EU Member States Sign Agreement to Terminate Intra-EU BITs While German Investor Brings Claim Against the Netherlands Under the ECT

On May 5, 2020, 23 European Union member states* formally agreed to the termination of intra-EU BITs.

The Agreement for the termination of bilateral investment treaties between members of the European Union comes as no surprise; a decision to terminate intra-EU BITs was reached in October of 2019, following declarations in January of that year regarding the legal ramifications of the CJEU’s ruling in the  Achmea v. Slovak Republic case.

As readers will recall, the CJEU found that the TFEU precludes the ability of investors from one EU member state to initiate an international investment arbitration proceeding against a member state.

The newly signed Agreement terminates all BITs signed between the parties (listed in the Agreement’s Annex), as well as the treaties’ sunset clauses, which otherwise would extend treaty protection to already established investments for a specified period after a BIT’s termination. The Agreement will enter into force 30 days after the Secretary-General of the Council of the EU, receives the “second instrument of ratification, approval or acceptance” from the member states (Art. 16).

While the Agreement does not affect concluded arbitration proceedings that ended with a settlement or award prior to March 6, 2018, it does have an impact on what it defines as “new” (initiated after March 6, 2018) and “pending” (initiated, but not concluded, prior to March 6, 2018) arbitration proceedings.

Regarding the former, Art. 5 of the Agreement states simply that “Arbitration Clauses shall not serve as legal basis for New Arbitration Proceedings.”

Regarding the latter, Arts. 7–9 of the Agreement lay out a series of steps to be taken by the parties. First, Art. 7 requires that any arbitral tribunal hearing a “pending” case be informed of the legal ramifications of Achmea, while any competent member state court currently hearing proceedings related to a “pending” claim will be asked to set aside, annul, or refrain from recognizing or enforcing the relevant award.

The Agreement further outlines a path toward the settlement of these “pending” claims by means of a “structured dialogue” (Art. 9), led by an “impartial facilitator” – an expert in EU law who will be appointed by EU authorities if the parties cannot agree on an appointment. These settlement proceedings must be initiated within six months of BIT termination, and may only be entered into if the CJEU or national court has found that the state measure contested in the original proceeding violated EU law.

Notably,  the Agreement does not address the Energy Charter Treaty, of which 26 EU member states, as well as the EU itself, are signatories.[1] While separate negotiations regarding the modernization of the ECT are currently underway, new claims continue to be brought against EU member states that have signed onto the ECT. Most recently, entities owned by  German energy company Uniper have notified the Netherlands of the existence of a dispute under the ECT. While public details remain sparse, this claim likely relates to the Netherlands’ planned phaseout of coal-fired power plants by 2030, as specified by the EU’s nationally determined contributions to the  Paris Agreement.

Observers have frequently noted that ECT has the potential to stymie efforts to combat climate change.

*Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, and Spain.

[1] Italy withdrew from the ECT in 2014.