EU 'grandfathering'regulation' for bilateral investment protection agreements (BITs)
The Treaty on the Functioning of the European Union (TFEU) has established a new Union authority for direct investments on December 1 2009. Since then, it is principally possible to include investment provisions in Union treaties with third countries. Therefore the new facility for concluding autonomous EU investment agreements requires a new legal basis for existing and future BITs of the EU Member States. After two and a half years of intense negotiations the European Parliament and the EU Council finally agreed on a regulation regarding the establishment of a transitional agreement for bilateral investment treaties between Member States and third countries. This agreement came into force on January 9 2013. With this existing BITs remain valid. They are still dependent on the authorisation by the European Commission after being discussed in the newly established 'Committee for Investment Agreements' (CIA). On February 8 2013, Austria reported all its existing as well as currently negotiated BITs to the European Commission.
EU agreements with Third Countries
The essential features of the new EU investment policy are included in the Commission's Communication COM (2010)343 of 7 July 2010. At present, negotiations on investment chapters in agreements with Canada, Vietnam and Singapore have been concluded. Negotiations with the US (TTIP), Japan, China, Myanmar,
Tunisia, the Philippines, and Mexico are ongoing. There are also negotiating mandates for India, Egypt, Jordan and Marocco, as well as for all ASEAN countries.
Investment protection in the EU-US-Trade and Investment Partnership Agreement (TTIP)
The negotiation directives ('mandate') for a transatlantic trade and investment partnership between the EU and the US was adopted by EU Member States in June 2013. The directives include the negotiation of an investment protection chapter with provisions on investor-state dispute settlement.
In January 2014, the European Commission temporarily suspended negotiations on investment protection and announced a public consultation process. An online consultation was conducted in spring 2014; the Commission received almost 150.000 replies, of which about 23 percent came from Austria alone. In January 2015, the Commission submitted a comprehensive analysis of responses. In May 2015, a concept paper on proposals for a reformed investment protection system in TTIP was presented. In July 2015, the European Parliament adopted a resolution on TTIP which inter alia formulates conditions for the acceptabilty of investment protection provisions in future EU agreements.
On this basis, and after intense discussion with both Member States and the European Parliament, the Commission transmitted a proposal for investment protection and investment dispute settlement in the TTIP to the US on 12 November 2015. This proposal was the basis of a re-opening of negotiations with the US on this issue during the 12th TTIP negotiation round (February 2016); negotiations were continued during the 13th and 14th rounds (April and July 2016). The following key new elements are proposed:
- Establishment of a bilateral Investment Tribunal and an Appeals Tribunal, with provisions on the indepedence, integrity and legal qualification of chosen judges;
- In the longer run, establishment of multilateral permanent investment court which would replace the bilateral mechanism;
- Introduction of a new specific clause on the state's right to regulate;
- Improvement of accessability of the investment protection system for SME's;
- Introduction of a clause obliging the Investment Tribunal to adhere to the interpretation of national and EU law by the competent courts;
- Obligation to disclose third party funding;
- Enlarged possibilities for procedural participation of third parties.
Investment protection in EU agreements with Canada (CETA), Vietnam, and Singapore
The EU-Canada Comprehensive Economic and Trade Agreement (CETA) was approved by the Council of the EU in October 2016. On 15 February 2017, the European Parliament voted in favour of it. CETA entered into force provisionally on 21 September 2017. The provisions on investment protection and on the foreseen Investment Court System are outside the scope of the provisional application of CETA. Due to its 'mixed nature', national parliaments of EU Member States still have to approve it before it can take full effect.
CETA's investment protection provisions and the foreseen Investment Court System mirror the new EU-reform approach for investment providing for detailed substantive provisions and a public court with treaty party appointed judges and an appeal tribunal for the settlement of investor-State disputes.
Similar provisions have been agreed upon by the EU and Vietnam in the investment chapter of the EU-Vietnam Free Trade Agreement. The agreement's text has been made public in January 2016 and is subject to approval by the competent institutions on the EU level and by Member States.
The text of the envisaged EU-Singapore Free Trade Agreement, which also foresees an investment chapter, was made public in May 2015. In September 2015, the European Commission requested of an opinion of the Court of Justice of the European Union on the allocation of competences between the EU and Member States with respect to the envisaged agreement, in particular, its provisions on transport services, sustainable development and investment. In Opinion 2/15, the Court identified the provisions on portfolio investment and investor state dispute settlement as shared competences, that is matters that can be exercised by the EU or by Member States, and held that the EU-Singapore Free Trade Agreement cannot be concluded by the EU alone. Further steps regarding the conclusion of the agreement are to be taken in the near future.
Intra-EU BITs are bilateral investment treaties between EU Member States. Currently Austria has 12 such Intra-EU BITS (Hungary, Poland, Czech Republic, Slovakia, Estonia, Latvia, Lithuania, Romania, Bulgaria, Slovenia, Malta and Croatia), which were ratified by Member States prior to their EU accession. Intra-EU-BITs are not covered by the Grandfathering regulation but are deemed as contracdicting EU law by the European Commission. In June 2015, the Commission therefore initiated infringement proceedings against Austria, Sweden, the Netherlands, Slovakia, and Romania, together with pilot procedures on further 21 Member States.
From the Austrian point of view, a termination of Intra-EU BITs without replacement would deteriorate the investment climate and imply a potential disadvantage for European investors vis-à-vis investors from third countries. Therefore, Austria, together with other Member States, promotes the establishment of a Europe wide, acquis-compliant investment protection mechanism.