Proposal for a COUNCIL DECISION on the conclusion, on behalf of the European Union, of the United Nations Convention on transparency in treaty-based investor-State arbitration
Date: 2015-01-29
Institutions: European Commission
Subjects: EU Member State, UN convention, access to information, administrative transparency, bilateral agreement, commercial arbitration, foreign investment, third country













EUR-Lex - 52015PC0020 - EN











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52015PC0020

Proposal for a COUNCIL DECISION on the conclusion, on behalf of the European Union, of the United Nations Convention on transparency in treaty-based investor-State arbitration /* COM/2015/020 final - 2015/0012 (NLE) */









EXPLANATORY MEMORANDUM
1.           CONTEXT OF THE PROPOSAL
Traditionally, investor-state dispute
settlement has been conducted on the basis of commercial arbitration rules,
which do not provide for transparency. Greater transparency in investor-state
dispute settlement is an important objective, as it aims at providing maximum
access of the public to documents and hearings, as well as allowing interested
third parties to make submissions. This is important as Investor-State dispute
settlement may concern disputes raising questions relating to public policies
or impact public finances.
The Commission has since 2010 focussed on
improving transparency for investor-state dispute settlement.[1] This was explicitly
requested by the European Parliament in its resolution on the future European
Investment Policy[2].
At the same time as ensuring that future EU agreements provide for a high
degree of transparency, the Commission has been instrumental in pushing in the
United Nations Commission on International Trade Law (UNCITRAL) for global
transparency rules for investor-state dispute settlement and to develop
mechanisms to apply these improved transparency rules to the 3,000 existing
investment treaties. The present proposal delivers on the policy objectives set
in 2010 and the European Parliament’s request of 2011, demonstrates the
Commission’s determination to reform and improve the investor-state dispute
settlement system as a whole and is tangible proof of the benefits of a common
EU external investment policy – such a result would have been highly unlikely
without such a common EU external investment policy. 
UNCITRAL adopted on 10 July 2013 rules on
transparency for investor-state dispute settlement (“the Transparency Rules”),
which were in turn endorsed by the United Nations General Assembly on 16
December 2013[3].
These provide for all documents to be made public (both decisions of the
tribunal and submissions of the parties), for hearings to be open to the public
and for interested parties (civil society) to make submissions to the tribunal.
Appropriate protections for confidential information are provided, but these do
not go beyond comparable protections in domestic courts. The Union will use
these rules as the basis for the provisions on transparency on investor-state dispute
settlement in all agreements currently under negotiations and has included them
or comparable rules and indeed gone further in the draft Comprehensive Economic
and Trade Agreement (CETA) with Canada and the draft EU-Singapore FTA. 
The rules became effective on 1 April 2014.
They apply automatically to investor-state dispute settlement arising on the
basis of treaties concluded after 1 April 2014 where a reference was made
therein to UNCITRAL Arbitration rules. At the same time, the Transparency Rules
do not apply to treaties concluded prior to that date. Given the very high
number of existing investment agreements concluded prior to 1 April 2014, it is
important to ensure the application of the Transparency Rules to those
agreements. The European Union is a party to one such agreement - the Energy
Charter Treaty - and the Member States of the European Union are parties to
around 1,400 such agreements with third countries. 
As a consequence, together with other
UNCITRAL Members, the Union has pushed for the negotiation of a multilateral
convention which would facilitate the application of the UNCITRAL Transparency Rules
to existing investment treaties. On 10 February 2014, the Council authorised
the Commission to negotiate such a convention under the auspices of UNCITRAL
(The Convention) and the Union, represented by the Commission has actively
participated in the negotiation of the Convention. The negotiations were
concluded on 9 July 2014 and
the Convention adopted by the United Nations General Assembly on 10 December
2014[4]. The Convention will be open for signature on 17 March 2015 in Port Louis, Mauritius and thereafter at the United Nations Headquarters in New York. 
The Convention applies to investment
treaties concluded before 1 April 2014 and establishes a mechanism allowing
countries and regional economic integration organisations to agree between
themselves to apply the UNCITRAL Transparency Rules in disputes covered by
investment treaties to which they are parties. It permits both the Union and the
  Member States to adhere to the Convention and to apply the Transparency Rules
to their existing investment treaties. By signing the Convention, the European
Union could become a party to the Convention in respect of the Energy Charter
Treaty and the Member States could become a party to the Convention in respect
of their existing agreements. The Convention provides for a negative list
approach, i.e. the Transparency Rules will apply unless a signatory lists
particular agreements as not being subject to the Convention by making a
reservation under Article 3.
With respect to the Energy Charter Treaty,
the European Union would become a party to the Convention in order to extend
the scope of application of the Transparency Rules to investor-State disputes
under the Energy Charter Treaty in which the Union is a respondent and the
claimant is of a non-EU State that that has not excluded the application of the
convention to disputes arising under the Energy Charter Treaty.
Having regard to the Treaty of the Functioning
of the European Union (TFEU) and in particular of Article 207 and Articles 63
to 66, in conjunction with Article 3(2), the conclusion of international
agreements in the field of foreign investments is part of the Union's exclusive
competence since the entry into force of the Lisbon Treaty. It is the
Commission's view that the Union's exclusive competence to adopt legally
binding acts in the field of foreign investment covers all matters relating to
foreign investment (foreign direct investment and portfolio investment),
including matters relating to the settlement of investment disputes.
As a result, the maintenance in force of
bilateral investment treaties signed by Member States with third countries
before 1 December 2009 has been authorized pursuant to Article 3 of Regulation
(EU) No 1219/2012 of 12 December 2012[5]
and the signing and conclusion of bilateral investment treaties between Member
States and third countries after 1 December 2009 must be authorized pursuant to
Articles 11 or 12 of Regulation (EU) No 1219/2012. The signing and conclusion
of this Convention also falls into the ambit of the European Union's exclusive
competence and, in accordance with Article 2(1) TFEU, Member States may adopt
legally binding acts within this area only if so empowered to do so by the Union. Therefore, the Union should empower Member States to become parties to the
Convention to allow them to extend the application of the Transparency Rules to
their bilateral investment agreements with non-EU countries concluded prior to
1 April 2014 and which are maintained in force pursuant to Article 3 of
Regulation (EU) No 1219/2012. This empowerment also covers Member States when
they act as respondents pursuant to the Energy Charter Treaty in respect of
cases brought by non-EU investors[6].
The Commission, consistent with the objective of increasing transparency of the
investor-state dispute settlement system considers that Member States should
provide for the application of the Transparency Rules to all of the
aforementioned treaties, i.e. by ratifying the Convention without carving out its
application to any of them.
. Finally it should be noted that the
Commission plans to provide the funding for the website upon which all
documents subject to the Transparency Rules will be provided. 
The Commission herewith submits a proposal
for a Council Decision on the conclusion of the Convention by the European
Union and on the empowerment of Member States to individually adhere to the
Convention. 
2.           RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
The UNCITRAL Convention on transparency in
treaty-based investor-State arbitration allows for the extension of the
application of the UNCITRAL Rules on Transparency. Observers and civil society
have participated in the negotiation of the Convention. They had the
opportunity to make their views known.
3.           LEGAL ELEMENTS
OF THE PROPOSAL
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 207(4), 1st
subparagraph in conjunction with Article 218(6)(a) thereof, the Commission is
submitting a proposal to the Council for a decision on the conclusion, on
behalf of the European Union, of the United Nations Commission on International
Trade Law Convention on transparency in treaty-based investor-State
arbitration.
Having regard to the Treaty on the
Functioning of the European Union and in particular Article 2(1), this proposal
also includes an empowerment of Member States to conclude the United Nations
Commission on International Trade Law Convention on transparency in
treaty-based investor-State arbitration.
4.           BUDGETARY IMPLICATION 
There are no budgetary implications.
2015/0012 (NLE)
Proposal for a
COUNCIL DECISION
on the conclusion, on behalf of the
European Union, of the United Nations Convention on transparency in
treaty-based investor-State arbitration
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European
Union, and in particular Article
207(4), 1st subparagraph, in conjunction with Article
218(6)(a) thereof, 
Having regard to the proposal from the
European Commission,
Having regard to the consent of the European Parliament,
Whereas:
(1)       Following the entry into
force of the Treaty of Lisbon, foreign direct investment is included in the list
of matters falling under the common commercial policy. In accordance with
Article 3(1)(e) of the Treaty on the Functioning of the European Union
(‘TFEU’), the European Union has exclusive competence with respect to the
common commercial policy. Accordingly, only the Union may legislate and adopt
legally binding acts within that area. The Member States are able to do so
themselves only if so empowered by the Union, in accordance with Article 2(1)
TFEU.
(2)       In addition, Chapter 4 of
Title IV of Part Three TFEU lays down common rules on the movement of capital
between Member States and third countries, including in respect of capital
movements involving investments. Those rules can be affected by international
agreements relating to foreign investment concluded by Member States with third
countries.
(3)       In accordance with Council Decision
[XXX] of […], the United Nations Commission on
International Trade Law Convention on transparency in treaty-based
investor-State arbitration was signed on […], subject to its conclusion at a later date.
(4)       It is desirable to apply
transparency rules to investor-State dispute settlement to the greatest extent
possible. As regards the European Union the transparency rules should apply to
the Energy Charter Treaty. It is desirable that the Member States conclude the
Convention, and apply it to existing bilateral investment treaties with third
countries.
(5)       The agreement should be approved
on behalf of the European
Union, Member States should be empowered to conclude the Convention and
apply it to existing bilateral investment treaties with third countries as well
as to disputes under the Energy Charter Treaty with investors of third
countries,
HAS ADOPTED THIS DECISION:
Article 1
The Convention
on transparency in treaty-based investor-State arbitration elaborated under the
auspices of the United Nations Commission on International Trade Law is hereby
approved on behalf of the Union. The text of the Agreement is attached to this
Decision.
Article 2
Member States
are empowered to individually conclude the Convention in relation to their
bilateral investment agreements with third countries authorised in application
of Regulation (EU) No 1219/2012 of 12 December 2012 and in relation to the
possible application of the Energy Charter Treaty in disputes between the
Member States and investors of third countries as provided for in the context
of the Energy Charter Treaty[7].
Article 3
The President
of the Council shall designate the person empowered to proceed, on behalf of
the European Union, to the deposit of the instrument of approval provided for
in Article 7 of the Agreement, in order to express the consent of the European
Union to be bound by the Agreement.
Article 4
This
Decision shall enter into force on
[…].
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               Commission Communication 'Towards a comprehensive
European international investment policy' (COM (2010)343 final); For the
Commission's commitment on transparency, page 10.
[2]               Report on the future European International
investment policy (A7-0070/2011), para. 31.
[3]               Resolution adopted by the UN General Assembly on 16
December 2013, Sixty-eighth session.
[4]               Resolution A/RES/69/116.
[5]               Regulation (EU) No 1219/2012 of the European
Parliament and of the Council of 12 December 2012 establishing transitional
arrangements for bilateral investment agreements between Member States and
third countries (OJ L 351, 20.12.2012, p. 40). 
[6]               See Statement submitted by the European Communities
to the Secretariat of the Energy Charter pursuant to Article 26(3)(b)(ii) of
the Energy Charter Treaty (OJ L 69, 9.3.98, p. 115).
[7]               See Statement submitted by the European Communities
to the Secretariat of the Energy Charter pursuant to Article 26(3)(b)(ii) of
the Energy Charter Treaty (OJ L 69, 9.3.98, p. 115).
ANNEX
Convention
on transparency in treaty-based investor-State arbitration
Preamble 
The Parties to this Convention,
Recognizing
the value of arbitration as a method of settling disputes that may arise in the
context of international relations, and the extensive and wide-ranging use of
arbitration for the settlement of investor-State disputes,
Also recognizing the need for provisions on transparency in the settlement of
treaty-based investor-State disputes to take account of the public interest
involved in such arbitrations,
Believing
that the Rules on Transparency in Treaty-based Investor-State Arbitration
adopted by the United Nations Commission on International Trade Law on 11 July
2013 (“UNCITRAL Rules on Transparency”), effective as of 1 April 2014, would
contribute significantly to the establishment of a harmonized legal framework
for a fair and efficient settlement of international investment disputes, 
Noting the
great number of treaties providing for the protection of investments or
investors already in force, and the practical importance of promoting the
application of the UNCITRAL Rules on Transparency to arbitration under those
already concluded investment treaties, 
Noting also
article 1(2) and (9) of the UNCITRAL Rules on Transparency,
Have agreed
as follows:
Scope of application
Article 1
1.           This Convention applies to
arbitration between an investor and a State or a regional economic integration
organization conducted on the basis of an investment treaty concluded before 1
April 2014 (“investor-State arbitration”). 
2.           The
term “investment treaty” means any bilateral or multilateral treaty, including
any treaty commonly referred to as a free trade agreement, economic integration
agreement, trade and investment framework or cooperation agreement, or
bilateral investment treaty, which contains provisions on the protection of
investments or investors and a right for investors to resort to arbitration
against contracting parties to that investment treaty. 
Application of the UNCITRAL Rules on Transparency
Article 2
Bilateral or multilateral application
1.           The
UNCITRAL Rules on Transparency shall apply to any investor-State arbitration,
whether or not initiated under the UNCITRAL Arbitration Rules, in which the
respondent is a Party that has not made a relevant reservation under article
3(1)(a) or (b), and the claimant is of a State that is a Party that has not
made a relevant reservation under article 3(1)(a). 
Unilateral offer of application
2.           Where
the UNCITRAL Rules on Transparency do not apply pursuant to paragraph 1, the
UNCITRAL Rules on Transparency shall apply to an investor-State arbitration,
whether or not initiated under the UNCITRAL Arbitration Rules, in which the
respondent is a Party that has not made a reservation relevant to that investor-State
arbitration under article 3(1), and the claimant agrees to the application of
the UNCITRAL Rules on Transparency.
Applicable version of the UNCITRAL Rules
on Transparency 
3.           Where
the UNCITRAL Rules on Transparency apply pursuant to paragraph 1 or 2, the most
recent version of those Rules as to which the respondent has not made a
reservation pursuant to article 3(2) shall apply.
Article 1(7) of the UNCITRAL Rules on
Transparency
4.           The
final sentence of article 1(7) of the UNCITRAL Rules on Transparency shall not
apply to investor-State arbitrations under paragraph 1.
Most favored nation provision in an
investment treaty
5.           The
Parties to this Convention agree that a claimant may not invoke a most favored
nation provision to seek to apply, or avoid the application of, the UNCITRAL
Rules on Transparency under this Convention.
Reservations
Article 3
1.           A Party may declare that: 
(a)     It shall not apply this Convention to
investor-State arbitration under a specific investment treaty, identified by
title and name of the contracting parties to that investment treaty; 
(b)     Article 2(1) and (2) shall not apply
to investor-State arbitration conducted using a specific set of arbitration
rules or procedures other than the UNCITRAL Arbitration Rules, and in which it
is a respondent; 
(c)     Article 2(2) shall not apply in
investor-State arbitration in which it is a respondent. 
2.           In the event of a revision
of the UNCITRAL Rules on Transparency, a Party may, within six months of the
adoption of such revision, declare that it shall not apply that revised version
of the Rules. 
3.           Parties may make multiple
reservations in a single instrument. In such an instrument, each declaration
made:
(a)     In respect of a specific investment
treaty under paragraph (1)(a); 
(b)     In respect of a specific set of
arbitration rules or procedures under paragraph (1)(b); 
(c)     Under paragraph (1)(c); or 
(d)     Under paragraph (2); 
shall constitute a separate reservation capable
of separate withdrawal under article 4(6).
4.           No
reservations are permitted except those expressly authorised in this article.
Formulation of reservations
Article 4
1.           Reservations may be made
by a Party at any time, save for a reservation under article 3(2). 
2.           Reservations made at the
time of signature shall be subject to confirmation upon ratification,
acceptance or approval. Such reservations shall take effect simultaneously with
the entry into force of this Convention in respect of the Party concerned. 
3.           Reservations made at the
time of ratification, acceptance or approval of this Convention or accession
thereto shall take effect simultaneously with the entry into force of this
Convention in respect of the Party concerned.
4.           Except for a reservation
made by a Party under article 3(2), which shall take effect immediately upon
deposit, a reservation deposited after the entry into force of the Convention
for that Party shall take effect twelve months after the date of its deposit. 
5.           Reservations and their
confirmations shall be deposited with the depositary.
6.           Any
Party that makes a reservation under this Convention may withdraw it at any
time. Such withdrawals are to be deposited with the depositary, and shall take
effect upon deposit.
Application to investor-State arbitrations
Article 5
This
Convention and any reservation, or withdrawal of a reservation, shall apply
only to investor-State arbitrations that are commenced after the date when the
Convention, reservation, or withdrawal of a reservation, enters into force or
takes effect in respect of each Party concerned. 
Depositary
Article 6
The
Secretary-General of the United Nations is hereby designated as the depositary
of this Convention.
Signature,
ratification, acceptance, approval, accession
Article 7
1.           This Convention is open
for signature in Port Louis, Mauritius, on 17 March 2015, and thereafter at the
United Nations Headquarters in New York by any 
(a) State; or (b) regional economic integration organization that is
constituted by States and is a contracting party to an investment treaty.
2.           This Convention is subject
to ratification, acceptance or approval by the signatories to this Convention. 
3.           This Convention is open
for accession by all States or regional economic integration organizations
referred to in paragraph 1 which are not signatories as from the date it is
open for signature. 
4.           Instruments
of ratification, acceptance, approval or accession are to be deposited with the
depositary. 
Participation by regional economic integration organizations
Article 8
1.           When depositing an
instrument of ratification, acceptance, approval or accession, a regional
economic integration organization shall inform the depositary of a specific
investment treaty to which it is a contracting party, identified by title and
name of the contracting parties to that investment treaty. 
2.           When
the number of Parties is relevant in this Convention, a regional economic
integration organization does not count as a Party in addition to its member
States which are Parties. 
Entry into force
Article 9
1.           This Convention shall
enter into force six months after the date of deposit of the third instrument
of ratification, acceptance, approval or accession.
2.           When
a State or a regional economic integration organization ratifies, accepts,
approves or accedes to this Convention after the deposit of the third
instrument of ratification, acceptance, approval or accession, this Convention
enters into force in respect of that State or regional economic integration
organization six months after the date of the deposit of its instrument of ratification,
acceptance, approval or accession.
Amendment
Article 10
1.           Any Party may propose an
amendment to the present Convention by submitting it to the Secretary-General
of the United Nations. The Secretary-General shall thereupon communicate the
proposed amendment to the Parties to this Convention with a request that they
indicate whether they favour a conference of Parties for the purpose of
considering and voting upon the proposal. In the event that within four months
from the date of such communication at least one third of the Parties favour
such a conference, the Secretary-General shall convene the conference under the
auspices of the United Nations. 
2.           The conference of Parties
shall make every effort to achieve consensus on each amendment. If all efforts
at consensus are exhausted and no consensus is reached, the amendment shall, as
a last resort, require for its adoption a two-thirds majority vote of the
Parties present and voting at the conference. 
3.           An adopted amendment shall
be submitted by the Secretary-General of the United Nations to all the Parties
for ratification, acceptance or approval. 
4.           An adopted amendment
enters into force six months after the date of deposit of the third instrument
of ratification, acceptance or approval. When an amendment enters into force,
it shall be binding on those Parties which have expressed consent to be bound
by it. 
5.           When a State or a regional
economic integration organization ratifies, accepts or approves an amendment
that has already entered into force, the amendment enters into force in respect
of that State or that regional economic integration organization six months
after the date of the deposit of its instrument of ratification, acceptance or
approval. 
6.           Any
State or regional economic integration organization which becomes a Party to
the Convention after the entry into force of the amendment shall be considered
as a Party to the Convention as amended.
Denunciation of this Convention
Article 11
1.           A Party may denounce this
Convention at any time by means of a formal notification addressed to the
depositary. The denunciation shall take effect 
twelve months after the notification is received by the depositary. 
2.           This Convention shall
continue to apply to investor-State arbitrations commenced before the
denunciation takes effect.
DONE in a single original, of which the
Arabic, Chinese, English, French, Russian and Spanish texts are equally
authentic. 
IN WITNESS WHEREOF, the undersigned
plenipotentiaries, being duly authorised by their respective Governments, have
signed the present Convention.