Today, I’ve presented a major change in our trade and investment policy. I’m proposing to set up a modern and transparent system for resolving disputes between investors and states - an Investment Court System. This new system will replace the old ISDS model in all our ongoing and future trade negotiations, including in the EU-US trade talks.
From the start of my mandate almost a year ago, ISDS has been one of the most controversial issues in my brief. I met and listened to many people and organisations, including NGOs, which voiced a number of concerns about the old, traditional system. It’s clear to me that all these complaints had one common feature - that there is a fundamental and widespread lack of trust by the public in the fairness and impartiality of the old ISDS model. This has significantly affected the public’s acceptance of ISDS and of companies bringing such cases.
We must keep in mind that investment protection is an important part of the EU’s investment policy. EU investors are the most frequent users of the existing system, which individual EU countries have developed over time. This means that we, from the EU side, must take our responsibility to reform and modernise it.
So how do we create trust? We need to introduce the same elements that lead citizens to trust their domestic courts. Concretely, I want to restore trust by setting up an Investment Court System under TTIP - one that is accountable, transparent and subject to democratic principles. It will be judges, not arbitrators, who sit on these cases. They must have qualifications comparable to those found in national domestic courts, or in international courts such as the International Court of Justice or the WTO Appellate Body.
Also - the judges will be publically appointed in advance. And, like in courts, you won’t be able to choose which judges hear your case. Furthermore, we will guarantee there is no conflict of interest. Again, like in domestic and international courts, the judges won’t be able to continue any activities which might interfere with their judicial functions. Finally, I want to introduce an Appeal Tribunal. Just like in domestic legal systems and the World Trade Organization.
The Investment Court System will also enshrine governments’ right to regulate. Our proposal includes a direct instruction to the judges, which the appeal tribunal will ensure is properly respected.
All this will be done in a system where there is even greater transparency than in domestic courts, with all documents online and all hearings open to the public. An overview of the proposal can be found here. The full text of the proposal along with a reader's guide is also available.
Some have argued that the traditional ISDS model is private justice. What I’m setting out here is a public justice system - just like those we’re familiar with in our own countries, and the international courts which Europe has so actively promoted in the past. As a bigger part of this reform process, the Commission is working in parallel to create an international court for investment.
I’m convinced that this system will also benefit investors. These changes will create the trust that is needed by the general public, while encouraging investment.
Today’s proposal builds on many comments and ideas received from a broad range of EU stakeholders. We’ve held extensive public consultations, followed by detailed discussions with Member States, the European Parliament, national parliaments and stakeholders. I’ve taken on board many comments, for example the suggestions contained in a Resolution from the European Parliament this summer.
I believe that this proposal meets those expectations for reform. This isn’t the end of the process in the EU, though. I will now discuss today’s proposal with the EU’s Member States and the European Parliament. Only after we’ve completed that round of discussions will we present a formal EU text proposal to the US.
I’ve also taken the step of immediately publishing the Commission’s proposal in its entirety, so that t everyone can see exactly what we’re proposing. It’s necessary and important to show that the Commission continues to be serious about transparency in TTIP - including on investment policy.
Today’s package sets out a series of far-reaching reforms. Big change is what many people and stakeholders have called for, and I agree with them. It’s high time we took this path - and the EU is committed to leading the way globally.