{"id":224,"date":"2009-02-10T08:43:00","date_gmt":"2009-02-10T13:43:00","guid":{"rendered":"http:\/\/itn.mattrock.ca\/2009\/02\/10\/eu-member-states-reject-the-call-to-terminate-intra-eu-bilateral-investment-treaties\/"},"modified":"2013-02-05T10:03:54","modified_gmt":"2013-02-05T16:03:54","slug":"eu-member-states-reject-the-call-to-terminate-intra-eu-bilateral-investment-treaties","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2009\/02\/10\/eu-member-states-reject-the-call-to-terminate-intra-eu-bilateral-investment-treaties\/","title":{"rendered":"EU Member States reject the call to terminate intra-EU bilateral investment treaties"},"content":{"rendered":"

By Damon Vis-Dunbar
\n10 February 2009<\/strong><\/p>\n

The majority of European Union Member States want to maintain the network of bilateral investment treaties (BITs) that exist between themselves, despite concerns by the European Commission that these treaties have been superseded by European Community law, according to a memo by the EU<\/span>\u2019s Economic and Financial Committee (EFC).<\/p>\n

The memo comes as a setback for the Commission, which warns that overlap between European Community law and BITs between EU Member States creates \u201clegal uncertainty.\u201d<\/p>\n

The Commission raised its concern with the EFC in 2006, when it cautioned that \u201cinvestors could try to practice forum shopping by submitting claims to BIT<\/span> arbitration instead of \u2014or additionally to\u2014national courts. This could lead to BIT arbitration taking place without relevant questions of EC<\/span> law being submitted to the ECJ<\/span>, with unequal treatment of investors among Member States a possible outcome.\u201d<\/p>\n

However, the Commission\u2019s opinion holds little sway over most EU states, according to a December 2008 letter by the EFC, a committee which includes representatives from the Finance Ministries and Central Banks of EU Member States.<\/p>\n

“Most Member States did not share the Commission\u2019s concern regarding arbitration risks and discriminatory treatment of investors and a clear majority of Member States preferred to maintain the existing agreements,\u201d writes the EFC, in a letter to the President of the Council of the European Union.<\/p>\n

Sergey Ripinsky, an expert on international investment treaty law at the British Institute of International and Comparative Law said: \u201cGovernments are likely to believe that BITs give their investors a higher level of protection abroad, compared to domestic laws of an EU host state or even EC law. For example, neither domestic systems nor European law include an obligation as broad or comprehensive as the Fair and Equitable Treatment obligation in BITs. Even more traditional provisions, such as the ones concerning expropriation, may be expressed in BITs in a stricter manner, leaving less discretion or margin of appreciation to host state governments.\u201d<\/p>\n

However, Dr. Ripinsky adds that \u201cthe European Commission may feel that existing intra-EU BITs create discrimination between investors from different Member States and pose indirect obstacles to the free movement of capital. For example, Estonia has a BIT with Germany while it does not have one with Hungary. It could be argued that this places a Hungarian investor in Estonia at a disadvantage compared to his German counterpart.\u201d<\/p>\n

While the Commission has called for the termination of intra-EU BITs\u2014i.e., investment treaties between two EU Member States\u2014, it has also warned that certain provisions in the BITs between EU Member States and non-EU states pose a problem. As ITN<\/span> has reported in the past, three countries \u2014Finland, Austria and Sweden\u2014currently face legal challenges brought by the European Commission at the European Court of Justice, after these countries refused to re-negotiate a number of their bilateral investment treaties with non-European states.<\/p>\n

In these disputes, the Commission is primarily concerned about BIT provisions that grant foreign investors the rights to move capital freely, which the Commission says are incompatible with its right to restrict capital flows in extraordinary circumstances.<\/p>\n

Although the ECJ cases concern extra-EU BITs, the EFC says that they may provide a clarification of the \u201cbasic principles involved in this complex area\u201d with respect to intra-EU BITs. As such, the EFC says that the Commission will likely wait for the ECJ rulings, before determining its next steps.<\/p>\n

For further ITN reporting, on the ECJ cases, see: \u201cECJ advocate general argues some Austrian and Swedish BITs are incompatible with EU law\u201d, By Damon Vis-Dunbar, 17 July 2008, available here:\u00a0 http:\/\/www.investmenttreatynews.org\/cms\/news\/archive\/2008\/07\/17\/european-court-of-justice-opinion-argues-some-austrian-and-swedish-bits-are-incompatible-with-eu-law.aspx<\/a><\/p>\n

For reporting on EU investment policy, see: \u201cEuropean treaty may revive debate over power to conclude investment agreements\u201d, By Damon Vis-Dunbar, 30 October 2007, available here: http:\/\/www.IISD<\/span>.org\/pdf\/2007\/itn_oct30_2007.pdf<\/a><\/p>\n