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CETA: the dispute resolution system validated by the Court of Justice of the European Union

It was in autumn 2016 that the Walloon Region, through its Minister President Paul Magnette, vetoed the signing of the Comprehensive Economic and Trade Agreement (“CETA”) by the European Union.

CETA, a trade agreement between the European Union and Canada aimed at stimulating trade and supporting growth and employment, aims to reduce tariffs and protect high European standards such as food safety and the environment.

Despite its partial entry into force on 21 September 2017, the arbitration mechanism provided for in Chapter 29 was put on hold.

The latter provides for a special arbitration system to deal with possible disputes between the EU and Canada on the interpretation or application of the agreement. It allows the parties, after unsuccessful attempts at expert consultation and mediation, to submit the dispute to an arbitration panel composed of 3 arbitrators. A list of 15 arbitrators would be established by the CETA Joint Committee from among international trade law professionals. The arbitrators would be independent and would not follow the instructions of any organization or government, nor would they be affiliated with the government of either party.

It is therefore planned to create an arbitral tribunal, an arbitral appeal tribunal and a multilateral long-term investment tribunal, which will be completely independent.

Concerns related to investors’ potential excessive powers over state choices, particularly in the areas of health and the environment.

Fears and challenges from NGOs and civil organizations had joined those of Wallonia, in particular on the fact that the situation of investors was, in their opinion, much more favorable than that of States, in particular because of the “principles of fair and equitable treatment” and the prohibition of “indirect expropriation”, allowing investments to be protected despite sudden and sovereign changes in national policies.

Faced with these objections, the Belgian government then referred the matter to the Court of Justice of the European Union on 7 September 2017 to find out whether this dispute settlement mechanism in CETA was compatible with European law, but also whether it did not affect the sovereignty of the States and the jurisdiction of the High Court.

On 30 April 2019, the Court of Justice delivered its opinion validating the arbitration procedure provided for in CETA.

The Court points out in particular that the institution by a treaty of a court responsible for interpreting the provisions of that treaty is not incompatible with Union law.

However, it specifies that the arbitral tribunals created by CETA are no jurisdiction to interpret or apply provisions of European law other than those of CETA or to render decisions that would prevent the European courts from functioning.

Moreover, the High Court adds that the agreement does not affect the autonomy of the legal order of the European Union in that the arbitral tribunals provided for do not have the power to challenge the choices made by the States, in particular, with regards to the protection of public order, health, personal life etc…

Finally, it considers that the mechanism is not incompatible with the general principle of equal treatment or with the right of access to an independent tribunal, as the provisions of the Treaty are sufficient and compatible with Union law.

The decision of the Court of Justice is therefore a victory for the promoters of CETA, and towards full enforcement of the Treaty.

Laura Canet and Brigitte Spiegeler