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Achmea, Komstroy and ICSID Arbitration - Ishaan Bhardwaj


Investment arbitration is a form of dispute resolution that typically occurs between large companies/investors, and states. There is a bespoke tribunal, the “ICSID” (International Centre for the Settlement of Investment Disputes) tribunal, located within Washington DC that arbitrates such disputes. Typically the reasons for bringing such problems in front of such tribunals range from arguments surrounding “discrimination”, to what constitutes an “investment”, and whether there was any violation of a bilateral or multilateral investment treaty. One prominent example of this is the Energy Charter Treaty (ECT), which entered into legal force in 1998 with 53 current signatories.

This is an important, yet often neglected topic for students interested in commercial or international law. Why is this the case? For starters, it is a major area of practice for many international law firms such as Latham & Watkins, Shearman & Sterling, and Debevoise & Plimpton. Yet it has not been immune to controversy. One reason is the volume of money involved when such large corporations attempt to bring states to court. Further significant is the secretive nature of the work, conducted by a few select arbitrators and global law firms that altogether, have raised critiques about a supposed lack of accountability.

A Decisive Change: Achmea, Komstroy and ECJ Jurisprudence

Firstly, critiques of investment arbitration, as specifically applied to intra-EU disputes, has increased substantially over the last few years. To understand this properly, we should turn to the policy backdrop. Initially, investment arbitration proved popular within the EU after the collapse of the U.S.S.R when states within the Eastern Bloc that needed investment from Western Europe, could not always provide reliable guarantees that the investments would be protected by secure property rights, or indeed that national courts would not protect them.

However over the past 30 years, the underlying context regarding investment arbitration has undergone a seismic shift. In particular companies bringing claims against states have been criticised for being oil or energy companies, acting under the ECT (Energy Charter Treaty) to prevent renewable or pro-climate change legislation from being implemented. There are additional public policy concerns, regarding the sovereignty of the states in question. This is compounded by the protections accorded to such large corporations as per ICSID and the ICSID convention under international law.

As a consequence, the CJEU has in a trio of judgements, beginning with Achmea, followed by Komstroy and culminating in PL Holdings, ruled against intra-EU BITs being adjudicated under ICSID arbitration. In such cases, only the CJEU itself can maintain jurisdiction or so goes the argument.

Ruling in Achmea:

On the 6th March 2018, following a request from a German court in a dispute between Achmea, a Netherlands Insurance group that established a subsidiary in Slovakia and the state of Slovakia, the CJEU ruled that dispute settlement provisions in intra-EU BITs such as the Netherlands-Slovakia BIT are precluded under EU law as they were incompatible with Articles 267 and 344 TFEU. Whilst the aftermath of the judgement did lead to the agreement terminating the intra-EU BITs, as many as 130 intra-EU BITs needed to be ended as per to the proclamation of the Commission according to Devin Bray and Surya Kapoor, writing in the Kluwer Arbitration Blog.

Yet this is not uniformly applied to all BITs, including extra-EU BITs, those concluded between the EU and a third party. For according to Opinion 1/17 - delivered on 30 April 2019, following Belgium’s request under Article 218(11) TFEU, the court concluded that the ISDS mechanism under the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU as well as its Member States was compatible after all with EU treaties. Therefore, although intra-EU BITs were ruled to have ended, extra-EU BITs, between the EU and a third party, like Canada were still available.

In any case, in assessing whether these two treaties were compatible with EU law, the principle of autonomy was pivotal. Put simply this means the principles of unity, solidarity, mutual trust and the judicial protection of fundamental rights are amongst the EU legal features that need to be protected, for they constitute the “very nature” of the Union.

CJEU jurisprudence in following judgements: Komstroy and PL Holdings:

On September 2nd 2021, the Court of Justice of the European Union delivered its judgement in the Republic of Moldova v Komstroy LLC (C-741/19). This held that Article 26(2)(c) of the Energy Charter Treaty was incompatible with EU law insofar as it provided for investment arbitration proceedings between a Member State and the investor of another Member State.

When it comes to investors, EU-based investors will now face greater legal hurdles when bringing ECT claims or enforcing ECT awards against Member States. Member States involved in pending arbitrations concerning the ECT will likely rely on the decision in Komstroy to avoid potential liability to investors.

The objections could be raised at two stages: first during the arbitration itself, through objections to the jurisdiction of an arbitral tribunal contested under the ECT, or secondly following the conclusion of the arbitration, either through a reapplication of an EU Member State or the setting aside of an award or resisting enforcement. Either way, this is likely to make the process much riskier and more difficult.

The national courts of EU Member States further have a duty of sincere cooperation under Article 4(3) TFEU to facilitate the achievement of the EU’s tasks and to refrain from taking measures to jeopardise EU objectives. As such in many ases where enforcement is sought in a Member State’s courts, there may be a reluctance to take action as this contravenes the decisions of the CJEU and Commission.

The enforcement risks do not end here. Article 54(4) of the ICSID Convention places an obligation on its contracting States to recognise and enforce an arbitral award rendered pursuant to the ICSID convention as if a judgement of its own court. As such a member state’s court asked to enforce an award could conclude its EU law obligation to refuse enforcement clashes with and potentially overrides its ICSID Convention obligation. In this specific context, EU investors should consider whether a Member State has assets outside the EU against which an award could be enforced.

ICSID Response:

Here it would be best to turn to three particular comparators, the United States, the United Kingdom, and Australia, all of which have ruled differently on ICSID claims.

On June 25th 2021, the Full Court of the Federal Court of Australia made an order recognising an award issued by ICSID against the Kingdom of Spain. The decision, “Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l (No.3) (2021) FCAFC 112”, held that Spain could not claim state immunity in relation to the recognition of an ICSID award in Australia.

In Micula v Romania, a case that was decided in front of an ICSID Tribunal, a unanimous ruling held that the Supreme Court of the United Kingdom would lift a stay of enforcement of an ICSID arbitral award despite a state aid investigation by the European Commission. The English courts were found to have the power to stay execution of an ICSID award but only in limited circumstances.

The last United States case in the District of Columbia, again featured the Micula v Romania saga albeit under slightly differing circumstances. Nevertheless, like in the UK case, the District of Columbia upheld the enforcement of the ICSID award. Yet this is not always clear. One example might be the case of Eiser Infrastructure Limited v. Kingdom of Spain. This was the first case where the Court ordered staying the case pending a decision by an ad hoc annulment committee constituted by ICSID upon Spain’s request. Here the uncertainty of enforcement is ever present. It further raises the question of whether the court is attempting to sidestep the critical issue of whether ICSID tribunals or the CJEU have ultimate jurisdiction.


Overall, courts in Australia, the United Kingdom and to a lesser extent, the United States have ruled against the CJEU’s exclusive jurisdiction on such matters. Yet there are still major enforcement risks when it comes to intra-EU investment arbitration treaties under ICSID tribunals. These risks are perhaps best mitigated by bringing claims to a jurisdiction outside the EU. However this will not be enough to eliminate such risk. The rulings of the District of Columbia court show how at times tribunals and courts might seek to sidestep the controversial question instead of ruling directly on the matter.

Though the judgements are complex and highly technical at times, I believe they can be summarised as follows. The central conflict within this article is between international law and EU law, as reflected by ICSID tribunals and the CJEU respectively.

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