*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"Beware of FDI statistics!", "Towards an Indicative List of FDI
Sustainability Characteristics", “The Importance of Negotiating Good
Contracts", "A New Challenge for Emerging Markets: the Need to Develop an
Outward FDI Policy”, "China Moves the G20 toward an International
Investment Framework and Investment Facilitation", "The Rise of
Self-judging Essential Security Interest Clauses in IIAs", "Can Host
Countries have Legitimate Expectations?", "The Next Step in Governance: The
Need for Global Micro-regulatory Frameworks", and "The Evolving
International Investment Law and Policy Regime: Ways Forward" *are*
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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 218  January 29, 2018
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Schroth ([log in to unmask])
*Europe’s new investment policy faces an uncertain future*
* <#m_5127072386706173465__edn1>
Guillaume Beaumier and Richard Ouellet** <#m_5127072386706173465__edn2>

A thorough analysis of the recent European Union (EU) free trade agreements
(FTAs) with Singapore (2015), Canada (2016) and Vietnam (2016) allows us
finally to grasp the impact of the Lisbon Treaty[1]
<#m_5127072386706173465__edn3> on the development of a unified European
investment policy. As the EU’s member states are signatories to almost half
of the world’s 3,000 international investment agreements (IIAs), the
investment treaty model being developed by the European Commission (EC)
could significantly influence international investment law.

Rather than replicating the traditional “gold standard” of European IIAs,
the EC has effectively developed a much more complex and elaborate model.
Nevertheless, the investment chapters in the three FTAs show few genuine
legal innovations, in that most of their standards can be traced back to
past IIAs, case law or other international rules. The inclusion of a WTO
“market liberalization” approach is unprecedented.

In sharp contrast to IIAs historically signed by EU member states, the EC
has embraced comprehensive pre-establishment guarantees. This is especially
striking given that the absence of pre-establishment protection was a
lasting difference between European and US IIAs. The EC however went
further than any past IIA by developing a market-access provision
stipulating that no numerical limitations shall be imposed on the number of
enterprises that may carry out an economic activity, or on the total value
of assets that can be moved. While some exceptions exist, that means that
an EU trade partner cannot limit the number of investors or the amount of
foreign money entering its market. Such rule is directly inspired by WTO
law.[2] <#m_5127072386706173465__edn4>

This unexpected linkage between trade and investment law appears to be an
indirect result of the singular EU integration process. Before the Lisbon
Treaty, at a time when it only had competence over trade policy, the EC
decided to develop its own investment policy through the negotiation of
norms on the establishment of service providers. As such, the “minimum
platform on investment for EU FTAs”[3] <#m_5127072386706173465__edn5> which
represented the *de facto *model for EU investment agreements pre-Lisbon
was greatly influenced by previous negotiations on market access for

As the EC is actively negotiating IIAs with major trading partners (e.g.,
China, India, Japan, the US), the impact of this new approach should not be
underestimated. While states have integrated many investor protections in
their IIA practice throughout the years, many still restrict the entry of
foreign investment. Furthermore, European states are genuinely more open
than most countries and stand to gain much from this approach, most notably
in the context of current IIA negotiations with China (which imposes
various entry restrictions).[4] <#m_5127072386706173465__edn6>

Interestingly, the EC has carved out the use of investor-state dispute
settlement for violations of these new guarantees on market access. This
shows that the EC distinguishes pre-establishment guarantees from
post-establishment protections given to foreign investors (e.g., fair and
equitable treatment). This reflects the US practice, but more importantly
it is consistent with a trade approach where norms on establishment are
concessions made between sovereign states. In practical terms, though, this
means that the enforceability of the EC’s approach will depend on the
goodwill of governments to bring complaints through state-to-state
dispute-settlement mechanisms.

With “Brexit” set to reshape the EU, it remains to be seen what will become
of the new European investment policy. On the one hand, its impact may be
slight, given that the EC appears more influenced by norms emanating from
international institutions (e.g., the WTO) or from non-European IIAs.[5]
<#m_5127072386706173465__edn7> On the other hand, it could lead the EC to
be more receptive to the views of individual member states. Although it is
questionable that such an outcome would cause a resurgence of the old “gold
standard,” greater involvement by member states could create new hurdles.
In the days following Britain’s referendum, the EC’s decision (reluctantly)
to ratify the FTA with Canada as a mixed agreement[6]
<#m_5127072386706173465__edn8> is one such example. While this might ease
the EC’s relationship with EU member states wary of ceding too much
sovereignty, the rising anti-trade rhetoric in some member states could
make the ratification of this FTA (and others) impossible. The Wallonia
crisis may not be an isolated event. If so, the outlook for a unified
European investment policy would be bleak.

* <#m_5127072386706173465__ednref1> *The Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author(s) do not
reflect the opinions of CCSI or Columbia University or our partners and
supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
** <#m_5127072386706173465__ednref2> Guillaume Beaumier (
[log in to unmask]) is a Ph.D. Candidate at Université Laval
and a member of the Canada Research Chair in International Political
Economy; Richard Ouellet ([log in to unmask]) is a full-time
professor of international economic law at Université Laval. The authors
are grateful to Marc Bungenberg, Catherine Kessedjian and August Reinisch
for their helpful peer reviews.
[1] <#m_5127072386706173465__ednref3> The Lisbon treaty (2007) gave
competence over investment policy to the European Commission: *Treaty on
the Functioning of the European Union *(2007), Art. 207. In a recent
decision (C-2/15), the European Court of Justice clarified that this
competence is however not exclusive. New FTAs with investment chapters will
now need to be concluded by both the EU and its member states.
[2] <#m_5127072386706173465__ednref4> *See*, *e.g.*, *General Agreement on
Trade in Services* (1995), Art. XVI.
[3] <#m_5127072386706173465__ednref5> Available at
[4] <#m_5127072386706173465__ednref6> Wenhua Shan and Seng Zhang, “Market
access provisions in the potential EU model BIT: towards a ‘global BIT
2.0?’,” *The Journal of World Investment & Trade*, vol. 15 (2014), p. 445.
[5] <#m_5127072386706173465__ednref7> The “Mapping BITs” database (http://
indicates that the treaties most similar to the recent EU investment
chapters are US IIAs. It also confirms that market access provisions have
no lineage in the IIA world.
[6] <#m_5127072386706173465__ednref8> Mixed agreements require approval of
both the EU and its member states.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Guillaume Beaumier and Richard Ouellet,
‘Europe’s new investment policy faces an uncertain future,’ Columbia FDI
Perspectives, No. 218, January 29, 2018. Reprinted with permission from the
Columbia Center on Sustainable Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*.*

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Schroth, [log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 217, Mouhamadou Madana Kane, “The Pan-African Investment Code: a
   good first step, but more is needed,” January 15, 2018.
   - No. 216, Kenneth J. Vandevelde, “IIA provisions, properly interpreted,
   are fully consistent with a robust regulatory state,” January 1, 2018.
   - No. 215, Karl P. Sauvant, “Beware of FDI statistics!”, December 18,

*All previous FDI Perspectives are available at *
*. *

*Other relevant CCSI news and announcements*

   - *On February 6, 2018,* CCSI and the International Institute for
   Environment and Development (IIED) will co-host a webinar on “Civil Society
   Submissions in Investor-State Arbitration” to discuss how civil society
   groups can bring forward community perspectives, human rights and
   environmental issues in investor-state arbitrations. This online seminar is
   designed for civil society organizations in low- and middle-income
   countries that want to support communities whose livelihoods are affected
   by natural resource projects. Further information is available here
   . *To join the webinar, email [log in to unmask]
   <[log in to unmask]> before February 1, 2018**. *
   - CCSI has released its 2016-2017 Annual Report. *The full report is
   available here
   - CCSI is accepting applications for our three upcoming executive
   trainings: on Extractive Industries and Sustainable Development
   (June 4-15, 2018), Sustainable Investments in Agriculture
   (June 19-29, 2018), and Investment Treaties and Arbitration for
   Government Officials
   (July 30-August 9, 2018). Each program is designed to equip participants
   with the necessary skills, analytical tools, and frameworks to address
   relevant challenges and opportunities, and to encourage a rich dialogue
   about best practices from around the globe. *More information about each
   training, including brochures and applications, is available at the links

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
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