New ECJ ruling could spell the end of 200 intra-EU investment agreements

Today, a landmark ruling of the European Court of Justice could signal the beginning of the end for around 200 investment agreements between EU Member States. The decision concerns a dispute between the Dutch company Achmea and Slovakia over the compatibility of an investment tribunal decision with the EU Treaties. That decision of the tribunal was taken on the basis of an investment agreement between the Netherlands and Slovakia and contains investor-state dispute settlement (ISDS).

ClientEarth lawyer Laurens Ankersmit said:

“Today’s decision marks the beginning of the end of ISDS in Europe. ISDS is not only an unwelcome tool that allows multinational corporations to put pressure on public interest decision-making, it is also incompatible with EU law.

“We call on all EU countries to immediately start the process of terminating their investment agreements containing ISDS.

“We will study our options to bring ISDS to justice if member states do not voluntarily terminate their agreements.

“The judgment is also a hopeful sign in the case over EU-Canada trade deal CETA. Belgium was right to get CETA legally checked by the ECJ and the Achmea judgment is yet another sign that Belgium’s request will spell the end of CETA as we know it.”

ISDS is used by foreign investors to side-line domestic courts and sue governments for any measure that affects their investment contrary to their investor rights – these measures include laws and decisions protecting health and the environment.

These tribunals, which sit outside our judicial system, let businesses huge pressure on public-interest decision making. Instead of using ISDS, conflicts should be settled by public courts, which better understand local circumstances and laws.

The case originated following a dispute over Slovak health care reforms between Dutch investor Achmea and the Slovak government.

Achmea entered the Slovak insurance market in 1997 and expanded to the health insurance market in 2006.

Following a number of reforms in 2006 on the Slovak health care insurance market, Achmea decided to bring a claim before an ISDS tribunal on the basis of the Dutch – Slovak Bilateral Investment Treaty (BIT).

The government lost the case before the investment tribunal and the tribunal issued an award of around 25 million EUR against Slovakia, which refused to pay.

When Achmea decided to enforce the award before German courts, the German Federal Court of Justice asked the European Court of Justice whether the ISDS mechanism in the Slovak-Netherlands investment agreement was compatible with the EU Treaties.

Around 200 of these intra-EU Bilateral Investment Treaties (BITs) exist, mainly between the oldest EU member states and more recent joiners from Eastern Europe. The Commission has long opposed these BITs, considering them both unnecessary and contrary to EU law.

In 2015, the Commission started legal proceedings against five EU countries for not terminating their intra-EU BITs. These proceedings have been on hold pending the Achmea case.

As the ECJ finds the investment agreement incompatible with EU law, around 200 other investment agreements containing ISDS might require termination. This would potentially also include the Energy Charter Treaty, which has been used by Swedish energy company Vattenfall to bring two cases against Germany. Vattenfall 1 concerned environmental restrictions imposed on a water use permit for a coal power plant in Hamburg, resulting in a suit of over 1 billion euros. Vattenfall 2 concerned the federal government decision to phase out nuclear power in Germany.

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