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Compatibility between EU law and Intra-EU BITs regarding the investor-State arbitration clause: a new step forward

The European Commission has attempted to eradicate bilateral investment treaties concluded between EU Member States (“Intra-EU BITs”). Indeed, it has submitted amicus curiae opposing the jurisdiction of Intra-EU BIT arbitration tribunals, taken legal proceedings against the enforcement of the awards and pressured EU Member States to terminate all of their Intra-EU BITs. The European Commission appears to be of the view that (i) eradicating Intra-EU BITs will foster the harmonisation of EU law and protect intra-EU investment from legal uncertainties caused by different interpretations of EU law by arbitral tribunals; and (ii) the rights granted by an EU Member State to investors of a particular EU nationality constitute a discrimination on grounds of nationality that runs contrary to EU law, particularly the Treaty on the Functioning of the European Union (“TFEU”).[1]


The Court of Justice of the European Union (“CJEU”) has not had, until now, the opportunity to express its opinion on the Intra-EU BITs. In 2016, the Bundesgerichtshof (the German Federal Court of Justice) requested a preliminary ruling from the CJEU (in the context of proceedings for the annulment of an investment arbitration award[2]). The request regarded the compatibility of the investor-State arbitration provision, under the 1991 bilateral investment treaty between the Netherlands and the Czech and Slovak Federal Republic (“BIT”), with EU law. The CJEU’s decision is yet to be issued, but the Advocate General (“AG”) to the CJEU, Melchior Wathelet, delivered his opinion on 19 September 2017[3] upholding the compatibility between the BIT (and therefore intra-EU BITs) and EU law.


No discrimination on grounds of nationality


The AG did not find that the dispute settlement provision under the BIT contravenes Article 18 TFEU that prohibits discrimination on grounds of nationality. The AG drew a parallel with intra-EU bilateral double taxation conventions, which have been considered by the CJEU (C-376/03) as non-discriminatory, and noted that Article 18 TFEU does not prevent a Member State from providing a more favourable treatment to an investor from another Member State under a BIT, compared to investors of a third Member State. The non-discrimination requirement of Article 18(1) TFEU rather applies with regard to the treatment that a State provides to its own citizens (§67-75).


Intra-EU BIT tribunals are equivalent to State courts: they have the power to request a preliminary ruling from the CJEU – and the obligation to apply the supremacy of EU law


The second question submitted to the CJEU is whether the preliminary reference procedure of Article 267 TFEU precludes the application of the dispute resolution clauses of intra-EU BITs. The AG considered that an arbitral tribunal judging a case under an intra-EU BIT is a court or tribunal within the meaning of Article 267 TFEU and is therefore competent to request a preliminary ruling from the CJEU on issues related to EU law (§85). The main reasons that the AG put forward are the following: (i) an intra-EU BIT tribunal is established by law, i.e. by virtue of the BIT that the contracting States integrated into their legal orders. Such a tribunal is different from a commercial arbitral tribunal established by a contract (§§90-109). (ii) The intra-EU BIT tribunal has compulsory jurisdiction over issues arising out of the BIT (§119) and makes its decision based on rules of law with independence and impartiality (§§120-131).


The AG went further to suggest that intra-EU BIT tribunals, falling under the definition of State courts are bound to apply the supremacy of EU law – not only over national laws, but also over “every international commitment given between Member States”. If an intra-EU BIT tribunal fails to recognise this principle, its award would be null as contrary to the public policy (§§134-135).


In the alternative, even if tribunals are not State courts, the dispute-resolution provisions of intra-EU BITs still do not violate EU law


The AG held that even if Intra-EU BIT arbitral tribunals are not considered as courts or tribunals under Article 267 TFEU, there would still be no breach of Article 344 TFEU. Firstly, the TFEU did not provide for any settlement mechanism between an individual and a Member State (§146). Secondly, the disputes did not concern the interpretation or application of EU law (§160) but only issues from the BIT (§174). The AG argued that the scope of investment protection under the BIT is wider than TFEU and had no equivalent in EU law. Although there were some overlapping rules, the application of the BIT did not necessarily achieve a result contrary to the application of EU law (§181). For these two reasons, the investor-State arbitration under the BIT did not undermine the autonomy of the EU legal system (§256).


And the winner is…


Although the AG’s opinion is not binding, the CJEU generally, but not always, follows it.[4] If the CJEU follows the opinion in this case, it would be interesting to see on which of the two antithetical bases, proposed by the AG, it will do so: on the basis that BIT tribunals are to be considered as national courts, or on the basis that they are part of a parallel system which has very limited overlap with the work of EU courts or EU Member States’ courts. Still, the CJEU is also free to decide otherwise, that the dispute-resolution provisions of intra-EU BITs are indeed contrary to EU law. The European arbitration community has every reason to be impatient in waiting for the decision of the CJEU on the matter.


Author : S. C. and A.F.P., B.L.B, LLB


[1]     Douglas Thomson, “European Commission takes on member states over intra-EU BITs”, Global Arbitration Review, 18 June 2015, at: http://globalarbitrationreview.com/article/1034546/european-commission-takes-on-member-states-over-intra-eu-bits.

[2]     Achmea B.V. v. The Slovak Republic, UNCITRAL, PCA Case No. 2008-13, Award, 7 December 2012.

[3]     Slovak Republic v Achmea BV, Case C-284/16, Advocate General’s Opinion, 19 September 2017.

[4]     See, Carlos A. Arrebola et al., “An Econometric Analysis of the Influence of the Advocate General on the Court of Justice of the European Union”, 5(1) Cambridge J. Comp. & Int’l L. 82-112 (2016).