In the framework of discussions on the future of world trade and investment policy at the World Economic Forum in Davos this week (17-20 January), the Commissioner for Trade, Cecilia Malmström, has been pushing the proposal tabled at the end of 2016 by the EU and Canada to establish a multilateral mechanism to settle disputes over investments.
Alongside the new Canadian Minister for Trade, François-Philippe Champagne, Malmström is to co-chair a first meeting at ministerial level on the Euro-Canadian proposal in Davos on Friday 20 January. This proposal aims to create a permanent single body responsible for ruling on disputes on investment matters, moving away from the current ISDS ad hoc investor/state dispute settlement mechanism included in 3,200 bilateral treaties on investment throughout the world, 1.400 of which concern member states of the EU.
This proposal is based on a new model promoted by the EU to settle disputes between investors and states, the Investment Court System (ICS), proposed by the Commission in September 2015 (see EUROPE 11390), and which is provided for in the free-trade agreements concluded by the EU with Canada (CETA), Singapore and Vietnam. It has been proposed by the EU in all free-trade or investment agreements it is currently negotiating with third countries.
The Commission and the Canadian government have already presented this proposal to more than 60 countries and eight international organisations competent in trade and investment matters, at a seminar held in Geneva on 16 December (see EUROPE 11687, 11691).
On Thursday 19 January, Malmström blogged that there was a "great amount of interest" in this proposal at Davos, despite the "many practical questions" that remain.
"Investment protection and arbitration are very much part of this ongoing global discussion, following a number of notable cases which have attracted public attention to this issue. Most countries around the world have investment protection rules with ISDS in place, but many countries are currently (...) seeing a need for change", Malmström explained.
"This first ministerial meeting in Davos is a good opportunity to reflect on whether working together at an international level would be more effective than more piecemeal reform efforts done by individual countries", she added.
Malmström feels that the current investment dispute settlement system raises two fundamental problems: - whether ad hoc arbitration, derived from the principles of trade arbitration, is the appropriate system as, given the changing nature of policies, disputes increasingly deal with matters of public policy such as health, safety and the environment; - ensuring that, as with any other legal system, there are no doubts as to the independence and qualifications of those ruling on the disputes.
"Fixing this is important (…), but it makes the most sense to build a common base and work together to fill the gap in the existing rules. We are thinking of creating a single international dispute settlement system, that should not only get the balance right between the interests of states and investors, but also be seen as legitimate by ensuring independence, accountability and transparency", she said.
A predictable, impartial and permanent system of this kind, which would also be in the interest of companies, could be based on the principles of an international dispute settlement system with permanent judges and a Court of Appeal and be open to any existing or future investment treaty.
The aim of the EU and Canada is to awaken interest in the project, leading to the formation of a group of countries wishing to carry out further work on their proposal.
In parallel to the public consultation on this dossier currently underway, the Commission is to host a seminar in Brussels this February for all interested stakeholders. (Original version in French by Emmanuel Hagry)