About this case:

• Citation:
  [2022] IESC 44
• Judgment:
  External link
• Court:
  Supreme Court

The seven-judge court was deeply divided in the case and the finding of unconstitutionality was only upheld by a 4-3 majority. However, a 6-1 majority held that certain amendments to the Arbitration Act 2010 would permit ratification without breaching the Constitution. Mr Justice Gerard Hogan outlined that the Irish courts needed to have sufficient powers to refuse to enforce an investor tribunal award.

All seven judges delivered a written decision in the case resulting in 476 total pages. As such, this case report is necessarily limited to outlining the majority view of the court.

Background

In October 2016, the European Union and Canada entered into the EU-Canada Comprehensive Economic Trade Agreement (CETA). While certain provisions of CETA were already in force from September 2017, the full agreement would not enter effect until each member state ratified the agreement. Accordingly, the Government of Ireland proposed to ratify CETA.

CETA was aimed at setting conditions of trade between the EU and Canada, but it included provisions relating to investor protection and dispute resolution under a model known as investor-state dispute settlement (ISDS). ISDS treaties are a common feature of international agreements and allow foreign investors to take action directly against a state.

In the case of CETA, Canadian investors could have recourse to an investor tribunal. This tribunal was an arbitral court which operated separately from the Irish judicial system and pursuant to the UNCITRAL model of arbitration. Crucially, the terms of CETA provided that the tribunals would be able to make binding determinations on State liability in the event of a complaint from Canadian investors. Further, the Joint Committee of CETA could make binding interpretations of the CETA treaty for the purpose of making awards.

The plaintiff, Mr Patrick Costello, was a Green Party TD who opposed the ratification of CETA. The High Court determined that there was no constitutional bar to the ratification of the agreement because the investor tribunals did not form part of, or have direct effect in, the domestic legal system. Instead, it was reasoned that the tribunals only operated at the level of international law and the decisions had no effect in Irish law.

The High Court also determined that the CETA Tribunal was not the administration of justice within the principles set out in McDonald v. Bord na gCon [1965] I.R. 217 and Zalewski v. Workplace Relations Commission [2021] IESC 24.

Mr Costello was granted a leapfrog appeal to the Supreme Court, where six issues were identified that required a determination. These issues included: 1) whether ratification of CETA was necessary for membership of the EU; 2) whether CETA was a breach of Article 15.2 of the Constitution; 3) whether the CETA Tribunal amounted to a parallel jurisdiction or a subtraction of the domestic courts’ jurisdiction contrary to Article 34 of the Constitution.

Further, the court was required to decide 4) whether the automatic enforcement of a CETA award constituted a breach of Article 34; 5) the effect of the interpretative role of the CETA’s Joint Committee and whether this was a breach of Article 15.2; and 6) whether an amendment of the Arbitration Act 2010 to alter the automatic enforcement of awards affected the position on ratification of CETA.

Supreme Court

On the first issue, the court unanimously agreed that the ratification of CETA was not necessitated by membership of the EU. The court accepted the reasoning of Mr Justice Gerard Hogan that it was established that “mixed” trade agreements (such as CETA, where the EU negotiated on behalf of member states) required consent from the individual member states (see Opinion 2/15 (“Singapore”) (Opinion 2/15, EU:C: 2017: 376); CETA Opinion 1/17 (Opinion 1/17, EU: C:2019: 341)).

The most controversial aspect of the appeal related to judicial sovereignty. In her decision, Mr Justice Elizabeth Dunne outlined the provisions of CETA and provided detailed analysis the key decisions of Crotty v An Taoiseach [1987] I.R. 713 and Pringle v. Ireland [2013] 3 I.R.

Ultimately, the majority of the court (Dunne, Charleton, Baker, Hogan JJ) determined that ratification of CETA would breach Article 34 of the Constitution because it involved an impermissible infringement of judicial sovereignty. It was held that the CETA Tribunal would be permitted to make binding decisions which were enforceable under Irish law and these awards could not be challenged before the Irish courts.

Ms Justice Dunne took the view that the CETA Tribunal amounted to either a parallel jurisdiction or a subtraction of jurisdiction from the Irish courts (Zalewski v. Workplace Relations Commission [2021] IESC 24). This issue, coupled with the automatic enforcement of awards in the State, led to the breach of Article 34.

However, a majority of the court (O’Donnell CJ, MacMenamin, Power, Dunne, Baker JJ) held that the interpretation of CETA by the Joint Committee would not infringe the legislative sovereignty (as opposed to judicial sovereignty) of the State. Mr Justice Donal O’Donnell stated that interpretation of the CETA treaties by Tribunals did not amount to legislation. Instead, the making of binding interpretations by the CETA Tribunal was no more than a “procedure designed to preclude the possibility of the development of jurisprudence beyond the scope anticipated by the Parties in the individual treaty provisions”.

Accordingly, the determination of unconstitutionality arose in respect of the CETA Tribunal’s powers to make awards which were automatically enforceable within the State.

In dealing with the issue potential amendments to the Arbitration Act, the court held in a 6-1 majority that the Act could be amended to cure the issues of unconstitutionality. In this regard, the majority agreed with the reasoning of Mr Justice Hogan, who was careful to emphasise that the matter was for the Government and the Oireachtas.

It was suggested that section 25 of the Act required modification or amendment as it was being “pressed into service for a different purpose entirely” under CETA “to give effect on a more or less automatic basis to the decisions of the CETA Tribunal”. It was stated: “This amounts in substance to a considerable broadening of the scope and purpose of s. 25 of the 2010 Act for which there has to be the appropriate legislative base in the manner that Article 15.2.1 of the Constitution requires.”

Mr Justice Hogan held that it was open to the Oireachtas to “spell out in legislative form the defences to the enforcement of such a final judgment of the CETA Tribunal”. In principle, the broadening of domestic defences concerning CETA awards could allow ratification to proceed.

At a minimum, it was said that the automatic enforcement procedure should be replaced with a procedure where the High Court was empowered to refuse to give effect to a CETA award where a) the award materially compromised the constitutional identity of the State or the fundamental principles of the constitutional order or b) the award materially compromised the State’s obligations to give effect to EU law.

Conclusion

The court held that ratification of CETA could not proceed on the basis that it interfered with judicial sovereignty of the State. The unconstitutionality of the CETA procedure could be cured by amending the Arbitration Act 2010.

However, it is necessary to say that each of the seven judges disagreed with one another in some form. For example, both Charleton and Hogan JJ held that CETA allowed awards damages against the State on a strict liability basis, which constituted a breach of legislative sovereignty. Further, Charleton, Baker and Hogan JJ held that ratification would offend Article 5 and the democratic nature of the State by permitting the interpretation and amendment of CETA by the Joint Committee. These propositions were rejected by the majority.

The appeal was allowed.

Costello v. Government of Ireland and Ors. [2022] IESC 44