This article is originally from The American Review of International Arbitration (ARIA)

PREVIEW

Reform of investor-state dispute settlement (ISDS) is currently on the agenda of UNCITRAL Working Group III (WG III). One of the options for reform is replacing conventional investor-state arbitration with a multilateral investment court (MIC) that would consist of a first-instance court and an appellate body, though some states seek the establishment of an appellate body only. Still others want to maintain the status quo, or to tinker with it only slightly.

The European Union is the foremost champion of the establishment of a MIC. Indeed, the most recent idea for permanent tribunal emerged when the legal “scrub” of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union was completed, and the revised text provided for the establishment of an investment court system specific to the CETA, in lieu of traditional investor-state arbitration, until a MIC could be established.  Subsequent EU investment agreements have contained similar placeholders.  Establishing a MIC, according to the European Union and other proponents of the idea, would eliminate or at least minimize problems accompanying traditional investor-state arbitration, including concerns about the appointment of arbitrators, the lack of consistency and therefore of predictability in arbitral decision making given the decentralized nature of the existing investment arbitration paradigm, and the limited power of existing control mechanisms to overturn decisions which contain errors of law or egregious errors of fact.

The move to negotiate an agreement for the establishment of a MIC has been paralleled by increasingly critical decisions of the European Commission and EU judicial organs about traditional investor-state arbitration. The decision in the first case, Achmea,  was hedged about with limitations, possibly because the Court anticipated the legal challenge that would be brought against the investment-court system included in the CETA.  Subsequent decisions have nonetheless extended the Achmea result to disputes under the Energy Charter Treaty  and to intra-EU arbitration agreements involving states even outside the investment treaty context.  In addition, EU Member States, frequently supported by the European Commission, have sought to set aside, or have resisted enforcement of, intra-EU arbitral awards on various grounds, chief among which is the inability of EU Member States to enter into treaties amongst themselves that would permit an investor from one EU Member State to arbitrate against another EU Member State.  The arguments made by the European Union and its EU Member States, and decisions by the CJEU, pose challenges for the successful negotiation of a MIC whose features will not violate the limitations on EU actors vis-à-vis international dispute settlement imposed by the CJEU yet will still result in a mechanism satisfactory to non-EU States. 

To explore these challenges, I will first review the Achmea line of cases, highlighting the decreasing room for maneuver that each subsequent case has left for international dispute settlement that can be viewed by the EU organs as consistent with EU law. In the course of that exploration I will highlight some of the arguments that the Commission and Member States have made to resist enforcement of intra-EU awards. In the second part I will explore why the CJEU’s approach to the “primacy” and “autonomy” of EU law bodes ill for the success of a multilateral investment court (and perhaps other forms of international dispute settlement as well).