New regulation sets out financial responsibility for investor-state disputes between the European Union and third countries

Today (17 September 2014) a new European Regulation enters into force (EU No 912/2014) with wide-ranging implications for the global investment community. The Regulation allocates financial responsibility going forward, for claims brought by non-EU investors for harm done to their investment within the European Union. Depending on who was involved in the treatment in question – a Member State or a body, institution or agency of the EU itself, responsibility is allocated accordingly.

The rules will only be applied to investor-state disputes brought under agreements to which the EU is itself a party and which incorporate an Investor State Dispute Settlement (ISDS) mechanism. The Energy Charter Treaty (ECT) is one such treaty already in existence and several bilateral investment treaties (BITs) between the EU and third states are in the process of being negotiated, in some cases with a view to replacing the current BITs between EU Member States and third states. This forms part of a wider re-evaluation of investment issues and the relative competences of individual Member States and the EU.

EU Trade Commissioner Karel De Gucht has described the Regulation as “another building block in our efforts to develop a transparent, accountable and balanced investor-to state dispute settlement mechanism as part of EU trade and investment policy.”

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