The Investment Court System
What is the investment court system?
The Investment Court System (“ICS”) is meant to address the shortcomings of Investor-State Dispute Settlement (“ISDS”) and ad hoc arbitral tribunals. The ICS aims at ensuring the highest standards of transparency, legitimacy and neutrality.
Disputes between foreign investors and the State where the investment was made – i.e. the ‘host State’, will be settled in a neutral forum. However, this will not be achieved through an ad hoc arbitral procedure, where the disputing parties appoint arbitrators, but rather through an institutionalised adjudicative body, resulting in a two-tier standing mechanism with a first-tier tribunal and an appellate tribunal. The permanent court will be composed of independent, highly qualified judges submitted to strict ethical rules.
In the view of ensuring impartiality and independence, the composition of the Tribunal is carefully balanced: one third of the members of the Tribunal shall be nationals of a Member State of the EU, one third shall be nationals of the other party to the agreement at stake, and the remaining one third shall be nationals of third countries. The same proportion will be kept also for the single division of the Tribunal hearing the case, as appointed by the President of the Tribunal.
The ICS is the first step toward the establishment of a Multilateral Investment Court (MIC) and will be replaced by the MIC when it enters into force.
How does the procedure under the ICS work?
The adjudicative procedure under the ICS system is divided into three main phases
- the consultation phase
- the tribunal phase, and
- the appeal phase.
Only if a dispute cannot be settled though consultations will it move to the tribunal phase and only if an appeal is lodged will a dispute move to the appeal phase.
Each Investment Protection Agreement (IPA) or broader agreement including the ICS includes specific timeframes for these phases.
In case of an alleged breach, the dispute should be as far as possible settled amicably through a consultation phase. A party shall seek consultations by means of a written request delivered to the other party identifying the measure at issue and the covered provisions that it considers.
If the parties fail to resolve the dispute through consultation, a claim may be submitted to the tribunal. The tribunal will hear the case and will decide and render its award according to the applicable law.
If the award rendered by the first-tier tribunal contains errors, it may be appealed. The appellate tribunal will review the award and will render the final award.
Read more in the Guide to Investment Court System
What is mediation?
Mediation is an alternative dispute resolution (“ADR”) mechanism. It is based on the disputing parties’ consent to find a mutually agreed solution to the dispute with the assistance of a third person i.e. the mediator.
Parties may opt for mediation at any time, even after the commencement of the proceedings.
Given the voluntary and consensual basis, mediation results in a flexible procedure which adapts to the parties’ specific needs in a particular case.
Parties exercise control over mediation with respect to
- appointment of the mediator,
- the scope and outcome of the mediation.
Indeed, the mediator is appointed by agreement of the disputing parties and the disputing parties determine the issues to submit to the mediator. Consequently, the settlement agreement will cover exclusively the issues that the parties decided to resolve through mediation.
What are the advantages of mediation?
Mediation provides for several advantages. It allows parties to save time and costs due to its flexibility since it may prevent a long and expensive litigation. Additionally, mediation may better preserve the interests and relationships of the parties.
How does mediation differ from litigation?
Contrary to a judge in court proceedings, the mediator does not impose any ruling on the parties but instead helps the parties to reach a solution that is mutually acceptable to them, by initiating meetings, discussing the issues at stake and assisting the parties to find possible solutions. Also, the mediation procedure is tailored in accordance with the parties’ specific needs to ensure a smooth and rapid resolution of the dispute.