EU court upholds EU-Canada trade deal's dispute settlement mechanism

The European Union's free trade deal with Canada is compatible with EU law in the way it handles dispute resolution, the top EU court has said. The opinion, which is binding, addresses a compromise that Belgium had secured in return for backing the Comprehensive Economic and Trade Agreement (CETA): The European Court of Justice (ECJ) had to weigh in on the legality of the treaty's provisions on resolving disputes between states and investors.

The pact has been under provisional application since October 2017, but the pending case meant that the tribunals and the provisions on investment and investment protection were on hold. The opinion means that the pact's text does not need to be changed, and that ratification by member states can proceed, the European Commission noted. To date, 12 out of the EU's 28 members have ratified the deal.

Concerns over arbitration clauses

The case has its origins in 2016, when Belgium's French-speaking region of Wallonia put up last-minute opposition to CETA, holding up its signature for several tense days amid fears that its investor arbitration clauses would give undue powers to corporations, among other things. Under CETA, a tribunal system is set up to resolve such disputes. Belgium warned that this might contravene EU
law and infringe on the ECJ's authority.

In a non-binding opinion in January, ECJ Advocate General Yves Bot rejected those arguments, and the Luxembourg judges agreed. The authority of these tribunals, they wrote, is confined strictly to the trade deal itself, to handle such questions as how to award compensation to injured investors in case the pact is breached. But this authority does not extend to EU institutions, including the ECJ, they wrote.

EU citizens "can have full confidence"

"The exclusive jurisdiction of the [ECJ] to give rulings on the division of powers between the EU and its member States is thereby preserved," they added. The tribunals' authority also does not infringe on the EU's internal market, including regulations on food safety and consumer rights, the ECJ wrote.

"This opinion confirms that citizens can have full confidence in the commission's new approach to investment protection," said EU Trade Commissioner Cecilia Malmstrom. The opinion also "reinforces the EU's leadership role in the ongoing wider discussions to reform the multilateral investment dispute settlement system," she added.

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