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Written by Silja Vöneky, University of Freiburg

Note: This blogpost is part of a series on „Corporate social responsibility and international law“ that presents the main findings of the contributions published in August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020.

I. Introduction

1. The question of the status of transnational corporations in investment arbitration is of central importance for the division of spheres of responsibility, for the pursuit and enforcement of values, and thus for the bases of legitimation of the international legal order today.

2. The promotion of foreign direct investments and the deepening of economic cooperation between States to promote economic development with the common welfare objective of increasing the prosperity of the peoples of the contracting States parties has been the legitimating basis of the ICSID Convention, which is central to investment protection under international law, and of the bilateral investment protection agreements.

3. Investment protection law, as part of public international law – from its basis and purpose – should not be understood as a departure from a state-centered international order.

4. From the point of view of international law, the following questions have to be answered: What are the implications for the investment protection regime and investment arbitration as its core

a) if the triad justifying economic globalization (foreign private investment – promotion of economic development – promotion of prosperity) loses its persuasiveness as a paradigm for its justification in a normative sense, and

b) if a discourse of delegitimization prevails that accuses profit-oriented transnational corporations in their role as investors of irresponsible conduct, which is incompatible with the public welfare, and States of enabling this conduct to the detriment of their own population by means of international treaties establishing investment arbitration?

5. The aim to align investment treaties with the principle of sustainable development can be seen by the reforms initiated by States, groups of States, and the United Nations Conference on Trade and Development; besides, this aim should have an impact on already existing investment treaties and investment arbitration as far as it is coherent with international law.

II. Transnational corporations as equal parties under international law within the framework of investment arbitration

6. A necessary condition for the equality of the host State and an investing foreign corporation as parties is that both by consent agree to arbitration in respect of a legal dispute directly related to an investment, i.e. that the State, which is a contracting party to the ICSID Convention and a subject of international law, besides ratifying the convention additionally gives its written consent (Art. 25 (1), Art. 36 (2) ICSID Convention), which has a threefold function (legitimating element, transformative element and constitutive element).

7. For various reasons, the procedural equality of the host State and the transnational corporations within the framework of a concrete arbitration procedure is justified and thus legitimate with regard to the international legal order as a whole. In particular, it complies with the principle of fair trial and the rule of law as enshrined in international law.

8. The principle of the equality of the parties does not preclude that transnational corporations are given preferential access to arbitration on the basis of international treaties and that arbitration is open only to transnational corporations.

9. The principle of the equality of the parties is inter alia observed during the composition of an arbitral tribunal if the judges are appointed by both parties in the same manner and each judge fulfils criteria which plausibly ensure impartiality. However, the appointment by the parties is not a necessary condition for the equality of the parties.

10. Questions about how to implement the principle of the equality of the parties arise in the arbitral proceedings themselves, in particular with regard to the possibility that several investors seek to bring their claims against the same host State, with regard to the admissibility of a counterclaim by the host State, with regard to the admissibility of “amicus curiae briefs” (third person submissions), with regard to the so-called equality of arms, and with regard to the problem of safeguarding confidentiality interests (in particular State secrecy).

11. Questions of the applicable law within the scope of the merits, such as the possibility of the host State to invoke justifications under international law (e.g. necessity) and the principles of interpretation of the investment protection agreements, are not considered to be questions of the principle of the equality of the parties.

III. (Un)justified unequal treatment to the detriment of transnational corporations as parties with regard to corruption problems

12. The decisions of arbitral tribunals, which deny their jurisdiction or the admissibility of the investor claim if the defendant host State asserts corruption, are convincing (only) with regard to limited types of cases.

13. The lack of jurisdiction of the tribunal or the inadmissibility of the investor’s claim does not seem to be justified even if the transnational corporation’s act of corruption made the investment possible in the first place: The contrary reasoning in investment arbitration decisions, based inter alia on the wording of bilateral investment treaties, the scope of the host State’s consent and/or a violation of fundamental general principles (such as, inter alia, the so-called “clean hands” principle, the “international public policy” or “transnational public policy”, or the principle that no one shall profit from his/her own wrong) is not convincing for various reasons .

14. The same is true even more – in accordance with recent investment arbitration decisions – if the foreign investor acted corruptly after the investment had already been initiated in the host State.

15. Instead, corruption should be taken into account in the decision on the merits of a case in accordance with the objectives and principles of the international legal order in such a way that central values of investment protection are not disproportionately undermined, but nevertheless relevant disadvantages arise for transnational corporations if they engage in acts of corruption abroad for or during investments. This can be achieved if the amount of investors compensation is reduced for example by a multiple of the sum of the corruption.

16. When considering acts of corruption in the merits of a case, the arbitral tribunal should therefore consider the distribution of responsibility, the pursuit and enforcement of global values, and the bases of legitimacy of the current international legal order, also taking into account the state’s anti-corruption obligations, in particular as enshrined in anti-corruption conventions and human rights treaties.

IV. Concluding remarks

17. The procedural equality of host States and transnational corporations within the framework of an investment arbitration procedure has no implications on the status of transnational corporations in the international legal order as a whole; other views, which argue that transnational corporations are (full or partial) subjects of international law in a normative sense, exceed the – de lege lata – narrowly limited equality.

18. The risks associated with a normative enhancement of transnational corporations in the international legal order present another argument against the view that corporations are (full or partial) subjects of international law. These risks are hinted at in the delegitimization discourse, which grants profit-oriented companies less influence in the international legal order of the 21st century.

19. Even without the status as subjects of international law, transnational corporations can be bound by norms of international law (international law in the narrow sense and so-called soft law). The UN Guiding Principles for the Business and Human Rights are, inter alia, of particular relevance.

20. If – with good reasons – foreign direct investments by transnational corporations continue to be promoted via international law as a means of increasing prosperity in the participating States for the benefit of the respective population, the public-good orientation of international investment arbitration tribunals should be further developed, on the one hand, by reforming the constitutional aspects of the arbitral procedure, and, on the other hand, by further focusing their jurisprudence on public-good aspects including the proportionate protection of responsible investments.

 

Full (German) version: Silja Vöneky, Die Stellung von Unternehmen in der Investitionsschiedsgerichtsbarkeit unter besonderer Berücksichtigung von Korruptionsproblemen – Unternehmen als völkerrechtlich gleichberechtigte Verfahrensparteien?, in: August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020, pp. 339 et seq.

 

Many thanks Russell Hopkins for alerting me to Stichting Human Rights for Eritreans v the European Union, demanding a halt to EU aid worth 80 million EUR being sent to Eritrea. The Foundation Human Rights for Eritreans argues the aid project financed by the EU aid relies on forced labour. Claimants have a portal with both the Dutch and English versions of the suit.

Of note to the blog is the jurisdictional section of the suit, p.32 ff. Claimants first of all put forward that the CJEU’s Plaumann criteria (which I discussed ia here in the context of environmental law) effectively are a denial of justice and that Article 6 ECHR requires the Dutch courts to grant such access in the CJEU’s stead. An interesting argument.

Note subsequently at 13.9 ff where Brussels Ia is discussed, the suggestion that given the large diaspora of Eritreans in The Netherlands, locus damni (actual or potential) lies there. This is in my view not an argument easily made under Article 7(2) Brussels Ia given CJEU authority.

Geert.

 

Class action based on NL WAMCA act
Jurisdiction discussed S13 p32 ff which suggests A7(2) BIA tort jurisdiction (with the Stichting suggested as suffering damages in NL); alternatively A6 #ECHR jurisdiction, with reference to the hardship in suing at the CJEU following Plaumann. https://t.co/9YMAjPS0wo

— Geert Van Calster (@GAVClaw) May 14, 2020

L’arrêt rapporté confirme, à propos du délit de banqueroute, qu’en matière correctionnelle, toute peine doit être motivée en tenant compte de la gravité des faits, de la personnalité de son auteur et de sa situation personnelle.

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Dans un arrêt de grande chambre, la CJUE décide que les États membres doivent vérifier l’absence de risque de peine de mort, torture ou de peines ou traitements inhumains ou dégradants avant de satisfaire une demande d’extradition vers un État tiers d’un ressortissant d’un État tiers.

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I earlier reviewed Szpunar AG’s Opinion in C‑641/18 Rina, on which the Court held on 7 May, confirming the AG’s view. Yannick Morath has extensive analysis here and I am happy to refer. Yannick expresses concern about the extent of legal discretion which agencies in various instances might possess and the impact this would have on the issue being civil and commercial or not. This is an issue of general interest to privatisation and I suspect the CJEU might have to leave it to national courts to ascertain when the room for manoeuvre for such agencies becomes soo wide, that one has to argue that the binding impact of their decisions emanates from the agencies’ decisions, rather than the foundation of the binding effect of their decisions in public law.

I was struck by the reference the CJEU made at 50 ff to the exception for the exercise of official authority, within the meaning of Article 51 TFEU.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.16.1.1.

 

In accordance with its goal to be a pan-European forum for reflection on issues of private international law, the European Association of Private International Law is seeking to establish working groups which will reflect on selected topics of private international law and submit their conclusions for endorsement by the Association.

EAPIL Working Groups might be constituted to reflect on any topic of private international law, whether broad or specific, theoretical or practical. The goal of Working Groups is to publish their conclusions in a document which could take various forms (reports, draft legislation, principles, recommendations, position papers, etc.).

All EAPIL members are entitled either to join any established Working Group, or to follow the work of the Working Group by joining its Members Consultative Committee.

Finally, the Association invites all members to propose the constitution of Working Groups on any topic of interest. More information on the procedure for establishing Working Groups can be found here.

Project on the Feasibility of a European Private International Law Act

The first Working Group established by EAPIL will refect on the feasibility of a European PIL Act and is chaired by Professor T. Kadner Gaziano. A full description of the project is available on the Group’s page.

Other Contemplated Working Groups

The establishment of several other working groups is currently contemplated. Proposals will be submitted for approval to the Scientific Committee once an appropriate number of members has expressed interest to join them. Any interested member is invited to contact the responsible person for the relevant group.

Project on a future European Regulation on International Property Law

So far, International Property Law has not been a subject matter in the ongoing process of Europeanisation of Private International Law through Regulations. This does not mean that the European legislator has not yet touched property law. The Regulations on matrimonial property and on succession have certain overlaps with international property law which the CJEU is in the process of clarifying (see e.g. the famous Kubicka case). Rights in rem also play a role for the rules on exclusive jurisdiction (Article 24 nr. 1 Brussels I bis Regulation). Furthermore, numerous directives, especially in the realm of finance law, use the lex rei sitae as a connecting factor.

This fragmented picture and the fact that Member States’ autonomous rules on international property law are by far not uniform although most, if not all, still use the lex rei sitae principle as a starting point, call for a European Regulation on the law applicable to proprietary rights. The project is meant to be limited to tangible movable and immovable property, leaving out rights in intangibles (claims, intellectual property rights) and securities whether incorporated or unincorporated.

The group is still under formation. EAPIL Members who like to join it are invited to signal their interest to Prof. Dr. Eva-Maria Kieninger (Kieninger@jura.uni-wuerzburg.de).

Project on Interests in European Private International Law

The issue of interests is a topic of the highest practical importance, which is raised by the award of any sums of money. In cross-border relations, it is necessary to assess which law applies to them, whether at the adjudicatory stage when a court rules on a financial claim, or at the enforcement stage, when an enforcement authority is requested to enforce a foreign judgment. Yet, European Regulations of PIL are largely silent on the topic. The working group will aim at proposing either amendments to existing legislation or interpretations addressing these issues.

Members interested to join the working group or follow its work in the Members Consultative Committee are invited to contact Prof. Dr. Caroline Kleiner (caroline.kleiner@parisdescartres.fr).

Project on the Evidence Regulation

The Evidence Regulation is currently being recast. Unfortunately, the contemplated reform neglects the most important of its flaws, the need for liberalization of the cross-border taking of evidence in the European Union. The CJEU has underscored the backwardness of the Evidence Regulation by allowing courts of the Member States to ignore it and use directly their national procedures. The working group will aim at proposing a new ambitious framework liberalizing cross-border taking of evidence in the European Union.

Members interested to join the working group or follow its work in the Members Consultative Committee are invited to contact Prof. Dr. Gilles Cuniberti (gilles.cuniberti@uni.lu).

Written by Stefan Huber, University of Tübingen

Note: This blogpost is part of a series on „Corporate social responsibility and international law“ that presents the main findings of the contributions published in August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020.

1. In investor-state arbitration, one has to distinguish between arbitral proceedings which are initiated on the basis of a contract concluded between the investor and the host state, on the one hand, and arbitral proceedings which are initiated on the basis of a bilateral investment treaty, on the other hand. In the latter case, there is no arbitration agreement in the traditional sense. This entails a unilateral right of the investor to initiate arbitral proceedings. Granting the host state the right to bring a counterclaim might compensate this asymmetry up to a certain degree.

2. Whether the host state has the right to bring a counterclaim, depends on the dispute settlement mechanism provided for in the bilateral investment treaty. For future investment treaties, it is recommended to grant the host state such a right. When the investor introduces arbitral proceedings on the basis of such a treaty, the investor usually declares his consent with the entire dispute settlement clause. If, at this moment, the investor expressly excludes the right of the host state to bring a counterclaim which is provided for in the bilateral investment treaty, there is no correspondence between the declaration of the host state and the declaration of the investor to submit the dispute to arbitration. Consequently, if the host state refuses to participate in the arbitral proceedings on such a basis, the arbitral tribunal does not have jurisdiction to decide the case.

3. The subject matter of treaty-based investor-state arbitration generally concerns regulatory measures of the host state. This makes a considerable difference in comparison to commercial arbitration, which focuses on the interests of private actors. This difference entails different procedural principles, primarily as far as questions of confidentiality and transparency are concerned.

4. There are, however, procedural principles of particular importance, which reflect the cornerstones in a system based on the rule of law in its substantive sense and require, as such, observance in all types of proceedings independently of the subject matter. The principle of equality of arms is one of these principles. Tribunals shall ensure that both parties are in an equal position to present their case. If there is a systemic superiority of one group of parties, tribunals have to be particularly vigilant and, if necessary, to intervene proactively in order to compensate factual inequality.

5. The principle of equal treatment of the parties is not only to be respected within one and the same proceeding. Treating two types of party – states on the one hand and investors on the other – differently in general, i.e. not just in a specific proceeding, would likewise amount to a violation of this principle. If certain questions concerning the burden and standard of proof arise in one procedural situation typically in the interest of the host state and in another procedural situation typically in the interest of the investor, the tribunals should deal with those questions in the same manner.

6. Investments which are in conformity with the law as far as their object is concerned, but which are corruption-tainted due to corruption that took place when the investment was made lead to discussions about the content of international public policy. Against this background, there would appear to be a practice for tribunals to deny jurisdiction or admissibility of the arbitral proceedings in cases concerning corruption-tainted investments. Actually, this leads to a denial of justice. International public policy, however, does not require such an approach. A comparison with the treatment of corruption cases in commercial arbitration shows this very clearly. The circumstances of the individual cases are too manifold; a one-fits-all solution construed at the level of jurisdiction or admissibility is not convincing. The arbitral tribunals should rather undertake a comprehensive analysis on the basis of the applicable substantive rules of law in order to take into account the particular circumstances of each individual case. State interests can be properly respected via mandatory rules and international public policy.

 

Full (German) version: Stefan Huber, Die Stellung von Unternehmen in der Investitionsschiedsgerichtsbarkeit (unter besonderer Berücksichtigung von Korruptionsproblemen) – Unternehmen als gleichberechtigte Verfahrensparteien?, in: August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020, pp. 303 et seq.

Gisela Rühl (Friedrich-Schiller-University Jena and Humboldt-University of Berlin) has posted Settlement of International Commercial Disputes Post-Brexit, or: United We Stand Taller on SSRN.

The abstract reads:

The European market for the settlement of international commercial disputes is currently dominated by London. According to official statistics, about 80% of the cases brought before the London Commercial Court involve at least one foreign party. And in about 50% of the cases both parties are foreign. Obviously, the London Commercial Court is a popular forum for the settlement of international commercial disputes. And, obviously, it has an international appeal that is – at least in Europe and at least thus far – second to none.The remaining EU Member States, however, are not sleeping. In fact, over the course of the last years the prospect of Brexit has induced some of them to take measures designed to make their civil justice systems more attractive for international commercial parties: Germany, for example, established two first instance, international commercial chambers at the Regional Courts in Frankfurt and Hamburg in 2018 which offer to conduct proceedings in English. France created an English language chambre internationale at the Paris Court of Appeal in March 2018 which complements and adds a second instance to the English language chamber at the Paris Commercial Court that has been operating since November 2010. The Netherlands inaugurated the English language Netherlands Commercial Court and the Netherlands Commercial Court of Appeal in January 2019. And other countries, notably Belgium and Switzerland are contemplating the establishment of one or more specialized courts to deal with international disputes. Quite clearly: the European market for international commercial litigation is on the move. And while some of the above mentioned chambers and courts were in the making before the UK decided to leave the EU in 2016, there can be little doubt that the prospect of Brexit has fuelled the development. The interesting question, however, is whether the recent trend to establish international commercial chambers and courts will actually yield any success? Will companies decide to come to the continent – rather than to London – to settle their disputes after Brexit? As a matter of principle, the odds are not too bad: After all the UK will lose its access to the European Judicial Area once Brexit becomes fully effective, namely when the transition period provided for in the Withdrawal Agreement expires. English court proceedings will then no longer benefit from the many European Regulations that ease the settlement of international disputes and judicial cooperation in cross-border civil matters. At least for companies which seek access to the European Judicial Area, Brexit will, therefore, make it less attractive to settle a dispute in London.The following chapter takes this observation as an occasion to explore the consequences of Brexit for the settlement of international commercial disputes in more detail. It argues that no court in the remaining Member State seems in a position to present itself as a serious alternative to the London Commercial Court. It is, therefore, suggested that the EU should step in and create a European Commercial Court. This Court would provide European companies with an international forum in the European Judicial Area after Brexit and would also attract disputes that would otherwise be settled before other international commercial courts or international arbitration tribunals.

The paper is forthcoming in Jörn Axel Kämmerer, Hans-Bernd Schäfer (eds), Brexit and the Law. An Interdisciplinary Study, Edward Elgar.

Selon la Cour européenne des droits de l’homme, la prescription de l’action publique à l’encontre d’un magistrat entraîne la préservation de son droit à la présomption d’innocence dès lors qu’elle fait obstacle à l’établissement de sa culpabilité. Dans ces circonstances, la suspension du traitement du magistrat porte quant à elle atteinte à son droit de propriété au sens de l’article 1 du Protocole 1 de la Convention européenne. 

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Par cette décision QPC particulièrement attendue, le Conseil constitutionnel déclare pour la seconde fois contraires à la Constitution les dispositions de l’article 706-71 du code de procédure pénale qui permettent de recourir à un moyen de télécommunication audiovisuelle pour les audiences de la chambre de l’instruction relatives au contentieux de la détention provisoire. 

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Amazingly, despite the severe crisis in Venezuela, the Master’s Program in Private International Law and Comparative Private Law at the Universidad Central de Venezuela has managed to publish its second Yearbook, with two theses and several impressive shorter pieces by students as well as two new pieces and two “classics” by professors.  (Report on the first yearbook last year is here.)

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A comprehensive Commentary, edited by Professor Sabine Corneloup and published by Edward Elgar Publishing, was recently released providing an in-depth analysis of the Rome III Regulation implementing enhanced cooperation in the area of the law governing cross-border divorce and legal separation. The Commentary is a welcome addition to Elgar’s already thriving ‘Commentaries in Private International Law’ series.

Written by a team of internationally renowned experts of private international law in family matters, the Commentary analyses, on an article-by-article basis, and contextualises the provisions of the Rome III Regulation, providing clear insight into the rationale behind the text. Substantive values and political choices underlying the adoption of the Regulation are factored in the analysis, offering the reader a thorough and comprehensive illustration of the objectives pursued with each article and with the Regulation, overall. In this context, each provision is pondered in connection with, inter alia, the relevant fundamental rights such as non-discrimination between spouses, self-determination of the individual, the protection of the right to marry, and the right to respect for family life.

Overall, the contributors critically engage with each article, shedding the light on the Regulation’s effectiveness and offering a balanced critique by approaching the topics from a variety of viewpoints. In this context, they do not shy away from underscoring gaps currently existing in the text of the Regulation (such as, for instance, that arising from the absence of an autonomous definition of ‘marriage’) and address the open questions that arise therefrom. Furthermore, the Commentary casts the light on the Regulation’s interactions and coordination with complementary instruments adopted in the area of EU family law, and in particular (but not only) the Brussels II-bis Regulation, promoting a thorough understanding of the EU private international law system on divorce and legal separation. Finally, the Commentary delves into the interface of the Regulation with national substantive provisions and the differences arising therefrom, hence providing the reader with a clear and valuable understanding of the issues surrounding the practical application of the Regulation at the national level.

The Commentary benefits from the contributions of:

Alexandre Boiché, Attorney in Paris (France)

Laura Carpaneto, Professor at the University of Genova (Italy)

Christelle Chalas, Senior Lecturer at the University of Lille (France)

Sabine Corneloup, Professor at the University of Paris II Panthéon-Assas (France)

Stefano Dominelli, Post-Doc Researcher at the University of Genova (Italy)

Pietro Franzina, Professor at the Catholic University of Milan (Italy)

Cristina González Beilfuss, Professor at the University of Barcelona (Spain)

Susanne L. Gössl, Professor at the University of Kiel (Germany)

Petra Hammje, Professor at the University of Nantes (France)

Bettina Heiderhoff, Professor at the University of Münster (Germany)

Fabienne Jault-Seseke, Professor at the University of Versailles Saint-Quentin – Paris Saclay (France)

Natalie Joubert, Professor at the University of Burgundy (France)

Thalia Kruger, Professor at the University of Antwerp (Belgium) and Honorary Research Associate at the University of Cape Town (South Africa)

Caroline S. Rupp, Junior Professor at the University of Würzburg (Germany)

Jinske Verhellen, Professor at the University of Ghent (Belgium)

The in-depth discussion offered by this Commentary will prove to be an essential guide for private international law scholars and practitioners alike to navigate the complex field of family litigation. It will be of particular interest to those working in family law, including judges, lawyers, public notaries and family mediators, as well as graduate students looking for in-depth knowledge of the subject.

Sabine CORNELOUP (ed), The Rome III Regulation. A Commentary on the Law Applicable to Divorce and Legal Separation, pp v-242 (Elgar, 2020). The eBook version of the Commentary is available on Google Play, ebooks.com and other eBook vendors, while in print the book can be ordered from the Edward Elgar Publishing website.

 

 

 

 

 

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Irrecevabilité

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