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Intra-EU BIT

Can EU Member States Replicate Plurilateral Agreement on Intra-EU BITs to Implement Komstroy Judgment?

On 2 September 2021, the Court of Justice of the European Union (the CJEU) handed down a judgment in Republic of Moldova v. Komstroy LLC, in which it ruled that intra-EU investment arbitration under the Energy Charter Treaty (ECT) was incompatible with EU law.

As a consequence of that judgment, the European Union and the EU Member States will soon need to take appropriate actions to implement and manage the legal consequences of that decision.

In this short blog post, I share some of my thoughts that I developed when preparing for my presentation at the 2020 EFILA Conference and where I specifically discussed the possibility for EU Member States to exclude intra-EU ISDS arbitral proceedings from the scope of the ECT through the adoption of a plurilateral inter se agreement (the Plurilateral Agreement) similar to the one they adopted to terminate their respective intra-EU BITs. READ MORE

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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

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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

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CJEU’s Advocate General Hints at Invalidity of Intra-EU ISDS Disputes Based on Energy Charter Treaty

I wanted to publish a short note on an Opinion handed down by Advocate General Saugmandsgaard Øe in which he provides his own personal answer to one of the most highly debatable questions among EU and arbitration practitioners. Namely, the impact of the Achmea judgment on intra-EU Investor-State disputes (ISDS) conducted pursuant to the Energy Charter Treaty (ECT).READ MORE

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EU Plurilateral Agreement on Termination of Intra-EU BITs Enters Into Force – What consequences for Sunset Clauses?

This article has jointly been co-authored by Isabelle Van Damme and Quentin Declève

With some delay, we wanted to discuss the latest developments on intra-EU BITs that took place during the last couple of months[1].

As we already discussed, instead of the EU Member States agreeing, on a bilateral basis, to amend or terminate their respective intra-EU BITs, most of the EU Member States have elected, as envisaged in their declarations of January 2019, to negotiate a single plurilateral agreement that will terminate all of the intra-EU BITs (the Plurilateral Agreement). That agreement received the political consensus of all EU Member States in October 2019. Twenty-three Member States (with the notable exceptions of Austria, Sweden, Finland, the United Kingdom[2] and Ireland)[3] signed the agreement on 5 May 2020[4] which entered into force on 29 August 2020[5].

Purposes of the Plurilateral Agreement

The use of a Plurilateral Agreement to terminate, amend, interpret or complement a series of existing agreements is not novel. This method – which relies on Article 30(3) of the Vienna Convention on the Law of Treaties (the VCLT) (“When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty“) – has been used in the past to, for example, modify bilateral tax treaties[6] and conclude the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (the “Mauritius Convention on Transparency”). It is currently being contemplated within the UNCITRAL Working-Group III as a possible method for establishing the Multilateral Investment Court, which is the preferred option of the European Union for ISDS reform. Such a method is typically preferred because, instead of concluding a high number of separate agreements whereby State parties amend or terminate existing agreements between themselves on a bilateral basis, it allows for the conclusion of a single multilateral agreement whereby the parties agree to amend all their respective (bilateral) treaties having the same subject-matter at once.READ MORE

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EU Commission Presents Proposals for Investment Court System in CETA and Announces Plurilateral Treaty to Terminate Intra-EU BITs

A couple of days before Working Group III of the United Nations Commission on International Trade Law (UNCITRAL) held its 38th session on the reform of investment arbitration, the European Commission (the Commission) presented four proposals (the Proposal(s)) to the Council of the European Union (the EU) for specific rules to put into place the Investment Court System (the ICS) provisions in the EU-Canada Comprehensive Economic and Trade Agreement (the Agreement or CETA).

The ICS included in CETA represents a new approach by the EU in relation to investment-related disputes and is the same approach taken in the agreements the EU has negotiated with Singapore, Viet Nam and Mexico, while also being on the table in all on-going investment negotiations.

The foundation of the ICS is already established in CETA (as discussed here, here and here), however it remains to be applied pending ratification of the Agreement by all of the EU Member States. The Joint Interpretative Instrument on CETA agreed by the EU and Canada in October 2016 includes a commitment to make the system operational as soon as the Agreement enters into force. The Proposals are thus necessary to deliver on this commitment and these rules complete the putting together of the reformed approach to investment dispute settlement under CETA.READ MORE

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