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Get the facts: Intra-EU bilateral investment treaties

(23/07/2015)
European Commission is taking steps to deal with issue of intra-EU BITs and working with Member States to improve investment protection.

In June, the European Commission took steps to deal with the issue of intra-EU bilateral investment treaties. It launched infringement proceedings against Austria, the Netherlands, Romania, Slovakia and Sweden. In parallel, it wrote to the other 21 Member States that still have such treaties in place, to seek their views on the issue. The move follows efforts by the Commission over the past few years to convince Member States to terminate these treaties. The Commission now plans to work with the Member States to further improve investment protection inside the single market.

What’s the issue?

Intra-EU bilateral investment treaties (‘intra-EU BITs’) are agreements between EU Member States establishing the terms and conditions for private investment by nationals and companies of one country in another one.

Many of these intra-EU BITs were agreed in the 1990s between existing Member States and countries that would go on to join the EU during the EU enlargements of 2004, 2007 and 2013. They were intended to reassure investors who wanted to invest in the then candidate countries, but were at times wary of doing so, sometimes due to historical political reasons. Intra-EU BITs were meant to strengthen investor protection, for example by allowing for compensation for expropriation and arbitration procedures during investment dispute settlements.        

The Commission’s position is that, since enlargement, this sort of additional reassurance should no longer be necessary because all Member States are subject to the same EU rules in the single market, including those on cross-border investments. What's more, all investors benefit from the same protection thanks to EU rules, for example non-discrimination on the grounds of nationality. 

Incompatible with EU law

According to the Commission, these treaties are incompatible with EU law and risk fragmenting the single market due to the fact that, by their very nature, they give rights to investors of certain EU countries and not others.

Furthermore, the experience of Ireland and Italy, both of which have already ended all their intra-EU BITs, shows the treaties are out-of-date. 'Intra-EU bilateral investment treaties are outdated and as Italy and Ireland have shown by already terminating their intra-EU BITs, no longer necessary in a single market of 28 Member States,' said Jonathan Hill, EU Commissioner for Financial Services, Financial Stability and Capital Markets Union.

The letters to the other 21 Member States requesting further clarification were sent via EU Pilot proceedings, which are designed to help the Commission and Member States resolve issues concerning the application of EU law. This stage has already been carried out with the five Member States that are now receiving letters of formal notice as the first step in a formal infringement procedure.

In early October, the Commission will meet all the Member States, with the aim of helping them ensure their intra-EU BITs are terminated in a coordinated way.

The Commission has also stressed its desire to work with the Member States to further improve investment protection within the single market. 'The Commission is ready to explore the possibility of a mechanism for the quick and efficient mediation of investment disputes,' Lord Hill said.

Read more on the Commission’s action regarding intra-EU bilateral investment treaties