News in Brief

European Commission addresses TTIP concerns at European Parliament meeting

At a March 18, 2015 meeting at the European Parliament’s International Trade Committee, EU Trade Commissioner Cecilia Malmström presented four “preliminary ideas” to address public concerns about investment in the Transatlantic Trade and Investment Partnership (TTIP) in negotiation between the European Union and the United States.

To prevent conflicts of interest resulting from the dual rule (arbitrator–lawyer) in investor–state arbitration, the Commissioner emphasized the role of arbitrator rosters. She also supported the idea of a permanent investment court—but aiming at a multilateral one, as a parallel medium-term objective.

The Commissioner also suggested including in TTIP an appeal body with permanent members to review decisions and ensure their consistency. In addition, to prevent giving investors “a second chance to overrule the decisions of national courts,” she proposed provisions to clarify the relationship between domestic systems and investor–state arbitration.

Malmström also discussed clauses to address the concern “that investment arbitration in TTIP will be a barrier to Europe’s noble tradition of high quality regulation.” Such concern is increasingly widespread in Europe. On April 18, thousands in several German cities protested against the TTIP fearing an erosion food, labour and environmental standards.

In the European Parliament, the leading European People’s Party favours investor–state arbitration in the TTIP, but six committees have drafted opinions against it. While not binding, these opinions will be taken into account in the International Trade Committee’s report, to be put to vote on May 28 and presented to the Parliament in June 2015.


 

TPP Investment Chapter: Re-edition of U.S. BIT, with ISDS carve-outs

A January 20, 2015 negotiating draft of the Investment Chapter of the Trans-Pacific Partnership Agreement (TPP) was leaked on March 25, 2015.

The TPP has been under negotiation for five years by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Since the draft texts are not shared with the public, interested observers must rely on periodic leaks.

Most of the latest leaked chapter is copy-pasted from the U.S. model bilateral investment treaty (BIT), with slight differences. Investment authorizations and contracts, normally within the scope of U.S. BITs, appear in square brackets, indicating that their inclusion is not yet confirmed. Performance requirements are broadly prohibited, but an exception covering “measures to protect legitimate public welfare objectives” was added. And states go as far as recognizing that voluntary corporate social responsibility should be encouraged.

Several negotiating countries carved out measures and sectors from the scope of investor–state dispute settlement (ISDS). Notably, a footnote expressly indicates that ISDS will not be available for use by Australian investors or against Australia. Yet the footnote is followed by an intriguing note: “deletion of footnote is subject to certain conditions.” It is not clear what Australia would trade for its anti-ISDS stance.


India releases Model BIT for comments; United States pushes for negotiations 

The Indian government published a draft of its model bilateral investment treaty (BIT) for public comment on March 24, 2015. By April 11, the deadline for submission, 185 comments were posted on the government’s online forum. The new text is set to replace the country’s 1993 model Bilateral Investment Promotion and Protection Agreement (BIPA) and results from an inter-ministerial review process started in mid-2012.

India’s new model includes obligations on foreign investors and investments and on their home state aimed at ensuring that investment contributes to inclusive growth and sustainable development. Investors and investments that breach obligations regarding corruption, disclosures and taxation do not benefit from the treaty benefits—and are subject to counterclaims by the host state. While retaining investor–state dispute settlement provisions, the model requires a foreign investor to exhaust administrative and judicial remedies before initiating arbitration against the host state.

Increasingly concerned with investor–state arbitration, India is reported to be considering renegotiating or exiting its BITs (currently, 83 signed, 72 in force). Although the country does not have an investment treaty with the United States, sporadic negotiations are reported to be occurring since 2008. The completion of India’s new model has motivated a new round of talks, as indicated in March 2015 by U.S. Assistant Secretary of State Nisha Desai Biswal.


UNCITRAL Transparency Convention opened for signature in Mauritius

The United Nations (UN) Convention on Transparency in Treaty-based Investor–State Arbitration was opened for signature in an official ceremony on March 17, 2015 in Mauritius.

Now also known as the Mauritius Convention on Transparency, the treaty results from the work of the UN Commission on International Trade Law (UNCITRAL) on transparency in investment arbitration dating back from 2010.

Another product of this work, the UNCITRAL Rules on Transparency in Treaty-based Investor–State Arbitration were adopted in 2013 and have been effective since April 1, 2014. They require publication of basic information about the arbitration, disclosure of key documents (including the tribunal’s decisions) and open hearings. The rules automatically apply to any UNCITRAL arbitration proceeding under a treaty concluded after April 1, 2014.

By signing the Transparency Convention, a state commits to applying the transparency standards of the UNCITRAL Rules on Transparency to any investor–state arbitration proceeding under treaties concluded before April 1, 2014, even if those treaties do not refer to UNCITRAL Arbitration Rules.

The first signatories of the Mauritius Convention were Canada, Finland, France, Germany, Mauritius, Sweden, the United Kingdom and the United States. It will enter into force six months after the deposit of the third instrument of ratification.