European Law and Investment Treaties

The Conflict Between EU Law and Investment Treaties: A Report

This article is an extract from TLR The Investment Treaty Arbitration Review – Edition 8. Click here for the full guide.

I. Historical aspects and the initial contradictions

The tension between EU law and bilateral investment treaties (BITs) has been a long-standing issue, especially in investment disputes involving EU Member States. The recent Achmea judgment of the EU Court of Justice (CJEU) and the subsequent Komstroy judgment have attempted to address this issue, but questions still remain regarding the impact of EU law on future arbitrations.

1. The rise of BITs: The popularity of BITs grew significantly in the 1990s as a means to stimulate foreign direct investment. By the time of writing, there are over 2,800 BITs in force globally.
2. Intra-EU BITs: Many EU Member States concluded BITs with other European countries before their accession to the EU. Over 190 intra-EU BITs were concluded, raising concerns about their compatibility with EU law.
3. Intra-EU treaty-based arbitrations: By July 2018, there were 174 known intra-EU treaty-based arbitrations, representing 20% of all investor-state dispute settlement cases globally at the time.
4. Energy Charter Treaty (ECT): The ECT, signed in 1994 and entered into force in 1998, is relevant to intra-EU BITs as most EU Member States are parties to the ECT. The European Union itself is also a party to the treaty.

II. The transformation brought by Achmea

In March 2018, the CJEU rendered its Achmea judgment, declaring that the dispute resolution clause in the Netherlands-Slovakia BIT was incompatible with EU law. This decision had significant implications for intra-EU investment arbitrations and raised questions about the application of the ECT.

III. The state courts’ review

State courts in EU Member States and third countries have been involved in ruling on issues related to the application of the Achmea judgment. Some courts have set aside investment awards based on the judgment, while others have rejected its application. The lack of alignment between arbitral and state court decisions adds to the ongoing debate.

IV. Conclusion

The conflict between EU law and investment treaties is not fully settled, as evidenced by the divergent decisions of arbitral tribunals and state courts. The impact of the Achmea and Komstroy judgments continues to be debated, especially in the context of the ECT and ICSID arbitrations. Further cases and debates are expected to arise in the future.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice, and Strong Institutions
• SDG 17: Partnerships for the Goals

The issues highlighted in the article relate to investment treaty arbitration and the conflict between EU law and bilateral investment treaties (BITs). These issues are connected to SDG 16, which aims to promote peaceful and inclusive societies, provide access to justice for all, and build effective, accountable, and inclusive institutions at all levels. The article discusses the tension between EU law and BITs, as well as the conflicting approaches taken by state courts and arbitral tribunals. It also mentions the role of the European Commission in pressuring EU Member States to terminate intra-EU BITs. This highlights the need for strong institutions and effective dispute resolution mechanisms to address these conflicts.

Additionally, SDG 17 is relevant as it focuses on partnerships for sustainable development. The article discusses the actions taken by EU Member States in response to the Achmea judgment and the termination of intra-EU BITs. This highlights the importance of cooperation and collaboration between countries to address these issues and ensure sustainable development.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all
• Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources

The article’s content relates to the following specific targets under the identified SDGs. Target 16.3 focuses on promoting the rule of law and ensuring equal access to justice. The article discusses the conflict between EU law and BITs, as well as the role of state courts and arbitral tribunals in resolving investment disputes. It highlights the need for a clear legal framework and effective dispute resolution mechanisms to ensure equal access to justice for all parties involved.

Target 17.16 emphasizes the importance of partnerships for sustainable development. The article discusses the actions taken by EU Member States in response to the Achmea judgment and the termination of intra-EU BITs. This highlights the need for collaboration and cooperation between countries to address these issues and ensure sustainable development.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 16.3.1: Proportion of population who have experienced a dispute in the past two years and who accessed a formal or informal dispute resolution mechanism, by type of mechanism
• Indicator 17.16.1: Number of countries that have national statistical legislation that complies with the Fundamental Principles of Official Statistics

The article does not explicitly mention specific indicators related to the identified targets. However, Indicator 16.3.1 can be relevant to measure progress towards ensuring equal access to justice. It measures the proportion of the population who have experienced a dispute and accessed a formal or informal dispute resolution mechanism. This indicator can help assess whether individuals have access to effective mechanisms for resolving investment disputes.

Indicator 17.16.1 can also be relevant to measure progress towards enhancing global partnerships for sustainable development. It measures the number of countries that have national statistical legislation complying with the Fundamental Principles of Official Statistics. This indicator reflects the commitment of countries to collect and share accurate and reliable data, which is essential for effective partnerships and informed decision-making.

Table: SDGs, Targets, and Indicators

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Source: lexology.com

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