Renegotiation of Existing BITs by the Netherlands May Directly Affect Current Investments

Author:Mr Charles Kotuby Jr., Lodewijk Berger, Gerjanne te Winkel, Baiju S. Vasani and Coen E. Drion
Profession:Jones Day
 
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In Short

The Situation: The Netherlands has 79 bilateral investment treaties ("BITs") in place with non-EU countries. On March 22, 2019, the Dutch government published a new model BIT ("2019 Model") as a template for negotiating new non-EU BITs and replacing existing ones. The 2019 Model offers investors less protection than do existing BITs.

The Result: The Netherlands plans to renegotiate existing BITs based on the 2019 Model. Investors that currently rely on a Dutch BIT may be affected, in particular if existing sunset protection no longer applies.

Looking Ahead: In May 2019, the Netherlands obtained authorization from the European Commission to renegotiate its existing BITs with Argentina, Burkina Faso, Ecuador, Nigeria, Tanzania, Turkey, the United Arab Emirates, and Uganda, and to start negotiations for new BITs with Qatar and Iraq.

In response to public criticism of existing BITs and to implement its new sustainable trade and investment policy, the Dutch government sought to replace its 2004 model BIT. In May 2018, it published a draft version of the 2019 Model for public consultation. Subsequently, an amended version was published in October 2018. Following discussions in Dutch Parliament, further amendments were made that resulted in the current 2019 Model. Read the 2019 Dutch Model BIT (source document in Dutch).

Pure Holding Companies May No Longer Qualify for Investment Protection

Under the 2019 Model, an "investor" must either have substantial business activities within the Dutch jurisdiction or be owned or controlled by such a person or entity. There are no fixed criteria for what is "substantial." The 2019 Model nonexclusively lists indicators such as location of registered office or headquarters, number of employees, turnover, and the nature and maturity of the activities. These indicators should be assessed in each specific case.

The Scope of Investments Is Narrower

An "investment" is defined as requiring a certain duration, the commitment of capital or other resources, and the assumption of risk. Claims to money arising solely from commercial contracts for the sale of goods or services, the domestic financing of such contracts, or any related order, judgment, or arbitral award are excluded.

The Level of Substantive Protection Is More Limited

The "most-favored-nation" clause no longer allows investors to claim a breach of this provision due to more favorable treatment accorded to investors in other treaties, absent...

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