FACULDADE DE DIREITO DA UNIVERSIDADE NOVA DE LISBOA Mestrado em Direito Forense e Arbitragem International Investment Arbitration Prof. Doutor Tiago Duarte Cláudia Saavedra Pinto 4 May2017 16.30h 19.15h Primary Texts: Treaty on the Functioning of the European Union (TFEU), Articles 2(1), 3(1)(e), 207, 218, 351. Treaty on European Union(TEU), Article 4(3). Regulation (EU) No 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, OJ L 351, 20.12.2012. 1
Bibliography: J. Kleinheisterkamp, 'Investment Protection and EU Law: The Intra- and Extra-EU Dimension of the Energy Charter Treaty', in Journal of International Economic Law, 2012, n.º15(1),pp.85ess; J. Kleinheisterkamp, 'European Policy Space in International Investment Law', in ICSID Review,2012,n.º27(2),pp.416ess S. Blanchard, What Can a Foreign Investor in a Future EU Member State Legitimately Expect: Negotiating Legal Certainty and Regulatory Flexibility During EU Accession, MPILux 4/2014, Working Paper 9, disponível aqui www.mpi.lu A. Reinisch e L. Stifter, What about ISDS in EU Investment Agreements?, in Revista Internacional de ArbitragemeConciliação, 2015,n.º8,pp.7ess M. J. Palma, A Nova Política Europeia de Investimento decorrente do Tratado de Lisboa: o Regulamento Grandfathering e a articulação entre a competência da União Europeia e as competências remanescentes dos Estados-Membros, in Revista Internacional de ArbitragemeConciliação, 2015,n.º8,pp.83ess R. N. Ferreira, A Judicialização do Sistema de ISDS no TTIP, in Revista Internacional de ArbitragemeConciliação,2015,n.º8,pp.111ess C. Saavedra Pinto, The Narrow Meaning of the Legitimate Expectations Principle in State Aid Law Versus the Foreign Investor s Legitimate Expectations, A Hopeless Clash or an Opportunity for Convergence?, EStAL, 2/2016, pp. 270 285 Case-law: Micula v Romania, Case ICSID ARB/05/20, 2013; Eastern Sugar B.V. v The Czech Republic, Case SCC 088/2004, 2007; Eureko v Slovak Republic, Case PCA 2008-13, 2010; AES v Hungary, Case ICSID ARB/07/22, 2010; Electrabel v Hungary, Case ICSID ARB/07/19, 2012; EDF v Hungary, Case UNCITRAL, 2014. 2
PLAN: o (EU MS) BITs & European Union o Intra-EU BITs & EU law o Extra-EU BITs & EU law Intra-EU BITs: Why is the situation different for extra-eu and intra-eu BITs? What is the EU Commission's position on the validity of the latter? In the light of the Micula decision, would you agree? What do you think will happen next? Existing BITs of Member States with third countries: Are they still in force? Why may the answer be different under Public International Law and under European Law? What is necessary to ensure legal certainty? WhathappensiftheprovisionsofaBITarecontrarytoEUlaw? The future EU international investment policy: Why do academics and EU institutions talk aboutanewgeneration ofbits?whatarethemain concerns oftheeu and themember States? Howcan thesebe met? In which way is the public policy space related to the investors protection? 3
BITs& European Union BITs in numbers: o 190 Intra-EU BITs o Over 1.400 Extra-EU BITs o 90% of these BITs with ICSID clause 4
Part I: BITs & European Union The potential clash between (MS) BITs and the European Union: European Union: single market, fundamental freedoms, national treatment, non-discrimination of EU nationals on grounds of nationality, level playing field. Part I: BITs & European Union The internal market comprises an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties (article 26 TFEU). Accordingly, investors may: - physically move and reside freely within the territory of the member states (art. 21); - move their capital freely within the internal market(art 63,65); - establish the companies they wish to use for their investments in any member state(art. 49, 52); - their companies can provide their services across borders (arts. 56, 62,52);and - their national employees can equally move freely(art. 45). 5
Part I: BITs & European Union The potential clash between (MS) BITs and the European Union: European Union: single market, fundamental freedoms, national treatment, non-discrimination of EU nationals on grounds of nationality, level playing field. BITs: investment promotion, increasing benefits granted to the foreign investors (substantive rights; standards of protection; arbitration), positive discrimination. PartI: BITs& EuropeanUnion Examples of conflicts between EU law and BITs provisions. Single market incompatibilities: Capital transfer restrictions(articles 64, 66, 75 TFEU); Quotas& performance requirements; Public policy exceptions(article 52 TFEU); State aid prohibitions and liberalisation (article 107 TFEU). 6
PartI: BITs& EuropeanUnion Micula v Romania, Case ICSID ARB/05/20, 2013: o Late 1990s: set of public policies aimed at fostering Romania s development towards a market economy system; o 2005: revocation of a set of incentives offered to encourage investment in economically disadvantaged areas (subsidies and exemptions from certain taxes),withaviewtotheaccessiontotheeu; o Micula Brothers: 200 million investment in food and beverage production in one disfavoured region of the northwest of Romania; Romania-Sweden BIT o ICSID arbitration: Romania was condemned to pay 82M to the Micula Brothers, plus interest ( 178M, 11/Dec/2013), for failing to ensure the legitimate expectations created; o EC notification: new aid, previous notification; article 108(2) TFEU procedure; infringement procedure against Romania; recovery order of the amounts paid. INTRA-EU BITs 7
Part II: Intra-EU BITs INTRA-EU BITs: o Total irreconcilability; o An anomaly within the EU internal market. Part II: Intra-EU BITs EU judicial system CJEU exclusive jurisdiction Article 344 TFEU Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein. 8
Part II: Intra-EU BITs CJEU has exclusive jurisdiction to: To solve any disputes arising between two Member States regarding the EU Treaties; To solve any doubts related to the interpretation and application of the Treaties; To give preliminary rulings on questions of EU law as requested by EU domestic courts and tribunals; and To determine infringement proceedings against EU Member States, when they do not fulfil their EU law obligations. Part II: Intra-EU BITs INTRA-EU BITs: o o o Anomaly within the EU internal market (CJEU exclusive jurisdiction) 90s- Central and Eastern European Countries: Develop these countries economy; attract foreign investment; enter in the market system; Narrow the distance between these economies and the EU Pre-EU BITs (eg. Micula, Sweden-Romania BIT) o EU enlargement and accession of new MS(2004; 2007). 9
Part II: Intra-EU BITs o Pre-EU BITs Until2004:2Intra-EUBITs After2007:190! Part II: Intra-EU BITs INTRA-EU BITs: o Future? Which treaty shall prevail? General inapplicability of Intra-EU BITs (EU law primacy & article 59 VCLT); Inapplicability of specific provisions of Intra-EU BITs (article 30 (3) VCLT) German Federal Court of Justice preliminary ruling(c-284/16); Conversations with MS to terminate their BITs (articles 351 TFEU & 4 (3) TEU); (2015) infringement procedures (article 258 TFEU) (2016) Austria, Finland, France, Germany and the Netherlands presented a non-paper to the EU Council s Trade Policy Committee. 10
EXTRA-EU BITs EU reality Lisbon Treaty Two Questions: Procedural How will new IIA and Investment Chapters in FTA be concluded? What happens until then? Substantive WhatshouldthenewIIAandInvestment ChaptersinFTAlooklike? Reshape new generation of IIA and Investment Chapters in FTA. 11
EXTRA-EU BITs: o Lisbon Treaty(articles 2(1), 3(1) and 207 TFEU): confers upon the EU an exclusive competence in the area of Foreign Direct Investment (FDI) now included in Common Commercial Policy. Article 2 TFEU 1. When the Treaties confer on the Union exclusive competence in a specific area, only the Union may legislate and adopt legally binding acts, the Member States being able to do so themselves only ifsoempowered bythe Unionorforthe implementation ofunionacts. Article 3 TFEU 1- The Union shall have exclusive competence in the following areas: a) Customs union; b) The establishing of the competition rules necessary for the functioning of the internal market; c) Monetary policy for the Member States whose currency is the euro; d) The conservation of marine biological resources under the common fisheries policy; e) Common commercial policy. Article 207 TFEU 1. The common commercial policy shall be based on uniform principles, particularly with regard to changes in tariff rates, the conclusion of tariff and trade agreements relating to trade in goods and services, and the commercial aspects of intellectual property, foreign direct investment, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade suchas those to be taken in the eventof dumping or subsidies. The common commercial policy shall be conducted in the context of the principles and objectives of the Union's external action. 12
EXTRA-EU BITs: o Lisbon Treaty(articles 2(1), 3(1) and 207 TFEU): confers upon the EU an exclusive competence in the area of Foreign Direct Investment(FDI) now included in Common Commercial Policy. o The EU alone is able to legislate and adopt binding acts (negotiate, conclude IIA, FTA). o EU countries are able to do so themselves only if empowered by the EU to implement these acts. EXTRA-EU BITs: o Fate of the existing BITs; o Article 351 TFEU and article 4(3) TEU; o Regulation (EU) No 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, OJ L 351, 20.12.2012. 13
EXTRA-EU BITs: o Regulation(EU) No 1219/2012: BITs celebrated before 1st December 2009; BITs celebrated between 1st December 2009 and 9th January 2013; Future BITs. New investment agreements finalised but not yet applied: Canada CETA Comprehensive and Economic Trade Agreement East African Countries Interim Economic Partnership Agreement Singapore Free Trade Agreement Vietnam Free Trade Agreement West Africa Economic Partnership Agreement 14
Ongoing negotiations: USA-TTIP Japan China ASEAN(Philippines, Indonesia) India Mexico + EC request mandates for: Australia, New Zealand, Turkey, Chile. New Generation of IIAs The EU currently has a unique opportunity to reshape international investment law by launching a new generation of BITs that accomplish that task. It would be a shame not at least to try. (J. Kleinheisterkamp, 2012) 15
New order of BITs Reinforcement of the Union s right to regulate; Protect public policy space (environment, decent work, health and safety, cultural diversity, competition,...); System of cross-subsidisation: investors protection & taxpayers exposure. New order of BITs More balanced framework: (EU Parliament position) No greater rights than accorded by the Union law; (no higher level of protection than) Detailed rules. Conscious inclusion of a dispute settlement mechanism. Not automatically undertaken. 16
TTIP - Transatlantic Trade and Investment Partnership Investment Court System/ Multilateral Investment Court Thank you! Cláudia Saavedra Pinto csp@ltadvogados.pt 17