Consultation on multilateral investment court misses the point

By EDRi · February 22, 2017

The European Commission has launched a consultation on establishing a multilateral investment court, which would serve as a permanent body to decide investment disputes. The court would replace controversial investor-to-state dispute settlement (ISDS) mechanisms in existing and future trade and investment treaties. It would interpret the substantive rules in these treaties, which provide a high level of legal protection for investors. This would leave states no or a very limited right to regulate, as regulation would always happen under the (real or perceived) threat of supranational litigation.

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The issue at hand is that the consultation has a narrow scope with no regard to social impacts, including fundamental rights. Therefore it is crucial to react. The deadline for submitting comments on the questionnaire on options for a multilateral reform of investment dispute resolution is 15 March 2017.

The multilateral investment court proposal is based on an Inception Impact Assessment which presents various scenarios. Its baseline scenario – what would happen without EU policy changes – is just one sentence long and doesn’t expect the court to have social (or environmental) impacts. The baseline scenario ignores existing impacts, a huge expansion, through new treaties, of covered foreign direct investment, and a greater scope, as EU trade and investment treaties bring EU decisions under the scope of investment mechanisms. A more comprehensive baseline scenario would address growing social impacts.

Compared to ISDS, a multilateral investment court would bring institutional improvements. Such improvements, however, do not solve systemic issues with specialised and supranational adjudications, which create a high risk of expansive interpretations of investors’ rights. Specialised courts tend to interpret expansively and the supranational level lacks effective instruments to correct expansive interpretations.

A multilateral investment court would shift the balance between investments on the one hand and democracy and fundamental rights on the other. This undermines our values, ability to reform, and ability to respond to crises.

Foreign investors would be able to use a multilateral investment court to challenge EU data protection enforcement measures. This could apply to, for instance, the suspension of cross-border data flows or fines imposed by supervisory authorities on data controllers and data processors under the General Data Protection Regulation (GDPR). A multilateral investment court would also impede reform of “intellectual property” rights.

The Commission’s consultation seems designed to keep social (and environmental) impacts out of the consultation’s results. In light of the need to protect fundamental rights, the EU cannot ignore, legitimise, or perpetuate increasing impacts. With a baseline scenario showing growing impacts on fundamental rights, the Commission should work out scenarios which will decrease them.

General Data Protection Regulation: Document pool

Questionnaire on options for a multilateral reform of investment dispute resolution

Multilateral investment court assessment obscures social and environmental impacts

Defend democracy: draft answers for new ISDS consultation

ENDitorial: EU Commission ISDS proposal – a threat to democracy

(Contribution by EDRi member Vrijschrift, The Netherlands)