Recently, the EU Court of Appeal’s General Yves Bot presented his opinion on whether the CETA investment protection is compatible with EU law. And that’s it, says Bot, who sees no risk of the EU legal order being undermined by the agreement. The Advocate General’s opinion is not binding on the court, but most of the cases the judges choose to go on the same line. The European Court of Justice sets judgment in the case this year.
Read more in the article below (in English)
Investment Dispute Systems – lingering Issue in Trade Agreements
Earlier this year, the Advocate General of the Court of Justice of the European Union (CJEU), Yves Bot, delivered his Opinion on whether the Investment Court System (ICS) in the Comprehensive Economic and Trade Agreement (CETA) is compatible with EU law . Stating clearly, that ICS is, in fact, compatible with EU law, this opinion may bring to Belgium’s concern raised following complications in its ratification process, which nearly stopped CETA from coming into force. The matter is before the CJEU to deliver its opinion in due course.
Belgium’s concern, though broadly phrased in its request for opinion by the CJEU on the compatibility, was not merits and touched upon a long history of legal debate on disputed settlement systems within trade agreements.
For many years, the mechanism for investment investment has been the Investor-State Dispute Settlement System (ISDS). In recent years, however, this system has been highly criticized for showing lack of uniformity and transparency between the different outcomes of the investment arbitration, as well as lack of legitimacy and impartiality of arbitrators under this system. Indeed, one of the main content points of the Transatlantic Trade and Investment Partnership (TTIP), was the ISDS system. An order to avoid such situations, more recently trade agreements with Canada, Vietnam, and Singapore, have removed ISDS as the disputed resolution system and instead introduced a new system, the Investment Court System.
In a recent statement, EU stated that it has deviated from the ISDS system altogether and further stated that ”the new system – called the Investment Court System, with judges appointed by the two parties to the FTA and public oversight – is the EU agreed approach That it is pursuing from now on in its trade agreements. This is a translation of the case with Japan. Anything less ambitious, including coming back to the old Investor-to-State Dispute Settlement, is not acceptable. For the EU ISDS is dead . ”
However, the EU’s ambitions to move forward solely with ICS as its new investment dispute resolution system, are not willingly accepted by all with open arms. Japan, though agreeing with the EU not reintroducing ISDS into the Japan EU Trade Agreement (JEEPA), is also not agreeing to take on EU proposal for ICS. Though discussions of the final investment dispute resolution are still ongoing, JEEPA has already entered into force since Jan. 31, 2019.
The world of trade agreements is thus in need of a new and reformed investor-state dispute resolution system.
A proposal for reform has been made to the UN Commission on International Trade Law (UNCITRAL). The Working Group III has gone through two of the three stages, of identifying the concerns around ISDS and considering whether reform of ISDS is desirable in the light of the identified groups. The third stage of designing the reform will welcome proposals regarding the content of such reform by member states.
Amongst others, the EU has proposed, as a potential solution, a new system called the Multilateral Investment Court (MIC), which suggests the establishment of a permanent investment court, which would have exclusive jurisdiction to rule on investment claim. This court would include an appeal body as well as an appointment process whereby each contracting state provides a panel of candidates to this court. It furthermore, proposes an autonomous mechanism of enforcement, which would exclude any domestic review.
As this debate continues and trade agreements between countries continue to develop and come into force, concerns raised by Belgium in the CETA are simply the side effects of unclear investment dispute resolution systems. The request raised by Belgium highlights that the general public’s mistrust for investment arbitration is still present and thus demands to be addressed properly including all stakeholders. The arbitration community, aware of the importance of a positive understanding of arbitration by public and investors, aims now to improve it.
The ICC, already approached by UNCITRAL in November 2017, has been asked to mobilize the business community to engage and be represented at the the next Working Group III’s session in early April, in order to give the business and arbitration community’s view on the question.