The EU-Vietnam Investment Protection Agreement: Analysing the Scope of the Agreement and National Treatment

Abstract

Vietnam is the second Asian country, after Singapore, to sign a trade and investment agreement with the European Union (“EU”). While opinions regarding its desirability from a human rights perspective differ, it should be noted that the EU is the 5th largest direct investor in Vietnam, having invested more than 23.927 billion US dollars by the end of 2018. Negotiations for this agreement lasted from 2012 until 2015, after which it was divided into two parts: (1) the Free Trade Agreement (“FTA”), and, (2) the Investment Protection Agreement (“IPA”). This apportionment is due to the division of the competences between the EU and its Member-States as embedded in the Treaty on the Functioning of the European Union (“TFEU”). A consequence of the division is that the international agreements made by the EU are to be separated into a part which contains competences exclusive to the EU and a part which contains shared competences (and therefore must be concluded and ratified by the EU as well as its Member-States). The trade and investment agreement was signed in June 2019 and is in the process of ratification by all the EU Member-States. Due to its scale and impact, this IPA has required significant time and attention to ensure indented scope and interpretation of its articles. This is important for the host state, as a broad or ill-drafted IPA could potentially result in investment disputes. It is therefore in the interest of the parties that the IPA is well defined and narrowly interpreted by tribunals, as tribunals have taken different approaches when interpreting treaty standards. A well-defined and narrow application of treaty standards could prevent unexpected interpretations which could broaden the scope and result in adverse effects for the treaty parties. One way to provide a narrow and well-defined standard is by limiting to what investors the IPA applies to. By imposing more requirements and narrowly defining its scope, an IPA can limit the scope of application, as well as provide less room for unexpected and broadening interpretations by tribunals. This scope of application, in turn, is significant for the standard of National Treatment (NT), as it compares foreign and domestic covered investors and investment to establish potential violations. Keeping that in mind, I shall analyse the scope of the IPA and the standard of NT, focussing on the clarity of the wording as well as the guidance and possible grey areas tribunals may face or encounter when interpreting these notions. Thereafter, a brief conclusion shall be provided.