Canada-European Union Comprehensive Economic and Trade Agreement (CETA): modifications to investment protection provisions
Question: Why was the CETA Investment Chapter modified?
Modifications have been made to CETA’s investment chapter to clarify provisions on the right to regulate by all orders of government; introduce more detailed commitments on ethics for members of tribunals; include a revised process for the selection of tribunal members; and introduce an appellate mechanism.
The level of protection afforded to Canadian investors has not been diminished and remains comparable to that provided in Canada’s current agreements. Our investors will also continue to have access to an impartial and expeditious dispute-resolution mechanism. These modifications demonstrate Canada’s leadership in promoting progressive, 21st-century investment-protection provisions.
Question: What changes were made to: Right to regulate?
Canada’s free trade agreements do not allow foreign investors or companies to force a government to change its laws and regulations.
A provision has now been included in the CETA investment chapter that reaffirms a government’s right to regulate for legitimate policy objectives (e.g. for the protection of health or the environment).
In other words, a government’s right to regulate in the pursuit of legitimate policy objectives is preserved, and such regulation may not lead to a breach of its obligations under the CETA investment chapter.
This provision continues to be included in the preamble of the CETA text. It is now mirrored in the investment chapter for greater clarity.
Question: What changes were made to: Loss of profit by an investor?
A provision was added to clarify that the mere fact that a regulatory change negatively affects an investment or interferes with an investor’s expectations, including expectations of profits, does not amount to a breach of investment protection obligations.
Question: What changes were made to: Discontinuation of a subsidy, including illegal subsidies?
A provision was added to clarify that—in the absence of a specific commitment to an investor a decision not to issue, renew or maintain—a subsidy does not constitute a breach of CETA’s investment chapter obligations.
A provision was added to further clarify that in a case where a subsidy has been declared illegal by a competent court, administrative tribunal, or other competent authority, the discontinuation or request for reimbursement of such a subsidy does not constitute a breach of CETA’s investment chapter obligations.
Question: What changes were made to: Public debt restructurings?
A clarification has been made to the provisions relating to the treatment of investors holding public debt that has been restructured. It has been made clear that differences in the treatment of certain investors on the basis of legitimate policy objectives in the context of a debt crisis do not constitute a breach of the non-discrimination obligations under CETA.
This ensures that governments remain fully able to take legitimate public policy actions that may be required to help resolve a debt crisis.
Question: What changes were made to: Applicable law?
A provision was added to clarify, among others, that tribunals do not have jurisdiction to determine the legality of measures under domestic law, and that a tribunal’s interpretation of domestic law is not binding upon domestic courts or authorities.
Question: What changes were made to: Constitution of a tribunal for investment disputes and appointment of members?
Fifteen individuals will be appointed by Canada and the European Union (EU) to constitute a tribunal for the purpose of deciding investment disputes. Disputes will be decided by a division of the tribunal comprising three randomly selected members of the tribunal.
The members of the tribunal will be appointed by Canada and the EU. This is a change from the practice in other agreements whereby the investor launching the dispute participates in the selection of arbitrators.
Question: What changes were made to: Ethics of members of the tribunal?
A provision was added to prohibit members of the tribunal from acting as counsel or as a party-appointed expert or witness in any pending or new investment dispute under CETA or any other international agreement.
This will address any perception of conflicts of interest on the part of the members of the tribunal.
Question: What changes were made to: Appellate mechanism?
An appellate mechanism is established as part of CETA’s investment dispute-resolution process.
The appellate mechanism will become operational once Canada and the EU agree on the administrative and organizational aspects of its functioning.
Question: What changes were made to: Multilateral investment dispute resolution system?
A provision was added to express the commitment of Canada and the EU to work toward a multilateral investment tribunal.
Question: What changes were made to: Continued improvements to the chapter and dispute-settlement provisions?
A provision was added that opens the door to future improvements to the chapter in light of experience and developments in other international forums and under other international agreements.
As a result, CETA’s investment dispute-settlement mechanism can remain current with future innovations and improvements.