Comprehensive Economic and Trade Agreement: Discussion with Tánaiste and Minister for Enterprise, Trade and Employment

Cuirim fáilte roimh an Tánaiste, an Teachta Varadkar, ar son an choiste. Táimid ag dúil go mór leis an díospóireacht atá ag teacht. The Tánaiste is also Minister for Enterprise, Trade and Employment. I also extend a welcome to his officials.

Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members are reminded of long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirements that members must be physically present within the confines of the place in which Parliament has chosen to sit, namely, Leinster House or the Convention Centre Dublin, to participate in public meetings. I will not permit a member to participate where they are not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any members who are participating via Teams to confirm, prior to making their contributions, that they are on the grounds of the Leinster House campus.

To anyone watching this meeting online, I point out that Oireachtas Members and witnesses are accessing this meeting remotely. Only I, as Chairman, and the necessary staff essential to the running of the meeting are physically present in the committee room.

We have had an intense degree of consultation and exchanges with many groups. I know the members will be interested to hear what the Tánaiste has to say and we are looking forward to the engagement. I call on him to make his opening statement.

I thank the Chairman and members of the committee for the invitation to speak today and for the opportunity to contribute to the committee's consideration of the Comprehensive Economic and Trade Agreement, CETA, the free trade agreement between the EU and Canada.

Ratifying CETA is Government policy and an objective of mine as Minister for Enterprise, Trade and Employment. I welcome the scrutiny and debate but I do not-----

As we are experiencing some feedback, we will suspend briefly.

Sitting suspended at 9.35 a.m. and resumed at 9.36 a.m.

I reiterate that ratifying CETA is Government policy and an objective of mine as Minister for Enterprise, Trade and Employment. While I welcome the scrutiny, I do not want ratification delayed and drifting indefinitely, and for Ireland to have to stand by and watch other member states ratify it ahead of us, as the majority already have. That would send out the wrong message to the world, one of waning commitment to trade and free enterprise in Ireland which would have negative consequences for investment and employment. Ireland should be a leader in Europe in support of free trade.

Unlike other countries, Ireland is not wealthy in natural resources. We did not grow wealthy on the back of colonies. Nobody owes us a basic income. As a country, we owe our relative prosperity to the goods and services produced by our people and our land which we sell around the world. It is a formula that has worked very well. It is based on international trade, our attractiveness as a place to invest and our ability to enter international free trade agreements with other countries. Our position at the heart of Europe, its Single Market and the eurozone is also crucial to this.

This economic model has consistently raised our living standards throughout the decades and created hundreds of thousands of jobs for our citizens. We will depend on that for the recovery. It is the model that can best serve Ireland, the EU and the world as a whole, lifting billions out of extreme poverty in our lifetime. This is the message I conveyed last week to EU trade ministers as we finalise Europe’s trade policy review.

However, Ireland cannot take this for granted. Following the departure of the UK from the European Union, Ireland has an even bigger responsibility to promote the EU’s role as a champion for global free trade and to resist any backward moves towards nationalism or protectionism. Nor can we take for granted the range of free trade agreements we benefit from every day - trade agreements that are negotiated on our behalf by the European Union, as a bloc of 27 countries and 440 million citizens.

Since the provisional application of CETA in 2017, the benefits have been plain to see. Goods exports to Canada increased from €953 million in 2016 to more than €1.7 billion in 2020, an increase of 78%. Services exports grew from €1.6 billion in 2016 to more than €2.3 billion in 2019, an increase of 44%. This all benefits Irish jobs, Irish businesses and Irish tax revenues, which we use to fund our public services and public infrastructure.

The elimination of tariffs, reduced trade barriers and simplified customs procedures and the more compatible technical requirements that flow from CETA make it easier and cheaper for Irish companies of all sizes to trade with Canada.

My Department recently released the results of an independent study by Copenhagen Economics of the potential economic opportunities and impacts for Ireland of the EU's free trade agreements, FTAs, with Canada, South Korea, Mexico and Japan. It found that these four European Union FTAs are forecast to have a positive effect on trade, GDP and national income for Ireland. It goes without saying that the deal with Japan benefits us the most, but that is due to the size of that country and its economy, which is approximately 120 million relative to Canada's 20 million. An important finding is that real wages would increase by up to 4.4% by 2030 as a result of the trade agreements, with the largest increases for low-income workers. This refutes the notion that well-designed free trade agreements exert downward pressure on wages or labour standards when in fact the reverse is true.

As members are aware, the full coming into force of CETA, once ratified across all member states, will see the implementation of the investment chapter of the agreement, including provisions for the resolution of disputes between investors and states should they arise. This has been the area of most controversy. All international agreements have dispute resolution arrangements. They have to. Where such agreements cover not only trade in both goods and services but also investment rules and protections, then there must be some form of dispute resolution mechanism that covers the investments. The EU's new approach to investment protection is the investment court system, ICS, which is contained in CETA and replaces the old investor-state dispute settlement or ISDS mechanism. It is something that we, as Europe, looked for. It was not imposed on us by Canada or anyone else. It is there as much to protect our companies and their workers and to ensure that they are treated fairly and not discriminated against if they trade with China and other countries.

The rights of governments to regulate in the public interest is paramount and I believe this is fully protected under the terms of this agreement and the joint interpretative instrument. Investors may utilise national courts or the ICS but cannot use both or forum shop. Equally, it is important to remember that a Canadian firm can already sue the Government for alleged unfair treatment or discrimination in our courts whether CETA exists or not. In the courts today we see plenty of examples of companies suing the Government and its agencies or the Government and its agencies suing companies. The same will apply to Irish companies that operate in Canada, so it very much works both ways. CETA simply provides an arbitration alternative to using national courts. However, that alternative, unlike a challenge in the courts, cannot find any act by Government to be ultra vires or unconstitutional - it is concerned only with redress if harm is proven. As the ICS tribunal cannot interpret national law or seek to overturn it, there is no question of it overriding national courts or legislatures. Significantly, CETA introduces a precise and specific standard of "fair and equitable treatment" of investors and investments. Therefore, an investor may only have recourse to the investment court system on very specific limited grounds such as in the case of the denial of justice, a fundamental breach of due process, or through targeted discrimination for example on the grounds of race religious belief or gender. None of these rights gives the Government any concern that Ireland would be subject to ICS proceedings. We are not going to discriminate against Canadian companies or treat them unfairly, so we do not anticipate many serious legal challenges. Moreover, it is important to say that under the ICS a state can never be forced to change its legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly under the specific grounds detailed. It is important to make clear that an investor cannot be given compensation just because they have lost profits or suffered economic loss or costs. It is for the investor to prove they were discriminated against and to establish that it incurred losses as a consequence of the discrimination.

CETA reaffirms the EU and Canada's right to regulate to achieve legitimate policy objectives, such as the protection of public health, the environment or consumer protection, meaning policies such as those relating to plain packaging on cigarettes, or minimum alcohol pricing can continue to be introduced. These "right to regulate" provisions are specifically designed to avoid any danger of so-called "regulatory chill". Despite having more trade agreements than ever, we have more regulations than ever and it is pretty obvious that one does not prevent the other.

As part of the finalisation of the agreement, the EU and Canada also agreed a legally binding joint interpretative instrument, JII, that was added to CETA to provide further assurances in relation to public services, labour rights, environmental protection and investment. CETA does not restrict either the EU or Canada from passing new laws in areas of public interest such as the environment, and health and safety nor does CETA affect the Government's scope for developing new laws in response to the needs and priorities of Irish citizens. Importantly, within CETA, both sides agree that more trade and investment should not be at the expense of environmental protection and labour rights. The EU and Canada will not seek competitive advantage through the lowering of standards in any domain. On the contrary, the European Union and Canada are committed to ensuring that CETA helps confirm that economic growth, social development, and environmental protection should go hand in hand as far as is practicable.

As a small, open economy, Ireland has benefited immensely from our export-orientated enterprises trading across the globe and, therefore, we support international trade and the EU free trade agreements that seek to underpin this. Equally, Ireland has been an attractive destination for foreign direct investment, FDI, for many decades and participating in EU third country agreements that cover investment and provide investment protection continue to assist us in marketing Ireland as a competitive FDI-friendly jurisdiction for multinational enterprise to invest with the attendant jobs and prosperity that entails.

As somebody who hopes in the coming months to travel to North America and around the world again to promote Ireland as a place to invest, ratifying CETA is an advantage in that regard. Not doing so may cause some potential investors to have concerns. Taking the foregoing into consideration and given that there can be no doubt that CETA is a progressive, high-standard agreement, I believe that ratifying the agreement, albeit at this late stage, would send a positive message to our trading partners around the world that Ireland continues to be committed to the values of open and fair global trade. I again thank the committee for taking the time to consider the agreement in detail. I hope this process can help us to move towards ratification very soon.

I thank the Tánaiste for coming before the committee. This all comes down to the investment court system that he dealt with substantially. We had a number of legal minds and other experts before the committee. There was some element in the narrative of people moving away from ISDS. Regarding the North American Free Trade Agreement, NAFTA, some of the ISDS-related situations were being negotiated out and the Canada-US-Mexico agreement does not have the same element of that at this point. The French are looking at moving away from the energy charter treaty on the basis of the ISDS provisions within it and the Dutch are being sued currently. The Tánaiste mentioned the fear of being sued on the basis of the legitimate expectation of profits. To a degree, I and others have asked why we would hamper ourselves in this regard and leave ourselves open to a chilling effect.

The Tánaiste stated earlier that Canadian companies currently have the right to go to court in the case of agreements. I contend that we are not a rogue state in terms of our legal system and therefore companies have the option of European or Irish courts. A number of speakers, including members, asked why we would rush into this given the difficulties. A number of major players in Europe are making no moves towards signing up to the ICS.

I am thinking of France and the Netherlands. Why would we sign up to this when elements of the provisions contained within the trade deal are in operation at this point? We are talking about signing up to the ICS, while many trade deals are now being done without that. That does not stop the EU, the UN or whoever coming up with some sort of ICS or dispute resolution mechanism that exists outside of trade deals and could be useful in facilitating business and such. In this case, the fear is the chilling effect and that we will be slower to take action on climate change and all the rest of it. The big example is the fears that have arisen regarding the Energy Charter Treaty.

Fundamentally, there are a few things we need to accept. If one has an investment treaty, one must have some form of dispute resolution system. An investor court system is as good as any and better than an investor-state dispute settlement, ISDS. This will not be renegotiated. It has been ratified by most member states. I would not like Ireland to be the country that holds this up.

It features in other trade deals. There are dispute resolution mechanisms in approximately 2,000 investment treaties. It is in the EU-Mexico deal. If we hold up CETA because of this issue, we will have to hold up the Mexico agreement too. That would be a big mistake and would damage relationships with Mediterranean countries and Latin American countries, in particular. While Canada might resile from aspects of this in the United States-Mexico-Canada Agreement, USMCA, it is signing up to it in the Pacific agreement. It is not going out of fashion. It may in time be replaced by some sort of world trade court, which I would not object to, but I imagine people will make the same arguments against that as they are making against this system.

Governments can always be sued and often the cases I hear people citing in their opposition to CETA have nothing to do with CETA. They are taken under other treaties or national laws. Governments can be and are sued by companies. It does not mean the companies win the cases. Vice versa, governments sue companies. That can be seen in our courts today. On the fear of being sued having a chilling effect, I do not get that argument. One may as well prevent access to the courts or to justice because companies can sue states and states can sue companies.

It is important to say it works both ways. This is there to protect our companies and their workers if they end up in difficulty in Canada. This is something the EU wants and looked for. It was not imposed on us by Canada. We would like this in agreements with other countries, particularly where we have concerns about their court systems. We do not have concerns about the Canadian court system but there are countries around the world where we might be concerned about their court systems and would like to have an alternative mechanism such as this. This is something the EU wants rather than something being imposed on us. We want it to protect our companies, their workers and their owners.

The real advantage for an Irish company investing in Canada is that rather than having to navigate their system which involves many provinces, municipalities and national courts, there is a single mechanism. That is an arbitration panel comprising one Canadian, one European and one independent. The same is true for Canadian companies. Instead of having to navigate 27 countries with different constitutions and legal systems, they can have one system. That promotes investment. It is easier to invest in Europe if there is one mechanism that can be used rather than having to navigate up to 27 different ones.

I heard what was said in terms of the rush. There is no rush whatsoever. The agreement has been around for approximately ten years. It might have been the Fine Gael-Labour Government that signed off on it. Maybe it was not that long ago. We have had another Government and two elections since then. This is not being rushed in the slightest. It is happening really slowly. Of the 27 states in the EU, 15 have ratified this. We are a slow adopter, which is not where Ireland should be. We should be early adopters of trade agreements, not slow ratifiers. Whether it is a UN convention or an international treaty, we should ratify agreements we sign up to quickly. I would have made the same argument about the UN Convention on the Rights of Persons with Disabilities and the Istanbul Convention and was keen to get them done during my period as Taoiseach. I am keen to get this done during my period in this office.

France was mentioned. The Assemblée Nationale in France has ratified this. We are behind them. It has not been ratified by the senate in France but it has been ratified by their lower house. It has also been ratified by the Bundestag in Germany but the vote has been challenged in the courts. So we are even behind countries such as France, which are not seen to be advocates of free trade. We are way behind on this. Far from a rush, we are laggards.

I will pick up on a couple of points the Tánaiste and Deputy Ó Murchú made, elements of which the Tánaiste referred to in his opening remarks. At the meeting in Brussels last week of EU trade ministers, Europe's general trade policy review was discussed. The Tánaiste explained to Deputy Ó Murchú that the majority of member states have ratified this, as have the vast majority of member state parliaments, but there are still elements to go through. Will the Tánaiste give us an insight as to what the overall EU opinion among the 27 member states on this?

Senator Doherty asked me to ask on her behalf what reputational damage is being done to Ireland by the delay in ratification. The Tánaiste pointed out we are laggards in ratification. There has been a theme that certain people have tried to bring into this debate inside and outside of this committee that we do not have to fully ratify CETA, but can take the bits that have been ratified already and forget the ICS. We got clear pushback from Canadian Government representatives in that area when we heard from them. Will the Tánaiste go into the importance of remembering that CETA is an overall package? We-----

(Interruptions).

On the overall approach to CETA, the Tánaiste went into great detail in his opening remarks on the importance of the Canadian market to Europe and Ireland, which is evident. What potential does CETA provide to workers and companies across Ireland? Has the Tánaiste’s Department, in conjunction with Enterprise Ireland or the IDA, identified particular sectors where there is serious opportunity? More generally on Irish and EU trade strategies, how important is it that we, as an open, dynamic trading country, seize the opportunity with new trade deals? Returning to Deputy Doherty’s point, how do we look to the rest of the world? For example, Australia and New Zealand are in their ninth round of negotiations with the EU or Vietnam and Malaysia which are starting off their negotiation with the EU on trade treaties. How do we reassure those future trade partners if, all of a sudden, Ireland, of all member states arguably the most reliant on open international trade and investment, is trying to throw a spanner in the works after more than a decade of discussions about CETA? I recall discussing this in 2014 in the European Committee of the Regions. It was imminent and soon to be a done deal but, seven years later, we are bringing it back to committees for review.

We had a meeting of EU trade ministers last week in Brussels. It was the first time we met in person since Berlin last year and my first time in Brussels since February 2020. It used to be kind of a second home. It was strange to be there again but great to meet up in person. Hopefully, that will be the norm again from now on. We had a very long meeting. It went on all day. CETA did not come up, or, if it did, somebody might have mentioned it in passing.

This is not a hot topic of debate among EU trade ministers because the expectation is that it will be ratified by every member state sooner or later. There is certainly no discussion of it being renegotiated. That is not something I have seen any government seriously propose. Individual politicians or parliamentarians might do so, but not a single one of the 27 member governments has said that. It is quite different from Mercosur where a number of governments, including our own, are saying it needs to be renegotiated to include legally binding and enforceable protections around the environment, afforestation etc. This is not in that space. Not one of the 27 governments is suggesting an annex, renegotiation or protocol or anything like that. Largely, Europe is moving on. The focus of our discussions was China. It was the US-EU trade agenda, trying to get things back on track given the change in administration with the Biden Harris Administration being much more multilateral and open to free trade agreements than the Trump Administration and also WTO reform now the new Director General is in place, and making that work better. That was the focus of the agenda.
The potential for Ireland is considerable, particularly being an English speaking country with a similar culture and business culture to Canada, Ireland will be one of the countries that can benefit the most from increased trade with Canada. The estimate you see from Copenhagen Economics might sound small, 0.2% of GDP, but that is €600 million a year, of which about a third gets to the Government in taxation. It could be worth €200 million a year to Revenue, which is 20% of the mental health budget, to put it in context. When you turn 0.2% of GDP into a cash figure and work out how much of that would come to us in tax, it is actually a considerable amount, and €200 million a year for the Irish State to use on public goods is worth fighting for, to my mind.
Yesterday, the Minster of State, Deputy Troy, launched the first of our free trade round table series which focused on raising the profile of the recent free trade agreements. An online webinar was held in conjunction with Enterprise Ireland which focused on the Canadian market and the benefits arising from CETA for those companies. Some 80 companies joined the webinar, mainly from the ICT area, digital, tech, engineering and consumer products. They are the companies expressing an interest in trading more with Canada. We were trying to help them to do business in the region, make them aware of CETA and its tariff-free benefits and also procurement opportunities. One of CETA's big benefits is that it has opened up public procurement in Canada to Irish companies. It is a campaign we will run through May and June, really focusing on the agreements with Canada, Mexico, Japan and South Korea. There will be a further cycle later in the year looking at other regions that represent further opportunities for Ireland.

As a member of the Government which ratified CETA originally, I was strongly of the view that CETA was in Ireland's interest and worthy of ratification. Since most of the treaty has already been implemented, the obvious benefits for Ireland as a very open trading-focused economy is already self evident. We live or die by trade. We trade more per capita than virtually any country in the world and we support free trade. However, the investment courts system has been focused upon. I have not only listened to every piece of evidence presented but I have also done my own research as has every member of this committee. There are undoubtedly real and substantial issues that we as a Parliament must address.

The Tánaiste, in his presentation, says that dealing with countries like China, we must have a robust dispute resolution system. Of course we do. Every international agreement has to have a dispute resolution system that both parties agree to, but in a trade deal with Canada and the EU there cannot be any doubt that the domestic court systems, the things that the Tánaiste has mentioned occur every day, are both fair, robust and ones that everybody who is party to the agreement can have full confidence in. Nobody has said for a second that any Irish investor could not have full confidence in a determination made by a Canadian court. No Canadian who presented evidence to us has said they could not have full and complete confidence in a decision of an Irish court. The whole mechanism has often been presented as a tool to encourage investors in developing countries where confidence in their court system is lacking but none of that applies in this particular agreement. There may well be situations were we do agreements where there is an arguable case for an external oversight mechanism for disputes outside the domestic dispute resolution systems that are robust, tried, tested and in accordance with our constitutions but I do not see it in the context of this agreement. That is the point on which I have the greatest difficulty.

The committee has had presentations from professors in Ireland and from the University of Amsterdam, for example, citing the individual issue that the Tánaiste has already been alerted to. Among them is that once this is agreed, there will be a lack of oversight available to our Parliament for any rogue decisions made subsequently. We have no legislative control over it once it is done. Therefore the net question is whether we can have CETA without the investment court system, ICS? The Tánaiste's answer to Deputy Richmond was "No", that it is an integrated package. My experience, and I chaired three European Councils, is that where there is a very serious difficulty to be overcome, the flexibility within the EU institutions is extraordinary. I have sat at Council meetings where intractable positions were resolved by clever legal operations. I have no doubt that these things can be resolved if there is determination for it.

It boils down to my last point that we do not want to go there because of the reputational damage it might do. That is a fair point to make but if there is a component part of an agreement that causes us real concern then we have to set it out and see if we can have the agreement without the ICS. I see no difficulty in arguing that case from an Irish perspective.

I agree with Deputy Howlin on a few points. We have no concerns about the domestic court system in Canada and I do not think that Canada has any concerns about the domestic court system in Ireland. I am not sure if that is necessarily the case for every EU country. There are some EU countries which unfortunately do not uphold the kind of legal standards of independence of the courts as we do, and we need to bear that in mind. ICS will work as an arbitration tribunal. One person from Canada, one from the EU and one independent. Before going down this line, a company has to decide if it is going to use the court system or whether it will use the investor court system. They must consult with the Government, mediate and then arbitration occurs. The advantage is that it will be easier for Irish companies in Canada. They might not choose to use the mechanism but if they run into difficulties, in the unlikely event they are being discriminated against or treated unfairly by Canada or a government agency of Canada, they can opt for this system rather than having to navigate different provincial courts, for example. Similarly, for a Canadian company investing in the EU, having this one simple mechanism that they can understand and take part in as an alternative to particular domestic courts, all with different systems and constitutions. It is an advantage in terms of investment and will help to promote investment. Companies will be more likely to invest in the EU and EU companies more likely to invest in Canada if we have this mechanism than if we do not. However, we need to be very clear about what it can and cannot do. Unlike the courts, it cannot overturn or strike down domestic legislation, it cannot decide that anything is ultra vires or unconstitutional. There is no concern about that with this mechanism.

The Deputy stated that sometimes in European politics, if a country is a particular concern or if there is a bottleneck, we get together politically and use our ingenuity to resolve matters. When Ireland initially rejected the Nice and Lisbon treaties, we saw how we could sit around a table and, without changing the treaties much, give reassurances to people that helped the treaties be ratified. I take the Deputy's point in that regard. It is only true to a point, however, and I think we have reached that point because that has been done. The ISDS was changed to an investor court system. We had the hearing of the European Court of Justice, which determined this was consistent with EU values, EU law and EU principles, and there was the joint interpretative instrument, so I think we have already been through that process. Steps can be taken to reassure people and to allay fears, but there is a point at which we can go beyond that. I think we have already reached that point.

As for what would happen if a member state definitively rejected CETA, I am advised that in order to formally communicate the completion of their national procedures, member states are required to officially notify the General Secretariat of the Council. Were a member state to lose a vote on ratifying the terms of CETA, it might choose to engage in a period of discussion regarding the possibility of charting a path forward towards a positive endorsement of the agreement. If a member state were unable to ratify CETA and this represented a permanent and definitive position, it would be obliged to formally notify this to the General Secretariat of the Council prior to any action being required on the part of the Commission. If that were to happen, it would be the first time for any EU trade agreement - I would not like Ireland to be the country to do that - and the Commission would engage with member states regarding the implications. The possibility of termination of the provisional application would arise and could be determined by qualified majority voting, QMV. The idea, therefore, that we have banked the good bit of CETA and that is grand, and that we do not now need to ratify the second bit or try to get it changed, is not entirely true because there is the possibility of the provisional application being terminated, and that would do harm economically.

I thank the Tánaiste for his presentation. In the context of the ratification of the treaty, he mentioned that he would not like it to be delayed indefinitely and that ratification would send out a positive message from Ireland at this time. How quickly would he like it to be ratified? He mentioned that 15 of the 27 member states have already ratified it. As a committee, we are coming to the end of our scrutiny process, although I am not sure what other Oireachtas committees are doing. Moreover, the trade agreement is being provisionally applied. Would the Tánaiste like the Dáil to conclude its deliberations on this matter before the July recess? How urgent does he consider it to be from an Irish point of view?

I accept that the Tánaiste cannot comment on the High Court challenge being taken by Deputy Costello, but is that challenge to the constitutionality of the trade agreement something he considers to be relevant or should we just proceed at a political level? There is potential for a referendum arising out of this process but, having said that, the submissions we have received seem to suggest that it is constitutional. How quickly would the Tánaiste like the Dáil to ratify the agreement?

On the lobbying of the Tánaiste, in his position as Minister, in respect of this issue by Canadian interests or general business interests, has he had many meetings in that regard? Has he been lobbied to any great degree by those interests on the importance of this trade agreement and its ratification?

I would like it to have been done already, when we attempted to put it to a vote in the Dáil last December, but our partners in government wanted to take a bit more time to allow committees such as this to scrutinise it. We were happy to concede to that. I would ideally like it to be put to a vote before the summer recess, and certainly no later than this year. I do not want to go into too much detail on any court cases but I would find it very surprising if the courts found this agreement to be unconstitutional. The ESM treaty was not, so I do not see how something that is less far reaching and does not involve a transfer of sovereignty could be unconstitutional. People have a right to go to court, but I hope they will not impose on the taxpayer the cost of the court cases. I think it would be wrong that the Government would have to pick up the bill for substantial legal fees if the case was defeated. The decent thing for them to do would be to cover the cost of that themselves, or at least to contribute to the cost of it rather than asking the hard-pressed taxpayer to do it or for the money to be taken away from public services, which would be the effect, unfortunately.

I do not recall being lobbied by any Canadian interests but the Minister of State, Deputy Troy, would certainly have met the Canadian ambassador and perhaps Canadian interests too. By lobby, I mean to physically or virtually meet. I get many letters all the time and I do not see them all, as the Deputy knows, so there may have been letters. The Irish business associations have been very much in favour of the treaty and supportive of it, such as the various IBEC associations. They are the ones dealing with Canada, and they know it is in their interest and is good for Irish business and Irish jobs. They also know what signal it could send if Ireland starts to be seen as one of those countries in which the political consensus in favour of free trade is breaking down. That would be a problem.

The chilling effect of that is the effect about which I worry. One good thing we have had in Ireland for decades is that business and investors know that among the major parties, there is a political consensus in favour of the European Union, the Single European Act, the euro and so on. It would be damaging for Ireland if people thought it was drifting away or that there was a move towards more extreme, nationalist ideologies that oppose the Union, the Single European Act and the euro, and that now might start opposing free trade agreements as well. When businesses make investments, they make 30-year investments. If they have a concern nationalistic politics of that sort could take hold in Ireland, they might invest elsewhere.

I thank the Tánaiste. We will move now to questions from non-committee members. I call Deputy Mairéad Farrell first, as she is substituting for Deputy Brady.

I thank the Cathaoirleach for letting me substitute for my colleague. Gabhaim buíochas leis an Tánaiste as teacht os comhair an choiste seo ar an ábhar fíorthábhachtach seo.

It is well known that taxation and regulation are mechanisms used to modify taxpayer behaviour and corporate behaviour, but the presence of the investor court system means that corporations will have recourse to a kind of court to which ordinary people do not have recourse. This has the potential to create a chilling effect whereby policymakers could be and will be hesitant to use the tax and regulatory system to try to change corporate behaviour. This will create significant risks and could place limits on legislators acting in the public interest. It will also mean that the State could incur significant fines or, even where cases are won, large legal fees. I am interested in what the Government has done to examine the financial impact assessment of CETA. Is the Tánaiste concerned about the financial impact it may have?

In regard to the argument on regulatory chill, it is clear in CETA that the Government continues to have the right to regulate. That is specifically directed to allay concerns about regulatory chill. Most investment claims do not challenge the Government's ability to legislate or regulate but are administrative in character.

A Government or State actor would be sued not because it has legislated or regulated, but because it has discriminated against a particular company or investor in the context of a particular licence or permit, or in cases of expropriation. CETA does not restrict the EU or Canada from passing new laws in the public interest, such as in the areas of the environment or health and safety, nor does it affect our scope to develop new laws in response to the needs and priorities of Irish citizens. As I said, the chill effect about which I am concerned is not around our ability to regulate and legislate. The number of free trade agreements is increasing year-on-year and so there is need for more regulations year-on-year. Some people would say we have additional taxes every year notwithstanding that we have more trade agreements every year and more environmental rules. As trade agreements have increased, so, too, have taxes, regulations and protections. I do not see that as a chill. The chill that I am concerned about is an economic one, that is, that Ireland, which has been always a reliable country and supportive of international trade, multilateralism, the EU and the WTO, might be moving away from that path. There could be a fear among investors that the political consensus that we have had in Ireland, which has been always internationalist, pro-European, pro-free trade and pro-enterprise, might be waning and that nationalistic forces might becoming popular again in Ireland. We saw the effect of that type of politics in the 1930s with the economic war. It brought our population down to 2.5 million at one point, until it was reversed by Seán Lemass and others.

On the financial impact, we do not think there will be a financial impact. If there is one, it will be minimal. The Deputy mentioned that we could still face legal fees, but if one wins the case generally legal fees are covered, or most of them are covered. There would only be a financial impact if the Irish Government or an Irish State actor was to discriminate against a Canadian company and that company was able to prove in court that it faced losses as a result of that decision and was then granted compensation as a result. We think that is pretty remote. It is impossible to assess on an econometric basis because there are so many variables and it is so unlikely to occur, but our assessment, applying logic, is that it would be zero or minimal because the Irish State and its agencies are not going to discriminate against Canadian companies and, therefore, they will not be able to prove that we have and, therefore, they will not receive any compensation for any losses.

Deputy Howlin made the valid point that there is a strong case for having these mechanisms when it comes to countries not like Canada. In other words, countries we are less confident about in terms of their legal systems and in their courts acting independently and fairly. One of the reasons the EU wants this in CETA and in the Mexico Agreement is to set a precedent. In negotiations, countries that are not democracies and do not have a courts system like ours, might ask why they should agree to this when it does not apply to other countries. They might take the view that we would be saying we do not trust them and that is why we are demanding that this clause be in a treaty with them, yet we did not say that this should be in a treaty with countries like Canada and Mexico. From a European point of view and from a strategic point of view, as team Europe, we want this included so that when we negotiate with Canada or, for example, countries in the Middle East, we can say this is standard clause that we now have in agreements with democratic partners like Canada and Mexico and we would like to see it in a particular agreement too.

I thank the Tánaiste.

Go raibh maith agat-----

There will be time for supplementaries later. Deputy Whitmore is waiting. Before I call her, I want to let members know that Senator Keogan is participating in the meeting this morning, but as she is not on campus she has submitted her question to me to ask on her behalf. What will be the impact of the ICS on the taxpayer?

It should not have any impact on the taxpayer unless a very the strange situation whereby a Canadian company can prove in court that it has been discriminated against by the Irish Government or one of its agencies. I do not see that arising. As I mentioned earlier, there is a potential very positive impact for the Irish taxpayer in that it is estimated that CETA will grow our GDP by approximately €600 million per annum, one-third of which will accrue to the Government in taxes, which is a benefit of approximately €250 million per annum.

I thank the Tánaiste. Apologies to Deputy Whitmore. I know she was raring to go before I interrupted. I invite to put her questions now.

I thank the Tánaiste for being here for this debate. It is important that we have this debate. The move prior to Christmas to have the vote following a 55-minute debate was the wrong choice. It is important that we have an opportunity to discuss this issue. As part of that discussion the information needs to be on the table so that the public understand what will be voted on. Members, too, need to have that information to enable us to make a considered determination. I understand that the Tánaiste has the economic report and analysis on the FTAs on Ireland, but there does not appear to be a risk analysis in regard to the ratification of the ICS on social or environmental considerations or a quantification of the likelihood of the chilling effect. That type of analysis would add value to this debate.

On the economic report, I understand a member of the public requested it and that the person was told that it could not be released because it was not in the public interest. That kind of discourse feeds into the suspicion around the investor court system, ICS. I would be interested in hearing the Tánaiste's thoughts on the following matter. At a previous meeting of this committee at which the Chair of the Ireland Canada Business Association was in attendance, I asked where I could find a list of the members represented by the association. He declined to tell me who the lobby group represented. This group has lobbied a number of Members of Parliament, including the Minister of State, Deputy Troy, and he has had meetings with the Minister, Deputy Troy. It would be important that as part of this debate we know what companies are represented by this business association. I was surprised that the Chair of the association declined to give us the information. Is that normal or is it something that would be of concern to the Tánaiste?

It is impossible for me to comment on the second question. Under the lobbying Act anyone who carries out lobbying has to declare on whose behalf the lobbying is being carried out. It is a question for SIPO more so than for me. My understanding is that anybody who is lobbying a designated public official, which all of us are, must declare that and state what the purpose of the lobbying was and who they represent. I note Deputy Howlin is nodding. Having drafted the legislation, he might be able to answer the question for us later.

On the risk analysis question, I do not know how we could do a risk analysis on the ICS element of this agreement because the risk is so obviously negligible. A company would have to go to the investor court tribunal and prove that the Irish State or one of its agencies had discriminated against it. The grounds on which discrimination is defined are very clear in CETA. They company would have to prove that it was discriminated against and that it incurred losses as a result and then be granted compensation from the Irish Government or one of its agencies as a result. That is extremely remote. I do not see the Irish State or Irish State agencies discriminating against Canadian companies and them being able to prove that before the three person tribunal. Even if it were true, they could use our domestic courts. I do not see it happening. It is like looking for a dragon under the bed. It seems too remote. I am sure we could get someone to provide an analysis on it, but it seems so obvious.

Some of the experts that we heard from previously gave a considerable list of examples of where this has happened, such as in Romania. A consideration of where the ICS has operated differently from in the previous examples would be useful. In the absence of that type of analysis, we would need to take a precautionary approach on this.

That is because the risks as outlined by many of these experts are so great that we are better off erring on the side of caution. Currently, we benefit from the trade aspects. The signing and ratification only relates to the investment court system. It would be a more risk averse approach to stay with the status quo and not rush into trying to ratify prior to other member states. My thanks to the Tánaiste for his answer.

I understand the argument in favour of a precautionary approach but if we took that approach we would not have signed up to anything. I do not think we would have signed up to the European Court of Justice, which is able to overrule our national courts. That is a more far-reaching action than could ever arise from something like CETA. We would not have signed up to the International Court of Justice. We would not have signed the European Convention on Human Rights. If we took the precautionary approach to any of these things we would not have signed up to them. I do not agree with that argument.

Many of the cases people have put forward have been red herrings. One case that people often mention was in Egypt, where a company took Egypt to court. The suggestion was that the company was suing Egypt because it increased the minimum wage. First, that was misleading. That is not why the company took Egypt to court. It took Egypt to court because there was a clause in the contract providing that it would be compensated for any changes to social charges. The company actually lost the case. Anyone can take a case to court. It does not mean the plaintiff will be successful. I think the case referred to by the Deputy taken against Romania is the Gabriel Resources case. That case is still pending. It is almost a natural extension of the Deputy's argument to say we should take away the right of people to go to court because they might do so.

That is absolutely not the case. What I am saying is that we should allow national courts to provide that arbitration, rather than setting up a secondary or alternative system whereby a corporation can pick and choose which it wishes to use while not affording governments the same right to pick and choose.

My generosity and latitude have been stretched. I have not allowed other members to put supplementary questions. People will get a chance to come in again if we have time at the end. We will move on to Senator Boylan, followed by Senator Higgins.

I welcome the Tánaiste. I find it interesting that the Tánaiste is concerned that a Member of the Oireachtas is taking a legal case. What I see is a threat that the State will pursue the costs. Then, the Tánaiste contradicts himself when he refers to Deputy Whitmore asking whether we should be stopping people from going to court and taking cases. It is also interesting that the investor court system the Tánaiste is advocating in CETA has per diem rates. The cost to the State of defending cases at the ICS will be substantial. That is a point of interest.

I have a "Yes" or "No" question for the Tánaiste. Is it not true that the following countries have not completed the ratification process: France, Germany, Italy, the Netherlands, Portugal, Czech Republic, Poland, Romania, Bulgaria and Hungary, while Cyprus has rejected it? Is this not the case? None of these countries has ratified the agreement. If we do a calculation, then approximately 77% of the population of the EU represented by those countries have decided not to ratify CETA yet.

On 26 March, following the EU-Canada second joint committee meeting, the French Europe minister, Clément Beaune, explicitly said in an interview with the media that his government would not contemplate ratifying CETA until after the presidential elections in 2022. The Tánaiste is saying Ireland is a laggard and that he has no wish to go to North America unless Ireland has ratified it. Yet, the French are content in the sense that they will not ratify this until after the French presidential elections. That is on the basis of their experience with investor-state dispute settlement under the Energy Charter Treaty and Canadian companies. The environment minister there was threatened with a billion euro legal suit by Vermilion, a Canadian oil company. It forced the French ministry to change position. If we are talking about being laggards, it is interesting that the French do not have the same concerns. Given their experience of ISDS, they know that to touch the ratification of CETA would be toxic prior to any election campaign.

I wish to clarify what I said earlier in case I was misunderstood or I misspoke. I would not question the right of any citizen to take a case to court, whether a Deputy, a Senator or otherwise. People and companies are free to go to court and free to seek vindication of their legal rights.

However, I believe there is a decency issue. When people take cases that are unnecessary or unsuccessful, they should not burden the taxpayer or the Irish citizen with the full cost of them. They should be willing to accept some of the costs themselves out of a point of decency, just as a person must when he or she makes a planning objection or when someone applies for a tender or contract and does not get it. The tenderer has to bear the cost of a failed attempt. There is a decency issue for people taking some of these cases. They should at least bear some of the costs if they are unsuccessful rather than impose the costs on Irish citizens and taxpayers. There are better ways to spend taxpayers' money in my view.

There are 27 member states in the European Union. Of those, 15 have ratified and 12 have not. To say "rejected" is incorrect. They have not rejected it. Something not being ratified is not the same thing as rejecting it. Two of the 12-----

I wish to make a point of order. Cyprus has voted against CETA. It has not notified the European Commission but it has rejected it.

Senator Boylan said the majority of countries representing the majority of the population had rejected it. That is not the case.

No, I said that the majority of the population has not ratified it.

It is correct to say they have not ratified it. My thanks to the Senator for clarifying that. Of the 27 countries, 15 have ratified and 12 have not. As I mentioned earlier, the Assemblée Nationale in France, the equivalent of the Dáil, has ratified it. As Senator Boylan said, the French Government intends to ratify it. It is simply a matter of timing. It is for political reasons, as Senator Boylan pointed out, rather than policy reasons. The German Parliament has ratified the agreement - these are the biggest countries in terms of population in Europe - but it is currently stuck in the courts.

I have a view on Ireland when it comes to international agreements and free trade agreements, whether they are on climate or the rights of people with disabilities or trade. We should seek to be among the early adopters and among the first to ratify the agreements. That is the approach I took with the United Nations Convention on the Rights of Persons with Disabilities when getting it through as Taoiseach. I feel the same about the Istanbul Convention and similar agreements. We should not wait to be last or be in the second half of countries. We should not say that simply because a country is slower than us, then it is fine. We should aim to be among the countries first to ratify. That is a matter of opinion. Again, it speaks to my issue of Ireland being seen as a country that is committed to being pro-enterprise, multilateralist and interested in free trade rather than a country that waits until everyone else has done it to ratify. I think that approach sends out the wrong message.

Before I bring in Senator Higgins, Deputy Duffy has indicated and has the floor.

My thanks to the Tánaiste for his statement. It is much appreciated. I found the discourse today informing.

I find myself agreeing with Deputy Howlin's position. It appears that this trade agreement and its benefits for our society outweigh our right to defend ourselves via our national courts. I believe that is a difficult position for many considering some fought hard for our independence and the right to defend ourselves. In that context, the Tánaiste mentioned positive income to the State. Has the Department considered or analysed that benefit relative to the potential litigation against us?

Sorry, I did not quite get the question. Can Deputy Duffy give it to me again?

The Tánaiste mentioned €600 million earlier. I believe €200 million of that would come into the State coffers.

In the context of litigation, which was mentioned earlier, has the Department or the State analysed the potential of litigation and the difference between what we gain over what we might have to pay out? It is better for society if we are more affluent but the cost of that is giving up part of our sovereignty to allow others to make decisions on litigation.

The sums of €600 million and €200 million are ballpark figures based on the Copenhagen estimate that it will increase our GDP by 0.2% between now and 2030. It is not possible to estimate the potential cost because then one has to start imagining cases that could be successful. One would have to imagine all cases of discrimination causing harm that could be successful that would get through the ICS but that would not have got through the national courts. To me, it is minimal or zero. To get compensation from the State, a company has to prove that it is being discriminated against and it has incurred losses as a result. It then gets compensation and that is the cost to the State. It also has to be proven that the company would not have achieved the same result had it gone through the national courts. One can imagine all sorts of scenarios where it would be different but they would be imagined. I do not see how it could calculate that.

I am advised by my officials that Cyprus has not notified its rejection. The negative parliamentary vote was about the halloumi cheese issue and geographical indicators. It is believed that can be resolved. No country has notified its rejection.

The Tánaiste mentioned there is more regulation all the time and there are still many trade agreements. However, as there is more regulation, particularly in the area of the environment, more cases are taken by investors for compensation in respect of that investment. Some 80% of investor claims have been taken in the past 15 years. The number has increased year-on-year. As we have more regulation, there is a relevant factor, so that where there is more regulation, we see more cases taken. That has been acknowledged by the European Commission in respect of the energy charter.

I have been on the board of a very small company and we conduct a risk analysis. Of course, it is about imagining scenarios. Frankly, the idea that the Department of Enterprise, Trade and Employment has not conducted a risk analysis is cause of concern for everyone. Something that could be considered in that is a risk analysis on the legal cost. Even the infamous Phillip Morris case, where Australia won, it paid a €12 million legal fee. We spoke of the decency principle but the fact is countries pay large costs even when they win. Then there is risk analysis on areas of policy where we may have exposed ourselves. One of the grounds for claims of unfair and inequitable treatment is under Article 10.2 of CETA where representations have been made to investors to induce investment leading them to have a legitimate expectation of operating in a particular area. A very clear example might be REITs, which have been encouraged to invest in a certain way in property, as well as many others who have been encouraged and supported. What is regarded as encouragement and inducement in case law under ISDS is often as simple as giving planning permission, giving a grant or a meeting with a representative body of the State. These can be regarded as creating legitimate expectation and then creating a vulnerability when regulations in that area are changed to a claim for compensation. We need to be really clear. No one is talking about whether the State can regulate; that is not the question. The question is: when the State regulates, is a potential liability added by this ICS for compensation in respect of companies that feel they have been unfairly or inequitably treated? The Tánaiste indicated that we do not need to worry because we will not discriminate. Is he telling us that all policies in these areas where there are investors from Canada will be examined and that we will ensure that we form those policies in a way that will not leave us vulnerable to cases being taken? Is that why he is confident we will not discriminate? Is it because the Department has conducted a full review of our exposure to investors and such things we have done that may constitute inducement?

It is correct that there are arbitration mechanisms in all trade deals but it is also the case that increasingly those arbitration mechanisms are solely between the parties, that is, the countries or blocs, not private investors. In the UK-EU deal. there is arbitration between the UK and EU. In the new deal between Canada, the US and Mexico, there is a very limited access for investors to arbitration mechanisms. One reason for this is internationalism, because there is increasing realisation that Europe shares international goals with Canada regarding climate, sustainability and so on, and they could be undermined when an individual company that does not have to share those values decides to take a case in respect of its interests. In that context, is the Tánaiste concerned that there may be diplomatic or international damage if an Irish company were, for example, to sue Canada for taking an action that damaged the company's interests and that the company might have thought was unfair, but that was in line with our collective international goals in areas such as climate?

I am asking explicitly around discrimination and what mechanisms will be in place to anticipate and look at questions about whether there might be discrimination and the risk assessments that might be taken.

One of the Senator's points is very valid, which is more cases are being taken with respect to environmental and other regulations, not only by companies but also NGOs. However, people, NGOs and companies have the right to sue. The question is whether they are successful.

The risk analysis is as I described it. We can write that up if the Senator wishes. Essentially, we are saying the risk is minimal to zero. It is never possible to know for sure because it is impossible to imagine every scenario but because of the reasons I explained, that is our belief. We can certainly write it up.

To clarify, I was asking about what the process will be to assess whether there is a risk of a case being taken for unfair and inequitable treatment in respect of a policy.

On NGOs and companies, everybody can take a case in our courts. Under CETA, only companies may take a case. There seems to be a bit of a contrast where the climate Bill has an explicit clause limiting liability in respect of inaction on environmental matters yet, at the same time, we propose to bring in a new financial liability in respect of CETA. We are treating NGOs and companies quite differently. We are trying to take financial leverage from one and give it to the other.

They are very different issues and that is a little disingenuous. This will be a scenario whereby an investor is discriminated against and loses out. An NGO claiming losses on behalf of someone else or society in general is very different from a legal entity like a company or even an individual claiming that they incurred losses themselves.

The Senator asked whether there was a risk of the State being sued if it was to change its regulations or rules mid-stream-----

I asked what the process will be to assess whether there is a risk relating to new areas of policy and new legislation.

I am not sure what the process would be. Is there a risk? Of course there is. If the State or a government changes its regulation or rules mid-stream, can it be sued? Of course it can and it has been sued. The State is sued from time to time when it changes its rules or regulations mid-stream or mid-process but is that risk higher because of an ICS? I do not think so because the same company or entity could take the State to the national courts. Is there a higher risk? I do not think so.

Does the Tánaiste not agree that a national court is required to interpret other aspects of the law, for example, to balance environmental law against the financial concerns of those seeking compensation, but as the Tánaiste described very eloquently, an investor arbitration court is solely concerned with the compensation question? In that regard, it is very different, which is why companies go for investor courts. Investor courts will not consider the rights of the child or whatever other considerations a national court would balance in determining an outcome.

The Tánaiste mentioned changing things mid-stream and said companies make 30-year investments. Is he suggesting that when a company has made a 20 or 30-year investment based on certain expectations and a State policy in that area is changed within that 20 or 30-year period, that is the State changing policy mid-stream? I would be very concerned that we might be tied in to the expectations a company had at its point of investment.

One point the Senator is missing is that it must be discriminatory. It is not a case of the State changing its rules or bringing in new public health restrictions or new environmental laws. The company would have to prove it had been specifically discriminated against.

It simply has to prove that it was treated unfairly or inequitably. Discriminatory treatment is only one part of the criteria. In fact, unfair and inequitable treatment is a moveable feast. It can be changed under CETA and new elements can be added to it, but one of the areas in Article 8.10.2 is that in deciding whether a company has been treated unfairly or inequitably, the question of inducements arises. Will the Tánaiste tell me whether the Government has analysed whether State planning permissions, State investment, as we have learned in some areas, State meetings with representative bodies, and other such State encouragements for companies to invest may be constituted as having given reasonable expectation? That is part of the risk analysis.

The Senator came back in and asked the question in different ways. Will she give the Tánaiste space to respond because a number of members have supplementary questions as well?

I will not intervene again.

To be very clear, it is always open and should always be open to states to change their rules and regulations if they believe it is in the public interest to do so. I have been a member of three governments and have done that regularly. Notwithstanding that, a policy certainty is good for business. If a business is making a long-term investment, it wants to be aware of that, so any time we change the rules, we must take the effect of that into account. We have to balance those considerations.

It might be helpful to state what is actually in the agreement. It is very clear in my mind. It says that a party breaches the obligation of fair and equitable treatment if a measure or series of measures constitutes a denial of justice in criminal, civil or administrative proceedings or a fundamental breach of due process, including a fundamental breach of transparency in judicial and administrative proceedings, so a company has to get over a very high bar to prove it has been mistreated. Again, it says in the agreement for certainty that the mere fact a party regulates, including through modification of its laws, in a manner that negatively affects an investment or interferes with an investor's expectations, including its expectations of profits, does not amount to a breach of an obligation under this section, so I think there are very clear protections and there is a very high bar for companies.

We have a number of supplementary requests. Can I impress on everybody the need to be as brief and specific as possible because the Tánaiste will respond to the question? Will speakers just ask their questions? I will allow them back in again but if they could be very specific and brief, I would appreciate it.

On some level, my question is a follow up from earlier. Some of the commentary relates to the flexibility referred to by Deputy Howlin and just continuing with provisional application. There has already been a fair amount of conversation about where ratification is and is not. A considerable number of states have not ratified it while others have difficulties with it. I cannot see the logic of us hamstringing ourselves. We will leave ourselves open to the legitimate expectation of profits for companies. We have already introduced a fair amount of legislation and will have to introduce far more in the area of climate change. We do not need the fear of being sued affecting things. I do not see why we would go ahead of other states, who are going to wait before they do anything, at this time. Will the Tánaiste address what Deputy Howlin said, which is that the EU is particularly adept at offering flexibility? At the end of the day, we all accept and the Tánaiste has stated himself that, in respect of Ireland and Canada, there are no difficulties relating to the legal framework that is open to people.

Often the value of detailed scrutiny of issues like this is that whenever everything gets teased out, we get to a point where we have a fundamental difference of opinion and we disagree. That is when we put it to a vote. My view is the best strategic position for Ireland to take is to be early adopters of international agreements to which we have signed up and that we believe to be in our interests. The "wait and see" argument made by the Deputy is one anyone could make about any international agreement - "let's be the last person to sign up". That is not my philosophy and I do not think it should be our national policy or philosophy. I think we should be a small country that is out there and is part of Europe and the world and that when we sign an agreement or convention, we should be the ones to sign up to and ratify it quickly. That is in our interests. I appreciate that the Deputy and I have fundamentally different views on that.

I think we can agree on that.

I thank the Tánaiste for a most helpful interaction this morning. It has been of great assistance to the committee. I want to deal with one issue I am still concerned we have not dealt with enough, which is the chilling effect many people have presented to us regarding regulation. I looked again at the chapter on investment and regulation measures. Certainly CETA does, as the Tánaiste says, reaffirm the right of states to regulate for legitimate policy objectives such as public health, environment, safety and so on. It goes on to say it can take account of an investor's profit expectations arising from its interactions with the state or statutory bodies.

I want to be careful in what I say about this. With regard to our public-private partnership programme, a particular company frequently resorted to the courts. In my judgement, our experience with this company had a real and demonstrable impact on other companies tendering for business.

I am referring to the circumstances that would arise if there were in the public system a notion that certain things could not be done because it would mean ending up in court. Can the Tánaiste assure us that the chilling effect whereby people avoid doing things for fear of being drawn before some international tribunal, which effect is very hard to quantify and see, will be addressed because it has an impact on public policy formation?

As I might have said before, the joint interpretive instrument was included specifically to set out the right to regulate in social and environmental areas. It is always the case that states and companies can end up in court. I believe I know the example the Deputy is thinking about. That has nothing to do with any international treaties but it is always the case that companies and states can end up facing each other in court. Of course, that could have a chilling effect, deter investment or deter people from tendering. It is a question of whether the inclusion of this additional mechanism, an investment court system, makes it better or worse. I believe it makes it better because there is a clear system that companies can use. It involves a panel of three people: one for Canada, one for the UK and one independent. It is an alternative mechanism and is very difficult from what could be a much more complicated and difficult process, namely the process of trying to get through different courts in different legal systems, whether it is across Canadian provinces or EU states. The risk exists. It is a matter of whether the existing mechanism, this arbitration and mediation option, makes it better or worse. I believe it alleviates the problem and makes things better.

With regard to the process for CETA and the argument that it is somehow being rushed, it was in negotiation for eight years and was agreed in 2016 with the joint interpretive instrument. It was approved by the European Parliament and the 15 member states in 2017. This was sorted out already. One gets one shot at allaying concerns, as was done after the ratification of the Nice and Lisbon treaties. We have already been beyond that process with CETA. That was done through the joint interpretive instrument and the ECJ ruling. I do not believe we can go back again. It would be like rejecting Lisbon twice, or at least twice. One would get a very different answer.

The Minister replied to me earlier in terms of internationalism. Let me be very clear: I am an internationalist. My concerns are specifically about the investor court system and the fact that companies will have access to a court that ordinary people do not have access to. It is astounding that there has been no risk analysis of the financial impact of this. The Tánaiste is saying there cannot be econometric analysis due to the many variables. Although I came late to this, I understand he is referring to the financial benefit that would be created for the country. I find it astounding that there would not be a risk analysis of the financial impact. One of the core components of behavioural finance is the concept of overconfidence bias. Does the Tánaiste believe there is potential for overconfident bias regarding the impact if there has not been a risk analysis of the financial impact?

I accept that the Deputy is an internationalist but there are different ways in which people define themselves when they use the term "internationalist". While I do not know about the Deputy, her party has certainly voted and campaigned against every single EU treaty, including the Single European Act, the Maastricht treaty, the Lisbon treaty and the fiscal treaty. To me, the European Union and European integration comprise one of the greatest acts of internationalism in recent history. Being against those would not be internationalist. This is not the only trade treaty the Deputy is opposed to so I do not believe it is just down to the investor court system. I believe there is a wider philosophical objection to multilateralism at play. The investor court system is just the one that is arising at the moment.

On risk analysis, I appreciate the Deputy is pressing me on this question. She is asking it time and again, which is fine, but I cannot really give a different answer. We do not have a difficulty in writing up what I have mentioned as a risk analysis but our view is that the risk is minimal to zero, precisely because we would have to identify potential cases that would be successful in an investor court system but not in the national courts. We just do not see-----

Does the Tánaiste believe there could be overconfidence bias?

There can always be bias, so the answer is "Yes".

It is specifically overconfidence bias, as per behavioural finance, that is of concern to me. The Tánaiste makes his point based on logic but it is very clear that there are biases. While the Tánaiste may disagree with my concerns and I may disagree with his view on benefits, we must, if we are to deal with this, because it is of such importance, realise that the fact that no analysis has been done is an issue. While I understand what the Tánaiste is saying about variables and so on, some kind of risk analysis of the financial impact must be done. We may have different opinions as to the benefits, and either of us could be proven right, but I am very concerned that if there is no risk analysis we will be basing the whole approach on overconfidence bias.

I thank the Deputy. I withdraw my "Yes" because I am not exactly sure what she means by “overconfidence bias” in this context. Of course people can always be biased. I can and everyone can, and anyone doing the analysis could also be biased.

I will go back to what Deputy Howlin was talking about, that is, the genuine fear of regulatory chill. The Tánaiste gave the example of Egypt and stated the case was won in the end. The problem was that the workers did not get a pay rise for several years while the court case was ongoing. The same applies to New Zealand. As a former doctor, the Tánaiste will appreciate that New Zealand and Australia withheld the introduction of plain packaging while the court case went ahead.

Let me give an example of regulatory chill at home. Maybe the Tánaiste can rule this out for us. The programme for Government contained a commitment to ban the importation of liquified natural gas, LNG, at Shannon. It was previously on a list of projects of common interest, PCIs, of the European Commission. The Government removed its support for the initiative from the PCI list but it remains on the PCI list until September. The Minister for the Environment, Climate and Communications released a policy statement on a ban on the importation of fracked gas last week. He said the Attorney General said it would not be compatible with EU law for the State to ban LNG importation. The Irish Centre for Human Rights at NUI Galway has a legal opinion that clearly contradicts that. Information I have from the European Parliament's research service states Article 194 of the Treaty on the Functioning of the European Union indicates that member states choose the conditions for exploiting their energy resources and which energy sources they use so they can, therefore, ban particular fossil fuels and structures if they so decide to. Can the Tánaiste confirm categorically that the Energy Charter Treaty was not part of the Attorney General’s opinion concerning why we are now going ahead with what was in the programme for Government, which was a ban on LNG importation?

Under the Energy Charter Treaty, in respect of which the Tánaiste keeps referring to fair and equitable treatment, 62% of the investor cases have been taken based on fair and equitable treatment. Is it not true that the chance of winning a case is far greater if the case is taken through the investor court system as opposed to the national courts system and that this is why investors choose it? We are going to set ourselves up for greater losses because the odds are against us. One of the international legal experts said it is the equivalent of playing at home rather than away. When one signs up to an investor court system, one is signing up to playing away constantly because investors will choose that system. I would particularly like the Tánaiste to confirm categorically that the Energy Charter Treaty was not part of the thinking in the advice that the Attorney General gave the Minister for the Environment, Climate and Communications on why we could not ban LNG importation.

Is it the case that we cannot ban it, which contradicts the advice I have from the EU, or is it that we stand at risk of being sued for compensation?

I do not know. I have not read the legal advice from the Attorney General on that matter. I have only read the memorandum brought to Cabinet by the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan. The best thing to do is take it up with him. The issues around LNG and the Energy Charter Treaty are matters for him, as Minister. The Energy Charter Treaty, which is old at this stage, was not deemed to be unconstitutional. If that was not unconstitutional, it is hard to see how CETA could be.

It was never challenged in the courts.

That may well be the case, but-----

The Tánaiste cannot say that because it was never challenged.

It has also not been deemed unconstitutional but the Senator may be correct that it was never challenged. She may wish to challenge it but maybe it is too late.

The Energy Charter Treaty was ratified in 1994, with no debate. Interestingly, that is similar to what the Government tried to do with CETA.

We did not try to do it. We would have been happy to have two days' debate at the time if that had been adequate for people. We agreed to this process. I am happy that we have debate and scrutiny of any issue like this but I do not think debate and scrutiny should be used to filibuster a decision being made. At a certain point, the Dáil has the right to have a vote and make a decision on this. That should not be obstructed by anyone.

It is clear that more scrutiny will be needed. The climate and finance committees are looking at that. From the answers that have been given, it seems that other Ministers may have pieces of the puzzle. Hopefully they will be able to tease that out in those committees as they scrutinise what is proposed.

I have a question on the ECJ ruling and the suggestion to the effect that it is all done. There were two ECJ rulings. One told us that states had responsibility, explicitly, for considering the investor court component and that this could not be decided at European level because of its implications for states. That is one ECJ ruling we are trying to fulfil through the process of scrutiny.

Paragraph 221 of the more recent ECJ ruling explicitly states that the dispute settlement mechanism should be reviewed prior to member states having to consider this in the ratification process. It explicitly pointed out that the investor court system is not finished. One of the concerns of the ECJ is that there is inequitable access and small and medium businesses do not have the same access to the investor court system as larger companies. It found the measures and suggestions the Commission made in that respect, about a one-judge court and so forth, inadequate. It explicitly asked that the mechanism be reviewed, allowing sufficient time for member states to consider that in the ratification process. As far as we know, it has not been reviewed. Is that not something of which member states should be aware?

I agree with Deputy Howlin that things may need to be negotiated. Whether or not they are negotiated to remove ICS, which I would prefer, it can certainly be adapted. One area which could be adapted is the 20-year sunset clause. Will the Tánaiste comment on that clause, which has been identified by the European Commission as a major concern in the context of the Energy Charter Treaty? Does the Tánaiste not think that we should look for a shorter sunset clause so if we have adverse consequences from an investor court system under CETA, we have the option of exiting?

A one-word response will do in respect of my final question regarding internationalist goals. I am an internationalist, as others have said. Does the Tánaiste see a danger in terms of our international shared diplomatic goals in areas like climate? Is there a tension between that and the goals individual companies may have in respect of the investment treaty?

We will let the Tánaiste respond to that and he can include his wrap-up as well as that is all the questions.

I always welcome the Senator's contributions. It has been a long time since we have debated legislation in the Seanad but I enjoyed it when we did. It is hard to keep up with the number of issues raised sometimes, so my apologies if I missed them.

On this treaty being scrutinised, it was the Government that agreed that the treaty should receive more scrutiny. It was a proposal from the Green Party, which the Government accepted, that it be referred to committees. When it comes to a vote, as it will and should, it will be one of the most scrutinised and debated treaties Ireland has been asked to ratify. That is good but I hope when it comes to a vote, people will allow the vote to happen and will not try to disrupt it through further procedural tactics at that point. I understand that SMEs have access to the investor court system and can look for a single-member arbitration panel. That is supposed to be designed to assist them.

I specifically ask about the concerns expressed in the ECJ rulings in which the court was explicit that the provisions such as the Tánaiste outlined were not adequate and that further review was needed on the dispute settlement mechanism. I ask specifically about the ECJ concerns, not the general principle of SME access.

My advice is it is no easier or harder for SMEs. It is always more difficult for an SME to take a case than a big company, for obvious reasons. It is more difficult for an SME to engage in a legal challenge. This does not change that.

Have there not been any actions the Tánaiste is aware of subsequent or pursuant to that ECJ ruling?

We will conclude after the Senator’s contribution. We are being as flexible as we can.

Apologies. I am happy to get anything in writing that might be useful to clarify that.

Not that I am aware of, but I can come back to the Senator on that. On climate goals, there is always a potential conflict between trade and climate. Trade, by its nature, means transporting things across seas and oceans. That can increase emissions but one has to look at these things in the round. There could be major advantages in terms of achieving our climate goals from increased trade and investment from Canada, particularly given their knowledge in the energy industry. I do not mean gas, but renewables and so on. There are potential benefits there.

The 20-year exit clause will only apply in the unlikely event of either party terminating the agreement. The purpose of the investment court system is to protect small and big businesses, individuals and pension funds from discriminatory and unfair treatment by the state. It is built around the core principles found in most domestic courts and international tribunals, such as permanency, the possibility of an appeal and the random allocation of cases. Were a party to deny an investor due process by simply terminating the agreement, this could result in significant adverse effects for the investor and would be against the principles of natural justice. Given that one of the main goals of CETA is to encourage further investment between the EU and Canada, which will facilitate jobs and improve prosperity for both parties, the agreement ensures only investment made under the terms of CETA is protected for a period of 20 years in the unlikely event that the agreement is terminated. It once again seeks to encourage and protect investment, which I believe is a good thing. It is important to note that only investments made prior to the agreement being terminated would be covered. The ICS provisions under CETA would not be available to new investors during a phase-out period.

On CETA being revised to permanently exclude ICS from the agreement, all international trade agreements have dispute resolution arrangements of some sort. Recent witnesses before the committee appear to have indicated there is very little appetite for reopening the agreement, from either the EU or Canada. I can attest to that. There is a fear that would lead to a Pandora’s box situation regarding adjustments to the current text of the agreement. Once the agreement is reopened, all the agreement is reopened. I can attest to that when it comes to other negotiations I have been involved in. Having negotiated a text that has been agreed and ratified by most European states over almost a ten-year period, there is no appetite to reopen it. If we sought to exclude the dispute resolution mechanism, it is not clear what value the protections set out in the agreement would be worth if one cannot vindicate one’s rights. The protections are intended to encourage investors in terms of the security of their investments.

We need to remember that the provisions of CETA are not judicable in our domestic courts because CETA is not part of our national law. In the absence of ICS, a Canadian investor would be required to progress a case under the respective national law and constitutions of 27 member states. If we are confirming protections in CETA, we need a way that they can be vindicated. I believe using arbitration and in a single consistent framework across 27 member states is a practical option.

There is an attempt to make it less costly for SMEs to engage in dispute resolution than is currently the case. CETA includes specific provisions on mediation which do not exist outside EU agreements. These are of relevance to SMEs, as mediation represents a low-cost option compared with full litigation in the courts. CETA encourages parties to a dispute to solve the issue amicably within 60 days, rather than go through litigation. The possibility to have mediation is available at any time in the proceedings.

The provisions allowing parties to hold consultations via video conference, which is easy and of low cost, can be of particular benefit to SMEs. Procedural deadlines also make proceedings faster and reduce the cost of litigation. As I mentioned earlier, an SME has the option, on request, to submit claims to a single judge which would make proceedings faster and cheaper. It seems that ICS might be a better option for SMEs rather than relying solely on national courts.

Arís, gabhaim buíochas don Tánaiste ar son an choiste agus dá oifigigh as ucht a theacht go dtí an díospóireacht inniu. Go raibh maith agaibh fá choinne an anailís, an léargas agus a thuairimí faoin ábhar seo. Is léir go bhfuil níos tuairimí ann ar an ábhar seo. Gabhaim buíochas leis na cuairteoirí agus baill an choiste as an díospóireacht chuimsitheach inniu.

I thank the committee members for a very interesting engagement and discussion. At the outset of this process, when we said we would go to the committees and not have a vote in the Dáil, I predicted that it was likely that people would not change their minds. That is not necessarily a bad thing. It means that all the issues have been aired and at least we know the items on which we agree and disagree. I hope the members will allow the Dáil to have a democratic vote on this in due course because that is the very least, we should expect in a democracy.

The joint committee went into private session at 11.23 a.m. and adjourned at 11.32 a.m. until 9.30 a.m. on Wednesday, 2 June 2021.