"The End is Near, Chaos Ensues" Consequences of the Termination Agreement in EU Arbitral Proceedings: Present & Future
Published 6 July 2020
On May 5, 2020, the Termination Agreement culminated the European Commission's efforts to end all investor-state arbitration proceedings initiated pursuant to intra-European Union bilateral investment treaties based on the argument that said treaties are contrary to EU law. The Termination Agreement, signed by 23 EU States, asserts a mutual termination of 126 treaties and their sunset clauses with retroactive and immediate effect upon claims not initiated yet but involving investments made before this consensual termination, as well as arbitral procedures initiated on or after March 6, 2018 (post Achmea judgment). This paper aims to resolve two imminent concerns. The first is whether arbitral tribunals would possess jurisdiction if EU investors attempt to rely on a sunset clause when the intra-EU BIT is mutually terminated. The second issue is whether a mutual termination of an intra-EU BIT could impose a retroactive effect on arbitral procedures previously commenced as the Agreement suggests. According to the Vienna Convention, there is a presumption against treaties having a retrospective effect and preserving existing treaty rights upon the termination of a treaty. However, it will be proven that this protection is subject to the Contracting parties' agreement. If the European States agree, they can rescind any claim for breach of the intra-EU treaty that resulted before the date of termination, but not with respect to a pre-existing claim already initiated. Thus, arbitral tribunals should decline jurisdiction over future proceedings involving breach of intra-EU BITs, yet those tribunals must hold jurisdiction over claims occurring after the Achmea ruling and prior to the signing of the Termination Agreement.