The Future of Intra-EU BITs after the Achmea Judgement

Arbitraż i Mediacja | 03/2018
Łukasz Chyla

Introduction In its latest landmark decision1 of 8 March 2018, The Court of Justice of the European Union (thereinafter: “CJEU”) ruled that the Article 8 of the Bilateral Investment Treaty (thereinafter: “BIT”) between Netherlands and Slovakia is incompatible with EU law, having an adverse effect on its autonomy. The importance of this judgment is evidenced by the fact that the European Commission and 16 Member States intervened and that it was rendered by the Grand Chamber2. It is the first time the general compatibility of intra-EU BITs arbitration clauses with the EU law has been undermined by the measure of such importance. The CJEU’s ruling is not only expected to have unimaginable impact on the potential investor-state disputes under remaining 196 intra-EU BIT agreements but also its consequences are believed to change the face of ISDS and the future of investment treaty arbitration in Europe (intra-EU arbitration in particular)3. One can argue, that the problems of Intra-EU BITs is nothing new under the sun – it was always somewhere in public debate since 2006 when the European Commission started its long-lasting war against Intra-EU BITs, alleging their incompatibility with EU law and taking a formal stand against them (even engaging into some infringement proceedings against particular countries reluctant to terminate those agreements). The reception, however, was generally mixed: some countries (like Czech Republic, Ireland, Italy, Romania) have terminated their Intra-EU BITs unilaterally, Poland and Denmark only have so far committed themselves to do so in near future, while countries like Germany,21 the Netherlands, Austria and France, in turn, proposed a system for multilateral termination of Intra-EU BITs4. One can perceive the ground-breaking Achmea decision as an absolute game-changer but it does, in fact, give more questions than answers. Why are intra-EU BITs still perceived as an important tool in order to mitigate political and legal risk in new Member States? What was the economic background of the case and what does it mean for the future of intra-EU BITs? What was the broader political and legal context of such unexpected twist5? What rationale stayed behind such a landmark judgement? And finally, what are the far-reaching implications of the already famous, Achmea case?What are the Intra-EU BITS and the ISDS? Bilateral Investment Treaties (BITs) are international agreements between countries that provide companies and individuals with special rights and legal protections when they invest in a foreign country (referred to as a host State). Those BITs set out the terms and conditions for investment in one country by investors of another country6. A key protection offered by the majority of bilateral investment treaties is to conduct international arbitration in the event of any investment dispute, instead of...