Trade Bill

Baroness Kramer Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 23rd January 2019 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, in speaking to Amendment 29 in my name I will also speak briefly to the amendment with which it has been grouped: Amendment 56 from the noble Baroness, Lady Kramer.

At the forefront of my amendment is whether we should retain the rather disputed separate mechanism for resolving investor settlement disputes—this applies to rollover and new FTAs. The concept of ISDS is not new; it certainly predates us joining the EU in 1972. Over the years, we have had a very large number of trade agreements—some several hundred—which Members of the House will be aware of, and many of these contain clauses under which the ISDS was created. In the early days, it was done with some justification in some countries to try to ensure that investment from third parties—particularly private investment, which was obviously necessary to unlock the activity that was the focus of the trade agreement—could be protected in situations where political issues or other issues intervened. Given that the legal systems in some countries will not be regarded as being as well-developed as in other countries such as ours, it is not unreasonable to therefore concede that some sort of special protection was required. That is really where it came from.

I do not think that there is very much more to say about it, except that our argument is that these ISDS schemes are of a bygone age. They relate to a situation in the world that does not really exist anymore. It certainly does not apply to many of the countries with which we will be creating free trade agreements or rolling over existing arrangements. In so far as they have legal systems that we can respect, there should be no question that we should work with our own legal system and with theirs to reflect any requirement for the need to ensure that parties to the agreement can pursue the establishment of a tribunal and appellate mechanism for the resolution of investment disputes.

I should wait for the noble Baroness, Lady Kramer, to introduce her amendment, but in case she has any doubt at all, I do not support where she is coming from. I want to make it very clear that I am not alone in this: the most numerous of the very large number of submissions we received on the Bill were on ISDS. I am sure the Ministers are aware of that. It is worth thinking about the role that civil society more generally will play, but if just about everybody is saying that the Government should move away from these as a model and should think, as the EU is doing, about moving to a system that relies on existing tried and tested systems in the countries, this is something we should bear in mind. I beg to move.

[Baroness Kramer (LD)]

My Lords, I share one point with the noble Lord, Lord Stevenson, on this issue: many of the various systems for investor and trade dispute resolution are broken. A search is on for new, more effective mechanisms to deliver much more satisfactory resolution, particularly as trade arrangements become far more complex and encompassing, and disputes have much greater significance for the global economy.

The Committee will be aware that the WTO’s arbitration system is on the verge of collapse. It relies on a panel that includes a minimum of three judges and a maximum of seven. The panel, through death and retirement, is now down to three. The United States has made it clear that one further death or retirement will mean the end of the WTO’s arbitration mechanism—it will not agree to replace any retired or dying judges. That mechanism is now effectively teetering on the verge.

Many will also have been involved in the debates around TTIP when that was active in this House and will understand that the resolution methods contemplated under it created a great deal of concern that private companies—specifically American companies—would be able to use the mechanism to wade in and counter local law and local decisions. The structure under TTIP relied on arbitration panels chosen specially for the purpose, against which there was no appeal. They were not part of a traditional judicial system.

We do, however, have an example of a system that works exceptionally well for trade resolution: the European Court of Justice, working for the currently 28 members of the European Union. As Trade Minister, when I talked with the Chinese, the Japanese and a number of other countries with which we were trying to build trade relationships, it was very often in the casual relationships that the issue of dispute resolution would come up. They all spoke, with sad envy, of the system we had in the European Union, known to be incorruptible, fair and efficient, and to have judging panels of real intelligence that were then supported by the collective Governments. They kept wistfully saying what a pity it was that, on a global level, there is nothing that mirrors that.

This is why I differ from the noble Lord, Lord Stevens, who is basically saying that a British company with a complaint will go to the British courts, an American company will go to the American courts and a Japanese company will go to the Japanese courts. It would be hard to persuade anybody that they would be justly treated under those circumstances and that there would not be national bias. I can see this becoming an inhibitor to trade. I also believe that on trade issues generally we need to look to international co-operation and shared sovereignty solutions. We need to recognise that, frankly, the best example we have of trade resolution is the ECJ, and see what lessons and mechanisms we can pick out of that. This is relevant in discussing the continuity agreements as well as future agreements. As this House and the Minister will know, the European Union is now making dramatic changes to the way it structures dispute resolution, recognising the problems and criticisms around the existing system.

The noble Lord, Lord Stevenson, referred to the investor-state dispute settlement system. That is largely an ad hoc arbitration system, but it is in many of the EU’s various trade agreements. He will know, or certainly the Minister will know, that the EU is now migrating from that. In CETA, we have an example of the first new version of the European system: the investment court system. It is a permanent standing court with a panel of judges; it is not ad hoc; and it is two-tier, so there is an appeal mechanism. Interestingly, under CETA, the EU and Canada will collectively appoint 15 judges—five from the EU, five from Canada and five third-country nationals—who will hear cases on a rotational basis. It is therefore bringing in a much more multilateral dispute resolution system with a great deal of independence and the opportunity to create a much more broad template. There is an intention to migrate many of the existing EU trade agreements on to this system over the coming years, which is why the continuity arrangements pose real questions that have to be answered. In the continuity arrangements, are we copying over the rather unsatisfactory investor-state dispute settlement system? Are we going to try to migrate? It is going to be difficult. Look at the EU and Canada. You can see that the capacity to create a panel of 15 judges might be a little tricky if you were trying to do it simply between the UK and Canada. I do not know what sort of system the UK is looking at as it tries to establish a continuity agreement with CETA, but we need some answers on all this.

[Lord Taylor of Goss Moor (LD)]

If my noble friend will allow me to intervene, there is a really important point here. Many Members of both Houses have assumed that the WTO can be relied on as a backstop arrangement. But the Americans’ unwillingness to appoint new judges means that the WTO mechanisms are effectively being brought to an end, and that no reliance can be placed on the WTO as an alternative to the European Union mechanisms that she is describing.

[Baroness Kramer]

My noble friend is absolutely right. One of the frustrations when people talk so blatantly about WTO rules is that the United States is working very hard to undermine the entire structure of the WTO and is threatening to leave. Talk about timing: they hold up and pray in aid a system that is on the verge of crumbling. It is hard to see how the WTO rules will have ongoing force and substance when there is no dispute resolution mechanism available. It could happen any day; with elderly judges, all it takes is one death or retirement. This issue will not stretch out into the future; it is a current and immediate problem that has to be dealt with. In this House we often try to explain that the WTO has severe limitations and real risks, but apparently Brexiteers’ ears are closed to those concerns. I very much agree with my noble friend.

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[Baroness Fairhead]

My understanding is that it does not require any further domestic legislation. I will write to the noble Lord if that is in error, but I understand that it is already in domestic legislation. If that is incorrect, I will write to him and put a letter on file in the Library.

[Baroness Kramer]

I understand what the Minister is saying, but as she addresses that issue, would it be possible to understand what will happen with the other continuity agreements? Singapore is just the beginning. We will be seeing others moving over to this split—a free trade agreement here, a dispute resolution system there—and it is unclear whether we will have negotiated to follow that pattern and to mirror that split of the new structure, or whether we will remain tied into the old structure while the EU moves on to the new one. There must have been an internal decision somewhere in government on how we deal with this.

[Baroness Fairhead]

I am happy to meet the noble Baroness and the noble Lord with officials to go through the detail of this, and then we will prepare a letter for the Committee if required. The discussions on whether the UN Commission on International Trade Law—UNCITRAL—should seek to establish a multilateral investment court are in their preliminary stages; there are no firm proposals on the structure, governance or cost. We are actively engaged. However, discussions on that possible reform are at an early stage. We should not prejudge the outcome of that process, because to do so could preclude the UK from making a later judgment when proposals are more advanced. We look forward to working with international partners. In addition to the discussion I offered, I welcome discussing this topic further. There are a range of views on this question. At this stage, should the UK require a universal commitment to pursue a multilateral investment court in all future agreements, that could result in the loss of our negotiating space.

In respect of the true aims of this Bill and the resolution systems that are already in place, and given our commitments to discuss MICs, I ask the noble Lord to withdraw his amendment.

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[Lord Tyler]

My noble friend is absolutely right. The important point is simply this: here is a truly successful scheme where UK Ministers have taken the initiative and grabbed the opportunities in the EU. We cannot allow it to disappear. The threat to a large number of enterprises would be disastrous. It would set such a bad example to the agricultural and food industry if we allowed the scheme to be diluted or dissolved in any way.

As we know, the Bill and the proposed new clause are caught up in the rather absurd contingency planning for the crash-out, no-deal scenario that the Government now insist Parliament must play with, despite the dire warnings about how awful such a result would be. If we are not careful, not carrying forward this very good scheme would be disastrous. Indeed, it would be tragic if this excellent scheme, in which successive Governments have invested so much energy, initiative and political capital and on which so many UK producers rely, were lost in the wash. The threat is there.

Of course, the ideal solution would be for it to continue exactly as it is now, with full UK membership of the EU—but I suppose we have to admit the possibility that the ideal will have to give way to the best available replication: hence the proposed new clause. In the words of the 20th century’s most authoritative actuary, Frank Redington, we are faced at the moment with an “expanding funnel of doubt”. We cannot afford for there to be any doubt about the success of this scheme and the necessity of its continuation. The best we can do is to insist, through the amendment, that we do not throw out this precious baby with the bathwater.

[Baroness Kramer]

My Lords, my son lives in Kent. I enjoy giving sparkling English wine from an excellent local vineyard as a present to various people, so I am slightly put out to understand that some local campaigners for Brexit have been urging vineyard owners to look forward to the day in late March when they will be able to call their product “champagne”—apparently with the Government’s backing, they have been assured. It is important that we understand the reciprocal nature of an arrangement like this. Therefore, to feed the expectation that we will keep our designation but remove it from other people is highly dangerous, and I suspect that the Minister sitting on the opposite Bench will have heard some very similar language.

[Baroness Fairhead]

My Lords, the Government see GIs as extremely important, and we are working to ensure that existing UK GIs will continue to be protected in future. I note the comments of the noble Lords, Lord Tyler and Lord Taylor, about the importance to specific rural economies. I could not agree more. They play a really important role in some very remote economies. For example, lest Scotland be forgotten, I know that the Scottish salmon industry directly supports 8,800 people, mainly in coastal locations. I hope my words today will offer noble Lords significant reassurance on a number of the points raised.

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The noble Lord, Lord Tyler, may be happy to hear that the 65 have now grown to 86; 76 of those are in agricultural products, five are in wine and five are in spirits—a varied collection. I think the noble Lords stated some very strong arguments for Cornish clotted cream and Cornish pasties, but let us not forget Anglesey sea salt or native Shetland wool. All 86 of these GIs will be given new UK GI status automatically on day one, whether or not the UK leaves the EU with a deal. The scheme will also be open for both UK and non-UK new applicants from the day it enters into force. We are committed to celebrating their success.

[Baroness Kramer]

I will be asked this question by the sparkling wine producer. Will Champagne, for example, need to apply to the UK for protection of its name, or will this carry over?

[Baroness Fairhead]

I was just coming on to that point: the future protection of UK GIs in the EU and then the reciprocal. We have heard loud and clear the desire of UK GI producers, and I can assure noble Lords that we are seeking to make this happen. At the time of this amendment being tabled, I believe there was no public statement from the EU on the future of existing GIs after exit. Since then, the European Commission has publicly stated, in November 2018, that:

“EU-approved geographical indications bearing names of UK origin … remain unaffected within the EU and therefore continue to be protected in the EU”.


This is consistent with what has always been the UK’s understanding. We expected that existing UK GIs would enjoy continued protection even after exit, because the current legislation means that the protection is indefinite unless specific grounds for cancellation are met. These grounds do not include removal from the EU. UK GIs will therefore continue to have the same level of protection as other third-country GIs protected in the EU. They are protected by virtue of being on the register, having earned that right by successfully passing the EU scrutiny processes. That protection will remain unless the relevant entries can justifiably be removed.

[Baroness Fairhead]

As I stated, the protection is indefinite unless there is a justifiable challenge, which would take an enormous amount of time—and that does not include leaving the EU.

The EU needs to comply with the TRIPS agreement in relation to how it handles GIs, and the EU member states are also bound by the European Convention on Human Rights. In terms of future protection of the GIs in the rest of the world, we are currently working with global trading partners to transition those EU FT agreements, which also include obligations on the protection of GIs.

Regarding the protection of EU GIs in the UK—I think the noble Lord was talking about reciprocal arrangements—should we reach a withdrawal agreement with the EU, existing EU GIs will be provided with the same level of protection as now until the future economic relationship agreement between the UK and the EU comes into force or becomes applicable and supersedes. The potential long-term protection of EU GIs in the UK would therefore be determined as part of the negotiations under the future economic partnership. It is key for the Government to retain different options to give the flexibility needed successfully to conclude these negotiations.

[Baroness Kramer]

I did not understand this: so if there is no deal, the EU has given a guarantee that it will protect UK GIs—and its system would require it to do so—but the UK has given no guarantee that it will protect EU GIs or those of any other country. Is that correct, unless it goes forward into the continuity agreement?

[Baroness Fairhead]

The departure from the EU is just between the EU 27 and the UK. It is true that, legally, UK GIs are protected under EU law indefinitely and in the UK the matter is subject to negotiation under the FEP.

I have assured your Lordships that we understand the desires of UK GI producers for continuity. We will continue the protection in the UK, and the public statements of the European Commission give us assurance. If this amendment passes, it would remove the flexibility necessary for the UK’s negotiating position to successfully build new trade relationships with the EU. I believe that a number of my answers addressed the questions raised by the noble Lord, Lord Grantchester. If he feels that they have not, I am happy to write to him, but I ask him to withdraw his amendment.