Slovak Republic v Achmea BV: Is It Time To Re-Invent The Intra-EU BIT Wheel?

Introduction

There are 196 bilateral investment treaties ("BITs") currently in force between Member States of the European Union ("EU"). Are those treaties incompatible with EU law by virtue of allowing arbitral tribunals to interpret EU law without review by EU courts? If intra-EU BITs are unenforceable for this reason, does this mean investor-state arbitration in EU Member States' external treaties is also a violation of EU law?

In the March 6, 2018 judgment of Slovak Republic v Achmea BV ("Achmea"), the Court of Justice of the European Union ("CJEU") found that the arbitration clause contained in the 1991 BIT between the Netherlands and Slovakia is, because of an adverse effect on "the autonomy of EU law", incompatible with EU law. Even though investment treaty tribunals are not bound by this decision, the consequences of Achmea may be far-reaching. It calls into question the investor-state arbitration mechanisms in the 196 intra-EU BITs and may signify a need for an entirely new approach to intra-EU investment arbitration. Importantly, it may also point towards difficulties in enforcing arbitral awards made in favour of Canadian investors in the context of the investor-state arbitration mechanism provided for under the Canadian-EU Comprehensive Economic and Trade Agreement ("CETA").

Background

The CJEU's judgment arose out of a dispute between Achmea B.V., a Dutch insurer, and Slovakia. In 2006, Slovakia partly reversed the liberalization of its private sickness insurance market and prohibited the distribution of profits generated by private sickness insurance.1 Achmea alleged that these changes effectively destroyed the value of its investment in Slovakia and brought arbitration proceedings under the BIT on the grounds that the prohibition was contrary to the BIT.2

During the proceedings, Slovakia argued that recourse to an arbitral tribunal, as provided for in Article 8(2) of the BIT, was incompatible with EU law.3 The Tribunal dismissed the objection and, on December 7, 2012, found that Slovakia had indeed violated the BIT and ordered it to pay EUR 22.1 million in damages to Achmea.4

Slovakia brought an action before the German courts5 to set aside the arbitral award, taking the position that the arbitral tribunal lacked jurisdiction to hear the claim because the BIT arbitration clause was incompatible with EU law.6 The Higher Regional Court of Frankfurt am Main dismissed the action but Slovakia appealed to the German Federal Court...