Reed Smith Client Alerts

On March 6, 2018, the Court of Justice of the European Union (CJEU) published its preliminary ruling in Slovak Republic v Achmea BV (Ruling), which held that the application of the investor-state dispute settlement (ISDS) provision at Article 8 of the Netherlands-Slovakia bilateral investment treaty (BIT) was incompatible with EU law. In particular, the CJEU held that Articles 267 and 344 of the Treaty of the Functioning of the European Union (TFEU) must be interpreted as precluding a provision in an international agreement concluded between Member States under which an investor from one Member State may bring proceedings against another Member State before an arbitral tribunal.

The Ruling (which does not apply to commercial arbitration) gives rise to a number of questions as to how ISDS provisions in intra-EU BITs can be applied in the future and whether arbitral tribunals will be able to accept jurisdiction over disputes arising under investment treaties involving an EU Member State.

Authors: Chloe J. Carswell Lucy M. Winnington-Ingram

Type: Client Alerts

Background

In December 2012 a Tribunal seated in Germany rendered its Award in the arbitration brought by Achmea against the Slovak Republic under Article 8 of the Netherlands-Slovakia BIT. Arbitration under the UNCITRAL Rules is a form of ad hoc arbitration, and since Germany was chosen as the place of the arbitration the arbitration proceedings were governed by German law.

Having dismissed a jurisdictional challenge brought by Slovakia, the Tribunal found on the merits that Slovakia had breached the protections contained in the BIT and awarded damages to Achmea in the sum of €22.1 million. Thereafter, Slovakia brought an action to set aside the UNCITRAL Award before the Frankfurt Court. When that court dismissed the action, Slovakia appealed the dismissal on a point of law to the Federal Court of Justice of Germany and requested a preliminary ruling on whether the application of the ISDS provisions in intra-EU BITs are:

  1. precluded by Article 344 TFEU, which provides for the exclusivity of the jurisdiction of the CJEU for disputes concerning the interpretation or application of EU treaties?
  2. precluded by Article 267 TFEU, which provides for the mechanism by which the courts and tribunals of EU Member States can refer questions of EU law to the CJEU for a preliminary ruling?
  3. contrary to the anti-discriminatory provisions under Article 18.1 TFEU on the grounds that the protections afforded by BITs are not universally applicable to all EU Member States?