On Aug. 16, the U.S. Court of Appeals for the District of Columbia Circuit resolved a split within its own circuit and greenlit the enforcement of three investment arbitration awards rendered in favor of investors from one European Union member state against another EU member state, Spain, in NextEra Energy Global Holdings B.V. v. Kingdom of Spain, No. 23-2031. In so doing, the court has given hope to those who wish for the United States to be a safe haven for awards rendered in so-called intra-EU arbitrations. This saga flows from the decisions of the Court of Justice of the European Union (CJEU) in the Achmea line of cases, which found that the arbitration provisions of investment treaties are contrary to EU law insofar as they provide for arbitration between an EU member state and a national of another EU member state. However, a closer read of this decision reveals that the court may be less inclined to allow for the unbridled enforcement of intra-EU awards than optimistic court-watchers may have hoped.
Achmea, Stileks, and the FSIA
The awards before the court—which were rendered in the NextEra, 9Ren, and Blasket cases— found that Spain’s elimination of feed-in tariffs payable to solar power projects breached its obligations under the Energy Charter Treaty (the ECT), a multilateral treaty that protects investments in the energy sector.
Spain sought vigorously to defend itself against claims in these (and other) arbitrations by invoking the CJEU’s Achmea decisions. Spain (and other EU states) have argued that these decisions mean that offers to arbitrate found in investment treaties are invalid (and thus cannot give rise to a valid arbitration agreement) insofar as they provide for intra-EU treaty arbitration.
The NextEra and 9Ren awards, however, were rendered pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). That treaty requires its signatory states (including the United States) to enforce the pecuniary obligations of an award rendered pursuant to the ICSID Convention as “if it were a final judgment of a court in that State.”
As such, it was not open to Spain to challenge recognition under the Federal Arbitration Act (FAA) and Spain could only claim that the arbitration exception to sovereign immunity under Section 1605(a)(6) of the FSIA did not apply. Instead, it argued that there had never been a valid arbitration agreement in the first place. While the Blasket decision was not an ICSID award, Spain filed a successful motion under the FSIA to dismiss Blasket’s application to confirm the arbitral award on the same grounds.
In the two ICSID decisions—NextEra and 9Ren—judges in the district court rejected Spain’s objection finding it went to the scope of the agreement, not its existence. In so doing, they relied on Stileks v. Moldova. In that decision, Moldova argued that the FSIA’s arbitration exception did not apply because the investor in that case did not meet the definition of investment under the ECT (and thus there was no consent to arbitrate the dispute in the first place). The D.C. Circuit rejected that argument, which, it said, went to the arbitration agreement’s scope (i.e. what disputes were covered by the arbitration agreement), not its existence (i.e. whether there had been consent to arbitration in the first place).
In Blasket, however, another D.C. district judge determined that Stileks did not apply because Spain’s standing offer to arbitrate was void. It reasoned that Stileks addressed the question of whether an arbitration agreement extended to a specific investor, but did not address the “antecedent question” of whether there was an arbitration agreement in the first place.
The D.C. District Court sided with the NextEra and 9Ren courts and rejected Spain’s objection. For the two ICSID awards (NextEra and 9Ren), this means that (barring other potential objections) they must now be enforced as though they were domestic judgments. The Blasket award is not immune from a challenge under the FAA, but is likely to succeed on any motion to dismiss on grounds that the FSIA’s arbitration exception does not apply.
Next Era and the Return of Chief Justice Roberts’ Dissent in ‘BG v. Argentina’
The court, however, does not appear to have given a green light to all intra-EU award debtors. It found that it could look to the arbitration provision in the investment treaty—the ECT—to identify the scope of the sovereign’s consent and also determined that this provision satisfied the FSIA’s requirement that the party seeking to invoke the FSIA’s arbitration exception produce evidence of the existence of an arbitration agreement. However, the reason it did so may not apply in other cases (namely, where the treaty at issue is a bilateral investment treaty).
The court acknowledged that this arbitration provision is not the arbitration agreement between the investor and the state. Rather, the investor’s commencement of arbitration creates a “second arbitration agreement” that is relevant for the purposes of the FSIA. In so doing, the court quoted at length from Chief Justice John Roberts’ dissent in BG v. Argentina, a case in which a majority of the Supreme Court found that arbitrators should apply to the arbitration provisions in investment treaties the same principles that they apply to arbitration provisions in contracts. As your authors have explained in a prior piece on this same issue, Roberts noted in his dissent that the treaty provision itself was not an arbitration agreement (but an offer to arbitrate) and cautioned against assuming too easily that an investor and a state had consented to investment treaty arbitration in the first place.
The circuit court took a similar approach. It found that the question of whether the arbitration provision of the ECT was invalid went to the scope of the provision, not its existence. This, it noted, was because Spain itself conceded that the ECT’s arbitration provision could still give rise to a valid arbitration agreement between an EU member state and a non-EU investor because (unlike many other EU investment treaties, including intra-EU bilateral investment treaties) the ECT is a multilateral treaty to which EU and non-EU states are parties. In the court’s mind, the same logic might not apply to the arbitration provision of a bilateral treaty between EU member states, in which there can be no arbitration between an EU member state and a national of a non-EU member state.
Anti-Suit Injunctions and Abuse of Discretion
The court also found that the NextEra and 9Ren courts abused their discretion when they issued anti-suit injunctions enjoining Spain from seeking to prevent the claimants from enforcing the awards in the United States. The circuit court found that the district court failed to address the fact that the anti-suit injunction was ordered against a foreign sovereign, which, it said, puts comity concerns “near their peak.” The court also found that the district court failed to identify domestic interests strong enough to warrant the anti-suit injunctions. It concluded that the fact that Spain’s actions were counter to its obligations under the ICSID Convention were not enough.
The court’s rollback of the anti-suit injunctions may be a bad omen for those who had hoped for a U.S. safe haven from Achmea. The court’s comity concerns, on the one hand, and its indifference to Spain’s purported violations of its obligations under the ICSID Convention, on the other, may suggest an overriding concern for comity that could extend to EU states’ views on the validity of the arbitration provisions of intra-EU investment treaties. Once again, however, this saga appears far from over.
Mark McNeill and Alexander G. Leventhal are partners at Quinn Emanuel Urquhart & Sullivan.
Author :
Publish date : 2024-09-26 09:00:00
Copyright for syndicated content belongs to the linked Source.
The post DC Circuit OKs Enforcement of Intra-EU Awards, Does Not Decide If Other Treaties’ Awards May Be Enforced first appeared on Love Europe.
Author : love-europe
Publish date : 2024-09-26 17:59:03
Copyright for syndicated content belongs to the linked Source.