On 23 April 2024, the Spanish Government’s Council of Ministers (Consejo de Ministros) authorised the signing by the Kingdom of Spain (Spain) of a new bilateral investment treaty with the United Arab Emirates (the UAE) under the name “Agreement for the Reciprocal Promotion and Protection of Investments” (the BIT).
This final approval (at the Spanish end) has come more than a year after the European Commission also authorised Spain to proceed with the signing of the BIT in accordance with Regulation (EU) N. 1219/2012 of the European Parliament and the Council of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries (which, subject to certain requirements, allows EU Member States to amend or conclude bilateral investment treaties with non-EU parties).
Negotiations for the signing of the BIT between Spain and the UAE had been ongoing since as far back as 2003. It was not until 2022 that significant steps were taken to bring negotiations to fruition, possibly hand in hand with the increased flow of investments between the two countries. Notably, according to the most recent data, the foreign direct investment stock of the UAE into Spain in 2021 reached almost USD 6 billion, while Spain’s investment stock in the UAE surpassed the USD 1,5 billion mark.
In February 2022, the Governments of Spain and the UAE issued a joint declaration to mark the visit of Spain’s current Prime Minister (Presidente del Gobierno) to the UAE, which was the first time the head of the Spanish government visited the UAE since 2011.
In this joint declaration the two countries expressed how, given their desire “to raise the level of ambition for the prosperity of the two economies and to increase bilateral investment flows, the leaders took positive note of the initialing of the [BIT] between the United Arab Emirates and Spain. Once in force, the new BIT will promote and enhance further bilateral investment and business opportunities”.
The joint declaration also stressed the countries’ goal of searching for co-investment opportunities in sectors such as energy transition, sustainable mobility, transportation, circular economy, digitalisation, biotechnology, and agribusiness.
It appears that this shared wish to strengthen the already close economic ties and to increase the mutual flow of investments between both countries will finally crystallise in the signing of the BIT.
It is worth noting that Spain already has similar agreements in place with other countries in the region such as Bahrain (2008), Yemen (2008), Saudi Arabia (2006) and Kuwait (2005), whereas the UAE has recently ratified a BIT with Iraq.
While the draft text has not yet been made public (and there is no indication as to when exactly signing will take place), it remains to be seen what substantive protections the BIT will offer to foreign investments and whether it will contain investor-state dispute settlement (ISDS) mechanisms.
A quick glimpse at the recent treaty practice of both states shows that the UAE (which does not have a Model Bilateral Investment Treaty to guide its treaty negotiations, unlike Spain which adopted one in 2008) has recently concluded similar treaties with countries such as Hungary (2022) and Turkey (2023) with both of these new treaties providing for ISDS in their articles 10 and 13, respectively. For its part, Spain has recently signed a new bilateral investment treaty with the Republic of Colombia (2021) that also contains ISDS provisions (section IV, articles 19 to 35).
In sum, the signing and publishing of the BIT text will be a positive development affording opportunities for investors of both countries to properly structure their planned investments into each other and reinforcing the already strong economic ties between the two states.
