Annulment of arbitral awards

Some Initial Reflections on CJEU’s Decision to Uphold Jurisdiction in Case C-741/19 (République de Moldavie)

By Giorgia Sangiuolo, Fellow at the Centre of European Law, King’s College London

On 2 September 2021, the Court of Justice of the European Union (the CJEU or the Court) rendered its decision in Case C-741/19 (République de Moldavie)^[1]. The decision was given in the context of a reference for a preliminary ruling received from the Paris Court of Appeal on the interpretation of the Energy Charter Treaty (the ECT) in proceedings to set aside an international arbitral award rendered in a dispute between a Ukrainian investor and Moldova.

Following the conclusions reached by Advocate General Szpunar last March^[2], the Court concluded that:

– it had jurisdiction to issue a preliminary ruling interpreting an international treaty to which the EU and some Member States are a party in a case which involved neither of them; and

– the application of the Investor State Dispute Settlement (ISDS) mechanism under Article 26 of the ECT between Member States is incompatible with EU law.

On this basis, the Court then moved to provide the referring French court with an interpretation of the concept of “investment” in Article 1(6) of the ECT.

This post sets out some initial thoughts on the decision of the CJEU to assume jurisdiction. After setting out the background of the dispute (section 1) and the reasoning of the CJEU on this point (Section 2), the post maintains that the judgment, and Advocate General Szpunar’s Opinion that the Court closely followed, seem to go well beyond judicial precedents and appear decoupled from any concerns regarding the risk of fragmentation of EU law (Section 3).

The post then concludes that the judgment seems to suggest that any link, however small, with EU law may be relied upon by the Court to interpret international treaties to which the EU is a party, together with its Member States, even when they have a merely potential, future relevance for EU law (section 4). It is argued that the Court’s decision in République de Moldavie seems to be guided by practical aims and seems to reveal that the Court intends to take an active role in shaping the external relations of the EU. The post finally observes that the Court’s decision may have some relevant practical consequences: parties to future ISDS proceedings under EU agreements, whether mixed or exclusive, regardless of their ties with the EU, will want to keep this case in mind if they wish to avoid the involvement of the CJEU in follow on proceedings before the national courts of the Member States.READ MORE

Case C-741/19: CJEU Decides That Intra-EU ECT Arbitration Is Incompatible with EU Law and Interprets Definition of “Investment” in ECT

This article has been co-authored by Nicholas Lawn (Partner at Van Bael & Bellis) and Isabelle Van Damme (Partner at Van Bael & Bellis), Quentin Declève (Senior Associate at Van Bael & Bellis) and Rebecca Halbach (Associate at Van Bael & Bellis)

On 2 September 2021, in its judgment in Case C-741/19, Republic of Moldova v. Komstroy LLC, the Court of Justice of the European Union (the CJEU) decided that intra-EU arbitration under the Energy Charter Treaty (the ECT) is incompatible with EU law. It also gave a restrictive interpretation to the definition of “investment” in the ECT.

The CJEU was seized by a request for a preliminary ruling from the Paris Court of Appeal which was hearing an action to annul the arbitral award which had been rendered by an ECT tribunal established to hear a dispute between the Republic of Moldova and Energoalians, a Ukrainian distributor.

Despite the fact that the underlying award involved the application of the ECT to a dispute between an investor from a non-EU country (Ukraine) and another non-EU country (Moldova), the CJEU nonetheless confirmed its jurisdiction to interpret the ECT. Moreover, notwithstanding that the dispute did not involve an investor of one EU Member State acting against another EU Member State regarding an investment made by the former in the latter (an intra-EU dispute), the CJEU found that Article 26(2)(c) of the ECT must be interpreted as being inapplicable to intra-EU disputes. It adopted a reasoning similar to that developed in its 2018 Achmea judgment (see here). In doing so, the CJEU also reached the same conclusion as Advocate General Szpunar in his Opinion and appeared to pre-empt the question of the compatibility of the draft modernised ECT with the EU Treaties, currently pending before the CJEU in Opinion 1/20.

Of the three questions referred by the French court, the CJEU limited its analysis to the first question. It interpreted the term “investment” as excluding “the acquisition, by an undertaking of a Contracting Party to [the ECT], of a claim arising from a contract for the supply of electricity, which is not connected with an investment, held by an undertaking of a third State against a public undertaking of another Contracting Party to that treaty“.READ MORE