On 29 August 2020, the Agreement for the Termination of Bilateral Investment Treaties (the “BITs”) between the Member States of the European Union (the “EU”) (the “Termination Agreement”) entered into force. As discussed in one of our previous blog posts, the Termination Agreement was signed on 5 May 2020 by 23 EU Member States. In its preamble, the signatories of the Termination Agreement confirmed their commitment to the “protection of cross-border investments within the [EU]” and “within the scope of application of [EU law]”, stating that intra-EU BITs are “contrary to the EU Treaties and, as a result of this incompatibility, cannot be applied after the date on which the last of the parties to an intra-EU bilateral investment treaty became a Member State of the [EU]”.
Denmark (on 6 May 2020) and Hungary (on 30 July 2020) were the first two EU Member States out of the 23 signatories to ratify the Termination Agreement. Pursuant to Article 16(1) of the Termination Agreement, it entered into force 30 calendar days after receipt of the second instrument of ratification from Hungary. According to Article 16(2) of the Termination Agreement, it is currently in force only as between Denmark and Hungary.
The signing and entry into force of the Termination Agreement are significant developments in the intra-EU investor-state dispute resolution landscape. Parties to existing intra-EU investor-state arbitration proceedings involving signatory states to the Termination Agreement, as well as those that are considering commencing such proceedings, are advised to seek guidance on the implications of the Termination Agreement.
For further information, please contact Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, Olga Dementyeva, Associate, or your usual Herbert Smith Freehills contact.