CYIL 2011

CZECH EXPERIENCE WITH BILATERAL INVESTMENT TREATIES: SOMEWHAT BITTER … particularly the question of their validity and desirability. These questions have had quite an important impact on Czech investment protection practice and have influenced Czech foreign investment policy perhaps more than has been the case of other Member States so far. 4.1 BITs with third countries For newly acceding EU Member States, the obligation to put their international obligations into accordance with EU law ensues from Article 351 TFEU (former Article 307 EC Treaty). According to this Article, treaties entered into before accession are not affected by the EC Treaty/TFEU, but the Member State is obliged to take all necessary steps to eliminate potential incompatibilities with EU law. Already during pre-accession negotiations, the Commission found the commitments of eight candidate countries from Central and Eastern Europe (including Czech Republic) contained in their BITs with the USA to be inconsistent with their future obligations as EU Member States. As a result of negotiations with the US representation, with the assistance of the Commission, a Memorandum of Understanding was signed in 2003 between the parties concerned regarding the interpretation of some sensitive clauses of US BITs in the light of EU law. 44 The Czech Republic and the USA have later, concluded an Additional Protocol to their BIT, which amended the treaty accordingly in a binding form. After the accession of the Czech Republic to the EU in May 2004, the compatibility of other BITs with EU law came into question. Already during the pre-accession consultations, the Commission expressed certain reservations with regard to the new Member States’ BITs concluded with third countries. 45 However, the Commission apparently did not find the incompatibilities as serious as in the case of the US BIT and did not qualify them as an impediment to the Czech Republic’s accession to the EU. In the course of consultations, the Commission pointed out the following incompatibilities: 46 • Provisions guaranteeing free transfers of capital and payments that do not allow implementation of a decision of the Council restricting the free movement of capital from and to third countries in accordance with Articles (former) 57, 59 and 60 of the EC Treaty; • BITs do not allow adoption on the basis of Articles (former) 60 and 301 EC of measures protecting essential security interests of the EU; 44 For more details on the US Memorandum, see: Radu, A. op. cit. supra note 43. 45 Government proposal to the Parliament of the Czech Republic for approval of the Protocol between the Government of the Czech Republic and the Government of the Socialist Republic of Viet Nam on the amendments to the Agreement between the Government of the Czech Republic and the Government of the Socialist Republic of Viet Nam for the Promotion and Reciprocal Protection of Investment, signed on the 21 st of March 2008 in Hanoi. Explanatory memorandum. p. 1. Available in Czech at www.psp.cz. 46 Ibid.

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