January 11, 2017

Consultation on ISDS successor obscures impacts

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The EU commission has launched a consultation on a multilateral investment court (MIC), an investor-to-state dispute settlement (ISDS) variant. 1 The commission does not expect a multilateral investment court to cause social or environmental impacts. 2 This is remarkable as the current ISDS system causes serious impacts. And even worse, the consultation seems designed to obscure the social and environmental impacts.

In an email to the commission I explained the issues and asked to publish a more meaningful Inception Impact Assessment and consultation.

Update: Commission confirms narrow scope; FFII submission.

Dear Madam, Sir,

I have two questions regarding the consultation on a multilateral investment court (MIC).

The results of the public consultation “Questionnaire on options for a multilateral reform of investment dispute resolution” will feed into the Impact Assessment report that the Commission services are currently preparing. 3 As a consequence, the contributors to the consultation should be able to provide feedback on all aspects of the Inception Impact Assessment. However, an open question on the Inception Impact Assessment (or the multilateral investment court system as a whole) is missing in the consultation.

This is relevant as the Inception Impact Assessment is not comprehensive. The assessment fails to mention (a) existing social and environmental impacts, (b) that additional investment agreements lead to more covered investments and so to greater exposure and greater impacts, (c) lock in, (d) the weaknesses of the “right to regulate” clause of which the commission’s lawyers must be well aware, and (e) systemic issues with specialised and supranational adjudication which create a high risk on expansive interpretations of investors’ rights. 4

Put differently, the baseline scenario – no EU policy change – shows growing impacts. In the light of the need to protect fundamental rights, and in the light of the risks of climate change, a baseline scenario leading to increased social and environmental impacts should set off alarm bells. The commission should have investigated options that would lead to decreased impacts (for instance renegotiation or withdrawal) and rejected options – including baseline and multilateral investment court – with continued or increased impacts. 5

All this is missing in the Inception Impact Assessment. It doesn’t seem the assessment complies with the commission’s guidelines as it is not comprehensive and it’s qualitative analysis is not rigorous and thorough. 6 The commission doesn’t act in a manner consistent with the highest values and principles on which the EU is based. Arguably, this amounts to maladministration. 7

The consultation text even suggests only narrow assessments will be accepted. Submissions to the consultation have to explain the link with the establishment of a multilateral investment court if social or environmental impacts are expected (questions 60 and 62). 8 This suggests submissions pointing out that the baseline scenario – no EU policy change – shows growing impacts will not be accepted – while the commission should have mentioned growing baseline scenario impacts itself in the first place.

This brings me to my questions:

Would the commission be willing, in order to make the consultation more meaningful, to add to the consultation open questions on the Inception Impact Assessment and the multilateral investment court system as a whole?

Would the commission be willing, in order to make the Inception Impact Assessment and consultation more meaningful, to withdraw them, and later publish comprehensive ones?

yours sincerely,

Ante Wessels

Analyst for FFII and Vrijschrift

https://blog.ffii.org/ ; https://www.vrijschrift.org/

(The blog intro added 2 footnotes and changed the footnote numbering.)


1 investor-to-state – check, dispute settlement – check, outside of domestic courts – check.

2 Inception Impact Assessment] page 8, http://ec.europa.eu/smart-regulation/roadmaps/docs/2016_trade_024_court_on_investment_en.pdf ; consultation questions 59 and 61, https://ec.europa.eu/eusurvey/runner/mutlilateralinvestmentcourt

3 Consultation, http://trade.ec.europa.eu/consultations/index.cfm?consul_id=233

4 For details, see FFII, Multilateral investment court would impede measures on climate change, https://blog.ffii.org/multilateral-investment-court-would-impede-measures-on-climate-change/

5 The MIC scenario will not, for instance, eliminate the environmental impacts mentioned by Van Harten, as they are not caused by institutional issues. Van Harten, An ISDS Carve-out to Support Action on Climate Change, page 3, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2663504

6 Guidelines on Impact Assessment, http://ec.europa.eu/smart-regulation/guidelines/ug_chap3_en.htm

7 Compare http://www.ombudsman.europa.eu/nl/activities/speech.faces/en/64453/html.bookmark

8 Consultation questions, https://ec.europa.eu/eusurvey/runner/mutlilateralinvestmentcourt