CJEU Advocate General finds ICS in line with EU law, final court ruling pending

CJEU Advocate General Yves Bot issued a non-binding opinion on January 29, 2019, deeming that the ICS included in the Canada–EU CETA is compatible with EU law. Bot assessed the ICS against the EU Treaty, the TFEU and the EU Charter of Fundamental Rights.

The Advocate General’s opinion came following a request from Belgium for the EU’s highest court to give its opinion on the ICS’s compatibility with EU law. Belgium made the request on September 7, 2017, a few weeks before CETA began its provisional application in Canada and the EU. The subject of ISDS, either through the ICS or through another mechanism, has been especially contentious in Belgium, where the region of Wallonia was able to delay CETA’s signature over several concerns with the original version, ultimately leading to further negotiations and the adoption of a joint interpretative instrument.

Bot’s opinion finds that the ICS mechanism “does not undermine the autonomy of EU law and . . . does not affect the principle that the Court of Justice has exclusive jurisdiction over the definitive interpretation of EU law.” Bot also says that the built-in safeguards for the ICS allow for enough access to an independent, impartial tribunal, which was one of the concerns raised by Belgium.

Bot makes various other comments in relation to how CETA establishes the proposed tribunal’s jurisdiction, stating that this is “narrowly circumscribed” and is “bound by the interpretation” of the ECJ. He also makes other findings related to the tribunal’s interactions with EU legal systems at the EU-wide and national levels. For instance, he says that the joint interpretative instrument agreed by the EU and Canada encourages investors to exhaust local remedies before proceeding to cases under the ICS.

Bot also says that, under CETA, there is no “alteration of the essential character of the powers which the Treaties confer on the institutions of the EU and on the Member States.” Additionally, the Advocate General finds that the provisions of CETA “do not infringe the general principle of equal treatment” in respect of access to the dispute settlement mechanism.

The CJEU must still render its final opinion on CETA’s ICS, which will be binding, though the date has not yet been confirmed. The ICS, as well as the provisions on investment protection and investment market access for portfolio investment, are not yet being applied in CETA. Their application is pending CETA’s ratification in EU member state legislatures.

The European Commission has decided to pursue trade and investment in separate agreements during upcoming negotiations with non-EU countries, due to the legal challenges seen in ratifying accords that incorporate both. That change in approach received the approval of the European Council in May 2018.