Published on 10 April 2018 in Client Alerts
On 1 September 2017, in the context of its ratification of the Comprehensive Economic and Trade Agreement between the European Union (“EU”) and Canada (“CETA”), Belgium requested an opinion from the Court of Justice of the European Union (“CJEU”). Specifically, Belgium inquired about “the compatibility of Chapter 8 (‘Investments’), Section F (‘Resolution of investment disputes between investors and states’) with the Treaty on EU and the Treaty on the Functioning of the EU (the “European Treaties”), including basic rights”. [See Belgian Request for an Opinion from the European Court of Justice] The referral concerned the reformed system of investor-State dispute settlement contained in CETA, the so-called Investment Court System (“ICS”), which will be made up of a Tribunal and an Appeals Body.
Background
CETA was signed on 30 October 2016 and became provisionally applicable on 21 September 2017. Given its status as a mixed-competence agreement, it is subject to ratification by the Member States of the EU. Moreover, due to its disputed compatibility with EU law, the investment chapter (which includes the ICS) was exempted from the provisional application of the treaty. In this context, and following pressure from the regional parliament of Wallonia, the Belgian government decided to request the opinion of the CJEU on the compatibility of the ICS with EU law.
Belgium’s Questions to the CJEU
Belgium put four questions to the CJEU. The CJEU will have to determine whether the ICS is compatible with EU law and, in particular, with the:
The first question presumptively relates to the concern that the ICS would endanger the exclusive competence of the CJEU to provide binding interpretations of EU law and to ensure uniformity and autonomy of EU law across the Member States.
The second and third questions allude to the alleged preferential treatment that foreign investors would receive on account of their nationality, in circumvention of the principle of equality in EU law. At the same time, they refer to the fact that arbitration is not among the dispute settlement mechanisms named in the European Treaties.
As for the fourth question, it pertains to the operational guarantees of the ICS as an objective and independent system for the settlement of investment disputes. Belgium has clarified further that it seeks to know how the members of the ICS will be remunerated, appointed and discharged and the regime for their ethical standards, their code of conduct and their permitted external professional activities.
The Future?
The significance of a negative answer to Belgium’s questions (concerning the compatibility of the ICS with EU law) is twofold. First, it could put an end to the ICS proposal as a dispute settlement mechanism for investment disputes. In that scenario, the Commission would have to discontinue its support. Second, should Wallonia not cooperate, the future of CETA itself, or at least of its investment chapter, would be uncertain.
In the past, the CJEU has declined to entrust the interpretation of EU law to other international adjudicatory bodies. All of that being said, CETA contains what may be seen as a “safeguard” provision. According to CETA Article 8.31, a tribunal may consider domestic law (including EU law) as a matter of fact and follow the prevailing interpretation given by national courts. This provision might be sufficient to satisfy the CJEU that its interpretative primacy is secure.
Also of note in this context, parallel to Belgium’s referral, and with a view to replacing CETA’s ICS, the European Commission is pursuing its general policy to reform investor-State dispute settlement through its proposal for the establishment of a multilateral court for the settlement of investment disputes (“MIC”). In September 2017, the Commission sought permission from the Council of the EU to begin negotiations on the MIC. In March 2018, the Council of the EU adopted the “Negotiating directives for a Convention establishing a multilateral court for the settlement of investment disputes”. And, in the coming months, on the basis of the Council’s mandate, the Commission will start negotiations with its trading and investment partners in the framework of the United Nations Commission on International Trade Law (UNCITRAL).
On 2 December 2024, representatives and legal counsel of Barbados made oral submissions to the International Court of Justice (the “Court”) in the climate change advisory proceedings (the “Obligations of States in respect of Climate Change Case”).
Learn moreThe global awards Lexology Index (formerly Who’s Who Legal) recognised three of Volterra Fietta’s lawyers in its 2025 edition for Arbitration.
Learn moreBarbados completed the first ever debt swap for climate resilience. The transaction generates USD 125 million for Barbados in fiscal savings, which it will use “to enhance water resource management and increase water and food security”. Barbados is a small island developing State, which is facing the destructive effects of climate change. The climate crisis
Learn moreOn 21 November 2024, Volterra Fietta partner Ahmed Abdel-Hakam was appointed to the International Law Committee of the New York City Bar Association. Ahmed’s selection by the New York City Bar Association was made despite the fact that he is not a member of the Association or even qualified to practice in New York. It
Learn more