In 2018, the European Court of Justice (ECJ) shocked the arbitration world: In its Achmea-decision, it invalidated arbitration agreements in bilateral investment treaties (BIT) entered into between EU member states. The rationale of the decision: Arbitral tribunals could not sufficiently ensure that European Law was applied in compliance with ruling of the ECJ. Accordingly, member states of the EU were not permitted to effectively opt-out of the last-instance jurisdiction of the ECJ by agreeing on investor-state-arbitration proceedings in intra-EU matters. The outcry of the arbitration community was immense. The objections ranged from doubting the efficiency of investor protection granted by stated courts (now alone competent) to the observation that bilateral investment treatments were contracts protected under the Vienna Convention and thus could not be set aside, let alone retroactively as done by the ECJ. All to no avail: In the following years, EU member states agreed on the termination of BITs between EU members states, including the arbitration agreements contained therein; state courts refused to enforce any arbitral awards based on such arbitration agreements and ultimately the EU even left the Energy Charter Treaty where the EU itself had agreed on arbitration as means of dispute resolution. As a consequence, the entire system of protecting investors by providing them access to the neutral forum of an arbitration tribunal (instead of requesting investors to address state courts of the very state accused of violating those investorsâ rights) had collapsed for intra-EU investor-state disputes.
But there was a shred of hope left, wasnât here? The German Constitutional Court! After Achmea, the German Federal Court of Justice had vacated the initial Achmea arbitral award. Achmea â a Dutch insurance company â turned to the German Constitutional Court arguing that the ECJ had grossly overstepped its competencies in the Achema decision by interfering with validly concluded BITs. And the German Constitutional Court had recently been rather skeptical with regard to the EUâs tendency to expand its powers without clear authorization in EU Treaties. Most notably, it had ruled in its decision about the European Central Bankâs program to buy government bonds that the jurisdiction of the ECJ ends where its interpretation of EU Law is only result-driven and otherwise y not comprehensible, arbitrary and thus excessive. Many within the arbitration community and beyond hoped that this reasoning was spot on with regard to the ECJâs decision in Achmea to invalidate and disregard binding contractual obligations of EU members states.
The German Constitutional Court has recently disappointed all those hopes. In two decisions dated July 23, 2024, it has dismissed the complaints against the Achmea-compliant decision of the German Federal Court as inadmissible. The comprehensive reasoning available now closes all loopholes for continuing the Achmea-discussions: The German Constitutional Court decided that the entire discussion is mute after the EU member states have contractually agreed in 2020 to terminate BITs between members states of the EU. Further, the German Constitutional Court ruled that the ECJ, in its Achmea-decision, was far from reaching the threshold or an arbitrary decision claiming powers for the EU which the EU does not have. The language of the court decision is rigid, not leaving any room for interpretation. One may criticize that a kowtow towards the ECJ after its courageous decision in the ECB-case which triggered immense. But it is as it is.
It is not over until it over. But now it is over! Intra-EU investor-state arbitrations are dead. To discuss Achmea and its consequences is from now on interesting for legal scholars and history buffs alone. For companies and legal practitioners: Welcome, for good or bad, to the world, where investors from EU member states who feel expropriated by other EU member states must embark on a long journey through the state courts of the host states to â hopefully â obtain a final and fair ECJ-decision.
