European investors reconsider their position following the ECJ’s decision in Achmea.

European investors are reconsidering the status of their investments in Europe following the European Court of Justice’s ruling in Slovak Republic v Achmea BV (Case C-284/16) that an investor-state arbitration clause in a bilateral investment treaty (BIT) between two European states is incompatible with EU law. This landmark decision is likely to have significant repercussions not only for European investors that have commenced arbitrations or are seeking to enforce awards, but also for investors that rely on any of the existing 196 intra-EU BITs to protect their investments in Europe. We are likely to see investors give careful consideration to restructuring their investments through a vehicle outside of the EU, such as, for example, Switzerland, in order to ensure that their investments benefit from BIT protection.


The European Commission has consistently advocated against intra-EU BITs, which it views as being contrary to the principles of the single market because they result in more favourable treatment of investors from certain EU Member States. The Commission has regularly made submissions as amicus curiae to investment tribunals, annulment committees and national courts to argue that intra-EU arbitration clauses are contrary to the Treaty on the Functioning of the European Union (TFEU), and in particular Article 344 (which provides that all disputes between Member States must be exclusively brought before the ECJ) and Article 267 (which provides that “courts” – but not arbitral tribunals – should in certain circumstances refer preliminary questions on EU law to the ECJ). To date, however, arbitral tribunals have routinely rejected submissions that arbitration clauses in intra-EU BITs are incompatible with EU law.

In recent times, the Czech Republic, Italy, Ireland, and Romania have terminated their intra-EU BITs, while Poland and Denmark have suggested that they may follow suit. The Commission has also commenced infringement proceedings against five Member States with a view to compelling these States to terminate their intra-EU BITs, while at the same time seeking to persuade the remaining 21 other Member States to unilaterally terminate their intra-EU BITs.

The Achmea Decision

In 2004, Slovakia began to liberalise its private health insurance market, prompting Dutch insurance group Achmea to invest in the jurisdiction. In 2006, however, Slovakia reversed its position and, in 2008, Achmea commenced an UNCITRAL arbitration under the 1991 Netherlands-Czechoslovakia BIT. During the course of this arbitration, the Commission intervened to support Slovakia’s jurisdictional objection. In 2010, an arbitral tribunal consisting of Vaughan Lowe QC, VV Veeder QC and Albert Jan van den Berg dismissed these jurisdictional objections before going on in its 2012 final award to order that Slovakia pay €22.1 million plus interest for violating the BIT’s fair and equitable treatment standard.

Slovakia’s challenge to the award was rejected by the Higher Regional Court of Frankfurt in 2014 Slovakia then appealed to Germany’s highest civil court (the Bundesgerichtshof), which in 2016 expressed the view that there was no incompatibility between EU law and the BIT, but nevertheless decided to refer the matter to the ECJ for a preliminary ruling. In the interim, one of the ECJ’s advocates general, Melchior Wathelet, provided an opinion in which he advised that the BIT’s arbitration clause was not incompatible with EU law and was not discriminatory.

On 6 March 2018, the ECJ disagreed with Mr Wathelet, the Bundesgerichtshof and numerous arbitral tribunals by concluding that the investor-state arbitration clause in the BIT was not compatible with EU law for three reasons.

First, an investment tribunal, in fulfilling its mandate under a BIT, could be required to interpret or apply EU law, which was contrary to Article 344 and established EU case law.

Second, the investment tribunal could not be said to form part of the judicial system of either the Netherlands or Slovakia and, as such, was not a “court” that could refer questions to the ECJ for a preliminary ruling, therefore contravening Article 267.

Finally, an arbitral tribunal’s award was not subject to review by a court of an EU Member State, as required by Article 19 of the Treaty of the European Union. The ECJ concluded that the investor-state arbitration clause had “an adverse effect on the autonomy of EU law” and called into question “the principle of mutual trust between the Member States”.


The ECJ’s ruling has already had significant ramifications for intra-EU BIT arbitrations. It is understood that Hungary and Spain have already applied to have awards set aside in light of the Achmea decision, while a prominent arbitrator has publicly expressed the view that an award issued by a tribunal on which he sat may be annulled. A Dutch investor has now withdrawn its intra-EU treaty claim against Poland, citing the Achmea decision, and the Netherlands has committed to terminating its 12 remaining BITs with other EU Member States.

Many matters still await resolution. Although a tribunal has recently ruled that the Achmea decision does not apply to multilateral treaties to which the EU itself is a party, such as the Energy Charter Treaty, much uncertainty still remains. For one matter, arbitral tribunals, which in all publicly available awards to date have ruled arbitration clauses to be compatible with EU law, are now going to find it much more difficult to reach such a conclusion in light of this judgment. Moreover, claimants who have successfully obtained arbitral awards that are based on intra-EU BITs may now face a further obstacle in seeking to enforce such awards in an EU Member State. Finally, the fact that the Achmea decision concerned an UNCITRAL arbitration may encourage claimants that have commenced ICSID arbitrations under intra-EU BITs to argue that their arbitration remains unaffected given that the ICSID rules contain significant differences on how national courts may review the compatibility of arbitral awards.

Perhaps the greatest impact, however, will be on how European investors looking to invest in other EU countries will structure their investments in the future. The potential lack of BIT protection for their investments within the EU may prompt some investors to consider restructuring their investments so that they are made through a holding company outside of the EU. Whereas investors have tended to favour Dutch or Luxembourg holding companies so as to benefit from BIT protections and favourable tax arrangements, investors may now consider routing their investments through a non-EU jurisdiction such as Switzerland.

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