The 12th Round of Negotiation of the TTIP, which concluded last week in Brussels, provided the first opportunity for the negotiating parties to discuss the EU's proposed Investment Chapter. The EU's formal proposal for the Investment Chapter, which is discussed here, includes a two-tiered Investment Court System (ICS) for resolution of investor-state disputes.
As noted in our blog post here, it is no by means a foregone conclusion that the US will depart from the form of investor-state dispute settlement (ISDS) envisaged in its 2012 Model BIT and included in the recently concluded Trans-Pacific Partnership Agreement (the TPP). The EU's Chief Negotiator has confirmed that the negotiators are "working on the basis of textual proposals from both sides", and identifying areas of convergence. However, the method of resolving investor-state disputes has become such a controversial issue in Europe – including in the European Parliament – that the EU may find it difficult to retreat too far from its ICS proposal should the US decide to oppose it.
Whilst the EU and US are likely to find some degree of common ground in terms of the desire on both sides to protect the right to regulate, ISDS may not be the only area of divergence. For example, in the US Model BIT, it is confirmed that the concept of fair and equitable treatment does not require treatment in addition to or beyond that which is required by the customary international law minimum standard. This language is replicated in the Investment Chapter of the TPP. In contrast, the EU's proposed text avoids linking the concept of Fair and Equitable Treatment to the customary international law minimum standard by limiting fair and equitable treatment to a closed list of types of behaviour.
The EU and US have stated that they aim to conclude negotiations by the end of 2016 and have planned two further negotiating rounds before the summer break. Whilst the 12th Round has formally concluded, negotiators will reportedly remain in contact to progress matters with a view to producing a draft text by July in which only the most sensitive issues are subject to further negotiation.
In a further significant development published today, the EU and Canada have released the revised text of the Comprehensive Economic and Trade Agreement (CETA) – which was concluded in August 2014 – following the completion of a legal review process which has resulted in modification of the text of the Investment Chapter. The revised CETA Investment Chapter will be continued in more detail in a later blog post. The most notable amendment is the removal of the previous text providing for investor-state arbitration. This has been replaced with the inclusion of a two-tier ICS, replicating the EU's TTIP proposal, and following the recent conclusion of similar provisions in the EU-Vietnam FTA. The apparent acceptance by Canada of this new form of investor-state dispute resolution may assist the EU in its negotiations with the US on this point.
For more information, please contact Larry Shore, Partner, Isabelle Michou, Partner, Christian Leathley, Partner, Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, Hannah Ambrose, Professional Support Consultant, or your usual Herbert Smith Freehills contact.