ECJ rules against arbitration clauses in bilateral investment treaties between EU Member States

ECJ rules against arbitration clauses in bilateral investment treaties between EU Member States

The European Court of Justice (ECJ) on Tuesday ruled [decision] that the arbitration provisions of a Bilateral Investment Treaty (BIT) between Czechoslovakia and the Netherlands was precluded by the terms of the Treaty on the Functioning of the European Union (TFEU).

The case decided before the ECJ involved Dutch insurance company Achmea [corporate website], and the Slovak Republic. Slovakia passed a law in 2007 that restricted private insurance companies from taking profits. Achmea suffered financially and claimed that the BIT between Czechoslavkia and the Netherlands was violated. Slovakia, one of the two successor states to Czechoslavkia was forced to go to an arbitration tribunal by the terms of the BIT. In 2012, the arbitration ruled for Achmea, and Slovakia was ordered to pay Achmea €22.1 million.

Slovakia, with the backing of the European Commission, challenged the arbitration decision in the German Federal Court of Justice [official website, in German], which then referred the preliminary issues of the preclusion of an arbitration clause through Articles 267 and 344 [text] of the TFEU to the ECJ. The ECJ held that Article 267 and 344 preclude BIT arbitration clauses between two EU member states and held that the principles of autonomy and sincere cooperation are violated by the arbitration clause. The decision could have ripple effects for the other 196 inter-EU investment treaties that include similar arbitration language.