The changing landscape of intra-EU investment protection: latest communication by the European Commission and other post-Achmea developments

In the wake of the Court of Justice of the European Union’s (“CJEU”) judgment in Achmea, the European Commission recently communicated that “EU investors cannot invoke intra-EU BITs” or the Energy Charter Treaty (“ECT”) for intra-EU investments and advertised alternative remedies available under EU law. Meanwhile, ICSID tribunals have continued to render awards on intra-EU investment disputes and a court in Stockholm is considering a preliminary reference to the CJEU with respect to the ECT (for further background see our previous posts on Achmea here, here and here.) But even five months after Achmea and numerous contributions to the debate on its interpretation, the pivotal questions remain unanswered.

The post-Achmea debate – two main issues

From a practical perspective, two issues stand out in the vigorous post-Achmea debate: How must tribunals react? And does the judgment apply to the multilateral ECT – the basis for a substantial part of intra-EU arbitrations – as well?

On the former: The ambiguous interplay between EU law and public international law leaves questions about arbitral tribunals’ obligations, especially so for tribunals established under the ICSID Convention and those with a seat outside the EU. The CJEU has previously found that it has only limited jurisdiction to interpret Member States’ international agreements (e.g. C-533/08 - TNT Express Nederland), contrary to international agreements concluded by the EU or otherwise forming part of EU law (cf. C-266/16 - Western Sahara Campaign UK). Achmea does not suggest a departure from this position. The judgment’s operative part is limited to finding incompatibility with EU law, it arguably does not directly address the per se validity of the arbitration clauses contained in intra-EU BITs.

Nonetheless, tribunals seated in the EU face setting aside of their awards by Member States’ courts based on public policy and are thus unlikely to press forward. By contrast, tribunals seated outside the EU (including ICSID tribunals) have little basis to reject jurisdiction over intra-EU claims while the BITs’ arbitration clauses remain – for the time being – valid. Those tribunals may prove unimpressed by Achmea, especially if enforcement is pursued outside of the EU. From a public international law perspective, those tribunals may revisit whether EU law, or a Member State’s accession treaty, takes precedence over the respective BIT under the Vienna Convention on the Law of Treaties. In the past, tribunals have not been receptive to this view. Whether Achmea changes this remains to be seen, but so far tribunals have stayed course (see below). Ultimately, the responsibility to resolve the existing norm conflict by terminating intra-EU BITs falls squarely in the Member States’ hands.

On the latter: The reach of Achmea has been read in starkly diverging ways, especially when it comes to its effect on the ECT. Some focus on the judgment’s broadly worded operative part, which refers to “international agreement[s]”, not specifically to ‘bilateral treaties’ alone. Others point to paragraphs in the judgment that acknowledge the special status of agreements concluded by the EU itself, arguing that this would not only hint at the viability of CETA-like agreements and the EU’s proposed multilateral investment court system, but also encompass the ECT.

The Commission’s communication

Most of the Commission’s communication is devoted to show that EU law provides investors with a high level of protection throughout an investment’s lifecycle, as well as viable mechanisms to realise that protection without resorting to arbitration (see our previous post on such remedies).

On Achmea itself, the Commission proffers that the CJEU “implies” that “arbitration clauses in intra-EU BITS are inapplicable” and that a tribunal constituted thereunder “lacks jurisdiction due to the absence of a valid arbitration agreement”. Yet, the Commission does not explain how the judgment would result in such invalidity. Tellingly, the Commission remains keen on Member States to terminate their intra-EU BITs, noting that it has “intensified its dialogue” with Member States and that it “may decide to further pursue the infringement procedures.”

Unsurprisingly, given the Commission’s well-established opposition to all intra-EU investment arbitration, it further opines that the Court’s reasoning “applies equally” to intra-EU ECT cases. Under the ECT, intra-EU disputes could be submitted “to a body which is not part of the judicial system of the EU”, just as with intra-EU BITs. The Commission sees limited meaning in the EU being a party to the ECT; that membership “has only created rights and obligations between the EU and third countries and has not affected the relations between the EU Member States.” From the Commission’s perspective, ECT claims insofar as they concern intra-EU scenarios are within Achmea’s reach.

Tribunals, Member States and Member States’ courts reactions to Achmea

In practice, the reactions to Achmea have been varied: two ICSID tribunals were undeterred by the CJEU’s ruling, rendering awards on the merits in intra-EU cases against Spain under the ECT. One (Masdar v. Spain) asserted that Achmea was limited to intra-EU BITs and had “no bearing” on the case due to the multilateral nature of the ECT and the EU being a party to that treaty. The other (Antin v. Spain) dismissed a request to reopen the proceedings in light of Achmea, the final award does not further address the tribunal’s reasoning. At the same time, at least one investor has withdrawn a significant intra-EU claim (under the Netherlands-Poland BIT). The Netherlands have already announced intentions to terminate their intra-EU BITs.

Attention is now focused on the Svea Court of Appeal in Stockholm. In addition to annulment actions against intra-EU BIT awards (e.g. PL Holdings v. Poland), Spain has asked the Swedish court to annul an ECT award rendered under SCC rules in Stockholm (Novenergia v. Spain). In those proceedings, Spain has requested the Svea Court of Appeal to seek a preliminary ruling on the ECT from the CJEU. The court has stayed enforcement of the award but not yet made further decisions.

Kirstin Schwedt and Maximilian Reichert would like to thank Hannes Ingwersen for his assistance in preparing this article.