On January 29, 2021, Canada and the European Union (EU) adopted four decisions related to the investor-state dispute resolution body established under the Canada-EU Comprehensive Economic and Trade Agreement (CETA) which move the parties one step closer to a fully fledged "investment court" system for the adjudication of investor-state disputes.

BACKGROUND

As described in the September 2017 Blakes Primer on the Canada-European Union Comprehensive Economic and Trade Agreement, CETA contains a unique "investment court" model of investor-state dispute resolution. While CETA entered into provisional application in September 2017, most of Chapter Eight (Investment), including the dispute resolution provisions, is not yet in force. These provisions will only come into force once CETA is ratified by every EU Member State (to date only 15 out of 27 EU member states – not including the United Kingdom – have given notice of ratification).

CETA Chapter Eight establishes a Tribunal to hear investment disputes and an Appellate Tribunal, but leaves some organizational details, including procedures for the initiation and conduct of appeals, to be decided by committees established under CETA. 

DECISIONS ON APPEALS, INTERPRETATION, CODE OF CONDUCT AND MEDIATION

On January 29, 2021, four decisions were formally adopted – two by the CETA Joint Committee and two by the Committee on Services and Investment (CSI) – which will take effect when the dispute resolution provisions of CETA Chapter Eight enter into force:

  1. Functioning of Appellate Tribunal: Under Chapter Eight, the Appellate Tribunal may uphold, modify or reverse a Tribunal's award based on (a) errors in the application or interpretation of applicable law (b) manifest errors in the appreciation of the facts, including the appreciation of relevant domestic law, and (c) certain grounds set out in the ICSID Convention.

    The decision adopted on January 29, 2021, provides that the Appellate Tribunal will be composed of six members – including at least two members who are not Canadian or EU member state nationals. Ordinarily, an appeal will be heard by three members. However, if an appeal "raises a serious question affecting the interpretation or application of Chapter Eight (Investment)", all six members may sit when requested to do so by the parties or on majority agreement of the Appellate Tribunal.

    The Appellate Tribunal may modify or reverse legal findings and conclusions of the Tribunal. If the facts established by the Tribunal permit, the Appellate Tribunal is to apply its own legal findings and conclusions to such facts and render a final award; and if that is not possible, it will refer the matter back to the Tribunal to render an award in accordance with the Appellate Tribunal's findings and conclusions. The Appellate Tribunal may also reject an appeal on an expedited basis "where it is clear that the appeal is manifestly unfounded". Parties seeking an appeal will have to post security for costs of the appeal.

  2. Adoption of Interpretations: Under Chapter Eight, where "serious concerns arise as regards matters of interpretation that may affect investment", the CSI may recommend the adoption of interpretations to the CETA Joint Committee. Where the latter adopts such interpretations, they become binding on the investor-state dispute Tribunal.

    The decision recently adopted provides, among other things, that in "any situation" where a CETA Party (i.e. the EU or EU member state or Canada) has such serious concerns, including related to a specific measure for which an investor has submitted a request for consultations, it may refer the matter to the CSI. The CETA Parties are then required to "immediately" enter into consultations with the CSI and the latter is to decide on the matter "as soon as possible". On agreement of the CETA Parties, the CSI may recommend to the CETA Joint Committee the adoption of interpretations to be given to relevant provisions of Chapter Eight, which may address, among other things, the question of whether a certain type of measure is compatible with Chapter Eight.

  3. Code of Conduct: Chapter Eight establishes ethical requirements for members of the Tribunal, including a prohibition on acting as counsel or party-appointed expert or witness in any pending or new investment dispute under any international agreement. The recently adopted Code of Conduct establishes explicit disclosure, confidentiality, independence and impartiality obligations. It also prohibits former Tribunal or Appellate Tribunal members from acting as counsel before the Tribunal or Appellate Tribunal for three years from the end of the member's term, their involvement in disputes that were pending before either body prior to the end of their term, and involvement in disputes "directly and clearly connected" with disputes the member dealt with while a member of the Tribunal or Appellate Tribunal. These rules also apply, with necessary modifications, to mediators.

  4. Rules of Mediation: Chapter Eight provides that disputing parties may at any time agree to a mediation, to be governed by rules they agree upon, including if available rules adopted by the CSI. The mediation rules recently adopted provide a basic framework for mediating disputes under CETA, including a procedure for the initiation of mediation and appointment of a mediator. Further, they prohibit introduction of positions, admissions, or views exchanged in the course of a mediation as evidence in other dispute settlement proceedings.

The adoption of these decisions demonstrates real progress toward an eventual Investment Court System that will be available to Canadian investors in the EU, and vice versa, under CETA.

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