New Investment Tribunal
The Proposal involves the creation of a new Investment Tribunal, with 15 judges (five EU nationals, five US nationals and five nationals of third countries) and an Appeal Tribunal, with 6 publicly appointed members (two EU nationals, two US nationals and two nationals of third countries).
The Investment Tribunal will hear cases in divisions consisting of three judges, a EU national, a US national and a national of a third country who would also be the Chairman. Disputes under TTIP would be allocated randomly in order to prevent dispute parties from having any influence on particular cases.
Right to regulate
The Proposal clarifies that investment protection provisions do not prevent governments from changing the legal framework (known as the non-stabilisation clause) even if this has a negative impact on investment expectations. It also confirms that the right to regulate for public policies is fully preserved and that TTIP will not prevent the EU from enforcing its law on state aids.
Standards of investment protection
The Proposal provides “standards of investment protection”. These are basic guarantees that governments will respect and which are granted to foreign investors when making a decision to invest. In order to prevent abuse, the standards of protection have been narrowly defined as follows:
- no expropriation without compensation;
- the possibility to transfer (and eventually repatriate) funds relating to an investment;
- a general guarantee of fair and equitable treatment and physical security (e.g. denial of justice, targeted discrimination on manifestly wrongful grounds such as gender, race or religious beliefs or on the grounds of harassment);
- a commitment that governments will respect their own written (and legally binding) contractual obligations towards an investor; and
- a commitment to compensate for losses in certain circumstances linked to war or armed conflict. Another guarantee – against nationality-based discrimination – was already included in the European Union’s formal proposal to the United States on Trade in Services, Investment and E-Commerce.
Building on existing EU reforms
The Commission has stressed that many elements in the proposal are already included in the free trade agreements with Canada and Singapore, however, the TTIP text goes further by including a prohibition for judges to act as legal counsel in investment dispute cases and including a so-called “third party funding” disclosure clause (i.e., the disputing parties are required to disclose who is funding their claim).
Investment dispute resolution and domestic remedies
Investors would be able to either seek to obtain redress in domestic courts or to submit a claim to the Investment Tribunal. Before submitting a claim to the Investment Tribunal, they would first have to withdraw from any domestic ongoing proceedings they had started. However, investors who have obtained a final ruling from a national court on their claim would be also able to seek to obtain redress on the same matter before the Investment Tribunal. This means that the Investment Tribunal can also be used by investors as means of appeal for unsuccessful claims before domestic courts.
According to the Proposal, the Investment Tribunal will hear exclusively on the provisions of TTIP. Where the Tribunal would be required to ascertain the meaning of a provision of domestic law of one of the Parties it would have to follow the interpretation made by that Party’s domestic courts. The meaning given to domestic law by such Tribunal would not be binding on domestic courts.