The case concerns a damage claim between a Luxembourg company and the Republic of Poland. The arbitral tribunal determined, in one separate and one final award, that Poland had violated its obligations under an intra-EU bilateral investment treaty (BIT) between Poland, Luxembourg and Belgium by expropriating the Luxembourg company’s shareholdings in a Polish bank, and subsequently, the company was entitled to damages.
The awards were challenged by Poland inter alia on the grounds that the dispute was not arbitrable since the investment treaty did not provide any possibility to request a preliminary ruling from the Court of Justice of the European Union (CJEU), and therefore undermined the autonomy of EU law. The arbitration clause was therefore as well, in conflict with the foundation of the EU legal system and thus, the Swedish legal system. Arbitral awards based on such an arbitration clause, were subsequently manifestly incompatible with the foundation of the legal system (ordre public) according to Poland.
The Swedish Svea Court of Appeal found[1] that the principles laid down in the Achmea ruling (C-284/16) were applicable on the dispute. In the Achmea ruling, the CJEU set out that an arbitration clause in an investment treaty, which permits an investor to request an arbitration against a member state at an arbitration tribunal whose competence the member state is bound to approve, is incompatible with EU law and thus invalid. The CJEU thus concluded that the articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.[2] The equivalent arbitration clause in the intra-EU BIT between Luxembourg and Poland was therefore also declared invalid by the Swedish Court of Appeal.[3]
However, the invalid arbitration clause did not, according to the Swedish Court of Appeal, restrain the Luxembourg company and Poland to enter into a valid arbitration agreement on an individual basis. The court therefore found that Poland had passively entered into a valid arbitration agreement with the Luxembourg company due to the fact that Poland did not object to the validity of the arbitration in a timely manner. The Swedish Court of Appeal thereafter concluded that, as the dispute was arbitrable and neither the arbitral awards nor the manner in which they arose were incompatible with Swedish ordre public, the arbitral awards were determined valid.[4]
After the case was appealed by Poland, the Swedish Supreme Court, contrary to the Court of Appeal, established that it is unclear how EU law should be interpreted in the case and therefore requested a preliminary ruling from the CJEU to clarify the matter. A response is requested to whether articles 267 and 344 TFEU entail, as interpreted in the Achmea ruling, that an arbitration agreement between a Member State and an investor is invalid due to an invalid arbitration clause contained in an intra-EU BIT if the Member State freely accepts the investor’s request for arbitration and refrains from objecting to the jurisdiction.[5]
[1] Judgement of the Svea Court of Appeal, 22 February 2019, Case no. T 8538-17 and T 12033-17.
[2] The Achmea case, Case no C 284/16, item 60.
[3] Judgement of the Svea Court of Appeal, 22 February 2019, Case no. T 8538-17 and T 12033-17. The Eco Swiss case (Case no. C-126/97), the Mostaza Claro case (Case no. C 168/05) and the Achmea case (Case no. C 284/16) was outlined and compared in the judgement of the Court of Appeal.
[4] Judgement of the Svea Court of Appeal, 22 February 2019, Case no. T 8538-17 and T 12033-17.
[5] Decision of the Supreme Court, 4 February 202, Case no. T 1569-19.
