21 November 2019
In three political declarations dated 15 or 16 January 2019, the Member States of the European Union (EU), including the United Kingdom (UK), 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 (CJEU) (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 the UK, has agreed on the text of such a multilateral treaty terminating investment treaties concluded between Member States (so-called “intra-EU BITs”).
The European Commission’s announcement came just days before the EU27 (EU Member States other than the UK) adopted a decision deferring the date for the UK to leave the EU from 31 October 2019 to 31 January 2020. As we observed in our Brexit Insight of 5 August 2019, if the Prime Minister had delivered on his promise to leave the UK by 31 October 2019 and had done so without a Withdrawal Agreement entering into force, the UK was unlikely to have had to deliver on its promise to terminate its intra-EU BITs.
Now that the UK’s departure date has been deferred, and the text of the multilateral treaty has been agreed, there is a very real chance that the UK will still be an EU Member State by the time the treaty is open for signature and ratification. Indeed, the draft treaty text released by IAReporter on 4 November 2019 envisages that the UK will be a party, both in its recitals and since it includes in its annex all of the UK’s existing intra-EU BITs.
Accordingly, after the UK’s General Election on 12 December, newly appointed Ministers will face a choice: sign and ratify the multilateral treaty before the UK leaves the EU and be left with no intra-EU BITs with other EU Member States for whom the treaty has also entered into force; or find another way to comply with the Achmea judgment, for as long as the UK is bound by EU law as a Member State or under any transition period.
The UK’s decision will have direct consequences for UK investors, especially those with pending and decided intra-EU claims. Of particular note is Magyar Farming Company Ltd, who recently won an award (including damages of just over EUR 7 million) against Hungary under the UK-Hungary BIT.
The announcement of the European Commission on agreement on the text of the draft agreement for the termination of bilateral investment treaties between the Member States of the European Union is available here. The draft agreement for the termination of bilateral investment treaties between the Member States of the European Union is available here. The Member State Declarations of January 2019 are available here. Our PIL News Update, which considers some of the PIL aspects of the treaty in more detail, is available here.
For further information, please contact Stephen Fietta or Laura Rees-Evans.