Client Alerts

The European Commission proposes a new permanent Investment Court System

Volterra Fietta Client Alert
22 September 2015

On 16 September 2015, the European Commission presented its proposal for a new Investment Court System to replace the investor-State dispute arbitration mechanism which currently forms part of the proposed Transatlantic Trade and Investment Partnership (“TTIP”). In addition, the Commission also confirmed its intention to start work, in parallel to the TTIP negotiations, on setting up a permanent International Investment Court that would, in the longer term, become the only dispute resolution mechanism in investment agreements to which the EU is a Party. The purported objective is to increase the efficiency, consistency and legitimacy of the international investment dispute resolution system.

Background

The Investment Court System proposal draws upon the Commission’s recent work. In May 2015, Commissioner Malmström proposed a bilateral appellate mechanism in the TTIP “modelled on the institutional set-up of the WTO Appellate Body” and suggested that the aim should ultimately be a “permanent investment court with tenured judges.”

The proposal for a new permanent international investment dispute forum has already received preliminary endorsement from the European Parliament. On 8 July 2015, the European Parliament adopted a resolution containing recommendations to the Commission on the negotiations of the TTIP (the “Lange Report”). The Lange Report emphasised the Parliament’s preference for publicly appointed judges and an appellate mechanism.

The Commission’s proposed model for an Investment Court System

The Commission’s draft text on the Investment Court System in the TTIP articulates some of the reforms that the Commission proposes to implement also in other future trade negotiations. The fundamental element is the establishment of a permanent court that would replace the current system of ad hoc investor-State arbitration.

The Commission proposes to establish a permanent investment court system for TTIP disputes composed of:

  • a Tribunal of First Instance; and
  • an Appeal Tribunal

 

The Tribunal of First Instance would be composed of 15 Judges appointed jointly by the EU and the US of whom five would be EU nationals, five US nationals and five nationals of third countries. The permanent Appeal Tribunal would be composed of six Members.

The Commission also intends further measures to safeguard the independence and professionalism of the Judges and Members. For both instances, the Judges and Members would be appointed for a six year term, once renewable. The Tribunal of First Instance would utilise a randomised system in appointing three Judges to each case (one from the EU, one from the US and one who would also be the Chairman, from a third country). The Appeal Tribunal would also hear appeals in divisions consisting of three Members, chosen in a similar manner.

The Judges and Members would be subject to strict ethical and professional requirements. Upon appointment they would be prohibited from acting as legal counsel in any investment disputes. The Commission’s draft text also contemplates a mechanism to address conflicts of interests.

The Commission envisages that either the ICSID Secretariat or the Permanent Court of Arbitration could act as the Secretariat to the Investment Court System, the cost of which would be shared between the EU and the US.

Next steps

The proposal is currently an internal document of the European Union and the Commission will consult with the Member States and with the European Parliament before presenting a formal text proposal to the United States. It thus remains to be seen to which extent the proposal will be incorporated into the final text of TTIP.