Arbitration Case Alert

Swiss Supreme Court upholds intra-EU ECT arbitration award and rejects ECJ's Komstroy ruling


Case number 4A_244/2023 (3 April 2024)

In Decision 4A_244/2023, the Swiss Supreme Court issued a landmark ruling on the controversial question of the jurisdiction of arbitral tribunals over intra-EU investment disputes. The Swiss Supreme Court rejected all challenges raised by Spain to an arbitration award rendered by a Swiss tribunal in favour of French investor EDF under the Energy Charter Treaty (ECT) and affirmed the tribunal's jurisdiction.

The Supreme Court held that, as a Swiss court called upon to examine the jurisdiction of a Swiss-seated arbitral tribunal, it was not bound by the ECJ judgment in Republic of Moldova v Komstroy, which held that the ECT did not apply to intra-EU disputes. In matters where there was a controversy as to the interpretation of foreign law, the Swiss courts will usually defer to the highest court of the country that enacted that law. However, that did not make sense where, as here, the court determining whether EU law prevailed over the ECT was an EU institution, which may be tempted to affirm the primacy of its own law over the international treaty and, effectively, render a decision in its own cause.

In any case, the Supreme Court was not convinced by the ECJ's reasoning in Komstroy, which was based exclusively on the specific nature of EU law and failed to take into account international law or the rules on treaty interpretation.

After a thorough analysis of several ECT provisions, EU and international law, and applying the Vienna Convention on the Law of Treaties, the Supreme Court concluded that there were no grounds to consider that the unconditional consent to arbitrate given by Spain in article 26 of the ECT excluded intra-EU disputes.

The Supreme Court also deemed Spain's argument that intra-EU disputes are inarbitrable in the wake of the Komstroy ruling to be inadmissible, as its challenge was improperly framed under the Swiss Private International Law Act.

The Supreme Court dismissed Spain's further argument that the arbitral tribunal had failed to deliberate on the award in Green Power v Spain and held that Spain was precluded from raising the alleged lack of impartiality of the presiding arbitrator as a ground for annulment of the award, given that it had never raised any objection regarding his impartiality during the arbitration.

The decision is notable for its thoroughness, rejecting on the merits several grounds that the court also ruled inadmissible, and also for the unusually strong terms in which the reasoning in Komstroy was rejected.

Read our full update on the decision here.


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