I’m participating in a number of discussions and seminars to address the year’s most pressing challenges, and to consider what would be the most effective responses to them. During the year ahead, the Commission will continue to pursue our agenda of regional and bilateral trade agreements, while aiming to also drive progress in the World trade Organisation (WTO). Here in Davos, I will meet with several of my fellow trade ministers to go over preparations for the WTO Ministerial Conference that will take place in Buenos Aires in later December.
Tomorrow, together with Canada’s Minister for International Trade Mr. François-Philippe Champagne, I will also be co-hosting the first ministerial-level exchange about the possibility of establishing a multilateral mechanism to resolve investment disputes between states and companies. I have touched upon this issue on this blog before. We are promoting this initiative together with Canada, and I have brought it up on several occasions at seminars and discussions here in Davos since yesterday. There is a great amount of interest even if, naturally, many practical questions remain.
Why are we pursuing this initiative? We believe it is an important and timely issue. Given the increase in scepticism about the benefits of trade and globalisation, as policy makers we need to listen and be ready to redesign international rules when needed. Investment protection and arbitration are very much part of this ongoing global discussion, following a number of notable high profile investor-to-state dispute settlement (ISDS) cases which have attracted public attention to this issue.
In fact, most countries around the world have investment protection rules with ISDS in place, with more than 3200 such treaties in force worldwide. But at the same time many countries are currently taking a critical look at these policies, seeing a need for change. As the exact direction is not yet clear, I consider this first ministerial meeting here in Davos tomorrow as a good opportunity – to reflect on whether working together at an international level would be more effective than more piecemeal reform efforts done by individual countries.
I see two fundamental issues with the current system of dispute settlement. Those are also issues that the EU addresses in our own bilateral reforms. The first issue is whether so-called ad hoc arbitration – derived from principles of commercial arbitration – is still a suitable system. With the changing nature of our policies, these disputes increasingly touch upon public policy issues such as health, safety and the environment. The second is a fundamental problem of legitimacy and accountability. We need to ensure, like in any other judicial system, that there is no doubt about the independence and high qualifications of those involved in solving these disputes. And, it’s not enough for justice to be done; it must also be seen in order to be done.
Fixing this is important – we all are or will be facing the same problems – but it makes the most sense to build a common base and work together to fill the gap in existing rules. We are thinking of creating a single international dispute settlement system; a system that should not only get the balance right between the interests of states and investors, but also be seen as legitimate by ensuring independence, accountability and transparency.
A predictable, impartial and stable system is also in the interest of business. It could, for instance, be modelled on principles of respected international dispute settlement systems, with permanent adjudicators and an appeals tribunal, designed to be open for inclusion of any existing or future investment treaty.
What we expect from the ministerial meeting here in Davos tomorrow is a first exchange of views. The next step will be to further engage with stakeholders, and to create a group of countries that are interested in the idea who can elaborate more on the details. There will also be a meeting in Brussels for all interested stakeholders at the end of February, and a public consultation is currently ongoing.
This is just the beginning of the process: working towards a possible new multilateral mechanism for investment disputes will take time. But we should take this opportunity to see if we can jointly build a better investment protection system for the future.
Compliments of Cecilia Malmström