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Investor-state dispute settlement in the TTIP - A fair dispute resolution mechanism or the bane of democracy?

Sampallo, Sebastian LU (2016) LAGM01 20152
Department of Law
Abstract
On July 8, 2013, the United States and the European Union started negotiations for the Transatlantic Trade and Investment Partnership (TTIP). The TTIP is a proposed international trade and investment agreement (IIA) that aims to create the largest free trade area in the world. Despite the promises of the TTIP, including job opportunities and economic gains of over €100 billion in the EU alone, there have been massive protests against the TTIP. The TTIP is according to some critics a “threat to democracy, the environment, consumers and labour standards”. The most contentious issue with the TTIP has been the inclusion of an investor-state dispute settlement (ISDS) provision. An ISDS provision grants investors the right to submit a claim... (More)
On July 8, 2013, the United States and the European Union started negotiations for the Transatlantic Trade and Investment Partnership (TTIP). The TTIP is a proposed international trade and investment agreement (IIA) that aims to create the largest free trade area in the world. Despite the promises of the TTIP, including job opportunities and economic gains of over €100 billion in the EU alone, there have been massive protests against the TTIP. The TTIP is according to some critics a “threat to democracy, the environment, consumers and labour standards”. The most contentious issue with the TTIP has been the inclusion of an investor-state dispute settlement (ISDS) provision. An ISDS provision grants investors the right to submit a claim against a state to an investment tribunal if the state has caused the investor damage by breaching an IIA entered into with the home state of the investor.
The subject of this thesis is international investment law and the main purpose of it is to examine arguments for and against the inclusion of an ISDS provision in the TTIP and how such an ISDS provision could be altered to avoid some of the potential downsides with ISDS. Furthermore, the thesis will discuss the proposal put forth by the European Commission to establish the Investment Court System (ICS). The thesis will conclude with a recommendation for or against ISDS in the TTIP as well as for or against the ICS.
Foreign direct investment is sometimes called the life blood of global economy. Attracting foreign capital is positive for states in many regards. For investors there are some risks associated with investing in a foreign state. Expropriations and discriminating treatment by the host state are such potential risks faced by the foreign investor. International investment protection has evolved over history, from gunboat diplomacy in the 1800s to a system based on BITs and other IIAs in modern time. Modern IIAs protect the investor by providing protection standards such as fair and equitable treatment and most favourable nation treatment, as well as ISDS.
Common arguments against ISDS are that ISDS is a threat to state sovereignty and the state’s right to regulate, that investment tribunals are biased in favour of the investors, that ISDS lacks fundamental procedural protections and that it is not transparent enough. While there are some issues with ISDS, for instance a lack of an appeal mechanism, much of the criticism against ISDS is based on misunderstandings and misrepresentations of the system. The conclusion of the thesis is that ISDS is the most effective and fair dispute resolution mechanism available for the TTIP.
While the ICS is an interesting proposal which remedies some of the issues associated with ISDS, such as the lack of an appeal mechanism, it is doubtful whether the need for such a system is pressing enough. ICS might lead to proceedings that are even more costly and lengthy than ISDS, which is undesirable. The thesis concludes that the potential downsides outweigh the potential gains with the proposal. Unless the ICS is modified to deal with some of these downsides it should not replace ISDS in the TTIP. (Less)
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author
Sampallo, Sebastian LU
supervisor
organization
course
LAGM01 20152
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
ISDS, TTIP, investment protection, Transatlantic Trade and Investment Partnership, Public international law, international investment law
language
English
id
8512308
date added to LUP
2016-02-01 14:11:17
date last changed
2016-02-01 14:11:17
@misc{8512308,
  abstract     = {On July 8, 2013, the United States and the European Union started negotiations for the Transatlantic Trade and Investment Partnership (TTIP). The TTIP is a proposed international trade and investment agreement (IIA) that aims to create the largest free trade area in the world. Despite the promises of the TTIP, including job opportunities and economic gains of over €100 billion in the EU alone, there have been massive protests against the TTIP. The TTIP is according to some critics a “threat to democracy, the environment, consumers and labour standards”. The most contentious issue with the TTIP has been the inclusion of an investor-state dispute settlement (ISDS) provision. An ISDS provision grants investors the right to submit a claim against a state to an investment tribunal if the state has caused the investor damage by breaching an IIA entered into with the home state of the investor.
The subject of this thesis is international investment law and the main purpose of it is to examine arguments for and against the inclusion of an ISDS provision in the TTIP and how such an ISDS provision could be altered to avoid some of the potential downsides with ISDS. Furthermore, the thesis will discuss the proposal put forth by the European Commission to establish the Investment Court System (ICS). The thesis will conclude with a recommendation for or against ISDS in the TTIP as well as for or against the ICS. 
Foreign direct investment is sometimes called the life blood of global economy. Attracting foreign capital is positive for states in many regards. For investors there are some risks associated with investing in a foreign state. Expropriations and discriminating treatment by the host state are such potential risks faced by the foreign investor. International investment protection has evolved over history, from gunboat diplomacy in the 1800s to a system based on BITs and other IIAs in modern time. Modern IIAs protect the investor by providing protection standards such as fair and equitable treatment and most favourable nation treatment, as well as ISDS.
Common arguments against ISDS are that ISDS is a threat to state sovereignty and the state’s right to regulate, that investment tribunals are biased in favour of the investors, that ISDS lacks fundamental procedural protections and that it is not transparent enough. While there are some issues with ISDS, for instance a lack of an appeal mechanism, much of the criticism against ISDS is based on misunderstandings and misrepresentations of the system. The conclusion of the thesis is that ISDS is the most effective and fair dispute resolution mechanism available for the TTIP.
While the ICS is an interesting proposal which remedies some of the issues associated with ISDS, such as the lack of an appeal mechanism, it is doubtful whether the need for such a system is pressing enough. ICS might lead to proceedings that are even more costly and lengthy than ISDS, which is undesirable. The thesis concludes that the potential downsides outweigh the potential gains with the proposal. Unless the ICS is modified to deal with some of these downsides it should not replace ISDS in the TTIP.},
  author       = {Sampallo, Sebastian},
  keyword      = {ISDS,TTIP,investment protection,Transatlantic Trade and Investment Partnership,Public international law,international investment law},
  language     = {eng},
  note         = {Student Paper},
  title        = {Investor-state dispute settlement in the TTIP - A fair dispute resolution mechanism or the bane of democracy?},
  year         = {2016},
}