Bilateral investment treaties and EU law

Common Market Law Review

Volumn 46, Issue 2, 2009, Pages 383-429

  Eilmansberger, Thomas ^a  

^a UNIVERSITY OF SALZBURG   (Austria)

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EID: 67649406262     PISSN: 01650750     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (255)

1. Namely the GATS, the TRIMs and the TRIPs. Of these agreements, the GATS deals most directly with investment issues. Mode 3 applies to the supply of trade in services through "commercial presence", which is in essence an investment activity. Mode 4 may also be regarded as investment-related because it deals, inter alia, with the temporary entry of managerial and other key personnel. In accordance with the MFN obligation, parties to the GATS are committed to treating services and service providers from one Member in a no less favourable way than like services and service providers from any other as concerns measures affecting trade in services.
2. The Multilateral Agreement on Investment was negotiated in the framework of the OECD between 1995 and 1998. After the first draft triggered widespread criticism from civil society groups and developing countries, in October 1998 France announced the withdrawal of its support which effectively doomed the project under the OECD's consensus requirement.
3. For a detailed description of these various attempts see Wolf, "Welthandelsrechtliche Rahmenbedingungen für die Liberalisierung ausländischer Direktinvestitionen", 61 Beiträge zum Transnationalen Wirtschaftsrecht (2006), 1, at 15 et seq.
4. The "Singapore issues" refer to four negotiating mandates agreed upon during the World Trade Organization Ministerial Conference of 1996 in Singapore. The issues covered were: transparency in government procurement, trade facilitation (trade-related fees, formalities, administrative procedures, etc.), trade and investment, and trade and competition.
5. By the General Council's post-Cancún decision; see www.wto.org/english/tratop_e/dda_e/ddadraft_31jul04_e.pdf. All webpages cited in this article were last visited on 27 Feb. 2009.
6. For a short overview see Lowenfeld, International Economic Law (Oxford, 2002), at pp. 391-414.
7. For more extensive analysis see Dolzer and Schreuer, Principles of International Investment Law (Oxford, 2008).
8. In the form of a so-called "Minimum Standard of Treatment", see e.g. Kishoiyian, "The Utility of Bilateral Investment Treaties in the Formulation of Customary International Law", 14 Northwestern Journal of International Law and Business (1994), 327-375.
9. sceptical however is Al Faruque, "Creating customary international law through bilateral investment treaties: A critical appraisal", 44 Indian Journal of International Law (2004), 292-318.
10. Porterfield, "An International common law of investors rights?", 27 University of Pennsylvania Journal of International Economic Law (2006), 79-113.
11. According to the "Hull rule", prompt, adequate and effective compensation is called for in case of expropriation. It has been argued that this rule lost its customary law character due to several UN General Assembly Resolutions in the 1960s and 1970s (e.g. Van Aaken, "Fragmentation of international law: The case of International investment protection", Law and Economics Research Paper Series (Paper No. 2008/1, University of St. Gallen Law School, 2008), 1, at 5). Given that these resolutions were not adopted unanimously and that it is furthermore questionable whether they reflected the opinio juris required to change customary law, expropriation standards under international law should still be influenced by the Hull formula.
12. The number of such IIAs has increased dramatically in the last 20 years. Presently, there are estimated to be more than 2500 BITs and over 175 RTAs. While new agreements are still being negotiated (and many of the existing ones in the process of being renegotiated), the increase of BITs has slowed markedly in recent years. There seems to be an inverse relationship between the proliferation of regional trade agreements containing investment provisions and the conclusion of new investment treaties. Given the number of BITs reached already, there may also be a certain saturation effect.
13. As to the complex relationship between BITs disciplines and GATS provision see Adlung and Molinuevo, "Bilateralism in services trade: Is there fire Behind the (BIT-)smoke?", 11 Journal of International Economic Law (2008), 365.
14. See Houde and Yannaka-Small, "Relationships between International Investment Agreements", 1 OECD Working Papers on International Investment (2004), 2.
15. Leeks, "The relationship between bilateral investment treaty arbitration and the wider corpus of international law: the ICSID approach", 65 University of Toronto Faculty of Law Review (2007), 1, at 19 et seq. (also available at findarticles.com/p/articles/mi_m6612/is_2_65/ ai_n25013931).
16. Franck, "Foreign direct investment, investment treaty arbitration, and the rule of law", (2007) Global Business & Development Law Journal, 337, at 342 (electronic copy available at ssrn.com/abstract=882443).
17. The Abs-Shawcross Draft Convention of 1959 was considered by the OEEC and adopted by the OECD in 1962 (with some revisions in 1967) as the OECD Convention on the Protection of Foreign Property; see 7 ILM 117(1968), OECD Publication 23081.
18. The US model BIT can be downloaded: www.ustr.gov/assets/Trade_Sectors/Investment/Model_BIT/asset_upload_file 847_6897.pdf.
19. Dolzer and Schreuer, op. cit. supra note 6, p. 80 et seq.
20. Echandi and Joubin-Bret, "Bilateral investment treaties 1995-2006: Trends in investment rulemaking", UNCTAD study (2007), xiii.
21. Franck, op. cit. supra note 13, 338.
22. for an analysis of investment treaty litigation see Franck, "The legitimacy crisis in investment arbitration: Privatizing public international law through inconsistent decisions", 73 Fordham L Rev. (2005), 1521.
23. Goldhaber, "Arbitration scorecard: Treaty disputes", (2005) Am. Law, available at www.americanlawyer.com/ focuseeurope/treaty0605.html.
24. Zaring, "Rulemaking and adjudication in international law", (2008) Society of International Economic Law (SIEL), Inaugural Conference 2008 Paper, available at ssrn.com/abstract=1156930.
25. Treaty establishing a Constitution for Europe, O.J. 2004, C 310/1.
26. Lisbon Treaty, O.J. 2008, C 115/1.
27. See Art. III-314 Constitutional Treaty, O.J. 2004, C 310/142; Art. 206 TFEU, O.J. 2008, C 115/139.
28. Beattie, "Brussels seeks greater power in foreign deals", Financial Times, 12 March 2008.
29. See below section 3.4.2.
30. See award of Oct. 2006, ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary, ICSID Case No. ARB/03/16, para 272; award of 13 Sept. 2006, Telenor Mobile Communications A.S. v. Republic of Hungary, ICSID Case No. ARB/04/15, para 50; partial award of 27 March 2007, Eastern Sugar v. Czech Republic, SCC No. 088/2004, para 156; Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20 (pending at time of writing); see also the cases mentioned by Söderlund, "Intra-EU BIT Investment Protection and the EC Treaty", 24 Journal of International Arbitration (2007), 455, 466.
31. Ceyssens, "Towards a Common Foreign Investment Policy? - Foreign investment in the European Constitution", 32 LIEI (2005), 259, at 262.
32. Which, given the narrow reading of that concept by the ECJ in Opinion 1/94, [1994] ECR I-5267, regarding GATS, likely only covers investment measures impacting trade.
33. see also Ceyssens, op. cit. supra note 25, 260.
34. Ceyssens, op. cit. supra note 25, 261; cf. also Dashwood, "EC external relations provisions Post-Amsterdam" in Dashwood and Hillion, The General Law of EC External Relations (Sweet & Maxwell, 2000), p. 279, at 280.
35. Mola, "Which role for the EU in the development of international investment law", (2008) SIEL, Inaugural Conference 2008 Paper, 12, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=1154583).
36. see however Karl, "The Competence for Foreign Direct Investment", (2004) The Journal of World Investment & Trade, 413, at 415 according to whom, Art. 57 confers an explicit (and exclusive) competence for the conclusion of international agreements concerning the establishment of foreign investors.
37. Ceyssens, op. cit. supra note 25, 261.
38. See also Maydell, op. cit. supra note 16, pp. 132 et seq.
39. Klamert and Maydell, "Rechtsfragen der impliziten Außenkompetenz der EG illustriert am Beispiel der Dienstleistungsrichtlinie und der Minimum Plattform on Investment", (2008) EuR, 589, at 600 et seq.
40. contrary Eeckhout, External Relations of the European Union (Oxford, 2004), p. 124.
41. Karl, op. cit. supra note 27, 415.
42. As to the requirements for necessity in this sense see e.g. Griller, "Die gemeinsame Handelspolitik nach Nizza" in Griller and Hummer (Eds.), Die EU nach Nizza (Wien, 2002), p. 131.
43. Opinion 1/03 of the Court, [2006] ECR I-1145, para 115 (Lugano Opinion).
44. Opinion of the ECJ 1/94, cited supra note 26, para 85. It is true that, as the Court stated in Opinion 1/76, the external competence based on the Community's internal powers may be exercised, and thus become exclusive, without any internal legislation having first been adopted. However, this relates to a situation where the conclusion of an international agreement is necessary in order to achieve Treaty objectives which cannot be attained by the adoption of autonomous rules. It is undisputed that that is not the case here.
45. Case C-475/98, Commission v. Austria (Open skies), [2002] ECR I-9797, paras. 92 et seq.; Lugano Opinion, cited supra note 31, para 120.
46. Opinion of the ECJ 1/94, cited supra note 26, para 95.
47. Lugano Opinion, cited supra note 31, 114.
48. Opinion of the ECJ 1/94, cited supra note 26, para 95.
49. Maydell, The European Community's Minimum Platform on Investment or the Trojan Horse of Investment Competence in Reinisch and Knahr (Eds.), International Investment Law in Context (Utrecht, 2008), p. 73.
50. Klamert and Maydell, "Lost in exclusivity - implied non-exclusive external competences in Community law", 13 EFA Rev. (2008), 493, at 497, especially 502 et seq.
51. Cf. Mola, op. cit. supra note 27, 11, who refers to controversial positions in this regard even within the Commission.
52. See also Ceyssens, op. cit. supra note 25, 261.
53. Maydell, op. cit. supra note 16, pp. 133 et seq.
54. The most important examples of such legislation concerning third country investment can be found in the financial services field, notably Directives 2006/48/EC (credit institutions), O.J. 2006, L 177/1-200; 2002/83/EC (life insurance), O.J. 2002, L 345/1-51; 72/239/EEC (direct insurance other than life insurance) O.J. 1973, L 228/3-19; 2004/39/EC (markets in financial instruments) O.J. 2004, L 145/1-44. For a detailed analysis of these directives in this regard see Maydell, op. cit. supra note 16, pp. 169 seq.
55. See also Ceyssens, op. cit. supra note 25, 271.
56. Mola, op. cit. supra note 27, 12.
57. Ibid. 14; for a contrary opinion, Maydell, op. cit. supra note 16, p. 137.
58. See also A.G. Maduro in Joined Cases C-205/06 & C-249/06, Commission v. Austria and Sweden, Opinion of 10 July 2008, nyr, para 28.
59. As well as alone by the EC, and by the EC and Member States together in a mixed agreement.
60. Thus obligatory mixity in the classification proposed by Rosas, "The European Union and mixed agreements" in Dashwood and Hillion, op. cit. supra note 27, p. 200, at p. 206.
61. With regard to the latter see Westcott, "Investment provisions and commitments in the CARIFORUM-EU EPA", 7 Trade Negotiations Insights (2008).
62. See the analysis by Karl, op. cit. supra note 27, 418.
63. For instance, the CARIFORUM-EU EPA does not seek to guarantee investors protection against host government expropriation of their investments without fair compensation, nor does it include dispute settlement provisions and the means for investors to submit treaty violations to international arbitration. Moreover, there is no promise that host governments accord foreign investors a minimum standard of treatment. On the other hand, there is a guarantee that host governments will not restrict the free movement of capital relating to investments.
64. See e.g. Art. 21 of the EC-Chile association agreement (O.J. 2002, L 352/1), Art. 50 agreement Euro-Med countries (O.J. 1998, L 97/2) and Art. 21 Cotonou agreement (O.J. 2000, L 317/3).
65. Adopted on 27 Nov. 2006 by the Council of the European Union; (unpublished Council document 15375/06).
66. see also the speech by the Minister Paula Lehtomäki in the Committee on International Trade (INTA) of the European Parliament on 18 Dec. 2006, available at www.eu2006.fi/news_and_do cuments/speeches/vko51/en_GB/11 66452215680. For a discussion of these developments see Klamert and Maydell, op. cit. supra note 36, 511 et seq.
67. Maydell, op. cit. supra note 36, p. 75.
68. Burgstaller, European law and investment treaties , (forthcoming) (2009) Journal of Int. Arbitration.
69. The perception now is that, in comparison to NAFTA countries' agreements, EU agreements and achievements in the area of investment lag behind because of their narrow content, and that, as a result, European investors are discriminated vis-à-vis their foreign competitors and the EU is losing market shares. See DG Trade Note for the attention of the 133 Committee "Upgrading the EU investment policy", 30 May 2006; www.iisd.org/pdf/2006/tas_upgrading_eu.pdf.
70. Cf. Maydell, op. cit. supra note 16, p. 147.
71. It will however not impact on existing Member States BITs. This is emphasized also by an Article of the MPoI on "Other Agreements" providing that "nothing in this Title shall be taken to limit the rights of investors of the Parties to benefit from any more favourable treatment provided for in any existing or future international agreement relating to investment to which a Member State of the Community and [a 'region' or country] are parties.".
72. See also Klamert and Maydell, op. cit. supra note 36, 502.
73. Maydell, op. cit. supra note 16, p. 154.
74. Karl, op. cit. supra note 27, 429.
75. See also Maydell, op. cit. supra note 16, p. 205.
76. Hummer, "Article III-315 para 9" in Vedder and Von Heinegg (Eds.), Europäischer Verfassungsvertrag (Baden-Baden, 2007).
77. Karl, op. cit. supra note 27, 420.
78. Ceyssens, op. cit. supra note 25, 274.
79. Krajewski, "External trade law and the Constitution Treaty: Towards a federal and more democratic common commercial policy?", 42 CML Rev. (2005), 91, at 112.
80. Mola, op. cit. supra note 27, 14.
81. See e.g. OECD Benchmark Definition of Foreign Direct Investment, 4th ed. (2008), p. 10.
82. I.e. to investments to establish an industrial or commercial presence for the production or trade of goods, analogous to the "commercial presence" as a means for supplying services in foreign countries (GATS mode 3 is defined as "the supply of a service by a service supplier of one Member, through commercial presence in the territory of any other Member.").
83. Krajewski, op. cit. supra note 57, 114.
84. in this sense also Metz, Die Außenbeziehungen der Europäischen Union nach dem Vertrag über eine Verfassung für Europa (Berlin, 2007), p. 291.
85. Woolcock, "The potential impact of the Lisbon Treaty on European Union External Trade Policy", 8 European Policy Analysis (2008), 1, at 4.
86. It has indeed been argued that this new competence extends to the promotion and liberalization of foreign investment as well as to its protection, Karl, op. cit. supra note 27, 421
87. Ceyssens, op. cit. supra note 25, 277.
88. Karl, op. cit. supra note 27, 425.
89. Krajewski, op. cit. supra note 57, 112.
90. Mola, op. cit. supra note 27, 14.
91. contra Maydell, op. cit. supra note 16, p. 221.
92. Cf. Karl, op. cit. supra note 27, 425.
93. See Ceyssens, op. cit. supra note 25, 269.
94. Unless, of course, liability vis-à-vis the other signatory State can be avoided by enforcing compliance of the Member States through use of the infringement procedure; more optimistic in this respect also Karl, op. cit. supra note 27, 432.
95. In this case also some difficult practical issues would arise: Should the Commission as the institution representing the EU in such litigations seek, and how could it secure, the assistance of the Member State concerned; and would the EU in case of a compensation order against it have a regress claim against the Member State concerned?.
96. The negotiating position is, however, clearly weakened by the wide array of already existing BITs concluded by the large Member States.
97. Mola, op. cit. supra note 27, 19.
98. A declaration regarding Art. 26 of the Energy Charter Treaty (O.J. 1998, L 69/115) specifies inter alia that the European Communities and their Member States have both concluded the Energy Charter Treaty and are thus internationally responsible for the fulfilment of the obligations contained therein, in accordance with their respective competence, and that the Communities and the Member States will, if necessary, determine among them who is the respondent party to arbitration proceedings initiated by an investor of another contracting party. In such cases, upon request of the investor, the Communities and the Member States concerned will make such determination within a period of 30 days. This is without prejudice to the right of the investor to initiate proceedings against both the Communities and their Member States.
99. Most importantly investment aspects of services; thus, under such BITs, Member States could not assume international obligations on mode 3 in services in addition to the GATS commitments submitted by the EC.
100. See also Hummer, op. cit. supra note 57, "Article III-315 para 10".
101. See also A.G. Tizzano, Joined Opinion in Cases C-466/98 et al., Commission v. United Kingdom et al. (Open Skies), [2002] ECR I-9427, para 113.
102. In this sense also Ceyssens, op. cit. supra note 25, 286.
103. See also Eeckhout, op. cit. supra note 29, p. 335.
104. Pache and Bielitz, "Das Verhältnis der EG zu den völkerrechtlichen Verträgen ihrer Mitgliedstaaten", (2006) EuR, 316, at 327.
105. Petersmann and Spennemann, "Article 307 para 6" in Groeben/Schwarze (Eds.), Kommentar zum Vertrag über die Europäische Union und zur Gründung der Europäischen Gemeinschaft, 6th ed. (Baden-Baden, 2004).
106. contra: Manzini, "The priority of pre-existing treaties of EC Member States within the framework of international law", (2001) EJIL 781, at 785 et seq.
107. A.G. Capotorti in Case 181/80, Procureur général près la cour d'appel de Pau v. José Arbelaiz-Emazabel, [1981] ECR 2961, para 4.
108. See also Hummer, op. cit. supra note 72.
109. Ceyssens, op. cit. supra note 25, 287 et seq.
110. As was suggested by A.G. Capotorti in Case 812/79, Attorney General v. Burgoa, [1980] ECR 2787, para 3 and A.G. Van Gerven in Case C-23/92, Maria Grana-Novoa v. Landesversicherungsanstalt Hessen, [1993] ECR I-4505, para 9.
111. Söderlund, op. cit. supra note 24, 462.
112. Committee on International Law on Foreign Investment, International Law Association, Draft Conference Report Rio 2008, available at www.ilahq.org/en/committees/draft_com-mittee_reports_rio_2008.cfm, at 6.
113. As well as of Art. 43 EC (freedom of establishment), which protects foreign investment in connection with the setting up of a permanent establishment in another Member State; as to the relationship between these two freedoms with regard to FDI see Hindelang, "Wie viel Freiheit wagen? Das Verhältnis von EG-Kapitalverkehrs- und Niederlassungsfreiheit und die Reglementierung von Direktinvestitionen in und aus Drittstaaten" in Knahr and Reinisch (Eds.), Aktuelle Probleme und Entwicklungen im Internationalen Investitionsrecht (Stuttgart, 2007), p. 79 (passim). In the following, references to free movement of capital provisions of the EC are meant to also include the freedom of establishment.
114. Indeed, in Nov. 2006 the European Commission (Internal Market and Services DG) sent a note to the Economic and Financial Committee in which it argued that there appears to be no need for BITs between Member States in the single market any more, and "that most of their content is superseded by Community law upon accession of the respective Member State". In this note the Commission suggests that Member States exchange notes to the effect that such BITs are no longer applicable, and also formally rescind such agreements; the relevant part of the note is reproduced in Eastern Sugar, cited supra note 24, para 126. This view was however rejected by most Member States; see 2007 EFC (Economic and Financial Committee) Report to the Commission and the Council on the Movement of Capital and the Freedom of Payments of 8 Jan. 2008, 5123/08, para 15; as well as the 2008 Annual EFC Report of 17 Dec. 2008, 17363/08, para 17.
115. United Nations, Treaty Series, vol. 1155, 331.
116. Poulain, "Quelques interrogations sur le statut des traits bilatéraux de promotion et de protection des investissements au sein de l'Union Européenne", (2007) Revue générale de Droit International Public, 803, at 812.
117. It appears that this argument was also made in another arbitration concerning a dispute between a German owner of a Czech transport company and the Czech Republic under the Germany-Czech Republic BIT; the case is mentioned by Burgstaller, op. cit. supra note 50.
118. Eastern Sugar, cited supra note 24, paras. 97 et seq. This view was however rejected by the Tribunal (para 128); for an instructive and critical analysis of the Tribunal's reasoning see Burgstaller, op. cit. supra note 50.
119. Art. 59 reads: 1. A treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject-matter and (a) it appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or (b) 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. 2. The earlier treaty shall be considered as only suspended in operation if it appears from the later treaty or is otherwise established that such was the intention of the parties.
120. Contra: Poulain, op. cit. supra note 82, 815.
121. It is equally obvious that the alternative condition in Art. 59(1) lit b VCLT is not fulfilled with regard to the relationship between intra-EU BITs and the free movement of capital regime of the EC Treaty. To the extent there is an incompatibility with regard to specific provisions, this can be solved through the application of the lex posterior rule provided for in Art. 30 VCLT.
122. see also Burgstaller, op. cit. supra note 50.
123. This has been clarified in Case C-491/01, British American Tobacco, [2002] ECR I-11453, para 179
124. see also Art. 4(2) lit b TFEU. 89.
125. See below at Sections 3.4.3, 5.2.
126. Bringing an action before national courts may be more efficient because of their power under the supremacy principle to set aside or refuse to apply the national legal measure violating Art. 56 EC. As a rule, however, investors will be more inclined to submit their claim to arbitration not least because of the better chances to obtain significant financial redress.
127. See also Radu, "Foreign Investors in the EU - Which 'best treatment'? Interactions between bilateral investment treaties and EU law", 14 ELJ (2008), 237, at 257.
128. See also Poulain, op. cit. supra note 82, 816.
129. See Case C-55/00, Gottardo, [2002] ECR I-413, paras. 34 et seq. (regarding social security entitlements).
130. and Case C-307/97, Compagnie de Saint Gobain, [1999] ECR I-6161, paras. 58 et seq. (regarding preferential treatment under a double-taxation treaty).
131. E.G. Arts. 24 and 52 of Directive 2000/12/EC relating to the taking up and pursuit of the business of credit institutions, O.J. 2000, L 126/1.
132. That appears to be the position taken by Van Aaken, op. cit. supra note 8, 30.
133. With regard to substantive guarantees, this solution was adopted for instance by the ECJ in Case 235/87, Matteucci, [1988] ECR 5589, para 23 concerning a treaty between Belgium and Germany providing for cultural exchange and also scholarships for their nationals. For an application of this approach in the BIT-context see Eastern Sugar, cited supra note 24, para 170.
134. ICSID Case No. Arb/97/7 (Decision on Jurisdiction 25 Jan. 2000), Maffezini v. Spain, which extended the MFN Clause to procedural provisions. The Maffezzini reasoning was recently followed by Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. Argentina, ICSID Case No. ARB/03/17, Decision on Jurisdiction (16 May 2006), at para 52 et seq. In a recently decided case cited above, Telenor Mobile Communications, cited supra note 24, para 95, the Tribunal rejected the relevance of the MFN clause for procedural issues, noting that "In these circumstances, to invoke the MFN clause to embrace the method of dispute resolution is to subvert the intention of the parties to the basic treaty, who have made it clear that this is not what they wish". In the same vein Berschader & Berschader v. The Russian Federation (Arbitration Institute of the Stockholm Chamber of Commerce), see UNCTAD, "Latest Developments in Investor-State Dispute Settlement", (4/2006) IIA MONITOR, International Investment Agreements (UNCTAD: Geneva/New York, 2006).
135. Discussed in detail by Söderlund, op. cit. supra note 24, 455, at 465.
136. see also Poulain, op. cit. supra note 82, 817, at 824.
137. Case C-459/03, Commission v. Ireland (MOX plant), [2006] ECR I-4635.
138. That is also the conclusion by Söderlund, op. cit. supra note 24, 458 et seq.
139. Contra: Van Aaken, op. cit. supra note 8, 30.
140. This is the reason suggested by Söderlund, op. cit. supra note 24, 459.
141. See supra note 80.
142. Neither would there be an interference with the Commission's competence to challenge Member State measures via the infringement proceeding (as is argued e.g. by Poulain, op. cit. supra note 82, 817). This is, first, because this competence is not exclusive in the sense that EC law infringing measures can also be challenged before national courts by concerned individuals and, second, because the Commission is not hindered by an arbitration proceeding from initiating proceedings under Art. 226 EC with respect to the measure at issue.
143. That applies also if the BIT contains a "fork in the road" provision (according to which that an investor loses the right to resort to international arbitration if he chooses to pursue the claim before other venues provided for in the BIT) because the investor would, when addressing national courts or the Commission, not attempt to enforce rights under the BIT.
144. Poulain, op. cit. supra note 82, 817.
145. It should, however, be possible that the Commission is granted an opportunity to make its point of view known to the arbitral tribunal as amicus curiae. According to information made available by the Energy Charter Secretariat, in at least two Investor-State Dispute Settlement Cases under this treaty, ICSID has indeed received a petition for amicus curiae participation from the Commission, namely in Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19 (pending), and in AES Summit Generation Limited and AES-Tisza Ero{double acute}mu{double acute} Kft. v. Republic of Hungary, ICSID Case No. ARB/07/22 (pending).
146. This issue will be discussed in more detail below; see section 5.
147. In the above mentioned Matteucci judgment (cited supra note 95, para 23), the ECJ ruled that the provision of research scholarships in a cultural agreement between Belgium and Germany (only) for nationals of these two countries constitutes discriminatory treatment under Art. 7 of Reg. 1612/68, which takes precedence also over such an agreement. The Court concluded that the authorities of those Member States may not refuse to award those scholarships to a national of another Member State residing and pursuing an activity as an employed person in their territory.
148. Such guarantees are also provided for under Art. XI of the GATS and a footnote to Art.` XVI.
149. For an instructive and comprehensive analysis of such EC rules see Radu, op. cit. supra note 90, 239 et seq.
150. Note that this sort of discrimination will not be cured by a ordinary Regional Economic Integration Organisation (REIO) clause (i.e. a clause merely excluding the applicability of the principle of most-favoured-nation treatment with regard to preferential treatment that members of a REIO grant other REIO members and their investors) because it would not remove the national treatment obligation contained in non-discrimination regimes of BITs. A different conclusion might apply in case of REIO clauses which do not specifically relate to MFN obligations but to the entire scope of the agreement, i.e. generally legitimizing acts adopted in the framework of the REIO (to be found e.g. in the model BIT of Finland providing in Art. 4). It has been argued (e.g. Radu, op. cit. supra note 90, 249) that such global REIO exceptions could act as an exception also to national treatment obligations requiring the Member State to extend preferential EU treatment to third country investors.
151. Art. 4 Television Without Frontiers Directive 89/552/EEC, O.J. 1989, L 298/23.
152. Otherwise this sort of clause is apparently rather rare; see Dolzer and Stevens, Bilateral Investment Treaties (The Hague, 1995), pp. 80 et seq.
153. Namely the Czech Republic, Estonia, Lithuania, Latvia, Poland, Slovakia, Bulgaria and Romania.
154. For a description of this new regime see Burgstaller, op. cit. supra note 50.
155. Applicable already at the pre-establishment phase; see Ceyssens, op. cit. supra note 25, 271.
156. Supra Section 1.3.
157. For analysis of this understanding see Burgstaller, op. cit. supra note 50.
158. Namely Austria, Denmark, Finland and Sweden; see Press Release IP/04/618.
159. Contrary to Art. 6(10) Accession Treaty, Art. 307(2) EC does not provide for a specific deadline in this respect.
160. Commission v. Austria and Sweden, supra note 43. Shortly after the proofs for this article were corrected, on 3 March 2009, Court rendered its judgment in these two cases. Substantially concurring with A.G. Maduro's Opinion, it concluded that, by not having taken appropriate steps to eliminate incompatibilities concerning the provisions on transfer of capital contained in the investment agreements in question, Austria and Sweden failed to fulfil their obligations under Art. 307(2) EC (unlike A.G. Maduro, however, the ECJ did not rely on Art. 10 EC to establish the Treaty infringement).
161. See also Söderlund, op. cit. supra note 24, 455.
162. Radu, op. cit. supra note 90, 237.
163. See e.g. Case C-84/98, Commission v. Portugal, [2000] ECR I-5215, para 52.
164. See Opinion of the Court 2/91, [1993] ECR I-1061, para 9; Lugano Opinion, cited supra note 31, para 18.
165. In Burgoa, cited supra note 77, para 10, the ECJ confirms neutrality of Art. 307 EC (depends wholly on internal Member States law).
166. see Eeckhout, op. cit. supra note 29, p. 339.
167. E.g. this appears not to be the case in the UK-China BIT (available at www.unctad.org/sections/dite/iia/docs/bits/uk_china.pdf); see Art 7.
168. Because compensation does not realize the capital transfer.
169. See also Maydell, op. cit. supra note 16, pp. 224 seq.
170. See supra note 111.
171. Critical also Burgstaller, op. cit. supra note 50.
172. Purportedly made by the Swedish Government; see Söderlund, op. cit. supra note 24, 458.
173. Case C-203/03, Commission v. Austria, [2005] ECR I-935, paras. 61 et seq. As is apparent from para 50 of Case C-62/98, Commission v. Portugal, [2000] ECR I-5171, the appropriate steps for the elimination of such incompatibility referred to in the second para of Art. 307 EC include, inter alia, denunciation of the agreements in question; cf. A.G. Maduro in Commission v. Austria and Sweden, cited supra note 43, para 68.
174. Commission v. Austria, cited supra note 131, paras. 62 et seq.
175. This rule excludes the application of the lex posterior principle in relation to treaties with different parties.
176. It is argued that Member States refusing to comply with the amendment obligation contained in Art. 307(2) EC (or Art. 6(10) Accession Treaty) may lose the benefit of Art. 307(1) EC at some point in time. For a discussion of this issue see Eeckhout, op. cit. supra note 29, p. 338.
177. Pache amd Bielitz, op. cit. supra note 75, 330.
178. there is controversy between A.G.s (see Opinion of A.G. Tesauro in Case C-158/91, Levy, [1993] ECR I-4287, paras. 6 et seq.
179. Opinion of A.G. Lenz in Joined Cases 209 to 213/84, Ministére public v. Lucas Asjes, [1986] ECR 1425, 1453).
180. With regard to these agreements see Pache and Bielitz, op. cit. supra note 75, 336 et seq.
181. And possibly all other WTO Members as far as services are concerned; see Adlung and Molinuevo, op. cit. supra note 10.
182. See also Committee on International Law on Foreign Investment, International Law Association, Draft Conference Report, cited supra note 78, at 7.
183. They are relevant for third-country BITs as well but could not, for the reasons set out above, affect the validity of such BITs, and will therefore be discussed in detail only with regard to intra-EU BITs.
184. See e.g. the Commission decision requesting Hungary to end long-term power purchase agreements and recover State aid from power generators, press release IP/08/850 of 4 June 2008.
185. That appears to be an issue in Ioan Micula and others v. Romania, cited supra note 24.
186. see Peterson, in (2008) Investment Arbitration Reporter, 1, 8 et seq.
187. As to the State aid qualification of such measure see e.g. Commission 92/465/EEC (O.J. 1992, L 263/15, aid granted by the Land of Berlin to Daimler Benz A.G. Germany concerning the sale of land); see most recently Case C-295/07 P, Commission v. Department du Loiret, judgment of 11 Dec. 2008, nyr; also Commission Communication on State aid elements in sales of land and building by public authorities (O.J. 1997, C 209/3).
188. See e.g. State aid N 376/01, O.J. 2002, C 172/2, paras. 13 et seq. (State scheme for cableways); most recently Case T-196/04, Ryanair Ltd v. Commission, judgment of 17 Dec. 2008, nyr.
189. As to when the prolongation of a contract or a concession constitutes the conclusion of a new contract or the grant of a new concession to which public procurement laws and principles apply, see most recently Case C-454/06, pressetext Nachrichtenagentur v. Republik Österreich, judgment of 19 June 2008, nyr; or Case C-260/04, Commission v. Italy (horse-race betting licences), [2007] ECR I-7083, para 25.
190. E.g. under Art. 7 of Reg. 1/2003, O.J. 2003, L 1/1.
191. E.g. under the Review of the EU Regulatory Framework for electronic communication networks and services a structural separation of vertically integrated firms was discussed, COM(2006)334 final; however the recent proposal by the Commission to amend the Directive 2002/19/EC only introduces the possibility of a functional separation (Art. 13a) and a voluntary structural separation (Art. 13b), COM(2007)697 final; in the energy sector full ownership un -bundling is proposed by the Commission (Art. 7 of the proposed "Gas-Directive" 2003/55/EC and Art. 8 of the proposed "Electricity-Directive" 2003/54/EC), COM(2007)529 final.
192. The doctrine was most recently applied in the Microsoft case; see CFI Case T-201/04, Microsoft v. Commission, [2007] ECR II-3601, paras. 332 et seq. For a comprehensive description of the essential facility doctrine see e.g. O'Donoghue and Padilla, The Law and Economics of Article 82 EC (Oxford, 2006), pp. 415 et seq.
193. Eilmansberger, "Article 82 paras. 332 et seq." in Hirsch, Montag and Säcker (Eds.), Münchener Kommentar zum Europäischen und Deutschen Wettbewerbsrecht, Vol. I (Munich, 2007).
194. Geradin, "Limiting the Scope of Article 82 of the EC Treaty: What can the EU learn from the U.S. Supreme Court's Judgment in Trinko in the wake of Microsoft, IMS, and Deutsche Telekom?", 41 CML Rev. (2004), 1520.
195. E.g. Art. 9 of the Austria-Slovenia BIT (available at www.unctad.org/sections/dite/iia/ docs/bits/austria_slovenia.pdf); Art. 7(2) of the Austria-Hungary BIT (available at www.unctad. org/sections/dite/iia/docs/bits/austria_hungary_ger.pdf); Art. 8(2) of the Germany-Estonia BIT (available at www.unctad.org/sec tions/dite/iia/docs/bits/germany_est-onia_gr.pdf); Art. 8(2) of the Germany-Portugal BIT (available at www.unctad.org/sections/dite/iia/docs/bits/ger many_ por tugal_gr.pdf).
196. E.g. Art. 3 Austria-Hungary BIT (cited supra note 147); Art. 3 Austria-Slovenia BIT (cited supra note 147); Art. 3 of the BIT Agreement between UK and Poland (Treaty Series No. 26, 1988); Art. 3 of the BIT Agreement between UK and Slovenia (Treaty Series No. 50, 1999); Art. 3 Germany-Bulgaria BIT (available at www.unctad.org/sections/dite/iia/docs/bits/germany_bulgaria.pdf).
197. See UNCTAD-Report, Bilateral Investment Treaties 1995-2006: Trends in Investment Rulemaking, available at www.unctad.org/en/docs/iteiia20065_en.pdf.
198. e.g. Art. 2(2) Austria-Slovenia BIT (cited supra note 147).
199. Art. 2(1) Austria-Hungary BUT (cited supra note 147); Art. 2(2) UK-Slovenia BIT (cited supra note 148).
200. Art. 2(4) of the Germany-Bulgaria BIT (available at www.unctad.org/sections/dite/iia/docs/bits/germany_bulgaria.pdf).
201. This aspect will be discussed in the following section.
202. See, e.g. Eastern Sugar, cited supra note 24, para 236.
203. Cf. also Burgstaller, op. cit. supra note 50.
204. However, once it had become clear that this issue was not even being negotiated, it must have been clear to the investor (i.e. beneficiary of the measure) that there would be no transition regime at all.
205. See also Mola, op. cit. supra note 27, 5.
206. For application of this approach in other context (fundamental rights protection under EC law and the ECHR) see ECtHR, Bosphorus Hava Yollari Turizm Ve Ticaret Anonim Sireketi/Irland, judgment of 30 June 2005, Application No. 45036/98.
207. For an instructive analysis of the State aid regime in the Europe Agreements see in particular Cremona, "State aid control: Substance and procedure in the Europe Agreements and the Stabilisation and Association Agreements", (9) ELJ (2003), 265-287.
208. These rules basically required the notification of aid schemes implemented after a certain point in time, failing which the measure would qualify as new aid subject to the implementation prohibition contained in Art. 88(3) EC; for a more detailed description and analysis see Schütterle, "Enlargement: Pre-Accession State Aid after Accession", (2003) EStAL, 29, at 36.
209. E.g. Art. 3(2) of the Sweden-India BIT (available at www.unctad.org/sections/dite/iia/ docs/bits/swe-den_india.pdf): "Investments and returns of investors of each Contracting State shall at all times be accorded fair and equitable treatment in the territory of the other Contracting Party and shall enjoy full protection and security under this agreement".
210. E.g. Art. 2(2) of the United Kingdom-Chile BIT (available at www.unctad.org/sections/ dite/iia/docs/bits/ch-ile_uk.pdf): "...Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of the other Contracting Party...".
211. The leading ruling is App. No. 24833/94, Matthews v. UK, [1999] BHRC 686, paras. 34-35.
212. for an analysis (also of other relevant ECHR rulings) see Craig and de Burca, EU Law, 4th ed. (Oxford, 2008), pp. 420-424.
213. Kuhnert, "Bosphorus - Double standards in European human rights protection?", 2 Utrecht Law Review (2006), 177.
214. Harmsen, "National responsibility for EC Acts under the ECHR: Recasting the accession debate", 7 EPL (2001), 625.
215. Van Aaken, op. cit. supra note 8, 9.
216. Substantial discussion of international law rules e.g. in Noble Venture, Inc v. Romania, ICSID Case No. ARB/01/11, Award of 12 Oct. 2005; Alex Genin and others v. Republic of Estonia, ICSID Case No. ARB/99/2, Award of 25 June 2001; failed to discuss the applicable international law in e.g. Emilio Augustin Maffezini v. Kingdom of Spain, cited supra note 96.
217. E.g. Art. 13 Austria-Slovenia BIT (cited supra note 147).
218. This is the conclusion of two recent empirical studies by Leeks, op. cit. supra note 12, at 33.
219. and Fauchald, "The legal reasoning of ICSID Tribunals - An Empirical Analysis", 19 EJIL (2008), 301, at 310 et seq.
220. See generally with regard to international agreements Pauwelyn, "The role of public international law in the WTO: How far can we go?", 95 AJIL (2001), 535, at 537.
221. For a more detailed analysis see McLachlan, "Investment treaties and general international law", 57 ICLQ (2008), 361 et seq.
222. van Aaken, op. cit. supra note 8, 3.
223. Leeks, op. cit. supra note 12, 19.
224. Case 10/61, Commission v. Italy, [1962] ECR 1, 23: "In fact, in matters governed by the EEC treaty, that treaty takes precedence over agreements concluded between Member States before its entry into force, including agreements made within the framework of GATT".
225. See Burgoa, cited supra note 77, para 8.
226. Case 121/85, Conegate Limited v. HM Customs & Excise, [1986] ECR 1007, para 25.
227. Case T-70/89, BBC v. Commission, [1991] ECR II-535, para 77.
228. Similarly, in its recent State aid decision 2008/719/EC, Bank Burgenland, O.J. 2008, L 239/32, the Commission held that a warranty clause promising to compensate the other party in case an infringement of EC State aid rules is established, and repayment of the aid element is ordered, would in itself be in contravention of Article 87 EC (para 158).
229. see also Commission Decision C (2008) 3118 final, Hellenic Shipyards, Art. 16 and paras. 297-330.
230. See supra note 168.
231. Case 106/77, Amministrazione delle Finanze dello Stato v. Simmenthal SpA, [1978] ECR 629, para 17.
232. Under the so-called interim procedure provided under the Accession Treaty (applicable between entry into force of the Accession Treaty and accession on 1 May 2004), the aid measure would become existing aid (subject only to possible future regulation, but legal until then) if it was notified to the national State aid authority and approved by this authority, and if no objection has been raised by the Commission within 3 months following formal notification by the accession country (the aid is then put on the existing aid list). According to a Commission publication (State aid control in the growing European Union, available at: ec.europa.eu/comm/competition/publications/special/5_state_aid.pdf), a significant proportion of such aid measures has indeed been accepted by the Commission for inclusion in the respective Accession Treaty.
233. The arbitral tribunal in the Eastern Sugar Case referred to the EU Treaty as "a regional multilateral treaty" (Eastern Sugar, cited supra note 24, para 156).
234. Case 26/62, Van Gend & Loos v. Netherlands Inland Revenue Administration, [1963] ECR 1, 12.
235. Opinion of 16 Jan. 2008 of A.G. Maduro in Case C-402/05 P, Yassin Abdullah Kadi and Al Barakaat International Foundation v. Council and Commission, judgment of 3 Sept. 2008, nyr, para 21.
236. See e.g. ADC Affiliate Limited, cited supra note 24, para 272; Telenor Mobile Communications, cited supra note 24, para 50; Eastern Sugar, cited supra note 24, para 156.
237. With the possible exception of peremptory law (ius cogens) which pursuant to the VCLT prevails over all, past and future, treaty norms (Arts. 53, 64 EC); for a sceptical voice see Weil, "Towards Relative Normativity in International Law", 77 AJIL (1983), 413.
238. According to the lex posterior rule in Art. 30(3) VCLT, earlier treaties only apply to the extent that their provisions are compatible with those of a later treaty. The rule does not apply if the later treaty specifies that earlier treaty shall take precedence (Art. 30(2) VCLT).
239. See supra Section 3.2. This is particularly obvious with regard to EC law provisions potentially in conflict with intra-EU BITs, namely competition rules etc.
240. Pauwelyn, op. cit. supra note 165, at 545.
241. Pauwelyn, "Bridging Fragmentation and Unity. International Law as a Universe of Interconnected Islands", (2004) Michigan Journal of International Law, 903, at 908.
242. See Pauwelyn, op. cit. supra note 165, at 544.
243. Pache and Bielitz, op. cit. supra note 75, 326.
244. See Commission v. Italy, cited supra note 168.
245. Case 102/81, Nordsee, [1982] ECR 1095, paras. 10 et seq.; Case C-126/97, Eco Swiss v. Benetton, [1999] ECR I-3055, para 34; Case C-125/04, Denuit, [2005] ECR I-923, para 17.
246. Opinion of A.G. Maduro in Joined Cases C-222-225/05, J. Van der Werd, [2007] ECR I-4233, para 28.
247. Eco Swiss, cited supra note 185, para 41.
248. Convention on the Recognition and Enforcement of Foreign Arbitral Awards - the "New York" Convention (1958).
249. See e.g. Cour de Cassation in Case Societé Ouest Africaine de Bétons Industriels v. State of Senegal, translated in 30 ILM 1167 (1991).
250. See e.g. Schreuer, The ICSID Convention: a Commentary, (2001) 1129/315, referring also to the conventions drafting history.
251. Baldwin, Kantor and Nolan, "Limits to Enforcement of ICSID Awards", 23 Journal of Int. Arbitration (2006), 1, at 4 et seq.
252. Sheppard, "Public Policy and the Enforcement of Arbitral awards: Should there be a Global Standard?", 1 Transnational Dispute Management (2004).
253. Carias-Borjas, "Recognition and enforcement of ICSID awards: the decision of the French Cour de Cassation in SOABI v. Senegal", 2 The American Review of International Arbitration (1991), 354.
254. See in this sense Alfaro and Lorenti, "Argentina: The Enforcement Process of the ICSID Awards: Procedural Issues and Domestic Public Policy", 13 Latin American Law and Business Reward (2005), 8.
255. Eco Swiss, cited supra note 185, para 40.