The CJEU extends Achmea to intra-EU Energy Charter Treaty arbitrations and interprets the term “investment”

In a judgment dated 2 September 2021 in Komstroy v Moldova (Case C-741/19), the Court of Justice of the European Union (“CJEU”) has held intra-EU investment arbitration proceedings under the multilateral Energy Charter Treaty (“ECT”) incompatible with EU law, and considered what constitutes an “investment” under the same treaty.

As we noted in our earlier post on Advocate General Szpunar’s March 2021 opinion in this case, Komstroy v Moldova was an unlikely contender to bring the intra-EU/ECT question to the CJEU’s bench, as the case does not actually involve an intra-EU claim. The Paris Court of Appeal as the court at the seat before which the setting aside of the underlying UNCITRAL/non-ICSID award is being requested, had consulted the CJEU regarding the interpretation of the term “investment” under the ECT. The dispute itself dates back to the late 1990s and arose out of the sale of electricity by Komstroy’s Ukrainian predecessor companies to a Moldovan state-owned entity.

The CJEU affirms jurisdiction to interpret the ECT

Komstroy, supported by the Council of the European Union, as well as the Hungarian, Finnish and Swedish Governments, had argued that the CJEU did not have jurisdiction, because EU law was inapplicable to the substance of the dispute and both parties were external to the EU. The CJEU rejects this position, ruling that the ECT was concluded by the EU and therefore forms “an integral part of the legal order of the European Union” (para. 23 of the judgment).

The CJEU also notes that it may interpret an international agreement where such agreement can apply both to situations falling within the scope of EU law and to situations not covered by that law (para. 29 of the judgment). Moreover, the court relies on the parties’ choice of a French seat and French law as the lex loci arbitri. As EU law forms part of the Member States’ legal order, this choice, finds the CJEU, entails the possibility of review by itself, if a preliminary reference is made under Article 267 TFEU.

The Achmea reasoning applies to the ECT

The majority of the CJEU’s short 19-page judgment is devoted to the court’s finding that intra-EU ECT investment arbitration proceedings under Art. 26(2)(c) ECT are incompatible with EU law (para. 66 of the judgment) and that the reasoning it had given in Achmea for bilateral investment treaties (“BIT”) applies likewise to the multilateral ECT.

The CJEU finds that an arbitral tribunal constituted under the ECT has “precisely the same” (para. 52 of the judgment) relationship to the EU’s legal order as a tribunal under a BIT (as in Achmea): ECT arbitral tribunals may interpret and apply EU law while these arbitration proceedings did not guarantee the effectiveness and autonomy of that law (most notably because arbitral tribunals cannot refer prejudicial questions to the CJEU and that their decisions are subject to limited grounds for annulment).

In other words: intra-EU investment arbitration proceedings under the ECT are, in the eyes of the CJEU, to be regarded in the same manner as investment arbitration proceedings under intra-EU BITs. The fact that the EU itself is a party to the ECT does not affect its view.

The CJEU, however, (narrowly) differentiates commercial arbitration from such intra-EU investment arbitration proceedings: It maintains, as it had in Achmea, that commercial arbitrations are not affected. While it objects to the limited review of arbitral awards in investment arbitration due to a risk that EU law is not given full effect, for commercial arbitration – while technically the same limitations apply – “… requirements of efficient arbitration proceedings justify the review of arbitral awards by the courts of the Member States being limited in scope” (para. 58 of the judgment).

Interpretation of the term “investment” under the ECT

Only on page 16 does the CJEU move to the question practically relevant for the non-EU parties, Komstroy and Moldova, finding that “a mere supply contract is a commercial transaction which cannot, in itself, constitute an ‘investment’ within the meaning of Article 1(6) ECT, irrespective of whether an economic contribution is necessary in order for a given transaction to constitute an investment” (para. 79 of the judgment). The CJEU comes to this conclusion based on the specific facts of the case and the general finding that, under the ECT, an important distinction must be drawn between investment and trade.

The specifics of this point are certainly relevant for Komstroy and Moldova. Of importance is also the willingness of the CJEU to interpret the ECT’s substance at all, in a dispute between two non-EU parties and where no substantive EU law came into play.


The judgment puts an end to speculation whether the CJEU would take a different approach than it did in Achmea regarding the multilateral ECT, compared to intra-EU BITs. Whereas Achmea ultimately led to a treaty between most Member States to terminate intra-EU BITs, that treaty left the signatories to “deal with [the ECT] at a later stage”. It is important to note that a similar possibility with regard to the ECT would require buy-in from all of its members, not just those that are also EU Member States, and it is not certain whether this would be the case.

As to the practical effects of the judgment: Achmea did not deter tribunals from continuing intra-EU arbitrations, and it is likely that the same will apply to currently pending intra-EU ECT cases. It is also open how Komstroy-based arguments will play out in ICSID arbitrations, in view of the enforcement obligations of the ICSID Convention and the self-contained ICSID mechanism. Notably, the Dutch Ministry of Economic Affairs – which is entangled in disputes with the German energy companies RWE and Uniper over the Netherlands’ coal phase-out – has communicated that it is seeking “anti-arbitration” measures from German courts, relying on Achmea, despite the arbitrations being subject to the self-contained ICSID mechanism. Komstroy might strengthen EU Member States' desire to bring such disputes before EU Courts (although the benefits may ultimately be limited, if ICSID tribunals remain unimpressed and enforcement is sought outside of the EU).

It also remains to be seen whether the CJEU’s decision will facilitate the European Commission’s legislative initiative to enhance intra-EU investment protection in view of the concerns that non-EU investors would be granted better protections than EU investors, since the latter do not benefit from investment arbitration under intra-EU BITs and, now, intra-EU disputes under the ECT.

Finally, the CJEU’s willingness to engage in interpretation of the ECT will surely attract attention. Some might see it as unwanted interference, others as the beginning of more robust investment protection through EU institutions.