CYIL vol. 12 (2021)

CYIL 12 (2021) THE MODERNIZATION OF THE ENERGY CHARTER TREATY TO ENABLE CLIMATE… As a consequence of the Achmea judgment, in May 2020, the EU Member States (except for three) signed a plurilateral agreement for the termination of intra-EU bilateral investment treaties. 81 The termination agreement sets out that arbitration clauses are incompatible with the EU Treaties and shall not serve as legal basis for new arbitration proceedings. The entry into force of the treaty will terminate more than a hundred of existing intra-EU bilateral investment treaties. The termination agreement expressly stipulated that it did not cover the ISDS for intra- EU proceedings contained in Article 26 of the ECT and will be dealt with separately at a later stage. During the ECT’s modernization process the EU pointed to the on-going initiatives for the reform of the ISDS and structural systemic changes at the multilateral level in the UNCITRAL Working Group III and ICSID. Several parties to the ECT, including the EU Member States, take active part in these fora and the topics are the same as identified for the ECT modernization. The EU and its members states also pursue in their bilateral agreements the establishment of a Investment Court System, and, in the medium term, a permanent standing mechanism, the Multilateral Investment Court, to resolve investment disputes. 82 The reforms in the ISDS at the various initiatives shall be ideally aligned and reflected in the modernized ECT and the EU invited the other parties to the ECT to consider the new system as an alternative to the investor-state arbitration contained in Article 26 of the ECT. 83 Nevertheless, the EU Proposal does not significantly change the wording of Article 26. It provides for investment arbitration and conciliation and adds the possibility for the contracting states to submit the dispute to the multilateral investment court whereas a separate provision contains the undertaking of the contracting parties to pursue with other interested partners the establishment of a multilateral investment tribunal and appellate mechanism. 84 As regards arbitration, it further proposes that arbitrators be required to have expertise in the subject matter of the treaty as well as environmental and labour law. 85 Given the complexity of the situation 86 and the fact that the EU Proposal is silent on the issue of intra-EU disputes, Belgium submitted a request to the European Court of Justice for an opinion on the compatibility of the intra-EU application of the dispute settlement mechanism in the draft modernized ECT with EU law, in particular Article 19 of the TEU and Article 344 of the TFEU. 87 In other words, whether the EU Proposal of the reformed ECT cannot be challenged from an EU perspective. The request has been pending since December 2020. It is likely that the European Court of Justice will look at the issue from a purely EU law perspective, and, will decide the compatibility question in negative. The 81 Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union. OJ L 169, 29. 5. 2020, pp. 1–41. 82 Decision of the Energy Charter Conference. CCDEC 2019 08 STR. 6 October 2019, pp. 2–3. 83 Note to Article 26 in the EU Proposal. 84 Part V of the EU Proposal. 85 Ibid. 86 For example some post-Achmea ECT investment tribunals considered the question differently. In Vattenfall v. Germany (ICSID Case No. ARB/12/12, Decision on the Achmea Issue, 31 August 2018) the tribunal held that nothing in Article 26 excludes intra-EU disputes from the scope of the provision. It denied any conflict between Article 26 ECT and Articles 267, 344 TFEU. In its view, even if such a conflict existed, EU law would not prevail over the ECT. 87 Opinion C-1/20: Request for an opinion submitted by the Kingdom of Belgium pursuant to Article 218(11) TFEU dated 2 December 2020.

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