Young EFILA Kick Off Event: a lively debate on the European Union as an attractive foreign investment destination

By Velislava Hristova[1]

Held in a hybrid format, the Young EFILA’s official kick-off event took place on 8 June 2022 at the Amsterdam office of Linklaters LLP and online.  The event featured an Oxford-style debate on the motion: “After Achmea, Komstroy and PL Holdings: the EU is still an attractive foreign investment destination”.

The debate was arbitrated by Prof. Gerard Meijer of Linklaters LLP, Dr. Crina Baltag of Stockholm University and Ms. Nynke M. Hupkens-Sipma of Achmea with:

  • Mr. Richard Trinick of Three Crowns LLP;
  • Ms. Naomi Briercliffe of Allen & Overy LLP and
  • Ms. Krystle Baptista Serna of KB International Law & Arbitration

for the motion and

  • Ms. Merryl Lawry-White of Debevoise & Plimpton LLP;
  • Ms. Isabel San Martin of LALIVE SA and
  • Mr. Georgios Fasfalis of Linklaters LLP

against the motion.

The event began with welcoming remarks by Prof. Meijer, who acknowledged that the European Federation for Investment Law and Arbitration (“EFILA”) owed its success to both the important topics it dealt with but also to its Secretary-General, Prof. Nikos Lavranos, who has been the driving force behind the initiative.  Following the welcoming remarks, Prof. Lavranos introduced the underlying reasons behind the establishment of Young EFILA, stressing the importance of broadening EFILA by involving the next generation of leaders of the arbitration community to ensure a continuous input of fresh ideas and initiatives for the organization.  Prof. Lavranos then set the background for the debate by briefly explaining the reason for selecting the motion to be discussed.

Before both sides made their submissions, the attendees were invited to vote on whether or not the motion should be accepted.  The combined vote of the in-person and online attendees showed 60% support in favour of the motion.


The first speaker for the motion, Mr. Trinick, introduced his team’s three main arguments under the common theme that the judgments in Achmea, Komstroy and PL Holdings have made no material difference to investors and the European Union (“EU”) remained a highly attractive destination for foreign investors.  

In addressing the argument that, according to the available evidence, the judgments in question could not and had not materially impacted companies’ willingness to invest in the EU, Mr. Trinick made two main submissions.

First, the economic evidence did not confirm any impact on investors’ willingness to invest in the EU.  The argument was supported by two propositions, the first being that limiting the access to investment arbitration could not impact the investment attractiveness of the EU.  That was because the EU was large and very open to the foreign direct investment (“FDI”) market.  The second proposition in support of the argument was that investors in the EU did not often consider the availability of investment treaty protection.  Studies have revealed that investors require a stable and effective investment environment but not necessarily the availability of investment treaty protection.  This was normal, according to Mr. Trinick, because, as a whole, the EU’s investment environment was stable and satisfactory. 

Second, the judgments had no impact on the FDI levels within the EU; on the contrary – intra-EU FDIs even increased after Achmea.  Achmea itself was used as an example since the company continued to invest in the EU, amongst others in Slovakia.

Mr. Trinick concluded that the economic advantages of investing in the EU are such that even after Achmea, investors have shown little reticence in continuing to invest in the EU.

The second speaker for the motion, Ms. Briercliffe, submitted that from a legal perspective the judgments of the Court of Justice of the European Union (“CJEU”) failed to affect the attractiveness of the EU for the EU investors.  The main reason was that EU investors were not allowed to refer to investment arbitration under intra-EU disputes even prior to Achmea; however, following Achmea, the legal framework became clearer.  Furthermore, the subsequent treaty to terminate existing intra-EU Bilateral Investment Treaties (“BITs”) was a political and not a legal decision, which was why it could not affect the EU’s attractiveness from a legal standpoint.  In addition, the Energy Charter Treaty (“ECT”) continued to provide investment protection in energy-related disputes.  In fact, according to Ms. Briercliffe, the EU’s investment attractiveness increased as a result of the judgments since they enhanced legal certainty.  EU investors became aware of where they stand investing in an EU member state.  Moreover, the judgments in question followed the reasoning of the established case law, granting primacy of EU law over domestic or international law when EU member states were concerned.  This was a tendency which could be traced back to case law of 1988.  

Ms. Briercliffe concluded that the recent judgments simply confirmed a pre-established position of EU law, reinstating the reliability of the EU system, making it more attractive to investors.

The third speaker for the motion, Ms. Baptista, argued that investors from non-EU countries still find the EU an attractive investment destination, making two main arguments.

First, by examining the scope of each of the three judgments, Ms. Baptista defended the view that they had no impact on foreign investors.  As a subsidiary argument, if deemed necessary, investors could ensure that the host country had assets outside of the EU which could be executed in case of a favourable award, choose a seat of arbitration outside of the EU and choose the International Centre for Settlement of Investment Disputes (“ICSID”) or ICSID Additional facility.

Second, Ms. Baptista argued that the EU has gone to great lengths in order to reinforce its attractiveness as an investment destination.  Ms. Baptista illustrated this argument with three examples.  First, the EU adopted new legislation and coordinated the efforts of all institutions to improve its investment protection policy, a continuation of which were also the three judgments in question.  Second, the EU continued to negotiate and implement investment rules in trade and investment agreements, however, with enhanced standards, thus improving standards globally.  The recently signed investment agreements ensured that the EU would continue to be an attractive investment destination while implementing internationally recognized standards like prohibitions to lower domestic environmental or labour standards and including references to human rights and corporate social responsibility.  Third, the EU continued its commitment and took an active role in reforming the ISDS system and led the UNCITRAL Working Group on the establishment of a Multilateral Investment Court.

Ms. Baptista concluded that the impact of the three judgments on the overall attractiveness of the EU was limited or nonexistent.

As the first speaker against the motion, Ms. Lawry-White clarified that her team interpreted the question as a relative one to understand the impact of the judgments—whether the EU is as attractive as it would have been had these judgments not been passed.  The short answer to that was “no” with the main reason for that being the destabilizing effect of Achmea and the other cases.  Investment does not flourish in the context of legal uncertainty.  Referring to the 2020 Queen Mary International Arbitration Survey: Investor-State Dispute Settlement (“2020 Queen Mary survey”), Ms. Lawry-White argued further that investors did not have the same confidence in domestic courts and investment arbitration.  She developed three main points against the motion.

First, Ms. Lawry-White highlighted the way the judgments undermined the international rule of law.  Both EU law and investment protections in treaties were “creatures of international law”.  From an international law perspective, this relationship was a question of the law of treaties.  Between international norms, there was no hierarchy.  Further, there was a presumption against conflict.  Parties were presumed to intend to uphold their commitments.  Instead of following those principles, the CJEU, driven purely by political considerations and without any systemic international legal analysis, assumed one set of international rules to have precedence over others.  According to Ms. Lawry-White, such an arbitrary line was deeply destabilizing to the regulatory environment.

In her second (related) point, Ms. Lawry-White discussed the importance of the rule of law for the investment attractiveness of the EU.  In support of her point, she noted that there are many studies underlining this point, including a 2014 study by the Economist Intelligence Unit underlining the essential role of a strong rule of law for investors.  The study also revealed that 73% of respondents confirmed that having an investment treaty in place was essential or very important to the FDI decision-making.

The third point of Ms. Lawry-White concerned the macroeconomic data introduced by the opposing team.  She noted that such data did not examine what would have happened had the judgments not been rendered.  In addition, studies did not take into account all other factors that could have contributed to investment attractiveness.  Lastly, Ms. Lawry-White asked whether the data could correctly measure all implications of the judgments since we have not fully discovered the full potential of their impact yet.

Speaking second against the motion, Ms. San Martin stated that the judgments in the three cases in question illustrated the extensive and surprising reach of the CJEU and represented the subversion of the rule of law in the EU more generally and discussed the judgments in turn.

Starting with Achmea, Ms. San Martin argued that the judgment itself was not bringing uncertainty.  Instead, the European Commission’s interpretation of Achmea in a manner extending its effects over all intra-EU BITs was what caused concern.  In addition, the requirement to terminate intra-EU BITs with retroactive effect undermined the perception of the rule of law in the EU.  Further uncertainty was created by the extension of Achmea over all pending investment arbitrations, including those where no enforcement of the award has taken place yet.  Finally, it was devastating to investors that sunset clauses in these BITs were also eliminated.

Moving on, Ms. San Martin expressed the view that Komstroy was an even more significant blow to the rule of law in the EU.  First, it was concerning that the CJEU expanded its jurisdiction to a case not involving EU parties and EU law.  Even more concerning was the fact that the court answered questions which were not put before it.  According to Ms. San Martin, it was highly irregular for the CJEU to conclude that intra-EU arbitration under the ECT was also incompatible with EU law in that case, especially when there was another case pending at the time, which was much more suitable for the purpose.

Finally, PL Holdings continued the tendency for EU law expansion by concluding that contract-based investment disputes, even if specifically agreed between the investor and the state, were also inadmissible.

Ms. San Martin concluded that the problem with the judgments in question was not only the complete dismantling of investment protection but the legal uncertainty and the watering down of the rule of law, all of which made the EU less attractive for investors.

Speaking last against the motion, Mr. Fasfalis expressed the view that the CJEU was not providing more enhanced legal certainty than investment arbitration, presenting two main arguments.

First, Mr. Fasfalis argued that the judgments and the termination agreement led to a situation that does not provide effective protection to investors.  He put forward that investors do not have the appropriate level of protection before domestic courts due to a lack of understanding of the legal framework and unfamiliarity with EU investment protection rules (or even challenges to the primacy of EU law by national courts).  Further, in many cases, the decisions of domestic courts might be affected by political considerations, especially in countries where the independence of the court system is put into question, even by the European Commission.  In addition, investors cannot – in practice – have direct standing before the CJEU.  As a result of that, Mr. Fasfalis concluded that investors are left unprotected against state measures.  Moreover, many investors have a negative view of domestic court litigation, referring to the results of the 2020 Queen Mary survey.  Mr. Fasfalis further highlighted that the EU investment framework was unclear, difficult to navigate and enforce and limited in its scope in comparison with investment arbitration.

Second, Mr. Fasfalis stated that investors that have secured favourable arbitral awards against EU member states but face difficulties enforcing those due to the judgments might think twice before re-investing in Europe.  That makes the EU a less attractive investment destination.  Mr. Fasfalis also noted that investors might also consider moving substantial business activities outside the EU in order to secure sufficient investment protection as a result of the judgments.  

Following a series of questions by the Tribunal and rebuttals made by both sides, the Tribunal withdrew for deliberation.

Tribunal’s decision and audience’s vote

While the Tribunal was deliberating in private, the audience was again asked to vote.  The results of the vote showed that after the debate audience’s support for the motion increased from 60% to 70%.

In contrast, the Tribunal decided unanimously against the motion.  Despite the creativity of the arguments of the team arguing in favour of the motion, Ms. Hupkens-Sipma found the arguments of the team against the motion to be more convincing, agreeing that the EU is not an attractive investment destination at the moment.  Like Ms. Hupkens-Sipma, Dr. Baltag pointed out that the team arguing in favour of the motion could have focused on the future initiatives of the EU related to the procedural and substantive investment protection that could provide a solution to the existing problems and decided against the motion.  Prof. Meijer concluded that the team arguing against the motion was more convincing than the other team but noted that it was a photo finish.  He complimented the team arguing in favour of the motion for the effort and creativity they put forward in pleading their case.  Referring to a comment made by Dr. Baltag, he suggested that both teams could have focussed more on existing differences between the different countries in the EU and the potential solutions available to the EU, its Member States, the CJEU and arbitration practitioners in the wake of Achmea, Komstroy and PL Holdings.

The views expressed by the speakers during the event should not be attributed to the firms they work at and not necessarily reflect their own opinion on the discussed issue.

[1] Velislava Hristova is a Bulgarian qualified lawyer trained in civil law and common law jurisdictions. She specialises in investor-state arbitration, complex commercial disputes and public international law and is a Dispute Resolution Fellow of the American Bar Association’s Section of Dispute Resolution and a Diversity Fellow of the International Law Section.

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