EESC supports reform of ISDS and addresses fundamental questions on the establishment of a multilateral investment court

At a time when major global players have initiated a trade war and protectionism is back in many parts of the world, the European Commission is promoting the establishment of a multilateral court for the settlement of investment disputes. In relation to this initiative, the European Economic and Social Committee (EESC) calls for fundamental questions on scope, protection of public interest, accessibility and relations with domestic courts to be addressed.

In an opinion approved at its December plenary session, the EESC welcomes the Commission's efforts towards a multilateral reform of investor-state dispute settlement under the auspices of the United Nations Commission on International Trade Law (UNCITRAL). These efforts include a commitment to transparency, which has allowed non-governmental organisations to take part in the discussions. However, the EESC calls on the Commission to step up its efforts to involve civil society, and in particular the EESC, more actively in the process.

Philippe De Buck, rapporteur of the EESC opinion, emphasised that while there is general agreement that investments abroad need some kind of protection, the multilateral investment court is a long-term political project that would need the support of a critical mass of countries in order to come into existence. Indeed, the opinion states that foreign investors must have global protection against direct expropriation, be free from discrimination and enjoy equivalent rights to domestic investors. However, it also points out that the right of States to regulate in the public interest must not be undermined.

In the same vein, co-rapporteur Tanja Buzek considered it vital that the EU remains open to all approaches and ideas that have surfaced regarding ISDS reformand stressed that the question of a multilateral investment court had many aspects, both procedural and substantial, that had to be taken into consideration.

Among these fundamental questions, the EESC considers it vital that the multilateral investment court does not affect the ability of the EU and its Member States to fulfil their obligations under international environmental, human rights, labour and consumer protection agreements, and therefore insists on the introduction of a hierarchy clause and a public interest carve-out. In this sense, it is important to note that none of the agreements concluded by the EU or its Member States would be automatically placed under the jurisdiction of the multilateral investment court and that a transition period would be agreed to guarantee a high level of protection of investments.

Autonomy of EU law

The EESC's opinion also highlights that the establishment of a multilateral investment court should not negatively affect the EU's judicial system and the autonomy of EU law. To tackle this issue, the EESC encourages the Commission to further investigate the issue of the exhaustion of local remedies and how it could work in the context of the multilateral investment court.

The opinion also stresses the importance of the independence and legitimacy of judges. According to the text drafted by Philippe De Buck and Tanja Buzek, the appointment of judges on a permanent basis is key in building case law and improving predictability. Finally, the EESC insists that SMEs should enjoy the same level of protection granted to big companies as well as access to dispute settlement at reasonable conditions and costs. It also insists that all decisions of the multilateral investment court should be enforceable and made public.

 

Background

The EU is the world's largest source and recipient of foreign direct investment. Worldwide, there are more than 3200 existing (bilateral) investment agreements – including over 1400 agreements concluded by EU Member States. It is therefore important for the EU to ensure that the resolution of investment disputes operates effectively at international level.

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