Brussels seeks greater power in foreign deals
Financial Times | March 12 2008
Brussels seeks greater power in foreign deals
By Alan Beattie in London
The European Commission is seeking to take more power into its hands to strike deals to protect European companies investing abroad, a role traditionally undertaken by the European Union’s member states.
Brussels has long had the power to set laws governing external trade tariffs but rules giving European companies rights against the foreign governments in whose countries they have invested have, until now, been agreed by the member states in bilateral investment treaties (BITs). Such treaties often contain “investor-state provisions” allowing companies to sue governments directly.
The proposed Lisbon treaty would centralise power over foreign direct investment into the Commission’s hands. The Commission is also pursuing agreements on investment in current negotiations on bilateral trade deals between the EU and South Korea and India.
An EU official claimed the EU’s deals were not designed to replace member states’ agreements. For the moment, “there are no plans to have the kind of arbitration mechanisms that are peculiar to BITs - things like investor-to-state arbitration”, the official said, though they might be needed in the future depending on the circumstances.
But Kamal Nath, the Indian trade minister, told the Financial Times that Brussels was already seeking such provisions in negotiations with India. “The EU has put investor-state [provisions] up for negotiation,” he said. India has traditionally been suspicious of such agreements. “To us it looks one-sided and inequitable and these things, in the end, can get into a mess,” Mr Nath said.
Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels think-tank, said that a power-grab appeared to be under way. “The Commission clearly thinks that this gives them all the rights they need to negotiate investment deals, and I have heard officials saying that it could make existing BITs illegal,” he said.
The EU tried and failed to insert rules governing investment into the so-called “Doha round” of global trade talks, where they were thrown out by developing countries at the price of keeping the round going.
The Commission has also pressed EU member states to cancel bilateral investment agreements between themselves, saying EU law should prevail. But in a recent case brought by a Dutch sugar company against the Czech Republic, a tribunal decided that a BIT signed between the Czech Republic before it joined the EU was not overruled by EU law.
