Reinforcing the commitments relating to sustainable development in the implementation of CETA

Reinforcing the commitments relating to sustainable development in the implementation of CETA Summary review Antoine Bailleux* & Sophie Grosbon**

Introduction This note examines, for exploratory purposes and subject to further study, the possibility of incorporating, within the legal regime relating to the EU-Canada Comprehensive Economic and Trade Agreement (hereinafter, CETA), a number of action points from the Commission Communication of 22 June 2022 entitled “The power of trade partnerships: together for green and just economic growth”1 (hereinafter, the “TSD Review”).

Through these action points, the Commission has undertaken to reinforce the centrality and effectiveness of sustainable development provisions in future trade agreements between the European Union and non-member countries. It has also recognised that “several of the identified action points, notably the majority of those that relate to the implementation of TSD commitments and the reinforcement of the role of civil society, can be immediately deployed, including in trade agreements already in force”. However, and despite Canada’s “enthusiasm” 2, the Commission rejected the idea of implementing some of these action points within CETA’s framework.

The Commission justified this refusal on the grounds that such a process would require a modification to CETA, even though this text has already been ratified by 17 member States and 10 others still need to approve it. An amendment to CETA would therefore lead to the coexistence of two versions of this text, and would involve restarting the ratification process amongst all member States.

This note questions the two premises which support the Commission’s reasoning, namely: Professor at UCLouvain – Saint-Louis Bruxelles and lawyer. The author can be contacted via the following email address: antoine.bailleux@uclouvain.be ** Lecturer at Paris Nanterre University (CEDIN), Delegation to the CNRS for research (CERIC-AMU). The author can be contacted via the following email address: sgrosbon@parisnanterre.fr. This work was conducted at the instigation and with the financial support of the MEP, Saskia Bricmont.

1 COM (2022) 409 final.

2 See the minutes from the joint committee meeting on 2 December 2022, p.8, which is available at https://circabc.europa.eu/ui/group/09242a36-a438-40fd-a7af-fe32e36cbd0e/library/6fc49aca-f7c0-4a45-8fe9d0c3f531a164/details *

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modifying CETA would imply a new ratification by each member State (Part 1);

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none of the action points can be implemented in trade relations between the European Union and Canada without modifying CETA (Part 2).

In accordance with the instructions received, the note focuses in particular on the following action points from the TSD Review: “4. Pursue a tailored approach and conduct better targeted impact assessments on TSD, with a view to identifying country-specific sustainability priorities and providing detailed analyses of impacts early on; 5. Negotiate, where appropriate in light of specifically identified priorities in partner countries and on a case-by-case basis, detailed and time-bound roadmaps with milestones. Roadmaps should recognise a role for civil society in monitoring their implementation. (…)

11. In parallel to the TSD review, revise the Operating Guidelines for the Single Entry Point to increase transparency and predictability for stakeholders, while clarifying who can bring complaints, how they will be handled and the applicable timeframes. The Guidelines will also make clear that DAGs can file collective complaints on violations of TSD commitments and represent the interests of a party located in a partner country. (…)

19. Further strengthen the enforcement of TSD commitments in future agreements by

proposing to EU trading partners to: a. Extend the general state to state dispute settlement compliance stage to the TSD chapter; b. Involve the DAGs in monitoring the compliance stage; c. Extend the possibility to apply trade sanctions in cases of failure to comply with obligations that materially defeats the object and purpose of the Paris Agreement on Climate Change or in serious instances of non-compliance with the ILO fundamental principles and rights at work.

The application of trade sanctions will follow the general state-to-state dispute settlement rules.”

1.

Would modifying CETA with a view to implementing the TSD Review complicate the ratification process with regards to member States?

For legibility and legal security reasons, the best way to implement certain action points presented above, and in particular point 19, would undoubtedly involve a formal amendment of CETA. Yet, it is not at all clear, as the Commission appears to assume, whether such a modification requires (another) ratification by each Member State of the European Union.

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Article 30.2§1 of the CETA specifies that any amendment to CETA enters into force “after the Parties exchange written notifications certifying that they have completed their respective applicable internal requirements and procedures necessary”. Pursuant to this provision, CETA does not dictate how the contracting parties must proceed internally to approve any amendments. The contracting parties are left to determine if and how their internal obligations and procedures will be met. In concrete terms, this means that no CETA provision requires the entry into force of an amendment to be duly ratified by each member State of the European Union, for example following the adoption of an Act of Consent in each of these States.

But we can reasonably consider that with regard to the matters concerned by the TSD Review, the amendments made to CETA to implement the aforementioned action points would come under the European Union’s exclusive jurisdiction.

In its Opinion 2/15 relating to the agreement between the European Union and Singapore, the Court of Justice considered in the clearest possible terms that the sustainable development commitments in this agreement would concern the common commercial policy and, hence, would come under the EU’s exclusive jurisdiction.

It concluded, in particular, that: -

“The objective of sustainable development henceforth forms an integral part of the common commercial policy” (point 147);

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The chapter relating to sustainable development, insofar as it obliges the parties to meet their international obligations in environmental and social terms, “displays a specific link with trade” (point 155) even if these commitments do not only cover this trade (point 153);

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This chapter is “such as to have direct and immediate effects on that trade” (point 157) as it enables unfair competition via a race to the bottom to be avoided;

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No provision in the agreement intends to harmonise the labour or environment standards of the Parties (points 164-165).

Based on this Opinion, it could therefore be argued that the corresponding CETA chapters, namely chapters 22 to 24, fall within the common commercial policy, and therefore the EU’s exclusive jurisdiction, even if the Council's decision relating to the provisional application of CETA – prior to Opinion 2/15 – cultivates doubt in this respect3. This position is also shared by the Commission, as evidenced by the fact that the recent free-trade agreement with New Zealand was concluded by the European Union alone.

This statement has important repercussions on the procedure which, on the European side, must control the modification of chapters 22 to 24 within CETA. This means that, for the European part, the European Union will have exclusive competence to make amendments to these chapters. In other words, the Member States have no jurisdiction to individually approve or reject such amendments. Consequently, it may be reasonably argued that the adoption of these amendments by a decision of the Council of the European Union, approved by qualified majority, would be sufficient to consider that the “applicable internal requirements and 3

Council Decision 2017/38 of 28 October 2016.

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procedures” have been fulfilled under article 30.2§1, for both the European Union and for its Member States. The fact that, furthermore, CETA contains provisions (relating to portfolio investments and to the much-talked-about ISDS), which do not fall within the EU’s exclusive competence, does not legally alter this conclusion.

It is no doubt preferable that the negotiation of such amendments by the Commission makes use of the Council’s explicit mandate. It is, however, uncertain that such a mandate is necessary.

On the one hand, articles 207, § 3, al. 2, and 218, § 2, of the TFEU illustrate that it is the negotiation of a new treaty that must obtain prior approval from the Council. It may therefore be argued that the modification - on limited points - of an existing treaty, and depending on the forms laid down in this treaty, may occur without the Council’s explicit mandate. This position seems to be all the more justifiable in a situation whereby, as in this case, the Council has approved the strategic line which underlies this modification, and which has been presented by the Commission in its TSD Review and which underlies this modification4. On the other hand, the Council is, in any case, the only body empowered to adopt the amendments proposed by the Commission. In other words, even supposing that the negotiation of these amendments should have been based on the Council’s ad hoc mandate, the approval of these amendments by the latter will, in any case, “purge” any defect.

Under the primacy of European Union law on domestic law, the Council’s decision approving these amendments cannot, in principle 5, be challenged in a Member State as being contrary to a rule of national law, such as a constitutional power. For the same reason, and strictly speaking, the constitutional review of a consent act regarding a mixed treaty such as CETA (in its original version or as modified via a Council decision) should not extend to the part of the treaty which falls within the EU’s exclusive jurisdiction. We cannot, however, exclude such an eventuality, as the national constitutional traditions and the notion of relations between constitutional law, EU law and general international law are extremely variable, from one Member State to another.

2.

Does CETA necessarily need to be revised in order to implement each point of action?

The Commission’s proposals under the TSD Review are of varying degrees and do not involve all the same procedures to be able to be applied to the existing free trade agreements and CETA, in particular. Some require a modification of the treaty and are thus subjected to a traditiona l process. This is the case in point 19, or in any case part of this point. Others require a consensus within the Committees set up by CETA and not a modification of CETA itself. This is the case for points 4 and 5. Other are subjected to the Commission’s unilateral autonomous initiatives within the framework of the European Union only and do not involve the other State party. This is the case for point 11.

Point 19 of the TSD Review proposes to “extend the general state to state dispute settlement compliance stage to the TSD chapter”. Yet, this proposal is incompatible with article 24.16 §1 4

See the Council Conclusions on the Trade and Sustainability Review of 17 October 2022 (https://www.consilium.europa.eu/en/press/press -releases/2022/10/17/council-conclusions-on-the-trade-andsustainability-review/): “The Council invites the Commission to use review clauses and, where relevant, joint committees to align existing trade agreements with the new TSD approach, as appropriate” (point 8).

5 The primacy of European Union law is currently being partially reconsidered by certain constitutional courts in Member States.

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of CETA whereby “for any dispute that arises under this chapter, the Parties shall only have recourse to the rules and procedures provided for in this chapter”, namely the non-binding procedure of articles 24.14 and 24.15 for the disputes relating to the “trade and environment ” chapter. This proposal is also incompatible with article 23.11§1 which, in identical terms, enforces the procedures for the resolution of disputes provided for in articles 23.9 and 23.10 in the “trade and labour” chapter. Paragraph 5 of article 23.11 specifies that the Committee on Trade and Sustainable Development (CTD) may recommend to the CETA Joint Committee modifications to relevant provisions (and therefore to the resolution of disputes) in chapter 23, in accordance with the amendment procedures established in Article 30.26. CETA does not therefore consider any modification of its text via an agreement within the Joint Committee or via an interpretive declaration.

Certainly, article 26.1§5c of the CETA authorises the Joint Committee to approve modifications to the agreement, but depending on “what is provided for” by this agreement, in other words provided that the amendment procedures in articles 23.11§1 and 24.16§1 of CETA are complied with. In the same way, while article 26.3 attributes a decision-making authority to the Joint Committee, this is only applied “in the cases provided for” by the agreement. It cannot therefore directly contravene the very provisions of the agreement and be used to bypass the amendment procedure. Finally, while article 30.2§2 specifies that the Joint Committee can amend certain elements of CETA, these are however limited to the Agreement’s protocols and appendices.

Besides, the coming into effect of such amendments is subject to their approval by the parties according to their respective internal procedures.

Some of the TSD Review’s proposals can be used in an interpretive declaration. Article 26.1§5e) of CETA actually authorises the Joint Committee to adopt interpretations of the provisions of the agreement which shall be binding on tribunals established under chapters 8 and 29. However, these interpretations - as their name indicates - must be used to interpret the text and not to modify it7. They cannot legally (even if they do sometimes in political practice) contribute to giving the treaty a meaning that is incompatible with its own conventional provisions. Admittedly, article 31§3a of the Vienna Convention on the Law of Treaties (accepted today as a reflection of international custom) specifies that for all purposes of interpreting a conventional text, “there shall be taken into account (...), any subsequent agreement between the parties regarding the interpretation of the treaty”. But the first interpretation rule laid down by this article states that “a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”. Yet, an interpretation which directly and strictly opposes an article (here, articles 23.11§1 and 24.16§1 of the CETA) cannot reasonably be considered to be an interpretation “in good faith in accordance with the ordinary meaning” 8.

Pursuant to article 30.2§1 of the CETA: “The Parties may agree, in writing, to amend this Agreement. An amendment shall enter into force after the Parties exchange written notifications certifying that they have completed their respective applicable internal requirements and procedures necessary for the entry into force of the amendment, or on the date agreed by the Parties.”

7 International Law Commission, Guide to Practice on Reservations to Treaties, 2011, §4.7.1: “An interpretive declaration does not modify treaty obligations. It may only specify or clarify the meaning or scope which its author attributes to a treaty or to certain provisions thereof and may, as appropriate, constitute an element to be taken into account in interpreting the treaty in accordance with the general rule of interpretation of treaties.”

8 International Law Commission, Subsequent agreements and subsequent practice in relation to interpretation of treaties (resolution no. 73/202 of the United Nations General Assembly of 20 December 2018), conclusion 7§3: “it is presumed that the parties to a treaty, by an agreement or a practice in the application of the treaty, intend to interpret the treaty, not to amend or to modify it […]”.

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However, point 19 of the TSD Review is not limited to the proposal of applying the general dispute settlement mechanism to the TSD chapter. It also aims to “extend the possibility to apply trade sanctions in cases of failure to comply with obligations that materially defeats the object and purpose of the Paris Agreement on Climate Change or in serious instances of noncompliance with the ILO fundamental principles and rights at work”. However, pursuant to the aforementioned Court of Justice’s Opinion 2/15, it is possible to consider that to a certain extent, this possibility already exists and does not require any modification to the treaty. Indeed, in this opinion, the CJEU assures that “a breach of the provisions concerning social protection of workers and environmental protection [set out in the TSD chapter] authorises the other Party — in accordance with the rule of customary international law codified in Article 60(1) of the Convention on the law of treaties (...) — to terminate or suspend the liberalisation, provided for in the other provisions of the envisaged agreement, of that trade” (point 161) 9. Yet, suspending or partially terminating the granted trade liberalisation is the basic trade sanction provided for by the various dispute settlement mechanisms in trade matters (suspension or partial termination of granted trade advantages). This possibility of applying trade sanctions in the event of serious failure to comply with articles 23.3 and 24.4§2 - according to which the Parties undertake to effectively implement the ILO’s Fundamental Principles and Rights at Work and the multilateral environment agreements - could be obligingly confirmed by an interpretive declaration.

Point 19 of the TSD Review also provides to “involve the DAGs in monitoring the compliance stage”. The focus here is on monitoring the implementation of the report published by the group of experts in the framework of the dispute settlement mechanism applicable to matters relating to work (chapter 23) and the environment (chapter 24). The Domestic Advisory Groups (DAGs) are advisory mechanisms including civil society organisations that are representative of various interests (articles 23.8§4 and 24.13§5). They can formulate opinions and recommendations on any question under the work or environment chapters. In the framework of CETA, these DAGs are already involved in compliance monitoring. Pursuant to articles 23.10§12 and 24.15§11, if the group of experts determines that a Party (defendant) has not fulfilled its obligations with regards to chapters 23 or 24, the party must inform the DAGs of its decision concerning the actions or measures to be implemented, on the one hand; on the other hand, the other Party (claimant) must inform the DAGs “of any other action or measure it may decide to take, as a follow-up to the final report”; finally, the Committee on Trade and Development, which monitors the follow-up given to the final report, may receive the DAG’s observations in this respect. If the dispute settlement mechanism in terms of sustainable development were to be modified to conform to the general dispute settlement system, the modification could specify the specific role attributed to the DAGs in the context of the compliance phase. It could specify that the DAGs “will be able to submit observations to the panel also at this stage” (according to the TSD Review terms, p.13).

Through points 4 and 5 of the TSD Review, the Commission would like to effectively target country-specific sustainability priorities and include these priorities in the detailed and timebound roadmaps with milestones. In the framework of CETA, these roadmaps could be negotiated according to the social and environmental cooperation within the Committee on Trade and Sustainable Development, authorised to “examine the progress made” in the

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Article 60§1 of the Vienna Convention authorises a party of a bilateral treaty to invoke the material breach by the other party and to terminate the treaty or suspend its operation in whole or in part.

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implementation of chapters 2310 and 2411. In order to make them more binding, these detailed roadmaps could be subjected to a joint unilateral declaration by both Parties. These legal acts constitute binding legal commitments if they are clear and precise and if they express the authors’ willingness to be bound in accordance with their terms 12. Points 4 and 5 therefore do not require any revision of the CETA to be implemented, but rather a consensus within the CTD or better still, a joint unilateral declaration from both parties.

Point 11 of the TSD Review proposes to revise the Operating Guidelines for the Single Entry Point to increase transparency, while clarifying who can bring complaints. These new guidelines were actually adopted at the same time as the TSD Review on 22 June 2022 under the title: “Operating guidelines for the Single Entry Point and complaints mechanism for the enforcement of EU trade agreements and arrangements”. This was the Commission’s initiat ive, which did not involve Canada and which, therefore, was not at all conventional. Indeed, in November 2020, the Commission created a single entry point within the Directorate-General for Trade enabling all stakeholders to lodge a complaint in the event of non-compliance of an EU state trading partner regarding its commitments under a free trade agreement. The complaints are centralised by the European Chief Trade Enforcement Officer (CTEO), a newly created post. Once the single entry point has been informed, the Commission decides, at its discretion, the complaints for which it will launch a dispute settlement mechanism under the free trade agreement. The proposal does not aim to modify the Commission’s discretionary power, nor to authorise Domestic Advisory Groups (DAGs) to inform the conventional authorities of collective complaints. Point 11 therefore does not require CETA to be revised in order to be implemented.

Conclusion At the end of this summary review, the following conclusions can be drawn: -

The revision of CETA required for the implementation of the TSD Review, and in particular the modification of the dispute settlement system relating to the TSD chapters (action point 19.a), does not seem to legally interfere with CETA’s current ratification procedure amongst Members States. At first glance, there is nothing to prevent the required amendments from being approved, on the European side, by a simple Council decision by qualified majority.

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The modification of the dispute settlement system relating to the TSD chapters (action point 19.a) does not seem to be possible, whether via a decision or via an interpretive declaration by the Joint Committee, outside of a conventional modification of CETA.

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The application of trade sanctions in the event of failure to comply with obligations that materially defeats the object and purpose of the Paris Agreement on Climate Change or in serious instances of non-compliance with the ILO fundamental principles and rights at work seems, in light of the Court of Justice’s Opinion 2/15, to be already possible on the basis of established law. Nevertheless, this possibility could be suitably confirmed by an interpretive declaration relating to articles 23.3 and 24.4§2.

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Article 23.8§3a).

Article 24.13§3.

12 Nuclear tests (New Zealand v. France), judgement, I.C.J. Reports 1974, p. 472, § 46.

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Articles 23.10§12 and 24.15§11 already involve DAGs to monitor the implementation of reports published by the group of experts in the settlement of disputes regarding work and the environment.

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The introduction of more detailed impact assessments as well as country-specific priorities and roadmaps (action points 4 and 5) does not require CETA to be revised, but does require a consensus within the CTD or a joint unilateral statement from the Parties.

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The revision of the Operating Guidelines for the Single Entry Point is at the discretion of the European Commission.

TSD Review Action Point 4 and 5

Subject Country-specific priorities and roadmaps

Required action Consensus within the CTD or joint unilateral statement from the Parties.

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Revision of the Operating Guidelines for the Single Entry Point Modification of the dispute settlement system relating to the TSD chapters Involve the DAGs in monitoring the compliance stage Trade sanctions in the event of a serious breach of the Paris Agreement or the ILO’s fundamental principles

The Commission's discretionary power

19a)

19b)

19c)

Revision of CETA

Already planned, could be supplemented by a revision of CETA13 Already operable in principle, but would benefit from being confirmed by an interpretive declaration relating to CETA articles 23.3 and 24.4§2

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See also the addendum below.

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Addendum: Towards an expanded role of the DAGs? In response to a first version of this note, it was suggested that the expression of “compliance stage” used in point 19 of the TSD Review should be understood as “the fulfilment of the commitments” and not only as the outcome of a dispute.

This proposal raises some problems: the TSD Review itself defines the compliance stage as “how to monitor the implementation of the report issued by the panel of experts” (p.13). Point 19 in its entirety discusses how to make the compliance phase more binding following a settlement of sustainable development disputes. It does not discuss how to involve DAGs in the compliance of sustainable development chapters, other than in the event of a dispute.

The suggested interpretation in response to the first version of this note, which aims for the close association of DAGs in the implementation of sustainable development chapters, excluding the event of a dispute, agrees with points 12 to 18 of the TSD Review, in reality, and not point 19. These points aim to “reinforce the role of civil society” in the implementation of chapters on sustainable development, work and the environment, independently of any potential dispute.

Via points 12 to 17, the Commission undertakes, in particular, to reinforce the DAGs’ role in the European Union in various ways. Its initiatives do not involve Canada and do not require CETA to be revised in order to be implemented. For point 18, which concerns the extension of the DAGs’ remit beyond TSD, the TSD Review refers explicitly to a desire to duplicate what already exists in the framework of the EU–UK Trade and Cooperation Agreement (TCA) (p.12). Article 13 of this agreement provides for a consultation with the DAGs concerning “all matters covered by the present agreement”.

However, in the framework of CETA, the consultation of DAGs is only provided for for questions relating to work, sustainable development or the environment and falling under chapters 23 and 24 (article 23.8§4 and article 24.13§5). In principle, therefore, to extend the CETA DAGs’ remit beyond TSD, the treaty would need to be amended with a view to inserting a clause similar to that of article 13 in the TCA. Nevertheless, as the Parties are only committed to consulting their DAGs on various matters, nothing prevents them from doing so. Once again, such an approach could be consolidated by a joint unilateral statement by the European Union and Canada.

Nonetheless, the proposals resulting from the EU DAGs non-paper “Strengthening and Improving the Functioning of EU Trade Domestic Advisory Groups” of October 2021 go beyond the TSD Review proposals, asking the European Commission to: - commit to answering DAGs’ recommendations formally and in a reasonable timeframe (recommendation 17); - incorporate, unless justified, DAGs’ priorities into the overall priorities of the EU for the implementation of the TSD chapter (recommendation 19); - provide for more frequent and detailed reporting on the implementation of the TSD chapter to DAGs and the annual FTA implementation report should involve DAGs more in the preparation phase (recommendation 12).

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These proposals are aimed at the Commission and not Canada. Therefore, they do not require a revision of CETA, but rather the Commission's independent commitment.

The non-paper suggests that DAGs should have the right to present their views in TSD Committee meetings and other meetings between the parties of FTAs (recommendation 24).

Article 22.4§4 of CETA simply provides that “the Committee on Trade and Sustainable Development shall present updates on any matter related to this Chapter ... to the Civil Society Forum .... Any view or opinion of the Civil Society Forum shall be presented to the Parties directly, or through the consultative mechanisms” like the DAGs and “the Committee on Trade and Sustainable Development shall report annually on the follow-up to those communications.”

This article is not enough to ensure the DAGs’ participation at Committee on Trade and Sustainable Development meetings. In principle, recommendation 24 of the non-paper should, to make it a requirement, be subjected to an amendment to the treaty. It seems, however, that upon reading the non-paper, more informal arrangements are being developed, such as, in the framework of the EU-Republic of Korea FTA, the participation of the DAG president at TSD Committee meetings.

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