A huge web of bilateral and multilateral investment treaties exists between EU member states and between EU member states and third countries. Under the Lisbon Treaty, foreign direct investment became part of the European Union’s exclusive competence. In practice, this means that only the EU is able to adopt legally binding acts in this area and that member states are no longer able to do so. Against this background, the European Commission is working to improve the transparency of Investor-State Dispute Settlement (ISDS) proceedings.
ISDS provisions provide an internationally accepted mechanism to ensure that investors are in a position to enforce their rights under investment treaties directly against a host state which has failed to observe its obligations towards investors under the treaty and obtain an award of damages to compensate the investors for losses occasioned by that breach. An international dispute resolution mechanism is essential since national dispute resolution procedures in the host state itself may be regarded as inadequate to protect the investor’s international rights under the treaty. Claims brought under ISDS provisions are frequently of public interest. Thus, transparency in these disputes is often considered to be important.
On 1 April 2014, rules on transparency in ISDS cases were adopted under the auspices of the United Nations Commission on International Trade Law (UNCITRAL). The rules provide for broad public access to documents and hearings. However, they apply only to disputes based on investment agreements concluded from 1 April 2014 onwards. The European Commission has supported the creation of a multilateral convention to extend the transparency rules to investment treaties already in force before 1 April 2014. The Commission has now made proposals that would make it possible for the EU and its member states to apply the UNCITRAL transparency rules to the approximately 1400 treaties already in place to which EU member states are parties.
Shepherd and Wedderburn lawyers, Claire Stockford and Jane Wessel, have considerable experience in ISDS matters.