The Greek government has been doing its best to present the country as a hotspot for investors. That includes investment from within the EU, but also abroad – with funds having arrived already from China, Qatar and Canada.
So it was a blow when Canadian mining firm Eldorado Gold recently announced its intention to shutter its Greek operations, protesting government interference. Eldorado has already made an investment in excess of US$3 billion in Greece. But it is not only the loss of jobs and tax incomes that is at stake here.
The argument between the Canadian miner and Greece could endanger the ratification process of CETA, the EU-Canada Free Trade deal that is partially coming into effect on September 21. This is bad news for an agreement that has struggled to get off the ground and continues to face significant resistance on both sides of the Atlantic.
Eldorado vs Greece
Eldorado’s potential withdrawal from Greece and the freezing of its operations announced on September 11 means that the miner is likely to sue the Greek government. Eldorado is rumoured to be considering a claim of €10 billion in damages for time and money wasted on Greek mining projects.
Greece itself, after threatening to do so for a long time, initiated arbitration proceedings against the miner on September 14. For years, the two sides have been unable to overcome differences regarding testing methods and how the mining project would comply with environmental regulations.
These arbitration proceedings will be focused on the contracts signed between the two parties. They will involve a tribunal with a multinational panel of judges who will consider whether either party is responsible for breaching the terms of the agreement between the miner and the Greek government, leading to potential remedial measures and compensation.
Taking jurisdiction for a dispute outside the domain of national courts is not unusual and most large investment projects make provision for this kind of arbitration. In these tribunals, the rights of each party are determined by the terms of their agreement and the national law selected to interpret those rights. Nothing controversial here.
But, if and when CETA comes fully into force, the game changes. CETA includes an important provision for investor protection – that of Investor-State Dispute Settlement (ISDS). This could skew things heavily in Eldorado’s favour.
How CETA changes the game
ISDS gives investors greater protection by allowing companies to sue states if they feel unfairly discriminated against. Determined by treaties between states, these rights are more broadly defined than contractual standards. This goes far beyond explicit commitments, as written out in contracts.
CETA provides for protection of investors and allows ISDS through its new arbitration mechanism. These protections will cover existing investments, such as Eldorado’s. Protections include the usual international law array of standards such as fair and equitable treatment, protection from discrimination, and security of investments.
CETA will offer to Canadian investors in Europe something that they lack at the moment (at least in the case of Greece): protection of their “legitimate expectations”. So even if the Greek government is not directly in breach of its contract with Eldorado Gold, and wins the current arbitration, it could yet face another suit, this time before an investment tribunal. So, regardless of whether Greece has breached any contractual agreement, it could still be violating Eldorado’s legally protected legitimate expectations as defined and secured by CETA.
Nothing changes yet. CETA’s provisional application, which starts on September 21, does not contain this chapter on investment issues. And before CETA fully comes into effect, it must be ratified by each EU member state.
This means that if Greece does not normalise relations with Eldorado, it has a vested interest in derailing CETA’s full progress. This would be easy enough: if the Greek parliament does not ratify the agreement, the EU cannot legally bring the trade deal into full force. Why would Greece give Eldorado better grounds to sue it for billions?
Greece could become the focal point for resistance to CETA, with a real case that shows how the ISDS feature of trade deals allows multinationals to interfere with national sovereignty. The Syriza government failed to spearhead a left-wing revolution in Europe, but it may yet become the pall-bearer of anti-globalisation.