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23 EU Member States sign an agreement to terminate intra-EU bilateral investment treaties

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12 May 2020

Further to the decision of the Court of Justice of the European Union (the Court) in Case C-284/16 Slowakische Republic v Achmea BV on 6 March 2018 (previously reported on here) (Achmea), 23 EU Member States (the Signatories) signed an Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union (the Agreement) on 5 May 2020.  Austria, Finland, Ireland and Sweden did not sign the Agreement.  As a non-EU Member State, the United Kingdom is also not a party to the Agreement.


In the Achmea judgment, the Court held that the Treaty on the Functioning of the European Union must be interpreted as precluding the operation of an investor-state dispute settlement (ISDS) provision in a bilateral investment treaty (BIT) between Member States, such as Article 8 of the BIT between Slovakia and the Netherlands, which was under consideration in that case.  The Court did not offer any guidance as to the consequences of that finding. 

In the Agreement, the Signatories agreed, amongst other things, that:

  • BITs listed in Annex A to the Agreement are terminated (Article 2);
  • sunset clauses (i.e. the clauses found in many BITs, which extend the protection of investments made prior to the date of termination of that treaty for a further period of time) are also terminated and shall not produce any legal effects (Article 2(2) and Article 3);
  • arbitration clauses contained in the affected BITs are contrary to the EU treaties and inapplicable and, from the date on which the last of the parties to the BIT became an EU Member State, they cannot serve as a legal basis for arbitration proceedings (Article 4(1) and Article 5);
  • concluded arbitration proceedings (i.e. those that ended with a settlement, where the award was executed prior to 6 March 2018 and in which no challenge is pending or where the award was set side/annulled before the entry into force of the Agreement) shall not be affected by the Agreement (Article 6(1) and Article 1(4));
  • the Agreement shall not affect any agreement amicably to settle a dispute that is the subject of arbitration proceedings initiated prior to 6 March 2018 (Article 6(2));
  • where the Signatories are parties to BITs pursuant to which arbitration proceedings are pending or new arbitral proceedings are initiated, they shall, in cooperation with each other and on the basis of the statement in Annex C to the Agreement, inform arbitral tribunals of the legal consequences of Achmea, as set out in Article 4 (Article 7(a)), i.e. that arbitration clauses contained in intra-EU BITs “are contrary to the EU Treaties and thus inapplicable” and that such clauses “cannot serve as legal basis” for arbitration proceedings; 
  • where they are party to judicial proceedings concerning an award issued on the basis of a BIT, ask the competent national court (including in any third country) to set the arbitral award aside, annul it or to refrain from recognising and enforcing it (Article 7(b));
  • where an investor is a party to pending arbitration proceedings and has not challenged the disputed measure before the competent national court, certain transitional measures set out in Articles 8 to 10 apply.  Provided that the investor withdraws any pending arbitration or enforcement proceedings, and undertakes not to institute new arbitration or enforcement proceedings, there is the possibility to enter into a structured dialogue overseen by an impartial facilitator with the Member State within six months from the termination of the BIT in question and/or invoke judicial remedies under national law. This will be the case even if they otherwise would have been time-barred (Articles 8(1), 9 and 10).)  The provisions of the BITs will not, however, form part of the applicable law in any such proceedings before national courts (Article 10(3)).  Other forms of appropriate dispute resolution, including an amicable resolution, remain possible, provided the solution complies with EU law (Article 8(4)).

The Agreement comes into force 30 days after the date on which the depository receives the second instrument of ratification, approval or acceptance (Article 16(1)) and for each party, 30 days after the date of deposit of its instrument of ratification, approval or acceptance (Article 16(2)). 


With the entry into force of the Agreement, the intra-EU BITs in place between the Signatories to the Agreement as listed in Annex A to the Agreement will stand terminated.  The Agreement explicitly states that it does not apply to the multilateral Energy Charter Treaty (ECT) (Article X of the Preamble to the Agreement).  All EU Member States, as well as the EU itself, are parties to the ECT, as are a number of non-EU States. The EU is currently seeking to renegotiate the ECT.

The fact that four Member States did not sign the Agreement does not necessarily mean that those remaining intra-EU BITs will survive. They may eventually be terminated unilaterally or on terms different from those set out in the Agreement.

It is unclear whether the agreement by the Signatories to nullify the effect of the sunset clauses in intra-EU BITs and the agreement on the (retroactive) effects of Achmea will indeed have the desired effects under international law.  With respect to sunset clauses, in particular, it may be that investors will seek to argue – whether in reliance on the concept of legitimate expectations, the doctrine of acquired rights or otherwise – that a sunset clause cannot be retrospectively abolished by the contracting parties to the relevant intra-EU BIT in respect of investments that were made prior to termination.  (The period of time for which a sunset clause would have operated may, however, be of relevance for the assessment of damages.)

As for the effects of Achmea, the question that arises is whether contracting parties to an intra-EU BIT can subsequently agree that treaty's ISDS provision had been inapplicable prior to the conclusion of the (subsequent) Agreement terminating the BIT, in circumstances where this agreement affects the rights conferred on investors by that BIT.  The answer to that question may differ depending on, amongst other things, when the relevant investment was made, when the alleged breach of the BIT was committed and when any arbitral proceedings were initiated.  So far as pending arbitration proceedings are concerned, the default position in international law is that jurisdiction cannot be vitiated by facts that did not exist at the time jurisdiction was conferred upon the relevant tribunal.  Arbitrations conducted under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) entail a further layer of complexity, as the ICSID Convention does not allow a Contracting State or the claimant investor unilaterally to withdraw their consent to arbitration once given.  It remains to be seen, therefore, how arbitral tribunals will react to this new development.  

While the Agreement seeks to extend an olive branch to investors by creating the offer of a structured dialogue or the possibility to bring proceedings in national courts under national laws, this is unlikely to prove to be practical, or to create a viable replacement for the framework terminated by the Agreement.  

Even if going forward, an investor succeeds in a claim under an intra-EU BIT, enforcement of such an award in the EU (let alone the Signatories) is extremely unlikely.  While it remains legally possible to enforce such awards outside the EU, from a practical point of view, it is necessary to identify commercial assets against which enforcement is possible.  The Member State in question can be expected to resist enforcement strong and, indeed, Article 7(b) of the Agreement obliges the Signatories to do so.

The termination of intra-EU BITs will leave a significant gap in the legal protection available to EU investors making an investment in another Member State.  EU law does not adequately fill that gap because: (i) absent a BIT, EU investors do not have direct access to any dispute resolution forum other than the host State's domestic courts; (ii) the substantive protections in EU law are not on par with the protections afforded by BITs and only apply to the extent the measures being challenged fall within the areas regulated by EU law; and (iii) damages for EU law breaches are scarce and not on par with the level of damages typically awarded in investment treaty arbitrations under BITs.  

Investors could potentially also file a claim with the European Court of Human Rights (ECtHR) most notably for breach of the right to property (Article 1, Protocol 1) under the European Convention on Human Rights.  Before doing so, however, local remedies may need to be exhausted first, the substantive protection differs in scope from BITs and the "just satisfaction" awarded by the ECtHR is also typically significantly lower than damages typically awarded under BITs. 

While Article XV of the Preamble to the Agreement contains a promise that the Member States and the European Commission will intensify discussions with the aim of ensuring complete, strong and effective protection of investments within the EU, it is unlikely that an equivalent investment-protection regime, comparable to that which existed under the terminated BITs, will be replicated within the EU in the short to medium term.  

Unless and until a replacement regime is developed and implemented, investors may consider structuring new investments – or restructuring their existing investments – through a vehicle incorporated outside the EU, in order to secure protection under the umbrella of a BIT between a Member State (or the EU) and a non-Member State. Where possible, investors may also look to enter into a specifically-negotiated agreement with the relevant Member State or its instrumentalities.  For an investment not to be disqualified from treaty protection, there can be no dispute in existence or reasonably anticipated at the time of the (re)structuring.