Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
European Law and Investment Treaties:
Exploring the Grey Areas
Investment Arbitration under
Intra-EU BITs
Prof. Dr. Christian Tietje, LL.M.
Transnational Economic Law Research Center
University Halle-Wittenberg
tietje@jura.uni-halle.de
London, 4 December 2008
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Outline
I.
II.
The Debate: Background
The Legal Issues
1.
2.
Applicable Law: Inevitably Different Perspectives
Public International Law as Applicable Law
a)
b)
c)
d)
3.
EC law is not public international law
MS have full competence to conclude BITs
Conflicts between Intra-EU BITs and EC Law are only a
matter of EC Law
Consequence: Necessity of disconnection clause
Assuming arguendo EC Law is Applicable
a)
b)
Art. 59, 30 VCLT?
Conflicts between EC Law and BITs?
(1) Substantial provisions
(2) Conflicting jurisdiction ECJ / Tribunal
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
The Debate: Background (1)
• 191 BITs between EU Member States
– Mostly between „old“ and „new“ Member States
– Reason: BITs concluded after 1989 in order to
promote economic relations after opening up of
Eastern Europe
• Eastern Sugar B.V. (Netherlands) v. The Czech
Republic, UNCITRAL ad hoc Arbitration, SCC
No. 088/2004, Partial Award of 27 March 2007
– Czech Republic argued against jurisdiction
because of EC law
– Quotes from internal EU Commission documents
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
The Debate: Background (2)
• EU Commission, INTRA-EU BILATERAL INVESTMENT
TREATIES (Note for the Alternates of the Economic and
Financial Committee) 2007
– “[…] Community law, including the jurisdiction of the Court
of Justice, prevails from the date of accession. However,
the transitional situation until the BITs are formally
terminated may result in complex questions of
interpretation with regard to jurisdiction in particularly with
regard to pending arbitration procedures but also in
relation to rules which provide for an extended application
of the agreement in a certain period after termination.”
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
The Debate: Background (3)
• EU Economic and Financial Committee [see Art. 114 (2) EC Treaty],
Annual Report to the Commission and the Council on the Movement
of Capital and the Freedom of Payments, 23 November 2007
– “15. Most Member States do not share the Commission's
concern about arbitration risks and discriminatory treatment of
investors. A clear majority of Member States prefers to maintain
the existing agreements, in particular with view to the provisions
on expropriation, compensation, protection of investments and
investor-to-state dispute settlement. Still, a few Member States
are seeking a solution for this issue. The EFC takes note that it
remains the responsibility of Member States that have been
informed of the Commission's concerns to address the issue
through bilateral actions and therefore invites Member States to
do what is necessary in this regard. The EFC will continue
monitoring developments in this respect and will come back on
this issue in its next report.”
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (1)
Applicable Law: Inevitably Different Perspectives
• EC law as applicable law
– Supremacy of EC law
– Even if no EC competence, MS are obliged to exercise
remaining competences in compliance with EC law,
namely fundamental freedoms
• Public international law as applicable law in investment arbitration
– Jurisdiction of Tribunal
• “The question of whether the parties have effectively expressed
their consent to ICSID jurisdiction is not to be answered by
reference to national law. It is governed by international law as set
out in Article 25(1) of the ICSID Convention” (CSOB v. Slovakia, ICSID
Case No. ARB/97/4, Decision on Jurisdiction of 24 May 1999, para. 35)
– Merits
• If BIT is bases for jurisdiction, in most cases BIT is also applicable
law concering merits
• EC law or national law applicable only as „facts“, i.e. „preliminary“ or
„incidental“ questions
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (2)
Public International Law as Applicable Law
• EC Law as public international law?
– Original EC Treaties are public international law
treaties
– However
• “By Contrast with Ordinary International Treaties,
the EEC Treaty has created its own legal system
…” (ECJ, Case 6/64, Judgment of 15 July 1964 –
Flaminio Costa v E.N.E.L.)
• Primary EC law is superior to public international
law (see Art. 300 (6) ECT)
• Public international law may become an „integral
part of community law“ (ECJ, Case 181/73,
Judgment of 30 April 1974 – Haegeman)
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (3)
Public International Law as Applicable Law
• EC Law as public international law?
– EC Law considers itself not to be public
international law
– For a Tribunal EC law is thus the same as
domestic law of a State
• Consider also
– Differentiation between
• Limited competences of EC and remaining
competences of MS (Art. 5 (1) ECT)
• EC law obligation to act in conformity with EC law
in areas of remaining MS competences
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (4)
Public International Law as Applicable Law
• Limited competences of EC and remaining competences of MS (Art.
5 (1) ECT)
– If no EC competence in a specific subject area, MS remain „full
subjects of international law“, thus they are capable to conclude
treaties inter-se
• Recent Example: „Convention between the Kingdom of Belgium, the
Federal Republic of Germany, the Kingdom of Spain, the French
Republic, the Grand Duchy of Luxembourg, the Kingdom of the
Netherlands and the Republic of Austria on the stepping up of
cross-border cooperation, particularly in combating terrorism, crossborder crime and illegal migration”, signed in Prüm (Germany) on 27
May 2005.
– External: EC has (currently) not BIT competence with regard to
third countries (only EC competence concerning admission of
FDI)
– Internal: Art. 43, 56 ECT (freedom of establishment and free
movement of capital and payments) are not exclusive EC
competences
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (5)
Public International Law as Applicable Law
• Situation is similar to double taxation conventions (DTAs)
of MS
• “It must be pointed out in that regard that, in the absence
of any unifying or harmonising Community measures,
Member States retain the power to define, by treaty or
unilaterally, the criteria for allocating their powers of
taxation, particularly with a view to eliminating double
taxation. … [I]n exercising the powers of taxation
allocated under them, the Member States are obliged to
comply with the rules of Community law” (ECJ, Case C524/04, Judgment of 13 March 2007, para. 49, 53 - Test
Claimants)
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (6)
Public International Law as Applicable Law
• Don‘t get confused:
– “The Court has consistently held … that, in
matters governed by the EEC Treaty, that Treaty
takes precedence over agreements concluded
between Member States before its entry into
force.” (ECJ, Case 235/87, Judgment of 27
September 1988, para. 22 - Annunziata
Matteucci)
– This is true from the perspective of EC law
– However, EC law does not effect situation under
public international law
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (7)
Public International Law as Applicable Law
• Consequences (1):
– Intra-EU BITs are within competence of MS
– EC law and public international law are separated legal
orders
– Thus, from the perspective of international law the validity
of intra-EU BITs can not be affected by EC law
• Art. 59 VCLT (Termination or suspension of the operation of a
treaty implied by conclusion of a later treaty) is not applicable
as there are no “two” treaties
• Art. 30 (3) VCLT (the earlier treaty applies only to the extent
that its provisions are compatible with those of the later
treaty) is not applicable for the same reason
– Incompatibilities are exclusively a matter of EC law (MS
may violate EC law while acting under a BIT) but not a
concern of Arbitral Tribunal
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (8)
Public International Law as Applicable Law
• Consequences (2):
– Necessity (from perspective of international law,
not EC law) of disconnection clause in inter se
agreements between MS
– Example Art. 47 (1) Prüm-Convention
“The provisions of this Convention shall apply
only in so far as they are compatible with
European Union law. Should the European Union
in future introduce arrangements affecting the
scope of this Convention, European Union law
shall take precedence in applying the relevant
provisions of this Convention.”
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (9)
Assuming arguendo EC Law is Applicable
• Art. 59 VCLT (termination/suspension)
– „same subject matter“
• BIT – treatment standards, expropriation and
arbitration
• EC
– Freedom of establishment (Art. 43 ECT) and free
movement of capital and payments (Art. 56 ECT) do
probably provide same standards as BIT treatment
standards
– However
» expropriation explicitly not EC competence (Art. 295
ECT)
» No possibility in EC law for investor to directly sue
MS
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (10)
Assuming arguendo EC Law is Applicable
• Art. 59 VCLT
– „parties intended that the matter should be
governed by [the later] treaty“ (lit. a)
• MS do not agree (see above)
– “the provisions of the later treaty are so far
incompatible with those of the earlier one that the
two treaties are not capable of being applied at
the same time”
• (-) as EC law obligations of MS remain uneffected
by BIT
• Art. 30 (3) VCLT (lex specialis application)
– Same problems as above
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (11)
Assuming arguendo EC Law is Applicable
• Conflict between EC law and BIT?
– Discrimination of EU citizens (Art. 12 ECT)
– Because rights under BIT are only available for own nationals
(„exporting“ perspective)
• “As regards, specifically, the refusal to grant to permanent
establishments of non-resident companies the international group
relief provided for by a bilateral agreement, concluded in order to
prevent double taxation, finds no justification in the fact that the
Member States are at liberty, in the framework of such agreements,
to determine the connecting factors for the purposes of allocating
powers of taxation as between themselves. As far as the exercise of
the power of taxation so allocated is concerned, the Member States
nevertheless may not disregard Community rules, under which the
national treatment principle requires a Member State which is party
to the agreement to grant to permanent establishments of nonresident companies the advantages provided for thereunder on the
same conditions as those which apply to resident companies.” (ECJ,
Case C-307/97, Judgment of 21 September 1999 - Saint-Gobain)
– However, under BIT, rights are granted not by home state, but by host
state
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (12)
Assuming arguendo EC Law is Applicable
• Conflict between EC law and BIT?
– Discrimination of EU citizens (Art. 12 ECT)
– Because rights under BIT are only granted to nationals of
one other MS („importing“ perspective)
• “Articles 56 EC and 58 EC do not preclude a rule laid down
by a bilateral convention for the avoidance of double taxation
which states that natural persons resident in one of the two
States are entitled in the other to the personal allowances
which are granted by it to its own residents from not being
extended to residents of a Member State which is not party to
that convention. The fact that the reciprocal rights and
obligations flowing from such a convention apply only to
persons resident in one of the two Contracting Member
States is an inherent consequence of bilateral double
taxation conventions.” (ECJ, Case C-376/03, Judgment of 5 July 2005, D)
– = No MFN treatment in EC law (disputed)
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
Legal Issues (13)
Assuming arguendo EC Law is Applicable
• Conflict between EC law and BIT?
– Conflicting jurisdiction ECJ/Investment Tribunal?
• Art. 292 ECT (ECJ, Case C-459/03,
Commission/Ireland, Judgment of 30 May 2006 MOX plant)
• Not applicable
– Refers exclusively to disputes between MS
– Refers only to procedures as provided for in ECT
– = No Investor-State procedure in ECT
Prof. Dr. Chr. Tietje – Transnational Economic Law Research Center
University Halle-Wittenberg
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