In a recent decision, the Regional Court of Essen (LG Essen) dismissed Spain’s request for an anti-enforcement injunction, sought to prevent the enforcement of the intra-EU ICSID award in RWE v Spain in the US.
Due to the EU law challenges posed by the Achmea, Komstroy and Romatsa judgments by the European Court of Justice (ECJ), investors are increasingly resorting to extra-EU jurisdictions (especially the US) to enforce their intra-EU investment treaty awards.
In the context of Spain’s efforts to resist enforcement of intra-EU Energy Charter Treaty (ECT) awards, the latest ruling by the LG Essen stands out as a critical juncture. This decision is part of a broader trend observed also in other EU jurisdictions of refusing to interfere with enforcement actions brought beyond EU borders, most recently in the Netherlands.
The background: clash between the German and US judiciaries
The procedural history leading to the LG Essen decision is notable for its intricate back and forth between German and US courts.
Spain’s anti-enforcement application of December 2022 was prompted by RWE’s enforcement action of its €28 million ECT award against Spain (ECT award) before the US District Court of Columbia in December 2021. Spain sought an order from the LG Essen (where RWE has its headquarters) to restrain RWE from pursuing enforcement outside the EU (ie an anti-suit or anti-enforcement injunction).
RWE then turned to US Courts in March 2023, where it applied for an (anti-)anti-suit injunction ordering Spain to stay the anti-enforcement proceedings before the LG Essen.
At that point, Spain responded by filing for an (anti-)anti-anti suit injunction before the LG Essen against the anti-suit application brought by RWE in the US. While the LG Essen rejected Spain’s application, it was then upheld in May 2023 on appeal by the Higher Regional Court of Hamm (OLG Hamm), which issued – for the first time ever in Germany – an (anti-)anti-anti-suit injunction in the context of investment arbitration. The OLG Hamm’s underlying reasoning was rooted in the preservation of Germany’s judicial sovereignty and the applicant’s right to justice (here Spain). In other words, the German court held that a foreign court cannot impede or obstruct legal proceedings in Germany.
The decision: German courts should not obstruct enforcement actions in the US
On 12 April 2024, the LG Essen dismissed Spain’s anti-enforcement application as being inadmissible. The German court confirmed the long-standing position under German law, that anti-suit injunctions violate the principles of territoriality and state sovereignty, regardless of whether the action was directed against the party (like in the case at hand) or against a foreign state court. The German court noted that it would be contradictory if German courts were to reject anti-suit injunctions from abroad, but then issued anti-suit injunctions themselves.
Most importantly, the LG Essen held that the ECJ case law on intra-EU investment arbitration (eg Achmea and Komstroy) does not establish an obligation for German courts to prevent the enforcement of ICSID awards outside of the EU. EU courts must only prevent enforcement within EU borders.
Spain’s argument that enforcing the ECT award would constitute a violation of EU law on State aid also failed. The German court noted that Spain had not yet sought authorisation from the EU Commission (which has the authority to assess and approve State aid measures proposed by EU Member States) to pay the ECT award. In other words, it was apparent to the LG Essen that Spain lacked any genuine intention to pay the ECT award.
Spain engaged in a similar multijurisdictional fight before Dutch courts, trying to prevent the enforcement of the ECT award in AES v Spain in the US. In two similarly reasoned decisions from March 2023, the District Court of Amsterdam dismissed Spain’s petition. It found that by seeking an anti-suit (or anti-enforcement) injunction before Dutch courts, Spain was attempting to create an additional forum to challenge the ECT award, which it found prima facie to be impermissible under the New York Convention.
Outlook
The LG Essen decision marks a setback for Spain’s efforts to obstruct enforcement of intra-EU ECT awards. The Essen and Amsterdam decisions constitute strong precedent that EU courts will not assist EU Member States unwilling to comply with investment treaty awards. Both courts held in clear terms that the CJEU case law in Achmea and Komstroy does not provide a legal basis to grant anti-suit injunctions. Rather, they found that the public international law principle of territorial sovereignty as well as the New York Convention, militate against anti-enforcement orders.
It is likely that Spain will appeal the LG Essen decision before the OLG Hamm. While it is true that the OLG Hamm had issued an anti-anti-suit-injunction in favour of Spain in the same case, it had done so solely to preserve judicial sovereignty of German courts. Due to comity considerations, it seems unlikely that the LG Essen decision will be reversed on appeal.
In the second (or even third) instance, German courts may however opt to refer the matter to the ECJ for a preliminary ruling on whether EU law – in order to uphold the principle of primacy of EU law – requires EU domestic courts to grant anti-enforcement injunctions in these circumstances. A similar approach was in fact adopted by the German Federal Court of Justice (FCJ) in its landmark decisions in Mainstream v Germany, Uniper v Netherlands and RWE v Netherlands. There, the FCJ essentially stretched procedural tools available to ensure primacy of EU law and declare those intra-EU investment arbitrations inadmissible, even though the “closed” ICSID system does not allow for state court review.
It remains to be seen whether the OLG Hamm, the FCJ or the ECJ (if requested to opine on the matter) will adopt a similar stance in this case.
At the moment, such scenario seems unlikely. As pointed out by the LG Essen, the principle of primacy of EU law merely requires EU Member States to ensure the application and observance of EU law in their respective territory. Thus, it does not provide a basis for resisting enforcement of investment treaty awards beyond EU borders.
