Originally from Investment Arbitration Decisions

1. Introduction

1.1 The emerging interface between Bilateral Investment Treaties and European Union law

Until recently, the relationship between bilateral investment treaties (BITs) and EU law attracted relatively little attention. The likely reason is that, due to a lack of immediately obvious points of contact between these two regimes, there did not seem to be much of a relationship to begin with. On the European side, the contracting parties have always been the individual Member States, which, by signing such agreements, appear to have exercised one of their remaining external competences. Given that these BITs were concluded with third countries, there seemed to be little room for friction also regarding the internal law of the EU. 

A number of developments in the last few years, however, have revealed that BITs and EU law do in fact interact in numerous ways, and it has also become evident that this interaction is rather complex and also potentially conflictive.

Treaty-making power with regard to BITs is one possible area of conflict. The Treaty on the Functioning of the European Union1 has added foreign direct investment to the common commercial policy of the EU,2 and in anticipation of these new EU competences, the European Commission had apparently already brought up investment issues in current negotiations on bilateral trade deals with third countries,3 and had tried and failed to insert rules governing investment into the so-called “Doha-Round” of global trade talks.4