CYIL vol. 8 (2017)

CYIL 8 ȍ2017Ȏ RESPONSIBILITY FOR VIOLATIONS OF INVESTORS’ RIGHTS … striking a balance between the rights of individual investors and the interest of states in pursuit of legitimate regulation of economic activities in public interest. As a result, the new EU investment model introduces a number of more or less far reaching reforms to the traditional patterns of international investment law. The most significant change undoubtedly concerns the new ‘court-like’ investor-state dispute settlement mechanism, originally presented by the Commission in its negotiating proposal for the TTIP, which has been already incorporated in the final text of the CETA and which also forms part of the agreed text of the VIEUFTA. Slightly aside the main current of the discussions, there are some other more ‘technical’ aspects of the operation of the new EU investment policy which also deserve attention. One of these aspects is certainly the question of responsibility for violation of third-country investors’ rights under new EU investment agreements (IIAs) and in particular its allocation between the Union and its Member States. The existing bilateral investment treaties have been negotiated by individual Member States, and there was little doubt that in cases when rights of foreign investors under these agreements were violated, the Member State concerned was internationally responsible for the breach of the agreement, and in case that the dispute was settled in arbitration, that Member State was acting as the respondent and was eventually obliged to comply with the award. The question is how the new allocation of competences, resulting in IIAs now being negotiated and concluded by the Union, impacts allocation of international responsibility for breaches of such agreements. A circumstance highlighting the urgency of the question is that the transfer of the external competence has not been accompanied by corresponding transfer of competence at the internal EU level. By concluding IIAs with third countries, the Union will introduce to the EU legal order far-reaching substantive rules of broad scope which have not formed its part before. At the same time, it can be expected that a majority of disputes initiated by third-country investors will originate from measures adopted by Member States (i.e. not by the bodies of the Union) acting under their own internal competence, as discussed below. 2.1 Setting the Scene The fact that the EU is about to conclude international agreements extending to post- establishment standards of investment protection, such as fair and equitable treatment or rules concerning expropriation, and furthermore providing for a dispute settlement mechanism accessible to individual investors, gives rise to complex questions related to allocation of international responsibility for breaches of these agreements and also to procedural aspects of dispute resolution in cases when third-country investors bring their claims under EU IIAs against the EU or its Member States. There are a couple of factors which complicate the legal analysis and underscore the need for a pragmatic solution which would be tailored to the new EU IIAs. First, after the entry of the Treaty of Lisbon into force, there has been a lot of discussion about the nature and breadth of the EU competence in the field of foreign investment, focusing in particular on the question whether the EU will be concluding new IIAs alone or jointly with its Member States. After Opinion 2/15 concerning the competence of the EU to conclude the EUSFTA, issued in May 2017, it should now be fairly clear that EU 2. Responsibility for Breaches of International Agreements Concluded by the Union – Setting the Scene

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