EU Arbitration Law
The Limited Express Competence of the EU in Arbitration
The European Union has no express legislative competence over arbitration in the Treaties, and arbitration has historically been treated as a matter for member state law, international convention, or party autonomy. Article 1(2)(d) of the Brussels I Recast Regulation (1215/2012) expressly excludes “arbitration” from the scope of the Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. This exclusion preserves the primacy of the New York Convention and the national procedural law of the member states in matters of arbitration. The precise scope of the arbitration exclusion has been the subject of significant CJEU jurisprudence. In Rich v Società Italiana Impianti (Case C-190/89, 1991), the Court held that the exclusion extends to proceedings ancillary to arbitration, including the appointment of arbitrators. In Van Uden Maritime v Deco-Line (Case C-391/95, 1998), the Court distinguished between proceedings that are ancillary to arbitration (excluded) and proceedings that relate to the substance of the dispute or seek provisional measures (not excluded). In Gazprom (Case C-536/13, 2015), the Court confirmed that the Brussels I Regulation does not preclude a member state court from recognising and enforcing an arbitral award that prohibits a party from bringing proceedings before a court of another member state, because the award itself falls within the arbitration exclusion.
The Achmea Doctrine and Intra-EU BIT Arbitration
The CJEU’s judgment in Slovak Republic v Achmea (Case C-284/16, 2018) was a watershed in EU arbitration law. The Court held that the investor-state arbitration clause contained in the Netherlands-Slovakia bilateral investment treaty (BIT) was incompatible with EU law because it removed disputes from the jurisdiction of the courts of the member states and the CJEU, thereby undermining the autonomy of the EU legal order and the principle of mutual trust between member state judiciaries. The Achmea ruling applied to intra-EU BITs generally, and the Court subsequently extended the reasoning in Komstroy (Case C-741/19, 2021), holding that the Energy Charter Treaty’s arbitration clause also does not apply to intra-EU disputes. The PL Holdings (Case C-788/19, 2021) ruling further held that EU law precludes member states from entering into ad hoc arbitration agreements with investors from other member states. Following Achmea, the EU and its member states undertook a coordinated effort to terminate intra-EU BITs through the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union, concluded in 2020, which terminated approximately 130 intra-EU BITs.
The Investment Court System
In response to the criticism of investor-state dispute settlement (ISDS), the EU has proposed the Investment Court System (ICS) as a replacement for traditional investor-state arbitration in its trade and investment agreements. The ICS, most fully developed in the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada, establishes a permanent Tribunal of first instance and an Appeal Tribunal, with members appointed by the parties for fixed terms rather than selected by the disputing parties on an ad hoc basis. The ICS incorporates detailed provisions on the independence and impartiality of tribunal members, including a code of conduct, restrictions on double-hatting, and a strict conflicts of interest regime. The EU is actively promoting the ICS model in its negotiations with other trading partners and is supporting the multilateral reform of ISDS within UNCITRAL Working Group III, where the EU has advocated for the establishment of a permanent multilateral investment court.
EU Law and the Regulation of Arbitration
Beyond the Achmea line of cases, EU law interacts with arbitration in several other significant respects. The Rome I Regulation (593/2008) on the law applicable to contractual obligations applies to the law governing the substance of the dispute, with Article 3(1) affirming party autonomy in choice of law, subject to mandatory EU law protections. EU sanctions regimes, particularly the sanctions adopted against Russia following the 2022 invasion of Ukraine, have had a significant impact on arbitration: the EU sanctions prohibit the provision of arbitration services to certain Russian entities and persons, raising complex questions about the performance of existing arbitration agreements and the conduct of ongoing proceedings. The European Convention on International Commercial Arbitration of 1961, to which many EU member states are party, provides a regional framework complementing the New York Convention. The EU Directive 2019/2121 on cross-border conversions and the recognition of restructuring and insolvency proceedings interacts with arbitration where insolvency proceedings affect the enforceability of arbitration agreements and the status of pending claims. The EU’s continuing engagement with arbitration reflects the tension between the autonomy of the EU legal order and the decentralised, party-driven character of international arbitration.