Originally from Investment Treaty Arbitration and International Law - Volume 10

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I.    INTRODUCTION

The United States and the European Union (EU) are currently negotiating the biggest bilateral trade deal in history: the Transatlantic Trade and Investment Partnership (TTIP).   A contentious part of those negotiations is whether the final agreement will include Investor-State Dispute Settlement (ISDS).  On November 12, 2015, the EU unveiled an innovative proposal for the creation of an Investment Court System (ICS) to replace the ISDS model in TTIP.   In support of the EU Proposal, EU Trade Commissioner Cecilia Malmstrom cited a “fundamental and widespread lack of trust by the public in the fairness and impartiality of the old ISDS model.” 

There is certainly room for debate whether ISDS deserves this indictment and also whether the “lack of trust” in ISDS is rooted in evidence or, rather, a misunderstanding of the current system.  That notwithstanding, the general notion that ISDS is in need of reform is neither novel nor controversial.   Indeed, according to the 2012 UNCTAD Report: “the shortcomings of the ISDS system have been well documented”, including contradictory interpretations of investment provisions, potential conflicts of interest arising from party-appointment of arbitrators and the practice of some arbitrators serving as counsel in some cases and arbitrators in others, and “overall concerns about the legitimacy and equity of the system.” 

Responding to these criticisms, the EU proposes the creation of ICS: “a new fully transparent system for resolving investment disputes, with publicly appointed judges, the highest ethical standards and the possibility to have errors corrected through an appeal instance.”   More specifically, the EU Proposal envisions a standing bilateral investment court of fifteen judges with an appellate chamber of six judges empowered to reverse or modify awards based on errors of law or fact.   The judges will be publicly appointed, possess qualifications comparable to those of national judges, and will be subject to strict conflicts rules.   In addition, there are relatively short deadlines for both chambers – 18 months to issue a provisional award and six to nine months to issue an appellate judgment, which is “shall not be subject to appeal, review, set aside, annulment or any other remedy.”