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*International Arbitration

Published on December 11th, 2017 | by Aspasia Archontaki


Towards a Post-Arbitration Age: The European Commission’s Fast-Track Reform of Investment Dispute Settlement

The European Commission (“EC”) has recently taken another step in its efforts to replace the traditional investor-state-dispute-settlement (“ISDS”) mechanism which underlies the approximately 1,400 bilateral investment agreements in force between EU Member States and third countries. On 13 September 2017, the EC issued, based on Article 218(3) of the Treaty on the Functioning of the European Union (“TFEU”), a Recommendation for a Council Decision authorising the EC to open negotiations on behalf of the European Union for an international convention establishing a multilateral court for the settlement of investment disputes (the “Recommendation”).1)

With the Lisbon Treaty (Article 207 of the TFEU) foreign direct investment (“FDI”) became part of the common commercial policy of the European Union, which lies within the EU’s exclusive competence. Recently, in the context of the free trade agreement with Singapore, the Court of Justice of the European Union (“CJEU”) has clarified that the competence regarding ISDS in relation to both FDI and non-direct investment is shared between the EU and its Member States, insofar as they are required to act as respondents in certain disputes.2)

The EC has long considered FDI a “new frontier for the common commercial policy.”3) Indeed, shortly after the entry into force of the Lisbon Treaty, the EC started its efforts to develop a consistent, unified and effective investment policy. In 2010, the EC published the communication “Towards a comprehensive European international investment policy”,4) which explored the characteristics of a new investment policy genuinely established by the European Union. The communication also identified the need for more transparency, consistency, predictability and an appeal system in ISDS. Remarkably, while the EC invoked the need for reforms of the traditional ISDS system, it still considered acceding to the ICSID Convention. In this respect, the EC even noted the need for an amendment of the ICSID Convention to allow the accession of the European Union.5)

Yet, given the public outrage that erupted in the context of the EU’s trade negotiations with the US and, more generally, the global controversy over the legitimacy, consistency and transparency of ISDS following high-profile investment cases (e.g. Vattenfall AB and others v Federal Republic of Germany, ICSID Case No ARB/12/12), the EC’s views on ISDS seem to have changed considerably. The EC’s strategy has shifted from promoting reforms within the framework of the existing ISDS system to pushing for a replacement of the ISDS system by a formal court system.

Kluwer Arbitration Blog, here…

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