European Court decision that ISDS is incompatible with national legal autonomy undermines ISDS in the TPP-11

April 3, 2018: The European Court of Justice ruled in March that Investor-State Dispute Settlement (ISDS) between two EU member states, which allows corporations to sue governments for damages over changes in domestic law, has an adverse effect on the autonomy of EU law, and is therefore incompatible with EU law.

The Court found that damages awarded to a Dutch private health insurance company against Slovakia by an ISDS tribunal breached EU law. The ISDS claim was made by the company under a Bilateral Investment Treaty because the Slovakian government reversed a decision to privatise health insurance.

The Chair of the International Trade Committee of the European Parliament Bernd Lange (S&D, DE) welcomed the decision, saying that “the decision showed again that the ISDS-system is an unacceptable mechanism to resolve disputes between investors and states, and in particular when it concerns two Member States of the EU. Investors should not be able to attack sovereign democratic decisions through arbitration procedures."

Paul de Clerck, trade campaigner at Friends of the Earth Europe said “the ruling confirmed what citizens across Europe have been saying for years – there is no place for corporate courts to supersede the public interest. It also makes it even more uncertain if trade deals that include parallel legal systems like the Canada-EU agreement (CETA) are even legal under European law. National parliaments across the EU should pull the plug now and reject these unfair trade deals."

The CETA includes a version of ISDS called the Investment Court System. After a request from the Belgian government, the ECJ will rule on whether the Investment Court System is compatible with EU laws.

The EU decision also has implications for ISDS in the revised TPP-11 currently being reviewed by a Joint Parliamentary Committee and a Senate Inquiry, with submissions due by April 20. AFTINET has consistently argued that ISDS undermines democracy and legal sovereignty and will continue to oppose it in the TPP 11 and other trade deals.