Raiffeisen Bank International AG and Raiffeisenbank Austria d.d. v. Republic of Croatia

Case summary

At a glance

Parties: Raiffeisen Bank International AG (Austria) and Raiffeisenbank Austria d.d. (Croatia) v. Republic of Croatia
Case no.: ICSID Case No. ARB/17/34
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding Washington, D.C.
Treaty: Austria–Croatia BIT (entered into force 1 November 1999)
Tribunal: Lucy Reed (President), Stanimir Alexandrov, Lazar Tomov (dissenting in part)
Sector: Banking; Swiss franc consumer loans
Outcome: Croatia's proposal to disqualify Alexandrov was rejected (17 May 2018). By majority, Croatia's intra-EU jurisdictional objections were dismissed and the case moved to the merits (30 September 2020). Separately, German courts declared inadmissible a later UNCITRAL arbitration brought against Croatia under the same BIT (2021).
Amount: Claimed: about EUR 64.5 million in damages, before interest. Costs of the jurisdictional phase awarded to the claimants: EUR 1,478,695.58 and USD 277,493.74.

The dispute

Raiffeisen Bank International AG set up its Croatian subsidiary, Raiffeisenbank Austria d.d., in 1994. From 2004 the subsidiary issued Swiss franc loans to Croatian consumers and businesses. On 18 September 2015 the Croatian Parliament adopted the Conversion Law, which converted these loans into euro loans. The claimants argued that the conversion breached the fair and equitable treatment standard of the Austria–Croatia BIT and claimed about EUR 64.5 million. Croatia objected to jurisdiction. Relying on Article 11(2) of the BIT, which releases the parties from the BIT "insofar as it is incompatible with the legal acquis of the European Union (EU) in force at any given time", it argued that the BIT's arbitration clause and its substantive protections were incompatible with EU law (the CJEU's Achmea Judgment, Articles 267 and 344 TFEU, the EU non-discrimination rules, the GATS). It also invoked the Monetary Gold principle. The European Commission filed an amicus brief supporting Croatia. The published documents also include German court decisions on a later UNCITRAL arbitration against Croatia under the same BIT. That arbitration was brought by an Austrian bank and its Croatian subsidiary over the Lex Agrokor insolvency amendment and an alleged denial of justice.

Key holdings

Croatia's proposal to disqualify Stanimir Alexandrov was rejected. His repeated appointments by claimants, including in other cases against Croatia, his exposure to the same intra-EU legal issue in Gavrilović, his past appointments involving WilmerHale, and his links to The Brattle Group did not show a manifest lack of impartiality or independence, whether the grounds were taken one by one or together. Decision on Disqualification ¶¶ 86–99
Article 11(2) of the BIT is a lex specialis conflict clause, so the residual rules of VCLT Articles 30 and 59 do not apply. Incompatibility exists where complying with one treaty would put a State in breach of the other. The phrase "in force at any given time" refers to the acquis in force on the critical date, which was 15 September 2017, the date ICSID registered the request for arbitration. Decision on Jurisdiction ¶¶ 131–150
By majority: the Achmea Judgment of 6 March 2018 was given after the critical date and could not have been "in force" on 15 September 2017, whatever ex tunc effect it has under EU law. On that date Article 9 of the BIT was not incompatible with the acquis. The Tribunal relied on Article 85 of the 2005 Association Agreement, the 2013 Treaty of Accession, Austria's stated position in February 2018 and the Wathelet Opinion. Any incompatibility was in any case not "manifest" in the sense of VCLT Article 46. Decision on Jurisdiction ¶¶ 226–248
The 15 January 2019 Declaration is not part of the acquis and came after the critical date. The 29 May 2020 Termination Treaty does not bind Austria, which did not sign it (VCLT Articles 34–35). The BIT does not breach the non-discrimination rules of Articles 18, 49 and 63 TFEU or the GATS, and the Monetary Gold principle is not engaged. Decision on Jurisdiction ¶¶ 251–253, 281–297
Lazar Tomov dissented. In his view, Article 11(2) makes EU rules govern the temporal effect of the Achmea Judgment. He also found that the materials relied on by the majority do not show that intra-EU arbitration clauses were reasonably understood to be compatible with Articles 267 and 344 TFEU in September 2017. Decision on Jurisdiction ¶¶ 255–258
Unanimously, Croatia was ordered to pay the claimants' full costs of the preliminary objections phase: EUR 1,478,695.58 and USD 277,493.74. Interest will be added if Croatia does not pay within three months. Decision on Jurisdiction ¶¶ 303–304
In the separate UNCITRAL arbitration seated in Frankfurt, the Higher Regional Court Frankfurt held that Article 9(2) of the BIT is contrary to EU law under Achmea and that there was therefore no valid offer to arbitrate. It declared the arbitration inadmissible without a reference to the CJEU (acte clair). The Federal Court of Justice rejected the appeal against that decision as inadmissible. OLG Frankfurt, pp. 8–12; BGH I ZB 16/21 ¶¶ 8–45

Procedural history

1 September 2017Request for Arbitration filed. ICSID registered it on 15 September 2017.
15 February 2018Tribunal constituted.
17 May 2018The Chairman of the ICSID Administrative Council rejected Croatia's proposal of 28 February 2018 to disqualify Stanimir Alexandrov. He decided because Lazar Tomov had recused himself.
21 December 2018Procedural Order No. 2 bifurcated Croatia's preliminary objections. On 31 December 2018 Procedural Order No. 3 partly granted the European Commission leave to file an amicus brief.
4–6 November 2019Hearing on preliminary objections held in Washington, D.C.
30 September 2020Decision on jurisdiction: by majority, the objections were dismissed and costs awarded to the claimants. Tomov dissented in part.
11 February 2021In the separate UNCITRAL arbitration commenced on 14 February 2020, the Higher Regional Court Frankfurt declared the arbitration inadmissible (26 SchH 2/20).
17 November 2021The Federal Court of Justice rejected the appeal against the Frankfurt decision as inadmissible (I ZB 16/21).

Tribunal, counsel and experts

Decided by: Lucy Reed President — appointed by the parties jointly
Stanimir A. Alexandrov Co-arbitrator — appointed by the claimant (challenge rejected)
Lazar Tomov Co-arbitrator — appointed by the respondent (dissented in part)
Jim Yong Kim ICSID Administrative Council, ICSID Administrative Council (Chairman; decided the disqualification proposal)
For the claimant: Wilmer Cutler Pickering Hale and Dorr LLP · Vavrovsky Heine Marth Rechtsanwälte GmbH
For the respondent: Office of the Attorney General of Croatia · Volterra Fietta
Experts: Manuel A. Abdala (claimant) · Francis Jacobs (claimant) · Alexander Milner (claimant) · Paul Craig (respondent)