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The German Magistrates Association (DRB) has dealt a major blow to one of the key elements of the TTIP deal. The judges said special courts allowing firms to sue countries were unnecessary and "had no legal basis."
The German Magistrates Association (DRB) has delivered a slap in the face to the European Union, by coming out against one of the key planks of the Transatlantic Trade and Investment Partnership (TTIP) - the special courts allowing investors and corporations to sue national governments if their policies happen to threaten their profits.
"The DRB sees neither a legal basis nor a need for such a court," the association said in a statement issued on Wednesday. The judges added that the assumption that foreign investors currently don't already enjoy "effective judicial protection" has no "factual basis."
Part of the TTIP deal proposed by the European Commission is a new Investment Court System (ICS) meant exclusively to protect investors. According to the DRB statement, the European Commission's definition of an investor's assets is so wide it effectively gives the ICS jurisdiction that "extends from civil law through to general administrative law and social and tax legislation." In other words, it potentially gives corporations the opportunity to sue governments over any piece of legislation it deems a threat.
The judges said the ICS represents a threat to the sovereignty of legal systems already in place in Europe, and they put little faith in the EU's ability to manage it: "The German Magistrates Association has serious doubts whether the European Union has the competence to institute an investment court," the statement read. "An ICS would not only limit the legislative powers of the Union and the Member States; it would also alter the established court system within the Member States and the European Union."
The judges' statement is being celebrated as a serious setback for the TTIP negotiations by the deal's opponents, not least because the ICS was meant to be a compromise to assuage critics' concerns.
The ICS was proposed by EU trade commissioner Cecilia Malmström as a permanent and organized alternative to the improvised courts in the current investor-state dispute settlement (ISDS) and which are currently used in trade deals between individual countries.
"The EU offices must be in turmoil now," said Nick Dearden of UK-based campaign group Global Justice Now. "They were really nervous about ever getting through an agreement that had ISDS in it, because every time they've done consultations on it people have overwhelmingly said they don't like it. So they put this on the table."
"[The judges' statement] is obviously more interesting than when some campaigner says something, because they're actually going to have to administer this thing," he added. "For us it's probably the most significant statement that any group has made so far on that part of the agreement.
"Is it really right that a foreign investor would have access to a whole legal process that an ordinary European citizen wouldn't have access to?"
Now, according to Dearden, the ICS proposal looks "dead in the water," especially since the US didn't want any reform of the ISDS process in the first place. So the judges' verdict effectively turns Malmström's initiative into a compromise that no one wants. In response to a request for comment, Malmström's office merely referred DW to a statement from last September, which said that the ICS had been approved by the Commission.
The German Justice Ministry defended the ICS proposal. "An investment court may well be necessary, because the US investor protection allowed by TTIP may not be enforceable in national courts," the ministry said in an emailed statement. It added that ICS was only designed to rule on compensation claims, and were therefore not a direct threat to national legislation.
Suing countries: A new legal industry
Though it's not new for companies to sue national states, more and more legal companies have come to specialize in such cases in recent years. "They have been pushing the interpretation to its absolute limit," said Dearden. "The famous example is Philip Morris the tobacco company suing Australia and Uruguay for putting cigarettes in plain packaging or putting health warnings on them. They're claiming that is an exploitation of their assets simply because they're not going to be able to make the profit they thought they would."
Up until now, the US and EU member states have largely been spared such cases, because investment courts have been contained in trade agreements between individual states. But, says Dearden, the advent of TTIP would potentially "open every country in Europe and the European Union itself to every American-based transnational corporation."
For instance, he argued, whenever a European government passed legislation to protect the environment, a US company may sue.
"This is certainly a very notable statement [from the judges]," said Klaus Ernst of the opposition Left party. "An international trade agreement is being put in doubt and actually declared unlawful. This is a blow for all special courts."
"We don't need any special courts," he told DW. "Every special court is a violation of the European court system."
The TTIP deal, currently being negotiated between the US and the EU, promises to create a vast new free-trade area that the European Commission says will boost the world economy. But many trade unions, NGOs and environmental groups fear that the resulting deregulation will lower consumer standards, while not increasing the wealth of average households - since most products traded across the Atlantic already enjoy very low tarifs. Nearly 3.3 million Europeans have signed a "Stop TTIP" petition.
The transparency of the negotiations has also been a major issue in Germany - as a compromise, the economics ministry this week opened a reading room to see some of the documents relating to the negotiations. It is open to all members of the German parliament, but they are forbidden from revealing any sensitive information.