The EU lacks much-needed policy standards on bilateral investment treaties (BITs), according to a recent report by the European Council on Foreign Relations (ECFR), a pan-European think tank. At present, there is no single organisation or set of standards to regulate the treatment of host states to investors. BITs have been created to allow companies and investors to initiate claims against host states.
Elena Ortiz de Solórzano, a researcher at ECFR, said that a common position for EU member states is critical: “We found that there was a feeling of a lack of unity and a lack of a common European position towards investments. This is particularly felt when controversial disputes arise.”
The report highlights the challenges of transparency, accessibility and cost effectiveness, and suggests that these should be key focus points for the EU in the future. Dan Lloyd, public policy director for Vodafone Group’s Africa, Middle East and Asia-Pacific region, said that “the stability of the rules and the enforcement mechanisms really do matter and they do matter for Europe – they matter for Europe’s position and future in the world and they matter for the emerging markets”.
Jonas Parello-Plesner, senior policy fellow at the ECFR, suggested that the EU should “create a template for negotiating investment treaties in the future and set standards on global governance”. This would be a significant change as the EU currently operates on a flexible case-by-case basis.
Another recommendation cited by the report was to “establish a global, joint task force” where the different international institutions can co-operate and allow companies to navigate the system more easily. The EU would benefit from this as a recipient of foreign investment, as a standard template would emphasise improved stability for investors.
According to figures from crossborder investment monitor fDi Markets, which were published in The fDi Report 2013, western Europe remains the leading source of FDI overseas, accounting for 43.12% of global FDI projects in 2012. The UK and Germany accounted for an aggregate 45.45% of FDI out of western Europe, while the UK remains the top destination in Europe for FDI.
Although private multinational companies often have larger resources than individual investors, Mr Lloyd said that driving investments to a dispute is not in their interest. Dr Lauge Skovgaard Poulsen, post-doctoral fellow at the University of Oxford, supported this claim, stressing that it can be dangerous to focus excessively on these agreements as they are “very last resort agreements”.
“No investor in their right mind would ever file an international arbitration claim against a sovereign government if it’s not a major dispute,” he said.