Dr John Cotter, Lecturer in Law, Keele University, UK

Photo credit: Guiseppe Milo, via wikicommons media

Background

The EU-Canada Comprehensive Economic and Trade Agreement (CETA), signed in 2016 after five years of talks, came at a critical point in EU trade policy. While trade wasn’t central to the Brexit vote earlier that year, prominent Brexit supporters used the EU’s slow trade deal progress to argue for a more agile UK that could ratify deals faster. This was compounded by Donald Trump’s US election win a month later, which ultimately ended the Transatlantic Trade and Investment Partnership (TTIP). However, those familiar with EU trade law understood that CETA’s signing was just the first step; as a mixed agreement involving both the EU and its members, it needed ratification not just from Canada and the EU, but from all EU member states. Political resistance, alongside anticipated legal challenges, meant ratification by all members was uncertain and potentially lengthy.

CETA was approved by the European Parliament in February 2017 and by Canada in May 2017. As of today, sixteen current EU members have informed the European Council of their ratification. In September 2017, following Council Decision 2017/38, a large portion of the agreement came into provisional effect. However, some key elements, particularly within Chapter 8 (investment) concerning the new Investment Court System (ICS), were left out. The ICS consists of a permanent arbitration court (the Tribunal) and an Appellate Tribunal. The Tribunal, comprising fifteen members chosen by the EU-Canada Joint Committee overseeing CETA’s implementation, will handle investor claims that a party breached obligations, resulting in financial loss. If an investor’s claim is successful, the Tribunal can award compensation, and all parties, including EU member states, are obligated to promptly acknowledge and comply with the award. However, domestic enforcement of any award would be determined by the laws of the state where enforcement is sought. Importantly, an application to enforce a Tribunal award wouldn’t necessarily have to go through the defendant state’s courts; enforcement could be pursued in any state that participates in the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).

As anticipated, CETA faced legal challenges, with the ICS a major point of contention. Most notably, in Opinion 1/17, the Court of Justice, in full session, confirmed CETA’s compatibility with EU law, addressing Belgium’s concerns that the ICS might conflict with the EU legal order’s independence. In March 2022, the German Federal Constitutional Court confirmed the constitutionality of CETA’s provisional application, though the ICS’s constitutionality in Germany is still undecided. In November 2022, a majority of the Irish Supreme Court ruled that ratifying CETA in its current form would be unconstitutional in Ireland.

Facts, arguments, and the Irish constitutional context

Patrick Costello, a Green Party member of the Dáil (Ireland’s lower house of parliament), brought the constitutional challenge against CETA in Ireland. Under Article 29.5.2˚ of the Irish Constitution (Bunreacht na hÉireann), any international agreement impacting public funds requires Dáil approval to be binding. Mr. Costello argued that ratifying CETA without a constitutional amendment, requiring a referendum, would be unlawful. He claimed CETA unconstitutionally transferred legislative and judicial power from the State to CETA institutions. He contended that giving the CETA Joint Committee rule-making powers equaled law-making power, binding in Ireland and contradicting Article 15.2, which gives sole law-making power to the Oireachtas.

Regarding judicial power, it was argued that the ICS under CETA Chapter 8 violated Article 34.1, stating that “justice shall be administered in courts established by law by judges appointed under this Constitution.” This judicial power, held exclusively by Irish courts, would be infringed because CETA, combined with the Arbitration Act 2010, would force Irish courts to automatically enforce CETA Tribunal awards. Mr. Costello’s case failed in the High Court, where Justice Butler viewed CETA as binding the State solely under international law, with CETA Joint Committee decisions not considered laws for the State as per Article 15.2. Justice Butler also held that disputes addressed by CETA Tribunals didn’t constitute “administration of justice” under the Constitution and wouldn’t interfere with Irish courts’ authority.

The concept of sovereignty is central to this case. Ireland’s history and the framers’ concerns are evident throughout the Constitution. The preamble references “heroic and unremitting struggle [of our fathers] to regain the rightful independence of our Nation”. Article 1 asserts the Irish Nation’s “right to choose its own form of Government, its relations with other nations, and to develop its life…in accordance with its own genius and traditions.” Article 5 declares Ireland a “sovereign, independent, democratic state.” These statements are reinforced throughout the Constitution, granting sole law-making power to the Oireachtas (Article 15.2) and placing the administration of justice within established courts (Article 34.1). Consistent with this protective approach, Article 29 establishes Ireland’s dualist approach to international law, requiring a referendum to amend Article 29 for Ireland to join the then EEC in 1973, which involved ceding some sovereignty. This was highlighted in 1986 when the Irish government tried to ratify the Single European Act without a constitutional amendment; in Crotty v An Taoiseach, the Supreme Court agreed that ceding external sovereignty required a referendum. Mr. Costello sought to add to this legacy.

Supreme Court judgments

Justice Hogan, in his judgment, described the Supreme Court appeal as potentially one of the most significant in its century-long history (para. 9). The appeal also sharply divided the seven-judge court, requiring a close examination of their substantial judgments to understand the case’s outcome. The judges narrowed down the appeal to six key issues, outlined in Justice Dunne’s judgment (para. 13):

i) Was ratifying CETA necessary due to EU membership obligations?

All seven judges (Chief Justice O’Donnell, Dunne, Hogan, Charleton, McMenamin, Power, and Baker) dismissed this argument, likely put forth half-heartedly by the State, concluding that EU membership didn’t mandate CETA ratification.

ii) Did CETA violate Article 15.2, concerning the Oireachtas’ exclusive law-making power?

Mr. Costello’s lawyers argued that CETA interfered with the Oireachtas’ power by enabling CETA Tribunals to make awards against the State based on Irish law, potentially causing a ‘regulatory chill’ influencing Irish lawmakers. The Court was split on this, with the majority (Chief Justice O’Donnell, Dunne, McMenamin, Power, and Baker) ruling that CETA wouldn’t interfere with the Oireachtas’ law-making powers. Justices Hogan and Charleton dissented, with Justice Hogan highlighting CETA’s “strict liability on the State for legislation deemed contrary to CETA without a good faith defense” (para. 14).

iii) Did establishing a CETA Tribunal create a parallel jurisdiction or undermine Irish courts, violating Article 34 (granting ‘administration of justice’ to Constitutionally established courts)?

This centered on whether the CETA Tribunal handled purely international law disputes (not constitutionally problematic) or if it could handle disputes that might otherwise fall under Irish courts (potentially problematic). The Court was again divided, with the majority (Chief Justice O’Donnell, McMenamin, Power, and Baker) finding CETA didn’t remove disputes from Irish courts. Justices Dunne, Hogan, and Charleton disagreed, with the first two pointing out that their main concern was the near-automatic enforceability of CETA Tribunal judgments in Ireland (Justice Hogan, para. 15).

iv) Was the ‘automatic enforcement’ of CETA Tribunal awards through CETA provisions and the Arbitration Act 2010 contrary to Article 34?

As a dualist state, Ireland doesn’t automatically enforce international tribunal awards unless explicitly stated under Irish law. Without such a law, CETA awards wouldn’t be enforceable in Ireland (unless EU law primacy or the principle of sincere cooperation under Article 4(3) TEU mandates it). However, the Arbitration Act 2010 sections 24(1) and 25(3) enforce the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and ICSID, respectively. CETA then designates awards by CETA Tribunals as applicable under these instruments, meaning post-ratification, these awards would be automatically enforceable in Ireland, except in limited cases. This presented a constitutional issue as it effectively gave an international tribunal, not Irish courts, final say in matters concerning the ‘administration of justice’ under Article 34.1. The majority (Dunne, Hogan, Charleton, and Baker) concluded that automatically enforcing CETA Tribunal awards violated Article 34. Justice Hogan’s reasoning was notable: using German Federal Constitutional Court jurisprudence, he found that CETA and the 2010 Act could prevent Irish courts from “refusing enforcement even if the award compromised Irish constitutional identity, values, or EU law requirements” (emphasis added).

v) Did the CETA Joint Committee’s interpretative role breach Article 15.2?

CETA’s Article 25 empowers the Joint Committee to make binding interpretations for CETA Tribunals. This raised the question of whether these interpretations interfered with the Oireachtas’ sole law-making authority under Article 15.2. The majority (Chief Justice O’Donnell, Dunne, McMenamin, and Power) found the Joint Committee’s interpretative role permissible. Again, the dissenting opinions (Hogan, Charleton, and Baker) were significant. Justice Hogan, in particular, viewed these interpretations as “quasi-legislation” potentially used to amend CETA without the required Dáil approval under Article 29.5.2˚ (para. 17).

vi) Could amending the Arbitration Act 2010 to modify the ‘automatic enforcement’ allow CETA ratification without a constitutional amendment and referendum?

Since the majority found CETA ratification unconstitutional due to the automatic enforceability of Tribunal awards conflicting with Irish courts’ jurisdiction, one might assume a constitutional amendment and referendum were necessary. The Supreme Court, however, proposed a simpler solution. Justice Hogan suggested that amending the Arbitration Act 2010 to allow Irish courts to reject enforcing CETA Tribunal awards (based on Irish constitutional identity or EU law obligations) would address the unconstitutionality (paras 228-237). All judges, except Justice Charleton, agreed with Justice Hogan’s solution. Justice Charleton’s dissent argued that these amendments would be ineffective because EU law primacy, stemming from Article 29, would prevent refusing enforcement based on Irish constitutional tradition (para. 62).

Observations

From a strictly legal perspective, the Costello case is solely about the Irish Constitution, not CETA or EU law directly. The Supreme Court judgments offer much for Irish constitutional scholars to analyze. However, they also provide valuable insights for trade, investment, and EU lawyers, and it’s these points I’ll focus on.

To assess constitutionality, the judges scrutinized CETA and made assumptions about its application. Examining CETA’s impact on Irish sovereignty, Justice Hogan adopted a cautious approach, considering hypothetical situations where Tribunal awards might hinder the Oireachtas’ policy-making. He also saw the Joint Committee’s role as potentially quasi-legislative, with the ability to effectively amend CETA’s text. This concern might stem from the CJEU’s historically broad interpretation of EU treaties, sometimes seen as de facto amendments, leading to apprehension about international bodies using interpretation to alter agreements beyond their nationally ratified form. Conversely, Chief Justice O’Donnell appeared more optimistic about the practical operation of agreements like CETA and expressed concern about excessive caution and a sovereignty-focused approach hindering the executive’s ability to forge international agreements. While a majority accepted Justice Hogan’s proposed constitutional fix, Justice Charleton argued that EU law primacy would supersede any such amendments. Should Justice Charleton’s view prove accurate, it could lead to a situation where Ireland ratified CETA based on a flawed understanding of enforcement obligations. This potential issue might have been avoided with a preliminary reference to the CJEU.

Justice Hogan’s (a former Advocate General at the Court of Justice) critique of the CJEU’s approach to CETA in Opinion 1/17 is noteworthy. While acknowledging different constitutional contexts, he identified perceived weaknesses in the CJEU’s reasoning. Taking a stance more protective of sovereignty, he disagreed with the CJEU’s view that only repeated damages awards by CETA Tribunals could impact EU or national legislation. He also pointed out that these Tribunals could disregard CJEU jurisprudence without legal recourse, calling it a “significant structural weakness” in CETA.

Also notable in Justice Hogan’s judgment is the emergence of “Irish constitutional identity and constitutional values.” Borrowed from German jurisprudence, this marks the first time such language has appeared in an Irish court judgment, limited to the enforceability of CETA Tribunal awards within the State. It doesn’t suggest using these concepts to justify non-compliance with EU membership obligations; Justice Hogan made it clear that if ratifying CETA was an EU obligation, it would override any constitutional objections.

Finally, while CETA opponents met the Supreme Court judgments with enthusiasm, while legally significant, they pose minimal obstacles to CETA’s ratification in Ireland.