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          The Court of Justice of the European Union ("CJEU") renders important judgement for investor-State arbitration within the EU.

          On 6 March 2018, the Court of Justice of the European Union ("CJEU") rendered an important judgement in case C-284/16, Slovak Republic v. Achmea. The CJEU declared invalid the investor-State dispute settlement ("ISDS") arbitration clause in the bilateral investment treaty between the Netherlands and Slovakia ("intra-EU BIT").  

          Date: 13/03/2018

          On 6 March 2018, the Court of Justice of the European Union ("CJEU") rendered an important judgement (which can be found here in case C-284/16, Slovak Republic v. Achmea. The CJEU declared invalid the investor-State dispute settlement ("ISDS") arbitration clause in the bilateral investment treaty between the Netherlands and Slovakia ("intra-EU BIT"). This is a judgement that affects the remedies available to EU investors when they invest in another Member State (intra-EU investments) under BITs concluded between the Member States of origin and the host Member State.

          The main rationale of the CJEU is that arbitral awards are not subject to review by national courts of EU Member States and, therefore, not capable of guaranteeing the uniform application and full effectiveness of EU law.  The CJEU also held that an arbitral tribunal cannot be considered as a national court or tribunal of a Member State pursuant to article 267 of the Treaty on the Functioning of the European Union ("TFEU"). Therefore, it does not have the power to make preliminary references to the CJEU for the interpretation of EU law, which is a fundamental function under the TFEU to ensure the full effectiveness of EU law. It is notable that the CJEU directly contradicted the Advocate General's opinion that the arbitral tribunal established under the BIT must be regarded as "a court or tribunal of one of the Member States" within the meaning of Article 267 TFEU.

          Interestingly, in its judgment the CJEU makes a distinction between commercial arbitration and the ISDS arbitration clause in the intra-EU BIT.  While in relation to commercial arbitration the requirements of efficient arbitration proceedings justify the limited review of commercial arbitral awards by the national courts of the Member States, thereby rendering the proceedings compatible with EU law as there is still the possibility of a preliminary reference by the national court to the CJEU for the interpretation of EU law, this is not the case for the arbitration clause in the intra-EU BIT, which is now declared invalid. According to the CJEU, this difference is justified because while commercial arbitration originates in the freely expressed wishes of the private parties involved in the dispute, arbitration under the BIT derives from a Treaty by which Member States agreed to remove from the jurisdiction of their own courts disputes that could concern the application or interpretation of EU law. According to the CJEU, this practice contravenes Member States' obligations under article 19(1), second subparagraph, of the TFEU that require Member States to provide remedies sufficient to ensure effective legal protection in the fields covered by EU law.

          The judgement may have important ramifications on intra-EU ISDS as there are about 200 BITs still in force between EU Member States, many of which are the remnants of international agreements prior to the Member States' accession to the EU in the 2004, 2007 and 2013 enlargements. At prima facie reading, it deprives EU investors of the currently applicable remedy in their disputes with the host Member State's authorities. EU Member States may therefore be obliged to amend these accordingly to provide other types of EU law-compatible remedies, ensuring a safe environment for investors.

           

          Related people

          Vassilis Akritidis

          • Partner // Head of WTO & International Trade