Since the adoption of its Communication Towards a comprehensive European international investment policy in 2010, the Commission has worked towards improving the Investor-to-State Dispute Settlement (ISDS) system, in particular the transparency of proceedings.
In 2013 rules on transparency in ISDS cases were adopted under the auspices of the United Nations Commission on International Trade Law (UNCITRAL transparency rules). These rules, which entered into force on 1 April 2014, provide for a maximum access of the public to documents and hearings, as well as allowing interested third parties to make submissions. The European Union has included these or equivalent wide-ranging rules in the finalized free trade agreements with Singapore and Canada. These rules will also be an integral part of any future negotiations on trade agreements that contain ISDS provisions.
The transparency rules however do not apply to disputes based on investment agreements concluded prior to 1 April 2014. The Commission has therefore pushed strongly for a multilateral Convention to allow these UN transparency rules to be extended to the 3,000 investment treaties in force worldwide. The proposals presented a week ago will make it possible for the EU and its member states to adhere to this Convention thus making possible the application of these transparency rules to the EU member states' existing 1,400 treaties and the Energy Charter Treaty.
The Convention makes it possible for both individual states and organisations like the EU to agree to apply the UNCITRAL Transparency Rules in investment treaties that are already in effect and to which they are parties. It would therefore permit the EU member states to apply the Transparency Rules to their 1,400 existing treaties concluded with third countries. In the case of the EU, this would mean that the Convention would apply to the Energy Charter Treaty to which the EU is a party since 1998.
If adhered to, the Convention would apply automatically to all treaties that a country has signed, unless the country specifically lists investment agreements where it does not want the Transparency Rules to apply (a so-called negative list).
Under the Lisbon Treaty, foreign direct investment has become a part of the Union's exclusive competence. Practically, it means that only the Union can adopt legally binding acts in this area and that member states may no longer do so without being empowered by the European Union.
Therefore, when adopted, the Commission's proposals would have two effects. First, the EU as a legal entity would be able to accede to the UN Convention. Second, member states will be empowered also to accede to the UN Convention so that they could apply the Transparency Rules to their existing bilateral investment agreements with third countries (that is, those concluded before 1 April 2014).
In light of the above the European Commission has therefore recently proposed to allow UN rules on transparency for Investor-to-State Dispute Settlement (ISDS) to apply also to existing investment treaties that the EU and member states have in place. These rules represent an important change in giving the public access to documents submitted in ISDS cases, making hearings open to the public and allowing interested parties to make submissions to the proceedings. So far, these UN rules on transparency are only used in new investment treaties. The European Commission has integrated them in all of the EU's completed and ongoing ISDS negotiations.
These fresh proposals, when adopted by the Council, will enable the EU and its member states to adhere to the new UN Convention on Transparency. This will make it legally and technically possible to extend these transparency rules to existing treaties. There are 3,000 such treaties in force worldwide and EU member states account for around half of these.
The UN's Convention allows countries and regional economic integration organisations like the EU, to declare their willingness to apply the UN transparency rules to cases brought under their existing investment treaties. The more countries and organisations adhere to the UN Convention, the more the rules will apply to the 3000+ investment agreements currently in force worldwide. It is now up to the Council to approve the Commission's proposals. The UN Convention will be open for signature as of 17 March in Port Louis, Mauritius and then with the United Nations in New York.