1. ISDS in the EU after Lisbon Treaty and Its Implications to Korea
Sungjin Kang
KSIEL – KCAB Joint International Seminar
December 19, 2014

2. About the Speaker Sungjin Kang PhD Candidate, Korea University
LLB, Korea University / LLM, University of Michigan Law School
Member of New York Bar
KSIEL – KCAB Joint International Seminar

3. Outline of the Discussion
Introduction - Inclusion of Investment into Common Commercial Policy
Transitional Measures by the EU
Review of the Existing BIAs
Role Distribution between MS and the EU in an ISD
ISD in Recent Trade Agreements (TTIP, CETA)
Conclusion - Need for “Investment” Chapter in Korea-EU FTA?
KSIEL – KCAB Joint International Seminar

4. Introduction Common Commercial Policy (CCP) of the EU
Exclusive Competence of the EU
Basis of the EU’s trade negotiating power, TDI, etc.
Did not include “investment” until 2009
Lisbon Treaty – inclusion of investment in the CCP
Articles 3 and 207
Lack of clear implementing rules
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5. Transitional Measures by the EU
Regulation 1219/2012 on Transitional Arrangements for Bilateral Investment Agreements (BIAs) b/w MS and 3rd counrties
There are about 1,400 BIAs between EU MS and 3rd countries
“Progressive” incorporation of FDI policy into CCP
Need for 1) negotiating principle of new BIAs; and 2) Rules on what to do with the existing BIAs
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6. Transitional Measures by the EU
Regulation 1219/2012 on Transitional Arrangements (Cont’d)
Existing BIAs continue to bind the MS until the new BIA is executed by the EU and the third country
MS must notify their BIAs concluded before Dec. 1, 2009 or the date of accession for review by the Commission
Commission review: Consistency of the BIA with the EU law / whether the BIA constitutes “serious obstacles” to the BIA between the EU and the 3rd country
Once the MS’ BIA fails the test, the MS and the Commission must enter into consultation
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7. Transitional Measures by the EU
Regulation 1219/2012 on Transitional Arrangements (Cont’d)
MS can still amend the existing BIAs
Must notify to the Commission 5 months before the beginning
The Commission must approve, unless:
Clash with the EU laws for other reasons than the allocation of competence
Commission (COM) decided to start negotiation of a BIA with that 3rd country, or if the COM notified its intention to the EP and the Council
It is inconsistent with the EU’s foreign policy objective and principle
It constitutes a “serious obstacle” to negotiation / conclusion of a BIA between the MS and the 3rd country.
Once approved, the MS must keep the COM informed of the process
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8. Transitional Measures by the EU
Regulation 1219/2012 on Transitional Arrangements
MS can conclude new BIAs between Dec. 1, 2009 and Jan. 9, 2013, subject to approval by the COM
Notification must reach to the COM by Feb. 8, 2013
COM approves them as long as the BIAs do not constitute “serious obstacles” to the BIAs between the EU and the 3rd country
If an ISD arises, the MS and the COM must work closely for effective defense
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9. Transitional Measures by the EU
Regulation 912/2014 on Distribution of Financial Responsibility linked to ISD between the MS and the EU
Key question: Who is responsible if the EU or an MS becomes a respondent in an ISD?
Distribution of financial responsibility
ISD solely based on MS’ measures: MS
ISD based on the EU’s measures or MS’ measures implementing EU’s measures: EU
KSIEL – KCAB Joint International Seminar

10. Transitional Measures by the EU
Regulation 912/2014 on Distribution of Financial Responsibility between the MS and the EU in an ISD (Cont’d)
Determination of who becomes respondent in an ISD
After Consultation between EU and MS, MS normally becomes respondent, except
When EU decides to financially responsible
When the similar dispute also went to the WTO DSB
If the MS informs the COM in writing that it won’t be a respondent
Close cooperation between MS and the EU in ISD proceedings
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11. ISD in Recent Trade Agreements
Transatlantic Trade and Investment Partnership (TTIP)
The biggest bilateral FTA in history
ISDS became a thorny issue
Question on regulatory autonomy
US and DG Trade in favor, MS objecting
Public Consultation of the ISD in the TTIP: Mar – Jul. 2014
Over 150,000 responses
Negotiation suspended until the result is fully analyzed
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12. ISD in Recent Trade Agreements
Comprehensive Trade and Economic Agreement (CETA)
Negotiation completed in September 2014: Pending ratification
Likely ratification in late 2015 – early 2016
Major overhaul of ISDS
Importance of Bilateral consultation
Significantly narrower scope of ISD: Only the following can be invoked
Breach of NT
Specifically defined breach of FET
Breach of requirements for Expropriation
Full transparency
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13. ISDS in Recent EU Political Situation
New EU Leadership (Nov ~)
Donald Tusk,
President of the European Council
Jean-Claude Juncker
President, European Commission
Cecilia Malmstrom,
Commissioner, Trade
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14. ISDS in Recent EU Political Situation
MS defiant against ISDS: Germany, France
Are MS happy with the CETA or EUSFTA’s ISDS?
Can the Commission persuade the MS?
Vattenfall (Swedish investor) v. Germany (II)
Germany’s nuclear phase-out brought before the ICSID
Disadvantage to German firms (E.On, RWE)?
Reinforcing the case against the ISDS?
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15. Need for “Investment” Chapter in Korea-EU FTA?
Korea has BITs with 23 EU MS
Need to fill the “gap” with MS without BITs
EU is likely to negotiate CETA-like provisions with Korea
EU-Singapore FTA also provides for similar provisions
Adding a chapter in the Korea-EU FTA will be helpful
Seamless coverage of investment protection with the EU
Ratification: Lobbying to the MS will be crucial
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16. Questions and Answers KSIEL – KCAB Joint International Seminar
© ljo / Fotolia (Photo courtesy of European Parliamentary Research Service)
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