On 31 July 2025, the German Constitutional Court declined jurisdiction over a constitutional complaint against a controversial decision of the German Federal Court of Justice (FCJ). (Link to Post on the Federal Court of Justice Decision from 2023). In 2023 the German Federal Court of Justice had issued a declaratory ruling in which it held that an arbitration between an investor from an EU Member State against another EU Member State (so called intra-EU arbitrations) based on the Energy Charter Treaty (ECT) under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID) was inadmissible. The arbitration tribunal on 13 May 2026 issued a final award. The tribunal rejected Germany’s intra-EU objection but also the claim brought by the investor.
Declarations of inadmissibility are unique to German arbitration law and have no equivalent in the UNCITRAL Model Law. Under Section 1032 para 2 of the German Code of Civil Procedure, a party can seek a declaration from the competent court that an arbitration is inadmissible, for example, due to an invalid arbitration agreement. The declaration may only be applied for until the tribunal is constituted, after which the tribunal decides on its own competence. These pre-arbitration admissibility proceedings before the national courts are intended to provide legal clarity regarding the competent forum before the parties engage in potentially lengthy and costly arbitration proceedings. They are available even if the seat of the arbitration is outside Germany, provided the respondent in the pre-arbitration admissibility proceedings (likely the investor) has its seat or residence Germany or the assets at issue are located in Germany. To expedite proceedings and avoid conflicting decisions, such pre-arbitration declarations are binding on other German courts in later enforcement or set-aside proceedings.
In 2023 the FCJ declared an ICSID arbitration brought by an Irish wind energy investor against Germany inadmissible. The Irish investor had sued Germany under the Energy Charter Treaty (ECT) after the German Federal Government had introduced a new application scheme for offshore wind farms. However, according to the Komstroy decision of the Court of Justice of the European Union (CJEU), intra-EU arbitration proceedings based on the ECT violate the autonomy of European law. In the later PL Holdings ruling, the CJEU held that Member States are required to give effect to the autonomy of European law before the arbitral tribunal or a competent national court by challenging the jurisdiction of the intra-EU arbitral tribunal.
With a view to this jurisprudence, the FCJ declared the intra-EU ICSID arbitration inadmissible. Because ICSID arbitration proceedings are delocalized and have no legal seat as required for the application of German arbitration law, the FCJ relied on an analogous application of the provisions on pre-arbitration declarations in its decision declaring the intra-EU ICSID proceedings inadmissible.
This decision was at issue in the proceedings before the Constitutional Court. Although the Constitutional Court declined jurisdiction, it made four key observations regarding the applicability of the provisions on pre-arbitration admissibility proceedings to intra-EU ICSID arbitrations.
First, the Constitutional Court agreed that the provisions on pre-arbitration admissibility proceedings can be applied to ICSID arbitrations by analogy. In the court's view, the FCJ's reasoning followed recognized methods of statutory interpretation and the applicants had failed to establish that the FCJ's reasoning was unjustifiable.
Second, the Constitutional Court considered that declaring ICSID proceedings inadmissible would create a conflict with Germany's obligations under international law. Article 41 and Article 26 of the ICSID Convention provide for an exclusive competence-competence of ICSID tribunals to rule on their own jurisdiction. A decision by a national court on the tribunal's jurisdiction violates that exclusivity claimed by public international law.
Third, the Constitutional Court decided that the Komstroy decision does not exceed the limits of interpretation conferred on the CJEU by the EU Member States. This is consistent with the Constitutional Court's 2024 ruling that the CJEU's Achmea decision was not ultra vires. Accordingly, German national courts remain bound by the Komstroy and Achmea jurisprudence.
Fourth and finally, the Constitutional Court found that the investor had not substantiated a need for legal protection required for a constitutional complaint. Because both the ICSID-arbitration proceedings and any enforcement actions within, as well as outside of, the European Union remain unaffected by an inadmissibility declaration, there would be no legal benefit to the investor if the court overruled the FCJ's decision.
Both investors and Member States are likely to be perplexed by the Constitutional Court's observations. The court seems to suggest that pre-arbitration inadmissibility proceedings before the German national courts pursuant to Section 1032 para 2 are available to Member States seeking to give effect to the CJEU's Komstroy and Achmea jurisprudence in ICSID arbitration proceedings, but that an inadmissibility decisions rendered in such proceedings will have no practical effect on the ICSID arbitration. Against this background it is not surprising that the tribunal issued an award in the proceeding brought by the Irish investor against Germany in May 2026 even though the FCJ declared those proceedings inadmissible already in 2023.
Where a Section 1032 para 2 declaration is available, Member States that are respondents in intra-EU investment arbitration proceedings might have to apply for a pre-arbitration inadmissibility declaration to comply with their duties under European law as interpreted by the CJEU in PL Holdings. However, without any res judicata effect either on the arbitration proceedings or later enforcement proceedings, a favorable decision will be of no value to the Member States. The proceedings will, thus, be a poor use of the Member States' time and resources. On the other side, investors will be confronted with a judicial measure that will not fulfil its intended purpose, but only increase the costs of, and time spent on, the dispute.
Unless the CJEU clarifies that its jurisprudence in PL Holdings requires Member States to only take effective legal action, Members States will continue to file remedies that are useless from the outset.
The Constitutional Court's ruling shows that the solution for the long-standing problem of intra-EU investment arbitration proceedings does not lie within national procedural measures, such as pre-arbitration inadmissibility declarations. A reliable solution is more likely to be achieved by the withdrawal or modification of the investment treaties.
