Protecting and facilitating investment within the EU

Late last year, members of IMI’s Investor-State Mediation Taskforce responded to an EU Commission public consultation on “the protection and facilitation of investment within the EU”. The aim of the consultation was to “assess the current framework of investment protection, including both substantive rules and dispute settlement mechanisms”. Below you will find both the a copy of the published background to the public consultation, and IMI’s response.

Thank you to Wolf von Kumberg, Hannah Tuempel, Rana Kassas, Catherine Kessedjian, Michael Cover, and Shanti Abraham for preparing and submitting a response on behalf of IMI.

IMI’s response

Note that while IMI was responding to specific questions, several of these were yes/no. To enhance readability, responses have instead been gathered under related headings.

13. Improving enforcement mechanisms at EU level

Foreign Direct Investment (FDI) is important to the economic development of many EU States. A crucial factor when considering FDI is the provision of an efficient and transparent dispute resolution mechanism that meets the needs of the foreign investor as well as those of the Host State and all stakeholders who have an interest in the dispute (notably civil society when issues such as climate change are at stake). As cited under Article 47 of the Charter everyone has the right to an effective remedy. In the preamble to this Section it cites that some Investors question the impartiality of national courts that may be influenced by national interests and suggest that there would be an added value in additional Europeans solutions to settle disputes between Member States and investors coming from other Member States. Given that there may be legitimate concerns anytime a State Court is being requested to determine a dispute between the State and a foreign investor, another option,  in addition to National Courts, could be created. The Commission has already provided a possible solution in the form of Article 9 in the Agreement for the termination of Bilateral Investment Treaties between Member States. Through this mechanism the framework for “facilitated settlements” is introduced. A settlement procedure can be entered into between an Investor and the State, overseen by an impartial facilitator to find an amicable, lawful and fair out-of-court settlement of the dispute. The independent facilitator must be someone who is independent and impartial and has in-depth knowledge of Union law. This mechanism, which one might also label “mediation” is one that has been advocated for some time by the International Mediation Institute of the Hague (IMI), which has been instrumental, together with ICSID, CEDR and the Energy Charter Treaty Secretariat (ECT) in helping to develop criteria and standards for the use of mediation in investment disputes. This development is also being contemplated by UNCITRAL through its working Group III. It is too early to know what will come out of the discussions within that forum since negotiations have been de facto suspended because of the Covid-19 pandemic. However, mediation and amicable dispute settlement mechanisms are certainly on the agenda of WGIII. The Academic Forum has published a paper to help focus attention on some issues and a webinar was conducted on 18 June 2020 (both are available on the UNCITRAL WG III website).

This is a progressive mechanism and takes into consideration rulings by the CJEU, national courts and European Commission, as well as the position of the Investor. It is a voluntary process, with no decision being imposed, the decision to settle remaining with the parties themselves. While this is currently only a temporary measure under the Agreement, it should be considered transforming it into a permanent measure. Consideration should be given to adding the IMI mediator criteria to those to be considered for appointment of the Facilitator. The criteria can be found at https://www.imimediation.org/2016/10/12/new-competency-criteria-for-investor-state-mediators/

There are often structural obstacles within State institutions, which make entering into settlements with Investors difficult. These inhibitors, which make it difficult for State officials to settle, in particular politically contentious matters, can be dealt with by putting an appropriate framework in place within the State apparatus. The Energy Charter Treaty Secretariat (ECT), has spent significant effort in formulating a Model Instrument recommended to its Member States (of which the EU is one), in order to permit them to engage in amongst others, mediation leading to a settlement agreement. It is highly recommended that the ECT Model Instrument on Managing Investment Disputes found at:

https://www.energycharter.org/fileadmin/DocumentsMedia/CCDECS/2018/CCDEC201826_-_INV_Adoption_by_correspondence_-_Model_Instrument_on_Management_of_Investment_Disputes,

(with which the EU as a Member of the ECT is familiar) be adopted for use by EU Member States in the context of Article 9 and any successor mechanism thereto. This will remove many of the internal structural obstacles to settlement by Member States and make the facilitation process more effective and transparent.

14. Improving cross-border investment dispute resolution

As stated in the introduction, “Given the incompatibility of intra-EU BITs (including investor-to-state arbitration) from the date of entry into force of EU law, where necessary all investors within the EU need to seek legal remedies for disputes related to their investments in national courts.”:

The current investment dispute resolution system is non-harmonized within the EU. The lack of coherence lies primarily in the discrepancies between the different forms of legal remedies available to investors in the EU seeking relief in accordance with the national legislation of any of the member states. Whi