On 6 March, the Court of Justice of the European Union (CJEU), in the case of the Slovak Republic v. Achmea BV, decided that an arbitration clause included in the Bilateral Investment Treaty (BIT) signed by the Netherlands and the then Czech and Slovak Republic, incompatible with European Union (EU) law.
The dispute behind this decision is as follows: in 2004, Slovakia, within the context of the reformation of its healthcare system, opened up its markets to national operators and other States offering private healthcare insurance provisions. Achmea BA, part of a Dutch insurance group, after having obtained the necessary license to operate, established a subsidiary in Slovakia through which it carried out the provision of its services. Subsequently, Slovakia partly revised the deregulation of this market, prohibiting in 2007 the distribution of profits obtained from private insurance activities. On considering that the legislative measures of Slovakia had caused it damage, Achmea BA, under the arbitration clause established in the respective BIT, brought arbitration proceedings against Slovakia. The Court of Arbitration ordered Slovakia to pay Achmea BA compensation for the amount of 22.1 million euros. Slovakia challenged the arbitration decision through an action for annulment with the German Courts, and the Federal Supreme Court, through the mechanism of a referral for a request for a preliminary ruling, raised with the CJEU the question basically of whether the BIT arbitration clause in question was compatible with EU law.
Germany, France, the United Kingdom, the Netherlands, Austria and Finland (traditionally countries of origin of investors and rarely the object of intra-Community investment arbitration) participated in the proceedings and submitted observations in the sense of supporting the theory of the compatibility with EU law of the arbitration clause in question, and of other similar ones used in 196 intra-Community BITs in force.
The Czech Republic, Estonia, Greece, Spain, Italy, Cyprus, Latvia, Hungary, Poland and Romania, all with a history of being the object of intra-Community investment arbitration, form part of a group of Member States which participated in the proceedings supporting the opposite theory to that defended by Slovakia. The European Commission, unsurprisingly, also supported the incompatibility theory.
In response to the conclusions of the Advocate General, the CJEU stated in short that an arbitration clause included in intra-Community BITs, such as the one signed by the Netherlands and Slovakia, was contrary to the autonomy of EU law.
This was an unprecedented and unquestionable controversial decision, the grounds of which, as well as the countless complex legal issues arising therefrom, will no doubt trigger meaningful intense debate among specialists in the period ahead. For the time being, if we take into account that Portugal is also a party to intra-Community BITs, specifically with Bulgaria, the Czech Republic, Germany, Hungary, Lithuania, Latvia, Poland, Romania, Slovakia and Slovenia, we may easily conclude that this CJEU decision also affects us.
Amber warning alert: this CJEU decision introduces a new significant factor of uncertainty and insecurity into matters relating to intra-Community BITs and investments made or to be made in the EU.
Originally published at Advocatus (Portugal), May 1st 2018
João Duarte de Sousa, Garrigues Partner, Head of Litigation and Arbitration Department in Portugal