By Philippe Vlaemminck and Lidia Dutkiewicz EU Regulatory
On 29 January 2019, the Advocate General Bot delivered his Opinion in Avis 1/17, initiated by the Kingdom of Belgium.
In this much-anticipated opinion, AG Bot considers that the mechanism for the settlement of investor-state disputes provided for by the Comprehensive Economic and Trade Agreement between the EU and Canada (“CETA”) is compatible with the EU Treaties and the EU Charter of Fundamental Rights.
On 30 October 2016, Canada along with the EU and its Member States, signed the CETA, a free trade agreement that includes a mechanism for settling disputes between investors and States. The agreement envisages the creation of a Tribunal and an Appellate Tribunal and later, a multilateral investment tribunal – an Investment Court System (“ICS”). On 7 September 2017, Belgium requested the opinion of the CJEU on the compatibility of the ICS with EU law.
Potential impact of Achmea?
In the Achmea ruling (Case C-284/16), which you can read more about here, the CJEU ruled that an international agreement that provides for the establishment of international courts and tribunals whose decisions are binding on the EU institutions, including the CJEU, is not in principle incompatible with EU law. This is providing that the autonomy of the EU and its legal order is respected (para 57).
According to AG Bot, the mechanism for settling disputes between investors and States in CETA is compatible with EU law, based on the following arguments:
- The CETA’s ICS does not adversely affect the autonomy of EU law and the CJEU’s exclusive competence to interpret EU law;
- The applicable law before the CETA Tribunal consists exclusively of the provisions of the CETA, and excludes the national law of the Member States and EU law, which can only be taken into account by that Tribunal as a matter of fact;
- The CETA Tribunal is bound by the interpretation of EU law given by the CJEU; on the contrary, neither the CJEU nor the national courts are bound by the interpretation of EU law made by that Tribunal;
- The decisions of the CETA Tribunal are subject to an Appellate Tribunal, which, with its mandatory code of conduct, guarantees the impartiality and independence of the Members of the Tribunals and the mediators.
MIC – the new normal?
Shortly after Belgium’s request, on 13 September 2017, the European Commission published a Recommendation for a Council Decision. This authorises the opening of negotiations for a Convention establishing a multilateral court for settlement of investment disputes – the Multilateral Investment Court (“MIC”).
The Commission aims to establish “one, multilateral institution to rule on investment disputes covered by all the bilateral agreements in place”, rather than a bilateral investment court for each free trade agreement. It has submitted the proposal to UNCITRAL and expects the final talks to take place by April 2019.
Without doubt, the CJEU’s ruling will have an enormous impact on the future extra-EU investment arbitration. As AG Bot highlighted, “what is at issue here is the definition of a model which is consistent with the structural principles of the EU legal order and which, at the same time, may be applied in all commercial agreements between the European Union and third States” (para 86).