Early March 2018, US President Trump announced significant global tariffs on steel and aluminium imports. In reaction to this announcement, EU Trade Commissioner Malmström felt obliged to meet the press and to announce a tough stance against the USA, if necessary. The previous day, on March 6, 2018, the European Court of Justice (ECJ) had taken a landmark decision. The ECJ decided that privilege rules of arbitration for foreign investors in trade agreements between Member States would not comply with Union law.
The plans of the European Commission to counter the tariffs planned by the USA of 25 % on steel imports and 10 % auf aluminium are getting more concrete. At a press conference on March 7, EU Trade Commissioner Cecilia Malmström explained why it was inevitable for the European Union to protect its domestic markets: Based on EC calculations, 15 million tons of steel would be additionally imported to Europe because of the new US tariff. According to the Commissioner, thousands of jobs would be at risk in the EU. The escalating situation was caused by the in any case already existing – in parts subsidised by countries - over capacities on the steel market, because of which the EU had adopted a new anti-dumping calculation method last year already. The base for the protectionist measures of the USA is a clause, which enables the President to initiate such steps based on a threat of national security. Malmström cannot comprehend this argumentation; after all, the EU and the USA would be NATO allies. She spoke of “disguised” economic protective measures” and pointed out that she still hoped the EU would be exempt. However, should this not be the case, the European Union would, consistent with WTO rules, follow three paths, to restore the “balance”. As a first measure one would call upon the WTO, as a second measure, protective measures of the European Market would be possible and with regard to a third, she supported “speedy, balanced measures” against the USA. One would prepare a list of US products, on which the EU could impose tariffs and which European producers could, if required, acquire outside the USA. Malmström vehemently rejected the terms “act of revenge” or “retaliation measure” in this context, as all contemplated steps would be WTO-compliant and because a trade war would harm all involved: hence, protectionism could never be the answer.
Preliminary rulings of the ECJ
Agreements on privilege rules in arbitration– short ISDS (for “Investor State Dispute Settlement”) - in case of trade disputes between member states within the European Union are in violation of Union law, if these disputes are not reviewed by ordinary courts. This was decided by the European Court of Justice on March 6. Apart from egress, the decision affects about 200 similar in bilateral investment treaties (short BITs).
The reason for the preliminary ruling was the dispute concerning an award between Slovakia and a Dutch insurance company: following Slovakia's accession to the EU, the country enabled private insurance companies to enter health insurance. Two years later, the government in Bratislava partly reversed the liberalisation. Subsequently, a Dutch insurance company sued referring to an investment protection agreement between Holland and Slovakia. The court of arbitration ruled that Slovakia had to pay compensation of 22.1 million Euro. According to the ruling, ultimately only ordinary courts can decide such disputes.
Apart from the Chair of the Trade Committee in the European Parliament, Bernd Lange, The Austrian MEP Karoline Graswander-Hainz also welcomed the decision: “It seems as if the old ISDS within the European Union run its course. The Member States must now speedily implement this ruling.”
To which extent this ruling can be regarded as an indicator for the still open decision on the Investment Court System – ICS – with Canada is seen very differently. Whilst not only NGOs are living in hope, the European Commission does not work on the assumption that here a similar ruling might be expected.