Starting Over
Europe’s system of investment treaties is in disarray.
What will emerge from the debris?
By Michael D. Goldhaber
Illustration by Wayne Brezinka
The streets of Brussels will soon be littered with the tatters of state- investor treaties signed in Europe’s national capitals. The European Union aims to shred the bilateral investment treaties signed by its
member nations, both with each other and with the rest of the world. What will
replace those treaties, no one quite knows.
The world’s 3,000-plus BITs give foreign investors the right to directly sue
a state, if they believe that it has seized their assets or otherwise treated them
unfairly. E.U. nations have signed more than half of current BITs, and our 2011
Arbitration Scorecard survey—which counts 151 state-investor arbitrations
with stakes of at least $100 million—confirms that E.U. member treaties generate over half the world’s largest investment arbitrations. (That’s why Arbitration
Scorecard is published in Focus Europe.)
Investors view the E.U.–treaty meltdown as a chance to strengthen investment protection. Some states view it as a chance to dilute investor protection.
Instead, both should view it as a golden opportunity for systemic reform.
As part of the Treaty of Lisbon, which revamped and strengthened European
institutions, the E.U. grabbed sole authority over investment policy from its
member states. As far as European law was concerned, that made the 1,200-
plus investment treaties signed by E.U. nations with nations outside the E.U.
obsolete overnight, when the treaty took effect in 2009. For practical reasons,
member states are still treating these “extra–E.U.” treaties as valid during a
transitional period. It could take a generation for the E.U. to negotiate new
