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Freshfields Risk & Compliance

| 4 minutes read

The US proves to be a promising jurisdiction to enforce intra-EU investor-State awards

Recent developments in the US courts reassure investors on the possibility of enforcing intra-EU investor-State awards. These developments come at a time when uncertainties surrounding intra-EU investment protection were continuously fueled by decisions on EU law level, inter alia, the ECJ’s ruling in Achmea and the ECJ’s ruling in Komstroy on the incompatibility with EU law of intra-EU BIT and Energy Charter Treaty (ECT) disputes, respectively. The first arbitral decision declining jurisdiction in an intra-EU dispute in Green Power v Spain as well as the termination of intra-EU BITs and – more recently – the announced withdrawal of certain EU member States from the ECT further increased such uncertainties.

Investors are however starting to see daylight, particularly in the US. Two recent judgments of the US District Court for the District of Columbia provide comfort to investors on the enforceability of intra-EU awards in the US. This confirms a positive trend which had already emerged in recent years. Developments on the attachment of assets in the UK also look promising for future enforcement proceedings. Investors are also exerting pressure on international institutions to downgrade credit ratings of States reluctant to comply with arbitral awards. This may prompt States to enter into settlement negotiations.

The US strengthens its position as a favourable jurisdiction to enforce intra-EU awards

To recap, EU courts established that – under EU law – intra-EU investment arbitration agreements are invalid because they are incompatible with EU law. The fate of an intra-EU investment arbitration award is troublesome wherever an EU court gets its hands on it, be it at the annulment (see annulment decisions by Swedish courts in Novenergia v Spain and PL Holdings v Poland) or enforcement stage (see ECJ’s decision in Micula et al v Romatsa et al). The question is what happens when an extra-EU court is seized of enforcement proceedings: can EU member States rely on the supposed invalidity of the arbitration agreement under EU law to resist enforcement outside of the EU? The DC district court said no.

The DC district court issued two landmark judgments in favour of 9Ren and NextEra, two renewable energy infrastructure developers incorporated in Luxembourg and the Netherlands, respectively. These investors had both obtained favourable ECT awards against Spain (approx. €40 million plus interest for 9Ren and approx. €290 million plus interest for NextEra) after Spain’s radical changes to its renewable energy tariff regime. After 9Ren and NextEra started seeking enforcement of their awards in the US, Spain filed anti-suit injunctions in the investors’ home States in an attempt to block enforcement. Both investors then turned to the US courts seeking anti-anti-suit injunctions.

To decide on such applications, the DC court declared its jurisdiction over Spain under the US Foreign State Immunities Act (FSIA). Under the FSIA, US courts only have jurisdiction over a sovereign State when specific exceptions apply. One of such exceptions is when an action is brought against a sovereign State to enforce an award made pursuant to an arbitration agreement. In the context of the enforcement of 9Ren’s and NextEra’s awards, the DC court held that its analysis was limited to ascertain the existence of an arbitration agreement – that is the ECT’s arbitration clause – but not its validity. Spain’s defence based on the alleged invalidity of the ECT arbitration clause under EU law was therefore rejected.

Most importantly, the DC court made a preliminary finding that these intra-EU awards are likely to be enforced. Anti-suit injunctions are preliminary measures and – as such – the relevant court must first preliminarily assess the prospect of success of the main dispute and be therefore satisfied that the applicant is likely to succeed on the merits (in this case, the enforcement of the two intra-EU awards). In both cases, the DC court opined that the investors’ success in confirming and enforcing the awards was “highly likely”. Commentators considered this a major turning point. The court also rejected all Spain’s defences, namely that (i) the arbitration agreement is not valid because it violates EU law; (ii) the arbitral awards violate EU State aid law; and (iii) international comity or the “acts of State” doctrines preclude the enforcement of the award.

Finally, the DC court concluded that public interest supports granting the anti-anti-suit injunctions 9Ren and NextEra applied for. The court reasoned that public interest entails protecting US courts’ lawful jurisdiction and encouraging the enforcement of international arbitration law as an efficient means of settling disputes.

Enforcement of assets of Spain’s debtor looks promising in the UK

Developments in the UK also look promising. There, the investment fund Antin Infrastructure Services (Antin) is seeking enforcement of a €100 million ECT award against Spain by attaching Spain’s €1 billion credit vis-à-vis the London Steam-Ship Owners’ Mutual Insurance Association through a third-party debt court proceeding.

The huge compensation owed to Spain by the insurer is due to the massive oil spill on Galicia’s coast occurred in 2002 with the sinking of the oil tanker “Prestige”. In July 2022, Antin succeeded in obtaining an interim order from the English High Court ordering the insurer to refrain from making any payments to Spain up to the amount owed to Antin. A final hearing is scheduled to take place in late March 2023. If successful, Antin will effectively be able to satisfy its intra-EU award against Spain through a portion of the compensation owed to Spain for the Prestige incident.

Alternative paths to monetise intra-EU awards

Moreover, Antin has resorted to out-of-court efforts to exert pressure on Spain to pay its award. It has reportedly approached the International Monetary Fund and other private rating agencies such as Fitch and Moody’s to request the downgrade of Spain’s credit rating in light of Spain’s non-compliance with international arbitration awards. Lower credit ratings would result in paying higher interest on sovereign debt. This may indeed wield significant pressure on EU members States to voluntarily comply with intra-EU awards or reach amicable settlements with investors (Germany’s settlement with Vattenfall over the phase-out of nuclear energy or Croatia’s settlement with a number of European banks on the forced conversion of Swiss franc-denominated loans prove that an amicable solution is a viable option worth pursuing for both sides).


achmea, ect, icsid, enforcement, international arbitration, arbitration, europe