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Is CETA a barrier to effective climate policy?

One of the objections to the Comprehensive Economic and Trade Agreement between Canada and Europe (Ceta) is that countries would be surrendering national sovereignty to multinationals which will obstruct effective climate policy. But compared to other trade agreements, CETA is an improvement.

'The aim of an investment treaty is to attract foreign investors’, says Eric De Brabandere, Professor of International Dispute Settlement at Leiden University.  'That’s why there are many investment treaties with developing countries; it is a way of offering extra protection to foreign investors’. Protecting investors is in itself something positive, but what makes the Uniper case stand out is that it is about climate policy.

Via a separate court of arbitration, multinational investors are able to sue a State, like Uniper proposes doing with the Netherlands. States, however, are unable to use the same route to achieve justice. Moreover, provisions concerning investment protection make no reference of public interests, such as the climate, which could carry more weight than the interests of the investor. So businesses have a much stronger position in investment treaties than States, according to Eric De Brabandere.

Though CETA does include a chapter on sustainable development, there is no way to make this enforceable. This is something that concerns all climate agreements, De Brabandere claims: 'Most countries want to take part in free trade and so it is in their interests that all parties adhere to the rules under an enforceable legal system. But this is apparently lacking when it comes to the climate. Contrary to the World Trade Organization agreements, the climate treaty of Paris contains no legally enforceable agreements.'

Whether it will actually come to legal action between Uniper and the Dutch State is by no means certain. Eighty to ninety percent of such cases are settled outside the tribunal. Governments would rather avoid high-profile proceedings that can drag on and involve high costs. 'But the mere threat of proceedings does indirectly have an effect’, De Brabandere says.

Such a threat can be enough to add weight to a claim for compensation. In the case of the coal-fired power plant at the Hemweg in Amsterdam, which was forced to close in early 2020, the government paid €52.5 million in compensation – a lot less than the 1.6 billion that Uniper has referred to in the media.   If Uniper does go through with its threat, all eyes will be on the case. Now that the scope of climate policy is becoming broader and affecting established private interests, it is expected that more legal conflicts will emerge in this area. However, it is by no means certain that Uniper would win such proceedings, according to De Brabandere: 'This ultimately depends on the interpretation of the arbitration tribunal, but times have changed. Arbiters are currently taking more account of public interests and climate policy.'

Read the full newspaper article (in Dutch) in the Groene Amsterdammer

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