The Investor-EU/Member State(s) Arbitration mechanism after the lisbon treaty: Allocating financial responsibility between the EU and its Member States

Questions arise as to what will happen when a foreign investor sues a Member State or even the EU, given the new European Union (EU) competence over foreign direct investment (FDI) from the Lisbon Treaty, Articles 206-207 of the Treaty on the Functioning of the European Union (TFEU). In particular, financial responsibility of the EU resulting from an investor-state arbitration is now becoming a politically sensitive topic, particularly regarding the on-going negotiations between EU and third countries for the conclusion of investmentrelated international agreements. While the EU bears, in principle, international responsibility for the breach of any provision to which it is bound under international law, it is possible, under EU law, to provide for the allocation of financial responsibility between the EU and its Member States. This paper analyses the recent EU Regulation on financial responsibility in investor-State arbitration, putting it in the broader framework of the creation of an EU investment policy and the on-going negotiations between the EU and third countries for the conclusion of investment-related international agreements.