Resolving Energy Investor-State Conflict Through Treaty Interpretation ‘is Problematic’

See this post from “ArbitrationBlog”

Key snips (unedited but emphasis added) of two sections, which are repeated below for convenience:


Interpreting Away Treaty Conflicts? Green Power, ISDS and the Primacy of EU Law

Federica I. Paddeu (Queens’ College, University of Cambridge) and Christian J. Tams (University of Glasgow and Matrix Chambers London)/ /Leave a comment

News of the award in Green Power and Obton v Spain is sinking in. Initial responses indicate that this is no ordinary decision – but rather a ‘major earthquake’, a ‘landmark decision’ and ‘one for the history books’. It may well be: on 16 June 2022, an SCC arbitral tribunal seated in Stockholm declined jurisdiction over claims brought by Danish investors under the Energy Charter Treaty (ECT) because of the intra-EU character of the dispute, following the approach developed by the Court of Justice of the EU (CJEU) in its Achmea and Komstroy judgments. In our view, this marks an overdue recognition that investment tribunals addressing disputes between EU nationals and EU member States cannot ignore the primacy of EU law. But the award’s reasoning is unlikely to persuade critics: the Tribunal reaches what we think is the correct outcome via a long and winding reasoning that overstretches the principles of treaty interpretation.

In this post, we situate the Green Power award, explain why its reasoning is problematic, and indicate how future tribunals might engage with the so-called ‘clash of Grundnormen’ between EU law and investment law.

At the source of this fundamental problem is the Tribunal’s preferred way out: treaty interpretation. Interpretation can assist where conflicts are merely apparent – where the two apparently conflicting rules can be reconciled (Pauwelyn, at 272). This was not the situation in Green Power, however, where two rules plainly clashed: Article 26(3)(a) required Spain to submit to arbitration; EU law required it not to do so. As much as the Tribunal tried, these two rules were genuinely incompatible – as the Tribunal’s brief comments on lex superior seemed to acknowledge (§469). The plain interpretation of Article 26(3)(a) (unconditional consent to arbitration) may not have reflected the ‘complexities’ of the case, but the point of interpretation is definitional: to elucidate the meaning of treaty clauses. The Tribunal was right that interpretation must not be an abstract process (§344), and that the normative environment of the provision to be interpreted must not be overlooked or ignored. But a systemically integrated interpretation, like the one advanced by the Tribunal, was a way to find, rather than resolve, the complexities of the case: a way to reveal the genuine conflict between ECT Article 26(3)(a) and EU law.


More thinking is required, the bloggers contended.

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