New Frontiers for EU Investment Policy
External and Internal Dimensions
- 2023
- Book
- Editors
- Marc Bungenberg
- August Reinisch
- Book Series
- European Yearbook of International Economic Law
- Publisher
- Springer Nature Switzerland
About this book
With the entry into force of the Treaty of Lisbon in 2009, the EU became a global actor in the field of foreign direct investment. Since then, the field of EU investment policy has been gradually shaped by numerous political changes, judgments and opinions delivered by the Court of Justice of the EU, as well as lively scholarly debate. Today, a clear division between the “internal” and “external” dimensions of EU investment policy has emerged, which constitutes the general topic of this book. Within these dimensions, additional – and sometimes contradictory – facets of the EU’s multi-layered approach to investment protection can be identified. On the one hand, EU investment policy is shifting toward a decentral approach when it comes to substantive standards of investment protection. On the other hand, the EU is following a multilateral approach with regard to procedural innovations in investor-State dispute settlement.
In this EYIEL Special Issue, leading experts in the field discuss the latest developments with regard to the above-mentioned dimensions and facets, which reflect new trends and challenges for EU investment policy. Among others, the book discusses the EU’s participation in the reform process for the international investment regime, the emergence of central planning and decentral implementation of EU investment policy, the feasibility of an intra-EU investment court, the protection and enforcement of investment standards under EU law, and the suitability of mediation as an alternative to intra-EU investment arbitration.
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Table of Contents
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Frontmatter
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Challenges Resulting from the EU’s Participation in International Dispute Settlement
Christoph SchreuerThe chapter delves into the complex challenges resulting from the EU’s involvement in international dispute settlement, particularly focusing on the shifting attitudes towards investor-State arbitration. Initially supportive, the EU has since adopted a hostile stance, as seen in the 2015 statement by Commissioner Malmström. The CJEU’s judgments, such as Achmea and Komstroy, have further solidified the EU’s rejection of intra-EU investment arbitration. The EU Commission’s interventions in arbitration cases, while often unsuccessful, highlight procedural and substantive issues. The chapter also discusses the potential implications of abolishing investor protections on future investments, particularly in renewable energy, and calls for a more constructive approach to investment protection within the EU.AI Generated
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AbstractThe EU Commission has moved from a supportive attitude towards investment arbitration to outright hostility. The CJEU has developed a practice to the effect that intra-EU investment arbitration is impermissible under EU law. The EU Commission routinely submits amicus curiae submissions in intra-EU investment arbitrations. Often these interventions ignore applicable procedural rules and go beyond the role of an amicus curiae. Substantively, the EU Commission has argued that EU law takes precedence over other legal obligations and that conflicting treaties must be disapplied. Arguments based on the law of treaties developed by the EU Commission to the effect that investment treaties had become inapplicable have been almost universally rejected by investment tribunals. The Commission, with the support of the CJEU, has also argued that compliance with awards stemming from intra-EU arbitration would be contrary to EU law. In doing so, it has ignored the multilateral nature of obligations under the ICSID Convention. -
Reform of Substantive Standards in a Multilateral Instrument and the Rule of Law
August ReinischThe chapter delves into the critical role of consistency and predictability in investor-state dispute settlement (ISDS) for maintaining the rule of law. It examines the historical context of ISDS, highlighting the divergent interpretations of similarly vague standards in investment agreements. The author discusses various reform proposals, such as promoting stare decisis, authentic treaty interpretation, and the establishment of an appellate mechanism or investment court. However, the chapter argues that procedural reforms alone cannot guarantee consistency and predictability. It proposes a coherent, single multilateral investment treaty with clear and precise protection standards, drawing inspiration from the successful reform of the international trade law system from GATT to the WTO. The chapter concludes by emphasizing the necessity of a multilateral investment agreement to achieve consistent and predictable outcomes in ISDS, echoing the 'single undertaking approach' of the WTO.AI Generated
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AbstractThe consistency and predictability of outcomes is a core rule of law-requirement for any form of dispute setlement. The fairly rapid development of investor-state dispute settlement (ISDS), with mostly ad hoc arbitral tribunals deciding on the basis of differently formulated investment agreements, has led to sometimes inconsistent outcomes. So far, attempts to foster predictable outcomes have focused on procedural measures, such as creating an appellate mechanisms or an investment court or giving the parties to investment agreements more control by providing them with authentic treaty interpretation powers. It seeem though that, ultimately, consistency can only be reached by harmonizing the applicable investment standards. -
Decentral Implementation of EU Investment Policy: Convergence, Divergence and EU-Plus
Marc Bungenberg, Bianca Böhme, Lars RufThis chapter delves into the decentralized implementation of EU investment policy, focusing on the convergence and divergence between EU agreements and Member States' Bilateral Investment Treaties (BITs). It examines how Member States' BITs have evolved to align with EU standards, particularly in terms of substantive protection and the right to regulate. The analysis also reveals areas of divergence, such as the persistence of traditional investor-State dispute settlement mechanisms and differences in market access policies. Notably, the chapter highlights the potential for an 'EU-plus' approach, where Member States incorporate provisions promoting sustainable development and stricter investor obligations beyond what is required in EU agreements. This comprehensive examination offers valuable insights into the current landscape of EU investment policy and its future trajectory.AI Generated
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AbstractThe legal protection of investments around the globe is mainly influenced by a broad variety of international agreements, such as Free Trade Agreements (FTAs) with investment chapters, specific Investment Protection Agreements (IPAs) as well as Bilateral Investment Treaties (BITs). Within the EU, the past decades have shown fundamental changes in the way that negotiations and the conclusion of such agreements are carried out. The central approach with negotiations on an EU level has faced several problems, especially in light of the need for ratification by the Member States. Therefore, more room is given to a new decentral approach with negotiations of BITs by individual Member States being authorised by the European Commission. This calls for a comparison of EU agreements and Member States’ BITs with regard to procedural and substantive investment protection standards. As this comparative exercise will show, new Member States’ BITs are largely convergent with the EU’s international investment policy, but also leave limited room for divergence (following the old European gold standard) and an EU-plus approach. -
The Institutional Design of an MIC: Why the Proposed MIC Fails to Address the Real Concerns
Nikos LavranosThe chapter begins by framing the Multilateral Investment Court (MIC) as a political fantasy of the EU, designed to solve a non-existent legal problem. It traces the origins of the MIC back to the TTIP negotiations and the political context that led to its proposal. The author argues that the MIC is primarily a political project serving the needs of specific stakeholders, such as the European Commission and the European Parliament. The chapter then delves into the criticisms and challenges facing the MIC, including the perceived lack of transparency, the alleged pro-investor bias, and the inherent inconsistencies and lack of predictability due to the existence of numerous Bilateral Investment Treaties (BITs). The author contends that the MIC fails to address the real concerns of states, which lie in the substantive protection standards of investment treaties. Instead, the author suggests that the OECD is a more suitable forum for addressing these concerns. The chapter concludes by questioning the necessity and effectiveness of the MIC, likening it to an unnecessary feature in a concept car.AI Generated
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AbstractThe Multilateral Investment Court (MIC) which the EU is proposing to replace the current Investor-State Dispute Settlement (ISDS) system fails to address the real concerns, which relate to the harmonisation of the substantive protection standards rather than procedural issues. More generally, it is shown that many of the concerns raised against ISDS have already been addressed or are not real concerns but rather based on misconceptions and misrepresentations. In any event, so far the support by other States for the creation of a full two-tiered MIC has been rather limited and it remains to be seen whether this going to change. -
Modernisation of the Energy Charter Treaty: A View from the Inside
Yuriy Pochtovyk, Lukas StifterThe chapter delves into the modernisation of the Energy Charter Treaty (ECT), highlighting the negotiation process and key achievements of the Agreement in Principle (AIP). The AIP introduces a stronger climate focus and aligns the treaty with the Paris Agreement, while reinforcing Contracting Parties' right to regulate. Notably, it includes a Flexibility Mechanism for phasing out investment protection for fossil fuels and clarifies definitions and substantive protection standards. The chapter also discusses the institutional setting, procedural aspects, and the outlook for the future of the AIP. It offers a detailed analysis of the modernised text, including investment protection, dispute settlement, and the right to regulate, providing valuable insights into the evolution of international investment law in the energy sector.AI Generated
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AbstractThe energy sector is subject to complex political risks, including regulatory ones, making foreign investors vulnerable in long-term energy projects. In response, the Energy Charter Treaty (ECT) was negotiated in 1994, becoming the first sector-specific multilateral treaty with investment provisions. However, the international energy and international investment regime have evolved significantly since then. Concerns have arisen over the legitimacy of investment arbitration and states’ regulatory flexibility, especially in light of growing awareness about threats of climate change and the environmental impact of the energy sector. To address some of these issues, the Energy Charter Conference embarked on an effort to reform the 1994 ECT, resulting in the Agreement in Principle (AIP) in June 2022. The AIP proposes amendments seeking a stronger climate focus and alignment with the goals of the Paris Agreement. It revises definitions, introduces detailed substantive protection standards, reinforces the right to regulate in the public interest, and pioneers the opt-in “Flexibility Mechanism” to gradually phase out investment protection for fossil fuels. Nevertheless, the AIP has faced criticism, prompting some Contracting Parties to announce their intention to withdraw or withdrawal from the ECT. This chapter explains the negotiation process and highlights the key achievements of the AIP. It further examines the most critical provisions with references to relevant arbitral jurisprudence and explores the potential outcomes of the proposed amendments. -
The Substantive Protection of Intra-EU Investors Under International Investment Law and EU Law: Convergence and Divergence on the Protection of Property and Legitimate Expectations
Christina Binder, Philipp JanigThe chapter examines the substantive protection of intra-EU investors under international investment law and EU law, following the dismantling of the intra-EU investment arbitration system. It compares the material and personal scope of application, focusing on the protection of property and legitimate expectations. The chapter also discusses the rare instance where the CJEU and investment tribunals both dealt with the same matter, the Photovoltaic Energy Cases, highlighting the significance of the specific comparator chosen from international investment law. Additionally, it explores the complex and fragmented picture of EU law when viewed through the lens of investment protection standards, and the implications for intra-EU investors. The chapter concludes by raising questions about the desirability of certain substantive protections and the need for legislative action in the EU.AI Generated
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AbstractThe dismantling of the system of intra-EU investment arbitration raises the question whether affected investors are provided with comparable protection under EU law. This contribution examines substantive aspects of that question, including the differences in personal and material scope of these fields of law, and focusses on the question of property rights and interests. It additionally discusses the Photovoltaic Energy cases, in which both the CJEU and investment tribunals dealt with the protection of legitimate expectations under the respective legal regime. The contribution highlights that the answer to the question of comparable protection depends to a great extent on the specific comparator chosen on the side of international investment law, both in terms of treaty provisions as well as arbitral case law. It then concludes by arguing that a potentially lower standard of protection under EU law is not necessarily undesirable for policy reasons. -
Enforcement (Deficits) of Substantive Investment Standards under EU Law
Christoph Herrmann, Tim EllemannThe chapter delves into the complexities of enforcing investment standards under EU law, particularly in the wake of the CJEU's judgments in Achmea and PL Holdings. It compares the substantive and procedural protections offered by EU law with those of international investment law, revealing significant discrepancies. The author argues that the current system of national courts and EU law principles fails to adequately protect investors, necessitating the development of a new, enforceable dispute settlement mechanism. The chapter also examines the challenges of enforcing judgments across EU Member States, underscoring the need for a more robust legal framework to safeguard investor interests within the EU.AI Generated
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AbstractThe protection of foreign investment under EU law is systemically different from that under international investment law, both in substance and in enforcement. With the CJEU having closed the door to investor-state arbitration in intra-EU disputes, fundamental freedoms, the EU Charter of Fundamental Rights and their enforcement by Member State courts are gaining importance. In theory, EU law is capable of providing adequate investment protection. However, substantive and procedural prerequisites under EU and national law render protection difficult to obtain. The stringent requirements for state liability as established in Francovich create greater barriers for claiming monetary compensation before national courts compared to international tribunals. Even if an investor successfully pursues their case before a national court—whose independence from political interference is perceived unevenly across Europe—there is no system for the recognition of domestic judgments in other Member States comparable to the enforcement of international awards. As a result, investors will only be satisfactorily protected if all national courts apply the Francovich conditions adequately and consistently, if they interpret the legal margins left for domestic laws on procedure and compensation strictly and if other Member States were to accept the enforcement of the judgments. Current practice still shows deficits to this ideal. -
Completing the Woodcut: On the Feasibility of an Intra-EU Investment Court
Nicolaj KuplewatzkyThe chapter delves into the complexities of resolving intra-EU investment disputes post-Achmea, evaluating options such as conferring jurisdiction to the CJEU through Article 273 TFEU, establishing specialized chambers or tribunals, and creating a self-standing investment court modeled on the UPC. It highlights the legal feasibility and institutional attractiveness of these options, emphasizing the need for compliance with the EU judicial architecture. The author also discusses the challenges and requirements for establishing an intra-EU investment court, including the need for internalization and safeguards to ensure the full application of EU law. The chapter concludes by suggesting that a self-standing investment court or 'docking' to an existing institution could be viable solutions, provided they meet the necessary legal and institutional criteria.AI Generated
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AbstractIn theory, the ECJ’s judgment in C-284/16 Slovak Republic v. Achmea BV marked the end to intra-EU investment arbitration under bilateral or multilateral investment treaties. In practice, the underlying grievances remain. That need for a workable post-Achmea dispute settlement system for intra-EU investment disputes was highlighted once more by the Commission’s 2020 Inception Impact Assessment on an Investment Protection and Facilitation Framework, which showed a clear preference for an institutionalised path for resolving such disputes. This working paper accordingly seeks to discuss the policy proposals voiced to-date. It assesses respectively the legal feasibility of conferring jurisdiction to the Court of Justice of the European Union and treating intra-EU investment disputes through a specialized chamber or a specialized investment tribunal attached to that institution; a self-standing intra-EU investment court modelled on the Unified Patent Court; as well as the idea of ‘docking’ intra-EU investment disputes to a third body standing ‘outside’ the system of judicial remedies of the EU legal order. Of those options, the working paper concludes that a self-standing intra-EU investment court appears a (legally) feasible and an institutionally attractive option, both for investors and the Member States, for the future of intra-EU investment disputes. -
Intra-EU Investor State Contracts After PL Holdings
Patricia NacimientoThe chapter examines the CJEU's decision in PL Holdings, which marks a significant milestone in the backlash against intra-EU investment disputes. It traces the evolution of investment law from the development of BITs and the ECT to the current challenges posed by the CJEU's rulings. The author delves into the implications of the PL Holdings decision on investor-state contracts and the validity of ad hoc arbitration clauses. The chapter also explores the reactions of courts and arbitral tribunals to the CJEU's jurisprudence, highlighting the legal uncertainties and inconsistencies that have emerged. Additionally, it discusses alternative means of protection for investors and the potential role of domestic courts and a multilateral investment court in resolving investment disputes. The chapter concludes by emphasizing the need for investment protection within the EU and the importance of Public International Law in the current global context.AI Generated
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AbstractThe decision in Republic of Poland v. PL Holding is the latest decision dealing with intra EU investment disputes.The article looks at the previous developments and case law leading up to PL Holding and analyzes the decision’smeaning in the broader context of former milestones. -
Intra-EU Investment Mediation as an Alternative?
Catherine KessedjianThe chapter delves into the current state of mediation in Europe, highlighting its late adoption compared to other regions. It discusses the European Union's mediation directive and the encouragement of mediation for civil and commercial matters. The author then focuses on investment mediation, identifying specific hurdles such as the perceived advantage of arbitration by states and the need for political will and capacity building. The chapter also addresses the missing pieces in the European mediation landscape, including the EU's reluctance to accede to the Singapore Convention and the lack of mediation provisions in Bilateral Investment Treaties (BITs). Finally, it argues that while mediation is not yet a primary alternative to litigation or arbitration in investment disputes, it has the potential to become a preferred means of dispute resolution with the right framework and political support.AI Generated
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AbstractThere are many impediments to the use of mediation in investment matters. However, none are unsurmountable. The increased use of mediation would necessitate reforms internal to the host state. UNCITRAL texts adopted in the summer of 2023, hopefully, will help.
- Title
- New Frontiers for EU Investment Policy
- Editors
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Marc Bungenberg
August Reinisch
- Copyright Year
- 2023
- Publisher
- Springer Nature Switzerland
- Electronic ISBN
- 978-3-031-41977-5
- Print ISBN
- 978-3-031-41976-8
- DOI
- https://doi.org/10.1007/978-3-031-41977-5
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