The EU’s exercise of its post-Lisbon competences over foreign direct investment (FDI) has been anything but smooth. In Opinion 2/15 the CJEU clarified the EU and Member State competences over the EU’s new generation free trade and investment agreements, resulting in the splitting of the EU‑Singapore agreement into a separate trade and investment agreement. Then, in Achmea the Court found investor-state arbitration (ITA) clauses under intra-EU BITs to be incompatible with EU law, which will result in the termination of almost 200 intra-EU BITs and the non-enforcement of ITA awards rendered under them within the EU. Now, everyone is anxiously awaiting the outcome of Opinion 1/17 – requested by Belgium under the insistencies of Wallonia – and whether the Investment Court System (ICS) under CETA is compatible with EU law. This opinion will not only affect the entry into force and conclusion of the trade and investment agreements with Canada, Singapore, Vietnam and Mexico, but it will have broader implications for the multilateral ISDS reform process and the EU’s investment policy.
Therefore, Advocate General Bot’s extensive opinion delivered on 29 January 2019 (first commentaries here and here) in which it found the CETA ICS to be compatible with EU law deserves scrutiny. I will only focus on the AG’s arguments concerning the exclusive jurisdiction of the Court of Justice over the definitive interpretation of EU Law. In a separate post, Harm Schepel will focus on the AG’s arguments on non‑discrimination. Continue reading →
Investment Tribunals called upon to resolve intra-EU disputes are getting used to the European Commission showing up at their doorstep to try to convince them to decline jurisdiction. Though the range of arguments is wide and varied depending on the circumstances of the case and the underlying Investment Treaties, the overarching theme is simply that EU Law reigns supreme in relations between Member States and overrides all international law commitments that individual Member States- and the EU itself in the case of the Energy Charter Treaty- have entered into. The Commission has occasionally met with success: in Electrabel, a long learned discussion on the relationship between EU Law and the ECT was concluded with the bombshell that EU law ‘would prevail over the ECT in case of any material inconsistency’ (para. 4.191). Other times, it is summarily dismissed. ‘Should it ever be determined that there existed an inconsistency between the ECT and EU Law’, observed the Tribunal in RREEF Infrastructure, ‘the unqualified obligation in public international law of any arbitration tribunal constituted under the ECT would be to apply the former. This would be the case even were this to be the source of possible detriment to EU law. EU law does not and cannot “trump” public international law.’[i]
The most interesting point about these wide divergences between different Tribunals on rather fundamental points of EU and international law is how little they seem to matter. In both RREEF and Electrabel and numerous other intra-EU cases, the Tribunals disposed of the matter by pointing out that, in casu, there was no relevant material inconsistency, no conflict, no need to rule on matters of EU law, no incompatibility of obligations under different Treaties, and/or nothing that could not be solved by ‘harmonious interpretation.’ It might make sense to think of this Tribunal practice as devising conflicts-rules.
There are good reasons for the Court of Justice not to want to play this game. A case by case analysis of whether a particular award passes muster through national enforcement proceedings, or a Treaty-by-Treaty analysis of whether a particular dispute settlement or applicable law clause is compatible with EU law, is bound to be time consuming and labor-intensive, and will inevitably be unpredictable and lead to legal uncertainty. Continue reading →
Opinion 2/15 on the division of requisite competences between the Union and its Member States for the conclusion of the EU-Singapore FTA has most certainly caused a flurry of academic discussions. Amongst the various topics discussed, two come to mind that are important for this short analysis. First, did the CJEU intend with its reasoning to effectively abolish ‘facultative mixity’ and ‘facultative EU-only’ agreements? (see here, here and here). Second, by placing almost all aspects of the EU-Singapore FTA under exclusive EU competences, with the exception of ISDS and non-direct foreign investment, did the Court of Justice implicitly determine the future of EU trade and investment policy? (see here, here and here). In other words, with a Commission that is determined to prioritize EU-only agreements, is the conclusion of mixed investment agreements in parallel to exclusive trade agreements a logical consequence of Opinion 2/15? Continue reading →
Opinion 2/15 might keep legal scholars, practitioners, and policy-makers busy for the foreseeable future. Many aspects of the ruling deserve comment and further discussion (see already for starters the blogposts here, here, here, here, here, and here) and I would like to follow up my previous post with some comments on an intriguing paragraph of the Opinion: paragraph 161 on the possible suspension of the agreement for a breach of one of its ‘sustainable development’ provisions. The ECJ’s statements here touch upon a long-standing debate whether labour and environmental provisions in trade and investment agreements should be enforceable. The ECJ found that Parties could indeed (partially) suspend or even terminate the agreement for breaches of such provisions. Practicalities aside, this finding is certainly a positive step from a social and environmental point of view. Continue reading →
Opinion 2/15 on the EU’s powers to conclude the EU-Singapore Free Trade Agreement (EUSFTA) delivered Tuesday received considerable attention from the press. This comes as no surprise as the Court’s Opinion has consequences for future EU trade deals such as CETA and potentially a future UK-EU FTA. Despite the fact that the ECJ concluded that the agreement should be concluded jointly with the Member States, the Financial Times jubilantly claimed victory for the European Union, belittling Wallonia in the process. This victory claim calls for three initial comments as there are aspects of the Opinion that might merit a different conclusion. Continue reading →
To say that the EU’s new generation of trade agreements (such as CETA and TTIP) is politically controversial is becoming somewhat of an understatement. These free trade agreements (FTA), going beyond mere tariff reduction and facilitating hyperglobalization, have faced widespread criticism from civil society, trade unions, and academics. It may come as no surprise therefore that the legal issue over who is competent to conclude such agreements (the EU alone, or the EU together with the Member States) has received considerable public attention, ensuring that the Advocate General Sharpston’s response to the Commission’s request for an Opinion (Opinion 2/15) on the conclusion of the EU-Singapore FTA (EUSFTA) has made the headlines of severalEuropeannewspapers.
The Opinion of Advocate General Sharpston in Opinion 2/15, delivered on 21 December, is partly sympathetic to the Commission’s arguments on EU powers, but ultimately refutes the most outlandish of the Commission’s claims to EU power vis-à-vis that of its constituent Member States. The Opinion is of exceptional length (570 paragraphs, to my knowledge the longest Opinion ever written), and contains an elaborate discussion on the nature of the division of powers between the EU and the Member States and detailed reasoning on specific aspects of the EUSFTA such as transport services, investment protection, procurement, sustainable development, and dispute settlement.
Given the breadth of the AG’s conclusions, the aim of this post is to discuss the Opinion only in relation to investment protection and to reflect upon some of the consequences for the Commission’s investment policy, perhaps the most controversial aspect of this new generation of trade agreements. Continue reading →
Last Thursday, the leaders of the Belgian federal government and the regional and community governments reached a compromise deal over the EU-Canada Comprehensive Economic and Trade Agreement (CETA). One of the key outcomes is that the Belgian federal government will seek the Opinion of the European Court of Justice on the compatibility of the Investment Court System (ICS) in Chapter Eight of CETA with the Treaties. As soon as the Belgian federal government makes the request for an Opinion, the Court will be able to express itself on this contentious legal issue. In this post, I will provide some background on the origins of the Walloon request before explaining why ICS could potentially pose a legal problem for the EU.
Wallonia’s longstanding resistance against CETA and the resolution of 25 April of 2016
To insiders, the resistance put up by Wallonia in particular should have been no surprise. Over the past few years, the Walloon and Brussels parliaments have had extensive debates on the merits of CETA and have been increasingly critical of the deal. One of the main and more principled sources of opposition was the inclusion of ICS in CETA, a judicial mechanism that allows foreign investors to sue governments over a breach of investor rights contained in the agreement. Continue reading →