Arnold Schwarzenegger first vowed “I’ll be back” in the 1984 movie The Terminator – an iconic pledge of chaotic determination he has since repeated, and made good on, in numerous assorted action films.

The European Commission first took the position back in January 2006 that EU law bars the arbitration of intra-EU investment disputes, in an Eastern Sugar v Czech Republic amicus brief. In 2018, the EU Court of Justice purported to hold an intra-EU bilateral investment treaty (BIT) invalid, in the would-be landmark of Achmea – but a chorus of arbitrators and enforcing judges has ignored Achmea, on the reasoning that EU courts lack authority in the order of international law.

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Fast-forward to the present. On May 5, 2020, 23 European states officially terminated intra-EU BITs, effective immediately upon the ratification of any two signatories. With this agreement, will the EU finally reclaim sovereignty over investment disputes within Europe, and to what extent?

The main objection to terminating BITs is that it pulls the rug out from under foreign investors who relied on them. That objection applies with special force here, because the EU is aggressively aiming to kill even claims that are already pending, and to void ‘sunset clauses’ that were designed to shield existing investments for 15 to 20 years after termination. Investors of the future may be especially leery to take an investment treaty sunset clause seriously again.

Leading arbitration counsel express concern about the rule of law. Tai-Heng Cheng, who co-heads Sidley Austin’s global practice group, says a terminating state “undermines not just the credibility of the state internationally but the confidence of participants all around the world in international law as a system of enforceable norms around which one can make longer-term capital-intensive business plans”.

Robert Volterra of Volterra Fietta calls the termination agreement “a huge violation of the concept of rule of law” – and an ironic one, given that the EC views itself as the rule of law’s very embodiment.

In a political climate sceptical of globalisation and hostile to investor-state dispute resolution, legislatures are apt to ratify the termination agreement in time. But for the foreseeable future, they’ll be preoccupied by Covid-19 and its economic fallout.

Once any two states have ratified the termination, a new round of challenges will emerge from pending claims. The question after Achmea was who can mould international law? The question after May 5 is whether two states, having summoned a treaty into being, may kill their creation even after it has conferred third-party benefits onto a private investor. 

International law being inter-national, nations are generally free to terminate their treaty as they please, the rule of law be damned. But pending cases, at varying stages of maturity, will present borderline calls about the vesting of consent to protect a given investment. And the investor argument will be strongest under the Washington Convention, where consent once given cannot be taken away.

Like the Terminator of Schwarzenegger fame, the treaty terminator of Brussels is back. This time, the EU is likely to achieve its goal, by asserting its will through the actors of international law (the states) rather than the court of a different legal order. But by acting with undue aggression, Europe has maximised the uncertainty in individual cases. Many a sequel is sure to follow.

Michael D Goldhaber serves as US correspondent for the International Bar Association. He has been tracking the world’s largest disputes since the turn of the millennium. Email: michael.goldhaber@gmail.com