The European Commission has approved a proposal for a new and transparent system for resolving disputes between investors and states.

The Investment Court System would replace the existing investor-to-state dispute settlement (ISDS) mechanism in all ongoing and future EU investment negotiations, including the EU-U.S. talks on a Transatlantic Trade and Investment Partnership (TTIP).

The proposal received substantial input received from the European Parliament, EU member states, national parliaments, and stakeholders through a public consultation process.

“The Investment Court System is intended to ensure that all actors can have full trust in the system,” said an EC statement. “Built around the same key elements as domestic and international courts, it enshrines governments’ right to regulate and ensures transparency and accountability.”

“With our proposals for a new Investment Court System, we are breaking new ground,” added EC First Vice-President Frans Timmermans. “The new Investment Court System will be composed of fully qualified judges, proceedings will be transparent, and cases will be decided on the basis of clear rules. With this new system, we protect the governments’ right to regulate, and ensure that investment disputes will be adjudicated in full accordance with the rule of law.”

Under the proposal, the Investment Court System would be composed of an initial tribunal and an appeal tribunal. The appeal tribunal would operate on similar principles to the WTO Appellate Body. The ability of investors to take a case before the tribunal would be precisely defined and limited to cases such as targeted discrimination on the base of gender, race or religion, or nationality, expropriation without compensation, or denial of justice. Governments’ right to regulate would be enshrined and guaranteed in the provisions of the trade and investment agreements.

The EC will now have discussions with the council and the European Parliament. Once the text of the proposal has been discussed, it will be presented as an EU text proposal in the EU-U.S. trade talks and will be used in other ongoing and future negotiations.

The commission will also start work on setting up a permanent International Investment Court. “The objective is that over time the International Investment Court would replace all investment dispute resolution mechanisms provided in EU agreements, EU member states’ agreements with third countries, and in trade and investment treaties concluded between non-EU countries,” said the EC statement.

The Investment Court System is delivering on an EC promise to propose a new, modernized system of investment courts, subject to democratic principles and public scrutiny, according to EU trade commissioner Cecilia Malmström. We want to establish a new system built around the elements that make citizens trust domestic or international courts,” she added. “I’m making this proposal public at the same time that I send it to the European Parliament and the member states. It’s very important to have an open and transparent exchange of views on this widely debated issue.”