A. Introduction
Investor-state dispute settlement (“ISDS”)—be it institutionalized in the guise of an investment court or ad hoc—is hugely contested worldwide because of its one-dimensional focus on foreign investors.Footnote 1 In Germany, the Magistrates Association posits that “[t]he creation of special courts for certain groups of litigants is the wrong way forward.”Footnote 2 To opponents of ISDS, the whole issue comes down to this: Do foreigners need special remedies? Suffice to say they do not believe so, especially as between Western-type democracies. It is true that ISDS is merely one answer to the controversy over the proper forum for the settlement of investment disputes. The examples of South Africa and Brazil show that there are other ways to enforce investors’ rights. Foreign investors in South Africa are compelled to rely on mediation and the national system,Footnote 3 while Brazil has adopted an ombudsman model.Footnote 4 Many academic experts even propose that “[a]ll private stakeholders (not just foreign investors) should have access to effective surveillance mechanisms regarding the compliance of the signatories with their obligations under these international trade agreements (including obligations on sustainability, environmental, social and health protection).”Footnote 5
The present Article seeks to answer the question of whether ISDS discriminates against national investors. This issue has vexed several national constitutional courts—including the German Federal Constitutional Court and the Court of Justice of the European Union (“ECJ”)—in the context of the ratification of the Comprehensive Economic and Trade Agreement between Canada and the European Union (“CETA”).Footnote 6 The parts of the CETA that come under the exclusive competence of the European Union have been provisionally applied since September 21, 2017, following the consent of the European Parliament.Footnote 7 The provisional application excepts the investor-state dispute resolution mechanism established in Section F of Chapter 8 of the CETA.Footnote 8 The complaints are predicated on the fact that the CETA allows foreign investors to take legal action against the host state but does not provide the same option to host country investors. Only foreigners have legal standing, whereas nationals—those having invested only domestically—are precluded from challenging measures of their own government before the CETA Tribunal.Footnote 9
Whether this amounts to discrimination is disputed. The complainants’ argument is reminiscent of the Calvo doctrine—denying foreign investors any special property enforcement rights outside of the national legal order.Footnote 10 While some commentators assume discrimination,Footnote 11 the French Constitutional Council and the ECJ took the opposite view.Footnote 12 For Lowe, investment protection is discriminatory per se whenever it goes beyond national treatment.Footnote 13 In any event, it is not an issue for international law—which is neutral on this point—but first and foremost a national law problem.Footnote 14 If the protection under international law leads to discrimination in the domestic legal order, then it is for domestic law to remedy this situation, for example, by increasing the level of protection afforded to nationals. The German Federal Court of Justice confirmed that the discrimination of nationals is due to national law, and therefore the alleged discrimination is to be assessed in light of national norms.Footnote 15
Even worse, from the vantage point of national investors, the CETA expressly negates direct effect, which signifies that the CETA cannot “be directly invoked in the domestic legal systems of the Parties.”Footnote 16 Moreover, pursuant to the second paragraph of Article 30.6 of the CETA, “[a] Party shall not provide for a right of action under its domestic law against the other Party on the ground that a measure of the other Party is inconsistent with this Agreement.”Footnote 17 Consequently, nationals are barred from bringing a case against the other Party before a domestic court and against their own government before the CETA Tribunal.Footnote 18 It should be stressed, however, that the problem here is that national investors are unable to have a measure of their own government reviewed, not “a measure of the other Party,” by an international forum.
The cases are argued, in part, on the basis of the principle of equality before the law. Is ISDS, which was designed to promote the international rule of law,Footnote 19 at odds with the principle of equality before the law, which itself forms part of the rule of law?Footnote 20 The principle of equality before the law entails that like cases are treated equally in terms of substance as well as procedure. From this principle, the requirement of equal procedural rights ensues. The Federal Constitutional Court could leave the question of discrimination open in the applications for a preliminary injunction but will have to take a stand in the principal proceedings.Footnote 21 The point made in the CETA complaints is not only of importance to a European constitutional law context. Whether investor-state adjudication is discriminatory by default is a fundamental issue which requires answering before any reform steps relating to ISDS are addressed.Footnote 22
The issue is related to the more general question of whether preferential treatment of foreigners discriminates against nationals. In this regard, the U.S.-Mexico General Claims Commission in Hopkins v. Mexico held as early as 1926:
[I]t not infrequently happens that under the rules of international law applied to controversies of an international aspect a nation is required to accord to aliens broader and more liberal treatment than it accords to its own citizens under its municipal laws…. There is no ground to object that this amounts to a discrimination by a nation against its own citizens in favor of aliens. It is not a question of discrimination, but a question of difference in their respective rights and remedies. The citizens of a nation may enjoy many rights which are withheld from aliens, and, conversely, under international law aliens may enjoy rights and remedies which the nation does not accord to its own citizens.Footnote 23
This ruling of the General Claims Commission is, of course, not binding upon national constitutional courts. Among other things, the standards of review differ. Whereas the objective of international investment law is to protect foreigners, not nationals,Footnote 24 the issue in a constitutional complaint is compliance with the national constitution.
Equality before the law is a constitutional requirement enshrined in many jurisdictions.Footnote 25 Article 14(1) of the International Covenant on Civil and Political Rights (“ICCPR”), for example, provides that “[a]ll persons shall be equal before the courts and tribunals.”Footnote 26 According to the International Court of Justice, “[t]he principle of equality of the parties follows from the requirements of good administration of justice.”Footnote 27 European courts are not unfamiliar with the phenomenon of reverse discrimination, as it can be caused by European Union law itself, which, as a rule, does not capture purely internal situations:Footnote 28 EU foreigners are to be treated more favorably than nationals in the like situation by an EU Member State because, as the case may be, a national rule does not apply to EU foreigners by virtue of the primacy of European Union law.Footnote 29
The national legal orders of EU Member States have responded differently to this phenomenon. In Austria, for instance, the European Convention on Human Rights (“ECHR”) has constitutional status.Footnote 30 The discrimination of nationals is thus reviewed in light of the prohibition of discrimination in Article 14 of the ECHR.Footnote 31 Therefore, if no objective ground of justification can be found, the discrimination will be deemed unconstitutional.Footnote 32 In Germany, reverse discrimination is measured against Article 3(1) of the Basic Law, which ensures equality before the law within the German legal order.Footnote 33 It is contested, however, if Article 3(1) of the Basic Law finds application in constellations when the complaint aims at the removal of unlawful preferential treatment of third parties, such as the elimination of distortions of competition.Footnote 34 In one minority view, Article 3(1) of the Basic Law does not capture reverse discrimination: Each legislature is only held accountable for their respective areas of responsibility—something that is generally accepted—even though Germany, through its participation in the Council, was involved in the making of the European law causing the discrimination of nationals, just as it would be in the case of CETA through its ratification.Footnote 35
In the present instance, the discrimination of nationals would result from an international instrument. If successful, the complaints would sound the death knell not only for the CETA in its present form, but also for the project of the European Union to negotiate a multilateral investment court.Footnote 36
B. Implications of a Veto by the Federal Constitutional Court
I. Impugnability of the Ratification Act
In the German CETA complaint, the Federal Constitutional Court has been called to review the legality of the German ratification act in light of the German constitution, the Basic Law.Footnote 37 A preliminary question is why the ratification act should be impugnable. The starting point is that ratification is subject to national constitutional law. Article 1.1 CETA defines the Member States as “Parties.”Footnote 38 As a mixed agreement, the CETA can only fully enter into force once the European Union and all EU Member States have ratified it.Footnote 39 Since Opinion 2/15, it is clear that ISDS falls within the purview of the EU Member States.Footnote 40
Commensurate with the Bosphorus doctrine of the European Court of Human Rights, the German state would be foreclosed from selling out constitutional rights protection by joining an international legal regime.Footnote 41 This is borne out by the eternity clause in Article 79(3) of the Basic Law, which stipulates that “[a]mendments to this Basic Law affecting … the principles laid down in Articles 1 and 20 shall be inadmissible.” Articles 1 and 20 cover the basic rights—including the principle of equal treatment—and constitutional precepts such as the rule of law and due process. The exercise of external power by the government is thus limited by the basic rights.Footnote 42 As a result, when it comes to passing ratification in Germany, the Federal Constitutional Court is the gatekeeper.
Considering Article 27 of the Vienna Convention on the Law of Treaties (“VCLT”),Footnote 43 the accession already would have to be stopped to avoid a potential conflict of norms. For, externally, Germany would be bound by the CETA after its entry into force, even if the CETA was incompatible with the Basic Law. This legal effect is reinforced by Article 216(2) of the Treaty on the Functioning of the European Union (“TFEU”),Footnote 44 pursuant to which “[a]greements concluded by the Union are binding … on its Member States,” making compliance with the CETA an obligation arising from European Union law as well. For that reason, it is in the legal interest of the applicants to have the ratification act declared incompatible with the Basic Law.Footnote 45
II. Incompatibility with the Basic Law
Should the Federal Constitutional Court disallow accession to CETA, the fallout of such a finding would also have implications for other German international investment agreements, including an envisaged convention for the establishment of a multilateral investment court. On principle, equality before the law does not prescribe a particular outcome but is relativeFootnote 46—for it is the prerogative of the legislature to decide how to correct a found discrimination.Footnote 47 Theoretically, an existing discrimination can be corrected in two ways—by treating the formerly favored group worse or by treating the formerly discriminated-against group better.Footnote 48 According to the ECJ, only the latter applies with regard to double taxation conventions.Footnote 49 The arbitral tribunal in Achmea v. Slovakia (I) opined that “the answer is to extend rights and not to cancel them.”Footnote 50 At this juncture, it should be noted that the Federal Constitutional Court would not be in a position to grant the applicants access to the CETA Tribunal. This would require altering the legal text of the CETA, and hence require the consent of Canada, the European Union, and the other EU Member States. If every investor—foreign and national—was given access to an investment court, this would change the whole nature of investment arbitration. If nationals could take legal action against their own government, the ISDS system would be turned into a forum to protect proprietary rights in general, not unlike a human rights court but confined to property. In this connection, it is worth calling to mind the primary purpose of international investment law: to facilitate the flow of foreign capital.Footnote 51 The only unilateral solution would be, therefore, to withdraw from existing agreements with an ISDS clause and not to join new ones—to the detriment of German overseas investors.Footnote 52
The irony, of course, is that not only did Germany conclude the first bilateral investment treaty (“BIT”) with Pakistan in 1959,Footnote 53 but no other country has concluded more BITs.Footnote 54 The Basic Law was not seen as a hindrance then, nor when the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”)Footnote 55 was ratified by Germany in 1969.Footnote 56
III. Termination of the Provisional Application
In principle, the ratification of a mixed agreement by an EU Member State only concerns matters of the agreement falling within Member State competences—be they exclusive or shared but not yet exercised by the Union within the meaning of Article 2(2) of the TFEU.Footnote 57 This is apparent from the fact that those matters can be decoupled and put in a separate agreement, as is envisioned in the wake of Opinion 2/15 with the standalone investment protection agreements with Singapore and Vietnam. The ECJ held:
The contracting parties to a mixed agreement concluded with third countries are, first, the European Union and, second, the Member States. When such an agreement is negotiated and concluded, each of those parties must act within the framework of the competences which it has while respecting the competences of any other contracting party.Footnote 58
By the same token, the rejection of a mixed agreement by an EU Member State can only affect matters which remain within the competence of the Member States.Footnote 59 Yet, because of the European customs union,Footnote 60 the CETA cannot be terminated unilaterally by one Member State—for example, only for the territory of the Federal Republic of Germany.Footnote 61 A German rejection would therefore prompt the European Union, first, not to ratify it, and second, to terminate its provisional application pursuant to Article 30.7.3(c) of the CETA, which supersedes Article 25(2) of the VCLT.Footnote 62 Accordingly, the Council stated when authorizing the signature of the CETA:
If the ratification of CETA fails permanently and definitively because of a ruling of a constitutional court, or following the completion of other constitutional processes and formal notification by the government of the concerned state, provisional application must be and will be terminated. The necessary steps will be taken in accordance with EU procedures.Footnote 63
As far as the internal EU procedures are concerned, it is disputed if paragraph 5 or paragraph 9 of Article 218 of the TFEU is the proper legal basis to terminate the provisional application.Footnote 64 Be that as it may, both legal bases lead to the same decision-making rule in Article 218(8) of the TFEU.
C. Relevance of the ECJ Ruling in Achmea
Achmea, too, was argued on the basis of Article 18(I) of the TFEU, which prohibits “any discrimination on grounds of nationality” within the remit of the European Treaties.Footnote 65 That provision is binding upon EU Member States.Footnote 66 One question asked in that case was if an intra-EU ISDS mechanism constitutes discrimination because it confers on investors from one Member State “the right to have recourse to international arbitration” against another Member State, “a right not enjoyed by investors from other Member States.”Footnote 67
I. Adverse Effect on the Autonomy of EU Law
The ECJ rejected intra-EU ISDS, not merely in the specific form at issue, but in general.Footnote 68 This is because the argument of the Court—“adverse effect on the autonomy of EU law”—can be generalized.Footnote 69 One of the critical considerations was:
[W]hether an arbitral award made by such a tribunal is, in accordance with Article 19 TEU in particular, subject to review by a court of a Member State, ensuring that the questions of EU law which the tribunal may have to address can be submitted to the Court by means of a reference for a preliminary ruling.Footnote 70
This, of course, would turn the ISDS system on its head. Article 53(1) of the ICSID Convention provides that “[t]he award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention.”Footnote 71 To subject ISDS awards to review by a court of a Member State—and possibly the ECJ if questions of European Union law should arise—would thwart their finality and thus their enforceability.Footnote 72 Additionally, it would also be at variance with “the neutrality and the autonomy of the resolution of investor-State disputes vis-à-vis the judicial systems of the Parties.”Footnote 73 Questions of European Union law will arise because an international investment agreement concluded by the European Union, such as the CETA, forms part of the EU legal orderFootnote 74—making the interpretation of the agreement an interpretive act of European Union law.Footnote 75 The fact remains that European Union law, including ECJ rulings, may violate the agreement, and European Union law may not be invoked as justification for failure to perform that agreement to which the European Union is a party.Footnote 76 The mandate of the ISDS system is to review the lawfulness of a government measure as applied and construed by national authorities, such as domestic courts, in light of investment protection standards.Footnote 77 In the present instance, the measure at issue can be a European Union act or an act of an EU Member State. Contrary to the ECJ,Footnote 78 European Union law is treated by arbitral tribunals as a matter of fact in the process of ascertaining if it breaches the respective international investment agreement.Footnote 79 It is immaterial from an international perspective whether the measure is based on a competence of the European Union or the Member States.Footnote 80 Not implementing arbitral awards, and instead subjecting them to a preliminary ruling procedure, would be inconsistent with Articles 53(1) and 54(1) of the ICSID Convention and Article III of the New York ConventionFootnote 81—depending on the arbitration regime chosen—which stipulate that arbitral awards are enforceable in the domestic legal systems.
That said, the fact that the European Union has also concluded CETA—and not the Member States alone—makes a difference.Footnote 82 In Achmea the ECJ reasoned:
In the present case, however, apart from the fact that the disputes falling within the jurisdiction of the arbitral tribunal referred to in Article 8 of the BIT may relate to the interpretation both of that agreement and of EU law, the possibility of submitting those disputes to a body which is not part of the judicial system of the EU is provided for by an agreement which was concluded not by the EU but by Member States. Article 8 of the BIT is such as to call into question not only the principle of mutual trust between the Member States but also the preservation of the particular nature of the law established by the Treaties, ensured by the preliminary ruling procedure provided for in Article 267 TFEU, and is not therefore compatible with the principle of sincere cooperation ….Footnote 83
As Advocate General Bot pointed out in Opinion 1/17, considerations of mutual trust and sincere cooperation are irrelevant in the relationship with third countries:Footnote 84 “EU law does not require trust in the judicial systems of third States, regardless of the level of reliability of the judicial system in those States.”Footnote 85 The ECJ followed this line of reasoning, thus distinguishing intra-EU ISDS from ISDS with third countries.Footnote 86 Notwithstanding Opinion 1/17, the ECJ—by insisting on safeguarding the preliminary ruling procedure in Article 267 of the TFEU—makes it difficult for the European Union to accept the jurisdiction of international courts outside the EU judicial framework if those courts provide legal standing to individuals.Footnote 87 This is questionable.
II. General Prohibition of Discrimination on Grounds of Nationality
Because it found that an intra-EU ISDS mechanism is not compatible with the autonomy of EU primary law,Footnote 88 the ECJ could leave the question open if such a mechanism is also discriminatory within the meaning of Article 18(I) of the TFEU vis-à-vis other EU investors that do not have access to it. On a related note, unlike the Advocate General,Footnote 89 the European Commission is of the view that intra-EU BITs are discriminatory: “[I]ntra-EU BITs conflict with the principle of non-discrimination among EU investors within the Single Market by conferring rights on a bilateral basis to investors from some Member States only.”Footnote 90 The rights that intra-EU BITs confer are of a procedural nature as well and include the right of “an investor from one Contracting Party to bring proceedings before an arbitral tribunal in the event of a dispute with the other Contracting Party.”Footnote 91 Advocate General Wathelet, by contrast, denying discrimination within the meaning of Article 18(I) of the TFEU, argued that “the fact that the reciprocal rights and obligations created by the BIT apply only to investors from one of the two Contracting Member States is a consequence inherent in the bilateral nature of BITs,” and that ISDS “is not a benefit separable from the remainder of the BIT.”Footnote 92 In the same vein, an arbitral tribunal held that “[t]he fact that, when there is a BIT, such national remedy is replaced or supplemented by an international arbitration mechanism does not … involve any discrimination ….”Footnote 93 Importantly, in Achmea, the problem was that investors from third EU countries could not bring a case and the ensuing issue was whether that amounted to discrimination on grounds of nationality, or in other words, whether Article 18(I) of the TFEU not only guarantees national treatment but also most-favored-nation treatment.
The constellation in casu is different: The complaining investor is a national of the respondent state, so the issue is that nationals cannot institute proceedings against their own government. According to the prevailing view, Article 18(I) of the TFEU does not cover reverse discrimination because it only applies “[w]ithin the scope of application of the Treaties,” that is, cross-border situations.Footnote 94 The ECJ consistently holds that the prohibition of discrimination on grounds of nationality:
[M]ay be invoked only where the case in question comes within the area to which [EU] law applies …. Not only does that conclusion emerge from the wording of those articles, but it also accords with their purpose, which is to assist in the abolition of all obstacles to the establishment of a common market in which the nationals of the Member States may move freely within the territory of those states in order to pursue their economic activities.Footnote 95
On that point, the ECJ ruled in Vatsouras and Koupatantze—which concerned “the withdrawal of basic benefits in favour of job-seekers”—that Article 18(I) of the TFEU “does not preclude national rules which exclude nationals of Member States of the European Union from receipt of social assistance benefits which are granted to nationals of nonmember countries.”Footnote 96
D. Discrimination of Nationals
I. International Law Position
The international law position is encapsulated in the Hopkins case mentioned above: Discrimination of nationals would be unproblematic from the vantage of international law, even if true, just like national constitutional law would not be concerned about foreigners being unable to participate in the political will formation of the host state to the same extent as nationals. If it were different, international law would encroach on national sovereign powers.Footnote 97 It is thus a corollary of the deference shown by international law to national lawmakers to be indifferent to the treatment of nationals, unless that treatment falls below the level of international human rights standards binding upon the states.Footnote 98
In 1926, the arbitral tribunal in the Harry Roberts case coined the proposition that foreigners are entitled to a degree of protection that may well be above the degree afforded to nationals: “[E]quality [of treatment of aliens and nationals] is not the ultimate test of the propriety of the acts of authorities in the light of international law. The test is, broadly speaking, whether aliens are treated in accordance with ordinary standards of civilization.”Footnote 99 This is the very essence of an “international minimum standard.”Footnote 100 The crux of the matter is how domestic law reacts to that.
II. Differential Treatment
1. Comparability: Opinion 1/17
Comparability is a precondition for any claim of discrimination.Footnote 101 The principle of equality before the law purports that the legislature treats as equal what is basically equal and treats as different what is basically different—without predetermining the comparators.Footnote 102 The notion that the legislature is under an obligation to ensure that identical treatment is available to all similarly situated investors is based in this principle.Footnote 103 This makes the formation of relevant comparison groups necessary.Footnote 104 So which is the right comparison: The treatment of national investors as compared to (a) foreign investors in the host state or (b) other nationals investing in the territory of another contracting party? In concreto, are German investors to be compared with Canadians investing in Germany or with fellow Germans investing in Canada?
1.1 Differences Between National and Foreign Investors
The ECJ in Opinion 1/17, among other things, reviewed the compatibility of the CETA investor-state dispute resolution system in light of Articles 20 and 21(2) of the Charter of Fundamental Rights of the European Union. Article 20 of the Charter stipulates equality before the law, and Article 21(2) of the Charter contains the general prohibition of discrimination on grounds of nationality. Yet, because the scope of Article 21(2) is congruent with the scope of Article 18(I) of the TFEU, and, as mentioned above, that provision does not capture the constellation at hand, the analysis pivoted on Article 20 of the Charter.Footnote 105 In this respect, the Court apodictically denied the comparability of foreign and national investors:
Canadian enterprises and natural persons that invest within the Union are … in a situation that is comparable to that of enterprises and natural persons of Member States that invest in Canada, their situation is not, on the other hand, comparable to that of enterprises and natural persons of Member States that invest within the Union.Footnote 106
As noted by Advocate General Bot, foreign investors are “subject to different rules” and have also assumed different risks and costs.Footnote 107 For foreigners it is about opportunity costs.Footnote 108 This finding is borne out by the purpose of Chapter 8 of the CETA, “which is to protect the investors of each Party from the disadvantages that they might suffer by investing in the other Party.”Footnote 109
It is worth recalling that, in connection with Article 3.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights,Footnote 110 the panel in EC—Trademarks and Geographical Indications observed that the proper standard of comparison for purposes of determining discrimination was “the nationals … who seek opportunities with respect to the same type of intellectual property in comparable situations.”Footnote 111 At first blush, both groups—national and foreign investors—are comparable: They may be direct competitors, operate in the same business sector, and even trade in identical products. Nevertheless, foreign investors face risks that national investors do not. By the same token, Advocate General Bot based his argument on the fact that there is a significant difference between investing in one’s own country and a foreign jurisdiction. According to Dolzer and Schreuer, foreign investors often “sink substantial resources into the project at the outset of the investment;”Footnote 112 then “the money sunk into the project at the outset typically cannot be used subsequently at another location because the machinery and installations of the project are specifically designed and tied to the particularities of the project and its location.”Footnote 113 They further stress that “[o]nce … the investor’s resources are sunk into the project, the dynamics of influence and power tend to shift in favour of the host state.”Footnote 114 Foreign investors choose to enter into a new relationship with the host state, while national investors are fully integrated into their home jurisdiction.Footnote 115 Foreign investors, by contrast, are subject to at least two legal orders—the one of the host state as well as the one of their home state.
1.2 Different Normgivers
In the same vein, Article 3(1) of the Basic Law does not apply to situations in which the differential treatment can be ascribed to two legislatures setting different rules.Footnote 116 When Germans invest in Canada, they are subject to Canadian jurisdiction and consequently governed by Canadian law. A violation of the principle of equality before the law, however, presupposes the unequal treatment by the same legislature. The German state, therefore, cannot be held accountable when the Canadian government treats Germans differently than the German government would in the same situation. That it is only a specific subset of nationals that benefit from ISDS—those with overseas investments—is immaterial; nationals with no overseas investment cannot be affected by a breach of Sections C and D of Chapter 8 of the CETA by the other Party in any event.Footnote 117
2. Formally Different Treatment but Equivalent Judicial Relief?
Because the ECJ denied comparability in Opinion 1/17, it could stop at this point. Au contraire, the Advocate General reasoned, in the alternative, that:
[E]ven if Canadian investors who make investments within the European Union and EU investors who make investments within the European Union should be regarded as being in a comparable situation, the fact that only the first category of investors can benefit from the investor-State dispute settlement mechanism established by the CETA is objectively justified ….Footnote 118
Here, the Advocate General skipped one step in his legal analysis. Before addressing justifiability, one could already ask if the different treatment of foreign investors accords an advantage in comparison to national investors. If not, one can deny discrimination on that basis; a justification of the differential treatment would no longer be called for.
Whether a particular case can be heard by a court or tribunal depends on the rules of jurisdiction and the subject matter of the dispute. The scope of the CETA Tribunal is set out in Article 8.18 of the CETA. Notably, market access is non-actionable. Access to the investment tribunal is conditional upon having invested in the territory of the other Party. Thus, Germans can gain access to the Tribunal by investing in Canada, but they could not challenge German government measures, only Canadian ones.
All specialized courts—be they national or international—have, by their nature, access requirements without any assertion that this is at variance with the principle of equality before the law. If a matter does not relate to an employment issue, it could not be brought before the labor courts; conversely, a labor dispute could not be litigated before the family courts, and so on. That a complainant must show legal standing is a procedural requirement widely recognized in national and international law.Footnote 119 Furthermore, a guarantee of multiple instances cannot be derived from Article 3 of the Basic Law; only in criminal procedures does Article 14(5) of the ICCPR assure a review process. In the final analysis, the mere existence of additional—jurisdictional—requirements does not eo ipso lead to the conclusion that national investors are discriminated against.Footnote 120 What matters is the actual position within the legal order.Footnote 121
In line with the German case law on reverse discrimination,Footnote 122 Voss considers reverse discrimination to be legitimate as long as it does not cause competitive distortions in the territory of the host state.Footnote 123 He submitted in relation to tender processes that:
Any preference accorded to some contenders tends to translate into “reverse discrimination” of other contenders…. BIT protection accords protection to beneficiary investors in addition to the protection afforded to domestic investors and foreign investors without BIT protection by the laws of the host country. This is legitimate.Footnote 124
Later on, he maintained that, inter alia, the right to fair competition “militates against developing a protection level under the FET standard which grants BIT protected investors a competitive advantage over their contenders without such protection. Added protection can distort competition.”Footnote 125 From this, it follows that treating national investors formally different from foreign investors does not, in and of itself, violate the principle of equality before the law either.Footnote 126 For having access to different adjudicatory bodies may have no impact on the quality of remedies available.
This begs the question of whether national investors, not being able to use ISDS, have equal chances to get redress as foreign investors do. In other words, does the differential treatment of national investors, as compared to foreign investors, reduce their prospects of justice? If not, such differential treatment is not perforce discriminatory.Footnote 127 As an aside, the Advocate General in the CETA Opinion had little doubt that the law of the European Union and its Member States “contains adequate standards of protection.”Footnote 128 The second sentence of Point 6(a) of the CETA Joint Interpretative Instrument, being an instrument within the meaning of Article 31(2)(b) of the VCLT,Footnote 129 affirms that the “CETA will not result in foreign investors being treated more favourably than domestic investors.”
It bears emphasizing that the issue is if nationals are disadvantaged vis-a-vis foreigners.Footnote 130 To answer this, the problem has to be assessed from different angles, in terms of stages of appeal, remedies, causes of action, length of procedures, and limitations.
2.1 Stages of Appeal
The International Court of Justice, in its Advisory Opinion in Judgment No. 2867 of the Administrative Tribunal of the International Labour Organization, addressed the principle of equality of access to courts and tribunals. Referring to the Human Rights Committee General Comment No. 32 on the Right to Equality before Courts and Tribunals and to a Fair Trial, the Court stressed that “if procedural rights are accorded they must be provided to all the parties unless distinctions can be justified on objective and reasonable grounds.”Footnote 131 With respect to ISDS procedures, it observed that “both parties—and not just one—are able to seek interpretation, revision or annulment of the award.”Footnote 132 What seems to be “key to equality was the same ability to appeal (or to seek annulment) of that initial decision.”Footnote 133
As a preliminary point, it should be noted that it is Canadian law that determines who is a Canadian and German law that determines who is a German, respectively.Footnote 134 That being said, CETA contains a stand-alone definition of an “enterprise of a Party,” making constitution or organization under the laws of the Party, the nationality of which is claimed as the decisive criterion.Footnote 135
As to the German context, both German and foreign investors can take legal action against German government measures before German courts in accordance with Article 19(4) of the Basic Law, which states, in relevant part, as follows: “Should any person’s rights be violated by public authority, he may have recourse to the courts. If no other jurisdiction has been established, recourse shall be to the ordinary courts.” To be able to bring the same case before the CETA Tribunal, however, a foreign investor would have to withdraw or discontinue “any existing proceeding before a tribunal or court under domestic or international law with respect to a measure alleged to constitute a breach referred to in its claim” and waive “its right to initiate any claim or proceeding before a tribunal or court under domestic or international law” with respect to the said measure.Footnote 136 This forecloses parallel proceedings.
Foreign investors, if organized as juridical persons, are precluded from bringing a case before the German constitutional court by virtue of Article 19(3) of the Basic Law, which restricts the invocability of constitutional basic rights, such as the right to property in Article 14 of the Basic Law, to “domestic artificial persons.”Footnote 137 The difference in treatment concerns the forum of litigation—constitutional court instead of investment tribunal—rather than the number of instances available to foreign and national investors. Just as foreign artificial persons do not have access to the constitutional court, nationals do not have access to an investment tribunal. In addition, both groups have access to the European Court of Human Rights given the ECHR’s broad personal scope of application.Footnote 138 Article 1 of the ECHR provides that “[t]he High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section I of this Convention.”Footnote 139
In this context, it should be recalled that the domestic subsidiary of a foreign investor could rely on Article 14 of the Basic Law.Footnote 140 The same is true of individual shareholders.Footnote 141 Under some investment regimes, a subsidiary in the territory of another contracting party can institute investment proceedings against measures of the home state of the holding company.Footnote 142 Under the CETA, the definition of “investor” in Article 8.1 excludes “a branch or a representative office.” Thus, a branch or a representative office is barred from taking legal action against measures of the home state of the parent company. Yet, there is a difference between subsidiary, branch and representative offices in terms of legal status and independence from the parent company.Footnote 143
2.2 Remedies
By the same token, domestic law may make available the same remedies as an international investment agreement. It is a difficult task to compare domestic with international remedies, as litigants are motivated by more than just the money amount awarded.Footnote 144 As indicated by the wording of Article 8.39.1 of the CETA,Footnote 145 the remedies available under the CETA are limited to:
(a) monetary damages and any applicable interest;
(b) restitution of property, in which case the award shall provide that the respondent may pay monetary damages representing the fair market value of the property at the time immediately before the expropriation, or impending expropriation became known, whichever is earlier, and any applicable interest in lieu of restitution ….
In consequence, the reversal of the measure at issue is not possible under the CETA.Footnote 146 Additionally, the CETA Tribunal may order interim measures.Footnote 147
German law provides for compensation in the event of expropriation,Footnote 148 as underpinned by the second sentence of Article 1(1) of the Protocol to the ECHR,Footnote 149 damages in cases of administrative injustice,Footnote 150 and restitution.Footnote 151 Although Germany has quite an elaborate state liability law, the options to claim monetary damages in situations of legislative injustice are restricted.Footnote 152 European Union law, by contrast, provides for non-contractual liability in the event of “any damage caused by its institutions or by its servants in the performance of their duties.”Footnote 153
Hoffmann found that the amount of compensation granted under domestic law is generally lower than what can be achieved under international investment law.Footnote 154 Both the Federal Constitutional Court and the European Court of Human Rights held that compensation may remain below the full market value.Footnote 155 At this juncture, it should be noted that German courts take pertinent rulings of the European Court of Human Rights into account.Footnote 156 Having said that, under German law, the measure at issue can be annulledFootnote 157 or—if the measure is an administrative act or a statutory order—its nullity can be established.Footnote 158 In actuality, commensurate with the principle of primacy of primary legal protection, the measure at issue has to be impugned; the person affected could not acquiesce in the measure and instead claim damages.Footnote 159 The rationale is to preserve the prerogative of the legislature to regulate damages for deprivations of property rights.Footnote 160 Furthermore, the administrative courts may issue a rejected or omitted administrative actFootnote 161 and make interim orders.Footnote 162 Importantly, only the Federal Constitutional Court, which does not hear individual complaints by foreign legal persons, has the power to declare a law unconstitutional.Footnote 163 Moreover, should Germany infringe European Union law, it may incur liability on the following three conditions:
[T]he rule of law infringed must be intended to confer rights on individuals; the infringement must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties ….Footnote 164
Both German law and the CETA provide for derivative actions.Footnote 165 Cognizant that ownership of shares is one of the specific examples of investment in Article 8.1 of the CETA,Footnote 166 derivative actions under the CETA are only available to controlling shareholders.Footnote 167 It follows that minority non-controlling investors have to show “loss or damage as a result of the alleged breach.”Footnote 168 CETA expressly distinguishes between the foreign investor’s loss or damage, on the one hand, and the loss or damage to a locally established enterprise that the investor owns or controls, on the other hand.Footnote 169 This outcome is equivalent to the “no reflective loss” principle in German law.Footnote 170
Taking all into account, the constitutional court may find that national investors are not put at a disadvantage in Germany when compared to foreign investors, as German law equips nationals with more far-reaching remedies—in the form of a rescissory or enforcement action.Footnote 171 We will now turn to the available causes of action, notably fair and equitable treatment (“FET”). Being an idiosyncratic international standard, an FET claim does not exist in domestic law. The arbitral tribunal in Achmea v. Slovakia (I) and the Advocate General in Achmea corroborated that for European Union law.Footnote 172 Yet, perfect congruence is not required to satisfy the requirements of Article 3(1) of the Basic Law.Footnote 173
2.3 Causes of Action
Under the CETA, the FET standard is highly constricted.Footnote 174 The adjectives—“fundamental,” “manifest” and “targeted”—are indicative of high thresholds.Footnote 175 Against this background, Sattorova submits that “the more recent treaties, by virtue of their revised wording [of FET], may come closer to EU law as far as their protective scope is concerned,”Footnote 176 given that a right to good administration derives from Article 41 of the Charter of Fundamental Rights of the European Union. It is, however, confined to “the institutions, bodies, offices and agencies of the Union.”Footnote 177
The several components of the FET standard—encapsulating rule of law principlesFootnote 178—can be found in German law, which is the question here.Footnote 179 For instance, Article 6(1) of the ECHR, which has the status of a statute in Germany,Footnote 180 guarantees a fair trial in civil and criminal proceedings,Footnote 181 which is also a requirement in paragraphs (a) and (b) of Article 8.10.2 of the CETA.Footnote 182 This guarantee is buttressed by the right to an effective remedy before a national authority in Article 13 of the ECHR and the tenet of effective judicial protection in European Union law.Footnote 183 Article 1(3) of the Basic Law stipulates that the “basic rights shall bind the legislature, the executive and the judiciary as directly applicable law,” and Article 20(3) of the Basic Law ensures that “[t]he legislature shall be bound by the constitutional order, the executive and the judiciary by law and justice.” The prohibition of arbitrary state action, as reflected in paragraph (c) of Article 8.10.2 of the CETA, is covered therein as well as in Article 3(1) of the Basic Law.Footnote 184 Article 3(3) of the Basic Law, Article 14 of the ECHRFootnote 185 and the General Act on Equal TreatmentFootnote 186 prohibit discrimination on grounds of gender, race, or religious belief, also found in paragraph (d). Furthermore, national investors are protected from abusive treatment, just like foreign investors are under paragraph (e): The German Criminal Code penalizes the use of “threats or force to cause a person to do, suffer or omit an act”Footnote 187 and contracts made with the government under duress are voidable.Footnote 188 Legal transactions contrary to public policy, which include transactions contrary to basic rights,Footnote 189 are void.Footnote 190 In addition, the German Civil Code proscribes the exercise of a right “if its only possible purpose consists in causing damage to another.”Footnote 191
All of this shows that nationals find equal protections in German law, even exceeding the relatively low standard set by Article 8.10 of the CETA. On top of that, the constitutional rule of law principles are backed up by the requirements of European Union law, for example, as regards legal certaintyFootnote 192 and due process,Footnote 193 which benefit national investors, at least indirectly.Footnote 194
2.4 Length of Procedures and Limitations
Foreign investors’ rights are different, but not necessarily better. Nevertheless, national procedures take considerably longer than ISDS procedures. So foreign investors have a time advantage, as they can go directly to the investment court, provided that they give a waiver pursuant to Article 8.22.1(g) of the CETA. Before domestic artificial persons can go to the constitutional court, they first have to exhaust all other remedies.Footnote 195 Yet, as seen above, the government measure at issue can be annulled and a specific action can be requested under domestic law, which is more than what can be achieved under the CETA. The open question is whether the stronger remedies warrant the lengthy procedures.Footnote 196 What is clear is that complainants would be ill-advised to argue that ISDS is discriminatory because the domestic system is inefficient, something that is the responsibility of the host state to address. For this would provide the perfect justification for ISDS.
Further differences exist as to the limitation of actions. Article 8.19.6 of the CETA provides as follows:
A request for consultations must be submitted within:
(a) three years after the date on which the investor … first acquired or should have first acquired, knowledge of the alleged breach and knowledge that the investor … has incurred loss or damage thereby; or
(b) two years after an investor … ceases to pursue claims or proceedings before a tribunal or court under the law of a Party, or when such proceedings have otherwise ended and, in any event, no later than 10 years after the date on which the investor … first acquired or should have first acquired knowledge of the alleged breach and knowledge that the investor has incurred loss or damage thereby.
In accordance with Section 93 of the Act on the Federal Constitutional Court, the limitation periods for a constitutional complaint are much shorter. For instance, pursuant to paragraph 3 thereof, a constitutional complaint against a law “may only be lodged within one year of the law entering into force ….”
E. Justifiability of Differential Treatment
We found above that nationals are not without effective judicial protection in Germany. Should the Federal Constitutional Court, on the contrary, conclude that the protection provided by German law is not equivalent to the remedies available under the CETA and, as a consequence, find that nationals are disadvantaged (for example, because of the way damages are being assessed or because of different limitation periods), the CETA investment dispute resolution mechanism might still be justifiable. Equality before the law is not an absolute principle.Footnote 197 It is settled case law of the Federal Constitutional Court that Article 3.1 of the Basic Law:
[D]oes not prohibit the legislature from all differentiation. But the legislature violates the fundamental right if in provisions that relate to groups of people it treats one group of persons addressed differently from other persons addressed although there are no differences between the two groups of such a nature and weight that they could justify the unequal treatment ….Footnote 198
A stricter test applies when the differential treatment relates to personal characteristics that cannot be changed easily, along the lines of those mentioned in paragraph 3 of Article 3 of the Basic Law, such as homeland and origin.Footnote 199 The same is true in cases in which the principle of equality of arms is concerned.Footnote 200 In the current instance, the ground of differential treatment is the nationality of the investor.
It is worth recalling here that, under the CETA, holding shares in a company of the other Party would satisfy the definition of “investment” in Article 8.1. Thus, a foreign nationality can be constructed in conformity with the CETA. All things considered, we can summarize that the principle of equality before the law does not preclude lawmakers from treating different groups of investors differently, provided that such differential treatment can be justified by “sufficiently weighty reasons.”Footnote 201
I. Rationale for ISDS
1. Rule of Law Rationale and Access to Justice
The ISDS system, as it exists, was created because national court systems were not deemed adequate by foreign investors. The system addresses, in other words, deficiencies in the administration of justice by national authorities.Footnote 202 Reportedly, problems of partiality and inefficiency do not only prevail in developing countries, especially in politically highly sensitive cases.Footnote 203 Fear of bias led to the establishment of the Chapter 19 mechanism in the North American Free Trade Agreement (“NAFTA”).Footnote 204 Domestic courts apply, and are bound by, ever changing domestic law and therefore cannot remedy any implementation deficits of domestic law,Footnote 205 unless, of course, international law takes precedence over domestic law in the national legal order, such as in the NetherlandsFootnote 206—something that is the absolute exception among the constitutional orders of the world.Footnote 207 As mentioned above, with regard to the CETA, direct effect has been explicitly foreclosed. In the case of China, for instance, foreign investors can no longer take legal action against the Chinese government before domestic courts because a provision to that effect in Chinese administrative procedural lawFootnote 208 was repealed.Footnote 209 On top of that, a national treatment obligation in an international investment agreement would not ordinarily capture procedural aspects. For example, the national treatment obligation in Article 8.6.1 of the CETA is confined to “the establishment, acquisition, expansion, conduct, operation, management, maintenance, use, enjoyment and sale or disposal” of investments.
So all that foreign investors are left with is domestic law, which may be at odds with the investment obligations of the host state, or ISDS.Footnote 210 The Advocate General in Opinion 1/17 acknowledged that: “[T]hat possibility [of being able to bring matters before the CETA Tribunal] merely compensates for the fact that the CETA cannot be relied on directly before the domestic courts and tribunals of the Parties.”Footnote 211 In situations where domestic accountability is wanting, ISDS steps in to hold local rulers accountable and thus upholds the rule of law in lieu of the domestic judicature—the international concept of the rule of law that is.Footnote 212 One might raise the question as to whether political risk insurance would serve the same purpose.Footnote 213 But then again, one could propagate the same—away from judicial protection and toward relief through insurance—in relation to many other types of disputes. Beyond that, ISDS is not infrequently used by foreign investors as a leverage to make governments negotiate an out-of-court settlement.Footnote 214
Even when fully independent, Gundel contends that national judges, adjudicating in the context of state liability on the use of taxpayers’ money for the benefit of foreign investors, are both adjudicators and party members, as is apparent from Article 4(1) of the Articles on State Responsibility:Footnote 215 “The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions ….”Footnote 216
According to the United States Trade Representative, ISDS may be particularly advantageous to small and medium-sized enterprises because they “often lack the resources or expertise to navigate foreign legal systems.”Footnote 217 On that note, the CETA accommodates the interests of small and medium-sized enterprises by reducing their financial burden in different ways, such as by the possibility of holding consultations through videoconferenceFootnote 218 or having the case heard by a sole Member of the Tribunal.Footnote 219 Furthermore, the European Commission envisages “the provision of technical assistance” for small and medium-sized enterprises.Footnote 220
2. Increase of FDI and Depoliticization of Investment Disputes
Whether investment protection actually increases the amount of foreign direct investment (“FDI”) that a particular host state receives is difficult to determine empirically because it hinges on a counterfactual: Would the foreign investor have made the investment even without the legal protection derived from international investment agreements?Footnote 221 Some might, but others might not, depending on their risk-averseness and, in particular, on the role that legal risks—concomitant with investing in another jurisdiction—take in their overall risk assessment.Footnote 222
Lowe maintains that international investment agreements “reassure actual and potential investors …. In the absence of such confidence, investors are likely to take their investments elsewhere.”Footnote 223 Against this, Sornarajah points out that “[t]he correlation between the treaties could not be established in clear terms.”Footnote 224 According to Berger and others, the impact of investment protection on FDI is very much contingent upon the content of the respective agreement.Footnote 225 They concluded that national treatment provisions are more significant than ISDS.
The prevalence of nationality construction might give some indication that international legal protection is a consideration that matters to foreign investors. That said, in 2017, Brazil was the world’s fourth top recipient of FDI, with only one BIT in force (with Angola).Footnote 226 As for Australia, the Productivity Commission found that “[a]n examination of foreign investment trends with Australia’s main foreign investment partners suggests that ISDS provisions are unlikely to have been relevant considerations in the investment decisions of Australian firms investing abroad or foreign firms investing in Australia.”Footnote 227 Still, the European Commission asserts that “[i]nternational investment rules and international investment dispute settlement have a role to play in encouraging and retaining investment.”Footnote 228 By allowing foreign investors to sue European governments, the Commission hopes to attract and retain FDI, which is “vital for ensuring economic growth and jobs in the EU.”Footnote 229 That is a public choice. The rub is this: Should a constitutional court show deference to that choice?
Additionally, whether ISDS also helps depoliticize investment disputes—because it forecloses diplomatic protectionFootnote 230—has recently been put into question,Footnote 231 especially when the home state of the investor and the host state have the authority under the treaty to issue binding interpretations, thereby interfering with ongoing disputes.Footnote 232 Schreuer submits that “[i]nvestor-State arbitration serves not only the investor’s interests but has an important function in the public interest for the relations between the States concerned.”Footnote 233 Even more so, diplomatic protection would not be viable considering the scale of FDI in the twenty-first century.
II. Reciprocity: The Decision of the French Constitutional Council on CETA
When a national legal order does not put foreigners at a disadvantage, ISDS may not be necessary. But that alone does not make it discriminatory against nationals because it could be justified on the basis that it protects national proprietary interests abroad by means of an international investment tribunal. On reciprocity grounds, the same kind of protection would have to be accorded to foreigners in the host jurisdiction.
That, in a nutshell, was the line of reasoning of the French Constitutional Council regarding the issue of whether the CETA investment dispute resolution mechanism conflicts with the principle of equality before the law under the French constitution.Footnote 234 The Constitutional Council held that, as long as foreign investors from all contracting parties have access to the investment tribunal, on a reciprocal basis, no infringement can be found.Footnote 235 The Council, consequently, equated reciprocity with equal treatment. In deciding the case, the Council relied on Point 6(a) of the CETA Joint Interpretative Instrument mentioned above. The second sentence thereof is worth recalling: “CETA will not result in foreign investors being treated more favourably than domestic investors.” This may be true in substantive terms but not necessarily in procedural terms, given that, due to its nature, the Joint Interpretative Instrument cannot diminish express treaty rights, such as the right to bring a claim.
The difference in treatment is, according to the Constitutional Council, justified by the overriding general interest in “creating a protective framework for French investors in Canada and … attracting Canadian investors in France.”Footnote 236 The latter argument was also advanced by the Advocate General in Opinion 1/17.Footnote 237 The situation at hand is comparable to the government offering a lower tax rate to attract businesses from overseas, justified by the prospective jobs and tax revenue that otherwise would not eventuate. Of note, the Constitutional Council compared “Canadian investors and other foreign investors in France.”Footnote 238 This latter point does not hold water as the issue concerns reverse discrimination, not most-favored-nation treatment.
III. Sufficiently Weighty Reason
Having discussed the rationale for investor-state adjudication in general, the pertinent question is whether the CETA mechanism could be justified by overriding reasons of public interest, as opined by the French Constitutional Council and Advocate General Bot. The consideration of allowing Germans that hold investments in Canada to make use of the investment court system might sway the Court. There is no denying that investment arbitration provides a country’s overseas investments with effective legal protection—this is why it is controversial in the first place. If one believes that foreign investors need international law protection,Footnote 239 then that notion encompasses an effective dispute settlement and enforcement mechanism, in keeping with ubi ius ibi remedium.
At this juncture, a word on the protection provided by Canadian law is in order. It is well-known that Canadian constitutional law does not protect property rights.Footnote 240 Nor does the Investment Canada Act of 1985 provide for substantive investment protection.Footnote 241 Then again, common and statutory law in Canada do.Footnote 242 Furthermore, Section 15 of the Canadian Charter of Rights and Freedoms on equality rights, including non-discrimination, only applies to individuals, not to corporations.Footnote 243 It is an open question if the German constitutional court would find that level of property protection sufficient, especially in light of the cases that Canada lost under NAFTA.Footnote 244 A recent study by de Mestral and Morgan examined the issue of “whether disputes submitted by foreign investors against Canada under Chapter 11 [NAFTA] could have been brought under Canadian law” and found that “in the great majority of cases there is no domestic remedy equivalent to one sought under Chapter 11.”Footnote 245 For “Canadian law does not generally provide foreign investors with remedies equivalent to those provided for under Chapter 11.”Footnote 246 In sum, “there exists considerable disparity between Canadian law and the remedies available under NAFTA Chapter 11, as well as within other foreign investment protection agreements.”Footnote 247 In which jurisdiction individual remedies from an international forum are desirable is perforce a political decision to be made by the competent authorities who dispose of the relevant information. With regard to Canada, the European Commission and several Member States pointed out that its law “does not necessarily offer adequate protection to European investors in relation to discrimination or expropriation.”Footnote 248
F. Conclusions
Article 3(1) of the Basic Law accords an ample margin of appreciation to the German legislature.Footnote 249 When the government seeks to improve the legal situation of a particular group of nationals abroad, the principle of equality before the law does not impede that improvement, as long as no nationals are precluded a priori from meeting the requirements necessary to benefit from international law protection—here investing abroad. As emphasized by the French Constitutional Council, foreign investors from all parties have access to the CETA Tribunal as a matter of principle. The different treatment of national investors bears a reasonable relationship to the rational policy of providing German investors in Canada with international legal protection on a reciprocal basis. Depending on the national legal order, investor-state adjudication may not even be discriminatory in cases in which domestic law provides national investors with equivalent legal protection. In this author’s view, this is true of Germany because of the stronger legal position enjoyed by nationals under German law. The principle of equality before the law, as enshrined in Article 3(1) of the Basic Law, does not ensure equal access of nationals to international courts and tribunals; rather, it guarantees equal access to national courts.
Passing the constitutional hurdle set by the principle of equality before the law does not mean that the CETA investment court system will be found compatible with the German constitution. The claim of discrimination is only one of the claims directed against investor-state dispute resolution. In Opinion 1/17, the ECJ found the CETA Tribunals compatible with EU primary law, in particular with the principle of autonomy as laid down in Articles 267 and 344 of the TFEU.Footnote 250 This occurred against the background that, in the past, the Court had rejected the jurisdiction of other courts, such as the European Court of Human Rights and the Unified Patent Court, over matters relating to European Union law.Footnote 251 As a final point, it should be noted that if the investment court system fell through because of an adverse ruling of the Federal Constitutional Court, then we would be left with the existing ISDS system and all its failings.Footnote 252 The existing system would not be directly affected by an adverse ruling. So, whatever the outcome, ISDS is here to stay—in which form, whether institutionalized or not, remains to be seen.
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