October 2019 - international litigation blog
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October 2019

EU Commission Presents Proposals for Investment Court System in CETA and Announces Plurilateral Treaty to Terminate Intra-EU BITs

A couple of days before Working Group III of the United Nations Commission on International Trade Law (UNCITRAL) held its 38th session on the reform of investment arbitration, the European Commission (the Commission) presented four proposals (the Proposal(s)) to the Council of the European Union (the EU) for specific rules to put into place the Investment Court System (the ICS) provisions in the EU-Canada Comprehensive Economic and Trade Agreement (the Agreement or CETA).

The ICS included in CETA represents a new approach by the EU in relation to investment-related disputes and is the same approach taken in the agreements the EU has negotiated with Singapore, Viet Nam and Mexico, while also being on the table in all on-going investment negotiations.

The foundation of the ICS is already established in CETA (as discussed here, here and here), however it remains to be applied pending ratification of the Agreement by all of the EU Member States. The Joint Interpretative Instrument on CETA agreed by the EU and Canada in October 2016 includes a commitment to make the system operational as soon as the Agreement enters into force. The Proposals are thus necessary to deliver on this commitment and these rules complete the putting together of the reformed approach to investment dispute settlement under CETA.READ MORE


ISDS Reform: Working Group III Gets Down to Brass Tacks

Last week, multilateral efforts to reform investor-state dispute resolution (ISDS) entered a new phase, with substantive discussions of reform options beginning in earnest. As readers of this blog are aware, delegations from around a hundred States have been working multilaterally toward reforming ISDS in the United Nations Commission on International Trade Law (UNCITRAL), Working Group III (WGIII) over the last two years.

This work began in earnest in WGIII’s 34th Session in Vienna (2017) and has continued through biannual Sessions in Vienna and New York. From 2017–2018, Delegations registered substantial concerns with ISDS, relating to fragmented arbitral outcomes; the arbitrators charged with adjudicating disputes; matters of duration and cost; the lack of a framework to address multiple proceedings; and third-party funding (Phase 1). In Vienna last year, WGIII decided to work multilaterally to reform such concerns within UNCITRAL (Phase 2) – discussed further here. Last week proved to be a key hinge in the process. WGIII has now moved firmly into working on concrete reform options (Phase 3).

WGIII’s 37th Session in New York this past Spring 2019 appeared as something of a lull in the process, but it culminated in a key compromise on working methods that preserved consensus for the time being. WGIII spent much of that week debating working procedures, ultimately adopting a compromise plan to divide working time between developing “structural reforms” (i.e., large scale institutional reform options like a standing investment court or a standalone appellate body), and “functional reforms” (i.e., specific targeted reforms on problematic aspects of ISDS, like the lack of code of conduct, the lack of a mechanism to address multiple claims and shareholder claims more generally, third party funding, and security for costs). But it deferred actually developing a concrete project schedule until the fall.

WGIII’s 38th Session in Vienna last week marked the fruition of that compromise, and a transition into detailed discussions on reform options.READ MORE


U.S. Circuit Court Finds Section 1782 Allows for Obtention of Evidence Located Outside the U.S. Detained by Companies not Incorporated in the U.S.

On 7 October 2019, the United States Court of Appeals for the Second Circuit (the Second Circuit) rendered a decision in the case of Re: Application of Antonio del Valle Ruiz in which it ruled on whether 28 U.S.C. Section 1782 (Section 1782) allows for the obtention of evidence located outside the United States.

As we discussed before, Section 1782 is a U.S. Federal Statute that allows a litigant before a “foreign or international tribunal” outside the United States to apply to the U.S. district courts to obtain discovery against a person or entity residing or found in the district where the application is sought. As many jurisdictions, in particular civil law jurisdictions, have more limited procedures for the disclosure of evidence between parties, the possibility of using Section 1782 to obtain evidence is thus potentially very useful.

The case related to a dispute over the 2017 take-over, by the Spanish bank Santander, of Banco Popular Espanol, another Spanish bank. A group of Mexican and American investors contested the take-over and brought a case against Santander in the United States. During the dispute, the investors sought to obtain documents held by Santander. However, since Santander itself was not incorporated in the United States (and thus was not “residing or found” in the relevant district), the investors sought to obtain discovery, through a Section 1782 order issued against Santander‘s New York affiliate: Santander Investment Securities Inc.READ MORE


Nord Stream 2 Investor Initiates ECT Arbitration Proceedings Against European Union

On 26 September 2019, the Russian energy giant Gazprom issued, through its Switzerland-based subsidiary Nord Stream 2 AG, a notice for arbitration against the European Union alleging that recent amendments brought to Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (the Gas Directive) damaged its investments in the Nord Stream 2 pipeline and thus violated the Energy Charter Treaty 1994 (the ECT).

The issuing of this notice for arbitration appears to mark the first time that investment arbitration proceedings under the ECT are to take place against the European Union itself and serves as the latest saga in the area of inter-mixity of investment dispute settlement and EU law.READ MORE