CJEU finds ICS in Canada–EU CETA to be in line with EU law

The CJEU has deemed that the ICS included in the Canada–EU CETA is consistent with EU law, issuing its final opinion on April 30, 2019.

The CJEU opinion is binding and was issued nearly two years after Belgium asked for the bloc’s highest court to examine whether the ICS would affect the “autonomy of the EU legal order.” In other words, it asked whether ICS tribunals would be able to weigh in on matters relating to EU law beyond what is included in CETA. Belgium also asked the CJEU to consider whether the ICS upholds the EU’s general principle of equality and “practical effect” and whether it ensures that Canadian investors, including small and medium-sized enterprises (SMEs), are able to access an independent tribunal.

On all three questions, the court found that the ICS mechanism’s design and safeguards were such that they would not infringe on EU law in any of the areas raised by Belgium.

“CETA does not confer on the envisaged tribunals any jurisdiction to interpret or apply EU law other than that relating to the provisions of that agreement,” the court said. According to the court, any ICS tribunal would be unable to “call into question the choices democratically made within a Party” on core public policy objectives, such as health, safety and environmental protections. On the access issue, the court referred to the pledges made by two of the EU institutions—the Council and Commission—to support SMEs’ ability to access these tribunals.

A prior, non-binding opinion by Yves Bot, an Advocate General of the CJEU, had also said that the ICS was compatible with EU law.

The CJEU opinion was welcomed by European Commission officials, who noted that this would make it easier for EU member states to ratify CETA. That is an ongoing process that is necessary for the ICS to take effect, as well as the provisions on investment protection and market access involving portfolio investments. Aside from those areas, CETA is being provisionally applied in Canada and the European Union.

“One of the key pledges in the political guidelines I presented for this Commission in 2014 was to not accept that the jurisdiction of courts in the EU member states is limited by special regimes for investor disputes. We delivered on that with the Investment Court System,” said European Commission President Jean-Claude Juncker in response to the CJEU opinion.

Juncker added that the opinion validated the EU’s approach to incorporate the new ICS in its recent investment negotiations, as well as its plan to push for these in subsequent agreements in lieu of the “notorious ISDS.”