Position paper: Protecting European Investment Abroad
The primary objective of IIAs is to create legal certainty for investors by protecting them against events such as expropriation.
In 2011, the value of German foreign direct investment (FDI) stocks was 1,144.0 billion euros. Stocks have thus risen fivefold since 1990 (1990: 226.5 billion euros). In 2012 alone German companies invested 52.1 billion euros abroad. A comprehensive protection of FDI is therefore all the more important. Investment promotion and protection agreements offer such protection. These agreements between two or more countries under international law serve to assure the foreign investors of fair competition, protection of property, and the prospect of legal enforcement of their rights in the host country.
The EU is presently negotiating a bilateral investment agreement with China. In negotiations for a Transatlantic Trade and Investment Partnership (TTIP), investment is on the agenda. In recent months a fierce discussion on investment agreements broke out. Investor-state dispute settlement (ISDS) is under special criticism. Such a mechanism is nevertheless indispensable for protecting foreign investment appropriately. Instead of categorically rejecting ISDS, it would be much better to improve existing procedures.
This should be done, among other things, by:
- Improving transparency (for example, when selecting judges or publishing documents)
- Specifying concepts such as indirect expropriation or fair and equitable treatment
- Introducing a protective mechanism against frivolous claims
- Establishing an exception clause for regulations regarding the public interest
- Establishing an appeals procedure
It would be desirable not only to implement these reforms in bilateral investment agreements, but also to anchor principles for the protection of FDI and the settlement of investment disputes multilaterally.
The BDI has published a comprehensive position paper entitled: “Protecting European Investment Abroad: A Roadmap for Improved International Investment Agreements”. The paper can be requested from the BDI and is available for download.