Author: Zizhi (Grace) Xu*
| Jurisdiction: | Topics: |
Introduction
The European Court of Justice’s (“ECJ”) landmark rulings in Slovak Republic v. Achmea B.V. (“Achmea”)[1] and Republic of Moldova v. Komstroy LLC (“Komstroy”)[2] represent a categorical rejection of treaty-based arbitration between EU member states. Following the decisions, EU member states have terminated their intra-EU bilateral investment treaties (“BITs”) and are now in the process of a coordinated withdrawal from the Energy Charter Treaty (“ECT”). Within the EU, these rulings have effectively shut the door on the arbitration of disputes between EU investors and member states under such treaties.
Outside the EU, however, the question remains: must courts outside the EU—particularly in major enforcement jurisdictions such as the United States—internalize and apply the ECJ’s jurisprudence? Recent U.S. cases such as NextEra Energy Global Holdings B.V. v. Kingdom of Spain (“NextEra”)[3] and MOL Hungarian Oil and Gas PLC v. Republic of Croatia (“MOL”)[4] demonstrate that this question is not theoretical. The tension between the EU law regime and the United States’ legal commitments—both under international treaties and domestic legislation—is playing out in real time. U.S. courts, and especially the D.C. Circuit, have emerged as pivotal forums in the global debate over the enforceability of intra-EU investor-state arbitration awards.
Overview of Achmea and Komstroy
The ECJ’s decision in Achmea, issued in 2018, marked a turning point in the increasingly tense relationship between international arbitration and EU law. Once considered parallel, the two legal regimes now present one of the greatest challenges to the fundamental purposes of each other.[5]
In Achmea, the dispute arose after Slovakia reversed its liberalization of the health insurance market, prompting Dutch investor Achmea to initiate UNCITRAL arbitration under the Netherlands-Slovakia BIT. The tribunal ruled in favor of Achmea, and Slovakia sought to annul the award in German courts. The German Federal Court of Justice referred the matter to the ECJ, asking whether arbitration clauses in intra-EU BITs were compatible with EU law. The ECJ firmly held that they were not.[6]
The Court’s reasoning rested on three core provisions of EU law. First, Article 344 of the Treaty on the Functioning of the European Union (“TFEU”) prohibits member states from submitting disputes concerning the interpretation or application of the EU treaties to any method of settlement other than those provided for in the EU legal framework. The ECJ found that investor-state arbitrations under intra-EU BITs were inherently liable to involve the application of EU law, since EU law is incorporated into the domestic legal systems of member states and frequently forms part of the applicable law in such disputes.[7]
Second, the ECJ turned to Article 267 of TFEU, which establishes the preliminary ruling mechanism as a cornerstone of the EU judicial system. This mechanism enables national courts to refer questions of EU law to the ECJ for preliminary rulings which are binding among all member states. Arbitral tribunals established under BITs, however, are not “court[s] or tribunal[s] of a Member State” within the meaning of Article 267 and therefore cannot refer such questions. In the ECJ’s view, this inability to ensure uniform interpretation of EU law severs the necessary institutional link between arbitral tribunals and the EU judicial system.[8]
Third, under Article 19(1) of the Treaty on European Union (“TEU”), member states are required to provide effective judicial remedies in the fields covered by EU law. This provision imposes a proactive obligation on the member states to ensure the full effectiveness of EU law. The ECJ expressed concern that arbitral awards rendered by investor-state tribunals are subject only to limited review in domestic courts, thereby posing a risk that errors in the interpretation and application of EU law will go uncorrected. Taken together, the above concerns led the ECJ to conclude that intra-EU BIT arbitration clauses are incompatible with EU law, and thus are invalid.[9]
In Komstroy, the ECJ extended its Achmea holding to intra-EU arbitrations conducted under the ECT, a multilateral investment treaty designed to promote international cooperation in the energy sector.[10] The case arose from a dispute between a Ukrainian investor and Moldova, and concerned whether an electricity supply contract qualified as an “investment” under Article 1(6) of the ECT. After Moldova applied to annul the award, the Paris Court of Appeal referred this question to the ECJ. Though the referred question was limited only to the definition of “investment”, the ECJ took the opportunity to opine more broadly on the legality of intra-EU arbitration under the ECT.[11]
Unlike the BITs at issue in Achmea, which were concluded solely between EU member states, the ECT signatories include not only the EU and most of its member states, but also numerous non-EU countries.[12] Thus, the central issue of Komstroy before ECJ was whether the Achmea holding should also be extended from intra-EU BITs to intra-EU arbitrations arising from a multilateral international agreement. The ECJ answered in the positive.[13]
According to the ECJ, because the EU itself is a signatory to the ECT, the treaty forms part of the EU legal order, and its interpretation and application fall under the exclusive jurisdiction of the ECJ. Following its own logic of Achmea, the Court reasoned that arbitral tribunals constituted under the ECT would likewise be required to interpret and apply EU law, but would be unable to refer questions to the ECJ under Article 267 of TFEU. As a result, intra-EU arbitration under the ECT, like under BITs, undermines the autonomy of EU law.[14]
In summary, the ECJ made clear through the Achmea and Komstroy decisions that neither intra-EU BITs nor the ECT can serve as a valid basis for arbitration between EU member states and investors from other member states. As a practical consequence, intra-EU awards are unenforceable in all EU courts. Member states may risk violating their EU law obligations on “state aid” by voluntarily complying with the arbitral awards.[15]
Enforcement Outside the EU: The U.S. as a Battlegrousnd
With EU courts largely closed to enforcing intra-EU investor-state awards, claimants have increasingly turned to jurisdictions outside the EU, particularly the U.S., to seek enforcement. The U.S. has become a key battleground for these disputes. As a party to both the ICSID Convention and the New York Convention, the U.S. is bound by treaty obligations that require it to recognize and enforce qualifying arbitral awards. U.S. domestic law, most notably the Foreign Sovereign Immunities Act (“FSIA”),[16] which provides the jurisdictional framework for the enforcement of arbitration awards against sovereign states, also limits the practical relevance of the ECJ’s rulings in Achmea and Komstroy in the U.S. context. Under FSIA, a foreign state shall not be immune from jurisdiction of U.S. courts in enforcing arbitral awards if the three jurisdictional elements are present: (1) the existence of an arbitration agreement, (2) an award rendered, and (3) a governing treaty in force for the U.S. (“FSIA arbitration exception”).[17]
Investors have argued consistently that Achmea and Komstroy do not affect enforcement proceedings in U.S. courts.[18] Investors point out that Spain cannot invoke its internal law, namely EU law, as justification for breaching its existing obligations under the ECT. From the investors’ perspective, when they seek enforcement in the U.S., it is the ICSID Convention (or the New York Convention) and U.S. domestic law that govern—not EU law.[19] Moreover, they contend that when ECT serves as an existing arbitration agreement required under the FSIA arbitration exception, disputes over the scope of the arbitration clause arising out of the Achmea and Komstroy holdings do not preclude jurisdiction under FSIA.[20]
The following sections examine how this legal clash has played out in recent D.C. Circuit decisions—NextEra and MOL—and what these rulings signal about the future of intra-EU arbitration enforcement in the United States.
NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain
Background
This case concerns the enforcement of arbitral awards rendered under the Spanish renewable saga arbitrations. The disputes between the investors and Spain arose from the host state’s decision to withhold from certain incentives for renewable energy investments, which had originally attracted significant foreign investment under a favorable regulatory regime.
Two Dutch investors—NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V.—invested approximately €750 million in Spanish solar power projects based on Spain’s prior commitments. When the incentives were repealed, the investors brought claims under the ECT, and an ICSID tribunal ultimately awarded them over €290 million in damages for Spain’s breach of the fair and equitable treatment standard.[21]
The investors sought enforcement of the ICSID award in the U.S. District Court for the District of Columbia (“D.C. District Court”). The NextEra enforcement case was eventually consolidated on appeal with two related proceedings—9REN Holding S.À.R.L. v. Kingdom of Spain (“9REN”) and Blasket Renewable Investments LLC v. Kingdom of Spain (“Blasket”)—which arose out of similar disputes. The district court had ruled in favor of enforcement in NextEra and 9REN, but dismissed the petition in Blasket.[22]
On appeal, the D.C. Circuit consolidated the three cases and issued a unified decision addressing the jurisdictional disputes. The D.C. Circuit rejected Spain’s position, and eventually held that the district courts had jurisdiction under the FSIA arbitration exception.[23]
Spain and EU’s Positions
Spain’s core jurisdictional defense relied on the ECJ’s Achmea and Komstroy rulings, which held that intra-EU investor-state arbitration violates EU law. Building on that, Spain argued that there was no valid arbitration agreement under Article 26 of the ECT. Further, Spain asserted that the ECT created obligations only among the contracting states and did not establish a direct arbitration agreement between Spain and EU nationals. Accordingly, Spain maintained that no valid agreement to arbitrate existed between the parties, namely, Spain and the individual investors, and that the FSIA’s arbitration exception was inapplicable.[24]
The European Commission also urged the D.C. Circuit not to find jurisdiction based on the ECT in its amicus curiae briefs. Drawing on the ECJ’s rulings in Achmea and Komstroy, the Commission reaffirmed that any arbitration proceeding that bypasses the ECJ’s supervisory jurisdiction violates the autonomy of the EU legal order and undermines the uniform application of EU law. The Commission also warned that enforcement of such awards outside the EU—including in the U.S.—would place EU member states in the impossible position of either breaching binding EU obligations, such as the rules governing unlawful state subsidy, or disregarding the enforcement decisions of non-EU courts.[25]
U.S. Government’s Position
In the NextEra appeal, the U.S. also submitted an amicus curiae brief with the aim of striking a careful balance between its treaty commitments to encourage a “reliable and efficient” enforcement of international arbitral awards, and its interest in giving proper consideration to EU judgments while preserving friendly relations with a key ally.[26]
Notably, the brief took no position on the enforceability of the intra-EU awards at issue here in NextEra. Instead, the U.S. limited its position to three non-dispositive issues. The first two are particularly relevant.[27] First, the U.S. contended that the courts must independently determine whether an arbitration agreement exists under the FSIA, and should not completely defer to the tribunal’s determination. Second, the U.S. took the position that a state’s ratification of the ICSID or New York Conventions does not constitute a general waiver of sovereign immunity under the FSIA. However, neither contention can be read to completely bar the enforcement of the intra-EU arbitral awards. The first contention only addresses the question of who should decide, while the second contention on the general waiver of immunity does not affect the application of the arbitration exception under the FSIA.[28]
The D.C. Circuit’s Reasoning
The court relied on the three jurisdictional facts required to trigger the arbitration exception under the FSIA: the existence of an arbitration agreement, an award, and a governing treaty. The D.C. Circuit held that Congress intended to require nothing more than these three elements for U.S. courts to establish jurisdiction against a foreign state. Here, the only jurisdictional fact in dispute was the “existence of an arbitration agreement.”[29]
The D.C. Circuit disagreed with Spain on all grounds. First, the court interpreted the FSIA to require only the “existence of an arbitration agreement,” and concluded that disputes about the scope of such an arbitration agreement are not jurisdictional questions. Spain’s argument—that there were no valid arbitration clauses between EU nationals and EU member states—concern the issue of the scope of the arbitration agreement, not its existence.[30]
Second, the court noted that the FSIA’s arbitration exception applies to agreements “made by the foreign state with or for the benefit of a private party,” and that the ECT arbitration clause satisfies this standard. The court emphasized that the sovereign’s consent to arbitrate is the key for the U.S. courts to establish jurisdiction. According to the court, by entering a treaty like the ECT with other sovereigns “for the benefit of a class of private investors,” Spain manifested its consent to arbitrate. The absence of a “disconnection clause”[31] in the ECT further supported the conclusion that the arbitration clause extends to EU investors.[32]
The D.C. Circuit declined to credit Spain’s reliance on EU law. However, its decision was narrowly focused on the threshold issue of jurisdiction under the FSIA. The court made clear that disputes over the intra-EU applicability of the ECT, including objections grounded in the ECJ’s rulings in Achmea and Komstroy, go to the scope—not the existence—of the arbitration agreement and therefore do not defeat jurisdiction. While the decision emphasized that such objections do not bar U.S. courts from hearing enforcement actions, it carefully avoided addressing whether Achmea and Komstroy affect the ultimate enforceability of the award on the merits.[33]
MOL v. Republic of Croatia
The MOL case arose from a dispute between a Hungarian investor, MOL Hungarian Oil and Gas PLC, and the Republic of Croatia over energy-sector investments protected under the ECT. After Croatia allegedly took actions that violated its treaty obligations, MOL initiated arbitration under the ICSID Convention. The tribunal found in MOL’s favor and awarded damages. When Croatia did not comply with the award, MOL petitioned to enforce the award against Croatia before the D.C. District Court.[34]
Croatia moved to dismiss the petition, asserting sovereign immunity under the FSIA. In its submissions, Croatia acknowledged that the D.C. Circuit’s ruling in NextEra foreclosed its central jurisdictional defense—namely, that no valid arbitration agreement existed in light of the ECJ’s decisions in Achmea and Komstroy. Nonetheless, Croatia preserved the argument for potential further review by an en banc panel or the Supreme Court and sought to distinguish NextEra through two alternative theories.[35]
First, Croatia attempted to attack the first jurisdictional fact under the FSIA—namely, the “existence of an arbitration agreement.” It argued that the ECJ’s Achmea and Komstroy decisions nullified any such consent to arbitration between EU member states and thus negated the existence of any arbitration agreement under the ECT. However, the D.C. District Court rejected Croatia’s argument as already settled by the D.C. Circuit in NextEra, which held that such objections relate to the scope rather than the existence of an arbitration agreement and thus do not undermine jurisdiction under the FSIA.[36]
Second, Croatia challenged the second jurisdictional fact under the FSIA—namely, the existence of an arbitration award. It argued that the tribunal could not have rendered a valid award under the ECT because it was aware of Komstroy at the time it issued its decision and therefore acted ultra vires. The D.C. District Court dismissed this argument as well, reaffirming that for FSIA purposes, what matters is the existence of an award—not its legality under a foreign legal system.[37]
Having concluded that both jurisdictional requirements under the FSIA’s arbitration exception were satisfied, the court turned to Croatia’s three principal merits-based defenses to enforcement. First, Croatia argued that the ICSID award was not entitled to full faith and credit as if it were a final domestic judgment because the jurisdiction of the tribunal was in dispute. The court rejected this argument, holding that such an arbitral award is entitled to full faith and credit under the ICSID Convention as long as the questions of jurisdiction have been fully and fairly litigated during the arbitration.[38]
Second, Croatia invoked the act of state doctrine, asserting that enforcing the ICSID award would require the U.S. court to pass judgment on the validity of a sovereign act of a foreign state. According to Croatia, recognizing the ICSID award would necessarily involve a U.S. court rejecting or disregarding the ECJ’s determination of the ECT’s incompatibility with EU law. The court found this argument unpersuasive, and emphasized that the ICSID Convention and its implementing legislation do not require the U.S. court to consider the validity of a foreign legal opinion in order to enforce the arbitration award.[39]
Third, Croatia asserted that the foreign sovereign compulsion doctrine barred enforcement, contending that enforcement of the award would compel it to make unlawful payments in violation of EU state-aid law and validate intra-EU arbitration incompatible with EU law. The court dismissed this argument, noting that the international comity is already embedded into the ICSID Convention and its implementing legislation. According to the court, enforcement in accordance with the Convention is the exercise of comity.[40]
In short, the court reaffirmed that neither EU law nor generalized defenses grounded in foreign legal constraints can override the U.S.’s enforcement obligations under the ICSID framework. The MOL ruling confirms that NextEra is not an isolated decision. In MOL, the D.C. District Court not only reaffirmed its jurisdictional authority to hear the enforcement petition but also squarely addressed and rejected Croatia’s merits-based objections. The court signaled that the ECJ’s rulings in Achmea and Komstroy do not undermine the enforceability of intra-EU ICSID awards in the U.S. This suggests that even if jurisdiction is established, U.S. courts remain committed to enforcing awards consistent with the ICSID Convention, despite the foreign jurisprudence to the contrary.
Conclusion
The ECJ’s decisions in Achmea and Komstroy have generated a sweeping legal shift within the EU, effectively barring intra-EU arbitrations. While these rulings have closed the doors of EU courts to the enforcement of intra-EU investor-state awards, they have had far more limited effect outside the EU, especially in the U.S. Both NextEra and MOL indicate that U.S. courts remain committed to enforcing intra-EU awards in accordance with international conventions. The broader implication is clear: U.S. courts have thus far rejected the notion that foreign jurisprudence—no matter how institutionally significant within the EU—can override the U.S.’s obligations under its own laws and treaties. For now, the U.S. remains a reliable and committed jurisdiction for enforcement of intra-EU investor-state awards—even in the face of Achmea.
[1] Case C-284/16, Slovak Republic v. Achmea BV, ECLI:EU:C:2018:158 (Mar. 6, 2018).
[2] Case C-741/19, Republic of Moldova v. Komstroy LLC, ECLI:EU:C:2021:655 (Sept. 2, 2021).
[3] NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, 112 F.4th 1088 (D.C. Cir. 2024).
[4] MOL Hungarian Oil and Gas PLC v. Republic of Croatia, 2025 WL 1134945 (D.D.C. Apr. 16, 2025).
[5] George A. Bermann, In the Cross-Fire of International Arbitration and EU law, The Paris Journal of International Arbitration 61, 62 (2023).
[6] Achmea, ¶¶ 8-9, 12, 61-62.
[7] Id. ¶¶ 32, 41-42.
[8] Id. ¶¶ 46-49.
[9] Id. ¶¶ 55-62.
[10] Energy Charter Treaty art. 2, Dec. 17, 1994, 2080 U.N.T.S. 95.
[11] Komstroy, ¶¶ 8-20.
[12] See Contracting Parties and Signatories of the Energy Charter Treaty, Energy Charter Treaty, https://www.energychartertreaty.org/treaty/contracting-parties-and-signatories/ (last visited Sept. 28, 2025).
[13] Komstroy, ¶ 85.
[14] Id. ¶¶ 23-38, 62-66.
[15] See e.g., Cases T‑624/15 RENV, T‑694/15 RENV and T‑704/15 RENV, Ioan Micula, Viorel Micula and others v. European Commission, ECLI:EU:T:2024:659 (Oct. 2, 2024).
[16] Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602-1611.
[17] Id. § 1605(a)(6).
[18] Supplemental Response Brief for Petitioners-Appellees, NextEra Energy Glob. Holdings B.V. et al., & 9REN Holding S.À.R.L., NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, Nos. 23-7031, 23-7032 (D.C. Cir. Feb. 16, 2024).
[19] Id. at 17.
[20] Appellant’s Response to Brief for the United States as Amicus Curiae, Blasket Renewable Investments LLC v. Kingdom of Spain, No. 23-7038, 3-10 (D.C. Cir. July 6, 2023).
[21] NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, 112 F.4th 1088, 1095-1097 (D.C. Cir. 2024).
[22] Id. at 1093-1094.
[23] Id. at 1111.
[24] Id. at 1096-1097, 1102.
[25] Brief for the European Commission as Amicus Curiae, NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, No. 23-7031 at 30, 44-45 (D.C. Cir. June 6, 2023).
[26] Brief for the United States as Amicus Curiae, NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, Nos. 23-7031, 23-7032, 23-7038 at 10 (D.C. Cir. February 2, 2024).
[27] The third issue concerns the propriety of the D.C. District Court’s anti-suit injunction against Spain.
[28] Brief for the United States as Amicus Curiae, NextEra Energy Glob. Holdings B.V. v. Kingdom of Spain, Nos. 23-7031, 23-7032, 23-7038 at 17-34 (D.C. Cir. February 2, 2024).
[29] NextEra supra note 22, at 1100-1101.
[30] Id. at 1101-1102.
[31] A provision stating that the treaty does that govern the relationship between EU member states.
[32] NextEra supra note 22, at 1101-1102.
[33] Id. at 1103.
[34] MOL Hungarian Oil and Gas PLC v. Republic of Croatia, 2025 WL 1134945, at 1-2 (D.D.C. Apr. 16, 2025).
[35] Id. at 1, 4-5.
[36] Id. at 5-6.
[37] Id. at 6.
[38] Id. at 6-8.
[39] Id. at 9-10.
[40] Id. at 11-12.
* Zizhi (Grace) Xu is a J.D. graduate of Columbia Law School and an incoming associate at A&O Shearman. She earned her LL.B. and LL.M. degrees from the China University of Political Science and Law and served as Co-President of the Columbia International Arbitration Association for 2023–24.