Promoting Sustainable Development in BITs: The EU Experience – Vol. 30 No. 1

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Author: Ramon Vidal Puig*

Published: December 2019



The Treaty of Lisbon conferred upon the European Union (“EU”) exclusive competence with regard to foreign direct investment. Following this transfer of competence, the dense network of existing bilateral investment treaties (“BITs”) concluded individually by each EU Member State with third countries will be progressively replaced by agreements concluded by the EU alone, or by the EU jointly with its Member States (so-called “mixed agreements”).

The emergence of the EU as a major actor in this field has coincided with increased public scrutiny and questioning of the investment protection agreements. One of the main objections raised against those agreements is that the protections accorded to foreign investors may unduly prevent or dissuade host States from pursuing legitimate public policies with a view to promoting sustainable development.

The content and meaning of the concept of “sustainable development” is uncertain and heavily disputed. As generally understood, it alludes to the need to reconcile economic development with environmental, social, human rights, and other non-economic concerns. It is in this broad sense that the term “sustainable development” will be used in this paper.


This paper will deal exclusively with the first type of concerns, the narrowing of states’ legitimate regulatory space by investment treaties. More specifically, this paper will describe the main tools used by the EU in the agreements negotiated so far to ensure that the substantive standards of protection achieve an appropriate balance between the protection of foreign investors, which remains the primary objective of those agreements, and the requirements of sustainable development. Those treaty tools build upon the practice of other countries, including in particular Canada and the United States, and take into account some of the recommendations made in various UNCTAD policy documents, but also present some innovative features.

Section II provides, by way of context, a brief overview of the constitutional framework and the current state of the EU’s investment protection policy. Section III describes the various preambular and purposive provisions included in EU agreements to ensure that the substantive standards of protection are interpreted consistently with the parties’ “right to regulate,” so as to promote sustainable development. Section IV discusses the limitations and clarifications to the various substantive standards of protection included in the EU agreements in order to preserve adequate “policy space” for the parties. Finally, section V describes the various public policy exclusions, reservations, and exceptions included in the EU agreements with the same purpose.

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*Legal Advisor of the Legal Service of the European Commission. All the views expressed in this article are strictly personal.