Strasbourg, 07/04/2011 (Agence Europe) - Foreign direct investment (fdi) was made the exclusive power of the European Union under the Lisbon Treaty and the European Commission must now strike the right balance between protection of legal investor rights and guaranteeing the right of the public authorities to regulate without coming under threat from private interests, particularly when it comes to the social and environmental aspects of fdi. This requires detailed definitions of types of investor and investment to be protected. These are the main messages of the report by Kader Arif (S&D, France) adopted by the European Parliament on 6 April on the range of measures unveiled in July 2010 by the European Commission to boost fdi and strengthen investor rights, measures currently being discussed by the EU institutions (namely a report setting out the EU's new fdi policy and a draft regulation on the fate of current bilateral fdi treaties).
The EU's current legal set-up for fdi comprises more than 1,200 bilateral investment treaties (BIT) between the EU and non-EU states. Since the Lisbon Treaty came into force on 1 December 2009, fdi has been an exclusive power of the EU under Articles 3 (1) (e), 206 and 207) and the Commission therefore now has the exclusive right to negotiate new investment deals with non-EU countries. This change will gradually see all the 1,200 BITs being replaced - a matter dealt with in a report by Karl Schlyter (Greens/EFA, Sweden). The Arif Report concentrates on the rules governing how the EU will negotiate future investment deals.
In its 6 April vote, the European Parliament stressed the need for the Commission to strike the right balance in new investment deals between investment protection (to prevent arbitrary expropriation by the state) and the right of public authorities to intervene in the public domain by introducing new environmental standards, for example, which investors may not appeal against or claim damages. The European Commission is therefore asked to include special clauses in any new investment deals to set out the parties' rights to regulate in the interest of national security, the environment, public health, worker and consumer rights and cultural diversity. The MEPs say that future agreements should include three well-defined sets of rules - non-discrimination between foreign and national investors, fair and equal treatment and protection against direct and indirect expropriation.
The EU Treaties do not give a definition of foreign direct investment, but the EP says a detailed definition is required of fdi to be protected, adding that speculative investment (as defined by the Commission) should not be protected. The Arif Report calls for a study of past experience where a broad definition of 'foreign investor' has led to abuse.
The Arif Report says the EP must be involved in drawing up the EU's new fdi investment and be consulted on the negotiating mandates. On Wednesday, Arif repeated his criticisms of the Commission of failing to wait until the Arif Report was adopted before asking the Council of Ministers for negotiating mandates for fdi deals with Canada, India and Singapore. (E.H./transl.fl)