ICS EU proposal

The Investment Court System (ICS) is a reform model first put forward by the European Commission in 2015 as a response to widespread criticism of traditional investor-state dispute settlement (ISDS). The Commission, then led by Trade Commissioner Cecilia Malmström, proposed ICS during the negotiations over the Transatlantic Trade and Investment Partnership (TTIP) with the United States and incorporated it into the Comprehensive Economic and Trade Agreement (CETA) with Canada and the EU-Vietnam Investment Protection Agreement.

Key features that distinguish ICS from conventional ISDS arbitration include:

• A permanent roster of judges appointed by the contracting parties, rather than party-appointed arbitrators chosen case-by-case.
• A two-tier structure, with a tribunal of first instance and a standing appellate tribunal capable of reviewing errors of law and manifest errors of fact.
• Stricter ethics rules prohibiting judges from acting simultaneously as counsel in other investment cases (addressing the "double-hatting" critique).
• Explicit reaffirmation of the right to regulate in the public interest, intended to narrow the scope for claims against legitimate policy measures.

ICS is conceived by the EU as a transitional step toward a Multilateral Investment Court (MIC), a project pursued under the auspices of UNCITRAL Working Group III on ISDS reform since 2017.

The proposal has been controversial. In Opinion 1/17 (30 April 2019), the Court of Justice of the EU ruled CETA's ICS compatible with EU law, clearing a major legal hurdle. However, civil society groups argue ICS still privileges foreign investors with a parallel justice system, while some investor and arbitration practitioners argue it undermines flexibility. Belgium's Wallonia region famously delayed CETA signature in 2016 partly over ICS concerns. As of the early 2020s, the CETA ICS provisions remain unratified by several EU member states and have not yet entered into force.