The ISDS legal industry and the European Court of Justice
by Gus Van Harten, law professor at Osgoode Hall Law School
16 October 2017
It is important that states’ decision-making about ISDS not be seen to have been captured by the ISDS legal industry. That is especially so when questions about the legality of ISDS come before courts, whose decision-making is expected to be separated from interested actors in legal and political debates.
Observers of the ISDS debate in Europe should therefore be concerned when the official position of an Advocate General before the European Court of Justice can be tied to the ISDS industry. The ECJ presently faces questions of the legality of ISDS — more precisely, investment treaty arbitration — in a case arising from an investment treaty claim by a Dutch company, Achmea, against Slovakia.
The Achmea case raises an apparent contradiction. On the one hand, EU member states have assumed the obligations of EU membership and the ultimate authority of EU institutions including the ECJ. On the other, they have given investment treaty tribunals the power to decide the legality of member states’ conduct, including conduct required by EU law, and to issue monetary or (through interim measures) non-monetary orders against member states. Compared to other court or tribunal decisions against states, for their sovereign conduct, investment treaty tribunals’ orders are exceptionally enforceable against states’ assets in many countries both in and outside Europe.
In Achmea, one of the ECJ’s Advocate Generals — whose role is to advise the Court on how to decide a case — recently submitted to the ECJ that this apparent contradiction between EU law and ISDS should be resolved by treating investment treaty tribunals as if they are themselves courts of EU member states. While I am not an expert in EU law, based on my knowledge of ISDS I would say that this position seems dubious due to the ad hoc nature of ISDS tribunals and the absence of conventional attributes of courts in investment treaty arbitration.
The troubling aspect of the Advocate General’s opinion is that it essentially tracks a position expressed previously by the relevant Advocate General’s legal assistant, named Paschalis Paschalidis, in his previously published work. (See for example Paschalidis’ article on the subject in Arbitration International, a journal whose editorial board consists mostly of ISDS practitioners.)
This is especially noteworthy because Paschalidis, the assistant, has ties to the ISDS legal industry:
The significance of these facts should not be exaggerated. They do not reveal the Advocate General himself to have a direct association with the ISDS legal industry, for example. Even if they did, the ECJ’s judges are not bound by an Advocate General’s submissions.
Yet the situation is still troubling if one considers the importance of the issues raised in Achmea and heightened public debate about ISDS in Europe. For an outside observer, they provide a credible basis for questions about Paschalidis’ role in preparing the Advocate General’s opinion and his history with Gaillard and the ISDS legal industry.
To avoid perceptions that the ECJ’s decision-making may have been influenced by actors with an interest in the outcome of Achmea, it would have been preferable for another Advocate General to have done the opinion in that case. Unfortunately, the ground has now been laid for criticism that the “revolving door” between the ISDS industry and state decision-makers also leads into the ECJ.