News in Brief

European Commission consultation shows public rejection of investor–state dispute settlement

On January 13, the European Commission published a report and an accompanying memo analyzing the results of its consultation on investment protection and investor–state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP) under negotiation between the European Union and the United States.

The consultation, held between March 27 and July 13, 2014, asked whether the EU approach for TTIP would achieve the right balance between investor protection and safeguards on the European Union’s and member states’ right to regulate in the public interest. It also asked about transparency, ethical requirements for arbitrators, and appellate mechanisms in ISDS.

Of the 149,399 submissions received in the Commission’s largest consultation to date, 97 per cent express opposition ISDS in TTIP, or to TTIP in general. According to EU Trade Commissioner Cecilia Malmström, “the consultation clearly shows that there is a huge scepticism against the ISDS instrument.”

However, the Commission made it clear that the consultation was not a referendum. Given that the negotiating directives (the mandate) received from the EU member states foresee the inclusion of ISDS in TTIP, the Commission will only decide on the inclusion in the final phase of negotiations. Some NGOs criticized the consultation as a “mockery of democracy.”

The report indicates that there were around 145,000 collective replies, based on pre-defined answers provided by NGOs. The Commission affirmed it did not take “all the identical ones for one,” as controversially suggested in July 2014 by then–EU Trade Commissioner Karel De Gucht, but that it considered all of them as valid. Among individual replies, there were 3144 by EU citizens and 445 by NGOs.

Among the replies, numerous indicated that ISDS was “a threat to democracy and public finance or to public policies,” or unnecessary between the European Union and the United States, “in view of the perceived strength of the respective judicial systems.” Others expressed concerns that high-stake arbitrations would have a “chilling effect” on the right to regulate. There was also “a generic mistrust with regard to the independence and impartiality of the arbitrators” and a concern that “ISDS may create a possibility for investors to circumvent domestic courts, laws or regulations.”

Based on the submissions, the Commission identified four areas to be further developed: the protection of the right to regulate; the establishment and functioning of arbitral tribunals; the relationship between domestic judicial systems and ISDS; and the review of ISDS decisions for legal correctness through an appellate mechanism.

Before making any policy recommendations, the Commission will discuss the results with the European Parliament, EU member states and civil society, starting with a presentation to the Committee on International Trade of the European Parliament on January 22.

Singapore introduces a new court to settle international commercial disputes

This January Singapore launched a new international court to address commercial disputes. The Singapore International Commercial Court is designed to settle cases involving foreign parties and laws.

The court holds jurisdiction over cases that are international and commercial, where the parties have given written consent, and where they do not seek relief in the form of a prerogative order (an order for an arm of government to do or not to do something).

The Chief Justice of Singapore and twelve international jurists have been appointed as judges to the court. In contrast to the norm in arbitration, where the disputing parties typically choose the arbitrators, the court will assign judges to the cases.

The court’s judgements will be equivalent to those of the Singapore High Court, the lower division of the Supreme Court of Singapore (with the Court of Appeal sitting in the upper division).

According to Singapore’s Ministry of Law, subsidiary legislation will set out the circumstances in which foreign-qualified lawyers may appear before the court. These will be “cases with no substantial connection to Singapore, or to address the court on matters of foreign law,” said the ministry.

First announced in December 2014, the court forms part of Singapore’s efforts to establish itself as a hub for dispute resolution. The court is the first of its kind in Asia.


Venezuela: new and concluded arbitration cases, and a new foreign investment law

In addition to the 26 cases against Venezuela listed as pending on the ICSID website, U.S. energy firm Harvest Natural Resources announced on January 16 that its Dutch affiliates initiated ICSID arbitration against Venezuela under the Venezuela–Netherlands BIT. The company alleges that the state systematically thwarted the development of the company’s investment and its ability to sell its interests.

Two ICSID arbitrations against Venezuela were concluded in the last quarter of 2014. The Awards and Decisions section of this issue of ITN presents summaries of the awards in the Exxon case, concluded on October 9, 2014, and in the Flughafen and IDC case, concluded on November 18, 2014.

Also on November 18, in parallel to these developments in investment treaty arbitration, a reformed law on foreign investment entered into force in Venezuela.

The new law highlights that foreign investment is subject to the jurisdiction of Venezuelan courts or to dispute settlement mechanisms of which Venezuela may participate within the framework of economic integration in Latin America and the Caribbean. Among other provisions, it establishes the rights and obligations of foreign investors, and reserves to the state the right to develop strategic sectors.