International Investment Law: A Self-Proclaimed Ally in Commission’s Rule ofLaw Endeavors

Bartosz Soloch

ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Methodological Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3The Argument for IIL’s Beneficial Influence on the Rule of Law in Member States . . . . . . . . . . 5EU, Rule of Law and the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Institutional Intersections Between National and International Frameworks in IIL andECHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10ECHR and the Power of Subsidiarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10The Parallel Universe of the Arbitral Tribunals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Case Study: Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Resume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

ISDS as a Threat to the Rule of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Addendum: System Operators’ Understanding of Underlying Problems . . . . . . . . . . . . . . . . . . . . . . . 27Conclusion: Two Separate Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Abstract

The aim of this chapter is to analyze whether and to what extent internationalinvestment law (IIL) is capable of contributing to the development of the rule oflaw within the European Union (EU), as suggested by some arbitration practi-tioners. Arguably, placing greater emphasis on the ISDS’s alleged beneficialeffect thereon could provide the so much needed legitimation boost, by placingIIL into the broader framework of institutional safeguards against the democratic

This publication represents private views of the author.

B. Soloch (*)Department for International and European Law, University of Łódź; General Counsel to Republicof Poland, Warsaw, Polande-mail: bartosz.soloch@gmail.com

© Springer Nature Singapore Pte Ltd. 2020J. Chaisse et al. (eds.), Handbook of International Investment Law and Policy,https://doi.org/10.1007/978-981-13-5744-2_116-1

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backsliding. Upon closer scrutiny, however, it turns out that due to its systemicflaws, the ISDS-mechanism could hardly be seen as a suitable tool to this end. Inparticular its detachment from national legal systems and fixation on pecuniaryremedies make it much less attractive in this context. This is particularly visible incomparison to European Convention of Human Rights. The possibility of ISDSassisting EU in its rule of law endeavors is further diminished by the fact that, atleast from EU’s point of view, there are reasonable doubts as to the conformity ofessential features of the ISDS framework with the rule of law standards set by theEU.

Keywords

International investment law · International law and domestic legal order ·European Union · Rule of law · Investor State Dispute Settlement · Achmeajudgment

Introduction

The aim of this chapter is to analyze whether and to what extent the internationalinvestment law (IIL) is capable of contributing to enhancing the rule of law within theEuropean Union (EU), as suggested by some practitioners of the international arbi-tration. Arguably, the rise of this argument may be traced back to two sets of events.The first one is the recent rise in importance of the rule of law issue connected to thecontroversies related to reforms of the judicial system in Poland, as well as develop-ments in Hungary. The second one concerns the so-called “ISDS legitimacy crisis”,reaching far beyond the experts’ debate directly into the realm of politics, as evidencedinter alia by controversies around the (now frozen) project of Transatlantic Trade andInvestment Partnership (TTIP), along with the Comprehensive Economic and TradeAgreement between Canada, of the one part, and the European Union and its MemberStates, on the other (CETA); the seminal Court of Justice of European Union (CJEU)Achmea judgment,1 as well as the works on Multilateral Investment Court (MIC)conducted in the UNCITRALWorking group. Conceivably, placing greater emphasison the ISDS’s alleged beneficial effect on the rule of law in host states could providethe so much needed legitimation boost, by placing IIL into the broader framework ofinstitutional safeguards against the so-called democratic backsliding.

It seems, however, that this cunning attempt to redeem Investment State DisputeSettlement (ISDS) mechanism’s perceived faults is bound to fail, for at least severalreasons. The first one is institutional. As shall be demonstrated, all that the EU rule oflaw principle (as understood with regard to its Member States) is about is the properfunctioning of the institutions on the domestic level. Both, the substantive rules andthe framework for their enforcement have been designed so as to contribute to thisend. At the same time, IIL by its very definition promises to provide an investor witha remedy by-passing the national legal framework. Furthermore, as a consequence,

1C-284/16, The Slovak Republic v. Achmea BV, ECLI:EU:C:2018:158, 6 March 2018.

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IIL cannot be viewed as penetrating the fabric of national law to a degree comparablein any way whatsoever with EU law: According to the few available sources (thisscarcity already tells us something), the instances of application of internationalinvestment agreements (IIAs) by the domestic courts are only few and far betweensince both the executive and the judiciary have little if any knowledge of the IIAs.Equally, there is hardly any evidence for the IIAs’ alleged impact on the nationallegislation. The degree of the IIAs’ lack of added value for strengthening the rule oflaw on national level shall be demonstrated by comparing it with the enforcementmachinery offered by another public international law framework providing effec-tive access to justice for individuals, namely the European Convention of HumanRights (ECHR, the Convention). Lastly one cannot lose out of sight the proponentsof IIL as a tool of improving ailing rule of law in certain Member States acting as akind of false prophets. After all, on many occasions the EU institutions haveunderlined the dubious character of many IIAs’ features, particularly ISDS mecha-nism in its current form as applied both within and outside of the EU.

Methodological Assumptions

Before going into details, following some assumptions are to be made.Firstly, it has to be underlined that the argument as to the alleged beneficial working

of the investment law for the state of rule of law in the EU will be taken at its facevalue. Consequently, only for the sake of this argument it will be (i) assumed that theEU indeed has competences for its recent actions related to the rule of law and (ii) theissue of whether (and to what extent) the claims related to the alleged democraticbacksliding are justified, shall not be thematized. It follows that an evaluation of theissue of the legitimacy of the recent developments regarding the observance of rule oflaw within EU, Commission’s actions in particular, would exceed the scope thereof.

Secondly, the choice of ECHR as a point of reference has to be explained. Tobegin with, due to the scarcity of literature related to the possible effects of IIL on thelegal systems of EU and its Member States,2 it would be advisable to look to otherframeworks for analogies. Additionally, there are several good reasons for choosingthe Convention as the comparator for the IIAs. To begin with, there are certainstructural similarities between ECHR and IIL: both provide a public internationallaw framework which, at the same time, is external to and independent from the EUlaw; has generated a considerable amount of jurisprudence and provides an

2The literature dedicated to the relationship between EU law and IIL is relatively opulent. None-theless, arguably, it is centered around the issues of the conformity of the IIAs’ ISDS clauses andmaterial provisions with EU law (or lack thereof), rather than an in-depth analysis of the IIL’scapabilities to influence legal developments within EU. In any case, only rarely do endeavors ofsuch kind reach beyond statements of general nature, e.g., concerning the alleged concordancebetween the goals of EU-internal market and facilitating cross-border investments by the intra-EUBITs. See Chaisse J (2012) Promises and pitfalls of the European Union policy on foreigninvestment – how will the new EU competence on FDI affect the emerging global regime. J IntEcon Law 15(1):51–84.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 3

individual with direct access to international adjudicating bodies. Furthermore, asshall be explained in more detail below, the Convention along with the jurisprudenceof European Court of Human Rights (ECtHR) has played an important role in theprocess of crystallizing the content of the EU rule of law principle. Lastly, through-out the years of coexistence between ECHR and IIL, certain behavioral patterns,facilitating judicial dialogue between ECtHR and the CJEU, have emerged in both,jurisprudence and the legal scholarship. All these render ECHR a reasonable bench-mark for other international agreements’ possible contribution towards the develop-ment of the rule of law within EU.

At this place, yet another caveat should be made. Since this chapter aims atanalyzing whether ISDS, as it is in this time and age, could be helpful in improvingthe quality of rule of law in EU and the Convention is to serve as the comparator, theissue of ECHR’s special status in EU law (see infra) shall not be further scrutinizedfrom the dogmatic point of view. This approach is justified by the formulation of IILrule of law argument, according to which investment law should be viewed as an allyof EU law, not for normative but rather practical reasons. Last but not least, the gistof the argument made concerns the institutional capacity of both, IIAs and ECHR, toinfluence national legal systems so as to enhance the rule of law on the national levelin a meaningful way and it is not concerned with the exact content of differentframeworks in itself. For this reason, this paper shall not thematize the issue of towhat extent do the protection standards contained in EU, ECHR, and IIL dooverlap.3 Similarly, analyzing hypothetical benefits that could stem from providingnational authorities with legal standards created by supranational dispute-settlementbodies, capable of enhancing the quality of domestic legal systems, which they couldimplement if they wished,4 would reach beyond the scope of this paper.

3For further reading in this respect see, e.g., Kriebaum U (2008) Eigentumsschutz im Völkerrecht.Eine vergleichende Untersuchung zum internationalen Investitionsrecht sowie zum Menschen-rechtsschutz. Duncker & Humblot, Berlin; Stirk P (2014) Shaping the single European market inthe field of foreign direct investment. Hart Publishing, Oxford u.a.; Sattorova M (2016) Investorrights under EU law and international investment law. J World Invest Trade 17(6):895–918. https://doi.org/10.1163/22119000-12340021; Fanou M, Tzevelekos VP (2018) The shared territory of theECHR and international investment law. In: Radi Y (ed) Research handbook on human rights andinvestment. Edward Elgar, pp 93–136.4Providing the possibility of enhancing the rule of law on domestic level by the investment law isput forward by Živković V (2019, forthcoming) Contribution to the national rule of law as alegitimating factor for international investment law – is it a potential or the outcome that matters? InLeal-Arcas R, Wouters J (eds) International trade, investment and the rule of law. Edward Elgar.Indeed, one could think particularly about the fair and equitable treatment standard or the protectionof legitimate expectations as containing useful guidelines to national authorities. Nonetheless, asshall be demonstrated below, there is an observable lack of empirical evidence that would supportthis view. Besides, in the European context, this elusive ground for legitimation would not seem tooutweigh the problems caused by the threat posed by BITs to the autonomy of EU law. Lastly, in thespecific context of the EU rule of law problems, one could assume that states disagreeing with theEuropean Commission about the assessment of their internal developments from the point of viewof EU law to the point of bringing the case before the CJEU would not show too much willingnessto treat an investment arbitral award as a learning opportunity and, thus, voluntarily introduce far-reaching institutional changes.

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The Argument for IIL’s Beneficial Influence on the Rule of Law inMember States

Historically, the claim of the investment arbitration to contribute to the developmentsof the institutional environment in the host states (“spill-over effect”) has beenalways one of the main justifications of the system.5 Seemingly, this argued hasattracted more attention particularly in the age of the so-called “backlash” againstinvestment arbitration, particularly given the fading of the argument regarding allegedbeneficial effects of the investment law for the inflow of foreign direct investments.6

Given the prominence of the rule of law discourse within the EU, it is all but surprisingthat eventually there have emerged certain attempts to show the interrelations betweenthe rules of law as defined in the investment law and in the EU law.7 It may look as ifthis line of reasoning gained in importance particularly in the aftermath of the CJEUAchmea judgment seemingly banning the intra-EU BITs.8 Indeed, arguments heading

5See Dolzer R, Schreuer Ch (2012) Principles of international investment law. OUP, Oxford [et al], pp24–25; more detailed; van Harten G (2010) Investment treaty arbitration, procedural fairness, and therule of law. In: Schill SW (ed) International investment law and comparative public law. OUP, Oxford[et al], p 627 ff., and the literature invoked in fn 1 on p. 627; Schill SW (2017) International investmentlaw and the rule of law. ACIL research paper 2017-15. Available at https://www.ilsa.org/ILW/2018/CLE/Panel%20%2320%20-%20Schill-%20International%20Investment%20law%20and%20the%20rule%20of%20law.pdf, for critical assessment of the concept’s genesis see Miles K (2013) Theorigins of international investment law. Empire, environment and the safeguarding of capital. CUP,Cambridge, p 334 linking the investment law rule of law concept to the nineteenth century minimumtreatment doctrines. For a more nuanced version of the argument, taking into account lack of empiricalevidence regarding the effects of IIL on national developments see Živković V (2019, forthcoming).6See, e.g., an analysis in Hallward-Driemeier M (2009) Do bilateral investment treaties attract FDI?Only a Bit . . . and they could bite. In: Sauvant KP, Sachs LE (eds) The effect of treaties on foreigndirect investment: bilateral investment treaties, double taxation treaties, and investment flow. OUP,Oxford [et al], p 364 ff.; Yackee JW (2016) Do BITs ‘Work’? Empirical evidence from France. J IntDispute Settle 7(1):55–71. https://doi.org/10.1093/jnlids/idv033. For a view more favorable to IIAs’impact on the inflow of foreign direct investment see an earlier UNCTAD study The Role ofInternational Investment Agreements in Attracting Foreign Direct Investment to Developing Countries.New York and Geneva, 2009, https://unctad.org/en/Docs/diaeia20095_en.pdf.7See particularly ILA (2018) Sydney conference rule of law and international investment law report.http://www.ila-hq.org/images/ILA/DraftReports/DraftReport_Investment_RuleofLaw.pdf,containing opulent references to the parallels between investment and European law.8See the Declarations of the Member States of 15 January 2019 on the legal consequences of theAchmea judgment and on investment protection. https://ec.europa.eu/info/publications/190117-bilateral-investment-treaties_en, and Commission communication on the protection of investments of 19July 2018 COM(2018) 547 final, expressing Commission’s and Member States’ unequivocal positionon the irreconcilability of the whole intra-EU BITs with EU law in the consequence of Achmeajudgment. Currently, Member States are finishing preparations for termination of the agreements, seeleaked draft agreement on termination of intra-EU BITs available at: http://arbitrationblog.kluwerarbitration.com/wp-content/uploads/sites/48/2019/12/a-draft-agreement-has-been-leaked.pdf. An over-view of the more sceptic positions as to the judgment’s (immediate) effects adopted by therepresentatives of the widely understood arbitration community may be found in Trade Lab reportprepared by Virginia-Motoc I, Tujakowska A, Yilmaz A. The effects of the Achmea judgment on intra-EU BIT claims, law firms, and third-party funders. https://www.tradelab.org/single-post/2019/04/08/The-Effects-of-the-Achmea-Judgment-on-Intra-EU-BIT-Claims-Law-Firms-and-Third-Party-Funders.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 5

into this direction, i.e., indicating at the function of the BITs as filling the gaps in theEU rule of law standards have been raised immediately in the aftermath of the Achmeajudgment by certain representatives of the investment arbitration practice.9 As one ofthe authors put it, despite its condemnation in the Achmea judgment, investment law,being a legal regime parallel yet coherent with EU law,10 that allows for a“decentralized and purely domestic system of private enforcement of rule of lawvalues”,11 deserves recognition on the part of EU law as a fall-back mechanismavailable for the protection of EU law principles.12

Consequently, the argument for the beneficial influence of IIAs on the rule of lawwithin the EUMember States could be summarized as follows: EU law should allowfor intra-EU application of IIAs since both, EU law and IIL share the same funda-mental values and strive at disseminating them within the Member States hostinginvestments, whereby the IIL offers a robust, independent institutional frameworkallowing for the effective implementation of these values.13 As shall be demon-strated below, however, this argument does not stand closer scrutiny for at leasttwofold reasons: firstly, it overemphasizes the reformatory powers of the IIL,secondly, it glosses over the problematic features of the IIL itself.

EU, Rule of Law and the Member States

Before confronting the above claims with reality, the essential features of the EU ruleof law principle in relation to national legal systems shall be analyzed.

To begin with, it strikes that the concept of “rule of law” made it into the Treatiesrelatively recently.14 Secondly, one cannot omit that the concept, while beingdeveloped by the CJEU’s jurisprudence even before its codification in Article 2TEU, initially was utilized in the context of legal remedies related to acts of EUorgans, not in connection to the governance of the Member States domestic legal

9See, e.g., Wernicke S (2018) Autonomie und Häresie – Investitionsschiedsgerichte in derRechtsunion. NJW 71(23):1644–1647.10Sadowski W (2018) Protection of the rule of law in the European Union through investment treatyarbitration: is judicial monopolism the response to illiberal tendencies in Europe. Common MarkLaw Rev 55:1036.11Sadowski W (2018), 1047.12Sadowski W (2018), 1058.13This reasoning seems to have been adopted (though in a more condensed form) also by some otherauthors, see, e.g., Papp M, Varju M (2019) Hungarian economic patriotism. In: Rauchegger C,Wallerman A (eds) The Eurosceptic challenge: national implementation and interpretation of EUlaw. OUP, Oxford (et al), p 94 or Novy Z, Warwas B (2019) The recent developments in arbitrationand the European regulatory space. In: de Almeida L, Cantero M et al (eds) The transformation ofeconomic law: essays in honour of Hans-W. Micklitz. OUP, Oxford [et al], p 252.14For the history of elevating the rule of law to the role of (written) EU constitutional principles seeSadurski W (2010) Adding a bite to a bark? A story of Article 7, the EU enlargement, and JörgHaider. In: Sydney law school legal studies research paper no. 10/01. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id¼1531393##.

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systems.15 It follows, taking into account that the rule of law in the “intra-EUinstitutional context” and “EU-Member States” context describes somewhat differ-ent realities,16 CJEU’s judgments relating to the EU institutions’ duties stemmingfrom the EU’s adherence to the principle of rule of law should be applied to therelations between EU and its Member States with a certain degree of caution.

The main source of EU’s interest in the observance rule of law within the MemberStates has to do with the fact that these are the Member States’ institutions (partic-ularly courts) that ultimately are responsible for providing for lawful enforcement, aswell as review of the EU law.17 After all, these are the Member States’ authoritiesthat are responsible for the enforcement of the vast majority of EU law and,accordingly, for its judicial supervision.18 This, in turn, may very well requirethem to ask the CJEU for the clarification of exact scope and meaning of EUlaw.19 If one was to look into the CJEU statistics, it would become blatantly clearthat such preliminary references generate the lion’s share of the Court’s caseload,with Commission’s infringement proceedings being responsible for less than 15% ofthe Court’s caseload at best.20 This coupled with the fact that many of the CJEUlandmark decisions were a result of preliminary references made by the domesticcourts21 shows clearly that proper functioning of national adjudicating bodies actingin their capacity of EU courts is of essential importance for the proper functioning ofthe EU legal system as a whole.22 Therefore, when assessing the usefulness of aparticular international framework for strengthening the rule of law, due weightshould be given to the capacity of the external institutions to strengthen nationaljudiciary’s performance. This intertwining between the EU rule of law principle andthe institutional capacity of Polish courts to fulfil their duties as European courts isvisible particularly in the context of both, preliminary references and the

15von Danwitz T (2014) The rule of law in the recent jurisprudence of the ECJ. Ford Int Law J37:1311–1344.16Konstadinides T (2017) The rule of law in the European Union. The internal dimension. Hart,Oxford [et al], p 109 ff.17Konstadinides T (2017), p 109 ff.18Oppermann T, Classen CD, NettesheimM (2016) Europarecht, 7th edn. Beck, München. § 23 par.23 ff.19See, e.g., Middeke A (2014) Das Vorabentscheidungsverfahren. In: Rengeling HW, id.,Gellermann M (eds) Handbuch des Rechtsschutzes in der Europäischen Union, 3rd edn. Beck,München, §10 paras 9–10.20See the statistics for years 2013–2017 contained in CJEU 2017 Annual Report. Available at:https://curia.europa.eu/jcms/upload/docs/application/pdf/2018-04/_ra_2017_en.pdf, p 102.21See, e.g., Weiler JHH (2013) Revisiting Van Gend en Loos: subjectifying and objectifying theindividual. In: 50th anniversary of the judgment in Van Gend en Loos, 1963–2013: conferenceproceedings, Luxembourg, 13 May 2013, pp 11–22; Broberg M, Fenger N (2014) Preliminaryreferences to the European Court of Justice, 2nd edn. OUP, Oxford (et al), pp 2–3.22Jaremba U (2016) The role of national courts in the process of legal integration in the EuropeanUnion: retrospective and prospective In: Goudappel FANJ, Hirsch Ballin EMH (eds) Democracyand rule of law in the European Union – Essays in honor of Jaap W. de Zwaan. Springer, TheHague, pp 49–62.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 7

infringement proceedings related to the judicial reform in Poland, where the issues ofArticle 47 of the EU Charter of Fundamental Rights (CFR) and Article 19 of theTreaty on the Functioning of the European Union (TFEU) play the first fiddle.23

Therefore, for the purpose of this paper, that will be the relatively recent Com-mission documents and CJEU jurisprudence that will serve as the main sources ofthe information on the content of the rule of law principle in relation to the MemberStates. Commission Rule of Law Communication seems to be the most importantdescription of the principle. According thereto, EU-Rule of Law encompasses“notably”: the principles of legality; legal certainty; prohibition of arbitrariness ofthe executive power; independent and effective judicial review, including respect forfundamental rights; principle of separation of powers and equality before the law.24

In Commission’s own words, proper functioning of the rule of law within theMember States is of critical importance for the fulfillment of EU’s goals.25 Inpractice, the aspect of the rule of law that has attracted the Commission’s attentionto greatest extent as evidenced by Commission’s own classification26 was clearly theissue of judicial independence. Commission July 2016 Recommendation,27 alongwith the follow-ups thereto, regarded the alleged irregularities connected with theelection of the Polish Constitutional Court judges and introduction of new Consti-tutional Tribunal legislation. Commission’s Reasoned Proposal to initiate Article 7Proceedings of 20 December 201728 apart from invoking the grounds mentioned inthe Commission’s July Recommendation took account of supposedly adverse effectsof the new laws regulating the functioning of National Council of Judiciary andpertaining to some lesser details of the laws on organisation of ordinary judiciary,both allegedly negatively affecting the judicial independence. Equally, Commis-sion’s infringement proceedings against Poland were related to the purportedinfringement of the Polish judiciary’s independence by means legislative measuresconcerning judges’ retiremen age and the possibility of influencing their terms of

23See in particular C-619/18, Commission v. Poland, ECLI:EU:C:2019:531, 24 June 2018 paras46–47 and an analysis in Bogdanowicz P, Taborowski M (2018) Brak niezależności sądówkrajowych jako uchybienie zobowiązaniu w rozumieniu art. 258 TFUE (Cz. I-II), EuropejskiPrzegląd Sądowy (1):4–11 and (2):15–24.24Annex no. 1 to Communication from the Commission to the European Parliament and theCouncil. A new EU Framework to strengthen the Rule of Law of 11 March 2014 COM(2014)158 final, pp 1–2.25Communication from the Commission to the European Parliament, the European Council and theCouncil Further strengthening the Rule of Law within the Union State of play and possible nextsteps COM/2019/163 final, p 2.26See Commission’s official webpage dedicated to the rule of law issue. Available at https://ec.europa.eu/info/policies/justice-and-fundamental-rights/effective-justice/rule-law/rule-law-framework_en#documents.27Commission Recommendation (EU) 2016/1374 of 27 July 2016 regarding the rule of law inPoland, OJ L 217/53.28Reasoned Proposal in Accordance with Article 7(1) of the Treaty on European Union regardingthe Rule of Law in Poland, 20 December 2017, COM(2017) 835 final.

8 B. Soloch

office by other powers.29 This conclusion would not be affected if one was to takeinto account also the earlier Hungarian cases, equally revolving around the issue ofthe independence of the judiciary.30 By the same token, nearly all the preliminaryreferences regarding the rule of law issue in Poland, be it made by Polish31 or otherEuropean courts,32 have revolved around the same topic of potential structuralthreats to judges’ independence after the legislative changes in Poland, with subjectmatter and institutional context of particular cases playing a rather subordinate role.

At this place, a further remark should be made. With regard to the material scope,as well as the procedural framework, international law instruments external to EUlaw were invoked as a source of inspiration. It is evidenced, among others, by boththe Commission’s opinions and the CJEU judgments containing numerous refer-ences to sources external to EU law, related primarily to the Council of Europe(CoE) framework and ECHR. In particular Annex no. 1 to the Commission Rule ofLaw Framework invokes Venice Commission Reports and ECHR case law bothdirectly, and indirectly. Further, the Portuguese judges’ case contains an indirectreference to articles 6 and 13 ECHR33; similarly the Celmer case34; Article 7Reasoned Opinion35 or July Recommendation.36 This reliance on ECtHR jurispru-dence becomes much more evident upon reading of the AGs’ opinions in bothaforementioned CJEU cases.37 Consequently, this is to be read as a strong indicatorthat the contours of the rule of law as understood by the CJEU, in particular inrelation to judicial independence within Member States, have been drawn to a largeextent within the (complementary) Council of Europe institutional framework.38 Thesame, however, cannot be said about the investment law, as at no point do any of thepublicly available documents invoked above refer to the rule of law doctrineselaborated upon within the field of international investment law.39

29C-619/18, see also C-192/18 Commission v. Poland, ECLI:EU:C:2019:924, 5 November 2019.This conclusions equally pertains to most recent proceedings in case C-791/19 (pending).30See in particular the CJEU judgment of 6 November 2012 in case C-286/12 Commission v.Hungary.31See joinded cases C-585/18, C-624/18 and C-625/18,ECLI:EU:C:2019:982, 19 November 2019;C-623/18; C-824/18; C-522/18 (pending); joint cases C-668/18; C-558/18 and C-563/18 (pending,AG opinion).32C-216/18 PPU LM v. Minister for Justice, ECLI:EU:C:2018:586, 25 July 2018.33C-64/16, Juízes Portugueses v. Tribunal de Contas, ECLI:EU:C:2018:117, 27 February 2018 para 35.34C-216/18 PPU paras 33 and 57.35Paras 117, 167. See also para 71 of AG Tanchev Opinion C-619/18.36Paras 34, 36.37See AG Øe Opinion C 64/16 reconstructing the EU concept of judicial independence on the basisof existing Strasbourg case law, similarly AG Tanchev Opinion C 216/18 PPU (in general, bothopinions were followed by the CJEU judgments).38Barcik J (2019) Ochrona praworządności w Radzie Europy i Unii Europejskiej ze szczególnymuwzględnieniem niezależności sądów i niezawisłości sędziów. Beck, Warszawa, p 225 ff.39Since, as already explained in more detail above, the aim of this analysis is to compare theusefulness of frameworks provided by IIAs and ECHR to the aim of enhancing national instutions,the issue of whether explicit references to ECHR should be interpreted as a sign of the Convention’sspecial normative position, within EU, shall not be thematized.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 9

Consequently, in the context of this article following could be said of the “rule oflaw” in relation to the EUMember -States. Firstly, this principle encompasses a widecategory of narrower topics, of both procedural and substantive character. Secondly,the main reason for the EU’s interest in the rule of law issues lies in the essential roleof national institutions in EU law implementation. From practical point of view,these are the institutional arrangements related to judicial independence that seem toplay the first fiddle. Lastly, it follows that in order to be viewed as beneficial to thedevelopment of intra-EU rule of law, an international law mechanism would have tobe capable of influencing both national laws and domestic institutions, in particularin the judicial context.

Institutional Intersections Between National and InternationalFrameworks in IIL and ECHR

Introduction

Drawing on the findings related to the EU rule of law principle as analyzed above,this section shall be devoted to a comparison between IIL and ECHR frameworksfrom the point of view of their capabilities to influence institutional developmentswithin the Member States. It shall begin with an analysis of the ECHR and IILframeworks, only to be followed by a case-study concerning the role of bothframeworks in Polish legal order, and end with brief conclusions.

ECHR and the Power of Subsidiarity

The Subsidiary Character of the ConventionECHR is a good example of an international framework deeply interconnected withnational legal systems. As Laurence R. Helfer rightly observed in his seminal article,Convention’s success or failure is contingent in the first place on achieving a highdegree of its “embeddedness” in national legal systems.40 The “Brighton Process”,describing coordinated action of the convention parties aiming at enhancing thesubsidiary character of the Convention could be viewed as an embodiment of thisdoctrine. The Brighton Declaration41 strongly emphasized the primary role ofnational remedies for the overall effectiveness of Convention system. This process

40Helfer LR (2008) Redesigning the European Court of Human Rights: Embeddedness as a DeepStructural Principle of the European Human Rights Regime. Eur J Int Law 19:125–159. https://doi.org/10.1093/ejil/chn00441Declaration of High-level Conference of Committee of Ministers in Brighton, United Kingdom,from 19 to 20 April 2012. Available at: https://www.echr.coe.int/Documents/2012_Brighton_FinalDeclaration_ENG.pdf, para 9. The declaration was followed by many further political andlegal commitments made over span of several years, their description, however, is not necessary atthis place.

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found its culmination in the Protocol No. 15, adding to the ECHR preamble explicitreferences to the principle of subsidiary and mentions of supervisory functionof theCourt, as well as further heightening the admissibility threshold. This quasi-consti-tutional function of the ECHR is further underlined by Protocol no 16, creating amechanism allowing national courts to make preliminary references to ECtHRconcerning the scope and meaning of the Convention provisions.42 On December4th 2018 a Grand Chamber panel accepted first request for advisory opinionsubmitted by the French Cour de cassation in a case pertaining to surrogacy, onlyto deliver the first opinion on 10 April 2019.43

Regardless of certain criticism of some aspects of the Brighton process comingparticularly from academia and the “3rd sector”,44 in no case may it be inferred thatthe Brighton Process fell out of the blue. It would be better to understand it rather as amere amplification of tendencies that have always been there, since the subsidiarityprinciple manifests itself in many ways, also in the context of deciding upon theadmissibility criteria. Alas, according to Article 35 para 1 ECHR the Court mayexamine the case only after the local remedies were exhausted. According tostanding jurisprudence, this means that not only does the applicant have to availhimself of all the remedies available to him but, equally he is required to raisearguments at least corresponding in substance with the provisions of the ECHR, sothat the national court would have a real chance to remedy a Convention breach.45

Apart from the principle of subsidiarity, also the judge-made concept of margin of

42Protocol 16 itself is not unproblematic, particularly from the point of view of possible jurisdic-tional clashes between EU law and ECHR. Regardless of these legitimate concerns, the protocol islikely to further contribute ti the dialogical relationship between the ECHR and national courts. Forfurther references see Paprocka A, Ziółkowski M (2015) Advisory opinions under protocol no. 16to the European Convention on Human Rights. Eur Const Law Rev 11:274–292. https://doi.org/10.1017/S157401961500017643ECHR Advisory Opinion, P16-2018-001, 10 April 2019.44See especially the recent debate surrounding the Copenhagen Declaration and the deep concernrelated to its content expressed with regard to its first draft versions by i.a. several EuropeanNGOs (Joint NGO Response to the Draft Copenhagen Declaration of 13 February 2018.Available at https://amnesty.dk/media/3931/joint-ngo-response-to-the-copenhagen-declaration-13-february-2018-with-signatures.pdf); academics (Andreas Follesdal, Geir Ulfstein (2018) TheDraft Copenhagen Declaration: Whose Responsibility and Dialogue?, https://www.ejiltalk.org/the-draft-copenhagen-declaration-whose-responsibility-and-dialogue/); It seems however, thatdespite some doubts as to the final content of the declaration expressed in the CoE ParliamentaryAssembly Recommendation 2129 (2018) adopted on 26 April 2018 ultimately both the final textand the spirit of the declaration do not seem to seriously threaten ECHR’s implementation, seeGerards J, Lambrecht S (2018) The final Copenhagen declaration: fundamentally improved witha few remaining caveats. https://strasbourgobservers.com/2018/04/18/the-final-copenhagen-declaration-fundamentally-improved-with-a-few-remaining-caveats/#more-4166. For a more comprehen-sive evaluation of Brighton Process see Cram I (2018) Protocol 15 and articles 10 and 11 ECHR – thepartial triumph of political incumbency post-Brighton? Int Comp LawQ 67:477–503. https://doi.org/10.1017/S002058931800011845See f. e. Case 22,978/05 Gäfgen v. Germany, 1 June 2010, paras 142, 144; Case 17,153/11Vučković and Others v. Serbia, 25 March 2014, para 75.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 11

appreciation, providing national authorities, particularly courts, with a certain degreeof deference, has an important role to play.46 Some authors would even suggest theexistence of positive correlation between the national courts’ sensitivity to the valuescontained in the convention and the level of the deference employed by ECHR.47

This reliance on the national courts is even more evident if one was to take intoaccount that, as a matter of principle, ECHR in its adjudicatory activities relies on thefact-finding conducted by the national courts.48

ECtHR as a Constitutional CourtThese above structural features of the Convention are in line with the ECtHR self-understanding as a kind of pan-European constitutional court.49 Arguably, the quasi-constitutional function of ECtHR finds its culmination in the pilot judgment proce-dure, enabling the Strasbourg court in case of systemic violations of the Conventionto decide jointly all the cases pertaining to a particular systemic problem whileinstructing national authorities on the preferred way of removing this deficit.50

Indeed, there are powerful tools enabling ECtHR judgments to influence the courtsof Member States along with other national actors. First of all, it is widely acceptedthat despite the judgments strictly speaking binding only their addressees (article 46para 1 ECHR), the interpretation of the convention contained therein has the

46For general considerations in relation to this doctrine see Spiellman D (2012) Allowing the rightmargin: the European Court of Human Rights and the national margin of appreciation doctrine:Waiver or subsidiarity of European review? Camb Yearb Eur Leg Stud 14:381–418. https://doi.org/10.5235/152888712805580570; for the intristic link between margin of appreciation and thesubsidiarity principle see Nußberger A (2014) Subsidiarity in the control of decisions based onproportionality: an analysis of the basis of the implementation of ECtHR judgements into Germanlaw. In: Seibert-Fohr A, Villiger ME (eds) Judgements of the European Court of Human Rights –effects and implementation. Nomos, Baden-Baden, p 181.47van der Heyning C (2011) No place like home. Discretionary space for the domestic protection offundamental rights. In: Popelier P, van Nuffel P (eds) Human rights protection in the EuropeanLegal order: the interaction between the European and the national courts. Intersentia, Cambridge[et al], pp 92–93. For an example supportive of this thesis see joint cases 40660/08 and 60641/08von Hannover v. Germany (II), 7 February 2012 para 124.48Harris D, O’Boyle M, Bates E (et al) (2014) Harris, O’Boyle, and Warbrick: law of the Europeanconvention on human rights, 3rd edn. OUP, Oxford et al, pp 143–147. The authors underline thateven in cases in which the court is somewhat mistrustful of the national courts its capacity toconduct a fully-fledged independent investigation is rather limited due to practical reasons.49Case 15318/89 Loizdou v Turkey, 23 March 1995 para 75. See Greer S (2006) The Europeanconvention on human rights. Achievements, problems and prospects. CUP, Cambridge, p 169 ff.Peters A, Altwicker T (2012) Europäische Menschenrechtskonvention. 2nd edn. Beck, München,§2 para 9 f.50See para 61 of ECHR Rules of Court. For general information on the topic of pilot judgment seeLubiszewski M, Czepek J (2016) Procedura wyroku pilotażowego w praktyce EuropejskiegoTrybunału Praw Człowieka. Wolters Kluwer, Warszawa, 2016.

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practical erga omnes effect.51 Therefore, in practice, the conduct of a given state isinfluenced also by ECtHR judgments rendered against other defendants. This influ-ence is particularly visible in the case of CFR since its Article 52 para 3 stipulatesthat rights contained in the CFR mirroring the Convention rights should be givenequal meaning as in the Convention. The above finding is corroborated by the factthat ECHR enjoys special status in many Convention states so that its practicalposition within national legal systems not rarely comes close to the one enjoyed byEU law with its primacy.52 The quasi-constitutional function was only strengthenedby the introduction of the abovementioned preliminary reference procedure withProtocol 16.

Remedies and Their EnforcementA closer look at the system of available remedies seems to correspond with this view.According to the classification presented by Adam Bodnar on the basis of theECtHR’s case law, one could differentiate between nine types of individual reme-dies, such as damages, revision of the proceedings, restitutio in integrum, orreopening of the proceedings; and five kinds of general remedies such as changingthe laws; changing their application and interpretation; etc.53 General remediesintroduced by the Member States in the consequence of an ECHR judgment includednot only changes to issues important from the rule of law perspective such asdomestic laws on civil proceedings,54 contours of judicial independence,55 buteven changes to domestic constitutions.56 Specifically, in the context of rule of lawissues the recent ECtHR judgment in the case Guðmundur Andri Ástráðsson v.Iceland,57 concerning possible influence of allegedly unlawful appointment of

51One speaks even of “de facto precedence“ character of ECtHR rulings, see Merrils JG (1993) Thedevelopment of international law by the European Court of human rights. Manchester UniversityPress, Manchester, p 12; Senden H (2011) Interpretation of fundamental rights in a multilevel legalsystem. An analysis of the European Court of Human Rights and the Court of Justice of theEuropean Union. Intersentia, Antwerp, pp 9–10.52Martinico G (2012) Is the European convention going to be ‘Supreme’? A comparative-consti-tutional overview of ECHR and EU law before National Courts. Eur J Int Law 23:401–424. https://doi.org/10.1093/ejil/chs02753Bodnar A (2018) Wykonywanie orzeczeń Europejskiego Trybunału Praw Człowieka w Polsce.Wymiar instytucjonalny. Wolters Kluwer, Warszawa, pp 157–178.54See e.g., the effects of ECHR judgment in pilot-judgment case Rumpf v. Germany consisting in.creation of new remedies in German administrative law, Paulus A (2014) From implementation totranslation: applying the ECHR Judgements in the Domestic Legal Orders. In: Seibert-Fohr A,Villiger ME (eds) Judgements of the European Court of Human Rights – effects and implementa-tion. Nomos, Baden-Baden, p 268, see also Polish cases described below.55Case 20261/12 Baka v Hungary, 23 June 2016 related to the influence of judges employmenttermination conditions on their independence.56See, e.g., CMCoE Resolution ResDH(2006)79 of 20 December 2006 regarding Turkish consti-tutional amendments abolishing National Security Courts foreseen in the constitution in theaftermath of the ECHR judgment in case Çiraklar v. Turkey.57Case 26374/18 Guðmundur Andri Ástráðsson v. Iceland, 12 March 2019.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 13

judges on the breach of the defendant’s due process rights could be of particularimportance.

According to Article 46 the CoE, Member States are the primary actors respon-sible for executing Strasbourg judgments. This means that besides the executive andthe judiciary also the national parliaments have an important role to play in thisregard.58 Domestic mechanisms are enhanced by the supervision exercised by theCoE institutions. Generally speaking, according to Article 46 (2) ECHR, it is theCoE Comity of Ministers (CM CoE), i.e., political body composed of representa-tives of ECHR parties, which is responsible for the supervision of the MemberStates’ execution of judgments. Details of this procedure are stipulated mostly in CMCoE rules of proceedings and soft law acts such as decisions and resolutions.59 Inextreme cases, CM CoE may bring a noncompliant state before ECHR by the vote of2/3 majority (Article 46 para 4 ECHR), which has happened only once, in anAzerbaijan case, so far.60 Last but not least, also the CoE Parliamentary Assemblyhas its role to play.61

In any case, possibly wide dissemination of the Strasbourg jurisprudence wasrecognized as one of the crucial factors contributing to the Convention’s success.The judicial decisions, along with materials generated during the judgments’ execu-tion are publicly available. They are stored mostly in the HUDOC databasecontaining all the contemporary rulings in English or French (sometimes alsolanguages of other ECHR parties),62 the Court, and other CoE constitution providealso for many open access guides and aids of different kind.63 Moreover, MemberStates are encouraged to undertake further steps to disseminate the knowledge aboutthe Convention and the ECtHR case law.64

The Parallel Universe of the Arbitral Tribunals

“Neutral Forum” and “Depoliticization”The viewpoint of the IIL on the states’ role in its implementation is worlds apart fromthe one of ECHR. After all, the “great promise” of ISDS is something completely

58See particularly PACE Background memorandum PPSD (2014) 22 of 13 October 2014 The roleof parliaments in implementing ECHR standards: overview of existing structures and mechanisms.59For general characteristics of the CM CoE’s role see Szklanna A (2009) Kontrola wykonywaniaorzeczeń Europejskiego Trybunału Praw Człowieka przez Komitet Ministrów – Ewolucja, Pro-cedury oraz stan obecny. In: Machińska H (ed) 60 lat Rady Europy. Tworzenie i stosowaniestandardów prawnych. Oficyna Prawa Polskiego, Warszawa, pp 249–266.60See description of proceedings in the case Mamadov v Azerbaijan case in Dzehtsiarou K (2018),Mammadov v. Azerbaijan: It Is about Effectiveness of the Strasbourg System. https://strasbourgobservers.com/category/cases/mammadov-v-azerbaijan/.61See Bodnar A (2018), pp 223 ff.62https://hudoc.echr.coe.int.63See particularly data available on the webpage of the Court. https://www.echr.coe.int.64See, e.g., CoE CM Recommendation of 18 December 2002 Rec(2002)13.

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different than in case of the Convention: It is the creation of a “neutral forum”,65

devoid of any substantive link to the legal system of the Member States.66 Conse-quently, these general considerations result in a predominant practice of rejecting theexhaustion of local remedies requirement in most of IIAs.67 It has to be underlinedthat even in the context of the denial of justice claims, where the investors aretypically required to exhaust local remedies68 some of the tribunals tacitly taking anagnostic stance on the issue of the possibility of creating a “one size fits all” standardfor the requirements for a judicial system,69 limit themselves to analyzing whetherthe Claimant was denied justice in the particular circumstances of a given case.70

There are also other reasons for ATs and national courts not to take into account eachother’s jurisprudence. In comparison to European courts, the case law generated byarbitral tribunals has not achieved an impressive level of density since as of 1January 2019 there were only 942 known ISDS cases worldwide.71 This meansthat statistically a single state has a rather low probability of being faced withrepetitive disputes pertaining to the same matter over a longer period of time,which in turn may be another disincentive for introducing further systemic

65See award of 9 January 2003 in case ADF Group Inc. v. United States of America, ICSID Case No.ARB (AF)/00/1, 9 January, para 25.66Bonnitcha, J Skovgaard-Poulsen LN, Waibel M (2017) The political economy of the investmenttreaty regime. OUP, Oxford [et al], p 86. See also Jandhyala S (2020) The politics of investor-statedispute settlement: how strategic firms evaluate investment arbitration. In: Chaisse J, ChoukrouneL, Jusoh S (eds) Handbook of international investment law and policy. Springer, Singapore.67see Dolzer R, Schreuer Ch (2012) pp 264–267; Kriebaum U (2009) Local remedies and thestandards for the protection of foreign investment. In: Binder Ch, Reinisch A, Wittich S (eds) Localremedies and the standards for the protection of foreign investment. OUP, Oxford [et al], p 426.With regard to the second text, at least from the standpoint of this inquiry, it deserves noticing thatwhile invoking the reasons for the existence of local remedies principle (p. 421) the author does notmention at all any justifications for the subsidiarity principle related to embedding internationalframework in the domestic context.68See, e.g., Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) andAbal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, 8 July2016 (award) para 503; David R. Aven and others v. Republic of Costa Rica, ICSID Case No.UNCT/15/3, 18 September 2018 (final award) paras 354–355. For less stringent approach see in thecase Rupert Binder v. Czech Republic, UNCITRAL 15 July 2011 (final award), paras 450–451.69See, e.g., Grand River Enterprises Six Nations, Ltd. and others v. United States of America,UNCITRAL, 12 January 2011 (award), paras 223–224.70See, e.g., Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1, 20 November 1984 (award), para 150; Mr. Franck Charles Arif v. Republic of Moldova, ICSIDCase No. ARB/11/23, 8 April 2013 (award), para 445; Philip Morris Brand Sàrl (Switzerland),Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republicof Uruguay, ICSID Case No. ARB/10/7, 8 July 2016 (award), paras 500–501.71UNCTAD fact sheet on investor–state dispute settlement cases in 2018, p 2. https://unctad.org/en/PublicationsLibrary/diaepcbinf2019d4_en.pdf.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 15

changes.72 Last but not least IILs’ capacity to perform a quasi-constitutional role isseriously hampered by intra-EU IIAs relative one-sidedness, i.e. their concentrationsolely on the investment protection with only limited regard for other values.73

Unsurprisingly, empirical evidence would suggest that, as a consequence, theIIAs typically are not scrutinized by national courts. Despite the investment disputescovering practically all the areas of law, the investors seem to invoke the IIL beforenational courts only on rare occasions, usually without success.74 This may havesomething to do with another typical feature of ISDS, namely the confidentiality ofthe awards, as well as the rest of the proceedings.75 Indeed, arbitration rules mostfrequently used in the arbitration foresee the non-disclosure of the awards76 and thepractical significance of international regulations striving at transparency (MauritiusConvention) is minimal due to lack of interest to become its parties on part of EUstates.77 In any case, domestic courts’ relative ignorance of IIAs seems to go hand inhand with the lack of civil servants’ familiarity therewith.78

Consequently, unlike in the case of ECHR, the system in no way encourages theinvestors to try to bring their case before national courts to let them rectify thealleged wrongs before going to international fora. This lack of “judicial dialogue”

72For the importance of the repetitiveness for the compliance see Hirsh M (2009) Compliance withinvestment treaties: when are states more likely to breach or comply with investment treaties. In:Binder Ch, Kriebaum U, Reinisch A, Wittich S (eds) Local remedies and the standards for theprotection of foreign investment. OUP, Oxford [et al], p 426.73Mouyal LW (2016) International investment law and the right to regulate. A human rightsperspective. Routlege, London/New York, p 56; Dolzer R, Schreuer Ch (2012). pp 25–26.74Gáspár-Szilágyi Sz (2020, forthcoming) Why do or should foreign investors resort to the courts ofthe host country prior to investment treaty arbitration?. In: Fauchald KO, Behn D, Langford M (eds)The legitimacy of investment arbitration. Empirical perspectives. CUP, p 27. Manuscript availableat https://www.academia.edu/37336807/Why_Do_or_Should_Foreign_Investors_Resort_to_the_Courts_of_the_Host_Country_Prior_to_Investment_Treaty_Arbitration, author conducted an in-depth analysis of investment disputes involving i.a. Hungary and Romania, frequent respondentsin intra-EU cases. This lack of practical influence of IIAs on the practice of domestic courts seems tobe a rule rather than exception also before other European and non-European courts, see Trade LawClinic report Application of International Investment Agreements by Domestic Courts, Geneva,2011. Available at https://www.tradelab.org/single-post/2018/03/02/Application-of-International-Investment-Agreements-by-Domestic-Courts. Notably, also the German Federal ConstitutionalCourt judgment of 16 December 2016 in case 1 BvR 2821/11 Vattenfall, rendered during theICSID proceedings against Germany contained not a single reference to the ECT.75See, e.g., UNCTAD (2012) Transparency, UNCTAD series on issues in international investmentagreements II. UNCTAD, New York/Geneva, 2012, p 36 ff. See Chaisse J, Donde R (2018) Thestate of investor-state arbitration – a reality check of the issues, trends, and directions in Asia-Pacific. Int Lawyer 51(1):47–67.76See, e.g., UNCITRAL Arbitration Rules (as revised in 2010), Article 35 para 4; Convention onthe settlement of investment disputes between States and nationals of other States (ICSID Con-vention) Artilcle 48 (5)).77According to the information available at UNCITRAL webpage. https://uncitral.un.org/en/texts/arbitration/conventions/transparency/status, as of today no EU country has become a party to theconvention (though there are some signatories).78ILA (2018), p 11.

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between ATs and municipal courts was already noticed by some authors, yet itseems, that this observation has not resulted in substantial changes to the existingpractice so far.79 In particular, it has to be stressed that despite certain voicessupportive of the re-introduction of local remedies requirements,80 provisions relatedthereto have not made it to too many existing investment treaties so far. Thisneutrality, coupled with the lack of deference characteristic of ECHR, furtherdissolves the sense of embeddedness and, thus, ultimately, the legitimacy of thearbitrator’s decisions in the domestic legal system.81 This general sense of estrange-ment is amplified by the detachment of the arbitrators from the context of both, theirnational legal systems and the European law (see infra).

In effect, this strict isolation between the ATs and domestic judicial systemsindeed makes the ATs “apolitical”, i.e. insulate them from any possible turmoilwithin a particular state. On the other hand, however, this makes them completelydisconnected from the local judiciary as well as other national authorities. This, inturn, does not seem to be a good incentive to engage in an in-depth analysis of thefunctioning of the institutions of a given state. Indeed there are also certain empiricalstudies indicating that the existence of a parallel framework for dispute resolutionavailable to the investors actually decreases their interest in the proper functioning ofthe domestic institutions.82

The Consequences: Lacking Effective Enforcement Mechanisms of aGeneral CharacterAs a consequence of the IIL’s preference for the private law enforcement mecha-nisms and the ad hoc nature of the tribunals, ISDS dispute settlement bodies do notshow much interest in the further fate of their award.83 It does not mean that the

79For more on the desirability of a dialogue between arbitral tribunals and municipal courts and lackthereof see Kalderimis D (2015) Back to the future: contemplating a return to the exhaustion of localremedies. In: Kalicki JE, Joubin-Bret A (eds) Reshaping the investor-state dispute settlementsystem: journeys for the 21st century. Brill, Leiden, pp 310–344.80Portfield MC (2015) Exhaustion of local remedies in investor-state dispute settlement: an ideawhose time has come. Yale J Int Law, 41:1–12.81Henckels C (2014) The role of the standard of review and the importance of deference in investor-state arbitration. In: Gruszczyński Ł, Werner W (eds) Deference in international courts and tribunals.OUP, Oxford [et al], pp. 125, 133. Besides, it should be noted that subsidiarity principle may play avery important role also for mitigating possible conflicts between national and international law, seeStoll PT (2018) International investment law and the rule of law. Goettingen J Int Law 9:285 f.82See Ginsburg T (2005) International substitutes for domestic institutions: bilateral investmenttreaties and governance. Int Rev Law Econ 25:118 ff., more generally Chen RC (2017) Bilateralinvestment treaties and domestic institutional reform. Columbia J Transnatl Law 55:547–591. Seealso Chaisse J (2015) The issue of treaty shopping in international law of foreign investment –structuring (and restructuring) of investments to gain access to investment agreements. HastingsBus Law Rev 11(2):225–306.83Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12, 31 August2018 (Achmea issue), para 230; Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. StarmillS.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, 11 December 2013(final award), para 340.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 17

remedies offered by IIL to particular investors may not safeguard their interests,quite the contrary.84 The case is that the system while empowering individualinvestors with access to pecuniary remedies does not provide for means affectingnational legal systems in a more general manner. In particular, the IIL offers nointernational supervisory framework for the oversight of the awards’ execution. Themission of an ad hoc tribunal is essentially to decide a particular dispute on the basisof the underlying arbitration agreement and provide an individual investor with aredress for the wrong suffered, which in turn, partially to lack of effective supervi-sory mechanisms, consists solely of financial compensation.85 For sure, it does notencompass removing systemic deficiencies.86 Even in single cases of awarding non-pecuniary remedies, they consisted solely of individual measures and had no furthersystemic consequences.87

Consequently, one could question how such a loose enforcement frameworkwould go hand in hand with the IIL’s self-understanding as agents of decentralizedglobal administrative system (see Pt. 7 infra) or what, in the absence of suchimplementation mechanisms, are the real chances for observing the “learning effect”as described in footnote [4] above. Indeed, at least for now, the empirical evidencewould allow speaking of rather limited institutional impact of the awards. Firstly, onecould speak of the so-called regulatory chill, i.e. governmental officials’ unwilling-ness to actively pursue public policy goals for fear of possible BIT claims.88

Regardless of the chilling effects actual impact, it is doubtful whether it couldinfluence reforms of national judiciaries in the Member States since the aforesaidregulatory chill concerns rather measures capable of being subject to BIT claims (i.e.measures targeting the investor, mainly of regulatory nature) than some more generalchanges to national laws. Secondly, it was observed in some non-EU states that ISDScases indeed led to some institutional reforms. The problem is, however, that thesereforms were limited to creating specialized institutional frameworks aimed

84Born G (2012) A new generation of international adjudication. Duke Law J 61:775–879, seeparticularly 835 ff.85Demirkol B (2015) Remedies in investment treaty arbitration. J Int Dispute Settle 6:410–411.86de Brabandere E (2014) Investment treaty arbitration as public international law: proceduralaspects and implications. CUP, Cambridge (et al), pp 183–190.87de Brabandere E (2014), pp 188–190.88The literature affirmative of the thesis of the BIT proceedings as a tool to exert pressure ongovernmental policy making seems to be quite numerous, see as an example Tienhaara K (2011)Regulatory chill and the threat of arbitration. A view from political science. In: Brown C, Miles K(eds) Evolution in investment treaty law and arbitration. CUP, Cambridge, pp. 606–627; van HartenG, Scott DN (2016) Investment treaties and the internal vetting of regulatory proposals: a case studyfrom Canada. J Int Dispute Settle 7:92–116. https://doi.org/10.1093/jnlids/idv031; Pelc K (2017)What explains the low success rate of investor-state disputes? Int Organ 71:559–583. https://doi.org/10.1017/S0020818317000212. Unsurprisingly there are also prominent scholars critical of thisthesis, see, e.g., Stone-Sweet A, ChungMY, Salzman A (2017) Arbitral lawmaking and state power:an empirical analysis of investor–state arbitration. J Int Dispute Settle 8:579–609. https://doi.org/10.1093/jnlids/idx009

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exclusively at cooperating with investors rather than being capable of contributing tothe development of local institutions.89 Lastly, in the recent period, in response to aseries of lost ECT cases concerning solar subsidies, Spain decided to proposeintroducing new regulations that would allow renewable energy producers for higherreturns in oncoming years in exchange for waiving any monetary claims against thehost state.90 Yet also this remote example does not pertain to any further reachingdomestic institutional reforms and has much more to do with class-action-relatedamicable settlement.

Consequently, neither of the institutional effects mentioned above, however,could be viewed as contributing to the rule of law in a host state in its institutionaldimension. Specifically, none of them may be even remotely compared to the evidentimpact of the implementation of ECtHR judgments on national legal systemsdescribed above.

Case Study: Poland

A case study of the situation in the particular Member States seems to be indispens-able for an in-depth analysis of the impact of both, ECHR and IIL frameworks on thedomestic legal systems. Consequently, Poland, being a frequent respondent in both,IIL and ECHR frameworks, seems to be the perfect candidate for such an exercise,particularly if to take into account the ongoing rule of law controversies.

ECHR in PolandPoland Acceded to ECHR in 1993 and the Convention enjoys the status of aninternational treaty concluded upon prior consent granted by statute.91 As such, itshould enjoy a rank between the constitution and ordinary laws.92 The most typicalway in which the Constitutional Tribunal (CT) invokes the Convention, however, is

89Sattorova M (2016) Reassertion of control and contracting parties’ domestic law responses toinvestment treaty arbitration. Between reform, reticence and resistance. In: Kulick A (ed)Reassertion of control over the investment treaty regime. CUP, Cambridge, pp 53–80.90See Pérez-Salido P (2019) Royal Decree-law 17/2019: an opportunity for Spain to leave behind therenewable energy arbitrations? http://arbitrationblog.kluwerarbitration.com/2019/12/30/royal-decree-law-17-2019-an-opportunity-for-spain-to-leave-behind-the-renewable-energy-arbitrations/; For furtherinformation on the interconnections between national energy laws and investement law see: Chaisse J(2016) Renewables re-energized? The internationalization of green energy investment rules anddisputes. J World Energy Law Bus 10(1):269–281.91An outline of most important issues related to the ECHR can be found in Polish Ministry ofForeign Affairs brochure Ministry of Foreign Affairs (2018) Poland in the European convention onhuman rights system. https://www.msz.gov.pl/resource/2a216648-a00d-4740-983d-25bc6ef68702:JCR.92Article 91 para 2 of the Polish Constitution of 2 April 1997, as amended.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 19

to resort thereto along with the constitution in order to create a common normativestandard.93 In practice, CT accepts the obligation to interpret national law, includingthe Constitution in accordance with the Convention as interpreted by ECtHR also incases against third states.94 These constitutional considerations by no means have anabstract character: the ordinary courts also did internalize the over-statutory statusimportance of the convention, which is reflected by both, invoking the Convention intheir rulings and invoking it in preliminary references regarding the constitutionalityof national regulations.95 Accordingly, it may be said that the Convention both,enjoys special status within the Polish legal system and has a considerable influenceon the jurisprudence of Polish courts.

Furthermore, Poland has created a robust mechanism for the implementation ofECtHR judgments. The implementation process is coordinated by the Inter-Minis-terial Committee presided over by the ECHR Government Agent, created on thebasis of a prime minister ordinance. Despite the low rank of the legal act creating theCommittee (an internal managerial act), the system shows a considerable degree ofstability,96 as evidenced by the regular Committee’s meetings (every 3 months) andthe substantive output generated in the course thereof.97 Judgments’ implementationis conducted in accordance with action plans adopted by the Government. After thenon-prolongation of the short-lived Parliamentary Committee for the enforcement of

93Polish Constitutional Tribunal (CT) judgment of 28 January 2003 in case K 2/02, para. III.4.6 f.Paprocka A (2012) Wpływ orzecznictwa ETPCz na rozumienie konstytucyjnych praw i wolnościw Polsce – kilka uwag na marginesie orzecznictwa Trybunału Konstytucyjnego. In: Zubik M (ed)XV lat obowiązywania Konstytucji z 1997 r. Księga jubileuszowa dedykowana ZdzisławowiJaroszowi. Wydawnictwo Sejmowe, Warszawa, p 84, fn.38. In general, the interpretation ofnational law (including constitution) in concordance with international law seems to be thepreferable way of ensuring the effectiveness of the latter in Polish legal order, see Czapliński W,Wyrozumska A (2014) Prawo międzynarodowe publiczne. Zagadnienia systemowe. Beck, War-szawa, para. 582.94CT Decision of 12 December 2005 in case K 32/04, para III 4.1. CT Decision of 18 October 2004in case P 8/04, para III 2.6, quoted i.a. in CT Decision of 7 March 2005 in case P 8/03. III. 4. Seealso later CT judgment of 11 May 2007 in case K 2/07, para 4.5.3. For general remarks on this topicsee Garlicki L (2003) Obowiązywanie Europejskiej Konwencji Praw Człowieka w porządkuprawnym Rzeczypospolitej Polskiej. Biuletyn Biura Informacji Rady Europy (3):19 f.95For a more general account of the application of the application of ECHR by Polish ordinarycourts see critical appraisal of the judicial dialogue between Polish Courts and ECtHR in Górski M(2017) The dialogue between selected CEE Courts and the ECHR. In Wyrozumska A (ed)Transnational judicial dialogue on international law in central and eastern Europe. Łódź UniversityPress, Łódź. https://doi.org/10.18778/8088-707-7.05. pp 233–296.96For more information on the history of Committee’s functioning see Florczak A (2016) Polskaprzed Europejskim Trybunałem Praw Człowieka – bilans doświadczeń w latach 1993–2014. In:Leszczenko L, Szablicka-Żak J (eds) Wybrane problemy ochrony praw człowieka w Polsce.Wrocław University Press, Wrocław, pp 55–58.97See minutes of Committee’s meetings. Available at https://www.msz.gov.pl/pl/polityka_zagraniczna/europejski_trybunal_praw_czlowieka/wykonywanie_orzeczen_europejskiego_trybunalu_praw_czlowieka/. It has to be underlined that these meetings have been attended not only by themembers of the government administration, but by the representatives of Parliament and various NGOsas well.

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ECHR judgments, an overview of the enforcement of the judgments is conductedwithin specialized committees of the upper chamber of the Polish parliament(Senat).98 There are also many other “softer” instruments serving the purpose ofimplementing the ECtHR judgments, such as translation of the judgments by variousstate authorities such as courts, prosecutor’s office and the Ministry of Foreignaffairs; judges’ secondments and study visits to Strasbourg; legal trainings ordelivering legal opinions on the legislative acts’ conformity with the Convention.99

The sharp drop in the number of cases supervised by the CM CoE due to theirsuccessful enforcement100 may be treated as an indicator of the effectiveness of theframework implemented by Poland.

A good example of how deep the Convention penetrates the Polish legalsystem may be provided by the turbulent story of the act on post-penal preventivedetention.101 In 2013, i.e. already after the ECHR landmark judgment in the caseM. v. Germany pertaining to this matter, Poland was faced with the problem ofviolent criminals whose death sentence was exchanged for 25 years prison termsin the wake of transition from communism to democracy, ending their prisonterms. Consequently, for the sake of public safety, regulations on post-penalpreventive detention had to be introduced. ECtHR case-law was being takeninto account during both, governmental and parliamentary stages of the legislativeprocess. Furthermore, immediately after the new legislation’s entry into forceseveral ordinary courts which had to apply the new laws made preliminaryreferences to the CT, invoking provisions of the Constitutions in conjunctionwith the Convention norms as the normative basis for their requests. Ultimately,CT in its judgment of 24 November 2016 in case K 6/14 declared the law to be inconformity with the Constitution as interpreted in the light of the Convention. Ithas to be underlined that Tribunal’s reasoning contained extensive references toStrasbourg judgments rendered in proceedings against other states (particularlyGermany). At the moment, there are several proceedings pending before theStrasbourg court related to this legislation. Regardless of their ultimate outcome,however, an analysis of the history of the legislation on post-penal detention inPoland may serve as a very good example how deeply ECHR pervades Polishlegal system. Firstly, all the actors throughout both legislative and adjudicativeprocesses were convinced that legislative acts have to conform with the Conven-tion as interpreted in ECHR judgments, also rendered in proceedings against other

98Bodnar A (2018), pp 362–364.99See Reports on the execution of ECtHR judgments issued by the Ministry of foreign affairs.Available at https://www.msz.gov.pl/resource/7e8554c9-e521-4c35-9c25-24b8115e095e:JCR,especially p 23 ff.100See CoE Country Factsheet for Poland. Available at: https://rm.coe.int/168070975d, p 6.101A detailed description of this process may be found in the author’s earlier piece Pluralizmkonstytucyjny i dialog międzysądowy: instytucja izolacji postpenalnej w orzecznictwieFederalnego Sądu Konstytucyjnego Niemiec, Europejskiego Trybunału Praw Człowieka ipolskiego Trybunału Konstytucyjnego In: Lachowski T, Mazurenko V (eds) Ukraina po RewolucjiGodności. Prawa człowieka – tożsamość narodowa. Bookmarked Olsztyn, 2017, pp. 86–90.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 21

states. Secondly, actors on all levels did correctly identify the possibility of thelegislation contradicting convention. Thirdly, ordinary courts opted for having apiece of legislation possibly contradicting the convention reviewed by the Con-stitutional Tribunal (Poland is not a party to Protocol 16) in lieu of simplyapplying it. Last but not least, the CT faced with the questions, indeed paid duerespect to the Convention and ECtHR’s jurisprudence while deciding the issues.

The purpose of the above example was solely to show how the Conventionworks in the Polish legal system. When it comes to assessing whether ECHR hascontributed to introducing systemic changes in areas sensitive from the rule of lawperspective, following, prominent examples may be invoked. Firstly, in the con-sequence of Kudła v. Poland judgment Poland had to create a completely newremedy, a complaint on the excessive duration of the court proceedings. Equally, itwas only after ECtHR judgment in case Broniowski v. Poland that a legal basis forcompensating thousands of Polish citizens who lose their property in the aftermathof the change of borders after World War II was created.

To sum up, the above shows clearly both, the embeddedness of ECHR in thePolish legal system and its ability to influence it to a considerable degree.

IIAs’ Impact on the Polish Legal SystemNothing like this may be said of the IIL, despite Poland apparently belonging to themost frequent respondents.102 Indeed, IIAs have little if any effect on the Polish legalorder, theoretically occupying the same place in the hierarchy of national laws as theECHR due to being qualified as ratified international agreements consented by aparliamentary legal act.

To begin with, Polish BITs are only rarely invoked both in the jurisprudence ofPolish courts and legal scholarship.103 There is only a handful of Polish top-courtscases in which BITs were invoked at all, in many instances in a manner not havingmuch to do with the typical investment disputes (i.e., in the context of nationalaccess to information laws or an analysis whether BITs put more strict formalrequirements on registration of foreign companies than in the case of nationalones, etc.). Even if the courts analyzed BITs in their proper context and seemed toassume the self-executing character of the provisions contained therein (thus,acknowledging their applicability in the Polish legal system) at no point didthey refer to any arbitral awards or the relevant legal scholarship. Rather unsur-prisingly, in none of the analyzed cases did the BIT give the applicant the winningedge.

102According to data available at UNCTAD and encompassing publicly known cases, Poland wasseventh most-frequent respondent. see https://investmentpolicy.unctad.org/investment-dispute-settlement.103A detailed analysis of jurisprudence of Polish top courts is available in the author’s paper (2020)International Investment Law as an Ally in EU’s Rule of Law Endeavours: an Epic Journey or aMisguided Quest? ESIL Conference Paper Series. https://papers.ssrn.com/sol3/papers.cfm?abstract_id¼3510811.

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Similarly, there is no framework for the BITs’ implementation even roughlycomparable with the one provided for the enforcement of the ECHR, with regard toboth “harder” and “softer”mechanisms. The inter-ministerial committee on certainaspects of IIAs concluded by Poland not only is not concerned with introducinginternal institutional reforms in connection with the arbitral awards but also doesnot show the degree of regularity or activity comparable to the ECHR Committeein any way whatsoever. No other national actors, in particular courts and tribunals,show involvement in the matters of IIL even roughly comparable with the onerelated to ECHR. Notably, there is hardly any literature analyzing the degree offamiliarity of lawmakers and governmental officials with the investment laws.Rather unsurprisingly, there are also little if any traces of examination of invest-ment agreements throughout the legislative process. In effect, there are no knowncases of institutional reforms induced by the rulings of arbitration tribunals thatwould be even roughly comparable to those caused by ECHR, be it in their depth ortheir scope.

The above may well serve as an illustration of the thesis on the practical lack ofIIAs’ effect on the domestic legal system.

Resume

Unlike the IIL, the ECHR is deeply embedded in the national legal systems of theEU Member States. There are many mechanisms providing for both, Convention’sreliance on the domestic legal machinery and, equally, its possibility of influencingit. Regarding the first point, the vision of the court as a quasi-constitutional bodyimplies its subsidiary role vis-à-vis national legal systems. This fact was recog-nized by the CoE parties which decided to further underline the weight of thesubsidiarity principle by their commitment to the Brighton Process that culminatedin the adoption of the Protocol no 15. Even without the declarations and thesubsequent Protocols, however, it would still be clear that the Court would notbe capable of performing its duties without the cooperation of the Member States,due to the constant backlog problems, difficulties connected with mustering evi-dence, etc. In any case, it was demonstrated that ECHR framework is capable ofinfluencing Member States’ legal systems both within the institutional frameworkforeseen for the enforcement of judgments and, independently, by means ofinstitutional (judicial) dialogue. In most EU Member States ECHR enjoys specialstatus, not very much different from the one enjoyed by EU or national constitu-tional law, it may even influence the interpretation of particular constitutions.Execution of Strasbourg judgments very often requires introducing systemicchanges to the domestic legal orders in areas important for the development ofrule of law. It may even happen that certain Member States would end up changingtheir constitutions in order to comply with ECtHR judgments. Hence, from boththeoretical and practical points of view, the Strasbourg court possesses a

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 23

formidable possibility to enhance the functioning of the national judiciary and,thus, to contribute to the rule of law within ECHR states.

The same cannot be said of IIL, which does not offer any comparable mechanismwhatsoever. To begin with, adjudicative decisions of arbitral tribunals are somewhatobscure to national actors, both due to their secrecy and a kind of esoteric flavorattached to them, so that on the national level no one really knows them, safe for thefew ISDS specialists. Secondly, due to the weak incentives for changing national lawsand, particularly, the fact that the awards are enforced in a way similar to judgments ofcommercial courts, they usually do not result in any kind of political process aiming attheir implementation and, consequently, do not create substantial pressure on mod-ernizing national legal systems. In particular, the mission of ATs is limited to renderingthe awards and the system puts no supervisory mechanisms in place. Safe for theregulatory chill effect, there are no known cases of arbitral awards leading to positivechanges in the states’ regulatory frameworks other than modification of its legal andinstitutional instruments for handling foreign investments and investors. Equally, bothIIAs and arbitral awards do not seem to have any influence on national courts’ practicewhatsoever. Therefore it is not possible to find meaningful ways in which IIAs couldreasonably contribute to the protection and enhancement of the rule of law in the EUMember States as it is conceived by the Commission.

The analysis of Poland’s case seems to confirm this conclusion. In the case ofECHR, there are rather elaborate procedures in place which provide for involve-ment of stakeholders representing different public interests and governmentalbranches in the process of the judgments’ implementation, there are also manysofter mechanisms aiming at augmenting the dissemination of the Conventionstandards. The existence of these mechanisms not only increases the nationalactors’ awareness of the Convention standards but, equally, results in a substantialdrop in the number of execution cases monitored by the CoE bodies. Moreover,ECHR enjoys a prominent position in the jurisprudence of Polish Courts, practi-cally nearing to constitutional status. At the same time, neither the number ofexisting documents nor the existing literature would indicate existence of anycomparable interest related to IIAs. Consequently, it could be assumed that theyindeed have no effect on Poland’s institutional developments, perhaps safe forisolated instances of regulatory chill.

In light of the above, it is blatantly clear that the institutional design of the IIAs,along with the practice of their application makes them useless at tackling prob-lems connected to the functioning of the national judiciary. The very same thingsthat make the ISDS attractive to the investors, namely, the depoliticization ofdisputes, their separation from national institutional context, and the possibility ofswift enforcement of pecuniary remedies, make them rather unwieldy for thepurpose of enhancing the quality of national court systems. The above analysismakes it clear that the possible contribution of the IIAs to proper conduct ofnational institutions, courts in particular, responsible for the implementation ofthe EU law, cannot be equated with this of ECHR due to the aforementioneddifferences in the both systems’ institutional design.

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ISDS as a Threat to the Rule of Law

Last but not least, one cannot be oblivious of the IIL’s own sins. At this place, it is notnecessary to recount all the arguments that could be summarized under the commonconcept of backlash against international arbitration104 and to analyze their verac-ity.105 It suffices to invoke the EU’s own documents assessing ISDS mechanism.

Firstly, the Achmea judgment, pertaining specifically to intra EU BIT’s, shouldbe recounted. Since the principle of autonomy of EU law seems to play no role forthe proponents of the ISDS allegedly beneficial contributions to the rule-of-law inthe EU as being merely the expression of CJEU irrational jealousy, for the sake ofargument it shall not be thematized. Even, however, setting aside the autonomyissue, in view of Achmea judgment the mandate of arbitration tribunals to act as theEU rule of law enforcers is doubtful at best, since not only the arbitral tribunalscannot be qualified as courts, but equally their jurisdiction cannot ensure fullapplication of procedural and substantive guarantees foreseen in EU law.106 Indeed,it can be only recollected at this place that at no point have arbitral tribunalsconsidered EU law to play the role of the legal basis for the decisions. Last but notleast, one has to be conscious of the fact that there are at least several cases in whicheither ATs’ awards flew in the face of substantive provisions of EU law, be it state-aidrules as in the infamous Micula case107 or environmental obligations, which werebreached by Germany in order to make a settlement with the investor and avoid acostly defeat before an AT.108

Secondly, EU’s own documents related to the ISDS in EU’s FTAs and the ISDSreform project advanced within the UNCITRAL framework also may not be ignoredas expressing EU’s assessment of ISDS mechanism as such. To begin with, publicconsultations related to TTIP have shown a great deal of concern of the European

104An up-to date overview of fields offering a fertile soil for conflicts between national andarbitration laws may be found in Stoll PT (2018), 267–292.105Such views are opposed mainly by the arbitration practitioners. For an outline of argumentationrepresentative for this way of thinking see Brower Ch, Blanchard S (2014) From “Dealing inVirtue” to “Profiting from Injustice”: the case against “Re-Statification” of investment disputesettlement. Harv Int Law J 55:45–59.106CJEU Judgment of 3 March 2018 in Case C-284/16 Achmea, paras 43–49.107At this place it suffices to recollect the latest episode of this Commission-ATs saga, namelyCommission’s decision to initiate infringement proceedings before CJEU for its failure to recoverthe financial means already paid to the successful investor, see EC Press Release (2018) State aid:Commission refers Romania to Court for failure to recover illegal aid worth up to €92 million. 7December 2018. http://europa.eu/rapid/press-release_IP-18-6723_en.htm.108For description of the case see Ankersmit L (2017) Case C-142/16 Commission v. Germany: thehabitats directive meets ISDS? https://europeanlawblog.eu/2017/09/06/case-c-14216-commission-v-germany-the-habitats-directive-meets-isds/.

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 25

general public towards ISDS clauses as such.109 This severe criticism resulted inserious modifications of the EU’s agenda with regard to ISDS. Consequently, in itsnew projects, the Commission put forward its propositions for a new InvestmentCourt System (ICS).110 According to the Commission the new proposal shouldaddress following deficiencies of traditional ISDS111 (i.e. ISDS as it is defined inECT ant intra-EU IIAs): (i) lack of regard for broadly understood states right toregulate and the public interest (p. 5); (ii) lack of arbitrators’ independence and falseincentives (p. 6); (iii) lack of appellate mechanism capable of generating stable andconsistent case-law thus providing effective guidance for the governments (p. 8). Ithas to be stressed that the outcome of this debate was embodied in ComprehensiveEconomic and Trade Agreement (CETA) between Canada, of the one part, and theEuropean Union and its Member States, being described by the commission as thegold standard agreement.112 Notably, as a matter of principle, this criticism waseventually endorsed by the CJEU in its CETA Opinion.

By all means, these concerns not only do remain valid but, additionally, should beviewed as a guiding principle for EU’s external action, as evidenced by EU’ssubmissions for UNCITRAL Working Group.113 As we may read in the 2017Submission, according to EU the changes to ISDS mechanism are required becauseof its system’s following vices: (i) frivolous and inconsistent interpretation on thepart of arbitral tribunals (paras 21–26); (ii) perceived arbitrators’ lack of impartiality(para 27); (iii) lack of correction mechanisms (paras 28–30); (iv) false incentives inthe ad-hoc arbitrators; selection process (paras 31–32) and (v) system’s lack oftransparency (para 35).114

109European Commission (2015) Commission Staff Working Document Report Online public con-sultation on investment protection and investor-to-state dispute settlement (ISDS) in the TransatlanticTrade and Investment Partnership Agreement (TTIP) SWD(2015) 3 final, Rather unsurprisingly, thisresistance against ISDS was dismissed by some arbitration scholars and practicitioners as misguidedand based on misinformation, prejudice and lack of sufficient understanding among the wider public.As a representative example see Brower ChN (2015) Are fear, disinformation, politics and theEuropean Commission becoming the four horsemen of the apocalypse for international investmentdispute arbitration? Arbitraje: Revista de Arbitraje Comercial y de Inversiones 8:653–686.110See particularly European Commission (2015) Fact sheet reading guide draft text on investmentprotection and investment court system in the Transatlantic Trade and Investment Partnership(TTIP) http://europa.eu/rapid/press-release_MEMO-15-5652_en.htm.111European Commission (2015) Concept paper investment in TTIP and beyond – the path forreform enhancing the right to regulate and moving from current ad hoc arbitration towards aninvestment court. http://trade.ec.europa.eu/doclib/docs/2015/may/tradoc_153408.PDF.112Joint statement Canada-EU Comprehensive Economic and Trade Agreement (CETA) of 29 Febru-ary 2016. Available at: http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154330.pdf.113Submission of the European Union and its Member States to UNCITRALWorking Group III of18 January 2019 and Submission of 12 December 2017A/CN.9/WG.III/WP.145 attached as AnnexI thereto (“COM 2017 Submission”).114In any case, EU’s proposals for the Multilateral Investment Court, appellate mechanism andadjudicators’ selection are being discussed within the framework UNCITRAL Working Group III(see Working Group Meetings minutes and provisory agendas). https://uncitral.un.org/en/working_groups/3/investor-state.

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In its recent CETA opinion,115 CJEU seems to endorse the above conclusions. Atno place does the CJEU dispose of the critique of ISDS’s perceived lack ofindependence and impartiality. Quite the opposite: it underlines the differencesbetween CETA ICS mechanism and traditional ISDS in many places, f. e. by flashingout CETA Tribunal’s similarity to courts rather than ATs (para 243); or CETAadjudicators’ protection against removal (para 225), while underscoring transitorycharacter of certain institutional arrangements “inherited” from traditional ISDS,such as arbitrators’ daily fee (para 239) or lack of regular remuneration (paras 230–231). Similarly, CJEU underscored the role of CETA substantive provisions inallowing for a far greater degree of protection of public interest than in the case oftraditional IIAs (paras 154–156). It may be safely assumed that the CJEU followedin these respects the Opinion of AG Bot.116 Thus, it is evident that CJEU makes herea clear distinction between the anticipated and acceptable ICS and the “traditional”ISDS as condemned in Achmea judgment.

Consequently, regardless of whether and to what extent the EU’s critical stancetowards ISDS is justified,117 it is blatantly clear that in view of the EU’s owndocuments ISDS definitely falls short of EU’s rule of law standards. Thus, old-style IIAs are not suitable for improving the rule of law in Member States.

Addendum: System Operators’ Understanding of UnderlyingProblems

Rounding up, while speaking both of the chances and threats for the rule of law in theEU flowing from application of different international frameworks, one cannot beoblivious of the different backgrounds of system operators. ATs are understood in theinvestment law scholarship as agents of global, decentralized quasi-administrative(regulatory) regime.118 This is mirrored by both the typical interpretation canons,

115CJEU Opinion 1/17 CETA ECLI:EU:C:2019:341 30 April 2019.116AG Bot opinion to Opinion 1/17 CETA 29 January 2019.117At this place it should be stressed that the EU’s position regarding the ISDS reform not only hasnot been endorsed by all the State-parties active with the UNCITRAL framework, but, equally, wassubject to criticism expressed by arbitration practicitioners in both the arbitration literature (see,e.g., Bernardini P (2017) The European Union’s Investment Court System – A Critical Analysis.ASA Bull 4:812–836) and policy papers (see, e.g., reports commenting on the EU’s ICS proposalsand the proposals presented during subsequent UNCITRAL meetings prepared by EuropeanFederation for Investment Law and Arbitration [EFILA]. Available at https://efila.org/publications/). On the other hand, some authors underline that EU’s proposals are too moderate and fallshort of providing sufficient legitimacy to ISDS, see e.g., Diependaele L, De Ville F, Sterckx S(2018) Assessing the normative legitimacy of investment arbitration: the EU’s investment courtsystem. New Polit Econ 24:37–61.118Kingsbury B, Schill SW (2009) Investor state arbitration as governance: fair and equitabletreatment, proportionality and the emerging global administrative law. In: van den Berg J (ed)50 years of of the New York convention: ICCA international arbitration conference, p 5 ff.; see alsoSalacuse JW (2010) The emerging global regime for investment. Harv Int Law J 51(2):427–474.

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where references to jurisprudence of different tribunals, adjudicating on the basis ofother IIAs plays crucial role,119 and the actual experience of the arbitrators, most ofwhom have rather private- than public sector background, not necessarily having anoticeable connection to the EU-member states, their administration or judiciary inparticular.120 This situation is further aggravated by certain practices related toarbitration as dispute settlement mechanism. In most cases, the chairperson is electedeither by the members of the tribunal, previously selected by the parties121 or by theparties themselves122 which results in tribunals being chaired by acclaimed arbitra-tors, mostly coming from within the transnational arbitration community. Further-more, as tribunals decide by majority of votes, the adjudicators all have to be capableof building coalitions with other members of the tribunal. The problem is, thatamong the “heavy-weight” arbitrators deciding the disputes involving EU statesthere is a considerable underrepresentations of EU-nationals, in particular in case ofCEE region.123 In effect, one could say that the arbitral tribunals, in general, are

119See, e.g., Weeramantry JR (2012) Treaty interpretation in investment arbitration. OUP, Oxford[et al], esp. paras 5.30–5.31; Gazzini T (2016) Interpretation of international investment treaties.Hart, Oxford/Portland, p 291 ff.120To name just a few examples from among the most acclaimed arbitrators: prof. GabrielleKaufmann Kohler, who was appointed i.a. in no less than 3 cases against Poland and SlovakRepublic; 2 cases against Hungary1 case against Czechia, Estonia, Germany, Croatia Spain some ofthem of great importance for mutual relations between the EU-law and arbitration law, such asElectrabel v. Hungary, Oostergetel v. Slovak Republic, (see https://investmentpolicy.unctad.org/investment-dispute-settlement), a Swiss national, has been throughout her career a Swiss academicon the field of private international law and a lawyer or arbitrator in various law firms (see the CVavailable at: https://lk-k.com/team/gabrielle-kaufmann-kohler-lawyer/); Mr. Yves Fortier, who satas arbitrator f. e. in at least 2 cases against Czechia, Poland and Estonia 1 against Hungary andGreece, whereby at least the case UPCD v Hungary was of importance (see https://investmentpolicy.unctad.org/investment-dispute-settlement) a Canadian national who for the mostof his professional career worked for big law firms, with short intervals for governmental appoint-ment in international organizations (see the CV available at: https://yfortier.ca/cv/Yves-Fortier-Resume-EN.pdf). Similarly, V. V. Veeder, who sat in 2 tribunals deciding upon claims againstPoland and Cyprus, 1 against Slovak Republic, Hungary, Romania, Estonia, Spain and Bulgaria,including such important cases like Electrabel v Hungary or Achmea v. Slovakia https://investmentpolicy.unctad.org/investment-dispute-settlement is a QC with an outstanding experienceas a barrister in commercial disputes and arbitrations (https://primefinancedisputes.org/expert/v-v-veeder-qc). Furthermore, all these three persons cases against today EU Member States constitutedfar less than one third of all the adjudicated cases.121See Article 9 para 1 of UNCITRAL Arbitration Rules (2010).122See Article 37 (2) (b) ICSID Convention.123See in-depth empirical study of Langford M, Behn D, Lie RH (2017) The revolving door ininternational arbitration. J Int Econ Law 20:310–314, for more information on the general involve-ment of arbitrations with big business see Eberhardt P, Olivet C (2012) Profiting from injustice Howlaw firms, arbitrators and financiers are fuelling an investment arbitration boom. Corporate EuropeObservatory, Brussels/Amsterdam.

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chaired mostly by legal experts with a) relatively little EU-law expertise and b) littleexperience in either public service or the court work.124

Consequently, in general, the IIAs are interpreted and applied also in the contextof sensitive intra-EU matters by people with little connection to EU, its practices,and values, which, in itself, does not to be much of an incentive to a deepenedinstitutional dialogue with both Member States and EU institutions.

This builds a visible contrast to the ECtHR embedded in the regional context alsofrom the organizational point of view. Not only do the judges (and part of theauxiliary staff, legal clerks in particular) have to represent all member states, butwith relation to their careers they are mainly former governmental officials, judgesand academics, with a substantive background in (European) public law.125 This isreflected by their judicial practice in which they often refer to their own legaltraditions and jurisprudence.126 This “osmosis” between the Convention andnational (as well as EU) legal systems is further facilitated by many institutionalarrangements. To name just a few examples, one has a lot of professional confer-ences taking place under the roof of European institutions, covering also topicscommon to different national and international systems and bringing together judgesfrom different courts.127 Various courts’ representatives on many occasions

124See an empirical study conducted by Pauwelyn J (2015) The rule of law without the rule oflawyers? Why Investment Arbitrators are from Mars, Trade Adjudicators are from Venus. CTEI-working paper 2015-05 http://repository.graduateinstitute.ch/record/293200/files/CTEIWP-2015-05_Pauwelyn.pdf comparing the composition of ICSID and WTO Panels, showing that in case ofthe former in relation to the latter (i) the adjudicators coming from the “old” EU and US had muchmore dominant position; (ii) substantially less people had a noticeable public employment back-ground, and (iii) there were considerably more ostensible division between the star adjudicators andthe rest of arbitrators.125See the judges’ curricula. Available at http://www.echr.coe.int/Pages/home.aspx?p¼court/judges. A vast majority of them served a noticeable amount of time as public servants, experts,judges or clerks in either their home states or international organizations; most of the judges withacademic background holding chairs in public law (particularly, but not only with some Europeanconnotations). Of the small group of judges comprising counsels, a substantial part either wasinterested rather with criminal than commercial law, or performed quasi-public functions assupreme-court advocates.126See Petkova B (2014) Three levels of dialogue in precedent formation at the CJEU and ECtHR.In Dzehtsiarou K (ed) Human rights law in Europe: the influence, overlaps and contradictions of theEU and the ECHR. Routledge, New York, p 80 and Mahoney P (2004) The comparative method injudgements of the European Court of Human Rights: reference back to national law. In: Canivet G,Andenas M, et al (eds) Comparative law before the courts. BIICL, London, p 135 ff.127As an example see f. e. the annual conference held in ECHR under the name Dialogue of judges.https://www.echr.coe.int/Pages/home.aspx?p¼court/events/ev_sem&c¼; but see also analytical pro-jects with the participation of national judges aimed specifically at the issue of judicial dialogue inEurope, conducted under the umbrella of European Institutions (EC DG Justice) between 2013 and2014. https://www.eui.eu/Projects/CentreForJudicialCooperation/Projects/EuropeanJudicialCooperationinFR/EuropeanJudicialCooperationinthefundamentalrightspractice.

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acknowledge their commitment to a common enterprise which is the protection offundamental rights in Europe.128 There are also many international associations ofjudges, comprising both EU and CoE member states, providing suitable for thefurther development of European judicial dialogue and, thus, a kind of Europeanlegal space.129 One should also remember about various programs aimed at famil-iarizing national judges (being the principal operators of both ECHR and EU law)with the real functioning of the European Courts, secondments to the ECHR being amost prominent example.130 The above is mirrored by the scholarly writings ofEurope’s top courts’ judges, demonstrating a deep conviction of the necessity ofcooperation between Europe’s top courts.131

To sum up, an insight into the matters related to personal connections betweenECHR and ATs on the one hand and the EU and its Member states judiciary on theother, would only augment the conclusions drawn from the earlier considerationsregarding the structural features of ECHR and IIL frameworks and speak stronglyagainst the possibility of considering IIAs as a fall-back system for the protection ofrule of law within EU.

128See, e.g., a presentation held by Dean Spielmann, president of the ECHR in FRAME, Brusseleson 27thMarch 2017 The Judicial Dialogue between the European Court of Justice and the EuropeanCourt of Human Rights Or how to remain good neighbours after the Opinion 2/13, in particular pp.11 ff. of the paper. Available at http://www.fp7-frame.eu/wp-content/uploads/2017/03/ECHRCJUEdialog.BRUSSELS.final_.pdf; or the speech given by CJEU Court’s president K.Lenaerts for the opening of ECHR judicial year 2018 The ECHR and the CJEU: Creating Synergiesin the Field of Fundamental Rights Protection. https://www.echr.coe.int/Documents/Speech_20180126_Lenaerts_JY_ENG.pdf, on generally shared roots and goals of both courts see MartinicoG, Pollicino O (2012) The interaction between Europe’s legal systems. Judicial dialogue and thecreation of supranational laws. Edward Elgar, Cheltenham et al, p 138.129See list of such organizations available on the webpage of European Network of Councils ofJudiciary. https://www.encj.eu/index.php?option¼com_content&view¼article&id¼38&Itemid¼94&lang¼en. Generally on the topic of dialogue of judges see de Claes M, de Visser V(2011) Are you networked yet? On dialogues in European judicial networks. Utrecht Law Rev8:100–114.130A practice expressly encouraged at pt. 20 b) of the 2012 Brighton Declaration.131See f.e former president of ECHR and current judge in the EU General Court speech SpielmannD (2017) The judicial dialogue between the European Court of Justice and the European Court ofHuman Rights or how to remain good neighbours after the Opinion 2/13. http://www.fp7-frame.eu/wp-content/uploads/2017/03/ECHRCJUEdialog.BRUSSELS.final_.pdf; speech of CJEU presidentLenaerts K (2018) The ECHR and the CJEU: creating synergies in the field of fundamental rightsprotection. In: Dialogue between judges. European Court of Human Rights Council of Europe,Strasbourg, pp. 57–65; articles of deputy president of the German Federal Constitutional CourtKirchhof P (2011) Grundrechtsschutz durch europäische und nationale Gerichte. NJW (51):3681–3686; former judge in Polish Constitutional Tribunal and ECHR Garlicki L (2015) Ochrona prawjednostki w XXI w. (globalizacja-standardy lokalne-dialog między sądami). In: Gdulewicz E,Orłowski W, Patyra S (eds) 25 lat transformacji ustrojowej w Polsce i w Europie Środkowo-Wchodniej. UMCS University Press, Lublin, pp. 161–180.

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Conclusion: Two Separate Orders

The above analysis shows clearly that the claims regarding IIAs’ alleged beneficialeffect to the development of rule of law within the EU (as it is understood by theCommission), are unsubstantiated. As evidenced above, regardless of the problemsrelated to its application and elusive normative basis, and the scope of EU’scompetences, after all, what the EU rule of law principle is about, is supportingwell-functioning institutions on the domestic level, in particular, effective andindependent courts capable of supervising the application of EU law. Therefore, inorder to be seen as beneficial to the EU’s rule of law principle, an internationalframework would have to ensure a tangible influence on Member States’ domesticlegal systems, in particular institutional design of the courts. IIL is not capable ofsuch contribution. In any case, punishing Member States for their trespasses againstIIL is surely not enough.

This is only more visible in comparison with ECHR. Throughout the Conven-tion’s long existence, an elaborate system for the reception of ECHR judgments onthe domestic level of many Member states was created. Even being mindful of all theimperfections connected to the practical hurdles to the ECHR’s effectiveness, onehas to admit that the mechanism it created has formidable capabilities of influencingnational legal systems. Generally speaking, at least in the case of EUMember States,the Convention tends to be taken into account by all the public powers in variousstages of the law application, from the legislative process till the adjudication.Furthermore, there are many mechanisms on domestic level ensuring familiarity ofthe national stakeholders with the Convention. Similarly, ECHR’s institutionaldesign provides for incentives for domestic actors to engage in meaningful institu-tional and, particularly, judicial dialogue. This is evidenced by many examples ofECtHR effectively forcing Member States to change their established legislative andjudicial practices and introduce new legal solutions. This domestic effect is furthercorroborated by the supervisory mechanisms existing on the international level.Consequently, regardless of the special status enjoyed by the ECHR in EU law(Article 6 TEU, Article 52 para 4 CFR), the appreciation of ECHR’s role inenhancing rule of law in EU is confirmed also by its actual effectiveness.

All this is absent in the IIL. Delivering on its promises, it creates a somewhat self-sufficient system, insulated from any external influence. Consequently, identifyingany tangible traces of the influence of the tribunals on the Member States’ domesticlegal systems, be it in the form of institutional changes or meaningful judicialdialogue, would be rather difficult. Equally, unlike ECHR, IIAs do not provide fora supervisory mechanism capable of overseeing introducing institutional reforms inthe Member States in the aftermath of arbitral awards. Consequently, it can be onlyhardly conceived how such a system could be viewed as beneficial to enhancing theEU rule of law principle vis-à-vis the Member States.

Indeed, this alone would be enough to discredit the claims regarding IIAs’ allegedbeneficial effects on the institutional safeguards for the rule of law on the domesticlevel. But there is something more: IIL’s own rule of law problems, related to the“perceived” systemic lack of adjudicator’s independence; its remoteness from

International Investment Law: A Self-Proclaimed Ally in Commission’s Rule. . . 31

judicial systems in the proper sense; its inability to take into account noneconomicvalues or to provide a consistent case law and so on. All this is acknowledged, be itwith certain caveat, by the CJEU and official EU-documents. Consequently, it ishard to imagine in what way could the IIL meaningfully contribute to EU rule of law.

Cross-References

▶EU Investment Agreements: A New Model for the Future?▶ From Arbitration to the Investment Court System (ICS): Comparing CETA,EVIPA, and TTIP

▶ ISDS Independence▶Regulatory Chill and the Effect of Investor State Dispute Settlements▶ Selection, Bias and Ethics of Arbitrators in Investor-State Arbitration▶The Importance of Transparency for Legitimizing Investor-State DisputeSettlement

Acknowledgment This chapter is based upon my presentation A Wolf in the Sheep’s Clothing:International Investment Law and the Rule of Law in Europe which was made during the 2019 ESILAnnual Research Forum in Göttingen, and the conference paper was published in the ESILConference SSRN Paper Series.

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