Lifting the veil on European international investment policy: the case of the TTIP

Nathan BIGAUD KOENIGSWARTER (2016), The London School of Economics and Political Science, Msc in International Political Economy. 

The European international investment policy is part of the exclusive EU competence and, as such, has been depicted as an area of expert, secretive negotiation understandable through careful analysis of the rules of procedure. This essay aims at proving that the process of aggregation of interests shaping the EU stance is highly problematic, using the example of the TTIP. Our main argument is that the process of aggregation creating a ‘European” stance on investment unfolds in a way that requires a detailed study of the interactions between actors shaping de facto competence and negotiation strategies. This essay falls into three parts. First, it shows that the structure of de jure competence is useful but not sufficient to understand the EU investment policy (1). Then, after justifying the use of the reasoning in terms of agency (2), this essay analyses the way actors define European Agenda while pursing theirs (3).

I. De jure competence and the balance of power: how the ‘European’ stance is created.

Since the Lisbon treaty integrated FDI’s to the Common Commercial Policy (Shan & Zhang, 2010), the issue investment is under exclusive EU competence and is thus a case in point of EU policy-making, and it seems that understanding EU stance on investment implies to study the way regulations shape it.

The EU negotiates Bilateral Investment Treaties, as well as multilateral agreements. The framework is not absolutely clear though, as some type of portfolio investments and “investment protection” may also be covered by investment treaties and are not legally included as part of EU competence.

Decisions on investment policy are made using the community method: the commission proposes and the council disposes (Conceição-Heldt, 2006). More precisely, the Commission initiates policies by drafting a proposal, the Council authorizes and sets the mandate of the measure, by qualified majority vote, and eventually the agreed text is accepted by the Parliament (Woolcok, 2011). The negotiation process is iterative and is an exchange between the Commission and the Council, proposals being discussed by working groups (Trade policy Committee, COREPER II). The parliament under the Lisbon Treaty should have access to the same information as the parliament does.

This description sets the structure of decision-making, which can be presented as an important factor of policy making on investment. It defines the place of each actor in the process – member states through the Council and EU through the Commission. Decision making, in that context, is a problem-solving exercise, described by Elgström & Jönsson (2000) or Jachtenfuchs & Kohler-Koch (1995) as the most common way of negotiation inside the EU. They state the existence of a trend toward problem-solving in the EU, defined as the focus on common interest and cooperation as opposed to self-interest and aggressive bargaining, which could be linked with the existence of a clear and undisputed structure of competence.

But would it be sufficient? Considering the general investment policy of the EU, it appears that the regulatory frame indeed fosters the emergence of a common stance. According to the commission, the two main objectives of the European Investment policy are to increase market access, and support legal certainty and transparency1. This liberal agenda is shaped by the preference of member states, having similar interest as developed, market-oriented economies with high standards on products and services. It is also shaped by the demand for negotiation from other actors, such as the US for example, where information technology sector pushed for the integration of investment clauses in treaties. It seems like members are not prone to debate on the general orientation of policies.

Yet, the detail of negotiations still may create difficulties. TTIP has been under negotiation for three years and has raised numerous concerns. Such difficulties cannot be comprehensively analyzed using only de jure competence and the structure of institutions. The detail of interest aggregation has to be examined, to show that formal competence is but one of a number of factors. Indeed, rules leave room for manoeuvre (Blyth, 2003), and might be disconnected form de facto competence and actors strategies.

II.  The complexity of EU decision-making

We apply to European investment policy the Principal-Agent reasoning to show that despite criticism, it can still help us understand the conflicts of interests and the way institutions act strategically.

The principal-agent problem is a widely used conceptualization of decision-making and can be applied to the EU (Pollack, 1997). Yet, in the case of investment policy, this approach has raised sharp criticism. Damro (2007) uses the institutional framework defining decision making to distinguish issues for which the principal-agent reasoning may be useful. Comparing regulatory and distributive polices, he states that “ instruments of political control in trade policy […] appear much more direct and comprehensive than the ones found in competition negotiations.” Thus, given the efficiency on controlling mechanism under exclusive EU competence, the Commission will have to anticipate the preferences of the Council and adjust its behaviour consequently.

We argue that investment policy, despite its inclusion, alongside trade, in the Common Commercial Policy, is not the simple expression of Member’s states preferences through EU exclusive competence mechanisms. We distinguish between three main reasons. First, Investment provisions are of different nature than classic trade measures, and indeed were included only late in the EU mandate. Investment policy is thus a grey area, being part of the common commercial policy for a short amount of time, it is not as embedded in habits and practices as more common trade measures such as tariffs are. Thus, limiting ourselves to a consensus-based understanding of decision-making processes is not enough to understand how investment policy emerged as part of the EU mandate and the way it shapes its policies.

Second, institutional mechanisms only partially make up for information asymmetries. Stone (2013) has stated the importance of informal negotiation, a sum of interactions that can be determinant in the outcome of negotiation and are inaccessible for those outside the room. The, and thus still has room for untold bargain. Despite the fact that regular meetings are held with the commission throughout negotiations, member states are not present during negotiations, and the Commission has control over the information that filters to member states. Moreover, the representation of member state depends on the importance of the issue negotiated, and is sometimes merely formal, from WTO ministerial level meetings to routine meetings with Geneva representative of each country (Woolcock, 2011).

Thirdly, the nature of investment policies implies too broad a scope of measures to be de facto exclusive competence. Elgström & Jönsson (2000) for instance distinguish five factors to explain the conflictual nature of decision making, among which the type of policy. Investment policies can be seen as redistributive and regulatory, depending on the measure considered. Both should lead to intra-sector negotiations and thus be limited to a problem-solving exercise. Yet, even when there is exclusive EU competence in a policy area, “linkages with other policy areas coming under member state competence are usually necessary for effective policies or as a result of the nature of the international agenda.” (Woolcock 2011). Moreover, the scope of investment provision has impact on a lot of different issues and cannot be isolated as “pure” investment measure, as opening to new countries has redistributive consequences (see the TTIP and the service industry) and standards on sustainable investment flirts with the limits of the Commission’s mandate.

Thus, given the nature of the issue at stake at information asymmetries, it seems the Commission cannot be considered a pure agent, and has the possibility to use negotiations to its advantage, as it gains de facto competence by negotiating. EU decision-making can thus be understood as a field for competence building. We now have to go into the detail of this mechanism to understand how actors define European Agenda while pursing theirs.

III. Competence building and the example of TTIP

European practices on investment policy existed before they were integrated to the regulation, which suggests once more the limits of de jure competence. We need to study what’s at stake for actors when discussing investment policy, in terms of normative power and de facto competence. To do so, we may use the example of the TTIP. For the sake of clarity, we will distinguish between different actors to explain the conflictual part of decision-making on investment, and not directly the five factors of Elgström & Jönsson (2000). Our point is to prove that each actor, by pursuing its own goals, shape investment policy in a distinctive way.

We start by the European Commission, which played an important role in the emergence of investment as part of the EU exclusive competence. We can here refer to a 2011 communication2 from the Commission to the other institutions, pushing for a comprehensive European investment policy and taking steps to ensure further development will be made under its direction. Indeed, once a policy is part if the “acquis communautaire”, the Commission gains control over it, which result in the growing importance of the Commission over the last 20 years. As demonstrated before, the commission is not a pure agent, as it gains de facto competence when negotiating. This “acquis communautaire” also provides the EU with greater bargaining power as some have argued (Meunier, 2000), as each negotiation with a third party has been internally negotiated in depth, which provides a solid position for EU negotiators.

The Council is the major institution through which member states influence decision under exclusive competence. It is in part kept out of the negotiation with third party, as described before. It may tend to resist the influence of the Commission, as it is shown by the case of the Singapore EU treaty. Member states have protested that EU competence only applied to the case of FDI’s, and that “the type of portfolio investments and “investment protection” covered by Investment Treaties (including ISDS) does not fall within the term “FDI” and [thus] remained a shared competence,” 3. The conclusion of the FTA showed the determination of the Commission to address the issue “head on”.

The parliament is gaining growing influence over EU exclusive policy and thus investment. This dynamic, acknowledged by the veto power it obtained from the Lisbon Treaty. As trade policy committee meeting are not public, the Parliament has indeed become a direct channel of influence for member states and civil society actors, as its debates are public. We can use here one of the five factors of Elgström & Jönsson: the level of politicization of investment policies. In tis case, parliament is a place where non-state actors and national political actors can express their concerns, as it is the case for the negotiation of the TTIP. The opening of investment possibilities is indeed perceived as threatening by some, and some anti-globalization sentiment can be expressed, as it was the case for instance in 2015 after a Ukip MEP voiced strong protests against the TTIP4.

Finally, non-state actors, which are the most forgotten actors of investment decisions, can have important influence, first in the definition of Member states preference, but also directly at the European level, trough international protest or the European Parliament. Investment and trade policies have been described as expert led negotiations (Elgström & Jönsson, 2000). The parallel with ‘technical’ or ‘parapolitical’ committees (Quaglia, 2008) is nevertheless limited given the level of politization we just described. First, business interest group have an important role in the decision making process, even if exclusive EU competence limit their possibility to influence directly negotiation. Yet, they overall push for more open investment policies. For instance, business interests in Germany welcome the TTIP5. NGO’s and civil society actors also have there say and try to influence the outcome through lobbying or public campaign (see for example the STOP TTIP and CETA Euroean Campaign6).


Primary sources


Secondary sources

Blyth, M. (2003). Structures do not come with an instruction sheet: Interests, ideas, and progress in political science. Perspectives on politics, 1(04), 695-706.

Conceição‐Heldt, D. (2006). Integrative and distributive bargaining situations in the European Union: what difference does it make? Negotiation Journal, 22(2), 145-165.

Damro, C. (2007). EU Delegation and Agency in International Trade Negotiations: A Cautionary Comparison*. JCMS: Journal of Common Market Studies, 45(4), 883-903.

Elgström, O., & Jönsson, C. (2000). Negotiation in the European Union: bargaining or problem-solving?. Journal of European Public Policy, 7(5), 684-704.

Jachtenfuchs, M., & Kohler-Koch, B. (1995). The transformation of governance in the European union.

Meunier, S. (2000). What single voice? European institutions and EU–US trade negotiations. International organization, 54(01), 103-135.

Pollack, M. A. (1997). Delegation, agency, and agenda setting in the European Community. International organization, 51(01), 99-134.

Quaglia, L. (2008). Financial sector committee governance in the European Union. European Integration, 30(4), 563-578.

Shan, W., & Zhang, S. (2010). The Treaty of Lisbon: half way toward a common investment policy. European Journal of International Law, 21(4), 1049-1073.

Stone, R. W. (2013). Informal governance in international organizations: Introduction to the special issue. The Review of International Organizations, 8(2), 121.

Woolcock, S. (2011). European Union economic diplomacy (pp. 169-186). Ashgate.



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