Patrick Costello, an MP for the governing coalition’s Green Party, challenged the Government’s planned ratification of the EU-Canada Comprehensive Economic and Trade Agreement (CETA). He argued that CETA’s investor-state dispute settlement (ISDS) mechanism interfered with the State’s juridical and legislative sovereignty, and so a referendum must be held.

Over a staggering 476 pages, the seven judges set out varied positions on the issues raised.

‘Almost automatic’ awards’ enforcement breaches juridical soveriegnty

Investor-state disputes are heard by the CETA Tribunal, which may make ‘binding’ awards against the State for breach of the Agreement. CETA awards are treated as arbitral awards either under the New York or ICSID Conventions. While Ireland is a dualist legal system, both Conventions have been incorporated into domestic law under the Arbitration Act 2010. In this framework, ICSID awards enjoy ‘virtually automatic’ enforcability in Ireland (analysis; Hogan J paras. 65-89).

For Justice Hogan, the enforcement of CETA awards through the 2010 act would unconstitutionally broaden that act’s scope. It was intended to give effect to ‘conventional’ arbitral awards, where the State has consented to external dispute resolution in a specific commercial contract. By contrast, CETA submits the State to a general ISDS mechanism under a multilateral treaty.

Three judges (Dunne, Baker, Charleton JJ) underscored that the same set of facts, such as an alleged breach of fair and equitable treatment, may ground a claim against the State under both Irish law and CETA. To pursue a CETA claim, domestic proceedings must be extinguished. Where a Canadian investor chooses this course, the Irish courts would be deprived jurisdiction over that dispute.

For the majority, Justice Dunne (paras. 242-247) concluded that this ‘parallel’ jurisdiction coupled with the ‘near automatic’ enforcability of awards breached the juridical sovereignty of the State.

Opinion 1/17 scrutinised

In its Opinion 1/17, the Court of Justice of the European Union (CJEU) found that the ISDS mechanism does not undermine the autonomy of the EU legal order. Specifically, Article 8.31.2 stipulates that the CETA Tribunal may consider domestic law only ‘as a matter of fact’, according to prevailing domestic interpretations. This satisfied the CJEU that its position as the definitive interpreter of EU law was preserved.

Justices Hogan and Baker (paras. 99-114; 49-69) expressed scepticism that the CETA Tribunal may nonetheless disregard or misinterpret EU or Irish law. In opposition to the CJEU, they criticised the lack of any structures for dialogue between the CETA Tribunal and domestic courts.

Recalling certain textual safeguards, the CJEU concluded that the CETA Tribunal could not call into question the level of public interest protection determined by the EU legislature. Six Irish judges also rejected the Green Party MP’s ‘legislative chill’ arguments, primarily based on the Irish constitutional separation of powers. In that light, some considered it inappropriate for the Irish Supreme Court to even consider potential ‘legislative chill’ (e.g. Dunne J, 249-261).

Union autonomy or Member State Sovereignty?

Some commentators suggest that through its principle of autonomy, the CJEU claims a form of ‘negative jurisdictional’ or ‘external’ sovereignty. The Irish majority approach provides a useful comparator in debates on the nature or extent of such claimed sovereignty, and the Union’s constitutional architecture.

The CJEU emphasised that its abiliy to have the final interpretative word on EU law is paramount to the proper functioning of the Union’s legal order. This claim was essentially satisfied by precluding the CETA Tribunal any jurisdiction to interpret EU law. By contrast, the Irish majority protected a broader power to settle disputes involving the Irish State. The fact that the CETA Tribunal cannot apply Irish law is immaterial to that constitutional prerogative. Justice Hogan, who previously served as Advocate General to the CJEU, stressed that the EU Treaties do not contain provisions analogous to the Irish Constitution’s ‘Article 5 sovereignty clause or… [those relating] to the administration of justice ... or finality of judgements’.

Of course, ‘sovereignty’ remains a somewhat ellusive notion, even within the Irish context. The seven judges broadly agreed that popular sovereignty, and the State’s ability to engage as an equal in internaitonal relations are the most fundamental tenets of Irish sovereignty. Yet, different nuances led to varied findings per issue. Notably, Chief Justice O’Donnell criticised the ‘somewhat rudimentary’ majority view of the majority, as it frustrates Ireland’s ability to take its place among sovereign States in the modern, increasingly interconnected world (paras. 164-165).

Joint Committee - preserving control or undermining democracy?

A minority of three considered the CETA’s Joint Committee’s interpretative powers breached Ireland’s ‘sovereignty clause’.

The Joint Committee may adopt binding interpretations of CETA provisions. This aims to limit the risk of incorrect or unduly expansive interpretations by the Tribunal. While the Joint Committee comprises of EU and Canadian officials only, the European Commission considers it a ‘safety valve’ for national governments. Indeed, Justices Baker and Hogan accepted that intra-EU politics would likely mean EU positions would be adopted by general consensus.

Nonetheless, they considered the possibility for an external body to effectively alter the CETA text without Irish consent or parliamentary input offends the democratic nature of the State. Justice Charleton agreed, and additionally held this ceded legislative sovereignty conferred on the domestic legislature by the Irish people.

Curing the unconstitutionality - legislative amendments

Justice Hogan (Part XIII) proposed that Parliament amend the 2010 Act to empower the courts to refuse to give effect to a CETA award where it materially compromises Irish constitutional identity, fundamental constitutional principles or EU obligations. Notably, this is the first time the Irish Supreme Court employed the term ‘constitutional identity’. Justices Baker and Dunne agreed these legislative amendments would permit CETA ratification.

Three judges (O’Donnell CJ, MacMenamin J, Power J) deemed this unnecessary; Irish courts must always refuse enforcement of any award contrary to constitutional identity or fundamental principles of EU law. Acknowledging their colleagues’ concerns, they concluded that explicitly poviding such grounds for refusal in legislation would ‘strengthen’ the constitutionality of CETA ratification.

Justice Charleton dissented; widening the grounds for refusal to enforce CETA awards would fundamentally contradict the Agreement itself - a course which is impossible under international law. It would also be inconsistent with Ireland’s EU obligations.

It may be a relief that legislative amendment, rather than a referendum, will alleviate the majority’s concerns. Yet, with some Green MPs insisting they will vote against any CETA-related legislative proposal, the political debate is far from over in Ireland.

Overall, the case underscores the immense difficulty in constructing an ISDS mechanism to satisfy Union autonomy and understandings of State sovereignty within and between 27 Member States. 11 Member States are yet to ratify the Agreement.

Note: a summary of the judgments can be found here.