On 20.02.2018, a public hearing on the controversial multilateral investment court took place or-ganised by the European Economic and Social Committee. The MIC is to create a common Inves-tor-State Dispute Settlement for over 3,000 bilateral investment protection agreements world-wide. Together with the international community, negotiations under the patronage of the UN are currently taking place in Vienna and New York.
The European Commission, following the difficulties in implementing CETA by national parliaments, has been searching for more accepted solutions for the still planned Investor-State Dispute Settlement (so far: ISDS). To avoid future disputes, it went internationally on the offensive: The proposed Multilateral Investment Court (MIC), which is to be constructed based on the model of the CETA Investment Court System (ICS), shall provide more legitimacy than the usual private investment arbitration under ISDS. In contrast to the latter, the MIC shall be a permanent court, comprise from independent judges proposed by participating countries, and provide appeal proceedings. Transparency and financial independency shall also be secured. In spite of this, general human, environmental and social rights are still neither given priority, nor equivalence over investor rights.
Legally a double bottom?
Caroline Nicolas, Senior Legal Officer of the United Nations Commission on International Trade Law in Vienna (UNCITRAL), who presented her point of view before the European Economic and Social Committee (EESC) on 20.02.2018, has taken on the task to design the MIC. In doing so, UNCITRAL exclusively concentrates on the procedural rules, as without a clear mandate of the participating countries nothing may be regulated, which would fall into national responsibility.
However, Peter Schneiderhan, the representative of the German Association of Judges, regarded this issue as legally problematic. If, after long-term and multiple use of the complaints procedure, customary law had been created from the court decisions of the MIC, this would go beyond the mandate of procedural rules. The thus created “material law” could not be interpreted or changed by the European Court of Justice (ECJ) or national constitutional courts either. According to Peter Schneiderhan, the MIC would then develop an independent existence, which was disconnected from national jurisdiction.
The legal protection of the investment regime goes far beyond the common national property right. Hence, Belgium has already requested the legal opinion of the ECJ in September 2017. Therefore, the German Association of Judges, the European Consumer Organisation BEUC, the European Trade Union Confederation (ETUC), as well as the United Nations Conference on Trade and Development (UNCTAD) demanded in EESC to stop the negotiations, at least until the ECJ opinion is available.
Political feasibility and global situation
The political feasibility also seems to be in doubt. Similar initiatives by WTO and World Bank have come to nothing. Economically important countries such as Japan, Brazil, India and Argentina have already explicitly opposed the MIC. A good dozen of other countries are at least sceptical. The USA under Trump has not yet made their position clear.
Even though the UNCTAD representative in general welcomed the MIC initiative, he criticised it against the background of the fragile situation regarding the Investor-State Dispute Settlement. He concisely summarizes the characteristic weaknesses of current bilateral investment treaties (BITs) in the “4 Fs”: Fragmented responsibilities, Fragile legal environment, Fluid legal understanding and Failure to include sustainability aspects. His concerns: the MIC does not address the problems of the outdated regime.
Special rights with obligations towards Employees und Environment
What is particularly striking is the fact that the current proposal of the Commission and UNCITRAL does not give equality to national and even international binding agreements such as the Convention on Human Rights, let alone priority over investor rights. An option to avert this competence of the MIC in the public interest has not been planned. There are currently ca. 3,000 international investment protection agreements; the other way round, no comparable international mechanism to claim labour or consumer rights, exists. Apart from that, domestic investors are not able to use the MIC as they are bound to the national stages of appeal.
Hence, without a restrictive clause in the public interest, there might be more cases such as the private arbitration claim of the Swedish energy company Vattenfall. Vattenfall sued Germany for compensation amounting to the horrendous sum of 4.4 billion euros because of her phasing out nuclear energy after the Fukushima disaster. And the company might even win the case. Hence, the representative of the European Consumer Organisation (BEUC) justifiably fears that countries may shy away from comprehensive environmental and social reforms because of threats of legal action by foreign investors alone. This would hit the least developed countries particularly hard, which per se have very weak legal protection in the public interest.
So far, sustainability aspects have not been very popular within bilateral investment treaties (BITs). The UNCTAD representative remarked that hardly any of the ca. 2,900 BITs prior to 2012 even contained the word “sustainability”. However, change might be on the way: Tanja Buzek, shadow rapporteur and employee representative in the EESC demanded a “holistic access” to the MIC. Therefore, the substantial rights of public interest had to be balanced towards investor rights and above all actionable.
During the past year, the Chamber of Labour has participated in the public consultation of the Commission and has carried out a fundamental assessment of the proposal: On the one hand, the MIC does not contribute to remedying any shortcomings of existing agreements of the old generation. In addition, the current proposal on the MIC poses a risk to the national regulatory law in the public interest. Hence, a Multilateral Investment Court can only exist, if investor rights are matched with investor obligations and if concerned third parties can also have recourse to the MIC in case of any violations.