The European Union's Emerging Approach to ISDS: a Review of the Canada-Europe CETA, Europe-Singapore FTA, and European-Vietnam FTA

• Autore: Gus Van Harten
• Carica: Professor and investment law specialist at Osgoode Hall Law School
• Pagine: 138-165

ARTICLES & ESSAYS

DOI 10.6092/issn.2531-6133/6318

UNIVERSITY OF BOLOGNA LAW REVIEW

ISSN 2531-6133

[VOL.1:1 2016]

This article is released under the terms of Creative Commons Attribution 4.0 International License

138

The European Unions Emerging Approach to SDS: a Review of the

Canada-Europe CETA, Europe-Singapore FTA, and European-Vietnam

FTA

GUS VAN HARTEN†

TABLE OF CONTENTS: 1. Introduction; 2. Response to the Lack of Judicial Independence in

ISDS; 3. Response to the Lack of Procedural Fairness in ISDS; 4. Response to the Lack

of Balance in ISDS; 4.1. Foreign Investor Rights, Without Responsibilities; 4.2.

Expansive Scope of Foreign Investor Rights and Protections; 4.2.1. Broad Access to

ISDS; 4.2.2. Expansive Version of Fair and Equitable Treatment; 4.2.3. Other Foreign

Investor Rights; 4.3. Affirmation of the Right to Regulate; 5. Conclusion.

ABSTRACT: The voeanqUnion approach to ISDS is examined based on the available

textual evidence in proposed or negotiated trade agreements. The evaluation focuses

on three criteria: judicial independence, procedural fairness, and balance in the

allocation of rights and responsibilities. Each criteria arises from concerns about the

powerful and far-reaching arbitration mechanism at the core of ISDS and its role to

decide the legality of sovereign conduct and allocate public funds to foreign investors.

The main conclusions are that, in pursuing a massive expansion of ISDS in new trade

agreements, the European Union has taken only partial steps on the issue of

independence, has signalled but not carried through with steps on the issue of

procedural fairness, and has not taken steps to balance investor rights with investor

responsibilities or to ensure respect for the role of domestic courts.

KEYWORDS: Foreign Investment; International Arbitration; Trade Negotiations; European

Union.

University of Bologna Law Review

[Vol.1:1 2016]

DOI 10.6092/issn.2531-6133/6318

139

1. INTRODUCTION

Investor-state dispute settlement (hereinafter ISDS) is an exceptionally

powerful form of international adjudication that regulates and disciplines the

legislatures, governments, and courts of countries for the main purpose of

protecting foreign investors. Treaties that allow for ISDS claims against

countries do so based on broadly-framed rights, without actionable

responsibilities, for foreign investors that are enforceable in non-judicial

arbitration processes. These processes are subject to limited judicial review

(in a jurisdiction usually chosen by the ISDS arbitrators) or to limited non-

judicial review by three arbitrators selected for each case by the World Bank

President or another default appointing authority. ISDS tribunals are

especially powerful because their awards and other decisions are enforceable

directly against assets of the losing country located in other countries; in this

respect, they are more powerful than other adjudicative forums, including

domestic and international courts, that involve the review of sovereigns.1

To date, ISDS has been used to order public compensation mostly for

very large multinational companies and very wealthy individuals in a range

of regulatory areas. Compensation has been ordered by ISDS tribunals both

foq genealq andq foq ecificq deciionq akenq bq conieq legilaeq

governments, or courts.2 The exclusive access to ISDS that is given to foreign

investors, especially companies and individuals more able to finance

expensive ISDS litigation, gives such investors a unique ability to influence

sovereign decision-making in their favour at the expense of those with

conflicting interests and no corresponding access to ISDS.

ISDS was developed in the late 1960s and 1970s for the resolution of

foreign investor disputes regarding relations between developed and either

developing or transition countries or, alternatively, among developing or

transition countries. In contrast, ISDS has been agreed rarely among

developed countries, whose judicial systems have a stronger claim than ISDS

† Professor and investment law specialist at Osgoode Hall Law School. He received the William

Robson Memorial Prize from LSE, a doctoral fellowship from the Social Sciences and Humanities

Research Council of Canada, an Overseas Research Award from Universities UK, and a Research

Award from the Canadian International Development Agency.

1 See GUS VAN HARTEN, INVESTMENT TREATY ARBITRATION AND PUBLIC LAW 117-119 (2007).

2 See GUS VAN HARTEN, SOVEREIGN CHOICES AND SOVEREIGN CONSTRAINTS 52-54, 82-89 (2013).