European Commission initiates infringement proceedings against the UK and Finland for failing to terminate intra-EU BITs
On May 14, 2020 the EC initiated infringement proceedings against the UK and Finland for failing to terminate the intra-EU BITs to which they are a party. Though the UK has formally left the European Union, EU law continues to apply to the UK during the transition period, which ends on December 31, 2020.
The decision to terminate intra-EU BITs was reached in October 2019, and 23 member states – excluding Austria, Sweden, Ireland, Finland, and the UK—formally agreed to do so on May 5, 2020. This agreement, which entered into force on August 29, 2020, outlined the steps members states must take both to terminate their BITs and to address ongoing arbitration proceedings.
Despite the May 2020 agreement, reaching a consensus among the member states with regard to intra-EU BITs has been slow going. While Ireland and Italy terminated their BITs with other member states early in the last decade, other states—namely Austria, Romania, and Sweden—have already faced infringement proceedings for failing to terminate their treaties. Romania subsequently did begin termination in 2017, while Austria and Sweden have reportedly recently begun terminating their BITs bilaterally.
According to the May infringements package released by the EC, Finland and the UK have “failed to engage in any discussion with the member states” regarding the bilateral termination of their BITs. In the case of infringement proceedings, member states are required to respond with a detailed reply within two months. If the EC concludes that the states are not complying with EU law, it follows up with a “reasoned opinion”—a formal request that the member states comply with the relevant EU law—and, if necessary, the Commission will refer the matter to the European Court of Justice.
Notably, while the EC has been strongly advocating for the termination of intra-EU BITs, the ECT, one of the most frequently invoked investment treaties, remains in force for intra-EU investors, though the EU is also advocating for a modernization of this treaty.