EU Investment policy and intra-EU BITs: the case of Czech Republic

Over a span of two decades (1991-2012), the Czech Republic ratified 71 Bilateral Investment Treaties (BITs)1. Out of these, 18 are BITs with other EU Member States -better known as intra-EU BITs2.

The Czech Republic is not an isolated case. During the 1990s, most European Union (EU) Member States (Western European countries) signed Bilateral Investment Treaties (BITs) with many Central and Eastern European and Mediterranean countries. At that time they were simply BITs between EU Member States and third countries. But, with the accession to the EU of 12 new countries (majority from Central and Eastern Europe3) in 2004 and 2007, suddenly, a vast web of BITs between EU Member States (“Intra-EU BITs”) emerged. Until 2004, there were only two BITs between Member States. Currently, there are an estimated 190 intra-EU BITs4.

These treaties include a set of investment protection clauses, such as national treatment (NT), fair and equitable treatment (FET), compensation in the event of expropriation – direct or indirect, most-favoured nation (MFN), and a ban on transfer of capital, among others. Furthermore, they all include an investor-state dispute settlement mechanism (ISDS), which gives companies the right to directly file lawsuits at international tribunals5, bypassing the national justice system, when they feel that their profits have been unfairly affected. These clauses tend to be formulated in very vague language, which has enabled investors to sue in a variety of circumstances making it difficult for governments to predict when their actions could be considered in breach of an investment treaty.

Research Impact Studies