The European Commission has initiated infringement proceedings against five Member States today requesting them to terminate intra-EU bilateral investment treaties between them ("intra-EU BITs"). BITs are agreements establishing the terms and conditions for private investment by nationals and companies of one state in another one. Intra-EU BITs are agreements that exist between EU Member States.
Many of these intra-EU BITs were agreed in the 1990s, before the EU enlargements of 2004, 2007 and 2013. They were mainly struck between existing members of the EU and those who would become the "EU 13". They were aimed at reassuring investors who wanted to invest in the future "EU 13" at a time when private investors - sometimes for historical political reasons – might have felt wary about investing in those countries. The BITs were thus aimed at strengthening investor protection, for example by means of compensation for expropriation and arbitration procedures for the settlement of investment disputes.
Since enlargement, such 'extra' reassurances should not be necessary, as all Member States are subject to the same EU rules in the single market, including those on cross-border investments (in particular the freedom of establishment and the free movement of capital). All EU investors also benefit from the same protection thanks to EU rules (e.g. non-discrimination on grounds of nationality). By contrast, intra-EU BITs confer rights on a bilateral basis to investors from some Member States only: in accordance with consistent case law from the European Court of Justice, such discrimination based on nationality is incompatible with EU law.
For all these reasons, the Commission has decided to request five Member States (Austria, the Netherlands, Romania, Slovakia and Sweden) to bring the intra-EU BITs between them to an end. The letters of formal notice, sent today, follow earlier exchanges with the Member States in question. This is not a new issue as the Commission has consistently and over a number of years pointed out to all Member States that intra-EU BITs are incompatible with EU law. However, since most Member States have taken no action, the Commission is now launching the first stage of infringement procedures against five Member States. At the same time, the Commission is requesting information from and initiating an administrative dialogue with the remaining 21 Member States who still have intra-EU BITs in place. It is worth noting that two Member States – Ireland and Italy – have already ended all their intra-EU BITs in 2012 and 2013 respectively.
Jonathan Hill, EU Commissioner for Financial Services, Financial Stability and Capital Markets Union said: "Intra-EU bilateral investment treaties are outdated and as Italy and Ireland have shown by already terminating their intra-EU BITs, no longer necessary in a single market of 28 Member States. We must all act together to make sure that the regulatory framework for cross-border investment in the single market works effectively. In that context, the Commission is ready to explore the possibility of a mechanism for the quick and efficient mediation of investment disputes."
