With the Lisbon Treaty, which came into force on December 1, 2009, EU has exclusive competence over trade policy. Such external competence is extended to foreign direct investment. On such issues, only the EU can negotiate and sign international agreements with third countries, which are also binding for member states.
In herNew developments on the scope of the EU Common Commercial Policy under the Lisbon Treaty: Investment Liberalization vs Investment Protection? (in K. P. Sauvant, ed., Yearbook on International Investment Law and Policy, Oxford University Press, forthcoming) Anna De Luca (Department of Law) discusses such extension of competence to foreign direct investment. In particular, she critically analyzes the position of the European Commission.
Firstly, according to the Commission the external competence of the EU on foreign direct investment would include all aspects that of investment protection that are regulated by bilateral agreements on the promotion and protection of investment signed by member states with third states. Secondly, such external competence would prevent member states to negotiate new bilateral agreements, as well as modify or renegotiate existing ones. Thirdly, the new external competence on commercial policy would make any bilateral agreement made by a member state with a third country incompatible with EU law.
First of all, the author looks at post-Lisbon EU common commercial policy from a historical perspective. She describes and analyzes the evolution and revision of European provisions on common commercial policy, particularly in the WTO context. On the basis of such historical analysis, she argues that the new competence on foreign investment mainly concerns the liberalization of foreign direct investment and not the protection of investments, regulated by bilateral agreements. The main aim of post-Lisbon trade policy is precisely the liberalization of and the elimination of restrictions on foreign direct investments. At the same time, the extension of common commercial policy to foreign direct investment solves the problems of shared competence by member states and EU over the establishment of non-EU firms and strengthens the Single Market, partially undermined by the different member states’ policies over access granted to foreign investors.
The author then addresses the free circulation of capital and right of business establishment in the Single Market according to the jurisprudence of the EU Court of Justice. She argues that the right of establishment and the freedom of capital movement do not suggest unconditional liberalization of capital vis-à-vis third countries. The principles expressed by the Court over capital flows only pertain to intra-UE capital movements and do not seem applicable to capital flows occurring between member states and third countries. Also, free circulation of capital and right of establishment do not impinge upon the protection of investment as warranted by member states’ bilateral agreements. Conversely, they provide non-discriminatory access to the markets of member states to firms of each member state, but do not protect against expropriation or other measures that can negatively affect investment. The author concludes that bilateral agreements made by member states with third countries are not generally incompatible with the new EU area of competence.