Litigants Beware! The Enforceability of Intra-EU Treaty Claims

International investors have historically relied on arbitration clauses in bilateral investment treaties (BITs) between their home country and the country in which they made their investment when bringing claims against a state for expropriation of that investment. Since 2018, however, the validity of those clauses in intra-EU BITs has been called into question. Recent case law in the US District Court for the District of Columbia creates further ambiguity about the enforceability of existing arbitral awards granted in disputes between EU member states.  

On 6 March 2018, the European Court of Justice (ECJ) issued its decision in Slovak Republic v Achmea BV, C-284/16, holding that investor-state settlement dispute (ISDS) clauses in intra-EU BITs are inconsistent with EU law. Under this ruling, the validity of ISDS clauses calling for arbitration in investment treaty tribunals – including International Centre for Settlement of Investment Disputes (ICSID) and UNCITRAL tribunals – in nearly 200 existing intra-EU BITs and multilateral investment charter treaties, such as the Energy Charter Treaty (ECT), became uncertain. In January 2019, EU member states issued a declaration recognising the consequences of the Achmea decision and the incompatibility of ISDS decisions with EU law (the “Declaration”), which was memorialised in a treaty signed on 5 May 2020, terminating all intra-EU BITs (the “Treaty”). 

In the years immediately following the decision, many EU member states attempted to assert a lack of jurisdiction for investment treaty arbitrations brought against them prior to the Declaration and Treaty and have prior arbitral awards annulled, with little success. Despite the ECJ’s ruling that EU law mandated that intra-EU investment disputes be handled in national courts or the European Commission, many of the investment treaty tribunals rejected jurisdictional arguments grounded in the Achmea decision.  

However, In June 2022, more than four years after the ECJ initially held that ISDS clauses were inconsistent with EU law, a Stockholm Chamber of Commerce (SCC) tribunal in Green Power Partners K/S and SCE Solar Don Benito APS v The Kingdom of Spain, SCC Arbitration V (2016/135) accepted the state’s objection over an intra-EU ECT claim and declined to find jurisdiction, marking the first successful Achmea objection in an investment arbitration and further muddying the waters for investors looking to bring and enforce intra-EU investment disputes. 

The confusion facing potential claimants and arbitral award holders is highlighted in the US District Court for the District of Columbia. In February 2023, in In NextEra Energy Glob. Holdings B.V. v Kingdom of Spain, 2023 WL 2016932 (D.D.C. Feb. 15, 2023) and 9REN Holding S.A.R.L. v Kingdom of Spain, 2023 WL 2016933 (D.D.C. Feb. 15, 2023), the Court issued anti-suit injunctions preventing Spain from pursuing litigation in the Netherlands and Luxembourg, the home nations of the investors in NextEra and 9REN, ruling that the litigation would interfere with the US proceedings for enforcement of ECT ICSID arbitral awards and, in so doing, reaffirmed the Court’s assertion that the US had jurisdiction to hear the enforcement action. While the decision seems to imply a likelihood that the Court will find the award to be valid and enforceable, at least in terms of ICSID’s authority to grant it, no final decision on the merits has been reached.

Just one month later, however, the same court took a diametrically opposite approach to the jurisdictional question in Blasket Renewable Invs., LLC, v Kingdom of Spain, 2023 WL 2682013 (D.D.C. Mar. 29, 2023), declining jurisdiction and refusing to enforce an ECT award against Spain. The judge in Blasket determined that, pursuant to the Achmea decision, there was no valid agreement to arbitrate under EU law, rendering the award unenforceable. This decision relied on arguments made by Spain that had already been expressly rejected by the District of DC Court in NextEra and 9REN. An appeal has been filed and remains pending in the Blasket case, which will provide clarity as to the United States’ position on enforceability of arbitral awards based on intra-EU BITs and the ECT. 

For lawyers, litigation funders, parties to ongoing disputes, and holders of existing arbitral awards, the lack of clarity over the validity of ISDS clauses in intra-EU BITs raises concerns. In October 2023, in Adria Group BV and another v Republic of Croatia (ICSID Case No ARB/20/6), an ICSID tribunal accepted jurisdiction over an intra-EU BIT claim summarily dismissing all objections based on Achmea and the Treaty, demonstrating that the matter is far from resolved and giving hope to those hoping to bring their claims before investment treaty tribunals. In the meantime, the appeal of the Blasket case in the District of DC will undoubtedly create broader discourse about the enforceability of existing awards against EU member states, even in non-EU jurisdictions. 

From a litigation funding perspective, the ever-evolving landscape surrounding the enforceability of intra-EU BIT and multilateral investment treaty arbitral awards creates new questions and challenges when evaluating the investment opportunity beyond just the merits of the claim. As demonstrated by the October 2023 Adria Group decision, ICSID tribunals continue to assert their jurisdiction and remain a favourable venue for investors to bring claims. Additionally, the ICSID Convention establishes a self-contained regime in which all ICSID awards are to be deemed final and recognised as if they were a judgment of the state, adding further protections to enforceability and making an ICSID case more attractive for a funder than one brought in another investment treaty tribunal. The location of assets for enforcement is another important consideration. While other EU member states may be unlikely to enforce an arbitral award, other countries housing assets of a respondent nation may find the awards to be valid and enforceable, including the United States if the Blasket decision is reversed on appeal. Finally, the annulment status of an award can be probative, as courts may be more likely to give deference to an arbitral award that is final and unappealable. 

While intra-EU claims can be a challenge to enforce, they can yield significant recovery if the appropriate strategy in the proper jurisdiction is used. Litigants who need financing for enforcement actions should seek out a litigation funder that understands the monetisation potential of intra-EU claims and will not summarily reject them.