A-List Celebrity No. 4: The ACHMEA case
- Raquel Macedo Moreira
- Aug 12, 2024
- 5 min read
This article is part of the series A-List: The Celebrities of Arbitration Cases. A series delving into the most renowned cases that have shaped the landscape of international arbitration.
Parties: Slowakische Republik (Slovak Republic) v. Achmea BV (C‑284/16)
Decided by: European Court of Justice (ECJ)
Date: 6 March 2018
Why is this case famous?
The Achmea decision sent a shockwave through the investment arbitration community dramatically upending the norms of investor-state dispute resolution within the European Union. In this ruling, the ECJ declared that arbitration clauses in bilateral investment treaties (BITs) between EU member states were a direct assault on EU law, threatening the core of EU's legal autonomy. The decision ignited fierce debates, as well as frightening questions about the fate of ongoing disputes at the time. There should be no doubt that this celebrity case left a permanent mark on the future of international investment arbitration.
The context to understanding this case
For those who are not familiar with the EU system of law, there are a few premises that I need to touch upon before telling you about the facts of this case.
Although each EU country has its own legal system and laws, they are also subject to the laws of the European Union. In (extremely) rough terms, it is as if the EU itself was a country, with its own ‘national’ rules and judiciary. At the same time, each member state maintains its autonomy to create laws and rule their own territory, as long as – of course – those laws do not contradict EU law itself.
One of the "constitutional" basis of the EU is the TFEU, the Treaty on the Functioning of the European Union. The TFEU provides that the Court of Justice of the European Union (also known as the European Court of Justice or the ECJ) has the power to grant preliminary rulings concerning the interpretation of the TFEU.
What are those? Think about it like this: when a member state court is faced with a case that requires the interpretation of an ambiguous, equivocal or unclear provision of the TFEU, they may refer that (preliminary) question to the ECJ. The ECJ then issues a preliminary ruling, which is a decision binding on all member states, to be uniformly applied whenever that same interpretation point is raised within any other EU court.
With that in mind, let’s now look at the facts of Achmea.
Facts of the Achmea Case
In 2004, Achmea (at the time still registered under the name “Eureko”), was an undertaking belonging to a Dutch insurance group who set up a subsidiary in Slovakia.
In 2007, a change in Slovakian government policies led to the prohibition of the distribution of profits generated by private sickness insurance activities.
In 2008, Achmea initiated a PCA arbitration against the Slovak Republic pursuant to Article 8 of the BIT signed between the Netherlands and the Czech and Slovak Federative Republic back in 1991.
In the arbitration, Slovakia raised an objection to the jurisdiction of the arbitral tribunal arguing that the relevant BIT had been terminated, or that its arbitration clause had been rendered inapplicable, after the Slovak Republic’s accession to the EU in May 2004. Their point was that, since the European Community Treaty governed the same subject matter as the BIT, the BIT should be considered terminated and/or inapplicable pursuant to Articles 59 and 30 of the Vienna Convention on the Law of Treaties.
In 2010, the arbitral tribunal composed by Professor Vaughan Lowe QC, Professor Albert Jan van den Berg and Mr. V.V. Veeder QC, dismissed that objection and proceeded to issue an award on the merits (issued in 2012). The result was that Slovakia was ordered to pay damages in the sum of € 22.1 million plus interest to Achmea.
Slovakia presented a motion to have the award set aside before the courts of the seat of arbitration, i.e. Frankfurt. The German courts were then faced with the question of whether the arbitration clause in Article 8 of the BIT was invalid because incompatible with the TFEU. Because the ECJ had not yet ruled on the interpretation of the TFEU as replacing intra-EU BITs, the German courts made a reference to the ECJ for a preliminary ruling.
The request for preliminary ruling was made by the German decision of 3 March 2016, received at the ECJ on 23 May 2016, and decided only on 6 March 2018. Imagine the anticipation! Afterall, everyone knew this decision would have an impact not only on the Achmea case but on any case concerning claims grounded on BITs signed between EU countries.
Worthy parenthesis here: Within the preliminary ruling procedure, an Advocate General assists the ECJ by writing an impartial and independent opinion that the judges will consider before issuing their judgment. The AG’s opinion is not binding, but the ECJ decisions agree with the AG’s opinion more often than not.
Going back to the story, we are in September 2017: the Advocate General issues a 48-page, 273-paragraph, opinion proposing that the ECJ answers the preliminary ruling as follows:
Articles 18, 267 and 344 TFEU must be interpreted as not precluding the application of an investor/State dispute settlement mechanism established by means of a bilateral investment agreement concluded before the accession of one of the Contracting States to the European Union and providing that an investor from one Contracting State may, in the case of a dispute relating to investments in the other Contracting State, bring proceedings against the latter State before an arbitral tribunal. (emphasis added).
On 6 March 2018, the world discovers that this is one of the times in which the ECJ decided NOT to follow the AG’s opinion and (in a surprisingly short decision) ruled that:
Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the BIT, 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.
What follows? DRAMA!
In July 2018, the EU Commission released a communication saying they had consistently taken the view that intra-EU BITs were incompatible with EU law, and that the Achmea case just confirmed that they were right. The communication was followed by EU member states signing, in 2019, a Declaration committing to terminate all their intra-EU BITs.
At the same time, however, some arbitral tribunals still found to have jurisdiction to decide cases grounded on intra-EU BITs (see, for instance, Cavalum SGPS, S.A. v. Kingdom of Spain and Adria v. Croatia).
Discussions also sparked as to the equivalence between the level of protection of intra-EU BITS and EU law. Especially considering that EU law provisions were found to be more ‘generic’ or not to directly address points equivalent to MFN clauses, umbrella clauses, or even the ISDS system.
Curious to learn more about this topic?
Then make sure you take some time to research news also about the Komstroy case, which discusses expanding the impact of Achmea to the Energy Charter Treaty (ECT) as well!
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