The creation of a more stable and clear regulatory environment to encourage investment is one of the key objectives of the EU's Investment Plan for Europe.  To help achieve this, the European Commission has started work on an impact assessment and a communication, as set out in the recent capital markets union mid-term review. To feed into these initiatives, the Commission has launched a public consultation. It focuses on the prevention and amicable resolution of disputes between investors (domestic or cross-border) and public authorities within the Single Market and areas where better clarity about EU investors' rights is needed.

EU action

The overall objective of the impact assessment is to explore whether an adequate framework for the amicable resolution of investment disputes should be set up. The communication, meanwhile, aims to provide guidance on existing EU rules for the treatment of cross-border EU investments.

In parallel, the Commission is taking legal action against Member States that maintain bilateral investment treaties (intra-EU BITs), which the Commission considers to be incompatible with EU law (see previous article).  

The impact assessment

Some of the disputes between investors and state authorities are today based on these intra-EU BITS. Intra-EU arbitration proceedings represent a large number of all international arbitration cases: they accounted for about one quarter of global investment arbitrations newly initiated in 2016 (see United Nations Conference on Trade and Development "Investor-State Dispute Settlement: Review of Developments in 2016"). The overall number of known pending intra-EU investment arbitrations totalled 147 at the end of 2016, i.e. approximately 19% of all known cases globally.

Issues leading to disputes between investors and public authorities are of varying nature. The contested measures often concern issues such as revocation of licences and permissions, alleged expropriations of a direct or indirect nature, or disguised discrimination of foreign investors.  

At EU level, there is no legislation that would allow an amicable, cost-effective and quick settlement of disputes between investors and public authorities. Similarly, Member States do not have specific rules dedicated to the prevention or amicable resolution of investment disputes with public authorities.

Mediation is a specific method for solving or preventing disputes with the assistance of a neutral and independent third party.  It could offer a way to ensure a cost-effective, flexible and quick resolution of disputes between investors and public authorities. Another possibility would be to establish a network of national contact points responsible for providing advice and information to investors about the legal environment relevant to their investment. These contact points could also, when complex legal or factual situations make it necessary, intervene on their behalf with public authorities. Any potential initiative would be a voluntary option for the parties involved and would not jeopardise their right to have access to a court.

The consultation aims in particular at gathering stakeholders' views on a number of specific issues. For instance, whether there is a need for clear EU rules to help prevent and solve disputes between investors and public authorities. The Commission would also like to get feedback on what the best characteristics and options are for an amicable dispute prevention/resolution framework for disputes between investors and public authorities, and what the impact of the possible options might be.

The communication

The single market contains clear safeguards for setting up businesses or buying companies in other EU countries. The rights to establish, to provide services or to transfer capital all apply to foreign investments. Moreover, the principle of non-discrimination on grounds of nationality ensures, as far as is possible, the same treatment for foreign and local investments. However, the Commission thinks that greater clarity on investors' rights and further guidance on how to interpret EU law might be necessary. This applies in particular to areas such as the protection of legitimate expectations or the right to property under EU law. With its communication on the treatment of cross-border EU investments, the Commission aims to help investors exercise their rights and contribute to a consistent application of EU law. 

The consultation will feed into the Commission's work on the impact assessment and the communication. It runs until 30 November 2017.

Read more or contribute to the public consultation on the prevention and amicable resolution of disputes between investors and public authorities within the Single Market