EDF v Kingdom of Spain, Swiss Federal Supreme Court, 4A_244/2023 of 3 April 2024
INTRODUCTION
On 3 April 2024, the Swiss Federal Supreme Court (the 'Swiss Supreme Court', 'Supreme Court' or 'Court') handed down a landmark decision confirming the jurisdiction of a Swiss-seated arbitral tribunal over an intra-EU investment dispute under the Energy Charter Treaty ('ECT').
Before the Swiss Supreme Court, Spain had – among other grounds1 – challenged an award rendered by an ad hoc arbitral tribunal constituted on the basis of Article 26 ECT on the ground that it lacked jurisdiction. Spain argued that, following the CJEU's judgment in Republic of Moldova v Komstroy LLC, 2 either the ECT's dispute resolution provisions in Article 26 ECT do not apply to intra-EU disputes or else EU law takes precedence over the ECT.
The Swiss Supreme Court rejected both arguments. It found that it was not bound by the CJEU's ruling in the Komstroy. Going beyond that finding, the Swiss Supreme Court noted that it was 'not convinced' by the CJEU's reasoning in Komstroy, pointing out that 'EU bodies have been waging a crusade' against arbitration to settle investment disputes of an intra-EU nature. The Court went on to perform its own detailed analysis of the ECT and EU law, applying the rules on treaty interpretation under the Vienna Convention on the Law of Treaties ('VCLT'), to determine whether intra-EU disputes fall within the scope of the ECT and, if so, whether EU law could invalidate Spain's consent to arbitrate pursuant to Article 26 ECT. The Supreme Court found that not to be the case.
I. FACTS
In 2007, Spain implemented a number of regulatory measures aimed at incentivizing foreign investment in the renewable energy sector.
As of 2010, Spain started retracting features of those regulations. This resulted in a flurry of investment treaty arbitrations against Spain, all of which were brought on the basis of the ECT.
In 2016, French company EDF, which had invested in a Spanish renewable energy project, brought one of those claims under the ECT against Spain. The ad hoc arbitral tribunal constituted to hear EDF's claim was seated in Geneva.
In the arbitration, Spain raised several jurisdictional objections, including that, under EU law, a claim brought by an investor of one EU Member State against another EU Member State under the ECT cannot be subject to investor-state arbitration (the 'intra-EU objection'). Spain based this argument on the CJEU's judgment in Komstroy and also sought to rely on an award rendered in another intra-EU arbitration brought under the ECT in the matter of Green Power v Spain. 3 In Green Power, the arbitral tribunal had rejected jurisdiction over the dispute under the ECT on the basis that it was an intra-EU dispute.4 Green Power is the only known instance of an arbitral tribunal applying the Achmea5 and Komstroy line of argument and accepting the intra-EU objection.
The arbitral tribunal issued its final award in April 2023, unanimously rejecting Spain's jurisdictional objection.
Spain challenged the award before the Swiss Supreme Court on several grounds, including alleged lack of jurisdiction based on the CJEU's Komstroy ruling.
Footnotes
1 Spain raised a number of other grounds for challenge, which the Swiss Supreme Court equally rejected; see Decision 4A_244/2023 of 3 April 2024 consids. 5 and 6.
2 Case C-741/19 Republic of Moldova v Komstroy LLC [2021] EU:C:2021:655.
3 Green Power Partners K/S and another v Kingdom of Spain, SCC Arb No V2016/135, Award (16 June 2022).
4 Ibid. The tribunal found that selecting Sweden as the seat of the arbitration implied the application of EU law, and particularly of the Achmea and Komstroy decisions to determine the tribunal's jurisdiction. The tribunal decided that it lacked ratione voluntatis jurisdiction. In order to reach this conclusion, the Tribunal analyzed the importance of the Declaration of Member States of 15 January 2019 to understand the intention of the parties regarding the application of EU law and its supremacy over ECT provisions.
5 Case C-284 Slowakische Republik v Achmea BV [2018] ECLI:EU:C:2018:158.
To view the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.