By Francesco Gravina[1]

Introduction

Do the European Court of Justice’s (ECJ) ruling in Achmea, its subsequent case law, together with the subsequent EU law and policy, violate the ECHR? A majority of scholarship suggests that it might in some constellations; namely, this jurisprudence could breach Article 1 of the First Additional Protocol to the ECHR (A1P1) and Article 6(1) of the ECHR, which enshrine, respectively, the rights to property and a fair trial. Were it so, national judges of EU Member States hearing some post-award actions could face a true dilemma: either comply with the ECHR or EU law. However, this blog entry will cast doubt on the correctness of this conclusion by showing that there are grounds for concluding that this ECJ’s case law might comply with the ECHR.

Context

To begin with, this section recalls the obligations under the acquis that EU Member State courts must observe when requested to enforce or annul an intra-EU investment award. In Achmea, the ECJ ruled that arbitration clauses in intra-EU BITs are incompatible with Articles 267 and 344 TFEU, because they allow arbitral tribunals to interpret and apply EU law outside the EU judicial system. The Court did not limit the temporal reach of the judgment, hence the default ex tunc consequences of its findings (PL Holdings, para. 58). Only after an obiter dictum in a judgment of 2021 was the ECJ crystal-clear in spelling out a duty for national courts of the EU, when competent to do so, to annul any intra-EU awards (PL Holdings, para. 55). Thus, the ECJ, which later expressly extended Achmea’s findings to any intra-EU BIT (European Food, paras. 138-139) and the ECT (Komstroy), endorsed the European Commission’s views. Successively, the ECJ, in a reasoned order under Art. 99 of its Rules of Procedure, found that national courts of EU Member States are to reject petitions to recognise and enforce an intra-EU award that had been the object of a State Aid decision (Romatsa, para. 43). Nonetheless, the abundant references to Arts.267 and 344 TFEU throughout that order permit the inference that this obligation applies to every intra-EU award (see also here for a recent referral to the ECJ of an infringement case against Belgium). Nor can domestic courts rely on Art. 351(1) TFEU to grant the request to enforce arbitral decisions rendered under the ICSID Convention (Commission v UK, paras. 58-88).

Since all EU Member States are Contracting Parties to the ECHR, the question arises of whether these obligations under the acquis are compatible with the growing corpus of ECtHR case law that deems the annulment of and failure to enforce valid arbitral awards incompatible with the ECHR. This blog entry will, therefore, deal with A1P1, then Article 6 ECHR, and the so-called Bosphorus presumption in this order.

A1P1

 A1P1 provides for three rules: the right to peaceful enjoyment of possessions, prohibition of expropriation subject to some exceptions, and the right of ECHR Contracting Parties to control property for certain purposes. On this distinction, the case law is unanimous in subsuming the refusal to enforce a valid arbitral award and its annulment as an interference with the right as per the first rule (Stran Greek, §§63-67; Ostapenko, §49). But the logical antecedent of this classification is whether an arbitral award is a possession in the first place, for whose ascertainment the ECtHR has always employed the Stran Greek test – whereby an arbitral decision amounts to a possession on condition that the latter ‘is sufficiently established to be enforceable’ (Stran Greek, §59). To that end, the ECtHR’s object of analysis has normally been the applicable law governing a particular post-award judicial action (Fahner (b), p. 46). Now, for EU Member States, that law includes the acquis (Achmea, para. 41), whose treatment of intra-EU awards was set out above. Concerning the annulment of intra-EU arbitral awards issued by tribunals seated in the EU, it appears that Stran Greek may be distinguished, as the interference did not result from legislative action, but rather from an interpretative ruling under Art. 267(1)(a) TFEU. Furthermore, the Strasbourg Court’s case law hints, albeit not without producing paradoxical consequences, that the curial court’s decision to quash an award normally (scenarios à la Stran Greek aside) denies its status of possession (Fahner (b), p. 49). The blog entry will, therefore, consider only denials to recognise and enforce intra-EU investment arbitration awards from this point, unless otherwise indicated.

While the situation thus appears straightforward in respect of annulment actions, the case of enforcement suits of non-set-aside intra-EU investment awards is more complicated. With regard to ICSID awards, the literature is unanimous in considering these awards, provided that they were upheld at the end of annulment proceedings or the deadline to challenge them has expired, as fulfilling the Stran Greek test in ICSID Contracting Parties (Spano, p. 166; Knoebel and Collins, pp. 260-261; Fahner (b), pp. 48-49; Andreotti, pp. 30-32). On the other hand, if the enforcement of a foreign intra-EU award is regulated by the New York Convention (NYC) of 1958 – which, unlike the ICSID Convention, binds every EU Member State – the framework seems more nuanced in light of Art. V of the NYC (Scheu and Nikolov, pp. 269-271). Nevertheless, the ECtHR in BTS Holdings implicitly treated the non-annulled award whose recognition and enforcement was sought before the Slovakian courts as a possession within the meaning of A1P1 (see §§64-65 and Fahner (b), p. 50). Consequently, the quality of possession of an intra-EU award whose recognition and enforcement was denied by a court of a Member State will ultimately depend on the applicable rules, the justification given by that court, and the weight that the ECtHR will assign to EU law as applicable law – even though the ECtHR appears to favour the rules on the enforcement of arbitral awards.

As for the legality of the interference, scholarship unanimously acknowledges that surviving the ECtHR’s scrutiny is an exacting task (Spano, p. 169; Knoebel and Collins, p. 268; Fahner (a), p. 6; Fahner (b), p. 53), for the Strasbourg Court’s mandate is limited to censuring manifestly erroneous application of the law and/or arbitrary conclusions (BTS Holdings, §65). As far as EU law is concerned, some learned commentators in the pre-Achmea scholarly debate had signalled that intra-EU investment arbitration, be it under intra-EU BITs, the ECT, or both, could pose a threat to the autonomy of EU law (Burgstaller, pp. 192-193 and 216; Kokott and Sobotta, pp.7-8 and 13; Dimopoulos, p. 90, yet see also Eilmansberger, p. 406). This circumstance – citing scholarly works in German, though – is, in the view of the German Federal Constitutional Court, a sufficient element in concluding that the ECJ’s interpretation of EU law is not ‘methodologically untenable’ (BVerfG, 2 BvR 557/19, §§66-67). Considering that the legality of the interference must be evaluated at the time it occurred (Paul Getty, §306), a refusal to enforce an intra-EU investment award is evidently more firmly grounded in the ECJ’s case law if it occurred after 2022 (i.e., after Romatsa). However, an obligation not to enforce awards that breach Arts.267 and 344 TFEU, respectively the ‘keystone’ of the judicial system of the EU Treaties (Opinion 2/13, para. 176) and a ‘fundamental feature’ thereof (MOX Plant, para. 169), can be deduced from a decision that predates Achmea (see EcoSwiss, paras. 37-38). Nonetheless, in the light of an ECtHR precedent, the Strasbourg Court could find itself conducting a rigorous review of the justification adduced by an enforcement court that refuses to recognise and enforce an award under the NYC (BTS Holdings, §§67-70). Moreover, some scholars point to two indicia of manifest errors/arbitrariness in respect of failures to enforce ICSID awards: not only do they negate the self-contained nature of the ICSID Convention, but they also overlook customary norms of treaty interpretation. Plus, the Achmea jurisprudence constitutes an unlawful unilateral revocation of the consent to arbitrate (Spano, pp. 169-170; Knoebel and Collins, pp. 269-270). Yet again, unsurprisingly (see, to that effect, Fahner (b), p. 53), the ECtHR might be confronted with the weight to be given to EU law, as interpreted by the ECJ, when it comes into conflict with the international rules applicable to the recognition and enforcement of arbitral awards.

As regards the proportionality of the interference, the ECtHR inquires whether (i) the measure pursues a legitimate aim and (ii) strikes a ‘fair balance’ between public interests and individual rights (Guide to A1P1, p. 35, §161). Although scholarship recognises that compliance with EU law meets condition (i) (O’Sullivan, §109), it maintains that the Achmea case law falls short of requirement (ii), as they contend it lacks an analysis of the issue of fundamental rights (Spano, p. 170; Knoebel and Collins, p. 272; Andreotti, p. 21). This issue was addressed by the ECJ’s case law, though, even if its discussion may appear unsatisfactory; as a matter of fact, the ECJ held that ‘the individual rights which [the investor-claimant] derives from EU law must be protected within the framework of the judicial system[s] of the Member States’ (PL Holdings, para. 68; Fahner (a), p. 7, n.37). The level of protection afforded by EU law will be further analysed below, but a few factors stand out. Positing, for the sake of simplicity, that EU law is equivalent to investment arbitration standards (there are compelling grounds for believing it is not, see Gáspár-Szilágyi), judicial actions before Member State courts might have been the object of investment arbitration or its precondition if the relevant treaty mandated the exhaustion of domestic remedies. Or, if neither of those situations applies, filing such suits many years after lodging an arbitration pursuant to an investment treaty might be barred by statutory time limits. The latter can be waived under certain circumstances according to Art. 10 TABIT, whose impact (of the agreement as a whole) on arbitral tribunals’ jurisdiction is not considered to keep things simple (see Nardell and Rees-Evans, though). But most importantly, applications for intra-EU investment arbitration proceedings were made possible by mistakes: that is to say, the (unlawful) conclusion of intra-EU BITs and the ECT as a mixed agreement with intra-EU applicability without requesting an Opinion from the ECJ under the current Art. 218(11) TFEU. In such situations, the ECtHR’s case law has consistently required that these errors not be remedied at the individual’s excessive expense, especially where no third-party interests are at stake (Guide to A1P1, p. 39, §189). Besides, the absence of compensation (see Nardell and Rees-Evans, pp. 219-220) normally militates against the finding that the interference struck a fair balance (Guide to A1P1, pp. 44-45, §§216 and 218). These formulas appear to fit perfectly to deny the proportionality of a refusal to enforce intra-EU awards.

Article 6 ECHR

Article 6(1) ECHR provides for the right to a fair and public hearing before an independent tribunal established by law. Regarding the guarantee to a fair trial, as long as national proceedings (enforcement/annulment) aim to vindicate rights of a pecuniary nature, the relevant ECtHR rulings deal with familiar points, namely the check of legal certainty and arbitrariness (Nardell and Rees-Evans, pp. 227-228), for which it suffices to refer to the findings above. As for the requirement that the claimant-investor not be placed at a substantial disadvantage to the detriment of legal certainty (Stran Greek, §46; Andreotti, p. 29), it should be noted that the obligation to annul intra-EU awards applies to proceedings in which the State prevailed as well (see the Swedish Supreme Court’s partial confirmation of the Svea Court of Appeal’s ruling that set aside the award in Festorino). Therefore, this strand of ECJ’s decisions cannot be said to sway proceedings in favour of the public party (which remains free to avail itself of Art. 33 ECHR to allege a violation of A1P1) – at least in the abstract.

Bosphorus presumption

As is well known, measures taken to comply with EU law enjoy a presumption of conformity with the ECHR, provided that (i) there is no margin of manoeuvre and (ii) the supervisory mechanism provided for by EU law is deployed (Michaud, §§113-114). As sketched above, the first condition appears to be met even more so after Romatsa and PL Holdings. The ECtHR exempts national courts of EU Member States from fulfilling condition (ii) in cases in which a) no genuine issue arises about fundamental rights or b) the ECJ has already demonstrated how to apply EU law in accordance with these rights (Avotiņš, §109). In the aftermath of paragraph 68 of PL Holdings, reproduced above, it can be concluded that a failure to enforce intra-EU awards falls under scenario b. This observation leads to the question, though, of whether, had claimant-investors chosen to pursue judicial actions to vindicate their rights under EU law as PL Holdings obliges them to do (if they have not done so prior to arbitration proceedings), they could have obtained a level of protection of their rights that matches that guaranteed by the ECHR. As this is a far-reaching endeavour, the limited space of this blog entry only allows for pointing to an instance in which similar sets of measures were scrutinised by the ECJ, the ECtHR, and investment tribunals: the ‘renewables’ saga. By way of a synthetic recollection, many EU Member States had adopted generous subsidies to spur renewable energy production, however these States then had to scale them back owing to the financial crisis of 2009 (for more details, see Balcerzak, pp. 26-53 and Dall’Agnola, pp. 511-519). In these cases, the ECtHR’s approach is broadly reminiscent of that of the ECJ: specifically, future subsidies were considered possessions within the meaning of neither A1P1 nor Art. 17 CFREU (Energyworks Cartagena, §48; Anie, paras. 31-54; Milis, paras. 33-53); or, even if the question of whether these subsidies were possessions was ignored, an EU Member State did not place an ‘excessive burden’ on energy producers by interfering with their contracts (Salento Energy, §§34-40, esp. §36). Obviously, this remains an example, whose truth in the abstract is subject to a case-by-case verification; and yet, it might reveal a broader trend, namely one in which the European courts’ case law in the field of ‘economic rights’, as opposed to other areas, appears to converge.

Be that as it may, the Bosphorus presumption of equivalent protection (see above) may be rebutted should the guarantees accorded by EU law be ‘manifestly deficient’ (Bosphorus, §156). In that regard, one indicator thereof, among others, is whether the ECtHR’s rulings were disregarded (Bivolaru and Moldovan, §123; Fahner (a), p. 8, n.43). The manifestly deficient elements of the Achmea jurisprudence pointed out by the literature were set out in the section dealing with the proportionality review. This literature has a point; still, the Bosphorus presumption, to the best of the author’s knowledge, has only been rebutted once, i.e. in Mr. Moldovan’s case (Bivolaru and Moldovan, §§117-126). This rebuttal occurred in an area (the European Arrest Warrant) which shows, unlike economic rights, some tension between Strasbourg and Luxembourg (see above). And there are indications that a refusal to enforce intra-EU investment awards can be distinguished from BTS Holdings, the most pertinent (and recent) case concerning an unlawful refusal to enforce foreign awards. Firstly, the denial to enforce an intra-EU investment award now has a clear basis in (EU) law (unlike BTS Holdings, §67). Secondly, in BTS Holdings, §70, the ECtHR noted that the Slovakian Competition Authority had failed to greenlight the lawfulness of the contract containing the arbitration clause, yet neither were there legal provisions permitting the inference that this silence constituted an objection. Here, on the contrary, the ECJ’s position reflects the Commission’s explicit views, although the latter changed its mind in 2006 (Spano, p. 162; Knoebel and Collins, pp. 269-270). Nonetheless, it should be recalled that under no circumstances can the Commission authorise practices that run afoul of the EU Treaties (Bosman, para. 136).

Conclusion

In conclusion, filing a suit under the ECHR for the annulment and non-enforcement of intra-EU awards may face multiple stumbling blocks, the main ones being the qualification of possession, the legality of the interference, and the Bosphorus presumption. All in all, the solution proposed here for national courts in the EU is to continue applying EU law, while also endeavouring to justify the denial of enforcement of an intra-EU award under the applicable international law – if this latter scenario is viable. While this suggestion may disappoint award-holders, another potentially promising avenue, where available, is to seek enforcement of the award before the courts of a third countries (e.g., the US).

[1] Francesco Gravina, PhD researcher in EU law (topic of the PhD thesis: The Autonomy of EU law), University of St. Gallen, francesco.gravina@unisg.ch