President of the European Commission, Jean-Claude Juncker said: "One of the key pledges in the political guidelines I presented for this Commission in 2014 was to not accept that the jurisdiction of courts in the EU Member States is limited by special regimes for investor disputes. We delivered on that with the Investment Court System, an innovative approach that became the template for all EU investment negotiations, replacing the old investor-state dispute system, the notorious ISDS. I can only but welcome the Court's decision as the ultimate confirmation of the approach undertaken by the Commission. Today's findings of the Court of Justice are important in paving the way for the full application of the trade agreement with Canada. Our partnership with Canada continues to be stronger than ever – politically as well as economically."
EU Commissioner for Trade, Cecilia Malmström, said: "This Opinion confirms that citizens can have full confidence in the Commission's new approach to investment protection. International investment rules and dispute settlement have an important role to play in encouraging and retaining investment. The Investment Court System guarantees that this is done fairly, effectively and transparently. Today's Opinion not only shows that it is legally sound, but also reinforces the EU's leadership role in the ongoing wider discussions to reform the multilateral investment dispute settlement system."
The outcome is in line with the Opinion provided by the Advocate General in January that the Investment Court System under CETA is fully compatible with EU law and, specifically, complies with:
(i) the principle of autonomy of EU law and the exclusive jurisdiction of the Court of Justice of the European union for the interpretation of EU law;
(ii) the principle of equal treatment and of the requirement of effectiveness of EU law; and
(iii) the Charter of Fundamental Rights, in particular of the right of access to a court and right to an independent and impartial tribunal under the Charter.
The decision by the Court means that no changes have to be made to the text of the EU-Canada agreement and Member States' ratifications can proceed. Equally, no change will be required in the ICS provisions included in the agreements with Singapore, Mexico and Vietnam. The Commission will continue to negotiate the Investment Court System in bilateral agreements with other partners.
The agreement with Canada is under provisional application since September 2017 and can only enter fully into force once ratified by all Member States and concluded by the Council. Only upon the conclusion of this process can the Investment Court System become operational. Until then, CETA will continue to be provisionally applied to the extent provided for in the Council Decision on its provisional application. CETA was approved by the European Parliament on 15 February 2017.
Replacing the out-dated ISDS system was one of the pledges made by President Juncker in his July 2014 speech in front of the European Parliament, as well as in the Political Guidelines of this Commission. It is equally one of the key elements in the Mission Letter addressed on 1 November 2014 to the EU's Trade Commissioner Cecilia Malmström.
EU Member States are parties to almost half of the total number of international investment agreements that are currently in force worldwide (roughly to 1400 out of 3000). Almost all of these agreements include a mechanism for resolving disputes between governments and foreign investors known as investor-state dispute settlement (ISDS).
Under CETA, the ISDS mechanism is replaced with a new, effective, fair and transparent Investment Court System (ICS) that:
- contains measures to protect foreign investments and investors;
- makes clear that governments preserve their right to regulate and to achieve legitimate policy objectives, such as public health, safety, environment, public morals and the promotion and protection of cultural diversity.
Main features of the new Investment Court System:
- a permanent court inspired by public international courts;
- made up of a Tribunal of First Instance and an Appeal Tribunal;
- not based on temporary ad hoc tribunals;
- professional and independent adjudicators
- appointed for long terms of office by both parties taking into account all interests at stake
- held to the highest ethical standards through a strict code of conduct
- will work transparently by opening up hearings to the public; publishing documents submitted during cases; allowing interested parties (NGOs, trade unions, citizens' representatives) to intervene in the proceedings and make submissions.
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