The European Union has a new set of rules to manage disputes under investment agreements with its trading partners. This is a building block towards a common EU investment policy, as the new rules create the internal framework for managing future investor-state disputes.
Under the Treaty of Lisbon, investment became part of the EU Common Commercial Policy – an exclusive competence of the EU. As a consequence, the European Commission now also negotiates the investment component of trade agreements on behalf of the European Union.
The EU is negotiating investment protection and investor-to-state-dispute (ISDS) in a number of agreements. The new rules define who is to defend the EU’s and Member States’ interests in the event of ISDS in EU trade agreements and the Energy Charter Treaty.
The new rules establish the principles for allocating eventual costs or compensation. Member States will defend any challenges to their own measures and the EU will defend measures taken at EU level. In all cases, there will be close cooperation and transparency within the EU and its institutions.
There are currently 3000 bilateral investment treaties in force globally, more than 1400 of which are concluded by EU Member States. The vast majority of them include ISDS, as a necessary enforcement mechanism for those investing in third countries. EU investors are the most frequent users of ISDS worldwide.