News & Views

Termination of Intra-EU BITs: Finland’s Way Forward and a Feedback Request from the EU Commission

2 June 2020

Finland was one of the few EU member states which did not sign the agreement for termination of intra-EU bilateral investment treaties (“BITs”) in May 2020. This poses the question of how the state will be addressing the issue of intra-EU BITs going forward.

The discussion around intra-EU BITs, and more specifically, the dispute resolution mechanisms therein, essentially dates back to the year 2009, when the Lisbon Treaty brought the matter of foreign direct investment under the EU’s common commercial policy. Thereafter, the EU has taken multiple stands on issues related to the resolution of investment disputes. Most notably, the European Court of Justice (the “ECJ”) confirmed in the Achmea case that investor-state arbitration clauses in intra-EU BITs, i.e. BITs between EU member states, are incompatible with EU law.

Since then, EU member states have resorted to various measures to terminate their intra-EU BITs. In early 2019, the 27 EU member states (and the UK) jointly declared their commitments to terminate such BITs. While Finland signed a declaration wherein this commitment was made, it did not sign the subsequent agreement for the termination of intra-EU bilateral investment treaties (the “Termination Treaty”), which was signed by 23 Member States on 5 May 2020.

In response, the EU Commission commenced infringement proceedings and announced that it had sent a letter of formal notice to Finland (and to the UK, which also did not sign the Termination Treaty). The Commission stated that Finland has four months to provide a satisfactory response to the Commission’s letter, or the Commission may consider addressing reasoned opinions (which would escalate the infringement proceedings against Finland to the next stage). As the Commission’s announcement was made on 14 May 2020, this would give Finland until mid-September to reply.

While it remains to be seen how the state will act, Finland seems set to bilaterally terminate its intra-EU BITs. In a union communication (FIN: “u-kirjelmä”) which the Finnish Government addressed to the Finnish Parliament in mid-March 2020, it has been proposed that Finland would bilaterally terminate its intra-EU BITs. The matter is still pending, but it looks like Finland will be opting for termination.   

Following the Termination Treaty, the Commission has also launched a public consultation on the protection and facilitation of investment within the EU. This includes both the substantive rules of investment protection as well as its dispute settlement mechanisms. All citizens and organisations may contribute to the consultation, which remains open until 8 September 2020. Feedback can be given through an online questionnaire available on the Commission’s website.

 Should you wish to discuss these matters, feel free to contact the undersigned.