The Polish-Portuguese Chamber of Commerce, with support of Mr. Marek Jeżewski, PhD, from one of our Member Companies Kochański Zięba & Partners, have prepared a summary regarding the status of termination of the Agreement signed between the Government of the Republic of Poland and the Government of the Republic of Portugal on promotion and reciprocal protection of investments. Please consult the text below:
On September 30, 2017, the President of the Republic of Poland signed a Bill (“Bill”) on termination of the Agreement between the Government of the Republic of Poland and the Government of the Republic of Portugal on promotion and reciprocal protection of investments, done in Lisbon on March 11, 1993 („Treaty”). The Bill was adopted by the Polish Sejm on September 15, 2017 and gave authorization to the President to terminate the Treaty in accordance with its Article 11(2). That provision allows the Contracting Party to unilaterally terminate the Treaty on the basis of a note of termination submitted at least 12 months prior to the expiry of each of the 5 years terms of applicability of the Treaty (“Sunset Clause”). According to the Government, the Bill is justified due to the Treaty’s alleged inconsistency with the EU Law and due to the fact that general public does not favor investor-State dispute settlement mechanism prescribed in the Treaty and other similar treaties (“BITs”).
The discussion regarding termination of the intra-EU BITs has started already in 2011 when the European Commission suggested that such BITs may be contrary to EU obligations. As from then, Polish government has started discussions with European counter-parts on potential mutual termination of the BITs. However, with the exception of BITs with Italy, Denmark, Romania, Czech Republic, Estonia and Latvia, which have been recently approached by the Polish government regarding mutual termination, no other EU Member States were interested. Consequently, Poland undertook steps to unilaterally terminate some of those BITs in accordance with respective Sunset Clauses.
The Treaty has been intended to create favorable conditions for investments by investors of one Contracting Party on the territory of another Contracting Party. The Treaty guarantees fair and equitable treatment, non-discrimination and protection against non-compensable expropriation and nationalization. The Treaty provides also for the possibility to defend investors’ rights in front of independent international arbitration tribunal who decides potential disputes on the basis of international standards and not on the basis of municipal law.
The note of termination of the Treaty was submitted by Polish MFA to Portuguese part in November 2017. As a result, the termination of the Treaty will become effective as of August 3, 2019. Under Article 11(3) of the Treaty, all investments undertaken prior to the latter date will enjoy protection for 10 following years, i.e., until August 3, 2029. Throughout that period, whenever Polish authorities breach obligations under the Treaty, Portuguese investors will still be in a position to initiate arbitration proceedings.
Please note, that contrary to the Government’s justification of the Bill, EU is not unanimous as to consistency of intra-EU BITs with the EU Law. Currently, the CJEU deals with a case concerning enforceability of arbitration award based on Slovak-Netherlands BITs and its consistency with the EU Law. In the recent opinion, dated September 19, 2017, the EU Advocate General rejected the European Commission’s standpoint as to the inconsistency of Intra-EU BITs with EU Law. The CJEU should render its judgment in the near future.
– all Portuguese investors, who made or will make their investments until August 3, 2019, will enjoy protection under the Treaty for the forthcoming 10 years, i.e., until August 3, 2029.
Marek Jeżewski PhD
Advocate, Partner. Head of Arbitration Practice. Marek specializes in international arbitration, particularly investment arbitration and international commercial arbitration.
We would like to remind you that the PPCC was involved in the matter from the very beginning and intervened on 1st of August by sending a letter to Mr. Tadeusz Kościński, the Undersecretary of State in the Ministry of Development of Poland. B both our letter and the response which we received on 13th September, with the respective working translations into English and Polish.