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The European Union and Bilateral Investment Treaties – Continuing Fallout

January 2019 has been a busy month for the continuing fall-out concerning the ECJ’s March 2018 judgment in the Achmea v. Slovak Republic case.

In that judgment, the ECJ held that Articles 267 and 344 of the Treaty on the Functioning of the European Union precluded investment treaties between EU Member States (“intra-EU BITs”). 

On January 15, 2019, 22 Member States issued a declaration setting forth the conclusions they draw from the Achmea  judgment, and the steps they will take to conform to the judgment.  The steps include notifying active investor-state arbitration tribunals of the legal consequences of the Achmea judgment; that defending Member States will request local courts handling any proceedings relating to an arbitration award concerning an intra-EU BIT to set aside or not enforce such an award, and notifying the “investor community” that no new intra-EU BIT arbitration should be initiated. 

This declaration is available here.

On January 16, 2019, two other declarations of Member States were issued: one by Hungary and the other jointly by Finland, Luxembourg, Malta, Slovenia and Sweden.  Thus, all Member States were accounted for. 

These declarations are available here and here.

The main point of difference concerned the fate of the Energy Charter Treaty.  The January 15 declaration concluded that the investor-state arbitration clause in the ECT was, pursuant to the Achmea judgment, incompatible with EU law and “thus would have to be disapplied.” Hungary, and Finland, Luxembourg, Slovenia and Sweden, in their respective declarations, noted that the “Achmea judgment is silent on the investor-state clause in the Energy Charter Treaty.  On this basis, Hungary concluded that it was “inappropriate for a Member State to express its view as regards the compatibility with Union law of the intra-EU application of the ECT.”  Finland, Luxembourg, Slovenia and Sweden noted the pendency of a set-aside proceeding before Luxembourg courts addressing the issue of the compatibility of the ECT with EU law, and that it would be “inappropriate, in the absence of a specific judgment on this matter, to express the views as regarding the compatibility of Union law of the intra EU application of the Energy Charter Treaty.”

On January 17, 2019, the EU Commission, unsurprisingly, issued a press release welcoming this declaration to terminate all intra-EU BITs and pointedly noted the differences concerning the ECT by welcoming “the fact that the majority of Member States committed to undertake action to ensure that the Energy Charter Treaty cannot be used as a basis for arbitration between investors and Member States.”

In a related development, on January 29, 2019, the Court of Justice of the European Union issued a press release summarizing Advocate General Yves Bot’s opinion that the Canada-EU Comprehensive Economic and Trade Agreement, (which includes investor-state arbitration provisions) is compatible with EU law. While this opinion is not binding on the Court, whose judgment is still awaited, it is unusual for the Court to depart from the opinion of its advocate generals; however, famously, the Advocate General in the Achmea case concluded that intra-EU BITs were compatible with EU law.  Matching the ECJ’s judgment in Achmea with AG Bot’s decision here warrants close scrutiny; at the moment, his actual decision is not available.  The Court’s press release is available here.

Contacts

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