European Courts’ Diverging Approach over Intra-EU Investment Arbitrations

Introduction

In the aftermath of the Achmea decision^[1], controversies on intra-EU arbitrations continue. Most recently, the Paris Court of Appeal has annulled two arbitral awards rendered against Poland. Meanwhile, the Higher Regional Court of Berlin has refused to declare that an Irish investor’s ICSID claim against Germany is inadmissible.

The Background

In the Achmea dated 06.03.2018, the Court of Justice of the European Union (“CJEU”) ruled on the incompatibility of intra-EU arbitrations with European Union (“EU”) law. According to the CJEU, the Netherlands-Slovakia bilateral investment treaty was contrary to the primacy and uniform application of EU law. Following this decision, the jurisdiction of arbitral tribunals dealing with intra-EU disputes came to a halt.^[2]

A number of arbitral tribunals such as Vattenfall AB and others^[3], UP (formerly Le Chèque Déjeuner) and C.D Holding Internationale^[4] and Masdar Solar & Wind Cooperatief^[5] refused to apply the CJEU’s reasoning in Achmea and upheld their jurisdiction. Their main justification for doing so was the non-applicability of the Achmea judgment to multilateral treaties such as the Energy Charter Treaty (“ECT”). However, the Komstroy^[6] ruling of the CJEU followed the reasoning of the Achmea to invalidate referrals to arbitration for investment disputes between member states governed by ECT.^[7]

Annulment Decisions from French Court

The applicability of Achmea to arbitral proceedings has been raised as an annulment ground in some recent cases. Poland sought annulment of arbitral awards rendered against Poland and in favour of (i) Austrian investors “Strabag and Raffeisen Centrobank” and (ii) a Czech investor “Slot Group”. The Strabag case was filed under the Austria – Poland BIT in 2014, and governed under ICSID Rules. The claimants’ alleged infringement related to their foreign investment in Warsaw hotels. The partial award rendered by the arbitral tribunal upholding its jurisdiction was brought before the Paris Court of Appeal by Poland. The French court concluded that the arbitral tribunal wrongly upheld its jurisdiction in an intra-EU arbitration by contrasting Achmea, and set aside the partial award.^[8]

The Slot Group case was filed under the Czech Republic – Poland BIT in 2016, and governed under ECT. The claim concerned gambling investors’ rights allegedly infringed after some regulatory changes in Poland. As in Strabag, the final award rendered by the arbitral tribunal upholding its jurisdiction was brought before the Paris Court of Appeal by Poland. The French court not only annulled the arbitral award by relying on Achmea, but also underlined that respondent states in intra-EU disputes are “obliged” to contest investment claims filed against them before arbitral tribunals and courts.^[9]

These cases are noteworthy since they are the first examples where a state court has relied on Achmea to annul international arbitral awards while confirming its general applicability to intra-EU disputes.

Rejection of Inadmissibility by German Court

The European courts are not fully convinced of Achmea’s applicability to “any intra-EU dispute”. An Irish wind power investor called Mainstream Renewable Power and its affiliates brought an ECT claim against Germany under the ICSID Rules.^[10] The claim was related to alleged disruption of offshore wind projects due to regulatory changes in Germany’s renewable energy legislation. Germany initially requested the arbitral tribunal to dismiss the case as per Achmea and Komstroy, underlining the incompatibility of intra-EU disputes with EU law. This request was rejected by the arbitral tribunal.^[11]

Germany also asked the Berlin court to declare the inadmissibility of the ECT arbitration due to its intra-EU nature. The Higher Regional Court of Berlin has recently rendered a decision declining Germany’s request, which is currently on appeal before Germany’s Federal Court of Justice. The Higher Regional Court of Berlin underlined that CJEU caselaw does not affect the international legal system established through Germany’s ratification of the ICSID Convention, which is independent from national courts.

Conclusion

Despite the effort of the CJEU, the inadmissibility of intra-EU disputes in arbitration is still not well recognized by all European courts. Although the Paris Court of Appeal annulled two arbitral awards by relying on Achmea, the Higher Regional Court of Berlin refused to declare an ECT arbitration inadmissible on the same ground. The approach of the German court makes sense since EU law does not (and should not) have precedence over multilateral investment treaties.^[12] Until a further legislative step on the matter is taken, admissibility of intra-EU matters before arbitral tribunals will remain highly disputable.