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The Status of International Investment Agreements Between EU Member States and Non-EU States

Implications of Developments in EU Law

Clinic: Hebrew University, Fall 2019

Beneficiary: Various Ministries, Government of Israel

Executive Summary

(Full Report available here)

Following recent developments in EU law concerning the validity of international investment agreements (IIAs) between the EU Member States, and primarily following the Court of Justice of the European Union’s (CJEU) recent ruling in the Slovak Republic v. Achmea case, there is a need for clarity regarding the status of IIAs between EU Member States and non-EU Member States.

In the 2018 Achmea ruling, the CJEU ruled that all intra-EU agreements with dispute settlement by arbitration conflict with Art. 344 TFEU, and therefore infringe on the autonomy of EU law and should be terminated. The CJEU revisited the subject the 2019 Opinion 1/17, concerning the Comprehensive and Economic Trade Agreement between Canada and the EU (CETA). The court concluded that contrary to the Achmea ruling, the arbitration mechanism in CETA does not raise the same issues of incompatibility with EU law. Specifically, the Court was certain that arbitration under CETA does not conflict with the autonomy of EU law as stated in the Achmea ruling.

The EU Commission and most EU Member States recently signed the Agreement for the Termination of Bilateral Investment Treaties Between the Member States of the European Union (May 5th, 2020), in which they agreed upon the formal termination of all intra-EU investment agreements. While the agreement does not explicitly refer to extra-EU agreements, the question of whether these developments in CJEU jurisprudence might affect extra-EU agreements must be considered. At first glance, it seems that there will be no effect in an extra-EU context, partially because the Achmea decision and the 2020 Termination Agreement specifically only mention intra-EU agreements. However, several issues raise the possibility that these recent developments could in fact have at least an indirect impact on extra-EU agreements as well. For instance:

  1. The vague wording used in Achmea may allow for a wider application of the ruling;

  2. The frequent jurisdictional objections raised by the EU and its Member States express the EU’s disapproval of the application of EU law by arbitral tribunals;

  3. A non-binding communication previously issued by the EU regarding the decision’s applicability to the ECT hints at the EU’s concerns in areas that are not purely intra-EU.

As Achmea and the subsequent d