New article examines the EU Commission proposal

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A new article, which will soon be published in an academic journal but is available in draft form through the science network SSRN, analyzes the appellate mechanism that the EU Commission intends to introduce in future EU investment treaties. The study finds that the new model, which has so far been incorporated in the treaties with Canada and Vietnam, is not compatible with the ICSID Convention. Among other things it finds that the proposed appellate mechanism would constitute a change of the ICSID Convention, which would require a formal procedure that does not look practically possible. Therefore, the ICSID system cannot be used seamlessly, which leads to several practical problems (first and foremost that the resulting awards are not enforceable under the ICSID Convention).

We have previously written more generally on the EU proposal on this blog, both briefly when it was first introduced, but also when the American Bar Association published its report. The new study is published by Jansen Calamita from National University of Singapore. It does not look at the proposed ”Investment Court System” generally but analyzes specific aspects of the proposal in the light of existing legal norms. Furthermore, it is not a policy text – it does not address whether or not the proposal is a good idea. Rather, it focuses on whether the appellate mechanism conforms with existing international rules, primarily the New York Convention and the ICSID Convention. The New York Convention regulates the enforcement of most international arbitral awards and therefore often applies also to ISDS awards. The ICSID Convention, by contrast, is a specific instrument which only covers ISDS.

Although the text finds that the EU proposal is not compatible with the ICSID Convention, it also argues that the proposal meets the definition of ”arbitration” under the New York Convention, which means that the resulting awards could probably be enforced under that convention instead.

The text also proposes that one way to get around some of the problematic issues (especially the question marks concerning enforcement) would be to do like the UNCITRAL Transparency Rules: create a separate convention, through which states can consent separately to the new system.