On Friday 18 January, the European Union submitted its proposals for reform of the Investor-State dispute settlement system to the United Nations Commission on International Trade Law (UNCITRAL).
In its proposal to the UNCITRAL Working Group on the Reform of the Investor-State Dispute Settlement System ('ISDS'), the EU suggests the creation of a standing Multilateral Investment Court, which could rule not only on disputes between investors and States, but also on disputes between two States. According to the Commission, this option is the only one capable of “effectively addressing all the concerns identified in the United Nations process” initiated in 2017 by the 60 States making up UNCITRAL, as it would improve the predictability and coherence of decisions, resolve the ethical concerns of the current system while addressing problems of excessive cost and/or duration.
A three-phase mechanism. The EU proposes, first of all, the creation of a support mechanism to promote the amicable settlement of disputes through conciliation or mediation. In the event of failure, the per se system will consist of two levels of decision-making: first instance and appellate tribunal. The second would deal with errors of law or manifest errors in the assessment of facts. The Europeans also propose to consider mechanisms to prevent any decision taken at first instance from being systematically appealed.
Guarantee the impartiality of adjudicators. The adjudicators, subject to strict ethical requirements, would be employed on a full-time basis. Their long-term term of office would not be renewable and the qualifications required would be similar to those of other major international courts.
Transparency and inclusiveness. A “high level of transparency” would also be applied to procedures. Third parties, such as “representatives of the communities affected by the dispute”, would be allowed to participate, according to the text of the proposal. The instrument creating a permanent mechanism should also “create its own enforcement regime, which would not provide for review at domestic level”. The Court will be financed by the contributions of the contracting parties, according to their respective levels of development and through a trust fund.
The EU also submitted a second document, a proposal on the future work plan of the group.
The ISDS mechanism had been developed to allow a foreign investor to take legal action directly against the State in which it was investing. A system that has attracted the wrath of European civil society, which culminated in the signing of the CETA, the free trade agreement with Canada. However, the EU's proposed response to the creation of a standing court does not address the concerns of civil society, which is protesting against the possibility of multinationals challenging state sovereignty (see EUROPE 12128).
These proposals and those from other countries will be discussed at the next meeting of the working group, scheduled for 1-5 April 2019. (Original version in French by Hermine Donceel)