The European Commission (EC) is, in fact, running two parallel proposals in its mission to reform investor-state dispute settlement. First, it aims to establish investment courts – in place of international arbitration tribunals – which would preside over bilateral EU investment agreements currently being negotiated or negotiated in the future. Such provisions are written into the EU-Canada Comprehensive Economic and Trade Agreement (CETA), as well as the EU-Vietnam Free Trade Agreement (EVFTA). Under these agreements, disputes will be referred to permanent tribunals with fixed numbers of members appointed from the EU and Canada/Vietnam, together with members from neutral countries. Members of the tribunal will be paid monthly retainers to ensure availability and will be required to conform to specific standards of independence. Both agreements also contain an appellate mechanism, with an appellate tribunal formed in a similar manner to the lower tribunal.
More significantly, both CETA and EVFTA envisage the formation of a permanent multilateral forum for investor-state dispute resolution. CETA, for example, provides that Canada and the EU “shall pursue with other trading partners the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes” and provides for this new system, once implemented, to have jurisdiction over disputes arising from CETA. This has been described by the EC as the “ultimate aim” and this investor-state court system (ICS) would be open to all countries. In December 2016, the EC and the Canadian Government co-hosted the first talks with government representatives from around the world on the establishment of this multilateral forum. A series of meetings are planned throughout 2017 to further develop the idea.
The ICS proposals can be seen as a response to criticisms (founded or otherwise) of the current ISDS system. Concerns around ISDS include alleged lack of transparency, oversight and due process and a perception that ISDS is weighted in favour of Western companies and states. Critics also cite the potential for conflicts of interest and corruption as tribunals are often formed of individuals whose professional background, critics allege, make their opinions predictable and may make them sympathetic to certain arguments. This plays into the concern that the current system favours foreign investors over states and impedes sovereigns’ rights to legislate and regulate in the interests of their citizens. These perceptions persist, despite not being supported by the empirical evidence. For example, the majority of cases referred to ISDS have been successfully defended by states.
The key elements of the proposed ICS include removing party autonomy as regards who will decide upon the dispute in favour of the permanent appointment of publicly appointed judges (who will be unable to act as counsel on other investor-state disputes) with comparable qualification requirements to those of other permanent international courts such as the International Court of Justice and the WTO Appellate Body.
Proceedings would be transparent, with open hearings and a right of intervention for third parties with an interest in the case. The system would preclude the ability to forum-shop and will tightly define and limit the ability of investors to bring cases to instances such as “discrimination on the basis of gender, race or religion, or nationality, expropriation without compensation, or denial of justice”. Crucially, the proposed system would enshrine and guarantee states’ right to regulate. It could be argued that these proposals, if enacted, would shift the balance of ISDS in favour of states.