EU-Canada Trade Deal Begins Provisional Application

21 September 2017

The Comprehensive Economic and Trade Agreement (CETA) between Europe and Canada is set to start its provisional application on Thursday 21 September, slashing duties on over 98 percent of tariff lines, along with further liberalising services trade and public procurement, among a host of other provisions.

The deal also includes chapters on trade and sustainable development, trade and environment, trade and labour, intellectual property rights, trade remedies, technical barriers to trade, sanitary and phytosanitary measures, and investment, among others, numbering 29 chapters in total.

While around 90 percent of the accord’s provisions take effect from today, some areas are still pending ratification at the member state level, including those related to investment protections and the investment court system. The Commission proposed that CETA be submitted to ratification as a “mixed agreement” last year. (See Bridges Weekly, 7 July 2016, 16 February 2017, and 18 May 2017)

“This is a positive signal for the global economy, with the potential to boost economic growth and create jobs. CETA is a modern and progressive agreement, underlining our commitment to free and fair trade based on values,” said EU Trade Commissioner Cecilia Malmström on Wednesday 20 September.

Investment court, ratification process

While some member states, such as the Czech Republic, Denmark, Latvia, Malta, and Spain, have ratified the agreement, approval by the remaining legislatures is expected to take months or years. Portugal’s parliament ratified CETA on Wednesday 20 September, according to a statement on social media from the EU Trade Commissioner.

Meanwhile, debate is still continuing within the EU over the investment court system that was included in the accord. Domestic lawmakers in some EU member states, including Poland, have reportedly raised questions over the setup of the investment court system, such as its system for appointing judges, as well as its compatibility with European law.

The court system, touted by proponents as an improvement over the previous investor-state dispute settlement (ISDS) model, already sparked controversy during the signing process for CETA last year after concerns were raised by the Belgian regional parliament of Wallonia. The disagreement led to a delay in the signing ceremony, though it was ultimately resolved after officials agreed on a “joint interpretative instrument” on this and other subjects. (See Bridges Weekly, 3 November 2016)

At the time, the Belgian government also reached an agreement with its regional legislatures to ask for an opinion from the bloc’s highest court, the European Court of Justice (ECJ), on whether the investment court included in CETA is in line with EU law. Deputy Prime Minister and Minister of Foreign Affairs Didier Reynders submitted the official request to the ECJ earlier this month.

“With its request for an opinion, the Kingdom of Belgium hopes to further clarify the legal framework in which CETA has been established, in accordance with the agreements which pertain to the signing of CETA by Belgium,” the document says, after outlining which questions it would like the court to clarify.

The EU-Canada and EU-Vietnam trade accords are the first European agreements to see the investment court system included, as opposed to the previous ISDS mechanism. The ICS in both is meant to serve as a precursor to a future multilateral investment court. How an ECJ ruling might affect those plans remains unclear at this stage.

Earlier this year, the ECJ issued a ruling on the investment provisions of another trade pact, specifically between the EU and Singapore. (See Bridges Weekly, 18 May 2017)

The opinion issued by the court at the time outlined which provisions within the accord qualified as falling with the EU’s “exclusive competence,” versus which ones were of shared or member state competence. Among other findings, it deemed that the ISDS mechanism in the EU-Singapore accord would require member state approval before going forward.

Meanwhile, the European Commission, following President Jean-Claude Juncker’s State of the European Union address last week, has now published a proposed draft mandate for the above-mentioned multilateral investment court. (See Bridges Weekly, 14 September 2017)

“The multilateral investment court initiative aims at setting up a framework for the resolution of international investment disputes that is permanent, independent and legitimate; predictable in delivering consistent case-law; allowing for an appeal of decisions; cost-effective; transparent and efficient proceedings and allowing for third party interventions (including for example interested environmental or labour organisations),” the draft mandate says.

An annex explains that the planned court would involve “first instance” and appellate tribunals, with judges to face “stringent requirements regarding their qualifications and impartiality,” while limited to single terms of an established duration. It also envisions the possibility of third party submissions, along with steps aimed at ensuring transparency and affordability for smaller companies.

ICTSD reporting; “Poland threatens to block part of EU-Canada trade deal,” THE FINANCIAL TIMES, 7 September 2017; “Europe braces for CETA, attacks its legality in top EU court,” EURACTIV, 8 September 2017; “Survey shows backing for Austrian leader’s criticism of EU-Canada trade deal,” REUTERS, 20 September 2016; “Brussels faces fresh crisis over CETA as 100 French MPs take EU-Canada trade deal to court,” EXPRESS, 22 February 2017.

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