The EU Commission (the Commission) has launched a public consultation on the multilateral reform of the investment dispute settlement system. The survey is found here and responses are due by 15 March 2017. The consultation is the next step in furtherance of the Commission's objective to develop a multilateral system for the resolution of international investment disputes and, amongst other things, seeks to explore views on its proposal to develop a permanent multilateral investment court system.
The development of the Commission's position over the last couple of years and the Commission's introduction to the consultation both suggest a determination to pursue wholesale change to the system of resolution of investor-state disputes, rather than a more nuanced approach in evaluating the perceived flaws in the current system under which investor-state disputes are largely resolved by ad hoc arbitration (often under the auspices of ICSID, part of the World Bank). However, notwithstanding its clearly stated objective, the Commission's survey also countenances in the alternative the establishment of a Multilateral Appeal Tribunal which would consider appeals from the decisions of ad hoc investment arbitration tribunals established under the current system.
The responses to the consultation will be significant in terms of the future of the Commission's objective to establish a Multilateral Investment Court. In particular, it will be crucial that a constructive and positive response is received from the third party states who are asked to partner with the Commission in developing the Multilateral Investment Court system. However, it remains to be seen whether the survey will elucidate clear responses which will assist the Commission in considering further its proposals for the future of investor-state dispute settlement: the majority of the survey questions treat as interchangeable the two different approaches (the establishment of a Multilateral Investment Court system and the establishment of a Multilateral Appeal Tribunal) and the survey does not seek responses on the development of a Multilateral Appeal Tribunal alongside reform of the current system of ad hoc arbitration. It is not clear whether this option continues to be considered by the Commission.
The issues and controversies surrounding the resolution of investor-state disputes are complex and any changes to the system pursued by the Commission would ideally be based on clearly expressed views from a range of stakeholders. It is to be hoped therefore that respondents to the survey take the opportunity offered by the Commission to clarify their responses by way of uploading a position paper.
With unprecedented growth in foreign direct investment, issues concerning substantive investment protection and the way in which investor-state disputes are resolved both now and in the future are significant for both states and investors. If you would like to discuss these issues or the Commission's consultation, please contact: Larry Shore, Partner, Dominic Roughton, Partner, Christian Leathley, Partner, Andrew Cannon, Partner, Iain Maxwell, Of Counsel, Vanessa Naish, Professional Support Consultant, Hannah Ambrose, Professional Support Consultant or your usual Herbert Smith Freehills contact.