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Respondent details

  • Company/Organisation: The Law Society of England and Wales
  • Location: United Kingdom
  • Activity: Legal services and law reform
  • Profile: The Law Society of England and Wales is the independent professional body, established for solicitors in 1825, that works globally to support and represent its 160,000 members, promoting the highest professional standards and the rule of law
  • Transparency register: Yes
  • Prior investment in the US: No


A. Substantive investment protection provisions

Explanation of the issue

The scope of the agreement responds to a key question: What type of investments and investors should be protected? Our response is that investment protection should apply to those investments and to investors that have made an investment in accordance with the laws of the country where they have invested.

Approach in most investment agreements

Many international investment agreements have broad provisions defining “investor” and “investment”.

In most cases, the definition of “investment” is intentionally broad, as investment is generally a complex operation that may involve a wide range of assets, such as land, buildings, machinery, equipment, intellectual property rights, contracts, licences, shares, bonds, and various financial instruments. At the same time, most bilateral investment agreements refer to “investments made in accordance with applicable law”. This reference has worked well and has allowed ISDS tribunals to refuse to grant investment protection to investors who have not respected the law of the host state when making the investment (for example, by structuring the investment in such a way as to circumvent clear prohibitions in the law of the host state, or by procuring an investment fraudulently or through bribery).

In many investment agreements, the definition of “investor” simply refers to natural and juridical persons of the other Party to the agreement, without further refinement. This has allowed in some cases so–called “shell” or “mailbox” companies, owned or controlled by nationals or companies not intended to be protected by the agreement and having no real business activities in the country concerned, to make use of an investment agreement to launch claims before an ISDS tribunal.

The EU's objectives and approach

The EU wants to avoid abuse. This is achieved primarily by improving the definition of “investor”, thus eliminating so –called “shell” or “mailbox” companies owned by nationals of third countries from the scope: in order to qualify as a legitimate investor of a Party, a juridical person must have substantial business activities in the territory of that Party.

At the same time, the EU wants to rely on past treaty practice with a proven track record. The reference to “investments made in accordance with the applicable law” is one such example. Another is the clarification that protection is only granted in situations where investors have already committed substantial resources in the host state - and not when they are simply at the stage where they are planning to do so.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion of the objectives and approach taken in relation to the scope of the substantive investment protection provisions in TTIP?

The Law Society promotes respect for the rule of law and supports the view that investors should respect the law of their host state. The proposed definition of "investor" was regarded by a number of practitioners as fairly sensible. It does narrow down the definition and would appear to achieve the Commission's stated objective in excluding shell and mailbox companies established merely to pursue a claim. [1] The definition could be improved by further guidance on the meaning of "substantial business activities" as this is currently unclear. The Law Society cautions against the use of a de minimis criterion which could exclude legitimate claims to compensation. The proposed definition of "investment" is also seen to be an improvement on the previous system but is still not as clear as it could be. Investors should not be entitled to disproportionate compensation. However, the definition should be sufficiently wide to ensure that investments of different types, and in particular modes of investment that may arise in future, receive protection. The language used ("such as") leaves the definition slightly open which is likely to be helpful in situations where there is clearly an investment, albeit one that does not follow the traditional or established investment blueprint. It is less clear, however, whether an investment must fall within the categories set out in list (a) to (i). If an asset does not fall within this list but satisfies the broader criteria in the first paragraph, then there may be uncertainty as to whether or not it falls within the scope of "investment". While the Law Society considers flexibility to be beneficial overall, this does of course mean that the definition will be open to arguments regarding interpretation. To a certain extent there will therefore still be differences in opinion and probably different decisions by tribunals, but this will most likely be based on very specific factual circumstances. Such flexibility is probably necessary to allow the Treaty to adapt to future changes, for example in relation to financial products. Similarly it makes sense to include indirect investments (under "covered investment") but questions will continue to arise as to exactly where the line should be drawn in allowing derivative actions. This will ultimately be determined on the facts of the case and as such it may be appropriate to leave this to the discretion of the arbitrator. Practitioners have also raised questions regarding use of the term "claims to money" which is unclear. It would be helpful if the Commission could give further explanation on the intended meaning and purpose of the wording. The need for such a restriction may be questioned in itself. Where a claim to money otherwise complies with the definitions of investment and covered investment, it is unclear why such a carve out should operate at all. The Law Society also queries the exclusion of sale of goods and management contracts and the underlying need for this. As far as the Law Society is aware these have not been expressly excluded from the definition of investment in previous treaties. In relation to the sale of goods, it is unlikely that most sale of goods contracts would fit within the conventional understanding of investment, but where circumstances are such that a sale of goods contract does constitute an investment, then it should be protected as one. Management contracts may also involve a lasting relationship with the host state and if the contract is such as to legitimately be viewed as an investments, then it should similarly be protected. As a general point, if the TTIP is to set a global standard, then carve outs with uncertain implications should be avoided as far as possible. [1] The Law Society stresses that the existence of shell and mailbox companies is not abusive per se.

Explanation of the issue

Under the standards of non-discriminatory treatment of investors, a state Party to the agreement commits itself to treat foreign investors from the other Party in the same way in which it treats its own investors (national treatment), as well in the same way in which it treats investors from other countries (most-favoured nation treatment). This ensures a level playing field between foreign investors and local investors or investors from other countries. For instance, if a certain chemical substance were to be proven to be toxic to health, and the state took a decision that it should be prohibited, the state should not impose this prohibition only on foreign companies, while allowing domestic ones to continue to produce and sell that substance.

Non-discrimination obligations may apply after the foreign investor has made the investment in accordance with the applicable law (post-establishment), but they may also apply to the conditions of access of that investor to the market of the host country (pre-establishment).  

Approach in most existing investment agreements

The standards of national treatment and most-favoured nation (MFN) treatment are considered to be key provisions of investment agreements and therefore they have been consistently included in such agreements, although with some variation in substance.

Regarding national treatment, many investment agreements do not allow states to discriminate between a domestic and a foreign investor once the latter is already established in a Party’s territory. Other agreements, however, allow such discrimination to take place in a limited number of sectors.

Regarding MFN, most investment agreements do not clarify whether foreign investors are entitled to take advantage of procedural or substantive provisions contained in other past or future agreements concluded by the host country. Thus, investors may be able to claim that they are entitled to benefit from any provision of another agreement that they consider to be more favourable, which may even permit the application of an entirely new standard of protection that was not found in the original agreement. In practice, this is commonly referred to as "importation of standards".

The EU’s objectives and approach

The EU considers that, as a matter of principle, established investors should not be discriminated against after they have established in the territory of the host country, while at the same recognises that in certain rare cases and in some very specific sectors, discrimination against already established investors may need to be envisaged. The situation is different with regard to the right of establishment, where the Parties may choose whether or not to open certain markets or sectors, as they see fit.

On the "importation of standards" issue, the EU seeks to clarify that MFN does not allow procedural or substantive provisions to be imported from other agreements.

The EU also includes exceptions allowing the Parties to take measures relating to the protection of health, the environment, consumers, etc. Additional carve-outs would apply to the audio-visual sector and the granting of subsidies. These are typically included in EU FTAs and also apply to the non-discrimination obligations relating to investment. Such exceptions allow differences in treatment between investors and investments where necessary to achieve public policy objectives.

Link to reference text

Taking into account the above explanations and the text provided in annex as a reference, what is your opinion of the EU approach to non –discrimination in relation to the TTIP? Please explain.

The Law Society fully supports the objective of ensuring non-discriminatory treatment for investors. However, the wording on general exceptions, in particular use of the GATT and GATS language, is ill thought through. It is not clear whether it is merely the wording on exceptions that is to be included and that a new jurisprudence relating to these concepts in the context of investment and ISDS should be developed, or whether the Commission intends that existing jurisprudence regarding interpretation of these exceptions as understood in trade law is also to be imported. While at present existing GATT/GATS jurisprudence may guide arbitrators in their analysis, and indeed investment tribunals are developing a sophisticated case law in part informed by GATT/GATS jurisprudence, this is not the same as imposing a requirement to consult existing trade law jurisprudence. Trade and investment, although clearly related, are different spheres of law and the accompanying jurisprudence relating to the GATT may be inappropriate for BITs and investor state dispute resolution. There is also a question as to whether other terms which are included here but may also appear in a trade law context are intended to be imported along with the exceptions, and again how they are to be understood in the context of ISDS. The Law Society is concerned that this may create uncertainty, thus frustrating the Commission's aim. MOST FAVOURED NATION (MFN) CLAUSES The Law Society queries the Commission's stated objective, as an MFN clause which covers neither dispute resolution nor substantive protections is pointless: it does not provide any additional protection to an investor at all. However, the MFN clause as currently drafted does not appear to achieve the Commission's stated objective as the drafting appears to exclude only dispute resolution and in fact to allow substantive measures to be taken into consideration, thus undermining the Commission's efforts. Defining the limits of the MFN protection is probably a good thing for this treaty, particularly as the MFN clause is the classic example of divergence in interpretation. Theoretically it may be possible to eradicate uncertainty by analysis of the outcomes of previous MFN clauses and drafting the TTIP (and subsequent) clause(s) to direct cases to the desired outcome. Some of this uncertainty could be removed by specifically stating that the MFN clause does not apply to dispute resolution/jurisdiction and, potentially, limiting the ability of investors to benefit from substantive protections from any treaties negotiated prior to (but not after) the TTIP. The Law Society considers that the current drafting merits further consideration if it is to provide the desired clarity. In the first place, the meaning of "measures" in the MFN clause is unclear. Similarly, it is not clear what the Commission means by "measures providing for recognition", the previously identified uncertainty as to "measures" compounded by lack of illustration as to what is being recognised. In the same vein, "treatment granted as a process of economic integration" could be clarified to show that it is referring to the EU and single market integration etc, [2] or equivalents within other contracting parties. [2] Assuming this is what the current drafting is intended to refer to

Explanation of the issue

The obligation to grant foreign investors fair and equitable treatment (FET) is one of the key investment protection standards. It ensures that investors and investments are protected against treatment by the host country which, even if not expropriatory or discriminatory, is still unacceptable because it is arbitrary, unfair, abusive, etc. 

Approach in most investment agreements

The FET standard is present in most international investment agreements. However, in many cases the standard is not defined, and it is usually not limited or clarified. Inevitably, this has given arbitral tribunals significant room for interpretation, and the interpretations adopted by arbitral tribunals have varied from very narrow to very broad, leading to much controversy about the precise meaning of the standard. This lack of clarity has fueled a large number of ISDS claims by investors, some of which have raised concern with regard to the states' right to regulate. In particular, in some cases, the standard has been understood to encompass the protection of the legitimate expectations of investors in a very broad way, including the expectation of a stable general legislative framework.

Certain investment agreements have narrowed down the content of the FET standard by linking it to concepts that are considered to be part of customary international law, such as the minimum standard of treatment that countries must respect in relation to the treatment accorded to foreigners. However, this has also resulted in a wide range of differing arbitral tribunal decisions on what is or is not covered by customary international law, and has not brought the desired greater clarity to the definition of the standard. An issue sometimes linked to the FET standard is the respect by the host country of its legal obligations towards the foreign investors and their investments (sometimes referred to as an "umbrella clause"), e.g. when the host country has entered into a contract with the foreign investor. Investment agreements may have specific provisions to this effect, which have sometimes been interpreted broadly as implying that every breach of e.g. a contractual obligation could constitute a breach of the investment agreement.

EU objectives and approach

The main objective of the EU is to clarify the standard, in particular by incorporating key lessons learned from case-law. This would eliminate uncertainty for both states and investors.

Under this approach, a state could be held responsible for a breach of the fair and equitable treatment obligation only for breaches of a limited set of basic rights, namely: the denial of justice; the disregard of the fundamental principles of due process; manifest arbitrariness; targeted discrimination based on gender, race or religious belief; and abusive treatment, such as coercion, duress or harassment. This list may be extended only where the Parties (the EU and the US) specifically agree to add such elements to the content of the standard, for instance where there is evidence that new elements of the standard have emerged from international law.

The “legitimate expectations” of the investor may be taken into account in the interpretation of the standard. However, this is possible only where clear, specific representations have been made by a Party to the agreement in order to convince the investor to make or maintain the investment and upon which the investor relied, and that were subsequently not respected by that Party. The intention is to make it clear that an investor cannot legitimately expect that the general regulatory and legal regime will not change. Thus the EU intends to ensure that the standard is not understood to be a “stabilisation obligation”, in other words a guarantee that the legislation of the host state will not change in a way that might negatively affect investors. In line with the general objective of clarifying the content of the standard, the EU shall also strive, where necessary, to provide protection to foreign investors in situations in which the host state uses its sovereign powers to avoid contractual obligations towards foreign investors or their investments, without however covering ordinary contractual breaches like the non-payment of an invoice.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion of the approach to fair and equitable treatment of investors and their investments in relation to the TTIP?

The Law Society supports the inclusion of the principle of fair and equitable treatment within investment/free trade agreements and the objective of the Commission in bringing greater clarity to the concept. As noted above, this should not impinge upon the legislator's right to regulate and ensuring FET does not extend to obstructing general legislative developments. The Law Society notes that clarifying the scope of FET may provide for a more limited concept that that which is currently understood although offers no position as to whether or not thus narrowing the definition is desirable. By and large the list of categories within FET seems sensible and it appears that the commission is trying to create an exhaustive list of the things which would be covered by a traditional FET clause. It should be noted that currently it is left to the tribunal to define what constitutes FET - a concept which is not defined in international law in its own right - although some have argued that the potential for creative interpretation has led to a trend in interpretation that is too investor-friendly. If this holds true then fixing the character of FET may offer the advantage of greater certainty but in doing so may be less beneficial from the investor perspective as it lessens the potential for creative argument. The "list" approach may itself create some initial uncertainty as legal advisers and their clients test the boundaries of each sub-category created by the new definition. The tribunals will need to assess terms such as "fundamental breach"; "manifest arbitrariness", "targeted", "abusive treatment". However, a period for adjustment will apply with any change in law and does not necessarily mean the objective will not be met in the long term. To lessen the uncertainty as to the interpretation of these terms, it is crucial that the new drafting is as clear and unequivocal as possible. Further clarification on what is meant by "specific representation" is required to create clarity in relation to the concept of legitimate expectations in light of the fact that the Commission appears to be setting out a new FET standard. "Specific representation" has been explored in previous case law but it would be useful to know if it is intended that this should continue in relation to TTIP (and CETA), or if the new framework requires a different approach. "Full protection and security" is defined in the text as relating to physical security of investors and covered investments. Previously case law has gone beyond this [3] so it might be helpful to specifically exclude the broader definition, if this is the Commission's intention. [3] See CME Czech Republic BV (Netherlands) v Czech Republic (UNCITRAL Arbitration Rules case), Award of 13 September 2001

Explanation of the issue

The right to property is a human right, enshrined in the European Convention of Human Rights, in the European Charter of Fundamental Rights as well as in the legal tradition of EU Member States. This right is crucial to investors and investments. Indeed, the greatest risk that investors may incur in a foreign country is the risk of having their investment expropriated without compensation. This is why the guarantees against expropriation are placed at the core of any international investment agreement.

Direct expropriations, which entail the outright seizure of a property right, do not occur often nowadays and usually do not generate controversy in arbitral practice. However, arbitral tribunals are confronted with a much more difficult task when it comes to assessing whether a regulatory measure of a state, which does not entail the direct transfer of the property right, might be considered equivalent to expropriation (indirect expropriation).

Approach in most investment agreements

In investment agreements, expropriations are permitted if they are for a public purpose, non-discriminatory, resulting from the due process of law and are accompanied by prompt and effective compensation. This applies to both direct expropriation (such as nationalisation) and indirect expropriation (a measure having an effect equivalent to expropriation).

Indirect expropriation has been a source of concern in certain cases where regulatory measures taken for legitimate purposes have been subject to investor claims for compensation, on the grounds that such measures were equivalent to expropriation because of their significant negative impact on investment. Most investment agreements do not provide details or guidance in this respect, which has inevitably left arbitral tribunals with significant room for interpretation.

The EU's objectives and approach

The objective of the EU is to clarify the provisions on expropriation and to provide interpretative guidance with regard to indirect expropriation in order to avoid claims against legitimate public policy measures.  The EU wants to make it clear that non-discriminatory measures taken for legitimate public purposes, such as to protect health or the environment, cannot be considered equivalent to an expropriation, unless they are manifestly excessive in light of their purpose. The EU also wants to clarify that the simple fact that a measure has an impact on the economic value of the investment does not justify a claim that an indirect expropriation has occurred.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion of the approach to dealing with expropriation in relation to the TTIP? Please explain.

The Law Society supports the inclusion of protection against direct and indirect expropriation. It further supports the approach outlined in paragraph 2 of the Annex on Expropriation which necessitates a thorough examination of the facts to establish whether there has been indirect expropriation. It is potentially positive to introduce policy powers and not to class everything as expropriation. However, other aspects of the approach are less satisfactory. The Law Society considers that further guidance is needed in relation to the use of the term "manifestly excessive" and what this might mean or how it is to be assessed. It should not be so wide as to completely negate investment protection as this would be illogical. The provision as currently drafted largely undermines the protection against indirect expropriation. It also appears to sit in isolation but it might be more usefully set in the context of enshrining a right to regulate and a limit to the scope of the FET guarantee. The Commission should consider these concepts together in order to produce a coherent outcome. The Commission could explore the use of other terms such as "proportionality" which might offer a useful alternative to "manifestly excessive". There is also a question as to who decides what is to be regarded as "manifestly excessive".

Explanation of the issue

In democratic societies, the right to regulate of states is subject to principles and rules contained in both domestic legislation and in international law. For instance, in the European Convention on Human Rights, the Contracting States commit themselves to guarantee a number of civil and political rights. In the EU, the Constitutions of the Member States, as well as EU law, ensure that the actions of the state cannot go against fundamental rights of the citizens. Hence, public regulation must be based on a legitimate purpose and be necessary in a democratic society.

Investment agreements reflect this perspective. Nevertheless, wherever such agreements contain provisions that appear to be very broad or ambiguous, there is always a risk that the arbitral tribunals interpret them in a manner which may be perceived as a threat to the state's right to regulate. In the end, the decisions of arbitral tribunals are only as good as the provisions that they have to interpret and apply.

 Approach in most investment agreements

Most agreements that are focused on investment protection are silent about how public policy issues, such as public health, environmental protection, consumer protection or prudential regulation, might interact with investment. Consequently, the relationship between the protection of investments and the right to regulate in such areas, as envisaged by the contracting Parties to such agreements is not clear and this creates uncertainty.

In more recent agreements, however, this concern is increasingly addressed through, on the one hand, clarification of the key investment protection provisions that have proved to be controversial in the past and, on the other hand, carefully drafted exceptions to certain commitments. In complex agreements such as free trade agreements with provisions on investment, or regional integration agreements, the inclusion of such safeguards is the usual practice.

The EU's objectives and approach

The objective of the EU is to achieve a solid balance between the protection of investors and the Parties' right to regulate.

First of all, the EU wants to make sure that the Parties' right to regulate is confirmed as a basic underlying principle. This is important, as arbitral tribunals will have to take this principle into account when assessing any dispute settlement case.

Secondly, the EU will introduce clear and innovative provisions with regard to investment protection standards that have raised concern in the past (for instance, the standard of fair and equitable treatment is defined based on a closed list of basic rights; the annex on expropriation clarifies that non-discriminatory measures for legitimate public policy objectives do not constitute indirect expropriation). These improvements will ensure that investment protection standards cannot be interpreted by arbitral tribunals in a way that is detrimental to the right to regulate.

Third, the EU will ensure that all the necessary safeguards and exceptions are in place. For instance, foreign investors should be able to establish in the EU only under the terms and conditions defined by the EU. A list of horizontal exceptions will apply to non-discrimination obligations, in relation to measures such as those taken in the field of environmental protection, consumer protection or health (see question 2 for details). Additional carve-outs would apply to the audiovisual sector and the granting of subsidies. Decisions on competition matters will not be subject to investor-to-state dispute settlement (ISDS). Furthermore, in line with other EU agreements, nothing in the agreement would prevent a Party from taking measures for prudential reasons, including measures for the protection of depositors or measures to ensure the integrity and stability of its financial system. In addition, EU agreements contain general exceptions applying in situations of crisis, such as in circumstances of serious difficulties for the operation of the exchange rate policy or monetary policy, balance of payments or external financial difficulties, or threat thereof.

In terms of the procedural aspects relating to ISDS, the objective of the EU is to build a system capable of adapting to the states' right to regulate. Wherever greater clarity and precision proves necessary in order to protect the right to regulate, the Parties will have the possibility to adopt interpretations of the investment protection provisions which will be binding on arbitral tribunals.  This will allow the Parties to oversee how the agreement is interpreted in practice and, where necessary, to influence the interpretation.

The procedural improvements proposed by the EU will also make it clear that an arbitral tribunal will not be able to order the repeal of a measure, but only compensation for the investor.

Furthermore, frivolous claims will be prevented and investors who bring claims unsuccessfully will pay the costs of the government concerned (see question 9).

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, what is your opinion with regard to the way the right to regulate is dealt with in the EU's approach to TTIP?

The Law Society fully supports the Commission's objective "to achieve a solid balance between the protection of investors and the Parties' right to regulate". It may therefore be helpful to confirm the right to regulate as a basic principle. However, the concept has not been fully developed and there would need to be clarification as to the interplay with investor protections, such as the guarantee of FET and the right to protection against indirect expropriation. If it is to be confined to the current understanding as an aspect of customary international law, then the specific inclusion is probably unnecessary and may merely give rise to additional uncertainty. The EU competition regime is regarded by the Law Society as one of the major successes of the internal market. Ensuring that the competition regime continues to function efficiently is fundamentally important. The Law Society supports the Commission's decision to exclude competition matters from the scope of ISDS within the TTIP for the reasons set out below. However, it is unclear from the reference text whether it is to be specifically excluded in the wording of the TTIP. The Law Society understands that competition matters are traditionally excluded from ISDS cases but it would be helpful to make this exclusion visible in order to ensure that it is exempt. ISDS is intended to compensate where appropriate and the Law Society does not consider that it would be appropriate in relation to competition matters due to the particular nature of the regime and the purposes for which it has been created. It would also create an anomalous situation if investor companies which had lost a competition claim, or received a less favourable outcome than they wished, were able to bring a further claim under ISDS when such rights would be denied to domestic companies. It is also desirable that competition claims should be treated as such and should not become trade disputes. Furthermore, in the EU-US context existing cooperation agreements exist in relation to competition matters, including systems for dealing with individual cases. These have been seen to work well and are a more appropriate mechanism for dealing with competition cases. The converse of exempting the EU system is that other parties may wish their own competition regimes to be exempt. The issue of the competition exclusion might therefore require to be reassessed in future agreements to take account of the specific circumstances pertaining to the party in question. It may still be appropriate to exclude competition matters from the scope of ISDS but the relevant factors should be considered to ensure the desired outcome. Please see question 9 below in relation to costs and frivolous claims.

B. Investor-to-State dispute settlement (ISDS)

Explanation of the issue

In most ISDS cases, no or little information is made available to the public, hearings are not open and third parties are not allowed to intervene in the proceedings. This makes it difficult for the public to know the basic facts and to evaluate the claims being brought by either side.

This lack of openness has given rise to concern and confusion with regard to the causes and potential outcomes of ISDS disputes. Transparency is essential to ensure the legitimacy and accountability of the system. It enables stakeholders interested in a dispute to be informed and contribute to the proceedings. It fosters accountability in arbitrators, as their decisions are open to scrutiny. It contributes to consistency and predictability as it helps create a body of cases and information that can be relied on by investors, stakeholders, states and ISDS tribunals.

Approach in most existing investment agreements

Under the rules that apply in most existing agreements, both the responding state and the investor need to agree to permit the publication of submissions. If either the investor or the responding state does not agree to publication, documents cannot be made public. As a result, most ISDS cases take place behind closed doors and no or a limited number of documents are made available to the public.

The EU’s objectives and approach 

The EU's aim is to ensure transparency and openness in the ISDS system under TTIP. The EU will include provisions to guarantee that hearings are open and that all documents are available to the public. In ISDS cases brought under TTIP, all documents will be publicly available (subject only to the protection of confidential information and business secrets) and hearings will be open to the public. Interested parties from civil society will be able to file submissions to make their views and arguments known to the ISDS tribunal. 

The EU took a leading role in establishing new United Nations rules on transparency[1] in ISDS. The objective of transparency will be achieved by incorporating these rules into TTIP.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, please provide your views on whether this approach contributes to the objective of the EU to increase transparency and openness in the ISDS system for TTIP. Please indicate any additional suggestions you may have.

Opinion is divided as to whether transparency should be viewed as a positive or a negative thing in the context of ISDS. But there are also different levels of transparency and different views on what transparency actually means. This is not a debate between investor and state and, in fact, both may be opposed to greater transparency. It is also inaccurate to say that there is no transparency at present. If anything the number of awards which are published is increasing year on year. Hand in hand with this, parties are becoming more comfortable with the idea that the public interest means there is a need for greater transparency. The argument for transparency when taxpayers are paying is also a strong one. In fact, some practitioners would say that the train has already left on this point and that transparency, at least to some extent, is already part of treaty arbitration. However, transparency should not be taken so far as risk making the cost of the process so potentially prohibitive as to dissuade investors from pursuing legitimate claims or indeed investing in the first place. Under the ICSID process there is already a level of transparency and typically the award is published. Negotiations leading to the new 2012 UNCITRAL rules also focused on increased transparency and many of these rules are reflected in the proposed TTIP approach. Indeed, some of the UNCITRAL transparency rules actually go beyond the level of transparency required by national courts (including the England and Wales courts) in some respects. However, the proposed transparency in TTIP is in fact greater than the UNCITRAL rules. In light of the lengthy UNCITRAL negotiations in which the EU participated, it might be prudent to reconsider applying this internationally agreed standard, rather than seeking to go beyond it. One practical argument against transparency, if this means that all documents/evidence must be published - and one which may unite both states and investors, - lies in the added cost. While the conditions for transparency are set out clearly, there is less clarity as to who is supposed to pay for the increase in transparency. [4] Obviously exceptions are made for privileged and confidential documents but the need to redact every document is potentially both time-consuming and expensive. There may also be costs resulting from practical considerations such as the delay caused by waiting for third party submissions, venue costs if open access for the hearing is required etc. The need to achieve a publicly acceptable level of transparency must be balanced against the significant issue of costs. It has also been suggested that transparency may impose public considerations and pressures on the arbitration proceedings which are not even desirable. The Law Society commends the UNCITRAL rules as an appropriate basis for consideration of these issues. [4] In cases where the cost is borne by the state, then it will ultimately be the taxpayer.

Explanation of the issue

Investors who consider that they have grounds to complain about action taken by the authorities (e.g. discrimination or lack of compensation after expropriation) often have different options. They may be able to go to domestic courts and seek redress there. They or any related companies may be able to go to other international tribunals under other international investment treaties.

It is often the case that protection offered in investment agreements cannot be invoked before domestic courts and the applicable legal rules are different. For example, discrimination in favour of local companies is not prohibited under US law but is prohibited in investment agreements. There are also concerns that, in some cases domestic courts may favour the local government over the foreign investor e.g. when assessing a claim for compensation for expropriation or may deny due process rights such as the effective possibility to appeal. Governments may have immunity from being sued. In addition, the remedies are often different. In some cases government measures can be reversed by domestic courts, for example if they are illegal or unconstitutional. ISDS tribunals cannot order governments to reverse measures.

These different possibilities raise important and complex issues. It is important to make sure that a government does not pay more than the correct compensation. It is also important to ensure consistency between rulings.

Approach in most existing investment agreements

Existing investment agreements generally do not regulate or address the relationship with domestic courts or other ISDS tribunals. Some agreements require that the investor choses between domestic courts and ISDS tribunals. This is often referred to as "fork in the road" clause.

The EU’s objectives and approach

As a matter of principle, the EU’s approach favours domestic courts. The EU aims to provide incentives for investors to pursue claims in domestic courts or to seek amicable solutions – such as mediation. The EU will suggest different instruments to do this. One is to prolong the relevant time limits if an investor goes to domestic courts or mediation on the same matter, so as not to discourage an investor from pursuing these avenues.  Another important element is to make sure that investors cannot bring claims on the same matter at the same time in front of an ISDS tribunal and domestic courts. The EU will also ensure that companies affiliated with the investor cannot bring claims in front of an ISDS tribunal and domestic courts on the same matter and at the same time. If there are other relevant or related cases, ISDS tribunals must take these into account. This is done to avoid any risk that the investor is over-compensated and helps to ensure consistency by excluding the possibility for parallel claims.

Link to reference text

Taking into account the above explanation and the text provided in annex as a reference, please provide your views on the effectiveness of this approach for balancing access to ISDS with possible recourse to domestic courts and for avoiding conflicts between domestic remedies and ISDS in relation to the TTIP. Please indicate any further steps that can be taken. Please provide comments on the usefulness of mediation as a means to settle disputes.

The Law Society encourages the use of amicable solutions such as mediation, where appropriate. This is particularly important in situations where the parties wish to continue a mutually beneficial relationship but a problem has arisen in a particular connection. However, there is a question as to how this fits with the Commission's stated desire for transparency. The Law Society queries the automatic preference for domestic courts. There may be a problem with national courts and bias, or even solely with the perception of bias. An investor may therefore be reluctant to bring a case in a forum which they believe to be inherently biased. Similarly, domestic courts/judges may feel pressure to side with their government as against the investor, or to go too far in compensating if they wish to be seen not to hold such favouritism. Arbitration may offer a more effective resolution in some circumstances, even if the neutrality of the court is unimpeachable. There is a growing trend towards the use of arbitration in the commercial sphere as well as in the context of ISDS. Furthermore, if arbitration is to be accepted as a means of resolving disputes and the decisions of arbitrations are enforceable, it would be detrimental to the entire system to create a presumption that arbitration somehow offers a "second best" solution. It should also be noted that in some countries investment agreements are not directly enforceable in national courts or may not be enforceable if they have not been transposed into national law. It may not therefore even be possible to pursue a claim through the domestic court system. The Law Society is concerned that the aggregate nine month cooling-off period is too long in terms of providing access to justice in line with commercial reality and the needs of business.

Explanation of the issue

There is concern that arbitrators on ISDS tribunals do not always act in an independent and impartial manner. Because the individuals in question may not only act as arbitrators, but also as lawyers for companies or governments, concerns have been expressed as to potential bias or conflicts of interest.

Some have also expressed concerns about the qualifications of arbitrators and that they may not have the necessary qualifications on matters of public interest or on matters that require a balancing between investment protection and e.g. environment, health or consumer protection.

Approach in existing investment agreements

  Most existing investment agreements do not address the issue of the conduct or behaviour of arbitrators. International rules on arbitration address the issue by allowing the responding government or the investor to challenge the choice of arbitrator because of concerns of suitability.

Most agreements allow the investor and the responding state to select arbitrators but do not establish rules on the qualifications or a list of approved, qualified arbitrators to draw from.

  The EU’s objective and approach

The EU aims to establish clear rules to ensure that arbitrators are independent and act ethically. The EU will introduce specific requirements in the TTIP on the ethical conduct of arbitrators, including a code of conduct. This code of conduct will be binding on arbitrators in ISDS tribunals set up under TTIP.  The code of conduct also establishes procedures to identify and deal with any conflicts of interest.  Failure to abide by these ethical rules will result in the removal of the arbitrator from the tribunal. For example, if a responding state considers that the arbitrator chosen by the investor does not have the necessary qualifications or that he has a conflict of interest, the responding state can challenge the appointment. If the arbitrator is in breach of the Code of Conduct, he/she will be removed from the tribunal. In case the ISDS tribunal has already rendered its award and a breach of the code of conduct is found, the responding state or the investor can request a reversal of that ISDS finding.

In the text provided as reference (the draft EU-Canada Agreement), the Parties (i.e. the EU and Canada) have agreed for the first time in an investment agreement to include rules on the conduct of arbitrators, and have included the possibility to improve them further if necessary. In the context of TTIP these would be directly included in the agreement.

As regards the qualifications of ISDS arbitrators, the EU aims to set down detailed requirements for the arbitrators who act in ISDS tribunals under TTIP. They must be independent and impartial, with expertise in international law and international investment law and, if possible, experience in international trade law and international dispute resolution. Among those best qualified and who have undertaken such tasks will be retired judges, who generally have experience in ruling on issues that touch upon both trade and investment and on societal and public policy issues. The EU also aims to set up a roster, i.e. a list of qualified individuals from which the Chairperson for the ISDS tribunal is drawn, if the investor or the responding state cannot otherwise agree to a Chairperson. The purpose of such a roster is to ensure that the EU and the US have agreed to and vetted the arbitrators to ensure their abilities and independence.  In this way the responding state chooses one arbitrator and has vetted the third arbitrator.

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Taking into account the above explanation and the text provided in annex as a reference, please provide your views on these procedures and in particular on the Code of Conduct and the requirements for the qualifications for arbitrators in relation to the TTIP agreement. Do they improve the existing system and can further improvements be envisaged?

The Law Society agrees that arbitrators must be independent and impartial. It supports the view that arbitrators should act ethically, should conduct themselves in a professional manner, and should have the requisite experience to carry out their role. However, it does not consider that there are significant concerns surrounding the current conduct and expertise of those acting as arbitrators. The Commission's basis for its assertion that there is concern is unclear. Views on the approach taken to arbitrators themselves were mixed. A number of practitioners subscribed to the view that arbitrators are self-policing because their desire for reappointment necessitates neutrality in their own self-interest. Practitioners did not see arbitrator conduct as a particular issue. Perceptions of the public or particular groups should not prompt unnecessary legislation unless these are well-founded. That said, some sort of code of conduct and specific process might promote transparency but it must of course be practical and workable. In relation to the TTIP's proposals, the Commission has drawn on a number of existing rules and systems and the proposals are not particularly innovative. As regards the suggestion of conduct rules, a clear system could be helpful but the current phrasing is unclear and not yet developed. One specific point that was made on the draft was that the "or additional rules" was illogical: if they are considered necessary then should be "and" and they should therefore override the IBA guidelines. Mention of the IBA guidelines may even be superfluous as they are routinely applied. That said, the specific reference is not harmful and, in the interests of transparency, it does provides clarity to public or others who do not know of the care taken by arbitrators to disclose any potential conflicts. The proposed roster system met with severe criticism from a number of practitioners. Lists of arbitrators tend to be unpopular and the view was put forward that they are also unworkable. One of the reasons that arbitration is so popular (with both sides) is the element of party autonomy and overly restrictive use of lists can detract from this. It is also "anti-free market", with the potential to prevent the use of extremely qualified arbitrators from outside the relevant jurisdictions. It was felt very strongly that if a roster were to be introduced, it should be used only as a fallback solution in appointing both the chair and the other arbitrators. It is reasonable that arbitrators on the roster should be able to demonstrate relevant experience as set out in the text. However, in line with the principle of party autonomy, where parties are appointing their own arbitrator, they should be allowed a complete freedom of choice and arbitrators should not have to meet qualification requirements, provided they are independent and impartial.

Explanation of the issue

As in all legal systems, cases are brought that have little or no chance of succeeding (so-called “frivolous claims”). Despite eventually being rejected by the tribunals, such cases take up time and money for the responding state. There have been concerns that protracted and frequent litigation in ISDS could have an effect on the policy choices made by states. This is why it is important to ensure that there are mechanisms in place to weed out frivolous disputes as early as possible.

Another issue is the cost of ISDS proceedings. In many ISDS cases, even if the responding state is successful in defending its measures in front of the ISDS tribunal, it may have to pay substantial amounts to cover its own defence.

Approach in most existing investment agreements:

Under existing investment agreements, there are generally no rules dealing with frivolous claims. Some arbitration rules however do have provisions on frivolous claims. As a result, there is a risk that frivolous or clearly unfounded claims are allowed to proceed. Even though the investor would lose such claims, the long proceedings and the implied questions surrounding policy can be problematic.

The issue of who bears the cost is also not addressed in most existing investment agreements. Some international arbitration rules have provisions that address the issue of costs in very general terms. In practice, ISDS tribunals have often decided that the investor and responding state pay their own legal costs, regardless of who wins or loses.

The EU’s objectives and approach

The EU will introduce several instruments in TTIP to quickly dismiss frivolous claims.

ISDS tribunals will be required to dismiss claims that are obviously without legal merit or legally unfounded. For example, this would be cases where the investor is not established in the US or the EU, or cases where the ISDS tribunal can quickly establish that there is in fact no discrimination between domestic and foreign investors. This provides an early and effective filtering mechanism for frivolous claims thereby avoiding a lengthy litigation process.

To further discourage unfounded claims, the EU is proposing that the losing party should bear all costs of the proceedings. So if investors take a chance at bringing certain claims and fail, they have to pay the full financial costs of this attempt.

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Taking into account the above explanation and the text provided in annex as a reference, please provide your views on these mechanisms for the avoidance of frivolous or unfounded claims and the removal of incentives in relation to the TTIP agreement. Please also indicate any other means to limit frivolous or unfounded claims.

The Law Society would not support a solicitor in acting for a client who was pursuing a frivolous or unfounded case. However, a claim that is without legal merit or unfounded as a matter of law is likely to be dealt with quickly in any case. The practical implications (including potential damage to existing working relationships) and potential expense mean that investors are unlikely to pursue frivolous and unfounded claims. Traditionally it has often been the case that each side has paid its own costs, although there have been some cases where costs have been awarded against the losing party. The risk of an adverse cost award could help to guard against frivolous claims. This risk, combined with the commercial realities referred to above, should suffice to control frivolous or unfounded claims. Although the Law Society has reservations about the introduction of a summary judgment system, if it is to be introduced, then the Law Society would support a presumption that the burden of costs be borne by the loser. However, the costs of the summary judgment should be considered separately from those of the eventual case (if it does proceed). Where a claim, on summary judgment, is found to be frivolous or lacking in legal merit then the investor may be expected to pay the costs for the summary judgment procedure. On the other hand, where a State files an objection that a claim is "manifestly without legal merit" and this is not upheld, then the State should be liable to pay the costs for the summary judgment, even if it eventually succeeds in defending the claim. There is no deterrent to the State in raising this objection unless it will have to meet the costs if it is unsuccessful in establishing its claim. As noted in the preceding paragraph, not all claims which are unsuccessful will necessarily be frivolous. The decision on costs should therefore be left to the arbitrator's discretion to account for cases where imposing costs (or the whole cost) upon an unsuccessful party might be unfair. A costs allocation provision that places the burden of costs on the losing party would seem to be sensible but it should be clearly stated that this may be waived in the interests of fairness if the arbitrator sees fit to do so.

Explanation of the issue

Recently, concerns have been expressed in relation to several ISDS claims brought by investors under existing investment agreements, relating to measures taken by states affecting the financial sector, notably those taken in times of crisis in order to protect consumers or to maintain the stability and integrity of the financial system.

To address these concerns, some investment agreements have introduced mechanisms which grant the regulators of the Parties to the agreement the possibility to intervene (through a so-called “filter” to ISDS) in particular ISDS cases that involve measures ostensibly taken for prudential reasons. The mechanism enables the Parties to decide whether a measure is indeed taken for prudential reasons, and thus if the impact on the investor concerned is justified. On this basis, the Parties may therefore agree that a claim should not proceed.

Approach in most existing investment agreements

The majority of existing investment agreements privilege the original intention of such agreements, which was to avoid the politicisation of disputes, and therefore do not contain provisions or mechanisms which allow the Parties the possibility to intervene under particular circumstances in ISDS cases.

The EU’s objectives and approach

The EU like many other states considers it important to protect the right to regulate in the financial sector and, more broadly, the overriding need to maintain the overall stability and integrity of the financial system, while also recognizing the speed needed for government action in case of financial crisis.

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Some investment agreements include filter mechanisms whereby the Parties to the agreement (here the EU and the US) may intervene in ISDS cases where an investor seeks to challenge measures adopted pursuant to prudential rules for financial stability. In such cases the Parties may decide jointly that a claim should not proceed any further. Taking into account the above explanation and the text provided in annex as a reference, what are your views on the use and scope of such filter mechanisms in the TTIP agreement?

This is potentially a very significant development and merits further consideration. It is difficult to see how the prudential carve out would work in practice and it is likely that it would in and of itself create interpretation issues. If it is to be included, it would require careful drafting, in particular to ensure that that the relationship with the right to regulate is clear. The timing for state intervention also needs to be given further thought.

Explanation of the Issue

When countries negotiate an agreement, they have a common understanding of what they want the agreement to mean. However, there is a risk that any tribunal, including ISDS tribunals interprets the agreement in a different way, upsetting the balance that the countries in question had achieved in negotiations – for example, between investment protection and the right to regulate. This is the case if the agreement leaves room for interpretation. It is therefore necessary to have mechanisms which will allow the Parties (the EU and the US) to clarify their intentions on how the agreement should be interpreted.

Approach in existing investment agreements

Most existing investment agreements do not permit the countries who signed the agreement in question to take part in proceedings nor to give directions to the ISDS tribunal on issues of interpretation.

The EU’s objectives and approach 

The EU will make it possible for the non-disputing Party (i.e. the EU or the US) to intervene in ISDS proceedings between an investor and the other Party. This means that in each case, the Parties can explain to the arbitrators and to the Appellate Body how they would want the relevant provisions to be interpreted.  Where both Parties agree on the interpretation, such interpretation is a very powerful statement, which ISDS tribunals would have to respect.

The EU would also provide for the Parties (i.e. the EU and the US) to adopt binding interpretations on issues of law, so as to correct or avoid interpretations by tribunals which might be considered to be against the common intentions of the EU and the US. Given the EU’s intention to give clarity and precision to the investment protection obligations of the agreement, the scope for undesirable interpretations by ISDS tribunals is very limited. However, this provision is an additional safety-valve for the Parties.

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Taking into account the above explanation and the text provided in annex as a reference, please provide your views on this approach to ensure uniformity and predictability in the interpretation of the agreement to correct the balance? Are these elements desirable, and if so, do you consider them to be sufficient?

The Law Society notes that some practitioners disagree with the premise of guidance by the Parties. If a Party is dissatisfied with the outcome of a dispute it may be open to them to clarify or correct the interpretation for future cases. This may be considered to be more transparent and fairer to the investor than allowing the Parties to intervene during the dispute itself.

Explanation of the issue

In existing investment agreements, the decision by an ISDS tribunal is final. There is no possibility for the responding state, for example, to appeal to a higher instance to challenge the level of compensation or other aspects of the ISDS decision except on very limited procedural grounds. There are concerns that this can lead to different or even contradictory interpretations of the provisions of international investment agreements. There have been calls by stakeholders for a mechanism to allow for appeal to increase legitimacy of the system and to ensure uniformity of interpretation.


Approach in most existing investment agreements

No existing international investment agreements provide for an appeal on legal issues. International arbitration rules allow for annulment of ISDS rulings under certain very restrictive conditions relating to procedural issues. 

The EU’s objectives and approach 

The EU aims to establish an appellate mechanism in TTIP so as to allow for review of ISDS rulings. It will help ensure consistency in the interpretation of TTIP and provide both the government and the investor with the opportunity to appeal against awards and to correct errors. This legal review is an additional check on the work of the arbitrators who have examined the case in the first place.

In agreements under negotiation by the EU, the possibility of creating an appellate mechanism in the future is envisaged. However, in TTIP the EU intends to go further and create a bilateral appellate mechanism immediately through the agreement.

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Question 12. Taking into account the above explanation and the text provided in annex as a reference, please provide your views on the creation of an appellate mechanism in TTIP as a means to ensure uniformity and predictability in the interpretation of the agreement.

APPEALS The Commission's proposed approach to the introduction of an appellate mechanism was strongly criticised. There is no process set out indicating what the appeal procedure would actually be, nor how the appellate body would be appointed. If appointed by the state, this undermines the very legitimacy of the system in the first place. It is also unclear how such body would be financed. Currently appeals are limited to appeals on procedural grounds under the ICSID rules, which, if successful, result in annulment of the original arbitration decision. The grounds are very limited and typically narrowly construed. Introducing a true appeal process would therefore be a big change to the existing situation. That said, the ICSID annulment procedure has been controversial and the introduction of an alternative approach could prove helpful. However, the effectiveness and desirability of such an appeal process will depend entirely on the type of body, its appointment process, the timescales envisaged and the grounds on which any appeal would be allowed. As things stand arbitration decisions are final and allowing appeals would undermine the finality element. It may be immensely popular with the losing side in the preliminary case but this does not mean that introducing an appeal mechanism will be an improvement, nor that it sits well with the fundamental aspects of arbitration. In ICSID arbitration an ad hoc tribunal is established to consider the merits of a particular claim and reach a ruling on that claim. An appellate body comprised of a second ad hoc tribunal would not necessarily produce a "better" or more "correct" result. The very point of an arbitration decision is that no further review of the substance is required and as such it was commented that appeals do not seem to serve any purpose beyond delaying enforcement. The timescales in investment arbitration are already long without adding to this through the introduction of an appeals process. Of course, it would seem sensible to allow appeals on procedural grounds as is already the case under ICSID but this is very different to appeals on the substance of a case. CONSISTENCY A further issue to be considered is whether the current system results in consistency of outcomes, and indeed whether this is even desirable or misses the point of arbitration as an alternative to court. It cannot, after all, be considered an alternative to litigation if it merely replicates the court system on some other plain. As mentioned above, the reasons ISDS is included in treaties is to offer an alternative to domestic court litigation. It is not so much a problem with the litigation process itself, but rather the domestic nature of it that poses the problem. Conclusions on consistency vary also. One practitioner said that the results we get at the moment are probably not coherent/consistent but went on to say that this is not what investment arbitration is about: coherence is not necessarily a virtue to be achieved. However, if the same factual scenario in the same countries leads to different outcomes, then this may be problematic. The more fact-based a particular strand of reasoning, the more agreement or consistency. Where parties bringing claims under different treaties but which refer to the same circumstances/state action, then of course there may be varying outcomes, depending on the precise wording of the treaties under which these claims are brought. Some practitioners consider that there is an unstoppable trend seeking to create consistent lines of interpretation (although some outlier awards will always go against the tide). Although jurisprudence from other arbitration cases is not binding, the publication of previous decisions introduces an element of informal precedent which results in greater cohesion. However, there are substantive issues where tribunals tend to diverge. The prime example of interpretation divergence lies in the interpretation of MFN clause: interpretation of MFN clauses goes one of two ways but with both paths based on solid academic and legal reasoning. Other common examples include inconsistencies in interpretation of "necessity" and in relation to umbrella clauses. The existence of these divergences leads to tactical decisions in arbitrator appointment but that is to be expected in a process involving party appointment. Given that both parties are able to appoint their own arbitrator, they will each appoint an arbitrator who may be more likely to sympathise with their position. In a market of experienced arbitrators and legal advisers on both sides, it may be argued that this does not therefore create any problems as long as there is sufficient transparency of the process and disclosure of arbitrator conflicts of interests to ensure that the arbitrator's natural "sympathies" do not affect their independence and impartiality. The flip-side of this is that consistency breeds certainty which is a good thing for clients. Clients want to know what the rules are - even if they are bad rules - so that they can assess risk and mitigate against it, eg by taking out political risk insurance. [5] There is therefore an element of economic efficiency in encouraging consistency. [5] It should be borne in mind that political risk insurance can be prohibitively expensive compared to dispute settlement. This is not suggested as an alternative to ensuring proper ISDS mechanisms, which remain the preferred option.

C. General assessment

General assessment
  • What is your overall assessment of the proposed approach on substantive standards of protection and ISDS as a basis for investment negotiations between the EU and US?
  • Do you see other ways for the EU to improve the investment system?
  • Are there any other issues related to the topics covered by the questionnaire that you would like to address?

The essential purpose of BITs is balancing the right to regulate on the part of participating states with the need to protect the rights of investors and ensure a sufficiently certain economic and regulatory environment in order to encourage investment. The corollary to this is reliable, efficient, and effective processes for dispute resolution to which both parties subscribe in the event that problems do arise. The Commission is aiming to achieve certainty but codification will not necessarily achieve this. Various practitioners took exception to the background document itself which is perceived to be inaccurate as to both law and aims. As noted above, the Law Society raises concerns regarding wording as currently drafted, particular that relating to some of the definitions, which it does not consider will achieve the desired clarity. Generally speaking, practitioners agree that investment protection should be included in TTIP. It is an aspect of business and can be hugely beneficial from the perspective of both investors and states. Even if recourse to the courts in much of Europe and the US would be sufficient, it creates a problematic precedent if it is not included in TTIP. In the wider context, it is therefore necessary. On one view arbitration is intended to offer a quick and cost-effective means of resolving disputes. Yet an alternative view argues that this only really applies to traditional commercial disputes [6]: to apply this to ISDS is to fundamentally misunderstand the purposes behind ISDS and its unique status within international law. In investor state arbitration then recourse to arbitration is pursued because it can provide neutrality: this is the central element and in reality it is not a speedy process. The value of ISDS is reflected in its inclusion in other BITs and FTAs and its inclusion in the TTIP therefore sets and important precedent for future negotiations. It is also important to discourage resort to treaty shopping. If the TTIP lacks ISDS provisions then investors may seek to access investment protection and corresponding dispute resolution capacity, through another treaty. The Law Society's view in relation to arbitrator conduct and ethics are discussed above. It is particularly important that parties to a dispute should be able to appoint arbitrators freely and the Law Society accordingly emphasises the fact that the proposed roster system should be used only as a fallback system where the parties have not otherwise managed to reach agreement. While the Law Society is therefore against qualification requirements that would exclude freedom of choice, it would seem sensible that a certain level of experience is required for those arbitrators who are appointed to the list. The Law Society notes more generally that the arbitration system might benefit from an increased number of arbitrators as this could help improve the public perception of legitimacy and openness EU COMPETENCE FOR ARBITRATION AND THE INDEPENDENT ARBITRATOR CRITERION UNDER ICSID Solicitors act for both states and investors and with clients on both sides are accustomed to arguing from both perspectives. From the legal professional perspective it is important to note the impact of the proposal on arbitrators, both as the role is fulfilled by individual EU lawyers, including Law Society members, and in relation to European arbitration centres, such as London, on the global stage. If the EU has taken over responsibility for negotiating international investment treaty provisions, [7] then it is likely that the ICSID independence rules will pose a problem if EU arbitrators are wishing to chair arbitration cases involving parties in other Member States or those Member States themselves. It is unclear how the roster system works in that situation and whether EU arbitrators would be able to act in those circumstances. For example would a UK arbitrator be unable to act as chair in a claim brought by a French company and vice versa? The problem is already present in the CETA draft text - members of the EU cannot sit as presiding arbitrator, even if they would in fact be able to act completely independently and impartially. At present, parties will frequently appoint an arbitrator from a country other than their own rather than automatically opting for a fellow national. While practitioners do not consider that membership of the EU would actually impair the impartiality of those acting as arbitrators, problems might nevertheless arise with the perception of their independence. The practical effect may therefore be to reduce the circumstances in which UK and other EU lawyers (and other arbitration experts) may be able to act as arbitrators in future. [6] Practitioners note that even then, the focus on speed in commercial arbitration carries less weight than previously and other advantages may have superseded speed, and even cost, as persuasive factors in choosing to go to arbitration over conventional dispute settlement mechanisms. [7] In BITs FTAs etc