German Federal Supreme Court of Justice Affirms Inadmissibility of Claims Under the Austria-Croatia BIT

Based on CJEU’s Achmea Judgment, Decision by Germany’s Highest Court of Civil and Criminal Jurisdiction Affirms that Investment Treaty Arbitration Proceedings Commenced against Croatia under the Austria-Croatia BIT Are Inadmissible

December 1, 2021

On December 1, 2021, Foley Hoag LLP client the Republic of Croatia (“Croatia”) succeeded in achieving the complete dismissal of an appeal filed in Germany’s Federal Supreme Court of Justice (the Bundesgerichtshof or “BGH”) by the Austrian bank Raiffeisen Bank and its Croatian subsidiary arising from the inadmissibility of an investment arbitration brought against Croatia under the Austria-Croatia bilateral investment treaty (“BIT”).

The Austrian bank sought to appeal the decision of the German Higher Regional Court of Frankfurt am Main (“OLG”) which, on February 17, 2021, found that the arbitration proceedings instituted by the banks against Croatia under the intra-EU BIT were inadmissible. The OLG had further ordered the banks to reimburse Croatia for the costs of the proceedings.

The BGH’s dismissal of the appeal as inadmissible is groundbreaking as it is the first time a court in the European Union has affirmed with finality the conclusion that the principles of EU law enunciated by the Court of Justice of the European Union (“CJEU”) in Achmea v. Slovakia apply beyond the Achmea litigation.

The arbitration proceedings are administered by the Permanent Court of Arbitration, with a three-member UNCITRAL tribunal seated in Germany comprised of Sir Christopher Greenwood (President), and Professors Bernard Hanotiau (Claimants’ appointee) and Sean D. Murphy (Croatia’s appointee) as co-arbitrators.

Together with co-counsel David Pawlak of David A. Pawlak LLC, the Foley Hoag team acting for Croatia in these cases includes partners Constantinos Salonidis, Andrew Loewenstein, Christina Hioureas, and associates Jose Rebolledo and Eva Paloma Treves. Croatia was represented in the German court proceedings by Dr. Matthias Koch and the law firm Alexander & Partner.

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