EU Interference with Commercial Arbitration: Duties, Consequences, and Preliminary References

1. Morten Broberg Faculty of Law Does the EU Interfere with Commercial Arbitration?

2. Structure of presentation • Arbitration Tribunals’ Duty to Take EU Law into Consideration • Consequences where an Arbitral Award is Contrary to EU Law • Can Arbitration Tribunals Submit Preliminary References to the European Court of Justice? • Should Arbitration Tribunals be able to Submit Preliminary References (de legeferenda)?

3. Arbitration Tribunals’ Duty to Take EU Law into Consideration Arbitration tribunal is part of a Member State’s judicial system • Must comply with EU law to the same extent as all other bodies that are part of the Member State’s judi-cial system. This includes: • Primacy of EU law • Direct effect • Sincere cooperation principle • Subject to the same (limited) ex officio obligations with respect to taking EU law into account as are ordinary courts Arbitration tribunal is not part of a Member State’s judicial system • Unresolved whether ex officio such tribunals must take EU law into account • Arguably the answer may depend upon: • Is the non-application of EU-law likely to lead to a clearly wrong decision when an arbitration tribunal decides a dispute. • Will the arbitral award that does not take EU law into account run a real risk of being set aside during subsequent review by the ordinary courts

4. Consequences where an Arbitral Award is Contrary to EU Law UNCITRAL Model Law Mainrule: An ordinary court cannot set aside an arbitral award by reference to ‘mistakes of the facts’, to ‘errors of law’ or to an ‘incorrect interpretation’ of the law. Exception: An ordinary court may set aside an arbitral award if it finds that ‘the award is in conflict with the public policy’ of the court’s State ECJ caselaw regarding arbitration between private parties: Mainrule: Only limited review of the arbitral awards, and only in exceptional circumstances will the award be set aside/not be recognised. Exception: If in conflict with funda-mental EU-law provisions the arbitral award must be overruled: • Competition law • Consumer protection • Possibly free movement rules • Others ?

5. If Member States are directly involved in arbitration cases Private arbitration where one party is a Member State • Member States cannot evade EU-law by going to private arbitration. • An ordinary court reviewing an arbi-tral award cannot limit its review (of compliance with EU-law) in the same way, as it can in cases between only private parties. • An ordinary court reviewing an arbi-tral award must ensure that EU law is given full effect (against the Member State) Arbitration tribunal established through the intervention of a Mem-ber State • Particularly relevant with regard to bi-lateral investment treaties (BITs). • Member States are not precluded from entering into arbitration clauses. • BUT Member States cannot, more ge-nerally, fully exempt certain disputes (eg BIT-disputes) from the jurisdiction of the national courts (and thereby from the application of EU-law).

6. Can Arbitration Tribunals Submit Preliminary References to the European Court of Justice? The Preliminary Reference Procedure • A ‘court or tribunal of a Member State’ may (or must) put a prelimina-ry reference question to the ECJ re-garding the interpretation or validity of EU-law. • There must be a pending case where the preliminaryrulingwillbeused. • Only the national judgehearing the case has the power to decidewhether or not to make a prelimi-nary reference (ie the parties have no veto right). Does an arbitration tribunal qualify as a ‘court or tribunal of a Member State’ (Art. 267 TFEU) ? • Independent • Adversary procedure • Decisions on the basis of legal rules • Established by law • Permanent character • Compulsoryjurisdiction

7. Should Arbitration Tribunals be able to Submit Preliminary References (de legeferenda)? Pros • Risk that an important part of the practice of law could become incon-sistent with EU law. • Still more cases are decided by arbi-tration tribunals. • Still more private law fields are (part-ly) EU regulated; egcontract law and company law. Cons • Allowing arbitration tribunals to make preliminary references requires new criteria for determining ‘who can refer’. • No direct appeal from arbitration tribunals fall under Art 267(3) TFEU obligation to refer. • Preliminary references will prolong the arbitration procedure and com-promise confidentiality. • Risk of abuse of preliminary referen-ces through arbitration tribunals.

8. Thank you