See our analysis of the Ruling here. In that article, we considered some of the questions raised by the Ruling, as well as the possible effects on arbitration under intra-EU investment treaties. While the position remains unclear, there have since been a number of developments that could go some way to providing clarity in the future.
ICSID arbitrations under intra-EU BITs
The constitution of the tribunal in Addiko Bank AG and Addiko Bank d.d. v. Republic of Croatia (ICSID Case No. ARB/17/37)
The tribunal in Addiko v. Croatia was fully constituted on March 19, 2018 with ICSID ’s appointment of Jean Kalicki as presiding arbitrator.1 As we understand it, this is one of a number of claims under the Austria-Croatia BIT brought by Austrian banks against Croatia following the enactment of legislation that converted Swiss franc-denominated mortgages and other loans into euros.2 This is also the first ICSID tribunal to be constituted to hear claims arising under an intra-EU BIT following the Ruling. In the likely event that Croatia disputes the tribunal’s jurisdiction in reliance on the Ruling, the tribunal’s decision may give guidance as to the likely significance and effect to be attributed to the Ruling (if any) by ICSID tribunals hearing claims arising under intra-EU BITs.
The registration of Hungary’s application for annulment of the award in ICSID Case No. ARB/12/9 - Dan Cake (Portugal) S.A. v. Hungary under the Hungary-Portugal BIT
Hungary’s application for annulment of the award in Dan Cake v. Hungary was registered on March 28, 2018. While the grounds relied on in the annulment application are not public, the application followed hot on the heels of the Ruling and it seems likely that the Ruling could, at least in part, form the basis for Hungary’s application. If this is the case, then any decision on the annulment application may provide further clarity as to the approach that may be adopted by ICSID tribunals (and ad hoc committees) in the future.
Arbitrations under the ECT
The Ruling has been the basis for a number of attempts by respondent states to dispute the validity of proceedings under the Energy Charter Treaty (ECT). In addition to Spain’s request that a pair of arbitral tribunals re-open proceedings brought under the ECT in the light of the Ruling (noted in our previous article), Reuters has reported that the German government has written to ICSID in relation to the proceedings in Vattenfall AB and others v. Federal Republic of Germany (ICSID Case No. ARB/12/12) pointing to the Ruling, to argue that arbitrations in a dispute between a company and a member state are invalid.3
The refusal of the tribunal in Novenergia v. Spain (SCC Case No. 063/2015) to re-open proceedings
In its Procedural Order No. 9 dated April 9, 2018 dismissing a request by Spain to the tribunal to inter alia “supplement or interpret” the award in relation to six issues regarding the applicability and relevance of EU law and its relationship with the ECT, the tribunal noted that it did not consider there to be any valid grounds for “supplementing” the award on this point and further that “it was not empowered to make a renewed assessment of the Respondent’s case on the merits.”4 The Ruling is not explicitly referenced in the decision, but it is likely that it would have been relied upon by Spain in its request dated March 13, 2018 and no doubt the tribunal would have considered its relevance and applicability to Spain’s request.
The award in Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain (ICSID Case No. ARB/14/1)
The award in Masdar v. Spain, arising out of a claim brought under the ECT, was rendered on May 16, 2018. Masdar v. Spain was one of a number of proceedings subject to petitions by Spain seeking that tribunals re-open proceedings to hear arguments on the effect of the Ruling on arbitrations under intra-EU BITs. The award is not publicly available, but we understand from reports that in its award against Spain the tribunal did acknowledge the Ruling, but found it had “no bearing upon” a case arising under a multilateral treaty such as the ECT. According to the same report, the tribunal drew attention to the failure of the CJEU to discuss the ECT in the Ruling, and accordingly declined to attribute any effect of the Ruling to the claims arising under the ECT.5 While the award is not binding on future ICSID tribunals, it will be met with relief by claimant investors relying on the ECT, with the most recent ICSID caseload statistics noting that 7.2 percent of the cases registered and administered by ICSID in 2017 were brought under the ECT.6
However, the award will not do much to alleviate concern among claimant investors relying on intra-EU BITs since, in contrast to intra-EU BITs (including the Netherlands-Slovakia BIT, which is the subject-matter of the Ruling), the EU itself is a signatory to the ECT and, thus, has arguably consented to investment-treaty claims brought under the ECT’s dispute resolution clause. Interestingly, in what could be said to be obiter comments, the tribunal stated that the Ruling was of only “limited application” to BITs concluded between EU member states.7 How that application is limited is not clear pending sight of the award itself, but it may be based on a commonly held view that the Ruling only applies to arbitrations seated within the EU. ICSID arbitrations, which comprise the vast majority of investment treaty disputes, are seated in Washington, D.C., and as such fall outside the jurisdiction of the CJEU.
Enforcement of awards rendered under intra-EU investment treaties
Investors seeking to enforce awards rendered under intra-EU investment treaties involving member states are likely to face ongoing difficulties. In an interview with the Kluwer Arbitration Blog, Secretary-General of ICSID Meg Kinnear noted that, in relation to non-compliance with arbitral awards rendered under the ICSID Convention based on the allegation that compliance with such arbitral awards are inconsistent with EU law, “[t]he ICSID secretariat needs to be impartial and that means not commenting on legal decisions. We are carefully watching the impact of the decision, and it is being raised by parties in a number of ICSID cases.”8 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 currently on foot in a number of jurisdictions, including Washington, D.C., England and Wales, Romania and Sweden. Eiser and Novenergia are also seeking to enforce awards against Spain in the United States. It remains to be seen how these courts will deal with the Ruling.
Termination of intra-EU BITs
Meanwhile, in a letter dated April 26, 2018, Dutch Minister for Foreign Trade and Development Cooperation Sigrid A.M. Kaag told the lower house that in the light of the Ruling the Dutch government sees no other option than to terminate the now arguably defunct Netherlands-Slovakia BIT and 12 further BITs with other EU member states that contain similar dispute resolution clauses. It is reported that the letter also proposed that all investment agreements between EU member states be terminated by way of a multilateral termination treaty.9 It is unclear how such a treaty would address the sunset provisions contained in the majority of BITs.
The Netherlands has also published a new draft-model BIT with radical proposals to do away with party appointed arbitrators and so-called “double-hatting,” which prevents the appointment of any arbitrator who has acted as legal counsel in an investment-treaty dispute in the preceding five years. In the current climate, it seems likely that other EU member states will follow suit.
Conclusion
The Ruling has had wide-ranging effects on ongoing arbitration proceedings in various fora and, more generally, on the approach to dispute resolution between EU member states. While recent decisions in proceedings under the ECT may suggest a reluctance to attribute significance to the Ruling outside of arbitrations under intra-EU BITs, it remains to be seen how tribunals in ICSID and other, ad hoc arbitrations will deal with the Ruling, and, critically, whether any awards rendered in investor-state disputes involving EU member states will be enforceable.
About Reed Smith investment treaty arbitration
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.
- icsid.worldbank.org.
- iareporter.com.
- reuters.com.
- Novenergia v. Spain (SCC Case No. 063/2015), Procedural Order No. 9 dated April 9, 2018.
- iareporter.com.
- The ICSID Caseload Statistics (Issue 2018-1).
- globalarbitrationreview.com.
- Interview with Meg Kinnear, Secretary-General of the International Centre for Settlement of Investment Disputes, by Crina Baltag (acting editor) on April 15, 2018, us6.campaign-archive.com.
- law360.com.
Client Alert 2018-116
