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Bilateral UK/EU investment treaties reinvigorated but gaps remain

Following the Court of Justice’s 2018 judgment in Achmea, in which investor State dispute settlement (ISDS) arbitration provision of an intra-EU bilateral investment treaty (BIT) was found to be incompatible with EU law, a majority of EU Member States have moved to terminate their intra-EU BITs.

In May 2020, 23 Member States signed an agreement to that effect (Austria, Finland, Sweden, the UK and Ireland did not sign; although Ireland had already terminated its only intra-EU BIT). They also agreed to contest jurisdiction in pending intra-EU investment treaty arbitrations on the basis of the Achmea judgment, and to seek the termination of such arbitration and related enforcement proceedings. 

International Arbitration Review

The UK, however, retains BITs with a number of EU Member States and, following Brexit, these should no longer be considered as intra-EU BITs. These treaties not only allow for recourse to binding arbitration to resolve investment disputes but also provide more robust investment protections than current EU and European human rights law. Post-Brexit, the UK’s BITs with EU countries may, therefore, make it an attractive jurisdiction through which to structure certain investments into the EU and there may be a resulting increase in the number of arbitrations brought by UK investors against EU Member States. The UK also may be an attractive place to enforce intra-EU arbitral awards, in light of the UK Supreme Court’s unanimous February 2020 holding in the case of Micula and others v. Romania that the UK’s enforcement obligations under the ICSID Convention are not affected by principles of EU law.

The UK/EU Trade & Cooperation Agreement, however, has little in the way of investment protections and no ISDS provisions. Moreover, following Brexit, the UK is no longer party to the EU’s international investment agreements and the first replacement agreement the UK has concluded, the new UK-Japan trade agreement, does not provide for ISDS. The UK is expected to conclude investment treaties in 2021 to fill the gap created by Brexit and it will be interesting to see if the new treaties include ISDS.

This article is part of the International Arbitration Review.

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