· (University of Lille); Stephen Coutts (University College Cork); Daniele Gallo (Luiss "Guido...

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Editors

Ségolène Barbou des Places (University Paris 1 Panthéon-Sorbonne); Enzo Cannizzaro (University of Rome “La Sapienza”); Gareth Davies (VU University Amsterdam); Christophe Hillion (Universities of Leiden, Gothenburg and Oslo); Adam Lazowski (University of Westminster, London); Valérie Michel (University Paul Cézanne Aix-Marseille III); Juan Santos Vara (University of Salamanca); Ramses A. Wessel (University of Twente).

Associate Editor

Nicola Napoletano (University of Rome “Unitelma Sapienza”).

European Forum Editors

Charlotte Beaucillon (University of Lille); Stephen Coutts (University College Cork); Daniele Gallo (Luiss "Guido Carli" University, Rome); Paula García Andrade (Comillas Pontifical University, Madrid); Theodore Konstatinides (University of Essex); Stefano Montaldo (University of Turin); Benedikt Pirker (University of Fribourg); Oana Stefan (King’s College London); Charikleia Vlachou (University of Orléans); Pieter Van Cleynenbreugel (University of Liège).

Scientific Board

M. Eugenia Bartoloni (University of Campania "Luigi Vanvitelli"); Uladzislau Belavusau (University of Amsterdam); Marco Benvenuti (University of Rome “La Sapienza”); Francesco Bestagno (Catholic University of the Sacred Heart, Milan); Giacomo Biagioni (University of Cagliari); Marco Borraccetti (University of Bologna); Susanna Maria Cafaro (University of Salento); Roberta Calvano (University of Rome “Unitelma Sapienza”); Federico Casolari (University of Bologna); Emanuele Cimiotta (University of Rome “La Sapienza”); Roberto Cisotta (LUMSA University, Rome); Angela Cossiri (University of Macerata); Francesco Costamagna (University of Turin); Gráinne de Búrca (New York University School of Law); Chiara Favilli (University of Florence); Ester Herlin-Karnell (VU University of Amsterdam); Costanza Honorati (University of Milano-Bicocca); Sara Iglesias Sanchez (Court of Justice of the European Union); Francesca Ippolito (University of Cagliari); Clemens Kaupa (VU University Amsterdam); Jeffrey Kenner (University of Nottingham); Jan Klabbers (University of Helsinki); Dimitry Kochenov (University of Groningen); Vincent Kronenberger (Court of Justice of the European Union); Mitchel Lasser (Cornell Law School, Ithaca – New York); Philippe Maddalon (University Paris 1 Panthéon-Sorbonne); Stefano Manacorda (Second University of Naples); Maura Marchegiani (University for “Foreigners” of Perugia); Mel Marquis (European University Institute, Florence); Fabrizio Marrella (University of Venice “Ca’ Foscari”); Francesco Martucci (University Paris 2 Panthéon-Assas); Rostane Mehdi (University Paul Cézanne - Aix-Marseille III); François-Xavier Millet (Court of Justice of the European Union); Vincenzo Mongillo (University of Rome “Unitelma Sapienza”); Elise Muir (Maastricht University); Fernanda Nicola (Washington College of Law, American University); Raffaella Nigro (University of Perugia); Massimo Francesco Orzan (Court of Justice of the European Union); Tom Ottervanger (University of Leiden); Lorenzo Federico Pace (University of Molise); Etienne Pataut (University Paris 1 Panthéon-Sorbonne); Fabrice Picod (University Paris 2 Panthéon-Assas); Emanuela Pistoia (University of Teramo); Sara Poli (University of Pisa); Jorrit Rijpma (University of Leiden); Sophie Robin-Olivier (University Paris 1 Panthéon-Sorbonne); Andrea Saccucci (Second University of Naples); Lorenzo Schiano di Pepe (University of Genua); Heike Schweitzer (Free University of Berlin); Silvana Sciarra (Italian Constitutional Court); Francesco Seatzu (University of Cagliari); Erika Szyszczak (University of Sussex); Chiara Enrica Tuo (University of Genua); Benedetta Ubertazzi (University of Milano Bicocca); Simone Vezzani (University of Perugia); Annamaria Viterbo (University of Turin); Jan Wouters (University of Leuven).

Editorial Committee

Managing Editors: Giulia D’Agnone (Magna Graecia University of Catanzaro); Alberto Miglio (University of Milan “Bicocca”); Aurora Rasi (University of Rome “La Sapienza”). European Papers is a double-blind peer-reviewed journal. This Issue of the e-Journal (final on 30 April 2019) may be cited as indicated on the European Papers web site at Official Citation: European Papers, 2019, Vol. 4, No 1, www.europeanpapers.eu. ISSN 2499-8249 – European Papers (Online Journal) Registration: Tribunal of Rome (Italy), No 76 of 5 April 2016.

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European Papers A Journal on Law and Integration

Vol. 4, 2019, No 1

Editorial

The 2019 Elections and the Future Role of the European Parliament: Upsetting the Institutional Balance? p. 3

Articles

Special Section – The Achmea Case Between International Law and European Union Law edited by Ségolène Barbou des Places, Emanuele Cimiotta and Juan Santos Vara

Ségolène Barbou des Places, Emanuele Cimiotta, Juan Santos Vara, Achmea Between the Orthodoxy of the Court of Justice and Its Multi-faceted Implications: An Introduction 7

Ivana Damjanovic and Nicolas de Sadeleer, I Would Rather Be a Respondent State Before a Domestic Court in the EU than Before an International Investment Tribunal 19

Sonsoles Centeno Huerta and Nicolaj Kuplewatzky, On Achmea, the Autonomy of Union Law, Mutual Trust and what Lies Ahead 61

Christina Eckes, Some Reflections on Achmea’s Broader Consequences for Investment Arbitration 79

Quentin Declève, Achmea: Consequences on Applicable Law and ISDS Clauses in Extra-EU BITs and Future EU Trade and Investment Agreements 99

Mauro Gatti, Opinion 1/17 in Light of Achmea: Chronicle of an Opinion Foretold? 109

2 European Papers – A Journal on Law and Integration – Vol. 4, 2019, No 1

Special Section – Regulatory Competition in the EU: Foundations, Tools and Implications edited by Francesco Costamagna

Francesco Costamagna, Introduction p. 123

Agustín José Menéndez, The False Commodity in the European Game of Legal Chairs: Between the Ideal of Regulatory Competition and the Practice of Capitalism Triumphant 127

Christian Joerges, Sociological Shortcomings and Normative Deficits of Regulatory Competition 157

Maurizio Ferrera, Loyalty Matters: The Delicate Balance Between Jurisdictional Competition and Political Order 169

Francesco Costamagna, At the Roots of Regulatory Competition in the EU: Cross-border Movement of Companies as a Way to Exercise a Genuine Economic Activity or just Law Shopping? 185

Francesco Munari, Do Environmental Rules and Standards Affect Firms’ Competitive Ability? 207

Pieter Van Cleynenbreugel, Regulating Tax Competition in the Internal Market: Is the European Commission Finally Changing Course? 225

Dialogues

Solidarity and Conflict

Elise Muir, Institutionalising Solidarity: A Genuine Challenge for Europe 251

Pietro Masala and Fernando Valdés Dal-Ré, The Future of Social Europe and of European Integration at a Crossroads: How Can We Recover and Enforce Solidarity as a Fundamental Principle of European Constitutional Law (or Die)? 257

European Forum

Insights and Highlights 269

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European Papers www.europeanpapers.eu ISSN 2499-8249 Vol. 4, 2019, No 1, pp. 3-6 doi: 10.15166/2499-8249/306

Editorial

The 2019 Elections and the Future Role of the European Parliament: Upsetting the Institutional Balance?

The elections of May 26 have been welcomed with a sense of relief by the inhabitants of the European districts in Brussels and Strasbourg. If, on the eve of the elections’ day, the dominant mood was fear of a euro-sceptic landslide, that would have deepened the cleavage between peoples and elites and shaken at its roots the process of integration, this mood has gradually changed as this looming perspective faded away. It turned out to be almost enthusiastic as certainty materialized to have the majority of the Members of the European Parliament’s on the “right” side.

In a nutshell, the populist parties increased their shares of the ballots, but less than expected; the Große Koalition lost the absolute majority, but, with some adjustment, the Parliament will continue to be controlled by an integrationist majority. A final touch of optimism came from the turnout, which has significantly increased, thus bestowing more legitimacy on the resistance to the populist wave. One may presume that, with a haircut on austerity policies, some more emphasis on social policy, and a crackdown on immigration, business could continue as usual.

Things, however, may be more complex than that. The avoided danger of having the Parliament controlled by nationalist parties should not overshadow the profound implications of this elections day. In particular, two aspects ought to be seriously con-sidered, despite the fact that they are somewhat incoherent.

On the one hand, the elections, unlike their preceding ones, have been dominated by European, not domestic, themes and, in particular, by the fate of the integration pro-ject. On the other hand, precisely because of that, the European Parliament is now deeply divided between a pro-integration majority and a euro-sceptic minority, some-times labeled as sovereigntist. It is this divide that will probably have a major impact on the functioning of the European Parliament and, ultimately, on its role in the decision-making process of the Union.

As a matter of fact, traditionally the European Parliament elections have been dominat-ed by national issues, to the point that they have been perceived not much more than a mid-term test of the respective national parliamentary majorities. A common complaint echoed in the comments on the past elections was precisely the absence of a clear

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2 Editorial

mandate entrusted by the European constituency as to a political line giving guidance to the Parliament.

However, in spite of this apparent failure, the Parliament has carved out a role – in-creasingly significant indeed – in the complex EU institutional system. It has presented itself as the only genuine representative of the European citizenry, as opposed to the representatives of the executives of the Member States, symbolized by the two Coun-cils. To fulfil this noble vocation, the Parliament has relied on a vast majority, including Members of the European Parliament and political groups who fiercely oppose each other in the national political arena.

There are, of course, notable examples where this simple scheme did not apply. Noteworthy, this has frequently occurred in recent years, where the rise of euro-sceptic parties has become visible and prompted an unnatural alliance among Institutions that traditionally play different parts in the game. Many an observer was stunned by the un-expected failure of the Parliament to defend its prerogatives in some highly-sensitive political matters, in particular those concerning migration. However, apart from some misguided sense of deference to the Council, the Parliamentary role has been magni-fied precisely by its capacity to oppose the political direction of the Member States.

It is remarkable that a weak institution, elected by a number of different national con-stituencies generally uninterested in European affairs, on the basis of national agendas, has become a champion of the integration project. This is probably due to an extraordi-nary combination of factors: on the one hand, the high majority threshold required, under the founding treaties, for the Parliament to safeguard its prerogatives in the EU decision-making process; on the other hand, the tendency to represent collective or European in-terest as opposed to groups of interest organized on a national basis, represented within the Council.

Be that as it may, the tendency of the Parliament to act as a unitary actor, could be regarded as a hallmark of the European political system and as a distinctive trait of what is generally referred to as the EU institutional balance. One may wonder whether this can change after the 2019 elections day.

Something has certainly changed in the European political landscape. Although the elec-toral campaign still remained confined within the national constituencies, “Europe”, its role and its responsibilities, abruptly burst upon the political scene and will not leave it soon.

Not every single aspect of the integration, of course, was duly considered in that campaign. Whereas the EU activities mainly remained in the background, the most visi-ble and symbolic themes dominated the campaign, probably well beyond their real im-pact of the daily life of citizens. This is part, alas, of the contemporary tendency of the political competitors to overstate symbolical issues, and there is no reason way Europe must remain immune from it.

The 2019 Elections and the Future Role of the European Parliament: Upsetting the Institutional Balance ? 3

Nevertheless, the May 26 elections represent a significant turn in the political life of Europe. They have mainstreamed within the European Parliament the classical internal dynamics of parliamentarism, namely the opposition between majority and minority, that had remained largely theoretical in the previous parliamentary terms.

The disappearance of a large majority in Parliament sharing a common vision of the process of integration, and its replacement with a tight majority opposed to a strong and fierce “sovereigntist” minority, is an event capable to alter in depth the functioning of the EU political system. To secure this functioning, a more intense, if not organic, link between the majority in the Parliament and the majority in the Councils, may be necessary.

This chain of events may be welcomed by those who believe that consociational mechanisms are the symptoms of teething problems of the European political setting, which will disappear as soon as it matures in an evolved full-fledged political system.

In the view of this writer, such an evolution not only is not auspicable; it is also at odds with the constitutional setting of the EU and with its overarching principle of insti-tutional balance.

This principle, constantly referred to in the case law of the CJEU, is based on the in-dependence of each of the three main political Institution in the decision-making pro-cess of the Union. The European model of democracy is fed more from inter-institutional relations than from infra-institutional relations, such as the dialectic be-tween majority and minority within the Parliament. Taking independence seriously en-tails that the component-parts of each institution share a common conception of the process of integration and of its vocation to fulfil it.

In the case of the European Parliament, independence for decades meant inde-pendence of its Members from their national political allegiance and, therefore, from the dynamics of political interests which guide the conduct of the representatives of their respective national state within the Councils. If this premise were to fail, the role of the Parliament would be seriously endangered and, with it, also the principle of institu-tional balance which constitutes on the foundations of the EU political system.

To start with, will the new Parliament find the cohesion that proved decisive in its victorious confrontation with the European Council, at the beginning of the last term, concerning the designation of the President of the Commission?

The principle of institutional balance reflects one of the rare cases in history where law creates policy, and not vice versa. By assigning a distinct role to each political institution, and by conferring the powers necessary to discharge it, that principle has forced the political dynamics into the straitjacket of the EU Institutional design. As a result, the Eu-ropean Parliament finally has found its mission as the institution representing the in-terests of the European constituency, as opposed to those of the Member States, in the process of integration.

4 Editorial

The 2019 elections may reverse the direction of the European political tide. Instead of injecting new blood in, and of bestowing additional authority upon, the European Parliament, the Europeanisation of the elections may prompt, paradoxically, the oppo-site effect: to establish a permanent link between the majorities in the European Par-liament and the intergovernmental Institutions, and, by so doing, to undermine the au-thority of the former to the benefit of the latter. Even more paradoxically, it may expe-dite the transformation of the European Parliament, from one of the independent branches of the European political system to a verbose Parliamentary house, controlled by the executive and deprived of a real decisional autonomy. If this were the effect of the revolutionary elections of 2019, this would be the beginning of the end of the new model of democracy that has germinated in the European laboratories.

E.C.

European Papers www.europeanpapers.eu ISSN 2499-8249 Vol. 4, 2019, No 1, pp. 7-17 doi: 10.15166/2499-8249/297

Articles Special Section – The Achmea Case Between International Law and European Union Law edited by Ségolène Barbou des Places, Emanuele Cimiotta and Juan Santos Vara

Achmea Between the Orthodoxy of the Court of Justice and Its Multi-faceted Implications: An Introduction

TABLE OF CONTENTS: I. Introduction. – II. Achmea, from the perspective of international investment law spe-cialists. – III. An impressive set of consequences inferred from Achmea. – IV. Achmea and the European integration process.

I. European Papers has decided to open a debate on the Achmea case, in which the Court of Justice (CJ) found an inconsistency between provisions of a Bilateral Investment Treaty (BIT) containing an agreement to arbitrate and provisions of the TFEU.1 In its ground-breaking judgment of 6 March 2018, in Slowakische Republik v. Achmea BV, the CJ, sitting in Grand Chamber, ruled on the compatibility with Arts 18, 267, 344 TFEU of the arbitra-tion clause contained in Art. 8 of the BIT concluded in 1991 between the Netherlands and Czechoslovakia, and still applicable to Slovakia after the dissolution of Czechoslovakia in 1993 (hereafter NL-SK BIT). The clause enabled an investor from a State Party to bring proceedings before an ad hoc arbitral tribunal in the event of a dispute concerning in-vestments in the other State Party. In spite of the opinion given by the AG Mr Wathelet,2 the Court declared such an Investor-State dispute settlement (ISDS) provided by a BIT be-tween two Member States (so-called intra-EU BIT) incompatible with EU law, due to the adverse effect it has on the autonomy of the EU legal system. According to the Court, therefore, the arbitral tribunal lacked jurisdiction in the case.

Scholars from different disciplines have been invited to comment upon this ruling in the present Special Section. They have been asked to examine the judgment, to eval-uate its scope and to identify, as much as possible, its potential consequences. In so do-ing, European Papers aims to participate in the understanding of a ruling whose brevity contrasts with the importance of the effects it may have on international investment law and its relationships with EU law. One thus needs to engage in a dialogue with in-

1 Court of Justice, judgment of 6 March 2018, case C-284/16, Slowakische Republik v. Achmea BV [GC]. 2 Opinion of AG Wathelet delivered on 19 September 2017, case C-284/11, Slowakische Republik v.

Achmea BV.

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8 Ségolène Barbou des Places, Emanuele Cimiotta and Juan Santos Vara

ternational law scholarship. The CJ’s ruling in Achmea has indeed generated remarkably critical comments among international law scholars. The first objective of this Special Section is to understand to what extent the Achmea judgment has stretched the differ-ences between the logics of international law and EU law respectively. A second pur-pose is to tease out Achmea’s (still) very uncertain consequences. Last, the ambition is to provide a broader analysis of such judgment. As anticipated, strictly speaking Ach-mea is about investment arbitration and the compatibility of an intra-EU BIT with EU law. But it should also be viewed through a “law and integration” lens.

II. Not surprisingly, Achmea has received numerous and important critiques from both public and private international law specialists.3 These critiques revolve around four main arguments: the limited motivation of the ruling, the absence of coherence in the reasoning, the excess of radicalism of the CJ and the exclusivist – not to say expansion-ist – and outdated conception of EU law advocated by the Court.

3 See, for example, B. ARP, Slowakische Republik (Slovak Republic) v. Achmea B.V., in American Journal of

International Law, 2018, p. 466 et seq.; M. AUDIT, ECJ, Note on Judgment of the Court (Grand Chamber), March 6th, 2018, Slowakische Republik v. Achmea B.V., Case C-284/16, in Revue Trimestrielle de Droit Finan-cier, 2018, p. 28 et seq.; M.R. CALAMITA, Sulla incompatibilità della “clausola ISDS” degli “intra-EU” BITs con il diritto dell’Unione europea: il caso Achmea, in Diritto pubblico comparato ed europeo on line, 2018, p. 467 et seq., www.dpceonline.it; J. CAZALA, L’incompatibilité avec le droit de l’Union européenne du système d’arbitrage investisseur-Etat contenu dans un traité bilatéral d’investissement intra-UE. A propos de l’arrêt Slowakische Republik c. Achmea du 6 mars 2018 (C-284/16), in Revue Trimestrielle de Droit Européen, 2018, p. 597 et seq.; E. CIMIOTTA, The First Ever Interpretative Preliminary Ruling Concerning the Validity of an Inter-national Agreement Between EU Member States: The Achmea Case, in European Papers, 2018, Vol. 1, No 1, p. 337 et seq.; A. DELGADO CASTELEIRO, El fin de los TBI intra-UE: una breve reflexión sobre la sentencia Ach-mea, in Aquiescencia, 8 March 2018, www.aquiescencia.net; X. FERNÁNDEZ PONS, La incompatibilidad con el Derecho de la Unión Europea del arbitraje inversor-Estado previsto en tratados bilaterales de inversión en-tre Estados miembros. Comentario a la sentencia del TJUE sobre el asunto Achmea, su contexto y sus impli-caciones, in Revista General de Derecho Europeo, 2018, p. 1 et seq.; L. FUMAGALLI, Meccanismi ISDS negli in-tra-EU BITs: la Corte di giustizia pone fine a un lungo dibattito. E ora?, in Rivista di Diritto Internazionale, 2018, p. 896 et seq.; E. GAILLARD, L’affaire Achmea ou les conflits de logique, in Revue Critique de Droit Inter-national Privé, 2018, p. 628 et seq.; B. HESS, The Fate of Investment Dispute Resolution after the Achmea De-cision of the European Court of Justice, in Max Planck Institute Luxembourg for Procedural Research Work-ing Papers Series, no. 3, 2018, www.mpi.lu; J. HILLEBRAND POHL, Intra-EU Investment Arbitration after the Ach-mea Case: Legal Autonomy Bounded by Mutual Trust?, in European Constitutional Law Review, 2018, p. 678 et seq.; P. IANNUCCELLI, La Corte di giustizia e l’autonomia del sistema giurisdizionale dell’Unione europea: quousque tandem?, in Il Diritto dell’Unione europea, 2018, p. 281 et seq.; I. IRURETAGOIENA AGIRREZABALAGA, Mecanismos de arreglo de diferencias entre inversores y estados (ISDS) y la autonomía del ordenamiento jurídico de la Unión Europea: ¿una ecuación (im)posible?, in Revista de Derecho Comunitario Europeo, 2018, p. 219 et seq.; E. LANOTTE, Arrêt «Achmea»: une décision de principe?, in Journal de Droit Européen, 2018, p. 268 et seq.; F. MUNARI, C. CELLERINO, EU Law is Alive and Healthy: The Achmea Case and a Happy Good-bye to Intra-EU Bilateral Investment Treaties, in SIDIBlog, 17 April 2018, www.sidiblog.org.; Y. NOUVEL, Note sous CJUE Achmea, 6 mars 2018, C-284/16, in Journal du Droit International, 2018, p. 903 et seq.; S. WUSCHKA, In-vestment Protection and the EU after Achmea, in Zeitschrift für Europarechtliche Studien, 2018, p. 25 et seq.

http://www.dpceonline.it/index.php/dpceonline/article/view/543https://aquiescencia.net/2018/03/08/el-fin-de-lostbi-intra-ue-una-breve-reflexion-sobre-la-sentencia-achmeahttps://www.mpi.lu/research/working-paper-series/2018/wp-2018-3/http://www.sidiblog.org/2018/04/17/eu-law-is-alive-and-healthy-the-achmea-case-and-a-happy-good-bye-to-intra-eu-bilateral-investment-treaties

Achmea Between the Orthodoxy of the Court of Justice and Its Multi-faceted Implications 9

As regards, first, the brevity of the reasoning, the CJ’s ruling is unanimously criticised for being elliptical. This is highly problematic given that the validity of nearly 180 intra-EU BITs was at stake. The Court had indeed to decide whether an ad hoc arbitral tribunal, such as that referred to in Art. 8 NL-SK BIT, could be regarded as a “court or tribunal of a Member State” within the meaning of Art. 267 TFEU. In his Opinion,4 the AG had provided many arguments to maintain that such a tribunal was indeed a “court or tribunal” under Art. 267 TFEU. The tribunal meets the conditions required by the CJ’s case-law (it is based upon law, is permanent, has compulsory jurisdiction and sufficient guarantees of inde-pendence and impartiality). In comparison, the CJ is more than concise. It only stressed that the arbitral tribunal is not part of the judicial system of the Netherlands nor of Slo-vakia because “it is precisely the exceptional nature of the tribunal’s jurisdiction compared with that of the courts of those two Member States that is one of the principal reasons for the existence of Article 8 of the BIT”.5 Needless to say, this (non)argument cannot con-vince the commentators. In the same vein, whereas the AG, the German Government and the referring German judge had insisted on affirming that Art. 344 TFEU does not apply to disputes between individuals and between individuals and Member States, the CJ accept-ed, but only implicitly, the applicability of Art. 344 TFEU in the circumstances of the case. Last but not least, the Court remained silent on a very central point: the possibility that the arbitration clause contained in Art. 8 NL-SK BIT would create a discrimination among investors on grounds of their nationality. The German judge had underlined that unlike Dutch and Slovakian investors, those from other Member States are unable to bring pro-ceedings before an arbitral tribunal instead of a domestic court. This represents a consid-erable disadvantage and may constitute discrimination prohibited by Art. 18 TFEU. Amaz-ingly the Court omitted to answer on this central question.

The lack of coherence is another alleged flaw of the judgment. There is, firstly, a de-fective logic in the Court’s reasoning. The solution given by the CJ is indeed mainly based on the argument that an arbitral tribunal, such as that envisaged by Art. 8 NL-SK BIT, is not entitled to make a reference for a preliminary ruling pursuant to Art. 267 TFEU. Hence the adverse effect on the autonomy of the EU legal order: it cannot be guaranteed that an arbitral award is subject to review by a court of a Member State nor, as a result, that the questions of EU law that the arbitral tribunal may have to address are submitted to the CJ by means of a reference for a preliminary ruling pursuant to Art. 267 TFEU. One can only note the paradox of enouncing this impossibility in a case… which was precisely born from a preliminary reference made by the German judge be-fore the CJ. A number of commentators have stressed another incoherence in the Court’s reasoning: while it refers to the specific (“exceptional”) nature of investment ar-bitration tribunals at the beginning of its judgment, this specificity (in particular the

4 Opinion of AG Wathelet, Achmea [GC], cit. 5 Ibidem, para. 45.


rules applied and interpreted by arbitral tribunals) is passed over in silence when the CJ comes to evaluate whether the arbitral tribunal under Art. 8 NL-SK BIT has the possibil-ity of applying and interpreting EU law.

Radicalism, for many international law specialists, is a third shortcoming of the rul-ing. Indeed, the CJ omitted to consider the possible alternatives to the declaration of in-validity of the arbitration clause at stake. The Court could have distinguished, for in-stance, between arbitral tribunals resorting to the jurisdiction of third States and those resorting to the jurisdiction of Member States. It also had the opportunity to make the validity of the clause conditional upon the possibility, for a national judge, of reviewing the compatibility of the arbitral award with EU law.6 Another viable option, for the Court, was to limit the scope of its decision to the (rare) cases in which arbitral tribunals are actually asked to apply or interpret EU legal provisions. However, the CJ preferred to maintain a less nuanced position.

The fourth – and probably more fundamental – critique is related to the so-called exclusivist, expansionist and outdated conception of the autonomy of the EU legal or-der. Critiques are sharp: the Court is under attack for having forgotten that, under in-ternational law, there is no hierarchy between international treaties.7 The main cri-tiques target the part of the judgment which deals with the applicability of Art. 344 TFEU. The CJ ruled that, pursuant to the NL-SK BIT, the arbitral tribunal is called to rule only on potential infringements of the NL-SK BIT but to this end it must, in accordance with Art. 8, para. 6, NL-SK BIT, take into account the law in force in the concerned Con-tracting Party and any relevant agreements between the Contracting Parties. Unsurpris-ingly, the CJ held that EU law must be regarded both as forming part of the law in force in every Member State and as deriving from an international agreement between Member States: “it follows that on that twofold basis the arbitral tribunal referred to in Art. 8 of the BIT may be called on to interpret or indeed to apply EU law, particularly the provisions concerning the fundamental freedoms, including freedom of establishment and free movement of capital”.8 It is this last sentence that has generated the bulk of criticism. E. Gaillard, with many others, stressed that in most cases arbitral tribunals do not apply nor interpret EU law.9 Likewise, Mr Wathelet, several Member States and the German referring judge argued that the fact that EU law is part of the law applicable to disputes between investors and States in accordance with Art. 8, para. 6, NL-SK BIT does not mean that those disputes concern the interpretation or the application of the EU

6 E. GAILLARD, L’affaire Achmea, cit., p. 628. 7 M. AUDIT, ECJ, Note on Judgment of the Court (Grand Chamber), March 6th, 2018, cit., p. 26. See also,

for an analysis of the judgment as regards the rules of Treaty conflicts, V. BARAUSOVA, Slovak Republic v. Ach-mea from a Public International Law Perspective: Is State Consent to Arbitrate Under Intra-EU BITS Still Val-id?, in European Investment Law and Arbitration Review Online, 29 November 2018, www.brill.com.

8 Achmea [GC], cit., para. 42. 9 E. GAILLARD, L’affaire Achmea, cit., p. 632.

https://brill.com/search?f_0=author&q_0=Victoria+Barausovahttps://brill.com/view/journals/eilo/eilo-overview.xml


founding Treaties. And this is so for two main reasons. First, the arbitral tribunal has ju-risdiction only to rule on alleged breaches of the NL-SK BIT. Second, the scope of the NL-SK BIT and the legal rules that it introduces, are not the same as those of the TEU and the TFEU.10 In the same vein, M. Audit insists on the fact that the scope of the NL-SK BIT is wider than that of the EU founding Treaties as it covers State acts or omissions likely to impact a foreign investor and its investment; for him, these rules do not apply in cases where European Treaties are enforced.11 As a result, the Court is believed to be “expansionist”. Many commentators agree that, apart from State aid law (it could hap-pen, for instance, that a defendant Member State argues that a national State aid had to be modified in application of EU law), the application and interpretation of EU law by an arbitral tribunal such as that provided by the NL-SK BIT is mostly hypothetical. Hence the critique addressed to the Court: a simple eventuality cannot be sufficient to trigger a reaction founded on the logic of exclusivism. Lastly, Y. Nouvel12 questions what he thinks is the blind and outdated logic of the CJ: isn’t it pure utopia, he asks, to assume that EU law can be insulated from external bodies? In daily life, the EU participates in the activities of international organisations and in the adoption of international agree-ments. Consequently, it frequently happens that non-EU entities provide their own in-terpretation of EU law. The attitude of the Court in Achmea, according to Nouvel, can best be described as a utopian project of normative autarchy. In sum, from the per-spective of both public and private international law, the Achmea judgment is flawed and gives evidence of the problematic closure of EU law.

III. It is likewise remarkable that, shortly after the CJ delivered its judgment, nearly all stakeholders – including Member States,13 EU institutions, arbitral tribunals, interna-tional law scholars, EU law scholars – have striven to draw from Achmea the fullest and most far-reaching set of consequences in all sorts of fields – whether normative, judicial and even political – perhaps going somehow beyond the purposes of the CJ itself.

First, as regards a normative level, questions have been raised whether the applica-bility and validity not only of the NL-SK BIT, but also of other intra-EU BITs and even ex-tra-EU BITs concluded between Member States and third countries, as well as of trade and investment agreements concluded between the EU itself and third-countries (such as the Energy Charter Treaty of 17 December 1994 (ECT) and the Canada-EU Compre-hensive Economic and Trade Agreement of 30 October 2016 (CETA)), may be somehow

10 Ibidem, p. 173. 11 M. AUDIT, ECJ, Note on Judgment of the Court (Grand Chamber), March 6th, 2018, cit., p. 32. 12 Y. NOUVEL, Note sous CJUE Achmea, cit., p. 917. 13 Declaration of the Member State of 15 January 2019 on the legal consequences of the Achmea

judgment and on investment protection, www.ec.europa.eu.


directly affected by Achmea, if and to the extent they contain ISDS clauses whose con-tent and effects are similar to those of Art. 8 NL-SK BIT.

Second, the same question has been raised – at a judicial level – with respect to both ongoing and forthcoming proceedings before international and arbitral invest-ment tribunals and to the prospect of domestic judges, whenever called upon to rule on the lawfulness of rulings medio-tempore eventually issued by such investment tribu-nals, refraining from executing or enforcing them or from declaring them void.

Third – at a political level – the necessity has been held, especially by the European Commission, on the one hand of releasing intra-EU BITs, extra-EU BITs and instruments of trade and investment cooperation between the EU and third-countries from ISDS mechanisms, and, on the other hand, of conceiving institutional and normative novel-ties, such as, just to name a very well-known example, the proposed establishment of a Multilateral Investment Court (MIC). The purpose of this Court is to have a permanent international body that can settle investment disputes between investors and States. The MIC would replace the current system of ISDS based on ad hoc arbitration. Accord-ing to its proponents, the MIC is meant to enhance predictability and consistency, en-sure correctness, eliminate the ethical concerns in the current system and effectively address the problem of excessive costs and duration, by bringing key features of do-mestic and international courts to investment arbitration. On 13 September 2017, the Commission recommended the opening of the negotiations on the establishment of the MIC14 and on 20 March 2018 – just two weeks after the Achmea judgment was given – the Council adopted the negotiating directives authorizing the Commission to negotiate, on behalf of the EU, an agreement on said project.15 On the basis of the mandate granted by the Council, the Commission started talks with its partners at the United Na-tions Commission on International Trade Law (UNCITRAL). The proposed MIC is meant to adjudicate disputes under both future and existing investment treaties and to re-place the bilateral investment court systems included in EU trade and investment agreements. While talks are currently ongoing and of course it is still uncertain whether they will lead to the desired reforms, or to any changes at all, so far the EU has made clear that it would favour a permanent international institution with an appeal mecha-nism; allowed to rule on disputes arising under future and existing investment treaties that States chose to submit to its jurisdiction; composed of full-time, tenured, qualified and independent adjudicators; enabled to conduct proceedings in a transparent man-ner and to issue decisions expected to be effectively enforced.

As one can easily see, Achmea has caused a considerable stir in the EU. 14 Commission Recommendation for a Council Decision COM(2017) 493 final of 13 September 2017

authorising the opening of negotiations for a Convention establishing a multilateral court for the settle-ment of investment disputes.

15 Council Document 12981/17 ADD 1 DCL 1 of 20 March 2018 on negotiating directives for a Con-vention establishing a multilateral court for the settlement of investment disputes.


IV. Because of all these potential effects on investment law and arbitration, there are good reasons to believe that Achmea will remain in law textbooks as a landmark case on the relationship between EU law and international investment law. But there is another pos-sible reading: one that views the judgment as a lecture of EU constitutional law. The cen-ter of gravity of the judgment could well be in its first part, in which the CJ restated the crucial importance of the autonomy of the EU legal order and of the principles governing EU legal life (supremacy, mutual trust and sincere cooperation). The Court was also very attentive to the preservation of the “essential characteristics of the EU and its law”, to “the constitutional structure of the EU” and to the “very nature of that law”.16 Thus Achmea seems to be much more than a mere judicial ruling, since it could launch somehow a new stage of the European integration process, inaugurating what perhaps may be called a “constitutional moment”. Achmea is not just a judgment on foreign direct investment or on related dispute settlement modalities among two or more Member States. As seen above, it prompted important normative amendments not only within the EU legal con-text but also in international investment arbitration at large. Likewise, Achmea depicts the muscular attitude of the CJ in the international adjudication’s landscape and calls into question the relationship between EU law and international investment law as regards investor-State dispute settlement. This is proved by the strong opposite views maintained by international investment law and EU law specialists about the legitimacy and correct-ness of the Court’s reasoning and conclusions.

The progression of the Court’s reasoning must be followed to uncover the “constitu-tional” objective pursued in Achmea. The CJ first holds that EU law is “based on the fun-damental premise that each Member State shares with all the other Member States, and recognizes that they share with it, a set of common values on which the EU is founded, as stated in Article 2 TEU”.17 Then the Court deals with the means at its dis-posal to protect the foundations of the EU legal order: “in order to ensure that the spe-cific characteristics and the autonomy of the EU legal order are preserved, the Treaties have established a judicial system intended to ensure consistency and uniformity in the interpretation of EU law”.18 To put it differently, the integrity of EU law – and its founda-tions – are protected by a collective endeavor: altogether, domestic judges and the CJ participate in the full application of EU law and the effective judicial protection of the rights it confers upon individuals. The Court’s focus, at this stage of the reasoning, is on what it names the European “judicial system”. The systemic aspect of the judicial organ-ization is decisive: the CJ describes the European judicial organization as a network of judges, aimed at “setting up a dialogue between one court and another, specifically be-tween the Court of Justice and the courts and tribunals of the Member States”, with the

16 Achmea [GC], cit., para. 33. 17 Ibidem, para. 34. 18 Ibidem, para. 35.


object of “securing uniform interpretation of EU law, thereby serving to ensure its con-sistency, its full effect and its autonomy”.19 The objective pursued by the Court in Ach-mea is clearly to insulate the European “judicial system” from disintegrative effects. This is why the CJ is obsessed by the preliminary ruling procedure, as it is best suited to en-sure a judicial dialogue that can secure interpretation of EU law consistent with the Member States’ common values.

Under this perspective, Achmea may be considered part of a broader judicial devel-opment. Its full appraisal suggests indeed that one read it in conjunction with Associao Sindical dos Juizes Portugueses20 and Minister for Equality for Justice and Equality.21 In these cases, which have arisen from the context of the rule of law crisis, the Court puts the emphasis on the independence of domestic judges. Judicial independence is indeed the pre-condition for a European judicial dialogue. Achmea may also be related to Commission v. France,22 in which, for the first time, the CJ found that a court against whose decisions there is no judicial remedy should have requested a preliminary ruling pursuant to Art. 267 TFEU in order to avert the risk of an incorrect interpretation of EU law. Since the French Conseil d’État failed to make such a reference, although the cor-rect application of EU law in its judgments was not so obvious as to leave no scope for doubt, an infringement of Art. 267 TFEU occurred. Commission vs France met with fierce criticism in France but it gives evidence of the Court’s willingness to protect, as much as possible, the judicial dialogue among domestic judges and the Court. This dia-logue implies that all courts in the system respect their respective roles. Little by little – and Achmea is a crucial step forward – the CJ is designing the main features of what can be termed the “European model of justice”.

This is why the facts and circumstances of the Achmea case were so challenging. The Court had to determine to what extent – if at all – Member States could rely on a parallel dispute settlement mechanism without putting at risk the proper functioning of the European judicial system. In particular, the CJ had to deal with two problematic as-pects of investment arbitration resulting from the conditions laid down in the NL-SK BIT.

It first raised concerns about the limited capacity of domestic judges to review the compatibility of arbitral awards with provisions of EU law, since the possibility to seek such review was fully dependent on the law of the seat of arbitration. In the Achmea case, it was the choice to have the seat in Germany that alone enabled Slovakia to seek judicial review of the arbitral award, by instituting proceedings before a German judge.

19 Ibidem, paras 35 and 37. 20 Court of Justice, judgment of 27 February 2018, case C-64/16, Associao Sindical dos Juizes Portu-

gueses [GC]. 21 Court of Justice, judgment of 4 December 2018, case C-378/17, Minister for Equality for Justice and

Equality [GC]. 22 Court of Justice, judgment of 4 October 2018, case C-416/17, Commission v. France.


But what would have happened if the parties had chosen another Member State, or a third State, as a seat of arbitration?

A second flaw concerned the scope of the judicial review, since it could be exercised only to the extent that German law permitted. Such review was limited to the validity of the arbitration agreement under applicable law in Germany and the consistency with pub-lic policy of the recognition or enforcement of the arbitral award. Unsurprisingly the Court found this to be problematic, as it did not correspond to the requirement that an arbitral award is, “in accordance with Article 19 TEU, subject to review by a court of a Member State, ensuring that the questions of EU law which the tribunal may have to address can be submitted to the Court”.23 The CJ thus requires full capacity of the host State’s domes-tic judges to review the legality of arbitral awards, at least as regards the application and interpretation of EU law. This high standard of justice was justified by the fact that EU val-ues and citizen’s rights are at stake together with mutual trust: “Article 8 of the BIT is such as to call into question not only the principle of mutual trust between the Member States but also the preservation of the particular nature of the law established by the Treaties, ensured by the preliminary ruling procedure provided for in Article 267 TFEU”.24

The BIT provision enabling an investor to bring proceedings before an arbitral tribu-nal raised another, very serious, difficulty. E. Gaillard25 rightfully speaks about a “clash of logic” between investment law justice and EU law justice. Under investment law, the ob-jective is to protect investors from what is perceived to be a “biased” justice: national judges are not assumed to be impartial. In order to guarantee a neutral judicial mecha-nism, arbitration is made fully independent from any national judicial system. This is what the CJ describes as being “precisely the exceptional nature” of the arbitral tribunal’s juris-diction compared with that of Slovakian and Dutch courts. It is precisely due to this pecu-liarity that the arbitral tribunal established pursuant to the NL-SK BIT could not be quali-fied as a “court or tribunal of a Member State” within the meaning of Art. 267 TFEU. There-fore, despite the value of his arguments, the AG Mr Wathelet missed the point. While he strived to convince the Court that the arbitral tribunal was a “tribunal”, he omitted that the essential issue was, instead, to determine whether the arbitral tribunal set up by the NL-SK BIT met the conditions to be qualified as a “national” adjudication. The focus in Achmea was not on the judicial but on the national nature of the arbitral tribunal.

The CJ was coherent with its previous case law. In Ascendi Beiras Litoral,26 the Court derived the status of “court or tribunal of a Member State” of the Tribunal Arbitral Tributário from the fact that it was part of the system of judicial resolution of tax dis-

23 Achmea [GC], cit., para. 50. 24 Ibidem, para. 58. 25 E. GAILLARD, L’affaire Achmea, cit., p. 628. 26 Court of Justice, judgment of 2 June 2014, case C-377/13, Ascendi Beiras Litoral e Alta, Auto Estra-

das das Beiras Litoral e Alta.


putes provided for by the Portuguese Constitution. In Parfums Christian Dior,27 the Court even accepted that a court common to a number of Member States, such as the Benelux Court of Justice, would refer questions for a preliminary ruling pursuant to Art. 267 TFEU in the same way as domestic judges of any one of the concerned Member States. In short, according to the CJ, the capacity to belong to the European judicial sys-tem does not depend on a specific structure or institutional setting but on the integra-tion into the national judicial system of at least one Member State.

In sum, Achmea is not simply a case about international investment law and EU law. It is about models of justice. Several investment law specialists have read Achmea as provid-ing a negative value judgment on arbitration. Their analysis seems to be indirectly sup-ported by the European Commission’s 2018 communication on the protection of intra-EU investment. It underlines that, unlike the mechanisms envisaged by intra-BITs, the EU of-fers a “complete and exhaustive system” of judicial remedies, which affords full protection of fundamental rights and “is not only aimed at compensating investors after the violation has taken place”, but also “at the prevention or resolution of violations of their rights”.28 But the CJ is more nuanced. Its focus is not on the merits or drawbacks of arbitral justice as such. It is on the capacity of arbitral justice mechanisms, as organized by an intra-EU BIT, to be adapted to the requirements of EU justice, which is organized as a “system”.

Furthermore, the intense defence of the autonomy of the EU legal order in Achmea allowed the CJ to support another policy pursued by the Commission, which shortly af-ter the entry into force of the Lisbon Treaty, and the inclusion of direct foreign invest-ments in the common commercial policy under Art. 207 TFEU, urged the Member States to terminate all intra-EU BITs still in force, but without any success.29 The Commission considered intra-EU BITS, due to their nature of bilateral differentiated regimes on in-vestments, as an anomaly vis-à-vis the uniform integration of markets in Member States, as well as the uniform interpretation and effective application of EU rules on free movement of capitals and on the right of establishment.

In view of all this, Achmea cannot be understood in isolation from the context of the rule of law crisis and the disintegrative forces currently threatening the EU. The CJ en-deavors to protect the Union and EU law from surreptitious forms of disintegration, coming from direct attacks on justice or from competing models of justice that do not meet the high standards of EU justice, as shaped by the Court itself. Whatever its flaws, Achmea is an important case as it provides insights on the kind of Justice that is and ought to be promoted in the EU.

27 Court of Justice, judgment of 4 November 1997, case C-337/95, Parfums Christian Dior. 28 Communication COM(2018) 547 final of 19 July 2018 from the Commission concerning the protec-

tion of intra-EU Investment. 29 Commission press release IP/15/5198 of 18 June 2015, europa.eu.

http://europa.eu/rapid/press-release_IP-15-5198_en.htm


However, in doing this, the risk is that the CJ makes the EU a closed legal system, grounded on the autistic defense of its values, its fundamental freedoms and its mecha-nisms of judicial protection. The EU could thus be shaped as an overconfident organiza-tion, having a growing mistrust of other and different legal regimes of investment protec-tion. Such clinging policy might prove difficult to reconcile with the EU’s need for interna-tional trade relations, unless and until it proves able to enforce its economic and political power vis-à-vis its commercial partners, as today most international trade and investment agreements are far-reaching and provide for ISDS-like mechanisms. Due to Achmea and the ensuing complexities of the EU legal system, the EU could run the risk of being per-ceived as a too demanding partner. It seems that in the much-awaited opinion 1/17 on the compatibility with EU law of the investor-State dispute settlement mechanism provid-ed for by CETA,30 which unfortunately could not been taken into account by the partici-pants to this Special Section the Court has wisely avoided these pitfalls…

Ségolène Barbou des Places*

Emanuele Cimiotta** Juan Santos Vara***

30 Court of Justice, opinion 1/17 of 30 April 2019. * Professor of Public Law, Université Paris 1 Panthéon Sorbonne,

[email protected]. ** Assistant Professor of International Law, Sapienza University of Rome,

[email protected]. *** Professor of International Law and International Relations, University of Salamanca,

[email protected].

mailto:[email protected]:[email protected]:[email protected]

European Papers www.europeanpapers.eu Vol. 4, 2019, No 1, pp. 19-60

ISSN 2499-8249 doi: 10.15166/2499-8249/287

Articles Special Section – The Achmea Case Between International Law and European Union Law edited by Ségolène Barbou des Places, Emanuele Cimiotta and Juan Santos Vara

I Would Rather Be a Respondent State Before a Domestic Court in the EU

than Before an International InvestmentTribunal

Ivana Damjanovic* and Nicolas de Sadeleer**

TABLE OF CONTENTS: I. Introduction. – II. Who trumps who? – II.1. Is EU law autonomous? – II.2. EU law and Member States’ BITs. – II.3. The peculiar case of the ECT. – III. Achmea or how international investment tribu-nals do not understand EU law. – III.1. Why investment tribunals do not have jurisdiction in all intra-EU dis-putes? – III.2. The Advocate General’s Opinion is not legally binding and preliminary ruling judgment only answers the questions asked. – III.3. Why is commercial arbitration different? – IV. Who fragments what? – IV.1. The peculiar case of the ECT again: fragmentation or integration? – IV.2. Why is intra-EU context differ-ent to extra-EU? – V. Why autonomy matters? – V.1. It matters for EU relationship with international courts. – V.2. It matters for EU integration. – V.3. It matters for practical reasons of enforcement. – VI. Conclusion.

ABSTRACT: In its landmark judgment in the case of Achmea (judgment of 6 March 2018, case C-284/16 [GC]), the Court of Justice adjudicated that Investor-State Dispute Settlement (ISDS) ad-versely affects the autonomy of EU law. Accordingly, ISDS clauses in international investment agreements that contravene Arts 267 and 344 TFEU and the principles of mutual trust and sincere cooperation enshrined in Arts. 19, para. 1, and 4, para. 3, TEU are inapplicable under EU law. How-ever, the reasoning of the Court of Justice in Achmea did not convince international investment tribunals that they lack jurisdiction in intra-EU investment disputes. This opposition calls for clarifi-cation of the different principles underpinning the EU legal order and international investment law. This Article presents a debate between these two legal orders, which unfolds around three sepa-rate, albeit related issues: the status and applicability of the EU and the Member States’ interna-

* Ph.D. Candidate, Centre for European Studies, Australian National University,[email protected]. Guest Researcher, St. Louis University, Brussels. Her research is support-ed by the Australian Government Research Training Program Scholarship.

** Professor of European Union Law, Jean Monnet Chair, St. Louis University, Brussels, [email protected].

http://www.europeanpapers.eu/https://search.datacite.org/works?query=%222499-8249%22http://www.europeanpapers.eu/en/content/e-journal/EP_eJ_2019_1https://search.datacite.org/works/10.15166/287mailto:[email protected]:[email protected]

20 Ivana Damjanovic and Nicolas de Sadeleer

tional agreements within the EU legal order; the manner in which the Achmea judgment must be interpreted and its application in the international investment law context; and the meaning and relevance of the concept of the autonomy of EU law as the key issue in defining the relationship between EU law and international investment law.

KEYWORDS: autonomy of the EU legal order – international investment law – Arts 267 and 344 TFEU – mutual trust – compatibility of ISDS with EU law – rule of law.

I. Introduction

This Article is a debate between the EU legal order and international investment law. It is a debate between two legal systems, which share similar foundations but have none-theless, different objectives and methods of reasoning. These differences have led to mutual tensions, with their full consequences yet to be revealed. In its essence, this de-bate is a discussion about the validity of the Investor-State Dispute Settlement (ISDS) clauses encapsulated in intra-EU bilateral investment treaties (BITs) and the Energy Charter Treaty (ECT) under EU law. These international investment agreements were concluded between mostly Western EU Member States and the Central and Eastern Eu-ropean States during the 1990s in order to protect Western States’ investors in the new-ly open markets of the former Comecon. At that time they were extra-EU international investment agreements, concluded between EU Member States and third States. From 2004, with the progressive accession of the Central and Eastern European States to the EU, they have become intra-EU BITs. There are still 181 of these agreements in force.1

The debate between these two legal orders commenced soon after the main en-largement, around the year 2006, when the European Commission noted “arbitration risks and discriminatory treatment of investors” stemming from intra-EU BITs, whose con-tent has partly been “superseded by Community law upon accession”. The Commission thus invited the Member States to review the need for these agreements “in order to avoid legal uncertainties”.2 The debate has intensified since, reaching its climax in March 2018 with the Achmea judgment delivered by the Grand Chamber of the CJEU, in which the Court ruled that the ISDS clause in the Netherlands-Slovakia BIT is incompatible with EU law.3 The consequences of the Achmea decision remain controversial and the subject of ever opposing views about its relevance for investment treaty arbitration in the EU.

1 United Nations Conference on Trade and Development (UNCTAD), Investment Policy Hub, invest-

mentpolicyhub.unctad.org. Only two BITs were concluded between “old” Member States: 1961 Germany – Greece BIT and 1980 Germany – Portugal BIT.

2 Economic and Financial Committee (EFC), 2007 Annual EFC Report to the Commission and the Council on the Movement of Capital and the Freedom of Payments of 23 November 2007, ECFIN/CEFCPE(2007)REP/55240, para. 14.

3 Court of Justice, judgment of 6 March 2018, case C-284/16, Achmea [GC].

https://investmentpolicyhub.unctad.org/IIAhttps://investmentpolicyhub.unctad.org/IIA

I Would Rather Be a Respondent State Before a Domestic Court in the EU 21

In broader terms, this is a debate about the autonomy of EU legal order and its re-lationship with international law in general, and investment law in particular. As pre-sented in this Article, the debate will oppose two visions on who should have the au-thority to adjudicate investment disputes between investors from a EU Member State and another EU Member State. The notion of autonomy is the central issue and at the same time the key misunderstanding of this debate. While EU law claims its autonomy, which cannot be adversely affected by international law, international investment law shows little interest in supporting such vision. Indeed, according to investment lawyers, EU law is embedded in a domestic or a regional context. Accordingly, this legal order is, in any case, subordinated to international law.

In more general terms, lawyers have a propensity to claim the autonomy of their legal orders. As autonomy goes hand in hand with national sovereignty, it comes as no surprise that every sovereign State asserts the autonomy of its law. At this stage, however, the EU has no sovereignty. It is neither a federation nor a confederation, let alone an independ-ent State. Yet, it claims the autonomy of its legal order with respect to both the legal order of its 28 Member States and international law, justifying it by the constitutional structure of the EU and the very nature of EU law, which stems from international law. The auton-omy has been defined either as “a normative axiom”4 or as a “central constitutional prin-ciple”.5 Moreover, EU law claims its primacy over domestic laws of its Member States. Such vision however, has not been immediately or unconditionally accepted by legal con-stituencies of all Member States. Only recently, in Germany and France, the Bundesver-fassungsgericht (Federal Constitutional Court) and the Conseil Constitutionnel respective-ly, have been referring questions for preliminary rulings to the CJEU.6 This trend is further exacerbated in dualist legal regimes, shared by several Member States, such as the UK, Italy, and Ireland. More cynical observers would note that this reluctance in accepting the prevalence of EU law over domestic laws of Member States has even resulted in the ex-treme scenario of Brexit. While most of the Member States have not been that extreme, in reality the authority of EU law over constitutional laws of Member States is tolerated ra-ther than embraced by national constitutional courts.

For pedagogical reasons, this debate espouses a fictional dimension.7 Two parties argue their case: on the one hand, an imaginary Professor of EU law, Mr Van Gend en Loos, convinced by the soundness of the CJEU case-law regarding the autonomy of the

4 A. VON BOGDANDY, J. BAST, Principles of European Constitutional Law, Oxford: Hart Publishing, 2010, p. 39. 5 E. PAASIVIRTA, European Union and Dispute Settlement: Managing Proliferation and Fragmentation,

in M. CREMONA, A. THIES, R.A. WESSEL (eds), The European Union and International Dispute Settlement, Ox-ford: Hart Publishing, 2017, p. 32.

6 M. BLANQUET, Le dialogue entre les juges constitutionnels et la Cour de justice: enfin des mots, tou-jours des maux?, in B. BERTRAND, F. PICOD, S. ROLAND (dir.), L’identité du droit de l’Union européenne. Mé-langes en l’honneur de Claude Blumann, Brussels: Bruylant, 2015, p. 288 et seq.

7 Any resemblance to real characters is unintentional and accidental.


EU legal order; on the other, an investment arbitrator, Ms Icsid, considering that EU law cannot ever trump international investment law. How will this debate proceed? Our protagonists will tackle three issues. Firstly, they will introduce the concept of EU au-tonomy and, through its lenses, discuss the relationship between EU law and interna-tional law. In this respect, the status and applicability of international agreements con-cluded by the EU and the Member States within the EU legal order is examined (section II). Secondly, the debate will continue by focusing on the Achmea judgment, which is at the core of controversy between international investment lawyers and EU lawyers. In this regard, in section III the two protagonists disagree on the effects of the Achmea judgment on jurisdictional issues in intra-EU disputes. Their debate then moves towards the interpretation of the Achmea judgment by various investment tribunals and its im-pact on international law, with particular focus on the ECT (section IV). As a third and final issue, the debate returns to the autonomy of the EU legal order, at this point ex-plaining its relevance, by focusing on EU relationship with other international courts; European integration more generally; and the enforcement of intra-EU investment awards in more practical terms (section V). For each issue, Professor Van Gend en Loos will attempt to convince Ms Icsid why she should give up her jurisdiction in intra-EU in-vestment disputes whilst she will, as a matter of course, defend her jurisdiction by questioning the relevance of EU law in investment arbitration. The aim of this fictional debate is not to let one protagonist win over the other, but to identify the bones of con-tention between their two visions.

II. Who trumps who?

ii.1. Is EU law autonomous?

Ms Icsid: The relationship between EU law and international investment law is complex and there is room for disagreements, as the debate on this issue has demonstrated so far. However, both the CJEU and investment tribunals agree that EU law is part of inter-national law. For example, the Electrabel tribunal noted that “EU law is international law because it is rooted in international treaties”,8 and this has been undisputed by all sub-sequent investment tribunals.9 Even the post-Achmea tribunals, such as the tribunal in Vattenfall II, found that EU law, to the extent of the founding Treaties, should not be ex-

8 ICSID, decision on jurisdiction, applicable law and liability of 30 November 2012, case no.

ARB/07/19, Electrabel S.A. v. Republic of Hungary, para. 4.120. 9 See for example, ICSID, decision on jurisdiction of 6 June 2016, case no. ARB/13/30, RREEF Infra-

structure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain (RREEF v. Spain), para. 73. To this effect, see the comment of the tribunal in ICSID, decision on the Ach-mea issue of 31 August 2018, case no. ARB/12/12, Vattenfall AB and others v. Federal Republic of Germa-ny (Vattenfall II), para. 146.


cluded from “the purview of international law” under Art. 38, para. 1, let. a), of the Stat-ute of the International Court of Justice.10 In the same manner, the Court of Justice re-calls that EU law is “characterised by the fact that it stems from an independent source of law, the Treaties”.11

Therefore, if we accept that EU law is part of international law, its Court should not claim that it is an autonomous legal order, which prevails over international law. In effect, the international legal order is a horizontal one. Various international agreements are placed upon equal footing, whereby any conflicts between them must be resolved by the application of general international law treaty conflict rules, which are codified in the Vi-enna Convention on the Law of Treaties (VCLT). In case of inconsistency between an in-ternational investment treaty and EU law, absent the possibility that such inconsistency can be reconciled through interpretation, “unqualified obligation” of any arbitral tribunal constituted under an international investment treaty would be to apply public interna-tional law. This applies to all cases, even when it is to the detriment of EU law since “EU law does not and cannot ‘trump’ public international law”.12 In buttressing the autonomy of the EU legal order, as the CJEU did in Achmea, EU law indeed trumps international law.

Professor Van Gend en Loos: The claim that EU law trumps international law is nugato-ry. At the outset, the EU legal system is an “open system”13 subordinated to internation-al law, be it jus cogens or jus erga omnes or jus dispositivum.14 Under Art. 3, para. 5, TEU, the EU is to contribute to the strict observance and the development of interna-tional law. In accordance with Art. 21, para. 1, TEU, “the Union’s action on the interna-tional scene” must be “guided” by “respect for the principles of the United Nations (UN) Charter and international law”. Consequently, when it adopts an act, the EU is bound to observe international law in its entirety, including customary international law, which is binding upon the institutions of the EU.15

In addition, any international agreement to which the EU accedes is, by virtue of Art. 216, para. 2, TFEU, binding on the institutions of the EU and its Member States.16 There-

10 Vattenfall II, cit., paras 145-150. 11 Achmea [GC], cit., para. 33. Regarding the international foundation of the EU legal order, see A.

PELLET, Les fondements juridiques du droit communautaire, in Collected Courses of the Academy of Euro-pean Law, Leiden: Martinus Nijhff, 1997, p. 219.

12 RREEF v. Spain, cit., para. 87. 13 P.J.G. KAPTEYN, P. VERLOREN VAN THEMAAT, Introduction to the Law of the European Communities,

London: Kluwer Law International, 1998, p. 278. 14 S. ADAM, S. HAMMAMOUN, E. LANNON, J.V. LOUIS, N. NEUWAHL, E. WHITE, L’Union européenne comme ac-

teur international, Brussels: Èditions de l’Université de Bruxelles, 2015, p. 82. 15 See, to this effect, Court of Justice: judgment of 24 November 1992, case C-286/90, Poulsen and

Diva Navigation, paras 9 and 10; and judgment of 16 June 1998, case C-162/96, Racke, paras 45 and 46. 16 In accordance with Art. 216, para. 2, TFEU, the treaties concluded have primacy over acts of second-

ary EU law. See, to that effect: Court of Justice, judgment of 3 June 2008, case C-308/06, Intertanko and Oth-ers, para. 42 and case-law cited. Moreover, measures emanating from bodies which have been established


fore, when exercising its powers, the EU must observe international law. The CJEU is competent to disapply incompatible provisions of an international agreement conclud-ed by the EU in case of their substantive inconsistency with EU law and international rules which are binding on the EU.17 Last but not least, the CJEU is under an obligation to “take due account” of the wording and purpose of international law, such as UN Se-curity Council (Security Council) resolutions.18

Mc Icsid: To my understanding, the EU legal order is only conditionally open towards international law. The CJEU as the supreme guardian of the EU legal order considers EU law as specific international law to which other international law instruments should conform, when necessary to achieve the objectives of the EU founding Treaties. In other words, international law is not deemed to be an autonomous source in the EU legal sys-tem. Such approach to international law is always justified by the international charac-ter of EU law itself as an autonomous legal order based on the founding Treaties, which cannot be trumped by an international agreement.19 In that connection, the CJEU has long ago emphasised the contrast between the EU founding Treaties and “ordinary in-ternational treaties”.20 The opinion of AG Poiares Maduro in Kadi mirrors that interpre-tation: “In Van Gend en Loos, the CJEU considered that the Treaty had established a ‘new legal order’, beholden to, but distinct from the existing legal order of public inter-national law”.21 I do not see why the EU founding Treaties would be any different from other international treaties, and how could that be an argument to justify EU law’s prevalence over international law.

Professor Van Gend en Loos: One has to differentiate between two issues. On the one hand, as a matter of principle, the EU legal order must be consistent with the general principles of international law.22 On the other hand, the agreements concluded by the EU have become part of the normative hierarchy of that legal order. In effect, in accord-ance with the Court’s settled case-law, international agreements concluded by the EU

by an international agreement concluded by the EU and a third State form part of the EU legal order. See Court of Justice: judgment of 20 September 1990, case C-192/89, Sevince, para. 10; judgment of 16 Decem-ber 1992, case C-237/91, Kus; judgment of 28 February 2008, case C-293/06, Deutsche Shell, para. 17.

17 Court of Justice, judgment of 27 February 2018, case C-266/16, Western Sahara Campaign UK, pa-ras 45-48. Taking into account that the territory of Western Sahara does not form part of the territory of Morocco under international law, the CJEU reached the conclusion that the EU-Morocco Agreement was not applicable to the waters adjacent to the territory of Western Sahara. See D. SIMON, Applicabilité des accords entre l’Union européenne et le Royaume du Maroc ou territoires du Sahara occidental: Acte II, in Europe, 2018, p. 6 et seq.

18 Court of Justice, judgment of 16 November 2011, case C-548 /09 P, Bank Melli, para. 106. 19 Court of Justice, judgment of 3 September 2008, joined cases C-402/05 P and C-415/05 P, Kadi, pa-

ras 281 and 316; Achmea [GC], cit., para. 33. 20 Court of Justice, judgment of 15 July 1964, case 6/64, Costa v. ENEL. 21 Opinion of AG Poiares Maduro delivered on 16 January 2008, case C-402/05 P, Kadi, para. 24. 22 Arts 3, para. 5 and 21, para. 1, TEU.


pursuant to the provisions of the Treaties constitute, as far as the Union is concerned, acts of the institutions of the EU.23 Accordingly, one has to understand that the interna-tional agreements concluded by the EU pursuant to the provisions of the Treaties are, from the date of their entry into force, an integral part of the EU legal order.24 It follows that the EU legal order is a monist system.25

However, it would be wrong to conclude that, once the EU is bound by an interna-tional treaty, the CJEU “must bow to that rule with complete acquiescence and apply it unconditionally”.26 Although the Court takes great care to respect the obligations that are incumbent on the EU by virtue of international law, it seeks, first and foremost, to preserve the constitutional framework created by the Treaty. In this connection, the in-tegration of international agreement into the EU legal order may be subject to both an ex-ante (Art. 218, para. 11, TFEU) and an ex-post review (Arts 263 and 267 TFEU). When-ever international agreements are inconsistent with either founding Treaties provisions or general principles of EU law, they are deemed to be invalid.

With respect to the ex-post review, the CJEU has jurisdiction, in the context of both an action for annulment (Art. 263 TFEU) and in a request for a preliminary ruling (Art. 267 TFEU), to assess whether an international agreement concluded by the EU is com-patible with the founding Treaties and the constitutional principles stemming from them. In so doing, the Court is empowered to nullify the decision of the Council con-cluding an international agreement whenever such agreement is incompatible with EU law.27 Therefore, the CJEU does not have the power to declare an international agree-ment invalid, but can nullify the decision adopted under EU law concluding the agree-

23 Racke, cit., para. 41; and Court of Justice, judgment of 25 February 2010, case C-386/08, Brita, para. 39. 24 Court of Justice, judgment of 30 April 1974, case 181/73, Haegeman, para. 5; judgment of 22 No-

vember 2017, case C-224/16, Aebtri, para. 50; opinion 1/91 of 14 December 1991, para. 37; judgment of 10 January 2006, case C-344/04, IATA and ELFAA, para. 36; and judgment of 21 December 2011, case C-366/10, ATAA, para. 73.

25 S. VAN RAEPENBUSH, Droit institutionnel de l’Union européenne, Brussels: Larcier, 2011, p. 486; A. POTTEAU, Les dimensions constitutionnelles de l’autonomie de l’ordre juridique communautaire, in S. Ro-drigues (dir.), L’Union européenne: Union de droit, Union des droits. Mélanges en l’honneur de Philippe Manin, Paris: Pédone, 2010, p. 190; A. Rosas, The European Court of Justice and Public International Law, in J. WOUTERS, P.A. NOLLKAEMPER, E. DE WET (eds), The Europeanisation of International Law as Law of the EU, The Hague: T.M.C. Asser Press, 2008, p. 71. Taking into consideration the process of domestic implemen-tation of international law, Cannizzaro is of the opinion that the EU legal order must be described as “neo-monist”: see E. CANNIZZARO, The Neo-Monism of the European Legal Order, in E. CANNIZZARO (ed.), In-ternational Law as Law of the EU, The Hague: Martinus Nijhoff, 2011, p. 35.

26 Opinion of AG Poiares Maduro, Kadi, cit., para. 24. 27 The international agreements are concluded under Art. 218, para. 6, TEU by the Council of Ministers.


ment.28 Of course, the Court’s jurisdiction arises only “in the context of the internal and autonomous legal order of the Community”.29

Ms Icsid: Would you not agree that the CJEU goes too far in reviewing the conformity of EU law with international law? The prime example is the Kadi case, in which the Court of Justice effectively assessed the validity of UN Security Council measures under EU law. The Court held that “an international agreement cannot affect the allocation of powers fixed by the Treaties or, consequently, the autonomy of the Community legal system”,30 essentially claiming precedence of EU law over the Security Council decisions. Would you not think that the Court is endorsing the tradition of nationalism or “fortress Eu-rope”, as some legal scholars noted while casting a critical eye over this judgment?31

Furthermore, the CJEU looks at the EU as an almost perfect legal order, in which all EU acts endorse protection of human rights as a condition of their validity, and can be reviewed in “the framework of the complete system of legal remedies established by the Treaty”.32 It seems to me that EU law claims superiority over international law, be-cause it is the rule of law order. At the same time, the CJEU sends an implicit message that international law does not comply with the rule of law, at least not to the same ex-tent. The Court explains this in the following terms: “The Community is based on the rule of law, inasmuch as neither its Member States nor its institutions can avoid review of the conformity of their acts with the basic constitutional charter, the Treaty, which established a complete system of legal remedies and procedures designed to enable the Court of Justice to review the legality of acts of the institutions”.33

Professor Van Gend en Loos: The Kadi judgment has to be examined in its specific context. It has to be noted that, at the time when this judgment was delivered, restric-tive measures adopted by the Security Council were not subject to any kind of review. These black list measures were fleshed out into the EU legal order, as a matter of effi-ciency, by a specific EU secondary act – a regulation – which had to be consistent with the general principles of the EU legal order, including fundamental rights.34 The CJEU

28 Court of Justice, judgment of 10 March 1998, case C-122/95, Germany v. Council of the European Un-

ion; judgment of 11 September 2003, case C-211/01, European Commission v. Council of the European Union. 29 Kadi, cit., para. 317. 30 Ibid., para. 282. 31 See for example, C. TOMUSCHAT, The Kadi Case: What Relationship Is There Between the Universal

Legal Order under the Auspices of the United Nations and the EU Legal Order, in Yearbook of European Law, 2009, p. 654.

32 Kadi, cit., paras 284-285. 33 Ibid., para. 281. 34 Kadi case concerned the adoption of restrictive measures executing the UN sanctions against the

Taliban regime in Afghanistan. The adoption of national measures freezing the assets of the claimants in each Member State would have been ineffective given the free movement of capital within the internal market. Accordingly, the EU adopted a series of measures at the Community level to give effect to Mem-


did not review the lawfulness of the Security Council measures but the lawfulness of an Union act that gives effect to these international law measure. The claimant had a remedy to challenge the EU secondary act while he was deprived of such a remedy under UN law. Hence, would you not agree that EU law offered a better protection to the claimant? That was what the Court had in mind when it asserted that “the Com-munity is based on the rule of law”.

Ms Icsid: I would agree that international law, although a rules-based order, in the ab-sence of review mechanisms of measures adopted under these rules, is not perfectly implementing the rule of law. However, it is almost as the EU asserts its specific interna-tional law nature, which is with its “complete system of legal remedies and procedures” also a higher rule of law, as an excuse when it wishes to justify its prevalence over in-ternational law. In other words, EU law is “better” international law, to say-so. For this reason, it affirms its supremacy whenever international law is unable to achieve the EU law standards, as assessed by the EU itself.

Professor Van Gen den Loos: The autonomy of the EU legal order has been buttressed in 2009 by the integration of the Charter of Fundamental Rights of the European Union (EU Charter) into primary law in accordance with Art. 6, para. 1, TEU. This bill of rights clearly brings the EU legal order closer to a constitutional order. What is more, given that the EU acknowledges the protection of human rights as one of its key values, do-mestic constitutional courts cannot anymore claim that EU law may trump their bill of rights.35 Kadi case was a reaction to the insufficient protection of fundamental rights at the UN level. Today, given that the UN review mechanism has

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