Transnational Notes

In Galsworthy Ltd of the Republic of Liberia v Glory of Wealth Shipping Pte Ltd [2010] SGHC 304 (“Galsworthy”), the Singapore High Court held that a losing party to an arbitration seeking to challenge an arbitral award had the “alternative and not cumulative options” of applying to set aside the award, or, applying to set aside any leave granted to enforce the award. This choice of wording is unfortunate because it gives the mistaken impression that the options described are mutually exclusive, when they are not.

The facts of the case are easy. There was a dispute over a charter party and an arbitration seated in London had issued an award against Glory of Wealth Shipping Pte Ltd (“Glory of Wealth Shipping”). Glory of Wealth Shipping applied to challenge the award before the English High Court on grounds of irregularity (“the first English application”). The opposing party, Galsworthy, applied for security of costs, which was granted by the English High Court. Glory of Wealth Shipping failed to furnish security, leading to a dismissal of their application without a hearing on the merits. Glory of Wealth Shipping also appealed against the arbitral award on a point of law, but the appeal was heard and dismissed by the English High Court.

Subsequently, Galsworthy obtained permission from the Singapore courts to enforce the award in Singapore. Glory of Wealth Shipping applied to set aside the order granting permission to enforce the award. The application was heard and dismissed by an Assistant Registrar, and failed again on appeal.

But the view of the learned Judge hearing the appeal at the High Court differed from the Assistant Registrar’s on one preliminary issue. That issue was whether Glory of Wealth Shipping was entitled to apply to set aside the order granting permission to enforce the arbitral award when it had already challenged the award before the English courts.

The Assistant Registrar was of the view that Glory of Wealth Shipping was still entitled to take up the application to set aside the leave to enforce the award and had proceeded to hear the application on its merits. The learned Judge, however, held that Glory of Wealth Shipping was not entitled to make the application because it had “elected” to proceed in the English courts and the application in the Singapore High Court amounted to “an abuse of process”.

The reasoning of the learned Judge can be summarised as follows:

(a)            Glory of Wealth Shipping’s application to set aside the order granting leave to enforce was a “considered decision on its part to avoid the need to furnish security to the English court”.

(b)            Glory of Wealth Shipping had “elected their forum of challenge and they ought to be bound by it”.

(c)            There were no exceptional circumstances permitting the derogation from the principle of comity of nations requiring the Singapore courts to be slow to undermine the orders of foreign courts.

(d)            If the application was allowed, it could result in a “duplication or conflict of judicial orders”.

(e)            If the first English application was heard on the merits and failed, Glory Wealth Shipping would be entitled to challenge the enforcement of the final award in the enforcement court if the grounds and standards between the supervising and enforcement jurisdiction are different.

The learned Judge consequently held that a party seeking challenge of an arbitral award can either apply to the curial court to set aside the award, or, apply to the enforcement court to set aside any leave granted to the opposing party to enforce. These options were, as he described, “alternative and not cumulative”.

This phrasing is inadequate because it covers too much and too little at once. It over-includes because it lends itself to the mistaken impression that the options are mutually exclusive, such that one option can no longer be exercised once the other has been elected. It under-includes because it does not explain whether one option can still be exercised if the legal grounds relied upon for the second option are different from the first.

It may be useful to set out with precision how the options of an unsuccessful party in an arbitration interact.  Generally, under the New York Convention, three general principles, which are by no means exhaustive, can be set out:

(a)            The unsuccessful party in the arbitration can resist enforcement at the enforcement jurisdiction, without having to first apply to set aside the award at the seat (see Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, per Lord Mance at [28]).

(b)            The unsuccessful party in the arbitration can apply to set aside the award at the seat, whilst at the same time, resist enforcement if enforcement is being sought in another jurisdiction. That explains why Art. VI of the New York Convention allows an enforcement court to order a stay of the enforcement proceedings if setting aside proceedings are pending at the curial court.

(c)            Regardless of whether the setting aside of an award is successful at the seat, the ruling of the curial court can create an issue estoppel in jurisdictions where such a doctrine (or its equivalent) exists (see Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, per Lord Collins at [98]). However, even if there is a successful annulment, the unsuccessful party in the arbitration may still find itself having to defend enforcement proceedings because certain courts may still enforce an award that had already been set aside (see Pabalk Ticaret Sirketi v Norsolor, Cour de cassation, 9 October 1984, 1985 Rev Crit 431; Hilmarton Ltd v OTV, Cour de cassation, 23 March 1994 (1995) 20 Yb Comm Arb 663; République arabe d’Egypte v Chromalloy Aero Services, Paris Cour d’appel, 14 January 1997 (1997) 22 Yb Comm Arb 691; Soc PT Putrabali Adyamulia v Soc Rena Holding, Cour de cassation, 29 June 2007 (2007) 32 Yb Comm Arb 299; Chromalloy Aeroservices v Arab Republic of Egypt, 939 F Supp 907 (DDC 1996).

The foundation of these principles stems from the way setting aside proceedings and enforcement proceedings are in fact designed as two separate and independent juridical proceedings. One may, and more critically, may not affect the other if, for instance, a result has already been reached in one or if setting aside proceedings are already pending.

Consequently, if a party aborts a setting aside proceeding before it is heard, that should not prejudice its application to defend enforcement proceedings in another jurisdiction. It is fully within that party’s prerogative to take the view that any security for costs ordered against it in the setting aside proceedings would not justify carrying through with the setting aside proceedings. In such a circumstance, it is entirely within that party’s option to terminate the setting aside proceedings, and respond to enforcement proceedings only when enforcement proceedings are commenced by the successful party in the arbitration.

It is therefore difficult to see how an “abuse of process” happened in Galsworthy. A possible abuse of process could arguably be made out in the rare instance where the unsuccessful party withdraws setting aside proceedings at the very last minute after a hearing of the merits when it became clear that it was losing that application, so as to avoid a final judgment which may have preclusive effect on subsequent enforcement proceedings. But even then, any abuse was of the process in the court of the seat, and not at the court of enforcement.

By dint of reasoning, the language of “election” used by the Singapore High Court in Galsworthy was unfortunate. There was no obligation on Glory Wealth Shipping to challenge the award in England, and even if it did so but aborted it ostensibly because of a security for costs order, that in itself does not affect its separate and independent right to defend enforcement proceedings in Singapore.

Darius Chan is an Associate at WilmerHale, London.

I am a bit surprised that the Supreme Court’s recent decisions in the stream of commerce cases have not been receiving more attention in the blog-o-sphere.  The issues are important, and the Court’s resolution of the cases contains some interesting developments in the law as well as some important signals of where future fights may lay [Disclosure – I filed briefs on behalf of an amicus in both cases.  The views expressed here are my own and do not reflect those of my client.]

For readers familiar with the cases, you can skip this paragraph which simply provides a bit of background.  The Court decided two cases – Goodyear and Nicastro.  Goodyear presented the question whether a state court could exercise general jurisdiction over foreign companies based on the flow of those companies’ goods (through intermediaries) into the state (the underlying facts involved forum state residents who were killed in a bus accident in France).  Nicastro presented the more standard question, created by the Supreme Court’s fractured opinion in Asahi – namely the conduct necessary to support specific jurisdiction based on the stream of commerce theory (the underlying facts involved a forum resident, injured in the forum state, by a machine manufactured in England and sold into the forum state by an independent US disributor with nationwide distribution rights).

In Goodyear, it was clear from the get-go that the Supreme Court was going to reverse and hold that the stream of commerce theory did not support general jurisdiction.  In doing so, the Court did a couple of interesting things.  First, and perhaps most importantly, the Court really narrowed the “continuous and systematic” contacts theory of general jurisdiction; the Court basically indicated that the theory was only available in an extraordinary case (like Perkins) where a foreign corporation relocated all of its operations to the US out of necessity.  Second, the Court explicitly linked purchases from the forum state (which had been at issue in Helicopteros) with sales to the forum state (at issue in Goodyear).  Prior decisions had suggested that, for export promotion reasons, purchaes from the forum state should be less likely to establish minimum contacts – Goodyear suggested there was no reason to treat the other differently.  Third, though the statement is technically dicta, the Court seemed to imply that a corporation could be subject to general jurisdiction not only in its state of incorporation but also in the state where it maintained its principal place of business (where that is a different state).  This strikes me as a rather radical statement- albeit dicta – especially becaues the Court offered no guidance on how to determine that place (particularly strange since, just last term, it had resolved a longstanding circuit split on that question in the context of determining the PPOB for diversity purposes).

In Nicastro, oral argument suggested that the vote would likely be 6-3, and that’s what happened albeit with another badly divided opinion (de ja vu from Asahi).  A couple of issues were at play in the Court’s decision.  One issue was the proper test.  Three justices (RBG, SS, and EK) embraced the Brennan view from Asahi.  The AMK plurality is a bit tougher to read but appears to embrace a modified version of the SOC view from Asahi.  It seems to say that stream of commerce theory still requires purposeful availment (the plurality uses the term “targeting”) of the forum state, but the plurality carefully avoids repearing the “additional conduct” factors that SOC identified in Asahi.  The Breyer/Alito concurrence is the most ambiguous.  It appears to reject the New Jersey Supreme Court’s rule (which drew on the Brennan Asahi opinion) but also cites the Brennan Asahi opinion (in my view, Breyer actually reinterprets that opinion without saying he’s doing so).  A second issue is the sovereign/forum analysis.  The AMK plurality pretty clearly wants to differentiate state sovereigns from national sovereigns and basically say that national sovereigns can consider nationwide contacts but state soveriegns can consider only contacts at the forum state itself (this has important implications for legislation pending before Congress).  The RBG dissent seems more willing to let forum states consider nationwide contacts at least where the foreign mfr uses a nationwide distributor.  Again, the Breyer/Alito concurrence is hardest to read on this point and probably cannot be understood to offer up a view.  A third issue is the methodology – the AMK plurality seems to be attempting to shift the Court away from fairness-based notions of constitutional limits on personal jurisdiction (note the repeated references to Scalia’s Burnham opinion which sought to do the same).  RBG doesn’t like that at all.  And again, Breyer and Alito are mum (though I suspect this may be a point on which these two might part ways).  Finally and perhaps most significantly, it’s worth noting that none of the justices cited the Asahi/Woodson “reasonableness” test, leaving one to wonder at least whether that prong of the test continues to hold appeal for a majority of the Court.

What does the future hold?  A couple of things.  As far as Goodyear, expect to see a lot more litigation on the issue of jurisdictional imputation of contacts – that was brimming beneath the surface in Goodyear, and RBG rightly concluded that the respondents had waived the issue.  But the law is all over the place, and some circuits (like CA9) are doing some nutty thing.  Additionally, expect to see a battle for the hearts and minds of Justice Alito and the Solicitor General.  Indeed, Alito’s vote in Nicastro is the most curious one in these cases, and I cannot help but think that Alito, a former ASG, was a bit tweaked that the SG didn’t file in that case (even though it filed in Goodyear), and the Breyer opinion basically says it’s awaiting the SG’s view.  Third, look for some internet cases.  Civ pro gurus know this has been a thorny area which Asahi did not contemplate and which dcts like the Zippo decision have struggled to address.  Breyer in particular appears keenly aware of the interplay between stream of commerce theory and internet contacts.

Peter Bowman Rutledge is Professor of Law at the University of Georgia School of Law

As the European Union realizes the economic advantages of the internal market, and its Member States (fitfully) move closer to becoming a single economic entity, European patent law nevertheless remains highly national in character.  Patent protection in Europe is granted under two parallel regimes: the national patent system; and the regime of the European Patent Convention (EPC).  National patents are issued by, and afford protection within, individual states, whereas the EPC provides a centralized administration for the issuance of ‘bundled’ national patents by the European Patent Organization (EPO).  The ‘European patent’ granted by the EPO does not constitute a unitary patent extending throughout Europe, but rather grants national patent protection in each EPC state specified in the patent application.  Both regimes operate independently of the EU; in fact, the EPC regime extends to non-EU states.

The EPC seeks to harmonize European substantive patent law by providing uniform rules for European patents, including in relation to: the extent of protection (art 69); patentability (arts 52-57); and revocation (art 138).  Uniformity is thwarted, however, by the fact that implementation and interpretation of these rules is left to national law (and national courts), and there currently exists no supranational judicial mechanism for ensuring the harmonization of national patent laws.

At the same time, generously construed rules on jurisdiction commonly permit patent litigants in Europe a choice of fora, and therefore an opportunity to engage in ‘forum shopping’.   Where a suit for patent infringement (or non-infringement) involves a defendant domiciled in an EU Member State, national courts of Member States must exercise jurisdiction in accordance with the Brussels Regulation (or Lugano Convention).

Under this regime, suit may be brought before the courts of the defendant’s domicile (art 2), or in the state(s) in which an infringing product was manufactured or sold in breach of a local patent (art 5(3)).  Dutch courts have even exercised jurisdiction over foreign defendants for violations of foreign patents, under art 6(1), where the defendant companies constitute a corporate group, and the head corporation of the group is domiciled in the Netherlands (see, e.g., Expandable Grafts Partnership v. Boston Scientific B.V., F.S.R., 352 [1999]; Solvay S.A. v. Honeywell Fluorine Products Europe B.V., District Court The Hague, Case No. 09-227 [2010]).

In recent years, the ECJ has made clear that a restrictive view is to be taken of the special bases of jurisdiction of the Brussels Regulation (see, e.g., Shevill v. Presse Alliance, 1995 E.C.R. I-415; Gesellschaft für Antriebstechnik m.b.H. & Co. K.G. v Lamellen und Kupplungsbau Beteiligungs K.G., 2006 E.C.R. I-06509; Roche Nederland B.V. v. Primus, 2006 E.C.R I-06535).  Some commentators consequently expected forum shopping in European patent litigation to be significantly curtailed.  Due to what these cases left open for forum shoppers, however, forum shopping remains prevalent.

Forum shopping both reveals and exacerbates economic inefficiencies arising from discordant national patent laws in Europe.  Allowing litigants an “often outcome-determinative” choice of court – borne out in widely varying ‘win-rates’ between European fora – distorts the economic policy balance which national patent laws strike between incentivizing innovation and competition.

Thus, reform is much needed in the European patent system.  Properly structured, a ‘Community patent’, extending unitary protection across Europe, would address the legal disunity that results in forum shopping.  One commentator has noted, however, that “[t]he Community patent seems to become less acceptable the more it is needed”.  Both the Community Patent Convention of 1975, and the Luxembourg Convention of 1989, proposed a Community patent, but failed to obtain sufficient ratification by EU Member States.  In 2000, the European Commission put forward a draft Community Patent Regulation, designed to “complement” the EPC regime, but negotiations between Member States broke down in 2004.

The reasons for the failure of these proposals are manifold.  Primarily, however, each failed: (i) to develop mutually acceptable mechanisms for judicial enforcement and revocation of patent protection at the Community level; and (ii) to adequately address the cost of filing and translating patent specifications in each jurisdiction.

Most recently, in 2007, the European Commission presented a proposal for a Community Patent Regulation, under which the EPO would be responsible for granting a Community patent extending unitary protection throughout EPC member states.  At the same time, an autonomous European and Community Patents Court would be established to decide all patent actions.  In 2011, however, the ECJ held this proposed regime to be inconsistent with EU law.  The Regulation would impermissibly divest national courts of first instance jurisdiction over patent disputes, and invest the Community Patents Court with the responsibility of interpreting and applying not only the envisaged international agreement, but also Community law (see E.C.J. Opinion 1/09 of 8 March 2011).  Thus, as of 2011, a Community Patent for Europe remains elusive.

In light of these failed efforts, it is suggested that the following structural elements be considered when formulated a new Community patent regime.  Although a tenable proposal would of course need to be much more comprehensive, it is hoped that this discussion contributes to the Community Patent debate.  First, national patent regimes should be phased out in EU Member States.  Thus, only a Community patent would be available, which would be issued, infringed, or revoked as a whole.  Secondly, a new Regulation under EC Treaty Article 308 should provide substantive Community patent law, and set minimum procedural standards for European patent litigation.  Thirdly, although national courts must retain first instance jurisdiction in patent cases, these courts should be limited in number and specialized in hearing patent matters.  Fourthly, a Common Patent Court should be established as a second instance court of appeal at the Community level, attached to the ECJ Court of First Instance.  The existence of appeal courts at the Community level would further the goal of substantive harmonization of European patent law.  Moreover, the ECJ should operate as a court of referral on questions of Community patent law, from national or Community courts.

In order to limit ‘torpedo’ actions, it is further suggested that current rules on jurisdiction be buttressed by a mandatory preliminary hearing on jurisdiction in national courts.  And, if such a preliminary ruling is not made by a first-seized national court within six months of filing, an application should be available to the Community Patent Court for a binding ruling on the first-seized court’s jurisdiction.  Finally, in order to overcome the controversial matter of translation requirements, a patentee should be required, at the time of filing, to translate patent claims into the official languages of Member States.  Translations of patent specifications (a more costly enterprise), should be required only prior to the commencement of patent litigation. (Notably, technological innovation may soon resolve this issue, as automated translations are already being employed by the EPO in respect of certain languages).

As former EU Commissioner Frits Bolkestein has stated, the failure to agree on a Community patent regime “undermines the credibility of the whole enterprise to make Europe the most competitive economy in the world”.  Indeed, Europe has been criticized for being less successful than other regions at converting its “excellent scientific base” into new products and market share.  EU Member States should once again return to the negotiation table, with the knowledge that political compromise will assuredly beget significant economic reward.

Owen Webb

On 7 July 2010, the European Commission published a proposal for a Regulation establishing transitional arrangements for bilateral investment agreements between Member States and third countries (COM (2010) 343 final, hereinafter: the Regulation Proposal; available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52010PC0344:EN:NOT). By adopting this Regulation Proposal, the Commission reacts to the changes by the Treaty of Lisbon concerning the division of competences in the field of investment law: According to Article 207 of the Treaty on the Functioning of the European Union (TFEU), the Common Commercial Policy (CCP) now expressly extends to foreign direct investments. Since the competences in the field of the CCP are exclusive, EU Member States are generally no longer allowed to conclude new agreements concerning foreign direct investment (see Article 2 para. 1 TFEU). Furthermore, the Member States are obliged to denounce agreements, for which they have lost their competence (compare Article 351 s. 2 TFEU; see Joined Cases 3, 4 and 6/76, Cornelis Kramer and others, 1976 E.C.R. 1279, ¶ 45; concerning investment agreements compare 205/06, Commission of the European Communities v Republic of Austria, 2009 E.C.R. I-1301 (Mar. 3, 2009); Case C-249/06, Commission of the European Communities v Kingdom of Sweden, 2009 E.C.R. I-1335).

However, it would not be desirable if the Member States would have to denounce all their BITs as a consequence of the EU having acquired exclusive competences for FDI. The EU Member States have concluded an impressive number of bilateral and also multilateral investment treaties: The numbers of BITs concluded by all EU Member States range between 1000 to 1300. With a total number of 130 BITs ratified (compare http://www.bmwi.de/BMWi/Navigation/aussenwirtschaft,did=194058.html), Germany can be considered the “BIT world champion”. Besides, all EU Member States are contracting parties to the ICSID-Convention, which offers a mechanism for the settlement of investment disputes between States and investors.

In case the EU Member States would have to denounce all their BITs, EU investors would be left unprotected until the EU concludes BITs on its own.  Therefore, like in similar cases before (compare, e.g., Regulations (EC) No. 662 and 664/2009), the European Commission seeks to establish a transitional procedure by the Regulation Proposal, which allows the Member States to maintain their existing BITs concluded with third countries and even to conclude new BITs. However, this Regulation Proposal must be criticized mainly for two reasons. First, the Commission incorrectly assumes that the EU has exclusive competences for all issues covered by the Member States’ BITs. Therefore, questions of “mixity” are neither discussed by the Regulation Proposal, nor by the Communication concerning a future European International Investment Policy (COM (2010) 343 final, available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52010DC0343:EN:NOT), which has been published on the same day as the Regulation Proposal. Second, the Proposed Regulation is poorly and incoherently drafted.

Concerning competences, most authors come to the conclusion – and rightly so – that Article 207 TFEU does not cover all issues addressed by current BITs (see, e.g., Markus Krajewski, External Trade Law and the Constitution Treaty, 42 Common Market Law Review 91, 112 (2005); Lorenza Mola, Which role for the EU in the development of international investment law? 15 (Society of International Economic Law Inaugural Conference, 2008), available at http://ssrn.com/abstract=1154583; Joachim Karl, The Competence for Foreign Direct Investment, 5 Journal of World Investment & Trade 413, 425 (2005); Jan Ceyssens, Towards a Common Foreign Investment Policy?, 32 Legal Issues of Economic Integration 259, 274-75 (2005)). For example, Article 207 TFEU is limited to direct investments, which require “lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity“ (see Case C-446/04, Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue, 2006 E.C.R. I-11573 at ¶ 181). However, current BITs generally use a broader definition of investment, which refers to all kinds of assets. In addition, it is arguable that the competences under Article 207 TFEU are limited to question of the admission of investments and do not govern the protection of admitted investments. Nevertheless, „[the]Commission is of the view that any legal uncertainty on the status and validity of these agreements, which could be detrimental for the activities of EU investments and investors abroad or foreign investments and investors in Member States, is to be avoided.“ (Regulation Proposal, at 3). It is certainly true that the investors’ major concern is not who will conclude future BITs, but whether the protection granted by existing BITs will remain in force (until replaced by an adequate standard of protection). Nevertheless, the EU cannot dispose over its own competences merely by adopting a regulation. Thus, the Draft Regulation is not a suitable instrument to create legal certainty regarding the extent of the competences of the EU or the Member States. Rather, such an attempt would contravene against the principle of conferral.

But apart from questions of competence, the Proposed Regulation may be subject to criticism. First, the legal certainty aimed at by this Regulation Proposal will be limited or may even be deceptive. Existing BITs will be – after a notification by the Member States –automatically authorized and then be published in the Official Journal (Articles 3 and 4 Regulation Proposal). The Commission may withdraw such an authorization, inter alia, in case of  a substantive conflict with the law of the Union (Article 6 para. 1 Regulation Proposal). But there is neither a binding decision by the Commission that there is no substantive conflict between the agreement and EU law, nor are there time limits for a review by the Commission. Thus, the publication of the agreement in the Official Journal as well as the fact, that the authorization has (not yet) been withdrawn, does not mean that he Commission will not do so in the future. Or worse, it can review the agreement immediately and come to the conclusion that there is no substantive incompatibility; but some years later it can change its mind and withdraw the authorization. Second, neither the grounds for a withdrawal of an authorization and the grounds for a non-authorization correspond, nor do so the grounds for withdrawing the authorization and the aspects to be assessed during the review according to Article 5. Third, Article 6 para. 1 lit. c provides a rather far reaching and indeterminate reason for withdrawal. According to this provision, the authorization can be revoked in case an agreement constitutes an obstacle to the development and the implementation of the Union’s policies relating to investment. Neither the proposal nor the explanatory memorandum explain how the “Union’s policies relating to investment” can be determined. Thus, if adopted tel quel this ground for withdrawal could constitute a carte blanche for the Commission. Fourth, the Draft Regulation sets a strict time limit for a notification by a Member State of its intention to negotiate an agreement, which does not correspond to the time limits for a review by the Commission (Article 8 ).

Despite this criticism, a transitional regime for existing BITs is urgently needed to avoid the severe consequences foreseen by Article 351 TFEU, regardless of whether the EU enjoys exclusive competences for all or only some subjects covered by current BITs (i.e. if the competence is mixed). Conversely, questions of “mixity” will arise as far as future agreements are concerned unless the Commission is willing to exclude non-direct investments from future EU BITs and to leave them unprotected. Although in theory the Member States retain the competence to conclude their own BITs limited to non-direct investments, this will hardly be a workable solution in practice.

Mixed agreements are quite a common phenomenon today. Still, their conclusion entails intricate problems resulting from the interplay of public international law and EU law. In the case of investment agreements, two issues are of particular interest: international responsibility and dispute settlement.

In general, international organizations are only liable for the conduct of their own organs. However, EU law is normally not implemented by the organs of the EU itself, but by the Member States,  which enjoy a certain discretion in implementing EU legislation. According to Article 16 of the Draft Articles on the Responsibility of International Organizations, an international organization may be responsible if it orders a state to commit an act contrary to its international obligations. However, if a Member State breaches an obligation under the BIT while implementing EU legislation without having been ordered to do so, Article 16 of the Draft Articles provides no answer. Whether the Member State itself is liable depends on the actual design of the BIT: Most modern mixed agreements delimitate the scope of rights and obligations of the EU and Member States according to the internal allocation of competences (compare, e.g., Article. 5, 6 para. 1 UNCLOS Annex IX). If such a clause is missing, the EU and its Member States are jointly liable for a breach (compare Opinion by Advocate General Jacobs, delivered on Nov. 10, 1994, Case C-316/91, Parliament/Council, 1994 E.C.R. I-625, ¶ 69). Assuming that a future EU BIT contains such a delimitation clause, neither the EU nor the Member State could be held responsible in the just mentioned case. To avoid such strange consequences, it thus will be necessary to treat the EU like a federal state and to attribute the conduct of the Member States to the EU itself (compare Article 4 para. 1 of the Draft Articles on Responsibility of States for Internationally Wrongful Acts).

As far as dispute settlement is concerned, a direct participation of the EU as a party to the dispute in an ICSID-arbitration is not feasible because the EU is not a contracting party to the ICSID-Convention. Therefore, an investor seeking redress from the EU will have to chose the rules of another arbitral institution, although this has some disadvantages compared to ICSID. Conversely, EU investors could still choose arbitration under the ICSID-Rules as long as the EU Member States remain contracting parties to ICSID. Thus, there is a serious imbalance between the rights of EU investors and investors of third countries. It seems doubtful whether, in a future EU-BIT, third countries are willing to submit to ICSID-arbitration under these circumstances. However, the ICSID-Convention would have to be amended in order to allow a direct participation of the EU because the participation of regional organizations for economic integration is not possible so far. But the revision of a multilateral treaty is always a delicate thing.

It becomes apparent that the extension of the CCP by the Lisbon Treaty has enormous consequences for existing and future investment agreements, which the drafters did not intend. The focus of the Commission in its Regulation Proposal and the Communication on exclusive EU competences for BITs tends to obscure the intricate questions of “mixity”, which inevitably will come up in the future. The Communication would have been a proper place to create a consciousness for these problems, to shape the discussion and to propose legal solutions. Although a uniform EU foreign investment regime can be a step towards more coherency in international investment law, mixed BITs will cause complications, which can undermine the whole process. If these complications prove to be insurmountable, a revision of Article 207 TFEU should be considered. Considering the frequent amendments of Article 207’s predecessors, such a revision is not unrealistic.

Jan Asmus Bischoff

Dr. Jan Asmus Bischoff studied law at Hamburg University from 2000 to 2005. After his graduation, he worked as a researcher at the Max Planck Institute for Comparative and International Private Law until 2010. In 2008, he completed his Master Degree in International Legal Studies at NYU, School of Law as a Hauser Global Scholar. In 2009, he completed his doctoral thesis on “The European Community and the Uniform Private Law Conventions” under the supervision of Prof. Dr. Dr. hc. Jürgen Basedow. In 2010, he passed the Second State Examination at the Hanseatic Regional Appelate Court, Hamburg. He is currently working as an attorney (Rechtsanwalt) at Luther Rechtsanwaltsgesellschaft, Hamburg in the field of investment law.