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News from Members A New EU Regulation Changes the Rules of the Game in Terms of the Financial Responsibility Linked to Investor-to-State Dispute Settlement

A New EU Regulation Changes the Rules of the Game in Terms of the Financial Responsibility Linked to Investor-to-State Dispute Settlement

by CMS Cameron McKenna September 24, 2014

„A new European Regulation entered into force on September 17th, 2014, setting out the legal framework for managing disputes between investors and EU member states. Since the entry into force of the Lisbon Treaty in 2009, the European Union has exclusive competence when it comes to international agreements on foreign direct investments. So far, it has been unclear for the investors where to file their claims arising from such treaties, either with the Union or with the member state, and who is financially liable. The new Regulation contains concrete provisions on how financial responsibility is established in these disputes, also who incurs the costs of such disputes and who will eventually pay the damages”, declared Gabriel Sidere, Managing Partner CMS Romania.

The new norms (EU Regulation no. 912/2014) are a positive development and aim at further developing a transparent, responsible and balanced mechanism for the settlement of disputes between investors and member states, as part of the EU’s commercial and investment policy.

The rules establish both the principles on awards for monetary compensations, and the dispute coordination procedure and negotiation of an agreement, in order to avoid the costs of an investment arbitration. This procedure allows the European Commission to reach a settlement in a case that involved the financial responsibility of the Union or of a Member State. The Member State takes financial responsibility and acts as a defendant in disputes concerning measures taken at national level, while the EU defends the measures adopted at EU level. The EU will also have to take financial responsibility and act as a defendant in disputes involving measures at member state level stemming from the implementation of EU legislation. In all cases, there will be tight and transparent cooperation between the member states and the European institutions.

„The novelty of these norms resides in the European Commission’s involvement in the disputes between investors and member states, both as regards the coordination of the defense, and the decision to settle the dispute through an agreement. The new Regulation defines who is best placed to defend the interests of the EU and of the member states in disputes on the breach of the international agreements to which the EU is a party, such as the Energy Charter Treaty. Thus, investors from non-EU countries considering filing action against Romania under the Energy Charter Treaty will have to calibrate their claims and case strategy depending on the European Commission’s involvement level”, concluded Gabriel Sidere.

The CMS office in Bucharest is specialized in investment-related dispute settlement, the Romanian team headed by Gabriel Sidere acting as a regional legal resource center in this field, with activities in several jurisdictions across Central and Eastern Europe.

Gabriel Sidere
Managing partner of CMS Romania, Gabriel Sidere is a litigation partner whose practice focuses on complex business litigation and international arbitration matters, in particular providing strategic advice on investment related disputes, as well as representing clients in high-level negotiations involving governmental institutions. He has represented and counselled clients in disputes involving numerous industries, including energy, infrastructure, manufacturing, financial services and consumer products.

Gabriel is recognized by legal directories such as Chambers Global as one of the leading experts in international commercial arbitration and business litigation in Romania. He is also listed as one of just two Romania-based lawyers in The International Who's Who of Mediation Directory 2013. Gabriel has extensive experience in dispute resolution and advocacy, both in Romania and beyond, and a significant track record in negotiating with, or advising, Romanian governmental institutions with respect to EU harmonization issues and application of international conventions ratified by Romania.
Gabriel is well known for “his vigorous and energetic advocacy” and for his “effective and efficient resolution of disputes in their early stages”. He was recently described as a "truly outstanding" lawyer with "a remarkable insight into clients' needs" in Chambers Global (2012 edition). Gabriel is an accredited mediator and certified advanced negotiator with CEDR.

About CMS
CMS is a full-service law firm, ranking among the top 10 law firms in the world in terms of the number of lawyers (Am Law 2012 Global 100). Having 56 offices in 31 countries, CMS recorded annual revenues of 841 million euro in 2012. CMS provides legal counseling to most companies in DAX 30, as well as to an important number of companies present in the 500 and FT European 500.

For additional information:
Ionel Barbalau
PRAIS Corporate Communications
T: + 40 722613196

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