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Multilateral Investment Court (MIC)

In “A Stronger Europe in the World”

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The Commission is engaged in multilateral discussions to establish a multilateral investment court.

Background and state of play

In a speech at Parliament in July 2014, European Commission President Juncker pledged for the replacement of the 'outdated' investor-state dispute settlement (ISDS) system that had governed most international investment agreements (IIA). The prevalent ISDS system is an arbitrator-based system that enables disputes to be settled whenever an investor (the claimant) considers that a State (the respondent) has infringed its obligations under relevant IIAs. Following a public consultation and impact assessment conducted by the European Commission in 2016-2017, the Council mandated the latter in March 2018 to negotiate a convention establishing a Multilateral Investment Court (MIC) on behalf of the European Union (EU) and its Member States.

Multilateral talks started in late 2017 under the auspices of the Working Group III of the United Nations Commission on International Trade Law (UNCITRAL). The talks have been divided in three phases:

  1. identifying the concerns regarding the ISDS;
  2. assessing the desirability of reforms for identified concerns; and if so,
  3. recommending action and reform options to the UNCITRAL Commission.

The working group has identified concerns pertaining to three categories:

  1. consistency, coherence and predictability of ISDS;
  2. arbitrators and decision-makers;
  3. cost and duration of cases.

For all these concerns, the working group concluded that multilateral reforms are desirable.

The talks are now in the third phase (recommending action and reform). The UNCITRAL Secretariat has issued three documents, which summarize the proposals and give reform directions:

  1. code of Conduct of Adjudicators,
  2. appellate mechanism and enforcement, and
  3. selection and Appointment of ISDS tribunal members.

Participants discussed these documents at the session in May 2021 and comments were submitted on some or all chapters by the some countries.

At the 15-19 November Session, the Working Group considered the draft code of conduct for adjudicators in international investment disputes based on the documents prepared by the Secretariat. The latest session took place on 14-18 February 2022 considered the institutional aspects of the proposals.

The next sessions are scheduled in New York, and 26-30 September 2022, Vienna (tentative).

Objectives of the Commission

The European Commission aims to establish a Multilateral Investment Court system that would address the concerns of stakeholders in order to restore confidence in international investment agreements. Concerns include the complexity and the lack of predictability of ISDS decisions, the time-lengthy and costly procedures deterring smaller respondent countries, and the impartiality of arbitrators. It is worth noting that the MIC is aimed at providing a judicial procedural framework for investor-state dispute settlements, and will not touch upon the underlying substantive laws, which remain part of the investment agreements.

MIC and European Law

The EU has replaced the ISDS mechanism with bilateral investment court systems (ICS) in recently negotiated international investment agreements - including those with Canada, Mexico, Singapore, and Vietnam; the agreements also include provisions anticipating the transition from the bilateral ICS to a permanent MIC.

Following a request submitted by Belgium in 2017 regarding the investment agreement between Canada and the EU, the Court of Justice issued an Opinion on 30 April 2019 confirming the compatibility of an ICS with the Treaties of the European Union (Opinion 01/17).

 

Main debates

Even though the EU has recently signed IIAs that include bilateral ICS, including with Canada, Singapore, Vietnam and Mexico, a number of the EU's major trading partners, including the USA and Japan, express little support for the creation of a MIC. Besides, some of the opponents to the ISDS system fear that the MIC will insufficiently address some of the major concerns associated with IIAs.

Position of the European Parliament

In a resolution of 8 July 2015 on the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the United States, the European Parliament requested the replacement of ISDS with a new system,  subject to 'democratic principles and scrutiny'. The new system would allow transparent treatment of cases by publicly appointed, independent professional judges in public hearings. In addition, the resolution requests that the new system includes an appellate mechanism and ensures consistency of judicial decisions. In a subsequent resolution of 5 July 2016 on a future strategy for trade and investment, Parliament shared the ambition of the Commission of establishing a 'multilateral solution to investment disputes'.

References

Further reading:

Author: Angelos Delivorias, Members' Research Service, legislative-train@europarl.europa.eu

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As of 20/11/2024.