The Comprehensive Economic and Trade Agreement’s (CETA) novel investment protection provisions provide a measured – and timely – response to criticisms directed at the ISDS system. The bargain struck in CETA between the interests of investors and those of the host state will undoubtedly inform the negotiation of the Transatlantic Trade and Investment Partnership (TTIP).
The Treaty on the Functioning of the European Union conferred exclusive competence to the EU over foreign direct investment. The European Commission has – not without controversy – taken this to extend beyond investment liberalisation to investment protection and Investor-State Dispute Settlement (ISDS).
This is of no small importance since it gives the EU the mandate to negotiate at a supranational level EU-wide agreements – over and above the 1400 or so bilateral investment treaties (BITs) between individual EU Member States and third countries.
The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada is the first of the EU’s new generation of free trade agreements (FTAs) negotiated by the EU in the exercise of its new competence.
However, CETA must first overcome the hurdle of an eagerly anticipated judgment of the European Court of Justice. The ECJ has been asked by the European Commission to opine on whether an analogous FTA between the EU and Singapore may be ratified at EU level or if it also requires individual ratification by each of the 28 EU Member States. The latter would prompt debate in multiple national parliaments, making it likely that CETA would take significantly longer to come into force, if ever.
If it does enter into force, CETA’s investment protection and ISDS provisions will replace eight existing BITs between Canada and individual EU Member States. However, the ramifications of this new, unified regime will reach far beyond the Canada–EU trade relationship. As part of the first wave of FTAs to be negotiated by the EU, CETA has laid the groundwork for future FTAs and BITs to be negotiated and potentially concluded by the EU, including the all-important Transatlantic Trade and Investment Partnership (TTIP) with the US.
“CETA has laid the groundwork for future FTAs and BITs to be negotiated and potentially concluded by the EU, including the all-important Transatlantic Trade and Investment Partnership (TTIP) with the US.”
CETA also comes at a critical time in the public discourse over investment protection, with a particular focus on ISDS, a system that has been criticised by influential publications and governments alike. Many question why ISDS is necessary where both state parties have robust legal systems, while others would prefer to do away with the system entirely. One polemicist has gone so far as to qualify TTIP as a ‘monstrous assault on democracy’. It is no surprise that the debate should be so fierce given that ISDS touches on the ability of states to regulate in the public interest and may result in significant monetary awards being paid out of the public purse.
An overview of some of CETA’s features indicates a measured response to the array of critics.