Disputes between foreign investors and EU governments

The regulation clarifies the financial responsibility between the European Union and its member countries when an investor from a non-EU country brings a claim for breach of an international agreement to which the EU is party.

ACT

Regulation (EU) No 912/2014 of the European Parliament and of the Council of 23 July 2014 establishing a framework for managing financial responsibility linked to investor-to-state dispute settlement tribunals established by international agreements to which the European Union is party.

SUMMARY

WHAT DOES THIS REGULATION DO?

Under the Lisbon Treaty, foreign direct investment became part of the EU’s trade policy, for which the EU has exclusive competence. This means that the European Commission negotiates on behalf of the EU countries the investment part of trade agreements concluded with non-EU countries. These agreements may include an investor-state dispute settlement mechanism (ISDS). This is a protective measure that gives the right to investors from non-EU countries concerned to take legal action against an EU country in which it has invested money. Claims are about alleged breach of the international agreements.

The new rules determine whether it is the EU, represented by the Commission, or the European governments that have to bear the financial costs, including compensation, arising from the disputes.

KEY POINTS

Criteria clarifying the division of financial responsibility

• 1.

  The EU bears the financial costs when the claim brought by an investor is about a measure taken by an EU institution, body or agency.

• 2.

  The EU country concerned bears the financial costs when the claim brought by an investor is about a measure it has taken.

• 3.

  If a measure is taken by an EU country but is required by EU law, the EU is financially responsible.

Procedure

Cooperation and consultations: the Commission and the EU country concerned by a dispute must cooperate, enter into consultation and share information. The regulation also provides for rules of conduct when arbitration proceedings (proceedings to resolve the dispute) are conducted by the EU and the EU country concerned.

Disagreement over the financial responsibility: where the EU is the respondent in the dispute, and the Commission considers that the EU country concerned is actually responsible for the costs arising from the arbitration, they have to reach an agreement with each other.

If the EU country disagrees with this, the Commission can then adopt a decision that forces the country in question to reimburse the amount paid.

WHEN DOES THE REGULATION APPLY?

The regulation applies from 17 September 2014.

Further information is available from the European Commission’s Directorate-General for Trade website.

last update 03.12.2014