Post-Achmea: Vattenfall tribunal maintains jurisdiction over intra-EU Energy Charter Treaty claim against Germany

In a detailed decision, an ICSID tribunal hearing a dispute between Swedish Vattenfall and Germany over the state’s phase out of nuclear power in the wake of the Fukushima disaster (ICSID Case No. ARB/12/12) has maintained jurisdiction to hear the dispute under the Energy Charter Treaty (“ECT”). The decision follows objections raised by Germany after the Achmea-judgment of the Court of Justice of the European Union (“CJEU”). We have previously reported on implications of Achmea for ECT-claims and the European Commissions’ view of the Achmea-judgment here.

The tribunal – chaired by Albert Jan van den Berg with co-arbitrators Charles N. Brower and Vaughan Lowe – addresses two principal issues debated post-Achmea in its 72-page decision: the implications of the CJEU’s judgment (finding the ISDS clause in the Netherlands-Slovakia BIT incompatible with EU law) for arbitral tribunals constituted under investment treaties governed by public international law and the impact of the judgment on claims under the multilateral ECT.

The Vattenfall tribunal’s decision also takes into account observations filed by the European Commission in the arbitration as a non-disputing party.

Timeliness of the objection and ex officio assessment of the intra-EU question

Despite Vattenfall arguing that Germany could not raise the objection because it had not relied on the intra-EU objection earlier, the tribunal finds that the objection was timely, as the “very existence” of the CJEU’s judgment amounted to a new fact. The tribunal further emphasises its authority to consider any issues relating to its jurisdiction on an ex officio basis under the ICSID Rules, remarking that it would have seen fit to consider the intra-EU issue even if Germany had not raised the objection. This stands in stark contrast to a recent decision by an ICSID Tribunal in Gavrilovic v Republic of Croatia (ICSID Case No. ARB/12/39) under the Austria-Croatia BIT, where the tribunal both dismissed Croatia’s intra-EU objection following Achmea for being late and refrained from an ex officio review of the issue.

Applicable law to the jurisdiction of the tribunal

The Vattenfall tribunal thoroughly assesses ­– and ultimately rejects – the significance of EU law for its jurisdiction, based on a public international law analysis and strong reliance on the Vienna Convention on the Law of Treaties (“VCLT”). It identifies the dispute resolution provision of the ECT, Article 26, as the legal basis for its jurisdiction. While the tribunal acknowledges that the EU treaties form part of international law, it does not see EU law as “principles of international law which may be used to derive meaning from Article 26 ECT, since [EU law] is not general law applicable as such to the interpretation and application of the arbitration clause in another treaty such as the ECT”. It finds no room within Article 31 VCLT to draw from EU treaties (and thus indirectly from the Achmea decision) to interpret another treaty, the ECT.

The tribunal is particularly concerned about the potential of different interpretations of the same ECT provisions if EU law was utilised in interpreting the multilateral treaty. This would result in an “incoherent and anomalous result” that would be inconsistent with the object and purpose of the ECT. Instead, “terms of that treaty have a single consistent meaning”. Article 31(3)(c) of the VCLT, which states that any relevant rules of international law applicable in the relations between the parties should be taken into account when interpreting a treaty could not be relied on to “rewrite the treaty being interpreted”.

Interpretation of the ECT

The tribunal proffers its own affirmative interpretation of Article 26 ECT. Of note: Its reliance on Article 16 ECT, which states that no prior or subsequent international agreements between two or more parties to the ECT shall be construed to derogate from, among other provisions, Article 26 ECT. Article 16 ECT is identified by the arbitrators as “a simpler and clearer route to the answer to the jurisdictional challenge”.

Responsibility for defining the scope of the obligations established by the ECT lays with the treaty drafters, finds the tribunal: “It would have been a simple matter to draft the ECT so that Article 26 does not apply to disputes between an Investor of one EU Member State and another EU Member State as respondents. That was not done”. Additionally, the arbitrators do not recognise a conflict between Article 26 ECT and Articles 267 and 344 TFEU, but remark that even when applying a variety of conflict rules – lex posterior, modification of the ECT or lex specialis ­– EU law would not prevail over the ECT.

While mindful of potential enforcement obstacles, the tribunal – “equally conscious of its duty to perform its mandate granted under the ECT” – does not consider such obstacles relevant for the jurisdictional issue.

Comment and conclusion
The Vattenfall tribunal’s meticulous jurisdictional decision will surely serve as a blueprint for tribunals still grappling with the intra-EU question in ECT cases. Juxtaposing the Achmea judgment, the Commission’s recent comments and now the Vattenfall jurisdictional decision only highlights the starkly different vantage points – EU law alongside public international law alongside private interests – that are in play when it comes to intra-EU investment arbitration. Although the Vattenfall decision solidifies international tribunals’ approach to the matter, the overall issue remains in flux: The CJEU may soon be called upon to express its view on the relationship between ECT and EU law.

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