ECJ: CETA dispute settlement mechanism compatible with EU law

By Thomas Verellen

05-2019

On 30 April 2019, the European Court of Justice (“ECJ”) issued its long-anticipated opinion on the compatibility with EU primary law of the Investor-State Dispute Settlement (“ISDS”) mechanism contained in the Comprehensive Economic and Trade Agreement (“CETA”) negotiated between the European Union (“EU”) and Canada.[1] When the Belgian region of Wallonia threatened to veto CETA in the autumn of 2016, the Belgian government sought an opinion from the ECJ. Most significantly, Belgium wondered whether the ISDS mechanism as envisaged in CETA would violate the autonomy of EU law. The ECJ answered this question in the negative.

In a line of cases dating back to the early 1990s, the ECJ has developed a legal doctrine aimed at protecting the self-declared unique constitutional framework of the EU.[2] At the heart of this legal framework lies the Court of Justice of the EU (“CJEU”) itself having jurisdiction to interpret EU law that is exclusive and that therefore cannot be shared with other tribunals – be they strictly inter-Member State tribunals – e.g. the unified Patent Court[3] – or tribunals with jurisdiction covering both the EU, its Member States and one or several third countries – e.g. the European Court of Human Rights.[4] Key in the ECJ’s assessment in these cases has been the envisaged possibility that tribunals other than the CJEU would be empowered to issue binding interpretations of EU law. This would undermine the role of the ECJ as the guardian of the aforementioned unique constitutional framework.

In the case of the CETA Tribunal (the “Tribunal”), the ECJ considered that no such risk was present. The Court pointed to several elements. Firstly, jurisdiction of the Tribunal would be limited to CETA itself, while other norms of EU law would be considered merely as elements of fact. Secondly, although the rulings of the Tribunal would be binding on the EU, the discretionary powers of the Tribunal and the Appellate Tribunal would not extend to permitting them to call into question the level of protection of public interest that the democratically elected EU legislature considered appropriate.[5] At most, the Tribunal could sanction manifestly excessive measures. The Court explained e.g. that the possibility of finding infringements of the obligation to accord “fair and equitable treatment” to investments covered by CETA is specifically circumscribed: the agreement lists exhaustively the situations in which such a finding can be made.[6]

The opinion – highly exceptional in that it was issued by a full court – takes away an important hurdle standing in the way of ratification of CETA by several EU Member States. As a “mixed agreement” (i.e. an international agreement to which not only the EU but also all Member States are a Party), all Member States must ratify CETA before it can enter into force. At present, the provisions of CETA that are covered by EU exclusive competences (as clarified by the ECJ in its much-discussed Opinion 2/15 on the EU-Singapore free trade agreement[7]) have entered into force provisionally. These provisions do not include the chapter on dispute settlement, however. Only when the agreement is fully ratified will the CETA Tribunal and the Appellate Tribunal be set up.

It should be noted that when this finally happens, the Tribunal might end up being short-lived, however. The EU is currently working alongside Canada towards establishing a permanent multilateral investment court. CETA already envisages the replacement of the CETA Tribunal by this investment court. 

The full text of the opinion is available here.



[1] Opinion 1/17 (‘CETA’), EU:C:2019:341.

[2] See already Opinion 1/91 (‘EEA’), EU:C:1991:490.

[3] Opinion 1/09 (‘Unified Patent Court’), EU:C:2011:123.

[4] Opinion 2/13 (‘Accession of the EU to the ECHR’), EU:C:2014:2454.

[5] Opinion 1/17 (‘CETA’), EU:C:2019:341, para. 156.

[6] See Article 8.10.2 of CETA.

[7] Opinion 2/15 (‘EUSFTA’), EU:C:2017:376.

 

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