On 18 September 2025, Germany’s Federal Constitutional Court (Bundesverfassungsgericht, Constitutional Court published two closely watched decisions at the intersection of EU law, international investment arbitration, and German constitutional rights. Both judgments arose from constitutional complaints against rulings of the German Federal Court of Justice (Bundesgerichtshof) but they addressed different contexts: (i) intra-EU arbitration under the Energy Charter Treaty (ECT) on the one hand, and (ii) extra-EU arbitration under the Germany-India Bilateral Investment Treaty on the other hand. Together, these rulings offer the most detailed insight to date into the Federal Constitutional Court’s approach to investment arbitration.
Background
With its well-known judgments in Achmea (2018) and Komstroy (2021), the Court of Justice of the EU (CJEU) held that both BIT and ECT intra-EU disputes are incompatible with EU law. Applying the same reasoning in PL Holdings (2021), the CJEU then extended this finding also to ad hoc arbitration agreements between EU investors and EU Member States.
Since then, these decisions have been continuously relied upon by EU Member States involved in intra-EU disputes to have the relevant claims dismissed, either by objecting to the jurisdiction of the arbitral tribunal, seeking annulment of awards, or resisting their enforcement.
The intra-EU ECT ICSID case
Mainstream Renewable Power initiated ICSID arbitration proceedings against Germany in 2021 under the ECT alleging that legislative reforms derailed its North Sea wind projects (Mainstream v Germany). Germany responded by applying to German courts seeking an early judicial declaration that the ICSID proceedings were inadmissible, relying on the Achmea and Komstroy jurisprudence.
The Higher Regional Court of Berlin rejected Germany’s request, holding that the ICSID Convention creates a self‑contained system and, under Article 41 ICSID Convention, the tribunal has the final authority to decide on its own jurisdiction. However, this ruling was later overturned by the German Federal Court of Justice. The Court found that, in principle, ICSID arbitration exclusive jurisdiction blocks parallel domestic court proceedings. This notwithstanding, it held that this blocking effect does not apply in the “special case” of intra‑EU ICSID arbitration under the ECT, given the primacy of EU law and the CJEU’s case law. The Federal Court of Justice thus found the ICSID proceedings inadmissible due to the absence of a valid arbitration agreement (see here our analysis of the BGH’s decision).
In Case No. 2 BvR 1277/23, Mainstream challenged this decision before the Federal Constitutional Court, arguing, among others, that the Federal Court of Justice had disregarded Germany’s constitutional commitment to international law and the ICSID Convention. The Federal Constitutional Court dismissed the complaint and found no violation of constitutionally protected rights. It found that the Federal Court of Justice’s reliance on EU law was not arbitrary and remained within permissible judicial interpretation without infringing fundamental rights.
Notably, however, the Federal Constitutional Court did not give the Federal Court of Justice a free pass. It expressly noted that “there is much to suggest” that the Federal Court of Justice’s interpretation “creates tension” with the German constitutional principle of commitment to international law. The Federal Constitutional Court further emphasised that EU Member States are required to challenge the validity of intra‑EU arbitration agreements “before that arbitration body or before the competent court”, and suggested that Germany might have sufficiently complied with EU law simply by contesting jurisdiction before the arbitral tribunal, without needing to breach the ICSID Convention at this stage.
The Germany-India BIT case
The second case (Case No. 2 BvR 85/24) addressed India’s challenge to the enforcement of an arbitral award obtained by Deutsche Telekom in an ICC/UNCITRAL arbitration seated in Geneva. The dispute had arisen after an Indian state-owned entity cancelled a contract with an Indian company in which Deutsche Telekom had invested. Deutsche Telekom subsequently claimed compensation under the Germany-India BIT and was eventually awarded USD 93.3 million plus interest and costs. After Deutsche Telekom sought to enforce the award in Germany, the Berlin Higher Regional Court declared the award partially enforceable, a finding which was later upheld by the Federal Court of Justice.
India had attempted to resist enforcement arguing that extra-EU BITs, like intra-EU ones, may also affect the autonomy of EU law. The Federal Court of Justice rejected this proposition, finding that the Achmea reasoning does not apply to relations between EU Member States and a third State, such as India (see our previous analysis of the BGH’s decision).
Against that background, India brought a constitutional complaint, asserting that the Federal Court of Justice should have sought CJEU guidance under Article 267(3) TFEU on the intra-EU question. The Federal Constitutional Court dismissed the complaint, finding that there had not been a violation of constitutional rights. The Constitutional Court accepted the Federal Court of Justice’s differentiation between intra‑EU and extra‑EU arbitration, holding that EU law does not preclude investor‑state arbitration clauses in treaties with non‑EU states. The Constitutional Court thus found Achmea’s logic inapplicable to extra‑EU BITs and saw no constitutional basis for further referral to the CJEU.
Practical implications: a sharper intra- / extra-EU divide
The Federal Constitutional Court’s decisions reinforce the well-known legal distinction that EU Member State courts apply between intra‑EU and extra‑EU investment arbitration.
While reaffirming restrictive application of EU law to intra‑EU investment arbitrations, the Federal Constitutional Court refrained from using constitutional review to overturn the Federal Court of Justice’s alignment with the CJEU’s intra‑EU jurisprudence. However, the Constitutional Court acknowledged that such alignment creates tension with the constitutionally guaranteed principle of “openness to international law”. At the same time, the Deutsche Telekom decision provides reassurance that extra-EU arbitration remains permissible and enforceable in Germany.
For investors, these decisions underline the importance of structuring investments, choosing fora and planning enforcement strategies with the intra‑ / extra‑EU divide firmly in mind.
