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Opinion 1/17 of the CJEU
In September 2017, Belgium requested the opinion of the CJEU on the compatibility with EU law of the Investment Court System (ICS) provided for by the Comprehensive Economic and Trade Agreement between the EU and Canada (CETA), in particular with: the exclusive competence of the CJEU to provide the definitive interpretation of EU law; the general principle of equality; the requirement that EU law is effective; and the right to an independent and impartial judiciary.
Most of the recent free trade agreements concluded by the EU (including with Singapore (the EUSFTA) and Vietnam (the EUVFTA)) also provide for this mechanism, whereby investor disputes may be submitted to a permanent and institutionalised court, whose members (subject to strict independence and impartiality requirements) are appointed in advance by the states party to the treaty and whose decisions are subject to an appellate body. The EU ultimately aims to replace the bilateral investment courts of each of these treaties by a single multilateral investment court. International negotiations are currently ongoing at UNCITRAL Working Group III, where the reform of the Investor-State Dispute Settlement system is under discussion.
In January 2019, Advocate General Bot concluded that the ICS mechanism for the settlement of investor-state disputes was compatible with the EU Treaties and the EU Charter of Fundamental Rights. The CJEU followed suit in its opinion 1/17 of 30 April 2019.
Similarly to the Achmea case (C-284/16 of 5 March 2018), the principle of autonomy of EU law constituted the crux of the court’s opinion. The court underscored at the outset that the mere fact that CETA’s ICS stands outside the EU judicial system does not, in itself, breach the autonomy of the EU legal order. It follows from the reciprocal nature of international agreements and the need to maintain the powers of the EU in international relations that an international tribunal may have jurisdiction to interpret those agreements without being subject to their interpretation by the domestic courts of the parties to the agreements. The principle of autonomy of EU law would only be breached if the CETA Tribunal could interpret and apply EU rules other than the provisions of the CETA or issue awards having the effect of preventing the EU institutions from operating in accordance with the EU constitutional framework. The court was satisfied that this was not the case.
Further, as the situation of Canadian investors that invest within the EU are only comparable to EU investors that invest in Canada (as opposed to EU investors that invest within the EU), the court found that there was no difference of treatment of persons in a relevant similar situation.
The CJEU also considered that the effectiveness of EU competition law cannot be jeopardised by the CETA Tribunal’s decisions (eg, by awarding damages equivalent to the amount of fines imposed by the European Commission or a national competition authority) because CETA acknowledges that the parties may take appropriate measures to proscribe anticompetitive behaviours and guarantees their right to regulate to achieve legitimate objectives in the public interest.
Finally, the court did not conclude that the CETA’s ICS would breach the right to court. As regards the CETA Tribunal’s accessibility, it underscored that the Council of the EU had undertaken to ensure ‘better and easier access to this new court for the most vulnerable users, namely [small and medium-sized enterprises] and private individuals’. The court also found that CETA offers sufficient procedural guarantees as to the CETA Tribunal’s independence from the parties.
The importance of this ruling goes beyond CETA’s ICS. As underscored by AG Bot in his opinion, ‘what is at issue here is the definition of a model which is consistent with the structural principles of the EU legal order and which, at the same time, may be applied in all commercial agreements between the European Union and third States’ (section 86). The court also envisaged the setting up of a ‘multilateral investment Tribunal in the longer term’ (section 108).
2019 Model BIT
In 2019, BLEU has adopted a new model BIT (2019 BLEU Model BIT) replacing the 2002 BLEU Model BIT. In line with the current trend of the EU’s investment protection policy, the 2019 BLEU Model BIT emphasises the promotion of investment supporting sustainable development objectives (article 14) and offers contracting parties greater regulatory powers in that regard (article 15). In this perspective, the 2019 BLEU Model BIT provides that the violation of fundamental principles and rights at work cannot be used by a contracting state as an encouragement for attracting or retaining foreign investments (article 16). Similarly, the 2019 BLEU Model BIT considers it inappropriate to lower the environmental standards of protection to encourage investment (article 15).
Among other modifications, the 2019 BLEU Model BIT also refines the definitions of ‘investors’ (article 2(2)) and ‘investment’ (article 2(3)) and modifies the arbitration rules available to investors in case of investor-state dispute (article 19(D)(4)). As opposed to the 2002 BLEU Model BIT, the SCC and ICC rules will only be available where all disputing parties agree to their application.
As indicated, no BIT has been concluded by Belgium or by the BLEU since 2010, and the 2019 BLEU Model BIT has yet to be applied.
The new model is available at: https://diplomatie.belgium.be/sites/default/files/downloads/54k1806007.pdf.
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