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Ref. Ares(2017)1963547 - 13/04/2017
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Detail:
COM
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introduced the discussion paper provided to the delegates (annex 1).
The idea of the multilateral investment court first appeared in the Commission's Concept
Paper of May 2015. The proposal is also part of the Trade for all communication and
features in Juncker's State of the Union address.
In terms of procedural steps for the discussions, an impact assessment is currently in the
making. The process for that will continue throughout 2016 and 2017. The present
exchange with MS on the multilateral court initiative is only the first of a series of
exchanges. If the idea concretizes, we would ask for negotiating directives from Council.
So far, interest from third countries expressed at different levels, but no detailed
discussion have taken place. Discussions with Member States would need to happen
before engaging with third countries.
Comments by Member States
[**] the idea of a multilateral court is not new. It has often been discussed in conjunction
with multilateral investment rules.
agrees on COM's premise: multiple ICS is
[**]
unsustainable. Multiple ICS plus traditional ISDS will lead to higher fragmentation. We
also need to look at the issue of the critical mass of third countries supporting the idea.
We may have more on this after COM's impact assessment is ready - do we have a
coalition of the willing? Small number is not sufficient – e.g. WTO sets a threshold as to
amount of trade covered for plurilaterals - eg 90% of global FDI as pre-condition.
[**]
Maybe in a year's time there will be more
maturity also on this issue. The cost side is very important- if no multilateral rules and
you use the opt in system from the Mauritius Convention - how do you then divide the
costs between members? One option would be user fees. But would it not also depend on
the number of of agreements submitted to the court?
[**]
is it then fair that we all pay for this court? Repartition of costs is also a very relevant
issue for developing countries.
welcome the idea as it will increase legitimacy and consistency. Also in favour of
[**]
using the same opt-in approach as for the Mauritius Convention (UNCITRAL
Transparency Convention). But the latter has shown how long this can take. Need critical
mass: OECD countries –must cover developed, developing and transition countries.
Which third countries have so far indicated support? Enforceability is essential point:
such a Court would need to have the same guarantees of enforcement as the
ICSID Convention. Proliferation of international institutions is not ideal -why not include
such a Court in the WTO, especially given that investment could be a post-Nairobi issue.
Also need special treatment for least developed countries.
[**] support idea of multilateral court. On organisational issues, [**] is not fixed.
COM line is ok – it makes sense to have two instances in one (First Tribunal and Appeal
Tribunal).
[**]
Premature to discuss grafting onto existing organisation, but
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as a first reaction,
[**]
Question is whether we really need new judges and new institutions.
[**]
For its establishment, using
the same opt-in process as for Mauritius Convention is a good idea. Costs would be much
lower than multiple ICS.
It assumes that the
[**]
political will is there to go ahead.
wants Council conclusions affirming this.
[**]
on need for critical mass of countries, especially if this is to serve cost
[**]
efficiency argument – can COM explain which countries have expressed interest to
become member? We are very interested to see the Impact Assessment. Interesting to
have first discussion on First Instance and appeal tribunal in one. But what about the link
to TPP where a vague reference to multilateral appeal instance is made? The proposal for
remand may make the process more time consuming. On consistency of rulings, can we
really achieve this with in a spaghetti bowl of Investment agreements? Intentions of the
contracting parties must be reflected.
The relevance of Mauritius Convention as a model for opt-in is procedural, whereas the
proposal in question is much broader in concept. [**] is against any renegotiations of
existing treaties to place them under proposed multilateral court. Aligning enforceability
with the New York Convention [on enforcement in domestic courts] is a better option as
it would allow national courts to still review awards.
One of the key objectives for the court should be efficiency: If the initial number of
countries is very small, then it is not evident at all that there would be efficiency/cost
gains as compared to the current ICS. COM's discussion paper jumps too easily to the
conclusion that a court would be more cost efficient. Have other intermediary solutions,
based on what is already there, been examined? The ICS can be seen as virtual courts so
why not examine using the ICS in a more efficient way – e.g. by having a network of ICS
that could be shared across several agreements, supported by a secretariat for instance. It
is important to have Council conclusions supporting this before we move forward into
concrete steps as described in the paper.
for the moment no position as to the necessity of having the court and would also
[**]
want more time to consult internally. The foreseen IA will be very useful to help us
assess cost-benefit relation. [**] thinks this is needed before having council decision.
would appreciate receiving more detailed scenarios on the different options.
[**] preliminary thoughts: it is important with consistency but a lot will depend on how
[**]
the court will be created and function. On enforceability: if there is no possibility to
review by national courts, then we need to focus on "no parallel claims" and
"res judicata". On the set up of the court, one can perhaps take inspiration from the ECJ
or ICJ?
What about the issue of the competence of Court in terms of interpretation of EU law?
PL and the EU are not ICSID members, so how would it work to dock it to ICSID? Also
how would a new court impact on pending investment disputes? [**] . On bringing
MS BITs under the multilateral court to: what about the ISDS that exists in MS
agreements? Don’t want to renegotiate those agreements. What about intra-EU BITs?
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the efforts towards the multilateral court have the potential to increase legitimacy-
[**]
main objective. Howver three points here (1) Cost-benefit analysis very important. The
design of such a court will necessary entail trade-offs (e.g. length of procedures, quality
of outcome). This proposal needs systematic comparison with other institutions and
presentation of those trades-offs. (2) Political feasibility: critical mass of countries
needed. We know the US is against such international courts. (3) Consistency – there is
no uniform body of law. So what do we achieve here? Potential tension between
emerging case law and intentions of parties to the BITs. Can we really confine this
reform process to procedure with no convergence in substance? Will we not be forced
into substantive problems?
On MS BITs: in procedural terms ok, but is there an intended substantive convergence
and how can we deal with all differences of BITs between them and with the EU
approach?
these are preliminary remarks only as we need time to consult internally especially
[**]
ministry of justice. Positive about the idea- not sustainable to continue with bilateral
courts in EU FTAs.
is negative on the creation of a new institution; would need to
[**]
make a very strong case in this respect. On costs, [**] is less concerned than others about
this as could be resolved through various ways e.g. a per case fee or a membership fee. It
is up to COM to present a workable solution – should in any event be clarified in a cost
benefit/ analysis. On the stated importance of critical mass, there is a balance to be struck
between that and the efficiency in designing the court. The issue of enforceability is the
key issue.
the negotiation of multilateral rules will take time. We need a balance between
[**]
critical mass and effective outcome. Only a single legal basis to interpret will provide
consistency, but there will be the BITs, which will be difficult to interpret in the same
way. Need an IA and deeper discussions before we engage in the next operational steps.
legitimacy is very important but we need more reflection on this. Consistency of
[**]
BITs with this system but we recognize that a mechanism that allows jurisdiction of MIC
will allow for coherence. Mauritius Convention is ok as a model for opt in. On costs we
would need to know how the calculations are made. On appeal side: will there be a
special regime for SMEs? Should we limit appeal only to legal issues not factual erorrs?
Important to ensure the enforcement and the recognition of decisions under the court.
Also, how many members will this court have?
support further discussion on the MIC. We need to see the IA. Is the proposal
[**]
compliant with EU law? And should the court be making requests to ECJ? What about
the question of governing law? How many third countries support this idea? On the
existing arbitration institutions: is it proper to use them given that they are all based on
arbitral rules? On rules of procedure would the proposed court replace ISDS provisions
in existing BITs or offer choice to investors between the two [ISDS and court]?
generally supportive of the concept. But securing a critical mass is essential. What is
[**]
the minimum threshold?
[**] in principle support the concept-
[**]
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[**] On MS BITs: interesting position; doubts as to substantive provisions in the BITs -
very difficult to renegotiate. There is also the underlying issue of negotiation of
substantive rules: Agenda for G20 and Post-Nairobi process. These things cannot be seen
totally in isolation from the proposed court.
On the structure of the court - no firm position on having an Appeal Tribunal - COM
arguments are convincing- would it be similar to the ICS set up? Will it fit to existing
structures of enforceability? New York Convention? Very difficult to trade off
«legitimacy» against efficiency in enforceability.
On scope, how do you distinguish between procedural and substantive rules? Would the
scope extend to State to State? What kind of procedural rules will apply? Will it be
possible to use the existing ones as in the ICS? We need a balance between a good
number of countries and be able to move forward. On institutional setting -stand alone or
grated onto existing organisation notably WTO- would claims brought by private
claimant fit into WTO?
raises a lot of questions about practicability, legitimacy and benefit? What is the
[**]
relation with ICSID? relation with MS BITs?
[**] need to examine how the court would interact with national legal systems. In favour
of settling disputes first before national courts - necessary to encourage recourse to
national courts. We need to further elaborate question of MS BITs. Costs of court? Court
needs to bring consistency in the interpretation of substantive standards.
[**] potential problems re implementation but also idea of system - enforcement
problematic – substantive rules are different so how far will consistency be ensured?
What third countries are interested?
crucial question regarding consistency.
[**]
[**] MIC needed because a global phenomenon needs a global solution
is in favour
[**]
of the proposal. But how do we get there?
[**]
agrees that we can start campaigning on this but we need to keep several
[**]
things in mind: on substantive rules, there is the July 2016 Ministers meeting in G20
under Chinese Presidency. As we know, for China investment is paramount.
What should this court look like – WTO, ICC,
[**]
ICSID, PCA?
[**]
Response by COM
We are at a stage where we do not have answers to all questions. Indeed we need to
further define and elaborate on some issues. To respond to specific questions by Member
States:
Critical mass vs efficiency: agree that it is clearly important to attract as many partners
as possible, also for question of legitimacy and cost. But COM not sure we should try at
this stage to define what is the critical mass:
[**]
There is the example of
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UNICITRAL where we lost some substance in the transparency rules in order to get
agreement of countries, which were clear they would not apply the rules. That is not
necessarily the best approach.
Costs issue: the planned Impact Assessment will cover cost/benefit question. But costs
would be comparable to e.g. International Tribunal of the Law of the Sea and other
institutions. Regarding the repartition of costs, clearly something we will need to discuss.
E.g. the costs of WTO are calculated in function of trade volume – a similar proxy could
be found for investment. We also need to discuss the question raised by some of you on
« user fees »: should we do this even if in other tribunals there is no such fee? The issue
of developing countries is important, whether balancing on the basis of purchasing
power. A centre for legal assistance for LDCs was again raised, to be seen…
Institutional set-up : this is something to discuss over time:
[**]
3rd countries: we picked up different levels of support. General interest in reform,
including at the OECD where a lot of talk about this. In terms of third country interest,
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At this stage these are
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technical level discussions.
Link with substantive rules: currently no religion.
[**]
But a permanent court will, like appeal courts in MS,
look at different sets of rules. For now, our position is that substantive rules and dispute
settlement should not be linked in terms of negotiation. Another question is the point of
arrival: need to foresee the possibility that the agreement evolves over time and keep
open the possibility of the MIC to potentially apply future multilateral rules.
Opt in: Mauritius Convention type approach is useful exactly to avoid renegotiations of
existing BITs.
Primary function of court would be to resolve dispute - in doing so, a body of law
would develop. We already see that investment arbitration tribunals cite previous cases.
In some cases they follow and in others they do not. Interpretations would be useful and
not necessarily binding. If judges apply VCLT on interpretation intentions would be
looked into even if judges refer to other awards. We will always have slightly different
substantive obligations unless we multilateralise the rules. Indeed this is a broader
exercise than UNCITRAL. On the fork in the road, no u turn etc approach we would not
regulate this in the court, but leave it for each agreement. The court would also not be
used for intra- EU agreements.
Enforcement:
[**]
SMEs: noted point - already cater for this - we can discuss what more we can precisely
do. A lot to be discussed on qualifications and appointment of judges. ICJ qualifications.
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Relation with SSDS : we need to work through that -
[**]
On procedural rules that would apply: we don't have any preconceived ideas.
Compatibility with EU law: COM does not see any issue with the compatibility of the
ICS and investment agreements with EU law, because the tribunals apply international
law (the international treaties) not EU law. We need to see how we manage the question
of the applicable law in the MIC system. That would be in line with opinions of ECJ.
[**]
Next steps: we are also looking at the possibility of exploring the issue of the court at the
World Investment Forum held in parallel with the UNCTAD ministerial in Nairobi this
coming July.
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Electronically signed on 10/06/2016 16:05 (UTC+02) in accordance with article 4.2 (Validity of electronic documents) of Commission Decision 2004/563