On March 3, 2021 the Advocate General issued its opinion in the proceedings before the Court of Justice of the EU (“CJEU“) under case file no. C-741/19[1] (“Opinion“) in favour of the CJEU’s jurisdiction over a request for preliminary ruling to interpret the Energy Charter Treaty (“ECT“) in a case concerning two non-EU parties. Furthermore, the Advocate General presented its view that the offer to arbitrate in the ECT should be considered incompatible with EU law in case of intra-EU proceedings.
Background facts
The case is connected to an ad hoc arbitration held under UNCITRAL Arbitration Rules based on the offer to arbitrate included in the ECT. The arbitration proceedings were initiated by a Ukrainian company – OOO Energoalians against the Republic of Moldova. The Ukrainian company pursued in these proceedings claims for compensation for the violation of the ECT by the Republic of Moldova in connection with electricity supply contracts. In the course of these proceedings Moldova raised several jurisdictional objections including objections as to the existence of a protected investment and claimant being an investor in these proceedings.
In the award, the Tribunal dismissed these objections and found in favour of the claimant, ordering the Republic of Moldova to pay to Energoalians the relevant compensation.[2]
In these circumstances, the Republic of Moldova initiated setting aside proceedings before the Cour d’Appel de Paris.[3] The grounds for that request were among others arguments that the dispute did not concern an investment in the meaning of the ECT, and the territorial requirement was not met by the activity of Energoalians. Even though the motion was initially successful, as the court set aside the award,[4] the Cour de Cassation overturned that decision and referred the case back to the Cour d’Appel de Paris for re-examination.[5]
In course of re-examination the Cour d’Appel de Paris concluded that in order to decide the case it is necessary to obtain a preliminary ruling from the CJEU.[6] It should be noted that the seat of the arbitration was in Paris, France, and this was the only connection between the EU and the arbitration proceedings, as neither of the parties is from the EU. However, the French court considered that there is a need to request the preliminary ruling of the CJEU as this may ensure the uniform application of EU law. In this context, the Court of Appeals in Paris requested the CJEU to provide an interpretation of Articles 1(6) and 26(1) of the ECT in order to establish the proper understanding of the term ‘investment‘. Neither of the questions concerned the compatibility of EU law with the offer to arbitrate and the dispute resolution mechanism included in Article 26 (2)-(8) of the ECT.
The Opinion
As a preliminary point the Advocate General considered whether the CJEU has jurisdiction to hear the questions referred to it.
The Advocate General noted that the established case law (rendered in the context of the EEA Agreement[7]) points to the conclusion that the CJEU does not have jurisdiction to rule on interpretation of an agreement with regard to its application in third countries. However, the Advocate General distinguished this case law from the current dispute on two grounds: (1) based on the fact that in these cases the provisions were intended to apply outside the EU, and (2) based on the fact that the EEA Agreement foresaw a specific mechanism for its interpretation, which still ensured uniform interpretation with EU case law. The Advocate General also relied on the Hermès judgment[8], to confirm that the Court has jurisdiction also in case a specific provision can be applied both in situations relevant to EU law, and irrelevant to EU law, since the EU has an interest to ensure uniformity of application of law within the EU. Furthermore, the Opinion interpreted the ECT to be a set of bilateral obligations enshrined in a multilateral treaty, which makes it a specific type of an agreement. As such, the Advocate General concluded that the ECT may be applicable specifically in the EU (if the case concerns EU parties), which would confirm the EU’s interest in a uniform application of this treaty within the EU.
The Opinion then extensively considered the issue of application of the entire Article 26 of the ECT in the EU, referring to the Achmea Judgment.[9] The Advocate General suggests that since the applicability of this provision within the intra-EU context is doubtful, the Court should take this opportunity to rule on this issue. Reiterating the arguments from the Achmea Judgment the Advocate General concluded that all offers to arbitrate which may be made by state parties in the intra-EU context are incompatible with the EU law. The Opinion argues that clause 26(6) of the ECT providing that the arbitral tribunal established under Article 26 should hear the case “in accordance with this Treaty and applicable rules and principles of international law” may be interpreted as granting the arbitral tribunal the hypothetical right to apply the law of member states of the EU, and as such – also the EU law. This is problematic for the Advocate General since it considers arbitral tribunals not to be part of the EU judicial system. This in return creates a risk of lack of uniformity of the application of EU law (since EU law may be applied by arbitral tribunals). Concluding these considerations, the Advocate General encourages the CJEU to find Article 26 of the ECT incompatible with EU law.
The final conclusion of the Advocate General is that the CJEU has the jurisdiction to hear the case, irrespective of the incompatibility of the offer to arbitrate included in Article 26 of the ECT, since this provision may be applicable before state courts.
With regard to the questions of the Cour d’Appel de Paris, the Opinion suggests that the CJEU should rule that a receivable resulting from an electricity supply contract not involving any contribution is not an investment within the meaning of Article 1(6) of the ECT.
Commentary
Several conclusions of the Opinion may raise doubts as to its usefulness for the CJEU in deciding on the request for preliminary ruling.
Firstly, with regard to the jurisdiction over the interpretation of the ECT by the CJEU, it should be noted that the ECT provides for a specific mechanism for disputes concerning the interpretation of the ECT. Pursuant to Article 27 of the ECT, if there is a dispute between the parties to the ECT as to the interpretation of the treaty the dispute should be first resolved by diplomatic channels and in case this does not resolve the dispute – the case should be referred to an ad hoc arbitral tribunal. While indeed this provision refers to a dispute between contracting parties, it is a specific mechanism for the interpretation of the ECT. As such, the question that should be asked in this context is whether the EU and its member states by becoming a party to the ECT agreed to the exclusive jurisdiction of the arbitral tribunal established under Article 27 of the ECT in cases of interpretation of the ECT, thus, excluding the possibility for the CJEU to provide interpretations of the ECT.
Secondly, if the CJEU was to assume jurisdiction to interpret the ECT, the question that arises is whether this interpretation would be indeed a binding one. The ECT is not an internal EU treaty, and thus, there is a risk that the views of the CJEU on the ECT’s interpretation and application may not be in line with the uniform interpretation and application of the ECT accepted by its signatories other than the EU. As a result, even assuming the CJEU could interpret the ECT for use in the EU, in case of a dispute as to the interpretation of the ECT between EU and third parties, based on Article 27 of the ECT, the CJEU’s judgment could be overruled by an ad hoc arbitral tribunal.
Thirdly, the Opinion does not justify why it considers the ECT to be a set of bilateral obligations enshrined in a multilateral instrument. This observation is a basis for the conclusion that ECT may, in a specific context, be similar to an intra-EU bilateral treaty, which in the view of the Opinion supports the claim for CJEU’s jurisdiction. Yet, any conclusion as to the character and contents of an international treaty should be based on a proper analysis, conducted under the relevant principles and rules of international law, starting with the Vienna Convention on the Law of Treaties. While the Advocate General refers to this instrument in answering the questions of the Cour d’Appel, these provisions are omitted in the reasoning with regard to the character of the ECT and the jurisdiction of CJEU over its interpretation.
Fourthly, the Advocate General relies on the Hermès judgment to justify the jurisdiction of the CJEU in the context of an arbitration involving two non-EU parties. However, the question that arises is whether the reasoning of this judgment is applicable in this case. The question considered by the CJEU in the Hermès judgment was whether in case of provisions which fall within both the competence of the EU and a EU member state, the CJEU has jurisdiction over their interpretation. The CJEU considered that “where a provision can apply both to situations falling within the scope of national law and to situations falling within the scope of Community law, it is clearly in the Community interest that, in order to forestall future differences of interpretation, that provision should be interpreted uniformly, whatever the circumstances in which it is to apply”.[10] Since this judgment did not address the issue of application of provisions of law in non-EU states, in case the same provisions are also hypothetically applicable in the EU (as in the current case), it seems this judgment cannot be a convincing authority supporting the CJEU’s jurisdiction.
Finally, the doubts presented in the Opinion as to the compatibility of Article 26 of the ECT with EU law, based on the Achmea Judgment fall outside the scope of the requested preliminary ruling. When rendering a preliminary ruling, the CJEU should answer the questions referred to it by the state courts and should decline answering hypothetical questions, which are not related to the case in which the preliminary ruling is sought. In this respect, the request for preliminary ruling in the current case only refers to the interpretation of Article 26(1) of the ECT which provides for the amicable resolution of the disputes, and not the offer to arbitrate included in the following subsections of this article. It is clear that the CJEU was not asked to address the offer to arbitrate included in the ECT, and the case does not concern an intra-EU context. And even the Opinion states that its own findings as to the incompatibility of the offer to arbitrate with EU law in the intra-EU context have in the end no bearing on the jurisdiction of the tribunal as Article 26 of the ECT will still apply to disputes heard by local courts.
As a side note, the Advocate General’s considerations of the Achmea Judgment and the scope of choice of law clause included in Article 26(6) of the ECT would require further analysis. The conclusion that a choice of law clause providing for the application of the “rules and principles of international law” provides for the application of EU law due to the fact that EU law forms part of the national laws of the EU member states seems to be contrary to the wording of this clause.
Irrespective of the above, it should be noted that in light of the applicable procedural rules, the Opinion is not binding on the CJEU. While the CJEU usually follows the views of the Advocate General, it is not an obligation.[11] As such, the CJEU may make different findings in its final decision.
[1] Opinion of the Advocate-General of 3 March 2021, case file no. C-741/19, available here (in French).
[2] Award of 23 October 2013, available here (in Russian).
[3] The proceedings take place against Komstroy, also a Ukrainian company – the successor in law to the company Energoalians.
[4] Decision of the Cour d’Appel de Paris of 12 April 2016, available here (in French).
[5] Decision of the Cour de Cassation of 28 March 2018, available here (in French).
[6] Decision of the Cour d’Appel de Paris of 24 September 2019, available here (in French).
[7] Agreement on the European Economic Area of 2 May 1992.
[8] Case no. C-53/96, available here.
[9] Case no. C‑284/16, available here.
[10] Case no. C-53/96, paragraph 32, available here.
[11] For example, in case of the Achmea Judgement (case no. C‑284/16), the CJEU fully diverged from the opinion of the Advocate General presented in that case.
