By Don Quijones, Spain & Mexico, editor at WOLF STREET. His blog: Raging Bull-Shit.

Amidst the rising drum beats of war and the growing fears of a new banking collapse in Europe (Portugal’s Banco Espiritu Santo), a very important news story seems to have flown below the radar.

Published on July 28^th by the German daily Süddeutsche Zeitung, the article’s basic premise is that the German government will not accept CETA, the Canadian-European trade agreement, if it contains a corporate sovereignty chapter in its present form:

German EU diplomats confirmed in Brussels on Friday that the [German] federal government could not sign the agreement with Canada “as it is now negotiated.” Germany is, in principle, ready to initial the agreement in September, but the chapter on the legal protection of investors is “problematic” and currently not acceptable.

The reason this could be of paramount importance – not only for Germans but for all Europeans, Canadians and Americans – is that the investor state dispute settlements (ISDS) that Germany now seems reluctant to accept are precisely what give trade agreements like CETA, the Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) their long canine teeth: they allow private companies to sue entire nations whenever they feel that a new law lost them money on their investment.

Historic U-Turn

Whether Germany’s reservations are genuine or whether they merely form part of last-minute horse trading is still too early to tell. However, it’s certainly telling that Süddeutsche Zeitung’s allegations come hard on the heels of a statement by Brigitte Zypries, a Parliamentary State Secretary at the Ministry for Economic Affairs and Energy, that Berlin is determined to exclude arbitration rights from the EU-US trade deal (TTIP) as well. “From the perspective of the [German] federal government, U.S. investors in the European Union have sufficient legal protection in the national courts,” she said.

If completed, Germany’s U-turn could well be a serious game changer, for two reasons. First, as home to the largest economy in Europe which is effectively backstopping the cratering economies on the periphery, Germany wields more influence over EU decision making than any other Member State. Second, Germany has been a major advocate of ISDS for decades. Indeed, the first ever bilateral investment treaty (BIT) was agreed between Germany and Pakistan, in 1959.

As the Transnational Institute reports, Germany currently heads the list of states to have signed such agreements, with a total of 139 signed BITs, of which 130 have entered into force. In the vast majority of these agreements investors have the right to apply for international arbitration (investor-state arbitration) when they feel there has been an alleged breach of a treaty provision. This right of action was increasingly included in BITS from the 1980s onwards, but it wasn’t until the end of the 1990s that investors began to widely and offensively sue host states.

Since then, nearly 400 known arbitration cases have been launched under these agreements. However, due to the acute lack of transparency and accountability of the international arbitration system, the total number of cases remains unknown.

What is known, thanks to recent figures published by the United Nations Conference on Trade and Development, is that almost half of new ISDS cases in 2013 were filed against developed countries – most of them against EU member states, including Germany. In the last decade it has been sued twice for billions of euros a piece – and what’s more, by the same company!

An Expensive Battle Over Germany Energy Policy

That company is Berlin-based energy giant Vattenfall AG, a subsidiary of Vattenfall AB, which is wholly-owned by the Swedish state. Vattenfall’s first complaint, for €1.4 billion, came on the back of Germany’s decision to reduce the damaging effects of carbon dioxide emissions from a coal-fired power plant owned by Vattenfall.

Then, following the Fukushima disaster, Germany decided to close a nuclear power plant also owned by Vattenfall, which hit back by taking the country to the International Centre for Settlement of Investment Disputes. The Swedish firm claims that it has suffered no less than €3.7 billion in losses and lost profits resulting from the government’s decision to phase out nuclear power.

Interestingly, neither of Vattenfall’s challenges argues that its power plants are actually safe or environmentally sound; the sole focus is on protecting investors from losing money. As I wrote in “The Global Corporatocracy Is Just A Few Strokes of a Pen From Completion,” it is this exclusive focus on investor rights – at the expense of all other considerations – that is at the root of all that is wrong with the new generation of “free” trade treaties:

If allowed to take universal effect, the system will impose above you, me, and our governments a rigid framework of international corporate law designed to exclusively protect the interests of corporations, relieving them of all financial risk and social and environmental responsibility.

But now Germany appears to be getting cold feet, having had a bitter foretaste of the potential consequences of handing over what remains of its national sovereignty to the Global Corporatocracy. If, in the end, Merkel’s coalition government does refuse to sign on the dotted line, the European Commission will have little option but to take the ISDS clause out; because of the nature of CETA and TTIP, all 28 EU member states must approve it before it is fully ratified.

The European Commission is not happy at the prospect; nor, it seems, is the Canadian government. Without these clauses, a Canadian company would hardly ever invest in Europe, the Commission’s trade department told the Süddeutsche Zeitung. The EC’s claim, however, is ludicrous: according to the Commission’s own figures, bilateral investment between the EU and Canada is flourishing. In 2012, the total investment by EU companies in Canada was €258 billion, while Canadian investment in the EU was €115 billion – 45% of the EU’s, even though Canada’s population is only 7% of the EU’s.

Contrary to the European Commission’s scaremongering, Canadian companies are perfectly happy to invest in Europe on a massive scale even without ISDS. The inescapable conclusion is that ISDS is therefore unnecessary, and can be dropped from CETA – and for that matter from the TTIP as well!

But then ISDS was never about trade; it was always about usurping sovereignty from nation states and planting it in the grasping hands of our corporations.

Yet the resistance, it seems, is on the rise. With growing ranks of countries beginning to question the legitimacy of ISDS, including France, Australia, Malaysia, Brazil (which has never included ISDS in its trade and investment treaties), Ecuador, India and South Africa, the future of corporate sovereignty may not be quite so bright after all. For the global citizenry, it represents only a razor-slim glimmer of hope, but at least it’s something. By Don Quijones. An exclusive for Wolf Street.

Meet the secretive powers behind the trade negotiations that attempt to rewrite US and EU laws and regulations to their liking and beyond democratic controls. Read…. Behind the Curtains: How The Corporatocracy Is Driving the US-EU Trade Agenda

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