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by giving foreign investors the right to attack its decisions using an arbitration forum
outside the national court system.”25 This claim is often being supported by the
increasing number of cases brought by investors against states.26 Especially, the recent
notorious cases Vattenfall v. Germany 27 and Philip Morris v. Australia 28 summon
doubts over a sovereign’s ability to make legitimate public policy choices in sensitive
areas such as energy policy or public health.
The criticisms often lack common sense. There is no doubt about growing use of
investment arbitration and the fact that US and EU investors are the most frequent
litigants. This, nevertheless, does not take into account the record of disputes
between American investors and eight EU Member States which have BITs in force
with the US. The record indicates that ISDS within the TTIP would not result in
increased disputes and such fears are overstated. Moreover, both the EU and the US
implemented in their latest agreements various safeguards and recognised the right
to regulate as a basic underlying principle.29 The new treaty practice also clarifies the
meaning of some problematic investment protection standards that raised concerns
in the past, notably fair and equitable treatment and indirect expropriation.
The European Commission is of the opinion that CETA30 reflects a turning
point ensuring a high level of protection while preserving the EU and Canada’s right
to regulate and pursue legitimate public policy objectives.31 A closer look at the text of
the treaty confirms this ambitious statement. In its Preamble CETA makes clear from
the start that the EU and Canada preserve their right to regulate.32 The detailed fair
and equitable treatment provision precisely defines the content of “treatment”, the
breach of which can only arise from a closed list of actions, e.g. manifest arbitrariness
or denial of justice. Moreover, the concept of legitimate expectations is limited to
situations where the State made a specific promise or representation.33 The proposed
list thus undoubtedly reduces the scope of this standard. The second “usual suspect”
due to vagueness misused by investors is indirect expropriation. In CETA, the term
25 Reinhard Quick, Why TTIP should have an investment chapter including ISDS, Journal of World
Trade, Vol. 49, No. 2 (2015), p. 199.
26 With 56 new cases, year 2014 registers the second largest number of known investment disputes
commenced in a single year. It brings the total number of known cases to 568.
27 Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v. Federal Republic of Germany,
ICSID Case No. ARB/09/6.
28 Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12.
29 European Commission, Public consultation on modalities for investment protection and ISDS in
TTIP (March 2014), p. 1.
30 The consolidated text of Canada-European Union Comprehensive Economic and Trade Agreement
(CETA) is available at
31 European Commission, Investment provisions in the EU-Canada free trade agreement (CETA)
(26 September 2014), p. 1, see
32 See CETA, Preamble.
33 See CETA, Art. X.9 Treatment of Investors and Covered Investments.