Worldwide: EU's Top Court Rules Investment Protections Under CETA Are Compatible With EU Law

In Opinion 1/17 (CETA Ruling) on the Comprehensive Economic and Trade Agreement (CETA), the European Court of Justice (ECJ) ruled that the investment protections under CETA, signed by Canada and the European Union, are compatible with EU law. The decision marks a welcome departure from the landmark Achmea v. Slovak Republic decision, in which the ECJ effectively invalidated all 196 investment agreements with similar provisions in force between EU Member States. For an overview of that decision and its possible implications, please see our May 2018 article, EU Top Court Rules EU Investment Arbitration Tribunals Are Incompatible with EU Law: Implications for Investors.

The CETA Ruling clears the way for Canadian investors whose rights have been violated under CETA to rely on the investor-state dispute settlement (ISDS) mechanisms under Chapter 8-F of CETA, subject to broad categories of public interest legislation.


CETA is a comprehensive trade agreement between the EU and Canada that provides a suite of rights and protections to investors, such as fair and equitable treatment, full protection and security, and non-discriminatory market access. CETA also establishes an ISDS arbitration tribunal (Tribunal) by which an aggrieved investor may have recourse to an international arbitration tribunal if those rights are breached, rather than suing the EU or a host state before its own courts.

While much of CETA has been provisionally in force since September 21, 2017, the ISDS provisions of CETA have not. Until recently, the ECJ's case law appeared extremely hostile to independent arbitration mechanisms such as that in CETA. As part of a political compromise to ensure Belgium's ratification of CETA, the ECJ was asked to give a preliminary ruling on Chapter 8-F of CETA. In particular, the ECJ was asked whether CETA (a) infringes the "autonomy of the EU legal order" and (b) interferes with the "effectiveness of EU law."


The Autonomy of the EU Legal Order

The autonomy of the EU legal order refers in this context to the supremacy of EU law and the interpretive monopoly of the ECJ. Under EU law, the ECJ has sole jurisdiction to ensure that the interpretation and application of EU law is observed. National courts have a duty to ensure the full implementation of EU law, and are required to submit references to the ECJ for a binding interpretation where the validity or effect of EU law is in dispute.

The ECJ has historically viewed arbitral tribunals as something of a challenge to this system for the simple reason that they are outside it; an independent arbitral tribunal, by definition, excludes disputes from judicial review in the courts of the EU.

In January 2019, Advocate General Bot's preliminary opinion on CETA (Opinion of AG Bot) called for a new approach, stating that the autonomy of the EU legal order "is not a synonym for autarchy." Following the Opinion of AG Bot, the ECJ held the mere fact that the Tribunal lies outside the EU's judicial system does not, in itself, violate the principle of autonomy. The autonomy of the EU legal order would only be breached if the Tribunal could either (a) interpret and apply EU law, or (b) rule that the EU had violated CETA through laws establishing a level of protection of public interests determined by EU institutions.

With respect to the first test, the ECJ held that the Tribunal did not infringe the autonomy of EU law because the jurisdiction of the Tribunal is limited to the provisions of CETA and must follow the ECJ's interpretations of EU law. The Tribunal may take EU law into account "as a matter of fact," but it is "obliged to follow the prevailing interpretation given to that domestic law by the Courts or authorities of that party."

With respect to the second test, the ECJ held that the Tribunal "has no jurisdiction to declare incompatible with the CETA the level of protection of a public interest established by the EU measures ... and, on that basis, to order the Union to pay damages."

The Effectiveness of EU Law

The principle of effectiveness refers to the obligation on all EU and EU Member State courts and institutions to ensure that EU law is fully applied within their territory. EU law, as interpreted by the ECJ, is supreme; national law—even constitutional law—and international treaties must be interpreted in conformity with EU law and, where they are in conflict, EU law must prevail.

In that respect, Belgium questioned the possibility that the Tribunal might issue financial compensation cancelling financial penalties issued under EU competition law or other laws of public interest. In particular, EU competition law and state aid law are of primary concern to investors, as both have been used to levy financial penalties on foreign companies in the EU. In Micula v. Romania, for example, the EU Commission prohibited Romania from paying out a US$250-million ISDS award for a breach of an investment treaty by an EU state aid decision, stating that payment of the award itself would violate EU state aid law. Belgium observed that awards contrary to EU state aid law are prohibited under CETA, but similar awards against EU competition law are not.

The ECJ confirmed that it would violate the effectiveness of EU law if the Tribunal could rule that the level of protection of public interests determined by EU institutions breached the substantive guarantees of CETA. However, it held that the Tribunal had no such jurisdiction, as "the required level of protection of a public interest, as established following a democratic process, is not subject to the jurisdiction conferred on the envisaged tribunals."

Furthermore, the ECJ stated that if, "in exceptional circumstances, an award by the Tribunal might have the consequence of cancelling out the effects of a [EU] fine," this was permissible in so far as "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 Tribunal.


The CETA Ruling is a welcome departure from the ECJ's previous case law on international ISDS arbitration. However, the decision also places significant limits on the ability of the Tribunal to compensate investors for breach of CETA by measures deemed to establish a "level of public interests determined, in accordance with the EU constitutional framework, by the EU institutions." This encompasses important categories of legislation (like EU state aid law, consumer law and competition law) not historically understood to fall within public policy under international law.

Further, it is not clear whether the ECJ accepts the Tribunal's jurisdiction to rule that the EU has violated CETA in circumstances where no equivalent error has been recognised by the ECJ in its interpretation of an EU measure. The Opinion of AG Bot stated that the Tribunal would be deemed to have lost jurisdiction if it failed to implement the interpretation of EU institutions, and the ECJ appeared to endorse this view, stating: "Such an award is, conversely, unimaginable where the competition rules have been correctly applied by the Commission or by a competition authority of a Member State." This would appear to leave the door open for review of a CETA award on grounds of jurisdiction for failing to follow the prevailing interpretation of EU law.

For permission to reprint articles, please contact the Blakes Marketing Department.

© 2018 Blake, Cassels & Graydon LLP.

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.

Events from this Firm
28 May 2019, Other, Toronto, Canada

Please join our Cybersecurity, Privacy and Technology lawyers for an in-depth discussion about data as one of the most valuable assets of an organization.

28 May 2019, Other, Toronto, Canada

Please join our Cybersecurity, Privacy and Technology lawyers for an in-depth discussion about data as one of the most valuable assets of an organization.

28 May 2019, Other, Toronto, Canada

Please join our Cybersecurity, Privacy and Technology lawyers for an in-depth discussion about data as one of the most valuable assets of an organization.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
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