Killing Three Birds with One Stone, An Analysis of the European Union’s Bilateral Negotiation Strategy in Pursuit of a Multilateral Investment Court

Abstract

In the past several years, the European Union has been proactively advocating for the establishment a Multilateral Investment Court, an institution that would be available to investors wishing to sue a country over potential losses. In the process, the European Union has decided to employ to utilize their ongoing bilateral trade and investment deals negotiations by including a clause committing the parties to engage in negotiations for the proposed MIC. The central question of this thesis is why the European Union had taken this unprecedented step of including these ‘negotiation commitment clauses’ in their bilateral trade and investment agreements. Using a sequential development analysis, the thesis considers five separate hypothesis that could explain the choice of the EU’s strategy, which are; 1. Multilateral Signaling hypothesis, which holds that the European Union’s incorporation of the MIC clause in bilateral negotiations is a signaling device it is employing to demonstrate their commitment to multilateralism in response to the election of Donald Trump and subsequent shift in the United States’ trade policy. 2. Sequential establishment hypothesis, which holds that the EU is trying to tailor the future MIC’s structure in their favor by first establishing an institution among like-minded partners, and gradually expand them to further member states who would adhere to their standards. 3. Norm Setting hypothesis which holds that the European Union is attempting to establish an international norm to establish a MIC through these bilateral negotiations. 4. Two level game hypothesis holds that the these MIC provisions are incorporated so that each individual bilateral trade deal is more palatable to their domestic, European audiences. 5. Integration by stealth hypothesis argues that these MIC provisions is an exercise by the Commission to expand its competencies over subject matters that it previously had limited or ambiguous powers. Upon consideration, the thesis rejected the multilateral signaling hypothesis, which posits that the ‘MIC negotiation clauses’ in bilateral trade deals were included to counter the tide of unilateral action in trade negotiations by demonstrating the EU’s commitment to multilateralism. Additionally, the thesis found little evidence that the EU’s strategy is a reflection of their desire to shape the structures of the future MIC by creating a coalition of ‘like-minded partners’. Instead, the thesis argues that the inclusion of the ‘MIC negotiation. commitment clause’ served three objectives; 1) to accumulate support for their initiative at the multilateral level – norm socialization hypothesis, 2) to garner enough support for the ratification of the individual bilateral deals at the European level and 3) to expand the competencies of the Commission visà-vis the member states in the realm of multilateral investment negotiations – integration by stealth hypothesis. Additionally, this thesis would demonstrate how while the inclusion of the ‘negotiation commitment clause’ may not appear to be the most efficient policy choice when considering each of the three objectives individually, but instead the most efficient policy choice to advance all three objectives simultaneously.