CYIL vol. 8 (2017)

CYIL 8 ȍ2017Ȏ RESPONSIBILITY FOR VIOLATIONS OF INVESTORS’ RIGHTS … The characteristic feature of the regulation is that it does not directly address the question of international responsibility of the Union and its Member States as such, but is primarily concerned with the new concept of ‘financial responsibility’. Financial responsibility is defined in Article 2(g) as an obligation to pay a sum of money awarded by an arbitral tribunal or agreed as part of a settlement and including the costs arising from the arbitration. The basic idea behind the regulation is that the question of international responsibility for breaches of EU IIAs should be separated from the question of financial responsibility related to investment disputes. The regime introduced by the regulation is implicitly based on the assumption that the Union (and only the Union) will bear international responsibility for any violations of investor‘s rights under new EU IIAs. This underlying assumption was briefly discussed by the Commission in the explanatory memorandum to the regulation proposal, where the Commission expressed the view that the international responsibility had to be determined not with reference to the author of the act, but on the basis of the competence for the subject matter of the international rules in question. As in the Commission’s opinion the Union had exclusive competence to conclude agreements covering all matters relating to foreign investment, extending to both foreign direct investment and portfolio investment and including all standards of treatment, including rules on expropriation, the Union would bear international responsibility for the breach of any investment-related provision within the Union’s competence, even where the treatment challenged in investment dispute was not afforded by the Union but by a Member State. 28 The apportionment of the financial responsibility follows different criteria than those implicitly assumed for allocation of international responsibility. One of the basic principles behind the concept of financial responsibility is that the overall operation of the allocation must ultimately be budget neutral as regards the Union with the result that the Union only bears those costs which are triggered by acts of Union institutions. Unlike the international responsibility, the financial responsibility should be attributed to the actor which has afforded the treatment in dispute. The Union shall bear the financial responsibility arising from treatment afforded by the institutions, bodies, offices or agencies of the Union. The Member State concerned shall bear the financial responsibility arising from treatment afforded by that Member State. It is interesting to note that while the international responsibility shall be in the Commission’s view governed by criteria departing from general international law, for the purposes of apportionment of the financial responsibility, the Union has introduced a rule which is very similar to the criteria for attribution of internationally wrongful acts under general international law. In addition, a Member State should not bear the financial responsibility arising from treatment afforded by a Member State where such treatment was required by Union law. Article 2(1) explains in which situation the treatment afforded by the Union is ‘required by Union law‘ − a Member State concerned can be exempted from the financial responsibility for treatment which it has afforded to a foreign investor where it could only have avoided the alleged breach of the agreement by disregarding an obligation under Union law such as where it had no discretion or margin of appreciation as to the result to be achieved. Thus, if a Member State has some latitude as to the specific way of implementation of EU law rules, it must implement them so as not to violate the rights of third-country investors under Union investment agreements. Otherwise, it will bear financial responsibility for such breaches. This rule comes close to the criterion of ‘normative control’. 28 Regulation proposal, supra n. 27, Explanatory Memorandum, at 4.

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