In the context of an investor- state dispute Vattenfall AB and others v. the Federal Republic of Germany (Vattenfall v. Germany), an ICSID tribunal rendered a separate decision in order to address the impact of the judgment rendered by the Court of Justice of the European Union (“CJEU”) in Case C-284/16 Slovakia v. Achmea BV, dated 6 March 2018.
A dispute between Vattenfal and Germany arose out of respondent’s decision to phase out the use of nuclear energy. In this context, Vattenfal argues that Germany has breached a number of its international obligations under the Energy Charter Treaty. In response to the Achmea decision, tribunal considered that it had a broad power to examine issues relating to its jurisdiction on an ex officio basis and to address alleged incompatibility of intra-EU investor-State arbitration under the ECT with EU law.
The CJEU in its Achmea judgment concluded that arbitration clause in intra-EU bilateral treaties was incompatible with EU law. In particular, the mechanism for settling disputes between an investor and a host state included in the BIT (bilateral investment treaty concluded between the Netherlands and the Czech and Slovak Federative Republic in 1992) is incompatible with the principle of autonomy of EU law as it is enshrined in Articles 344 and 267 of the Treaty on the Functioning of the EU. The Court observed that the arbitration procedure is not itself capable of ensuring the uniform application of EU law. Since arbitral award is subject only to limited judicial review by competent national courts, uniform and consistent interpretation of EU law is not ensured. Given the importance of the Achmea judgment, the tribunal found necessary to consider whether the conclusions of the CJEU’s judgment apply to the Energy Charter Treaty.
Germany argued that the Achmea decision is not limited to BITs between EU member states, but it must also be applied to multilateral agreements such as the ECT. Given this understanding of the judgment, Article 26 of the Energy Charter Treaty must be interpreted in a restrictive manner such that it is not applicable in intra-EU investor-State disputes. In line with the CJEU’s argumentation, Germany claimed that the mere possibility that a case before an arbitral tribunal established under the ECT might touch upon EU law was sufficient to assume a relation to the interpretation or application of EU law. Therefore, CJEU’s conclusions should be equally applicable to tribunals resolving intra-EU investor-State disputes under the ECT. Invoking the principle of primary of EU law, Germany contended that if there is any inconsistency between the ECT and the EU Treaties EU law will always prevail over the ECT between EU member states.
Vattenfall AB argued that the EU is a Contracting Party to the ECT, which implies that the EU itself has agreed to and approved the contents of the ECT, including its dispute resolution mechanisms. In addition, CJEU only addressed validity of dispute resolution mechanisms contained in BITs from the EU law perspective. In fact, the incompatibility of a treaty provision with EU law does not automatically lead to the termination of the said treaty provision, or to its retroactive invalidity. Moreover, Article 16 of the ECT specifically ensures that the investor’s right to dispute resolution is maintained, regardless of the existence of other (potentially conflicting) commitments.
In order to determine whether the CJEU’s judgment has legal implications for the investment arbitration under the ECT, it was necessary to decide upon the applicable law when examining the tribunal’s jurisdiction. The tribunal concluded that EU law, to the extent that it is rooted in the EU Treaties, constitutes international law. However, EU law and the Achmea judgment should not be “taken into account” for the purposes of a harmonious interpretation of Article 26 ECT that would exclude intra-EU arbitrations. Other interpretation would depart Article 26 radically from the ordinary meaning of the term.
Interpretation of Article 26 of the ECT in the light of the object and purpose of the ECT carried out by the tribunal revealed that a Contracting Party to the ECT in Article 26 includes EU member states and non-EU Member States without distinction. For above-mentioned reasons, the tribunal rejected Germany’s request for all claims pending before the tribunal to be dismissed because the tribunal has no jurisdiction in the light of the CJEU’s judgment in Achmea of 6 March 2018.