intra-EU Bilateral Investment Treaties Research Articles

Article: German Federal Supreme Court Declares Intra-EU Investor-State ICSID Arbitration Inadmissible

In 2018, the Court of Justice of the European Union (CJEU) declared arbitration clauses in intra-EU bilateral investment treaties (BITs) incompatible with EU law, extending this ruling to multilateral investment protection agreements such as the Energy Charter Treaty (ECT) in 2021. Section 1032 II German Code of Civil Procedure (ZPO), a provision solely known to German law, allows for the invalidation of arbitration agreements even before the stage of enforcement. The Netherlands and Germany sought to apply this provision to intra-EU International Centre for Settlement of Investment Disputes (ICSID) arbitrations, resulting in conflicting decisions by the Higher Regional Court Cologne and the Court of Appeal Berlin. On 27 July 2023, the German Federal Supreme Court affirmed the inadmissibility of the intra-EU investor-state arbitrations at ICSID, aligning with the previous decisions of the Higher Regional Court Cologne and the CJEU. Among other considerations, the German Federal Supreme Court ruled on the applicability of section 1032 II ZPO to ICSID arbitration proceedings, primarily justifying its decision by emphasizing the primacy of EU law. This case note analyses the German Federal Supreme Court’s reasoning and provides insights into the practical implications and the broader impact on intra-EU investment arbitration proceedings.

Article: State Aid Through Arbitration Awards: EU Law as a Ground for Non-enforcement

The relationship between international investment law (IIL) and EU law is not without problems as evidenced by the Achmea ruling. These tensions have become more evident in the Micula case in which the commission resorted to the state aid rules in order to attack arbitration awards arising from intra-EU Bilateral investment treaties (BITs) (deeming its enforcement as state aid). Despite its two rulings relating to the Micula saga, the Court of Justice of the European Union (CJEU) has not yet validated (or not) the application of state aid rules to the enforcement of intra-EU awards. Hopefully, the upcoming general court’s judgment shall rule on the merits of the Micula case thereby dispelling doubts. Nevertheless, it is foreseeable that further clarifying judgments will be required concerning the recognition and enforcement of intra-EU awards in non-EU jurisdictions. This article reviews the current situation to show that, while state aid rules could adequately prevent the enforcement of an intra-EU award within EU borders, they lack effectiveness for blocking enforcement beyond its borders. Arbitration award, intra-EU BIT, State aid, Tax benefit repeal, Damages, Award recognition, Award enforcement, Public policy, Micula, Achmea, ICSID Convention, New York Convention.

Conflict resolution between EU law and bilateral investment treaties of the EU Member States in the aftermath of Achmea

Abstract This article examines how conflicts between European Union (EU) law and Bilateral Investment Treaties (BITs) between EU Member States (intra-EU BITs) are to be tacked following the judgment of the Court of Justice of the EU (CJEU) in Achmea (C-284/16). Starting from an analysis of the CJEU’s ruling and its aftermath (Sections II and III respectively), the article argues that conflicts in the interrelation of EU law with inter se agreements, such as intra-EU BITs, are to be approached as normative conflicts between different sub-systems within the broader system of public international law and resolved in favour of EU law. This argument is based on a two-fold premise, analysed in Section IV: first, that EU law does not constitute a ‘new legal order’, outside of and cut off from international law, but rather a ‘self-contained regime’, operating ‘within’ the broader system of international law. Since EU law is treaty law, conflicts in its relationship with (other) inter se agreements are, therefore, to be addressed using the conflict rules of international law. Against this background, the second premise of the article is that the EU Member States have agreed on a special conflict rule to regulate conflicts between EU law and inter se agreements. That rule is the principle of primacy of EU law. Having established the applicable conflict rule, Section V expands on the consequences of its application to the conflict between EU law and investor-state arbitration clauses in intra-EU BITs affirmed by the CJEU in Achmea.

Veolia v Republic of Lithuania: A Case on the Legality of the Suspended Intra-EU Investment Arbitration and the Question of Lis Pendens

This article addresses the issue of parallel proceedings in suspended arbitration cases based on intra-EU bilateral investment treaties. The furthering of such disputes was declared illegal by the recent CJEU decision in PL Holdings case. However, not all of them were terminated by the agreement of the parties. The said illegality of such proceedings might prevent Governments of the EU Member States to attend the hearing or implement the award, but this alone cannot force the investor to scrap the claim. The pertinent example of the investment dispute in Veolia Environnement S.A. and Others v. the Republic of Lithuania provides additional argument for the investor to hold onto the arbitral tribunal. Lithuanian courts refused so far to accept the Government’s counterclaim avoiding the duplication of the proceedings in the same case. Moreover, Supreme Court’s decision provides a far-reaching interpretation on the nullity of all inter EU arbitration agreements ever concluded. The following analysis provides some certainly interesting details.

The European Union’s Proposal for the Modernization of the Energy Charter Treaty

After the European Court of Justice seminal decision in Achmea, where consent to investor-State arbitration enshrined in intra-EU bilateral investment treaties was found to be incompatible with the autonomy of the European Union (EU) legal order, the European Commission has presented a draft proposal for the modernization of the Energy Charter Treaty (ECT). The proposal relies markedly on the new investment agreements concluded between the European Union and third states, mainly CETA and the agreements with Singapore and Vietnam. It puts forward some key amendments on substantive provisions, by creating regulatory space for sustainable development and transition to clean energy. As regards the fair and equitable standard, the proposal adds that the ‘the tribunal may take into account whether a Contracting party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, upon which the investor relied in to make or maintain the covered investment’. This article focuses on the concept of ‘specific representation’, by asking whether it (still) encompasses promises made by the legislator, in order to access the impact that said provision might have on previous ECT arbitration case law concerning renewable energy and climate change. sustainable development, Energy Charter Treaty, legitimate expectations, specific representation, autonomy, investment treaties, fair and equitable treatment, energy transition

The Constitutional Dilemmas of Terminating Intra-EU BITs

The adoption of the agreement for the termination of intra-EU bilateral investment treaties in 2020 is a big step forward in the long saga of these investment treaties. This agreement aims to overcome every point of discord between the investment agreements and the EU legal order by terminating both intra-EU bilateral investment treaties and the pending dispute settlement procedures that arose from them. In light of the landmark 2018 Achmea judgement, the agreement asserts that the key role should be given to the Court of Justice of the European Union in this area. This is a great endeavour since almost one-fifth of the investment arbitrations worldwide came from disputes within the European Union. However, it does not seem that the agreement will have the final say since constitutional questions were raised concerning its application. In this spirit, this article briefly outlines the legal and constitutional dilemmas intra-EU bilateral investment treaties pose in the European Union. Then, it outlines the contours and major provisions of the termination agreement, especially with regard to the pending arbitration proceedings. In light of a concrete case brought before the Hungarian Constitutional Court, the article explores the constitutional dilemmas raised by the termination agreement. It highlights three major questions: the international legal aspects, the question pertaining to the European judicial dialogue, and the constitutional principle of non-retroactivity. The article takes into account the major theoretical aspects of each of these dilemmas.

Intra-EU BITs in Light of the Achmea Decision

In its Achmea decision rendered in March 2018, the Court of Justice of the European Union declared that arbitration clauses contained in intra-EU bilateral investment treaties are incompatible with EU law. The Court’s judgment brought to an end the decade long legal battle between the Member States and the European Commission over the EU law compatibility of these treaties. In response to Achmea, the majority of Member States have agreed to terminate their treaties in order to eliminate the EU law incompatibility identified by the Court. At the same time, the political battle over the need for the special protection of cross-border investments in the EU continues. This paper looks back at the political and legal controversy that was sparked by intra-EU bilateral investment treaties and culminated in the Court’s Achmea judgment, and briefly discusses the practical consequences of Achmea for intra-EU investment protection.

Veolia v Republic of Lithuania: A Case on the Legality of the Suspended Intra-EU Investment Arbitration and the Question of Lis Pendens

This article addresses the issue of parallel proceedings in suspended arbitration cases based on intra-EU bilateral investment treaties. The furthering of such disputes was declared illegal by the recent CJEU decision in PL Holdings case. However, not all of them were terminated by the agreement of the parties. The said illegality of such proceedings might prevent Governments of the EU Member States to attend the hearing or implement the award, but this alone cannot force the investor to scrap the claim. The pertinent example of the investment dispute in Veolia Environnement S.A. and Others v. the Republic of Lithuania provides additional argument for the investor to hold onto the arbitral tribunal. Lithuanian courts refused so far to accept the Government’s counterclaim avoiding the duplication of the proceedings in the same case. Moreover, Supreme Court’s decision provides a far-reaching interpretation on the nullity of all inter EU arbitration agreements ever concluded. The following analysis provides some certainly interesting details.

The Web of Autonomy of the EU Legal Order: Achmea

Achmea is a seminal case on intra-EU bilateral investment treaties, which will have wider effect on EU external relations law. The judgment has triggered the renegotiation of all intra-EU bilateral investment treaties (BITs), and is one in a long strand of cases in which the Court has interpreted the principle of autonomy of the EU legal order. In Achmea, the Court reinstates the claim against international law and, more specifically, against the judicial control of external judicial views. The case is closely connected to the subsequent Opinion 1/17, and was expected to anticipate the results thereof in terms of the compatibility of investor-state dispute settlement (ISDS) proceedings with the principle of autonomy. The aim of this chapter is to study the relevance and consequences of Achmea for the EU legal order in general and EU external relations in particular. The ‘blind autonomy’ which the Court has purportedly resorted to in Achmea may be difficult to maintain in all practical situations. Inevitably, some exceptions will be necessary to accommodate ‘reasons of policy’, which are already appearingat both judicial and legislative levels. The former includes Opinion 1/17. At the legislative level, four Member States have refrained from signing the Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union (‘Termination Agreement’) following the Achmea judgement. These exceptions lead in the direction of an asymmetric conception of autonomy in EU law, which strongly contrasts with the ‘totalitarian vision’ endorsed by Achmea.

The Termination Agreement of Intra-EU Bilateral Investment Treaties: A Spaghetti-Bowl with Fewer Ingredients and More Questions

This article deals with the issue of the implementation of the Achmea judgment of the Court of Justice of the European Union (CJEU) through the Termination Agreement of Bilateral Investment Treaties (‘Termination Agreement’, TA) between some Member States of the European Union (EU). The article focuses on the analysis of the TA provisions that terminate Bilateral Investment Treaties (‘intra-EU BITs’) and investor-State dispute settlement (ISDS) among EU Members. It also describes TA provisions regulating concluded, new, and pending arbitration proceedings having as a reference the date the CJEU issued the Achmea judgment. Also, it examines how the TA regulates pending arbitration proceedings and discusses how TA Members are allowed to resort to transitional measures to resolve their dispute, throughout an amicable resolution proceeding, if they fulfil some conditions. Further, the article analyses some systemic issues of the TA, some related to the EU investment protection regime, others regarding the legal implications for intra-EU BIT provisions for EU Member States which did not sign the TA. Further, the article examines some possible issues related to the legal nature of the TA under international law and EU law.

The agreement terminating intra-EU BITs: are its provisions on ‘New’ and ‘Pending’ Arbitration Proceedings compatible with investors’ fundamental rights?

Abstract On 5 May 2020, 23 Member States of the EU signed a plurilateral treaty with the purpose of terminating the nearly 130 Bilateral Investment Treaties (BITs) between them (the so-called ‘intra-EU BITs’) and the 11 sunset clauses that continue in effect in intra-EU BITs that have already been terminated. The treaty, entitled the ‘Agreement for the Termination of Bilateral Investment Treaties Between the Member States of the European Union’, marks the beginning of the next—but by no means the final—chapter in the controversy over the status of intra-EU BITs. In this article, we examine one of the many important legal questions raised by the Agreement; namely, whether its attempt to undercut arbitrations commenced well before the Agreement came into force, including those resulting in awards rendered before the Achmea judgment, is compatible with investors’ rights under the European Convention on Human Rights and the Charter of Fundamental Rights of the European Union. We argue that by purporting to deprive investors of the fruits of valid claims in this way, the Agreement infringes Article 1 of the First Protocol to the ECHR (‘A1P1’) and may also breach the rights of access to justice and a fair hearing under Article 6(1) (and their equivalents in the Charter).

Vattenfall in the Aftermath of Achmea: Between a Rock and a Hard Place?

On 6 March 2018, the Court of Justice of the European Union (CJEU) issued its judgment in the case between Slovakia v. Achmea BV (Case C-284/16). The CJEU ruled that the investor-state dispute settlement (ISDS) provisions in the Netherlands-Slovakia bilateral investment treaty are incompatible with the principle of autonomy of EU law. This addressed a highly controversial issue that has been lingering for years: whether bilateral investment treaties (BITS) concluded between EU Member States are compatible with EU law. The judgment has caused controversy amongst scholars and international practitioners, and its significance is undeniable. Yet, the judgment has led to many unanswered questions, including, inter alia, what EU law requires of arbitral tribunals in such cases, how the seat of the arbitration tribunal may affect the outcome of the above judgement and whether the outcome of the judgement is limited to intra-EU BITS. This Article will reflect on these open issues and will endeavour to respond such issues by examining the application of the above ruling in the context of the case Vattenfall AB and others v. Federal Republic of Germany (II) (ICSID Case No. ARB/12/12) as well as other recent investment arbitration decisions.

Slowakische Republik (Slovak Republic) v. Achmea BV (C.J.E.U.)

On March 6, 2018, the Court of Justice of the European Union (CJEU) found in Slowakische Republik (Slovak Republic) v. Achmea B.V. that the arbitration agreement contained in the 1991 Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic (BIT) had an adverse effect on the autonomy of EU law and, thus, was incompatible with EU law. This important decision has ignited a debate on the compatibility of other arbitration agreements in both intra-EU bilateral investment treaties (intra-EU BITs) and in the Energy Charter Treaty (ECT) with EU law.

The Impact of Achmea on Investor-State Arbitration under Intra-EU BITs: A Treaty Law Perspective

This article examines the consequences of the Court of Justice of the European Union’s (CJEU) ruling in Achmea concerning Investor-State Arbitration (ISA) under intraEU Bilateral Investment Treaties (BITs) from a treaty law perspective. It begins by briefly setting out the arguments of Advocate General Wathelet and the CJEU supporting their different positions on whether intra-EU BITs ISA clauses are compatible with EU law. The article then proceeds to analyse Achmea’s implications for intra-EU BIT ISA. It concludes that, as a result of the CJEU’s ruling, arbitral tribunals are deprived of their jurisdiction to entertain investors’ claims brought under intra-EU BIT ISA clauses. Finally, the article argues that Achmea’s applicability to cases brought under intra-EU BIT ISA clauses is limited, using the application of EU law as a relevant qualification. In order for an arbitral tribunal to be deprived of its jurisdictional competence as a result of Achmea, it must be entitled to interpret and apply EU law directly or indirectly in determining its jurisdiction.

Implementing Achmea: The Quest for Fundamental Change in International Investment La

The judgment of the Court of Justice in the Achmea case evoked significant repercussions regarding the application and operation of the bilateral investment treaties (BITs) concluded between EU Member States. As a result of this decision, EU Member States have decided to terminate almost 190 intra-EU BITs. Nevertheless, full implementation of the Achmea judgment remains a complex issue, entangled in political and legal controversies concerning intra-EU BITs which have been present for more than a decade. On a more general level, the implementation process is simultaneously entwined in two other significant debates: the specifics of the rights of investors, and the relationship between EU law and international law.

THE FATE OF INVESTMENT DISPUTE RESOLUTION AFTER THE ACHMEA DECISION OF THE EUROPEAN COURT OF JUSTICE

This article explores the contents and consequences of the Achmea judgment recently given by the European Court of Justice (6 March 2018, case C-284/16). In its first part, the article analyses the judgment from a European point of view. It notes that Achmea is primarily concerned with the autonomy of the EU legal order in international dispute resolution and only secondarily with investment arbitration. The judgment seamlessly ties in with the Court’s Opinion 2/13 on the Accession of the EU to the European Convention of Human Rights. In its second part, the article assesses the consequences of the judgment for current and future investment dispute resolution. It argues that (i) investment arbitration is over for intra-EU Bilateral Investment Treaties and (ii) most likely also for intra-EU disputes under the Energy Charter Treaty; (iii) the European Commission must be careful not to jeopardise the supremacy of the ECJ in interpreting the EU law when concluding future international dispute resolution agreements; (iv) the same holds true regarding dispute resolution under the UK Withdrawal Agreement when negotiating the Brexit.

Intra-EU Bilateral Investment Treaties and EU Law AfterAchmea: “Know Well What Leads You Forward and What Holds You Back”

This paper analyzes the compatibility of intra-EU bilateral investment treaties—intra-EU BITs—with EU law. The status and validity of intra-EU BITs gave rise to a heated debate in Europe, which culminated in the CJEU's recent controversial judgment inAchmea.This Article demonstrates that although the CJEU approached intra-EU BITs from the angle of federalism—where they are both redundant and illegitimate—the reality is that EU law does not provide for the kind of protection afforded by BITs. The paper gives both a positivist and a critical assessment of theAchmearuling. It argues that the judgment should be construed in the context of the underlying facts and, hence, notwithstanding the CJEU's apparently anti-arbitration attitude, its holding is rather narrow. It gives an alternative theory on intra-EU BITs' fit in the EU internal market—based on European reality—showing that the complete invalidation of intra-EU BITs is flawed because the overlap between BITs and EU law is merely partial: BITs address a subject EU law does not. This Article's central argument is that intra-EU BITs accelerate the internal market and, hence, their suppression does not lead the European integration further, but holds it back. Finally, this Article argues that the prevailing pattern of investment protection is a global scheme that cannot be arrested through regional unilateralism as essayed by the CJEU.

Digging Deeper: Summary of the Hearing before the CJEU in the Achmea Case

On 6 March 2018, the Court of Justice of the European Union (CJEU) rendered its much-awaited judgment in Slovak Republic v Achmea, in which it found that the arbitration clause contained in Article 8 of The Netherlands-Slovak Republic bit was incompatible with EU law. While the implications of this decision are not entirely clear yet, it is generally agreed that it is likely to have an impact on pending and future arbitration proceedings initiated pursuant to arbitration clauses contained in intra-EU bilateral investment treaties (BITs). This article illustrates the arguments presented at the hearing that took place before the CJEU on 19 June 2017. The contribution addresses two main points. First, it lays out the arguments of the disputing parties, the Slovak Republic and Achmea. Second, it sheds light on the positions of the several interested EU Member States as argued at the hearing in Luxembourg. At the hearing, the interested Member States presented opposing views on the interpretation of Articles 344, 267, and 18 TFEU. This article facilitates the understanding of the different ways in which these Articles are interpreted, and have been interpreted, by the Member States and sets out their arguments in favour or against intra-EU BITs. The multiplicity of the views expressed at the hearing may assist the interested audience in understanding how the Advocate General Wathelet and the CJEU could reach such different conclusions on the same case.

The Fate of Investment Dispute Resolution after the Achmea Decision of the European Court of Justice

This article explores the contents and consequences of the Achmea judgment recently given by the European Court of Justice (6 March 2018, case C-284/16). In its first part, the article analyses the judgment from a European point of view. It notes that Achmea is primarily concerned with the autonomy of the EU legal order in international dispute resolution and only secondarily with investment arbitration. The judgment seamlessly ties in with the Court’s Opinion 2/13 on the Accession of the EU to the European Convention of Human Rights. In its second part, the article assesses the consequences of the judgment for current and future investment dispute resolution. It argues that (i) investment arbitration is over for intra-EU Bilateral Investment Treaties and (ii) most likely also for intra-EU disputes under the Energy Charter Treaty; (iii) the European Commission must be careful not to jeopardise the supremacy of the ECJ in interpreting the EU law when concluding future international dispute resolution agreements; (iv) the same holds true regarding dispute resolution under the UK Withdrawal Agreement when negotiating the Brexit.

A Treaty Law Perspective on Intra-EU BITs

The Commission of the European Union (EU) sees intra-EU bilateral investment treaties (BITs) as incompatible with the overall structure of European Union law. Against this background, certain Member States have started to terminate their treaties. Also, some of the new Member States have, in their role as Respondents in intra-EU BIT arbitrations, asserted inter alia that the intra-EU BITs had been automatically terminated upon their accession to the EU and that BIT provisions were inapplicable because of the operation of EU law. This contribution deals with these questions from a treaty law perspective and examines the alleged conflict between EU law and intra-EU BITs in investment cases as well as the consensual termination of intra-EU BITs, including the sunset clauses incorporated therein. It argues that if intra-EU BITs are already ‘in action’, their protection usually persists. On the other hand, investors enjoy only limited protection when States agree to terminate an intra-EU BIT by consent.