EU-India FTA - EC negotiating mandate on investment (draft 2011)
Brussels, 20.1.2011
SEC(2010) 1579 Final
RESTREINT UE
RECOMMENDATION FROM THE COMMISSION TO THE COUNCIL
on the modification of the negotiating directives for the EU-India negotiations towards Broad-based Trade and Investment Agreement in order to authorise the Commission to negotiate, on behalf of the Union, on investment
A. EXPLANATORY MEMORANDUM
In October 2007, the European Union and India launched bilateral negotiations towards a Broad-based Trade and Investment Agreement. The Commission conducts the negotiations, on behalf of the Union and its Member States, in accordance with the directive for negotiations adopted by the Council on 19 April 2007.
Title 3 “Trade in Services, Establishment” of the afore-mentioned negotiating directives provides that, “respecting the respective competence of the EC and its Member States the parties shall agree to establish a framework for establishment, which shall be based on principles of transparency, non-discrimination, market access, stability and on general principles of protection, based on the Minimum Platform on Investment for EU FTAs, as agreed within the framework of the Article 133 Committee (doc. St 15375/06).”
The Lisbon Treaty, which amends the Treaty Establishing the European Communities and renames it the Treaty on the Functioning of the European Union (hereafter: “the Treaty”), provides that the Union is to contribute to the progressive abolition of restrictions on foreign direct investment (Article 206). Furthermore, the Treaty establishes the European Union’s exclusive competence on foreign direct investment, as part of the common commercial policy (Article 207(1) and Article 3(1)e). In accordance with Article 2 of the Treaty, only the Union may legislate and adopt legally binding acts in an area where exclusive competence is conferred upon the Union.
Further to the conferral of exclusive competence on foreign direct investment to the Union, the Commission adopted on 7 July 2010 a Communication on a common international investment policy [1]. The Communication considers the main strategic orientations of an EU investment policy for the future, as well as the main parameters and principles for action in the short to medium term. The EU-India FTA negotiations are identified as one of the ongoing negotiations which present an opportunity to engage on investment more broadly, by covering also investment protection provisions, investor-state dispute settlement and addressing all forms of investment.
India being a large emerging economy is an important recipient of EU investment and a promising source of foreign investment in the EU. The activity of Indian affiliates in the EU and EU affiliates in India is increasing already, and has a great potential for further increase in both directions. The rights afforded through a comprehensive investment agreement would offer to investors security while choosing destination country for their investment as well as prompt and effective mechanisms to settle disputes in case these occur. For both EU as well as Indian investors, an EU-level investment agreement would great the benefit of single set of rules and single dispute mechanism in a set of multilayered administrations
B. RECOMMENTATION
In the light of the above, the Commission recommends that the Council modifies the negotiating directives for a Board-based Trade and Investment Agreement with India as regards investment by inserting a paragraph 25 bis drafted as follows:
“Investment
1. Objective: the agreement shall provide for the progressive abolition of restrictions on investment, with the aim to ensure the highest level of market access, and provide protection for investors and investment of both parties.
2. Scope: the agreement shall apply to investments, whether the investment is made before or after the entry into force of the agreement. The agreement shall cover every kind of asset, in particular though not exclusively:
(a) An enterprise;
(b) Shares, debentures and other debt instruments of an enterprise;
(c) A loan to an enterprise;
(d) An interest in an enterprise that entitles the owner to a share in income or profits of the enterprise;
(e) Interest arising from the commitment of capital or other resources to economic activity;
(f) Claims to money which has been used to create an economic value or claims to any performance having an economic value;
(g) Business concessions conferred by law or under contract, including concessions to search for, cultivate, extract or exploit natural resources;
(h) Movable and immovable property and any other property rights such as mortgages, liens or pledges; or
(i) Intellectual property rights, goodwill, technical processes and know-how.
3. Standards of treatment: the negotiations shall aim to include the following standards of treatment:
(a) ensure that each Party accords to investors of the other Party fair and equitable treatment and full protection and security.
(b) ensure that each Party grants to investors and investments of the other Party treatment no less favourable that that it accords, in like circumstances, to its own investors and investments.
(c) ensure that each Party grants to investors and investments of the other Party treatment no less favourable that it accords, in like circumstances, to investors and investments of other countries.
(d) ensure that neither Party, directly or indirectly, nationalises or expropriates an investment except for a public interest, on a non-discriminatory basis, in accordance with due process of law and on payment of adequate compensation.
In line with point 4, third indent of the Preamble, the agreement shall aim to ensure that non-discriminatory regulatory actions by a Party that are necessary to achieve legitimate public policy objectives, such as the protection of public health, safety and the environment, do not constitute indirect expropriation.
(e) ensure that each Contracting Party observes any obligation it may have entered into with regard to investments of nationals or companies of the other Contracting Party.
4. Performance requirements: the agreement shall aim to impose disciplines on requirements, undertakings and commitments which are directly imposed on or made by an investor vis-à-vis the Party in connection with its investment, without prejudice to the rights and obligations of the Parties under the WTO rules. Conditions on the receipt or continued receipt by the investor of an advantage in connection with an investment are included in the covered requirements. Sectors excluded from market access commitments (including audiovisual sector) in accordance with Title 3: Trade in Services, Establishment would not be subject to performance requirements disciplines.
5. Transfers: the agreement shall aim to ensure that the transfers relating to investment can be made freely. Such transfers include profits, interests, dividends, capital gains, royalties, fees and returns in kind.
6. Subrogation: the agreement shall aim to respect and recognise the subrogation of the rights held by an investor in favour of the Party or any designated agency thereof. The agreement shall also respect the rights a Party or any agency thereof have, when that Party or any agency thereof have been subrogated to the rights of an investor.
7. Relationship with other agreements: the agreement shall aim to clarify the relationship between the rights contained in this agreement and the rights that may be available through other agreements.
8. Enforcement: In addition to state-to-state, the agreement shall aim to provide for investor-to-state dispute settlement. Any arbitrations shall be subject to transparency requirements, starting at the outset from the initiation of the proceedings, through the proceedings themselves to publication of the final award. The negotiations shall aim to have arbitrators appointed from a pre-established list of arbitrators or other mechanisms designed to ensure consistency of rulings.
9. General and security exceptions: the agreement shall provide for exceptions based on those found in the WTO agreements.
Footnotes:
[1] Commission Communication from the Commission to the Council and the European Parliament, the European Economic and Social Committee and the Committee of the Regions – “Towards a European international investment policy”, 07.07.2010.
