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Canada is one step closer to ratifying its free trade agreement with European Union. Once implemented, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) deal is expected to:
Provide Canadians with easier access to 28 countries and 500 million consumers in the EU Remove almost 98% of EU tariffs on a wide range of Canadian products (over 98% of Canadian
tariffs) immediately with elimination of 99% of tariffs ultimately on two-way trade Add $12b to Canada’s GDP.
Negotiations between Canada and the 28-member EU began in 2009. An agreement in principle was reached on the comprehensive deal in October 2013.
On 29 February 2016, International Trade Minister Chrystia Freeland announced that the legal review of the text of the agreement by both parties is now complete. As part of the review process, amendments have been made to the agreement in principle draft. These amendments include changes to the Investment chapter to strengthen provisions relating to the right of governments to regulate investments on a public policy basis.
The revised text includes a new article that ensures that the right of a party to regulate for public policy purposes is reserved to all levels of government. The article also ensures the investment protection provisions shall not be interpreted as a commitment from the parties that legal frameworks must remain static. Accordingly, a measure that may negatively affect an investment or
2016 Issue No. 10 3 March 2016
Tax Alert — Canada CETA one step closer to completion
EY Tax Alerts cover significant tax news, developments and changes in legislation that affect Canadian businesses. They act as technical summaries to keep you on top of the latest tax issues. For more information, please contact your EY advisor.
CETA one step closer to completion | 2
affect an investor’s profit expectations will not be inconsistent with the agreement for that reason alone. This is a major change from existing Investor State Dispute Settlement (ISDS) mechanisms such as NAFTA, which European States had feared and had delayed the CETA final text.
Other changes to the ISDS, which allows government laws and regulations to be challenged outside of domestic courts and had become a major sticking point in ongoing negotiations to allow for adoption within the EU States, include:
A move to a permanent investment dispute settlement multinational tribunal; members would beappointed in advance by the parties as opposed to the current ad hoc process with an Investorappointee
A “loser pay “ system to reduce vexatious claims
The tribunal can only apply the principles of the agreement in accordance with customaryinternational law principles
Introduction of a judicial review appeal process based on a “correctness standard” rather than only ona “jurisdictional” basis
A definition of the “indirect expropriation” concept in a separate annex
As a result of these changes, the ISDS will now more closely resemble an international court, thus helping to facilitate the delivery of fair and objective judgments. Under the agreement in principle, investment claims would have been settled by ad hoc panels, with members chosen by the two sides as disputes arose (as is now the case under NAFTA).
As for next steps, prior to implementation, the agreement will have to be translated into French and the EU’s other 21 languages. The Liberal government also intends to start to implement it into domestic law, which requires parliamentary approval and direct legislation as Canada is a dualist nation. This means the government will work with Canadian domestic producers that will be adversely affected (e.g., supply management agricultural industries, food and wine producers) to talk about issues such as compensation in exchange for support.
It is expected the parties will sign CETA later this year and it will enter into force in 2017 after EU country approval and Canadian domestic legislation is passed.
Learn more
For more information, contact your EY or Couzin Taylor advisor or one of the following professionals:
Central
Dalton Albrecht Canadian Leader, Global Trade +1 416 943 3070 | [email protected]
West
Katherine Xilinas +1 604 899 3553 | [email protected]
East
Sylvain Golsse +1 514 879-2643 | [email protected]
CETA one step closer to completion | 3
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