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Investment | Brussels, 29 January 2015

The European Commission tables proposals to improve transparency in Investor-to-State Dispute Settlement (ISDS) based on existing investment treaties

Since the adoption of its Communication ’Towards a comprehensive European international investment policy’ in 2010, the Commission has worked towards improving the Investor-to-State Dispute Settlement (ISDS) system, in particular the transparency of proceedings.

In 2013 rules on transparency in ISDS cases were adopted under the auspices of the United Nations Commission on International Trade Law (UNCITRAL transparency rules). These rules, which entered into force on 1 April 2014, provide for a maximum access of the public to documents and hearings, as well as allowing interested third parties to make submissions. The European Union has included these or equivalent wide-ranging rules in the finalized free trade agreements with Singapore and with Canada. These rules will also be an integral part of any future negotiations on trade agreements that contain ISDS provisions.

The transparency rules however do not apply to disputes based on investment agreements concluded prior to 1 April 2014. The Commission has therefore pushed strongly for a multilateral Convention to allow these UN transparency rules to be extended to the 3000 investment treaties in force worldwide. Todays’ proposals will make it possible for the EU and its Member States to adhere to this Convention thus making possible the application of these transparency rules to the EU Member States‘ existing 1400 treaties and the Energy Charter Treaty.

The UN Convention on transparency

The UN Convention was drawn up by a special working group composed of representatives of a large number of countries that have investment treaties with ISDS. The Convention was adopted on 10 December 2014 by the UN General Assembly.

The Convention makes it possible for both individual states and organisations like the EU to agree to apply the UNCITRAL Transparency Rules in investment treaties that are already in effect and to which they are parties. It would therefore permit the EU Member States to apply the Transparency Rules to their 1400 existing treaties concluded with third countries. In the case of the EU, this would mean that the Convention would apply to the Energy Charter Treaty to which the EU is a party since 1998.

If adhered to, the Convention would apply automatically to all treaties that a country has signed, unless the country specifically lists investment agreements where it does not want the Transparency Rules to apply (a so-called negative list).

Content of the draft proposals Council decisions

Under the Lisbon Treaty, foreign direct investment has become a part of the Union’s exclusive competence. Practically, it means that only the Union can adopt legally binding acts in this area and that Member States may no longer do so without being empowered by the European Union.

Therefore, when adopted, the Commission's proposals would have two effects. First, the EU as a legal entity would be able to accede to the UN Convention. Second, Member States will be empowered also to accede to the UN Convention so that they could apply the Transparency Rules to their existing bilateral investment agreements with third countries (meaning those concluded before 1 April 2014).