In his late January opinion, Advocate General Bot assessed the investor-state dispute settlement (ISDS) system introduced by the EU-Canada comprehensive economic and trade agreement (CETA) in Chapter 8, Section F as compatible with EU law. In case the forthcoming opinion of the Court of Justice follows his legal position, the world of international ISDS may experience a significant push towards developing a more robustly institutionalised, more transparent system of investment dispute settlement, where the guarantees applicable to judicial systems under the relevant fundamental rights provisions may be more closely observed. The changes may eventually lead to the setting up of a permanent international court for investment disputes, as declared in the CETA as an express intention of the contracting parties.

The opinion was delivered in a procedure initiated by Belgium for an opinion of the Court of Justice on the legality of the CETA. The CETA, although signed by the parties, is not yet legally binding. Belgium put forward a number of claims contesting the compatibility of the provisions regulating the CETA ISDS system with the relevant principles and rules of EU law. It first raised that the establishment of the CETA ISDS forums, in parallel with the judicial system of the EU, undermines the exclusive and final jurisdiction of the EU Court of Justice to interpret EU law and review the legality of EU measures, and with that poses a threat to the autonomy and the particular characteristics of the EU legal order. It also asserted that the CETA ISDS provides opportunities of legal protection for Canadian investors which are not available to investors from the EU, thereby violating the principle of equal treatment and jeopardising the effectiveness of EU law. Finally, it claimed that certain provisions which regulate the composition of and the procedure before the CETA forums violate rights recognised in the EU Charter of Fundamental Rights, in particular the right of access to an independent and impartial tribunal.

The predictions before the delivery of the Advocate General’s opinion had been mixed. On the one hand, there was inevitable the fact that a little less than a year ago the Court of Justice declared in its ruling in Achmea (Judgment of 6 March 2018, Slovakia v Achmea BV, C-284/16, EU:C:2018:158) that clauses for investment arbitration in so-called intra-EU bilateral investment treaties (BITs) contravened core provisions of EU law. The opinion itself distinguished Achmea on two grounds. First, the obligations of the parties in the domain of the judicial protection of the rights made available to individuals are rather different in intra-EU relations and in the relationship of the Union with a third-State. Specifically, the Member States are bound by the obligations of mutual trust and loyalty towards each other, and the Union and a third-State are not. Second, the arbitration clauses of intra-EU BITs put EU law as the law applicable to the dispute and gave jurisdiction to the arbitration forum to interpret and apply EU law. In the case of the CETA ISDS system, these are explicitly excluded in law. As a more positive precursor for the assessment of the Advocate General, as recognised in the opinion, there was the pre-existing expectation that the Union will negotiate an international treaty with Canada covering international investment which will enable the mutual protection of investors’ rights under that treaty subject to a uniform level of legal protection as a matter of both substantive and procedural law. Bearing this in mind, it was unavoidable for the opinion to accept that the Union had no other political choice, when exercising the competences conferred onto it by the Member States in the field of external relations, but to favour establishing a system of ISDS for the CETA which would fulfil those requirements.

By-and-large, the Advocate General’s opinion relied on the provisions regulated in the CETA when declaring its system of ISDS as compatible with EU law. To much a lesser extent, it also relied on the special nature of the CETA forums, as forums of quasi-judicial decision-making, as well as the declared intention of the Union to use the CETA dispute settlement system as a first step towards improving the current system of ISDS. This approach seems rather solid legally. The only way to reach a different conclusion would be to assess the legal guarantees laid down in the CETA rules as providing either less certain legal (i.e., jurisdictional) boundaries, or a lesser degree of protection, in particular as matter of the applicable fundamental rights requirements. Reaching the latter conclusion may presume taking the position that investment dispute settlement forums should be subject to the same constitutional requirements as ordinary courts of law.

Concerning the first criticism that the CETA ISDS mechanism may undermine the final and exclusive jurisdiction granted to the EU Court of Justice in the interpretation as well as in the review of legality of EU law, the opinion asserted that the CETA provisions provide a number of legal guarantees which are capable of adequately safeguarding the jurisdiction of the Court. First, the jurisdiction of the CETA forums has been limited strictly to the application of two specific substantive provisions of the CETA. The application of EU law, by definition, falls outside of this remit. Second, when exercising their jurisdiction the CETA forums may only apply the relevant provisions of international law, which does not include EU law. Nor does this jurisdiction extend to the review of the legality of EU measures. Third, in light of the task imposed on the CETA forums, which is to grant ex post remedies to investors wronged in their rights, the interpretation and application of EU law, as well as the judicial review of EU measures, does not emerge as an issue in CETA ISDS procedures. Fourth, the impact of CETA ISDS decisions has been delimited in law. They will not bind other judicial forums (e.g., the EU Court of Justice) in other procedures, and any interpretation given to the applicable law, which may incidentally include EU law, will have binding effect neither on the EU Court of Justice, nor on national courts.

In connection with the first limb of the second claim that protection as a result of the establishment of the CETA ISDS mechanism Canadian and EU investors, with regard to their investments in the EU, are provided unequal opportunities of judicial, the opinion asserted that in the specific context of CETA investment dispute resolution the principle of equal treatment is applicable only in regards the protection of investments made by EU investors in Canada, on the one hand, and the protection of investments made by Canadian investors in the EU, on the other. All other parallel investment protection scenarios, including the EU investments of Canadian investors and those of EU investors, are in a factually different situation, therefore, their equal treatment is not required. In connection with the second limb of that claim that Canadian investors may avoid the payment of fines imposed on them for the violation of EU or national competition provisions by securing a decision from the CETA ISDS system that the enforcement of competition law was unlawful and that damages equal to the fine should be paid out to the investor concerned, the opinion held that the protection of competition is an objective specifically included in the CETA and that the CETA accepts the autonomy of its parties to introduce regulatory measures in the general interest, such as those aiming the protection of competition. On this basis, it concluded that it is unlikely that the CETA forums would, without violating the boundaries of their jurisdiction, deliver the earlier suggested decision.

Regarding the final claim that the rules governing the CETA ISDS system may contravene the fundamental right of access to an independent and impartial tribunal, the Advocate General asserted first that the fundamental rights requirements applicable to courts of law should be applied in the case of the CETA forums having taken into account their specific characteristics as quasi-judicial decision-making bodies. This could mean, for example, accepting that the rules regulating the remuneration of their members are legitimately different from those applicable to members of the national judiciary. In its response to the first limb of this claim that the regulation of the costs of the procedure before the CETA forums disadvantage investors with lesser means, the opinion highlighted that it is not excluded for potential CETA ISDS litigants to seek legal redress in the financially less burdensome procedures before national courts. It also noted that the applicable CETA provisions allow numerous exceptions making CETA ISDS available to all eligible investors. Regarding the second and third limb of the claim that the rules on remuneration, appointments and removals, and the code of ethics violate judicial independence and impartiality, the Advocate General asserted that the applicable CETA rules either provide sufficient guarantees in this regard, or do not raise the concerns formulated by Belgium.

Opinion of 29 January 2019, Advocate General Bot, 1/17 (CETA investment dispute settlement mechanism), EU:C:2019:72