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

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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)

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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

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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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Brussels Court of Appeal Upholds Attachment Order against Kazakhstan

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On 29 June 2021, the Brussels Court of Appeal (the Court of Appeal) handed down a judgment in which it upheld a protective attachment order over more than USD 500 million worth of assets, owned by Kazakhstan, and held with the Brussels subsidiary of the Bank of New York Mellon (the BNYM).

Background

The proceedings before the Belgian courts result from the efforts of two Moldovan investors (Anatolie and Gabriel Stati (the Investors)) who seek to enforce an arbitral award handed down in their favour in 2013. The arbitral tribunal (chaired by Karl-Heinz Böckstiegel) had found Kazakhstan liable for a harassment campaign against the Investors which ultimately resulted in a violation of the Energy Charter Treaty provisions on Fair and Equitable Treatment. As a result, the arbitral tribunal had ordered Kazakhstan to pay USD 508 million to the Investors as compensation for the damage suffered.

In the absence of voluntary payment from Kazakhstan, the Investors sought a protective attachment order from the Brussels Court of First Instance in 2017 enabling them to freeze assets owned by Kazakhstan held with BNYM pending the outcome of the proceeding leading to the recognition and enforcement of their arbitral award in Belgium. The protective attachment order was obtained in ex parte proceedings (i.e., without notice to Kazakhstan). However, upon notice of the attachment order, Kazakhstan lodged a third-party challenging the validity of the protective order. After the Brussels Court of First Instance dismissed the third-party opposition, Kazakhstan appealed that decision before the Court of Appeal.READ MORE

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Brussels Court Issues Judgment against Belgian Government in Climate Change Litigation

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On 17 June 2021, the French-speaking Brussels Court of First Instance (the Court) handed down its judgment in the so-called “Klimaatzaak” case, in which it found that the federal government as well as the governments of the three Belgian regional entities (i.e., Flanders, Wallonia and Brussels-Region) breached Article 1382 of the Belgian Civil Code on tort liability and Articles 2 and 8 of the European Convention on Human Rights (the ECHR) by failing to take the necessary measures to limit the adverse effects of climate change on the country’s population.

On 27 April 2015, the environmental non-profit association “Klimaatzaak” representing 58,000 Belgian citizens (the claimants) filed a lawsuit against the Belgian federal government as well as against the governments of the three regional entities, alleging that these authorities breached their general duty of care and the citizen’s human rights by failing to implement their commitments in terms of fighting climate change.

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European Commission Rejects UK Application to Join Lugano Convention

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On 4 May 2021, the European Commission (the Commission) published a communication which recommends that the European Union (the EU) should not approve the United Kingdom’s (UK) application to accede to the 2007 Lugano Convention (Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters; the Lugano Convention).

The Lugano Convention governs international jurisdiction and the enforcement of judgments in civil and commercial matters between the EU Member States and three of the European Free Trade Association (EFTA) States, notably Iceland, Switzerland and Norway.

In its communication to the European Parliament and the Council, the Commission indicated that the Lugano Convention is aimed solely at third countries that have a particularly close regulatory integration with the EU and that “participate, at least partly, in the EU’s internal market“, which is the case for countries that are part of the European Economic Area. By deciding to leave the EU and the Single Market, the UK has, in the view of the Commission, become a “third country without a special link to the internal market“. As a result, the Commission considers that future civil judicial cooperation between the EU and the UK should be governed by the multilateral Hague Conventions, in line with the EU consistent policy towards all third countries.

The Commission’s recommendation is non-binding and the final decision on the UK accession rests on the EU Council.

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UK Supreme Court Confirms Jurisdiction Over Claims Brought Against UK Parent Companies for Acts Committed Abroad by Foreign Subsidiaries

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On 12 February 2021, the UK Supreme Court (the Supreme Court) handed down judgment in the Okpabi and others (Appellants) v. Royal Dutch Shell Plc and another (Respondents). The case follows from a decision of the English Court of Appeal (the Court of Appeal) on 14 February 2018 which was discussed here.

The preliminary question before the Supreme Court regards the admissibility, before U.K. courts, of legal proceedings brought by a Nigerian farming and fishing community of approximately 40,0000 individuals against Royal Dutch Shell (RSD) – a UK-domiciled parent company – for oil pollution in the Niger Delta allegedly caused by RDS’s Nigerian subsidiary (Shell Petroleum Development Company of Nigeria Ltd (SPDC)).

In 2018, the Court of Appeal rejected the claim finding – among other things – that the claimants had failed to demonstrate an arguable case that RDS controlled SPDC’s operations in the Niger Delta or that RDS was otherwise responsible for the latter’s failures.

In its decision of 12 February 2021, the Supreme Court rejected the decision of the Court of Appeal as having erred in law.READ MORE

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