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06 September 2017
Controversial investment tribunals sent to Europe’s highest court
Today the Belgian government announced that it has requested an opinion of the European Court of Justice (ECJ) on the compatibility of investment protection provisions in the EU-Canada agreement CETA. The move comes almost a year after Wallonia made international headlines for refusing to grant the federal government permission to sign off on the deal.
The ruling could have significant impact on EU trade policy and on current trade agreements in the pipeline if provisions in CETA on investment protection are deemed incompatible with EU law.
Victory for EU-wide campaign
Civil society groups have long sought legal clarity on investment protection mechanisms in trade agreements, particularly following the launch of the EU-US trade deal TTIP. The Investor State Dispute Settlement (ISDS) was roundly rejected in a public consultation launched by the Commission in 2014. A revised system proposed by the Commission called the Investment Court System (ICS) eventually found its way into CETA, as well as the Singapore and Vietnam agreements.
While ICS offered some procedural changes, it did not address fundamental concerns, such as the basic issue of equal access to justice and the restrictions put on national governments enacting public policy due to the threats of litigation from multinationals. The decisions made in previous investment tribunals are often contradictory and don’t follow case law as developed by the legal order of the European Court of Justice. As a result, past cases have resulted in conflicts between ISDS rulings and EU law, leading to legal uncertainty and conflicting obligations for Member States.
The NGO ClientEarth said today:
“International investment rules must not undermine the powers of our own courts and tribunals. Because EU rules protect those powers, there are serious doubts whether the system in CETA can survive the scrutiny of the ECJ. If the ECJ proves us right, it would be a huge victory for the rule of law and for judges across Europe.”
In 2016, the European Parliament’s two biggest political groups rejected the call made by Green MEPs to send CETA to the ECJ. CETA was later passed by the European Parliament in February this year and will be provisionally applied on September 21.
Implications of ruling
The request for an opinion is likely to take over a year to process before a final ruling is issued by the court. In May 2017 another ECJ opinion (case A-2/15) ruled that trade deals between the EU and other countries that include investment protection must be approved by all Member States. Hence, parts of CETA relating to investor protection must be ratified by 38 parliaments across Europe.
In recent weeks the Commission has reacted to the May ruling by suggesting that trade agreements should be split into two parts, with the bulk of the agreement fast-tracked through the EU parliament, and investment protection ratified separately by Member States. If the ECJ rules that investment protection mechanisms are not compatible with EU law, this may scupper the Commission’s plans, including upcoming efforts to develop a Multilateral Investment Court system (MIC) with trading partners.
Today Green trade spokesperson Yannick Jadot said:
“In the European Parliament, the Greens strongly campaigned on this basis to send CETA to the Court of Justice in order to verify its compliance with EU treaties. Unfortunately, our resolution to send CETA to the court was defeated but the debate has lived beyond that. That's why we strongly welcome that there will now be an opportunity to establish without doubt that Investors-to-state-dispute settlement systems are inconsistent with EU law”
Greens/EFA co-president and Belgian MEP Philippe Lamberts added:
"Although it has been nine months and the court's judgment is not expected until spring 2019, we are pleased that this step has finally been taken. The verdict will be decisive for all ongoing and future trade negotiations. But in the meantime, vigilance is needed, particularly in the coming weeks when the Council will define the Commission's mandate to negotiate with other economic powers the creation of the multilateral investment court."
Read the full request for an opinion here: https://diplomatie.belgium.be/sites/default/files/downloads/ceta_summary.pdf