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Investment Law

CETA ISDS Mechanism Compatible with EU Law: What Implications?

This article has jointly been co-authored by Isabelle Van Damme and Quentin Declève

On 30 April 2019, the Court of Justice of the European Union (CJEU) decided in Opinion 1/17 that the chapter on investor-State dispute settlement (ISDS) in the Comprehensive Economic and Trade Agreement between Canada, of one part, and the European Union and its Member States, of the other part (CETA) is compatible with EU primary law. On 29 January 2019, Advocate General Bot had already reached the same conclusion (for an analysis, see here).

Opinion 1/17 removes a significant obstacle to the ratification of CETA by the EU Member States and the ratification of investment protection agreements with, for example, Singapore and Vietnam, which contain similar chapters on ISDS. The Opinion also significantly boosts the European Union negotiating position in the ongoing United Nations Commission on International Trade Law (UNCITRAL) negotiations on ISDS reform. At the same time, the Opinion might, to some extent, tie the hands of the European Union in negotiating in that forum.READ MORE

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Opinion 1/17 on CETA: Advocate General Bot Finds Investment Court System in CETA compatible with EU law

This article has jointly been co-authored by Quentin Declève and Isabelle Van Damme

On 29 January 2019, Advocate General Bot delivered his long-awaited Opinion (the Opinion) on whether the investment court system (ICS) in Chapter Eight, Section F, of the European Union-Canada Comprehensive Economic and Trade Agreement (CETA) is compatible with European Union (EU) law, in particular with the autonomy of the EU legal order and fundamental rights. The next step in the proceedings before the Court of Justice of the European Union (CJEU), initiated by Belgium following complications in its ratification process, is for the CJEU to deliver its Opinion on the same question (see previous post here and report of the hearing before the CJEU here).

This article discusses the key elements of the Opinion and the implications of these CJEU proceedings on the European Union’s common commercial policy and its policy of advocating reform of existing investor-State dispute settlement (ISDS) and the establishment of a multilateral investment court (MIC).READ MORE

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ISDS Reform, Intra-EU BITs and CETA: New and Upcoming Developments

On 19 January 2019, the European Union submitted new proposals to the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WGIII) tasked with examining the reform of investor-State dispute settlement (ISDS).

As we have reported before (see here, here, here and here), discussions are currently being held within WGIII on a possible reform of ISDS mechanisms. Those rounds of discussions take place twice a year (in April and in November) and were initiated in November 2017. The discussions are divided into three distinct phases: identifying concerns about ISDS (Phase I); considering whether reform of the current system is desirable in the light of any identified concerns (Phase II); and designing options for reform responding to any such concerns (Phase III).

After its 36th Session (which took place in Vienna in October-November 2018), WGIII has now almost completed Phase II of its mandate.

In order to move into Phase III and start discussing concrete reform options, the Chairman of WGIII has invited countries involved in the discussions to submit proposals regarding the content of such reform as well as the roadmap to achieve those reforms. Those proposals would then be discussed during the next meeting of WGIII in April 2019.

In light of this invitation, the EU has now submitted two papers to the WGIII Secretariat.READ MORE

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Modernizing ICSID’s Rules for Resolving Investment Disputes

By Martina Polasek and Damon Vis-Dunbar[1]

The procedural rules of the International Centre for Settlement of Investment Dispute  (ICSID) have been successfully applied to hundreds of cases since they were first adopted in 1967, a remarkable testament to the innovative spirit and foresight of the original drafters. The robustness of the rules has also made the task of gradual modernization much easier.

The rules have, in fact, evolved over the last 50 years. In 1978, the ICSID Additional Facility was created, offering arbitration, conciliation, and fact-finding services to disputes that fall outside the scope of the ICSID Convention – namely where only one of the parties is an ICSID Member State or national of one, or where the dispute does not arise “directly” out of an investment between a state and a foreign national.

There have been three subsequent rounds of rule changes, the most recent of which entered into force in April 2006. Those amendments included strengthened disclosure requirements for arbitrators; expanded transparency provisions (including a provision allowing open hearings); and a new rule allowing a party to obtain an early dismissal of a case due to manifest lack of legal merit[2].

As readers of this blog may be aware, ICSID is now in the process of updating its rules for the fourth time. Notably, the amendments under consideration are the most extensive to date. They cover the ICSID Regulations and Rules, adopted pursuant to the ICSID Convention; the Additional Facility Rules; the Administrative and Financial Regulations; and the Institution Rules.READ MORE

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The Peruvian State’s Response to International Investment Disputes

The dispute settlement system between foreign investors and host States of investment has seen an important development in recent years. This should not be a surprise if we consider that the trend of signing bilateral agreements for the promotion and protection of investments had a notable increase at the beginning of the nineties. These agreements establish a series of guarantees and minimum protections for foreign investment, as well as a mechanism for the resolution of disputes that may arise with respect to alleged breaches of said commitments. The vast majority of proceedings initiated at the International Centre for Settlement of Investment Disputes (ICSID) are based on an alleged breach of one of these instruments.

Peru has not been a stranger to the tendency of signing international agreements for the promotion and protection of investments and, unfortunately, it has also seen a sharp increase in new international investment controversies in recent years.

After facing a first case in 2003, Peru understood the importance of being able to efficiently and effectively organize its defence, establish coordination mechanisms within the State, centralize all relevant information and define the responsibilities of the entities involved in the controversies.READ MORE

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A Watershed Moment for ISDS Reform

Last week marked a watershed moment for the movement to reform investor-state dispute settlement (ISDS). Meeting in Vienna, Delegates to the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WGIII) agreed to work multilaterally to reform the resolution of investment disputes. Delegates agreed to focus on responding to key systemic concerns with ISDS, as identified in WGIII’s two previous sessions.[1]

WGIII began its work on ISDS in Vienna last year, at its 34th Session. From the start, Delegates divided the process into three broad phases: identifying concerns about ISDS (Phase I); deciding which concerns, if any, were ripe for multilateral reform in UNCITRAL (Phase II); and designing options for reforms responding to any such concerns (Phase III). Phases I and II would be of prime importance in setting the frame. Though additional concerns can always be raised, any agenda for reform would be largely grounded in the problems identified in these early meetings. WGIII began its work identifying concerns with ISDS in 2017 and essentially concluded Phase I at its 35th Session in New York last Spring. By the end of that meeting, WGIII had identified a range of procedural and structural concerns with ISDS, relating to: (i) fragmented arbitral outcomes; (ii) the arbitrators charged with adjudicating disputes; (iii) matters of duration and cost; and (iv) third-party funding.READ MORE

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Opinion 1/17 on CETA: Hearing Report

On 26 June 2018, the Court of Justice of the European Union (the CJEU) heard the legal arguments raised by the institutions of the European Union and by some EU Member States in Opinion 1/17 on the compatibility of the Investment Court System (ICS) provided for in the EU-Canada Comprehensive Economic and Trade Agreement (CETA).

As we discussed before, the CJEU is requested to provide an opinion regarding the compatibility of the ICS contained in CETA with respect to: (i) the exclusive competence of the CJEU, pursuant to Article 267 of the Treaty on the Functioning of the European Union (TFEU), to give a binding interpretation of EU law; (ii) the general principle of equality and the practical effect (‘effet utile‘) of EU law; (iii) the right of access to courts; and (iv) the right to an independent and impartial judiciary.

I was unfortunately unable to attend this hearing. However, my friend José Rafael Mata Dona attended the hearing and has kindly provided us with a summary of the main points which were raised.READ MORE

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