The European Union Investment Arbitration Regime and Local Governments: The Need for a Synchronization of Efforts

Nijhoff International Investment Law Series, v.3 ("The Role of the State in Investor-state Arbitration") 2014

Posted: 28 Feb 2015

Date Written: February 26, 2015

Abstract

The European Union (EU) investor-State arbitration regime is currently undergoing a dramatic change where the European Union has obtained exclusive competence over issues pertaining to foreign direct investment (FDI). Several contentious questions prevent the successful consolidation of competence and fuel a complex debate on the future of the EU arbitration regime. How will the agreements between EU Member States and third nations look? What sort of dispute resolution mechanism will be available to foreign investors investing within the intra-EU framework?

In the context of this debate, local authorities as sub-divisions of the State are the driving force behind attracting, stimulating and regulating investment in a particular region. The EU Council has already recognized that local authorities exercise a “crucial role” in EU-wide development policy. Despite their important roles in attracting investment, local governments and municipalities are often overlooked even when their conduct may be attributed to the Respondent State and they are known to trigger the State’s liability under bilateral agreements. Time and again, the local authorities’ power to regulate leads to potential disputes with foreign investors: such disputes being defended by States in costly arbitration proceedings.

This chapter delineates the EU investor-State arbitration regime post-Lisbon Treaty, with specific reference to the 2009 decision against Sweden rendered by the European Court of Justice (ECJ). The article explores the current points of tension in the investor-State arbitration regime as materialized in Vattenfall v. Germany. The contribution also discusses the lack of information available to local communities on investor-State liability and the importance of ensuring that local communities are aware of the complex issues in the debate, while offering a range of instruments to resolve the potential silence on the subject matter confronted by local governments.

Keywords: EU, local governmens, investment

Suggested Citation

Marian, Cornel, The European Union Investment Arbitration Regime and Local Governments: The Need for a Synchronization of Efforts (February 26, 2015). Nijhoff International Investment Law Series, v.3 ("The Role of the State in Investor-state Arbitration") 2014. Available at SSRN: https://ssrn.com/abstract=2570809
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