Advocate General Finds That Ceta's 'Investment Court System' Is Compatible With EU Law

Author:Mr Andrew Cannon, Hannah Ambrose, Vanessa Naish and Rebecca Warder
Profession:Herbert Smith Freehills

One of the Advocates General to the Court of Justice of the European Union ("CJEU"), Advocate General Bot, has issued an opinion confirming that the mechanism for the settlement of disputes between investors and states provided for in the Comprehensive Economic and Trade Agreement between the EU and Canada (the "CETA") is compatible with European Union ("EU") law.

If the opinion is adhered to by the CJEU, it confirms the viability of the EU's mooted Investment Court System ("ICS") in terms of its co-existence with the EU legal order, and permits the EU to continue to pursue adoption of the ICS on a wider scale across all of the EU's trade agreements.


On 30 October 2016, Canada and the EU signed the CETA containing detailed provisions on trade and investment. One of CETA's innovations is the creation of a Tribunal and an Appellate Tribunal and, in the longer term, a commitment to the establishment of a multilateral ICS which, in line with the Commission's objectives to transform investment treaty arbitration into a court-like system, departs from several long-standing features of investment arbitration, including party appointed arbitrators and the absence of an appeal mechanism.

On 6 September 2017, before ratifying CETA, Belgium asked the CJEU to assess the compatibility of this ICS with EU law (although it took no official position on the merits of its questions). Specifically, it asked questions covering three broad issues:

The compatibility of the ICS with the principle that the CJEU has exclusive competence to provide the definitive interpretation of EU law Belgium observed that the ICS allows the CETA Tribunal to examine the compatibility of the provisions of secondary EU law with the relevant provisions of CETA. Given that the CETA Tribunal can interpret EU law, and that there is no express mechanism in CETA for a preliminary reference on a question of EU law being made to the CJEU, this could result in the CETA Tribunal making final awards of a binding nature on EU law, potentially undermining the exclusive jurisdiction of the CJEU to provide the definitive interpretation of EU law.

The compatibility of the ICS with the principle of equal treatment and the effective application of EU law Belgium observed that the ICS under CETA could be seen as providing for a preferential judicial process for Canadian investors. Canadian undertakings investing in the EU will be able to bring a dispute either before an internal court...

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