The ‘Spanish Saga’ in the Antin case and beyond: award recognition and asset recovery in EU investment arbitration

Appropriately, the High Court of London referred to the analysis of these doctrines as ‘the EU law question’. In short, what the court had to determine was whether, based on the principle of primacy of EU law, Spain held sovereign immunity from jurisdiction that invalidated ICSID’s competence to resolve such disputes through arbitration and, consequently, whether it was appropriate to deny recognition of the award.

The High Court of London dismissed Spain’s opposition, on the grounds that the primacy of EU law does not render Spain’s (or the UK’s) obligations under the ICSID Convention or ECT ineffective ‘as a matter of international law’. Thus, the High Court of London considered that Spain, by signing the ICSID Convention and ECT, waived its immunity from jurisdiction and submitted to arbitration for dispute resolution in this matter.

Does EU law have primacy over international law?

The CJEU established in its decisions on the Achmea and Komstroy cases that investment arbitration established both in bilateral investment treaties between EU states and in multilateral treaties signed by them, are contrary to the ‘primacy’ of EU law.

The CJEU considered that investment arbitration leaves the final word on the application of EU law to an arbitral tribunal and not to the CJEU, which violates the exclusive competence of the latter for the interpretation and application of EU law.

As a matter of principle, ‘primacy’ of EU law means that its application prevails over the national law of EU Member States. Domestic law of an EU Member State that contradicts EU law must be disregarded, giving priority to the application of EU law.

However, can this primacy also be invoked with respect to international law? May EU Member States invoke EU law to render ineffective the obligations imposed on them by international law, in the case at hand, the ICSID Convention and the ECT, that these same EU Member States have freely signed? The High Court of London understands that they may not.

Certainly, from the perspective of an EU Member State, international law is ‘domestic law’, from the moment that EU Member States have incorporated their international obligations into their legal system. However, the ICSID Convention and the ECT also impose international obligations on States that are not members of the European Union (EU), such as, for example, the UK. Hence, the High Court wonders whether EU law prevails over the ICSID Convention and the ECT ‘as a matter of international law’ because it is the only link between EU Member States and non-Member States in such matters.

In this respect, the High Court of London invokes the Vienna Convention on the Law of Treaties Article 26 (‘pacta sunt servanda’) and Article 27 (ie, the prohibition of invoking an internal rule to render ineffective an obligation arising from an international treaty) to reject the primacy of EU law over the ICSID Convention and the ECT. Consequently, the High Court of London considers that it cannot either rely on the alleged primacy of EU law to render ineffective the obligations that arise from the ICSID Convention and the ECT, of which the UK is also a party.

That is, according to the High Court of London, international law does not allow it to disregard the ICSID Convention or the ECT based on EU law. In other words, EU law is not a kind of ‘supra-international’ order that prevails over the international obligations of Member and non-Member States of the EU.

A controversial topic

This decision of the High Court of London has been received with special joy in common law jurisdictions, particularly in England, which from now on can present itself as a ‘safe haven’ in which to execute awards issued in investment arbitrations that the EU Member States refuse to recognise.

In the author’s opinion, the Achmea and Komstroy doctrines should not render unenforceable the arbitral awards issued in arbitrations that started before the elaboration of these doctrines by the CJEU. Rather, these doctrines impose on EU Member States the obligation to walk away from the international treaties that contravene EU law, as interpreted by the CJEU. This is what Spain has recently done denouncing the ECT.

However, this denunciation should not have ‘retroactive’ effects. Therefore, arbitral awards issued in accordance with the ECT while it was binding on Spain should be respected and complied with.[3]

The topic remains a controversial one. In fact, the decision of the High Court of London has not been the only decision on identical or similar cases issued in common law jurisdictions outside the EU. Specifically, Australia and the United States have dealt with other recognition requests, both for the same award as in the Antin case and for other awards against Spain arising from renewable energy investment arbitrations.

However, although most of those decisions have been favourable to the claimant investors, this has not always been the case.

For example, the ‘Memorandum Opinion’ of 29 March 2023, issued by the US District Court for the District of Columbia in the case Blasket Renewable Investments LLC v The Kingdom of Spain,[4] resolved the case in the opposite direction, indicating that the Achmea and Komstroy doctrines invalidated any arbitration agreement applicable and, consequently, the exception to jurisdictional immunity provided for in section 1605(a)(6) of the Foreign Sovereign Immunity Act,[5] consisting of the existence of an arbitration agreement in favour of a private party, was not applicable. Consequently, according to the US District Court, the arbitral award was issued in violation of the jurisdictional immunity that protects Spain as a sovereign State and, therefore, cannot be either recognised or enforced in the US.

Currently, this decision is pending an appeal filed by the enforcing party.

Conclusion

The decision of the US District Court is an interesting example of the enormous uncertainty caused by the Achmea and Komstroy doctrines, as well as the different interpretations that still exist in the field of state immunity, even among common law jurisdictions, such as the US and the UK.

These differences in interpretation are aggravated by the lack of validity of the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property, which the US has not even signed and which the UK has signed but not ratified (unlike Spain, which did ratify this Convention in 2011, although it has not entered into force as the minimum of 30 ratifications required for this purpose in the Convention itself has not been reached).

On the other hand, one can expect that these different interpretations regarding the scope of jurisdictional immunity may also translate into differences in interpretation regarding the scope of execution immunity, and consequently, to the efforts of tracing and recovering of sovereign assets.

This will continue to affect the effectiveness of the awards and will continue to highlight the need for greater harmonisation of asset recovery at an international level, especially when it comes to its relations with sovereign immunities.