Multilateral investment court: Framework options

Briefing 03-06-2021

The Council of the EU has authorised the European Commission to represent the EU and its Member States in the intergovernmental talks at the United Nations Commission on International Trade Law (UNCITRAL), with a view to reforming the existing investor-state dispute settlement (ISDS) system. The latter provides a procedural framework for disputes between international investors and host states in relation to international investment agreements, and relies on arbitration procedures. The system has raised serious concerns among stakeholders across the EU, especially in relation to the transparency and consistency of decisions, the independence of arbitrators, and the cost and duration of arbitral procedures. The intergovernmental talks at UNCITRAL are aimed at reforming the system in a manner that would address these concerns; the overarching goal of the Council mandate is to establish a full-fledged permanent multilateral investment court with an appellate mechanism and tenured judges. UNICTRAL talks started in 2017; in April 2019, the working group identified three areas of concerns, namely a) consistency and predictability of arbitral decisions; b) integrity of arbitrators and decision-makers; and c) cost and duration of ISDS disputes. The states then tabled reform proposals that provided the framework for the discussions launched in October 2019. The UNCITRAL Secretariat has circulated two documents summarising the proposals regarding the selection and appointment of ISDS members, the establishment and scope of an appellate mechanism, and the enforcement mechanism. The proposals range from perfecting the current ISDS to setting up formal investment courts comprised of first-instance and appellate tribunals. The documents include questions to the government delegations. In its reply to the initial draft, the delegation at UNCITRAL for the EU and its Member States supports the establishment of a multilateral investment court composed of a first-instance and an appellate tribunal staffed by full-time adjudicators.