Preface - EU

The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada covers classical trade law issues that one may expect to be in conformity with World Trade Organization (WTO) law, given that both parties are members of the WTO, as well as questions of investment, investment protection, and dispute settlement. These latter issues touch upon the domain of international investment law, which though less monolithic than WTO law, is just as real. Both WTO law and investment law are characterized by elaborate dispute settlement procedures that are compulsory, binding, and enforceable. CETA itself is also equipped with important dispute settlement procedures of this nature. Moreover, the EU is, on the one hand, an international organization but, on the other hand, bestowed with near-sovereign powers in the field of trade and investment. It thus acts mostly as a unitary actor in these latter domains, which form the external counterpart to the core of the EU, the internal market. The EU has a formidable court system that has proved to be very jealous of its exclusive prerogative of interpretation of EU treaties and the acts based on these treaties, including international agreements such as CETA.[1]

This brief characterization of CETA and one of its parties gives rise to a number of important questions. How do the CETA dispute settlement procedures relate to the WTO procedures in the field of classical trade law? How do the CETA dispute settlement procedures in the field of investment law relate to the comparable procedures in the International Centre for Settlement of Investment Disputes (ICSID) system, the Permanent Court of Arbitration (PCA) system, and other investor-state dispute settlement (ISDS) systems that are linked to bilateral investment treaties (BITs)? Are there risks of overlap and hence a risk of a clash between these (worldwide) jurisdictions and the "regional" jurisdiction of CETA, which may generate a risk of contradictions between judicial rulings? Another important issue is the extent to which the alleged "provincialism" of the European Court of Justice (ECJ) with respect to the interpretation of EU-concluded international agreements can lead to clashes with CETA's dispute settlement system in cases where its panels are called upon to interpret provisions of EU law in the light of CETA's norms. The big question is whether CETA's drafters have done enough, when formulating the treaty, to avoid the risks mentioned above.

First of all, CETA itself firmly seeks to avoid overlap between dispute settlement in the investment domain (Section F of Chapter 8) and dispute settlement in the trade domain (Chapter 29) within the agreement itself. According to the black-letter rules of CETA, the jurisdiction of the permanent dispute settlement tribunal in the field of investment does not go beyond the provisions of Chapter 8 of the agreement, and the article on the scope of the general (trade) dispute settlement mechanism refers back to this provision.

Second, overlap between the dispute settlement procedures of CETA and of the WTO, including the suspension of concessions authorized under either agreement, is firmly excluded under the choice of forum provisions in Article 29.3 of Chapter 29 of CETA. It is interesting to note that the parties have used a broad formula in order to define lis pendens. It is sufficient to constitute a situation of lis pendens if a party is seeking redress for the breach of a substantially equivalent obligation under the other agreement or before the other forum. Complete identity of claims and obligations, as is often required in the classical approach to lis pendens, is thus no longer necessary. As far as investment claims are concerned, these may inter alia be submitted to the investment tribunal by an investor who has also initiated a claim before a domestic or international court or tribunal with respect to a breach referred to in his investment claim only if that investor provides a declaration that a final judgment or award has already been made by such court or tribunal or the claim in this other forum has been withdrawn. This provision does much to avoid parallel procedures in other fora that may lead to incompatible judgments or decisions.

The risk of a clash of jurisdiction involving CETA courts either among themselves or with other international and national courts in the fields of trade and investment is thus clearly reduced to a minimum. Negotiators have done what they could in order to prevent this from happening and that is the maximum one can reasonably ask for.

Much more worrisome from a European perspective are the complications created by the European Court of Justice's recent Opinion 2/13 [2] in the matter of the EU's accession to the European Convention on Human Rights (ECHR). There, the ECJ seems to take the extraordinary position that in all instances in which an international court is called to rule upon an alleged breach by the EU of its international obligations, the ECJ must have had a guaranteed prior opportunity to decide the issue. There is no highest court in any state that makes this claim.[3] The ECJ itself has so far never given the slightest inkling that this was its position in, for instance, WTO cases.

One could argue that the court meant this approach to be restricted to human rights cases, in which individuals resident in the EU may bring a claim directly before an international court such as the European Court of Human Rights.[4] Although there are no indications in Opinion 2/13 to this effect-there is no qualification whatsoever of the sweeping language used by the ECJ-the effect of the opinion does not formally go beyond the case of the accession agreement to the ECHR. However, that is not a reassuring position as regards BIT arbitrations. After all, BITs are in many ways like human rights treaties equipped with a court: they are agreements between states, which give rights to physical and moral persons, including the right to invoke their personal rights directly before an international jurisdiction. Only, in the case of human rights treaties, there is a rule requiring exhaustion of local remedies, while in the case of most BITs, the aim is precisely to do away with this rule. It is this latter point that is in direct opposition to the ECJ's view in Opinion 2/13.

For the moment, the situation remains in limbo. Although the European Commission's services have produced an informal paper that lists the steps that might be taken in a renegotiation of the accession agreement,[5] at the political level neither the European Commission nor the Council of the European Union have thus far given any sign of how they wish to react to Opinion 2/13 as such or how to handle the parallel with BIT cases. It is well-known that the European Parliament contains an important contingent of law-makers who would gladly reintroduce the rule requiring exhaustion of local remedies.

It would be extremely regrettable if, because of the ECJ's somewhat myopic position in respect of international dispute settlement, the overdue reforms of ISDS, which the EU was introducing together with countries such as Singapore, Canada, and the United States, were to come to naught.

P.J. Kuijper