Uneven Competition With U.S. Worries EU Business

By Bengt Ljung

European businesses are concerned that they could be put at a disadvantage compared to the U.S. and other world competitors if the European Union joins a global investment court system, EU business leaders said.

As the EU and Canada try to lead a pioneering group of countries to construct a multilateral investment court, the issue is prompting a multitude of questions for businesses investing in foreign countries, according to stakeholders at a conference.

“For us it is important we have a level playing field with the companies [with which] they are in direct competition. We’re going ahead with a lot of reforms without having tested them,” Luisa Santos, director for international relations at the European business lobby Business Europe, said Feb. 27.

Santos spoke at a stakeholders’ conference organized by the European Commission to address questions and worries inside the EU about the international talks on the multilateral investment court.

“There are doubts [about] how the United States will react to the new system,” or if other major countries like China will join it, Santos said.

The aim is to replace the current ad hoc system of private panels of the investor-state dispute settlement (ISDS) system. Disputes before the new court would be settled quicker, cheaper and with more legal consistency by full-time judges, the EU and Canada have said.

Some Interest

China has expressed an interest in constructing a multilateral investment court, European Trade Commissioner Cecilia Malmstroem said. In the U.S., the Trump administration hasn’t yet commented on the system, but the Obama administration had expressed interest in looking into problems with the ISDS system’s appeal process, she said. Congress has at least twice said it was in favor of an appeal mechanism, she added.

The EU introduced clauses about replacing ISDS with investment courts in its most recent bilateral trade agreements with Canada and Vietnam. The Europeans also want all future trade agreements to rely on investment courts, including deals with Japan, Mexico and the U.S.

The European Commission’s view is that the multilateral investment court would emerge when the pioneering group of countries agrees to place their bilateral agreements on investment courts under the global system.

To negotiate 20 trade agreements at once and then set up 20 bilateral courts “would be quite expensive. It’s more rational to have one single multilateral court,” Malmstroem said.

The conference prompted a host of questions about remedies, enforcement of decisions, appointment of judges, handling frivolous claims, simplified procedures for small businesses, and protecting European health and environmental standards.

Questions Continue

Malmstroem said at the conference that many questions on how to design the new system are wide open.

“We don’t have all the answers. We are at a very early stage, so we’re having consultations broadly. And it won’t be done over a weekend,” she said.

The multilateral investment court should not become the tool to correct every wrong in the world that an interest group is fighting, Malmstroem warned. The system shouldn’t be overburdened with, for example, demands of green investments in developing countries because that would slow or kill it, she said.

She added that she expects continued strong support for the multilateral investment court from the trade ministers of the 28 EU countries when they meet March 3 on the island of Malta.

To contact the reporter on this story: Bengt Ljung in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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