System of private corporate courts rightly shot down by ECJ

Welcoming today’s European Court of Justice ruling that Investor-State Dispute Settlement (ISDS) mechanisms within the single market are incompatible with EU law, GUE/NGL MEPs have said the announcement must spell the end of such corporate courts in Europe.

Investor-State Dispute Settlement rules allow foreign investors to bypass normal public courts to sue governments if they bring in laws that affect their potential profits. Some corporations have already used it to collect millions from governments by claiming damage to their profit margins by public interest decision-making on topics like workers’ rights, environmental protection, energy and public health policy. This ultimately puts enormous pressure on public-interest law-making.

Reacting to the ruling, Dutch GUE/NGL MEP Anne-Marie Mineur said she was “very happy with this ruling, as the European Court of Justice makes a very clear and powerful statement about the bilateral investment treaties between member states.

“We have always argued that this type of investment protection is in conflict with the European legal system, and we feel supported by this ruling. We are hopeful that the upcoming ruling about the CETA agreement with Canada will be a next step in ending this hateful practice,” she said.

The decision concerns a dispute between the Dutch company Achmea and the Slovakian government, a textbook example of why ISDS is such an unwanted instrument. The Slovak government decided that profits generated by sickness insurance would no longer be paid to investors, a very justifiable step to take. However, Achmea tried to use the ISDS clause in the bilateral treaty between the Netherlands and Slovakia, and the arbitration panel found in favour of that claim. The European Court of Justice has now annulled that ruling, and by doing so, undermined the ISDS clauses in all 200 bilateral investment treaties between member states. The ruling could also restrict the use of special justice for investors, such as ISDS, ICS*, and undermine the Commission's project for the Multilateral Investment Court.

German GUE/NGL MEP Helmut Scholz also welcomed the Court's decision:

“The tribunals used by corporations to sue governments do not operate on the basis of constitutional law. They are simply not courts, regardless of whether you call them ISDS or ICS. They operate outside the law governing our citizens, and even considered their rulings as something above the law. The Court of Justice of the EU has now stopped this for agreements concluded between EU Member States. I hope for the same legal approach to be applied in the upcoming decision on the conformity of investment arbitration panels in CETA with our Union law."

The Court’s decision is available here.

* ICS: Investment Court System - essentially a rebranding of ISDS started in 2015 in reaction to massive public outrage over ISDS.