Development and Implementation of the EU Investment Policy

37. Prior to the Lisbon Treaty, investment was an area in which the EU shared competence with Member States. The Union negotiated the liberalisation of investment, by establishing conditions for the access of EU investors to foreign markets (either multilaterally in GATS – for mode 3 commitments - or bilaterally through FTAs). At the same time, the EU Member States were seeking to promote and protect investment. Investment promotion and protection was generally pursued by Member States through the negotiation of so-called Bilateral Investment Treaties (BITs) with third countries, of which about 1200 have been concluded as of today by the EU Member States.

38. The Treaty of Lisbon has established the EU's exclusive competence on foreign direct investment (FDI), as part of the common commercial policy (Article 207(1) and Article 3(1)e). This change implies two immediate needs:

- for transitional arrangements to enhance legal certainty for existing investment agreements concluded by Member States with 3^rd countries; and

- for developing a targeted and gradual policy that would define EU interests in exercising its newly gained competence.

39. In response to these needs on 7 July 2010, the Commission adopted two initiatives on investment.

40. In a proposal for a Regulation on transitional arrangements regarding BITs concluded by Member States with third countries, the Commission proposes to authorise Member States to maintain in force all investment agreements they concluded prior to entry into force of the Regulation, and – under certain conditions – to negotiate new and/ or to renegotiate old agreements. The draft Regulation is to be adopted by the Council and the Parliament in the ordinary legislative procedure. Discussions are ongoing at the moment.

41. In the Communication "Towards a comprehensive European international investment policy" the Commission lays down its views on the broad orientations of the future EU comprehensive investment policy that in addition to investment liberalization should also seek for best available standards of protection for all European investors, to ensure they can operate in a stable, fair and predictable environment. In this Communication, the Commission takes the view that the principles and parameters for EU investment protection negotiations will be inspired by the best practices developed by Member States, and include among others such standards as the guarantee of a fair and equitable treatment, full protection and security, non-discriminatory treatment or protection against unlawful expropriation. As enforcement mechanisms are of crucial importance for ensuring effectiveness of any investment agreement, the Communication calls to include in the EU agreements provisions establishing investor-to-state dispute settlement mechanisms. The Communication determines criteria for defining priority countries for the EU comprehensive investment negotiations. These include the magnitude of actual and potential investment flows, and the stability and predictability of the investment climate in countries – prospective candidates for the EU investment negotiations. The Communication has already been followed by conclusions by the Council and a resolution in the Parliament on the Communication is also underway.

42. The best prospects for comprehensively addressing EU investment interests, both in terms of market access and investment protection, arise in the context of broader trade negotiations. Nonetheless, the EU will also explore the desirability and feasibility of negotiating stand-alone investment agreements with certain countries which receive a high proportion of EU investment, and with whom an FTA negotiation is not envisaged.

43. The EU will develop its investment policy progressively. The Commission has already tabled proposals for investment negotiating directives for Canada, India and Singapore to seize opportunities of ongoing wider trade negotiations with these countries. These directives are currently under consideration by the Council.