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Review of EU investor protection rules could affect ratification of EU-Vietnam FTA

Following the opinion by the Court of Justice of the EU on 16 May, the Commission is currently reviewing its approach to some provisions on investment protection. Depending on the outcome of this assessment, a change to the agreement with Vietnam could in principle be considered, which would lead to a further delay of the procedure to approve and ratify the agreement.

The agreement stipulates the use of the investment court system, which was first introduced by the European Commission for TTIP and “dropped into” the Vietnam agreement. A regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without the Member States’ consent and hence requires ratification by national and regional parliaments in the EU, the Court of Justice of the EU decided. Given the risk of failure inherent to the ratification procedure, the Commission has a strong motivation to seek concluding “EU-only” agreements by either not including the investment protection rules (as they pertain to ISDS) in question at all or agreeing to these in a separate agreement which would be submitted for ratification by member states independently from the trade agreement. In theory, further changes to make the Vietnam agreement an EU-only agreement could be requested.

Officially, the Commission still intends to submit the agreement for approval by the Parliament and the Council after this summer, once the legal scrubbing is finalised. Once approved, the agreement would then be applied provisionally, with the exception of portfolio investment rules and the investment court. The full implementation would only be possible if and when the agreement was ratified by all relevant member states’ and regions’ parliaments, mirroring the procedure for the agreement with Canada.

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