The involvement of the EU in investor-state dispute settlement: A question of responsibilities

Abstract

This article discusses the legal framework for the involvement of the EU and its Member States in Investor-State Dispute Settlement (ISDS) under EU and Member State international investment agreements (IIAs). It assesses whether the Financial Responsibility Regulation is a sufficient and appropriate instrument to address the issue. It examines if and when EU involvement in ISDS under EU IIAs is compatible with international law and argues that EU IIAs and the Regulation should take into consideration that international responsibility rules pose constraints on the EU and Member State participation in ISDS, and that ICSID arbitration can be a truly available ISDS option only if Member States can act as respondents in all disputes concerning violations of EU IIAs. The article then assesses the EU law implications of EU involvement in ISDS. It explores the threats to the autonomy of the EU legal order; it examines whether the allocation of financial responsibility is compatible with EU rules on EU and Member State liability; it discusses how the application and interpretation of the Financial Responsibility Regulation by the ECJ may interfere with ISDS proceedings. Finally, it identifies the limited scope for EU involvement in ISDS under Member State BITs, arguing that the price that Member States have to pay for retaining their own investment treaties is to bear full responsibility for all violations of their BITs, even if they result from EU conduct.