“Intra-EU Objection” Does “Incompatible” Always Equal “Inapplicable”? Mainstream v. Germany – a New Chapter of an Old Story
Authors: Pączek Jarosław 
Published: October 2024

In investment arbitration, the so-called “intra-EU objection” is based on the concept of the inadmissibility of claims. Such an objection, often presented in arbitrations by the defendants – EU member states, not only purports to quell BIT-based claims, but also stands in the way of the enforcement and execution of arbitral awards based on the ICSID Convention. After the landmark CJEU decision in Achmea, the issue seemed to be done and dusted, at least under the European legal system. All the recent different awards rendered by the German courts in Mainstream v. Germany, Uniper v. Kingdom of the Netherlands, as well as RWE v. Kingdom of the Netherlands seem to confirm the firm principle included in the Achmea decision, i.e., that the arbitration clause (standing offer to arbitrate) included in BITs entered into by two EU member states stands contrary to the internal investment regulations of the EU. On 28 April 2022, the German Higher Regional Court of Berlin (first instance) decided to dismiss Germany’s request to declare that Mainstream Renewable Power Ltd.’s claim, put forward in the arbitration against Germany under Article 26(2)(c) of the Energy Charter Treaty (“ECT”)6, was inadmissible because it concerns an intra-EU dispute. As it is the case with the Uniper and RWE cases, the claim in Mainstream was filed according to § 1032(2) of the ZPO (“ZPO”), which allows such a claim to be filed in the German court to determine the admissibility of arbitral claims before the constitution of the tribunal. Germany appealed that decision to the Federal Court of Germany and the final decision of that court is pending. Germany filed a similar claim in the arbitration proceedings before the ICSID, instigated by Mainstream, where it asserted, based on Rule 41(5) of the ICSID Arbitration Rules, that: “[…] the Tribunal manifestly lacks jurisdiction to adjudicate the dispute due to the incompatibility of the relevant parts of Article 26 of the ECT with the EU Treaties. And that some of the Claimants are incorporated in Germany and therefore do not qualify as protected investors under ICSID rules […]”. Also, the arbitration Tribunal denied Germany’s claim, in particular stating that: “On the basis of the legal arguments raised by the Parties, and their submissions concerning those arguments, the Tribunal is not persuaded that the Respondent’s interpretation of the effect of developments, including recent developments, under EU law is a sufficiently “undisputed or genuinely indisputable rule of law”, as required to decide that the claim in the current arbitration is “manifestly without legal merit”. This is particularly so given the recency of the Komstroy Judgment and PL Holdings Judgment”. The Tribunal seemed to have agreed with Mainstream’s argumentation that: “[…] the ECT, including Article 26, has not been superseded by the EU Treaties pursuant to Article 30(4)(a) of the VCLT because the EU Treaties do not post-date the ECT on the basis that the relevant provisions of the EU Treaties were already part of their predecessor treaty. […] even if the EU Treaties were considered to be later, the EU Treaties and the ECT cannot be considered part of the same “treaty regime” and do not relate “to the same subject matter” within the meaning of Article 30(1) of the VCLT, and in any event, the lex specialis conflict rules in Article 16 of the ECT prevail”. The issue of the so-called intra-EU objection was dealt with in other cases prior to the Mainstream, Uniper and RWE proceedings. In two separate cases, Micula v. Romania (I and II), the Micula brothers and the companies controlled by them first prevailed in the arbitration but failed to enforce the arbitral award in European courts. In the second arbitration, their different claims were dismissed altogether. The American courts did not subscribe to the argumentation presented in the European courts that the incompatibility of the EU regulation with the BIT system established in the Achmea case stands for the automatic inadmissibility of the ICSID Convention. In the US courts’ view, one does not trump the other. All the recent cases dealt with by the German Supreme Court seem not only to uphold the view that the European Union has a legitimate authority to protect its internal investment legal system by abolishing arbitration as a parallel system of serving justice among member states. It also confirms that the issue at hand is complex and the courts of lower instances frequently do not share the view presented by the CJEU11. It is becoming apparent that the CJEU hasted into the revolutionary judgment in Achmea and by doing so created a vacuum of insecurity for investors after the abandonment of BITs and the ECT. The convention establishing a multilateral court for the settlement of investment disputes has not been agreed and the court systems in different European countries do not guarantee fair and equitable treatment of foreign investors as was the case under the system of BITs and the ECT. Keywords: BIT, Rule 41(5) of the ICSID Arbitration Rules, Energy Charter Treaty, TFEU – Art. 267 and 344, Uniform interpretation and application of EU law, preliminary rulings, autonomy of the EU legal order, execution of BIT-based arbitral awards, principle of sincere cooperation, ICSID Convention