German Higher Regional Court of Frankfurt am Main Upholds Croatia’s Case

Based on CJEU’s Achmea Judgment, Decision that Investment Treaty Arbitration Proceedings Commenced against Croatia under the Austria-Croatia BIT Are Inadmissible

February 17, 2021

On February 11, 2021, in a case initiated by the Republic of Croatia (“Croatia”) against the Austrian bank Raiffeisen Bank and its Croatian subsidiary, the German Higher Regional Court of Frankfurt am Main (“OLG”) accepted Croatia’s claim, based on the decision of the Court of Justice of the European Union (“CJEU”) in the Slovakia v. Achmea case, that the arbitration proceedings instituted by these two banks against Croatia under the Austria-Croatia BIT are inadmissible. The Court further ordered the banks to reimburse Croatia for the costs of the proceedings. The decision is groundbreaking as it is the first time a court in the European Union has concluded that the principles of EU law enunciated by the CJEU in Achmea apply beyond the Achmea litigation. 

Constantinos Salonidis, partner and Deputy Chair of Foley Hoag’s International Litigation and Arbitration Department, called the OLG’s judgment “an important victory for our client the Republic of Croatia and for all EU Member States involved in intra-EU investment proceedings. The OLG’s judgment serves as useful confirmation that the effects of Achmea are not limited to the Netherlands-Slovakia BIT at issue in that case, but extend to all bilateral investment treaties concluded between EU Member States (intra-EU BITs).”

Partner Andrew Loewenstein, who, together with Salonidis and David Pawlak of David A. Pawlak LLC, leads the representation of Croatia in the arbitration proceedings, explained that “European investors can no longer claim that the decision in Achmea was specific to the Dutch-Slovak BIT or that the Member States cannot invoke that decision to challenge the jurisdiction of investment arbitration tribunals.”

The Foley Hoag team acting for Croatia in these cases includes partner Christina Hioureas, associates Jose RebolledoEva Paloma TrevesSudhanshu Roy, Katherine Peiffer and Sara LeBarron. Foley Hoag and David Pawlak LLC are acting for Croatia in the arbitration and with the law firm Alexander & Partner in the German court proceedings.

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.  

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