1
CETA, the rule of law and
Ethics
The relationship between the Comprehensive Economic Trade
Agreement and the rule of law.
MA Thesis in European Studies
Track: Governing Europe
Graduate School for Humanities
Universiteit van Amsterdam
Author: Theophile Maiziere
Student Number: 11313889
Thesis Supervisor: Dr. A.C. van Wageningen
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Contents
Introduction ... 3
1- CETA and Sovereignty ... 7
A danger for our democracies ... 7
Understanding sovereignty ... 8
2 – CETA’s ICS ... 11
From ISDS to ICS ... 11
Solutions to ICSID and UNCITRAL issues ... 14
3 - Chapter 8 and its compatibility with EU law ... 17
The doctrine of supremacy ... 17
Consistency of opinions by the ECJ ... 20
4 - Domestic and international law... 23
Domestic legal systems ... 23
Jus Cogens ... 28
5- Ethics and Law ... 30
Law and social demand ... 30
The technical system ... 31
Conclusion ... 34
BIBLIOGRAPHY ... 37
LITERATURE ... 37
LEGAL SOURCES ... 38
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THESIS
CETA, the rule of law and Ethics: The relationship between the Comprehensive Economic Trade Agreement and the rule of law.
Introduction
On February 2017, Canadian Prime minister Justin Trudeau addressed the European Parliament. His address came right after the European Parliament voted in favor of implementing the Comprehensive Economic Trade Agreement (the deal was approved by 408 votes to 254, with 33 abstentions). CETA was hailed by Trudeau and EU officials as the blueprint for future trade agreements. CETA aims to eliminate 98% of the tariffs between Canada and the EU. CETA in its current form is a 1600 (approximately) page document which covers a wide variety of fields from agriculture to financial services
The Comprehensive Economic trade agreement has been in the works for the past 10 years. Indeed, one can trace the beginnings of CETA back to June 2007 during the EU-Canada summit in Berlin1.
During this summit, EU and Canadian leaders recognized the potential in broadening their cooperation in multiple fields (the three main topics discussed were: Peace and security, Economic Partnership, Climate Change and Energy). An agreement was made to conduct a joint study examining the costs and benefits of pursuing a closer economic partnership. This joint study was published in 20082 and
served as a base to truly begin negotiations. In that same year, Canada began consulting its population about a potential EU – Canada trade agreement by publishing a notice in Canada gazette3. In May
2009, the trade negotiations were officially launched4. Throughout the following years, Canada and
the EU managed to close multiple rounds of negotiations. By 2013, Canada and the EU announced that they had reached an agreement in principle. In 2014, at the Canada-EU summit, leaders officially released the completed text of the agreement5. This version received many criticisms and therefore
underwent multiple changes. In July 2016, the agreement was sent to the Council of the EU in order for it to be signed. EU trade Commissioner Cecilia Malmstrom stated in a press release: “the
Commission considers this agreement to fall under exclusive EU competence”. Yet, when the Council
1 European Commission. 2007. 2007 EU-Canada Summit Statement Berlin.
http://europa.eu/rapid/press-release_PRES-07-131_en.htm. Accessed 27 September 2017
2 European Commission and the Government of Canada. 2008. Assessing The Costs And Benefits Of Closer EU -
Canada Economic Partnership. http://trade.ec.europa.eu/doclib/docs/2008/october/tradoc_141032.pdf. Accessed 15 January 2017
3 "Canada Reaches Historic Trade Agreement With The European Union". 2013.
http://www.sice.oas.org/TPD/CAN_EU/Negotiations/CETA_conclude_neg_e.pdf. Accessed 15 January 2017
4 Council of the European Union. 2009. EU-Canada Summit Declaration.
https://ec.europa.eu/transport/sites/transport/files/modes/air/international_aviation/country_index/doc/200
5 "Canada-EU Summit - September 26, 2014". 2017. Canadainternational.Gc.Ca.
http://www.canadainternational.gc.ca/eu-ue/bilateral_relations_bilaterales/2014_09_26_summit-sommet.aspx?lang=eng. Accessed 16 January 2017
4 of the EU received the document, it deemed it necessary to turn it into a mixed agreement6. This meant
that the Commission no longer had exclusive competence and that the agreement would have to be signed by governments from every Member State in the EU to be provisionally applied. It would then have to be signed by every parliament in the EU to be fully implemented. Most Governments went on to sign the agreement, but it received opposition by some. The most prominent figure to oppose CETA was Paul Magnette7 (Wallonia’s Minister President). In his address to the Walloon parliament, Paul
Magnette expressed his concern with CETA. He believed it to be an inadequate agreement for
European standards and should therefore be modified. One of the major concerns that was put forward was the issue of the ISDS/ICS (Investor State Dispute settlement) which was considered to be an inadequate and undemocratic way of resolving issues. By vetoing the Belgian Government, Wallonia forced EU and Canadian leaders to make concessions. Multiple safeguards were added to satisfy the people opposing CETA. Paul Magnette’s opposition pushed EU leaders to agree to having CETA reviewed by the CJEU, to truly determine its compatibility with EU treaties (though this process will very likely be a long one). Paul Magnette, with the help of many renowned academics, released the Namur declaration8 in which he expressed his concerns about CETA and how he believes it is
disrespecting the democratic choices of the people. Nonetheless, Governments from every Member State ended up agreeing to CETA’s provisional application. We have now begun the stage where each Parliament will have to agree to CETA in order for it to be fully implemented. In February 2017, the Latvian Parliament became the first member state parliament to vote in favor of CETA9. The signing
process by Parliaments of every Member State will very likely take years.
CETA’s timeline puts forward an interesting element: its complexity. Indeed, this trade agreement seems to involve a wide variety of actors from regional parliaments to international institutions. These diverse actors show that CETA involves numerous legal systems (from national to international ones). Those who oppose CETA put forward the argument that it is in strong tension with the rule of law and with the principles present in national constitutions and European law. Some critics say the autonomy of the EU’s legal order is in peril. On the other hand, some believe the safeguards present within CETA are enough to guarantee this autonomy. One thing is certain, there are many questions surrounding CETA and its place in the legal world. As Trudeau and many EU officials have said, CETA may very well be the blueprint for future trade agreements. It seems only natural that we should
6 European Commission. 2016. European Commission Proposes Signature And Conclusion Of EU-Canada Trade
Deal. http://europa.eu/rapid/press-release_IP-16-2371_en.htm. Accessed 16 January 2017
7 Tripalio. “Paul Magnette Refuse le CETA.” YouTube. October 16, 2016.
https://www.youtube.com/watch?v=B5GhqxWeqzQ. Access 24 January 2017
8 "La Declaration De Namur". 2016. http://declarationdenamur.eu/index.php/declaration-de-namur/. Accessed
3 February 2017
9 McGregor, Janyce. 2017. "Latvia The 1St EU Country To Sign On To Canada's Trade Deal". CBC News.
5 ensure this blueprint is satisfactory. Therefore, within this thesis, we will attempt to answer the
following question:
Can CETA, in its current form, be said to respect the different legal orders in which it is involved and therefore ensure the protection of the rule of law?
CETA is indeed a complex agreement, understanding its place in the legal world could help us understand if the European citizen’s rights will be infringed and if the democratic choices of the people will be put in question. The ICS is not only inaccessible to the common citizen, but it is very likely that only big multinationals will be able to use it. Indeed, small and medium sized companies would very likely lack the financial backing necessary to successfully bring claims to this jury of arbitrators. CETA may not be the ideal agreement Trudeau and EU officials paint it to be. One should not forget that the agreement was negotiated under prime minister Harper, a global warming skeptic, who nowadays offers council to multinationals. It was done under the previous president of the European Commission, Manuel Barroso, who now works for Goldman Sachs. The agreement
happened under the previous trade commissioner, Mr. De Gucht, who is also now offering his services to multinationals.
The British decision to exit the European Union and the election of President Donald Trump in the US show us we are at a pivotal moment in history. One could justify these surprising events as being the result of deregulation of globalization. It’s partially this deregulated globalized world that keeps the right-wing extremist movements alive. A well-regulated globalized order is what could potentially help Europe from falling apart. If we wish to avoid Brexits and Trumps, Europe has to present itself as a pillar of strong public regulation. The European Union needs to ensure that Human, social and environmental rights are protected above commercial and investment rights.
There is a fear that CETA might be doing the exact opposite. The trade Commission of the European Union argues it wishes to protect employment and yet admit that they do not know if CETA will lead to any job creation 10. The Commission vowed to fight climate change alongside Trudeau. Yet
Trudeau alongside Trump agreed to relaunch the Keystone XL pipeline project that Obama’s
administration had stopped because it was considered too harmful for the environment. MEP Jean Luc Melenchon told the European Parliament in February 2017, that CETA represented a
catastrophic addition to the environmental crisis the world is facing. It encourages the importation of fossil fuels, cruel and disloyal agricultural practices and sets up special tribunals which will allow multinationals to oppose the people’s choices.
10 European Parliament. 2017. EU-Canada Comprehensive Economic And Trade Agreement - Conclusion Of The
EU-Canada CETA - EU-Canada Strategic Partnership Agreement (Debate). Video.
http://www.europarl.europa.eu/plenary/EN/vod.html?mode=chapter&vodLanguage=EN&startTime=20170215 -09:15:08-220#. Accessed 15 September 2017
6 This thesis will have to do multiple things to answer the question asked above. It will first establish what is meant by sovereignty and the rule of law as these terms may vary in their definitions depending on the academics you may refer to. It will then observe the Investment Court System (CETA’s controversial answer to investment arbitration) to understand its functioning and from where it draws its legitimacy. Afterwards, the thesis will analyze CETA’s Chapter 8 (the investment chapter) and its compatibility with EU law. This will be followed by a chapter focusing on the compatibility of the agreement with international and domestic law. The chapters on EU law and domestic and
international law will help us determine if CETA respects the rule of law. Finally, the thesis will focus in the relation between law and Ethics to understand whether a respect of the law is sufficient in order to respect the ethics and values put forward by a society.
7
1- CETA and Sovereignty
A danger for our democracies
MEP Yannick Jadot (in an interview) expressed his opinion of CETA11. He believes CETA is a
significant threat to our democratic sovereignty. He argues these free trade agreements, are continuing this terrible trend of the transferring of sovereignty as citizens, to big multinational corporations. He continues to say the free trade agreement will not liberalize commerce between Canada and Europe (Jadot considers trade between Europe and Canada to already be very free). It will only serve towards a downwards harmonization of our norms. Jadot expects to see a lowering of the standards of our, social, environmental, sanitary norms. He proceeded to say that a report (asked for by French President Emmanuel Macron) pointed out how CETA could be a very real threat to health,
environment and Climate. With CETA thousands of tons of Canadian beef could be imported into the European Union destroying Europe’s meat industry (and therefore making the high standards put forward by that industry, disappear). Jadot claims Canadian beef is raised in the worse conditions. The animals suffer, are filled with antibiotics, and the sanitary norms are unsatisfactory. The carcasses of the animals are washed with bleach. And it is through CETA that these products will be able to enter the European market. Jadot argues that through CETA, both Canadian and American companies will be able to pressure Europe into being less active about its counter measures for climate change. These firms will be able to take on, regions, states and the European Union by bringing them in front of the tribunal created through the agreement. Whether CETA will be able to create jobs is another
disappointing aspect. The only independent study that was conducted on this matter, was made by the University of Tuft in the United States12. Their findings show that less than 100,000 jobs will be
created in Europe. The only ones truly supporting this agreement are a few multinational corporations who will acquire, through this, more abilities to govern the people. They will be able to determine our societal rules and norms. CETA is a danger for Democracy, Climate, Health and our Sovereignty. CETA being an extremely ambitious and broad agreement covers too many fields for us to cover every single aspect of it. But Jadot’s argument puts forward an interesting aspect: Sovereignty. To best understand CETA, we must look at its potential impact on Sovereignty.
11 L'Obs. 2017. "Le Ceta Est Une Atteinte À Notre Souveraineté Démocratique" Juge Jadot. Video. Accessed
March 2. http://www.nouvelobs.com/videos/rfsumz.DGT/le-ceta-est-une-atteinte-a-notre-souverainete-democratique-juge-jadot.html. Accessed 2 Octobre 2017
12 GLOBAL DEVELOPMENT AND ENVIRONMENT INSTITUTE WORKING PAPER NO. 16-03. (2016). CETA Without
Blinders: How Cutting ‘Trade Costs and More’ Will Cause Unemployment, Inequality and Welfare Losses. http://www.ase.tufts.edu/gdae/Pubs/wp/16-03CETA.pdf Accessed 2 Oct. 2017.
8
Understanding sovereignty
So, what does one mean by sovereignty. Should we understand it the way brexiteers advertised it during the United Kingdom’s referendum? As something filled with sentimentalism and synonymous with having a strong (and borderline chauvinistic) national identity? This chapter will first try and explain what one might mean when talking of sovereignty so that we can better understand whether it is at risk or not.
The concept of sovereignty can be found in both national and international law, but one might say it is more of an idea from political science rather than law13. It is a form of declaration of independence.
When exercising power, declaring it to be sovereign means it cannot be put into question by external forces. Sovereignty is an idea that arrived with the modern nation state. It was a concept used to advocate independence. It was put forward to break free from the previous political system of feudalism. It was meant to promote principles of liberty and not submission. Sovereignty was the change from an outdated feudal system to a modern nation state14. As complicated as sovereignty
might be to define, we have to see it as integral and intertwined with the concept of the nation state. And one of the most important parts of the modern nation states like that of Canada and the Members States of the European Union, is the separation of powers.
The French 1789 Declaration of the rights of Man and of the Citizen in its article 16 says the
following: “ Any society in which the guarantee of rights is not assured, nor the separation of powers determined, has no Constitution “. This separation of powers is usually associated with Montesquieu’s
The spirit of the Laws15. Montesquieu first elaborated his system of separation of powers after having
observed the British political regime. His findings went on to shape and influence the development of every western Nation state. In his conception of the separation of powers, Montesquieu sees the participation of the people within politics as only a secondary element. For him what matters is the liberalization of economic exchanges and the profit that comes from it. Montesquieu had a very liberal mindset (not necessarily a democratic one). For him, liberalization meant Political freedom. Both France and the United States originally very much followed these ideas. This is seen through selective suffrage. After the French revolution, the revolutionaries did not give power back to the people immediately. They installed a selective suffrage where only those who had paid a tax could vote (this was the case till 1948). The philosophy of the revolutionary bourgeoisie was that only those who were capable of it, should participate in the exercise of power (and therefore guarantee sovereignty). The idea was that those who could pay the tax could do so because they had proved themselves capable of
13 Hobbes, T., & Brooke, C. (2017). Leviathan. Penguin Classics.
14 Bodin, J., Frémont, C., Couzinet, M., & Rochais, H. (1986). Les six livres de la République. Paris: Fayard. 15 Montesquieu, C. and Nugent, T. (n.d.). The spirit of laws.
9 acquiring money by successfully running their personal affairs. It was a system based on some sort of vision of meritocracy.
Montesquieu’s vision could be said to be characterized by relativism. For him, every excess is bad. We should constantly strive to relativize, nuance and balance constraints. What Montesquieu has in mind in the spirit of the laws is to guarantee the autonomy of the individual by having effective checks and balances on the judicial and institutional levels to assure that no abuse of power takes place. The limitation of certain powers (as Hobbes or Locke point out) is key in creating a proper frame for an efficient democracy. Though what Montesquieu calls ‘democracy’ is more akin to the governance systems described by Aristotle and Plato16.
Within our western democracies, we can witness two different categories: The presidential system and the parliamentary system. In the former, there is a strict separation of powers. Parliament and the executive branch are strictly separated and theoretically have no genuine control over one another. In the latter system, the regime has adopted a more flexible separation of powers. The executive and legislative rule together and collaborate (without fusing). As much as both systems may vary, one thing is clear, a certain level of separation of powers is key to each regime.
The whole point of the separation of powers is to have an effective State in which the checks and balances provide an efficient level of protection of the individual. This brings us to an (arguably) even more important principle, that of the rule of law. This principle aims to ensure these checks and balances by restraining the influence of arbitrary power
The rule of law as defined by Dicey17, the Rechtstaat explained by Gneist18 or the Etat de droit in
France all have the same idea and guiding principle: To have a State in which the actions of the executive branch are subject to the law. One could trace back this idea to medieval Europe under classical monarchies in which the State was not the master of the law but rather its guarantor. To sum it up in a simplified manner, the Rechtstaat is seen through a separation of powers, where the executive branch acts within the limits set out by the law. This idea is expressed in the French
constitution of 179119 “There is no authority in France superior to that of the law; the King reigns only
thereby, and only in the name of the law may he exact obedience.” Public administration is required to respect the law regardless of the way it was made. Nonetheless, it
would be wrong to say that public administration is denied any type of freedom when acting. Indeed, the general rules that must be followed by the administration remain abstract in certain instances, allowing it to determine things on its own (the laws do not cover every single situation in which the
16 Plato, Benjamin Jowett, and Tom Butler-Bowdon. 2012. The Republic. Chichester, West Sussex, England:
Capstone.
17 Richard A Cosgrove and Albert Venn Dicey, The Rule Of Law (University of North Carolina Press 1980). 18 Rudolph Gneist, Der Rechtsstaat (Elibron Classics 2012).
10 administration might be involved). One of the key elements put forward by Jean Rivero20 is that there
is no Etat de Droit unless the individual has a legal resort available to him/her in order to sanction a violation of the rule of law. Another key element is that the State that has committed the violations of the rule of law, must be sanctioned by a judge. These are broad elements that still allow for a wide variation of application of the principle. This can be witnessed through the differences between the Continental Europe and the Anglo-Saxon approach. In continental Europe, the administration is subject to law made specifically for it: an autonomous administrative law21. On the Anglo-Saxon side administration is regulated though ordinary law (this is
something seen in all common law systems)22. In countries like France, the administration will have to
face a special judge coming from the Conseil d’Etat, whereas in the British system, a judge who takes
care of private litigation may end up dealing with litigation concerning administration. It is safe to say that there is not a uniform definition of a state that abides by the rule of law. But
whatever happens, our western societies follow one unchangeable principle: Administration action must be founded on law, limited by law and controlled by a judge. One might say that this regulation of administrative acts is not a positive thing and that it only serves to obstruct the efficiency of the State. Indeed, the creative genius of administrators finds itself shackled by the restrictions imposed by regulation. But one should remember that efficiency cannot take place amidst chaos, and chaos finds its roots where regulation is absent. Rivero tells us that without the rule of law, we are tempted to let
ourselves be guided by the dangerous impulsions of creative genius23.
Respecting the rule of law is essential in order to protect the sovereignty of our western nation states. The three following chapters will therefore focus on determining whether CETA does not contradict the rule of law, as such a contradiction would put sovereignty in jeopardy.
20 Jean Pierre Machelon and Jean Rivero, La Republique Contre Les Libertes? : Les Restrictions Aux Libertés
Publiques (Presses de la Fondation nationale des sciences politiques 1976).
21 Pejovic, C. (2001). CIVIL LAW AND COMMON LAW: TWO DIFFERENT PATHS LEADING TO THE SAME GOAL.
Retrieved from https://www.victoria.ac.nz/__data/assets/pdf_file/0008/830780/Pejovic.pdf Accessed 2 June. 2018
22 Ibid.
11
2 – CETA’s ICS
From ISDS to ICS
As stated in the introduction, the ICS (Investment Court system) is CETA’s designated entity to deal with investment disputes between parties. CETA, like most Free trade agreements of this size, initially planned on having an ISDS (Investor State Dispute Settlement). But because of the criticism it
received24, it was modified to an ICS in an attempt to calm people’s fears and worries. The ISDS is a
system that seems to make sense on paper. It used to be a fairly common tool. The general principle behind the ISDS is to create a mechanism that allows a foreign company to sue a state that has acted in a way that discriminates against the foreign company and aimed at reducing its profits. ISDS tribunals are something that have been around for some time. Indeed, they have been used numerously in the past to resolve issues of investments in developing countries (as their legal systems were deemed to be too unpredictable). But a more recent case involving an ISDS tribunal shows the limitations of such a system. Indeed in 2012, the Swedish power company Vattenfall used an ISDS tribunal to claim 4.7 billion dollars from the German Government as compensation for them closing down two Swedish nuclear power plants25 (due to Merkel’s decision to abandon all nuclear energy). This example shows
how an ISDS tribunal may become a lobbying tool to oppose and hinder public policies. In their resolution of July 2015, the European Parliament expressed its fears with the ISDS (it also expressed its wish to move away from it in the TTIP26). This pushed the commission to present (in September
2015) a proposal for a new protection mechanism called: The Investment Court System (ICS). The ICS differs from the ISDS as it proposes a permanent body for the resolution of investment disputes. It also proposes a “right to regulate” in order to avoid disputes from influencing public policies by Member States or the EU. Both the Commission and Canada agreed to this new system. But whether this new system is truly the right solution is still questionable. Indeed, the ICS might pose a challenge to the proper functioning of the rules governing the EU internal market. It provides remedies that could go against articles 45, 54 and 56 of the TFEU. For example, it might allow Canadian Investors to bring claims on behalf of their EU incorporated companies. Seeing how this new dispute resolution
24 Kumm, Mattias. 2015. "An Empire Of Capital? Transatlantic Investment Protection As The Institutionalization
Of Unjustified Privilege | European Society Of International Law". Esil-Sedi.Eu. http://www.esil-sedi.eu/node/944. Accessed 18 September 2017
25 "VATTENFALL V. GERMANY (II) AND THE FAMILIAR IRONY OF ISDS: INVESTORS BEFORE PUBLIC INTEREST?".
2017. Corporate Disputes. https://www.corporatedisputesmagazine.com/vattenfall-v-germany-ii-and-the-familiar-irony-of-isds-investors-before-public-interest/. Accessed 20 September 2017
26 "Texts Adopted - Wednesday, 8 July 2015 - Negotiations For The Transatlantic Trade And Investment
Partnership (TTIP) - P8_TA(2015)0252". Europarl.Europa.Eu.
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2015-0252+0+DOC+XML+V0//EN. Accessed 12 February 2017
12 system still raises some questions, it would be good to try and understand it. Understanding the ICS might help us answer the question of CETA’s place and legitimacy in the legal world.
The ICS differs from the ISDS in multiple ways. One of these ways is that it will possess two tribunals: the Tribunal and the Appellate Tribunal27. The CETA articles defining them tell us that the
Tribunal will be composed of fifteen judges. Five of them will be nationals of a Member State of the European Union, five will be nationals of Canada and five will be nationals of third countries. The members of the Tribunal need to possess the required qualifications necessary in their respective countries for the appointment to judicial office. They also need to have demonstrated expertise in public international law and more specifically international investment law28. These Tribunal
members will be appointed for a period of 5 years (renewable once)29. The Tribunal will hear cases in
divisions of three. Among those three, there will be one EU national, one Canadian national and one Third country national30. The appointment of members to the divisions will be done on a rotational
basis to ensure the composition remains random and unpredictable31. One big change from the ISDS,
is that the judges of the ICS will have to be permanent. This means that they need to always be ready and available if a dispute settlement case arises. To ensure this, CETA tells us these judges will be paid a monthly retainer fee (which will be funded equally by the two parties of the agreement in an account managed by the ICSID Secretariat)32. According to regulation 14(1) of the Administrative and
Financial Regulations of the ICSID Convention, the basic retainer fee received by judges will be complemented with an ad hoc compensation every time they take care of a case. But due to the EU’s push for a new approach, it is possible for the CETA Joint Committee to decide to transfer the retainer fee and other fees and expenses into a regular salary33. The shift towards a regular salary could help
legitimize these judges within public opinion. Though initially, the ICS will have the characteristics of a semi-permanent judiciary. As for the members of the Appellate Tribunal, it seems they have to respect the same requirements as the Tribunal34.
In a wish to have a solid working ICS and clear ethical standards, CETA has attempted to ensure things such as the independence of judges35. The judges have to follow the International Bar
association guidelines on conflicts of interest in International Arbitration. They will also have to refrain from acting as counsel or as party appointed expert or witness in any pending or new
investment dispute under this or any other international agreement.
27 Articles 8.27 and 8.28 CETA 28 Article 8.27(4) CETA 29 Article 8.27(5) CETA 30 Article 8.27(6) CETA 31 Article 8.27(7) CETA 32 Article 8.27(13) CETA 33 Article 27(15) CETA 34 Article 8.28(4) CETA 35 Article 8.30(1) CETA
13 Until Canada and the EU agree on a definitive code of conduct, the IBA guidelines will be followed. CETA therefore ensures that judges do not do anything that may create the impression that they are in a position to be influenced by others. The judges cannot use their position to advance any personal or private interest. The ICS aims to follow the rules of transparency set out in the United nations Commission on International Trade Law (UNCITRAL). This means that once proceedings begin, the name of the disputing parties and the economic sector will be made public36. Overall these changes
from the ISDS to an ICS are the result at an attempt to create a more legitimate legal entity by making it seem more like a court37. Unlike a more classic arbitration tribunal which has arbitrators appointed
for a specific dispute, the ICS judges will be appointed in a more permanent fashion38. As mentioned
previously, the ICS follows the rules and guidelines set out in the ICSID. Yet, the ICS not being a classic ISDS, it varies from certain norms set out under that convention. The problem with this is that not all Member states of the EU have signed the ICSID. The EU itself has not signed it. Therefore, when a claim is brought against a Member State of the EU that is signatory to the ICSID, the ICS should have the necessary jurisdiction. But when a claim is brought against the EU itself (or a non-signatory Member State), problems of jurisdiction may arise. According to Article 25 ICSID “The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State
designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre”. This means that the parties that are not part of the ICSID may decide to question its jurisdiction and therefore the jurisdiction of the ICS as well. The European Union has raised the question of officially signing the convention to resolve this issue39.
Though, having the EU be a part of the ICSID convention might be more complicated as Article 67 tells us it is only open to states and the EU fails to qualify as such. On paper, it would seem the only way for the EU to become a member, is to have the ICSID amended (this is possible under article 66 ). This procedure would be a complicated one but is still achievable. Even if the EU does manage to become a member of the ICSID, it still does not resolve the issue of certain EU member states not being a party to it. This issue could potentially be resolved. A similar type of dilemma was faced in the 60s and 70s when some EEC Member States were not part of the GATT. These members, recognizing that the
Community had taken over the external trade power of its Member States, eventually recognized that it had become de facto parties to the GATT. If the EU were to become a member of the Convention,
36 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration Article 2
37 ", Online Public Consultation On Invest- Ment Protection And Investor-To-State Dispute Settlement (ISDS) In
The Transatlantic Trade And Investment Partnership Agreement (TTIP)".
http://trade.ec.europa.eu/doclib/%20docs/2015/january/tradoc_153044.pdf. Accessed 12 February 2017
38 Merrills, J. G. 2014. International Dispute Settlement. 1st ed. Cambridge, UK: Cambridge University Press. 39 "COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE
EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS". http://trade.ec.europa.eu/doclib/docs/2010/july/tradoc_146307.pdf. Accessed 20 February 2017
14 one could therefore imagine the Member States might recognize they have become de facto members of said convention. The possibility of that happening depends to what extent the Member states
recognize the field of investments has been taken over by the EU. Opinion 2/15 by the ECJ, which will be analyzed later in the thesis, looks at the EU’s competence when it comes to this area and could therefore help us resolve this issue.
The ICSID could in itself be modified to accommodate the two parties of the agreement. This inter se modification could be attempted through article 41 VCLT which tells us “Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone” it then proceeds to list the conditions necessary for the modification. One of the most important conditions is set out in Article 41(1)(b) which tells us the modification should not “affect the
enjoyment by the other parties of their rights under the treaty or the performance of their obligations”. According to the available literature, it would be safe to assume that when the treaty says “affect”, it means affecting in a negative way40. This means that if the two parties wished to modify ICSID in a
way to better fit with things such as environmental policies, even though it might affect the
convention, it would still be permissible. Article 41(b)(ii) tells us modifications to a treaty that pose an obstacle to the purpose of the treaty as a whole are not permissible. Determining if a modification disturbs the purpose of a treaty is not a simple thing to do and can therefore be very debatable. A modification can argue that it adds to the treaty. The ICSID states its purpose in the following way “The purpose of the Centre shall be to provide facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of other Contracting States in accordance with the provisions of this Convention”41.
Solutions to ICSID and UNCITRAL issues
The ICS differs from the classic ISDS set out under the ICSID in the ways that have been pointed out earlier (more permanent feature of the arbitrators, rotational basis etc.). Such differences raise certain questions. Indeed, the fact that some of the judges have to be selected from the Member states of the EU and from Canada raises the question of State bias within the cases that the ICS will have to deal with. The modifications from the ISDS to an ICS can be argued to still fit the ICSID. The fact that parties will have to select judges of their nationality may not conflict with the rules set out in the convention. The ICSID tells us that even though the convention prefers a majority of third country nationals as arbitrators, the parties may still agree to appoint their own nationals42. The ICS, may
consider domestic law and its interpretation by domestic courts if it wishes to do so. Overall it would seem (similarly to the way EU law works), the only valid interpretation of investment law under
40 "Yearbook Of The International Law Commission 1966, Vol. II". 1966.
http://legal.un.org/ilc/publications/yearbooks/english/ilc_1966_v2.pdf. Accessed 20 February 2017
41 Article 1(2) ICSID 42 Article 39 ICSID
15 CETA’s chapter 8 will have to come from the ICS itself. According to the ICSID, the domestic law plays an important role in the resolution of investment disputes whereas here it does not seem to be the case. Though this is very unlikely to pose a problem as similar approaches have already been
witnessed. This is the case for the North American Free Trade Agreement (NAFTA) (which Canada is a part of) and the Energy Charter Treaty (which the EU is a part of). On top of this Article 42 of the Convention provides a certain amount of freedom when it comes which law should be put forward: “The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties”. The other distinguishing feature of the ICS is the presence of its Appellate Tribunal which can decide to overturn the decisions made by the Tribunal43. This Appellate Tribunal can be argued to
go beyond the powers of annulments of award seen in the ICSID convention44. The permissibility of
such an Appellate Tribunal will depend on whether it respects Article 41 VCLT, meaning, if it respects the object and the purpose of the ICSID convention. One could argue this Appellate Tribunal does not obstruct the execution of the purpose of the treaty. Indeed, the treaty’s purpose is to resolve conflicts concerning investments. The limitation of awards through the Appellate Tribunal would not interfere with the dispute resolution as some resolution to the conflict would ultimately be found. Therefore, even though the ICS differs from the classic ISDS in that respect, it may still be considered permissible by the ICSID and its convention.
As for the respect of the rules set out in UNCITRAL, the ICS stills seems to pose certain issues. A country, unlike the ICSID convention, does not need to be a member of UNCITRAL to apply the convention’s rules to its arbitration procedures. The issue seen previously therefore does not apply to this convention, but other problems still arise. Do the awards made by the ICS count as arbitral awards under UNCITRAL? Some national courts may argue it is not the case in an attempt to question the legitimacy of the ICS. UNCITRAL requires to have an agreement in writing45. A lack of agreement in
writing will make it difficult to enforce the awards made by the Tribunal. This is an issue that arose in the Iran-US claims tribunal where the lack of a proper written agreement undermined the awards made by the Tribunal46. CETA responds to this by explaining in its provisions that the submission of a claim
under the ICS counts as written consent and therefore satisfies the conditions set out by UNCITRAL. In the end, the ICS raises many issues which brings its legitimacy into question. It is an attempt at answering criticism towards the classic ISDS method which seems a bit dated for agreements as modern as CETA. The ICS therefore aims to replace the ISDS and introduce new customs of arbitration within FTAs. Indeed, the ICS tries to implement more permanent features within its Tribunal, making it more like a court than an average ISDS. Judges within the ICS will be changed
43 Article 8.28 CETA
44 Article 52(1)(a) to (e) ICSID 45 Article II UNCITRAL
46 Caron, David D. The Nature Of The Iran-United States Claims Tribunal And The Evolving Structure Of
16 every few years and they will be selected by the two parties of CETA. Before, the arbitrators were meant to be brought in on a case by case basis. By trying to make this new form of tribunal more transparent and similar to a court, CETA tries to change the notion that this arbitration tribunal might just be a tool for big multinationals to interfere with the policy making of states and infringing the democratic choices of people. But whether this new form of tribunal is legitimate under the ICSID and UNCITRAL is another issue. From what we have seen, CETA has taken the necessary precautions to try and respect the guidelines and rules under those two conventions and its Tribunal could therefore be considered as legitimate. But this area is still debatable and one will first have to wait for the full implementation of CETA (which will mean the implementation of Chapter 8) to start getting more answers. The EU’s new approach to arbitration in CETA through the inclusion of strict ethical guidelines, tries to respect the rule of law, but still leaves certain aspects unanswered. The judges of the ICS could still be accused of being part of a problem of institutional bias. As long as the ICS does not become a genuinely permanent court, the worry of bias within the arbitration will always be present and debates about legitimacy will continue to go on. It might be best in the case of CETA, to rely more on the domestic legal systems. Both parties to CETA currently have functional domestic legal systems that respect the rule of law and provide investment protection. The EU by pushing for the ICS is clearly trying to push for new standards of arbitration within its future FTAs. But whether it is taking the best possible path is debatable. The next thing we have to understand when trying to comprehend CETA’s place (and more specifically, chapter 8) in the legal world, is its relationship with National and International legal systems. We will therefore look at EU law’s relationship with CETA’s Chapter 8 in the following Thesis Chapter
17
3 - Chapter 8 and its compatibility with EU law
The doctrine of supremacy
The European Parliament’s vote on CETA was decisive as it was the last step needed to provisionally apply the agreement. It was also important as EU parliamentarians are directly elected by the peoples of Europe making it their job to represent them as best as they can. The deal was approved by 408 votes to 254, with 33 abstentions. MEPs from certain countries seem to have strongly opposed the agreement. This was the case of France which saw 48 of its 78 MEPs vote against CETA47. Through
such results one might be able to speculate the potential results of the national Parliaments. This present opposition had led, in the past, the European Parliament to ask for advice from its legal service48. This Chapter will attempt to understand and build on the findings of the European
Parliament’s legal service. The document raises the question of competence of the EU when it comes to investment protection (which therefore concerns Chapter 8 CETA). Investment protection is
something that we have seen in numerous international trade agreements (usually between a developed and developing country). It is here to ensure that investments are protected and secured while
guaranteeing the application of fair treatment. This protection is guaranteed by an ISDS (Investor-state dispute settlement) or an ICS (Investment Court System). These systems avoid political interference by providing an alternative to state to state dispute settlement. The ISDS allows companies to launch proceedings against a state if they believe they have been unfairly treated. These proceedings are put before a panel of international arbitrators. These arbitration tribunals usually operate under the rules set out by the World Bank’s International Center for Settlement of Investment Disputes (ICSID) under the convention on the settlement of Investment Disputes between States and Nationals of other States (1965). The Member States of the EU are part of approximately 1400 agreements that use such a system. The EU itself is only part of one agreement that uses this system (the Energy Charter treaty). In 2015, the Commission proposed an alternative to the ISDS for CETA: The ICS. The
Comprehensive Economic Trade Agreement officially adopted it on February 29. In April 2019, the ECJ officially released its opinion on CETA as a whole and decided that it did not go against EU law49. Though the controversial aspects of CETA remain and despite the ECJ’s affirmative answer, it
is still adequate to look into the potential areas in which legitimacy could still be argued to be lacking.
47 Chastand, Jean-Baptiste, and Maxime Vaudano. 2017. "Traité CETA : Les Eurodéputés Français Ont
Majoritairement Voté Contre". Le Monde.Fr. http://www.lemonde.fr/les-decodeurs/article/2017/02/15/traite-ceta-les-eurodeputes-francais-ont-majoritairement-vote-contre_5080287_4355770.html. Accessed 18 September 2017
48 "Compatibility with The Treaties Of Investment Dispute Settlement Provisions In EU Trade Agreements".
2016. https://polcms.secure.europarl.europa.eu/cmsdata/upload/49daf369-5480-40d7-aa8d-df745c4ff98c/SJ-0259-16_legal_opinion.pdf. Accessed 15 February 2017
18 According to Article 30.6 CETA, a claim for investment protection can only be made under the
provisions of CETA. These provisions cannot be “construed as conferring rights or imposing
obligations on persons other than those created between the parties under Public International law”50.
CETA also cannot be “directly invoked in the domestic legal systems of the parties”. CETA does not create a direct effect in the legal systems of the EU and its member states. If a party believes a country has violated principles set out by CETA, this party can bring a claim in front of the ICS and let the international jury of arbitrators decide on the matter. If the other party is found to have violated the provisions of CETA then compensation will be provided to the claimant. Some of the most important principles that have to be followed include non-discrimination and fair treatment. The term Investment is defined under Article 8.1 CETA. Article 8.6 CETA prohibits discrimination of investors. One of the most important articles concerning CETA and the ICS is Article 8.9 CETA. It concerns the right to regulate. This article gives parties the possibility to continue to take measures concerning public health, safety, public morals (and other areas), even if those measures interfere with the profits of the other party. This would not signify that the provisions of CETA have been breached. What is even more interesting in this article is paragraph 4 : “ For greater certainty, nothing in this section shall be construed as preventing a party from discontinuing the granting of a subsidy or requesting its
reimbursement where such measure is necessary in order to comply with international obligations between the parties or has been ordered by a competent court, administrative tribunal or other
competent authority” (my italics). This last part allows us to think that other courts (and not just the
CJEU) may have a say when it comes to the way the ICS is being handled. A similar type of thing is seen in Annex 8-A, in regards to the restriction on expropriation. It states that “in the rare
circumstance when the impact of a measure or series of measures is so severe in the light of its purpose that it appears manifestly excessive, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives such as health, safety and the environment, do not constitute indirect expropriations”. CETA seems to leave a bit of freedom to other legal entities when it comes to certain areas. Though how much power is left to these other entities is a bit unclear. Within that same chapter, we have Articles 8.22 and 8.24 CETA which specify that one has to abandon his/her right to start proceedings in other courts once the proceedings have begun in the ICS. This restriction not only applies to national courts but also to other entities such as the ICSID or UNCITRAL. One can imagine the prohibition may also concern the European Court of Human rights. Another aspect that is worth mentioning is seen in Article 8.31 CETA which states that decisions made by the ICS will have to be made in accordance with the Vienna Convention on the Law of Treaties and other rules and principles of international law applicable between the Parties. Another part of this article worth mentioning is paragraph 2 where it is said the Tribunal “may consider, as appropriate, the domestic law of the disputing Party as a matter of fact”.
19 All these articles raise important questions such as: How does European Union Law fit into all of this? According to Article 216 TFEU, the European Union can make International agreements on behalf of the Member States. The Court of Justice of the European Union has confirmed more than once that EU law holds supremacy over national Law. This means that when national law and EU law clash, EU law prevails. This is referred to as: the doctrine of supremacy. This doctrine was never explicitly present in the European Economic Community treaty (Rome treaty). But it was laid out in Declaration 17 of the treaty on the Functioning of the European Union (TFEU). The fact that the concept does not have its own treaty article and is only mentioned in a declaration, does not take away its legal authority (at least this is what some figures in the legal world argue)51. We can argue that the doctrine existed prior
to its implementation in the treaty. Indeed, the first foundation of the doctrine was in the famous case of Van Gen en Loos52 where the European Court of justice (ECJ) held that the community constituted
a new legal order of International Law where Member States had agreed to limit their sovereign rights. This concept also finds its foundation in the important case of Flaminio Costa v ENEL53. In this case,
the ECJ held that the Member States had created a body of law that binded their nationals and
themselves. The nature of the community law made it so that it could not be overwritten. But when articles of EU law and International law conflict with one another, EU law may be annulled.
International agreements seem to have primacy over EU law. This is demonstrated in multiple cases such as Commission v Germany54, Bellio F.Illi55 and others. International law appears to have
primacy. But there are limits to this primacy. Indeed, technically, International agreements cannot change the autonomy of the EU legal order. It also cannot change its main principles. This means that fundamental rights as they are currently defended in the EU, cannot be altered. But according to the ECJ’s logic, a court created for the purpose of an international agreement, may interpret EU law provisions. The idea that the ICS may interpret EU law is therefore not incompatible with EU treaties. Opinion 1/91 puts forward that very logic by explaining that EU law may submit itself to the
interpretation of another court. The opinion is also careful to include that the autonomy of the EU legal order cannot be affected by this and these interpretations “must not have the effect of binding the EU and its institutions to a particular interpretation of the rules of EU law”56. The EU legal system once
again demonstrates its willingness to give a certain amount of freedom to international judicial
systems while confirming it wish to retain primacy over its fundamental principles and maintaining its autonomy. One can look to Article 2 TEU and Article 3(5) TEU to understand some of the
51 Beck, G. (2011), The Lisbon Judgment of the German Constitutional Court, the Primacy of EU Law and the
Problem of Kompetenz-Kompetenz: A Conflict between Right and Right in Which There is No Praetor, in: European Law Journal, 2011, 17: pp. 470-494
52 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue
Administration. Case 26-62
53 Flaminio Costa v E.N.E.L. Case 6-64 54 Commission v Germany Case 61/94
55 Bellio F.Ili Srl v Prefettura di Treviso Case 286/02 56 Opinion 1/91, 14 December 1991
20 fundamental principles on which the EU legal order will not make compromises. Indeed, the former lists the values shared by the Member States and therefore fundamental to the EU: “respect for human dignity, freedom, democracy, equality, the rule of law […] non-discrimination, tolerance, justice,
solidarity and equality between women and men” (my italics). The latter article promotes “free and fair trade” and “strict observance and the development of international law”. The European Union, according to its legal system, will act on the international scene in a way that fits with the principles found in articles such as Article 2 TEU and Article 3 TEU. Article 21 TEU confirms that attitude. It might be worth mentioning paragraph 2(b) of Article 21 which states the union will seek to
“consolidate and support democracy, the rule of law, human rights and the principles of international law”. This attitude is confirmed and consolidated in other articles which states the Council “may take appropriate action to combat discrimination”57.
One cannot speak about fundamental rights and the EU without talking about the Charter of
Fundamental Rights of the European Union. Declaration 1 TFEU tells us that the charter has a legally binding force and confirms that the EU will guarantee the rights established in the European
Convention for the Protection of Human Rights and Fundamental Freedoms. The charter once again confirms through its Article 21 that “any discrimination […] shall be prohibited”. If there is one thing we can be sure of, is that the treaties and charters regulating the EU and its attitude provide explicit protection from any form of discrimination in national and international agreements. This leaves us in a complicated place where the EU is willing to let other qualified courts interpret its provisions, but it also is not willing to compromise or alter its fundamental rights and values.
Consistency of opinions by the ECJ
The compatibility of an ICS/ISDS in CETA’s case with the EU’s legal autonomy is still a
controversial thing. As previously stated, the only other agreement in which the EU is a part of that involves such a system is the Energy Charter Treaty. But there is now another agreement that involves such a system: the free trade agreement with the Republic of Korea (we will observe this relevant example in more detail later in the thesis). Answering the question of compatibility is a difficult one. The ECJ’s opinion determining that CETA’s ICS mechanism is compatible is consistent with its previous opinion: Opinion 1/91. Indeed, this opinion, like others which will be subsequently mentioned in this Thesis, addresses the issue of having courts able to rule on provisions of
international agreements negotiated by the EU. As previously stated, Opinion 1/91 (which was about the creation of the European Economic Area), EU law may submit itself to the interpretation of
another court. This interpretation does not have to be binding as the ECJ wants to ensure the autonomy of the EU legal order is preserved. A similar logic is displayed in Opinion 1/92 (which addresses the
21 same issues as 1/91 after renegotiations took place). The idea that an agreement concluded by the EU could affect the powers of the Court of Justice as long as it respected the autonomy of the system was once again seen in Opinion 1/00 (which was about the establishment of a European Common Aviation Area). Indeed paragraph 21 confirms the consistency of the ECJ’s approach by stating that although an international agreement affects the power of the Community institutions, “it does not alter the essential character of those powers and, accordingly, does not undermine the autonomy of the Community legal order.”. This rationale can be observed in Opinion 1/0958, the joined cases of Yassin Abdullah Kadi
and Al Barakaat International Foundation59, and even more recently in Opinion 2/13 (concerning the
accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms). This recent Opinion tells us the following: “the Court of Justice has also declared that an international agreement may affect its own powers only if the indispensable conditions for safeguarding the essential character of those powers are satisfied and, consequently, there is no adverse effect on the autonomy of the EU legal order”60. Yet that same Opinion states that
“The interpretation of a provision of EU law, including secondary law, requires, in principle, a decision of the Court of Justice where that provision is open to more than one plausible
interpretation”61. When looking at CETA’s investment chapter, it would appear that only the ICS
would be able to settle a dispute between two parties. This raises the problem of the exclusion of national courts. If the tribunal set up by CETA can be the only one to adjudicate the dispute, this means that national systems cannot bring matters in front of the ECJ. This would deprive them of their right set out in Article 267 TFEU which sets out that a court or tribunal of a Member State may request the Court of Justice of the European Union to give preliminary rulings concerning
interpretation of EU law. Chapter 8 could potentially deprive Member States of one of their rights
guaranteed under the Treaty on the Functioning of the European Union. But one could argue Article 8.31 CETA provides enough proof that national Courts and Tribunals will retain power as the ICS will have no jurisdiction to “determine the legality of a measure, alleged to constitute a breach of this Agreement, under the domestic law of the disputing Party.”62. That same
article also establishes that when the tribunal resorts to using domestic legislation, it will follow the interpretation given by the domestic courts and authorities.
The Opinions we have looked at so far, show consistency with the ECJ’s opinion to confirm the legitimacy of CETA. The interpretation of EU law by the ICS would of course not be binding on the ECJ and the national courts and it would have to make sure not to alter the fundamental principles of
58 Paragraph 76, Opinion 1/09
59 Kadi and Al Barakaat International Foundation v Council and Commission Cases C-402/05 P and C-415/05 P,
paragraph 282
60 Paragraph 183, Opinion 2/13 61 Paragraph 245, Ibid.
22 the treaties63. The respect of these fundamental rights protected by EU law is vital for the legality of
CETA. These values (as stated previously in the thesis), include non-discrimination, equality before the law, equality of citizens etc. The necessity to respect these values when concluding international agreements has been made clear by the EU legal order.
One of the contested aspects of the ICS is that it provides a way for foreign investors to bring a claim forward, but it does not provide local parties an opportunity to do the same. One might argue this goes against the values of equality before the law and non-discrimination the EU seems to hold so dearly. The legal service of the European Parliament justifies this by explaining that this is not an unusual situation in a trade deal. Indeed, when it comes to trade, it is natural for the Investor to have different rights apply compared to the investee. On top of this, Canadians are granted a right to bring a claim to the ICS in Europe, but EU parties are also allowed to bring such claims on Canadian soil. A party may also be hesitant to invest in another territory due to linguistic, political, cultural differences. The ICS in its current form provides a way to overcome this potential fear of investment. This type of system also is not new as EU Member States are part of many International agreements with some form of ISDS. The ICS allows CETA to level the playing field for foreign investors and take full advantage of the new markets now open to them. In its opinion on CETA, the ECJ points out that there is a
difference between international investments and intra-Community investments. It argues this distinction is enough to make the two cases incomparable and therefore brush aside claims of discrimination64.
Overall, by basing ourselves on EU case Law, Opinions from the court of Justice and the European Parliament, we were able to analyze articles from CETA and EU law. Evidence seems to point
towards a compatibility of CETA’s Chapter 8 with EU law as long as it respects its autonomy. But the compatibility of the agreement with domestic and international law is another issue altogether which we will attempt to answer in the following chapter.
63 Paragraph 68, Opinion 1/17 64 Paragraph 204. Ibid.
23
4 - Domestic and international law
Domestic legal systems
The German Constitutional Court on October 2016 released a judgment about CETA. One should know that this is not a final judgment on the matter. Though, the FCC being a very influential institution within Europe, one should still take what was said seriously. In their judgement the court did not rule against the provisional application of CETA. Indeed, they expressed that the German representative could agree to CETA in the Council. But, this agreement needs to meet three conditions:
- The council decision to provisionally apply CETA must only concern parts where the EU has exclusive competence.
- Until the FCC reaches a final decision, any of the committees within CETA must have sufficient “democratic backing”
- Art. 30.7 para. 3 (c) of CETA has to be interpreted in a way that allows a unilateral termination of the provisional application of CETA by Germany.
The court’s logic behind agreeing to this provisional application was that, if the German Government was not allowed to proceed in participating in European trade and foreign policy, it would deal a massive blow to Germany and Europe’s reputation as a trustworthy trade partner. A negative vote by Germany could have led to the end of CETA. Whereas a positive vote meant securing this reputation while leaving the question of constitutional compatibility open ended (but not abandoning the issue). The first condition put forward by the court seems acceptable. The provisional application is only acceptable if it concerns area that fall within the exclusive competence of the EU. The German government itself said that it did not agree with the disputed areas. The disputed areas are the following: Dispute settlement system (Chapter 8), Portfolio investments (Chapter 13), maritime transport (Chapter 14), Mutual recognition of professional qualifications (Chapter 11), and trade and labour (Chapter 23).
The second condition also makes sense. The FCC sees a potential threat to the German Constitution by CETA committees. Therefore, it wishes to make sure that Committee decisions are only taken on the basis of a common position taken by the council65 , which requires a unanimous vote in the council
(therefore giving a veto right to all Member states on any decision taken in the committees).
24 The third condition presents another way the FCC wishes to protect the German Constitution. It gives the German government the possibility to withdraw and terminate the provisional application through a unilateral declaration.
By using art. 218 TFEU and interpreting EU Law, the FCC may be overstepping its boundaries. A clarification of the use of art. 218 TFEU should be provided by the CJEU in order to confirm what the FCC has said.
Another interesting issue that is brought up here is the “unilateral termination”. Does this mean Germany can by itself terminate the provisional application? In CETA it is stated that “A party may terminate the provisional application of this agreement”66. When reading CETA, it suggests that there
are only two parties: EU and Canada. Yet CETA is a mixed agreement (meaning that the 28 Member States of the EU have to ratify it). If CETA is truly a mixed agreement this would mean that there are 30 parties (Canada, EU and the 28 Member States). If there are indeed 30 parties involved, then Germany could bring in International Law into all of this and apply art. 25 Vienna Convention on the Law of Treaties between States and International Organizations or between International
Organizations (VCLT).
Through Art. 25 VCLT Germany should be able to terminate the provisional application. But whether this would fit with art. 216 (2) TFEU (“agreements concluded by the Union are binding upon the institutions and on its Member States”) is another issue. Indeed, if the provisional application only concerns areas that belong to the EU then it may be useless for Germany to resort to Art. 25 VCLT. The FCC in its opinion, raises many interesting questions concerning the power a Member State may have to protect its democratic choices and its legal autonomy.
In this part, we will therefore look at whether a domestic court like the FCC can truly decide to circumvent its international law obligations if they deem them to clash with the fundamental rights they have vowed to protect. Similarly, to the way the ECJ decided not to implement a security council resolution in the case of Kadi67 because it deemed it to go against its fundamental principles, we shall
ask ourselves if domestic courts (like the German Federal Constitutional Court) can do the same. It is agreed that there is a primacy of international law therefore, when domestic and international law clash, international law should apply68. This supremacy is confirmed within the Vienna Convention on
the Law of Treaties69. The United Nations Charter also includes what some refer to as a ‘supremacy
clause’70 confirming this. On paper, it would appear that CETA provisions, being part of the realm of
66 Paragraph 3(c) Article 30.7 CETA
67 Kadi and Al Barakaat International Foundation v Council and Commission Cases C-402/05 P and C-415/05 P 68 Fitzmaurice, Gerald. 1957. The General Principles Of International Law Considered From The Standpoint Of
The Rule Of Law. 1st ed.
69 Articles 27 and 46 VCLT
25 international law, would have primacy. Case law like ING België v B I71 show us that some courts (in
this case, the Belgian one) make sure to set aside their domestic law when a conflict arises with international law. But not all courts apply this type of behavior. As one would expect there are many cases exemplifying the reluctance of domestic legal systems to embrace the supremacy of international law. Indeed, most states believe in the supremacy of their constitution (this is what one could call a dualist system compared to the Belgian approach which is a monist one72). The dualist systems tend to
consider the will of their domestic parliaments as supreme. The supremacy principle of international law in these latter states depends on its ability to respect fundamental principles set out in domestic law73.This logic is shown in case law around the world. An example of this is the case of
Sanchez-Llamas v Oregon & Bustillo v Johnson where the supreme court of the United States decided it could
moderate, in accordance with its domestic law, the decision of the International Court of Justice. There is a trend within states to accept international law as long as it respects the preexisting
fundamental right protected by the domestic legal system. The case of Bosphorus74 concerning the
rights set out under the European Convention of Human Rights is an example of this logic. This type of approach is similar to what we can see under EU law through the Solange II75 case where the
German Federal Constitutional court ruled that it would apply EU law as long as it would not go under a certain standard the German court considered to be adequate. The problems concerning International law clashing with domestic law will vary. Indeed, in cases of international customary law, the issues will only be marginal. When it comes to the application of treaties and agreements, this is where things get more complicated. Some treaties and agreements include provisions referencing the domestic law of countries and recognizing their validity. This can be seen in the Vienna Convention on Consular Relations where it recognizes that the rights should be exercised “in conformity with the laws and regulations of the receiving State”76. Though CETA does
not have an article providing an explicit explanation when it comes to this. There are certain parts of CETA’s Chapter 8 such as Article 8.31 which mention the tribunal set up by the agreement “may consider, as appropriate, the domestic law of the disputing party”. There seems to be nothing as explicit as in the Vienna Convention on Consular Relations. Nonetheless, the sensitivity that an international agreement or treaty may have to a country’s fundamental values, is not contrary to its principle of supremacy. If the arbitrators of CETA’s judicial order were to interpret the agreement in a
71 ING België v B I, Case No C.05.0154
72 Novaković, Marko, and Milenko Kreća. 2013. Basic Concepts Of Public International Law. 1st ed. Belgrade:
Faculty of Law, University of Belgrade, Institute of Comparative Law, Institute of International Politics and Economics.
73 Cassese, Antonio. 1994. International Law In A Divided World. 1st ed. Oxford: Clarendon Press. 74 Bosphorus Hava Yollari Turizm ve Ticaret AS v Minister for Transport, Energy and Communications and
others. Case-84/95
75 Re Wünsche Handelsgesellschaft (22 October 1986) BVerfGE 73, 339[1987] 3 CMLR 225 76 Article 36(2) Vienna Convention on Consular Relations
