The Impact of the TTIP on Europe’s Investment Arbitration Architecture Dr. Roland Kläger10. DAJV Fachgruppentag - 21 March 2014.

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 10. DAJV Fachgruppentag - 21 March 2014

Dr. Roland Kläger 2

1. The old world of BITs

2. EU competence

3. Effect on existing BITs between EU Member States and the US

4. Scope of substantive guarantees for foreign investors

5. Dispute settlement mechanism

6. Respondent status of EU and Member States

7. Conclusion

Topics addressed

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 3

• Bilateral investment treaties (BITs) focus only on the promotion and protection of investment

• Originally concluded between a developed and a developing state

• Worldwide: > 3000 BITs

• EU Member States: around 1400 BITs

• Germany: 131 BITs

• Contain substantive legal guarantees for investors and dispute settlement mechanism

1. The old world of BITs

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 4

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 such as those to be taken in the event of dumping or subsidies. The common commercial policy shall be conducted in the context of the principles and objectives of the Union's external action.

4. […] For the negotiation and conclusion of agreements in the fields of trade in services and the commercial aspects of intellectual property, as well as foreign direct investment, the Council shall act unanimously where such agreements include provisions for which unanimity is required for the adoption of internal rules.”

2. EU competence

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 5

Scope of the EU competence:

•Limitation to foreign direct investment?

•Limitation to liberalisation of market access?

•EU competence for expropriation?

Exclusive competence of EU or conclusion of mixed agreements necessary?

2. EU competence

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 6

• EU Member States that have concluded BITs with the US:

Bulgaria, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia

• Article 3 “grandfathering regulation”:

“Without prejudice to other obligations of the Member States under Union law, bilateral investment agreements notified pursuant to Article 2 of this Regulation may be maintained in force, or enter into force, in accordance with the TFEU and this Regulation, until a bilateral investment agreement between the Union and the same third country enters into force.”

3. Effect on existing BITs

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 7

4. Substantive guarantees

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

• Initially: “highest standards of protection that both Parties have negotiated to date” (EU negotiation mandate), including

• fair and equitable treatment• national treatment• most-favoured-nation treatment• protection against direct and indirect expropriation• full protection and security• “umbrella clause”• free transfer of funds

• Now: strong emphasis on right to regulate detailed language to narrow the scope of the guarantees possibility to clarify interpretation of individual provisions

Dr. Roland Kläger 8

Innovative proposals to amend investor-state dispute settlement clause:

•Costs follow the event

•UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration

•Code of conduct for arbitrators

•Appellate body?

Attempt to increase consistency, legitimacy and transparency in investment arbitration to accommodate public policy concerns

5. Dispute Settlement Mechanism

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 9

• Proposal for a Regulation establishing a Framework for Managing Financial Responsibility Linked to Investor-State Dispute Settlement

• Article 4: “The Union shall act as respondent where the dispute concerns treatment afforded by the institutions, bodies or agencies of the Union.”

• Member States may act as respondent after consultations with the EU Commission (Article 8)

• EU Commission may actively participate in investment disputes conducted by Member States (Article 9)

• Foreign investors need to request whether EU or Member States shall act as respondent before submitting a claim

• Enforcement of arbitral awards against the EU uncertain

6. Respondent status of EU/Member States

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

Dr. Roland Kläger 10

7. Conclusion

The Impact of the TTIP on Europe’s Investment Arbitration Architecture

• EU is now an active player: negotiations with US, Canada, Singapore, China, India, Japan, Ecuador etc.

• European system of investment protection is becoming more NAFTA-like

from bilateral to regional from specialized investment agreement to FTA with investment

chapter substantive guarantees and dispute settlement mechanism take up

NAFTA elements

• Considerable uncertainties remain with regard to future of TTIP negotiations

Dr. Roland Kläger 11

Dr. Roland KlägerHAVER & MAILÄNDER RechtsanwälteLenzhalde 83-8570192 Stuttgart (Germany)

Phone +49 711 22744-0Fax +49 711 2991935

[email protected]

Contact Details

Stuttgart · Frankfurt · Dresden · Brüssel

Thank you for your attention!