INVESTMENT TREATY ARBITRATION

CD: Could you provide an overview of recent developments in investment treaty disputes? What trends have you seen over the last 12 months or so?

Morris: Over the last year, intra-European Union (EU) investment arbitration and the implications of the Court of Justice of the European Union’s (CJEU’s) decisions in Achmea and Komstroy continue to make headlines. In those cases, the CJEU held that treaties that allowed EU investors to bring arbitration claims against EU member states are contrary to EU law. Recent issues include whether EU respondent states will be able to secure anti-suit injunctions from courts in the EU to prohibit investor award-creditors from seeking to enforce awards in non-EU jurisdictions, such as the US or Switzerland. EU respondent states have also argued in enforcement proceedings outside the EU that the awards should be deemed unenforceable due to the effects of EU law. The federal court of appeals in Washington DC is considering this question. The Swiss Supreme Court very recently held that it would not set aside an intra-EU investment award on the basis of EU law, presumably indicating that it would enforce such an award as well.

Villalon: One major trend in investor-state arbitrations has been the efforts of certain European countries to withdraw from the Energy Charter Treaty (ECT). The ECT, which protects foreign energy investments, imposes obligations on states when regulating existing fossil fuel investment. If ECT signatory countries take steps to phase out fossil fuels – for example by limiting or eliminating existing projects – the ECT may yet require the state to pay significant compensation. Notably, countries such as France, Germany and Poland have recently withdrawn from the treaty, while several other countries have voiced plans to exit, reflecting widespread European concern as to the compatibility of longstanding investment treaty obligations with modern environmental objectives. This will eventually reduce the number of new arbitrations under the ECT as fewer states participate. However, due to the 20-year sunset clause, we can still expect to see a substantial level of ECT-based arbitration cases in the near term.

Jul-Sep 2024 issue

Andres Alvarez Calderon

Three Crowns

WilmerHale