European Union: The CJEU Holds CETA's Dispute Resolution Mechanism To Be Compatible With EU Law

Last Updated: 28 May 2019
Article by Laurent Gouiffès, Thomas Kendra, Melissa Ordonez and Lucas Aubry

The European Court of Justice's opinion: On 30 April 2019, the European Court of Justice (CJEU) issued its much-anticipated Opinion 1/17 finding that the investor-state dispute settlement mechanism provided in the Canada-EU Comprehensive Economic and Trade Agreement (CETA) is compatible with EU law, in keeping with the conclusions of Advocate General Bot.

This opinion, issued further to a request by Belgium, represents an important development as it paves the way for the acceleration of the ratification process of CETA by national parliaments in EU countries and validates the European Commission's new approach to investor-state dispute settlement. 

The proposed CETA dispute resolution mechanism

CETA provides for a novel investor-state dispute settlement mechanism, a hybrid between a court and an arbitral tribunal. In particular, under this framework, parties to a dispute will not be able to select arbitrators. Instead, CETA provides for the creation of a CETA Tribunal, the members of which will be appointed by an EU-Canada Joint Committee and hold five year terms.

Moreover, this new system provides for a CETA Appellate Tribunal, with the power to review first instance decisions on wide grounds, including "errors in the application or interpretation of applicable law" and "manifest errors in the appreciation of the facts."

Parties to a dispute, however, will have the option of selecting their chosen rules of procedure before the first instance tribunal. They will, for example, be able to submit a claim under the ICSID Convention and Rules of Procedure for Arbitration Proceedings, the ICSID Additional Facility Rules (as the case may be), the UNCITRAL Arbitration Rules, or any other rules on which they agree.

Furthermore, in line with the long-standing policy objective of the European Commission, CETA contemplates the establishment of a future multilateral investment tribunal, which would not only hear CETA disputes but investment disputes arising out of a wide range of treaties in the long term.

The Opinion

The Court addressed three main topics: first, compatibility with EU Law; second, compatibility with the general principle of equal treatment and the requirement of effectiveness; and third, compatibility with the right of access to an independent tribunal.    

  • On compatibility with the autonomy of the EU legal order

One of the main issues at stake was whether this new system violated the exclusive jurisdiction of the CJEU to provide a definitive interpretation of EU law, in light of the Achmea Judgment where the CJEU had held that investor-state dispute settlement "is not in principle incompatible with EU law" provided that "the autonomy of the EU and its legal order is respected."

The Court considered that in order to be compatible with EU law, the CETA Tribunal should accordingly not have an "adverse effect on the autonomy of the EU legal order" by either (i) interpreting and applying EU law beyond the provisions of CETA itself, or by (ii) "preventing the EU institutions from operating in accordance with the EU constitutional framework."

As to the first requirement, the CJEU stressed that CETA Tribunal and Appellate Tribunal would not interpret or apply EU law, as the CETA applicable law clause only refers to the treaty itself construed in accordance with the Vienna Convention and other applicable rules and principles of international law. This should be distinguished, wrote the Court, from the Achmea case, where the "agreement established a tribunal that would be called upon to give rulings on disputes that might concern the interpretation or application of EU law." The CJEU went on to note that pursuant to the treaty, domestic and EU law may only be taken into account as a fact, and that the CETA Tribunal is bound to "follow the prevailing interpretation" given by domestic or EU courts (while these courts would not be bound by the meaning given to their domestic law by the CETA Tribunal).

As regards the second requirement, Belgium had expressed concern that in assessing whether an EU measure complied with the substantive protections of CETA, the CETA Tribunal might be called upon to weigh the "level of protection of a public interest established by the EU institutions", leading to a situation where "in order to avoid being repeatedly compelled by the CETA Tribunal to pay damages to the claimant investor, the achievement of that level of protection needs to be abandoned by the Union."

While the Court held that such a situation would be unacceptable and undermine the capacity of the EU to "operate autonomously within its unique constitutional framework", it noted that CETA provided for sufficient safeguards in the form of clauses and interpretative instruments guaranteeing the right of the parties to regulate for a public purpose. Accordingly, the CJEU found that the discretionary powers of the CETA Tribunal "do not extend to permitting [it] to call into question the level of protection of public interest determined by the Union following a democratic process."                                                                                      

  • On compatibility with the principles of equal treatment and effectiveness

In relation to the principle of equal treatment, Belgium first questioned whether the difference in the situation of intra-EU and Canadian investors, with only the latter having access to the CETA dispute resolution mechanism, was compatible with EU law. The CJEU however concluded that the situations at hand were not comparable, as Canadian investors are foreign investors within the EU, while intra-EU investors are not.

The Court then turned to the concern that the CETA dispute resolution mechanism may impair the principles of effectiveness and equal treatment in relation to EU Competition law, as the CETA Tribunal may issue an award considering a fine imposed by the European Commission or a national competition authority to constitute a breach of the substantive protections of CETA. However, the Court considered that such an award would be conceivable only where the impugned decision was profoundly flawed, and that "EU law itself permits annulment of a fine when that fine is vitiated by a defect corresponding to that which could be identified by the CETA Tribunal." 

  • On compatibility with the right of access to an independent tribunal

While the Court emphasized that the CETA dispute resolution mechanism should be "financially accessible to natural persons and small and medium-sized enterprises" and not only to "investors who have available to them significant financial resources" in order to comply with the requirement of accessibility, it went on to note that that the European Commission and the Council had made sufficient commitments to this effect (see here, Statement No. 36).

Moreover, the Court found that the CETA dispute resolution mechanism guarantees the independence and impartiality of members of the CETA Tribunal and Appellate Tribunal, ruling out Belgium's doubts as to the remuneration of the members of these bodies and approving the reference to the IBA Guidelines on Conflict of Interests. The Court further considered that the power of CETA parties to adopt joint interpretative statements was "neither illegitimate nor unusual, under international law", provided that such interpretations would not have retroactive effect.

Further thoughts

The key takeaway of Opinion 1/17 is undoubtedly that the CJEU approves the new model of investor-state dispute settlement with third States. This system was designed and negotiated by the European Commission, which ultimately advocates for the creation of a Multilateral Investment Court, in order to be implemented in all future trade and investment protection agreements concluded by the European Union. Indeed, a similar, if not identical, dispute resolution mechanism has been included in several treaties: EU-Singapore, EU-Vietnam, and EU-Mexico. However, it should be underlined that neither CETA nor these three other treaties are yet in force, as CETA is currently undergoing ratification by national parliaments in EU countries, with 16 Member States yet to ratify it.

It is also noteworthy that the Court carefully differentiates CETA from the situation at hand in the Achmea case by stressing that while a principle of mutual trust applies between EU Member States, this is not the case for relations between the EU and non-member States. Nevertheless, questions may arise as to how to bridge this Opinion with the Achmea Judgment. While in the Achmea Judgment the Court affirmed its interpretative monopoly over EU law, the present opinion differentiates  CETA from the applicable treaty in Achmea on the ground that the interpretative power of the CETA Tribunal is limited to the provisions of CETA itself, EU law being treated as a fact.

Similarly, the Court stressed the principle that public policy decisions in the EU and levels of protection of public interests set democratically should not be put in question by the CETA Tribunal, relying heavily on the general exceptions clause and the interpretative instruments provided by CETA.  

Practice will determine the impact of the CJEU's findings on arbitral tribunals constituted under the aegis of existing investment treaties between EU Member States and third States.

Finally, the practical application of the CETA dispute resolution mechanism may be limited as, to date, there have only been a handful of disputes under the aegis of ICSID between nationals of Canada and Member States of the European Union.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions