Brussels moves on negotiating trade treaties
Financial Times | July 8 2010
Brussels moves on negotiating trade treaties
By Stanley Pignal in Brussels
Brussels is bidding to take over responsibility for negotiating key investment treaties with the European Union’s trade partners, potentially making it easier for investors from India and China to do business in Europe.
The European Commission wants to replace a thicket of about 1,200 bilateral investment treaties signed by the EU’s 27 member states over five decades with far fewer treaties binding the entire bloc.
Akin to trade agreements, BITs are signed between countries to reassure companies that they would have some legal redress in the event of disputes with the countries in which they had invested.
Considered essential by multinationals before making foreign investments, they are typically used as a recourse when a company’s assets have been nationalised, often forcing the government of the country involved to accept international arbitration.
In the same way the EU has negotiated all trade treaties on behalf of its members since 1970, it now wants to take over responsibility for bilateral investment treaties.
However, as with trade treaties, it will have to contend with the pre-existing BITs. The Commission has yielded to pressure from some member states to keep the old treaties in place for now, though Brussels will review them and could ask for them to be withdrawn “as a last resort”, according to officials.
How the tidying up exercise will work will partly depend on the European parliament and representatives of the EU governments in a discussion expected to take one year.
The Commission is likely to start negotiating its own EU-wide BITs as soon as September, however, as part of the bilateral trade deals it is currently hammering out with India, Singapore and Canada. China and Russia are also likely to be early BIT counterparts.
Figures from the Commission show that all but a handful of the EU’s countries have BITs in place with India or China, for example, but only seven have such agreements in place with Canada.
Under the new rules, countries with EU-wide BITs will be able to invest anywhere in the bloc with the same investment guarantees. Similarly, all companies in the EU will be able to invest overseas with the same level of protection as other EU companies.
The new BITs would closely resemble the standard agreements that most member states have been signing with their investment partners in recent years. They will allow investors to agree different venues for international arbitration.
EU countries furthermore would be allowed to keep negotiating or renegotiating BITs on their own, but only if no moves were afoot for an EU-wide agreement, experts said.
The EU is both the biggest recipient and originator of foreign direct investment, with outward flows of €3,300bn and inward flows of €2,400bn.
