EU international investment policy: Looking ahead

The Lisbon Treaty entered into force in 2009, providing the European Union (EU) with exclusive competence in the area of 'direct investment', as part of the common commercial policy. This covers the conclusion of international investment agreements (IIAs), which typically aim to protect and/or liberalise foreign direct investment. Since then, the EU has ratified protection IIAs (or provisions in trade agreements) with Canada, Singapore and Vietnam. Early on, concerns were raised as to the specific EU competence. Opinions requested from the Court of Justice of the EU (CJEU) established that the EU had neither exclusive competence in portfolio international investments (which, unlike direct investments, provide limited control over a firm) nor in the investor-state dispute settlement (ISDS) mechanism – two domains covered by EU protection IIAs. EU Member State approval on these provisions was therefore needed. Moreover, to tackle stakeholders' general misgivings about the ISDS system – currently based on arbitral tribunals and perceived by some as insufficiently transparent and predictable – the EU is actively contributing to the multilateral talks to reform the current system, the objective being to establish a fully fledged 'multilateral investment court' with an appeal tribunal and its own judges. Furthermore, EU Member States have protection IIAs with other Member States in place (intra-EU IIAs), which envisage arbitral ISDS mechanisms. However, the CJEU ruled in 2018 that arbitral decisions between Member States are incompatible with EU law, and most Member States have agreed to terminate their intra-EU IIAs, raising major stakeholder concerns; the European Commission has launched an initiative to address these with a proposal for a regulation. Finally, for security reasons, the EU has also implemented EU- and domestic-level mechanisms to screen, coordinate and exchange information about direct investment entering the EU. The European Parliament is preparing an own-initiative report on EU international investment policy.