[Page 1]
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 22 April 20211
Case C-109/20
Republic of Poland
v
PL Holdings Sàrl
(Request for a preliminary ruling
from the Högsta domstol (Supreme Court, Sweden))
(Request for a preliminary ruling – Investment Treaty of 1987 between Poland, Luxembourg and
Belgium – Provision enabling an investor from one contracting party to bring proceedings before an
arbitration tribunal in the event of a dispute with the other contracting party – Inapplicability of that
arbitration clause – Arbitration agreement – Entering of an appearance without raising an objection –
Applicability – Compatibility with Articles 267 and 344 TFEU – Autonomy of EU law)
1. In the judgment in Achmea,2 the Court ruled that arbitration clauses in favour of investors in
investment treaties between Member States are incompatible with Articles 267 and 344 TFEU and must
therefore be disapplied. What are the consequences, however, if a Member State does not invoke the invalidity
of the arbitration clause before the award is made? A Swedish court concluded from this, in the context of
examining the validity of an arbitration award, that the Member State concerned had entered into an arbitration
agreement for the dispute in question on an ad hoc basis by entering an appearance in the arbitration proceedings
without raising an objection. However, the Högsta domstol (Supreme Court, Sweden) has doubts as to whether
this approach is compatible with the abovementioned judgment and has therefore referred the matter to the
Court.
2. On 19 May 1987, Poland, of the one part, and Luxembourg and Belgium, of the other, entered into an
investment treaty (‘the investment treaty’). The contract entered into force on 2 August 1991. In order to ensure
that investors from those States are protected, it provides for the possibility to refer investment-related disputes
with the other State to an arbitration tribunal, including the Stockholms Handelskammares Skiljedomsinstitut
(Arbitration Institute of the Stockholm Chamber of Commerce, Sweden). In such cases, the arbitration tribunal is
[Page 2]
to apply, inter alia, the law of the State which is party to the dispute and in which the investment was made. Its
decisions are to be final.
3. The request for a preliminary ruling sets out the relevant provisions of the lagen (1999:116) om
skiljeförfarande (Law No 116 of 1999 on arbitration proceedings; ‘the Law on arbitration proceedings’) as
follows.
4. Under Paragraph 1 of the Law on arbitration proceedings, disputes which the parties may be able to settle
may be submitted by agreement to the decision of one or more arbitrators.
5. Arbitration proceedings are to be based on the arbitration agreement. The latter is based on the parties’
entitlement to reach a settlement concerning the subject matter of the dispute. Paragraph 1 of the Law on
arbitration proceedings provides that disputes in which public interest is more marked are to be excluded from
arbitration. It may also follow from specific legislative provisions that a dispute on a particular issue may not be
submitted to arbitration.
6. Under point 1 of the first subparagraph of Paragraph 34 of the Law on arbitration proceedings, an
arbitration award on appeal by a party is to be annulled, in whole or in part, if it is not covered by a valid
arbitration agreement between the parties.
7. In accordance with the second subparagraph of Paragraph 34 of the Law on arbitration proceedings,
however, it follows that a party is not entitled to rely on a fact which he or she, by participating in the
proceedings without objection, or by any other conduct, may be regarded as having refrained from raising.
8. In accordance with point 1 of the first subparagraph of Paragraph 33 of the Law on arbitration
proceedings, an arbitration award is to be void if it involves the examination of a question which, under Swedish
law, may not be decided by arbitrators. Under point 2 of the first subparagraph of Paragraph 33, an arbitration
award is also to be void if it, or the manner in which it was arrived at, is manifestly incompatible with the
Swedish legal order. The court must raise the grounds of invalidity of its own motion.
9. Under Swedish law, the conclusion of an arbitration agreement is not subject to any condition as to form.
The question of whether or not a valid arbitration agreement has been concluded must be assessed in the light of
the general rules of contract law. A valid arbitration agreement may result, for example, from the collusive
conduct of the parties or the inertia of one of the parties.
10. PL Holdings Sàrl is a limited company registered in Luxembourg and subject to Luxembourg law.
11. Between 2010 and 2013, PL Holdings acquired shares in two Polish banks which merged in 2013. PL
Holdings eventually held more than 99% of the shares in the new bank.
12. In July 2013, the Komisja Nadzoru Finansowego (Financial Market Commission, Poland), an authority
under Polish law which is responsible for supervising banks and credit institutions in Poland, decided to revoke
PL Holdings’ voting rights in that bank and ordered it to divest its shares in that bank. It took the view that PL
Holdings exerted an adverse impact on the bank’s sound and prudent management.3
13. PL Holdings subsequently brought arbitration proceedings against Poland before the Stockholms
Handelskammares Skiljedomsinstitut (Arbitration Institute of the Stockholm Chamber of Commerce) on the
[Page 3]
basis of the investment treaty. Poland set out its position by written observations of 30 November 2014.
14. On 7 August 2015, PL Holdings filed an action. In its defence, which it lodged on 13 November 2015,
Poland claimed that PL Holdings could not be regarded as an investor within the meaning of the investment
treaty and that, consequently, the arbitration tribunal did not have jurisdiction to hear the case. By a submission
of 27 May 2016, Poland also challenged the validity of the arbitration clause on the ground that the investment
treaty did not comply with EU law.
15. In a separate arbitration award of 28 June 2017, that is to say, before the judgment in Achmea was
delivered on 8 March 2018, the arbitration tribunal rejected, inter alia, the objection that the arbitration clause
was invalid. It stated that that objection, although raised belatedly, is of fundamental importance for the
arbitration proceedings. However, Poland’s accession to the EU did not have the effect of rendering the
investment treaty invalid under international law.4
16. Moreover, in the separate arbitration award, the arbitration tribunal had already found that Poland had
breached the investment treaty by ordering the sale of the shares held by PL Holdings in the Polish bank.
According to those findings, the supervisory authorities had behaved inconsistently5 and prevented effective
legal protection against the supervisory measures.6 PL Holdings was therefore entitled to damages.7
17. On 28 September 2017, the arbitration tribunal made a final award. The arbitration award ordered Poland
to pay the sum of 653 639 384 zlotys (PLN) (approximately EUR 150 million), together with an amount of
interest, to PL Holdings and to pay the company’s costs of the arbitration proceedings.8
18. Poland subsequently brought an action against PL Holdings before the Swedish courts in which it sought
to have both the separate and final award annulled. Poland continued to claim, in particular, that the arbitration
clause of the investment treaty was invalid owing to an infringement of EU law.
19. The Svea Hovrätt (Court of Appeal, Stockholm, Sweden) dismissed Poland’s action. According to that
court, although the arbitration clause of the investment treaty is invalid in accordance with the judgment in
Achmea, that invalidity does not prevent a Member State and an investor from concluding an arbitration
agreement in respect of the same dispute at a later stage. In such a case, that arbitration agreement is one which
is based on the common intention of the parties and concluded in accordance with the same principles as
commercial arbitration proceedings. The judgment in Achmea did not specifically preclude the permissibility of
such agreements, however. In the present case, the agreement came about because Poland appeared in the
proceedings without raising the objection that the arbitration clause was invalid in due time.
20. Poland’s appeal has now been brought before the Högsta domstol (Supreme Court), which puts the
following question to the Court of Justice:
‘Do Articles 267 and 344 TFEU, as interpreted in [the judgment in] Achmea,9 mean that – where an
investment agreement contains an arbitration clause that is invalid as a result of the fact that the contract
was concluded between two Member States – an arbitration agreement is invalid if it has been concluded
between a Member State and an investor by virtue of the fact that the Member State, after arbitration
proceedings were commenced by the investor, refrains, by the free will of the State, from raising
objections as to jurisdiction?’
21. PL Holdings and the Republic of Poland, as parties to the main proceedings, and the Czech Republic, the
Federal Republic of Germany, the Kingdom of Spain, the French Republic, the Italian Republic, the Grand
Duchy of Luxembourg, Hungary, the Kingdom of the Netherlands, Poland, as a Member State, the Slovak
Republic, the Republic of Finland, the Kingdom of Sweden and the European Commission submitted
observations in the present proceedings, first in writing and then at the hearing on 15 March 2021.
[Page 4]
22. The Högsta domstol (Supreme Court) wishes to ascertain whether the findings in the judgment in Achmea
also preclude an individual arbitration agreement (see Section A). In that context, it is necessary to consider the
importance of the case-law on the compatibility of commercial arbitration with EU law (see Section B) and the
principle of equal treatment (see Section C). In addition, I will examine, by way of an alternative view, the
influence of the form of the presumed agreement, namely the Member State’s waiver of the right to assert the
arbitration tribunal’s lack of jurisdiction by means of an objection, or, in other words, the entering of an
appearance without raising an objection (see Section D). Finally, it is necessary to consider whether the temporal
effect of the proposed decision should be limited (see Section E).
23. In the judgment in Achmea, the Court held that Articles 267 and 344 TFEU preclude a provision in an
international agreement concluded between Member States 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 arbitration tribunal whose jurisdiction that Member State has
undertaken to accept.10
24. The judgment in Achmea concerned a general provision that permitted recourse to an arbitration tribunal
in certain cases. In contrast, the question to be decided in the present case is whether Articles 267 and 344 TFEU
preclude an individual arbitration agreement between a Member State and an investor.
25. Article 267 TFEU regulates the preliminary-ruling procedure and does not contain explicit rules on
arbitration proceedings. In such proceedings, however, the Court would ensure the uniform application of EU
law in disputes between Member States and investors before national courts by interpreting that law in an
ultimately binding manner.
26. This is because the Treaties established the EU judicial system in order to ensure that the specific
characteristics and autonomy of the EU legal order are preserved. In that context, in accordance with
Article 19(1) TEU, it is for the national courts and tribunals and the Court of Justice to ensure the full application
of EU law in all Member States and to ensure judicial protection of the rights of individuals under that law. In
particular, the judicial system as thus conceived has as its keystone the preliminary-ruling procedure provided
for in Article 267 TFEU, which, by setting up a dialogue between one court and another, specifically between the
Court of Justice and the courts and tribunals of the Member States, has the object of securing uniform
interpretation of EU law. That procedure thereby serves to ensure the consistency, full effect and autonomy as
well as, ultimately, the particular nature of the law established by the Treaties.11
27. Article 344 TFEU guarantees this allocation of responsibilities defined in the Treaties and, consequently,
the autonomy of the EU legal system, compliance with which is ensured by the Court.12 This is because,
under that provision, the Member States undertake not to submit a dispute concerning the interpretation or
application of the Treaties to any method of settlement other than those provided for in the Treaties. In that
context, the interpretation or application of the Treaties covers EU law in its entirety.13
28. The Treaties do not provide for any arbitration procedures other than in Article 272 and 273 TFEU. Those
provisions establish the Court’s competences as an arbitration body, but do not allow for recourse to other
arbitration tribunals.
29. Moreover, Article 344 TFEU covers not only the abstract settlement of disputes in general, but also
individual disputes. Accordingly, the judgment in Commission v Ireland concerned Ireland’s individual recourse
to arbitration in a dispute with the United Kingdom.14
30. Accordingly, in the judgment in Achmea, the Court took objection to the agreement between two Member
States that was the subject matter of those proceedings on the ground that, by virtue of that agreement, they
agreed to remove from the system of judicial remedies, which the second subparagraph of Article 19(1) TEU
[Page 5]
requires them to establish in the fields covered by EU law, disputes which may concern the application or
interpretation of EU law.15 In so far as arbitration tribunals are not entitled to make a reference, they are not
part of that system.
31. An individual arbitration agreement between a Member State and an investor can remove disputes
concerning the application and interpretation of EU law from the EU judicial system in the same way as a
general investment treaty between Member States that provides for the settlement of disputes between a Member
State and an investor by way of arbitration. Whether an individual case is removed from the judicial system
depends on the specific dispute and not on whether the dispute is brought before an arbitration tribunal under a
general investment treaty between Member States or under an individual arbitration agreement between an
investor and a Member State.
32. In the present case, the parties, according to their own submissions, are in dispute as to the application of
banking supervision rules that arise from EU law, in particular from Article 21(2) of the Directive 2006/48/EC of
the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business
of credit institutions.16 PL Holdings also invokes freedom of establishment. Although the Swedish courts
would have to examine whether that plausible argument is well founded, it appears, at least according thereto,
that the arbitration agreement did in fact concern an EU-law dispute.
33. The arbitration award does not apply the provisions of EU law on banking supervision,17 but is based
on the rules of the investment treaty. Nevertheless, it proceeds on the basis of standards which, in the view taken
by the arbitration tribunal, Poland should have observed when exercising the banking supervision provided for
under EU law, for example with regard to proportionality18 or effective legal protection.19 While the
arbitration tribunal assumes that those standards are in line with EU law,20 it does not comprehensively
examine this question.
34. According to the judgment in Achmea, the removal of such a dispute from the EU judicial system by
means of an individual arbitration agreement between a Member State and an investor from another Member
State would in fact be incompatible with Articles 267 and 344 TFEU. At the very least, it would constitute a
circumvention of that judgment, as rightly emphasised by Spain, in particular, but also by Poland, Germany,
Hungary, Slovakia and the Commission.
35. The Court has recognised certain arbitration tribunals as courts or tribunals of the Member States within
the meaning of Article 267 TFEU and thus as part of the EU judicial system. Those arbitration tribunals have a
number of features, such as whether they are established by law, whether they are permanent, whether their
jurisdiction is compulsory, whether their procedure is inter partes, whether they apply rules of law and whether
they are independent.21 Such arbitration tribunals are therefore entitled to make a reference. The Court has
recognised this, for example, in the case of a Danish arbitration tribunal in respect of the interpretation of
collective agreements22 and in the case of Portuguese arbitration tribunals in respect of tax matters23 or
intellectual property.24 For that reason, their jurisdiction in respect of EU-law disputes does not run counter to
Articles 267 and 344 TFEU.
36. The Swedish courts, on the other hand, proceed on the assumption that the jurisdiction of the arbitration
tribunal at issue is based on the agreement between the parties, namely an arbitration agreement. There is
therefore at least a lack of compulsory jurisdiction.25 Moreover, the arbitration tribunal, like that at issue in
the judgment in Achmea, is not part of the judicial system of a Member State and was seised for precisely that
reason.26 The arbitration tribunal in the main proceedings is therefore not part of the EU judicial system either
and, in particular, cannot refer doubts concerning EU law to the Court.27
37. It is true that the Court regularly derives a threat to the autonomy of EU law from situations in which a
body outside the EU system interprets provisions of EU law.28 That risk would be low if the arbitration
tribunal – as appears to be the case here29 – primarily applies the provisions of an investment protection
agreement of Member States under international law.30 Moreover, contrary to the view taken by Poland,
despite the fundamental importance of the principle of proportionality in EU law, the arbitration tribunal also
[Page 6]
applied that principle not as part of EU law, but because it also applies in other legal systems and in particular in
the area of investment protection under international law.31
38. Nevertheless, Germany and France rightly state that, under the investment treaty, the arbitration tribunal
was required to consider EU law as being, in principle, part of domestic law. In particular, however, there is a
risk that the arbitration tribunal will take decisions that will ultimately result in an infringement of EU law.
39. Accordingly, in the present case, it cannot be ruled out that the arbitration tribunal misconceived the
obligations of the Polish banking supervisory authority under the relevant directive. Moreover, there would be a
risk that not only the Polish banking supervisory authority, but also bodies of other Member States, would take
the decision of an arbitration tribunal into account in the future application of that EU legislation, especially if
the Court has not yet taken a position on that question. This is because the arbitration award could set a
precedent and lead to other investors in similar cases being awarded compensation.
40. It is true that both the risk of an infringement of EU law and the risk of divergent interpretation could be
limited or even eliminated if compliance with EU law by arbitration awards were comprehensively reviewed by
the national courts – where appropriate, after having conducted a preliminary-ruling procedure.
41. In Sweden, point 1 of the first subparagraph of Paragraph 33 of the Law on arbitration proceedings
provides that an arbitration award is to be void if it involves the examination of a question which, under Swedish
law, may not be decided by arbitrators. Under point 2 of the first subparagraph of Paragraph 33, an arbitration
award is also to be void if the manner or manners in which it was arrived at are manifestly incompatible with the
Swedish legal order. The court must raise the grounds of invalidity of its own motion. Only the Swedish courts
can assess the extent to which those provisions allow for comprehensive enforcement of EU law. This prima
facie constitutes only a very limited review in the sense of ordre public, however, which also corresponds to the
standard of review applied by the court of appeal in the main proceedings.32
42. The recognition of individual arbitration agreements between Member States and investors from other
Member States would therefore create the risk of an infringement of EU law by the arbitration tribunals in so far
as the national courts could not ensure that arbitration awards comply with EU law.
43. However, the Court has at least implicitly recognised that the settlement of certain disputes by arbitration
is permissible, and has thereby accepted a limited review of compliance with EU law. This related to what is
referred to as commercial arbitration.
44. First, in the judgment of 23 March 1982, Nordsee (102/81, EU:C:1982:107), concerning an arbitration
procedure, the Court held that the parties to a contract are not free to create exceptions to EU law, because the
latter had to be observed in its entirety throughout the territory of the Member States. In that judgment, it
emphasised that the national courts may be called upon to examine questions of EU law raised in connection
with the arbitration procedure, with the result that they may refer those questions to the Court.33 Those
statements could have been understood to mean that the national courts must comprehensively review
compliance with EU law in arbitration proceedings.
45. However, the Court subsequently recognised, in its judgment of 1 June 1999, Eco Swiss (C-126/97,
EU:C:1999:269), that it is in the interest of efficient arbitration proceedings that review of arbitration awards
should be limited in scope and that annulment of or refusal to recognise an award should be possible only in
exceptional circumstances. The national courts would however have to ensure compliance with fundamental
provisions which are essential for the accomplishment of the tasks entrusted to the European Union and, in
particular, for the functioning of the internal market.34
46. Both approaches therefore allow disputes to be referred to arbitration tribunals for a ruling, although they
are unable to ensure the correct and uniform application of EU law through requests for a preliminary ruling
[Page 7]
under Article 267 TFEU. The more recent ruling even accepts an infringement of EU law by arbitration awards if
the provisions concerned are not fundamental in nature.
47. The judgment in Achmea distinguishes commercial arbitration between private parties, which is
permissible in accordance with that case-law, from the impermissible arbitration between a private party and a
Member State on the basis of investment treaties, in that the former originate in the freely expressed wishes of
the parties, whereas the latter derive from a treaty between the Member States.35
48. As stated by PL Holdings, Luxembourg, Finland and Sweden, an individual arbitration agreement
between an investor and a Member State would be permissible on the basis of that distinction. This is because
such an agreement also originates in the freely expressed wishes of the parties to the arbitration proceedings. In
such a case, it would be permissible to limit the national courts’ review of the arbitration award in cases
concerning investment protection to compliance with the fundamental rules of EU law.
49. However, Italy is to be agreed with in that the demarcation is not conclusively defined by merely referring
to the will of the parties.
50. On the contrary, Advocate General Szpunar recently understood the distinction of commercial arbitration
in the judgment in Achmea to mean that that judgment only precludes Member States from systematically
removing EU-law disputes from the EU judicial system by means of a prior obligation.36 Such an
understanding would also allow the present arbitration agreement.
51. I am not convinced by this view, nor are a number of the parties concerned. Why should Member States
be allowed to remove EU-law disputes from the EU judicial system in individual cases if they are not allowed to
enter into a foreseeable general obligation of this kind? In addition to the risks to the uniform application of EU
law, there would also be the risk of unequal treatment of different investors.37
52. Rather, it is expressly only in relation to commercial arbitration that the Court has advanced the argument
regarding the autonomy or freely expressed wishes of the parties. Such arbitration relates to disputes between
parties operating on an equal footing. In such disputes, it is not only the arbitration agreement but also the
disputed legal relationship itself that is based on the autonomous will of the parties.
53. Even in arbitration proceedings in consumer cases, which, at least in practice, are no longer characterised
by a level playing field, the Court requires a strict review, conducted of the court’s own motion, as to whether the
arbitration agreement is effective in the first place.38
54. As pointed out by Poland, Italy, Hungary, the Netherlands, Slovakia and the Commission, however, the
case in the main proceedings is not a commercial dispute between parties on an equal footing, but relates to the
exercise of sovereign powers by Polish authorities. If a private party is subjected to a sovereign measure – in
casu, banking supervision – there can be no question of free will, at least on the part of that party. For that reason
alone, it seems unlikely that a Member State would subsequently enter into an arbitration agreement with the
private party in relation to such a measure of its own free will.
55. Above all, however, Member States may not remove disputes relating to the sovereign application of EU
law from the EU judicial system.39
56. This is because, in accordance with the principle of sincere cooperation enshrined in Article 4(3) TEU, it
is the task of all bodies of the Member States to ensure compliance with EU law within the scope of their
respective competences.40 Article 344 TFEU gives concrete expression to that obligation of the Member
States.41 It is not limited to compliance with fundamental rules, but concerns all rules of EU law.
57. As a consequence, a structured network of principles, rules and mutually interdependent legal relations
which justifies the autonomy of EU law with respect both to the law of the Member States and to international
law binds the EU and its Member States reciprocally and binds its Member States to each other.42
[Page 8]
58. Private parties who freely submit to commercial arbitration are not subject to those obligations. In
particular, Article 344 TFEU does not apply to disputes between private parties.43 Therefore, despite the risk
of an infringement of EU law, it is consistent to permit arbitration proceedings concerning disputes between
private parties.
59. In contrast, it is problematic when authorities of the Member States in EU law disputes use an arbitration
tribunal which is neither part of the EU system nor subject to comprehensive review by national courts with
regard to compliance with EU law. This is because it cannot be ruled out in such cases that the arbitration award
will fail to have regard to EU law and will thereby impair its effectiveness.44
60. It is true that infringements of EU law resulting from an individual arbitration agreement could give rise
to claims for compensation against the Member State concerned or be the subject of infringement
proceedings.45 These forms of enforcement of EU law are relatively cumbersome, however, and therefore
cannot ensure its full effectiveness.
61. The Court accepts the risk of an infringement of EU law if the arbitration is based on an agreement
between the EU and non-Member States46 or on old agreements concluded by Member States with non-
Member States before their accession to the Union, which continue to be effective under Article 351 TFEU.47
By contrast, EU law takes precedence over international agreements concluded between the Member States.48
Similarly, it is not compatible with the effectiveness of EU law for Member States to conclude with certain
investors individual arbitration agreements in relation to sovereign measures for enforcing EU law, where such
agreements create a risk that the arbitration award will infringe EU law.
62. However, the risk of an infringement of EU law can be countered if the courts of the Member States not
only review the arbitration award with regard to whether it complies with fundamental provisions of EU law, but
comprehensively verify compliance with EU law and refer the matter to the Court if necessary.
63. As already explained, it is doubtful whether Swedish law guarantees such verification.49 In any event,
contrary to the submissions of PL Holdings, the Swedish court of appeal did not comprehensively examine the
compatibility of the arbitration award with EU law, but only ruled out the existence of a breach of fundamental
obligations. In so doing, it confined itself to the question of whether the arbitration agreement was compatible
with EU law, without, however, taking a view on the relevant requirements of EU law for banking
supervision.50
64. The immunity of the Member States under international law, as emphasised by France, does not preclude
a comprehensive review either. It is true that, in principle, State immunity precludes the sovereign acts of one
State from being reviewed by the courts of other States.51 However, the State submitting to arbitration has
already waived that immunity where the national law at the seat of arbitration provides for a review of the
arbitration award and the sovereign acts at issue.
65. Consequently, individual arbitration agreements between Member States and investors from other
Member States concerning the sovereign application of EU law are compatible with the duty of sincere
cooperation under Article 4(3) TEU and the autonomy of EU law under Articles 267 and 344 TFEU only if
courts of the Member States can comprehensively review the arbitration award for its compatibility with EU law,
if necessary after requesting a preliminary ruling under Article 267 TFEU.
66. The Commission also rightly emphasises the right of all investors to equal treatment in the
implementation of EU law.
67. The principle of equal treatment is a general principle of EU law which is enshrined in Article 20 of the
Charter of Fundamental Rights of the European Union (‘the Charter’). It requires that comparable situations
must not be treated differently and that different situations must not be treated in the same way unless such
treatment is objectively justified. A difference in treatment is justified if it is based on an objective and
[Page 9]
reasonable criterion, that is, if the difference relates to a legally permitted aim pursued by the legislation in
question, and it is proportionate to the aim pursued by the treatment.52
68. If some investors were referred to national courts for disputes with the Member State, but others could
have recourse to an arbitration tribunal, there would be unequal treatment.
69. If such unequal treatment were based on an investment treaty – unlike in the present case – it might be
justified by the fact that the contract embodies a balance between the legitimate interests of both sides.53
Similar considerations could also justify arbitration clauses agreed between a Member State and an international
investor as a precondition for the investment or by a Member State in the context of a legal relationship in which
the parties are on an equal footing.
70. On the other hand, it is difficult to conceive of a legitimate objective with which a Member State could
justify entering into an arbitration agreement with some investors in relation to a dispute that has already arisen,
while referring others to the national courts.
71. It is ultimately for the national court to examine whether there is any such justification, however.54 For
the purposes of the present proceedings, it is sufficient to note that individual arbitration agreements between
Member States and investors from other Member States concerning the sovereign application of EU law must
also be compatible with the principle of equal treatment under Article 20 of the Charter.
72. Based on the considerations made up to this point, the incompatibility of the arbitration agreement with
EU law does not depend upon whether it was concluded in the form of an entering of an appearance in the
arbitration proceedings without raising an objection. I will therefore consider the significance of that form only
for the event that the Court takes a different view on the points already examined.
73. First, it should be emphasised that recognition of such arbitration agreements can be of considerable
practical importance on a temporary basis. This is because it can be assumed that this issue affects many still-
pending arbitration proceedings and disputed arbitration awards between Member States and investors from
other Member States in which the respective Member States, before the judgment in Achmea, did not raise the
objection of incompatibility of the arbitration clause of the respective investment treaty with EU law in due
time.55
74. In the medium term, however, it is to be expected that Member States concerned will raise that objection
in good time,56 if investors initiate such arbitration proceedings in the first place.
75. This practical aspect demonstrates that the recognition of such arbitration agreements concluded by way
of an entering of an appearance without raising an objection would temporally limit the effectiveness of the
judgment in Achmea to a certain extent, namely with regard to certain arbitration proceedings already pending at
that time, even though the Court did not address such a limitation in that judgment. However, if the previous
considerations do not convince the Court that the compatibility of the present arbitration agreement with EU law
is doubtful, the effectiveness of the judgment in Achmea will also not be of any decisive importance for the
assessment of the form of the arbitration agreement.
76. More generally, contrary to the view taken by Germany and France, EU law does not contain any rule that
would prohibit Member States from entering into an arbitration agreement in the form of an entering of an
appearance without raising an objection.
77. On the contrary, as PL Holdings points out, EU law recognises the concept of an entering of an
appearance without raising an objection in various rules that are not applicable in the present case.57 It is true
that France refers to the fact that, in consumer cases, the Court requires courts to examine the validity of an
arbitration clause of their own motion even if no objections have been raised.58 However, there is no need to
protect Member States in arbitration proceedings in this manner. Rather, it can be assumed that they are
[Page 10]
represented in them in a highly professional manner and therefore have sufficient opportunity to raise objections
in good time.
78. Since EU law therefore does not regulate this question in respect of the present case, the form of the
arbitration agreement has no relevance for its compatibility with EU law.
79. On the other hand, the rules of arbitration organisations highlighted by Sweden are likely to assume a
much greater importance before the national courts. However, both the United Nations Commission on
International Trade Law (UNCITRAL)59 and the International Centre for Settlement of Investment Disputes
(ICSID)60 provide that parties may no longer rely on objections that they did not raise without undue delay.
Nevertheless, Hungary emphasises that during the negotiations for the ICSID Convention, the Contracting States
assumed that the jurisdiction of the arbitration tribunal has to be established at the time of its constitution and
cannot be established subsequently.61
80. PL Holdings requests, lastly, that the temporal effect of the judgment in the present case be limited in the
event that the Court declares individual arbitration agreements to be incompatible with EU law. At the very least,
arbitration proceedings that are already pending and thus, a fortiori, those that have been concluded should not
be affected.
81. The interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the
Court gives to a rule of EU law clarifies and defines the meaning and scope of that rule as it must be or ought to
have been understood and applied from the date of its entry into force.62 It is only quite exceptionally that the
Court may, in application of the general principle of legal certainty inherent in the EU legal order, be moved to
restrict the opportunity, open to any person concerned, of relying on a provision which it has interpreted with a
view to calling into question legal relationships established in good faith. Two essential criteria must be fulfilled
before such a limitation can be imposed, namely that those concerned should have acted in good faith and that
there should be a risk of serious difficulties.63
82. However, the answer to the request for a preliminary ruling proposed here merely requires that the
compliance of the arbitration award with EU law be subject to comprehensive judicial review. The good faith of
those concerned cannot be based on the expectation that EU law is not fully enforced, however. For that reason
alone, a limitation of the temporal effect is precluded.
83. In addition, a limitation of the temporal effect may be allowed only in the actual judgment ruling upon the
interpretation sought. There must necessarily be a single occasion when a decision is made on the temporal
effects of the requested interpretation, which the Court gives of a provision of EU law. In that regard, the
principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees
the equal treatment of the Member States and of other persons subject to EU law, under that law, fulfilling, at the
same time, the requirements arising from the principle of legal certainty.64
84. In the present case, the essential requirements already follow from the judgment in Achmea, the temporal
effect of which was not limited by the Court. Moreover, the unrestricted permissibility of arbitration agreements
on the basis of late objections regarding the competence of the arbitration tribunal would temporarily deprive
that judgment of its practical effect.65 This is another reason why it is not possible to limit the temporal effect
of the judgment to be delivered in the present proceedings.
85. I therefore propose that the Court give the following ruling:
Individual arbitration agreements between Member States and investors from other Member States
concerning the sovereign application of EU law are compatible with the duty of sincere cooperation under
[Page 11]
Article 4(3) TEU and the autonomy of EU law under Articles 267 and 344 TFEU only if courts of the
Member States can comprehensively review the arbitration award for its compatibility with EU law, if
necessary after requesting a preliminary ruling under Article 267 TFEU. Such arbitration agreements must
furthermore be compatible with the principle of equal treatment under Article 20 of the Charter of
Fundamental Rights of the European Union.
1 Original language: German.
2 Judgment of 6 March 2018 (C-284/16, EU:C:2018:158; ‘the judgment in Achmea’).
3 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraph 189).
4 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraph 306 et seq.).
5 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, in particular paragraphs 229, 234 and
418 et seq.).
6 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraphs 408 and 444).
7 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraph 318 et seq.).
8 Final Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163).
9 Judgment of 6 March 2018 (C-284/16, EU:C:2018:158).
10 The judgment in Achmea (paragraph 60).
11 The judgment in Achmea (paragraphs 35 to37, with further references).
12 See judgment of 30 May 2006, Commission v Ireland (C-459/03, EU:C:2006:345, paragraph 123), and the
judgment in Achmea (paragraph 32).
13 See judgment of 30 May 2006, Commission v Ireland (C-459/03, EU:C:2006:345, paragraphs 127 and
128).
14 Judgment of 30 May 2006 (C-459/03, EU:C:2006:345).
15 The judgment in Achmea (paragraph 55). See also Opinion 1/09 (Agreement creating a Unified Patent
Litigation System) of 8 March 2011 (EU:C:2011:123, paragraph 80).
[Page 12]
16 (OJ 2006 L 177, p. 1), as amended by the Treaty between [the Member States] and the Republic of Croatia
concerning the accession of the Republic of Croatia to the European Union (OJ 2012 L 112, p. 10). That
directive was replaced by Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013
on access to the activity of credit institutions and the prudential supervision of credit institutions and investment
firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176,
p. 338), Article 21(2) of Directive 2006/48 becoming Article 26(2) of Directive 2013/36.
17 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraphs 87, 88 and 248), does
refer to the framework of EU law, however.
18 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, in particular paragraphs 229, 234
and 418 et seq.).
19 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraphs 408 and 444).
20 Partial Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraph 339).
21 See judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta
(C-377/13, EU:C:2014:1754, paragraph 23).
22 Judgment of 17 October 1989, Handels- og Kontorfunktionærernes Forbund i Danmark (109/88,
EU:C:1989:383, paragraphs 7 to 9).
23 See judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta
(C-377/13, EU:C:2014:1754, paragraphs 28 to 34).
24 Order of 13 February 2014, Merck Canada (C-555/13, EU:C:2014:92, paragraphs 19 to 25).
25 See judgments of 23 March 1982, Nordsee (102/81, EU:C:1982:107, paragraph 11), and of 27 January
2005, Denuit and Cordenier (C-125/04, EU:C:2005:69, paragraph 13).
26 The judgment in Achmea (paragraph 45).
27 Judgments of 23 March 1982, Nordsee (102/81, EU:C:1982:107, paragraphs 11 to 13), and of 1 June 1999,
Eco Swiss (C-126/97, EU:C:1999:269, paragraph 34).
28 Opinions 1/91 (EEA agreement – I) of 14 December 1991 (EU:C:1991:490, paragraphs 34 and 35); 2/13
(Accession of the Union to the ECHR) of 18 December 2014 (EU:C:2014:2454, paragraphs 184 and 223 to
231); and 1/17 (EU-Canada CETA) of 30 April 2019 (EU:C:2019:341, paragraphs 123 to 126); and the judgment
in Achmea (paragraphs 40 to 42).
[Page 13]
29 However, Spain rightly points out that, in connection with the determination of its jurisdiction, the
arbitration tribunal interpreted Article 344 TFEU in contradiction with the later judgment in Achmea (Partial
Award, PL Holdings S.à.r.l. v Republic of Poland (V 2014/163, paragraphs 314 and 315)).
30 See Opinion 1/17 (EU-Canada CETA) of 30 April 2019 (EU:C:2019:341, paragraphs 121 to 123).
31 See, for instance, De Brabandere, E. and da Cruz, P.B.M., ‘The Role of Proportionality in International
Investment Law and Arbitration: A System-Specific Perspective’, Nordic Journal of International Law,89(3-4),
2020, pp. 471-491.
32 See the judgment of the Svea Hovrätt (Court of Appeal, Stockholm) of 22 February 2019, Poland v PL
Holdings (T 8538-17 and T 12033-17, pp. 48 and 49 of the English translation).
33 Judgment of 23 March 1982, Nordsee (102/81, EU:C:1982:107, paragraphs 14 and 15).
34 Judgment of 1 June 1999, Eco Swiss (C-126/97, EU:C:1999:269, paragraph 35 et seq.). See also judgment
of 26 October 2006, Mostaza Claro (C-168/05, EU:C:2006:675, paragraph 35), and the judgment in Achmea
(paragraph 54).
35 The judgment in Achmea (paragraph 55).
36 Opinion in Komstroy (C-741/19, EU:C:2021:164, points 61 and 62).
37 See also, in this respect, point 66 et seq. below.
38 Judgments of 26 October 2006, Mostaza Claro (C-168/05, EU:C:2006:675, paragraph 39); and of
6 October 2009, Asturcom Telecomunicaciones (C-40/08, EU:C:2009:615, paragraph 59); and order of
16 November 2010, Pohotovost’ (C-76/10, EU:C:2010:685, paragraph 54).
39 The Commission also argues that, under Swedish law, sovereign acts by Swedish authorities cannot be
removed from the jurisdiction of the national courts. In accordance with the principle of equivalence, Swedish
courts would also have to apply that rule to the sovereign acts of other Member States in so far as they are based
on EU law.
40 Judgments of 12 June 1990, Germany v Commission (C-8/88, EU:C:1990:241, paragraph 13); of
13 January 2004, Kühne & Heitz (C-453/00, EU:C:2004:17 paragraph 20); and of 4 October 2012, Byankov
(C-249/11, EU:C:2012:608, paragraph 64). See also the judgment in Achmea (paragraphs 34 and 58).
41 Judgment of 30 May 2006, Commission v Ireland (C-459/03, EU:C:2006:345, paragraph 169).
42 The judgment in Achmea (paragraph 33), and judgment of 10 December 2018, Wightman and Others
(C-621/18, EU:C:2018:999, paragraph 45).
[Page 14]
43 Opinion 1/09 (Agreement creating a Unified Patent Litigation System) of 8 March 2011 (EU:C:2011:123,
paragraph 63).
44 See above, point 39.
45 This differs from the situation in Opinion 1/09 (Agreement creating a Unified Patent Litigation System) of
8 March 2011 (EU:C:2011:123, paragraphs 86 and 87).
46 Opinion 1/17 (EU-Canada CETA) of 30 April 2019 (EU:C:2019:341, paragraph 117).
47 Judgment of 15 September 2011, Commission v Slovakia (C-264/09, EU:C:2011:580, paragraph 32).
48 Judgment of 27 February 1962, Commission v Italy (10/61, EU:C:1962:2, paragraph 22); of 27 September
1988, Matteucci (235/87, EU:C:1988:460, paragraphs 21 and 22); and of 20 May 2003, Ravil (C-469/00,
EU:C:2003:295, paragraph 37); and also, to that effect, the judgment in Achmea (paragraph 58).
49 See above, point 41.
50 See the judgment of the Svea Hovrätt (Court of Appeal, Stockholm) of 22 February 2019, Poland v PL
Holdings (T 8538-17 and T 12033-17, pp. 48 and 49 of the English translation).
51 See judgment of the International Court of Justice of 3 February 2012, Immunités juridictionnelles de
l’Etat (Allemagne c. Italie; Grèce (intervenant)), C.I.J. Recueil 2012, p. 99, paragraphs 55 to 61).
52 Judgments of 17 October 2013, Schaible (C-101/12, EU:C:2013:661 paragraphs 76 and 77), and of
3 February 2021, Fussl Modestraße Mayr (C-555/19, EU:C:2021:89, paragraph 95).
53 Judgment of 5 July 2005, D. (C-376/03, EU:C:2005:424, paragraph 62). See also Opinion 1/17 (EU-
Canada CETA) of 30 April 2019 (EU:C:2019:341, paragraph 169). See also, however, judgment of
27 September 1988, Matteucci (235/87, EU:C:1988:460, paragraph 23).
54 Judgment of 3 February 2021, Fussl Modestraße Mayr (C-555/19, EU:C:2021:89, paragraph 97).
55 See, for instance, Vattenfall AB and Others v. Federal Republic Germany, Decision on the Achmea Issue
of 31 August 2018 (ICSID Case No ARB/12/12, paragraph 18). The parties appear to have recently settled that
case, however (Federal Government, Government Press Conference of 5 March 2021, and Vattenfall, Press
Release of 5 March 2021).
56 In that regard, 23 Member States signed the Agreement for the termination of Bilateral Investment Treaties
between the Member States of the European Union on 5 May 2020 (OJ 2020 L 169, p. 1).
[Page 15]
57 See, for instance, Article 5 of Council Regulation (EC) No 4/2009 of 18 December 2008 on jurisdiction,
applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance
obligations (OJ 2009 L 7, p. 1) or Article 26 of Regulation (EU) No 1215/2012 of the European Parliament and
of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil
and commercial matters (OJ 2012 L 351, p. 1). See also judgments of 14 December 1995, van Schijndel and van
Veen (C-430/93 and C-431/93, EU:C:1995:441, paragraph 21), and of 27 February 2014, Cartier parfums-
lunettes and Axa Corporate Solutions assurances (C-1/13, EU:C:2014:109, paragraphs 34 and 36 and the case-
law cited).
58 See judgment of 26 October 2006, Mostaza Claro (C-168/05, EU:C:2006:675, paragraphs 36 to 39).
59 Article 4 of the Model Law on International Commercial Arbitration (1985), with amendments as adopted
in 2006.
60 ICSID Convention – Articles 27 and 41 Rules of Procedure for Arbitration Proceedings.
61 To that end, Hungary cites Schreuer, C.H. et al., The ICSID Convention – A Commentary, Cambridge
University Press, 2nd Edition, 2009, Article 25, paragraph 481. However, see also paragraph 498.
62 Judgments of 6 March 2007, Meilicke and Others (C-292/04, EU:C:2007:132, paragraph 34), and of
23 April 2020, Herst (C-401/18, EU:C:2020:295, paragraph 54).
63 Judgments of 6 March 2007, Meilicke and Others (C-292/04, EU:C:2007:132, paragraph 35), and of
23 April 2020, Herst (C-401/18, EU:C:2020:295, paragraph 56).
64 Judgments of 6 March 2007, Meilicke and Others (C-292/04, EU:C:2007:132, paragraphs 36 and 37), and
of 23 April 2020, Herst (C-401/18, EU:C:2020:295, paragraph 57).
65 See above, point 73.