27 avr. 2018

EU against ICSID (2): Achmea v Slovakia, UNCITRAL, arbitration, investors' rights, ISDR, TTIP, CETA - Stanislovas Tomas

In my last video I have spoken about the fight between the EU and the ICSID in the Micula case. It is a case where the ICSID arbitral tribunal has awarded damages of € 178 million to the Swedish investors for the breach of their rights by the European Commission. In that video I have predicted that the European Court of Justice would take the position that the Micula brothers should be paid nothing, that the ECJ would prohibit the execution of the award. As always, I was right. 

The Micula execution case is still under consideration, however we have got the Achmea case.

In the Achmea case, the arbitral tribunal established under the UNCITRAL rules has awarded a compensation of € 22.1 million for the breaches of the Dutch investors rights by Slovakia. In this case, the Slovakian Government behaved in a very stupid way: they prohibited distribution of profits generated by private sickness insurance companies. I think that this is a very stupid approach. If a legal business generates profit, why should you prevent it from distributing profits? So this business has got € 22 million from the arbitral tribunal. What does happen next?

The German Federal Court of Justice decides to transfer the question whether the award is executable to the European Court of Justice, and as I have predicted this is very bad for the investors. Foreign investors do not trust the European courts, and they are right.

There are two important positions that are present in the Achmea judgment: the position of the German Federal Court of Justice and the one of the ECJ itself.

The German Federal Court of Justice supports the execution of the award, and makes two very important statements:
1)   The EU law is not applicable to the Achmea case, because it is decided by the arbitral tribunal with no references to the Union law. The Union law is not necessary in this case. The Union law does not regulate this kind of issues.
2)   If the execution would be contrary to the Union law, if it went against the policy of the European Commission, then the German courts would annul the execution.

This is a moderate approach of which I was talking in my last video. However, the European Commission takes the radical approach or even a Jihadist approach, and the ECJ ratifies this radical position as its own: the Luxembourg court prohibits all the intra-EU BITs with their arbitration remedies.

Now let’s take a look at the arguments of the ECJ:

It agrees that the Union law is not necessary for solving the Achmea dispute, however the ECJ says that the issue of application might raise in other cases, and then the arbitral tribunal would consider, apply and interpret the Union law in those other cases (§§ 42 and 58). They do not talk about Micula, but we know that they imply Micula, and the breaches of investors rights by the European Commission.

Then, the ECJ explains everything it thinks about international arbitration in the same Jihadist manner: it says that the arbitral tribunals are not national courts of Member States (§ 45), they are not common courts of Member States like the Benelux Court of Justice (§ 47), and they are created in order to escape from the ordinary judicial system (§§ 46 and 55). Well, this is true, because the investors do not trust the European courts. This is normal. Investors want to have independent courts. Therefore, they try to escape from the European courts. 

Finally, the ECJ says that in principle it could authorise the EU to transfer a part of its competence to the ICSID and UNCITRAL tribunals, but in the case of BITs the competence is transferred by the individual Member States themselves.

So, as I have predicted, the ECJ denounces the intra-EU BITs in a retrospective manner.

Why do I call this approach Jihadist? First of all, the same argumentation is applicable not only to the intra-EU BITs, but to all BITs concluded by the Member States all around the world. Look: the EU breaches the rights of Russian investors in the same manner as it breaches the rights of Dutch investors. It means that the same issue of interpreting the Union law may raise in extra-EU arbitration. And then – yes – almost all extra-EU BITs are concluded by individual Member States.

Second, if the EU is allowed to invoke its internal law to invalidate the arbitration awards, then Russia also has the same right. This is a collapse of the whole arbitration system.

As an Islamic fundamentalist, the European Commission and the ECJ decide to explode all the system. However, I predict that they will fail. 

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