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Competence Shift on FDI from the EU Member States to the EU

This memorandum examines the shift of competence on FDI to the EU. With a focus on the long term developments of EU IIAs, the analysis contains five core parts. First, it address the inclusion of FDI in the Common Commercial Policy, its definition, and the context. Second, it discusses whether EU IIAs will be mixed or “pure” Union Agreements. Third, it elaborates on the allocation of international responsibility for IIAs. Two options are discussed: the most probable WTO like system and an ECT like system. Fourth, it analyzes possible dispute settlement mechanisms, through recourse to internal tribunals, through international law, or through a new system with panels and appeal. Fifth and finally, it articulates the ways of enforcement against EUMS and the EU.

Clinic: Graduate Institute, Spring 2010
Beneficiary: IISD
Introduction
Read the full report here

The purpose of this legal memorandum is to examine the shift of competence on Foreign Direct Investment (FDI) to the European Union (EU). Now the Lisbon Treaty has entered into force, FDI is a part of the Common Commercial Policy (CCP) and thus the EU has exclusive competence over it.1However, it remains unclear how competences are divided among EU institutions and EUMS, and how future EU FDI practice will be. Complex legal questions arise with two recurrent areas of tension. The first is the interplay between four legal actors: the EU, the EUMS, third countries and third country investors. The second is the existence of three legal orders of which the relation among each other is not clear and often contested: EU Law, MS’ national legal orders and international law. To guide us through these areas of tension and the complex legal questions, this memorandum will rely on four overarching principles on which the authors believe future EU investment practice should be based upon: transparency, predictability, coherence and fairness of dispute settlement mechanisms.


This memo thus focuses on the longer term developments of EU International Investment Agreements (IIAs). Our analysis will contain five core parts. (1) We will look at the inclusion of FDI in the CCP, its definition and the context in which an EU IIA will be concluded. (2) Then we will discuss whether EU IIAs will be mixed or “pure” Union agreements. We will also explain how EU IIAs will be concluded and ratified. (3) This will be followed by an analysis of the allocation of international responsibility for IIAs. In the EU there can be a difference between internal division of competence and who is the external respondent in proceedings. We will discuss two main options: the most probable WTO like system, and an ECT like system. (4) The fourth part will go on possible dispute settlement mechanisms. We will investigate two main possibilities. First the recourse to internal tribunals (Member States or CJEU). And second mechanisms provided for in international law (ICSID and others). We will suggest a possible new system with panels and appeal which would entail the core principles we want the future investment system to be based upon. (5) And fifth, we will look at the ways of enforcement against EUMS and the EU once an award would have been granted to a foreign investor, based on the EU IIA. We will not deal with the substantive content of future EU IIAs nor its relations with previous EUMS BITs.


Click this link to download the full memorandum in pdf format.

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