Since 2015, the European Commission has worked on the establishment of a Multilateral Investment Court which would have a permanent international body with the power to settle investment disputes between investors and states. This would replace in whole or part the current system of Investor State Dispute Settlement (“ISDS”) found in trade deals worldwide.

The aim of instituting a new body would be to address criticisms of the system as it exists today; namely that it lacks transparency, prioritises the financial interests of foreign investors over democratic policy goals, and that the ad-hoc structure does not lend itself to judicial predictability.  Based on the papers thus far available, it is not clear however that changes desired by the Commission will succeed in addressing these points (or are even likely to gather the requisite international support)

ISDS mechanisms worldwide have their origins in several 19th Century Peace conferences, which were aimed at creating a forum for peaceably resolving disputes between states at a time when the customary consequence of a diplomatic failure was to send a gunboat. From there, international practice developed to allow legal persons to seek redress against states via arbitration, a custom which was formalised in the Bilateral Investment Treaties (“BITs”) and Multilateral Investment Agreements signed between Western and post-colonial countries.  

Although public international law has, in the last decades, evolved to include a wider range of non-state bodies, the ability of companies to pursue legal action (resulting in enforceable damages) against a state, often as a result in a change of policy carried out by that state, remains controversial. Criticism tends to come from a number of angles, namely that the process is overly secretive; that arbitrators, who often continue to act as counsel in between appointments to tribunals have an inherent conflict of interest and that the awards granted are often inconsistent across similar sets of facts, while allowing only very limited grounds for appeal. Perhaps most damningly, ISDS is often criticised for permitting corporations to roll back environmental or social legislation which has resulted, or which may result, in financial damages to them. Although these concerns are far more often cited than proven, opposition to ISDS formed such a major part of civil society opposition to the proposed Transatlantic Trade and Investment Partnership (“TTIP”) deal that the Commission felt moved to respond in 2015 with a concept paper calling for a series of reforms that would move ISDS towards a “a permanent multilateral system for investment disputes”.

Towards a Multilateral Investment Court

The steps proposed in the commission paper - Investment in TTIP and beyond; the path for reform - are rather wide-ranging, and can be divided into three blocks; reforms addressing procedural issues, such as a ban on ‘forum shopping’ and clarifying the position on transparency and amici curiae submissions; reforms addressing more substantive concerns, primarily on the right to regulate, and the third block, changes aimed at establishing a new investment court, primarily by incorporating a defined – i.e., government-controlled – list of arbitrators and establishing a more wide ranging appeal mechanism. 

As regards the first two blocks of reform, the changes proposed by the Commission may not go farther than restating existing ISDS customary law (although, it should be acknowledged, investment law does not operate with a formal system of precedent) and international instruments such as the UNCITRAL transparency rules.

It is unclear, however, whether these are new reforms as opposed to a restatement of existing ISDS custom. For this, a more concrete set of proposals is needed. As yet, however, little codification of the Commission’s ambitions exists. Although a December 2016 Commission press release states that “the signed EU-Canada trade deal (CETA) and the EU-Vietnam trade agreement both contain a reference to the establishment of a permanent multilateral investment court“, the current CETA text restricts this to a single paragraph (Art. 8.29), requiring parties to “pursue with other trading partners the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes”. The most recent text of the EU-Vietnam agreement is more laconic still, with the only reference to a dedicated EU-Vietnam procedure (as opposed to recourse to a standard model of international arbitration) being contained in Article 23, which provides for a list of five EU, five Vietnam and five third party arbitrators from which panels shall be constructed as needed.

On the domestic front, a consultation for public stakeholders ended in March. The results have yet to be released, however to judge from the available responses, scepticism runs high. Discussions do continue, but it is unclear when a model will be available, or even whether those talks are being carried out on a truly multilateral, as opposed to piecemeal, basis. Likewise, procedural concepts, such as how judges will be selected and whether the lex loci arbitri will depart from ICSID or UNCITRAL rules appear not to have progressed beyond the discussion stages.


The Commission proposals do not lack for ambition. Historically, attempts to create an international body to adjudicate investment disputes – as the WTO does for trade disputes – have foundered, in no small part due to differences in approach between developed and less-developed countries concerning state liability for expropriations. The Commission’s task is therefore twofold; firstly to overcome scepticism from external actors, such as that which scuppered the 1995 attempt by the OECD to create a similar permanent investment court, and secondly to produce a court that would overcome at least some of the domestic opposition from civil society mentioned in the introduction. As things stand, bridging this double gap appears to be some way off, and the additional hurdle placed by the CJEU’s Opinion 2/15 will present another set of political challenges for the drafters of investment and dispute settlement chapters to consider. Add to this the distinct antipathy shown by other countries to the concept, and it is likely to be some time before a new court is in place.