I. INTRODUCTION

In its resolution of 6 April 2011 on the future European international investment policy, under the heading ‘Protecting the Right to Regulate’, the European Parliament ‘stressed that future investment agreements concluded by the EU must respect the capacity for public intervention’.² Already the Council of the European Union (EU), in its conclusions on the same subject of 25 October 2010, ‘stressed’ that ‘[t]he European investment policy must continue to allow the EU and the Member States to adopt and enforce measures necessary to pursue public policy objectives.’³ Both instruments echoed the Commission’s communication ‘Towards a comprehensive European international investment policy’ of 7 July 2010, in which the Commission had insisted that: It should be recalled that the Union's trade and investment policy has to fit with the way the EU and its Member States regulate economic activity within the Union and across our borders. Investment agreements should be consistent with the other policies of the Union and its Member States, including policies on the protection of the environment, decent work, health and safety at work, consumer protection, cultural diversity, development policy and competition policy. Investment policy will continue to allow the Union, and the Member States to adopt and enforce measures necessary to pursue public policy objectives. A common investment policy should also be guided by the principles and objectives of the Union's external action more generally, including the promotion of the rule of law, human rights and sustainable development.⁴

This note explores the meaning of this bold claim to ‘European policy space’⁵ that needs to be protected in the context of investment treaty arbitration, and contrasts this claim with the current reality. Section II gives a quick sketch of what ‘European policy space’ could mean, and Section III outlines the potential—and actual—clashes with bilateral investment …