The Investment Court System (ICS) is compatible with European Union law, the Court of Justice of the European Union ruled in its opinion (1/17) delivered on Tuesday 30 April in Luxembourg.
In September 2017, Belgium requested the opinion of the European judge on the compatibility of this judicial system, as proposed in the CETA, the free trade agreement with Canada, with EU primary law (see EUROPE 11856/9). The aim was to address the concerns, mainly expressed in Wallonia, about: - the impact of these courts on the autonomy of the Union's legal order; - the compatibility of the ICS, consisting of a General Court and an Appeal Court, with the exclusive competence of the CJEU to provide a definitive interpretation of EU law; - the general principle of equality and the imperative of the effectiveness of EU law; - the right of access to the courts; - the right to independent and impartial justice.
The main lines of Opinion 1/17
In this binding opinion, the Court first recalls that an international agreement is, in principle, compatible with EU law - and therefore so is the creation of a court responsible for interpreting the provisions of that agreement.
However, such an agreement must preserve the nature of the competences of the EU institutions and must not undermine the autonomy of the Union's legal order and, therefore, its founding values, the Court also considers. The ICS will therefore not have jurisdiction "to determine the legality of a measure, alleged to constitute a breach of this Agreement, under the domestic law of a Party" for the agreement, the Court points out (paragraph 121).
The European judge also points out that the ICS courts do not belong to the EU judicial system (unlike the ‘Achmea’ case - see EUROPE 11975/18). Their competence is therefore strictly limited to interpreting or applying legal provisions relating to CETA. Nor can their decisions have the effect "to prevent the Union from operating in accordance with the above-mentioned constitutional framework" (112), the Court states in its opinion.
In addition, it notes that the ICS "has no jurisdiction to declare incompatible with the CETA the level of protection of a public interest established by the EU measures... to order the Union to pay damages' (153). CETA does not allow its courts "to call into question the level of protection of public interest determined by the Union following a democratic process", the Court notes (156).
According to her, "the Parties have taken care to ensure that those tribunals have no jurisdiction to call into question the choices democratically made within a Party relating to, inter alia, the level of protection of public order" (160).
Scope of the opinion
The CETA agreement is a so-called "mixed" agreement: to be fully implemented, it must be ratified by all Member States (see EUROPE 12223/28). Sixteen of them, including Germany, Austria, Belgium, France, Germany, Italy and the Netherlands, have not yet done so. The Court's opinion could therefore help to remove their reluctance.
Since the CETA, the ICS has been promoted by the EU in its investment protection agreements (IPAs), such as those negotiated with Singapore and Vietnam. Opinion 1/17 could give European negotiators more legitimacy in these talks, particularly in the negotiation of an API with their Japanese partner.
The ICS is the first step towards a Multilateral Investment Tribunal or MIC, under the auspices of UNCITRAL, which, according to the Commission's wishes, should eventually become the competent legal body to rule on investor-state disputes (see EUROPE 12176/8). In the meantime, the Court therefore also validates its compliance.
Mixed reactions
"I can only but welcome the Court's decision as the ultimate confirmation of the approach undertaken by the Commission", said Jean-Claude Juncker, President of the European Commission, underlining "an innovative approach that became the template for all EU investment negotiations, replacing the old investor-state dispute system, the notorious ISDS". The ISDS had indeed been criticised for its abuses and lack of transparency.
Didier Reynders, Belgian Minister for Foreign Affairs, also said he was "delighted" with an opinion that "reconfirms our ambitions for reform" and the establishment of a multilateral court.
However, according to their reactions on Twitter, some researchers, including David Schneiderman, Professor of Law at the University of Toronto, or Simon Lester of the Cato Institute, do not share their optimism or that of the Court regarding the exceptions and guarantees provided by CETA in protecting the general interest, among others (see 156 and 160 above).
Finally, the civil organisations, which are at the root of the controversy surrounding the ICS, take note and call on the Member States not to ratify the CETA.
Paul de Clerck, activist at Friends of the Earth Europe does not question the opinion, but reminds us that "legal is not the same as fair".
"With the legal question now settled, the political debate now needs to be conducted", calls Michel Cermak, Research Fellow at CNCD-11.11.11.
More vehemently, the reaction of the Corporate Europe Observatory, which calls the stop a "blow to democracy".
To read the notice: https://bit.ly/2GSPt6D. (Original version in French by Hermine Donceel)