Determining international responsibility under the new extra-EU investment agreements: what foreign investors in the EU should know.

JurisdictionUnited States
AuthorBaetens, Freya
Date01 November 2014
  1. Determining Who is Responsible: Attribution of Conduct

    The second problem created by the Regulation relates to the determination of who is responsible. Under the international rules on responsibility of states and international organizations, an internationally wrongful act consists of a certain conduct (act or omission) which forms a breach of international law (here, the IIA) and which can be attributed to an actor who was under such obligation. (123) The latter element (attribution) may give rise to legal difficulties in the present context. In the case of mixed agreements, both the EU and its Member States would be under the obligation to comply with the IIA, but this does not imply that the conduct of either could automatically be extended to the other. In its explanatory memorandum to the Proposed Regulation, the Commission put forward that attribution should not be determined by the author of the act but on the basis of the competence for the subject matter. (124) In simple terms, like parents can be held legally responsible for the acts of their children, the EU would be responsible for the conduct of its Member States, if such conduct would concern a subject matter which falls under EU competence. The problem with determining attribution based on competence is that it departs from the usual international legal approach and, more importantly, that it differs from the manner in which respondent status as well as the identity of the bearer of the duty to compensate is determined. The section below first deals with the legal value of the Commission's explanatory memorandum, followed by an examination of the general international rules on attribution as applicable in the present context.

    1. Legal Value of the Explanatory Memorandum

      Unlike the arrangements on respondent status, the Regulation itself does not contain any provisions on how responsibility should be determined, nor did the Proposed Regulation; the Commission's views in this respect are only outlined in the so-called "explanatory memorandum" accompanying the Proposed Regulation. Therefore, even if the IIA's arbitration clause incorporates the Regulation, it will still not cover the issue of determination of responsibility--unless the contents of the explanatory memorandum of the Proposed Regulation were also to be incorporated in to the IIA, for example as an annex.

      According to the explanatory memorandum of the Proposed Regulation, responsibility should be based on competence--and not the identity of the entity that actually extended the allegedly wrongful treatment: (125)

      Should it be the case that both the European Union and the Member States are parties to an agreement and it needs to be decided who is responsible as a matter of international law for any particular action, the Commission takes the view that this has to be decided not by the author of the act, but on the basis of the competence for the subject matter of the international rules in question, as set down in the Treaty. (126) This is contrary to the organizing principle in the Proposed (as well as the ultimately adopted) Regulation to determine both respondent status and compensation (though with some adjustments). To support its view, the Commission relies on Opinion 1/91 of the CJEU, which stated in the context of the Agreement on the European Economic Area (EEA) that:

      The expression 'Contracting Parties' is defined in Article 2(c) of the [EEA] agreement. As far as the Community and its Member States are concerned, it covers the Community and the Member States, or the Community, or the Member States, depending on the case. Which of the three possibilities is to be chosen is to be deduced in each case from the relevant provisions of the agreement and from the respective competences of the Community and the Member States as they follow from the EEC Treaty and the ECSC Treaty. (127) However, on plain reading, it appears that the CJEU opinion--unlike the Commission proposal--links respondent status with responsibility, and discusses "Contracting Parties" either in the "respondent" sense or in both the "respondent" and "responsibility" sense.

      Setting aside the persuasiveness or otherwise of the Commission's arguments, it remains an open question to what extent the contents of the explanatory memorandum would be taken into account by an arbitral tribunal. While, strictly speaking, it cannot qualify as travaux preparatories, since it was not created during the preparation of an IIA, it would most likely be taken into account--if at all--as a supplementary means of interpretation. (128) In accordance with Article 32 of the 1986 VCLT,

      Recourse may be had to supplementary means of interpretation ... in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

      (a) leaves the meaning ambiguous or obscure; or

      (b) leads to a result which is manifestly absurd or unreasonable. (129)

      But if there is no provision at all on determination of responsibility, it seems quite a stretch of the imagination to conclude that any one of the three scenarios outlined above--confirmation, ambiguous meaning, or manifestly absurd result--could be reached by an arbitral tribunal. It is more likely that in the absence of lex specialis laid down in the agreement, the tribunal would simply look to the general rules on the responsibility of international organizations.

    2. Applying General Rules to a Specific Context

      Interestingly enough, there is some doubt as to what exactly the general rules on the responsibility of international organizations entail. Different international adjudicatory institutions and the International Law Commission (ILC) have displayed different approaches to determining the responsibility of the EU and/or its Member States. As the case will ultimately turn on which approach an arbitral tribunal finds more convincing: the conduct-based, or the competence-based determination of responsibility. A brief overview of each is given below.

      a. The Conduct-based Approach

      The responsibility of the EU and/or its Member States can arise with conduct that may be categorized as follows: (1) conduct of EU organs themselves, (2) conduct of Member States acting pursuant to an EU measure, and (3) conduct of Member States acting on their own accord. (130) The first scenario is quite clear (the EU is responsible for the conduct of its own organs), and will therefore not be further discussed,131 while the third scenario is only of concern when the Member State's conduct has an impact in an area falling under EU competence. The analysis below will thus focus on the second scenario.

      Following in the footsteps of the ILC's Articles on State Responsibility, the ILC's Draft Articles on the Responsibility of International Organizations define an internationally wrongful act as "conduct consisting of an action or omission [which] (a) is attributable to that organization under international law and (b) constitutes a breach of an international obligation of that organization." (132)

      The following conduct is attributable to the international organization in question: acts or omissions of its organs or agents (Article 6), that of organs or agents of other states/organizations placed at its disposal (Article 7), and conduct acknowledged and adopted by it (Article 9). (133) While this may seem fairly straightforward at first sight, it is complicated by the fact that different bodies--most notably the ECtHR and various WTO panels--have taken different views as to whether certain types of conduct are attributable to the EU or to one of its Member States when a certain EU measure is carried out or implemented by the Member States.

      i. Human Rights Cases

      In general, the ECtHR has shown a greater tendency to attribute such conduct to the Member State. In Cantoni, it held that the fact that a piece of French legislation "is based almost word for word on Community Directive 65/65 ... does not remove it from the ambit of ... the Convention." (134) Similarly, in the Matthews case, the Court decided that "[t]he Convention does not exclude the transfer of competences to international organizations provided that Convention rights continue to be 'secured'. Member States' responsibility therefore continues even after such a transfer." (135) Even where there was no margin of appreciation or discretion for the Member State--as in Bosphorus, (136) which concerned an Irish measure taken pursuant to an EU sanctions regulation--the Court still held that "a Contracting Party is responsible under Article 1 of the Convention for all acts and omissions of its organs regardless of whether the act or omission in question was a consequence of domestic law or of the necessity to comply with international legal obligations." (137)

      In sum, the ECtHR has been more inclined to attribute implementing conduct to the Member States. It is a commonly held view that this approach is mainly due to the ECtHR's lack of jurisdiction so far over the EU138 and "driven by the mission of the Court to provide effective human rights protection." (139) In other words, if the ECtHR had not held the Member States responsible, the violation of the victims' rights would have gone unpunished as the EU was not a party to the European Convention on Human Rights, hence not bound by its terms and could not be sued before the Court.

      However, it is interesting to note that according to the recently finalized EU accession agreement to the European Convention on Human Rights, "an act, measure or omission of organs of a Member State of the European Union or of persons acting on its behalf shall be attributed to that State, even if such act, measure, or omission occurs when the State implements the law of the European Union." (140) At the same time, this does not exclude the participation of the EU in a case alongside the Member State, through the so-called co-respondent...

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