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ClientEarth Communications

19th April 2018

Rule of law

Report: Landmark ruling suggests investor-state dispute settlement illegal in all EU-investment deals

A report published today by ClientEarth and the Center for International Environmental Law (CIEL) reveals that the recent Achmea ruling by the European Court of Justice (ECJ) could render investment agreements between the European Union (EU) or its Member States and non-EU countries illegal. The report analyzes how the March 2018 ECJ decision — which found investor-state dispute settlement (ISDS) provisions in bilateral investment agreements between EU countries incompatible with EU law — extends beyond intra-EU trade deals and could apply to any EU agreement with third parties, a finding that could radically reshape the future of investor-state dispute settlement.

The report finds that there could be serious implications for agreements with non-EU countries, including that countries would be unable to enforce awards granted under existing agreements, and the European Commission would be unable to negotiate new agreements that include investment arbitration provisions.

ClientEarth trade lawyer Laurens Ankersmit says, “Domestic courts are the keystone to Europe’s judicial system and the judgment in Achmea makes clear that these courts are constitutionally protected against ISDS. Non-EU countries, including developing countries, should be aware of the profound consequences of this judgment for their investment agreements with Europe. Their investors may not be able to rely on these agreements anymore and this should raise the question whether such agreements should be maintained.”

“ISDS is profoundly problematic, from the issues of jurisdiction highlighted in the Achmea ruling to the inequality between investors’ rights and investors’ obligations to respect human rights and local laws,” says Layla Hughes, Senior Attorney for CIEL. “The ECJ’s ruling could have a ripple effect for investment agreements around the world because it raises fundamental questions about how ISDS undermines countries’ own legal systems. The ECJ ruling could be the first domino falling on the end of ISDS worldwide.”

On April 23-27, more than 50 countries will gather to meet for a working group of the UN Commission on International Trade Law (UNCITRAL) to discuss reforms to the ISDS system. The EU has used UNCITRAL and other fora to push its proposal for a Multilateral Investment Court to hear investment disputes. “Our analysis suggests UNCITRAL should carefully consider the value of reforming ISDS given that the ECJ has ruled its very premise violates EU law,” adds Hughes.

Read the report : Implications of Achmea: How the Achmea Judgment Impacts Investment Agreements with Non-EU Countries