The idea is to establish a permanent body to decide investment disputes, moving away from the ad hoc system of investor to state dispute settlement (ISDS). This multilateral investment court would adjudicate disputes under future and existing investment treaties.For the EU, it would replace the bilateral Investment Court Systems included in the recent EU level trade and investment agreements.
The concept of multilateral investment dispute settlement was already raised at EU level by some stakeholders in the 2014 public consultation as a more effective way to reform the ISDS system than bilateral reforms. In its Concept Paper of 5 May 2015 on "Investment in TTIP- the path beyond", the Commission also indicated that, in parallel to the reform process undertaken in bilateral EU negotiations, work should start on the establishment of a multilateral system for the resolution of international investment disputes. The European Parliament has also broadly supported the proposal to work towards a multilateral solution. In the same vein, the Commission's Trade for all communication of 2015 sets as an objective to engage with partners to build consensus for a fully-fledged, permanent multilateral investment court in order to develop a coherent, unified and effective policy on investment dispute resolution.
The proposal for a multilateral reform has also been met with increasing interest by many third countries. The signed EU-Canada trade deal (CETA) and the EU-Vietnam trade agreement both contain a reference to the establishment of a permanent multilateral investment court. The EU includes similar references in all of its ongoing negotiations involving investment.
As part of the discussions around the conclusion of the CETA agreement, the EU governments in the Council of Ministers adopted a declaration on the multilateral investment court:
"Moreover, the Council supports the European Commission's efforts to work towards the establishment of a multilateral investment court, which will replace the bilateral system established by CETA, once established, and according to the procedure foreseen in CETA."
The EU-Canada Joint Interpretative Instrument also states:
"Therefore, CETA represents an important and radical change in investment rules and dispute resolution. It lays the basis for a multilateral effort to develop further this new approach to investment dispute resolution into a Multilateral Investment Court. The EU and Canada will work expeditiously towards the creation of the Multilateral Investment Court. It should be set up once a minimum critical mass of participants is established, and immediately replace bilateral systems such as the one in CETA, and be fully open to accession by any country that subscribes to the principles underlying the Court."
The Commission is also carrying out an impact assessment on this initiative (see here and here). A 12-week public consultation will be launched shortly and a stakeholder meeting will be organised by February 2017.
Questions and Answers
Does the Commission already know what an actual permanent multilateral investment court would look like?
The purpose of the first exploratory discussions at government level in Geneva is precisely to examine this issue, so it is too early to say anything concrete about this.
The multilateral investment court could be modelled on the set up of most domestic and international courts and tribunals, which are normally composed of two instances - a first instance and an appeal instance. The first instance level could adjudicate claims brought under investment treaties that interested countries have decided to assign to the authority of the multilateral court. The appeal instance could hear appeals of the decisions of the first instance tribunal. Building further on the operation of existing courts, the multilateral investment court could have permanent staff and a secretariat to support it in its daily work.
Is it not the same model (first instance/appeal tribunal) as that which the EU and Canada are proposing in CETA?
The Investment Court System (ISC) in CETA is built around core principles as found also in most domestic courts and international tribunals such as permanency, appeal possibility, and random allocation of cases. These core principles would also feature in the discussions on a multilateral court.
However, negotiations in a multilateral context raise a number of specific issues such as scope of the tribunal, membership, appointment of adjudicators, geographical balance, permanency, enforcement, cost allocation and location which are not necessarily the same and cannot necessarily be dealt with in the same way as in a bilateral context. The discussions will be precisely about these issues.
How would stakeholders be involved in the negotiation process?
This is an inclusive process open to all interested countries. At EU level, the European Commission intends to keep the process around the initiative very open and transparent, with regular meetings convened with stakeholders to discuss progress made with other countries on the initiative. The Commission is also creating a dedicated website where all relevant material about the about the initiative will be made publicly available.
The Commission is also carrying out a full Impact Assessment of the initiative to establish a multilateral investment court. The 12-week, questionnaire based, public consultation process will be launched shortly and a stakeholder meeting on the initiative will be organised by February 2017. The final impact assessment report is expected to be made public around summer of 2017.
What would happen to the Investment Court Systems established in EU trade and investment agreements?
Once operational, the multilateral investment court would replace the bilateral Investment Court Systems that will have been included in EU level agreements and any other dispute settlement mechanisms included in investment treaties of EU Member States or in investment treaties between third countries.
The recent EU agreements with Vietnam and Canada both include provisions that foresee the transition from the current Investment Court System to a permanent multilateral investment court committing them to work with the EU to create a future multilateral investment court. The EU includes similar references in all of its negotiations involving investment.
Would such a permanent multilateral investment court be part of an already existing international organisation?
The multilateral court would need to be a legal entity under international law, but it is too early to say whether it would be a new stand-alone body or be docked into an existing international organisation. This perspective is kept open, but would need to take account of the views of the members of the international organisations being considered, their current and projected workload as well as the vocation and other activities of these existing organisations.
What is the likely timing for a permanent international investment court?
This will require building consensus with other likeminded countries. This cannot be achieved overnight. We will work with our partners to identify the best way forward.
What about the costs to operate a permanent multilateral investment court?
One possibility could be that the multilateral court is financed through permanent transfers from members, which is how most international organisations such as the World Trade Organisation (WTO) are financed.
Projected costs would be comparable to those of other international tribunals, such as the International Law of the Sea Tribunal, which costs around USD 10 million per year to run or the WTO Appellate Body costs around USD 7 million to operate per year.
The costs per member country would of course depend on the overall size of the membership. Over time, the operating costs of the multilateral court are also likely to decrease as the circle of membership grows and the institution gains in efficiency.
Would the EU need negotiating directives to establish a multilateral investment court? Where are we in the process?
Yes, as it would require the negotiation, signing and conclusion of an international agreement. In line with Article 218 of the Treaty, the Commission would act on the basis of a Council decision authorizing the Commission to negotiate such an agreement on behalf of the EU, together with negotiating directives.
At Commission level, as the recommendation for authorization would be considered a major EU policy initiative an impact assessment is required and is being carried out until mid-2017.
For More Information
Press Release on the future multilateral investment court