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October 2018: ICSID Arbitration Victory: First Award Rejecting Achmea on Intra-EU BIT Case

October 2018

A team led by Quinn Emanuel partner Isabelle Michou from our Paris office achieved a ground-breaking victory for UP (formerly Cheque Dejeuner) in an ICSID arbitration against Hungary. In this case, an international arbitral tribunal ruled for the first time that the Achmea decision rendered by the European Court of Justice (ECJ) cannot defeat the jurisdiction of a tribunal constituted under an intra-EU bilateral investment treaty (BIT).

In March 2018, the ECJ rendered a decision in the Achmea case that rocked the global arbitration community.  In this decision, the ECJ ruled that an arbitration clause in an intra-EU BIT was incompatible with EU law and suggested that all arbitral tribunals constituted on the basis of such BITs should decline jurisdiction.  Quinn Emanuel was the first to comment in depth on the Achmea decision on the same day the decision was rendered. (Click here to read the article)

The decision set off a wave of panic - particularly, in existing cases under intra-EU BITs.  The whole arbitration community has debated at innumerable conferences and seminars what the impact of the Achmea decision would be on existing and future intra-EU BIT arbitrations, with no clear answer emerging.  In the meantime, the European Commission has sought to pressure EU Member States to terminate existing intra-EU BITs and applied to submit amicus briefs in support of the Achmea decision in all pending intra-EU cases - including our client's case against Hungary. 

When the Achmea decision was rendered, our client, who was seeking relief from tax measures imposed by Hungary had already completed a hearing on the merits in an ICSID arbitration under an intra-EU BIT.  Notwithstanding its case on the merits, our client's fate appeared uncertain in light of Hungary's Achmea-based jurisdictional objection. 

Quinn Emanuel obtained its first victory in September when the Arbitral Tribunal rejected the attempts of the European Commission to submit an amicus brief, refusing to grant it leave to do so.  Then, last week, the Tribunal rendered an Award rejecting Hungary's jurisdictional objection.  In so doing, it became the first tribunal to decide that the Achmea decision does not apply to an ICSID arbitration based on an intra-EU BIT.  The Tribunal found that, because its jurisdiction arose under a multilateral public international law treaty, the 1965 ICSID Convention, the dispute was placed in a public international law context, and not in a national or regional context.  On the merits, the Tribunal agreed with Quinn Emanuel's arguments that Hungary's tax reforms were intended to create a monopoly and exclude our client from the meal voucher market, dispossessing our client of the greatest part and the economic heart of its investment.  The Tribunal added that this amounted to an unlawful indirect expropriation and therefore a violation of the intra-EU BIT and awarded our client damages with interest and most of its legal costs.

This case is not only a significant win because it is the first case in which an international arbitral tribunal ruled that the Achmea decision has no impact whatsoever on an ICSID arbitration based on an intra-EU BIT, but it also endorses the principle that a state may not withdraw its consent to arbitration under international law simply by invoking its domestic or regional law.