THE AUTHOR:<\/strong> Daniel M\u00fcller <\/strong><\/a>is one of the founding partners of FAR Avocats<\/a><\/p>\n\n\n\n Despite our expectations and hopes expressed in a previous post<\/a> on the Jus Mundi Blog, it was probably only a matter of time. On 16 June 2022, an arbitral tribunal constituted under the Rules of the Stockholm Chamber of Commerce (SCC)<\/a> and seated in Stockholm has rendered its award<\/a> declining jurisdiction over claims brought by two Danish investors against Spain under the 1994 Energy Charter Treaty (ECT).<\/a> The three arbitrators, Hans von Houtte<\/a>, Inka Hanefeld<\/a>, and Jorge Vi\u00f1uales<\/a>, unanimously found that European Union law as interpreted by the Court of Justice of the European Union (CJEU) in the Achmea<\/em><\/a>, Komstroy<\/em><\/a>, and PL Holdings<\/em><\/a> judgments precluded Spain from making a valid offer to arbitrate under Article 26 ECT. As far as we know, it is the only decision of an arbitral tribunal upholding the position imposed by the Luxembourg court, compared to more than 60 awards and decisions that have rejected the intra-EU objection before and after the CJEU\u2019s judgments in respect of bilateral investment treaties and the ECT.<\/p>\n\n\n\n The Green Power<\/em> award is and might remain a one-shot given the particularities of the procedural environment. The arbitration was conducted under the SCC Rules of Arbitration<\/a> and the seat of the arbitral tribunal was in Stockholm, Sweden<\/a>, an EU Member State (\u00a7 12<\/a>). This fact to which Spain referred in the proceedings (\u00a7 137<\/a>) constituted certainly a decisive element in the decision. Yet, the arbitrators did not limit their findings on jurisdiction ratione volontatis<\/em> to this fact but tried to ground it in an interpretation of Article 26 of the ECT, which to a large extent, is questionable.<\/p>\n\n\n\n At the outset, the Tribunal has noted that the issue of consent under the ECT \u201cmust overcome the binary logic of an either \u2018insider\u2019 or \u2018outsider\u2019 perspective with respect to EU law and focus on the situation as it appears to the Tribunal<\/em>\u201d (\u00a7 332). It continued to opine that \u201c[t]he analysis must be conducted at a finer-grained level whereby certain questions are governed by the combined operation of certain specific norms, whether from international or domestic law<\/em>\u201d (\u00a7 333). Even if, in the abstract, this approach is not misconceived, the Tribunal clearly failed to abide by it by choosing and picking from different legal norms of international law, European Union law, and municipal law in order to advance its case.<\/p>\n\n\n\n The Arbitral Tribunal recognized that Article 26 ECT<\/a> \u2013 being the starting point of its analysis \u2013 is part of an international legal instrument and should therefore be interpreted in accordance with the provisions of Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969)<\/a> (\u201cVienna Convention\u201d). It should be recalled that the CJEU, in its Komstroy<\/em> judgment, had simply ignored these rules of interpretation which, clearly, do not support the \u201cinterpretation\u201d of Article 26 unilaterally imposed by the Luxembourg Court on EU Member States. The Green Power<\/em> tribunal tried very hard to correct this shortcoming of the Komstroy<\/em> decision; of course, it was not able to do so without scarifying well-established principles of international treaty law.<\/p>\n\n\n\n The starting point of the Tribunal\u2019s analysis was the ordinary meaning of Article 26(3)(a<\/em>) ECT. The Tribunal concluded that \u201c[o]n its wording, the offer to arbitrate in this sentence is unqualified by any carve-out for intra-EU investor-State arbitrations, and it is \u2018unconditional<\/em>\u2019\u201d (\u00a7 341). As far as Spain being the Respondent is concerned, this is incorrect. The text of Article 26(3)(a<\/em>) ECT subjects the \u201cunconditional consent\u201d to the provisions of subparagraphs (b<\/em>) and (c<\/em>), and to these conditions only. Although the Tribunal extensively examined the declaration made by the European Union in 1997 under Article 26(3)(b<\/em>) as part of its analysis of the context, it overlooked Spain\u2019s declaration retaining is \u201cunconditional consent where the Investor has previously submitted the dispute<\/em>\u201d to its courts or to any other previously agreed dispute settlement procedure only. More interestingly, in accordance with Article 26(3)(c<\/em>), Spain declared<\/a> that it gives its consent if \u201c[t]he concerned investor renounces to submit the same despite to any other procedure of dispute settlement and withdraws from any other previous procedure before the responsible Authority issues a decision<\/em>\u201d. It is noteworthy that neither Spain nor any other EU Member State had limited its consent to extra-EU disputes, which of course would not have been feasible in light of the wording of Article 26(3) ECT.<\/p>\n\n\n\n Yet, the Tribunal did not stop its interpretative analysis there. It considered that taking the literal interpretation for granted or merely searching for its confirmation in the context, object and purpose or the travaux pr\u00e9paratoires<\/em> \u201cwould overlook, indeed ignore the complexities of this case<\/em>\u201d (\u00a7 343). It is of course true that the interpretation of provisions in an international treaty is not limited to the text; as the International Court of Justice has underlined, ordinary meaning, context and object and purpose \u201care to be considered as a whole<\/em>\u201d (Application of the International Convention on the Elimination of All Forms of Racial Discrimination (Qatar v. United Arab Emirates)<\/em>, Preliminary Objections, Judgment, \u00a7 78<\/a>) and not in any particular successive order. However, also according to the World Court, if it has \u201cbefore it a clause which leaves little to be desired in the nature of clearness, it is bound to apply this clause as it stands, without considering whether other provisions might with advantage have been added to or substituted for it<\/em>\u201d (Acquisition of Polish Nationality, Advisory Opinion, 1923, P.C.I.J., Series B, No.<\/em> 7, p. 20<\/a>).<\/p>\n\n\n\n Indeed, despite the clear wording of Article 26 of the ECT, the Tribunal tried very hard to resolve the obvious inconsistency between this text and the obligations of EU Member States under the EU treaties by way of interpretation. When considering the context to be taken into account, it clearly set this goal stating that \u201cit <\/em>[was] still necessary to consider whether a unilateral offer to arbitrate under Article 26(3)(a) ECT can be validly given by an EU Member State to the investors of another EU Member State despite the existence of another agreement between these EU Member States which prevents them from making such an offer<\/em>\u201d (\u00a7 348<\/a>). In other words, the Tribunal endeavored to show that the arbitration offer contained in Article 26 cannot be, because it must not be in terms of Member States EU obligations. This is not a question of interpretation, but one of compatibility and precedence (and the Tribunal ultimately had to accept this point).<\/p>\n\n\n\n The Tribunal nevertheless relied on some provisions of the ECT, in particular, Articles 1(3), 1(10) and 25, as well as in declarations and statements made when concluding the ECT and concluded that the ECT did accept the existence of specific rules and requirements between EU Member States. None of these provisions is, however, a disconnection or carve out clause, or any other provision that would exclude the application of the arbitration offer in intra-EU relations. In this regard, the Tribunal misunderstood entirely the context of the statement made by the then European Communities in accordance with Article 26(3)(b) ECT. Contrary to what the Tribunal suggested, the declaration does not carve out the EU\u2019s consent to arbitration; it simply confirms that the EU does not \u201cgive such unconditional consent<\/em> where the investor has previously submitted the dispute under subparagraph 2(a) or (b)<\/em>\u201d and explains the reasons and policy of the EU for this exclusion in accordance with the requirements of Article 26(3)(b<\/em>)(ii). Excluding consent altogether could only have been achieved by a reservation; but Article 46 ECT<\/a> explicitly prohibits reservations. This point was particularly well explained in the recent RREFF Annulment Decision (\u00a7\u00a7 65-68)<\/a>.<\/p>\n\n\n\n Furthermore, the Tribunal put much weight on what it considered to be interpretative statements made by 22 EU Member States on 15 January 2019<\/a>. It has suggested that this declaration \u201cwould reflect their authentic interpretation of the meaning of certain legal relations <\/em>inter se\u201d (\u00a7 370). However, the Tribunal simply failed to explain how a provision of a multilateral instrument can have one meaning in the relations of all parties, and yet a different one in the relation of some of them only. An interpretation is authentic only if it is shared and agreed upon by all parties to the treaty, as the International Law Commission has explained rightly in the 2011 Guide to practice on Reservations<\/a> (guideline 4.7.3). In any event, the 15 January 2019 statement does not purport to interpret the ECT or its Article 26. Rather, the 22 Member States expressed their position that as interpreted by arbitral tribunals, the arbitration clause is contrary to EU law and \u201cwould have to be disapplied<\/em>\u201d. This means that the 22 Member States purported to modify the application of Article 26 in their mutual relations. Of course, parties to a multilateral treaty are open to entering into agreements that modify a treaty or some of its provisions in their mutual relations in accordance with the conditions and procedural requirements codified in Article 41 of the 1969 Vienna Convention<\/a>. This is not what the EU and its Member States have done. In these circumstances, it is not for a tribunal or a court of justice to remedy an obvious omission by way of interpretation. The role of a court or of a tribunal is to interpret a treaty, not to revise it (Interpretation of Peace Treaties with Bulgaria, Hungary and Romania<\/em>, Advisory Opinion, p. 229<\/a>).<\/p>\n\n\n\n The framing of the question as one of interpretation is clearly misconceived. The meaning of a provision is one thing that can and must be established through interpretation; the compatibility of this provision with other rules of law is another one, that can only be solved through conflict rules. The Tribunal misunderstood this basic distinction when concluding: \u201cIn the context of intra-EU cases, Article 26 ECT could be interpreted as rendering the Respondent\u2019s offer to arbitrate invalid in the sense of \u2018to be disapplied\u2019 \u2026 Therefore, as discussed next, the Tribunal must determine whether such conclusion would be the correct one when Article 26 is interpreted in the light of the wider body of legal relations between <\/em>Denmark<\/a><\/em> and <\/em>Spain<\/a><\/em>, specifically, the relevant norms of EU law<\/em>.\u201d (\u00a7 412).<\/p>\n\n\n\n In any event, the State parties to the ECT have recently confirmed that the arbitration offer is not simply \u201cdisapplied\u201d by way of interpretation of Article 26 or of the ECT as a whole. In the realm of the Modernization of the ECT, they have decided<\/a> to include a provision making clear that Article 26 (and some others) \u201cshall not apply among Contracting Parties that are members of the same Regional Economic Integration Organisation in their mutual relations<\/em>\u201d. If the Green Power<\/em> Tribunal were right, no such provision would be necessary.<\/p>\n\n\n\n The Tribunal\u2019s desperate and largely unsuccessful attempt to re-interpret Article 26 in order to include (or exclude) provisions it does not contain was unnecessary to solve the jurisdictional issue. Although it is of course tempting, it is not the role of arbitral tribunals to set precedents that might be applicable to similar disputes raising similar questions. Clearly, the \u201cinterpretation\u201d of Article 26 proposed by the Tribunal is wrong and it is unlikely that other tribunals will endorse it \u2013 whether in International Centre for Settlement of Investment Disputes (ICSID)<\/a> arbitrations or others.<\/p>\n\n\n\n The Tribunal could not but recognize that the issue was one of conflicting norms. Yet, rather than resolving the conflict by established conflict norms, including those codified in Articles 30 and 59 of the 1969 Vienna Convention, or indeed Article 16 of the ECT, it invented a new one: \u201cthe primacy of EU law in the relations between EU Member States, such as Denmark and Spain, is not a matter of <\/em>lex specialis or of <\/em>lex posterior, but one of <\/em>lex superior\u201d (\u00a7 469). It is of course true that, under international instruments, States have the power to give priority over obligations contained in one instrument; UN Member States did so in Article 103 of the Charter, EU Member States accepted the primacy of EU law under the EU treaties and the case law of the CJEU. Noteworthily, Article 16 of the ECT contains also a conflict norm under which the contracting States have agreed to the primacy of more favourable ECT obligations. Even if lex superior <\/em>were to exist as a concept in international law, it remains relative, agreed upon by some States and subject to the rules applicable to international agreements, such as modification. EU law is only one part of international law, binding on only a minority of States, and its position vis-\u00e0-vis other bodies of international law, including the ECT, must be determined by those rules and principles of international law which regulate conflicts between different parts of the international legal order. The reliance by the Tribunal to the \u2013 different \u2013 concept of peremptory norms is in this respect boldly wrong. First of all, it is beyond question that EU law is not jus cogens<\/em>, i.e.,<\/em> norms accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted. Second, and in any event, neither Article 53 nor Article 64 are norms of conflict resolution; indeed, no such conflict could exist because jus cogens<\/em> prevents a possible conflicting norm to enter into force or terminates it if a new jus cogens<\/em> norm emerges. Not even the CJEU\u2019s Komstroy<\/em> judgment went so far as to declare the ECT null and void. Arguing now that the intention of the EU Member States could not have been to create a conflict with their obligations under EU law, as the Tribunal tried to do, is pure wishful thinking: international law as it stands is not a coherent system of law; conflicting obligations exist and it is the responsibility of States, not of courts, to eliminate them.<\/p>\n\n\n\n Whereas there is no (partial) international law in which the EU treaties enjoy primacy over all other rules of international law, the situation is different in the municipal legal orders of the Member States. Given the fact that the Tribunal was bound by Swedish law as the lex arbitri<\/em> and the unquestionable primacy of EU law in the Swedish legal system, it seems logical for the Tribunal to give full consideration and primacy to EU law. Indeed, as the CJEU has stressed long ago<\/a>, rules that are in conflict with EU law must be set aside and remain inapplicable. To the extent that EU law precludes offers to arbitration by a Member State in respect of investors of another Member State, Swedish law must implement this prohibition and render any other conflicting norm inapplicable. In turn, the arbitral tribunal, bound by Swedish law as the law of the seat, has to abide by the prohibition and leave the relevant conflicting norms inapplicable. Nevertheless, neither EU Law, nor Swedish law can validly modify the conflicting provisions in the ECT, even less by way of interpretation. Indeed, the CJEU has confirmed<\/a> previously that it remains the responsibility of the Member States to remove any rules which are in conflict with their obligations under EU law. Until then, uncertainty and inconsistency might prevail, as the quite different decision of the Stockholm seated arbitral tribunal in the Festorino Invest and others v. Poland<\/em><\/a> case makes clear.<\/p>\n\n\n\n The selection of the arbitral institution and the legal seat of an arbitral tribunal was therefore crucial to the decision of the tribunal in Green Power<\/em>. Arguably, any different decision of the arbitral tribunal would have been subject to annulment, as the Achmea<\/em> saga and the decision<\/a> of the German Bundesgerichtshof have demonstrated. Yet, this is not a question of interpretation of Article 26 of the ECT, but the result of the operation of EU primacy within the EU legal order. This is best demonstrated by a previous decision rendered by a Tribunal also chaired by Prof. Houtte. The tribunal in Photovoltaik Knopf Betriebs-GmbH v. Czech Republic<\/em><\/a>, operated under the UNCITRAL Rules<\/a> and was seated in Geneva, Switzerland<\/a>. The Tribunal did not engage in a lengthy interpretation of what Article 26 of the ECT could mean in the relationship between investors from an EU Member State and another EU Member State. It simply rejected the relevance of EU law stating that \u201cthe <\/em>Achmea judgment and the principle of EU law for which it stands cannot have the effect of ignoring the procedural rules applicable to this Swiss arbitration<\/em>\u201d which admitted the arbitrability of the dispute brought by the investors under Article 26 ECT.<\/p>\n\n\n\n Given the procedural specificities of the Green Power<\/em> arbitration proceedings, the decision is unlikely to constitute a valuable precedent clarifying the broader issue of EU Law and investment arbitration. The Tribunal\u2019s attempt to draw broader conclusions through a highly questionable interpretative analysis of Article 26 of the ECT cannot change this picture. In different procedural settings, like before ICSID tribunals or arbitral tribunals seated outside the European Union, the proper interpretation of Article 26 ECT is likely to prevail as long as the European Union and its Member States will not \u2013 finally \u2013 take the appropriate measures to eliminate what they consider as a conflict. This has been largely \u2013 yet not completely \u2013 accomplished through the 2020 Termination Agreement<\/a>. The modification of the ECT in the realm of its modernization is likely to finally include the \u2013 missing \u2013 disconnection clause into Article 26 ECT, too.<\/p>\n\n\n\n Daniel M\u00fcller <\/strong><\/a>is one of the founding partners of FAR Avocats<\/a>. He has been working in international dispute settlement for twenty years, and has represented States as counsel and advocate on numerous occasions before international courts and tribunals, as well as before arbitral tribunals constituted under Chapter VII of the United Nations Convention on the Law of the Sea and ad hoc<\/em> arbitral tribunals.<\/p>\n\n\n\n For the first time, an arbitral tribunal has declined jurisdiction over claims brought by EU investors against Spain under the 1994 Energy Charter Treaty (ECT).This article discusses the significance of this case and what it means for future intra-EU ECT arbitrations.<\/p>\n","protected":false},"author":4,"featured_media":277206,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":{"subtitle":"","format":"standard","video":"","gallery":"","source_name":"","source_url":"","via_name":"","via_url":"","override_template":"0","override":[{"template":"custom","single_blog_custom":"274736","parallax":"1","fullscreen":"1","layout":"right-sidebar","sidebar":"author","second_sidebar":"default-sidebar","sticky_sidebar":"1","share_position":"hide","share_float_style":"share-monocrhome","show_share_counter":"0","show_view_counter":"0","show_featured":"1","show_post_meta":"1","show_post_author":"0","show_post_author_image":"0","show_post_date":"1","post_date_format":"default","post_date_format_custom":"Y\/m\/d","show_post_category":"0","show_post_reading_time":"0","post_reading_time_wpm":"300","show_zoom_button":"0","zoom_button_out_step":"2","zoom_button_in_step":"3","show_post_tag":"0","show_prev_next_post":"0","show_popup_post":"0","number_popup_post":"1","show_author_box":"0","show_post_related":"0","show_inline_post_related":"0"}],"override_image_size":"0","image_override":[{"single_post_thumbnail_size":"crop-500","single_post_gallery_size":"crop-500"}],"trending_post":"0","trending_post_position":"meta","trending_post_label":"Trending","sponsored_post":"0","sponsored_post_label":"Sponsored by","sponsored_post_name":"","sponsored_post_url":"","sponsored_post_logo_enable":"0","sponsored_post_logo":"","sponsored_post_desc":"","disable_ad":"0"},"jnews_primary_category":{"id":"187","hide":""},"jnews_social_meta":{"fb_title":"EU Law And Arbitration Under International Investment Instruments: The Surprising Award In Green Power v. 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\n\n\n\nIntroduction<\/h2>\n\n\n\n
The Tribunal\u2019s Questionable Interpretation Of Article 26 ECT<\/h2>\n\n\n\n
The Application \u2013 And Primacy \u2013 Of EU Law As Part Of The Lex Arbitri<\/h2>\n\n\n\n
Conclusion<\/h2>\n\n\n\n
\n\n\n\n
\n","protected":false},"excerpt":{"rendered":"