A Shift From Arbitration To Multilateral Investment Court System At EU

Author:Ms Tilbe Birengel
Profession:Erdem & Erdem Law


The establishment of an international investment court system has been one of the major objectives of the European Commission since 20151, as the investor-to-state dispute settlement via arbitration is argued to become obsolete.

In this article, the shift from arbitration into a permanent court system will be covered.

The Reasons Behind an Investment Court System

As per the Fact Sheet2 of the Commission of 2017:

Case-by-case establishment of ad hoc tribunals with diverging approaches on investment rules avoid predictability in investment disputes; The current system is not transparent enough, since it lacks systematic publication of arbitral awards or decisions; Due to the party appointed nature of the arbitrators, partiality concerns are on the rise; and The limitations on grounds for rights of appeal in the current ad-hoc mechanism reduce comprehensiveness. According to these grounds, termination of intra-EU bilateral investment treaties ("BITs") and the establishment of a multilateral investment court has been promoted. This system is claimed to avoid the above-stated shortcomings through its permanency, transparency and cost-efficiency by avoiding duplicate work for each BIT3.

Achmea Judgment

In line with this notion, the Court of Justice of the European Union ("CJEU") rendered its Achmea judgment on 6 March 20184, by concluding on the incompatibility of the arbitration clause in the Netherlands-Slovakia BIT5 with the primacy of the EU law, which was analysed in our previous article6.

This judgment has been widely criticized within the arbitration community and has become major support for the Commission in its intensified invitation to the MSs on the termination of the intra-EU BITs7.

Termination of intra-EU BITs

In its Communication8 dated 19 July 2018, the Commission qualified the intra-EU BITs as "a parallel treaty system overlapping with single market rules, preventing the full application of EU law"9and even added that it may activate infringement procedures against the MSs during its monitor on the termination phase of the BITs10.

As a complement to this statement, the MSs committed to terminate all intra-EU BITs no later than 6 December 2019 in a declaration published on 17 January 201911 and acknowledged that:

The EU law takes precedence over intra-EU BITs; The arbitration clauses contained in these BITs are contrary to EU law and are, hence, inapplicable; The arbitral tribunals established as per these arbitration clauses lack jurisdiction; No new intra-EU investment arbitration proceeding may be initiated; and The MS courts shall either set aside, or not enforce, the intra-EU investment arbitration awards. It should be noted that the MSs did not provide a common position on the effect of the Achmea judgment on the investor-state arbitration clause of the Energy Charter Treaty and...

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