In a communication published on 19 July 2018, the European Commission issued guidance aimed at strengthening the business environment for EU investors. By clarifying the rights that investors benefit from within the single market, the Commission hopes the guidance will encourage investment in the European Union. The communication is in line with the goals of the EU's capital markets union project, which places significant emphasis on boosting investment in the EU by creating a stable business environment.

Protection of investment

The communication sets out clearly how EU law protects investment within the single market. This protection covers each stage of investment: from market access (mainly through EU market freedoms), to running the investment (for example rules on secondary establishment and cross-border restructuring or non-discriminatory taxation) and exit from the market. Furthermore, EU investors are protected by national measures and, at a broader level, by the EU Charter of Fundamental Rights (for example with regard to the right to property). These rules are all reflected in sector-specific legislation, including in the financial sector. The Communication focuses on intra-EU investment and so does not concern investments made by EU investors in non-EU countries or investments made by non-EU country investors in the EU.

The communication also sets out the wide array of enforcement tools linked to investment protection. Overall, the aim of the guidance is to clarify investors' rights and reassure them that cross-border investment in the European Union is already, and continues to be, protected by EU law.

Bilateral investment treaties

The guidance touches on aspects of investment protection that are usually covered at international level by bilateral investment treaties ('BITs'), EU free trade agreements or EU investment protection agreements. Traditionally, BITs focus on investor protection and provide for a system that allows the settlement through arbitration of investment disputes between investors and the country where the investment is made.

Before joining the EU, countries in Central and Eastern Europe concluded BITs amongst themselves as well as with a number of EU Member States. From the date of accession, these agreements became treaties among EU Member States ('intra-EU BITs'). A little under 200 intra-EU BITs still exist, although some Member States – such as Ireland and Italy – no longer have any bilateral investment treaties at all. The Commission maintains that these treaties are illegal as they overlap with EU single market rules and discriminate between EU investors. It has launched infringement procedures against five Member States for failure to terminate them.

In a March 2018 ruling (Slowakische Republik v Achmea BV), the European Court of Justice confirmed that investor-state arbitration in intra-EU BITs is incompatible with EU law. Following the judgment, the Commission has intensified its dialogue with all Member States, calling on them to take action to terminate intra-EU BITs.

"There is no place in the single market for bilateral investment treaties between Member States,” Valdis Dombrovskis, Vice-President in charge of Financial Stability, Financial Services and Capital Markets Union said when presenting the communication. "EU law already protects investors,” he continued, adding that "they can therefore remain confident when investing within the EU.”

Read more on the communication