Brussels, 16/09/2015 (Agence Europe) - On Wednesday 16 September, the European Commission unveiled a proposal to create a special court for settling investment-related disputes in the future free trade agreement between the EU and the USA (TTIP). This would replace the current investor-state dispute settlement (ISDS) mechanism in a future negotiation on investment between the EU and a third country or regional bloc.
“Today, we're delivering on our promise - to propose a new, modernised system of investment courts, subject to democratic principles and public scrutiny (…) the old, traditional form of dispute resolution suffers from a fundamental lack of trust”, European Commissioner for Trade Cecilia Malmström stated when presenting the proposal to the press after it had been adopted by the Commission. “We have taken account of the public's concerns on the private arbitration system [Ed: underpinning the ISDS mechanism]. We must establish the same elements as those that allow the citizens to have trust in their national courts”, she said.
The Commission's proposal provides for a first instance court and an appeals court to be set up - with the first instance court being allocated 15 judges (five judges appointed by the EU, five judges appointed by the USA and five judges from third countries) and the appeals court being allocated six judges (two judges appointed by the EU, two judges appointed by the USA and two judges from third countries).
Judgments would be returned by these publicly appointed judges, who would possess high-level qualifications comparable with those required for the members of permanent international jurisdictions such as the International Court of Justice and the WTO Appellate Body. Unlike the current practice, a case would be attributed to these judges at random in order to avoid any conflict of interest.
The appeals court that the Commission has in mind would work on the basis of principles similar to those that govern how the WTO Appellate Body works.
The Commission says that the ability of investors to take a case to court would be precisely defined and limited to cases such as targeted discrimination on the basis of religion or nationality, expropriation without compensation or denial of justice.
In order to avoid multinational companies being able to contest national policies for public health purposes, for example, “governments' right to regulate would be enshrined and guaranteed in the provisions of the trade and investment agreements”, the Commission states.
The proposal builds on the approach developed by the Commission as part of the chapters linked to investment in the agreements recently concluded with Singapore and Canada. This approach ensures that proceeding will be transparent, hearings open and comments available on line, and that a right to intervene for parties with an interest in the dispute will be provided.
Forum-shopping (or the possibility that the diversity of international competence rules offers a complainant of being able to use the courts of the countries that will make the most favourable decision in the complainant's interests) will be banned.
In addition, frivolous claims will be dismissed quickly, a clear distinction will be maintained between international law and domestic law, and multiple and parallel proceedings will be avoided.
The Commission will now discuss its proposal with the Council and the European Parliament. It will then present it to the US side in the TTIP negotiations as an EU text proposal on protecting investments.
The Commission also wants to use this approach in other ongoing or future free trade negotiations that include an investment chapter with other third countries.
Alongside the TTIP negotiations, the Commission will start work, together with other countries, on setting up a permanent international investment court to settle investment disputes. The goal is for an international investment court gradually to replace all the investment dispute settlement mechanisms provided for in the agreements on trade and investment concluded by the EU or its member states with third countries and in agreements on trade and investment concluded between third countries.
“EU investors are the most frequent users of the existing model [Ed: ISDS] (…) This means that Europe must take the responsibility to reform and modernise it. We must take the global lead on the path to reform. We want to establish a new system built around the elements that make citizens trust domestic or international courts”, Malmström concluded. (EH)