6 - EU Approach to International Investment Regimes and Climate Change Mitigation

Question 1

What does this lecture on the EU’s approach to international investment regimes and climate change mitigation touch upon? (6)

Answer 1

1/ role and place of envtal protection in EU investment law and policy

2/ EU current substantive approach to investment protection standards

3/ relationship of invst protection standards and MS + EU ability to take necessary measures to combat CC

4/ EU current procedural approach to invst protection

5/ relationship procedural approach to invst protection and MS + EU ability to take necessary measures to combat CC

6/ ability EU to reform IIL under EU law, esp. in relation to existing & new invst agreements of EU and MS

Question 2

Which case is discussed as explanatory example?

Answer 2

Rockhopper case

Question 3

Considerations on Rockhopper case? (7)

Answer 3

1/ 2005 exploration permit

2/ 2010 prohibition of offshore drilling

3/ 2012 & 2014 legal exceptions to prohibition

4/ 2016 law ending exceptions

5/ 2016 denial of permit

6/ 2017 arbitration proceedings

7/ 2022 240 million EUR award

Question 4

Key questions of this lecture? (5)

Answer 4

1/ relationship btwn IIL and CC policies?

2/ impact of IIL on CC policies?

3/ what is response of EU?

4/ can EU meaningfully reform IIL?

5/ is EU approach to IAs adequate in light of its int. climate ambitions?

Question 5

History IIL? (4)

Answer 5

1/ colonial era (1800-1945)

2/ post-colonial era (1945-1990)

3/ global era (1990-2014)

4/ era of contestation (2014-current)

Question 6

Characteristics colonial era IIL? (5)

Answer 6

1/ friendship, commerce and navigation treaties

2/ rational and content: protection of ind. doing business abroad

3/ strong ties with trade

4/ min, standards of protection for nationals doing business abroad

5/ espousal for DS

Question 7

Characteristics post-colonial era IIL? (4)

Answer 7

1/ separation from trade agreements, mainly bilateral agreements

2/ North-South dynamics

3/ introduction of ISDS

4/ protection of ind. and legal entities

Question 8

Characteristics global era IIL? (3)

Answer 8

1/ end of history?

2/ changing dynamics in int. political economy

3/ key examples: ECT, NAFTA

Question 9

Characteristics era of contestation IIL? (3)

Answer 9

1/ litigation on agreements

2/ termination of IIAs

3/ efforts to reform IIAs

Question 10

Why are IIAs concluded? (3)

Answer 10

1/ initially, to facilitate commerce

2/ then, to protect and attract capital

3/ now, again to facilitate commerce

Question 11

For whose and what benefit are IIAs concluded? (2)

Answer 11

1/ from individuals to corporations

2/ from protection of goods to all possible forms of invst

Question 12

What do IIAs include? (2)

Answer 12

1/ initially, min. standard of protection & espousal

2/ now, elaborate invst protection standards & ISDS

Question 13

History of EU relationship to IIL? (3)

Answer 13

1/ Treaty of Rome period (1958-1991)

2/ Treaty of Maastricht period (1991-2007)

3/ Treaty of Lisbon

Question 14

Characteristics of Treaty of Rome period? (4)

Answer 14

1/ limited liberalisation of intra-EU capital movements

2/ no need for common external capital regime

3/ Keynesian thinking dominant (gvt involvement & control over capital flows)

4/ rejection of EU BITs

Question 15

Characteristic Treaty of Maastricht period?

Answer 15

Limited EU competence related to invst liberalisation with third countries (current Art. 63 TFEU)

Question 16

Characteristics Treaty of Lisbon period? (4)

Answer 16

1/ inclusion of FDI in scope of CCP (Art. 207 TFEU)

2/ shared competence for portfolio invst (Arts. 63 and 216(1) TFEU)

3/ shared competence for ISDS

4/ shared competence for termination of MS BITs (Arts. 207 and 63 TFEU)

Question 17

What are substantive basics of IIL? (3)

Answer 17

1/ def. of investment

2/ def. of investor

3/ market access

Question 18

Investment protection standards? (4)

Answer 18

1/ national treatment

2/ MFN treatment

3/ fair and equitable treatment

4/ right to compensation for expropriation

Question 19

Procedural basics of ISDS? (4)

Answer 19

1/ foreign investor access to int. arbitration over any asset

2/ generally no exhaustion domestic remedies

3/ remedies

4/ procedural rules (ICSID, UNCITRAL, enforcement)

Question 20

What are challenges for climate mitigation policies? (5)

Answer 20

1/ weak role and place of CC policies in invst treaties

2/ regulatory chill and ISDS

3/ just and fair transition

4/ flexibility in relation to CC policies

5/ ‘green’ investments under invst policies

Question 21

Considerations on regulatory chill? (3)

Answer 21

1/ incentives for gvts to be less ambitious or abandon CC policies

2/ direct and indirect effects

3/ delays, modification and abandonment

Question 22

What is a concrete example of challenge for climate mitigation policies?

Answer 22

NZE scenario and oil & gas projects

Question 23

What are advantages of using ICSID for fossil fuel investors? (8)

Answer 23

1/ higher amounts of compensation

2/ one-sided

3/ broad scope

4/ enforceable rights

5/ detached from national law

6/ exclusively focused on investor rights

7/ governed by invst arbitration community

8/ limited transparency

Question 24

What are responses to the situation of challenges to climate mitigation policies? (2)

Answer 24

1/ termination

2/ reform

Question 25

Considerations on termination IIAs? (3)

Answer 25

1/ is it even possible?

2/ either withdrawal, denunciation or agreement

3/ sunset clauses

Question 26

What is an interesting example of termination of IIAs? (4)

Answer 26

1/ South Africa Investment Protection Act 2015

2/ unilateral internal act

3/ copies investment rights from IIAs

4/ subjects disputes to jurisdiction of domestic courts

Question 27

What types of reform are possible? (3)

Answer 27

1/ procedural

2/ investor rights

3/ investor obligations

Question 28

Which procedural reforms are envisageable? (6)

Answer 28

1/ no ISDS

2/ exhaustion of domestic remedies

3/ carve-out of ISDS

4/ transparency requirements

5/ third party rights

6/ counterclaims

Question 29

Which reforms of investor rights are envisageable? (3)

Answer 29

1/ carve-outs for definition of investment or investor

2/ change def. of substantive investor rights (e.g. FET)

3/ interpretative instruments

Question 30

What is the EC’s response to EU IIAs? (5)

Answer 30

1/ ‘save the system’

2/ 2015 Commission Concept Paper

3/ 2015 TTIP proposal for an Investment Court System

4/ right to regulate clauses

5/ more language clarifying substantive rights

Question 31

What would procedural aspects of the Investment Court System be? (3)

Answer 31

1/ appeal mechanism

2/ roster of arbitrators

3/ prepare for Multilateral Investment Court

Question 32

Contribution of Opinion 1/17? (4)

Answer 32

1/ competence void

2/ incompatibility of IA with EU law if amendment or withdrawal of legislation required bc of assessment made by a tribunal outside EU on level of protection

3/ EU cannot conclude IAs setting up bodies competent to call into question choices democratically made on, e.g., level of envtal protection

4/ but only so if body can only award monetary damages, leading to a requirement to abandon achievement level of protection

Question 33

EP position on IIL and climate mitigation policies? (2)

Answer 33

1/ 2017: consent to Council decision concluding CETA

2/ 2022: resolution on future of EU int. invst policy

Question 34

What does EP resolution on future of EU int. invst policy contain? (3)

Answer 34

1/ carve-out for invst in fossil fuels

2/ exhaustion domestic remedies

3/ 3rd party rights

Question 35

Considerations on ‘modernisation’ of ECT? (4)

Answer 35

1/ ECT = multilateral trade and invst agreement in energy sector (1998)

2/ 2018: EU modernisation initiative

3/ MS and Council not in favor

4/ EP resolution: full withdrawal if EC proposes

Question 36

What can and does the EU do with respect to MS IIAs? (3)

Answer 36

1/ termination of existing MS IIAs (either by EU or by MS)

2/ blocking new or renegotiated agreements

3/ conditioning authorisation

Question 37

Recap? (2)

Answer 37

1/ IIL entered a period of contestation as result of use by foreign investors of ISDS against public policy measures (incl. those aimed at addressing CC)

2/ EU response has largely been to save the system by making procedural and substantive changes to new IIAs