European Commission Draft on Investment Court

The European Commission released on Wednesday a long-awaited draft proposal on a possible “investment court system,” one that it says could replace the controversial investor-state dispute settlement system in all current and future investment negotiations – starting with the planned Transatlantic Trade and Investment Partnership (TTIP).

Negotiations with the US on this bilateral trade and investment deal are now over two years in, with reports generally indicating the talks to be lagging.

The talks specifically on TTIP investor protections and investor-state dispute settlement have been on hold since early 2014, after the European Commission announced it would be suspending these in order to solicit public comment on the matter.

Court system

According to the Commission’s draft proposal, this new public Investment Court System for TTIP would feature both a first-instance Tribunal as well as an Appeal Tribunal, with publicly appointed, qualified judges.

The former tribunal would have 15 judges, including five EU nationals, five US nationals, and five from other countries. The latter tribunal would have six members, with two EU nationals, two US nationals, and two from other countries. The Appeal Tribunal would follow similar principles to that of the WTO’s Appellate Body, which is the highest court at the latter organisation.

Right to regulate

The Commission document also includes a series of fundamental principles of treatment that foreign investors would be able to rely upon when choosing to invest in a partner country. To file a complaint with the Investment Court, an investor would have to claim that one of these guarantees has been violated by a host country.

These include guarantees against expropriation without compensation; the possibility of transferring investment-related funds; commitments to ensure fair and equitable treatment and physical security; commitments that governments respect obligations to investors that are written and legally binding; and guarantees of compensation for those losses that arise in specific circumstances, such as armed conflicts.

Domestic versus international courts

Another concern that has been raised in the past by ISDS opponents is whether such international courts would supersede the authority of domestic ones.

The draft proposal attempts to respond to such concerns, essentially suggesting that investors may first present cases domestically. However, if they wish to have their case heard by the Investment Tribunal – for instance, in cases where the domestic system does not have the needed investor guarantees – any ongoing domestic proceedings must then be withdrawn.

The document also includes a series of provisions regarding the interpretation of domestic laws when addressing these international investment disputes. For one, the Investment Tribunal’s interpretation of a party’s domestic law must be in line with that of domestic courts. Furthermore, the tribunal’s interpretation would not be at all binding on domestic courts.