Do investor-to-state dispute settlement mechanisms fit in the EU legal system?

Abstract

Investor-to-state dispute settlement (ISDS) mechanisms are a feature of international investment agreements (IIAs). They give private investors the right to initiate a claim against the State in which they made an investment, seeking redress against violations of an IIA concluded between that State and the investor’s home State. As it is explained in this paper, the current EU policy foresees the inclusion of ISDS in EU IIAs. This raises a number of critical issues, related: i) to the appropriateness of ISDS as a mechanism for the fair administration of justice, ii) to the risks that ISDS may affect public interest (e.g. environmental and health) laws, and iii) to the compatibility of ISDS with EU law. This article describes the framework underlying the inclusion of ISDS in EU IIAs and analyses the abovementioned issues. It discusses the concerns raised, particularly by NGOs, on the potential impact of ISDS on EU and Member States’ regulatory powers. The article outlines the EU policy on ISDS, examines some critical aspects of ISDS as a mechanism for the administration of justice, using the CETA provisions as reference, and illustrates the threats posed by ISDS to environmental and health regulations. It also highlights the challenges in preserving public authorities’ regulatory space in the context of IIAs. Furthermore, this article deals with the compatibility of ISDS with the exclusive jurisdiction of the CJEU and the principle of autonomy of EU law, and concludes with some final remarks.