Reed Smith News Flashes

In a major decision released Thursday 2 September, the Court of Justice of the European Union (CJEU) ruled that the Investor-State Dispute Settlement mechanism provided for by the Energy Charter Treaty (ECT) (Article 26 (2) c) is not applicable to intra-EU disputes (C-741/19).

Following the same reasoning of its previous ruling in the Achmea case (C-284/16 dated 6 March 2018), the CJEU considered in essence that:

  • The arbitration clause of the ECT removes disputes involving the interpretation or application of EU law from the mechanism of judicial review provided for by the EU legal framework and prevents, therefore, the uniform and consistent interpretation and application of EU law within the EU.
  • The arbitral tribunal constituted under the ECT must rule on the basis of the law in force of the contracting state involved in the dispute as well as other (international) agreements between the contracting parties, which includes EU law.
  • The arbitral tribunal constituted under the ECT is not part of the judicial system of a member state and, consequently, has no power to make a reference to the CJEU for a preliminary ruling.
  • The arbitral award is only subject to a limited review by a court of a member state which does not guarantee the uniform and consistent interpretation and application of EU law.

These issues were not part of the initial questions put to the CJEU by the Paris Court of Appeal. As a matter of fact, at the origin of the case before the CJEU were several questions put to the European Court by the Paris Court of Appeal over the notion of protected investment under the ECT. In reply, the CJEU followed the conservative approach proposed by Advocate General Szpunar in his opinion (dated 3 March 2021) and decided that Article 1(6) and Article 26(1) of the ECT must be interpreted as meaning that the acquisition of a claim arising from an electricity supply contract does not constitute an ‘investment’ within the meaning of those provisions.

Read the decision at InfoCuria.