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In the Wake of Achmea: Early Assessments, Consequences, and Approaches

The Court of Justice of the European Union ("CJEU") shocked the investment arbitration community in March earlier this year by ruling in the Slovakia v. Achmea case that Article 8 of the Netherlands-Slovakia bilateral investment treaty ("BIT") was incompatible with EU law.1 Legal practitioners had expected the CJEU to uphold the validity of the BIT's arbitration clause, especially given Advocate General Melchior Wathelet's recommendation to the CJEU to find the clause as compatible with EU law. This article briefly discusses the main holdings of the Achmea decision. It then examines several early consequences in the aftermath of Achmea and analyzes two recent investment arbitral decisions that have ruled on the jurisdictional implications of the Achmea decision.

The Achmea decision

The CJEU, which functions as Europe's top judicial body to interpret EU law, ruled in Achmea that the investor-State dispute settlement ("ISDS") clause in the Netherlands-Slovakia BIT is incompatible with EU law. In its decision, the CJEU held that only EU judicial institutions are authorized to interpret EU law. Under the EU constitutional treaties, investment arbitral tribunals are not part of the EU judicial system, have no ability to refer questions of EU law to the CJEU, and are not subject to the CJEU's judicial supervision. According to the CJEU, ISDS provisions improperly sever from the jurisdiction of EU Member States' courts disputes which concern the application or interpretation of EU law, thus threatening the consistency and full effectiveness of the EU legal order. Given this "adverse effect on the autonomy of EU law," the CJEU held that ISDS provisions, "such as" Article 8 of the Netherlands-Slovakia BIT, are incompatible with EU law.

Arbitral decisions rendered after Achmea

The Masdar case

The Masdar v. Spain tribunal was one of the first to address the jurisdictional implications of the Achmea decision.2 The Masdar case dealt with Spain's alleged violations of its treaty obligations under the Energy Charter Treaty ("ECT") towards a Dutch-incorporated energy investor. In Masdar, Spain argued that the tribunal lacked jurisdiction under the ECT due to the intra-EU nature of the dispute. After the Masdar tribunal had already closed the arbitral proceedings, Spain submitted an application to reopen the arbitral procedure based on the newly-issued Achmea decision, arguing that the tribunal should interpret the ECT in accordance with EU law. According to Spain, pursuant to its interpretation of the Achmea decision, an EU investor is not entitled to bring an investment treaty arbitration proceeding against an EU Member State.

The tribunal rejected Spain's request. The arbitrators concluded that Achmea did not affect or apply to the Masdar case; indeed, it found that this decision had "no bearing" upon the case and was of "limited application." The award affirmed that Achmea specifically applies only to the Netherlands-Slovakia BIT and, in a more general sense, to an international agreement between EU Member States, not the ECT. Notably, the tribunal concluded that the ECT is not such a bilateral treaty between EU Member States; rather it is a multilateral agreement to which the EU itself is a party. Moreover, the tribunal expressly referred to, and endorsed, the opinion of Advocate General Wathelet in Achmea, according to whom the Achmea case only concerned the question of the validity of ISDS clauses in BITs between EU Member States. Finally, the Masdar tribunal duly noted that the Achmea decision consciously chose not to refer to the ECT and to Wathelet's distinction between dispute settlement mechanisms in these two different types of agreements. Accordingly, the Masdar tribunal concluded that Achmea did not apply to ECT arbitrations and thus did not affect the Masdar case.

The Vattenfall case

The Vattenfall v. Germany case is a second decision expressly dealing with Achmea.3 Vattenfall concerns a Swedish nuclear energy investor's claims against Germany under the ECT. Germany requested–following Achmea–the dismissal of all the investor's claims for lack of jurisdiction. Here, too, as in Masdar, the tribunal rejected the host state's arguments.

The Vattenfall tribunal first determined that its jurisdiction was governed exclusively by the ECT, which was to be interpreted in accordance with international law. It then relied on Article 38(1) of the Statute of the International Court of Justice to determine that certain rules of EU law constitute international law.

Similar to the Masdar tribunal, the Vattenfall arbitrators then concluded that the Achmea decision did not specifically address the dispute settlement clause under the ECT; the Vattenfall tribunal could not recognize any applicable rule of international law arising from Achmea as it relates to multilateral agreements. The tribunal deemed it "an open question" whether the Achmea reasoning applied in ECT cases, likely meaning that it had not squarely been decided by the CJEU in Achmea.

Following Masdar, the Vattenfall tribunal noted that the ECT is a "mixed agreement"–one that is between EU Member States, third States, and the EU itself. According to the Vattenfall arbitrators, it was not for the tribunal to extend Achmea to the ECT. In addition, the tribunal specifically addressed the question of whether Article 26 of the ECT's reference to a "Contracting Party", in the context of the parties' consent to arbitration, could be read as excluding EU Member States. Here, the tribunal found no reason to deviate from the literal meaning of the term and rejected any implicit exclusion. Moreover, the tribunal noted that, unlike Achmea, there was no conflict between Article 26 of the ECT and the Treaty on the Functioning of the European Union.

Finally, the tribunal also highlighted the absence of a disconnection clause in the ECT which would prevent its provisions from applying to EU Member States. Because the EU had included such clauses in other treaties and the ECT final treaty draft eliminated such a provision despite the EU's proposal to include one during negotiation of the ECT, the tribunal concluded that the clause was intentionally omitted. Thus, the Vattenfall tribunal concluded that the ECT was intended to create obligations between EU Member States, including in intra-EU disputes.

Consequences in the Wake of Achmea

The Achmea decision has altered the legal landscape for investment treaty disputes in Europe and has already prompted action from several EU respondent States facing investment treaty claims. For example, Spain has invoked the Achmea decision in multiple set-aside proceedings against adverse ECT awards, including in the Novenergia arbitration administered by the Stockholm Chamber of Commerce in which Spain was held liable for €53 million for breaches of the ECT's fair and equitable treatment standard. In particular, Spain has requested a Swedish review court to formally refer to the CJEU the question of whether the ECT's ISDS provisions as applied in intra-EU disputes are valid and compatible with EU law. Other EU respondent States, such as Hungary in the Edenred case, have sought post-award remedies under the ICSID system challenging awards rendered in intra-EU disputes. We can expect that EU respondent States will continue to push for setting aside awards, especially those rendered pursuant to intra-EU BITs with EU-based arbitral seats. At the same time, this decision likely will render arbitral seats outside the EU, such as Switzerland and Singapore, more attractive to foreign investors who have disputes against EU Member States, especially when the investor hails from another EU Member State.

Second, investors will likely encounter difficulties in enforcing intra-EU BIT awards in European courts, although they may find success outside the European Union. Courts outside the European Union are not bound to accord supremacy to EU law and, on the contrary, may be required to give legal effect to arbitral awards pursuant to international treaties such as the ICSID and New York Conventions. Indeed, the Micula brothers are currently attempting to enforce their ICSID award against Romania in the U.S. District Court for the District of Columbia. The award was rendered under the Romania-Sweden BIT, and the European Commission has taken an active stance against enforcement of this award. This will be a major test case for enforcement of intra-EU BIT awards outside the European Union in the post-Achmea era.

Third, it remains to be seen whether arbitrators in intra-EU BIT disputes will accept objections to their jurisdiction in light of Achmea, notwithstanding the consistent approach of investment treaty tribunals in rejecting intra-EU jurisdictional objections pre-Achmea. Likewise, foreign investors may resort to other investment protection mechanisms; indeed, Airbus recently withdrew its arbitration against Poland under the Netherlands-Poland BIT, citing the Achmea decision as a reason.

Thus far, as mentioned above, tribunals sitting in ECT arbitrations have rejected Achmea's application to the ECT. Even though they have rejected Achmea-based jurisdictional objections, the broad language of Achmea could be misinterpreted to apply its reasoning beyond the facts at issue in the Achmea case. This arguably creates at least some level of uncertainty in the future claims that investors may advance under the ECT, especially in light of the European Commission's recent doubling down on its efforts to put an end to intra-EU ISDS mechanisms.

From the perspective of investment protection, it is not immediately clear whether the level of protection afforded to investors within the EU, or with claims against EU Member States, will diminish in the wake of Achmea. We can know, however, that with lessening treaty protection investors will undoubtedly have much less protection for their investments within the EU and will face hurdles advancing claims against EU Member States within the EU system. On the one hand, under the Treaty for the Functioning of the European Union, investors do not have legal standing to sue a Member State directly before the CJEU. In addition, if investors are confined to the European judicial system, they likely would have to satisfy the requirement of exhaustion of local remedies, which is not present in investment treaties like the ECT, making advancement of claims against EU Member States more cumbersome, time-consuming, and costly.

In terms of substantive protections within the EU justice system, the picture for investors and the investment protection afforded to them will most assuredly diminish if claims against EU Member States cannot be advanced via investment treaties. For instance, the national treatment standard provided in BITs and the ECT, on one side, and in EU law, on the other, may largely differ. Of particular interest are the standards of protection of fair and equitable treatment ("FET") and compensation in case of expropriation. While FET has no real, comparable standard under EU law,4 the CJEU has ruled that it is within the competence of individual EU Member States to provide rules on expropriation, thus the absence of uniform EU rules on the matter.5 In contrast, the public international law standard applicable to investor-State arbitrations requires the calculation of the fair market value of the investment at the time of the expropriation.


The Achmea decision has invariably altered the investment arbitral legal landscape, at least in arbitrations within Europe and especially in those involving an intra-EU BIT. Tribunals and courts alike will feel the diverging pressures of heeding the CJEU's pronouncements on the one hand, and according full legal effect to duly-executed investment treaties and duly-rendered investment awards on the other. At the same time, there are strong reasons to believe that foreign investments will not be equally protected by investment protection standards within the EU legal system. The reverberations of Achmea will continue to be felt for years to come, and practitioners, investors, and States will have to keep a very close eye on how the landscape continues to evolve in the post-Achmea era.

  1. Slowakische Republik v. Achmea BV, Case C-284/16, Judgment of the Court (Grand Chamber), 6 March 2018, ECLI:EU:C:2018:158 (hereinafter "Achmea").
  2. Masdar Solar & Wind Cooperatief U.A. v. the Kingdom of Spain, ICSID Case No. ARB/14/1, Award, 16 May 2018 (hereinafter "Masdar").
  3. Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, 31 August 2018 (hereinafter "Vattenfall").
  4. Angelos Dimopoulos, EU Foreign Investment Law, Oxford University Press, 2011, p. 315.
  5. Daniele Annibaldi v. Sindaco del Commini di Guidoma and Presidente Regione Lazio, Case C-309/96, Judgment of the Court (First Chamber), 18 December 1997, ECR I-7493.