘make or break’. Basically, we are positively disposed towards it, but not towards the investor protection [clauses] – that we regard critically,” she said.

The deal is estimated to be worth an extra €11.6bn ($15.6bn) annually in gross domestic product in the EU and an extra €8.2bn annually in Canada, according to a joint study by the European Commission and the Canadian government.

The case comes as several officials in Brussels say that Germany’s commissioner, Günther Oettinger, who currently holds the energy portfolio, is a leading candidate to take the EU’s top trade job in the autumn. A German in the trade role would be an important factor in TTIP talks, as Berlin’s trust in Washington has been severely rocked by a spy scandal this year.

Markus Kerber, managing director of the BDI, the German employers’ organisation, urged the government to go ahead with the EU-Canada accord.

He did not foresee a problem with investor protection clauses. “Germany has such agreements with 120 countries and we have not had an argument,” he said.

Additional reporting: Stefan Wagstyl in Berlin


 source: FT