CYIL 2011

TOMÁŠ FECÁK CYIL 2 ȍ2011Ȏ • Too narrow a regional integration organization (REIO) exception from the most favoured nation and national treatment clauses. The reservations of the Commission concerned virtually all BITs that the Czech Republic had entered into with third countries. These reservations on the one hand implied a duty to include “EU clauses” in any future negotiations on new BITs. However, the question of conflicting BITs already in force was more complicated. A decision was to be made at the national level whether to take the relevant steps to remove alleged incompatibilities in existing treaties, or let them be and risk potential infringement proceedings. Several pragmatic arguments would favour the second option. At that time, the problem was of a rather hypothetical nature – the incompatibilities were asserted by the Commission but they had never been subject to a decision or an opinion of the European Court of Justice, the only body competent for a final and binding interpretation of EU law. Moreover, the problem did not concern the Czech Republic or new Member States only – virtually all BITs concluded by Member States with third countries, including the BITs of the original EU 15, would be incompatible with EU law in the sense presented by the Commission. But there were no reports of any other Member State taking relevant steps aimed at solving the incompatibilities. But the most discouraging factor concerned the practical implications of the solution. The problematic BITs could either be unilaterally terminated, or amended by mutual consent of the contractual parties. The first approach would seem to be quite inopportune and could the damage political and economic interests of the state. The second approach – the renegotiation of all existing BITs – would theoretically seem more appropriate, but its implementation would be excessively burdensome, while the final outcome would be difficult to foresee. Regardless of the practical difficulties, the consensual approach was adopted. In 2005 the Czech Republic sent diplomatic notes to all concerned contracting countries with a proposal to renegotiate the existing BITs in order to put them into compliance with EU law. 47 Since then several successful negotiations have taken place in order to fulfil this “Sisyphean task” and to date the Czech Republic has managed to sign amendments or new agreements putting the respective BITs into compliance with EU law with regard to 22 countries. 48 But it is becoming clear that especially countries with a strong negotiating position are not interested in accepting any amendments of their BITs that are in their essence favourable to the proposing party. The standard clauses inserted in the BITs by the amendments are the following: • An extended REIO exception for the most favoured nation and national treatment. Standard REIO exception excludes extension of advantages based upon membership in REIO to the investors of the other contracting party by virtue of MFN and NT standards. The extended REIO exception expressly

47 Ibid. 48 See Annex 1 to this article.

252