International

They hadn’t spoken in months and before that when they spoke it was hard, bitter

Trump – and Biden – are culturally Irish

The Comprehensive Economic and Trade Agreement – implemented in an EU/Canada trade deal – introduces a bilateral Investment Court System and will transform it into a Multilateral Investment Tribunal. By Anna Jermak Introduction Given that foreign investments significantly contribute to a country’s economic prosperity, States have been trying to attract foreign investors by offering them a favourable investment environment. Through proliferating bilateral investment treaties (BITs) and treaties with investment protection – safeguarding foreign investors against unfair or discriminatory treatment by a host State – an international system governing the investor-State relationship was created. The Investor-State Dispute Settlement (ISDS) is at its heart a mechanism for foreign investors to sue a host State for breaches of their rights. Traditionally, the proceedings took the form of arbitration before ad hoc tribunals. However, due to the shortcomings of the ISDS system, the voices calling for its reform have been heard more and more loudly. The EU’s reform proposal – implemented in the Comprehensive Economic and Trade Agreement (CETA) – is so far the most promising one. It introduces a bilateral Investment Court System (ICS) and commits to ultimately transform it into a Multilateral Investment Tribunal. Why reform at all? The current ISDS system’s adaptability to international reality, and its implementation of global legitimacy standards, have been widely questioned for want of reliability, predictability, transparency, and consistency. The fact the arbitration proceedings do not constitute precedents for later proceedings to rely on, and their decentralisation – that is, the formation of arbitration tribunals ad hoc, separately for each dispute – make it close to impossible for decided cases and interpretations to be consistent. Such legal uncertainty inevitably leads to decreased trust from the parties in the institution of investment arbitration, as the majority’s ‘correct’ interpretation of law or facts is so uncertain. In conjunction with the colossal costs that arbitration proceedings entail, the parties may be overwhelmed by the risk. Economically weak countries pay the highest price for its unpredictability. Another factor that contributes to low levels of confidence in ISDS has been the absence of an appeal mechanism that would ensure coherent interpretation and application of the law. Widely present in national legal systems (appeal courts) as well as in WTO dispute settlement (the Appellate Body), the review mechanisms serve to not only allow for uniformity of court and tribunal decisions but also to reassure the parties that the decision held is legitimate and must be respected. Without the parties’ confidence, the ISDS is on the verge of collapsing. Lastly, the fact that disputing parties themselves appoint the arbitrators who resolve their conflict undermines confidence not just in the ISDS system but also in the arbitrators’ independence and impartiality. The parties are certainly inclined to nominate an arbitrator who they believe will decide in their favour. And although arbitrators are expected to followthe soft-law International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration which require their impartiality and independence, they may still be biased on a conscious or subconscious level. Thus, even a mere suspicion of an arbitrator’s bias is unsustainable – as Paulsson rightly noticed: an unfavourable decision is unlikely to be accepted as legitimate if it is perceived to be the product of arbitrariness or bias. Jan Paulsson, ‘Moral Hazard in International Dispute Resolution’ (2010) 25 ICSID Review – Foreign Investment Law Journal 340. How is CETA’s mechanism different? The enshrinement of the ICS in EU trade and investment treaties – such as the EU-Vietnam Free Trade Agreement, the EU-Singapore Free Trade Agreement, and CETA – appears to be the answer to these criticisms. Despite neither of the ICS provisions in these agreements being operative, the mere act of replacement of the ISDS system has aroused so much controversy that it led the Court of Justice of the EU to confirm CETA’s ICS’s compatibility with EU law. For the purpose of critiqueing the EU’s ICS proposals, the focus will here be on CETA’s investment provisions. CETA was signed in 2016, following eight years of negotiations. Its emphasis on the removal of trade barriers between the EU and Canada did not stop it from putting in place remarkable provisions on international investment protection and dispute settlement. Art. 8.27 of CETA establishes a permanent Tribunal for the resolution of investment claims. It is to be composed of fifteen highly qualified and (as stated in Art. 8.30) fully independent members coming from the EU, Canada, and third countries. Pursuant to Art. 8.28, an Appellate Tribunal, reviewing the first instance Tribunal’s awards, has come into existence. The language allowing it to “uphold, modify or reverse” an award resembles the wording referring to the Appellate Body’s competences in the WTO’s Dispute Settlement Understanding. Under Art. 8.29, the contracting parties pledge to pursue, in collaboration with other trading partners, the establishment of a multilateral investment tribunal and a separate appeal body. Upon their creation, the ICS (together with bilateral investment courts established pursuant to the EU’s other free trade agreements) will be replaced by the new single multilateral dispute-settlement mechanism. Any country willing to accept the rules underlying its functioning will be welcome to join it. Pros and cons This two-tier system is a move away from the traditional ISDS framework to permanent, transparent, impartial, and independent Tribunals inspired by the principles of public judicial systems in the EU and its Member States and Canada, as well as international courts such as the International Court of Justice and the European Court of Human Rights. Council of the EU, Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its MemberStates 27 October 2016, 13541/16. Indeed, the permanency of the investment Tribunal under the ICS stands in opposition to the ad hoc character of regular arbitration tribunals, providing more consistency and predictability and therefore a more stable investment dispute settlement system overall. The fact that the Tribunal’s members are designated in advance eliminates the danger of biases and conduces to trust. The requirements of absolute independence

The UK will probably apply lower environmental and social standards, and in exchange will have EU tariffs applied to its goods and restrictions on freedom of movement to the EU. By Michael Smith Britain formally left the EU on 31 January, and is now in a transition perioduntil the end of the year. Boris Johnson’s shot-to-his-ownfoot deal crashes the UK out of both single market and customs union, unless there had been deal with the EU by the end of June 2020; and poses the possibility, which I have long here predicted, that the UK will reduce standards particularly on labour and the environment. Inept Theresa May’s luckless deal kept Britain in the single market and the customs union until at least 1 July, 2020, extendable only by mutual agreement. However, her Northern Ireland ‘backstop’, which restricted the whole UK to avoid opening differences between Britain and Northern Ireland has been replaced, in Boris Johnson’s deal, with a frontstop meaning he crashes the UK out of both single market and customs union, unless there are deals with the EU reinstating them by the end of this year.Talks, however, are deadlocked. The two sides have taken polar positions on fisheries, governance and competition. And in what was an, apparently unwitting, big concession then, by accepting a customs border Northern Ireland will now remain aligned tothe EU’s Custom Union, but will be in the United Kingdom’s custom territory, allowing Northern Ireland to avail of future non-EU trade deals. In practice, this means that if goods are sent from Britain to Northern Ireland, no tariffs apply. If goods are sent from Britain through NorthernIreland to Ireland, tariffs will apply, but they will be collected at ports and airports – effectively putting a customs border along the Irish Sea betweenGreat Britain and Northern Ireland, something that was thought to be a bridge too far. Annex 4 of the Theresa May Protocol – which contained references to EU laws that would apply to the whole of UK in what were called “level playing field” commitments to limit the UK’s capacity to gain what it would see as an unfair advantage by lowering standards – have now been removed. The level-playing-field provisions were in the areas of taxation, environmental protection, labour standards, state aid and competition. They had been subject to a legally-binding agreement in the Withdrawal Agreement – it’s now stated in the Political Declaration – with only non-binding commitments. Britain can reduce these standards and negotiate new trade agreements with blocs outside the EU, notably the US. It can remove protectionsagainst chlorinated chicken, open up the National Health Service to commercialisation and competition and remove habitats protectionand Environmental Impact statement requirements. This is what Johnson and his mates always wanted to do though they fudged the issue like practised fraudsters. If the UK reduces standards the EU will have to decide whether it wishes to do a big trade deal with it or whether it wants to protect its own standardsby imposing proportionately heavy tariffs and restrictions on freedoms of movement. My guess is the EU will be reluctant to impose tariffs and restrict movement and will indulge some insidious reductions in standards, particularly those that won’t register at a border: some standards are evident from inspection of a good (chlorinated chicken); others aren’t (parental leave in the workplace). We can look forward to Tory Britain reducing labour, environmental and other standards, and to Northern Ireland specialisingin attracting jobs on the basis of such low standards. It would certainly tie in with the DUP’s ethos; and there is not much evidence that any party in the North cares much for environmental niceties. Unfortunately the reality is that if the UK loses the EU baseline standards regulation will fall to Parliament. We know from the zeal with which the Tories undermined EU social standards and their excitement at “unleashing” new entrepreneurial zeal, that they are looking forward to deregulation. And any change in standards, even an ostensibly neutral one, opens up the possibility of lack of clarity and regulatory gaps. To compete in attracting inward investment, especially with a Janus-like Northern Ireland benefiting from the best of both worlds, Ireland willitself feel obliged to reduce its own standards. And in addition to the disbenefits of reduced trade with the neighbours, and the Coronavirus slump that is why Brexit is a disaster for us, all. Under the withdrawal treaty, the two sides could have chosen before the end of June 2020 to extend the transition for up to two years. Failing that, any extension now needs a fresh treaty and the approval of all 27 national and some regional parliaments. Brinkmanship failed. Statecraft died. Turmoil awaits.