Preliminary References As Well As Investment Tribunals: Is The Luxembourg Courtroom Extending A Helping Hand?

Hannes Lenk, PhD Candidate at the University of Gothenburg

The human relationship of arbitral tribunals alongside the Court of Justice of the European Union (CJEU) has been the dependent plain of a long-lasting juridical struggle. The electrical flow seat is every bit elementary too pragmatic every bit it is controversial. Commercial arbitration tribunals are non considered to live a ‘court too tribunal of a Member State’ inside the pregnant of the Article 267 TFEU and, thus, unable to refer questions to the CJEU on matters of interpretation of European Union law.  At the same time, it is an opened upward hole-and-corner that questions of European Union constabulary create arise during arbitration proceedings, too at that topographic point is an inherent risk that tribunals instruct it wrong—at to the lowest degree sometimes. In commercial arbitration these shortcomings mightiness live addressed through the indirect interest of domestic courts too the CJEU at the recognition too enforcement phase of arbitral awards. Influenza A virus subtype H5N1 similar possibility mightiness non be inwards investment arbitration too for exactly about fourth dimension at in i lawsuit the inquiry of whether or non investment tribunals are entitled to asking preliminary references from the CJEU has been simmering nether the surface of a deeply politicised fighting on investor-state dispute small town provisions inwards currently ongoing negotiations for deep too comprehensive merchandise too investment agreements with, inter alia, Canada too the US. Influenza A virus subtype H5N1 recent persuasion of Advocate General Wathelet mightiness suspension novel soil inwards this fighting too gear upward the plain for hereafter judicial dialogue.

Commercial arbitration: from Nordsee to Eco Swiss

'Article 267 TFEU is an of import musical instrument for cohesion too coherence inwards the judicial organization of the European Union (EU), including domestic courts every bit ‘ordinary courts of the European Union legal order’ (Opinion 1/09, para. 80). By agency of establishing a judicial dialogue, the preliminary reference machinery guarantees that individuals guide maintain their rights nether European Union constabulary enforced inwards domestic courts, too assures a uniform interpretation too application of European Union constabulary inwards all Member States. Notably, the determination to asking a preliminary reference is to a greater extent than oft than non inside the discretion of domestic courts, which are obligated to refer questions only inwards limited circumstances, i.e. inwards instances where the representative is pending earlier a domestic courtroom of lastly instance.

Article 267

1. The Court of Justice of the European Union shall guide maintain jurisdiction to laissez passer on preliminary rulings concerning:

(a) the interpretation of the Treaties;

(b) the validity too interpretation of acts of the institutions, bodies, offices or agencies of the Union;

2. Where such a inquiry is raised earlier whatsoever courtroom or tribunal of a Member State, that courtroom or tribunal may, if it considers that a determination on the inquiry is necessary to enable it to laissez passer on judgment, asking the Court to laissez passer on a ruling thereon.

3. Where whatsoever such inquiry is raised inwards a representative pending earlier a courtroom or tribunal of a Member State against whose decisions at that topographic point is no judicial remedy nether national law, that courtroom or tribunal shall convey the affair earlier the Court.

4. If such a inquiry is raised inwards a representative pending earlier a courtroom or tribunal of a Member State alongside regard to a mortal inwards custody, the Court of Justice of the European Union shall deed alongside the minimum of delay.'

However, Article 267 TFEU includes a important procedural limitation. In social club to to asking a reference from the CJEU the judicial trunk must live covered yesteryear the concept of ‘any courtroom or tribunal of a Member State’. The CJEU has historically interpreted this concept restrictively. In Dorsch Consult the CJEU clarified the characteristics that demand to live taken into account. Accordingly, a ‘court of tribunal’ is whatsoever judicial trunk that exercises judicial functions, i.e. that is (a) established yesteryear law, (b) a permanent institution, (c) alongside compulsory jurisdiction, (d) whose physical care for is inter partes, (e) applying rules of law, too (f) acts independent of other branches of government. Applying these criteria to a commercial arbitration tribunal, the CJEU later on declared inwards Nordsee that despite “certain similarities betwixt the activities of the arbitration tribunal … too those of an ordinary court”, the tribunal inwards inquiry was non a ‘court or tribunal’ inside the pregnant of the preliminary reference procedure.

Arbitral tribunals are, therefore, left without guidance on the interpretation of European Union constabulary where this becomes relevant during the arbitration proceedings. From an European Union constabulary perspective, the adverse number of wrong interpretation too application of European Union constabulary inwards commercial arbitration is mitigated yesteryear the indirect interest of domestic courts, too yesteryear association the CJEU. Indeed, domestic courts play an of import role inwards supporting the arbitral tribunal upon request, every bit good every bit inwards the recognition too enforcement of arbitral awards. In Eco Swiss the CJEU emphasized that domestic courts are to a greater extent than oft than non required to assess the compatibility of arbitral awards alongside European Union populace policy too may asking a preliminary reference from the CJEU to that end. The abide by inwards Eco Swiss was considered a violation of European Union contest rules (now Article 101 TFEU), which, according to the CJEU, constitutes a ‘fundamental provision which is essential for the accomplishment of tasks entrusted to the [Union]’ (para. 36). The CJEU furthermore clarified that it is to live considered component subdivision of populace policy inwards the pregnant of Article V(1)(c) too (e), too II(b) of the New York Convention on the Recognition too Enforcement of Foreign Arbitral Awards.  Consequently, arbitral awards that are irreconcilable alongside European Union populace policy are unenforceable inside the territory of the Member States nether domestic too international law.

Investment arbitration: commercial arbitration inwards disguise or something else entirely?

This approach is opened upward for much criticism, non to the lowest degree because the concept of European Union populace policy remains notoriously undefined. “In calorie-free of a constant referral of additional tasks upon the European Union over the lastly 20 years, it has move increasingly hard to seat those provisions which may live regarded every bit fundamental for those tasks.” (Basedow, p. 373). Nonetheless, from an European Union constabulary perspective it appears to furnish a pragmatic procedural solution that reserves the interest of the CJEU too assures the application of European Union constabulary inwards domestic courts. Particularly inwards the expanse of investment arbitration it has been suggested that invoking European Union populace policy at the enforcement phase mightiness forestall exactly about of the most controversial awards from gaining legal number inside the European Union legal order. But investment arbitration is inwards many ways different from commercial arbitration. The vast bulk of proceedings is governed yesteryear the rules of the International Centre for Settlement of Investment Disputes (ICSID). Article 54 ICSID provides for the automatic recognition too enforcement of awards, excluding domestic courts from whatsoever interest inwards the review of ICSID awards vis-à-vis populace policy. To brand matters worse, non-ICSID awards are non seldom enforced exterior the territory of the respondent state. Enforcement of the controversial Micula award, for instance, is currently sought in the US.

Gaffney and Basedow guide maintain of late advocated the watch that investment tribunals should live able to asking references nether Article 267 TFEU. It is inwards this context noteworthy that the CJEU inwards Nordsee conceded to the possibility that an arbitral tribunal mightiness autumn inside the ambit of Article 267 TFEU, provided that the tribunal derives its jurisdiction non exclusively from political party autonomy of the disputing parties, but instead involves the do of state ascendence to the extent that it tin live considered an establishment of the state. This watch was later confirmed inwards Ascendi, a asking from the Tribunal Arbitral Tributário inwards Portugal. The CJEU observed that Portuguese constabulary provides for the resolution of taxation disputes through arbitration, which too regulates the surgical operation too constitution of the tribunal. “[The Tribunal’s] jurisdiction stems direct from the provisions of Decree-Law No 10/2011 too is not, every bit a result, dependent plain to the prior human face of the parties’ volition to submit their dispute to arbitration”, the CJEU concluded (para. 29). Not dissimilar the Tribunal Arbitral Tributário, investment tribunals are an choice dispute small town organization provided for inwards law, i.e. the the underlying investment agreement, which constitute a “non-transient chemical cistron of [the domestic] judicial system” (Basedow, p. 379-380).

The thought to construe investment tribunals every bit ‘court or tribunal’ for the purpose of Article 267 TFEU is non exactly a scholarly elbow grease to foursquare the circle. There are signs from inside the CJEU that this mightiness acquaint an acceptable solution to the occupation of integrating investment tribunals inwards the European Union legal order. In his recent Opinion inwards Genentech, a preliminary ruling from the Cour d’appel de Paris concerning the notion of European Union populace policy inwards the recognition too enforcement of arbitral awards, Advocate General Wathelet presented his well-balanced too carefully drafted watch on the human relationship of arbitral tribunals alongside the CJEU. On the outset the AG simply confirms good established representative constabulary along the lines of Nordsee and Eco Swiss.

'Referring to the organization for reviewing the compatibility of international arbitral awards alongside European Union constabulary through the populace policy reservation […] the Court has held that arbitral tribunals ‘constituted pursuant to an agreement’ are non courts of the Member States inside the pregnant of Article 267 TFEU. Consequently, they cannot refer questions for a preliminary ruling. It is so for the courts of the Member States, inside the pregnant of Article 267 TFEU, to examine, if necessary yesteryear referring a inquiry for a preliminary ruling, the compatibility of (international or domestic) arbitral awards alongside European Union constabulary where an activity is brought earlier them for annulment or enforcement, or where whatsoever other cast of activity or review is sought nether the relevant national legislation.'

Much to a greater extent than powerful considerations are hidden inwards the footnotes. Here the AG addresses the province of affairs of investment tribunals explicitly to which, inwards his view, different considerations should apply.

Footnote 34

'Based on this case-law, the arbitral tribunals hearing cases inside the framework of the Convention on the Settlement of Investment Disputes Between States too Nationals of Other States (ICSID) could live regarded every bit existence able to refer questions to the Court for a preliminary ruling. See, to that effect, [Basedow], p. 376 to 381. Since the number too size of investment arbitrations raising questions on the application of European Union constabulary are increasing, peculiarly inwards the plain of State aid, the possibility for arbitral tribunals to refer questions for a preliminary ruling could assist to ensure the right too effective implementation of European Union law.'

Indeed, these remarks are exactly obiter dicta too the CJEU is unlikely to address whatsoever of this inwards the terminal judgment, other than—probably—following the AG on substance. The opinion, nonetheless, sends a potent signal to investment tribunals, i.e. an explicit invitation to asking preliminary references from the CJEU on matters of interpretation of European Union law.

Helping manus or lastly straw

In the best of cases AG Wathelet’s persuasion would live construed every bit a helping manus from Grand Duchy of Luxembourg to divulge an amicable solution to the electrical flow conflict, based on judicial dialogue too usual comity. However, investment tribunals guide maintain thus far refused to engage alongside the CJEU on questions of European Union law. Or set differently, it does non seem every bit if investment tribunals consider European Union constabulary to live of actual relevance to arbitration. In Oostergetel too Laurentius, for instance, the tribunal acknowledged that at that topographic point is “absence of whatsoever conclusive seat of the [CJEU]” on the relevant issues of European Union law, but later on rejected the respondent’s asking to refer a inquiry to the CJEU alongside the assist of a domestic courtroom (para. 109). The investment tribunal inwards Micula rejected concerns raised yesteryear the Commission to the number that the award, if rendered, were unenforceable nether European Union state assist law; apparently ignoring the resulting conflict.

Gaffney suggested that a lack of guidance on questions of European Union constabulary would prompt a domestic court’s responsibleness nether Article 267 TFEU. However, even domestic courts mightiness live cautious of involving requests for preliminary references inwards investment arbitration cases. When the abide by on jurisdiction inwards Achmea was challenged inwards May 2012 the Higher Regional Court of Frankfurt decided that, acre European Union constabulary was raised during the arbitration, the dispute concerned inwards fact the interpretation of the arbitration clause inwards the investment understanding too every bit such brutal exterior the ambit of interpretation of European Union law. Ultimately, the terminal abide by was challenged earlier the same courtroom inwards December 2014. The Frankfurt courtroom recognized that the compatibility of arbitration clauses inwards intra-EU investment agreements alongside the Treaties is much debated but refused to refer the inquiry to the CJEU. These cases reverberate anything but excitement almost the interest of the CJEU inwards the arbitration process. Rather than jumping on the invitation from Grand Duchy of Luxembourg to refer questions, AG Wathelet’s persuasion runs the risk of existence perceived every bit a lastly straw for investment tribunals that are ultimately expected to pick out the ascendence of European Union constabulary too the jurisdiction of the CJEU.

Remaining challenges

However, fifty-fifty if investment tribunals refer questions to the CJEU inwards the future, a few questions soundless remain. First, courts or tribunals against whose determination at that topographic point is no judicial remedy are non only entitled, but, inwards accordance alongside Article 267(3) TFEU, obligated to refer questions on the interpretation too the legality of European Union law. Although domestic arbitration laws may furnish for investment awards to live laid aside, it does non forestall the abide by from existence enforced nether Article (1)(e) of the New York Convention inwards exactly about other state. Article 52 ICSID provides for an internal physical care for for the annulment of ICSID awards on limited grounds, which effectively excludes the interest of domestic courts. Considering, therefore, that an investment abide by cannot live appealed or permanently laid aside on the soil of wrongful interpretation of European Union law, investment tribunals mightiness agree squarely into Article 267(3) TFEU.

The investment court, which was of late incorporated inwards the Comprehensive Economic too Trade Agreement alongside Canada (CETA) too the EU-Vietnam FTA, too which is proposed inwards Transatlantic Trade too Investment Partnership alongside the the States (TTIP), raises similar concerns. Decisions of the Tribunal may live appealed earlier the Appeals Tribunal, inter alia, on grounds of the wrongful appreciation of domestic constabulary (as a affair of fact). Albeit that the kickoff representative Tribunal is relieved from whatsoever obligation nether Article 267(3) TFEU, it ultimately shifts this burden onto the Appeals Tribunal. The to a greater extent than substitution occupation inwards this regard is that the European Union Treaties cannot truly obligate investment tribunals to refer questions to the CJEU.

Secondly, decisions of the CJEU nether the preliminary reference physical care for are binding on the referring court. Without explicit safeguards inwards the investment agreement, however, investment tribunals are nether no obligation to follow the interpretation of the CJEU (Gaffney, p. 13). There is no obvious argue why investment tribunals would refer a inquiry to the CJEU exactly to later on ignore the respond provided. Be that every bit it may, these 2 inwards a higher house reservations are probable to behavior on the essential characteristics of Article 267 TFEU, too the powers conferred thereunder on the CJEU. According to well-established representative constabulary of the CJEU, this would adversely behavior on the autonomy of the European Union legal social club too consequently violate the Treaty (Opinion 1/09, para. 77-79). An interpretation of Article 267 TFEU that invites arbitral tribunals to refer questions but neither obligates them to create so nether Article 267(3) TFEU nor renders answers of the CJEU binding on the referring investment tribunal would, thus, live incompatible alongside the Treaties.

Third, too peradventure most problematic, are denial of jurist cases where the interpretation of domestic constabulary mightiness itself live the argue for an investment dispute. It would live bizarre scenario, indeed, for investment tribunals to asking a preliminary ruling from the CJEU on a domestic court’s interpretation of European Union law, peculiarly if the CJEU was involved during the domestic proceedings. Under the EU-Vietnam FTA too CETA, such a scenario could live captured yesteryear manifest arbitrariness (e.g. Article 8.10(2)(c) CETA). Gaffney points out a few other challenges such every bit the steadily growing influx of preliminary references that is already creating a backlog of cases, too which is probable to extend the arbitration physical care for for several month, if non years (p. 14).

Conclusions

Although nosotros are unlikely to run into changes inwards the approach of the CJEU to commercial arbitration anytime soon, AG Wathelet’s persuasion amounts to a potent endorsement of the watch that investment tribunals are an alone different story. Whether or non the preliminary reference physical care for paves the agency for much needed judicial comity betwixt Grand Duchy of Luxembourg too investor-state tribunals is, however, soundless really much an opened upward question. 

Barnard & Peers: chapter 10

Photo: ICSID headquarters, Washington DC

Photo credit: icsid.worldbank.org

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