Opinion 1/17
EU-Canada CET Agreement
Opinion of the Court (Full Court), 30 April 2019
(Opinion pursuant to Article 218(11) TFEU — Comprehensive Economic and Trade Agreement between Canada, of the one part, and the European Union and its Member States, of the other part (CETA) — Investor-State Dispute Settlement (ISDS) — Establishment of a Tribunal and an Appellate Tribunal — Compatibility with primary EU law — Requirement to respect the autonomy of the EU legal order — Level of protection of public interests determined, in accordance with the EU constitutional framework, by the EU institutions — Equal treatment of Canadian investors and EU investors — Charter of Fundamental Rights of the European Union — Article 20 — Access to the above Tribunals and their independence — Article 47 of the Charter — Financial accessibility — Commitment to guarantee that accessibility for natural persons and small and medium-sized enterprises — External and internal aspects of the requirement of independence — Appointment, remuneration and ethics of the Members — Role of the CETA Joint Committee — Binding interpretations of the CETA determined by that Committee)
1. International agreements — Conclusion — Competence of the Union — Scope — Creation of a court or other entity with competence to rule on the provisions of the agreement — Included — Conditions — No adverse effect on the autonomy of the EU legal order
(Art. 1, second para., TEU, Arts 2 and 19 TEU; Art. 267 TFEU)
(see paragraphs 106-111)
2. International agreements — European Union agreements — EU-Canada free trade agreement — Mechanism for the resolution of investment disputes between investors and States — Creation of tribunals standing outside the EU judicial system, but with no power to interpret or apply rules of EU law or to prevent the operation of the EU institutions — Lawfulness
(Art. 19 TEU)
(see paragraphs 114-119, 122, 150-153)
3. Member States — Obligations — Due regard to the principle of mutual trust — Scope — Applicability to relations between the Union and a non-Member State — Not included
(Charter of Fundamental Rights of the European Union, Art. 47)
(see paragraphs 128, 129)
4. International agreements — Conclusion — Prior opinion of the Court — Subject matter — Questions on the substantive or formal validity of an agreement with regard to the Treaty — Compatibility of the agreement with the Charter of Fundamental Rights of the European Union
(Art. 6(1) TEU; Arts 217 TFEU and 218 TFEU)
(see paragraph 167)
5. EU law — Principles — Equal treatment — Discrimination on grounds of nationality — Prohibition — Scope — Difference in treatment between nationals of Member States and nationals of non-Member States — Not included
(Art. 18, first para., TFEU; Charter of Fundamental Rights of the European Union, Art. 21(2))
(see paragraphs 169, 170)
6. Fundamental rights — Charter of Fundamental Rights of the European Union — Equal treatment — Scope — International agreement between the European Union and a non-Member State — Included — Limits
(Charter of Fundamental Rights of the European Union, Art. 20)
(see paragraphs 171-174)
7. International agreements — European Union agreements — EU-Canada free trade agreement — Mechanism for the resolution of investment disputes between investors and States — Possibility of challenging European Union measures available only for Canadian investors, not for EU investors — No comparable situation for the two categories of persons — Infringement of the principle of equal treatment — No infringement
(Arts 101 and 102 TFEU; Charter of Fundamental Rights of the European Union, Art. 20)
(see paragraphs 179-186)
8. International agreements — European Union agreements — EU-Canada free trade agreement — Mechanism for the resolution of investment disputes between investors and States — Access by litigants to the bodies for the resolution of disputes — Observance of the right to effective judicial protection — Infringement of the requirements of accessibility, independence and impartiality — No infringement
(Charter of Fundamental Rights of the European Union, Art. 47)
(see paragraphs 190-193, 201-204, 222, 244)
Résumé
The mechanism for the resolution of disputes between investors and States provided for in the free trade agreement between the European Union and Canada (CETA) is compatible with EU law
In the Opinion of the plenary Court on the EU-Canada CET Agreement (Opinion 1/17) of 30 April 2019, the Court declared Section F of Chapter Eight of the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part, concerning the establishment of a mechanism for the resolution of investment disputes between investors and States (‘the ISDS mechanism’) compatible with EU primary law. This mechanism provides, inter alia, for the creation of a Tribunal and an Appellate Tribunal, and, in the longer term, a multilateral investment Tribunal.
The Court first of all recalled that an international agreement could be compatible with EU law only if it had no adverse effect on the autonomy of the EU legal order. That autonomy, which exists with respect both to the law of the Member States and to international law, stems from the essential characteristics of the European Union and its law and thus resides in the fact that the Union possesses a constitutional framework that is unique to it. The Court stated, at the outset, that the envisaged ISDS mechanism stood outside the EU judicial system. The courts envisaged by the CETA are indeed separate from the domestic courts of Canada, the Union and its Member States. Consequently, the Court held that EU law does not preclude the CETA from providing for the creation of tribunals or from conferring on them jurisdiction to interpret and apply the provisions of the agreement. On the other hand, such tribunals cannot have the power to interpret or apply provisions of EU law other than those of the CETA or to make awards that might have the effect of preventing the EU institutions from operating in accordance with the EU constitutional framework. The Court stated, first, that the CETA does not confer on the envisaged tribunals any power to interpret or apply EU law other than that relating to the provisions of that agreement. As regards there being no effect on the operation of the EU institutions in accordance with the EU constitutional framework, the Court stated, secondly, that the jurisdiction of the envisaged tribunals would adversely affect the autonomy of the EU legal order if it were structured in such a way that those tribunals might, in the course of making findings on restrictions on the freedom to conduct business challenged within a claim, call into question the level of protection of a public interest that led to the introduction of such restrictions by the Union with respect to all operators. However, it is apparent from the CETA that the discretionary powers of the envisaged tribunals do not extend to permitting them to call into question the level of protection of a public interest determined by the Union following a democratic process. Consequently, the Court concluded that Section F of Chapter Eight of the CETA does not adversely affect the autonomy of the EU legal order.
As regards the compatibility of the ISDS mechanism with the general principle of equal treatment, the request for an opinion referred to a difference in treatment arising from the fact that it will be impossible for enterprises and natural persons of Member States that invest within the Union to challenge EU measures before the tribunals envisaged by the CETA, whereas Canadian enterprises and natural persons that invest within the Union will, for their part, be able to challenge such measures before those tribunals. In this respect, the Court recalled that no express limitation is imposed on the scope of equality before the law, as enshrined in Article 20 of the Charter of Fundamental Rights of the European Union (‘the Charter’), and that principle is therefore applicable to all situations governed by EU law, including those falling within the scope of an international agreement entered into by the Union. Furthermore, that fundamental right is available to all persons whose situations fall within the scope of EU law, irrespective of their origin. Equality before the law enshrines the principle of equal treatment, which requires that comparable situations must not be treated differently. However, the Court found that Canadian enterprises and natural persons that invest within the Union are not in a situation comparable to that of enterprises and natural persons of the Member States that invest within the Union, so the difference in treatment referred to in the request for an opinion does not constitute discrimination.
As regards the compatibility of the ISDS mechanism with the right of access to an independent tribunal, the Court recalled first that the Union is subject to the provisions of the second and third paragraphs of Article 47 of the Charter, which enshrine that right. Accordingly, while Canada is indeed not bound by the safeguards provided by the Charter, the Union is so bound and therefore cannot enter into an agreement that establishes tribunals with the jurisdiction to issue awards that are binding on the Union and to deal with disputes brought before them by EU litigants if those safeguards are not provided. The Court then observed that the purpose of the creation of a mechanism standing outside the judicial systems of the parties is to ensure that the confidence of foreign investors extends to the body that has jurisdiction to declare infringements, by the host State with respect to their investments, of Sections C and D of Chapter Eight of the CETA. Consequently, the independence of the envisaged tribunals and access to those tribunals for foreign investors are inextricably linked to the objective of free and fair trade that is stated in Article 3(5) TEU and is pursued by the CETA. As regards accessibility to the envisaged tribunals, the Court observed that in the absence of rules designed to ensure that the tribunals are financially accessible to natural persons and small and medium-sized enterprises, the ISDS mechanism may, in practice, be accessible only to investors who have significant financial resources. It then noted that there was no commitment contained in the CETA that a body of rules to ensure the level of accessibility required by Article 47 of the Charter will be put in place as soon as those tribunals are established. However, Statement No 36, which forms an integral part of the context in which the Council adopts the decision to authorise the signature of the CETA on behalf of the Union, provides that the Commission and the Council give a commitment to ensure the accessibility of the envisaged tribunals to small and medium-sized enterprises. The Court found that that commitment was sufficient justification for the conclusion that the CETA is compatible with the requirement that those tribunals should be accessible. Finally, the Court found that the CETA provided sufficient guarantees that the envisaged tribunals will satisfy the requirement of independence, both in its external aspect, which presupposes that those tribunals will exercise their functions wholly autonomously, and in its internal aspect, which concerns the maintenance of an equal distance of the Members of those tribunals from the parties to the proceedings, and the absence of any personal interest of those Members in the outcome of those proceedings.