International Investment Agreements and the European Union

Abstract

Recent activity has affected international investment law in the European Union and will have flow-on affects around the world. Specifically, the European Court of Justice decisions in European Commission v Austria, European Commission v Sweden and European Commission v Finland have affected the validity of pre-accession Member State bilateral investment treaties (BITs) with third states. Further, the Lisbon Treaty, which came into effect in 2009, transferred competence over foreign direct investment from Member States to the European Union. These significant events have raised questions about the continued validity of Member State BITs, and the approach the EU will take to exercise its new competence. This paper will focus on the impact of these developments on the EU, Member States, and European investors, as the most obviously affected parties. However, there will also be considerable impact on third states that are party to extra-EU BITs and investors under those BITs. In addition, the approach the EU takes in implementing the new competence over FDI may have wide-reaching effects. This paper will first address the impact and importance of BITs and the availability of international investment arbitration. This will establish the context for the issues discussed later in the paper. Second, it will discuss the European Court of Justice’s BIT judgments and the impact of these three decisions. Third, the paper will examine the changes to the EU’s international investment strategy with the entry into force of the Lisbon Treaty and TFEU. Finally, it will analyse the benefits and detriments of an EU strategy of replacing Member States’ BITs with a network of pan-EU investment agreements. This will lead into a discussion of the practical difficulties of concluding such pan-EU investment agreements.