Summary:

I.

The applicant, a Dutch company, seeks a preliminary injunction against ratification by Germany of the Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union (hereinafter, the “Agreement”).

The applicant had set up a subsidiary in Slovakia with a view to offering private health insurance services after Slovakia opened its health insurance market to private investors in 2004. However, in 2006 Slovakia partly reversed the liberalisation of the insurance sector and prohibited in particular the distribution of profits generated by health insurance activities to shareholders.

The applicant brought arbitration proceedings against Slovakia under a bilateral investment treaty (BIT) between Slovakia and the Netherlands. The arbitral tribunal, seated in Frankfurt/Main (Germany), ordered Slovakia to pay the applicant damages in the amount of approximately EUR 22 million. Slovakia brought an action before the German courts for the arbitral tribunal’s award to be set aside. The Federal Court of Justice, hearing the case on appeal, requested a preliminary ruling from the Court of Justice of the EU (Article 267 TFEU). The Court of Justice held that the bilateral arbitration clause was not compatible with EU law as it removed disputes relating to the application and interpretation of EU law from the European Union’s system of judicial review. Based on this ruling, the Federal Court of Justice held in October 2018 that the arbitration clause could not be applied in the dispute before it, setting aside the arbitration award.

The applicant challenged this judgment, together with other decisions rendered by the Federal Court of Justice in this matter, with a constitutional complaint to the Federal Constitutional Court (pending case 2 BvR 557/19). In the applicant’s view, the judgment rendered by the Court of Justice of the EU amounted to an ultra vires act and violated Germany’s constitutional identity.

Following the preliminary ruling delivered by the Court of Justice, EU Member States had meanwhile negotiated the Agreement because they assumed that the incompatibility with EU law outlined in that ruling extended to all intra-EU BITs – about 200 treaties at the time – regardless of whether they contain a clause comparable to the one that was declared unlawful. The Agreement was signed by 23 Member States on 5 May 2020. It has the effect of terminating intra-EU BITs upon its entry into force in the relevant Contracting Parties and of extinguishing any sunset clauses to ensure that bilateral treaty protection is not extended beyond the date of termination. Article 9 of the Agreement sets out a ‘structured dialogue’ as a mechanism to resolve pending arbitration proceedings. If this is not successful, affected investors are entitled to access judicial remedies under national law (Article 10 of the Agreement). The Slovakia-Netherlands BIT falls within the Agreement’s scope of application.

The Bundestag adopted the act of approval necessary to ratify the Agreement. The applicant seeks a preliminary injunction to prevent this act of approval from entering into force; the applicant claims that ratification of the Agreement by Germany would undermine its pending constitutional complaint by jeopardising its prospects of success.

II.

The Second Chamber of the Second Senate dismissed the application, based on the following considerations:

The applicant failed to demonstrate that it would suffer severe disadvantages if ratification of the Agreement were to go ahead.

The applicant neither asserted nor substantiated that and how it would even be affected, or suffer irreversible and severe disadvantages, by the entry into force of the German act of approval or the Agreement’s ratification by Germany. According to Article 4.2 of the Agreement, the envisaged termination of intra-EU BITs, together with any sunset clauses contained therein, takes effect when the Agreement enters into force for the respective Contracting Parties. The pending constitutional complaint proceedings 2 BvR 557/19 concern a BIT between the Netherlands and Slovakia. Neither the German act of approval nor ratification of the Agreement by Germany would have any bearing on the termination of that treaty.

Moreover, the applicant did not sufficiently substantiate the claim that the Agreement’s entry into force would essentially render meaningless the constitutional complaint in proceedings 2 BvR 557/19. With its still pending constitutional complaint, the applicant asserts that its rights were violated by the Federal Court of Justice’s decisions and claims that the preliminary ruling rendered by the Court of Justice of the EU amounted to an ultra vires act. However, from the applicant’s submission, it is not ascertainable in what way the Agreement would compel the Federal Court of Justice, in the event the constitutional complaint were successful, to (again) set aside the arbitration award in favour of the applicant.

In its submission, the applicant failed to address the provisions on concluded or pending arbitration proceedings laid down in the Agreement. Nor did the applicant address the question of what legal consequences would arise if the arbitration proceedings brought by the applicant, which for now must be regarded as concluded by the arbitration award, were to be considered ‘pending proceedings’ within the meaning of the Agreement in the event the constitutional complaint were successful. In this respect, Article 7 of the Agreement determines the duties of Contracting Parties concerning pending arbitration proceedings, Article 8 of the Agreement sets out transitional measures, and Article 9 of the Agreement establishes a dispute settlement mechanism (‘structured dialogue’). Where dispute settlement by means of the structured dialogue is unsuccessful, Article 10 of the Agreement allows for recourse to the national courts subject to certain conditions. The applicant neither substantiated why these procedures were not sufficient to protect its – purely financial – interests nor why it would not be possible to remedy, for the most part or in full, the asserted violation of its fundamental rights under Article 14.1 of the Basic Law (property) and Article 2.1 of the Basic Law (general freedom of action).