Policy Analysis

Commentary to the Draft Investment Chapter of the Canada-EU Comprehensive Economic and Trade Agreement (CETA)

By Nathalie Bernasconi-Osterwalder on February 5, 2014

Shortly before the Lisbon Treaty's entry into force, Canada and the EU started negotiating a Comprehensive Economic and Trade Agreement (CETA) that was originally confined to trade issues.

In September 2011 the European Council expanded the mandate for the European Commission to cover negotiations on a CETA investment chapter. The commentary examines selected elements of this chapter, highlighting issues that should be addressed before the negotiations are finalized and the agreement concluded. The commentary focuses on the following sections: scope and definition; establishment of investment; non-discriminatory treatment; investment protection; reservations and exceptions; and final provisions. It provides critical analysis of the sections' content and offers some concluding remarks pointing out that both Canada and the EU have moved away from previous treaty practice, with their CETA approaches, unfortunately, not going into the right direction. While Canada takes back the procedural and substantive innovations that it incorporated in its 2004 Model Foreign Investment Protection Agreement (FIPA) (and ensuing investment agreements), the EU combines the traditionally broad member states' BIT provisions with wide-ranging market access and related commitments. A critical change compared to earlier EU free trade agreements (FTAs) is that the EU seems to have been convinced to shift from a positive to a negative list approach. Furthermore, the previous EU FTAs' market access and establishment rights were not subject to ISDS. Now that the EU is negotiating market access and investment protection as part of the CETA and has agreed to incorporate investor-state dispute settlement (ISDS), the question is whether the ISDS coverage will be limited to post-establishment treatment or also cover market access.

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