On 16 December 2024, The European Commission referred the United Kingdom to the Court of Justice of the European Union (“<span class="news-text_medium">CJEU</span>”) due to its failure to terminate Bilateral Investment Treaties (“<span class="news-text_medium">BITs</span>”) still in effect with Bulgaria, Czechia, Croatia, Lithuania, Poland and Slovenia. These BITs, established to promote and safeguard foreign investment, offer guarantees such as equitable treatment and protection against expropriation.
The CJEU's <span class="news-text_italic-underline">Achmea</span> judgment in March 2018 established that Investor-State arbitration pursuant to intra-EU BITs is incompatible with EU law. The court found such mechanisms undermine the principle of mutual trust between Member States and the primacy of EU law.
In light of this judgment, in January 2019 EU Member States, which then included United Kingdom, committed to terminate their intra-EU BITs. A coordinated termination was to be achieved through a plurilateral treaty, signed by most Member States in May 2020, or through bilateral agreements. Although the treaty was open for the UK’s signature, it did not sign the agreement nor proceed with bilateral terminations for its BITs with Bulgaria, Czechia, Croatia, Lithuania, Poland and Slovenia.
The European Commission initiated infringement proceedings against the United Kingdom by sending a letter of formal notice in May 2020, followed by a reasoned opinion in October 2020. These steps aimed to ensure compliance with EU law under the terms of the Withdrawal Agreement, which grants the Commission jurisdiction over certain matters until the end of 2024. Despite these efforts, the UK has not terminated the treaties.
The Commission contends that by maintaining these agreements, the United Kingdom breaches the principles outlined in the <span class="news-text_italic-underline">Achmea</span> judgment and violates its obligations under EU law. The BITs in question were established during the UK’s membership in the EU, making them intra-EU BITs.
The case reflects the ongoing legal interplay between EU and UK obligations following Brexit. The Commission’s referral to the CJEU emphasises its role in ensuring adherence to EU law and maintaining consistency within the internal market.
For businesses and legal professionals, this development illustrates the challenges associated with managing obligations under both EU and UK legal systems. It also highlights the relevance of commitments made during the UK's membership in the EU and the mechanisms for enforcing those commitments during the post-Brexit transition period.
The decision of the CJEU in this matter may influence the interpretation of the Withdrawal Agreement and provide clarity on unresolved legal issues stemming from the UK’s exit from the EU.
