As reported in our previous blog posts (please click here and here), the proposed inclusion of investor-state-dispute settlement (ISDS) provisions in the Transatlantic Trade & Investment Partnership (the TTIP), has caused considerable debate amongst many stakeholders. Against this backdrop of heated public discussion, the European Parliament (the EP) has drawn up recommendations on the TTIP, including on ISDS. Whilst it is the European Commission (the Commission) which is negotiating the TTIP with the US on behalf of the EU, there can be no final agreement without the EP’s approval. The EP’s recommendations are a crucial indication of what it would want to see in the final agreement and will undoubtedly shape the Commission’s negotiating position. 

After a postponement of the vote on the recommendations, they were finally approved by a vote on 8 July 2015. The amended recommendation in relation to ISDS, an issue of great controversy which divides even members of the two majority parties in the EP, proposes to: 

ensure that foreign investors are treated in a non-discriminatory fashion, while benefiting from no greater rights than domestic investors, and replace the ISDS system with a new system in which investor-state disputes are dealt with “by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected, and where private interests cannot undermine public policy objectives.”

The EP’s recommendation builds on the proposals expressed in the Commission’s Concept Paper published earlier this year and discussed in our blog post here, in which the Commission put forward reforms to investment arbitration and also outlined future reform of the system to establish an international Investment Court. In a statement after the EP’s vote, EU Trade Commissioner Malmström commented: “What today’s vote also signals is that the old system of investor-state dispute settlement should not and cannot be reproduced in TTIP – Parliament’s call today for a “new system” must be heard, and it will be. I presented to Parliament far-reaching reform ideas in May. I will now press ahead to flesh these out, and transform them into legal proposals, so that these further reforms can be incorporated into Europe’s proposals for TTIP.”

However, it remains to be seen whether such radical changes to the ISDS system will be accepted by the US negotiators. The USTR’s negotiating position has not been publicly stated in the same way as their EU counterparts, but the general tenor of the USTR’s public communications has been positive in relation to the resolution of investor-state disputes by way of arbitration (for example, see here). Further, the revision of the US Model BIT in 2012, which came after a three year consultation process involving a spectrum of stakeholders, led to increased transparency in the process but nonetheless retained the general system of ISDS by way of arbitral tribunal.

The 10th round of the EU-US trade negotiations on the TTIP is scheduled for 13-17 July 2015 in Brussels.