Termination Agreement Bits

Practitioners should be aware that the previous notification period for the termination of a BIT may serve as a red flag for the other Party to take the necessary steps to inform its investors of the impending termination of the BIT, who in turn can prepare for the consequences of the termination for their investments in the other Party. For ongoing arbitrations, the termination agreement provides for a „structured dialogue“ between the investor and the EU Member State (Article 9). To access this settlement mechanism, investors must withdraw their claims before entering into negotiations. However, the State concerned is not obliged to participate in the negotiations or to conclude a settlement agreement. This does not make this mechanism particularly attractive to investors involved in ongoing intra-EU investment arbitrations. EU Member States have considered terminating all of their approximately 190 intra-EU BITs through a single termination agreement. The resulting termination agreement was signed by 23 EU Member States on 5 May 2020 and entered into force on 29 August 2020.12 It aims not only to end all intra-EU BITs between these 23 EU Member States13, but also to eliminate the legal effects of sunset clauses in these intra-EU BITs that would normally be triggered, i.e. the protection of intra-EU BITs would be increased by 5, extended by 10 or even 20 years (see discussion in sunset clauses). According to the Achmea judgment, the purpose of the termination agreement is to ensure that the arbitration provisions contained in intra-EU BITs „can no longer be applied after the last of the parties to a bilateral investment agreement within the EU has become a Member State of the European Union“. 3 To this end, the termination agreement has the effect of terminating intra-EU BITs as soon as they enter into force in the RELEVANT EU Member States and extinguishing all sunset clauses contained in these BITs, so that they do not extend the contractual protection beyond the date of termination. On 5 May 2020, all EU Member States (with the exception of Ireland, Sweden, Finland and Austria) concluded the Agreement on the Denunciation of Bilateral Investment Treaties between eu Member States (the „Denunciation Agreement“). As the name suggests, this agreement aims to terminate all bilateral investment treaties („BITs“) between its signatories.

As a general rule, bilateral (and multilateral) investment treaties (BITs) contain provisions that contain formal details on the termination of the respective contract and all the consequences for existing and future investments in terms of temporal and territorial scope. With regard to the question of territorial scope, it is possible that the effects of the termination of a BIT could be specified for a given geographical area. Where the territory of a Party consists of more than one Party, the BIT could be terminated only for a specific Party, but remain in force for the other Parties. Therefore, some BITs contain specific provisions to this effect.7 Therefore, the effect of termination of the BIT cannot necessarily cover the entire territory of a Party. „Settled Arbitration“ means a proceeding that ended with a settlement agreement or final award rendered before March 6, 2018, where (a) the award was enforced before that date and no review, set aside, set aside, review or enforcement proceedings were pending on that date, or (b) the award was set aside or set aside before the effective date. These procedures are not affected by the termination agreement and should not be repeated. As we discussed when signing the agreement, it remains to be seen how arbitral tribunals in ongoing and future intra-EU-BIT arbitrations will react to the agreement in practice. The decision on whether or not investors can continue to avail themselves of the protection offered by intra-EU BITs is influenced by Article 54(.b) and (70) of the Vienna Convention on the Law of Treaties and by the relationship between the Agreement and the ICISD Convention. It will also be interesting to see whether investors and states use „structured dialogue“ to settle pending cases, as provided for in Article 9 of the agreement. Finally, an important debate is to be expected on the termination of the bit`s sunset clauses in the agreement. The effects of the agreement will now be felt slowly, and it will be useful to observe the next steps taken by investors, states and arbitral tribunals in investment disputes within the EU. On 24 October 2019, EU Member States agreed on a plurilateral treaty on the termination of bilateral investment treaties (BITs) within the EU.

The agreement follows the statements of 15 and 16 January 2019 on the legal consequences of the Court of Justice`s ruling in the Achmea case and on investment protection in the European Union, in which Member States committed to end their intra-EU BITs. The termination agreement shall be subject to the ratification requirements laid down in the national law of each Member State. The agreement will enter into force when the second ratification is deposited with the Secretary General of the Council of the EU. The Convention shall become binding on each Member State 30 days after its ratification by that Member State. In practice, this means that the agreement to terminate a particular intra-EU BIT will be deposited 30 days after the last State party to that BIT has deposited its instrument of ratification. .