Investment Protection: Modern Investment Protection Chapter in Free Trade Agreement with Vietnam

Few trade issues have been discussed as intensively and critically in recent years as international law on investment protection. In mid-2015, the EU Commission presented a proposal for reforming investment protection in trade agreements. These reform ideas have decisively influenced the investment chapter in the trade agreement with Vietnam. While its modern architecture addresses many points of criticism, business still sees the need for improvements.

As such, the chapter largely corresponds with the Commission’s proposals for investment protection in TTIP and the investment protection chapter in the trade agreement with Canada (CETA). In certain respects the chapter is groundbreaking, with many innovative provisions specifically addressing criticisms raised in recent years.

Investment Chapter Largely Satisfies the Requirements of Industry

As in conventional agreements, investors are fundamentally protected against discrimination, unfair treatment, and expropriation. In that respect the chapter largely satisfies the requirements of industry. At the same time, the state’s right to regulate is underlined at numerous points. The chapter defines precisely what is understood by unfair and inequitable treatment and what the agreement defines as indirect expropriation. Unjustified cases are excluded. Probably the most far-reaching innovation is the introduction of a permanent investment court with tenured judges.

BDI is open to these innovations. From the business perspective, however, it is disadvantageous that companies involved in cases have no possibility to influence the composition of the tribunals. Moreover, numerous sectors are excluded from particular protections. Although improvements are necessary in certain aspects, the chapter can serve as a good model for future EU agreements.