In my latest article in The American Interest How the European Court of Justice Undermined Europe I examine the consequences of the Slovakia v Achmea case. In Achmea the ECJ handed down a judgment which had the effect of making unlawful at least all the intra-EU bilateral investment treaties (BITS) across the continent. The tenor of the judgment, (and this argument appears to have significant support within the European Commission) is that the ruling can be extended to all BITS with third countries. The ECJ’s argument focused on the issue of the autonomy of the EU legal order i.e. that investor dispute tribunals necessarily make decisions involving EU law which cannot be reviewed by the Union’s own superior courts. Aside from the argument that such rights of appeal could be put in place, which the ECJ refused to do, there was no recognition on the Luxembourg bench of the consequences of their decision.
One of the major objectives which runs through the case law of the ECJ since it opened its doors in 1952 as the Court of the European Coal and Steel Community has been to promote the integration of the European market. Achmea by contrast is likely to have a significant disintegrative effect. Most of the capital that flows into CEE and Baltic states comes from other EU states, Japan and the US. Those capital flows are protected by a network of BITs across the eastern half of the continent (US firms usually deploying EU vehicles to obtain BIT protection). There is now a real danger that with the removal of BIT protection those flows are disrupted. Given the CEE and Baltic states are recovering from more than 40 years of Soviet occupation, they need to maintain significant capital flows in order to catch up with the economic development of Western Europe.
A range of problems in the region largely emanating from the Soviet occupation judicial legacy of slow procedures. legal formalism, and politicisation undermine confidence of Western investors. Whilst they are Member State legal systems subject to Union law, there is very little Union law can do to ensure that the rights of investors are protected.
In addition, there is a further problem that if capital flows are disrupted the CEE states may be subject to greater capital leveraging by China, who has already announced a €10 billion infrastructure fund for CEE states. This fund has not been substantially deployed so far, Achmea may provide an incentive to do so.