CETA on hold for now

A free trade agreement between Canada and the European Union that was agreed in principle in August appears to have been put on ice for the time being.

The Comprehensive Economic and Trade Agreement, CETA, was supposed to be signed in a formal ceremony on September 26. The text of the proposed agreement had been finalized on August 5, 2014, after months of wrangling.

The deal was expected to serve as a blueprint for a similar agreement with the United States called the Transatlantic Trade and Investment Partnership (TTIP) - and that may be one reason why CETA has been put on hold.

Brigitte Zypries, deputy minister of the German economic affairs ministry, declined to give background details on who intervened to halt the CETA process and why.

Non-government organizations who campaigned against the agreement, by contrast, were happy to comment - including Christoph Bautz, CEO of Campact, a public interest campaigning platform. Campact organizes petition drives on various policy topics and presents the results to politicians.

Bautz attributed the stoppage of CETA to German Vice Chancellor Sigmar Gabriel, who is also Germany's Minister of Economic Affairs and Energy.

"Sigmar Gabriel apparently pulled the emergency brake in Brussels, and prevented the completion of the CETA deal," Bautz wrote on a Campact blog. "That's a big success of the broad citizens' movement against TTIP and CETA."

Each EU member country must ratify CETA

On Monday (22.9.2014) in Berlin, Zypries presented an expert's report on behalf of the economic affairs ministry that is intended to provide a formal rationale for the decision to delay the CETA approval process. The core argument is that the draft CETA agreement is structurally a "mixed" agreement, i.e. the contracting parties are not just Canada and the European Commission, but also the individual European Union member states.

"The EU by itself doesn't have all the jurisdictional competencies for the full range of issues, goods and services treated in CETA," according to Franz C. Mayer, a law professor at the University of Bielefeld who authored the report for Gabriel and Zypries's ministry.

As long as it remains unclear who the contracting parties actually are, in relation to all parts of the draft CETA text, the text cannot serve as a legally complete agreement and cannot become law, Mayer concluded.

The consequence is that the parliaments of all 28 European Union member states must approve CETA for it to become law. This entails the risk that CETA could fail, if one of the member states refuses to approve it, Mayer noted.

In Germany, ratification would involve both chambers of the federal parliament, the Bundesrat and the Bundestag. In a question-and-answer document, the economic affairs ministry wrote that experience shows the ratification process would therefore take "at least two years".

The Q-and-A document also says that the parliament of the European Union would not be able to deal with the proposed CETA agreement before the end of 2015. Since due process requires that the EU parliament must approve the agreement before the agreement of the member states can be sought, this implies that CETA could be signed at the end of 2017 at the earliest.

Zypries says Germany can live with CETA

This doesn't mean that any basic changes are likely to be made to the CETA text, however. Zypries said that "Germany can live with CETA." She left open the question of whether or how changes could be made to the text during the parliamentary review and ratification process.

She did say, however, that changes would require the approval of a majority of EU member states. In response to reporters' questions she admitted that Germany might be interested in seeking changes in relation to "questions of sovereign debt restructuring".

For now, though, the EU Commission is still insisting that it has sole jurisdiction over the approval of free trade agreements like CETA. Germany's government doesn't agree, and together with other member states, Germany now plans to stop the EU Commission's attempt to push through the agreement on its own.

The outcome is uncertain. If the EU Commission doesn't back down, then the European Court of Justice will have to decide, Zypries said.

Overprotected investors?

The ministry of economic affairs also presented a second expert's report, assessing the clauses covering investor protections and courts of arbitration foreseen in the draft CETA agreement.

The second report was authored by Stephan Schill, an international law expert at the Max Planck Institute for Comparative Public Law and International Law in Heidelberg

CETA's and TTIP's investor protection clauses are seen with particular skepticism by a large segment of the German and European public. There is a concern that investors would be able to sue governments whenever particular laws are not to their liking, and demand enormous compensation payments for foregone profits.

But Schill sees little reason for such worries. According to Schill, Germany's existing investor protection laws would take precedence over CETA's provisions, which he believes would mainly benefit German investors in Canada.

Zypries added that CETA would improve protections for investors in other EU member states - and not in Germany, which she said has, in this regard, the highest standards in Europe. If Germany is willing to live with lower standards in CETA, it's because "the other member states have to be brought on board."

Greater transparency for courts of arbitration

In conversations held separately from the event at which the two expert reports were presented, economic affairs ministry officials told DW that CETA would only enable an investor to make a claim after an investment had already been made. For example, investors could sue if they suffered material damages as a result of a new law passed after their investment was made.

Schill argued that when such cases occur and independent arbitration processes are invoked, these must be a great deal more transparent than has been the case to date in other jurisdictions where free trade agreements apply.

But CETA, in its current form, foresees no appeal mechanism for an arbitrator's decision.

Activists want CETA stopped, not delayed

Vice Chancellor Gabriel's several roles include being chairman of Germany's social democratic party (SPD). At a party congress on the weekend, Gabriel obtained general approval for continuing negotiations for CETA and TTIP.

In the lead-up, Gabriel had set out some red lines for the negotiations, including a rejection of arbitration panels and investor protection clauses. That position is in direct contradiction to the two expert opinions his ministry obtained from Franz Mayer and Stephan Schill, and to deputy minister Zypries's position - which is that they have no general problem with arbitration panels and investor protection clauses.

"If the SPD wants to stay credible, clear actions are needed now, not vague words," said Campact's Christoph Bautz.

"Sigmar Gabriel must reject the CETA deal negotiated by the EU Commission, because it contradicts all the conditions set by the SPD for TTIP and CETA."