The ISDS Mechanism Provided For Under The CETA Is Compatible With EU Law

Author:Ms Anaëlle Idjeri
Profession:Soulier Avocats

While the Transatlantic Trade and Investment Partnership ("TTIP", also known as the Trans-Atlantic Free Trade Agreement or "TAFTA" ) has been abandoned, the Court of Justice of the European Union ("CJEU"), in an opinion dated April 30, 2019, ruled on the compatibility with EU law of the mechanism for the settlement of disputes provided for under the Comprehensive Economic and Trade Agreement ("CETA") entered into between Canada and the European Union.

On March 6, 2018, the CJEU ruled in the so-called Achmea case and held that a clause of a Bilateral Investment Treaty ("BIT") allowing an investor from the European Union to initiate arbitration proceedings against an EU Member State was incompatible with EU law1. In this context, there was every reason to believe that such decision would be applied to the mechanism for the settlement of disputes between investors and States provided for under the CETA (the mechanism is called Investor-State Dispute Settlement, hereinafter "ISDS").

However, on April 30, 2019, in light of the Achmea decision and previously rendered decisions, the CJEU, ruling on a request for an opinion made by the Kingdom of Belgium, issued an opinion with a challenging but yet questionable reasoning in which it held that the ISDS mechanism provided for under the CETA was compatible with EU law.

Compatibility of the ISDS mechanism with the autonomy of the European Union legal order In general, and in accordance with the position adopted in the Achmea decision, the CJEU recalled that the final interpretation of EU law should not be left to a competing court.

It specified that "in order to ensure that the specific characteristics and the autonomy of the [EU] legal order are preserved, the Treaties have established a judicial system intended to ensure consistency and uniformity in the interpretation of EU law", making an express reference to the preliminary ruling procedure provided for in the Treaty on the Functioning of the European Union.

Regarding in particular the provisions set forth in the CETA, the CJEU held that a tribunal, an appellate tribunal and a multilateral tribunal can be established to "interpret and apply provisions" but pointed out that "since those tribunals stand outside the EU judicial system, they cannot have the power to interpret or apply provisions of EU law other than those of the CETA or to make awards that might have the effect of preventing the EU institutions from operating in accordance with the...

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