Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the International Centre for Settlement of Investment Disputes (ICSID)
Date: 2022-02-09
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: EU Member State, International Centre for Settlement of Investment Disputes, commercial arbitration, international commercial arbitration, international convention, investment, revision of an agreement

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   EUROPEAN COMMISSION  Brussels, 9.2.2022  COM(2022) 38 final 2022/0025 (NLE)  Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the International Centre for Settlement of Investment Disputes (ICSID)  
 
EXPLANATORY MEMORANDUM 

1. 

SUBJECT MATTER OF THE PROPOSAL 

This  proposal  concerns  the  decision  establishing  the  position  to  be  taken  on  behalf  of  the 
European Union within the Administrative Council of the International Centre for Settlement 
of  Investment  Disputes  (ICSID)  in  connection  with  the  envisaged  adoption  of  the  amended 
ICSID rules.1 The adoption will produce legal effects on the European Union’s treaty practice 
in the field of investment dispute settlement. 

2. 

CONTEXT OF THE PROPOSAL 

2.1. 

The Particular Interest of the European Union in ICSID 

Currently 155 States are contracting states of ICSID, among which 26 are Member States of 
the  Union.  The  European  Union  is  not  a  member  of  ICSID  itself.  However,  the  European 
Union has incorporated the ICSID Arbitration Rules and Additional Facility Arbitration Rules 
in  all  of  its  trade  and  investment  agreements  that  include  rules  on  investment  protection.2 
Pursuant  to  such  agreements,  the  ICSID  rules  can  apply  in  investment  disputes  initiated  by 
EU  investors  against  third  countries,  by  non-EU  investors  against  EU  Member  States  or, 
following the proposed amendments, in disputes brought against the Union under the ICSID 
Additional Facility Arbitration Rules. Thus, the Union has a particular interest in the reform 
of ICSID rules. 

2.2. 

ICSID 

ICSID  is  an  institution  that  is  part  of  the  World  Bank  Group.  It  is  an  independent  and 
depoliticised dispute-settlement institution. The objectives of ICSID are:  

(a) 

(b) 

(c) 

providing a dispute settlement mechanism for investor-State disputes by conciliation, 
arbitration or fact-finding,  

administering these disputes, and 

promoting international investment by providing confidence in the dispute resolution 
process.  

The ICSID dispute settlement mechanism is available to investor-State disputes and to State-
State  disputes  under  investment  treaties  and  trade  agreements,  under  domestic  investment 
laws  and  pursuant  to  investment  contracts  concluded  between  States  and  foreign  investors. 
ICSID also acts as an administrative registry. 

2.3. 

The envisaged acts of ICSID 

The Secretariat of ICSID initiated a consultation process on the reform of the Centre’s Rules 
in  2018.  Throughout  the  years  2018-2021,  intensive  discussions  took  place  between  the 
Secretariat  and  ICSID  member  states  based  on  five  successive  drafts  of  revised  rules.  The 
European  Union,  represented  by  the  European  Commission,  has  actively  participated  in  the 

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I.e.,  the  ICSID  Administrative  and  Financial  Regulations,  Institution  Rules,  Arbitration  Rules, 
Conciliation  Rules,  Additional  Facility  Rules,  Additional  Facility  Administrative  and  Financial 
Regulations, Additional Facility Arbitration Rules, Additional Facility Conciliation Rules, Fact-Finding 
Rules,  Fact-Finding  Administrative  and  Financial  Regulations,  Mediation  Rules,  Mediation 
Administrative and Financial Regulations. 
See Article 8.23(2) of the EU-Canada Comprehensive Economic and Trade Agreement (CETA), Article 
3.33(2) of  the  EU-Vietnam  Investment  Protection  Agreement  and  Article  3.6(1) of  the  EU-Singapore 
Investment  Protection  Agreement.  Article  26  of  the  Energy  Charter  Treaty,  to  which  the  Union  is  a 
party, also allows for the application of the ICSID Rules. 

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consultation  process,  coordinated  the  positions  of  the  EU  Member  States  and  repeatedly 
submitted written comments on the draft texts on behalf of the EU and its Member States. As 
a result of this  process,  the following  amendments and new texts, producing legal  effect  on 
the European Union’s treaty practice, will be put to a vote of the Administrative Council by 
written procedure scheduled to close on 21 March 2022: 

2.3.1.  Amendments to the ICSID Convention Proceedings 

The  amendments 
the  ICSID  Administrative  and  Financial 
Regulations,  the  ICSID  Institution  Rules,  the  ICSID  Arbitration  Rules  and  the  ICSID 
Conciliation Rules.  

include  amendments 

to 

Among  the  main  substantive  changes  are  a  new  requirement  to  include  a  description  of  the 
ownership and control of the investment within the request for arbitration or conciliation, an 
obligation  to  disclose  third-party  funding,  enhanced  rules  regarding  the  disqualification  of 
arbitrators, the costs of the proceedings, early dismissals of unfounded claims, bifurcation of 
proceedings,  as  well  as  revised  timelines.  A  new  provision  addresses  explicitly  requests  for 
security  for  costs.  The  transparency  of  proceedings  has  been  enhanced  as  far  as  possible 
without requiring an amendment of the ICSID Convention. A new set of rules for expedited 
arbitration proceedings are also proposed. 

2.3.2. Amendments to the Additional Facility Proceedings 

The  amendments  include  changes  to  the  ICSID  Additional  Facility  Rules,  the  ICSID 
Additional  Facility Administrative and Financial Regulations,  the  ICSID  Additional  Facility 
Arbitration Rules and the ICSID Additional Facility Conciliation Rules. 

The possible scope of application of the Additional Facility Rules is extended to investment 
disputes in which neither the respondent nor the State of the claimant are ICSID Contracting 
Parties,  as  well  as  to  disputes  involving  Regional  Economic  Integration  Organisations.  In 
addition, most of the changes made to the ICSID Arbitration and Conciliation Rules are also 
reflected  in  the  revised  ICSID  Additional  Facility  Rules,  with  slightly  more  ambitious 
provisions on transparency.  

2.3.3. Amendments to the ICSID Fact-Finding Proceedings  

Changes  concern  the  ICSID  Fact-Finding  Rules,  as  well  as  the  ICSID  Fact-Finding 
Administrative and Financial Regulations. A set of updated stand-alone fact-finding rules are 
proposed  through  which  disputing  parties  can  jointly  request  a  fact-finding  Committee  to 
conduct a specific fact-finding proceeding.  

2.3.4. Proposal of new ICSID Mediation Rules 

A new set of ICSID Mediation Rules and relevant Administrative and Financial Regulations 
are  proposed  in  reply  to  requests  by  States  and  investors  to  provide  greater  capacity  for 
mediation.  The  mediation  rules  have  a  broad  scope  of  application  and  can,  upon  consent, 
apply  to  any  mediation  proceedings  relating  to  an  investment  that  involve  a  State  or  a 
Regional Economic Integration Organization  

3. 

POSITION TO BE TAKEN ON THE UNION'S BEHALF 

The  amendments  the  Administrative  Council  of  ICSID  will  be  called  to  vote  upon  address 
some of the identified shortcomings of the current system of investor-state dispute settlement. 
It  must  be  noted  that  in  parallel  to  the  ICSID  reform  process,  the  European  Union  and  its 
Member  States  are  pursuing  the  creation  of  a  permanent  multilateral  investment  court  that 
would replace the current system of investment arbitration by a permanent mechanism. Work 

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on the creation of a multilateral investment court is currently taking place within the United 
Nations  Commission  on  International  Trade  law  (UNCITRAL)  and  is  expected  to  be 
concluded in 2026. In view of the European Union, only a permanent investment court will 
address sufficiently and comprehensively all the problems resulting from  the current system 
of ad hoc investment arbitration. However, until the establishment of a multilateral court, the 
current system of investment arbitration will continue to apply and any improvements to its 
rules should be welcomed. The Council should therefore support the proposed amendments to 
the ICSID Rules. 

4. 

LEGAL BASIS 

4.1. 

Procedural legal basis 

4.1.1.  Principles 

Article 218(9) of the Treaty on the Functioning  of the European Union (TFEU) provides  as 
follows: ‘The Council, on a proposal from the Commission or the High Representative of the 
Union for Foreign Affairs and Security Policy, shall adopt a decision suspending application 
of an agreement and establishing the positions to be adopted on the Union’s behalf in a body 
set up by an agreement, when that body is called upon to adopt acts having legal effects, with 
the  exception  of  acts  supplementing  or  amending  the  institutional  framework  of  the 
agreement.’ 

First, Article 218(9) TFEU requires a body set up by an international agreement that has the 
power to establish rules or adopt decisions in the context of that agreement. The wording ‘in a 
body  set  up  by  an  agreement’  indicates  that  the  ‘provision  concerns  the  positions  to  be 
adopted  on  behalf  of  the  European  Union  in  the  context  of  its  participation,  through  its 
institutions or, as the case may be, through its Member States acting jointly in its interests, in 
the adoption of such acts within the international body concerned’.3  

Article 218(9) TFEU applies regardless  of whether the  European  Union is  a member of the 
body or a party to the agreement.4 The Court of Justice has stated that ‘[w]here an area of law 
falls within a competence of the European Union […] the fact that the European Union did 
not  take part in the international agreement  in  question does  not  prevent  it from exercising 
that competence by establishing, through its institutions, a position to be adopted on its behalf 
in the body set up by that agreement, in particular through the Member States which are party 
to that agreement acting jointly in its interest.’5 

4.1.2.  Application to the present case 

The envisaged acts amending the ICSID rules fulfil these principles. 

First, the ICSID Administrative Council, the body voting on the amendments, is a body set up 
by  an  agreement,  in  line  with  Article 218(9) TFEU.  The  current  Article 7 of  the  ICSID 
Convention  and  Regulation 7  of  the  ICISD  Administrative  &  Financial  Regulations  express 
the  ICSID  rules.  The 
the  Administrative  Council’s  role 
Administrative Council has the power to establish rules or adopt decisions in the context of 
the ICSID agreements. The Administrative Council is not acting independently of the parties 
but through its Contracting States (see Article 4(1) ICSID Convention). 

inter  alia,  amending 

in, 

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Judgment  of 
ECLI:EU:C:2015:663, paragraph 63. 
Judgment  of 
ECLI:EU:C:2014:2258, paragraph 64. 
Judgment  of 
ECLI:EU:C:2014:2258, paragraph 52. 

the  Court  of  Justice  of  6  October  2015,  Council  v  Commission,  C-73/14, 

the  Court  of  Justice  of  7  October  2014,  Germany  v  Council,  C-399/12, 

the  Court  of  Justice  of  7  October  2014,  Germany  v  Council,  C-399/12, 

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legal  effects’, 

the  envisaged  acts  are  ‘acts  having 

Second, 
in  accordance  with 
Article 218(9) TFEU. The ICSID dispute settlement mechanism is applicable in the European 
Union’s and its Member States’ international investment protection agreements.6 In particular, 
after  adoption  of  the  amendments,  the  ICSID  Additional  Facility  Rules  will  potentially 
become  applicable  in  disputes  initiated  against  the  European  Union  in  which  measures 
adopted by the Union are the subject of the dispute and in which the Union would act as the 
respondent. Thus, the amendments of the ICSID Rules have legal effects on the functioning 
and  application  of  international  agreements  concluded  by  the  Union  and  on  the  conduct  of 
legal proceedings to which the Union would be a party.  

In summary, the Commission requests the Council to adopt the Union’s position with regard 
to the envisaged acts so  that the Member States which are Contracting Parties to the  ICSID 
Convention,  acting  jointly  in  the  interest  of  the  Union,  may  express  the  Union’s  position 
within  the  Administrative  Council  of  ICSID.  The  procedural  legal  basis  for  the  proposed 
decision is Article 218(9) TFEU. 

4.2. 

Substantive legal basis 

4.2.1.  Principles 

Primarily,  the  substantive  legal  basis  for  a  decision  under  Article  218(9)  TFEU  depends  on 
the objective and content of the envisaged act in respect of which  a position is taken on the 
European  Union’s  behalf.  ‘It  is  settled  case-law  that  the  choice  of  the  legal  basis  for  a 
Community measure must rest on objective factors amenable to judicial review, which include 
in particular the aim and the content of the measure’7. 

4.2.2.  Application to the present case 

The main objective of the envisaged acts relates to updating and amending the existing ICSID 
rules, i.e. the reform of investment dispute-settlement rules used by the European Union and 
its Member States in several EU agreements. 

Pursuant  to  Article 207  TFEU,  foreign  direct  investment  is  part  of  the  European  Union’s 
common commercial policy. The EU’s and EU Member State’s international agreements that 
refer  to  the  ICSID  rules  provide  protection  for  foreign  direct  investment  and  have  been 
adopted  (or  authorised  in  the  case  of  EU  Member  States’  investment  agreements8)  on  the 
basis of Article 207 TFEU. According to the Court of Justice of the European Union, foreign 
direct  investment  falls  within  the  exclusive  competences  of  the  Union,  while  foreign  non-
direct investment and investment dispute settlement falls within a competence which is shared 
between the Union and its Member States9.  

The  substantive  legal  basis  for  the  proposed  decision  should  therefore  be  the  first 
subparagraph of Article 207(4) TFEU. 

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See Article 8.23(2) of the EU-Canada Comprehensive Economic and Trade Agreement (CETA), Article 
3.33(2) of  the  EU-Vietnam  Investment  Protection  Agreement  and  Article  3.6(1) of  the  EU-Singapore 
Investment  Protection  Agreement.  Article  26  of  the  Energy  Charter  Treaty,  to  which  the  Union  is  a 
party, also allows for the application of the ICSID Rules. 
Judgement  of  the  Court  of  Justice  of  12  December  2002,  Commission  v  Council,  Case  C-281/01, 
ECLI:EU:C:2002:761, paragraph 33. 
See  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. 
Opinion 2/15 of the Court of Justice of 16 May 2017, ECLI:EU:C:2017:376, paragraph 293. 

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4.3. 

Conclusion 

In  conclusion,  the  legal  basis  of  the  proposed  decision  should  be  the  first  subparagraph  of 
Article 207(4) TFEU in conjunction with 218(9) TFEU. 

5. 

PUBLICATION OF THE ENVISAGED ACT 

In view of the public interest in the reform of investor-state dispute settlement and in line with 
the  Union’s  commitment  to  transparency,  it  is  appropriate  to  publish  the  Council  Decision 
after the completion of the voting procedure within the Administrative Council of ICSID on 
21 March 2022. 

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2022/0025 (NLE) 

Proposal for a 

COUNCIL DECISION 

on the position to be taken on behalf of the European Union in the International Centre 
for Settlement of Investment Disputes (ICSID) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, and in particular the 
first subparagraph of Article 207(4) in conjunction with Article 218(9) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

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The  Administrative  Council  of  ICSID  will  vote  on  amendments  of  the  ICSID  rules, 
which  will  have  legal  effects  for  the  purposes  of  Article  218(9)  TFEU  by  written 
procedure scheduled to be concluded on 21 March 2022.  

The European Union  is  not  a member of  ICSID. However, the Union has constantly 
incorporated  by  reference  the  ICSID  rules  into  its  trade  and  investment  agreements 
that provide for investment protection and investment dispute settlement.  
In  Opinion  2/15  of  the  Court  of  Justice  of  16  May  201710,  the  Court  clarified  that 
foreign  direct  investment  falls  within  the  exclusive  competences  of  the  Union  while 
competence  over  foreign  non-direct  investment  and  investment  dispute  is  shared 
between the Union and its Member States. 

Through  the  reform  of  the  ICSID  rules,  the  ICSID  Additional  Facility  Rules  will 
potentially  become  applicable  to  disputes  initiated  against  Regional  Economic 
Integration Organisations such as the European Union. The Union also uses the ICSID 
rules in its treaties and these can be used by Union investors in cases brought against 
third  countries,  by  non-Union  investors  against  Member  States  of  the  Union  or  the 
Union itself when the relevant requirements of the ICSID Convention are met.11 Thus, 
the  amendments  of  the  ICSID  rules  will  have  legal  effects  on  the  functioning  and 
application of international agreements concluded by the Union and on the conduct of 
legal  proceedings  to  which  the  Union  may  be  a  party.  The  Union  therefore  has  a 
particular interest in the reform of ICSID rules. 

Twenty-six Member States of the Union are members of ICSID. Those Member States 
have  the  possibility  to  participate  in  the  Administrative  Council  and  vote  on  the 
amended rules in the context of the written procedure.  

Therefore, the Council should adopt the Union’s position with regard to the envisaged 
amendments  of  the  ICSID  rules  so  as  to  allow  the  Member  States  which  are 
Contracting  Parties  to  the  ICSID  Convention,  acting  jointly  in  the  interest  of  the 
Union, to express the Union’s position within the Administrative Council of ICSID.  

Opinion 2/15 of the Court of Justice of 16 May 2017, ECLI:EU:C:2017:376. 
This is currently not possible as regards the Union given Regional Economic Integration Organisations 
cannot be members of ICSID, absent an amendment to the ICSID Convention. 

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(7) 

(8) 

In the context of ICSID Convention Proceedings, the amendments update and develop 
the ICSID Administrative and Financial Regulations, the ICSID Institution Rules, the 
ICSID  Arbitration  Rules  and  the  ICSID  Conciliation  Rules.  The  amendments  will 
inter alia lead to enhanced transparency of the proceedings, clarify provisions on early 
dismissal  of  unfounded  claims  and  security  for  costs,  and  implement  disclosure 
obligations for third-party funding.  

In  the  context  of  ICSID  Additional  Facility  Proceedings,  the  proposed  amendments 
update  and  develop  the  ICSID  Additional  Facility  Administrative  and  Financial 
Regulations,  the  ICSID  Additional  Facility  Arbitration  Rules  and  the  ICSID 
Additional  Facility  Conciliation  Rules.  Most  of  the  amendment  to  the  ICSID 
Convention proceedings will also be mirrored in the ICSID Additional Facility Rules. 
In addition, the scope of the Additional Facility Proceedings will be extended to also 
include inter alia disputes involving Regional Economic Integration Organisations.  

(9) 

In the  context  of  ICSID  Fact-Finding Proceedings,  the proposed amendments  update 
and  develop  stand-alone  ICSID  Fact-Finding  Rules  and  ICSID  Fact-Finding 
Administrative and Financial Regulations.  

(10) 

In the context of ICSID Mediation, the reform proposal establishes a new set of ICSID 
Mediation Rules and ICSID Mediation Administrative and Financial Regulations.  

(11)  The  Commission,  together  with  the  governments  of  the  Member  States  that  are 
Contracting  Parties  to  the  ICSID  Convention,  has  taken  a  leading  role  in  the 
negotiation  of  the  updated  rules  based  on  agreed  Union  positions.  The  amendments 
address current concerns expressed with regard to the existing Investor-State Dispute 
Settlement system and substantially improve the ICSID Rules and Regulations.  

(12)  The position to be adopted on behalf of the Union pursuant to this Decision is without 
prejudice to the Union and its Member States’ main objective to pursue the creation of 
a  permanent  multilateral  investment  court  that  would  replace  the  current  system  of 
investment arbitration by a permanent mechanism, 

HAS ADOPTED THIS DECISION: 

Article 1 

Acting jointly in the interest of the Union, the Member States that are Contracting Parties to 
the ICSID Convention shall express their acceptance of the amendments of the ICSID rules 
during the written voting procedures initiated by the Chairman of the Administrative Council 
of ICSID on 20 January 2022. 

Article 2 

This  Decision  shall  be  published  in  the  Official  Journal  of  the  European  Union  after  the 
completion of the voting procedure within the Administrative Council of ICSID. 

Article 3 

This  Decision  is  addressed  to  the  Member  States  that  are  Contracting  Parties  to  the  ICSID 
Convention. 

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Done at Brussels, 

For the Council 
The President 

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