Sunset Clauses in International Law and their Consequences for EU Law
PE 703.592
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In practice, amendments to the ECT are often discussed. For instance, in 2018 a series of topics were
selected for the modernization of the Treaty.
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However, the ECT was amended once in 1998.
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Through the amendment process, Parties may propose the amendment of the sunset clause in Article
47 paragraph 3 of the ECT. In particular, the Parties may propose to shorten the duration of the sunset
clause from 20 years, to five years or ten years.
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Interestingly, the recent BIT between the EU and Vietnam makes a specific reference
to the Contracting
Parties option to amend the sunset clause and possibly increase and decrease the duration of the 15-
year sunset clause or even repeal it. In particular, Article 4.15 provides that ‘In the event that this
Agreement is terminated pursuant to Article 4.10 (Duration), the provisions of Chapter 1 (Objectives
and General Definitions), Articles 2.1 (Scope), 2.2 (Investment and Regulatory Measures and Objectives)
and 2.5 (Treatment of Investment) to 2.9 (Subrogation), the relevant provisions of Chapter 4 and the
provisions of Section B (Resolution of Disputes between Investors and Parties) of Chapter 3 (Resolution
of Disputes between Investors and Parties) shall continue to be effective for a further period of 15 years
from the date of termination, with respect to investments made before the date of termination of the
present Agreement,
unless the Parties agree otherwise..
.’
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In like manner, Model BITs such as the Slovakia Model BIT of 2019 or the Russian Federation Model BIT
of 2016 also make a specific reference to the Contracting Parties option to amend the sunset clause.
For instance, the Model Treaty of Slovakia in Article 28 paragraph 3 states that ‘In respect of investments
made prior to the date of the termination of this Agreement the provisions of this Articles 1 to 28 of
this Agreement shall continue to be effective for a period of five (5) years from the date of its
termination,
unless the Contracting Parties agree otherwise’
.
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In practice, when Australia and Chile terminated their Investment Promotion
and Protection
Agreement (IPPA) and replaced it with a free trade agreement, they amended the former treaty’s sunset
clause. The sunset clause according to the IPPA had a duration of 15 years,
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and with the FTA the
duration was shortened to three years.
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In like manner, CETA, which is a trade
agreement between
the EU and Canada replaced a number of BITs between Canada and EU Member States and respectively
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See ‘Approved topics for the modernisation of the Energy Charter Treaty’ (29 November 2018) available at
https://energycharter.org/media/news/article/approved-topics-for-the-modernisation-of-the-energy-charter-treaty
(last
date accessed August 25 2021).
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The trade-related provisions of the Energy Charter Treaty were amended to comply with the WTO. See ‘The Amendment
to the Trade-related Provisions of the Energy Charter Treaty’ available at
https://www.energycharter.org/process/energy-charter-treaty-1994/trade-amendment/
(last date accessed August 25
2021)
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According to an OECD report, in a sample of 2061 International Investment Agreements, the average
duration of sunset
clauses in was 12.5 years, while about half of them had duration of 10 years. See Joachim Pohl, ‘Temporal Validity of
International Investment Agreements: A Large Sample Survey of Treaty Provisions’ OECD Working Papers on
International Investment, 2013/04 [Figure 5].
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EU-Vietnam Investment Protection Agreement (30 June 2019) Article 4.15.
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Slovakia Model BIT 2019, Article 28 paragraph 3 available at
https://investmentpolicy.unctad.org/international-
investment-agreements/model-agreements
(last date accessed August 25 2021). The same construction is recorded in
the Russian Federation Model BIT 2016 see Article 77.
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Australia-Chile Agreement on the Reciprocal Promotion and Protection of Investments (1999), Article 11.
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See for instance the Australia-Chile Free Trade Agreement, Annex 10-E, para. 3. ‘Notwithstanding paragraph 2, an
investor may only submit a claim under Article 11 of the IPPA (Settlement of disputes between a
Contracting Party and
an investor of the other Contracting Party) within three years from the date of entry into force of this Agreement.’
IPOL | Policy Department for Citizens’ Rights and Constitutional Affairs
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PE 703.592
reduced the duration of the sunset clauses in the BITs. To exemplify this, the 20-year sunset clause in
the BIT between Canada and Poland
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was reduced to three-years according to the CETA.
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Finally, an alternative would be to partially amend the sunset clause. For example, the EU has submitted
a proposal to limit the duration of the sunset clause up to ten years (after entry into force of the
amendment) only for existing fossil fuel investments.
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This proposal does not affect the sunset clauses
in relation to green energy, and possibly has more chances to receive more consensus among the
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