The CJEU Finds Investor-State Arbitration Clause in the Energy Charter Treaty Inapplicable to Intra-EU Disputes

In a September 2, 2021 judgment in Republic of Moldova v. Komstroy LLC, the Court of Justice of the European Union found that the investor-State arbitration clause in the Energy Charter Treaty is inapplicable to disputes between investors and States from the EU.

In the wake of the landmark judgment of the Court of Justice of the European Union (“CJEU”) in Slovak Republic v. Achmea BV (“Achmea Judgment”) and in line with the position of the European Commission and the majority of EU Member States, the Court has ruled that the investor-State arbitration clause in Article 26 of the Energy Charter Treaty (“ECT”) is not applicable to disputes between an EU Member State and an investor of another EU Member State concerning an investment made by the latter in the first Member State (“intra-EU disputes”).  The Court found that such arbitration clause, if interpreted as applying to intra-EU disputes, would adversely affect the autonomy and particular nature of EU law.

The CJEU judgment in Republic of Moldova v. Komstroy LLC (“Komstroy Judgment”) is in stark contrast with a consistent line of investment treaty awards which have concluded that the ECT’s investor-State arbitration clause is applicable in intra-EU disputes.

Rendered in the context of an arbitration between two non-EU parties, and regarding the ECT, a multilateral treaty whose contracting parties include the EU as well as both EU and non-EU Member States, the CJEU judgment has potentially far-reaching implications, including when it comes to the very future of investment arbitration under the ECT within the EU.

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