Investment Court System

Investment Court System in Europe

The European Commission approved in September 2015 a proposal for a new system for resolving disputes between investors and states.

The Investment Court System would replace the existing investor-to-state dispute settlement (ISDS model) mechanism in all ongoing and future EU investment negotiations, including the EU-US talks on a Transatlantic Trade and Investment Partnership (TTIP).

Article 3 of the the Commission’s proposal document said that each Party will accord, in its territory, to covered investments of the other Party and investors with respect to their covered investments fair and equitable treatment and full protection and security

Therefore, a Party breaches the obligation of fair and equitable treatment referenced above where a measure or a series of measures constitutes:

  • denial of justice in criminal, civil or administrative proceedings; or
  • fundamental breach of due process, including a fundamental breach of transparency and obstacles to effective access to justice, in judicial and administrative proceedings; or
  • manifest arbitrariness; or
  • targeted discrimination on manifestly wrongful grounds, such as gender, race or
    religious belief; or
  • harassment, coercion, abuse of power or similar bad faith conduct; or
  • a breach of any further elements of the fair and equitable treatment obligation
    adopted by the Parties

There is a fundamental and widespread lack of trust by the public in the fairness and impartiality of the old investor-to-state dispute settlement model. This has significantly affected the public’s acceptance of investor-to-state dispute settlement and of companies bringing such cases.

Investment protection is an important part of the European Union’s investment policy. European investors are the most frequent users of the existing system, which individual European Union countries have developed over time.

The idea is to introduce the same elements that lead citizens to trust their domestic courts. It will be judges, not arbitrators, who sit on these cases. They must have qualifications comparable to those found in national domestic courts, or in international courts such as the International Court of Justice or the WTO Appellate Body.

Those judges would be publically appointed in advance. And, like in courts, citizens will not be able to choose which judges hear your case. Furthermore, it should be guarantee there is no conflict of interest. Again, like in domestic and international courts, the judges won’t be able to continue any activities which might interfere with their judicial functions. Finally, it will be introduced an Appeal Tribunal. Just like in domestic legal systems and the World Trade Organization.

The Investment Court System will also enshrine governments’ right to regulate. Our proposal includes a direct instruction to the judges, which the appeal tribunal will ensure is properly respected.

All this will be done in a system where there is even greater transparency than in domestic courts, with all documents online and all hearings open to the public. An overview of the proposal can be found here. The full text of the proposal along with a reader’s guide is also available.

Real Courts

It is intended to ensure that all actors can have full trust in the system. Built around the same key elements as domestic and international courts, it enshrines governments’ right to regulate and ensures transparency and accountability.

The new Investment Court System will be composed of fully qualified judges, proceedings will be transparent, and cases will be decided on the basis of clear rules. In addition, the Court will be subject to review by a new Appeal Tribunal. With this new system, it is protected (at least, in theory) the governments’ right to regulate, and ensure that investment disputes will be adjudicated in full accordance with the rule of law.

Main elements

The proposal for the new court system includes major improvements such as:

  • a public Investment Court System composed of a first instance Tribunal and an Appeal Tribunal would be set up;
  • judgements would be made by publicly appointed judges with high qualifications, comparable to those required for the members of permanent international courts such as the International Court of Justice and the WTO Appellate Body;
  • the new Appeal Tribunal would be operating on similar principles to the WTO Appellate Body;
  • the ability of investors to take a case before the Tribunal would be precisely defined and limited to cases such as targeted discrimination on the base of gender, race or religion, or nationality, expropriation without compensation, or denial of justice;
  • governments’ right to regulate would be enshrined and guaranteed in the provisions of the trade and investment agreements.

This builds on the EU’s existing approach which ensures:

  • Proceedings will be transparent, hearings open and comments available on-line, and a right to intervene for parties with an interest in the dispute will be provided;
  • Forum–shopping is not possible;
  • Frivolous claims will be dismissed quickly;
  • A clear distinction between international law and domestic law will be maintained;
  • Multiple and parallel proceedings will be avoided.

Towards an International Investment Court

Finally, in parallel to the TTIP negotiations, the Commission will start work, together with other countries, on setting up a permanent International Investment Court. The objective is that over time the International Investment Court would replace all investment dispute resolution mechanisms provided in EU agreements, EU Member States’ agreements with third countries and in trade and investment treaties concluded between non-EU countries. This would further increase the efficiency, consistency and legitimacy of the international investment dispute resolution system.


See Also

References (Papers)

  • The Function Of The International Court Of Justice In The World Community, Sir Francis Vallat, Apr 2016
  • The Proper Reach Of Territorial Jurisdiction: A Case Study Of Divergent Attitudes, Philippe Schreiber, Apr 2016
  • The Proper Reach Of Territorial Jurisdiction: A Case Study Of Divergent Attitudes, Robert Y. Jennings, Apr 2016
  • The Place Of Policy In International Law, Richard A. Falk, Apr 2016
  • The Place Of Policy In International Law, Elihu Lauterpacht, Apr 2016
  • The Place Of Policy In International Law, D. H. N. Johnson, Apr 2016
  • Dorothy Moser Medlin Papers – Accession 1049, Dorothy Moser Medlin, Jan 2017

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