1
Investment Court System in the TTIP and CETA Proposals: An
Analysis of its Conformity with the principle of Fair Trial
Thesis
submitted in fulfilment of the requirements for the
LL.M. in International and European Trade and Investment Law
at University of Amsterdam (UvA)
by Valeria Comegna Student ID No: 11422424 Supervisor: Prof. S. W. Schill
2
Abstract
This paper will address the question of whether the Investment Court System (ICS) proposed by the European Commission is in conformity with the right to a fair trial as elaborated by the European Court of Human Rights (ECtHR) and the Court of Justice of the European Union (CJEU). The objective legal criteria set out by the European Courts in their case-law will be illustrated and will serve as yardsticks for the assessment of selected institutional and procedural features of the Proposal. It is argued that a reform which aims to establish an international court structured in a way comparable to domestic and other international courts should satisfy both institutional and procedural basic requirements that inspire the creation and govern the functioning of already existing well-established courts. The most critical issues raised by the reform that will be dealt with mirror the core elements of the right to a fair trial. These are the elements of access to court, equality of arms between the disputing parties, the right to a reasoned decision, independence and impartiality of the dispute resolvers and publicity of the dispute settlement mechanism.
After briefly introducing the subject-matter with an overview of Investor-State dispute settlement mechanism and its shortcomings and contextualizing the role of the European Union in reacting to the so-called legitimacy crisis of ISDS, each chapter will be devoted to the issue of conformity of selected aspects of the European Commission's proposal with the core components of the right to a fair trial referred to above. The aim of the analysis is twofold. On the one hand, it purports to enquire into whether the ICS architecture provides a solution to the shortcomings of ISDS and, on the other hand, whether the same provides an alternative to domestic courts whose access is precluded to foreign investors and limited to domestic investors and third interested parties. In the course of the dissertation I will give account of scholarly writings that corroborate and counter the arguments against and in favor of the reform’s novelties and their ability to satisfy the requirements enshrined in the principle of fair trial.
3 LIST OF ABBREVIATIONS
AT Appellate Tribunal
BITs Bilateral Investment Treaties
CETA Comprehensive Economic and Trade Agreement
between Canada and the European Union
CFREU Charter of Fundamental Rights of the European Union
CJEU Court of Justice of the European Union
ECHR European Convention of Human Rights and
Fundamental Freedoms
ECtHR European Court of Human Rights
FET Fair and Equitable Treatment
FIT First Instance Tribunal
FTAs Free Trade Agreements
IBA Guidelines International Bar Association Guidelines on Conflict of Interest in International Arbitration
ICS Investment Court System
ICSID International Center for the Settlement of Investment Disputes
IIAs International Investment Agreements
ISDS Investor-State Dispute Settlement
MIC Multilateral Investment Court
SMEs Small and Medium Enterprises
TEU Treaty on the European Union
TFEU Treaty on the Functioning of the European Union
TTIP Transatlantic Trade and Investment Partnership between
4 UNCITRAL Transparency Rules United Nations Convention on Transparency in
Treaty-Based Investor-State Arbitration
5
I.
Introduction
1. Overview of the ISDS system: Status Quo and its Weaknesses
Investment treaty law is a relatively young and sophisticated hybrid creature. It is relatively young, as it let out its first cries back in 1959, when the first bilateral investment treaty (BIT) was concluded by Germany and Pakistan. As all young creatures, it needs constant care and attention, especially when approaching an "early life crisis". Its hybrid nature has been wittingly explained by comparing it to a platypus1, for it combines characteristics of both public and private international law.
While it manifests itself in international treaties between states governed by public international law, its enforcement is guaranteed by a dispute settlement mechanism derived from international commercial arbitration and designed for disputes between private parties, that have been long outside the public eye. While it purports to further peaceful and friendly economic relations between States, it empowers party-appointed arbitrators to strike balances between private rights bestowed on foreign investors and the sovereign right to regulate of the contracting parties. It is precisely this ambivalence that is the source of all tensions that is presently threatening the longevity of the creature, of what has been called a backlash or legitimacy crisis that the investment treaty regime has been witnessing in the last few decades. Albeit the critiques target both substantive and procedural aspects of the system, the legitimacy crisis is perceived to be mainly rooted in the hybrid enforcement mechanism, namely the investor-state dispute settlement (ISDS) mechanism.
Since the establishment of the ICSID, states began to include ISDS clauses providing for “compulsory arbitral jurisdiction over disputes between investor and host States”2 in their bilateral investment treaties. In these clauses, both contracting states express their consent to have their disputes with foreign investors settled by an arbitral tribunal composed by experts
1 Roberts, A., ‘Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System’, in The American Journal of International Law, Vol 107, no.1, (2013), p. 1.
2 Johnson, O.T. Junior, and Gimblett, J., ´From Gunboats to BITs: The Evolution of Modern International Investment Law´ in Yearbook on International Investment Law and Policy 2010-11, Oxford University Press, (2012), p. 679.
6 appointed by the disputing parties on an ad hoc basis. Whenever a breach of one or more substantive standards protected under the international agreement takes place, the investor has the option to initiate a claim before the arbitral tribunal by expressing his written consent. To date, the over 3300 BITs, several FTAs, domestic legislation and investor-State contracts contain an ISDS clause and numerous institutional frameworks provide for procedural rules governing the arbitral proceedings.
At the time of its birth, the ISDS constituted “a progressive institutional innovation” that “helped to reduce sources of international tension and recourse to military force”.3 Only two avenues were available for investors to seek justice: the mostly ineffective diplomatic protection exercised by their home States and the unknown and allegedly time-consuming and biased domestic court system of the host States. The mechanism was welcomed by the international community as a "swifter, cheaper, and more flexible"4 design expected to lower the overall costs of investments and enhance compliance with IIAs’ commitments.5
The actual functioning of the system has nonetheless proved less successful than expected and with the proliferation of ISDS cases in the past 15 years, the debate over the flaws of the system has gained momentum and attracted public attention. The costs of investor-state disputes have reached $114 billion and compensation awarded amounted up to $1,77 billion,6 with strong repercussions on the States’ budget, freedom to exercise their regulatory power in good faith and in the public interest and availability of the system to less powerful foreign investors, such as small and medium enterprises.
The main concerns voiced by the civil society revolve around the public nature of the issues at stake in proceedings involving the assessment of the compatibility of states’ conduct with international law, which could no longer be decided by an elite group of arbitrators allegedly
3 Gaukrodger, D. and Gordon, K., ‘Investor-State Dispute Settlement: A Scoping Paper for the Investment
Policy Community’ in OECD Working Papers on International Investment, No. 2012/03, OECD Publishing, Paris (2012), p. 9. Available at: DOI: http://dx.doi.org/10.1787/5k46b1r85j6f-en.
4 U.N. Conference on Trade & Development, Investor-State Dispute Settlement: UNCTAD Series on Issues in
International Investent Agreements II: A Sequel 18, 30-31 (May 2014), http://unctad.org/eng/PublicationsLibrary/diaeia2013d2_en.pd.
5 Schwieder, R. W., ‘TTIP and the Investment Court System: A New (Improved?) Paradigm for Investor-State
Adjudication’ in Columbia Journal of Transnational Law, Vol. 55, Issue 1, (April 20, 2016). Available at SSRN:https://ssrn.com/abstract=2767721.
7 lacking the typical guarantees of judicial independence and impartiality. Other crucial critiques target the lack of transparency of high stakes involving compromises struck in the backdoor and the absence of a control mechanism over a mostly inconsistent and unpredictable jurisprudence based on a myriad of international agreements.
As a consequence of a general discontent hailing from both the users and the civil society, States have begun to react in several different manners. Some Latin American countries have withdrawn from the ICSID Convention, other States have terminated their BITs or excluded ISDS provisions in their newly concluded IIAs. Against this background, other States, and remarkably the European Union, have decided to embark on an arduous path for reform and put ISDS in the agenda of IIAs negotiations with a view of paving the way for future multilateral projects.
2. The Role of the European Union
In the context of global critique and reform efforts for the ISDS, the European Union has purported to take the lead in reform and react by launching its own brand-new model with its proposal for an Investment Court System (ICS).7 It has done so on the basis of the newly gained exclusive competence in the area of foreign direct investment as part of its commercial policy under Article 207 TFEU, following the entry into force of the Lisbon Treaty. Article 207 (1) first sentence TFEU reads: ´The common commercial policy shall be based on uniform principles, particularly with regard to [..] foreign direct investment [..]´.
It is important here to note that, with specific regard to ISDS, the CJEU has recently found that ISDS comes within the ambit of shared competence.8 As a consequence, the text of the proposal will be put under the scrutiny of all EU Member States and will come into effect to the extent it is ratified. Hence, the actual text of the proposal is destined to be replaced by another draft
7 Cecilia Malmström, Proposing an Investment Court System (16 September 2015)
<https://ec.europa.eu/commission/2014-2019/malmstrom/blog/proposing-investment-court-system_en> accessed 5 October 2015.
8 Ankersmit, L., ‘Opinion 2/15 and the future of mixity and ISDS’ in European Law Blog, 18th May 2017.
8 approved by the Member States. This change of direction provide a good reason for considering the reform in the light of a principle governing the domestic judicial systems.9
2.1. The European Commission’s Reaction
Once it received the mandate from all its Member States, the European Commission started a series of negotiations of IIAs with some of its most influential trading partners, such as Vietnam, Singapore, China, India, Canada and the United States.
While initially still anchored to the previous ISDS arbitral model, the impetus for change came when the European institutions opted for public involvement in the reform process, by launching a public consultation that was held in September 16, 2015. The outcome of the public scrutiny and findings of the Commission were then transposed into the ICS Proposal for the Transatlantic Trade and Investment Partnership (TTIP Draft Proposal), and presented to its negotiating-partners. Successively, the ICS has flown into the already under negotiation investment chapters of the EU-Vietnam FTA and, with some modifications, of the Comprehensive Economic and Trade Agreement with Canada (CETA). Insofar as relevant distinctions can be drawn between the TTIP and the CETA versions, the assessment of conformity will be based on these two texts of the Proposal.
2.2. Why should the Reform conform to the Constitutional Right to a Fair Trial? A Constitutional Approach
This analysis welcomes and is based on the idea advanced by scholars10 that the shortcomings of the Investor-State dispute settlement mechanism can be adequately tackled under a constitutional law perspective, as it is acknowledged that the ISDS system exercises public authority. This approach aims to correct the loopholes of the system by adjusting them to the
9 Both CJEU and ECtHR apply the right to a fair trial to the conduct of domestic bodies. The former when
domestic institutions implement EU measures on the national level, and the latter in each and every case a Convention right is violated with respect to any persons within the domestic jurisdiction.
10 Schill, S. W., Reforming Investor-State Disupte Settlement (ISDS): Conceptual framework and Options for
the Way Forward, E15 Task Force on Investment Policy Think Piece 7-8 (July 2015), available at http://e15initiative.org/wp-content/uploads/2015/07/E15-Investment-Schill-FINAL.pdf.
9 globally shared principles of the rule of law, democracy and fundamental human rights, of which the right to a fair trial forms integral part.
As a creature of public international law, international investment law needs a public law reform11 capable of aligning it and, in particular, its enforcement mechanism, to a public law paradigm. This is exactly the purpose of the reform proposal put on the diplomatic table by the European Union in all its IIAs negotiations. Indeed, the European project aims at constitutionalizing the field by stressing the right to regulate, transparency of proceedings, third party participation and judicial guarantees12 and leans towards a highly institutionalizing approach, by establishing a two-tier court system.
A further indicator of the constitutional approach adopted by the European legislator lies in that the ICS courts are meant to pave the way for the more overarching project of a multilateral investment court which would wholly replace the pre-existing arbitral regime. In the words of the European Commissioner for Trade Cecilia Malmström, the reform will be ´built around the elements that make citizens trust domestic or international courts´13 and will globally lead the way for reform of the previous ISDS. The express reference to domestic and international courts by the Commissioner further urges an assessment of compatibility of the reform with the guarantees that traditionally surround the judicial bodies taken as models.
In its traditional role of standard-setter and exporter of constitutional values in the international arena, the European Union bears the responsibility to design a reform which lives up to its funding values.
This statement is confirmed by European primary law. Article 207 (1) TFEU continues: ´The common commercial policy shall be conducted in the context of the principles and objectives of the Union's external action´. Under Article 21 TEU, the external action of the European Union ´shall be guided by the principles which have inspired its own creation, development
11 Schill, S. W., ‘The European Commission’s Proposal of an Investment Court System for TTIP: Stepping
Stone or Stumbling Block for Multilateralizing International Investment Law?’ in ASIL Insights, Vol. 20 Issue 9, April 22nd, 2016. Available at: https://www.asil.org/insights/volume/20/issue/9/european-commissions-proposal-investment-court-system-ttip-stepping.
12 Ibidem.
13 European Commission Press Release, Commission Proposes New Investment Court System for TTIP and
Other EU Trade and Investment Negotiations (16th September, 2015). Available at: http//europa.eu/rapid/press-release_IP-15-5651_en.htm.
10 and enlargement, and which it seeks to advance in the wider world: democracy, the rule of law, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, the principles of equality and solidarity, and respect for the principles of the United Nations Charter and international law´.
It remains to be proven that the principle of fair trial can be regarded as a guiding principle of the Union´s external action.
2.2.1. Principle of Fair Trial as guiding principle of the EU External Action
First and foremost, the fact that the principle of fair trial belongs to the system of values and principles of the European legal system has been authoritatively stated by the Luxembourg Court.14 It is however worth advancing further arguments in support of this statement.
The right constitutes also a milestone in the common heritage of universally recognized human rights. It is enshrined in Articles 8 and 10 of the Universal Declaration of Human Rights15 signed in New York in 1948, which has been recognized as declaratory of customary international law by the International Court of Justice16, and the UN International Covenant on Civil and Political Rights (ICCPR).17 Several regional instruments of human rights law18 contain equivalent provisions with more or less detailed terminology and different scopes of application. All these instruments are binding and create positive obligations upon States to ensure the enjoyment of the rights recognized therein.
The universal acceptance of the right and its multi-layered binding force provide a valid argument to a statement that the efforts of the European Union, as a community of States, along with those of its negotiating partners are to be informed and guided by the respect for the right
14 ECtHR, Les Verts v. Parliament Case 294/83 [1986] ECR 1339, para. 23.
15 UN, GA (1948), Universal Declaration of Human Rights (UNDHR), 10 December 1948.
16 Cunningham, A.,J., ´The European Convention on Human Rights, Customary International Law and the
Constitution´ in The International and Comparative Law Quarterly, vol. 43, no. 3, 1994, p. 542.
17 UN, General Assembly (GA) (1966), International Covenant on Civil and Political Rights (ICCPR),
16 December 1966.
18 Such as the American Convention of Human Rights, the African Charter on Human and Peoples’ Rights, the
European Convention of Human Rights and in the European Charter of Human Rights and Fundamental Freedoms.
11 to a fair trial. Article 21 TEU makes direct reference to human rights and fundamental freedoms.
Further, it is widely acknowledged by the international community that its compliance represents a basic requirement of a legal system based on the rule of law,19 which itself is enumerated in Article 21 TEU. Without its existence, and -a fortiori- the respect and compliance by those called to turn the abstract provision into its actual realization, the very existence of substantive rights would be emptied of its practical meaning, function and mission. Most importantly, the European legal framework itself provides for a double statement of the right, which is expressed in two fundamental norms: Article 47 CFREU and Article 6 ECHR. While the former forms in all effects part of the European primary law in light of Article 6 (1) TEU, the ECHR has often been referred to by the CJEU as expressing general principles of EU law common to the constitutional traditions of the Member States, even before the Charter came into existence.20
Noteworthy, there is a substantial overlap between the norms and the ways they have been interpreted by the Strasbourg and Luxembourg Courts respectively. This strong interconnection is confirmed by both treaties21 which create a relationship of correspondence between the meaning and scope of the rights laid down therein. With special regard to the CFREU, Article 52 (3) says that ´in so far as this Chartercontains rights which correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms, the meaning and scope of those rights shall be the same as those laid down by the said Convention´, signaling that the case-law of the ECtHR is relevant for interpreting the CFREU. In the course of the dissertation more reliance will be given to the ECtHR’s jurisprudence, in consideration of that fact that, in its lifespan of almost 60 years, it elaborated on a more far-reaching set of legal parameters, i.e. constitutive elements of the right to a fair trial.
19 For an account on the fair trial a being part and parcel of rule of law see Pech, L., ‘The Rule of Law as a
Constitutional Principle of the European Union’, in the Jean Monnet Center for International and Regional Economic Law & Justice, Jean Monnet Working paper No. 04/09, New York University School of Law, (2009), p. 27 ff. Available at <http://www.jeanmonnetprogram.org/wp-content/uploads/2014/12/090401.pdf>.
20 See e.g. Case C-4/73, Nold, Case C-222/84, Johnston, Case C- 5/88, Wachauf, Case C-260/89, ERT.
12 Although secondary, an additional reason to assess the reform through the lenses of the fair trial principle is the proposal by the European Parliament “to ensure that ICS and ISDS mechanisms are constructed in a way that obliges them to implement the European Convention on Human Rights and the rulings of the European Court of Human Rights”.22
In the light of the foregoing, it can be concluded that, as a fundamental human right expressive of customary international law, integral part of the rule of law and of the common heritage of the constitutional values of the European Member States, the principle of fair trial is a guiding principle of the external action of the European Union. Thus, the reform drafters shall take it into account when devising a court system to be set up by an international agreement.
2.2.2. Framing the Issues: The Right to a Fair Trial and its core elements. Fair Trial to whom?
Before venturing into the analysis, it is worth recalling the text of the right to a fair trial as spelled out in Article 6 ECHR, explain who are the addresses of the provision in the specific context of ISDS, and sketch out the core elements that will serve as yardsticks of the analysis.
As international investment disputes are traditionally devised to redress civil rights of individuals, more specifically the right to property of foreign investors, only the civil limb of the provision comes under consideration:
‘In the determination of his civil rights and obligations or [..], everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law’.
The text of the norm, and its nature of fundamental human right, suggest that the addresses are an indefinite number. ‘Everyone is entitled’ to the protection.
However, in the specific context of an investment dispute the number of addresses is necessarily limited to the actors whose rights and obligations are concerned. These are the
22 Resolution 2151 of the European Parliament, Human rights compatibility of investor-State arbitration in
international investment protection agreements (27th January 2017). Available at:
13 foreign investors and the host States in the first place, and, although traditionally outside the IIAs’ protection, domestic investors and third interested parties.
In the course of the dissertation, I will give account of the interests of all the possible participants of an investment dispute, and enquire into what extent those interests are taken into account by the reform drafters.
The right to a fair trial has been articulated by the European Courts in guiding principles governing both the institutional outlook and procedural functioning of any judicial institutions at any level of governance. The institutional requirement that will be under analysis is the qualification of the ICS courts as tribunals within the meaning of Article 6 ECHR, which encompasses the requirements of impartiality and independence of the judges. With regards to the procedural requirements, this analysis will be centered on access to court, equality of arms, right to a reasoned decision and publicity of proceedings.
Further relevant elements, such as timely resolution of disputes, the right to adequate redress, and the general application of the principles of efficiency and effectiveness to the delivery of justice23 will be dealt with only incidentally.
3. Aims and Methodology
The analysis has a two-fold purpose.
One the one hand, it purports to enquire into whether the judicial system envisioned in the Proposal is designed in a way that resembles the physiognomy and functioning of domestic courts and therefore provides for an alternative to the latter. This query is urged by the limited access to the domestic avenue for the foreign investors and the total exclusion of domestic investors and third interested parties from benefiting of the ICS specialized jurisdiction. As it will be seen, the reform architecture creates indeed a sharp divide between the domestic and international spheres.
23European Union Agency for Fundamental Rights and Council of Europe, Handbook on European Law
relating to Access to Justice, Luxembourg: Publications Office of the European Union, 2016, p. 9. Available at:
14 It will be argued that this sharp divide would be efficiently counterbalanced through the introduction of a preliminary reference mechanism linking the international and domestic judicial systems. In so doing, the mutual recognition of the two legal orders24 would be promoted. Part of the analysis will therefore focus onto whether the ICS courts could fall within the meaning of ‘tribunal’ under the CJEU case-law.
On the other hand, and in more general terms, the analysis aims to highlight the positive developments brought in by the reform along with the possible contribution to the global-shaping of the ISDS system, while criticizing its drawbacks.
The methodology of legal research chosen is a constitutional assessment of the reform resembling a constitutional court’s review. In particular, I used the core elements of the right to a fair trial as set out by the European Courts as legal parameters to evaluate selected aspects of the reform. In the argumentative parts, I drew inspiration from and cited scholarly writings in order to enrich the analysis with experts’ insights.
For the purpose of discerning the core elements, I consulted the Handbook on European Law relating to Access to Justice published by the European Union Agency for Fundamental Rights and Council of Europe. The latter helped me to understand the meaning of the components of the right to a fair trial and find the relevant ECtHR’s and CJEU’s case-law.
In order to discern and find legal materials and literature relevant to the analysis, I used the online UvA Law School Library catalogue and the courses’ syllabi of my Master’s track.
II. Qualification of the ICS Tribunals as “tribunal” under the right to a Fair
Trial. Green Lights to the Preliminary Reference mechanism?
15 A preliminary question to address is whether the tribunals envisioned in the proposal fall within the scope of the definition of ¨tribunal¨ contained in the right to a fair trial as elaborated by the ECtHR and by the CJEU. The text of the first paragraph of both Article 47 CFREU and Article ECHR provision refers to ‘an independent and impartial tribunal established by law’.
The question is relevant to the analysis in that only a ‘tribunal established by law’ could possibly resemble and, therefore, be an alternative to domestic courts. Also, the Luxembourg Court often addresses the issue when coping with the question as to whether a particular entity is entitled to refer a case for a preliminary ruling.25 A positive finding would provide a supportive argument to the introduction of a preliminary reference mechanism between the international and domestic courts, including the CJEU.
The two Courts have formulated consistent principles to shape the meaning of the above referred terms.
According to the Strasbourg Court, the main characteristic of a tribunal is its judicial function,26 which is present if it is established by law, possesses full jurisdiction over the case,27 the power of determining matters within its competence by applying rules of law, capacity to issue binding decisions28 after proceedings conducted in a prescribed manner.29
1. A Tribunal established by law
A tribunal is established by law, where it finds its origin in a law enacted by the State whose object and purpose is the creation of a permanent body and the regulation of its functioning.
25 C-61/65 Vaassen-Goebbels v Beambtenfonds voor het Mijnbedrijf [1966] ECR 2545; C-14/86 Pretore di Salò v Personsunkown [1987] ECR 2545; C-54/96 Dorsch Consult v Bundesbaugesellschaft Berlin unkown [1987]
ECR 2545, para 7; C-109/88 Danfoss [1989] ECR 3199, paras 7-8, and; C-393/92 Almelo and Others [1994] ECR 1-1477.
26 ECtHR, Julius Kloiber Schlachthof GmbH and Others v. Austria, Nos. 21565/07, 21572/07, 21575/07 and
21580/07, 4 April 2013; ECtHR, Sramek v. Austria, No. 8790/79, 22 October 1984, para. 36.
27 ECtHR, Galina Kostova v. Bulgaria, No. 36181/05, 12 November 2013, para. 5. 28 ECtHR, Benthem v. the Netherlands, No. 8848/80, 23 October 1985, paras. 40 and 43. 29 ECtHR, Sramek v. Austria, No. 8790/79, 22 October 1984, para. 36.
16 Inherent in the quality of being ‘established by law’ is the element of permanence, which is of great importance, as the Court has excluded bodies that exercise a judicial function on the basis of an agreement between the parties.
The institutional relationship between IIAs-ICS could be said to correspond to that of a domestic law establishing a tribunal with the said tribunal. In this way, IIAs equate to a domestic law, as they belong to the most crystallized legal source of international law, namely the law of the treaties. Establishing a permanent court and setting out an almost comprehensive set of rules of procedures are typical objectives of the new generation European IIAs that envisage the ICS.
Turning to the requirement of permanence, the European Courts have understood it as referring to the permanent existence of the body as opposed to ad hoc bodies set up upon agreement between the parties, such as the arbitral panels of the traditional ISDS system.30 The ICS courts would be composed of tenured judges whose selection is not in the hands of the disputing parties. It can be concluded that, in this respect, the ICS proposal meets the requirement of being a tribunal established by law and introduce a corrective to the previous ISDS mechanism. 1.1. Full Jurisdiction and Application of Rules of Law
The requirement of having full jurisdiction over the case has been read by the ECtHR as referring to the exercise of sufficient jurisdiction and sufficient review by administrative bodies of the Member States with regard to the powers of the judicial body in question and to factors relating to the specialized nature of the subject-matter of the case requiring professional knowledge or experience, et similia.31 While these elements are more appropriate for a review of a case that has already been decided, the CJEU has offered a more neutral understanding of having compulsory jurisdiction, which is given when the parties are required to apply to the relevant body for settlement of their dispute.32
30 Thus, the element of permanence does not concern the permanence in office of its members. The institutional
existence of the ICS is independent from from the fact that the members the ICS judges are appointed for a limited period of time.
31 Supra n 23, para. 59.
32 CJEU, C-54/96, Dorsch Consult Ingenieurgesellschaft mbH v. Bundesbaugesellschaft Berlin mbH,
17 It is worth noting that both the investment chapters of CETA and TTIP contain a clear provision which confines the First Instance Tribunal’s jurisdiction to a breach of the relevant agreement33 and to grant a remedy for loss or damage as a result of the alleged breach, and that of the Appellate Tribunal to errors in the appreciation of laws and facts, including domestic law of the Contracting Parties, made by the lower tribunal and procedural flaws affecting the preceding stage.34 Moreover, the choice of the applicable law and the half fork-in-the-road clause attempt to further circumscribe the jurisdictional power, so as to exclude domestic law matters and overlapping proceedings. In so doing, the two IIAs establish a system of compulsory jurisdiction accepted ex ante, which excludes any other concurrent jurisdiction and the risk of parallel proceedings.
Article 8.31 (1) and (2) CETA and Article 13 (2) and (3) TTIP prescribe the applicable law and the non-applicable law, leaving no doubt as to the tribunals’ power to determine a case by application of rules of law. The applicable law is the IIA, the rules and principles of international law applicable between the parties in accordance with the Vienna Convention on the Law of Treaties. Furthermore, the tribunals have no jurisdiction to determine the legality of the state’s regulatory measure, alleged to breach one or more substantive standards of the IIA. This task is left to the domestic courts. The domestic law, including EU law, of a Party must be considered as a matter of fact, following the prevailing interpretation given to the domestic law by the courts or authorities of that Party.
In addition to the above requirements, the ECtHR added that a tribunal can be a body set up to decide a limited number of specific issues,35 which is the case of the ICS, in accordance with the above considerations regarding its jurisdictional purview. Likewise, the set of remedies provided is limited to restitution or compensation.
1.2. Capacity to issue Binding Decisions and Proceedings conducted in a Prescribed Manner
33 Article 8.18 (1) (2) CETA. Article 1 (1) TTIP Draft. 34 Article 8.28 (2) CETA; Article 29 (1) TTIP Draft.
35 ECtHR, Lithgow and Others v. the United Kingdom, Nos. 9006/80, 9262/81, 9263/81, 9265/81,
18 As to the capacity to issue binding decisions, the text of the proposal is crystal-clear: the award shall be binding between the disputing parties and in respect of that particular case.36 As well, the requirement of proceedings conducted under a prescribed manner is fulfilled by the reference to the widely-recognized and used procedural rules provided by in arbitral institutional frameworks to be chosen by the disputing parties,37 the incorporation of the UNCITRAL Rules on Transparency in Investor-State Arbitration38 and the regulation of a series of procedures contained in the proposal itself.39
1.3. CJEU’s Understanding and Preliminary Reference
So far, the CJEU has recognized only a court and tribunal from an EU Member State as a tribunal entitled to launch the reference. Notoriously, international courts, such as the European Court of Human Rights, have not received such recognition.40 Interestingly, the Benelux Court of Justice is competent, as long as it has the task to ensure the uniform application of EU law in three Member States.41
The introduction of a preliminary ruling mechanism in the ICS has been oftentimes voiced, especially by the scholars, for it would ease the possible concerns from the CJEU as to the compatibility of the ICS with EU law, especially with principles of primacy and autonomy and the separation of powers underpinning the EU legal system.42 It could be used to refer to the domestic courts questions as regards the interpretation of domestic law, which under the Proposal is to be interpreted and applied as a matter of fact in the light of the understanding given by the domestic courts.
36 Article 8.41 (1) CETA; Article 30 (1) TTIP Draft. 37 Article 8.23 (2) CETA; Article 6 (2) TTIP Draft. 38 Article 8.36 (1) CETA; Article 18 (1) TTIP Draft.
39 These procedural rules relate to the pre-trial stage, the submission, consolidation, discontinuance of claims,
staying of proceedings, the provision of interim measures, etc.
40 CJEU, Opinion 2/13 of 18 December 2014.
41 Rodriguez Medal, J., ‘Concept of a Court or TRibunal under the Reference for a Preliminary Ruling: Who
can Refer Questions to the Court of Justice of the EU?’ in European Journal of Legal Studies, Vol. (), Issue 18
42 See Szilárgyi, G., ‘A standing Investment Court under TTIP from the perspective of the CJEU,’ in Journal of
19 Given the reluctance repeatedly shown by the CJEU to entitle international tribunals to make use of the preliminary reference mechanism,43 a positive finding with regard to the ICS would not automatically give the green light to its introduction. Its necessity has also been questioned by scholars.44 However, a positive finding would corroborate arguments in its favor. What matters is that the criteria laid out by the CJEU reflect the criteria adopted by the ECtHR.4546 It has been demonstrated above that the ICS proposal presents all the above requirements with the exception of the guarantees of impartiality and independence of the judges, which will be discussed in the following chapter.
III. Procedural aspects of the Right to a fair trial: Access to Court, Right to a
Reasoned Decision, Equality of Arms, Publicity of Proceedings.
Further: the institutional requirement of Impartiality and Independence of the
judges.
The analysis will now move on to the assessment of the ICS proposal’s conformity with the core procedural elements of the right to a fair trial.
Access to court constitutes a thorny issue in the context of the Proposal, as it concerns all the possible players of the investment law field. Access to ICS is not granted to everyone. It is therefore to be demonstrated whether this conflicts with the principle of fair trial and, therefore, with the requirements applied to the domestic judicial systems.
Connected thereto is the question of equality of arms of those involved into an investment dispute under the EU IIAs, notably States and foreign investors. Here, more attention will be given to the idiosyncrasies of ISDS.
43 CJEU, Opinion 2/13, Accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms (18 December 2014) <http://eur-lex.europa.eu/
legal-content/EN/TXT/HTML/?uri=CELEX:62013CV0002&rid=1> accessed 1 April 2015.
44 Schill, S. W., ‘Editorial: Opinion 2713 - The End for Dispute Settlement in EU Trade and Investment
Agreements?’ in The Journal of World Investment & Trade, 16 (2015), pp. 385-386.
45 CJEU, C-54/96, Dorsch Consult Ingenieurgesellschaft mbH v. Bundesbaugesellschaft Berlin mbH,
17 September 1997, para. 23. See, in particular, the judgments in Case 61/65 Vaassen (neé Göbbels) [1966] ECR 261; Case 14/86 Pretore di Salò v Persons unkown [1987] ECR 2545, paragraph 7; Case 109/88 Danfoss [1989] ECR 3199, paragraphs 7 and 8; Case 393/92 Almelo and Others [1994] ECR I-1477; and Case C-111/94 Job Centre [1995] ECR I-3361, paragraph 9.
46 CJEU, C-443/09, Camera di Commercio, Industria, Artigianato e Agricoltura (CCIAA) di Cosenza v. Grillo Star Srl., 19 April 2012, paras. 20–21.
20 The right to a reasoned decision is also common to the constitutional values of domestic jurisdictions and the problem of lack or insufficiency of judicial reasoning in ISDS has been often criticized.47
Further, if the requirements of impartiality and independence of the judges are met, the hypothesis of the introduction of a preliminary reference mechanism linking the ICS courts with the CJEU and the higher domestic courts of the Member States could be advanced. Finally, publicity is another fundamental tenet of domestic judiciaries and a possible substitute to the lack of direct links between the insulated domestic and IIAs’ legal orders. It will be seen whether the Proposal adjusts to the shared rule of transparency and how it departs from the previous ISDS.
1. Access to Court
In light of the ECtHR’s jurisprudence, when dealing with the right to a fair trial, consideration must be given to the proceedings as a whole, from the institution of proceedings to the final determination of an appeal.48
The first element that comes into consideration is the right of access to a tribunal, which, in practical terms, means actual availability of the enforcement mechanism of rights.
In Golder v UK49, the ECtHR has clarified that the right to a fair trial must be read in the light of the principle of international law which forbids the denial of justice and entails the principle whereby a civil claim must be capable of being submitted to a judge. However, the right of access to court is qualified, that is to say, it can be subject to restrictions. Accordingly, states are free to impose limits to the range of would-be litigants, as the right of access “by its very nature calls for regulation by the State, which could vary in time and in place according to the needs and resources of the community and of individuals”.50 Notably, the limitations must not
47 Ortino, F., ‘Legal Reasoning of International Investment tribunals: A Typology of Egregious Failures’ in Journal of International Dispute Settlement, Vol. 3, No. 1 (2012), pp. 31-52.
48 ECtHR, Edwards v. the United Kingdom, No. 13071/87, 16 December 1992, para. 34. 49 ECtHR, Golder v. the United Kingdom, No. 4451/70, 21 February 1975, para 35. 50 Ibidem, para 38 quoting Belgian linguistic, para 5.
21 impair the very essence of the right, must pursue a legitimate aim and there should be a reasonable relationship of proportionality between the means used and the aim sought to be achieved.51
The ICS architecture is not devoid of limits on access to court and allegations of denial of justice have been raised by opponents of the proposal with regard to disparate actors possibly involved in an investment dispute.
1.2. Access to Court for domestic investors and interested third parties
In particular, the absence of a right to claim upon domestic investors and other potentially interested parties has been fiercely contested, not least because it violates the principle of non-discrimination.52 Domestic investors have access solely to domestic remedies, and individuals whose rights and interest could be legally affected by the outcome of a dispute under the relevant IIA have no right to bring their own claims before the ICS courts. The only way for them to get involved is to intervene as amicus curiae, a possibility opened up by the application of the UNCITRAL Rules on Transparency foreseen by the proposal53 and expressly provided in TTIP54. However, the actual participation remains conditional upon the discretion of the tribunal and does not allow third parties to assert their rights and to extend the res judicata effect of the decision in their legal sphere.
As noted above, States are free to impose similar restrictions in the name of a community need, or, in other words, a legitimate aim. Considering that the very justification of this choice probably rests on the ease of reproducing and not excessively altering the previous ISDS regime that was exclusively devised for foreign investors, it is not an easy task to pinpoint a particular
51 ECtHR, Ashingdane v United Kingdom, No 8225/78 May 1985, para 57.
52 Van Harten, G., ‘Key Flaws in the European Commission’s proposal for foreign investors protection in the
TTIP’ in Osgoode Legal Studies Research Paper No. 16/2016, Vol. 12, Issue 4, (2016), p. 3; Schill, . W., ‘Authority, Legitimacy, and Fragmentation in the (Envisaged) Dispute Settlement Disciplines in Regionals’ (March 14, 2017). Forthcoming in Stefan Griller, Walter Obwexer, Erich Vranes (eds), Mega-Regional Agreements: TTIP, CETA, TiSA. New Orientations for EU External Economic Relations (Oxford University Press, 2017); Amsterdam Law School Research Paper No. 2017-05; Amsterdam Center for International Law No. 2017-04. Available at SSRN:https://ssrn.com/abstract=2932810
53 Article 8.36 (1) CETA; Article 18 (1) TTIP Draft provides for the application of the UNCITRAL Rules on
Transparency, whose Article 4 allows for third-parties participation.
22 community need that the drafters of the Commission’s ICS proposal could have in mind when excluding standing for domestic investors and interested third parties.
In relation to third parties’ access, the interest in the proper administration of justice could come into play, as long as it is part and parcel of the rule of law, and requires justice to be made in an efficient manner, that is to say, without delays. However, such consideration bears a similar weight in the decision of the tribunal to accept amicus curiae submissions, as they equally prolong the duration of proceedings. In my opinion, their exclusion is therefore not justified.
The choice to exclude domestic investors could be explained by the fact that they already dispose of the domestic court system with which they are more confident. This argument has nonetheless little value, for the ICS courts’ jurisdiction ratione materiae allows foreign investors to seek remedies that are not so smoothly accessible to the domestic investors in their home jurisdictions. One could think in this connection of the stricter statutory limitations for bringing a claim under domestic laws compared to the longer periods afforded to foreign investors under the proposal,55 or the foreseen time-limits on the duration of proceedings whose benefits in terms of length and costs could only be enjoyed by foreign investors.
Allowing access to the ICS courts to domestic investors through a pan-European intra-EU BIT may be a way to avoid such discrimination. It may also be of great help in the context of intra-EU cross-border investment relationships, where European investors find themselves facing considerable procedural hurdles due to the panoply of procedural laws within the EU.56 Denial of access to court to domestic investors can hardly be justified by a legitimate aim. A possible justification could be seen in that there is no reason to divest domestic courts of their jurisdictional competence over cases concerning the application of domestic law, not least because the system of the IIAs has been designed so as to preclude the submissions of claims based on domestic law. Yet, this justification does not identify a legitimate aim that corresponds to a public interest. Rather, it is an explanation of the self-containing system created by the IIAs.
55 Article 8.19 (6) CETA; Article 4 (5) TTIP Draft.
56 For instance, under German constitutional law, foreign citizens are, in certain instances, not allowed to assert
23 A community need may require the reflection of a compelling public interest pursuing a legitimate aim apt to justify an utter negation of procedural rights. In light of the absence of such a public interest and with specific regard to access to ICS, the result is that the very essence of the right is impaired and the proposal lacks conformity with the right to access to court. Looking at the issue of access to court in general terms, so as to include access to domestic courts, the above described exclusion does not impair the very essence of the right. The domestic avenue is still available and it can be concluded that, notwithstanding the length of domestic proceedings, chances to seek justice are given. Opening the doors of ICS to domestic actors and third parties may nevertheless guarantee a fully-fledged right of access to justice for all the potential actors of ISDS.
1.3. Access to Court for foreign investors
Foreign investors have the option to resort to both domestic and international avenues, although the chances are limited and, in some cases, there is no possibility for a second shot before the domestic courts. The reform compels the investor to withdraw any pending claims with regard to the measure alleged to breach the treaty and to waive its right to submit such claims to domestic and other international courts.57 The waiver is not permanent and would cease to operate in the event that the claimant withdraws its claim within 12 months from the constitution of the tribunal58, or the IIA tribunal dismisses the claim on jurisdictional or other procedural grounds, or when the claim is manifestly without legal merit or frivolous. In this way, foreign investors can turn back to domestic courts in a set number of cases. Although in a partial manner, it can be said that access to court is guaranteed before both international and domestic courts.
From a different perspective, the provision creates confusion and uncertainty as to the choice of the forum, as far as foreign investors could find themselves at a crossroad between the
57 Article 8.22 (1) (f) and (g) CETA. Article 14 (3) (b) TTIP Draft. 58 Article 8.22 (5) (c) CETA.
24
international and domestic law avenues, before or after having resorted to the ICS courts.59 This confusing situation is sharpened by distinct and separate jurisdictional purview and set of judicial remedies of respectively the ICS and domestic courts. Thus, access to court is given, but hindered by a complicated mechanism devised to avoid parallel proceedings.
The ECtHR established that right of access to court is not absolute. “The dispute must be genuine and serious [..] may relate not only to the actual existence of a right but also to its scope and the manner of its exercise [..] the result of the proceedings must be directly decisive for the right in question”.60 Along these lines of reasoning, the ICS proposal contemplates a filter mechanism intended to avoid the submission of manifestly unfounded or frivolous claims61. While certainly reducing the number of cases likely to be brought before the ICS courts, it can be concluded that –in this regard- the mechanism seems to be in line with the above referred understanding of the ECtHR.
1.4. Small and Medium Enterprises (SMEs)
A further seminal aspect of the right of access to court outlined by the ECtHR is that the rights asserted before a court must be “practical and effective” rather than “theoretical and illusory”.62 This means that individuals must be enabled to access court effectively and, when needed, receive legal aid. In general terms, legal aid adds to the proper and efficient administration of justice, since it equips unrepresented claimants with technical assistance in the absence of which the proceedings would delay. The kind of legal aid the ECtHR has dealt with is not only free legal aid directed at natural persons in a state-of-poverty, but also legal aid for legal persons, such as companies. In this case, the Court observed that there is no consensus among State parties to the Convention,63 which is due to divergent legislation on the matter.
59 Supra note 11.
60 ECtHR, Boulois v. Luxembourg [GC], No. 37575/04, 3 April 2012, para. 90. 61 Articles 8.32 and 8.33 CETA. Articles 16 and 17 TTIP Draft
62 ECtHR, Artico v. Italy, No. 6694/74, 13 May 1980, para. 33.
63 ECtHR, Granos Organicos Nacionales S.A. v. Germany, No. 19508/07, 22 March 2012, para. 47
25 In principle, investor claimants and respondent states dispose of sufficient financial resources to cover the expenses of the proceedings. The past arbitral experience has nevertheless shown that SMEs have suffered considerable losses when they embarked on long and costly investment disputes.64 This is precisely a challenge which has been softly tackled by the reform. With Article 8.23 (5) and 8.27 (9) CETA and TTIP, the proposal seeks to promote SMEs’ access to the system by allowing the parties to opt for sole arbitrators. Further, a rendez-vous clause is added only in CETA, which entrusts the Joint Committee with the task of elaborating new rules aiming at facilitating SMEs access.65
However, the option to have the disputes decided by a sole arbitrator does not cure the problem of SMEs’ access to court. Statistics elaborated by the OECD reveal that arbitrators fees on average amount to 16% of the total costs of the proceedings, whereas the fees and expenses incurred for the legal counsels and experts represents 82%.66 Leaving aside the critique over the weak incentive effect of the provisions, it can be concluded that these novelties, especially the opening clause, would bring in brighter perspectives of access to the ICS for SMEs. The Proposal’s approach is certainly a satisfactory response to the total lack of a common standard at the European level.
2. Right to a Reasoned Decision
While the claimants need to demonstrate that they can identify the appropriate legal and factual issues for their claims to be successfully accepted and heard, those called for the examination of the legal and factual questions are also required to give accurate reasons of their decision. The right to a reasoned decision is another core procedural aspect of the right to a fair hearing and a fundamental tenet of democratic legal systems. In light of the ECtHR’s case law, a tribunal must clearly indicate the grounds on which it bases its decision, in order to enable the parties to fully exercise their right of appeal.67 It has now to be seen whether the ICS
64 Supra note 52, Van Harten, at p. 2.
65 Article 39 (6) CETA says: “The CETA Joint Committee shall consider supplemental rules aimed at reducing
the financial burden on claimants who are natural persons or small and medium-sized enterprises. Such
supplemental rules may, in particular, take into account the financial resources of such claimants and the amount of compensation sought”.
66 Supra note 3, at p. 19.
67 ECtHR, Hadjianastassiou v. Greece, No. 12945/87, 16 December 1992, para. 33.ECtHR, Jodko v. Lithuania
26 architecture enables or improves the chances for the thereby instituted courts to deliver clear and transparently reasoned decisions.
2.1. Well-defined rules of interpretation
The proposal provides clear guidance to the adjudicators with regard to the rules and principles to apply in their interpretative task, by prescribing that the treaty shall be interpreted ¨in accordance with customary rules of interpretation of public international law, as codified by the Vienna Convention of the Law of the Treaties”.68 Whilst it is true that arbitral tribunals have largely applied the rules of interpretation of the Vienna Convention, the proposal has the advantage of reaffirming the practice, stabilizing its authority within ISDS and coordinating the judicial activity of several domestic and international tribunals which apply the same rules. Similarly, domestic courts statutes and codes provide for rules of interpretation to support judges in their interpretive task.
2.2. Well-defined standards of protection and self-containing legal framework
Also, open-ended clauses and multiplicity of sources constituting the legal framework for foreign investment would no longer taint the reason-giving of the tribunals. More specified substantive standards of protection and a single self-containing legal framework could go hand in hand with enhanced clarity of decisions.
2.3. Transparency leads to Clarity
As it will be illustrated in Section 5, the reform introduces a higher level of transparency than that existing in the field of investment dispute settlement. With it, the vast majority of disputes are likely to make their way into the public domain. The publicity of proceedings and awards could serve as a stimulating factor for judges to better reason their decisions,69 as they would be exposed to a larger audience in continuous demand for participation in disputes involving interests that transcend the legal relationship of the disputing parties.
68 Article 8.31 (1) CETA. Article 13 (2) TTIP Draft. 69 Supra note 52. See n 4 at p. 32.
27 Similarly, and in relation to the inclusiveness of proceedings, the possibility for non-disputing parties to intervene in the dispute by way of filing submissions of an interpretive nature and the introduction of third-parties intervention have the potential to improve the quality of the reasoning of the tribunal, as far as the intervener brings to the attention of the tribunal material and insight on the subject-matter of the case that otherwise would have not been considered. As demonstrated by some scholars,70 a rule of transparency permeates most domestic jurisdictions, which lean towards open hearings and third parties intervention.
2.4. Merits Review gives a second chance to improve the reasoning
A true factor for change in the institutional framework that could improve the often criticized quality of the reasoning of arbitral tribunals,71 is the introduction of a fully-fledged appellate review. The AT envisioned by the proposal would be tasked with the review of both points of law and facts of the dispute, in addition to the grounds of review set out in Article 52 (1) (a) through (e) of the ICSID Convention, which concern procedural aspects. The establishment of the AT would usher in a powerful corrective tool which could simultaneously remedy inadequate reasoning of the lower tribunal and push them towards more transparent and compelling reasoning.72 Additionally, it would attune the ICS functioning to that of domestic judiciaries, which are commonly characterized by two – or three-tier courts.
2.5. The conundrum of the appreciation of domestic law as a matter of fact
Some issues could arise where a case before the ICS courts would concern the appreciation of the domestic law of the contracting parties. The lack of a mechanism for strong judicial cooperation between the ICS courts and the domestic courts constitutes a risk that could undermine the quality of decisions, unless the former would show great efforts in giving meaning to domestic laws by drawing from the domestic case-law, as it is required by the
70 Asteriti A., Tams, C.J., ´Transparency and Representation of the public interest in investment treaty
arbitration´ in Schill, S. ´International Investment Law and Comparative Public Law´, Oxford University Press, (2010), p. 813.
71 Ibidem for a critical, though limited to specific case-law, analysis.
72 Venzke, I., ‘Investor-State Dispute Settlement in TTIP from the Perspective of a Public Law Theory of
28 reform.73 Under a more optimistic point of view, it could be argued that the demanding endeavor of appreciating laws as a matter of fact could have the effect of stimulating the ICS courts’ to better reason their decisions. A further argument in favor of more clarity is that the appointment of qualified lawyers with expertise in domestic law could strengthen the ICS tribunals’ capacity to issue well-reasoned decisions.
At the end of the day, the innovations introduced by the proposal have the potential to guarantee for an increased quality of judicial reasoning compared to the previous ISDS system and comparable to domestic judicial systems.
3. Equality of Arms
The CJEU has clearly elucidated “the principle of equality of arms [..] implies that each party must be afforded a reasonable opportunity to present his case, including his evidence, under conditions that do not place him at a substantial disadvantage vis-à-vis his opponent”.74 Similarly, the ECtHR stresses on the adversarial nature of the proceedings, for which the parties must be given the opportunity “to have knowledge of and comment on the observations filed or evidence adduced by the other party”75. The question is here whether the ICS proposal creates a level playing field for the foreign investors and the respondent states. The idiosyncrasies of the ISDS system do not allow comparisons with domestic judicial systems.
3.1. In limine litis
At the pre-trial stage, parties are given the chance to either settle their dispute amicably through consultations76 or resort to mediation77. Both mechanisms allow the parties to diplomatically exchange their views and reach an agreement without the necessity of initiating a legal dispute. In these contexts, either through exchanges between their representatives or with the assistance
73 Article 8.31 (2) CETA. Article 13 (3) TTIP Draft.
74 CJEU, C-199/11, Europese Gemeenschap v. Otis NV and Others, 6 November 2012, para. 71. 75 ECtHR, Ruiz-Mateos v. Spain, No. 12952/87, 23 June 1993, para. 63.
76 Article 8.19 (1) CETA; Article 4 TTIP Draft. 77 Article 8.20 CETA; Article 3 TTIP Draft.
29 of an impartial mediator, parties are afforded equal opportunities to present their arguments in a more informal fashion than that characterizing the judicial route.
3.2. Discrepancies as to the choice of procedural rules
Investor claimants from a non-EU country are in some instances deprived of the chance to select the ICSID Convention and Rules of Procedure or the ICSID Additional Facility Rules as the procedural framework to apply to the dispute. On the face of the proposal, free choice of any procedural framework is fully afforded,78 but when it comes to the binding determination of the correct respondent, that must be requested to and issued by the European Union, the scenario considerably changes. If the European Union is chosen as the respondent, the application of the ICSID Arbitration Rules and Facility Rules is excluded, as the European Union is neither party to the Washington Convention nor is it eligible thereto.79 In this case the automatic recognition and enforcement of awards characterizing the ICSID system would not be available to non-European investors that would be exposed to the scrutiny of the domestic court of the place of the “seat of arbitration”. This situation creates an imbalanced allocation of procedural chances in favor of the European Union and its Member States.
3.3. Asymmetries
When it comes to the actual resolution of a legal dispute and its governing rules, the proposal shows certain lacunae typical of the previous arbitral regime. Firstly, the ICS proposal does not contemplate any actionable responsibility upon foreign investors,80 thus maintaining the asymmetrical structure of ISDS. By the same token, it does not incorporate recent developments obtained by expansive interpretation of ISDS clauses in IIAs by the arbitral jurisprudence permitting respondent states to file counterclaims.81 Rather than welcoming such
78 Article 8.23 (2) CETA; Article 6 (2) TTIP.
79 Lavranos, N.,‘How the European Commission and the EU Member States are Reasserting their Control over
their Investment Treaties and ISDS Rules’ in A. Kulick (Ed), States’ Reassertion of Control Over International Investment Agreements and International Investment Treaty Dispute Settlement (Cambridge University Press, 2016), at p. 320.
80 Supra note 52, Van Harten, at p. 3.
81 Antoine Goetz & Consorts and SA Affinage des Metaux v Burundi, ICSID Case No ARB/01/2, Award (21
June 2012). Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v The
30 developments, the European IIAs crystallize the most conservative status quo, by further shrinking the width of the tribunals’ interpretation of the ISDS clause.
The scope of the application of this provision makes this point clear by granting the right to claim solely to “an investor of a party” for a breach of an obligation of Section C and D of the relevant agreements, which respectively deal with the substantive treatment of an investment and the procedural remedies available to redress the investor’s rights. This provision limits both jurisdiction ratione personae and ratione materiae of the tribunal, therefore placing the respondent at a disadvantage.
3.4. Counterbalancing factors
However, the introduction of the third and non-disputing parties intervention in the form of interpretative statements82 may compensate the impossibility for States and, for individuals and groups adversely affected by the investment, to vindicate rights and hold the investors responsible. By bringing into the disputes insights more sensitive to public interests such as health, environment or social concerns, States, NGOs and IGOs can serve as mouthpieces of the common interests on behalf of those who have no participative rights.83 In order to guarantee parties equal opportunities to present their case, the proposal adds that “the Tribunal shall ensure that the disputing parties are given a reasonable opportunity to present their observations on a submission by the non-disputing Party to this Agreement”,84 this provision clearly speaks the language of the Strasbourg Court.
3.5. Interim Conclusions
82 Article 8.38 (2) CETA; Article 22.3 TTIP Draft.
83 Francioni, F., ‘Access to Justice, Denial of Justice and International Investment Law’ in The European
Journal of International Law, Vol. 20 no. 3, EJIL (2009), at p. 738.
31 It emerges from the foregoing that, where the asymmetrical structure of ISDS has remained untouched, more inclusiveness in the investor-State disputes as envisioned in the proposal has the advantage of fixing the imbalance of procedural chances generated by the absence of a right to claim upon the respondent states. It is argued that more inclusiveness creates a level playing field for both disputing parties. However, the procedural discrepancy relating to the choice of procedural rules constitutes a hard challenge to tackle. To this end, the ICSID Convention may need to be amended, which is possible only if all Contracting States thereto unanimously agree on the modification of the requirements for the accession.
4. Impartial and Independent Judges
Independence and impartiality of the adjudicators epitomizes the characteristics that each court system should possess in order to be considered as such. The restricted access to domestic courts for foreign investors could be eased by the existence of a solid court system legitimized by the presence of independent and impartial judges. As the two adjectives form part of the definition of tribunal under the right to a fair trial, the ensuing enquiry is important to the end of proving whether the ICS courts can be regarded as tribunals entitled to request a preliminary ruling under the CJEU’s case law. Moreover, the Proposal aims to respond to the traditional critique against ISDS as to the lack of these guarantees on the part of the dispute resolvers. It is to be seen how and to what extent a solution is provided.
4.1. General remarks regarding the guarantees
The right to a fair trial expressly refers to independent and impartial tribunal, signaling the necessity of institutional safeguards of judicial independence and impartiality. As explained by the ECtHR, independence relates to the structure of a tribunal, whereas impartiality is an individual characteristic of a decision-maker.85
Both CJEU and ECtHR have outlined clear criteria to assess the neutrality of a tribunal, which relates to the manner of appointing tribunal members, the duration of their terms of office,86
85 ECtHR, Parlov-Tkalčić v. Croatia, No. 24810/06, 22 December 2009, paras. 86–87. 86 Ibidem, pp. 24-25, para. 57.
