ADVOCATE GENERAL KOKOTT ON INTRA-EU INVESTMENT ARBITRATION POST-ACHMEA

JUDr. Ing. Miloš Olík, Ph.D., LL.M., FCIArb, JUDr. Margarita Karešová Kucharčuk and Mgr. Bc. Alžběta Böhmová

In her recent opinion in the C-109/20 Poland v. PL Holdings Sàrl case, Advocate General Kokott (the “AG”) addressed the possibility of intra-EU investment arbitration after the CJEU judgment in the Achmea B.V. v. Slovak Republic case, C-284/16 (“Achmea”).

The case in question revolved around the forced sale of an international investor’s shareholding in a Polish bank which led to arbitral proceedings being initiated by the investor, PL Holdings, in 2014, before the Arbitration Institute of the Stockholm Chamber of Commerce, on the basis of the Belgium-Luxembourg Economic Union – Poland BIT. The arbitration tribunal decided in favor of PL Holdings. Poland brought an action before the Swedish courts to annul the award, arguing that the arbitration clause in the BIT infringed EU law. The action was dismissed, as the court held that the invalidity of the arbitration clause in accordance with the judgment in Achmea does not prevent a Member State and an investor from concluding an individual arbitration agreement in respect of the same dispute at a later stage, since such arbitration agreement is concluded in accordance with the same principles as commercial arbitration proceedings, which are permissible under EU law according to Achmea. In the court’s view, Poland consented to arbitration by failing to object to the arbitral tribunal’s jurisdiction in due time.

Poland appealed against the decision. In its request for a preliminary ruling, the Swedish Supreme Court asked whether Articles 267 and 344 TFEU, as interpreted in Achmea, mean that an arbitration agreement is invalid if it has been concluded between a Member State and an investor by virtue of the fact that after the commencement of arbitration proceedings by the investor, the state refrained from raising an objection to jurisdiction.

In her legal assessment, AG Kokott pointed out that individual arbitration agreements concluded between Member States and investors which create a risk that the award will infringe EU law, cannot be regarded as EU law-compatible.

The AG suggested that such arbitration agreements are compatible with EU law, however, if national courts can comprehensively review the award’s compatibility with EU law and refer the matter to the CJEU via a request for a preliminary ruling, if necessary. Mere scrutiny of whether there is a breach of fundamental obligations is not enough. Furthermore, the AG underlined that such arbitration agreements must be compatible with the EU law principle of equal treatment.

The AG also pointed out that whether the arbitration agreement was concluded in the form of appearing in the arbitration proceedings without raising an objection is, as a question of the form of the arbitration agreement, irrelevant. Incompatibility of the arbitration agreement does not depend on its form.

The opinion of the AG seems to introduce limitations for individual arbitration agreements concluded between investors and Member States within the EU. The requirement of a “comprehensive” review of the arbitration award as regards its compatibility with EU law by the courts of Member States also raises additional questions: What are the criteria for this comprehensive review? How should the said requirement be dealt with in view of the grounds of refusal to recognize international arbitration awards in the New York Convention which do not contemplate any full review of substantive law?

Whether the CJEU will follow the AG’s opinion remains to be seen.

AG Kokott’s opinion is available at this link.

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