Abstract
In recent years only, investor-state dispute settlement has come into the focus of public debate. In particular in Germany and Austria, but also in other EU Member States its democratic legitimacy is questioned. Arbitral tribunals, the argument goes, would intrude into the exercise of sovereign powers by democratically elected parliaments while the tribunals themselves would not possess a similar level of legitimacy. As a consequence, the European Parliament adopted a resolution on 8 July 2015 that it would not approve of an investment treaty which is based on the traditional model of international investment arbitration. This article analyses the fundamentals of legal legitimacy and applies them to the mechanics of investor-state dispute settlement. It argues that issues of legality and legitimacy must be seen in their interdependency. Insofar, the most outstanding deficits of investor-state dispute settlement are not of procedural but of substantive nature. Arbitral tribunals interpret and apply substantive standards under bilateral investment treaties which in most cases are too vague and, therefore, translate into too much power of the tribunals. In contrast thereto, the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States will considerably change the standards of international investment protection. It strengthens the rule of law in substantive and procedural terms which also translates into a higher level of democratic legitimacy.
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Notes
- 1.
COM (2016) 443 final; COM (2016) 444 final.
- 2.
European Commission, Joint statement: Canada-EU Comprehensive Economic and Trade Agreement (CETA), STATEMENT/16/446, 29 February 2016.
- 3.
European Parliament resolution of 8 July 2015 containing the European Parliament’s recommendations to the European Commission on the negotiations for the Transatlantic Trade and Investment Partnership (TTIP) (2014/2228(INI)), para. 2(d)(xv).
- 4.
- 5.
Figures available under http://ec.europa.eu/trade/policy/countries-and-regions/countries/canada/ (last accessed 1 March 2017).
- 6.
See e.g. the contribution by Provost C and Kennard M, The obscure legal system that lets corporations sue countries, The Guardian, 10 June 2015.
- 7.
- 8.
- 9.
Cf. Federal Constitutional Court, 2 BvR 1368/16, CETA – Preliminary Injunction, judgment of 13 October 2016.
- 10.
- 11.
- 12.
Wolfrum (2011), para. 1.
- 13.
- 14.
Krajewski (2008), para. 12.
- 15.
See e.g. Franck (1988), p. 705 et seqq.
- 16.
For this view see e.g. Benvenisti (2004), p. 348 et seq.
- 17.
- 18.
- 19.
- 20.
For a theoretical account see Bogdandy (2004), p. 889 et seq.
- 21.
Article 23(1) German Grundgesetz.
- 22.
- 23.
From a legal point of view, the commonly used term “mandate” is not correct, as an international organization normally acts on its behalf and in its own name.
- 24.
- 25.
Cf. Kumm (2004), p. 918 et seq.
- 26.
Wolfrum (2011), para. 23.
- 27.
Lauterpacht (1933, 2011), p. 213.
- 28.
Bogdandy and Venzke (2012), p. 17 et seq.
- 29.
- 30.
Bodansky (1999), p. 612.
- 31.
For similar view Classen (2014), p. 615.
- 32.
See e.g. Moravcsik (2000).
- 33.
With respect to decisions of the ICJ see Oellers-Frahm (2012), para. 14.
- 34.
Oellers-Frahm (2012), para. 8; cf. also Article 54(3) ICSID Convention.
- 35.
Available under https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/basic-en.htm (last accessed 1 March 2017).
- 36.
Ohler (2016), p. 18 et seq.
- 37.
Cf. Tietje (2015), p. 3.
- 38.
Article 37(2)(a) ICSID Convention.
- 39.
Article 37(2)(b) ICSID Convention.
- 40.
Schill (2012), p. 136 et seq.
- 41.
- 42.
- 43.
Article 8.39(1)(b) CETA.
- 44.
Schill (2012), p. 137.
- 45.
Jaeger (2016), p. 209.
- 46.
Under Article 8.27(2) CETA, the CETA Joint Committee comprising representatives of both parties appoint the 15 members of the Tribunal.
- 47.
Cf. Classen (2014), p. 615.
- 48.
Article 14(1) ICSID Convention.
- 49.
Lauterpacht (1933, 2011), p. 212.
- 50.
Article 39 ICSID Convention.
- 51.
Article 56(1) ICSID Convention.
- 52.
Articles 57 and 58 ICSID Convention.
- 53.
Article 8.30 CETA.
- 54.
For an insightful comparison between WTO and ICSID see Pauwelyn (2015) who assumes an ideologically polarized pool of ICSID arbitrators.
- 55.
According to No 3 Schedule of Fees (as of 1 July 2016) the daily rate per arbitrator is USD 3000.
- 56.
Cf. Schill (2012), p. 150: “significant law-making powers”.
- 57.
- 58.
Cf. CJEU, joined cases C-46/93 and C-48/93, Brasserie de Pȇcheur, ECLI:EU:C:1996:79, para. 85. See also Kleinheisterkamp (2014), p. 460.
- 59.
Cf. Article 19(4) German Grundgesetz.
- 60.
CJEU, case 5/71, Schöppenstedt/Council, ECLI:EU:C:1971:116, para. 3.
- 61.
CJEU, case 543/79, Birke/Commission and Council, ECLI:EU:C:1981:265, para. 28.
- 62.
Kleinheisterkamp (2014), p. 460.
- 63.
See Jaeger (2016), p. 208 et seq.
- 64.
For a different view see Bronckers (2015), p. 658 who argues in favor of a fail-safe system also amongst developed jurisdictions.
- 65.
- 66.
- 67.
Cf. Federal Constitutional Court, 2 BvR 1368/16, CETA – Preliminary Injunction, judgment of 13 October 2016, para. 48.
- 68.
Cf. Article 8.9(1) CETA.
- 69.
Article 8.10 CETA.
- 70.
Annex 8-A(3) CETA.
- 71.
Article 8.27(5) CETA.
- 72.
Article 8.27(1) CETA.
- 73.
Article 26.1 CETA.
- 74.
A minor exemption is provided by Articles 8.23(5) and 8.27(9) CETA.
- 75.
Article 8.27(4) CETA.
- 76.
Article 8.27(6) CETA.
- 77.
Article 8.27(7) CETA.
- 78.
Article 8.27(10) CETA.
- 79.
Article 8.36(1) CETA.
- 80.
Article 8.28 CETA.
- 81.
Cf. e.g. Miles (2016) p. 289.
- 82.
Article 8.31(3) CETA.
- 83.
- 84.
CJEU, opinion 2/13, Accession to the ECHR, ECLI:EU:C:2014:2454, para. 174 et seq.; see also CJEU, opinion 1/09, European Patent Court, ECLI:EU:C:2011:123, paras. 67, 76 et seq.
- 85.
CJEU, opinion 2/13, Accession to the ECHR, ECLI:EU:C:2014:2454, para. 179 et seq.
- 86.
- 87.
CJEU, opinion 2/13, Accession to the ECHR, ECLI:EU:C:2014:2454, para. 182; CJEU, opinion 1/91, European Economic Area, ECLI:EU:C:1991:490, paras. 40, 70; CJEU, opinion 1/09, European Patent Court, ECLI:EU:C:2011:123, para. 74.
- 88.
CJEU, opinion 2/13, Accession to the ECHR, ECLI:EU:C:2014:2454, para. 183 et seq.
- 89.
- 90.
Cf. Kokott and Sobotta (2016), p. 19.
- 91.
- 92.
Critically also Tietje (2015), p. 7.
- 93.
Article 8.29 CETA.
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Ohler, C. (2017). Democratic Legitimacy and the Rule of Law in Investor-State Dispute Settlement under CETA. In: Bungenberg, M., Krajewski, M., Tams, C., Terhechte, J., Ziegler, A. (eds) European Yearbook of International Economic Law 2017. European Yearbook of International Economic Law, vol 8. Springer, Cham. https://doi.org/10.1007/978-3-319-58832-2_8
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