Originally from Investment Treaty Arbitration and International Law Volume 17

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INTRODUCTION

In 2004, ten eastern European, southern European, and Baltic States joined the European Union. And they did so after having entered into many international investment agreements in the preceding years, including many agreements that became, by dint of the 2004 accessions to the EU, agreements with their now-fellow Member States.  

On their face, these agreements required State parties to arbitrate investment disputes with the nationals of the counterparty State. But since the first dispute initiated under one of these agreements after the 2004 accessions, Member States have argued these agreements are invalid under EU law. By referring investment disputes to arbitration, these agreements undermine both the uniform interpretation and application of EU law and the review powers of the Court of Justice of the European Union (CJEU).  

Over time—and investor-state dispute resolution often takes a long time—this argument made its way to the CJEU, whose 2018 decision in Achmea held that agreements between Member States to arbitrate investment disputes involving Member State nationals are invalid. The resolution went beyond the judicial. Member State governments embrace the holding, and have since terminated whatever obligations remained in nearly all bilateral investment agreements between Member States. The investors lost. Any awards issued under these agreements are denied enforcement in the courts of EU Member States.

Claimants now seek to re-litigate this issue across the Atlantic, arguing before U.S. Courts that EU law and Member States’ own understanding of their treaty obligations are irrelevant.  In 2023, the D.C. federal district court issued two competing decisions on this issue.  In Blasket Renewable Invs., LLC v. Kingdom of Spain, the court heard an action by assignees seeking to enforce an ad hoc award issued under the Energy Charter Treaty (ECT) against Spain.  Relying on its default immunity from jurisdiction under the Foreign Sovereign Immunities Act (FSIA), Spain argued that the assignees could not show an exception to that immunity. The court agreed with Spain. Even though the ECT delegated issues of tribunal jurisdiction to the tribunal, the court held that Spain lacked the legal capacity to agree to such a delegation.  Nor could the assignees establish that Spain waived its sovereign immunity.  Though Spain was party to the New York Convention, the court held that waiver requires both that a State be party to an enforcement convention and that it agree to arbitrate in a convention state. Having already established the absence of an arbitration agreement, the court held there was no waiver.  Spain won, Blasket appealed.