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Do international arbitral tribunals have jurisdiction in investment disputes involving intra-EU BITs?

In a much anticipated judgement in Slovak Republic v. Achmea B.V. (C-284/16), the Court of Justice of the European Union (‘CJEU’) ruled that the arbitration clause contained in the Netherlands-Slovakia BIT (the ‘BIT’) has an adverse effect on the autonomy of EU law.

In the following, the CJEU extended the applicability of its Achmea conclusions and considered the dispute settlement mechanism involving an arbitration procedure under the multilateral Energy Charta Treaty (ECT) invalid if the investment dispute had arisen between an investor of one EU Member State and another EU Member State. Finally, the CJEU held in the Republic of Poland v. Pl Holing Sarl case (C-109/20) that the invalidity of an arbitration clause contained in an intra-EU BIT cannot be cured by way of subsequent tacit consent of the EU Member State to arbitrate a dispute by entering an appearance in the proceedings without objecting to the jurisdiction of the arbitral tribunal.

In the more recent debate, legal commentators questioned whether the conclusions of the CJEU were also to be applied to arbitrations under the convention of the International Centre for Settlement of Investment Disputes (“ICSID”). Under the ICSID Convention, it is not possible to set aside an award in a domestic court. Instead an award can be annulled only in accordance within the rules of this convention. The rules of the ICSID Convention also do not provide for a seat of arbitration (“country in which the award was made”), which by contrast is a requirement to set aside an arbitral award rendered under the scope of application of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).

In more recent decisions nos. I ZB 43/22, I ZB 74/22 and I ZB 75/22 dated 27 July 2023, the German Federal Court of Justice (Bundesgerichtshof), nevertheless decided on the inadmissibility of an ICSID arbitration in an intra-EU investment dispute on the basis of section 1032 (2) of the German Civil Code of Procedure (“ZPO”). Pursuant to this provision a German court is competent to render a declaratory decision on the admissibility or inadmissibility of arbitral proceedings if a request for such decision is filed with the court before the arbitral tribunal is constituted. Remarkably, the court found that German courts have international jurisdiction if the dispute concerned an ICSID arbitration. The court decided that the respective ICSID proceedings were inadmissible due to the lack of an effective arbitration agreement.

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