COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Multilateral reform of investment dispute resolution Accompanying the document Recommendation for a Council Decision authorising the opening of negotiations for a Convention establishing a multilateral court for the settlement of investment disputes
Date: 2017-09-13
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: common commercial policy, direct investment, foreign investment, international convention, international court, international investment, international negotiations, multilateral relations, settlement of disputes, trade dispute

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 13.9.2017  SWD(2017) 302 final   COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Multilateral reform of investment dispute resolution Accompanying the document Recommendation for a Council Decision authorising the opening of negotiations for a Convention establishing a multilateral court for the settlement of investment disputes  {COM(2017) 493  final} {SWD(2017) 303 final}  
 
 
TABLE OF CONTENTS 

GLOSSARY ........................................................................................................................ 3 

LIST OF ABBREVIATIONS ............................................................................................. 5 

INTRODUCTION ............................................................................................................... 6 

1.  WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? ................................. 7 

1.1  What is the issue that may require an  action, what is the size of the 

problem .............................................................................................................. 7 
1.2  What are the drivers of the problem? .............................................................. 17 
1.3  Problem tree ..................................................................................................... 19 
1.4  Who is affected by the problem? ..................................................................... 19 
1.5  How would the problem evolve, all things being equal? ................................ 21 
1.6  Has any fitness check/retrospective evaluation been carried out of the 

existing policy framework? ............................................................................. 22 

2.  WHY SHOULD THE EU ACT? .............................................................................. 23 

3.  WHAT SHOULD BE ACHIEVED? ......................................................................... 24 

3.1  General objectives ........................................................................................... 24 
3.2  Specific objectives ........................................................................................... 26 

4.  WHAT  ARE  THE  VARIOUS  OPTIONS  TO  ACHIEVE  THE 

OBJECTIVES? .......................................................................................................... 26 

5.  WHAT ARE THE IMPACTS OF THE DIFFERENT POLICY OPTIONS 

AND WHO WILL BE AFFECTED? ........................................................................ 33 

5.1 
5.2 

Impacts of policy option 1: Baseline scenario ................................................. 33 
Impacts of policy option 5 ............................................................................... 39 

6.  HOW DO THE OPTIONS COMPARE? .................................................................. 59 

6.1  Positive and negative effects of the policy options ......................................... 59 
6.2  Summary table of the effects of the different policy options .......................... 60 
Identification of a preferred policy option ....................................................... 63 
6.3 

7.  HOW  WOULD  ACTUAL 

IMPACTS  BE  MONITORED  AND 

EVALUATED? ......................................................................................................... 64 

7.1  Operational objectives ..................................................................................... 64 
7.2  Future monitoring and evaluation .................................................................... 64 

ANNEXES ........................................................................................................................ 67 

ANNEX 1 .......................................................................................................................... 68 

ANNEX 2 .......................................................................................................................... 70 

ANNEX 3 .......................................................................................................................... 82 

ANNEX 4 .......................................................................................................................... 85 

2 

 
 
 
 
 
GLOSSARY  

(In alphabetical order) 

Ad hoc tribunal: A tribunal formed with a purpose of resolving a specific case. 

Appeal: Tribunal reviewing decisions of the court of the first instance. 

Code  of  Conduct:  Set  of  rules  governing  the  behaviour  and  ethical  requirements  of 
adjudicators. 

Developing  countries:  Countries  that  are  less  developed  than  developed  countries  in 
the context of social and economic indicators. 

Fair and equitable treatment (FET): The principle that requires that an investment is 
treated in a just, unbiased and equitable manner, which is in accordance with the rules.  

Foreign direct investment (FDI): An investment, which is made by the investor from 
one country to another country, by which the investor obtains managing control over the 
investment. 

Host state: A country in which a foreign investment is made.  

Investment Court System (ICS): The system for the resolution of investment disputes 
included  in  EU  trade  and  investment  agreements  from  2015  on,  which  includes  the 
Tribunal of First instance and Appeal Tribunal with permanent tribunal members to be 
appointed by the EU and its respective FTA or investment treaty partner. 

Investor-State  Dispute  Settlement  (ISDS):  Mechanism  to  resolve  disputes  between 
the foreign investors and host countries.  

"Loser  pays"  principle:  The  principle  that  provides  the  unsuccessful  party  to  the 
dispute to cover all costs of the procedure.  

Least-developed  countries:  Countries  that  are  least  developed  with  respect  to 
developed and developing countries in the context of social and economic indicators. 

Most-favoured  nation  treatment  (MFN)  principle:  The  principle  included  in 
international agreements that requires not discriminating between countries. It requires 
that certain favourable treatment be granted to all the parties to an agreement.  

National treatment principle: The principle included in international agreements that 
requires  not  discriminating  between  goods,  services  or  investors  of  domestic  and 
foreign  goods  and  services.  It  requires  granting  foreign  goods  and  services  with  the 
same treatment as domestic ones. 

Protection  against  uncompensated  expropriation:  The  principle  that  requires  a  just 
compensation in return for the expropriation of an investment.  

Principle of rule of law: The principle that makes sure that all public powers act within 
the  constraints  set  out  by  law,  in  accordance  with  the  values  of  democracy  and 
fundamental rights, and under the control of independent and impartial courts. 

Right  to  fair  trial:  The  right  to  an  independent  and  impartial  tribunal  established  in 
accordance with the law. 

3 

 
 
Right to an effective remedy: The right to an effective remedy before an independent 
tribunal that ensures fair, public hearing within a reasonable period of time when rights 
are alleged to be violated.  

Small  and  Medium-sized  Enterprises  (SMEs):  According  to  EU  legislation, 
enterprises which, among other criteria, employ fewer than 250 persons and which have 
an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total 
not exceeding EUR 43 million.  

Tribunal of First instance: A tribunal that hears the first arguments and considers all 
the evidence to be contrasted to an appeal mechanism. 

4 

 
 
 
 
 
 
LIST OF ABBREVIATIONS 

(In alphabetical order) 

AB (or WTO AB): Appellate Body of the World Trade Organisation 
ACWL: Advisory Centre for WTO Law 

BIT: Bilateral Investment Treaty 

CETA: Comprehensive Economic and Trade Agreement 
CJEU: Court of Justice of the European Union 

ECB: European Central Bank 
ECT: Energy Charter Treaty 
ECHR: European Convention of Human Rights 
ECtHR: European Court of Human Rights 

FDI: Foreign Direct Investment 
FTA: Free Trade Agreement 

GDP: Gross Domestic Product 

ICC: International Criminal Court  
ICJ: International Court of Justice 
ICS: Investment Court System 
ICSID: International Convention for the Settlement of Investment Disputes 
IMF: International Monetary Fund 
ISDS: Investor-State Dispute Settlement 
ITLOS: International Tribunal for the Law of the Sea  

NGO: Non-Governmental Organisation 

OECD: Organisation for Economic Co-operation and Development 

PCA: Permanent Court of Arbitration 

SME: Small and Medium-sized Enterprise 

TEU: Treaty of the European Union 
TFEU: Treaty on the Functioning of the European Union 
TTIP: Transatlantic Trade and Investment Partnership 

UN: United Nations  
UNCITRAL: United Nations Commission on International Trade Law 
UNCTAD: United Nations Conference on Trade and Development 

WTO: World Trade Organisation 

5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTRODUCTION 

In  recent  years,  the  inclusion  of  investor-state  dispute  settlement  (ISDS)  in  trade  and 
investment agreements has become subject to increased public scrutiny and questioning. 
This has been the case in the EU with regards to EU agreements with partner countries 
but also in other parts of the world. In the EU, concerns around ISDS have been voiced 
particularly  in  the  context  of  the  negotiations  of  the  Comprehensive  Economic  and 
Trade  Agreement  (CETA)  with  Canada  and  the  Transatlantic  Trade  and  Investment 
Partnership  (TTIP)  with  the  United  States,  as  became  clear  in  the  2014  public 
consultation organised by the Commission on investment in TTIP. 

In  May  2015, in  light  of the public consultation, the Commission presented a concept 
paper "Investment in  TTIP and beyond  – the path for reform  - Enhancing the right to 
regulate  and  moving  from  current  ad  hoc  arbitration  towards  an  Investment  Court". 
The  paper  set  out  a  two-step  approach  to  reforming  the  current  ad  hoc  ISDS  system. 
The  first  step  was  the  inclusion  of  an  institutionalised  court  system  for  resolving 
investment  disputes  to  apply  in  each  future  EU  level  trade  and  investment  agreement 
(i.e. investment court system). The second step was that the EU should in parallel work 
towards  the  establishment  of  an  international  investment  Court  and  appellate 
mechanism with tenured adjudicators. This Court would aim to replace all the bilateral 
Investment Court Systems (ICSs) included in the EU's trade and investment agreements. 
It  would  also  provide  the  EU,  EU  Member  States  and  partner  countries  with  the 
possibility  to  replace  the  ISDS  provisions  featuring  in  their  existing  investment 
agreements with access to the multilateral investment Court.  

Since  2016  the  Commission  has  actively  engaged  with  a  large  number  of  partner 
countries  both  at  technical  and  political  level  to  further  the  reform  of  the  ISDS  system 
and to build consensus for the initiative of a permanent multilateral investment Court. 

In  August  2016,  the  Commission  launched  an  Impact  Assessment  process  to  examine 
the possible  options  and impacts of  a reform of  the ISDS system at  multilateral level, 
including through the establishment of a permanent multilateral investment Court. The 
Impact  Assessment  is  limited  to  examining  options  for  reforming  at  multilateral  level 
the  dispute  settlement  system  and  does  not  examine  the  substantive  investment 
protection standards, which are not intended to be addressed by this reform.   

6 

 
 
 
 
1.  WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? 

1.1  What  is  the  issue  that  may  require  an  action,  what  is  the  size  of  the 

problem 

Since  the  1950s,  disputes  between  foreign  investors  and  the  host  States  of  their 
investments are solved through ISDS. The ability to bring such a dispute is created by 
investment  agreements.  These  are  either  standalone  agreements  (Bilateral  Investment 
Treaties – BITs) or investment chapters in Free Trade Agreements (FTAs). According 
to  the  United  Nations  Conference  on  Trade  and  Development  (UNCTAD)  there  are 
3,328  such  agreements  in  existence  internationally.1  The  disputes  concern  claims  that 
the investor's investment in a country has been treated inconsistently with certain core 
protection standards included in those agreements, i.e. guaranteeing equal treatment of 
different  foreign  investors  (most-favoured  nation),  guaranteeing  equal  treatment  as 
domestic  investors  (national  treatment),  protection  against  unlawful  expropriation  and 
ensuring fair and equitable treatment of investors and investments.  

The  core  reason  for  ISDS  proceedings  is  that  it  permits  the  standards  of  investment 
protection contained  in  international  investment  treaties  to  be  enforced  directly  by  the 
investor.  It  does  not  require  an  investor  to  persuade  its  government  to  raise  the  case 
through  diplomatic  or  other  channels  at  the  inter-state  level  and  avoids  that  a  case  is 
politicised through the intervention of the investor's home state. 

Under the dispute settlement system included in these agreements, investment disputes 
are  adjudicated  by  an  ad  hoc  tribunal  composed  according  to  the  rules  also  used  for 
commercial  arbitration,  i.e.  in  general  the  disputing  parties  (investor  and  challenged 
state)  appoint  an  arbitrator  each  and  they  either  agree  on  a  third  arbitrator  to  serve  as 
president  of  the  tribunal  or  he  or  she  is  appointed  by  an  appointing  authority.  These 
arbitral  tribunals  are  disbanded  after  the  award  is  issued  and  future  tribunals  are  not 
legally bound by decisions of previous ones.  

Arbitrators  are  remunerated  by  the  disputing  parties  on  the  basis  of  a  fee  per  day 
worked. The arbitration rules, i.e. the procedural rules to adjudicate investment disputes, 
are incorporated by reference into the investment agreements. The most frequently used 
arbitration  rules  are  the  Arbitration  Rules  under  the  International  Convention  for  the 
Settlement of Investment Disputes (ICSID Convention)2 or the Arbitration Rules of the 
United Nations Commission on International Trade Law (UNCITRAL), 3 although other 
rules may also apply.  

1 UNCTAD International Investment Agreements Navigator. Data accurate on 13 April 2017. 

2 Available at: 

https://icsid.worldbank.org/en/Documents/icsiddocs/ICSID%20Convention%20English.pdf.  

3  Available  at:  http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-

E.pdf.  

7 

 
 
                                                 
Except where arbitration is conducted pursuant to more recent treaties, proceedings are 
confidential  unless  the  disputing  parties  agree  to  make  information  on  the  dispute 
publicly available.  

Awards  issued  by  ISDS  tribunals  are  final  and  cannot  be  appealed  on  the  grounds  of 
errors  of  law  or  misinterpretation  of  the  facts.  They  can  only,  at  the  request  of  either 
disputing  party,  be  cancelled  (technically,  "annulled"  or  "set-aside")  in  full  or  in  part, 
under  very  limited  procedural  grounds.  The  enforcement  of  ISDS  awards  is  governed 
either by the ICSID Convention or the Convention on the Recognition and Enforcement 
of  Foreign  Arbitral  Awards  (New  York  Convention)4  and  relevant  domestic 
implementing legislation.  

According  to  UNCTAD,  as  of  1  January  2017,  there  have  been  a  total  of  767  known 
ISDS  cases  based  on  international  investment  treaties.5  259  of  them  are  currently 
pending, whereas 495 have been concluded.  

Figure 1: Known ISDS proceedings from international investment agreements. Source: UNCTAD 
(2017).6 

UNCTAD figures show that more than one third of ISDS proceedings were concluded 
in  favour of the state (36.4%), while slightly  more than  one  fourth found in  favour of 
the investor (26.7%). Almost another fourth (24.4%) were settled between the parties. 

4  Available  at:  http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-

E.pdf.  

5 There is no legal obligation in these treaties to disclose the initiation of proceedings. Hence the precise 
number of cases cannot be stated with full certainty. The "known" cases are those for which there is 
at least some information in the public domain permitting them to be counted.  

6  See http://investmentpolicyhub.unctad.org/ISDS.  

8 

 
 
 
                                                 
Figure 2: Concluded ISDS proceedings. Source: UNCTAD (2017).7 

ICSID data from April 2017 indicate that 58% of the total of cases administered under 
the  ICSID  Convention  involved  investors  from  an  EU  Member  State,8  while  17% 
involved  an  EU  Member  State.  Spain,  Hungary  and  Romania  have  been  most  often 
involved as respondents (29, 13 and 13 disputes respectively as of April 2017).9  

7 See http://investmentpolicyhub.unctad.org/ISDS?status=1000.  

8 Data based on the nationality of investors as reported at the time of registration.    

9 In the 108 ICSID cases involving an EU Member State, 78% were commenced by an investor who was 
also from an EU Member State. These intra-EU investment treaties are not covered by this initiative 
(see footnote 13 below). 

9 

 
 
 
 
                                                 
Figure 3: Geographic distribution of all cases registered under the ICSID Convention and Additional 
Facility Rules, by State Party involved. Source: ICSID (2017).10 

In recent years ISDS has become subject to increased public scrutiny and questioning, 
in  the  EU  and  other  parts  of  the  world.  In  the  EU,  concerns  have  been  voiced 
particularly  in  the  context  of  the  negotiations  of  the  EU-United  States  (US)  and  EU-
Canada  trade  and  investment  agreements,  as  was  made  evident  in  the  2014  public 
consultation carried on investment in the TTIP.11 

A  core  concern  by  the  public  is  the perceived  limitation  in  terms  of  legitimacy  of  the 
existing  system  to  deal  with  issues  that  concern  acts  of  public  authorities.  Other 
concerns  relate  to  the  current  ISDS  system's  deficiency  in  predictability  and 
interpretative consistency of case-law, lack of possibility of review of decisions, lack of 
transparency and costs of the proceedings.   

To address these limitations, the EU's approach since 2015 has  been to institutionalise 
the system for the resolution of investment related disputes in EU trade and investment 
agreements, through the inclusion of the ICS. 

The  main  feature  of  the  ICS  as  proposed  in  EU  negotiations  is  the  establishment  of  a 
Tribunal of First Instance and an Appeal Tribunal with permanent tribunal members to 
be appointed by the EU and its respective FTA or investment treaty partner. Members 
are  required  to  have  qualifications  similar  to  the  judges  of  the  International  Court  of 
Justice  (ICJ).  Cases  are  allocated  to  them  on  a  random  basis.  Tribunal  members  are 
bound  by  a  strict  code  of  conduct  that  requires  them  to  disclose  any  personal  or 
professional relation that could impede or be perceived as impeding their independence 
and they cannot act as counsel in other investment cases.  

Tribunal members jointly appointed by the Contracting Parties to an EU agreement are 
paid  a  monthly  retainer  fee  in  order  to  secure  highly  qualified  individuals  and  their 
availability on short notice. They are also paid a daily fee per day actually worked. The 
costs of the monthly retainer fees and the daily fees for the Appellate Tribunal members 
are  to  be  shared  by  the  Parties  to  the  agreement  (i.e.  the  EU  and  its  trade  and/or 
investment  treaty  partner).  Procedures  are  subject  to  the  UNCITRAL  Rules  on 
Transparency,12 meaning that hearings, documents and findings relating to the disputes 
are made public.  

In  this  light,  the  initiative  to  engage  on  a  multilateral  reform  of  investment  dispute 
settlement aims at addressing problems arising in the context of two situations: 

10 World Bank. 2017. The ICSID caseload: statistics (special focus - European Union). Washington, DC: 
World 
at: 
Group. 
https://icsid.worldbank.org/en/Documents/resources/ICSID%20Web%20Stats%20EU%28English%2
9April%202017.pdf.   

Available 

Bank 

11  See  the  online  public  consultation  on  investment  protection  and  investor-to-state  dispute  settlement 
(TTIP): 

Investment  Partnership  Agreement 

(ISDS) 
http://trade.ec.europa.eu/consultations/index.cfm?consul_id=179.  

the  Transatlantic  Trade 

and 

in 

12Available 

at: 
Transparency-E.pdf.  

http://www.uncitral.org/pdf/english/texts/arbitration/rules-on-transparency/Rules-on-

10 

 
 
                                                 
1.  ISDS:  The  traditional  problems  affecting  ISDS  continue  to  exist,  inasmuch  as 
this system is foreseen in the vast majority of the 3328 investment treaties. EU 
Member States have concluded 1384 of such treaties with third countries.13 The 
EU  itself  is  party  to  one  such  agreement,  the  Energy  Charter  Treaty  (ECT). 
These traditional problems relate to legitimacy, consistency and predictability, 
lack of possibility of review, transparency and high costs for users. 

2.  Coexistence of ISDS and ICS: The introduction of an ICS in each EU trade and 
investment  agreement  addresses  a  number  of  important  problems  of  ISDS 
notably  legitimacy,  lack  of  review  and  transparency,  but  it  raises  other  issues, 
notably  concerning  predictability  and  consistency  of  decisions  across 
different EU agreements, use of EU resources and costs for the EU budget.  

1. 

a) 

Problems arising from ISDS 

Lack of legitimacy and safeguards for independence 

Independence,  efficiency  and  quality  are  the  main  elements  of  an  effective  justice 
system.14  The  ISDS  arbitration  system  has  been  criticised  for  lacking  sufficient 
legitimacy, a perception based on concerns as to the effectiveness of the independence 
of  arbitrators  from  disputing  parties.  Criticism  along  these  lines  was  submitted  by  a 
large  number  of  stakeholders  from  different  backgrounds  through  the  public 
consultation. 

ISDS is based on the mechanisms of dispute resolution used in the field of arbitration, 
where disputes arise between private entities over a particular set of reciprocal contract-
based  obligations.  As  a  result,  ISDS  differs  significantly  from  traditional  judicial 
systems, in particular as regards the safeguards to guarantee judicial independence. For 
one, disputes under ISDS are decided by arbitrators, i.e. individuals not holding judicial 
office appointed for a specific dispute. The system is funded by users, i.e. the parties to 
a  dispute  pay  for  the  costs  of  the  arbitration  tribunal.  Arbitrators  are  chosen  by  the 
disputing parties and decide only that specific case. ISDS tribunals are disbanded (i.e. 
dissolved)  after  issuing  the  award,  meaning  that  arbitrators  serving  in  these  tribunals 
necessarily have other professional occupations.  

However, ISDS tribunals are not comparable to one-off arbitration since ISDS tribunals 
are interpreting treaties which first, bear a great deal of similarity and second, need to be 
applied again and again.15 Partly for this reason and partly because it is applied to solve 
disputes between an individual and a state, the use of ISDS has been broadly criticised.  

13  EU  Member  States  also  have  such  agreements  between  themselves.  The  Commission  takes  the  view 
that  such  agreements  are  inconsistent  with  EU  law  and  hence  cannot  be  covered  by  the  current 
initiative. These are not included in this total number. 

14 See the EU Justice Scoreboard: http://ec.europa.eu/justice/effective-justice/scoreboard/index_en.htm. 

15  In  fact,  the  ICSID  system  was  mainly  intended  for  investment  contract  litigation  and  it  was  not 
expected that it would be used to such an extent for investment treaty litigation. See J.C. Thomas and 
H.K. Dhillon; "The Foundations of Investment treaty Arbitration, The ICSID Convention, Investment 
Treaties and the review of Arbitration Awards" at p. 21 and 22, forthcoming in the ICSID Review.  

11 

 
 
                                                 
In  addition,  there  is  a  perception  held  by  some  that  arbitrators  may  unduly  favour 
investors  in  order  to  create  future  opportunities  to  serve  as  arbitrators  rather  than 
applying  strictly  the  law  in  any  particular  case.16  Such  criticism  was  submitted  by 
stakeholders in the context of the 2014 public consultation as well as in the consultation 
for this Impact Assessment. On the other hand, certain arbitrators are considered to be 
state-friendly and so are almost continually appointed by states.17 

The importance of having a dispute settlement system in place that not only functions in 
an impartial manner but is perceived to be devoid of any undue interest becomes even 
more  crucial  due  to  the  possible  impact  these  cases  may  have  on  public  budgets  and 
public  actions  (to  the  extent  that  actions  are  inconsistent  with  the  substantive  rules  of 
investment protection laid down in the agreements).  

b) 

Lack of consistency and predictability of case-law 

The  ISDS  system  provides  for  decisions  of  tribunals  that  are  composed  on  an  ad  hoc 
basis and dissolved after they have issued an award. There is no coordination between 
tribunals  and  therefore  no  formal  possibility  to  align  the  interpretations  of  substantive 
rules of investment protection, although almost all of the 3328 treaties contain identical 
or  very  similar  standards  of  protection.  These  include  non-discrimination  (national 
treatment  and  most-favoured  nation  (MFN)  principles),  protection  against  unlawful 
expropriation (i.e. compensation) and Fair and Equitable Treatment (FET).  

Although  the  provisions  on  these  standards  are  not  worded  in  exactly  the  same  way 
across agreements (there are differences, for example, to the standard US approach), the 
basic  function  of  the  standards  is  the  same  across  agreements.  Indeed,  the  fact  that  a 
majority of these treaties are bilateral and their provisions must be read in light of each 
agreement's  context  and  negotiating  parties'  intention,  does  not  mean  that  there  is  no 
margin  for  a  significant  degree  of  consistency  to  be  achieved  across  agreements.  An 
interpretation of a key standard, for example national treatment, can form the core of an 
interpretation  of  that  standard  as  included  in  multiple  agreements  which  is  then 
adjusted,  as  appropriate,  to  take  account  of  variations  in  drafting  or  context  of  other 
agreements which use similar or identical terms.  

In  ISDS there  is  no compelling incentive  or  requirement  for the different  tribunals to, 
when  interpreting  standards  in  a  given  treaty,  be  informed  by  past  interpretations  of 
those standards in the same or other agreements where it may be very similarly if not 
identically  worded.  ISDS  arbitrators  have  therefore  no  mandate  or  incentive  (for 
example through being reversed by an appeal mechanism) to build a coherent body of 
investment case law.   

16 Considering that ISDS disputes can only be brought by investors, critics of the ad hoc system argue that 
it  may  be  in  the  arbitrators'  interest  to  unduly  favour  investors  and  expand  jurisdiction  to  increase 
work load. 

17  Todd  Tucker,  "Inside  the  Black  Box:  Collegial  Patterns  on  Investment  Tribunals"  available  at 
https://academic.oup.com/jids/article/7/1/183/2357930/Inside-the-Black-Box-Collegial-Patterns-
on#37574807  quoting  Kevin  P  Gallagher  and  Elen  Shrestra,  ‘Investment  Treaty  Arbitration  and 
Developing Countries: A Re-Appraisal’ (2011) 12 J World Invest Trade 919. 

12 

 
 
                                                 
The  lack  of  consistency  of  the  case-law  leads  to  limited  predictability,  which  affects 
legal  certainty  and  expectations  for  all  actors  (states,  investors  and  other  interested 
parties).  In  particular,  it  deprives  stakeholders  of  the  ability  to  rely  on  previous 
interpretations to calibrate their actions and anticipate the outcome of potential disputes. 
It means that certain arguments can be repeated time and again in the hope that a new 
tribunal will take them up, wasting time and resources. In the stakeholder consultation, 
the lack of consistency was regarded as problematic especially by academics. 

The lack of consistency affects the interpretation and application of standards under the 
same  agreement  in  different  disputes;  and  standards  contained  in  different  agreements 
where the standard may be identically or very similarly worded.18  

Conflicting decisions on the same investment treaty provisions are as a consequence not 
uncommon.  A  striking  example  are  the  ISDS  cases  brought  under  the  Argentina-US 
BIT by US investors against Argentina in relation to very similar factual situations and 
measures adopted in the context of Argentina’s financial crisis (2000-2002). While one 
tribunal  (LG&E)19  accepted  Argentina’s  plea  of  necessity  justifying  the  breach  of  the 
obligations,  another  tribunal  (CMS)20  found  that  the  conditions  for  accepting  the 
defence of necessity were not met. This meant that damages were payable in one case 
but not the other, although both cases were brought under the same treaty and based on 
the same facts.21 

c) 

Lack of possibility of review  

The  current  ISDS  rules  only  provide  for  a  limited  review  of  tribunal  awards.  Awards 
can only be annulled, in part or in full, or set aside on very limited procedural grounds 
(such  as  corruption  on  the  part  of  a  tribunal  member,  errors  in  the  constitution  of  the 
tribunal,  manifest  exceeded  powers  or  breaches  by  the  tribunal  of  fundamental 

18  With  regards  to  the  latter,  BITs  and  FTAs  contain  a  number  of  substantive  investment  protection 
standards  that  are  contained  in  virtually  all  agreements  (including  most-favoured  nation,  national 
treatment,  protection  against  unlawful  expropriation  and  fair  and  equitable  treatment).  Save  for 
marginal differences, these standards are worded practically identically across agreements. Of course, 
a very high degree of consistency could only be achieved if there was one single set of substantive 
standards but that is not the case at hand. 

19 LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic (ICSID 

Case No. ARB/02/1). 

20 CMS Gas Transmission Company v. Argentine Republic (ICSID Case No. ARB/01/8). 

21 Another example of conflicting decisions with regard to similar BITs on identical facts is the two cases 
brought by the company CME and its shareholder Ronald Lauder against the Czech Republic under 
this  country's  investment  treaties  with  the  Netherlands  and  the  US.  The  tribunals  gave  two 
contradictory  awards,  with  one  dismissing  the  claim  while  the  other  awarded  damages  to  CME. 
Among  other  provisions,  the  tribunals  interpreted  differently  the  scope  of  the  standard  of  full 
protection and security. While one tribunal found that the standard may only be breached in case of 
physical  violence  or  damage  to  the  investment,  the  other  tribunal  adopted  a  much  broader  view 
encompassing  also  a  duty  to  provide  legal  protection  to  investors.  Source:  Rudolf  Dolzer  and 
Christoph Schreuer, Principles of International Investment Law, 2nd edition, OUP Oxford (2012). 

13 

 
 
                                                 
procedural  rules).  Conversely,  ISDS  awards  cannot  be  reviewed  on  the  grounds  that 
decisions are legally incorrect or seriously factually flawed.22 

This lack of legal review is problematic in cases where awards may be inaccurate from 
the  perspective  of  the  interpretation  and/or  application  of  the  law  and  as  regards 
manifest  errors  of  fact  (e.g.  flawed  fact  finding,  illogical  or  irrational  examination  of 
evidence).  

It is problematic not only from a systemic point of view (it has a negative impact on the 
quality of the overall system by impacting consistency) but also on specific cases (that 
may  be  decided  according  to  fundamentally  wrong  interpretations  or  based  on  a 
manifestly  erroneous  assessment  of  facts).  Indeed,  the  possibility  of  review  was 
considered  important  by  a  large  number  of  stakeholders  in  the  context  of  the  public 
consultation. 

d) 

High costs  

ISDS  proceedings  are  costly  both  for  investors  and  states,  which  poses  a  problem  of 
access  to  the  system  and  availability  of  legal  remedies.  This  was  highlighted  by 
stakeholders representing medium and smaller investors in the stakeholder meeting and 
reiterated in the online public consultation. 

According to the Organisation for Economic Co-operation and Development (OECD), 
the  costs  of  an  ISDS  dispute  amount  on  average  to  USD  8  million.23  The  largest  cost 
component is the expense incurred by each party (investor and state) for  its own legal 
counsel  and  experts  (about  82%  of  the  overall  cost  of  an  ISDS  case).  Arbitrator  fees 
average  about  16%  of  costs  and  institutional  costs  payable  to  organisations  that 
administer the arbitration and provide secretariat24 generally amount to about 2% of the 
costs. 

An OECD survey carried out between 2006 and 2011 of 100 ISDS cases indicates that 
almost  a  quarter  (22%)  of  the  claimants  were  either  individuals  or  very  small 
corporations with limited foreign operations (one or two foreign projects). Almost half 
the  cases  (48%)  were  brought  by  medium  and  large  enterprises,  varying  in  size  from 
several hundred employees to tens of thousands of employees, while only 8% of these 

22  As  set  out  in  the  decision  of  the  ICSID  annulment  committee  in  CDC  group  pls  v.  Republic  of 
Seychelles "the main function of annulment is to provide a limited form of review of awards in order 
to  safeguard  the  integrity  of  the  proceedings".  This  ad  hoc  committee  stated  that  "this  [limited 
review] mechanism protecting  against errors that threaten  the  fundamental fairness of  the  arbitral 
process (but not against incorrect decisions) arises from the ICSID drafters desire that the Awards 
be  final  and  binding  […]".  See  CDC  group  pls  v.  Republic  of  Seychelles  (ICSID  case  No. 
ARB/02/14), decision on Annulment, June 29, 2005, para 36 ("CDC v. Seychelles"). 

23 David Gaukrodger and Kathryn Gordon, “Investor-State Dispute Settlement: A Scoping Paper for the 
Investment  Policy  Community”,  OECD  Working  Papers  on  International  Investment,  2012/03, 
OECD Publishing, Paris (2012). Available at: http://dx.doi.org/10.1787/5k46b1r85j6f-en, p. 19. 

24 Such as ICSID, the Permanent Court of Arbitration (PCA) or the Arbitration Institute of the Stockholm 

Chamber of Commerce. 

14 

 
 
                                                 
were large multinational companies.25 In 30 % of the cases there was little or no public 
information  on  the  type  of  claimant.26  Data  on  potential  claimants  who  did  not  bring 
claims  due  to  excessive  costs  is  not  available.  It  is  possible  that  micro-enterprises  are 
practically deprived from this dispute resolution route, given the average costs.27  

e) 

Lack of transparency  

ISDS cases are adjudicated on the basis of strict confidentiality criteria, in accordance 
with the tradition of commercial arbitration to protect the confidentiality of information. 
Although the various sets of arbitration rules provide for varied degrees of transparency 
in different aspects of the proceedings, these do not necessarily involve full disclosure 
of key elements such as the identity of the parties, submissions or awards.  

Despite a significant increase in the transparency of ISDS in recent years and concerted 
action at international level, with some countries including requirements in their treaties 
and others putting it into practice, this is not systematic.28 Submissions and awards are 
not  necessarily  made  public  nor  hearings  opened  to  the  public.  Concerns  related  to 
insufficient transparency in ISDS were consistently voiced by civil society groups and 
academia in the public consultation. 

This  uneven  level  of  transparency  contrasts  with  the  publication  of  judgments  and 
decisions  of  most  national  and  international  courts,  which  are  mostly  promptly 
accessible online. 

2. 

Problems remaining under ICS or arising where ISDS and ICS coexist  

The  ICS  to  be  included  in  all  EU  trade  and  investment  agreements  addresses  to  a 
significant  extent  important  shortcomings  identified  with  the  ISDS  system,  notably  as 

25 I.e. those appearing in UNCTAD’s list of top 100 multinational enterprises. 

26 David Gaukrodger and Kathryn Gordon, “Investor-State Dispute Settlement: A Scoping Paper for the 
Investment  Policy  Community”,  OECD  Working  Papers  on  International  Investment,  2012/03, 
OECD Publishing, Paris (2012). Available at: http://dx.doi.org/10.1787/5k46b1r85j6f-en, p. 17. 

27 Based on the EU definition of SMEs,  the turnover of micro companies equals or is less than EUR  2 
Million. See: http://ec.europa.eu/growth/smes/business-friendly-environment/sme-definition_en. 

28  The  situation  has  also  recently  been  improved  at  international  level  with  the  adoption  of  the 
UNCITRAL  Rules  on  Transparency  in  Treaty-based  Investor-State  Arbitration  (available  at: 
https://www.uncitral.org/pdf/english/texts/arbitration/rules-on-transparency/Rules-on-Transparency-
E.pdf),  which  provide  for  a  maximum  access  of  the  public  to  documents  and  hearings,  as  well  as 
allowing  interested  third  parties  to  make  submissions.  In  addition,  the  Mauritius  Convention  on 
Transparency in ISDS - which will enter into force in October 2017 - has the potential to eventually 
apply  the  UNCITRAL  transparency  rules  to  all  existing  investment  agreements.  However,  with 
respect  to  pre-existing  investment  treaties,  these  rules  only  apply  where  individual  states  have 
agreed  to  apply  them  via  the  Mauritius  Convention.  The  continuing  lack  of  transparency  is  a 
problem in itself and contributes to problems of consistency in case-law.  

15 

 
 
 
                                                 
 
regards  the  system's  legitimacy  and  independence,  consistency  and  predictability  of 
case-law within each EU agreement, possibility of review and transparency.  

Nevertheless,  there  are  certain  limits  to  what  can  be  achieved  through  reforms  at 
bilateral level as regards predictability across agreements, costs for the EU budget and 
administrative burden for the EU. This was expressly highlighted by stakeholders in the 
2014  public  consultation  on  investment  dispute  settlement  in  the  TTIP.  Stakeholders 
argued that the many concerns expressed in the EU and other parts of the world on the 
legitimacy  and  independence  of  the  investment  dispute  settlement  system  would  be 
more  effectively  addressed  through  a  multilateral  reform  than  through  bilateral 
reforms.29 

a) 

Limited consistency and predictability of case-law 

The  ICS  addresses  the  issue  of  a lack  of  consistency and  predictability  of  case-law  in 
relation  to  substantive  standards  contained  in  a  given  agreement,  given  that  standards 
will be interpreted by a permanent body even if in different disputes. However, the same 
or  very  similar  substantive  rules  across  agreements  will  continue  to  be  interpreted  by 
different  bodies  without  any  incentive  to  be  informed  by  previous  decisions.  In  these 
cases,  the  risk  of  disparate interpretation  of  the same  or  very  similar  substantive rules 
remains.   

b) 

Costs 

Disputes under the ICS are funded by a mix of the Parties to the trade and/or investment 
agreement  (i.e.  the  EU  and  its  treaty  partner)  and  users.  Under  the  ICS,  the  disputing 
parties  are  still  required  to  cover  the  legal  fees  (which  make  for  the  highest  part  of 
dispute-related costs) and some of the costs of management of the dispute (i.e. certain 
daily  fees  of  tribunal  members).  Nevertheless,  the  cost  of  legal  fees  should  be  lower 
than  under  ISDS  as  legal  counsel  will  not  have  to  spend  time  anymore  choosing  an 
arbitrator  and  the  increase  in  legal  certainty  should  decrease  the  costs  of  legal  advice 
(i.e. there will be less temptation to make arguments which had been clearly rejected by 
e.g. the Appeal Tribunal). 

The inclusion of an ICS in each EU agreement has implications for the EU budget. It is 
estimated that each ICS, if active with one case before the First  Instance Tribunal and 
one  case  under  Appeal,  would  cost  around  EUR  800,000  per  Contracting  Party  per 
year.30  Calculations  are  based  on  permanent  judges  and  members  of  the  Tribunal  of 
First Instance and of the Appeal Tribunal being part-time and remunerated on the basis 
of  retainer  fees  and  fees  for  day  actually  worked.  In  some  EU  trade  and  investment 
agreements  (e.g.  EU-Viet  Nam  FTA),  it  has  been  decided  that  the  division  of  costs 
amongst the EU and its treaty partner will take account of the development level of the 
Parties, which in practice may mean that the EU would bear a significant amount of the 
costs.  

29   See  above  –  online  public  consultation  on  investment  protection  and  ISDS  in  the  TTIP: 

http://trade.ec.europa.eu/consultations/index.cfm?consul_id=179.  

30 This figure has been rounded. See Annex 4 for further details. 

16 

 
 
                                                 
c) 

Use of financial and human resources  

The ICS approach foresees a multiplication through the inclusion in many agreements 
of  institutional  mechanisms  that  need  to  be  managed  and  funded.  The  more  ICSs  are 
included  in  EU  agreements,  the  more  complex  the  management  will  be  for  the 
Commission  services,  which  will  have  to  bear  the  administrative  burden  in  terms  of 
time, workforce and financial resources.  

1.2  What are the drivers of the problem? 

A  number  of  issues  have  been  identified  as  the  main  drivers  that  would  need  to  be 
addressed in order to solve the problems outlined above. Below are the drivers that lead 
to each problem: 

Lack of legitimacy and safeguards for independence in ISDS 

 

 

ISDS  is  based  on  the  mechanisms  of  dispute  resolution  used  in  the  field  of 
commercial  dispute  resolution  as  opposed  to  a  judicial  system;  and  does  not 
provide  for  the  safeguards  for  independence  found  in  public  international  law 
tribunals  or  in  domestic  courts  dealing  with  public  law  matters.  The  more 
specific drivers below emanate from this general one. 
ISDS  procedures  utilise  different  sets  of  arbitration  rules,  which  gives  leeway 
for investors to choose the most advantageous one on which to bring a case. 
  Arbitrators  deciding  on  ISDS  disputes  are  not  judges  in  the  traditional  sense, 
meaning that they are not backed by a state or an international institution. This 
has implications for their perceived independence and associated legitimacy. 
ISDS  cases  are  decided  by  tribunals  constituted  on  an  ad  hoc  basis  and  are 
disbanded after issuing the award.  

 

  Arbitrators  serving  in  ISDS  tribunals  necessarily  have  other  professional 
occupations and nothing prevents them from acting as counsel for investors and 
states in other ISDS disputes where the same issues may arise.  
ISDS arbitrators are appointed by the parties to the dispute, paid by those parties 
and therefore may have a professional interest in reappointment in future cases, 
which  impacts  on  the  perception  that  they  are  impartial.  This  point  is  widely 
raised by stakeholders as of particular concern. 

 

Lack of predictability and consistency of case-law 

  Although  substantive  standards  of  investment  protection  are  contained  in 
multiple agreements with a high degree of commonality, if not identity, there is 
no  systemic  coordination  of  ISDS  cases,  tribunals  and  decisions,  consideration 
of precedent etc.  

  The various existing sets of arbitration rules that may govern ISDS procedures 
do  not  guarantee  substantive  standards  be  interpreted  by  arbitrators  in  a 
consistent and predictable fashion.  

  The inherently bilateral nature of ICS implies that predictability and consistency 
of case-law, where applicable, will be limited, i.e. within the limits of each ICS. 

17 

 
 
 
Lack of possibility of review in ISDS 

 

 

ISDS  does  not  provide  for  mechanisms  for  correcting  legal  and  factual  errors, 
such as an appeal, while stakeholders consider such mechanisms important. 
ISDS awards can only be annulled on very limited procedural grounds, such as 
corruption, errors in the composition of the tribunal or breaches of fundamental 
procedural rules. 

High costs  

 

In ISDS proceedings, fees of arbitrators and institutions are exclusively borne by 
the disputing parties. 

  As  highlighted  in  the  stakeholder  consultation,  ISDS  does  not  provide  for 
avenues  for  Small  and  Medium-sized  Enterprises  (SMEs)  not  to  have  to  face 
such important expenditures and is likely to pose significant problems of access 
to justice, in particular for small investors. 

  The  bilateral  nature  of  ICS  means  that  states  Party  to  each  trade  and/or 
investment agreement must cover a substantial part of the costs of the ICS. This 
is especially significant for the EU, which may have to cover parts of the costs 
appertaining to its treaty partner in the event that it is a developing country.  

Lack of transparency in ISDS 

  The  recently  developed  transparency  rules  for  ISDS  cases  are  not  yet  in 
application to many existing treaties meaning that awards are not made available 
in  a  systematic  manner,  submissions  are  only  provided  in  a  sporadic  way  and 
hearings are mostly not public.  

Administrative burden of ICS for the EU or the Commission 

  Multiple  ICSs  trigger  high  costs  and  a  significant  administrative  burden  (in 

terms of workforce, time and financial resources) for the Commission. 

18 

 
 
 
1.3 

Problem tree 

1.4  Who is affected by the problem? 

The  problems  previously  described  affect  a  number  of  actors  that  play  a  role  in  the 
settlement of investment disputes. The main affected stakeholders are: 

a) 

Investors and businesses 

When involved in an ISDS case, investors can be faced with a number of shortcomings 
of ISDS, specifically: 

  Potential reputational damage in case the investor brings a dispute resulting from 

 

the generalised perceived lack of legitimacy of ISDS; 
Inability  to  get  useful  guidance  from  previous  interpretations  of  the  same 
substantive standard as  a  result of the  lack  of predictability and consistency of 
case-law in ISDS, costs resulting from this; 

  Risk of receiving an award that may be legally incorrect and inability to have it 

reviewed due to the lack of possibility to appeal;  

  Where  an  award  is  annulled  in  full,  the  situation  is  equivalent  to  that  prior  to 
launching  the  dispute,  i.e.  the  investor  has  to  restart  the  dispute,  with  the 
consequent important monetary losses and wasted time for the investor; 

  Costs associated in appointing arbitrators (higher legal fees as a result of having 

to spend time on this issue); 

  Particularly  if  the  business  is  an  SME,  significant  accessibility  problems  to 
ISDS, notably  high  costs, which  may effectively deprive from access to ISDS. 

19 

 
 
 
 
This  group  of  stakeholders  consistently  flagged  this  circumstance  in  the 
consultation. 

In  the  event  that  the  dispute  arises  under  ICS,  these  problems  are  significantly 
overcome, as highlighted above.  

These problems affect both EU investors when launching a case against a third state and 
foreign investors that may be launching a case against the EU or an EU Member State.  

b) 

General public 

In  relation  to  disputes  brought  under  ISDS,  the  general  public  (both  in  the  EU  and  in 
third countries) may be negatively affected by: 

  Public mistrust in ISDS; 
  Taxpayers'  money  may  have  to  be  paid  to  investors  as  a  result  of  a  legally 

incorrect award, given that it cannot be appealed;   

  Lack  of  information  on  how  disputes  involving  important  societal  values  are 

decided, due to the lack of transparency in ISDS proceedings. 

Civil society platforms actively voiced these points in the consultation. 

In  the  event  that  the  dispute  arises  under  ICS,  these  problems  are  addressed,  as 
highlighted above.  

c) 

States (including the EU Member States and third countries) and the EU 

The EU and its Member States, as well as third countries, are affected by the problems 
at stake similarly to investors. In the event that they are challenged by a foreign investor 
and find themselves involved in ISDS procedures, they are affected by: 

  Damage resulting from the generalised public mistrust in ISDS;  
 

Inability  to  get  useful  guidance  from  previous  interpretations  of  the  same 
substantive standards due to lack of predictability and interpretative consistency. 
This may affect states during ISDS proceedings but also in the normal operation 
of their BITs; 

  As a result of the lack of appeal and very limited grounds of annulment, risk that 
they will have to enforce and abide by legally incorrect awards (i.e. possibly pay 
significant sums of taxpayers' money as compensation); 
Inability to provide to the public information on a case that may involve issues 
of public policy, where confidentiality rules prevent publication. 

 

  High fees for legal counsel including as a result of lengthy procedural steps such 

as choosing arbitrators and inability to rely on previous interpretations. 

These problems do not arise in the event of a dispute under the ICS. Nevertheless, the 
issue  of  interpretative  consistency  is  not  completely  solved  under  ICS,  which  limits 
predictability to cases under the same agreement to which the ICS applies. 

d) 

The arbitrator community 

Under  ISDS,  individuals  currently  acting  as  arbitrators  (e.g.  arbitrators,  practising 
lawyers,  retired  adjudicators  and  law  professors)  benefit  from  the  professional 

20 

 
 
opportunities of being appointed arbitrators in ISDS tribunals for claims brought under 
the many existing investment agreements. 

Under  the  ICS,  some  of  such  individuals  may  experience  a  loss  of  professional 
opportunities, since the strict requirements to be appointed and conditions applicable to 
act as judge or member of an ICS will render some of them ineligible.  

e) 

Existing arbitration centres 

Under ISDS, there are a number of arbitration centres that handle investment disputes, 
such  as  ICSID,  the  International  Chamber  of  Commerce,  the  Stockholm  Chamber  of 
Commerce,  the  Permanent  Court  of  Arbitration  or  the  London  Court  of  International 
Arbitration. 

Under  the  ICS,  these  centres  may  no  longer  have  such  a  prominent  role  to  play, 
inasmuch  they  will  not  in  principle  have  a  role  in  the  administering  of  disputes  or  at 
least it is unlikely that all of them would and therefore may, over time and depending on 
the uptake of ICS, lose income.  

1.5  How would the problem evolve, all things being equal? 

The  current  EU  policy  of  including  in  each  EU  trade  and  investment  or  investment 
agreement  a  bilateral  ICS  already  constitutes  a  very  significant  step  to  provide  an 
alternative form of dispute resolution as compared to ISDS. However, this policy alone 
fails  to  fully  address  the  problems  arising  from  ISDS  as  included  in  the  nearly  1,400 
BITs  concluded  by  Member  States  and  the  Energy  Charter  Treaty  (ECT),  although  it 
does to the extent that the Member State agreements are gradually replaced by EU level 
agreements.  

In addition, the ICS itself presents certain limitations that would accentuate in the mid 
to  long  term,  when  the  EU  will  likely  have  to  operate  a  significant  number  of  ICSs 
(around  20  are  currently  potentially  envisaged).  This  is  likely  to  lead  to  a  number  of 
operational  challenges,  in  particular  in  terms  of  costs  and  administrative  complexity. 
Each  active  ICS  with  one  case  before  the  First  Instance  Tribunal  and  one  case  under 
Appeal  per  year  is  expected  to  cost  under  EUR  800,000  per  Contracting  Party  per 
year.31  Clearly,  the  more  ICSs  are  in  place,  the  more  significant  the  budgetary 
implications  for  the  EU  will  be.32  Administering  numerous  ICSs  will  create 
administrative  burden  as  human  resources  within  the  Commission  will  be  needed  to 
manage the functioning of the ICS. In addition, a multiplication of ICSs would impact 
the interpretative consistency sought with the institutionalisation of ICS. Each ICS will 
create its individual cluster of interpretative consistency. While this does not appear to 
be  overly  problematic  if  only  a  few  ICSs  exist,  inasmuch  as  judges/members  can 

31 For the calculations, see Annex 4. 

32  No  transitional  arrangements  are  considered  necessary  in  relation  to  the  costs  that  will  arise  from  a 
progressive replacement of ISDS by ICS. Costs arising from ICS will be triggered when an ICS, as 
foreseen in a trade or investment agreement, enters into force. 

21 

 
 
 
                                                 
reasonably stay abreast of developments in other ICSs, this would become impossible if 
bilateral ICSs start to multiply. 

The ICS approach does not provide for an immediate phase-out of ISDS and its related 
problems,  inasmuch  as  the  numerous  EU  Member  State  BITs  with  unreformed  ISDS 
provisions and the ECT would only be progressively replaced by EU agreements with 
an ICS.33 Moreover, Member States can obtain EU authorisation to conclude new BITs 
with ISDS34 and therefore be sued under such mechanism. To improve the investor-state 
dispute  resolution  in  these  BITs,  when  authorising  Member  States  to  negotiate,  the 
Commission  already  requires  that  the  prospective  BIT  embodies  the  principles  of  the 
ICS  to  the  largest  possible  extent  and  that  it  includes  a  reference  to  the  multilateral 
reform of investment dispute resolution.35 

In this progressive replacement of ISDS with ICS, the problems related to ISDS would 
progressively disappear as the problems arising from the multiplication of ICS (limited 
overall predictability, higher costs for the EU budget and higher administrative burden) 
would  increase.  Lastly,  this  process  of  progressive  replacement  would  likely  take 
decades  of  negotiation  and,  at  this  point  in  time,  no  guarantee  that  all  Member  State 
BITs would be eventually covered by an ICS.36  

1.6  Has any fitness check/retrospective evaluation been carried out of the 

existing policy framework?  

The ICS has been introduced only recently (the first agreement including it which has 
been approved by the European Parliament is the CETA between the European Union 
and Canada) and it is not yet in force, therefore no evaluation has yet taken place. 

ISDS is included in bilateral agreements concluded by Member States37 and in the ECT. 
The ECT is subject to periodical review under Article 34.7 of the ECT38 which provides 

33 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  notes  that  at  the  time  when  foreign  direct  investment  became  an  exclusive  EU 
competence,  EU  Member  States  had  many  BITs  with  third  countries  in  place.  The  regulation  lays 
down  the  conditions  for  the  continued  existence of  these BITs  and  their  relationship with  the  EU's 
investment policy until they are progressively replaced by agreements concluded at the EU level with 
each third country in question. 

34 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. 

35 See Article 9.2 of Regulation 1219/2012 (see supra). 

36 The impacts of the baseline scenario are analysed in detail in Chapter 5.1. 

37 ISDS has been the subject of numerous academic studies on its functioning and shortcomings, some of 

the most relevant are quoted in the previous sections. 

38 Article 34(7) of the ECT provides that "In 1999 and thereafter at intervals (of not more than five years) 
to  be  determined  by  the  Charter  Conference,  the  Charter  Conference  shall  thoroughly  review  the 
functions provided for in this Treaty in the light of the extent to which the provisions of the Treaty 

22 

 
 
 
                                                 
that  the  functioning  of  the  ECT  be  subject  to  regular  review  (of  not  more  than  five 
years) by its political body (i.e. the Charter Conference). This review must be conducted 
in  light  of  the  extent  to  which  the  provisions  of  the  ECT  and  its  Protocols  have  been 
implemented.  

As  Contracting  Parties  to  the  ECT,  the  EU  and  the  Member  States  are  shaping  and 
actively  participating  in  these  reviews.  The  most  recent  review  process  has  been 
ongoing  since  2014  and  focuses  on  core  areas  of  the  ECT,  including  investment 
promotion and protection and dispute settlement. The draft conclusions of such review 
find  inter  alia  that  further  discussions  including  within  other  fora  are  needed. 
Discussions on the scope of the next review (to take place in 2019) will be held in 2018. 
In  this  sense,  modernisation  of  the  investment  protection  part  of  the  ECT  (including 
dispute  settlement)  remains  an  EU  priority  (although  the  preferred  vector  for  dispute 
settlement remains the project described in this Impact Assessment). 

2.  WHY SHOULD THE EU ACT? 

Article  207 of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  foresees 
that foreign direct investment (FDI) is part of the EU's common commercial policy. In 
accordance  with  point  (e)  of  Article  3(1)  of  the  TFEU,  the  EU  has  exclusive 
competence with respect to the common commercial policy. This exclusive competence 
includes  the  possibility  to  negotiate  and  conclude  international  agreements  covering 
FDI.  According  to  Article  5(3)  of  the  Treaty  of  the  European  Union  (TEU),  the 
subsidiarity principle does not apply to areas of exclusive EU competence.   

The  Court  of  Justice  of  the  EU  (CJEU)  ruled  in  its  Opinion  2/15  regarding  the  EU-
Singapore  FTA  that  the  Union  has  exclusive  competence  with  regard  to  all  matters 
covered by the agreement but that the competences over portfolio investment and ISDS 
are shared between the EU and  its Member States.39 The impact  of this ruling  on this 
initiative is not significant, since the Commission has from the beginning expected that 
any multilateral reform of investment dispute settlement would need to be subscribed by 
Member States in addition to the EU, not least so that all BITs concluded by Member 
States can be brought into the reform too.   

In its Opinion 2/13 concerning the accession of the EU to the European Convention on 
Human  Rights  (ECHR),  the  CJEU  confirmed  its  consistent  case-law  that  an 
international  agreement  providing  for  the  creation  of  a  court  responsible  for  the 
interpretation of its provisions is not, in principle, incompatible with EU law. However, 
such a court should not have an adverse effect on the autonomy of the EU legal order or 

and Protocols have been implemented. At the conclusion of each review the Charter Conference may 
amend or abolish the functions specified in paragraph (3) and may discharge the Secretariat". 

39 Opinion of the CJEU of 16 May 2017, C-2/15,EU:C:2017:376 pursuant to Article 218(11) TFEU on 
the competence of the European Union to conclude the Free Trade Agreement with Singapore. 

23 

 
 
 
                                                                                                                                               
negatively impact the level of protection of fundamental rights within the EU.40 In this 
respect, the standards provided by the Charter of Fundamental Rights are an important 
source  against  which  to  measure  the  effectiveness  of  the  reforms  envisaged  in  this 
initiative. 

It  should  be  noted  in  passing  that  the  multilateral  reform  scenario  would  significantly 
differ from the accession of the EU to the ECHR. Considering that currently tribunals in 
EU agreements only apply international law (i.e. the investment agreements) but not EU 
law, the reformed framework would not interpret EU law, but only be allowed to use it 
as  matter  of  fact  in  its  judgements.  The  autonomy  of  EU  law  would  therefore  remain 
unaffected. 

A  multilateral  reform  of  investment  dispute  settlement  could  not  be  carried  out  at  the 
Member  State  level  for  the  basic  reason  that  it  would  not  achieve  coverage  of  all 
existing investment treaties, leaving out all agreements concluded  by the EU. Member 
States  do  not  have  competence  for  all  the  matters  that  would  be  dealt  with  in  this 
initiative. The matters are either of the exclusive or shared competence of the European 
Union. 

In line with the principle of proportionality, all reasonable policy options are presented 
below in order to assess the likely effectiveness of such policy action. 

3.  WHAT SHOULD BE ACHIEVED? 

3.1  General objectives 

With  the  entry  into  force  of  the  Lisbon  Treaty  in  2009,  foreign  direct  investment 
became  part  of  the  common  commercial  policy.  As  regards  non-direct  investment, 
Treaty provisions on free movement of capital apply also to capital movements between 
Member States and third countries. With the Lisbon Treaty, the Charter of Fundamental 
Rights of the European Union became fully part of the EU treaties.  

As established by Article 205 of the TFEU, the common commercial policy also serves 
the more general objectives of the  EU’s External  Action as described in Article 21 of 
the TEU. 

Article 21(1) of the TEU specifies that, in the exercise of its external action, the EU is to 
be  guided  by  the  principles  and  objectives  that  inspired  its  own  creation,  including 
"democracy,  the  rule  of  law,  the  universality  and  indivisibility  of  human  rights  and 
fundamental  freedoms,  respect  for  human  dignity,  the  principles  of  equality  and 

40 Opinion of the CJEU of  18 December 2014, C-2/13, EU:C:2014:2454  on the compatibility with the 
Treaties of the draft agreement providing for the accession of the European Union to the Convention 
for  the  Protection  of  Human  Rights  and  Fundamental  Freedoms,  para  169-170,  182-183.  (see  also 
Opinion of the CJEU of 14 December 1991,  1/91, EU:C:1991:490  on the draft agreement relating to 
the creation of the European Economic Area, para 40 and 70 and Opinion of the CJEU of 8 March 
2011, C-1/09, EU:C:2011:123 on Patent Litigation System, para. 74). 

24 

 
 
 
                                                 
solidarity,  and  respect  for  the  principles  of  the  United  Nations  Charter  and 
international law". 

Article  21(2)  of  the  TEU  envisages  a  number  of  objectives  that  the  EU  is  to  pursue 
through "a high degree of cooperation in all fields of international relations". The most 
relevant objectives in relation to this initiative include: "(e) encourage the integration of 
all  countries  into  the  world  economy,  including  through  the  progressive  abolition  of 
restrictions on international trade; […] and (h) promote an international system based 
on stronger multilateral cooperation and good global governance". 

Taking stock of the trade policy developments in the years that followed, especially the 
EU negotiations in the context of the TTIP, the Commission Communication "Trade for 
all"41 from October 2015 sets out that the Commission will in parallel with its bilateral 
efforts  "engage  with  partners  to  build  consensus  for  a  fully-fledged,  permanent 
International Investment Court". 

At  the  public  release  on  12  November  2015  of  the  EU's  proposed  text  for  TTIP  on 
investment protection and investment dispute settlement, the Commission stated that the 
"Commission will start work, together with other countries, on setting up a permanent 
International  Investment  Court.  […]  The  objective  is  to,  over  time,  replace  all 
investment  dispute  resolution  mechanisms  in  EU  agreements,  in  EU  Member  States’ 
agreements with third countries, and trade and investment treaties concluded between 
non-EU countries, with the International Investment Court. This would lead to the full 
replacement  of  the  "old  ISDS”  mechanism  with  a  modern,  efficient,  transparent  and 
impartial system for international investment dispute resolution".42  

The more recent Commission Reflection Paper on Harnessing Globalisation from May 
2017 also contains an explicit reference when stating that "[t]he EU will also continue 
its  efforts  to  establish  fair  rules  for  the  protection  of  international  investments  while 
allowing  governments  to  pursue  their  legitimate  policy  objectives.  Disputes  should  no 
longer  be  decided  by  arbitrators  under  the  so-called  investor-state  dispute  settlement. 
This  is  why  the  Commission  has  proposed  a  multilateral  investment  court  that  would 
create a fair and transparent mechanism; this is being discussed with our partners".43 

On the occasion of the adoption by the Council of the decision authorising the signature 
of  CETA,  the  Council  stated  that  "the  Council  supports  the  European  Commission's 
efforts to work towards the establishment of a multilateral investment court, which will 
replace  the  bilateral  system  established  by  CETA,  once  established,  and  according  to 
the procedure foreseen in CETA".44 

41 See http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf. 

42 See http://europa.eu/rapid/press-release_IP-15-6059_en.htm. 
43 See https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-globalisation_en.pdf.  

44 Statement 36 of the Statements and Declarations entered on the occasion of the adoption by the Council 

of the decision authorising the signature of CETA. Brussels, 27 October 2016. 

25 

 
 
                                                 
Moreover,  action  by  the  EU  at  international  level  cannot  compromise  the  level  of 
protection  of  fundamental  rights  in  the  EU.  This  initiative  is  intended  to  create  an 
additional  remedy  under  international  law  for  enforcing  the  obligations  imposed  upon 
States by international agreements. It is therefore without prejudice to the existing rights 
of foreign investors under domestic EU law and the laws of the Member States or to the 
remedies  for  enforcing  such  domestic  law  rights.  Nevertheless,  when  assessing  this 
initiative  it  is  useful  to  evaluate  the  various  options  in  the  light  of  the  objectives  and 
principles  foreseen  in  the  EU  Charter  of  Fundamental  Rights,  including  in  particular 
Article 47 of the Charter. 45 

3.2 

Specific objectives 

More  specifically,  this  initiative  aims  at  bringing  coherence  to  the  EU's  policy  in 
investment dispute resolution, to align it with the EU's  global approach in other areas of 
international dispute settlement favouring multilateral solutions. The objective is to set 
up a framework for investment dispute resolution that is:  

  Permanent,  independent  and  that  enjoys  the  recognition  of  authority  and 

legitimacy of citizens. 

  Predictable,  delivering  consistent  case-law  in  its  functioning,  ensuring  that  the 

interpretation of substantive standards is consistent.  

  Allowing for an appeal of decisions in order to correct legal and factual errors. 
  Transparent, in line with the fundamental expectations from citizens that justice 

is a public good. 

  Efficient,  in  that  it  satisfies  the  needs  of  involved  stakeholders  through  an 

effective use of financial and human resources. 

4.  WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES? 

In  the  Inception  Impact  Assessment  published  on  1  August  2016,  six  options  were 
identified to multilaterally reform the system of investment dispute settlement (options 
1-6).  Two  additional  options  (numbered  options  7  and  8)  were  suggested  by 
stakeholders in the context of the public consultation and the stakeholder meeting of 27 
February 2017.  

Option 1 

Baseline scenario 

Under  the  baseline  scenario,  the  EU  would  continue  to  pursue  its  current  policy  of 
negotiating  ICS  in  its  bilateral  trade  and  investment  or  investment  agreements,  while 
ISDS would continue to exist insofar as the treaties that utilise it have not been phased 
out by an EU agreement featuring ICS. 

45 The Charter provides under its Article 47 that "everyone whose rights and freedoms guaranteed by the 
law of the Union are violated has the right to an effective remedy before a tribunal in compliance 
with the conditions laid down in this Article. Everyone is entitled to a fair and public hearing within 
a reasonable time by an independent and impartial tribunal previously established by law. Everyone 
shall have the possibility of being advised, defended and represented". 

26 

 
 
 
                                                 
While  the  problems  related  to  ISDS  would  gradually  decrease  as  the  new  agreements 
with the ICS will be concluded hence replacing existing MS BITs, the problems arising 
from  the  multiplication  of  ICS  (limited  overall  predictability,  higher  costs  for  the  EU 
budget and higher administrative burden) would increase.  

The ICS only applies to future EU agreements. It does not address the ISDS problems 
that  persist  with  regards  to  the  3,328  existing  investment  treaties  worldwide,  the  vast 
majority of which contain traditional ISDS provisions. This is particularly problematic 
for  the  EU,  considering  that  treaties  between  EU  Member  States  and  third  countries 
alone account for 1,384 of those existing treaties, although these will be very gradually 
replaced. In addition, the EU itself is party to the  ECT which also contains traditional 
ISDS.  No  significant  evolution  of  either  the  ECT  or  Member  States’  existing  BITs  is 
expected  in  the  short  term,  certainly  as  regards  the  objectives  being  examined  in  this 
assessment in the timeline envisaged under this initiative.  

Option 2 
an ICS 

Renegotiation  of  EU  Member  States'  BITs  and  the  ECT  to  include 

Under  this  policy  option,  the  EU  and  its  Member  States  would  seek  to  renegotiate 
Member States' BITs with each relevant third country and the ECT in order to align the 
dispute settlement provisions therein with the ICS policy pursued at the EU level. Most 
notably,  the  reformed  provisions  would  address  ad  hoc  party  appointments  by 
conferring some degree of permanency to the dispute settlement system and detaching 
the  appointment  of  adjudicators  from  the  disputing  parties.  Such  reformed  provisions 
would also feature an appeal instance and include rules on transparency of proceedings. 

This option is considered overly burdensome in terms of time and resources, as well as 
extremely complex and disproportionate to its likely use per BIT, as was highlighted by 
a  majority  of  stakeholders  in  the  public  consultation.  Moreover,  since  negotiations 
would need to be conducted individually with each partner country, there is a high risk 
that  partner  countries  would  use  the  opportunity  to  reopen  negotiations  on  aspects  of 
BITs other than dispute settlement. Additionally, it cannot be excluded that the outcome 
of  such  negotiations  would  be  different  across  BITs  to  the  detriment  of  the  overall 
system's coherence and predictability. 

This option is therefore considered not feasible and not analysed in further detail. 

Option 3 

Reform of international arbitration rules 

Option 3 would consist of reforming the several sets of arbitration rules that normally 
govern ISDS, e.g. rules of ICSID, of UNCITRAL or of the PCA in order to bring these 
rules in line with the principles of ICS, namely permanency, detachment of adjudicators 
from disputing parties and allowing an appeal.  

However, this option would present a number of shortcomings. First, since there is no 
common institutional framework for the procedural aspects of ISDS, it would in effect 
mean  renegotiating  several  sets  of  arbitration  rules,  some  used  predominantly  for  the 
adjudication of commercial and not investment disputes. Renegotiating each set of rules 
would also be extremely complex.  

27 

 
 
There are several reasons why reforming an existing forum so that it acts as multilateral 
court  does  not  seem  optimal.  The  main  reason  relates  to  the  fact  that  ISDS  operates 
under  different  rules,  so  reforming  one  institution  or  set  of  arbitration  rules  does  not 
address litigation under another institution or arbitration rules. Moreover, some of these 
bodies already have an established jurisdiction (i.e. they apply certain established rules) 
that  would  require  unanimity  of  their  membership  to  amend.  For  instance,  adding  an 
appeal  mechanism  to  the  ICSID  Convention  (the  main  forum  for  ISDS  cases)  would 
most  likely  require  the  consent  of  all  current  159  members  to  the  ICSID  Convention. 
This initiative is not considered feasible at the time of writing. 

There are also reasons of perception and therefore closely linked to legitimacy at stake. 
For example, some of the organisations  active in this field are closely associated with 
business interests. 

Due  to  the  complexity  explained  above,  this  option  is  not  considered  realistic  and 
therefore it is discarded.  Its impacts are not further analysed. 

Option 4 

Establishment of a multilateral appeal instance 

This  option  envisages  the  creation  of  a  permanent  multilateral  appeal  instance 
competent  to  hear  appeals  based  on  errors  of  law  and  fact  (i.e.  presumably  manifest 
errors  in  the  appreciation  of  the  facts).  The  multilateral  appeal  tribunal  would  hear 
appeals of decisions issued by ad hoc ISDS arbitral tribunals as well as by Tribunals of 
First Instance under the ICS. This option would therefore leave ISDS and ICS in place 
but add the possibility to appeal disputes arising from BITs and investment agreements.  

This  option  would  address  a  number  of  the  problems  examined  presently.  It  would 
address the issue of  limited legitimacy and independence by aligning the adjudicators' 
regime with that under the ICS (adjudicators would be permanent and subject to a strict 
ethical  code  of  conduct  including  a  regime  of  incompatibilities).  A  permanent 
multilateral Appeal instance would bring some degree of predictability and consistency 
of case-law as regards the interpretation of substantive standards, although it would be 
limited  to  the  cases  or  aspects  of  cases  that  were  appealed.  The  establishment  of  a 
permanent  Appeal  Tribunal  would  contribute  to  ensuring  that  decisions  be  legally 
correct. The issues of costs and transparency of proceedings could also be aligned with 
the principles of the ICS. 

However, leaving ISDS in place for the first instance would make it extremely difficult 
to remand cases after revision by the Appeal Tribunal, since the ad hoc ISDS tribunal 
would  already  have  been  disbanded  and  its  individuals  would  be  engaged  in  other 
activities.  Nor  would  it  be  feasible  for  the  Appeal  Tribunal  to  issue  the  award  itself 
since  this  would  frequently  involve  an  examination  of  the  facts,  which  would  delay 
proceedings and often amount to a relitigation of the original proceedings. In the WTO 
dispute  settlement  system,  divisions  of  the  permanent  Appellate  Body  only  examine 
issues of law and do not have the possibility to remand cases to the ad hoc panel. This is 
an issue of concern to the EU in the WTO. The EU has made proposals to change the 
system. 

28 

 
 
Second,  and  most  fundamentally,  this  option  would  not  address  the  problems  at  first 
instance. An Appeal Tribunal would only address issues which were actually appealed, 
but  it  would  leave  out  all  other  concerns  relating  to  legitimacy,  consistency  and 
predictability, costs and transparency related to the first instance tribunals.  

A  majority  of  respondents  to  the  public  consultation  acknowledged  the  potential 
benefits of setting up an appeal instance, although they also indicated that a permanent 
appeal without a permanent first instance would not suffice to address all the problems 
at stake.  

For these reasons, this option is not further analysed.  

Option 5 

Establishment of a multilateral investment court 

This option foresees that the EU works with other interested third countries toward the 
creation of a permanent multilateral investment court.  

This court would be composed of a Tribunal of First Instance and an Appeal Instance, 
and  would  adjudicate  claims  brought  under  investment  treaties  that  countries  have 
decided  to  assign  to  the  authority  of  the  Court.  The  Court  would  deal  with  the 
agreements  (both  existing  and  future  ones)  between  the  two  countries  when  both 
countries have ratified the agreement establishing the multilateral investment court and 
both countries have agreed that the bilateral investment agreement between them should 
be  subject  to  the  multilateral  court.46  The  Appeal  Instance  would  hear  appeals  of  the 
decisions  of  the  First  Instance  Tribunal.  Both  instances  would  be  staffed  by  tenured 
adjudicators remunerated on a permanent basis and should have a secretariat to support 
their daily work.  

The precise design, functioning and technicalities of several aspects of the Court would 
depend  on  the  multilateral  negotiations.  The  likely  impact  of  these  sub-options  is 
analysed  in  Chapter  5  and  the  preferred  sub-options,  as  they  will  be  reflected  in  the 
mandate, are identified in Chapter 6.  

The features of the Court that present more than one possible sub-options include:  

  Composition of the Court: 

o  Number  of  adjudicators:  linked  to  number  of  Contracting  Parties  or  to 

volume of cases; 

o  Terms of mandate: long or short and renewable or non-renewable; 

o  Employment status of adjudicators: full-time or part-time; 

o  Adjudicators' qualifications: experience-based or knowledge-based; 

o  Adjudicators'  ethical  requirements:  precluding  any  other  professional 

activity or only those related to investment dispute settlement; 

  Procedural aspects: 

46 Similar mechanism is applied for the UNCITRAL Transparency Rules for Treaty-based Investor-State 

Arbitration to existing agreements (the Mauritius Convention). 

29 

 
 
                                                 
o  Appointment  of  adjudicators:  by  the  Contracting  Parties,  by  a  separate 

body or by an independent body; 

o  Case allocation: random or according to disputing party's choice; 

o  Scope of appeal: allowing for a certain review of the facts; 

 

Institutional aspects: 

o  Secretariat: creation anew or relying on an existing organisation; 

o  Mechanism to be part of the Court: through and opt-in or re-negotiating 

each treaty; 

o  Support to SMEs: yes or no; 

o  Support to Developing Countries: yes or no; 

  Financial aspects: 

o  Allocation  of  costs  among  Contracting  Parties:  according  to  level  of 

development or equally; and 

o  Mixed financing (i.e. user fees): yes or no. 

The  fact  that  many  aspects  of  the  functioning  of  the  Court  would  still  need  to  be 
negotiated would allow room to discuss different views from interested countries within 
the common goal of creating a permanent multilateral court in line with certain broader 
requirements. These multilateral discussions should be carried out in a transparent and 
inclusive manner.  

Moreover,  this  option  would  allow  building  on  the  appetite  that  has  been  detected 
internationally  to  reform  investment  dispute  settlement  multilaterally.  It  would  be 
limited to negotiating a common dispute settlement framework, without going as far as 
trying  to  agree  on  multilateral  substantive  provisions  (which  as  explained  below  is 
deemed  politically  unrealistic  at  this  point  in  time).  Indeed,  the  various  informal 
exploratory  discussions  held  in  this  regard  have  evidenced  that  there  is  considerable 
interest in engaging in potential discussions. 

Stakeholders  appear  to  largely  agree  with  the  principles  of  setting  up  a  multilateral 
investment court, although questions remain in relation to specific details. 

This option and its relevant sub-options are further analysed in Chapter 5. 

Option 6 

Negotiation of multilateral substantive investment rules 

Under this policy option, the EU would seek to negotiate multilateral substantive rules 
on  investment  protection  as  a  wider  framework  for  the  negotiation  of  corresponding 
multilateral dispute settlement provisions.  

An attempt was made in the 1990s to start negotiations for a Multilateral Agreement on 
Investment within the OECD which ultimately failed. Despite the failure of this specific 
initiative,  the  Commission  has  continued  to  support  the  ultimate  goal  of  agreeing  on 
multilaterally-backed  substantive  investment  protection  rules  and,  in  this  vein,  it  has 

30 

 
 
striven  to  negotiate  clearer  and  more  precise  substantive  investment  rules  in  the  EU’s 
most recent investment treaties.  

However, although potentially desirable, it is not politically feasible at this moment in 
time to engage in multilateral negotiations for substantive investment protection rules. 
There is currently insufficient appetite across countries to re-start such negotiations, in 
part because countries do not agree on the broad parameters of what such a discussion 
should  encompass.  Also,  nothing  suggests  that  there  is  a  willingness  to  leave  legal 
approaches behind in favour of a unified approach to substantive investment standards. 

The Commission agrees that reaching multilaterally-agreed investment substantive rules 
would be desirable but believes that it is not a realistic goal in the short term, hence the 
current project should proceed but be designed to potentially align with any such future 
multilateral substantive investment rules.  

Therefore, this is not considered a feasible option to embark on at this moment and is 
not analysed further in this impact assessment.  

Option 7 

Improving ISDS in bilateral EU investment agreements and the ECT 

Several  stakeholders  have  suggested  that,  instead  of  engaging  in  a  radical  reform  of 
investment  dispute  settlement  through  a  multilateral  approach,  the  EU  reforms  the 
system  of  investment  dispute  resolution  in  its  bilateral  investment  treaties  by 
undertaking reforms that go beyond the current ICS policy.  

Stakeholders  have  largely  referred  to  the  following  features  as  desirable  in  such  a 
reform: 

 

Introduction  of  more  stringent  ethical  requirements  for  arbitrators  in  order  to 
prevent possible conflicts of interest and overall address their neutrality and the 
system's legitimacy. 

  Possibility  for  interested  stakeholders  to  meaningfully  intervene  in  ISDS 

 

proceedings. 
Introduction of the necessary flexibilities so that the fees system in ISDS is not 
prohibitive for SMEs. 

  Extension  of  the  type  of  remedies  available  under  ISDS  to  introduce  the 
possibility of non-pecuniary remedies, including mandating a change in the host 
State's legislation.  

  Exhaustion  of  domestic  remedies  (i.e.  obligation  to  seek  redress  at  the  host 

state's courts) as a pre-requirement to file an ISDS dispute. 

However,  this  option  includes  points  that  are  not  part  of  the  EU's  or  Member  States' 
traditional approach in investment, such as exhaustion of domestic remedies. Similarly, 
investment policy makers have consistently rejected the idea of non-pecuniary remedies 
as being too intrusive on the right to regulate.  

In addition, this option is based on a bilateral approach and would require the EU to re-
negotiate the agreements where an ICS has been included and that it seeks to negotiate a 
further  reformed  system  in  future  negotiations.  It  would  therefore  require  large 

31 

 
 
resources and still not guarantee a uniform outcome to all such negotiations. For these 
reasons, this option is discarded and not further analysed in the assessment. 

Option 8 

Making national courts competent to decide on investment disputes  

Under  this  option,  stakeholders  propose  that  ISDS  be  phased-out  and  that  disputes 
between foreign investors and host states be decided by the domestic courts of the host 
state. This would be equivalent to giving so-called direct effect to investment provisions 
in  international  trade  and  investment  or  investment  agreements.  This  option  has  been 
proposed by stakeholders that regard ISDS as a system that grants an additional avenue 
to foreign investors, while the same is not available for national investors. It was also 
voiced at the meeting of 27 February 2017. 

A  variation  of  this  option,  also  proposed  by  certain  stakeholders  in  the  context  of  the 
meeting, would be to implement a tailored approach depending on the trading partner. 
In  other  words,  recourse  to  domestic  courts  would  apply  in  host  states  that  are 
considered  to  provide  sufficient  guarantees  regarding  their  judicial  systems.  In  those 
states that fail to give satisfactory guarantees, a parallel ISDS system would be in place. 

This  option  needs  to  be  distinguished  from  the  scenario  of  disputes  between  EU 
investors  and  Member  States  arising  from  intra-EU  investment  treaties,  which  the 
Commission  considers  incompatible  with  EU  law.  In  those  circumstances,  national 
courts and eventually resort to the CJEU based on EU law are considered an appropriate 
forum for conflict resolution.47 

Making national courts competent to hear investment disputes arising from treaties with 
third  countries  would  run  counter  to  the  main  purpose  of  international  dispute 
settlement systems (e.g. ICJ, WTO dispute settlement system and International Tribunal 
for the Law of the Sea (ITLOS)), which is to provide an international and neutral forum 
for  the  resolution  of  cross-border  disputes.  This  builds  on  the  assumption  that  a 
potential for bias exists where a foreign investor seeks redress in a domestic court of a 
partner  country,  especially  against  the  government  of  that  country.  For  this  reason, 
international systems (i.e. different from national fora) for the resolution of disputes are 
considered necessary.  International investment agreements are of course based on the 
principle of reciprocity – the idea is that both countries consider it desirable that their 
nationals, when operating in a third country, are afforded the opportunity to be heard by 
international tribunals and be protected under international law.  

Furthermore, the option of giving direct effect (i.e. to allow the rules to be invoked in 
domestic courts) in EU treaties has been examined and rejected by the EU Institutions 
because,  amongst  other  things,  to  be  effective  it  requires  that  the  other  countries 
concerned also grant direct effect, which many countries do not do.48  

47 This issue is currently being examined in proceedings before the CJEU in the Achmea case (C-284/16 

Slovak Republic v Achmea BV). 

48 For an example, see Article 30.6 of the Comprehensive Economic and Trade Agreement between the 

European Union and its Member States and Canada OJ L 11/193 14.1.2017. 

32 

 
 
                                                 
Moreover, putting this proposal into practice would require either removing all existing 
treaties and hence dismantling the existing system, or requiring that all such treaties be 
directly effective which is against the constitutional practices of a significant number of 
states.  

For  these  reasons,  this  option  is  not  considered  a  feasible  avenue  and  is  not  further 
analysed.  

5.  WHAT  ARE  THE  IMPACTS  OF  THE  DIFFERENT  POLICY  OPTIONS 

AND WHO WILL BE AFFECTED?  

This  chapter  analyses  the  impact  of  the  baseline  scenario  (option  1,  i.e.  no  policy 
change) and of option 5. Other options were discarded for the reasons explained in the 
previous chapter. The assessment is based on the analysis of the Commission services, 
input  from  the  stakeholder  consultations  and  research  on  existing  multilateral  dispute 
settlement systems. It must be noted that the analysis of option 5 is to a large extent a 
projection, inasmuch as the final outcome would depend on multilateral negotiations. 

The  analysis  of  the  two  options  follows  the  same  structure.  First,  the  key  features  of 
each option are analysed with respect to the achievement of the objectives as laid down 
in  Chapter  3  and  their  impacts.  The  analysis  of  key  features  is  conducted  through  the 
following  main  categories:  (1)  Composition  of  tribunals,  (2)  Procedural  aspects,  (3) 
Institutional  aspects,  and  (4)  Financial  aspects.49  Where  key  features  under  option  5 
present  sub-options  subject  to  negotiation,  the  analysis  is  carried  out  for  each  sub-
option. Then, the overall impacts of the option are analysed.  

5.1 

Impacts of policy option 1: Baseline scenario 

This  option  requires  no  policy  change.  Under  the  baseline  scenario,  the  EU  would 
continue  to  negotiate  ICSs  in  its  bilateral  trade  and  investment  or  investment 
agreements, while ISDS would continue to exist insofar as the treaties that utilise it have 
not  been  phased  out.50  These  two  regimes  would  therefore  continue  to  coexist,  which 
was considered problematic by a large number of stakeholders from different groups.51  

5.1.1 Composition of tribunals 

Where ISDS applies 

49 These categories have been created for practical purposes within this report only. They are not intended 

to affect any further work in this direction. 

50 See Section 1.5 for a description of the baseline scenario and its related problems. 

51 51.2% of respondents with an opinion on the matter consider it important that the same procedural rules 
apply  to  disputes  arising  from  both  Member  States'  BITs  with  third  countries  and  EU  investment 
agreements with third countries.  

33 

 
 
 
 
                                                 
ISDS does  not  bring  any  permanency to  the system of investment dispute  resolution, 
inasmuch as disputes are decided by ad hoc tribunals that are disbanded after issuing the 
award.  Moreover,  independence  of  adjudicators  is  perceived  as  not  being  guaranteed 
sufficiently to ensure the continued legitimacy of the system since they are appointed by 
the  disputing  parties,  which  in  turn  does  not  contribute  to  improving  the  system's 
legitimacy. In the public consultation, certain stakeholders from academia argued that 
ISDS  puts  the  claimant  into  an  undue  advantageous  position  vis-à-vis  the  responding 
state (due to party-appointment and the ensuing possibility of conflicts of interest). Non-
Governmental  Organisations  (NGOs),  trade  unions  and  consumer  associations  raised 
similar concerns. 

The  lack  of  security  of  tenure  and  the  party-appointment  mechanism  are  perceived  to 
have a negative impact on the right to a fair trial and effective remedy because such 
features do not ensure the confidence of all stakeholders in the system.  

Where ICS applies 

The  ICS  contributes  significantly  to  permanency  in  investment  dispute  resolution, 
since disputes are decided by judges sitting in a permanent First Instance Tribunal and 
Appeal Tribunal. The ICS significantly improves the  legitimacy of the system, thanks 
to mechanisms that safeguard adjudicators' independence, such as removing the ability 
of  disputing  parties to  appoint tribunal  members  and  random  allocation  of  cases,  high 
qualification criteria and strict ethical rules. Predictability and consistency of case-law 
are achieved albeit only within the specific agreement, since the First Instance Tribunal 
and Appeal mechanism are integral part of each ICS. 

In  terms  of  efficiency,  however,  the  multiplication  of  ICSs  in  bilateral  agreements 
would  require  significant  human  and  financial  resources  to  manage.  In  the  public 
consultation,  stakeholders  from  the  legal  and  business  sector  as  well  as  certain  NGOs 
agreed that the ICS leaves room for improvement in terms of efficiency. 

Introducing  tenure  and  permanency  has  a  positive  impact  on  the  right  to  a  fair  trial 
and  an  effective  remedy  and  contributes  to  the  global  objective  of  supporting  the 
principle of rule of law. 

5.1.2 Procedural aspects 

Where ISDS applies 

There is no appeal mechanism under ISDS, hence the objective to allow for an appeal 
cannot be achieved under ISDS. This was perceived as a disadvantage by a number of 
stakeholders in the public consultation, including certain trade unions. Although narrow 
grounds  of  annulment  are  available,  this  cannot  be  considered  as  comparable  to  an 
appeal. Enforcement of arbitral decisions is therefore due (subject to the specificities of 
the  applicable  regime,  whether  the  ICSID  Convention  or  the  New  York  Convention) 
regardless of any possible legal or factual errors. This does not bring legitimacy to the 
system.  Predictability  and  consistency  of  case-law  are  not  achieved  since  arbitrators 
are  not  bound  by  previous  decisions  and  there  is  no  systemic  requirement  to  take 

34 

 
 
 
account  of  them.  The  lack  of  uniform  coverage  of  binding  transparency  rules  (since 
enhanced  requirements  have  only  been  adopted  by  some  countries)  only  makes  the 
system more opaque and inaccessible to citizens. Poor transparency was recognised as 
problematic by various groups of stakeholders, especially NGOs, consumer associations 
and trade unions, but also certain representatives of the business community. 

The  absence  of  an  appeal  and  the  limited  transparency  in  the  traditional  ISDS  system 
have a negative impact on the right to a fair trial and effective remedy.  

Where ICS applies 

The existence of an appeal instance brings predictability and consistency of case-law 
within  given  bilateral  agreements.  The  appeal  allows  to  prevent  that  any  legally 
incorrect  decision  be  enforced.  Under  the  ICS,  decisions  are  enforced  under  the  same 
terms as under ISDS. This is done by referencing the relevant existing rules (e.g. ICSID 
Convention or New York Convention) in the underlying FTA. 

Transparency is achieved through important disclosure requirements embodied in the 
UNCITRAL Rules on Transparency. 

Introducing  an  appeal  instance  and  providing  for  transparency  rules  has  a  positive 
impact on the right to a fair trial and effective remedy and contributes to the global 
objective of supporting the principle of rule of law.  

5.1.3 Institutional aspects 

Where ISDS applies 

ISDS is essentially an ad hoc system designed to solve specific disputes and therefore 
with  no  objective  of  permanency  whatsoever.  A  number  of  fora  administering  the 
applicable  procedural  rules  provide  secretarial  support  to  the  resolution  of  specific 
disputes,  notably  ICSID52  the  Stockholm  Chamber  of  Commerce,  the  International 
Chamber  of  Commerce  and  the  Permanent  Court  of  Arbitration  (PCA).  With  small 
variations  across  organisations,  these  platforms  provide  for  logistical,  administrative 
and a certain amount of legal support throughout proceedings. The lack of permanency 
and  fragmentation  does  not  contribute  to  predictable  and  consistent  case-law.  These 
features do not contribute to the legitimacy of ISDS. 

In addition, ISDS does not provide for any mechanisms of financial or legal assistance 
to  SMEs  to  ensure  access  to  effective  justice  for  all  investors,  as  was  pointed  out  by 
certain  business  stakeholders  in  the  public  consultation.  Similarly,  no  assistance  is 
foreseen for developing countries in the event that they are challenged through ISDS.  

52 Overall, 62% of all known ISDS cases have been filed under the ICSID Convention or under the ICSID 
see 

Additional 
http://investmentpolicyhub.unctad.org/Upload/ISDS%20Issues%20Note%202016.pdf. 

UNCTAD 

Facility 

Rules. 

Issues 

2015, 

Note 

IIA 

35 

 
 
 
 
                                                 
By failing to  provide special  assistance or support to SMEs and  developing countries, 
the  ISDS  system  does  not  address  the  issue  of  effective  access  to  justice  of  these 
entities.  

Where ICS applies 

The  ICSID  Secretariat  provides  secretarial  support  to  the  ICS  included  in  the 
agreements  with  Canada  and  is  intended  to  do  so  also  for  Viet  Nam  and  further 
agreements. It will manage the payments to judges, provide for logistic support and act 
as  repository  for  disputes.  Having  one  forum  act  as  secretariat  for  several  ICSs  is  a 
significant contribution in terms of efficient use of resources. 

ICS makes the system more accessible for SMEs. In particular, it includes (i) a specific 
provision on voluntary mediation to solve the dispute amicably before the first formal 
steps  of  dispute  settlement;  (ii)  procedural  deadlines  intended  to  make  proceedings 
faster  and  less  costly;  (iii)  in  certain  cases,  the  possibility  to  submit  claims  to  a  sole 
judge; and (iv) limits to the costs the SME will be required to cover in case it loses a 
case or an appeal. 

In relation to developing countries, the sharing of costs of the ICS is dependent on the 
Parties'  respective  level  of  economic  development.  This  is  for  instance  the  case  under 
the EU-Viet Nam FTA.  

By introducing special provisions or mechanisms of support for SMEs and developing 
countries, ICS moves towards establishing mechanisms to ensure the effective access to 
justice of these entities.  

5.1.4 Financial aspects53 

Where ISDS applies 

In  general,  under  ISDS,  costs  borne  by  States  are  those  related  to  their  status  as 
respondent  in  a  given  dispute,  i.e.  the  arbitrator’s  fees,  the  fees  of  the  arbitration 
institution handling the dispute, the costs of experts and the costs for legal counsel. 

In some cases, arbitral tribunals have ruled that each disputing party should bear its own 
costs while others have applied the principle that “costs follow the event”, making the 
losing party bear all or part of the costs of the proceeding and attorney fees.54  

ISDS cases' costs are high. Research by the OECD indicates that the average legal and 
arbitration costs for a claimant are around USD 8 million.55 These high costs can result 

53 For a more detailed analysis of the allocation of costs under ICS and ISDS, please refer to Annex 4. 

54  Examples  of  arbitration  on  apportionment  of  costs  are  UNCITRAL  Article  40(1)  and  ICSID  Article 
61(2). Article 40(1) of the UNCITRAL Rules provides that the costs of arbitration shall in principle be 
borne by the unsuccessful party. It also grants the Tribunal discretion to apportion the costs otherwise 
between the Parties if it considers a different apportionment reasonable taking into consideration the 
circumstances  of  the  case.  Article  61(2)  of  the  ICSID  Convention  provides  that:  "[...]  the  Tribunal 
shall, except as the parties otherwise agree, assess the expenses incurred by the parties in connection 
with the proceedings, and shall decide how and by whom those expenses, the fees and expenses of the 
members  of  the  Tribunal  and  the  charges  for  the  use  of  facilities  of  the  Centre  shall  be  paid.  Such 
decision shall form part of the award". 

36 

 
 
                                                 
in  discouraging  smaller  investors  from  bringing  cases  they  might  otherwise  have 
brought successfully, meaning they will not be compensated for illegal actions.56 

Annex  4  includes  an  estimation  of  the  cost  of  those  ISDS  mechanisms  that  would 
remain in place for the EU and EU Member States because they would not be replaced 
in  the  short  term  by  ICS  mechanisms  in  EU  agreements  with  third  countries.  The 
calculation includes only tribunal and institutional costs (i.e. not the legal fees) and does 
not  take  into  account  the  allocation  of  costs  decided  by  the  tribunal  in  the  individual 
cases. Conversely, the cost is assumed to be borne equally by the disputing parties. On 
this  basis,  it  is  estimated  that  the  EU  and  Member  States  would  continue  to  spend  an 
average of around EUR 70,000 per year per ISDS case.57 

Where ICS applies 

In the scenario where the ICS is inactive (i.e. there are no cases pending before it), its 
costs are equally allocated between the two Contracting Parties. Consequently, the costs 
borne  by  the  EU  would  amount  in  general  to  half  of  the  costs  of  an  inactive  ICS, 
although the EU may cover a larger proportion in case its treaty partner is a developing 
country.  The  cost  of  an  inactive  ICS  would  amount  to  around  EUR  400,000  per 
Contracting  Party  per  year.58  The  sharing  of  costs  of  the  ICS  has  in  some  cases  been 
made dependent on the Parties' respective level of economic development, as is the case 
under e.g. the EU-Vietnam FTA. 

The  ICS  is  partly  funded  (in  particular  the  appeal  instance)  by  the  Parties  to  the 
agreement, which diminishes the risk that costs discourage users from bringing cases.  

Where the ICS is active, the EU proposal in the TTIP negotiations makes a distinction 
between  costs  that  are  borne  equally  by  the  Contracting  Parties  and  costs  that  are 
allocated by the tribunal among the disputing parties. The tribunal will be able to order 
that all or part of the costs which fall to the respondent as a disputing party be borne by 
the unsuccessful disputing party according to the "loser pays principle".59  To estimate 
the costs when ICS is active, an assumption of one case before the first instance tribunal 
and one case under appeal was made. This  resulted in estimated costs of around  EUR 
800,000 per Contracting Party per year.60 

55 David Gaukrodger and Kathryn Gordon, “Investor-State Dispute Settlement: A Scoping Paper for the 
Investment Policy Community”, OECD Working Papers on International Investment, 2012/03, OECD 
Publishing, Paris (2012). Available at: http://dx.doi.org/10.1787/5k46b1r85j6f-en,  p. 19. 

56 Although some may be able to benefit from third party financing. 

57 See Annex 4. 

58 See Annex 4. 

59  Under  the  EU  proposal  in  TTIP  negotiations,  "reasonable  costs  incurred  by  the  successful  disputing 
party  shall  be  borne  by  the  unsuccessful  disputing  party,  unless  the  Tribunal  determines  that  such 
apportionment  is  unreasonable  in  the  circumstances  of  the  case"  (Article  28(4)),  available  at:  
http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf. 

60 See Annex 4. 

37 

 
 
                                                                                                                                               
There is an issue of efficiency (i.e. financial and administrative burden) where several 
ICSs coexist. This was flagged by legal practitioners and business representatives in the 
context of the public consultation, where they suggested that bringing all ICSs under a 
single institution would reduce costs for the EU and Member States.  

5.1.5 Overall impacts of policy option 1 

Where  ISDS  continues  to  apply,  none  of  the  specific  objectives  of  the  multilateral 
reform initiative are met.  

The  ICS  addresses  the  specific  objectives  of  multilateral  reform  to  some  extent,  i.e. 
permanency, enhanced legitimacy and transparency and possibility of review of awards 
through an appeal instance.  

This  policy  option,  covering  both  ISDS  and  ICS,  contributes  only  partially  to  the 
general  objectives  of  this  initiative,  i.e.  supporting  the  principle  of  rule  of  law  (in  the 
sense  of  designing  a  legitimate  system  to  hear  public  law  disputes)  and  promoting  an 
international  system  based  on  stronger  multilateral  cooperation  and  good  global 
governance.  

In relation to the former, ISDS lacks the necessary tools to ensure effective application 
of  the  principles  emanating  from  public  law  disputes  (i.e.  the  rule  of  law),  including 
inter  alia  fully  independent  and  impartial  courts  and  effective  review  ensuring  the 
legitimacy of the system is upheld. Disputes are decided by arbitrators appointed by and 
paid  for  by  the  disputing  parties,  there  is  no  appellate  instance  and  therefore  no  real 
possibility  to  have  decisions  reviewed.  Comparatively,  the  rule  of  law  and  its  main 
principles  are  duly  protected  under  the  ICS,  where  disputes  are  decided  by  judges 
appointed  on  a  permanent  basis  without  any  role  for  the  disputing  parties.  The  ICS 
includes  an  Appeal  Tribunal  to  ensure  that  any  errors  in  decisions  issued  by  the  First 
Instance  are  reviewed.  Therefore,  under  the  baseline  scenario  the  optimal  approach  to 
public law adjudication (i.e. the rule of law) is unevenly projected.  

The ICS constitutes an important improvement from the system that results from ISDS. 
However, the risk of fragmentation between the different ICS remains. Where no policy 
action is taken, the costs derived from the continued coexistence of ISDS and ICS will 
have a considerable impact on the EU budget (for the ICS) and on EU Member States 
budgets  (for  the  remaining  ISDS  mechanisms).  Whilst  the  costs  of  these  mechanisms 
are  significantly  driven  by  the  number  of  actual  cases,  it  is  estimated  based  on  an 
assumption of two cases per ICS61 and on an average over recent years (1997 to 2015) 

61  For  purposes  of  the  calculation  of  the  costs,  and  given  the  impossibility  to  anticipate  how  many 
disputes will on average the ICS have to hear, it has been assumed that one case before each instance 
(i.e. a total of two cases) is a reasonable scenario. This scenario is consistently used throughout this 
report. 

38 

 
 
 
                                                 
of  ISDS  cases62  that  the  impact  on  the  EU  and  EU  Member  States  budget  of  policy 
option 1 would amount to around EUR 9 million.63  

In addition, the baseline scenario will require high human and financial resources to 
manage an increasing number of ICS with limited coordination across them.  

As  the  reform  being  analysed  here  is  the  reform  of  the  procedural  elements  of  the 
dispute settlement system, not a reform of the substantive provisions, no further impacts 
(e.g.  environmental  and  social  impacts)  are  expected.  It  is  only  with  regard  to  the 
substantive provisions that one can have a debate on such potential impacts.  

5.2 

Impacts of policy option 5  

This option foresees that the EU works with other interested third countries toward the 
creation and establishment of a permanent multilateral investment court. 

As  stated  in  Chapter  4,  there  are  a  number  of  features  that  present  sub-options  to  be 
discussed  in  future  multilateral  negotiations.  In  contrast,  there  are  other  features  that 
form an inherent part of the policy option and for which there are no alternatives. These 
include the permanent nature and remuneration of adjudicators and the existence of an 
Appeal Tribunal. Both types of features, including their sub-options when relevant are 
analysed in this chapter. 

5.2.1 Composition of the court 

Number of adjudicators of the first level tribunal and appeal tribunal 

The Court would be composed of a First Instance Tribunal and an Appeal Tribunal. The 
first  level  Tribunal  would  examine  the  legal  submissions  and  evidence,  conduct  an 
analysis and render a decision, while the Appeal Tribunal would hear cases on appeal.  

As highlighted in  the problem definition the establishment of an  appeal  mechanism  is 
necessary  to  ensure  legal  correctness  of  decisions  to  the  benefit  of  both  governments 
and investors. Moreover, an appeal instance would promote consistency of case-law, in 
turn  enhancing  predictability.64  The  majority  of  responses  to  the  public  consultation 
were in favour of setting up an Appeal. It was supported in particular by NGOs and part 
of the business sector. 

62 The averages are of course variable. Some years have seen peaks in cases. 

63 This figure results from the sum of around EUR 8.5 million as cost of 11 ICSs for the EU (this assumes 
that all of the active negotiations reach satisfactory conclusions given the EU’s objectives) and under 
EUR 135,000 for the cost of the remaining ISDS mechanisms for the EU and EU Member States. For 
the time being, it is assumed that the EU would bear the total cost of ICS  in EU agreements. These 
figures  do  not  include  the  costs  of  legal  counsel,  but  only  the  specific  costs  of  arbitration.  For  the 
calculations and reasoning, refer to the Annex 4.  

64  KatiaYannaca-Small,  “Improving  the  System  of  Investor-State  Dispute  Settlement”  OECD  Working 
Papers  on  International  Investment,  2006/01,  OECD  Publishing,  Paris  (2006).  Available  at: 
http://dx.doi.org/10.1787/631230863687. 

39 

 
 
 
 
                                                 
Concerning the  number  of  adjudicators  under  the  two  tribunals,  two  main  alternatives 
are available:   

(i)  Number linked to the number of Contracting Parties; or 
(ii)  Number linked to the volume of cases. 

(i) This sub-option is often used in international courts to ensure that there is at least one 
adjudicator  from  each  Contracting  Party.  However,  it  means  that  less  suitable 
candidates may become adjudicators (since origin may be prioritised over qualifications 
or  competences). In  addition,  the  number of adjudicators appointed might be too  high 
unless  there  is  a  corresponding  number  of  cases.  Such  a  scenario  risks  leading  to 
inefficiencies.  

(ii) This sub-option would be more in line with the objective of efficiency. Considering 
that the number of Contracting Parties to the multilateral Court is unknown but would 
be expected to grow over time, the number of adjudicators should be flexible enough to 
adapt  to  the  workload.  This  is  the  approach  favoured  by  most  recently  established 
international  courts  (such  as  the  International  Criminal  Court  (ICC)  and  ITLOS).  In 
fact,  most  responses to  the  public  consultation  argued  that  the  number  of  adjudicators 
should be tailored to the number of cases.65 

In terms of impacts, the estimated cost for the (fixed) remuneration of one adjudicator is 
around EUR 285,000 per year on the basis of the average annual remuneration level of 
judges in international courts and tribunals. It is impossible to be certain at the time of 
writing  on  the  number  of  adjudicators  but  on  the  basis  of  a  reasonable  estimate  (nine 
adjudicators at First Instance, five on appeal) the remuneration of adjudicators under the 
multilateral court is estimated to cost almost EUR 4 million per year (i.e. around EUR 
2.5  million  for  the  First  Instance  plus  around  EUR  1.5  million  for  the  Appeal 
Tribunal).66 

Regarding the  number  of  adjudicators,  it is  likely  that this  figure  would  be  lower  if  it 
were  tailored  to  the  effective  workload,  which  would  result  in  overall  lower  costs  for 
the EU and indeed all participants. This sub-option would be more advantageous for the 
EU budget as well for the budgets of Member States (see details about cost estimation 
in Annex 4).  

Regarding the achievement of other objectives, there is no difference between the two 
sub-options.  Besides  financial  costs,  there  are  no  other  (economic,  social  or 
environmental)  impacts  on  any  of  the  two  sub-options.  Tailoring  the  number  of 
adjudicators  in  the  First  Instance  and  Appeal  tribunals  to  the  volume  of  cases  would 
therefore appear to be the most efficient option although this would of course depend on 
the outcome of negotiations and of the future Court's overall structure. 

65  In  addition,  stakeholders  from  different  backgrounds  considered  important  that  certain  additional 
considerations  (such  as  representativeness  of  world  legal  systems  among  others)  be  taken  into 
account. 

66 For calculation see Annex 4. 

40 

 
 
 
                                                 
Terms of mandate 

Adjudicators should be appointed for a fixed period of time (i.e. permanent) as opposed 
to ad hoc (i.e. on a case-by case basis, as is the case under the current system). Indeed, 
permanent appointments (and remuneration) for a certain period of time would address 
the  concerns  regarding  impartiality  and  independence  of  investment  dispute 
resolution.67  Academics  stressed  the  importance  of  independence  and  impartiality  of 
adjudicators through a secure tenure and fixed salaries.  

Adjudicators  appointed  on  a  permanent  basis  would  ensure  that  legal  proceedings 
around  investment  follow  procedures  that  are  in  line  with  Article  6  of  the  ECHR  and 
Article  47  of  the  Charter  of  Fundamental  Rights,  according  to  which  "everyone  is 
entitled  to  a  fair  hearing  by  an  independent  and  impartial  tribunal  previously 
established by law".68 

Various sub-options are possible regarding adjudicators' terms of mandate.69 Two main 
alternatives appear available: 

(i)  Long and non-renewable mandate;  
(ii)  Long or short mandate renewable (once). 

(i)  A  long  and  non-renewable  mandate,  where  adjudicators  cannot  be  reappointed, 
would  be  most  consistent  with  the  goal  of  independence,  inasmuch  as  adjudicators 
would carry out their functions knowing that, regardless of their decisions, they will not 
be  re-appointed.  Long  mandates  would  lead  to  fewer  appointment  procedures  (i.e. 
happening less often) and the associated administrative burdens.  

(ii)  Whether  longer  or  shorter,  renewable  mandates  allow  the  Parties  to  dispose  of 
ineffective  adjudicators  after  the  end  of  their  first  mandate  and  to  ensure  that 
particularly  effective  or  experienced  ones  serve  for  a  longer  period  (i.e.  for  a  second 

67 The idea of permanent appointments was widely supported by stakeholders in the public consultation. 
NGOs  in  particular  strongly  support  this  feature  on  grounds  that  it  would  minimise  exposure  to 
conflicts  of  interests.  On  the  other  hand,  certain  stakeholders  raised  the  idea  of  a  system  of  semi-
permanent judges, similar to WTO panels. However, the system of party-appointment of arbitrators, 
by  its  very  nature,  can  generate  an  interest  in  future  appointments,  which  runs  counter  to  the 
objective of independence and enhanced safeguards for independence of adjudicators. For references 
to such arguments, see David Gaukrodger and Kathryn Gordon, “Investor-State Dispute Settlement: 
A  Scoping  Paper  for  the  Investment  Policy  Community”,  OECD  Working  Papers  on  International 
Investment,  2012/03,  OECD  Publishing,  Paris  (2012)  http://dx.doi.org/10.1787/5k46b1r85j6f-en,  p. 
47. 

68 Article 6 ECHR, available at: http://www.echr.coe.int/Documents/Convention_ENG.pdf and Article 47 
of the Charter, available at: http://fra.europa.eu/en/charterpedia/article/47-right-effective-remedy-and-
fair-trial. 

69 In some international courts, where adjudicators are appointed for a fixed period of time, their mandate 
can be renewed once (ICJ: 9 years renewable once; CJEU: 6 years renewable once; WTO Appellate 
Body:  4  years  renewable  once),  although  others  provide  for  longer  and  non-renewable  mandates 
(ECtHR: 9 years non-renewable mandate). 

41 

 
 
 
 
                                                 
term). Certain stakeholders from the business sector expressed scepticism for renewable 
mandates, which they believe may cause bias in adjudicators' decision making. Indeed, 
this  option  would  be  less  in  line  with  the  objective  of  the  furtherance  of  the 
independence of the adjudicative system because adjudicators may act guided by their 
desire to be re-appointed. 

Opting  for  a  long  and  non-renewable  mandate  would  be  the  best  guarantee  for 
independence of adjudicators in line with the right to an effective remedy before an 
independent tribunal. This option would also imply a lower administrative burden 
for the appointing authorities. Subject to the outcome of negotiations and of the overall 
structure of the future Court, it is therefore the preferred option. 

Employment status and remuneration of adjudicators 

Two broad alternatives are available in terms of status and remuneration of adjudicators: 

(i)  Adjudicators  could  work  full-time,  be  employed  by  the  Court  and 

receive a fixed salary; or  

(ii)  Adjudicators  could  work  part-time,  be  self-employed  and  receive 

monthly or daily fees for service. 

(i)  Full-time  adjudicators  with  secure  tenure  and  fixed  remuneration  would  not  be 
exposed to conflict of interests, hence enhancing their independence and impartiality. 
For these reasons this option received the most support among respondents to the public 
consultation, in particular from NGOs. Legal practitioners and academics were also in 
favour of full-time adjudicators. However, legal practitioners raised concerns that full-
time adjudicators could be under-utilised yet unable to accept any other position in case 
that  would  be  prohibited.  On  the  other  hand,  this  option  might  be  relatively  costly, 
require higher administrative resources and not be the most efficient if only a few cases 
are submitted to the Court. It is estimated that a full-time adjudicator, employed by the 
Court  and  receiving  a  fixed  salary  would  cost,  around  EUR  285,000  per  year  (see 
Annex 4).  

(ii)  This  second  option  complies  less  with  the  objective  of  independence  and 
impartiality of  the  system  given  that  the adjudicators  could  be  exposed  to  conflicts  of 
interests  because  of  their  other  occupations.  Possible  conflicts  of  interest  would 
therefore  have  to  be  managed  through  the  ethics  regime  in  the  code  of  conduct.  A 
number  of  respondents  to  the  public  consultation  were  of  the  opinion  that  part-time 
adjudicators would ensure expertise in the particular matter under dispute (e.g. energy). 
However,  in  reality  most  disputes  (whether  in  the  investment  field  or  trade  more 
generally)  are  not  decided  by  specialists  in  the  particular  sector  but  by  generalist 
arbitrators and panellists.70 Moreover, adjudicators could rely upon experts provided by 
the parties or appointed by the Tribunal to analyse any given matter. 

70 An example of this is the WTO dispute concerning hormone treated beef where the panellists were not 

scientists but relied upon the advice of scientists in examining the matters before them. 

42 

 
 
 
 
                                                 
Compared to full-time adjudicators, part-time self-employed adjudicators would be less 
costly71  (and  may  be  more  efficient  when  only  few  cases  are  submitted  to  the  Court, 
which can be the situation in particular at the beginning of the functioning of the Court). 
In this sense, a number of stakeholders submitted that adjudicators should be part-time 
at the beginning, when the Court would have fewer cases to decide on, and become full-
time and employed by the Court once the workload so demanded. This approach, which 
has been used in other courts (such as the European Court of Human Rights – ECtHR), 
might help ensure that high quality individuals be attracted to sit on the Court.  

However,  part-time  self-employed  adjudicators  would  not  be  the  preferred  approach, 
since  it  would  address  the  issues  of  conflicts  and  of  legitimacy  to  a  lesser  extent. 
Regarding 
in  particular  permanence, 
transparency, predictability and consistency there are no differences between the two 
options.  

the  achievement  of  other  objectives, 

There are no economic, social and environmental impacts of the two options besides 
the costs related to the remuneration of adjudicators. However, the option of permanent 
adjudicators  is  more  consistent  with  the  right  to  an  effective  remedy  before  an 
independent tribunal (Article 6 ECHR and Article 47 of the Charter). 

Despite  the  higher  costs  and  administrative  burden,  the  option  that  adjudicators  be 
employed  by  the  Court,  receive  a  fixed  salary  and  be  entitled  to  benefits  (e.g.  health 
insurance  and  pensions)  is  the  preferred  option  because  it  brings  a  higher  level  of 
independence  and  impartiality.  However,  the  option  that  adjudicators  be  part-time 
before  becoming  full-time  should  not  be  excluded  provided  that  possible  conflicts  of 
interest are effectively managed through the code of conduct. 

Qualifications 

Adjudicators would have to meet high qualification criteria to sit on the Court in order 
to  ensure  the  quality  of  justice.  This  was  supported  by  an  overwhelming  majority  of 
respondents to the public consultation, who stressed the relevance of high qualification 
requirements for the future development of the Court, its case-law and reputation. 

Two approaches seem possible regarding the qualification criteria: 

(i) Criteria defined in broader terms; or  
(ii) Expertise in more specific areas required.  

(i)  Most  existing international  courts  require  qualifications  identical  or  very  similar  to 
those  required  for  the  ICJ,  the  Statue  of  which  states  that  "[t]he  Court  shall  be 
composed  of  a  body  of  […]  judges,  […],  who  possess  the  qualifications  required  in 
their  respective  countries  for  appointment  to  the  highest  judicial  offices,  or  are 

71 Since the actual level of fees has not been agreed and estimating the number of days adjudicators will 
work  would  be  highly  speculative,  the  calculation  of  a  fee-based  remuneration  system  for 
adjudicators is not carried out. It is likely that, a fee-based remuneration system alone would cost less 
than a fixed remuneration system. See Annex 4. 

43 

 
 
 
                                                 
jurisconsults of recognized competence in international law".72 Broadly defined criteria 
would ensure a consistent approach to dispute resolution across cases and contribute to 
predictability  of  case-law.  A  majority  of  stakeholders  supported  this  sub-option  and 
representatives  of  the  business  community  in  particular  indicated  that  adjudicators 
should be highly qualified in areas of public law such as investment law, constitutional 
law and economic matters.  

(ii)  Qualification  requirements  could  also  be  formulated  in  more  specific  terms,  for 
instance,  requiring  that  adjudicators  have  expertise  in  trade  law,  intellectual  property 
and  economics,  experience  in  arbitration  and  mediation,  background  in  the  field  of 
human rights, environmental, social and health law as well as domestic law. However, 
this  approach  risks  excluding  good  candidates  from  the  Court.  NGOs  and  consumer 
associations  argued  that  adjudicators  should  have  expertise  in  specific  areas  of  law, 
while  certain  business  stakeholders  expressed  concerns  that  overly  high  qualifications 
could politicise procedures.  

High  qualification  criteria  are  necessary  to  ensure  legitimacy  and  independence  of 
adjudicators, as well as consistency and predictability in the functioning of the Court. 
They are also essential to ensure that the right to a fair hearing is effectively observed. 
Neither of these options will produce any environmental impacts. These options would 
also  not  produce  any  economic  impacts.  However,  overly  strict  requirements  would 
have negative social impacts on a reduced group of persons, i.e. the pool of candidates 
who  would  otherwise  be  eligible.  Defining  qualification  criteria  according  to  broader 
terms would appear preferable, although the most important criterion for the functioning 
of the system is having highly effective adjudicators.  

Ethics  

Like international and domestic courts, the multilateral Court would need to function on 
the  basis  of  certain  ethical  rules  to  ensure  the  independence  of  its  adjudicators  and 
prevent conflicts of interest.  

International courts have  similar approaches to ethical  requirements based on those of 
the ICJ, which stipulates that “[t]he Court shall be composed of a body of independent 
judges,  elected  regardless  of  their  nationality  from  among  persons  of  high  moral 
character [...]”.73 The independence requirement (i.e. that adjudicators not be affected 
by other government branches) is part of all models of international courts and should 
certainly be included in a potential multilateral investment Court.74 Impartiality (i.e. that 

72 Article 2 of the Statute of the ICJ. 

73 Article 2 of the Statute of the ICJ. 

74 ECtHR: "During their term of office the judges shall not engage in any activity which is incompatible 
with their independence, impartiality or with the demands of a fulltime office". ICJ: "No member of the 
Court  may  exercise  any  political  or  administrative  function,  or  engage  in  any  other  occupation  of  a 
professional  nature.  No  member  of  the  Court  may  act  as  agent,  counsel,  or  advocate  in  any  case.  No 
member  may  participate  in  the  decision  of  any  case  in  which  he  has  previously  taken  part  as  agent, 
counsel, or advocate for one of the parties, or as a member of a national or international court, or of a 

44 

 
 
 
                                                 
adjudicators treat all parties equally and not be biased) is also deemed key. Inclusion of 
these  two  requirements  is  supported  by  a  majority  of  responses  to  the  public 
consultation.  Some  stakeholders,  especially  from  academia  and  the  legal  sector,  also 
raised the possibility that adjudicators be removed in case of breach of their obligations 
of independence. 

There  are  different  sub-options  with  regards  to  the  regime  of  incompatibilities  of 
adjudicators, in other words whether they should be precluded to exercise: 

(i)  Any other professional activity; or 
(ii)  Only legal activities related to other investment disputes. 

(i)  A  broad  regime  of  incompatibilities  encompassing  any  professional  activity  would 
be  fully  aligned  with  the  objective  of  independence  and  impartiality  of  adjudicators, 
although it may be less efficient in that it may discourage good candidates from taking 
office  particularly  at  the  beginning  of  the  operation  of  the  Court.  A  number  of 
academics and NGOs were specifically in favour of this sub-option.  

(ii) Under the second sub-option, adjudicators would only be precluded from exercising 
certain activities carrying a high risk of bias (such as having a role in other investment 
disputes).  This  approach  would  achieve  less  satisfactory  results  in  terms  of 
independence  and  impartiality  of  adjudicators,  inasmuch  as  it  might  expose  them  to 
potential  conflicts  of  interest.  It  would  however  be  efficient,  in  that  it  would  not  risk 
discouraging  good  candidates  (although  the  question  of  encouragement  would  derive 
also from other  factors).  Most  respondents from the business sector  went  even  further 
and  supported  that  adjudicators  should  be  able  to  work  as  professional  lawyers  and 
academics,  which  would  bring  in  valuable  knowledge  and  competencies.  However, 
allowing adjudicators to work as lawyers would expose them to undue conflicts, as was 
submitted by a number of NGOs and consumer associations. Certain respondents from 
universities believed that adjudicators should nonetheless be able to work as academics, 
which seems less likely to expose them to conflicts. 

Setting out high ethical standards and safeguards would be consistent with the right to 
an  independent  adjudicator.  The  regime  of  incompatibilities  should  be  sufficiently 
strict to effectively prevent conflicts of interest, although it should not result in driving 
away  good  potential  candidates  to  serve  as  adjudicators.  This  issue  is  also  related  to 
whether  adjudicators  are  employed 
regime  of 
full 
incompatibilities may have a certain social impact on the professional opportunities of 
the potential candidates to serve as adjudicators. Neither sub-option would produce any 
environmental  or  economic  impact.  The  first  option  would  be  the  preferred  option, 
consistent with other international courts where the adjudicators are full time.  

time.  An  overly  strict 

commission of enquiry, or in any other capacity." ITLOS: "1. No member of the Tribunal may exercise 
any political or administrative function, or associate actively with or be financially interested in any of 
the operations of any enterprise concerned with the exploration for or exploitation of the resources of the 
sea or the seabed or other commercial use of the sea or the seabed. 2. No member of the Tribunal may 
act as agent, counsel or advocate in any case". 

45 

 
 
 
                                                                                                                                               
5.2.2 Procedural aspects 

Appointment of adjudicators  

Adjudicators need to be appointed to form part of a pool of adjudicators serving under 
the Court, who will later be allocated to hear specific cases.  

Different systems for the appointment of adjudicators can be envisaged: 

(i)  Directly by the Contracting Parties (i.e. States); 
(ii)  By a separate body composed by Contracting Parties and other 

stakeholders; or 

(iii)  By an independent body. 

Although  the  first  and  second  sub-options  have  been  traditionally  favoured  in 
international courts and tribunals,75 there is a recent trend to move towards models like 
the third sub-option.76 

(i) Allowing the states party to the agreement to directly appoint adjudicators is the sub-
option that disincentivises the most any bias in favour of investors. A large number of 
respondents  to  the  public  consultation  submitted  that  the  Contracting  Parties  should 
appoint  adjudicators.  However,  this  sub-option  is  seen  by  some  as  not  contributing 
significantly to the independence of adjudicators, on the argument that the appointment 
process could be subject to undue influence from other government branches.  

(ii)  A  different  sub-option  would  be  to  appoint  adjudicators  through  a  separate  body 
where other stakeholders groups such as investors77 were represented in addition to the 
Contracting Parties. By allowing broader groups of stakeholders (i.e. potential plaintiffs 
in  addition  to  respondents)  to  be  involved  in  the  appointment  of  adjudicators,  this 
possibility would  bring a higher degree of  legitimacy  and independence  to  the Court 
and its adjudicators. 

(iii) Under this sub-option, an independent body where neither Contracting Parties nor 
investors would be represented would have a key role in the appointment or screening 
of adjudicators. It could be made up, for example, of senior serving or former judges or 
senior academics (as is the case of the Article 255 Committee established for the CJEU 
and the practice of national councils for the judiciary in Member States). This approach 
would  ensure  the  highest  degree  of  depoliticisation  and  hence  of  legitimacy  and 
independence, since no potential disputing party would be involved in the appointment. 

75 Judges are nominated directly by Contracting States in the ITLOS and by “National Groups” in the ICJ. 
Subsequently, judges are selected by vote (ITLOS), common accord (CJEU) or by consensus (WTO 
AB) of the Contracting States or by the UN General Assembly and Security Council for the ICJ. 

76  In  the  case  of  the  Caribbean  Court  of  Justice,  judges  are  nominated  and  selected  by  an  independent 

body, namely the Regional Judicial and Legal Services Commission (RJLSC). 

77 The modalities to identify the groups are not specified at this stage. 

46 

 
 
 
 
                                                 
However, this may be politically difficult to achieve, since countries might want to have 
a  say  in  the  appointment  of  adjudicators.  This  was  the  sub-option  most  favoured  by 
NGOs.  

Subject  to  the  outcome  of  multilateral  negotiations,  the  third  sub-option  would  be  the 
preferred  approach  since  it  would  bring  the  highest  degree  of  independence  and 
legitimacy and be most consistent with the logic behind Article 6 ECHR and Article 47 
of the Charter on the  right  to  an effective remedy before an  independent  tribunal. 
The  exact  details  would  however  largely  depend  on  how  exactly  the  procedure  was 
designed and how this would interact with the initial nomination.  

Case allocation 

Cases arriving to the Court would need to be allocated to adjudicators of the Court for 
deciding on their merit. Two main alternatives are available: 

(i)  According to objective criteria (i.e. random allocation); or  
(ii)  Allowing the disputing parties to intervene. 

(i)  Allocation  of  cases  without  the  involvement  of  disputing  parties  is  the  principle 
before  international  and  domestic  courts.78  In  fact,  most  respondents  to  the  public 
consultation strongly support the idea of an allocation of adjudicators not involving the 
disputing  parties  and  consider  it  a  necessary  safeguard  to  ensure  the  independence  of 
adjudicators. Academics stressed that random allocation would be in line with the aim 
of increasing independence and legitimacy of the adjudicative body.  

(ii)  Conversely,  allowing  the  disputing  parties  to  have  a  say  would  run  counter  to  the 
goal  of  moving  the  resolution  of  investment  disputes  onto  a  basis  that  is  more 
legitimate,  independent  and  impartial.  Certain  business  stakeholders  indicated  that  by 
randomly allocating cases, valuable expertise could be lost. However, specific expertise 
can  always  be  brought  in  through  experts,  as  is  the  case  in  most  international  and 
domestic courts, where trained generalist judges handle cases with specific expertise as 
necessary.  In  addition, a  number  of  respondents  from  the  legal  sector and  partly  from 
the business sector considered it important that adjudicators not hear cases against their 
own home states.  

Random allocation of cases would increase adjudicators' independence and impartiality 
and  improve  the  system's  legitimacy,  in  compliance  with  the  right  to  an  effective 
remedy  before  an  independent  and  impartial  tribunal.  The  two  sub-options  would 
not have any economic, social or environmental impacts.  Random allocation of cases 
is therefore the preferred option.  

78  Judges  of  the  ICJ  are  allocated  to  a  specific  case  by  decision  of  the  Court;  in  other  courts  they  are 
distributed by lot drawing from a list (Iran-US Claims Tribunal) or cases are allocated to chambers 
(CJEU, ECtHR); while a system of rotation is provided for members of the WTO Appellate Body.  

47 

 
 
 
 
 
                                                 
Scope of appeal 

At a minimum it should be possible to appeal a decision issued at First Instance in the 
event of procedural errors and substantial errors of law. This is in line with the practice 
of domestic and some international tribunals (particularly those where a first request for 
judicial review goes to part of the same court structure) and contributes to the system's 
legitimacy  and  adjudicators' 
to  consistency  and 
predictability of case law.  

independence,  as  well  as 

In addition to the procedure and the law, it could be argued that the appeal should also 
carry  out  a  certain  examination  of  the  facts.  In  this  sense,  the  Appeal  Tribunal  could 
conduct: 

(i)  A complete fresh analysis of the facts; or 
(ii)  An analysis limited to check manifest errors in the appreciation of 

facts. 

(i)  Allowing  for  a  complete  fresh  analysis  of  the  facts  would  be  burdensome  since  it 
would amount to relitigating the case and  have a negative impact on the  efficiency of 
the Court system because it would be equal to a second analysis of the case. Since this 
would translate in additional workload, this sub-option would increase the costs of the 
Court and of the secretariat, which would have to be borne by the budgets of the EU and 
its  Member  States,  as  well  as  other  Contracting  Parties.  This  sub-option  could  also 
extend litigation proceedings and increase the costs for the disputing parties (i.e. legal 
advice and preparation of the facts).  

(ii) The second alternative would give the possibility of review and correction of errors 
of  fact  made  by  the  First  Instance  Tribunal  that  are  manifestly  wrong.  This  approach 
strikes  a  good  balance  between  the  need  of  having  an  efficient  dispute  settlement 
system and reasonable administrative and budgetary burden for the Contracting Parties. 
It  would  not  increase  the  length  of  proceedings  and/or  costs  for  disputing  parties 
dramatically.  It  would  therefore  not  impact  all  parties'  access  to  justice  and  to  a  fair 
trial. A number of stakeholders from the business sector supported the appeals both on 
legal and factual grounds. Some respondents from the legal sector had reservations on 
the possibility of the review of questions of fact and indicated that the grounds of appeal 
should be clearly defined in order to prevent any abuses. 

The  second  sub-option,  which  favours  an  appeal  in  cases  of  manifest  errors  in  the 
appreciation  of  facts  (in  addition  to  procedural  errors  and  substantial  errors  of  law)  is 
the preferred approach inasmuch as it ensures the right to an effective remedy without 
requiring  a  high  budgetary  or  administrative  burden  for  the  Contracting  Parties  and 
disputing  parties.  It  therefore  brings  efficiency.  It  secures  the  objectives  of  having  an 
appeal that provides for consistency and predictability of case-law and secures legal 

48 

 
 
 
correctness of decisions but limits the necessary resources by circumscribing the cases 
where a factual review can be conducted.79 

5.2.3 Institutional aspects 

Secretariat 

Adjudicators  and  the  Court  will  need  secretarial  support.  It  can  be  expected  to  cover 
legal analysis to assist them in their substantive work, registrar services to manage the 
flow of cases and general administrative tasks.  

Two sub-options exist with regards to the provision of such support: 

(i)  Creating a self-standing secretariat; or 
(ii)  Housing that secretariat in an existing organisation.  

(i) The main advantage of setting up a new secretariat and employing new staff would 
be  not  being  obliged  to  fit  the  new  system  into  an  existing  one.  However,  this  sub-
option would be more costly. It is estimated that it would cost under EUR 6 million per 
year  (see  Annex  4).  It  would  also  be  more  burdensome  to  set  up,  since  the  whole 
system, including staff regulations for the employees, would need to be designed anew. 

(ii) The second alternative would have lower cost implications80 and be more efficient 
because  the  Court  would  rely  on  the  expertise  and  experience  of  an  existing 
organisation.  The  issue of  which  organisation  could  host the  Court's  secretariat  would 
have to be decided through a careful examination of which organisations are willing to 
do so and some key aspects such as their existing membership, voting rules and public 
perception.  In  any  event,  such  a  scenario  could  only  exist  if  the  existing  organisation 
takes the decisions to permit this to happen. This may be possible, but is impossible to 
determine at this stage.  

79 The issue of enforcement does not directly relate to any of the problems  identified above, but it will 
have  to  be  addressed  when  establishing  the  Court.  Presently,  arbitral  awards  are  mostly  enforced 
through the1966 Convention on the Settlement of Investment Disputes Between States and Nationals 
of Other States (ICSID Convention) or the 1958 Convention on the Recognition and Enforcement of 
Foreign  Arbitral  Awards  (New  York  Convention).  The  ICSID  Convention  provides  for  the 
enforcement  of  the  award  without  review  at  domestic  level  in  any  country  party  to  the  ICSID 
Convention. Except for the limited possibilities of annulment, awards are final and parties may not 
seek another remedy before another tribunal. The domestic court is therefore limited to verifying that 
the award is authentic. Conversely, awards rendered under the New York Convention can be subject 
to review at domestic level but no annulment is available. Under the multilateral Court, it would be 
overall most efficient to rely on an existing framework, considering that no new system would have 
to be designed and a significant administrative burden and costs would therefore be saved for the EU 
and  its  Member  States.  The model  of  the  ICSID Convention without domestic  review would bring 
added  consistency  and  predictability  to  the  system.  By  not  allowing  for  unnecessary  additional 
litigation opportunities, it would ensure the right to a fair process and independence. 

80 Since the actual level of fees has not been agreed and estimating the number of days staff will work 
would  be  highly  speculative,  the  calculation  of  a  fee-based  remuneration  system  for  staff  was  not 
carried  out.  Undoubtedly,  a  fee-based  remuneration  system  alone  would  cost  less  than  a  fixed 
remuneration system. See Annex 4. 

49 

 
 
 
 
                                                 
In  terms  of  impacts,  creating  a  self-standing  secretariat  would  entail  higher  financial 
implications. It would have a positive impact on global governance to the extent that 
specific expertise would be developed without borrowing it (from other organisations) 
and  would  also  ensure the  complete  independence  of  the  staff,  which  would  increase 
the  Court's  legitimacy.  None  of  the  sub-options  would  have  any  environmental  or 
social  impacts  besides  the  effect  on  employment  of  potential  staff  of  the  new  self-
standing  secretariat  and  the  staff  of  the  current  institutions,  the  extent  of  which  is 
however difficult to estimate at this stage. The first alternative seems preferable, despite 
higher  costs,  because  it  can  better  achieve  the  objectives.  However,  in  the  event  that 
existing organisations offered to host the Court's secretariat, such opportunities should 
be nonetheless considered.  

Mechanism to be part of the multilateral Court  

It  is  expected  that  the  membership  of  the  Court  grows  over  time.  Therefore  a 
mechanism  must  be  in  place  to  accommodate  a  growing  number  of  members  and  of 
treaties under its scope. Because this issue will only arise with the creation of the Court, 
it does not directly relate to any of the problems of the current scenario. It is however 
examined here due to the interest it gathered among stakeholders and the fact that it will 
be an issue to be addressed in the negotiations. 

Two sub-options are available regarding the mechanism to become part of the Court: 

(i)  An opt-in system; or  
(ii)  Re-negotiating and/or amending each treaty. 

(i)  Through  an  opt-in  system,  countries  would  agree  in  the  legal  instrument  (e.g. 
convention) establishing the multilateral Court to subject their investment treaties to the 
jurisdiction  of  the  Court.  The  Court  would  then  supersede  ISDS  or  ICS  provisions  in 
investment  treaties  of  the  EU  and  EU  Member  States  with  third  countries  or  between 
third  countries.  This  mechanism  would  be  highly  efficient  in  that  it  would  discharge 
states  from  the  potentially  complex  and  lengthy  processes  of  re-negotiating  the 
underlying investment treaties to amend their dispute settlement rules to submit them to 
the jurisdiction of the Court.  

There are important precedents of mechanisms of this type, such as the United Nations 
Mauritius Convention on Transparency for Investor-State Dispute Settlement81 and the 

81  The  Mauritius  Convention  on  Transparency  extends  the  scope  of  the  UNCITRAL  Rules  on 
Transparency  in  Treaty-based  investor-State  Arbitration  (which  ensure  transparency  and  public 
accessibility to treaty-based ISDS proceedings) to investment treaties concluded before 1 April 2014. 
The  Mauritius  Convention  therefore  makes  it  possible  for  states  (and  organisations  like  the  EU)  to 
agree  to  apply  the  UNCITRAL  Transparency  Rules  in  their  investment  treaties  that  are  already  in 
effect.  For  countries  who  decide  to  sign  it,  the  Convention  would  apply  automatically  to  all  their 
treaties,  unless  the  country  specifically  lists  investment  agreements  where  it  does  not  want  the 
Transparency Rules to apply. The Mauritius Convention on Transparency is set to enter into force on 
18  October  2017,  following  the  three  necessary  ratifications  (from  Mauritius,  Canada  and 
Switzerland). 

50 

 
 
 
 
                                                 
OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent 
Base Erosion and Profit Shifting.82 

An opt-in mechanism would allow submitting existing and future investment treaties to 
the  jurisdiction  of  the  Court.83  84  It  would  bring  a  certain  degree  of  flexibility  to  the 
system which would need to be balanced with objectives such as consistency of case-
law.85 This approach would bring permanency and transparency to the system, since 
all  agreements  under  the  scope  of  the  Court  would  be  referred  to  in  the  Convention 
establishing the Court. 

Half of respondents to the public consultation86 considered it important that the Court be 
competent  to  adjudicate  disputes  arising  under  existing  and  future  investment  treaties. 
National  business  groups  argued  in  favour  of  a  mechanism  that  effectively  aligns 
dispute  settlement  in  all  investment  treaties  and  large  environmental  platforms 
specifically  noted  that  an  opt-in  system  would  be  the  best  way  forward.  However, 
certain  other  business  groups  suggested  that  an  opt-in  mechanism  would  entail  a 
potentially  long  transition  period  with  a  certain  level  of  fragmentation  until  the  Court 
has  completely  replaced  ISDS.  Although  it  is  true  that  such  period  could  entail 
financial and administrative resources for states that have opted-in to the Court but 
continue  to  be  challenged  before  ISDS  tribunals,  such  risks  would  be  transitional  and 
would be lessened over time.  

(ii) A second approach could be to re-negotiate or amend each investment treaty that is 
to  be  brought  under  the  jurisdiction  of  the  Court.  For  the  reasons  set  out  above,  this 

82 This Convention is one of the outcomes of the OECD/G20 Project to tackle Base Erosion and Profit 
Shifting  (BEPS  Project).  It  aims  implementing  at  a  series  of  tax  treaty  measures  to  update 
international  tax  rules  and  lessen  the  opportunity  for  tax  avoidance  by  multinational  enterprises.  In 
order to transpose those measures into the more than 2000 relevant tax treaties worldwide, countries 
will opt-in to the multilateral convention, set to be signed in June 2017. 

83 Gabrielle Kaufmann-Kohler and Michele Potestà; "Can the Mauritius Convention serve as a model for 
the reform of investor-State arbitration in connection with the introduction of a permanent investment 
tribunal  or  an  appeal  mechanism?  Analysis  and  roadmap";  CIDS  –  Geneva  Centre  for  International 
Dispute Settlement; 2016. 

84 It would be important to foresee the different scenarios where in practice the multilateral court would 
be competent to hear a case, e.g. to allow it only where both the host state and the investor's state have 
opted-in to the court, or catering for instances where only one or none of them have but agree to on an 
ad  hoc  basis.  In  addition,  it  may  be  worth  considering  the  possibility  to  allow  for  states  to  record 
reservations  and/or  declarations  to  tailor  their  level  of  involvement  to  the  multilateral  court. 
Reservations could entail excluding specific investment agreements from the scope of the court; and 
declarations  whether  the  multilateral  court  would  apply  exclusively  or  alternatively  with  respect  to 
ISDS. 

85  Treaty  law  issues  connected  to  the  relationship  between  the  opt-in  Convention  and  the  existing 
investment treaties would also have to be considered, inasmuch as they will co-exist. Consideration 
should  be  given  to  whether  the  opt-in  Convention  is  to  be  regarded  as  an  amendment  to  existing 
investment  treaties  or  as  a  subsequent  treaty  with  the  same  subject  matter,  which  seems  more 
appropriate. The choice is important in terms of applicability of treaty law rules. 

86 50% of respondents to the public consultation with an opinion on the matter consider it important that 

the court be able to hear cases under existing and future investment treaties.  

51 

 
 
                                                 
approach would be inefficient (large resources needed) and run counter to the objective 
of predictability (since the outcome of negotiation for each treaty would be uncertain). 
It  would  not  necessarily  be  transparent  (in  the  sense  of  easily  available)  since  the 
results of potentially many different negotiations would have to be examined.  

An opt-in mechanism allowing to replace all existing treaties at once would be efficient 
and have lower cost impacts than the potentially complex and lengthy processes of re-
negotiating  the  totality  of  underlying  investment  treaties  to  amend  their  dispute 
settlement  rules.  This  approach  would  also  contribute  more  to  the  objective  of 
transparency  and  would  give  enhanced  predictability  to  future  agreements  (e.g. 
between parties that have already signed up to the convention establishing the Court). It 
is therefore the preferred sub-option. 

Support to SMEs 

The  current  system  poses  accessibility  problems  for  companies  with  a  smaller  size  or 
turnover. Concerning SMEs, two sub-options could be envisaged: 

(i)  To create specific measures to ensure access to the Court for SMEs such 

as simplified procedural rules or the waiving of certain costs; or 

(ii)  Not to create any specific procedure for SMEs. 

(i)  Having  specific  assistance  in  place  for  SMEs  would  ensure  that  the  high  costs  of 
litigation do not prevent any investor from resorting to an effective dispute settlement 
system.  In  this  sense,  it  would  contribute  to  the  goal  of  efficiency  and  to  ensuring  an 
effective remedy.  

A number of support measures could be envisaged for SMEs. Although stakeholders did 
not  show  an  overwhelming  support  for  special  rules  for  SMEs,  those  in  favour  put 
forward  a  number  of  ideas  including  legal  assistance,  simplified  proceedings  (stricter 
deadlines  and/or  limited  document  production)  and  incentivised  use  of  alternative 
methods  of  dispute  resolution.  More  specific  proposals  include  allowing  cases  to  be 
heard  by  one  sole  adjudicator,  the  possibility  to  conduct  proceedings  online  or  via 
teleconference  and  to  allow  for  flexible  hearing  locations.  The  idea  of  setting  up  an 
Advisory  Centre  for  SMEs  funded  partly  by  the  EU  and  partly  by  users  of  the  Court, 
and providing for legal advice and possibly for financial support, has also been raised. 
More  broadly,  the  idea  has  been  flagged  that  any  support  granted  to  developing 
countries  should  also  be  extended  to  SMEs.    In  addition,  respondents  representing 
SMEs  submitted  that  a  holistic  approach  rather  than  specific  measures  would  be 
necessary  to  ensure  that  smaller  investors  enjoy  full  access  to  the  multilateral 
investment  court.  These  possibilities  are  not  analysed  individually  since  that  would 
require making an overly large number of assumptions. 

On  the  downside,  this  approach  meets  political  difficulties  such  as  agreeing  on  a 
definition of SMEs and that the Contracting Parties agree to bear the costs of any such 

52 

 
 
 
 
assistance. This sub-option would therefore have financial implications for the EU and 
its Member States. 

87 

(ii)  A  different  approach  would  be  not  to  grant  any  additional  assistance  to  SMEs, 
considering  inter  alia  that  the  size  of  the  disputants  is  not  necessarily  related  to  the 
importance,  significance  or  difficulty  of  such  case.  Bigger  businesses  consider  that 
enhanced  support  for  SMEs  risks  creating  categories  within  investors  and  that 
simplified procedures should apply according to the size of the claim instead. 

Still,  not  assisting  SMEs  may  result  in  smaller  businesses  being  unable  to  utilise  the 
protection laid down in the agreements even in cases of blatant violations of investment 
protection due to the high costs and complexities associated with litigation. This second 
approach would have less financial implications for the EU and its Member States, but 
compromise access to justice of smaller companies. 

Securing SMEs access to the multilateral system according to the first sub-option would 
be more costly for the EU, but such costs would be outweighed by positive implications 
on the EU's economy and competitiveness (since 99% of EU companies are SMEs).88 
The first approach should therefore be further explored.  

Support to developing countries 

A criticism commonly made in relation to ISDS is that it puts developing countries and 
least-developed  countries  at  a  disadvantageous  position  vis-à-vis  investors,  as  the 
former  do  not  always  have  the  budget  and/or  the  expertise  to  effectively  defend 
themselves in arbitration proceedings.  

The question in relation to developing countries is whether: 

(i)  There should be a more favourable system of support to developing countries 

to ensure access to the multilateral investment Court; or 

(ii)  There should be no specific procedures for developing countries. 

(i)  Ensuring  that  the  Court  caters  for  the  special  needs  of  these  countries  would 
contribute to making the system more legitimate. Although it is not possible to estimate 
the  costs  at  this  stage,  it  would  be  more  costly  for  developed  countries.  The  benefits 
would in all likelihood however outweigh costs. 

A  majority89  of  respondents  to  the  public  consultation  agreed  that  discussions  should 
cover the issue of special assistance to developing countries. Of them, a good number 

87 The costs related to special assistance for SMEs have not been calculated in Annex 4 as large number 

of assumptions would have to be made for the different possibilities. 

88 European Commission, DG GROW (2017).  

89 60.9% of respondents to the public consultation with an opinion on the matter support that negotiations 
cover the issue of special assistance to developing countries. It is notable however that more than one 
third of overall respondents did not express an opinion.  

53 

 
 
 
 
                                                 
suggested that support to developing countries should materialise before disputes arise, 
for example through training to government officials (dialogues, knowledge transfer and 
exchange  of  best  practices)  or  development  aid.  A  smaller  number  instead  deem  it 
preferable that assistance takes the form of legal advice during disputes and/or financial 
aid to cover the litigation costs. The idea that there should be a special structure of costs 
for developing countries was also flagged.  

Based on the model of the Advisory Centre for WTO Law (ACWL), an advisory centre 
to provide legal advice and training to developing and least-developed countries could 
be  set  up.90  The  ACWL  precedent  was  considered  a  relatively  useful  precedent  by  a 
number  of  stakeholders.91  Interestingly,  a  parallel  idea  was  discussed  at  the  OECD  a 
decade ago.92  

Indeed,  support  could  take  different  forms.  These  possibilities  are  not  analysed 
individually since that would require making an overly large number of assumptions.  

(ii) A number of respondents representing business platforms submitted that the existing 
mechanisms  to  support  developing  countries  are  sufficient  and  that  no  additional 
assistance is needed. While it is true that most if not all states allocate budget lines to 
dispute  settlement,  many  of  them  are  affected  by  financial  and  human  resource 
constraints that do not affect developed countries. Mechanisms allowing for assistance 
seem therefore to be worth exploring.  

Facilitating access for developing countries to the multilateral system (or failing to do 
so) will have important implications on the inclusiveness of the multilateral project. A 
system  of  support  for  developing  and  least-developed  countries  would  ensure  an 
effective  access  to  justice  for  all  states  in  the  event  that  they  are  sued  by  a  foreign 
investor, regardless of their size and GDP.  Granting some sort of special assistance to 
developing  and  least-developed  countries  would  therefore  be  the  preferred  approach. 
The specific features of that assistance will however have to be negotiated. 

5.2.4 Financial aspects 

Allocation of costs among members 

90 The Advisory Centre for WTO Law (ACWL) provides developing and least-developed countries legal 
advice on all procedural and substantive issues arising under WTO law, support at all stages of WTO 
dispute settlement and training on topical issues of interest of WTO law.   

91 In any event, the ACWL experience would not be directly transferrable to a parallel Centre under the 
multilateral investment Court mainly due to the very distinct nature of disputes at stake (the ACWL 
works on state-to-state disputes and in both offensive and defensive standpoints). 

92 The idea was put forward that, in order to create a level playing field for developing countries in their 
disputes against foreign investors, relevant organisations could jointly create an advisory facility to 
assist developing countries involved in ISDS.  The mooted Advisory Facility for Dispute Settlement 
would be a forum for information and advice on international investment law and arbitration generic 
issues,  technical  assistance  and  capacity  building  for  all  countries,  with  additional  support  to 
developing countries. 

54 

 
 
 
                                                 
In  order  to  ensure  that  the  multilateral  investment  court  can  fully  operate,  sufficient 
financing  will  have  to  be  provided.  Since  the  Court  aims  to  include  countries  with 
different  levels  of  economic  development,  there  are  two  main  possibilities  of 
apportionment of the costs of the Court: 

(i)  A system that reflects the level of development of members, as operated 

by different international organisations; or 

(ii)  A system that equally allocates costs among members.  

(i) Allocating costs according to Parties' level of development would be in line with the 
practice  of  other  international  organisations93  and  tribunals  such  as  the  WTO,94  the 
ECtHR95  and  the  ICJ,96  which  have  different  formulas  in  place  calculating  costs 
according to development-related factors. Other international platforms ensure coverage 
of  costs  through  a  repartition  key.  For  instance,  the  allocation  of  costs  of  the  World 
Bank  is  based  on  the  International  Monetary  Fund  (IMF)  quotas,  which  take  into 
consideration  the  development  of  the  country,  established  on  the  elements  of  the 
national GDP, openness (the annual average of the sum of current payments and current 
receipts), variability of current receipts and net capital flows; and reserves.97  

considerations 

93 The UN lists of Developing Countries and Least-Developed Countries are available on the UN website. 
prospects 

See 
(http://www.un.org/en/development/desa/policy/wesp/wesp_current/2014wesp_country_classificatio
n.pdf) 
(http://www.un.org/en/development/desa/policy/cdp/ldc/ldc_list.pdf).   

Least-Developed 

Economic 

Countries 

Situation 

world 

UN 

and 

and 

list 

on 

of 

94 The WTO is financed from the contributions of its member states which are based on the shares of the 
member states in international trade, considering the trade in goods, services and IP rights in the past 
five years. Additionally, this method also determines the minimum contribution for member states that 
See 
trade 
has 
https://www.wto.org/english/thewto_e/secre_e/contrib_e.htm.  

international 

smaller 

value. 

share 

than 

the 

the 

set 

in 

a 

95 The ECtHR is financed from the budget of the Council of Europe, which divides the costs between the 
member states based on the formula involving national GDP and the annual national population. See: 
http://www.echr.coe.int/Documents/Budget_ENG.pdf  and  Council  of  Europe,  Committee  of 
Ministers, Resolution (94)31 on the Method of Calculating the Scale of Member States' Contributions 
to Council of Europe Budget (Adopted by the Committee of Ministers on 4 November 1994 at the 519 
bis 
at: 
Ministers' 
of 
http://www.echr.coe.int/Documents/Budget_ENG.pdf.  

Deputies), 

available 

meeting 

the 

96 The expenses of the ICJ are included in the UN budget, which are allocated on the basis of a "scale of 
assessment"  which  is  annually  recalculated.  This  method  takes  into  consideration  Gross  National 
Income and relief measures (debt burden adjustment and low per capita income adjustment) and sets 
the minimum and maximum contribution that a member shall pay. United Nations, New York, 2015, 
Report  of  the  International  Court  of  Justice  1  August  2014  –  31  July  2015,  available  at: 
http://www.icj-cij.org/court/en/reports/report_2014-2015.pdf,  p.58/61.  And  United  Nations,  New 
York,  2016,  Report  of  the  Committee  on  Contributions  Seventy-sixth  session  (6-24  June  2016), 
available at: http://www.un.org/ga/search/view_doc.asp?symbol=A/71/11, Chapter III, pp. 8-28. And 
United Nations, New York, 2015, Report of the Committee on Contributions Seventy-fifth session (1-
26 June 2015), available at: http://www.un.org/ga/search/view_doc.asp?symbol=A/70/11, Chapter III, 
pp. 9-37. 

97  These  figures  are  rounded.  International  Monetary  Fund:  Reform  of  Quota  and  Voice  in  the 
International Monetary Fund – Report of the Executive Board to the Board of Governors, 28 March 
2008, p. 3. 

55 

 
 
 
                                                 
This  sub-option  would  be  in  line  with  the  principles  of  fostering  multilateral 
cooperation  and  good  global  governance.  This  sub-option  would  have  higher 
budgetary implications for the EU and its Member States, to the extent that they are 
developed  countries  and  would  need  to  pay  higher  contributions  than  other  less 
developed  Contracting  Parties.  The  majority  of  respondents  to  the  public  consultation 
supported  the  use  of  a  repartition  key  as  a  method  of  allocation  of  costs  among 
Contracting Parties.  

It should be stressed that the exact contribution is almost impossible to estimate since is 
highly dependent on the design of the system, the number of adjudicators and staff, the 
number  of  participants  and  the  formula  used  for  allocation  of  costs  amongst 
participants, all factors which cannot be determined in advance. It was estimated that if, 
for  example,  one  was  to  take  the  approach  of  the  World  Bank  contributions,  and 
assuming  a  membership  of  35  Contracting  Parties,  98  the  impact  on  the  EU  and  EU 
Member  States'  budgets  of  the  policy  option  of  establishing  a  multilateral  investment 
Court with the preferred features delineated in the paragraphs above would amount to 
around EUR 2.7 million per year for Member States and to around EUR 2.7 million per 
year for the EU.   

(ii)  In  contradistinction,  although  setting  up  a  system  that  allocates  costs  among 
members  on  the  basis  of  equal  shares  would  be  less  expensive  for  the  EU  and  its 
Member  States,  it  would  however  be  contrary  to  the  practice  of  main  international 
organisations and courts and would run counter to the general objective of promoting an 
international  system  based  on  stronger  multilateral  cooperation  and  good  global 
governance as it would make participation of developing and least developed countries 
in the system too costly for their available financial means. Consequently, this system 
would render the whole Court overall less efficient, in that it could hamper access for 
countries with less means available. 

For the EU and its Member States and all developed countries, a system that takes into 
account  countries'  level of  development  would  entail  additional  costs. However,  these 
costs would be outweighed in terms of efficiency, inclusiveness and global reach of the 
multilateral project, enhancing multilateral cooperation and good global governance. 

Mixed financing 

It  would  need  to  be  decided  who  bears  the  costs  of  establishing  and  operating  the 
multilateral Court. The costs of the Court could be covered by: 

(i)  Contracting Parties' contributions exclusively; or 
(ii)  Contracting Parties' contributions and user fees;  

98 35 Contracting Parties, including the EU, its 28 Member States and six third countries. 

56 

 
 
 
 
                                                 
(i) Dispute settlement mechanisms between states99 and dispute settlement mechanisms 
set  up  by  states  for  claims  by  individuals100  do  not  generally  require  a  filing  fee  for 
claimants. The current ISDS system deviates from this practice and requires  claimants 
to pay their share.101 Respondents to the public consultation from the legal sector argued 
that this sub-option seemed overly friendly to investors and could lead to an increased 
number  of  manifestly  unfounded  claims.  However,  these  claims  could  be  discouraged 
by  the  application  of  the  "loser  pays"  principle  and  dismissed  on  an  expedited  basis 
before  they  reach  the  First  Instance  as  already  provided  for  in  EU  agreements.  This 
would be even more likely when adjudicators are not paid by case and therefore have an 
interest in case management rather than being appointed to as many cases as possible.  

This  sub-option  would  bring  added  legitimacy  to  the  system  by  limiting  financial 
control  of  the  Court  to  the  Contracting  Parties,  thereby  contributing  to  approximate 
investment dispute resolution to international and domestic tribunals. Although it would 
be more costly for states, it may help reduce the upfront costs which may be attractive 
for more participants.  

(ii) A system of user fees could be introduced to cover the costs of the Court in addition 
to the contributions of Contracting Parties. Such user fees would obviously not be equal 
to  those  that  apply  under  the  current  system,  but  could  be  destined  to  cover  specific 
services like the registrar. This approach would be less costly for the EU and Member 
States' budgets, however it is not possible at this stage to estimate the amount of users' 
contributions  in  a  meaningful  way.  A  large  number  of  respondents  to  the  public 
consultation supported that part of the operational costs be at least partly funded by user 
fees.  

Limiting  the  Court's  funding  to  Contracting  Parties  would  improve  the  system's 
legitimacy,  while  requiring  users  to  contribute  to  the  costs  would  relieve  EU  and 
Member States budgets to some extent. Both options seem to present pros and cons and, 
although the first sub-option appears preferable at this stage, it cannot be excluded that a 
certain system of user fees needs to be introduced. In any event, such fees should not be 
prohibitive for users, particularly SMEs, turning into a de facto barrier to access.  

5.2.4 Overall impacts of policy option 5 

The multilateral investment Court would build upon the principle of the rule of law (in 
the sense of ensuring the legitimacy of adjudicators of public matters) by addressing at 
global level issues raised previously concerning the traditional ISDS system regarding 
predictability  and  independence  (including  impartiality)  and  legitimacy  which  are 
addressed  by  the  ICS  but  only  at  bilateral  level.  First,  the  multilateral  Court  would 

99 ICJ, WTO, Iran-US Claims Tribunal. 

100 CJEU, ECtHR, Inter-American Court of Human Rights.  

101  In  ICSID,  for 

instance, 

the  party 

instituting  proceedings  must  pay  a 

lodging  fee,  see 

https://icsid.worldbank.org/en/Pages/Services/Cost-of-Proceedings.aspx.  

57 

 
 
 
                                                 
introduce  some  fundamental  features  of  independence  and  legitimacy  in  the  field  of 
settlement of international investment disputes, notably by ensuring that the principle of 
independence,  including  impartiality,  of  adjudicators  (who  would  no  longer  be 
appointed by the disputing parties to hear specific cases, but appointed ex ante and for 
fixed terms by the Contracting Parties) is absolutely upheld.  

Second,  the  multilateral  Court  would  ensure  transparency.  Third,  differently  from  the 
decentralised structure of ISDS and the bilateral nature of ICS,  and thanks to the very 
significant similarity across investment agreements, which essentially contain the same 
standards  of  protection,102  a  permanent  and  multilateral  body  would  enhance  legal 
certainty of the system by improving consistency in decision-making and predictability 
in the outcomes of cases when the situations so allow. 

It is expected that dispute settlement procedures under the multilateral Court would be 
more expedient than under the current scenario basically due to the fact that procedures 
would be streamlined and that certain procedural steps that are currently lengthy would 
be eliminated (i.e.  choice of arbitrators).  In  addition,  the higher predictability of case-
law would contribute to faster decisions.  Shorter procedures should bring cost-savings 
the value of which is however impossible to quantify at this stage. 

In  addition,  the  multilateral  investment  Court  would  serve  the  general  objective  of 
promoting  an  international  system  based  on  stronger  multilateral  cooperation  and 
good  global  governance,  inasmuch  as  it  would  have  to  be  designed  in  a  manner  that 
secured  inclusiveness  of  all  interested  countries  and  ensuring  that  countries'  level  of 
development not be an obstacle to an effective use of the Court. 

The multilateral investment Court scenario favours the general goal of simplification in 
EU policy-making. It is intended that once operational, the Court would replace bilateral 
ICSs that will have been included in EU agreements and any other ISDS mechanisms 
included  in  investment  treaties  of  Member  States.103  As  regards  treaties  in  force 
between non EU-countries, such countries will have to decide whether they want to be 
Parties  to  the  mechanism  establishing  the  Court  and  thus  replace  the  existing  ISDS 
provisions of their agreements by this new dispute settlement mechanism. 

Concerning  the  economic  impact,  the  option  of  the  multilateral  Court  is  expected  to 
have different budgetary implications depending on the sub-options that are eventually 
retained.  The  budgetary  implications  of  some  of  these  sub-options  (i.e.  number  of 
adjudicators, fixed remuneration  systems for adjudicators and staff, allocation systems 
of costs among members and exclusive Contracting Parties' contributions) are estimated 
to be around EUR 5.4 million for the EU and EU Member States' budgets under the sub-

102  For  further  background,  see  description  on  the  lack  of  consistency  and  predictability  problem  in 

Chapter 1.1 above. 

103  The  Convention  establishing  a  multilateral  investment  Court  would  provide  specific  rules  on 
replacement mechanisms of ICS and ISDS mechanisms in place with the multilateral Court system 
and  any  transitional  arrangement  where  applicable.  Costs  arising  from  the  functioning  of  the 
multilateral  Court  (as  per  Annex  4)  will  be  triggered  when  the  Convention  establishing  the 
multilateral investment Court enters into force. 

58 

 
 
                                                 
options identified as preferred, while the costs of other sub-options (namely, fee-based 
remuneration  systems  for  adjudicators  and  staff,  special  assistance  for  SMEs  and 
developing countries and user fees) cannot be quantified at this stage.104 

In addition, better access by SMEs to the Court may result in a higher number of cases, 
but  that  cannot  be  estimated  at  this  stage.  Since  the  multilateral  Court  initiative  only 
addresses procedural (i.e. dispute settlement) rules and not substantive rules (which are 
included  in  the  underlying  investment  agreements),  there  are  no  likely  economic 
impacts beyond the costs mentioned above.  

No environmental impacts are expected to result from the establishment of the Court. 
Nonetheless, the combination of preferred sub-options coupled with the contribution to 
the principle of the rule of law, is expected to bring the system more in line with other 
international and domestic courts, moving it away from ad hoc ISDS. In so doing, the 
functioning  of  the  multilateral  Court  would  be  closer  to  other  areas  of  public  law 
(safeguarding public interests) instead of being based on commercial law (based on the 
protection  of  private  interests).  As  the  example  of  the  WTO  Appellate  Body 
demonstrates,  the  permanency  associated  with  such  bodies,  which  creates  a  concern 
with  the  long-term  interpretation  of  the  underlying  substantive  rules  provides  a  better 
balance  between  the  objectives  pursued  by  international  trade  and  investment 
agreements (i.e. ensuring freedom to trade and investment whilst respecting the ability 
of states to regulate to protect e.g. the environment).  

Minor social impacts have been anticipated regarding the professional opportunities of 
the  arbitrator/judge  community  in  becoming  adjudicators  under  the  Court.  The  same 
applies to the professional opportunities of potential staff of the Court's secretariat. 

6.  HOW DO THE OPTIONS COMPARE? 

This chapter compares the positive and negative impacts of the baseline scenario and of 
option 5 with its sub-options as identified in the analysis in Chapter 5. The comparison 
has been conducted according to the criteria of effectiveness in achieving the objectives, 
efficiency and coherence with overarching EU policy objectives. The analysis has also 
taken  into  account  the  economic,  social,  environmental,  budgetary  and  administrative 
impacts as well as impacts on human rights.  

6.1 

Positive and negative effects of the policy options 

Option 1: Baseline scenario 

The  baseline  scenario,  where  ISDS  and  the  ICS  coexist,  would  only  address  the 
problems partially and would only allow the EU to achieve the identified objectives to a 
limited extent.  

104 The budgetary impacts of the multilateral investment Court can be reasonably expected to materialise 

in the context of the next Multiannual Financial Framework (after 2020). 

59 

 
 
 
                                                 
The  baseline  scenario  would  have  important  implications  for  the  EU  in  terms  of  the 
human  and  financial  resources  that  would  be  necessary  to  manage  the  coexistence  of 
ISDS  and  ICS.  The  costs  are  estimated  to  be  around  EUR  9  million  for  the  EU  and 
Member  States  budgets (see  Annex  4).  In  addition,  the  baseline  scenario  runs  counter 
the  general  goal  of  simplification  in  EU-policy  making  because  multiplying  bilateral 
agreements  with  an  ICS  without  phasing  out  the  ISDS  mechanism  adds  further 
complexity. The baseline scenario also has an uneven impact on access to fair trial and 
effective remedy.  

Option 5: Establishment of a multilateral investment court 

Option 5 has the potential to allow for a satisfactory attainment of the policy objectives. 
The  degree  of  contribution  of  this  option  to  the  specific  objectives  will  be  however 
conditional  upon  the  outcome  of  multilateral  negotiations  reflecting  the  various  sub-
options that at this stage seem preferable. 

Compared  to  the  baseline  scenario  this  option  would  have  a  clear  positive  impact  on 
human  rights  regarding  the  right  to  a  fair  trial  and  an  effective  remedy.  It  will  also 
alleviate  the  administrative  burden  by  centralising  all  disputes  under  a  single  set  of 
procedural  rules.  Regarding  the  costs  for  the  EU  and  Member  States  budgets,  it  is 
estimated that the multilateral Court will annually cost around EUR  5.4 million to the 
EU and Member States. 

6.2 

Summary table of the effects of the different policy options 

The table below summarises the contribution of each option to the general and specific 
objectives. The baseline scenario is considered to include the coexistence of ISDS and 
ICS and no distinction is made between the two regimes. The assessment under option 5 
is broken down into sub-options as analysed in Chapter 5. 

60 

 
 
 
 
Table 1: Summary of options' contribution to the objectives 

Specific objectives 

General objectives 

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Number 
adjudicators 

of 

of 

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Status 
remuneration 

and 

Composition 
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Ethics 

Procedural 
aspects 

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Renewable 
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Part-time, fees 
Broad requirements 
Specific requirements 
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regime  
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an 

the 

disputing 

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Opt-in 
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Support 
No support 
Support 
No support 
Level of development 
Equal 
Yes 
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Case 
allocation 

Scope 
appeal 

of 

Secretariat 

Membership 

SMEs 

Developing 
Countries 
Allocation  of 
costs 
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financing 

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aspects 

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Positive contribution 
Negative contribution 
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62 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.3 

Identification of a preferred policy option 

From the analysis in Chapter 5 as well as from the above table it is evident that the best option 
to  address  the  problems  described  in  Chapter  1  of  this  Impact  Assessment  is  option  5 
including specific features to secure the highest attainment of the specific objectives linked to 
this initiative. 

In  particular,  the  multilateral  Court  should  include  a  First  Instance  and  an  Appeal  Tribunal 
composed  in  turn  by  a  certain  number  of  adjudicators  to  be  determined  by  the  effective 
workload. It would be preferable that adjudicators be appointed for a fixed period of time on a 
long and non-renewable mandate. Adjudicators would need to meet high qualifications. They 
would be subject to high ethical requirements and mechanisms should be in place to ensure 
adjudicators'  independence  and  impartiality,  including  random  allocation  of  cases  and  a 
certain regime to ensure ethical concerns are upheld. They would be ideally appointed by an 
independent  body  or  an  independent  body  would  have  a  significant  role  in  the  selection 
process. 

There are important procedural aspects that would need to be considered. Resort to the Appeal 
Tribunal  should  certainly  be  possible  in  cases  of  procedural  errors  and  substantial  errors  of 
law  in  First  Instance,  and  preferably  also  in  cases  of  manifest  errors  in  the  appreciation  of 
facts.  

Among the most relevant institutional aspects that would have to be considered, it is clear that 
the court would need secretarial support, preferably by a self-standing body created anew. It 
seems that an opt-in mechanism which would not require to re-negotiate existing agreements 
would be the most legally sound avenue for countries to be part of the Court system and bring 
their investment treaties under its jurisdiction. Systems to ensure that SMEs and developing 
countries enjoy effective access to the Court would need to be put in place. 

Concerning the financial aspects of the permanent Court, it would have to be decided how to 
allocate  costs  among  member  countries,  preferably  according  to  a  repartition  key  that  takes 
into  account  their  level  of  development,  as  is  common  practice  across  the  main  existing 
multilateral courts. The possibility of charging user fees to cover some of the Court services 
should also be considered. It is estimated that option 5 would cost the EU and Member States 
around  EUR  5.4  million  annually,  compared  to  around  EUR  9  million  of  the  baseline 
scenario.105 

The identification of preferred sub-options above is conducted on the basis of the analysis in 
Chapter 5 and for purposes of this Impact Assessment. The actual features of the multilateral 
Court will be subject to negotiations the outcome of which cannot be anticipated at this stage. 
Negotiations  can  be  expected  to  cover  issues  such  as  available  remedies  of  the  multilateral 
court. In general, older investment agreements are unclear whilst more modern treaties limit 
the  remedies  to  the  option  of  compensation  to  repair  the  damage.  Current  practice  differs 

105 For the detailed calculations and reasoning, refer to the Annex 4. 

63 

 
 
                                                 
across  international  courts  and  tribunals,  106  although  EU  agreements,  like  most  modern 
investment agreements, only foresee compensation.  

Another important issue concerns the enforcement of decisions of the multilateral court. The 
model of the ICSID Convention without domestic review would bring added consistency and 
predictability to the system and would be consistent with the idea of a self-contained regime, 
including  an  appeal  instance.  By  not  allowing  for  unnecessary  additional  litigation 
opportunities, it would ensure the right to a fair process and independence. 

7.  HOW WOULD ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

7.1  Operational objectives 

The operational objectives are derived from the specific objectives and take into account the 
preferred sub-options for the multilateral investment Court as identified in Chapters 5.2 and 
6.3. The following operational objectives are identified:   

  Ensuring independence (particularly impartiality) of adjudicators; 
  Ensuring efficient dispute settlement proceedings;  
  Ensuring access to investment dispute settlement for all investors;  
  Building up consistent case law including ensuring legally correct decisions; 
 

Improving transparency. 

7.2 

Future  monitoring  and  evaluation  of  the  functioning  of  the  multilateral 
investment court 

Since  the  parameters  and  functioning  of  the  multilateral  investment  Court  will  necessarily 
depend  on  the  outcome  of  a  multilateral  negotiation  process,  it  is  difficult  at  this  stage  to 
establish  stable  monitoring  indicators.  Also,  the  Court  may  have  to  adjust  to  a  growing 
membership in the first years.   

However,  once  the  Court  is  operational,  regular  annual  monitoring  would  be  carried  out  by 
the European Commission to measure its success rate in reaching the objectives set out in the 
Impact  Assessment.  It  is  also  expected  that  monitoring  would  be  complemented  by  regular 
dialogue  with  EU  Member  States  and  EU  stakeholders.  In  addition,  the  Commission  would 
regularly audit the use of the EU's financial contributions to the costs of the Court.   

The table below presents indicators to be used by the European Commission to monitor the 
progress  in  achieving  the  operational  objectives.  The  last  two  columns,  "Baseline"  and 
"Target", are not  considered  useful at this  stage, as  it is  not possible to say  when the Court 
would start operating.  

106 E.g. the WTO Dispute Settlement Body requires countries to bring the relevant measures in line with WTO 
law; while the ICJ and ITLOS can decide on compensation as well as oblige countries to bring their national 
laws into compliance with their international obligations. 

64 

 
 
 
 
 
                                                 
Table 2: Indicators to monitor achievement of operational objectives as set out in this Impact 
Assessment  

Operational 
objectives 

Indicator and unit of 
measurement  

Source of data 

Frequency of 
measurement 

Ensuring 
independence 
(particularly 
impartiality)  of 
the adjudicators  

of 
Number 
- 
successful  challenges 
brought 
against 
individual 
adjudicators 
members  

and 

Ensuring  access 
to 
investment 
dispute 
settlement 
all investors 

for 

-  Statistics  on  cases 
brought  to  the  Court 
broken  down  per  type 
of investor 

-  Average  cost  per 
case per different type 
of investor 

-  Secretariat  of 
the Court 

Annual 

Independent 
and 

 - 
reviews 
articles 
specialised 
investment law 

in 

-  Secretariat  of 
the Court 

Annual 

Academic 

- 
articles 

Ensuring 
efficient  dispute 
settlement 
proceedings  

length  of 
Average 
proceedings 
and  
resources  spent  per 
case 

-Secretariat of  the 
Court  

Annual 

- User feedback 

up 
Building 
case-
coherent 
law 
including 
ensuring  legally 
correct 
decisions 

Improving 
transparency 

A 

- 
analysis of case law  

qualitative 

-  Secretariat  of 
the Court  

Annual  

- 
of 
Percentage 
decisions  upheld  by 
the Court  

- Academia 

Setting up a website, a 
documentation  centre 
and a repository 

Annual 

User frequency of 
the 
website  of 
and 
Court 
requests 
for 
information 

The  monitoring  foreseen  by  the  European  Commission  in  relation  to  the  operational 
objectives identified in this Impact Assessment is without prejudice to the monitoring of the 
functioning  of  the  multilateral  investment  Court  to  be  undertaken  by  the  Court  itself.  The 

65 

 
 
 
 
 
 
  
 
Court  should  establish  relevant  indicators,  particularly  regarding  the  effectiveness  of  its 
functioning, and present the results of the regulator monitoring to the Contracting Parties.  

The  multilateral  Court  should  undertake  an  evaluation  of  its  functioning  and  discuss  the 
evaluation results with the Contracting Parties.  

In  addition,  in  line  with  the  Better  Regulation  requirements,  the  Commission  should 
undertake its own evaluation of the functioning of the Court when it has been in force for a 
sufficient period of time to ensure availability of meaningful data. The creation of academic 
networks to evaluate the functioning of the Court should be encouraged. 

The  Commission  will  communicate  the  results  of  its  evaluation  to  the  European  Parliament 
and  the  Council.  The  Commission  will  inform  the  membership  of  the  Court  about  the 
evaluation results and may propose adjustments to the functioning of the Court as necessary.  

66 

 
 
 
 
ANNEXES 

67 

 
 
 
 
 
 
 
ANNEX 1  

PROCEDURAL INFORMATION 

The Impact Assessment was led by DG TRADE Unit F2.  

The  agenda  planning/Work  Programme  reference  is  2016/TRADE/024  (Convention  to 
establish a multilateral court on investment). 

The Inception Impact Assessment was published and open for comments on 1 August 2016. It 
is  available  on  the  Commission's  "Better  Regulation"  website  at  the  following  address: 
http://ec.europa.eu/smart-
regulation/roadmaps/docs/2016_trade_024_court_on_investment_en.pdf. 

The  Inception  Impact  Assessment  is  also  linked  on  DG  TRADE's  page  on  dispute 
settlement.107 

Five meetings and one on-line consultation of the Inter-service Steering Group were called in 
the course of this Impact Assessment. The following Commission Directorates-General (DGs) 
and  services  were  invited:  Agriculture  and  Rural  Development  (AGRI),  Budget  (BUDG), 
Climate  Action  (CLIMA),  Competition  (COMP),  Communications  Networks,  Content  & 
Technology (CNECT), International Cooperation and Development (DEVCO), Economic and 
Financial  Affairs  (ECFIN),  Employment,  Social  Affairs  and  Inclusion  (EMPL),  Energy 
(ENER),  Environment  (ENV),  Financial  Stability,  Financial  Services  and  Capital  Markets 
Union (FISMA), Internal Market, Industry, Entrepreneurship and SMEs (GROW), Justice and 
Consumers  (JUST),  Maritime  Affairs  and  Fisheries  (MARE),  Mobility  and  Transport 
(MOVE), European Neighbourhood Policy and Enlargement Negotiations (NEAR), Regional 
and Urban Policy (REGIO), European External Action Service (EEAS), Eurostat – European 
Statistics  (ESTAT),  Service  for  Foreign  Policy  Instruments  (FPI),  Joint  Research  Centre 
(JRC), European Anti-Fraud Office (OLAF), Research and Innovation (RTD), Legal Service 
(SJ) and Secretariat-General (SG). 

The draft Impact Assessment Report was entirely prepared in-house by DG TRADE services. 
No external services or consultants were involved. 

The evidence used for the impact assessment includes input by stakeholders through various 
channels  as  per  the  Consultation  Strategy  (Annex  2)  and  relevant  case  law  and  academic 
literature.  

Considering that  the multilateral  reform of investment dispute settlement remains subject to 
multilateral  negotiations  with  third  countries,  this  report  is  partially  based  on  assumptions 
that, to the largest possible extent, are based on evidence (literature or stakeholder input). In 
any event, the  results presented in the Impact  Assessment  Report constitute, at this point in 
time, the most exhaustive and far-reaching endeavour in this direction. 

The draft Impact Assessment Report was submitted to the Regulatory Scrutiny Board (RSB) 
on  21  June  2017  and  was  examined  at  the  meeting  of  19  July  2017.  The  Board  issued  its 

107 See http://ec.europa.eu/trade/policy/accessing-markets/dispute-settlement/.  

68 

 
 
                                                 
opinion  regarding  the  Impact  Assessment  Report  on  24  July  2017.  The  table  below 
summarises how the recommendations from the RSB were taken into account in the current 
version of the report: 

Table 3  

Recommendations from the RSB 

Existing arbitration systems. 

Modifications to the Impact Assessment 
Report 

Clarifications  added 
Option 3 under Chapter 4. 

to  description  of 

Implications of the CJEU opinion 2/13. 

Language added in Chapter 2. 

Investment 
remedies.  

standards 

and 

available 

Clarification added to Chapter 5.2 (section 
on overall impacts of Option 5) and in the 
description  of  the  lack  of  consistency  and 
predictability problem in Chapter 1.1. 

On  the  issue  of  remedies,  language  added 
in Chapter 6.3. 

Cost split between EU and Member States.  Annex 4.  

Success indicators and stakeholder views. 

Explanatory  language  in  Annex  1  and 
Chapter 4. 

In parallel to the preparation of this Report, the Commission has held preliminary exploratory 
discussions with Member States and third countries on the multilateral reform of investment 
dispute settlement. In this context, Member States have consistently expressed support for the 
idea of establishing a multilateral investment court, although the position regarding individual 
design elements of the system remain to be discussed.  

In its 50th session (10 July 2017), the UNCITRAL Commission entrusted Working Group III 
with  a  mandate  to  work  on  the  possible  reform  of  the  current  system  of  investment  dispute 
resolution. This was supported by all UNCITRAL members, which will now discuss possible 
ISDS  reform,  including  on  the  possible  establishment  of  a  multilateral  system  for  the 
resolution  of  investment  disputes.  Since  design  elements  still  need  to  be  negotiated  under  a 
broad multilateral discussion, it is not yet possible to identify support for particular elements 
of the mechanism. 

69 

 
 
 
 
 
 
 
ANNEX 2  

STAKEHOLDER CONSULTATIONS 

The information and views in this Annex do not necessarily reflect the official position of the 
European Commission. This Annex summarises the input submitted by the stakeholders who 
participated  in  the  consultation  on  options  for  a  multilateral  reform  of  investment  dispute 
settlement. 

The  Commission  has  actively  engaged  with  stakeholders  and  conducted  a  comprehensive  
consultation throughout the Impact Assessment process. The Consultation Strategy108 set out 
a  number  of  actions  for  the  Commission  to  organise  as  part  of  the  consultation  process, 
notably  an  online  public  consultation,  a  stakeholder  meeting  and  academic  conferences.  In 
addition to all these, the Commission has held bilateral meetings with certain stakeholders as 
part of its targeted outreach. 

1. 

Feedback received on the Inception Impact Assessment 

The Commission received seven reactions to the Inception Impact Assessment, although some 
of  these  contributions  fall  outside  the  scope  of  the  topic.  Reactions  originated  from 
environmental  and  development  NGOs,  EU  and  national  consumer  associations,  EU 
platforms in the field of healthcare and academia. All submissions have been published on the 
relevant Commission website.109 

In their contributions, stakeholders give their initial views on the possible establishment of a 
multilateral  investment  court  and  highlight  key  issues  of  interest  to  them.  In  general, 
submissions  tend  to  welcome  the  Commission's  initiative  for  a  multilateral  reform  of 
investment  dispute  settlement.  Other  submissions  adopt  a  more  technical  approach  and  dig 
into the features of such multilateral system, outlining the broader lines that, in their view, the 
reform process should pursue. Academic papers on issues related to this initiative were also 
received. Views expressed through these contributions are in line with the more specific input 
received at a later stage through the online public consultation. 

2. 

Online public consultation 

The online public consultation was launched on 21 December 2016 and remained open for a 
standard  12-week  period  until  15  March  2017.  It  was  launched  on  DG  Trade's  website 
through  EU  Survey  (i.e.  the  Commission's  online  tool  for  conducting  public  consultations). 
The  consultation  consisted  of  a  questionnaire  of  63  questions  including  14  open  questions. 
Contributors  had  the  possibility  to  upload  a  position  paper.  The  online  public  consultation 

108 See http://trade.ec.europa.eu/doclib/docs/2016/october/tradoc_154997.pdf.  

109 See http://trade.ec.europa.eu/doclib/docs/2017/april/tradoc_155496.pdf.  

70 

 
 
 
 
                                                 
relayed 193 replies, 54 of them enclosing a position paper.110 The Commission received eight 
additional independent contributions in the form of comments or position papers sent directly 
to  the  dedicated  functional  mailbox.  On  11  April  2017,  all  contributions  were  published  on 
the dedicated website.111  

The  online  public  consultation  also  triggered  a  petition  from  specific  NGOs.112  The 
Commission replied directly in writing by letter of 3 May 2017.113 

2.1   Overview of respondents 

Respondents contributed to the online public consultation both in their personal (34.7%) and 
professional  (45%)  capacity.  Those  that  responded  personally  reside  mainly  in  Belgium 
(11.4%),  Germany  (7.4%),  Austria  (5.7%)  and  the  United  Kingdom  (5.2%).  More than  half 
(51.3%)  of  them  declined  to  specify  their  country  of  residence.  Respondents  answering  in 
their  professional  capacity  mostly  represent  trade  unions  and  NGOs  (28.5%)  and  trade, 
business or employers' associations (11.4%), although almost half of them (48.7%) declined 
to  specify  what  type  of  organisation  they  represent.  These  organisations  are  mostly 
established in Belgium (12.4%), Germany (8.8%) and Austria (5.7%), although almost half of 
them (48.1%) declined to specify this point. 

The map below shows the distribution of respondents in the EU. 

110 45 different position papers were received since a few of them were repeated. Two additional replies to the 
questionnaire were received after the closing deadline. Although for technical reasons these do not count for 
statistical purposes, they are considered as independent contributions and analysed in this Annex. 

111 See http://trade.ec.europa.eu/consultations/index.cfm?consul_id=233. Separated lists were put together taking 

into account contributors' preferences with regards to the publication of their personal data. 

112 Given the impossibility of conducting the petition through the online public consultation (due to the presence 
of  a  "captcha"  at  the  end  of  the  questionnaire),  these  NGOs  collected  signatures  that  were  handed  to  the 
Cabinet  of  the  Commissioner  for  Trade,  Cecilia  Malmström,  on15  March  2017  together  with  a  position 
paper and a leaflet. The position paper had also been submitted through the online consultation.  

113 Letter to Campact e.V. Demokratie in Aktion. 

71 

 
 
                                                 
Source: DORIS (2017)114 

Despite the high rate of respondents declining to volunteer information about their affiliation 
or origin, a comprehensive range of stakeholders were represented in the replies. Responses 
originate both from EU-wide and national/regional platforms not necessarily connected to the 
countries  mentioned  above.  This  stems  from  an  analysis  of  the  open  questions  and  position 
papers rather than from the statistical results. 

2.2  

Limitations of the consultation 

Firstly, as in any such online consultation, we note that the replies submitted by respondents 
cannot be regarded as a representative sample of all stakeholders and have to be  interpreted 
with caution. This is intrinsic to this method of consultation, where inter alia the number of 
questions and the length of the questionnaire have to be balanced with the aim to collect as 
much and as comprehensive information as possible, in the period of three months. 

Despite  the  Commission's  efforts  to  elaborate  a  balanced  consultation  in  that  sense,  the 
questionnaire  was  criticised  by  some  stakeholders  for  being  too  technical,  too  long  and  not 
allowing  respondents  sufficient  margin  to  express  their  views.  Most  of  these  respondents 
submitted however a position paper where they explained their views without the perceived 
constraints of the questionnaire.  

In  particular,  critical  respondents  regretted  that  the  consultation  did  not  ask  about  the 
desirability of investment dispute resolution in general and only sought views on the technical 
details  of  a  multilateral  reform  path.  These  respondents  lamented  that  the  questionnaire  did 
not  allow  giving  views  on  the  degree  of  the  reform  that  is  needed.  Generally,  these 
respondents argue that the current regime grants foreign investors excessive rights and that a 

114 For an explanation of the DORIS tool, see section 2.3 below. This map is purely illustrative. The blue mark 

means one submission from Slovakia. 

72 

 
 
 
                                                 
deep  and  comprehensive  reform  of  the  entire  investment  regime  is  necessary.  This  is  made 
clear in several answers to open questions, where a number of respondents do not address the 
question but indicate their express rejection to ISDS. This input is treated as referring to ISDS 
and  not  to  the  proposed  multilateral  initiative.  However,  where  they  respond  to  the  actual 
questions,  these  respondents  tend  to  agree  to  some  extent  with  the  option  for  a  multilateral 
reform, although they deem such option insufficient and not targeted to the real problems. 

The Commission sought to clarify this issue with concerned stakeholders in the context of the 
stakeholder  meeting  of  27  February  2017.  In  the  Commission's  view,  the  2014  public 
consultation  on  investment  protection  and  ISDS  in  the  TTIP  already  consulted  stakeholders 
on  those  broader  considerations  and  provided  sufficient  elements  in  that  regard.115  The 
Commission  considered  that  the  consultation  at  hand  would  thus  build  on  the  2014  public 
consultations  and  aim  at  seeking  more  specific  information  about  the  options  for  such 
multilateral reform. Admittedly, however, this was not well understood and the perception of 
traditional ISDS blurred the scope of the consultation. 

Secondly,  as  mentioned  above,  the  vast  majority  of  respondents  were  either  trade  unions, 
NGOs  or  business  associations  (almost  40%  combined).  Of  course  these  groups  cover 
important categories of stakeholders affected by the intended multilateral reform, but are not 
the only affected ones. The participation of other relevant groups (private investors, arbitrator 
community/legal practitioners and academia) was either low (5.5% combined) or impossible 
to measure (since almost half of respondents answering in their professional capacity declined 
to  specify  what  type  of  organisation  they  represent).  In  addition,  a  number  of  questions 
relayed  relatively  high  percentages  of  "I  don't  know"  or  "I  don't  have  an  opinion"  answers. 
For  purposes  of  this  report,  percentages  only  take  into  account  those  respondents  who 
expressed an opinion. Those who expressed no opinion are discounted. In instances where this 
approach could be misleading, the absolute number of responses is specified. In any case, the 
results of the online public consultation must be interpreted in this context. 

2.3  

Summary of stakeholders' contributions by topic 

The Commission analysis of stakeholders' submissions was twofold. First, a careful analysis 
of  each  individual  submission,  especially  of  the  answers  to  open  questions  and  position 
papers, was conducted. In addition, the Commission utilised the automated system DORIS,116 
which produced statistics of responses according to different parameters. The analysis by way 
of  clustering  was  particularly  useful  to  confirm  the  individual  assessment  of  replies.  The 
assessment  below  is  the  result  of  the  two  methods  of  analysis  jointly  and  reference  to  one 
method or another is only specified where relevant.  

The questionnaire followed a clear structure starting from the identification of the problems, 
following the identification of options, technical questions about such options and concluding 
with a reflection on possible impacts. 

115 

The 

report 

of 

the 

2014 

consultation 

is 

available 

online: 

http://trade.ec.europa.eu/consultations/index.cfm?consul_id=179  

116  DORIS  (Data  ORIented  Services)  is  a  new  tool  developed  by  the  European  Commission  to  provide  data 
analytics services of public consultations directed at supporting policy making and operational needs.  

73 

 
 
                                                 
Desirability of a multilateral approach  

A  majority  of respondents (68.2%) agrees that multiplying  ICSs in  EU  bilateral agreements 
may be problematic from the viewpoint of complexity and costs and more than half (51.2%) 
supports that the same rules on dispute settlement should apply to Member States' BITs and 
EU  agreements  with  third  countries.  Where  respondents  support  this  idea,  they  point  at 
reasons of uniformity (62%), legal certainty (49.1%), credibility (44.4%) and improvement of 
investment climate (34.3%).  

Possible features of a multilateral dispute settlement system  

More than half of respondents consider it important that specific features of the functioning of 
the ICS  be  reflected  in  a  multilateral  system,  notably  permanency  (52.8%),  appeal  (67.2%), 
full-time  adjudicators  (55.3%),  fixed  remuneration  for  adjudicators  (61.4%)  and  random 
allocation of cases (60.6%). Respondents show even higher support for traits concerning the 
adjudicators' regime and transparency of proceedings, notably high qualification requirements 
(82.8%), high ethical standards (86.8%), safeguards for independence such as tenure (78.8%) 
and full disclosure criteria for documentation (79.3%).  

Respondents  also  suggest  other  features  that  a  new  multilateral  system  should  reflect, 
including  that  effective  enforcement  of  decisions  be  ensured.  Certain  health-centred  interest 
groups expressly advocate for a carve-out in the scope of the multilateral system for decisions 
aimed  at  protecting  public  health.  Respondents  consistently  underline  that  the  duration  of 
proceedings  must  remain  reasonable,  that  mediation  should  remain  available  and  that  full 
disclosure  requirements  are  necessary  (with  respondents  from  the  business  and  arbitration 
communities stressing that the latter should not hamper the protection of trade secrets).  

Not  strictly  related  to  the  multilateral  dispute  resolution  system,  but  depending  on  the 
underlying treaties or domestic law, stakeholders defending a deeper reform of the investment 
system favour the inclusion of requirements on the exhaustion of domestic remedies and that 
states or citizens be able to bring cases against investors. 

60.9%  of  respondents117  agree  that  discussions  on  a  new  multilateral  system  should  include 
the  possibility  of  special  assistance  to  developing  countries  and  45.6%118  support  that  the 
existing ACWL could be used as a model. A good number of respondents across stakeholder 
groups  suggest  that  this  support  should  materialise  before  disputes  arise  through  training  to 
government  officials  (e.g.  dialogues,  knowledge  transfer,  exchange  of  best  practices)  or 
development aid. A smaller number of respondents instead deem it preferable that assistance 
takes  the  form  of  legal  advice  during  disputes  and/or  financial  aid  to  cover  litigation  costs. 
The  idea  that  there  should  be  a  special  structure  of  costs  for  developing  countries  was  also 
flagged.  It  has  also  been  submitted  that  assistance  be  provided  at  the  negotiation  stage  of 
investment  treaties  and  that  enhanced  mediation  opportunities  be  provided  for  in  case  of  a 
dispute. 

117 75 of 193 (36.2% of respondents did not have an opinion on this matter). 

118 36 of 193 (59.1% of respondents did not have an opinion on this matter). 

74 

 
 
                                                 
At  the  other  side  of  the  spectrum,  a  number  of  respondents  mostly  representing  business 
platforms submit that the existing mechanisms to support developing countries are sufficient. 
On a side note, a number of respondents also signal the need to establish objective criteria to 
define "developing countries", as is the case with "least developed countries". 

More than half of respondents support that the multilateral system include special provisions 
for  SMEs  (59.8%).119  More  specific  proposals  such  as  simplified  procedures,  lower  fees, 
flexible  hearing  locations  and  enhanced  possibilities  to  resort  to  methods  of  alternative 
disputes  resolution  are  supported  by  more  than  75%  of  respondents  on  average.  Other 
proposals  from  stakeholders  representing  trade  unions,  NGOs  and  businesses  include  that 
cases  be  heard  by  one  sole  adjudicator  and  that  proceedings  be  conducted  online  or  via 
teleconference. The idea of setting up an advisory centre for SMEs funded partly by the EU 
and  partly  by  users  of  the  court,  and  providing  for  legal  advice  and  possibly  for  financial 
support,  has  also  been  raised.  More  broadly,  the  idea  has  been  flagged  that  any  support 
granted to developing countries should also be extended to SMEs.  

In  addition,  respondents  representing  SMEs  submit  that  a  holistic  approach  rather  than 
specific measures would be necessary to ensure that smaller investors enjoy full access to the 
multilateral  system.  Conversely,  bigger  businesses  consider  that  enhanced  support  to  SMEs 
risks creating categories within investors and submits that simplified procedures should apply 
to small claims instead. 

Respondents  to  the  public  consultation  are  divided  on  whether  the  multilateral  dispute 
settlement  system  should  only  apply  to  investment  treaties  (54.7%  in  favour  versus  45.3% 
against).120  Stakeholders  with  mostly  a  business  background  suggest  that  the  system  could 
apply to investment contracts a well, while disputes related to the protection of human rights 
or social and environmental standards should be subject of special mechanisms. Conversely, 
respondents from NGOs and similar platforms advocate for an extended scope that includes 
claims related to such areas and brought by third parties. 

More than half of respondents (55.1%)121 believe that an enforcement mechanism comparable 
to ICSID is needed under a multilateral system. Indeed, the business community emphasises 
the importance of legal certainty, transparency and effectiveness regarding the enforcement of 
awards  as  provided  by  the  existing  systems.  To  this  group  of  stakeholders,  an  enforcement 
system  that  is  at  least  comparable  to  the  existing  ones  is  necessary.  Conversely,  other 
stakeholders  underline  the  importance  of  domestic  review  in  light  of  national  public  policy 
considerations.  The  possibility  to  allow  domestic  review  only  in  states  with  a  developed 
judicial  system  was  also  raised.  This  idea  was  also  flagged  by  certain  academics  at  the 
stakeholder meeting of 27 February 2017. 

Options for a multilateral reform: multilateral court or appeal instance  

119 107 of 193 (55.3% of respondents did not have an opinion). 

120 60.7% of respondents did not have an opinion on the matter. 

121 70 of 193 (34.2% of respondents did not have an opinion). 

75 

 
 
                                                 
In the event that a multilateral investment court was established, 50% of respondents122 agree 
that  it  should  be  competent  to  hear  disputes  under  existing  investment  treaties  and not  only 
under  future  agreements.  Among  the  main  benefits  of  the  centralisation  that  would  be 
achieved by a court, respondents point at enhanced predictability (56.6%) and consistency of 
case-law  (48%),  while  they  show  less  support  for  higher  legitimacy,  efficiency  and  lower 
costs (35% approximately on average).  

There is  overall agreement among respondents  that centralisation  is beneficial. Respondents 
from  academia  suggest  that  it  would  bring  integrated  substantive  coherence  ultimately 
resulting in an overall reduction of disputes and their costs, while legal practitioners argue that 
it would lead to  enhanced clarity and certainty on the applicable obligations (especially if a 
system of precedent is introduced). A large number of respondents representing inter alia the 
business  community  indicate  that  such  benefits  will  not  emerge  immediately  but  after  a 
transitional  period  of  co-existence  of  the  current  system  and  a  multilateral  court.  These 
respondents  also  indicate  that  the  benefits  of  centralisation  will  be  dependent  upon  the 
functioning of the court in practice. 

Some  respondents  acknowledge  that  centralisation  also  carries  certain  risks,  including  a 
possible tendency to lower the standards of protection or that the whole system be politicised. 
Certain  anti-globalisation  platforms  are  concerned  that  centralisation  would  legitimise 
existing perceived undesirable social and environmental inequalities. 

When  presented  with  the  possibility  of  a  multilateral  appeal  tribunal  (i.e.  without  a 
multilateral  first  instance),  a  majority  of  respondents  (65%)123  agree  that  such  mechanism 
would not be sufficient (while 11.7%124 believe it would suffice). Respondents are divided on 
whether  such  a  mechanism  would  contribute  to  improving  investment  dispute  resolution 
(35.6% agree versus 40.5% that disagree). 

Regarding several technical features of a potential new multilateral system, whether a court or 
an appeal tribunal, about half of respondents support that all contracting parties should be able 
to  appoint  at  least  one  adjudicator  (50.9%).125  Practically  the  same  percentage  (50.5%)126 
defends that the total number of adjudicators should instead be linked to workload rather than 
to the number of countries signatory to the agreement.  

Stakeholders  stress  that  adjudicators  must  have  relevant  experience  (submissions  being 
divided  between  the  need  for  specific  investment  or  sectorial  experience  and  general  legal 
experience) and be subject to sanctions in case of breach of ethical standards. Responses are 
divided on whether nationality should be the deciding factor, with a number of submissions 
indicating that instead adjudicators should be selected based on qualifications and experience 

122 38 of 193 (39.9% of respondents did not have an opinion). 

123 78 of 193 (37.8% of respondents did not have an opinion on this question). 

124 14 answers of 193. 

125 56 of 193 (43% of respondents did not have an opinion).  

126 53 of 193 (45.6% of respondents did not have an opinion). 

76 

 
 
                                                 
and securing a balance of age, gender and religion, and countries' legal systems and level of 
development.  The  idea  of  a  selection  committee  formed  by  states,  business  representatives, 
international  organisations,  NGOs  and  academia  has  been  flagged.  These  ideas  have  been 
raised by stakeholders from different backgrounds. Conversely, among stakeholders arguing 
in  favour  of  a  strict  balance  of  nationalities,  NGOs  tend  to  suggest  that  adjudicators  be 
appointed by states, while business groups highlight the importance that investors be involved 
in the appointment as well.  

More  generally,  responses  largely  support  that  adjudicators  meet  high  qualification  criteria, 
including being qualified to hold judicial office in their country or being recognised jurists, in 
addition  to  having  expertise  in  public  international  law  and  previous  experience  in 
international investment law (67.8%).127 A number of respondents with an NGO or academic 
background advocate for the strictest approach whereby candidates having previously worked 
(or presently working part time) for a business or as legal practitioners or lobbyists should be 
disqualified. Conversely, other respondents representing businesses and a sector of academia 
defend  that  this  approach  would  preclude  professionals  with  valuable  skills.  Stakeholders 
across  stakeholder  groups  agree  that  compliance  with  a  code  of  conduct  is  fundamental. 
Certain respondents highlight the importance that states be able to vet adjudicators selected by 
other states. 

There  seems  to  be  support  towards  the  idea  that  as  part  of  their  remuneration  adjudicators 
receive a regular monthly salary not linked to their workload (68.4%)128 and that adjudicators 
be subject to high ethical standards (63.9%).129 A similar proportion of respondents consider it 
important  that  cases  be  allocated  on  a  random  basis  (68.9%)130  to  ensure  impartiality  and 
independence.  

In relation of the financing of the multilateral system, about two thirds of respondents support 
that  a  repartition  key  (based  e.g.  on  the  level  of  Parties'  economic  development)  be  applied 
(66.4%)131 while more than half support that user fees be considered (55.5%).132  

Possible impacts  

Respondents  only  partially  agree  that  a  multilateral  investment  court  or  appeal  tribunal  will 
improve  the  global  investment  climate  (24.4%),  but  express  higher  support  that  it  will 
contribute  to  a  higher  acceptability  of  investment  dispute  settlement  (45.6%),  bring  higher 
consistency  of  case-law  (55.4%)  and  unify  the  dispute  settlement  system  (51.2%).  NGOs 
argue that a multilateral system will politicise disputes and negatively impact states' ability to 

127 80 of 193 (38.3% did not have an opinion). 

128 78 of 193 (40.9% did not have an opinion). 

129 78 of 193 (36.8% did not have an opinion). 

130 80 of 193 (39.9% did not have an opinion). 

131 71 of 193 (44.6% did not have an opinion). 

132 65 of 193 (39.4% did not have an opinion). 

77 

 
 
                                                 
regulate  in  the  public  interest.  Respondents  across  stakeholder  groups  welcome  the 
multilateral initiative as innovative but note that any positive effects remain to be seen. Others 
argue  that  such  system  will  bring  added  consistency  and  efficiency  to  investment  dispute 
settlement. 

As for the economic impacts of establishing a multilateral system, respondents are divided on 
whether it will lead to a reduction of costs for the EU (45.4% due to unification) and for users 
(31.2%  due  to  increased  predictability  and  33.4%  thanks  to  adjudicators'  permanent 
remuneration). A number of stakeholders mainly from civil society submit that a permanent 
multilateral system will boost reform and growth thereby driving sustainability and economic 
growth in developing countries. More specifically, respondents from a variety of backgrounds 
underline  that  shorter  proceedings  are  likely  to  be  less  costly.  On  the  other  hand,  a  few 
stakeholders representing business groups are concerned that such system will make taxpayers 
cover  for  adjudicators'  remunerations  regardless  of  their  actual  workload,  and  that  the 
possibility  of  appeal  will  make  proceedings  longer  and  therefore  more  expensive. 
Development  groups  argue  that  a  multilateral  system  will  only  bring  positive  economic 
impacts for developing countries if their expenses are covered by developed countries. Certain 
NGOs and individual citizens also flag the idea that it is social and human rights impacts, and 
not economic impacts, which should drive the multilateral reform process. 

More  than  two  thirds  of  respondents  (67.1%)133  believe  the  establishment  of  a  multilateral 
system will produce environmental impacts, but inputs on the reasons are considerably vague. 
Numerous stakeholders representing NGOs and other environmental and civil society groups 
argue  that  environmental  protection  measures  will  continue  to  be  at  the  mercy  of  the 
multilateral court or tribunal and many of them call for a carve-out for measures taken in the 
public  interest.  A  majority  of  these  respondents  acknowledge  that  such  mechanism  would 
relate  to  the  underlying  investment  agreements  and  not  to  the  functioning  of  the  court  or 
appeal tribunal. Other stakeholders note the absence of any binding international obligations 
for investors related to environment (and other areas such as human rights) and call for UN 
action in this regard. 

A  large  percentage  of  respondents  (72.4%)134  think  that  the  establishment  of  a  multilateral 
court  or  appeal  tribunal  will  have  social  impacts.  Again,  inputs  are  not  specific.  Numerous 
submissions  indicate  that  what  is  indicated  with  regard  to  environmental  impacts  applies  to 
social  impacts  as  well.  A  number  of  NGOs  and  civil  society  groups  are  concerned  that  the 
multilateral  system  will  negatively  impact  on  acquired  social  rights  (e.g.  the  right  to  strike) 
while on the other side of the spectrum other stakeholders argue that a multilateral system will 
allow  for  more  effective  policy-making  and  improve  the  perception  of  investment  dispute 
resolution.  The  idea  has  been  flagged  that  as  a  result  of  the  required  qualifications  for 
adjudicators,  adjudicators'  age  will  increase  and  thereby  exclude  younger  professionals  and 
professionals from minorities from the system. 

133 96 of 193 (25.9% did not have an opinion). 

134 110 of 193 (32.7% did not have an opinion). 

78 

 
 
                                                 
3. 

Stakeholder meeting  

On 27 February 2017, the Commission hosted a stakeholder meeting on a multilateral reform 
of  investment  dispute  resolution  including  the  possible  establishment  of  a  multilateral 
investment court. The meeting was held in Brussels (Belgium) and included the participation 
of the EU Trade Commissioner Ms Cecilia Malmström. The meeting was recorded and web 
streamed and questions were allowed via the social network Twitter. 

Around 100 stakeholders participated. More than one third of attendants (35.9%) constituted 
individual  investors,  business  representatives  or  trade  associations  operating  in  different 
sectors. More than one fourth of attendants (28.4%) represented NGOs and trade unions at the 
global,  national  or  regional  level.  Several  public  authorities  attended  the  meeting  (12.2%), 
including  international  organisations,  representatives  of  third  countries  and  of  regions  in 
Member  States.  Academia  and  legal  practitioners  were  represented  by  10%  and  7.5%  of 
attendants respectively. Media (4.5%) and consultants (1.5%) were also represented.  

Participants showed an interest in the rationale of the multilateral approach, particularly after 
the  EU's  bilateral  reform  through  the  ICS  has  just  been  included  in  two  EU  FTAs.  Some 
participants  especially  from  business  groups  proposed  to  address  the  shortcomings  of  the 
current  system  through  less  radical  reforms.  A  few  of  them,  including  academia 
representatives,  considered  that  the  project  is  hasty  given  that  the  EU's  bilateral  reform  has 
not yet been put to practice.  

On  the  other  side  of  the  spectrum,  a  number  of  stakeholders  from  environmental  and  civil 
society  groups  called  for  a  deeper  reform  of  investment  rules  beyond  investment  dispute 
settlement.  Business  platforms  and  trade  unions  raised  the  issue  of  possible  multilateral 
negotiations of substantive investment rules.  

Some  participants  representing  environmental  and  development  groups  suggested  that  the 
court  should  be  able  to  decide  on  disputes  arising  from  national  law  and  private  contracts 
apart from international investment treaties, while others expressed concern that a single body 
would interpret rules included in different legal instruments.  

The  design  and  functioning  of  the  court  gathered  considerable  interest.  Stakeholders  were 
interested  in  the  profile  of  adjudicators,  in  particular  whether  they  would  have  specific 
expertise  in  fields  such  an  human  rights,  labour  law  or  investment.  Methods  to  ensure 
adjudicators'  independence,  their  appointment  and  the  configuration  of  tribunals,  as  well  as 
the democratic oversight of the overall process, were also raised.  

On  the  need  for  an  appeal  instance,  while  a  number  of  industry  representatives  expressly 
supported  it,  others  indicated  that  it  may  result  in  unnecessarily  long  proceedings.  National 
chambers of commerce were interested in whether the multilateral mechanism would provide 
for flexibilities for SMEs.  

Participants  from  different  backgrounds  stressed  the  importance  that  decisions  of  the 
multilateral  court  be  effectively  enforceable,  i.e.  at  a  level  comparable  to  the  one  provided 
under ICSID rules. The need for the court to operate transparently was also highlighted.  

79 

 
 
 
Environmental and development groups asked whether resort to the court would be dependent 
on  exhaustion  of  domestic  remedies  and  whether  the  court's  decisions  would  benefit  from 
direct effect. These groups also referred to the desirability of systems to filter frivolous claims 
and of institutional mechanisms of restrain. 

A  number  of  participants  representing  the  arbitration  community  expressed  concerns  about 
the impact of the court on the current system. Some civil society stakeholders also suggested 
that resort to the court should not be restricted to investors but be open also to claims from 
states  or  third  parties.  Furthermore,  participants  from  public  authorities  referred  to  the 
remedies  that  the  multilateral  court  will  be  able  to  award,  noting  that  investment  tribunals 
function very differently to ordinary international tribunals. The opt-in instrument to adhere to 
the multilateral court also gathered significant interest. 

Stakeholders  from  different  backgrounds  showed  an  interest  in  the  (at  the  time)  pending 
opinion  of  the  Court  of  Justice  of  the  EU  in  the  EU-Singapore  FTA  and  its  possible 
implications for the establishment of a multilateral investment court. Questions on the role of 
Member States, the Council and the European Parliament in this process were raised.  

A variety of participants expressed an interest in the position of third countries, especially key 
EU  trading  partners  and  in  light  of  recent  political  events.  These  stakeholders  called  for  a 
negotiating process that effectively includes developing countries.  

4. 

Academic conferences and seminars 

With the aim of gathering views from academia, the Commission has participated in a number 
of academic events during the Impact Assessment process.  

Although  these  events  presented  different  settings  and  formats,  they  generally  allowed  for 
good exchanges of views with academics and other relevant actors such as former government 
officials  and  legal  practitioners.  The  geographical  coverage  differed  across  meetings,  some 
being focused on the national level and others covering global or nearly global representation. 
Not all these meetings allowed for issues of substance to be discussed in depth and some of 
them were focused on key procedural aspects. However, they constituted useful opportunities 
to  exchange  views  on  the  pros  and  cons  of  the  current  system  with  a  view  to  reforming  it. 
Where  discussions  were  held  on  a  non-prejudice  basis,  participants  displayed  views  and 
arguments that are rarely heard in more formal, government-represented negotiations, which 
was particularly illustrative. 

The relevant events include: 

Investment Treaty Dialogue (OECD), Paris, France (October 2016) 

 
  Singapore International Arbitration Academy, Singapore (November 2016) 
  King's College, London, UK (October 2016) 
  University of Cologne, Germany (January 2017) 
  Centre for International Dispute Settlement, UNCITRAL University of Geneva, 

Geneva, Switzerland (March 2017) 

80 

 
 
 
 
5. 

Targeted outreach to key stakeholders 

In  addition  to  the  activities  foreseen  in  the  consultation  strategy,  and  in  order  to  further 
exchange  with  stakeholders,  the  Commission  has  met  business  organisations,  trade  unions, 
national  associations  and  NGOs  concerned  with,  inter  alia,  sustainable  development  and 
environment  protection.  In  these  meetings,  the  Commission  provided  clarifications  on  the 
rationale of the initiative and on the state of play and timeline of the Impact Assessment work 
and the public consultation. Stakeholders provided additional details on their submissions to 
the public consultation and key aspects thereof were discussed. The Commission took note of 
these  discussions  and  they  have  been  taken  into  account  as  part  of  the  stakeholder 
consultation.  

The Commission also discussed this initiative with third countries, including in the margins of 
the  UNCTAD's  World  Investment  Forum  in  July  2016  in  Nairobi  (Kenya).  In  December 
2016, the Commission co-hosted a dedicated expert meeting with the Government of Canada 
in  Geneva  (Switzerland).  Almost  170  delegates  from  more  than  60  countries  and  8 
international organisations participated. The meeting included initial exploratory discussions 
on  the  possible  establishment  of  a  multilateral  investment  dispute  settlement  system  and  its 
rationale, its possible functioning and next steps. 

This initiative was raised at the political level at the informal ministerial breakfast meeting co-
hosted  by  the  Commission  and  the  Government  of  Canada  in  January  2017  in  Davos 
(Switzerland) in the margins of the World Economic Forum. The Commission held a number 
of bilateral meetings with third countries in the margins of these events. 
Outside  the  context  of  these  meetings  the  Commission  has  exchanged  bilaterally  with  a 
number  of  third  countries.  The  main  purpose  of  these  exchanges  has  been  to  provide 
information  on  the  ongoing  Commission  work  and  to  hold  exploratory  talks  with  a  view  to 
testing  their  potential  interest  on  the  matter.  These  countries  showed  from  moderate  to 
considerable degrees of interest and willingness to engage. They consistently requested to be 
informed  of  any  development  and  mostly  promised  to  share  more  concrete  views  after 
additional internal reflection. 

81 

 
 
 
 
ANNEX 3  

WHO IS AFFECTED BY THE INITIATIVE AND HOW? 

Establishing  a  multilateral  investment  court  that  provides  for  the  desired  sub-options  as 
specified  above  would  have  practical  implications  for  a  number  of  stakeholders  including 
investors, states, legal practitioners and the arbitrator community and the general public. 

82 

 
 
 
 
Table 4: Implications for stakeholders 

Composition of the court 

Procedural aspects 

Institutional aspects 

Financial aspects 

Option 5: Establishment of a multilateral investment court 

Investors 

No  role 
the  selection  of 
adjudicators for specific disputes.  

in 

Possibility 
appointment of adjudicators. 

to  be 

involved 

in 

the 

to 

first 

appeal 

Ability 
instance 
decisions  with  procedural  errors  or 
substantial  errors  of  law,  and  possibly 
also  with  manifest  errors 
the 
appreciation of facts. 

in 

States 

Prominent 
appointment of adjudicators. 

role 

in 

the 

Prominent  role  in  the  appointment  of 
adjudicators. 

to 

first 

appeal 

instance 
Ability 
decisions  with  procedural  errors  or 
substantial  errors  of  law,  and  possibly 
also  with  manifest  errors 
the 
appreciation of facts. 

in 

Resort  to  the  court  conditional  upon 
their  home  state  opting-in  to  the 
Convention establishing the court. 

Will  face  lower  costs,  possibility  of 
user  fees,  possibility  for  SMEs  to 
benefit from assistance. 

Possibility  for  SMEs  to  benefit  from 
assistance. 

Lower  resources  to  manage  court 
thanks 
the  existence  of  a 
to 
secretariat. 

Budgetary 
implications  (costs  of 
functioning  to  be  at  least  mostly 
covered by states). 

Ability  to  decide  on  the  jurisdiction 
(i.e.  scope)  of 
the  court  when 
negotiating investment treaties. 

Ability to opt-in or not. 

Possibility  to  benefit  from  assistance 
to developing countries. 

Legal 
practitioners / 
Arbitrator 
community 

Ability  to  participate  as  legal 
counsel 

Provided  that  is  not  against  the 
ethical requirements, ability to sit 
as adjudicators. 

General 
public 

N.a. 

Possibility 
appointment of adjudicators. 

to  be 

involved 

in 

the 

Possible 
existence of a secretariat. 

lower  workload  due 

to 

Lower legal fees charged as a result 
streamlined  proceedings  and 
of 
steps  being 
certain  procedural 
of 
choice 
(e.g. 
eliminated 
arbitrators). 

Easier  access  to  documents  through 
the secretariat. 

Taxpayers'  money  spent  on  funding 
the court. 

to  be 

involved 

Possibility 
the 
appointment  of  adjudicators  in  the 
event  that  an  independent  body  be  set 
up. 

in 

83 

 
 
 
 
 
 
 
Additional  guarantees  of  procedurally, 
legally  and  possibly  factually  correct 
decisions  thanks  to  the  possibility  to 
appeal. 

84 

 
 
ANNEX 4  

EXPLANATION OF COSTS ANALYSIS 

1.  

INTRODUCTION 

This annex presents the analysis of the expenses that the establishment and functioning of a 
Multilateral  Investment  Court  for  investment  dispute  resolution  would  entail.  The  analysis 
compares estimates of the expenses of the Multilateral Investment Court (i.e. option 5) with 
the costs of the existing system of international investment disputes for the European Union 
(EU)  and  for  its  Member  States,  which  encompasses  the  Investment  Court  System  (ICS)135 
and the traditional Investor-State Dispute Settlement (ISDS) system136 (i.e. option 1 - baseline 
scenario). 

After  a  description  of  the  methods,  rules  and  assumptions  employed  (section  2. 
Methodology),  the  expenses  of  the  two  scenarios  were  separately  estimated  (section  3. 
Baseline scenario and 4. Multilateral Investment Court scenario) and then compared in the 
final  section  (5.  Comparison  of  the  costs  of  the  baseline  scenario  and  the  Multilateral 
Investment Court scenario). 

2.   METHODOLOGY  

The  quantitative  and  qualitative  analysis  of  the  budgetary  impact  of  the  initiative  of 
establishing  a  multilateral  dispute  settlement  mechanism  follows  a  two-step  approach  of 
establishing the costs of the baseline scenario (section 3), as well as constructing the expenses 
of the multilateral investment Court scenario (section 4). 

The  quantitative  analysis  draws  on  available  and  reliable  data  and  statistics  to  project  the 
potential impact of the two scenarios on the EU budget and the budget of Member States. It is 
fundamental to recall that both the ICS and the multilateral investment Court models are not 
yet  operating.  Consequently,  given  the  lack  of  concrete  and  precise  data  for  some  key 
variables  (e.g.  caseload,  number  of  adjudicators,  number  of  staff),  the  figures  and  numbers 
found in this Annex are estimates based on projections of most likely features based on the 
best available information:  

  For  ICS,  estimates  are  based  on  the  EU  proposal  in  the  Transatlantic  Trade  and 
Investment Partnership (TTIP) negotiations, which is the basis for all ICS negotiations 
with third countries137.  

135  ICS  has  been  included  in  all  investment  agreements  negotiated  or  under  negotiations  between  the  EU  and 

third countries. 

136 EU Member States' Bilateral Investment Treaties (BITs) generally contain provisions on  ISDS. In addition, 
the EU is a Contracting Party to the ECT, which provides for ISDS procedures (Article 26: Settlement of 
Disputes between an Investor and a Contracting Party). 

137  EU  proposal  in  the  Transatlantic  Trade  and  Investment  Partnership  (TTIP)  negotiations,  Chapter  II  - 
Investment,  Section  3  Resolution  of  Investment  Disputes  and  Investment  Court  System,  Sub-Section  4: 
Investment 
at: 
http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf. See para. 3.1 below. 

available 

System, 

Articles 

Court 

9-10, 

85 

 
 
 
                                                 
  For ISDS, averages are based on available and reliable data of past cases published in 
the arbitral awards, in surveys conducted by the United Nations Conference on Trade 
and  Development  (UNCTAD),  the  International  Centre  for  Settlement  of  Investment 
Disputes (ICSID) and the Permanent Court of Arbitration (PCA)138. 

  For the multilateral investment Court, the assessment relies on budgetary information 

of other international courts and tribunals139. 

The  main  cost  components  of  investor-state  dispute  settlement  are:  (i)  tribunal  fees  and 
expenses,  (ii)  institutional  costs  payable  to  the  organisation  administering  the  dispute  and 
providing  the  secretariat  and  (iii)  expenses  incurred  by  each  disputing  party  (investor  and 
state)  for  their  own  legal  counsels  and  experts.  As  explained  in  the  problem  definition,  the 
largest cost component is the third one, which amounts to ca. 82% of the overall costs of an 
ISDS case, while  arbitrator  fees average  about 16%  of costs and institutional  costs are  low, 
generally amounting to about 2% of the costs140. 

This reform initiative acknowledges the problem of high costs of ISDS as a barrier to access 
to justice and seeks to lower these costs in a number of ways: 

  Directly  for  tribunal  and  institutional  costs,  by  redesigning  their  amount  and 

 

allocation rules; and 
Indirectly for other costs (legal counsel and expert fees), inter alia as a consequence 
of the streamlining of the procedural rules that both ICS and multilateral investment 
court policy options intend to address, e.g. by agreeing on timelines for the conduct of 
the proceedings which are absent from most of today’s ISDS arbitration systems. 

For  the  purposes  of  costs  calculations  in  this  Annex,  however,  on  one  side  it  is  possible  to 
estimate the tribunal and institutional costs of the policy options, on the other side, it is not 
possible  to  calculate  how  much  legal  counsel  and  expert  fees  will  be  reduced  as  a 
consequence of the institutional reforms to lower ISDS costs overall. 

Consequently, the types of costs considered in this quantitative assessment are:  

  Tribunal costs;141 and 
Institutional costs.142  
 

138 See para. 3.2 below. 

139 See section 4 below. 

140  David  Gaukrodger  and  Kathryn  Gordon,  “Investor-State  Dispute  Settlement:  A  Scoping  Paper  for  the 
Investment  Policy  Community”,  OECD  Working  Papers  on  International  Investment,  2012/03,  OECD 
Publishing, Paris (2012). Available at: http://dx.doi.org/10.1787/5k46b1r85j6f-en, p. 19. 

141  Tribunal  costs  essentially  cover  the  remuneration  of  adjudicators.  There  are  two  types  of  remuneration:  (i) 
fixed or (ii) fee-based. In the former case, adjudicators (who are in an employment relationship) are paid a 
base remuneration per month plus benefits (health insurance, pensions, etc.). In the latter case, adjudicators 
(who are self-employed and are thus responsible for their own social security) are generally paid a monthly 
retainer and a daily/hourly fee. 

142 Institutional costs mainly cover the administrative expenses of the institution administering the case, i.e. the 
costs  of  the  secretariat/registry.  These  costs  include  the  time  spent  by  the  legal  and  administrative  staff 

86 

 
 
                                                 
Conversely, types of costs that are omitted in this analysis include: 

  Legal counsel and expert fees; and 
  Additional costs that, at the moment of writing, could be highly speculative  (e.g. costs 

related to the rental of premises). 

The costs considered are the expenses of active dispute settlement mechanisms (in turn, ICS, 
ISDS and Multilateral Investment Court) with an assumption being made of 2 cases (or 1 case 
at  first  instance  plus  1  appeal)  per  year  for  those  mechanisms  for  which  the  level  of  costs 
varies according to the number of cases (ICS and ISDS; on the contrary, for the Multilateral 
Investment Court the same costs would not be case-dependant). The potential apportionment 
of  costs  between  the  disputing  parties  was  not  taken  into  consideration  since  this  entails 
speculation  given  that  it  is  dependent  on  the  specific  circumstances  of  the  case  and  the 
decision of the judicial authority.143  

All costs expressed in currencies different from the Euro were converted to Euro at the 2016 
average exchange rate set by the European Central Bank.144 

When calculations produced a result that was not a whole number, that number was rounded 
down to the nearest whole number if it was less than 0.5 and up to the nearest whole number 
if it was 0.5 or more. 

The  quantitative  analysis  was  corroborated  by  qualitative  analysis.  The  qualitative  analysis 
was based on research of the most relevant and up to date literature and on stakeholder inputs 
to  identify  selected  indicators  and  issues.  With  regards  to  stakeholder  contributions,  the 
analysis  incorporated  information  generated  by  the  extensive  and  continuous  stakeholder 
consultation, both through the stakeholder meeting, the completion of the online questionnaire 
which  closed  on  15  March  2017  and  the  other  position  papers  received.  The  qualitative 
analysis thus allowed for a more accurate picture of the impact of the  different scenarios on 
the EU budget. 

3.  

BASELINE SCENARIO  

The baseline scenario corresponds to the coexistence of the ICS at EU level and ISDS at EU 
and  EU  Member  State  level.  More  specifically,  this  scenario  would  imply  retaining  and 
operating both multiple ICSs in EU trade and/or investment agreements with third countries 

allocated  to  a  case,  the  assistance  of  the  Secretary  at  hearings  and  the  financial  management  of  the  case 
account. 

143 Possible costs related to any additional support to SMEs and/or developing countries (sub-options considered 
above but subject to negotiations) have not been calculated in this Annex as this would have been an overly 
speculative exercise. 

144 The average 2016 exchange rates are: 0.819483074 (for GBP); 1.11 (for USD) and 1.090155253 (for CHF). 
at: 

of 
The 
https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/index.en.
html. No rate of inflation was added. 

exchange 

reference 

available 

ECB 

rates 

the 

are 

87 

 
 
 
                                                                                                                                                         
and  those  remaining  ISDS  mechanisms  in  EU  Member  States'  BITs  and  in  the  ECT  for  the 
EU that are not replaced by ICS.145 

There  were  two  questions  that  had  to  be  addressed  to  determine  the  overall  cost  of  the 
baseline scenario, namely: 

  The cost for the EU of multiple ICSs currently in EU bilateral trade and/or investment 

agreements (para. 3.1); and 

  The cost of the remaining ISDS mechanisms in place for the EU and the EU Member 

States (para. 3.2). 

The sum of these two calculations resulted in the overall cost of the baseline scenario (para. 
3.3). 

3.1   Calculating  the  cost  for  the  EU  of  multiple  ICSs  in  EU  bilateral  trade  and/or 

investment agreements 

To establish the cost of multiple ICSs in EU trade and/or investment agreements a three-step 
process was followed: 

1.  The cost of a single ICS per year (para. 3.1.1); 
2.  The cost of a single ICS per year only for the EU budget was calculated (para. 3.1.2); 

and 

3.  The  latter  amount  was  multiplied  by  the  number  of  ICSs  currently  projected  or 
reasonably  foreseeable  to  be  included  in  EU  bilateral  trade  and/or  investment 
agreements (para. 3.1.3). 

This three-step process resulted in the annual cost for the EU of multiple ICSs in its bilateral 
trade and/or investment agreements with third countries. 

3.1.1 Cost of a single ICS per annum 

In order to calculate the yearly total cost of a single ICS, the following core cost components 
were taken into account: 

  Remuneration of adjudicators per year (para. 3.1.1.1); and 
  Cost of secretariat per year (para. 3.1.1.2).  

The sum of  these cost components  resulted in the overall cost  of one ICS per annum (para. 
3.1.1.3). 

3.1.1.1 Remuneration of adjudicators 

Data  on  remuneration  of  adjudicators  is  based  on  the  remuneration  proposals  presently 
contained in the EU standard approach to investment dispute settlement146. According to this 
text, First Instance Tribunal adjudicators:  

145 For the purposes of this analysis, only extra-EU BITs (i.e. investment treaties between EU Member States and 
third countries) and the ECT (to which the EU is also part) are considered. Intra-EU BITs (i.e. BITs between 
EU Member States) fall outside the scope of this analysis. The cut-off date to distinguish between intra-EU 
and extra-EU BITs is the accession date of the Member State. 

88 

 
 
 
                                                 
  Would be 15 in number; 
  Would  be  paid  a  monthly  retainer  fee  (to  be  determined  by  decision  of  the 
Committee) that is suggested by the EU to be around 1/3rd of the retainer fee for WTO 
Appellate Body members (i.e. around EUR 2,000 per month);147 

  The President of the Tribunal would receive a fee for each day worked in fulfilling 
the  functions  of  President  of  the  Tribunal    suggested  by  the  EU  to  be  around  the 
same as for WTO Appeal Tribunal members (i.e. CHF 600 – plus CHF 435 for meals 
and accommodation – per day, which is equivalent to EUR 949 per day);148 and 
  Would receive a fee for each day worked as an adjudicator determined pursuant to 
Regulation  14(1)  of  the  Administrative  and  Financial  Regulations  of  the  ICSID 
Convention  in  force  on  the  date  of  the  submission  of  the  claim  (i.e.  USD  3,000  per 
day, which is equivalent to EUR 2,710).149 

  A  survey  conducted  by  ICSID  among  cases  administered  by  ICSID  shows  that  the 

average time spent by each arbitrator per case is of 53 days a year per case.150 

According to the same text, Members of the Appeal Tribunal:   

  Would be 6 in number; 
  Would  be  paid  a  monthly  retainer  fee  (to  be  determined  by  decision  of  the 
Committee) that is suggested by the EU to be around the same as for WTO Appellate 
Body  members  (i.e.  CHF  7,000  per  month,  which  is  equivalent  to  EUR  6,421  per 
month);151 

  The President of the Appeal Tribunal and, where applicable, the Vice-President, would 
receive  a  fee  for  each  day  worked  in  fulfilling  the  functions  of  President  of  the 
Appeal  Tribunal    suggested  by  the  EU  to  be  around  the  same  as  for  WTO  Appeal 
Tribunal members (i.e. EUR 949 per day);152 and 

146 The EU proposal in the TTIP negotiations of 12 November 2015 is the reference text for all EU proposals on 
investment dispute settlement (hereinafter, the EU standard approach). In particular, see Article 9 (Tribunal 
of First Instance) and 10 (Appeal Tribunal) of Section 3 (Resolution of Investment Disputes and Investment 
Court System) of Chapter II (Investment). 

147 See 

https://www.google.be/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjwsMDEwL3TAh
XrC8AKHSseAcEQFgglMAA&url=https%3A%2F%2Fdocs.wto.org%2Fdol2fe%2FPages%2FFE_Search
%2FExportFile.aspx%3Fid%3D88355%26filename%3DQ%2FWT%2FBFA%2FW109.pdf&usg=AFQjCN
GEZW75uMaTI5Fyxr_z5wcMc9CnXg&sig2=OjSIsoBbw98C2_wIKMInpQ&cad=rja. 

148 See the EU proposal in the TTIP negotiations. 

149 

ICSID  Cost  of  Proceedings,  available  at:  https://icsid.worldbank.org/en/Pages/Services/Cost-of-
Proceedings.aspx. 

150 Meg Kinnear, Secretary-General of ICSID, Appointment of Adjudicators to a Multilateral Investment Court, 

Presentation in Geneva, Experts Meeting, 14 December 2016. 

151 See the EU proposal in the TTIP negotiations. 

152 Ibid. 

89 

 
 
                                                                                                                                                         
 
  Would receive a fee for each day worked as a Member of the Appeal Tribunal that 
is suggested by the EU to be around the same as for WTO Appellate Body members 
(i.e. EUR 949 per day)153. 

  As for the adjudicators of the First Instance Tribunal, the ICSID survey shows that the 

average time spent by each arbitrator per case is of 53 days a year per case154. 

In addition, the EU standard approach provides that the fee-based remuneration system may 
be  permanently  transformed  into  a  fixed  salary  system  for  both  adjudicators  of  the  First 
Instance  Tribunal  and  Members  of  the  Appeal  Tribunal.  In  such  an  event,  the  adjudicators 
would serve on a full-time basis and the Committee would fix their remuneration and related 
organisational matters. Indeed, there is an intention to move in that direction.155 

3.1.1.2 Cost of secretariat 

The  standard  approach  also  establishes  that  the  Secretariat  of  ICSID  shall  act  as  Secretariat 
for the First Instance Tribunal and Appeal Tribunal and provide it with appropriate support.156 

ICSID charges its parties for its services of an annual fee, currently USD 32,000,157 which is 
equivalent  to  EUR  28,909,  covering  the  time  spent  by  all  members  of  the  dedicated  case 
team, including the assistance  of the Secretary  at  hearings and the financial management of 
the  case  account.  This  fee  is  usually  divided  equally  between  the  parties.  It  applies  to  all 
ICSID cases and non-ICSID cases administered by ICSID. Consequently, it would apply also 
to ICS cases. 

3.1.1.3 Overall cost of a single ICS per annum  

Table  5  below  provides  an  overview  of  the  likely  costs  of  a  single  ICS  (First  Tribunal  and 
Appeal  Tribunal)  for  its  Contracting  Parties  per  year  under  three  scenarios  according  to  the 
number of cases pending before the court: 

  Scenario 1: ICS inactive (with no cases); 
  Scenario 2: ICS active with 1 case pending before the First Instance Tribunal; and 
  Scenario  3:  ICS  active  with  1  case  pending  before  the  First  Instance  Tribunal  and  1 

case pending before the Appeal Tribunal (i.e. with a total of 2 cases). 

153 Ibid. 

154 Meg Kinnear, Secretary-General of ICSID, Appointment of Adjudicators to a Multilateral Investment Court, 

Presentation in Geneva, Experts Meeting, 14 December 2016. 

155 See Statement n. 36 by the Commission and the Council on investment protection and the Investment Court 
System ('ICS'), to be entered on the occasion of the adoption by the Council of the decision authorising the 
signature  of  the  Comprehensive  Economic  and  Trade  Agreement  (CETA)  between  Canada  and  the 
European Union, available at: http://data.consilium.europa.eu/doc/document/ST-13463-2016-REV-1/en/pdf. 

156 

157 

See 

for 

instance 

Article 

8.27.16 

of 

CETA, 

available 

at: 

http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf.  

ICSID  Cost  of  Proceedings,  available  at:  https://icsid.worldbank.org/en/Pages/Services/Cost-of-
Proceedings.aspx.  

90 

 
 
                                                 
 
Table  5:  Estimate  of  expenses  for  the  ICS  per  annum  under  EU  trade  and  investment 
agreements based on various scenarios of workload 

Scenarios 

Estimated annual costs of ICS 

for its Contracting Parties (EU and trading partner) 

Scenario 1: 

1. Fixed annual operating costs of ICS158: 

ICS 
inactive  
(No cases) 

  Base  remuneration  for  the  15  adjudicators  at  First  Instance  Tribunal159: 

EUR 360,000. 

  Base remuneration for the 6 Appeal Tribunal members160: EUR 462,312. 

= Total cost of Scenario 1: EUR 822,312 

Scenario 2: 

1. Fixed annual operating costs of ICS: EUR 822,312 (as under Scenario 1) 

ICS active: 

+ 

(1  case  at 
First 
Instance)  

2. Case-related costs at First instance:  

  Fees for days worked as adjudicators in case 1161: EUR 430,890 
  Fees for days worked as President of the First Instance Tribunal162: EUR 

50,297 

  Fees for case handling (secretariat/registry costs)163: EUR 28,909 

= Total cost of Scenario 2: EUR 1,332,408 

Scenario 3 

1. Fixed annual operating costs of ICS: EUR 822,312 (as under Scenario 1) 

ICS active: 

+ 

(1  case  at 
First 
Instance 
and 
appeal) 

1 

2.  Case-related  costs  at  First  Instance:  EUR  510,096  (as  under  point  2, 
Scenario 2) 

+ 

3. Case-related costs at Appeal Instance: 

  Fees for days worked as Members in case 1164: EUR 150,891 

158 In the scenario in which the ICS is inactive because there are no cases pending before it, there would be no 

costs for the Secretariat of ICSID nor for the Registry of the PCA. 

159 I.e. EUR 2,000 x 15 x 12 months. See para. 3.1.1.1 above. 

160 I.e. EUR 6,421 x 6 x 12 months. See para. 3.1.1.1 above. 

161 I.e. EUR 2,710 x 3 judges (according to the EU TTIP proposal the Tribunal of First Instance would hear cases 
in divisions consisting of three judges, Article 9(6)) x 53 days worked in 12 months. See para. 3.1.1.1 above. 

162 I.e. EUR 949 x 53 days worked as President in 12 months. See para. 3.1.1.1 above. 

163 EUR 28,909 is the annual fee charged by ICSID for its services. See para. 3.1.1.2 above. 

91 

 
 
                                                 
 
  Fees for days worked as President of Appeal Tribunal165: EUR 50,297 
  Fees for case handling (secretariat/registry costs)166: EUR 28,909 

= Total cost of Scenario 3: EUR 1,562,505 

3.1.2 Calculating the cost of a single ICS only for the EU budget 

In order to calculate the impact on the EU budget of a single active ICS (with 1 case at first 
instance and 1 case at appeal) per year, it was necessary to: 

  Divide the total cost obtained under Scenario 3 between the 2 parties (3.1.2.1); and 
  Consider whether specific circumstances may change the share of cost to be borne by 

the EU (3.1.2.2). 

3.1.2.1 Costs that are born by the EU 

The  EU  standard  approach  makes  a  distinction  between  costs  that  are  born  equally  by  the 
Contracting Parties and costs that are allocated by the tribunal among the disputing parties. A 
portion  of  costs  could  be  borne  by  the  unsuccessful  disputing  party  according  to  the  "loser 
pays" principle. In  fact,  under the EU standard approach,  "reasonable  costs incurred by the 
successful  disputing  party  shall  be  borne  by  the  unsuccessful  disputing  party,  unless  the 
Tribunal  determines  that  such  apportionment  is  unreasonable  in  the  circumstances  of  the 
case" (Article 28(4)).  

However, it is impossible to make an estimate of the apportionment the Tribunal would made 
on  the  basis  of  the  "loser  pays"  principle  or  different  "exceptional  circumstances".  For  this 
reason,  the  apportionment  of  costs  between  the  disputing  parties  made  by  the  Tribunal  was 
not taken into consideration for ICS, ISDS and the multilateral investment Court.  

Consequently,  it  was  considered  that  the  costs  borne  by  the  EU  amount  to  half  of  the  total 
costs  of  Scenario  3  (EUR  1,562,505),  i.e.  EUR  781,253  per  party  per  year  given  the 
assumption  of  2  cases  in  that  year  (1  case  before  the  First  Instance  Tribunal  and  1  case 
before the Appeal Tribunal).167 

3.1.2.2 Special circumstances  

It is possible that the EU would be covering more of the fixed costs of the ICS in case it is 
concluding  an  agreement  with  a  transition  or  developing  country.  Therefore,  the  sharing  of 
costs  of  the  ICS  could  be  made  dependent  on  the  Parties'  respective  level  of  economic 
development.  This  is  for  instance  the  case  under  the  EU-Vietnam  FTA168  and  the  EU-

164  I.e.  EUR  949  x  3  judges  (according  to  the  EU  TTIP  proposal  the  Appeal  Tribunal  would  hear  cases  in 
divisions consisting of three judges, Article 10(8)) x 53 days worked in 12 months. See para. 3.1.1.1 above. 

165 I.e. EUR 949 x 53 days worked as President in 12 months. See para. 3.1.1.1 above. 

166 EUR 28,909 is the annual fee charged by ICSID for its services. See para. 3.1.1.2 above. 

167 It is assumed that the EU will bear the full budgetary impact of the ICS. 

168 The text of the EU-Vietnam FTA is available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437. 

92 

 
 
 
 
                                                                                                                                                         
Myanmar/Burma  Treaty  (almost  finalised  at  the  time  of  writing).169  However,  it  is  not 
possible  to  estimate  the  precise  amount  of  this  extra  cost  for  the  EU,  which  is  thus  not 
computed into the cost calculation of this impact assessment.   

3.1.3 Impact of multiple ICSs on the EU budget  

In  order  to  obtain  the  overall  impact  on  the  EU  budget  of  all  ICS  in  EU  trade  and/or 
investment  agreements,  the  result  obtained  under  para.  3.1.2.1  (EUR  781,253)  was  then 
multiplied  by  the  number  of  concluded,  ongoing  and  prospective  negotiations  in  which  the 
EU has or will introduce the ICS.  

Four categories of trade and or/investment treaties including ICS with trading partners can be 
identified depending on the current stage in the process of negotiations: 

1.  Negotiations that are concluded (3): Canada, Vietnam and Myanmar/Burma; 
2.  Negotiations  that  are  ongoing  (8):  Singapore,  China,  Indonesia,  Japan,  Malaysia, 

Mexico, Morocco and Philippines; 

3.  Negotiations for which the EU has the Council mandate, but they are not ongoing (6): 
Egypt,  Jordan,  Russian  Federation,  Thailand,  Tunisia  and  United  States  of  America; 
and 

4.  Negotiations  that  are  foreseen  in  the  Trade  for  All  Communication170  and  for  which 
the Council mandate is foreseen in the short-medium term (6): Australia, Chile, Hong 
Kong (China), Chinese Taipei, South Korea171 and New Zealand.  

Therefore,  the  total  annual  cost  for  the  EU  of  active  ICSs  with  2  cases  (1  before  the  First 
Instance  Tribunal  and  1  before  the  Appeal  Tribunal)  contained  in  all  EU  trade  and/or 
investment agreements listed in categories 1-4 above (23 agreements) was found to be EUR 
17,968,819 per year.172 If we consider, instead, only those agreements listed in categories 1-2 
(11 agreements), for which negotiations have either been concluded or they are ongoing, the 
total annual cost for the EU would amount to EUR 8,593,783 per year.173 This latter value 

169 See http://ec.europa.eu/trade/policy/countries-and-regions/countries/myanmar/. 

170 

Trade 

9, 
http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf. 

Communication, 

All 

pp. 

for 

31-33, 

available 

at: 

171 With respect to South Korea, at the moment of writing it is not possible to foresee when the EU would start 
the  process  of  negotiating  directives.  However,  the  EU-South  Korea  Agreement  contains  a  rendez-vous 
clause for investment. See the Free Trade Agreement between the European Union and its Member States, 
of  the  one  part,  and  the  Republic  of  Korea,  of  the  other  part,  Chapter  Seven  on  Trade  In  Services, 
Establishment And Electronic Commerce, Section B on Cross-Border Supply Of Services, Article 7.16 on 
Review  Of  The 
  http://eur-lex.europa.eu/legal-
Investment  Legal  Framework,  available  at: 
content/EN/TXT/PDF/?uri=OJ:L:2011:127:FULL&from=EN, pp. 29-30. 

172 EUR 781,253 x 23 agreements. The total does not take into account potential extra costs for the EU linked to 

the level of development of the trading partners. 

173 EUR 781,253 x 11 agreements. The total does not take into account potential extra costs for the EU linked to 

the level of development of the trading partners. 

93 

 
 
                                                 
will be considered for comparison with the scenario of the multilateral investment court given 
the more advanced status of the negotiations under categories 1 and 2 above.174 

For the same reasons outlined under paragraph 3.1.2.2, this cost could be higher for the EU, in 
light  of  the  level  of  development  of  its  treaty  partner,  but  as  explained  under  paragraph 
3.1.2.2, this was not considered in the current cost estimation. 

3.2   Calculation of cost of remaining ISDS mechanisms for the EU and EU Member 

States 

The  procedural  framework  for  settling  international  investment  disputes  for  the  EU  and  its 
Member States that would remain in place despite the introduction of ICS in EU trade and/or 
investment  agreements  with  third  countries  would  comprise  also  the  ISDS  mechanisms 
included in: 

a)  The  ECT  to  which  the  EU  and  all  but  one  of  its  Member  States  are  Contracting 

Parties175; and 

b)  Investment treaties between EU Member States and those third countries with which 
the  EU  has  not  concluded  or  does  not  envisage  to  conclude  a  bilateral  trade  and/or 
investment agreement including provisions on ICS.176 

Investment treaties between EU Member States and those third countries with which the EU 
has concluded or envisages to conclude in the near future a bilateral trade and/or investment 
agreement  (as  defined  in  categories  1-4  in  para.  3.1.3)  were  not  considered  in  this  analysis. 
This  is  because  the  ICS  in  EU  level  agreements  will  replace  the  ISDS  mechanisms  in  the 
investment treaties with those third countries the EU has negotiated an ICS with. 

In  general,  in  the  traditional ISDS  system,  the  costs  borne  by  States  are  costs  related  to  the 
status  of  disputing  party  (respondent)  in  an  investment  arbitration  dispute.  There  are  no 
additional  costs  in  connection  with  the  status  of  being  member  or  party  of  an  institution 
administering investment arbitration disputes. 

Consequently,  in  order  to  estimate  the  costs  deriving  from  ISDS  mechanisms  that  would 
remain in place for the EU and EU Member States, an analysis has been undertaken of all past 
disputes  arising  from  investment  treaties  (a)  and  (b)  and  between  the  EU  or  EU  Member 
States (acting as respondents) and investors with the nationality of those third countries that 
are not countries with which the EU has negotiated or currently envisages to negotiate a trade 
and/or investment agreement.  

174 As explained above, it is assumed that the EU will bear the full budgetary impact of the ICS. 

175 Italy's withdrawal from the ECT took effect on 1 January 2016, see http://www.energycharter.org/who-we-

are/members-observers/countries/italy/. 

176  I.e.  excluding  the  agreements  with  treaty  partners  listed  in  categories  1-4  under  para.  3.1.3  above.  The 
objective of the calculation is to estimate the average cost per ISDS case per year and not the total cost of 
ISDS  cases.  Since  for  calculating  this  average  there  is  no  considerable  difference  between  excluding 
disputes arising from all categories of agreements 1-4 or excluding only disputes arising from categories 1-
2, the most comprehensive approach excluding all categories of agreements was adopted (1-4). 

94 

 
 
 
                                                 
The analysis is based on the sections on costs of the arbitral tribunals' awards. As clarified in 
the  section  on  methodology  (section  2  above),  only  tribunal  and  institutional  costs  were 
considered and not legal counsel and expert fees. In addition, for consistency with the analysis 
of  costs  of  ICS,  the  tribunals'  decisions  on  apportionment  of  costs  among  disputing  parties 
were not taken into account177 and costs were considered to be borne by the disputing parties 
in equal shares.  

Table 6 below shows the results of this research.178  

177  On  apportionment  of  costs,  depending  on  the  circumstances  of  the  case,  some  arbitral  tribunals  have  ruled 
that  each  party  should  bear  its  own  costs,  while  others  have  applied  the  principle  that  “costs  follow  the 
event,” making the losing party bear all or part of the costs of the proceeding and attorney fees. Examples of 
arbitration on apportionment of costs are UNCITRAL Article 40(1) and ICSID Article 61(2). Article 40(1) 
of the UNCITRAL Rules provides that the costs of arbitration shall in principle be borne by the unsuccessful 
party.  It  also  grants  the  Tribunal  discretion  to  apportion  the  costs  otherwise  between  the  Parties  if  it 
considers  a  different  apportionment  reasonable  taking  into  consideration  the  circumstances  of  the  case. 
Article  61(2)  of  the  ICSID  Convention  provides  that:  "[...]  the  Tribunal  shall,  except  as  the  parties 
otherwise agree, assess the expenses incurred by the parties in connection with the proceedings and shall 
decide  how  and  by  whom  those  expenses,  the  fees  and  expenses  of  the  members  of  the  Tribunal  and  the 
charges for the use of facilities of the Centre shall be paid. Such decision shall form part of the award". 

178 The research was conducted on http://investmentpolicyhub.unctad.org/ISDS by selecting all 28 EU Member 
States as respondent States and by excluding both pending and discontinued cases (for which a decision on 
costs is not present). The research produced a total of 82 results. No cases were brought against the EU. Out 
of the 82 cases, 12 cases were excluded because they concerned disputes between a EU Member State and 
an  investor  with  the  nationality  of  a  country  with  which  the  EU  has  negotiated  or  is  in  the  process  of 
negotiating a trade and investment agreement that includes provisions on ICS. 59 cases concerned intra-EU 
disputes. Out of these, the disputes considered were disputes arisen after the date of accession to the EU of 
the respondent Member State and before the date of accession of the investor's host State. Consequently, 13 
results were found to be relevant for this analysis. 

95 

 
 
                                                 
 
Table 6: ISDS cases between EU Member States and investors that are third country nationals (excluding nationals of EU treaty partners;  
including nationals of Member States before date of accession to the EU). 

Case 

Applicable IIA179 
and Nationality of 
disputing parties 

Arbitral rules  
and 
Administering 
Institution 

Outcome of 
proceedings 

Tribunal and 
institutional costs 
borne by 
respondent State 
(assuming 50/50) 

Duration of 
proceedings 

India  -  Poland  BIT 
(1996) 

UNCITRAL 

Decided  in  favour  of 
investor 

EUR 414,711181 

2 years: 

Tribunal and 
institutional costs 
borne by 
respondent State 
per year 
EUR 207,356 

Respondent State(s): 
Poland 

Home  State(s)  of 
investor: 
India 
Norway - Poland BIT 
(1990) 

Respondent State(s): 
Poland 

PCA 

Year  of 
2014 

initiation: 

Award 
August 2016 

dated: 

12 

UNCITRAL 

PCA 

Decided  in  favour  of 
State 

EUR 121,422183 

3 years: 

EUR 40,474 

Year  of 
2013 

initiation: 

Flemingo 
DutyFree  v. 
Poland180 

Almås 
Poland182 

v. 

179 International Investment Agreement (IIA). 

180 Award, paras. 964-975, https://www.italaw.com/sites/default/files/case-documents/italaw7709_3.pdf. 

181 This amount includes 50% of the Tribunal fees, travel and other expenses incurred by the arbitrators and cost of expert advice, registry service and other assistance  as 
established by the Tribunal in paras. 964-967 of the Award. It does not take into account any costs of legal representation for coherence with the analysis of ICS costs and 
as explained in Section 2. on Methodology. 

182 Award, paras. 300-308, http://www.pcacases.com/web/sendAttach/1872. 

183 This amount includes 50% of the Tribunal fees and expenses, fees for registry services and other tribunal costs, as established by the Tribunal in paras. 301-303 of the 

Award. 

96 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Home  State(s)  of 
investor: 
Norway 
Latvia  -  Switzerland 
BIT (1992) 

Respondent State(s): 
Latvia 

Home  State(s)  of 
investor: 
Switzerland 
Inter alia  
Hungary 
Switzerland 
(1988) 
 Respondent State(s): 
Hungary 

- 
BIT 

Home  State(s)  of 
investor: 
inter  alia 
Switzerland 
Spain 
BIT (1995) 

-  Venezuela 

Bryn 
Services  v. 
Latvia184 

Emmis 
v. 
Hungary185 

IGB 
Spain187 

v. 

dated: 

27 

Award 
June 
2016 

None (ad hoc) 

Settled 

No data available 

Year  of 
2013 

initiation: 

Data not available 

administering 

No 
institution 

ICSID 

ICSID 

ICSID 

ICSID 

Decided  in  favour  of 
State 

USD  165,634186,  i.e. 
EUR € 149,637  

2 years 

EUR 74,819 

Year  of 
2014 

initiation: 

dated: 

16 

Award 
April 
2016 

Decided  in  favour  of 
State 

No data available 

3 years: 

Data not available 

Year  of 

initiation: 

184 For information on the case, see http://investmentpolicyhub.unctad.org/ISDS/Details/610. 

185 Award, paras. 256-264, https://www.italaw.com/sites/default/files/case-documents/italaw3143.pdf. 

186 These costs include 50% of the ICSID's administrative fees and expenses and tribunal's fees and expenses, as ordered by the arbitral Tribunal in paras. 262-263 of the 

Award. 

187 Award, paras. 210-213, https://www.italaw.com/sites/default/files/case-documents/italaw7474.pdf. 

97 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Dede 
v. 
Romania188 

Alps 
Finance  v. 
Slovakia190 

Respondent State(s): 
Spain 

Home  State(s)  of 
investor: 
Venezuela 
Romania 
BIT (1996) 

-  Turkey 

Respondent State(s): 
Romania 

Home  State(s)  of 
investor: 
Turkey 
Slovakia 
Switzerland 
(1990) 

- 
BIT 

Respondent State(s): 
Slovakia 

Home  State(s)  of 
investor: 
Switzerland 

ICSID  

ICSID 

Decided  in  favour  of 
State 

USD  153,515189,  i.e. 
EUR 138,689 

2012 

Award 
August 
2015 

dated: 

14 

3 years: 

Year  of 
2010 

initiation: 

Award 
dated: 
September 2013 

5 

EUR 46,230 

UNCITRAL 

administering 

No 
institution 

Decided  in  favour  of 
State 

Data  not  publicly 
disclosed  

3 years: 

Data not available  

Year  of 
2008 

initiation: 

Award 
March 2011 

dated: 

5 

Phoenix 
Action 

v. 

Czech  Republic 
Israel BIT (1997) 

- 

ICSID 

Decided  in  favour  of 
State 

USD  178,000192,  i.e. 
EUR 160,809  

3 years: 

EUR 53,603 

188 Award, paras. 265-273, https://www.italaw.com/sites/default/files/case-documents/italaw5010.pdf. 

189 These costs include 50% of arbitrators' fees and expenses and ICSID administrative charges, as ordered by the arbitral Tribunal in para. 277 of the Award.  

190 Award, paras. 253-270, https://www.italaw.com/sites/default/files/case-documents/ita0027.pdf. 

98 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Czech 
Republic191 

Parkerings 
v. 
Lithuania193 

Pren  Nreka 
v. 
Czech 
Republic195 

Respondent State(s): 
Czech Republic 

Home  State(s)  of 
investor: 
Israel 
Lithuania  -  Norway 
BIT (1992) 

Respondent State(s): 
Lithuania 

Home  State(s)  of 
investor: 
Norway 
-  Czech 
Croatia 
Republic BIT (1996) 

Respondent State(s): 
Czech Republic 

Home  State(s)  of 
investor: Croatia196 

ICSID 

ICSID 

ICSID 

Decided  in  favour  of 
State 

Year  of 
2006 

initiation: 

Award 
April 2009 

dated: 

15 

2 years: 

Year  of 
2005 

initiation: 

dated: 
Award 
September 2007 

11 

Data not available 

costs 

refers 

Only  data  on  costs 
to 
available 
and 
total 
expenses, 
i.e. 
including  costs  of 
representation 
legal 
(EUR 1,340,716)194 

UNCITRAL 

administering 

No 
institution 

Decided  in  favour  of 
investor 

Data not available 

2 years: 

Data not available 

Year  of 
2005 

initiation: 

Award 
February 2007 

dated: 

5 

192 This amount covers 50% of the fees and expenses of the members of the Tribunal and of the ICSID Secretariat as established by the Tribunal at para. 152 of the Award. 

191 Award, paras. 148-152, https://www.italaw.com/sites/default/files/case-documents/ita0668.pdf. 

193 Award, paras. 457-464, https://www.italaw.com/sites/default/files/case-documents/ita0619.pdf. 

194  The  award  does  not  specify  the  exact  content  of  this  amount,  therefore  there  is  the  risk  that  the  costs  of  legal  representation  of  the  respondent  are  included  therein. 

Accordingly, it is not included in the calculation of the average.  

195 For information on the case, see https://www.italaw.com/cases/756. 

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                           
v. 
Telenor 
Hungary197 

Hungary  -  Norway 
BIT (1991) 

ICSID 

ICSID 

Decided  in  favour  of 
State 

USD  150,000198,  i.e. 
EUR 135,513 

EUR 67,757 

2 years: 

Year  of 
2004 

initiation: 

Award 
dated: 
September 2006 

13 

Sancheti  v. 
Germany199 

Mafezzini v. 
Spain200 

Respondent State(s): 
Hungary 

Home  State(s)  of 
investor: 
Norway 
Germany - India BIT 
(1995) 

Respondent State(s): 
Germany 

Home  State(s)  of 
investor: 
India 
Argentina 
BIT (1991) 

-  Spain 

Respondent State(s): 
Spain 

Home  State(s)  of 

Data not available 

Settled 

Data not available 

Year  of 
2000 

initiation: 

Data not available 

Data not available 

ICSID 

ICSID 

Decided  in  favour  of 
investor 

No data available 

3 years: 

Data not available 

Year  of 
1997 

initiation: 

Award 
dated: 
November 2000 

13 

196 Croatia acceded to the EU on 1 July 2013, therefore in 2005 its investor was a third country national. 

197 Award, para. 108 and Schedule of Costs, https://www.italaw.com/sites/default/files/case-documents/ita0858.pdf. 

198 This amount covers 50% of the ICSID costs including the fees and expenses of the Tribunal, as established by the Tribunal at para. 108. 

199 For information on the case, see http://investmentpolicyhub.unctad.org/ISDS/Details/46. 

200 Award, paras. 98-100, https://www.italaw.com/sites/default/files/case-documents/ita0481.pdf. 

100 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                                                                                                                                                                                                           
investor:  
Argentina 

101 

 
 
In order to estimate the annual cost for the EU and for EU Member States per ISDS case, the 
average cost that EU Member States have spent per year per case was calculated among those 
cases above. For those cases for which data on costs was not available, an average cost per 
year was attributed (calculating it among the other cases).201 For those cases for which data on 
duration of proceedings was not available, an average duration was attributed (calculating it 
among the other cases).202 

It was found that EU Member States have spent on average EUR 67,133 per year per ISDS 
case in disputes with investors that are nationals of third countries (non EU trading partners), 
considering  only  institutional  and  tribunal  costs  as  borne  by  the  disputing  parties  in  equal 
shares. 

Table 7 below shows the results of this calculation. 

201 The average cost per year is EUR 81,706. 

202 The average duration of cases is 2 years. 

102 

 
 
 
                                                 
Table 7: Average cost per case per year 

2015 

2014 

2013 

2012 

2011 

2010 

2009 

2008 

2007 

2006 

2005 

2004 

2003  2002 

2001 

2000 

1999 

1998 

1997 

Flemingo 
DutyFree  

207,356 

207,356 

Almås 

40,474 

40,474 

40,474 

81,706 

81,706 

74,819 

74,819 

81,706 

81,706 

81,706 

46,230 

46,230  46,230 

81,706 

81,706  81,706 

53,603 

53,603  53,603 

81,706 

81,706 

81,706 

81,706 

67,757 

67,757 

322,648 

486,060 

203,886  127,936  46,230  127,936  81,706  135,309  53,603  217,015  231,169  67,757  0 

3 

5 

3 

2 

1 

2 

1 

2 

1 

3 

3 

1 

0 

107,549 

97,212 

67,962 

63,968 

46,230  63,968 

81,706  67,655 

53,603  72,338 

77,056 

67,757  0 

81,706  81,706 

81,706  81,706  81,706 

81,706  81,706  81,706  81,706  81,706 

1 

1 

1 

1 

1 

81,706  81,706  81,706  81,706  81,706 

0 

0 

0 

132,094 

67,133 

Bryn 
Services  
Emmis  

IGB  

Dede  

Alps 
Finance  
Phoenix 
Action  
Parkerings  

Pren 
Nreka  
Telenor  

Sancheti  

Maffezzini  

TOTAL 
(per year) 
Number 
of cases 
Cost  per 
case  per 
year 
Average 
cost 
year 
Average 
per 
cost 
case  per 
year 

per 

103 

 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Since for calculating the costs of ICS we used the assumption of an active court with 1 case at 
first instance and 1 appeal per year, the same assumption of 2 cases per year was used here for 
ISDS.  The  result  was  that  the  EU  and  EU  Member  States  would  spend  on  average  EUR 
134,266 per year per 2 ISDS cases.203 These assumptions are of course very much subject to 
variations in reality. 

3.3 Total cost of baseline scenario  

In light of the analysis conducted in para. 3.1 and para. 3.2 it was possible to conclude that the 
overall annual cost of the baseline scenario assuming 2 cases per year was estimated to be the 
sum of: 

  The estimated cost of 11 active ICSs with 2 cases each, i.e. EUR 8,593,783 per year 
(the  estimated  cost  of  23  active  ICSs  with  2  cases  each  would  amount  to  EUR 
17,968,819, but the estimate of 11 active ICSs is preferred given the more advanced 
status of the negotiations);204 and 

  The  estimated  cost  of  2  ISDS  cases  per  year  (in  relation  to  those  ISDS  mechanisms 

that would be replaced by ICS in the short term), i.e. EUR 134,266 per year. 

The sum of these two calculations gave us the overall cost of the baseline scenario, i.e. EUR 
8,728,049. 

4.   MULTILATERAL INVESTMENT COURT SCENARIO 

This  scenario  estimates  the  costs  of  a  permanent  multilateral  investment  Court,  which  is 
assumed  to  include  a  First  Instance  Tribunal  and  an  Appeal  Tribunal  with  full-time 
adjudicators. 

The precise cost of this Court is hard to predict with a high level of accuracy because this data 
will  ultimately  depend  on  a  number  of  factors,  such  as  its  concrete  design,  methods  of 
functioning, its size, arrangements relating to possible user fees and on the concrete outcome 
of future negotiations. 

Nevertheless, it was possible to construct an estimate of the cost of this Court on the basis of a 
comparative  analysis  with  corresponding  budgetary  data  of  other  international  dispute 
settlement  mechanisms.  Specifically,  the  fees  and  expenses  of  the  following  international 
courts and tribunals were analysed: 

  The International Court of Justice (ICJ); 
  The International Criminal Court (ICC); 

203 In  addition,  no  additional  costs  were  found  connected  to  membership  in  one  of  the  arbitral  institutions.  In 
particular, 
ICSID, 
join 
https://icsid.worldbank.org/en/Documents/about/Guide%20to%20Membership%20in%20the%20ICSID%20
Convention.pdf, p. 2. 

or  maintain  membership 

there 

cost 

no 

to 

in 

is 

204 As explained above, it is assumed that the EU will bear the full budgetary impact of the ICS. 

104 

 
 
 
 
                                                 
  The Appellate Body of the WTO (AB WTO); 
  The Court of Justice of the European Union (CJEU); 
  The International Tribunal of the Law of the See (ITLOS); and 
  The European Court of Human Rights (ECtHR).205 

In order to establish what would be the impact on the EU budget of the cost of the multilateral 
Court per year, a two-step process was followed: 

1.  Calculating the overall cost of the multilateral investment Court for all its Contracting 

Parties per year (para. 4.1); and 

2.  Calculating the share of cost that has to be borne by the EU budget and Member States 

budgets per year (para. 4.2). 

4.1   Calculation of overall cost of the Multilateral Investment Court per year 

In order to calculate the yearly total cost of the multilateral investment Court, the following 
core cost components were taken into account: 

  Remuneration of adjudicators per year (para. 4.1.1); and 
  Expenses for staff/secretariat per year (para. 4.1.2). 

The sum of these cost components resulted in the overall cost of the multilateral investment 
Court for its Contracting Parties per annum (para. 4.1.3). 

4.1.1 Remuneration of adjudicators 

As illustrated for the ICS, there are two main types of remuneration of adjudicators: (i) fixed 
or (ii) fee-based. In the former case, adjudicators (who are in an employment relationship) are 
paid  a  base  remuneration  per  month  plus  benefits  (health  insurance,  pensions,  etc.).  In  the 
latter case, adjudicators (who are self-employed and are thus responsible for their own social 
security) are generally paid a monthly retainer and a daily/hourly fee. 

The  preferred  option  for  the  multilateral  investment  Court  would  be  to  have  permanent 
adjudicators employed full time and remunerated with fixed salary as  it is the case for most 
international courts and tribunals (see Table 8 below). However, the alternative or the addition 
of a mechanism allowing for a fee-based system of remuneration is not excluded. Since the 
actual level of fees has not been agreed and estimating the number of days adjudicators will 
work  would  be  highly  speculative,  the  calculation  of  a  fee-based  remuneration  system  for 
adjudicators is not carried out.  

For the purposes of the projection carried out below, it is assumed there are 9 adjudicators for 
the First Instance Tribunal and 5 adjudicators for the Appeal Tribunal. Table 8 below shows a 

205 Budget information of other international courts were searched, but they were not publicly available, namely 
the  Inter-American  Court  of  Human  Rights,  the  Iran-US  Claims  Tribunal,  the  Caribbean  Court  of  Justice 
(CCJ) and the Arab Investment Court. 

105 

 
 
 
                                                 
 
comparative  analysis  of  remuneration  of  adjudicators  in  other  international  courts  and 
tribunals. 

Table 8: Remuneration of adjudicators in international courts 

International 
Court or Tribunal 

International 
Court  of  Justice 
(ICJ)206 

International 
Criminal  Court 
(ICC)207 

Trade 

World 
Organization 
Appellate  Body 
(WTO AB) 

Remuneration per year 

(Salary + Benefits or 

Retainer + Fees) 

Total average per 
adjudicator per 
year 

in EUR 

Fixed remuneration system. 

EUR 456,758 

For the biennium 2016-2017 the ICJ budgeted for its 15 
judges USD 15,167,600 covering judges’ salaries, other 
entitlements  and  pensions,  i.e.  EUR  13,702,735,  i.e. 
EUR 6,851,368 per year. 

Fixed remuneration system. 

EUR 330,556 

For  2017  the  ICC  budgeted  for  its  18  judges  EUR 
5,950,000 covering judges' salaries and entitlements. 

Fee-based remuneration system. 

EUR 103,655 

For  2017  the  WTO  budgeted  for  its  7  Appellate  Body 
Members  CHF  791,000,  i.e.  EUR  725,585,  to  fully 
finance  the  fees  7  Appellate  Body  Members  for  one 
year208. 

A  different  source  provided  data  on  the  different 
components  of  the  remuneration  of  Appellate  Body 
Members: 

  Retainer CHF 7,000 per Member per month; 
  Daily  fee  CHF  600  plus  CHF  435  allowance  for 

206  Proposed  programme  budget  for  the  biennium  2016-2017,  Seventieth  session  of  the  General  Assembly,  21 
the  Court,  p.  6,  available  at: 

April  2015,  Table  7.6  Resource  requirements:  Members  of 
http://www.un.org/ga/search/view_doc.asp?symbol=A/70/6%28Sect.7%29.  

207 Proposed Programme Budget for 2017 of the International Criminal Court, Fifteenth session, The Hague, 16-
24 November 2016, Annex VI (e), p. 191, available at: https://asp.icc-cpi.int/iccdocs/asp_docs/ASP15/ICC-
ASP-15-10-ENG.pdf 

208  2016-2017  Budget  proposals  by  the  Director-General,  Table  23.  Section  2:  Temporary  Assistance,  p.  26, 
available 
https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-
DP.aspx?language=E&CatalogueIdList=134952,134411,120331,119761,102411,49810,100892,76277,5656
0,3697&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True
&HasSpanishRecord=True. 

at: 

106 

 
 
 
 
 
 
 
 
 
                                                 
Court  of  Justice 
of  the  European 
Union (CJEU)210 

The  International 
Tribunal  of 
the 
Law  of  the  See 
(ITLOS)211 

The 
European 
Court  of  Human 
Rights (ECtHR)212 

meals and accommodation; 

  CHF 300 per member per month allowance for 

administrative expenses209. 

Fixed remuneration system. 

EUR 394,041 

For  2017  the  EU  budgeted  for  its  85  Members  (40 
Members of the Court of Justice, including 28 judges, 11 
Advocate Generals and 1 Registrar; 45 Members of the 
General  Court,  including  28  judges,  16  Advocate 
Generals  and  1  Registrar)  EUR  33,493,500  for  their  
remunerations, other entitlements and allowances. 

Fixed remuneration system. 

EUR 201,698 

For 2017-2018 ITLOS budgeted for its 21 judges: 

  EUR  4,393,000 
allowances; 

for 

remuneration  and  other 

  EUR 1,857,300 for pensions; and 
  EUR  2,221,000  for  case-related  expenditures  for 

judges 

For a total of EUR 8,471,300, i.e. 4,235,650 per year. 

For  2017,  the  remuneration  of  the  47  judges  of  the 
ECtHR include: 

EUR 226,825 

  A basic salary per  judge that equals to stap 6 of 
the  grade  A7  pay  scale  for  Council  of  Europe 
staff  members  based 
i.e.  EUR 
15,259.15 per month, i.e. EUR 183,110 per year; 
  A  displacement  allowance  per  judge  equal  to 
12,5%  of  the  basic  salary,  i.e.  EUR  22,888  per 
year; 

in  France, 

209  Committee  on  Budget,  Finance  and  Administration,  Letter  from  the  Chairman  of  the  Appellate  Body,  18 
at:  

March 
https://www.google.be/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0ahUKEwjuh5jM1uXTAhX
QEVAKHSqnD0MQFggsMAE&url=https%3A%2F%2Fdocs.wto.org%2Fdol2fe%2FPages%2FFE_Search
%2FExportFile.aspx%3Fid%3D88355%26filename%3DQ%2FWT%2FBFA%2FW109.pdf&usg=AFQjCN
GEZW75uMaTI5Fyxr_z5wcMc9CnXg&cad=rja. 

available 

2004, 

p. 

3, 

210  General  Budget  of  the  European  Union  for  the  financial  year  2017,  Section  IV  Court  of  Justice  of  the 
European Union, L 51/2000, available at: http://eur-lex.europa.eu/budget/data/General/2017/en/SEC04.pdf. 

211  Draft  Budget  Proposals  of  the  International  Tribunal  for  the  Law  of  the  Sea  for  2017-2018,  Twenty-sixth 
meeting of State Parties, New York, 20-24 June 2016, Annex I Budgets of the Tribunal from 2011-2012 to 
2017-2018, pp. 26-27, available at: http://undocs.org/SPLOS/2016/WP.1. 

212 Resolution CM/Res(2009)5 on the status and conditions of service of judges of the European Court of Human 
Rights  and  of  the  Commissioner  for  Human  Rights,  adopted  by  the  Committee  of  Ministers  on  23 
September  2009,  1066th  meeting  of  the  Ministers’  Deputies,  Article  3  –  Remuneration,  available  at: 
https://search.coe.int/cm/Pages/result_details.aspx?ObjectID=09000016805c0ce3#_ftn4. 

107 

 
 
 
 
 
                                                 
 
  Additional 

for 
President of the Court of EUR 13,885; and  
  Additional  annual  remuneration  for  the  Vice-

remuneration 

annual 

the 

President of the Court of EUR 6,942 

For a total of EUR 226,825. 

Considering  that  the  above  courts  and  tribunals  have  very  different  expenses,  types  of 
remuneration, workload and number of Contracting Parties, an average has been calculated to 
have an idea of how much the remuneration of the multilateral investment Court would cost. 
A  cost  (including  salary,  benefits  for  pensions  and  for  expenses  and  allowances)  totalling 
EUR 285,589 per adjudicator per year was obtained.  

As  the  table  above  illustrates,  the  number  of  adjudicators  varies  among  the  different 
international  courts  examined  for  a  number  of  factors,  including  the  different  workload, 
functioning  and  set-up  of  these  courts.  For  this  reason,  it  is  difficult  to  extrapolate  a 
meaningful number of adjudicators from the information we have available. Consequently, for 
the  purposes  of  the  calculation  of  the  number  of  adjudicators,  it  is  assumed  there  are  9 
adjudicators  for  the  First  instance  tribunal  and  5  adjudicators  for  the  Appeal  tribunal,  for  a 
total  of  14  adjudicators  to  allow  several  three-adjudicator  divisions  to  hear  cases 
simultaneously.  

The annual cost of remuneration per adjudicator was multiplied by the number of adjudicators 
foreseen for the Court (i.e. 14, 9 for the First Instance Tribunal and 5 for the Appeal Tribunal) 
and an estimate of EUR 3,998,246 per year for the remuneration of the adjudicators of the 
Multilateral Investment Court was obtained. 

4.1.2 Expenses for staff 

The expenses for staff include: 

  Remuneration of permanent staff (professional and general service staff); 
  Remuneration of temporary staff; and  
  Other  expenses  of  the  Secretariat  related  to  staff  (e.g.  training,  hospitality, 

consultancy and official travel). 

In  relation  to  remuneration,  as  analysed  for  adjudicators,  the  types  of  remuneration  of  staff 
can be: (i) fixed or (ii) fee-based. In the former case, members of staff are paid a salary, they 
would  be  employed  by  the  Court,  which  would  be  responsible  for  staff  benefits  (health 
insurance,  childcare,  pension,  etc.).  In  the  latter  case,  members  of  staff  are  generally  paid  a 
monthly  retainer  and  a  daily/hourly  fee,  they  would  be  employed  by  the  arbitral  institution, 
which would be responsible for staff benefits.213 

The  preferred  option  for  the  multilateral  investment  Court  would  be  to  employ  its  staff  on 
fixed terms as it is the case for most international courts and tribunals (see Table 9 below for a 

213  Two  examples  of  fee-based  registries  (with  no  available  data  on  costs)  are  the  Eritrea-Ethiopia  Claims 

Commission and the Standing Arbitral Tribunal for The Bank for International Settlements.  

108 

 
 
 
 
                                                 
comparative analysis). However, as explained for adjudicators, the alternative or the addition 
of a mechanism allowing for a fee-based system of remuneration is not excluded. Since the 
actual  level  of  fees  has  not  been  agreed  and  estimating  the  number  of  days  staff  will  work 
would  be  highly  speculative, the  calculation  of  a  fee-based  remuneration  system  for  staff  is 
not carried out.  

Table 9 below shows a comparative analysis of expenses for staff in other international courts 
and tribunals.214 

Table 9: Expenses for staff in international courts 

Average of 
expenses per 
member of staff per 
year in EUR 

EUR 110,161 

International 
Court or Tribunal 

International 
Court  of  Justice 
(ICJ)215 

Expenses of the Secretariat per year 

Salary-based staff/secretariat. 

For the biennium 2016-2017 the ICJ budgeted for its 119 
Registry staff members assisting 15 judges: 

  USD 25,968,600 for remuneration of permanent 
staff  (professional  staff  and  general  service 
staff); and 

  USD  3,052,600  for  remuneration  of  temporary 

staff and other expenses 

For a total of USD 29,021,200, i.e. EUR 26,218,374, i.e. 
13,109,187 per year. 

Salary-based staff/secretariat. 

EUR 147,233 

International 
Criminal  Court 
(ICC)216 

For 2017 the ICC budgeted for its 980 Secretariat posts 
assisting its 18 judges: 

  EUR 85,949,000 for remuneration of permanent 
staff (professional staff and general service 
staff); 

  EUR 19,010,300 for remuneration of temporary 

staff; and 

  EUR 39,328,700 for other expenses 

214 The resources of staff indicated in the Table 9 broadly include remuneration of permanent staff (professional 
and general service staff) and temporary staff and other expenses of the Secretariat related to staff, including 
hospitality, consultancy, after service medical and related costs and official travel.  

215  Proposed  programme  budget  for  the  biennium  2016-2017,  Seventieth  session  of  the  General  Assembly,  21 
at: 

April 
Registry, 
http://www.un.org/ga/search/view_doc.asp?symbol=A/70/6%28Sect.7%29.  

requirements: 

Resource 

available 

Table 

2015, 

7.8 

p. 

9, 

216 Proposed Programme Budget for 2017 of the International Criminal Court, Fifteenth session, The Hague, 16-
24 November 2016, Table 2: Total ICC: Proposed budget for 2017, p. 27; Annex VI (a), p. 189; available at: 
https://asp.icc-cpi.int/iccdocs/asp_docs/ASP15/ICC-ASP-15-10-ENG.pdf. 

109 

 
 
 
 
 
 
 
 
                                                 
Trade 

World 
Organisation 
Appellate  Body 
(WTO AB)217 

For a total of EUR 144,288,000 per year. 

Salary-based staff/secretariat. 

EUR 172,636 

For  2017  the  WTO  budgeted  for  its  25  posts  assisting 
the 7 Appellate Body members: 

  CHF 

4,573,000 

staff 
for 
expenditure  (remuneration,  pensions,  benefit 
and other expenditure); 

(permanent) 

  CHF 81,000 for temporary assistance; and  
  CHF  51,000  for  other  expenses  (travel  and 

hospitality) 

For  a  total  of  CHF  4,705,000,  i.e.  EUR  4,315,899  per 
year.  

Fixed remuneration system. 

EUR 135,164 

Court  of  Justice 
of  the  European 
Union (CJEU) 218 

For 2017 the EU budgeted for its 2,063 staff assisting its 
85 Members: 

  EUR  249,717,500  for  remuneration  and  other 
entitlements,  allowances  of  officials  and 
temporary staff; 

  EUR  22,985,500  for  expenditure  for  other  staff 

and external services; and 

  EUR 6,140,000 for other expenditure relating to 

persons working with the CJEU 

The  International 
the 
Tribunal  of 
Law  of  the  See 
(ITLOS)219 

For a total of EUR 278,843,000 per year. 

Salary based staff/secretariat. 

EUR 136,308 

For 2017-2018 ITLOS budgeted for its professional staff 

217  2016-2017  Budget  proposals  by  the  Director-General,  Table  22.  Section  1:  Staff  Expenditure;  Table  23. 
Section 2: Temporary Assistance; Table 24. Part B – Other Resources (only section 4. Travel & Hospitality 
https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-
Total); 
DP.aspx?language=E&CatalogueIdList=134952,134411,120331,119761,102411,49810,100892,76277,5656
0,3697&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True
&HasSpanishRecord=True. 

available 

26-27, 

pp. 

at: 

218  General  Budget  of  the  European  Union  for  the  financial  year  2017,  Section  IV  Court  of  Justice  of  the 
http://eur-
51/2001-2002, 

available 

at: 

L 

European 
lex.europa.eu/budget/data/General/2017/en/SEC04.pdf. 

Union, 

219  Draft  Budget  Proposals  of  the  International  Tribunal  for  the  Law  of  the  Sea  for  2017-2018,  Twenty-sixth 
meeting of State Parties, New York, 20-24 June 2016, Annex I Budgets of the Tribunal from 2011-2012 to 

110 

 
 
 
 
 
 
 
 
                                                 
 
 
(18 members) and general service staff (20 members) of 
the registry assisting  its 21 judges: 

  EUR 8,577,200 for remuneration and other 

expenditures of (permanent) staff; 

  EUR 1,499,200 for remuneration and other 

expenditures of temporary staff (under recurrent 
expenditures and case-related costs); and 
  EUR 283,000 for other expenses (training, 

representation allowances, official travel, 
hospitality) 

The 
European 
Court  of  Human 
Rights (ECtHR)220 

For  a  total  of  EUR  10,359,400,  i.e.  EUR  5,179,700  per 
year. 

The only budget information available for 2017 is that: 

  The Secretariat is composed of 614 posts; 
  The  overall  budgetary  resources  for  staff/judges, 
non-staff,  CoE  contributions  to  JP/AP  amount  to 
EUR 71,279,600. 

specific 
– 
in 

No 
available 
computed 
calculation 

data 
not 
the 

The  average  cost  of  expenses  per  member  of  staff  was  calculated  among  available  data  on 
expenses  of  international  courts  and  tribunals,  amounting  to  EUR  140,300  per  member  of 
staff per year. 

As the table above shows, the number of staff working for the international courts examined 
varies substantially for a number of factors linked to the different functioning  and set-up of 
these courts. For this reason, it is difficult to extrapolate a meaningful number of staff from 
the  information  we  have  available.  Consequently,  for  the  purposes  of  the  calculation  of  the 
expenses for staff, it is assumed there are 3 members of staff per adjudicator: 1 legal assistant, 
1 secretary and 1 case manager and translator. Having assumed 14 adjudicators (9 for the First 
Instance Tribunal and 5 for the Appeal Tribunal), the total members of staff would be 42.  

Consequently, the total cost of expenses per 42 members of staff amount to  EUR 5,892,600 
per year. 

Nevertheless, this amount could vary depending on the extent to which the Court is included 
in an existing institution. Table 10 below illustrates a spectrum of alternatives.221 

2017-2018, pp. 26-27; Annex II Professional Staff of the Registry in 2017-2018, p. 28; Annex III General 
Service Staff of the Registry in 2017-2018, p. 29; available at: http://undocs.org/SPLOS/2016/WP.1. 

220  Council 

of 

and  Budget 
https://wcd.coe.int/com.instranet.InstraServlet?command=com.instranet.CmdBlobGet&InstranetImage=286
4512&SecMode=1&DocId=2342508&Usage=2. 

Programme 

2016-2017, 

available 

Europe 

20, 

p. 

at: 

221 Dirk Pulkowski, Costs. From present-day investment arbitration to a multilateral court system, presentation, 

Experts meeting, Geneva, 14 December 2016. 

111 

 
 
 
 
 
                                                                                                                                                         
 
Table 10: Scenarios of inclusion of the multilateral investment court in an existing institution 

Scenario 1 

Scenario 2 

Scenario 3 

Scenario 4 

Scenario 5 

 Court legally 
independent 
 Court provides 
full registry 
services 

 Court legally 
independent 
 Court provides 

 Court legally 
independent 
 Court employs 

some 
services 

registry 

 Supported by 
Institution 

core admin. staff 
Registry services by 
institution 

 Court legally 

independent but 
employs no staff 
 Administrative & 
registry services 
by institution 

  Court legally part 
of institution 
  Administrative & 
registry  services 
by  dedicated  unit 
of institution 

All 
functions by 
Court staff 

Judges 
+ Core staff 
+ Registry 
oversight 

Legal and 
logistical 
support 

Judges 
+ Core staff 

Judges 

Registry 

Registry 
+Administra-
tive staff 

All 
functions by 
Institution's 
staff 

Given the numerous caveats in the variables of the table above, calculating estimates of costs 
under  the  different  scenarios  would  be  highly  speculative.  For  this  reason,  these  estimates 
were not calculated. 

4.1.3 Overall cost of the multilateral investment Court per year 

The overall estimated annual cost of the multilateral investment Court was thus fund summing 
the two cost components of: 

  Remuneration of adjudicators per year, i.e. EUR 3,998,246 per year; and 
  Expenses for staff per year i.e. EUR 5,892,600 per year. 

The sum of these cost components amounted to EUR 9,890,846 per year. 

4.2   Calculation  of  cost  of  the  Multilateral  Investment  Court  for  the  EU  and  EU 
Member States per year 

In order to calculate the impact of the multilateral investment Court on the EU  and Member 
States  budget  per  year,  it  was  necessary  to  assess  different  principles  for  the  allocation  of 
costs, namely: 

  Considerations on the overall number of participants and rules on allocation of costs 

among them (4.2.1); and 

  Considerations on mixed financing (4.2.2). 

112 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.2.1 Allocation of costs among Contracting Parties 

The  estimated  cost  of  EUR  9,890,846  per  year  will  have  to  be  shared  by  Members.  It  was 
supposed  that  the  multilateral  investment  Court  would  start  operating  with  the  EU,  its  28 
Member  States  and  16  other  Contracting  Parties  with  different  levels  of  economic 
development. Of these, it was assumed that: 

  5  Members  would  be  "high  income"  countries  (according  to  the  World  Bank 

classification); 

  7 Members would be "upper middle income" countries (according to the World Bank 

classification); and  

  4 Members would be "lower middle income" and "low income" countries (according 

to the World Bank classification). 

One basis for allocating the costs of the multilateral investment Court among its Contracting 
Parties would be to follow the rules on allocation rules of the IMF. Each Member country of 
the IMF is assigned a quota, based broadly on its relative position in the world economy.222 

The  IMF  quota  formula  includes  four  quota  variables  (GDP,  openness,  variability  and 
reserves), expressed in shares of global totals, with the variables assigned weights totalling to 
1.0.  The  formula  also  includes  a  compression  factor  that  reduces  dispersion  in  calculated 
quota shares. The formula is: 

CQS = (0.5*Y + 0.3*O + 0.15*V + 0.05*R) k 

Where: 

  CQS = calculated quota share; 
  Y = a blend of GDP converted at market rates and PPP exchange rates averaged over a 
three  year  period.  The  weights  of  market-based  and  PPP  GDP  are  0.60  and  0.40, 
respectively; 

  O  =  the annual  average of  the  sum  of  current  payments  and  current receipts  (goods, 

services, income, and transfers) for a five year period; 

  V  =  variability  of  current  receipts  and  net  capital  flows  (measured  as  a  standard 

deviation from the centred three-year trend over a thirteen year period); 

  R  =  twelve  month  average  over  a  year  of  official  reserves  (foreign  exchange,  SDR 

holdings, reserve position in the Fund, and monetary gold); and 

  k  =  a  compression  factor  of  0.95.  The  compression  factor  is  applied  to  the 

uncompressed calculated quota shares which are then rescaled to sum to 100.223 

The  variables  of  the  formula  were  calculated  first  in  absolute  terms  based  on  data  of  2014 
available on the IMF website (SDR Millions) and then in shares (Shares %) for: the 28 EU 

222  Quotas 

-  Data  Update  and  Simulations, 
http://www.imf.org/external/np/pp/eng/2016/080916.pdf. 

IMF  Policy  Paper,  September  2016,  available  at: 

223 For the quota formula see Quotas - Data Update and Simulations, IMF Policy Paper, September 2016, Box 2. 

Quota Formula. p. 22, available at: http://www.imf.org/external/np/pp/eng/2016/080916.pdf.   

113 

 
 
 
                                                 
Member  States,  16  anonymised  third  countries  (with  different  levels  of  economic 
development as explained above) and the EU (for which the variables are equal to all Member 
States  values).224  Then  the  IMF  formula  was  applied  to  calculate  the  quota  for  each 
Contracting Party and then normalised to add up to 100%. The results of the calculations are 
shown in Table 11 below. 

224  For the updated individual member country data for the variables used in the quota formula and calculated 
quotas based on the quota formula see Quotas - Data Update and Simulations -  Statistical Appendix, IMF 
Policy  Paper,  September  2016,  Table  A6.  Distribution  of  Quotas  and  Updated  Quota  Variables—by 
Member  (concluded)  (in  SDR  millions),  pp.  44-49  for  figures  in  SDR  millions.  Available  at: 
http://www.imf.org/external/np/pp/eng/2016/081016.pdf. 

114 

 
 
 
                                                 
 
Table 11: Simulation of allocation of costs 

SDR Millions 

Countries 

Income Level 

GDP 

Reserves 

Variability  

PPP GDP 

Openness 

28 EU MS 

EU only 

- 

- 

11747248 

538866 

11747248 

538866 

Country1 

High income 

1188272 

Country2 

High income 

984900 

49693 

33653 

Country3 

High income 

3394254 

822571 

Country4 

High income 

861989 

Country5 

High income 

486752 

235092 

487489 

middle 

358259 

17247 

309819 

309819 

16372 

12148 

47090 

8445 

22934 

4024 

11918482 

12386721 

11918482 

12386721 

1008211 

693324 

840665 

492287 

3065528 

1406256 

1117665 

1008154 

606798 

893073 

415862 

127476 

Country6 

Country7 

Country8 

Country9 

Country10 

Upper 
income 

Upper 
income 

Upper 
income 

Upper 
income 

Upper 
income 

middle 

6434582 

2600450 

75379 

11157060 

3301487 

middle 

1498366 

242729 

15699 

2095469 

430624 

middle 

817995 

123077 

14462 

1362728 

548167 

middle 

1316498 

274740 

23996 

2291627 

759510 

Country11 

Upper 

middle  237310 

29404 

2965 

449020 

169654 

115 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Country12 

Country13 

Country14 

Country15 

income 

Upper 
income 

Lower 
income 

Lower 
income 

Lower 
income 

middle 

527337 

73040 

9762 

947699 

299648 

middle 

112328 

22979 

2947 

313502 

169469 

middle 

1265388 

194161 

13087 

4478365 

708255 

middle 

594444 

69238 

6452 

1651587 

282730 

Country16 

Low income 

4988 

807 

67 

10977 

3653 

Shares % 

Countries 

Income Level 

GDP 

Reserves 

Variability 

PPP GDP 

Openness 

Quota 

Normalised Quota 

28 EU MS 

EU only 

- 

- 

Country1 

High income 

Country2 

High income 

Country3 

High income 

Country4 

High income 

Country5 

High income 

27.0 

27.0 

2.7 

2.3 

7.8 

2.0 

1.1 

Country6 

Upper 

middle  0.8 

8.5 

8.5 

0.8 

0.5 

12.9 

3.7 

7.7 

0.3 

34.6 

34.6 

1.8 

1.4 

5.3 

0.9 

2.6 

0.4 

21.2 

21.2 

1.8 

1.2 

5.5 

2.0 

1.8 

1.1 

34.8 

34.8 

2.4 

1.4 

3.9 

2.5 

1.2 

0.4 

24.0 

24.0 

2.1 

1.5 

5.5 

2.0 

1.8 

0.7 

27.24 

27.24 

2.40 

1.74 

6.27 

2.26 

2.00 

0.75 

116 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
middle 

14.8 

40.9 

Country7 

Country8 

Country9 

Country10 

Country11 

Country12 

Country13 

Country14 

Country15 

income 

Upper 
income 

Upper 
income 

Upper 
income 

Upper 
income 

Upper 
income 

Upper 
income 

Lower 
income 

Lower 
income 

Lower 
income 

middle 

3.4 

middle 

1.9 

middle 

3.0 

middle 

0.5 

middle 

1.2 

middle 

0.3 

middle 

2.9 

middle 

1.4 

Country16 

Low income 

0.0 

8.4 

1.8 

1.6 

2.7 

0.3 

1.1 

0.3 

1.5 

0.7 

0.0 

19.9 

3.7 

2.4 

4.1 

0.8 

1.7 

0.6 

8.0 

2.9 

0.0 

9.3 

1.2 

1.5 

2.1 

0.5 

0.8 

0.5 

2.0 

0.8 

0.00 

12.7 

14.39225 

2.5 

1.8 

2.8 

0.6 

1.2 

0.4 

3.2 

1.4 

0.0 

2.81 

2.03 

3.20 

0.63 

1.32 

0.47 

3.66 

1.56 

0.02 

3.8 

1.9 

4.3 

0.5 

1.1 

0.4 

3.1 

1.1 

0.0 

225 Country4 in the table is a large country with high values for GDP, openness, variability and reserves. 

117 

 
 
 
                                                 
It is intended that the EU and each Member State would be separate Parties to the Convention 
establishing the multilateral investment Court, each for its respective international investment 
agreements.  

In Table 11 above, the entry "28 EU MS" refers to the sum of all EU Member States' GDP, 
reserves,  variability, PPP GDP, openness and, as a result, weighted quotas in  application  of 
the IMF formula. The formula on  weighted contributions would be applied also  to Member 
States, as separate Parties. Consequently, also Member States' individual contributions will be 
dependent  on  their  individual  level  of  development  (i.e.  by  following  the  IMF  formula,  on 
their GDP, reserves, variability, GDP PPP and openness). 

As  a  consequence,  according  to  the  IMF  quota  system,  the  EU  and  Member  States' 
contributions  would  correspond  to  the  following  quotas  of  the  total  annual  cost  of  the 
multilateral investment Court (i.e. EUR 9,890,846): 

  All EU Member States would cover 27.24% of the total annual cost of the multilateral 

investment Court (i.e. EUR 2,694,266 per year); and  

  The EU would cover 27.24% of its total annual cost (i.e. EUR 2,694,266 per year). 

As explained in section 2 on the general methodology and then clarified in paragraphs 3.1.2.1 
and  3.2,  costs  for  ICS  and  ISDS  are  dependent on  the  number  of  cases.  Therefore,  the  cost 
obtained  per  year  was  multiplied  by  2  cases.  Conversely,  for  the  multilateral  investment 
Court, given the assumptions of fixed remunerations and expenses for adjudicators and staff, 
the  same  costs  do  not  vary  depending  on  the  number  of  cases  pending  before  the  court. 
Consequently, no additional calculation has to be made. 

Over time, the operating costs are also likely to decrease as the circle of membership grows 
and the institution gains in efficiency.  

Other  systems  of  allocation  of  costs  exist  in  international  organisations.  However,  the  IMF 
system  best  takes  into  account  the  level  of  development  of  Contracting  Parties.  Table  12 
below shows Member State contributions in a number of international organisations. 

Table 12: Weighted Member State contributions226 

International organisation 

Contribution of Members 

Allocation system 

World Trade Organisation 

Contributions 
CHF 29,325-CHF 22,114,960 

range  between 

Based on share of world trade 

United Nations 

Contributions 
range  between 
USD 27,136-USD 654,778,938 

Based  (mostly)  on  estimates  of 
Gross National Income 

Permanent 
Arbitration 

Court 

of 

Contributions 
EUR 535 and EUR 53,550 

range  between 

Based  on  the  Universal  Postal 
Union contribution class system 

ranging  from  ½  to  50  units  (1 
unit = EUR 1,071) 

226 Dirk Pulkowski, Costs. From present-day investment arbitration to a multilateral court system, presentation, 

Experts meeting, Geneva, 14 December 2016. 

118 

 
 
 
 
 
                                                 
4.2.2 Mixed financing 

The overall cost for establishing and operating the multilateral investment Court could be: 

  Entirely financed by Contracting Parties' contributions (as in para. 4.2.1 above);  
  Partly financed by Contracting Parties' contributions and partly financed by users, i.e. 

investors bringing cases (e.g. for registry/staff services); or 

  Entirely financed by users. 

Therefore, a potential other source is user fees. These could not be the same as for the current 
situation,  where  users  pay  for  the  whole  exercise,  including  the  work  of  the  adjudicators. 
However, it is possible that a fixed user fee be charged which would cover at least some of the 
expenses of the mechanism. 

Inter-State  dispute  settlement  mechanisms227  and  dispute  settlement  mechanisms  set  up  by 
States  for  claims  by  individuals228  do  not  generally  require  a  filing  fee  for  claimants. 
However, claimants must pay their share in the current ISDS system.229 

In  the  scenarios  in  which  users  contribute  to  the  financing  of  the  multilateral  investment 
Court, the contribution of the EU and of EU Member States shown in paragraph 4.2.1 above 
would be reduced. However, since the assumptions about such mixing financing would have 
been highly speculative, it was not possible to calculate it in this analysis. 

5.  

COMPARISON  OF  THE  COST  OF  THE  BASELINE  SCENARIO  AND  THE 
MULTILATERAL  INVESTMENT  COURT  SCENARIO  FOR  THE  EU  AND 
MEMBER STATES 

Annual cost of  

Baseline scenario  

Cost of 11 ICSs for 
the EU 

Cost of remaining 
ISDS for the EU230 
and for EU Member 
States  

Annual cost of  

Multilateral Investment Court scenario  

Cost for the EU  

Cost for EU Member 
States 

EUR 8,593,783  

EUR 134,266 

EUR 2,694,266 

EUR 2,694,266 

227 ICJ, WTO, Iran-US Claims Tribunal. 

228 CJEU, ECtHR, Inter-American Court of Human Rights.  

229 

ICSID, 

In 
https://icsid.worldbank.org/en/Pages/Services/Cost-of-Proceedings.aspx.  

the  party 

instituting  proceedings  must  pay 

instance, 

for 

a 

lodging 

fee, 

230 For the EU under the ECT. 

119 

 
 
 
 
 
 
                                                 
Total cost for the EU and Member States = 

Total cost for the EU and Member States =  

EUR 8,728,049 

EUR 5,388,532 

120