International arbitration partner Christian Leathley spoke on a panel at an event organized by transatlantic business organization BritishAmerican Business yesterday discussing how important investor-state dispute settlement is to the success of the TTIP and whether it is feasible or desirable for the TTIP to be concluded in the absence of ISDS provisions. The TTIP is discussed in our blog post here. The keynote speech at the event was delivered by European Commissioner for Trade Karel de Gucht, who is negotiating the TTIP on behalf of the EU.
Mr de Gucht described the need for the EU Commission to get the right balance between protecting the rights of investors and preserving the right of states to regulate in the public interest. He also explained how the investment protection provisions in the TTIP were of fundamental importance in setting the standards which would be relevant in the negotiation of future investment agreements and FTAs between the EU and other states. Other speakers also referred to the global signal which would be sent by the inclusion of ISDS and the content of the substantive protections in the TTIP.
Christian noted that there was a need to identify what was the fundamental problem with ISDS; namely, that it was not the arbitral institutions (in particular ICSID) which were the issue and, whilst access to arbitration is fundamentally important, the core of the criticism of ISDS addressed the substantive rights granted to investors. He commended the EU Commission for launching the public consultation on the investment protection provisions in the TTIP as an attempt to bring together the perspectives of states and investors on substantive protection in a meaningful way. In terms of the EU Commission’s approach to the negotiation of the investment protection chapter with the US, Christian highlighted some points for further consideration, including: (i) questioning the need to amend or add to the UNCITRAL Transparency Rules, which themselves were the product of very detailed consideration; (ii) noting that the “closed list” of grounds for breach of the Fair and Equitable Treatment Standard was in places inconsistent and incomplete, particularly with regard to the treatment of an investor’s legitimate expectations; and (iii) criticising an approach which was premised on an assumption that use of shell companies was per se abusive.
Other panellists noted the importance of promoting investment and that the corollary to promotion was robust protection. They also stressed the need for a transparent and fair dispute resolution mechanism.
The EU Commission’s consultation on the investment protection provisions in the TTIP closes on 6 July 2014.
For further information, please contact Christian Leathley, Partner, Hannah Ambrose, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.