Abstract
Currently—as the European Union (EU) composes itself to negotiate investment chapters providing for investor-State arbitration in free trade agreements with Canada, Singapore, and India and as it proposes a regulation establishing a framework for managing financial responsibility linked to investor-State dispute settlement—we can witness an intensifying public and non-public debate on the vision, aims, actors and means of the emerging Common European Investment Policy. Surprisingly, the conditions and limits stipulated by the Treaties upon which the European Union is founded, i.e. the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU), have received only selective attention. In this respect, the issue of distribution of competences between the Member States and the Union in the area of foreign investment—including the possibility of providing for investor-State arbitration in future EU investment-related agreements—has more widely been discussed. However, when it comes to the establishment of dispute resolution bodies in international agreements concluded by the EU the concept of the autonomy of EU law has proven to be the crucial touchstone. The role of this concept, mainly developed in a series of opinions of the Court of Justice of the European Union (CJEU), in limiting the Union’s “leeway” in subjecting itself to the current model of investor-State arbitration has so far not sufficiently been explored.
This contribution is an abridged and updated version of Hindelang, Der primärrechtliche Rahmen einer EU-Investitionsschutzpolitik: Zulässigkeit und Grenzen von Investor-Staat-Schiedsverfahren aufgrund künftiger EU Abkommen, in: Bungenberg/Herrmann (eds.), Die Gemeinsame Handelspolitik der Europäischen Union “nach Lissabon”, 2011, pp. 157–184. Lines of argument—summarized and shortened in the present version—are fully developed in the German one. For his research support the author wishes to thank Mr. Sebastian Schreiber, stud. iur., Freie Universität Berlin.
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Notes
- 1.
There is no official EU document publicly available which reproduces the text of the negotiating directives for the EU-Canada, India, and Singapore trade and investment agreements granted to the Commission by the Council of the EU on 12.9.2011 (cf. Agenda of the General Affairs Council Meeting, 3109th meeting on 12.9.2011, List of “A” Items, Doc. No. 13954/11). The purported text of the negotiating directives has been made public by a NGO, cf. Seattle to Brussels Network, Text of the Mandates, available at http://www.s2bnetwork.org/themes/eu-investment-policy/eu-documents/text-of-the-mandates.html.
- 2.
European Commission, Proposal for a Regulation of the European Parliament and of the Council establishing a framework for managing financial responsibility linked to investor-state dispute settlement tribunals established by international agreements to which the European Union is party, Brussels, 21.6.2012, COM(2012) 335 final.
- 3.
For a view of an EU Member State cf., e.g., Deutscher Bundestag, Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Thilo Hoppe, Kerstin Andreae, Dr. Gerhard Schick, weiterer Abgeordneter und der Fraktion BÜNDNIS 90 / DIE GRÜNEN, Drucksache 17/7473, available at http://dipbt.bundestag.de/dip21/btd/17/074/1707473.pdf; for the position of a business association cf., e.g., Federation of Germany Industry, Bilateral investment treaties: German industry’s position on the transfer of competencies to the European Union, position paper, No. D 0352, available at http://www.bdi.eu/download_content/GlobalisierungMaerkteUndHandel/Positionspapier_BITs_EN.pdf; for an account of the EU investment policy by a civil society campaigning organization cf., e.g. Seattle to Brussels Network, EU Investment Policy, available at http://www.s2bnetwork.org/themes/eu-investment-policy.html.
- 4.
Collectively referred to in this paper also as “EU Treaties”.
- 5.
In this respect, the case law of the European Court of Justice – cf. ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para 40 – provides a rather straight forward answer: The EU's competence for dispute settlement activities follows the competence for the substance of the matter. Thus, to the degree the Union can conclude international agreements on material standards of treatment of foreign investments to the same extent it vests the competence to subject itself to dispute resolution mechanisms. Cf. on the issue of EU competences in respect of the material standards usually contained in an investment agreement Hindelang, Der primärrechtliche Rahmen einer EU-Investitionsschutzpolitik: Zulässigkeit und Grenzen von Investor-Staat-Schiedsverfahren aufgrund künftiger EU-Abkommen, in: Bungenberg/Herrmann (eds.), Die Gemeinsame Handelspolitik der Europischen Union “nach Lissabon”, p. 157, pp. 159–164 with further references.
- 6.
Hindelang, Der primärrechtliche Rahmen einer EU-Investitionsschutzpolitik: Zulässigkeit und Grenzen von Investor-Staat-Schiedsverfahren aufgrund künftiger EU-Abkommen, in: Bungenberg/Herrmann (eds.), Die Gemeinsame Handelspolitik der Europischen Union “nach Lissabon”, p. 157, pp. 159–164; Hindelang/Maydell, The EU’s Common Investment Policy – Connecting the Dots – Origins, Trends, and Perspectives, in: Bungenberg/Griebel/Hindelang (eds.), International Investment Law and EU Law, Special Issue to the European Yearbook of International Economic Law, 2011, p. 1; Bungenberg, Die Kompetenzverteilung zwischen EU und Mitgliedstaaten “nach Lissabon”, in: Bungenberg/Griebel/Hindelang (eds.), Internationaler Investitionsschutz und Europarecht, 2010, p. 81, (pp. 88 et seqq); de Luca, New Developments on the Scope of the EU Common Commercial Policy under the Lisbon Treaty: Investment Liberalization vs. Investment Protection?, in: Sauvant (ed.), Yearbook on International Investment Law & Policy 2010–2011, p. 165; Reinisch, The Devision of Powers between the EU and its Member States “after Lisbon”, in: Bungenberg/Griebel/Hindelang (eds.), Internationaler Investitionsschutz und Europarecht, 2010, p. 99 (pp. 100 et seqq); Tietje, Die Außenwirtschaftsverfassung der EU nach dem Vertrag von Lissabon, 2009.
- 7.
For the purpose of this paper establishment shall include the possibility of empowering an already existing dispute resolution body.
- 8.
From a public international law perspective, it is beyond dispute that the European Union can be disputing party in an international dispute resolution procedure. This follows in particular from the Union's ability to conclude international agreements with other subjects of public international law, cf. Art. 47 TEU, Art. 216 TFEU; see also ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 40. In accordance with general public international law, the Union has on principle free choice of means in respect of settling its disputes. Cf. Tomuschat, Art. 281 EGV, in: von der Groeben/Schwarze (eds.), EUV/EGV, 2004, para. 18.
- 9.
ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 35; ECJ, Opinion 1/00, European Common Aviation Area, [2002] ECR, I-3493, para. 11-12; ECJ, C-459/03, Mox Plant, [2006] ECR, I-4635, para. 123.
- 10.
CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p., para. 77 et seqq.
- 11.
ECJ, Case 26/62, van Gend en Loos, [1963] ECR Special Edition, 3; ECJ, Case 106/77, Simmenthal, [1978] ECR, I-629.
- 12.
ECJ, Case 6/64, Costa/ENEL, [1964] ECR Special Edition, 614; note also von Danwitz, Verwaltungsrechtliches System und europische Integration, 1996, p. 101.
- 13.
Von Danwitz, Verwaltungsrechtliches System und europäische Integration, 1996, p. 101.
- 14.
Those opinions of the Court related to the European Economic Area, to the European Common Aviation Area and - very recently - to the proposed European and Community Patent Court: ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079; ECJ, Opinion 1/92, European Economic Area II, [1992] ECR, I-282; ECJ, Opinion 1/00, European Common Aviation Area, [2002] ECR, I-3493; CJEU, Opinion 1/09, Creation of a unified patent litigation system, n.y.p., especially para. 77 et seqq. Note also ECJ, C-459/03, Mox Plant, [2006] ECR, I-4635; CJEU, Case C-196/09, Paul Miles and Others v. coles europennes, [2011] ECR, n.y.p.
- 15.
In this paper secondary law alludes to the law set autonomously – in contrast to such formed contractually with third countries or international organisations – by the EU.
- 16.
ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 39.
- 17.
I.e. autonomous – non-contractual – EU law.
- 18.
ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 41-46.
- 19.
Note also ECJ, Ruling 1/78, Draft Convention of the International Atomic Energy Agency on the Physical Protection of Nuclear Materials, Facilities and Transports, [1978] ECR, I-2151, para. 35: “It is sufficient to state to the other contracting parties that the matter gives rise to a division of powers within the Community, it being understood that the exact nature of that division is a domestic question in which third parties have no need to intervene”.; ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 31-36; ECJ, C-459/03, Mox Plant, [2006] ECR, I-4635, para. 135: “It is for the Court, should the need arise, to identify the elements of the dispute which relate to provisions of the international agreement in question which fall outside its jurisdiction”.
- 20.
Embodied in particular in Art. 263 and 267 TFEU.
- 21.
For the avoidance of misunderstanding, international agreements are binding on the EU according to the general principle of “pacta sunt servanda”. This is “reaffirmed” in Art. 216 (2) TFEU. With entry into force of an international agreement it forms part of the EU legal order, cf. ECJ, Case 181/73, Haegeman, [1974] ECR, I-449, para. 5. Secondary acts taken on the basis of the agreement including decisions of courts or tribunals are – provided that they conform to EU primary law (cf. arg. Art. 218 XI TFEU; ECJ, C-402/05 P and 415/05 P, Kadi, [2008] ECR, I-6351, 5. guiding principle on review of an administrative act) – binding on the institutions of the EU, cf. ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 39. This however, does not mean that they are – automatically – also directly applicable in the sense that they form a standard of review for lower-ranking secondary EU law or measures of the Member States, cf., e.g. ECJ, C-377/02, van Parys, [2005] ECR, I-1465.
- 22.
[Emphasis added] ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 59. An issue to be distinguished relates to the question of whether an agreement (to which non-Member States are party) can provide for preliminary reference to the CJEU by a court or tribunal established on the basis of the said agreement for questions relating to the interpretation and application of EU law within the ambit of the EU. This would probably be perceived as an inadmissible attempt to change the EU Treaties – providing only for preliminary reference to the CJEU by Member State courts, cf. Art. 267 TFEU – by concluding an international agreement.
- 23.
ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 54 et seqq.
- 24.
Of course, as regards annulment and set aside proceedings, the nature of an ICSID-arbitral award is different from that of other arbitral awards rendered under the auspices of one of the commercial arbitration institutions. The annulment process in respect of the former arbitral awards is – at least on paper – narrower than the process in respect of awards rendered under the auspices of one of the commercial arbitration institutions. For a more detailed discussion see Dugan, et al., Investor-State Arbitration, 2008, p. 627; Burgstaller/Rosenberg, Challenging International Arbitral Awards: To ICSID or not to ICSID?, Arbitration International 27 (2011) 1, p. 91.
- 25.
They are binding and can be enforced in all Member States of the ICSID Convention as a final domestic judgement (Art. 53 and Art. 54 ICSID Convention).
- 26.
See on this Hindelang, Member State BITs - There's Still (Some) Life in the Old Dog Yet - Incompatibility of Existing Member State BITs with EU Law and Possible Remedies, in: Sauvant (ed.), Yearbook on International Investment Law and Policy 2010-2011, p. 221; Hindelang, Contracting out – Circumventing Primacy of EU Law and the CJEU’s Judicial Monopoly by Resorting to Dispute Resolution Mechanisms Provided for in Inter-se Treaties? – The Case of Intra-EU Investment Arbitration, LIEI 39 (2012) 2, p. 179.
- 27.
Member States are not party to this agreement. The act of the Member State would be attributable to the EU. Cf. on the question of attribution Hoffmeister, Litigating against the European Union and Its Member States – Who Responds under the ILC’s Draft Articles on International Responsibility of International Organisations?, EJIL 21 (2010) 3, p. 723; Paasivirta/Kuijper, Does one Size fit all?: The European Community and the Responsibility of International Organisations, NYIL 36 (2005), p. 169.
- 28.
Cf., e.g. ECJ, C-24/95, Alcan, [1997] ECR, I-1591, especially guiding principle 2: “In that connection, although the Community legal order cannot preclude national legislation which provides that the principles of the protection of legitimate expectations and legal certainty are to be observed with regard to recovery, nevertheless, in view of the mandatory nature of the supervision of State aid by the Commission under Article 93 of the Treaty, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in that article. A diligent businessman should normally be able to determine whether that procedure has been followed, even if the State in question was responsible for the illegality of the decision to grant aid to such a degree that its revocation appears to be a breach of good faith”.
- 29.
Indeed, this could prompt attempts to make sure that State aid granted by Member States which for whatever reason cannot be paid out due to EU law restrictions, can be implemented via the back-door of investment arbitration.
- 30.
Such function is performed by the way of annulment and preliminary reference procedure. Cf. Frenz, Handbuch Europarecht, volume 5, 2010, para. 2725-2726, para. 3223 et seqq, especially para. 3228.
- 31.
The appreciation of an EU measure in the light of an EU agreement could be perceived as a review of legality covered by the CJEU’s monopoly as an EU agreement – from the perspective of the CJEU – forms an integral part of the EU legal order. Also conceivable is that the CJEU would (mis-)interpret the appreciation of a tribunal in the context e.g. of the review of the fair and equitable treatment standard of whether an EU secondary law act is in compliance with EU primary law – for the tribunal a matter of fact, not law – as encroaching on its judicial monopoly.
- 32.
ECJ, Opinion 1/00, European Common Aviation Area, [2002] ECR, I-3493, para. 24.
- 33.
Statement submitted by the European Communities to the Secretariat of the Energy Charter Treaty pursuant to Article 26. (3) (b) (ii) of the Energy Charter Treaty, OJ L 336, 23.12.1994, p. 115.
- 34.
Cf. Art. 267 TFEU; the situation is different in respect of the interpretation of provisions of an agreement for the application in a third country: “Admittedly, there is no provision of the EEC Treaty which prevents an international agreement from conferring on the Court of Justice jurisdiction to interpret the provisions of such an agreement for the purposes of its application in non-member countries”. [Emphasis added] Cf. ECJ, Opinion 1/91, European Economic Area I, [1991] ECR, I-6079, para. 59.
- 35.
CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p.
- 36.
Hindelang, Der primärrechtliche Rahmen einer EU-Investitionsschutzpolitik: Zulässigkeit und Grenzen von Investor-Staat-Schiedsverfahren aufgrund künftiger EU Abkommen, in: Bungenberg/Herrmann (eds.), Die Gemeinsame Handelspolitik der Europischen Union “nach Lissabon”, 2011, pp. 157–184; see also Burgstaller, Investor-State Arbitration in EU International Investment Agreements with Third States, LIEI 39 (2012) 2, p. 207.
- 37.
CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p., para. 83.
- 38.
It held that the Member States “cannot confer the jurisdiction to resolve … disputes on a court created by an international agreement which would deprive … [national] courts of their task, as ‘ordinary’ courts within the European Union legal order, to implement European Union law and, thereby, of the power provided for in Article 267 TFEU”. Cf. CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p., para. 80.
- 39.
Cf. CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p., para. 86-88; stated in such absolute terms, one could wonder whether the Court of Justice of the European Union wanted to exclude any possibility to confer jurisdiction on other courts or tribunals outside the world of Member State courts and itself which might come in touch with questions linking to EU law only very remotely.
However, such radical reading as well as the transferability of the reasoning one-on-one on investment tribunals established on the basis of future EU investment-related agreements is not compelling: while the proposed European and Community Patent Court was entitled and obliged by agreement to apply EU law in its exclusive sphere of jurisdiction, investment tribunals established on the basis of future EU investment-related agreements will – absent any explicit stipulation to the contrary – take EU law in into account as facts only.
The CJEU’s statements should, furthermore, be viewed in conjunction with two other principles discussed by the Court in its Opinion which are (also) put in place to preserve the very nature or autonomy of EU law: i.e., first, that “a Member State is obliged to make good damages caused to individuals as a result of breaches of EU law by its judicial bodies” [CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p., para. 86] and, second, that the violation of EU law by a national court can result in infringement proceedings on the basis of Art. 258 et seqq. TFEU. In the case before the Court, however, both mechanisms were “deactivated”. The proposed European and Community Patent Court was supposed to form a body of an international organisation, i.e. an entity formally distinct from the Member States and the EU. Infringements of EU law by the proposed European and Community Patent Court hence could neither result in a claim for damages nor in infringement proceedings against Member States as not the Member States or a court of the Member States but an international organisation would violate EU law. Such situation was perceived by the CJEU as impermissible; cf. CJEU, Opinion 1/09, European and Community Patent Court, [2011] ECR, n.y.p., para. 86-88.
Turning to the issue of investment tribunals – for the sake of the argument considered regardless of the fact that such tribunals will presumably not apply EU law as law and dependent of whether the Member States will be parties to future EU investment-related agreements – this paper suggests that the situation discussed in Opinion 1/09 is different from the one investment tribunals are placed in. Investment-related agreements will not establish an international organisation distinct from the parties to the investment-related agreement and investment tribunals are not organs of such an organisation. Hence, attribution of the conduct of an investment tribunal to the parties of the investment-related agreement remains on principle possible.
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Hindelang, S. (2013). The Autonomy of the European Legal Order. In: Bungenberg, M., Herrmann, C. (eds) Common Commercial Policy after Lisbon. European Yearbook of International Economic Law(). Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-34255-4_11
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