My Lords, I turn to Amendment 15, in the names of the noble Baroness, Lady Kramer, and the noble Lord, Lord Purvis, and Amendment 19, in the name of the noble Lord, Lord Stevenson. These proposed new clauses concern the approach taken to investment protection and the settlement of investment disputes where these provisions are included in free trade agreements. I will try to restrict my comments to points germane to these amendments.
The UK has included these provisions in more than 90 bilateral investment treaties, which have been crucial for our overseas investors. The UK is one of the most open countries for investments. That is because one of the great attractions for foreign investment is the fair and independent legal system underpinning domestic and foreign investment. We look to use investment provisions in trade agreements to guarantee equivalent levels of legal certainty for our businesses expanding overseas. These businesses make sizeable investments and incur significant risks. It is therefore vital that they can operate in a free and fair environment with a means of independent redress where treaty commitments have been breached.
In response to points made by the noble Lord, Lord Hendy, and the noble Baroness, Lady Jones of Moulsecoomb—not that I expect I will cause noble Lords to change their minds, sadly—many major British companies tell me that the existence of ISDS in certain overseas countries is absolutely germane to their decision to invest in that country. I recognise that noble Lords are concerned that these interests are correctly balanced in our free trade agreements with the Government’s right to regulate in the public interest. That is an objective I share. I was grateful to my noble friend Lord Lansley for answering the noble Baroness, Lady Kramer, on Canada in such depth and with such erudition—in words I could not hope to better.
Amendment 15 would permit the UK to sign a trade agreement only if it commits all parties to pursue the establishment of a multilateral investment tribunal system and an appellate mechanism for the settlement of investment disputes. It would also require all such disputes against the UK to be heard by UK domestic courts until such a system is in place. Your Lordships will no doubt be aware that not all trade agreements include investment protection and dispute settlement. It would not be appropriate to require all trade agreements to include a commitment to pursue a multilateral investment tribunal system or for disputes to be heard in UK domestic courts. In the absence of such a system, including this requirement would only hinder the progress of UK trade policy.
The UK is fully engaged in negotiations at the UN Commission on International Trade Law on the options to reform investor-state dispute settlement and the possibility of establishing a multilateral investment court
—MIC. I confirm to the noble Lord, Lord Purvis, that the process of triangulation continues, and we have not yet come to a conclusion on the most appropriate way forward. Binding the hands of both the UK and our treaty partners before negotiations are concluded may not be in either their or the UK’s best interests, especially, as my noble friend Lord Lansley noted, some of our major trading partners are against the concept of the MIC. My noble friend Lord Caithness asked about ISDS and China. I confirm, perhaps surprisingly, that we have had a bilateral investment treaty with China since 1986. However, perhaps to the relief of noble Lords, there has never been a case brought against the UK under that treaty—nor do I expect there to be.
As for the requirement for UK courts to hear investment disputes, depending on the circumstances foreign investors in the UK will already have a means to legal redress against the Government without resorting to ISDS. It is likely that if we impose a requirement for disputes to be handled only by national courts, this will need to be agreed on a reciprocal basis with treaty partners. This would then require disputes brought by UK investors against a host state to be heard in their national courts, undermining the access to independent ad hoc arbitration for UK investors which has successfully supported UK investors worldwide for the past 40 years. I have no doubt that our major investing companies would oppose this.
ISDS in its current form is valuable for UK businesses investing overseas. This in turn benefits UK citizens as their shareholders. Conversely, the UK has never been a respondent in an investment dispute before a tribunal that has gone against it. The UK’s existing stock of bilateral investment treaties all contain ad hoc arbitration as the form of dispute settlement. Arbitration is a widely used means of resolving disputes between parties, including under international and domestic law.
Amendment 19 would similarly require the UK to pursue the establishment of a multilateral investment tribunal system and appellate mechanism. It would also result in the UK being unable to implement trade agreements containing ISDS unless the subject matter of a claim is something under which UK domestic law offers redress to UK persons. It would require the Government to approve a mandate for a free trade agreement containing ISDS provisions through regulations of both Houses of Parliament.
I will start with the redress available to investors under domestic law. The amendment overlooks the fact that, depending on circumstances, foreign investors in the UK already have the means to seek legal redress against the UK Government through domestic law, without resorting to ISDS. I humbly suggest that is one reason cases have never been brought against the UK under ISDS. As I mentioned, UK courts are regarded internationally as reliable and independent. It is worth reiterating that this is one reason the UK has never been a respondent in an ISDS case.
The amendment requires that the Government approve the inclusion of ISDS provisions through both Houses of Parliament. The Government have already committed to publishing their negotiating objectives, along with an initial impact assessment and a response to any public consultations, before entering negotiations. I humbly suggest that noble Lords know well that, as
required under the CRaG procedure, the Government will lay the final treaty text alongside an explanatory memorandum before both Houses for 21 sitting days. This House has the power to prevent ratification should the ISDS provisions in the proposed treaty not be to the satisfaction of noble Lords. The House of Commons can do so indefinitely.
On the point raised by my noble friend Lady McIntosh about dispute resolution in any EU agreement, I am afraid that, like me, noble Lords will have to wait and see. I hope this reassures noble Lords and, on that basis, I ask for the amendment to be withdrawn.
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