CETA’s court on trial
The ink barely had time to dry on the final text of Canada’s CETA trade agreement the previous Conservative government had negotiated with EU last year when a freshly elected Liberal government decided to suddenly change it. Newly minted International Trade Minister Chrystia Freeland, concerned that the deal as written would not be ratified by EU members unhappy with the investor- state dispute mechanism, agreed to replace it with an unprecedented method of settling international investment disputes.
Driven by a “fundamental lack of trust” in the use of ad- hoc arbitrators hired to rule on investment quarrels, Europe had been pushing for an investment court system, first in its trade negotiations with the United States, and then with Canada and Vietnam. The proposed i nvestment court system would replace adhoc treaty arbitrators with a standing court comprised of permanent judges, with binding conflict- of- interest rules, enhanced transparency, and an appeals tribunal. Freeland thought the EU’s proposal sounded good enough to write into CETA, and agreed to substitute it for the traditional investorstate dispute system.
The concern about investment protection and the resolution of investmenttreaty disputes has been front and centre i n Wallonia’s recent objections to the CETA. But this is not simply an issue restricted to one region of Belgium. The ad- hoc investor- state arbitrations have been the subject of criticism in Canada, the United States and in Europe. The merits of the critiques are objectively mixed, with many based on a fundamental misunder- standing of the operations of complex global agreements. But the fact that there are so many different critiques makes the issue of investment- treaty dispute resolution one that needs to be part of the public debate on the CETA.
The proposed CETA investment court would replace the ad- hoc investorstate arbitration system completely for any investment di s pute be t ween Canada and Europe. While some of t he i nvestment court’s elements are not novel, CETA is the first time that these concepts have been put into action in a large- scale treaty. Canada and the EU have chosen a court system, to “court the critics,” as leading international law professor Robert Howse succinctly put it.
That being said, it is far from certain that this investment- court novelty will satisfy radical anti- globali zation critics, who have investor- state arbitration focused in their crosshairs, and call this form of dispute settlement an unjustified privilege of corporations to threaten legitimate government action. Such groups have attempted, with some success, to hold CETA, TPP and TTIP prisoner. It is also uncertain that the European Court of Justice will confirm the authority of the EU to create the investment court ( although, based on prior European Court decisions, it likely will).
What is certain is that Freeland’s bold step with this proposed CETA investmentcourt system raise as many questions as it answers. Indeed, an October 2016 com- prehensive discussion paper on the i nvestment court produced by the American Bar Association’s Investment Treaty Working Group identified the following unresolved, principal issues: ❚ The CETA i nvestment court does not explicitly enshrine protection for due process, fairness and the rule of law; ❚ CETA does not follow the best practices of international courts and tribunals to ensure diversity and neutrality in the appointment of judges, judge qualifications, and to minimize the danger of politicization of the court; ❚ There are doubts about whether awards ordered by the investment court can be enforced outside of Europe and Canada without further amendments or treaties being made; and ❚ There are concerns about the absence of published procedures governing participants that appear before the court.
Not all critics will be satisfied by the investment court, but the well- regarded reputation of the WTO’s Appellate Body shows that it is possible for a standing judicial body to gain grudging respect, even from hostile constituencies, when it is seen to be impartial, reasoned and balanced.
The temporary suspension forced by Wallonia of CETA’s investment court provides much-needed time for Canada and the EU to reflect and address its problems in a transparent manner. Perhaps this can be addressed in a multi-lateralized investment court or in an improved CETA.
Freeland should take the lead once again to improve the investment court in a manner consistent with traditional Canadian values that respect and promote the rule of law, fairness and due process. If these questions can be better answered, there is a real opportunity to advance fairness and the rule of law in international economic relations.
FREELAND’S BOLD STEP TOWARD A CETA INVESTMENT COURT RAISES AS MANY QUESTIONS AS IT ANSWERS.