Eco Swiss and its Ramifications
Dr Phillip Landolt
Landolt & Koch, Geneva
Vienna Arbitration Days 2012
17 February 2012
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EU Law Background
There are no EU courts for the general enforcement
of EU law rights
Rights arising under EU law are enforced by courts
of the EU Member States
EU Member State courts under duty loyally to apply
EU law, by virtue of Article 4(3) TEU
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EU Law Background
Where there are no relevant EU rules …
EU law respects the procedural autonomy of
Member State courts, subject to three
exceptions:
• Principle of effectiveness
• Principle of equivalence
• Availability of preliminary reference for interpretation of EU
law (Article 267 TFEU)
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Pre-Eco Swiss
Preliminary references
• EU Member State law is not permitted to preclude
opportunity for preliminary reference to the ECJ for the
authoritative interpretation of EU law
Rheinmühlen v. Einfuhr-und Vorratsstelle für Getreide und Futtermittel
(1974)
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Pre-Eco Swiss
Arbitral tribunals are not “tribunals”
within the meaning of Art. 267 TFEU
• Arbitral tribunals cannot make preliminary
references to ECJ for interpretation of EU law
Nordsee (1982), confirmed in Denuit (2005)
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Pre-Eco Swiss
Violation of principle of effectiveness
for court not to raise EU law of its
own motion in certain circumstances
• Where EU Member State law limited
opportunity for beneficiary to raise new plea
• But court need not go beyond the ambit of the
dispute defined by the parties themselves and
relying on facts and circumstances other than
those on which the party with an interest in
application of those provisions bases his claim
Peterbroek and Van Schijndel (both 1995)
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Eco Swiss (1999)
 Facts
• During the entirety of the arbitration proceeding, neither party
took the EC competition law point, and the tribunal did not
raise it of its own motion. There was a partial final award
finding Benetton liable for the early termination of the licence
agreement. Over two years later there was a final arbitral award
ordering Benetton to pay millions of dollars in damages.
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Clear ramifications of Eco Swiss
 The ECJ recognises the importance of international arbitration,
and the importance of finality in international arbitration:
• “[…] it is in the interests of efficient arbitration proceedings
that review of arbitration awards should be limited in scope
and that annulment of or refusal to recognise an award should
be possible only in exceptional circumstances.”
• This recognition is important since the significance of Member
State goals in their procedural choices is an element in the
equivalency analysis
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Clear ramifications of Eco Swiss
 Wherever an application for annulment on the basis of a
violation of public policy is available in Member State law an
application for annulment on the basis of a violation of EC
competition law must be available
• EC competition law is so important to the EU legal order – it
needs to be compared with the most important policies in
Member State “domestic” law, i.e. “public policy”
• Operation of the principle of
equivalence binding upon EU
Member States
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Clear ramifications of Eco Swiss
 Failure to raise the plea before the arbitral tribunal can be no
bar to raising it before the EU Member State court
• Arbitration tribunals cannot make preliminary references under
Art. 267 TFEU
• There has to be a possibility for an EU Member State court to
make a preliminary reference
• So parties must be able to raise EC competition law points in
challenges to arbitration awards
on the basis of their
incompatibility with EU law
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Clear ramifications of Eco Swiss
 Three month limit for challenging arbitral awards is no violation
of EU law
• A period of three months within which an arbitral award must
be challenged or it becomes res judicata is a valid limitation on
the application of EU competition law
• Not versus the principle of effectiveness
• Regarding other Member States’ laws, not too short
• This rule serves real purpose – legal certainty
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Inferential ramifications of Eco Swiss
 Member State law restrictions on arbitrators’ raising EU
competition law of their own motion are contrary to EU law
• The Hoge Raad was of the opinion that an arbitrator’s raising
EC competition law of its own motion would be a violation of
the arbitrator’s terms of reference and a ground to set aside the
arbitration award
• But this is contrary to the ECJ’s conclusion that there must be
public policy review of awards for their conformity with EC
competition law at the annulment stage
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Inferential ramifications of Eco Swiss
 Arbitrability of EU competition law
• Concern to protect efficiency of international arbitration
• Willingness to limit Member States’ courts to public policy
review of treatment of EC competition law by arbitral tribunals
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Inferential ramifications of Eco Swiss
 As a general proposition, the EU will accept the level of a
Member State’s public policy review of arbitration awards
• But this is not certain since really loose review may imperil the
effectiveness of EC competition law
• Eco Swiss says nothing directly about the requirements of
effectiveness on this point
• AG in subsequent case of Van der Weerd (2007) says that the
comment on preliminary references is based on principle of
effectiveness. But the court says in Van der Weerd that it is not
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Van der Weerd (2007)
 EU effectiveness requirements relevant to arbitration
• must be opportunity to raise plea before EU Member State
courts
• the importance of a particular EU legal norm is not relevant to
the determination of whether or not the principle of
effectiveness requires a Member State court to raise EU law of
its own motion
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Mostaza Claro (2006)
 EU Directive on Unfair Contract Terms (the “Directive”)
• Spanish woman protected by the Directive entered into a
contract with a telecoms supplier with an arbitration clause in it
• She participated in the arbitration, and did not raise the unfair
contract terms point
• She then sought the annulment of the arbitration award on the
basis that the arbitration clause was an unfair contract term and
therefore not binding on her
• The ECJ’s judgment simply reports that the annulment court
considered the arbitration clause an unfair contract term
without providing any indication of the basis for this
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Mostaza Claro
 Where the arbitration clause is an unfair contract term, an EU
Member State court must annul the award even of its own
motion
• Limited to the particular circumstances of consumer protection
where the court must supply the consumer’s failure to invoke
this right
• the EU had in the Directive actually legislated this requirement
of judicial intervention, bringing the case outside of the usual
treatment of EU Member State procedural autonomy
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Asturcom (2009)
 A case on the principle of equivalence
• The consumer does not even participate in the arbitration
concerning her telecommunications contract, and does not
even participate in the court proceedings to enforce the award
• The seat of the arbitration, Bilbao, was not indicated in the
contract, and was so far away from the residence of the
consumer that it would have cost her more to attend than the
value in dispute. Moreover, the body administrating the
arbitration is the body that creates the model contract used by
the telecommunications company claimant.
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Asturcom
 Member State courts must raise EU law of their own motion in
certain circumstances
• “[W]here [the court] has available to it the legal and factual
elements necessary for the task” and insofar as “under national
rules procedure, it can carry out such an assessment in similar
actions of a domestic nature.”
• The two-month period for challenging arbitration awards was
not a violation of EU law (not contrary to the principle of
effectiveness)
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Conclusions
1. EU Member State courts requested to enforce arbitration
awards must consider compatibility with requirements of
important EU law, even if not raised in the arbitration, and
even of their own motion
2. In annulment actions, EU Member State courts must consider
plea of incompatibility with EU law even if not raised in
arbitration but not necessarily of own motion
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Conclusions (continued)
3. Where the unfair contract terms directive applies there is
always the danger that the arbitration award is invalid as a
matter of EU law binding on the Member States
4. EU law may contain requirements as to the nature of a
Member State court’s public policy review of an award’s
compatibility with EU law
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Thank you for your attention!
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