[00:00:00] Speaker 06:
Case number 23-7031, Nexter Energy Civil Holdings BV and Nexter Energy Spain Holdings BV versus Kingdom of Spain Appellant.

[00:00:10] Speaker 06:
And case number 23-7032, Nyren Holding SARL versus Kingdom of Spain Appellant.

[00:00:17] Speaker 06:
Ms.

[00:00:17] Speaker 06:
Harris for the Appellant Kingdom of Spain.

[00:00:19] Speaker 06:
Ms.

[00:00:20] Speaker 06:
Pei, I mean Ms.

[00:00:21] Speaker 06:
Curia for the European Commission.

[00:00:23] Speaker 06:
Ms.

[00:00:23] Speaker 06:
Ringo, I make it Gary I for the United States of America.

[00:00:27] Speaker 06:
Mr. Dwarski for the Apple East next year, energy global holdings at L and nine Rand folding as a RL.

[00:00:35] Speaker 03:
Good morning, Ms.

[00:00:36] Speaker 03:
Harris.

[00:00:37] Speaker 03:
Good morning.

[00:00:38] Speaker 03:
Thank you.

[00:00:39] Speaker 09:
And may it please the court, Sarah Harris for the kingdom of Spain, the foreign sovereign immunities act bars restriction over Spain.

[00:00:47] Speaker 09:
First, the arbitration exception doesn't apply.

[00:00:51] Speaker 09:
That exception requires federal courts to confirm for themselves that an arbitration agreement exists.

[00:00:58] Speaker 09:
None exists here.

[00:01:00] Speaker 09:
EU law is paramount international law for EU members like Spain and EU nationals like the investors.

[00:01:08] Speaker 09:
EU law has always deprived EU members of any power to agree to resolve intra-EU disputes outside the EU system, including through arbitration.

[00:01:19] Speaker 09:
Second, the waiver exception doesn't apply.

[00:01:22] Speaker 09:
Foreign sovereigns don't implicitly waive their immunity just by ratifying arbitration treaties.

[00:01:28] Speaker 09:
Foreign sovereigns must also agree to arbitrate with particular parties.

[00:01:33] Speaker 09:
And third, the investor's position will upend settled international law

[00:01:38] Speaker 09:
and make the U.S.

[00:01:39] Speaker 09:
a haven pursuits that investors home countries forbid.

[00:01:43] Speaker 09:
The settled rule is that when the EU itself ratifies a treaty, as here, the EU controls intra-EU relations and that treaty doesn't supplant EU law.

[00:01:56] Speaker 05:
Ms.

[00:01:56] Speaker 05:
Harris, you mentioned that the EU and the member states ratified the treaty and under

[00:02:04] Speaker 05:
The Foreign Sovereign Immunities Act, we look not only to whether the nation state has, under the arbitration exception, whether the nation state has agreed with that counterparty, but whether it's entered an agreement for the benefit of other parties.

[00:02:22] Speaker 05:
And here, I take it you don't dispute that the EU and Spain entered into an agreement for the benefit of the investors.

[00:02:32] Speaker 09:
We dispute that the relevant agreement, I guess, is the Energy Charter Treaty.

[00:02:37] Speaker 09:
So we think that the agreement here is a very specific one, to the extent one exists at all.

[00:02:43] Speaker 09:
It would be between Spain and the individual investors.

[00:02:46] Speaker 05:
What do we make of it?

[00:02:46] Speaker 05:
I mean, we're interpreting the Foreign Sovereignty Act, and for the purpose of this question, the arbitration exception.

[00:02:53] Speaker 05:
Is your position that the parties

[00:03:00] Speaker 05:
than who have to submit their disputes to arbitration, have to be the same parties who entered the agreement for the benefit of others?

[00:03:08] Speaker 09:
Our position is there's only one arbitration agreement here because the Energy Charter Treaty itself seems to recognize that.

[00:03:14] Speaker 05:
Well, the BG group and the Chief Justice as well talk about the relationship between two agreements, an agreement to settle disputes by arbitration that could be the treaty and

[00:03:27] Speaker 05:
the agreement creating a standing offer for investors?

[00:03:32] Speaker 09:
That's true.

[00:03:33] Speaker 09:
But I think the relevant precedents here would be the later Supreme Court decision in ZF Automotive, which discusses the type of investment treaty we have here, as well as the Olin decision from the Second Circuit, which is surveying this, and looking at the Energy Charter Treaty itself.

[00:03:50] Speaker 09:
So if you look at Article 26.5 in particular, I don't think you can construe sort of whatever

[00:03:56] Speaker 09:
background is going on with member states or not as the relevant arbitration agreement.

[00:04:01] Speaker 09:
Because Article 26.5 recognizes that to have the type of arbitration agreement required under both ICCID and the New York Convention, you need both consent given by the sovereign together with the written consent of the investor.

[00:04:17] Speaker 09:
And those two things together are what would satisfy the requirements under ICCID and the New York Convention.

[00:04:22] Speaker 08:
So why does the ECT not satisfy that test?

[00:04:25] Speaker 09:
These look here.

[00:04:26] Speaker 09:
We don't think that there is any.

[00:04:28] Speaker 09:
Spain does not have the power to agree to arbitrate with these investors from European countries, and so the missing ingredient here is the consent given by state Spain in the words of the European Court of Justice, but the ECB contains an unconditional agreement to arbitrate and sign that.

[00:04:47] Speaker 08:
And we have held in at least two cases Chevron and still it's that.

[00:04:52] Speaker 08:
this type of agreement in a treaty married with a request for the arbitration consistent with what the treaty requires is sufficient to confer jurisdiction, at least on a prima facie level.

[00:05:06] Speaker 09:
So two issues with that.

[00:05:07] Speaker 09:
First of all, I think there's a preliminary question, which is what law governs whether Spain actually consented in the energy charter treaty or not.

[00:05:16] Speaker 09:
And given that this is a dispute between an EU member

[00:05:20] Speaker 09:
and EU parties, the primary law governing their relationship is and always has been EU law.

[00:05:26] Speaker 08:
I guess the question is, why is not your position just a question of arbitrability as opposed to a question about jurisdictional facts?

[00:05:36] Speaker 08:
Because it seems that if we're just looking at jurisdictional facts,

[00:05:39] Speaker 08:
We have precedents addressing the ECT specifically in Stoics and a similar agreement in Chevron, which said that while you need to show is a treaty like this and a request to arbitrate from the investor and an arbitral award, we have that here.

[00:05:58] Speaker 08:
And if you have other arguments as to why this doesn't apply, why isn't that just a question of arbitrability, which is not about jurisdiction?

[00:06:06] Speaker 09:
Two reasons, and first of all, is this court's other precedents, which seem to clearly establish that whether a party has the power to agree to arbitrate is a question of whether an agreement is formed, which is always for this court to decide de novo under the Foreign Sovereign Immunities Act.

[00:06:22] Speaker 05:
Which precedents are you principally relying on?

[00:06:24] Speaker 05:
Both.

[00:06:25] Speaker 05:
The FAA precedents?

[00:06:26] Speaker 09:
No, I'm particularly relying in the Foreign Sovereign Immunities context on Belize and Mykula, but I also can talk about FAA cases because those also confirm the point.

[00:06:36] Speaker 09:
And just to walk through the Belize decision, if it were true that all you had to do is take a quick look at whether there is an investment treaty, whether there is a purported agreement, that case would be inexplicable because this court said, no, there has to be a further look at whether Belize's prime minister actually had the authority to agree to arbitrage.

[00:06:58] Speaker 08:
Can I ask you a question?

[00:07:00] Speaker 08:
It seems to me that you've conceded

[00:07:01] Speaker 08:
that the language in the ECT and the ECT itself does create an agreement to arbitrate with non-EU signatories to the ECT.

[00:07:10] Speaker 08:
Is that correct?

[00:07:10] Speaker 09:
That is correct.

[00:07:11] Speaker 09:
And that is no diff, but we don't think that that means it's necessarily a question of arbitrability.

[00:07:16] Speaker 08:
No, well, I guess my question is, it's the exact same language that creates an agreement to arbitrate with non-EU countries.

[00:07:24] Speaker 08:
And there's no carve out in the ECT for intra-EU disputes.

[00:07:29] Speaker 08:
So it's the exact same language.

[00:07:30] Speaker 08:
It does create an agreement for non-EU countries, but it does not.

[00:07:34] Speaker 08:
For intra-EU countries, it's the same language.

[00:07:36] Speaker 09:
So two points on that.

[00:07:37] Speaker 09:
I just, first of all, if you're looking at the ECC itself, we disagree with that reading because, and I would first point you to Article 1.3 of the ECT, which expressly recognizes that economic integration organizations like the EU

[00:07:51] Speaker 09:
have primacy and control relations between EU members.

[00:07:55] Speaker 09:
And that provision says that- I'm sorry, what was the number of that again?

[00:07:59] Speaker 09:
13, Article 13.

[00:08:03] Speaker 09:
And it says that an organization constituted by states to which they have transferred competence, i.e.

[00:08:10] Speaker 09:
sovereignty, over certain matters, a number of which are governed by this treaty, including the authority to take decisions binding on them with respect to those matters.

[00:08:19] Speaker 05:
Is your position any different from what it would be had all the current members of the EU been members and the EU only on its own behalf had joined the ECT?

[00:08:34] Speaker 09:
I don't think so.

[00:08:35] Speaker 09:
The reason why the EU joins alongside members is usually there are issues of sort of shared competence in a treaty.

[00:08:42] Speaker 09:
And this one, again, is an express recognition that the EU is going to have primacy in certain regards.

[00:08:48] Speaker 05:
So it's not... So your answer to my question was that your position is the same as it would be if the individual member states

[00:08:55] Speaker 05:
had not joined, but only the ECT had joined.

[00:08:58] Speaker 05:
Only the EU.

[00:08:59] Speaker 05:
I'm sorry, only the EU.

[00:09:01] Speaker 09:
Thank you.

[00:09:03] Speaker 09:
Yes, and the reason is when the EU joins a treaty, it's demarcating with respect to individual members that there are matters within the exclusive competence of the European Union between the members.

[00:09:14] Speaker 09:
That is how 28 signatories unanimously understand the energy charter treaty.

[00:09:19] Speaker 09:
That is how signatories across the world understand other treaties like the World Trade Agreement in 1995.

[00:09:26] Speaker 05:
You mentioned the Belize case, but Belize case doesn't really get you out of the questions I think that Judge Pan and I were asking where you have a background treaty that under which the parties have agreed to

[00:09:42] Speaker 05:
to arbitrate with respect to third parties, that was just a bilateral situation.

[00:09:48] Speaker 05:
You're talking about the competence of the chain.

[00:09:51] Speaker 09:
Sure.

[00:09:51] Speaker 09:
And two responses on that.

[00:09:52] Speaker 09:
Nicula, I think, is very squarely on all fours, albeit an unpublished decision.

[00:09:56] Speaker 09:
But this court is saying in Nicula that it is a jurisdictional question whether the bar on intra-EU arbitration

[00:10:03] Speaker 09:
precluded Romania from entering into an agreement.

[00:10:06] Speaker 09:
And just more broadly, the idea that there is a distinction between bilateral treaties and an international agreement respectfully puts the cart before the horse.

[00:10:14] Speaker 09:
The question in the first instance is, did Spain, could Spain, consent to take

[00:10:20] Speaker 09:
certain types of disputes outside the EU system, did the parties to the Energy Charter Treaty understand that Spain and any other EU members were doing this?

[00:10:29] Speaker 09:
And any way you look at it, under any sort of choice of law principle, either because you agree that when EU members and nationals are doing anything, the primary law governing their relationship is EU law, or because under the Energy Charter Treaty itself,

[00:10:45] Speaker 09:
the EU joining Article 13, the other principles in Article 266 recognize that EU law has a significant role to play and cannot allow.

[00:10:54] Speaker 08:
So shouldn't the EU and Spain just withdraw from the ECT if that's the case?

[00:10:59] Speaker 08:
Because they have signed an agreement that unconditionally agrees to arbitrate and now they're saying we can't sign that agreement.

[00:11:06] Speaker 08:
It seems

[00:11:07] Speaker 08:
The EU and Spain are still benefiting from the ECT.

[00:11:10] Speaker 08:
Their nationals can arbitrate against non-EU countries and have all of these benefits, but they're saying that they don't have to sort of pay the price.

[00:11:19] Speaker 08:
And it seems to me that if they have a problem and there's a conflict between the ECT and EU law, then they need to resolve it themselves, not through coming to court like this, but just withdrawing from the ECT, which in no uncertain terms says is an unconditional agreement to arbitrate.

[00:11:35] Speaker 09:
But respectfully, that would contravene the way every signatory to the ECT that has ever waiting on this issue understands the treaty.

[00:11:42] Speaker 09:
So it will be really strange to force signatories just to withdraw.

[00:11:46] Speaker 08:
What do you mean?

[00:11:47] Speaker 08:
What do you think everybody's agreeing to?

[00:11:48] Speaker 08:
Because I think there's a dispute here as to whether

[00:11:51] Speaker 09:
There is certainly a dispute with the investors, but among signatories to the Energy Charter Treaty, 28 of them, and no one has said otherwise, everyone interprets that treaty to mean that Spain and other EU members never agreed to arbitrate in the EU system.

[00:12:06] Speaker 09:
And that's not a surprise given the backdrop of the treaty.

[00:12:09] Speaker 09:
The idea of even having intra-EU arbitration was unheard of until the mid-2000s.

[00:12:14] Speaker 09:
And whenever it cropped up, when it started cropping up then, the European Court of Justice immediately made clear in the Ireland decision.

[00:12:22] Speaker 08:
I want to go back to what you said before, because we have an amicus brief from international scholars.

[00:12:29] Speaker 08:
And they note that when the ECT was being negotiated and drafted,

[00:12:36] Speaker 08:
There was a suggestion that we have a disconnection clause, which is something that would carve out intra-EU disputes.

[00:12:44] Speaker 08:
And they chose not to do that.

[00:12:45] Speaker 08:
It was actually considered and not done.

[00:12:48] Speaker 08:
But the EU did carve out this Svalbard treaty concerning an archipelago in the Arctic.

[00:12:54] Speaker 08:
But you never carved out intra-EU

[00:12:57] Speaker 08:
Disputes and the plain language of the ECT says they are unconditionally agreeing to arbitrate these disputes even among the European countries.

[00:13:06] Speaker 08:
And what you pointed to me before Article one three is just a definition section.

[00:13:11] Speaker 08:
It's not a disconnection clause.

[00:13:12] Speaker 09:
So a few responses.

[00:13:14] Speaker 09:
First of all, the EU offered the disconnection clause only if necessary, and it is superfluous because when the EU itself joins a treaty, the EU is making the treaty part of EU law.

[00:13:24] Speaker 09:
Now, Article 13, of course, is a definitional section, but it's still highly significant.

[00:13:29] Speaker 09:
that the definition of the EU is as an organization to which states transfer competence and that the EU can take binding decisions with respect to matters within the treaty.

[00:13:40] Speaker 09:
So it is defining what the EU does, but it's saying that matters governed by the treaty are subject to the EU's competence, including the power to take those decisions.

[00:13:53] Speaker 09:
It brings a lot into this definition.

[00:13:55] Speaker 08:
Well, I don't say that I'm looking at it right now.

[00:13:57] Speaker 09:
Respectfully, I don't have to just rely on Article one three.

[00:14:00] Speaker 09:
I am also relying on the significance of the EU joining a treaty.

[00:14:03] Speaker 09:
This is no different from the WTO agreement from 1995.

[00:14:09] Speaker 09:
There also was a disconnection clause proposed for that treaty.

[00:14:12] Speaker 09:
No one has understood the idea that you propose a disconnection as only if

[00:14:17] Speaker 09:
if relevant, to mean that the EU somehow lacks the authority to make EU law on this and on the Spalbard issue.

[00:14:23] Speaker 08:
I'm sorry.

[00:14:24] Speaker 08:
So are you saying that at the time that they drafted the ECT, everybody understood that it would not apply to intra-EU disputes?

[00:14:30] Speaker 09:
Yes, I am absolutely saying that.

[00:14:32] Speaker 09:
And not only am I saying that, that is evident from the signatories' understanding of this treaty.

[00:14:37] Speaker 09:
But Acmea and Comstroy had not been decided yet.

[00:14:40] Speaker 09:
Yes, but Acmea and Comstroy are applying settled principles that date to 1957 in the EU system.

[00:14:46] Speaker 09:
It is not just the case that these were principles that were only discovered in 2018 or later.

[00:14:51] Speaker 09:
They are principles that have undergirded the entire EU system since its formation.

[00:14:55] Speaker 09:
Article 344 of the Treaty on the Functioning of the EU sets out in very plain language that member states who join the EU no longer can refer disputes outside the European system if they are intra-EU disputes.

[00:15:09] Speaker 09:
It is not allowed to do so.

[00:15:11] Speaker 05:
What if Switzerland and the United States had a treaty

[00:15:16] Speaker 05:
that predated the ECT and that incorporated sort of First Options versus Kaplan, you know, your idea about verifying the existence in advance of the validity of the arbitration agreement.

[00:15:36] Speaker 05:
in advance.

[00:15:37] Speaker 05:
And then they claimed that the ECT, even though they're signatories and exit, even though they're signatories, are subject to a different jurisdictional inquiry than the inquiry that one would ordinarily make in an exit case applying the ECT.

[00:15:55] Speaker 05:
That's also internationalized, is it not?

[00:15:57] Speaker 09:
So that would be international law.

[00:15:59] Speaker 09:
I think the question is, we're all in the same world, I think, of deciding which conflict principles apply.

[00:16:05] Speaker 09:
And we have three options that have been on the table from both sides, both of which we win.

[00:16:10] Speaker 09:
The first of which is that European law is the primary law governing relations between EU members.

[00:16:18] Speaker 09:
That's what everyone expects, investors, nationals, members alike.

[00:16:22] Speaker 09:
Second of all is the general principle that the specific governs the general.

[00:16:26] Speaker 09:
The EU treaties are themselves international law and are the most specific rules governing the capacity or power of EU membership that general laws more specific than the ECT that contains an explicit.

[00:16:39] Speaker 08:
agreement and consent to arbitrate?

[00:16:41] Speaker 08:
How is that more specific than the ECT?

[00:16:43] Speaker 09:
Because the ECT is silent with respect to power to agree to things and not only is the ECT, again, the ECT itself is internally conflicting but does not have a rule saying, you know, this is the rule for capacity or power to.

[00:16:56] Speaker 09:
Does your position boil down to Spain signed the ECT

[00:17:00] Speaker 08:
believing it could agree to this unconditional arbitration agreement, but they were wrong.

[00:17:05] Speaker 08:
They weren't able to sign that.

[00:17:07] Speaker 09:
Absolutely not.

[00:17:08] Speaker 09:
What we are saying is Spain and everyone else, again, all 28 signatories who have weighed in unanimously saying this, that when an EU member such as Spain or anyone else signs the EC2, especially when you have the EU joining, what it is agreeing to is arbitrating with non-EU members.

[00:17:26] Speaker 09:
And so that is what is agreed to.

[00:17:29] Speaker 08:
It is not that you just say that in the treaty, then, because it says the complete opposite in the plain words of the treaty.

[00:17:34] Speaker 08:
Respectfully, it's every signatory.

[00:17:37] Speaker 08:
where every contracting party is agreeing to an unconditional arbitration.

[00:17:42] Speaker 09:
And you could say the same thing for the UN Convention on the Law of the Sea and the WTO agreements.

[00:17:46] Speaker 09:
And the understanding at the time is that when the EU itself joins a treaty alongside members, there is no power to sort of say, oh, we thought that this meant to supersede primary EU law that governs these relationships.

[00:17:59] Speaker 09:
It is clear to everyone.

[00:18:00] Speaker 09:
And again, I can't emphasize enough how

[00:18:03] Speaker 09:
unusual it be for a court to sort of say that all signatories who have weighed in just got this totally wrong.

[00:18:12] Speaker 09:
They have been operating under this understanding.

[00:18:13] Speaker 08:
Your position relies on this sort of fiction that at the time they assumed they knew what Comstroy and Acmea were going to decide.

[00:18:22] Speaker 09:
So respectfully, no, it doesn't rely on that fiction.

[00:18:24] Speaker 09:
It relies on the understanding that when the EU members formed the European Union in 1957 and agreed to a provision,

[00:18:33] Speaker 09:
that put off limits any sort of dispute resolution that did not let the European Court of Justice have primary decision-making responsibility, that was not allowed.

[00:18:42] Speaker 09:
They gave up that power.

[00:18:43] Speaker 04:
And let me ask you a question about arbitration, because that's what we're focusing on here.

[00:18:53] Speaker 04:
When the EU signed the ETC, it knew that arbitration was different than litigation.

[00:19:03] Speaker 04:
so that parties could agree to arbitrate a matter where they would reach an agreement through the arbitration process.

[00:19:14] Speaker 04:
That would not be appealable, would be bound by it, but they had a choice of going that route or litigating.

[00:19:22] Speaker 04:
So why do we read this treaty in a manner that assumes that the EU did not know

[00:19:33] Speaker 04:
what commercial arbitration was.

[00:19:37] Speaker 09:
Respectfully, I don't think it's a matter of reading the treaty as if the EU doesn't understand arbitration.

[00:19:43] Speaker 04:
Well, what did it mean by arbitration, commercial arbitration then, in the understanding that one of the reasons post World War II arbitration was so desirable was you could avoid the costs and delay

[00:20:02] Speaker 04:
of litigation, and surely the EU and its leaders were sophisticated enough to realize that.

[00:20:11] Speaker 04:
All I'm getting at is if it joins a treaty where it embraces the understanding of a term in a commercial field, how can it come back years later and say, oh, that's not what we meant?

[00:20:27] Speaker 04:
I'm just trying to understand where your argument goes.

[00:20:31] Speaker 04:
Yes.

[00:20:32] Speaker 04:
And our argument is that arbitration, commercial arbitration at least, among parties was not a matter that came through the court system or the legislative system on an individual basis.

[00:20:52] Speaker 09:
And what the EU agreed to and what the member states agreed to is arbitration vis-a-vis non-EU members.

[00:21:00] Speaker 09:
It sort of begs the question, who are they agreeing with?

[00:21:03] Speaker 09:
It's sort of as if states could try.

[00:21:05] Speaker 04:
Well, they are a sophisticated party.

[00:21:07] Speaker 04:
They know who they're agreeing with.

[00:21:10] Speaker 04:
They know they're agreeing with sovereigns who are part of the EU, not only an agreement as to

[00:21:21] Speaker 04:
countries that are not part of the EU.

[00:21:24] Speaker 04:
I mean, you're asking us to assume, and you may be correct, but I just want to be clear about it, that there was either a bit of naivety or ignorance on the part of the EU when it agreed by signing a treaty that enabled independent commercial arbitration.

[00:21:49] Speaker 09:
So respectfully, I think this is like the UN Convention on the Law of the Sea, where it is not naivety or lack of sophistication going on.

[00:21:57] Speaker 09:
It is the understanding that when the EU itself joins a treaty, it is taking intra-EU matters off the table.

[00:22:04] Speaker 09:
So the agreement is absolutely between the EU members and people outside the EU.

[00:22:09] Speaker 09:
But there is no agreement to arbitrate things within EU members

[00:22:16] Speaker 04:
So when Judge Pillard asked you what authorities you were relying on, you gave her two cases from our court, and you dismissed the Supreme Court BG authority.

[00:22:29] Speaker 04:
And of course, we can go through those cases and point out how they're factually different.

[00:22:34] Speaker 04:
That's why I thought Judge Penn's question about trying to understand what's going on when the EU signs

[00:22:43] Speaker 04:
A treaty that calls for commercial arbitration as an option.

[00:22:50] Speaker 09:
Yes, and what goes on, and again, this is the way that treaties have been understood, similar treaties.

[00:22:56] Speaker 09:
And so it would really upend the way these treaties have been read by all the signatories to say, suddenly, this is not the case.

[00:23:02] Speaker 09:
But when the EU signs a treaty, it is fencing off inter-EU relations.

[00:23:07] Speaker 09:
And that's not just sort of me saying it.

[00:23:09] Speaker 08:
It's also the European Court of Justice repeatedly saying this, including why did all the individual members of the EU separately sign the treaty?

[00:23:16] Speaker 08:
If only the EU had signed it, your position would make a lot more sense.

[00:23:20] Speaker 09:
The reason is, and I think, again, Article one three recognizes that some of the matters in the treaty are exclusive competence of the European Union.

[00:23:28] Speaker 09:
Others at the time were not.

[00:23:30] Speaker 09:
And so that is the practice of the European Union.

[00:23:32] Speaker 09:
If there are sort of shared matters, the EU signs and also the individual members.

[00:23:37] Speaker 09:
But the key thing is that you signing and recognizing that with respect to external matters, that is what happened.

[00:23:43] Speaker 09:
And that

[00:23:43] Speaker 05:
You talk about throughout your briefing and your argument that the implications of Comstra and may are that Spain lacks the capacity, but that is not how those decisions read.

[00:24:01] Speaker 05:
Comstroy talks about, as a matter of EU law, the ECT's arbitration provision has to be interpreted as not being applicable to disputes between a member state and an investor of another member state.

[00:24:12] Speaker 05:
It goes more to whether Spain did enter an agreement as opposed to whether it could.

[00:24:17] Speaker 05:
And so is there anything you can point me to in those decisions, the EU Court of Justice decisions that point to this capacity argument?

[00:24:31] Speaker 09:
Yes.

[00:24:33] Speaker 09:
First of all, when Comstray says that the ECT arbitration provision cannot apply to intra-EU arbitration, it is saying that that lacks force between EU members.

[00:24:44] Speaker 09:
It's not just sort of, it doesn't apply means it doesn't exist.

[00:24:48] Speaker 09:
And I think the European Foodist decision from the European Court of Justice makes this super clear.

[00:24:53] Speaker 09:
It's going over those cases and saying that

[00:24:55] Speaker 09:
The consent, quote, lacks force, which is sort of the typical language you would expect if it was a lack of power, lack of authority argument of the type this court has.

[00:25:04] Speaker 05:
It can be that it's invalid, which is, you know, and I understand and appreciate why you're using the capacity arguments.

[00:25:11] Speaker 05:
I think that's your strongest footing in a very tough battle against exit.

[00:25:17] Speaker 05:
And we haven't even talked about the full faith and credit.

[00:25:20] Speaker 05:
aspect of exit.

[00:25:21] Speaker 05:
But so the logic underlying the position is that an international tribunal or an arbitral tribunal can't interpret EU law because it's not part of the EU judicial system, but fundamentally

[00:25:37] Speaker 05:
I don't understand what the threat is to the EU judicial system and the EU court's primacy in a kind of a Mari versus Madison sense as interpreters of EU law because arbitration awards are not presidential.

[00:25:53] Speaker 05:
So you end up with, I mean, is your position that parties, private parties can't settle energy disputes?

[00:26:00] Speaker 05:
within the EU or private and state parties can't settle disputes based on a misapprehension of EU law?

[00:26:09] Speaker 09:
Our position is what the European Court of Justice said in Comstrait and in previous cases and why this is part of one of the foundational treaties on the EU, which is that the EU members and their nationals really are getting together and so that the European Court of Justice can actually develop this body of law

[00:26:26] Speaker 09:
dispute resolution mechanisms that are outside of that, that do not respect the premise of EU law, undermine the system that is being built in the EU.

[00:26:35] Speaker 09:
They leave, even when it's an arbitral decision where you sort of say it's just an award, you can decide whether or not to enforce it.

[00:26:42] Speaker 09:
Those are extremely important interpretive questions of treaties that the members of the EU agreed, at least in matters among them, would be subject to the European Court of Justice.

[00:26:52] Speaker 09:
And that's- What about settlement?

[00:26:53] Speaker 09:
settlement, uh, with respect to you have to, I suppose, have a dispute brought somewhere in the outset and nine run and next era decide to settle this case.

[00:27:03] Speaker 05:
And they have ideas in their own minds about you long, what it means.

[00:27:10] Speaker 05:
And they just settle and they don't publish anything.

[00:27:13] Speaker 05:
They talk among themselves.

[00:27:15] Speaker 05:
They are

[00:27:16] Speaker 05:
interpreting EU law.

[00:27:18] Speaker 05:
It sounds like your position is requiring everybody to litigate, which is, as Judge Rogers was asking, there are some benefits to having some disputes arbitrated.

[00:27:29] Speaker 05:
So you're saying, no, they cannot be arbitrated, period?

[00:27:33] Speaker 09:
And I'm saying, within EU members, it's not just me saying that.

[00:27:35] Speaker 09:
That is the European Court of Justice's longstanding position from 2006, when it said the UN Convention on the Law of the Sea, which is also a multilateral treaty,

[00:27:46] Speaker 09:
You have two EU members who try to invoke the arbitration provision there.

[00:27:50] Speaker 09:
The Court of Justice says, no, that is taking disputes outside the system.

[00:27:54] Speaker 09:
It is a fundamental affront.

[00:27:56] Speaker 09:
Does this mean that nobody can arbitrate within the EU?

[00:27:59] Speaker 08:
Because what about private parties?

[00:28:01] Speaker 09:
So ComStory paragraph 65 says that the limits of this are respect to EU member and EU nationals.

[00:28:08] Speaker 09:
It's not speaking to private arbitration.

[00:28:11] Speaker 08:
It's the same principle.

[00:28:12] Speaker 08:
The whole idea about arbitration is parties are agreeing to it, consenting to let this arbitrator just decide this case.

[00:28:19] Speaker 08:
And it saves time, like as Judge Rogers said.

[00:28:22] Speaker 08:
We're not litigating.

[00:28:23] Speaker 08:
And we're just going to abide by this.

[00:28:25] Speaker 08:
It's an agreement among the parties.

[00:28:27] Speaker 08:
And it has no precedential value.

[00:28:29] Speaker 08:
It has no presidential effect.

[00:28:30] Speaker 08:
So it doesn't affect the primacy of EU law.

[00:28:35] Speaker 08:
It doesn't affect the EU's interest in making sure the law is consistent.

[00:28:39] Speaker 08:
And if it does, then why is that different from private arbitration that interprets EU law?

[00:28:45] Speaker 09:
Respectfully, the European Court of Justice truly has said in many, many opinions that even arbitration, if it involves an EU member,

[00:28:54] Speaker 09:
and an investor or another EU member really does offend the system.

[00:28:58] Speaker 09:
I understand that.

[00:28:59] Speaker 08:
My question is why?

[00:29:00] Speaker 09:
Yes.

[00:29:00] Speaker 09:
And the why is because as part of forming the EU to develop a coherent body of law and to ensure that EU... Non-precedential.

[00:29:09] Speaker 09:
So how is this part of developing a coherent body of law?

[00:29:12] Speaker 09:
It's taking a dispute that should be developed by the European Court of Justice out of the European Court of Justice.

[00:29:17] Speaker 09:
You're saying they have to litigate.

[00:29:19] Speaker 09:
we are saying between EU members, that is what people agree to.

[00:29:22] Speaker 09:
And it does not, the come straight decision, the European Court of Justice has not- So that means any EU member cannot arbitrate.

[00:29:29] Speaker 09:
And between each other, that is- Ever.

[00:29:32] Speaker 09:
So yes, that is, you cannot do that because it's not an arbitrary, unless the arbitral tribunal were allowed to have de novo review by the European Court of Justice, this is what that court held.

[00:29:43] Speaker 05:
So you also say that no tribunal outside the EU can decide an issue of EU law.

[00:29:52] Speaker 05:
But you're also asking us to apply EU law, right?

[00:29:58] Speaker 05:
So under your reading of ACMEA, it violates EU law for us to decide the case in your favor.

[00:30:07] Speaker 05:
I'm not really following how that

[00:30:10] Speaker 05:
It doesn't run afoul of the very principle on which your case rests.

[00:30:14] Speaker 09:
No, our argument is that because EU law governs, you should apply what the European Court of Justice has said and respect that it has interpreted EU law as governing and it's interpreted EU law clearly.

[00:30:27] Speaker 09:
We obviously understand.

[00:30:28] Speaker 08:
You just said you want us to apply EU law.

[00:30:30] Speaker 09:
Yes, and so the argument is not courts can never resolve a dispute involving EU law in any context.

[00:30:36] Speaker 09:
The alternative would be what Spain is supposed to argue, EU law never applies.

[00:30:41] Speaker 09:
Spain is arguing there's no jurisdiction over Spain under the Foreign Sovereign Immunities Act in the first instance.

[00:30:46] Speaker 05:
In order to so hold, we would have to apply EU law.

[00:30:51] Speaker 05:
And Ahmed is saying our international arbitration tribunal can't even apply, let alone interpret.

[00:30:58] Speaker 05:
EU law, but you're asking us to apply it.

[00:31:01] Speaker 09:
So what we're saying is there are contexts in which obviously EU law has to be applied.

[00:31:06] Speaker 09:
This is one of them.

[00:31:07] Speaker 09:
And that in order to avoid the issues with, uh, with, with letting parties circumvent their obligations here, there's no other choice.

[00:31:15] Speaker 09:
I mean, Spain can't get up here and say what, like no EU law applies.

[00:31:20] Speaker 05:
The other choice is full faith and credit.

[00:31:21] Speaker 05:
I mean, there's no, there's no question that Spain is a member of

[00:31:28] Speaker 05:
exit and that this case was arbitrated under exit and that we as a U.S.

[00:31:37] Speaker 05:
court are bound to give that award full faith and credit.

[00:31:42] Speaker 05:
And so that award has done its job in deciding

[00:31:48] Speaker 05:
what you claim is a threshold jurisdictional question that would otherwise be for us.

[00:31:54] Speaker 05:
So we decide that, but we're bound separately by the exit treaty, exit convention to give full-time faith and credit.

[00:32:03] Speaker 05:
So why is our job not done?

[00:32:05] Speaker 09:
Because that respectfully, that would both create a circuit split and do violence to the Foreign Sovereign Immunities Act, which is the only source of subject matter jurisdiction.

[00:32:12] Speaker 09:
1650A, which is the full faith and credit provision for exit, is not a source of subject matter jurisdiction.

[00:32:19] Speaker 09:
The Foreign Sovereign Immunities Act requires federal courts to assure themselves that they have jurisdiction.

[00:32:24] Speaker 09:
And just sort of outsourcing the jurisdictional determination to arbitrators does not do that job and would be flatly contrary to the way this court has actually done an inquiry into whether questions are arbitrability or existence of the arbitration agreement.

[00:32:40] Speaker 09:
Not only- What's your circuit split?

[00:32:42] Speaker 09:
The circuit split is with the Second Circuit.

[00:32:43] Speaker 09:
The Mobile Serial Decision very clearly holds that you can't just use the New York Convention or ICSID as if they're sort of separate bodies of law.

[00:32:51] Speaker 09:
And Amirata Hess from the Supreme Court also says,

[00:32:54] Speaker 09:
The only source of jurisdiction over foreign sovereigns is the Foreign Sovereign Immunities Act.

[00:32:58] Speaker 09:
You can't just look to the exit, you can't look at something else.

[00:33:05] Speaker 08:
But what you can do with the ECT.

[00:33:10] Speaker 05:
And MOBA was under the waiver exception, not the arbitration.

[00:33:13] Speaker 09:
But the principles it's applying are the starting point for the inquiry is that the Foreign Sovereign Immunities Act does not sort of allow you to look to other

[00:33:21] Speaker 09:
treaty implementing provisions as if they supply subject matter jurisdiction.

[00:33:25] Speaker 09:
This court still must.

[00:33:25] Speaker 05:
We look to facts and decisions.

[00:33:28] Speaker 05:
I mean, we look to the existence of an agreement to arbitrate.

[00:33:31] Speaker 05:
We look to whether there's an award.

[00:33:33] Speaker 05:
I mean, those are facts in the world that we have to honor and credit in order to make our own immunity decision under the FSIA, don't we?

[00:33:45] Speaker 09:
I think it would be contrary to also this court's decision in Belize and even Chevron and still X to sort of say you're no longer going to take a look at whether the question is one of formation or our ability and if it is one of formation, you're no longer going to look for yourselves.

[00:34:01] Speaker 09:
whether in Belize's case, for instance, the prime minister had the power to agree to arbitration.

[00:34:07] Speaker 09:
Those cases don't make any sense under the other side's view that you're just sort of checking boxes and looking if there's an agreement to arbitrate because all of those cases also involve delegation.

[00:34:16] Speaker 05:
Weren't those cases New York Convention cases, not exit cases?

[00:34:19] Speaker 05:
I mean, we're in a very different situation, I think, under

[00:34:23] Speaker 05:
exit because of the full faith or credit.

[00:34:25] Speaker 05:
We really, it's an extremely powerful treaty in terms of the credit we have to give to the arbitration.

[00:34:33] Speaker 09:
Two responses.

[00:34:33] Speaker 09:
First of all, the McCullough decision, obviously not presidential, but it did involve exit and this court and Judge Mehta and the district court did a very fulsome analysis.

[00:34:42] Speaker 09:
It would be flatly incompatible with the idea that the exit convention meant you just sort of drop pencils and say that the issue is delegated, there's an award, you're all done.

[00:34:52] Speaker 09:
And with respect to exit, again, relying on the idea that you give an award full faith or credit still puts the cart before the horse because that is what happens if there actually is jurisdiction under the Foreign Sovereign Immunities Act to begin with.

[00:35:05] Speaker 09:
But otherwise you'd have circumstances, potential circumstances in which you are not actually ascertaining for yourselves whether an arbitration agreement exists.

[00:35:13] Speaker 09:
You're sort of rubber stamping whatever an arbitral terminal might or might not have said on this.

[00:35:17] Speaker 09:
And again, that is contrary to both bedrock principles of really bedrock principles of arbitration everywhere.

[00:35:23] Speaker 09:
I would point you to the China mid-medals decision that we cited from the Third Circuit.

[00:35:28] Speaker 09:
because that decision canvases both Foreign Sovereign Immunities Act, International Practice, Domestic Foreign Federal Arbitration Act practice.

[00:35:36] Speaker 09:
And I think just refutes the idea that ICSID is somehow a sort of super powered convention that allows you to bypass the jurisdictional inquiry that applied.

[00:35:46] Speaker 09:
If that's what the- I'd like to ask a question about the injunction, if I may.

[00:35:49] Speaker 08:
There's a lot of talk about comedy with respect to this injunction.

[00:35:55] Speaker 08:
Isn't it Spain who acted with a lack of comedy by bringing a suit in another country just to stop the proceedings in the US courts?

[00:36:05] Speaker 09:
Absolutely not.

[00:36:06] Speaker 09:
Spain's only choice in order to enforce its obligations under EU law and to cease circumvention of those obligations was to try to bring suits in the investors' home countries, which is where you would expect litigation to be brought.

[00:36:18] Speaker 09:
And comedy interests that this court talked about in Laker Airways are about the singular affront that would happen from subjecting a foreign student to.

[00:36:28] Speaker 08:
I think comedy is a little bit broader.

[00:36:29] Speaker 08:
It's about respecting proceedings in foreign courts.

[00:36:33] Speaker 08:
and think there is definitely a very strong interest when there's a sovereign involved.

[00:36:37] Speaker 08:
I accept that.

[00:36:39] Speaker 08:
But it just seems to me that that's the entire goal and purpose of the suit brought by Spain as the Netherlands and Luxembourg was to stop the US proceedings.

[00:36:51] Speaker 08:
That seems to be a lack of comedy on Spain's part.

[00:36:54] Speaker 09:
Spain is respecting, I mean, again, I'm not sure what Spain was supposed to do in order to enforce its EU law obligations in order to say that there is.

[00:37:02] Speaker 08:
But I guess what Spain could have done is allow this proceeding to go forth while trying to confirm whether or not they have to pay in the EU courts and then ask for a stay of these proceedings while that's being decided.

[00:37:16] Speaker 08:
It just seems that trying to stop these proceedings, it's very much like Laker Airways, except I do understand that the

[00:37:23] Speaker 08:
The party is a sovereign and not a private company.

[00:37:26] Speaker 08:
But the whole purpose of it was to stop the US suit for confirmation of the award.

[00:37:33] Speaker 09:
And I think if you bought that view, anti-suit injunctions against foreign sovereigns would suddenly become commonplace in US courts.

[00:37:39] Speaker 09:
Because you would be saying, I guess would be asking only, is there some attempt by a foreign sovereign to stop litigation in the United States?

[00:37:48] Speaker 09:
And if that were the test, again, it would not be the case that across the world, foreign sovereigns would

[00:37:53] Speaker 09:
virtually, it would be unheard of to enjoin foreign sovereigns.

[00:37:55] Speaker 08:
It seems to me that there are cases not like this one, where they're just parallel proceedings going on in foreign courts and US courts.

[00:38:02] Speaker 08:
And then it's kind of trying to get to the end and who's going to get there first and then assert race judicata or whatever.

[00:38:08] Speaker 08:
But this is a different kind of case, which is more like Laker Airways, where the whole purpose of the litigation in Luxembourg and in the Netherlands was to stop this litigation.

[00:38:19] Speaker 08:
And it seems to me that if all people subject

[00:38:23] Speaker 08:
all sovereign subject to exit could go and just try to stop investors from trying to apply exit.

[00:38:30] Speaker 08:
It would just collapse if they can sue in these national courts to stop exit proceedings.

[00:38:36] Speaker 08:
They said would collapse.

[00:38:37] Speaker 08:
And the whole purpose of exit is to prevent investors from having to go to these national courts to seek justice because the idea of it is

[00:38:44] Speaker 08:
they should be entitled to a neutral arbiter through this international arbitration system and not be subject to any any courts, national courts.

[00:38:53] Speaker 09:
And I respectfully disagree on two fronts.

[00:38:55] Speaker 09:
First of all, that Laker Airways is in any way resembling this case.

[00:38:59] Speaker 09:
In that case, the whole point was to deprive of any form for litigating antitrust claims.

[00:39:04] Speaker 09:
Again, the whole point of Spain's litigation is that these claims only properly belong in the investors home states or within the European Union.

[00:39:12] Speaker 09:
So that is the

[00:39:14] Speaker 05:
Finish your question.

[00:39:15] Speaker 09:
I want to.

[00:39:15] Speaker 09:
Sorry.

[00:39:16] Speaker 09:
That is the point of fame was doing.

[00:39:17] Speaker 09:
And second of all, the idea that exit is going to collapse if investors cannot bring these suits or there's some sort of there's some sort of undermining seems defied by practice in which again, the European Court of Justice is holding that there is no arbitration among intra EU members under exit in the European food decision and the collateral consequences of requiring EU members to say

[00:39:39] Speaker 09:
and to object to such arbitrations and to claw back such awards, Exxon is not collapsing because people understand and the signatories understand that this is just not something that EU members agree to.

[00:39:49] Speaker 05:
Why then didn't Spain go into the Dutch or the Luxembourgish courts to stop the arbitration before it concluded?

[00:39:59] Speaker 05:
It seems to me you'd be in a better position.

[00:40:02] Speaker 09:
Spain at that point was resisting, attempting to, you know, resist the arbitration every way it could.

[00:40:09] Speaker 09:
I don't know the details of when it would have been, whether it would have been jurisdictionally premature to do so, but it's sort of just the question of what Spain should have done as a litigant, I think underscores why an antecedent junction is so strange.

[00:40:21] Speaker 09:
You're sort of second guessing

[00:40:22] Speaker 09:
what a foreign sovereign can or cannot do in litigation context.

[00:40:26] Speaker 09:
As the United States points out, there's a very strong reciprocal interest in not having foreign sovereigns also second guess what the United States is doing in foreign courts.

[00:40:35] Speaker 09:
And again, that is why no circuit court ever has greenlit this kind of injunction and why it would be so extraordinary here.

[00:40:41] Speaker 05:
And even under the injunction that Judge Chuckin put in place, it doesn't prevent Spain from seeking monetary relief from

[00:40:51] Speaker 05:
through the Dutch and Luxembourgish courts to effectively claw back, to recoup whatever these investors managed to win in the United States.

[00:41:05] Speaker 05:
So why doesn't that really lower the temperature, lower the stakes on these proceedings?

[00:41:10] Speaker 05:
Because the EU, as unified as you describe it, will in the end come to Spain's rescue.

[00:41:20] Speaker 09:
Well, respectfully, the idea that Spain's litigation choices are supposed to be sort of dictated by others, especially in other countries courts is sort of like doubling the offense.

[00:41:31] Speaker 05:
It's sort of saying Spain did join some treaties.

[00:41:34] Speaker 05:
That's why its choices are being dictated.

[00:41:38] Speaker 09:
And again, we can go through this.

[00:41:40] Speaker 09:
Again, Spain's position is that the treaties that agreed to did not involve this type of consent.

[00:41:44] Speaker 09:
And Spain's position is consistent with the idea that EU law is primary, is imposing obligations on Spain to resist this sort of circumvention of the EU system.

[00:41:53] Speaker 09:
And that if courts... Isn't Spain just trying to get out of its commitments?

[00:41:57] Speaker 08:
I mean, it owes more than $1.3 billion for 16 unpaid investor state awards.

[00:42:02] Speaker 08:
It just doesn't want to pay.

[00:42:04] Speaker 08:
It's about the benefits of all this investment and now they don't want to hold up there under the bargain by going to arbitration, which they agreed to in the ECT.

[00:42:12] Speaker 09:
So two responses.

[00:42:13] Speaker 09:
One, no, Spain is not trying to get out of something it agreed to.

[00:42:17] Speaker 09:
Spain's position throughout has been it didn't agree to this.

[00:42:19] Speaker 09:
And second of all, I don't think it's just a sort of opportunistic view of the energy target.

[00:42:23] Speaker 08:
Just take a step back.

[00:42:24] Speaker 08:
Do you think these investors wouldn't have necessarily invested all this money in Spain without the assurance that

[00:42:30] Speaker 08:
If something like this were to happen and Spain wanted to get out of it, they wouldn't have a neutral arbiter to decide this dispute.

[00:42:36] Speaker 09:
I'm glad you raised what the investors should have understood at the time that they invested and at the time they purported to form these agreements in 2011 and 2014 and 15, because I think the first and foremost thing that European investors in the EU member states understand is that EU law is going to be the paramount law governing the relationship.

[00:42:54] Speaker 09:
And the second thing they would understand at the time of these things is that intra-EU arbitration at the time was absolutely unheard of.

[00:43:01] Speaker 08:
So they can't rely on the words of the ECT.

[00:43:03] Speaker 09:
Well, I think what they can rely on is the text of the ECT and going back to it, that the EU joined it, which at the time.

[00:43:09] Speaker 09:
Correct.

[00:43:09] Speaker 08:
And the text of the ECT says there's an unconditional agreement and consent to arbitrate with an investor that asks for it.

[00:43:17] Speaker 09:
Or under the UNSATRAO.

[00:43:19] Speaker 09:
And again, what people would understand from certainly from 2006 onward from the Ireland decision is that when you have such an international agreement,

[00:43:26] Speaker 09:
the EU joins it, even if you have an arbitration provision that is exactly like the ECTs, you do not have consent to EU arbitration.

[00:43:34] Speaker 04:
Just one other thing with respect to clarify your position.

[00:43:38] Speaker 04:
Your position then is that there is no arbitration in the EU in the sense that neither its highest judicial authority could so find

[00:43:53] Speaker 04:
nor its highest legislative body could so provide?

[00:44:00] Speaker 09:
There's no intra-EU arbitration in the sense between an EU member and another EU member or EU member or nationals.

[00:44:09] Speaker 09:
And that is, again, based on what the European Court of Justice has said, that there is just no power to agree to that sort of thing.

[00:44:16] Speaker 04:
And it said neither its highest judicial authority

[00:44:22] Speaker 04:
nor its highest legislative authority could provide for such arbitration.

[00:44:29] Speaker 03:
In other words, the EU is a closed

[00:44:36] Speaker 04:
I don't know what to call it, a closed governmental entity.

[00:44:40] Speaker 09:
So the only way it could be provided for would be if you had arbitration and then it was reviewable de novo by the European Court of Justice.

[00:44:48] Speaker 04:
Well, that's not arbitration.

[00:44:49] Speaker 04:
I mean, we discussed what is arbitration and why parties have sought arbitration, particularly commercial parties.

[00:44:56] Speaker 04:
So your position is that there can be no arbitration among commercial parties who are members of the EU.

[00:45:06] Speaker 04:
period that the EU's highest court and the EU's highest legislature neither would provide that power to a member of the EU.

[00:45:25] Speaker 09:
So I think my position, just thinking about where it comes from, is Article 344 of the treaty.

[00:45:30] Speaker 04:
No, but where does it go?

[00:45:32] Speaker 04:
That's what I'm trying to understand, all right?

[00:45:35] Speaker 04:
And what I hear you saying is there is none and there can be none.

[00:45:39] Speaker 04:
And I want to be clear if you have some qualifications on that.

[00:45:45] Speaker 04:
I haven't heard any so far.

[00:45:47] Speaker 09:
The qualifications, I think, are best expressed in paragraph 65 of the comms rate decision.

[00:45:53] Speaker 09:
The limitations are between EU member, so country, country, or country, EU member, and EU national.

[00:46:01] Speaker 09:
That is the full limits of what the European Court of Justice has said on this, and the reason is, again.

[00:46:07] Speaker 04:
That's not my question, counsel, and you're sharp enough to know it.

[00:46:12] Speaker 09:
With respect, Judge Rogers, that is the limit that we know.

[00:46:18] Speaker 09:
And the other limit is that to the extent there is an attempt to, if you say arbitration is allowed in the home countries, your domesticated and the European Court of Justice can review that, that would also satisfy the limitation.

[00:46:32] Speaker 09:
But the limitation just is what it is and always has been since 1957, which is- But it never changes your argument to us today.

[00:46:40] Speaker 09:
You could change it through treaty amendment, but that is not what has happened with the treaties on the functioning of the European Union.

[00:46:45] Speaker 04:
How would that treaty be amended?

[00:46:48] Speaker 09:
The members of the European Union would get together, which they have done with the treaty on the functioning of the EU.

[00:46:54] Speaker 09:
What would the treaty say?

[00:46:55] Speaker 09:
The treaty would say that we no longer, you know, you no longer have to turn to the European Court of Justice as the, no longer has privacy.

[00:47:02] Speaker 09:
That's one way of doing it.

[00:47:03] Speaker 04:
Who has authority to do that under your argument?

[00:47:07] Speaker 09:
Well, it's a treaty, so you would have to have the treaty signatories do it, because the understanding of the treaty.

[00:47:11] Speaker 04:
You couldn't sign that treaty.

[00:47:13] Speaker 09:
The EU, it would be a matter about what the EU can or cannot do.

[00:47:18] Speaker 09:
So the EU members would be making the treaty, which is what they do.

[00:47:20] Speaker 04:
Your argument, so far as I can see it, cuts off members of the EU in a way that you say everybody understood, but I certainly never understood

[00:47:34] Speaker 04:
the EU's position to be what you're saying today.

[00:47:36] Speaker 04:
And the cases that have been cited to us, as well as our own authorities, haven't said that in those terms.

[00:47:48] Speaker 04:
And as you know, courts are very good as our lawyers of distinguishing cases.

[00:47:54] Speaker 04:
But I think it's an astounding argument we're hearing today.

[00:47:59] Speaker 04:
And maybe the European Commission

[00:48:02] Speaker 04:
confirm it, but in any event.

[00:48:05] Speaker 09:
I mean, respectfully, the European Union is an innovation where sovereigns gave the European Union certain powers.

[00:48:13] Speaker 09:
And that decision has consequences and has always had consequences.

[00:48:17] Speaker 09:
And that is why the signatories to the Energy Charter Treaty.

[00:48:19] Speaker 04:
That's what we're trying to distinguish here.

[00:48:22] Speaker 04:
Anyway, I will belabor this.

[00:48:23] Speaker 04:
Thank you, Council.

[00:48:27] Speaker 05:
Did you reserve time for rebuttal?

[00:48:29] Speaker 09:
Yes, I reserved three minutes.

[00:48:33] Speaker 05:
As you know, our practice is to give you a time limit.

[00:48:37] Speaker 05:
And then we promptly seem to disregard it with our active questioning.

[00:48:42] Speaker 05:
So you will have an opportunity.

[00:48:44] Speaker 05:
Thank you.

[00:48:44] Speaker 05:
Just a rebuttal.

[00:48:46] Speaker 05:
And we will next hear from the European Commission.

[00:48:49] Speaker 03:
And that's is it miss pay?

[00:49:01] Speaker 03:
Good morning.

[00:49:01] Speaker 03:
May it please the court, Sally Pay for the European Commission.

[00:49:04] Speaker 07:
I'm also pleased to introduce Lorna Armati, Petra Nomechkova, and Paul John Lowenthal from the Commission's legal service, who have traveled from Brussels to observe argument today.

[00:49:15] Speaker 07:
The investor's position is extraordinary on every level.

[00:49:19] Speaker 07:
It ignores the EU treaties, which are the foundational instruments of the EU legal order.

[00:49:24] Speaker 07:
It disregards the decisions of the EU's highest court about an issue that's of fundamental importance to the EU structure.

[00:49:30] Speaker 07:
And it seeks to restrain an EU member state from pursuing litigation in EU courts on questions of EU law.

[00:49:37] Speaker 08:
This is all answered.

[00:49:38] Speaker 08:
Kind of following up on Judge Pillers question to Ms.

[00:49:42] Speaker 08:
Harris.

[00:49:44] Speaker 08:
We're trying to understand the EU's interest here because there is this

[00:49:51] Speaker 08:
declaration in your brief that this case implicates the EU's authority and primacy and all these things.

[00:49:58] Speaker 08:
But given that arbitral awards are non-precedential, how is that a threat to, I guess, the supremacy of the EU courts?

[00:50:09] Speaker 07:
So I think as Ms.

[00:50:10] Speaker 07:
Harris was discussing toward the end of the argument, the question really goes back to two key provisions of the EU treaties, which are Articles 344 and Article 267.

[00:50:20] Speaker 07:
Under Article 344, the EU member states agreed that they would never submit questions of EU law for resolution outside the EU judicial system.

[00:50:30] Speaker 07:
And Article 267 is the other side of that same coin.

[00:50:33] Speaker 07:
It provides that questions of EU law must be ventilated through the EU system so that they can be referred.

[00:50:39] Speaker 08:
Even if it's non-precedential?

[00:50:40] Speaker 08:
Because if it's non-precedential, it doesn't affect your case law.

[00:50:45] Speaker 08:
It doesn't affect anything.

[00:50:46] Speaker 08:
It's just two parties agreeing on something.

[00:50:48] Speaker 08:
That's what arbitration

[00:50:49] Speaker 08:
is, and it's just more efficient.

[00:50:51] Speaker 07:
So with respect to questions of the Energy Charter Treaty, the Energy Charter Treaty is EU law as between matter states.

[00:50:57] Speaker 08:
I guess my question is more basic than that, which is I don't understand why the EU has an interest in not letting people arbitrate.

[00:51:06] Speaker 07:
So the interest really is in ensuring that questions of EU law are developed and ventilated within the European Union.

[00:51:12] Speaker 08:
But there's no developing or ventilating happening if it's non-precedential, is there?

[00:51:17] Speaker 07:
Well, it is to the extent that EU members and EU nationals should not be submitting questions outside the EU system.

[00:51:24] Speaker 07:
For them to be able to go outside the EU system to resolve disputes that really are internal to the EU and should have been governed by EU law in the first place is quite detrimental.

[00:51:32] Speaker 08:
So what about arbitrations between EU and non-EU signatories to the ECT that involve EU law?

[00:51:40] Speaker 08:
You say that an arbitral panel can decide those.

[00:51:45] Speaker 07:
In such a case, the questions being presented in that kind of arbitration would not necessarily raise questions of EU law in the same way as a dispute between an EU member state and an energy charter treaty.

[00:52:00] Speaker 07:
So I think there could be situations conceivably where if the arbitral tribunal were being asked actually to resolve a legal question of EU law,

[00:52:10] Speaker 07:
It's conceivable that the same questions of primacy would arise.

[00:52:15] Speaker 07:
I would note that the Court of Justice has not reached this particular question.

[00:52:19] Speaker 07:
It's left open.

[00:52:20] Speaker 07:
Comstroy seems to suggest that there is a distinction here if there were a case involving a third-country investor.

[00:52:27] Speaker 08:
Just sort of putting the law aside, though, I'm just trying to understand, where would you draw this line?

[00:52:31] Speaker 08:
You have decided this principle.

[00:52:34] Speaker 08:
You know, EU courts should decide EU law.

[00:52:36] Speaker 08:
And we have private parties settling based on their understanding of EU law.

[00:52:40] Speaker 08:
We have private parties arbitrating based on an arbitrator's interpretation of EU law.

[00:52:47] Speaker 08:
We have EU members arbitrating with non-EU people deciding questions of EU law.

[00:52:52] Speaker 08:
All of these things are happening.

[00:52:54] Speaker 08:
And that doesn't seem to be disrupting the primacy of EU law because it's non-precedential.

[00:53:01] Speaker 07:
So with respect to the different scenarios that you've referred to, with respect to purely private disputes that might involve questions of EU law as a matter of fact, for example, the Court of Justice, I think, has recognized that those do not raise the same kinds of concerns as you have in Acmea and Comstroy.

[00:53:19] Speaker 07:
And that's partly because those arbitrations are not based on an agreement by a member state, a treaty agreement.

[00:53:28] Speaker 07:
to take these disputes outside the EU legal system.

[00:53:30] Speaker 07:
So I think there's something fundamentally different between two commercial parties agreeing.

[00:53:34] Speaker 08:
So are you saying it's not about the actual substance of the EU law that's being interpreted?

[00:53:39] Speaker 08:
It's about the act of agreeing by the members?

[00:53:42] Speaker 07:
That's at least a line that the Court of Justice has drawn so far.

[00:53:46] Speaker 07:
It has carved out commercial arbitration.

[00:53:48] Speaker 05:
And the reason why the members have signed

[00:53:52] Speaker 05:
Exit and uncentral and private parties benefit from that.

[00:53:58] Speaker 05:
I'm not sure that I'm seeing your distinction.

[00:54:00] Speaker 05:
You say that purely private settlements or arbitrations aren't threats because they're not based on a treaty agreement by EU members to take the cases outside.

[00:54:13] Speaker 05:
But exit is a treaty agreement to take the cases outside the EU core system.

[00:54:18] Speaker 07:
So if I might just back up a little bit and finish the answer that I was going to give.

[00:54:22] Speaker 07:
I'm sorry about that.

[00:54:23] Speaker 07:
So first of all, the question about commercial, the idea is that there are two private parties that have agreed between themselves.

[00:54:31] Speaker 07:
The Court of Justice has said that that does not raise the same issues and for the reason that it's not through a treaty agreement between EU member states.

[00:54:41] Speaker 07:
In addition, those kinds of disputes are subject to review in EU courts

[00:54:47] Speaker 07:
to the extent that there may be set aside proceedings at the end of the arbitration, those questions of EU law can still be ventilated within the EU system.

[00:54:55] Speaker 07:
Now, turning to the question about exit and arbitration agreements that member states have signed, as Ms.

[00:55:03] Speaker 07:
Harris was explaining, here, Spain did not have the capacity to enter into an agreement to arbitrate disputes between itself and members of another EU member state.

[00:55:15] Speaker 05:
But it has signed exit.

[00:55:17] Speaker 05:
So a Spanish private entity and a Dutch private entity could, Spain could enter an agreement that allows those private parties to take their dispute outside.

[00:55:33] Speaker 05:
And that's this action by Spain.

[00:55:35] Speaker 07:
So if it were going to be a dispute between a Spanish private party and a Dutch private party, you would not need an investment treaty to do that.

[00:55:43] Speaker 07:
That would be a purely, that would be an agreement just between these parties.

[00:55:48] Speaker 05:
But the parties want to, it exits only with governments.

[00:55:51] Speaker 05:
Correct.

[00:55:52] Speaker 05:
How about Ancetral, same?

[00:55:55] Speaker 07:
Ancetral, I think that that would govern.

[00:55:57] Speaker 07:
So Ancetral governs commercial arbitrations as well.

[00:55:59] Speaker 07:
So you could have a private arbitration agreement between two parties.

[00:56:03] Speaker 07:
But Ancetral is,

[00:56:05] Speaker 07:
Yeah, again, that would be a set of rules.

[00:56:08] Speaker 05:
The governments are signatories.

[00:56:09] Speaker 07:
Correct.

[00:56:12] Speaker 05:
I thought you were making a point that the governments couldn't even purport to be signatories to something that affords arbitration to bilateral private party disputes.

[00:56:23] Speaker 05:
It wasn't your point.

[00:56:24] Speaker 07:
So I think my point was that there would be no need for a sovereign state to enter into such an agreement that would govern

[00:56:32] Speaker 07:
purely commercial arbitrations between private parties.

[00:56:34] Speaker 07:
But they have, no?

[00:56:37] Speaker 07:
So with respect to the conventions like the exit convention and the New York convention, those are not in themselves arbitration agreements.

[00:56:47] Speaker 07:
They govern the enforceability and it's a framework for arbitration, but the substantive

[00:56:54] Speaker 07:
agreement to arbitrate, even if you're talking about the context of investor state arbitration, that's why you need recourse to something like the Energy Charter Treaty or a bilateral investment agreement.

[00:57:05] Speaker 07:
You cannot, unfortunately, simply look to the ICCID convention and say that that is endorsing arbitration.

[00:57:12] Speaker 04:
So I understand your position.

[00:57:15] Speaker 04:
I understand your point about there's no need for a sovereign state, which is a member

[00:57:25] Speaker 04:
of the EU to enter an agreement with a private commercial corporation located in another sovereign state.

[00:57:38] Speaker 04:
But wasn't what happened here an example of why it was necessary?

[00:57:46] Speaker 04:
I mean, in order to attract investors, the sovereign state was offering tax benefits

[00:57:56] Speaker 04:
So with respect to- Private parties can't do that.

[00:58:00] Speaker 04:
And private parties may not be willing to enter a contract that's financially beneficial.

[00:58:08] Speaker 07:
So I agree with your point, Judge Rogers, that in many cases, investment treaties serve as an important reason for investors to invest in foreign countries.

[00:58:20] Speaker 07:
The point with respect to the Energy Charter Treaty and intra-EU investment agreements is that these kinds of agreements never were designed to provide benefits that would apply within the EU.

[00:58:33] Speaker 07:
Investment protection within the EU is governed by EU law and EU regulations, and those are the remedies that EU investors should have availed themselves of if they believe.

[00:58:42] Speaker 08:
So I understand that that's your position, and that could be a question of arbitrability versus whether or not there was an agreement.

[00:58:50] Speaker 08:
I want to put that aside for a moment and just say that the EU did sign the ECT, which has language that says there's unconditional consent to arbitrate.

[00:58:59] Speaker 08:
Spain signed it too, and there's no disconnection clause that carves out anything for entry EU disputes.

[00:59:09] Speaker 08:
So why

[00:59:10] Speaker 08:
Can't the EU and Spain just be held to what they signed in the ECT?

[00:59:14] Speaker 08:
And if you want to litigate these other issues, the question of arbitrability, they got to litigate these issues before the exit tribunal.

[00:59:24] Speaker 07:
So first of all, with respect to the disconnection clause, a disconnection clause would have been superfluous here.

[00:59:30] Speaker 07:
Member states are already under obligations to accord primacy to EU law.

[00:59:34] Speaker 07:
So the purpose of a disconnection clause in any treaty would be only to inform non-EU parties

[00:59:39] Speaker 07:
of the existence of the EU and the existence of EU obligations that govern member states that are signing onto this.

[00:59:47] Speaker 08:
I'm just looking at the plain language of the ECT, and that seems to be contrary to what you're saying.

[00:59:51] Speaker 08:
I know that that's your legal position, which can be litigated, but the EU and Spain signed the ECT, which has very plain language about arbitration.

[01:00:03] Speaker 08:
I know your position.

[01:00:05] Speaker 08:
The question is, who do you get to argue that before?

[01:00:07] Speaker 08:
If it's a question of arbitrability, it's before the arbitral panel.

[01:00:10] Speaker 08:
And I believe you intervened and did argue this position before the arbitral panel, and it was rejected.

[01:00:16] Speaker 08:
But in any event, I don't see why the ECT language doesn't control here.

[01:00:22] Speaker 08:
And if there's a problem with it, the EU and Spain should withdraw from the ECT.

[01:00:26] Speaker 07:
So respectfully, your honor, I will first address the point about about whether this court can can look at this.

[01:00:32] Speaker 07:
And it's it's not a question of arbitrability.

[01:00:34] Speaker 07:
It's a question of the formation of the agreement.

[01:00:37] Speaker 07:
And the absolutely has the ability and obligation to review this question to know on the question of the language of the Energy Charter Treaty.

[01:00:46] Speaker 07:
I suppose you're referring to the paragraph Article 26, paragraph 3A, which contains the

[01:00:53] Speaker 07:
language about unconditional consent.

[01:00:55] Speaker 07:
Yes, I would also point you to Article 2626 one, which delineates the kinds of disputes that are being contemplated for submission to arbitration.

[01:01:08] Speaker 07:
It says disputes between a contracting party

[01:01:11] Speaker 07:
and an investor of another contracting party relating to an investment of the latter in the area of the former, which an alleged breach will be settled amicably.

[01:01:20] Speaker 07:
And then that's the kind of dispute that would be submitted for resolution.

[01:01:25] Speaker 07:
Now, I would note that contracting party here is a defined term.

[01:01:30] Speaker 07:
So you go back to the definition section.

[01:01:32] Speaker 07:
Article 1.2 provides that a contracting party may include a regional economic integration organization.

[01:01:38] Speaker 07:
And it's understood that the regional economic integration organization, the paradigm example of that is the EU.

[01:01:45] Speaker 07:
And then you look to Article 1.3, which I understand this is quite a complicated, yes.

[01:01:50] Speaker 08:
It is, it's very convoluted.

[01:01:52] Speaker 07:
Right.

[01:01:52] Speaker 08:
But- Section 3 is very straightforward.

[01:01:54] Speaker 07:
Yes.

[01:01:54] Speaker 08:
Unconditional consent.

[01:01:55] Speaker 08:
And what about Section 5?

[01:01:55] Speaker 05:
Wait, wait, but continue.

[01:01:56] Speaker 05:
I want to hear the rest of the example.

[01:01:57] Speaker 05:
You say then you go to Article 1.3.

[01:01:59] Speaker 07:
1.3 is about the regional economic integration organization.

[01:02:03] Speaker 07:
And this is the provision that Ms.

[01:02:04] Speaker 07:
Harris was discussing with you earlier, which

[01:02:07] Speaker 07:
explains that a regional economic integration organization is an entity constituted by states to which they have transferred competence over certain matters, a number of which are governed by this treaty, including the authority to take decisions binding on them in respect of those matters.

[01:02:24] Speaker 07:
And so in an intra-EU situation, the relevant contracting party for purposes of Article 26.1 is the European Union.

[01:02:34] Speaker 07:
And so there's no, you don't have the requisite diversity between the investor of a contracting party and the investor of another contracting party in an intra-EU situation.

[01:02:44] Speaker 08:
So that's the textual argument for why this particular- Can you address subsection five, which says the consent given in paragraph three together with the written consent of the investor given pursuant to paragraph four shall be considered to satisfy the requirement for written consent of the parties to a dispute.

[01:03:03] Speaker 08:
and or an agreement in writing for purposes of Article 2 of the New York Convention.

[01:03:09] Speaker 08:
There's also a provision that says this is an agreement to arbitrate.

[01:03:13] Speaker 07:
So paragraph 5 is the paragraph that provides that you need both consent in paragraph 3 and written consent by the investor to create an arbitration agreement for purposes of these, for purposes of the UN Convention and the unsuitable rules and the exit convention.

[01:03:28] Speaker 07:
The reference to the consent in paragraph three.

[01:03:34] Speaker 07:
then refers you back to dispute, which is governed by 26.1.

[01:03:38] Speaker 07:
That defines the universe of disputes that are being contemplated could be submitted to arbitration.

[01:03:45] Speaker 07:
And again, you need diversity between the contracting party and the investor of the other contracting party.

[01:03:52] Speaker 07:
In an intra-EU situation, there is no diversity because the contracting party is the EU as recognized by the inclusion of the regional economic integration organization.

[01:04:03] Speaker 05:
You mentioned in your brief that the European Commission is considering whether to permit Spain to pay these exit awards.

[01:04:15] Speaker 05:
I wonder if you have any update on any progress in that.

[01:04:19] Speaker 07:
So that's correct.

[01:04:20] Speaker 07:
The Commission's deliberations on this are still ongoing.

[01:04:23] Speaker 07:
Spain has notified all of these awards to the Commission and unless and until the Commission renders its decision, Spain is not permitted to pay them under EU law.

[01:04:34] Speaker 05:
And I had also asked Ms.

[01:04:35] Speaker 05:
Harris this, but what's your position on whether this court is prohibited by Akhmeya and Khamstray from applying EU law or why we're not in our FSIA determination?

[01:04:53] Speaker 07:
So with respect to your FSIA determination, the question, of course, is whether an arbitration agreement exists.

[01:04:59] Speaker 07:
And the Court of Justice has spoken clearly on this.

[01:05:01] Speaker 07:
You are not being asked to do anything other than to take notice of what the Court of Justice has said and to apply that as a question of fact in determining whether the agreement exists as a question of jurisdictional fact.

[01:05:16] Speaker 05:
Although, for example, the EU has not characterized

[01:05:22] Speaker 05:
It's ruling in terms of the capacity of Spain.

[01:05:27] Speaker 05:
And we would have to be doing something interpretive, not just accepting some kind of legal fact and applying it.

[01:05:33] Speaker 05:
But that's not in violation of those very decisions.

[01:05:38] Speaker 07:
No, I think, Your Honor, I think that to understand why this is a question of capacity, I think the reason why the Court of Justice did not refer to it in those particular terms is because this really is a question that is sort of inherent to how the Court of Justice conceives of the EU treaties.

[01:05:57] Speaker 07:
It's useful to remember that when EU member states join the union,

[01:06:01] Speaker 07:
They are transferring certain parts of their sovereignty to the Union member states assume obligations.

[01:06:08] Speaker 07:
That and and they agree that the EU treaties will have primacy over their national law and other international agreements and that brings you back to articles 344 and 267 those are very much.

[01:06:19] Speaker 07:
deeply ingrained, and as a matter of the way that the EU is structured, when EU member states join the union, they essentially give up their ability to agree to anything that would be contrary to the EU treaty.

[01:06:32] Speaker 07:
So it is very much a question of power and capacity, even though the Court of Justice did not use that particular term of art.

[01:06:43] Speaker 01:
Judge Rogers, did you have any other questions?

[01:06:46] Speaker 03:
No.

[01:06:48] Speaker 03:
Thank you.

[01:06:53] Speaker 05:
And now we'll hear for the United States as amicus, Sharon Swingle from the Department of Justice.

[01:06:59] Speaker 10:
Thank you, Your Honors, and thank you for the court's invitation to be heard on the issues presented.

[01:07:04] Speaker 10:
I'd like to make just three basic points.

[01:07:07] Speaker 10:
First is that in determining whether a court has jurisdiction over a foreign state under the FSIA's arbitration exception, court must make an independent determination regarding the existence of an arbitration agreement.

[01:07:21] Speaker 10:
I think that is a legal principle that is clear from this court's cases, which treat the existence of the arbitration agreement as a jurisdictional fact that must be established.

[01:07:32] Speaker 10:
In Belize, for example, the court evaluated whether the prime minister lacked authority to enter into the arbitration agreement.

[01:07:39] Speaker 10:
In Ecuador, the court held that a district court erred when it failed to make that determination as part of its jurisdictional analysis.

[01:07:47] Speaker 10:
And in the middle of the court reviewed whether Romania's ascension to the European Union

[01:07:51] Speaker 10:
nullified its agreement to arbitrate.

[01:07:53] Speaker 10:
Your honor asked Judge Pillard about whether any of those rules applied, EXID rules, and Mkula, of course, that was EXID arbitration.

[01:08:03] Speaker 10:
But I would note that Belize also involved arbitration under rules that gave the arbitral tribunal authority to conclusively decide its own jurisdiction and to conclusively decide the existence and validity of the arbitration agreement.

[01:08:19] Speaker 10:
And yet this court, nevertheless, independently reviewed that.

[01:08:23] Speaker 08:
But you do acknowledge there's a difference between deciding if there's an agreement and whether it's a question of arbitrability, because that seems to be... We do, Your Honor.

[01:08:31] Speaker 10:
And we understand that to be the distinction the court drew in Stillex.

[01:08:34] Speaker 10:
And I think that same distinction flows from the arbitration cases that the court looks to.

[01:08:40] Speaker 10:
In district number one, for example, the court recognized that the question of formation was one that could not be delegated to the arbitrator to decide and was necessarily for the court.

[01:08:53] Speaker 08:
So it doesn't seem like your position would be inconsistent with the view that there is an agreement based on the ECT and the

[01:09:05] Speaker 08:
I guess what we said in Chevron's Felix, we have this treaty, we have an award, you know, we have an agreement by the investor under the terms of the treaty to arbitrate.

[01:09:17] Speaker 08:
Your position is not inconsistent with that.

[01:09:19] Speaker 08:
The agreement is the ECT.

[01:09:21] Speaker 10:
We do not take a position on whether in fact there is a valid agreement here.

[01:09:27] Speaker 10:
I do want to take issue- Under the ECT?

[01:09:30] Speaker 10:
Yes, but I do want to take issue with one point

[01:09:34] Speaker 10:
In our understanding, the ECT is not itself an agreement to arbitrate.

[01:09:39] Speaker 10:
And I think just an example will establish why that's so.

[01:09:43] Speaker 10:
For example, I do not think a foreign state that is a party to the ECT could invoke arbitration against the wishes of an investor.

[01:09:53] Speaker 10:
We understand the ECT to be a standing offer to arbitrate.

[01:09:57] Speaker 08:
Correct.

[01:09:58] Speaker 08:
It would be in combination with the acceptance by the investor and then the arbitration award under our case law.

[01:10:03] Speaker 05:
And do you have a position on whether the ECT is an agreement for the benefit, an agreement to resolve issues by arbitration for the benefit of others?

[01:10:18] Speaker 10:
So again, we don't understand the ECT itself to be an agreement to arbitrate.

[01:10:25] Speaker 05:
I'm asking the specific question now that the FSA has its own language.

[01:10:30] Speaker 10:
Yes.

[01:10:30] Speaker 10:
And I want to look to that.

[01:10:32] Speaker 10:
It's again, that is that that description of which may arise to enforce an agreement made by the foreign state with or be for the benefit of a private party to arbitrate.

[01:10:48] Speaker 10:
And again, I think that

[01:10:50] Speaker 10:
is envisioning an arbitration agreement.

[01:10:53] Speaker 10:
I think that is the jurisdictional fact.

[01:10:54] Speaker 10:
But why isn't an agreement among the contracting parties to arbitrate?

[01:10:58] Speaker 10:
Because I think in some instances, you can have third party enforcement of an arbitration agreement.

[01:11:04] Speaker 10:
A third party beneficiary of the arbitration agreement might.

[01:11:07] Speaker 05:
And why isn't that what we have here?

[01:11:09] Speaker 10:
So again, we're not taking a position on the bottom line of whether there is in fact an agreement to arbitrate here.

[01:11:17] Speaker 04:
Though could I just clarify one thing in my own mind when the United States, in its first point, that at least as to the FSIA, the district court, faced with an enforcement petition, must make an independent determination that there is an arbitration agreement.

[01:11:41] Speaker 04:
By that, I assume that the United States is saying it's not enough

[01:11:47] Speaker 04:
with district court to defer to an EU arbitrator's conclusion?

[01:11:56] Speaker 10:
That is absolutely correct, Your Honor.

[01:11:57] Speaker 10:
We think the court needs to make its own independent determination.

[01:12:01] Speaker 04:
Does that mean in the nature of a summary judgment proceeding potentially on maybe a trial?

[01:12:10] Speaker 10:
If there are disputed jurisdictional facts, potentially, yes.

[01:12:14] Speaker 10:
You know, I think generally it would be our view that this would likely be legal issues to be decided.

[01:12:20] Speaker 04:
Yes, I understand, but I just want to understand where we're going here potentially.

[01:12:27] Speaker 04:
Depending on the evidence, it may not be possible to resolve this matter.

[01:12:34] Speaker 04:
Simply our procedural rule 56.

[01:12:39] Speaker 10:
And that's possible, Your Honor, as is typically the case in FSIA cases.

[01:12:44] Speaker 10:
if there are disputed questions of fact that are necessary to be resolved to address the question of whether a particular exception to foreign sovereign immunity applies.

[01:12:53] Speaker 04:
So do you know, and there's no reason you should necessarily, whether or not throughout the world when a party has an award and seeks its enforcement

[01:13:12] Speaker 04:
there are independent determinations as to whether or not that party is properly before the court, and there is no deference as to whether or not the agreement on which it is seeking exists.

[01:13:27] Speaker 10:
So I do not know, Your Honor, but I think that is unsurprising.

[01:13:30] Speaker 10:
And I would just, to return to the ICSID convention,

[01:13:34] Speaker 10:
I think it's clear that the exit convention sets out a framework for arbitration, but it is not an agreement among states to waive their sovereign immunity.

[01:13:44] Speaker 10:
That's clear from the convention itself, which references sovereign immunity only to make explicit that it is not abrogated by the convention.

[01:13:52] Speaker 10:
And it's clear from Article 54, which provides that a state party with a federal constitutional structure like ours agrees to enforce an arbitration agreement

[01:14:04] Speaker 10:
as if it were a final judgment of the courts of a constituent state.

[01:14:08] Speaker 10:
So under US law, that requires that there be a basis for subject matter jurisdiction under the FSIA.

[01:14:14] Speaker 10:
And I would note that the convention was implemented domestically through 22 USC 1605A, which doesn't itself abrogate sovereign immunity and doesn't provide an independent basis for jurisdiction over a foreign state.

[01:14:27] Speaker 10:
That's governed solely by the FSIA.

[01:14:30] Speaker 05:
There's an argument that's that immunity is not abrogated with respect to execution and the Investors Council points out that the limits of that abrogation imply that the immunity may well be abrogated in their view is abrogated with respect to

[01:14:49] Speaker 05:
you know, recognition and enforcement.

[01:14:52] Speaker 10:
So I think both textually, that's a dramatic overreading of the convention to take by negative implication that the parties meant to waive sovereign immunity.

[01:15:01] Speaker 05:
Certainly doesn't expressly preserve it, except with respect to execution.

[01:15:04] Speaker 10:
Well, I don't think it's consistent with Article 54 either, because the obligation to enforce an arbitration award as if it were a final judgment of the courts of constituent state and vision enforcement under domestic law, which in this case incorporates

[01:15:18] Speaker 10:
you know, whatever you need to do to show that sovereign immunity doesn't apply.

[01:15:22] Speaker 10:
And I would also just point to the legislative history of 1605A, which was the implementing legislation.

[01:15:28] Speaker 10:
Obviously, the legislative history strongly suggests that it was understood that the convention was not waiving sovereign immunity.

[01:15:36] Speaker 10:
If you take a look at the Second Circuit's decision in Mobile Cerro Negro, it outlines that legislative history.

[01:15:42] Speaker 10:
But I also think

[01:15:43] Speaker 10:
It's not the kind of clear statement we would expect to constitute a waiver of sovereign immunity from suit.

[01:15:49] Speaker 10:
Certainly that would not be sufficient to waive U.S.

[01:15:52] Speaker 10:
sovereign immunity.

[01:15:52] Speaker 05:
Going back to the arbitration exception, what about exit and the full faith and credit clause?

[01:15:58] Speaker 05:
You say in your brief that dismissing for lack of jurisdiction would not run afoul of the exit full faith and credit obligation.

[01:16:08] Speaker 05:
But is that, I mean, doesn't the full faith and credit encompass or effectuate issue preclusion, client preclusion, if there's a jurisdictional issue that was decided by the exit panel?

[01:16:25] Speaker 10:
I think the court needs to have jurisdiction in order to exercise any power over a foreign state, right?

[01:16:31] Speaker 10:
The subject matter jurisdiction inquiry under the FSIA is a threshold question of this court's authority.

[01:16:37] Speaker 10:
Again, under exit article 54, you know, our obligation is to enforce the arbitral award in the same way that we would enforce a judgment of a constituent state.

[01:16:49] Speaker 10:
And that, too, under federal law would require finding a plenary basis for jurisdiction under the FSIA at the threshold.

[01:16:58] Speaker 10:
Now, on the merits, certainly the court would not be

[01:17:01] Speaker 10:
reconsidering, assuming it had jurisdiction to enforce, would not be reconsidering the merits of the arbitral award.

[01:17:08] Speaker 10:
But that is a different inquiry, I think, from the subject matter jurisdiction inquiry.

[01:17:12] Speaker 05:
So if an investor in Switzerland decided

[01:17:18] Speaker 05:
We are going to enter into an arbitration agreement and we are going to give the arbitrators the authority to decide whether we have agreed.

[01:17:37] Speaker 01:
whether we have an arbitration agreement, and then to decide under it.

[01:17:41] Speaker 05:
And the arbitrators say, yes, you have an agreement, and yes, you've decided under it.

[01:17:45] Speaker 05:
We as a US court enforcing that against Switzerland could not credit the conclusion in that award as to the existence of an agreement.

[01:17:55] Speaker 10:
On the merits, certainly, but as conferring subject matter jurisdiction on this court, no.

[01:18:02] Speaker 10:
And I think that that follows necessarily from this court's prior decisions.

[01:18:06] Speaker 10:
In Belize itself, as I mentioned, arbitration took place under rules that gave the jurisdictional, gave the arbitral panel the authority to decide conclusively disputes about the existence and validity of the agreement.

[01:18:21] Speaker 05:
And what about Chevron and Sticlos?

[01:18:23] Speaker 10:
Well, I think there's this basic distinction that we've drawn between the existence of the agreement and questions about arbitrability.

[01:18:32] Speaker 10:
And we understand Chevron and Stilix to be

[01:18:36] Speaker 10:
based on that distinction.

[01:18:37] Speaker 05:
And finding the existence of agreement based on what?

[01:18:42] Speaker 10:
Well, I think independently examining, for example, in Belize, the court looked to whether the governmental official, in fact, had authority to enter into a binding agreement to arbitrate.

[01:19:00] Speaker 01:
That's Belize.

[01:19:01] Speaker 01:
But Chevron, Stiklis, I mean, they're

[01:19:05] Speaker 05:
Where do you see them determining that there is an agreement to arbitrate?

[01:19:09] Speaker 10:
So in Chevron, the court held that the district court had in fact determined that there was an agreement to arbitrate, right?

[01:19:19] Speaker 10:
And based on the treaty that offered arbitration acceptance by the court, the district court had not understood itself to be making that determination as part of the jurisdictional inquiry, but it had in fact determined that there was a valid

[01:19:35] Speaker 10:
agreement and still ex the court simply decided that it was a question of the scope of the arbitration agreement.

[01:19:40] Speaker 10:
It wasn't a dispute about the existence of the arbitration agreement itself.

[01:19:45] Speaker 08:
Can you address the injunction, please?

[01:19:47] Speaker 10:
I'd like to, Your Honor.

[01:19:49] Speaker 10:
I will say in the view of the United States, this is an extraordinary set of injunctions that Judge Chuckin entered.

[01:19:56] Speaker 10:
We are aware of no other instance in which a court has enjoined a foreign sovereign from pursuing litigation in a foreign court.

[01:20:04] Speaker 10:
I want to

[01:20:05] Speaker 10:
turn if I can, Judge Pan, to your earlier question about why this wasn't just like Lakers Airways.

[01:20:11] Speaker 10:
Because in the United States' view, what's relevant here is the circumstances presented and the real balancing of interests here that make clear what an extraordinary affront to international comedy this is.

[01:20:25] Speaker 10:
In Laker Airways, it was a junction against a private entity, and I think that's extremely significant.

[01:20:31] Speaker 10:
Obviously, the affront to sovereign dignity is

[01:20:34] Speaker 10:
greatly heightened when you're talking about enjoining a foreign state itself.

[01:20:38] Speaker 10:
But in addition, the court in that case was applying, being asked to apply domestic substantive rules of decision to govern the conduct of entities operating in this country whose operations were alleged to be in violation of domestic law to the serious detriment of both the functioning of United States markets and

[01:21:00] Speaker 10:
US consumers.

[01:21:02] Speaker 10:
Here, this is a far cry from that.

[01:21:05] Speaker 10:
The underlying arbitration here involves arbitration between a foreign state, a foreign national from an EU member country addressing questions of EU law.

[01:21:15] Speaker 10:
The United States here is acting solely as an enforcement arm of an arbitral tribunal.

[01:21:21] Speaker 10:
And I would just add, you know, obviously we have grave concerns about the propriety of

[01:21:28] Speaker 10:
coercive measures like injunctions against foreign states.

[01:21:31] Speaker 10:
The law of many foreign countries do not allow for such orders to be entered.

[01:21:36] Speaker 10:
Countries rightly think that it is a violation of their sovereignty.

[01:21:41] Speaker 10:
And obviously, we have concerns about the reciprocal treatment of the United States.

[01:21:45] Speaker 08:
Is it your position, though, that it isn't ever a situation in which the United States would sanction or approve of an anti-suit injunction against a foreign sovereign?

[01:21:58] Speaker 10:
Where do we draw that line?

[01:21:59] Speaker 10:
We have not taken the position that it would never be appropriate.

[01:22:02] Speaker 10:
I think the question has not been squarely presented, but certainly both in this case and in the BAE case we cite, it was the government's view that injective relief would not have been appropriate.

[01:22:14] Speaker 10:
We don't think it was appropriate here.

[01:22:16] Speaker 08:
So if I could give you a hypothetical, we do have an amicus brief from a party called Mole Hungarian Oil.

[01:22:26] Speaker 08:
I don't know if you've read it, but it's supposed to illustrate the importance of the exit framework for ensuring that justice is done to investors when a nation decides they want to get out of a deal and assume this nation is doing it in bad faith.

[01:22:43] Speaker 08:
Because in this amicus brief, it recounts how Croatia steps to get out of an investment agreement

[01:22:50] Speaker 08:
with Mol Hungarian Oil, which included relying on false information, criminally prosecuting and imprisoning one of the officers of the Investor Corporation.

[01:23:01] Speaker 08:
And in spite of all that, however, Mol Hungarian Oil was able to get an arbitration award from the ICSID framework and neutral arbitrators

[01:23:14] Speaker 08:
found that Croatia was acting in bad faith, that these were false, these were lies and awarded an arbitral award to mole Hungarian oil.

[01:23:23] Speaker 08:
And this is supposed to illustrate why ICSID is so important.

[01:23:27] Speaker 08:
So what if Croatia had sued mole Hungarian oil in Hungary to prevent that company from availing itself of the benefits of ICSID?

[01:23:39] Speaker 08:
Would comedy say we can't grant an anti-suit injunction under such a circumstance?

[01:23:47] Speaker 10:
So again, we're not taking any hard and fast position that it would never be appropriate.

[01:23:51] Speaker 10:
And of course, I can't speak to the rasty or propriety of the facts in that hypothetical.

[01:23:57] Speaker 10:
Let's assume that they're true.

[01:23:58] Speaker 08:
I'm just wondering if there is room for an anti-suit injunction under narrow circumstances where there's apparent bad faith or something that indicates there would be an injustice.

[01:24:08] Speaker 10:
I would say, I think the circumstances presented here are a far cry from circumstances that would demonstrate bad faith.

[01:24:15] Speaker 08:
Are you getting my hypothetical?

[01:24:16] Speaker 10:
Well, and I want to just point out something that I think is important.

[01:24:20] Speaker 10:
Even in BAE, you know, there you had the Korean government going into Korean courts seeking relief under their own law, you know, where you had every reason to think that that was a

[01:24:32] Speaker 10:
particularly favorable forum for the home country to be litigating in here different kind of case because those are sort of parallel proceedings.

[01:24:40] Speaker 08:
This is a suit to stop the U.S.

[01:24:42] Speaker 08:
proceedings.

[01:24:43] Speaker 08:
Well, it's also in BAE.

[01:24:45] Speaker 08:
It looks like there was an injunction which was lifted that I was reading that case this morning and it says there was an injunction entered which was lifted.

[01:24:53] Speaker 10:
The district court, ultimately, when it came before this court, there was no injunction in place.

[01:24:58] Speaker 08:
Correct.

[01:24:58] Speaker 08:
But earlier in the proceedings of that case, you said there never has been one.

[01:25:02] Speaker 08:
It looks like there was one in that case.

[01:25:04] Speaker 10:
I misspoke, Your Honor.

[01:25:08] Speaker 10:
I think there's every reason to think that the EU courts, where these proceedings are taking place,

[01:25:16] Speaker 10:
would have no reason to be unduly favorable to Spain, right?

[01:25:20] Speaker 10:
Spain has gone into the home court of the investor to try and get that court, which is under the EU rubric and framework to decide questions of EU law.

[01:25:32] Speaker 08:
want to opine on what the motivations of the EU courts are or anything like that.

[01:25:36] Speaker 08:
But I thought that the whole reason for exit was to ensure that there would be a neutral arbiter, that investors don't have to go before national courts.

[01:25:47] Speaker 08:
they get to go before international arbiters.

[01:25:50] Speaker 08:
And the United States is a signatory to Ixid and has 150 cases out there with American investors availing themselves of Ixid.

[01:25:58] Speaker 08:
And doesn't the United States have an interest in making sure the Ixid framework doesn't collapse?

[01:26:03] Speaker 08:
Because if nation states can find a way to enjoin people from using Ixid,

[01:26:12] Speaker 08:
That's a threat to Ixid.

[01:26:14] Speaker 08:
And the United States is a member of Ixid and has an interest in making sure that doesn't happen.

[01:26:20] Speaker 10:
So again, Your Honor, it is true that the United States is a member of Ixid.

[01:26:25] Speaker 10:
I think that the United States' interest in acting purely as an enforcement court for an Ixid arbitral award is not the same kind of interest that this court had before it in Laker Airways, where even there, where the injunction ran purely against a private entity

[01:26:43] Speaker 10:
the court recognized that it was an extraordinary circumstance, but that in that case in particular, the domestic forums interest in adjudicating questions of U.S.

[01:26:54] Speaker 10:
law to apply to regulate conduct of companies, join businesses in this country and availing themselves of the legal protections in this country.

[01:27:02] Speaker 08:
I think that's my question is whether United States is interest in upholding the framework is something similar or akin to, you know,

[01:27:11] Speaker 08:
this interest in US law.

[01:27:13] Speaker 10:
We do not see the interest as the same.

[01:27:15] Speaker 10:
And I would point out that this is not merely a hypothetical circumstance in which an injunction against litigation could harm our foreign relations.

[01:27:25] Speaker 10:
But we have no reason to think that is manifest.

[01:27:28] Speaker 10:
What we have here are statements.

[01:27:32] Speaker 10:
It's not purely hypothetical that the injunctions here are harming our foreign relations and our relations with our international partners.

[01:27:41] Speaker 10:
We have statements from the EU here about the interference with the resolution of complex questions of law that the injunctions pose.

[01:27:50] Speaker 10:
We have the European Union and relevant foreign sovereigns have raised diplomatic concerns directly with the State Department.

[01:27:58] Speaker 10:
I think they all just reflect the significant affront to foreign relations that those injunctions have caused.

[01:28:06] Speaker 08:
Is there room for a very narrow path to upholding an injunction like this?

[01:28:11] Speaker 08:
Because these are very specific circumstances where the foreign case is one which is directly targeted at stopping jurisdiction in a US court.

[01:28:21] Speaker 08:
It's not just like a parallel proceeding based on the same facts.

[01:28:24] Speaker 08:
The purpose of these suits brought by Spain is to stop the

[01:28:31] Speaker 08:
this ongoing legal proceeding in the United States.

[01:28:34] Speaker 08:
And it's under circumstances where these investors won't get to, I guess, have the benefits of ICSA or probably have their awards at all, because we know how the EU feels about these awards.

[01:28:49] Speaker 08:
It just seems that it leaves the investors in a difficult place.

[01:28:53] Speaker 08:
It seems to me that in Laker,

[01:28:55] Speaker 08:
um, airways.

[01:28:56] Speaker 08:
We said that the test is we have to examine the equitable circumstances to determine if, um, the attitude injunction is required to prevent an irreparable miscarriage of justice.

[01:29:06] Speaker 08:
And I don't know how this all balances out because I do understand that this is different from Laker Airways because we're talking about a sovereign and I just don't know, you know how that always it just seems that there are also other circumstances here that aren't considered in Laker Airways.

[01:29:21] Speaker 08:
So

[01:29:22] Speaker 10:
I think it's not just that it's a foreign sovereign here that makes this case different from Laker Airways.

[01:29:28] Speaker 10:
I do think the nature of the domestic court's interest is reduced here.

[01:29:31] Speaker 10:
And I would just, if I can, Judge Pan, it is true that the European proceedings are intended to stop the domestic litigation, but it is routinely the case that at least the practical effect that a foreign litigant who's litigating both in domestic courts and in some foreign proceeding

[01:29:52] Speaker 10:
is going to be to nullify the effect of the domestic judgment.

[01:29:55] Speaker 10:
That was true in BAE Airways, where Korea was looking for a Korean court adjudication that it would be able to recoup whatever payment.

[01:30:04] Speaker 08:
But those were just parallel proceedings, which is a little different in my eyes, where somebody's just trying to stop something from happening here.

[01:30:13] Speaker 10:
I think it is correct that the fact that a foreign proceeding is for the purpose of

[01:30:21] Speaker 10:
short-circuiting or stopping the domestic litigation in US court is a relevant factor.

[01:30:27] Speaker 08:
But I don't- Didn't Spain behave with a lack of comedy by doing that?

[01:30:31] Speaker 10:
I don't think it's a dispositive factor, Your Honor.

[01:30:33] Speaker 10:
And I don't want to speak for Spain, but I would assume that Spain's view is that it has been forced into arbitration that it cannot validly agree to and then put at risk of facing awards that it can't comply with

[01:30:51] Speaker 10:
consistent with EU law.

[01:30:53] Speaker 05:
But again, I- So your view is its interest, it may be using this tool, but its interest is closer to the heart of at least what it perceives to be its sovereign prerogatives than the US's interest as an exit signatory in being a forum for enforcement.

[01:31:13] Speaker 10:
Correct, particularly when the underlying questions are one.

[01:31:17] Speaker 05:
Is not US law, not US party.

[01:31:19] Speaker 05:
A treaty to which we are not.

[01:31:24] Speaker 10:
If the court has no further questions.

[01:31:26] Speaker 05:
Thank you very much and we appreciate your submitting a brief and appearing today at our invitation.

[01:31:34] Speaker 05:
And now we will hear from Mr. Boratsky for next year and nine months.

[01:31:41] Speaker 05:
Good morning.

[01:31:42] Speaker 00:
Good morning.

[01:31:43] Speaker 00:
May it please the court.

[01:31:44] Speaker 00:
I'd like to start with the ICSID issue.

[01:31:47] Speaker 05:
I was hoping that you were going to pronounce your name so that I could see that I pronounced it.

[01:31:50] Speaker 00:
No, you got it correctly.

[01:31:53] Speaker 00:
I'd like to start, if I could, with the ICSID waiver issue, but in my time also, of course, address the arbitration exception as well.

[01:32:02] Speaker 00:
Ixid is an extraordinarily broad convention.

[01:32:06] Speaker 00:
Spain's position in this case would effectively tear down the Ixid regime without regard for the US's own obligations under Ixid, which the United States recognized, for example, in its filing in the Second Circuit in the Mobile Saro case.

[01:32:24] Speaker 00:
There's jurisdiction here under the waiver exception because by ratifying the exit convention, Spain waived immunity to exit award enforcement actions in member states courts.

[01:32:33] Speaker 00:
It would create a circuit split with the Second Circuit in Blue Ridge to hold otherwise.

[01:32:37] Speaker 00:
It would also be at odds with the Australian High Court's decision, which followed Blue Ridge to hold otherwise.

[01:32:44] Speaker 00:
The ICSID Convention is a unique treaty that governs disputes with foreign states and waives by its terms immunity to award enforcement in courts of member states.

[01:32:54] Speaker 00:
We get that first from the text, if you walk through the text of ICSID.

[01:32:58] Speaker 00:
Article 25 one of exit talks about how the jurisdiction of the center shall extend to any legal dispute arising directly out of an investment between a contracting state and a national of another contracting state.

[01:33:11] Speaker 00:
So from the outset, exit is contemplating disputes against or involving contracting states.

[01:33:18] Speaker 00:
Article 41 one again, a very broad provision talks about how the tribunal shall be the judge of its own competence and