The saga regarding German judicial review of the so-called “intra-EU jurisdictional objection” has reached its final stage. In the matter of Slovakia’s application to have an arbitral award of EUR 22 million in favour of Dutch insurer Achmea (formerly Eureko) set aside, the German Federal Court of Justice has requested guidance from the European Court of Justice (ECJ) and thereby forced it to take a position on intra-EU bilateral investment treaties (BITs) (Docket No. I ZB 2/15). This may have an effect on the 200 plus BITs in force between EU member states.
In its carefully reasoned decision, the Federal Court of Justice adopted a decidedly pro investment arbitration stance. It opined that intra-EU BITs are compatible with EU law and that Articles 344, 267 and 18 of the Treaty on the Function of the European Union (TFEU) do not pose an obstacle to the applicability of an arbitration clause contained in a BIT between member states. However, since the ECJ has not decided the issue definitively, the Federal Court of Justice found it necessary to request guidance from the ECJ accordingly. In its reasoning, the Federal Court of Justice rejected the European Commission’s position, voiced in various amicus curiae briefs, that intra-EU BITs should be abolished completely.
However, the Federal Court of Justice is concerned about a possible discriminatory nature of intra-EU BITs. To avoid any such discrimination on the grounds of nationality, the court suggested that the offer to arbitrate contained in the intra-EU BIT between Slovakia and the Netherlands should be extended to investors from all member states, instead of just the investors from the two member states that entered into the BIT. For Slovakia and any other EU member state that entered into BITs with other member states prior to joining the EU, this would mean extending the offer to arbitrate, contained in the BIT, to every investor from an EU member state.
The pro-arbitration stance of the Federal Court of Justice in this decision is striking, particularly when taking into account that intra-EU BITs have been under attack for quite some time. It appears that the decisions of the ECJ that deal with the issue of intra-EU BITs, without definitively deciding the questions now raised by the Federal Court of Justice, are tilted towards the position of the European Commission to abolish intra-EU BITs and to establish the competence of the ECJ to decide any such investment disputes. It remains to be seen whether the ECJ can be swayed by the reasoning of the Federal Court of Justice.
It is probably not a coincidence that it was leaked, shortly after the Federal Court of Justice published its decision, that a group of EU countries (Germany, France, Austria, Finland and the Netherlands) has proposed to cancel all intra-EU BITs and replace these agreements with a single EU wide multilateral investment treaty. This would apply to all intra-EU investments and provide for arbitration of any disputes under the rules of the Permanent Court of Arbitration in The Hague. This would accomplish the same result the Federal Court of Justice has proposed as achievable, without any need to conclude further agreements. That is by simply extending the benefits of intra-EU BITs to all investors from EU member states.
Irrespective of how the EU ends up dealing with the issue of intra-EU BITs, it is comforting for the investment arbitration community to see that the negative press that investment arbitration has received in recent times in relation to the Transatlantic Trade and Investment Partnership (TTIP) negotiations has not influenced the German courts. Tellingly, the Federal Court of Justice reiterated explicitly the usefulness of arbitration for investment disputes. It pointed out that parties are able to conduct the arbitration in English (instead of the language in the country where the investment took place), and can choose arbitrators with specific knowledge and expertise for their concrete case. Quite obviously, German courts continue to see investment arbitration as a useful and efficient alternative to state courts.
