The European Commission finalises its proposal for new permanent Investment Court System

As Volterra Fietta reported here, on 16 September 2015 the European Commission presented its draft proposal for a new Investment Court System to replace the investor-State dispute arbitration mechanism forming part of the proposed Transatlantic Trade and Investment Partnership (“TTIP”). On 12 November 2015 the European Commission finalised this proposal and made it public, following extensive negotiations with the European Council, European Parliament, stakeholders and citizens. The proposal has now been formally transmitted to the United States (“US”). The TTIP proposal has been developed in parallel to the European Commission’s work on establishing a new permanent International Investment Court. The European Commission reiterated that its objective in these endeavours is to replace the existing ad hoc system with a “modern, efficient, transparent and impartial system” for the resolution of international investment disputes.

Background

The final proposal, building on prior work undertaken by the Commission, sets out the Commission’s preferred position on the TTIP dispute resolution mechanism. The Commission’s ultimate vision was the establishment of a permanent investment court system, with tenured judges appointed in equal numbers by the European Union (“EU”), the US and third countries. In the period since the draft proposal was announced, the proposed TTIP text has been reviewed and debated by all key stakeholders within the EU with a view to securing broad endorsement before being formally tabled for discussion with the US.

Key elements of the finalised model for an Investment Court System

The final proposal released by the Commission included all of the key elements contained in the draft proposal announced on 16 September, plus a few additions to enhance accessibility for small and medium sized companies. As such, the final text contains the same proposal to establish a Tribunal of First Instance consisting of 15 appointed Judges and an Appeal Tribunal consisting of 6 Members.

As indicated in its earlier proposal, a key element for the Commission was to ensure independence and professionalism of the Judges and Members. The final proposal retains this intention, with the Judges and Members being 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 from a third country, who will act as chair). The Appeal Tribunal would also hear appeals in divisions consisting of three Members, chosen in a similar manner. The Commission envisages that either the ICSID Secretariat or the Permanent Court of Arbitration would act as the Secretariat to the Investment Court System, the cost of which is to be shared between the EU and the US. 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 text also includes the mechanism intended to address conflicts of interest which was contained in the draft.

Next steps

The next stage will see resumption of the negotiations between the EU and the US which had been on hold whilst the European Commission undertook public consultations on the existing TTIP mechanism. The proposal reflects only the EU’s view, and so the text in the final agreement will be the result of the negotiations to take place between the EU and US in the coming months. The most recent round of negotiations took place in Brussels from 22 to 26 February and this was the first time the EU’s proposal for the Investment Court System was available for discussion with the US. It is currently hoped that the TTIP negotiations will conclude in 2016. If agreed, the new system will replace the existing mechanism in the TTIP and the Commission will also propose it for adoption in all other on-going and future EU trade and investment negotiations. This trend was evidenced recently in the conclusion of the Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”), which contains similar requirements for a permanent, transparent and institutionalised dispute-settlement tribunal, a procedure for selecting tribunal members, an appeal process and more detailed ethical obligations for tribunal members.

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