Resolving Incompatibilities of Bilateral Investment Treaties of the EU Member States with the EC Treaty : Individual and Collective Options

Bilateral Investment Treaties (BITs) concluded by the EU Member States contain substantially similar clauses, including free movement of capital and investor-to-state dispute resolution. Article 307 EC provides for the primacy of pre-accession treaties over the EC Treaty and simultaneously requires the Member States to eliminate their mutual incompatibilities. The European Court of Justice has declared that free movement of capital clauses of Austrian and Swedish pre-accession extra-EU BITs are incompatible with the EC Treaty as they will impede any restrictions on the movement of capital imposed as future Community legislation. A similar ‘free movement of capital’ clause is present in all extra-EU BITs of the Member States, whether pre- or post-accession. Article 307, however, does not apply to the post-accession treaties which are equally capable of contriving the same consequences of impeding the application of the EC Treaty. In addition, the application of intra-EU BITs provides investors from BIT party states access to the investor-to-state dispute resolution which is not available to investors from the Member States who do not have BITs with those Member States. This is discrimination and may distort the principle of equal treatment within the EU. Furthermore, the newly acceding EU States are facing extensive arbitral claims for carrying out the BIT-EU conflicting obligations within their respective territories