Investor-state arbitration is a field to which John Beechey, a man of many talents, interests and achievements, devoted much professional energy as counsel and arbitrator. It is in that context that I first encountered him, when I appeared before him in an ICSID arbitration. While President of the ICC International Court of Arbitration, and with his characteristic feistiness, John recently took on the role of advocate for investor-state arbitration (or ISDS, as it is now fashionable to call it). That was a commendable undertaking, given the mounting hostility towards this form of dispute settlement. It therefore seemed apt to reflect on the future of ISDS for this tribute to a distinguished lawyer and valued friend.

1. The debate over the reform of investor protection and ISDS

In its modern form, ISDS owes its origins essentially to the ICSID Convention. During that Convention's early life, ISDS remained unknown and of interest only to a small circle of academics, predominantly public international lawyers. Then it was discovered by practitioners, who for a quarter of a century exploited its potential, in conjunction with bilateral and multilateral treaties that laid down substantive rules on the protection of foreign investors. As a result, investor-state arbitration enjoyed an unimagined boom for a few decades, as [Page320:] evidenced by the number of awards, academic articles, conferences, moots and specialized publications on the subject, and, of course, the scores of lawyers, law firms and arbitrators who made investor-state arbitration a prestigious, and in many cases lucrative, centrepiece of their practice. It nonetheless remained a niche product, even during that heady period.

In the last few years, almost overnight as it were, ISDS has become a subject of public conversation, heated political discussion, newspaper articles,2 parliamentary debate and even street protests. When observing this, one cannot help thinking of the flash of insight that Joseph Kennedy Sr. (or J.P. Morgan according to some) is said to have had just before the 1929 crash, upon hearing his shoeshine boy talk about investments in the stock market: it was time to get out. Does popular discussion of investment arbitration likewise signal that its heyday is over?

The concern is not that widespread interest will banalize what until now has been an elite branch of legal practice. That would only trouble practitioners exposed to new competition and declining revenues. Rather, the concern is whether this public debate and the serious criticism levelled at ISDS will lead to profound reforms or perhaps even to the complete demise of the system its current form, with implications that are as yet unclear but not necessarily positive.

ISDS has always been a fundamental feature of investment protection agreements. The reason why it has emerged into the public arena is that it is central to the discussions on the free trade and investment protection agreements that are currently being negotiated between the European Union (EU) and some of its principal trading partners, in particular the United States.3 Following the EU's acquisition of exclusive external powers in 2009, existing bilateral investment agreements (BITs) between individual states are to be replaced by agreements negotiated at EU level. Negotiations are at their most advanced stage with Canada and Singapore, and the resulting texts (respectively the CETA and the EU-Singapore FTA) have been made public. Negotiations [Page321:] with the United States on the so-called Trans-Atlantic Trade and Investment Partnership (TTIP) and with China on the EU-China BIT are ongoing but less advanced.

It was originally envisaged that, like the existing bilateral and multilateral investment protection agreements, the new EU agreements would similarly provide for investor-state arbitration. The EU's involvement in the negotiation of these new agreements and the intense public scrutiny to which the negotiations have been subject have led to widespread criticism of the traditional paradigm of investor-state protection. That criticism has also targeted ISDS.4 The current model is depicted as a threat to democracy and the sovereignty of states, and especially their right to regulate matters such as health, the environment and the protection of workers.5

As a result of this change of mood, the current draft texts of the CETA and the EU-Singapore FTA already differ significantly from the traditional model. Since their adoption, that model has come under even more intense criticism, which is reflected in particular in the European Commission's proposals discussed below. If the innovations propounded by the Commission were to find their way into the future texts, the system of investor protection might well undergo a genetic mutation.6

The reasons for this change of attitude towards investor protection and ISDS, which is no longer the preserve of lawyers and academics but a subject of intense public debate, as well as the implications of this change for the future, deserve in-depth analysis. Given the complexity of the issues involved and the fact that discussions are still at an embryonic stage, this essay cannot presume to speculate in any meaningful way on the prospects of ISDS. Its aim will be rather to give [Page322:] a brief overview of the current state of play, particularly the position of the EU and the agreements now under negotiation, and to provide some elements of reflection.7

2. Origins of the new EU investment policy

Immediately after the entry into force of the Lisbon Treaty, which broadened the EU's exclusive external competence, the EU began actively to address the development of an international investment policy which would ultimately lead to the replacement of the existing extra-EU BITs.8 The first significant step in that direction was the Commission's Communication of 7 July 2010, entitled 'Towards a comprehensive European international investment policy',9 and its adoption of a proposal for what was to become Regulation (EU) No. 1219/2012 of the European Parliament and of the Council establishing transitional arrangements for bilateral investment agreements between Member States and third countries.10

The Communication set out the main tenets of EU investment protection policy at both the substantive and procedural levels. The Commission recognized the importance of investment protection, stressing the need to combine investment liberalization, which was the [Page323:] prime aim of the policy, with investment protection. It also noted that, in order for its policy to be effective, 'guarantees from third countries on the conditions of investment should come in the form of binding commitments under international law'.11 This policy could no longer be achieved, as before, by a network of bilateral BITs, but required the direct involvement of the EU to ensure a level playing field for all Member States. It also pointed out the inappropriateness of a 'one-size-fits-all' approach for investment agreements with third countries.

At the substantive level, the Commission acknowledged the need to supplement non-discrimination, a core principle in EU agreements, with other standards fundamental to investment protection that are found in BITs. The Commission listed fair and equitable treatment after the admission of the investment, full security and protection, and protection against unlawful expropriation, pointing to the need to ensure a balance between investor protection and the right to regulate in the public interest. It also noted that investment policy should be guided by the principles and objectives of EU external action in general, including the promotion of the rule of law, human rights and sustainable development.

The Commission's Communication insisted on the importance of effective enforcement of agreements related to common commercial policy through binding dispute settlement, which should include not only the state-to-state dispute settlement system already used by the EU, but also investor-state dispute settlement, 'which forms a key part of the inheritance that the Union receives from Member State BITs'.12 Interestingly, the Commission stated: 'Investor-state [dispute settlement] is such an established feature of investment agreements that its absence would in fact discourage investors and make a host economy less attractive than others.'13 Accordingly, 'future EU agreements including investment protection should include investor-state dispute settlement'.14 This was said to raise challenges 'relating, in part, to the uniqueness of investor-state dispute settlement in international economic law, and in part to the fact that the Union has not historically been a significant actor in this field'.15 It noted that current structures are to some extent ill-adapted to the role foreseen for the EU and gave as an example the fact that the EU could not become part of the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).

The Commission called for the EU to 'build on Member State practices to arrive at state-of-the art investor state dispute settlement mechanisms'.16 The main challenges were identified as being to ensure the transparency of these mechanisms; avoid the atomization of [Page324:] disputes and interpretations through consistency, predictability and 'the use of quasi-permanent arbitrators (as in the EU's FTA practice) and/or appellate mechanisms';17 and rules for the conduct of arbitration, with a particular focus on the possibility of the EU's accession to the ICSID Convention. Finally, the Commission evoked the need to address the sharing of international responsibility between the EU and Member States when actions under the investment agreements are brought against them.

The Commission's assessment as set out in its Communication was substantially endorsed by the Council in its 'Conclusions on a comprehensive European international investment policy' of 25 October 2010.18 However, the Council stressed that the new framework 'should not negatively affect investor protection and guarantees enjoyed under the existing agreements'19 (i.e. BITs).

The European Parliament responded to the Commission's Communication with a Resolution entitled 'Future of European international investment', issued on 6 April 2011.20 It underlined the importance of investment policy and the need for the Parliament to be involved in shaping it. The Parliament expressed concern that the Council's position might lead to opposition to any new agreement and endanger the necessary balance between investor protection and protection of the right to regulate, particularly 'in an era of increased inward investment'.21

As to substantive protection, which it stated had to remain the first priority, the Parliament concluded that it should be based on the best practices drawn from Member State experiences and include the standards of non-discrimination, fair and equitable treatment and protection against direct and indirect expropriation. It also requested an assessment of the potential impact of the inclusion of umbrella clauses in future agreements.

The Parliament stressed that future agreements had to respect the capacity for public intervention and expressed 'concern regarding the level of discretion of international arbitrators to make a broad interpretation of investor protection clauses, thereby leading to the ruling out of legitimate public regulations'.22 To avoid these problems it called on the Commission to clearly define investor protection standards and to include in the new agreements specific clauses providing for the right to regulate in areas of national security, public health, workers' and consumers' rights, industrial policy and cultural diversity.

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With regard to dispute settlement, the Parliament called for changes to the present regime 'in order to include greater transparency, the opportunity for parties to appeal, the obligation to exhaust local judicial remedies where they are reliable enough to guarantee due process, the possibility to use amicus curiae briefs and the obligation to select one single place of investor-state arbitration'.23 The Parliament added that, in addition to state-to-state procedures, investor-state procedures were needed to secure comprehensive investment protection.

The above overview shows that at the time all three EU institutions acknowledged the need for effective investment protection through international agreements involving the EU. Moreover, they all recognized the need to take into account the substantive standards and the investor-state dispute settlement mechanism that have characterized the BIT-based investor protection regime in recent decades. However, they all - and especially the Commission and the Parliament - seemed to consider that neither those substantive standards nor the dispute settlement mechanism of the present system could simply be replicated in the future EU agreements. Although with differing emphases, they all concluded that they would need to be adapted to satisfy new concerns. That ISDS would remain part of the new regime, however, appeared to be confirmed by the adoption of Regulation (EU) No. 912/2014 of the European Parliament and of the Council of 23 July 2014 establishing a framework for managing financial responsibility linked to investor-to-state dispute settlement tribunals established by international agreements to which the European Union is party.24

3. Substantive protection and ISDS in the draft CETA and EU-Singapore FTA

Exercising its newly acquired exclusive competence over external commercial policy, the EU has entered into negotiations with a number of key economic partners with a view to concluding agreements offering foreign investment protection. At the time of writing, those with Canada and Singapore have reached an advanced stage of negotiation. They are intended to be comprehensive trade agreements covering more than simple protection of foreign investments as in classic BITs. Negotiations on both agreements have finished and the final texts are now subject to legal review and then ratification. They will serve as a useful starting point for this analysis of emerging EU policy in relation to such agreements. This section will discuss their provisions on substantive and procedural protection of foreign investments.

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a) Substantive standards for investor protection

In the drafts of the CETA25 and the EU-Singapore FTA,26 the provisions on investment protection appear respectively in chapters 10 and 9. They are broadly similar and, although at first sight they recall those found in traditional BITs, they depart from these in many significant respects.27

The standards of treatment that apply to investors and investments covered by the agreements28 are: the prohibition of discriminatory treatment and most-favoured nation treatment (Articles X.6 and X.7 CETA and Article 9.3 EU-Singapore FTA); fair and equitable treatment and full protection and security (Article X.9 CETA and Article 9.4 EU-Singapore FTA); and the prohibition of expropriation (Article X.11 CETA and Article 9.6 EU-Singapore FTA). While the provisions on national and most-favoured nation treatment are standard, those on fair and equitable treatment (FET) and full protection and security introduce important innovations compared to traditional BITs.

One difference relates to the definition of FET, whose open-ended nature is often considered responsible for much of the discretion that arbitral tribunals are increasingly accused of abusing, in particular to the detriment of a state's right to regulate.29 According to Article X.9 CETA, FET is breached by a measure that constitutes: a denial of justice in criminal, civil or administrative proceedings; a fundamental breach of due process, including a breach of transparency, in judicial or administrative proceedings; manifest arbitrariness; and targeted discrimination on manifestly wrongful grounds. Article X.9 CETA allows Contracting Parties to review the content of the FET obligation and the Committee on Services and Investments, which is a forum for consultation between Contracting Parties on matters related to the investment section of the agreement, to make recommendations in this regard.

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Article 9 CETA also contains a provision on the protection of legitimate expectations aimed at curbing the discretion of arbitral tribunals and giving investors the possibility to invoke legitimate expectations of certain treatment by the host state:

a tribunal may take into account whether a Party made a specific representation to an investor to induce a covered investment, that creates a legitimate expectation, and upon which the investor relied in deciding to make or maintain a covered investment, but that the Party subsequently frustrated.

This restrictive view of legitimate expectations is clearly influenced by Article 1105 NAFTA case law, which considers legitimate expectations to be merely a 'factor' that arbitral tribunals may take into account when assessing whether other elements of FET have been violated.30 On this issue the EU-Singapore FTA is more in line with the jurisprudence of the majority of non-NAFTA tribunals, which consider legitimate expectations as an autonomous component of FET.31 Article 9.4(2)(e) lists breaches of legitimate expectations among the measures that violate FET, describing legitimate expectations as being those that arise from 'specific or unambiguous representations from a Party so as to induce the investment and which are reasonably relied upon by the investor'.

Articles X.95 CETA and 9.4(4) EU Singapore FTA both specify, 'for greater certainty', that full protection of security, which some investment tribunals have tended to treat in tandem with and as equivalent to FET, refers to the physical security of investors and covered investments, thereby considerably reducing its scope compared to FET.

The provisions on expropriation, although more detailed than their counterparts in BITs, do not depart fundamentally from the traditional model. Both agreements afford the investor the right, under the law of the expropriating state, to a prompt review of its claim and the valuation of its investment by a judicial or other independent authority of that state (Article X.11(4) CETA and Article 9.6(4) EU-Singapore FTA).

b) Investor-state dispute settlement procedures in the draft CETA and EU-Singapore FTA

The availability of ISDS, which permits arbitration directly between private investors and the host state in the event of disputes over the violation of their internationally protected rights, is a fundamental [Page328:] feature of traditional BITs. Access to ISDS is considered a necessary complement to substantive investment protection and indispensable for ensuring the attractiveness of foreign investment.32

As indicated above, EU institutions, albeit to differing degrees, initially considered the availability of ISDS to be a necessary part of EU investment policy. However, ISDS has come under increasing criticism in the overall reassessment of investment protection and, in particular, of EU investment policy. It is evident from the draft CETA and EU-Singapore FTA that an attempt has already been made to address the problems identified by the critics through a number of reforms that seek to increase the 'legitimacy' of ISDS.33

According to both agreements, the provisions on ISDS are applicable to claims brought by investors under the provisions on non-discrimination and protection of investments of the respective treaties (Articles X.17 CETA and 9.11 EU-Singapore FTA). In keeping with investor-state jurisprudence, the CETA clarifies that a claim cannot be submitted to arbitration where the investment has been made through fraudulent misrepresentation, concealment, corruption or abuse of process (Article X.17(2) CETA). Interestingly, it also states that under certain conditions ISDS is available for disputes relating to the restructuring of debt issued by a Contracting Party (Article X.17(3) CETA).

Both agreements contain extensive provisions on amicable resolution, consultation, mediation and alternative dispute resolution, which may precede the initiation of arbitral proceedings (Articles X.18-X.19 CETA and 9.12-9.14 EU-Singapore FTA). Their provisions on arbitration are extremely detailed. Those that depart significantly from standard investor-state arbitration will be mentioned below.

• Both agreements have specific provisions on the determination of the proper respondent in proceedings brought against the EU or a Member State (Articles X.20 CETA and 9.15(2)-(3) EU-Singapore FTA), which are aligned with those of the Financial Responsibility Regulation34 and aim to forestall defences based on the incorrect identification of the respondent.

• Articles X.22 CETA and 9.16(1) EU-Singapore FTA provide that a claim can be brought under the ICSID Convention, the ICSID Additional Facility Rules, the UNCITRAL Arbitration Rules, or [Page329:] any other rules agreed by the Parties. The reference to the ICSID Convention is incongruous, given that the EU is not a party to it, nor can become one at the present time as the Convention is open only to states.

• With regard to the constitution of the arbitral tribunal, the two treaties follow the Commission's preference for the use of 'quasi-permanent' arbitrators.35 Articles X.25 CETA and 9.18(3) EU-Singapore FTA provide that arbitrators not appointed by the parties are appointed by the Secretary General of ICSID from a list of at least fifteen individuals with suitable expertise in international law drawn up by the Committee on Services and Investment. That list is made up of three sub-lists of at least five individuals (one for each Contracting Party and the third consisting of persons who are nationals of neither Contracting Party).

• Article X.23 CETA provides for proceedings to be stayed to allow claims and decisions under other agreements that could overlap with or have a significant impact on the proceedings to be taken into account.

• With regard to the law governing the merits, Articles X.27 CETA and 9.19 EU-Singapore FTA require arbitral tribunals to render their decisions consistent with the agreement as interpreted in accordance with the Vienna Convention on the Law of Treaties, and other rules and principles of international law applicable between the Contracting Parties. A particular feature that distinguishes the agreements from traditional BITs is the interpretative role assigned to the Trade Committee, which is borrowed from NAFTA. Where serious concerns arise over matters of interpretation that may affect investments, the Trade Committee has the power to adopt interpretations of the agreements that are binding on arbitral tribunals. This is seen as another attempt to curb the discretion of arbitral tribunals and a 'safety valve in the event of errors by the tribunals'.36

• To forestall frivolous claims, Articles X.29 and X.30 CETA (and the corresponding Articles 9.20 and 9.21 EU-Singapore FTA) grant arbitral tribunals the power to suspend proceedings on the merits and issue a decision or an award addressing, as a preliminary question, an objection raised by the respondent that the claims are manifestly without legal merit or unfounded as a matter of law, i.e. cannot be adjudicated in favour of the claimant even if the alleged facts are assumed to be true.

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• Both agreements contain provisions aimed at ensuring a broad level of transparency in the proceedings, including the application of the UNCITRAL Transparency Rules (Article X.33 CETA and 9.22 EU-Singapore FTA).37

• Another novel provision concerns the so-called 'non-disputing Party', i.e. the Contracting Party that is not the respondent in the dispute (which, in the case of the EU, will be the EU, not a Member State). Under Articles X.35 CETA and 9.23 EU-Singapore FTA, the non-disputing Party must be informed of the dispute and provided with all relevant documents after issues of confidentiality have been resolved. The non-disputing Party is entitled to make oral and written submissions and attend hearings.

• With regard to the enforcement of awards, Articles X.39 CETA and 9.27 EU-Singapore FTA merely state that a disputing party shall recognize and comply with an award without delay. They also indicate that claims submitted to arbitration 'shall be deemed to arise out of a commercial relationship or transaction for the purposes of Article I of the New York Convention', which is presumably intended to anticipate the possible argument that these are not normal commercial awards subject to the New York Convention. In line with Article III of the New York Convention, Article X.39 CETA provides that the execution of an award shall be governed by 'the laws concerning the execution of judgments in force where execution is sought' (and Article 9.27 EU-Singapore FTA 'in accordance with [the Contracting Party's] international obligations and relevant laws and regulations'). There is no provision on the internationally binding force of awards, as in Article 54 of the ICSID Convention.

• Neither agreement directly envisages an appellate mechanism for reviewing awards. However, the Contracting Parties may consult with each other on creating one and on related issues (Articles X.42 CETA and 9.30(1)(c) EU-Singapore FTA).

• The agreements contain interesting provisions on consolidation when claims relating to a common question of law or fact and arising out of the same facts or circumstances are submitted to different tribunals. In such a case, one or more of the disputing parties may request the establishment of a separate tribunal to decide on the consolidation, which may 'assume jurisdiction over some or all of the claims, in whole or in part' (Article X.41 CETA and 9.29 EU-Singapore FTA).

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4. Recent developments in the ISDS debate: the European Commission's proposal for a permanent international investment court

As is apparent from the brief analysis in the previous section, the substantive standards of investor protection and the ISDS provisions in the investment chapters of the draft CETA and EU-Singapore FTA contain several of the innovations advocated by the EU's institutions when they first tackled the subject.38 They therefore already mark a significant departure from the traditional BIT regime that has been the backbone of investor protection during recent decades.

Originally, the CETA and EU-Singapore FTA drafts were to serve as blueprints for the negotiation of the TTIP.39 However, the debate on investor protection and ISDS has continued since their adoption and criticism has even increased, in particular in relation to the proposed TTIP. In March 2014, in response to public concern, the European Commission launched an online public consultation, which drew a big response. A Commission report analysing the results was issued on 13 January 2015.40 It noted that the consultation revealed 'a wide-spread opposition' to ISDS,41 which was 'perceived as a threat to democracy and public finances or to public policies' and 'considered unnecessary between the EU and the US, in view of the perceived strength of the respective judicial systems'.42 Opposition to the inclusion of ISDS in the TTIP has been echoed by politicians, scholars and activists, who have expressed similar fears over the impact of ISDS on state sovereignty.43

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Amid this climate of opposition, EU institutions have become even more hesitant about including investment arbitration in future agreements, starting with the TTIP.44 The Commission's Concept Paper of 7 May 2015 proposed several 'stepping stones' towards the establishment of a multilateral system for the settlement of investment disputes45 and called for the creation of a permanent investment court and an appeals mechanism.46 The European Parliament's Committee on International Trade recommended that the Commission use the Concept Paper as a basis for future negotiations and suggested setting up 'a public international investment court' in the medium term.47

These proposals were in essence confirmed by the European Parliament's resolution of 8 July 2015, in which a recommendation was made 'to replace the ISDS system with a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny, where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, [Page333:] where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected, and where private interests cannot undermine public policy objectives'.48

This line of thinking has led to what, at the time of writing, is the latest proposal on the subject: the European Commission's draft text on Investment Protection and the Investment Court System in the Transatlantic Trade and Investment Partnership, published on 16 September 2015.49 Although this proposal is framed for the TTIP, the Commission's intention is that it should be used as a model for the negotiation of all future EU investment agreements.50

The draft contains substantive rules that largely resemble those of the EU Singapore FTA and CETA, but with an even greater emphasis on the protection of the 'right to regulate'.51 Its most significant feature, however, is the institution of a permanent court system consisting of a fifteen-member Tribunal of First Instance and a six-member Appeal Tribunal, along the lines of the WTO Appellate Body.52 The members of the two Tribunals would be required to have specific qualifications and expertise, meet ethical standards and have no conflicts of interest. They would be appointed by a committee of representatives of the Contracting Parties, equally divided between nationals of EU Member States, the United States, and third countries.53

5. Outlook for the future

At the time of writing, the situation is in a state of flux. The EU institutions' current proposals, including that of a permanent court, are still work in progress. They clearly reflect the iconoclasm of opponents to the present system of investor-state arbitration. The most recent documents either question the very concept of ISDS or, as in the Commission's latest proposal,54 call for a completely new system centered on a profound review of substantive standards of protection and a permanent investment court. The impact of this new approach to ISDS is likely to be far-reaching and not confined to the ongoing TTIP negotiations. It could well result in the draft agreements with Canada and Singapore being revisited. However, although this new approach [Page334:] is stated to be intended to apply to all future agreements, one may wonder whether it will actually be followed, even with partners that are unable to guarantee acceptable levels of protection. The need for stronger protections has been voiced in relation to the negotiations with China, whose judicial system and commitment to values fundamental to the EU, such as the respect of basic social rights and environmental standards, raise concerns.55

It is too early to say whether these proposals will eventually be incorporated into future treaties, or whether such treaties will indeed be concluded at all. 56 What is clear is that there has been a momentous change of attitude towards the current system, which, to say the least, can no longer be taken for granted. Further reflection on these issues is certainly warranted. The advocates of traditional ISDS have so far been much less vociferous than its opponents. Only recently have they begun to engage in the public debate. While admitting that there is room for improvement, they point out that much of the criticism is based on an improper understanding of the present system.57 Concerns over the abolition of the present system and its replacement with one that is unlikely to improve the protection of investors deserve a full airing.

That said, there are several factors that help to explain why investor protection and ISDS have given rise to so much controversy. One is the involvement of the EU and its institutions. They have entered into the debate with the reformist zeal of neophytes, as well as with their own [Page335:] preoccupations, one of which is to safeguard the predominance of EU law and its uniform application by the Court of Justice of the European Union.58

However, this cannot be the only explanation, given that a similar aversion to the current system is also found in public opinion elsewhere. A deeper reason is the fundamental change that has taken place in the playing field since the first generation of BITs were negotiated and applied. Although they provide for symmetric obligations, they were in reality conceived to afford protection to companies from western industrialized nations investing in developing countries. Given the inadequacy of the legal systems in those countries, it was important to create a stable environment for investments and to provide external protection through the rule of law against abuses and arbitrariness. On the whole, traditional BITs served their purpose well. Over time, the constructive attitudes of arbitral tribunals have fleshed out the content of the host-state obligations to provide significant protection to investors, possibly extending them beyond the scope that was initially foreseeable. They have also contributed to a better understanding and greater acceptance of the required standards of treatment for foreign investors.

However, political and economic changes have created a situation in which investment flows are no longer unidirectional, and those states that were traditionally exporters of investment and whose nationals benefitted from the protection afforded by ISDS and arbitration have increasingly become respondents in such arbitration. Added to which, there has been disenchantment in some sectors of opinion with the way the mechanism functions. Partly as a consequence of what some regard as excessively broad interpretations of BIT standards by some [Page336:] arbitral tribunals, there is a sense that the substantive and procedural rules that underlie traditional investment protection work to unduly restrict the regulatory powers of states. The debate is possibly also influenced by the fact that the players involved - the EU, USA, Canada, Singapore - can be said to have sophisticated and trustworthy legal and judicial systems that provide equivalent levels of protection and make the need for a specific mechanism to settle investment disputes seem less compelling.59

Be that as it may, investor protection and ISDS as they have existed for several decades are undeniably in a state of turmoil, with many of their fundamentals called into question. The debate is still highly charged politically, and insufficiently informed technically. For the moment, any attempt to forecast future developments is premature. However, some thoughts on the merits of the solutions under discussion may be useful.

6. Critique of the options foreshadowed by the debate on EU investment agreements

Even if certain concerns about the present system are understandable, the solutions under discussion are highly debatable. The least that can be said is that they would represent a considerable step back compared with the level of protection the current regime affords against interference by host states in investments, without appreciably curing the problems they seek to address.

a) Abolition of ISDS

The outright abolition of ISDS demanded by the more extreme critics and evoked in some official documents would be a most undesirable outcome, sinisterly reminiscent of the Calvo doctrine. It would dramatically decrease the level of protection for investors, who view ISDS as an indispensable protection against the risks of investing abroad and would be discouraged from doing so, even in countries with sophisticated legal and judicial systems. For an investor, having to litigate against a foreign state in its own courts, regardless of how sophisticated or respectful of the rule of law they are, will usually be less reassuring than litigating in a neutral international forum. Matters of concern will be whether local judiciary are sufficiently competent and unbiased, the prospect of having to take complex disputes involving international investment protection rules through a succession of courts, typically starting in the court of first instance at the place where the investment is made, and to do so in a foreign language, following the intricacies of idiosyncratic national procedures and relying on the local Bar. Equally concerning will be the likelihood of having to overcome defences based on the interplay between domestic law and international law and possibly the compatibility of international law [Page337:] with domestic constitutional law.60 Even within the EU it is unrealistic to expect foreign investors to have the same level of confidence in the judicial systems of all Member States. These concerns are, incidentally, the same as those that militate in favour of arbitration as an alternative to litigation in national courts in commercial relations. They are even stronger when protection against a state is at stake.

Abolishing ISDS would be antithetical to the very goal of investor protection. The system that has evolved over the years is founded on the principle that states should be bound by the rules of international law that offer protection to investors and which prevail over national law. Obviously, they must prevail over EU law too, which, from the perspective of investors from third states, is equivalent to domestic law. Substantive protection is inseparable from procedural protection through ISDS, which is the means whereby substantive rights of protection enjoyed by investors can be enforced against host states. Control over the host state's compliance with its international obligations on the treatment of investors cannot be left to the courts of that state, nor is state-to-state dispute settlement a viable alternative. ISDS avoids the riskiness of diplomatic protection, which is an unappealing remedy for investors and leaves them hostage to their home state's discretion.

Eliminating ISDS only in relations between countries that are considered to have advanced legal systems is no solution either. An asymmetrical system, in which protection against a state with an allegedly reliable legal system would be left to the local courts while protection against a state with a legal system perceived as less reliable would require ISDS, is out of the question politically. The alternative would be either to provide for ISDS for claims against both the less reliable and the more reliable states, which would favour investors from states with unreliable legal systems over those from reliable legal systems, or abolish ISDS in both cases, which would increase the risks for investors investing in countries with less reliable systems. Complete abolition of ISDS would furthermore put states with unreliable legal and judicial systems at a competitive disadvantage vis-à-vis states with sophisticated legal systems as recipients of foreign investments.

Nor is it plausible to argue that abandoning ISDS would put foreign and domestic investors on an equal footing. This argument overlooks the fact that foreign investors are not in the same position as nationals in their relations with the state in which the investment is made. It is for this reason that they need additional protection.

b) Permanent investment court

The creation of a permanent investment court may appear to be a more palatable option. The official documents on the subject are very recent and have not yet been sufficiently discussed and analyzed. Given the complexity of such an initiative and the fact that the system would [Page338:] have to be tailored to the diverse relations between states currently linked by bilateral agreements, it is unlikely to be widely accepted in the short term.61

The idea of a permanent court for the settlement of investment disputes is not new. The complexities and implications of such a mechanism cannot be examined here. Suffice to say that, as observed by those who have already commented on permanent courts,62 there is no assurance that such a system would significantly avert the risks of unpredictability and bias that are seen as problems in the present system. Also, a centralized dispute settlement mechanism, particularly one that aspires to have jurisdiction over disputes between a wide range of states, would lack flexibility. It would lead to the creation of an expensive, politicized and bureaucratized international judiciary largely in the hands of states, and would eliminate the possibility of party-selected adjudicators, which helps to ensure impartiality and trust in the system.63 Experience has shown that, when appointing judges to international courts, states cannot always be trusted to appoint those who are most competent. Investors are unlikely to feel adequately protected by such a system in which the interests of states would inevitably have a predominant role.

c) Tweaking the present system

Assuming the encouragement and protection of foreign investment to be desirable goals, neither of the above - abolition of ISDS or the creation of a permanent investment court - can be considered a viable option. A third option contemplated in the current proposals is to maintain investor-state arbitration but with substantial changes, as foreseen in the draft CETA and EU-Singapore FTA. This is definitely a more acceptable option, but it too suffers from severe defects.

As already mentioned, the current system has on the whole functioned well and greatly contributed to the emergence of a solid body of law and widely recognized standards for the protection of investors. From a functional point of view, and leaving aside substantive rules, investor-state arbitration has similarities with commercial arbitration from which it evolved. While the paradigm of arbitration remains perfectly suited to the settlement of commercial disputes, which is a purely private [Page339:] affair, its suitability for dealing with claims against sovereigns in a greatly changed political and economic climate may be less evident. At the outset and for some considerable time, investor-state disputes were principally concerned with state measures directed at a specific investor. To that extent, they resembled ordinary commercial disputes. Now, they very often involve claims against general measures, which, admittedly, may sometimes raise concerns over the state's freedom to exercise its regulatory powers.

The criticism of the present system is overblown. It is true that the disputes are decided by tribunals chosen by the parties, but states have a powerful say in the choice of the arbitrators and often appoint arbitrators whose pro-state stance is unswerving. It is equally true that tribunals may focus primarily on the particular dispute before them, but it is not true that they are completely oblivious to the need to ensure some level of consistency and predictability.64 In any event, divergent and sometimes unpredictable decisions are an inevitable feature of any judicial system and are in part explained by different fact patterns and applicable rules. As to the purported lack of transparency, this too is overstated. One has only to think of the broad level of publicity given to awards, decisions and other procedural documents such as submissions and procedural orders, the growing concern of arbitral tribunals to ensure the transparency of the proceedings, and the increasing regularity with which non-parties intervene as amici curiae. Even the inhibiting effect that investment arbitration is said to have on the freedom of states to regulate is perhaps exaggerated. Arbitral tribunals have by and large managed to decide in a fairly balanced manner. It is wrong to assume that investors breeze through arbitrations with states assured of success. However, it must also not be forgotten that if states enter into agreements promising investors a given level of treatment, then they must be held liable for breaches.

The negotiators of the CETA and the EU-Singapore FTA have tried to address these problems by introducing several innovations into the present system. Some are interesting, like the provisions on the coordination and consolidation of arbitrations,65 or the early determination of claims with a view to weeding out frivolous claims.66 The present wording of these provisions is not ideal and, in the hands of a state bent on obstructing the proceedings, could be used to bad effect. The underlying idea is understandable, however, because it pursues the commendable goal of increasing efficiency.

[Page340:]

Other proposed innovations are more troubling. The most alarming is the provision on the interpretation of treaty provisions by Contracting States.67 It is understandable that states may wish to introduce safeguards against what they may perceive as excesses in the exercise of the arbitral tribunal's discretion or interference in their regulatory and legislative activities. However, the proposed provision risks tilting the balance in the other direction, giving states excessive freedom in interpreting the treaties and the rights of investors. This would clearly conflict with the principle nemo iudex in re sua, especially if the interpretations are to apply also to pending cases. And the intervention of the investor's home state will do little to avoid that risk: the two states may have similar interests if they are both recipients of foreign investment, or the investor's home state may have reasons of its own to favour a solution that sacrifices the investor's interests. The analogy with diplomatic protection is all too evident. At the very least, some way must be found to take the position of investors into account in the process.

Similar concerns are raised by the entitlement of the investor's home state (the 'non-disputing Party') to intervene in the proceedings.68 This, too, evidences a desire to transform ISDS from a system concerned with the individual relationship between the state and the investor and the protection of investors into a system that systematically gives the interests of states precedence over those of investors.

The addition of an appellate mechanism would have similar drawbacks to a permanent investment court,69 and deal a very severe blow to efficiency and to the principle of the finality of awards. It is important to delimit the grounds for appeal, even though it is well known that they tend to be distorted, expanded and exploited for tactical purposes, and to keep the review of awards and the duration of the proceedings in check.70

The recommendation to use quasi-permanent arbitrators is equally unsound. Experience shows that using lists of arbitrators is no guarantee of their competence, not to mention their impartiality. Too often the inclusion of arbitrators on lists, particularly by states, is based on questionable and opaque criteria. Furthermore, the use of lists unnecessarily limits the pool of potential arbitrators and is an obstacle to introducing new arbitrators with the required qualifications into the system and removing those whose performance or qualifications prove unsatisfactory. It also increases the risk of conflicts.71

[Page341:]

A notable omission among the innovations is a provision on the binding effect of awards, similar to Article 54 of the ICSID Convention. This is perhaps a further indication of the lack of any real commitment on the part of states to protect the rights of investors.

7. The way forward

It is too early to draw any conclusions. Investor-state arbitration is under scrutiny and attack. However, the criticism of the current system is excessive, even though some of it is understandable and in part legitimate, and the solutions being considered at EU level are inadequate.

The first issue that must be seriously addressed is whether the protection of foreign investment is indeed desired. If it is, then ISDS cannot be abandoned. If investment protection is considered necessary to encourage investments, investors must be assured that their interests will be effectively protected by a dispute settlement mechanism they can trust. Much thought still needs to go into how to devise a workable system that takes into account the legitimate concerns of states without jeopardizing the interests of investors. The present discussion has started out on the wrong foot by engaging in all-out criticism of the current system. Despite some problems, that system works relatively well, although attempts must be made to improve it by addressing the more justified concerns of its critics. Doing so requires considerable pragmatism and the abandonment of the ideological partis pris that underlie today's debate, including in the arena of EU policy, in favour of level-headed and informed reflection. The advantages of the present system are the subject of much learned and convincing scholarly work, but have not been sufficiently explained in the public discussion. They deserve more attention. The EU itself initially recognized that ISDS is an important legacy it receives from Member States.72 It should not be jettisoned lightly without considering the implications.

As indicated above, even attempts to improve the system by tweaking it, as in the draft CETA and EU-Singapore FTA, are unsatisfactory. Those texts considerably reduce the level of protection of foreign investors through increased state interference and deference to state interests, without curing the problems in any meaningful way. The reason may well be that, as has been convincingly argued,73 the criticism of ISDS not only ignores the inherent imperfections of any judicial system, and particularly the impossibility of entirely eliminating the discretion of the decision-maker, but is also largely misdirected because it focuses excessively on the adjudicative mechanism rather than on the substantive rules and standards and on their application.

[Page342:]

Discussions on the way forward must therefore go beyond political posturing and delve into technicalities and detail with a sharp understanding of the stakes involved. As those discussions proceed, the arbitral tribunals that decide such disputes should act with an awareness of their responsibilities towards the system and of the concerns that have been raised over its legitimacy. They should bear in mind the expectations of all the stakeholders and avoid exacerbating the tensions and the backlash against investment arbitration.

As a final remark, regardless of the merits of the criticism against investor-state arbitration, it is crucial to mark the distinction between this type of arbitration and commercial arbitration, in order to prevent the attacks on the former from spilling over to the latter. Despite their apparent similarities, these two types of arbitration are completely different as far as the issues they raise are concerned. Those debated in investment arbitration have very little relevance for commercial arbitration.



1
Professor, Catholic University of Milan; partner, Arblit - Radicati di Brozolo Sabatini Benedettelli, Milan; arbitrator, Fountain Court Chambers, London; luca.radicati@arblit.com. The author thanks Alessia Norsa for her invaluable assistance in the preparation of this article.After completion of the article, the successful conclusion of negotiations on the Trans-Pacific Partnership between the United States and several Asian nations was announced. Although no text is publicly available, it seems that the draft provides for ISDS along more traditional lines than those envisaged in the EU projects discussed in this article; see N. Lavranos, 'It's Asia, Stupid! The Race Between the EU and the US for Concluding Free Trade Agreements in Asia', http://kluwerarbitrationblog.com/blog/2015/10/06.


2
See e.g. 'The obscure legal system that lets corporations sue countries', The Guardian (10 June 2015); 'The Arbitration Game', The Economist (11 Oct. 2014).


3
On emerging European investment policy see generally the Concept Paper by the EU Trade Commissioner, C. Malmoström, 'Investment in TTIP and beyond - the path for reform, Enhancing the right to regulate and moving from current ad hoc arbitration towards an Investment Court', http://trade.ec.europa.eu/doclib/docs/2015/may/tradoc_153408.PDF ('Concept Paper'); 'EU: An investment court for TTIP and beyond?', Global Arbitration Review (17 July 2015); F. Hoffmeister & G. Alexandru, 'A First Glimpse of Light on the Emerging Invisible EU Model BIT' (2014) 15 The Journal of World Investment & Trade 379; A. Reinisch, 'Putting the Pieces Together … an EU Model BIT?' (2014) 15 The Journal of World Investment & Trade 679; C.J. Tams, 'Procedural Aspects of Investor-State Dispute Settlement: The Emergence of a European Approach?' (2014) 15 The Journal of World Investment & Trade 585; L.G. Radicati di Brozolo & F. Iorio, 'Arbitration under Investment Protection Agreements between the EU and Non-Member States' [2015:8] World Arbitration Reports.


4
The opposition to traditional investment protection is spreading to existing agreements, such as the Energy Charter Treaty (ECT). Italy's withdrawal from that treaty, for example, although officially justified by the need to reduce the cost of its membership of international organizations, seems more likely to be due to concerns over existing and potential future claims from the renewable energy sector, despite the fact that these would probably remain covered by the sunset clause of Art. 47(3) ECT. See 'Italy to Quit Energy Charter Treaty', Global Arbitration Review (23 Apr. 2015); Italian Institute for International Political Studies, 'Any consequences stemming from Italy's withdrawal from the Energy Charter Treaty?' (15 May 2015), www.ispionline.it.


5
For an official overview of the main concerns about ISDS see generally UNCTAD, 'Reform of Investor-State Dispute Settlement: In Search of a Roadmap', IIA Issues Note No. 2 (June 2013) at 2-4.


6
The death of the investor protection system and ISDS seems almost certain in intra-EU relations, since the EU considers such agreements contrary to EU law (see generally P. Mariani, 'The future of BITs between EU Member States: are intra-EU BITs compatible with the internal market?, in G. Sacerdoti, ed., General Interests of Host States in International Investment Law, (Cambridge University Press, 2014) 265). The Commission recently decided to bring infringement proceedings against several Member States to compel them to terminate their intra-EU BITs (see http://europa.eu/rapid/press-release_IP-15-5198_en.htm).


7
On these issues see generally EU Parliament, Legal Instruments and Practice of Arbitration in the EU (2015) at 267-303, http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(2015)509988_EN.pdf; S.W. Schill, 'The Sixth Path: Reforming Investment Law from Within' (2014) 11:1 Transnational Dispute Management; C.A Rogers, 'The Politics of International Investment Arbitrators' (2014) 11:1 Transnational Dispute Management; K.P. Sauvant & F. Ortino, 'Improving the international investment law and policy regime: Options for the future' (2013), http://formin.finland.fi/public/download.aspx?ID=113259&GUID=%7B1202781B-0D9B-4E9C-9621-FCA4DA87881E%7D; K.P. Sauvant & F. Ortino, 'The Need for an International Investment Consensus-Building Process', Columbia FDI Perspectives, No. 101 (2013); S.M. Schwebel, 'In defense of bilateral investment treaties' (2015) 31:2 Arbitration International 181; M. Sornarajah, 'Starting Anew in International Investment Law', Columbia FDI Perspectives, No. 74 (2012); M. Waibel et al., eds., The Backlash Against Investment Arbitration (Kluwer Law Arbitration, 2010); G. Van Harten et al., 'Public Statement on the International Investment Regime - 31 August 2010', http://www.osgoode.yorku.ca/public-statement-international-investment-regime-31-august-2010/; R. Alford, 'Scholars Debate Investment Arbitration Chapter in TPP and TTIP', http://kluwerarbitrationblog.com/blog/2015/04/07/scholars-debate-investment-arbitration-chapter-in-tpp-and-ttip/; V. Cassin, 'Investment Arbitration is Now on Broadway, And The Critics Are Not Being Kind', http://kluwerarbitrationblog.com/blog/2015/01/23/investment-arbitration-is-now-on-broadway-and-the-critics-are-not-being-kind/; L. Pantaleo, 'Il TTIP e la risoluzione delle controversie tra investitore e Stato: ipocrisia, schizzofrenia o preoccupazioni giustificate?', http://www.sidi-isil.org/sidiblog/?p=1321; F. Fontanelli, 'Does Investor-State Dispute Settlement (ISDS) threaten States' regulatory autonomy? Fact-checking a commonplace of the TTIP debate', http://www.sidi-isil.org/sidiblog/?p=1360.


8
For an overview of the initial attitudes of the EU institutions towards investment policy see F. Hoffmeister & G. Alexandru, supra note 3 at 380-383; A. Reinisch, supra note 3 at 679-684.


9
Available at http://trade.ec.europa.eu/doclib/docs/2010/july/tradoc_146307.pdf.


10
O.J. Legislation (20 Dec. 2012) No. 351 at 40.


11
supra note 9 at 5.


12
Ibid. at 9.


13
Ibid. at 10.


14
Ibid.


15
Ibid.


16
Ibid.


17
Ibid.


18
Available at https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/117328.pdf.


19
Ibid. at 2, § 9.


20
Available at http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2011-0141&language=EN.


21
Ibid., § 17.


22
Ibid., § 24.


23
Ibid., § 31.


24
O.J. Legislation (28 Aug. 2014) No. 257 at 121.


25
http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf


26
http://trade.ec.europa.eu/doclib/press/index.cfm?id=961. For a summary of the investment provisions of the EU-Singapore FTA see http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152845.pdf.


27
For an analysis of the first EU BITs see A. Reinisch, supra note 3 at 684-703; F. Hoffmeister & G. Alexandru, supra note 3 at 383-400; see also generally P. Dumberry, 'Drafting the Fair and Equitable Treatment Standard Clause in the TPP and the RCEP: Lessons Learned from the Nafta Article 1105 Experience' (2015) 12:1 Transnational Dispute Management; U. Kriebaum, 'FET and Expropriation in the (Invisible) EU Model BIT' (2014) 15:3-4 The Journal of World Investment & Trade; A. Tzanakopoulos, 'National Treatment and MFN in the (Invisible) EU Model BIT' (2014) 15:3-4 The Journal of World Investment & Trade.


28
The definitions of 'investor' and 'investment' appear in Arts. X.3 and 9.1 respectively of the CETA and the EU-Singapore FTA. The definition of investor covers enterprises that have 'substantial business activities' in the host state, which excludes mailbox companies from the protection.


29
F. Hoffmeister & G. Alexandru, supra note 3 at 389-392; U. Kriebaum, supra note 27 at 468-482; see also P. Dumberry, supra note 27.


30
P. Dumberry, supra note 27 at 27.


31
See e.g. Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 Nov. 2012, § 7.75; see also Saluka Investments B.V. v. The Czech Republic, Partial Award, 17 Mar. 2006, § 302, http://www.italaw.com/sites/default/files/case-documents/ita0740.pdf.


32
According to E. Gaillard, 'Conclusions', in C. Kessedjian, ed., Le droit européen et l'arbitrage d'investissement (Panthéon-Assas, 2011) 195, investor-state arbitration is the only mechanism capable of guaranteeing respect of the right to a fair trial enshrined in Art. 6 of the European Convention on Human Rights; see also C. Schreuer, 'Do We Need Investment Arbitration?' in J.E. Kalicki & A. Joubin-Bret, eds., Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (TDM-OGEMID/Brill Nijhoff, 2015) 879.


33
Concept Paper, supra note 3 at 6-10; C.J. Tams, supra note 3 at 596-610; J.A. Bischoff, 'Initial Hiccups or More? About the Efforts of the EU to Find its Future Role in International Investment Law' (2014) 11:1 Transnational Dispute Management at 25-28.


34
See supra note 24.


35
See supra note 17.


36
Concept Paper, supra note 3 at 2.


37
L. Malintoppi & N. Limbasan, 'Living in Glass Houses? The Debate on Transparency in International Investment Arbitration' (2015) 2:1 Bahrain Chamber for Dispute Resolution International Arbitration Review 31 at 41-43.


38
See section 2 above.


39
A leaked early version of the TTIP is available at http://eu-secretdeals.info/upload/EU-Investment-Text-TTIP-v_July2nd-2013_v1.pdf. Negotiations with China on the EU-China BIT, which is expected to deal exclusively with the protection of foreign investments, like traditional BITs, began on 21 November 2013 (http://ec.europa.eu/trade/policy/countries-and-regions/countries/china) and the first round of negotiations was held in January 2014 (http://europa.eu/rapid/press-release_IP-14-33_en.htm).


40
Available at http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153044.pdf.


41
Ibid. at 14.


42
Ibid.


43
See e.g. a letter addressed by over one hundred law professors to US Congressional leaders stressing the need to prevent the inclusion of ISDS in the TTIP 'to protect the rule of law and our nation's sovereignty', http://www.afj.org/wp-content/uploads/2015/03/ISDS-Letter-3.11.pdf. For a response thereto, see http://www.mcgill.ca/fortier-chair/isds-open-letter.


44
See e.g. the Draft Report of 5 Feb. 2015 containing the European Parliament recommendations to the Commission on the negotiations for the TTIP at 11: 'ISDS mechanism … is not necessary in TTIP given the EU's and the US' developed legal systems; a state-to state dispute settlement system and the use of national courts are the most appropriate tools to address investment disputes' (http://www.europarl.europa.eu/meetdocs/2014_2019/documents/inta/pr/1049/1049287/1049287en.pdf); see also the opinions of the following committees: Committee on the Environment, Public Health and Food Safety, http://www.europarl.europa.eu/meetdocs/2014_2019/documents/envi/ad/1057/1057731/1057731en.pdf) at 12-13; Committee on Constitutional Affairs, http://www.europarl.europa.eu/meetdocs/2014_2019/documents/afco/ad/1057/1057859/1057859en.pdf at 6; Committee on Legal Affairs, http://www.europarl.europa.eu/meetdocs/2014_2019/documents/empl/ad/1054/1054474/1054474en.pdf at 3-4; Committee on Employment and Social Affairs, http://www.europarl.europa.eu/meetdocs/2014_2019/documents/empl/ad/1054/1054474/1054474en.pdf at 5; Committee on Civil Liberties, Justice and Home Affairs, http://www.europarl.europa.eu/meetdocs/2014_2019/documents/libe/ad/1056/1056815/1056815en.pdf; Committee on Agriculture and Rural Development Opinion, http://www.europarl.europa.eu/meetdocs/2014_2019/documents/agri/ad/1057/1057664/1057664en.pdf at 4.


45
See Concept Paper, supra note 3; see also C. Malmström, 'Investments in TTIP and beyond ( towards an International Investment Court', blog post, 5 May 2015, https://ec.europa.eu/commission/2014-2019/malmstrom/blog/investments-ttip-and-beyond-towards-international-investment-court_en.


46
Global Arbitration Review, supra note 3.


47
Report of 1 June 2015 containing the European Parliament's recommendations to the European Commission on the negotiations for the TTIP at 18, § (xv), http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2f%2fEP%2f%2fNONSGML%2bREPORT%2bA8-2015-0175%2b0%2bDOC%2bPDF%2bV0%2f%2fEN; see also European Parliament News, 'TTIP: what exactly is the ISDS mechanism for resolving investor disputes?' (9 June 2015), http://www.europarl.europa.eu/news/en/news-room/content/20150605STO63242/html/TTIP-what-exactly-is-the-ISDS-mechanism-for-resolving-investor-disputes.


48
Resolution of 8 July 8 2015 containing the European Parliament's recommendations to the European Commission on the negotiations for the TTIP, § 2(d)(xv), http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2015-0252&format=XML&language=EN.


49
Available at http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf. See also the Reading Guide to the Draft text on Investment Protection and Investment Court System in the Transatlantic Trade and Investment Partnership (TTIP), http://trade.ec.europa.eu/doclib/press/index.cfm?id=1365.


50
C. Malmström, 'Proposing an Investment Court System', blog post, 16 Sept. 2015, http://ec.europa.eu/commission/2014-2019/malmstrom/blog/proposing-investment-court-system_en.


51
See supra note 49, Section 2, Art. 2.


52
Ibid., Section 3, Arts. 9 and 10.


53
Ibid., Section 3, Arts. 9, 10, 11 and Annex II.


54
See supra note 49.


55
See Parliament Resolution, 9 Oct. 2013, http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2013-411.


56
E.g. in the USA, the Obama administration has expressed itself in favour of traditional ISDS; see G. Sargent, 'Battle rages over key Obama trade policy', https://www.washingtonpost.com/blogs/plum-line/wp/2015/04/30/battle-rages-over-key-obama-trade-policy/.


57
See e.g. the open letter at http://www.mcgill.ca/fortier-chair/isds-open-letter; the statement of the International Bar Association (IBA) at http://www.ibanet.org/Article/Detail.aspx?ArticleUid=1dff6284-e074-40ea-bf0c-f19949340b2f; the response of the European Federation for Investment Law and Arbitration (EFILA) at http://efila.org/wp-content/uploads/2015/05/EFILA_in_response_to_the-criticism_of_ISDS_final_draft.pdf; Hogan Lovells Briefing Note at http://www.hoganlovellsruleoflaw.com/_uploads/risk-and-return/rar_note.pdf, which highlights the importance of investment treaty protection for the investment decisions of corporations; S.W. Schill, supra note 7 at 6-10; S.M. Schwebel, supra note 7 at 187(190.


58
A striking example of the EU's negative attitude towards investor protection is its attempts to enjoin a Member State from complying with an investor-state award in Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania (ICSID Case No. ARB/05/20) on the grounds that enforcement would conflict with EU state aid rules (see European Commission Letter to Romania, 1 Oct. 2014, http://www.italaw.com/sites/default/files/case-documents/italaw4066.pdf). This position is particularly shocking because the award in question is an ICSID award, subject to Art. 54 of the ICSID Convention. It amounts to interference by the Commission in a Member State's compliance with its obligations under the ICSID Convention. It is true that this case concerns an intra-EU BIT, and thus a situation where the Commission considers that international law is not applicable. See S. Lemaire, Annotation of Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, Final Award, ICSID Case No. ARB/05/20, 11 Dec. 2013, Revue de l'arbitrage 2014.455; G. Alvarez, 'About the Ostrich, the Micula Brothers and other European Fables', http://kluwerarbitrationblog.com/blog/2015/04/22/about-the-ostrich-the-micula-brothers-and-other-european-fables/; C. González-Bueno & L. Lozano, 'More Than a Friend of the Court: The Evolving Role of the European Commission in Investor-State Arbitration', http://kluwerarbitrationblog.com/blog/2015/01/26/more-than-a-friend-of-the-court-the-evolving-role-of-the-european-commission-in-investor-state-arbitration/. Nonetheless, the case is indicative of the distrust, if not outright hostility, of the Commission towards rules on investor protection that depart from EU law. This attitude could resurface in relations with non-EU investors.


59
As mentioned supra note 55, a different position is expressed in relation to the proposed EU-China BIT.


60
Similar concerns would apply to interpretations of EU law by the EU Court of Justice capable of impacting on the rights of non-EU investors.


61
The difficulties raised by such a momentous change are underscored by the fact that the system is not expected to come into being before the next ten to fifteen years; see European Parliament News, supra note 47; Global Arbitration Review, supra note 3


62
See E. Zuleta, 'The Challenges of Creating a Standing International Investment Court' (2014) 11:1 Transnational Dispute Management; S.W. Schill, supra note 7 at 5; C.A Rogers, supra note 7 at 22(26; J. Paulsson, 'Avoiding Unintended Consequences' in K.P. Sauvant & M. Chiswick-Patterson, ed., Appeals Mechanism in International Investment Disputes (Oxford University Press, 2008) 241 at 258. The creation of a permanent investment court was vigorously supported by G. Van Harten, 'A Case for an International Investment Court', http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1153424. See also UNCTAD, supra note 5 at 9.


63
Global Arbitration Review, supra note 3.


64
G. Kaufmann-Kohler, 'Arbitral Precedent: Dream, Necessity or Excuse?' (2007) 23:3 Arbitration International 357 at 368-373; G. Kaufmann-Kohler, 'Is Consistency a Myth?' in E. Gaillard & Y. Banifatemi, eds., Precedent in International Arbitration, IAI Series on International Arbitration, No. 5 (2008) 137 at 138(141.


65
See Arts. X.23 and X.41 CETA and 9.29 EU-Singapore FTA.


66
See Arts. X.29 and X.30 CETA and 9.20 and 9.21 EU-Singapore FTA.


67
See Arts. X.27(2) CETA and 19 EU-Singapore FTA. See also Art. 13 of Section 3 of the EU Commission draft text TTIP, supra note 48.


68
See Arts. X.35 CETA and 9.23 EU-Singapore FTA.


69
See section 6(b) above.


70
Global Arbitration Review, supra note 3.


71
Ibid.


72
See supra note 12.


73
See generally S.W. Schill, supra note 7.