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Protecting foreign investments through reliable and neutral dispute resolution mechanisms

PACE Committee on Legal Affairs today said that that effective protection of foreign investments “requires reliable, efficient and neutral dispute resolution mechanisms”. The committee noted that European States have concluded thousands of international investment agreements or bilateral investment treaties with investor-state dispute settlement (ISDS) clauses with third countries and among themselves.

Such clauses allow foreign investors to sue host States before private arbitration panels set up by the parties whenever a dispute on the application of the of international investment agreements arises. ISDS has “serious implications for human rights, the rule of law, democracy and national sovereignty”.

According to the Committee, the Investment Court System (ICS) proposed by the European Commission is intended to correct the flaws of traditional ISDS mechanisms without entrusting the protection of foreign investors exclusively to the host States’ courts. It would consist of a permanent first instance and an appeals court staffed by judges appointed by participating States. The proposed ICS would follow transparent procedures, allow third-party interventions by representatives of civil society as a matter of right and be subjected to binding interpretations of the underlying agreement laid down by the States parties.

Adopting a draft resolution based on the report prepared by Pieter Omtzigt (Netherlands, EPP/CD), the parliamentarians considered that replacing ISDS clauses by a permanent, multilateral ICS would be “a reasonable compromise” between the status quo consisting of multiple ISDS mechanisms and the full re-nationalisation of investment protection. The Committee called therefore on the EU “to actively pursue”, in their on-going and future negotiations of IIA’s, including TTIP, the establishment of an ICS to gradually replace traditional ISDS mechanisms. The Council of Europe member States should in parallel “take an active part in the creation of an ICS” and ensure that the human rights and rule of law considerations are fully taken into account.

The Assembly should debate the draft resolution during its next plenary session in Strasbourg (23-27 January 2017) .