REUTERS | Mihai Barbu

Romania’s termination of its intra-EU BITs: a counterproductive move

In September 2015, it was reported that the Romanian President submitted draft legislation to the Parliament approving the termination of Romania’s 22 intra-EU bilateral investment treaties (BITs). The main reason given for this move is the pressure the European Commission (Commission) has imposed on EU member states for several years now.

As is well-known, the Commission considers the intra-EU BITs to be incompatible with EU law. For this reason, it has brought infringements proceedings before the Court of Justice of the EU (CJEU) against five member states, including Romania. The European Commission is also actively trying to prevent the payment of a US $250 million International Centre for Settlement of Investment Disputes (ICSID) award, which the Micula brothers obtained against Romania. This is also now before the CJEU.

In short, Romania has every reason to get rid of these BITs. However, it is by no means the first member state to consider this step. Italy has already terminated its intra-EU BITs, Poland is currently considering it and Denmark has indicated its readiness to terminate them.

However, the termination of the intra-EU BITs does not immediately end the possibility of investors bringing claims. That is because these BITs usually contain a so-called “sunset clause“, which protects existing investments for a period, varying from 10 to 20 years, and allows investors to continue to bring claims against member states. The only solution would be to remove the sunset clause and then terminate the BITs. That, of course, would not be compatible with the principles of legal expectations and legal certainty, and would therefore violate the rule of law.

Regardless of whether or not Romania terminates its intra-EU BITs, it will actually be the CJEU which will soon decide the fate of these treaties. A related issue, which the CJEU will also decide, is whether or not investment treaty arbitration is at all compatible with EU law.

Apart from these legal aspects, this development raises more general issues about the level of investment protection, and access to independent and impartial courts in EU member states. The annual rankings of transparency, anti-corruption and doing business, which are published by various organisations, show that many member states still lag behind the top member states. In other words, the EU is still far from offering a level playing field.

So, if one is of the opinion that BITs are important to attract foreign investment, and provide investors with a minimum level of protection and access to justice (which are otherwise lacking), the termination of intra-EU BITs is counterproductive.

This aspect deserves far more attention from the member states and the Commission when they consider the consequences of terminating intra-EU BITs.

EFILA Nikos Lavranos

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