The Lisbon Treaty extends the European Union's exclusive powers in the area of trade policy to include foreign direct investment. A proposal to ensure a smooth transition until the new system with EU-wide bilateral investment treaties is in place was discussed by trade ministers at the Council on 13 May.
The aim of the draft regulation is to ensure legal certainty until the current bilateral investment treaties (BITs) between member states and non-EU countries are replaced by future European Union BITs. Member states want to continue to attract investors from third countries to come and invest in Europe and to make sure at the same time that European investments in third countries will be adequately protected.
The Commission proposal provides for all the bilateral agreements currently in force to remain valid and sets the conditions for member states to modify existing agreements and negotiate and conclude new ones. It also suggests ways of possibly reviewing and withdrawing authorisations for these BITs in certain cases.
At its meeting the Council stressed that the new framework - which has to be agreed by the Council and the European Parliament - needs to be put in place as soon as possible and expressed its hope that work with the Parliament can be taken forward rapidly.
Foreign direct investment (FDI) includes any foreign investment with direct links with the undertaking to which capital is made available and a lasting interest in its management or control. An example of such investment is a shareholding which enables the shareholder to participate in the management or control of the company.
The overall benefits of FDI are well-established. It has a positive impact on growth and competitiveness, creating jobs and boosting trade.
Today, with almost 1200 member states' bilateral investment agreements, the EU is world leader in both inward and outward investment. While FDI flows are still heavily concentrated among industrialised countries, emerging market economies have become increasingly active as both investors and recipients of investment.
Beyond the scope of this regulation, a comprehensive European investment policy, based on the EU's new exclusive competence, will be gradually developed, taking into account this changing global environment.
Draft regulation establishing transitional arrangements (pdf)
Council conclusions setting out investment policy objectives (25 October 2010, pdf)
Council debate webcast
Press conference webcast