Latest Developments on Multilateral Investment Court – EU Commission Holds Stakeholder Meeting - international litigation blog
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Latest Developments on Multilateral Investment Court – EU Commission Holds Stakeholder Meeting

Latest Developments on Multilateral Investment Court – EU Commission Holds Stakeholder Meeting

As I have already discussed in previous articles, the European Commission (the Commission) has been pushing forward a proposal for the establishment of a multilateral investment court (the Multilateral Investment Court) in order to address the numerous criticisms concerning existing investor-State dispute resolution (ISDS) mechanisms.

In essence, the Commission’s proposal aims at dealing with procedural issues arising in the context of ISDS. In this vein the Commission proposes:

(i) The creation of a Multilateral Investment Court which would have exclusive jurisdiction to rule on investment claims and would therefore render forum-shopping and multiple parallel proceedings impossible;

(ii) That this Multilateral Investment Court would consist of a First Instance Tribunal and an Appellate Tribunal;

(iii) That judgments would be made by publicly appointed judges; and

(iv) That proceedings would be transparent; and

(v) That all interested parties would have a right to intervene.

The proposal has received a positive response from the United Nations Commission on International Trade Law (UNCITRAL) which has agreed, last summer, to consider a possible reform of the existing ISDS mechanisms and to act as a forum for negotiations in order to consider a reform of the existing systems. Those discussions will begin this week (i.e. 27 November and 1 December 2017) within UNCITRAL Working Group III (Working Group III). The Commission considers that UNCITRAL is the most appropriate forum for such discussions, given its wide membership and the opportunity for stakeholders to obtain observer status.

UNCITRAL (which supervises the work of each of its working groups) has granted a mandate to Working Group III in order to (i) identify and consider concerns regarding ISDS; (ii) consider whether reform of the current system is desirable in the light of any identified concerns; and (iii) if a reform of the system is desirable, develop and recommend relevant solutions to UNCITRAL. As a result, the mandate of Working Group III was multilateral reform of ISDS, and not the creation of a Multilateral Investment Court.

Working Group III will hold discussions twice a year, in particular in November (in Vienna) and in April (in New York City). In addition, UNCITRAL will present a report in July of each year.

In anticipation of those negotiations (which are scheduled to begin in Vienna this week), the Commission held a stakeholder meeting on 20 November 2017 which I have attended with my colleague Isabelle Van Damme. You will find below (based on a combination of our notes) a summary of the essential points mentioned during this discussion.

(i) The Commission recalled that the Council of the European Union (i.e. the Representatives of the EU Member States) was still in the process of reviewing the Recommendation authorising the opening of negotiations for the establishment of a Multilateral Investment Court (see my previous discussion on this topic). Those negotiations are aimed at addressing dispute settlement under investment agreements concluded by the European Union and/or the EU Member States, including the Energy Charter Treaty. However, according to the Commission, even if this review process is still under way, nothing prevented the Commission from taking part in the discussions of UNCITRAL Working Group III.

(ii) The Commission expects the first discussions of Working Group III to be very general and to focus initially on the first step of the mandate (i.e. to identify and consider concerns regarding ISDS). During the stakeholder meeting, the Commission confirmed that it will argue during those negotiations that traditional ISDS mechanisms face “systemic” problems. The Commission has also just published a paper setting out its views and concerns.

(iii) The Commission confirmed that if the Multilateral Investment Court is ever established, judgments rendered by that court will be enforceable through the New York Convention or the ICSID Convention. However, the Commission recognised that there was a concern that the European Union should not, through the negotiation of the Multilateral Investment Court, indirectly harmonise procedural rules governing the recognition and enforcement of awards for which the Member States might still enjoy a degree of competence.

(iv) The fact that States currently take part in the negotiations does not mean that they will necessarily adhere to the Multilateral Investment Court. Indeed, the Multilateral Investment Court would, in principle, only have jurisdiction in disputes in cases where both the respondent State and the investor’s home State would have adhered (through an opt-in process) to the jurisdiction of the Multilateral Investment Court for all their respective bilateral investment treaties. This opt-in mechanism is similar to the one put in place with respect to the application of the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (“The Mauritius Convention on Transparency”) and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS.

(v) The Commission also made clear that it was too early to tell whether certain countries will categorically refuse to adhere to the Multilateral Investment Court. The Commission specifically mentioned that in July 2017, all countries within UNCITRAL (including the United States, Russia and South Africa) had agreed to envisage a reform of the current ISDS system. In any event, the Commission signalled that agreement could be found on the Multilateral Investment Court without the need that all States become a party to that agreement.

(vi) The Commission also emphasized that – although the Multilateral Investment Court will be interpreting key provisions of various bilateral investment treaties – one of its objectives was to deliver a predictable and consistent case-law. According to the Commission, this can be achieved since most bilateral investment treaties are, to a large degree, drafted similarly and contain common clauses (such as national treatment, MFN, FET and full protection and security). In that regard, the Commission finds inspiration in the success of the WTO dispute settlement system. However, the Commission did not address the fact that WTO panels and the Appellate Body typically interpret treaties that bind all WTO Members.

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In the meantime, Gabrielle Kaufmann-Kohler and Michel Potestà (both of Levy Kaufmann-Kohler) have just published a supplement (the Supplement) to the report that they produced last year for UNCITRAL on whether the Mauritius Convention could serve as a model for the reform of ISDS and the establishment of a Multilateral Investment Court. This Supplement specifically addresses the composition of the Multilateral Investment Court and the appointment of its judges.

The Supplement offers a comparative analysis of the most important international courts and tribunals that adjudicate both State-to-State and individual-to-State disputes and examines (i) how many judges should be appointed to the Multilateral Investment Court; (ii) what would be the key requirements that judges should fulfill in order to be appointed as members of this court; (iii) how the judges should be selected; and (iv) what would be the judges’ term of office.

How many judges?

With respect to the first issue, the authors of the Supplement note that “[a] threshold issue in the design of the composition of a permanent dispute settlement body is the number of members and, in this respect, whether States wish to establish “full representation” or “selective representation” bodies. In full representation bodies, each State has an adjudicator on a permanent basis [e.g. the Court of Justice of the European Union or the European Court of Human Rights], usually a national of that State; in selective representation courts, there are fewer seats than the number of States parties to the court’s statute [e.g. the International Court of Justice]”.

With this in mind, the authors note that the choice between full or selective representation and the determination of the number of adjudicators will mainly depend on:

(i) Whether a large number of States adhere to the Multilateral Investment Court system. Indeed, if a large number of States become parties to this court, it will be difficult to ensure that each State will be represented by one adjudicator;

(ii) The fact that first instance tribunal is likely to comprise a larger number of judges than the appeal tribunal;

(iii) The fact that the number of adjudicators composing the Multilateral Investment Court is also likely to evolve with time, in particular if new States adhere to the system.

Key Requirements for Appointment

Unsurprisingly, the authors of the Supplement highlight that, with respect to the requirements for appointing judges to the Multilateral Investment Court, criteria such as nationality, linguistic competence, independence, impartiality, personal integrity and reputation should play a big role.

The authors also highlight that, in addition to reaching diversity goals (based on geography, age and gender) the candidates should have expertise and experience in international law and international investment law. The authors also make clear that when examining a candidate’s expertise, one should focus on the candidate’s competence rather than on a specific prior professional activity. According to the authors, “[e]xpertise and experience in international law and international investment law and/or familiarity with international dispute settlement are skills that may be acquired in a variety of ways beyond the judicial and academic paths, including through the practice of law, service as government officials“.

How Should Judges be Selected?

In addition to the key requirements mentioned above, the authors of the Supplement identify possible solutions and mechanisms, such as consultations and expert screening, aimed at minimizing risks of political interference (whether direct or indirect) and ensuring rigorous, transparent and meritocratic selection in the judges’ appointment process.

How long should the terms of office last?

With respect to the duration of the terms of office, I was glad to read that Gabrielle Kaufmann-Kohler and Michel Potestà seem to adhere to longer but non-renewable terms (without being explicitly mentioned, they seem to favour terms of 9 years). As you may recall, I had previously expressed a similar preference for long but non-renewable terms in a post published during the summer.

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PS: I would like to thank my colleague Isabelle Van Damme for her valuable contribution to this post – Quentin.

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