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EP Committee report on European investment policy
Practical Law Legal Update 0-505-4342 (Approx. 4 pages)
EP Committee report on European investment policy
by PLC Arbitration
| Published on 29 Mar 2011 • European Union, International |
The report of European Parliament rapporteur, Kader Arif, on future international investment policy has been published.
Following the Foreign Affairs Council's adoption of conclusions on EU foreign direct investment (FDI) policy (see Legal update, Council adopts conclusions on a European foreign direct investment policy), and the subsequent European Parliament (EP) hearing (see Legal update, European Parliament to hold hearing on transitional arrangements and future European international investment policy), the report by the EP rapporteur, as endorsed by the European Parliament's Committee on International Trade, has now been published.
The report (which includes a Motion for a European Parliament Resolution and an Explanatory Statement) addresses a number of issues, including various suggested reforms of the ICSID and UNCITRAL arbitration mechanisms.
In relation to dispute settlement mechanisms, the report suggests that significant changes to the current ICSID/UNCITRAL regime are required. In particular, the report highlights:
- The need for greater transparency.
- The need for the opportunity for parties to appeal from awards.
- The need to introduce an obligation to exhaust local judicial remedies where these will guarantee due process.
- The use of amicus curiae briefs.
- The need to prevent forum-shopping by introducing an obligation to select a single place of investor-state arbitration.
The report calls upon the Commission and EU member states to work towards the "necessary reforms" of the ICSID and UNCITRAL rules. In addition, the report suggests that the Commission should look as soon as possible into the question of how awards against the EU itself are to be satisfied, including the question of how responsibility is to be divided between the EU and member states.
The report also highlights issues relating to investor protection, in particular:
- Concerns about the use of broad definitions of "foreign investor" and the related risk of "BIT-shopping", whereby investors have been able to bring claims against their own countries by use of branches abroad.
- Concerns regarding the "level of discretion" of international arbitrators in interpreting investor protection clauses. The report suggests that problems have arisen from the use of vague language in bilateral investment treaties (BITs), which have failed adequately to protect states' regulatory and public intervention competence. The example of Argentina's failed reliance on the defence of necessity (see Legal update, ICSID tribunals reject defence of necessity) is cited. The report suggests that all future agreements should contain specific clauses stating the rights of states to regulate areas such as:
- national security;
- the environment;
- public health;
- worker and consumer rights;
- industrial policy; and
- cultural diversity.
The rapporteur suggests that any future investment agreements concluded by the EU should include more tightly defined standards relating to:
- Non-discrimination.
- Fair and equitable treatment.
- Direct and indirect expropriation (the US and Canadian Model BITs are cited as good examples).
The inclusion of umbrella clauses is not recommended.
The report has generated a good deal of discussion, particular in relation to the proposed requirement of exhaustion of local remedies. It is expected to go to plenary session in April or May. We will continue to report on developments.