\n<\/p>\n
On 13 September 2024, the German Constitutional Court (Bundesverfassungsgericht<\/em>, \u201cBVG\u201d or \u201cthe Court\u201d) published two judgments dated 23 July 2024 (available here<\/a> and here<\/a>, both in German), accompanied by a press release (here<\/a>), rejecting as inadmissible two constitutional complaints brought by the claimant in the\u00a0Eureko (later Achmea) v Slovakia (1)<\/em>\u00a0<\/a>arbitration (\u201cBVG Judgments\u201d). \u00a0While other commentators have already provided an overview of the background to and content of the BVG Judgments (e.g., here<\/a>), we consider in this post the Court\u2019s approach to Achmea\u2019s fundamental rights arguments and potential implications for investors seeking protection under the European Convention on Human Rights<\/a> (the \u201cConvention\u201d or \u201cECHR\u201d) as an alternative to intra-EU investment arbitration.<\/p>\n \u00a0<\/p>\n Origins of the BVG Judgments<\/strong><\/p>\n The BVG Judgments essentially arise out of the Court of Justice of the European Union (\u201cCJEU\u201d)\u2019s (in)famous Achmea <\/em>Judgment<\/a>, finding that the arbitration clause of the Netherlands-Slovakia BIT was incompatible with EU law (see our previous coverage here<\/a>).\u00a0 The CJEU\u2019s ruling led to the subsequent Order of the German Federal Court of Justice (Bundesgerichtshof<\/em>, or \u201cBGH\u201d) of 31 October 2018, setting aside the arbitral award in Achmea v. Slovakia <\/em>(\u201cBGH Order<\/a>\u201d). \u00a0On 12 December 2018, Achmea filed a constitutional complaint before the BVG challenging the BGH Order. \u00a0Achmea complained, inter alia<\/em>, that the BGH Order had violated its fundamental rights, including the guarantee of property, freedom to practise an occupation, and the right to effective legal protection, as well as its legitimate expectations, because the BGH should not have considered itself bound by the Achmea<\/em> Judgment.<\/p>\n In 2022, Achmea filed a second constitutional complaint before the BVG challenging the 2021 German Parliament Act ratifying the Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union (\u201cTermination Agreement<\/a>\u201d).<\/p>\n On 23 July 2024, the BVG dismissed both complaints as inadmissible (see detailed analysis of each judgment in Greg Lourie\u2019s blog post here<\/a>).\u00a0 Our comments focus on the BVG\u2019s analysis in its first judgment (Case 2 BvR 557\/19) (\u201cBVG First Judgment\u201d), in which the Court found no violation of Achmea\u2019s fundamental rights.\u00a0 However, it bears emphasising at the outset that, as Lourie observes in his post<\/a>, the Court found that, because of the Termination Agreement, \u201ceven if the BVG were to uphold Achmea\u2019s constitutional complaint and remit the case to the BGH, the result would be no different\u201d\u2014\u201cthe BGH would have to set aside the award again because the BIT ceased to exist in the meantime.\u201d\u00a0 The Court\u2019s fundamental rights analysis must therefore be read in this light.<\/p>\n \u00a0<\/p>\n The BVG\u2019s Approach to Fundamental Rights <\/strong><\/p>\n The BVG First Judgment acknowledged that the Achmea<\/em> Judgment effectively precludes investors from resolving intra-EU investment disputes through arbitration.\u00a0 However, the BVG emphasised that investors continue to have access to a legal framework that, although not specifically designed for investors, provides adequate protection of their fundamental rights.\u00a0 In particular, in its view, investors remain protected under the EU\u2019s multi-level legal framework, including the Treaty on the Functioning of the European Union<\/a> (\u201cTFEU\u201d) and the EU Charter of Fundamental Rights<\/a> (\u201cCharter\u201d).\u00a0 The Court also pointed out that investors may bring individual complaints before the European Court of Human Rights (\u201cECtHR\u201d) for violation of their property rights under Article 1 Protocol No. 1 (\u201cA1P1\u201d) to the ECHR.<\/p>\n However, the Court saw no violation of Achmea\u2019s right to property, arising out of the set-aside of its award, in this case.\u00a0 First, it recalled the notion of property under the Charter and the ECHR: it held that the Charter does not cover \u201cmere commercial interests or expectations,\u201d and that A1P1 of the ECHR protects only final and binding arbitral awards that (i) have the same status as final court decisions under domestic law, (ii) are subject to only limited review by national courts, and (iii) cannot be examined for substantive correctness (para. 76) (referring to the ECtHR judgments in Stran Greek v Greece<\/em><\/a> (para. 61) and BTS Holdings v Slovakia<\/em><\/a> (paras. 47 et seq<\/em>.)).\u00a0 The Court does not appear to have taken a clear view as to whether the Achmea<\/em> award constituted a possession in these terms (unlike the BGH before it, which had found that Achmea had not been \u201cdeprived of any asset as a result of the setting aside of the arbitral award\u201d (authors\u2019 translation) (BGH Order, para. 72)).<\/p>\n The BVG rejected the argument that the retroactive application of the Achmea<\/em> Judgment violated Achmea\u2019s legitimate expectations, noting that the CJEU did not limit the temporal effects of the Judgment.\u00a0 The Court similarly found no breach of the principle of good faith given that, since 2006, the European Commission had consistently maintained that intra-EU BITs are incompatible with EU law and Slovakia had raised jurisdictional objections on this basis from the outset of the arbitration.<\/p>\n The Court also saw no issue with the BGH\u2019s refusal to seek an additional preliminary ruling from the CJEU or a preliminary ruling from the BVG on the temporal application of the Achmea<\/em> Judgment. \u00a0The Court observed in this context that Achmea had failed to demonstrate any right to investor-State arbitration under customary international law.<\/p>\n Perhaps the most contentious aspect of the Court\u2019s reasoning is its conclusion that, by agreeing on a dispute settlement mechanism outside of the state justice system, the parties waived their right of access to justice.\u00a0 In the Court\u2019s view, the agreement to settle disputes through arbitration is, at best, protected as an exercise of procedural autonomy rather than a fundamental right.\u00a0 The Court accordingly saw no violation of Achmea\u2019s right to effective legal protection.<\/p>\n Finally, the Court found no evidence that the BGH had failed to consider a potential violation of the principle of legal security or had acted arbitrarily.<\/p>\n In light of the above, the BVG concluded that Achmea had not substantiated any violation of its fundamental rights.<\/p>\n \u00a0<\/p>\n The ECHR as an Alternative to Intra-EU Arbitration<\/strong><\/p>\n The BVG\u2019s confidence in the availability of alternative remedies under the ECHR for intra-EU investment protection post-Achmea<\/em> remains to be fully tested. \u00a0While the ECtHR may indeed provide a forum for investors to pursue new intra-EU investment claims\u2014as suggested by the BVG\u2014it may not always be an attractive route for those seeking valuable (and prompt) recovery (the proceedings in Iliria v Albania<\/em> being a case in point, see here<\/a>).\u00a0 The requirement to exhaust domestic remedies before bringing a claim to the ECtHR presents an additional procedural hurdle.\u00a0 It effectively undermines the core benefit of arbitration: direct access to a neutral and independent forum for dispute resolution.<\/p>\n \u00a0<\/p>\n Concluding Remarks <\/strong><\/p>\n The BVG First Judgment represents one of the first occasions on which an EU Member State Court has grappled head-on with the role of fundamental rights in proceedings impacted by the CJEU\u2019s Achmea <\/em>Judgment (as Nardell KC and Rees-Evans observed in their post on BTS Holding v Slovakia<\/em>, here<\/a>, earlier domestic court decisions in the post-Achmea<\/em> line have been light-touch or even silent on fundamental rights issues).\u00a0 However, the BVG\u2019s analysis of these questions was perhaps more limited than might have been expected, possibly on account of the decisiveness of the separate but intervening issue of the Termination Agreement.\u00a0 The respective relevance of fundamental rights, as against the impact of the Termination Agreement, will vary from case to case, and from jurisdiction to jurisdiction.<\/p>\n What the BVG did not address in its Judgment\u2014and understandably so\u2014is the possibility of award-holders, like Achmea itself, turning to the ECtHR for redress against Convention States whose courts have annulled or refused to recognise or enforce intra-EU arbitral awards rendered post-Achmea<\/em>.\u00a0 Achmea itself may make this next move, potentially bringing to the ECtHR a claim against Germany in relation to the set-aside of its arbitral award against Slovakia under A1P1, Article 13 (the right to an effective remedy) in conjunction with A1P1 and Article 6(1) (the right to a fair trial) of the ECHR (see e.g.<\/em>, here<\/a>, here<\/a>, here<\/a>, and here<\/a>).\u00a0 How the ECtHR will engage with such claims on their merits is hotly anticipated but remains to be seen.<\/p>\n <\/div>\n\n","protected":false},"excerpt":{"rendered":" On 13 September 2024, the German Constitutional Court (Bundesverfassungsgericht, \u201cBVG\u201d or \u201cthe Court\u201d) published two judgments dated 23 July 2024 (available here and here, both in German), accompanied by a press release (here), rejecting as inadmissible two constitutional complaints brought by the claimant in the\u00a0Eureko (later Achmea) v Slovakia (1)\u00a0arbitration (\u201cBVG Judgments\u201d). \u00a0While other commentators 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