The European Union and Investor-State Arbitration: A Work in Progress - ARIA - Vol. 24, No. 4 2013

Author(s):

Gabriele Mazzini

Page Count:

38 pages

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Published:

June, 2014

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I. INTRODUCTION

Investor-state arbitration is currently the most widely used method for the

settlement of international investment disputes between investors and host States.

In the near future, foreign investors in those countries belonging to the European

Union (“EU”) may have to file those claims against the EU instead of against the

European Member State where the investment has been physically made. This

development is due to the classification by the Treaty of Lisbon of foreign direct

investment (“FDI”) as within the exclusive competence of the EU. The Treaty of

Lisbon, which entered into force on December 1, 2009, constitutes a substantial

reform of the two core EU treaties, the Treaty on the European Union (“TEU”)

and the Treaty establishing the European Community (“TEC”), the latter renamed

the Treaty on the Functioning of the European Union (“TFEU”).1

While the European institutions are still in the process of articulating the

characteristics of the EU’s new exclusive competence on FDI, there are

unequivocal indications that the EU intends to play a primary and direct role in

respect of the settlement of future international investment disputes. As an

international organization with a legal personality distinct from its Member States,

the EU and its predecessors (in particular the European Community) have long

been considered capable of assuming international commitments, including

submitting to international dispute settlement mechanisms, for which there is an

established practice.2 In the field of FDI, however, things are quite different: the

largely prevailing dispute settlement mechanism is investor-state arbitration, a

concept that, although not completely new to the EU legal system, has not been

tested in practice with the EU as an autonomous participant. In other words, while

the EU has risen to the level of an acknowledged litigant in classic public

international law tribunals and fora, in primis and most prominently before the

World Trade Organization, the EU has no experience with international dispute

settlement mechanisms involving private parties. As of today, the Energy Charter