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Commissioner Malmström proposes to replace ISDS by Investment Court

The European Commission has published a draft for the creation of an Investment Court System to replace the traditional dispute settlement model used in other trade agreements. It will first be tried in the reality of the negotiations on TTIP.

Commissioner Malmström said: "The old, traditional form of dispute resolution suffers from a fundamental lack of trust. However, EU investors are the most frequent users of the existing model, which individual EU countries have developed over time. This means that Europe must take the responsibility to reform and modernise it. We must take the global lead on the path to reform." She added: "We want to establish a new system built around the elements that make citizens trust domestic or international courts.”

The proposal for the new court system is built around the following core features:

  • A public Investment Court System composed of a first instance Tribunal and an Appeal Tribunal would be set up
  • Judgements would be made by publicly appointed judges with high qualifications, comparable to those required for the members of permanent international courts such as the International Court of Justice and the WTO Appellate Body;
  • The new Appeal Tribunal would be operating on similar principles to the WTO Appellate Body;
  • The ability of investors to take a case before the Tribunal would be precisely defined and limited to cases such as targeted discrimination on the base of gender, race or religion, or nationality, expropriation without compensation, or denial of justice;
  • Governments’ right to regulate would be enshrined and guaranteed in the provisions of the trade and investment agreements.

The Commission hopes to achieve transparent proceedings while maintaining a clear distinction between international law and domestic law. It hopes to avoid frivolous litigation, forum shopping and multiple proceedings.

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