Effects of CETA on Social Standards - eesc.europa.eu€¦ · Effects of CETA on Social Standards Presentation at the extraordinary workers` group meeting 12th may in Malta Prof. Dr

Effects of CETA on Social Standards

Presentation at the extraordinary workers` group

meeting

12th may in Malta

Prof. Dr. Reingard Zimmer

Prof. of Labour Law

Berlin School of Economics and Law

12.05.2017 Prof. Dr. R. Zimmer, Prof. für Arbeitsrecht

2 12.05.2017 2 12.05.2017 2

Structure of the presentation

I. Threat to social standards by investment protection provisions?

II. Labour chapters in trade agreements

I. Effectiveness of provisions in labour chapters

II. Labour chapter of CETA

III. Final conclusions and Recommendations

I. Threat to social standards by investment protection

provisions?

(chapter 8 CETA)


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1. Most favoured treatment (Art. 8.7.1 CETA)

Most favoured treatment (“most-favoured nation, MFN)

Opportunity for investors to invoke other investment agreements concluded by the host country in ques-tion, should these offer more favourable treatment than the BIT concerned;

even if this was not the original intention of the con-tracting parties;

moreover: „import“ of standards from older BITs, even if the content is „bizarre“, like Art. 5.3 of the BIT between Germa-ny and Ethopia from 1951;

These rules could serve as a gateway against parity code-termination of German supervisory boards!!!


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2. „Fair and Equitable Treatment (FET)“ Chapter 8, Art. 8.10 CETA

Most ISDS-procedures (private dispute settlement) are based upon violation of the FET-Standard.

Breach of contract e.g. in CETA (Art. 8.10.2) through: “denial of justice”, “significant breaches of ordinary court proceedings”, “obvious arbitrariness”, “targeted discrimination” or “improper use” (…).

“Legitimate expectations, may be derived from specific assurances which may have been raised in the inves-tors” (Art. 8.10.4 CETA).

These undefined legal expressions were broadly inter-

preted in ISDS proceedings in the past.

ISDS-proceedings based upon

violation of FET-standard: Centerra vs. Kyrgystan (2006): ISDS-procedure by Canadian

mining company after the Kyrgyz government prescribed extra

pay for miners working at high altitude (case still pending or

outcome not accessible to public).

Veolia vs. Ägypten (2012): arbitration based upon the BIT bet-

ween France and Egypt. The city Alexandria had refused con-

tract changes (Veolia wanted to introduce to counter higher

costs, arising among others from the introduction of a national

minimum wage). Due to media reports, Veolia is demanding

€ 82 million in damages (case still ongoing).

Noble Vetures vs. Romania: 2001 ISDS-procedure of US-

commodities group for 365 Mio US $ of damages. Investment

became more expensive due to protests and strikes; although

Romania won the case, the country was facing enourmous

costs, because the costs of the procedure are shared. 6

3. Protection against direct and indirect expropriation

Mandatory compensation in cases of direct or indirect

CETA defines an indirect expropriation like this: “Indirect

expropriation occurs where a measure or series of mea-

sures of a party has an effect equivalent to direct expropri-

ation, in that it substantially deprives the investor of the

fundamental attributes of property in its investment, inclu-

ding the right to use, enjoy and dispose of its investment,

without formal transfer of title or outright seizure” (CETA,

Annex 8-A.1.b).

Even regulative measures reducing the value of an invest-

ment are affected, which might be relevant in terms of

social standards.

12.05.2017 Prof. Dr. R. Zimmer, Prof. für

Arbeitsrecht 7

Example for ISDS-procedure based

upon indirect expropriation

Foresti vs. Südafrika (2007): Claim of investors from Italy

and Luxemburg for compensation (350 Mio. US-$), be-cause

the new act on mining contained elements of antidis-

crimination in favor of black workers (Black Empowerment

Act). Dispute settlement in 2010, after the state made con-

cessions in favour of investors.

Acknowledged as grounds of justification in CETA are:

“non-discriminatory measures” aimed at “legitimate public

purposes”, such as “health, safety and the environment”.

Social standards are not mentioned. 12.05.2017 Prof. Dr. R. Zimmer, Prof. für

Arbeitsrecht 8

II. Enforcement of social

standards through

labour chapter of trade

agreements?

1. Social standards in labour (or

sustainability) chapters

All recent investment protection or trade agreements

(EU, US, …) contain a sustainability or social chapter.

This is the case for CETA (as well as for TTIP).

The ILO counts 75 trade agreements with labour

provisions in 2016.

Reference to ILO core labour standards:

Either to the ILO-declaration from 1998, or

to the core conventions (with specific reference to C. No.

87, 98, …); preferable, because they are interprted by the

supervisory bodies, etc.


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2. Labour chapter in CETA

Safeguarding labour standards against the effects of

trade liberalization?

The parties are required not to “waive or otherwise

derogate from” or “fail to enforce” their domestic la-

bour standards in order “to encourage trade or (…)

investment”, Art. 23.4 CETA.

Soft wording.

(P): Link necessary between the lowering of domestic labour

standards and the intention to encourage trade or investm.

(high standard of proof).

The labour provisions in CETA do not address the re-

lation between the labour provisions and the agree-

ments’ investment provisions. 12.05.2017 Prof. Dr. R. Zimmer, Prof. für

Arbeitsrecht 11

3. Labour standards in sustainability

chapters: two different approaches

EU Trade Agreements: Sustainability chapters are exclu-

ded from „normal“ (ISDS) mechanism of sanctions.

„Sanction“ only via a consultation or complaints mecha-

nism („naming and shaming“); complaints can be filed by

the contracting parties (governments), not by representa-

tives of the civil society (like trade unions).

US Trade Agreements: regular dispute settlement mecha-

nism is applicable to sustainability chapter.

Dispute-settlement mechanism is applied only in rather ex-

ceptional cases on the violation of labour standards (1. case

ever: Guatemala).


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4. Complaint mechanism

EU’s trade agreements do not usually provide

a formal complaint mechanism for third

parties.

Cases have to be brought to national contact

points which examine the case and might

initiate further procedures.


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5. CETA: mechanism of enforcement

CETA: “Committee on Trade and Sustainable De-

velopment” (TSD Committee) for interparty dialogue

on labour matters (Art. 22.4).

Submissions from civil society related to labour

issues can be made to the domestic advisory

groups, Art. 23.8 (5).

Unclear, how these submissions will be handled.

No sanctions for violations of labour or sustainability

provisions; the regular dispute settlement mecha-

nism (ISDS) is expressly excluded for that chapter

(Art. 23.11 CETA).

Final report (experts). 12.05.2017 Prof. Dr. R. Zimmer, Prof. für

Arbeitsrecht 14


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IV. conclusions

The analysis of the free trade agreements illustrates

the tense relationship between state`s interest in re-

gulation and investment protection rules which aim at

protecting investors and their interests.

The current design of chapters on investment protec-

tion trigger a dynamic of a competitive-based deregu-

lation of standards and can be considered as a threat

for social standards.

Unless the investment protection chapter stays the

same, it is rather doubtful weather an annex or a pro-

tocol will change the outcome of ISDS-cases (same

with an investor court system).

Recommendations

concerning CETA (1)

Clarifications concerning the Investment protection

provisions should be added (directly into the invest-

ment chapter), for example:

„Labour law related measures cannot be considered

an expropriation or a violation of the FET standard.“

The MFN-standard is a dangerous and unclear

provision and should be deleted.


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Recommendations

concerning CETA (2)

Addition to Government Procurement chapter:

„The agreement does not prevent the inclusion of labour

standards-related conditions (such as those requiring

compliance with local collective agreements) in any pu-

blic contract“.

The Joint Interpretative Instrument (Oct 2016):

CETA preserves the parties’ ability “to use environmental, so-

cial and labour-related criteria, such as the obligation to com-

ply with and adhere to collective agreements, in procurement

tenders”.

But: The parties will be able to do so “in a way that is not dis-

criminatory and does not constitute an unnecessary obstacle

to international trade”… 12.05.2017 Prof. Dr. R. Zimmer, Prof. für

Arbeitsrecht 17

Recommendations (3)

A priority clause should guaranty, that the

social chapter prevails if there are inconsis-

tencies between the labour chapter and other

chapters.

“If there is any inconsistency between the labour

chapter and another chapter, this chapter pre-

vails to the extent of the inconsistency”.

“The provisions of the labour chapter will be

used to interpret undetermined legal terms of

any other chapter of this agreement”.


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Recommendations (4)

The involvement of trade unions and other ac-

tors from civil society should be integrated into

CETA’s institutional setting as a whole and

should be mandatory rather than voluntary for

the parties.

Trade unions (and other actors from civil socie-

ty) would need direct access to the dispute

settlement mechanism.


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Further reading:

Zimmer, R., The Impact of CETA and TTIP on Social Standards,

in: Hotvedt, Marianne J./ Mulder, Johann/ Nesvik, Marie/ Sundet,

Tron Løkken (eds.), Sui generis - Festskrift til Stein Evju, Universitets-

forlaget, p. 752-764, Oslo 2016.

Zimmer, R., Auswirkungen von CETA und TTIP auf soziale Stan-

dards, in: Soziales Recht (SR) 2/2016, p. 62-76.

Zimmer, R., Sozialklauseln im Nachhaltigkeitskapitel des Frei-

handelsabkommen der Europäischen Union mit Kolumbien und

Peru, in: Scherrer, C./ Hänlein, A. (Hrsg.), Sozialkapitel in Handelsab-

kommen. Begründungen und Vorschläge aus juristischer, ökonomi-

scher und politologischer Sicht, Baden-Baden 2012, p. 141-156.

Ebert, C., The Comprehensive Economic and Trade Agreement

(CETA) between the EU and Canada: Are Existing Arrangements

Sufficient to Prevent Adverse Effects on Labour Standards? ,

forthcoming in ILCLLIR, 2017.


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Thank you very much for your

attention!

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Effects of CETA on Social Standards - eesc.europa.eu€¦ · Effects of CETA on Social Standards Presentation at the extraordinary workers` group meeting 12th may in Malta Prof. Dr