SCC to stop choosing EU-seated arbitration centres

iclg | 6 November 2024

SCC to stop choosing EU-seated arbitration centres

Six years after Achmea, the Stockholm Chamber of Commerce will now hear investment disputes outside the European Union.

In a dramatic move that has sent shockwaves through the international arbitration community, the Stockholm Chamber of Commerce (SCC) yesterday announced that it will no longer select arbitration centres within the European Union (EU) for handling . This decision is the latest chapter in a story which began in 2008, when the Dutch insurance company Achmea called on the Netherlands-Slovakia bilateral investment treaty (BIT) to initiate arbitration proceedings in a dispute involving the privatisation of Slovakia’s health care system. Fast forward a decade, and the Court of Justice of the European Union (CJEU) ruled that and incompatible with EU law.

Then, in September 2021, the CJEU delivered another landmark ruling, this time in the case of Moldova v Komstroy, a dispute over an electricity supply contract, in which it held that the investor-state dispute settlement (ISDS) mechanism enshrined in the Energy Charter Treaty (ECT) does not apply to intra-EU disputes. The CJEU’s stance has since been upheld by national courts in EU member states with – for example – the German Federal Supreme Court ruling in 2023 that intra-EU investment arbitration proceedings were incompatible with EU law, specifically articles 267 and 344 of the Treaty on the Functioning of the European Union.

Writing online, the SCC explained: “Unless agreed upon by the parties, the SCC Board will no longer select Stockholm, or any other judicial district within the EU, as the seat of intra-EU, or potentially intra-EU, investment treaty arbitrations.”

THE INTERNATIONAL ARBITRATION PIE

The SCC has long been recognised as one of the leading arbitration institutions in the world, particularly when it comes to commercial and investment disputes, and this decision will doubtless come as a blow to EU-seated arbitration centres which are vying with institutions from all over the world for their slice of the lucrative and prestigious international arbitration pie. And with remote proceedings becoming de rigueur since physical venues were forced to close during the Covid-19 pandemic, parties can choose, for example, Dubai or Singapore without actually having to up sticks and travel halfway around the world to take part.

For investors and companies with business interests in the EU, the SCC’s decision demands a radical rethink of the arbitration provisions enshrined in their contracts. Moreover, foreign investors rely on arbitration as a more neutral and predictable mechanism

with states, especially those involving regulations that may impact investments in sectors such as energy, infrastructure and telecommunications. And for those parties who prefer to resolve any disputes within Europe, it is surely London – with its sophisticated judicial infrastructure and world-leading reputation for observance of the rule of law – which will benefit the most as a preferred seat. One has only to turn to the May 2023 decision of Mr Justice Fraser in the English High Court, when he ruled that the International Centre for Settlement of Investment Disputes (ICSID) award in Infrastructure Services Luxembourg v Kingdom of Spain (commonly known as the Antin award) should be recognised, upholding Mrs Justice Cockerill’s June 2021 decision and sending a powerful signal that post-Brexit Britain is open for arbitration business, signalling a clear departure from the diktats of the CJEU.

THE QUESTION OF ENFORCEMENT

It is a universal truth that a reliable and impartial dispute resolution framework is a prerequisite for companies seeking to invest overseas and, even with alternative seats such as England and Switzerland providing perfectly acceptable solutions on the EU’s doorstep, there remains the problem of enforcement, with it unlikely to the point of impossible that a member state’s national courts would fly in the face of the CJEU and enforce an award from, say, the London Court of International Arbitration. As the SCC stated: “The SCC’s new policy aims to address the evolving legal landscape while ensuring the legal enforceability of arbitral awards rendered under the SCC Rules.”

While the enforcement conundrum has existed since Achmea, Stockholm’s public breaking of ranks with its EU siblings sends a clear signal to the wider world that EU legislation is inclined towards protecting the interests of its member states as a whole rather than being entirely impartial, and there will be less enthusiasm to invest in a country – or, for that matter, a supranational trading bloc – with a judicial system that runs the risk of being seen as inherently biased to one party in a dispute.

source: iclg