Prof. Axel Flessner on the free trade agreements, the possibilities of the Federal Constitutional Court and the failure of politics
The most controversial ie of the two trade agreements CETA and TTIP is the arbitration provided for therein according to the ISDS mechanism. Despite the strong resistance that can be felt in some parts of the SPD base, Axel Flessner, professor emeritus of law at Berlin’s Humboldt University, expects that the SPD will vote for CETA by a majority in the Bundestag. However, he sees chances in this case that the federal trial court could have prevented the president from signing the consent law. Over 17.000 citizens of Germany have so far supported an action for a preliminary injunction.
If the investor protections of the TTIP agreement with the U.S. became law, U.S. corporations could challenge a German ban on gas demand through fracking. They could demand billions of dollars in compensation from the state, the amount of which was not determined by independent courts but by three private business lawyers under ISDS (Investor to State Dispute Settlement). Do you think this fear is justified?? Axel Flessner: The fear is justified in the event that the American company has invested in Germany and sees its investment reduced in value or its activities in Germany hindered by the non-admission of fracking. However, the ISDS arbitrators, who are appointed by the World Bank under an international agreement or by the parties themselves, may be persons other than lawyers – e.g.B. businessmen, business consultants, academics, former judges, and government officials who are knowledgeable in international legal and economic transactions. The contents of the two planned trade agreements with Canada and the USA, CETA and TTIP, go far beyond trade. The planned right of corporations to sue states before private arbitration bodies would clearly limit the sovereignty of the states involved. But isn’t that in line with the legal situation, now that EU member states have ceded competence on trafficking ies to the EU? Axel Flessner: The EU has been given this competence, but only for matters for which it may also regulate within the Union, and it must exercise this competence in accordance with its fundamental principles, such as democracy and the rule of law. For example, the Union does not have the right to prohibit member states from imposing taxes for economic reasons that are compatible with the European Treaties per se, or to determine member states’ cultural policies, such as schools, universities, and the operation of theaters and museums. But CETA is supposed to allow foreign investors to sue against new taxes and levies – for example, if Germany introduced a property tax or a road toll – and foreign investors were allowed to challenge state funding of theaters as an anti-competitive subsidy. In your opinion, to what extent have the previous powers of the Bundestag and the parliaments of the other EU member states been reduced?? Axel Flessner: The parliaments had to take into account the financial liability of their state for the robbery of an indefinite number of North American investors before any law affecting the economy was passed; they are thus intimidated and induced to make considerations that are actually irrelevant to the matter at hand. Moreover, if the state is actually ordered to pay and has to pay, their budgetary sovereignty – a central parliamentary right in democracy – will be! – is thwarted. On the proposed agreement with Canada, Professor Andreas Fischer-Lescano of the University of Bremen has serious concerns about the "Regulatory cooperation" presented. In a report commissioned by Attac, he complains in particular about the gross influence of the proposed "Joint Committee" (Joint Committee), which is to be formed from executive representatives of the EU and Canada, and its administrative substructure. This committee can be.B. obtain exemption from import duties and also extend other rules. Can you imagine how the participation of the EU Parliament is to be ensured?? Axel Flessner: It’s hard to imagine. The participation of the EU Parliament in legislation is regulated in the European Treaties. These can only be changed and supplemented by all member states together, not by the EU itself, i.e. not even by an international agreement to be concluded by the EU. How do you rate the chances that the conservative majority in the EU Parliament and the majority in the German Bundestag (CDU) will vote in favor of the Tamagotchi?? Axel Flessner: Rather low. Even among social democrats, many are impressed with the growth and jobs argument put forward for the agreements, and Christian Democratic conservatives and social democrats have the rough majority, joined by liberals. In the Bundestag, there is also the fact that for the SPD, government participation is also in play, and German politics is very reluctant to upset the U.S. and stand as a European stubborn cemetery. According to the German constitution "all state power emanates from the people". If CETA indeed reduces the power of the people’s representatives, did not the Federal Constitutional Court have to intervene in case of a constitutional complaint?? Would it be able to prevent the German president from signing the treaty even after a majority approval by the Bundestag?? Axel Flessner: The Federal Constitutional Court can also be asked for legal protection in advance against laws which, if they were later held by the court to be unconstitutional and void, could no longer be corrected. A German law approving CETA or TTIP would be such a case. If the EU Parliament, the EU Council and all other member states also agree, the agreement would then have become European law according to the European Treaties, if the other contracting party (Canada, USA) also agrees, and a later decision by the Federal Constitutional Court could not change this. In order to prevent this, the court could order the President of the Republic to refrain from signing the Consent Act until the court’s decision, and, if it considered the consent to be contrary to the treaty, it could then definitively prohibit him from signing it. CETA has been negotiated in secret for years, and the text of the agreement has only recently become available in German in an unofficial translation. The treaty includes the requirement that foreign companies be "justly and cheaply" (fair and equitable), a very elastic formulation. It is not suitable for opening the door to arbitrary decisions by private arbitrators – who are not, as a rule, judges? Axel Flessner: The arbitrators have certainly been carefully selected by the governments involved, the EU Commission and the World Bank, and they have a reputation to lose. The text of CETA diminishes the elasticity of "fair and equitable" also by narrower additional definitions. That is why it is not possible to speak about further opening for Willkur. However, the fact remains that arbitrators are appointed and paid by the disputing parties for the specific dispute, therefore they will also act with their own interests in mind and do not have to strive for consistency in their decisions with previous decisions of other arbitrators in other cases. The demand for a world court for commercial matters instead of private arbitration has recently become louder and louder, even the German Minister of Economics Gabriel has now expressed sympathy for it. To conceive and realize such a world court, however, would require a long time. Is it conceivable for you that such a substantial change can still be incorporated into CETA, for which the ratification process is to begin in a few months?? Axel Flessner: That seems inconceivable to me. After all, CETA could only be about a European-Canadian court, not a world court. Even a bilateral common court would be a completely new concept of investor protection, which the professional circles involved (governments, international organizations, academia) are not at all prepared to conceive and discuss, having devoted themselves for decades to the objectionable special jurisdiction for foreign investors. There was also massive resistance to this, especially from the World Bank and the circles working for it, which had to reckon with a drying up of their previous arbitration jurisdiction. How can it be explained that the serious constitutional concerns about the free trade agreements with Canada and the USA have hardly been noticed by the public so far?? Is this a failure of the media?? Axel Flessner: First of all, this is a failure of politics. So far, it has ignored the constitutional ambiguity of the agreements – firstly, perhaps, because it was not initially imagined in Europe that the European states that export capital could one day be dragged before the arbitration courts as importers of capital, then perhaps out of a sense of familiarity with the seemingly well-functioning system of the many bilateral agreements, and probably also due to prere from the domestic economy. With each agreement, the latter gains an additional legal option for claims and actions abroad, which it would not have had without the agreement. And finally, politicians, at least those of the governing parties, do not like to hear that their freedom of movement could be limited by the constitutional law. However, the problem of constitutional law is obvious today. The media could also pick up on this. Why they don’t remains conjecture – editorial convenience, ownership of media companies, and political herd behavior could all play a role.
Axel Flessner recently gave a lecture on this topic at a legal symposium of the Max Planck Institute.