A group of 121 academic experts has spoken out against planned provisions on investor-state arbitration in the Transatlantic Trade and Investment Partnership. The provisions are modeled on the investor-state arbitration provisions in the Canada-E.U. Comprehensive Economic and Trade Agreement (CETA).
The academics include leading international experts in trade and investment law, EU law, international law and human rights, constitutional law, private law, political economy and other fields. They criticize the investor-state arbitration provisions for failing to protect the right to regulate, displacing the role of courts, and failing to ensure basic safeguards of judicial independence in investor-state arbitration.
The scholars have spoken out in a contribution to a public consultation launched by the European Commission in the face of strong public interest and growing concern about the issue. They criticize the Commission for failing to make a plausible case for the need for investor-state arbitration provisions. They welcome, on the other hand, the Commission’s recognition of serious flaws and shortcomings of the international investment arbitration regime as it has developed over the last few decades.
In launching the consultation, Commissioner De Gucht acknowledged these problems and announced the ambition to ‘re-do’ investment law, make the system ‘more transparent and impartial’, ‘build a legally water-tight system’, and ‘close these legal loopholes once and for all.’ These objectives may be laudable but the proposed approach falls far short of achieving them.
The scholars express the hope that the controversy over investor-state arbitration in Europe will prompt a broad and serious debate about existing and new investment treaties. Investment law is far too important to leave to trade officials and investment lawyers.
The submission was written by Peter Muchlinski (SOAS School of Law), Horatia Muir Watt (Sciences Po Law School), Harm Schepel (Kent Law School), and Gus Van Harten (Osgoode Hall Law School).
Examples of academic experts’ comments on the proposals for investor-state arbitration in the U.S.-E.U. TTIP and Canada-E.U. CETA
On the right to regulate:
The approach “[f]ails to protect the ‘right to regulate’ as a general right of states alongside the many elaborate rights and protections of foreign investors, let alone as a component of the FET and Expropriation standards”. “By its omissions, the consultation text actually confirms boldly that the right to regulate has not been affirmed and preserved, by a clear and unequivocal statement of the right, alongside the rights and protections of foreign investors.”
On conflicts of interest among investor-state arbitrators:
“The Commission, rightly, has misgivings about the standards of ethical behavior and conflicts of interest that prevail in the investment arbitration regime. The reference text from CETA does not assuage the fears…. It is imperative… to make sure that no one who stands to profit in any way from the income generated by the representation of parties to investment disputes acts as an arbitrator.”
On the Commission’s proposal for a code of conduct for investor-state arbitrators:
The Commission “is so vague on the contents of this code that is difficult to come to any judgment”. “Even with the most robust code of conduct, the absence of basic institutional safeguards of judicial independence undermines fundamentally the claims of investor-state arbitration to neutrality and impartiality.”
On the use of arbitrators instead of judges:
“[T]he Commission seems content to entrust to these same actors the vital constitutional task of weighing and balancing the right to regulate of sovereign states and the property rights of foreign investors. This task is one of the most profound roles that can be assigned to any national or international judicial body. To entrust these decisions to the very actors who have an apparent financial interest in the current situation and moreover remain unaccountable to society at large is a contentious situation…. [T]here seems to be consensus that the regime falls short of the standards required of an institutionally independent and accountable dispute settlement system.”
On protecting public funds in a sovereign debt crisis:
The Commission’s proposal “[f]ails to exclude acquisitions of sovereign debt instruments from the scope of the Treaty”. “In light of the social misery and hardship the sovereign debt crisis has brought, it requires little discussion to conclude that the mere thought of speculative investors in government bonds seeking damages before investment arbitration Tribunals is utterly unacceptable.”
