The Commission seeks greater power for European companies’ investing abroad
The Commission seeks greater power for European companies’ investing abroad
Eugene Eteris, BC, Riga-Copenhagen, 19.05.2008.
The European Commission is seeking to take more power in regulating deals for the European companies working abroad; first of all in deals concerning protection of investments abroad, a role traditionally undertaken by the EU’s member states in their trade outside the Union-block. Hence, the EU common commercial policy rules might extend to investments, as well.
The EU “common rules” and regulations governing external trade and tariffs have been regarded exclusive as “common commercial policy”. However, rules governing the EU companies rights in trade with “third countries” have been generally regulated by the governments in whose countries they have invested. These rules, until now, have been agreed by the member states in the so-called bilateral investment treaties (BITs). Such treaties often contain “investor-state provisions” concerning violations of the treaties allowing companies to sue governments directly.
The Lisbon Reform Treaty, 2007 (see our articles in the magazine) intends “to centralise power over foreign direct investments” within the competence of the European Commission. The Commission is also pursuing agreements on investment in current negotiations on bilateral trade deals between the EU and several Asian countries, e.g. South Korea and India.
The EU official position so far is such that the EU trade deals with foreign countries are not designed to replace member states’ BITs and there are no plans in the Commission to install a sort of arbitration mechanisms into present BITs, i.e. relationships leading to “investor-state arbitration”, though these clauses might be needed in the future.
Indian trade minister, for example, told the Financial Times that Brussels was already seeking such provisions in negotiations with India, puting investor-state provisions on the negotiation table. However India has traditionally been suspicious of such agreements.
Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels think-tank, said that the EU “power-grab” appeared to be under way as the Commission has sent a clear sign to acquire all the rights needed to negotiate investment deals. At the same time, if that position wins, as logic anticipates, this could make existing BITs illegal. (March 12 2008, Financial Times).
The EU tried and failed to insert rules regulating foreign investments into the so-called “Doha round” of global trade talks, where these daraft rules were rejected by the developing countries at the price of keeping the round going.
The Commission has also pressed EU member states to cancel bilateral investment agreements between themselves, saying EU law should prevail. But in a recent case brought by a Dutch sugar company against the Czech Republic, a tribunal decided that a BIT signed between the Czech Republic before it joined the EU was not overruled by EU law.
