The Incompatibility of Intra-EU Investment Treaty Arbitration With European Union Law – Assessing the Scope of the ECJ’S Achmea Judgment

Abstract

In March 2018, the European Court of Justice rendered its Achmea judgment, by which the Court considered the investor-State dispute settlement (ISDS) clause contained in the Dutch-Slovakian investment treaty to be incompatible with EU law. Even though the judgement is considered to be a landmark decision, its potentially far-reaching consequences remain, due to a rather obscure legal reasoning, difficult to assess. The aim of the present contribution is to assess the scope of the Achmea judgment in order to shed light on its relevance for pending and future intra-EU investment arbitrations. In view of the ECJ’s Opinion 1/17 rendered in April 2019 and in consideration of recent arbitral practice it is concluded that the scope of the Achmea judgement concerns the incompatibility of intra-EU investment treaty arbitration with EU law. This means on the one hand that the reasoning in Achmea is transferable not only to ISDS clauses in other intra-EU BITs, but also to Art. 26 of the Energy Charter Treaty. On the other hand, the analysis shows that contract-based investment arbitrations are not concerned by the ECJ’s findings. Finally and in view of its clarified scope of application, the relevant factors for analyzing the consequences of the Achmea judgement are identified.