INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
In the arbitration proceeding between
JCDECAUX SA
Claimant
and
CZECH REPUBLIC
Respondent
ICSID CASE NO. ARB/20/33
Members of the Tribunal
The Rt. Hon. Lord Jonathan Mance, President of the Tribunal
Professor Kaj Hobér, Arbitrator
Professor Raúl E. Vinuesa, Arbitrator
Secretary of the Tribunal
Ms. Alicia Martín Blanco
Date of dispatch to the Parties:
28 July 2023
|
Representing JCDecaux SA: Mr. Leon Kopecký |
Representing The Czech Republic: Dr. Martina Matejová Dr. Sabine Konrad |
[Page i]
5. This dispute relates to the alleged breaches by the State of standards of protection guaranteed by the BIT and international law, including fair and equitable treatment, no expropriation or nationalization, full protection and security, national and most favourable treatment, no unjust or discriminatory measures, and the BIT's umbrella clause.
6. In this ruling, the Tribunal decides the preliminary objection submitted by the Respondent that the Tribunal lacks jurisdiction due to the alleged invalidity of the offer to arbitrate contained in Article 10(2) of the BIT and/or should not purport to exercise any jurisdiction which it might otherwise have. The alleged invalidity would stem primarily from the allegedly retroactive effect of the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union, in force since 10 December 2021 for both the French Republic and the Czech Republic (“Termination Agreement”), but also from alleged inconsistency with European Union law, as interpreted by the Court of Justice, and from Article 30(4) of the Vienna Convention on the Law of Treaties (“VCLT”) as well as from EU Member States' Declarations and entry into the Termination
[Page 2]
Agreement even before it came into force. The submission that the Tribunal should not purport to exercise any jurisdiction it might otherwise have rests on submissions made by the Respondent of lack of good faith on the Claimant's part, comity, and the Tribunal's alleged duty to render an enforceable award.
7. On 26 August 2020, ICSID received a request for arbitration from JCDecaux SA against the Czech Republic, with factual exhibits C-001 through C-011 and legal exhibit CL-001 (the "Request").
8. On 16 September 2020, the Secretary-General of ICSID registered the Request in accordance with Article 36 of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID's Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.
9. By correspondence of 26 and 29 October 2020, the Parties agreed to constitute the Tribunal in accordance with Article 37(2)(a) of the ICSID Convention as follows: the Tribunal would consist of three arbitrators; one to be appointed by each Party and the third, presiding arbitrator, to be appointed by the co-arbitrators.
10. By letter of 19 November 2020, Claimant appointed Prof. Kaj Hobér, a national of Sweden, as an arbitrator in this case. Prof. Hobér accepted his appointment on 20 November 2020.
11. By correspondence of 4 January 2021, Respondent appointed Prof. Raúl Emilio Vinuesa, a national of Argentina and Spain, as an arbitrator in this case. Prof. Vinuesa accepted his appointment on 5 January 2021.
12. On 10 March 2021, the Claimant informed the Secretary-General of the Parties agreement to appoint The Rt. Hon. Lord Jonathan Mance, a national of the United Kingdom, as President of the Tribunal. Respondent confirmed the agreement on the same day. Lord Mance accepted his appointment on 12 March 2021.
[Page 3]
13. On 12 March 2021, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the “Arbitration Rules”), notified the Parties that all three arbitrators had accepted their appointments and, therefore the Tribunal was deemed to have been constituted on that date. Ms. Aurélia Antonietti, ICSID Senior Legal Counsel, was designated to serve as Secretary of the Tribunal.
14. The Tribunal is composed of The Rt. Hon. Lord Jonathan Mance, a national of the United Kingdom, President, appointed by agreement of the Parties; Prof. Kaj Hobér, a national of the Kingdom of Sweden, appointed by the Claimant; and Prof. Raúl E. Vinuesa, a national of the Argentine Republic and the Kingdom of Spain, appointed by the Respondent.
15. On 18 March 2021, Lord Mance submitted a disclosure.
16. By letter of 18 March 2021, the Respondent requested full disclosure regarding Prof. Hobér's work in “intra-EU” and “contra-EU” cases. Prof. Hobér provided a response on 22 March 2021. The Responded requested further confirmations on 24 March 2022, which were provided by Prof. Hobér on the same day.
17. In accordance with ICSID Arbitration Rules 13(1) and 20(1), the Tribunal held the first session and preliminary procedural consultation with the Parties on 4 May 2021 by videoconference.
18. On 14 May 2021, the Tribunal issued Procedural Order No. 1, recording the agreements of the Parties and the decisions of the Tribunal on procedural matters, including the procedural calendar (Annex B). Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, the procedural language would be English, and the place of proceedings would be Paris, France, although the Tribunal may hold in-person hearings at any other place in geographical Europe that it considers appropriate having consulted the Parties.
19. On 19 October 2021, the Claimant filed its Memorial on the Merits along with Factual Exhibits C-0001 to C-0091, Legal Authorities CL-0001 to CL-0080 (the “Memorial”). The pleading was also accompanied by three witness statements and an expert report, as follows: (i) Witness Statement of [Redacted] dated 13 October 2021 (the
[Page 4]
Statement"); (ii) Witness Statement of [Redacted] dated 14 October 2021 (the [Redacted] Statement"); Witness Statement of [Redacted], dated 24 of September 2021 (the [Redacted] Statement"); and (iii) Expert Report from [Redacted] dated 12 October 2021, (the "[Redacted] Report").
20. On 30 November 2021, Respondent filed its Request for Bifurcation and Memorial of Preliminary Objections along with Legal Authorities RL-0001 to RL-0090 (the “Request for Bifurcation").
21. On 11 January 2022, the Claimant filed its Answer to Respondent's Request for Bifurcation along with Legal Authorities CL-0081 to CL-0093.
22. On 25 January 2022, Respondent filed its Reply on Bifurcation along with Legal Authorities RL-0091 to RL-0097.
23. On 8 February 2022, Claimant filed its Rejoinder on Bifurcation along with Legal Authorities CL-0094 to CL-0100 and a list of Intra-EU Decisions (Appendix 1).
24. On 24 February 2022, the Tribunal issued Procedural Order No. 2 granting the bifurcation of the preliminary objections and the merits. By correspondence of the same day, the Parties were invited to confer and comment on the amended procedural timetable proposed by the Tribunal.
25. Further to the Parties' comments, on 3 March 2022, the Tribunal issued Procedural Order No. 3, containing the timetable on the preliminary objections.
26. Following a case redistribution, on 3 March 2022, the Centre informed the Tribunal and the Parties that Ms. Alicia Martín Blanco, ICSID Legal Counsel, had been assigned to serve as Secretary of the Tribunal going forward.
27. On 14 April 2022, the Tribunal proposed that provisional arrangements be made at the International Dispute Resolution Centre (IDRC) in London to preserve the possibility that the hearing be held in person given that the World Bank Paris facilities, as well as the ICC Hearing Centre in Paris, would not be available to host the hearing.
[Page 5]
28. On 20 April 2022, the Parties agreed with the provisional arrangements for an in-person hearing at the IDRC in London and disagreed on whether the hearing should be held remotely or in person, and on when the decision should be made. Further to the Parties' communications of 22 April 2022, and of 16, 17, 18, 20, and 23 May 2022, on 23 May 2022, the Tribunal indicated that an in-person hearing was on the face of it both feasible and appropriate, and that none of the other alternatives for its location seemed wholly satisfactory. In the circumstances, the Tribunal took the view that hearing should be confirmed at the IDRC in London.
29. On 7 June 2022, Claimant filed its Counter-Memorial on Preliminary Objections along with Legal Authorities CL-0001 to CL-0165 and a list of Intra-EU Decisions Post-Achmea (Appendix 1) (the “Counter-Memorial on Preliminary Objections”).
30. On 26 July 2022, Respondent filed its Reply on Preliminary Objections along with Legal Authorities RL-0098 to RL-0122 (the “Reply on Preliminary Objections").
31. On 6 September 2022, Claimant filed its Rejoinder on Preliminary objections along with Factual Exhibits C-0001 to C-0092 and Legal Authorities CL-0001 to CL-0190 (the “Rejoinder on Preliminary Objections”).
32. On 22 September 2022, the Tribunal issued procedural order No. 4 on the organization of the hearing.
33. The hearing on preliminary objections was held on 12 October 2022 at the premises of the International Dispute Resolution Centre (the “Hearing”). The following persons were present at the Hearing:
Tribunal:
Jonathan Mance President
Kaj Hobér Arbitrator
Raúl E. Vinuesa Arbitrator
ICSID Secretariat:
Alicia Martín Blanco Secretary of the Tribunal
For the Claimant:
Leon Kopecký Schönherr Rechtsanwälte GmbH
[Page 6]
Sebastian Lukic Schönherr Rechtsanwälte GmbH
[Redacted] JCDecaux SA
[Redacted] JCDecaux SA
For the Respondent:
Sabine Konrad Morgan, Lewis & Bockius LLP
Maximilian Pika Morgan, Lewis & Bockius LLP
Pierre Trippel Morgan, Lewis & Bockius LLP
Martina Matejová Ministry of Finance of the Czech Republic
Jaroslav Kudrna Ministry of Finance of the Czech Republic
Lucie Ostrá Ministry of Finance of the Czech Republic
Court Reporter:
Diana Burden
34. On 31 October 2022, the Parties submitted their agreed corrections to the Hearing transcript.
35. The Parties filed their respective submissions on costs on 9 January 2023.
36. On 27 September 1991, the BIT between the Czech and Slovak Federal Republic, and the French Republic entered into force, and it remained in force for the Czech Republic after the dismemberment of the Czech and Slovak Republic Federal Republic in 1992.1
37. The French Republic became a member of the European Union (“EU”) on 1 January 1958.2
38. On 1 May 2004, the Czech Republic acceded to the EU.3
39. On 6 March 2018, the Court of Justice of the European Union (“CJEU”) rendered the Achmea Judgment.4
1 Request for Bifurcation, para. 2. ↩
2 Request for Bifurcation, para. 2. ↩
3 Request for Bifurcation, para. 3. ↩
4 Request for Bifurcation, para. 4, relying on Slovak Republic v. Achmea BV. CJEU, Case C-284/16, Judgment of the Court (Grand Chamber), (the “Achmea judgment") 6 March 2018 (RL-0001). ↩
[Page 7]
40. On 15 and 16 January 2019, the EU Member States issued declarations “on the legal consequences of the judgment of the Court of Justice in Achmea and on investment protection in the European Union” and “on the enforcement of the judgment of the Court of Justice in Achmea and on investment protection in the European Union” (“Declarations").5
41. On 25 February 2020 the Claimant served a Notice of Dispute on the Respondent.6
42. On 29 May 2020, the EU Member States concluded the Termination Agreement.7
43. On 26 August 2020, Claimant filed the Request for Arbitration.8
44. On 28 August 2021, the Termination Agreement entered into force for France.9
45. On 10 December 2021, the Termination Agreement entered into force for the Czech Republic.10
46. The Respondent requests that the Tribunal:11
- DECLARE that it has no jurisdiction over Claimant’s claims;
- ORDER Claimant to fully reimburse the Czech Republic for all costs it has incurred in relation to the present arbitration.
5 Request for Bifurcation, paras. 5 and 32, relying on the following Declarations: Declaration of the Representatives of the Governments of the Member States, 15 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0005); Declaration of the Representatives of the Governments of the Member States, 16 January 2019 on the Enforcement of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0006); and Declaration of the Representative of the Government of Hungary, 16 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0007). ↩
6 Request for Arbitration, para.28. ↩
7 Request for Bifurcation, para. 6, relying on The Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union, signed on 5 May 2020 (RL-0009). ↩
8 Request for Bifurcation, para. 7. ↩
9 Request for Bifurcation, para. 8. ↩
10 Request for Bifurcation, para. 9. ↩
11 Reply on Preliminary Objections, para. 138. ↩
[Page 8]
47. The Claimant requests that the Tribunal:12
- DISMISS Czechia's Preliminary Objections;
- ORDER Czechia to pay for all the associated costs.
48. The Parties' positions on each issue are summarized briefly below. Each such summary is not intended to be exhaustive, but rather to reflect the Parties principal arguments. For the avoidance of doubt, the Tribunal has carefully considered the entirety of the Parties' submissions in arriving at its determination, and the absence of reference to any particular matter should not be taken as an indication that the Tribunal has not considered it.
49. The Respondent contends that the Tribunal lacks jurisdiction because Article 10(2) of the BIT “can no longer serve as a basis for the Tribunal's jurisdiction”. The case is, according to the Respondent, about what States can do by treaty, and the answer given is that (there being no question of jus cogens) they can do anything they like.13 According to the Respondent, Article 10(2) is incapable of operating because of "the Termination Agreement's retroactive effects” and, separately, because of “the invalidity of the offer to arbitrate" under Article 30(4)(a) of the VCLT, having regard to the binding interpretation of the effect of the European Treaties established by the CJEU.14 The Claimant may pursue its domestic rights under French law before French courts, and its substantive claims before Czech courts.15 Moreover, the principle of comity and the duty to render enforceable awards prevent the Tribunal from assuming jurisdiction.16
12 Rejoinder on Preliminary Objections, para. 235. ↩
13 Transcript pp.8-9 and 28. ↩
14 Reply on Preliminary Objections, paras. 3 and 86. ↩
15 Reply on Preliminary Objections, para. 4. ↩
16 Reply on Preliminary Objections, para. 5. ↩
[Page 9]
50. The Respondent explains that the CJEU in Achmea held that ISDS clauses contained in treaties concluded between EU Member States are incompatible with EU law and therefore inapplicable. As to reasoning, the CJEU relied on the principle of autonomy of EU law in Article 344 TFEU, on the obligation of EU Member States to respect EU law, on the importance of the EU legal system, and on the key value of the option to request a preliminary ruling under Article 267 TFEU. The CJEU found that BIT investment tribunals do not qualify as courts or tribunals that can make a request for a preliminary ruling under Article 267 despite the fact that BIT arbitration may concern the application or interpretation of EU law, which adversely affects the autonomy of EU law. The CJEU concluded that the ISDS clause in the Achmea BIT was incompatible with Articles 267 and 344 TFEU in a way that precludes ISDS provisions such as the one in Achmea.17
51. As established in the settled case law of the CJEU and confirmed by the Court in PL Holdings, the Achmea judgment merely clarified the provisions that already existed in the TFEU from the moment of its entry into force. Accordingly, “the source of the binding rule imposing invalidity of arbitration clauses in intra-EU BITs is not the Achmea judgment, but the TFEU.”18
52. Following the Achmea judgment, various EU stakeholders have acknowledged the judgment and declared its consequences:19
53. The European Commission. The European Commission in its Communication of 19 July 2018 (i) recognized that the CJEU had confirmed its longstanding position that intra-EU BITs are incompatible with EU law and argued that the EU Member States are obliged to terminate all intra-EU BITs; and (ii) explained that EU law protects all intra-EU
17 Request for Bifurcation, paras. 16-25. ↩
18 Request for Bifurcation, paras. 48-53, relying on Amministrazione delle Finanze dello Stato v. Denkavit Italiana S.r.l., CJEU, Case 61/79, Judgment, 27 March 1980, para.16 (RL-0013); and Republiken Polen v. PL Holdings Sàrl., CJEU, Case C-109/20, Judgment of the Court (Grand Chamber), 26 October 2021, paras. 57, 58 (RL-0011). The Respondent further relies on Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Statement of Dissent of Professor Marcelo G. Kohen, 3 February 2020, para. 6 (RL-0014). ↩
19 Request for Bifurcation, para. 26. ↩
[Page 10]
investments and that disputes are to be resolved in the domestic courts of the EU Member States.20
54. The EU Member States: In their Declarations, the EU Member States –including France and the Czech Republic – (i) stated that arbitration clauses in intra-EU BITs “are contrary to Union law and thus inapplicable”; (ii) recognized that intra-EU investments fall within the scope of protection of EU law; and (iii) formally declared that they would terminate all intra-EU BITs by means of a multilateral treaty.21
55. In the Termination Treaty, 23 EU Member States – including France and the Czech Republic - (i) confirm that intra-EU ISDS clauses are inapplicable and cannot serve as legal basis for arbitration proceedings; (ii) terminate the intra-EU BITs concluded between them, including the sunset clauses; and (iii) offer investors two new options to settle their disputes through the "structured dialogue for settlements" and before national courts.22
56. The CJEU In PL Holdings, the CJECU followed its findings in Achmea and found that the ISDS provision in the relevant intra-EU BIT was invalid due to incompatibility with EU law. The Court went one step further to confirm that ISDS agreements which have the same content as ISDS provisions in intra-EU BITs are contrary to EU law regardless of whether they are incorporated in international treaties or as ad hoc contracts.23
57. The Respondent explains the policies that underline the preclusion of intra-EU ISDS under EU law,24 as follows:
20 Request for Bifurcation, paras. 27-31. ↩
21 Request for Bifurcation, paras. 32-36, relying on Declaration of the Representatives of the Governments of the Member States, 15 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0005); Declaration of the Representatives of the Governments of the Member States, 16 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0006); and Declaration of the Representative of the Government of Hungary, 16 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0007). ↩
22 Request for Bifurcation, paras. 37-41. ↩
23 Request for Bifurcation, paras. 43-47, relying on Republiken Polen v. PL Holdings Sàrl., CJEU, Case C-109/20, Judgment of the Court (Grand Chamber), 26 October 2021 (RL-0011). ↩
24 Request for Bifurcation, para. 54. ↩
[Page 11]
58. EU law provides procedural and substantive protection to cross-border investments within the EU that overlap with the protection provided in investment treaties and must be resolved in favour of EU law and the EU national courts, including, (i) as regards substantive protection, through the four fundamental freedoms, the obligation that EU Member States accord nationals or another Member State the same treatment as their nationals regarding participation in the capital of companies or firms, the rights granted to intra-EU investors in The Charter of Fundamental Rights of the European Union, and the principles of proportionality, legal certainty and legitimate expectations; and (ii) as regards procedural protection, though the guarantees of due process, enshrined in the value of the rule of law, and the possibility of preliminary referral to the CJEU, which ensures that EU law is applied in a uniform manner.25
59. The principle of mutual trust, which is one of the fundamental principles for European integration and was addressed by the CJEU in the Achmea judgment, (i) constitutes a liberty of EU Member States to be confident that the shared values enshrined in Article 2 TUE will be respected by other EU Member States; and (ii) results in an obligation between EU Member States to respect each other's judicial decisions and not to turn to other methods of dispute resolution outside the EU national courts.26
60. The principle of autonomy of EU law is closely tied to the special nature of the integration in the EU, has brought about “a new legal order of international law for the benefit of which the states have limited their sovereign rights”, and is protected by the CJEU through its authoritative and uniform interpretation of EU law by means of the preliminary rulings under Article 267 TFEU.27
61. The Respondent explains that the jurisdiction of an arbitral tribunal is based on the consent of the disputing parties. Such consent derives from the applicable international investment agreement, and there is no difference between an ICSID and UNCITRAL arbitration for
25 Request for Bifurcation, paras. 56-70. ↩
26 Request for Bifurcation, paras. 71-77. ↩
27 Request for Bifurcation, paras. 79-84. ↩
[Page 12]
the purpose of assessing whether a valid arbitration agreement was concluded. Article 25 contains additional jurisdictional requirements, but the ICSID Convention is not the basis for the Tribunal's jurisdiction.28
62. The Achmea judgment is relevant to determine the validity of the arbitration agreement, and it also determines that intra-EU ICSID arbitrations pose a higher risk to the uniform application of EU law than UNCITRAL arbitrations, since ICSID awards cannot be subject to any domestic court review.
63. The Respondent contends that the jurisdictional requirements under Article 25(1) of the ICSID Convention are not met because of the Termination Treaty. In particular, the Respondent claims that the Termination Treaty is worded to apply retroactively, which would have prevented the perfection of an arbitration agreement in August 2020 through the Request for Arbitration.
64. The Notice of Dispute of 25 February 2020 failed to perfect an arbitration agreement as consent cannot be presumed and, in this case, it did not include an acceptance that was clear and unequivocal.29 To the contrary, the wording used constitutes a warning that the offer might be accepted in the future, as it does not contain the words “accept” or “consent to”, but uses conditionals (“unless”) and hypotheticals (“would be forced”). In addition, it is not clear which investor would have accepted the offer as the Notice of Dispute was sent on behalf of JCDecaux SA (France) and JCDecaux Central Eastern Europe Holding GmbH (Austria), and it not clear either whether consent was to
28 Request for Bifurcation, paras. 87-91. ↩
29 Reply on Preliminary Objections, paras. 29-31, relying on ConocoPhillips Petrozuata BV, ConocoPhillips Hamaca BV, ConocoPhillips Gulf of Paria BV and ConocoPhillips v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and Merits, 3 September 2013, para. 254 (RL-0100) (omitting references); Tenaris SA & Talta Trading e Marketing Sociedade Unipessoal LDA v. Bolivarian Republic of Venezuela (II), ICSID Case No. ARB/12/23, Decision on Annulment, 28 December 2018, para. 337 (RL-0099); Wintershall Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/04/14, Award, 8 December 2008, para. 160.3 (RL-0101); and ICS Inspection and Control Services Limited v. The Argentine Republic, PCA Case No. 2010-9, Award on Jurisdiction, 10 February 2012, para. 280 (RL-0102). See also Transcript p.10. ↩
[Page 13]
UNCITRAL or ICSID arbitration as the Notice does not specify which of the two potential BITs it references.30
65. The Respondent contends that the Termination Treaty is intended to apply retroactively at least as regards any offer or consent to arbitrate BIT disputes.31 The retroactive application follows from the wording of Articles 1(6), 4(1), and 5, which indicate that the present arbitration constitutes a New Arbitration Proceeding under the Termination Treaty, and that the BIT shall not serve as a legal basis for it. The retroactive application is further supported by the wording of Article 9, which is addressed to investors in pending arbitrations and would not make sense otherwise, by the object and purpose of the Termination Treaty as expressed in its Preamble (4), and by the rationale of the signatories to implement Achmea, as confirmed by PL Holdings. The retroactive application is also in line with the termination of the sunset clauses pursuant to Article 3 of the Termination Treaty.32
66. The Respondent further contends that the Termination Treaty can apply retroactively because the VCLT allows for retroactive treaty terminations. Article 28 of the VCLT provides that, where (as here) States intend, a treaty can apply retroactively, and Article 70(1) provides that they can also terminate a treaty with retroactive effects. The retroactive effect of the Termination Treaty between its signature and entry into force is also consistent with Article 18 of the VCLT, which obliges States to refrain from acts that would defeat the object and purpose of a treaty, and with Article 24(4), which provides for the application of certain provisions of a treaty before its entry into force.33 The potential separability of an arbitration clause in a commercial contract is irrelevant; it addresses the validity of such a clause in a context where the commercial contract is open to some
30 Reply on Preliminary Objections, paras. 32-37. ↩
31 Transcript pp. 12-15. ↩
32 Reply on Preliminary Objections, paras. 9-18; Request for Bifurcation, paras. 195-200. ↩
33 Reply on Preliminary Objections, paras. 19-24. ↩
[Page 14]
challenge, not the present international law problem where it is the clause itself which is invalid.34
67. According to the Respondent, it is irrelevant whether the Claimant initiated the arbitration before the Termination Treaty entered into force as the Claimant does not have any independent rights that could override the VCLT. Outside the area of jus cogens, individual rights, even human rights, depend on and are subject to the will of the parties to the treaty creating them.35 Here, the Claimant's rights are derivative of France. This is shown by the historical context, where (before investment treaties and investment arbitration) investors were protected through diplomatic protection. It is shown by the nature of the BIT, which is expressed as being “conducive to the stimulation of capital and technology transfer between the two countries in the interest of their economic development”, in other words entered into to further the two States' public good and development, not in the individual interest of companies claiming under the BIT.36 Arbitration clauses in investment treaties constituted "a shortcut of protection" that does not change the derivative nature of the investor's rights. Any issue in this regard is between the Claimant and France under domestic French law.37
68. The Respondent contends that, even if the Claimant had any independent rights that could limit the contracting States' power to terminate the BIT retroactively, these rights would not apply since its consent to arbitrate in the Request for Arbitration was not performed in good faith. At the time of the Request for Arbitration in August 2020, the Claimant knew of the wording of the Termination Treaty, which the Claimant acquired in May 2020 at the latest, when the Termination Treaty became public.38 The treaty did not come as a surprise given the extensive discussions on intra-EU BITs since Achmea as well as the Declarations of France and the Czech Republic and their undertaking to terminate all intra-EU BITs. As a consequence of this knowledge, the purported acceptance of the arbitration offer in August 2020 was not made in good faith and cannot be protected by Article 69 of the
34 Transcript pp. 37-38. ↩
35 Transcript pp.17-20. ↩
36 Transcript p. 20. ↩
37 Request for Bifurcation, paras. 207-215; Tanscript p. 35 ↩
38 Transcript p. 24. ↩
[Page 15]
VCLT, a provision which protects acts performed in good faith in the scenario where a treaty is invalid.39
69. According to the Respondent, the Claimant has not disputed and cannot dispute that the Termination Treaty is worded to apply retroactively, that the VCLT allows for retroactive treaty terminations, and that at the time of the Request for Arbitration in August 2020 the Claimant knew of the wording of the Termination Treaty.40
70. For these reasons, as “a simple consequence of the VCLTs rules and the decision of the signatories to the Termination Agreement”, Article 10(2) BIT and the arbitration agreement became invalid retroactively ex tunc,41 and the Claimant's allegations to the contrary are to no avail.
71. The allegation that jurisdiction is assessed at the date when the tribunal is seized is irrelevant since Article 10(2) became invalid ex tunc.
72. The submission that the termination of the treaty cannot retroactively divest a seized tribunal of jurisdiction is incorrect, as offers to arbitrate included in treaties are subject to the VCLT's rules on retroactivity and good faith:42 (i) international law, including the VCLT, is the law applicable to the arbitration agreement;43 (ii) the VCLT does not distinguish between ISDS and other provisions;44 (iii) the sovereignty rationale behind Article 70 VCLT apply to ISDS provisions as much as to substantive protection provisions;45 (iv) the Claimant cannot claim self-standing rights on equal footing with States and simultaneously escape the application of the VCLT rules on retroactivity and good faith;46 (v) the principle of good faith is a fundamental principle with regard to jurisdiction, and Tribunals have declined jurisdiction because the investor did not acquire
39 Reply on Preliminary Objections, paras. 25-28; Request for Bifurcation, paras. 217-221. ↩
40 Reply on Preliminary Objections, p. 4. ↩
41 Reply on Preliminary Objections, para. 38. ↩
42 Reply on Preliminary Objections, para. 41. ↩
43 Reply on Preliminary Objections, para. 42. ↩
44 Reply on Preliminary Objections, para. 43. ↩
45 Reply on Preliminary Objections, para. 44. ↩
46 Reply on Preliminary Objections, para. 45. ↩
[Page 16]
standing or initiate arbitration in good faith;47 (vi) the ICJ jurisprudence relied on by the Claimant is irrelevant since none of those cases concerns “a treaty terminating jurisdiction, let alone with explicit retroactive effect”;48 (vii) it would not make sense for the ICJ to decide over an expressly retroactive termination of jurisdiction in a treaty;49 and (viii) none of the investment tribunal decisions relied on by the Claimant support the same fact pattern as the current case.50
73. The ICSID Convention does not establish jurisdiction by itself. To establish jurisdiction, the ICSID Convention requires a valid arbitration agreement and imposes jurisdictional requirements ratione personae and ratione materiae in addition to the requirements under the BIT. In this case, the Respondent contends that the Claimant does not meet the requirements under the BIT because the treaty, including its Article 10(2), ceased to apply retroactively under the VCLT, and the Claimant's reliance on the ICSID Convention is inapposite: (i) the Termination Treaty does not constitute a unilateral withdrawal of consent in the sense of the second sentence of Article 25(1) of the ICSID Convention; and (ii) the Preamble to the ICSID Convention is insufficient to establish jurisdiction without consent.51
47 Reply on Preliminary Objections, paras. 46-49, relying on Phoenix Action Ltd v. The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, para. 107 (RL-0109); Philip Morris Asia Limited v. The Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015, paras. 404, 407, 412, 413, 414, 420, 423, 440, 444, 483, 487, 536, 537 (RL-0110); and Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019, para. 206 (CL-0122). ↩
48 Reply on Preliminary Objections, paras. 50-53, (emphasis in original), relying on Nicaragua v. Colombia, Judgement, 21 April 2022, para. 42 (CL-0135); Nottebohm (Liechtenstein v. Guatemala), Judgement, I.C.J. Reports 1953, p. 120 (CL-0092); Libyan Arab Jamahiriya v. United States of America, Preliminary Objection, Judgment, 27 February 1998, I.C.J. Reports 1998, pp. 128-129 (CL-0095); and Arrest Warrant of 11 April 2000 Democratic Republic of the Congo v. Belgium, Judgment, I.C.J. Reports 2002, pp. 12-14 (CL-0093). ↩
49 Reply on Preliminary Objections, para. 54. ↩
50 Reply on Preliminary Objections, para. 55, relying on Spółdzielnia Pracy Muszynianka v. Slovak Republic, PCA Case No. 2017-08, Award, 7 October 2020 (CL-0090). ↩
51 Reply on Preliminary Objections, paras. 57-67; and see also Transcript pp. 29-31, submitting that the ICSID Convention preceded the concept of a BIT, and that the parties whose consent was envisaged under Article 25 of the Convention would have been States; and Transcript pp. 44-45. ↩
[Page 17]
74. In any event, even if the Tribunal were to find that the arbitration agreement remained valid despite the retroactive application of the Termination Treaty and the Claimant's lack of good faith when it initiated the arbitration, there is no dispute under Article 25(1) of the ICSID Convention as the substantive rights under the BIT have ceased to exist.52 According to the Respondent:
a. The Claimant's rights are only derivative rights of its home State, France, as supported by international law and legal authorities such as Mavromatis, Lowen, and HICEE;53 and
b. Even if the investor exercises its own substantive rights under the BIT, these rights cannot exist against the declared will of both signatories to the BIT, i.e., “while investors may be able to rely on BIT rights, States establish and terminate BIT rights, including retroactively."54
c. The Claimant has not pointed to any authority, including Occidental, that supports the position that the contracting States' treaty-making power is restricted by the investment-treaty rights of the investors, and such rule would be inconsistent with the following rules and principles: (i) States are sovereign and their treaty-making power is only restricted by ius cogens; (ii) multinational companies are not on equal footing with States as regards the treaty's fate; (iii) international law does not impose duties on States to provide diplomatic protection; and (iv) Tribunals should not intervene in domestic disputes as is any disagreement that the Claimant may have with the fact that France consented to the retroactive termination of the BIT.55
52 Reply on Preliminary Objections, paras. 69. ↩
53 Reply on Preliminary Objections, paras. 71-75, relying on Mavrommatis Palestine Concessions, 1924 P.C.I.J. (ser. B) No. 3, Judgement, 30 August 1924, p. 12 (RL-0113); Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003, para. 233 (RL-0114); and HICEE B.V. v. The Slovak Republic, PCA Case No. 2009-11, Partial Award, 23 May 2011, paras. 138-139 (RL-0115). ↩
54 Reply on Preliminary Objections, paras. 76, emphasis in original, and 85. ↩
55 Reply on Preliminary Objections, paras. 77-84, referencing Occidental Exploration & Production Company v. Republic of Ecuador, [2005] EWCA Civ. 1116, (CL-0100); and Mavrommatis Palestine Concessions, 1924 P.C.I.J. (ser. B) No. 3, Judgement, 30 August 1924, p. 12 (RL-0113), Status of Eastern Carelia, 1923 P.C.I.J. (ser. B) No. 5, Advisory Opinion, 23 July 1923, p. 27 (RL-0118). ↩
[Page 18]
75. The Respondent submits that Article 30(4)(a) operates as a separate reason for the invalidity of the offer to arbitrate in Article 10(2) BIT.
76. This submission proves to have two branches. First, in oral submissions, the Respondent argued that the Termination Treaty between France and Czechia had the same subject-matter as, and was, once it came into effect retrospectively, the “anti-matter" to the earlier BIT between the same parties, in so far as both addressed the issue of dispute resolution for investor claims.56
77. Second, the Respondent points out that the BIT was also earlier in time than, and, in the light of the Achmea line of decisions, inconsistent with, the later Treaty on the Functioning of the European Union (“TFEU”). More specifically, the relevant EU Treaties constitute the later treaties in the sense of Article 30 VCLT because (i) the BIT entered into force on 27 September 1991; and (ii) the TEU and TFEU entered into force between both France and the Czech Republic when the Czech Republic acceded to the EU on 1 May 2004.57 The Respondent also points out that the Treaty of Lisbon that amended the TEU and TFEU and made the CFREU legally binding at the same level entered into force on 1 December 2009.58 Article 10(2) BIT is thus also incompatible with Articles 267 and 344 TFEU in the sense of Article 30 VCLT.
78. As a consequence of one or both of these conflicts, Article 10(2) BIT is inapplicable and the offer it contains has been invalid since the Czech's Republic's accession to the EU in 2004 and/or since the coming into effect of the Termination Treaty, “leading to invalidity of the offer to arbitrate at the moment of its acceptance by Claimant."59
56 Transcript p. 29. ↩
57 Request for Bifurcation, paras. 100-101, 103. ↩
58 Request for Bifurcation, para. 102. ↩
59 Reply on Preliminary Objections, paras. 86-88; Request for Bifurcation, paras. 95-99, and 189-191. ↩
[Page 19]
79. The Respondent contends that the decisive test under Article 30(4)(a) of the VCLT is the one described in the Report of the Study Group on Fragmentation by the International Law Commission (“ILC”)60, as follows:
[t]he test of whether two treaties deal with the ‘same subject matter' is resolved through the assessment of whether the fulfilment of the obligation under one treaty affects the fulfilment of the obligation of another. This ‘affecting' might then take place either as strictly preventing the fulfilment of the other obligation or undermining its object and purpose in one or another way.
80. According to the Respondent, there is no confusion between sameness and incompatibility on the part of the ILC, and the authority on which the Claimant relies, EURAM61, addressed the requirements under Article 59 VCLT, not the test under Article 30(4)(a) VCLT.62.
81. The Respondent further contends that this test applies not only to substantive provisions, but also to procedural ones, and that it is irrelevant whether the treaties contain the same rules on a specific issue or whether they apply the same degree of precision.63
82. Under the ILC test, there is an identity of the subject matter of the BIT and the EU Treaties because Article 10 of the BIT provides for arbitration, whereas Articles 267 and 344 of the TFEU require the mandatory submission of disputes to national EU courts, such that the Respondent cannot comply with the obligations under the BIT without infringing those under the FTEU and vice versa.64
60 Reply on Preliminary Objections, paras. 95, 97; Request for Bifurcation, paras. 104-108, relying on Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, Report of the Study Group of the International Law Commission, 13 April 2006, p. 130 (RL-0033). See also Transcript pp. 46-48. ↩
61 European American Investment Bank AG (Austria) v. The Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction, 22 October 2012. ↩
62 Reply on Preliminary Objections, paras. 99-100, relying on European American Investment Bank AG (Austria) v. Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction, 22 October 2012, paras. 169-175 (CL-0127). ↩
63 Request for Bifurcation, paras. 109-110. ↩
64 Request for Bifurcation, paras. 113-114; Reply on Preliminary Objections, para. 101. ↩
[Page 20]
83. The Respondent argues that even if the Tribunal were to accept the Claimant's position on the same subject-matter test, there would be identity of subject-matters between the BIT and the EU Treaties, as EU law provides effective protection in terms of substantive and procedural standards that is at least equivalent to the protection under the BIT.65
84. As to the substantive standard, the Respondent contends that:
a. The European Commission's communication of 19 July 2018 explains that “the [TFEU] prohibits measures unduly preventing or discouraging cross-border capital movements and payments”;66
b. EU law provides the protection of the national treatment standard under the non-discrimination principle in Articles 18 and 55 TFEU, and Article 21(2) CFREU;67
c. Articles 18 TFEU and Article 21(2) CFREU also correspond to the rationale of the MFN standard in that they ensure that the treatment provided by an EU Member State cannot be discriminatory on the grounds of nationality;68
d. The courts of EU Member States are obliged to apply EU law and make preliminary references to the CJEU for EU law to be applied consistently, effectively, and uniformly, which is a guarantee of protection equivalent to the full protection and security standard in the BIT even if the BIT standard “would, arguendo, encompass legal protection and security”;69 Moreover, the preliminary ruling mechanism under EU law provides a uniformity and predictability that surpass the differences in interpretation offered by investment Tribunals regarding standards of protection such as MFN and the umbrella clause;70
e. Protection against unlawful expropriation under EU law can be included under the right to property in Article 17 CFREU and under the freedom to establish and provide services in Articles 49 and 56 of TFEU. These provisions provide protection that is at least equal to the protection under the BIT, and the Claimant
65 Reply on Preliminary Objections, paras. 102-103, 114. ↩
66 Reply on Preliminary Objections, para. 104, relying on European Commission, Communication from the Commission to the European Parliament and the Council: Protection of intra-EU investment, COM (2018) 547 final, 19 July 2018, p. 2 (RL-0003). ↩
67 Request for Bifurcation, paras. 133-140. ↩
68 Reply on Preliminary Objections, para. 105; Request for Bifurcation, paras. 154-156. ↩
69 Reply on Preliminary Objections, para. 106. ↩
70 Request for Bifurcation, paras. 157, 160. ↩
[Page 21]
has not provided any authority for the proposition that EU law does not provide protection against creeping expropriation;71
f. The FET standard has been interpreted to have the international minimum standard of treatment as its lowest common denominator, which in turn encompasses the protection against interference, denial of justice, due process, and transparency, all of which are covered under EU law.72 To the extent that FET includes the additional elements of protection of legitimate expectations, legal certainty, and non-discrimination, the Respondent contends that these are also covered by EU law.73 Legitimate expectations in particular are ensured under EU law, which was specifically confirmed by the EU Member States as well as by the EU Commission;74
g. While the Respondent contends that the BIT does not contain an umbrella clause, the Respondent argues that EU law reaches the same goal of protection through different means.75
85. As to the procedural standards, the Respondent contends that the Claimant's argument that there is no direct ISDS mechanism under EU law is irrelevant because the effective implementation of an investor's substantive rights is ensured before the national EU courts through the following standards: (i) the direct application and effect of EU law, which include the possibility of an individual invoking an EU law provision against an EU Member State; (ii) the possibility or the obligation of national EU courts to refer matters to the CJEU for a preliminary ruling; and (iii) the fact that individuals can, under certain conditions, claim damages before EU courts against EU Member States for violations of rights granted to them by EU law.76
71 Request for Bifurcation, paras. 123-132; Reply on Preliminary Objections, para. 108. ↩
72 Request for Bifurcation, paras. 141-149. ↩
73 Request for Bifurcation, paras. 150-152. ↩
74 Reply on Preliminary Objections, para. 107, relying on Declaration of the Representatives of the Governments of the Member States, 15 January 2019, on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union, p. 2 (RL-0005); Declaration of the Representatives of the Governments of the Member States, 16 January 2019, on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union, p. 29 (RL-0006); Declaration of the Representative of the Government of Hungary, 16 January 2019, on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union, p. 2 (RL-0007), and European Commission, Communication from the Commission to the European Parliament and the Council: Protection of intra-EU investment, COM (2018) 547 final, 19 July 2018, p. 14 (RL-0003). ↩
75 Request for Bifurcation, paras. 158-159. ↩
76 Reply on Preliminary Objections, paras. 109-113; Request for Bifurcation, paras. 161-178. ↩
[Page 22]
86. According to the Respondent, the Claimant (i) does not dispute that the CJEU, the European Commission and all EU Member States agree that intra-EU arbitrations are impermissible under EU law, and (ii) instead argues that all the EU stakeholders are interpreting Articles 267 and 344 TFEU incorrectly. The Respondent contends that it is the Claimant's interpretation that is incorrect and that intra-EU arbitration clauses are incompatible with Articles 267 and 344 TFEU.77
87. The Respondent argues that, even if the Tribunal were to have concerns regarding the same subject matter issue, the Tribunal must give effect to the understanding that France and the Czech Republic expressed in subsequent agreement and practices after the Achmea judgment, in accordance with Article 31(3)(a) and (b) VCLT. This understanding was expressed in the Declaration of 15 January 2019 and in the Termination Treaty, both of which confirm that the EU Treaties take precedence over the BIT. The wording used shows that the signatories consider the EU Treaties to cover investment protection.78
88. The Respondent contends that there are legal authorities supporting its position, such as BayWa, which confirms that the obligations in the subsequent treaty as interpreted by the CJEU in Achmea override conflicting obligations under the BIT. The BayWa Tribunal held that the conclusions in Achmea were not applicable to the Energy Charter Treaty because of its multilateral nature and inclusion of the EU itself, different from the bilateral nature of the treaty at issue in Achmea, from which it follows that the conclusions in Achmea "authoritatively establish that the TFEU takes priority between the concerned EU Member States" as regards the BIT.79
77 Reply on Preliminary Objections, paras. 90-94. ↩
78 Request for Bifurcation, paras. 179-188. ↩
79 Reply on Preliminary Objections, paras. 115-119, relying on BayWA r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Kingdom of Spain, ICSID Case No. ARB 15/16, Decision on Jurisdiction, Liability and ↩
[Page 23]
Directions on Quantum, 2 December 2019, paras. 280-282 (CL-0152). See Transcript pp. 48-50 for the submissions developed on these cases.
89. The Respondent further contends that the Green Power Tribunal confirmed that the declaration of the EU Member States of 15 January 2019 is “relevant as an authentic interpretation” of the States concerned and, although the Green Power Tribunal considered the declaration in the context of the Energy Charter Treaty, this conclusion is applicable in the context of the BIT. This Tribunal further confirmed that the primacy of EU law as regards the relationship between EU Member States is “one of lex superior".80
90. The Respondent contends that the lack of a valid arbitration agreement already leads to the lack of jurisdiction of the Tribunal over this dispute under Article 25(1) of the ICSID Convention. However, there are two further “substantial obstacles preventing the Tribunal from assuming jurisdiction”, namely the principle of comity towards the CJEU's judgment in Achmea, and the principle that arbitrators have a duty to render enforceable awards.81
91. As to the principle of comity, the Respondent contends that it remains a significant principle of international law that should guide the Tribunal in this case as it ensures stability and predictability and prevents inconsistent judgments by allowing a tribunal to limit its own jurisdiction where exercising it would be inappropriate or unreasonable. According to the Respondent, assuming jurisdiction in this case “in direct contradiction to the CJEU's Achmea judgment would be inappropriate and unreasonable". The legal authority on which the Claimant's rely, A.M.F, acknowledged the existence of this principle and did not exclude it altogether, but rather limited it to “extreme cases”. The Respondent considers that this is such an extreme case as refusing to exercise comity would be inefficient, lead to uncertainty on the available fora within the EU, and subject the Respondent to contradictory obligations.82 The Respondent adds that there is nothing odd
80 Reply on Preliminary Objections, paras. 120-121, relying on Green Power K/S and SCE Solar Don Benito APS v. The Kingdom of Spain, SCC Case No. V2016/135, Award, 16 June 2022, paras. 370, 372 (RL-0119); and Declaration of the Representatives of the Governments of the Member States, of 15 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (RL-0005). ↩
81 Reply on Preliminary Objections, paras. 122-124. ↩
82 Reply on Preliminary Objections, paras. 125-130, relying on A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG, Hamburg (Germany) v. The Czech Republic, PCA Case No. 2017-15, Final Award, 11 May 2020, para. 405 ↩
[Page 24]
about an investment Tribunal exercising comity towards the CJEU, and points to the MOX Plant case.83
92. As to the duty to render an enforceable award, the Respondent contends that any award that this Tribunal renders would be unenforceable in the EU pursuant to the limits of Article 54 of the ICSID Convention, which assimilates ICSID awards to final judgments of domestic courts and therefore implies that enforcement may be resisted where domestic rules provide for the exceptional possibility to refuse enforcement of a final judgment. This would be the case within the EU where an award violates EU law, as illustrated by the Swedish courts' refusal to enforce the pre-Achmea award in Micula. The incompatibility of intra-EU BITS with EU law constitutes one such circumstance that leads to unenforceability in the EU.84
93. The Respondent further contends that should the Tribunal proceed anyway, it would violate the duty to render an enforceable award. According to the Respondent, this duty is part of an arbitrator's legal and ethical obligations, and it is not relevant that the duty is not specifically stated within the ICSID Convention and the BIT as it exceeds institutional rules and is "the arbitrator's equivalent to the Hippocratic Oath."85 The Respondent contends that although enforcement of ICSID awards may be sought in any ICSID State, enforcement will still be sought where there are available assets that are not exempted from execution, and most of the economic activities and assets of the Czech Republic are located in the EU. The Tribunal is therefore unable to render an enforceable award in this matter and must decline jurisdiction.86
(CL-0115); Request for Bifurcation, paras. 224, 226, and 229-230, relying, among others, on, case concerning The Northern Cameroons, Cameroon v. United Kingdom, International Court of Justice, Judgement on Preliminary Objections, I.C.J. Reports 1963, 2 December 1963, p. 29 (RL-0072).
83 Request for Bifurcation, para. 230, relying on, MOX Plant Case, Ireland v. United Kingdom, PCA Case No. 2002-01, Order No. 3 - Suspension of Proceedings on Jurisdiction and Merits, and Request for Further Provisional Measures, 24 June 2003, paras. 20, 28 (RL-0073). ↩
84 Request for Bifurcation, paras. 232-237, relying on, Ioan Micula and others v. Romania, Nacka District Court, Case No. Ä 2550-1, Decision, 23 January 2019, p. 13 (RL-0075). ↩
85 Reply on Preliminary Objections, paras. 131-133, and 137. ↩
86 Request for Bifurcation, paras. 238-242. ↩
[Page 25]
94. According to the Respondent, the legal authorities on which the Claimant relies in the context of the duty to render an enforceable award are irrelevant as those decisions were rendered under different factual circumstances. In particular, the Respondent contends that in Micula this issue was not raised by the respondent, and that the conclusions of the Achmea judgment have been further confirmed since United Utilities by (i) the CJEU in PL Holdings and Komstroy, and by (ii) the EU Member States in their Termination Treaty.87
95. The Claimant contends that (i) the Respondent “does not engage with the key arguments", namely, that it has unconditionally consented to ICSID arbitration and that “a uniform body of ICSID case law supports that, as a matter of international law, EU law does not automatically vitiate a State's consent to ICSID arbitration”. The Tribunal does not derive its jurisdiction from EU law, but from the BIT and the ICSID Convention.88 Instead, the Respondent attempts to mischaracterize the Claimant's arguments and rebuts arguments that were not made. The Claimant further considers that (ii) the Respondent "indiscriminately mixes legal concepts and builds arguments on provisions that plainly do not apply in this case”, like its argument on Article 69 VCLT. The Claimant also states that (iii) the Respondent "fails to engage with the case law supporting JCDecaux's position" and, when it does, it takes decisions out of context or incorrectly describes the issues.89
96. The Claimant contends that the Termination Treaty came into effect after the Claimant had accepted the Respondent's consent, thus perfecting an ICSID arbitration agreement. This agreement is a distinct legal act, and the relevant question is therefore whether the
87 Reply on Preliminary Objections, paras. 134-136, relying on Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013, paras. 331-333 (CL-0137); and United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para. 490, 541 (CL-0105); and relying on PL Holdings Sàrl.R v. epubliken Polen, CJEU, Case C-109/20, Judgment of the Court (Grand Chamber), 26 October 2021, paras. 44-46 (RL-0011); and Komstroy LLC. v. Republic of Moldova, CJEU, Case C-741/19, Judgment of the Court (Grand Chamber), 2 September 2021, paras. 47-60 (RL-0012). ↩
88 Transcript p. 63. ↩
89 Rejoinder on Preliminary Objections, paras. 1-11, Counter-Memorial on Preliminary Objections, para. 1. ↩
[Page 26]
Termination Treaty can retroactively terminate the ICSID arbitration agreement, not whether States can retroactively terminate treaties.90 The Claimant contends that, to evade this conclusion, the Respondent argues that the Claimant has only derivative rights of its home State. However, the Claimant's rights are direct rights in international law.91
97. The Claimant contends that its position that it vindicates its own rights rather than those of its home State “conforms with the purpose of investment treaties and the ICSID scheme, a long line of case law, and academic writing.” The Respondent's contrary position ignores that the investment treaty regime is materially different from diplomatic protection, which was developed at a time when only States were subjects of international law and relied on the fiction that an injury to a national was an injury that national's State.92
98. According to the Claimant, the diplomatic protection principles cannot be transferred to this arbitration. In modern international law, treaties frequently confer upon individuals direct rights. In particular, it is the “very purpose” of investment treaties to give direct rights in international law to investors. Likewise, the ICSID Convention was “designed to give investors a direct right to international law remedies” and, as a trade-off, Article 27 of the ICSID Convention excludes recourse to diplomatic protection once a dispute is brought to arbitration.93
99. Investment Tribunals have also consistently endorsed the view that the rules of diplomatic protection cannot be transferred to investment treaties and the ICSID Convention.94 The
90 Transcript pp.56-57. ↩
91 Rejoinder on Preliminary Objections, paras. 17-21. ↩
92 Rejoinder on Preliminary Objections, paras. 23-26; Counter-Memorial on Preliminary Objections, paras. 143-146. ↩
93 Rejoinder on Preliminary Objections, paras. 27-34; Counter-Memorial on Preliminary Objections, paras. 143-146. ↩
94 Rejoinder on Preliminary Objections, para. 35, relying on Mr. Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award, 14 July 2010, para. 69 (CL-0172); Occidental Exploration & Production Company v. Republic of Ecuador, [2005] EWCA Civ. 1116, para. 20 (CL-0100), citing to Camuzzi International S.A. v. The Argentine Republic, ICSID Case No. ARB/03/2, Decision on Objections to Jurisdiction, 11 May 2005, para. 145 and Camuzzi International S.A. v. The Argentine Republic, ICSID Case No. ARB/03/7, Decision on Jurisdiction, 10 June 2005, para. 44 (emphasis added); Gas Natural SDG, S.A. v. The Argentine Republic, ICSID Case No. ARB/03/10, Decision on Preliminary Questions on Jurisdiction, 17 June 2005, para. 34 (CL-0006) (emphasis added); and Corn Products International, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/1, Decision on Responsibility, 15 January 2008, para. 169 (CL-0173). ↩
[Page 27]
Claimant contends that, to escape the conclusion that it exercises a direct right, the Respondent relies on Loewen and HICEE, but Loewen is ambiguous on the issue and HICEE was not constituted under the ICSID Convention, did not engage in any detail with the issue and therefore lacks the weight to override the authorities on which the Claimant relies.95
100. The Claimant contends that when an investor accepts a State's standing offer to arbitrate future disputes, it perfects an arbitration agreement. This agreement is not between States, but between the investor and the host State, and it does not include the investor's home State. This agreement is also “a separate and binding act of international law" and, pursuant to ICSID Article 25(1), consent to this agreement cannot be withdrawn unilaterally by the State. The Claimant explains that, applied to this case, this means that:96
(a) The Respondent unconditionally consented to ICSID arbitration;
(b) Its consent was open to acceptance at the time when the Claimant accepted the offer, and so perfected an ICSID arbitration agreement;
(c) The Respondent's argument that the Termination Agreement retrospectively defeats the arbitration agreement runs contrary to Article 25(1) of the ICSID Convention, and is irreconcilable with the VCLT and the well-established principle that jurisdiction is established at the date when a court or tribunal is seized.
101. The Claimant submits the Respondent has not rebutted the Claimant's case that:
95 Rejoinder on Preliminary Objections, para. 37, relying on Loewen Group, Inc. and Raymond L. Loewen v. United Stated of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003, para. 223 (RL-0114); and HICEE B.V. v. The Slovak Republic, PCA Case No. 2009-11, Partial Award, 23 May 2011 (RL-0115). See also Transcript pp. 33-35. ↩
96 Rejoinder on Preliminary Objections, paras. 39-43. ↩
[Page 28]
a. the Tribunal does not derive its jurisdiction from EU law, but from the BIT and the ICSID Convention;97
b. the ICSID Convention is a multilateral treaty that creates a self-contained regime that constitutes a distinct legal order of public international law, different from the legal order of the EU;
c. Article 10(2) of the BIT contains an unqualified consent to ICSID arbitration, which is not put in question by anything in the wording, the context, or the preamble of the BIT, nor does its meaning leave any “interpretative doubt”; and
d. the Respondent could have conditioned its consent in Article 10(2) of the BIT, or under Article 25(4) of the ICSID Convention at any time since its accession to the EU in 2004, but the Respondent did not do so – nor did the Respondent require the exhaustion of local remedies as a condition to consent under Article 26 of the ICSID Convention.98
102. The Claimant further contends that there is no “interpretative doubt” about the meaning of Article 13 BIT, which provides that the BIT will continue in force until terminated per its terms and contains a 15-year sunset clause; it further alleges that the Respondent could have conditioned its consent in Article 10(2) of the BIT, or required the exhaustion of local remedies as a condition to consent under Article 26 of the ICSID Convention, but the Respondent did not.99
103. The Claimant further notes that the Respondent does not engage with its submission that, as a matter of international law, EU law does not automatically vitiate consent to ICSID arbitration.100 According to the Claimant, the ICSID Convention creates a self-contained regime and a distinct legal order of public international law that has international law as its lex arbitri.101 Unlike in the case of Achmea and PL Holdings, a respondent State in an ICSID arbitration owes a duty to comply with the Convention to all ICSID Contracting
97 Transcript pp.63-64. ↩
98 Rejoinder on Preliminary Objections, paras. 44-48; Counter-Memorial on Preliminary Objections, paras. 5-21. See also Transcript p. 59 Article 25(4) provides that a Contracting State "may, at the time of ratification, acceptance or approval of this Convention, or at any time thereafter, notify the Centre of a class of disputes which it would not consider submitting to the jurisdiction of the Centre." Article 26 provides that a Contracting State “may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention." ↩
99 Counter-Memorial on Preliminary Objections, paras. 13-20. ↩
100 Rejoinder on Preliminary Objections, para. 49; Counter-Memorial on Preliminary Objections, paras. 23-77. ↩
101 Transcript pp. 62-65. ↩
[Page 29]
States, such that the arbitration agreement is therefore not a purely internal matter between EU Member States.102 The Claimant explains that CJEU case law does not suggest that acceding Member States must denounce or breach their duties towards third States.103 And even if the CJEU were to extend to ICSID, EU law would not automatically invalidate the Respondent's consent because: (i) CJEU judgments are not binding on ICSID tribunals as they operate in different legal orders; (ii)104 the authority of the CJEU extends only to the interpretation of EU law and its assessments are from the perspective of EU law and premised on constitutional principles of EU law; (iii)105 any decision by the CJEU that consent to arbitration in a BIT is precluded under EU law could only create obligations for the Respondent under EU and would, at most, result in the breach of EU law, but “wrongful consent nonetheless constitutes consent";106 (iv) adopting the view that EU law automatically invalidated the Respondent's consent to ICSID arbitration despite Article 13 of the BIT setting out that the BIT would continue in force until terminated in accordance with its terms would be contrary to Articles 26 and 27 VCLT.107 Finally, the Claimant contends that, as a matter of international law, policy statements by various EU "stakeholders" do not bear on the jurisdiction of ICSID Tribunals.108
104. The Claimant contends that it accepted the Respondent's offer on 25 February 2020, when it gave notice that it was prepared to resort to ICSID arbitration under Article 10(2) of the BIT. Alternatively, it perfected the arbitration agreement by submitting a Request for ICSID Arbitration on 26 August 2020.109
105. According to the Claimant, the Respondent's denial that the agreement was perfected in February 2020 is based on formalities that are not required by the BIT. However, the
102 Counter-Memorial on Preliminary Objections, paras. 24-41. ↩
103 Counter-Memorial on Preliminary Objections, para. 42. ↩
104 Counter-Memorial on Preliminary Objections, paras. 43-46. ↩
105 Counter-Memorial on Preliminary Objections, paras. 47-58. ↩
106 Counter-Memorial on Preliminary Objections, paras. 59-60. See also Transcript p.67. ↩
107 Counter-Memorial on Preliminary Objections, paras. 61-69. ↩
108 Counter-Memorial on Preliminary Objections, paras. 70-76. ↩
109 Rejoinder on Preliminary Objections, para. 51. ↩
[Page 30]
February notice "reflects a sufficiently clear intention to submit the dispute to ICSID arbitration as per Article 10 of the BIT and is therefore an acceptance of Czechia's offer", such that the Request for Arbitration merely reiterated the Claimant's request. The fact that other treaties are mentioned in the notice does not vitiate the Claimant's acceptance, nor does the fact that the notice sought to resolve the dispute amicably before submitting it to arbitration, which is a condition under the BIT.110
106. In any event, the Claimant contends that it is irrelevant whether the arbitration was perfected in February or in August 2020 since on both dates the Termination Treaty had not yet become effective, the BIT was in force, and the State's offer was open to acceptance.111 The Respondent in turn contends that the arbitration was not initiated in good faith. However, according to the Claimant, this argument is unavailing112 since:
a. The Respondent relies on Article 69 VCLT, but this provision does not apply to this case as it is concerned with the invalidity of treaties, not with their termination, and therefore the Claimant need not rely on the good faith exception embodied in Article 69(2)(b) VCLT. To offset this, the Respondent points to Phoenix and Philipp Morris, but the Tribunals in those cases rejected jurisdiction because the investments had been restructured with the purpose of bringing the claim under the BIT.113
b. Nowhere does the Termination Treaty use the term “retroactive", and the Respondent's position that it should be read into Articles 4 and 5 of the Termination Treaty is unpersuasive, as is the attempt to attribute to the Claimant knowledge that the Claimant did not have. What the Claimant did know is that a uniform body of international law authorities confirms that an investor may accept an offer to arbitrate contained in an investment treaty at any time during that treaty's validity.114
110 Rejoinder on Preliminary Objections, paras. 52-54. ↩
111 Rejoinder on Preliminary Objections, paras. 55-60. ↩
112 Rejoinder on Preliminary Objections, para. 61; Counter-Memorial on Preliminary Objections, paras. 147-150. ↩
113 Rejoinder on Preliminary Objections, paras. 62-67, relying on Phoenix Action Ltd v. The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, paras. 143-145 (RL-0109); and Philip Morris Asia Limited v. The Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015, para. 585 (RL-0110). ↩
114 Rejoinder on Preliminary Objections, paras. 68-69, relying on United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, paras. 558-559 (CL-0105); Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award, 26 July 2018, para. 593 (CL-0119); and Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case N. ARB/17/27, Award, 13 November 2019, para. 213 (CL-0098). ↩
[Page 31]
c. Claims of bad faith are subject to a high threshold. By definition, a party complying with a uniform body of international law authorities does not act in bad faith.
d. Treaty law distinguishes between the signing of a treaty and its ratification, and only the latter brings a treaty into effect. According to the Claimant, the Respondent in fact agrees with this position, as shown by the fact that the Ministry of Finance had listed the BIT as a valid treaty while the Respondent's Parliament discussed whether to ratify the Termination Treaty, and these discussions continued long after the commencement of this arbitration. The Respondent cannot escape this conclusion by relying on Articles 18 and 24 of the VCLT, which govern State conduct.115
107. The Claimant contends that the Respondent's retroactivity argument is contrary to116:
a. The ICSID Convention. The second sentence of Article 25(1) of the ICSID Convention provides that party consent is irrevocable once consent has been perfected.117 The principle of irrevocability is reinforced by the Convention's preamble, which refers to the arbitration agreement as “binding". To take the opposite view would undermine the effectiveness of all investment treaties and the ICSID system.118
b. The well-settled principle that jurisdiction is established at the date when the Tribunal is seized, as well the doctrine of acquired rights.119
108. To escape the conclusion that the Claimant's acceptance brought into operation Article 25(1) of the ICSID Convention, the Claimant contends that the Respondent makes the following unavailing arguments:
115 Rejoinder on Preliminary Objections, paras. 72-77. ↩
116 Rejoinder on Preliminary Objections, para. 79. ↩
117 Transcript pp.77-78, citing Principles of International Investment Law, Dolzer, Schreuer, and Kriebaum, Oxford press 2022, 3nd Edition, pp. 22-23 (CL-0139), and ICSID, History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention, vol. II-1, 9 July 1964, p.334 (RL-0074), where Aron Broches, as chair of the drafting Convention, is recorded as explaining that: "There would be no point in contemplating a Convention unless a government's word was regarded as its bond. The decision to submit a dispute was voluntary, but once made, became binding", ↩
118 Rejoinder on Preliminary Objections, paras. 80-84; Counter-Memorial on Preliminary Objections, paras. 138-139. ↩
119 Rejoinder on Preliminary Objections, paras. 85-87, relying on Eskosol S.p.A in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection Based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019, para. 226 (CL-0122); A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG, Hamburg (Germany) v. The Czech Republic, PCA Case No. 2017-15, Final Award, 11 May 2020, para. 338 (CL-0115); and Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 214 (CL-0098); Counter-Memorial on Preliminary Objections, paras. 140-142. ↩
[Page 32]
a. The Respondent's argument that its withdrawal is not covered by Article 25(1) because it was not unilateral, as the Termination Treaty was also signed by France. According to the Claimant, this argument is misconceived as the term “parties” in Article 25(1) refers to the parties to the arbitration agreement, which is confirmed by the context of the rule and accords with the preparatory work of the Convention. The Claimant explains that only an agreement between the investor and the host State (which does not exist in this case) could undo an arbitration agreement, and that the Respondent's interpretation would create an unprecedented result and depart from the clear text of the Convention120.
b. The Respondent's argument that the Termination Treaty has “explicit retroactive effect" such that none of the ICJ cases relied on by the Claimant applies to the facts of this case. According to the Claimant, the ICJ case law is based on the principle that States cannot withdraw from the instrument conferring jurisdiction upon the institution of proceedings; that principle applies to this case, is not driven by the individual facts, and is further supported by ICSID Tribunals. The Respondent relies on three incorrect assumptions: (i) that the Termination Treaty contains “expressly retroactive” rules; (ii) that the arbitration agreement is between the Czech Republic and France; and (iii) the Claimant enforces France's rights.121
c. The Respondent's argument that the Claimant has been stripped of substantive rights by the Termination Treaty and therefore there is no “dispute”. According to the Claimant, the provisions of the Termination Treaty on which the Respondent relies only mention arbitration clauses (not substantive rights), and the Termination Treaty does not establish (i) that investors can or should be retroactively stripped of substantive treaty rights acquired before its entry into force; or (ii) that EU Member States should be retroactively excused for breaches of international law duties owed under investment treaties.122
d. The Claimant further contends that the Respondent's subsidiary argument based on the arguendo assumption that the Claimant exercises its own rights are in fact based on the incorrect view that the Claimant exercises derivative rights. The Claimant explains that “international law has moved on since the Westphalian Peace in 1648", that individuals are subjects of the international legal order and acquire their own rights, and those rights are protected including by the doctrine of vested rights, a principle which forms part of generally accepted international law. According to the Claimant, the VCLT does not give States the right to strip individuals of vested
120 Rejoinder on Preliminary Objections, paras. 90-98. ↩
121 Rejoinder on Preliminary Objections, paras. 99-107, relying on Compañía de Aguas del Aconquija S.A. and Vivendi Universal v. Argentina, ICSID Case No. ARB/97/3, Decision on Jurisdiction, 14 November 2005, paras. 60 et seqq (CL-0096); Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction, 21 December 2012, para. 255 (CL-0097); Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, 14 November 2005, para. 178 (CL-0179); Magyar Farming Company Ltd, Kintyre Kft Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 214 (CL-0098). ↩
122 Rejoinder on Preliminary Objections, paras. 108-111. ↩
[Page 33]
rights, and international authorities contradict the Respondent's position: (i) ARSIWA Article 13 provides that a breach of an international duty occurs if the wrongful act is perpetrated while the State is bound by the obligation in question; (ii) Article 28 of the VCLT does not govern retroactivity in relation to treaties already in force at the time of the alleged breaches; (iii) Articles 28 and 70(1)(b) do not extend to vested rights of individuals.123
e. Finally, the Claimant rejects the argument that any disagreement is to be addressed with France, under French law and in French courts, as it is premised on the view that “the Termination Agreement retroactively stripped JCDecaux of its acquired rights in international law, and France agreed to a departure from most basic international law rules”; the Claimant's dispute is with the Respondent.124
109. The Claimant contends that Article 30 VCLT does not apply as (i) this provision calls for a two-stage analysis; and (ii) the Respondent has failed to show that its conditions are met.125
110. According to the Claimant, Article 30 VCLT does not establish a test of incompatibility, but rather involves two stages that must be met sequentially, as consistently reflected in the practice of ICSID Tribunals. The Tribunal must analyse first whether the treaties in question relate to the same subject matter and, if so, whether there is a normative conflict. The same-subject-matter requirement follows from the ordinary meaning of the terms used in the provision, constitutes a precondition, and cannot be replaced by a test of
123 Rejoinder on Preliminary Objections, paras. 112-125, relying on Certain German Interests in Polish Upper Silesia v. Poland (Merits), P.C.I.J. Ser A No. 7, 1926, p. 42 (CL-0181); Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, paras. 343-344 (CL-0098); Saudi Arabia v. Arabian American Oil Co (Aramco), ILR 117, Award, 23 Aug 1958, p. 205 (CL-0182); Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 September 2007, para. 386 (CL-0183); Occidental Exploration & Production Company v. Republic of Ecuador, [2005] EWHC 774 (Comm), para. 85 (CL-0184); and Spółdzielnia Pracy Muszynianka v. Slovak Republic, PCA Case No. 2017-08, Award, 7 October 2020, para. 263, footnote 382, para. 264 (CL-0090). ↩
124 Rejoinder on Preliminary Objections, paras. 126-127. ↩
125 Rejoinder on Preliminary Objections, para. 131. ↩
[Page 34]
incompatibility.126 The Claimant submits that the correct approach in assessing the same-subject-matter requirement is to determine the scope of the two relevant treaties.127
111. The Respondent argues that the Tribunal in EURAM was addressing Article 59 and not Article 30 VCLT, but the Claimant explains that the EURAM Tribunal also applied a two-stage analysis in relation to Article 30, and that both provisions share a common conceptual ground.128
112. The Respondent also relies on the work of the ILC. However, according to the Claimant, the Respondent only provides a selective account of it. The Claimant's position is that, for the ILC, the question is whether the treaties “are linked institutionally and [...] part of the same concerted effort” and, when they are not, “the emphasis should be on guaranteeing the rights set up in the relevant conventions.” The ILC further considers that "[i]n international law, there is a strong presumption against normative conflict.”129
113. The Claimant contends that the Respondent fails to show that the conditions of Article 30 VCLT are met as (i) the BIT and the EU Treaties do not share the same subject matter;
126 Rejoinder on Preliminary Objections, paras. 132-140, relying, among others, on AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, para. 641 (CL-0087); Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award, 26 July 2018, para. 587 (CL-0119); A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG, Hamburg (Germany) v. The Czech Republic, PCA Case No. 2017-15, Final Award, 11 May 2020, para. 350 (CL-0115); European American Investment Bank AG (Austria) v. Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction, 22 October 2012, para. 175 (CL-0127); Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 191 (CL-0098); Renergy S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022, para. 388 (CL-0120); United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para. 543 (CL-0105); Counter-Memorial on Preliminary Objections, paras. 82-83. ↩
127 Counter-Memorial on Preliminary Objections, paras. 90-91, relying on European American Investment Bank AG (Austria) v. Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction, 22 October 2012, para. 172 (CL-0127). ↩
128 Rejoinder on Preliminary Objections, paras. 141-142, relying on European American Investment Bank AG (Austria) v. Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction, 22 October 2012, para. 267 (CL-0127). ↩
129 Rejoinder on Preliminary Objections, paras. 144-146, relying on the Report of the Study Group of the ILC, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, 13 April 2006, paras. 37, 255, 323 (RL-0033); Counter-Memorial on Preliminary Objections, paras. 84-85. ↩
[Page 35]
and, even if they did, (ii) there would be no incompatibility within the meaning of this provision.130
c. The BIT and the EU Treaties Do Not Share the Same Subject Matter
114. The Claimant explains that the BIT and the EU Treaties do not share the same subject matter because:
130 Rejoinder on Preliminary Objections, para. 148. ↩
131 Rejoinder on Preliminary Objections, para. 149(i), paras. 151-154; Counter-Memorial on Preliminary Objections, paras. 94-96. ↩
132 Rejoinder on Preliminary Objections, para. 149(ii), paras. 155-164; Counter-Memorial on Preliminary Objections, para. 97. ↩
133 Rejoinder on Preliminary Objections, para. 149(iii), paras. 165-166; Counter-Memorial on Preliminary Objections, para. 98. ↩
[Page 36]
to those at issue in BIT cases, or addressed all other FET sub-standards, or the fact that “ FET entitles investors to a remedy for any degree of interference by the host State", or the fact that EU law does not protect against measures which have no link to EU law, malicious misapplication of national law, or creeping FET breaches; (iv) the protection against expropriations afforded by BITs is far wider than that afforded by EU law, e.g., EU law does not provide protection where there is no link to EU law, or in cases of creeping expropriation, and the Respondent's reference to Article 17 of the CFR overlooks that this rule envisions fair compensation, whereas the BIT provides for prompt and adequate compensation. The duty to make full reparation for unlawful expropriations further distinguishes the BIT from EU law;134
115. According to the Claimant, the Respondent's argument (based on the January 2019 Declaration and the Termination Treaty) that France and the Czech Republic agree on the subject-matter identity of the BIT and the EU Treaties is unavailing, as those instruments do not address the same-subject-matter issue and “are not directed to interpret or apply BITs as a matter of international law." The Claimant contends that the BayWa Tribunal held that EU law and the ECT do not relate to the same subject matter, and the Green Power Tribunal, which reasoning has been dismissed by ICSID Tribunals, was careful to limit its reasoning to the non-ICSID context of an SCC tribunal seated in Stockholm. According to the Claimant, and as uniformly concluded by Tribunals, it is also incorrect to say that Achmea decided on the same-subject-matter question, or that EU law enjoys superiority in all circumstances.136
134 Rejoinder on Preliminary Objections, para. 149(iv), paras. 167-168; Counter-Memorial on Preliminary Objections, para. 99. ↩
135 Rejoinder on Preliminary Objections, para. 149(v), paras. 169-184; Counter-Memorial on Preliminary Objections, paras. 100-105. ↩
136 Rejoinder on Preliminary Objections, paras. 185-193, relying on BayWA r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Kingdom of Spain, ICSID Case No. ARB 15/16, Decision on Jurisdiction, Liability and ↩
[Page 37]
d. The Incompatibility Element Is Not Met
116. The Claimant contends that the incompatibility analysis of the Respondent glosses over the fact that there is a presumption against normative conflict.137 The Claimant argues that the incompatibility element of the analysis is not met, and that the Respondent's reliance on statements made by “stakeholders” do not bear upon the jurisdiction of ICSID Tribunals.138
117. The Claimant argues that the Respondent relies on incorrect assumptions when it contends that Achmea and PL Holdings establish that consent to ICSID arbitration is incompatible with the EU Treaties. In particular: (i) this ICSID Tribunal does not derive its authority from the EU Treaties, nor does EU law apply to issues of jurisdiction: (ii) this is not a dispute about EU law and it is not concerned about the enforcement of EU law rights; and (iii) EU law does not compel the conclusion that Articles 267 and 344 TFEU prohibit ICSID arbitration in all circumstances as (a) the CJEU did not extend its rulings to ICSID arbitrations and therefore a narrower interpretation is to be preferred in line with the presumption against normative conflict in international law, considering the uniform interpretation by international tribunals that there is no incompatible conflict, and (b) consent to ICSID arbitration brings into operation a multilateral treaty creating a distinct legal order of international law with features such a self-contained regime, and a duty to comply that is owed to all ICSID Contracting States.139 According to the Claimant, the
Directions on Quantum, 2 December 2019, paras. 271-273 (CL-0152); and Green Power K/S and SCE Solar Don Benito APS v. The Kingdom of Spain, SCC Case No. V2016/135, Award, 16 June 2022, para. 161 (RL-0119), and relying, among others, on Infracapital F1 S.à r.l. and Infracapital Solar B.V. v. Kingdom of Spain, ICSID Case No. ARB/16/18, Decision on Respondent's Second Request for Reconsideration, 19 August 2022, paras. 41, 45 (CL-0190); AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, para. 594, 616 (CL-0087); Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, 31 August 2018 para. 131 (CL-0160); Landesbank Baden-Württemberg and others v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on the "Intra-EU" Jurisdictional Objection, 25 February 2019, paras. 178 and 194 (CL-0099); and Fynerdale Holdings B.V. v. The Czech Republic, PCA Case No. 2018-18, Award, 29 April 2021, para. 278 (CL-0091); Counter-Memorial on Preliminary Objections, paras. 106-110, relying, among others, on AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, paras. 573, 574 and 578 (CL-0087); Ioan Micula, Viorel Micula and others v. Romania (II), ICSID Case No. ARB/14/29, Award, 5 March 2020, para. 286 (CL-0140).
137 Counter-Memorial on Preliminary Objections, para.114. ↩
138 Rejoinder on Preliminary Objections, paras. 194-195. ↩
139 Rejoinder on Preliminary Objections, paras. 196-214, relying, among others, on Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 246 (CL-0098); Spółdzielnia Pracy Muszynianka v. The Slovak Republic, PCA Case No. 2017-08, Award,7 October 2020, para. 256 (CL-0090); AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU ↩
[Page 38]
Article 267 system does not confer on the CJEU global jurisdiction, or preclude the application of EU law outside the judicial framework of the EU or impede investors from vindicating their rights under a BIT.140 Any conflict is between the EU Treaties and the ICSID Convention.141
118. Even if the CJEU decisions were to extend to ICSID, the Claimant contends that they would only be authoritative as a matter of EU law, as the CJEU only has authority within the EU legal order.142
119. As for the EU principle of mutual trust, the Claimant contend that the BIT does not preclude investors from invoking the jurisdiction of the host State courts, and that the Respondent could have terminated the BIT or carved out intra-EU disputes under Article 25(4) of the ICSID Convention if it believed that this principle required mandatory submission to national courts.143
(3) The Tribunal Must Exercise Its Jurisdiction
120. The Claimant disagrees with the Respondent's argument that the Tribunal should not exercise jurisdiction "out of comity”, and its “inability to produce an enforceable award".144
Objection, 14 May 2021, paras. 651, 653-654 (CL-0087); Counter-Memorial on Preliminary Objections, para. 115-123.
140 Counter-Memorial on Preliminary Objections, para. 127, relying on Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 246 (CL-0098). ↩
141 Counter-Memorial on Preliminary Objections, para. 116. ↩
142 Rejoinder on Preliminary Objections, paras. 215-218, relying, among others, on Raiffeisen Bank International AG and Raiffeisenbank Austria d.d. v. Republic of Croatia, ICSID, Case No. ARB/17/34, Decision on the Respondent's Jurisdictional Objections, 30 September 2020, para. 220 (CL-0104); Magyar Farming Company Ltd, Kintyre Kft and Inícia Zrt v. Hungary, ICSID Case No. ARB/17/27, Award, 13 November 2019, para. 207 (CL-0098); UP and C.D Holding Internationale v. Hungary, ICSID Case No. ARB/13/35, Award, 9 October 2018, para. 211 (CL-0103); Cavalum SGPS, S.A. v. Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020, para. 366 (CL-0114) Ioan Micula, Viorel Micula and others v. Romania (II), ICSID Case No. ARB/14/29, Award, 5 March 2020 (CL-0140); Raiffeisen Bank International AG and Raiffeisenbank Austria d.d. v. Republic of Croatia, ICSID, Case No. ARB/17/34, Decision on the Respondent's Jurisdictional Objections, 30 September 2020, para. 220 (CL-0104); AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, para. 594 (CL-0087). ↩
143 Counter-Memorial on Preliminary Objections, paras. 130-133. ↩
144 Rejoinder on Preliminary Objections, para. 219. ↩
[Page 39]
a. The Comity Argument Fails
121. According to the Claimant, the comity argument fails as it finds no support in authority, including Mox Plant, A.M.F., and Cameroon v United Kingdom. The Claimant contends that it would not be unreasonable or inappropriate for the Tribunal to accept jurisdiction, and that ICSID Tribunals confirm that they have a duty to do so. The Claimant further argues that it is not “extreme" for an investor to seek to enforce its rights during the BIT's validity.145
b. The Unenforceability Argument Fails
122. The Claimant contends that ICSID awards are enforceable, and that the Respondent's unenforceability argument is premised on the assumption that the latter will breach its obligation to comply with the award under the ICSID Convention and on speculations as to the likely State of enforcement. The Claimant explains that a Tribunal cannot refuse jurisdiction on that basis under the ICSID Convention. To the contrary, the Tribunal has a duty to exercise the jurisdiction it has found to exist.146
145 Rejoinder on Preliminary Objections, paras. 220-225, relying, among others, on A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG, Hamburg (Germany) v. The Czech Republic, PCA Case No. 2017-15, Final Award, 11 May 2020, para. 413 (CL-0115); Eskosol S.p.A in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection Based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019, para. 186 (CL-0122); Counter-Memorial on Preliminary Objections, paras. 154-167, relying, among others, on AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, para. 654 (CL-0087); UP and C.D Holding Internationale v. Hungary, ICSID Case No. ARB/13/35, Award, 9 October 2018, para. 278 (CL-0103). ↩
146 Rejoinder on Preliminary Objections, paras. 226-231, relying, among others, on Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013, para. 340 (CL-0137); United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para. 541 (CL-0105); and Renergy S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022, para. 416 (CL-0120); Claimants' Counter-Memorial on Preliminary Objections, paras. 169-180, relying, among others, on Silver Ridge Power BV v. Italian Republic, ICSID Case No. ARB/15/37, Award, 26 February 2021, paras. 233, 236 (CL-0138); and Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019, para. 235 (CL-0122). ↩
[Page 40]
123. The question here is whether the Claimant's February Notice of Dispute dated 25 February 2020 amounted to valid invocation of ICSID arbitration under Article 10(2) of the BIT, either because it amounted to a request by the Claimant to submit its dispute with the Respondent to ICSID arbitration or because it manifested the Claimant's consent to ICSID arbitration capable of satisfying Article 10(2).
124. The Tribunal answers that question in the negative. Article 10(2) provides that:
a dispute, if it cannot be settled amicably within six months from the notification thereof by any party to such dispute, shall be submitted to [ICSID] for arbitration upon request of any of the parties to the dispute.
125. Article 10(2) may be open to the reading that it is only “upon request” for arbitration by a party that there is a valid submission to ICSID arbitration. That is not, however, as the Tribunal understands it, the basis on which Respondent submits that the Notice of Dispute dated 25 February 2020 is inadequate to give rise to a perfected ICSID arbitration agreement.
126. Rather, the Respondent's submission is that, in order to perfect such an arbitration agreement, there had to be shown to be a “voluntary and indisputable”, “clear and unambiguous” consent, and that the letter dated 25 February 2020 did not meet this test. In this connection, the Respondent cites ConocoPhillips Petrozuata B v. Bolivarian Republic of Venezuela147. The Tribunal notes, in passing, that the issue in that case was not identical with that in the present. It was whether the terms of a Venezuelan Investment Law, referring to the submission to ICSID arbitration of investment disputes constituted vis-à-vis an investor a consent by the Republic to ICSID arbitration, for the purposes of Article 25 of the ICSID Convention, rather than for the purposes of specific wording of a BIT. In the event, however, it is sufficient for the Tribunal to consider both whether ICSID arbitration was clearly and unambiguously requested and (to the extent that there may be a difference) whether the Claimant clearly and unambiguously consented to ICSID arbitration. On neither basis does the Tribunal consider that Article 10(2) of the BIT or
147 ConocoPhillips Petrozuata BV, ConocoPhillips Hamaca BV, ConocoPhillips Gulf of Paria BV and ConocoPhillips Company v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and Merits, 3 September 2013, para. 254 (R-L0100) ↩
[Page 41]
ICSID arbitration was invoked in terms sufficient to give rise to a perfected agreement to arbitrate the present substantive dispute.
127. First, the Claimant's letter dated 25 February 2020 was headed “Notice of Dispute and Request for Amicable Settlement”. It was written on behalf of the Claimant and three associated companies (together described as “the Investors”). Its text read "We notify you of a dispute..." said to have arisen from actions and omissions of or attributable to the Respondents in breach of both the France-Czechia BIT and an Austria-Czechia BIT dated 1 October 1991. It continued by saying that:
To resolve the dispute amicably as contemplated by [the two BITs] the Investors serve Czechia this notice of dispute and request for amicable settlement. Unless the dispute is settled amicably within the there-prescribed period, the Investors intend to commence investment arbitration proceedings under the respective BITS.
128. At the end of the letter, the Investors repeated their will to settle the dispute amicably, but ended:
Should the Government of Czechia not be prepared to engage in amicable discussions, the Investors would be forced to resort to the dispute settlement mechanism established under the BITs, six months after Czechia's receipt of this notice, i.e. on [24] July 2020.
129. For legal purposes, the letter dated 25 February 2020, on its proper construction, did no more than give notice of the dispute and call for an attempt at amicable settlement. Its statements regarding arbitration were, in contrast, couched only in terms of present intention and of conditional warnings regarding future conduct. It was only after six months that the Claimant on 26 August 2020 made its actual request for arbitration or indicated unambiguously any consent to arbitrate the then also still unresolved dispute. It is not without note that this was only served by the Claimant, not the other three Investors, and only under the France-Czechia BIT. The fact that the letter dated 25 February 2020 was couched only in terms of intention and warning allowed for this.
130. The Tribunal is therefore satisfied that, whether the question posed is whether the Claimant requested ICSID arbitration or is whether it gave clear and unambiguous consent to ICSID
[Page 42]
arbitration under the BIT, on neither basis can it be said that the Claimant did this by its 25 February 2020 letter or until 26 August 2020.
131. The Tribunal turns on this basis to the central issues regarding its jurisdiction. Under ICSID Article 41(1), the Tribunal “shall be the judge of its own competence".
132. The Respondent, in their oral submissions, started with the question whether the Termination Agreement had the effect retrospectively of invalidating any prior consent or agreement for the submission of the substantive dispute to arbitration. Chronologically, however, it is the Respondent's other way of putting their submissions that comes first, namely that the principle established by Case C-264/16 Achmea BV v. Slovak Republic and subsequent cases precludes the existence of any valid consent to ICSID arbitration. The Tribunal will start with that way in which the Respondent's case is put.
(1) The Achmea
133. Achmea concerned an UNCITRAL arbitration claim made by a Dutch investor against Slovakia under a BIT between the Netherlands and Slovakia. The tribunal chose to sit in Frankfurt am Main, making the seat of the arbitration German. The tribunal rejected an objection to its jurisdiction, and made an award against Slovakia, which brought an action to set aside the award. A reference was made by the German Federal Court of Justice on the question whether the arbitration clause in the BIT was consistent with EU law.
134. The CJEU held that the arbitration clause was not consistent with EU law. More particularly, it said in the dispositif, 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 Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, 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.
[Page 43]
135. Article 267 of the TFEU (essentially reproducing Article 177 EEC Treaty and Article 234 TEC) reads:
The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of the Treaties;
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon.
Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court.
136. Article 344 TFEU (essentially reproducing Article 219 EEC Treaty and Article 292 TEC) reads:
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 therein.
137. The detailed reasoning with reference to Articles 267 and 344 TFEU leading the CJEU to the conclusion expressed in the dispositif in Achmea has been usefully summarised by a tribunal consisting of Lord Collins of Mapesbury, Daniel P. Haigh KC and Daniel Bethlehem KC in Cavalum SGPS, S.A. v. Kingdom of Spain148, in terms which the present Tribunal can for present purposes gratefully adopt:
343. The crucial steps in the legal reasoning were:
(1) An international agreement cannot affect the allocation of powers fixed by the Treaties or, consequently, the autonomy of the EU legal system, observance of which is ensured by the court.
(2) That principle is enshrined in particular in Article 344 TFEU, under which the Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement
148 Cavalum SGPS, S.A. v. Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020 (CL-0114). ↩
[Page 44]
other than those provided for in the Treaties: CJEU Opinion 2/13 (European Convention on Human Rights).
(3) The autonomy of EU law with respect both to the law of the member states and to international law is justified by the essential characteristics of the EU and its law, relating in particular to the constitutional structure of the EU and the very nature of that law.
(4) EU law is characterised by the fact that it stems from an independent source of law, the Treaties, by its primacy over the laws of the Member States, and by the direct effect of provisions which are applicable to their nationals and to the Member States themselves.
(5) Those characteristics given rise to a structured network of principles, rules and mutually interdependent legal relations binding the EU and its Member States reciprocally and binding its Member States to each other: Opinion 2/13, paras 165-167.
(6) The Member States are obliged, by reason, inter alia, of the principle of sincere co-operation, to ensure the application of and respect for EU law, and to take for those purposes any appropriate measure to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the EU: Opinion 2/13, paras 168 and 173.
(7) In order to ensure that the specific characteristics and the autonomy of the EU legal order, it for the national courts and tribunals and the CJEU 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.
(8) The EU judicial system has as its keystone the preliminary ruling procedure provided for in Article 267 TFEU, which has the object of securing uniform interpretation of EU law, thereby serving to ensure its consistency, its full effect and its autonomy as well as the particular nature of the law established by the Treaties: Opinion 2/13, para.176.
344. The application of those principles involved the following steps:
(1) Under the terms of BIT Article 8.6, the arbitral tribunal was called on to rule on possible infringements of the BIT, but in order to do so it was obliged to take account in particular of the law in force of the Contracting Party concerned and other relevant agreements between the Contracting Parties, and might therefore be called on to interpret or indeed to apply EU law, particularly the provisions concerning the fundamental freedoms, including freedom of establishment and free movement of capital.
(2) The arbitral tribunal was not part of the judicial system of the Netherlands or Slovakia, and it was the exceptional nature of the tribunal's jurisdiction
[Page 45]
compared with that of the courts of the two Member States that was one of the principal reasons for the existence of Article 8 of the BIT.
(3) Consequently, it could not be classified as a court or tribunal ‘or a Member State' within the meaning of Article 267 TFEU.
(4) Under Article 8.7 of the BIT, the decision of the arbitral tribunal was final, and, pursuant to Article 8.5 of the BIT, the arbitral tribunal was to determine its own procedure applying the UNCITRAL arbitration rules and was itself to choose its seat and consequently the law applicable to the procedure governing judicial review of the validity of the award.
(5) Because the arbitral tribunal chose to sit in Frankfurt am Main, German law was applicable to the procedure governing judicial review of the validity of the arbitral award, but the review was a limited review, concerning in particular the validity of the arbitration agreement under the applicable law and the consistency with public policy of the recognition or enforcement of the arbitral award.
(6) By contrast with commercial arbitration, where the requirements of efficient arbitration proceedings justify limited review of arbitral awards by the courts of the Member States, provided that the fundamental provisions of EU law can be examined in the course of that review and, if necessary, be the subject of a reference for a preliminary ruling, arbitration proceedings under Article 8 of the BIT derive from a treaty by which Member States agree to remove from the jurisdiction of their own courts, and hence from the system of judicial remedies in the fields covered by EU law, disputes which may concern the application or interpretation of EU law.
(7) By concluding the BIT, the Member States established a mechanism for settling disputes between an investor and a Member State which could prevent those disputes from being resolved in a manner that ensured the full effectiveness of EU law, even though they might concern the interpretation or application of that law.
138. Article 8(2) of the BIT in Achmea provided that each contracting State “hereby consents to submit a dispute [between such State and an investor of the other State concerning an investment] to an arbitral tribunal, if the dispute has not been settled amicably within a period of six months”. Article 8(6) provided that the tribunal “shall decide on the basis of the law, taking into account”, inter alia, “the law in force of the Contracting Party concerned" and “the general principles of international law". Article 8(6) appears to
[Page 46]
address the applicable substantive law, rather than any issue arising as to whether there had been a valid consent by a State accepted by the investor.
a. The scope of the Achmea principle under EU law
139. Following Achmea, some investment tribunals saw, in the reference in the dispositif in Achmea to EU law precluding a provision in an international agreement concluded between Member States, “such as Article 8”, the possibility of a different outcome in situations not on all fours with Achmea, for example in an ICSID arbitration under a BIT or in an arbitration under the ECT. The CJEU has however now made clear, in the present Tribunal's view, that it was speaking generally and that the principle in the Achmea extends to both those situations.
140. In its Opinion 1/17 (the CETA Opinion)149, the CJEU stressed that, although the principle of mutual trust between Member States was not engaged, the need to preserve the autonomy of the EU legal order still applied in relation to the creation of an international CETA Tribunal charged with the resolution of disputes between EU investors and a third State, Canada; but (in summary) that this need was satisfied by provisions which excluded any jurisdiction on the part of the proposed CETA Tribunal to interpret or apply rules of EU law other the provisions of CETA. In Case C-109/20 PL Holdings Sarl v. Poland150 the CJEU held that the principle in the Achmea also precluded a EU Member State's tacit acceptance of an investor's request for arbitration under an intra-EU BIT from giving rise to a valid ad hoc arbitration agreement. In Case C-741/19 Komstroy LLC v. Republic of Moldova151 the CJEU held that the provision in the ECT (to which the EU itself was party) permitting an investor to submit any dispute to ICSID, UNCITRAL or SCC arbitration was equally covered by the principle in Achmea, when the investor was based in one EU Member State and the respondent was another Member State.
149 Opinion 1/17 of the Court, CJEU, 30 April 2019 (CL-0134). ↩
150 PL Holdings Sàrl. V. Republiken Polen, CJEU, Case C-109/20, Judgment of the Court (Grand Chamber), 26 October 2021 (RL-0011). ↩
151 Komstroy LLC. v. Republic of Moldova, CJEU, Case C-741/19, Judgment of the Court (Grand Chamber), 2 September 2021, paras. 47-60 (RL-0012). ↩
[Page 47]
141. More particularly, the CJEU reasoned in Komstroy:
62. ...[T]he exercise of the European Union's competence in international matters cannot extend to permitting, in an international agreement, a provision according to which a dispute between an investor of one Member State and another Member State concerning EU law may be removed from the judicial system of the European Union such that the full effectiveness of that law is not guaranteed.
63. Such a possibility would, as the Court held in the case giving rise to the judgment of 6 March 2018, Achmea (C-284/16, EU:C:2018:158, paragraph 58) and as the Advocate General observed in essence in point 83 of his Opinion, call into question the preservation of the autonomy and of the particular nature of the law established by the Treaties, ensured in particular by the preliminary ruling procedure provided for in Article 267 TFEU.
64. It should be noted in that regard that, despite the multilateral nature of the international agreement of which it forms part, a provision such as Article 26 ECT is intended, in reality, to govern bilateral relations between two of the Contracting Parties, in an analogous way to the provision of the bilateral investment treaty at issue in the case giving rise to the judgment of 6 March 2018, Achmea (C-284/16,EU:C:2018:158, paragraph 58).
65. It follows that, although the ECT may require Member States to comply with the arbitral mechanisms for which it provides in their relations with investors from third States who are also Contracting Parties to that treaty as regards investments made by the latter in those Member States, preservation of the autonomy and of the particular nature of EU law precludes the same obligations under the ECT from being imposed on Member States as between themselves.
66. In the light of the foregoing, it must be concluded that Article 26(2)(c) ECT must be interpreted as not being applicable to disputes between a Member State and an investor of another Member State concerning an investment made by the latter in the first Member State.
142. The present Tribunal agrees in these circumstances with the conclusion expressed by the tribunal in AS PNB Banka v. Republic of Latvia152 in an arbitration under the Latvia/United Kingdom BIT dated 1994, Article 8 of which provided simply for ICSID arbitration of any dispute arising. The tribunal said:
503. With respect to the learned tribunals that have distinguished Achmea, this Tribunal is of the view that the constitutional principles actually applied by the
152 AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021 (CL-0087). ↩
[Page 48]
CJEU in that case did not turn on the lex arbitri under the UNCITRAL Rules and the applicable law provision in the BIT there under consideration. The principle of autonomy, specifically the protection of the preliminary ruling procedure by the CJEU, is the fundamental basis of the decision. In this respect, Article 8 of the BIT answers the description of a provision “such as” the ISDS clause in Achmea.
504. As a matter of EU law, on the materials before the Tribunal, Achmea is not distinguishable. What the effect of the decision is on the law applicable to this Tribunal's jurisdiction is a distinct matter. The Tribunal's jurisdiction does not derive from EU law.
143. Achmea, PL Holdings and Komstroy are all judgments reached by the EU's highest court in performance of its role under Article 267 TFEU. They establish the EU legal position in a manner which is binding under EU law and on any court in an EU member State charged with the application of EU law. Further, the legal position which they establish in EU law is one which, under EU law and in accordance with ordinary principles governing judicial interpretation, must be taken to have reflected EU law from the time when Articles 267 and 344 TFEU and their essentially identical predecessors were first agreed by Member States: see PL Holdings v. Poland153. In that case the CJEU expressly refused to exercise the power, which it has in “quite exceptional” cases, to limit the temporal effects of its judgment, so as not to affect previously concluded arbitration agreements.
144. Reference was made by the Respondent to the suggested endorsement of the significance of the Achmea by the European Commission154 and all EU Member States, by two Declarations of 15 and 16 January 2019.155 The Declarations recited the CJEU's decision in Achmea that arbitration provisions in intra-EU BITs were “precluded” under EU law. The first, signed by the majority of Member States continued with a “preambular paragraph," reading:
153 Republiken Polen v. PL Holdings Sàrl., CJEU, Case C-109/20, Judgment of the Court (Grand Chamber), 26 October 2021 paras. 58-69 (RL-0011). ↩
154 In its Communication on Intra-EU Investment; European Commission, Communication from the Commission to the European Parliament and the Council: Protection of intra-EU investment, COM(2018) 547 final, 19 July 2018 (RL-0003), saying that the CJEU had in Achmea confirmed that intra-EU BIT arbitration clauses were "unlawful” and that, following this, “Commission has intensified its dialogue with all Member States, calling on them to take action to terminate the intra-EU BITs, given their incontestable incompatibility with EU law". ↩
155 Request for Bifurcation, paras. 32-36. ↩
[Page 49]
Union law takes precedence over bilateral investment treaties concluded between Member States. As a consequence, all investor-State arbitration clauses contained in bilateral investment treaties concluded between Member States are contrary to Union law and thus inapplicable [...]. An arbitral tribunal established on the basis of investor-State arbitration clauses lacks jurisdiction, due to a lack of a valid offer to arbitrate by the Member State party to the underlying bilateral investment Treaty.
145. The second Declaration contained a sentence basically the same as the second sentence of this "preambular paragraph” in the first Declaration. By the operative parts of the Declarations, Member States then undertook to inform investment arbitration tribunals "about the legal consequences of the Achmea” and stated in paragraph 5 that:
In the light of the Achmea judgment, Member States will terminate all bilateral investment treaties concluded between them by means or a plurilateral treaty or, where that is mutually recognized as more expedient, bilaterally.
146. This statement was combined with undertakings to make best efforts to ratify, approve or accept such termination treaty no later than 6 December 2019, though the Termination Treaty was in fact only concluded on 29 May 2020, and only came into effect as regards France on 28 August 2021 and as regards Czechia on 10 December 2021.
147. Having set the scene by the recitals, the operative part of the Declarations therefore recognized the need for formal termination of existing intra-EU BITs. As the tribunal said in United Utilities (Tallinn) B.V. v Estonia156, this “implies that the BIT remains in force and that its [provision offering to arbitrate] constitutes a valid offer to arbitrate, which Claimants accepted". Similarly, and more recently, the tribunal said in Fynerdale Holdings B.V. v. Czech Republic157:
In the view of the Tribunal, paragraph 5 of the operative part of the Declaration indicates that the statement in the preambular paragraph quoted above is of a political and not a legally binding nature. It reflects the view of the Member States, but as indicated in paragraph 5 of that Declaration, the Member States are aware and accept the legal fact that termination of an international law-based treaty can
156 United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para.559 (CL- 0105). ↩
157 Fynerdale Holdings B.V. v. The Czech Republic, PCA Case No. 2018-18, Award, 29 April 2021, para. 290 (CL-0091). ↩
[Page 50]
only been achieved by a consent-based agreement amongst the parties of that treaty concerned.
148. The Tribunal takes the same view. In so far as the Commission Communication and the Declarations recite the effect under EU law of the Achmea, they carry the legal analysis no further. In so far as they related to the existing BITs with their arbitration provisions, they expressly contemplated that these continued in existence and required a Treaty to determine.
b. The Tribunal's role and position
149. The Tribunal is not a court, still less a court of an EU Member State, and, unlike the tribunals in Achmea and Komstroy, it is not seated in any EU Member State. As an ICSID tribunal, it is commonly regarded as having no national seat at all, though, if any connection with any State were to be sought, it would be with Washington DC, the headquarters of ICSID. Further it is clear that, as a matter of general international law and subject to the impact of EU law, the Tribunal has both come into existence under, and is charged with the resolution of the parties' dispute under, the terms of the BIT to which both parties have subscribed by their agreement to arbitrate, and which are subject to international law. It has come into existence as a result of the combined operation of the mutual consent of the parties to the present dispute and of Article 25 of the ICSID Convention.
150. Article 25 of the ICSID Convention provides:
(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally. [...]
(4) Any Contracting State may, at the time of ratification, acceptance or approval of this Convention or at any time thereafter, notify the Centre of the class or classes of disputes which it would or would not consider submitting to the jurisdiction of the Centre...
151. For Article 25 to confer jurisdiction on an ICSID tribunal in respect of any dispute, the parties to the dispute must therefore have consented in writing to submit the dispute to the
[Page 51]
jurisdiction of ICSID. Such consent is, prima facie, found in the case of the present arbitration in the form of the standing offer made by Czechia by the BIT of ICSID arbitration of disputes under the BIT, and its acceptance by the Claimant by its Notice dated 26 August 2020.
152. The principle in the Achmea is relied upon as negating the validity of any such standing offer by the Respondent, and so precluding any valid acceptance by the Claimant. In its decision in Cavalum v. Kingdom of Spain158, the tribunal said:
368. The Achmea ruling says that the agreement to arbitrate is precluded, not that it is void, or incompatible with the TEC/TFEU, and consequently the ruling leaves open the question of the effect of preclusion, and in particular whether its effect is that any such provision ceased to have effect, or whether Member States should modify or abrogate the BITs between them.
153. In another, still more recent award under the ECT, Renergy v. Kingdom of Spain159, the tribunal raised the same point, namely whether, even under EU law, the Achmea principle voids any consent, saying:
356. In the Tribunal's view, the Achmea and Komstroy Judgments thus mean that from an internal EU law perspective, EU Member States should not have entered into the ECT in its current form and may even mean that EU Member States should try to amend their obligations thereunder (an interpretation of the necessary process that also finds an expression in the existence and content of the EU Member States Declarations). However, it is doubtful to this Tribunal whether, in such a scenario, the Achmea or Komstroy Judgment, from an internal EU law perspective, could mean that the obligations of EU Member States under the ECT are void, invalidated, or could not have been validly entered into, as the Respondent seems to argue. It is furthermore uncertain whether the CJEU assumes that its judgments do have, or could have, such an effect.
357. Therefore, it is not apparent whether EU law, as interpreted by the Achmea and Komstroy Judgments, from an EU-internal point of view, has the legal consequences for an ECT Tribunal that the Respondent attributes to it.
154. The present Tribunal does not find it necessary or appropriate to consider this point further, particularly because it was not developed in submissions before it. The Tribunal will
158 Cavalum SGPS, S.A. v. Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020, (CL-0114). ↩
159 Renergy S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022 (CL-0120). ↩
[Page 52]
proceed on the basis that, under EU law, the effect of Achmea would be to prevent or invalidate any consent to ICSID arbitration that could otherwise have existed by virtue of Czechia's standing offer and the Claimant's Notice dated 26 August 2020.
c. Is the Achmea principle part of international law which it is for the Tribunal to apply?
155. On this basis, the question arising is how far EU law is part of the international law which the Tribunal has to apply in order to decide whether the parties validly consented to ICSID arbitration under Article 8 of the BIT and for the purposes of Article 25(1) of the ICSID Convention. This question has been addressed by a number of investment tribunals. In Vattenfall AB v. Federal Republic of Germany160 the tribunal agreed with the view expressed by an earlier tribunal in Electrabel v. Hungary161 that “EU law is international law because it is rooted in international treaties," but went on:
It would be more exact to say that the corpus of EU law derives from treaties that are themselves a part of, and governed by, international law, and contains other rules that are applicable on the plane of international law, while also containing rules that operate only within the internal legal order of the EU and, at least arguably, are not a part of international law; ...
156. In Cavalum v. Spain162 the tribunal cited these two awards, but went on:
But in the view of this Tribunal, the point that EU law (or most of it) is international law, or that the rulings of the CJEU are part of international law is not in any sense conclusive. The question still remains whether EU law and the rulings of the CJEU are part of the applicable international law.
157. The tribunal then turned to examine EU law, and said:
363. Although phrased in terms of interpretation of two provisions of the TFEU, it is hard to read the Achmea ruling as a normal case of treaty interpretation, since Article 267 is simply the latest iteration (originally in Article 177 of the EEC Treaty) of the power (and in some cases the duty) of national courts to make references to the CJEU, and Article 344 (originally Article 219 of the EEC Treaty)
160 Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, 31 August 2018, para.146 (CL-0160). ↩
161 Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012. ↩
162 Cavalum SGPS, S.A. v. Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum, 31 August 2020, para. 359 (CL-0114). ↩
[Page 53]
simply prevents Member States from submitting disputes concerning the interpretation or application of the Treaties to any method of settlement other than those provided for in the Treaties.
364. The residual remedy for a national of an EU Member State who wishes to complain of a breach by an EU Member State of the relevant provisions of the ECT is to commence an ICSID arbitration against that State. The only time at which national courts will normally be engaged in this process is at the time of enforcement.
365. It is impossible to see how, on the face of Articles 267 and 344 TFEU, and in accordance with normal rules of treaty interpretation, the effect of Article 26.3 ECT is to prevent national courts from making references to the CJEU or to allow Member States to submit disputes concerning the interpretation or application of the Treaties to any method of settlement other than those provided for in the EU Treaties.
366. The Achmea ruling is a decision on the constitutional order of the EU in support of the policy of European integration rather than an orthodox application of the rules of treaty interpretation. As such the ruling of the CJEU is entitled to the greatest respect from an international arbitral tribunal. But such a tribunal is not in any sense bound by the ruling. Nor, consequently, can the Tribunal find that on any normal basis of interpretation under customary international law or the VCLT that the dispute resolution provisions of the ECT are incompatible with Articles 267 and 344 TFEU.
367. It follows that, in the view of the Tribunal, there is no conflict between Article 26.1-3 ECT and Articles 267 and 344 TFEU such as to bring the principles reflected in Articles 30 or 41 VCLT into play. .....
158. In AS PNB Banka the tribunal found it necessary to consider whether the Achmea principles “operate only within the internal legal order of the EU”163. Its answer was that:
525. The Tribunal does not accept that CJEU decisions are international law of the same character as the Treaties. It accepts the formulation in Electrabel, endorsed in Vattenfall, that CJEU decisions are “applicable on the plane of international law”. This distinction is of significance for the application of conflict rules, as we have to consider a conflict between a treaty and judicial decisions.
526. As we have noted, CJEU decisions are not based on principles of interpretation, codified in the VCLT, applicable to treaties, but on a teleological approach applicable to constitutional law. As further discussed below, we do not identify a conflict between the BIT and the EU Treaties. The conflict arises from
163 AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, para. 524 (CL-0087). ↩
[Page 54]
an incompatibility between the BIT and the CJEU's interpretation of those Treaties by application of the teleological approach.
159. Most recently, the tribunal in Renergy Sarl v. Kingdom of Spain164 drew a similar distinction, in the context of the ECT, between the international law which governed its jurisdiction and EU law, saying that:
..., even assuming that those judgments (i.e. in Achmea and subsequent caselaw), from an EU-law perspective, did purport to directly void or rewrite a clause in an international agreement of one of its Member States, the question that is relevant for this Tribunal is not one of EU-internal law. The question that is relevant for this Tribunal is whether, from the viewpoint of the ECT, i.e. the perspective that matters to this Tribunal, in a decision on jurisdiction under the ECT, there are points of contact with EU law through which the EU-internal reading of the law and the ECT could become relevant to this ECT.
160. The same tribunal also, highlighted the discrepancy between the CJEU's approach to interpretation and that required by the VCLT and general international law, saying, at [370] that "neither the ordinary meaning of the terms used by the ECT, nor the systematic analysis of its provisions, offer a basis for the Tribunal to conclude that the ECT is to be construed as removing intra-EU claims from ECT dispute settlement.”165
161. The approach taken by the three tribunals in Cavalum, AS PNB and Renergy treats the interpretation put on the EU Treaties by the CJEU in Achmea and subsequent caselaw as involving or creating no more than a sub-branch of international law. This sub-branch was not bound to generate different legal principles from those applicable in general international law. However, according to the analysis adopted in these three tribunal authorities, this is what the CJEU has in fact done; it has developed wide-ranging constitutional principles regarding the autonomy, primacy and exclusivity of EU law and the EU legal system, which Member States are bound to preserve to the exclusion of any other arrangements for dispute resolution between Member States or between investors in one Member State against another Member State. Further, these principles have not been developed by reference to ordinary treaty methods of interpretation crystallised in the VCLT, but by a teleological approach which is particular to EU law. In these
164 Renergy S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022, para. 358 (CL-0120). ↩
165 Renergy S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/14/18, Award, 6 May 2022, para. 370 (CL-0120) ↩
[Page 55]
circumstances, the Claimant submits that the Tribunal, which is charged with the application of international law, is not bound to adopt the reasoning or result that would follow under the special approach developed by the CJEU under EU law for EU constitutional or internal purposes.
162. In support of this analysis, the novelty of the interpretational approach adopted by the CJEU in relation to Articles 267 and 344 may be said to be confirmed, by recalling that the European Communities, predecessor to the EU, were party to the ECT when signed in 1994 and have been since it came into force in April 1998. It cannot have been thought then that the ECT was or would be held inconsistent with the EU Treaties. This point was noted by the tribunal in Eskosol S.p.A. v. Italian Republic166 with reference to similar observations in Electrabel. Further, when the predecessors to Articles 267 and 344 TFEU were agreed and when Czechia joined France and other Member States in 2004, the outcome arrived at in the Achmea was clearly never envisaged. As Advocate General Wathelet said in his Opinion167 in that case:
39. The Commission's argument [challenging intra-EU BIT arbitration clauses] is also striking.
40. For a very long time, the argument of the EU institutions, including the Commission, was that, far from being incompatible with EU law, BITs were instruments necessary to prepare for the accession to the Union of the countries of Central and Eastern Europe. The Association Agreements between the Union and candidate countries also contained provisions for the conclusion of BITs between Member States and candidate countries...
163. The Respondent in response to the Claimant's submissions and analysis, draws attention to other investment arbitration decisions, notably BayWa R.E. Renewable Energy GmbH v. BayWa R.E. Asset Holding GmbH, Green Power Partners K/S and anor v. Kingdom of
166 Eskosol S.p.A in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection Based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019, para. 106 (CL-0122). ↩
167 Slowakische Republik v. Achmea BV, Case C-284/16, Opinion of Advocate General Wathelet, 19 September 2017 (CL-0132) ↩
[Page 56]
Spain168 and the statement of dissent by Professor Marcelo Kohen in Adamakopoulos v. Republic of Greece169.
164. In BayWa170, the tribunal was concerned with an ICSID arbitration under the ECT, and said that:
For these reasons, the Tribunal, if it were free to do so, would hold that under international law the TFEU did not modify inter the provisions of the ECT, either as to substance (Part III, notably Article 10) or as to jurisdiction (Part V, notably Article 26). The question is whether the CJEU's decision in Achmea compels the contrary conclusion. For just as the European treaties are part of international law, so the CJEU, which exercises jurisdiction as between EU Member States, is an international court whose decisions are binding on those states inter se. International law allows the states parties to a regime treaty to establish their own international courts with jurisdiction over and authority to bind the Member States on issues of international law affecting them. It also allows those States to establish the priority of the regime treaty over other sources of international law, at least so long as peremptory norms are not implicated.
165. After quoting the dispositif171 in Achmea, the tribunal said at [282]:
282. If this dictum were to be applied to the ECT, it would authoritatively establish, as between Germany and Spain, that the TFEU modifies Article 16 of the ECT on an inter se basis.
166. But the tribunal then went on at [282] to distinguish Achmea and hold it inapplicable under the ECT, for two reasons: First,
..., the CJEU in Achmea was considering a bilateral treaty ‘concluded between Member States', not a multilateral treaty such as the ECT. Secondly, the CJEU was discussing ‘an agreement which was concluded not by the EU but by Member States', whereas the ECT was concluded also by the EU and its terms are opposable to the EU.
168 Green Power K/S and SCE Solar Don Benito APS v. Kingdom of Spain, SCC Case No. V2016/135, Award, 16 June 2022 (RL-0119). ↩
169 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Statement of Dissent of Professor Marcelo G. Kohen, 3 February 2020 para. 38 (RL-0014). ↩
170 BayWA r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Kingdom of Spain, ICSID Case No. ARB 15/16, Decision on Jurisdiction, Liability and Directions on Quantum, 2 December 2019, para. 280 (CL-0152). ↩
[Page 57]
167. Both these grounds of distinctions have, under EU law, been disapproved by the Komstroy judgment. In the present case, the Respondent relies upon the general statements in paragraph 280 and 282 as supporting its submission, that, leaving the ECT aside, a tribunal applying international law should treat Achmea as a decision by a court, set up by the parties to a "regime treaty”, also applying international law and having authority “to establish the priority of the regime treaty over other sources of international law” (there being no question here of any relevant jus cogens).
168. As to Green Power, the arbitration there was an SCC arbitration, with a seat in Stockholm. The tribunal on that basis held that EU law was “part of the law applicable to the determination of jurisdiction” and took care to distinguish ICSID arbitrations where “the reasoning did not take into account the relevance for jurisdictional matters of the applicable law attracted by the selection of the seat in an EU Member State”.172
169. Finally, in Adamakopoulos, the dissenting view of Professor Kohen proceeded on the basis that EU law was part of both the national law of Cyprus and international law, both of which were applicable law for the tribunal's purposes173, and that Achmea was “an authoritative interpretation of EU Treaties and of their impact on other rules of international law, i.e. the BITs concluded by EU Member States at a time one of the parties to those treaties was not a member of the EU"174. Professor Kohen went on to hold that the EU Treaties as interpreted in Achmea dealt with the same subject-matter as, and were incompatible with, the BITs; and that they prevailed over the BITs “by virtue of the rules embodied in Article 30 of the VCLT and in Article 351 of the TFEU"175.
170. At the times when the BIT was agreed and when the Respondent joined France as an EU State, the Tribunal is confident that no-one would have regarded the BIT or its arbitration
172 Green Power K/S and SCE Solar Don Benito APS v. Kingdom of Spain, SCC Case No. V2016/135, Award, 16 June 2022, paras. 439 and 441 (RL-0119). ↩
173 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Statement of Dissent of Professor Marcelo G. Kohen, 3 February 2020, para. 3 (RL-0014). ↩
174 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Statement of Dissent of Professor Marcelo G. Kohen, 3 February 2020, para. 6 (RL-0014). ↩
175 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Statement of Dissent of Professor Marcelo G. Kohen, 3 February 2020, para. 48 et seq. (RL-0014). ↩
[Page 58]
provision (Article 10) as other than valid and enforceable. As other tribunals, already cited, have observed, Achmea and the subsequent caselaw involve a teleological approach to interpretation, rather than a conventional application of the VCLT or its principles. The effect of this approach to interpretation of the Treaties has been to develop a closed constitutional regime, focused on the autonomy and primacy of the EU legal order and its courts, and excluding the operation of any intra-BIT system of arbitration, on the basis of a mere risk that a BIT tribunal might have to pronounce on EU law, and be unable to refer a question to an EU court.
171. Under EU law, this interpretation and effect are to be taken as having applied and existed since the predecessors of Articles 267 and 344 TFEU were first agreed. The CJEU had power but refused, under EU law, to limit the Achmea principle so that it would apply only prospectively. But it does not follow axiomatically that the Tribunal, applying general international law, is bound to treat the Achmea principle as invalidating Article 10(3) of the BIT ab initio or from the moment that the Respondent became an EU Member. To do so would, on the face of it, amount to a retrospective invalidation of what were and would have been regarded unquestionably as valid Treaty provisions, under ordinary principles of international law, prior to the development and recognition by the CJEU in EU law of the Achmea principle. That would undermine the legal security which the BIT arbitration provisions clearly intended to provide not only to States, but also to their investors.
d. Article 30 of the VCLT
172. The Respondent submits that, even if EU law doctrines of primacy and autonomy are confined to the EU legal sphere, the interpretation of the EU Treaties adopted in Achmea and subsequent caselaw disentitles Member States from agreeing or maintaining in force between themselves arbitration provisions such as Article 10 of the BIT; and that this brings into operation a question of priority as between successive treaties, which falls to be answered by reference to Article 30 of the VCLT. As will appear, this submission travels to a considerable extent over terrain examined under the immediately preceding head in paragraphs 155 to 171 above.
173. Article 30 VCLT provides so far as material:
[Page 59]
Application of successive treaties relating to the same subject matter
1. Subject to Article 103 of the Charter of the United Nations, the rights and obligations of States Parties to successive treaties relating to the same subject matter shall be determined in accordance with the following paragraphs.
2. When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail.
3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.
4. ....
174. Czechia has at all material times been a party to the VCLT. France has not, but the Tribunal understands it to be accepted that the principles of the VCLT are to be taken to apply to France, as part of customary international law.
175. Nothing in the EU Treaties or the BIT makes Article 30(2) relevant. The Respondent relies on Article 30(3), read with Article 30(1). It is not in dispute that the BIT dating from 1990 constitutes an earlier Treaty than the EU Treaties, to which the Respondent only became party in 2004. Under the language of these Articles, two conditions exist to the application of Article 30(3): one, the existence of successive Treaties “relating to the same subject matter”; the other, incompatibility between provisions of the earlier and later Treaties, in which case Article 30(3) provides that the earlier Treaty (here the BIT) “applies only to the extent that its provisions are compatible with those of the later treaty”.
176. Both the caselaw and the parties' submissions to the Tribunal have however ranged wide on the question what constitutes a “conflict” for the purposes of Article 30. The Tribunal will therefore also address observations to this question. The Respondent cites the ILC Study Group Report on Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of International Law of 13 April 2006176, in particular paragraph 22 in section B of its Report. The Tribunal will set out the surrounding text:
21. This report examines techniques to deal with conflicts (or prima facie conflicts) in the substance of international law This raises the question of what is a “conflict”? This question may be approached from two perspectives: the subject-
176 Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, Report of the Study Group of the International Law Commission, 13 April 2006 A/CN.4/L.682. (RL-0033) ↩
[Page 60]
matter of the relevant rules or the legal subjects bound by it. Article 30 VCLT, for example, appears to adopt the former perspective. It suggests techniques for dealing with successive treaties relating to the “same subject-matter". It is sometimes suggested that this removes the applicability of article 30 when a conflict emerges for example between a trade treaty and an environmental treaty because those deal with different subjects. But this cannot be so inasmuch as the characterizations (“trade law”, “environmental law”) have no normative value per se. They are only informal labels that describe the instruments from the perspective of different interests or different policy objectives. Most international instruments may be described from various perspectives: a treaty dealing with trade may have significant human rights and environmental implications and vice versa. A treaty on, say, maritime transport of chemicals, relates at least to the law of the sea, environmental law, trade law, and the law of maritime transport. The characterizations have less to do with the “nature” of the instrument than the interest from which it is described. Borgen, “Resolving Treaty Conflicts”, supra, note 10, pp. 603-604.
22. If conflict were to exist only between rules that deal with the “same” subject-matter, then the way a treaty is applied would become crucially dependent on how it would classify under some (presumably) pre-existing classification scheme of different subjects. But there are no such classification schemes. Everything would be in fact dependent on argumentative success in pigeon-holing legal instruments as having to do with “trade”, instead of “environment”, “refugee law” instead of “human rights law”, “investment law” instead of “law of development”. Think again about the example of maritime carriage of chemical substances. If there are no definite rules on such classification, and any classification relates to the interest from which the instrument is described, then it might be possible to avoid the appearance of conflict by what seems like a wholly arbitrary choice between what interests are relevant and what are not: from the perspective of marine insurers, say, the case would be predominantly about carriage while, from the perspective of an environmental organization, the predominant aspect of it would be environmental. The criterion of “subject-matter" leads to a reductio ad absurdum. Therefore, it cannot be decisive in the determination of whether or not there is a conflict.19 As pointed out by Vierdag in his discussion of this criterion in regard to subsequent agreements under article 30 VCLT:
the requirement that the instruments must relate to the same subject-matter seems to raise extremely difficult problems in theory, but may turn out not to be so very difficult in practice. If an attempted simultaneous application of two rules to one set of facts or actions leads to incompatible results, it can safely be assumed that the test of sameness is satisfied.
23. This seems right. The criterion of “same subject-matter” seems already fulfilled if two different rules or sets of rules are invoked in regard to the same matter, or if, in other words, as a result of interpretation, the relevant treaties seem to point to different directions in their application by a party."
[Page 61]
177. The Respondent relied on this analysis as indicating why Article 30(3) should be understood as focusing on inconsistency, rather than any general attempt to classify the two treaties under consideration as falling or not falling within some general category. It is however of some interest to note what the Study Group also said when it returned to the same phrase at a later stage in section E of its Report. It said:
253. Article 30 deals with the issue of conflict between prior and subsequent treaties. As many commentators have noted, however, it does not appear to do so very successfully. One of the problems is that the title of the article (and paragraph 1) seems to limit it to a conflict between treaties “relating to the same subject-matter". If that limitation is interpreted strictly, then it seems to lift most of the important cases - for example conflicts between environmental and trade treaties, or conflicts between human rights and humanitarian law treaties - outside its scope. However, as pointed out in section B above, this is neither a necessary nor a reasonable interpretation of the expression “same subject-matter"
...
255. As pointed out above, the test of whether two treaties deal with the ‘same subject matter”” is resolved through the assessment of whether the fulfilment of the obligation under one treaty affects the fulfilment of the obligation of another. This “affecting” might then take place either as strictly preventing the fulfilment of the other obligation or undermining its object and purpose in one or another way. Nevertheless, it will also be argued below that the question of the relationship between two treaties cannot be resolved completely in abstraction from any institutional relationship between them. The way a WTO treaty links with a human rights treaty, for example, is not identical to the way a framework treaty on an environmental matter relates to a regional implementation instrument. It may not be possible to determine in an abstract way when two instruments deal with the “same subject-matter”. But this does not mean that it would be impossible to establish an institutional connection between “chains” or clusters of treaties that are linked institutionally and that States parties envisage as part of the same concerted effort. The significance of identifying such “treaty regimes” lies in the way it seems relatively less complicated to establish a relationship between two instruments within one such regime than between two instruments across different regimes. For example, the argument from lex posterior or lex specialis seems clearly more powerful between treaties within a regime than between treaties in different regimes. In the former case, the legislative analogy seems less improper than in the case of two treaties concluded with no conscious sense that they are part of the “same project”.
256. The distinction between treaties dealing with the “same subject-matter" and treaties within the same “regime” may appear slight, but it constitutes an important practical shift of perspective. In the former case, focus is on the object that is being regulated while in the latter case, focus is on the intent of the States
[Page 62]
parties and the institutions they have established. The former is dependent on an abstract characterization of an issue as a “human rights issue", an “environmental problem” or a “trade question” - and meets with the difficulty that often many characterizations may be applied to a single problem and different actors may have an interest to characterize the problem in different ways so as ensure that their preferred rule-systems will be applied. By contrast, the notion of a “regime” points to the institutional arrangements that may have been established to link sets of treaties to each other. Treaties may of course enter into conflict both within and across regimes. To make that distinction is merely to point out that the task of settling the conflict - for example, by seeking a “mutually supportive solution” - may be much easier or more straightforward in the former than in the latter situation where at issue is often a conflict of wider objectives or values underlying the very regimes themselves.
178. The caselaw of investment tribunals contains considerable discussion of the meaning and application of both conditions. On one approach, the “same subject matter” necessarily involves an overall comparison of the two treaties. Thus, the tribunal said in Eskosol177:
It is notable, moreover, that the comparators in Articles 30(1) and 30(3) are different: Article 30(1) examines the relationship between treaties as a whole (whether they “relat[e] to the same subject matter”), while Article 30(3) examines the relationship between particular provisions within such related treaties (whether they are “compatible”).
179. Similarly, the tribunal in Spółdzielnia Pracy Muszynianka v. Slovak Republic178 said this:
232. According to certain highly qualified publicists, the term “same subject-matter" should be understood widely. However, the Tribunal concludes that this cannot be reduced to a requirement that the two treaties be potentially applicable to or govern the same set of circumstances or facts. As noted by the tribunal in EURAM:
'Even if two different rules deal with issues arising from the same facts, it does not necessarily mean that they have the same subject matter. This can be seen from a simple example: a treaty on environmental protection and a treaty on trade may both apply to the same factual situation but the subject matter with which they deal is quite different.'
177 Eskosol S.p.A in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection Based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019 (CL-122) ↩
178 Spółdzielnia Pracy Muszynianka v. Slovak Republic, PCA Case No. 2017-08, Award, 7 October 2020 (CL-0090). ↩
[Page 63]
233. In this context, investment arbitration tribunals have held that subject matter identity of treaties is defined by the matters with which the treaty's constituent provisions deal. For instance, the Oostergetel tribunal held:
'The requirement [...] that the two treaties relate to the "same subject matter" has to be construed in line with the dominant view expressed in scholarly writings to the effect that two treaties can be considered to relate to the "same subject matter" only if the overall objective of these treaties is identical and they share a degree of general comparability.'
234. In respect of the EU Treaties, investment arbitration tribunals have held that investment treaties do not share the same subject matter with the EU Treaties. The Wirtgen tribunal considered it “obvious” that intra-EU investment treaties and EU Treaties did not have identical subject matters. As noted in Marfin, the EU Treaties and BITs do not only have a different objective, but the protections afforded by the latter are not coextensive or exhausted by the former. Similarly, the Eastern Sugar tribunal had earlier observed that:
‘[BITs provide] for fair and equitable treatment of the investor during the investor's investment in the host country, prohibits expropriation, and guarantees full protection and security and the like. The BIT[s] also provide [] for a special procedural protection in the form of arbitration between the investor state and the host state and, especially arbitration of a "mixed" or "diagonal" type between the investor and the host state, as in the present case. From the point of view of the promotion and protection of investments, the arbitration clause is in practice the most essential provision of Bilateral Investment Treaties. Whereas general principles such as fair and equitable treatment or full security and protection of the investment are found in many international, regional or national legal systems, the investor's right arising from the BIT's dispute settlement clause to address an international arbitral tribunal independent from the host state is the best guarantee that the investment will be protected against potential undue infringements by the host state. EU law does not provide such a guarantee.'
235. The findings in Eastern Sugar were recently stressed by the tribunal in Magyar as follows:
'[A]s the most evident distinction [between the EU Treaties and investment treaties], the application of [BITs] is contingent upon an investor of one State making a cross-border investment in the other State. In turn, the EU Treaties provide guarantees for nationals of the EU Member States irrespective of an investment. Due to this crucial distinction, the substantive protections afforded to a foreign investor under the Treaty are unsurprisingly not comparable to, or of the same nature as, those offered to EU nationals under the BIT. By way of an example, as the Eureko v. Slovakiatribunal observed, the protections afforded by BITs under the FET
[Page 64]
standard are not limited to the existing EU law provisions prohibiting discrimination. Similarly, while EU law may condition expropriatory takings upon public interest and fair compensation, it has not been established that it offers comparable protections to those available under the Treaty in case of indirect expropriations, or that it applies the protections to “every kind of asset”. The BIT and the EU Treaties also differ in their overarching goals. As the Oostergetel tribunal underscored, the EU treaties' objective is to promote economic integration, including by creating a common market, among the Member States, whereas the objective of BITs (including the Treaty) is to provide for specific guarantees in order to encourage the international flows of investment into particular States.'
236. The Tribunal shares the views expressed in these decisions. Therefore, it comes to the conclusion that the BIT and the EU Treaties do not share the same subject matter for the purposes of the VCLT. For this reason, Articles 30 and 59 of the VCLT are inapplicable to the present case.”
180. There is therefore a strong body of authority pointing towards a conclusion that the BIT and the EU Treaties (even as interpreted by the CJEU in Achmea) differ in nature and subject-matter, so that, on this ground also, no question of inconsistency can arise under Article 30. However, the caselaw also contains some contrary views, which the Tribunal will address.
181. First, the Tribunal in AS PNB Banka was, evidently, not so confident about the correctness of the approach taken in the caselaw referred to in paragraphs 178-179. It recognised that considerations of comity and legal certainty meant that “normally a substantial body of prior decisions that appears to represent a shared view will be treated with appropriate respect" ([644]) but it preferred nonetheless to decide the case on an assumption that the same subject matter threshold was satisfied ([649]). As to that threshold it said:
“645. The Tribunal has before it a number of analyses of the overlap between protection of investments under the BITs and under EU law. Advocate-General Wathelet set out considerable detail on this issue in his Opinion before the Court in Achmea. There are also some detailed academic writings. The EC published a statement in support of this approach.
646. No doubt drawing on these materials, Latvia's submissions focused on three aspects of the EU which it contended showed a substantial degree of overlap between EU law and the BIT. First, it identified the requirements of a single market and the means by which that is enforced, notably by the principles against
[Page 65]
discrimination between Member States. Secondly, and overlapping with the first, the existence and application of the four freedoms guaranteed by the TEU: freedom of movement of goods, services, capital and persons. Thirdly, protection of the right to property under the Charter of Fundamental Rights of the European Union.
647. The objective of the BIT set out in the Preamble the Tribunal has quoted above, is the promotion of cross-border investment. The EU single market and the four freedoms have a similar purpose within the borders of the EU. Further, the Tribunal accepts that there is substantial overlap between the protections available under the four freedoms and the Charter with respect to expropriation protection under the BIT and, in view of the EU law on legitimate expectations, with the fair and equitable treatment standard. However, these are matters going to merits."
182. Second, the decision in Adamakopoulos179 also evidences the dichotomy of views capable of being taken in this area. Professor Marcelo Kohen in his strong dissent addressed this as follows:
24. The majority recognizes that both BITs and EU Treaties deal with investment and that “at a certain, general, level the treaties deal with the same subject matter". Indeed, the fact that one treaty has a wider scope than another treaty but deals with matters covered by the latter, does not mean that they have different “subject matters”. My colleagues consider, however, that “at a more specific level they deal with a different subject matter". For them, the crucial point is that BITs “provide a mechanism for nationals of one party to bring a claim against another party, something that is not provided for in the EU treaties”. Before demonstrating that this is not correct, I consider necessary to show that on substantial issues relating to the treatment to be granted to investment, both the BITs and EU Treaties deal with the same subject. The next section, analyzing the incompatibilities of the BITs with EU Treaties, will complete the analysis by demonstrating that the fulfilment of the obligations of the BITs both affects the obligations of EU Member States under the EU Treaties and indeed undermines their object and purpose.
183. Professor Kohen goes on to conclude that the EU regime offers investor protection at least equal to that provided by the BITs, with an international court, the CJEU, ultimately responsible for adjudication upon its scope; and he takes particular issue with the majority conclusion that the difference between recourse to an international investment tribunal and to a domestic or EU meant that the subject matters of the EU Treaties and the BIT were
179 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Statement of Dissent of Professor Marcelo G. Kohen, 3 February 2020 (RL-0014). ↩
[Page 66]
different. As to this, he stated at [34]: “The subject-matter includes dispute resolution in both, as recognised by the Decision".
184. In the light of the conclusion already expressed in paragraph 171 above, it is unnecessary for the Tribunal to form or express any definitive view on the difference in the caselaw discussed in paragraphs 178-183 above. The Tribunal does however note the nuanced approach taken by the ILC in this area in paragraphs 252 and 255 to 256 (quoted in paragraphs 176-177 above). That approach suggests that, even if the view taken by the majority of investment tribunals about the meaning of “same subject matter” is not accepted, it can still be relevant to consider whether the two treaties are part of the same regime or project. As the Study Group put it, the principle of lex posterior or lex specialis “seems clearly more powerful between treaties within a regime than between treaties in different regimes”. Taking that approach, the Tribunal would conclude here that the BIT and the EU Treaties are not part of the same regime or project. In particular, the former operates at the international law level, whereas the latter operate at a European level on autonomous principles established by the CJEU diverging definitively from ordinary international legal principles.
185. Finally, in relation to Article 30, the Tribunal addresses the Respondent's submission that the Respondent and the French Republic have, by their Declarations of 15 and 16 January 2019 and/or by their Termination Agreement of May 2020, expressed their understanding and agreement that the BIT and the EU Treaties relate to the same subject matter and that Article 30 applies in a manner which is binding under Article 31 of the VCLT. Article 31 provides that a treaty “shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose, and it continues:
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties.
[Page 67]
186. The Declarations are addressed in paragraphs 144-148 above and they and the Termination Agreement of May 2020 are also addressed in paragraphs 189 et seq. below. For present purposes, however, it is sufficient to say that the Tribunal rejects the Respondent's submission that they or either of them can determine the applicability of Article 30 of the VCLT. The reason why not is already indicated as regards the Declarations in what has been said in paragraphs 144 to 148 above. But as regards both the Declarations and the Termination Agreement, the Tribunal adopts what was said by the tribunal in AS PNB Banka180:
573. The first thing to note about the Declaration and the subsequent Termination Agreement is that these documents do not state that they are directed to interpretation or application of intra-EU bilateral investment treaties as international law. Moreover, there is no reference in either to Article 31(3)(a) or (b) of the VCLT.
574. The Declaration and its subsequent implementation are directed to acknowledging the binding force of the CJEU decision in Achmea and establishing an agreed process for bringing Member States into compliance with that ruling. That includes the steps Member States will take with respect to any investment treaty proceedings and the termination of existing BITs. It also includes a commitment to extending protection of investments under EU law.
...
578. The Tribunal accepts Professor Talmon's conclusion that the Declaration is a statement of the effect of EU law on Member States. It does not address the position of the BIT as a matter of international law.
187. A similar conclusion was expressed by the tribunal in the Micula181 case. On this basis, the Tribunal therefore rejects the Respondent's submission that the Declarations and/or the Termination Agreement mean that Article 30 must be regarded as applicable.
e. The Tribunal's conclusion: the Achmea principle is inapplicable
188. For these reasons, the Tribunal considers that the Achmea principle, as developed under EU law with regard to the EU's constitutional regime, does not prevail over the general international legal position which the Tribunal is charged with applying when considering its jurisdiction under the BIT. Subject to the further issues regarding events in 2020 and
180 AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021, paras. 573, 574 and 578 (CL-0087). ↩
181 Micula and others v Romania (II), ICSID Case No. ARB/14/29, Award, 5 March 2020, para. 286 (CL-0140) ↩
[Page 68]
subsequently, the position is therefore that the BIT contained a valid standing offer by the Respondent capable, on ordinary principles, of acceptance by the Claimant. Upon such acceptance occurring, there was under general international law and Article 25(1) of the ICSID Convention, a valid consent to arbitration before the Tribunal as now constituted. The most that can be said is that the principle in Achmea means that, under EU law, such consent should not have been allowed to come into existence, but that in no way determines the Tribunal's jurisdiction under international law.182
(2) The Declarations and the Termination Treaty
189. The Tribunal turns to the issues which arise on the basis that the Achmea principle did not and does not by itself invalidate the Respondent's standing offer to arbitrate or the Claimant's acceptance of that offer in August 2020, giving rise prima face to a valid consent to ICSID arbitration within the meaning of Article 25(1) of the ICSID Convention. The Respondent's submission, on that hypothesis, is that (a) the parties to the BIT (a) made clear, at latest by their Declarations of 15 and 16 January 2019, both that they understood the Achmea judgment to decide that intra-EU BIT arbitration clauses were precluded under EU law and that they intended as a result to terminate any intra-EU BITs by latest December 2019 and (b) they in fact terminated the BIT retrospectively by the Termination Treaty dated 29 May 2020, to which both France and the Respondent, Czechia, subscribed and which entered into force for France on 28 August 2021 and for the Respondent on 10 December 2021.
190. The Tribunal has summarized the nature and content of the Declarations earlier in the Decision.183 As follows from what is there said, the operative part of the Declarations recognized that intra-EU BITS with their arbitration provisions continued in existence and that there was a need for a Termination Treaty to terminate them, as EU law required. The actual Termination Treaty, which was as a result made, only came into effect for France on 28 August 2021 and for Czechia on 10 December 2021. The “more important” issue, as
182 See AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Decision on the Intra-EU Objection, 14 May 2021 (CL-0087), para. 507. ↩
183 See paras. 144-147 above. ↩
[Page 69]
the Respondent described it in its submissions184, thus concerns not the Declarations, but the Termination Treaty itself, and its suggested retroactive effect on the Claimant's claim to arbitrate. The Tribunal turns accordingly to that issue.
191. The Termination Agreement in its Annex A specifically listed the BIT between France and the Respondent as one of those which it covered. It provided:
Section 1
Definitions
Article 1 Definitions
For the purposes of this Agreement, the following definitions shall apply:
(1) "Bilateral Investment Treaty" means any investment treaty listed in Annex A or B;(2) "Arbitration Proceedings" means any proceedings before an arbitral tribunal established to resolve a dispute between an investor from one Member State of the European Union and another Member State of the European Union in accordance with a Bilateral Investment Treaty;
(3) "Arbitration Clause" means an investor-State arbitration clause laid down in a Bilateral Investment Treaty providing for Arbitration Proceedings;
(4) "Concluded Arbitration Proceedings" means any Arbitration Proceedings which ended with a settlement agreement or with a final award issued prior to 6 March 2018 where:
(a) the award was duly executed prior to 6 March 2018, even where a related claim for legal costs has not been executed or enforced, and no challenge, review, set-aside, annulment, enforcement, revision or other similar proceedings in relation to such final award was pending on 6 March 2018, or
(b) the award was set aside or annulled before the date of entry into force of this Agreement;(5) "Pending Arbitration Proceedings" means any Arbitration Proceedings initiated prior to 6 March 2018 and not qualifying as Concluded Arbitration Proceedings, regardless of their stage on the date of the entry into force of this Agreement;
(6) "New Arbitration Proceedings" means any Arbitration Proceedings initiated on or after 6 March 2018;
184 Request for Bifurcation, para. 167. ↩
[Page 70]
(7) "Sunset Clause" means any provision in a Bilateral Investment Treaty which extends the protection of investments made prior to the date of termination of that Treaty for a further period of time.
Section 2
Provisions regarding the termination of bilateral investment treatiesArticle 2 Termination of Bilateral Investment Treaties
(1) Bilateral Investment Treaties listed in Annex A are terminated according to the terms set out in this Agreement.(2) For greater certainty, Sunset Clauses of Bilateral Investment Treaties listed in Annex A are terminated in accordance with paragraph 1 of this Article and shall not produce legal effects.
Article 3 Termination of possible effects of Sunset Clauses
Sunset Clauses of Bilateral Investment Treaties listed in Annex B are terminated by this Agreement and shall not produce legal effects, in accordance with the terms set out in this Agreement.Article 4 Common provisions
(1) The Contracting Parties hereby confirm that Arbitration Clauses are contrary to the EU Treaties and thus inapplicable. As a result of this incompatibility between Arbitration Clauses and the EU Treaties, as of the date on which the last of the parties to a Bilateral Investment Treaty became a Member State of the European Union, the Arbitration Clause in such a Bilateral Investment Treaty cannot serve as legal basis for Arbitration Proceedings.(2) The termination in accordance with Article 2 of Bilateral Investment Treaties listed in Annex A and the termination in accordance with Article 3 of Sunset Clauses of Bilateral Investment Treaties listed in Annex B shall take effect, for each such Treaty, as soon as this Agreement enters into force for the relevant Contracting Parties, in accordance with Article 16.
Section 3
Provisions regarding claims made under bilateral investment treatiesArticle 5 New Arbitration Proceedings
Arbitration Clauses shall not serve as legal basis for New Arbitration Proceedings.Article 6 Concluded Arbitration Proceedings
(1) Notwithstanding Article 4, this Agreement shall not affect Concluded Arbitration Proceedings. Those proceedings shall not be reopened.(2) In addition, this Agreement shall not affect any agreement to settle amicably a dispute being the subject of Arbitration Proceedings initiated prior to 6 March 2018.
[Page 71]
Article 7 Duties of the Contracting Parties concerning Pending Arbitration Proceedings and New Arbitration Proceedings
Where the Contracting Parties are parties to Bilateral Investment Treaties on the basis of which Pending Arbitration Proceedings or New Arbitration Proceedings were initiated, they shall:(a) inform, in cooperation with each other and on the basis of the statement in Annex C, arbitral tribunals about the legal consequences of the Achmea judgment as described in Article 4; and
(b) where they are party to judicial proceedings concerning an arbitral award issued on the basis of a Bilateral Investment Treaty, ask the competent national court, including in any third country, as the case may be, to set the arbitral award aside, annul it or to refrain from recognising and enforcing it."
Article 9 goes on to establish a “structured dialogue for pending arbitration proceedings”.
192. As regards the present BIT, the Termination Agreement provides that, under EU law, not only is the arbitration “clause” that it contains “contrary to the EU Treaties and thus inapplicable" and incapable of serving “as a legal base for Arbitration Proceedings" (Article 4(1)) but that it “shall not serve as a basis for” the present arbitration proceedings as these constitute “New Arbitration Proceedings” since they were initiated on or after 6 March 2018 (Article 5).
193. The Claimant submits that the Termination Agreement addresses only arbitration “clauses” and does not address the perfected consent to ICSID arbitration constituted by the Claimant's Notice dated 26 August 2020. It further submits that the Treaty does not on its true construction operate retrospectively in relation to such a perfected consent. The Tribunal cannot accept either submission. The Termination Agreement was clearly drafted so as to purport to impact and, as the Tribunal reads it, to invalidate the present arbitration proceedings, by retrospective invalidation of the consensual basis on which they were and are based. It was, as its Preamble states at [4], designed to "draw the necessary consequences from Union law as interpreted in ... Achmea ...” The structured dialogue provided for by Article 9 was introduced precisely because of the Termination Agreement's retrospective operation under EU law. There is no doubt that it is open to
[Page 72]
States under the principles in or reflected in the VCLT to agree retrospective amendments of their legal position inter se: see Articles 28, 39 and 70(1) VCLT.
194. The Tribunal therefore turns to consider whether the Termination Agreement has this intended effect under international law. In so far as it operated to terminate the BIT as between the two States party to it, no suggestion has been made that it was ineffective. The question is its effect on the consent to arbitrate, which must, for reasons already indicated, be taken to have existed between the Claimant (JCDecaux) and the Respondent (Czechia), not between France and Czechia.
a. The nature of BIT rights and claims
195. Both the Claimant and the Respondent having given their consent to ICSID arbitration, the last sentence of Article 25(1) of the ICSID Convention provides that neither could “withdraw its consent unilaterally”. The Claimant submits that it was equally impossible for France, or for the Respondent and France together, to undermine a valid consent to which they were not both party. The Respondent submits that this misunderstands the nature of BIT arbitration; the Claimant is, it submits, simply exercising State rights, as a sort of proxy for France, which France is entitled to withdraw or qualify, even while they are being invoked. Leaving aside human rights conventions conferring an individual right of access to an international court or commission and the individual human responsibility which exists in e.g., the criminal law sphere, that is, the Respondent submits, still the general international legal position.
196. The Respondent points out that investor protection was, as originally developed, a matter to be resolved by representation, negotiation or, where agreed, more formal dispute resolution at a State-to-State level: see Case of the Mavrommatis Palestine Concessions (Greece v United Kingdom)185, where the Permanent International Court of Justice said:
“In the case of the Mavrommatis concessions it is true that the dispute was at first between a private person and a State - i.e. between M. Mavrommatis and Great Britain. Subsequently, the Greek Government took up the case. The dispute then entered upon new phase; it entered the domain of international law, and became
185 Mavrommatis Palestine Concessions (Greece v. U.K.), 1924 P.C.I.J. (ser. B) No. 3, Judgement, 30 August 1924, para. 12 (RL-0113). ↩
[Page 73]
a dispute between two States. Henceforward therefore it is a dispute which may or may not fall under the jurisdiction of the Permanent Court of International Justice.
...... It is an elementary principle of international law that a State is entitled to protect its subjects, when injured by acts contrary to international law committed by another State, from whom they have been unable to obtain satisfaction through the ordinary channels. By taking up the case of one of its subjects and by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own rights - its right to ensure, in the person of its subjects, respect for the rules of international law.
The question, therefore, whether the present dispute originates in an injury to a private interest, which in point of fact is the case in many international disputes, is irrelevant from this standpoint. Once a State has taken up a case on behalf of one of its subjects before an international tribunal, in the eyes of the latter the State is sole claimant. The fact that Great Britain and Greece are the opposing Parties to the dispute arising out of the Mavrommatis concessions is sufficient to make it a dispute between two States within the meaning of Article 26 of the Palestine Mandate."
197. The Respondent submits that BITs and BIT arbitration clauses represents no more than a convenient development of this home-State protection. It points out that the Preamble of the BIT states explicitly the two States' mutual interest in “Wishing to strengthen economic cooperation between the two States and create favourable conditions for .... Investments" in each other, which will also be “conducive to the stimulation of capital and technology transfers between the two countries in the interest of their economic development”.
198. As regards caselaw it also relies on The Loewen Group, Inc v United States of America186 and HICEE Bv v Slovak Republic187. Loewen was a case where a Canadian entity having commenced a NAFTA arbitration ceased to exist under a reorganisation plan which transferred its claim to a United States entity. The tribunal held that, under NAFTA, understood in the light of general principles of international law, the requirement that an investment claim be by an investor from one State party to NAFTA against another State party to NAFTA required to be satisfied, not only at the commencement, but also throughout the NAFTA arbitration, and that, if it ceased to be satisfied, the arbitration
186 Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003 (RL-0114). ↩
187 HICEE B.V. v. The Slovak Republic, PCA Case No. 2009-11, Partial Award, 23 May 2011 (RL-0115). ↩
[Page 74]
failed. Although a NAFTA arbitration has an “apparent resemblance” to a private international commercial arbitration, that was “misleading”:
"The two forms of process, and the rights which they enforce, have nothing in common. There is no warrant for transferring rules derived from private law into a field of international law where claimants are permitted for convenience to enforce what are in origin the rights of Party states. If the effects of a change of ownership are to be ascertained we must do so, not by inapt analogies with private law rules, but from the words of Chapter Eleven, read in the context of the Treaty as a whole, and of the purpose which it sets out to achieve.”
The use of the structure provided by ICSID, to which Canada was not a party, was also irrelevant to the construction of NAFTA.
199. Secondly, in HICEE the tribunal held that the Netherlands and the Czechoslovak governments had, when concluding a BIT in 1991, agreed between themselves on an interpretation (set out in a Dutch Explanatory Note found in governmental files in Prague) of the nature of direct or indirect investment it covered. The claimant commenced a BIT arbitration in 2008 relying on a different interpretation, which it said followed from the wording of the BIT itself. One question was whether the meaning set out in the Explanatory Note was "opposable" to the claimant. The tribunal regarded the answer to be clear:
“a treaty can have only one authentic meaning, which cannot on grounds of basic principle vary according to who are the parties to a particular dispute. ... [T]he present question of interpretation could have arisen in inter-State proceedings under Article 10. If it had done so, it would have attracted the consequence that the decision of the tribunal “shall be final and binding on both Contracting Parties”. That cannot possibly mean that the arbitral decision would be binding on the States only, but without effect on an investor claiming derivatively through the rights procured for it by one of the States”.
200. In Loewen the investor, or its successor entity, was (unsurprisingly) held bound by the tribunal's interpretation of NAFTA in the light of its underlying aim to protect the investors of one State against mistreatment by another NAFTA State. The tribunal did not elaborate on its brief reference to “claimants [being] permitted for convenience to enforce what are in origin the rights of Party states”. The phrase “in origin” does not necessarily mean that the tribunal regarded rights being enforced in a NAFTA arbitration as still belonging to or capable of abandonment or alteration by the investor's State. The reference to claimants
[Page 75]
being permitted “for convenience” to enforce (direct) rights seems to the present Tribunal considerably to undervalue the characteristics and implications of the modern BIT arbitration mechanism, viewed objectively.
201. The Tribunal also agrees with what was said about this part of the decision in Loewen by the English Court of Appeal in in Occidental Exploration & Production Company v. The Republic of Ecuador188.
The award on this point in Loewen is controversial (cf The Hybrid Foundations of Investment Treaty Arbitrations (2003) BYIL 151, especially 175-6). But we do not, in any event, consider that its reasoning or decision affects the proper conclusion regarding the nature of the rights capable of pursuit by investors under the present Bilateral Investment Treaty. The provisions of NAFTA, although it is a trilateral investment treaty, appear for present purposes to be materially the same as those of the present Treaty, but even the tribunal in Loewen accepted that the claimant was pursuing claims "in its own right" and "on its own behalf". The statement that NAFTA "claimants are permitted for convenience to enforce what are in origin the rights of Party states" was said in a context where the tribunal was concerned to emphasise that the rights (to whomsoever they belonged) remained subject to international law principles governing continuity of nationality. It is reading too much into this compressed language to conclude that the tribunal meant that the rights enforced remained simply and solely the rights of the States, which claimants were being given some form of power to enforce, as third parties or attorneys. But, if the tribunal in Loewen meant to suggest that the rights conferred under a bilateral (or multilateral) investment treaty such as the present remain of the same character as the rights identified by the Permanent Court of International Justice in Case of the Mavrommatis Palestine Concessions or by the International Court of Justice in the Barcelona Traction case, we would respectfully disagree with its analysis.
202. As to HICEE, what was decided was that an investor must accept the interpretation of a BIT which the parties to the treaty agreed when concluding it. The reference to “an investor claiming derivatively through the rights procured for it by one of the States” is again unelaborated, and does not indicate any view on the part of the tribunal in that case about the extent to which “the rights procured for [the investor]” remain, nonetheless, under the continuing control of the investor's State.
188 Occidental Exploration and Production Company v. Ecuador, [2005] EWCA Civ. 1116, para. 22 (CL-0100). ↩
[Page 76]
203. In contrast with these citations, the Claimant is able to invoke extensive and more specific authority on the issue whether a BIT investor commencing a BIT arbitration is invoking its own right, or one which is derivative from and at the mercy of its investor State. A starting point is that non-State actors have acquired a generally increasing role in international law, and the Tribunal does not accept that this role is confined to any specific area, such as human rights or criminal law. As the English Court of Appeal stated in Occidental:189
19. That treaties may in modern international law give rise to direct rights in favour of individuals is well established, particularly where the treaty provides a dispute resolution mechanism capable of being operated by such individuals acting on their own behalf and without their national state's involvement or even consent. Oppenheim's International Law (9th Ed.), para. 375 put the matter in this way in 1992:
"States can, ... and occasionally do, confer upon individuals, whether their own subjects or aliens, international rights strictu sensu, i.e., rights which they can acquire without the intervention of municipal legislation and which they can enforce in their own name before international tribunals".
See also Oppenheim, para. 7, as well as McCorquodale, The Individual and the International Legal System in Evans' International Law (OUP) (2003), pp. 304-6. Most frequently cited in this connection is the Permanent Court of International Justice's Advisory Opinion in the Jurisdiction of the Courts of Danzig Case (1928) PCIJ Rep Series B No. 15, p.1, considering the effect of a treaty (the Beamtenabkommen) made on 22 October 1921 between Poland and Danzig. The Beamtenabkommen regulated the employment conditions of Danzig railway employees who had, after the First World War, passed into the service of the Polish Railways Administration. Poland's contention that this treaty only created inter- State rights was rejected. The Court said that:
‘It may be readily admitted that, according to a well established principle of international law, the Beamtenabkommen, being an international agreement, cannot, as such, create direct rights and obligations for private individuals. But it cannot be disputed that the very object of an international agreement, according to the intention of the contracting Parties, may be the adoption by the Parties of some definite rules creating individual rights and enforceable by the national courts. That there is such an intention in the present case can be established by reference to the terms of the Beamtenabkommen. (pp.17-18)'
189 Occidental Exploration and Production Company v. Ecuador, [2005] EWCA Civ. 1116, para. 22 (CL-0100). ↩
[Page 77]
The Court thus looked at the intention of the States making the treaty and held, in that light, that the Beamtenabkommen "constitutes part of the provisions of the "contract of service", that is "the series of provisions which constitute the legal relationship between the Railways Administration and its employees"; and that the relevant officials could sue the Administration direct in the Danzig courts. In the more recent Case LaGrand (2001) 40 ILM 1069, the International Court of Justice held that article 36(1)(b) of the Vienna Convention on Consular Relations, requiring prison authorities to "inform the person concerned without delay of his rights under this subparagraph" creates "individual rights". By this we read the Court as meaning rights of the person concerned operating independently of and not derivative from any rights of such person's national state (even though that state, Germany, was invoking such rights under the compulsory jurisdiction article of the relevant Optional Protocol).
204. Professor Zachary Douglas KC in The International Law of Investment Claims190 notes that:
69. Hersch Lauterpacht interpreted this passage as clear authority to the effect that ‘there is nothing in international law to prevent individuals from acquiring directly rights under a treaty provided that this is the intention of the contracting parties'. More recently, the International Court of Justice in the LaGrand case decided that Article 36(1)(b) of the Vienna Convention on Consular Relations ‘creates individual rights', whether or not these fall to be classified as human rights.
205. The “father” of the ICSID Convention, Aron Broches, related the ICSID Convention191 to the same development, saying:
From the legal point of view the most striking feature of the Convention is that it firmly establishes the capacity of a private individual or a corporation to proceed directly against a State in an international forum, thus contributing to the growing recognition of the individual as a subject of international law.
206. Professor Douglas also says with regard to BIT protection and arbitration that [65]:
65. The foregoing analysis of the principal features of diplomatic protection under general international law and investment treaty arbitration reveals their essential divergence. Given that the raison d'être of the investment treaty mechanism for the presentation of international claims may well be a response to the inadequacies of diplomatic protection, this should come as no surprise. The
190 'The juridical foundations of investment treaty arbitration' in The International Law of Investment Claims, Zachary
Douglas, CUP 2009 (CL-0167). ↩
191 The Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Aaron
Broches, (1972-II) 136 Recueil des Cours, p. 349 (CL-0171). ↩
[Page 78]
fundamental assumption underlying the investment treaty regime is clearly that the investor is bringing a cause of action based upon the vindication of its own rights rather than those of its national state. In these circumstances it is untenable to superimpose the Mavrommatis formula of diplomatic protection over a triangular relationship between investor, its national state and the host state of the investment for a rationalisation of investment treaty arbitration.
207. In support, Professor Douglas points to the way in which substantive BIT protection is commonly formulated, that is as the conferral by each State on investors from the other State of rights to fair and equitable treatment, to treatment no less favourable that accorded to its own investors, to full protection and security, etc. The present BIT is formulated in such terms. More importantly, however the substantive protection may be viewed, the inclusion of a BIT arbitration represents, on its face, a novel shift from the State-to-State discretionary protection, which a State may or may not chose to give, in the direction of a direct and unqualified right to invoke and enforce the substantive protection guaranteed in the BIT.192
208. That is also how the Court of Appeal in Occidental saw the matter, as well as a number of investment tribunals. A number of these tribunal decisions were cited in Occidental193, as follows:
20..... in Enron Corporation v. The Argentine Republic (ICSID Case No. ARB/01/3; January 14. 2004) the tribunal said that the Barcelona Traction case ‘has been held not to be controlling in investment claims such as the present, as it deals with the separate question of diplomatic protection in a particular setting' (para. 38) and that:
“.... what the State of nationality of the investor might argue in a given case to which it is a party cannot be held against the rights of the investor in a separate case to which the investor is party. This is precisely the merit of the ICSID Convention in that it overcame the deficiencies of diplomatic protection where the investor was subject to whatever political or legal
192 Professor Douglas notes that other writers share his view: “Writers supporting the 'direct' theory, at least in
relation to the procedural right of an investor to bring arbitration proceedings against the host state, include:
Nouvelles perspectives pour l'arbitrage dans le contentieux économique intéressant l'Etat, G. Burdeau,“ (1995)
Revue del'arbitrage 3, 12et seq.; Arbitration Without Privity, J. Paulsson, (1995) 10ICSID Rev-Foreign Investment
LJ232, 256; Investment Arbitration under the Energy Charter Treaty, T. Wälde, (1996) Arbitration Int 429, 435–7.”
'The juridical foundations of investment treaty arbitration' in The International Law of Investment Claims, Zachary
Douglas, CUP 2009 (CL-0167), footnote 150. ↩
193 Occidental Exploration & Production Company v. Republic of Ecuador, [2005] EWCA Civ. 1116, para. 20
(CL-0100) ↩
[Page 79]
determination the State of nationality would make in respect of its claim” (para. 48).
Similar statements appear in LG&E Energy Corporation v. Argentine Republic ICSID Case No. ARB/02/1; April 30, 2004, para. 52, in GAMI Investments Inc. v. United Mexican States NAFTA Final Award 15 November 2004, para. 30, in Camuzzi International S.A. v. The Argentine Republic ICSID Case No. ARB/03/2; May 11, 2005, paras. 138-145, where the tribunal observed that diplomatic protection "cannot be considered the general rule in the system of international law presently governing the matter, but as a residual mechanism available when the affected individual has no direct channel in its own right", and in Camuzzi International S.A. v. The Republic of Argentina ICSID Case No. ARB/03/7, para. 44, where the tribunal said of the Barcelona Traction case that:
“.... this decision of the International Court of Justice referred particularly to the protection that could be expected by the shareholders in this case, but specifying that they can enjoy other protection, if there is a specific agreement in this regard. In this case, this is precisely the situation. There is an applicable international juridical agreement. This agreement is the Treaty and according to it, Camuzzi has the right to request, directly and immediately, the protection of its rights by accessing the Tribunal.”
Finally, we mention Gas Natural SDG S.A. v. The Argentine Republic ICSID Case No. ARB/03/10, where the tribunal stated:
"The scheme of both the ICSID Convention and the bilateral investment treaties is that in this circumstance, the foreign investor acquires rights under the Convention and Treaty, including in particular the standing to initiate international arbitration." (para. 34)”
209. Since the decision in Occidental, there has been further caselaw in the same sense.
210. In Corn Products International, Inc. v. Mexico194 an investor invoked the protection of Chapter XI of NAFTA by claiming to arbitrate. Mexico argued unsuccessfully that the investor's claim was derivative, and as such subject to countermeasures which Mexico had invoked against the investor's state. The tribunal (chaired by Professor Greenwood) rejected that submission robustly, saying:
"166. ... [C]ounsel for Mexico argued that Chapter XI of the NAFTA grants an investor only a procedural, and not a substantive, right.... However, Mexico argued, the substantive right which the investor was empowered to enforce was
194 Corn Products International, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/1, Decision on Responsibility, 15 January 2008 (CL-0173). ↩
[Page 80]
still the right of the State as a Party to NAFTA. Mexico maintained that this approach was supported by the fact that the substantive provisions of Chapter XI were not cast in terms of individual rights. It also relied upon the award of the Loewen Tribunal and what it claimed was the concordant subsequent practice of the three NAFTA Parties.
167. The Tribunal has concluded that these arguments are not persuasive. In the Tribunal's view, the NAFTA confers upon investors substantive rights separate and distinct from those of the State of which they are nationals.
168. It is now clear that States are not the only entities which can hold rights under international law; individuals and corporations may also possess rights under international law. In the case of rights said to be derived from a treaty, the question will be whether the text of the treaty reveals an intention to confer rights not only upon the Parties thereto but also upon individuals and/or corporations.
169. In the case of Chapter XI of the NAFTA, the Tribunal considers that the intention of the Parties was to confer substantive rights directly upon investors. That follows from the language used and is confirmed by the fact that Chapter XI confers procedural rights upon them. The notion that Chapter XI conferred upon investors a right, in their own name and for their own benefit, to institute proceedings to enforce rights which were not theirs but were solely the property of the State of their nationality is counterintuitive.”
211. The tribunal went on to note in a footnote (no.72) the decision in Occidental in relation to a claim to arbitrate under a BIT.
212. To these decisions, one may also add that of the tribunal in American-Israel Corp ('Ampal') v. Republic of Egypt195, where Egypt, after the commencement against it by an alleged investor of a BIT arbitration, claimed to invoke a “denial of benefits" clause in the BIT. The clause read:
“Each Party reserves the right to deny the benefits of this Treaty to any company of either Party, or its affiliates or subsidiaries, if nationals of any third country control such company, affiliate or subsidiary; provided that, whenever one Party concludes that the benefits of this Treaty should not be extended for this reason, it shall first consult with the other Party to seek a mutually satisfactory resolution of this matter.
195 Ampal-American Israel Corp., EGI-Fund (08-10) Investors LLC, EGI-Series Investments LLC, BSS-EMG Investors LLC and David Fischer v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Jurisdiction, 01 February 2016 (RL-0105). ↩
[Page 81]
213. The tribunal found that the denial of benefits clause had not been properly invoked according to the terms of the BIT in any event, but went on nonetheless to say this, on an opposite hypothesis:
164. The Respondent submits that by invoking the denial-of-benefits provision in the Protocol to the Treaty after Ampal had submitted its claim to ICSID arbitration, it did not withdraw its previously given consent to arbitration but rather exercised its right to deny benefits which was reserved within that consent.
165. On the other hand, the central argument of the Claimants is that the jurisdiction of the Centre is to be assessed at the time that jurisdiction is invoked, to wit when the Request for Arbitration is registered and that, as clearly set out in Article 25(1) of the ICSID Convention, 'no Party may withdraw its consent unilaterally'. In short, say the Claimants, a denial of benefits such as the present one cannot have retroactive effect. It can only be effective prospectively.
166. The Claimants' interpretation, says the Respondent, would give no "effet utile" to the denial of benefits provision in the Protocol.
167. The Tribunal agrees with the Claimants that the jurisdiction of the Centre must be determined at the time that the Request for Arbitration is registered.
168. Article 25(1) of the ICSID Convention is very clear. The jurisdiction of the Centre is to be assessed at the time that jurisdiction is invoked, which is when the investor's Request for Arbitration is registered by the Centre. When jurisdiction has crystallized, "no Party may withdraw its consent unilaterally", says plainly Article 25(1).
169. As the Egypt-US Treaty and its Protocol must be read in the light of the ICSID Convention, the Tribunal finds that there cannot be an embedded conditionality in the Treaty which could be triggered after the submission of the dispute to arbitration.
214. Although the present context is different, the focus in Ampal on the crystallisation of ICSID's jurisdiction at the date when BIT arbitration is validly invoked presupposes that, as at that date, the investor has also acquired direct and irrevocable rights against the respondent state, meaning that any joint right on the part of the States party to the BIT to revoke the protection of the BIT, in particular the right to ICSID arbitration under the BIT, cannot thereafter survive.
[Page 82]
215. Having considered the parties' submissions and the material cited, the Tribunal concludes for the reasons given in paragraphs 195 to 214 above that the right view is that a BIT in the present form confers on the investor a direct (and not a derivative) right to the procedural and substantive protection guaranteed by the BIT. That right crystallises at latest when ICSID arbitration is requested; and the Tribunal's jurisdiction falls to be assessed by reference to the position as at the crystallisation, or perfection, of that right. It further concludes that such a direct right cannot, once validly invoked by a submission to arbitration, be unilaterally terminated. That follows as a matter of basic principle from the nature of the right, which would otherwise risk being illusory. It also follows directly from Article 25(1) of the ICSID Convention, providing that “Where the parties have given their consent, no party may withdraw its consent unilaterally”. This follows directly a sentence referring to ICSID's jurisdiction in respect of “any legal dispute arising directly out of an investment ... which the parties to the dispute consent in writing to submit to the Centre”. It is therefore clear that Article 25(1) enshrines the principle that neither party to a valid submission to ICSID arbitration can withdraw its consent unilaterally. The same principle is, as has already been noted, reflected in the reasoning in Ampal, cited in paragraphs 212 to 214 above. The principle also means neither the consent to arbitrate, once given, nor the substantive protection invoked by the arbitration can be abrogated or qualified by any agreement made between the two States party to the BIT subsequently to the time when an investor validly invokes the right, or consents, to arbitrate.196 This follows from the fact that the investor is in its own right invoking against the respondent state the substantive protection afforded by the BIT, and the right to do so cannot be removed the respondent and a third party without the investor's consent.
216. It follows in the present case that the Termination Agreement, although purportedly retrospective, cannot as such have had and did not have any effect on the arbitration or on
196 Principles of International Investment Law, Rudolf Dolzer & Christoph Schreuer, 2nd Edition, Oxford 2012, p.367 (CL-0024) "Once consent is perfected through the acceptance of the offer contained in the treaty, it remains in existence even if the States partis to the BIT agree to amend or terminate the treaty." ↩
[Page 83]
the Claimant's right to pursue its claim in this arbitration for alleged breaches of the BIT by the Respondent State.
217. This is not however the end of the matter, because of the Respondent's submission that, even if the Termination Agreement does not operate retrospectively to invalidate the consensual basis of the arbitration, the request for arbitration was not made in good faith and cannot be relied upon accordingly. The Respondent started in this connection with a citation of Article 69 of the VCLT. That provides:
“1. A treaty the invalidity of which is established under the present Convention is void. The provisions of a void treaty have no legal force.
2. If acts have nevertheless been performed in reliance on such a treaty:
(a) each party may require any other party to establish as far as possible in their mutual relations the position tha.t would have existed if the acts had not been performed;
(b) acts performed in good faith before the invalidity was invoked are not rendered unlawful by reason only of the invalidity of the treaty.”
218. Article 60 could have been directly relevant if the Tribunal had come to the conclusion that the BIT, or BIT arbitration clause, was invalid, either at the time when ICSID arbitration was invoked or retrospectively as at that time as a result of the Termination Agreement. That is the hypothetical situation in which the tribunal in Eskosol S.p.A. v. Italy197 considered the potential application of Article 60(2) in circumstances where an ECT arbitration was begun under an intra-EU BIT before the judgment in Achmea. The tribunal went no further than to say that the delivery of the Achmea judgment was “the very earliest” date at which it might be said that “investors were placed on notice about the risks of relying on Member States' apparent consent to arbitration in Article 26 of the ECT”. The tribunal had already made clear its primary position, namely that the Achmea judgment did invalidate the prior consent and was not concerned with or expressing any view about the
197 Eskosol S.p.A in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection Based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes, 7 May 2019 (CL-0122). ↩
[Page 84]
position with regard to consent to arbitrate invoked under an intra-EU BIT after the Achmea judgment. Still less was it expressing any view about the relevance of good faith if neither the Achmea judgment nor the Termination Agreement is held to invalidate the consent to arbitrate under an intra-EU BIT.
219. There is, however, no doubt about the existence in international law, including in the context of investment arbitration, of a general doctrine of good faith. As the tribunal said in Phoenix Action Ltd v. Czech Republic (albeit in the different context of investments not made in good faith)198:
The principle of good faith has long been recognized in public international law, as it is also in all national legal systems. This principle requires parties “to deal honestly and fairly with each other, to represent their motives and purposes truthfully, and to refrain from taking unfair advantage ...” This principle governs the relations between States, but also the legal rights and duties of those seeking to assert an international claim under a treaty. Nobody shall abuse the rights granted by treaties, and more generally, every rule of law includes an implied clause that it should not be abused. This is stated for example by Hersch Lauterpacht:
“There is no right, however well established, which could not, in some circumstances, be refused recognition on the ground that it has been abused."
The idea that the international conventions granting protection to foreign investors through arbitration have to be applied in good faith was also underscored by the tribunal in Amco Asia Corporation et al v. Indonesia:
"... like any other conventions, a convention to arbitrate is not to be construed restrictively, nor, as a matter of fact, broadly or liberally. It is to be construed in a way which leads to find out and to respect the common will of the parties ... Moreover – and this is again a general principle of law – any convention, including conventions to arbitrate, should be construed in good faith, that is to say by taking into account the consequences of their commitments the parties may be considered as having reasonably and legitimately envisaged.”
198 Phoenix Action Ltd v. Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009 (RL-0109). ↩
[Page 85]
220. Philip Morris Asia Limited v. Commonwealth of Australia199 is an example of the application of this principle of good faith or abuse to declare an arbitration inadmissible. The claimant there was the product of corporate restructuring, the principal, if not the sole, purpose of which was for it, as a new parent company, to acquire ownership and control of various Philip Morris subsidiaries carrying on business in Australia and, thereby, gain protection under the Hong Kong-Australia BIT in respect of anticipated Australian legislation relating to the plain packaging of tobacco.
221. The Respondent submits that in the present case the Claimant was well aware, before and when it made its request for arbitration on 26 August 2020, what the attitude of EU law was towards the BIT arbitration clause as well as that the Termination Agreement had on 29 May 2020 been agreed, but not yet come into force and that, when it came into force it would purportedly operate retrospectively.
222. The Tribunal cannot accept the Respondent's submission that it was in these circumstances an act of bad faith or abusive for the Claimant to invoke arbitration. There is no suggestion that the claim was manipulated in any way analogous to what happened in Philip Morris. So far as appears, it arose in the ordinary course, and it was the subject, prior to the making of the Termination Agreement, of the Notice of Dispute dated 25 February 2020. Until the BIT was terminated, the Claimant was, on the face of it, entitled to initiate an arbitration, as it did on 26 August 2020. When the Termination Agreement came into force, it was, as the Tribunal has already held, too late for this to have any effect on the existing arbitration. The Claimant was entitled to proceed on that basis. It was not abusive to do so. It was simply taking legitimate advantage of the way in which, as a matter of interpretation and law, the BIT is structured and the period during which it was open for use by an investor wishing to pursue a claim.
199 Philip Morris Asia Limited v. The Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015 (RL-0110). ↩
[Page 86]
223. The Tribunal turns to the Respondent's next submission, which is that the Tribunal should as a matter of comity defer to EU law or EU courts, which would have jurisdiction under EU law over any claim that the Claimant might pursue before them against the Respondent or others allegedly involved in the matters about which the Claimant complains.
224. Comity, or at least concepts of mutual respect and judgments as to appropriateness, are at the root of many jurisdictional rules, as well as relevant factors in the evaluative exercises involved in, for example, deciding whether a forum is a forum conveniens, whether to stay proceedings pending the resolution of other parallel proceedings and whether to recognise and enforce judgments of other courts. Chevron Corp. v. Yaiguaje and others200, cited by the Respondent referred to them in such a sense. The existence of a general principle of comity was also recognised in A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG, Hamburg (Germany) v. The Czech Republic201 - albeit with considerable qualifications regarding its application in the present context.
225. Comity is relied on in the present case because it is said that “the Czech Republic would otherwise be bound by contradictory obligations stemming from the contradicting decisions of this Tribunal (requiring it to arbitrate) and the CJEU in Achmea (requiring it not to arbitrate). That may be the case, but, if so, it will arise because the Respondent has entered into, or been committed to, obligations which now prove to compete. It is not self- evident why this means that the Achmea principle should prevail, or why Claimant should suffer, by having to forego its preferred legal course of arbitration under the BIT.
226. This is not a case where one and the same issue is being or is likely to be considered by two different courts or tribunals, where one such court or tribunal might well see it as appropriate to stay its proceedings, at least pending the outcome of the other's proceedings – particularly if both sets of proceedings raised a difficult question of EU law regarding
200 Chevron Corp. v. Yaiguaje and others, Supreme Court of Canada, 3 SCR 69, Judgment, 4 September 2015, p. 73
(RL-0070). ↩
201 HICEE B.V. v. The Slovak Republic, PCA Case No. 2009-11, Partial Award, 23 May 2011, para. 407 (CL-0115). ↩
[Page 87]
UNCLOS on which the CJEU was likely to pronounce in the other set of proceedings, as in the case cited by the Respondent of MOX Plant Case, Ireland v. United Kingdom202.
227. It is also not clear what, if any, relevant adverse consequences might befall the Respondent. It will have complied with its EU obligations under Article 7(a) of the Termination Agreement to inform the Tribunal about Achmea, and, should it find itself held liable in any award, it will no doubt do its best to comply with the provisions of the Termination Treaty.
228. Far from deferring to the Achmea principle, investment tribunals have, after affirming their jurisdiction, declared that it is their duty to exercise it: see e.g., Eskosol at [186] and AS PNB at [654]. In A.M.F.203 the tribunal said this:
406. The Arbitral Tribunal does not deny the existence and the relevance of the principle of comity in international law. However, Respondent's position needs to be nuanced as to the circumstances under which it has been and can be applied in international (investment) law.
407. First, it must be emphasised that the principle of comity has no binding force at the international level and that even domestic judges grant its application rarely and only in extreme cases (Filippo Fontanelli ‘Comity' Overview of Topic Westlaw UK (2016), Exh RL-55, Introduction and paras 1 and 20).
408. Second, it is true that comity can be a useful tool of coordination in the application of international obligations from different regimes in absence of a positive rule of conflict.
409. However, comity remains a discretion-driven device, which cannot impose precise obligations on international courts and tribunals, which can always uphold and exercise their jurisdiction... In particular, comity is not a binding principle of international law ...
410.If one looks at the rare instances where comity was expressly exercised by international courts or tribunals, these latter never went as far as to decline their jurisdiction, but preferred instead to suspend their proceedings or grant comity at the level of applicable laws or remedies .... In other words, the Arbitral Tribunal is not aware of any other (investment arbitral) tribunal or international court
202 MOX Plant Case, Ireland v. United Kingdom, PCA Case No. 2002-01, Order No. 3 - Suspension of Proceedings
on Jurisdiction and Merits, and Request for Further Provisional Measures, 24 June 2003, paras. 20, 28 (RL-0073). ↩
203 A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG, Hamburg (Germany) v. The Czech Republic, PCA Case
No. 2017-15, Final Award, 11 May 2020 (CL-115). ↩
[Page 88]
having declined to exercise jurisdiction over a dispute due to considerations of comity when its jurisdiction was otherwise established.
411.It is true that the International Court of Justice (hereinafter “ICJ”) considered in the Cameroon v United Kingdom case that, “even if the Court, when seised, finds that it has jurisdiction, the Court is not compelled in every case to exercise that jurisdiction”... Nonetheless, the ICJ made this statement obiter dictum. In addition, the ICJ when making this statement relied not on the principle of comity as such, but rather on the concept of administration of justice and the related need to maintain the ICJ's judicial character ...
412.The present Arbitral Tribunal's jurisdiction stems from the valid arbitration agreement that was concluded between the Parties and by which they entrusted the resolution of their dispute to the present Arbitral Tribunal. There exists no other forum that could adjudicate the Parties' dispute that arose under the Germany-Czech Republic BIT.
413. Therefore, in absence of a specific provision contained in the Germany-Czech Republic BIT or a binding principle of international law, the present Arbitral Tribunal must exercise its jurisdiction once it has been established.”
229. The Tribunal considers the approach taken in A.M.F. to be both persuasive and correct. Having found that the present arbitration was properly instituted by valid mutual consent, and that neither the Termination Agreement nor considerations of good faith or abuse preclude the Claimant from pursuing this arbitration, the Tribunal fails to detect any reason why the arbitration instituted should not proceed.
230. This brings the Tribunal to the Respondent's final submission. This is that the Tribunal should decline to proceed with the arbitration, having regard to its duty to render an enforceable award. The submission is that, although, under Article 54 of the ICSID Convention, each ICSID Contracting State is obliged to recognize and enforce an ICSID award, it is only bound to do so “as if it were a final judgment of a court of that State”. The Respondent cites a decision of a Swedish court which refused to enforce an ICSID award rendered in the pre-Achmea case of Micula v. Romania.204 The District Court held that:
204 Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013 (CL-0137). ↩
[Page 89]
“[...] Sweden is obliged pursuant to Article 54 of the [ICSID] Convention to enforce the arbitral award as though it were a final Swedish judgment. A Swedish judgment of this type, whose enforcement was in violation of EU law, could not have been enforced either. There is no difference in this respect, therefore, between a Swedish final judgment and the arbitral award. Sweden's commitments pursuant to Article 4(3) TEU, therefore, entail that there are impediments to the enforcement sought. Application of Article 351 TFEU does not lead to a different view (C-241/91 P and C-242/91 P). The appeals should, therefore, be dismissed.”
231. Any award which the present Tribunal might make will, therefore, the Respondent submits, be unenforceable within the EU. Even if one were to follow that reasoning to this point, the present Tribunal sees no basis on which it could or would decline or stay its jurisdiction. There are States outside the EU where any award might be enforceable. There are sometimes even ways of putting pressure on States to meet voluntary or unenforceable obligations.
232. More importantly than any of these factors, references to a tribunal's duty to make an enforceable award do not mean that it is an arbitration tribunal's function, or within its competence, to undertake some form of prediction, still less investigation, as to where, when and how any award it makes may be enforced, before deciding whether or not to assume or continue to exercise jurisdiction. Such considerations may be relevant when a tribunal is making an award which a party tells the tribunal may need to be made in a certain form (or even place) in order to be recognised and enforced in a particular State where enforcement is envisaged. But that does not mean that it is a properly constituted tribunal's concern, when enforcement is likely to be resisted or to be difficult, to refrain from exercising its adjudicatory role, leaving a potential winning party without having the prospect of any award for enforcement anywhere.
233. The Tribunal therefore takes the same general approach as has been taken by all investment tribunals who have considered an objection to jurisdiction based on enforcement difficulties: see e.g., United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia205. It dismisses the objection.
205 United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24, Award, 21 June 2019, para. 541 (CL-0105). ↩
[Page 90]
234. In conclusion, the Tribunal therefore decides as follows:
235. The Tribunal has received and considered submissions from both Parties with regard to the appropriate costs order in the event of the Tribunal concluding that the Respondent's objection to the Tribunal's jurisdiction fails. The Claimant submits that the Tribunal should in that event order the Respondent to pay the Claimant's costs, in the sum of “EUR 416,791.94 and USD 300,000, plus interest at a rate that is equivalent to the London Interbank Offered Rate (LIBOR) plus 2% as of the date of the award until full payment” as well as “such other relief as the Tribunal deems appropriate”206 The Respondent has indicated that “if the Tribunal were to reject the preliminary objections (quod non), the Czech Republic reserves the right to claim these costs in the Award”207.
236. The Tribunal considers that it is appropriate to make the following order at this stage regarding costs of the issue of jurisdiction, namely that the costs should be reserved to further order.
206 Claimants' Costs Submission, para. 9. ↩
207 Respondent's Costs Submission, p. 2. ↩
[Page 91]
Signature
Professor Raúl E. Vinuesa
Arbitrator
Date: 28 July 2023
Signature
Professor Kaj Hobér
Arbitrator
Date: 28 July 2023
Signature
The Rt. Hon. Lord Jonathan Mance
President of the Tribunal
Date: 28 July 2023