The European Commission has recently issued a proposal regarding the establishment of transitional arrangements for investment agreements between member states and third countries. This agreement will establish the European Union’s exclusive competence on foreign direct investment as part of the common policy adopted by member states with regard to commerce.
EU members have concluded more than 1,000 agreements with third countries in the field of financial investment. The EU’s latest proposal intends to cap all these agreements under one structured framework. This will guarantee legal certainty and safeguard the position of the investors in a more controlled environment. However, this will entail the modification of some of the existing agreements in order to comply with Treaty obligations. The existing agreements will, however, all remain in force.
It is, however, imperative member states have the necessary flexibility to be able to negotiate investment agreements according to their differing national needs and priorities while also providing the preliminary framework that will enhance the consistency, certainty and reliability of the agreements that are both in force and also those yet to be concluded.
The investment framework in place is characterised by low predictability of Treaty interpretation and costly arbitration processes lacking in procedural safeguards. At present, flows of capital between EU member states and developing countries are no longer largely one-directional and this shift should, therefore, be taken into account when considering any European investment framework.
Obviously, there has to be a coordinated European framework that will focus on providing certainty in order to have a smooth transition from member state – third party agreement to an EU – third party deal. A transitional system needs to be put in place during such shift.
Having said all this, we also have to ensure no unnecessary and disproportionate burdens are put on member states and that the new obligations do not in any way prejudice their negotiating capabilities.
This new system is intended to facilitate negotiations and, thus, the European Commission has to ensure there is as little interference as possible in the agreement negotiation stage as unnecessary interventions may make negotiating parties wary and even scare away prospective investment.
Furthermore, in order to have a more structured system it has also been suggested that negotiating parties use a non-mandatory template when concluding agreements; this to avoid past situations where vague wording led to confusion and to various interpretations. This template will therefore enhance certainty and consistency.
All agreements under the new framework will be published annually in the official journal to ensure the exact scope of legal coverage provided by the regulation is known by all stakeholders and, thus, encouraging transparency throughout the whole process. There will also be a review of all the agreements notified. This will identify quantitative and qualitative aspects of the agreements in place as well as the possible obstacles the agreements could present to the implementation of the common commercial policy.
As the person entrusted with formulating an opinion on this dossier, I have kept in mind the importance of discussing the subject with interested parties and stakeholders in an ongoing process of consultation in order to come up with the best possible formula for this important exercise to be a successful one. I will be working closely with my colleagues to smooth out any irregularities and to eliminate any incompatibilities so that, firstly, the transition to the new system will be as smooth as possible and, secondly, to ensure that when the new system is in place this will work as intended for the benefit of all member states.
The author is a Nationalist member of the European Parliament.