On October 30, 2016, Canada, the European Union (EU), and the EU’s member states (Member States) signed the Comprehensive Economic and Trade Agreement, or CETA. The Investor Court System (ICS) regime of CETA’s Chapter Eight will ideally settle dispute between foreign investors and Member States or Canada. In the meantime, the envisioned ICS system has been highly controversial because it would permit private investors to sue a signatory state for actions that infringe CETA.
The ICS would act as an arbitration body outside the EU or Canadian court systems and is to be rolled out in phases. The ICS would consist of a first instance tribunal and an appellate tribunal, with the ultimate goal being a multilateral investment court to which any country, investor or party to the court could have their case heard. The proposed ICS survived numerous legal challenges by Member States in the Court of Justice of the European Union and continues to be implemented in full.
On October 11th 2019, the European Commission presented the Council of the European Union four proposals relating to CETA’s ICS for review. Once these are approved by the Council and each Member State, they can be agreed upon with Canada and CETA’s Joint Committee and other subcommittees.
The proposals address four issues relating to the ICS:
1) rules on the administration and organization of the ICS Appellate Tribunal;
2) the code of conduct for ICS members;
3) rules for mediation ; and
4) rules for binding interpretations by the CETA Joint committee.
1) Rules on the Administration and Organization of the ICS Appellate Tribunal
Pursuant to Article 8.28.7 of CETA, numerous details are laid out regarding the Appellate Tribunal. The Appellate Tribunal will have a President and Vice President responsible for organization whom are selected by the Chair of CETA’s Joint Committee for a two year term. The members of the Tribunal will consist of six members from three categories of individuals:
a) two members nominated from Canada;
b) two members nominated from the EU; and
c) two members nominated by both Canada and the EU who are not nationals of either.
These members will serve a nine year non-renewable terms and the first three selected will serve terms of six years, “with a view to principles of diversity and gender equality“. Each case will be heard by three members from each category, which will be selected by the President of the Appellate Tribunal with an eye to ensuring unpredictable compositions of adjudicators.
2) The Code of Conduct for ICS members
Article 8.44.2 of CETA pertains to the broader code of conduct for ICS members as well as mediators, which addresses an array of standards and positive or negative obligations shouldered by tribunal members.
There are obligations for disclosure which include, inter alia, the admission of any interest that may create an appearance of impropriety or bias going back at least five years. There is also an obligation for the tribunal members to remain independent and impartial. More interestingly, there are obligations on former tribunal members, which include the rule that former members of the ICS tribunals must not act as representatives of disputing parties before the ICS for a period of three years.
3) Rules for Mediation
In order to fulfill CETA’s Articles 8.20 & 8.44.3(c), rules for mediation were recommended. As previously stated, the code of conduct referenced in CETA Article 8.44 also applies to mediations.
A disputing party may request mediation and the parties may elect to appoint an ICS tribunal member of the tribunal, who will not be a national of either party, unless the parties consent. Flexibility is given to the mediator as they can offer advice, organize meetings, and may consult the parties, experts, or other stakeholders for guidance. This mediation mechanism is without prejudice at all steps (except mutually agreed solutions) and are confidential unless the parties agree otherwise. Otherwise, all mediation proceedings are inadmissible in a dispute resolution proceeding before a Tribunal.
4) Rules for Binding Interpretations by the CETA Joint Committee
Articles 8.31.3 & 8.44.3(a) relate to the process of coming to binding interpretations within the ICS. If there is a question of interpretation that affects investment, Canadian, EU or Member States may refer the matter in writing to the Committee on Services and Investment (CSI);
Afterwards, the parties shall immediately enter into consultations within the CSI and the CSI shall decide on the matter forthwith. The CSI may then recommend to the CETA Joint Committee the adoption of interpretations of the relevant provisions of CETA relating to the ICS. Following this, the Joint Committee shall adopt a decision on the related interpretation as soon as possible. Any such interpretation adopted by the Joint Committee is binding on the Tribunal, the Appellate Tribunal, and the Joint Committee.
These proposals address numerous features being considered in regards to CETA’s investor court system. They clarify the goal of attaining efficient proceedings. There is also an emphasis on neutrality, and gender equality through the principles and rules that guide the selection of Tribunal members. Moreover, the disclosure of Tribunal members’ outside interests, which is furthered by the constraints on former members, achieves the goal of transparency.
It has yet to be determined how the Council and eventually Canada and the Member States will react to these proposals.
Article by Martin Aquilina with assistance from Alexander Krush