The Complex World of International Arbitration and Eventual Enforcement

Recently, in a decision issued by the Court of Justice of the European Union, in the case of Slovak Republic v. Achmea, intra-EU bilateral investment treaties’ (“BIT”) arbitration clauses were declared to be in violation of governing European Union (“EU”) law and therefore illegal. The court stated “that the arbitration clause in the BIT [between Slovakia and the Netherlands] has an adverse effect on the autonomy of EU law, and is therefore incompatible with EU law” as it violated multiple articles of the Treaty on the Functioning of the European Union.

            After this decision was issued, bilateral investment treaties in the EU were reexamined and later terminated, to ensure that the arbitration clauses would be in line with governing EU law. In 2019, twenty-two EU member states issued the Declaration of the Member States of 15 January 2019 on the legal consequences of the Achmea judgment and on investment protection. This was a declaration of intent to terminate certain EU member bilateral investment treaties that stated “arbitration clauses contained in bilateral investment treaties concluded between Member States are contrary to Union law and thus inapplicable.” On May 5, 2020, twenty-three EU member states released the Agreement for the Termination of Bilateral Investment Treaties Between the Member States of the European Union. In this Agreement, the respective member states dissolved their bilateral investment treaties so as to be in conformity with the Achmea decision. This dissolution of BIT’s has led to greater uncertainty regarding the enforcement of arbitral awards when they arise from intra-EU bilateral investment treaties. 

            The Achmea ruling and the following termination of intra-EU bilateral investment treaties has left a changing, complicated, and questionable EU arbitration landscape. This landscape has been addressed by several United States courts in determining the enforceability of arbitral awards. The issue was addressed in Micula v. Government of Romania. This case arose from a bilateral investment treaty between Romania and Sweden. In this case, the court ruled that due to Romania’s later timeline of entering the EU, EU law and the Achmea decision were inapplicable and that the award could be enforced despite the termination of intra-EU bilateral investment treaties. 

            Other United States courts have issued stays in cases that involve the application of EU arbitration law and the termination of the bilateral investment treaties until other EU courts or arbitral panels make clarifications. The D.C. District Court issued a stay in Masdar Solar & Wind Cooperatief U.A. stating that deciding the enforceability “may eventually demand resolving a thorny dispute over the implications of multiple treaty obligations and a shifting legal landscape in the European Union.”

            This dissolution or termination of inter-EU bilateral investment treaties has left many legal questions unanswered and has caused global hesitancy in regards to arbitral enforcement. The EU should issue statements and clarifications in regards to the enforceability of arbitration awards that arise out of intra-EU bilateral investment treaties that have recently been terminated. Since the termination is so recent, it will be important to keep searching for global precedents that decide the enforceability. 

By: Alexandria Bowles

Sources:

  • Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, 397 F. Supp. 3d 34, 36 (D.D.C. 2019). 

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