Abstract
This chapter explores the development of EU investment agreements as a new paradigm of international investment agreements. It argues that on the one hand, the EU has gradually become an assertive global actor in the field of foreign investment: Firstly, EU agreements aim to restore the lost legitimacy of investment protection by offering innovative substantive rules on foreign investment protection that provide a clearer balance between investors’ rights and recipient countries’ public policies. Moreover, the EU pioneers a radical approach toward the preservation of a strong dispute settlement system for investment disputes, offering changes to its nature that aim to address its legitimacy and transparency shortcomings. Secondly, EU agreements enhance the scope and extent of investment liberalization, address the key concerns of foreign investors in the modern era, and shape the future of investment liberalization norms. On the other hand, it is argued that there are constraints to the EU’s ambition to lead the debate toward the transformation of international investment law. The most important one stems from the EU’s own constitutional framework. By looking into the effects of Opinions 2/15 and 1/17, it is argued that the expansive understanding of the principle of autonomy of EU law results in reduced jurisdiction of arbitral tribunals in a manner that is both inefficient and patronizing.
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Notes
- 1.
Article 207 TFEU together with Article 3(1)(e) TFEU confer exclusive competence to the EU in the field of the Common Commercial Policy, which since 2009 covers also FDI. For an early and visionary analysis, see Chaisse J (2012) Promises and pitfalls of the European Union policy on foreign investment – how will the new EU competence on FDI affect the emerging global regime. J Int Econ Law 15(1):51–84.
- 2.
Commission, “Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: Towards a Comprehensive European International Investment Policy” (Investment Policy Communication) Brussels 7 July 2010, COM (2010) 343 http://trade.ec.europa.eu/doclib/docs/2010/july/tradoc_146307.pdf
- 3.
European Parliament Resolution of 6 April 2011 on the Future European International Investment Policy (2010/2203IINI); Council of the European Union, Conclusions On A Comprehensive European International Investment Policy, Luxembourg, 25 October 2010
- 4.
Investment Policy Communication (n 2) 5
- 5.
Regulation (EU) No 1219/2012 of the European Parliament and of the Council of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries, OJ2012, L351/40
- 6.
EU Council, 3109th General Affairs Council Meeting, Press Release (12 September 2011) 13
- 7.
Commission Press Release, “European Commission Launches Public Online Consultation on Investor Protection in TTIP” (27 March 2014)
- 8.
On criticism of ISDS, see indicatively Hachez N, Wouters J (2013) International investment dispute settlement in the twenty-first century: does the preservation of the public interest require an alternative to the arbitral model? In: Baetens F (ed) Investment law within international law. Cambridge University Press, pp 417–449.
- 9.
Regulation No 912/2014 of the European Parliament and of the Council Establishing a Framework for Managing Financial Responsibility Linked to Investor-State Dispute Settlement Tribunals Established by International Agreements to Which the European Union Is Party, OJ L257/121, 28 August 2014
- 10.
See Dimopoulos A (2014) The involvement of the EU in investor state dispute settlement: a question of responsibilities. Common Mark Law Rev 51:1671.
- 11.
See, for example, the contributions to the special issue of Transnational Dispute Management 1 (2016), which is devoted to CETA; Reinisch A (2014) The EU on the investment path – Quo Vadis Europe? The future of EU BITs and other investment agreements. Santa Clara J Int Law 12:111.
- 12.
The Comprehensive and Economic Trade Agreement (CETA), available at http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter/
- 13.
EU-Singapore FTA and Investment Protection Agreement, available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=961
- 14.
EU-Vietnam FTA and Investment Protection agreement, available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437
- 15.
EU- Mexico FTA, text available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1833
- 16.
EU-Japan FTA, text available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1684
- 17.
The EU-Mercosur FTA has not yet been public, but the content of the agreement in principle can be found at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1833
- 18.
On the political difficulties concerning the conclusion of CETA, due to its initial rejection by the Waloon regional parliament, see EU and Canada to sign trade pact after Belgians strike key deal, available at http://www.reuters.com/article/us-eu-canada-trade-idUSKCN12S1RR
- 19.
Opinion 2/15, ECLI:EU:C:2017:376
- 20.
Belgium is asking the CJEU to assess the compatibility of the ICS with (1) the exclusive competence of the CJEU to provide the definitive interpretation of European Union law, (2) the general principle of equality and the “practical effect” requirement of European Union law, (3) the right of access to the courts, and (4) the right to an independent and impartial judiciary. See https://diplomatie.belgium.be/sites/default/files/downloads/ceta_summary.pdf
- 21.
Opinion 1/17, ECLI:EU:C:2019:341
- 22.
Opinion procedure 1–17 [2019] ECLI:EU:C:2019:72, Opinion of AG Bot
- 23.
Opinion 2/15, above note 19
- 24.
See Dimopoulos A (2019) European Union. In: Krajewski, Hoffmann (eds) Research handbook on foreign direct investment. Edward Elgar, Chap 14.
- 25.
Draft Convention on the protection of Foreign Property 1967, OECD. (1960) Draft convention on investments abroad. J Public Law 9:116
- 26.
On the evolution of ISDS mechanisms, see Juillard P (1994) L’evolution des sources du droit des investissements. Recueil des Cours de l’Academie de droit international de la Haye 250:9.
- 27.
See European Parliament Resolution 2013/2674 of 9 October 2013; Lavranos N (2013) In defence of member states BITs gold standard: the regulation 1219/2012 establishing a transitional regime for existing extra-EU BITs: a member state’s perspective. Transnational Dispute Settlement 1
- 28.
Opinion1/17, above note 14
- 29.
Opinion 1/17, para 119
- 30.
See Dimopoulos in Schill.
- 31.
Opinion 1/17, para 130–132. See also AG Bot, Opinion 1/17, paras 136–141.
- 32.
Hepburn J (2017) Domestic law in international investment arbitration. OUP, Chaps 2 and 3
- 33.
See, for example, the PCIJ judgment in Certain German Interests in Polish Upper Silecia (Germany v Poland), Series A No 7 (1926) 19. In the context of investment law, see indicatively Electrabel SA v Hungary, (ICSID Case No ARB07/19) Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012, p. 4.129.
- 34.
E.g., Bayview v Mexico (ICSID Case No ARB (AF)/05/01, Award 19 June 2007, para 109–118; Mobil Investments Canada v Canada (ICSID Case No ARB(AF)/07/04) Decision on Liability and on Principles of Quantum, 22 May 2012, para 354. See also Douglas Z (2003) The hybrid foundations of investment treaty arbitration. Br Yearb Int Law 74:151, at 194–196
- 35.
Opinion 1/17, para 145–150
- 36.
Ibid., paras 145–146
- 37.
Ibid., paras 152–159
- 38.
On how autonomy is used by the CJEU to assert a hegemonic role over international courts, see de Witte B (2014) A selfish court? The court of justice and the design of international dispute settlement beyond the European Union. In: Cremona M, Thies A (eds) The European court of justice and external relations law, constitutional challenges. Hart, p 33
- 39.
Krajewski M (2013) New functions and new powers for the European Parliament: assessing the changes of the common commercial policy from the perspective of democratic legitimacy. In: Bungeberg M, Hermann C (eds) Common commercial policy after Lisbon. Springer, p 67
- 40.
Above note 3
- 41.
Dimopoulos A (2011) EU foreign investment law. Oxford University Press, pp 85–94
- 42.
Agreement establishing an association between the European Community and its Member States, of the one Part, and the Republic of Chile, of the other part, [2002] OJ L352
- 43.
Maydell N (2007) The European community’s minimum platform on investment or the Trojan horse of investment competence. In: Reinisch A, Knahr C (eds) International investment law and context. Eleven, p 75
- 44.
Economic Partnership Agreement between the CARIFORUM States, of the one part, and the European Community and its Member States, of the other Part, [2008] OJ L289/3
- 45.
De Mestral A (2015) Pre-entry obligations under international law. In: Bungeberg et al. (ed) International Investment Law – a handbook. Hart Nomos, p 685
- 46.
EU Trade Strategy, “Trade for all, Towards a more responsible trade and investment policy”, available at http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf
- 47.
Investment liberalization is also dealt with separately in the IIAs with Singapore (Chap. 8), Vietnam (Chap. 8) and Mexico (Chap. XX, section A)
- 48.
The EU agreements with Mexico, Vietnam and Singapore adopt a positive list approach.
- 49.
Article 8.15 CETA. A negative list approach is also adopted in the recent EU-Japan FTA that includes commitments only on investment liberalization and not on investment protection (Article 8.12 of EU-Japan FTA).
- 50.
E.g., Article 8.4 CETA; Article 8.10 EU-Singapore FTA
- 51.
Article 17.6 of EU-Mexico FTA provides that
In the sectors or subsectors where market access commitments are undertaken, neither Party shall adopt or maintain, with respect to market access through establishment or operation by investors of the other Party or by enterprises constituting covered investments, either on the basis of its entire territory or on the basis of a territorial subdivision, a measure that:
- (a)
limits the number of enterprises that may carry out a specific economic activity, whether in the form of numerical quotas, monopolies, exclusive rights or the requirements of an economic needs test;
- (b)
limits the total value of transactions or assets in the form of numerical quotas or the requirement of an economic needs test;
- (c)
limits the total number of operations or on the total quantity of output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test;
- (d)
restricts or requires specific types of legal entity or joint venture through which an investor of the other Party may carry out an economic activity;
- (e)
limits the total number of natural persons that may be employed in a particular sector or that an enterprise may employ and who are necessary for, and directly related to, the performance of economic activity in the form of numerical quotas or the requirement of an economic needs test.
- (a)
- 52.
On the interpretation of Art XX GATT, see indicatively Mavroidis P (2007) Trade in goods. pp 254–286.
- 53.
Lévesque C (2013) The challenges of ‘Marrying’ investment liberalisation and protection in the Canada-EU CETA. In: Bungenberg M, Reinisch A, Tietje C (eds) EU and investment agreements. Nomos, pp 121–144
- 54.
Article 29.2 EU-Singapore FTA; Article 15.2 EU-Vietnam FTA
- 55.
Article 8.18 CETA; Article 19.2 EU-Mexico FTA
- 56.
Parliament Investment Resolution (n 3) paras 24–25
- 57.
Henckels C (2016) Protecting regulatory autonomy through greater precision in investment treaties: the TPP, CETA, and TTIP. J Int Econ Law 19:25
- 58.
Art 8.9 CETA; Article 17.1 EU-Mexico FTA, 17.1; Article 2.2 EU Singapore FTA; Article 2.2. EU-Vietnam FTA. For example, Article 8.9 CETA provides that “the Parties reaffirm their right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, safety, the environment or public morals, social or consumer protection or the promotion and protection of cultural diversity.”
- 59.
For example, Article 2.2.2 EU- Vietnam FTA
- 60.
European Commission Communication, “Trade for All – Towards a more responsible trade and investment policy”, COM(2015) 497 final; European Commission, “Concept Paper: Investment in TTIP and beyond – The Path for Reform Enhancing the Right to Regulate and Moving from Current ad hoc Arbitration towards and Investment Court”
- 61.
Titi C (2019) The right to regulate. In: Mbengue, Schacherer (eds) Foreign investment under the Comprehensive Economic and Trade Agreement (CETA). Springer International Publishing, p 171
- 62.
The Preamble to CETA provides among others that “… the provisions of this Agreement preserve the right of the Parties to regulate within their territories and the Parties’ flexibility to achieve legitimate policy objectives, such as public health, safety, environment, public morals and the promotion and protection of cultural diversity”
- 63.
For example, Article G-1(3) Canada-Chile FTA; Article 9 Switzerland-Georgia BIT
- 64.
De Brabandere E (2017) “States” Reassertion of control over international investment law (Re)Defining “Fair and Equitable Treatment and Indirect Expropriation”. In: Kulick (ed) Reassertion of control over the investment treaty regime. CUP, p 288. See also Kläger, above note 32, 246–249. Cross reference to other relevant chapters in the book?
- 65.
For example, Article 8.10.2 CETA provides that
- 1.
Each Party shall accord in its territory to covered investments of the other Party and to investors with respect to their covered investments fair and equitable treatment and full protection and security in accordance with paragraphs 2 through 6.
- 2.
A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 if a measure or series of measures constitutes:
- (a)
denial of justice in criminal, civil or administrative proceedings;
- (b)
fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings;
- (c)
manifest arbitrariness;
- (d)
targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;
- (e)
abusive treatment of investors, such as coercion, duress and harassment; or
- (f)
a breach of any further elements of the fair and equitable treatment obligation adopted by the Parties in accordance with paragraph 3 of this Article.
- (a)
- 1.
- 66.
Article 8.10.3 CETA
- 67.
On the scope of International minimum standard, see Kläger R (2011) Fair and equitable treatment in international investment law. Cambridge University Press, esp., pp 53–78.
- 68.
For example, Occidental Exploration and Prod. Co. v Republic of Ecuador, UNCITRAL, LCIA Case No UN3467, Final Award, 1 July 2004
- 69.
For example, Article 9.4.2(e) of EU-Singapore FTA
- 70.
For a detailed analysis of the law on legitimate expectations, see Wongkaew T (2019) Protection of legitimate expectations in investment treaty arbitration: a theory of detrimental reliance. CUP.
- 71.
See chapter (cross reference).
- 72.
Annex 8-A CETA; ‘Annex on Expropriation’ EU Mexico FTA; Annex 4 EU Vietnam FTA; Annex 1 EU Singapore FTA
- 73.
Annex 8-A, article 2 CETA
- 74.
For example, Annex 8-A, article 2(d) of CETA
- 75.
For example, Annex 9-A, article 2 of EU-Singapore FTA
- 76.
For a broader review of expropriation provisions under EU IIAs, see De Nanteuil A (2019) Expropriation. In: Mbengue, Schacherer (eds) Foreign investment under the Comprehensive Economic and Trade Agreement (CETA). Springer International Publishing.
- 77.
For a detailed review of ISDS criticism, see Bungenberg M, Reinisch A (2018) From bilateral arbitral tribunals and investment courts to a multilateral investment court. Springer.
- 78.
European Commission, Concept Paper, Investment in TTIP – the path for reform, 5 May 2015, available at http://trade.ec.europa.eu/doclib/docs/2015/may/tradoc_153408.PDF
- 79.
The European Commission commenced a new public consultation on possible options for multilateral reform of investment dispute resolution, including the possible establishment of a permanent Multilateral Investment Court. European Commission, Impact Assessment on the Establishment of a Multilateral Investment Court for investment dispute resolution, 1 August 2016, available at http://trade.ec.europa.eu/doclib/docs/2016/october/tradoc. For a critical review, see Chaisse J, Vaccaro-Incisa M (2018) The EU investment court: challenges on the path ahead. Columbia FDI Perspect 218:1–3.
- 80.
For a critical review of the ICS, see Baetens F (2016) The European Union’s proposed investment court system: addressing criticisms of investor-state arbitration while raising new challenges. Leg Issues Econ Integr 43(4):367–384; Schill S (2017) Authority, legitimacy, and fragmentation in the (envisaged) dispute settlement disciplines in mega-regionals. In: Griller S, Obwexer W, Vranes E (eds) Mega-regional agreements: TTIP, CETA, TiSA. New orientations for EU external economic relations. OUP, pp 112–150.
- 81.
Schill S (2017) Reforming investor–state dispute settlement: a (comparative and international) constitutional law framework. J Int Econ Law 20:649, 660–661
- 82.
Schacherer S (2016) TPP, CETA and TTIP between innovation and consolidation – resolving investor–state disputes under mega-regionals. J Int Dispute Settlement 628
- 83.
United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (“Mauritius Convention”), UN General Assembly, [2014] Res A/69/116
- 84.
For example, Article 8.36 CETA
- 85.
Bonnitcha J, Pauulsen L, Waibel M (2017) The political economy of the investment treaty regime. OUP, pp 172–178
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Dimopoulos, A. (2019). EU Investment Agreements: A New Model for the Future. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-5744-2_30-1
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