THE AUTHOR:
Zoë Hughes-Nind, Associate at Osborne Clarke LLP (London)
London International Disputes Week 2024
The future of arbitration in Europe. That is, from any angle, a broad topic. The continued developments regarding the application of the Energy Charter Treaty (ECT) and its application in Europe mean this remains a highly relevant subject. Within individual European states, too, courts and governments continue to shape the arbitration landscape.
Inspired by a panel talk covering European arbitration held as part of London International Disputes Week 2024, this article considers the most significant recent developments and what we may see going forward.
The talk was given in June 2024 by five arbitration specialists: Duarte G. Henriques of Victoria Associates, Professor Gerard Meijer of Linklaters LLP, Professor Veronika Korom of Paragon Advocacy, Professor Stefan Kröll of the Deutsche Institution für Schiedsgerichtsbarkeit (DIS) and Dr Monique Sasson of DeliSasson and Arbitra. Dr Sasson also moderated. The panel first considered the ECT, before moving on to individual states.
The Future of the ECT
It has been some months since the European Council confirmed that the EU and Euratom, the European Atomic Energy Community, are to withdraw from the ECT (taking effect on 28 June 2025). The panel debated the effect of these withdrawals alongside those of contracting states. Since 2022, about 12 states have notified their intent to withdraw.
It appears now that the principal effect has been twofold. One, to pause the adoption by the remaining signatories of a modernised version of the treaty. Two, to encourage the EU to clarify and reinforce its position following the Achmea v. Slovakia (I) (“Achmea”), Judgment of the Grand Chamber of the European Court of Justice, 6 March 2018.
As regards one, the panel stressed that states who wish to remain party to the ECT remain able to adopt any modernised text that is agreed.
As regards two, on 26 June 2024, 26 EU Member States, Euratom and the EU signed an inter se declaration regarding the non-applicability of Article 26 of the treaty to intra-EU disputes. The declaration appears to be based on the draft agreement proposed by the Commission in October 2022. Importantly, it states that the signatories have agreed that:
- Article 26, the arbitration clause, does not apply to intra-EU disputes;
- Arbitral institutions must decline to register new intra-EU cases;
- Institutions must terminate pending cases; and
- Existing awards resulting from such cases are unenforceable.
The signatories also reportedly initialled an agreement reflecting the declaration. The Member State which did not sign seems to be Hungary, which issued its own declaration on 26 June 2024. The Hungarian Government signalled support for points 1 and 2 above, but, it appears, considers that a formal amendment of the treaty is required for it to have retrospective effect.
Such actions go some way to answering the much-debated question of whether Member States would enter into an inter se agreement. However, the declaration is a political statement without legal effect and the agreement will only enter into force once ratified, accepted or approved. The impact on existing proceedings and awards remains unclear.
For example, under the sunset clause in Article 47, qualifying investors with existing investments in a Member State would ordinarily be able to bring claims until 2045. Yet the declaration asserts the disapplication of Article 47 within the jurisdiction of the signatories. Whether a subsequent agreement may, within international law, disapply a sunset clause is relatively untested. That is in particular in an inter se context.
The answers will continue to largely be driven by politics. In the meantime, there may be more withdrawals by states.
Developments of Note in Individual European States
There have been several important developments in arbitration in Europe in recent years. These include the Benelux region, France, Germany, Italy, the Netherlands and Portugal.
As part of the talk, Professor Meijer submitted that the future of Dutch investor-state dispute settlement lies in contract-based investment claims. Many European courts distinguish between investment claims made on the basis of an intra-EU treaty, such as the ECT, and those made on the basis of a private contract. In the Netherlands, whilst the former may no longer be possible following the CJEU’s ruling in Achmea, the Dutch courts have since allowed contractual claims to proceed. The recent request filed by Shell and ExxonMobil against the Netherlands provides a possible example.
Professor Meijer posited that this approach may be in opposition to an emerging trend in other European states where the scope of the application of Achmea has been extended to contract-based investment arbitration. For instance, the Greek Hellenic Supreme Administrative Court has applied the reasoning advanced by the CJEU in Achmea and PL Holdings v. Poland, Judgment of the Grand Chamber of the European Court of Justice, 26 October 2021 to an arbitration clause contained in a contract. Perhaps, Meijer suggested, this signals a shift by some jurisdictions to now equate investment contracts with bilateral or multilateral investment treaties.
In Germany, the courts have so far fully embraced Achmea. The most significant development in arbitration in Germany is its proposed amendment of it’s national arbitration law. On 26 June 2024, the German Federal Government presented a draft bill setting out the changes. Based on his experience, Professor Kröll‘s argued that the key changes are:
- allowing English-language documents to be submitted without translations;
- relaxing the requirements that an arbitration clause must fulfill to be valid;
- confirming that arbitrators may give dissenting opinions; and
- creating an exception to the deadline of three months for challenging an award in the case of proven fraud.
The response from the arbitration community to the bill has been positive. The next stage is for the bill to be reviewed and passed by the German legislature.
Similarly, Italy has recently updated its arbitration law. Legislative Decree No 149/2022 offers an example. The decree empowers tribunals to grant interim and provisional measures. That is significant as previously the Italian courts had exclusive jurisdiction over such measures. While a party may still challenge a tribunal’s measures in the Italian courts, this reflects a wider trend across arbitration globally. The decree also specifies that arbitrators must be impartial and independent. Whilst Dr Sasson confirmed that this was already the position, the express confirmation reflects the increased scrutiny of arbitrators’ impartiality and independence that we are seeing worldwide.
The Benelux region too is considering a renewed arbitrational law. The Benelux Union is considering a new arbitration act that would apply to any party who has selected a seat in the region. According to Professor Meijer, the act will be opt-in and based on the UNCITRAL (United Nations Commission On International Trade Law) Model Law on International Commercial Arbitration (2006). The Benelux Court of Justice will be the court of enforcement.
Turning to arbitration in Portugal, Mr Henriques shared his experience. In his practice, Paris is typically the most popular arbitral seat. Mr Henriques questioned why this is not London. From his perspective, England and Wales have long been political allies of Portugal, perhaps more so than France. The answer may be down to a question of client familiarity: Portuguese parties may be more familiar with Paris than London and with International Chamber of Commerce (ICC) arbitration than the London Court of International Arbitration (LCIA).
Dr Sasson’s Italian clients have likewise historically been more familiar with Paris than London. Dr Sasson noted the recent inclination of the Paris courts to take an expansive approach when reviewing an award on the grounds of public policy and jurisdiction. In 2022, the courts issued a string of decisions resulting in the annulment of several awards (see, for example, decisions in Belokon v. Kyrgyzstan, Slot Group v. Poland and Santullo Sericom v. Gabon. See also earlier Alexander Brothers v. Alstom). Such an approach contrasts with that generally taken by the English courts, where awards are frequently enforced. It is questionable whether this will impact, or has impacted, Paris’ attractiveness as an arbitral seat.
What Next?
The developments above coupled with the increasing concern of national governments to at least be seen to be implementing climate-friendly regulation make it an exciting time for arbitration in Europe.
In terms of the ECT and intra-EU arbitrations, we may now see a more consistent approach taken by at least the majority of EU Member States. That would contrast with the recent reduction in uniformity in European courts’ approach to investment-based claims in general.
The impact of Achmea and its non-applicability in England may be felt more clearly. Prior to the declaration by EU Member States, England was not the only jurisdiction where courts were clearly willing to allow intra-EU disputes. Last year the Dutch courts allowed LC Corp, a Dutch investor, to continue an intra-EU arbitration against Poland (See, LC Corp v. Poland). However, following the declaration, fewer EU Member States may permit such claims. London, as the most developed European arbitration centre not subject to Achmea or the decisions of the EU, is well-placed to benefit.
ABOUT THE AUTHOR
Zoë Hughes-Nind is an Associate at Osborne Clarke LLP in London. Zoë specialises in international arbitration and litigation. She has worked on institutional arbitrations under the ICC, ICSID, DIAC and SCC Rules, on ad-hoc arbitrations subject to English law, and as Tribunal Secretary.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
