Brussels, 19/03/2015 (Agence Europe) - Trade Commissioner Cecilia Malmström, addressing the European Parliament international trade committee on Wednesday 18 March, set out her “preliminary ideas” on the controversial issue of investor-state dispute settlement (ISDS) in the free-trade agreement - the TTIP - that is being negotiated between the EU and the United States. These are ideas she will put to EU trade ministers at their informal meeting in Riga on 25 March. A full proposal will be presented in May, ahead of an EU common position on this deadlocked chapter of the TTIP negotiations.
Using the free-trade agreement with Canada (CETA), which includes an updated ISDS clause, as a “baseline”, the further reforms being suggested by Malmström for each of the four priority strands defined by the public consultation held in spring 2014 will be an excellent way of ensuring that a new form of investment arbitration that keeps the benefits but avoids the negatives can be designed, she said.
On protecting the right of states to regulate, Malmström advances two ideas: firstly, including an article in the agreement that clearly states that governments are free to pursue public policy objectives and they can choose the level of protection that they deem appropriate and, secondly, including a clause that says that investment protection rules offer no guarantee for investors that the legal regime under which they have invested will stay the same.
In terms of supervision and operation of the arbitration tribunals to avoid conflicts of interest, Malmström suggests that governments nominate a limited list of trustworthy arbitrators, for example, they would have to be eligible to be judges in their home systems, who would decide on all TTIP investment cases. “Of course, this does not go the whole way to creating a permanent investment court, with permanent judges who would have no temptation to think about future business opportunities”, acknowledged the commissioner. “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”, she stated.
On the appeals mechanism, Malmström suggests including an appeals body, with permanent members, directly within TTIP, which would ensure consistency of interpretation and review of decisions. “We will also be proposing an appeal mechanism to our other negotiating partners, including in Canada. As with the permanent court, however, there are strong efficiency and legitimacy reasons to aim for a multilateral appeal mechanism”, she said.
Lastly, on the issue of the relationship between domestic legal systems and ISDS, Malmström sees two possible ways to address the notion that investors have a second chance to overrule the decisions of national courts, something that “contributes to the perception of ISDS as unfair”. One would be to force investors to choose between national courts and ISDS from the outset, though this might have the negative side-effect of encouraging companies to avoid national courts altogether. The second option would be to require investors to abandon any proceedings they have started in national courts if they launch an ISDS case and to rule out recourse to investment arbitration if the investor has decided to exhaust local remedies. (Emmanuel Hagry)