European Commission considers establishment of a Multilateral Investment Court

By Gabriel M. Lentner

On 1 August 2016, the European Commission published a so-called Inception Impact Assessment analyzing the establishment of a Multilateral Investment Court (MIC) for investor-state dispute settlement (ISDS).

This MIC, conceived as a permanent and centralized institution, would replace the current investment arbitration mechanism in place for the (about 1400) existing Bilateral Investment Treaties (BITs) of EU Member States. Further, the envisioned Investment Courts would be established through the new Free Trade Agreements (FTAs) negotiated between the EU and Canada (CETA) and EU and the U.S. (TTIP). The EU-Vietnam FTA should similarly be replaced by the single MIC.

The European Commission is considering several options for replacing the existing system with the MIC. A more limited approach would create a permanent appeal tribunal competent to hear appeals of ISDS awards rendered under the existing BITs of EU Member States and the EU agreements with third states. This would leave the current system of ISDS in place.

The more promising option is the proposal to establish a permanent Multilateral Investment Court with both a First Instance Tribunal and an Appeals Tribunal. This MIC should then replace existing BITs of EU Member States and the Investment Court System to be created under CETA, TTIP, and the EU-Vietnam FTA (which include this option in the negotiated treaty texts or in case of the TTIP in the textual proposal of the EU).

In order to replace the currently existing and negotiated ISDS mechanisms, the EU considers the adoption of an international agreement establishing the MIC, which applies to all existing treaties between countries that have ratified the agreement (through a negative or positive list of BITs to be excluded or included). This option borrows from the model of the Mauritius Convention, which makes the UNCITRAL Transparency Rules for Treaty-based Investor-State Arbitration applicable to existing agreements.

To be sure, many follow-up questions posed by the Commission remain unanswered. This includes the questions of how this institution will be financed and whether the MIC will be attached to existing institutions, such as the International Court of Justice or the Permanent Court of Arbitration.