Foreign investment

What is the prevailing attitude towards foreign investment?

In Germany, a positive attitude towards foreign direct investment prevails. It is general government policy, largely irrespective of the political parties in power, that foreign direct investment should be supported. Primarily, this applies to outbound foreign direct investment. Germany is a major source of outbound foreign investment flows and German companies have invested in a large number of companies across diverse sectors around the world. Inbound foreign direct investment became a focus only gradually over time and its volume has remained below that of outbound foreign investment. Nonetheless, Germany actively seeks to attract inbound foreign direct investment as well.

However, the public’s attitude towards special legal protection for the benefit of foreign investors (eg, in the form of bilateral or multilateral investment treaties) has shifted in recent years. Investment treaties and, in particular, investor-state dispute settlement (ie, the possibility for investors to bring claims against states before an investment arbitration tribunal) have been constantly criticised by various non-governmental organisations as favouring the interests of investors over the interests of states. This should not, however, be taken to mean that there has been a general shift in German public opinion to oppose outbound or inbound foreign investment.

What are the main sectors for foreign investment in the state?

Foreign direct investment into Germany occurs, in principle, in all sectors. Recently, according to statistics of the Organisation for Economic Co-operation and Development, the largest inflow of foreign investment has occurred in the finance, chemicals and pharmaceuticals, industrial machinery and trade sectors.

Is there a net inflow or outflow of foreign direct investment?

Historically, Germany has been a capital-exporting country. In other words, foreign direct investment outflows typically surpass inflows. According to World Bank statistics, in 2015, the net inflow of foreign direct investment amounted to US$46.2 billion, which equates to approximately 1.4 per cent of the German gross domestic product (GDP). At the same time, the net outflow of foreign direct investment reached US$108.8 billion, which equates to approximately 3.2 per cent of the German GDP. Since 2006, the net inflow of foreign direct investment has fluctuated between US$9 billion and US$97 billion. During the same period, the net outflow of foreign direct investment has fluctuated between US$91 billion and US$148 billion.

Investment agreement legislation

Describe domestic legislation governing investment agreements with the state or state-owned entities.

There is no domestic legislation specifically addressing investment agreements with the state or with state-owned entities. Normally, general contract law will apply to a contractual relationship between a foreign investor and the state or a state-owned entity. However, in specific circumstances, it may be possible for a foreign investor to conclude a contract with the state regarding issues of administrative law. In this case, specific rules of administrative law will apply to the contract.

International legal obligations

Investment treaties

Identify and give brief details of the bilateral or multilateral investment treaties to which the state is a party, also indicating whether they are in force.

Germany has entered into bilateral investment treaties (BITs) with a total of 136 countries. Of these, 127 are in force, while four (with Brazil, Iraq, Israel and Timor-Leste) are signed but have not yet entered in force and five (with Bolivia, Ecuador, India, Indonesia and South Africa) were terminated by the other state party. The treaties with the former Soviet Union, the former Federal Republic of Yugoslavia and the former Czech and Slovak Federative Republic remain in force and are still applicable to a number of their successor states (including Russia, the Czech Republic and Slovakia, Serbia and Montenegro, and Kosovo).

Germany has the largest network of BITs in the world. With the exception of North America (ie, the United States and Canada) and Western Europe (eg, France, Spain, the United Kingdom), all major world regions are covered by the network of German BITs. Should the EU-Canada Comprehensive Economic and Trade Agreement be ratified in due course, Germany, as an EU member state, would be covered by the terms of that agreement as well.

Note, however, that numerous German BITs were concluded many years ago, at a time when investor-state dispute settlement clauses were not included within the treaties. Therefore, investors to these particular BITs have no means of directly invoking their rights under them before an investment arbitration tribunal. Examples of such treaties include the Germany-Pakistan BIT of 1959 - the first-ever BIT to be concluded - and the Germany-Malaysia and Germany-Greece BITs of 1960 and 1961 respectively.

Apart from its BITs, Germany is also a party to the Energy Charter Treaty (ECT), which it signed in 1994 and ratified in 1997, with the treaty entering into force in 1998. The ECT, inter alia, regulates foreign direct investment in the energy sector and applies to all EU member states and to numerous other European and Central Asian countries.

If applicable, indicate whether the bilateral or multilateral investment treaties to which the state is a party extend to overseas territories.

Germany possesses no overseas territories.

Has the state amended or entered into additional protocols affecting bilateral or multilateral investment treaties to which it is a party?

For many German BITs, protocols were signed simultaneously with the BIT itself (eg, the BITs with Burkina Faso, Bosnia and Herzegovina, Kenya and Turkmenistan). These protocols provide guidance in interpreting the terms of the BITs, for example, by clarifying that the BITs also apply within the exclusive economic zone of the state parties or that proof of nationality of a natural person can be furnished by providing that person’s passport. The protocols can be accessed at:

On occasion, Germany has also entered into protocols amending existing BITs subsequently to the latter’s conclusion. Specifically, such additional protocols exist for the BITs with Moldova, Poland and Panama (with the latter not yet having entered into force). These protocols amend the BITs with regard to specific details relating to, for example, the dispute resolution mechanism and the expropriation clause.

Has the state unilaterally terminated any bilateral or multilateral investment treaties to which it is a party?

Germany has terminated none of its investment treaties. However, five states have terminated their BITs with Germany, namely Bolivia and South Africa with effect from 2014, India and Indonesia with effect from 2017 and Ecuador with effect from 2018. The BITs with these five states all contain sunset clauses providing for the protection of existing investments for a period of time after the termination, namely 15 years in the case of the BITs with India and Ecuador and 20 years in the case of the BITs with Bolivia, Indonesia and South Africa.

Has the state entered into multiple bilateral or multilateral investment treaties with overlapping membership?

Germany is a party to the ECT and, simultaneously, has concluded a number of BITs with other ECT member states. Specifically, these are Afghanistan, Albania, Armenia, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Georgia, Greece, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Malta, Moldova, Mongolia, Montenegro, Poland, Portugal, Romania, Slovakia, Slovenia, Tajikistan, the former Yugoslav Republic of Macedonia, Turkey, Turkmenistan, Ukraine and Uzbekistan. According to article 16 of the ECT, nothing in the ECT shall be construed to derogate from the terms of these BITs and nothing in these BITs shall be construed to derogate from the terms of the ECT, ‘where any such provision is more favourable to the Investor or Investment’. One can arguably construe this to mean that an investor can rely on both the ECT and one of the respective BITs in parallel.

ICSID Convention

Is the state party to the ICSID Convention?

Germany is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which it signed in 1966, with ratification and entry into force in 1969. Germany has made no notifications regarding the exclusion of territories (see article 70 of the Convention) or regarding a class or classes of disputes that it would or would not consider submitting to ICSID jurisdiction (see article 25(4) of the Convention). Furthermore, Germany has not designated constituent subdivisions or agencies as possible parties to an ICSID dispute (see article 25(1) and (3) of the Convention). For the purpose of recognising and enforcing awards rendered pursuant to the Convention, the district courts are competent.

Mauritius Convention

Is the state a party to the UN Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention)?

Germany is one of the original signatories of the Mauritius Convention, having signed it on 17 March 2015. However, to date, Germany has not yet ratified the Mauritius Convention.

Investment treaty programme

Does the state have an investment treaty programme?

Germany has actively promoted the conclusion of BITs, and by doing so has become the country with the most BITs worldwide (see question 5). For this purpose, Germany used a model BIT. As a result, German BITs have been broadly similar to one another throughout the years (although updates of the model BIT were made to reflect the development of international investment law). Notably, investor-state dispute settlement by way of arbitration has only been provided for in German BITs since the 1980s.

In 2009, competence for foreign direct investment was transferred to the European Union with the entry into force of the Lisbon Treaty. As a result, the EU member states can no longer negotiate and conclude BITs without permission from the European Commission. Consequently, since 2009, no new German BITs have entered into force. Rather, the European Union has sought to negotiate free trade agreements (FTAs), including chapters on investment protection, with various countries (eg, Canada, Singapore, the United States and Vietnam). At the time of writing, the negotiations for some of these FTAs have been concluded (eg, Canada, Singapore and Vietnam). However, the investment chapters of these FTAs have not yet entered into force since this will still require ratification by the EU member states.

Regulation of inbound foreign investment

Government investment promotion programmes

Does the state have a foreign investment promotion programme?

While Germany seeks, in principle, to pursue policies favouring foreign direct investment, the state does not have a generally applicable programme with the specific purpose of promoting foreign direct investment.

Applicable domestic laws

Identify the domestic laws that apply to foreign investors and foreign investment, including any requirements of admission or registration of investments.

The laws applicable to domestic investors and domestic investment apply equally to foreign investors and investment, both with regard to regulation and to possible subsidies. However, pursuant to the German Foreign Trade Law and the German Foreign Trade Ordinance, specific foreign investments can be forbidden or restricted with a view to public security concerns. Notably, the state amended the relevant provisions in 2017 and significantly increased the means at its disposal to interfere in acquisitions of German companies by foreign nationals.

The most important case in this regard is the acquisition by a foreign national of 25 per cent or more of the voting rights in a domestic company that produces or develops:

  • weapons;
  • engines or gearboxes for battle tanks and other armoured tracked vehicles; or
  • products with an information technology security function for processing classified governmental files.

Such an acquisition has to be notified to the Federal Ministry for Economic Affairs and Energy (BMWi), which approves the acquisition if it is not contrary to essential security interests of the state. The BMWi is deemed to have given approval if it does not open a review process within three months from transaction notification.

Moreover, the BMWi can impose a prohibition or restriction order on the acquisition by a national of a state that is neither an EU nor EFTA member of 25 per cent or more of the voting rights in a domestic company to safeguard public order or national security. Since 2017, the law specifies numerous acquisition targets for which this is assumed to be the case, including domestic companies that operate critical infrastructure or that develop or revise certain industry-specific software for the operation of critical infrastructure. In that context, critical infrastructure is defined as facilities or installations, or parts thereof, in the sectors of:

  • energy;
  • information technology and telecommunication;
  • transport and traffic;
  • health;
  • water;
  • food; and
  • finance and insurance.

If the relevant legal provisions are triggered, the acquisition must be notified to the BMWi. Once the BMWi has learned of the acquisition contract’s conclusion, it has three months to initiate a review process. Irrespective of the BMWi’s knowledge, the review process can no longer be initiated once five years have elapsed since the contract’s signing. As part of the review process, the BMWi can request documentation regarding the acquisition. Following the receipt of all documentation, the BMWi has four months to issue a decision prohibiting the acquisition or to impose conditions safeguarding public order or national security. The time limit will be suspended during negotiations between the BMWi and the entities involved in the acquisition regarding contractual provisions safeguarding public order or national security.

Notably, a foreign investor may also voluntarily notify a transaction to the BMWi beforehand and request confirmation that the transaction will not be forbidden or prohibited. The BMWi will be deemed to have issued the confirmation if it does not initiate the review process within two months from receipt of the request.

Relevant regulatory agency

Identify the state agency that regulates and promotes inbound foreign investment.

Insofar as there is regulation specifically pertaining to foreign direct investment (see question 14), the BMWi exercises the state’s competences. The BMWi also seeks to promote foreign direct investment within its competences.

Relevant dispute agency

Identify the state agency that must be served with process in a dispute with a foreign investor.

In the event of a foreign investor initiating investment arbitration proceedings against Germany, the ministry responsible for the actions that are the subject of the investor’s complaint will be served. If it is not clear which ministry is responsible or if the actions in question were not taken by a ministry but, for example, by another entity, such as a municipality, the investor should turn to the BMWi and request an indication as to which entity will be considered internally competent to deal with the investor claim. Practically, such a request to the BMWi can be combined with a request for amicable settlement typically required by German BITs.

Equally, in the event a foreign investor pursues proceedings before domestic courts, the answer will depend on the specific measures that are the subject of the foreign investor’s complaint. If the measures were taken by one of Germany’s federal states, the lawsuit will be directed against that federal state. If the measures were taken by the federal government, the lawsuit will be directed against Germany.

Investment treaty practice

Model BIT

Does the state have a model BIT?

Germany has a model BIT. The latest version of the model BIT, which is from 2008, can be accessed at: The model BIT’s provisions are broadly consistent with general treaty practice and the BITs of other nations (with the exception of newer model BITs, such as that of India, which contain numerous unique provisions).

Article 1 sets out the definitions of ‘investment’ and ‘investor’ that are relatively broad and inclusive. Articles 2 to 5 provide the substantive protections to be afforded to investors and investments, in particular:

  • the standards of fair and equitable treatment;
  • full protection and security;
  • national as well as most-favoured-nation treatment;
  • protection against discrimination and expropriation without prompt, adequate and effective compensation; and
  • the right to a free transfer of payments.

Article 7(2) contains an umbrella clause (ie, a clause obliging the state to fulfil obligations it has entered into with an investor). Regarding investor-state dispute settlement, article 10 provides for a variety of options, including:

  • conciliation and arbitration under the ICSID Convention;
  • arbitration under the ICSID Additional Facility Rules;
  • arbitration under the Rules of Arbitration of the United Nations Commission on International Trade Law (UNCITRAL);
  • arbitration under the Rules of Arbitration of the International Chamber of Commerce;
  • arbitration under the Rules of Arbitration of the London Court of International Arbitration; and
  • arbitration under the Rules of Arbitration of the Stockholm Chamber of Commerce.

To date, no BITs based on the 2008 model BIT have entered into force (see question 12). Therefore, the German BITs in force are based on earlier versions of the model BIT (eg, that of 1998 ( or 1991 ( The different versions have remained broadly consistent over time, with one important caveat: under the 1991 and 1998 model BITs, the nationality of juridical persons, and the question of whether a juridical person is protected, is determined by reference to the seat of the juridical person, whereas, under the 2008 model BIT, the law under which the juridical person is founded and organised is decisive.

Preparatory materials

Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?

There is no central repository specialised in treaty preparatory materials. However, materials from the federal ministries, including materials on treaty negotiations, are kept at the Federal Archive and are generally available to the public. Moreover, for some BITs, Germany and the other contracting state have agreed additional protocols upon signing. These protocols provide for definitions and interpretative guidelines that can be taken into account in the interpretation of the respective BIT’s provisions (see question 7).

Scope and coverage

What is the typical scope of coverage of investment treaties?

Coverage of German BITs is usually characterised by defining the terms ‘investment’ and ‘investor’. The standards of substantive protection and the investor-state dispute settlement mechanisms contained in the BITs expressly set out that they are only available to ‘investors’ and ‘investments’ as defined under the BIT. Specifically, it is necessary for the applicability of these provisions that an investor of one contracting state to the BIT makes an investment in the territory of the other contracting state.

German BITs typically contain a broad definition of the term ‘investment’, referring to ‘every kind of asset’ and then setting out a non-exclusive list of examples of qualifying investments, usually including items such as:

  • ‘movable and immovable property’;
  • ‘shares in companies’;
  • ‘claims to money’
  • ‘claims to any performance’;
  • ‘intellectual property rights’; and
  • ‘concessions’.

With regard to the definition of the term ‘investor’, German BITs differentiate between natural and juridical persons. For natural persons, German BITs refer to the domestic law of the states that are party to the BIT. Thus, in deciding whether a natural person qualifies as an investor of Germany, the German Law on Citizenship applies. In case of juridical persons, German BITs typically follow the ‘seat theory’, meaning that a juridical person is an ‘investor’ of one of the contracting states of the BIT if it has its seat in that state. The seat is typically understood as the place from where the juridical person is managed (ie, the place where day-to-day management decisions are being made).


What substantive protections are typically available?

German BITs offer a wide range of standards of protection for foreign investors. Most importantly, German BITs guarantee the fair and equitable treatment of investors. Various investment tribunals have held this guarantee to include:

  • protection against the frustration of legitimate expectations;
  • the obligation to provide a transparent and stable business environment;
  • the obligation not to apply arbitrary measures; and
  • a duty on the state to act in good faith.

In addition, German BITs also guarantee full protection and security of foreign investors and their investments. This means, in particular, that the state is obliged to exercise a certain level of diligence - and take necessary measures - to protect foreign investments from damage inflicted by third parties.

German BITs also protect foreign investors from discrimination. This includes a ‘national treatment’ obligation (ie, the obligation of the state to treat foreign investors no less favourably than it treats its own investors). Typically, the BITs also include ‘most favoured nation’ treatment (ie, the obligation of the state to treat the foreign investors protected under the BIT no less favourably than foreign investors of third states). Also, there is usually a general non-discrimination clause, prohibiting other forms of discrimination.

A further common feature of German BITs is a clause protecting against expropriation without compensation. Importantly, both direct and indirect expropriation is covered. This means that both the outright taking of the title to property (ie, ‘direct’ expropriation), and other state acts that have an effect comparable to that of an outright taking of the title (ie, ‘indirect’ expropriation), are only allowed if compensation is paid. The compensation has to be:

  • paid ‘promptly’ (ie, immediately upon the taking);
  • adequate (ie, reflecting the fair market value of the property that is expropriated); and
  • effective (ie, in a freely convertible currency).

German BITs typically also guarantee the free transfer of funds in and out of the state in which the investment is made. This includes, in particular, the returns generated by the investment.

Finally, German BITs also generally contain an umbrella clause. Tribunals have understood this to mean that a breach of contract entails a breach of the BIT, with it being possible that the latter breach is pursued before an investment arbitration tribunal.

Dispute resolution

What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?

Typically, German BITs refer to ICSID arbitration as a means of dispute resolution. Numerous German BITs also provide for ad hoc arbitration under the UNCITRAL Rules. Some German BITs also offer the investor the choice between the two.


Does the state have an established practice of requiring confidentiality in investment arbitration?

German BITs are generally silent as regards confidentiality of pleadings and hearings, and awards or other decisions by tribunals in investment arbitration cases. However, the situation is different under EU FTAs with investment chapters that are currently being negotiated and are supposed to enter into force in the near future (see question 12). Under these FTAs, the publication of pleadings and procedural decisions by the tribunal, and the broadcasting of hearings, is envisaged.

In the investment arbitration cases Germany has been involved in so far (see question 24), the state has largely pursued a policy of maintaining confidentiality. Insofar as these cases have been under the auspices of ICSID, the minimum transparency requirements of ICSID have been observed. That generally means that the existence of the cases and the names of the arbitrators were publicised. In addition, in one case that has already been concluded, the award was published. However, the parties’ pleadings in cases involving Germany have not been made publicly available to date and hearings have generally not been publicised. Nonetheless, it is to be expected that future cases involving Germany will be subjected to greater transparency. This became clear in the recent case of Vattenfall v Germany whose live-stream broadcast appeared on the ICSID website.


Does the state have an investment insurance agency or programme?

For decades, the German government has provided investment guarantees to German investors investing abroad. These investment guarantees typically cover losses resulting from a number of risks, including:

  • direct and indirect expropriation;
  • breach of contract by the state;
  • war and other armed conflict; and
  • revolution and civil disturbance.

Investments that may be covered are:

  • equity participation (including participation through holding companies);
  • investment-like loans (ie, shareholder or bank loans that resemble equity);
  • endowment capital for foreign branches or plant locations of German companies; and
  • rights qualifying as assets in the form of long-term investments (eg, concessions, production-sharing agreements for oil and gas, and bonds).

An BMWi-headed inter-ministerial committee decides whether or not to grant a guarantee to an investor. An investment must fulfil numerous requirements before an investment guarantee is granted. In particular, the investment has to be a new or a follow-up investment. Moreover, the investment has to be made by a company based in Germany on a long-term basis and an apparent German national interest must be present. The investment must also be viable from an entrepreneurial and economical perspective. Furthermore, the investment needs to have a positive effect on the host country and Germany alike, and it should intensify the relations between the countries.

Legal protection of the investment in the host country is also a necessary requirement for an investment guarantee to be granted. Sufficient legal protection generally requires that there is an investment treaty in place between Germany and the host country. Without an investment treaty in place, an investment guarantee will only be granted in exceptional cases in which the host country’s domestic legal system is considered sufficient. In all cases, the economic and political environment, and the development of the host country, are considered too.

Investment arbitration history

Number of arbitrations

How many known investment treaty arbitrations has the state been involved in?

Infsofar as it is publicly known, three investment arbitration cases have been commenced against the German state. The first was an UNCITRAL arbitration initiated in 2000 by an Indian investor under the Germany-India BIT. The case was settled, with no further details made publicly available. The two further cases have been brought at ICSID by the Swedish energy company Vattenfall pursuant to the Energy Charter Treaty. Vattenfall initiated the first case in 2009, with the subject matter being environmental requirements imposed on a coal-fired power plant in Hamburg. The case was settled in 2011 by way of a consent award, with the state making no monetary payments. The second Vattenfall case, initiated in 2012, relates to measures taken by Germany with regard to its nuclear phaseout. The case is ongoing.

Industries and sectors

Do the investment arbitrations involving the state usually concern specific industries or investment sectors?

Given the limited number of cases brought against Germany so far (see question 24), there is insufficient information to draw sectoral conclusions. While two of three known cases were brought in the energy sector, those two were also brought by the same investor.

Selecting arbitrator

Does the state have a history of using default mechanisms for appointment of arbitral tribunals or does the state have a history of appointing specific arbitrators?

In the two Vattenfall cases, Germany exercised its right to appoint an arbitrator, appointing two British nationals, Sir Franklin Berman and Professor Vaughan Lowe, respectively. Judging by the limited information available, it appears that the German state will act promptly and exercise its right to appoint.


Does the state typically defend itself against investment claims? Give details of the state’s internal counsel for investment disputes.

Germany typically defends itself against investment claims, with both internal and external counsel acting in the arbitrations. In the two Vattenfall cases, a team at the Ministry for Economic Affairs and Energy acted as internal counsel.

Enforcement of awards against the state

Enforcement agreements

Is the state party to any international agreements regarding enforcement, such as the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards?

Germany has signed and ratified the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention). This Convention has been in force in Germany since 1961.

Award compliance

Does the state usually comply voluntarily with investment treaty awards rendered against it?

Germany’s compliance with adverse awards has never been tested. Two of the cases brought against Germany have been settled, whereas the third case is still pending (see question 24). However, Germany generally takes its obligations under international law seriously. Consequently, one would expect that Germany would comply with an adverse award if one were to be rendered.

Unfavourable awards

If not, does the state appeal to its domestic courts or the courts where the arbitration was seated against unfavourable awards?

Germany has never appealed to its domestic courts or to the courts where the arbitration was seated against an unfavourable investment arbitration award.

Provisions hindering enforcement

Give details of any domestic legal provisions that may hinder the enforcement of awards against the state within its territory.

The regime for the enforcement of arbitration awards in Germany will depend on whether the arbitration award at issue was rendered pursuant to the ICSID Convention or pursuant to other rules. ICSID awards are enforced pursuant to article 54 of the ICSID Convention. Other than the annulment of an ICSID award by an ICSID annulment committee, the revision of an ICSID award by an ICSID tribunal, or the stay of enforcement imposed by such a committee or tribunal, no objection can be raised against the enforcement of an ICSID award (articles 2(4) and 3 of the German ICSID Approval Statute of 1969). Rather, with regard to the pecuniary obligations imposed by an ICSID award, such an award is to be treated like a final judgment of a German court.

For commercial arbitration awards against the state or investment arbitration awards rendered otherwise than pursuant to the ICSID Convention, the New York Convention is the most relevant instrument regarding the enforcement in Germany. Under the New York Convention, enforcement may be refused only if one of the grounds for refusal stated in article V of the New York Convention is present. This may be the case, for example, if the tribunal had no jurisdiction to decide on a case or if fundamental procedural rules have been violated so that one of the parties could not properly present its case. Generally, the threshold for refusing enforcement of a foreign arbitral award is high.

Irrespective of whether enforcement is sought pursuant to the ICSID Convention or the New York Convention, rules on sovereign immunity may hinder the enforcement of an award against Germany. In this respect, the nature of the asset against which enforcement is sought will be decisive. Specifically, enforcement against an asset of the state will be rejected if the asset in question is needed for the fulfilment of public duties.

Update and trends

Current developments

Are there any emerging trends or hot topics in your jurisdiction?

On 6 March 2018, the European Court of Justice (ECJ) issued a judgment with strong repercussions for investment protection under bilateral investment treaties concluded between EU member states (intra-EU BITs). In the case of the Slovak Republic v Achmea, the German Federal Supreme Court (BGH) had to decide whether an award rendered under the BIT between the Netherlands and the Slovak Republic could be enforced in Germany. In that context, the question arose whether the dispute resolution clause contained in this BIT was compatible with EU law. In order to have that question answered, the BGH turned to the ECJ for a preliminary ruling.

The ECJ held that the dispute resolution clause in question was incompatible with EU law. According to the ECJ, the dispute resolution clause created a risk that an investment arbitration tribunal would interpret and apply EU law. At the same time, the ECJ concluded that such a tribunal could not refer questions to the ECJ for preliminary rulings and that such a tribunal is also not subject to the control of a member state court. Therefore, from the ECJ’s perspective, the full effectiveness of EU law, its uniform interpretation and, ultimately, its autonomy were supposedly threatened by the dispute resolution mechanism of the BIT. As a result, the dispute resolution clause of the BIT was considered incompatible with EU law.

The implications of the ECJ’s Achmea judgment have been hotly debated ever since the judgment was issued. While some consider it the end of investment arbitration under intra-EU BITs, others have argued that the judgment’s reasoning does not necessarily apply to all intra-EU BITs, given the particular wording of the applicable dispute resolution clause. Another open question is whether the Achmea judgment also indicates that investment arbitration under the ECT is incompatible with EU law in a case involving an EU member state and an investor from another EU member state.

Nevertheless, there is little doubt that the judgment has further accelerated a movement against investment protection under intra-EU BITs. The European Commission has been arguing for years that intra-EU BITs are incompatible with EU law and the Achmea judgment has provided the Commission with further ammunition in this regard. As a result, the future of investment protection under intra-EU BITs is now very much in doubt.