The fundamental challenges facing the EU at the moment (Brexit, refugees, the state of the Eurozone) have been attracting the lion's share of attention by academics, practitioners, and policy-makers. And yet, one would be wrong to assume that all is calm in the other, more mundane, areas of EU activity. A case in point is foreign investment policy.
Since the entry into force of the Lisbon Treaty, this field has gradually become an important strand of the EU's external relations. It became part, for the first time, of the EU's Common Commercial Policy (CCP) under art.207 TFEU. As such, it now falls within the scope of the Union's exclusive competence. As the EU was not in a position to articulate fully its investment policy as soon as it assumed the competence to do so, pragmatic arrangements were adopted which would enable the Member States to maintain their investment treaties with third countries provided that they complied with a set of EU procedural and substantive conditions.
For some time, the tensions between the EU and the Member States about the scope and nature of the former's powers and their implications for the latter's policy have been managed without a major crisis. Recent developments, however, have brought to the fore a number of questions with considerable intensity. The first question is about the scope and nature of the Union's external competence in the field. What is the scope of foreign direct investment pursuant to art.207 TFEU? For the areas not covered by the CCP, does the EU enjoy an exclusive implied competence pursuant to the TFEU provisions on capital movement (art.64(2) TFEU)? At the time of writing, these questions are examined by the European Court of Justice in the context of the conclusion of the EU-Singapore Free Trade Agreement. In its request for an Opinion in accordance with art.218(11) TFEU, the Commission has put forward an extremely broad reading of the Union's investment competence.
The second question is about the maintenance of bilateral investment treaties (BITs) between Member States (intra-EU BITs). The Commission's long-standing argument that they are inconsistent with EU law has been ignored by most of the Member States (except for Italy and Ireland which have terminated their intra-EU BITs). In June 2015, the Commission initiated proceedings against Austria, the Netherlands, Romania, Slovakia and Sweden. It has also requested information from the remaining 21 Member States.
The third question, following from the above, is about the investor-State dispute settlement rules laid down in intra-EU BITs, their impact on national legal orders and their interactions with EU law. This question has been raised in the context of the Micula dispute. This was about compensation granted to investors by an arbitral tribunal award pursuant to the BIT between Romania and Sweden. The investors sought to enforce the award before the Bucharest Tribunal which, bizarrely, did not consider it necessary to refer to the Court of Justice, even though the Commission had already opened the formal investigation procedure against Romania as to whether the partial implementation of the Award that had taken place was consistent with state aids rules. The Commission decided subsequently that the payment of the compensation awarded by the Arbitral Tribunal would be illegal under EU law as it would constitute State aid pursuant to art.107(1) TFEU. It also held that Romania should recover any compensation it had already paid to the Micula brothers in implementation of the award. This Decision has been challenged by the investors before the General Court of the European Union. They allege, amongst others, that the Commission's decision violates art.351 TFEU and general principles of law and amounts to an incorrect application of the state aid rules.
The issue of the compatibility of the dispute settlement mechanism laid down in intra-EU BITs with EU law has also been raised in a reference by the German Federal Court of Justice (Bundesgerichtshof) in the context of the BIT between Czechoslovakia and the Netherlands. The Bundesgerichtshof has raised questions regarding the scope of the exclusive jurisdiction of the Court of Justice under art.344 TFEU, the preliminary reference procedure, and the nondiscrimination principle.
The above developments raise complex questions that are central not just to the evolving investment policy of the Union but, more broadly, to the interaction between EU and international law. Their significance is illustrated by their emergence in a variety of procedural settings and in an ever wider canvass, involving national and transnational courts, arbitral tribunals, where the Commission routinely points out the supremacy of EU law, as well as courts in third states (the Micula saga has given rise to enforcement proceedings before national courts in Romania, United Kingdom, Belgium, France, and Luxembourg, as well as the United States).
Two factors underline the significance of these developments. The first is the increasingly prominent position of the principle of autonomy of the EU's legal order in the Court's caselaw. The ambiguous concept, ill-defined outer limits, and unclear implications of this principle raise questions about the management of the co-existence between EU and international investment law. The second factor is the politically charged environment within which such questions are raised. After all, investment arbitration is viewed with scepticism, if not outright hostility, by the wider public, as illustrated only too clearly by the reactions to the Comprehensive Economic and Trade Agreement between the EU and Canada and the ongoing negotiation of the Transatlantic Trade and Investment Partnership. The EU foreign investment policy landscape is, therefore, gradually shifting and the repercussions would be felt beyond the EU legal order, as they would have an impact on the work of EU, international, and national lawyers alike.