¹ Preamble to the Treaty on the European Union.

² The TEU, the TEC and the Treaties on the accession of the new Member States (Accession Treaties) will also jointly be referred to as the European Treaties.

³ Before accession of ten new Member States to the European Union in 2004 only two intra-European BITs existed (Germany-Greece and Germany-Portugal)—significantly, these had been concluded before Greece and Portugal became Members of the European Communities in 1981 and 1986 respectively.

⁴ Cyprus, The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia became Members of the EU with effect from 1 May 2004.

⁵ With the exception of Ireland (which has only one BIT with the Czech Republic) and Portugal (which does not have a BIT with Estonia), all old Member States have concluded BITs with all new Members from the former Eastern bloc. In addition, there is a considerable number of BITs between the new Members themselves. The Czech Republic takes the lead, having BITs in place with all other EU Member States. As of 1 June 2007, all but one of these BITs (the Cyprus-Italy BIT, signed on 27 April 2004, only days before Cyprus' accession to the EU) had entered into force.

⁶ The term of EC law will be used in the sense of the law specific to the European Community, as notably deriving from the TEC. The European Court of Justice (ECJ) has established the understanding of EC law as an autonomous ‘legal order of international law’, applying not only between Member States, but also between their nationals, Decision of the European Court of Justice Case C-26/62 Van Gend & Loos [5 February 1963].

⁷ The Free Movement of Capital, Note for the Economic and Financial Committee, prepared by the European Commission, Internal Market and Services DG, 26–27.

⁸ Annual EFC Report to the Commission and the Council on the Movement of Capital and the Freedom of Payments, 15 November 2006, 7. It does not appear that this invitation has caused any visible action by the Member States.

⁹ Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 97.

¹⁰ Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 119.

¹¹ Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 181.

¹² Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Final Award of 12 April 2007.

¹³ See Investment Arbitration Reporter of 1 July 2008, http://www.iareporter.com/Archive/IAR-07-01-08.pdf.

¹⁴ ibid.

¹⁵ Including the possibility of a preliminary ruling by the ECJ in accordance with Article 234 TEC, see infra [p 309].

¹⁶ The question of the extent to which EC law can work in favour of an investor in proceedings brought under an intra-EU BIT will not be explicitly addressed in this article. However, the procedural analysis contained in the first part would seem to apply mutatis mutandis.

¹⁷ Each tribunal derives its legitimacy from the specific act providing for its creation—there is no a priori hierarchy between different international judicial systems, see Semmelmann, C, ‘Forum Shopping between UNCLOS arbitration and EC adjudication—And the winner … should be … the ECJ!’, in European Law Reporter 2006, 234 ff 237Google Scholar. As a consequence, from the perspective of international law, an investment tribunal is always entitled to decide on its own jurisdiction.

¹⁸ See C McLachlan, L Shore and M Weiniger, International Investment Arbitration, (OUP, Oxford, 2007) 3.66. This is true even where a BIT provides that the national law of the state in which the investment was made shall apply in arbitration proceedings initiated under its dispute resolution provision next to international law (see eg Article 7(3) of the Lithuania-Poland BIT) and in ICSID proceedings (Article 42(1) of the ICSID Convention providing that in the absence of agreement ‘the Tribunal shall apply the law of the Contracting State party to the dispute … and such rules of international law as may be applicable’). In both cases the application of national law will not extend to the interpretation of the Treaty itself, see Siemens v Argentina (ICSID), Award of 6 February 2007, paras 77–78 and A Parra, ‘Applicable Law in Investor-State Arbitration,’ draft published in November 2007 on www.transnational-dispute-management.com, 13. Regarding a potential influence of EC law on issues where national law is applicable see infra n. [20].

¹⁹ See Söderlund, C, ‘Intra-EU Investment Protection and the EC Treaty’ Journal of International Arbitration, (2007) 455 ff 457–459Google Scholar, claiming notably that the offer to arbitrate contained in the BIT's dispute resolution clause could not be ‘compromised by any purported higher legal order such as the EC Treaty’. This contention is however unconvincing. While the investment tribunal technically derives its authority from an arbitration agreement between the host state and the investor constituted by an offer in form of the BIT's dispute resolution clause and its acceptance by the investor's written request for arbitration (see C McLachlan, L Shore and M Weiniger, International Investment Arbitration (OUP, Oxford, 2007) 3.21 ff), the very validity of the offer cannot be assessed without having regard to the BIT and its regulatory content, interpreted in the light of international law. See also Decision of the English Court of Appeal of 9 September 2005 in Occidental Exploration v Ecuador, para 33, holding that the arbitration agreement between the investor and Ecuador based on the US-Ecuador BIT should be interpreted in accordance with international law, as being ‘closely connected with the international Treaty which contemplated its making.’

²⁰ In addition to the possibilities discussed here, EC law can indirectly influence the outcome of investment proceedings where specific issues (such as the scope of protected assets or the legality of an investment) must be addressed by a tribunal under the national law of a Member State (see A Parra, ‘Applicable Law in Investor-State Arbitration,’ draft published in November 2007 on www.transnational-dispute-management.com, 9 and J Crawford, ‘Treaty and Contract in Investment Arbitration’ (2008) Arbitration International 351 ff, 352). Since the national legal systems of the Member States will (in the absence of a conflict with national norms of a constitutional character) accord prevalence to EC law, an arbitral tribunal applying such national law would arguably have to do the same. This potential impact of EC law is however neither specific to intra-EU investment proceedings nor does it necessarily represent an obstacle to them—as a consequence, this article does not attempt to deal with it.

²¹ There is no doubt that the European Treaties are instruments of public international law, see infra [6].

²² Decision of the European Court of Justice Case C-102/81 Nordsee Deutsche Hochseefischerei GmbH [23 March 1982] para 13; Decision of the European Court of Justice Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV [1 June 1999] para 34; Decision of the European Court of Justice Case C-125/ Guy Denuit 04 [27 January 2005] para 13. The subsidiary request of the Czech Republic in the Eastern Sugar arbitration to refer the matter to the ECJ (Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, paras 109 and 130) was consequentially refused by the Tribunal, Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 131.

²³ Procedural Order no 3 in the MOX Plant case (Ireland v United Kingdom), dated 24 June 2003.

²⁴ See Procedural Order no. 3 in the MOX Plant case (Ireland v United Kingdom), dated 24 June 2003, paras 22–23. No provisions similar to Article 282 UNCLOS usually exist under BITs.

²⁵ See Decision of the European Court of Justice Case C-26/62 Van Gend & Loos [5 February 1963].

²⁶ See E Klein, ‘Self-Contained Regime’ Max Planck Encyclopedia of Public International Law para 15.

²⁷ See also K Schmalenbach, ‘International Organizations or Institutions: General Aspects’ Max Planck Encyclopedia of Public International Law, para 61.

²⁸ See supra [4].

²⁹ It should be noted that even from the ECJ's perspective qualifying EC law as a separate legal order is not irreconcilable with acknowledging the international law character of the TEC, see Opinion of the European Court of Justice O-1/91 EEA Agreement [14 December 1991] para 1: ‘In contrast, the EEC Treaty, albeit concluded in the form of an international agreement, nonetheless constitutes the constitutional charter of a Community’ (emphasis added). The same opinion implicitly acknowledges that from a public international law perspective the TEC is subject to normal rules of treaty interpretation, see Kuijper, P, ‘The Court and the Tribunal of the EC and the Vienna Convention on the Law of Treaties 1969’ (1998) Legal Issues of European Integration, Vol 25 Issue 1, 1 ff 3.Google Scholar

³⁰ See however the different conclusion of C Tietje with regard to the relevance of EC law in arbitration proceedings based on the Energy Charter Treaty, ‘The Applicability of the Energy Charter Treaty in ICSID Arbitration of EU Nationals vs EU Member States,’ draft published in September 2008 on www.transnational-dispute-management.com, 7.

³¹ It indeed appears that all existing intra-EU BITs have been concluded while at least one of the signatories was still not an EU member.

³² Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, paras 100 ff.

³³ See Investment Arbitration Reporter of 1 July 2008, http://www.iareporter.com/Archive/IAR-07-01-08.pdf.

³⁴ The only EU Member States that have not ratified the VCLT are France, Malta and Rumania.

³⁵ Article 4 VCLT states: ‘Without prejudice to the application of any rules set forth in the present Convention to which treaties would be subject under international law independently of the Convention, the Convention applies only to treaties which are concluded by States after the entry into force of the present Convention with regard to such States.’

³⁶ This is the case for most of the VCLT, see International Law Commission ‘Report of the Study Group of the International Law Commission on Fragmentation of International Law’ (13 April 2006) para 194. See also C McLachlan, L Shore and M Weiniger, International Investment Arbitration (OUP, Oxford, 2007) 3.66 and Decision of the Swiss Federal Supreme Court of 7 September 2006 following appeal against the Partial Award on Jurisdiction of 17 March 2006 in Saluka Investments BV v Czech Republic, para 5.4.1 on the interpretation rules under the Vienna Convention constituting customary international law.

³⁷ In full, Article 59 VCLT states: ‘Termination or suspension of the operation of a treaty implied by conclusion of a later treaty

1. 1.

   1. A treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject matter and:

   1. (a)

      (a) it appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or

   2. (b)

      (b) the provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time.

2. 2.

   2. The earlier treaty shall be considered as only suspended in operation if it appears from the later treaty or is otherwise established that such was the intention of the parties.'

³⁸ However, some intra-EU BITs may have been modified after the enlargement. This is true for example of the Germany-Poland BIT, an amendment to which became effective only in October 2005. In these cases, it would seem that the signatories had no intention of terminating their BIT and Article 59 VCLT could not be applied.

³⁹ See notably the Treaty on the accession of the 10 new Member States (Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovak Republic) signed 16 April 2003, stating in Art. 1 that the above-mentioned states ‘hereby become members of the European Union and Parties to the Treaties on which the Union is founded as amended or supplemented.’

⁴⁰ It would be systematically wrong to conclude from Article 133 TEC that the Community has no competence in the field of intra-EU investment, as the provision does not apply to such investments. See however the different opinion of Söderlund, C., ‘Intra-EU Investment Protection and the EC Treaty’ Journal of International Arbitration, 455 ff 458, 462Google Scholar.

⁴¹ For the details of these provisions see infra [15].

⁴² See Report of the Study Group of the International law Commission on Fragmentation of International Law of 13 April 2006, para 253, advising against a restrictive interpretation of what constitutes the ‘same subject matter’ in the context of Article 30 VCLT. According to this report, the test should be whether ‘the fulfilment of the obligation under one treaty affects the fulfilment of the obligation of another.’ (13 April 2006), ‘Report of the Study Group of the International law Commission on Fragmentation of International Law’ para 254. A more restrictive approach appears to be favoured by I Sinclair, The Vienna Convention on the Law of Treaties (1973). 68. Similarly, the Tribunal in the Eastern Sugar arbitration found that the BIT in question and the TEC did, ‘not cover the same precise subject-matter’ Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 160.

⁴³ In case of conflicts between treaties that have not been concluded with the same objective in mind, the posteriority of one of them does not necessarily express a presumption of priority, see ‘Conclusions of the work of the Study Group on the Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of International Law,’ Yearbook of the International Law Commission, (2006) vol II, Part Two, para 26.

⁴⁴ See infra [13 ff].

⁴⁵ Art 30(3) VCLT states: ‘When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.’ Article 30 VCLT would seem to represent customary international law, see International Law Commission ‘Report of the Study Group of the International Law Commission on Fragmentation of International Law’ (13 April 2006) para 252.

⁴⁶ See Article 2 of the respective Acts concerning the conditions of accession of the new Member States, which are referred to as ‘integral part[s]’ of the Accession Treaties: ‘From the date of accession … the acts adopted by the institutions … before accession … shall be binding on [the respective new Member States].’

⁴⁷ The TEC itself establishes the ECJ's exclusive competence for the interpretation of the Treaty, see Article 292 TEC and infra 22.

⁴⁸ One should bear in mind, however, that the limit of any interpretation is the meaning of the words and thus anything going beyond what can reasonably be understood by the wording constitutes a possible interpretation only if one can be absolutely certain of a corresponding intention of the signatory states, see Decision of the Swiss Federal Supreme Court of 7 September 2006 following appeal against the Partial Award on Jurisdiction of 17 March 2006 in Saluka Investments BV v Czech Republic, para 5.4.1.

⁴⁹ See International Law Commission ‘Report of the Study Group of the International Law Commission on Fragmentation of International Law’ (13 April 2006) paras 230, 233.

⁵⁰ See Decision of the European Court of Justice Case, C-235/87 Annunziata Matteucci v Communauté francaise of Belgium and Commissariat général aux relations internationales of the Communauté francaise of Belgium [27 September 1988] para 22; Decision of the European Court of Justice Case, C-10/61 Commission v Italy [27 February 1962].

⁵¹ See the suggestion of Ireland in the MOX Plant case before an UNCLOS tribunal, referred to in Opinion of AG Maduro in C-459/03, para 49.

⁵² C McLachlan, L Shore and M Weiniger, International Investment Arbitration (OUP, Oxford, 2007) 3.66.

⁵³ See supra 303.

⁵⁴ See C McLachlan, L Shore and M Weiniger, International Investment Arbitration (OUP, Oxford, 2007) 3.66 with examples of awards.

⁵⁵ See Partial Award in Saluka Investments BV v The Czech Republic (UNCITRAL rules) para 254.

⁵⁶ See eg Article 8(6) of the Czech-Netherlands BIT.

⁵⁷ See C McLachlan, et al supra n 18 3.69 and ‘Conclusions of the Work of the Study Group on the Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of International Law’ Yearbook of the International Law Commission, (2006) vol II, Part Two, para 21. See also Judgment of the International Court of Justice in case concerning Oil Platforms (Islamic Republic of Iran v United States of America) [6 November 2003] paras 41–42.

⁵⁸ See McLachlan, C, ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention’ International and Comparative Law Quarterly 2005, 279 ff.CrossRefGoogle Scholar

⁵⁹ Decision of the European Court of Justice Case C-106/77 Simmenthal, [9 March 1978] para 17; Opinion of the European Court of Justice O-1/91, opinion EEA Agreement, [14 December 1991] para 21.

⁶⁰ Decision of the European Court of Justice, Case C-235/87 Annunziata Matteucci v Communauté francaise of Belgium and Commissariat général aux relations internationales of the Communauté francaise of Belgium [27 September 1988] para 22; Decision of the European Court of Justice Case C-3/91 Exportur SA v LOR SA and Confiserie du Tech SA [10 November 1992] para 8. This claim for supremacy of EC law over other international treaties (despite the treaty character of the TEC itself) can only be explained by the ECJ's characterization as a ‘new legal order’ based on the ‘constitutional charter’ of the ECT, see Opinion of the European Court of Justice opinion O-1/91 EEA Agreement [14 December 1991] para 21. It has rightly been pointed out that the ECJ also relies on methods of interpretation different from those under public international law, see C Semmelmann, Forum Shopping between UNCLOS arbitration and EC adjudication—And the winner … should be … the ECJ!' European Law Reporter 2006, 234 ff 239. See also International Law Commission ‘Report of the Study Group of the International law Commission on Fragmentation of International Law’ (13 April 2006), para 218.

⁶¹ See eg Decision of the Swiss Federal Supreme Court of 7 September 2006 following appeal against the Partial Award on Jurisdiction of 17 March 2006 in Saluka Investments BV v Czech Republic, where the Court explicitly refused the argument that the dispute resolution clause contained in the Czech Republic-Netherlands BIT excluded its jurisdiction on appeal, para 5.

⁶² See C McLachlan, et al supra n 18 3.51. Only in the case of ICSID arbitrations, the lex arbitri is the ICSID Convention itself and the laws of the physical place of arbitration have no bearing on the arbitration procedure, seeibid 3.34, 3.51. A similar conclusion is reached by R Happ, ‘The legal status of the investor vis-à-vis the European Communities: some salient thoughts’ International Arbitration Law Review 2007, 74 ff 77.

⁶³ L Reed, J Paulsson and N Blackaby, A Guide to ICSID Arbitration (Kluwer Law International, The Hague, 2004), 95.

⁶⁴ They may actually have to do so as a matter of EC law to the extent that the incompatibility concerns a ‘fundamental provision which is essential for the accomplishment of the tasks entrusted to the Community and, in particular, for the functioning of the internal market’, see Decision of the European Court of Justice Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV [1 June 1999] para 36.

⁶⁵ Even with regard to the enforcement of an ICSID award where Article 54 of the ICSID Convention requires the Signatories to ‘enforce the pecuniary obligations imposed […] as if it were a final judgment of a court in that State’, it has been suggested that courts might have recourse to Article 31(3)(c) VCLT to interpret their obligations under the ICSID Convention in the light of international law doctrines such as ‘abuse of right’ or ‘good faith’ see E Baldwin, M Kantor and M Nolan ‘Limits to Enforcement of ICSID Awards’ (2006) 23 Journal of International Arbitration 1 7, 17.

⁶⁶ The annulment proceedings in the Czech courts against the jurisdictional award in RJ Binder mentioned above could become a reason for the ECJ's involvement, see Investment Arbitration Reporter of 1 July 2008, http://www.iareporter.com/

⁶⁷ The different ways in which such a conflict could become an obstacle to arbitral proceedings based on intra-EU BITs have been described above, see supra [301 ff.].

⁶⁸ The Free Movement of Capital, Note for the Economic and Financial Committee, prepared by the European Commission, Internal Market and Services DG, 27 (emphasis added).

⁶⁹ The argument that bilateral investment comes under the competence of the Member States would do nothing to prevent a conflict with EC law. The ECJ has repeatedly held that where Member States were at liberty to conclude bilateral agreements, this did not disband them from exercising their powers in consistency with EC law, Decision of the European Court of Justice Case C-307/97 Compagnie de Saint-Gobain Zweigniederlassung Deutschland v Finanzamt Aachen-Innenstadt [21 September 1999] para 57, and Decision of the European Court of Justice Case C-235/87 Annunziata Matteucci v Communauté francaise of Belgium and Commissariat général aux relations internationales of the Communauté francaise of Belgium [27 September 1988] para 19.

⁷⁰ C McLachlan, et al supra n 18 2.20. BITs also often feature additional protection, notably through ‘umbrella clauses’ and the guaranteed free transfer of payments related to an investment, seeibid 2.20–2.24.

⁷¹ A detailed comparison of the substantive standards provided and their application in the juvisprudence of the European Courts and investment tribunals is beyond the scope of this article. However, the question to which extent EC law provides for MFN and national treatment of investors will be addressed infra III.B.

⁷² See eg the provision to that effect in the Czech-Netherlands BIT, Article 3(5) stating explicitly that other rules under international law more favourable to investments by investors of the Contracting Parties shall prevail.

⁷³ See also C Söderlund, supra n 19 455 ff 461.

⁷⁴ The question whether the different treatment of investors as a result of different BITs (or the lack of BITs) between Member States is compatible with EC law will be addressed below.

⁷⁵ See also Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 180.

⁷⁶ See Article 28 TEC (‘Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States’) on the free movement of goods, Article 39(2) TEC (‘freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment’) on the free movement of workers, Article 43 TEC (‘Freedom of establishment shall include the right to take up and pursue activities […] under the conditions laid down for its own nationals by the law of the country where such establishment is effected’) on the freedom of establishment, Article 49 TEC (‘restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended’) on the freedom to provide services and Article 56(1) TEC (‘all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited’) on the free movement of capital.

⁷⁷ The freedom of establishment and the free movement of capital appear to be the most relevant principles in this regard.

⁷⁸ While two of these decisions address the question of discrimination in a free movement of workers context (Article 39 TEC and Regulation 1612/68), the ECJ's reasoning with regard to the freedom of establishment should in principle not be different.

⁷⁹ See Wehland, H, ‘Schiedsverfahren auf der Grundlage bilateraler Investitionsschutzabkommen zwischen EU-Mitgliedstaaten und die Einwendung des entgegenstehenden Gemeinschaftsrechts,’ (2008) SchiedsVZ, 222 ff 229.Google Scholar

⁸⁰ See eg Article 1(b) of the Netherlands-Czech Republic BIT, defining as ‘investors’ either ‘natural persons having the nationality of one of the Contracting Parties’ or ‘legal persons constituted under the law of one of the Contracting Parties’.

⁸¹ Decision of the European Court of Justice Case C-307/97 Compagnie de Saint-Gobain Zweigniederlassung Deutschland v Finanzamt Aachen-Innenstadt [21 September 1999].

⁸² ibid para 34.

⁸³ ibid paras 43, 47, 63.

⁸⁴ ibid para 59.

⁸⁵ Decision of the European Court of Justice Case C-55/00 Elide Gottardo v Istituto nazionale della previdenza sociale (INPS) [15 January 2002] para 34.

⁸⁶ ibid para 37.

⁸⁷ Decision of the European Court of Justice Case C-235/87 Annunziata Matteucci v Communauté francaise of Belgium and Commissariat général aux relations internationales of the Communauté francaise of Belgium [27 September 1988] para 3.

⁸⁸ ibid para 17.

⁸⁹ ibid para 23.

⁹⁰ Decisions of the European Court of Justice Cases C-466-469/98 C-471-472/98, C-475-476/98, in infringement proceedings against Austria, Belgium, Denmark, Finland, Germany, Luxembourg, Sweden and the United Kingdom, [5 November 2002].

⁹¹ See eg Decision of the European Court of Justice Case C-471/98 Commission v Belgium [5 November 2002] paras 137–142.

⁹² ibid para 141.

⁹³ ibid para 143.

⁹⁴ Seeibid para 141.

⁹⁵ See Decision of the European Court of Justice Case C-307/97 Compagnie de Saint-Gobain Zweigniederlassung Deutschland v Finanzamt Aachen-Innenstadt [21 September 1999] para 60; Decision of the European Court of Justice Case C-55/00 Elide Gottardo v Istituto nazionale della previdenza sociale (INPS) [15 January 2002] para 36.

⁹⁶ C-205/06, C-249/06 and C-118/07.

⁹⁷ See eg the definition of ‘investor’ in Article 1(2) of the BIT between Austria and the Republic of Korea as ‘any natural person who is a national of either Contracting Party’ or ‘any juridical person or commercial partnership constituted in accordance with the laws and regulations of either Contracting Party, having its seat in the territory of this Contracting Party’.

⁹⁸ See supra [15]. In the Eastern Sugar arbitration, the Czech Republic limited its argument to the general prohibition of discrimination contained in Article 12 TEC, see Eastern Sugar BV v Czech Republic (ad hoc arbitration under UNCITRAL rules), Partial Award of 27 March 2007, para 106.

⁹⁹ For an overview see G Kofler and C Schindler, ‘Dancing with Mr D’: The ECJ's Denial of Most-Favoured-Nation Treatment in the ‘D’ case, 45 European Taxation 2005, 530–540, 532; see also R van der Linde, ‘Some thoughts on most-favoured-nation treatment within the European Community legal order in pursuance of the D case,’ 13 EC Tax Review 2004, 10–17, 12. Those in favour of intra-European MFN treatment seemed however not to agree whether the basis for such treatment be found in the fundamental freedoms of Art. 49, 56 TEC (N Herzig, ‘Der EWG-Vertrag und die Doppelbesteuerungsabkommen,’ Der Betrieb 1992, 2519 ff 2522), the general prohibition of discrimination contained in Art. 12 TEC (see R van der Linde,ibid, at 13 EC Tax Review 2004, 10–17, 13 and Weggenmann, H, ‘EG-rechtliche Aspekte steuerlicher Meistbegünstigung im Abkommensrecht’ (2003) Internationales Steuerrecht 677 ff 679Google Scholar) or both (see Weber, D and Spierts, E, ‘The “D Case”: Most-Favoured-Nation Treatment and Compensation of Legal Costs before the European Court of Justice’ (2004) European Taxation 65–71, 67.Google Scholar

¹⁰⁰ Decision of the European Court of Justice Case C-376/03 D v Inspecteur van de Belastingdienst/Particulieren/Ondernemingen buitenland te Heerlen. [5 July 2005], Decision of the European Court of Justice Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation v Commissioners of Inland Revenue [12 December 2006].

¹⁰¹ Decision of the European Court of Justice Case C-376/03 D v Inspecteur van de Belastingdienst/Particulieren/Ondernemingen buitenland te Heerlen [5 July 2005] para 46.

¹⁰² Advocate General Ruiz-Jarabo Colomer stressed that residents of all Member States were entitled not to be disciminated against on grounds of their nationality and that there was nothing to prevent Community law from being applied to rectify any inequality amounting to a hindrance to the free movement of capital, see Opinion in C-376/03, para 97.

¹⁰³ Decision of the European Court of Justice Case C-376/03 D v Inspecteur van de Belastingdienst/Particulieren/Ondernemingen buitenland te Heerlen [5 July 2005] para 61.

¹⁰⁴ ibid para 62.

¹⁰⁵ Notably, the ECJ's reasoning has been identified as circular, see G Kofler and C Schindler, supra n 99.

¹⁰⁶ Decision of the European Court of Justice Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation v Commissioners of Inland Revenue [12 December 2006] paras 91–93.

¹⁰⁷ Notably, the ECJ referred to Article 293 TEC, which states that ‘Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals: […] the abolition of double taxation within the Community.’

¹⁰⁸ In any event, even if there was a conflict, its consequence would likely be the extension of BIT provisions to investors from other Member States, rather than their inapplicability, see Decision of the European Court of Justice Case C-235/87 Annunziata Matteucci v Communauté francaise of Belgium and Commissariat général aux relations internationales of the Communauté francaise of Belgium [27 September 1988] para 23, where the ECJ merely observed that the reservation of a certain advantage to nationals of a certain Member State could ‘not prevent the application of the principle of equality of treatment’.

¹⁰⁹ This objection would in fact seem to be based on two different concerns: first, that an investment tribunal will not accord precedence to EC law over other applicable norms, and second, that an investment tribunal may, ‘misinterpret’ provisions of EC law. However, both concerns ultimately relate to the question of the effective enforcement of EC law through the ECJ.

¹¹⁰ For example the TEC provisions on state aid, see infra [120].

¹¹¹ See Decision of the European Court of Justice of Case C-24/95 Land Rheinland-Pfalz v Alcan Deutschland GmbH [20 March 1997]: ‘Community law requires the competent authority to revoke a decision granting unlawful aid … even where such recovery is excluded by national law.’

¹¹² However, there would likely be room for the tribunal to take into account a conflicting EC law provision when interpreting the substantive protection standards of the relevant BIT. See supra [309–310].

¹¹³ Decision of the European Court of Justice Case C-294/83 Parti écologiste ‘Les Verts’ v European Parliament [23 April 1986] para 23.

¹¹⁴ Article 292 TEC reads: ‘Member States undertake not to submit a dispute concerning the interpretation or application of this Treaty to any method of settlement other than those provided for therein.’ The idea of this provision is to avoid modifications to what is regarded as a coherent judicial system, see C Semmelmann, supra n 17 (2006) 234 ff 239.

¹¹⁵ Decision of the European Court of Justice Case C-459/03S Commission v Ireland [30 May 2006] para 123.

¹¹⁶ ibid para 184.

¹¹⁷ ibid para 121.

¹¹⁸ See C Söderlund, supra n 19 ff 457.

¹¹⁹ See supra [308].

¹²⁰ See also C Söderlund, supra n 19 ff 459. Two current ICSID proceedings against Hungary, both relating to long term power purchase agreements, provide an illustration of the European institutions' limited control over the handling of EC law in investment disputes under the Energy Charter Treaty. The European Commission, which apparently takes the view that these agreements constitute illegal state aid under EC law, has (at least in one case successfully) applied to intervene as amicus curiae in these proceedings, see Investment Arbitration Reporter of 11 December 2008, http://www.iareporter.com/Archive/IAR-12-11-08.pdf. A similar scenario can also be envisaged under an intra-EU BIT.

¹²¹ The Lisbon Treaty, signed by the Member States in December 2007, could take effect from January 2009 at the earliest. However, as a result of the Irish referendum failed in June 2008, the future of the Treaty currently appears uncertain.

¹²² Article 207 of the consolidated version of the ‘Treaty on the Functioning of the European Union’ includes foreign direct investment into the Common Commercial Policy, while also stating that ‘[t]he exercise of the competences conferred by this Article in the field of the common commercial policy shall not affect the delimitation of competences between the Union and the Member States.’ Assuming that the latter reservation only applies to the delimitation of internal competences, the Member States, according to Articles 10 and 307 TEC, would arguably have to either terminate or at least adapt their BITs with third countries to account for Community measures.

¹²³ Intra-EU BITs do not come under the Common Commercial Policy, see supra [8].

¹²⁴ See supra at [III.B.].