News in Brief

Binding instrument on business and human rights: Working Group holds its first session

From July 6 to 10, 2015, a UN working group* convened its first meeting in Geneva, Switzerland, to discuss a legal instrument on human rights and transnational corporations. The working group was established by UN Human Rights Council Resolution A/HRC/RES/26/9.

The inaugural session was attended by representatives of UN member and observer states, UN agencies and other intergovernmental organizations, and national human rights institutions and non-governmental organizations with consultative status at the UN Economic and Social Council. The session was also broadcasted live and archived at UN Web TV.

After electing Ambassador Maria Fernanda Espinosa of Ecuador as Chairperson-Rapporteur, the participants focused on the scope of coverage of the future instrument and on principles and key elements it should include, such as state obligations, legal liability of transnational corporations and other business entities, as well as national and international mechanism for access to remedies. They also acknowledged the importance of taking into account the UN Guiding Principles on Business and Human Rights as a reference point in the drafting process.

The Working Group will convene its second session in 2016. In the meantime, it will engage in informal consultations with various stakeholders.

* The Open-ended Intergovernmental Working Group for the Elaboration of an International Legally Binding Instrument on Transnational Corporations and Other Business Enterprises with respect to Human Rights.

European Parliament supports TTIP, but rejects current ISDS model

On July 8, 2015, the European Parliament adopted a non-binding resolution guiding the European Commission on the negotiations of the Transatlantic Trade and Investment Partnership (TTIP) with the United States. The resolution generally supports TTIP—but rejects its investor–state dispute settlement (ISDS) provision.

The Parliament asked the Commission to replace the provision with a new system that is “subject to democratic principles and scrutiny” and conducted “in a transparent manner by publicly appointed, independent professional judges in public hearings.” It also called for an appellate mechanism, consistency of decisions, respect for the jurisdiction of EU and member state courts, and prevalence of public policy objectives over private interests.

For EU Trade Commissioner Cecilia Malmström, the resolution signalled that “the old system of [ISDS] should not and cannot be reproduced in TTIP.” She committed to flesh out the reform ideas she presented in May and to incorporate them into the TTIP.

Bolivia promulgates Conciliation and Arbitration Law with regime for investor–state disputes

On June 25, 2015, Bolivian President Evo Morales promulgated Law No. 708 on Conciliation and Arbitration, approved by the Bolivian parliament with inputs from the private sector, academia and civil society. The law creates a Special Arbitration Regime for resolving investor–state disputes, particularly concerning strategic natural resources.

Bolivia’s Attorney-General Héctor Arce stated that the law guarantees the rights of both the state and domestic and foreign investors. President Morales added that “now no business sector can complain that Bolivia offers no legal guarantees or security.”

European Commission requests Member States to terminate intra-EU BITs

On June 18, 2015, the European Commission initiated infringement proceedings against Austria, the Netherlands, Romania, Slovakia and Sweden, formally requesting them to terminate their bilateral investment treaties (BITs) with other EU Member States.

According to the Commission, these treaties are out-dated and no longer necessary, since all Member States are subject to the same rules on cross-border investments, such as freedom of establishment and of capital. It indicates that the rights conferred by intra-EU BITs on a bilateral basis to investors of some Member States constitute nationality-based discrimination and are incompatible with EU law.

The five states have two months to reply to the request. While other infringement proceedings are expected, the Commission is initiating an administrative dialogue on intra-EU BIT termination with all other Member States—except for Ireland and Italy, which terminated their own in 2012 and 2013, respectively. A meeting to ensure coordinated termination will be held in October.

In parallel, the Commission plans to discuss improved investment protection within the bloc. Lord Jonathan Hill, EU Commissioner for Financial Services, Financial Stability and Capital Markets Union, stated that “the Commission is ready to explore the possibility of a mechanism for the quick and efficient mediation of investment disputes.”

China signs FTAs with South Korea and Australia, conducts new round of BIT negotiation with United States

On June 1, 2015, China and South Korea signed a free trade agreement (FTA), after three years of negotiations. Chapter 12 (Investment) of the FTA updates the 2007 China–Korea BIT with key provisions, including pre- and post-establishment national treatment, minimum standard of treatment, denial of benefits, and dispute settlement.

It also establishes a Committee on Investment as a bilateral communication channel for matters arising under the FTA. Each party will also designate a national contact point to receive complaints from investors of the other party regarding administrative measures and to assist in resolving difficulties of investors of the other party.

Later, on June 17, China entered into another landmark FTA with Australia, concluding decade-long negotiations. The national treatment provision in Chapter 9 (Investment) contains asymmetrical commitments rarely seen in recently concluded treaties: Australia commits to extend national treatment for Chinese investors to pre-establishment market access, while China only agrees to post-establishment national treatment.

Traditional provisions were left out, such as standard of treatment, expropriation and transfers, leaving related commitments under the 1988 Australia–China BIT intact. However, the FTA significantly updates the dispute settlement mechanism of the 1988 BIT. The parties also agree to establish a work program to consolidate the FTA’s Investment Chapter and the BIT into a Comprehensive Investment Chapter, which will likely include provisions on minimum standard of treatment, expropriation, transfers, performance requirement, senior management and board of directors, and dispute settlement.

Meanwhile, from June 8 to 12, China and the United States conducted the 19th round of BIT negotiations in Beijing. During the negotiations, the parties discussed core issues on substantive obligations and exchanged their preliminary negative lists. Both parties agree that the BIT negotiations are still in early stages.