Bilateral Investment Treaties (BITs) and the private arbitration tribunals often provided for in them –  so-called Investor State Dispute Settlement (ISDS) – were originally set up to protect (western) investors against unlawful confiscations abroad, thereby simplifying investments. Among other in East European countries who later joined the EU. However, these courts of arbitration represent a parallel justice, which is highly non-transparent, as foreign companies are granted an exclusive right to sue States. In reverse, these companies cannot be held to account if they are responsible for human rights violations or environmental damage. Due to the huge legal costs alone, the threat of suing may lead to influencing national legislators in the interest of potentially suing companies.

The Achmea ruling

The so-called Achmea ruling by the European Court of Justice (ECJ) forms the basis of the signed Agreement. During the course of a liberalisation in 2004, the Dutch insurance company Achmea had entered the Slovakian health insurance market. When Slovakia (partly) reversed the deregulation in 2006 and prohibited the profit distribution of private health insurances, the company sued on the basis of the Dutch-Slovakian Investment Treaty. The competent court of arbitration awarded the company damages of EUR 22.1 million – excluding interest. Thereupon Slovakia questioned the competence of the court of arbitration and took the case to the ECJ. In its ruling in spring 2018, the ECJ declared that special suing rights for investors within the European Union were incompatible with EU law. The Commission has also for a long time supported the position that investment treaties within the EU are not legal because EU law has primacy of application.

Agreement to terminate intra-EU BITs

After the Commission had asked Member States for years to cancel their intra-EU investment treaties, the vast majority has reacted at last. Apart from Sweden, Finland and Ireland (whose sole BIT with Czechia was already mutually cancelled in 2011), Austria is one of the four countries, who did not sign the Agreement. The now signed Agreement does not only terminate about 200 investment treaties within the EU, decisions in ongoing procedures may no longer be executed. Austria’s missing signature is also a surprise because the then caretaker government had still approved of the relevant agreement on 18 December 2019.

Austria is the contracting party in bilateral investment treaties with 60 States, twelve of which are EU Member States. According to the civil society Platform Anders Handeln, the Agreement, on the basis of which four national banks are currently suing the Croatian State, will also remain in force. The platform states: “If Austria had signed the Termination Agreement on 5 May, Austria and Croatia would be obliged to inform the court of arbitration in a joint declaration, that the arbitration clause agreed in the investment agreement cannot be applied”. In reverse, Austria too has already been sued by a bank. Even though the case was won, the legal costs incurred by the Republic amount to about EUR 5 million. However, according to the ECJ ruling, Austria is obliged to terminate her intra-EU bilateral investment treaties soon. Still, the chance of a common European approach was sadly missed.

Energy Charter Treaty exempt from the Agreement

The signed Agreement does not include proceedings which are held on the basis of the Energy Chart Treaty/ECT. The EU intents to address this issue later. However, the agreement, which was signed in the mid-1990s, is one of the most controversial investment treaties. Currently, 129 cases are known, where investors have sued States; 80 % of these cases were brought in the last ten years. According to calculations by the Transnational Institute, by the end of 2019, States had been ordered within the scope of the ECT to pay damages in the amount of 52 billion Dollar; further 32 billion Dollar were and still are under negotiation. The Agreement is also problematic, because major oil, gas and coal companies are using it as a powerful tool to discourage governments to transfer to sustainable energies. These companies for example use the ECT to sue against the ban on oil drillings, pipeline rejection, taxes on fossil fuels and planned departures from controversial energy types. Hence, due to the nuclear phase-out, the Swedish energy company Vattenfall is suing Germany for damages of more than EUR 4.4 billion.

AK President Renate Anderl demands immediate stop to special suing rights for investors

Adopting this approach, the Government is ignoring the continuing strong rejection of the courts of arbitration in the population. About 847,000 people, who signed the petition “Rights for People, Rules for Corporations – Stop ISDS”, demanded an end of special suing rights for corporations and binding rules to ensure that those could be held to account for human rights violations committed worldwide. Together with ca. 200 European organisations, trade unions and social movements, AK EUROPA is fighting for globalisation dominated by global prosperity and against the reckless enforcement of corporate interests. Early February, the signatures were handed to Vice-Chancellor Werner Kogler. AK President Renate Anderl too demands an explanation from the Austrian Government, why the Agreement has not been signed; after all, these investment agreements infringe EU law. “We don’t want any parallel justice for investors, who will be able to sue to the detriment of workers, consumers and citizens”, commented the AK President. Legal disputes have to be clarified by public courts; this must also apply to investors: “A parallel judicial system is unacceptable; there are public courts, which can assume this responsibility”. Apart from that, the attitude of the Government could cost Austria dear; after all infringement proceedings against Austria have already been instituted. Anderl therefor demands an immediate stop to these investment agreements.

Further information:

AK EUROPA: Internationale campaign demands new rules for corporations

AK EUROPA: Energy Charter Treaty prevents environmental change

A&W Blog: EU States end privileges for investors – when will Austria follow suit?