France: The ISDS Mechanism Provided For Under The CETA Is Compatible With EU Law

Last Updated: 5 July 2019
Article by Anaëlle Idjeri

While the Transatlantic Trade and Investment Partnership ("TTIP", also known as the Trans-Atlantic Free Trade Agreement or "TAFTA" ) has been abandoned, the Court of Justice of the European Union ("CJEU"), in an opinion dated April 30, 2019, ruled on the compatibility with EU law of the mechanism for the settlement of disputes provided for under the Comprehensive Economic and Trade Agreement ("CETA") entered into between Canada and the European Union.

On March 6, 2018, the CJEU ruled in the so-called Achmea case and held that a clause of a Bilateral Investment Treaty ("BIT") allowing an investor from the European Union to initiate arbitration proceedings against an EU Member State was incompatible with EU law1. In this context, there was every reason to believe that such decision would be applied to the mechanism for the settlement of disputes between investors and States provided for under the CETA (the mechanism is called Investor-State Dispute Settlement, hereinafter "ISDS").

However, on April 30, 2019, in light of the Achmea decision and previously rendered decisions, the CJEU, ruling on a request for an opinion made by the Kingdom of Belgium, issued an opinion with a challenging but yet questionable reasoning in which it held that the ISDS mechanism provided for under the CETA was compatible with EU law.

  • Compatibility of the ISDS mechanism with the autonomy of the European Union legal order

In general, and in accordance with the position adopted in the Achmea decision, the CJEU recalled that the final interpretation of EU law should not be left to a competing court.

It specified that "in order to ensure that the specific characteristics and the autonomy of the [EU] legal order are preserved, the Treaties have established a judicial system intended to ensure consistency and uniformity in the interpretation of EU law", making an express reference to the preliminary ruling procedure provided for in the Treaty on the Functioning of the European Union.

Regarding in particular the provisions set forth in the CETA, the CJEU held that a tribunal, an appellate tribunal and a multilateral tribunal can be established to "interpret and apply provisions" but pointed out that "since those tribunals stand outside the EU judicial system, they cannot have the power to interpret or apply provisions of EU law other than those of the CETA or to make awards that might have the effect of preventing the EU institutions from operating in accordance with the EU constitutional framework".

The CJEU rejects any incompatibility with the autonomy principle and further specified that the CETA includes provisions that expressly stipulate that such tribunals have no jurisdiction to call into question the "choices democratically made within a Party relating to, inter alia, the level of protection of public order or public safety, [...] the preservation of food safety, [...] product safety, [...] or, equally, fundamental rights".

  • Compatibility of the ISDS mechanism with the general principle of equal treatment and with the requirement that EU law be effective

First, concerning the general principle of equal treatment, the CJEU was asked to rule on the fact that "the CETA provides for a preferential judicial process for Canadian investors. Canadian undertakings investing in the European Union will be able to bring a dispute either before an internal court of the European Union or before the CETA Tribunal, whereas EU undertakings investing in the European Union will not have that choice".

In this respect, the CJEU explained that since both investors from the EU in their relationships with Canada and Canadian investors in their relationships with a EU Member State may bring their dispute before the CETA Tribunal, there is no ground to consider that the fact that a EU investor who invests in a Member State may not bring proceedings before this Tribunal leads to discrimination. The CJEU indeed considers that this difference in treatment is justified by an objective difference in the respective situations.

Secondly, on the requirement that EU law be effective, the CJEU held that the CETA may not be considered as adversely affecting the effectiveness of EU law on the sole ground that in exceptional circumstances, an award by the CETA Tribunal might have the consequence of cancelling out the effects of a fine imposed by the European Commission or by a competition authority of a Member State for infringement of applicable competition rules. Indeed, EU law itself permits the annulment of a fine wherever that fine is vitiated by a defect corresponding to that which could be identified by the CETA Tribunal.

  • Compatibility of the ISDS mechanism with the right of access to an independent tribunal

While the CJEU pointed out that the aim of the agreement is to ensure that the CETA Tribunal will be accessible to any Canadian company and any Canadian natural person that/who invests within the European Union, and to any company and any natural person of a EU Member State that/who invests in Canada, it also noted that in the absence of rules designed to ensure that the CETA Tribunal is financially accessible to natural persons and small and medium-sized businesses, the ISDS mechanism might, in practice, be accessible only to investors with significant financial resources.

However, due to and subject to the implementation of the commitments made by the European Commission and the Council of Europe, the CJEU considers that the CETA is compatible with the requirement of accessibility and access to an independent tribunal.


While the analysis contained in this opinion is disappointing – a gap seems to be widening between the principles to which the CJEU refers and the scope it confers on them in its opinions and decisions – it is nevertheless a first step towards the creation of a foreign private investment law that respects the aspirations of States and investors.

This was, incidentally, the ambition expressed by Advocate General BOT according to whom "The European Union is at the forefront of a movement the future of which will determine whether — from a legal standpoint — it is likely to be continued".

In this perspective, while the CETA can fully enter into force since April 30, 2019, subject to ratification by the Member States of the European Union, the impact of the validation of this mechanism by the CJEU on the European Commission's willingness to generalize a specific ISDS mechanism instead of the use of arbitration provided for by the existing BITs will have to be closely monitored.


1 Cf. article entitled The arbitration clause included in a Bilateral Investment Treaty concluded between two Members States is incompatible with EU law published in March 2018

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