“Legitimacy, transparency and a consistent jurisprudence are the benchmarks for an arbitration system”

The TTIP Agreement is highly controversial in the public opinion in Europe and especially in Germany. First and foremost the opponents criticize the intended arbitration process for investor-state dispute settlement (ISDS). By the supporters it is considered as a general practice.

To discuss possibilities for investor-state dispute settlement from the legal perspective, the Max Planck Institute Luxembourg for Procedural Law held a conference on TTIP, on 3 and 4 December 2015. The institute’s directors, Burkhard Hess and Hélène Ruiz Fabri, talk about the results of their conference.

Could the differences between TTIP opponents and supporters also be observed at the Round Table Discussion that took place at the beginning of the conference?

Hess: The first day of the conference was devoted to the political debate of ISDS and of the TTIP. On the panel, Viviane Reding, former EU-Commissioner of justice and Blanche Weber, who initiated a petition against TTIP with more than 3 million signatures, discussed pros and cons of the TTIP. Other participants were representatives of the Luxemburgish Government, of the European Commission and of the Luxemburgish Chamber of Commerce. It became clear that the role of the EU-Parliament in the negotiations has improved considerably, and that the EU-Parliament closely controls the process.

Ruiz Fabri: On the other hand, there is a need for improving transparency. One additional reason why TTIP has raised so many concerns in the civil society is the technical complexity of the future agreement and its impacts on future security standards for services and goods in the US and in Europe.

Do such controversies concerning TTIP exist among legal scholars, too?

Ruiz Fabri: Yes they do. However, as far as law experts are involved, ISDS has become the major issue. Accordingly, the discussions at the conference were controversial, but also very constructive in the sense that the arbitration community has become aware of the political impacts of the current debate. Although a large majority of scholars is favoring ISDS as a major improvement of dispute settlement in international law, there is a concern that disputes affecting fundamental political choices of states as the renunciation of atomic energy might be decided by a small group of arbitrators according to very general standards. However, the EU-Commission has reacted to this criticism by clarifying and narrowing down the legal concepts to be applied in ISDS.

From the legal point of view, which are the most pertinent problems of ISDS?

Hess: The conference addressed three basic requirements of dispute resolution in this field: legitimacy, transparency and consistency. Although these terms are mainly borrowed from political science, they describe the benchmarks the system must meet:

To achieve legitimacy arbitrators or judges must be independent and impartial and they have to be appointed in a predetermined process by state parties. The influence of the investors on the arbitration process must be limited.

For more transparency the procedures themselves must be open to the public – usually they are live streamed and the civil society has access to the files via web platforms. Third parties like NGOs should be permitted to submit amicus curia briefs on public concerns.

Ruiz Fabri: And last but not least a major deficiency of the present system is the lack of a consistent jurisprudence. This failure is mainly due to the structure of ISDS which is based on bilateral investment agreements which are not always consistent. However, the idea of creating a permanent court for investment disputes and a second instance which shall review the legal reasoning of the first instance might entail a more consistent case-law.

Which new questions does a permanent court raise?

Hess: At present, it is an open issue whether the American government will accept an international permanent court. Since the WWI, they have been reluctant to accept international dispute settlement by permanent bodies with the exception of the dispute settlement in the WTO. From the perspective of EU-law, the relationship between the Court of Justice of the European Union and a future dispute resolution body deserves further inquiry.

Could the results of the conference play a role in policy advice?

Ruiz Fabri: This conference was a good example of an ongoing dialogue between political stakeholders and experts in this field. It should be mentioned that the chief negotiator of the EU-Commission for TTIP discussed the proposals of the Commission openly with the experts of dispute resolution. This kind of conferences is the best framework for the current political debate where political, technical and legal issues are discussed in an open and constructive manner.

Interview by Mechthild Zimmermann.