Tag Archives: debate

The U.S is sceptical of the European Commission’s ISDS proposal

?????????????????????????????????????????????????????????????????????????????In mid-September, the European Commission presented its proposal on dispute resolution in the TTIP, as we have previously discussed on this blog. In our previous post, we find it promising that the Commission’s proposal is built on existing practices but we also note that the proposal raises many questions.

The Commission’s proposal is only a proposal. It must first be accepted at home within the European Union and later be put on the negotiating table with the U.S counterpart. There has been some suspicions that the U.S would have doubted the proposed changes and this suspicion has now been confirmed.

The U.S Trade Representative Michael Froman especially expresses scepticism about the proposal of appeal mechanism in which the entire case will be reheard (in the current system, an award may only be appealed on procedural grounds). The U.S is among the countries that has been sued the most in ISDS nevertheless it has never lost a case, and the U.S Trade Representative is hesitant to give investors a second chance in the proceeding. As he puts it, “It’s not obvious to me why you would want to give companies a second bite of the apple”.

Another aspect of the proposal that has been widely criticized is the closed list of arbitrators to be pre-appointed unilaterally by states, in contrast to the current system in which each party in dispute may appoint an arbitrator.

Michael Froman would prefer that the investment chapter of the TTIP has provisions closer to those in the U.S model investment agreement of 2012. This model agreement is considered to be the most progressive of its kind and is based on international “best practices”.

The text of the completely negotiated TPP, which has recently been released, is based largely on such American model agreement. Froman believes that this should be the starting point of the TTIP.

Investment Treaty Forum in Stockholm

ITFSeminarThe Investment Treaty Forum was recently held for the first time in Stockholm.

The British Institute of International and Comparative Law, in cooperation with the SCC, Mannheimer Swartling and Uppsala University, organized Investment Treaty Forum in Stockholm on 12 June 2015.

The Investment Treaty Forum was founded in 2004 with the aim to provide a global centre for serious high level debate in the field of international law. The theme of the meeting – Europe as an Investment Treaty Actor – brought together speakers and participants from government, legal practitioners, academia, politicians and business. See the full program here.

The importance of investment treaty for European economic development was one of the topics discussed. Investment treaty contributes to predictability, stability and transparency in investment relation. It was further highlighted that investment treaty will benefit not only the industry, but also governments and consumers. Investment treaty has the potential to open up new market opportunities for European investors abroad and also to make Europe a more attractive place for investment. But there were also critical voices raised, questioning the need for investment protection.

The evolution of substantive terms of investment treaty was equally addressed. States retain full control of the regime, among others by issuing interpretation of the treaty and by introducing new provisions of investment protection. The former has been done by the state parties to the North American Free Trade Agreement and the latter by, among others, the European Commission.

The seminar ended with the well-anticipated discussion on the roles of the European Commission in investment law regime. In addition to its role as negotiator of future investment treaty, the Commission has also emerged as litigator and enforcer in the regime.

More pictures and presentation materials from the seminar will be published here shortly.

 Photo: Björn Leijon

 

 

 

A better debate on ISDS

Let us start with a better debate on ISDS. Describing ISDS as a method by which investors are “circumventing decisions states deem in their best interest” is simply not correct. Yet, this argument recently came up in an Op-Ed at the New York Times.

But a better debate should start with a comprehensive understanding of the basis and functioning of ISDS.

From the outset, the Op-Ed reflects a lack of understanding of the rule of law. Governments are not immune. We cannot go back to the days where “the King can do no wrong”. When a government violates a certain right, an individual who suffers damage from the violation should be able to bring a claim to enforce his/her right.

The right to bring a claim against the state in ISDS does not come from thin air. It comes from an investment treaty, concluded by the very same state. The treaty typically provides, for the substantive part, certain rights to foreign investor and, for the procedural part, the right to bring a claim against government to enforce this right.

In comparison, the human right regime similarly provides for the right of individuals to bring a claim against a government for an alleged violation of a human rights protection. In fact, the European Court of Human Rights received more than 65,000 claims in the year 2013 alone. As we have written before, a large number of ISDS claimants are also individuals.

Governments have also been using ISDS to bring claims against investors, provided the underlying agreement provides for this possibility. See for example an ICSID case, Republic of Peru v Caraveli.

A better debate on ISDS should carefully put numbers into perspective. The Op-Ed is critical towards the huge claims in the Vattenfall and Pacific Rim cases to illustrate the system’s flaws. These cases are not yet decided thus it is at best unwise to assess ISDS as a legal mechanism based on undecided claims.

The Op-Ed further points out the unusually high award in Occidental Petroleum v Ecuador. This fact however does not define ISDS as a legal mechanism. If the investor’s claim is granted, the amount of damages does not depend upon ISDS as a procedural form, but upon the size of the investment in the first place. A calculation of damages needs to be done also when domestic courts are charged with the task of deciding claims based on an alleged violation of rights.

The ICSID statistic is clear that in 43% of cases, government was successful in defending its case.

The Op-Ed is therefore nothing more than a selective mentioning of different ISDS claims. It does not analyze the functioning of the system or even the merits of the claims. The important debate on the future of ISDS and the importance of the rule of law deserves a more fact-based approach.