Belgium asks for the CJEU's opinion on the compatibility of the Investment Court System with European Law

On 6 September 2017 the Belgian Deputy Prime Minister and Minister of Foreign Affairs Didier Reynders submitted a request from Belgium to the Court of Justice of the European Union for an opinion on the compatibility of the Investment Court System (ICS) with the European Treaties.  The Belgian government has made the request in recognition of the concerns raised by the regional assembly of Wallonia about the ICS when it was considering whether or not to sign the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

Belgium's press release has been careful to state that it does not take any position itself regarding the questions which have been put to the CJEU, but hopes to clarify the legal framework in which CETA has been established.

The CJEU has been asked to provide an opinion regarding the compatibility of the ICS with:

1. The exclusive competence of the CJEU to provide the definitive interpretation of European Union law
2. The general principle of equality and the 'practical effect' requirement of European Union law
3. The right of access to the courts
4. The right to an independent and impartial judiciary.

Regarding the right to an independent and impartial judiciary, the CJEU is asked to give consideration to certain specific elements including:

• the conditions regarding the remuneration of the members of the Tribunal and the Appeals Body.
• the appointment of members of the Tribunal and the Appeals Body.
• the release of members of the Tribunal and the Appeals Body.
• the guidelines of the International Bar Association regarding conflicts of interest in international arbitration and the introduction of a code of conduct for the members of the Tribunal and the Appeals Body.
• the external professional activities related to investment disputes of members of the Tribunal and the Appeals Body.

Comment

CETA is scheduled to enter into force on a provisional basis on 21 September. Belgium's request will not affect this deadline as the ICS is a part of the CETA which does not have provisional application and will only enter into force when all EU Member States have ratified the treaty.

However, Belgium's request may have wider ramifications. The request itself focuses on the ICS very directly. As such, it is difficult to see how the CJEU can avoid issuing an opinion on many aspects of the ICS, including a number of procedural elements. The ICS emerged from the European Commission as a proposed solution to concerns about Investor-State arbitration as a method of dispute resolution and although it has been adopted in 2 signed agreements to date, (CETA and the EU-Vietnam FTA) no such agreement has yet been ratified by all EU Member States and entered into force. Any negative views expressed by the CJEU on that flagship policy have the potential to cause further complications in this sensitive area.

Belgium's request accordingly adds to an existing and acknowledged concern about EU competence in relation to the conclusion of trade agreements containing Investor-State dispute settlement provisions. The  ECJ ruled in May that the EU-Singapore Free Trade Agreement, which also provides for binding Investor-State dispute settlement, requires ratification by both the EU itself, and by the EU Member States individually.  Jean-Claude Juncker is expected to announce next week that the EU will proceed with separate agreements with third party states on trade and on investment, rather than combining the two into a single agreement. This is no doubt in part a recognition of the potential difficulty in obtaining approval across the EU of agreements including Investor State dispute settlement provisions.

For more information, please contact Andrew Cannon, Partner, Lode Van Den Hende, Partner, Eric White, Consultant, Hannah Ambrose, Professional Support Consultant, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.