Ïðàâî / 13. Ìåæäóíàðîäíîå ïðàâî

Student O.Balash

Oles Honchar Dnipropetrovsk National University, Urkaine

 

The evolution of the of the EU investment legislation in the context of domestic economic imbalances of the Union

 

International capital flows in the form of foreign direct investment is considered the main mover of the internationalization and economic globalization forces. From an economic point of view, it was and remains the issue of the imbalance effects of direct foreign investment. The benefits of FDI are not automatic, positive effects depend on the business environment, the behavior of the investor, the state of the national economy, political, institutional, and infrastructural factors [4].

Existing international investment agreements primarily contain provisions on the rights and protection of the investor, but the role, rights and obligations of States are not always regulated. Growing risks to governments, the private sector in the host country are also associated with the lack of a unified international investment law.

Observing the system of the European investment law sources, it is necessary to classify them into the following components:

1.       founding treaties of the Community (now Union);

2.       treaties of the European Union and member States;

3.       normative legal acts of the EU institutions (regulations, directives, decisions);

4.       the decisions of the European Union and the court of first instance.

The basis for the EU law unification in this area is the Rome Treaty establishing the European economic community, signed on 25 March 1957. Article 63(1) of the Treaty establishing the European Economic Community (TEEC) extendedly determined the basis for the the EU investment policy functioning: «... all restrictions are prohibited in case of capital movements between member States and between members and third countries» [1]. Despite the fact that the term «investment» is not explicitly used in this article, it is generally recognized that investment is a subclass of a capital movement.

The Single European Act (SEA) of 1986 lays the foundation of the investment climate in particular items such as: freedom of workers’ movement (article 39); promoting the exchange of young workers (article 41); the limitation of entrepreneurship freedom; the mutual diplomas recognition, certificates and other documents attesting qualifications (article 47), etc [2].

Council Directive No. 88/361/EEC «On the implementation of article 67 of the Treaty» of 24 June, 1988, defining the types of investments does not reveal this concept, but in the explanatory Memorandum it specifies the main characteristics of direct investment [3]. Monetary market operations indicator is the highest degree of integration, as the removal of restrictions from these operations allows residents of the EU-member States freely place their funds within the common market.

Apart from classifying the types of capital movement and the definition of foreign direct investment, the EU Council Directive of 1988 includes the actual regulatory rule – rule on protective measures taken by the state party in the extreme case. Moreover, these measures lead to the fact that national legislation is in conflict with the regulatory principles contained in the Rome Treaty.

Another tool of the EU countries investment – the approximation of the member States laws to the level that is necessary for the common market functioning. The gradual development of EU legislation on the Treaty of Rome basis has largely contributed to the free capital movement. Legal regulation of foreign investments in the EU-member countries was aimed at a gradual abolition of existing national legislational restrictions on the capital movement. The EU Council directives reflected this pursuing to the Treaty of Rome norms. EU legislation represented by the five directives of the EU Council aimed at the sequential removal of restrictions in the field of capital movement regulation.

The problem of the investors’ right insecurity is gaining relevance among the developed countries. According to UNCTAD, 113 cases (or 52%) of the 214 registered cases in the International centre for settlement of investment disputes (ICSID) during 2008-2012 were connected to the EU countries, including 27% of the mutual claims on the basis of bilateral investment treaties and the Energy Charter Treaty. Only 52 cases in 2012 were initiated (but not reviewed), including 31 European investors, which accounted for 60% of all recorded cases [3]. Thus, the EU faces both the problems of uneven involvement in international investment processes, and a significant gap with the US and Japan due to investment activity indicators, including the peculiarities of national laws on the protection of the investors rights.

With the entry into force of the Lisbon Treaty of 2009 legal regulation of foreign direct investment is transferred from the exclusive member States competence into the common commercial policy. Therefore, the secondary law of European investment law(such as regulations, directives and decisions)  has become the key source adopted by the competent EU institutions regulating investment activity.

According to the Lisbon Treaty, the following changes occurred:

-         FDI is considered as an integral part of the common commercial policy of the EU (article 207 of the Treaty);

-         the EU received an exclusive competence on investment policy, including investment protection (article 3(1)e);

-         European institutions apply the normal procedure of decision-making on investment policy;

-         European Parliament consents to the conclusion of investment treaties.

These changes mean that EU-member countries can not continue to conclude bilateral treaties on investment because they «delegate all functions» at the supranational level to the EU institutions. During procedural issues, the European Commission prepares a draft resolution that passes for discussion and approval to the European Council and the European Parliament.

Relative to existing bilateral agreements, the EU has proposed a mechanism of «caring» (grandfathering) investment by European institutions. Investment agreements are recognized as legitimate prior to the signing of the Lisbon Treaty, and continue to operate, but «being tested» for compliance with European standards.

In the case of non-compliance the country needs to revisit the provisions of existing agreements which establish the basis for negotiation of new agreements. Thus, the member States delegate its powers under the investment policy of the EU, in turn, the EU gives them the full right to use these powers. According to the Lisbon Treaty, investment policy has become a common horizontal policy of the EU.

The development, adoption and implementation of the unified principles and rules of investment, the typical investment treaty with the developed countries and developing countries and «investor-state» dispute settlement mechanism will allow the EU to reach a qualitatively new level of negotiations with Canada, Singapore, China, India, Japan, which already have a regional trade agreement and to sign a new with the US and ASEAN[3].

For the harmonization of national investment laws, creation of equal, non-discriminatory environment for investment and investors' right protection, the EU adopted Regulation No. 1219/2012 of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between member States and third countries [5]. The order provides that from January 2013 the EU's role in negotiations will continue to grow and European agreements gradually replace the bilateral countries-EU members.

An important component of the EU investment policy is the introduction of a dispute settlement mechanism, that is inextricably linked with the adoption of the principles and norms of international legal protection of investment in the recipient countries. The EU focuses on principles and current norms of ICPS and the UNCITRAL, developing a model investment agreement taking into account the experience of developed countries of their trade partners.

According to the «Europe 2020» strategy, the future of the EU is associated with the production and exchange of high-tech, higher-quality goods and services, in particular, the telecommunication, financial, transport services, development of «green economy», mechanical engineering, for which investments are required, a key condition for the development of the industry [6]. A common European policy is designed to create the effect of «alignment» that will allow companies in countries with a small number of bilateral agreements and small amounts of FDI inflows have equal opportunities to attract foreign investors.

 

References:

1.                     Treaty of Lisbon. Council of the European Union [Electronic resource]. – Access mode: http://www.consilium.europa.eu/ documents/treaty-of-lisbon?lang=en.

2.                     Single European Act [Electronic resource]. – Access mode: http://www.consilium.europa.eu/ documents/single-european-act?lang=en.

3.                     EU investment policy: Civil Society Dialogue [Electronic resource]. – Access mode: http://trade.ec.europa.eu/doclib/ docs/2013/april/ tradoc_150853.pdf.

4.                     Blomkvist K. The impact of a common EU FDI approach on individual member states and overall EU competitiveness / K. Blomkvist [Electronic resource]. – Access mode: http://www.snee.org/filer/papers/621.pdf.

5.                     Regulation (EU) ¹ 1219/2012 of the European Parliament and of the Council of establishing transitional arrangements for bilateral investment agreements between Member States and third countries, 12 December 2012 [Electronic resource]. – Access mode: http://www.europarl.europa.eu/code/lex/default_2012_ en.htm

6.                     EU FTA manual briefing: The EU’s approach to Free Trade Agreements Investment [Electronic resource]. – Access mode: http://aprodev.eu/files/Trade/EU%20FTA%20Manual%20 fta5_investment.pdf.

 

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