At tomorrow’s European Council, EU leaders will try to close a deal on using frozen Russian assets to finance Ukraine’s defence. This is challenged by Belgium, which fears billion-euros arbitration claims that could be made under bilateral investment treaties (BITs). As these treaties undermine states’ ability to act in the public interest and clash with EU’s own sanction powers [1], civil society organisations are today filing complaints calling on the European Commission to start infringement procedures against Germany, France, Austria and Sweden for failing to remove EU law incompatibilities in BITs concluded with third countries.
Since Russia’s aggression against Ukraine and the related EU sanctions, there has been a surge of arbitration cases initiated by sanctioned oligarchs or companies. These cases rely on Investor-State Dispute Settlement (ISDS) clauses contained in most EU member states’ investment treaties with Russia and Ukraine. The ISDS system not only thwarts the EU sanction regime – as ruled by the Court of Justice of the EU in 2009 – but is also incompatible with the autonomy of EU law. Many recent cases have shown how this secretive mechanism undermines the bloc’s policies on public interest areas such as energy, national security, mining and climate.
For these reasons, Friends of the Earth Europe and the European Trade Justice Coalition support PowerShift (Germany), Veblen Institute (France), Attac Austria and Jordens Vänner/Friends of the Earth Sweden in their complaints. They call on the European Commission to start infringement procedures against these countries to make sure they terminate their bilateral investment treaties.
Paul de Clerck, economic justice expert at Friends of the Earth Europe, said:
“For decades, bilateral investment treaties have granted foreign investors access to secretive tribunals to challenge governments’ democratic choices. As if it wasn’t enough, sanctioned oligarchs are now exploiting them to drag Europe, and even more so Ukraine, into billion-dollar disputes. This must be a wake-up call for the European Commission to strip these treaties of such illegitimate investor privileges.”
Note
[1] The incompatibility of EU countries’ investment treaties with EU sanctions policy was previously highlighted by the European Court of Justice in 2009. In three rulings against Austria, Sweden, and Finland, it found that capital transfer clauses in the three countries’ investment treaties conflict with the Council’s authority to unilaterally impose sanctions on third countries. However in the years since then, the countries and other EU Member States with similar clauses in their treaties have failed to remedy the situation. They have not renegotiated their treaties to include safeguards, nor have they cancelled them.More information on the issue of ISDS and sanctions in our recently published analysis “Frozen Assets, Hot Claims: how Russian oligarchs & other investors sue over sanctions”
