Achmea’s Constitutional Complaints related to Intra-EU Arbitration Are Dismissed

The Achmea saga seems to have come to an end. On 23 July 2024, the German Federal Constitutional Court (Bundesverfassungsgericht) declined to hear two constitutional complaints filed by the Dutch insurance company Achmea BV (“Achmea”). One complaint was directed against a court decision by the German Federal Court of Justice (Bundesgerichtshof), the second one was directed against the adoption of a law related to intra-EU investment treaties.

Achmea asks for constitutional review of decision to set aside BIT award 

By its first constitutional complaint, Achmea had asked for a constitutional review of the set-aside decision by the German Federal Court of Justice with regard to an arbitral investment law award issued on the basis of Art. 8 of the Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federal Republic of 1991 (“Slovak-Dutch-BIT”).

Achmea had won this award worth EUR 22.1 million against the Slovak Republic in 2012 in a dispute over the Slovak Republic’s decision to reverse the liberalisation of the private health insurance market. The arbitration had been seated in Frankfurt am Main, Germany. The Slovak Republic had pursued the annulment of this award before the Higher Regional Court of Frankfurt am Main and, later, before the German Federal Court of Justice (Bundesgerichtsfhof). As part of the annulment proceedings, the German Federal Court of Justice had referred the question to the European Court of Justice (“ECJ”) as to whether arbitration clauses, such as those in the intra-EU investment protection agreement are compatible with EU law.

In its landmark Achmea ruling of 6 March 2018, the ECJ ruled that such arbitration clauses are incompatible with EU law, in particular Articles 267 and 344 of the Treaty on the Functioning of the European Union. As a result, the German Federal Court of Justice set aside the Achmea arbitration award. Achmea lodged its constitutional complaints against this, alleging the Federal Court of Justice and CJEU had violated its constitutional rights and broader principles of public international law.

The Federal Constitutional Court however, declared this complaint to be inadmissible, since Achmea had not sufficiently substantiated a violation of German constitutional law. In particular, the Federal Constitutional Court was not convinced by Achmea's ultra vires argument: Achmea had considered the decision by the ECJ to be an overstepping of the EU's powers. The Federal Constitutional Court, however, dismissed this argument. According to the Federal Constitutional Court, an act by an EU organ was ultra vires if its “competence in applying general methodological standards cannot be justified under any legal aspect”. Here, the conclusion reached by the ECJ in its Achmea ruling of 6 March 2018, could be traced back to recognized methodological principles and the application of law was not manifestly unjustifiable, leading to a structural shift of competences away from the Member States to the benefit of the EU.

The Federal Constitutional Court also dismissed Achmea’s argument that the set-aside decision was a violation of Germany’s autonomy, especially since Germany still can enter into bilateral investment treaties. It also held that Achmea had failed to prove that the set aside decision had violated Achmea’s right to property, freedom to practise an occupation or effective legal protection, or that the court had violated its duty of referral.

Achmea challenges German Parliament’s Act to ratify EU Termination Agreement

Achmea's second constitutional complaint was directed against the German Parliament's 2021 German Act ratifying the Agreement for the termination of bilateral investment treaties between the member states of the European Union of 5 May 2020 (“Termination Agreement”) in which 21 EU Member States agreed to terminate their intra-EU investment treaties, among which the Slovak-Dutch-BIT.

However, the Federal Constitutional Court rejected the second constitutional complaint due to the lack of a direct violation of Achmea’s own rights by the 2021 German Act ratifying the Termination Agreement. The termination of the investment treaty between the Slovak Republic and the Kingdom of the Netherlands was only due to both states signing the 2020 Termination Agreement. The 2021 German Act ratifying the Termination Agreement has no effect regarding the validity of other intra-EU bilateral investment treaties. It can only affect the validity of bilateral investment treaties concluded by the Federal Republic of Germany. Therefore, even if the Federal Republic of Germany had not ratified the Termination Agreement, this would not have had any effect on the termination of the Slovak-Dutch-BIT. 

The decisions of the Federal Constitutional Court bear witness to the consistent application of EU law by German courts. They show that German courts follow and apply the hierarchy of norms applicable in the German legal system. The decisions of the Federal Constitutional Court join a growing number of national decisions confirming the incompatibility of arbitration clauses in intra-EU investment treaties with EU law.