Achmea: The Future of Investment Arbitration in Europe 2 July 2018 - PowerPoint PPT Presentation

Achmea: The Future of Investment Arbitration in Europe 2 July 2018

Agenda The Achmea Issue and Developments 01 02 Proceedings Implications Concluding remarks 03 04 . 2

Achmea Proceedings 01 Commenced in 2008 by a Dutch company, Achmea B.V., v. Slovak Republic, under Article 8 of the Netherlands-Czech and Slovak Republic Bilateral Investment Treaty 3

The Achmea Proceedings 01 In 2010, the Tribunal issued a partial award rejecting Slovakia's jurisdictional objection Decision The award was of the that Article 8 of the challenged by the Netherlands-Slovakia CJEU Slovak Republic BIT, providing for before the German arbitration, was Courts incompatible with 2016 2008 2012 EU Law 2013 2010 2018 The Tribunal issued its final award, finding that The Achmea arbitration was the Slovak Republic commenced by a Dutch insurance violated the BIT , and The German Federal Court of company, Achmea (formerly, ordered the State to pay Justice referred the case to CJEU Eureko) damages of € 22.1 million under Article 267 TFEU, for a preliminary ruling It claimed that its investment in the Slovak health insurance market was impaired by certain measures taken by the Slovak Government 4

The Achmea Proceedings: questions for the CJEU 01 The German Federal Court of Justice raised three questions to the CJEU: 2 3 1 Whether Article 344 of the If the application of a forum If questions 1 and 2 are to be TFEU , which prevents clause contained in an intra- answered in the sense that Member States from EU BIT is not excluded, they do not preclude the submitting disputes whether Article 267 TFEU , application of a forum clause concerning the interpretation which bestows upon the CJEU or an arbitration clause, or application of the EU jurisdiction to rule on the whether Article 18(1) TFEU , Treaties to settlement interpretation of the EU which prohibits discrimination methods not contemplated by Treaties, precludes the among EU Member States on the EU Treaties, precludes application of a arbitration grounds of nationality, the application of a forum clause contained in an intra- precludes the application of clause contained in an EU BIT a forum clause contained in intra-EU BIT an intra-EU BIT 5

Achmea Proceedings 01 Primacy of EU Law The CJEU clarified that the autonomy and the primacy of EU Law are instrumental to the preservation of the European Union as an independent legal order built on a complex institutional system and on founding values shared by all Member States. To preserve this institutional system, the EU Treaties have established an autonomous judicial system to ensure the uniform interpretation and application of EU Law. 6

The Achmea Proceedings: reasoning of the CJEU 01 1. The autonomy and the primacy of EU Law are instrumental to the preservation of the European Union as an independent legal order 8. Articles 267 and 344 TFEU must be interpreted as precluding 2. The EU Treaties have established an 1 arbitration clauses in investment autonomous judicial system to ensure the treaties uniform interpretation and application of 8 2 EU Law 7. Investment arbitration is inconsistent with EU Law because, in adjudicating 3. In particular, Members States may not 7 3 investor-State disputes an investment submit a dispute concerning the tribunal may be called to consider EU interpretation of the EU Treaties to any Law issues without being required to other body than the CJEU, which is refer those issues to the CJEU, as a court empowered to give the final and of a Member State would be authoritative interpretation of EU Law 6 4 5 4. In adjudicating an investor’s claim under the 6. Investment disputes would not be BIT, a tribunal may also have to consider the resolved by investment tribunals “in a law of the contracting party and international manner that ensures the full agreements entered into by the contracting effectiveness of EU law”. states. Thus an investment treaty tribunal “may be called on to interpret or indeed to apply EU 5. . But an investment treaty tribunal cannot Law” be regarded as a court of a Member State within the meaning of Article 267 TFEU and is prevented from seeking a preliminary ruling from the CJEU 7

Issues and Developments: issues 02 Applicability of BIT substantive Incompatibility between 2 1 standards and EU law dispute resolution clauses contained in BITs and EU law Are BIT substantive standards of Are existing clauses and awards invalid? protection (such as FET or FPS) Are EU member states prohibited from incompatible with EU law? Does Achmea concluding BITs with such clauses? Are preclude investor-State arbitration when no awards enforceable? EU law issue is at stake? Impact on intra-EU ECT Impact on ICSID arbitrations 4 3 arbitrations How might the CJEU address the issues How might the CJEU address the identified in Achmea in ICSID issues identified in Achmea in ECT arbitrations? arbitrations? Impact on Arbitrations based Impact on commercial 6 5 on BITs between EU and arbitration agreements non-EU member States Does the Achmea ruling have impact How might Achmea ruling impact commercial arbitration agreements? arbitrations arising under BITs between EU and non-EU member States, And between non-EU member States? 8

Issues and developments: developments 02 01 – Non-ICSID award challenged in Court Several arbitral awards based on intra-EU 02 - Set aside application of ICSID award BIT have been challenged In Dan Cake v Hungary , Hungary applied for the annulment of the ICSID award relying 03 - Bilateral jurisdiction objections on the Achmea award In several investor-State arbitrations based on intra-EU BITs, respondent States have raised 04 - Withdrawal of intra-Eu investor-State jurisdictional objections at a relatively late claim stage of the proceedings In Airbus v. Poland , Airbus, withdrew under 05 – Seat of arbitration the Netherlands-Poland BIT A debate exists as to whether arbitral institutions or tribunals should fix the place of arbitration in EU jurisdictions in proceedings brought on the basis of intra- EU investment treaties 9

Implications: Impact on intra-EU investment treaties 03 The unanswered questions: The Achmea ruling raises more issues than it solves Several important issues The reasoning of the Court is raised by the Advocate not clear General and the German Federal Court of Justice were not addressed by the CJEU The CJEU focused exclusively If EU Law plays no role in on the arbitration clause, but did the arbitration, how can not clarify whether and to what investment arbitration be extent Intra-EU investment inconsistent with EU Law? treaties’ substantive protections overlap or are inconsistent with EU Law 10

Implications: Impact on intra-EU investment treaties 03 The unanswered questions The dispositive part of the ruling, read in isolation, suggests that even when the conflict is hypothetical, investment arbitration should not be allowed. Read in its entirety, the conclusion might be different. According to the Court, since an investment tribunal “ may be called on to interpret or to apply EU law, particularly the provisions concerning the fundamental freedoms, including freedom of establishment and free movement of capital ”, investor-State arbitration “ could prevent those disputes from being resolved in a manner that ensures the full effectiveness of EU law. ” (CJEU ruling, ¶¶42, 55-56, 58). Ergo , if the dispute does not involve EU Law at all, the “ full effectiveness of EU Law ” would not be in jeopardy. 11

Implications: Impact on intra-EU investment treaties 03 The Vienna Convention on the Law of Treaties Article 59 Article 30 Termination or suspension of the Application of successive treaties operation of a treaty implied by relating to the same subject matter conclusion of a later treaty 1. A treaty shall be considered as 3. When all the parties to the earlier treaty terminated if all the parties to it conclude are parties also to the later treaty but the a later treaty relating to the same subject earlier treaty is not terminated or matter and: suspended in operation under article 59, the earlier treaty applies only to the extent (a) it appears from the later treaty or is that its provisions are compatible with otherwise established that the parties those of the later treaty. 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 12

Implications: Impact on intra-EU investment treaties 03 Has the bell tolled for investment arbitration? Is Achmea a death knell for intra-EU investment arbitration? Maybe not 1 2 BITs have not been terminated When EU Law is not at stake, under Article 59 of the Vienna there is no actual inconsistency Convention that makes the arbitration clause inapplicable under Article 30(3) of the Vienna Convention This conclusion: is not inconsistent with the principles stated by the Court; 1. is respectful of the autonomy of EU Law; and 2. does not encroach on the Court’s power to interpret EU Law. 3. 13