LEGAL OPINION - June 2016
Re: Compatibility with the Treaties of investment dispute settlement provisions in EU trade agreements
On 5 April 2016 the Legal Service received a request1 for a legal opinion from Mr Bernd LANGE, Chairman of the Committee on International Trade ("INTA"), concerning the compatibility with the Treaties of investment dispute settlement provisions in trade agreements negotiated by the European Union (EU), with reference in particular to the envisaged Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.
2. According to the request, some of the concerns about trade agreements relate to the impact of an investment dispute settlement mechanism on the exclusive prerogatives of EU courts in terms of application and interpretation of EU law. In this light, the Legal Service has been asked to "give its informal legal opinion on whether or not the inclusion of investment dispute settlement provisions in EU's trade agreements with third countries is compatible with the EU Treaties.
It is requested to specifically account for the exclusive competence of EU courts on EU law and to analyse whether or not the applicable law of international agreements covering investment - and the interpretation thereof - poses any problems in this regard.
The request is annexed to the present legal opinion.
Chapter 8 of the recently concluded EU-Canada Comprehensive Economic and Trade Agreement (CETA) should serve as a basis for the analysis, together with any other provisions of that agreement that the Legal Service might deem relevant".
3. As a preliminary remark, the Legal Service points out that the issue of competence of the EU in the area of investment protection is at present contested. An important finding in this regard will be made by the Court of Justice (ECJ) in Opinion 2/15 concerning the envisaged Free. Trade Agreement between the EU and the Republic of Singapore, which is currently pending. The principles laid down by the ECJ in this opinion will however also apply to the delimitation of competence in other bilateral trade agreements including investment provisions. The present legal opinion only concerns the question of compatibility of the investment protection provisions with the Treaties and the EU's institutional framework.
4. To answer the question raised in the request with due regard to its frame of reference, the Legal Service will first outline the legal background of the issue of investment protection in international agreements, including a summary of the key provisions of Chapter 8 of CETA (hereinafter referred to as "CETA Investment Chapter"), and then, on that basis, evaluate a number of possible issues that could be raised as regards the compatibility of such provisions with the Treaties.