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10. 07. 2021

Authors: JUDr. Ing. Miloš Olík, Ph.D., LL.M., FCIArb; JUDr. Margarita Karešová Kucharčuk

Three years ago, in its decision of 6 March 2018, case C-284/16 (Achmea), the Court of Justice of the European Union (CJEU) ruled that EU law precludes an arbitration clause, such as the arbitration clause in the Netherlands/Czech and Slovak BIT, from being invoked by an investor in intra-EU investment disputes (i.e. disputes between an EU Member State and an investor from another EU Member State).

The ruling of the CJEU gave rise to a number of questions. Among those was whether the conclusions in Achmea could be applied to investment disputes under the Energy Charter Treaty.

The Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union of 29 May 2020 expressly states in its preamble that it does not cover intra-EU disputes conducted on the basis of the Energy Charter Treaty and this matter will be dealt with at a later stage.

Recently, on 2 September 2021, the Grand Chamber of the CJEU had the first opportunity to address this issue, in case C-741/19 (Republic of Moldavia v Komstroy).

The dispute

The dispute, which the ECT tribunal decided in favour of the investor, arose out of the sale of electricity by a Ukrainian entity (Komstroy’s legal predecessor) to a Moldovan public undertaking.

The Court of Appeal in Paris (as the court before which an action for annulment of the arbitration award was brought by the unsuccessful party in arbitration proceedings, the Republic of Moldova), referred several questions to the CJEU for a preliminary ruling on the interpretation of the term “investment” under the ECT.

The CJEU: Achmea reasoning applies to intra-EU disputes under the ECT

The CJEU opined that the arbitration clause in the Energy Charter Treaty is not applicable to intra-EU disputes. The CJEU fully applied its reasoning in Achmea.

The CJEU emphasized that it has the exclusive jurisdiction to give the definitive interpretation of EU law. One of its main concerns was thus the issue that, while arbitration tribunals established in ECT arbitrations may interpret and apply EU law, they cannot refer preliminary questions to the CJEU, unlike the national courts. Furthermore, the CJEU considered whether a subsequent review of such arbitral award by a national court is capable of ensuring full compliance with EU law guaranteeing that questions of EU law which the tribunal may have to address can, if necessary, be submitted to the CJEU by means of a reference for a preliminary ruling. Noting that the scope of such review is a matter of the domestic law of the Member State, the CJEU found that in this particular case the national law provided only for limited review.

The CJEU: the CJEU has jurisdiction to interpret the ECT

The CJEU was not requested by a national court to interpret an EU law, but instead a provisions of the ECT. The CJEU found that it had jurisdiction to do so based on the following reasoning.

The CJEU acknowledged that it does not have jurisdiction to interpret provisions of international treaties in the context of a dispute not covered by EU law. It added though, that it had held that in cases where such international agreement can apply both to situations falling within the scope of EU law and to situations not covered by EU law, it may interpret such international agreement for the sake of uniform interpretation.

The CJEU also relied on the fact that the parties to the dispute chose an EU law country for the seat of their arbitration. It is up to the national court to determine the need for a preliminary ruling and the relevant questions to submit to the CJEU. The CJEU concluded that, where the submitted questions concern the interpretation of EU law, the CJEU is in principle required to give a ruling.

Closing remarks

As the CJEU was not asked to rule on whether the arbitration clause in the ECT is compatible with EU law, it introduced its opinion as obiter dictum only. Nevertheless, this may be the direction the CJEU will choose in its future decisions regarding the ECT.

Notably, the Komstroy case was not an intra-EU dispute, as neither of the parties to the dispute was an EU Member State or an investor from an EU Member State. However, the decision highlighted the importance of the proper choice of the place for the seat of arbitration.

It is clear that the Komstroy decision will provide at least another set of arguments for parties’ pleadings in pending intra-EU ECT arbitrations. However, it would be naïve to suppose that all arbitral tribunals would immediately discontinue proceedings, also taking into account the current development in investment case-law after Achmea.

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