Source: https://www.reedsmith.com/en/perspectives/2018/08/the-cjeu-preliminary-ruling-in-slovak-republic-v-achmea-bv
Timestamp: 2019-04-21 16:35:07+00:00

Document:
On March 6, 2018, the Court of Justice of the European Union (CJEU) published its preliminary ruling in Slovak Republic v. Achmea BV (the Ruling), which held that the application of the investor-state dispute settlement (ISDS) provisions under Article 8 of the Netherlands-Slovakia bilateral investment treaty (BIT) was incompatible with EU law.
The CJEU Preliminary Ruling in Slovak Republic v Achmea BV – what does it mean for arbitration under intra-EU BITs? (April 3 2018).
The CJEU Preliminary Ruling in Slovak Republic v Achmea BV – where are we now? (May 22 2018).
(i) The application of BITs between EU member states has created a parallel treaty system overlapping with single market rules and thereby preventing the full application of EU law (i.e., contrary to article 344 of the Treaty on the Functioning of the European Union (TFEU), which provides for the exclusivity of the jurisdiction of the CJEU in disputes concerning the interpretation or application of EU treaties).
(ii) Intra-EU BITs confer rights only in respect of investors from one of the two member states concerned, in conflict with the principle of non-discrimination among EU investors within the single market under EU law (i.e., contrary to the anti-discriminatory provisions under article 18.1. TFEU).
(iii) Intra-EU BITs “take away from the national judiciary” litigation concerning national measures and involving EU law, and entrust this litigation to private arbitrators who cannot properly apply EU law and, importantly, cannot refer questions of EU law to the CJEU for a preliminary ruling pursuant to article 267 TFEU, which is said to be the “keystone” of the EU judicial system.
It follows that it is likely that tribunals in ad hoc arbitrations seated within the EU will no longer have jurisdiction to hear disputes arising under intra-EU BITs. This also leaves the door open for challenges to jurisdiction of tribunals appointed to hear such disputes and seated outside of the EU, but the CJEU has no jurisdiction over proceedings conducted outside of its borders.
Enforcement of arbitral awards under intra-EU BITs: The Ruling raised questions as to the validity and therefore enforceability of previous awards rendered under intra-EU BITs. In this regard, the Communication states that “national courts are under the obligation to annul any arbitral award rendered on that basis and to refuse to enforce it.” Of course, the European Commission does not have the power to enforce this “obligation” on national courts outside of EU member states.
The Communication advances the argument that EU law is itself sufficient to “protect … all EU cross-border investments throughout their lifecycle.” However, both the substantive protections and the remedies available to EU investors are confined to those that are available under EU law. It follows that many of the protections typically provided for in investment treaties are not covered. For example, the most commonly invoked protection under investment treaties, fair and equitable treatment, is not replicated in EU law.
At the same time, there is no uniform standard approach by domestic courts toward investment protection, as is recognized by the EU in the proposal to introduce an EU investment court.
As previously noted, the International Centre for Settlement of Investment Dispute (ICSID) is an independent dispute settlement institution governed by the Washington Convention of 1965 (the ICSID Convention). ICSID tribunals derive jurisdiction under the ICSID Convention and ICSID arbitrations are seated in Washington, D.C. Contracting states are obliged to disapply their domestic arbitration legislation and it follows that the Ruling (and any subsequent EU directives) will not by default bind an ICSID tribunal.
It will be open to investors to challenge the jurisdiction of an ICSID tribunal to hear disputes arising under intra-EU BITs in reliance on the Ruling; however, any decision in this regard will be decided by the tribunal. The CJEU technically has no authority over ICSID arbitrations, even if they are intra-EU, because the seat will always be Washington, D.C. and the tribunal takes its jurisdiction from the relevant BIT and the ICSID Convention, not from the EU or any domestic law. If an intra-EU BIT has not been terminated by the EU member state parties, there is an argument that it remains a valid instrument on which investors can rely and from which a tribunal derives jurisdiction to determine disputes under it. An EU member state respondent would be forced to argue that there was no valid submission to arbitration on the basis that, as a matter of EU law, the BIT is invalid and therefore the standing offer to arbitrate contained within it is ineffective.
In our last client alert, we reported that the position in respect of ICSID arbitrations remained unclear, but clarification may come from pending ICSID cases under intra-EU BITs, including Addiko Bank AG and Addiko Bank d.d. v. Republic of Croatia (ICSID Case No. ARB/17/37) and the annulment proceedings underway in Dan Cake (Portugal) S.A. v. Hungary (ICSID Case No. ARB/12/9).
In this regard, and since our last client alert, the award in Marfin Investment Group v. The Republic of Cyprus (ICSID Case No. ARB/13/27) under the Cyprus-Greece BIT was rendered on July 26, 2018. The award was not made public, but the authors understand that the tribunal dismissed Cyprus’ jurisdictional objections made in reliance on the Ruling. The award may be the first ICSID award to consider intra-EU BIT objections since the Ruling, and may provide an indication of how ICSID tribunals will view the Ruling and its applicability to ICSID arbitration.
In other news, the Svea Court of Appeal has granted both Spain’s application for a stay of enforcement of an award rendered under the ECT in Novenergia v. Spain (SCC Case No. 063/2015) as well as Poland’s application for a stay of enforcement of an award under the BLEU-Poland BIT in PL Holdings S.a.r.l. v. Poland (SCC Case No. 2014/163). The Ruling was cited by both Spain and Poland in their applications for a stay of enforcement.
Spain will no doubt welcome the Communication’s clarification of the position as regards the ECT, not least because the overwhelming majority of the solar energy cases brought against Spain are pursued under the ECT.
Meanwhile, the enforcement proceedings arising out of the award in Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania (ICSID Case No. ARB/05/20) are ongoing in a number of jurisdictions, including Washington, D.C., England and Wales, Romania and Sweden.
Reed Smith’s investment treaty arbitration team advises investor and state clients on pre- and post-contract investment strategy and on disputes that arise under bilateral and multilateral investment treaties.

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