5 May 2020
On 5 May 2020, 23 Member States of the European Union (EU) signed the much-anticipated Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union (the Agreement). The Agreement terminates existing intra-EU BITs between the Contracting Parties, purports to terminate and deprive of any “legal effects” any sunset clauses in them, and establishes “transitional measures” for “pending arbitration proceedings”. The Agreement enters into force 30 calendar days after receipt by the Depositary of the second instrument of ratification, approval or acceptance (Article 16), but may also be provisionally applied (Article 17). The United Kingdom (UK), and four EU Member States (Austria, Ireland, Finland and Sweden), have not signed the agreement.
As we explained in a previous Brexit Insight here, the background to the Agreement is the three political declarations dated 15 and 16 January 2019, in which the Member States of the EU, including the UK (who was of course still a Member State at that time), declared their intention to “terminate all bilateral investment treaties concluded between them by means of a plurilateral treaty or, where that is mutually recognised as more expedient, bilaterally”, “in light of the Achmea judgment” of the Court of Justice of the European Union (judgment of 6 March 2018 in Case C-284/16, Achmea v. Slovak Republic). On 24 October 2019, the European Commission announced that the majority of EU Member States, including (at that time) the UK (again, still at the time a Member State), had agreed on the text of such a multilateral treaty terminating investment treaties concluded between Member States. The text of the final signed Agreement is in most part the same as the draft text leaked in October 2019. The major difference is the exclusion in the final Agreement of references to Austria, Ireland, Finland, Sweden and the UK. (The other substantive difference is the completion of the text regarding the procedure for the appointment of an impartial facilitator where the parties to a dispute cannot agree on the appointment (Article 9(8)).)
At first glance, this would appear to be good news for investors in or out of the UK who currently rely on the UK’s remaining eleven BITs with EU Member States (those with Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Romania, Slovakia, and Slovenia). However, as we concluded in our latest Brexit Insight (here), it seems likely that investment protection will be addressed, in some form, in the future partnership agreement. If it is, the UK’s existing eleven BITs with EU Member States may be terminated and replaced by that agreement. So while investors currently reliant on the UK’s existing BITs with Member States are able to continue doing so in the immediate future as a result of the UK’s decision not to sign and ratify the Agreement, they may nonetheless begin to consider restructuring their investments ahead of the anticipated conclusion of a future partnership agreement by the end of 2020.
The Agreement is available here; the European Commission’s announcement of the Agreement is available here.
Fietta’s Public International Law news update on the Termination Agreement is available here.
For further information, please contact Stephen Fietta or Laura Rees-Evans.