Multilateral Investment Court System does not deliver equal justice

By EDRi · March 22, 2017

On 15 March 2017, the public consultation on “options for a multilateral reform of investment dispute resolution” launched by the European Commission (EC) was concluded. EDRi responded to the consultation, in line with the response to the previous Investment-to-State-Dispute-Settlement (ISDS) consultation and our work on trade and fundamental rights. Our view is that the Multilateral Investment Court System (MICS) is not a suitable option to replace the flawed ISDS system. Instead, insofar as any state has an inadequate legal system, it is this problem which should be addressed.

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In addition to the contents of the proposal, the public consultation itself can be criticised. The way in which it was formulated did not allow for unbiased responses, and thus a full response, addressing the entire range of problems related to the reform proposed is precluded. Firstly, the questionnaire does not even contain the most important question: is an ISDS or MICS necessary at all? Secondly, based on an Inception Impact Assessment (IIA) that denies the potential existence of social impacts of the adjustment to the current system, the scope of the consultation has been narrowed down, which leaves very little space for discussion. For example, the Commission fails to address any potential impact to fundamental rights online, such as the rights to privacy and data protection. A Multilateral Investment Court would assess whether democratic decisions are arbitrary from the point of view of the protection of foreign investments, creating major risks for democracies and civil rights.

The Commission’s proposal itself, although not perfect, does take some steps in the right direction. As compared with the previously suggested ISDS system, it looks at improving consistency, efficiency, legal certainty, legal correctness, impartiality in the decisions, legal predictability, accessibility for Small and Medium Sized Enterprises (SMEs) and better costs management. Unfortunately, although these intentions are to be welcomed, they are applied to a system which is inherently incapable of delivering equal justice.

Despite the suggested improvements, the proposal raises concerns of compatibility with the EU Treaties, does not consider the practical difficulties in the creation and implementation of a MICS and leaves a wide list of hurdles unaddressed. EDRi encourages the Commission to request analysis from the Court of Justice of the European Union (CJEU), the highest court of the European Union, about the compatibility of its proposals with the Treaties. This would ensure legal certainty on a very important and highly controversial issue.

One of the unaddressed problems is that the proposal discriminates between foreign and local investors. It provides that foreign investors are given the right to circumvent domestic legal systems and use supranational adjudication to challenge government decisions, even though supranational adjudication places the development of law outside democratic oversight.

The proposal is also a threat to EU policy making, as it fails to meaningfully address substantial issues, such as the right to regulate, in practice as well as in principle.

In sum, the proposal is detrimental for democracy, human rights and the rule of law, and should therefore be strongly opposed.

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Questionnaire on options for a multilateral reform of investment dispute resolution

EDRi’s reponse to the public consultation on a multilateral reform of investment dispute resolution (15.03.2017)

EDRi’s response to the ISDS consultation (13.07.2014)

Inception Impact Assessment: Establishment of a Multilateral Investment Court for investment dispute resolution (01.08.2016)

EDRi: Consultation on multilateral investment court misses the point (22.02.2017)

Multilateral investment court strengthens investments vis-a-vis democracy and fundamental rights (08.03.2017)

(Contribution by Tommaso Crepax, EDRi intern)