Termination of treaties is governed by Articles 42 to 45 and 54 to 64 of the Vienna Convention on the Law of Treaties, which sets out the circumstances in which a treaty can be denounced (i.e. terminated unilaterally) or terminated and in which a party can withdraw from a multilateral agreement.1
General international law applies in the absence of specific provision in the treaty.
On the suspension of treaties, see i.e. Güriş and others v. Syria, Final Award.
Transban Investments Corp. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/24, Award, 22 November 2017, para. 75; Oded Besserglik v. Republic of Mozambique, ICSID Case No. ARB(AF)/14/2, Award, 28 October 2019, para. 382; Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award (redacted), 26 July 2018, para. 595; Silver Ridge Power BV v. Italian Republic, ICSID Case No. ARB/15/37, Award, 26 February 2021, para. 224; A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG v. Czech Republic, PCA Case No. 2017-15, Final Award, 11 May 2020, paras. 339-340; (1) Mr Idris Yamantürk (2) Mr Tevfik Yamantürk (3) Mr Müsfik Hamdi Yamantürk (4) Güriş İnşaat ve Mühendislik Anonim Şirketi (Güris Construction and Engineering Inc) v. Syrian Arab Republic, ICC Case No. 21845/ZF/AYZ, Final Award, 31 August 2020, paras. 141, 143-144, 151-153.
While the specific wording of such provisions varies per BIT, they usually contain the following elements:
Practitioners should be aware that the prior notification period for the termination of a BIT can serve as warning sign allowing the other Contracting Party to take the necessary steps to inform its investors about the upcoming termination of the BIT, who in turn can prepare for the consequences of the termination for their investments in the other Contracting Party.
Bahrain – Netherlands BIT (2007), Article 14; Slovakia-United Arab Emirates (2016) BIT, Article 26; EU-Vietnam Investment Protection Agreement (2019), Article 14.5; Israel – Latvia BIT (1994), Article 14; Indonesia-Sweden BIT (1992), Article 12; Portugal – Qatar BIT (2009), Article 15; China –Malaysia BIT (1988), Article 13; Egypt-United States of America BIT (1992), Article XIII; Turkey-Turkmenistan BIT (1992), Article IX.
UP and C.D Holding Internationale v. Hungary, ICSID Case No. ARB/13/35, Award, 09 October 2018, para. 265; Mohamed Abdel Raouf Bahgat v. Arab Republic of Egypt, PCA Case No. 2012-07, Decision on Jurisdiction, 30 November 2017, para. 313; BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Kingdom of Spain, ICSID Case No. ARB/15/16, Decision on Jurisdiction, Liability and Directions on Quantum, 02 December 2019, para. 233; Anglia Auto Accessories Limited v. The Czech Republic, SCC Case No. 2014/181, Final Award, 10 March 2017, para. 117; J.P. Busta and I.P. Busta v. The Czech Republic, SCC Case No. 2015/014, Final Award, 10 March 2017, para. 117.
In addition to the termination procedure contained in a BIT, a treaty could also be terminated by way of being replaced by a new similar treaty regarding the “same subject-matter” between the Contracting Parties according to Article 59 VCLT. This argument has been advanced by the European Commission and EU Member States in the context of the claimed incompatibility between intra-EU BITs and EU law. However, the Achmea tribunal ruled that the conditions of Article 59 VCLT were not met.4 In particular, the Achmea tribunal noted that the subject-matter of EU law and the BIT are substantially different and that accession to the EU cannot lead to the cancellation of the rights of investors granted by the BITs.5 See Intra-EU objections.
In the same vein, the tribunal in Marfin rejected the claim that Article 65 VCLT could be relied upon by the EU Member States in the sense that they could escape from their obligations entered into those intra-EU BITs.6
Achmea v. Slovak Republic (I), PCA Case No. 2008-13, Award on Jurisdiction, Admissibility and Suspension, 26 October 2010, paras. 252-255; Oostergetel v. Slovak Republic, Decision on Jurisdiction, 30 April 2010, paras. 72-88; Spółdzielnia Pracy Muszynianka v. Slovak Republic, PCA Case No. 2017-08, Award, 7 October 2020, paras. 236-238; Fynerdale Holdings BV v. The Czech Republic, PCA Case No. 2018-18, Award, 29 April 2021, paras. 308-314.
Regarding the issue of territorial scope, it is possible that the effect of the termination of a BIT can be specified for a particular geographic area. If the territory of a Contracting Party consists of several parts, the BIT could be terminated only for a certain part but remain effective for the other parts. Accordingly, some BITs contain specific provisions to that effect.7 Thus, the effect of the termination of the BIT may not necessarily cover the whole territory of a Contracting Party.
Investment treaties are usually unilaterally terminated, i.e. denounced due to dissatisfaction by one of the Contracting Parties, often as a result of being hit by an increasing number of claims. Well-known examples have occurred in relation to several countries such as Venezuela, Bolivia, and more recently, South Africa, Indonesia and India.8 Another noteworthy example saw Italy withdraw from the Energy Charter Treaty (ECT) as of 1 January 2016, after it was hit by the first renewable energy claims.9 In 2017, the number of effective terminations of BITs exceeded for the first time the number of new treaties.10 See Backlash in investment arbitration.
Following the Court of Justice of the European Union (CJEU) Achmea judgment in 2018, in which it declared the arbitration provision contained in the BIT to be incompatible with European Union (EU) law, tribunals ruled that the 2019 Achmea Declarations issued by the EU's Member States containing their understanding of the legal consequences of the Achmea judgment were not a proper procedure to terminate or amend the applicable BITs.11
The EU Member States began contemplating termination of all their circa 190 intra-EU BITs by a single termination agreement. The resulting termination agreement was signed on 5 May 2020 by 23 EU Member States and entered into force on 29 August 2020.12 It aims to not only terminate all intra-EU BITs between those 23 EU Member States,13 but also removes the legal effects of the sunset clauses contained in those intra-EU BITs that would normally be triggered, meaning that the protection of the intra-EU BITs would be extended for 5, 10 or even 20 years (see discussion in sunset clauses).
Moreover, the intra-EU termination agreement foresees the removal of the legal effect of the sunset clauses of intra-EU BITs that have been terminated in previous years, despite the fact that the respective sunset clauses are already operational.14 In other words, the EU termination agreement could in some circumstances15 retroactively abrogate the right of investors to rely on the protection offered by those BITs, which are still applicable due to the sunset clauses.
Reportedly, the European Commission has sent letters of formal notification for infringement proceedings against the United Kingdom and Finland for failing to sign the termination agreement. It is unclear whether the remaining Member States will also receive such letters of formal notification.
Peterson, L.E., Venezuela Surprises the Netherlands with Termination Notice for BIT; Treaty has been Used by Many Investors to "Route" Investments into Venezuela, 16 May 2008, Investment Arbitration Reporter.
Ross, A., India's termination of BITs to begin, Global Arbitration Review, 22 March 2017.
Jaramillo, J., Ecuadorian BIT’s Termination Revisited, Behind the Scenes, Kluwer Arbitration Blog, 26 May 2017.
Jus Mundi search engine Treaties, Denounced (Status); UNCTAD, International Investment Policymaking in Transition: Challenges and Opportunities of Treaty Renewal, IIA Issues Note, No. 4, 2013, UNCTAD/WEB/DIAE/PCB/2013/9, p. 3; Travendale, C. and Naish, V., Indonesia Indicates its Intention to Terminate all of its Bilateral Investment Treaties?, Herbert Smith Freehills Arbitration Notes, 20 March 2014; Agarwal, A., Rethinking the Regulation of International Foreign Investment: Recent Developments in Brazil, South Africa and India, Indian Journal of International Economic Law, 2019.
United Utilities v. Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para. 559; Magyar Farming Company Ltd, Kintyre Kft and Inicia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, paras. 222, 224; GPF GP S.à.r.l v. Republic of Poland, SCC Case No. V2014/168, Final Award, 29 April 2020, paras. 352, 357; Raiffeisen Bank International AG and Raiffeisenbank Austria d.d. v. Republic of Croatia, ICSID Case No. ARB/17/34, Decision on the Respondent's Jurisdictional Objections, 30 September 2020, para. 251; Spółdzielnia Pracy Muszynianka v. Slovak Republic, PCA Case No. 2017-08, Award, 7 October 2020, para. 224.
Achema tried to halt its ratification by Germany but the German Constitutional Court refused to grant its request. See below:
Information concerning the entry into force of the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union, Official Journal of the European Union, 28 August 2020; Achmea B.V. (formerly Eureko B.V.) v. The Slovak Republic (I), PCA Case No. 2008-13, Judgment of the Federal Constitutional Court of Germany, 3 February 2021.
This would not be the case of pending proceedings initiated before the entry into force of the Termination Agreement.
Raiffeisen Bank International AG and Raiffeisenbank Austria d.d. v. Republic of Croatia, ICSID Case No. ARB/17/34, Decision on the Respondent's Jurisdictional Objections, 30 September 2020, para. 253; Spółdzielnia Pracy Muszynianka v. Slovak Republic, PCA Case No. 2017-08, Award, 7 October 2020, para. 263.
Already registered ?