Abstract
The Investment Court System (ICS) gives foreign investors the possibility to bring complaints about measures adopted by the EU and its Member States to arbitrators, and receive compensation accordingly. At the ICS, under certain conditions foreign investors will be able to challenge public policy measures aimed at, for instance, protection of the environment or public health, if these measures decrease the value of their investments. This chapter focuses on what the right to regulate public welfare objectives means in the light of potential claims by investors under CETA’s provisions, and examines the reasoning of the CJEU in Opinion 1/17 on this particular point. Furthermore, it is investigated whether the need for ICS in the relationship between the EU, the USA and Canada has been demonstrated, in line with the evidence based approach that the Commission underlines as the basis for its own action. Finally, the chapter will assess whether the Commission followed its own guidelines on Trade Sustainability Impact Assessments, i.e. the ex-ante assessment process of treaties under negotiation that includes public participation in order to assist the EU negotiators.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
CJEU Opinion 2/15 on the EU-Singapore FTA, 16 May 2017, ECLI:EU:C:2017:376.
- 2.
See for instance the letter signed by over 220 law and economics professors from the USA, claiming that the ISDS system (in TPP) “undermines the important roles of our domestic and democratic institutions, threatens domestic sovereignty, and weakens the rule of law”. ‘220+ Law and Economics Professors Urge Congress to Reject the TPP and Other Prospective Deals that Include Investor-State Dispute Settlement (ISDS)’ (2015) citizen.org, https://www.citizen.org/our-work/globalization-and-trade/nafta-wto-other-trade-pacts/tafta. On procedural rule of law challenges of ISDS, see Van Harten 2010, pp. 627–658.
- 3.
For instance the European Association of Judges, ‘Statement on the proposal from the European Commission on a new investment court system’ (2015) International Association of Judges, available at www.iaj-uim.org/iuw/wp-content/uploads/2015/11/EAJ-report-TIPP-Court-october.pdf (expressing ‘serious reservations’), 120 European academics, ‘Statement of Concern about Planned Provisions on Investment Protection and Investor-State Dispute Settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP)’ Kent Law School, https://www.kent.ac.uk/law/isds_treaty_consultation.html and some 100 professors and other representatives of the European legal community, ‘Legal Statement on investment protection’{ and investor-state dispute settlement mechanisms in TTIP and CETA’, October 2016, https://stop-ttip.org/wp-content/uploads/2016/10/13.10.16-Legal-Statement-1.pdf.
- 4.
For instance the Dutch Social and Economic Council (SER), ‘TTIP Transatlantic Trade and Investment Partnership’ (2016) SER Advisory Report 16/04E, 95, Ankersmit 2016, Kokott and Sobotta 2016, Krajewski and Hoffmann 2016, as well as Govaere 2016. Meanwhile, the Legal Services of the European Parliament, ‘Legal opinion on compatibility with the Treaties of investment dispute settlement provisions in EU trade agreements’ (2016), reaches a different conclusion.
- 5.
The U.S.A. signed but decided to withdraw under the Trump Administration. The country is still a party to the 1992 UN Framework Convention on Climate Change, however. The parties to the latter agreement committed themselves to adopt precautionary measures against the negative effects of climate change caused by human action.
- 6.
Trade Sustainability Impact Assessments are prepared by independent consultants, and according to its own guidelines should be followed by a reaction from the side of the Commission indicating which recommendations it accepts and which not, in order to guide EU negotiators. The CETA TSIA process, in which these guidelines were not abided by, is discussed in more detail below.
- 7.
The original 2009 negotiating directives, as well as a 2011 modification to allow for talks on investment protection, were partially made public only on 15 December 2015. See www.consilium.europa.eu/en/press/press-releases/2015/12/15-eu-canada-trade-negotiating-mandate-made-public/.
- 8.
- 9.
Proposal for a Council Decision on the provisional application of the Comprehensive Economic and Trade Agreement between Canada of the one part, and the European Union and its Member States, of the other part, COM(2016)470 of 5 July 2016.
- 10.
A Ericsson, ‘EU admits 'unrealistic' to close TTIP deal this year’, EU Observer 23 September 2016, https://euobserver.com/economic/135217. An earlier Presidency’s compromise proposal dated 16 September 2016 can be found at https://www.scribd.com/document/325493614/Draft-Council-Decision-on-the-Provisional-Application-of-CETA#download.
- 11.
BVerfG, Urteil des Zweiten Senats vom 13. Oktober 2016 - 2 BvR 1368/16 - Rn. (1-73),www.bverfg.de/e/rs20161013_2bvr136816.html. The courts reservations regarding investment protection probably are linked to the fact that the chapter covers both foreign direct investment (FDI) and portfolio investment. According to the Commission, the EU is competent to conclude agreements covering all these matters, including portfolio investment (in accordance with Article 3(2) TFEU, the existing common rules on free movement of capital and in particular Article 63 TFEU, see answers by Commissioner De Gucht on behalf of the Commission of 3 November 2014). Besides Chapter 8 and 13 on investment protection and financial services respectively, other areas where the constitutional court expects the German government to ensure that provisional application is not agreed to include international maritime transport services (Chapter 14) and mutual recognition of professional qualifications (Chapter 11).
- 12.
Financieel Dagblad, Wallonië zegt nee tegen EU-verdrag met Canada, 14 October 2016.
- 13.
Declaration of the Kingdom of Belgium on the conditions regarding the powers of the federal state and the regional states for the signing of CETA.
- 14.
Kuijper 2014, 33.
- 15.
Compare the MEP questions on the possibility to challenge climate change decisions under ICS in CETA of 30 September 2016.
- 16.
On 6 September 2017, Belgium requested an opinion under Article 218(11) TFEU, where it is stipulated that in case the opinion of the Court is adverse, the agreement envisaged may not enter into force, unless it is amended or the Treaties are revised. It limits itself to the compatibility of Chapter 8 ("Investments"), Section F ("Resolution of investment disputes between investors and states") with the European Treaties, including basic rights, and more specifically 1) The exclusive competence of the CJEU to provide the definitive interpretation of European Union law; 2) The general principle of equality and the 'practical effect' requirement of European Union law; 3) The right of access to the courts; and 4) The right to an independent and impartial judiciary. See https://diplomatie.belgium.be/sites/default/files/downloads/ceta_summary.pdf. On 30.
- 17.
F Bermingham, ‘TTIP: Germany accused of hypocrisy over opposition to ISDS clause’, International Business Times (6 November 2014), www.ibtimes.co.uk/ttip-germany-accused-hypocrisy-over-opposition-isds-clause-1473566 ‘Investor-State Dispute Settlement: the Arbitration Game’, The Economist (11 October 2014), available at www.economist.com/news/finance-and-economics/21623756-governments-are-souring-treaties-protect-foreign-investors-arbitration and American Chamber of Commerce, Belgium, ‘7 Surprising things about ISDS’ (2015), available at www.amcham.be/blog/2015/04/7-surprising-things-about-isds.
- 18.
C Tietje, F Baetens and Ecorys, ‘The Impact of Investor-State-Dispute Settlement (ISDS) in the Transatlantic Trade and Investment Partnership’ (2014), study for Ministry of Foreign Affairs, The Netherlands, 21. https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/rapporten/2014/06/24/the-impact-of-investor-state-dispute-settlement-isds-in-the-ttip/the-impact-of-investor-state-dispute-settlement-isds-in-the-ttip.pdf.
- 19.
K. Vanlouwe (N-VA) in a debate in the Commission for Foreign Policy, European Affairs, International Cooperation etc. of the Flemish Parliament, 17 May 2016, https://www.vlaamsparlement.be/commissies/commissievergaderingen/1058503/verslag/1059820.
- 20.
See Titi 2014.
- 21.
Treaty for the Promotion and Protection of Investments between the Federal Republic of Germany and Pakistan, signed on 25 November 1959, UNTS 1963, 24.
- 22.
‘Agreement on economic co-operation between the Government of the Kingdom of the Netherlands and the Government of the Republic of Kenya’ (1970), Article XI, http://wetten.overheid.nl/BWBV0004287/1979-06-11 (‘The Contracting Party in the territory of which a national of the other Contracting Party makes or intends to make an investment, shall give sympathetic consideration to a request on the part of such national to submit, for conciliation or arbitration, to the Centre established by the Convention of Washington of 18 March 1965, any dispute that may arise in connection with the investment.’).
- 23.
M Schaake, ‘ISDS - what's going on?’ (marietjeschaake.eu, 19 November 2014), http://marietjeschaake.eu/nl/isds-whats-going-on.
- 24.
Agreement on economic cooperation between the Kingdom of the Netherlands and the Republic Indonesia (7 July 1968), provisionally applied from the date of signature, entry into force 17 July 1971. See http://investmentpolicyhub.unctad.org/Download/TreatyFile/3329. See Salacuse 2015, p. 103. Other early examples of agreements with ISDS are the Belgian/Luxembourg-Indonesia BIT (1970), the Malaysia-Netherlands BIT (1971), the Morocco-Netherlands BIT (1971)), and the France-Tunisia BIT (1972).
- 25.
See Lenk 2015, p. 20.
- 26.
Notably Bolivia, Ecuador, South Africa, Indonesia and India. See Abbott et al. 2014.
- 27.
Such as the China-Australia Free Trade Agreement, Ch 9 section B.
- 28.
Arbitrations can be kept confidential under certain circumstances, hence the actual number of disputes is likely to be higher.
- 29.
Sources: http://ec.europa.eu/trade/policy/countries-and-regions/countries/united-states and http://ec.europa.eu/trade/policy/countries-and-regions/countries/canada, data on 2014; accessed 1 October 2016.
- 30.
Notably Bulgaria, Italy and Spain. In 2013, that percentage was lower, namely some 25%, and concerned Spain and the Czech Republic. The number of intra-EU ISDS cases should drop due to the CJEU judgment in Case C-284/16, Slovak Republic v. Achmea, ECLI:EU:C:2018:158.
- 31.
Transcanada v USA (ICSID Case No. ARB/16/21). Canadian companies complained about U.S. authorities not granting them a permit to construct the Keystone XL Pipeline from Canada to the U.S.A. that would transport tar sands oil. According to the investors, this amounted to a violation of several NAFTA provisions, notably those on non-discrimination, and they demanded US$ 15 billion in damages. The decision not to grant the permit was taken because of climate policy reasons. The pipeline could lead to 935 million tons extra CO2 emissions over the coming decades. The Trump administration issued a Presidential Permit to construct the Keystone XL Pipeline anyway, and Transcanada dropped its claim in March 2017. See https://www.italaw.com/cases/3823 and D Biello, ‘How much will tar sands oil add to global warming’, Scientific American 23 January 2013, www.scientificamerican.com/article/tar-sands-and-keystone-xl-pipeline-impact-on-global-warming (both last accessed 15 September 2017).
- 32.
Gabriel Resources Ltd. and Gabriel Resources (Jersey) v. Romania (ICSID Case No. ARB/15/31). The Canadian gold exploration companies filed an ICSID claim of US$ 4.4 billion against Romania. The investor was granted a licence to develop a mine in 1997, but subsequently failed to receive an approval of the environmental impact assessment and to obtain the environmental permit required to start exploitation of the project. See https://www.italaw.com/cases/4721. By August 2017, it was reported that the Romanian government was considering to allow the mine to go ahead (see https://www.theguardian.com/environment/2017/aug/31/romania-may-seek-to-pull-gold-mine-from-unesco-protected-list). The mine is to use cyanide to extract gold, causing wide opposition in the country that had witnessed the disastrous effects of the Baia Mare cyanide spill of 2000, which also affected Hungary and Serbia. The European Court of Human Rights later on held that the Romanian authorities’ failure to protect the applicants who lived in the vicinity of the Baia Mare gold mine violated their right to respect for private and family life (ECtHR, Application No 67021/01, Tatar v. Romania, 27 January 2009).
- 33.
ICSID Case nr. ARB/09/12, Pac Rim Cayman LLC v El Salvador, award in favour of state issued 14 October 2016, see www.ciel.org/wp-content/uploads/2016/10/PacRimVElSal-award.pdf.
- 34.
PCA Case No. 2009-04 Bilcon of Delaware et al. v Canada, www.italaw.com/cases/1588. The claim amounts to US$ 443 million to make up for lost profits and other losses, of which US$ 7 million was awarded in the end.
- 35.
Case No. ARB (AF)/97/1 Metalclad Corporation v. United Mexican States. See fn. 84 below.
- 36.
Vattenfall v Germany I, ARB/09/6. Germany had imposed conditions in the water permit regarding the impact of the coal-fired power plant on the water of the river Elbe, which according to the investor were so strict that the whole project became ‘unviable’ in violation of the ECT rules on protection of investments, and probably claimed compensation, the amount of which remains unknown as the arbitration was kept confidential, but is rumoured to be 1.4 billion Euro. A settlement was reached under which Germany lowered its conditions. See N Bernasconi, ‘Background paper on Vattenfall v. Germany arbitration’, (2009) IISD www.iisd.org/pdf/2009/background_vattenfall_vs_germany.pdf and Investment Arbitration Public Policy, ‘Vattenfall v Germany (Energy Charter Treaty)’, http://iiapp.org/media/uploads/vattenfall_v_germany.rev2.pdf.
- 37.
In the Lone Pine Resources Inc. v Canada case (ICSID Case No. UNCT/15/2), the Government of Quebec’s ‘arbitrary, capricious, and illegal revocation of the Enterprise’s valuable right to mine for oil and gas under the St. Lawrence River’ forms a violation of NAFTA according to the investor, notably because Quebec decided to a impose a moratorium on the drilling for shale gas on its territory, “without due process, without compensation, and with no cognizable public purpose” and in violation of the obligation to ensure “fair and equitable treatment”. Lone Pine claims compensation for damages of up to 250 million US$. See www.italaw.com/sites/default/files/case-documents/italaw1596.pdf.
- 38.
Occidental v Ecuador (ICSID Case No. ARB/06/11. Also see fn. 43 below.
- 39.
Philip Morris Asia v Australia, PCA Case No. 2012-12, Award on jurisdiction and admissibility 17 December 2015, https://www.pcacases.com/web/sendAttach/1711. Philip Morris had claimed the measure constitutes an expropriation of its Australian investments in violation of the ‘1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments’ (1993) 30 Australian Treaty Series www.austlii.edu.au/au/other/dfat/treaties/1993/30.html, that it forms an unreasonable and discriminatory measure, and that investments have been deprived of full protection and security. The arbitral tribunal declined jurisdiction to hear the case, because the company restructured to Hong Kong in order to benefit from the BIT this country had in place with Australia at a moment in time when the dispute was already foreseeable. This constitutes an abuse of right, or abuse of process (Award, para 585). In the Philip Morris v Uruguay dispute (ICSID Case No. ARB/10/7), an award discussing the merits of the case was issued on 8 July 2016. The arbiters found that increasing the size of graphic health warnings on cigarette packages and the ban on marketing more than one variant of cigarette per brand family did not violate the Uruguay-Switzerland BIT, rejected all claims and ordered the investor to pay all costs of the proceeding (nearly 1.5 million US$, plus 7 million US$ to Uruguay on account of its own costs. Yet Uruguay still is left with costs it had to make of several million dollars that it does not get back, forming a considerable burden for this country with a mere 3.3 million inhabitants (see https://www.theguardian.com/global-development/2016/jul/28/who-really-won-legal-battle-philip-morris-uruguay-cigarette-adverts). Australia also faced challenges against plain packaging in the WTO after Ukraine, Honduras, Indonesia, Dominican Republic and Cuba argued the measure breached Australia’s WTO obligations. On 28 June 2018, a WTO Panel decided in Case DS467 that the claims were unfounded.
- 40.
Vattenfall v Germany II, ICSID Case No. ARB/12/12. Germany amended its Atomic Energy Act for the thirteenth time (13. AtGÄndG of 31.07.2011, BGBl I S. 1704 (No. 43)). Because of this amendment, Vattenfall was forced to shut down two nuclear power plants, in Brunsbüttel and Krümmel (the latter had not operated since 2007 due to accidents). The Swedish company issued a claim against Germany for reparation of damages that reportedly amounts to 3.7 billion Euro. See Bernasconi-Osterwalder and Hoffmann 2012, p. 2. In another dispute at the German Constitutional Court, it was decided that Vattenfall is entitled to compensation (BverfG 6 December 2016, 1 BvR 1456/12).
- 41.
Ethyl v Canada, NAFTA Case, 1997. The case concerned the banning of importation and interprovincial trade in MMT, because of, inter alia, its potential toxic effects. Ethyl demanded over 200 million USD in damages, but in a settlement it agreed to 13 mln USD, with the measure being withdrawn. Source: http://investmentpolicyhub.unctad.org/ISDS/Details/16. In the EU, MMT was banned and a challenge before the EU courts remained unsuccessful (case C-343/09, Afton Chemical Limited v Secretary of State for Transport, [2010] ECR I-7027).
- 42.
It has been claimed that the decision in the Philip Morris v Australia case (see fn 39 above) shows that the regulatory chill effect is a myth: see Lavranos 2016. More convincingly, others pointed out that it is premature to claim that the regulatory chill argument failed because of this case—noting that some states that waited for the outcome of the case now might introduce Australia- or Uruguay-like tobacco regulations (reaction by L Nottage (22 August 2016), http://kluwerarbitrationblog.com/2016/08/18/after-philipp-morris-ii-the-regulatory-chill-argument-failed-yet-again/#comment-21209). See Govaere 2016, pp. 8–11. New Zealand did so on 14 March 2018.
- 43.
The highest award in an investor-state arbitration case used to be the $2.3 billion awarded to the oil company Occidental, against the government of Ecuador (see fn. 38 above), over its (apparently lawful) termination of an oil-concession contract. See Cheng 2012. More recently, the Yukos award topped all other awards, amounting to 50 billion US dollars. See PCA Case AA226, Hulley Enterprises (Cyprus) v Russia, final award 18 July 2014, www.pca-cpa.org/showfile.asp?fil_id=2722. Also see Niebruegge 2007.
- 44.
According to an OECD study from 2012, legal and arbitration costs for the parties in ISDS cases averaged over USD 8 million with costs exceeding USD 30 million in some cases. See Gaukrodger and Gordon 2012.
- 45.
Up to 2013, some 31% of the cases was decided in favour of the investor, 26% was settled and 43% was decided in favour of states. By 2014, some 25% of the concluded cases was decided in favour of the investor, 28% of the cases was settled and 37% was decided in favour of the State. Source: UNCTAD, Latest development in Investor-State Dispute Settlement (2014) and (2015), http://investmentpolicyhub.unctad.org/Publications/Details/132.
- 46.
Of the 16 cases, 2 are pending (one of which is the Keystone XL Pipeline case discussed below), 1 discontinued, 3 were settled and 10 decided in favour of the U.S.A.
- 47.
U.S. companies initiated 145 cases against other countries, which is by far more than in any other country. The Netherlands is no 2 with 89, and UK no 3 with 64 cases. 42 of the 145 U.S. cases are still pending or were discontinued; in 56 of the remaining 103 cases, a settlement was reached or the U.S. investor won. Source: UNCTAD ISDS Database, accessed 1 October 2016.
- 48.
Canada was respondent in 26 cases. Eight cases are still pending, 6 won, 5 settled (notably the MMT case, see fn 41 above), 4 discontinued and 3 lost.
- 49.
An example in the area of public health is the Asian arm of tobacco group Philip Morris suing the Australian government for introducing plain white cigarette packaging at the end of 2011. Philip Morris claims the measure constitutes an expropriation of its Australian investments in violation of the ‘1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments’ (1993) 30 Australian Treaty Series www.austlii.edu.au/au/other/dfat/treaties/1993/30.html, that it forms an unreasonable and discriminatory measure. The arbiters declined jurisdiction on 17 December 2015, see https://www.pcacases.com/web/sendAttach/1711.
- 50.
See P-T Stoll, W Th Douma, N De Sadeleer and P Abel, ‘CETA, TTIP und das europäische Vorsorgeprinzip. Eine Untersuchung zu den Regelungen zu sanitären und phytosanitären Maßnahmen, technischen Handelshemmnissen und der regulatorischen Kooperation in dem CETA-Abkommen und nach den EU-Vorschlägen für TTIP’ (German original); ‘CETA, TTIP and the precautionary principle. Legal analysis of selected parts of the draft CETA agreement and the EU TTIP proposals’ (English condensed version), Foodwatch, June 2016 and Douma 2019 pp. 163–200.
- 51.
Compare Council of Canadians, ‘Paris climate summit: New report protects climate legislation from trade deals’ (2015), http://canadians.org/media/paris-climate-summit-new-report-protects-climate-legislation–trade-deals, see Van Harten 2015, and NRC Handelsblad, ‘Handelsarbitrage vormt risico voor soevereiniteit regeringen’, 10 June 2016, where Van Harten explains that the ICS proposal forms a small improvement but does not change fundamental challenges that ISDS poses (only foreign investors can bring a claim, they only have rights—notably to public money if their claims are accepted—and no duties); he agrees with the request of Dutch parliament for a carve-out in CETA for Paris Agreement related measures.
- 52.
According to NASA, global annual average temperature in 2015 was 0.87 °C above the 20th century average, and by 2016 this was 0.99 °C. See http://climate.nasa.gov/vital-signs/global-temperature.
- 53.
With CCS techniques, waste carbon dioxide (CO2) from fossil fuel power plants is captured and stored in underground geological formation, preventing it from reaching the atmosphere and allowing for some 80% reduction of CO2 emissions.
- 54.
Article 2 UNFCCC.
- 55.
Article 2(1)(a) Paris Agreement.
- 56.
Commission, ‘Towards a comprehensive European international investment policy’ (Communication) COM (2010) 342 final, 9 and 10. Available at http://trade.ec.europa.eu/doclib/docs/2010/july/tradoc_146307.pdf. It is noted that challenges exist where transparency, consistency and predictability and rules for the conduct of arbitration are concerned.
- 57.
See for instance Commission Communication ‘Smart Regulation in the European Union’, COM(2010)543 final of 8.10.2010, in which it is claimed that ‘regulation must promote the interests of citizens, and deliver on the full range of public policy objectives from ensuring financial stability to tackling climate change’.
- 58.
EP, ‘Resolution on the future European international investment policy’ 2 October 2012, 2010/2203(INI)www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2011-0141&language=EN. It noted a number of ISDS problems because of vague language, the possibility of conflict between private interests and the regulatory tasks of public authorities (for example where the adoption of legitimate legislation led to states being condemned for breaches of the ‘fair and equitable treatment’ (FET) principle), and asked the Commission to ‘better address the right to protect the public capacity to regulate and meet the EU's obligation to exercise policy coherence for development’.
- 59.
Council, ‘Conclusions on a comprehensive European international investment policy’, 3041st Foreign Affairs Council meeting, Luxembourg (25 October 2010), 2.
- 60.
Articles 21 TEU and 11 TFEU.
- 61.
Development Solutions, ‘A Trade SIA relating to the negotiation of a Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada’, Final Report (June 2011) 19, 20. Available at http://trade.ec.europa.eu/doclib/docs/2011/september/tradoc_148201.pdf. The report also notes that there ‘is no solid evidence to suggest that ISDS will maximise economic benefits in CETA beyond simply serving as one form of an enforcement mechanism, just as state-state dispute settlement is also an enforcement mechanism. (…) As such, the study’s assessment suggests that a well-crafted state-state dispute settlement mechanism might be a more appropriate enforcement mechanism in CETA than ISDS.’.
- 62.
Handbook for Trade Sustainability Impact Assessment, 1st edition. A second edition was adopted in 2016, see http://trade.ec.europa.eu/doclib/docs/2016/april/tradoc_154464.PDF.
- 63.
- 64.
Answer given by Mr De Gucht on behalf of the Commission of 5 February 2013, OJ C 321 E of 7 November 2013.
- 65.
EurActiv 16 September 2015, ‘Positive effects of TTIP tribunals for investment unclear’, www.euractiv.com/section/trade-society/news/positive-effects-of-ttip-tribunals-for-investment-unclear.
- 66.
Council of the EU, Directives for the negotiation on the Transatlantic Trade and Investment Partnership between the European Union and the United States of America, 17 June 2013 (made public on 9 October 2014). See http://data.consilium.europa.eu/doc/document/ST-11103-2013-DCL-1/en/pdf and http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/foraff/145014.pdf. It can be added that the Commission’s Impact Assessment report on the future of EU-US relations SWD(2013)68 of 12.3.2013 accompanying the document Recommendation for a Council Decision authorising the opening of negotiations on TTIP does not discuss ISDS at all.
- 67.
Idem, p. 8.
- 68.
European Commission, ‘Preliminary report (statistical overview)’ (July 2014) European Commission. Online public consultation on investment protection and investor-to-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership Agreement (TTIP), July 2014. Most replies were submitted by individuals as part of collective, coordinated civil society actions. 569 organisations also responded to the consultation, many of these being NGOs. Of the remaining responses, 3144 stemmed from individual citizens, 445 from companies, trade unions etc., and eight from academics—inter alia 120 European academics, ‘Statement of Concern about Planned Provisions on Investment Protection and Investor-State Dispute Settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP)’ Kent Law School, www.kent.ac.uk/law/isds_treaty_consultation.html.
- 69.
European Commission, ‘Report on the Online public consultation on investment protection and investor-to-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership Agreement (TTIP)’ (Staff Working Document] SWD (2015)3 final, http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153044.pdf.
- 70.
Idem, p. 26.
- 71.
Idem, p. 21. For instance, it was explained that NGO’s and trade unions had warned that ISDS would insufficiently address concerns regarding the right to regulate, whereas others (notably business representatives) had warned that investors might not be sufficiently protected any more if standards were to be lowered.
- 72.
European Parliament, ‘Resolution of containing the European Parliament’s recommendations to the European Commission on the negotiations for the Transatlantic Trade and Investment Partnership (TTIP)’. (2014/2228(INI)). This contentious point was adopted by 447 votes for to 229 against, with 30 abstentions.
- 73.
- 74.
- 75.
European Commission, ‘CETA: EU and Canada agree on new approach on investment in trade agreement’ (29 February 2016) European Commission Press Release http://europa.eu/rapid/press-release_IP-16-399_en.htm.
- 76.
The Economist, ‘Hot-air Walloons’, 22 October 2016, www.economist.com/news/europe/21709060-tiny-region-belgium-opposes-trade-reasons-are-hard-understand-wallonia.
- 77.
See Krajewski 2017, p. 9.
- 78.
Point 3 Annex 8-A CETA.
- 79.
According to US studies that were made regarding the proposed Keystone XL pipeline that is to transport Canadian oil to the US. See https://insideclimatenews.org/news/04042017/tar-sands-greenhouse-gas-emissions-climate-change-keystone-xl-pipeline-donald-trump-enbridge.
- 80.
Similar points can be made about shale gas, as will be touched upon in the next section of this chapter.
- 81.
Idem, under Question 4.
- 82.
UNCTAD, Investment Policy Framework for Sustainable Development, 2015, http://unctad.org/en/PublicationsLibrary/diaepcb2015d5_en.pdf.
- 83.
Idem, p. 81.
- 84.
Case No. ARB (AF)/97/1 Metalclad Corporation v. United Mexican States, International Center for Settlement of Investment Disputes [2000]. The arbiters found that “the Municipality’s insistence upon and denial of the construction permit in this instance was improper” and that “this conclusion is not affected by NAFTA Article 1114” (paras 97 and 98 award). The amount was reduced to $15.6 million. See www.citizen.org/documents/ACF186.PDF, at 12.
- 85.
S.D. Myers Inc. v. Canada. The export ban was judged to form a violation of the minimum standards of treatment foreign investors must be provided under NAFTA, and the damages were awarded on 21 October 2002. See https://www.italaw.com/cases/969.
- 86.
Ethyl Corporation v. Canada, award on jurisdiction 24 June 1998, www.italaw.com/cases/409. MMT stan ds for methylcyclopentadienyl manganese tricarbonyl and contains the heavy metal manganese, a neuro-toxin.
- 87.
Case C-343/09 Afton Chemical, [2010] ECR I-7027.
- 88.
Bilcon v Canada, see fn 34 above.
- 89.
Dissenting Opinion of Professor Donald McRae, www.italaw.com/sites/default/files/case-documents/italaw4213.pdf.
- 90.
Article 8.10 para 2 CETA lists the (a) denial of justice in criminal, civil or administrative proceedings; (b) fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings; (c) manifest arbitrariness; (d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; and (e) abusive treatment of investors, such as coercion, duress and harassment. The list can be extended where the parties specifically agree to add such elements to the content of the standard, for instance where there is evidence that new elements of the standard have emerged from international law (Article 8.10 para 2 sub f CETA).
- 91.
120 academics, fn. 3 above, under Question 3, point 1.
- 92.
Opinion 1/17, para 156.
- 93.
As will be discussed below, such treaties can play a role where the treatment of US companies is concerned that try to seek legal protection at an EU member state’s court.
- 94.
See Abbott et al. 2014. The authors explain that “[t]there has been no known case with an EU investor as claimant and the United States as respondent since the late 1980s, the time from when there is some public information available.”
- 95.
Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
- 96.
See Abbott et al. 2014.
- 97.
Compare SER, ‘TTIP Transatlantic Trade and Investment Partnership’ (2016) SER Advisory Report 16/04E, 95 www.ser.nl/~/media/files/internet/talen/engels/2016/ttip.ashx where after studying ISDS and ICS it is concluded that “a separate investment arbitration mechanism is not necessary in a properly functioning and highly developed legal system.”
- 98.
Especially not where only about one third of the current EU Member States has BITs in place with the U.S.A, while two thirds does not. The fact that from the perspective of Canada or the U.S.A., a couple of EU Member States do not sufficiently protect the rights of foreign investors does not outweigh the fact that in the vast majority of the EU, such challenges do not exist.
- 99.
See Kokott and Sobotta 2016, p. 14.
- 100.
See Bronckers 2015, p. 658.
- 101.
See Schill 2014.
- 102.
Basic Law for the Federal Republic of Germany, translated by C Tomuschat and D P Currie, as revised, www.gesetze-im-internet.de/englisch_gg/englisch_gg.html#p0101.
- 103.
BVerfG 19 July 2011, - 1 BvR 1916/09 - Rn. (1-100),www.bverfg.de/e/rs20110719_1bvr191609.html. Note that in BverfG 21 December 2009, 1 BvR 2738/08, NVwZ 2010, 373 the question whether the Swedish-state owned company Vattenfall could invoke protection under the German GG was left unanswered, but in BverfG 6 December 2016, 1 BvR 1456/12 it was made clear that this was possible. See also fn. 40 above.
- 104.
BGB1.1956 II, S. 488.
- 105.
It has been underlined that if a treaty awards the right to be treated equal to non-German persons, this implies that this would include the right to bring forward claims regarding violation of German constitutional rights. See Doehring 1974, p. 15.
- 106.
U.S.A. Department of State: 2014 Investment Climate Statement, June 2014, www.state.gov/documents/organization/226815.pdf, 1.
- 107.
Ecorys, SIA in support of the negotiations on a Transatlantic Trade and Investment Partnership (TTIP), Final report, March 2017, http://www.trade-sia.com/ttip/wp-content/uploads/sites/6/2014/02/TSIA-TTIP-Final-Report.pdf.
- 108.
European Commission services' position paper on the sustainability impact assessment in support of negotiations of the Transatlantic Trade & Investment Partnership between the European Union and the United States of America, March 2017, http://trade.ec.europa.eu/doclib/docs/2017/march/tradoc_155462.pdf.
- 109.
Idem, p. 8.
- 110.
Ibidem.
- 111.
The Trade SIA (p. 67) refers to the EIA 2015 Annual energy outlook, according to which emissions of methane along the supply chain will dent the environmental credentials of gas unless action is taken to tackle these leaks.
- 112.
- 113.
The Gillard government announced in 2011 that it supports the principle of national treatment—that foreign and domestic businesses are treated equally under the law, but opposes provisions that would confer greater legal rights on foreign businesses than those available to domestic businesses. It also opposed provisions that would constrain the ability of Australian governments to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses, and stated that it “will not accept provisions that limit its capacity to put health warnings or plain packaging requirements on tobacco products or its ability to continue the Pharmaceutical Benefits Scheme.” If “Australian businesses are concerned about sovereign risk in Australian trading partner countries, they will need to make their own assessments about whether they want to commit to investing in those countries” It was added. Australian Government, Department of Foreign Affairs and Trade, Gillard Government Trade Policy Statement: Trading our way to more jobs and prosperity, April 2011. Critical about this decision: (Kurtz 2012).
- 114.
At the 16th EU-China summit that took place 20-21 November 2013 in Beijing.
- 115.
- 116.
AUSFTA was signed in May 2004 and entered into force on 1 January 2005.
- 117.
Compare H Klodt, Investitionsschutzabkommen: mehr Rechtssicherheit oder Verzicht auf Souveränität?, Wirtschaftsdienst 2014/7, pp. 459–463, at 460.
- 118.
Compare Politico, ‘EU faces tough sell on TTIP compromise’, 7 February 2016, www.politico.eu/article/eu-faces-tough-sell-on-ttip-compromise-malmstroem-froman and Reuters, 29 October 2015, ‘U.S. wary of EU proposal for investment court in trade pact’, www.reuters.com/article/us-trade-ttip-idUSKCN0SN2LH20151029.
- 119.
It concerns the questions whether the Union has the requisite competence to sign and conclude alone the Free Trade Agreement with Singapore, and more specifically which provisions of the agreement fall within the Union’s exclusive competence, which within the Union’s shared competence and whether any provision falls within the exclusive competence of the Member States. The opinion C-2/15 was delivered on 16 May 2017 by the CJEU.
- 120.
Similar to the obligation to perform an environmental impact assessment before certain projects with potential serious environmental effects at the national level.
References
Abbott R, Erixon F, Ferracan M (2014) Demystifying Investor-State Dispute Settlement (ISDS). ECIPE Occasional Paper 5.
Ankersmit L (2016) The Compatibility of Investment Arbitration in EU trade Agreements with the EU Judicial System. Journal for European Environmental & Planning Law 13:46–63.
Bernasconi-Osterwalder N, Hoffmann R T (2012) The German nuclear phase-out put to the test in international investment arbitration? Background to the new dispute Vattenfall v. Germany (II). International Institute for Sustainable Development – Briefing Note.
Bronckers M (2015) Is Investor-State Dispute Settlement (ISDS) superior to litigation before domestic courts? An EU view on Bilateral Trade Agreements. In: Van den Bossche P, Baetens F, Bronckers M, Van Calster G (eds) Settlement of international trade disputes: achievements and challenges, pp. 75–103.
Cheng T H (2012) ICSID’s largest award in history: an overview of Occidental Petroleum Corporation v the Republic of Ecuador. Kluwer Arbitration Blog, available at http://arbitrationblog.kluwerarbitration.com/2012/12/19/icsids-largest-award-in-history-an-overview-of-occidental-petroleum-corporation-v-the-republic-of-ecuador/.
Doehring K (1974) Die Staatsrechtliche Stellung der Ausländer in der Bundesrepublik Deutschland. de Gruyter, Berlin.
Douma W Th (2019) The limits to precaution in international trade: from WTO law to EU trade agreements. In: Squitani L, Darpö J, Lavrysen L, Stoll P-T (eds) Managing facts and feelings in environmental governance. Edward Elgar, 163–200.
Gaukrodger D, Gordon K (2012) Investor-State Dispute Settlement: A Scoping Paper for the Investment Policy Community. OECD Working Papers on International Investment.
Govaere I (2016) TTIP and dispute Settlement: potential consequences for the autonomous EU legal order. Collège d’Europe Research Paper in Law 01/2016.
Kokott J, Sobotta C (2016) Investment Arbitration and the EU law. Cambridge Yearbook of European Legal Studies 18:3–19.
Krajewski M, Hoffmann R T (2016) The European Commission’s Proposal for Investment Protection in TTIP. FES Publication, available at http://library.fes.de/pdf-files/bueros/bruessel/12662.pdf.
Krajewski M (2017) Ensuring the primacy of human rights in trade and investment policies: Model clauses for a UN Treaty on transnational corporations, other businesses and human rights. CIDSE Study.
Kuijper P J (2014) Study on investment protection agreements as instruments of international economic law. In: European Parliament, Directorate-General for External Policies of the Union, Investor-state dispute settlement (ISDS) provisions in the EU’s international investment agreements (Study), Vol. 2 – studies.
Lenk H (2015) Investor-state arbitration under TTIP: resolving investment disputes in an (autonomous) EU legal order. Swedish Institute for European Policy Studies - SIEPS Report no. 2.
Lavranos N (2016) After Philip Morris II: the “regulatory chill” argument failed – yet again. Kluwer Arbitration Blog, available at http://arbitrationblog.kluwerarbitration.com/2016/08/18/after-philipp-morris-ii-the-regulatory-chill-argument-failed-yet-again/.
Niebruegge A M (2007) Provisional application of the Energy Charter Treaty: the Yukos arbitration and the future place of provisional application in international law. Chicago Journal of International Law 8:355–376.
Salacuse J W (2015) The law of investment treaties. Oxford University Press, Oxford.
Schill S (2014), Internationaler Investitionsschutz und Verfassungsrecht. Verfassungsblog, available at https://verfassungsblog.de/internationaler-investitionsschutz-und-verfassungsrecht/.
Titi C (2014) The right to regulate in international investment law. Hart Publishing, Oxford.
Van Harten G (2010) Investment treaty arbitration, procedural fairness, and the rule of law. In: Schill S W (ed) International investment law and comparative public law. Oxford University Press, Oxford, pp. 627–658.
Van Harten G (2015) An ISDS Carve-out to Support Action on Climate Change. Osgood Hall Law School Legal Studies Research Paper Series 11:1–12.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2020 T.M.C. Asser Press and the authors
About this chapter
Cite this chapter
Douma, W.T. (2020). Investor-State Dispute Settlement in EU Trade Agreements in the Light of EU Policy and Law. In: Andenas, M., Pantaleo, L., Happold, M., Contartese, C. (eds) EU External Action in International Economic Law. T.M.C. Asser Press, The Hague. https://doi.org/10.1007/978-94-6265-391-7_10
Download citation
DOI: https://doi.org/10.1007/978-94-6265-391-7_10
Published:
Publisher Name: T.M.C. Asser Press, The Hague
Print ISBN: 978-94-6265-390-0
Online ISBN: 978-94-6265-391-7
eBook Packages: Law and CriminologyLaw and Criminology (R0)