The European Union's Competence on Foreign Investment: 'New and Improved?'
San Diego International Law Journal, Vol. 18, 2017
22 Pages Posted: 28 Aug 2017 Last revised: 9 Feb 2018
Date Written: August 23, 2017
The Treaty on the Functioning of the European Union (TFEU) brought numerous changes to European Union (EU) law in 2009. One such change brought the competence on foreign investment under the exclusive competence of the EU. In light of current investment negotiations, which are eroded by the lack of unity amongst the EU and its Member States, this paper explores the evolution of EU foreign investment competence before and after the enactment of the TFEU, concluding that the competence bears significant limitations stemming from the past that have not been compensated for thus far.
Whereas EU exclusive competence may enhance the negotiation leverage of the EU when compared to single Member States, portfolio investments are still excluded from the scope of the competence even after the adoption of the TFEU. Post-Lisbon limitations also pertain to the application of the TFEU to Member States’ property ownership governance despite the fact that investment revolves around the property rights or is even based on them. Such a narrow scope of competence prevents the EU from committing itself to guarantees due to expropriation of investments that are relatively common to investment arbitration. Furthermore, competence conferred on the EU in Article 207 of the TFEU curbs implementation of harmonization measures should they be enacted in connection with the investment treaty.
Recent negotiations of the Transatlantic Trade and Investment Partnership (TTIP), however, showed the opposition of certain Member States to the exclusive competence of the Commission, which undermined the major strength of the conferral—unified negotiation power of the Union. Future TTIP negotiations, resistance of Member States to the already-concluded Comprehensive Economic and Trade Agreement (CETA), and legal counselors advising their clients to optimize for an extra-EU bilateral treaty (BIT) construction of their intra-EU BIT investments, in light of an unresolved conflict of intra-EU BITs with EU law, all provoke further thoughts of future potential adjustments of EU investment competence. The EU’s competence on foreign investment under the TFEU is still relatively new, but is already in need of improvement.
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