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Achmea v Slovak Republic: Cause and Effect

Achmea V Slovak Republik: what's Next for Investor State Dispute Settlement (ISDS) ?

On the 6th of March 2018, the European Court of Justice delivered a preliminary ruling that will undoubtedly have a lasting effect on Intra-Eu Bit's and possibly Bit's around the world.

As things stand,there are 196 existing Bit's in the EU.What does the ruling mean for them?

The ruling was delivered after the Federal Court of Justice of Germany referred to the ECJ for a preliminary ruling on the interpretation of the arbitration clause (Article 8) of the Holland-Slovakia BIT(1991).

As per Article 267 of the TFEU, matters of interpretation and application of treaties are to be interpreted by the ECJ. The court found the arbitration clause to be ''a precluding provision in an international agreement concluded between member states and thus inconsistent with EU law.It further concluded that the submission of disputes to a body which is not part of the judicial system of the EU and is provided for by an agreement which was concluded not by the EU but by member states" is inconsistent with the EU's principle of mutual trust between member states and the principle of cooperation between member states. It concluded by strongly alleging that the arbitration clause has an adverse effect on the autonomy of EU Law.

It is clear that there is a conflict of laws on a multilateral and national level however what is the relationship between the various laws?

It should be noted that EU law is supreme over the national legislation of it's member states.The TFEU is the constitution of the EU. And as such any laws or ad hoc legislation that is inconsistent with it violates the principles of the Treaty.

The execution of the BIT by two member states is an implied expression to preclude themselves from the the legislation of their respective states, states that are members of the EU. It is at this juncture that the ECJ stated that Article 8 violates the principles of trust enshrined in the TFEU. Furthermore, reference to a governing law of a member state, in this case Germany, does not preclude EU law. By virtue of the treaty, EU Law constitutes as part of the national legislation of all it's member states. Eventually arbitrators will be called to interpret EU law.

It seems that there is no way to avoid EU law when the chosen law governing the arbitration proceedings is that of an EU member state.Furthermore arbitrators cannot invoke the special clause in Article 267 of the treaty for a preliminary ruling. Why is this? By signing a BIT the members inadvertently choose preclude the seat of arbitration to fall within the EU and thus the subject tribunals do not fall within the definition of courts and tribunals under Article 267 of the Treaty.

What's left for the existing BIT's? to be honest the future is unknown and the precedence will have to be build on to interpret the decision of the ECJ since the ruling cannot be appealed. However it will not be surprising to see previous awards or on going tribunals to have the ruling submitted as evidence. some parties to the dispute might opt to use arbitration centres that are outside the EU such as ICSID, however it might prove difficult to convince the host state to do so.

In my assessment,the ruling provided is sound in law,however it has long been known that the EC advocates for the dissolution of existing Bit's as they are operate parallel to the treaty and thus prevent the full application of the EU laws and principles. The European Parliament also passed a proposition to have a multilateral investment court to hear ISDS cases in the EU. The Impact of this decision is likely to have far reaching consequences beyond the border of the EU.



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