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The European Union and international arbitration are two robust legal regimes that have managed to develop largely in accordance with their own respective “first principles,” and they have accordingly thrived. This article initially explains why that has been the case.

But the era of parallelism between the regimes has ended, and rather suddenly. This article identifies the two principal fronts on which tensions between EU law and international arbitration law have emerged. Interestingly, both commercial and investment arbitration are implicated.

A first front entails a conflict between the European Court of Justice's (ECJ's) expansive notions of EU public policy and two well-established axioms of international commercial arbitration law: first, that public policy must be construed narrowly when invoked as a ground for annulling an award or denying it recognition and enforcement; and second, that parties in arbitration are expected to raise all substantive arguments pertinent to their claims or defences in the course of the arbitral proceedings and not reserve them for post-award relief from a disappointing award. A second front finds EU Member States invoking their obligations under EU law as a defence – sometimes jurisdictional, sometimes substantive – in investor-State tribunals. The paradigm argument is that EU law mandates withdrawal of an illegal state aid in reliance on which an investor entered that market.

This article examines two prevailing methodologies for addressing these tensions, in arbitral tribunals themselves as well as in reviewing courts. It concludes that many such tensions – particularly those along the first front – may be resolved through accommodation techniques well-established in other areas of the law. Others, particularly those arising in the investor-State context, resist resolution in that way and are requiring decision-makers to face the uncomfortable prospect of making one of these legal regimes cede ground to the other. The ECJ and investor-State tribunals are understandably inclined to prioritise the regimes differently, with the ultimate outcome falling to member state courts which owe allegiance to both regimes.


Dispute Resolution and Arbitration | European Law | International Law | Law