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CIArb Features

EU-Japan Partnership Agreement

31 August 2017 Features

EU – Japan Partnership Agreement

At the 24th Summit between the EU and Japan held in Brussels on 6 July, leaders of both parties reached two agreements, an Economic Partnership Agreement (EPA) as well as a Strategic Partnership Agreement. The EPA will be the most important bilateral trade agreement concluded by the EU, which also contains a specific commitment to the Paris climate agreement. The economic agreement will cover roughly 40% of the exported goods and 30% of the global GDP, ultimately aimed at removing tariffs from 99% of the goods traded between the EU and Japan. The Strategic Partnership will enhance cooperation between the EU and Japan, by providing a binding framework, covering existing and future work.

Investor-State Dispute Settlement (ISDS)

Even though the whole texts have not yet been finalised, the existing draft provides a good understanding of the approach taken to ISDS in the Economic Partnership Agreement. The provisional documents provide for a basic approach to investment protection and liberalisation, by outlining similar provisions to the ones contained in the other investment treaties. However, even these basic provisions fail to provide a definition for “treatment” in the paragraphs addressing “National Treatment and Most-Favoured-Nation Treatment”. It is for this reason that the dispute settlement provisions have received criticism, as they prevent investors from claiming the benefit of standard ISDS procedures without clarifying what procedures are in fact applicable.

Investment Court System (ICS)

In a recently published fact sheet, the EU Commission declared that “for the EU ISDS is dead”, noting that the ICS is pursued by the EU in all trade agreements and that this will also be the case with Japan. To support its position, the EU highlighted several benefits of the ICS, such as predictability, public oversight, transparency and highly qualified, state appointed judges. It is not yet clear whether Japan will follow the ICS, especially since most of its international investment agreements contain ISDS mechanisms. Japan is only known to have agreed to the exclusion of the ISDS system in its economic partnership agreement with Australia, resorting to domestic courts while a dispute resolution agreement would be reached.

It remains to be seen whether the EU and Japan will reach an agreement on investment protection dispute resolution. A positive agreement will complete the already existing innovative provisions regarding environmental protection, sustainable development and governance, providing more certainty for investors.

Sabina Adascalitei LLB, LLM, MCIArb

Research and Academic Affairs Coordinator