Dr. Oisin Suttle:

I thank the Deputy very much for the question.

I might deal with the view of the Court of Justice of the European Union, CJEU, and the chillingeffect questions separately. With regard to the CJEU's decision on this, as Dr. Fennelly said, the Court of Justice looked at this matter in the context of the EU legal framework and concluded that the treaty was compatible with a number of specific tests in EU law. That decision has been invoked a number of times since as political evidence that this treaty does not interfere with the right to regulate. There are a number of things to say about that. The first is that what the European Court of Justice did in that case was offer its own interpretation of the meaning and effect of the relevant provisions of the treaty. That is worthy of respect. This is the opinion of the Continent's leading jurists so it is certainly not to be set aside readily. However, it is not the opinion of the key decision makers for these purposes because as the Court of Justice recognises in that opinion, the ultimate question of how this treaty should be interpreted will be resolved by the CETA tribunals, that is, those who are appointed to the investor court system. They will not be bound, and the Court of Justice is comfortable with this, by the Court of Justice's interpretation of the treaty. The Court of Justice can give us an informed legal view of how the members of the court think it will be interpreted but they cannot give us confidence or security about how these rules will be applied.

There are reasons to be concerned about the depth to which the Court of Justice interrogated the treaty, particularly around the question of the right to regulate. I will give the members an example. The Court of Justice placed weight on the fact that the treaty includes exceptions by states to policies that are necessary for a number of specific goals, provided that those do not involve arbitrary or unjustifiable discrimination or a disguised restriction. That language is taken directly from the General Agreement on Tariffs and Trade, GATT, so it is World Trade Organization language. We are incorporating into CETA a number of exceptions that we find in WTO law.

If we then look at how those exceptions have been interpreted in the WTO law we find that in fact they are incredibly restrictive. For example, the European Union's regime prohibiting the importation of seal products, especially an animal welfare regime, was found not to fall within those exceptions in the WTO. That included an exception for seal products caught by Inuit communities in traditional ways. The WTO health body essentially said that that is an arbitrary discrimination because it seems as if the same animal welfare issues arise whether the seal is killed by a commercial hunter or by an indigenous hunter so the EU regime falls. The EU then had to try to revise its regime to be compatible with that. That is just one example.

The key point to take from that is that the fact that there is an exception and the fact that there is a reference to a right to regulate does not actually tell us very much. Ultimately, what matters is how these things will be interpreted by the CETA tribunal when the time comes. The Court of Justice cannot tell the members that. I cannot tell them that. Nobody on this court can tell them that because ultimately the proposal is that we establish a tribunal, give it a whole lot of language, much of which is quite evaluative. When exactly is something manifestly arbitrary? I am guessing the members and I would disagree on particular instances. We are then tying our hands and saying that we will comply with what that unknown group of adjudicators in the future will say. They might interpret it in ways that are entirely compatible with a state's right to regulate or they might not, but it is important to put a question mark next to that. I hope that is helpful on the CJEU point.

On the chilling effect point, I have to clarify my remark with regard to the existing chilling effect. The suggestion is not that CETA itself is already having this effect but rather the states already signed up to the energy charter treaty. The energy charter treaty includes analogous rights and remedies but specifically in the energy context.

For example, Italy is currently being sued under the Energy Charter Treaty because it brought in a moratorium on oil and gas exploration and did not include an exception for existing licence holders. Two years later, we brought in a moratorium on oil and gas exploration and we did include an exception. I have no insight into the drafting process or how the Department of the Environment, Climate and Communications does its business but from the outside one would look at that sort of thing and say it is eminently plausible that somebody in the Attorney General's office or the Department said that, given what happened with the Italians, they should probably be fairly cautious in relation to this matter.

The literature shows different ways of trying to map this chilling effect. Ultimately it is a hard thing to pin down because it is built around hypotheticals and trying to work out what governments would have done if it was not the case that this risk was there. Some papers have looked at the tobacco plain packaging issue, which has been very prominent over the past three years and one of them is referenced in the submission I have given the committee. The papers essentially say that we can look at these policies and track when they came in as proposals, whether they are open to be adopted or whether there is a delay in adoption. We can then cross-reference that to what is happening in these high-profile international cases. The suggestion is that there are at least two different ways that this happens. One is through express threats, wherein an investor writes a letter to the relevant regulator saying it does not think the regulator can do this and if it does it can expect the following sorts of consequences. We see international arbitration law firms put this forward in their marketing material as one of the services they can offer. They can help people use these remedies to block or slow down legislation they do not like the look of.

The other way this operates is through the mechanism of internalisation. Effectively, regulators come to think about these risks off their own bat. We see examples of this in Ireland, such as in the way the Constitution has been invoked over the past few years in discussions about housing reform. There is a sense that we cannot adopt long-term rent controls or more secure tenure because the Supreme Court told us 40 years ago that we could not. There has been a very limited willingness to try to push that envelope. CETA is just another set of constraints and, ultimately, threats that are available to investors to try to slow down that sort of regulation. I hope that is helpful.