On 23 May 2013, the European Commission announced that it was requesting a mandate from the Council to negotiate an investment agreement with China.

The decision to launch negotiations on a bilateral investment agreement had been taken by the EU and China at the 14th EU-China Summit held in February 2012 in Beijing (see Legal update, EU-China Summit: Leaders announce possibility of investment agreement and agree to pursue resolution of Market Economy Status issue). At the 15th EU-China Summit held on 20 September 2012, both sides agreed to launch negotiations on a bilateral investment agreement as soon as possible.

This is the first ever proposal for a stand-alone investment agreement since foreign direct investment became the exclusive competence of the EU under the Lisbon Treaty.

Next steps: The negotiating directives for the EU-China investment negotiations will need to be adopted by the Council. Under Regulation (EU) 1219/2012 of the European Parliament and of the Council of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between member states and third countries, the existing bi-lateral investment agreements between EU member states and China will remain in place until they are replaced by the future EU-China Agreement.

Background: Article 206 of the Treaty on the Functioning of the EU (TFEU) provides that by establishing a customs union in accordance with Articles 28 to 32, the EU will contribute to the progressive abolition of restrictions on international trade and foreign direct investment, and the lowering of customs and other barriers. Article 207 includes foreign direct investment as one of the areas covered by the common commercial policy of the EU. The common commercial policy is an area of exclusive competence pursuant to Article 3(1) of the TFEU.

In July 2010, the Commission adopted a Communication on developing a comprehensive European international investment policy which identified China as a candidate for a stand-alone investment agreement (see Legal update, Commission publishes EU investment policy and sets its approach to bilateral investment agreements between member states and third countries).

A Joint EU-China Investment Task Force was set up in the summer of 2010 to explore the scope for deeper co-operation on investment, including consideration of a possible stand-alone investment agreement.

In May 2011, the Commission launched a consultation on the subject of the EU-China investment relationship (see Legal update, EU-China investment relationship: European Commission launches consultation). The results of the consultation showed that a large majority of respondents believed that it would be preferable to have one single EU agreement covering investment protection rather than 25 different bilateral investment treaties, as it would ensure greater legal certainty.

Negotiations on investment at EU level are currently on-going with Canada, Singapore, India, Japan, Malaysia, Mercosur, Morocco, Thailand and Vietnam within the context of the negotiations for Free Trade Agreements.

Negotiating directives for deep and comprehensive Free Trade Agreements including investment were also adopted by the Council in December 2011 for Egypt, Jordan and Tunisia.

The Transatlantic Trade and Investment Partnership Agreement between the EU and the US will also include investment provisions.

Source: European Commission: Press Release, Commission proposes to open negotiations for an investment agreement with China (IP/13/458) (23 May 2013).

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