Athanasios Fotiadis (12296961) Page 1
UNIVERSITY OF AMSTERDAM
LLM INTERNATIONAL TRADE AND INVESTMENT LAW
D E F E N D I N G T H E W A L L S F R O M T H E A C H M E A
D I C T U M :
T H E R E S P O N S E O F I N V E S T M E N T T R I B U N A L S
A N D T H E R E A L E F F E C T O F A C H M E A O N
A R B I T R A L J U R I S D I C T I O N
Athanasios Fotiadis 12296961 +30 6978651793Athanasios Fotiadis (12296961) Page 2
TABLE OF CONTENTS
TABLE OF CONTENTS ... 2
ABSTRACT ... 3
A. INTRODUCTION ... 4
1. THEQUESTION’SIMPORTANCEANDTIMING ... 4
2. RESEARCHQUESTION,LAWTOBEAPPLIEDANDPLANNING ... 4
3. BACKGROUND ... 6
B. CENTRAL ANALYSIS BY INVESTMENT TRIBUNALS ... 14
1. APPLICABLELAW:EULAWWITHINTHEAMBITOFPUBLIC INTERNATIONALLAW,ANDITSAPPLICABILITYINJURISDICTION ... 14
2. HOWTHELEGALANALYSISHASEVOLVEDSOFAR ... 16
3. THEDISTINCTIONBETWEENTHEBITSANDTHEENERGYCHARTER TREATY 21 4. THEEUROPEANCOMMISSION’SANDTHEMEMBERSTATES’ PERCEPTIONONTHEEFFECTOFACHMEA ... 29
C. LEGAL ANALYSIS THAT HAS YET TO BE EXPLORED ... 31
1. THEPOSSIBILITYOFHARMONIZATION:COULDINTERNATIONAL INVESTMENTAGREEMENTSANDTHEEUTREATIESAPPLYSIMULTANEOUSLY? . 31 2. THENATUREOFCONSENTININVESTMENTARBITRATION AGREEMENTSANDITSIMPACTONTHEQUESTIONOFINTRA-EUARBITRATIONS 33 D. CONCLUSION ... 41
Athanasios Fotiadis (12296961) Page 3
ABSTRACT
Following the Achmea Judgment of the CJEU, international investment tribunals remain loyal to their established case law, upholding their jurisdiction in intra-EU Disputes. Based on traditional norms of Treaty Conflict and Interpretation, they consider the position taken by the EU authorities inapplicable in their legal analysis, keeping at bay all arguments promulgated by this sui generis self-contained autonomous regime. However, the majority of member states declare that the arbitration clauses in intra-EU IIAs are ineffective since there is no standing offer by the contracting EU member states. This deadlock of legal views might soon be moot in the case of intra-EU BITs. On the contrary, in the case of the ECT it appears that the EU does not aim to support a process of revision; hence bold actions need to be taken. Should it be that tribunals should dismiss their jurisdiction over such disputes? What is the role of Achmea and the states’ reaction thereto in the evaluation of arbitral jurisdiction? The specificities of state consent might be able to provide for a legal formula, under which this deadlock may be resolved.
Chapter A, briefly refers to the underlying conflict between the European Union legal system and international Investment Arbitration, giving an overview of the focal cases. Part 4 examines the EU Law perspective. Afterwards, in Chapter B, I elaborate on the hot questions regarding jurisdiction of the arbitral tribunals, starting from the choice of law that governs arbitral jurisdiction (under section B.1). Section B.2 delves into the legal analysis made by investment Tribunals in the aftermath of Achmea, while Section 3 refers to the BIT/ECT divergences. Finally, Chapter C is dedicated in novel legal arguments that have not caught much attention but may contribute to this ongoing discussion about the future of intra-EU investor-state arbitration. Chapter D is reserved for the conclusions reached on this study on the effect of the Achmea Dictum on arbitral jurisdiction.
Athanasios Fotiadis (12296961) Page 4
A. INTRODUCTION
1. THE QUESTION’S IMPORTANCE AND TIMING
In search of my thesis topic, I was inclined to research issues concerning investment arbitration that arose somewhat recently, hence demanding some further elaboration or requiring novelty in academic arguments. As a result, during the process, I was intrigued by the Achmea saga which provides for diametrically different opinions. I decided that my research question would revolve around a possible harmonization between the divergent positions or a critique on one of the two, proposing a case law transformation.
The question at stake has been a focal point in cases that arose in the recent past. This legal issue is of crucial importance as to the future of intra-EU International Investment Arbitration applying Bilateral/Multilateral Investment Treaty provisions, while the same issue may influence future arrangements on investment within the EU1. Hence, the possible repercussions involved may drastically change the status of investor protection in highly developed host states and the extent of Investor-State Dispute Settlement (ISDS) by arbitration, marking a shift of judicial power from ad hoc arbitrators to permanent or quasi-permanent judges2.
2. RESEARCH QUESTION, LAW TO BE APPLIED AND PLANNING
1 As early as April 2016, a group of capital-exporting EU members issued a non-paper destined for
the EU Trade Policy Committee proposing measures for an intra-EU BIT “phase-out” including alternative rules on dispute settlement on a multilateral level:
http://arbitrationblog.kluwerarbitration.com.proxy.uba.uva.nl:2048/2016/11/16/the-end-of-intra-eu-bits-fait-accompli-or-another-way-out/
2 See also European Commission’s Proposal for quasi-permanent arbitrators in ISDS, Commission, Towards a Comprehensive European International Investment Policy (Communication) COM (2010)
Athanasios Fotiadis (12296961) Page 5 The Achmea judgment3 [hereinafter: Achmea] has been widely commented upon ever since its publication. In fact, the intra-EU issue has been sporadically discussed even before the Judgment. Commentators who are familiar with Union Law would basically focus on the question whether Investor-State Arbitration is in fact incompatible with the European legal establishment under EU law4. On the other hand, most of the jurists who share an expertise in investment law usually place the question in a policy context, referring to extraneous issues such as the Commission’s aims to detach its investment policy from arbitration as we know it, especially in extra-EU BITs (between the EU and third states) and in Multilateral developments5. Others focus on the member states’ investment policy6 . There are also a number of publicists that dug deeper into the legal effect of incompatibility on investment arbitration law, but they either focus on enforcement rather than jurisdiction7, or discuss jurisdiction strictly in public international law terms, concluding that jurisdiction is unaffected by virtue of Treaty Law provisions on validity and treaty conflict.8
3 CJEU Case C-284/16 Slovak Republic v Achmea BV [2018] ECLI 158 [hereinafter Achmea
Judgment].
4
John Gaffney, “Slovak Republic v. Achmea: A Disproportionate Judgment?” 14 September 2018, available at http://arbitrationblog.kluwerarbitration.com.proxy.uba.uva.nl:2048/2018/09/14/slovak-republic-v-achmea-a-disproportionate-judgment/; Gloria Maria Alvarez, “Note: Slovak Republic v.
Achmea, Judgement of the Court of Justice of the European Union (Grand Chamber) Case No. C-284/16, 6 March 2018”, in João Bosco Lee and Flavia Mange (eds), (2018) 15 RevBrasArb 59, 149 - 155.
5
Nikos Lavranos and Tania Singla, “Achmea: Groundbreaking or Overrated?”, in Jörg Risse , Günter Pickrahn , et al. (eds), SchiedsVZ, German Arbitration Journal, available at Kluwer Law International; (2018) 16 VerlagCHBeckOHG 6, 351-355.
6See Josep Gálvez, “Investment Arbitrations Against Spain in a Post-Achmea Scenario: A New Hope
for Mediation?” (2018), available at
http://arbitrationblog.kluwerarbitration.com.proxy.uba.uva.nl:2048/2018/11/16/investment-arbitrations-spain-post-achmea-scenario-new-hope-mediation/ , where the author discusses mediation as a solution to investment policy issues.
7Deyan Dragiev, “A Procedural Perspective of Achmea: What Does Achmea Imply in Practice”
(2018), available at
http://arbitrationblog.kluwerarbitration.com.proxy.uba.uva.nl:2048/2018/06/10/procedural-perspective-achmea-achmea-imply-practice/ ;
Athanasios Fotiadis (12296961) Page 6 On the contrary, this master Thesis aspires to examine the possible effect that the Achmea dictum and the member states’ perception thereof may have on an investor-state arbitral jurisdiction. It shall not focus on EU Law; it will rather highlight the nature of an arbitration agreement and the consent that this agreement entails. Consequently, in this study, I will basically try to answer the following question:
“Do the Achmea Judgment and its subsequent reception by the EU member states affect the jurisdiction of investment tribunals in intra-EU disputes?”
As far as methodology is concerned, the following research will a) pinpoint the applicable legal norms used to determine a Tribunal’s jurisdiction in cases of intra-EU arbitration clauses, b) to interpret and examine the application of those norms in order to answer the central question and c) to elaborate on works of international lawyers and relevant case law, focusing mostly on decisions and awards of international investment tribunals issued after the CJEU Judgment on Achmea, including inter alia, the Vattenfall9 decision on the Achmea issue, which constituted the basic stimulus on the writer, as the first post-Achmea arbitral response to the CJEU.
It is evident in the main disputes that brought up the aforementioned question, namely the ones in Achmea before the CJEU and those before Investment Tribunals, that the core problem is whether the jurisdiction of such tribunals is affected by a presumed incompatibility with the principles and norms of EU Law. This study shall focus in the translation of the norms of the community legal order via the CJEU and the member states’ views into investor-state arbitral reality.
3. BACKGROUND
Shortly after the collapse of the Eastern Bloc, in the early 1990’s, eastern European states were in pursuit of their further development by creating economic
9 Vattenfall AB and others v Germany, Decision on the Achmea Issue (Jurisdictional), ICSID Case
Athanasios Fotiadis (12296961) Page 7 and institutional ties to the states of the former Western Bloc. The latter, in turn, aspired to penetrate the new emerging markets of the East and take advantage of the tremendous investment opportunities. In this framework, a series of international agreements were concluded between capital exporting western states and the formerly communist countries of Europe, including Bilateral Investment Treaties. At that point, of course, the European Communities did not seem to realize what would happen in a decade; that is the transformation of those BITs into a legal complication. As a matter of intent, history shows that EU member-states never aimed to add investment treaties as an extra layer of protection for their citizens. All BITs were concluded between EU member states and extra-EU states.10 By the end of the 2000s, a large number of eastern states acceded to the European Union, and more than a hundred extra-EU BITs would naturally become intra-EU BITs.11
In principle, that would not constitute a problem. However, as the European integration moved forward, the Court of Justice of the European Union took up more responsibilities in the delivery of Justice and the interpretation of the primary legal rules of the European Union’s legal establishment. Especially after the year 2009, the Treaty of Lisbon radically changed the context of international investment protection in the EU, since it specifically included in the subject-matter of the European Treaties the Common Investment Policy of the Communities.12 As a result, a number of legal issues pertaining to treaty conflict saw the light of the day. Respondent states before investment tribunals started to submit objections as to the merits of investment disputes, citing the case law of the ECJ in order to argue over the substance of their disputes. In other instances, respondent states even started to
10 George Berman, “EU Law as a Jurisdictional and Substantive Defense in Investor State
Arbitration” in Franco Ferrari (ed), The Impact of EU Law on International Commercial Arbitration (JURIS 2017) at 649, 650.
11Tom Fecak, International Investment Agreements and EU Law, (Kluwer Law International 2016) pp
371-373.
12 Ibid, 141-3; see also article 207 of the Treaty on the Functioning of the European Union, available
Athanasios Fotiadis (12296961) Page 8 argue that the tribunals did not enjoy jurisdiction as their BITs were superseded by the EU Treaties.13
Investment Tribunals, on the other hand, were eager to take note of the European Union Law either as a set of applicable rules incorporated into the domestic law of the host states14, as applicable international law,15 or simply as a fact.16 The European Communities, in turn, intervened in various occasions in investment proceedings, through letters or amicus curiae briefs17, arguing for the primacy of EU law in intra-EU disputes. In fact, in some instances, they went as far as to suggest that the principle of pacta sunt servanda is inapplicable as such in the relations between EU member-states and that the Treaties prevail over all rules of public international law.18
Lacking any major jurisdictional conflict of rules, investment tribunals continued to weigh EU law in their awards without trouble. The ECJ, though, would change this reality. In 2018, the Court issued a Judgment after the Federal Court of Germany requested a preliminary ruling on the compatibility of investment arbitration with EU Law. In short, the questions referred to the ECJ by the national
13 The first prominent cases included: Eastern Sugar B.V. v. The Czech Republic, SCC Case No.
088/2004, Partial Award, 27 March 2007; Binder v. Czech Republic, UNCITRAL, Award on Jurisdiction, 6 June 2007; Achmea B.V. v. The Slovak Republic, UNCITRAL, PCA Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension, 26 October 2010.
14 Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction,
Applicable Law and Liability, 30 November 2012, 4.119.
15 Electrabel, 4120; see also ibid, 4122-3 : surprisingly, the Electrabel tribunal considers the totality
of EU law (the droit dérivé included) as part of international law; similarly, RREEF Infrastructure
(G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain,
ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, 30 November 2018, 73.
16 Electrabel, 4195. 17 Fecak , 373-375.
18 See, to that effect, Letter from the Commission to the PCA (PCA case N° 2010-17), available at:
https://www.italaw.com/sites/default/files/case-documents/italaw4243_0.pdf :
“Insofar as the arbitration claims involve questions of application and interpretation of law covered
by the EU treaties, EU law takes precedence. Where there is а conflict with EU law, the general international law rule of 'pacta sunt servanda' does not apply to treaties concluded between EU Member States” […]
“An investor cannot rely on provisions of bilateral investment treaties concluded between EU
Athanasios Fotiadis (12296961) Page 9 Court were 1) whether article 344 TFEU precludes the application of dispute settlement provisions in case of BITs concluded before one of the contracting states acceded to the EU, 2) whether article 267 TFEU would preclude the application of such provision and 3) whether article 18 TFEU would preclude the application of such provision. The Court did not answer the third question but, in answering questions 1) and 2) went as far as to declare that dispute settlement clauses in bilateral investment treaties, such as the Slovak-Dutch BIT, are incompatible with the European legal establishment, because the ECJ enjoys exclusive competence to interpret EU law. What is more, it held that the primacy and autonomy of the EU Law results not only in the “preclusion of the application” of such arbitration clause but in the “preclusion” of the arbitration clause itself.19
In other words, the primacy and assertion of EU law over investment treaties was affirmed as strictly as possible.20 Finally, we must note that the Court’s decision was related to that specific case, which was a territorialized arbitration under the UNCITRAL rules.21 In this vein, the ECJ held that any such dispute settlement that may involve the interpretation of the EU Treaties by an extraneous tribunal is incompatible with EU law, since the judicial review by the national courts -such as the German ones- is limited.22 A fortiori, one would expect that arbitrations seated outside the EU or under the auspices of the ICSID mechanism, an internationalized procedure without judicial review from the courts of the seat23, would be even more unacceptable under the EU Treaties.
This Judgment naturally inspired respondents, who raised jurisdictional objections in pending investment arbitration cases. A shining example would the Germany’s jurisdictional objection in Vattenfall, which was even raised after the
19 Andrea Pinna, “The Incompatibility of Intra-EU BITs with European Union Law, Annotation
Following ECJ, 6 March 2018, Case 284/16, Slovak Republic v Achmea BV”, (2018) 1 PJIA, 83.
20 Ibid.
21 However, despite the fact that the lex arbitri in this specific case happened to include EU law via
the German domestic law, there is nothing to safeguard in the Dutch-Slovak BIT that a tribunal established thereby will be seated in an EU member-state.
22 Achmea Judgment, 51-3.
23 To that effect, see ICSID Convention, articles 51, 52 and especially 53(1) : “The award shall be
binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention”.
Athanasios Fotiadis (12296961) Page 10 hearings in an attempt to defeat the claimants on jurisdiction, although the treaty in question was not an intra-EU BIT, but the Energy Charter Treaty which is binding among EU states. The tribunals, however, retained their jurisdiction at all times.
The EC, on the other hand, has requested the termination of intra-EU BIT24 and several member states already started to terminate their investment treaties.25
4. THE ISSUE OF INCOMPATIBILITY AS SEEN THROUGH THE LENS OF THE EU LEGAL ORDER
From an early stage, the ECJ had expressed its skepticism on the function of judiciary bodies and tribunals outside its legal authority. With opinion 1/91 concerning the creation of the proposed European Economic Area Court (EEA Court), the ECJ pronounced the incompatibility of such court with the European Economic Community Treaty (EECT) since the jurisdiction to be transferred thereto - namely the interpretation of provisions identical to EEC Treaty provisions - would adversely “affect the allocation of responsibilities defined in the Treaties and, hence, the autonomy of Community legal order”.26
One year later, the ECJ in its Opinion 1/92 considered another body, the EFTA Court, compatible with the EC legal order because of its statutory obligation to interpret the law in accordance the ECJ’s rulings.27 What is more, it considered arbitration in this new EFTA system also compatible because the interpretation of provisions that are identical to the EEC Treaty provisions was explicitly precluded, while at the same time, arbitration was reserved for the EFTA states and not for the EC members.28
24 European Commission, Commission Asks Member States to Terminate Their Intra-EU Bilateral
Investment Treaties. 18 June 2015, http://europa.eu/rapid/press-release_IP-15-5198_en.htm (accessed 5 April 2016).
25
Andrea Pinna, 93.
26 Opinion 1/91, ECJ, ECR I-6079 (14 December 1991), para 35.
27 Boxun Yin and Peter Goldsmith, “Chapter 14: Intra-EU BITs: Competence and Consequences”, in
Neil Kaplan and Michael J. Moser (eds), Jurisdiction, Admissibility and Choice of Law in
International Arbitration: Liber Amicorum Michael Pryles (Kluwer Law International, 2018), 226. 28 Ibid.
Athanasios Fotiadis (12296961) Page 11 As regards the compatibility of arbitration within the EU system, the most pertinent and often invoked case was the Mox Plant case. Long story short, Ireland had initiated arbitral proceedings against the UK in accordance with the UN Convention on the Law of the Sea, accusing the UK of radioactive discharge from the Mox Plant into the Sea. However, as expected, the arbitration involved issue pertaining to the EU Law as well. Therefore, the EC brought the case before the ECJ, claiming that Ireland had breached article 292 EC (344 TFEU), which provides for the exclusive jurisdiction of the ECJ in the interpretation and application of EU law.29 The ECJ concluded that Ireland had breached that article, since such tribunal “might” apply or interpret an issue of EU Law.30
Although relevant, Mox Plant is not totally pertinent. In particular, article 344 as analyzed in the said case refers to a submission of disputes between member states, not a submission of disputes between individuals/ between an individual and a member state.31 After all, the CJEU in its Opinion on the European Patent Court pronounced that the TFEU does not prohibit the submission of disputes between individuals to alternative forms of settlement.32 The issue of investor-State dispute settlement is thus a grey zone, while the wording of article 344 TFEU does not appear to be prima facie preclusive.
With regards to the other issue raised in Achmea, namely the supremacy of EU Law over intra-EU treaties, EU Law has been perceived for decades –ever since the early 1990s - to exclude the application of provisions of intra-EU treaties if incompatible with it. In the case of Exportur, the CJEU clarified that such provisions are inapplicable after the accession of the states to the EU.33 In the specific case of the BIT, should incompatibility arise, the Micula v Romania case showed that the
29 Ibid, 227-228.
30
Commission v. Ireland, ECJ Case C-459/03 (30 May 2006) paras 128, 132, 154-5.
31 Konstanze Von Papp, “Clash of ‘Autonomous Legal Orders’: Can EU member state courts bridge
the jurisdictional divide between investment tribunals and the ECJ? A plea for direct referral from investment tribunals to the ECJ”, (2013) 50(4) CMLREV, 1054.
32 Opinion 1/09, European and Community Patents Courts [2011] ECR I-1137, 63. 33 Exportur v. LOR and Confiserie du Tech, ECJ Case C-3/91 (10 November 1992), para 8.
Athanasios Fotiadis (12296961) Page 12 European Commission considers that EU law takes precedence over BITs with the effect that the latter is “invalid” under the prism of EU law.34
Nonetheless, there is a caveat in this regard: whatever EU law and EU authorities may require, the Law of the Treaties contains an exhaustive number of grounds of invalidity. Therefore, a tribunal applying public international law may as well disregard the requirements by the European establishment.35 After all, the wording of the Achmea judgment demonstrates a “preclusion” of a provision, not an “invalidation” of a treaty. That being said, the only reasonable outcome of the Achmea Judgment according to EU is that states have to take the necessary measures to cure this incompatibility under article 351(2) TFEU.36
Most recently the CJEU issued its Opinion on the compatibility of CETA with EU law. As regards the autonomy of the EU legal order, the Court reiterated that an agreement which provides for the establishment of a court that interprets its provisions and binds the EU is in principle compatible with EU law.37 Moreover, a CETA ISDS Tribunal and Appellate Tribunal may be compatible with EU only insofar as it does not adversely affect the legal autonomy of the EU order,38 including the preliminary reference mechanism which safeguards the exclusive interpretation of the EU Law by the CJEU. The Court found that the CETA Tribunals do not adversely affect autonomy39, since they have no power to apply and interpret EU Law40, unlike those established under the Dutch-Slovak BIT in
34
Commission Decision (EU) 2015/1470 of 30 March 2015 on State aid SA.38517 (2014/C) (ex
2014/NN) implemented by Romania – Micula v Romania, Arbitral Award (11 December 2013) of 11 December 2013 [2015] OJ L232, para 104.
35 As for the ECJ Judgments, they may be seen –at best- as persuasive authorities of international law
under the Statute of the International Court of Justice, 3 Bevans 1179; 59 Stat. 1031; T.S. 993; 39 AJIL Supp. 215 (1945), art 38(1)(d).
36Guido Carducci, “A State’s Capacity and the EU’s Competence to Conclude a Treaty, Invalidate,
Terminate – and ‘Preclude’ in Achmea – a Treaty or BIT of Member States, a State’s Consent to be Bound by a Treaty or to Arbitration, under the Law of Treaties and EU Law, and the CJEU’s Decisions on EUSFTA and Achmea. Their Roles and Interactions in Treaty and Investment Arbitration”, (2018) 33(2) ICSID Review, 596.
37
Opinion 1/17, Accord ECG UE-Canada, (ECJ 30 April 2019), para 106.
38 Ibid, 108. 39 Ibid, 114-5.
Athanasios Fotiadis (12296961) Page 13 Achmea. 41 In conclusion, the CJEU made a clear delimitation of its legal requirements along with its policy objectives: safeguarding its interpretative monopoly and precluding only intra-EU ISDS.
Now let us move to the TFEU provisions per se.
As for the requirement of uniform application of EU law and the interpretative monopoly by the CJEU, article 267 TFEU’s ratio is to ensure a line of communication between the CJEU and national courts42. It has been argued, therefore, that the general “preclusion” of investment arbitration clauses in Achmea came as an over-extension of this Union Law provision, especially given the fact that some forms of arbitration are not territorialized, hence not controlled by the domestic courts.43
Concerning the second ground of the Achmea Judgment, that is article 344 TFEU44, one necessarily wonders whether the Treaty actually prohibits the submission of investment disputes to arbitration. While it is clear from the text that states undertake not to submit disputes between them to alternative methods of settlement, it remains a question if this would include investor-state disputes. Arbitral case law thinks it does not.45 In a strictly textual sense, I agree that article 344 does not necessarily prohibit intra-EU investment arbitration. However, as Hindelang notes46 in a more teleological sense, the submission of a dispute to
41
Ibid, 126-127.
42 Case C160/14, Joao Filipe Ferreira da Silva e Brito and Others V Estado Portugues, (ECJ 9
September 2015) para 37.
43 Guido Carducci, 598.
44 “Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for herein” [i.e. the CJEU]. 45
Charanne v Spain, SCC Case No. V062/2012, Final Award, 21 January 2016 para. 438; Eiser
Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No.
ARB/13/36, 4 May 2017, para. 204. “Neither does anything in European law expressly preclude investor-State arbitration under the ECT and the ICSID Convention.”: Blusun S.A., Jean-Pierre
Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, 27 December
2016 para. 289.; Rockhopper, para 146.
46
Steffen Hindelang, “Member State BITs- There’s Still (Some) Life in the Old Dog yet: Incompatibility of existing Member State BITs with EU Law and possible remedies- A position paper” , in Karl Sauvant (ed.), Yearbook on International Investment Law & Policy 2010-2011 (Oxford University Press, 2012), 230-1.
Athanasios Fotiadis (12296961) Page 14 arbitration by an investor is a procedural step that refers to a substantial obligation(/right) towards(/of) another state. In other words, an IIA creates inter-state norms; hence the submission thereof to arbitration substantiates a state’s claim through the procedural act of an investor. In my opinion, this latter analysis may easily stand having the effect that article 344 is indeed violated by investor-state arbitration clauses.
B. CENTRAL ANALYSIS BY INVESTMENT TRIBUN ALS
1. APPLICABLE LAW : EU LAW WITHIN THE AMBIT OF PUBLIC INTERNATIONAL LAW, AND ITS APPLICABILITY IN JURISDICTION
To begin with, judgments by the ECJ do not automatically determine the jurisdiction of an arbitral tribunal. Tribunals have the final word for the affirmation or negation of their jurisdiction in any case before them.47
As far as international arbitration is concerned, it is widely accepted that the law applicable to the jurisdiction of the case is to be found in the instrument that purports to found its jurisdiction48.
A significant question raised is whether the instrument of consent refers to the domestic law of the parties as the law applicable to the dispute. In the recent Talinn v Estonia case, the tribunal reiterated a position that if a treaty does not refer to the applicability of domestic law, a tribunal is not under duty to evaluate
47 The ICSID Convention (article 41) and the UNCITRAL rules both include a provision that crearly
empowers their respective tribunals to decide their own competence (Kompetenz-Kompetenz principle).
48 PL Holdings S.A.R.L. v. Republic of Poland, SCC Case NoV2014/163, Partial Award, 28 June
2017, para. 309, citing also RREEF Infrastructure (G.P.) Limited and RREEF Pan-European
Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, para. 74 (6 June
Athanasios Fotiadis (12296961) Page 15 the EU Treaties.49 However, this argument is unconvincing, since EU law forms part of international law as well.
In the case of ICSID, that instrument sets some jurisdictional requirements that in turn refer to the instrument of consent, whether it be a contract, a domestic legal provision, or an international treaty. In the latter case, it is rather clear that this instrument in investor-state arbitration would be either a BIT or an MIT, such as the ECT or Chapter 11 of NAFTA.
It is true that a number of ECT cases have evaluated the applicability of EU law in the finding of jurisdiction. The Tribunal in Electrabel, not only declared EU law to be applicable as part of international law50, but it also confirmed the primacy of EU law in the case of a treaty conflict51. However, it concluded that there is no inconsistency between the ECT and the EU Treaties.52
The Energy Charter Treaty, in a provision identical to the relevant provision of NAFTA, sets out the applicable law before investment tribunals that are established under its provisions. In particular, article 26(6) provides that the applicable law shall be a) the Treaty itself and b) the ‘applicable rules and principles of international law’. In consequence, one would expect that the TEU and TFEU, constituting international treaties, are applicable in the determination of jurisdiction.
On the contrary, investment tribunals have interpreted this provision in a way that excludes the application of the EU Treaties. Under part 3 of this Chapter, we will see how the ECT case law evolved after the Achmea judgment, essentially rejecting all arguments that connect EU law with their jurisdiction.
49 United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case
No. ARB/14/24 , Award (21 June 2019), 540 et seq.
50 Electrabel, 4.119, 4.122, 4.195. 51 Ibid, 4.187
Athanasios Fotiadis (12296961) Page 16 2. HOW THE LEGAL ANALYSIS HAS EVOLVED SO FAR
TREATY CONFLICT: ARTICLES 30, 41 AND 59 OF THE
I.
VIENNA CONVENTION ON THE LAW OF TREATIES (VCLT)
As already discussed in the previous sections, the intra-EU issue involves a certain degree of treaty conflict, hence a question arises: in a case of treaty conflict, which provisions shall prevail and on which grounds? Tribunals before and after the Achmea Judgment touched upon this issue and covered it rather extensively. Here follows a brief analysis of treaty conflict as examined by investment arbitral case law.
Article 30.3 of the VCLT reads as follows:
“3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.”
The Achmea Tribunal answered the question of prevalence by upholding its jurisdiction. Slovakia, the respondent, had raised a jurisdictional objection claiming that the arbitration clause was not applicable by virtue of articles 30 and 59 VCLT. In other words, it claimed that the EU provisions were lex posterior, subsequent law of the same subject matter (article 30.3) and that the lex anterior should be considered terminated (article 59). The Tribunal, however rejected the objection, arguing that the EU treaties are not of the same subject matter with the BIT.53 This view was consistently followed by subsequent tribunals even post-Achmea.54
53 Achmea PCA, paras 233–64
54 See i.e. Marfin Investment Group v. The Republic of Cyprus, ICSID Case No. ARB/13/27, Award,
26 July 2018, paras 584-5; Greentech Energy Systems A/S (now Athena Investments A/S), NovEnergia
II Energy & Environment (SCA) SICAR and NovEnergia II Italian Portfolio SA v. Italian Republic,
SCC Case No. V (2015/095), Final Award, 23 December 2018, paras 344 et seq; NextEra Energy
Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case
No. ARB/14/11, Decision on Jurisdiction, Liability and Quantum Principles, 12 March 2019, para 350;Talinn v Estonia, 543-554.
Athanasios Fotiadis (12296961) Page 17 On the other hand, article 59 of the VCLT deals will the implicit termination of a treaty by virtue of another subsequent treaty.55 This provision presupposes, inter alia, just like article 30 that both the earlier and the subsequent treaty deal with the same subject matter.56 Investment tribunals, however, considered this condition unfulfilled in the case of the EU Treaties. The Achmea tribunal conducted an analysis, concluding that the substantive standards of the EU Treaties are not as wide as the Slovak-Dutch BIT.57 In my view, this view is not completely correct. Articles 30 and 59 require a treaty of same subject matter, without further elaboration as to the width of protections. It is possible that the latter treaty might restrict the protections of the earlier one as a matter of principle. As far as the sameness of subject matter is concerned, I will explain my disagreement in a next section58. In any event, in the context of article 59 the EU Treaties cannot practically terminate a BIT, since partial incompatibility (i.e. incompatibility of the dispute settlement provision) will lead to the application of article 30 VCLT in preclusion of article 59.59 In other words, an older treaty is subrogated by a newer one under article 59 only if the parties intended to extensively regulate the matter of the earlier treaty through the newer one.60
Finally, another issue arising under articles 30(3) and 59 is their applicability in cases where the ECT functions as the investment treaty. Since one of the conditions of a termination of a treaty is that “all parties” conclude a later treaty that is incompatible with the earlier one, it appears that the ECT fails to fall within
55 Art 59 VCLT reads as follows: “(1) A treaty shall be considered as terminated if all the parties to it
conclude a later treaty relating to the same subject-matter and: (a) It appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or (b) The provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time.”
56
Victoria Barausova, “Slovak Republic v. Achmea from a Public International Law Perspective: Is State Consent to Arbitrate Under Intra-EU bits Still Valid?” (2018) 3 EILARev 1, 139-141.
57 Achmea PCA, paras 233–64. See also PL Holdings S.A.R.L. v. Republic of Poland, SCC Case No
V2014/163, Partial Award, 28 June 2017, paras 312-13.
58 Chapter B, Section 3, p 28.
59 Mark Villiger, Commentary on the 1969 Vienna Convention on the Law of Treaties, (Nijhof, 2009),
727.
60 Thomas Giegerich, In: Olivier Dörr & Kirsten Schmalenbach (eds), Vienna Convention on the Law of Treaties: A Commentary, (Springer, 2012) 1014-1015.
Athanasios Fotiadis (12296961) Page 18 the notion of an earlier treaty, since extra-EU states are also parties to it and the EU Treaties form res inter alios acta to them. In this instance, though, article
30(4)(a) may be applicable between the parties to both treaties, that is the EU
member states. Then, it follows that the only question is whether there actually exists an incompatibility. Investment tribunals have up to this date found that there is nothing in the EU Treaties that demonstrates a presumed incompatibility. The more recent Blusun tribunal argued that investment protection in the ECT (let alone the BITs) is more specific, while the EU prohibition of expropriation and discrimination provides for a wider and complementary protection, hence no incompatibility appears.61 As regards the dispute settlement provision of article 26 ECT, the arbitrators took again the view that article 344 TFEU refers to state-state disputes, not precluding investor-state dispute settlement.62 This reasoning was adopted in full by the more recent CEF63 and Rockhopper decision.64
As regards article 41 of the VCLT65 , it is based on the presumption of
incompatibility between the two treaties, which was firmly rejected by even recent awards66 and, secondly, that the parties to the latter treaty have notified
61 Blusun, paras 285-6. 62 Ibid, para 289. 63
CEF Energia BV v. Italian Republic, SCC Case No. V 2015/158, Award, 16 January 2019, paras 64 et seq.
64 Rockhopper Italia S.p.A., Rockhopper Mediterranean Ltd and Rockhopper Exploration Plc v. Italian Republic, ICSID Case No. ARB/17/14, Decision on the Intra-EU Jurisdictional Objection, 26
June 2019, para 146.
65
“1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:
(a) The possibility of such a modification is provided for by the treaty; or (b) The modification in question is not prohibited by the treaty and:
(i) Does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;
(ii) Does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.
2. Unless in a case falling under paragraph l(a) the treaty otherwise provides, the parties in question shall notify the other parties of their intention to conclude the agreement and of the modification to the treaty for which it provides.”
Athanasios Fotiadis (12296961) Page 19 their counterparts of the earlier one, both on their intent to conclude a new treaty and with regard to the modifications sought specifically. Evidently enough, the EU Treaties may not serve as a subsequent treaty in the sense of article 41, due to the lack of proper notification by the EU states to their counterparts.
Beside articles 30(3) and 59 VCTL, Slovakia and the EC further argued before the Achmea tribunal against its jurisdiction, stating that the EU law has direct effect on international treaties and that the ECJ enjoys exclusive competence to interpret EU law. Once again, the Tribunal dismissed this argumentation, holding that the application of EU law by a Tribunal would not defeat the ECJ’s interpretative monopoly.67
Just like in the Achmea case, the Tribunal in European American Investment Bank some years ago had arrived in the same conclusion, stating that there are other examples where the law of the EU is applied by courts and tribunals and yet, no review by the judicial organs of the members or by the ECJ is established.68 Likewise, the decision in Charanne also involved the interpretation of the EU treaties and reached a conclusion completely opposite to the European institutions’ argumentation.69
After the ECJ’s decision, though, a tribunal’s interpretation of EU law was categorically denied by the Court, and the question became more urgent. Given a declared incompatibility with EU law by the authoritative ruling of the ECJ, how is arbitral jurisdiction affected in intra-EU arbitration clauses?
TREATY INTERPRETATION
II.
67
Achmea, Jurisdiction, paras. 281-283.
68 European American Investment Bank v. Hungary, PCA Case No. 2010-17, Award on Jurisdiction,
22 October 2012, paras 249 et seq.
69 Charanne, para 444: “The scope of Article 344 TFEU cannot, therefore, be to prohibit Member States to submit any dispute that could involve an interpretation of European treaties to a dispute settlement proceedings other than those provided by EU framework. ”
Athanasios Fotiadis (12296961) Page 20 Another argument that came as a jurisdictional objection before investment tribunals was based on treaty interpretation through article 31(3)(c) of the
VCLT.70 Theory considers that rules of international law which are (a) relevant and (b) applicable in the relations (c) between the parties may be taken into account in the interpretation of treaty provisions.71 This reference to “rules of international law” could be paralleled to the one in article 42(1) ICSID Convention which was understood to generally include the sources of international law as stipulated in Article 38(1) of the ICJ Statute.72 It is doubtful, though, whether interpreting a treaty in coherence with another one may go as far as to add extra requirements to the specific wording of the treaty. In Waste Management II73 the tribunal noted that “where a treaty spells out in detail and with precision the requirements of maintaining a claim, there is no room for implying into the treaty additional requirements, whether based on alleged requirements of general international law in the field of diplomatic protection or otherwise”. In other words, the tribunal was very skeptic about the importation of more hindrances from another field of international law. In general, arbitral practice shows that tribunals have taken into account rules and principles of general international law rather than specific rules of self-contained autonomous regimes.74 Finally, arbitral case law has rejected the relevance of article 31(3)(c) in the context of the ECT in particular, due to the phrase “between the parties”, considering that this wording requires an agreement between all the parties to the earlier treaty,75 in line with the established view of jurisprudence on this matter.76 However, Koskenniemi notes the paradox of this view on harmonious
70
Article 31(3) reads as follows: “3. There shall be taken into account, together with the context: …
(c) Any relevant rules of international law applicable in the relations between the parties.”
71 Romesh Weeramantry, Treaty Interpretation in Investment Arbitration (Oxford University Press,
2012), 90.
72 Executive Directors’ Report on the ICSID Convention, para. 40; Christoph Schreurer, The ICSID Convention: A Commentary (Cambridge University Press, 2001), 610
73 Waste Management II (Award), para 85. 74
See Weeramantry, 93-4, enumerating instances of rules applied in accordance with 31(3)(c) VCLT including, inter alia, good faith, treaty law rules, state responsibility rules, norms on compensation etc, but not special rules of special public international law regimes.
75 Eskosol, para 125. 76 Villiger, 433.
Athanasios Fotiadis (12296961) Page 21 interpretation: multilateral treaties are interpreted in a way that they disregard a whole system on international law that deals with the same issue in a completely different way, at the dispense of the parties that also participate in this second system. As a result, article 31(3)(c) should be read as incorporating a set of rules binding between the parties to the dispute.77
3. THE DISTINCTION BETWEEN THE BITS AND THE ENERGY CHARTER TREATY
JURISDICTION IN ACCORDANCE WITH THE BITS
I.
One question that readily arose in theory after Achmea was whether the Judgment applies only to clauses similar to the Slovak-Dutch BIT or it is generally applicable in all intra-EU BITs. Both stances having been supported,78 it is true that the wording79 of the Judgment shows no distinction between BITs80: all dispute settlement provisions in intra-EU BITs are precluded.
However, one must note the conclusion reached by the tribunal in the UP v. Hungary case, which, unlike the Achmea case was constituted under the ICSID rules, hence the tribunal was neither territorialized nor bound to apply national law: the fact that the Award may not be reviewed or annulled by a domestic court was evaluated by the tribunal, which considered this distinction of vital importance and finally rejected the Achmea dictum. The Tribunal concluded that there is no rule in EU law expressly inconsistent with the ICSID Convention.81
77 ILC, UN Doc A/CN.4/L.682, infra n. 114, para 472.
78 For the former opinion, see UP and C.D Holding Internationale v. Hungary, ICSID Case No.
ARB/13/35, Award, 9 October 2018, paras 253-9 ; on the contrary, Burkhart Hess, “The Fate of Investment Dispute Resolution after the Achmea Decision of the European Court of Justice”, (2018) 3 MPILux, 11.
79
“precluding a provision in an international agreement concluded between Member States […]
under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal […]”
80 Andrea Pinna, 94. 81 UP, paras. 253-9.
Athanasios Fotiadis (12296961) Page 22 In any event, the question of the effects of the ECJ dictum on BITs is not the most urgent one. It has been made public the intention of the European Commission end once and for all the intra-EU BIT regime. In fact, the Commission has made a press release since 2015, urging its member states to terminate their BITs with each other82. Some states have already complied with the call, but the most definitive end is near by virtue of the 15 January 2019 member states’ declaration on the effect of Achmea, which included a pledge by the states to terminate their intra-EU BITs by the end of 2019.83
II. ASSESSING JURISDICTION IN LIGHT OF THE ENERGY
CHARTER TREATY
The Energy Charter Treaty is a legal creature completely different than the BITs. For starters, it is a multilateral treaty including Extra-EU States, EU-Member States and the European Union itself as a contracting party. In this vein, it is an instrument that includes heterogeneous signatories, while one of the most influential creators thereof was the EU itself, in accordance with its competence to conclude international agreements84.
Moreover, it would be fair to say that it is doubtful whether the Achmea Judgment applies to a multilateral arrangement such as the ECT. It is true that paragraphs 57-8 of the Judgment refer to international agreements to which the EU is a party: “[…] the competence of the EU in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court which is created or designated by such agreements as regards the interpretation and application of their provisions provided that the autonomy of the EU and its legal order is respected”. This
82 European Commission - Press release, “Commission asks Member States to terminate their
intra-EU bilateral investment treaties”, 18 June 2015, available at http://europa.eu/rapid/press-release_IP-15-5198_en.htm.
83 Declaration of the representatives of the governments of the member states, of 15 January 2019 on the legal consequences of the judgment of the Court of Justice in Achmea and on investment protection in the European Union [hereinafter Declaration].
Athanasios Fotiadis (12296961) Page 23 section of the Judgment might be read as extending the effect of the judgment to treaties such as the ECT85, but it is also possible to conclude the exact opposite.86
There have been investment tribunals that interpreted this part of the Judgment as precluding its application to the ECT. More specifically, in Masdar Solar, the Tribunal laid emphasis on the fact that the EU is itself a contracting party of the ECT, stating that the Achmea decision only applies to BITs.87 In the same fashion, the more recent CEF and Rockhopper decisions unequivocally state that Achmea refers only to the Slovak-Dutch BIT.88 It is rather problematic for the EU to claim incompatibility between the ECT and its own legal establishment while it became itself a party to the ECT. After all, this would look as if the EU is trying to escape its international obligations, which is prohibited under the VCLT. 89 However, other tribunals have considered that in the case of inconsistency between article 344 TFEU and article 26 ECT, the arbitration provision in the ECT should be inapplicable.90
As a matter of analysis, the tribunals established under the ECT have consistently rejected any incompatibility of their constitutive Treaty (or rather the arbitration clause) with EU law. In an early instance, the RREEF v Spain Tribunal clarified that the ECT is the “constitution” of the tribunal, it is the law to be applied and the EU law is res inter alios acta, which may not alter the application of jurisdiction in accordance with the ECT.91 In line with this view, the decisions
85 Steffen Hindelang, “The Limited Immediate Effects of CJEU's Achmea Judgement”,
Verfassungsblog, 9 March 2018, available at https://verfassungsblog.de/the-limited-immediate-effects-of-cjeus-achmea-judgement/ .
86 Gordon Blanke, “Trends in International Energy Arbitration: Can ECT Claims be Arbitrated? Some
Initial Considerations in the Light of the CJEU’s Ruling in Achmea”, (2019) 37 (1) KLI.
87 Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain (ICSID Case No. ARB/14/1), Award
dated 16 May 2018, paras. 678-683.
88
CEF Energia paras 98 et seq; Rockhopper, para. 172
89 Andrea Pinna, 95. See Also Kirsten Schmalenbach, ‘art 27 VCLT’ in Oliver Dörr and Kirsten
Schmalenbach, Vienna Convention on the Law of Treaties A Commentary (2nd edn, Springer 2018), 11, stressing the ‘concurring character’ of the TFEU as a treaty (2 VCLT) and as internal law.
90 Blusun, para 289.
Athanasios Fotiadis (12296961) Page 24 published post-Achmea have stuck to this constitutive treaty argument, with some more in-depth analysis.
On a first level, they consider EU law inapplicable to arbitral jurisdiction. The Vattenfall tribunal was the first post-Achmea tribunal to analyze article 26 of the ECT. Responding to Germany’s jurisdictional objection, it stipulated that article 26(6)92 of the ECT does not refer to the law applicable to jurisdiction, but only to the substance of the dispute. In doing so, it based its argument on a parallel with article 42(1) ICSID and the wording of article 26(6).93 I respectfully disagree with the textual interpretation made by the tribunal, since the term “shall decide the issues in dispute” is wide enough to incorporate the jurisdictional issues. After all, the next ECT article 27, which deals with state-to-state disputes arising out of the ECT, uses a different wording (“shall decide the dispute”), which might be interpreted as establishing a distinction made intentionally by the parties. On the other hand, an earlier tribunal had accepted that article 26(6) ECT is applicable in the determination of its jurisdiction.94 Therefore, at least in the context of systemic interpretation under article 31(3)(c) of the VCLT, EU Law should definitely be taken into account by tribunals, as this VCLT provision is incorporated in the ECT.95 This position might be reinforced by jurists who consider the principles of autonomy and supremacy of EU law as “principles of international law”, in the sense of article 26(6) ECT.96
In any event, the Vattenfall tribunal solidified the dominant view that the law applicable to the jurisdiction of a tribunal is the arbitration clause alone, in this
92
“A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with
this Treaty and applicable rules and principles of international law.” 93
Vattenfall, para 116-117.
94 Electrabel, paras 4.192, 4.193.
95 Gloria Maria Alvarez , “Redefining the Relationship Between the Energy Charter Treaty and the
Treaty of Functioning of the European Union: From a Normative Conflict to Policy Tension” (2018) 33 (2) ICSIDRev, 569.
96 Case No. 18-cv-01686-CKK, US District Court for the District of Columbia, Eiser v Spain, Expert
Declaration of Steffen Hindelang in support of Respondent Kingdom of Spain’s motion to dismiss for lack of jurisdiction under the FSIA (14 December 2018) p. 41 et seq.
Athanasios Fotiadis (12296961) Page 25 case article 26(3) ECT97. In the recent Eskosol decision, for instance, the tribunal followed the Vattenfall line by making a rather fair point that article 26(6) is very unlikely to produce the result of excluding investors from EU states:
“As a threshold matter, a governing law clause would be a highly unusual place to signal an intent to exclude numerous Contracting Parties from the reach of express treaty provisions, including the treaty’s dispute resolution mechanisms [..].”98
This stance is also followed in a slightly different variation by Greentech v Italy99, where the tribunal considers that the choice of law clause of article 26(6) ECT could not make a difference, since its ordinary meaning would include the principles of public international law, and not a whole specific regime such as EU law.
Case law remains rather solid on its rejection of EU law applicability. According to the Greentech v Spain Award, article 26 of the ECT is to be interpreted in accordance with its context and any relevant rules of international law100, but the direct context includes only the definitions of “contracting party” and “investor”, as well as the standards of protection in article 10(1) and 13
97
The tribunal’s argument that the determination of jurisdiction is based exclusively on the jurisdictional requirements of the ECT is followed by Foresight Luxembourg Solar 1 S. Á.R1., et al. v.
Kingdom of Spain, SCC Case No. 2015/150, [Greentech v Spain] Final Award, 14 November 2018,
218-9, which in turn quotes Eiser para. 199 :
“The Tribunal's jurisdiction is derived from the express terms of the ECT, a binding treaty under international law. The Tribunal is not an institution of the European legal order, and it is not subject to the requirements of this legal order.”
98 Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on
Respondent Request for Immediate Termination and Respondent Jurisdictional Objection based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019, para 96.
99 Greentech, para397.
Athanasios Fotiadis (12296961) Page 26 ECT.101 There is no indication in article 25 or anywhere in the ECT that intra-EU disputes should be carved out due to a presumed EU law primacy.102
Finally, the most recent case law shows that:
a) All arbitral decisions note that the ECT does not contain a disconnection clause103, explicit or implicit 104, hence an intra-EU carve-out seems impossible in the case of the Energy Charter.
b) Both Greentech Spain105 and Greentech Italy106 reaffirm the position taken in Masdar107 that the Achmea dictum does not apply to multilateral treaties, such as the ECT, where the EU itself is a party. After all, we must take note of a similar opinion expressed ever since Electrabel, namely that the EU entered itself in a treaty providing for international arbitrations that escape the ECJ’s control.108
101 Greentech Spain, paras 202-6. 102 Ibid, paras 215-219.
103 Greentech Spain, para 207; Greentech Energy Systems A/S (now Athena Investments A/S), NovEnergia II Energy & Environment (SCA) SICAR and NovEnergia II Italian Portfolio SA v. Italian Republic, SCC Case No. V (2015/095), Final Award, 23 December 2018, [Greentech Italy], para 338. 104
See RREEF Jurisdiction, paras. 84-85.
105Greentech Spain, para 220-21. 106Greentech Italy, paras 395-6, 398. 107 Masdar, paras. 679-682
108 Electrabel: “ 4.158. Moreover, the Tribunal notes the important legal fact that the European Commission itself, in signing the ECT, accepted the possibility of international arbitrations under the ECT […]. It is also noteworthy that this acceptance applied to both ICSID and non-ICSID arbitrations, in other words (i) non-ICSID arbitration awards whose recognition or enforcement
within the European Union could entail possible control by EU national courts (under the lex loci
arbitri or the New York Convention) with a possible reference to the ECJ, and (ii) ICSID arbitration awards equivalent under the ICSID Convention to judgments of national courts which are not
Athanasios Fotiadis (12296961) Page 27 c) In a very recent decision, the Next Era tribunal addressed a legal issue of novelty. The Respondent (Spain) and the EC as an intervening third party promulgated the argument that an investor of an intra-EU dispute fails to fulfil the ratione personae requirement: according to articles 1(3) and (10) and 26(1) of the ECT, investors from EU member states are linked to the same contracting party, that is to say the EU to whom the member states have transferred certain competences; hence they are not investors from “another contracting party”.109
Of course, the tribunal rejected the argument concluding that there is nothing in article 1 ECT to establish an explicit transfer of consent to be bound from the states to the EU.110 The Tribunal also referred to the previous Blusun case, where it was held that at the time the ECT was created, the competence was at best a “shared” competence.111
In my opinion, the strongest argument against a jurisdictional objection regarding the ECT is that article 16 thereof safeguards the Charter’s prevalence against any other treaty that is less favorable to the investor. This function is highlighted by arbitral tribunals in many instances.112 Article 16 reads as follows:
Where two or more Contracting Parties have entered into a prior international agreement, or enter into a subsequent international agreement, whose terms in either case concern the subject matter of Part III or V of this Treaty,
(1) nothing in Part III or V of this Treaty shall be construed to derogate from any provision of such terms of the other agreement or from any right to dispute resolution with respect thereto under that agreement; and
109
NextEra Energy, paras 339-340.
110 Ibid, 342-3. 111 Blusun, 283.
112 See, for example, Greentech Italy, para. 340-41 et seq : “Respondent does not explain how court
litigation against a host state in the host state’s courts could be more favourable to investors than investor-State arbitration before a neutral arbitral tribunal independent of the host state.”
Athanasios Fotiadis (12296961) Page 28 (2) nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty, where any such provision is more favourable to the Investor or Investment.113
In my view, Investment Tribunals, including those dealing with the ECT, failed to moderately evaluate arguments regarding ECT’s supersession by the TFEU. One of their primary conclusions, as mentioned supra, was that IIAs and the TFEU are not of the same subject matter in the sense of article 30(3) , 30(4)(a) and 59(1) VCLT, since IIAs supposedly cover wider standards of protection. However, the notion of “sameness” in the subject matter needs not refer to the whole treaty. It is perfectly plausible, in the case of article 30(4)(a) that the latter treaty is of a different nature, dealing with another field of regulatory policy. The subject matter is evaluated only with one benchmark: whether the provision of the latter treaty is affects the obligation of the provision of the earlier one, even if the two treaties regulate a different field of law.114 In other words, a conflict of provisions is enough.115 In addition, one should take note of the sui generis nature of an arbitration clause in an IIA: the whole treaty might have a different nature, a different objective, a different normative role. In this fashion, arbitration clauses are autonomous and deserve differentiation in the way they are interpreted.116 Finally, it quite plausible to suggest the EU Treaties’ subject matter, which includes the freedom of capital, may as well incorporate investment.117 Hence, it follows that a TFEU provision prohibiting arbitration is in conflict with a provision of investment dispute settlement in an IIA. As long as the TFEU is the
113 Energy Charter Treaty, article 16.
114 UN International Law Commission, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, UN Doc A/CN.4/L.682, 13 April 2006, paras
22-23, 253-6.
115 Joost Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of International Law (Cambridge: Cambridge University Press, 2009), 364.
116 Yulia Andreeva, “Interpreting Consent to Arbitration as a Unilateral Act of State: A Case Against
Conventions”, (2011) 27(2) ArbIntl, 138-9.
Athanasios Fotiadis (12296961) Page 29 later treaty, it follows that articles 267 and 344 TFEU are superior to article 16 ECT.
4. THE EUROPEAN COMMISSION’S AND THE MEMBER STATES’ PERCEPTION ON THE EFFECT OF ACHMEA
In the meanwhile, soon enough after Achmea, in 19 July 2018, the EC issued a Communication118 expressing its perception of the Achmea dictum and its effect. The Commission first explained that, according to the ruling, investor-state arbitration clauses “jeopardise the autonomy, effectiveness, primacy and direct effect of Union law and the principle of mutual trust”, undermining the preliminary question procedure of article 267 TFEU.119 Thus, arbitration agreements of this kind are inapplicable and invalid, the tribunals established under their terms lack jurisdiction, while the treaties they are placed in are subject to termination.120 What is more, the EC extended this pronouncement to the ECT in its intra-EU dimension, stating that the EU’s participation to the Treaty does not alter the legal consequence of inapplicability of the arbitration agreement in article 26 ECT.121
The arbitral tribunals’ reaction was quite predictable: in Greentech v. Italy122, the tribunal unequivocally rejected any binding effect of the EC’s Communications, while it also discredited arguments on a presumed authoritative interpretation of the ECJ Judgment, made by the EC. After all, the tribunal was neither constituted under EU law, nor did it apply or interpret it.123
118 Communication from the Commission to the European Parliament and the Council, “Protection of
intra-EU investment” COM/2018/547 final, 19 July 2018.
119 Ibid, 3. 120 Ibid. 121 Ibid, p 3-4.
122 Greentech Italy, para 402. 123 Ibid.
