The positive impact of the Comprehensive Agreement on Investment between the European Union and China and its big challenge.

Maria Camila Lizarazo González*

SUMMARY:

Recently was concluded the most important principles of investment negotiations between the European Union and China. After several meetings of negotiations they were agreed on market access standards, loyal competence, and fair playing field. However, it has not yet been agreed the investment dispute settlement proposed by the UNCTAD: a Multilateral Investment Court, which means a radical reform on the dispute settlement mechanism replacing the arbitration panels that already exist and producing big challenges for the current system. 

 

At the end of 2020, December 30^th was concluded the negotiations of the Comprehensive Agreement on Investment (CAI) between the European Union (EU) and China, after eight years of permanent debates around it, meaning one of the most important advances in China’s opening.

Since 2013, both countries have initiated negotiations in order to scope the future investment deal. The agreement’s core is to improve market access opportunities for their investors by guaranteeing the right to invest without any measure that implies discrimination against their respective companies.

Actually, the EU has traditionally been much more open than China to foreign investment, also because China is the EU’S second-biggest trading partner behind the United States, whereas it is the first time that China agrees to such ambitious provisions with a trade partner “despite the fact that EU is China's biggest trading and a key investment partner” (European Commission).  

It is worth noting that the scope of the negotiations is comprehensive as it goes beyond traditional investment protection agreements including market access commitments and obligations on non-discrimination practices, the prohibition of performance requirements and specific of financial services, transparency subsidies, as well as commitments on sustainable development, including labor (International Labor Organization Conventions (ILO)), environment and climate rules (Paris Agreement on climate change), technology transfers, among others.

This CAI has huge effects replacing the 26 existing bilateral investment treaties between 27 individual EU member states and China, and representing an enormous advance in manufactory industry, which is one of the most important sectors for EU investment in China, the automotive sector, and in various services sectors, such as cloud services, financial services, private healthcare, environmental services, international maritime transport, and air transport-related services.

However, the effectiveness of the principle of the agreement reached depends on complete negotiations on investment protection and determine how is going to be the investment dispute settlement. The latter, taking into account the work undertaken by United Nations Commission on International Trade Law (UNCITRAL) on a Multilateral Investment Court (MIC).

MIC, a body that would replace the old EU bilateral Investor-State Dispute Settlement system, was already incorporated in EU-Canada Comprehensive Economic and Trade Agreement (CETA), the EU-Vietnam Investment Protection Agreement (IPA), and the EU-Singapore IPA (Yuwen Li y Cheng Bian, 2020).

Installing a MIC, instead of preserving arbitration panels could be a hard task, regarding the main reasons to go for arbitration, such as the informality and the simplified rules of evidence, and procedure, the control over the arbitrators’ selection and the privacy, and confidentiality of the proceedings and terms of the final resolution.

By contrast, a permanent court with full-time judges is viewed as meeting the standards of impartiality and independence. For instance, the WTO dispute settlement system (Hongling, Ning y Qi, Tong, 2018).

In this regard, it should be a well-thought-out decision, because it is a radical reform so it could be a double sword, depending on the point of view from where you look at it. Hence, it might pose systemic challenges, particularly the worldwide enforceability of awards, which is an essential element of an effective dispute settlement (Multilateral Investment Court: The Gap Between the EU and China, 2018).

Thereby, this is the first step of a non-traditional agreement, and of course, it shows China’s opening around EU investment requests, so that, I have the aim of inviting you to analyze both positions and adopt one of them.

For now, there are key aspects that need to be discussed and both sides have the compromise to complete negotiations within 2 years of the signature of the CAI, before the approval of the EU Council and the European Parliament, which has also the power to withhold or decline its consent to an international agreement.

 

* Universidad Externado de Colombia; ENAE Business School; Member of Colvyap; Former associate of tax, customs & international trade area in Posse Herrera Ruiz. E-mail: mariacamilalizarazo94@gmail.com

 

References:

Official Website: European Commission: https://trade.ec.europa.eu/doclib/press/index.cfm?id=1435

Yuwen Li y Cheng Bian, 2020 China’s Stance on Investor‐State Dispute Settlement: Evolution, Challenges, and Reform Options. Netherlands International Law Review: (December) 67:503–551

Hongling, Ning y Qi, Tong, 2018. Multilateral Investment Court: The Gap Between the EU and China. The Chinese Journal of Global Governance. 4. 154-175. 10.1163/23525207-12340035.

Lino Torgal y Cláudia Saavedra, 2019. The Multilateral Investment Court Project: The ‘Judicialization’ of Arbitration: (July) International Arbitration Newsletter.

Sofia Baruzzi, 2020. What Do EU Investors Seek from China? China Briefing, October 6, ECONOMY & TRADE.

United Nations UNCTAD, 2013 Reform of investor-state dispute settlement: in search of a roadmap (June) No. 2. United nations conference on trade and development.

Fuente de imagen: EIAS. org