Advocate General finds that CETA’s “Investment Court System” is compatible with EU law

One of the Advocates General to the Court of Justice of the European Union, Advocate General Bot, has issued an opinion confirming that the mechanism for the settlement of disputes between investors and states provided for in the Comprehensive Economic and Trade Agreement  between the EU and Canada (the CETA) is compatible with European Union law.

We discuss the content of the Advocate General’s opinion on our new blog piece, published on our Public International Law blog here.

For further information please contact Andrew Cannon, Partner, Hannah Ambrose, Senior Associate, Vanessa Naish, Professional Support Consultant, Rebecca Warder, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852
Hannah Ambrose
Hannah Ambrose
Senior Associate
+44 20 7466 7585
Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112
Rebecca Warder
Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418

State-to-State dispute settlement under the EU’s draft Withdrawal Agreement: CJEU jurisdiction not arbitration

We have known for some time now that the UK and EU have very different views regarding the state-to-state dispute resolution mechanism to be contained in the Withdrawal Agreement between the EU and the UK. The EU has never made any secret of its intention for the CJEU to adjudicate on disputes between the UK and the EU over the interpretation of, and compliance with, the Withdrawal Agreement. Yesterday the EU released a draft Withdrawal Agreement for the UK’s consideration which contains a state-to-state dispute resolution provision which is consistent with that approach. This post provides an initial reaction to this draft provision.

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Belgium asks for the CJEU’s opinion on the compatibility of the Investment Court System with European Law

On 6 September 2017 the Belgian Deputy Prime Minister and Minister of Foreign Affairs Didier Reynders submitted a request from Belgium to the Court of Justice of the European Union for an opinion on the compatibility of the Investment Court System (ICS) with the European Treaties.  The Belgian government has made the request in recognition of the concerns raised by the regional assembly of Wallonia about the ICS when it was considering whether or not to sign the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

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Is there an inherent tension between the EU’s investment court system and the EU legal order?

As discussed in our previous blog posts here and here, the EU has introduced a new system to resolve disputes arising between investors and states which may herald the beginning of a move away from the traditional use of investor-state arbitration. In a recent article contributed to the Law Societies' Joint Brussels Office Newsletter, Vanessa Naish and Hannah Ambrose consider whether the EU's proposed multilateral investment court system is compatible (either practically or legally) with EU law. 

For more information, please contact Hannah Ambrose, Professional Support Consultant, Vanessa Naish, Professional Support Consultant or your usual Herbert Smith Freehills contact.

Hannah Ambrose
Hannah Ambrose
Professional Support Consultant
+44 20 7466 7585
Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

The European Court of Justice renders its opinion on the EU-Singapore free trade agreement: investment chapter is not within EU’s exclusive competence

On 16 May, 2017 the European Court of Justice (the Court) rendered its Opinion on the competence of the European Union to conclude the Free Trade Agreement (FTA) with Singapore. The Opinion recognises exclusive EU competence over most of the agreement and largely settles a long-standing dispute between the Commission and the Member States on the division of competences under the Lisbon Treaty.

Importantly, in the context of investor-state dispute resolution, the Court's Opinion is likely to render any agreement including protection for non-direct foreign investments or investor-state dispute settlement (ISDS) provisions a so-called "mixed agreement" which requires each of the Member States as well as the EU itself to become party, unless certain aspects commonly found in such agreements are removed or the Member States otherwise agree (discussed further below).  

The Opinion will have a major impact on the negotiation of future EU trade agreements, whether pending or anticipated (including the potential FTA between the UK and the EU following Brexit).

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Brexit—the future of state-to-state, investor-state and domestic dispute resolution

The Brexit White Paper

The much-anticipated Brexit White Paper, ‘The United Kingdom’s exit from and new partnership with the European Union’, was published on 2 February 2017. This post focuses on a subject that has to date received relatively little attention—what it has to say about the future of dispute resolution. In its Chapter 2 (‘Taking control of our own laws’), and Annex A, the White Paper contains perhaps a surprising amount on dispute resolution, in comparison to the text devoted to the other eleven of the UK government’s 12 stated principles.

In this blog post we review the White Paper with the aim of discerning so far as possible the potential future of dispute resolution for the UK. In particular, we consider how the UK government envisages, at this relatively early stage, that disputes will be resolved under new post-Brexit UK-EU agreements, and if and how UK businesses will be able to enforce their provisions. We also consider certain implications of the end to the Court of Justice of the European Union (CJEU)’s jurisdiction in the UK and the adoption of the acquis under the Great Repeal Bill.

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French Supreme Court declares inadmissible appeal of Court of Appeal’s decision to seek an opinion from the CJEU

In Cass. Civ. 1re, 18 novembre 2015, n°14-26.482, the French Supreme Court considered an appeal from a Court of Appeal decision seeking an opinion from the CJEU on the applicability of European competition law in the context of proceedings to set aside an ICC award.

On 18 November 2015, the Cour de Cassation (French Supreme Court) held that an appeal against the lower court’s decision to seek a ruling from the Court of Justice of the European Union (CJEU) was inadmissible.

The applicant (Genentech) sought to set aside an International Chamber of Commerce (ICC) award ordering it to pay sales royalties due under a biotechnology licence. It did so on the basis that the award breached European competition law (and therefore international public policy). In a preliminary decision dated 23 September 2014, the Paris Court of Appeal stayed the proceedings and referred the question to the CJEU. The respondents appealed to the Supreme Court against the Court of Appeal's decision to seek a ruling from the CJEU. 

In declaring the appeal to be inadmissible, the Supreme Court also found that the Court of Appeal had not carried out a review of the award under Article 1520 5° of the French Code of Civil Procedure, but had simply exercised its right, under Article 267 of the Treaty on the Functioning of the European Union, to refer a question on the "interpretation of the Treaties" to the CJEU.

This decision confirms that the French courts retain the right to refer questions on the interpretation of treaties to the CJEU, even when exercising their supervisory jurisdiction over international arbitrations seated in France. It will be interesting to see how the Court of Appeal deals with Genentech's application to have the award set aside, if the CJEU eventually rules that the award breaches European competition law. (Cass. Civ. 1re, 18 novembre 2015, n°14-26.482)

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CJEU reaches decision on enforcement of arbitral awards containing anti-suit injunctions in the EU: A sensible decision, but limited in scope

The CJEU has issued its much awaited decision in the reference to the Court of Justice of the European Union (CJEU) by the Lithuanian Supreme Court in the case of Gazprom (C-536/13). The Lithuanian Court referred to the CJEU three questions regarding the effect of the Brussels I Regulation (EC) No 44/2001 (the Regulation). As discussed in our earlier blog piece here, the reference related to a request to enforce an arbitral award which has a similar effect to an anti-suit injunction and has therefore been of considerable interest to the arbitration community. This is particularly the case following the opinion of Advocate General Wathelet which considered not only the text of the original Brussels Regulation, but also the Recast Regulation (see our blog post here for more information).

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Anti-suit Injunctions within the EU: AG Wathelet delivers his Opinion in Gazprom

The Advocate General Wathelet (the AG) has delivered his much awaited Opinion in the reference to the Court of Justice of the European Union (CJEU) by the Lithuanian Supreme Court in the case of Gazprom (C-536/13). The Lithuanian Court referred to the CJEU three questions pertaining to the effect of the Brussels I Regulation (EC) No 44/2001 (the Regulation). The Regulation determines the member state courts’ jurisdiction and excludes arbitration from its scope. However, the exception has gradually been eroded by the CJEU in decisions such as West Tankers.

The Reference in the present case related to a request to enforce an arbitral award which has a similar effect to an anti-suit injunction and has therefore been of considerable interest to the arbitration community. The background to the reference is more fully explained in our blog post [here]. In his Opinion, AG Wathelet also considered in detail the effect of the Recast Brussels I Regulation (the Recast Regulation), which comes into force on 10 January 2015. This opinion is the first that considers its terms, and, if adopted by the CJEU, would set down a marker for the interpretation of the arbitration exception within the Recast Regulation, with the effect that an anti-suit injunction issued by an arbitral tribunal would be recognisable and enforceable by member state courts.

AG Wathelet concluded that:

  • the Regulation does not require the court of a member state to refuse to recognise and enforce an anti-suit injunction issued by an arbitral tribunal; and
  • the fact that an award contains an anti-suit injunction is not a sufficient ground for refusing to recognise and enforce it on the basis of Article V(2)(b) of the 1958 Convention because the Regulation is not a matter of public policy.

The Opinion holds great interest for its discussion of the implications of the Recast Regulation (even though it was the current Regulation that was in issue). In the AG’s view, the Recast Regulation aims to correct the boundary which the ECJ (now the CJEU) had traced between the application of the Regulation and arbitration in the West Tankers (Case C-185/07). The decision in West Tankers was seen by many as signifying the death of the anti-suit injunction in Europe. In the AG’s view, it is clear from its legislative history that the Recast Regulation seeks to reinstate the position in which the consideration of the validity of an arbitration agreement as an incidental question falls outside the scope of the Recast Regulation.

The AG also opined on what it means for a court to be seised on the question of the validity of an arbitration agreement in the context of the Recast Regulation. He noted that while a court may be seised on the incidental question of validity of an arbitration agreement, this falls outside the scope of the Recast Regulation. A court is not seised on the substance of the dispute (proceedings which do fall within the scope of the Recast Regulation), until it has decided the issue of the validity of the arbitration agreement.

AG Wathelet also observed that an anti-suit injunction issued by an arbitral tribunal could not be considered in the same way as that issued by a member state court.

Whilst it remains to be seen whether the AG’s opinion will be adopted by the CJEU, his interpretation of the effects of Recital 12 of the Recast Regulation offers hope that a party will be able to protect an arbitration agreement by virtue of an anti-suit injunction, even when parallel proceedings are threatened or brought within the EU.

READ MORE…

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Madrid Court of Appeal affirms optional dispute resolution clause

On 18 October 2013, the Madrid Court of Appeal (the Court of Appeal) affirmed the validity of an optional dispute resolution clause which provided for disputes to be resolved either before an arbitration tribunal or national courts.

The Court of Appeal also affirmed, in line with earlier case law of the Court of Justice of the European Union  (CJEU) and jurisprudence of the Spanish Supreme Court, that EU competition law issues can validly be submitted to arbitration (i.e., they are arbitrable).

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