According to a report in German newspaper Heise, the decision could affect nearly 200 treaty agreements between EU member states.
The verdict, published yesterday by the European Court of Justice (ECJ), could have a huge impact on investment protection agreements beyond the specific case – at least between two or more EU member states.
This ruling has been made as a result of a claim by Dutch insurance group Achmea against Slovakia, who in 2006 had partially reversed a lucrative liberalisation of the health insurance market.
The Achmea group, which had a subsidiary in Slovakia, then sued for lost profits, citing the Bilateral Investment Treaty (BIT), an investment protection agreement signed by Czechoslovakia and dissolved in 1993 with the Netherlands.
This regulates that disputes come before a private arbitration court in Frankfurt and in 2012, this arbitral tribunal awarded Achmea €22.1m of lost profits, which Slovakia has to pay.
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They disputed this and appealed to the German Federal Supreme Court, which passed the case to the ECJ to look at whether the arbitration clause contained in the investment protection agreement with Articles 18, 267 and 344 of the Treaty on the functioning of the European Union (TFEU) is compatible.
The ECJ found that “by concluding the BIT, Slovakia and the Netherlands have established a disputes settlement mechanism which can not ensure that a court of the Union’s judicial system is involved in these disputes” and that “only such a court is capable of ensuring the full effectiveness of EU law”.
It added that in these circumstances, “the arbitration clause contained in the BIT affects the autonomy of EU law and is therefore incompatible with it”.
Roman Huber of the Federation Executive of the Association More Democracy, said the verdict was “good news for all organisations that criticise parallelism as a democracy problem arising from ISDS (Investor-State Dispute Settlement)” and as “a positive signal for the review of the CETA trade agreement between the EU and Canada on its compatibility with EU law.”
According to the report in Heise, a number of EU countries had differing views on the case in the lad up to the ruling.
The Netherlands were supported in their views in favour of private arbitration by the German, French, Finnish and Austrian governments, while Slovakia’s position was supported by the Czech Republic, Hungary, Poland, Romania, Italy, Spain, Greece, Cyprus, Estonia and Latvia.
Additional reporting by Monika Pallenberg