The decision of the International Centre for Settlement of Investment Disputes (ICSID) tribunal in the RREEF v Spain energy dispute has recently been published, and with it, a yet further analysis of the relationship between the EU and intra-EU investment treaties (specifically, the Energy Charter Treaty). The RREEF proceedings represent one of around 30 arbitrations arising from reforms to the Spanish renewable energy sector. (Such claims are, it seems, the reason for Western Europe being the most-sued region in 2015, according to ICSID statistics.)
In brief, the issue that arises is whether the EU legal order must take primacy over norms of international law arising under investment treaties. More specifically, the issue focuses on investment treaty provisions requiring disputes to be submitted to arbitration, and asks whether such provisions can co-exist with article 344 of the Lisbon Treaty, which requires disputes concerning the interpretation or application of European Union (EU) treaties to be submitted to the Court of Justice of the European Union (CJEU). This is, of course, a very hot topic at present. As discussed in a recent blog post, the European Commission has adopted an uncompromising position, arguing that the EU has sole competence in respect of foreign direct investment and seeking to bring to an end bilateral investment treaties (BITs) between EU member states. Indeed, some member states are in the early stages of dismantling their intra-EU BITs. The legal position will be hammered out in proceedings before the CJEU in the not too distant future: Germany has recently requested guidance on the question of whether intra-EU BITs are compatible with EU law. All this takes place against the more general backdrop of the development of an investment court system under the Comprehensive Economic Trade Agreement (CETA) and the Transatlantic Trade and Investment Partnership (TTIP).
One way or another, then, discussion of the issues relating to intra-EU BITs are gathering pace and will at some stage be ruled upon finally by the CJEU. But what about the ECT? The EC was heavily involved in the negotiation of the ECT, and the position is perhaps more complex than the case of BITs because the signatories to the ECT include both EU member states and non-EU states.
As well as RREEF, the relationship between the EU and the ECT has already been canvassed and discussed in two published previous cases: Electrabel and Charanne. (There is also a fourth, unpublished, award, PV Investors v Spain, which is referred to in RREEF but in redacted form). In each case, the “intra-EU objection” was raised as a basis for challenging the tribunal’s jurisdiction. (In)famously, in Electrabel, the parties to the dispute agreed that the tribunal had jurisdiction, but the jurisdictional challenge was nevertheless advanced by the European Commission, which had intervened as amicus curiae. (Notably, the tribunal in RREEF refused to admit the EU Commission as amicus curiae.)
From a broad perspective, the outcome has been the same in each case: the intra-EU objection has been dismissed, the tribunals holding that the CJEU does not enjoy an “interpretative monopoly” on issues of EU law. These cases were described by the tribunal in RREEF as disclosing a “consistent pattern of decision-making”. It is true, there does appear to be consensus on a number of points. Broadly, for example, it appears that tribunals have agreed that, where possible, the ECT and EU law should be interpreted so as to be consistent with each other, and to avoid conflicts where possible. It also appears that there has been broad agreement that a disconnection clause cannot be implied into the ECT. (A disconnection clause would require relationships between EU parties to the ECT to be determined by reference to EU law. However, where there is no inconsistency between the two instruments, there is simply no basis for implying a disconnection clause.)
There is a difficult issue that remains unclear: what happens if a conflict between the ECT and EU law were ever to be found? According to the Electrabel tribunal, the question depends on the identity of the parties: where a treaty was entered into between a non-EU member state and an EU member state before the EU member state’s accession to the EU, the provision of the earlier treaty would prevail; but where a treaty was entered into between two EU member states before one of them acceded to the EU, the provision of the later treaty (that is, the EU treaty) would prevail. In such a case:
“… from whatever perspective the relationship between the ECT and EU Law is examined, the Tribunal concludes that EU Law would prevail over the ECT in case of any material inconsistency”.
The RREEF tribunal, though, took the opposite view. In its opinion, a tribunal constituted under the ECT was under a duty to apply the ECT, even if inconsistent with EU law and even were this to be the source of possible detriment to EU law. If any hierarchy of norms were to apply, this should be determined in accordance with international law. In the words of the tribunal, “EU law does not and cannot ‘trump’ public international law.”
These are complex issues and there is, of course, room for more than one view. The debate does highlight, though, the lack of any system of precedent in the investment treaty arena, and the difficulty of predicting the outcome of any given case. Investment treaty arbitration raises issues of public interest that are disposed with a significant degree of transparency. Tribunals tend to refer to previous awards but are not, of course, bound by them. Compared to commercial arbitration tribunals applying national laws, investment tribunals arguably enjoy a significant degree of discretion in applying the looser-textured norms of international law. There are several solar energy cases pending against Spain; will the intra-EU jurisdictional objection be ruled on individually in each case? Watch this space.