European Commission v Slovak Republic.

• Jurisdiction: European Union
• Celex Number: 62009CC0264
• ECLI: ECLI:EU:C:2011:150
• Date: 15 March 2011
• Docket Number: C-264/09
• Court: Court of Justice (European Union)
• Procedure Type: Recours en constatation de manquement - non fondé

OPINION OF ADVOCATE GENERAL

JÄÄSKINEN

delivered on 15 March 2011 (1)

Case C‑264/09

European Commission

v

Republic of Slovakia

(Failure of a Member State to fulfil obligations – Internal market in electricity – Directive 2003/54/EC – Priority Access – Non-discriminatory access to transmission and distribution systems – Investment contract concluded prior to accession to the European Union – Energy Charter Treaty – Bilateral Investment Protection Agreement –Article 307 EC – Fair and equitable treatment – Expropriation)

I – Introduction

1. This case concerns the relationship between Slovakia’s EU law obligations to ensure non-discriminatory access to the electricity transmission network pursuant to Directive 2003/54/EC (‘Directive 2003/54’) (2) and its obligations to protect investments pursuant to an agreement on the promotion and reciprocal protection of investments (‘the Investment Protection Agreement’) signed on 5 October 1990 and concluded with Switzerland prior to Slovakia’s accession to the EU on 1 May 2004. (3)

2. At the centre of the dispute is a private law contract (‘the Contract’) concluded on 27 October 1997, between a Swiss company (Aare-Tessin AG für Elektrizität (‘ATEL’)) and a State-owned network operator in Slovakia (known as Slovenské elektráne a.s. at the time, and subsequently as Slovenská elektrizačná prenosová sústava a.s. (‘SEPS’)). Pursuant to the Contract ATEL paid over half of the construction costs of the yet-to-be-constructed Lemesany-Krosno line from Poland to Slovakia, in return for priority access to the line for a defined and non-renewable period of 16 years.

3. The Commission now asks the Court to declare that by not ensuring non-discriminatory access to the electricity transmission network, Slovakia has failed to fulfil its obligations pursuant to Articles 20(1) and 9(e) of Directive 2003/54. Although the Commission does not expressly ask the Court to declare that Slovakia should annul the Contract, in its observations to the Court it states that Slovakia is not obliged to keep that contract in force. It further contends that a mere non-application of the Contract would be insufficient to remedy the alleged infringement. In this respect, the Court has implicitly been invited by the Commission to consider whether Slovakia should be obliged to annul the Contract.

4. Slovakia, on the other hand, submits that the Contract is protected as an investment under the Energy Charter Treaty and that Directive 2003/54 should be interpreted in conformity with the EU’s obligations under the Energy Charter Treaty.

II – Legal framework

International law

– Vienna Convention on the Law of Treaties (4)

5. Article 31 of the Vienna Convention of the Law of the Treaties, entitled ‘General rule of interpretation’, states:

‘1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

…

4. A special meaning shall be given to a term if it is established that the parties so intended.’

– Energy Charter Treaty (5)

6. Article 10(1) of the Energy Charter Treaty states:

‘Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party.’

7. Article 13 of the Energy Charter Treaty deals with expropriation. It states in the relevant part:

‘(1) Investments of Investors of a Contracting Party in the Area of any other Contracting Party shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation (hereinafter referred to as “Expropriation”) except where such Expropriation is:

(a) for a purpose which is in the public interest;

(b) not discriminatory;

(c) carried out under due process of law; and

(d) accompanied by the payment of prompt, adequate and effective compensation.’

– The Investment Protection Agreement

8. Article 1 of the Investment Protection Agreement, entitled ‘Definitions’, states in the relevant part:

‘(2) The term “investments” shall include every kind of assets and particularly:

…

(c) claims and rights to any performance having an economic value;

…’

9. Article 3 of the Investment Protection Agreement, entitled ‘Promotion, admission’, states:

‘(1) Each Contracting Party shall in its territory promote investments by investors of the other Contracting Party and admit such investments in accordance with its laws and regulations.

…’

10. Article 4, entitled ‘Protection, treatment’, states:

‘(1) Each Contracting Party shall protect within its territory investments made in accordance with its laws and regulations by investors of the other Contracting Party and shall not impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment, extension, sale and liquidation of such investments …

(2) Each Contracting Party shall ensure fair and equitable treatment within its territory of the investments of the investors of the other Contracting Party. This treatment shall not be less favourable than that granted by each Contracting Party to the investments made within its territory by its own investors or than that granted by each Contracting Party to the investments within its territory by investors of the most favoured nation, if this latter treatment is more favourable …’

11. Article 6, entitled ‘Dispossession, compensation’, states:

‘(1) Neither of the Contracting Parties shall take, either directly or indirectly, measures of expropriation, nationalization or any other measure having the same nature or the same effect against investments of investors of the other Contracting Party, unless the measures are taken in the public interest, on a non discriminatory basis, and under due process of law, and provided that provisions be made for effective and adequate compensation …’

12. Article 9, which is entitled ‘Disputes between a contracting party and an investor of the other contracting party’, states:

‘(1) For the purpose of solving disputes with respect to investments between a Contracting Party and an investor of the other Contracting Party and without prejudice to Article 10 of this Investment Protection Agreement (Disputes between Contracting Parties), consultations will take place between the parties concerned.

(2) If these consultations do not result in a solution within six months, the dispute shall upon request of the investor be submitted to an arbitral tribunal. Such arbitral tribunal shall be established as follows:

(a) The arbitral tribunal shall be constituted for each individual case. …

(b) If the periods specified in paragraph (a) of this Article have not been observed, either party to the dispute may, in the absence of any other arrangements, invite the President of the Court of Arbitration of the International Chamber of Commerce in Paris to make the necessary appointments. …

(c) Unless the parties to the dispute have agreed otherwise, the tribunal shall determine its procedure. Its decisions are final and binding. Each Contracting Party shall ensure the recognition and execution of the arbitral award. …

(3) In the event of both Contracting Parties having become members of the Convention of Washington of March 18, 1965 on the Settlement of Investment Disputes between States and Nationals of other States, disputes under this Article may, upon request of the investor, as an alternative to the procedure mentioned in paragraph 2 of this Article, be submitted to the International Centre for Settlement of Investment Disputes.

…

(5) Neither Contracting State shall pursue through diplomatic channels a dispute submitted to arbitration, unless the other Contracting State does not abide by or comply with the award rendered by an arbitral tribunal.’

13. Article 10, entitled ‘Disputes between contracting parties’, states:

‘(1) Disputes between Contracting Parties regarding the interpretation or application of the provisions of this Investment Protection Agreement shall be settled through diplomatic channels.

(2) If both Contracting Parties cannot reach an agreement within twelve months after the beginning of the dispute between themselves, the latter shall, upon request of either Contracting Party, be submitted to an arbitral tribunal of three members. Each Contracting Party shall appoint one arbitrator, and these two arbitrators shall nominate a chairman who shall be a national of a third State.

…

(7) The decisions of the tribunal are final and binding for each Contracting Party.’

14. Article 11 is entitled ‘Observance of commitments’. Its relevant parts state:

‘Either Contracting Party shall constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors of the other Contracting Party.’

EU law

– The EC Treaty (6)

15. Article 307 EC states:

‘1. The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other...