Reflections from the EFILA Conference during Paris Arbitration Week 2025

By Kubra Bayramova and Ana Cheminot[1]

Economic security has emerged as a cornerstone of the European Union’s (EU) strategic agenda, especially as geopolitical tensions, technological competition, and foreign influence reshape the investment landscape. Despite its growing importance, the term “economic security” lacks a universally accepted definition; its interpretation is both fluid and politically sensitive, with Member States holding divergent views based on national interests and risk perception.

In 2023, the EU elevated economic security to a strategic priority, the concept of security strategies moving beyond traditional military threat only. The concept is now expanding to foreign investment regulation. While the EU tries to harmonize its economic security strategy, divergences persist among Member States.

These issues were recently highlighted during the EFILA Conference titled “Hot Topics in EU Economic Security: Challenges & Opportunities,” held on 9 April 2025 as part of Paris Arbitration Week. This article summarizes the panel’s perspectives and highlights legal challenges posed by the shifting geopolitical landscape. These issues were recently highlighted during the EFILA Conference titled “Hot Topics in EU Economic Security: Challenges & Opportunities,” held on 9 April 2025 as part of Paris Arbitration Week. This article summarizes the panel’s perspectives and highlights legal challenges posed by the shifting geopolitical landscape.

The discussion was rich and timely, and opened the door to important questions about the conceptual and legal frameworks that underlie the EU’s approach, particularly in the context of investment regulation, strategic autonomy and the securitization of trade and economic policy.

The panel was led by Nikos Lavranos Secretary General at EFILA and featured contributions from James Casey (counsel at Gide), Saadia Bhatti (partner at Gide), Christian Tietje (Professor of International Economic Law at Martin-Luther-University Halle-Wittenberg),  Dorieke Overduin (Counsel at Sovereign Arbitration Advisors) and Szabolcs Nagy (Trade and Investment Diplomat at the Permanent Representation of Hungary to the EU).

The discussion focused on a wide array of urgent matters, including geopolitical risks, trade fragmentation, investment protection mechanisms, and the pursuit of strategic autonomy. This blog post retraces the session and examines its key takeaways, analyzing the legal implications of securitization, investment screening, and arbitration trends emerging from the EU’s evolving economic security doctrine.

Defining “Economic Security”: Conceptual Ambiguity

Professor Tietje opened the session by tracing the origins of the term “ economic security” , a theory developed by the Copenhagen School in the late 1990s. This theory expanded the notion of “security” beyond traditional military threats to encompass issues, from the environment to trade. To illustrate this point, Prof. Tijtie cited the example of the recent tariffs on steel and aluminum implemented by US President Donald Trump under the Trade Expansion Act of 1962 and the International Emergency Economic Powers Act., justified as national security measures, illustrating the expansion of the concept.  This expansion challenges traditional trade norms by blurring the lines between economic competitiveness and national defense. It signals a broader shift in how countries justify protecting strategic industries and reflects a growing trend toward protectionism.

This raises a legal concern: Can such an open-ended concept be effectively operationalized in law without compromising legal certainty?

The problem here lies in the institutional ambiguity. Prof. Titje cautioned that while securitization enables swift action, it often bypasses democratic processes. Once an issue is categorized under the umbrella of security, it becomes a binary matter, leaving little room for nuanced debate or negotiation.

FDI Screening: Between Market Openness and Security

Professor Tietje further examined the European Commission’s January 2024 proposal to reform the Foreign Direct Investment (FDI) Screening Regulation (Regulation (EU) 2019/452).      

He explained that through the FDI Screening Regulation, the EU aims to harmonize Member State actions and uphold a collective economic defense while maintaining its commitment to an open single market, but without centralizing authority. The actual decision-making power remains at the national level. This leaves a fragmented system that confuses investors and dilutes the EU’s approach as a unified market. He noted that competitiveness and strategic autonomy now sit at the core of the EU’s policy priorities, recognizing FDI screening as crucial for protecting critical infrastructure and technology.

However, as mentioned before, without a precise legal definition of “economic security” regulatory ambiguity persists.

Trade Defense Instruments: Strategic Tools or Regulatory Overreach?

Szabolcs Nagy explored economic security under the WTO perspective. While WTO rules generally constrain unilateral trade measures, they also include exceptions, such as those for national security, which allow states some leeway to act when they perceive economic threats. However, States increasingly use the “national security exemption” as a broad justification for measures that might otherwise breach WTO obligations. Mr. Nagy raised concerns about whether it could be misused, and potentially undermining the rules-based global trade system.

Globalization has created deep interdependencies, particularly through supply chains built on comparative advantage. Yet, this very interdependence has also exposed vulnerabilities, such as those seen in critical sectors like energy or technology. In response to these risks, some countries, most notably the United States, have embraced a broader interpretation of national security. This includes a strategic shift towards bilateral investment negotiations rather than multilateral frameworks. Bilateral negotiations allow stronger economies like the U.S. to engage on a one-to-one basis, where power asymmetries are more pronounced. This      dynamic enables the U.S. to set terms more favourably, secure concessions, and exert greater influence over strategy outcomes than would be possible in a multilateral setting where consensus and compromise are required. [6]      This reallocation might be favoring the return to bilateralism and fragmentation marking a permanent shift away from multilateralism.

In this context, Mr. Nagy expressed concern that adherence to the WTO “rulebook” has weakened, and there’s a growing sense that countries are operating increasingly outside of its framework.

From a European perspective, bypassing multilateral negotiations could adversely affect long-term economic performance. Mr. Nagy suggested that the current “trade war” serves as an illustrative case study for assessing the broader implications of prioritizing politically motivated trade policies over market-oriented approaches.

Investment Screening and Competitiveness: Striking a Balance

The discussion continued with Mr. Nagy addressing the impact of expanding FDI screening on the EU’s competitiveness. The Foreign Direct Investment (FDI) screening framework aims at protecting sensitive technologies and sectors from potentially harmful foreign takeovers. While the intention is to ensure consistent application, the expansion risks imposing significant administrative burdens.   

Mr. Nagy underlined that while protecting national and economic security is vital, there must be a balance. Overregulation and lack of transparency could stifle competitiveness and discourage much-needed investment. An excessive expansion of the system could overwhelm national administrations and deter investments.

He also added that within the EU institutional disagreement persists. While the Council favors less interference and a more harmonized approach, the Parliament is pushing for greater centralization, even giving veto power to the Commission. The final outcome is still uncertain, but unless the balance is struck carefully, the EU risks creating a system that is both overburdened and unattractive to global investors.

FDI Screening in Practice: The Dutch Model of Risk-Based Governance

Dorieke Overduin provided a concrete example of how the EU’s Foreign Direct Investment (FDI) screening regulation operates in practice, specifically from her experience with the Dutch government at the Ministry for Economic Affairs and Climate.

The FDI Screening Mechanism has the ambition to harmonize Member States actions and strike a balance between openness to investment and protection of critical infrastructure.      

While the Dutch government was eager to expand its 5G infrastructure, it imposed specific conditions to mitigate potential national security risks. The Dutch Intelligence Services assessed the risks associated with foreign direct investments, particularly in the core infrastructure of the 5G network, which involved sensitive technologies like routing, encryption, and authentication equipment. Initially open to foreign participation, the Netherlands reversed its stance after national security assessments.

This targeted, case-by-case approach allowed the Netherlands to mitigate the national security factor in high-risk areas while allowing other investments to proceed, so long as they do not pose a threat to national security.

In sum, The FDI screening regulation in practice should provide a tailored approach to balancing the need for foreign investment with the protection of national security. Yet, Ms. Overduin also acknowledged due to divergent national practices, legal uncertainty continues to pose challenges for investors and EU policymakers alike.

Economic Crises and Security Exceptions: Rethinking Treaty Protections in Arbitration

Prof. Tietje [8] delivered a comprehensive overview of the intersection between economic security interests and investment arbitration, referring to recent cases, specifically  analysing how security exemptions interact with economic crises.

In Nicaragua v. United States, the International Court of Justice (ICJ) emphasized that “essential security interests” are not limited to protection against armed attacks. This broad interpretation opened the door to include non-military concerns, such as economic security, under this category.

This understanding was later tested in BIT cases from Argentina’s 2001–2002 economic crisis, most notably CMS v. Argentina and Continental Casualty v. Argentina.

In CMS v. Argentina the court took a narrow interpretation of the concept of national security. It found that Argentina had contributed to the economic crisis and that alternative policy options were available. It therefore rejected Argentina’s necessity defense under customary international law.

In contrast, the tribunal in Continental Casualty v. Argentina (2008) took a more flexible approach. It interpreted Article XI of the U.S.–Argentina BIT as self-judging to a certain degree, giving states some discretion in defining their essential security interests. The tribunal accepted that Argentina’s economic crisis, marked by extreme inflation and widespread social disruption, constituted a threat to its essential security. As the measures taken were considered proportionate and directly linked to this interest, the tribunal held that no breach of the BIT had occurred.

This broader view was echoed in SEDA v. Colombia, where the tribunal reaffirmed that non-military interests, such as economic stability, could qualify as essential security concerns under investment treaties.

These cases illustrate the evolution of the interpretation of “essential security interests” from a strict, necessity-based standard to a more context-sensitive, treaty-based analysis.

More recently, Deutsche Telekom v. India (2014), the tribunal acknowledged economic threats as valid concerns but emphasized that security exceptions are not self-judging: Treaties must explicitly define these standards.

This highlights the importance of language in investment treaties.

National Security and Investment Arbitration in the EU: Navigating Legal Uncertainty in a Shifting Geopolitical Landscape

James Casey focused on the evolving landscape of investment treaties and dispute resolution mechanisms, particularly in relation to Chinese foreign direct investment and the rise of inbound investment screening measures in Europe.

A key shift in the nature of Chinese outbound FDI raised critical questions about whether BITs are being used as originally intended. BITs renegotiated by China now often include mechanisms allowing investors to challenge screening decisions, reflecting a shift in legal accountability for States invoking national security. China renegotiated several Bilateral Investment Treaties (BITs) with European nations, including Germany in 2003, France in 2007, and notably with Sweden in 2004. This movement was accompanied by a notable increase in ISDS claims by Chinese investors especially in the last four years. This surge in claims coincides with a rise in investment screening across Europe, aiming to scrutinize foreign investments. The disputes tend to involve investments that are already established, with foreign investors seeking to expand or modify their investments post-establishment.

The emblematic dispute between Sweden and Huawei illustrates this trend posing the issue of economic security exemptions in high-tech. Sweden decided to ban Huawei from its 5G network on national security grounds, despite the absence of an essential security exception clause in the 1982 China-Sweden BIT. This case questions whether Huawei’s technology poses an “imminent and grave threat” sufficient to justify invoking national security defences under Article 25 of the ILC Articles on State Responsibility, which requires such a threat for the invocation of national security defences.

The Issue of ISDS becomes more complex when national security exceptions are factored. Mr. Casey emphasized the growing tension between national discretion and treaty obligations and the fragmentation raises the risk of politicizing arbitration and weakening international investment norms. He stressed that the need for clear treaty language and legal predictability grows ever more urgent.

Conclusion: Pursuing Coherent Economic Security Strategy – Challenges on the Horizon

The session concluded with a forward-looking discussion on the implications of the EU’s economic security agenda for international arbitration. Panellists underscored the need for greater legal clarity, institutional coordination, and stakeholder engagement. While the EU’s new approach is still taking shape, its emphasis on resilience and strategic autonomy will likely generate more disputes touching on national security exceptions, proportionality, and the interpretation of evolving legal standards.

The panellists’ insights reveal a rapidly changing legal environment in which economic policy, security concerns, and legal accountability intersect. The EU’s challenge lies in shaping a coherent strategy that safeguards both its strategic autonomy and its openness to investment, without compromising the rule of law.

[1] Kubra Bayramova earned her bachelor’s degree with honours from Baku State University in 2022. After graduation, she studied at Paris-Saclay University on a full French Excellence Scholarship, specializing in international law and European fundamental law. She is currently pursuing an LL.M. in International Dispute Resolution at Humboldt University of Berlin. Kubra has a strong interest in international arbitration.

Ana Cheminot is a German-French jurist with a strong foundation in both legal systems. She earned a Bachelor’s and Master’s degree in law through the integrated DFM program at the University of Cologne and Paris 1 Panthéon-Sorbonne. After an insightful experience at the European Parliament, where she conducted research for her Bachelor’s thesis, she decided to deepen her expertise in European legal matters. In 2025, she will join the European Law School at Maastricht University to pursue an LL.M. in European Law.