Monthly Archives: March 2018

Plastic Waste Emergency in Caribbean Sea: What is the Region Doing About It?

Alicia Nicholls

The 2.75 million square km Caribbean Sea’s ecological value is perhaps only outweighed by its economic value to the countries and territories, many of which are small island developing states, whose major industries and the livelihood of their populations depend on the health of the marine environment.

A 2016 World Bank Report entitled Toward a Blue Economy: A promise for Sustainable Growth in the Caribbean estimated the total gross revenues of the Caribbean ocean economy at US$407 billion based on 2012 data. Considering only the Caribbean small island States and territories, these gross revenues were estimated at US$53 billion, equivalent to over 18 percent of the total GDP for all Caribbean Island States and Territories in 2012″, according to this report.

Threats to the Caribbean Sea are numerous, but one of the biggest is the accumulation of plastic waste material.  The above-mentioned World Bank Report noted that the Caribbean Sea “is estimated to have relatively high levels of plastic concentrations compared with many other large marine ecosystems”.

Major culprits are plastic shopping bags, as well as Styrofoam containers and plastic cutlery which are commonly used by street food vendors, food establishments and at festivals and parties. These materials take hundreds of years to decompose, while in the meanwhile clogging drains and being blights on the beaches and other landscape. Plastic waste is often transported through waterways into the ocean via normal rainfall or flooding, and poses serious danger to marine life and coral reefs, with knock-on effects for fisheries, food security and tourism.

Legislative approaches

Several countries in the Caribbean have taken steps to tackle the plastics problem. Haiti was among the first, banning the importation, marketing and sale of plastic products in 2012 by presidential decree, with mixed results.

In 2016 Guyana banned the importation, sale and manufacture of expanded polystyrene products (styrofoam) and its regulations have served as a model for several other countries. Bans on the importation, sale and/or manufacture of various plastics have also been done in Antigua & Barbuda, Aruba, St. Vincent and the Grenadines, and the US Virgin Islands.

In Antigua & Barbuda, for instance, the External Trade (Shopping Plastic Bags Prohibition Order) of 2017 prohibited after June 30, 2016 the importation, distribution, sale and use of shopping bags, except for those set out in the schedule. Another order, the External Trade (Import Prohibition) Order of 2017 takes a phased approach to banning certain polystyrene items, such as food service containers, utensils and the like. However, airline carriers, private charters and passenger cruise vessels are exempted from these rules. According to news reports, while larger retailers have been generally adhering to the ban, achieving compliance by some small retailers has been more challenging.

Some other Caribbean countries are also contemplating similar measures. In 2017 the Government of Jamaica appointed a multi-stakeholder committee to make recommendations regarding plastic and Styrofoam. A petition has been launched by activists in Trinidad & Tobago for banning plastics.

Market-based approaches 

Market-based approaches have also been used to a limited extent, such as imposing point of sale charges for plastic bags as a disincentive to consumers. In Barbados, for example, a well-known environmental charity lobbied to have retailers charge consumers extra for plastic bags, and to encourage consumers to opt for reusable bags, with some limited success.

Lessons Learnt So far 

  1. Strong enforcement and monitoring are needed to ensure compliance with the regulations. Under the Guyana Regulations, for example, the Environmental Protection Agency is empowered to conduct inspections and investigations to ensure compliance with the ban.
  2. Fines should be high enough to serve as a deterrent to non-compliance. In the US Virgin Islands, businesses found to be in violation are liable to a civil fine of not less than US$500 nor more than US$1,000 for each day of violation.
  3. Fines collected should be allocated towards some kind of environmental fund, environmental or waste management improvement agencies or programmes. Under the US Virgin Islands’ legislation, the monies collected are to be allocated as follows: 75 percent to the Virgin Islands Waste Management Authority; and 25 percent to the General Fund of the Treasury of the Virgin Islands.
  4. The penalty for non-compliance is generally fines or a term of imprisonment. However, community service is another option which could be used.
  5. Resistance by consumers and some business owners has delayed the implementation of the bans in some cases. Retailers incur losses from unused stock, and some consumers see the measures as an inconvenience or just another  tax. A phased approach is, therefore, preferable to allow retailers, wholesalers and the like time to get rid of as much of the stock, and shift to more environmentally-friendly products, while also giving the relevant implementing agency and civil society time to educate the public about the importance of the measures to be introduced. A possible option is also the issue of incentives, such as tax waivers for the importation of environmentally-friendly substitutes.
  6. As such, legislative and/or market-based approaches have to be married with strong stakeholder engagement, public education and sensitisation campaigns to change ingrained cultural behaviours and attitudes towards the use and disposal of plastics, to educate the public about the environmental harm caused by marine waste, to encourage public buy-in and to show persons more environmentally-friendly alternatives. To this effect, the Guyana Regulations mandate the Environmental Protection Agency to “offer guidance on, promote and encourage the utilisation of recyclable, biodegradable and other environmentally friendly products as containers, or packaging for food products”. The St. Vincent & the Grenadines Regulations also provide for the same.
  7. On-going monitoring of the impact of these measures is crucial in order to determine their effectiveness and what adjustments are needed in ensure the desired results are being  obtained. This requires conducting an adequate baseline study before the measures are implemented and collecting data on a regular basis.
  8. Besides curbing plastic consumption, another problem is proper waste management. Latin America and the Caribbean accounted for 12% of waste generation by region per year, according to a World Bank publication. According to the publication, “the total amount of waste generated per year in this region is 160 million tonnes, with per capita values ranging from 0.1 to 14 kg/capita/ day, and an average of 1.1 kg/capita/day.” Within this grouping, the largest per capita solid waste generation rates are found in the islands of the Caribbean, the Report notes. As such, encouraging individuals, households and businesses to reduce their waste, recycle and to find more environmentally sustainable ways of managing waste is vital.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Advertisements

Caribbean Trade & Development Digest – March 18-24, 2018

Welcome to the Caribbean Trade and Development Digest for the week of March 18-24, 2018! We are pleased to share some of the major trade and development headlines and analysis across the Caribbean region and the World. We hope you enjoy this edition.

REGIONAL

CDB programme to support increased trade among CARICOM states

St. Kitts & Nevis Observer: The Board of Directors of the Caribbean Development Bank (CDB) has approved USD$750,000 in funding for a programme that will assist the Caribbean Community (CARICOM) with strengthening intra-regional trade. Read more 

Is Guyana ready for an oil boom?

Eurasia Review: Guyana’s story shares many similarities with the story of the ugly duckling. One of the poorest countries in South America, it has historically been entirely dependent on oil imports. Read more 

Catfish exports

Stabroek (Guyana): It is incomprehensible that the government here was given notification by the US government in November, 2015 of new regulations for Siluriformes (catfish) and failed to take all of the required steps to enable continued exports from Guyana. Read more 

North America continues to dominate imports into the TCI -Gov’t makes moves to improve trade with Caribbean neighbours

Turks & Caicos Weekly News: The North American Free Trade Agreement (NAFTA) continues to dominate imports into the Turks and Caicos Islands, accounting for $394.1 million or 91.1 percent of the total import bill for 2017. Read more 

What is the value of CARICOM to Curacao and Sint Maarten (and to ALL Caribbean nations)?

St. Lucia Star: Earlier in March news broke that the Caribbean Community (CARICOM) was officially assessing the application of Curacao and Sint Maarten for associate membership. These two islands are separated by 900 km of water but they share a cultural heritage, central bank, and a view that within CARICOM a brighter future awaits them. Read more 

Lessons from EPA must inform Post-Cotonou Agreement – Trade Expert

Business Ghana: Mr Tetteh Hormeku, Head of Programmes at the Third World Network, has advised governments in the African, Caribbean and Pacific (ACP) countries to use lessons from the Economic Partnership Agreement (EPA) for the post-Cotonou possible framework. Read more 

INTERNATIONAL

Forty-four countries sign historic African Union free trade agreement

Africa News: Forty-four African countries have signed up to a historic trade agreement aimed at paving the way for a liberalized market for goods and services across the continent. Read more

Fiji-PNG discuss trade relations with UK post-Brexit 

Fiji Times: The United Kingdom has begun the process of exiting the European Union (EU) and in this endeavour, it is working with the African, Caribbean, and Pacific (ACP) countries to avoid any trade disruptions, during and post-withdrawal. Read more 

Brexit: Government still planning for no deal scenario

The Independent: David Davis has said the Government will continue to plan for a no-deal scenario despite reaching an agreement with Brussels on the transition period last week.  Read more 

Mercosur “blocks” talks on auto exports and government procurement contracts, claims EU

Mercopress: European officials said this week that significant obstacles remain to a long-delayed trade deal between the European Union and Mercosur, even as South American officials expressed optimism a deal would be finalized soon. Read more

Heatwaves, hurricanes, floods: 2017 costliest year ever for extreme weather and climate events, says UN

Mercopress: Hurricanes, monsoon floods and continuing severe drought made 2017 the costliest year ever for severe weather and climate events, according to a new report by the United Nations weather agency launched on the eve of World Meteorological Day. Read more 

India Hosting Mini-Ministerial meet to break WTO impasse 

Economic Times: Taking a lead to break the impasse, India is hosting a two-day informal meeting of 50 WTO members here which would deliberate upon ways to create a positive atmosphere for carrying forward the mandate of the global trade organisation.  Read more

G20 pushes for free trade as U.S. vows to defend national interest

Reuters: World financial leaders pleaded for an endorsement of free trade on Monday amid worries about U.S. metals tariffs and looming trade sanctions on China, but Trump administration officials said they would not sacrifice U.S. national interests. Read more

 

China threatens to raise tariffs on about $3 billion of U.S. imports

Washington Post:  President Trump embarked Thursday on the sharpest trade confrontation with China in nearly a quarter-century, moving toward imposing tariffs on $60 billion in Chinese goods and limiting China’s freedom to invest in the U.S. technology industry. The Chinese government fired back hours later, threatening to hit $3 billion in U.S. goods with tariffs. Read more 

US and South Korea Reach Agreement on Trade, Steel Tariffs

Bloomberg: The U.S. and South Korea reached an agreement on revising the allies’s six-year-old bilateral trade deal and President Donald Trump’s plan to impose tariffs on imported steel, Treasury Secretary Steven Mnuchin said. Read more 

EU Commission welcomes adoption of negotiating directives for a multilateral investment court

EU: The Commission welcomes today’s adoption by the Council of the negotiating directives for a multilateral investment court, as well as the fact that for the first time the Council makes its negotiating mandate public right at the time it is adopted. Read more 

WTO members raise concerns over US tariffs on steel and aluminium at Goods Council

WTO: WTO members expressed concern over the United States’ imposition of higher tariffs on steel and aluminium imports and the impact they may have on the global trading system at a meeting of the Council on Trade in Goods on 23 March, the same day the new US measure came into effect. The US responded by saying that the tariffs are necessary to address the threat these imports pose to national security. Read more 

Appellate Body issues report regarding Russian duties on vehicle imports from Germany, Italy

WTO: On 22 March 2018, the WTO Appellate Body issued its report in the case “Russia — Anti-Dumping Duties on Light Commercial Vehicles from Germany and Italy” (DS479). Read more 

WTO issues compliance panel report regarding US countervailing duties on Chinese imports

WTO: On 21 March a WTO panel issued its compliance report in the dispute “United States — Countervailing Duty Measures on Certain Products from China — Recourse to Article 21.5 of the DSU by China” (DS437). Read more

Liked this issue? To read past issues of our weekly Caribbean Trade & Development Digest, please visit here. To receive these mailings directly to your inbox, please follow our blog.

Brexit: Provisional Transition Deal Struck between EU and UK

Alicia Nicholls

A provisional agreement has been struck between the European Union (EU) and the United Kingdom with regard to the terms of the latter’s withdrawal from the EU.

The 129-page provisional withdrawal agreement touches on a wide number of areas from  residence, employment rights and social security systems to public procurement and cooperation in criminal and civil matters. The Agreement provides for a transition period lasting from the date of entry into force of the Agreement until 31 December 2020.

Most of the provisions have been agreed to, with some remaining areas still subject to further negotiation. One of these unresolved areas is the Draft Protocol on Ireland/Northern Ireland.

A key concession is that the UK will be able to negotiate trade deals with third States during the transition period.

Some aspects of the provisional deal, however, have received some push back in the UK. A particular sore point is that UK fishing policy will continue to be Brussels-controlled during the transition period, although the agreement provides for the UK to be “consulted”.

More details to come

The text of the provisional agreement may be found here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Caribbean Trade & Development Digest – March 11-17, 2018

Welcome to the Caribbean Trade and Development Digest for the week of March 11-17, 2018! We are pleased to share some of the major trade and development headlines and analysis across the Caribbean region and the World. We hope you enjoy this edition.

REGIONAL

Work to begin on new CARICOM Strategic Plan

Barbados Advocate: By year end the CARICOM Secretariat will be hard at work getting the framework in place for the new strategic plan for the Caribbean Community. Read more

CSME MER Framework Workshop 

Barbados Advocate: It is imperative that systems be put in place to more effectively monitor and evaluate the CARICOM integration journey. So says Dr. Richard Brown, Director, CARICOM Single Market and Sectoral Programmes. Read more 

CARICOM observer mission releases preliminary statement on Grenada elections

CARICOM: At the invitation of the Government of Grenada the CARICOM Secretariat constituted an eleven-member team to observe Grenada’s Parliamentary Election held March 13, 2018.The full statement may be read here.

Protecting consumers in the CSME

CARICOM: It is important to consider the protection of the consumer as many persons now engage suppliers in a different jurisdiction. This was posited by a senior official from the Caribbean Community (CARICOMSecretariat during the Barbados Fair Trading Commission’s (FTC) annual lecture series held in Barbados. Read more 

INTERNATIONAL

EU Lists US Exports it could hit 

CNNMoney: The EU has published a list of hundreds of American products that it could target if President Donald Trump moves forward with new tariffs on imports of steel and aluminum. Read more 

EP wants to include gender equality in free-trade agreements

EURACTIV: The European Parliament has adopted a resolution to better account for gender equality in trade agreements. The commission could follow up on the resolution in its agreement with Chile, which would be the first to integrate such a chapter. Read more 

India-EU trade: India, EU to decide fate of trade agreement next month

Economic Times: New Delhi: India and the European Union will discuss next month resumption of the much-delayed Bilateral Trade and Investment Agreement (BTIA) that hasn’t progressed much over the past five years. Read more 

Vietnamese farmers expect higher profits with CPTPP

Vietnam Net: At least $40 billion worth of export turnover from farm produce in 2018 is within reach, some experts believe. Read more 

Trade deals a priority at ASEAN-Australia summit 

Australian Financial Review: Prime Minister Malcolm Turnbull is pushing for free trade deals with Indonesia and the wider region to be signed by the end of this year, as he insisted there were “no protectionists” around the table at the ASEAN-Australia summit in Sydney. Read more 

Buhari cancels Rwanda trip, reconsiders signing African trade agreement

Premium Times: President Muhammadu Buhari has cancelled his trip to Kigali, Rwanda scheduled for Monday. Mr. Buhari was expected to attend an Extraordinary Summit of the African Union (AU) on Tuesday, March 21, to sign the framework agreement for establishing the African Continental Free Trade Area. Read more 

Top five trade deals that changed history

World Finance: Today, the global trading network is well established, but it has taken multiple decades and various trade agreements to reach the current degree of complexity. Read more 

Jordan suspends free trade agreement with Turkey

Ahval: The Jordanian government suspended a free trade agreement with Turkey, citing unfair competition, the Jordan Times reported. Read more

Winners and Losers in an EU-UK agreement

Financial Times: Read the article here.

Indonesian President Widodo wants a free trade agreement with Australia

Sydney Morning Herald: Indonesian President Joko Widodo will push to sign off an Australia-Indonesia free trade agreement when he meets Prime Minister Malcolm Turnbull this weekend, declaring that only “technical” details were delaying the deal. Read more 

The Globe and Mail: Now that International Trade Minister François-Philippe Champagne has put Canada’s signature on the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) agreement, the doors to the Asia-Pacific are about to crack open for Canadian businesses. Read more 

Severing NAFTA ties harms much more than trade

The Hill: U.S. ties with Mexico and Canada touch the daily lives of more Americans than ties with any other two countries in the world. Trade, border connections, tourism, family ties and mutual security concerns link us closely, but we are endangering those links and our wellbeing by a contentious modernization of the North American Free Trade Agreement (NAFTA). Read more 

What impact will trade agreements have on global food markets?

Devex: The political uncertainty surrounding the Trans-Pacific Partnership Agreement and North American Free Trade Agreement, as well as the implications of Brexit, has left experts struggling to understand what their impacts will have on markets — particularly in developing countries. Read more 

BONUS

Trade War Bad for Region

My commentary in the Business Authority of March 18 (page 15) on the possible fall-out of any trade war between the US and other major trading powers on the Caribbean.

Liked this issue? To read past issues of our weekly Caribbean Trade & Development Digest, please visit here. To receive these mailings directly to your inbox, please follow our blog.

Caribbean Trade & Development Digest – March 4-11, 2018

Welcome to the Caribbean Trade and Development Digest for the week of March 4-11, 2018! We are pleased to share some of the major trade and development headlines and analysis across the Caribbean region and the World. We hope you enjoy this edition.

REGIONAL

CARICOM Institutions talk CSME Free Movement of Persons

CARICOM: The Caribbean Community (CARICOM) Secretariat this week engaged regional institutions based in Barbados on the processes for Free Movement of persons under the CARICOM Single Market and Economy (CSME). Read more 

Trade Stakeholders from the Public and Private Sectors in St. Kitts and Nevis to Explore Importance of Trade in Services

WINN FM: Trade stakeholders from the public and private sectors are currently participating in a three day Seminar on the General Agreement on Trade in Services (GATS) in St. Kitts and Nevis with the aim to better understand the importance of services sectors from an international trade perspective. Read more 

CARICOM Reviews Dutch Territories’ Applications For Membership

Curacao Chronicle: Even as the Caribbean Community (CARICOM) continues to examine the issue of an enlargement policy, heads of government have mandated the secretary-general to begin negotiations for associate membership by the Dutch territories of Curaçao and Sint Maarten. Read more 

CARICOM seeking to step-up implementation of building codes

St Kitts & Nevis Observer: Recognising that implementing building codes is still a significant challenge to the region’s efforts to build resilience, CARICOM heads of government have asked the Caribbean Disaster Emergency Management Agency (CDEMA) to provide recommendations to expedite implementation of the codes. Read more 

Regional Standards to be set for quality and safety of coconut water 

Barbados Advocate: Given concerns about food safety issues in relation to the quality of coconut water sold at retailers in Barbados and across the region, efforts are being made to establish regional coconut water quality standards and protocols, to better protect consumers. Read more 

Chastanet supports OECS oversight of Citizenship by Investment

St Lucia Times: Prime Minister, Allen Chastanet, has said that Saint Lucia supports the idea of the Citizenship by Investment Programme (CIP) being run out of the Organisation of Eastern Caribbean States (OECS). Read more 

Consumer Protection in Digital Era is CARICOM goal

St. Kitts & Nevis Observer: It is important to consider the protection of the consumer as many persons now engage suppliers in a different jurisdiction. This was posited by a senior official from the Caribbean Community (CARICOM) Secretariat during the Barbados Fair Trading Commission’s (FTC) annual lecture series held 8 March at the Accra Beach Hotel & Spa in Barbados. Read more 

Exports down in January

Breaking Belize News: Belize’s exports got off to a rough start in 2018, falling by more than 20 percent when compared to January 2017, according to the Statistical Institute of Belize (SIB). Read more 

New trade dispute brewing with Jamaica 

Trinidad Guardian: Jamaican manufacturers say they intend to approach the island’s Anti-Dumping and Subsidies Commission after accusing their T&T counterparts of dumping flour onto the local market. Read more 

Barbados No.1 with travellers

Nation News: Seventy thousand travellers across the world have chosen Barbados as their place to visit in the 2017 Destination Satisfaction Index (DSI). Read more

Concern that Caribbean women are still being marginalised

Barbados Today: The economic progress of women in Barbados and the Caribbean as a whole continues to be thwarted, despite gains made in some areas, a senior Jamaican trade official has said. Read more 

INTERNATIONAL

11 countries sign revamped TPP trade deal without US

The Star (Malaysia): Eleven nations signed a slimmed-down version of the Trans-Pacific Partnership (TPP) trade agreement, moving to lower tariffs just as US President Donald Trump seeks to raise them after withdrawing from the deal. Read more 

In full: Theresa May’s Speech on future UK-EU Relations

BBC: Here is the full text of Theresa May’s Mansion House speech setting out her vision for the UK’s relationship with the EU after Brexit. Read more 

Africa: Women-Friendly Trade – What Can Governments Do Better?

AllAfrica: Informal cross-border trade is one of the oldest forms of economic survival for women. Prevalent across Southern and Eastern Africa, the plight of women traders are well-documented, but policies still tend to overlook their specific needs.  Read more

2018 USTR Trade Agenda Highlights WTO Reform, FTA Talks

ICTSD Bridges: US Trade Representative (USTR) Robert Lighthizer released the latest version of the annual President’s Trade Policy Agenda last week, outlining the administration’s plans for the coming year. Read more 

Brexit: EU rejects Theresa May’s trade plan

The Independent (UK): The EU has rejected Theresa May’s vision for a post-Brexit trade relationship, laying out its own plans and warning that her choices will have “negative economic consequences” for Britain. Read more 

Report shows extent of endangered animal trade between Africa and Asia

CNN: The report says that almost 1,000 at risk but legally exportable species have been transported from dozens of African nations to countries in East and Southeast Asia between 2006 to 2015. Read more 

Theresa May’s Brexit plan to register millions of EU citizens risks descending into ‘chaos’

Business Insider: Theresa May’s plan to register 3 million EU nationals ahead of Brexit risks failure due to under investment and government fears of a backlash by the Daily Mail, a senior former Home Office official has told Business Insider. Read more 

Trump tariffs: China warns trade war would be ‘disaster’

The Guardian: Any trade war with the United States will only bring disaster to the world economy, the Chinese commerce minister Zhong Shan has said, as Beijing stepped up its criticism of metals tariffs introduced by the White House. Read more 

Canada, Mexico Stick to Nafta Plan After Trump’s Tariff Reprieve

Bloomberg: While Donald Trump ’s tariff gambit spared his NAFTA partners for now, Canada and Mexico are pledging it won’t make them budge at the bargaining table. Read more 

NAFTA termination could result in loss of 85k jobs in Canada: report

Global News: The Conference Board of Canada is predicting a 0.5 per cent decline in the country’s economy resulting in the loss of about 85,000 jobs within a year if the North American Free Trade Agreement (NAFTA) is terminated. Read more 

Donald Trump signs order for metals tariff plan, prompting fears of trade war

The Guardian (UK): Trump pushes forward with plan for 25% tariff on imports of steel and a 10% tariff on aluminum, but says exceptions will be made. Read more 

Trump threatens with tariffs on European cars as trade war looms

Deutsche Welle: US President Donald Trump has once more attacked the EU over trade barriers and threatened to slap a tax on imports of European cars. His comments come amid fears of a trade war over new US steel and aluminum tariffs. Read more 

Commission extends anti-dumping measures on Chinese steel products

EU: The Commission today prolonged the existing anti-dumping measures on Chinese imports of seamless pipes and tubes of stainless steel for another five years. Read more

EU halts trade barrier investigation after Turkey lifts restrictions on paper

EU: The EU officially halted its probe into trade barriers in Turkey after the country removed measures concerning imports of a particular variety of paper. Read more 

European Commission outlines EU plan to counter US trade restrictions on steel and aluminium

EU: The College of Commissioners discussed today the EU’s response to the possible US import restrictions for steel and aluminium announced on 1 March. Read more 

European Commission responds to the US restrictions on steel and aluminium affecting the EU

EU: The European Commission takes note of the announcement by the President of the United States of the imposition of restrictions in the form of an import surcharge on EU exports to the US of steel and aluminium. Read more 

Members adopt catalogue of instruments for managing food safety, animal, plant health issues

WTO: WTO members successfully concluded almost four years of discussion by adopting the “Catalogue of Instruments” available to WTO members for managing sanitary and phytosanitary (SPS) issues, at an SPS Committee meeting on 2 March. Read more

Azevêdo calls on members to avoid triggering an escalation in trade barriers

WTO: DG Azevêdo warned of the risks posed by such measures, calling on members to reflect and avoid escalation. Read more 

Least-developed countries urge WTO members to facilitate use of services waiver

WTO: At a meeting of the Council for Trade in Services on 2nd of March chaired by Ambassador Julian Braithwaite (UK), least-developed Countries (LDCs) called on WTO members to undertake capacity building measures that would enable their suppliers to take advantage of preferential treatment notified under the LDC Services Waiver. Read more

NEW ON CTLD BLOG

ECJ rules arbitration clauses in Intra-EU BITs contrary to EU Law

Liked this issue? To read past issues of our weekly Caribbean Trade & Development Digest, please visit here. To receive these mailings directly to your inbox, please follow our blog.

ECJ rules arbitration clauses in Intra-EU BITs contrary to EU Law

Alicia Nicholls

In a landmark and much-anticipated judgement delivered on Tuesday, March 6th, the European Court of Justice (ECJ) ruled that arbitration clauses in bilateral investment treaties (BITs) concluded between European Union Member States were incompatible with, and had ‘an adverse effect’ on EU law.

The background to the judgement involved a claim brought against the Slovak Republic by a Dutch private sickness insurance services subsidiary, Achmea, after the former had briefly prohibited the distribution of profits generated by private sickness insurance activities. This prohibition was later ruled unconstitutional by that country’s Constitutional Court, and Achmea subsequently brought a claim for damages under the Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and Czechoslovakia (Netherlands- Slovak Republic BIT), to which the Slovak Republic had succeeded upon Czechoslovakia’s dissolution.

In 2012 an arbitral tribunal established in Frankfurt am Main, Germany, pursuant to Article 8(2) of the Netherlands-Slovak Republic BIT found in favour of Achmea and ordered the Slovak Republic to pay 22.1 million euros in damages. As German law applied (since Frankfurt am Main was the chosen place of arbitration), the Slovak Republic turned to the German courts to have the arbitral award set aside.

The Slovak Republic argued that the arbitration clause in Article 8 of the Netherlands-Slovak Republic BIT was compatible with Articles 18, 267 and 344 of the Treaty on the Functioning of the European Union. Given the importance of this question and its implications for the many remaining intra-EU BITs in force, the German Federal Court of Justice referred this question to the ECJ

In its judgment, the ECJ held that

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the BIT, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.

The ECJ came to its decision based on the fact that arbitral tribunals established under such treaties may be called on to interpret and apply EU law, but could not be classified as a court or tribunal ‘of a Member State’ within the meaning of Article 267 of the TFEU. The tribunals had no power to refer matters to the ECJ and could stop disputes from “being resolved in a manner that ensures the full effectiveness of EU law even though they might concern the interpretation or application of that law”. The Court went further by stating that Article 8 of the BIT in question “has an adverse effect on the autonomy of EU law” and was not compatible with the principle of sincere cooperation.

Unlike state to state dispute settlement, ISDS allows an investor of a party who believes its rights have been violated to bring a claim directly against the host State before an arbitration tribunal. The rationale was that it precluded investors from having to convince their home State to bring a claim on their behalf, and was also borne out of distrust of the courts in host States (usually mainly developing countries).

ISDS has come under much fire, particularly due to inconsistent arbitral rulings (which are final under most BITs with these clauses), the lack of transparency in the process, and the concern about the system’s implications for States’ regulatory flexibility and authority in the public interest, particularly with regard to the protection of public health and the environment. Moreover, for small States, such as those in the Caribbean, the financial and reputational burdens of an adverse judgement are magnified.

In the EU context, intra-EU BITs have long been a controversial issue due to treaty shopping; investors have often favoured the ISDS provisions in intra-EU BITs over EU judicial channels for the settlement of disputes. This is costly for EU Member States having to defend themselves against claims and has implications for the uniform interpretation of EU law.

Newer investment agreements, including BITs,  have increasingly included express language regarding a party’s right to regulate in the public interest,  have considerably narrowed the scope of applicability of ISDS clauses, or have abandoned ISDS altogether. In light of the growing backlash against ISDS within the EU, the European Commission has already signalled that it is moving away from the ISDS model of dispute settlement in favour of an investment court as the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada shows.

Implications for Caribbean BITs with EU countries  

The ECJ ruling is clear that the ISDS clauses in the nearly 200 BITs currently in force between EU member states inter se are incompatible with EU law. What is not so clear-cut is whether this also applies to BITs concluded between individual EU member countries and third States, such as those in the Caribbean. In such cases, the governing law in such disputes might not be EU law but the law of the third State.

While there is little evidence that the existence of a BIT is a major factor in a European investor’s decision to invest in the Caribbean, given that the BITs existing between European and Caribbean countries are generally of an older vintage and in need of modernisation, the time is ripe to have a relook at the regime for the protection and promotion of investment between the EU and CARIFORUM countries which is currently fragmented. Such a review is provided for under Article 74 of the Agreement.

At the time of the negotiation of the CARIFORUM-EC Economic Partnership Agreement, the European Commission only had competence to negotiate market access for investment, which explains why the investment chapter (Chapter 2: Commercial Presence) of the EPA is limited mainly to market access, national treatment, most favoured nation treatment, with some provisions on investor behaviour and a requirement that parties do not lower standards to attract FDI. More extensive investment protection provisions, such as the controversial fair and equitable treatment clauses, are covered in the BITs between individual EU and Caribbean States, many of which were signed before the EPA and also lack the more development friendly provisions of newer BITs.

Conclusion

The ECJ’s ruling is significant and may be considered another nail in the ISDS coffin. It is worth considering what, if any, impact this ruling may have for EU Member States’ BITs with third States, such as those in the Caribbean, and whether it is time to re-examine the regime for EU-CARIFORUM investment as provided for under Article 74 of the EPA.

The full judgement may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.