Reference for a preliminary ruling: Questions on the effectiveness of arbitration agreements in light of EU law

Decision of the German Federal Court of Justice (Bundesgerichtshof) – I ZB 2/15

The case concerned is about the Slovak Republic as an applicant which has become since 01.01.1993 successor of Czechoslovakia. It seeks the annulment of an arbitral award which a Dutch insurance group as a respondent has obtained against it. The appeal states that the prohibition imposed on the Member States to use, in disputes with EU law relevance, other procedures than those provided in the Union Treaties, comprises all disputes involving a Member State regarding the application and the interpretation of the European Union law.

The proceedings were stayed and questions on the effectiveness of arbitration agreements in bilateral investment treaties between Member States of the European Union were referred to the Court of the European Union for an interpretation of Art. 344, 267 and 18, para. 1 of the Treaty on the Functioning of the European Union (TFEU).

The Federal Court of Justice (Bundesgerichtshof, BGH) took the view that the compatibility of the arbitration clause with Art. 267 TFEU is not excluded. Art. 344 TFEU does not apply in arbitration disputes between a private investor and a Member State according to the meaning and the purpose of this provision. According to the jurisprudence of the Court of Justice of the European Union in case of a collision the provisions of the Union law take precedence over prior to their implementation stipulated regulations in other agreements between the Member States (ECJ, C-235/87). An arranged agreement between a Member State and another country may no longer apply in the relations between these countries after the other country joins the European Union, if the agreement is contrary to the European Union law (ECJ, C-3/91, C-478/07).

The Federal Court of Justice ruled that Art. 344 TFEU guarantees the decision-making authority of the Court of the European Union for the interpretation of the European Union law in any disputes concerning the application and the interpretation of the Union law. The provision of Art. 344 TFEU protects the exclusive competence of the Court of the European Union and the autonomy of the legal system of the procedures provided by the Union Treaties in such a way that the Member States need to make use of the procedure that is assigned to the Court of the European Union by the Union Treaties.

The Federal Court of Justice also held that the arbitration clauses may violate Art. 18 para. 1 TFEU according to which any discrimination on grounds of the nationality is prohibited. As only the investor of the contracting party may invoke the arbitration clause in the BIT, this can constitute a discrimination of investors from other Member States who may not complain before an arbitration court. However, from this assumption it must not necessarily follow that the respondent cannot invoke the arbitration clause. In the present constellation this would mean that in disputes with the applicant third parties ought to be also given access to an arbitration court.

The full text is available on EuroCases

For more case-law see EuroCases

Leave a Reply

Your email address will not be published. Required fields are marked *

CAPTCHA Image

*