Case-Note on BITs Judgments of the ECJ
American Journal of International Law, Forthcoming
7 Pages Posted: 23 Nov 2009
Date Written: November 23, 2009
Taken together, two cases before the European Court of Justice (ECJ) — Commission v. Austria and Commission v. Sweden, both decided March 3, 2009 — allowed the Court to review the compatibility of pre-accession bilateral investment treaties (BITs), concluded by member states of the European Community (EC) before their accession to the European Union, with Article 307 of the Treaty Establishing the European Community (EC Treaty). While the EC Treaty does not describe in great detail the relationship between EC law and international law, Article 307(2) is an exception in that it provides that “[t]o the extent that such agreements [like BITs] are not compatible with the [EC Treaty], the Member State or States concerned shall take all appropriate steps to eliminate the incompatibilities established.” In these two decisions, the ECJ clarified the following issues: (1) What is the relationship between pre-accession treaties with subsequent EC law obligations? (2) When does an “incompatibility” within the meaning of Article 307 arise? (3) What are the obligations of the ECmember states to eliminate such incompatibilities? For (1), the ECJ confirmed that, while pre-accession treaties remain in principle unaffected by subsequent EC law obligations, any incompatibilities between pre-accession treaties and EC law obligations must be eliminated in favor of EC law. For (2), the ECJ elucidated a new concept of “hypothetical incompatibility,” meaning that even a perceived — but not yet materialized — conflict between pre-accession treaties and EC law obligations is sufficient to constitute a violation of Article 307. And for (3), the ECJ confirmed, in line with its previous jurisprudence, that the obligation ofECmember states to eliminate any incompatibility ultimately requires the denouncement of the pre-accession treaty, if re-negotiation or adjustment of the pre-accession treaty fails or is impossible. In both cases, the Court concluded that Austria and Sweden violated their obligations arising out of Article 307 by failing to eliminate the incompatibility between their pre-accession BITs and EC law.
Keywords: Article 307 EC, BITs, pre-accession treaties, relationship between Community law and international law, foundations of the Community legal order, hypothetical incompatibilities
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