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Case number 23-1738, Laskett Renewable Investments LLC, Appellant vs. Kingdom of Spain.

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Mr. McGill for the Appellant, Laskett Renewable Investments LLC.

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Ms.

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Harris for the Amboli Kingdom of Spain.

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Ms.

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Pei, amicus curiae for the European Commission.

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Ms.

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Wingel, amicus curiae for the United States of America.

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Good morning, Mr. McGill.

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You may proceed when you're ready.

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Thank you.

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Technically, good afternoon.

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Good afternoon, Judge Pillard.

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Is Judge Rogers joining us?

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Oh, good question.

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I believe.

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I've been here during the entire years.

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Excellent.

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but I muted myself and I turned off the video.

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Thank you.

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Thank you, Judge Pillard, and may it please the court, Matthew McGill or Laskett.

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In this round two, I would like to start with the arbitration exception.

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The Supreme Court's decision in BG Group and this court's decision in Stylex demonstrate that there is jurisdiction in this case under the arbitration exception.

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The central lesson

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of the Supreme Court's decision in BG Group is that an investment treaty is more than just a unilateral standing offer to investors.

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It is, quote, an already formed arbitration contract among the signatory states.

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In the language of the FSIA then, that investment treaty is an agreement to arbitrate by states made for the benefit of private investors.

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The Energy Charter Treaty is such an investment treaty.

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In Style X, Moldova argued it did not consent to arbitrate with the investor before the court, but this court held that Moldova's signature on the treaty itself, suffice to establish the arbitrator's jurisdiction.

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That was because in BG Group, the Energy Charter Treaty

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under BG Group, excuse me, the Energy Charter Treaty itself was a contract.

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If the arbitrator's jurisdiction had depended on the existence of an agreement with that particular investor, then the existence dispute would have needed to have been resolved before the court could have determined that Moldova agreed to delegate arbitrability questions to the tribunal.

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Or this is different, though, because that had to do with the issue as opposed to the party.

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No, because Spain's argument here is similar.

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It says it did not consent to arbitrate.

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Just as in BG Group, its argument was it did not consent to arbitrate.

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The argument is about the scope of the consent by the investor state.

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And here, this is

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The foreign state here argued it didn't agree to arbitrate this dispute, but not others that style X and this court says that's a question of arbitrability.

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They're saying we didn't agree to arbitrate with any EU investors.

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That's a different question.

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That's who we're arbitrating with, as opposed to, yeah, we agreed to arbitrate with Blasket's predecessors, but only on green energy and not on fossil fuel.

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It's not a question of the parties have an agreement, and we're trying to figure out the details of it.

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I mean, as Spain is saying, no, no, no, no.

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No agreement with Spain and this counterparty at all.

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I understand.

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So I guess I have two points in response.

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First is that they are both questions about the scope of consent.

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Different, but they are both questions about the scope of consent.

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In BG Group, it was we did not consent to arbitration with people who do not fulfill the local litigation requirement.

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That's a class of investors.

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In Stilex, we don't consent to class with this type of investors, but Stilex actually does involve who?

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Because Moldova's argument in Stilex was that it did not agree to arbitrate with Energo Alliance because the investment actually came through the BVI entity Derriman.

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So there was a who issue in Stilex itself.

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It's not as neatly compartmentalized as Spain would have it.

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So under PG Group, if you view the agreement here as the agreement to arbitrate, the Energy Charter Treaty itself is the agreement to arbitrate.

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It is within the meaning of the FSIA, an agreement for the benefit of private parties.

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That accords, of course, with the whole purpose of the 1988 amendments.

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In the 1988 amendments that added the arbitration exception

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It was to, as the United States says in its amicus brief, it was to streamline, to make easier the enforcement of New York Convention Arbitral Award in US courts.

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That was the purpose of adding this exception.

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It was to eliminate doubt that there was subject matter jurisdiction to enforce Arbitral Awards in this court.

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So that,

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when you are looking at the language.

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I think this is a hypothetical from your opponent's brief.

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If North Korea comes in and says, you know, standing agreement to arbitrate, we want to arbitrate against Spain and the arbitrators wanting ever more business say, great, we'll arbitrate that.

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And it's just not the case that any offer was ever made to those

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investors but the arbitrators say there was done under the exit convention that doesn't get out of the out of the gate because exit itself would not initiate a proceeding under the new york convention you would require a under unsutra rules a there would have to be an arbitral panel that would quickly conclude that there's no jurisdiction here these panels are not staffed by you know

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by hacks.

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They are respected international law experts.

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The second point I wanted to make is that even if you viewed the arbitration agreement as Spain does here at the level of the particular investor, Spain is raising a question of validity or enforceability, not one of capacity or formation.

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Spain is arguing in essence that EU law preempts its decision to enter into the energy charter treaty on the plain, on the text of its plain terms.

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Those types of questions of preemption are questions of validity and enforcement.

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I would point to the ninth circuits case and unite here local and the 11 circuits decision in addicts.

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These are not questions that go to formation that must be for the court.

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They can be delegated to arbitrators.

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The question of whether federal law preempts arbitration can be delegated to arbitrators because it is one of validity.

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And under the Supreme Court's decision in Buckeye Check Cashing footnote one, validity is not formation.

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So what is more?

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When an EU member state violates EU law, the action of that member state is not void ab initio.

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EU law does not in fact have preemptive force like US law.

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Instead, under Article 260 of the Treaty for the Functioning of the European Union, it requires the member state to take steps to comply or face an infringement action from the European Commission.

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That is why you have all the EU member states saying, we're going to withdraw from the energy charter treaty.

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Spain has not yet taken that step, but they have indicated their intention at some point in the future to withdraw from the energy charter treaty in order to comply with the court of justice's mandate as set down in Comstroy.

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And is that a prolonged process?

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I mean, the withdrawal itself, the withdrawal is effective one year after the date of the notice to the energy charter treaty, but the treaty obligations have a 20 year sunset.

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So finally, I guess the next point I would make is that even if you rejected my validity argument, even if you were viewing this as an issue of formation,

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It's not obvious to me that Spain should not be bound by its own voluntary submission of this question to arbitrators.

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Spain itself invited the arbitrators to decide this.

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And I am aware of while this is a jurisdictional fact that this court must

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It must find an agreement to arbitrate.

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I'm aware of no precedent that would preclude this court from saying you are bound by your litigation choice to pursue this in front of the arbitrators.

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Most of the US cases on this are pre-arbitration, but it wasn't First Options versus Kaplan was a case afterwards where they went through arbitration, but they're allowed to look back and say, no, no, no, this person wasn't bound.

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It wasn't a signatory.

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Right.

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And I'm not disputing that formation questions generally for the court under the FAA framework.

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The question is, what is necessary to find a jurisdictional fact?

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under the FSIA, what is necessary to find a jurisdictional fact?

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And my submission would be that when a party chooses to arbitrate the issue without reservation, they never said, arbitral panel, you cannot decide this issue.

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They said that

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They raised their intra-EU objection, but they raised no objection to the delegation of that precise question to the tribunal.

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Far from it.

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They invited the tribunal to decide it.

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So this is different from other cases where the jurisdictional fact has not been passed upon before.

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This is one that's been invited the arbitrators to decide, and now it wants a second bite at the Apple enforcement courts.

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Does that have to be a factual, I guess, finding by the arbitral tribunal to work?

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So the way I was thinking of it, Judge Pan, is it would also apply to mixed questions of law and fact.

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But I'm just using the court's terminology of the existence of an arbitration agreement as a jurisdictional fact.

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And that question clearly was litigated before the tribunal at Spain's invitation.

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And now they want a different result in this court.

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If you're saying even if we're responsible for determining contract formation, we can just adopt what the tribunal said if the parties agreed that that's... I am not saying that as a matter of arbitration law generally.

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I'm saying that with respect to the very precise and narrow question of what is sufficient to demonstrate a jurisdictional fact to obtain jurisdiction under the SIA.

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And I'm not aware of any case that says you cannot conclude a jurisdictional fact from a prior litigation in which you voluntarily participated and indeed invited.

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Arbitration.

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Well, or a litigation for that matter.

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But in this case, it was an arbitration.

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I have a choice of law question for you.

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The New York convention authorizes national courts to decline to enforce an arbitral award if the arbitral arbitral award was if the agreement i'm sorry was not valid.

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Under the lot of the parties have subjected it or if there's no indication about that under the law of the status.

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of the arbitration itself.

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And so that's on the merits.

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We have choice of law spelled out in the New York Convention.

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And I guess in evaluating whether there's an agreement in the first place, do we use that same choice of law analysis?

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I think at the bottom, I'm trying to figure.

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No, I was not.

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I would think not your honor.

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I would think that under the FSI because you're interpreting the FSI a here.

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So I would think that the question of whether there is an agreement to arbitrate would be.

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one that would be decided under federal law.

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Well, under, I mean, like under the FAA, we look to state law because it's a contract question.

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So under the FSIA, in terms of the contract law that would apply, what is the analogous, to the extent that there's the same kind of question.

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Well, then I mean, I think you would look to the energy charter treaty itself, which, because that is,

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The document under which arbitration was conducted here in Article 26 says that you interpret the Energy Charter Treaty in accordance with its terms and international law.

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So the question of whether there is an agreement, I suppose, would fold back onto one of international law.

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But I don't see that as there's no dispute that the Energy Charter Treaty exists.

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So if you take my front line argument that that is sufficient to establish subject matter jurisdiction.

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And Spain has an argument that the energy charter treaty means something different than what you.

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think it means.

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And if that's a question about the nature of an agreement, I understand that we look first to the text, we look to international law, but international law doesn't typically have a lot of contract law in it.

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So let me take, I mean, this is even EU law.

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I mean, this goes straight to the merits of Spain's argument.

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And so let me just address the merits analysis here.

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I would start first with the United States' submission that at least some deference is due to the arbitrator's conclusion here.

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And second, Spain has raised this argument before 30 different arbitral tribunals against it, and it has lost every one.

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It has lost this argument indeed with 28 of its own appointed arbitrators voting against it.

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So it's asking this court to be really an outlier.

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Except that, I mean, Ms.

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Harris will say, courts, every court to look at this issue, every court agrees with the EU.

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That's simply not true.

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The UK certainly does not agree.

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The UK held that this entry.

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Right, every court in the EU.

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Well, even that is of quite recent vintage.

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It is simply not true that

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The EU member states have always understood this to be the case since the founding of the Energy Charter Treaty in 1994.

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I would point to Joint Appendix 398.

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This is the jurisdictional decision in this case, which is from 2014.

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And there, it is addressing the commission's amicus brief in what was the Acmea case.

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It's called Eureko, but that's Acmea.

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And it says, what is more, the views expressed by the European Commission are not shared by the majority of EU member states who, in fact, have expressed different views on this matter.

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Suffice it to say that the stance taken by the Dutch government in the San Francisco case, in which the Dutch government taking a diametrically opposed position as the one held by the commission, supported jurisdiction of the tribunal.

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It is not

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that all EU member states always understood that they were not allowed to arbitrate under EU law.

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You raise a question, Judge Pillard, that I think it's important to address, but what about, what importance does it have to non-EU members?

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The importance is that if arbitration is unavailable within the EU, then EU member states have an incentive to choose

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EU-based investors over non-EU-based investors who could invoke arbitration.

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That is why it has to be horizontally fair.

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And all the EU investors will go overseas and all the overseas investors will go to the EU.

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I would add that the implications of

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The implications of Spain's argument are quite stunning.

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It would mean that any decision of the Court of Justice for the European Union could alter the treaty obligations of all EU member states for any number of treaties.

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The New York Convention, ICSID, just a decision of the EU, the Court of Justice for the EU would just take the entire European Union out of these treaties

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which is of course contrary to the terms of those treaties which provide methods for amending them, methods for withdrawing from them, methods for modifying them.

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I wonder, you pointed to an earlier time, I think it was 2014, when there wasn't the kind of consensus that seems to be emerging today within the EU.

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And we were discussing earlier this morning Article 46 of the Vienna Convention on which a state may not invoke its internal law.

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And it's being applied to the EU may not invoke EU.

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law as invalidating its consent to a treaty unless the violation is manifest and concerns a rule of internal law of fundamental importance.

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Example in the briefing was if the president tries to sign a treaty and doesn't have Senate consent, it would be manifest to the world that that was not binding.

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And I guess my question is, given the coalescence now of the EU, do you have a view on whether moving forward in a convention at some point

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precludes EU investors from relying on the ECT to form arbitration agreements with Spain?

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Well, first of all, I think that would be a different argument than the one Spain is making.

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Spain's not saying that it has permission under the Vienna Convention to abrogate it.

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It's saying that it never meant what it said.

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Right, but I'm saying as their view coalesces, I'm trying to appreciate what wiggle room other than

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Rewriting the treaties.

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The EU is en masse withdrawing from the energy charter treaty.

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And that is its remedy.

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If it wants to actually remedy it today, it can get the other member states to agree to the modification that it says has always existed.

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And my question is really, is there a way under the convention that that occurs without

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Sort of positive treaty.

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I'm not aware of any of I'm not aware of the Article 46 case law that would permit or would foreclose that possibility.

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On the injunction.

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Are you still seeking an anti suit injunction against Spain?

[00:21:38] Speaker 02:
No, so the the it's so as as the court is aware, our.

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The district court denied our motion for preliminary injunctive relief as moot because it found no subject matter jurisdiction.

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Since the briefing, the primary briefing on this appeal concluded, Spain has withdrawn its request for anti-suit relief against us in the Netherlands.

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And that makes sense because we're now a Delaware entity.

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So we don't have an anti-suit issue at this point anymore.

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I do want to address the fundamental basis for the district court's decision below here, which was that under Article 26,

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Paragraph six of the treaty, EU law is international law that supervenes and alter the meaning of the energy charter treaty itself.

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That is not correct.

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If it were correct that EU law could modify the meaning of the treaty, so could

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any bilateral investment treaty between two member states.

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That is obviously not what the members of the Energy Charter Treaty signed up to address.

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Instead, I would point this court to Medellin versus Texas, the Supreme Court's decision in that case, where it says that

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You know, even if the treaty violates US law, that means that the treaty cannot operate within the US.

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It does not mean that the United States does not have obligations within the international law domain.

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EU law operates within its own domain.

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It operates on that plane alone.

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It does not

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change the meaning or content of international law in a treaty that governs not just the EU and its member states, but 56 different member states.

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There are no further questions.

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I hope I reserved a little bit of time for rebuttal as I requested.

[00:24:03] Speaker 06:
You requested three minutes?

[00:24:05] Speaker 06:
I did.

[00:24:06] Speaker 06:
Do my colleagues have a question?

[00:24:08] Speaker 06:
Thank you, Mr. McGill, and we will hear again from Ms.

[00:24:12] Speaker 06:
Harris for Spain.

[00:24:14] Speaker 05:
Thank you, and may it please the court, Sarah Harris for the Kingdom of Spain.

[00:24:20] Speaker 05:
I'd just like to briefly touch on three points that Blaskett addressed.

[00:24:24] Speaker 05:
First of all, it doesn't matter how you view the energy charter or the putative agreement, however you slice or dice it, even if you thought that the energy charter treaty itself

[00:24:34] Speaker 05:
was somehow an agreement to arbitrate among the members.

[00:24:38] Speaker 05:
Spain couldn't and didn't consent with other EU members to arbitrate.

[00:24:43] Speaker 05:
Now, the other side seems to assume that agreeing with anyone is good enough to agree with everyone.

[00:24:50] Speaker 05:
But notably, their answer to the hypothetical of North Korea appeared to be, don't worry about that.

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Arbitrators are smart, and we'll deal with that on the backend.

[00:24:58] Speaker 05:
That is not a satisfying answer either with respect to the sort of this court's precedents saying that whether you agreed with someone or not as a fundamental question of formation or other circuits cases.

[00:25:12] Speaker 05:
And I would specifically point to the Lloyd's decision from the 11th circuit.

[00:25:17] Speaker 05:
the Al-Kharkani decision for the Fifth Circuit.

[00:25:20] Speaker 05:
Both of those cases also involve fact patterns, where the question is, did someone form an agreement with someone else?

[00:25:27] Speaker 05:
Yes, there might be an agreement with one person, but not the person who's relevant to the consent.

[00:25:31] Speaker 05:
So you can't just sort of say, oh, well, agreeing with everyone would be enough.

[00:25:36] Speaker 05:
And anyway, as the United States has pointed out, it would be pretty strange to think that the Energy Charter itself is sort of a self-encompassing agreement to arbitrate among

[00:25:45] Speaker 05:
Member states, given that the text of the Foreign Sovereign Immunities Act Arbitration Act exception refers to the parties having an agreement to arbitrate the parties really are talking about like the people before the court trying to sue the Foreign Sovereign and US courts.

[00:26:00] Speaker 06:
Second of all, you do have the provision about the parties agreeing to arbitrate or on behalf of others.

[00:26:09] Speaker 05:
Yes.

[00:26:10] Speaker 05:
And so it's the second part that I'm focusing on.

[00:26:11] Speaker 05:
It's not just an agreement made by the foreign state with or for the benefits of a private party to submit to arbitration differences.

[00:26:19] Speaker 05:
It's differences between the parties.

[00:26:22] Speaker 05:
So the parties here are investors and Spain.

[00:26:25] Speaker 05:
And I think that text shows that our interpretation has to be correct in terms of the relevance.

[00:26:30] Speaker 06:
It seems like the FSAA, we've been talking about this all morning, but it seems like it pivots, it's a little inexact in its wording, that the agreement between the parties

[00:26:41] Speaker 06:
something or for the benefit of, and if the parties to the treaty are states of the nature of the beast, but for the benefit of are not states, and then the disagreement or the dispute between the parties, it appears that the FSIA is using parties in the later clause, describing parties to dispute, not to be the same parties as the parties to the treaty.

[00:27:09] Speaker 05:
But it's I think under I think the better view of the FSA is it's more naturally talking about the people actually before the US court.

[00:27:17] Speaker 05:
So you could have a potential agreement maybe for the benefit of third parties.

[00:27:21] Speaker 05:
But the parties are actually talking about like have to have some sort of consent.

[00:27:24] Speaker 06:
And I think that also just more what is your sort of classic case that you think the for the benefit of is referencing?

[00:27:31] Speaker 06:
I think for the benefit of you could have an beneficiary arbitrate under that agreement or no.

[00:27:37] Speaker 05:
I mean, let's say you had like I think the person would probably have to have sent it because otherwise they are not actually agreeing to arbitrate at all like they could be hailed before they could be subjected to arbitration.

[00:27:48] Speaker 05:
They didn't agree to would be kind of strange.

[00:27:51] Speaker 05:
I think this just tracks the nature of the Foreign Sovereign Immunities Act itself, the idea that foreign sovereigns actually have to have consented to be in US courts in a pretty clear way or had done through their conduct that sort of consent.

[00:28:03] Speaker 05:
Anyway, regardless, just looking at the energy charter treaty one way or another, the baseline concern remains.

[00:28:09] Speaker 05:
Under the other side's view, they seem to think that everything reduces to a question of scope that is always arbitrable.

[00:28:15] Speaker 05:
I'm not sure what would remain of this court's decision in Belize, at this court's decision in Mykula,

[00:28:21] Speaker 05:
even the distinction drawn in Stilakes itself, their case that they rely on over and over again, it would make no sense for this court to have said, wait a minute, Moldova's argument is not really an argument about the formation of an agreement.

[00:28:34] Speaker 05:
What they're trying to do there is backdoor a question of scope.

[00:28:38] Speaker 05:
Was this an investment or not?

[00:28:39] Speaker 05:
To try to say, oh, we didn't agree to that type of dispute, but we agreed to this one.

[00:28:43] Speaker 05:
Everyone agreed there because there was no issue of intra-EU issues with the parties there.

[00:28:48] Speaker 05:
But there was some sort of agreement.

[00:28:50] Speaker 05:
Again, the only question was, do they agree to this particular investment or not?

[00:28:54] Speaker 05:
And that is what the Supreme Court has said the dividing line is in the domestic arbitration context in cases like Buckeye.

[00:29:02] Speaker 05:
And that's what this court has done in the Foreign Sovereign Immunities Act.

[00:29:04] Speaker 05:
context.

[00:29:05] Speaker 05:
So again, it would be really hard to explain what this court has actually done in Foreign Sovereign Immunities Act cases if it just didn't matter.

[00:29:13] Speaker 05:
And if all you could do is say any sort of dispute over who can sign an agreement or whether they had the power to do so, always reverts to arbitrability.

[00:29:22] Speaker 05:
Just look what the arbitrator did and we're done here.

[00:29:24] Speaker 05:
Third of all, just the view that you should look at the arbitrators win-loss record and the votes for investors as somehow probative of what treaties mean is a crazy way to understand what treaties mean.

[00:29:37] Speaker 05:
Certainly not the way the Supreme Court or this court has ever interpreted a treaty.

[00:29:42] Speaker 05:
and not a good road to go down.

[00:29:44] Speaker 05:
What a treaty means is a matter of both text and signatories understandings and this is not a question for the EU treaties of some sort of national law like the sort of Belize constitution at issue in Belize.

[00:29:56] Speaker 05:
This is international law.

[00:29:57] Speaker 05:
It is the stuff of treaties between EU members.

[00:30:00] Speaker 05:
Now of course it doesn't govern

[00:30:02] Speaker 05:
relations between non-EU members.

[00:30:06] Speaker 05:
But between EU members, investors included, that is the supreme law above all in international law.

[00:30:14] Speaker 05:
And that is what the investors should have known as the sort of clearest rule of the EU system for all time.

[00:30:20] Speaker 05:
And so the idea that you should discount how the treaty signatories have understood the Energy Charter Treaty, again, there is no principle of case law that would suggest

[00:30:31] Speaker 05:
throw the signatories understandings out the window because they're at this point in time versus the other one.

[00:30:36] Speaker 06:
Is your position that the Vienna Convention Article 46 one condition has been met since this investment was made or you know that the provision allowing saying that that

[00:30:52] Speaker 06:
internal law here, internal EU law, invalidates consent to enter a treaty because it was manifest and concerned a rule of the EU's internal law of fundamental importance.

[00:31:04] Speaker 06:
You mentioned that this morning.

[00:31:06] Speaker 05:
So our fundamental position is that rule doesn't even apply because it involves internal law.

[00:31:12] Speaker 05:
EU law is emphatically international law.

[00:31:14] Speaker 05:
And that is talking about domestic.

[00:31:16] Speaker 05:
It's really both.

[00:31:17] Speaker 05:
Yes.

[00:31:17] Speaker 05:
And their position discounts the key thing, which is if it's international law, you look at other treaty conflict rules under which I think we clearly win.

[00:31:25] Speaker 05:
However, you apply the other Vienna Convention rules.

[00:31:28] Speaker 05:
Uh, and look, I think we would say even if you wanted to apply the internal law rule, we could satisfy it, but I don't think that's the right way of looking at it because again, the relevant conflict rules first and foremost should be the specific governing the general or the EU primacy principle, which is you have a dispute.

[00:31:47] Speaker 05:
One hand is an EU member.

[00:31:48] Speaker 05:
On the other hand is a new national.

[00:31:50] Speaker 05:
The order of priority under international law as set forth in the EU treaties

[00:31:54] Speaker 05:
is specifically that EU law takes precedence, first and foremost, over other international agreements.

[00:32:01] Speaker 05:
And again, if you want to look for notice of that, that is not some sort of principle that just emerged recently.

[00:32:07] Speaker 05:
There are a ton of European Court of Justice decisions establishing that way, way, way before these investors even stepped foot in trying to invest.

[00:32:15] Speaker 06:
And I have the same question for you that I had for Mr. McGill about choice of law.

[00:32:20] Speaker 06:
The New York Convention says national courts should evaluate the validity of an arbitration agreement under the law the parties have agreed to or barring that under the law of the situs of the arbitration.

[00:32:31] Speaker 06:
Do you agree that that provision also should govern our choice of law analysis for purpose of the threshold FSIA question or no?

[00:32:42] Speaker 05:
We think that what governs first and foremost would still be EU law.

[00:32:47] Speaker 06:
That is the law first and foremost that these parties apply different choice of law analysis to the same question when it arises under the FSIA as a jurisdictional question than we would in the merits.

[00:33:00] Speaker 05:
You might, but let me just sort of back up and say, I don't think it matters in this case because first of all, I think the relevant choice of law question is did Spain have the power to agree to the agreement under the FSA?

[00:33:14] Speaker 05:
I think that's your first point of decision because you're asking, is there an agreement?

[00:33:19] Speaker 05:
And so under the FSA inquiry, your question will be what law tells me if Spain had the power to agree or not?

[00:33:25] Speaker 05:
We say first and foremost, you law.

[00:33:27] Speaker 05:
I took Blaskett's brief to be saying you apply different Vienna Convention principles like look to you know what's more specific, look to what's later in time.

[00:33:37] Speaker 05:
Our position is if you apply those conflict rules we still win because again the EU treaties are international law they are more specific and also they are later in time given the re-ratification

[00:33:51] Speaker 05:
of the treaty on the functioning of the EU.

[00:33:53] Speaker 05:
So those seem to us to be the relevant rules that have been argued in the case that would apply to this specific question.

[00:33:59] Speaker 05:
Now, again, if we then pivoted to their other alternative, which is start off from the world where you look at the Energy Charter Treaty, we then just get back into all the arguments about what does it mean that the EU itself signed this treaty?

[00:34:11] Speaker 06:
I think I asked you in the last case whether the EU,

[00:34:21] Speaker 06:
EU Court of Justice cases actually spoke of Spain's incapacity, as opposed to the invalidity of actions taken.

[00:34:32] Speaker 06:
And I'm not sure I heard a clear answer whether those are really properly understood as capacity questions.

[00:34:39] Speaker 05:
Our position is yes, they are.

[00:34:41] Speaker 05:
And let me just give you some specific language.

[00:34:43] Speaker 05:
European Foods, I think, is the clearest in just synthesizing the line of cases.

[00:34:47] Speaker 05:
And it talks about sort of, and quote, lacking force.

[00:34:51] Speaker 05:
The German High Court's decision, Acmea 2, is also a good way of looking at this because it's obviously applying the relevant EU decisions and trying to figure out what does that mean in the posture of a court

[00:35:04] Speaker 05:
trying to figure out what happens to confirming the award or not.

[00:35:08] Speaker 05:
And there, the court said the agreement is, quote, void ab initio.

[00:35:12] Speaker 05:
That's the kind of language that means you didn't have an agreement at all, not some sort of enforceability argument.

[00:35:18] Speaker 05:
The other side's comparing this preemption, and I think that's just the wrong analogy.

[00:35:22] Speaker 05:
This is much more like, do states that purport to enter into a treaty with Mexico, is that a treaty or not?

[00:35:28] Speaker 05:
No, it's not a treaty.

[00:35:29] Speaker 05:
States gave up the power to form treaties as part of the Constitutional Convention.

[00:35:34] Speaker 05:
And in terms of other... That is not true with respect to the EU.

[00:35:40] Speaker 05:
With respect to the EU treaties, what happened is Spain and other member states are saying they do not have the power anymore.

[00:35:49] Speaker 05:
They're giving it to the EU to have a system in which disputes are exclusively resolved by the European Court of Justice when they are between members and involve EU laws.

[00:35:59] Speaker 05:
Spain will not submit

[00:36:01] Speaker 05:
cannot submit disputes that implicate EU law other ways.

[00:36:04] Speaker 05:
And that sort of distinguishes the question we had earlier.

[00:36:07] Speaker 05:
What happens if Spain is in a forum against its will trying to deal with questions of EU law?

[00:36:13] Speaker 05:
The obligation there isn't to sort of throw up Spain's hands and say, we no longer want to defend EU law.

[00:36:18] Speaker 05:
We no longer

[00:36:19] Speaker 05:
to the European Court of Justice's decision to be bound.

[00:36:22] Speaker 05:
When Spain is in this forum, Spain is saying, apply European law.

[00:36:25] Speaker 05:
But the obligation is, don't try to circumvent the EU treaties that Spain agreed to follow as paramount law.

[00:36:32] Speaker 05:
Don't try to do side deals.

[00:36:34] Speaker 05:
Don't try to do side agreements.

[00:36:35] Speaker 05:
You can't do that as part of the price of being a member of the European Union, which is a really novel enterprise in its respect of shared sovereignty in the EU.

[00:36:44] Speaker 06:
I think this is a practical question

[00:36:48] Speaker 06:
What do you make of the arbitral panels uniformly or almost uniformly rejecting this view, including international law jurists chosen by Spain or other EU countries?

[00:37:05] Speaker 06:
I mean, this is not the kind of dispute we hear every day.

[00:37:11] Speaker 06:
So it's helpful to have bearings on some of these more practical questions.

[00:37:17] Speaker 06:
What's going on there in your view?

[00:37:19] Speaker 05:
In our view, again, I can't speculate what is motivating the arbitrators in these panels to say, essentially, we think we can keep arbitrating because we don't want to pay attention to European Court of Justice law.

[00:37:33] Speaker 05:
I think the problem is, on their side, they're pointing to a lot of arbitrators' decisions.

[00:37:38] Speaker 05:
And on our side, we're seeing what you should be looking at is what the signatories understood and the way that the treaties play together.

[00:37:46] Speaker 05:
And I think you just can't credit what a bunch of arbitrators are saying and the framework for evaluating how you interpret treaties.

[00:37:52] Speaker 05:
That's just not one of the tools that people normally turn to, ever, as a matter of treaty interpretation.

[00:37:58] Speaker 05:
So no, I think you can say, yes, these are.

[00:38:00] Speaker 06:
If those arbitrators, if they're presumptively acting in good faith and on their best reading of the law, they're looking at the same materials you're looking at.

[00:38:12] Speaker 05:
Yes, and again, I think this shows like in the international community, there might be like among law professors and arbitrators disputes on these questions, but it would be really strange to say you credit those views over in a treaty that is has a bunch of signatories over what the signatories themselves are understanding the tree to be especially because the US isn't a signature to that like that's pretty disruptive to the treaty framework.

[00:38:36] Speaker 05:
if all of a sudden people who didn't expect to have intra-EU arbitration, who didn't see it under this treaty, even attempted until 2007, suddenly see, oh, well, what do we do with this?

[00:38:50] Speaker 05:
The European Court of Justice said this is not a thing, but we're supposed to defer to arbitrators and supposed to sort of- Defer.

[00:38:57] Speaker 06:
I'm just asking you for a sort of-

[00:39:00] Speaker 06:
just a real world take on what universe are they operating in from your perspective?

[00:39:06] Speaker 05:
I honestly and I really think it is just a dispute among international scholars over like what to do with EU law but to me the more resilient point is

[00:39:17] Speaker 05:
Has this been a feature that the EU has done with treaties in the past?

[00:39:21] Speaker 05:
Yes.

[00:39:22] Speaker 05:
That is how the EU has approached other treaties like the WTO, the UN Convention on the Law of the Sea.

[00:39:28] Speaker 05:
Those are treaties like 1995, one of them.

[00:39:31] Speaker 05:
And so for this court to say, sorry, you know, if the EU joined those treaties, doesn't matter, you should have known that you agreed to arbitrate under those as well.

[00:39:40] Speaker 05:
or had other dispute resolution outside of the EU system, that's a real problem, both in terms of how those treaties currently operate and what signatories are at the end.

[00:39:49] Speaker 05:
Did you argue about those those treaties in your brief?

[00:39:52] Speaker 05:
We argued about the WTO and then the UN Convention on the Law of the Sea is a subject of the Ireland decision, which we do rely on extensively.

[00:39:59] Speaker 05:
It's from 2006.

[00:40:01] Speaker 05:
So yes, those are, those are important sort of context in terms of what people are thinking and what might happen and why Spain here is really struggling about the arguments here.

[00:40:11] Speaker 06:
Thank you.

[00:40:11] Speaker 05:
Thank you.

[00:40:12] Speaker 06:
Questions and Rogers.

[00:40:16] Speaker 04:
Great.

[00:40:16] Speaker 04:
Thank you very much, Ms.

[00:40:17] Speaker 04:
Harris.

[00:40:26] Speaker 04:
Thank you.

[00:40:26] Speaker 07:
May it please the court, Sally pay for the European commission.

[00:40:29] Speaker 08:
I have just three points to make at this stage.

[00:40:33] Speaker 08:
The first is that EU law is absolutely international law, and I just wanted to make sure that there's no confusion about the European Commission's position on this point.

[00:40:43] Speaker 08:
It's well accepted that EU member states can enter into agreements regulating the relationships between present and future treaties, and that is precisely what they have done in the EU treaties

[00:40:53] Speaker 08:
The relevant principle is that of primacy, and that's what governs the relationship between EU law and any contrary international agreements.

[00:41:01] Speaker 08:
And this is very important to the structure and the integrity of the EU legal order, because if the rule were otherwise, member states could simply enter into other international agreements that would undermine and circumvent EU law itself.

[00:41:14] Speaker 06:
So if the EU law, if the EU came up with principles that were in variance with the Vienna Convention, those would be primary over?

[00:41:22] Speaker 06:
The principles of the Vienna Convention are in.

[00:41:24] Speaker 08:
So this is we're discussing here an intra EU situation.

[00:41:27] Speaker 06:
So as you say, primacy, it's like not only is it international law, but it's it's above all international.

[00:41:34] Speaker 06:
I'm just having trouble understanding.

[00:41:35] Speaker 08:
Yes.

[00:41:36] Speaker 08:
So EU law and the EU treaties have primacy over other international law as far as they in so far as they

[00:41:44] Speaker 08:
are regulating intra-EU circumstances.

[00:41:46] Speaker 06:
So that would be true of the Vienna Convention?

[00:41:47] Speaker 08:
That would be true of the Vienna Convention with respect to internal EU application of it.

[00:41:53] Speaker 08:
But that's the whole way that the European system has been constituted.

[00:41:59] Speaker 10:
So what about your friend on the other side's hypothetical about NATO?

[00:42:02] Speaker 10:
What if the EU decided that it violates internal EU policy and norms for members to be in NATO?

[00:42:11] Speaker 10:
Would that just take them out of NATO?

[00:42:13] Speaker 08:
Well, I think that in that case, there would be potentially a question about the rights and obligations of third parties that are not EU member states to the NATO agreement.

[00:42:24] Speaker 08:
And so just to be clear, the primacy of EU law is with respect to the international obligations owed between member states.

[00:42:36] Speaker 10:
I guess under the ECT, you agreed in a multilateral treaty, which included people not within the EU, that there would be this unconditional consent to arbitration.

[00:42:47] Speaker 10:
So isn't it like NATO in that respect, that you agreed in a multilateral international treaty to do something?

[00:42:55] Speaker 08:
With respect to the Energy Charter Treaty, yes, it has implications for relations outside the EU.

[00:43:02] Speaker 08:
And that is, in fact, the sole purpose of the Energy Charter Treaty.

[00:43:06] Speaker 08:
It was never intended to govern intra-EU relations.

[00:43:09] Speaker 08:
And so it's within those intra-EU relationships that EU law has primacy.

[00:43:14] Speaker 10:
So I guess my question is, if

[00:43:17] Speaker 10:
the EU and EU countries agree to something in the context of a international multilateral treaty to do something that affects intra-EU relations.

[00:43:32] Speaker 10:
You're saying that they're not bound by those international treaty obligations, that they can trump it.

[00:43:38] Speaker 08:
So I would put it,

[00:43:41] Speaker 08:
Instead, by saying that when the EU and member states enter into a multilateral treaty, they are not creating obligations between themselves under the treaty.

[00:43:50] Speaker 08:
Instead, the rules that govern are EU law.

[00:43:53] Speaker 08:
So the EU's position on this is that the Energy Charter Treaty's substantive provisions do not have any effect with respect to intra-EU relations.

[00:44:01] Speaker 08:
So EU investors are supposed to bring actions if they think that they've been wronged by an EU member state.

[00:44:09] Speaker 08:
The remedies are in EU national courts under EU law causes of action.

[00:44:12] Speaker 10:
No, I understand your position.

[00:44:14] Speaker 10:
I'm just trying to understand how that relates to your obligations under international multilateral treaties that involve

[00:44:21] Speaker 10:
Parties that are not just within the EU.

[00:44:24] Speaker 08:
Yes.

[00:44:24] Speaker 08:
And so with respect to parties that are outside the EU, the there are obligations under the Charter Treaty.

[00:44:30] Speaker 08:
And that's why non EU member.

[00:44:33] Speaker 10:
I'm trying to sort of zero in on if you commit in a international multilateral treaty to do things, including with respect to people within the EU, you think you can abrogate that?

[00:44:43] Speaker 10:
I just hypothetically say you did commit to that within the ECT.

[00:44:48] Speaker 10:
You made commitments to people outside of the EU that you would do certain things, including within the EU.

[00:44:55] Speaker 10:
You think you can abrogate that based on EU law.

[00:45:00] Speaker 08:
So I do think that EU law would have primacy within the EU if it's not affecting the rights of third countries or third country parties.

[00:45:09] Speaker 08:
The rule of privacy really is about the.

[00:45:12] Speaker 10:
So what if it does affect the third party countries?

[00:45:15] Speaker 10:
Because there was an argument that

[00:45:17] Speaker 10:
it creates incentives for EU states to favor EU investors because you don't have to arbitrate with them.

[00:45:24] Speaker 08:
So if we're talking about the rights of third countries or the rights of third country investors, those rights are valid and they are live within the treaty.

[00:45:33] Speaker 10:
So what if your position contradicts the rights of these third party investors?

[00:45:38] Speaker 08:
The primacy would not apply in that particular situation.

[00:45:43] Speaker 06:
So I think what Judge Pan is arguing is arguably it's not fair and equal treatment as between potential within EU investors and foreign investors.

[00:45:55] Speaker 06:
They're coming to Spain to invest with different

[00:46:00] Speaker 06:
different procedural recourse, and that that itself might have implications to the non-EU parties.

[00:46:13] Speaker 10:
Yeah, I think you just conceded that your position would not hold if it affects non-EU parties.

[00:46:19] Speaker 10:
And I gave you a hypothetical where it does.

[00:46:21] Speaker 06:
And you're saying that- Under this very treaty.

[00:46:23] Speaker 10:
Under this very treaty.

[00:46:24] Speaker 10:
And so now you're saying that EU law doesn't have primacy.

[00:46:29] Speaker 08:
So I just wanted to make sure that I am understanding the question that you're asking.

[00:46:34] Speaker 10:
The issue is, I said, what if you make promises that affect people who are not within the EU in the context of this multilateral international treaty, and you've promised to do things under this treaty that do affect intra-EU relations, but that would affect the third parties?

[00:46:59] Speaker 09:
And you said, then EU law wouldn't have primacy.

[00:47:03] Speaker 08:
And so in this hypothetical, the parties that are trying to invoke the protections of the energy charter treaty are the third country investors, or are they?

[00:47:12] Speaker 09:
I know that what your friend on the other side said was that if there's

[00:47:22] Speaker 10:
If your view is true, it does affect the non-EU members of the treaty because EU nations will favor EU investors because they don't have to arbitrate with them.

[00:47:34] Speaker 10:
So that is detrimental to all the other non-EU parties to the treaty.

[00:47:39] Speaker 10:
And they're affected.

[00:47:41] Speaker 10:
And I believe you just said then EU law would not have primacy.

[00:47:45] Speaker 08:
So I think that's not the kind of situation where that would be an issue of a right or obligation owed to third country investors under the Energy Charter Treaty itself.

[00:48:00] Speaker 09:
So what's the answer to my hypothetical?

[00:48:02] Speaker 08:
So under the hypothetical where you have an EU investor that is saying that

[00:48:07] Speaker 08:
that they should be?

[00:48:10] Speaker 10:
No, I'm just saying as a general matter, EU primacy will hurt the members of the treaty who are not from the EU.

[00:48:18] Speaker 08:
In a more attenuated sense than the idea that the EU and its member states have not, they must respect primacy as it applies within the European Union to intra-EU relations.

[00:48:32] Speaker 10:
No, I can see that the focus of my question is why is it that the EU can abrogate terms of a treaty that affects people who are not within the EU?

[00:48:40] Speaker 10:
It's an international multilateral treaty.

[00:48:43] Speaker 08:
So in terms of how it is affecting other member states that are other members of that treaty that are not.

[00:48:50] Speaker 10:
So you agree that they can't do that if it is affecting members who are not part of the treaty?

[00:48:55] Speaker 08:
If it is affecting member states that are not part of the EU.

[00:48:58] Speaker 08:
So if it is going to affect the treaty rights and obligations owed to those member states, then primacy is not in the picture.

[00:49:08] Speaker 08:
But I don't understand your hypothetical to be a situation where the EU rules would be affecting the rights and obligations owed under the treaty.

[00:49:16] Speaker 10:
I'm just trying to get to a basic premise, which I think you agree with, which is that if the EU has obligations under an international multilateral treaty, it cannot unilaterally abrogate them.

[00:49:30] Speaker 07:
Yes, I think that's correct.

[00:49:33] Speaker 08:
Moving on to the second point that I wanted to make at this stage is just really about this theme of unfair surprise and unfairness to the investors here.

[00:49:44] Speaker 08:
The notion that the investors are somehow being treated unfairly and have been surprised by developments in the EU is a false narrative for at least three reasons.

[00:49:52] Speaker 08:
First of all, I think it's important to recognize that intra-EU investor state arbitration is a very recent phenomenon.

[00:49:59] Speaker 08:
The first intra-EU bilateral investment treaty case was brought in 2005.

[00:50:02] Speaker 08:
And the first intra-EU energy charter treaty case was brought in 2007.

[00:50:07] Speaker 08:
That's a case called Electrabel versus Hungary.

[00:50:10] Speaker 08:
And so when these cases started emerging, the commission acted immediately to raise questions about at least a potential incompatibility between this type of dispute resolution and the EU treaties.

[00:50:21] Speaker 08:
And you can see references to some of those statements at page 477 of the Blasket Joint Appendix that's in Spain's Hindalang Declaration.

[00:50:29] Speaker 08:
Regardless, at least as early as 2006, and that's already five years before any of the investors in these cases attempted to invoke Article 26.

[00:50:39] Speaker 08:
Investors would have been aware and on notice of the potential incompatibility between intra-EU arbitration and EU law, even based on the jurisprudence of the Court of Justice.

[00:50:48] Speaker 08:
That's the Mox Plant case involving Ireland, where the Court of Justice held that Ireland had breached the EU treaties by initiating arbitration under the UN Convention on the Law of the Sea against the United Kingdom, which of course at that point in time was an EU member state.

[00:51:04] Speaker 08:
And so EU investors should have been on notice of the content of

[00:51:08] Speaker 08:
the decisions of the EU's highest court on this matter.

[00:51:12] Speaker 08:
And finally, there's just the basic point that Acmea and Comstroy, while they are, of course, decisions of more recent vintage, they were applying principles that flow from the EU treaties themselves that have been enshrined in those instruments for many decades.

[00:51:27] Speaker 08:
And of course, also the decisions of the Court of Justice are retroactive, much in the same way as when a US court issues a decision about the meaning of the statute, it is saying,

[00:51:36] Speaker 08:
what the statute means and what it always meant.

[00:51:39] Speaker 10:
This is all new to me, all this EU law.

[00:51:45] Speaker 10:
I'm trying to understand the incentives of the EU in this case.

[00:51:50] Speaker 10:
It seems like the EU has an interest in, I guess, keeping

[00:51:57] Speaker 10:
the financial assets of its member states within the government.

[00:52:01] Speaker 10:
Isn't that the whole point of this?

[00:52:02] Speaker 10:
It's a state subsidy argument.

[00:52:06] Speaker 10:
It's like, I'm just trying to understand why the EE thinks it's important that things be ruled on the way

[00:52:14] Speaker 10:
you say, and I don't see the importance of uniformity in laws because it's not presidential, and I'm wondering if there's some other motivating reason for the EU to be here.

[00:52:24] Speaker 10:
And isn't it in the EU's interests to allow these EU member states to avoid paying these judgments because it keeps the money with the governments, which is better for the EU than letting it go to private parties that are energy companies and other investors?

[00:52:42] Speaker 08:
So I don't think that the issue for the EU is exactly keeping money within the governments.

[00:52:48] Speaker 08:
For the commission, the question really is one of its exclusive competence to regulate state aid within the EU.

[00:52:55] Speaker 08:
State aid is a principle that under which governments cannot provide subsidies to businesses or companies operating in the EU without- Isn't that one of the premises of the ECT though, like to encourage investment they were giving

[00:53:10] Speaker 10:
deals to people to come in.

[00:53:12] Speaker 08:
Only with respect to investors who are outside the European Union.

[00:53:17] Speaker 10:
Putting aside to who, the ECT was to encourage investment and that included incentives.

[00:53:26] Speaker 08:
Correct, but it was never intended to apply with respect to intra-EU investors.

[00:53:31] Speaker 08:
It was never intended to create rights to EU people already within the EU.

[00:53:38] Speaker 10:
So why would the EU

[00:53:41] Speaker 10:
enter the ECT if the purpose of it was to provide this state aid that's not authorized.

[00:53:48] Speaker 08:
So it was in order to extend the EU's energy policy beyond the EU's borders.

[00:53:53] Speaker 08:
So it was creating sort of a framework that would essentially try to encourage

[00:53:59] Speaker 08:
members, non-member states who eventually might accede to the union to bring their legal protection, their laws in line with the EU's internal policy.

[00:54:10] Speaker 08:
So it was never intended to authorize the granting of state aid.

[00:54:13] Speaker 10:
Can you explain that?

[00:54:14] Speaker 10:
Like what was supposed to happen from the EU's perspective?

[00:54:18] Speaker 10:
If they signed the ECT, it's going to do what?

[00:54:20] Speaker 10:
It's going to encourage non-EU nations to join the EU?

[00:54:24] Speaker 08:
That was part of the picture.

[00:54:27] Speaker 08:
So in the 1990s, this is when the Energy Charter Treaty was negotiated.

[00:54:32] Speaker 08:
The idea was that already within the EU, there was an existing energy policy and investment protection for EU investors.

[00:54:41] Speaker 08:
And the EU wished to try to extend some of those policies outside the EU.

[00:54:46] Speaker 08:
And the way to do that was by negotiating an agreement with

[00:54:50] Speaker 08:
countries that were not part of the EU.

[00:54:52] Speaker 10:
But I thought you said that the investment protections were unlawful state aid.

[00:54:57] Speaker 06:
So you're saying there were different pre-existing protections?

[00:55:02] Speaker 08:
There are different rules that govern investment protection within the European Union.

[00:55:09] Speaker 08:
And the Energy Charter Treaty was simply never intended to supplant or displace those.

[00:55:14] Speaker 08:
And so going back to the question of state aid, the reason why the commission is so concerned about these awards is that an enforcement court outside the EU or for that matter within the EU does not have the ability or competence to order a state to provide aid.

[00:55:34] Speaker 08:
Subsidies can only be paid

[00:55:35] Speaker 08:
to investors if the commission has specifically authorized that.

[00:55:40] Speaker 08:
And the commission has not authorized to date the payment of these awards.

[00:55:45] Speaker 08:
So from the commission's perspective, it's very important that it be able.

[00:55:51] Speaker 10:
So it's not really the judgments that are unlawful.

[00:55:53] Speaker 10:
It's the fact that your EU members ever gave any of these investment incentives.

[00:56:00] Speaker 10:
They weren't allowed to do that, but they did it.

[00:56:02] Speaker 10:
And now the investors are trying to collect them

[00:56:05] Speaker 10:
was promised to them, and you're saying they never were allowed to do that to begin with?

[00:56:10] Speaker 08:
So it is both, to the extent that EU member states, such as Spain, but also other countries, to the extent that they offered and paid subsidies to EU or other companies without first getting approval from the commission, that is unlawful state aid.

[00:56:29] Speaker 06:
And do you think they believe the ECT was the permission?

[00:56:33] Speaker 08:
that the investors believed the UCT was permissioned?

[00:56:37] Speaker 06:
That Spain did.

[00:56:38] Speaker 08:
I don't know what Spain believed at that point.

[00:56:41] Speaker 08:
I think Spain should have been on notice of its obligations under EU state aid law to notify the commission.

[00:56:47] Speaker 06:
But it did a lot of this.

[00:56:49] Speaker 08:
It did a lot of the payment of subsidies.

[00:56:53] Speaker 06:
Giving up subsidies.

[00:56:54] Speaker 08:
Yes, and the commission's position is that Spain should not have done that without first notifying the commission and obtaining permission to do so.

[00:57:01] Speaker 10:
And it's not state aid if you pay a subsidy to a non-EU investor?

[00:57:07] Speaker 08:
It also may be a question of state aid in that respect.

[00:57:10] Speaker 08:
The identity of the beneficiary of the aid is not dispositive of the state aid analysis.

[00:57:17] Speaker 08:
It's really whether the payment of an amount would potentially cause distortion of competition within the aid.

[00:57:24] Speaker 10:
Then why can Spain pay subsidies to non-EU people?

[00:57:29] Speaker 10:
Doesn't that still violate the state aid

[00:57:32] Speaker 08:
I guess doctrine.

[00:57:34] Speaker 08:
So the question of I think the commission's position is that is that there are state aid implications also for for non EU investors investing in in the EU.

[00:57:43] Speaker 08:
They also should be on notice of the content of EU law and should be.

[00:57:47] Speaker 10:
And I just don't understand the divide that you're drawing between EU and non EU investors.

[00:57:52] Speaker 06:
Is it that the ECT, as you read it and as Spain reads it, was EU authorization, notice and authorization for state aid to non-EU investors?

[00:58:06] Speaker 06:
And the mistake was Spain extending that to EU investors?

[00:58:11] Speaker 08:
So I don't think that the Commission would agree that the ECT itself constitutes authorization to pay state aid.

[00:58:18] Speaker 08:
There needs to be

[00:58:19] Speaker 08:
a formal process by which the member state notifies the commission of its intent to pay and receives a decision.

[00:58:27] Speaker 10:
And just going back to Judge Pan's question about- And why isn't your position that Spain didn't have the authority to enter any of these investment decisions within EU or external to EU investors because it's state aid?

[00:58:45] Speaker 08:
So I think the state aid analysis would need to, if there's an award against Spain that's been obtained by an EU investor, I think there would still need to be a state aid investigation and analysis of whether Spain can actually do that.

[00:59:00] Speaker 08:
Why not for the non-EU?

[00:59:03] Speaker 08:
I think there would also need to be an analysis of that because of the state aid.

[00:59:07] Speaker 10:
Then why are these awards enforceable as to non-EU investors but not EU investors?

[00:59:14] Speaker 08:
At least as far as the Court of Justice has left the question, and it has not yet definitively ruled on the scope of the principles as far as they apply to third country investors.

[00:59:30] Speaker 08:
But the court has left that open.

[00:59:33] Speaker 08:
But it would be something that the court would need to address in the future.

[00:59:38] Speaker 10:
Yeah, I'm just confused by the use

[00:59:40] Speaker 10:
position because it just doesn't seem like I don't understand that we're trying to keep the cases in alignment because these have no presidential value.

[00:59:51] Speaker 10:
And now I don't understand the, you know, it's important for EU order because of state aid, et cetera, because there's no reason to distinguish between intra EU and outside of EU investors like

[01:00:05] Speaker 10:
Yes, your position.

[01:00:06] Speaker 10:
I don't understand the reasons for your position.

[01:00:08] Speaker 08:
So I'm sorry about the confusion.

[01:00:10] Speaker 08:
I mean, I think that the fundamental point here is that the commission is the union's state aid regulator, and it has an interest in making sure that its ability to evaluate and decide on these questions of state aid, whether they pertain to, especially where they pertain to EU investors, where the law seems to have been focused, but also in future cases, that it's important that the EU

[01:00:35] Speaker 08:
Commission be the party that is able to exercise its obligations and its regulatory mandate that flow from the EU treaties itself.

[01:00:45] Speaker 10:
It just seems that also your interests can be vindicated by allowing these proceedings to happen and then moving for a stay of any execution of the judgment in the United States and then proceeding with your what you're doing already, which is determining whether Spain is allowed to pay any of these judgments.

[01:01:03] Speaker 08:
So I think with respect to that, there are a couple of problems.

[01:01:06] Speaker 08:
First of all, the mere idea of a body other than the European Commission authorizing or ordering an EU member state to pay aid is problematic from the perspective of the Commission's exclusive authority in this area.

[01:01:26] Speaker 08:
With respect to what should happen in the hypothetical world in which these awards are permitted to be enforced, there would be a complicated cascade of litigation and other proceedings that would need to happen in the EU.

[01:01:41] Speaker 08:
So say, for example, Spain were to pay in compliance with a U.S.

[01:01:46] Speaker 08:
order, or say even that Spain had some of its assets attached in execution.

[01:01:53] Speaker 10:
Say that's all stayed pending whatever you all decide about what Spain can do.

[01:01:57] Speaker 10:
What would happen?

[01:01:59] Speaker 08:
So then the EU would still be, I think, the basic point about another entity having ordered the payment of aid.

[01:02:11] Speaker 08:
I think that is still fundamentally a problem for the commission and one that it takes strong issue with.

[01:02:19] Speaker 08:
But I also think your point that

[01:02:21] Speaker 08:
If further proceedings were to be stayed, the practical consequences might not be the same, but I just wanted to lay out for the court some of the practical consequences and what they would be.

[01:02:30] Speaker 08:
Because if Spain were actually to pay anything, the commission would be required to order it to recover and claw back any such amounts.

[01:02:39] Speaker 08:
A recovery decision itself would be, in principle, subject to further challenge and appeal within the EU system.

[01:02:46] Speaker 08:
And that I think you can take a look at the MICULA

[01:02:50] Speaker 08:
decision and that case is an example of the very complicated machinations that result from a state actually paying or being made to pay an award that is indisputably unenforceable within the EU as a matter of both EU law and impermissible state aid.

[01:03:10] Speaker 10:
Well, I thought that the EU is deciding whether or not it's permissible.

[01:03:16] Speaker 08:
Correct.

[01:03:16] Speaker 08:
But until unless and until the commission actually issues a decision authorizing it is impermissible.

[01:03:23] Speaker 10:
It puts Spain in a difficult position because assuming that their assets in the United States are seized to pay the judgment, then within the EU, they would be required to claw back those assets.

[01:03:35] Speaker 10:
Correct.

[01:03:35] Speaker 10:
Through more litigation against the petitioners in this case or the

[01:03:40] Speaker 10:
investors in this case.

[01:03:41] Speaker 08:
Correct.

[01:03:41] Speaker 08:
And unfortunately, that is the bind that Spain would find itself in.

[01:03:47] Speaker 08:
And the commission does not really have discretion not to order recovery.

[01:03:51] Speaker 08:
And I think that's, again, highlighting why Spain actually went to the court.

[01:03:56] Speaker 10:
So what are the proceedings going on to decide whether or not Spain can pay these judgments or not?

[01:04:01] Speaker 10:
Like, how does that work?

[01:04:02] Speaker 08:
So Spain has has notified the EU, the commission of these awards.

[01:04:08] Speaker 08:
And just I think this goes back to an earlier question about what is when is what is the aid here?

[01:04:13] Speaker 08:
It's not only the original subsidies, but the court has also held that the payment and the commission understands that the payment of an award, an award itself would constitute aid.

[01:04:24] Speaker 08:
So Spain has notified the awards to the commission.

[01:04:28] Speaker 08:
commission is reviewing those.

[01:04:31] Speaker 08:
While it is reviewing, it is impermissible and unlawful for Spain to pay anything.

[01:04:35] Speaker 10:
Does the EU just have discretion to say you can pay these awards?

[01:04:40] Speaker 08:
There are laws on factors for when it would be permissible to pay state aid.

[01:04:47] Speaker 08:
I think

[01:04:47] Speaker 08:
given the way that the commission's decisions and the court's jurisprudence has developed on this point, I think probably it would be quite unlikely that these awards could be paid just based on the way that the principles have been developing.

[01:05:03] Speaker 08:
And I also would point out that there is no

[01:05:08] Speaker 08:
principle of state aid law under which an order from, you know, a national court, whether it's in the EU or outside the EU, would be a reason to excuse Spain from a recovery obligation.

[01:05:20] Speaker 08:
So again, I think that that simply is to underscore the complicated questions that are posed by by these particular awards and the notion that this will be settled.

[01:05:30] Speaker 10:
Can the EU and Spain and these investors all get into a room and just settle this?

[01:05:37] Speaker 08:
Um, in terms of in terms of settlement, I think that that, too.

[01:05:41] Speaker 08:
And once again, this all comes back to state aid.

[01:05:43] Speaker 08:
I think that that, too, could could pose some serious questions.

[01:05:47] Speaker 10:
I don't know what the contours of all this be, but I'm just wondering, can the EU actually does it have authority to enter settlement negotiations along with Spain and these investors and just work this out?

[01:06:01] Speaker 08:
Uh, in terms of the authority, I

[01:06:04] Speaker 08:
I don't know for sure the answer to that question.

[01:06:07] Speaker 10:
Because I guess the EU could go to the table and say, well, we'd be willing to waive or, I guess, allow payment of this much as state aid as part of the settlement and withdraw the clawback requirements, et cetera.

[01:06:24] Speaker 08:
Under existing state aid law, I don't know whether that would actually be possible given the

[01:06:31] Speaker 08:
The content of state aid laws it stands, I mean, you know, whether whether the law would be or could be amended.

[01:06:36] Speaker 10:
I mean, I think that then we are really straying into things that are asking because it just seems like I'm not an expert on international law, but this case cries out for settlements, just looking at just the complexities involved and different.

[01:06:51] Speaker 08:
I agree with you about the very high degree of complexity of this case.

[01:06:55] Speaker 08:
And I think that really underscores why, again, it would be extraordinary for, I think, this court to take the bold step that the investors are inviting, particularly given that the United States is not a party to the Energy Charter Treaty.

[01:07:10] Speaker 10:
What's the bold step we're talking about?

[01:07:12] Speaker 08:
The bold step of allowing the enforcement of these awards and seeking an anti-suit injunction.

[01:07:18] Speaker 08:
I understand that Blasket is no longer seeking an anti-suit injunction, but enjoining a foreign sovereign and preventing the European Commission from being able to enforce and carry out its regulatory mandate under the state aid regime.

[01:07:33] Speaker 10:
But it's not extraordinary to just enforce an award under the exit, which Spain is a party to.

[01:07:43] Speaker 10:
That's an extraordinary.

[01:07:44] Speaker 10:
Well, I understand the injunction.

[01:07:45] Speaker 06:
Why is it a ball step, especially in this case, where if it continues in the district court, the court will have a chance that they're more

[01:07:57] Speaker 06:
bases under the New York Convention to hold that a reward is invalid on its merits, even if jurisdiction is recognized.

[01:08:09] Speaker 06:
So what would be bold about allowing this to go forward and have the arguments about validity or not be vetted before the court?

[01:08:20] Speaker 08:
So I think that the court still needs to

[01:08:22] Speaker 08:
even before you get to the questions about the merits and whether enforcement could be permitted or not under the New York Convention.

[01:08:30] Speaker 08:
There's still, of course, the threshold jurisdictional question of whether there is an arbitration agreement.

[01:08:36] Speaker 08:
And here, where the Court of Justice has spoken, has reached that conclusion based on longstanding principles of EU law.

[01:08:46] Speaker 08:
And these are principles also that are fundamental to the EU legal order.

[01:08:52] Speaker 08:
and where I think that if you are choosing between two positions and two interpretations of this treaty language, one of which is consistent with the views of the European courts and every relevant sovereign here, including the home countries of the investors, if you're choosing between that and on the other hand, an interpretation that would go against that uniform consensus that would open the door to all sorts of disruption

[01:09:20] Speaker 08:
within the European Union.

[01:09:21] Speaker 08:
I think there is a role for deference here.

[01:09:26] Speaker 06:
You don't think STILX effectively and Chevron effectively require us to hold that there's jurisdiction?

[01:09:39] Speaker 08:
I don't.

[01:09:40] Speaker 08:
I think that those cases all, in none of those cases was there

[01:09:44] Speaker 08:
a dispute about whether there was an arbitration agreement.

[01:09:49] Speaker 08:
Nobody was arguing that there hadn't been an offer made and that the offer was not to the, you know, that there hadn't been an agreement created between the people who were trying to arbitrate.

[01:09:59] Speaker 08:
And now here that the question is fundamentally different.

[01:10:03] Speaker 08:
It's a question whether Spain actually could ever have entered into an agreement with these people, with these parties.

[01:10:10] Speaker 06:
Still like Sue said, the treaty, the award,

[01:10:14] Speaker 06:
the ECT, the award, and the exit.

[01:10:23] Speaker 06:
Is it exit?

[01:10:24] Speaker 06:
Or New York Convention?

[01:10:26] Speaker 08:
I think it was a New York Convention case.

[01:10:28] Speaker 06:
So the ECT was the agreement to arbitrate in that case.

[01:10:34] Speaker 08:
Well, I think, fair in mind, that Stillex, of course, was not an intra-EU case.

[01:10:38] Speaker 08:
So there was no argument being made there that Moldova did not have the power to agree to arbitrate the dispute with the relevant investor.

[01:10:46] Speaker 06:
No, but the move was that you don't have to get into Moldova and the investor, the intent there, the agreement to arbitrate there, because the ECT was itself.

[01:11:01] Speaker 08:
So I think that in the Silex case, there was in fact, there was an offer and it had been accepted by the investor.

[01:11:12] Speaker 08:
And that's simply not what the argument is here.

[01:11:16] Speaker 08:
I think the question there was the scope of the dispute that was being submitted to arbitration and whether the investment that was being sued about was an investment that was covered by the treaty.

[01:11:29] Speaker 08:
And that, again, I think is a fundamentally different question from the one that we're facing here about whether there was ever an ability on the part of Spain sovereign to agree to this, to arbitrate with an intra EU investor.

[01:11:45] Speaker 10:
Can I ask you, I guess it was represented to us that this argument that you're making or Spain has made has been run up the flagpole in a bunch of different arbitration

[01:11:56] Speaker 10:
settings and has been shot down.

[01:11:58] Speaker 10:
And so I'm just wondering, those awards, have they been paid and have you been trying to claw them back or what has happened in those 30 other?

[01:12:06] Speaker 08:
So in those in those other cases, I mean, I think the position is probably similar in respect to the Spanish awards.

[01:12:12] Speaker 08:
You know, I don't believe that Spain has actually paid any of them yet because of the state aid implications and the commission will need to evaluate and issue its decision about whether or not the awards can be paid.

[01:12:24] Speaker 10:
So it's not extraordinary then, because 30 other awards are out there.

[01:12:30] Speaker 08:
But they haven't been enforced.

[01:12:35] Speaker 10:
Oh, you mean they haven't been confirmed?

[01:12:38] Speaker 08:
Yes, that's correct.

[01:12:39] Speaker 08:
I think these are the first three cases that have made it up to the Court of Appeals.

[01:12:44] Speaker 08:
And I think you raise a good point that there are

[01:12:46] Speaker 08:
um, multiple other cases involving the same kind of facts.

[01:12:50] Speaker 08:
I think there are probably about a dozen others, um, in the district court at the moment.

[01:12:55] Speaker 08:
They implicate not just Spain, but there are cases against Italy as well.

[01:12:59] Speaker 08:
Um, cases also against it in Croatia and Poland.

[01:13:02] Speaker 08:
So this is not just an issue that's confined to the three cases that the court is hearing today.

[01:13:07] Speaker 10:
Thank you.

[01:13:10] Speaker 08:
Court has no further questions.

[01:13:11] Speaker 07:
Thank the court for the opportunity to present the commission's views.

[01:13:14] Speaker 04:
Thank you.

[01:13:15] Speaker 04:
Thank you very much.

[01:13:20] Speaker 04:
I know it's been a long morning.

[01:13:22] Speaker 01:
If the court has questions, I'm welcome to answer them.

[01:13:24] Speaker 01:
But otherwise, we would just rest on our briefs.

[01:13:27] Speaker 06:
I had a question about, so the United States filed an amicus brief in the Nigeria case process in industrial development versus Republic of Nigeria.

[01:13:37] Speaker 06:
And you argued that

[01:13:42] Speaker 06:
it wasn't required that there be a valid arbitral award under the Foreign Sovereign Immunities Act because the New York Convention, its implementing legislation only require an arbitration where not a valid one.

[01:13:59] Speaker 06:
And I wondered whether

[01:14:02] Speaker 06:
You know, here the question is whether there's a valid agreement, not a valid award.

[01:14:06] Speaker 06:
Does the same principle apply or no?

[01:14:09] Speaker 01:
I don't think so, Your Honor.

[01:14:11] Speaker 01:
I think there does need to be an actual agreement to arbitrate formed as a precondition, whether to compel arbitration or to enforce a resulting award.

[01:14:22] Speaker 01:
I mean, I think the point is somewhat different.

[01:14:25] Speaker 01:
And I think it is consistent with and flows from the text of the FSIA as well, which provides for an action

[01:14:32] Speaker 01:
to confirm an award made pursuant to such an agreement to arbitrate.

[01:14:37] Speaker 01:
And, you know, obviously under the New York Convention, it retains the discretion to enforce an award that is no longer valid in the sense that it's been nullified perhaps by a court of the primary jurisdiction.

[01:14:51] Speaker 01:
So I think that that is the distinction we would rest on.

[01:14:57] Speaker 04:
Thank you again for appearing in our request.

[01:15:04] Speaker 04:
Mr. Miguel.

[01:15:06] Speaker 04:
Big finish.

[01:15:11] Speaker 02:
There's been no answer presented to BG Group.

[01:15:15] Speaker 02:
And it's holding that there is an investment treaty and already formed arbitration contract.

[01:15:21] Speaker 02:
That holding is the basis for Chevron's conclusion that the issue there in that case was a scope question to be addressed at the merits.

[01:15:30] Speaker 02:
Stilex, Chevron, and BG Group all dealt with challenges to the scope of consent.

[01:15:36] Speaker 02:
To be sure, this one comes in a little different packaging, but they all were about the scope of the state's consent.

[01:15:44] Speaker 02:
And in each case, this court and the Supreme Court held that those were arbitrability issues meant for the merits.

[01:15:53] Speaker 02:
Belize, Al-Kharkani, and Lloyds, none of those cases involved investment treaties.

[01:15:59] Speaker 02:
They are instead bilateral commercial arbitration agreements.

[01:16:04] Speaker 02:
And that makes all the difference.

[01:16:06] Speaker 02:
If the prime minister of Belize didn't have authority to enter into an agreement at all, this bilateral treaty, then that is indication that there would be no agreement to arbitrate.

[01:16:18] Speaker 02:
That's not the case here.

[01:16:19] Speaker 02:
There is no dispute that Spain entered into the ECT and that it remains in force and effective, at least as did non-EU states.

[01:16:28] Speaker 02:
The EU itself, apparently the CJEU, that is, does not view this as a capacity or formation problem.

[01:16:35] Speaker 02:
We heard Council for Spain say that this consent is, quote, lacking force or is void ab initio.

[01:16:44] Speaker 02:
Those are not formation issues.

[01:16:47] Speaker 02:
Those are validity issues under Buckeye check cashing.

[01:16:50] Speaker 02:
They are arbitrable.

[01:16:54] Speaker 02:
Judge Pillard, you asked about first options and the first option rule.

[01:16:59] Speaker 02:
I would point to the Second Circuit's case in Olin, where it's 73F4 at 107.

[01:17:06] Speaker 02:
And it says there that the first options rule doesn't apply where Libya, quote, independently urged the tribunal to decide issues of arbitrability.

[01:17:14] Speaker 02:
That is exactly what happened here.

[01:17:16] Speaker 02:
The oddity here is that Spain is seeking a level of review at the jurisdictional phase that it cannot possibly obtain at the merits phase.

[01:17:25] Speaker 02:
That turns the whole purpose of the 1988 amendments on their head.

[01:17:29] Speaker 02:
It was supposed to streamline the path to enforcement, ensure that there was jurisdiction, not make it more difficult.

[01:17:37] Speaker 02:
On the merits here, of course arbitration decisions are highly relevant to international law arbitration.

[01:17:44] Speaker 02:
What is going on here is an overwhelming consensus that EU law does not diminish member states' treaty commitments.

[01:17:52] Speaker 02:
It's an overwhelming consensus rejecting this idea of the primacy of EU law within the international law domain.

[01:18:02] Speaker 02:
Finally, on state aid,

[01:18:05] Speaker 02:
This court, of course, has an unflagging obligation to exercise subject matter jurisdiction where it exists, whatever the European Commission says about state aid.

[01:18:17] Speaker 02:
The United States has a treaty obligation to enforce awards.

[01:18:20] Speaker 02:
There's a statutory obligation of this court to enforce awards.

[01:18:24] Speaker 02:
And there's been no finding that the awards in our case are state aid at all.

[01:18:31] Speaker 04:
Thank you, Your Honors.

[01:18:36] Speaker 04:
The case is submitted.