Advertisement

Introduction

  • Marc Bungenberg
  • August Reinisch
Open Access
Chapter
Part of the European Yearbook of International Economic Law book series (EUROYEAR)

Abstract

In March 2018 the Council of the European Union (EU Council or Council) gave the Commission of the EU (EU Commission or Commission) a mandate to negotiate a Multilateral Investment Court (MIC). Furthermore, since July 2017 the United Nations Commission on International Trade Law (UNCITRAL) Working Group III is discussing different options for the reform of Investor State Dispute Settlement (ISDS). The UNCITRAL Working Group III was mandated to:

39

In March 2018 the Council of the European Union (EU Council or Council) gave the Commission of the EU (EU Commission or Commission) a mandate to negotiate a Multilateral Investment Court (MIC).1 Furthermore, since July 2017 the United Nations Commission on International Trade Law (UNCITRAL) Working Group III2 is discussing different options for the reform of Investor State Dispute Settlement (ISDS).3 The UNCITRAL Working Group III was mandated to:

First, identify and consider concerns regarding ISDS; second, consider whether reform was desirable in light of any identified concerns; and third, if the Working Group were to conclude that reform was desirable, develop any relevant solutions to be recommended to the Commission.4

Consensus to develop solutions (thus enter stage 3 of the UNCITRAL WGIII mandate) was reached at the Thirty-seventh session in New York from 1 to 5 April 20195; the option of an institutionalized as well as multilateralised investor state dispute settlement mechanism will now be discussed in detail inside and outside UNCITRAL. This is all the more the case after the Court of Justice of the European Union (CJEU) has given its Opinion 1/17 confirming the compatibility of the EU-Canada Comprehensive Economic and Trade Agreement (CETA) Investment Court System with the EU Treaties. The CJEU recalled “that an international agreement providing for the creation of a court responsible for the interpretation of its provisions and whose decisions are binding on the European Union, is, in principle, compatible with EU law. Indeed, the competence of the European Union in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court that is created or designated by such agreements as regards the interpretation and application of their provisions”.6

This study assesses both the option of a two-tiered MIC as well as of a Multilateral Investment Appellate Mechanism (MIAM). Both models provide for a permanent, pre-appointed judiciary according to rule of law standards. The structure of the new dispute settlement mechanism should pursue the following objectives:
  • procedures adhering to the rule of law,

  • independence and neutrality of judges,

  • publicly appointed judges,

  • uniform interpretation of the law,

  • efficient and expedient procedures,

  • protecting states’ right to regulate,

  • transparency,

  • an appeal mechanism.

Fulfilling these objectives would satisfy both the rule of law requirements which must be taken into account when formulating international legal protection and the legitimacy criteria.7

40

EU Commissioner Malmström mentioned the “Multilateral Court” for the first time on 18 March 2015 in the Committee on International Trade (INTA Committee) and at an informal meeting of the Council (Foreign Affairs) on 25 March 2015.8 Finally, UNCITRAL decided on 10 July 2017 to work on a reform of the investment dispute settlement mechanism, including the possible establishment of an MIC.9

41

The EU Commission is currently investigating the feasibility of an MIC due to the modernisation of investment protection and the ISDS mechanism10 in the CETA,11 the EU-Singapore Investment Protection Agreement (IPA),12 the EU-Mexico Global Agreement13 and the EU-Vietnam IPA.14

42

Since the first proposals in spring 2015, the discussion about an Investment Court System (ICS) and multilateralisation has sparked an enormous debate.15 The Commission presented the first basic structures of a bilateral investment court system in a position paper in May 201516 and proposed this system to the United States of America (US) in autumn 2015 in the context of the Transatlantic Trade and Investment Partnership (TTIP) negotiations.17 At the same time, the EU Commission managed to successfully introduce this dispute settlement system into the CETA negotiations with Canada as well as into the EU Free Trade Agreement with Vietnam at a relatively late stage. Also the EU-Singapore agreement was revised again after negotiations had actually already been finished, also due to the “necessity” to isolate investment law from trade law in these agreements due to a new Commission approach as a consequence of the Singapore Opinion of the CJEU.18 This bilateral approach on the ICS chosen by the Commission is also seen as a test or pilot phase for a future multilateral system.19

43
In addition to the bilateral investment court systems introduced in the CETA, the EU-Vietnam IPA, the EU-Singapore IPA and the EU-Mexico Global Agreement, it was stated in each agreement in almost the same wording that the parties to the agreement intend to transfer the respective bilateral investment court system to a multilateral system:

The Parties shall pursue with other trading partners the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes. Upon establishment of such a multilateral mechanism, the CETA Joint Committee shall adopt a decision providing that investment disputes under this Section will be decided pursuant to the multilateral mechanism and make appropriate transitional arrangements.20

44

A number of procedural elements have also been included in the relevant agreements and in the Investment Protection Agreements between the EU and Singapore, EU and Vietnam and in the EU-Mexico Global Agreement in order to achieve greater transparency and to reject clearly inadmissible or unjustified complaints at an early stage. The rule on cost distribution states that the losing party has to bear the costs. These provisions already constitute a number of innovative elements in investment protection in comparison to the existing agreements of the EU Member States, as well as to almost all other existing agreements.

45
The European Parliament “shares the ambition of establishing, in the medium term, a multilateral solution to investment disputes.”21 Thus, in its resolution on the TTIP negotiations in 2015, the Parliament recommended the following:

to ensure […] to replace the ISDS system with a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny, where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected, and where private interests cannot undermine public policy objectives22

46

This feasibility study aims to illustrate options for the organisational and procedural design of an MIC. For the specific design of this new system, the requirements of Article 21 of the Treaty on European Union (TEU) are a decisive prerequisite from the EU’s perspective.23 Accordingly, this provision already indicates that the EU shall plead primarily for multilateral solutions. At the same time, it stresses the particular importance of complying with the EU’s rule of law principle .24 In light of these rule of law considerations, procedural equality of arms should be ensured.25 For example, the G20 Guiding Principles for Global Investment Policymaking also provide that “dispute settlement procedures should be fair, open and transparent, with appropriate safeguards to prevent abuse.”26 In various papers,27 the Council of Europe has developed basic requirements concerning the rule of law for judicial systems, which must be duly respected while designing the MIC.

47

This study discusses the option of a two-tiered system as well as a multilateral system of appeals. Both options bring ISDS in line with constitutional requirements of the rule of law and the protection of fundamental rights.28 The views and positions on these proposed systems of other entities with international legal personality as well as of third countries are being taken into consideration. In the long term, setting up an MIC may also require convincing ‘heavyweights’ in the area of protection of foreign investment such as China or the US, in addition to the EU and its current 28 Member States including their respective International Investment Agreement (IIA) networks, of the advantages of such a system. Canada, Vietnam, Singapore and Mexico have already committed themselves in this respect.

48

The two-tiered solution and the mere appellate mechanism discussed below are both different models of a multilateral approach.

Footnotes

  1. 1.

    Council of the EU (2018).

  2. 2.

    UNCITRAL Working Group III is composed of the 60 member States of the Commission and attended by observers from other UN member States, non-member States, intergovernmental organizations and invited non-governmental organizations.

  3. 3.

    UNCITRAL (2017a).

  4. 4.

    UNCITRAL (2017b), para. 264 and 447.

  5. 5.

    UNCITRAL (2019).

  6. 6.

    CJEU, Opinion 1/17 of 30 April 2019, ECLI:EU:C:2019:341, para. 106.

  7. 7.

    Cf. for instance, Kastler (2017), p. 265.

  8. 8.

    Malmström (2015): “However, I believe that we should aim for a court that goes beyond TTIP. A multilateral court would be a more efficient use of resources and have more legitimacy. That makes it a medium-term objective to be achieved in parallel to our negotiations with the United States. I hope for Parliament’s support and advice as we try to achieve it.” Cf. in connection also European Commission (2015), pp. 3 and 13; cf. previously already the proposals of Krajewski (2015) and the French proposal, Vers un nouveau moyen de régler les différends entre États et investisseurs, May 2015; thereto Fouchard Papaefstratiou (2015).

  9. 9.

    European Commission (2017b).

  10. 10.

    European Commission (2017a).

  11. 11.

    Art. 8.27 and 8.29, Comprehensive Economic and Trade Agreement, OJ L 11, 14.1.2017, p. 23.

  12. 12.

    Art. 3.9 and 3.12, EU-Singapore IPA (draft for signature) as on 2 April, 2019.

  13. 13.

    Art. 11 and 14, Section- Resolution of Investment Disputes, EU-Mexico Global Agreement (draft for signature) as on 2 April, 2019.

  14. 14.

    Art. 3.38 and 3.41, EU-Vietnam IPA (draft for signature) as on 2 April, 2019.

  15. 15.

    Cf. European Commission (2016), Ghahremani and Prandzhev (2017), Blair (2017), Ambrose and Naish (2017), Kaufmann-Kohler and Potestà (2016, 2017), Howse (2017a), Happ and Wuschka (2017), Hoffmeister (2017), Brown (2017), Katz (2016), Alvarez Zarate (2018), Ghori (2018), Howard (2017), Howse (2017b), Brower and Ahmad (2018), Benedetti (2019), Schill (2019) and Calamita (2017).

  16. 16.

    European Commission (2015).

  17. 17.
  18. 18.

    CJEU, Opinion 2/15, ECLI:EU:C:2017:376; on this see, inter alia Bungenberg (2017), Hindelang and Baur (2019) and Usynin and Gáspár-Szilágyi (2018).

  19. 19.

    Pauwelyn (2015).

  20. 20.

    Article 8.29 CETA, Establishment of a multilateral investment tribunal and appellate mechanism; Art. 3.41, EU-Vietnam IPA (draft for signature) as on 2 April, 2019; Art. 14, Section- Resolution of Investment Disputes, EU-Mexico Global Agreement (draft for signature) as on 2 April, 2019; Art. 3.9, EU-Singapore IPA (draft for signature) as on 2 April, 2019.

  21. 21.

    European Parliament resolution (2016), para. 68.

  22. 22.

    European Parliament resolution (2015), para. 2.d)xv).

  23. 23.

    The significance and compulsory consideration of Article 21 TEU was last emphasised again by the Court of Justice of the European Union (CJEU) in its Singapore opinion. Cf. CJEU, Opinion 2/15, Singapore FTA, ECLI:EU:C:2017:376, para. 142 et seq.: “One of the features of this development is the rule laid down in the second sentence of Article 207(1) TFEU that ‘the common commercial policy shall be conducted in the context of the principles and objectives of the Union’s external action’. Those principles and objectives are specified in Article 21(1) and (2) TEU […]. The obligation of the European Union to integrate those objectives and principles into the conduct of its common commercial policy in apparent from the second sentence of Article 207(1) TFEU read in conjunction with Article 21(3) TEU and Article 205 TFEU.” See in regard to the relevance of rule of law considerations etc. CETA, Opinion 1/17 of 30 April 2019, ECLI:EU:C:2019:341, para. 105 et seq.

  24. 24.

    Thereto in general, Schröder (2016) and Bungenberg and Hazarika (2019).

  25. 25.

    On the aspect of “equality of arms” as an aspect of the rule of law, cf. Fleiner and Basta Fleiner (2004), p. 250; hereto also for example the jurisprudence on Article 6 European Convention on Human Rights (ECHR), cf. European Court of Human Rights (ECtHR), No. 2689/65, Del-court v. Belgium; ECtHR, No. 8562/79, Feldbrugge v. the Netherlands; ECtHR, No. 14448/88, Dombo Beheer B.V. v. the Netherlands; ECtHR, No. 17358/90, Bulut v. Austria; ECtHR, No. 13645/05, Ko-kelvisserij e.a. v. the Netherlands; thereto in the literature Safferling (2004), p. 181 et seqq.; Grabenwarter and Struth (2015), Article 6, para. 46 et seqq.

  26. 26.

    G20 Guiding Principles for Global Investment Policymaking, July 2016, para. III: “Dispute settlement procedures should be fair, open and transparent, with appropriate safeguards to prevent abuse.”

  27. 27.

    Cf. for instance Council of Europe (2014, 2016).

  28. 28.

    Schill (2015), p. 8.

References

  1. Alvarez Zarate JM (2018) Legitimacy concerns of the proposed multilateral investment court: is democracy possible. BCL Rev 59:2765–2790Google Scholar
  2. Ambrose H, Naish V (2017) An investment court system or an appeals mechanism? The EU’s 2017 consultation on multilateral reform of ISDS. Arbitration Blog of 15.2.2017Google Scholar
  3. Benedetti JPC (2019) The proposed Investment Court System: does it really solve the problems? Revista Derecho del Estado 42:83–115Google Scholar
  4. Blair C (2017) A global investment court for a changing era of trade. Financial Times of 24.1.2017Google Scholar
  5. Brower CN, Ahmad J (2018) From the two-headed nightingale to the fifteen-headed Hydra: the many follies of the proposed International Investment Court. Fordham Int Law J 41:791–820Google Scholar
  6. Brown CM (2017) A multilateral mechanism for the settlement of investment disputes. ICSID Rev Foreign Invest Law J 32:673–690Google Scholar
  7. Bungenberg M (2017) The Common Commercial Policy, Parliamentary participation and the Singapore Opinion of the CJEU. ZEuS 20:383–395CrossRefGoogle Scholar
  8. Bungenberg M, Hazarika A (2019) Rule of law in the EU legal order, ZEuS 22:383–404Google Scholar
  9. Calamita NJ (2017) The challenge of establishing a Multilateral Investment Tribunal at ICSID. ICSID Rev Foreign Invest Law J 32:611–624Google Scholar
  10. Council of Europe (2014) Consultative Council of European Judges (CCJE), the evaluation of judges’ work, the quality of justice and respect for judicial independence. Opinion No. 17 (2014) of 24.10.2014Google Scholar
  11. Council of Europe (2016) Consultative Council of European Judges (CCJE), the role of court presidents. Opinion No. 19 (2016) of 10.11.2016Google Scholar
  12. Council of the EU (2018) Negotiating directives for a Convention establishing a multilateral court for the settlement of investment disputes, 12981/17 ADD 1 DCL 1, 20.3.2018Google Scholar
  13. European Commission (2015) Concept paper – investment in TTIP and beyond – the path for reform, May 2015Google Scholar
  14. European Commission (2016) A future multilateral investment court. Factsheet of 13.12.2016Google Scholar
  15. European Commission (2017a) Impact Assessment- Multilateral reform of investment dispute resolution, SWD(2017) 302 final, 13.9.2017Google Scholar
  16. European Commission (2017b) Factsheet of 10.7.2017. http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155744.pdf
  17. European Parliament (2015) Resolution of 8.7.2015 containing the European Parliament’s recommendations to the European Commission on the negotiations for the Transatlantic Trade and Investment Partnership (TTIP), 2014/2228(INI)), P8_TA(2015)0252Google Scholar
  18. European Parliament (2016) A new forward-looking and innovative future strategy for trade and investment, resolution of 5.7.2016, P8_TA-PROV(2016)0299Google Scholar
  19. Fleiner T, Basta Fleiner L (2004) Allgemeine Staatslehre, Über die konstitutionelle Demokratie in einer multikulturellen globalisierten Welt. Springer, HeidelbergCrossRefGoogle Scholar
  20. Fouchard Papaefstratiou A (2015) TTIP: the French proposal for a permanent European Court for investment arbitration. Kluwer Arbitration Blog of 22.7.2015Google Scholar
  21. Ghahremani S, Prandzhev I (2017) Multilateral investment court: a realistic approach to achieve coherence and consistency in international investment law? EFILA Blog of 14.3.2017Google Scholar
  22. Ghori U (2018) The international investment court system: the way forward for Asia. Int Trade Bus Law Rev 21:205–229Google Scholar
  23. Grabenwarter C, Struth K (2015) 6 Justiz- und Verfahrensgrundrechte. In: Ehlers D (ed) Europäische Grundrechte und Grundfreiheiten, 4th edn. De Gruyter, Berlin, pp 198–238Google Scholar
  24. Happ R, Wuschka S (2017) From the Jay treaty Commissions towards a multilateral Investment Court: addressing the enforcement dilemma. Indian J Arbitr Law 6:113–132Google Scholar
  25. Hindelang S, Baur J (2019) Stocktaking of investment protection provisions in EU agreements and Member States’ bilateral investment treaties and their impact on the coherence of EU policy. Committee on International Trade (INTA)- European ParliamentGoogle Scholar
  26. Hoffmeister F (2017) The EU contribution to the progressive development of institutional aspects in international investment law. Revue Belge de Droit International 2:566–590Google Scholar
  27. Howard DM (2017) Creating consistency through a World Investment Court. Fordham Int Law J 41:1–52Google Scholar
  28. Howse R (2017a) International investment law and arbitration: a conceptual framework. IILJ Working Paper 2017/1Google Scholar
  29. Howse R (2017b) Designing a multilateral investment court: issues and options. Yearb Eur Law 36(1):209–236CrossRefGoogle Scholar
  30. Kastler HA (2017) Föderaler Rechtsschutz: Personenbezogene Daten in einem Raum der Freiheit. Springer, HeidelbergCrossRefGoogle Scholar
  31. Katz RL (2016) Modeling an International Investment Court After the World Trade Organization Dispute Settlement Body. Harv Negot Law Rev 22:163–188Google Scholar
  32. Kaufmann-Kohler G, Potestà M (2016) Can the Mauritius Convention serve as a model for the reform of investor-State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism?Google Scholar
  33. Kaufmann-Kohler G, Potestà M (2017) The composition of a Multilateral Investment Court and of an appeal mechanism for investment awardsGoogle Scholar
  34. Krajewski M (2015) Modell-Investitionsschutzvertrag mit Investor-Staat-Schiedsverfahren für Industriestaaten unter Berücksichtigung der USA. Bundesministerium für Wirtschaft und EnergieGoogle Scholar
  35. Malmström C (2015) Speech: remarks at the European Parliament on Investment in TTIP of 18.3.2015. http://trade.ec.europa.eu/doclib/docs/2015/march/tradoc_153258.pdf
  36. Pauwelyn J (2015) Why the US should support the EU Proposal for an “Investment Court System”. Georgetown Journal of International Law Online of 24.11.2015Google Scholar
  37. Safferling C (2004) Audiatur et altera pars – die prozessuale Waffengleichheit als Prozessprinzip? Neue Zeitschrift für Strafrecht 24(4):181–188Google Scholar
  38. Schill S (2015) Reforming Investor-State Dispute Settlement (ISDS): conceptual framework and options for the way forward, E15 Initiative. International Centre for Trade and Sustainable Development, GenevaGoogle Scholar
  39. Schill S (2019) From investor-state dispute settlement to a multilateral investment court? Evaluating options from an EU law perspective. Committee on International Trade (INTA)- European ParliamentGoogle Scholar
  40. Schröder W (ed) (2016) About strengthening the rule of law in Europe, from a common concept to mechanisms of implementation. Hart Publishing, OxfordGoogle Scholar
  41. UNCITRAL (2017a) Possible future work in the field of dispute settlement: reforms of investor-State dispute settlement (ISDS)- Note by the Secretariat, A/CN.9/917, 20 April 2017Google Scholar
  42. UNCITRAL (2017b) Report of the United Nations Commission on International Trade Law, Fiftieth Session (3-21 July 2017), A/72/17, 2017Google Scholar
  43. UNCITRAL (2019) Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-seventh session (New York, 1-5 April 2019), A/CN.9/970 (draft document)Google Scholar
  44. Usynin M, Gáspár-Szilágyi S (2018) The growing tendency of inducing investment chapters in PTAs. In: Netherlands Yearbook of International Law 2017, vol 48. pp 267–304Google Scholar

Copyright information

© The Author(s) 2020

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommercial use, sharing, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if you modified the licensed material. You do not have permission under this license to share adapted material derived from this chapter or parts of it.

The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

Authors and Affiliations

  • Marc Bungenberg
    • 1
  • August Reinisch
    • 2
  1. 1.Faculty of LawSaarland UniversitySaarbrückenGermany
  2. 2.Faculty of LawUniversity of ViennaViennaAustria

Personalised recommendations