EUROPEAN COMMISSION Brussels, 11.10.2019 COM(2019) 457 final 2019/0217(NLE) Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the CETA Joint Committee established under the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part as regards the adoption of a decision setting out the administrative and organisational matters regarding the functioning of the Appellate Tribunal



EXPLANATORY MEMORANDUM 1.Subject matter of the proposal This proposal concerns the decision establishing the position to be taken on the Union's behalf in the CETA Joint Committee established under the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part, in connection with the envisaged adoption of a decision setting out the administrative and organisational matters regarding the functioning of the Appellate Tribunal. 2.Context of the proposal 2.1.The Comprehensive Economic and Trade Agreement (CETA) between the European Union and its Member States, of the one part, and Canada, of the other part The Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part (‘the Agreement’) aims to liberalise and facilitate trade and investment, as well as to promote a closer economic relationship between the European Union and Canada (‘the Parties’). The Agreement was signed on 30 October 2016 and has been provisionally applied since 21 September 2017. 2.2.The CETA Joint Committee The CETA Joint Committee is established under Article 26.1 of the Agreement, which provides that the CETA Joint Committee comprises representatives of the European Union and representatives of Canada and is be co-chaired by the Minister for International Trade of Canada and the Member of the European Commission responsible for Trade, or their respective designees. The CETA Joint Committee meets once a year, or at the request of a Party, and agrees on its meeting schedule and its agenda. The CETA Joint Committee is responsible for all questions concerning trade and investment between the Parties and the implementation and application of this Agreement. A Party may refer to the CETA Joint Committee any issue relating to the implementation and interpretation of this Agreement, or any other issue concerning trade and investment between the Parties. In accordance with Article 26.3 of the Agreement, the CETA Joint Committee has the power to make decisions, by mutual consent, in respect of all matters when the Agreement so provides. The decisions made by the CETA Joint Committee are binding on the Parties, subject to the completion of any necessary internal requirements and procedures, and the Parties have to implement them. In accordance with Article 26.2.4 of the Agreement, the specialised committees, including the Committee on Services and Investment, may propose draft decisions for adoption by the CETA Joint Committee. In accordance with Rule 10.2 of the Rules of Procedure of the CETA Joint Committee and of the Specialised Committees, in the period between meetings, the CETA Joint Committee may adopt decisions or recommendations by written procedure if the Parties to the Agreement decide by mutual consent. For that purpose, the text of the proposal will be circulated in writing from the co-chairs to the members of the CETA Joint Committee pursuant to Rule 7, with a time limit within which members will make known any concerns or amendments they wish to make. Adopted proposals will be communicated pursuant to Rule 7 once the time limit has elapsed and recorded in the minutes of the next meeting. 2.3.The envisaged act of the CETA Joint Committee The CETA Joint Committee is to adopt a decision setting out the administrative and organisational matters regarding the functioning of the Appellate Tribunal pursuant to Article 8.28.7 of the Agreement (‘the envisaged act’). Therefore, the purpose of the envisaged act is to implement Article 8.28.7 of the Agreement. The envisaged act will become binding on the Parties. Article 26.3.2 of the Agreement provides: ‘The decisions made by the CETA Joint Committee shall be binding on the Parties, subject to the completion of any necessary internal requirements and procedures, and the Parties shall implement them’. 3.Position to be taken on the Union's behalf As provided in paragraph 6(f) of the Joint Interpretative Instrument on the Agreement, the European Union and its Member States and Canada have agreed to begin immediately further work on the implementation of the provisions on investment dispute resolution of the Agreement, the so-called ‘Investment Court System’. Pursuant to Article 8.28.7 of the Agreement, ‘The CETA Joint Committee shall promptly adopt a decision setting out the following administrative and organisational matters regarding the functioning of the Appellate Tribunal: (a) administrative support; (b) procedures for the initiation and the conduct of appeals, and procedures for referring issues back to the Tribunal for adjustment of the award, as appropriate; (c) procedures for filling a vacancy on the Appellate Tribunal and on a division of the Appellate Tribunal constituted to hear a case; (d) remuneration of the Members of the Appellate Tribunal; (e) provisions related to the costs of appeals; (f) the number of Members of the Appellate Tribunal; and (g) any other elements it determines to be necessary for the effective functioning of the Appellate Tribunal’. Paragraph 6(g) of the Joint Interpretative Instrument on the Agreement provides: ‘CETA is the first agreement to include an Appeal mechanism which will allow the correction of errors and ensure the consistency of the decisions of the Tribunal of first instance’. In addition, Statement No 36 by the Commission and the Council, entered into the Council minutes on the occasion of the adoption by the Council of the decision to authorise the signature of CETA on behalf of the Union, provides: ‘The appeal mechanism laid down in Article 8.28 of the CETA will be organised and improved to render it wholly fit to ensure consistency of decisions rendered at first instance and thus to contribute to legal certainty. This presupposes in particular: The composition of the Appellate Tribunal will be organised so as to ensure the greatest possible continuity. Each member of the Appellate Tribunal will have the obligation to keep informed of decisions by divisions of the Appellate Tribunal of which he or she is not a member. The Appellate Tribunal should have the option to sit as a ‘Grand Chamber’ in cases raising important questions of principle or on which the divisions of the Appellate Tribunal are divided’.

The envisaged act implements these commitments by including detailed rules on the composition of the Appeal Tribunal and administrative arrangements (Article 2 of the envisaged act); and the conduct of appeals (Article 3). The envisaged act will enter into force on the date of entry into force of the Agreement (Article 4). This proposal fits in with other initiatives on the implementation of the CETA Investment Court System. Specifically, since June 2018, the Commission has been working with the Member States in the Trade Policy Committee on Services and Investment of the Council and with Canada on a package of four draft decisions regarding: –rules setting out administrative and organisational matters regarding the functioning of the Appellate Tribunal in accordance with Article 8.28.7 of the Agreement; –a code of conduct for Members of the Tribunal, the Appellate Tribunal and mediators in accordance with Article 8.44.2 of the Agreement; –rules for mediation for use by disputing parties in accordance with Article 8.44.3(c) of the Agreement; and –rules on the procedure for the adoption of interpretations in accordance with Articles 8.31.3 and 8.44.3(a) of the Agreement. Further work on other areas of implementation of the Investment Court System continues, including on the selection, appointment and remuneration of the Members of the Tribunal and Appellate Tribunal. Although the amount of the remuneration of the Members of the Tribunal and Appellate Tribunal is subject to discussions with the Member States and Canada, the Commission has in the past estimated that the annual fixed costs of the CETA Investment Court System would amount to around EUR 800.000, to be divided equally between Canada and the EU. Therefore, the impact of these fixed costs on the EU budget would be of around EUR 400.000 per year. These costs will be factored in the EU budget for 2021. It is therefore appropriate to establish the position to be taken on the Union's behalf in the CETA Joint Committee on the envisaged act in order to ensure the effective implementation of the Agreement. 4.Legal basis 4.1.Procedural legal basis 4.1.1.Principles Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.’ The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the rules of international law governing the body in question. It also includes instruments that do not have a binding effect under international law, but that are ‘capable of decisively influencing the content of the legislation adopted by the EU legislature’. 4.1.2.Application to the present case The CETA Joint Committee is a body set up by an agreement, namely the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part (‘the Agreement’). The act which the CETA Joint Committee is called upon to adopt constitutes an act having legal effects. The envisaged act will be binding on the Parties under international law in accordance with Article 26.3.2 of the Agreement. The envisaged act does not supplement or amend the institutional framework of the Agreement. Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU. 4.2.Substantive legal basis 4.2.1.Principles

The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on the objective and content of the envisaged act in respect of which a position is taken on the Union's behalf. If the envisaged act pursues two aims or has two components and if one of those aims or components is identifiable as the main one, whereas the other is merely incidental, the decision under Article 218(9) TFEU must be founded on a single substantive legal basis, namely that required by the main or predominant aim or component. 4.2.2.Application to the present case The main objective and content of the envisaged act relate to the common commercial policy. Therefore, the substantive legal bases of the proposed decision are Article 207(3) and the first subparagraph of Article 207(4) TFEU. 4.3.Conclusion The legal bases of the proposed decision should be Article 207(3) and the first subparagraph of Article 207(4), in conjunction with Article 218(9) TFEU. 5.Authentic languages and publication of the envisaged act As the act of the CETA Joint Committee will implement the Agreement with respect to the resolution of investment disputes between investors and states, it is appropriate to adopt it in all authentic languages of the Agreement and publish it in the Official Journal of the European Union after its adoption. 2019/0217 (NLE) Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the CETA Joint Committee established under the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part as regards the adoption of a decision setting out the administrative and organisational matters regarding the functioning of the Appellate Tribunal THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207(3) and the first subparagraph of Article 207(4), in conjunction with Article 218(9) thereof, Having regard to the proposal from the European Commission, Whereas: (1)Council Decision (EU) 2017/37 provides for the signing on behalf of the European Union of the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part (‘the Agreement’). The Agreement was signed on 30 October 2016. (2)Council Decision (EU) 2017/38 provides for the provisional application of parts of the Agreement, including the establishment of the CETA Joint Committee. The Agreement has been provisionally applied since 21 September 2017. (3)Pursuant to Article 26.3.1 of the Agreement, the CETA Joint Committee shall, for the purpose of attaining the objectives of this Agreement, have the power to make decisions in respect of all matters when this Agreement so provides. (4)Pursuant to Article 26.3.2 of the Agreement, the decisions made by the CETA Joint Committee shall be binding on the Parties, subject to the completion of any necessary internal requirements and procedures, and the Parties shall implement them.