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Foreign Investment under the UK-EU Trade and Cooperation Agreement: Mitigating Punctuated Equilibrium in Legal Economic Dis-Integration

Collins, D. A. ORCID: 0000-0002-5517-6949 (2021). Foreign Investment under the UK-EU Trade and Cooperation Agreement: Mitigating Punctuated Equilibrium in Legal Economic Dis-Integration. Manchester Journal of International Economic Law, 18(1), pp. 50-69.


While it aims to foster an economic relationship conducive to continued Foreign Direct Investment (FDI) based on shared values such as free markets, the United Kingdom (UK) – European Union (EU) Trade and Cooperation Agreement (TCA) of 2020 contains limited formal protections for FDI, focusing on the prohibition of nationality-based discrimination with a view to minimizing significant disruptions, but with extensive exceptions to market access commitments contained in Annexes. The TCA does contain an innovative non-regression mechanism, designed to maintain a regulatory Level Playing Field (LFP) through which unfair distortions in competition resulting from radical policy departures are curtailed when a material impact on investment results. This article will review the investment provisions of the TCA including the new LPF rebalancing mechanism as well as the agreement’s state to state dispute settlement system. It will suggest that the TCA’s treatment of investment captures the theoretical model of ‘punctuated equilibrium’ in public policy through which associated changes are generally gradual but marked by sudden, severe upheavals – such as Brexit itself. The limited coverage for investment coupled with a narrow re-balancing mechanism for LPF departures therefore appears to be designed primarily to discourage sudden, major policy changes by the Parties regarding environmental and labour matters which have distinct impacts on FDI. In so doing the TCA seeks to mitigate the worse effects of economic dis-integration between the UK and the EU as their respective approach to foreign investment diverges over time. Whether it manages to achieve a state of policy equilibrium between the parties which is conducive to high FDI flows is uncertain and may depend on modifications made to the treaty at a later stage, including formalization of the dispute settlement system.

Publication Type: Article
Subjects: H Social Sciences > HG Finance
J Political Science > JZ International relations
Departments: The City Law School > Academic Programmes
The City Law School > International Law and Affairs Group
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