EU Investment Policy

Investment as part of the Common Commercial Policy

The Lisbon Treaty gave the EU a competence to conclude investment provisions in agreements with third countries.

Unlike the provisions on free trade, the scope of this competence is limited: In addition to the approval of the Council and the European Parliament, separate ratification by member states is required for investment agreements to enter into force. Against this background, the EU has moved to conclude separate free trade and investment protection agreements with its trade and investment partners.

The agreements already successfully concluded with Canada (CETA), Singapore and Vietnam are in the final ratification process.

The EU approach: modernized investment protection

A modern investment policy aims to address public concerns related to the current system of investment protection and investment arbitration.

The EU’s modern approach are implemented in the agreements with Canada, Singapore and Vietnam, is taken up in all negotiations and contains the following core elements:

Precise standards of protection are to protect investors in particular from unlawful expropriation, discrimination, denial of justice or fundamental violations of procedural guarantees under the rule of law. At the same time, the right to regulate is safeguarded. Government measures in the general public interest (e.g. in the area of environmental protection) cannot in principle lead to claims for damages - even if they have the effect of reducing profits for investors.

In order to settle disputes arising from violations of the above-mentioned protection standards, affected investors can appeal to a new type of public investment court and claim any damages there.

Settlement of investment disputes: Court proceedings instead of arbitration

The so-called Investment Court System (ICS) in EU agreements differs from investment arbitration and adopts essential features of national and international courts.

It consists of a first instance and an appellate instance. The members of the investment court (tribunal of first instance and appeals tribunal) are appointed by the contracting parties for a period of several years and are assigned to a dispute on a random basis. They must meet the highest qualification requirements and are bound by a comprehensive code of conduct.

The court hearings are open to the public. Moreover, in addition to decisions and judgments, all important documents from the proceedings are made public.

In Opinion 1/17, the ECJ confirmed the compatibility of the investment court system with EU law.

Establishment of a multilateral investment court

In the long term, a Multilateral Investment Court should be established for the resolution of investment disputes. From the perspective of the EU and the Member States, this court would replace the bilateral investment courts in EU investment agreements or the investment arbitration tribunals in Member States' agreements with third countries.

Based on negotiating directives adopted by the Council in March 2018, the EU and its Member States are pursuing this initiative in the framework of the United Nations Commission on International Trade Law (UNCITRAL).

The relevant UNCITRAL Working Group III is dedicated to the possible reform of investor-state dispute settlement. Meeting dates and minutes as well as position papers of the states are available on the website of Working Group III.