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Foreign Investment Under the Comprehensive Economic and Trade Agreement (CETA) PDF

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Studies in European Economic Law and Regulation 15 Makane Moïse Mbengue  Stefanie Schacherer E ditors Foreign Investment Under the Comprehensive Economic and Trade Agreement (CETA) Studies in European Economic Law and Regulation Volume 15 Series editors Kai Purnhagen Law and Governance Group, Wageningen University Wageningen, The Netherlands Josephine van Zeben Worcester College, University of Oxford Oxford, United Kingdom Editorial Board Alberto Alemanno, HEC Paris, Paris, France Mads Andenaes, University of Oslo, Oslo, Norway Stefania Baroncelli, University of Bozen, Bozen, Italy Franziska Boehm, Karlsruhe Institute of Technology, Karlsruhe, Germany Anu Bradford, Columbia Law School, New York, NY, USA Jan Dalhuisen, King’s College London, London, UK Michael Faure, Maastricht University, Maastricht, The Netherlands and Erasmus University Rotterdam, Rotterdam, The Netherlands Jens-Uwe Franck, Mannheim University, Mannheim, Germany Geneviève Helleringer, University of Oxford, Oxford, UK Christopher Hodges, University of Oxford, Oxford, UK Lars Hornuf, University of Bremen, Bremen, Germany Moritz Jesse, Leiden University, Leiden, The Netherlands Marco Loos, University of Amsterdam, Amsterdam, The Netherlands Petros Mavroidis, Columbia Law School, New York, NY, USA and University of Neuchatel, Neuchatel, Switzerland Hans Micklitz, European University Institute, Florence, Italy Giorgio Monti, European University Institute, Florence, Italy Florian Möslein, Philipps-University of Marburg, Marburg, Germany and Munich Centre on Governance, Communication, Public Policy and Law, Munich, Germany Dennis Patterson, Rutgers University, Camden, NJ, USA Wolf-Georg Ringe, University of Hamburg, Hamburg, Germany Jules Stuyck, Katholieke Universiteit Leuven, Leuven, Belgium Bart van Vooren, University of Copenhagen, Copenhagen, Denmark This series is devoted to the analysis of European Economic Law. The series’ scope covers a broad range of topics within economics law including, but not limited to, the relationship between EU law and WTO law; free movement under EU law and its impact on fundamental rights; antitrust law; trade law; unfair competition law; financial market law; consumer law; food law; and health law. These subjects are approached both from doctrinal and interdisciplinary perspectives. The series accepts monographs focusing on a specific topic, as well as edited collections of articles covering a specific theme or collections of articles. All contributions are subject to rigorous double-blind peer-review. More information about this series at http://www.springer.com/series/11710 Makane Moïse Mbengue • Stefanie Schacherer Editors Foreign Investment Under the Comprehensive Economic and Trade Agreement (CETA) Editors Makane Moïse Mbengue Stefanie Schacherer Faculty of Law Faculty of Law University of Geneva University of Geneva Geneva, Switzerland Geneva, Switzerland Science Po Paris School of Law Paris, France ISSN 2214-2037 ISSN 2214-2045 (electronic) Studies in European Economic Law and Regulation ISBN 978-3-319-98360-8 ISBN 978-3-319-98361-5 (eBook) https://doi.org/10.1007/978-3-319-98361-5 Library of Congress Control Number: 2018961561 © Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Foreword The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union (EU) and its Member States went through a long gestation and negotiation period. Its actual birth was late and painful but yielded an extremely interesting treaty that had many innovative aspects in international law and led to many interesting repercussions for the internal legal regimes in the field of trade and investment law of both parties. In Canada, the negotiations contributed to bringing about a new interprovincial agreement on trade, called the Canadian Free Trade Agreement, in April 2017, which considerably freed up interprovincial trade and inter alia brought about mechanisms for reducing technical barriers to trade between the provinces. Inside the EU, it was an important test of the Union’s newly acquired powers in the field of international investment and a continued legal need (or politi- cal wish on the part of the Member States) for the conclusion of so-c alled mixed agreements when concluding broad trade agreements. After the Wallonia crisis over CETA and Opinion 2/15 on the EU-Singapore Free Trade Agreement, the Commission has pledged never to propose anymore to the EU Council of Ministers the negotiation of trade agreements which would go beyond the Union’s exclusive trade policy power. In the field of investment, this implies that portfolio investments and investor-state dispute settlement (ISDS) will no longer be covered by such agreements. How the Member States will react when this policy pledge is executed remains to be seen. The two politically responsible persons, Minister Chrystia Freeland for Canada and Commissioner Cecilia Malmström for the EU, participated actively in the final phase of the negotiations and made considerable claims about the new and unprec- edented character of the agreement, especially in the field of investment and ISDS, the parts of the agreement that had caused much of the political resistance to CETA on both sides of the Atlantic. This book arrives at the right moment to assess these claims, as well as the probable repercussions of the investment provisions of the agreement on other, future, agreements in this field. The book opens with the chapter written by Nicolas Angelet. This chapter is unusual and interesting because it critically discusses the arguments advanced by both sides in the debate about the (lack of) need for reform of investment protection v vi Foreword and ISDS, as it was finally laid down in CETA. Arguments from both sides are found wanting, the willingness to listen to the other side is low, while arguments of authority are frequent, and thus the quality of the debate overall is pretty dismal. Although one feels that Angelet’s heart is perhaps slightly more on the side of the reformers, all this is laid out in a vivid style of “a plague on both your houses.” This is refreshing, but, in the end, does not really grapple with the question whether the war of words between the defenders of the status quo and the hard-core opponents of any investment agreement has been successfully transcended by the investment chapter of CETA. It is the merit of the following chapters, which discuss the core concepts of any investment protection and/or BIT agreement, such as the notions of investment, of national treatment, the most-favored-nation clause, the concept of fair and equitable treatment, and the notion of expropriation (including indirect and partial expropria- tion), that they deal, whether implicitly or explicitly, with this question. Taking the chapters by Bischoff and Wühler on the notion of investment and by De Nanteuil on expropriation as examples, these show how the drafters of CETA took evolving case law and drafts for a new generation of international investment agreements by vari- ous states into account, and sometimes carried them a bit further, when they drafted in the early stages and modified in extremis the texts on investment protection and ISDS. The core concepts of investment protection may not have changed too much, but they have been further refined and explained in CETA and its annexes so as to take fully into account shifts in case law and changes in new texts of model BITs that had been going on already for some time—an evolution of which the hard-core naysayers to international investment protection never wanted to take cognizance. The three chapters that discuss matters which are fully new in CETA, the explicit recognition of the right to regulate of the parties (by Catherine Titi, a prolific author on the subject), the new investment court system (by Von Walter and Andrisani, both from the European Commission), and the attempt to operationalize the notion of sustainable development (by Stefanie Schacherer), also set out clearly to what extent the relevant CETA provisions build on existing concepts, whether in the con- text of CETA they go much beyond the symbolic, and if not, why that might be useful nonetheless. The new investment court system is, of course, a much more substantive achievement than the other two, but it may prove to be a one-treaty wonder if the Commission carries out its intention not to propose anymore any trade agreements that go beyond the EU’s exclusive powers. The three chapters that give a refreshing view, from the outside (Africa, Asia, and Latin America) looking in, of the trans-Atlantic tribulations between the Canada and the EU (with the USA heavily breathing over their shoulders), also remind us that the countries from these regions are actively concluding BITs and multilateral investment agreements among themselves and that these agreements, and any dis- pute settlement that takes place under their aegis, will inevitably have an impact on attempts at making any worldwide rules in this domain. The book ends with a thoughtful final look toward the future from the vantage point of the present CETA provisions on investment and ISDS. Foreword vii The core chapters, covering the main concepts of investment protection, situate themselves wonderfully in the middle of the big debate over these issues of the last few years and then lead onto new concepts, such as the right to regulate and sustain- ability, which are fighting for a more than symbolic place in the field, and onto the most advanced solutions to dispute settlement that have been put on paper in nego- tiations so far. Moreover, the outside perspectives permit the readers to escape from a purely “Western” perspective on it all. University of Amsterdam P. J. Kuijper Amsterdam, The Netherlands Preface On October 30, 2016, the European Union (EU) and Canada finally signed the Comprehensive Economic and Trade Agreement (CETA) after a considerable polit- ical struggle. The Belgian region of Wallonia kept the signature of CETA in limbo for almost 2 weeks, as it refused to give its consent to the central Belgian govern- ment to sign the agreement. Wallonia eventually agreed to the signature after Belgium issued a statement, which inter alia announced its intention to ask the Court of Justice of the European Union (CJEU) to rule on the compatibility with EU law of the investor-state dispute settlement mechanism contained in CETA Investment Chapter, the so-called Investment Court System (ICS). Wallonia’s signa- ture was also prompted by the fact that the EU and Canada signed a Joint Interpretative Instrument along with CETA, which seeks to address the concerns of CETA’s opponents with respect to the potential negative effects of CETA on the right to regulate of governments. The signature of CETA paved the way for ratification, a process that in turn poses its own challenges. One challenge is that CETA has to be ratified by all the EU Member States as CETA has been classified as a mixed agreement under EU law. Thus, national and also regional opposition to CETA can still materialize in the course of its ratification. The second and arguably even more important challenge lays within the request for an opinion on the compatibility of the CETA’s ICS with EU law. On September 6, 2017, pursuant to its previous statement, Belgium submit- ted the request to the CJEU, which is to become Opinion 1/17. At this point, it seems to be impossible to predict how the Court will decide and thus the ultimate fate of the ICS contained in CETA. Yet, the recently rendered CJEU judgment in the case of Achmea (C-284/16), in which the Court held that the investor-state dispute settlement system contained in an intra-EU bilateral invest- ment treaty was incompatible with EU law, does a priori not cause optimism that the ICS contained in CETA will be considered as compatible. Will the Court decide Opinion 1/17 similarly? Or will the Court draw a distinction between intra-E U BITs and, as it is the case for CETA, agreements of the EU with a third country? Questions that still need to be answered. ix x Preface This book on Foreign Investment under the Comprehensive Economic and Trade Agreement (CETA) was prepared and finalized before Opinion 1/17 was rendered by the CJEU. However, irrespective of the outcome of Opinion 1/17, the CETA Investment Chapter constitutes a prime example of new trends in investment law making. Even if the ICS in its current form was to be held incompatible with EU law, the CETA Investment Chapter including the ICS gives an important impetus for the start of the discussion on a multilateral investment court. CETA is already an important and influential agreement for the still ongoing reform of international investment law and investor-state dispute settlement. This book seeks to highlight the contribution of the investment chapter of CETA to the future of international investment law. Geneva, Switzerland Makane Moïse Mbengue J une 2018 Stefanie Schacherer

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This book analyzes the investment chapter of a new type of trade agreement between Canada and the European Union to help readers gain a better understanding of this mega-regional deal, which includes foreign investment protection. It first provides background information on the Comprehensive Economi
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