11 October 2022
In August the European Commission and Germany published a statement summarising recent discussions on investment protection in the context of the Comprehensive Economic and Trade Agreement (CETA, also unofficially known as the Canada-Europe Trade Agreement).
The statement confirmed discussions were focused on supporting the common objective of climate protection, and that the objective of those discussions was to prepare a text that clarifies certain provisions in the CETA, providing contracting parties a framework to regulate in the climate, energy and health sectors.
The announcement follows hot on the heels of the recently announced modernisation of the Energy Charter Treaty (ECT). As we wrote last month, many have criticised the ECT modernisation process for not going far enough to protect climate-related policy changes in furtherance of States' climate change commitments. So, what's the impact of these latest proposals?
The CETA Joint Committee is responsible for the implementation and application of CETA and for furthering its general aims. It's composed of representatives of all parties to CETA and its decisions relating to the interpretation of the provisions of CETA are binding on any arbitral tribunal established pursuant to the treaty (Articles 8.31(3) and 26.1(5)(e)).
The recent statement confirmed that a new draft text has been agreed between the Commission and Germany. It now needs to be agreed to by all other EU Member States, before it's shared with Canada so that the proposals can be adopted by the CETA Joint Committee. Only then will it become binding.
A copy of the draft decision of the CETA Joint Committee was made available by the IA Reporter in September. Notable measures announced include:
The draft decision is still only that: a draft. It remains to be seen whether the text will be amended when going through the internal approval process.
What's clear is that the text of the current draft still leaves considerable room for dispute: for example, what does it mean for an investor to 'expect' States to take decisions that are designed to meet their commitments under the Paris Agreement? Does it mean that all such decisions are automatically legal? This continued lack of clarity will no doubt raise concerns when viewed alongside the doctrine of proportionality which informs the application of the various standards of investment protection.
There has been a palpable move in recent years within the investment treaty sphere to support policy changes by States in pursuit of their climate change commitments. Providing this kind of encouragement is undoubtedly a good thing.
But investors will no doubt be raising alarm in view of this latest trend, at least within Europe, of moving away from the traditional 'investor-bias' often found in investment treaties and towards a more supportive atmosphere for States attempting to reach their net zero targets. Particularly if the changes raise more questions than answers…
Reach out to a member of our Disputes and investigations team if you want to understand more about what this might mean for you.
by Jessica Thomas and Karel Daele