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 on 30 October
2016 following five years of negotiations, was in retrospect concluded at a pivotal
moment in the history of EU trade policy. Though trade policy might not have
been the most salient issue in the Brexit referendum earlier that year,
prominent Brexiters nevertheless sought to make hay from the EU’s torpid
progress in concluding trade deals with third countries, arguing that a nimbler
post-Brexit UK would be free to conclude and ratify trade agreements at a
faster pace. Less than a month later, in November, Donald Trump won the US
Presidential election, which would ultimately put paid to the prospect of
completion of the Transatlantic Trade and Investment Partnership (TTIP). Of
course, those with a reasonable grasp of EU trade law and policy knew that the
signature of CETA marked only the end of the beginning; as a mixed agreement
(ie both the EU and its Member States were parties), CETA would require
ratification by not only Canada and the EU, but also by all EU Member States.
Political opposition, as well as anticipated constitutional and other legal
challenges, meant that ratification by all Member States might be a drawn-out
affair and was by no means certain.
CETA was approved by the European
Parliament on 15 February 2017 and ratified by Canada on 16 May 2017. To date, sixteen
current EU Member States have notified the European Council of ratification. On
21 September 2017, in accordance with Council Decision 2017/38,
most of the agreement was afforded provisional application. However, several
key provisions of the agreement were excluded from provisional application. Of
relevance to this blogpost, key provisions of Chapter 8 (investment) were
excluded; in particular, those relating to the new Investment Court System
(ICS). This ICS comprises a permanent arbitration tribunal (the Tribunal) and
an Appellate Tribunal. The Tribunal, which will consist of fifteen members
appointed by the EU-Canada Joint Committee established to oversee the
application of CETA, will hear and determine claims by investors that a party
to CETA has breached certain obligations under the agreement which has resulted
in financial loss to the investor. Where a claimant investor is successful, the
Tribunal may award compensation, with the parties, including of course EU
Member States, being required to recognise and comply with any award without
delay. However, execution of any award domestically will be governed by the
laws concerning execution of judgments or awards in the state in which
execution is sought. It is worth mentioning that an application for execution
of a Tribunal award would not have to be brought before courts or tribunals of
the defendant state; enforcement could be sought in any state which is a party
to the Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (ICSID).
As expected, CETA attracted legal
challenges, with the ICS being an especial bone of contention. The most notable
of these was in Opinion
1/17, in which the Court of Justice, sitting as a full Court, upheld the
compatibility of CETA with EU law in the face of concerns expressed by Belgium
that, among other things, the ICS might be incompatible with the autonomy of
the EU legal order. In March 2022, the German Bundesverfassungsgericht upheld
the constitutionality of the provisional application of CETA, though the
constitutionality of the ICS in Germany remains an open question. On 11
November 2022, a majority of the Supreme Court of Ireland ruled
that ratification by Ireland of CETA as matters stand would be
unconstitutional.
Facts, arguments, and the Irish constitutional context
The constitutional challenge to
CETA in Ireland was brought by Patrick Costello TD, a Green Party member of the
Dáil (the lower house of Ireland’s parliament, the Oireachtas). Pursuant to
Article 29.5.2˚ of Bunreacht na hÉireann (the Constitution of Ireland),
any international agreement which involves a charge on public funds must be approved
by the Dáil in order for that agreement to be binding on the State. Mr Costello
argued, however, that CETA could not be ratified by the State without an
amendment to the Constitution, which would require a referendum. It was
submitted on behalf of Mr Costello that CETA involved the otherwise
unconstitutional transfer of legislative and juridical power of the State over
to institutions established by CETA. As regards legislative power, it was
argued that CETA provided rule-making powers to the CETA Joint Committee which
amounted to a power to make laws which would be binding in Ireland in
contravention of Article 15.2 of the Constitution, which vests sole and
exclusive law-making powers for the State in the Oireachtas.
With respect to juridical power,
it was contended that the ICS established under Chapter 8 of CETA would be
contrary to Article 34.1 of the Constitution, which provides that “[j]ustice
shall be administered in courts established by law by judges appointed in the
manner provided by this Constitution”. This juridical power within Ireland held
exclusively by Irish courts would be infringed because CETA in conjunction with
domestic legislative provisions in the Arbitration Act 2010 would require Irish
courts to give virtually automatic effect domestically to awards made by CETA
Tribunals. Mr Costello was unsuccessful before the High Court, where Butler J
took the view that CETA would bind the State as a matter of international law
only and that any decisions of the CETA Joint Committee could not be
characterised as laws made for the State within the meaning of Article 15.2.
Butler J also held that the disputes to be determined by the CETA Tribunals did
not constitute the “administration of justice” within the meaning of the
Constitution and therefore would not interfere with the powers of the Irish
courts in that regard.
Central to this case in every
sense is the concept of sovereignty. Ireland’s history and the anxieties of the
framers of Bunreacht na hÉireann leap forth from the constitutional text. The
preamble refers to “heroic and unremitting struggle [of our fathers] to regain
the rightful independence of our Nation”. The very first article asserts the “inalienable,
indefeasible, and sovereign right [of the Irish Nation] to choose its own form
of Government, to determine its relations with other nations, and to develop
its life, political, economic and cultural, in accordance with its own genius
and traditions.” Article 5, with reference to the State, declares that Ireland
is a “sovereign, independent, democratic state.” These assertions are given
mechanical form in various provisions throughout the Constitution which confer
the sole and exclusive law-making power for the State on the Oireachtas
(Article 15.2) and the administration of justice in courts established by law
(Article 34.1). Consistent with this protectionist approach to sovereignty,
Article 29 also establishes that Ireland adopts a dualist approach to
international law obligations. Those with pre-existing knowledge of Ireland’s
history in the EU will be aware of these facts. In order for Ireland to join
the then EEC in 1973, which involved the ceding of some sovereignty, and of
legislative and judicial power in the State to European institutions, a
referendum had to be held in 1972 to approve the requisite amendment to Article
29. In 1986, when the Irish government sought to ratify the Single European Act
sans a constitutional amendment, lawyers on behalf of Raymond Crotty in Crotty
v An Taoiseach were successful in convincing the Supreme Court that an
international agreement involving the cession of external sovereignty would
require a further amendment to the Constitution and, therefore, a referendum.
Europe has had to hold its breath while awaiting the results of a number of
Irish constitutional referendums since. Mr Costello was evidently hoping to add
another chapter to that story.
Supreme Court judgments
Hogan J in his judgment opined
that the appeal before the Supreme Court “may yet be regarded among the most
important which this Court has been required to hear and determine in its
almost 100-year history” (para. 9). The appeal also resulted in a deeply
divided court, with each of the seven judges authoring substantial (and in some
cases lengthy) judgments which require close examination to reveal the ratio of
the case. Mercifully, the judges were able to whittle the appeal down to six
issues, set out in the judgment of Dunne J (para. 13):
i)
Whether ratification of CETA was necessitated by
the obligations of membership of the EU.
This had been an argument
advanced on behalf of the State in the alternative to the assertion that CETA
could be ratified utilising normal processes under Article 29. All seven judges
(O’Donnell CJ, Dunne, Hogan, Charleton, McMenamin, Power, and Baker JJ) rejected
what one suspects was a rather half-hearted argument, ruling that EU membership
did not necessitate ratification of CETA.
ii)
Whether CETA amounted to a breach of Article
15.2 of the Constitution (sole and exclusive law-making power of the Oireachtas).
It had been submitted on behalf
of Mr Costello that CETA would involve interference with the law-making powers
of the Oireachtas for the State. In this regard, Mr Costello’s lawyers pointed
to the jurisdiction of the CETA Tribunals to make awards against the State for
losses suffered by an investor as a result of the operation of a provision of
Irish law, arguing that the threat of such awards would create a ‘regulatory
chill’ which might prey on the minds of Irish law and policy makers. The
Supreme Court was divided on this question, with the majority (O’Donnell CJ,
Dunne, McMenamin, Power, and Baker JJ) ruling that CETA would not amount to an
interference with the law-making powers of the Oireachtas. Hogan and Charleton
JJ, dissented on this point, with the former pointing in particular to the fact
that CETA provides for a “form of strict liability on the part of the State in
respect of legislation which is found to be contrary to CETA and insofar as it
does not contain a good faith defence” (para. 14).
iii)
Whether the creation of a CETA Tribunal amounted
to the creation of a parallel jurisdiction or a subtraction from the
jurisdiction of the courts in Ireland contrary to Article 34 of the
Constitution (conferral of ‘administration of justice’ in courts established
under the Constitution).
In essence, the issue amounted to
whether one viewed the CETA Tribunal as a body which would hear and determine
disputes which were purely matters of international law (not constitutionally
problematic) or whether it amounted to a body which would (or could) become
involved in disputes that might otherwise have been heard and determined in
Irish courts (possibly constitutionally problematic). Again, the Supreme Court
was divided on this issue, with the majority (O’Donnell CJ, McMenamin, Power,
and Baker JJ) of the view that CETA did not involve the impermissible
withdrawal of disputes from the jurisdiction of Irish courts. Dunne, Hogan, and
Charleton JJ differed on this point, though the former two judges pointed to
the fact that their chief constitutional objection in this regard arose from
the fact that the judgment of a CETA Tribunal would be, in Hogan J’s words,
“virtually automatically enforceable” in Ireland (para. 15).
iv)
Whether the ‘automatic enforcement’ of a CETA
Tribunal award by virtue of the enforcement provisions of CETA in conjunction
with the provisions of the Arbitration Act 2010 is contrary to Article 34 of
the Constitution.
As Ireland is a dualist state, an
award granted by an international tribunal will not enjoy automatic enforcement
in Irish courts unless such enforcement is provided for specifically under
Irish law. In the absence of such a domestic law, therefore (unless one takes
the view that the primacy of EU law or the principle of sincere cooperation
under Article 4(3) TEU would require enforcement of CETA awards domestically), CETA
awards would not be enforceable in Ireland. However, sections 24(1) and 25(3)
of the Arbitration Act 2010 give force of law in Ireland to the UN Convention
on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New
York Convention) and ICSID respectively. CETA in turn provides that awards made
by the CETA Tribunals are awards for the purposes of the aforementioned
international law instruments, meaning that following ratification, CETA
Tribunal awards would, save in very limited circumstances, be automatically
enforceable in Ireland. Automatic enforcement of CETA Tribunal awards would
raise a constitutional difficulty in that it would effectively confer the final
decision in a dispute concerning the ‘administration of justice’ within the
meaning of Article 34.1 to an international tribunal rather than the Irish
courts. On this point, a majority of the Supreme Court (Dunne, Hogan, Charleton,
and Baker JJ) held that the virtual automatic enforcement of CETA Tribunal
awards in the State would be a violation of Article 34. The reasoning of Hogan
J was particularly interesting in this regard; borrowing apparently from the
jurisprudence of the German Bundesverfassungsgericht, Hogan J found that the
combination of CETA and the 2010 Act would mean that the Irish courts “would
have no power to refuse enforcement even where the award compromised Irish
constitutional identity or constitutional values in a fundamental way or where
it was inconsistent with the requirements of EU law” (my emphases).
v)
Whether the effect of the interpretative role of
the CETA Joint Committee and its role are a breach of Article 15.2 of the
Constitution.
Article 25 of CETA allows the
CETA Joint Committee to make interpretative decisions which are binding upon
the CETA Tribunals. A question arose as to whether these interpretative
decisions would constitute an interference with the sole and exclusive law-making
function for the State of the Oireachtas under Article 15.2. On this issue, the
majority of the Supreme Court (O’Donnell CJ, Dunne, McMenamin, and Power JJ)
held that that interpretative role of the CETA Joint Committee was
constitutionally permissible. Again, the dissents (Hogan, Charleton, and Baker
JJ) were noteworthy. Hogan J, in particular, opined that CETA Joint Committee
interpretative decisions amount to “a form of quasi-legislation” which in
practice would involve a de facto amendment of CETA without the
constitutionally mandated prior consent of the Dáil under Article 29.5.2˚ (para.
17).
vi)
Whether an amendment to the Arbitration Act 2010
to alter the ‘automatic enforcement’ of a CETA Tribunal award would allow
ratification of CETA without an amendment to the Constitution and attendant
referendum.
The majority of the Supreme Court
had held that ratification of CETA would be unconstitutional owing to the fact
that CETA Tribunal awards would be virtually automatically enforceable arising
from the interaction of CETA and the Arbitration Act 2010, which would
constitute an interference with the constitutionally defined jurisdiction of
the Irish courts. One might be forgiven therefore for concluding that
ratification of CETA would require a constitutional amendment and a referendum.
The Supreme Court, however, took it upon itself to signpost a less complicated
way out of the quandary. Hogan J suggested that amendments to the Arbitration
Act 2010, which would empower the Irish courts to refuse to give effect to a
CETA Tribunal award (on the grounds of Irish constitutional identity or obligations
under EU law), would cure the unconstitutionality identified by the majority of
the Court (paras 228-237). All of the judges of the Court, save for Charleton J
agreed that Hogan J’s prescription would cure the unconstitutionality (or be
constitutionally permissible, in the case of those judges who saw no
unconstitutionality in the first place). Charleton J’s “ultimate dissent”
posited the view that the suggested amendments to the 2010 Act would be
ineffectual since the primacy of EU law flowing from Ireland’s obligations to
the EU under Article 29 of the Constitution would render it impossible to
refuse to enforce a CETA Tribunal award on grounds such as Irish constitutional
tradition (para. 62).
Observations
Viewed formalistically, the Costello case is purely about the Constitution
of Ireland, not CETA itself or indeed, in a direct sense anyway, EU law. There
is certainly more than enough in the Supreme Court judgments to engage Irish
constitutional scholars for another century. However, the judgments of the
Supreme Court have much of interest to say to trade and investment lawyers, as
well as EU lawyers, and it is on these points that I will focus my
observations.
In order to assess
constitutionality, the judges had to analyse the CETA agreement and in many
cases make assumptions about its likely operation. In examining the possible
effects of CETA on Irish legislative and juridical sovereignty, Hogan J, for
instance, took what might be described as a precautionary approach in
entertaining (perhaps remote) hypotheticals in which CETA Tribunal awards might
result in inhibiting the formulation of legislative policy by the Oireachtas. Hogan
J also identified the interpretative role of the CETA Joint Committee as
potentially quasi-legislative in nature, with the possibility that this role
could be used to effect de facto amendments to the text of CETA. Ironically, it
may be the historic expansive interpretation of the EU Treaties by the CJEU,
some of which have arguably amounted to de facto textual amendments, that have
led to some fear about international or supranational institutions using
interpretative powers to change the nature of an international agreement beyond
what was ratified at national level. O’Donnell CJ, in contrast, seemed to take
a much more sanguine approach to how international agreements like CETA operate
in practice and to show concern for what an overly cautious and sovereigntist
approach might have on the ability of the executive to conclude international
agreements. On a related note, while Hogan J’s suggested constitutional cure
was accepted by a majority, Charleton J maintained forcefully that the primacy
of EU law would nullify the effect of any such amendments. In the perhaps
unlikely scenario that it transpires that Charleton J is correct on this point,
it could result in a situation where CETA was ratified by Ireland based on a
misapprehension on the part of the majority of the Supreme Court on the nature
of the CETA enforcement obligations. This is a conceivable prospective mess
that might have been avoided by a preliminary reference to Luxembourg.
The stinging criticism by Hogan J
(a former Advocate General at the Court of Justice) to the CJEU’s approach to
CETA in Opinion 1/17 is also notable. Although keen to point out the differing
constitutional contexts, Hogan J identified what he saw as weaknesses in the
CJEU’s reasoning. Taking a position more defensive of legislative and juridical
sovereignty (or autonomy) Hogan J rejected, for instance, the CJEU’s notion
that only repeated awards of damages by the CETA Tribunals could impact EU or
national regulatory legislation and policy making. Hogan J pointed also to the
fact that the CETA Tribunals could in practice disregard CJEU jurisprudence and
that there would be no remedy in EU or national law for such disregard, a
matter the judge believed to be a “significant structural weakness” in the
drafting of CETA.
Likewise of note in the judgment
of Hogan J is the appearance of the idea of Irish constitutional identity and
constitutional values. Seemingly drawn from the terminology of Karlsruhe, this
is the first time that such phraseology has appeared in an Irish court
judgment. It should be noted, however, that the use of the terms is limited to
the enforceability of CETA Tribunal awards in the State. There is no suggestion
that such concepts could be utilised to justify non-compliance with obligations
flowing from EU membership; indeed, Hogan J made it abundantly clear that if
ratification of CETA were required by obligations arising from EU membership
that would have overridden any other possible constitutional objection.
As a final remark, the Supreme
Court judgments were received with some fanfare by opponents of CETA on the day
of their publication. While they are of major legal significance, they – in
reality – place little in the way of legal obstacles to the ratification of
CETA in Ireland.
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