DENMARK Trends and Developments Contributed by: Johannes Grove Nielsen, Jakob Lentz, Anne Buhl Bjelke and Daniel Myhre Engell, Bech-Bruun Law Firm P/S
Investor–State Arbitration in Denmark: An Introduction
tions such as fair and equitable treatment, protection against direct and indirect expropriation and free transfer of funds. Illustratively, the Denmark–Lithu- ania BIT of 1992 offered these protections, and the Denmark–Mexico BIT of 2000 ties expropriation com- pensation to fair market value with interest. Denmark’s treaty network and texts are catalogued by the public register of the UN’s Conference on Trade and Development (UNCTAD). Despite this network, Denmark has rarely been the target of investor–state claims. As such, public data- bases record very few cases against Denmark. The two most prominent are Aleksandravicius v Denmark (ICSID case no ARB/20/30) and the pending Klesch Group Holdings Ltd. et al. v Kingdom of Denmark (ICSID case no ARB/23/48), which challenges Den- mark’s energy “solidarity contribution” under the ECT. The turning point for Denmark’s intra-EU exposure instigated by EU case law In the Achmea case from 2018 (C-284/16), the Euro- pean Court of Justice held that arbitration clauses in intra-EU BITs were incompatible with EU law. Later, in the Komstroy case from 2021 (C-741/19), the Europe- an Court of Justice applied the same logic to intra-EU disputes under Article 26 of the ECT. In response, Denmark – alongside 22 other EU mem- ber states – in 2020 signed the “Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union”, which entered into force on 29 August 2020. From a practical standpoint, the agreement removed the intra-EU trea- ty arbitration path for EU-based investors, who must now rely on EU law remedies and domestic courts, while Denmark’s extra-EU BITs and other non-intra- EU instruments remain the primary treaty bases for investor–state dispute settlement (ISDS) with non-EU- based investors. With the path of intra-EU now being closed, Den- mark’s ISDS exposure concentrates on extra-EU trea- ties and ECT legacy disputes, which explains why the aforementioned Klesch Group Holdings Ltd. et al. v Kingdom of Denmark – an ECT-based ICSID case –
Denmark’s investor–state arbitration framework has undergone a notable transition over the past decade. Historically, Denmark maintained a mix of intra- and extra-EU bilateral investment treaties (BITs). After the European Court of Justice’s Achmea and Komstroy rulings and the 2020 termination agreement, intra-EU BITs are gone, leaving EU investors reliant on EU law or national courts for protection. Denmark’s decision to exit the Energy Charter Treaty (ECT) in 2025 adds another layer, although the treaty’s 20-year “sunset clause” offers investors protection for legacy invest- ments. From a Danish perspective, the investor–state arbi- tration framework now consists of extra-EU BITs, EU agreements and ICSID membership. In addition, where Danish law is agreed, investors are offered a legal framework that is based on the UNCITRAL Model Law through the Danish Arbitration Act (DAA). However, the DAA does not include the amendments to the UNCITRAL Model Law implemented in 2006 on interim measures, inter alia, but it is expected to be updated to conform with international standards within the coming years. ICSID arbitration against Denmark is rare, although current live cases – such as Klesch Group Holdings Ltd. et al. v Kingdom of Denmark – illustrate that inter- national arbitration remains a possibility. This case illustrates the balance between providing adequate investor protection and other potentially conflicting political agendas, such as the climate agenda. The case will also show the remedies available in a situa- tion where governments invoke emergency measures. This article maps the current key trends and important developments in an arbitration context for investors considering Denmark as an avenue for future invest- ments, with a focus on Denmark’s currently only active investor–state arbitration case. Denmark’s bilateral investment treaties – and the EU turning point For two decades, Denmark’s investment protection framework combined a network of intra-EU and extra- EU BITs. Those treaties typically offered core protec-
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