Douwe Korff, Emeritus Professor of International Law, London Metropolitan University; Associate, Oxford Martin School, University of Oxford

A major issue for the EU is whether to sign and provisionally implement CETA, the free trade agreement with Canada. How this power is divided between the EU and its Member States is important, as it determines whether individual countries could veto parts or all of the agreement. This situation is complex, potentially hindering the deal’s proponents while empowering its critics.

Furthermore, the CETA dispute has wider consequences, especially for the debated EU/US trade deal (TTIP) and any post-Brexit trade agreement between the EU and the UK. The EU Court of Justice will soon decide on the division of power between the EU and its member states regarding the EU/Singapore free trade agreement. However, the pressing matter is the signing and provisional implementation of CETA.

Currently, the parliament in Belgium’s Wallonia region has stalled the EU/Canada deal, but this analysis will focus on the legal aspects. While we anticipate the CJEU’s decision on the comparable EU/Singapore deal, national courts have become involved. Recently, the German Constitutional Court declined to issue a temporary order against the German Government signing the CETA Agreement. This judgment is significant as it sets a precedent for TTIP, Brexit, and is therefore worthy of further scrutiny.

The Decision

The German Constitutional Court’s decision wasn’t about whether the initialed CETA was compatible with the German Constitution. Instead, it focused on whether the Court should issue an interim order, or injunction, barring the German Government from signing the Agreement. The Court emphasized its practice of only issuing such an injunction against a proposed treaty if it clearly and irreversibly violated the Constitution (or citizens’ constitutionally protected rights) and required immediate intervention. Potential but unrealized or reversible risks to such rights should be weighed against the importance of the treaty’s objectives. Additionally, the Government generally has significant discretion in such matters.

The Court refused to issue the injunction primarily for the following reasons:

- Signing CETA would only lead to its provisional application. It would become fully effective upon ratification by all parties. Crucially, the German Government (like any other Member State Government) could end the Agreement’s application anytime before full ratification through a simple declaration to the other parties. Therefore, signing CETA wouldn’t irrevocably risk any constitutional rights violations.

- The Court has serious doubts about the EU’s competence in certain areas of investor protection, particularly regarding worker health and safety regulations.

- The Court also doubts the EU’s authority to transfer “sovereign rights” concerning judicial and quasi-judicial dispute resolution systems to other systems (i.e., the proposed investor-state dispute settlement (ISDS) “court” mechanism). The court finds it “not completely inconceivable” that the proposed (revised) ISDS mechanism might violate the principle of democratic legitimacy.

- However, the Court believes these risks can be mitigated in practice through various means (which it implies the German Government must use):

· The Court believes some risks can be addressed through declarations issued by the European Council. It tentatively accepts that these declarations ensure only specific parts of the Agreement will be provisionally applied upon signing. The Court stated that “reservations” are already in place regarding certain parts of the Agreement.

· The Court “assumes” (effectively demands) the German Government will employ these same measures to ensure specific parts of CETA “in particular” “will not be included in the provisional application” upon signing. This exclusion explicitly includes “the rules on investment protection, including the [investment dispute resolution] court system.”

· The Court suggests that while CETA is provisionally in force, Germany can require unanimous EU Council agreement for any decisions made by the investment dispute resolution “court,” effectively giving Germany veto power.

· If these measures prove insufficient, Germany can, as a last resort, exercise its right to terminate the Agreement. However, the Court doesn’t consider the interpretation granting a State Party this right (termination during provisional application) “binding,” despite the Government’s compelling arguments.

Therefore, the Court demands the Government “must clarify this interpretation of the Agreement in an internationally legally appropriate way” and “inform its Treaty Partners [of this interpretation].”

Comments

Signing CETA with the German Constitutional Court’s conditions could address many concerns raised by activists:

- The controversial investment dispute resolution “court” wouldn’t become operational.

- Should it become operational, Germany (and any Member State adopting a similar approach) would have veto power over any decisions by that (quasi-) “court” impacting rights and interests protected by its (their) constitution(s).

- If, despite these safeguards, the dispute resolution system (or any other aspect of the Agreement) still negatively affects those constitutionally protected rights and interests, Germany (and any such Member State) could withdraw from the Agreement, even if it means ceasing its operation entirely.

Perhaps current CETA opponents could accept it operating indefinitely on such a “provisional” and conditional basis.

Barnard & Peers: chapter 24

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