An independent report by Harvard scholar, Love Rönnelid, on the EU’s proposed Multilateral Investment Court.

Key points of the report include:

  • There is no clear evidence that countries signing treaties that give special rights to investors will actually attract more foreign direct investment.
  • Some of the EU’s bilateral trade agreements already contain ISDS mechanisms, but this has not led to significant problems in Europe so far because these agreements are with countries whose investors are focused on developing countries instead. As the EU creates agreements with countries like Canada, the United States and Singapore, whose investors do focus on European countries, this may lead to significant investment disputes in Europe.
  • Investor-state dispute settlement mechanisms in bilateral trade deals have already been judged as incompatible with EU law by the European Court of Justice (Achmea v. Slovakia).
  • The proposal gives no new legal rights to states and local communities affected by the operations of foreign investors. This contradicts the approach in most EU Member States that tries to balance investor rights with investor obligations.
  • The MIC is likely to have a ‘regulatory chill’ effect, in which governments are deterred from regulating on human rights and environmental sustainability due to fear of litigation from foreign investors.
  • Investment insurance, which has been proposed as a better alternative to the MIC, would also have a ‘regulatory chill’ effect, due to the fact that investment insurance is often backed by states budgets.
  • Successful development strategies used by China, South Korea and Taiwan would not be possible for other developing countries if they would sign onto the Multilateral Investment Court.
  • This proposal comes from a long history of European trade in which colonial investors used international agreements to gain special privileges with negative impacts on local populations.