Access to Legal Redress in an EU Investment Screening Mechanism verfassungsblog.de/access-to-legal-redress-in-an-eu-investment-screening-mechanism/The proposal for a regulation of the European Parliament and of the Council establishing a framework for screening of foreign direct investments into the European Union (Draft Proposal) presupposes (some would even say: proposes) investment screening and control mechanisms (ISCMs) at member state level. Approaching ISCMs from the angle of legal redress raises three questions:

The article analyses the practice of tied aid and draws a comparison to export subsidies both in an economic as well as in a legal sense. Tied aid is a form of development aid granted upon the condition that it is spent according to donor preferences. The legal review concentrates on the consistency of tied aid with the Agreement on Subsidies and Countervailing Measures (SCMA) and Article XVII of the General Agreement on Tariffs and Trade (GATT). Here, many potential breaches of the SCMA are revealed, while a violation of the GATT is less apparent due to the unclear concept of State Trading Enterprises. Many variants of tied aid are found to constitute prohibited or at least actionable export subsidies and no regular development aid. Despite the breaches, no trade dispute involving tied aid has been brought before the WTO's dispute settlement system. The final section analyses the practical obstacles to a precedent and argues that the freedom from regulation of development aid cannot be extended to tied aid, which is guided by protectionist motives.

In light of the limited possibility to seek legal recourse against screening of foreign investments on grounds of national security, can insurance provide an alternative avenue to compensate affected investors? The answer is: Yes, but with caveats. For investors, even if insurance does not provide an equivalent to full reparation, it can serve as a useful mitigant of the risk that contemplated investment transactions cannot be consummated as anticipated due to screening measures. For host States, insurance provides a useful mechanism by which they can facilitate compensation of investors without having to disclose information contrary to their essential security interests and thus a means by which host States can remain attractive to foreign direct investment in spite of investment screening.

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