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  • Writer's pictureDaniel Müller

Five are gone, 169 remain still in force: The entry into force of the Termination Agreement

Updated: Sep 21, 2020

On 29 August 2020, the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union entered into force sealing the fate of five intra-EU bilateral investment treaties. Many others seem to remain in force.

Entry into force of the Terminational Agreement

Following the ratification by the Kingdom of Danmark on 6 May 2020 and of Hungary on 30 July 2020, the Termination Agreement (OJ L 169, 29 May 2020, p. 1) is now officially in force. This was confirmed by the European Union in the Official Journal (OJ L 281, 28 August 2020, p. 1). Article 16(1) of the Termination Agreement provides that the Agreement shall enter into force 30 calendar days after the date on which the Depositary receives the second instrument of ratification, approval or acceptance”.

Being a plurilateral instrument, the Agreement is binding only on those EU Member States that have expressed their consent to be bound by the instrument. In other words, as of 29 August 2020, the Termination Agreement is in force only between Danmark and Hungary. This means that as of that date, the Agreement between the Government of the Hungarian People’s Republic and the Government of the Kingdom of Denmark for the encouragement and the reciprocal protection of investments, signed in 1988, is terminated under Articles 2 and 4(2) of the Termination Agreement, and produces no legal effect anymore. In particular, the unilateral offer of Danmark and Hungary to submit disputes with investors concerning the expropriation of their investments to ICSID has now be withdrawn. To our best knowledge, no arbitration proceedings concerning this bilateral investment agreement are pending, in the sense of Article 1(5) of the Termination Agreement.

Provisional application of the Termination Agreement

In the meantime, two other EU Member States have deposited notifications accepting the provisional application of the Termination Agreement. Article 17 of the Termination Agreement authorises provisional application:

(1) The Contracting Parties, in accordance with their own constitutional requirements, may decide to apply this Agreement provisionally. The Contracting Parties shall notify the Depositary of any such decision. (2) When both parties to a Bilateral Investment Treaty have decided to apply this Agreement provisionally, the provisions of this Agreement shall apply in respect of that Treaty 30 calendar days from the date of the later decision on provisional application.

The Slovak Republic—the EU Member State that has triggered the Achmea saga—has accepted provisional application as of 8 June 2020; the Kingdom of Spain applies the Termination Agreement provisionally as of 11 August 2020.

As a result, and in accordance with Article 17(2) of the Termination Agreement, the Agreement for the protection and reciprocal promotion of investments between the Czech and Slovak Federal Republic and the Kingdom of Spain will be terminated—or at least will not produce any legal effect—, in respect of the Slovak Republic and Spain, on 10 September 2020. Moreover, the Agreement between the Republic of Hungary and the Kingdom of Spain for the encouragement and reciprocal protection of investments will also be terminated on the same day as a result Spain’s acceptance to provisional application.

In addition, in view of Slovakia’s notification on provisional application and the entry into force of the Termination Agreement for Danmark and Hungary, the Agreement between the Czech and Slovak Federal Republic and the Kingdom of Denmark for the promotion and reciprocal protection of investments (with regard to Slovakia) and the Agreement between the Republic of Hungary and the Slovak Republic for the promotion and reciprocal protection of investments are terminated as of 29 August 2020.

The remaining intra-EU bilateral investment treaties

The termination of five intra-EU bilateral investment treaties is only a small first step in light of the 169 treaties that seem still to be in force. 127 of these agreements are due to be formally terminated once their respective parties will have ratified the Termination Agreement or accept its provisional application. 21 EU Member States out of the 23 that have signed the Termination Agreement in May 2020 still need to ratify the Agreement.

The fate of the remaining 42 bilateral investment treaties (those ratified by Austria, Finland and Sweden—the EU Member States that have not signed the Termination Agreement—, and the United Kingdom—still bound by EU law as the European Commission has pointed out) remains more uncertain. The pending infringement proceedings will clarify this issue in due course.

For more information on the status of the Termination Agreement, see the website of the European Council.

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