The case concerns a dispute related to the issue of intra-EU objection. In the past years, EU Member States have increasingly started to contest the ability of international tribunals to rule on intra-EU disputes. This comes as a result of CJEU’s Achmea decision, whereupon the Court ruled that arbitral tribunals constituted under intra-EU investment agreements (IIAs) are prohibited from ruling on cases that involve the interpretation and application of EU Law.[1] International tribunals on the other side, have rejected this doctrine and continue to do so. This has resulted in a tumultuous conversation on the issue of jurisdiction between the CJEU and the tribunals. The case at hand typically illustrates the conflict between the arguments put forth by these institutions.
The dispute arose between the Kingdom of Spain and two affiliates of Infracapital established in the Netherlands and Luxembourg. Infracapital is an infrastructure investment company based in London. The case was submitted to the International Centre for Settlement of Investment Disputes (ICSID) in 2016.
Infracapital brought claims against Spain on the basis of the Energy Charter Treaty (ECT) alleging that the latter’s energy reforms introduced between 2012-2014 infringed upon the treaty.[2] Prior to these reforms, Spain’s regulatory framework provided for remunerations granted to companies developing solar photovoltaic plants, some of which happened to be owned by Infracapital. The new reforms, however, reduced the remuneration, and this created an issue for Infracapital and other investors who had previously relied on those remunerations.
Back in September 2021, the Tribunal found that on the basis of the ECT, Spain’s new reforms were in fact disproportionate and infringed upon Infracapital’s rights.[3] Amongst other issues, the Tribunal rejected Spain’s claim that the Achmea decision would prevent the tribunals constituted under the ECT from exercising jurisdiction on intra-EU disputes. However, while the Tribunal was in the process of publishing its decision, the CJEU on the other hand issued the Komstroy decision, clarifying that EU law indeed prevented tribunals constituted under the ECT from jurisdiction as well.[4]
According to Spain, this decision constituted a new fact that needed to be considered in the Tribunal’s ruling, hence it filed a request for reconsideration.[5] The Tribunal took this opportunity to determine whether Komstroy could present new facts to the case and consequently change its outcome.
Intra-EU objection
As far as the history of intra-EU objection goes, it is not the first time and it is unlikely to be the last where an EU Member State invokes Achmea to challenge an arbitral tribunal’s jurisdiction.[6] As noted above, this is becoming more frequent as a result of political shifts within the Union in matters such as intra-EU investment. Spain found support in Achmea, claiming that tribunals formed under intra-EU IIAs are excluded from deciding on cases which involve the interpretation and the application of EU law.[7] It is important to emphasise that the prohibition stands against tribunals constituted under intra-EU IIAs specifically, however, the present claim arose under the ECT, which is not an IIA but rather, a multilateral treaty. This detail questioned the relevance of Achmea.
Nevertheless, in the September 2021 proceedings, Spain used Achmea’s reasoning to argue that even disputes arising under the ECT would require the application of EU law, and hence barring the Tribunal from jurisdiction. Concretely, Spain claimed that Article 26(6) of the ECT required the tribunal to issue its decision in accordance with applicable and principles of international law. In that sense, EU law would be applicable because it is considered to be international law and also was the law of the parties to the dispute. As a result, this would preclude the Tribunal from jurisdiction.[8]
Furthermore, Spain claimed that the dispute involved matters such as EU fundamental freedoms and State Aid, which require the application of EU law. More specifically, Spain argued that the case concerned claims on financial distributions for energy projects, funded by EU taxpayers, and passed by the Spanish Government to the private sector.[9] According to the CJEU, this is the definition of State Aid,[10] and only the CJEU can rule upon disputes based on these issues.[11]
CJEU’s Komstroy ruling echoed these arguments and added that EU investors could not access arbitration under the ECT, as opposed to non-EU investors. This was done in order to ensure that EU investors and Member States were not denied the protection that the EU judicial system guarantees.[12]
Tribunal’s reasoning
It is clear that Spain and the CJEU were using the principles of primacy and autonomy of EU law as rules on jurisdiction, claiming that they cause EU law to prevail over international agreements in case of conflict. This leads us to believe that even though the EU might have signed an international agreement, which in theory is supposed to bind the signatories, the EU will not be bound by the agreement’s provisions that stand in conflict with its law.
One example of a conflict, which the reader should have already understood by now, is the issue of jurisdiction of an international tribunal on cases that involve the application of EU law. It is part of reality to have conflicts, therefore, parties to an international agreement always have the option to make reservations or revocations on certain provisions. Nevertheless, in order to do so, they need to follow certain procedures enshrined in the Vienna Convention on the Law of the Treaties (VCTL).[13]
The CJEU however, claims that principles such as primacy and autonomy of EU law are sufficient to solve issues on conflict of international law. From an EU expansion perspective this makes sense, however any lawyer trained in international law would raise their eyebrows when hearing that principles forming part of sub-systems of international law are now suddenly replacing the core jurisdiction rules enshrined in the VCLT.
With that being said, the Tribunal rejected this claim. It reasoned that the point of signing an international agreement is to be bound by that agreement, and if the parties do not want to be bound by certain provisions, they need to explicitly say so.[14] Similarly, it reasoned that the point of creating an international tribunal under international law is to make that tribunal bound by international law only.[15] It is true that EU Treaties are considered as international law, and by that reasoning, the Tribunal would be required to apply EU law. However, the Achmea prohibition is not enshrined on a Treaty level. Therefore, the treaties would not create a conflict with the ECT in that sense.
Moreover, in and of itself, Achmea and any principles deriving from EU case law or State Aid rules for that matter, are part of a sub-system of international law, but not international law themselves.[16] Therefore, they cannot be taken into account to determine the jurisdiction of an international tribunal.
Building upon that, the Tribunal argued that Spain’s claim that these principles were applicable through Article 26(6) was wrong, because that article governs the law applicable to the merits, not jurisdiction.[17] As far as the ECT rules on jurisdiction provided, nothing in its text prevented the Tribunal from ruling on cases involving intra-EU investor-State disputes.[18] Additionally, the parties to the dispute had given proper consent to arbitration by signing the Treaty and despite the political changes in the EU, they had not made any reservation or revocation of consent under the procedures laid down in the VCLT that would preclude the tribunal from jurisdiction.[19]
Conclusion
It is safe to say that Komstroy did not bring any new facts to the decision, because it mostly repeated Spain’s arguments which were already addressed in the first decision by the Tribunal. As regards the CJEU’s argument claiming that disputes between an investor from one Member State and another Member State concerning EU law should be submitted only before the CJEU or national courts to guarantee the full effectiveness of EU law, well that was in and of itself a cause for concern.[20] As the tribunal noted, not only EU nationals invest in the EU, but also individuals from other nationalities. Therefore, a difference in treatment would result in discrimination between investors.
As one can notice, the dialogue between international tribunals and the CJEU is not going well. The reason why is that both parties hold positions in complete opposition to each other. The CJEU on one hand aims at ensuring the consistency and uniformity of EU law to achieve a closer Union, which is perfectly understandable. On the other hand, tribunals want to ensure that respect for international law and norms is maintained. So far, we continue to see decisions from both sides which reflect these views, however, the issue remains unsolved. In the long run, this will have an effect on legal certainty.
[1] Case 284/16 Slowakische Republik v Achmea BV [2018] EU:C:2018:158.
[2] Infracapital F1 S.À R.L. and Infracapital Solar B.V. v Kingdom of Spain, ICSID Case No. ARB/16/18, Decision on Jurisdiction, Liability and Directions on Quantum – 13 September 2021.
[3] ibid.
[4] Case 741/19 Moldova v Komstroy [2021] EU:C:2021:655.
[5] Infracapital F1 S.À R.L. and Infracapital Solar B.V. v Kingdom of Spain, ICSID Case No. ARB/16/18, Decision on respondent’s request for reconsideration regarding the intra-EU objection and the merits – 12 September 2021.
[6] AS PNB Banka and others v. Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection – 14 July 2021.
[7] Achmea (n 1).
[8] Infracapital F1 S.À R.L. and Infracapital Solar B.V. v Kingdom of Spain, ICSID Case No. ARB/16/18, Decision on Jurisdiction, Liability and Directions on Quantum – 13 September 2021, para. 230.
[9] ibid, para 234.
[10] ibid, see CJEU Opinion 1/91.
[11] ibid.
[12] Case 741/19 Moldova v Komstroy [2021] EU:C:2021:655.
[13] Vienna Convention on the Law of the Treaties (adopted on 23 May 1969, entered into force on 27 January 1980) 1155 UNTS 331 (VCLT).
[14] Decision on Jurisdiction (n 7). paras. 296 – 298.
[15] ibid., para 294.
[16] ibid., para 107.
[17] ICSID Case No. ARB/16/18 (n 2), para 289.
[18] ibid., para 291.
[19] ibid., paras. 296 – 298.
[20] ICSID Case No. ARB/16/18 (n 7), paras. 109 – 110.
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