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'Gold Standards' for the International Investment Policy of the European Union

Memorandum to the European Commission, Cabinet of the Trade Commissioner, Mr. Damien Levie

Clinic: Graduate Institute, Spring 2011

Beneficiary: European Commission, Cabinet of the Trade Commissioner

Executive Summary

Read the full report here.

This memorandum was prepared by students of the Investment Law Clinic at the Graduate Institute of International and Development Studies as a response to a request by the Private Office of the Trade Commissioner of the European Commission for research on what investment protection policy it could pursue. As such, we were asked to analyse the best practices for investment protection as provided for in international investment agreements, including but not limited to those concluded by EU Member States. In addition, we also consider the advantages and disadvantages of adopting a model BIT.

As foreign direct investment now falls within the exclusive competence of the EU through its Common Commercial Policy, it will have to consider the practical implications of this competence shift, such as the conclusion of international investment agreements. We recommend a European model BIT as the starting point and accordingly analyse the possible content in this memorandum.

Our analysis was guided by the EU’s ambition to be a competitive player in the investment field and its intention to improve investment conditions both within the EU’s territory and outside of it. While a BIT does not directly change the internal regulation of investments within a State, their value, as UNCTAD have highlighted, “…lies primarily in the contribution they can make to promote investment by helping to secure a welcoming and stable environment for foreign investment”.1 In addition, we were mindful throughout that good global governance, human rights, the rule of law and sustainable development all inspire the commercial policy of the EU. As such, the proposals suggested take these considerations as their premise and, in the authors’ opinion, represent the “gold standards” in international investment law.

The particular methodology adopted was as follows. First, we identified the pertinent issues in international investment law around which there exists a debate as to the level of investor protection they provide. Second, we set out the options in each area, the various configurations of which have resulted in a variety of outcomes in practice.

Finally, we analysed the practice for each option and concluded upon the option that provided the highest level of investor protection. At the end of each section, we suggested a possible construction of the standard to be included on the basis of the foregoing analysis.