Commission provides guidance on protection of cross-border EU investments

Article written by Neil Portelli – Director, EU Policy and Legislation
Published on The Malta Business Weekly – 13.09.18

Following the Court of Justice of the European Union judgment that investor-Stat arbitration in intra-EU BITs is not compatible with EU law, this article is a synthesis of the Commission’s communication highlighting clarifications necessary on the protection provided by EU law with regards to EU’s investor’s rights.

On July 19, 2018 the Commission issued guidance to help EU investors to invoke their rights before national administrations and courts and to help Member States to protect the public interest in compliance with EU law.  The full Commission’s communication may be found here.

The Commission’s Communication aims to strengthen the business environment for EU investors.  This is a crucial element in supporting more investment in the EU Single Market.  EU law does not solve all problems investors may face in their activities.  However, the Communication clarifies that EU law protects EU investors’ rights, and investors can enforce these rights before national administrations and courts, and ultimately the European Court of Justice.

In a recent ECJ ruling, it was held that EU investors can no longer rely on intra-EU bilateral investment treaties (‘intra-EU BITs’), as these treaties are not compliant with EU law and they overlap with the EU single market rules and discriminate between EU investors.  In the case (Slovak Republic v. Achmea B. V. Case C 284/16), the Court of Justice of the European Union confirmed that investor-State arbitration in intra-EU BITs, such as the bilateral investment treaty between the Netherlands and the Slovak Republic, are not legal.

The Commission’s Communication is intended to assist investors in invoking their rights before administrations and national courts and help legal practitioners to correctly apply EU rules.  In this regard, the Communication clarifies that:-

  • The free movement of capital, services, goods and workers in the EU Single Market are fundamental freedoms for EU individuals.  They give companies and citizens the right to establish a business, invest in a company and provide services and goods across European borders.  EU investors are also protected by general principles of non-discrimination, proportionality, legal certainty and protection of legitimate expectations.  EU law also recognises fundamental rights, such as the right to conduct a business, the right to property and the right to effective judicial protection.  EU rules protecting investors can be found in the Treaty, in the Charter of Fundamental Rights of the European Union, in the general principles of Union law, and in extensive sector-specific legislation;
  • Investor-State arbitration between a Member state and an investor from another Member State is incompatible with EU law, including through ‘intra-EU BITs’, as the European Court of Justice recently held in the recent judgment in the Achmea case.  In that case the Court considered that investor-State arbitration clauses in EU bilateral investment treaties are not compatible with EU law and that they do not have legal effect.  According to the Commission’s Communication, the Achmea judgment is also relevant for the application of the Energy Charter Treaty between EU Member States.  In the Commission’s view that Treaty cannot be used as a basis for dispute settlement between EU investors and EU Member States.  EU law already offers a comprehensive and effective legal framework, including remedies, to intra-EU investors when they invest in another Member State;
  • At the same time, EU law allows for markets to be regulated with a view to pursue legitimate public interests such as public security, public health, social rights, consumer protection or the preservation of the environment, which may have negative consequences for investors.  Public authorities of the EU and in the Member States have a duty and a responsibility both to protect investment and to regulate markets.  Therefore, the EU and Member states may take legitimate measures to protect those interests.  However, they can do so only in certain circumstances and under certain conditions, and in compliance with EU law.

Finally, the Commission’s communication highlights that EU investors’ rights emanating from the EU Treaties are guaranteed by national courts and the European Court of Justice.  Currently, the Commission and Member States are holding discussions to analyse possible future developments on investment protection within the EU.

« Back