Embedded Neoliberalism and the Legitimacy of the Post-Lisbon European Union Investment Policy

Much has been written about the ongoing legitimacy crisis of the global investment treaty regime and the system of investor-to-state dispute settlement (ISDS). In the European Union (EU), the proposed inclusion of investment protection provisions and ISDS in negotiations on the Comprehensive Economic and Trade Agreement (CETA) with Canada and the Transatlantic Trade and Investment Partnership (TTIP) with the United States triggered unprecedented levels of contestation. This article seeks to explain why EU responses to such contestation, in the form of an investment court system and a multilateral investment court, did not bring about a clear break away from the traditional ISDS model. Drawing on critical political economy perspectives, it regards the EU investment policy following the entry into force of the Treaty of Lisbon as deeply embedded in a broader neoliberal project mediated by material, institutional, and ideological configurations. Several factors have inhibited possibilities for more fundamental changes. The European Commission construed the lack of legitimacy as stemming from ISDS’ procedural features rather than questioning its social purpose. There has been no shift in the underlying social power balance, and no comprehensive counter-project has been proposed. The European Commission enjoys relative autonomy vis-à-vis other parts within the EU institutional ensembles and wider societal interests, allowing it to block more radical solutions. Finally, there were no clear signs of a fundamental departure from the neoliberal path in terms of wider EU economic regulation.