A Response to the European Commission’s December 2013 Document “Investment Provisions in the EU-Canada Free Trade Agreement (CETA)”

The International Institute for Sustainable Development (IISD) argues that the draft CETA text often contradicts the European Commission's claims of providing clarity and protecting the right to regulate. The analysis highlights that the 'right to regulate' remains subject to treaty obligations, the Fair and Equitable Treatment (FET) standard remains open to expansive interpretation due to a link to customary international law, and the Most-Favoured Nation (MFN) provision could allow investors to bypass CETA's protections by importing more favourable terms from other treaties. While the report acknowledges improvements in transparency and the handling of indirect expropriation, it concludes that the investor-state dispute settlement (ISDS) mechanism still lacks sufficient safeguards regarding arbitrator independence and legal consistency.

• The draft CETA does not establish an independent right to regulate; instead, any such right is explicitly subordinated to the agreement's obligations.
• The 'general exceptions' clause is considered speculative and potentially problematic because it introduces trade law 'necessity tests' into investment law without a review mechanism like the WTO Appellate Body.
• The Fair and Equitable Treatment (FET) obligation remains unpredictable because the text includes a second prong that allows breaches to be identified based on the 'general practice of States accepted as law' in addition to a specific list of breaches.
• The definition of 'legitimate expectations' within the FET standard is broader than the European Commission claims, using the term 'specific representation' rather than a 'promise' and omitting the requirement that the representation be in writing.
• The definition of 'investment' is an open-ended asset-based approach that may allow for expansive interpretations by tribunals, increasing the risk of host states being sued.
• The agreement includes a provision to prevent 'treaty shopping' by excluding enterprises that have no substantial business activities in the territory of the Party under whose law they are organized.
• The Most-Favoured Nation (MFN) provision could undermine all other drafting clarifications by allowing investors to 'cherry-pick' more favourable provisions from other treaties signed by the host state.
• The proposed roster of arbitrators is viewed as a mere backup rather than a primary safeguard, as the first two arbitrators are still nominated unilaterally by the parties.
• The promised Code of Conduct for arbitrators is not yet finalized and its adoption is postponed by up to two years after the agreement's entry into force, leaving its effectiveness uncertain.
• CETA incorporates the UNCITRAL Rules on Transparency, which is described as a welcome development for openness in arbitral proceedings.

APA

Bernasconi-Osterwalder, N., & Mann, H. (2014). A Response to the European Commission’s December 2013 Document “Investment Provisions in the EU-Canada Free Trade Agreement (CETA)”. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/reponse_eu_ceta.pdf

Chicago

Bernasconi-Osterwalder, Nathalie, and Howard Mann. A Response to the European Commission’s December 2013 Document “Investment Provisions in the EU-Canada Free Trade Agreement (CETA)”. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/reponse_eu_ceta.pdf.

Wikipedia

{{cite report |last1=Bernasconi-Osterwalder |first1=Nathalie |last2=Mann |first2=Howard |title=A Response to the European Commission’s December 2013 Document “Investment Provisions in the EU-Canada Free Trade Agreement (CETA)” |publisher=International Institute for Sustainable Development |date=February 2014 |url=https://www.iisd.org/system/files/publications/reponse_eu_ceta.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bernasconiosterwalder2014response, author = {Bernasconi-Osterwalder, Nathalie and Mann, Howard}, title = {{A Response to the European Commission’s December 2013 Document “Investment Provisions in the EU-Canada Free Trade Agreement (CETA)”}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = feb, url = {https://www.iisd.org/system/files/publications/reponse_eu_ceta.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }