Abstract
By its landmark ruling on 6 March 2018 in the Achmea case, the European Court of Justice considered that ISDS in an international agreement between EU Member States, such as an intra-EU bilateral investment treaty (BIT), can have an adverse effect on the autonomy of the EU legal order because investment tribunals can decide matters of EU law without being under the Court’s control. Specifically, the Court ruled that if a tribunal is called on to resolve a dispute liable to relate to the interpretation or application of EU law, its decisions must be subject to mechanisms capable of ensuring the full effectiveness of EU law. For this purpose, either the arbitral tribunal must constitute a court or tribunal situated within the judicial system of the EU, or its arbitral awards must be subject to judicial review by such court or tribunal, so that in either case questions of EU law which the arbitral tribunal may have to address can ultimately be submitted to the Court by means of a reference for a preliminary ruling. Since neither of these conditions were present with respect to the ISDS provision at issue—and normally would not be in other intra-EU BITs either—the Court ruled that the ISDS provision was incompatible with EU law.
Highlights
In its much-awaited preliminary ruling in the Achmea case delivered on 6 March 2018,1 the European Court of Justice considered that investor–State dispute settlement (ISDS) under a bilateral investment treaty (BIT) between two Member States could adversely affect the autonomy of the EU legal order, because EU law matters could be decided without the Court as final arbiter
As concerns the material scope of ‘interpretation and application of the Treaties’, the Court took the view that the mere fact that an ISDS provision in an intra-EU BIT might concern disputes liable to relate to the interpretation or application of EU law, means that the provision is incompatible with the Member State’s undertaking in Article 344 TFEU
Apart from commercial arbitration, this appears to leave no room for ISDS under any BITs, including BITs with third countries, nor for State–State dispute settlement involving third countries, such as the WTO dispute settlement system, and even potentially Member States’ submission to international dispute settlement, such as to the jurisdiction of the European Court of Human Rights
Summary
In its much-awaited preliminary ruling in the Achmea case delivered on 6 March 2018,1 the European Court of Justice considered that investor–State dispute settlement (ISDS) under a bilateral investment treaty (BIT) between two Member States could adversely affect the autonomy of the EU legal order, because EU law matters could be decided without the Court as final arbiter. Adding to a long line of cases defending EU legal autonomy,[2] the Court ruled that if an arbitral tribunal is called upon to resolve a dispute liable to relate to the interpretation or application of EU law, the tribunal’s decisions must be subject to mechanisms capable of ensuring the full effectiveness of EU law For this purpose, either the tribunal must be situated within the judicial system of the EU, or its rulings must be subject to review by a court or tribunal of a Member State so situated, such that, in either case, questions of EU law can be submitted to the Court by means of a reference for a preliminary ruling.
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