EU law and investment treaty law: convergence, conflict, or conversation?

SENATE HOUSE, LONDON, 23 JANUARY 2015

I. Introduction

The European Federation for Investment Law and Arbitration (EFILA) marked the commencement of its activities on Friday 23 January 2015 with the Inaugural Conference entitled “EU law and investment treaty law: convergence, conflict, or conversation?” at Senate House of the University of London. An impressive array of stakeholders attended, from backgrounds as diverse as the European Commission, the European Parliament and officials from European governments, as well as senior figures from arbitration institutions and trade associations, academia and private practice. A rich and stimulating debate ensued on recent EU investment policy and the challenges associated with the use of Investor State Dispute Resolution (ISDS), a highly topical issue given the controversy over its proposed inclusion in the Transatlantic Trade and Investment Partnership (TTIP), among other international agreements currently under negotiation.

A vast array of issues was canvassed over the course of discussions led by five panels, which explored how ISDS mechanisms can co-exist with the EU legal framework.

II. Panel 1: Pros and Cons of the existing ISDS system

The first panel examined the existing ISDS system and its effectiveness. It was acknowledged that the introduction of bilateral investment treaties (BITs) has revolutionised dispute resolution by giving investors recourse against the state. However, the panel contrasted the growth in the number and substance of BITs in recent times with the burgeoning disengagement from the investment arbitration system visible in certain jurisdictions. Speakers tackled oft-cited criticisms of ISDS and BITs, including the notions that BITs limit state sovereignty, that ISDS favours the investor, and that decisions of the democratically elected should not be challenged by unelected international tribunals. Options for improvement were considered, such as promoting alternative dispute resolution mechanisms; amending treaty provisions, and establishing an international investment court. The suggestion of an appeals facility was met with concern about the legitimacy of having a ‘superior’ tribunal in a system with no formal doctrine of precedent, and the role of the tribunal in deciding individual cases rather than ruling on the state of the law as such. The impact of such a facility on settlement was also discussed.

Available PowerPoint presentations:
1. Elisabeth Tuerk: Investor-State Dispute Settlement: Trends, Challenges and Way Forward

III. Panel 2: Intra-EU issues

The next panel engaged in heated debate on the interplay between public international law and EU law in the context of investment arbitration. Those who consider EU law to be another form of international law maintained it should be interpreted on an equal plane with investment treaties. For these speakers, conflicts between international law and EU law should be resolved using the usual tools of treaty interpretation and conflict of laws rules. Strong opinions were voiced on the European Commission’s perceived intervention in arbitration proceedings and awards, to the detriment of investors. Others opined that EU law reigns supreme within the EU above all forms of international law, including BITs, the Energy Charter and the ICSID Convention. They argued that, in order to respect the single legal order which the EU has attempted to create, and to ensure that all member state investors receive equal rights and protections, incompatibility between BITs and EU law must be interpreted to fit within the context of EU law. While arbitral tribunals have so far accepted jurisdiction in the intra-EU context, it was noted that it remains to be seen whether the opinion of the CJEU will differ.

Available PowerPoint presentations:
1. Frank ter Borg: Disparities in European Law
2. Markus Burgstaller: Intra-EU Investment Treaties and EU Law
3. Stefaan De Rynck, EU Commission: Recent economic developments in investment and capital flows

IV. Panel 3: Extra-EU issues

The succeeding panel considered extra-EU issues and the position of BITs between Member States and third party countries. The panel differentiated between treaties entered into prior to the Lisbon Treaty, under which the investor may theoretically sue either the EU or the Member State, and those concluded post-Lisbon, for which a framework exists for allocating responsibility. Speakers examined practical considerations in bringing an action against the EU, including the importance of which court has control, whether the court should be within or outside of the EU, and the use of institutional rules to minimise risk. While the CJEU has established that EU law is supreme, the panel acknowledged that the CJEU will usually try to apply EU law in light of international law. However, speakers recognised that, since there is no judicial review available for ICSID awards, a tribunal could theoretically take a position which, upon enforcement, would run contrary to EU law. It was therefore suggested that parties to an ICSID dispute refer to the CJEU for a preliminary reference, to establish any clash with EU law prior to the tribunal’s decision.

Available PowerPoint presentations:
1. Davide Rovetta: If you play with fire, you get burned: EU law vs. investment arbitration law
2. Prof. Dr. Christian Tietje: Enforcement of ICSID Awards and Conflicts with EU Law

V. Panel 4: Future treaty making

The penultimate panel looked at the future of treaty-making and emphasised the organic and evolving nature of international law, which has already achieved significant developments in investor-state dispute resolution. The clear message from the panel was that states have regained control from the tribunal. The speakers touched on the unique legal framework of investment treaties, which permits direct action by third parties, and the pros and cons of umbrella clauses. It was also suggested that treaties should ensure ISDS is not used by investors to seek compensation for mere contractual breaches. The panel noted that policy makers should consider any potential repercussions beyond the signatory states and the EU when drafting treaties. Lastly, the panel encouraged the active involvement of lawyers and academics in the negotiations on the proposed inclusion of ISDS in TTIP, highlighting that the vast majority of participants in the recent consultation were businesses.

Available PowerPoint presentations:
1. Markus Burianski: Umbrella Clause – A Desirable Instrument ?
2
. Speech by Annette Magnusson: Future Treaty Making

VI. Panel 5: Future Investment Policy Making and Its Expected Effects

The final panel considered the future of investment policy and its effect on foreign direct investment and dispute resolution. Speakers focused on the EU’s goal to increase investment protection, and also perceived attempts to limit the application of ISDS. Both UNCTAD and UNCITRAL were felt to have a continuing practical influence on states in their policy making. Some methods to improve the application of investment treaty standards were considered, including making the interpretation of treaties binding to allow for greater predictability, more detailed drafting of the substantive content of treaties to provide maximum guidance on their application, and an appellate system. Speakers also encouraged the enhancement of environmental protections through treaty drafting. It was warned that exclusion of ISDS in TTIP may lead to questions of discrimination, should states try to negotiate its inclusion in future BITs with other states. For increased protection, investors were advised to address any rights limited by treaties through the drafting of the arbitration clause itself.

VII. Conclusions

Overall, the conference demonstrated that, in general, participants’ views on the relationship between EU law and investment treaty law depended on from which of the two main underlying perspectives they approached the topic, i.e. that EU law is supreme, or merely forms part of international law. While the ‘Solange’ approach was suggested as a practical solution to the tension between the two, the CJEU’s Opinion in Micula and others v Romania (ICSID Case No. ARB/05/20) casts doubt on its viability. Several questions arose from the conference, including whether it is possible to establish a functioning co-existence between EU law and international investment law in Europe; the role, if any, that arbitral tribunals should have in constitutional, democratic legal systems, and how future BITs and ISDS can positively contribute to promote sustainable investments and the Rule of Law, and protect fundamental rights.

The depth and breadth of dialogue generated at the conference, both by the panel members and the attendees, provided an unprecedented opportunity for increased appreciation of the complex debate surrounding investor-state arbitration and its place within the EU legal framework. It is hoped that the deepened understanding gleaned from such discussions will assist in promoting an informed and balanced approach to investor-state arbitration, as well as influencing EU policy to promote improved investment treaty legislation, policy and mechanisms for the resolution of related disputes.

PROGRAM

Conference programme is available here.