The US government and European Commission insist that the inclusion of a corporate sovereignty chapter in the TAFTA/TTIP treaty will not in any way diminish the ability of nations to pass laws as they wish. A fascinating case involving an investment in Romania shows why that’s just not true. It concerns a state aid scheme instituted by Romania to attract investments in the country, which offered tax breaks or refunds of customs duties on raw materials. The scheme was supposed to remain in place for 10 years. But as part of Romania’s accession to the EU, it was required to cancel this scheme, which was regarded by the European Commission as providing unfair state aid. So, obediently, Romania abolished the scheme in 2005, some years earlier than it had promised.
That didn’t go down too well with investors. Two of them were able to use the investor-state dispute settlement (ISDS) clauses of a bilateral treaty between Sweden and Romania to sue the latter. Here’s what happened next, as described in the European Commission’s press release:
An arbitral award of December 2013 found that by revoking an investment incentive scheme in 2005, four years prior to its scheduled expiry in 2009, Romania had infringed a bilateral investment treaty between Romania and Sweden. The arbitral tribunal ordered Romania to compensate the claimants, two investors with Swedish citizenship, for not having benefitted in full from the scheme.
Just part of the price of joining the European Union, you might think. But the European Commission is unhappy that compensation has been paid:
By paying the compensation awarded to the claimants, Romania actually grants them advantages equivalent to those provided for by the abolished aid scheme. The Commission has therefore concluded that this compensation amounts to incompatible state aid and has to be paid back by the beneficiaries.
That is, both the original state aid and the subsequent compensation for not providing that aid for the full term of the agreement are regarded as forbidden under EU law. So the European Commission is ordering Romania somehow to pull back from the Swedish investors the compensation awarded by the ISDS tribunal. Leaving aside the difficulty of doing so, even if Romania manages that, it will then be in breach of the corporate sovereignty tribunal ruling, which could leave it open to further legal action, and further awards against it. On the other hand, if it doesn’t rescind the compensation, it will be fined by the European Commission.
This provides a perfect demonstration of how corporate sovereignty provisions in treaties take away the ability of national governments to act freely. Moreover, in this particular case, whatever Romania chooses to do, its people will suffer financially.
Tag: European Comission
Angry Austrian could turn Europe against the US – thanks to data
In a David versus Goliath battle, an Austrian law student may topple the biggest EU-US data sharing deal when he gets his day in court in a couple of weeks’ time.
Max Schrems, who set up the Europe v Facebook group, alleges that Facebook violated the so-called safe harbour agreement which protects EU citizens’ privacy by transferring personal user data to the US National Security Agency (NSA).
The European Court of Justice (ECJ) will hear details of the case on 24 March.
Schrems first appealed to the Irish Data Protection Commissioner to investigate his claims. He was refused on the grounds that Facebook was signed up to the safe harbour agreement and so could transfer data to the US with impunity.
Under European data protection law, companies can only transfer consumer data out of the EU to countries where there is an “adequate” level of privacy protection. As the US does not meet this adequacy standard, the European Commission and the US authorities came up with a workaround and, in 2000, set up the voluntary safe harbour framework whereby companies promise to protect European citizens’ data.
These promises are enforced by the US Federal Trade Commission – but since the Snowden revelations, there has been doubt these promises are worth the paper they’re written on.
EU Commissioner Wants to Abolish Netflix-Style Geoblocking
Due to complicated licensing agreements Netflix is only available in a few dozen countries, all of which have a different content library.
The same is true for many other media services such as BBC iPlayer, Amazon Instant Video, and even YouTube.
These regional blockades are a thorn in the side of Andrus Ansip, Vice-President for the Digital Single Market in the European Commission. In a speech this week he explained why these roadblocks should be abolished.
“Far too often, consumers find themselves redirected to a national website, or blocked. I know this from my own experience. You probably do as well,” Ansip said.
“This is one of many barriers that needs to be removed so that everyone can enjoy the best Europe has to offer online. It is a serious and common barrier, as well as extremely frustrating,” he added.