The CJEU AG opinion on the compatibility of CETA ICS with EU law -- that's a lot of acronyms, but I'm sure this blog's readers can follow! -- was released earlier this week (my vague sense from EU law experts is that it is not at all clear whether the Court will come out the same way). Here is an excerpt that seems particularly important to the general debate about investment protection/ISDS:
201. As regards establishing whether the general principle of equal treatment is observed in the context of the establishment of the ICS, it must be recalled that, in accordance with the Court’s settled case-law, the principle of equal treatment requires that comparable situations must not be treated differently and different situations must not be treated in the same way, unless such treatment is objectively justified.
202. Most of the governments which submitted observations as well as the Council and the Commission are of the view that the Kingdom of Belgium wrongly assumes that Canadian undertakings investing in the European Union, on the one hand, and EU undertakings investing in the European Union, on the other, are in the same situation.
203. That is specifically not the case: one category of undertakings referred to above is making international investments, whereas the other is making intra-Community investments. The situation is not comparable. Intra-Community investments are inevitably, to some extent, subject to different rules than international investments. The only comparable situations are that of Canadian undertakings investing in the European Union, on the one hand, and that of EU undertakings investing in Canada, on the other.
204. The difference in the fact that Canadian undertakings investing in the European Union may bring disputes before the CETA Tribunal, whereas EU undertakings investing in the European Union will be unable to do so, cannot therefore be deemed discriminatory. In this regard, the abovementioned interested parties refer, by analogy, to the case-law of the Court, in accordance with which the difference in treatment between individuals who benefit from the rules laid down in an agreement concluded between Member States for the avoidance of double taxation, on the one hand, and individuals who do not benefit from such rules, on the other, does not constitute discrimination since the situations of those two categories of persons are not comparable.
I don't have a view on whether this reasoning makes sense as a matter of EU law, but I'm interested in the implications for the broader investment protection/ISDS debate. To me, one of the fundamental questions in that debate is the following: Are foreign investors and domestic investors in comparable situations in terms of how they are treated when they make an investment in a particular jurisdiction? My instinct is yes, and I haven't seen much evidence to the contrary. And yet the AG opinion comes to the opposite conclusion, with reasoning that glosses over the issue very quickly.
In the AG's defense, he was dealing with a lot of issues, and couldn't write a dissertation on just this one point. So how should we think about this question with the luxury of more time? The way I would approach it is to look at the universe of foreign investors and the universe of domestic investors in Canada, and see how each group is treated under Canadian law; and then do the same thing for EU law. I would be surprised if there were much of a difference, on balance, in the treatment of these groups under either Canadian or EU law, but I'm open to evidence to the contrary. In my view, however, one of the big gaps in this debate is that we don't have much in the way of evidence here.
Of course, there may be instances where a particular Canadian investor was treaty badly under EU law, or a particular EU investor was treated badly under Canadian law. But that kind of cherry-picking of data doesn't answer the question. Canadian investors are also treated badly under Canadian law sometimes, and EU investors are treaty badly under EU law. You need the overall picture to come to a conclusion here.
My sense has always been that the situation of foreign and domestic investors is comparable in most jurisdictions. Perhaps not identical, but certainly comparable. For those, like the AG, who want to argue that the situations are not comparable, what is your basis for this? The AG says the Canadian and EU investments are "subject to different rules." That's true, but how does that lead to the conclusion that the situations are not comparable? Investments can be subject to "different rules" for all kinds of reasons. Different products/services are subject to different rules; companies from different regions within a country can be subject to different rules. This doesn't seem sufficient to conclude that foreign and domestic investors are not in a comparable situation. Let's say Tim Hortons and Pret A Manger (or some better example you can think of!) both want to open a store in Copenhagen. Are their situations really not comparable?
I would love to see this point developed more by the Court.