1. Framing investment Law
Judicial Protection in the Investment Chapters of the European Union’s FTAs
What Now? – The Future of EU Law
Treaty of Lisbon
European Investment Law
Giorgia Sangiuolo
King’s College London
Jean Monnet Network LawTTIP
An overview of Opinion 2/15

2. PART I Some considerations on BITs and ISDS

3. Pros… From one perspective, an unparalleled success story:
More than 2700 BITs and numerous investment chapters in FTAs (see UNCTAD Policy hub);
Very straight forward model (European!): Only essential investment-related subjects such as treatment standards, expropriation, financial transfers, and dispute settlement;
Positive impact on economic environment of the host State?
ISDS:
Finality of the adjudication (efficiency) - No appeal
Moves away from gunboat diplomacy - Depoliticization of dispute settlement (see WTO)

4. Cons…
- Vagueness of investment fragmentation of international investment law
- Preferential treatment for investors (Admissible under a competence strandpoint?)
ISDS
Built-in bias favouring foreign investors and foreign investments over legitimate non-investment policy choices (?) Shrinking of domestic policy space (Eg. Vattenfall) – International Investment Law as a public law subject
No consistency & fragmentation of international investment law
Reduce national courts’ incentives to improve performance
Accountability of investment arbitrations
Party-owned process
Affected on-parties are voiceless
Challenges about accountability and legitimacy in investment treaty arbitration
► Alleged ‘backlash’ against the system of International Investment Law & Arbitration

5. PART II EU Law and international investment law

6. The Pre-Lisbon situation
CCP = Trade, Competence of the EU, Government to Government dispute resolution
Investment protection = Member States - Bilateral Investment Treaties (BITs) or International Investment Agreements (IIAs) among themselves and with third countries
Germany was the first nation in the world to conclude a BIT, in 1959
Broad provisions on investment protection and facilitation
Most of these BITs contain ISDS – First one, Italy…

7. The Treaty of Lisbon FDIs
Part of the CCP (Art. 207 TFEU) – Enhances the economic power of the EU on the international plane
2. Exclusive competence of the EU (Article 3 TEU)
Articles 5, 4, 6, 3(5) TEU
-Principle of conferral
-Subsidiarity and proportionality in the exercise
-Presumption of competence in favour of MS
Articles 3, 4 TFEU
-Exclusive and shared competences
Art. 4 TEU
Principle of sincere cooperation – Unity of the Union’s external action
…facilitate the achievement of the Union's tasks […] refrain from any measure which could jeopardise the attainment of the Union's objectives.

8. Aims and Values of the EU
3. Subject to the aims and values of the Treaties (Art 207 TFEU)​
Art. 207 TFEU The common commercial policy shall be conducted in the context of the principles and objectives of the Union's external action
21 TEU The Union's action on the international scene shall be guided by the principles which have inspired its own creation, development and enlargement, and which it seeks to advance in the wider world: democracy, the rule of law, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, the principles of equality and solidarity, and respect for the principles of the United Nations Charter and international law
4. Further step in the constitutionalization of the role of individuals (Fundamental rights, enhanced role of the EP)

9. Linked to the concept of autonomy of EU law - Two main dimensions need to be kept into account: Internal - Safeguard its values, fundamental interests, security, independence and integrity; External - consolidate and support democracy, the rule of law, human rights and the principles of international law; promote an international system based on stronger multilateral cooperation and good global governance

10. Commission’s communication (COM(2010)343):
Create legal certainty and a stable, predictable, fair and properly regulated environment in which investors can conduct their business;
To be used to maximise the Union’s leverage in negotiations;
Guided by the principles and objectives of the Union's external action more generally, including the promotion of the rule of law, human rights and sustainable development (Article 205 TFEU and Article 21 TEU)
HOW?
Case by case negotiation
MS’s best practices – Will become EU’s ‘better practices’

11. PART III Modelling International Investment Law onto EU Law

12. Proceduralization and Judicialization…
Eliminate clear incompatibilities with EU law (Autonomy)
The essential character of the powers of the EU and its institutions ‘as conceived in the Treaty should remain unaltered’
(Opinion 1/00, Common Aviation Area)
Coordinating EU law and international law? Art. 21 TEU
How?

13. Specific tools I. Generally speaking:
No direct effect – No Member States’ Courts
Preciseness of the wording (eg. FET in CETA)
Rules on transparency
Choice of arbitrators (predetermined roasters, competences, choice)
Some cases, preliminary reference
Rules on participation

14. Eg. FET Clause…
CETA Article 8.10 Treatment of investors and of covered investments
1. Each Party shall accord in its territory to covered investments of the other Party and to investors with respect to their covered investments fair and equitable treatment and full protection and security in accordance with paragraphs 2 through 6.
2. A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 if a measure or series of measures constitutes: (a) denial of justice in criminal, civil or administrative proceedings; (b) fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings; 7 In the case of the European Union, “subsidy” includes “state aid” as defined in its law. 8 In the case of the European Union, “competent authority” is the European Commission, in accordance with Article 108 of the Treaty on the Functioning of the European Union. 48 (c) manifest arbitrariness; (d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; (e) abusive treatment of investors, such as coercion, duress and harassment; or (f) a breach of any further elements of the fair and equitable treatment obligation adopted by the Parties in accordance with paragraph 3 of this Article. 3. The Parties shall regularly, or upon request of a Party, review the content of the obligation to provide fair and equitable treatment. The Committee on Services and Investment, established under Article (b) (Specialised committees), may develop recommendations in this regard and submit them to the CETA Joint Committee for decision.
4. When applying the above fair and equitable treatment obligation, a Tribunal may take into account whether a Party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the covered investment, but that the Party subsequently frustrated.
5. For greater certainty, “full protection and security” refers to the Party’s obligations relating to the physical security of investors and covered investments.
6. For greater certainty, a breach of another provision of this Agreement, or of a separate international agreement does not establish a breach of this Article.
7. For greater certainty, the fact that a measure breaches domestic law does not, in and of itself, establish a breach of this Article. In order to ascertain whether the measure breaches this Article, a Tribunal must consider whether a Party has acted inconsistently with the obligations in paragraph 1.
Art 10.1 ECT
Art. 10 (1) Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. […] In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. […]

15. II. ISDS -> Towards a multilateral Court
Public policy constraints (see definition of FET clause)
Financial regulation - Choice of the respondent(s)
Prohibition of interpretation of EU law
Appellate body (CETA, TTIP)
Only monetary compensation (whilst Government to Government…)
Fork in the road, No U-turn

16. Eg. Article 8.31 CETA Applicable law
When rendering its decision, the Tribunal established under this Section shall apply this Agreement as interpreted in accordance with the Vienna Convention on the Law of Treaties, and other rules and principles of international law applicable between the Parties.
The Tribunal shall not have jurisdiction to determine the legality of a measure, alleged to constitute a breach of this Agreement, under the domestic law of the disputing Party. For greater certainty, in determining the consistency of a measure with this Agreement, the Tribunal may consider, as appropriate, the domestic law of the disputing Party as a matter of fact. In doing so, the Tribunal shall follow the prevailing interpretation given to the domestic law by the courts or authorities of that Party and any meaning given to domestic law by the Tribunal shall not be binding upon the courts or the authorities of that Party.
Where serious concerns arise as regards matters of interpretation that may affect investment, the Committee on Services and Investment may, pursuant to Article (a), recommend to the CETA Joint Committee the adoption of interpretations of this Agreement. An interpretation adopted by the CETA Joint Committee shall be binding on a Tribunal established under this Section. The CETA Joint Committee may decide that an interpretation shall have binding effect from a specific date.

17. Does an international Court really solve the problem?
Competing views...
Arguably is the political response to the international backlash against ISDS;
Very costly both in economic and political terms - Not all trade partners may agree with it;
Does not tackle all the issues raised;
At the stage it is still a disguised ISDS (eg. Government agents’ participation in the panels)

18. For instance…
Determination of the respondent (EU or the host Member State) will be decided on the basis of the FRR)
Problematic:
Looks like a ‘fortunate’ choice;
Having the EU as a whole as a respondant is more attractive than having single Member States;
What happens if the decision on the respondent is challenged?
Issue in terms of ascertaining the ‘causal link’ between alleged breach and behaviour that caused it

19. PART IV Where are we now? The Court’s Opinion of the EUSFTA

20. The new ‘battlefield’ of external competences – Round I
Outcome...
All-round competence in the conclusion of trade agreements (sustainable development/labour) – Good news for the EU!
Mixed competences on a number of chapters – Including ISDS.

21. Issues… Facultative mixity and: Loyal cooperation (art. 4(3) TEU)
1.1) See Opinion 1/76 - where the Union chooses to exercise its shared competences in the external relations, mixity must be justified. Mixity renders the pursuit of the Union’s aims more difficult – Rule should be pre-emption;
…at the same time…
1.2) Subsidiarity and Proportionality
2) Competence – ISDS are ancillary to FDI
…After 5 years of negotiation can MS just not ratify the FTAs?

22. What the Court says on ISDS…
Ancillary link is the rule but does not apply to ISDS because of the ‘level’ of impairment of Member States’ interest as:
Removes disputes from the national courts;
MS as respondents
Moreover, the Court does not rule on compatibility with EU law. Is it rational?
This does not apply to the Government-to-Government system of dispute resolution (?!)

23. A couple of points for discussion…
Where does the exception to the ancillary rule come from?
How much impairment do you need to break the ancillary link? (Not much, mere possibility…)
State to State dispute resolution can have as much as a powerful impact on national governance as ISDS
The effective regulation of FDIs is inseparable from a well-functioning ISDS system – Encroach upon exclusive competence of the EU on FDI
What happens if we give up ISDS?

24. Thank You!