Komstroy: Invalidating investor-State Arbitration Under the Energy Charter Treaty in intra-EU Disputes : Manifesting the Principle of Autonomy of the EU Legal Order, the International Law Infraction and the Investors Caught in Between

Abstract: This thesis analyses the Court of Justice of the European Union (the Court) recent ruling Komstroy on the compatibility between the EU Treaties and the investor-State arbitration mechanism contained in Article 26 of the multilateral 1994 Energy Charter Treaty (ECT). The Court determined that Article 26 ECT is inapplicable in intra-EU disputes, albeit the European Union (EU) being a Contracting Party to the ECT, because such alternative methods for dispute settlement threatens the autonomy of the EU legal order. The assessment of Article 26 ECT in Komstroy sheds light on the interaction between the principle of autonomy and international law. In Komstroy’s dictum regarding autonomy lies further revelations of how the relationship between the EU and the wider world is. The Court’s view collides with how the ECT tribunals have come to justify their own jurisdiction in intra-EU disputes under international law.  This thesis has strived to understand the interplay between the autonomy of the EU legal order and international law in light of the Komstroy ruling on the ECT investor-State arbitration mechanism and how the Court’s conclusions relate to an international legal analysis. Accordingly, the Komstroy ruling has been analysed from an EU law perspective and an international law perspective. It is concluded that whereas the Komstroy ruling is tenable under an EU law perspective, the opposite is found under an international legal analysis. In essence, the Court alleviates from the risk that certain EU energy investors circumvent EU law by invoking Article 26 ECT and thereby risk withering the internal market. Komstroy affirms the development of a contemporary legal reality by clarifying that investments made internally in the EU is handled in the same way as if the EU was one State. The Court’s invalidation of Article 26 ECT conveys that the principle of autonomy becomes self-referential and therefore equips the EU with a contention to sovereignty. This consolidates the view of the EU as independent to determine the legal effects of international law on its territory. Conversely, the ECT tribunals, whose jurisdiction derives from the ECT, may not accept a Contracting Party’s contention to internal law for abrogating its international law obligations. The principle of pacta sunt servanda will likely be upheld and the ECT tribunals will likely continue to establish their jurisdiction in intra-EU disputes.  A conflict between the systems is, thus, inevitable because in both cases the existential base of each legal order is jeopardised by the respective views. Between this clash of systems are the investors with pending ECT disputes who are placed in legal uncertainty. A solution to this conflict is proposed, where the European Commission is given the mandate to negotiate the issue of the intra-EU applicability of Article 26 ECT in the current modernisation process of the treaty.