Abstract
The question of the allocation of powers between the centre and the periphery, i.e. between the EU and its Member States, with regard to regulating and protecting investments has attracted the attention of many EU as well as investment law scholars. This rather recent interest may have been the result of the fact that the “new” investment power was inserted into the framework of the existing Common Commercial Policy (CCP) in a fairly low key style during the convention deliberations on a Constitution for Europe, probably going unnoticed by many, though opposed by some.
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- 1.
See Bungenberg, Centralizing European BIT Making under the Lisbon Treaty, Draft Paper to be presented at the 2008 Biennial Interest Group Conference in Washington, D.C., November 13–15, 2008; Bungenberg, Going Global? The EU Common Commercial Policy After Lisbon, in: Hermann/Terhechte (eds.), European Yearbook of International Economic Law, 2010, pp. 123–151; Bungenberg, Außenbeziehungen und Außenhandelspolitik, EuR Beiheft 1 (2009), pp. 195–218; Ceyssens, Towards a Common Foreign Investment Policy? – Foreign Investment in the European Constitution, Legal Issues of Economic Integration 32 (2005), pp. 259–291; Dimopoulus, The Common Commercial Policy after Lisbon: Establishing Parallelism between Internal and External Economic Relations? Croatian Yearbook of European Law and Policy 4 (2008), pp. 101–131; Ehlers/Wolffgang/Schröder, Bilaterale und regionale Handelsabkommen als Kernstück der “neuen” EG-Handelspolitik, 2009; Griebel, Überlegungen zur Wahrnehmung der neuen EU-Kompetenz für ausländische Direktinvestitionen nach Inkrafttreten des Vertrags von Lissabon, Recht der Internationalen Wirtschaft (2009), pp. 469–474; Karl, The Competence for Foreign Direct Investment: New Powers for the European Union?, Journal of World Investment and Trade 5 (2004), pp. 413–448; Klamert/Maydell, Lost in Exclusivity: Implied Non-Exclusive External Competences in Community Law, European Foreign Affairs Review 13 (2008), pp. 493–513; Krajewski, External Trade Law and the Constitution Treaty: Towards a Federal and More Democratic Common Commercial Policy?, Common Market Law Review 42 (2005), pp. 91–127; Maydell, The European Community’s Minimum Platform on Investment or the Trojan Horse of Investment Competence, in: Reinisch/Knahr (eds.), International Investment Law in Context, 2008, pp. 73–92; Mola, Which role for the EU in the development of international investment law? SIEL Inaugural Conference 2008, Online Proceedings Working Paper No. 26/08, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1154583; Shan, Towards a Common European Community Policy on Investment Issues, Journal of World Investment and Trade 2 (2001), pp. 603–625; Tietje, Die Außenwirtschaftsverfassung der EU nach dem Vertrag von Lissabon, in: Tietje/Kraft (eds.), Beiträge zum Transnationalen Wirtschaftsrecht, Heft 83, 2009; Woolcock, The potential impact of the Lisbon Treaty on EU External Trade policy, SIEPS – European Policy Analysis 8/2008.
- 2.
Treaty Establishing a Constitution for Europe, OJ 2004 C 310/1.
- 3.
See French, German, and other objections: Proposition d’amendement à l’article III-212 Déposée par Monsieur de Villepin, available at http://european-convention.eu.int/docs/treaty/pdf/866/Art%20III%20212%20de%20Villepin%20FR.pdf; Suggestion for amendment of Article 24 by Mr. Joschka Fischer, CONV 685/03, available at http://european-convention.eu.int/Docs/Treaty/pdf/866/Art24Fischer.pdf; Suggestion for amendment of Article 24 by Mr David Heathcoat-Amory, available at http://european-convention.eu.int/Docs/Treaty/pdf/866/Art24Heathcoat-Amory%20EN.pdf; see also Krajewski, External Trade Law and the Constitution Treaty: Towards a Federal and more Democratic Common Commercial Policy?, Common Market Law Review 42 (2005), p. 91 (103–104); Ceyssens, Towards a Common Foreign Investment Policy? – Foreign Investment in the European Constitution, Legal Issues of Economic Integration 32 (2005), p. 259 (273).
- 4.
Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, OJ 2008 C 115/1.
- 5.
See Bungenberg, in this special issue, pp. 29 et seq.
- 6.
See supra footnote 1.
- 7.
See, e.g. Pollan, Legal Framework for the Admission of FDI, 2006; Shihata, Recent Trends relating to Entry of Foreign Investment, ICSID Review-FILJ 9 (1994), p. 48; Alfaro/Chanda/Kalemli-Ozcan/Sayek, How does Foreign Direct Investment Promote Economic Growth? – Exploring the Effects of Financial Markets on Linkages, Working Paper Series 12522, National Bureau of Economic Research, Cambridge, Mass., 2006; Blomström, The Economics of Foreign Direct Investment Incentives, Centre for Economic Policy Research, London, 2003; Graham, Foreign Direct Investment in the World Economy, IMF Working Paper, 1995; UNCTAD, The Determinants of Foreign Direct Investment – A Survey of Evidence, 1992.
- 8.
Article 57(1) TEC, Treaty Establishing the European Community (consolidated version), OJ 2002 C 325/1, provides: “The provisions of Article 56 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Community law adopted in respect of the movement of capital to or from third countries involving direct investment – including in real estate – establishment, the provision of financial services or the admission of securities to capital markets”.
- 9.
Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty, OJ 1988 L 178/5, provides in full: “Investments of all kinds by natural persons or commercial, industrial or financial undertakings, and which serve to establish or to maintain lasting and direct links between the person providing the capital and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity. This concept must therefore be understood in its widest sense.
The undertakings mentioned under I-1 of the Nomenclature include legally independent undertakings (wholly-owned subsidiaries) and branches.
As regards those undertakings mentioned under I-2 of the Nomenclature which have the status of companies limited by shares, there is participation in the nature of direct investment where the block of shares held by a natural person of another undertaking or any other holder enables the shareholder, either pursuant to the provisions of national laws relating to companies limited by shares or otherwise, to participate effectively in the management of the company or in its control.
Long-term loans of a participating nature, mentioned under I-3 of the Nomenclature, means loans for a period of more than five years which are made for the purpose of establishing or maintaining lasting economic links. The main examples which may be cited are loans granted by a company to its subsidiaries or to companies in which it has a share and loans linked with a profit-sharing arrangement. Loans granted by financial institutions with a view to establishing or maintaining lasting economic links are also included under this heading”.
- 10.
OECD Benchmark Definition of Foreign Direct Investment, 4th edition, April 2008, para. 11, available at http://www.oecd.org/dataoecd/26/50/40193734.pdf. (“11. Direct investment is a category of cross-border investment made by a resident in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor. The motivation of the direct investor is a strategic long-term relationship with the direct investment enterprise to ensure a significant degree of influence by the direct investor in the management of the direct investment enterprise. The ‘lasting interest’ is evidenced when the direct investor owns at least 10% of the voting power of the direct investment enterprise. Direct investment may also allow the direct investor to gain access to the economy of the direct investment enterprise which it might otherwise be unable to do. The objectives of direct investment are different from those of portfolio investment whereby investors do not generally expect to influence the management of the enterprise”.) (Emphasis added).
- 11.
International Monetary Fund, Balance of Payments Manual, 5th edition, 1993, para. 362, available at http://www.imf.org/external/np/sta/bop/BOPman.pdf. (“362. Reflecting the difference noted previously, a direct investment enterprise is defined in this Manual as an incorporated or unincorporated enterprise in which a direct investor, who is resident in another economy, owns 10 percent or more of the ordinary shares or voting power (for an incorporated enterprise) or the equivalent (for an unincorporated enterprise). Direct investment enterprises comprise those entities that are subsidiaries (a nonresident investor owns more than 50 percent), associates (an investor own 50 percent or less) and branches (wholly or jointly owned unincorporated enterprises) either directly or indirectly owned by the direct investor. […]”.).
- 12.
See, e.g. Article 1 US Model BIT 2004: “For the purpose of this Treaty (…) ‘investment’ means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. Forms that an investment may take include:
-
(a)
an enterprise;
-
(b)
shares, stock, and other forms of equity participation in an enterprise;
-
(c)
bonds, debentures, other debt instruments, and loans;
-
(d)
futures, options, and other derivatives;
-
(e)
turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts;
-
(f)
intellectual property rights;
-
(g)
licenses, authorizations, permits, and similar rights conferred pursuant to domestic law; and
-
(h)
other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges”.
-
(a)
- 13.
Article 25(1) Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention), 18 March 1965, UNTS 575 (1966), p. 159; ILM 4 (1965), p. 532, provides: “The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally”.
- 14.
See, e.g. Ceskoslovenska obchodni banka v. Slovak Republic, ICSID Case No. ARB/97/4, Decision on Objections to Jurisdiction, 24 May 1999, ICSID Review – FILJ 14 (1999), p. 251.
- 15.
See, e.g. Fedax N.V. v. Republic of Venezuela, ICSID Case No. ARB/96/3, Decision on Objections to Jurisdiction, 11 July 1997, ICSID Reports 5 (2002), p. 186.
- 16.
Certain restrictive elements remain relevant as far as the interpretation of the term “investment” under the ICSID Convention is concerned. ICSID tribunals have developed a test, often referred to as Salini test, according to which the following elements indicate the existence of an investment: a certain duration, a regularity of profit and return, an element of risk for both sides as well as a substantial commitment and significance for the host state’s development. See Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 23 July 2001, Journal du droit international 129 (2002), p. 196, English translations of the French original in ILM 42 (2003), p. 609, ICSID Reports 6 (2004), p. 400. See also Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on Jurisdiction and Recommendation on Provisional Measures, 21 March 2007, para. 99 (“[T]he notion of investment implies the presence of the following elements: (a) a contribution of money or other assets of economic value, (b) a certain duration, (c) an element of risk, and (d) a contribution to the host State’s development”.).
This test largely corresponds to the criteria developed by Schreuer in the first edition of his ICSID commentary. Schreuer, The ICSID Convention: A Commentary, 2001, p. 140. On the notion of “investment” in general see also Rubins, The Notion of “Investment” in International Investment Arbitration, in: Horn/Kröll (eds.), Arbitrating Foreign Investment Disputes, 2004, p. 283–324; Yala, The Notion of “Investment” in ICSID Case Law: A Drifting Jurisdictional Requirement? Some “Un-Conventional” Thoughts on Salini, SGS and Mihaly, Journal of International Arbitration 22 (2005) 2, p. 105; Dolzer, The Notion of Investment in Recent Practice, in: S. Charnovitz/Steger/van den Bossche (eds.), Law in the Service of Human Dignity: Essays in Honour of Florentino Feliciano, 2005, p. 261; Krishnan, A Notion of ICSID Investment, in: T. Weiler (ed.), Investment Treaty Arbitration and International Law, 2008, p. 61–84. Recently, some tribunals have displayed a more restrictive attitude, disqualifying economic activities as investments if they did not “contribute” to the development of the host state. Cf. Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2006; Malaysian Historical Salvors, SDN, BHD v. Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, 17 May 2007. See also Reinisch, Back to Basics: From the Notion of “Investment” to the Purpose of Annulment – ICSID Arbitration in 2007, The Global Community Yearbook of International Law & Jurisprudence (2008), p. 1591.
- 17.
According to the Doha Ministerial Conference the “Working Group on the Relationship Between Trade and Investment will focus on the clarification of: scope and definition; transparency; non-discrimination; modalities for pre-establishment commitments based on a GATS-type, positive list approach; development provisions; exceptions and balance-of-payments safeguards; consultation and the settlement of disputes between members. […]”. Doha Ministerial Declaration, para. 22, adopted on 14 November 2001, WT/MIN(01)/DEC/1, 20 November 2001, available at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm.
- 18.
See Communication from the European Community and its Member States to the Working Group on the Relationship between Trade and Investment: “Concept paper on the definition of investment”, WT/WGTI/W/115, 16 April 2002, 4. (“Should a direct investor control the company with less than 10 per cent of the ordinary shares the following criteria could be taken into account to determine whether a direct investment relationship exists: (a) representation in the Board of Directors; (b) participation in policy-making processes; (c) inter-company transactions; (d) interchange of managerial personnel; (e) provision of technical information; (f) provision of long-term loans at lower than existing market rates”.).
- 19.
Bungenberg, Centralizing European BIT Making under the Lisbon Treaty, Draft Paper to be presented at the 2008 Biennial Interest Group Conference in Washington, D.C., November 13–15, 2008, p. 20; Griebel, Überlegungen zur Wahrnehmung der neuen EU-Kompetenz für ausländische Direktinvestitionen nach Inkrafttreten des Vertrags von Lissabon, RIW (2009), p. 470; Tietje, Die Außenwirtschaftsverfassung der EU nach dem Vertrag von Lissabon, in: Tietje/Kraft (eds.), Beiträge zum Transnationalen Wirtschaftsrecht, Heft 83, 2009, p. 16.
- 20.
See, e.g. Krajewski, External Trade Law and the Constitution Treaty: Towards a Federal and more Democratic Common Commercial Policy? Common Market Law Review 42 (2005), p. 91 (112 et seq.).
- 21.
Article 206 TFEU: “By establishing a customs union in accordance with Articles 23 to 27, the Union shall contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and on foreign direct investment, and the lowering of customs and other barriers”. (Emphasis added).
- 22.
See, e.g. Article 3 (1) Bolivia-Netherlands BIT: “Each Contracting Party shall ensure fair and equitable treatment to the investments of nationals of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment, or disposal thereof by those nationals”. Article 3 (3) Austria-Georgia BIT: “Each Contracting Party shall accord to investors of the other Contracting Party and to their investments treatment no less favourable than that it accords to its own investors and their investments or to investors of any third country and their investments with respect to the management, operation, maintenance, use, enjoyment, sale and liquidation of an investment, whichever is more favourable to the investor”. (Emphasis added).
- 23.
See supra footnote 17.
- 24.
Council of the EU, Minimum Platform on Investment, 15375/06, 27 November 2006.
- 25.
See Maydell, The European Community’s Minimum Platform on Investment or the Trojan Horse of Investment Competence, in: Reinisch/Knahr (eds.), International Investment Law in Context, 2008, p. 73 (75 et seq.).
- 26.
See already Shihata, Towards a Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA, ICSID Review-FILJ 1 (1986), p. 1.
- 27.
See, e.g. Schreuer/Malintoppi/Reinisch/Sinclair, The ICSID Convention – A Commentary, 2009, (2nd ed.) p. 416; Schreuer, Investment Protection and International Relations, in: Reinisch/Kriebaum (eds.), The Law of International Relations – Liber Amicorum Hanspeter Neuhold, 2007, p. 345 (346 et seq.).
- 28.
Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Decision on Objections to Jurisdiction, 25 January 2000, ICSID Review-FILJ 16 (2001), p. 212; ICSID Reports 5 (2002), p. 396; ILR 124 (2003), p. 9; ILM 40 (2001), p. 1129; Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, 3 August 2004, ILM 44 (2005), p. 138. According to the Siemens tribunal BITs included “as a distinctive feature special dispute settlement mechanisms not normally open to investors. Access to these mechanisms is part of the protection offered under the Treaty. It is part of the treatment of foreign investors and investments and of the advantages accessible through a MFN clause”. (Siemens v. Argentina, para. 120).
- 29.
See Article 25 ICSID Convention, supra note 13; Article 67 ICSID Convention: “This Convention shall be open for signature on behalf of States members of the Bank. […]” (Emphasis added).
- 30.
The practical difficulties of revising the ICSID Convention were discussed earlier this decade when the introduction of an appellate body was debated. See, e.g. Legum, Options to Establish an Appellate Mechanism for Investment Disputes, in: Sauvant (ed.), Appeals Mechanism in International Investment Disputes, 2008, pp. 231–239; Bishop, The Case for an Appellate Panel and its Scope of Review, TDM 2 (2005) 2; Tams, An Appealing Option? The Debate about an ICSID Appellate Structure, in: Tietje/Kraft/Sethe (eds.), Beiträge zum Transnationalen Wirtschaftsrecht, Heft 57, Juni 2006; Gantz, An Appellate Mechanism for Review of Arbitral Decisions in Investor-State Disputes: Prospects and Challenges, Vanderbilt Journal of Transnational Law 39 (2006) 1, p. 39.
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Reinisch, A. (2011). The Division of Powers Between the EU and Its Member States “After Lisbon”. In: Bungenberg, M., Griebel, J., Hindelang, S. (eds) International Investment Law and EU Law. European Yearbook of International Economic Law(). Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-14855-2_3
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