On January 29, 2019, Advocate General Bot issued an opinion on the compatibility of the dispute resolution mechanism established in the Comprehensive Economic and Trade Agreement (CETA) signed between Canada, the European Union and its Member States with EU Law. CETA has not officially entered into force but has been partially provisionally applied since September 2017.
On September 7, 2017 the Kingdom of Belgium requested the European Court of Justice (ECJ) to issue a preliminary ruling on whether creating an independent Investment Court System (ICS) for the resolution of disputes between investors and States (ISDS) respects the autonomy of the EU legal order, the judicial system of the EU and rights enshrined in the Charter of Fundamental Rights.
Advocate General Bot in his opinion observes that international agreements between third states and the EU are governed by different sets of principles than those signed between Member States of the EU. In 2018 the ECJ found in its Achmea decision that intra-EU Bilateral Investment Treaties (BITs) are incompatible with the EU legal order because they breached the principle of mutual trust and sincere cooperation. However, according to Advocate General Bot, the reasoning in Achmea could not be transposed to the analysis of ICS because the relationship with Canada is based not on mutual trust but rather on the principle of reciprocity and establishing equivalent substantive and procedural protection between the Parties.
Drawing further comparisons, Advocate General also stated that the ISDS mechanism was a product of deliberate negotiations between the EU, Member States and Canada in order to ensure the kind of fair and neutral conflict resolution that is a cornerstone for creating a stable and safe environment for potential investors and thus is in line with EU law.
Analyzing the principle that the ECJ has exclusive jurisdiction over the definitive interpretation of EU law, Bot noted that the applicable law before the CETA Tribunal consists exclusively of the relevant provisions of CETA, which excludes disputes relating to the interpretation and application of EU law. The CETA Tribunal may consider the domestic law only as a matter of fact and in that scenario it would be bound by the interpretation of EU law given by the ECJ. On the other hand, any interpretation of EU law provided by the CETA Tribunal would not be binding onto the EU authorities and courts.
Finally, regarding the compatibility of ISDS with fundamental rights, Bot stated that the principle of equal treatment established in Articles 20 and 21 of the Charter of Fundamental Rights must be respected only in comparable situations between nationals of different member states and not between nationals of the member state and those of third Sates. As such, refusal to grant the same level of protection under CETA to EU nationals investing within other EU countries is not in breach of the principle of non-discrimination.
Weighing all these considerations in combination with others, the Advocate General concluded that CETA is compatible with the EU legal order. The Opinion of the Advocate General is not, of course, binding on the ECJ and as such, the question has not finally been resolved. For its part, the ECJ is expected to issue a final decision later this year.
Author: Emilija Berzanskaite