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The European Union terminates all Intra-EU Bilateral Investment Treaties

On 5 May 2020, the majority of European Union (EU) Member States (MSs) signed a plurilateral agreement for the termination of all intra-EU Bilateral Investment Treaties (BITs). Despite longstanding reluctance, the Member States were forced to act in accordance with the “Achmea” judgement. In its reasoning, the Court of Justice of the European Union (CJEU), ruled that the arbitration clause included in the Slovakia-Netherlands BIT was incompatible with EU law. Further, the Court held that the investment arbitration clauses in all intra-EU BITs have an “adverse effect on the autonomy of EU law” and hence are not compatible with EU law.

The history of the intra-EU BITs dates back to the 1990s – before the enlargement of the Union. Initially, they were concluded mainly between existing MSs and countries, which were not yet members, therefore for the purposes of the EU they were considered as “third countries”. The purpose of the agreements was to provide investors with greater security and assurance, as well as to strengthen their protection, for example through arbitration procedures as means of resolving investment disputes. According to the European Commission, after the enlargement of the EU, such “extra” reassurances are unnecessary, due to the reason that the EU single market rules provide equal rules applicable to all EU MSs, hence all MSs are subject to the same rules in the single market. Moreover, the rules of the EU guarantee equal protection for all investors (e.g. non-discrimination). Contrary, intra-EU BITs are considered to be discriminatory as they confer rights to investors from certain EU countries only, while they do not provide the same conditions to others. In conclusion, the European Commission claims that the BITs’ provisions overlap and are in conflict with the EU single market rules governing cross-border investment. Additionally, Jonathan Hill, EU Commissioner for Financial Services, Financial Stability and Capital Markets Union, notes that intra-EU BITs are “outdated and no longer necessary in a single market of 28 Member States”. As an example he cites the experience of Ireland and Italy, which already terminated their intra-EU BITs.

The issue of the incompatibility of the agreements with the European laws is not something new, as the Commission has been urging this for years and calling on the Member States to take some actions. However, only Ireland and Italy terminated their intra-EU BITs in 2012 and 2013, respectively. After most of the other States did not initiate any actions in this regard, in 2015 the European Commission requested five MSs (Austria, The Netherlands, Romania, Sweden and Slovakia) to terminate their intra-EU BITs due to their incompatibility with EU law and initiated infringement proceedings against those countries. Since the “Achmea” judgement was issued in 2018, the European Commission has been pushing the Member States to terminate all their intra-EU BITs as soon as possible. However, this did not have much effect as only few Eastern European Member States complied with the Commission’s request. As a result, in January 2020, the MSs announced their intention to terminate all their intra-EU BITs. Finally, the Member States negotiated under the supervision of the Commission a plurilateral agreement for the termination of the BITs, which resulted in the Termination Agreement. The Agreement is a crucial milestone in the reshaping of the EU’s investment law regime.

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