Hearing on 17 May 2023 at 9:00 a.m. concerning cases I ZB 43/22, I ZB 74/22 and I ZB 75/22 (admissibility of intra-European Union (EU) investor-State arbitration proceedings at ICSID on the basis of the Energy Charter Treaty)

Année d'émission 2023
Date de publication 13.02.2023

No. 27/2023

The First Civil Panel of the Federal Court of Justice, competent, among other matters, for legal disputes concerning arbitration proceedings, is required to rule in three cases whether European Union (EU) Member States are allowed to use upstream national judicial protection against intra-EU investment arbitration proceedings. The requests of the Member States to determine the inadmissibility of the arbitration proceedings relate to proceedings initiated by investors from other Member States against the applicant Member States on the basis of the Energy Charter Treaty at the International Centre for Settlement of Investment Disputes (ICSID) under the ICSID Convention of 18 March 1965.

Facts and Circumstances and Previous Proceedings in case I ZB 43/22

The applicant is an EU Member State that has amended its legislation in the field of wind and solar energy. The respondents, who belong to a group of companies in another Member State, see this as damaging their relevant investments in the EU Member State to the amount of a three-digit million figure. They therefore initiated investor-State arbitration proceedings with the ICSID on the basis of the arbitration clause contained in Article 26 of the Energy Charter Treaty. The applicant thereupon addressed a request to Berlin Higher Regional Court to determine the inadmissibility of these arbitration proceedings.

Berlin Higher Regional Court denied the request as inadmissible. It held that the request under section 1032 (2) of the Code of Civil Procedure (Zivilprozessordnung, ‘ZPO’) was not admissible in arbitration proceedings under the ICSID Convention, which was a closed system of rules. In its view, the case law of the Court of Justice of the European Union did nothing to change that; in the Achmea (C-284/16) and Komstroy (C-741/19) cases in particular, the Court derived the ineffectiveness of arbitration clauses in bilateral and multilateral investment contracts in the intra-European context from Articles 267 and 344 TFEU. Berlin Higher Regional Court held that the Court of Justice of the European Union had not ruled on the special national provision of section 1032 (2) ZPO, which serves procedural economy, and its applicability in the case of ICSID arbitration proceedings.

Facts and Circumstances and Previous Proceedings in the parallel cases I ZB 74/22 and I ZB 75/22

The applicant in both proceedings is the same EU Member State. It decided to phase out electricity generation from coal by 2030. As a result, the respondent in proceedings I ZB 74/22 and the respondent in proceedings I ZB 75/22, which have their seat in another Member State, both saw damage to their investments in a coal-fired power station located in the EU Member State amounting to a three-digit million figure (in case I ZB 74/22) and a one-digit billion figure (in case I ZB 75/22). Each of them therefore initiated investor-State arbitration proceedings with the ICSID on the basis of the arbitration clause contained in Article 26 of the Energy Charter Treaty. The applicant in each case thereupon submitted a request to Cologne Higher Regional Court to determine the inadmissibility of these arbitration proceedings and of any arbitration proceedings between the respective parties on the basis of the arbitration clause in the Energy Charter Treaty.

Cologne Higher Regional Court admitted the requests. In particular, contrary to the legal opinion of Berlin Higher Regional Court, Cologne Higher Regional Court held that they were admissible. It was true that ICSID arbitration proceedings were not subject to the control of national courts in principle. However, for the question of whether an effective arbitration agreement exists on the basis of the arbitration clause in Article 26 of the Energy Charter Treaty, which itself is an act of EU law, Cologne Higher Regional Court held that the full effectiveness of European Union legislation would have to be ensured. Consequently, the requests were admissible. The requests also had merit. According to the case law of the Court of Justice of the European Union, in particular in the Achmea (C-284/16) and Komstroy (C-741/19) cases, the arbitration clause is ineffective in intra-EU investment disputes under Articles 267 and 344 TFEU.

Lower Court in case I ZB 43/22

Berlin Higher Regional Court – Decision of 28 April 2022 - 12 SchH 6/21

and

Lower Court in case I ZB 74/22

Cologne Higher Regional Court – Decision of 1 September 2022 - 19 SchH 14/21

and

Lower Court in case I ZB 75/22

Cologne Higher Regional Court - Decision of 1 September 2022 - 19 SchH 15/21

Relevant legal provisions:

Section 1032 (2) ZPO

(2) Until the arbitral tribunal has been formed, a request may be filed with the court to have it determine the admissibility or inadmissibility of arbitral proceedings.

Article 26 of the Energy Charter Treaty

(1) Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably.
(2) If such disputes cannot be settled according to the provisions of paragraph (1) within a period of three months from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution: …
c) in accordance with the following paragraphs of this Article.
(3) (a) Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of this Article. …
(4) In the event that an Investor chooses to submit the dispute for resolution under subparagraph (2)(c), the Investor shall further provide its consent in writing for the dispute to be submitted to:
a) i) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention on the Settlement of Investment Disputes between States and Nations of other States opened for signature at Washington, 18 March 1965 (hereinafter referred to as the “ICSID Convention“), if the Contracting Part of the Investor and the Contracting Party party to the dispute are both parties to the ICSID Convention; …
(5) (a) The consent given in paragraph (3) together with the written consent of the Investor given pursuant to paragraph (4) shall be considered to satisfy the requirement for:
i) written consent of the parties to a dispute for purposes of Chapter II of the ICSID Convention and for purposes of the Additional Facility Rules; …

Article 267(1) TFEU

The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of the Treaties;
(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union.

Article 344 TFEU

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.

Karlsruhe, 8 February 2023