Intra-EU BITs - Marcin Aslanowicz - 9 May 2023.pdf

Intra eu

1. Intra-EU BITs
Prof. Marcin Asłanowicz (SWPS University, Warsaw, Poland)
MykolasRomerisUniversity
Vilnius, May 9, 2023

2. 2
BIT typically includes provisions to protect foreign investors by
providing them with certain guarantees and protections, e.g.:
➢the right to fair and equitable treatment (FET);
➢protection against expropriation without compensation;
➢freedom to transfer funds related to their investments.
BIT (bilateral investment
treaty) is an agreement
between 2 countries that
establishes the terms and
conditions for private
investment by nationals and
companies of one country in
another country.

3. What is objective of the BIT?
3
BITs provide legal framework
for investors to operate
within and –usually –
establish dispute resolution
mechanism to settle any
investment –related
disputes between the
investor and the host
country.
➢promotion of foreign investment by reducing the risks and uncertainties
associated with investing in a foreign country

4. 4
➢increased investment flows
(due to greater legal certainty and predictability for investors, thanks to clear rules and
protections for their investments)
➢protection of foreign investors
(see above)
➢dispute resolution mechanism
(ISDS: investor –state dispute settlement –neutral forum for resolving disputes
between investors and host countries which helps to reduce the risk of investment –
related disputes escalating into diplomatic or legal conflicts)
➢promotion of economic cooperation
(cooperation based on mutual benefit and respect)
Key benefits of BITs:

5. 5
➢imbalanced benefits
(BITs provide significant protection and guarantees for foreign investors, while limiting
the ability of host countries to regulate investments in the public interest –in
consequence, foreign investors have greater rights than local investors, what can be
viewed as unfair)
➢lack of transparency
(BITs negotiated behind closed doors and can include provisions that are not publicly
disclosed –lack of transparency can lead to concerns about the potential impact of
these agreements on the public interest)
➢limited development impact
(BITs viewed as primarily benefiting investors from developed countries, with less
benefit accruing to investors from developing countries –what limits the potential
development impact of BITs)
➢ISDS mechanisms (included in some BITs)
(allowing foreign investors to sue host international tribunals if they believe their
investments have been expropriated or otherwise mistreated –this can be used to
challenge legitimate public policy measures, e.g.environmental regulations or public
health measures + are costly for host countries to defend against)
Is there any criticism
of BITs?
Yes!

6. 6
➢FET (fair and equitable treatment);
➢ISDS mechanism
➢protection of foreign / domestic investments
Key issues to be
considered / terms to
be analyzed:

7. The European Commission has been encouraging EU member states to terminate their intra-EU
BITs in favor of the EU-wide investment protection framework provided by the Lisbon Treaty.
7
Approx. 3,300 +
Approx. 1,200 (including BITs signed prior to accession of the member states to the EU)
How many intra-EU BITs remain in force?
Approx. 190
How many intra-EU BITs remain in force?
How many intra-EU BITs were concluded?
Why has the number decreased so significantly?
How many BITs were concluded?

8. Shall intra-EU BITs remain in force?
8
In March 2018, the EC issued
a recommendation calling for
termination of all intra-EU BITs,
arguing that they are
incompatible with EU law and
create legal uncertainty. The
recommendation calls on EU
member states to take steps to
terminate their intra-EU BITs
and to ensure that any ongoing
investment disputes are
resolved in accordance with
EU law.
Yes–as they provide important
protection for foreign investors /
their termination would have
negative consequences for the
investments.
No–as all EU member states are
already bound by EU law –what can
create confusion / conflicts between
EU law and investment laws.

9. 9
1.Expiration
Depends on the provisions of the BIT.
2. Mutual agreement
Agreement between the states, but what about the investors’ interests?
3. Unilateral denunciation
Depends on the provisions of the BIT –applicable if one party believes that the
BIT is no longer serving its interest, or there has been a significant change in
circumstances the treaty was signed.
4. Material breach
Depends on the provisions of the BIT –if the other party has materially breached
its obligations under the BIT.
How a BIT could be
terminated?

10. What is the „sunset clause”in aBIT?
How does the sunset clause impact on early termination of aBIT?
Can the parties to aBIT contractually modify the provisions of the sunset clause?
10

11. 11
1.Loss of investment protection.
Investors may no longer have access to protections granted by the BIT (i.e.
protection against expropriation and discrimination).
2. Loss of access to international arbitration.
Investors may no longer have access to this form of dispute resolution and may
need to rely on domestic courts or other means of dispute resolution.
3. Uncertainty and instability.
Creates legal and regulatory gaps that were previously filled by the BIT –what
can make it more difficult for investors to plan and execute their investments and
can increase the risk of political and economic instability in the host country.
4. Impact on existing investments.
May have retroactive effects on existing investments, as it may remove
protections that were previously available to investors –what may create
exposure to new risks and uncertainties and may require them to reevaluate
their investment strategies or consider exiting their investment together.
What are the
consequences of
(early) termination of
the (intra-EU) BIT for
the investors?

12. What is a potential alternative to (intra-EU) BITs?
1.Multilateral investment agreement; or
Examples: Energy Charter Treaty, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
2. Rely on domestic legal systems and international law to protect foreign investments;or
3. Rely on political risk insurance and or other risk mitigation strategies (private insurance).
BUT-are the above real (attractive) alternatives indeed?
12

13. 13
SO, should intra-EU BITs be terminated?
WHOSEinterests should prevail? Investors (foreign / domestic) or
states?
HOWto encourage investments within the EU without infringing /
limiting anybody’s interests?
WHAT is the future of international investment treaties?
Final thoughts /
conclusions

14. Thank you for your attention