In the last few years there have been important debates regarding investor–state dispute settlement (ISDS) mechanisms in international investment law. These discussions are triggering change in the area, as we see in the current Comprehensive Economic and Trade Agreement (CETA) and in the creation of the Investment Court System (ICS) as an alternative ISDS mechanism. European Union law is playing an important role in this change. The European Union is an important actor in the creation and development of international investment law topics. This paper primarily focuses on European Union law and significant Court of Justice of the European Union decisions in this area, aiming to evaluate the effect of the decisions for international investment law and settlement of investor–state disputes. The paper’s analysis particularly focuses on two important EU Court of Justice decisions: “Slovak Republic v. Achmea BV” and “Opinion 1/17”. Important arbitral tribunal awards are also discussed where relevant. In “Achmea”, the question was whether Article 344 of the Treaty on the Functioning of the European Union (TFEU) prevents EU members from referring to the investor–state dispute settlement provisions in Intra-EU BITS (bilateral investment treaties), and, if the answer is negative, does Article 267 of the TFEU prevent the application? Finally, if the second answer is negative, does Article 18(1) of the TFEU prevent the application of these provisions? Although Advocate General Wathelt stated in his opinion that neither the provisions in the objected agreement nor the other investor–state arbitration provisions in Intra-EU BITS violate EU law, the Court decided otherwise and found the provisions to be in conflict with EU law in an unexpected and surprising decision. The Court found the provisions in Intra-EU BITS regarding ISDS provisions contradictory with EU law, ruling that only the Court of Justice has the competence to interpret and apply EU law and these provisions therefore contradict with the autonomy of EU law. The “Achmea” decision was thus an end to the investor–state arbitration provisions in Intra-EU BITS. The decision had a shocking effect, especially for the future of ISDS in EU law. The decision also opened a debate on the future of the existing Intra-EU BITS. 

This paper discusses the current stage of the developments within the European Union, such as the International Agreement for the Termination of Intra-EU Bilateral Investment Treaties that was adopted on 5 May 2020 in the European Union.

In addition to its effect on Intra-EU BITS, the “Achmea” decision is also important for the application of the Energy Charter Treaty (ECT) provisions, and especially application of Article 26 of the ECT among EU members. It is important to have a decision from the Court of Justice on whether Article 26 on ISDS provisions applies between EU members through a preliminary ruling, but that opportunity was missed in the “Spain v. Novenergia II - Energy & Environment (SCA)” case. The issue has also been discussed at arbitral tribunals, such as the “Vattenfall AB and others v.

Federal Republic of Germany” dispute. The arbitral tribunal for “Vattenfall”, taking into consideration the Vienna Convention on Law of Treaties, decided that the ECT is not in the scope of the “Achmea” decision. It will be interesting to follow the changes in this discussion, especially with the modernization of the ECT arguments and possible Court of Justice decisions in the future. 

In the second important decision of the Court, in “Opinion 1/17” the Court was asked to answer whether the provisions related to ISDS and the ICS were compatible with EU law. Advocate General Bolt in his decision found the investor–state dispute mechanism in the CETA compatible with the TFEU, the Treaty on European Union (TEU), and the EU Charter on Fundamental Rights. Similarly, the Court found the provisions in Chapter 8 of the CETA compatible with primary EU law. It is important to analyse the Advocate General’s opinion and the Court’s decision, especially to see the discussion on the differences in international commercial and investment arbitration and the dynamics of EU law.

The “Achmea” and “Opinion 1/17” decisions are important for both EU law and the development and change in international investment law. Of course, there are other topics in the area that are not covered by these two court decisions but are also important to analyse for an understanding of the topic and all of its aspects in order to project the future developments in ISDS in international investment law. For example, how does the Court of Justice look at investor–state arbitration provisions in international agreements? Some aspects of this topic were discussed in “Opinion 2/15” regarding the EU–Singapore Free Trade Agreement, but the issue of whether investor–state arbitration was compatible with EU law was not discussed. The Court only discussed the issue in terms of competence arguments and whether Member States or the EU would have competence to sign these treaties. It will also be interesting to see the developments in the United Nations Commission on International Trade Law (UNCITRAL) Working Group III on ISDS, the outcome of the modernization of the ECT, and other relevant cases of the Court of Justice, such as the “PL Holdings S.á.r.l. v. Poland” decision. The topic will continue to be discussed and will be a part of many studies in the coming years, and the European Union will have an important role in shaping new ISDS mechanisms in international investment law.