# EUR-Lex - 52012PC0335 - EN

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# 52012PC0335

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework for managing financial responsibility linked to investor-state dispute settlement tribunals established by international agreements to which the European Union is party /* COM/2012/0335 final - 2012/0163 (COD) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

1.1.        Introduction

The Treaty of Lisbon has brought foreign
direct investment within the scope of the Union's common commercial policy and,
consequently, of the Union's exclusive comptence. A central feature of
international agreements on foreign direct investment (normally referred to as
investment protection agreements) is the possibility for an investor to bring a
claim against a state where the state is alleged to have acted inconsistently
with the investment protection agreement (hereinafter referred to as
"investor-state dispute settlement"). When such litigation takes
place, the state concerned will incur costs (fees for the administration of the
dispute, for the payment of arbitrators, for the payment of lawyers) and may,
if it loses, be required to pay compensation.

The Union is already party to one agreement
with the possibility for investor-state dispute settlement (the Energy Charter
Treaty[1])
and the Union will seek to negotiate such provisions in a number of agreements
currently under negotiation or to be negotiated in the future. It is thus
necessary to consider how to manage the financial consequences of such disputes.
This Regulation seeks to establish the framework for managing such consequences.

The central organising principle of this
Regulation is that financial responsibility flowing from investor-state dispute
settlement cases should be attributed to the actor which has afforded the
treatment in dispute. This means that where the treatment concerned is afforded
by the Union institutions then financial responsibility should rest with the
Union institutions. Where the treatment concerned is afforded by a Member State
of the European Union, then financial responsibility should rest with that Member
State. It is only where the actions of the Member State are required by the law
of the Union that financial responsibility should lie with the Union.
Establishing this central principle also entails that consideration needs to be
given to the issue of whether, and under what circumstances, the Union or the Member
State which has afforded the treatment in dispute should act as respondent, how
to structure co-operation between the Commission and the Member State in
specific cases, how to deal with the possibility for settlements and finally,
the mechanisms necessary to ensure that any apportionment can be made
effective.

These additional elements also need to take
into account the three other principles underlying this Regulation. The first
is that the overall operation of the allocation must ultimately be budget
neutral as regards the Union with the result that the Union only bears those
costs which are triggered by acts of Union institutions. Second, the
functioning of the mechanism must be such that a third country investor is not
disadvantaged by the need to manage the financial responsibility within the
Union. In other words, in the event that there is a disagreement between the
Union and the Member State, the third country investor would be paid any award,
and then the internal allocation within the Union would be addressed. Third,
the mechanism must respect the fundamental principles governing the Union’s
external action as established by the Treaties and the case law of the Court of
Justice of the European Union, in particular that of unity of external
representation and of sincere co-operation.

It is to be noted that the Commission
foresaw the need for this Regulation in its Communication "Towards a
comprehensive European international investment policy"[2].

The proposed Regulation has been explicitly
requested by the European Parliament in its resolution on the future EU
International Investment Policy (para. 35 of Resolution A7-0070/2011 adopted on
22 April 2011). Furthermore, the Council requested the Commission to study the
matter in its Conclusions on a Comprehensive International Investment Policy
(25 October 2010). Subsequent discussions in the Council, notably in relation
to the adoption of the relevant negotiating directives for certain agreements
currently subject to negotiation, have confirmed the strong interest of the
Council in this initiative.

1.2.        The Union's competence to
conclude investment protection agreements and the Union's international
responsibility under those agreements

The Commission takes the view that the Union
has exclusive competence to conclude agreements covering all matters relating
to foreign investment, that is both foreign direct investment and portfolio
investment.[3] Article 207 of the Treaty on the Functioning of the European Union
("TFEU") provides the exclusive competence for foreign direct
investment. The Union’s competence for portfolio investment stems, in the
Commission’s view, from Article 63 TFEU. That article provides that the
movement of capital between Member States of the Union and third countries is
to be free of restrictions. Article 3(2) TFEU provides for the exclusive
competence of the Union whenever rules included in an international agreement
"may affect common rules or alter their scope". In the Commission's
view, the Union must have exclusive competence also over matters of portfolio
investment since the rules being envisaged, which would apply indistinctly to
portfolio investment, may affect the common rules on capital movement set down
in Article 63 of the Treaty.

Furthermore, the Commission takes the view
that the Union’s competence covers all the standards provided for in investment
protection texts, including expropriation. First, the European Court of Justice
has consistenly held that the Union’s competence for the common commercial
policy includes obligations applying post entry (i.e. after a good has been
imported or a service supplier has established) even where Member States retain
the possibility to adopt internal rules[4].
Thus, it is well-established that the Union's competence in the field of trade
in goods is not limited to border measures, such as tariffs or import quotas,
but covers also post-importation matters, such as the granting of national
treatment and most favoured nation treatment in respect of taxes and other
internal laws and regulations[5],
or the abolition of unnecessary obstacles to trade arising from technical
regulations and standards.[6]
Likewise, it is generally agreed[7]
that the Union's competence with regard to 'trade in services' is not confined
to issues of market access, but includes also matters such as national
treatment and most-favoured nation treatment in respect of internal laws and
regulations, as well as certain obligations with regard to the administration
and the content of domestic regulation. Following this logic, the Union’s
competence for foreign direct investment and capital movements must also cover
the standards applying post-establishment, including national and most-favoured
nation treatment, fair and equitable treatment and protection against
expropriation without compensation.

It should further be noted that Article 345
TFEU provides only that the Treaties shall not affect the system of property
ownership prevailing in the Member States. Treaties providing for investment
protection do not affect the system of property ownership – rather they require
that expropriation be subject to certain conditions, including, inter alia, the
payment of compensation. Hence, the specific rule in Article 345 is not such as
to imply that the Union does not have competence for the rules on expropriation
included in agreements providing for investment protection. Finally, it is also
established that the competence to establish and administer dispute settlement
provisions runs together with the underlying competence for the subject matter
of the rules.[8]

It follows, therefore, that where the
agreement is one which is concluded by the Union only, then it is only the
Union which may be sued by an investor. This would be the case even if the
treatment accorded which is challenged in investor-state dispute settlement is
treatment accorded not by the Union but by a Member State. Should it be the
case that both the European Union and the Member States are parties to an
agreement and it needs to be decided who is responsible as a matter of
international law for any particular action, the Commission takes the view that
this has to be decided not by the author of the act, but on the basis of the
competence for the subject matter of the international rules in question, as
set down in the Treaty. In this perspective, it is immaterial that a Member
State has competence under the rules on the internal market allowing it to
legislate in its domestic sphere.

This logic has been confirmed in the Court
of Justice's case-law. For instance, in Opinion 1/91 the Court held (emphasis
added):

The expression 'Contracting Parties' is defined
in Article 2(c) of the agreement. As far as the Community and its Member States
are concerned, it covers the Community and the Member States, or the Community,
or the Member States, depending on the case. Which of the three possibilities
is to be chosen is to be deduced in each case from the relevant provisions of
the agreement and from the respective competences of the Community and the
Member States as they follow from the EEC Treaty and the ECSC Treaty.[9]

In the international context, the
International Law Commission has recognised the possibility that special rules
may apply between an international organisation and its members. In elaborating
its draft articles on the Responsibility of International Organisations, the
International Law Commission provides that its rules on responsibility may not
be applicable, or may be modified, in specific circumstances.[10]

While, for the reasons set out above, the
Union bears, in principle, international responsibility for the breach of any
provision within the Union's competence, it is possible, as a matter of Union
law, to provide for the allocation of financial responsibility between the
Union and the Member States. As discussed below in section 1.3, the Commission
considers that it would be appropriate that each Member State bears financial
responsibility for its own acts, unless such acts are required by Union law.

Similarly, while for the reasons mentioned
above, the Union should, in principle, act as respondent in any dispute
concerning an alleged violation of a provision of an international agreement
falling within the Union's exclusive competence, even if such violation arises
from a Member State's action, it may be possible, as provided expressly in
Article 2(1) TFEU, to empower a Member State to act as respondent in
appropriate circumstances given the potential for significant demands (even
temporary) on the Union budget and on Union resources were the Union to act as
respondent in all cases. This implies that rather than set up the mechanisms in
a manner reflecting a strict application of the rules on competence, it is more
appropriate to put forward pragmatic solutions which ensure legal certainty for
the investor and provide all the necessary mechanisms to allow for the smooth
conduct of arbitration and, eventually, the appropriate allocation of financial
responsibility. As explained in section 1.4 below, the Commission is of the
view that Member States should be permitted to act as respondents in order to
defend its own actions, except under certain circumstances where the Union
interest requires otherwise. This has to be done while ensuring, at the same
time, respect for the principle of unity of external representation

1.3.        Allocation of Financial
Responsibility

As set out above, investor-to-State dispute
settlement will give rise to costs for the parties concerned, both in terms of
fees and in terms of the payment of final award. It is important to separate
the issue of the conduct and management of an investor-to-State arbitration
claim from the issue of the allocation of financial responsibility. This is
necessary in order to ensure the fair allocation of costs, so that the EU
budget – and consequently the budgets of Member States not concerned with the claim
in question – are not burdened with costs relating to treatment afforded by one
Member State. Therefore, regardless of whether the Union or a Member State acts
as respondent to a claim, the financial responsibility for any costs should
follow the origin of the treatment of which the investor complained. Therefore,
should the treatment attacked by an investor exclusively originate in a Member
State, the Member State in question should be liable for the costs flowing from
the dispute settlement. Similarly, where the treatment of which an investor
complained originates in the institutions of the Union (including where the
measure in question was adopted by a Member State as required by Union law),
financial responsibility should be borne by the Union. Equally, the decision on
whether to settle a dispute settlement claim and the responsibility for the
payment of a settlement award should normally follow the origin of the
treatment.

However, while the allocation of financial
responsibility between the Union and a Member State may give rise to complex
considerations, the investor bringing the claim should not be adversely
affected by any disagreement between the Union and the Member State. Therefore,
provision should be made to ensure that any final award or settlement award is
paid to the investor promptly, regardless of the decisions on the allocation of
financial responsibility. In addition, and in order to avoid unnecessary
drawings on the Union budget, there should be provisions for periodic payments
to be made into the Union budget to cover arbitration costs, as well as for the
prompt reimbursement of the Union budget by the Member State concerned.

1.4.        The roles of the Union and
of the Member States in relation to the conduct of disputes

This proposal distinguishes three different
situations, as regards the distribution of roles between the Union and the
Member States in relation to the conduct of disputes under agreements to which
the Union is a party.

In the first situation, the Union would act
as respondent where the treatment alleged to be inconsistent with the agreement
is treatment afforded by one or several Union institutions. The Union would
accept full financial responsibility in such cases.

In the second, the Member State would act
as respondent where the treatment in question is afforded by the Member State.The
Member State would accept full financial responsibility is such cases. In this
situation, the Member State would need to keep the Commission informed of
developments in the case, and permit the Commission to give direction on
particular issues.[11]

In the third situation, the Union would act
as respondent in respect of treatment afforded by a Member State. This would
occur where the Member State has opted not to act as respondent. It would also
occur where the Commission decides that issues of Union law are involved such
that the Union may be financially responsible, in whole or in part. It would also
apply where the Commission takes the view that a Union position is required in
order to ensure unity of external representation, because it is likely that
similar claims may be raised in disputes against other Member States or because
the disputes raises unsettled issues of law that are likely to recur in other
disputes. The Union will be represented by the Commission in accordance with its
role in external representation established by Article 17 of the Treaty on
European Union.

It is evident for the Commission that,
where the Union acts as respondent concerning treatment afforded by a Member
State, it will be necessary to ensure a high degree of co-operation with the
Member State concerned. This will involve close co-operation in the preparation
of the defence, from the beginning to the end of the procedure. Thus, documents
will need to be shared and representatives of the Member States should form
part of the Union's delegation. However, legislating for a specific role for
such representatives in the hearings or permitting the filing of individual
briefs, would introduce too rigid a system and might lead to difficulties in
ensuring the unity of external representation of the Union. For that reason,
while the Commission is keen to ensure close and effective co-operation, this
Regulation should not contain details of such elements and should only specify
the principle of close co-operation between the Union and Member States.

A number of alternatives were examined by
the Commission in informal consultations in preparation for this proposal. One
such alternative was a mechanism whereby the Union and the Member State concerned
would have acted as co-respondents. However, in the Commission's view, such
mechanism is not well suited to investor-to-state dispute settlement. First, it
does not adequately provide for a mechanism for the allocation of financial
responsibility between the Member State concerned and the Union. A Member State
paying any eventual award and then seeking to recover from the European Union
by itself seeking to determine which elements are required by the law of the
Union would be neither consistent nor effective as regards budgetary
procedures, nor would it recognise the Commission’s role in the implementation
of Union law. Second, it could lead to inconsistencies in the defence of the
claim, with each co-respondent presenting conflicting or diverging arguments.
This would be inconsistent with the principle of unity of external
representation as established by the Court of Justice of the European Union.
Third, it could result in the tribunal having to make a pronouncement on the
division of competences between the Union and Member States, in circumstances
where the two co-respondents present divergent positions on this issue to the
tribunal; a scenario where a third party gives an opinion on a purely internal
EU matter is to be avoided. Finally, in a scenario where a case is successfully
defended, and the respondent is awarded costs, it is unlikely that a tribunal
would permit the Union and the Member State concerned both to recover costs. It
is not acceptable that the potential costs which would be reimbursed to the
Union be reduced in order to cover the costs incurred by a co-respondent Member
State (or vice-versa). The result would be less than full restitution of the
funds allocated by the Union and as a consequence the budget neutrality of the
operation for the Union could not be ensured.

1.5.        Recognition and
enforcement of awards against the Union

It is also necessary to set down rules to deal
with the situation in which the EU is held liable. Since the European Union is
or will be a party to such agreements, the European Union will be under an
international obligation to accept any award made against it. The European
Union would honour such obligation.

Given investor-state dispute settlement is
based on arbitration, in most countries, including the Member States of the
European Union, the recognition and enforcement of investment awards is based
on the relevant legislation governing arbitration. This is often in turn based
either upon the New York Convention of 10 June 1958 on the Recognition and
Enforcement of Foreign Arbitral Awards or on the United Nations Commission on
International Trade Law (UNCITRAL) Model Law on International Commercial
Arbitration of 1985 (as amended in 2006).[12]
The Convention on the Settlement of Investment Disputes between States
and Nationals of Other States (the "ICSID Convention") provides a
specific forum for the settlement of investment disputes. It provides in
Article 54(1):

Each Contracting State shall recognize an award
rendered pursuant to this Convention as binding and enforce the pecuniary
obligations imposed by that award within its territories as if it were a final
judgment of a court in that State. A Contracting State with a federal
constitution may enforce such an award in or through its federal courts and may
provide that such courts shall treat the award as if it were a final judgment
of the courts of a constituent state.

The rules which apply to the recognition
and enforcement of investment awards are those set down in the ICSID Convention
when the arbitration in question is pursuant to the rules of the ICSID
Convention and otherwise, those elaborated in the New York Convention and
national laws on arbitration. To the Commission’s knowledge, only the United
Kingdom and Ireland provide, in domestic law, specific procedures on the
management of awards rendered under the ICSID Convention.[13]

These rules would apply, as appropriate, to
arbitration conducted pursuant to Union agreements. While there are no recorded
cases of the Union or of its Member States refusing to respect an award, if an
investor were to consider it necessary to seek recognition or enforcement of an
award, it would need to seek such recognition or enforcement via the courts of
the Member States. If enforcement is sought of an award made against the Union,
Article 1 of Protocol (No. 7) on the Privileges and Immunities of the European
Union would apply:

The property and assets of the Union shall not
be the subject of any administrative or legal measure of constraint without the
authorisation of the Court of Justice.

This means that the investor may need to go
to the Court of Justice of the European Union if enforcement against Union
assets is requested. The Commission considers that the Court of Justice would
apply the standard approach on sovereign immunity to such situations, with the
result that the situation within the Union would be comparable to the situation
in other countries, including the Member States of the European Union, where
the international principle of sovereign immunity would come into play.

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

This proposal has not been subject to an
impact assessment. This is because the regulation does not, in and of itself,
include the provisions on investor-state dispute settlement which in turn may
lead to the need to engage in arbitration or in liability to pay compensation.
To the extent that it is possible to analyse the potential impacts of such
provisions, this will be done in the impact assessment for the agreements in
question. Section 4 below nevertheless gives some explanation on the likely
budgetary effects.

The Commission held several meetings with Member
State representatives and with the European Parliament in the preparation of
this proposal. The views expressed in those meetings have been carefully taken
into account in the attached proposal.

3.           LEGAL ELEMENTS OF THE PROPOSAL

3.1.        Legal basis

The proposal is based on Article 207(2) of
the TFEU which establishes the exclusive competence of the Union for a common
commercial policy, including for foreign direct investment.

3.2.        Presentation
of the proposal

The proposed Regulation establishes a
framework for the allocation of the financial responsibility arising out of
investor-to-state dispute settlement conducted pursuant to agreements to which
the Union is a party.

3.2.1.     Chapter
I: General Provisions

This Chapter sets out the scope of the
proposed Regulation and includes the definitions of the terms used. The
proposed Regulation applies to dispute settlement initiated by an investor of a
third country and conducted pursuant to an agreement to which the Union is a
party. It does not apply to state-to-state dispute settlement concerning
investment protection provisions, since these do not as such concern the
possibility of financial compensation. A state wishing to seek compensation
would need to be assigned the relevant claims from its investors.

3.2.2.     Chapter
II: Apportionment of financial responsibility

This Chapter sets out the basis on which
the financial responsibility arising from a dispute settlement claim will be
allocated to the Union, a Member State or both.

The main criterion for the allocation will
be the origin of the treatment of which the investor has complained. If the
treatment originates in a Union act, then the financial responsibility will be
borne by the Union. If the treatment originates in an act of a Member State,
then the financial responsibility will be borne by the Member State, unless the
treatment was required by Union law. However, the Member State should bear
financial responsibility for treatment required by Union law, in cases where
such treatment was required in order to correct a pre-existing violation of
Union law.

In cases where financial responsibility has
been allocated to a Member State, the Commission may adopt a decision setting
out the allocation.

Notwithstanding these apportionment
criteria, if a Member State chooses to accept the financial responsibility
arising from a claim to which the Union is respondent or acts as respondent to
the claim or chooses to settle the claim, the financial responsibility will be
borne by the Member State.

Should a Member State accept financial
responsibility arising from a claim, the Member State and the Commission may
agree the mechanism by which the arbitration costs and award will be paid. The
Commission will inform the arbitration tribunal and the investor of the Member
State's acceptance of financial responsibility.

3.2.3.     Chapter III: Conduct of
disputes

This Chapter sets out the principles
relating to the conduct of disputes relating to treatment afforded either by
the Union or by a Member State, whether fully or in part.

Section 1 of this Chapter provides that the
Union shall act as respondent whenever the dispute concerns treatment afforded
by the Union.

Section 2 deals with the sitiuation where
the dispute concerns, fully or partially, treatment afforded by a Member State.
The Commission will notify the Member State concerned as soon as it becomes
aware that consultations have been requested by an investor, in accordance with
the provisions of an investment protection agreement. The Member State may
participate in the consultations and it shall provide the Commission with all
relevant information.

As soon as the Commission or a Member State
receives a notice of arbitration from an investor in accordance with the
provisions of an investment protection agreement, they will notify each other.
The Member State may act as a respondent to the claim, unless the Commission
decides that the Union should act as respondent or the Member State itself
wants the Union to so act. The Commission may issue a decision that the Union
shall act as respondent where:

(a)          it is likely that the Union will
have to bear at least some of the financial responsibility of the claim;

(b)          the dispute also concerns treatment
afforded by the Union

(c)          it is likely that similar claims
will be brought against treatment afforded by other Member States; or

(d)          it is likely that the claim will
raise unsettled issues of law.

Where the Union is acting as a respondent,
the Member State concerned must provide all necessary assistance to the
Commission and may form part of the Union delegation in the arbitration
proceedings. The Commission will keep the Member State closely informed of all
significant steps in the process, will work closely with the Member State and
will consult with the Member State regularly.

Where the Member States is acting as
respondent, it must provide all documents relating to the proceedings to the
Commission and shall allow the Commission to form part of the Member State
delegation in the arbitration proceedings. The Member State will keep the Commission
closely informed of all significant steps in the process and may be required to
adopt a particular position in its defence of the claim where there is a Union
interest.

3.2.4.     Chapter IV: Settlements

If the Commission considers that the
interests of the Union would be best served by the settlement of a claim
concerning treatment exclusively afforded by the Union, it may adopt a decision
to approve a settlement. This decision shall be adopted in accordance with the examination
procedure created by Regulation (EU) 182/2011[14].

If the Commission considers that the
interests of the Union would be best served by the settlement of a claim
concerning treatment afforded by a Member State or by both a Member State and
the Union, the Commission will consult with the Member State concerned. If the
Member State agrees to a settlement, it shall endeavour to agree with the
Commission the necessary elements for the negotiation and implementation of the
settlement. The Commission may decide to settle the dispute even if the Member
State concerned does not consent, if the Commission considers that there is an
overriding interest of the Union. The terms of the settlement will be agreed in
accordance with the examination procedure.

Where a claim concerns treatment exclusively
afforded by a Member State, the Member State may settle the dispute provided
that:

(a)          the Member State accepts any
financial responsibility arising from the settlement;

(b)          the settlement agreement is only
enforceable against that Member State;

(c)          the terms of the settlement are
compatible with Union law and:

(d)          there is no overriding Union
interest.

The Member State shall consult with the
Commission which will decide whether all of the conditions set out above are
met within 90 days.

3.2.5.     Chapter V: Payment of final
awards and settlements

Where the Member State concerned has acted
as respondent to a claim, it shall be responsible for the payment of final
awards and settlements relating to that claim.

Where the Union has acted as respondent to
a claim, it shall pay any final award to the investor in accordance with the
rules laid down in the relevant agreement, unless a Member State has accepted
financial responsibility for the dispute. In cases where a settlement has been
agreed, the Commission will pay the settlement amount in accordance with the
rules laid down in the settlement agreement.

Where the Commission considers that all or
part of a final award or settlement amount should be paid by a Member State
which has not accepted financial responsibility, it will consult with the
Member State concerned. If the Commission and the Member State cannot reach
agreement on the matter, the Commission will adopt a decision setting out the
amount to be paid by that Member State. The Member State will compensate the
Union budget, including interest, within three months from the date of the
decision. If the Member State disagrees with the Commission's allocation of
financial responsibility, it shall submit an objection. If the Commission does
not agree with the Member State's objection, it shall adopt a decision asking
the Member State to compensate the Union budget, including interest. The Member
State may then have recourse to Article 263 of the Treaty on the Functioning of
the European Union in order to seek annulment of the decision in question. The
matter will thereafter be decided by the Court of Justice of the European Union
in accordance with this Regulation. This procedure should not include any
element for the control of the Commission's decision by the Member States. This
is a decision which applies only to one Member State and in respect of which
the Commission's application of the standards set down by the regulation should
not be subject to a political control by the Member States. It is key for the
proper functioning of the regulation that the criteria are strictly applied in
an objective manner. Should the Member State concerned seek the annulment of
the Commission's decision before the Court of Justice of the European Union
then other Member States with an interest in the interpretation would be able
to intervene in the proceedings before the Court of Justice.

Where the Union is acting as a respondent,
arbitration costs shall be paid by the Union or the Member State in accordance
with how the financial responsibility for the dispute is allocated. The
Commission may adopt a decision requiring the Member State concerned with the
claim to make financial contributions to the Union budget to cover any periodic
payments of arbitration costs.

4.           BUDGETARY IMPLICATIONS

It is by definition not possible to give
precise information on the likely costs associated with investor-state dispute
settlement. These depend on a wide array of factors including the volume of
capital flows, the stabilitity of the investment environment etc. The Union’s
exposure to such liability also depends, of course, on the number of such
agreements to which it will eventually be a party. At the time this proposal is
made, the Union is only party to one agreement with investor-state dispute
settlement, even if a number of other agreements are currently under
negotiation. Hence, it is impossible to be specific as to the likely budgetary
consequences in the preparation of a Regulation of this nature, intended to
have a horizontal effect. While the difficulty of making accurate estimates
should not be discounted, a more accurate analysis is possible on a
case-by-case basis in the impact assessments which will be prepared for
specific agreements and the agreements should also be subject to ex post evaluation.
Financial Statements shall be prepared for all future agreements to be
concluded pursuant to Article 218 of the Treaty which would fall under the
scope of this Regulation.

It is necessary to ensure that the
requisite elements in the General Budget of the Union are in place in order to
cover any potential costs arising from agreements with third countries
including investor state dispute settlement as implemented in this Regulation.
This has three elements. First, provision needs to be made for the payment of
any expenses of the arbitral tribunal and any other related costs. Second,
provision needs to be made for situations where the Union is required to pay
compensation on final awards or settlement in respect of acts of its
institutions. Third, in cases in which the Union acts as respondent, but where
the Member State concerned is ultimately to be considered as financially
responsible, it is necessary for the Union to make any necessary payments and
then have these payments reimbursed by the Member State concerned. It is also
necessary to provide for a mechanism where a Member State, which has accepted
the financial responsibility on a case, makes periodic payments to the EU
Budget in order to compensate the cost of arbitration. All such payments and
recoveries would be made through the budget line 20 02 01 - External trade
relations, including access to the markets of third countries. The necessary
provisions for this have been taken up in the Commission’s proposal for the 2013
budget[15]
in the form of an addition to the budgetary comments of the afore-mentioned budget
line referring to:

"Investor
to state dispute settlement as established by international agreements

The following expenditure is to support:

–
Arbitration costs, legal expertise and fees
incurred by the Union as party to disputes arising from the implementation of
international agreements concluded under Article 207 of the Treaty on
Functioning of the European Union.

–
Payment of final award or award settlements paid
to an investor in the context of such international agreements."

2012/0163 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

establishing a framework for managing
financial responsibility linked to investor-state dispute settlement tribunals established
by international agreements to which the European Union is party

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 207(2) thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)       With the entry into force
of the Lisbon Treaty, the Union has acquired exclusive competence for the
conclusion of international agreements on investment protection. The Union is
already party to the Energy Charter Treaty[16]
which provides for investment protection.

(2)       Agreements providing for
investment protection typically include an investor-to-state dispute settlement
mechanism, which allows an investor from a third country to bring a claim
against a state in which it has made an investment. Investor-to-state dispute
settlement can result in awards for monetary compensation. Furthermore,
significant costs for administering the arbitration as well as costs relating
to the defence of a case will inevitably be incurred in any such case.

(3)       In accordance with the
case-law of the Court of Justice of the European Union[17], international responsibility
for treatment subject to dispute settlement should follow the division of
competence between the European Union and Member States. As a consequence, the
Union will in principle be responsible for defending any claims alleging a
violation of rules included in an agreement which fall within the Union's
exclusive competence, irrespective of whether the treatment at issue is afforded
by the Union itself or by a Member State.

(4)       Where the Union has
international responsibility for the treatment afforded, it will be expected,
as a matter of international law, to pay any adverse award and bear the costs
of any dispute. However, an adverse award may potentially flow either from
treatment afforded by the Union itself or from treatment afforded by a Member
State. It would as a consequence be inequitable if awards and the costs of
arbitration were to be paid from the Union budget where the treatment was afforded
by a Member State. It is therefore necessary that financial responsibility be
allocated, as a matter of Union law, and without prejudice to the international
responsibility of the Union, between the Union and the Member State responsible
for the treatment afforded on the basis of criteria established by this Regulation.

(5)       In its resolution on the
future EU International Investment Policy[18],
the European Parliament has explicitly called for the creation of the mechanism
provided for in this Regulation. Furthermore, the Council requested the
Commission to study the matter in its Conclusions on a Comprehensive
International Investment Policy of 25 October 2010.

(6)       Financial responsibility
should be allocated to the entity responsible for the treatment found to be
inconsistent with the relevant provisions of the agreement. This means that the
Union should bear the financial responsibility where the treatment concerned is
afforded by an institution, body or agency of the Union. The Member State
concerned should bear the financial responsibility where the treatment
concerned is afforded by a Member State. However, where the Member State acts
in a manner required by the law of the Union, for example in transposing a
directive adopted by the Union, the Union should bear financial responsibility
in so far as the treatment concerned is required by Union law. The regulation
also needs to foresee the possibility that an individual case could concern both
treatment afforded by a Member State and treatment required by Union law. It
will cover all actions taken by Member States and by the European Union.

(7)       The Union, represented by
the Commission should always act as the respondent where a dispute concerns exclusively
treatment afforded by the institutions, bodies or agencies of the Union, so
that the Union bears the potential financial responsibility arising from the
dispute in accordance with the above criteria.

(8)       On the other hand, where a
Member State would bear the potential financial responsibility arising from a dispute,
it is appropriate, as a matter of principle, to permit such Member State to act
as respondent in order to defend the treatment which it has afforded to the
investor. The arrangements set down in this Regulation provide for that. This
has the significant advantage that the Union budget and Union resources would
not be burdened, even temporarily, by either the costs of litigation or any
eventual award made against the Member State concerned.

(9)       Member States may,
nevertheless, prefer that the Union, represented by the Commission, act as a
respondent in this type of disputes, for example for reasons of technical
expertise. Member States should, therefore, have the possibility to decline to
act as a respondent, without prejudice to their financial responsibility.

(10)     In certain circumstances, it
is essential, in order to ensure that the interests of the Union can be
appropriately safeguarded, that the Union itself act as a respondent in
disputes involving treatment afforded by a Member State. This may be so in
particular where the dispute also involves treatment afforded by the Union,
where it appears that the treatment afforded by a Member State is required by
Union law, where it is likely that similar claims may be brought against other
Member States or where the case involves unsettled issues of law, the resolution
of which may have an impact on possible future cases against other Member
States or the Union. Where a dispute concerns partially treatment afforded by
the Union, or required by Union law, the Union should act as a respondent,
unless the claims concerning such treatment are of minor importance, having
regard to the potential financial responsibility involved and the legal issues
raised, in relation to the claims concerning treatment afforded by the Member
State.

(11)     It is necessary to provide
for the possibility for the Union to act as respondent in such circumstances in
order to ensure that the interests of the Union and hence of the collectivity
of Member States can be taken into account. This is given expression in the
principles of unity of external representation and the duty of co-operation,
established in Article 4(3) of the Treaty on European Union and in the case-law
of the Court of Justice of the European Union[19]
which apply irrespective of the underlying competence.

(12)     It is appropriate that the
Commission decide, within the framework set down in this regulation, whether
the Union should be the respondent or whether a Member State should act as
respondent.

(13)     It is necessary to provide
for some practical arrangements for the conduct of arbitration proceedings in
disputes concerning treatment afforded by a Member State. Irrespective of
whether the Union or the Member State acts as respondent in such disputes, those
arrangements should aim at the best possible management of the dispute whilst ensuring
compliance with the principles of unity of external representation and the duty
of co-operation, established in Article 4(3) of the Treaty on European Union
and in the case-law of the Court of Justice of the European Union[20]. Where the Union acts as
respondent such arrangements should provide for very close co-operation including
the prompt notification of any procedural steps, the provision of documents,
frequent consultations and participation in the delegation to the proceedings.

(14)     Equally, when a Member
State acts as respondent it is appropriate that it keep the Commission informed
of developments in the case and that the Commission can, where appropriate,
require that the Member State acting as respondent takes a specific position on
matters having a Union interest.

(15)     A Member State may at any
time accept that it would be financially responsible in the event that
compensation is to be paid. In such a case the Member State and the Commission
may enter into arrangements for the periodic payment of costs and for the
payment of any compensation. Such acceptance does not imply that the Member
State accepts that the claim under dispute is well founded. The Commission should
be able to adopt a decision requiring the Member State to make provision for
such costs. In the event that the tribunal awards costs to the Union, the
Commission should ensure that any advance payment of costs is immediately
reimbursed to the Member State concerned.

(16)     In some cases, it may be
appropriate to reach a settlement in order to avoid costly and unnecessary
arbitration. It is necessary to lay down a procedure for making such
settlements. Such a procedure should permit the Commission, acting in
accordance with the examination procedure, to settle a case where this would be
in the interests of the Union. Where the case concerns treatment afforded by a
Member State, it is appropriate that there should be close co-operation and
consultations between the Commission and the Member State concerned. The Member
State should remain free to settle the case at all times, provided that it
accepts full financial responsibility and that any such settlement is
consistent with Union law and not against the interests of the Union.

(17)     Where an award has been
rendered against the European Union, that award should be paid without delay.
The Commission should make arrangements for the payment of such awards, unless
a Member State has already accepted financial responsibility

(18)     The Commission should consult
closely with the Member State concerned in order to reach agreement on the
apportionment of financial responsibility. Where the Commission determines that
a Member State is responsible, and the Member State does not accept that
determination, the Commission should pay the award, but should address a
decision to the Member State requesting it to provide the amounts concerned to
the budget of the European Union, together with applicable interest. The
interest payable should be that set down pursuant to [Article 71(4) of Council
Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial
Regulation applicable to the general budget of the European Communities as
amended[21]][22]. Article 263 of the Treaty is
avalable in cases where a Member State considers that the decision falls short
of the criteria set out in this Regulation.

(19)     The Union budget should
provide coverage of the expenditure resulting from agreements concluded
pursuant to Article 218 of the Treaty providing for investor-state dispute
settlement. Where Member States have financial responsibility pursuant to this
Regulation, the Union should be able to either accumulate the contributions of
the Member State concerned first before implementing the relevant expenditure
or implement the relevant expenditure first and be reimbursed by the Member
States concerned after. Use of both of these mechanisms of budgetary treatment should
be possible, depending on what is feasible, in particular in terms of timing.
For both mechanisms, the contributions or reimbursements paid by the Member
States should be treated as internal assigned revenue of the Union budget. The
appropriations arising from this internal assigned revenue should not only
cover the relevant expenditure but they should also be eligible for
replenishment of other parts of the Union budget which provided the initial
appropriations to implement the relevant expenditure under the second
mechanism.

(20)     In order to ensure uniform
conditions for the implementation of this Regulation implementing powers should
be conferred on the Commission.

(21)     The implementing powers
relating to Articles 12(1), 13(4) and 14(3) should be exercised in accordance
with Regulation (EU) No 182/2011 of the European Parliament and of the
Council of 16 February 2011 laying down the rules and general principles
concerning mechanisms for control by Member States of the Commission's
exercise of implementing powers[23].

(22)     The advisory procedure
should be used for the adoption of decisions on settlement of disputes pursuant
to 14(3) given that those decisions will have at most a
merely temporary impact on the Union budget, since the Member State
concerned will be required to assume any financial responsibility arising from
the dispute, and because of the detailed criteria set down in the regulation
for acceptability of such settlements,

HAVE ADOPTED THIS REGULATION:

CHAPTER I

General
Provisions

Article 1

Scope

1.           This Regulation applies to
investor-to-state dispute settlement conducted pursuant to an agreement to
which the Union is a party and initiated by a claimant of a third country.

2.           For information purposes,
the Commission shall publish in the Official Journal of the European Union
and keep up to date, a list of the agreements falling within the scope of this
Regulation.

Article 2

Definitions

For the purposes of this Regulation, the
following definitions shall apply:

(a)          “agreement” means any
international agreement to which the Union is a party and which provides for
investor-to- state dispute settlement;

(b)          "costs arising from the
arbitration" means the fees and costs of the arbitration tribunal and the
costs of representation and expenses awarded to the claimant by the arbitration
tribunal;

(c)          "dispute" means a claim
brought by a claimant against the Union pursuant to an agreement and on which
an arbitration tribunal will rule;

(d)          "investor-to-state dispute
settlement" means a mechanism provided for by an agreement by which a
claimant may initiate claims against the Union;

(e)          “Member State” means one or more
Member States of the European Union;

(f)           "Member State
concerned" means the Member State which has afforded the treatment alleged
to be inconsistent with the agreement;

(g)          "financial
responsibility" means an obligation to pay a sum of money awarded by an
arbitration tribunal or agreed as part of a settlement and including the costs
arising from the arbitration;

(h)          "settlement" means any
agreement between the Union or a Member State, or both, of the one part, and a
claimant, of the other, whereby the claimant agrees not to pursue its claims in
exchange for the payment of a sum of money, including where the settlement is
recorded in an award of an arbitration tribunal;

(i)           "arbitration tribunal"
means any person or body designated under an agreement to rule on an
investor-to-state dispute;

(j)           "claimant" means any
natural or legal person which may bring a claim to investor-to-state dispute
settlement pursuant to an agreement or any natural or legal person to whom the
claims of the claimant under the agreement have been lawfully assigned.

CHAPTER
II

Apportionment
of financial responsibility

Article 3

Apportionment
criteria

1.           Financial responsibility
arising from a dispute under an agreement shall be apportioned according to the
following criteria:

(a)     the Union shall bear the financial responsibility
arising from treatment afforded by the institutions, bodies or agencies of the
Union;

(b)     the Member State concerned shall bear
the financial responsibility arising from treatment afforded by that Member
State, except where such treatment was required by the law of the Union.

Notwithstanding point (b) of the first
subparagraph, where the Member State concerned is required to act pursuant to
the law of the Union in order to remedy the inconsistency with the law of the
Union of a prior act, that Member State shall be financially responsible unless
the adoption of such prior act was required by the law of the Union.

2.           Where provided for in this
Regulation, the Commission shall adopt a decision determining the financial
responsibility of the Member State concerned in accordance with the criteria
laid down in paragraph 1.

3.           Notwithstanding paragraph
1, the Member State concerned shall bear the financial responsibility where:

(a)     the Member State concerned has
accepted potential financial responsibility pursuant to Article 11;

(b)     the Member State concerned acts as
respondent pursuant to Article 8 or,

(c)     the Member State concerned enters into
a settlement pursuant to Article 12.

CHAPTER III

Conduct
of disputes

Section
1

Conduct
of disputes concerning treatment afforded by the Union

Article 4

Treatment
afforded by the Union

The Union shall act as respondent where the
dispute concerns treatment afforded by the institutions, bodies or agencies of
the Union.

Section
2

Conduct
of disputes concerning treatment afforded by a Member State

Article 5

Treatment
afforded by a Member State

The provisions of this Section shall apply in
disputes concerning, fully or partially, treatment afforded by a Member State.

Article 6

Consultations

1.           As soon as the Commission
receives a request for consultations from a claimant in accordance with the
provisions of an agreement, it shall notify the Member State concerned. A
Member State which has been made aware of or has received a request for
consultations shall immediately inform the Commission.

2.           Representatives of the
Member State concerned shall form part of the Union's delegation to the
consultations.

3.           The Member State concerned
shall immediately provide the Commission with all information which may be
relevant to the case.

Article 7

Initiation
of Arbitration proceedings

As soon as the Commission receives notice
by which a claimant states its intention to initiate arbitration proceedings,
in accordance with the provisions of an agreement, it shall notify the Member
State concerned.

A Member State which receives notice by
which a claimant states its intention to initiate arbitration proceedings, shall
immediately notify the Commission.

Article 8

Respondent
status

1.           Provided the agreement
provides for the possibility, the Member State concerned shall act as
respondent except where any of the following situations arise :

(a)     the Commission has taken a decision
pursuant to paragraph 2; or,

(b)     the Member State has not confirmed to
the Commission in writing that it intends to act as respondent within 30 days
of receiving notice or notification referred to in Article 7.

If either of the situations referred to in (a)
or (b) arise, the Union shall act as respondent.

2.           The Commission may decide,
within 30 days of receiving notice or notification referred to in Article 7,
that the Union shall act as respondent where one or more of the following
circumstances arise:

(a)     it is likely that the Union would bear
at least part of the potential financial responsibility arising from the
dispute in accordance with the criteria laid down in Article 3;

(b)     the dispute also concerns treatment
afforded by the institutions, bodies or agencies of the Union;

(c)     it is likely that similar claims will
be brought under the same agreement against treatment afforded by other Member
States and the Commission is best placed to ensure an effective and consistent
defence; or,

(d)     the dispute raises unsettled issues of
law which may recur in other disputes under the same or other Union agreements
concerning treatment afforded by the Union or other Member States.

3.           The Commission and the
Member State concerned shall immediately after receiving notice or notification
referred to in Article 7 enter into consultations on the management of the case
pursuant to this Article. The Commission and the Member State concerned shall
ensure that any deadlines set down in the agreement are respected.

4.           The Commission shall
inform the other Member States and the European Parliament of any dispute in
which this Article is applied and the manner in which it has been applied.

Article 9

Conduct
of Arbitration proceedings by a Member State

1.           In the event that a Member
State acts as respondent, the Member State shall

a)      provide the Commission with all
documents relating to the proceeding;

b)      inform the Commission of all
significant procedural steps, and enter into consultations regularly and, in
any event, when requested by the Commission; and,

c)      permit representatives of the
Commission, at its request, to form part of the delegation representing the
Member State.

2.           The Commission may, at any
time, require the Member State concerned to take a particular position as
regards any point of law raised by the dispute or any other element having a
Union interest.

3.           When an agreement, or the
rules referred to therein, provide for the possibility of annulment, appeal or
review of a point of law included in an arbitration award, the Commission may where
it considers that the consistency or correctness of the interpretation of the agreement
so warrant, require the Member State to lodge an application for such
annulment, appeal or review. In such circumstances, representatives of the
Commission shall form part of the delegation and may express the views of the
Union as regards the point of law in question.

Article 10

Conduct
of Arbitration proceedings by the Union

The following provisions shall apply
throughout arbitration proceedings where the Union acts as a respondent
pursuant to Article 8:

(a)     the Commission shall take all necessary
measures to defend the treatment concerned;

(b)     the Member State concerned shall
provide all necessary assistance to the Commission;

(c)     the Commission shall provide the
Member State with all documents relating to the proceeding, so as to ensure as
effective defence as possible; and,

(d)     the Commission and the Member State
concerned shall prepare the defence in close co-operation with the
representatives of the Member State concerned who shall be entitled to form
part of the Union delegation in the proceedings.

Article 11

Acceptance
by the Member State concerned of potential financial responsibility where the
Union is respondent

Where the Union acts as respondent pursuant
to Article 8, the Member State concerned may, at any time, accept any potential
financial responsibility arising from the arbitration. To this end the Member
State concerned and the Commission may enter into arrangements dealing with,
inter alia;

(a)     mechanisms for the periodic payment of
costs arising from the arbitration;

(b)     mechanisms for the payment of any
awards made against the Union.

CHAPTER IV

Settlements

Article 12

Settlement
of disputes concerning treatment afforded by the Union

1.           If the Commission
considers that a settlement of a dispute concerning treatment exclusively afforded
by the Union would be in the interests of the Union, it may adopt an
implementing decision in accordance with the examination procedure referred to
in Article 20(3) to approve the settlement.

2.           Should a settlement
potentially involve action other than the payment of a monetary sum, the
relevant procedures for such action shall apply.

Article 13

Settlement
of disputes concerning treatment afforded by a Member State

1.           Where the Union is
respondent in a dispute concerning treatment afforded, whether fully or in
part, by a Member State, and the Commission considers that the settlement of
the dispute would be in the interests of the Union, it shall first consult with
the Member State concerned. The Member State may also initiate such
consultations with the Commission.

2.           If the Member State
concerned consents to settle the dispute, it shall endeavour to enter into an
arrangement with the Commission setting out the necessary elements for the
negotiation and implementation of the settlement.

3.           In the event that the
Member State does not consent to settle the dispute, the Commission may settle
the dispute where overriding interests of the Union so require.

4.           The terms of the
settlement agreed shall be approved in accordance with the examination
procedure referred to in Article 20(3).

Article 14

Settlement
by a Member State

1.           Where the Union is
respondent in a dispute concerning exclusively treatment afforded by a Member
State, the Member State concerned may settle a dispute where:

(a)     the Member State concerned accepts any
financial responsibility arising from the settlement;

(b)     any settlement arrangement is
enforceable only against the Member State concerned;

(c)     the terms of the settlement are
compatible with the law of the Union; and,

(d)     there is no overriding interest of the
Union against the settlement.

2.           The Commission and the
Member State concerned may enter into consultations to evaluate a Member
State's intention to settle a dispute.

3.           The Member State concerned
shall notify the Commission of the draft settlement arrangement. The Commission
shall be deemed to have accepted the settlement arrangement unless it decides
otherwise, in accordance with the advisory procedure referred to in Article 20(2)
and within 90 days following the notification of the draft settlement by the
Member State, on the grounds that the settlement does not meet all of the
conditions set out in paragraph 1.

CHAPTER V

Payment
of final awards and settlements

Article 15

Scope

The provisions of this chapter shall apply
where the Union acts as respondent in a dispute.

Article 16

Procedure
for the payment of awards or settlements

1.           A claimant having obtained
a final award pursuant to an agreement may present a request to the Commission
for payment of that award. The Commission shall pay any such award within the
relevant time periods set down in the agreement, except where the Member State
concerned has accepted financial responsibility pursuant to Article 11 in which
case the Member State shall pay the award.

2.           Where a settlement
approved by the Union pursuant to article 12 or 13 is not recorded in an award,
a claimant may present a request to the Commission for payment of the
settlement. The Commission shall pay any such settlement within any relevant
time periods set down in the settlement agreement.

Article 17

Procedure
where there is no agreement as to financial responsibility

1.           Where the Union acts as
respondent pursuant to Article 8, and the Commission considers that the award
or settlement in question should be paid, in part or in full, by the Member
State concerned on the basis of the criteria laid down in Article 3(1), the
procedure set out in paragraphs 2 to 5 shall apply.

2.           The Commission and the
Member State concerned shall immediately enter into consultations to seek agreement
on the financial responsibility of the Member State concerned, and the Union
where applicable.

3.           Within three months of
receipt of the request for payment of the final award or settlement, the
Commission shall adopt a decision addressed to the Member State concerned,
determining the amount to be paid by that Member State.

4.           Unless the Member State
concerned objects to the Commission's determination within one month, the
Member State concerned shall compensate the budget of the Union for the payment
of the award or the settlement no later than three months after the
Commission's decision. The Member State concerned shall be liable for any
interest due at the rate applying to other monies owed to the budget of the
Union.

5.           If the Member State
concerned objects, unless the Commission agrees with the Member State's
objection, the Commission shall adopt a decision within three months of receipt
of the Member State’s objection, requiring the Member State concerned to
reimburse the amount paid by the Commission, together with interest at the rate
applying to other monies owed to the budget of the Union.

Article 18

Advance
payment of arbitration costs

1.           The Commission may adopt a
decision requiring the Member State concerned to make financial contributions
to the budget of the Union in respect of any costs arising from the arbitration
where it considers that the Member State will be liable to pay any award
pursuant to the criteria set down in Article 3.

2.           To the extent that the
costs arising from the arbitration are awarded to the Union by the arbitration
tribunal, and the Member State concerned has made periodic payment of costs
arising from the arbitration, the Commission shall ensure that they are
transferred to the Member State which has paid them in advance.

Article 19

Payment
by a Member State

A Member State's reimbursement or payment
to the budget of the Union, for the payment of an award or a settlement or any
costs, shall be considered as internal assigned revenue in the sense of [Article
18 of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the
Financial Regulation applicable to the General Budget of the European
Communities[24]].
It may be used to cover expenditure resulting from agreements concluded
pursuant to Article 218 of the Treaty providing for investor-state dispute
settlement or to replenish appropriations initially provided to cover the
payment of an award or a settlement or any costs.

CHAPTER VI

Final
provisions

Article 20

1.           The Commission shall be
assisted by [the Committee for Investment Agreements established by Regulation
[2010/197 COD]]. That committee shall be a committee within the meaning
of Regulation (EU) No 182/2011.

2.           Where reference is made to
this paragraph, Article 4 of Regulation (EU) No 182/2011 shall apply.

3.           Where reference is made to
this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 21

Report and Review

1.           The Commission shall
submit a report on the operation of this Regulation to the European Parliament
and the Council at regular intervals. The first report shall be submitted no
later than three years after the entry into force of this Regulation.
Subsequent reports shall be submitted every three years thereafter.

2.           The Commission may also
submit, together with the report referred to in paragraph 1 and based on the
Commission's findings, a proposal to the European Parliament and the Council
for the amendment of this Regulation.

Article 22

This Regulation shall enter into force on
the twentieth day following that of its publication in the Official Journal
of the European Union.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               OJ L 380, 31.12.1994, p. 1.

[2]               COM(2010)343 final, page 10.

[3]               Ibid, page 8.

[4]               Opinion 1/94 of the European Court of Justice [1994]
ECR I-5267 in particular paragraph 29 and paragraphs 32 and 33  
"32) According to the Netherlands
Government, the joint participation of the Community and the Member States in
the WTO Agreement is justified, since the Member States have their own
competence in relation to technical barriers to trade by reason of the optional
nature of certain Community directives in that area, and because complete
harmonization has not been achieved and is not envisaged in that field.
33) That argument cannot be accepted. The Agreement on Technical Barriers to
Trade, the provisions of which are designed merely to ensure that technical
regulations and standards and procedures for assessment of conformity with
technical regulations and standards do not create unnecessary obstacles to
international trade (see the preamble and Articles 2.2 and 5.1.2 of the
Agreement), falls within the ambit of the common commercial policy."

[5]               Cf. Article I:1 and Article III of the General
Agreement on Tariffs and Trade 1994 (GATT 1994), and Opinion 1/94, para. 34.

[6]               Cf. Article 2.2 of the WTO Agreement on Technical
Barriers to Trade (TBT) and Opinion 1/94, paragraphs. 31-33.

[7]               In its Opinion 1/2008 the ECJ rejected Spain's
contention that the Community's competence with regard to trade in services
pursuant to Article 133 EC was limited to services supplied according to mode 2
(i.e. cross-border services). According to the ECJ, following the Treaty of
Nice, Article 133 EC also covered the other three modes of supply provided in
the GATS, including the supply of services through the establishment of a
'commercial presence' (mode 3). See Opinion 1/2008, paragraphs. 120-123.
Furthermore, there is no indication in Opinion 1/2008 that, as regards the
sectors where the EC was exclusively competent, such competence did not extend
to the national treatment commitments.

[8]               Opinion 1/91 of the European Court of Justice [1991]
ECR I-060709

[9]               Opinion 1/91, paragraph 33

[10]             See Article 64 Document A/CN.4/L.778 of 30 May 2011 and
the Report of the International Law Commission, Sixty First Session (A/64/10)
p. 173-175.

[11]             As provided in Article 13 of the Regulation of the
European Parliament and of the Council establishing transitional arrangements
for bilateral investment agreements between Member States and third countries
[2010/197 COD].

[12]             These instruments have many similarities.

[13]             See, for the UK the Arbitration (International
Investment Disputes) Act 1966 and for Ireland, the Arbitration Act, 1980, (Part
Iv).

[14]             Regulation (EU) No 182/2011 of the European Parliament
and of the Council of 16 February 2011 laying down the rules and general
principles concerning mechanisms for control by Member States of the
Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).

[15]             Adopted by the Commission on 25 May 2012 (COM(2012)300).

[16]               OJ L 69, 9.3.1998, p. 1.

[17]               Opinion 1/91 of the European Court of Justice [1991]
ECR I-60709

[18]               Paragraph 35 of Resolution A7 0070/2011 of 22 April
2011.

[19]               Opinion 1/94 of the European Court of Justice [1994]
ECR I-5267; Commission v. Council (FAO), [1996] ECR I-1469

[20]               Opinion 1/94 of the European Court of Justice [1994]
ECR I-5267; Commission v. Council (FAO), [1996] ECR I-1469

[21]               OJ L 248, 16.9.2002, p. 1.

[22]               References to be replaced by references to the
Regulation of the European Parliament and of the Council on the financial rules
applicable to the annual budget of the Union (2010/395(COD)) once adopted.

[23]               OJ L 55, 28.2.2011, p. 13.

[24]               References to be replaced by references to the
Regulation of the European Parliament and of the Council on the financial rules
applicable to the annual budget of the Union (2010/395(COD)) once adopted.