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European Parliament votes on transitional arrangements for BITs between member states and third countries
Practical Law UK Legal Update 9-506-0409 (Approx. 4 pages)
European Parliament votes on transitional arrangements for BITs between member states and third countries
by PLC Arbitration
| Published on 11 May 2011 • European Union, International |
On 10 May 2011, the European Parliament in plenary session adopted a position on the European Commission's proposed Regulation on transitional arrangements for bilateral investment agreements between member states and third countries (COM(2010)344). (Free access).
We previously reported that the European Commission had proposed a draft Regulation establishing transitional arrangements for bilateral investment agreements between member states and third countries (COM(2010)344) (see Legal update, Commission publishes EU investment policy and sets its approach to bilateral investment agreements between members states and third countries). On 10 May 2011, the European Parliament in plenary session adopted a position on the proposed Regulation. It substantially adopted the text of its Committee on International Trade's report on the proposal for a regulation of the European Parliament and of the Council establishing transitional arrangements for bilateral investment agreements between member states and third countries (14 April 2011). The report was originally prepared by rapporteur Carl Schlyter and then subject to various amendments by groups represented in the Committee.
There are currently over 1,200 bilateral investment treaties (BITs) between EU member states and third countries. Since the Lisbon Treaty, foreign direct investment has become an exclusively EU competence. The Commission's proposed Regulation, which establishes the terms, conditions and procedure under which member states are authorised to maintain in force, amend or conclude BITs with third countries, includes the following provisions:
- Member states must notify the Commission of all BITs with third countries concluded or signed before the Regulation comes into force, in exchange for which they will be authorised to maintain those BITs in force.
- The Commission must review existing BITs and withdraw authorisation where:
- the BIT is incompatible with EU law;
- there is an overlap with an EU agreement in force with the third country; and
- the BIT constitutes an obstacle to the development and implementation of the EU's policies on investment.
- Subject to the terms of the Regulation, member states are authorised to enter into negotiations to amend an existing BIT with a third country or conclude a new investment agreement with a third country.
The position adopted by the European Parliament suggests amendments to the proposed Regulation, which generally aim to weaken the Commission's power to review existing BITs and withdraw authorisation for them. The amendments include:
- Giving the Commission a discretionary, rather than mandatory power to review BITs notified under the Regulation.
- Limiting the scope of the Commission's review to cases where a BIT is incompatible with EU law or constitutes a serious obstacle to the conclusion of future investment agreements with the third country.
- Placing similar limits to those set out in the point above on the circumstances in which the Commission should withdraw authorisation for an existing BIT.
In addition, the European Parliament's amendments would allow member states to conclude new investment agreements with third countries, unless a simple majority of member states considered that an EU-level agreement with the relevant third country would be preferable.
This was the European Parliament's first reading vote under the ordinary legislative (formerly the co-decision) procedure. The next stage will be for the European Parliament's amendments to be considered by the Council of the EU. We will continue to monitor developments.