The European Union's New Powers on Foreign Direct Investment: Implications for International Business and Global Economic Stability

Abstract

The Lisbon Treaty has given EU institutions power over foreign direct investment (FDI). The Commission has indicated that it will use these powers to develop an EU wide FDI policy. FDI policy consists of measures to protect investment, restrictions that apply to FDI and measures to promote investment including incentives. Initially, the new EU FDI policy is likely to be confined to the protection of investment and, more specifically, the gradual replacement of member states' bilateral investment treaties (BITs) with EU wide treaties. By leaving investment incentives and restrictions within the control of member states for the time being, the Commission is taking a pragmatic approach that seeks to minimize resistance from member states to its new powers. While some hurdles will need to be overcome, EU wide protection of investment can be argued to result in benefits for international businesses both inside and outside of the EU as well as for the EU itself. Further, an EU wide policy has the potential to pave the way for a global investment agreement which would create a more certain global environment for FDI and hence contribute to global economic stability.