We have previously reported on the European Commission's (EC) concerns regarding intra-EU bilateral investment treaties (BITs) (see Legal updates, The EU's Economic and Financial Committee reports on intra-EU BITs and European governments defend proceedings alleging conflict between BITs and EC Treaty). In 2004, the EC notified Austria, Finland, Sweden and Denmark that some of their pre-accession BITs with non-EU countries may be in conflict with certain powers reserved to the EU Council of Ministers. In March 2009, the European Court of Justice (ECJ) found that Austria and Sweden were in breach of article 307 of the EC Treaty due to their failure to revise BITs with certain non-EU countries (see Legal update, ECJ finds Austrian and Swedish BITs breach article 307 of the EC Treaty).

On 19 November 2009, in Commission v Finland (Case C 118/07), the ECJ held that the Republic of Finland had also failed to fulfil its obligations under article 307 of the EC Treaty to take the appropriate steps to eliminate incompatibilities with the EC Treaty concerning the provisions on the transfer of capital contained in the pre-accession BITs at issue (Russia, Belarus, China, Malaysia, Sri Lanka and Uzbekistan). The BIT provisions in question allow investors from each signatory country to move capital freely into and out of the territory of the other signatory. The ECJ considered that such unrestricted free movement of capital was incompatible with certain provisions in the EC Treaty that empower the Council to restrict such payments to or from third countries. The ECJ rejected Finland's assertion that the BIT provisions were not incompatible with article 307 because they were stated to be subject to the limits authorised by the laws of the contracting parties, of which Community law was a part. The scope, interpretation and effects of those provisions were too uncertain and it followed that they were not sufficient to ensure compatibility with article 307. Accordingly, Finland should have renegotiated the treaties to bring them into line with the EC Treaty.

The EC case against Denmark was closed following Denmark's notification that it would terminate the BIT in question.