Regulating for Globalization

EU Investment Court System

The Investment Court System (“ICS”) included in the European Union (“EU”)’s recent investment and trade agreements with Canada, Singapore, Vietnam and Mexico (together, the “EU Agreements”)1 provides for the creation of a permanent first instance tribunal and an appellate tribunal drawn from a pre-selected roster of tribunal members. In this regard, the ICS represents a significant departure from the long-standing investor-State dispute settlement (“ISDS”) model of party-appointed arbitrators.

While the ICS is expected to address a number criticisms of ISDS such as the (real or perceived) lack of consistency of arbitral awards and independence of arbitrators, it also raises new challenges that must be resolved for its effective operation. One such challenge is around uncertainty regarding the enforcement of ICS awards under the ICSID Convention and/or the New York Convention.2 Whilst the enforcement provisions under the EU Agreements refer to both the ICSID Convention3 and the New York Convention,4 serious questions arise as to whether they will fulfill the necessary requirements.

Enforcement under the ICSID Convention

Most scholars and practitioners agree that there is no mechanism for enforcement of ICS awards under the ICSID Convention.5 For enforcement under the ICSID Convention, the award must have resulted from arbitration proceedings conducted in accordance with the ICSID Convention and ICSID Rules. The two-tier structure and appeal mechanism under the ICS are clearly not compatible with Article 53(1) of the ICSID Convention, which expressly forbids any appeal.6 To address this inconsistency, parties to the EU Agreements could seek to amend the ICSID Convention (either in its entirety or by way of a limited inter se amendment) to permit an appeal mechanism for claims brought pursuant to the EU Agreements.7