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Something Borrowed, Something New: The TTIP Investment Court: How to Fit Old Procedures into New Institutional Design

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Institutionalisation beyond the Nation State

Part of the book series: Studies in European Economic Law and Regulation ((SEELR,volume 10))

Abstract

The key component of the European Union’s ambitious foreign investment policy is the shift away from traditional investor-state arbitration to a permanent investment court system. This bilateral investment court features, amongst other things, an appeals mechanism and thereby responds to widespread criticism over the inconsistency, and consequent lack of legitimacy, of investor-state arbitration. Rather than addressing all aspects of investor-state dispute settlement, however, the investment court system is merely an institutional reform, which depends for all other relevant purposes on established arbitration rules. A TTIP investment court would therefore fall prey to the legal and institutional constraints for which ICSID and UNCITRAL have initially been designed. Taken together with the current US administration’s division on trade and investment policy, the prospects of a TTIP investment court remain all but certain. If successful, on the other hand, it would represent above all an important step towards transatlantic adjudicative institutionalisation.

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Notes

  1. 1.

    Friedmann (1964).

  2. 2.

    The failure of the ITO is in large part ascribed US omission to ratify its Charter. However, it illustrates a larger point of resistance against international institutionalization. Toye observes that, ‘Protectionists, of course, felt that (some forms of) state intervention in foreign trade matters was acceptable, but saw any kind of international trade organization as an incipient “superstate” that would infringe American national sovereignty. What they had in common with free trade enemies of the ITO was support for domestic free enterprise, to which—both groups of opponents claimed—the Havana Charter posed a threat.’ (footnotes omitted) Toye (2012), p. 97.

  3. 3.

    On the dialectic relationship of domestic courts of Member States and the Court of Justice of the European Union, and domestic political reservations from an institutional perspective see Stein (1981), pp. 1–27.

  4. 4.

    Amongst international judicial bodies for instance the International Court of Justice, the WTO Dispute Settlement Body, the Court of Justice of the European Union, and others.

  5. 5.

    In a review of Stein and Hay’s ‘Law and Institutions in the Atlantic Area’, Angelo observes: ‘The emergent cross-Atlantic organizations of the 1950s are suffering from internal attacks. To the casual observer there appears to be more conflict than law in Atlantic institutions. Hence earlier hopes for an “Atlantic Community” or even a “Partnership” seem to be an ever-receding dream. But in considering the alternatives, many serious citizens may conclude that in preserving and rebuilding Western unity lies one of the principal hopes for establishing a just and peaceful world.’ Angelo (2017), p. 923.

  6. 6.

    Commission Staff Working Document, Report on Progress Achieved on the Global Europe Strategy, 2006–2010, 3SEC(2010) 1268/2, http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146941.pdf (accessed 16 September 2015), see also Rigod (2012), pp. 277, 287–288.

  7. 7.

    Opinion 2/15, Free Trade Agreement between the EU and Singapore, ECLI:EU:C:2017:376.

  8. 8.

    Ibid, para. 305.

  9. 9.

    Textual proposal for the Chapter on Trade in Services, Investment and E-Commerce in TTIP of November 12, 2015, Section 3, Sub-Section 5 [hereinafter referred to as ‘TTIP proposal’].

  10. 10.

    EU Commission, Directorate General for Trade, Concept Paper, ‘Investment in TTIP and beyond—the path for reform: Enhancing the right to regulate and moving from current ad hoc arbitration towards an Investment Court’, 2015, pt. V; and the EU Commission Communication, ‘Trade for all, Towards a more responsible trade and investment policy’, 14 October 2015, p. 22.

  11. 11.

    Commission Press Release of 7 January 2015, trade.ec.europa.eu/doclib/press/index.cfm?id=1231.

  12. 12.

    Later published as, Gélinas (2005), pp. 489–504.

  13. 13.

    Ibid, p. 503.

  14. 14.

    Ibid, p. 490.

  15. 15.

    United Nations Conference on Trade and Development, ‘World Investment Report 2015: Reforming International Investment Governance’, New York, p. 150; it is generally suggested that an appeals mechanism would enhance credibility, legitimacy, coherence and foreseeability of the ISDS system, although it was also argued that an agreement-centric permanent court system risks increasing already existing discrepancies in awards, see Schwieder (2016), p. 178.

  16. 16.

    Amarasinha and Kokott (2008), p. 127.

  17. 17.

    Geiger (2002), pp. 94, 106.

  18. 18.

    It is noteworthy that, despite the heavy focus on trade liberalization, the WTO has long acknowledged a link between the regulation of foreign investments and trade distortion. Efforts to bring foreign direct investment under the auspice of the WTO has, however, been of limited success, see Amarasinha and Kokott (2008), p. 125.

  19. 19.

    Ibid, pp. 128–129; it should be noted that opposition against the negotiation of multilateral rules on investment within the WTO framework were already voiced in 1999 at the Seattle Ministerial Meeting, see Muchlinski (2000), pp. 1033–1053.

  20. 20.

    ICSID Secretariat Discussion Paper, Possible improvements of the framework for ICSID arbitration, October 2004.

  21. 21.

    Annex to the ICSID Secretariat Discussion Paper, Possible improvements, para. 7.

  22. 22.

    Ibid, paras. 2–3.

  23. 23.

    Working Paper of the ICSID Secretariat, Suggested changes to the ICSID Rules and Regulations, May 2005; see also Parra (2014), p. 1.

  24. 24.

    See, for instance, Korea-New Zealand FTA of 2015, Art. 10.26.9; Canada-Korea FTA of 2014, Annex 8-E; Australia-China FTA of 2014, Art. 9.23; Australia-Korea BIT of 2014, Art. 11.20.13 and Annex 11-E; Uruguay-US BIT of 2005, Art. 28(10); Dominican Republic-Central America-United States FTA of 2004, Art. 10.20(10); Chile-US FTA of 2004, Art. 10.19(10); Singapore-US FTA of 2003, Art15.19(10); see also US Model BIT of 2004, Art. 28(10); and US Model BIT of 2012, Art. 28(10).

  25. 25.

    See, for instance, Trans-Pacific Partnership Agreement, Article 9.22(11).

  26. 26.

    Kaufmann-Kohler and Potestà (2016), pp. 22–23.

  27. 27.

    Ethyl Corporation v. Canada, UNCITRAL, Award on Jurisdiction of 24 June 1998.

  28. 28.

    Geiger (2002), p. 101.

  29. 29.

    Ibid, p. 105; Muchlinski (2000), p. 1046.

  30. 30.

    Geiger (2002), p. 98.

  31. 31.

    Power dynamics in the context of the ITO, the precursor of the WTO, are best explained by a statement of the US negotiator of the ITO Charter in 1947, Clair Wilcox: ‘This Charter is very one-sided. It will impose restraints and limitations on one side and leave almost absolute freedom on the other side. And the way it is one-sided is this: It imposes on most of the other countries in the world limitations on their freedom to do a lot of things they have been doing, are doing, want to do, otherwise will do, without this Charter. Now these limitations are also imposed on us, but they are things we haven’t done, aren’t doing, and don’t intend to do. And the Charter, as far as I can see, is not going to prevent us from doing anything that we are doing or intend to do or want to do.’ See Toye (2012), p. 97.

  32. 32.

    The Act effectively inserted as a principal trade negotiating objective, to provide for ‘an appellate body or similar mechanism to provide coherence to the interpretations of investment provisions in trade agreements’; see Trade Promotion Authority Act of 2002, P.L. 107–210, sec 2102(b)(3)(g)(iv), 19 U.S.C § 3802(b)(3)(G)(iv).

  33. 33.

    Parra (2014), p. 9.

  34. 34.

    European Parliament, Plenary 8 July 2015, Minutes, pt. 4.1.

  35. 35.

    EU Commission Press Release, ‘CETA: EU and Canada agree on new approach on investment in trade agreement’, 29 February 2016, http://trade.ec.europa.eu/doclib/press/index.cfm?id=1468.

  36. 36.

    Gélinas (2005), pp. 502–503.

  37. 37.

    Article 8.29 CETA.

  38. 38.

    Article 15, EU-Vietnam FTA.

  39. 39.

    Pantaleo (2016a), pp. 80–81; he further points out that points out that the lack of party autonomy in the ICS system is likely to render ICS awards judicial decisions rather than arbitral awards in accordance with Art. 1 of the New York Convention, pp. 85–87.

  40. 40.

    Amongst the EU-Vietnam FTA, CETA and the TTIP textual proposal, it is only the latter that refers to members of the tribunal as ‘judges’. Notably, whereas Art. 9 of the textual proposal for the Chapter on Trade in Services, Investment and E-Commerce in TTIP of November 12, 2015, Section 3, Sub-Section 5 [hereinafter referred to as ‘TTIP proposal’] refers to Judges on the Tribunal, Art. 10 on the Appeal Tribunal refers to Members of the Appeal Tribunal.

  41. 41.

    National affiliation of members is in this respect a matter of appointment, rather than nationality, Footnote 25 and 26, EU-Vietnam FTA; Footnote 9, CETA, notably, CETA does not feature a similar provision with regards to the Members on the Appeals Tribunal.

  42. 42.

    Chapter 17, Article 5 EU-Vietnam FTA; Article 26.3 CETA.

  43. 43.

    Pantaleo (2016a), p. 82; Schwieder (2016).

  44. 44.

    Article 12(18) EU-Vietnam FTA; Article 8.27(6) CETA.

  45. 45.

    Lenk (2016), pp. 1–23; for a general discussion on the role normative control in the attribution of international responsibility to the EU, see Casteleiro (2016).

  46. 46.

    Article 6(2) EU-Vietnam FTA; Article 8.21 CETA.

  47. 47.

    European Parliament and Council Regulation 912/2014 establishing a framework for managing financial responsibility linked to investor-to-state dispute settlement tribunals established by international agreements to which the European Union is party [2014] OJ L257/121.

  48. 48.

    Opinion 2/15, op cit.

  49. 49.

    The system of attribution in international law, following the method proposed in the Draft Articles on International Responsibility of International Organisations, deviates from the model of determining the respondent under EU agreements with third countries. This point is extensively argued elsewhere, Lenk (2016); for a view to the contrary see Pantaleo (2016b), pp. 847–860.

  50. 50.

    Articles 52 and 53 ICSID are limited to improper constitution of the panel, manifest excess of power, corruption, serious departure of fundamental rules of procedure, and failure to provide reasons; reasons for setting aside an award are often limited to personal misconduct, procedural improprieties, and the lack of a valid arbitration agreement, see e.g. Section 34, Swedish Arbitration Act (SFS 1999:116).

  51. 51.

    Dolzer and Schreuer (2012), pp. 300–301.

  52. 52.

    Art. 28, para. 1, EU-Vietnam FTA; Art. 8.28, para. 2, CETA; Pantaleo (2016a), pp. 89–90, differentiates between a private and public purpose objective underlying appeals mechanisms and emphasizes that the broad powers to review of the Appeal Tribunal in the ICS, including the possibility to review the appreciation of facts, goes beyond what is necessary to guarantee overall credibility, legitimacy and coherence of the dispute resolution mechanism.

  53. 53.

    Art. 28, para. 3, EU-Vietnam FTA; a decision of the Appeal Tribunal is considered final in accordance with Art. 29, para. 3, EU-Vietnam FTA.

  54. 54.

    Titi (2017), pp. 11–12, points out that the TTIP proposal blurs the line as to whether the TTIP Appeals Tribunal is endowed with powers of final decision-making, instead the procedure envisages that matters are in all cases referred back to the Tribunal with binding and detailed instructions as to the modification or reversal of the provisional award; CETA provides no guidance on this matter as the CETA Joint Committee has yet to determine the rules of procedure for the CETA Arbitral Tribunal, see Art. 8.28, para. 7, lett. (b), CETA.

  55. 55.

    Although no such reference is made in the TTIP proposal, it is recognized both in Article 31(7) of the EU-Vietnam FTA and Article 8.41(5) CETA.

  56. 56.

    See Article 31(8) EU-Vietnam FTA Article 8.41(6) CETA.

  57. 57.

    Article 8.41(3) CETA.

  58. 58.

    Article 8.28(9)(b) CETA.

  59. 59.

    Article 10(3)(b) EU-Vietnam FTA.

  60. 60.

    Dahlquist (2017).

  61. 61.

    Articles 3(3)(g) and 18 of the UNCITRAL Arbitration Rules.

  62. 62.

    C-126/97 Eco Swiss China Time Ltd. v Benetton International NV EU:C:1999:269; see for a discussion Komninos (1999), p. 459; Von Papp (2013), p. 1039.

  63. 63.

    Presidential Executive Order Addressing Trade Agreement Violations and Abuses, 29 April 2017: ‘Sec. 2. Conduct Performance Reviews. The Secretary of Commerce and the United States Trade Representative (USTR), in consultation with the Secretary of State, the Secretary of the Treasury, the Attorney General, and the Director of the Office of Trade and Manufacturing Policy, shall conduct comprehensive performance reviews of: (a) all bilateral, plurilateral, and multilateral trade agreements and investment agreements to which the United States is a party; and (b) all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.’

  64. 64.

    Donnan and Webber (2017).

  65. 65.

    Donnan and Sevastopulo (2017).

  66. 66.

    In its recent Opinion 2/15 the Court of Justice of the European Union has confirmed that exclusive EU competences are much broader than traditional trade issues, including transport and trade in services. The only major reservation to deep and comprehensive trade agreements remains non-direct, i.e. portfolio, investment.

  67. 67.

    Holton and Ireland (2017).

  68. 68.

    According to investmentpolicyhub.unctad.org.

  69. 69.

    For an overview see Von der Loo (2016).

  70. 70.

    For the final draft text of the chapter on investment liberalization of the Japan—EU Economic Partnership Agreement, see http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156432.B%20Chapter%208%20Section%20B%20Investment%20Liberalization.pdf.

  71. 71.

    Gélinas (2005), p. 503.

  72. 72.

    Posner (2009), pp. 5, 16.

  73. 73.

    Gélinas (2005), p. 501.

  74. 74.

    Posner (2009), p. 17.

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    Hannes Lenk

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    Elaine Fahey

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Lenk, H. (2018). Something Borrowed, Something New: The TTIP Investment Court: How to Fit Old Procedures into New Institutional Design. In: Fahey, E. (eds) Institutionalisation beyond the Nation State. Studies in European Economic Law and Regulation, vol 10. Springer, Cham. https://doi.org/10.1007/978-3-319-50221-2_9

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