Summary: Will the ICS proposal of the European Commission eliminate investment treaty arbitration in Europe and beyond?

On 26 April 2016 Dr. Nikos Lavranos held a lecture at the Prague University, Law Faculty on the question:  Will the ICS proposal of the European Commission eliminate investment treaty arbitration in Europe and beyond?

Nikos Lavranos started off his lecture by asking why States have concluded more than 3,000 bilateral investment treaties (BITs) worldwide. To answer that question he goes back to 1778 when the US concluded its first Friendship, Commerce and Navigation (FCN) treaty with France.

He explained that already these early FCN treaties were aiming at promoting trade by promoting the traders going abroad. In particular, already at that time the prohibition against expropriation and non-discrimination were fundamental elements of those treaties. However, the FCN treaties only contained State-State dispute resolution. This was changed by the BITs which introduced investor-State dispute resolution. The message thus is that the protection of property, non-discrimination and dispute resolution have been generally accepted for centuries by States.

He the moved on to explain how investor-State dispute resolution nowadays works. He focussed in particular on the importance of party autonomy and finality. Both elements are vitally important for both investors and States.

He then turned to the proposal of the European Commission to establish an international court system (ICS), which would replace the existing investor-State arbitration system. Having explained the shortages of the ICS proposal, he concludes that there is a real risk that the ICS will be a pro-State biased institution.

His main conclusion is that the ICS system may look advantageous for States at first sight, but at the end, it will not address the root of the many investment disputes, which is the lack of Rule of Law, the lack of functioning courts and administration, the lack of transparency and the widespread corruption in most countries – even in Europe.

So, while the ICS proposal may please the critics of the current investor-State dispute settlement and the States, it will not promote investments and thus will not contribute to economic growth.

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