Member States' Bits: Lost in Transition?

25 Pages Posted: 1 Oct 2011

See all articles by Nikos Lavranos

Nikos Lavranos

European Federation for Investment Law and Arbitration (EFILA)

Date Written: September 29, 2011

Abstract

In 2009 the European Court of Justice (ECJ) rendered - for the first time - three important judgments on the relationship between pre-accession Bilateral Investment Treaties (BITs) of EU Member States with third states and Community law. As will be discussed below in more detail, the thrust of these judgments is that even in case of ‘hypothetical incompatibilities’ between the BITs and Community law, the BITs must be either brought into line with Community law or, if that proves impossible, be denounced.

This approach not only illustrates that, according to the ECJ, Community law in any case supersedes even prior international obligations of the EU Member States, but - even more importantly - underlines the desire of the ECJ to ensure that no international court or arbitral tribunal gets into the position of interpreting or applying Community law, thereby undermining the exclusive jurisdiction of the ECJ.

Moreover, with the entering into force of the Lisbon Treaty on December 1, 2009, foreign direct investment (FDI) has been added to the exclusive external trade competence of the EU (Article 207 TFEU, former Article 133 EC). Despite the fact that FDI is nowhere defined in the EU Treaties, the European Commission assumes that all the issues typically regulated in BITs (i.e. most favoured nation treatment (MFN), national treatment (NT), fair and equitable treatment (FET), dispute settlement procedures, compensation for expropriation) fall under this new exclusive competence of the EU. However, as will be discussed in more detail below, this view is certainly not shared by most, if not all EU Member States.

In the light of these recent developments in EU law, the European Commission has published a Communication and a proposal for a Regulation that are intended to address most of the unsettled issues. Irrespective of the final outcome, one thing is certain: the already complicated matrix of investment law and public international law will become even more complicated by the addition of Community law as new important factor.

The aim of this contribution is to analyze the new Common European Investment Policy (CEIP) that is currently in the making from the perspective of the Netherlands, which belongs to the leading EU Member States regarding inward and outward investments.

The main argument that will be put forward is that the high standards of protection provided for by the existing Member States' BITs will - most probably - be lost in this transitional operation of transferring the FDI competence to the EU.

Keywords: BITs, FDI, CEIP, Lisbon Treaty, Article 207 TFEU, exclusive competence, exclusive jurisdiction

Suggested Citation

Lavranos, Nikos, Member States' Bits: Lost in Transition? (September 29, 2011). Available at SSRN: https://ssrn.com/abstract=1935625 or http://dx.doi.org/10.2139/ssrn.1935625

Nikos Lavranos (Contact Author)

European Federation for Investment Law and Arbitration (EFILA) ( email )

Brussels
Belgium

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