Brussels, 06/05/2015 (Agence Europe) - As we went to press on Wednesday 6 May, MEPs at the European Parliament's International Trade Committee were debating the ideas put forward by the Commissioner for Trade, Cecilia Malmström, to improve the dispute settlement between investors and states (ISDS), in view of including a reformed mechanism in the future Transatlantic Trade and Investment Partnership (TTIP) agreement between the EU and US. Malmström is expected to put forward her ideas to the Ministers for Trade on Thursday 7 May in Brussels.
In a brief presentation in her blog at the end of Tuesday afternoon on 5 May, Malmström explained that the traditional ISDS system was not fit for purpose in the 21st century and that the chapter on the protection of investments in the free trade agreement with Canada (CETA) constituted the “basis” of the Commission's new approach for a modernised ISDS mechanism. She explained that the ISDS mechanism in the CETA “contains a set of modern provisions which rebalance the rights of the state and the investor in favour of the state, and its right to regulate in the public interest”.
In a reflection document that does not represent the official Commission position in the ongoing TTIP negotiations (this chapter is currently frozen), Malmström puts forward new suggestions for each of the four priority areas defined by the public consultation carried out in spring 2014: legal protection for states to regulate, work and supervision by the tribunals to prevent conflicts of interest, the question of the appeals mechanism and relationship between ISDS settlement and national legal systems.
Malmström is proposing to initially remove any ambiguity regarding the right of governments to regulate by ensuring that the future European proposal includes an “operational provision” asserting this right. On the question of the functioning of the tribunals she explains that this “also makes arbitral tribunals operate more like traditional courts”. The commissioner suggests that the contracting parties would be able to decide in advance what groups of people will be included in the arbitral tribunals. Currently, investors and states can choose the arbitrators on the basis of the different dossiers, which can lead to conflicts of interest. In the medium term, Malmström is examining the possibility of setting up a permanent multilateral tribunal for investment. The commissioner is also suggesting the introduction of an appeals mechanism.
Malström insisted that “Our new approach ensures that a state can never be forced to change legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly (suffered discrimination or expropriation, for example)”. (Emmanuel Hagry)