In  response to the Achmea judgment of the Court of Justice of the European Union  (CJEU), the Netherlands has announced that it will seek to terminate all its  intra-EU bilateral investment treaties. The Netherlands is the first EU  member state to take the decisive step of terminating its intra-EU BITs  following the Achmea decision.

   On the 6th March 2018, the CJEU issued a long-awaited decision on a preliminary ruling on the Slovak Republic v. Achmea. The CJEU concluded that an arbitration clause in intra-EU bilateral treaties is incompatible with EU law. In particular, the CJEU held that the mechanism for settling disputes between an investor and a host state is incompatible with the principle of autonomy of EU law as it is enshrined in Articles 344 and 267 of the Treaty on the Functioning of the EU (TFEU). The Court observed that the arbitration procedure is not itself capable of ensuring the uniform application of EU  law. Since an arbitral tribunal cannot be regarded as a ‘court or tribunal’,  it is not entitled to make a reference to the CJEU for a preliminary ruling  and the arbitral award is, thus, subject only to limited judicial review by  competent national courts. In other words, the mechanism for settling disputes between an investor and a host state included in the respective intra-EU bilateral investment treaty (concluded between the Netherlands and the Czech and Slovak Federal Republic) does not ensure uniform and consistent interpretation of EU law.

   The CJEU has confirmed the European Commission's position that there is no place for investor-state arbitration in the EU market. In 2015, the Commission launched infringement proceedings against 5 EU Member States for failure to terminate their intra-EU BITs (these infringement proceedings are  pending). The Achmea judgment may have serious implications for 196 intra-EU  bilateral investment treaties in force and the European Commission is expected to intensify its work with the Member States concerned in order to ensure that the judgment is fully implemented (all intra-EU bilateral  treaties have already been terminated by Italy and Ireland).

   It is worth mentioning that Dutch bilateral investment treaties typically include a so-called sunset clause allowing investors to take the advantage of BIT protection for additional period of time after the notice of termination (15 years in the case of the 2004 Dutch model BIT). In light of the Achmea  judgment, it is uncertain how these sunset clauses are to be interpreted and applied.

   As regards alternative protection, the European Commission asserts that EU  investors already enjoy significant protection arising out of EU law. EU investors benefit from the single market fundamental freedoms and can rely on the fundamental rights protected by the Charter of Fundamental Rights of the  EU as well as on the applicable general principles of EU law (e.g. principle  of proportionality, legal certainty and the protection of legitimate  expectations). Since the Netherlands is a hub for intermediate or holding companies  (principally for investor-friendly policies and tax reasons), and Dutch BITs  are the second most frequently-invoked BITs globally, termination of Dutch  intra-EU BITs may negatively affect the investment climate in the whole  EU.

DLA Piper