Case C‑741/19
Republic of Moldova
v
Komstroy LLC, successor in law to Energoalians
(Request for a preliminary ruling from the Cour d’appel de Paris)
Judgment of the Court (Grand Chamber), 2 September 2021
(Reference for a preliminary ruling – Energy Charter Treaty – Article 26 – Inapplicability between Member States – Arbitration Award – Judicial review – Jurisdiction of a court of a Member State – Dispute between a third-State operator and a third State – Jurisdiction of the Court – Article 1(6) of the Energy Charter Treaty – Concept of ‘investment’)
1. Questions referred for a preliminary ruling – Jurisdiction of the Court – Interpretation of an international agreement concluded by the European Union and the Member States on the basis of shared competence – Energy Charter Treaty – Dispute between a third-State operator and a third State – European Union interest in a uniform interpretation of a provision of that agreement – Jurisdiction of the Court to provide that interpretation
(Art. 19 TEU; Art. 267 TFEU; Energy Charter Treaty 1994, Arts 1(6) and 26(1))
(see paragraphs 22-38)
2. International agreements – Energy Charter Treaty – Dispute submitted to an arbitral tribunal provided for by that treaty – Tribunal not part of the judicial system of a Member State, but constituted on the basis of the Arbitration Rules of the United Nations Commission on International Trade Law (Uncitral) – Dispute between a Member State and an investor in another Member State on the subject of an investment made by the latter in the first Member State – Not included
(Energy Charter Treaty 1994, Arts 1(6) and 26)
(see paragraphs 48-66)
3. International agreements – Energy Charter Treaty – Investment – Concept – Acquisition by an undertaking of a Contracting Party to the treaty, of a claim arising from a contract for the supply of electricity not connected with an investment, held by an undertaking of a third State to that treaty against a public undertaking of another Contracting Party to the same treaty – Not included
(Energy Charter Treaty 1994, Arts 1(6) and 26(1))
(see paragraphs 67-85, operative part)
Résumé
In performance of a series of contracts concluded in 1999, Ukrenergo, a Ukrainian producer, sold electricity to Energoalians, a Ukrainian distributor, which resold that electricity to Derimen, a company registered in the British Virgin Islands, which in turn resold that electricity to Moldtranselectro, a Moldovan public undertaking with a view to exporting it to Moldova. The volumes of electricity to be supplied were agreed each month directly between Moldtranselectro and Ukrenergo.
Derimen paid Energoalians the full amounts due for the electricity purchased, whilst Moldtranselectro only partially settled the amounts due to Derimen for that electricity. On 30 May 2000, Derimen assigned to Energoalians the claim that it had against Moldtranselectro. The latter settled its debt to Energoalians in part by assigning to it claims that it held. Energoalians attempted unsuccessfully to obtain payment of the remainder of that debt, a sum of 16 287 185.94 United States dollars (USD) (approximately EUR 13 735 000), by bringing proceedings before the Moldovan courts and subsequently the Ukrainian courts.
Energoalians considered that certain conduct by the Republic of Moldova in that context constituted serious breaches of the undertakings made under the Energy Charter Treaty (1) (‘the ECT’), the essential concept of which is to catalyse economic growth by means of measures to liberalise investment and trade in energy.
Energoalians, whose rights were subsequently assigned to Komstroy LLC, initiated the arbitration procedure provided for by the ECT. (2) The ad hoc arbitral tribunal constituted in order to resolve that dispute, sitting in Paris (France), held that it had jurisdiction and ordered the Republic of Moldova to pay a sum of money to Energoalians on the basis of the ECT. Following an action to set aside the arbitral award and a judgment of the Cour de cassation (Court of Cassation, France), the jurisdiction of that arbitral tribunal is disputed by the Republic of Moldova before the Cour d’appel de Paris (Court of Appeal, Paris, France), the referring court, on the ground that the claim arising from a contract for the sale of electricity does not constitute an ‘investment’ within the meaning of the ECT. (3) To that end, the referring court has asked three questions relating to the concept of ‘investment’.
By its judgment, the Court, sitting as the Grand Chamber, holds that the acquisition, by an undertaking of a Contracting Party to the ECT, of a claim arising from a contract for the supply of electricity, which is not connected with an investment, held by an undertaking of a third State to that treaty against a public undertaking of another Contracting Party to the same treaty, does not constitute an ‘investment’ within the meaning of the ECT. (4)
Findings of the Court
As a preliminary matter, the Court ascertains its own jurisdiction to answer the questions referred for a preliminary ruling since several parties, including Komstroy, submitted that EU law does not apply to the dispute in issue, the parties to the dispute being outsiders to the European Union.
The Court confirms that it has jurisdiction to give a preliminary ruling on the interpretation of the ECT, which is a mixed agreement, that is to say concluded by the European Union and a large number of Member States. More specifically, it has jurisdiction to answer the questions referred since they concern the concept of ‘investment’ within the meaning of the ECT and, since the entry into force of the Treaty of Lisbon, the European Union has exclusive competence as regards foreign direct investment and, as regards investments that are not direct, it has shared competence. (5)
That conclusion is not called into question by the fact that the dispute at the origin of the main proceedings is between an investor of a third State and another third State. It is true that, in principle, the Court does not have jurisdiction to interpret an international agreement as regards its application in the context of a dispute not covered by EU law. That is the case in particular where such a dispute is between an investor of a non-member State and another non-member State. However, it is in the interest of the European Union that, in order to forestall future differences of interpretation, the concept of ‘investment’ should be interpreted uniformly, whatever the circumstances in which it is to apply. That is the case for the provisions whose interpretation is sought by the referring court. In particular, in a case covered by EU law, that court could be required to rule on the interpretation of those same provisions of the ECT whether in the context of an application to set aside an arbitral award or in ordinary court proceedings.
In any event, the parties to the dispute chose to submit that dispute to an ad hoc arbitral tribunal established on the basis of the Arbitration Rules of the United Nations Commission on International Trade Law (Uncitral) (6) and agreed, in accordance with those arbitration rules, that the seat of the arbitration should be established in Paris, that is to say on the territory of a Member State, in this case France, in which the ECT is applicable as an act of EU law. For the purposes of the proceedings brought in that Member State, that fixing of the seat of arbitration thus entails the application of EU law, compliance with which the court hearing the case is obliged to ensure in accordance with Article 19 TEU.
In order to answer the referring court’s first question relating to the concept of ‘investment’ within the meaning of the ECT, that interpretation being necessary in order to ascertain whether the ad hoc arbitral tribunal has jurisdiction, the Court first of all examines which disputes may be brought before an arbitral tribunal pursuant to Article 26 ECT. Several Member States that participated in the written and oral stages of the proceedings invited the Court to specify whether such a tribunal may, in compliance with the principle of the autonomy of the EU judicial system, rule on a dispute between an operator of one Member State and another Member State. (7)
The Court states in that regard, in the first place, that the arbitral tribunal rules in accordance with the ECT, which is an act of EU law, and also of international law, with the result that that tribunal may be required to interpret and apply EU law.
In the second place, that arbitral tribunal does not constitute an element of the judicial system of a Member State, in this case France. It follows that that tribunal cannot be regarded as a court or tribunal ‘of a Member State’ within the meaning of Article 267 TFEU, and is not therefore entitled to make a reference to the Court for a preliminary ruling. (8)
In the third place, in order to ensure compliance with the principle of the autonomy of the EU judicial system, the arbitral award must be subject to review by a court of a Member State, capable of ensuring full compliance with EU law, guaranteeing that questions of EU law may, if necessary, be submitted to the Court by means of a reference for a preliminary ruling. In the present case, the parties to the dispute chose an arbitral tribunal on the basis of the Uncitral arbitration rules and accepted that the seat of arbitration be established in Paris, with the result that that renders French law applicable to proceedings for judicial review of the arbitration award made by that tribunal. However, such judicial review can be exercised by that national court only to the extent that national law so permits. French law provides only for limited review concerning, in particular, the jurisdiction of the arbitral tribunal. Moreover, the arbitration procedure in question is different from commercial arbitration proceedings, which originate in the freely expressed wishes of the parties concerned. That procedure derives from a treaty whereby Member States consent to remove from the system of judicial remedies that they are required to establish disputes that could involve the application and interpretation of EU law.
Having regard to all of the characteristics of the arbitral tribunal, if the dispute was between Member States, the mechanism for settling that dispute would not be capable of ensuring that the dispute would be determined by a court within the EU judicial system, it being understood that only such a court is capable of guaranteeing the full effectiveness of EU law. (9) Consequently, the provision of the ECT at issue (10) does not apply to disputes between a Member State and an investor in another Member State on the subject of an investment made by the latter in the first Member State.
Next, the Court clarifies the concept of ‘investment’ within the meaning of the ECT. In that regard, the Court holds that a claim arising from a contract for the supply of electricity constitutes an asset held directly by an investor, it being specified that the term ‘investor’, defined by the ECT and used in particular in Article 26(1) ECT, designates, inter alia, as regards a Contracting Party such as Ukraine, any undertaking organised in accordance with the legislation applicable in the territory of that Contracting Party. However, a claim arising from a mere contract for the sale of electricity cannot be regarded as having been granted in order to undertake an economic activity in the energy sector. It follows that a mere contract for the supply of electricity, in this case produced by other operators, is a commercial transaction which cannot, in itself, constitute an ‘investment’. That interpretation is consistent with the clear distinction made by the ECT between trade and investments.