The EU and Investor-State Dispute Settlement: WTO Litigators Going “Investor-State Arbitration” and Back to a Permanent “Investment Court”

Abstract

With acquiring powers to conclude investment treaties in the field of the common commercial policy, the EU has entered the scene as a regional actor in investment treaty law-making. Since the Commission, the EU’s trade negotiating arm, has refrained from adopting a Model BIT or Model IIA, the contours of investment agreements and investment chapters in the EU’s trade agreements remained vague and uncertain for a while. Meanwhile the first finalized texts of such investment standards have emerged. Most prominent are the 2015 draft TTIP investment chapter and the 2016 CETA text. This contribution focuses on the role of investor-State dispute settlement in the negotiation of these agreements. It shows that the Commission initially adopted the traditional European view that an effective investment protection required the enforcement mechanism of investor-State arbitration. With the increasing public criticism of this form of investor-State dispute settlement, however, various attempts have been made to correct the perceived deficiencies of investor-State arbitration. In addition to fine-tuning and limiting the scope of the substantive investment protection standards in the new EU treaties, the Commission has equally inserted a number of changes to investor-State arbitration, such as broad transparency rules, the possibility of amicus curiae submissions, strict rules on arbitrator independence and impartiality, the power to dismiss frivolous claims, etc. Then, in a September 2015 TTIP text, the Commission proposed to the US-side the adoption of an investment court system with standing judges on two levels.