EU Commission Holds Second Stakeholder Meeting on Multilateral Investment Court - international litigation blog
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EU Commission Holds Second Stakeholder Meeting on Multilateral Investment Court

EU Commission Holds Second Stakeholder Meeting on Multilateral Investment Court

As you certainly know, international discussions are being held within UNCITRAL Working Group III (Working Group III) regarding the establishment of a multilateral investment court (Multilateral Investment Court).

As discussed before (here, here, here, here and here) the establishment of such a Multilateral Investment Court aims to address the numerous criticisms concerning existing investor-State dispute resolution (ISDS) mechanisms.

The first round of discussions took place in November 2017 in Vienna and the second round is scheduled to take place next week in New York City (23-27 April 2018).

As it did prior to the first round of negotiations in November 2017 (see our report), the European Commission (the Commission) held, on 13 April 2018, its second stakeholder meeting in order to discuss and share with civil society the key aspects of the negotiations  and the expectations regarding next week’s discussions in New York.

I was unfortunately not able to attend this stakeholder meeting. However, my colleague Benedict Blunnie has taken part in those discussions and has provided us with a summary of the points which have being raised.

Enjoy!

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The meeting was moderated by Adeline Hinderer (Deputy Head, Information, Communication and Inter-institutional Relations Unit). Colin Brown (Deputy Head, Dispute Settlement and Legal aspect of Trade policy Unit) gave an overview of the current state of play, and responded to questions from attendees.

State of play

Mr Brown began by recalling that the EU’s involvement in the UNCITRAL discussions relies on a decision of the Council of the European Union and a decision of the Member States within the Council. This is because the subject-matter falls jointly under national and European Union (EU) competence. The combined effect of these two decisions is to authorise the Commission to begin negotiations. On 20 March 2018 the Council adopted negotiating directives which set out the aims and objectives of the negotiations. Mr Brown noted that transparency is a priority for the Commission, and that it was the first time negotiating directives had been made public immediately upon adoption.

Mr Brown outlined the Commission’s preference for pursuing the establishment of a Multilateral Investment Court through UNCITRAL. Since 2017, Working Group III of UNCITRAL has been tasked with examining investor-state dispute resolution reform. This follows on from the completion of its work on online dispute resolution, which has led to a complete change of personnel within Working Group III.

While committed to the multilateral approach of UNCITRAL, the EU faces some challenges operating in this forum. Although almost half of the EU Member States are voting members of UNCITRAL, the EU as such is not a member of UNCITRAL. Observer status is, however, open to all other Member States and international organisations. This allows the EU to attend as an observer and to be represented by the votes of its Member States.

During those negotiations, the EU’s priorities include the following:

– The implementation of a Multilateral Investment Court treaty should be similar to the mechanism provided for in the Mauritius Convention on Transparency. This means that the provisions of the final Multilateral Investment Court Treaty should supplement existing investment treaties upon its ratification by State parties. This mechanism, noted Mr Brown, could potentially extend the reach of the such a treaty to the approximately 3000 existing bilateral investment treaties.

– The Multilateral Investment Court should be composed of two tribunals – one with jurisdiction at first instance, and the other with appellate jurisdiction.

– Judges of the Multilateral Investment Court must be independent and impartial. Mr Brown noted that the method of appointing members of the Multilateral Investment Court will require detailed work.

– Transparency should be a priority, and in line with the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration.

– The Multilateral Investment Court treaty should include appropriate guarantees of access to justice, in particular for SMEs. Participation by less economically developed countries should also be a priority.

Mr Brown noted that EU Trade Commissioner Cecilia Malmström has called for an inclusive process. While the voting membership of UNCITRAL is limited to 60, its sessions are open to all UN members and other observers from academia and civil society. Transparency is facilitated by the participation of observers, as well as the public availability of meeting documents and unedited sound recordings (which are available here).

Mr Brown also recalled that mandate of Working Group III is in three parts. First, it will identify and consider concerns regarding ISDS. Second, it will consider whether, in light of such concerns, reform is in fact desirable. Third, if reform is desirable, it will make concrete recommendations to the main UNCITRAL Commission.

The first meeting of Working Group III took place in Vienna from 27 November–1 December 2017. It was attended by approximately 130 participants, including 60 States. The chairmanship was contested, and Mr Shane Spelliscy of Canada was elected by a majority of 51% on the first ballot. Mr Brown regretted that a more consensual decision was impossible, but that ‘consensus‘ in UNCITRAL usage generally means something closer to ‘large majority‘ than ‘unanimity‘.

Working Group III proceeded to start work on the first part of its mandate on the basis of a Note prepared by the UNICTRAL Secretariat. The main procedural issues are identified as being duration, cost, and transparency of arbitral proceedings. The discussions covered those procedural issues, as well as investment protection standards and awards in ISDS cases (i.e., to page eight of the Note). The discussions in April 2018 will therefore continue this work and are unlikely to move beyond point one of Working Group III’s mandate.

Mr Brown noted that the Commission made a submission to UNCITRAL on 20 November 2017. This sets out the EU’s position on the first point of Working Group III’s mandate. It looks at a number of features of ISDS in a comparative context and examines the history of the ISDS system and its limitations in the modern world.

After its April 2018 meeting, Working Group III will report back to the main UNCITRAL Commission on the state of discussions. This is not expected to be extensive, unless significant progress is made on the first point of the mandate. The following meeting will take place in Vienna in November 2018, and is expected to start work on the second point of the mandate. The precise dates will be confirmed in July 2018.

Stakeholders’ questions

Mr Brown also responded to a number of questions from attendees. Recurring themes included concerns over transparency and legitimacy, the impact of the recent judgment in Case C-284/16 Achmea (something that we discussed here), the anticipated Opinion 1/17 (Opinion 1/17) requested by Belgium on the compatibility – with EU law – of the investment court system provided for in the CETA, and the interaction between national and international law. Active participants primarily represented trades unions, academia, NGOs and the press. A short thematic summary of Mr Brown’s responses follows.

– Mr Brown made clear that the Multilateral Investment Court will not apply on an intra-EU basis. The Achmea judgment was essentially about an intra-EU Bilateral Investment Treaty. In this case, the Court of Justice of the European Union highlighted the importance of mutual trust between EU Member States and the fact that the arbitral tribunal in this case had to apply EU law. This will not be the case with the Multilateral Investment Court.

– In relation to Opinion 1/17, the Commission’s position is that the CETA tribunal will act like any other international court (such as the ICJ) when considering domestic (or in this case European) law. In those cases, the international court must decide whether domestic laws are consistent with international obligations, but has no power to invalidate the domestic (or European) legislation in case of incompatibility with an investment treaty.

– Paragraph 11 of the negotiating directives sets out the EU’s position on the appointment of judges to the Multilateral Investment Court. Candidates must be of a “high quality with the necessary professional and ethical qualities to fulfil their duties“. There will be an emphasis on candidates skilled in public international law. Older practitioners and arbitrators may not necessarily have the requisite skills of treaty interpretation. The EU foresees long, non-renewable terms as a way of ensuring independence. This will also affect the composition of the candidate pool.

– Input from third parties in the course of the negotiations is welcomed, especially in the early stages. Groups of academics and practitioners have been organised on the margins of Working Group III’s sessions, but the Commission has no role in either of these. It is unclear how these groups will feed into the work of UNCITRAL generally.

– On whether the Multilateral Investment Court might favour corporate interests over sovereign interests, participants expressed concerns that there was an improvement in transparency but still fears of regulatory chill (e., the idea that governments would be less willing to adopt key legislation in certain areas for fear of being obliged to pay compensation to companies affected by those regulatory changes). Mr Brown suggested that these concerns were similar to those raised in relation to WTO accession twenty years ago. The WTO’s Appellate Body has taken a leading role in setting the balance between the interests of States and companies. This arises in large part, from the permanence and stability of its membership. A similar effect is expected from the Multilateral Investment Court.

The next stakeholder meeting will be held in October 2018 in advance of the 36th session of Working Group III in Vienna.

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