CJEU Opinion 1/17 30 April 2019

On 30 October 2016, Canada and the European Union signed a free trade agreement called the Comprehensive Economic and Trade Agreement (“CETA”)[1] . This Agreement provides for an investor-state dispute settlement (“ISDS”) mechanism, including an Investment Court System. In September 2017, Belgium requested an opinion from the Court of Justice of the European Union (“CJEU”) regarding the compatibility of such a mechanism with European Union law[2].

On 30 April 2019, in a much-anticipated decision, the CJEU decided that it was compatible with EU law, and gave the green light for the creation of a tribunal to apply the provisions of this Agreement, with the possibility of recourse to an Appellate tribunal[3].

However, it expressed some reservations. Indeed, the CETA tribunal will have no jurisdiction to, inter alia, interpret and apply rules of EU law other than the provisions of CETA, nor can it challenge choices democratically made within Canada or the EU with regard to “the level of protection of public order or public safety, the protection of public morals, the protection of health and life of humans and animals, the preservation of food safety, protection of plants and the environment, welfare at work, product safety, consumer protection or, equally, fundamental rights”. In any case, the tribunal’s decisions cannot have an effect on the operation of EU institutions in accordance with the EU’s constitutional framework.

Given this limitation on the powers conferred to CETA’s ISDS mechanism, one might worry that a great number of situations will fall outside the scope of its jurisdiction. However, a defined field of competence was likely to be a prerequisite for the EU Court to be satisfied that the CETA tribunal would not represent a threat to the EU legal order.

This case is of utmost interest in light of the CJEU’s ruling on the “Achmea case” on 6 March 2018[4]. In this decision, the European Court decided that an arbitration clause provided for in a bilateral investment treaty between two Member States of the EU was incompatible with EU law. While some were apprehensive that the CJEU’s opinion would extend to Agreements between the EU and third parties, the EU Court found that the principle of mutual trust observed in EU law, which is the crux of the Achema decision, is not applicable to treaties between the EU and non-Member States.

The CJEU decision on the compatibility of CETA’s court system with EU law means that no amendments have to be made to the EU-Canada treaty, which may now proceed to ratification. Indeed, pending this ruling, some Member States were seemingly postponing their ratification of the Agreement. The Comprehensive Economic and Trade Agreement has been in force provisionally since September 2017 and may fully enter into force only once it is ratified by all Member States and concluded by the Council. The CJEU’s opinion will therefore most likely pave the way for ratification from more Member States and further broaden the implementation of the Agreement.

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[1] The Comprehensive Economic and Trade Agreement, or CETA, is a trade agreement between the European Union and Canada. CETA has been in force provisionally since September 2017.