In the infamous Achmea decision, the Court of Justice of the European Union (CJEU) held that an arbitration agreement contained in an intra-EU BIT had an adverse effect on the autonomy of EU law and was precluded by Articles 267 and 344 of the Treaty on the Functioning of the European Union (TFEU). In a recent opinion, the CJEU Advocate General Juliane Kokott (AG Kokott) considered the implications of the Achmea decision on intra-EU investor-state disputes where the arbitration agreement is not derived from an investment treaty. She found that an “individual arbitration agreement” between an EU Member State and an investor from another EU Member State can, in principle, be compatible with EU law provided that the courts of EU Member States can comprehensively review the resulting arbitration award for its compatibility with EU law.


AG Kokott’s opinion relates to an arbitration brought by a Luxembourg company, PL Holdings, against Poland under the bilateral investment treaty between the Belgium-Luxembourg Economic Union and Poland (BLEU-Poland BIT). In the arbitration, the tribunal held that Poland had breached the BLEU-Poland BIT and awarded PL Holdings compensation. In the course of the proceedings, the tribunal considered Poland’s jurisdictional objection that the BLEU-Poland BIT was incompatible with EU law due to the CJEU’s decision in Achmea. The tribunal rejected the jurisdictional objection as it had been raised belatedly.

Following its defeat in the underlying arbitration, Poland applied to the Svea Court of Appeal at the seat of the arbitration in Stockholm, Sweden, to set aside the award. Poland argued that the arbitration agreement in the BLEU-Poland BIT was invalid as a result of the decision in Achmea. The court agreed with Poland as to the invalidity of the arbitration agreement in the BIT. Nevertheless, since Poland had not raised the jurisdictional objection in the arbitration on time, the court refused to set aside the award. Poland appealed to the Swedish Supreme Court.

PL Holdings argued before the Swedish Supreme Court that the commencement of proceedings represented an offer to arbitrate and that Poland should, therefore, on the basis of its “free will”, be able to expressly or implicitly accept this offer in line with the principles that the CJEU endorsed with regard to commercial arbitration proceedings in the Achmea decision. In the Achmea decision, the CJEU distinguished commercial arbitration from investment treaty arbitration by holding that the former originates in the “freely expressed wishes of the parties” (see para. 55) and acknowledged that it had previously found commercial arbitration agreements compatible with EU law (see para. 54).

The key issue in PL Holdings was therefore whether, despite the incompatibility of the dispute resolution provision in an intra-EU BIT with the TFEU, an agreement to arbitrate could still be formed between an EU Member State and an investor from another EU Member State by not challenging the jurisdiction of the arbitral tribunal on time.

As the Swedish Supreme Court deemed it unclear how EU law should be interpreted in response to this issue, it referred the following question to the CJEU for a preliminary ruling:

“Do Articles 267 and 344 TFEU [Treaty on the Functioning of the European Union], as interpreted in [the judgment in] Achmea, mean that – where an investment agreement contains an arbitration clause that is invalid as a result of the fact that the contract was concluded between two Member States – an arbitration agreement is invalid if it has been concluded between a Member State and an investor by virtue of the fact that the Member State, after arbitration proceedings were commenced by the investor, refrains, by the free will of the State, from raising objections as to jurisdiction?”

By way of explanation, Article 267 TFEU gives a “court or tribunal of a Member State” the ability to request a preliminary ruling from the CJEU. Pursuant to Article 344 TFEU, EU Member States undertake not to submit disputes concerning the interpretation or application of the EU treaties to any method of dispute settlement other than those provided for in the EU treaties. The CJEU held in Achmea that both Articles 267 and 344 precluded investor-state arbitration under an intra-EU BIT. In particular, the CJEU found that an arbitral tribunal did not qualify as a court or tribunal within the scope of Article 267. The Swedish Supreme Court’s reference to “free will” is also reminiscent of the Achmea decision (and in line with the argument of PL Holdings in the Swedish Supreme Court, see above).

Recommendation of AG Kokott

In response, AG Kokott issued an opinion in Case C‑109/20 with the following recommendation:

“Individual arbitration agreements between Member States and investors from other Member States concerning the sovereign application of EU law are compatible with the duty of sincere cooperation under Article 4(3) TFEU and the autonomy of EU law under Articles 267 and 344 TFEU only if courts of the Member States can comprehensively review the arbitration award for its compatibility with EU law, if necessary after requesting a preliminary ruling under Article 267 TFEU. Such arbitration agreements must furthermore be compatible with the principle of equal treatment under Article 20 of the Charter of Fundamental Rights of the European Union”.

Key findings

There are several key findings in this recommendation, which can be unpacked against the wider backdrop of the Achmea decision.

  • Individual arbitration agreements between EU Member States and investors from other EU Member States: AG Kokott dubbed an agreement to arbitrate based on the lack of a jurisdictional objection an “individual arbitration agreement” (para. 22). This term is arguably sufficiently wide to embrace other kinds of arbitration agreements, as long as these are not derived from treaties concluded by EU Member States. Consequently, an arbitration provision in a contract negotiated directly between an EU Member State and an EU investor would be an obvious example of an individual arbitration agreement. In theory, therefore, individual arbitration agreements should not be caught by the CJEU’s ruling in Achmea, which dealt with an investment treaty concluded on an EU Member State level.
  • The sovereign application of EU law: The crux of the Achmea decision was that arbitration agreements contained in intra-EU BITs could remove disputes involving the application and interpretation of EU law from the EU judicial system as an arbitral tribunal did not qualify as a court or tribunal under Article 267 TFEU. AG Kokott found that an individual arbitration agreement could have the same effect (para. 31), which ultimately puts a question mark over its validity under EU law. Although in PL Holdings the arbitral tribunal primarily applied the provisions of the BIT under international law (para. 37), AG Kokott noted that the arbitral tribunal had been required to consider EU law as part of Polish domestic law (para. 38). In AG Kokott’s view, there was accordingly a risk that the arbitral tribunal could take decisions that would ultimately result in an infringement of EU law. Furthermore, AG Kokott was concerned that awards involving a misconceived application of EU law could be afforded a precedent value by EU Member States (para. 39). This, in turn, could compromise autonomy, the full effectiveness and consistency of EU law, which formed basis of CJEU’s decision to denounce intra-EU investment treaty arbitration in Achmea.
  • Comprehensive review of intra-EU arbitration award for its compatibility with EU law: This is the cornerstone of AG Kokott’s recommendation. AG Kokott stated that individual arbitration agreements between an EU investor and an EU Member State may be permissible under EU law to the extent that domestic courts can “comprehensively” review the resulting award, including a request for a preliminary reference from the CJEU if necessary (para. 62). AG Kokott may be suggesting here that investment arbitration awards involving EU Member States will have to be substantively reviewed by an EU court for their compatibility with EU law if they are to be enforceable. The courts of EU Member States are, however, restricted in their review of New York Convention awards pursuant to Article V of the New York Convention. Article V(2)(b) may offer courts a way to review New York Convention awards on public policy grounds: in Eco Swiss v Benetton, the CJEU held that EU Member States must take EU law into account when considering public policy. Nonetheless, the contours of EU public policy are far from clear and it is difficult to predict whether this standard of review will be sufficiently comprehensive to fulfil AG Kokott’s proposal. ICSID awards are exempt from review by national courts altogether pursuant to Articles 53 and 54 of the ICSID Convention. This was accepted, for instance, by the UK Supreme Court in Micula v Romania. In Micula, the court held that the United Kingdom’s treaty obligations under the ICSID Convention trumped EU law as the United Kingdom’s accession to the ICSID Convention predated accession to the EU treaties. AG Kokott’s solution may therefore prove to be unworkable in practice.
  • Arbitration agreements must be compatible with principle of equal treatment: The principle of equal treatment, enshrined in Article 20 of the Charter of Fundamental Rights of the European Union, provides that “[e]veryone is equal before the law”. In that regard, AG Kokott observed that there would be unequal treatment if some investors were limited to bringing their claims in court, but other investors could bring claims before arbitration tribunals. While the issue of equal treatment would need to be examined by the national courts of EU Member States in every case, AG Kokott concluded that there would be no legitimate objective for an EU Member State to conclude an arbitration agreement with an investor after a dispute has already arisen (para. 70). This suggests that individual arbitration agreements would only be compatible with the principle of equal treatment if they were made in advance of a dispute — i.e. an arbitration agreement contained in a contract negotiated directly between an EU Member State and an EU investor.


Whether the CJEU follows AG Kokott’s opinion will likely turn on what it makes of the “individual arbitration agreement” distinction. AG Kokott herself indicated that intra-EU individual arbitration agreements suffer from the same issues as arbitration agreements contained in intra-EU treaties, namely that they remove disputes involving application of EU law from the purview of the EU judicial system. In any case, in practical terms, AG Kokott’s suggested standard of review may be too high to keep intra-EU investment arbitration alive. The limited standard of review that national courts have over arbitration awards under the ICSID and New York Conventions, will likely preclude the comprehensive review of arbitration awards that would be necessary under AG Kokott’s proposal.


Duncan Gorst is a Senior Associate at Osborne Clarke. He advises businesses, states and international organisations on a wide range of international law and dispute resolution issues and acts as counsel in international commercial and investment arbitration proceedings.

VYAP X JM Editorial Team