The new EU Regulation on the screening of foreign direct investments: A tool for disguised protectionism?

Prof. Nikos Lavranos, Secretary General of EFILA

In December 2018, the EU institutions agreed on the text for an EU Regulation establishing a mechanism for screening all foreign investments into the EU.

In just over a year the EU institutions adopted this Regulation, which is unusually fast and reflects the apparent political will of the institutions involved to deliver something tangible that would address the fear against Chinese investments that would essentially take over the European economies.

The Regulation is in particular noteworthy because it introduces an EU-wide screening mechanism at the EU level as well as at the Member States’ level, which in many ways is similar to the US screening mechanism (CFIUS) whose scope of application was recently also significantly expanded. (The revised CFIUS text is part of the very extensive National Defense Authorization Act for Fiscal Year 2019, sections 1701 et seq.)

The EU Regulation is also significant in that it gives the Commission and other Member States the power to directly interfere in the screening of FDI in a particular Member State.

At the Member States’ level, it should be noted that there is a disparity among them regarding their approach of whether or not to screen FDI, and if so, under which conditions and procedures.

According to the Commission, about half of the Member States have currently no screening mechanism at all, while the other half does have one. In addition, the conditions and procedures of the existing screen mechanisms differ.

Accordingly, the Regulation aims to harmonize this situation by grandfathering all existing screenings mechanisms and by encouraging all Member States, which have not yet one, to establish such a mechanism. In addition, common basic criteria for the screening of FDI are laid down in this Regulation. Indeed, all Member States are required to register all incoming FDI and to report them to the Commission and to all other Member States. In fact, the Member States and the Commission are required to set up a dedicated contact point for that purpose.

At the European level, the Regulation gives the Commission – for the first time – the power to actively screen FDI – not only those that are “likely to affect projects or programmes of Union interest on grounds of security or public order”, but also those that are “likely to affect security or public order in more than one Member State”.

The Commission may issue opinions, which the Member State concerned is required to duly take into consideration. Similarly, Member States can comment on the screening of FDI in other Member States.

However, what is most interesting is the wide scope of the sectors that may be screened, which covers, inter alia, the following areas:

(a) critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, as well as sensitive facilities and investments in land and real estate, crucial for the use of such infrastructure;

(b) critical technologies and dual use items as defined in Article 2.1 of Regulation (EC) No 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, quantum, aerospace, defence, energy storage, nuclear technologies, nanotechnologies and biotechnologies;

(c) supply of critical inputs, including energy or raw materials, as well as food security;

(d) access to sensitive information, including personal data, or the ability to control such information; or

(e) the freedom and pluralism of the media.

Also, noteworthy is the fact that there is no minimum threshold of the amount of the FDI for screening, which means that potentially any FDI from 1 to 100 billion euros could be screened.

While the fear against a Chinese takeover of the European economies is widespread and understandable, it is not supported by facts. Indeed, as a recent study by the well-respected Copenhagen Economics institute shows that countries other than China invest much more into the EU.

According to this study the US is by far the largest investor in the EU and accounted for 51.1% of the M&As by third country investors, followed by Switzerland (10.8%), Norway (4.6%) Canada (3.8%), while China comes only fourth with a meager 2.8%.

When it comes to investments by State Owned Enterprises (SOEs) from third states, Russian investors accounted for 16.6% of M&As, followed by Norway (15.8%), Switzerland (11.8%), while Chinese SOEs account only for 11% of the M&As.

In other words, the amount of Chinese FDI are far lower than from several other third countries, but which seemingly are considered friendlier and thus approached with less hostility.

Be that as it may, the real risk of this Regulation is not so much the screening of FDI but that it could be abused as a tool for disguised protectionism and classic state-governed economic nationalism.

This is so because the big Member States will be able to force smaller Member States to block FDI, for example from China, in order to give preference instead to French, German or Spanish investors.

Similarly, the Commission may force a Member State to block an FDI for unrelated more important geopolitical reasons.

This can also raise the tension among EU Member States which are competing for FDI. For example, if the Rotterdam harbour wants to attract Chinese investments for upgrading and expanding its facilities in order to be able to better compete against the harbour of Hamburg, Germany might very well use the argument of “security or public order” in this Regulation to force the Netherlands to block the Chinese investor and rather accept a European investor instead, or forget about the whole project altogether.

This is not to say that one should be naïve about Chinese, American or Russian investments, which are often connected with geopolitical aims or potentially (business) espionage. The example of Huawei, which has been restricted in developing the 5G network in some Western countries, is telling. At the same time, one should not forget that EU Member States are competing with each other to attract FDI and have the vested interests of their national champions always in mind.

Thus, the line between genuine protection of “security and public order” and disguised protectionism is very thin and tempting to cross for short term political and/or economic gains. However, this Regulation – unsurprisingly – does not contain any effective mechanisms to mitigate this risk.

Therefore, when this EU Regulation enters into force, foreign investors are well-advised to seek proper in-depth advice prior to investing into the EU.

Report on the 4th Annual EFILA Lecture delivered by Prof. George A. Bermann (Columbia University New York, School of Law), Brussels 25 October 2018

by Adam Marios Paschalidis (NautaDutilh)

Recalibrating the European Union – International Arbitration Interface

Introduction

The 2018 Annual EFILA Lecture by Prof. George A. Bermann (Columbia University School of Law), continues the successful Annual EFILA Lectures series, which were previously delivered by Sophie Nappert (2015), Johnny Veeder (2016) and Sir Christopher Greenwood (2017).

Before giving the floor to Prof. Bermann, Prof. Dr. Lavranos, Secretary General of EFILA set the scene of the Lecture by referring to the EU’s recent trend of re-considering the inclusion of the investment court system (ICS) in its FTAs. While the ICS has been included in EU-Singapore FTA, EU-Vietnam FTA, EU-Mexico FTA and CETA, this is not the case anymore in EU-Japan FTA, and neither is it on the table for the EU-Australia and New Zealand FTAs, whose negotiation phase started after the CJEU’s Opinion on the EU-Singapore FTA in which the CEJU determined that the competence on investor-state dispute settlement (ISDS) provisions is mixed. He, also, referred briefly to the Vattenfall arbitral tribunal on the Achmea issue and predicted that the ECT-related disputes will be the next theatre to watch in the upcoming years.

By way of introduction, Prof. Bermann considered as a fact that there is little new to be said with regard to the EU law-International Arbitration interface, since a lot of ink has already been spilled on this subject. Furthermore, he clarified that the purpose of his speech is to trigger a constructive discussion through the identification of some EU policy features that, if “revisited”, would promote a better relationship between the two regimes. Moreover, he expressed that the relationship between EU law and International Investment Arbitration is experiencing the most dramatic confrontation amongst other legal order’s interactions. In that regard, he further added that, despite the considerable level of fragmentation, different legal orders seldom collide on such a considerable level.

The Lecture was divided primarily in three parts. Firstly, he referred to the initial stages of European law and its rather scattered interaction with international (private) law. He then proceeded with the main part of his Lecture. In that respect, by eloquently addressing the different phases Community law has undergone, he identified three particular features of EU policy, which have affected the interaction between the European and Investment Arbitration legal framework. At the end of his Lecture, he shared his opinion concerning the future image of the ISDS regime and how EU law can be “refurbished” in parallel to the already accelerated re-examination of the ISDS regime.

Initial stages of EU law and its interaction with international (private) law

Prof. Bermann noted that at first EU law and international private law, especially international arbitration, were experiencing a status of “peaceful co-existence”, as early European law was exclusively focused on regulating the Union’s internal matters. As such, both European Treatises, the European Common Commercial Policy, the European Common Agricultural Policy, the European Common Fisheries Policy and so forth were adopted primarily for internal consumption. The result of this “introversion” was that legal instruments, which were also addressing some “external” aspects of the Union’s law, for instance private law affairs, were adopted outside the EU structures and in the form of conventions, such as the Brussels and Rome Conventions. At this point, Prof. Bermann made specific reference to the absolute exclusion of international arbitration from the content of the above mentioned conventions.

However, since the signing of the Amsterdam Treaty a dramatic shift has become evident. Amongst many other reforms, the regulation of private international law became part of the European Community column. As such, the European Union realised a wider role on that field, driven perhaps by its will to achieve a higher level of federalisation. Therefore, European legal instruments began to deal with private international law affairs as the European Commission was gaining more and more competence to address them. Unsurprisingly enough, the Court of Justice of the EU (CJEU) could not remain silent in light of this wave of “extroversion” and started assuming exclusive jurisdiction in a variety of cases. Both of the abovementioned escalations placed European law, as Prof. Bermann illustratively put it, in orbit of collision with international private law, especially international investment law. At this point, it should be mentioned that Prof. Bermann referred to the rise of ISDS arbitration and leading to a quantum shift as an additional crucial factor for the tension amongst the two regimes. Once again, however, he stressed that the purpose of his Lecture was to identify the changes that took place on the EU’s side of the equation.

EU law changes and their impact in investment arbitration

Prof. Bermann underlined three EU law features that have evolved or have been “invented”, thus influencing its correlation with International Investment Arbitration. However, before presenting them he pointed out that the impact of the first two is relatively limited in comparison to the third one.

First of all, European legal instruments initiated by the European Commission assumed wider roles and attempted to regulate fields of law, that fell under the Member States competence at the first stages of the Union. New legal instruments concerning private and commercial relationships were adopted, thus placing EU law, which would arise previously primarily as a defence in arbitral proceedings, in orbit of collision with international commercial arbitration.

As a second EU law feature that contributed to the prospective/already existing confrontation of the EU legal order with investment arbitration, Prof. Bermann specifically referred to the notion of the private enforcement of EU competition law. Stemming primarily from the CJEU judgment in the EcoSwiss case, this special element of EU law could provide a domestic court with the power to place an arbitral award under a special scrutiny regime, and even reject its enforcement on European public policy grounds. In that respect, two facts are of particular interest. First, he referred to the undefined level of review (deferential or non-deferential) that a domestic court can exercise. Second, he was concerned with the possibility of this ground being investigated by a domestic court on its own motion, irrespective of a party’s previously raised objection. Moreover, Prof. Bermann took his thoughts one step further and directed the audience’s attention to the fact that the precise rationale of the EcoSwiss decision could be utilized by the CJEU in different legal contexts and relationships as well.

Before resuming with the identification of the third EU policy feature, Prof. Bermann concluded that both aforementioned features provided the appropriate fuel for a new EU norm to arise, namely, that of European public policy. He even expressed his concern with regard to the implications European public policy will have in the substantive level of the EU law-International Investment Arbitration interface.

With the aforementioned last consideration, Prof. Bermann proceeded to the third European law element, that according to him affects the interaction between EU law and International Investment Arbitration the most. Prof. Bermann noticed that the concept of “autonomy of EU law” constitutes a rather recent trend in CJEU’s decisions. As found in some of the Court’s Opinions, including the Opinion 2/13 on the EU’s accession to the ECHR and in the Achmea case as well, it seems that the CJEU reserves its right to interpret EU law. In fact, not only does it reserve it, but it also assumes a monopoly in applying it. According to Prof. Bermann, the origin of the “EU law’s autonomy” concept can be traced back to the notion of the EU law’s primacy over the domestic law of the Member-States, as the CJEU held already found in Van Gend en Loos and Costa v. ENEL.

However, Prof. Bermann considered that there is a significant gap between these two EU law concepts (autonomy of EU law and primacy of EU law). On the one hand, the legal norm of “primacy” is expected to operate in intra-EU conflicts of law. On the other hand, the “autonomy of EU law” has been invented in order to interact with the international legal order. As it was articulated in its series of Opinions, the CJEU stands in opposition to any EU’s accession in international treaties that establish a Court or Tribunal whose decisions have an “adverse effect on the autonomy of the EU’s legal order”. In that regard, Prof. Bermann was astonished to note there is no other legal order that purports to disallow foreign courts to interpret its law.

In addition, Prof. Bermann invited the audience to “see” the bigger picture. As such, he remarked that the concept of EU law’s autonomy is expected to create turbulence and confusion concerning the EU’s and its Member States’ international legal standing. Obviously, such a monopoly of interpretation can be abused by the CJEU to form a potential rejection of a claim against the EU or one of its Member States. Even worse, the CJEU could force a domestic court not to enforce a decision or award that stands in contradiction with any part of the EU’s superior legal framework. However, Prof. Bermann did also refer to attempts to moderate/limit the concept of autonomy of EU law with respect to CETA and the ICS system contained therein, which, however, awaits approval by the CJEU in Opinion 1/17.

Furthermore, Prof. Bermann accepted that there is a fundamental difference between the CJEU’s Opinions and its Decisions. The Court’s Opinions, such as Opinion 2/13, were asked in order to predict incompatibilities between two separate legal regimes before signature. On the other hand, the Court’s Decisions like Achmea touched upon a Treaty’s validity after having been signed. As such, the Achmea decision “condemned” a Treaty and “dishonoured” an award, creating a considerable level of precedence. Additionally, Prof. Bermann considered that, although the Court in Achmea reassured the validity of investment treaties like the ECT or the CETA, it made clear that it reserves the exclusive right to interpret EU law.

Last but not least, Prof. Bermann could not help but notice the possible startling outcome of the combination of the CJEU’s monopoly of interpretation with the notion of EU public policy. In that regard, he referred to the Micula case, where the CJEU considered the domestic court’s level of scrutiny as insufficient. As such, the CJEU gave a substantive law dimension to the level of control, which a domestic court should exert when confronted with the recognition and enforcement of an arbitral award. Prof. Bermann took his consideration a step further and “painted” a realistic picture of the CJEU’s demands from a domestic court to reject the enforcement of a decision against the EU itself on public policy grounds.

Future image of Investor-State Dispute Settlement (ISDS)

Taking a third person’s sight in respect of European political and legal dynamics, Prof. Bermann specifically mentioned the need for the ISDS system to be re-examined in its entirety. Being a member of the Gabrielle Kaufmann Kohler academic forum, which has been created in the context of the UNCITRAL Working Group on ISDS reforms, Prof. Bermann called for a reconsideration of the basic features of investment arbitration, as this will prove useful in its interaction with EU law as well. At the same time he also referred to the possible steps, which the EU institutions and EU law could take in order to optimize its interaction with international investment arbitration. As such, a clearer delineation and clarification of the aforementioned EU law concepts, such as “European public policy”, “EU law autonomy” and the extent of an arbitral award’s substantial review by domestic courts could be helpful. Last but not least, Prof. Bermann made specific reference to the potential use of the CJEU’s “proportionality” principle in the “re-calibration” of the EU law-Investment Arbitration law relationship. He also expressed his discomfort of the absence of a constructive dialogue between EU institutions and International Arbitration institutions.

 

Q&A session moderated by Mr Kamil Zawicki (KKG)

The following four points of discussion formed the core of the Q&A session.

First, a comment was raised with regard to the relationship between CJEU’s Opinions and post treaty decisions/judgments. It was stated that there is a considerable difference between the two. The first has to do with a matter that may raise concerns in the future and are non-binding, whereas the Court’s decisions/judgments deal with a specific case and provide a solution based on the facts of the case. On this point, Prof. Bermann argued that CJEU’s Opinions are quite abstract and cannot anticipate which points of concern will arise at a later stage. They represent a special kind of precedent and are rarely not followed by the EU’s organs, despite the fact of not being binding. As for the Court’s decisions/judgments, he stated that they refer quite often to generic norms, although they deal with the particular facts of the case at hand.

Second, a question was raised concerning what  possible considerations an arbitrator is forced to make when sitting in ICSID arbitration proceedings, which take place in an EU Member State. Prof. Bermann replied that firstly an arbitrator should take  into consideration  his/her mandate to deliver an enforceable award. Secondly, he noted, in response to another point raised, that the interpretation of the Achmea case should be the same under intra-EU BITs, the ECT and the ICSID contexts. However, Prof. Bermann made a comment of significant value with regard to this question. He stated that even an award delivered in a seat of arbitration located outside the EU, such an award could still be annulled or not enforced for reasons of comity.

Third, a significant difference between the EcoSwiss case and the Achmea case was underlined. It was mentioned that in EcoSwiss the CJEU forced the Dutch courts to annul the arbitral award at hand. On the other hand, in Achmea the CJEU found that the arbitration clause was incompatible with the EU law, thus leaving more space for the domestic court’s deliberation. Prof. Bermann acknowledged the point raised, but he then turned the discussion on the EU law dynamics. Therefore, a domestic court cannot do much when confronted with the notion of EU law’s supremacy over domestic law. At this point, Prof. Lavranos added that indeed there is no room left to a domestic court to decide otherwise. Prof. Lavranos, also, referred to the need for widening the preliminary ruling system. In that respect, he expressed that it is of utmost importance that arbitral tribunals are provided with the right to request a preliminary ruling from the CJEU in case EU law is at issue. According to him, this crucial step would simplify the current situation in terms of consistency and predictability.

Fourth, a rather crucial remark was raised in respect of a very interesting feature of the Achmea case. In that regard, it was mentioned the Achmea case dealt primarily with the preliminary question of the presence or absence of the State’s relevant consent. The CJEU based its interpretation on the fact that the Member States compromised a part of their sovereignty by signing the Lisbon Treaty. Therefore, the CJEU can invoke the “supreme” instruments of EU law in order to determine the element of consent. At this point of the session, a debate took place with regard to the interpretation of Art. 54 ICSID “as it if were a final judgment of the courts of a constituent state”. It was mentioned by the audience that Art. 54 ICSID does not prevent a State from not enforcing an award on one of the grounds for annulment under ICSID or the ones for refusal of enforcement under the New York Convention. Prof. Bermann responded to the second point by mentioning that this depends on a particular State’s reading of the provision and exemplified his position by referring to the US framework concerning ICSID awards under which this kind of decisions are immune.

As far as the interpretation of a consent’s validity and its co-relation with EU law is concerned, Prof. Bermann made the following remarks. He firstly admitted that the supremacy of the EU law is a norm that should be taken into consideration when discussing the interaction of the EU’s and its Member States’ legal frameworks. However, when the concept of “supremacy” transforms into the one of “autonomy” and is used against the international legal order, problems as the one in the Micula case will arise. He further supported his opinion by inviting the audience to adopt a broader view beyond intra-EU BITs and imagine how an individual would investigate the existence of a consent from an international law perspective, by making reference to the Vienna Convention and its relevant provisions. As a last point, Prof. Bermann subscribed that a State is still considered a subject of international law, despite being a member of the EU.

The EU’s foreign investment screening proposal: Towards more protectionism in the EU

by Prof. Nikos Lavranos, Secretary General of EFILA

Last September, European Commission President Juncker presented a proposal for a European foreign investment screening regulation – apparently following a request by Germany, France and Italy.

The proposal fits the protectionist mood that has taken hold in Brussels and in many EU Member States. The backlash against TTIP, CETA and ISDS – suddenly supported by once free trade minded countries such as Germany and the Netherlands – has prepared the ground for this proposal.

Indeed, the EU has failed to deliver so far anything on its competence on Foreign Direct Investment (FDI). TTIP has been put in the freezer; the CETA investment chapter is on hold because it is awaiting adjudication by the Court of Justice of the EU (CJEU) and in the new envisaged trade agreements with Japan, New Zealand and Australia the investment chapter is left out altogether.

So, instead of promoting and protecting foreign direct investments – especially European foreign direct investments abroad – the EU has followed suit on populist calls for protecting Europe from perceived dangerous Chinese and other foreign investors, which aim at supposedly buying up strategic European companies.

As often is the case, the main argument for this European screening mechanism for foreign investments is “harmonization”, since several EU Member States already have a national screening mechanism while other Member States don’t.

Accordingly, the proposal first and foremost claims to provide legal certainty for Member States that maintain a screening mechanism or wish to adopt one. In other words, this Regulation would empower Member States to maintain their mechanisms or to create new ones in line with this Regulation.

Second, the Regulation aims at creating a “cooperation mechanism” between the Member States and the European Commission to inform each other of foreign direct investments that may threaten the “security” or “public order”. This cooperation mechanism enables other Member States and the Commission to raise concerns against envisaged investments and requires the Member State concerned to take these concerns duly into account. In other words, this “cooperation mechanism” is an “intervention mechanism” in disguise by given the Member States and the Commission a tool to review and intervene against planned foreign investments in other Member States.

Third, the proposal also enables the Commission itself to screen foreign investments on grounds of security and public order in case they “may affect projects or programmes of Union interest”.

In short, Member States and the Commission will effectively be enabled to review any screening of any foreign investments and to intervene if they think that their interests may be affected.

If one looks at the description of the screening grounds (“security” or “public order”), it immediately becomes clear that this proposal essentially can cover any investment.

Article 4 Factors that may be taken into consideration in the screening of the proposal states:

In screening a foreign direct investment on the grounds of security or public order, Member States and the Commission may consider the potential effects on, inter alia:

  • critical infrastructure, including energy, transport, communications, data storage, space or financial infrastructure, as well as sensitive facilities;
  • critical technologies, including artificial intelligence, robotics, semiconductors, technologies with potential dual use applications, cybersecurity, space or nuclear technology;
  • the security of supply of critical inputs; or
  • access to sensitive information or the ability to control sensitive information.

In determining whether a foreign direct investment is likely to affect security or public order, Member States and the Commission may take into account whether the foreign investor is controlled by the government of a third country, including through significant funding.

Moreover, in order to be effective, this Regulation essentially will require all Member States – in particular those which have not yet a screening mechanism in place – to create one, otherwise these Member States and the Commission will not be able to share the required information about planned new foreign investments and the review them.

As a result, if this proposal is approved, the screening of foreign investments will become a standard procedure in all Member States.

The question arises to what extent this proposal may be damaging for the economies of the Member States. In this context, it is telling that this proposal is not accompanied by an impact assessment study. This proposal contains the following justification for the lack of the impact assessment:

“In view of the rapidly changing economic reality, growing concerns of citizens and Member States, the proposal is exceptionally presented without an accompanying impact assessment. The proposal targets specifically the main issues identified at this stage in a proportionate manner. Other elements will be further assessed in the study announced in the Communication accompanying this Regulation. In the meantime the Commission proposal for Regulation is accompanied by a Staff working document providing a factual description of foreign takeovers in the EU on the basis of the available data, as well as a brief analysis of the issue at stake.”

This “justification” reveals that the need to satisfy populism quickly is considered more important than performing a proper impact assessment.

Apart from this, there are significant reasons to reject this proposal.

Firstly, the question arises whether such a screening mechanism would be compatible with the 1,500 extra-EU BITs which the EU Member States currently have in place with third states. The proposal does not discuss the potential incompatibility with BITs and neither does it discuss the potential claims based on the BITs by foreign investors against such screening decisions. This is very surprising since one of the main aims of BITs is to promote foreign investments and to protect them against unfair or discriminatory treatment. Prima facie, it seems that such a screening mechanism could lead to breaches of these BITs and thus to subsequent claims.

Secondly, there are many countries within the EU, in particular in Central, Eastern and Southern Europe which actually are in dire need of foreign investments – including also Chinese investments. Creating more obstacles against such investments is not going to help these countries economically.

Thirdly, one may wonder whether it is in the interest of the EU to send out such a protectionist signal to the world – in particular in light of the current US Administration’s protectionist attitude. Indeed, the experience with the American CFIUS mechanism shows that the screening of foreign investments is mainly used for domestic political gains rather than for economic benefits.

Finally, one wonders who will be financially responsible if foreign investments fail to materialize due to the market distorting interventions by other Member States and/or the Commission.

So, for all these reasons, the EU Member States should resist riding on the populist protectionism wave that may be helpful to satisfy short-term political gains, but which will be damaging for the EU as an attractive FDI dentition. The EU Member States are in dire need for more foreign investments, for example in renewable energy but also for large infrastructure projects such as connecting to the One Belt one Road (OBOR) project, which is currently pushed by China.

The first steps towards a Multilateral Investment Court (MIC)

by Prof. Nikos Lavranos, Secretary-General of EFILA

 

On the instigation of the EU, the UNCITRAL Commission adopted a broad mandate for a Working Group to:

  • identify and consider concerns regarding ISDS;
  • consider whether reforms are desirable in light of the identified concerns;
  • if the Working Group were to conclude that reform is desirable, to develop and recommend any relevant solutions;

This mandate was adopted after a heated debate in which the USA and Japan were the strongest opponents to such a mandate, while the EU, Canada, Mauritius, South Africa and several Latin American countries vigorously pushed for such a mandate.

The debate reflected the different views as to whether, and if so, to what extent the ISDS system needs to be reformed or even preferably replaced by a permanent multilateral investment court (MIC).

Eventually, all present states accepted to give UNCITRAL such a broad mandate.

Although, the proponents of this mandate repeatedly reassured each other that the outcome of the work of the UNCITRAL Working Group should not be prejudged and that all options should be on the table, it was obvious for everybody in the room that the only outcome will be the creation of the MIC.

Indeed, the template for the negotiation process and draft text for the MIC will replicate the ‘Mauritius Convention approach’, which was successfully adopted for the UNCITRAL Transparency Rules for investment treaty arbitrations adopted in 2014 and which will enter into force in October 2017. A detailed report by Gabrielle Kaufman-Kohler and Michele Potestà in which they describe how the Mauritius Convention approach could serve as a model for creating the MIC provided the basis for the discussion and the eventual adoption of the mandate.

The ‘Mauritius Convention approach’ allowed for an extraordinarily fast negotiation process and contains a flexible opt-in menu for the contracting parties. Accordingly, states are free to select whether or not the UNCITRAL Transparency Rules will also apply for disputes initiated under pre-existing BITs or only for BITs which entered into force after the Transparency Rules become applicable. In addition, the unusual low requirement of only 3 ratifications for the entering into force of the Mauritius Convention is another feature, which allows for turning a negotiated text into a formally applicable legal instrument.

Considering the fact that work on the MIC is slated to start already next November and assuming that the ‘Mauritius Convention approach is’ followed, a draft text for the MIC could be on the table by the end of 2018, so that the first signatures could be put under such a text in 2019, making the MIC a reality by 2020.

In sum, the EU has successfully managed to instrumentalize UNCITRAL for its MIC idea.

Only time will tell how much traction there actually will be among states for creating the MIC.

The debate on the mandate showed that there is not yet consensus for the MIC throughout the world. While the EU, most EU Member States, Canada, some Latin American countries and South Africa seem very eager to create the MIC, in the Asian and Pacific region there seemed to be considerably less appetite. In particular, Japan, China, Singapore, South Korea, NZ and Australia, but also the USA were much more cautious and less convinced about the urgent need to replace the current ISDS system with something completely new, which may very well create new legal and policy problems.

 

In search of a “better” globalization

by Nikos Lavranos, Secretary-General of EFILA

The backlash against globalization

At the OECD, Global Forum on International Investment (6 March) more than hundred stakeholders from businesses, trade unions, academics and OECD member states gathered together for a one-day meeting considering ways towards a “better” globalization, which is more “inclusive”, i.e., which benefits all.

The OECD set the scene by describing the current backlash against globalization, trade, investment and investor-state dispute settlement (ISDS) as an urgent matter that must be addressed now to reverse the trend of protectionism and populism, which is increasingly visible in the US and Europe.

While it was stressed from the outset that foreign direct investments (FDI) have created many jobs and hugely benefitted many countries around the world over the past decades, it was also concluded that this was not an “inclusive” development. In other words, the benefits of globalization were distributed unevenly and there have been many more losers – not only low-skilled workers but also domestic businesses – than has generally been acknowledged so far.

At the backdrop of this, it was argued that nowadays FDI must not only be perceived to be more inclusive but that they must be more inclusive by making a positive, lasting and substantial contribution to the economy and benefit all citizens of the host state.

The responsibility of multinationals

In this context, many speakers from emerging economies and representatives of trade unions put the responsibility to achieve this on multinationals.

In the first place, many speakers stressed the need that the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct must be systematically adhered to by all investors. Moreover, it was argued that multinationals must take the lead towards a low carbon economy and “green investments”.

In the second place, it was stressed that multinationals must pay their fair share of taxes. The current tax system which allows multinationals to avoid paying the full amount of taxes was criticized. The OECD’s efforts against Base Erosion and Profit Shifting (BEPS), the increasing transparency regarding international tax rules and the implementation of country-to-country reporting were considered essential in countering the backlash against globalization.

In the third place, multinationals were called upon to invest in the “social infrastructure” of societies by supporting the losers of globalization in building a new future.

Towards “quality” investments?

The discussion then turned towards a new econometric study which aims at analyzing how “good” or “quality” investments, which are “inclusive”, could be fostered.

To achieve that it is first all necessary to decide the factors which should be taken into account in order to determine whether, and if so, to what extent an investment is “inclusive”.

The researchers of the study made a distinction between (i) FDI policy and framework composition, (ii) different FDI types, and (iii) FDI outcomes.

The first results show that all of these factors have an important impact on the outcome, which means that a much more nuanced view of FDI must be developed for this new narrative. It also was admitted by the researchers that there is still a lack of sufficient data regarding the various FDI types and FDI outcomes. Obviously, the vast differences in the economies of various is another complicated factor, which makes it difficult to provide easy answers.

As a one of the speakers pointedly concluded:

“it is not the same if an investor invests in producing microchips or potato chips”.

Preliminary results were also shown which indicate that foreign investors compared to their domestic counterparts generally pay higher wages, tend to have a higher productivity, create more and better jobs, and employ more female workers. In other words, foreign investors are in many cases already now providing relatively more inclusive investments than domestic investors.

A new positive globalization narrative

While this study has just been started and much more work needs to be done, the discussion raised several additional issues.

The first issue is the seemingly complete absence of required state action. Instead, many participants expect that multinationals will take on this responsibility, while states do not need to act. However, one may question whether this is not a too easy solution for the states. After all, the domestic Rule of law and governance situation in each state can significantly impact the level of “inclusiveness” of an investment. For example, if a state is run by practically one family clan, any FDI will naturally benefit mainly or exclusively that family clan and thus can never be considered “inclusive”. However, does this fact make every investment – even in for example renewable energy – automatically a “bad” investment? And is the investor solely responsible for the fact that the country is run by a family clan?

The second issue concerns the almost exclusive focus on multinationals in this narrative, whereas it is well-known that SMEs play a very important role in most, if not all, economies of the world. It therefore would seem necessary and appropriate to consider how these additional obligations – if they were to be imposed on investors – would affect SMEs. More generally, it would seem important to make a clear distinction between the needs and obligations of multinationals and SMEs. In other words, the narrative must also be “inclusive” vis-à-vis all types of investors and investments.

The third and probably most complex and contentious issue relates to the question of how states could make a distinction between “bad” and “good” FDI without discriminating against certain foreign investors. Arguably, a state could always invent and apply certain criteria, which would enable it to decide one way or the other as it sees fit, while the investor would be rather helpless against this kind of potential arbitrariness.

This in turn raises the fundamental question of whether this new narrative of “quality” FDI and “inclusiveness” can actually be effectively applied in practice? For now, it is too early to give a definite answer.

Nonetheless, the efforts of the OECD and most of its member states to continue to push for a multilateral framework, which promotes and supports FDI as an essential and important element for an open economy must be applauded. This is a rarely heard sound in these days.

The development of a new, positive narrative in support of FDI is any case a welcome tool to help fight the backlash against globalization.

 

The continued lack of adequate investment protection in Europe

Nikos Lavranos, Secretary General, EFILA

Recently, the UNCTAD Investment Division announced that it had “completed its regular semi-annual update of the Investment Dispute Settlement Navigator, which is now up-to-date as of 1 January 2017”.

The Navigator is a useful web-based search tool containing information regarding pending and closed investor-State disputes based on the thousands of investment treaties.

According to UNCTAD, the key findings of this update are as follows:

“In 2016, investors initiated 62 known ISDS cases pursuant to international investment agreements (IIAs). This number is lower than in the preceding year (74 cases in 2015), but higher than the 10-year average of 49 cases (2006-2015).

The new ISDS cases were brought against a total of 41 countries. With four cases each, Colombia, India and Spain were the most frequent respondents in 2016.

Developed-country investors brought most of the 62 known cases. Dutch and United States investors initiated the highest number of cases with 10 cases each, followed by investors from the United Kingdom with 7 cases.

About two thirds of investment arbitrations in 2016 were brought under bilateral investment treaties (BITs), most of them dating back to the 1980s and 1990s. The remaining cases were based on treaties with investment provisions (TIPs).

The most frequently invoked IIAs in 2016 were the Energy Charter Treaty (with 10 cases), NAFTA and the Russian Federation-Ukraine BIT (three cases each).

The total number of publicly known arbitrations against host countries has reached 767.”

Some of these above key findings are of particular interest and should be put into a broader perspective.

First, it is interesting to note that the number of new ISDS cases has fallen. This is a trend that can also be seen for example in the ICSID statistics, which show that the number of ICSID cases has been falling as well (in 2015 52 new cases were registered, while in 2016 48 new cases were registered).

UNCTAD does not give any explanation as to the possible reasons for the fall in cases. One could of course think of several reasons: the States have improved their behaviour vis-à-vis foreign investors or investors consider the use of investment treaty arbitration as a less attractive option for dispute resolution and instead prefer to use other options. In this context, it is interesting to note that according to the same UNCTAD Navigator, States continue to win more cases (36.4%) than investors (26.7%), while 24.4% of the cases are settled. Investors/Claimants could perceive this as not such an attractive option to resolve a dispute with a State, in particular in conjunction with the high costs associated with the proceedings.

Second, it is noticeable that the Energy Charter Treaty (ECT) is the most frequently invoked investment treaty in 2016. This has been a trend of the past years with the explosion of disputes in the renewable energy sector, mainly against Spain but also against several other European States. Moreover, in the past 3 months it has been reported that investment arbitration proceedings – not only based on the ECT – have been initiated against Italy, Croatia, Bosnia-Herzegovina, Latvia, Greece and Serbia.

This suggests that European States have a poor track record when it comes to the protection of foreign investors and their investments. Again, one wonders what the reasons are for the fact that the ECT is so popular and why European States face some many disputes. Whatever the reasons may be, the fact that the ECT and BITs are used so frequently against European States underlines the continued lack of adequate investment protection in Europe, which in turn confirms the necessity of investment treaties.

In fact, the World Rule of Law index 2016 indicates very clearly the stark differences among European States regarding their Rule of Law track record. This index ranks Denmark (1), Norway (2), Finland (3), Sweden (4), Netherlands (5), Austria (6), Czech Republic (17), France (21), Spain (24), Romania (32), Italy (35) and Bulgaria (53) out of 113 countries.

The Corruption Transparency index 2016 of Transparency International ranks Denmark (1), Finland (3), Sweden (4), Switzerland (5), Norway (6), Netherlands (8), Germany (10), Poland (29), Lithuania (38) Czech Republic (47), Croatia (55), Romania (57), Italy (60), Greece (69) out of 176 countries.

The Doing Business Report 2017 ranks Denmark (3), Norway (6), UK (7), Sweden (9), Finland (13), Germany (17), Lithuania (21), Bulgaria (39) and Malta (76) out of 190 countries.

Obviously, these rankings have their limitations and must be treated with caution but the emerging general picture is nonetheless very clear. The “Nordic” European countries simply have a better track record than the “Southern” and “Eastern” European countries. In other words, they not only treat foreign investors better but they also have less perceived corruption and less red tape for doing business.

It is about time that this reality is generally accepted also in the European institutions living in the “Schuman bubble”.

These obvious conclusion from this is that – contrary to UNCTAD’s and European Commission’s repeated call for “reforming” the current system by inter alia also terminating investment treaties – all efforts should be focused on improving the Rule of Law track record in those European countries which clearly show deficiencies.

However, in the past decades little progress has been made and there is no reason to believe that things will improve very soon. Consequently, in these circumstance investment treaties are still very much needed – in particular in Europe.

 

The ‘Mixed’ Future of the EU’s Investment Law and Arbitration Policy

by Nikos Lavranos, Secretary General of EFILA*

The year 2016 must be considered a real “annus horribilis” for the EU’s investment law and arbitration policy. The following list is just an incomplete overview of the failures of the European Commission to deliver any positive results:

  • TTIP was not concluded within the presidency of the Obama Administration and seems to be put in the freezer by President-elect Trump;
  • Even after Wallonia has been appeased, CETA is still not certain of being actually ratified by all Member States and enter fully into force, since the Court of Justice of the EU (CJEU) is going to opine on the compatibility of the investment court system (ICS) with EU law;
  • AG Sharpston recently delivered her opinion on the EU-Singapore FTA, arguing that this FTA must be concluded as a “mixed” agreement, i.e., signed and ratified by all Member States and the EU. Consequently, also this FTA will most likely face similar difficulties as CETA, in particular since it still contains the ostracized “old school” ISDS provisions.
  • The European Commission intensified its efforts of destroying the intra-EU BITs by mounting infringement proceedings against 5 Member States and by prohibiting Romania to pay out the $ 250 million Micula award and thereby fulfilling its international.
  • Similarly, the European Commission continues to intervene in all intra-EU BITs and intra-ECT disputes, trying to prevent European investors to rely on the rights granted to them by these treaties, which are still valid and in force.

In short, after 7 years since the EU obtained exclusive competence for “foreign direct investments”, the EU’s investment policy is not only practically absent but has – more importantly – created legal uncertainty and cast doubt as to the investment climate and the rule of law within the EU. This is even more disappointing in light of the unprecedented financial and economic crisis, which has hit most of the EU Member States and continues to smoulder beneath the surface. Instead of attracting new foreign direct investments, which would create jobs, the European Commission has been financing anti-ISDS, anti-investment and anti-globalization groups to scare the general public and media about something that has been in place for more than 50 years.

Looking ahead, the year 2017 should be used for pause and reflection, and ultimately, change of the chosen path.

After the CETA-drama and the Opinion of the CJEU on the EU-Singapore FTA, which will most likely follow AG Sharpeston’s analysis, the European Commission should – for a start –

accept and embrace “mixity” as the new reality. This would be a very important move by the European Commission because it could allow her to stop fighting with the Member States about competences, thereby enabling it to spend her resources on more relevant issues.

As the CETA-drama has aptly demonstrated, involving the Member States – including their regional parliaments – is a necessity in order to create any sufficient level of support for FTAs. In other words, “mixity” is a tool for increasing democratic involvement and control by the Member States and their voters. In light of the rising populism in Europe – and in light of the upcoming elections in France, Germany and Netherlands which all will take place in 2017 – this point should not to be underestimated.

In this connection, it may be advisable if the European Commission would apply the motto “less is more”. Currently, the European Commission is negotiating more than a dozen FTAs ranging from China to Tunisia. Considering the efforts, time and resources necessary for negotiating and concluding just one FTA, a prioritization of all these FTA-negotiations is essential.

In the second place, the European Commission and the European Parliament should stop stirring up the hysteria again investors, investment protection and arbitration. Investment protection and arbitration have been important and necessary elements for the promotion and protection of European investments and investors investing abroad and thereby creating jobs in Europe as well as improving the economic development in the countries of their investment destinations. Moreover, investment treaties continue to have an important role as a tool for improving the rule of law situation in many countries in the world.

Therefore, in the third place, the discourse has to change towards how investment treaties can be used as a tool for improving the functioning, efficiency and transparency of state organs across the board, in particular with the aim of eradicating corruption. This would not only benefit foreign investors but – more importantly – domestic investors and the general public.

In sum, 2017 should be the year in which the demonization of investment treaties, investment protection and arbitration has to end. Instead of spreading myths and hysteria, all relevant stakeholders should calm down and return to a fact- and merit based discourse.

As in the past years, EFILA will continue to exactly do that.

Starting with our 3rd Annual Conference on 23 February in Vienna.

At the same time calling for submissions of papers for the European Investment Law and Arbitration Review.

By requesting blogpost submssions for the EFILAblog.

By submitting its views to the public consultation on the investment court system.

Finally, by hosting the next Annual Lecture, which will be delivered by a well-known arbitration expert, sometime in the fall of 2017.

With this hopeful outlook, I wish you all a very peaceful new year.


* Nikos Lavranos, Secretary General of EFILA, visiting professor Verona University, Fellow at the WTI.

 

The Provisional Application of CETA is Coming Close

by Nikos Lavranos, Secretary General of EFILA

The anti-CETA/TTIP campaign is reaching its climax.

After the anti-ISDS NGOs have managed to bring the TTIP-negotiations to halt – at least it has now been officially admitted that the negotiations cannot be concluded in 2016 and it remains unclear whether, and if so, how long the negotiations under the new US President will be under way.

The attention has now turned to CETA, in particular the – finally – scheduled signature of it on 27 October 2016 between the EU and Canada, which would entail the immediate provisional application of most parts of CETA, i.e., the trade, services, customs, rules of origin chapters, which fall under the exclusive competence of the EU.

Since the European Commission accepted that CETA is to be ratified as a mixed agreement, the anti-CETA groups have been focusing their efforts to stop CETA in some of the Member States, in particular Germany, the Netherlands and Austria.

On 12 October 2016, the Dutch Parliament approved the provisional application of CETA. So, the anti-CETA groups lost in that Member States.

On 13 October 2016, the German Constitutional Court rejected their injunction in their entirety. Accordingly, the German Government is free to agree to the provisional application of those chapters, which clearly fall into the exclusive competence of the EU. Of course, it remains to be seen how the Court will decide on the merits. This decision will be interesting in the light of the CJEU’s Opinion on the EU-Singapore FTA, which revolves around the question whether, and if so, to what extent, this agreement is a mixed agreement.

At this point in time, Austria and Belgium, in particular the regional Parliament of Wallonia, are other potential candidates for blocking CETA.

But let us not forget the European Parliament (EP). Much to the dismay of many of the MEPs, the Legal Service of the MEP recently concluded that there are no legal obstacles for agreeing to CETA. It remains to be seen whether the necessary majority for a “yes” vote will be found in the EP, that is, Article 218 TFEU requires the “consent” of the EP.

In short, the final fate of CETA is still unclear and will remain so for some time. Nonetheless, the green lights by the Netherlands and in particular Germany for the provisional application of CETA are important signals, which should persuade the doubters in other Member States.

Of course, Canada is not the US, so if CETA finally would enter into force in its entirety (after it has been ratified by all Member States – maybe not by the UK anymore), this could help giving TTIP a positive boost it so desperately needs.

But that will depend on the outcome of a whole series of elections, not only in the US, but also in France, Germany and the Netherlands.

Meanwhile, the time should be used to remind policy makers and the general public of the overall huge benefits of trade and investment agreements for all.

NOTICE:

Register for the 2nd  EFILA Annual Lecture to be delivered by Johnny Veeder, QC, with the timely title:

“The Phoenix to emerge from the ashes of TTIP and CETA: an international appellate court for investment disputes in Europe …”

Click here for all information regarding registration:

http://efila.org/events/next-annual-lecture-2016/

SAVE the DATE:

23 February 2017 Vienna: 3rd EFILA Annual Conference!

Click here for the flyer: http://efila.org/events/next-annual-lecture-2016/

 

Why the EU’s Foreign Direct Investment (FDI) Competence Should be Re-nationalized

by Nikos Lavranos, Secretary General of EFILA

At the last meeting of the Trade Policy Committee (TPC) at Full Members level, that is at Director General level, encompassing all MS and the European Commission, DG Demarty of the Commission is quoted as saying that the EU trade policy would have a “big credibility problem” if it could not ratify the CETA deal and added that it would be “close to death.”

He is definitely correct with this assessment, but he does not draw the necessary conclusions from this assessment, namely, that the Commission has spectacularly failed to provide the added value when the Member States rather unconsciously transferred the competence on foreign direct investment to the EU. This in turn leads to the conclusion that the trade and investment policy has been de facto re-nationalized.

In order to understand this conclusion, it is important to give a short historic overview of what has happened (or rather not) since the Lisbon Treaty entered into force in December 2009.

The unconscious transfer of the FDI competence

There seems to be no documented story on why, how and when exactly the FDI competence was transferred from the Member States to the EU. Anecdotal stories tell that in the very last minutes before the European Convention was concluded, which was tasked with drawing up a European Constitution, the European Commission rather secretly smuggled the three words “foreign direct investment” into the provision containing the exclusive trade competence of the EU.

At that time, since investment policy had been a purely national matter of the Member States, no investment policy or arbitration experts were present or involved in the drawing up of the European Constitution. Rather general EU law experts were doing the job, which were told since the EU’s internal capital market provisions already also apply to foreign investors, it makes sense as a sort of mirror provision to expand the EU’s competence to include foreign direct investment. In this context, it is interesting to note that nowhere was there any further definition or description of the scope of  FDI. As will be explained below, this lack of clarity is the root of the failure of the EU’s investment policy.

Whether or not the anecdotal stories are true, the fact is that after the European Constitution was re-labelled as Lisbon Treaty, FDI became part of Art.207 TFEU, which used to be the old Art.133 EC, covering the European Common Commercial Policy, in particular WTO law.

So, when the Lisbon Treaty entered into force in late 2009, neither the Member States nor the Commission really knew what this meant.

Mixity: the big elephant in the room

But from the very beginning, it was clear that there was one big elephant in the room, named “mixity”.

The mixity issue surfaced regularly at various levels and has created constant tensions between the Member States and the European Commission.

The first issue where mixity came up was regarding the scope of the FDI competence.

While most Member States understand FDI in a narrow sense, encompassing  only direct investments, the Commission naturally construed it broadly, covering also indirect investments.

These divergent views have been simmering in the background all the time with occasional burst outs. For example, when Member States or rather the Council issued negotiating mandates to the Commission for FTAs. The Member States always stressed that they assumed these FTAs should be mixed, whereas the Commission always claimed that they are in principle EU exclusive, and in any case this would depend on the final content of the FTAs.

In other words, this issue was never settled and it appeared that only the Court of Justice of the EU (CJEU) could settle this for good. Indeed, Karel de Gucht, the former Trade Commissioner, was so fed up about the mixity issue, that in his final day in office he brought the question to the CJEU. He asked the CJEU for an opinion as to whether the EU-Singapore FTA is mixed or EU exclusive. The Commission obviously being of the opinion that it is EU exclusive.

Mixity as a political appeasement instrument

 

While the general public has largely been unaware of the EU-Singapore FTA and the mixity issue before the CJEU, the widespread political hysteria against TTIP, and to lesser extent against CETA, has forced the Commission to adopt a selective U-turn on the mixity issue.

First, with regard to TTIP, Commissioner Malmstrom rather quickly understood that in order to save TTIP and obtain some minimum acceptance in several key Member States, such as Germany, France, Netherlands and Austria, a vote by the respective national parliaments is an absolute precondition for getting the TTIP deal done. Accordingly, Malmstrom has been touring most Member States assuring them that their parliaments will be voting on TTIP.

Second, and in contrast to the politically sensible U-turn regarding TTIP, which though is in clear conflict with the Commission’s longstanding view that it is exclusively competent for all investment issues, Malmstrom, and her adjutant Demarty, until very recently maintained their position that CETA should be ratified as an EU-exclusive agreement. After all, CETA and in particular the hated ISDS provisions have been drastically reformed, so all concerns have been addressed and a vote by the European Parliament on CETA should give sufficient comfort to the Member States and their citizens.

But the massive critique against any trade deal in the Member States has been gaining so much momentum that the Commission had to give in – also regarding CETA. Thus, CETA will be ratified as a mixed agreement, which may take several years before all parliaments (it appears that also several regional parliaments will vote on it as well) have ratified it.

This brings us to the third thorny issue, namely the so-called “provisional application” of CETA (or any other trade deal). It has become tradition in the past to apply trade deals provisionally as soon as the Council signs it off, while awaiting the conclusion of the whole ratification process. The obvious advantage of this is that the benefits of the trade deal can be reaped immediately, notwithstanding the non- fulfillment of the formal legal requirements. The question, which pops up in this context is, which parts of the trade deal can be immediately “applied provisionally”? That depends on which parts of the trade deal are considered to fall in the exclusive competence of the EU and which parts are still wholly or partly with the Member States’ competence.

Again, the Commission started off from its maximum position that the whole treaty should be provisionally applied. But the Member States – having realized how far the Commission is ready to go in order to save the CETA deal – came up with a whole list of policy areas (which most likely will be extended after the summer break), which are to be excluded from the provisional application of CETA. In addition to investment protection rules, Member States have flagged in particular transport, sustainability chapter in parts, culture subsidies, mediation and criminal sanctions to protect intellectual property, as areas to be excluded from provisional application.

The Commission already has accepted that investment rules should be excluded but continues to fight any further expansion of the list, arguing that this would undermine any meaningful provisional application.

This battle will go for some weeks ahead, but the intention is that CETA is finally signed at the EU-Canada summit on 27 October 2016. Accordingly, sometime in early October the Member States and the Commission must agree on the list of policy areas, which de facto are considered to be mixed.

The de facto re-nationalization of the trade and investment policy

Again, it can be expected that the Commission will be flexible in order to get the deal done, which only  enhances the position of the Member States.

That will be even more so in the case of TTIP, which is far more important (politically and economically speaking), but also far more contagious and politicized in the public debate. Member States have realized that they are in a much stronger position if they appear to be critical or outright against TTIP rather than in support of it. Consequently, citing domestic public outcry against TTIP, Member States can not only request that TTIP must be mixed, but can extract further demands from the Commission, such the exclusion of certain policy areas or further “improvements” of highly politicized areas such as regulatory cooperation, geographical indications, agricultural etc.

All this boils down to the conclusion that the Commission’s position that it has exclusive competence over all trade and investment aspects can simply not be maintained anymore by the Commission. Whereas the original idea might have been good to give the Commission a carte blanche because it presumably could negotiate better trade deals, it has become clear over the past 6 years that the Commission has failed to deliver. The main reason for that is that it “forgot” to take the Member States’ concerns serious and instead consistently opted to remind them that they have no say anymore on trade and investment issues. In other words, rather than working closely together with the Member States and carefully listen to them, the Commission did what it wanted. However, in the current political climate and with Brexit ahead of us, the support for the EU is rapidly dwindling. Instead, Member States are reasserting their powers again. Indeed, it is striking to see how easily and within months the Member States have been able to force the Commission to give up its almost sacred position of exclusive competence. The Commission has now seemingly adopted a more practical and realistic approach of accepting mixity for free trade deals. Although, it remains to be seen how it will handle the outcome of the Opinion of the CJEU regarding the EU-Singapore FTA.

In sum, it must be concluded that the transfer of the FDI competence to the EU has not yielded any results since the beginning. After 6 years no single trade deal has been fully signed, ratified and entered into force. In addition, the Commission is spreading doubts about the legal certainty of Member States’ BITs (both intra and extra) and is undermining the application of the ECT. Therefore, the Member States are only right in re-asserting control over trade and investment issues. Indeed, Brexit will offer an excellent opportunity to delete FDI from the exclusive EU competence, when the EU treaties have to be modified anyway.

BDA & AIA: Master Class on Investment Arbitration: Brussels, 19-22 September 2016

Dr. Nikos Lavranos, Secretary-General of EFILA, will give a Master Class on Investment Arbitration for the Brussels Diplomatic Academy and AIA on Monday, 19 September 2016 in Brussels. This Master Class is part of the closer cooperation agreed between EFILA and the AIA.

See here for the programme and registration: Master Class: Investment Arbitration


The Brussels Diplomatic Academy (BDA) and the Association for International Arbitration (AIA) kindly invite you to attend:

Master Class
on
Investment Arbitration

19-22 September, 2016

[Interesting to know: Several top diplomats already confirmed their participation]

BACKGROUND
The law on foreign investment protection is one of the fastest developing and intellectually challenging branches of international law with high practical relevance. Investment arbitration is predicted to be a major factor in the development of the global economic system. The number of investment disputes before international arbitral tribunals has increased significantly over the last decades and reflects the notable preferences of the international business community for resolving international investment disputes. Acquaintance with the legal regime for investment arbitration and case law has now become indispensable for those involved in investments, economic diplomacy and international dispute resolution. In the course of the Master Class, speakers will examine the fundamental notions relevant to investment arbitration and critically review a number of major cases.

AUDIENCE
This course is recommended to diplomats, government officials, investment arbitrators, lawyers involved in investment protection, private investors and executives involved in investment decision-making processes.

ADDED VALUE
The four days seminar is designed to provide its participants with a concentrated educational experience in the areas of law on foreign investment protection and investment arbitration. It is specifically aimed to provide practical help to those who wishes to grasp the fundamentals of investment arbitration. The course also offers an explanation of legal rules and relevant guidelines as well as checklists and practice examples.

The course’s unique feature is its international scope. Participants from a broad range of backgrounds will participate in a dynamic learning experience, where the multifaceted aspects of arbitration are considered from a range of comparative perspectives.