Since September 2015, the European Commission has been pushing forward a proposal for a new investment court system (ICS) aimed at addressing the numerous criticisms expressed about the existing investor-State dispute resolution (ISDS) mechanisms (see here, here and here for previous posts on this topic).
ISDS is a very sensitive topic since such disputes always place States in the position of respondents. Furthermore, they are seen by many as placing restrictions on a State’s right to sovereignty and right to regulate. In addition, the outcome of these disputes may profoundly impact the financial situation of a State. On top of those concerns, investor-State disputes are generally solved by recourse to international arbitration, a mechanism which is seen by many as lacking consistency, transparency and legitimacy.
In order to address those concerns, the key aspects of the proposal brought forward by the European Union are the following:
– The creation of a permanent investment court which would have exclusive jurisdiction to rule on investment claims and would therefore render forum-shopping and multiple parallel proceedings impossible;
– This permanent court would be composed of a First Instance Tribunal and an Appeal Tribunal;
– Judgements would be made by publicly appointed judges;
– Proceedings would be transparent and a right to intervene for all interested countries would be provided.
While I personally think that the ICS presents a step in the right direction, as it offers possible solutions to the main concerns raised about classical ISDS mechanisms, I do not think, nor pretend, that this proposal is free from any potential flaws.
Indeed, one of the main doubts expressed by many commentators against the ICS relates to the methodology for appointing judges to the First Instance Tribunal and to the Appeal Tribunal. For instance, in respect of the EU-Canada free trade agreement (CETA), it is currently contemplated that judges of the new investment court will be appointed by States and they should only serve a limited term of 5 years renewable once (Article 8.27 of the CETA).
If this appointment procedure is ever adopted, it will certainly not take long before the credibility, legitimacy, independence and neutrality of the whole system starts to be contested by the perception that the judges are biased in favour of States. It is indeed very likely that such a suspicion will quickly arise since those judges will be appointed (even if indirectly) by the States and because their term in office will be subject to re-appointment by those same States (meaning that the judges might be tempted to render decisions more favourable to States in order to be re-appointed).
While it remains to be seen whether the ICS will ever see the light of day, and if so under which form, I hereby suggest three possible alternatives/solutions in order to address the risk of State-partiality by judges.READ MORE