In the Achmea v. Slovak Republic judgement (case C-284/16) the Court of Justice of the European Union (CJEU) ruled that provision in an international agreement concluded between Member States, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept, is incompatible with EU law.

The judgement at hand may be considered as a milestone decision and it has an effect on all the following international investment arbitrations proceeded on the basis of so called Intra EU BITs (agreements on encouragement and reciprocal protection of investments entered into by and between the Member States of EU).[1] 

The CJEU ruled that arbitral tribunal which is not part of the judicial system of the Member State cannot in any event be classified as a court or tribunal ‘of a Member State’ within the meaning of Article 267 TFEU.[2] Tribunal as that referred to in Article 8 of the BIT[3] may be called on to interpret or indeed to apply EU law, particularly the provisions concerning the fundamental freedoms, including freedom of establishment and free movement of capital.[4] By concluding the BIT, the Member States parties to it established a mechanism for settling disputes between an investor and a Member State which could prevent those disputes from being resolved in a manner that ensures the full effectiveness of EU law, even though they might concern the interpretation or application of that law and it is therefore is incompatible with EU law.

Relevant circumstances of the case 

In 1991 the Kingdom of the Netherlands and the Czech and Slovak Federative Republic concluded an Agreement on encouragement and reciprocal protection of investments - Bilateral Investment Treaty (hereinafter referred to as “BIT”), which entered into force on 1^st January 1992. 

Article 8 point 2 thereof provides, that Each Contracting Party hereby consents to submit a dispute referred to in paragraph 1 of this Article to an arbitral tribunal, if the dispute has not been settled amicably within a period of six months from the date on which either party to the dispute requested amicable settlement.[5] 

On 1^st January 1993 the Slovak Republic, as a successor State to the Czech and Slovak Federative Republic, succeeded to the rights and obligations of that State under the BIT, and on 1^st May 2004 it accessed to the European Union. 

As part of a reform of its health system, the Slovak Republic opened the Slovak market in 2004 to national operators and those of other Member States offering public health insurance services. The Achmea, an undertaking belonging to a Netherlands insurance group, after obtaining authorisation as a public health insurance provider, set up a subsidiary in the Slovak Repúblic to which it contributed capital and through which it offered public health insurance services on the Slovak market. 

In 2007 the Slovak Republic prohibited the distribution of profits generated in public health insurance sector. Since it considered that the legislative measures of the Slovak Republic had caused it damage, Achmea brought arbitration proceedings against the Slovak Republic in 2008 pursuant to Article 8 of the BIT. The place of arbitration was agreed to be the Frankfurt am Main (Germany),  applying German law on arbitration proceedings then.[6] 

The Slovak Republic raised an objection of lack of jurisdiction of the arbitral tribunal, submitting, that as a result of its accession to the European Union, recourse to an arbitral tribunal provided for in Article 8(2) of the BIT was incompatible with EU law. However, the arbitral tribunal dismissed the objection and ordered later the Slovak Republic to pay Achmea damages in the principal amount of EUR 22.1 million. 

The Slovak Republic brought an action to set aside that arbitral award before German courts. After the Oberlandesgericht Frankfurt am Main dismissed the action, the Slovak Republic appealed on a point of law against the dismissal to the German Bundesgerichtshof.[7] 

German Bundesgerichtshof as the court of appeal allowed the appeal of Slovak Republic and referred questions to the CJEU for a preliminary ruling. 

CJEU, answering the question set out for preliminary ruling, ruled that the arbitral tribunal referred to in Article 8 of the BIT may be called on to interpret or indeed to apply EU law, particularly the provisions concerning the fundamental freedoms, including freedom of establishment and free movement of capital. 

CJEU also stated, that arbitration proceedings at hand were also different from commercial arbitration proceedings. By concluding the BIT, the Member States parties to it established a mechanism for settling disputes between an investor and a Member State which could prevent those disputes from being resolved in a manner that ensures the full effectiveness of EU law, even though they might concern the interpretation or application of that law.[8] 

As the main conclusion, CJEU pointed that according to the fact, that the disputes falling within the jurisdiction of the arbitral tribunal referred to in Article 8 of the BIT may relate to the interpretation both of that agreement and of EU law, the possibility of submitting those disputes to a body which is not part of the judicial system of the EU is provided for by an agreement which was concluded not by the EU but by Member States. Such conduct would call into question not only the principle of mutual trust between the Member States but also the preservation of the particular nature of the law established by the Treaties, ensured by the preliminary ruling procedure provided for in Article 267 TFEU, and is not therefore compatible with the principle of sincere cooperation of the Member States.[9]

[1] MIČINSKÝ, Ľ. Rozhodnutie SD EÚ vo veci Slovenská republika vs Achmea B.V. – koniec investičnej arbitráže v EÚ. Online:< https://www.epravo.sk/top/clanky/rozhodnutie-sd-eu-vo-veci-slovenska-republika-vs-achmea-bv-koniec-investicnej-arbitraze-v-eu-4010.html >.

[2] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 46.

[3] The BIT between the Kingdom of the Netherlands and the Slovak Republic.

[4] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 42.

[5] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 4.

[6] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 6 – 10.

[7] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 11 – 12.

[8] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 55.

[9] CJEU judgement of Achmea v. Slovak Republic, C-284/16, p. 58.