The Effect of EU State Aid Law on the Future of EU Investment Policy

Abstract

On 1 July 2017, the Commission of the European Union (Commission) announced that investor state dispute settlement (ISDS) was dead. Apart from the fundamental public distrust of ISDS, its rejection by the European Union (EU) is a symptom of several underlying causes, the foremost of which is the need to protect the autonomy of the EU legal order and its right to regulate public policy objectives, as well as to avoid jurisdictional conflicts. With this backdrop EU state aid law, which enjoys public policy status, has emerged as a major example of the conflict between investor protection and the right to regulate. As state aid law imposes measures on the EU Member States that conflict with these states’ international obligations to foreign investors under bilateral investment treaties (BITs), they have become subject to claims and substantial liabilities. This dilemma can arise in any setting that involves the EU or one or more of its Member States. It also includes relations with non-EU countries, as the web of international investment agreements (IIAs) operates, in different forms, on an international scale. Therefore, this dilemma and the EU’s responses to it is analysed through the different forms in which EU state aid law appears, dependent on the EU investment policy aspect utilised as a platform for analysis. Utilising a doctrinal analysis by studying, discussing and analysing the impact of EU state aid law on the EU Member States’ BITs and EU Trade Agreements, this dissertation provides an insight into the function and logic behind international treaties involving the EU’s competition and investment policy. This is done by utilising the research question: How does the European Union (EU) state aid law affect the future of EU investment policy in a global context? Further, this thesis puts forward three arguments in which EU state aid law is affecting the future of EU investment policy in a global context. First, state aid law applies in the EU’s incorporation of clauses promoting fair competition and state aid policy in international trade agreements. Second, state aid law and policy has contributed to recent EU internal development, which led the EU Member States to terminate their bilateral agreements with each other (intra-EU BITs) by the end of 2019. Third, the EU has been working towards replacing the existing BITs between the EU’s Member States and third countries (extra-EU BITs) with the EU’s own trade agreements, which are aligned with EU legislation. Essentially, this thesis golden thread is a debate on who gets to decide on the scope of state aid law now and in the future. In other words, is it the EU that sets the borders and the status of state aid law and policy law regarding investment protection or the international investment tribunals by their legal practice? Hence, this thesis offers a glimpse of a conceivable future of EU investment policy in a global context. An analysis of the relevant literature, and observation of recent policy changes on its subject matter, as reflected in the Commission’s policy documents, the EU’s international agreements and declarations by the Member States, leads to the findings of this dissertation. A conflict situation that originated from legal conflicts within the EU, the EU experience of investment protection and state aid regarding intra-EU BITs, provided some lessons to learn for the EU organs. These lessons learned have found expression on a global scale. By incorporating fair competition and state aid policy in international trade the EU is reasserting that it is the EU that decides on state aid law and policy law regarding investment protection. Indeed, the EU is attempting to tame investment protection in such a way that fair competition and investment protection can peacefully coexist in international trade. Ultimately, the interplay of state aid and the EU’s investment policy within the internal market reflects on the external trade relations of both the Member States and the EU through this practice. Thus, state aid law affects and will continue to affect the future of EU investment policy in a global context.