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EU, Canada Agree On New Approach To Investment In FTA

by Ulrika Lomas, Tax-News.com, Brussels

01 March 2016


Canada and the European Union (EU) have agreed to the inclusion in their proposed free trade agreement of a new approach to investment protection and dispute resolution.

Negotiations toward an EU-Canada Comprehensive Economic and Trade Agreement (CETA) were concluded in 2014. The text of the agreement included clearly defined standards of protection, and provided for full transparency of proceedings, a ban on forum shopping, governmental control of interpretation of the agreement, a strict code of conduct, early dismissal of unfounded claims, and a "loser pays" principle.

Following the required legal review of the text, which has yet to enter into force, the main elements of the EU's new approach on investment have been incorporated into CETA. This approach was previously outlined in the investment protection package presented by the EU to the US in September as part of their ongoing Transatlantic Trade and Investment Partnership (TTIP) negotiations. In that case, the EU proposed the creation of an international Investment Court System, with an appeal mechanism based on clearly defined rules, qualified judges, and transparent proceedings.

According to the European Commission, the revisions to CETA represent a clear break from the old Investor to State Dispute Settlement (ISDS) approach. Trade Commissioner Cecilia Malmström said: "CETA takes on board our new approach on investment and its dispute settlement. By making the system work like an international court, these changes will ensure that citizens can trust it to deliver fair and objective judgements."

The revised CETA establishes a permanent Tribunal of 15 members that will be competent to hear claims for violation of the investment protection standards established in the agreement. It also provides for the creation, upon the agreement's entry into force, of an Appellate Tribunal.

Canada and the EU have committed to join efforts with other trading partners to set up a permanent multilateral investment court with a standing appellate mechanism. The revised text recognizes that a court of this nature will come to replace the bilateral mechanism established in CETA.

In a joint statement with Canada's International Trade Minister, Chrystia Freeland, Malmström said: "With these modifications, Canada and the EU will strengthen the provisions on governments' right to regulate; move to a permanent, transparent, and institutionalized dispute settlement tribunal; revise the process for the selection of tribunal members, who will adjudicate investor claims; set out more detailed commitments on ethics for all tribunal members; and agree to an appeal system."

Canada and the European Commission will now complete the translation and review of the text. Malmström and Freeland said that they will then "focus on the swift ratification of CETA so that individuals and businesses, both large and small, are able to benefit from the opportunities offered by this gold standard agreement."

"We are confident that CETA will be signed in 2016 and enter into force in 2017," they said.

Once the deal is fully implemented, 99 percent of the EU's tariff lines will be duty-free, including 100 percent of non-agricultural tariff lines and 95 percent of agricultural tariff lines. Nearly 92 percent of EU agricultural and food products will be exported to Canada duty-free.

TAGS: individuals | court | tax | investment | business | European Commission | free trade agreement (FTA) | export duty | tariffs | trade treaty | food | tax rates | Canada | import duty | tax reform | standards | trade | European Union (EU) | Investment | Europe | Invest | Investment

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