Politics

EU court rules investor protections in Canada's trade deal are legal

The Canada-European Union free trade agreement's provisions to protect investors do not breach EU law, the European Court of Justice (ECJ) ruled Tuesday, in a major relief for proponents of the deal that came into force in 2017.

Belgium requested opinion on CETA's investment court system, EU hopes to apply it to other partners

Prime Minister Justin Trudeau, left, and European Council President Donald Tusk signed the Comprehensive Economic and Trade Agreement in 2016. (Francois Lenoir/Reuters)
The European Union-Canada free-trade agreement's provisions to protect investors do not breach EU law, the European Court of Justice (ECJ) ruled on Tuesday in a major relief for proponents of the deal that came into force in 2017.

The ECJ's judges said that the mechanism to resolve disputes between investors and states in the Comprehensive Economic and Trade Agreement (CETA) with Canada, which critics say unfairly favor multinationals, is in line with EU law.

The system of tribunals to settle disputes between foreign investors and states became a focal point of protests against the planned EU-U.S. TTIP trade deal and CETA when EU countries were deciding whether to back the latter in 2016.

The Belgian region of Wallonia, then led by the Socialists, threatened to block the deal, but the federal government persuaded it not to do so in return for certain concessions — including a request for the ECJ to give its view.

Belgian Foreign Minister Didier Reynders, whose liberal MR party will be battling to stay in power in an election in May, said he was pleased with the ruling, adding in a statement that Belgian businesses had done well in the first year of CETA.

The court ruled that an international agreement, such as CETA, could lead to the creation of a tribunal to rule on 
matters related to it. The deal did contain provisions preventing investors from challenging public decisions on issues 
such as consumer or environmental safety, it said.
 
It also said CETA did not infringe the principle of equal treatment, since Canadian investors with interests in the EU 
were not comparable with EU investors with interests in the bloc. 

Most countries have not ratified

When CETA was provisionally applied in September 2017, a small number of its measures — including investment protection provisions — were not brought into effect pending resolution of the jurisdictional questions the court was asked to consider.

In the face of heated debate and civil society protests, the European Commission decided to treat CETA as a "mixed agreement," meaning that ratification required not only a vote in the European Parliament but a successful ratification process in each of the 28 member states.

To date, only 12 have ratified. France and Germany are among those that have yet to ratify.

European Commission President Jean-Claude Juncker welcomed the court's decision as "the ultimate confirmation" of his team's negotiating approach.

"Today's findings of the Court of Justice are important in paving the way for the full application of the trade agreement with Canada," he said in a release.

Just because something is legal does not make it acceptable.- Maude Barlow

EU Trade Commissioner Cecilia Malmstrom said that Europeans can now have "full confidence" in the investment court system Canada agreed to re-work in order to finalize the deal.

"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," Malmstrom said.

The EU hopes this arbitration system eventually can become a multilateral investment court used by other European trading partners. But some civil society groups are still fighting to shut it down

Even though CETA's investment court system is an improvement over the deal's original investor-state dispute settlement chapter, critics say it still gives corporations too much power to sue states for changing policies, regulations or laws.

"Just because something is legal does not make it acceptable," said Maude Barlow, honourary chairperson of the Council of Canadians, which worked with opponents in several EU countries to lobby against the deal.

"In the new NAFTA, Canada accepted the elimination of ISDS. This showed that it had the courage to bail on a failed system that gives corporations powers to attack sound public policy that protects people and the environment. Canada should pull the plug on ICS in CETA, as well."

'Good for Canada'

Canadian Minister of International Trade Diversification Jim Carr said the European Court of Justice decision was "very good news."

"There were a number of European nation states waiting for this judgment before they moved to the ratification process," he told CBC News Tuesday. "They`ll now be able to move more speedily with ratification and that's good for Canada."

In an earlier statement, the minister's office said that during the first year of CETA's provisional application, bilateral trade between Canada and the EU increased by 9.4 per cent.

Early trade data suggest that European businesses may be taking better advantage of the deal than Canadian companies. Canada's imports from Europe rose faster than its exports to the EU during the first year of CETA's implementation.

Certain Canadian agricultural products, such as beef, continue to face regulatory barriers to entering the EU, despite the tariff-free market access secured in the deal.

With files from Janyce McGregor

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