Progress towards a Multilateral Investment Court? EU-momentum building and divisions in UNCITRAL Working Group III

In the past few years, discontent about Investor-State Dispute Settlement (ISDS, a recognised shorthand for ad hoc arbitration of investor-state disputes) has been fomenting in various parts of the world but nowhere more so than within the EU. The European Commission’s focus on ISDS has been so intense that far-reaching reform has been portrayed by many as inevitable. The Commission’s proposal is for the development of a multilateral investment court system (MIC). The proposal is ambitious, but may not be realistic or achievable. Last year, the ISDS debate moved into the auspices of UNCITRAL Working Group III (WGIII). It is recognised in the report of the 35th session of WGIII[1] that this “constitute[s] a unique opportunity to make meaningful reforms in the field”. Certainly the involvement of high level government representatives from across the world and the transparent nature of WGIII’s process suggest this forum provides the conditions for systemic reform. However, the features of the WG III process expose the Commission’s plans to global scrutiny at a relatively early stage in their development, potentially before the Commission has managed to gain significant support for wholesale change. One of the EU delegation, in its capacity as an observer, noted in the 34th session[2] that the EU was “confident that UNCITRAL is a forum where a solution can be found” even where the delegates start from different positions. The question will be whether the conclusion of the deliberations will lead to the reform that the Commission wants.

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Update on the future of ISDS: the discussions within UNCITRAL Working Group III – no apparent consensus to date

After a number of years of public debate in a variety of fora, the discussion of the future development of investor-state dispute settlement (ISDS) has recently moved to the United Nations Commission on International Trade Law (UNCITRAL). UNCITRAL Working Group III (WGIII) has been given a broad mandate to identify concerns regarding ISDS, consider whether reform is desirable and, if so, develop relevant solutions to be recommended to UNCITRAL.

WGIII started its work in the 34th session which took place from 27 November to 1 December 2017. As discussed further below, a number of key points were discussed, including: (i) the duration and costs involved in the procedure; (ii) the allocation of costs; and (iii) transparency. There was also some preliminary consideration of possible developments or changes in relation to the treatment of these issues. The Report of the 34th session indicates that some states advocate a fact-based analysis of ISDS but others note the need to address wider public perceptions of ISDS, as these can raise concerns over the legitimacy of the system.

Bringing the debate about the future of ISDS under the auspices of UNCITRAL, involving high level government representatives from across the world, and also in view of the transparent nature of WGIII’s process, raises the stakes, and perhaps also the prospects, of a more systemic reform. However, whilst the forum has the potential to generate a multilateral plan for ISDS, it is hard to discern any broad consensus at this stage either on the nature of the perceived problems associated with the current system of ad hoc arbitration, or on how those problems may be resolved. This is apparent from the Report and also from the audio recordings (helpfully summarised by IA Reporter, here). The 35th session will take place on April 23 to April 27 2018, following which further clarity on these issues may emerge.

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Brexit—the future of state-to-state, investor-state and domestic dispute resolution

The Brexit White Paper

The much-anticipated Brexit White Paper, ‘The United Kingdom’s exit from and new partnership with the European Union’, was published on 2 February 2017. This post focuses on a subject that has to date received relatively little attention—what it has to say about the future of dispute resolution. In its Chapter 2 (‘Taking control of our own laws’), and Annex A, the White Paper contains perhaps a surprising amount on dispute resolution, in comparison to the text devoted to the other eleven of the UK government’s 12 stated principles.

In this blog post we review the White Paper with the aim of discerning so far as possible the potential future of dispute resolution for the UK. In particular, we consider how the UK government envisages, at this relatively early stage, that disputes will be resolved under new post-Brexit UK-EU agreements, and if and how UK businesses will be able to enforce their provisions. We also consider certain implications of the end to the Court of Justice of the European Union (CJEU)’s jurisdiction in the UK and the adoption of the acquis under the Great Repeal Bill.

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CETA UPDATE: CETA is signed; Provisional application of CETA and Brexit; First government-to-government meeting to discuss establishing the multi-lateral investment court system

On 30 October 2016, the EU and Canada signed the Comprehensive Economic and Trade Agreement (the CETA).  As explained in our blog post here, the text of the CETA, which was originally agreed in 2014, was subjected to "legal scrubbing" in February 2016 which led to the inclusion, at the instigation of the EU, of an Investment Court System (an ICS) in place of the ad hoc investor-State arbitration provisions which had originally been included in CETA, and are included in roughly 3200 international investment agreements and other treaties. 

On 13 and 14 December 2016, the European Commission (the Commission) and the Canadian Government met in Geneva to engage in "exploratory discussions" with government representatives from around the world on the establishment of the multilateral ICS. It will have been the first meeting at government-to-government level on this initiative since the ICS was first proposed by the Commission in its Concept Paper of May 2015. For the multilateral ICS to succeed in the way envisioned by the Commission, broad global support will be required.

The CETA will be provisionally applied in advance of its ratification. However, as discussed below, provisional application will not extend to certain of the substantive investor protections, nor to the ICS. The exclusion of certain provisions from provisional application raises a number of questions as to how the agreement will operate in practice. 

Interestingly, whilst the UK has indicated that it intends to provisionally apply the CETA, the exclusion of the ICS from the provisional application has been described by the UK Government as its "main ask" of the EU in this context. The UK Government has also concluded that, even though CETA is being put forward as a "mixed agreement" and ratified by all the Member States, the UK will not automatically benefit from CETA's provisions after the UK leaves the EU.

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European Commission formally presents proposed Investment Chapter for TTIP to the US

Yesterday, 12 November, the EU formally presented its proposed language for the Investment Chapter of the TTIP to the US. As discussed in our earlier blog piece here, the EU is suggesting an "Investment Court System" to resolve disputes between investors and states under the TTIP.

The 12 November text is very similar to that seen in the previous draft, with a number of small changes. These changes include (but are not limited to):

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European Commission publishes draft investment chapter for the TTIP, including investment protection provisions and the establishment of an International Investment Court

On 16 September the European Commission published detailed draft proposals for the investment chapter in the proposed Transatlantic Trade and Investment Partnership treaty between the EU and the US (“TTIP”). The full text is available here. The chapter includes detailed investment protections and the establishment of an International Investment Court to resolve disputes under the TTIP. These proposals follow the Commission’s 5 May 2015 Concept Paper (discussed in our earlier blog here), which looked at reforming the ISDS system and proposed moving away from the current system of Investment Treaty arbitration.

The Commission has made it clear that this draft is for discussion and consideration within the EU before being put to the US as part of the TTIP text.

We explore and summarise below some of the key issues raised in the chapter.

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