The new system to settle disputes between states and private investors included in the EU-Canada trade agreement is compatible with EU law, the EU Court’s advocate general concluded on Tuesday (29 January), dismissing previous concerns.
The opinion drafted by Advocate General Yves Bot said the new version of the investor-state dispute settlement system (ISDS) included in the Comprehensive Economic and Trade Agreement (CETA) signed with Canada “does not adversely affect the autonomy of EU law”.
The French lawyer added that it “does not affect the principle that the Court of Justice has exclusive jurisdiction over the definitive interpretation of EU law”.
Following the concerns triggered by the parallel system of ISDS mechanisms, seen as a favourable option for private interests, the EU and Canada agreed on a new and hybrid framework (public and private) of a tribunal and an appellate tribunal to settle disputes.
The aim is to establish an investment court system and, in the longer term, set up a multilateral investment tribunal.
The opinion is not the definitive ruling of the court, although the EU judges follow the criteria of their advocate generals in more than two-thirds of cases.
In September 2017, Belgium had doubts on whether the mechanism would question the exclusive jurisdiction of the Court over the interpretation of EU law or the general principle of equal treatment, giving preferred treatment to investors over the general public.
Bot argued that the investor-state dispute settlement mechanism responded to the requirement of reciprocity in the protection afforded to investors, and it has “narrowly circumscribed jurisdiction”.
ISDS would decide only on compensations to affected investors suffering losses in case one of the parties breaches an agreement.
But the mechanism is bound by the interpretation of EU law given by the EU Court, and it does not affect the role of national courts in applying EU law.
The advocate general also highlighted that the EU Court retains its powers to give its opinion (as preliminary rulings) on the provisions of the private agreement reached between the investors and EU jurisdictions.
“The advocate general is therefore of the opinion that the system for the settlement of disputes is entirely consistent with the objectives of the Union’s action on the international stage by combining rules on the protection of investments and a specific dispute settlement mechanism with the express confirmation of the Parties’ right to adopt legislation necessary to achieve legitimate objectives in the public interest, for example in the areas of public health, safety, the environment and social protection,” the opinion said
It also denies that the new system infringed the principle of equal treatment before the law.
“The situation of Canadian investors who invest in the EU is not comparable with the situation of European investors who invest within their own economic area,” it said.
Finally, it recalled that, compared with other models of investor-state dispute settlement system, it has “sufficient” safeguards, a hybrid nature and rules of ethics applicable to the members of the mechanism to guarantee their independence and impartiality.
[Edited by Zoran Radosavljevic and Sam Morgan]