Background
The Singapore International Commercial Court (“SICC”) has made a notable contribution to the evolving jurisprudence on investment treaty arbitration, by refusing to set aside an Energy Charter Treaty (“ECT”) arbitral award rendered in favour of investors incorporated in the United Kingdom and against an EU Member State (“State”). This decision reflects the Court’s engagement with the complex legal dynamics that arise at the intersection of EU law and the framework of international investment arbitration.
The dispute arose out of an energy project located in the host State, in which the UK investors collectively held a 72% majority stake in the project company, while the remaining shares belonged to a non-EU affiliate. In response to the measures implemented by the State, two arbitral proceedings were commenced: one initiated by the non-EU affiliate under a bilateral investment treaty, and a separate claim brought shortly thereafter by the UK investors pursuant to Article 26 of the ECT. The ECT tribunal, constituted under the UNCITRAL Rules and seated in Singapore, awarded damages apportioned to the investors’ 72% shareholding in the project company. The arbitration commenced on 9 September 2020, during the Brexit Transition period when EU law was still applicable to the United Kingdom. The award, however, was rendered after 1 January 2021, by which time the Transition Period had expired.
Application before SICC and Submissions of the Parties
The State applied to the SICC to set aside the ECT award. Central to its challenge was the contention that the dispute was an “intra-EU” dispute and that, following the Court of Justice of the European Union’s (“CJEU”) decisions in Achmea and Komstroy, Article 26 of the ECT was incompatible with EU law and incapable of providing valid jurisdiction or consent to arbitration. In particular, the State relied on Articles 267 and 344 of the Treaty on the Functioning of the European Union, contending that disputes touching upon the interpretation or application of EU law ought to remain within the EU judicial framework and subject to the supervisory role of the CJEU, and therefore should not be determined by arbitral tribunals. The State also advanced additional grounds of challenges, including non-qualification of
investment as “investment” under the ECT, the award being contrary to Singapore’s public policy, breach of natural justice based on the inability to present its case in reference to adjustments to the damage calculations made by the Tribunal, and that the ECT claim was barred by the fork-in-the-road provision by arguing that related claims arising from the same measures had already been pursued by the non-EU affiliate through the BIT arbitration.
The investors resisted the application on the basis that the ECT is a multilateral treaty operating on the plane of international law. They submitted that EU law doctrines of primacy and autonomy operate only within the EU legal order and do not function as international conflict rules capable of overriding treaty obligations before courts of third states. The investors further maintained that the ECT claim was legally distinct from the earlier BIT arbitration brought by the non-EU affiliate and was therefore not precluded by the fork-in-the-road provision. In any event, they contended that even if a jurisdictional issue had arisen at the commencement of arbitration, it had been cured by the time the award was rendered, following the cessation of EU law’s application to the UK.
The Decision
The SICC dismissed the State’s application in its entirety. It held that the arbitration agreement in Article 26 of the ECT is governed by international law, and not by EU law, in the absence of any express or implied choice to that effect. The Court held that the CJEU decisions in Achmea and Komstroy bind EU institutions and courts, but do not automatically displace the ECT’s arbitration consent as a matter of international law in third-country fora. The SICC further reflected the State’s attempt to characterize Article 26 as a bilateral obligation capable of selective disapplication between EU Member States, and instead treating it as a multilateral commitment undertaken by each contracting party under the ECT.
The SICC rejected the State’s submission that the UK investors’ interests had to satisfy the Salini criteria in addition to falling within the ECT’s definition of “Investment”. It held that the satisfaction of the definition of investment under Article 1(6) of the ECT is sufficient in itself, without the need to apply further objective criteria developed in the context of the ICSID Convention. In any event, the tribunal had considered the Salini factors ex abundante cautela and correctly found them satisfied, including the existence of a contribution, duration,
assumption of risk, and participation in an economic venture in the host State. Therefore, the investors’ direct and indirect shareholdings constituted protected investments under the ECT. The Court further observed that the tribunal had carefully considered competing expert reports and the valuation material, found no procedural unfairness in the tribunal’s adjustments to the assessment of damages, and accordingly, rejected the State’s submission that it had been deprived of a fair opportunity to present its case on quantum. The Court also found no merit in the public policy, natural justice, or fork in the road objections. Accordingly, the award was upheld.
Comments and Conclusion
This judgment signals, in practical and doctrinal terms, that courts of third states continue to play a vital role in upholding international arbitration and preserving treaty-based dispute resolution. By anchoring its analysis in the text of the ECT and applying orthodox principles of treaty interpretation, the SICC has reiterated that enforcement certainty outside the EU is not contingent on the contours of the evolving scope of the EU law, but on the continued application of international law.
The judgment is consistent the Swiss Federal Supreme Court’s April 2024 decision rejecting the intra-EU objection to an ECT award[1]. Taken together, these decisions may reinforce the preference for neutral seats such as Switzerland and Singapore for ECT disputes, particularly at a moment where approaches to investor-state arbitration are no longer aligned across EU and non-EU states. What makes DNZ v DOA particularly instructive is not that it challenges the autonomy of EU law, but that it clearly demarcates its reach. This decision brings into focus an emerging asymmetry whereby EU courts have increasingly restricted investor-State arbitration in the intra-EU context, while similar arguments have received a more limited reception when disputes are examined beyond EU borders.
*Vyapak Desai, Counsel – International Disputes & Investigations, Vyapak Desai Law Chambers
** Ananya Mittal, is associated with Vyapak Desai Law Chambers.
[1] EDF v Kingdom of Spain, Swiss Federal Supreme Court, 4A_244/2023 of 3 April 2024