Documents considered by the Committee on 19 December 2017 Contents

12Multilateral Court for the settlement of investment disputes

Committee’s assessment	Legally and politically important
Committee’s decision	Cleared from scrutiny; further information requested
Document details	Recommendation for a Council Decision authorising the opening of negotiations for a Convention establishing a multilateral investment court for the settlement of investment disputes
Legal base	Articles 207(4) and 218(3) and (4) TFEU
Department	International Trade
Document Number	(39047), 12131/17 + ADDs 1–3, COM(17) 493

Summary and Committee’s conclusions

12.1The Commission’s proposal for a new Multilateral Investment Court (MIC) is of clear interest to the UK in the context of its future trade policy. The Commission seeks the adoption by the Council of a negotiating mandate to take the proposal to the United Nations Commission of Trade Law (UNCITRAL)—the relevant multilateral body that the Commission hopes will agree to facilitate eventual negotiations.

12.2We asked the Government whether it agreed with the Commission’s assessment that neither the traditional investor-state dispute settlement system (ISDS) nor the revised investment court system (ICS) were viable long-term models. We also asked whether the Government believes that the proposal is capable of delivering fair dispute outcomes in a transparent manner, to ethical standards, and in a cost-effective manner.

12.3We further enquired whether the Government agreed with the Commission’s costings of the proposal, notably that annual costs would come to around €2.7 million (£2.48 million) for each Member State and the Commission. Related to this, we asked the Government’s views on the Commission’s suggestion that the court’s running costs should be apportioned based on the level of development of third country members.

12.4Finally, we wanted to know whether the Government would consider joining eventual international negotiations on the establishment of the multilateral investment court.

12.5The Minister of State for Trade Policy (Greg Hands MP) has responded to our questions and indicates that the UK intends, in due course, to “actively participate” in the negotiations as a member of UNCITRAL.

12.6We agree with the Minister’s assessment that it is not possible, at this early stage, to assess the likely establishment and running costs of the court with a high degree of accuracy, since the final model adopted will depend on agreement on a combination of possible options. We are reassured, however, that the Government appears to agree with the empirical basis of the Commission’s impact assessment.

12.7We note that the Minister has not responded directly to our request for the Government’s view on the Commission’s assertions that the ISDS and ICS systems are fundamentally deficient. However, the Minister has reiterated the Government’s expectations of the principles that any new system must adhere to, and states that since the multilateral negotiations have not yet begun (and there is as yet no timetable for their commencement), there is likely to be significant development of the detail in the Commission’s proposal.

12.8We are content to release this proposal from scrutiny, but request the Minister to keep us updated on its progress, both through the Council and eventually in negotiations with third countries. In particular, we wish to be briefed on the options chosen for the format, remit and funding of the court, and the Government’s views on their merits.

Full details of the documents

Recommendation for a Council Decision authorising the opening of negotiations for a Convention establishing a multilateral investment court for the settlement of investment disputes: (39047), 12131/17 + ADDs 1–3, COM(17) 493.

Background

12.9Full details of the Commission’s proposal can be found in the Committee’s previous report, listed below.

The Minister’s letter of 29 November 2017

12.10The Minister of State for Trade Policy and Minister for London (Greg Hands MP) writes with responses to the Committee’s questions.

12.11The Minister observes that negotiations on the MIC are likely to take several years, during which time there will likely be significant development of the detail in the Commission’s proposal. He states:

“We would not want to prejudge those negotiations at this stage. Rather, the Government shall want to see how those negotiations progress so as to allow an understanding of how any resulting MIC might improve the existing ISDS framework.”

12.12On the question of the Commission’s calculation of the possible running costs of the court, the Minister agrees with the Commission’s impact assessment that the precise cost of the court is hard to predict with a high level of accuracy because of the different possible variables, which would all be the focus of future negotiations. He notes also that the Commission’s assumptions of the salary costs for adjudicators and supporting staff are based on a comparison with existing international courts and tribunals.

12.13Regarding the distribution of costs among the members of the Court, the Minister notes that the Commission’s cost estimates are based on an indicative number of contracting parties, and that:

“As negotiations progress it is likely that a range of indicators will be considered by UNCITRAL as to how costs could be apportioned and I will provide an update to the Committee on this in due course.”

12.14On the UK’s intentions regarding possible future membership of the court, the Minister states:

“The Government will actively participate in those negotiations as a member of UNCITRAL. We will assess the detail of this proposal as it develops, and will consider the compatibility of any outcome with the UK’s interests.”

Procedural issues

12.15The Minister also provides a clarification from the Council Legal Service on the voting procedure for this file. In addition to the previously notified Council Decision to be adopted by qualified majority voting, a decision of the Representatives of the Governments of the Member States meeting within the Council will be required. This is necessary to authorise the Commission to negotiate on behalf of Member States in an area of shared competence (investor-state dispute settlement). The legal basis for the proposal has consequently been updated to include Article 207(4) TFEU in addition to Article 218(3) and (4) TFEU.