ACELG

The recent judgment of the Court of Justice CJEU) in the so-called Achmea case[1], has given rise to a lot of comments. Now we also dispose of the reaction of the Netherlands government to the case, which can be characterized as quite radical: in the end, all intra-EU bilateral investment treaties (BITs) should be terminated. The Dutch government, however, seeks to draw a sharp distinction with Member State and EU BITs with third States, such as the Comprehensive Economic and Trade Agreement (CETA) with Canada. Will the Court agree with this in its pending Opinion 1/17 on CETA? This comment shows which dilemma the Court will now be confronted with.

The Achmea case turned, among other matters, on a provision (Art. 8(3)) of the BIT between the Netherlands and Slovakia, both Members of the European Union. This provision enabled the parties to the dispute (Achmea and Slovakia) to go directly to an arbitral tribunal that is not part of the judicial system of the Union and, in the view of the Court, thus to escape from the jurisdiction of the CJEU under Article 267 TFEU on preliminary rulings. This Treaty provision is essential to the preservation of the particular nature of the law established by the Treaties. Lack of respect for Article 267 indicated a breach of the principle of mutual trust between the Member States and was bound to have a negative effect on the autonomy of Union law, in the view of the Court.

However, the Court also recalled that it is settled case law to accept that the Union concludes from time to time international agreements that contain dispute settlement clauses, which provide for the establishment of an international tribunal or court that is responsible for the interpretation and application of the international agreement in question, and the judgments of which will be binding on the EU and its institutions, including the CJEU. This is not in principle incompatible with EU law.[2]

 

Consequences drawn by the Netherlands from Achmea

On 26 April 2018 the Dutch government, through the Minister for External Trade and Development, Mrs. Sigrid Kaag, who is also responsible for the Dutch BITs, addressed a letter to the Second Chamber of the Dutch Parliament setting out the consequences that the Dutch government had drawn from the Achmea judgment.[3] One of the core passages of that letter explains the government’s views with typical Dutch bluntness, as follows:

 

Given this judgment of the Court of Justice, the Dutch government does not see any other possibility than the termination of the investment agreement with Slovakia. In the view of the government, this judgment of the Court of Justice does not only have consequences for the investment agreement with Slovakia, but also for the investment agreements with other EU Member States with a similar dispute settlement mechanism. The Netherlands has such twelve investment agreements with other EU Member States [there follows a list of names of the countries]. The government recognizes that it is necessary to terminate these agreements as well. The judgment does not affect the Netherlands alone. There are about 180 investment agreements between EU Member States.[4]

 

The government next states that it will discuss with the European Commission and the other Member States concerned how all these intra-EU investment agreements could be terminated simultaneously by one multilateral treaty.[5] It then goes on to explore the possible implications for the dispute settlement mechanism of the Energy Charter Treaty.

 

The government believes that the judgment will also have consequences for the application of the dispute settlement mechanism contained in the Treaty on the Energy Charter to disputes between an investor of an EU Member State and another Member State…….The Member States and the European Commission will have to discuss in which way they can draw consequences from the judgment in the context of the Treaty on the Energy Charter.[6]

 

The letter ends with a paragraph that recalls that this judgment need not have consequences for investment protection agreements with third States, and in particular for the Comprehensive Economic and Trade Agreement (CETA) with Canada, the “constitutional” legality of which is the subject of the procedure started by Belgium for Opinion 1/17. The Dutch government seems to be of the view that the clause (Art. 8.31 CETA) in the dispute settlement mechanism, which explicitly states that the “Investment Court” can only apply and interpret CETA itself and has no power of authoritative interpretation over EU law, is sufficient protection for the autonomy of the EU legal order. The Dutch government states that it is supported in this position by the Council, the Commission and other Member States. Obviously, there has been a certain measure of co-ordination of the positions of the institutions and the Member States in the procedure leading up to Opinion 1/17, which will probably be rendered in early 2019.[7]

 

Some comments

The argument advanced by the Dutch government to distinguish Achmea from the future Opinion 1/17, and in particular from the question of the legality of the investment protection and the accompanying ISDS procedure foreseen in CETA, raises interesting questions. As already stated above, the Netherlands and the EU institutions and other Member States are likely to rely strongly on Article 8.31.2 of CETA, according to which the Investment Tribunal may only “consider the domestic law of the disputing party as a matter of fact” to which rules of international law have to be applied[8] and, in doing so, “shall follow the prevailing interpretation given to the domestic law by the court or authorities of that Party.” Moreover, such consideration by an international court obviously has no authoritative power in the domestic legal system of a Party, including for its courts.

Christina Eckes in her blog of 13 March of this year[9] is of the view that after Achmea this CETA provision will be seen by the Court as inadequate for averting the threat to the autonomy of the EU legal system. And indeed, it is possible to say that if one or two Member States cannot lift a dispute out of the system of judicial protection of the EU by international agreement, and in particular avoid the preliminary ruling procedure in this way, the EU institutions cannot use the treaty-making power of the Union to do so either. On the other hand, as we saw, the CJEU was also at pains to recall in Achmea that binding international dispute settlement mechanisms could continue to be part of EU international agreements. Moreover, Article 8.31.2 CETA can be said to have implicitly referred to those passages of the Kadi I case, where the CJEU is at pains to reassure the UN and its institutions that its judgment will be limited only to the method of implementation in the EU of the Security Council resolutions and will in no way touch the authority and binding character, or the supremacy under international law of these resolutions.[10] This may be a formalist position, but it simplifies the co-existence between two different legal systems, of the EU and the UN, under international law.

On the basis of its own case law, the Court of Justice is thus on the prongs of a dilemma. Will it simply extrapolate Achmea from intra-EU BITs between Member States to EU or mixed agreements with third States, because in both situations the Parties committed the cardinal sin of permitting individuals to avoid the preliminary ruling procedure, which is the keystone of the (formally) watertight system of judicial protection of the Union[11]? Or will the Court accept that an international court, such as the CETA Investment Tribunal, in conformity with long-standing practice, will itself form a view on the question whether Union law and/or its application is in breach of an international agreement on the basis of a factual appreciation of that law and the way it has been interpreted by the executive and judicial authorities of the EU? And will the Court accept that such a view of EU legislation and its application does not represent some intention of the international court in question of attacking the legal autonomy of the EU legal order? In short, is the CJEU ready to accept its own formalist reasoning as expressed in Kadi I, when used by an arbitral tribunal, such as the CETA Tribunal, vis-a-vis the EU and its institutions, including the Court of Justice? Will the Court (sufficiently) realize that these are matters of reciprocity in international relations? Will it be aware of the risk that treating third States, their courts, and international courts the Achmea way, i.e. as if they are embedded in the preliminary ruling mechanism and are bound by Union loyalty, may precisely bring the risks the Court fears, namely that such courts will not be content to treat Union law as mere facts to which international, or national law of a third State, must be applied?

[1] Case C-284/16, Slovak Republic v Achmea, ECLI:EU:C:2018:158, paras 51-58.

[2] Case C-284/16, para. 57.

[3] See ‘Kamerbrief over investeringsakkoorden met ander EU-lidstaten’ (Letter to the Second Chamber on investment agreements with other Member States), retrieved at

www.rijksoverheid.nl/documenten/kamerstukken/2018/04/26/kamerbrief-over-investeringsakkoorden-met-andere-eu-lidstaten

[4] Translation by the author, ibid. p.2

[5] Ibid. p.2.

[6] Translation by the author, Ibid. p. 2.

[7] Ibid. p. 3.

[8] This is the prevailing position of virtually all international courts and tribunals, when they are confronted with the national law of one of the parties before them. See Jennings and Watts eds., Oppenheim’s International Law, 9th edition, Longman 1992, p. 83 and the authorities referred to there.

[9] “Don’t lead with your chin! If Member States continue with the ratification of CETA, they violate European Union Law”, retrieved at https://acelg.blogactiv.eu/

[10] See Case C-402/05 P, Kadi and Al Barakaat International Foundation v Council and Commission, ECLI:EU:C:2008:461, paras 280-288.

[11] Note that the Court has been forced to give such enormous importance to the preliminary question procedure in the system of judicial protection, because it has never been willing, in spite of Opinions of several AG’s, to change much or anything at all to the notion of “individually concerned” in Art. 263 TFEU – and that in the face of the well-known factual difficulties of having effective recourse to the preliminary ruling procedure.

 

Pieter Jan Kuijper is former Professor of the Law of International (Economic) Organizations at the Faculty of Law of the University of Amsterdam.

Tweet about this on TwitterShare on Facebook0Share on Google+0Share on LinkedIn0
Author :
Print

Leave a Reply