Foreign direct investment as common commercial policy: EU external economic competence after Lisbon

Abstract

The Treaty of Lisbon added a new impetus to the Common Commercial Policy (CCP) with the inclusion of Foreign Direct Investment (FDI) within its scope. The latter thus falls within exclusive competence of the European Union (EU). The redistribution of competences between the Union and its Member States as well as the enlargements of the Union do however create legal uncertainties and poses challenges to pre-existing agreements signed between the Member States and third countries. This chapter examines the various efforts that the Commission has made in lessening the potential difficulties. It firstly looks to the EU-US understanding and services agreements with interested World Trade Organisation (WTO) members which gave rise to the competence issues. It also examines relevant recent case-law, Commission v. Austria, Commission v. Sweden, and Commission v. Finland, which again complicate the situation. This chapter investigates a proposed Regulation on transitional arrangements for Member State Bilateral Investment Treaties (BITs) and finds the authorisation mechanism insufficient to ensure the smooth transition for the Union taking over this new competence on FDI. This chapter also examines external economic policy changes from the Lisbon Strategy to the Europe 2020 Strategy and reflects whether this new competence on FDI, situated in the context of CCP, contributes to the strengths of EU within the WTO and with its trading partners in Free Trade Agreement (FTA) talks. I thus examine the position of the EU within the WTO and relevant investment provisions in the EU-Chile Association Agreement, EU-Indonesia Partnership and Cooperation Agreement (PCA) and EU-Korea Free Trade Agreement. The EU-Korea FTA, being the first in the post-Lisbon era with ambitious market access commitments and substantive national treatment and MFN treatment obligations, offers a good model for integrating FDI into CCP and investments issues into trade agreements in the field of EU external economic relations.