We have previously blogged here on the Comprehensive Economic and Trade Agreement (“CETA”), the trade agreement which is Canada’s largest trade initiative since NAFTA and, if implemented, would provide Canadian exporters preferential access to the sizable EU market.
Following the recent “Brexit” referendum, in which the United Kingdom voted to withdraw from the EU, there was concern as to whether CETA would proceed or whether a new agreement would have to be negotiated independently with the United Kingdom.
However, the legal review of the CETA text proceeded amongst the member states and it was anticipated that ratification would be announced on Thursday, October 27, 2016 during a signing ceremony in Brussels. However, Wallonia, the pre-dominantly French speaking region of Belgium, has created additional uncertainty as to when, and if, CETA will be ratified.
Under Belgium’s system of government, five regional and language-based legislatures vote with respect to issues of foreign affairs. On October 19, 2016, Wallonia’s President Paul Magnette advised that Wallonia would not ratify CETA. Wallonia’s regional political leadership has expressed concerns about the effect of CETA on the region’s farmers and whether the investor-state dispute settlement (“ISDS”) system would inhibit the ability of national governments to enact labour and environmental legislation and regulation.
ISDS is a system in which investor companies have standing to claim against member states before an arbitral tribunal for what it claims are discriminatory practices in violation of trade agreements.
As a concession to EU concerns, the ISDS provisions were already modified allowing for a permanent investment court of first instance comprised of three arbitrators chosen from a roster of people. 5 members of the roster are Canadian, 5 are EU nationals, and 5 are nationals of countries not party to CETA. The court will be composed of an arbitrator from each group so that one Canadian, one EU, and one non-party national sits on each hearing. A permanent Appellate Tribunal was also created enabling member states to challenge legal errors of the lower investment court’s decisions.
Furthermore, language was inserted into the legal text affirming the right of member-states to regulate in order to achieve legitimate policy objectives, such as the protection of public health, safety, the environment, public morals, social or consumer protection, and the promotion and protection of cultural diversity. However, it appears that these steps were not sufficient to immediately assuage the concerns of Wallonia’s political leadership.
The signing ceremony was scheduled to occur on October 27, 2016. Talks amongst officials continued through October 26, 2016 in hopes of salvaging the planned signing ceremony. On the morning of October 27, 2016, the Belgian government announced it had reached an agreement with Wallonia which would allow Belgium’s parliament to support CETA, provided certain conditions are met as outlined in what is being termed the Belgian declaration. Amongst these conditions, the European Court of Justice is to assess the permanent investment court and its compatibility with existing European treaties, Europe is to evaluate the socioeconomic and environmental effects of CETA, and regions with agricultural producers may activate safeguards if they anticipate a “market disequilibrium” to a specific agricultural product as a result of CETA.
Canadian officials with International Trade cautioned that there is still much work to do before CETA can be signed by Canada and all member-states of the European Union. At this time, it is unclear when the signing ceremony will occur or when CETA will enter into force following the various national ratification procedures.