intra-EU BITs Research Articles

Book Review: C. Baltag, A. Stanic, The Future of Investment Treaty Arbitration in the EU: Intra-EU BITs, the Energy Charter Treaty, and the Multilateral Investment Court (Kluwer Law International, 2020)

Book Review: C. Baltag, A. Stanic, The Future of Investment Treaty Arbitration in the EU: Intra-EU BITs, the Energy Charter Treaty, and the Multilateral Investment Court (Kluwer Law International, 2020)

Intra-EU BITs after Achmea: A Cross-Cutting Issue

In Achmea, the CJEU pronounced an arbitration clause in an intra-EU BIT non-compliant with EU law because it found that it endangered the stability of the EU’s judicial architecture and encroached on EU courts’ privilege to interpret EU law. While the judgment came as a huge surprise, its repercussions and aftermath are still uncertain. It is unclear what the judgment’s holding is, whether it covers arbitration clauses different from the one that reached the CJEU and what impact it will have on investment arbitration in Central Europe. Nonetheless, it is certain that the ruling generated a huge pessimism.

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.

Reform of Investment Dispute Settlement and Developments in EU Investment Law: Is There Any Future for Investment Treaty Arbitration in Europe? Some Comments in the Light of Achmea Decision

The contribution aims at commenting on the fate of the intra-EU BITs after the recent judgment of the CJEU C-284/16 (Slovak Republic v. Achmea). The judgment produced a shock among international lawyers and members of the international arbitration community. To its better understanding, the judgment needs to be read in a broader political context. It includes, on one hand, the long-lasting effort of the European Commission to push the Members States to terminating or withdrawing from the existing intra-EU BITs and, on the other hand, the contemporary backlash in the European society against the ISDS as such. This judgment clearly stresses the autonomy of the EU legal order. From the international law perspective of the possible implications of Achmea, however, one should not rush to conclusions. One can expect more successful actions on annulment of arbitral awards in the EU Member States. However, a number of investment arbitrations take place in accordance with ICSID rules (where review and interference by national courts does not apply) or outside the ICSID, but tribunals with a non-EU jurisdiction. It is not clear if the tribunals will respect the Achmea judgment. From the point of view of the law of treaties, it results that neither the CJEU judgment itself, nor the underlying provisions of the TFEU can cause the invalidity or termination of the BIT in question, unless the Member States take steps under the law of treaties to terminate the BIT.

The Multilateral Investment Court: A Stumbling Block for Comprehensive and Sustainable Investment Law Reform

For the last years, reforming the international investment law regime has been a key priority of the trade agenda of the European Commission. Two important decisions in March 2018 can either be seen as a stepping stone or stumbling block in this regard. On 20 March 2018, the Council authorised negotiations for a treaty establishing a multilateral investment court (MIC). This proposal was yet the latest step in a series of activities aimed at replacing the traditional arbitration system of dispute settlement in investment treaties (Investor-State Dispute Settlement, ISDS) with a treaty-based MIC. The latest development concerns the multilateralization of the Investment Court System leading to a MIC. After lobbying for this approach in various intergovernmental fora, the Commission developed a more concrete proposal over the course of 2016 and the first half of 2017. Last year, the ISDS debate moved into the auspices of UNCITRAL Working Group III. Neither the negotiation mandate nor the UNCITRAL mandate touch upon substantive investment standards or refer to the current debates and negotiations on business and human rights. The negotiations will therefore not address any substantive elements of investment treaties. In all likelihood, they will also not address procedural issues such as counterclaims, participation rights of affected stakeholders, presumption of responsibility or burden of proof. The second important decision was taken two weeks earlier by the Court of Justice of the European Union (CJEU) on 6 March 2018. In its ruling in the case C-284/16 Achmea, the CJEU clarified that investment agreements between EU Member States (so-called intra-EU BITs) that have an ISDS clause violate EU law. It is not quite clear whether the CJEU would also transfer its view to other agreements such as CETA or the planned treaty for a MIC. However, the ruling indicates that any investment agreement providing for dispute settlement procedures in which EU law can be applied or interpreted and which does not ensure a review of this interpretation by the CJEU is in breach of EU law.

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.

The Incompatibility of Intra-EU Investment Treaty Arbitration With European Union Law – Assessing the Scope of the ECJ's Achmea Judgment

Abstract: In March 2018, the European Court of Justice rendered its Achmea judgment, by which the Court considered the investor-State dispute settlement (ISDS) clause contained in the Dutch-Slovakian investment treaty to be incompatible with EU law. Even though the judgment is considered to be a landmark decision, its potentially far-reaching consequences remain, due to a rather obscure legal reasoning, difficult to assess. The aim of the present contribution is to assess the scope of the Achmea judgment in order to shed light on its relevance for pending and future intra-EU investment arbitrations. In view of the ECJ's Opinion 1/17 rendered in April 2019 and in consideration of recent arbitral practice it is concluded that the scope of the Achmea judgment concerns the incompatibility of intra-EU investment treaty arbitration with EU law. This means on the one hand that the reasoning in Achmea is transferrable not only to ISDS clauses in other intra-EU BITs, but also to Article 26 of the Energy Charter Treaty. On the other hand, the analysis shows that contract-based investment arbitrations are not concerned by the ECJ's findings. Finally, and in view of its clarified scope of application, the relevant factors for analysing the consequences of the Achmea judgement are identified.

The Uneasy Relationship between Intra-Eu Investment Tribunals and the Court of Justice's Achmea Judgment

This paper focuses on the ways in which investment tribunals constituted under intra-EU BITs and the Energy Charter Treaty (in an intra-EU dispute) have reacted to the Court of Justice’s Achmea judgment of 6 March 2018. The first part of the paper maps out the existing intra-EU arbitrations in which the issues arising from Achmea appear in one form or another. We then take a critical look at how the disputing parties have used Achmea in their argumentation and how the investment tribunals have dismissed these arguments and upheld their jurisdiction. The second part of the paper is analytical. When the tribunals uphold their jurisdiction and decide on the merits, they knowingly deliver an award, which is unenforceable in the Respondent State and the entirety of the EU. By drawing parallels with decisions rendered by other international tribunals, we argue that the rendering of potentially unenforceable awards is not specific to intra-EU investment disputes. We then look at why international tribunals render potentially unenforceable awards. The third part of the paper presents several suggestions of how intra-EU investment tribunals should tackle the Achmea conundrum, either by declining their jurisdiction pursuant to judicial comity or upholding their jurisdiction but dismissing the cases as inadmissible.

The Uneasy Relationship between Intra-EU Investment Tribunals and the Court of Justice’s Achmea Judgment

This article focuses on the ways in which investment tribunals constituted under intra-EU BITs and the Energy Charter Treaty (in an intra-EU dispute) have reacted to the Court of Justice’s Achmea judgment of 6 March 2018. The first part of the article maps out the existing intra-EU arbitrations in which the issues arising from Achmea appear in one form or another. We then take a critical look at how the disputing parties have used Achmea in their argumentation and how the investment tribunals have dismissed these arguments and upheld their jurisdiction. The second part of the article is analytical. When the tribunals uphold their jurisdiction and decide on the merits, they knowingly deliver an award, which is unenforceable in the Respondent State and the entirety of the EU. By drawing parallels with decisions rendered by other international tribunals, we argue that the rendering of potentially unenforceable awards is not specific to intra-EU investment disputes. We then look at why international tribunals render potentially unenforceable awards. The third part of the article presents several suggestions of how intra-EU investment tribunals should tackle the Achmea conundrum, either by declining their jurisdiction pursuant to judicial comity or upholding their jurisdiction but dismissing the cases as inadmissible.

The evolution of european policies on investment arbitration

Over the last two decades, the European Commission radically altered its attitude towards investment arbitration and became its fierce opponent. This article considers the history of this change, attempts to fathom the pragmatic thinking of the European policy-makers, and considers its wisdom. The article analyses legal instruments that allowed the EU to implement the reform, examines their compliance with the Washington Convention 1965 and the Energy Charter Treaty and considers their practical effects on investment in Europe. It makes use of the historical and comparative legal methodology and occasionally relies on statistical data. The reasons behind the EU policies might have included the global backlash against the current system, the dissatisfaction with the Member States being targeted as respondents, the aspirations to move the Union towards a more centralised federation, and possibly the populist motives. Having started with the intra-EU BITs, the EU authorities are now leading the way of the global reform of ISDS with the idea of permanent tribunals bearing a strong resemblance to the state judiciary. Many remain sceptical, and the initial economic effects were unfavourable. A surprising aspect was the role the CJEU had to play. It delivered a decisive blow to the existing system in alignment with the Commission's policies, but without openly admitting the motives behind its decisions, and relying instead on the principle of autonomy of the EU law.

역내EU BIT상 국제투자중재의 위기 – Achmea 선결적 판결을 중심으로 –

역내EU BIT상 국제투자중재의 위기 – Achmea 선결적 판결을 중심으로 –

Achmea and its Implications for Investor Dispute Settlement

Arbitration in disputes between investors and States has been discussed most controversially in recent years, with the discussions culminating in the context of CETA and in the proposed TTIP but also in relation, for example, to cases such as the Moorburg case or the Vattenfall case turning on the German nuclear phase-out. The case of Achmea was far less well known in public but it offered the Court of Justice of the European Union (CJEU) the opportunity to rule on arbitration under a specific type of investment agreements, the so-called ‘intra-EU BITs’. Intra-EU BITs are bilateral investment treaties between EU Member States that foresee, in one way or the other, investment arbitration to be brought by investors from one EU Member State against another EU Member State. These treaties have come under fire in recent years and the European Commission has urged Member States to abolish them. Academics have also debated the viability of intra-EU BITs. The Court of Justice handed down its judgment on 6 March 2018, causing a shock to the investment lawyers’ community. The exact meaning and effect of the judgment, including its impact on extra-EU BITs, however, has been subject to most diverse interpretations in academic writing. After a short introduction of the Achmea case, this article presents the background of the various conflict lines between EU law and intra-EU BITs and then discusses the (potential) implications of the judgement for these conflict lines as well as for the various types of investor protection agreements.

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.

Slovak Republic v. Achmea from a Public International Law Perspective: Is State Consent to Arbitrate Under Intra-EU BITs Still Valid?

This essay is a contribution to the debate on the implications of the recent decision of the CJEU in Slovak Republic v. Achmea on investment arbitration under intra-EU BITs. This essay critically examines the implications that the findings of the CJEU may have on the validity of State consent to arbitrate under treaties as a matter of public international law. The CJEU concluded that there is an inconsistency (or a treaty conflict) between provisions of intra-EU bits containing an agreement to arbitrate and provisions of the TFEU. The resolution of such a treaty conflict in favour of the TFEU inevitably affects the validity of agreements to arbitrate contained in intra-EU BITs. This essay considers the public international law rules on treaty conflict, in particular, Article 30(3) of the VCLT, and concludes that this provision’s requirement that conflicting treaties must deal with the same subject matter, will become central in the analysis of any tribunal dealing with the issue in the future. This requirement may serve as a lifeline for investment arbitration in the aftermath of Slovak Republic v. Achmea. The essay also addresses the conflict provision of Article 351(1) of the TFEU to conclude that it is not applicable to the conflict with BITs, and would thus not affect the validity of the consent to arbitrate contained in intra-EU BITs.

After Achmea: Maintaining the EU Law Compatibility of Intra-EU BITs Through Treaty Interpretation

Following the CJEU’S preliminary ruling in Achmea, the Netherlands announced on 26 April 2018 its intention to terminate all intra-EU BITs, on the basis that termination is the only available option. This article takes issue with that proposition by assessing the Achmea ruling and its effects from the perspective of treaty interpretation under customary rules of international law. It notes how the analysis from the CJEU failed to interpret the Netherlands-Slovakia bit in accordance with the VCLT, especially by not departing from the presumption against the incompatibility of the bit with EU law. This article also argues how and why joint interpretations by parties to intra-EU BITs, as authentic expressions of their common understanding, may constitute an effective alternative to termination or amendment of intra-EU bits in the wake of the Achmea judgment. In fact, this is a solution that was already applied by the European Commission in 2003 in relation to the bits of the eight (then) accession or candidate states (all now EU Member States) with the United States. Furthermore, this could potentially constitute another option for policy-makers so as to maintain compatibility of intra-EU BITs with EU law, as well as other international agreements between Member States equipped with dispute settlement mechanisms, through treaty interpretation.

Achmea: The End of Investment Arbitration as We Know It?

The authors focus on the impact of the Achmea judgment on the current system of investment treaty arbitration. Particularly, the authors look at the impact on arbitration clauses in the intra-EU bits and the ECT. The authors also consider the possible impact of the decision on investment arbitration clauses in investment contracts with the EU Member States, the future intra-EU investment court system, the EU Member States’ bits with third countries, the CETA investment court system and the multilateral investment court. Is the Achmea judgment the end of investment arbitration as we know it? The authors conclude that Achmea marks the end of one chapter in the history of investment treaty arbitration, specifically that of investment treaty arbitration based on intra-EU bits. The authors argue that Achmea also marks the beginning of a new chapter in investment treaty arbitration. According to them, Achmea is an additional factor in the current legitimacy crisis of investment treaty arbitration, which forces both States and the arbitration community to look for new innovative solutions to replace or at least reform the current system.

Achmea: The End of Investment Arbitration as We Know It?

The authors focus on the impact of the Achmea judgment on the current system of investment treaty arbitration. Particularly, the authors look at the impact on arbitration clauses in the intra-EU BITs and the ECT. The authors also consider the possible impact of the decision on investment arbitration clauses in investment contracts with the EU Member States, the future intra-EU investment court system, the EU Member States’ bits with third countries, the CETA investment court system and the multilateral investment court. Is the Achmea judgment the end of investment arbitration as we know it? The authors conclude that Achmea marks the end of one chapter in the history of investment treaty arbitration, specifically that of investment treaty arbitration based on intra-EU BITs. The authors argue that Achmea also marks the beginning of a new chapter in investment treaty arbitration. According to them, Achmea is an additional factor in the current legitimacy crisis of investment treaty arbitration, which forces both States and the arbitration community to look for new innovative solutions to replace or at least reform the current system.

Slovak Republic v. Achmea from a Public International Law Perspective: Is State Consent to Arbitrate Under Intra-EU BITS Still Valid?

Slovak Republic v. Achmea from a Public International Law Perspective: Is State Consent to Arbitrate Under Intra-EU BITS Still Valid?

Turning Tides: The Landmark Decision in the Achmea Case – The Ecosystem of EU Law Means the End of Intra-EU BITs

The Court of Justice of the EU (CJEU) has delivered a landmark decision by ruling that Article 8 of the bit between the Netherlands and the Slovak Republic, providing for investor-state arbitration, is not compatible with EU law. The implications of this ruling go beyond this particular case, which can be considered a landmark decision for two reasons. First of all, the CJEU placed particular emphasis on the ecosystem of EU law, as enshrined in Articles 344 and 267 of the Treaty on the Functioning of the European Union (TFEU). Moreover, with this ruling, the CJEU has finally put an end to the legal uncertainty that has arisen regarding the place of so-called intra-EU BITs in the legal order of the EU. This case note provides the background to the case and a deeper analysis of the judgement following the three-step approach adopted by the CJEU, and will look ahead towards unaddressed questions that might be raised as a consequence of this ruling.

Extra-EU BITs and EU law: Immunity, 'Defense of Superior Orders', Treaty Shopping and Unilateralism

This paper addresses three aspects of the relationship between extra-EU BITs and EU law. First, are disputes under extra-EU BITs concluded before the given country’s accession affected (and suppressed) by EU law? Second, given the fact that Member States ceded parts of their sovereignty to the EU, would the “defense of superior orders” work in relation to Member State acts mandated by EU law? Third, will the suppression of intra-EU BITs intensify the use of extra-EU BITs in terms of treaty shopping?