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German Court Dismisses Spain's Anti-Enforcement Injunction Request
German Court Dismisses Spain's Anti-Enforcement Injunction Request
Background of the case:
On April 12, 2024, the Regional Court of Essen (LG Essen) dismissed Spain's request for an anti-enforcement injunction against an intra-EU investor-state arbitration award (2 O 447/22). This decision highlights the ongoing conflict between EU law and international arbitration enforcement. In December 2020, an ICSID tribunal found Spain in breach of the Energy Charter Treaty (ECT), awarding $28.08 million to the German and Spanish subsidiaries of RWE AG. Spain refused to pay, citing recent Court of Justice of the European Union (CJEU) rulings that invalidated arbitration clauses in intra-EU treaties and the ECT (Achmea; Komstroy). Consequently, RWE sought enforcement of the award in the US District Court for the District of Columbia (DC District Court) in December 2021. Spain responded by seeking an anti-enforcement injunction from the LG Essen to prevent RWE from enforcing the award outside the EU. In March 2023, RWE countered with a request for an anti-anti-enforcement injunction from the DC District Court, which has previously ruled in favour of such requests (9Ren v. Spain; NextEra v. Spain). Spain then sought an anti-anti-anti-enforcement injunction from the LG Essen, which was granted on appeal by the Higher Regional Court of Hamm (OLG Hamm) in May 2023.
Legal Issues and Rationale:
The LG Essen's decision to dismiss Spain's request for an anti-enforcement injunction rests on several legal principles:
- Jurisdiction: The LG Essen established its jurisdiction based on domestic rules, applying Sections 12 and 17 of the German Code of Civil Procedure (GCCP) by analogy. It emphasized that the Brussels Ia Regulation, which excludes the enforcement of arbitral awards, was not applicable.
- Admissibility of Anti-Enforcement Injunctions: The court found anti-enforcement injunctions inadmissible as they violate state sovereignty, a core principle of the EU's constitutional identity. The LG Essen argued that while the principle of effectiveness is important, it cannot override the respect for the sovereignty of non-EU states.
- No Legal Basis: The LG Essen determined that there was no legal basis for anti-enforcement injunctions in EU, Spanish, or German law. It found that the enforcement of the award was more closely connected to Spain, and thus Spanish law should apply. However, the court concluded that under both German and Spanish law, interpreted in light of EU law, anti-enforcement injunctions are prohibited.
Implications and Future Outlook:
The LG Essen decision marks a significant development in the trend among EU jurisdictions to refrain from intervening in enforcement proceedings of arbitral awards outside the EU. This aligns with the cautious approach of civil law jurisdictions to anti-enforcement injunctions, which are seen as potentially undermining the policy in favour of res judicata. The court's reasoning emphasizes the primacy of state sovereignty over the EU principle of effectiveness, indicating that EU member states' courts are not obligated to prevent the enforcement of ICSID awards outside the EU. This sets a precedent that may influence future cases, showing that EU courts might not support EU member states that refuse to comply with investment treaty awards. Spain is likely to appeal the decision to the OLG Hamm, which previously issued an anti-anti-anti-enforcement injunction in favour of Spain. However, given that the LG Essen's decision mirrors the OLG Hamm's reasoning, it might be upheld. Alternatively, Spain could appeal to the German Federal Court of Justice (BGH), which might reverse the decision based on the EU principle of effectiveness and state aid law considerations. In conclusion, the LG Essen decision represents a setback for Spain's attempts to block the enforcement of intra-EU ECT awards, reinforcing the enforcement of international arbitration awards outside the EU.
- This decision highlights the ongoing conflict between EU law and international arbitration enforcement.
- It emphasized that the Brussels Ia Regulation, which excludes the enforcement of arbitral awards, was not applicable.
- The LG Essen determined that there was no legal basis for anti-enforcement injunctions in EU, Spanish, or German law.
