German Court upholds Award on Jurisdiction in Eureko B.V. v. The Slovak Republic (PCA Case No. 2008-13)

In its Decision[1] of May 10, 2012, the Frankfurt Higher Regional Court (the “Court”) upheld the Award[2] on Jurisdiction, Arbitrability and Suspension (the “Award”) of 26 October 2010 in the UNCITRAL arbitration Eureko B.V. v. The Slovak Republic. The Award concerns a dispute between the Slovak Republic and a Dutch company, which arose out of the 1991 Netherlands-Czechoslovakian BIT (the “BIT”)[3]. In the Award, the Tribunal (Lowe, van den Berg, Veeder ) rejected the jurisdictional objections raised by the Respondent concerning the prevalence of European Union law over the BIT. The Frankfurt Higher Regional Court now confirmed that the Award is not in conflict with EU Law.

I. Background of the Dispute

The dispute underlying the Award arose out of a Slovakian legislation on health insurance from 2006.

In 1991, the Netherlands and Czechoslovakia signed the BIT, which entered into force in 1992. After the dissolution of Czechoslovakia, Slovakia became a party to the BIT by virtue of succession. On May 1, 2004, Slovakia acceded to the European Union.

Also in 2004, Slovakia opened its market for foreign insurance companies. However, the liberalization of the market was soon reversed in 2006 after a change of government. The Dutch insurance company Eureko B.V. (“Eureko”), which had invested in Slovakia after 2004, claimed that this legislation led to a de facto expropriation of its investment in Slovakia. In 2008, the Eureko filed a notice of arbitration under Article 8 of the BIT, which provides for arbitration according to the UNCITRAL Rules.

After its constitution, the Tribunal decided that the seat of arbitration would be Frankfurt am Main, Germany. Subsequently, the parties filed their written observations. In its Statement of Defence, Slovakia challenged the jurisdiction of the tribunal inter alia because the BIT would be superseded by the EC Treaty (now the Treaty on the Functioning of the European Union, “TFEU”). The Tribunal rejected this argument in the Award and held that it has jurisdiction.

On November 26, 2010, Slovakia filed a request with the Court, asking it to rule on the jurisdiction of the Tribunal pursuant to Section 1040(3) of the German Civil Procedure Code (Zivilprozessordnung, “ZPO”)[4].

II. The Decision of the Court

The Court affirmed the Award and thus rejected the Slovakian request. The Court reasoned that it has jurisdiction to review the jurisdiction of the Tribunal (1.), which rightly had assumed its jurisdiction (2.).

1. Jurisdiction of the Court to review the Award

Since the seat of the arbitration was Frankfurt am Main, Germany, the Court itself had jurisdiction to rule on the jurisdiction of the Tribunal according to Sections 1040(3) and 1062(1)(2) ZPO. In contradistinction to arbitrations under the auspices of ICSID, investment arbitrations according to the UNCITRAL Rules (as provided for in the BIT) are not de-nationalized. Recourse against the Awards according to the domestic law of the seat of the arbitration as lex arbitri remains possible[5].

2. Conformity of the Award with EU Law

After having affirmed that the arbitration clause in Article 8 BIT would satisfy the requirement of a written agreement under domestic German law (cf. Section 1029 ZPO), the Court turned to the central issues of this dispute: Whether the Award was in accordance with EU Law.

The first question to be discussed by the Court was the conformity of the arbitration clause with Article 344 TFEU, which provides that the “Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein.” The Court reasoned that this provision would only apply in relation between the EU Member States, but not in relation between an EU Member State and an individual. The apprehension expressed by Slovakia, that a future award on the merits would not be in accordance with EU Law or that EU Law could be completely disregarded, would not justify the application of Article 344 TFEU. The Court took into account that a future award on the merits would be itself – within certain limits – subject to review by the German courts. The Court pointed out that the Opinion 1/09 expressly limited the application of Article 344 TFEU to disputes between EU Member States. It could find to indicators that the Mox Plant-Judgment[6] would provide to the contrary. Finally, the Court stressed that the EU itself is a contracting party to the Energy Charter Treaty[7]. Therefore, the Court concluded that the EU has expressed its consent to investment arbitration under the auspices of ICSID as well as by other institutions.

The Court rejected the general proposition that only the ECJ would competent to apply EU law regardless of Article 344 TFEU. Instead, the courts of the EU Member States would be obliged to apply EU law. Conversely, the ECJ would not be competent to interpret treaties concluded by the EU Member States. In this regard, the Court referred to a judgment of the ECJ concerning the Swiss-Slovakia BIT of September 15, 2011[8]. No argument to the contrary could be inferred from the so-called ECJ’s Eco-Swiss Judgment[9]. In this judgment, the ECJ held that Community law can constitute a question of public policy, which has to be considered by the courts of the EU Member States when deciding whether an arbitral award is recognized or annulled.

Furthermore, the Court rejected the argument that the Article 8(2) of the BIT would be inapplicable because of Article 30 VCLT, which concerns the conflict of treaties governing the same subject matter. Since Article 8(2) of the BIT would not be in breach of Article 344 TFEU, there would be no conflict as required by Article 30 VCLT.

Neither the alleged contravention against the equal treatment principle under Article 18 TFEU nor against the principle of mutual trust could justify annulling the Award. Even if the BIT was discriminating third party nationals from EU Member States, the consequence could not be to disregard the BIT. Instead, nationals of another EU Member State would also be entitled to recourse to arbitration under the BIT. Although the Court recognized that there are ongoing discussions concerning the relationship between EU Law and investment arbitration, investment arbitration could not be as such incompatible with EU Law, as evidenced by the accession of the EU to the Energy Charter Treaty.

Finally, the Court justified its decision not to request a preliminary rules by the ECJ since the interpretation of Article 344 TFEU would be clear in this regard. Furthermore, a preliminary ruling by the ECJ could not clarify issues concerning the interpretation of Article 8(2) of the BIT, as the ECJ could only rule on EU Law.

III. Comment

The fact that, from the EU Law perspective, an investment agreement between the EU Member States might be “illegal” does not necessarily entail the consequence that, from an international law perspective, an arbitral tribunal, which derives its jurisdiction from an international treaty and which is authorized to apply only international law, should disregard the BIT. Investment tribunals confronted with this question have repeatedly rejected the argument brought forward by respondent EU Member States that EU Law would supersede the BIT[10]. Likewise, the Tribunal in Eureko B.V. v. The Slovak Republic followed this approach.

But the decision by the Court concerns a different constellation: In this case, a Court of an EU Member State had to rule on an arbitration based on an intra-EU BIT that was in force between two other EU Member States. Unlike an arbitral tribunal bound to apply international law in the first place, a Court of an EU Member State is bound to apply the law applicable in the EU Member State, which most notably includes EU Law as the supreme law of the Union[11].

After the entry into force of the Lisbon Treaty, the relationship between EU Law and Investment Treaties concluded by the EU Member States is complex. According to Article 207 TFEU, the Common Commercial Policy (“CCP”) now expressly extends to foreign direct investments. This competence is exclusive[12]. Thus, the EU Member States have no longer the competence to conclude BITs with third countries alone[13]. It is arguable that this applies a fortiori to BITs concluded with EU Member States, especially because the exception of Article 351 TFEU does not apply to intra-EU agreements. On the other hand, the CCP now belongs to “Part V” of the TFEU on the external action by the EU. Therefore, it is arguable that the compatibility of intra-EU BITs with EU law as to be primarily assessed in the light of the provisions governing the internal market. As the EU-competence for the internal market is a shared competence[14], one can suggest that the EU Member States still retain their competence unless and to the extent the EU has enacted legislation and the intra-EU BITs are incompatible with this EU legislation.

In its assessment, the Court merely took into account the compatibility of the dispute settlement provisions of the respective BIT and EU law. It did not consider the compatibility of the investment treaty as a whole with EU law. Although he acknowledged the possibility of conflicts between substantive provisions of EU law and the treaty, he considered this to be a matter to be discussed in potential annulment proceedings concerning the award. The consequential question is whether it is really possible to differentiate between the dispute settlement procedure and the actual dispute[15]? If the exclusive competence for the CCP also covers intra-EU BITs, it is hardly arguable that only the substantive provisions of the BIT are incompatible with EU law, but that the dispute settlement provisions remain in valid.

Therefore, the Court should have made use of its competence to request a preliminary ruling. The argument that this is a clear case and therefore requires no preliminary ruling is rebutted by the extensive reasoning by Court itself. Slovakia filed an appeal against the decision of the Court with the German Supreme Court (Bundesgerichtshof, “BGH”). Hopefully, the BGH will not try to avoid a preliminary ruling, as this would provide the much needed legal certainty regarding the extent of the EU’s external competences in the field of investment law.

Jan Asmus Bischoff

Dr. Jan Asmus Bischoff studied law at Hamburg University from 2000 to 2005. After his graduation, he worked as a researcher at the Max Planck Institute for Comparative and International Private Law until 2010. In 2008, he completed his Master Degree in International Legal Studies at NYU, School of Law as a Hauser Global Scholar. In 2009, he completed his doctoral thesis on “The European Community and the Uniform Private Law Conventions” under the supervision of Prof. Dr. Dr. hc. Jürgen Basedow. In 2010, he passed the Second State Examination at the Hanseatic Regional Appelate Court, Hamburg. He is currently working as an attorney (Rechtsanwalt) at Dabelstein & Passehl, Hamburg in the field of maritime law and international dispute settlement.

[1] Decision of the Frankfurt Higher Regional Court, 10 May 2012, 26 SchH 11/10, available at: <>.

[2] Eureko B.V. v. The Slovak Republic, UNCITRAL arbitration, PCA Case No. 2008-13,

Award on Jurisdiction, Arbitrability and Suspension, 26 October 2010, available at: <>.

[3] Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federal Republic, available at: <>.

[4] A translation of the German arbitration legislation contained in the ZPO is available at: <>.

[5] Douglas, The International Law of Investment Claims 115-116 (Cambridge University Press, 2009).

[6] ECJ, Judgment of May 30, 2006, Commission of the European Communities v Ireland, Case 459/03, ECR 2006, I-4635, <>.

[7] As to questions on the relationship between the Energy Charter Treaty and EU Law in general, see the contributions in: Coop (ed.),  Energy Dispute Resolution: Investment Protection, Transit and the Energy Charter Treaty, part II (2011, Juris Publishing).

[8] ECJ Judgment of September 15, 2011, C-264/09, available at: <>

[9] ECJ, Judgment of June 1, 1999, Eco Swiss China Time Ltd v Benetton International NV, Case C-126/97, ECR 1999, I-3055, available at: <>.

[10] AES Summit Generation Limited and AES-Tisza Emrömü Kft. v. Republic of Hungary, Award of September 23, 2010, para. 7.6; Telenor Mobile Communications A.S. v. The Republic of Hungary, Award of September 13, 2009, para. 47.; Eastern Sugar B.V. v. Czech Republic, Partial Awarad of March 27, 2007, paras. 114-181; Rupert Joseph Binder v. Czech Republic, Award on Jurisdiction of June 6, 2007, not published; Ioan Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L., & Multipack S.R.L. v. Romania, Decision on Jurisdiction and Admissibility of September 24, 2008, para. 41; compare also: Saluka Investments B.V. v. Czech Republic, Partial award of March 17, 2006, para. 351; see also Happ and Bischoff, “Role and Responsibility of the European Union under the Energy Charter Treaty” in Coop(ed.), Energy Dispute Resolution: Investment Protection, Transit and the Energy Charter Treaty 156-63 (Juris Publ., 2011); Eilmannsberger, “Bilateral Investment Treaties and EU Law”, 46 CML Rev. 383, 399-401 (2009); Wehland, “Intra-EU Investment Agreements and Arbitration: Is European Community Law an Obstacle?”, 58 ICLQ 297 (2009); Burgstaller, “European Law and Investment Treaties”, 26 J. Int’l Arb. 181, 184-96 (2009); Ghouri, “Resolving Incompatibilities of Bilateral Investment Treaties of the EU Member States with the EC Treaty: Individual and Collective Options”, 16 ELJ 806 (2010).

[11] [No. 17. Declaration concerning primacy; C 83/344 Official Journal of the European Union 30.3.2010]

[12] Cf. Article 3(1)(e) TFEU.

[13] Bischoff, Just a little BIT of “mixity”?, 48 CMLR 1527, 1557 seq. (2011); see also in this Blog: <>.

[14] Cf. Article 4(2)(a) TFEU.

[15] The contrary is suggested by ECJ, Opinion 1/91, December 14, 1991 ECR, ECR 1991 Page I-6079, para. 40.