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 (the Ruling), which held that the application of the investor-state dispute settlement (ISDS) provisions under Article 8 of the Netherlands-Slovakia bilateral investment treaty (BIT) was incompatible with EU law.

This alert is the third in our series of updates on the Ruling. Our previous two alerts can be found here:

The CJEU Preliminary Ruling in Slovak Republic v Achmea BV – what does it mean for arbitration under intra-EU BITs? (April 3 2018).

The CJEU Preliminary Ruling in Slovak Republic v Achmea BV – where are we now? (May 22 2018).

The European Commission speaks out about the Ruling 

In a rare move the European Commission issued a communication to the European Parliament and Council on the “protection of intra-EU investments” on July 19, 2018 (the Communication). 

With reference to the Ruling, the Communication notes that the CJEU has “confirmed that investor-State arbitration clauses in intra-EU BITs are unlawful.” This finding is stated to be consistent with the CJEU’s view that “intra-EU BITs are incompatible with Union law” for the following reasons:

(i) The application of BITs between EU member states has created a parallel treaty system overlapping with single market rules and thereby preventing the full application of EU law (i.e., contrary to article 344 of the Treaty on the Functioning of the European Union (TFEU), which provides for the exclusivity of the jurisdiction of the CJEU in disputes concerning the interpretation or application of EU treaties).

(ii) Intra-EU BITs confer rights only in respect of investors from one of the two member states concerned, in conflict with the principle of non-discrimination among EU investors within the single market under EU law (i.e., contrary to the anti-discriminatory provisions under article 18.1. TFEU). 

(iii) Intra-EU BITs “take away from the national judiciary” litigation concerning national measures and involving EU law, and entrust this litigation to private arbitrators who cannot properly apply EU law and, importantly, cannot refer questions of EU law to the CJEU for a preliminary ruling pursuant to article 267 TFEU, which is said to be the “keystone” of the EU judicial system.