Just like a century ago – and throughout their entire history – the Balkans remain a zone of structural instability. In this respect, the ‘end of history’ has not come around to the fringes of Europe, as Francis Fukuyama once optimistically expected. Therefore, although the Balkan area is an essentially coherent cultural sub-space, while still being radically diverse, the relations of its constituent states have been marked by a confuse set of bilateral – and adversarial – interactions.

This resilient anarchy in Balkan coexistence has only proved to benefit external players. Consequently, each country – however fluid such notion may be there – sought to ‘balance’ the other by adhering to another global power’s grand strategy. Diverging loyalties only reflected – and continue to do so – the global rivalries at a sub-regional level, where no such oppositions appear natural or inevitable.

However, the nature of the risks involved in the area has changed, also paving the way for different types of confrontations, armistices and imperfect solutions. The keg might look differently, but it is nonetheless still filled with gunpowder.

More precisely, from a once strategically and militarily troubled area, the Balkans appear nowadays as touched by economic malaise. Within and outside the EU, within and outside NATO, this patchwork of states with competing and overlapping allegiances has proved a fertile (but troubled) ground for foreign investment and international trade. As a vital link between the Black Sea and the Mediterranean, between Asia Minor and mainland Europe, the Balkans are not just a transit route, but also a potential hub for the global flux of capital in search of a strategic haven at the crossroads.

The real problem of investing in this area largely reflects the shortcomings of the geostrategic zero-sum game. All the external players interested in ‘rooting’ themselves in the Balkans mainly tend to do so from geopolitical imperatives and when they do, their further intention is to build up momentum and exclude their global competitors from such markets. In essence, the ‘great game’ is repeated in this claustrophobic patchwork of polities, with no other intention but attaining the fine balance needed in realpolitik calculations. Thus, in such a paradigm, hegemony is the keyword. Economic hegemony.

The actual – and sustainable – development of the Balkan area is left on a secondary level. A rhetoric and academic endeavor at most. Nonetheless, even for major power brokers, it should appear evident that an economically consolidated Balkan space would lead beyond the mere zero-sum game for all competitors involved. Veritable development would translate into an outsourcing of economic security and into a reduction in costs for ‘keeping the others out’, making the Balkan states less receptive to mixed incentives (economic plus military/strategic packages) and to financial hijacking by global actors.

In other words, ensuring the autonomy – or, even better, the autarchy – of the Balkan space through investments would benefit the whole range of interests involved. A first step would be to determine Balkan polities to pool their resources on a multilateral level. By blocking the diffuse and adversarial nature of bilateral negotiations, often simply mirroring global allegiances, such a collective manner of interaction would lead to harsh discussions, but conclusive results.

Moreover, prioritizing such a negotiation and moving it higher on the list than the over-exalted comprehensive pacts with the EU ‘neighbor’, the US ‘guardian’, the Russian ‘protector’ or Chinese ‘partner’, would awaken a certain conscience of a shared Balkan economic destiny. Not one without asperities or divergences, but one that is enhanced by competition. The fact that some of these states are already EU members can only relieve the Commission of its increasingly burdensome mission and allow it to exercise its leverage by local proxies. And so could the other actors …

Instilling a multilateral trade and investment framework in the Balkans would allow this recalcitrant area to draft its own rules, while taking into consideration all the existing dynamics and not fall into the diplomatic trap of global balancing. Regional games can also be regionally played. A micro-space open for investment and commerce, at the fringes of Europe, might prove to be a better option than insisting to forcefully integrate it in a globalized flux for which it is not yet ready.

In addition, a different type of settling trade and investment disputes could be conceived in this limited geographic framework. Beyond the classical ISDS and surpassing the ‘revolutionary’ elements of the Commission’s ‘investment court system’, the apparatus for solving such cases should take into consideration the numerous ‘incidents’ in the Balkans. However, given the fact that such investors are aware of the complicated economic situation, a larger regulatory margin could be left in the states’ competence. Nonetheless, what might be truly innovative in this regard would be a compulsory enforcement mechanism which should function directly within all those states, in accordance with a simplified treaty-based procedure, circumventing any recourse to domestic rules.
Thus, in an area of lasting paradoxes, investment multilateralism might prove a key to development and to the diffusion of tensions. For the Balkans, more regional might prove more global. More autarchy might – over time – become more openness to the world. And the powder within the keg might turn into something less volatile …

* Horia Ciurtin (h.ciurtin@efila.org) is Managing Editor of the online platform for the European Federation for Investment Law and Arbitration (Brussels), the EFILA Blog; Expert for New Strategy Center, a reputed strategy think-tank with offices in Bucharest, as well as Legal Adviser in the field of International Arbitration for Scandic Distilleries S.A [see SSRN author page].


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  1. Dear Horia, thank you for this interesting post and a different perspective on the always volatile region. I had a couple of questions/comments:

    1) The non-EU Balkan states are already within a free trade agreement – CEFTA. How do you rate its success so far? It arguably had positive effects, that might bode well for a similar investment framework, but the fact that EU membership means exclusion from CEFTA also limits its membership and reach. Would it not likewise present problems for getting EU Member States from the Balkans involved in any such framework? Or is this not something you propose at all?

    2) From first- and second-hand experience I can suggest that proposing new Balkan unions of any sort is viewed with deep suspicion in former Yugoslav states. For those in the EU accession process, it can be interpreted as an unwelcome sign that EU will not be their home for the foreseeable future. Interpreting it such a way can be potentially politically harmful in many ways?

    3) From a more technical viewpoint, would not the volatility of the region require more stringent investment protection rules as opposed to a ‘larger regulatory margin’? Similarly, I’m a bit unclear on what you see as ‘compulsory enforcement mechanism’? Is it along the lines of ICSID Convention Article 54?

  2. Dear Velimir,

    Thank you for your interest. These are very pertinent questions which I have thought about myself. However, due to the spatial limits of a blog post, I did not dare touch upon them all. I intend to expand this topic into a larger article or policy paper someday.

    However, briefly taking them into consideration, I would say the following:

    1) The most stringent shortcoming of CEFTA is that it consists only of non-EU states. It is (presently) a trade area confined to the non-EU Balkans, leaving such states once more on the ‘fringes’ of Europe until they become members. Once they join the Union, they leave CEFTA and join another ‘club’. The main idea for advancing a multilateral Balkan treaty is to attain a sufficient level of cohesion within the Balkan space which mingles EU and non-EU member states. Some of them might never join the Union at all and this should not be a problem. Moreover, I think that the EU central institutions should not interfere with this type of Balkan process directly, but only through their ‘proxies’ in the region. Once the EU would appear to disengage, the other competing ‘hegemons’ would be constrained to also do the same. And – as it looks in the ‘realist’ IR theory – a competition among proxies might look totally different from a direct competition between global hegemons.

    2) The Balkan states might take into consideration that – at least for some of them – EU membership is a very long way ahead, if at all. In addition, the EU they might join in the future might be a very different one. Maybe one of ‘multiple speeds’. However, the Balkans and their strategic-cultural structure is a constant feature. If the idea to allow a multilateral treaty to emerge (irrespective of EU membership) would go on and older EU member states would be present (such as Greece, Slovenia, Romania, Bulgaria, Croatia), no concerns should appear that they would somehow be ‘left aside’. On the contrary, even if they would not manage to finally join the EU, the membership in such a Balkan space would still be a way in for European goods and capital (through the EU local proxies).

    3) Indeed, stricter rules can be imposed in some areas (for example expropriations and FPS), but as regards the FET standard some limits could be brought in. At least cleared definitions (on the CETA model) so as to allow regulators to be certain how they can act. In a fair number of Balkan cases some breaches are not at all ‘classical’ interference into the business, but rather indecisive regulatory measures that turned bad into practice.

    As regards the enforcement mechanism, I was rather thinking that the established ‘court’ or ‘tribunal’ (which I see as permanent) would also have competences in dealing with enforcement measures. Art. 54 is conceived for a ‘universal’ membership and leaves a greater manoeuvre space for domestic authorities. However, in this limited areal, exemptions in the national procedure codes could be made in advance to allow the ‘court’ to exclusively deal with the enforcement phase as well [and thus avoiding the need for provisions such as art. 54(3) of the ICSID Convention] and directly oblige enforcement authorities to act upon the issued decision.

    However, this is all theoretical and mostly wishful thinking. Preparing the technical details would likely be less complicated than obtaining the initial political consensus.

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