Brussels take legal action against seven EU countries for failing to obey EU orders to stop intra-bilateral investment agreements.

EU officials have taken legal action against seven countries for failing to stop intra-bilateral investment agreements.

The EU executive has threatened to send Austria, Sweden, Belgium, Luxembourg, Portugal, Romania, and Italy to the European Court of Justice if they do not cease their individual intra-EU Bilateral Investment Treaties (BITs).

All BITs were to be terminated in 2020 since they were judged incompatible with EU legislation.

The EU Commission issued a warning to the seven-member states, writing: “The Commission has decided to open infringement proceedings against Austria, Sweden, Belgium, Luxembourg, Portugal, Romania and Italy for failing to effectively remove from their legal orders the intra-EU Bilateral Investment Treaties (BITs) to which they are contracting parties so that they cease to produce any legal effects.”

“It has been the Commission’s long-standing position that BITs between EU Member States constitute a parallel treaty system overlapping and conflicting with Union law, thereby preventing its full application.”

It went on to say: “The Commission notes that Austria and Sweden did not sign the plurilateral agreement with other Member States and have not finalised the bilateral termination of their intra-EU BITs.”

“Meanwhile, Belgium, Luxembourg, Portugal, Romania and Italy signed the plurilateral agreement in May 2020, but have not yet completed its ratification process, necessary to ensure legal certainty for investors and businesses.”

“The Commission urges the above-mentioned Member States to urgently take all necessary action to remove the intra-EU BITs from their legal order, bearing in mind their incompatibility with Union law.”

“Without a satisfactory response from them within two months, the Commission may decide to address reasoned opinions.”

The letter followed with a clear warning to Sweden, stating that their case would be sent to the European Court of Justice if they did not respond within two months.

It read: “In addition, today, the Commission has sent a complementary reasoned opinion to Sweden for failing effectively to ensure that its Bilateral Investment Treaty (BIT) with Romania ceases to produce legal effects.”

“Although Sweden removed the BIT from its legal order formally and unambiguously via mutual agreement with Romania, it has failed to ensure the required degree of legal certainty for investors and businesses, as it did not eliminate in practice all legal effects that the BIT had produced since its incompatibility with Union law first arose.”

“This has enabled arbitral tribunals to take their own view as to the validity of the BIT, so far upholding its applicability and accepting jurisdiction based on its provisions.”

“The Commission urges Sweden to take all necessary actions to ensure that its BIT with Romania ceases to produce legal effects, bearing in mind the incompatibility of the BIT with Union law.”

“Without a satisfactory response from Sweden within the next two months, the Commission may decide to refer the case to the Court of Justice of the European Union.”

The majority of the BITs impacted by this agreement were signed before Eastern, and Western European countries joined the EU.

The expiration of intra-EU BITs marked the end of an era for investor-state dispute resolution (“ISDS”), thereby putting a stop to a large number of prospective claims against sovereigns.