Investors need to understand enforcement risk under investment treaties

Investor-state dispute settlement (ISDS) mechanisms are embedded in thousands of international investment treaties, ranging from bilateral treaties between individual states to multi-lateral treaties with global signatories. In general terms, the treaties provide important protections for foreign investors against expropriation, and discriminatory, unfair, or inequitable actions by states. They also offer a right to remedy via independent, often confidential, arbitration, rather than through the national courts of states against which claims are raised.

Where investors are granted awards in ISDS proceedings and the state does not voluntarily comply, they must then enforce the awards before national courts. However, as we explore below, the ease with which investors can enforce awards varies globally – with states’ claims to immunity, if recognised by courts, liable to leave investors out of pocket, even where the states are responsible for a treaty breach.

For investors, understanding jurisdictional nuances is therefore essential for informing how they structure investments.

The global divide

The New York Convention provides a framework for enforcement of arbitral awards, by requiring signatory states to ensure their courts recognise and enforce arbitral awards – other than where limited exceptions apply. A separate international treaty, the International Centre for Settlement of Investment Disputes (ICSID) Convention, has similar effect in respect of the enforcement of awards made by arbitral tribunals established under ICSID – the leading institution for resolving investor-state disputes. There are more than 150 states that have signed both conventions.

However, a global divide has emerged in respect of enforcement risk.

Enforcement risk is high in cases where the national courts of EU member states are asked to enforce awards made under investment treaties agreed between EU member states. This position stems from two landmark rulings by the EU’s highest court, the Court of Justice of the EU (CJEU), in the so-called Achmea and Komstroy cases.

In the Achmea case, the CJEU held that the investor-state arbitration provisions in bilateral investment treaties (BITs) between EU member states were incompatible with EU law. In the Komstroy case, the CJEU held that the same principle applied to arbitrations between EU member states and EU investors under the Energy Charter Treaty (ECT).

The two rulings have caused uncertainty regarding the enforceability of awards arising from intra-EU investment treaty disputes. States that have had awards made against them have often challenged enforceability on the grounds of incompatibility with EU law. Examples of where those arguments have been successful include cases handled by the German and Swedish courts.

The position regarding intra-EU cases can be differentiated from the approach to enforcement in non-EU jurisdictions, where the courts have typically taken a more pro-enforcement approach. There are examples arising in this regard from the UK, Switzerland, the US, Australia and, most recently, Singapore.

EU examples

In 2025, in Antaris and Michael Gode v Czech Republic, the Federal Court of Justice in Germany, the country’s highest court for civil cases, upheld an earlier decision by a regional court in Bavaria where the CJEU’s Achmea decision had been cited as authority to deny enforcement of a UNCITRAL award issued against an investor in a case where the Czech Republic’s measures to curb solar energy generation were at the heart of their dispute.

The courts considered that the dispute was based on the Czechia-Germany BIT and the ECT and that, as a result, no valid arbitration agreement existed between the parties. The New York Convention provides for refusal of enforcement where there was no valid arbitration agreement in place. In its ruling, the Federal Court of Justice reiterated the primacy of EU law, emphasising that the arbitration clauses in the ECT and BIT are not applicable to intra-EU disputes, as they undermine the autonomy of European law.

The Antaris ruling followed a 2023 judgment in three appeals (cases I ZB 43/22, I ZB 74/22 and I ZB 75/22) where the Federal Court of Justice ruled that EU member states can claim national judicial protection against arbitral proceedings initiated by investors from other EU member states in intra-EU ICSID cases.

The 2023 ruling concerned claims by investors that their investments had been harmed owing to changes an EU member state had made to its laws on energy production. The state involved asked the German courts to stop an ICSID tribunal from proceeding with the arbitration claims. The Federal Court of Justice agreed with the state, deciding that the ICSID Convention does not prevent state intervention and instead referred to the primacy of EU law to justify the triggering of an anti-arbitration declaration mechanism under Germany’s code of civil procedure.

However, in 2024, in RWE v Spain, the Regional Court of Essen rejected an application made by Spain for an anti-suit injunction, which, if granted, would have had the effect of preventing an investor from enforcing an ICSID award issued against Spain in the US. It did so despite finding that the award in question was incompatible with EU law.

In that case, the Essen court addressed principles of territoriality and state sovereignty and said it would be contradictory for German courts to consider injunctions against proceedings before them as infringing Germany’s judicial sovereignty and the right to justice, while themselves issuing anti-suit injunctions. It said that even if any obligation to ensure the effectiveness of European law applied in the case – which it did not, since the investor was not seeking to enforce the award in the EU – that obligation would be overridden by the need to respect the sovereignty of third countries.

The Swedish courts have also grappled with the question of enforcement of awards made in intra-EU investor treaty disputes.

In 2024, the Svea Court of Appeal in Triodos SICAV II v Kingdom of Spain, declared that an intra-EU arbitral award rendered under the ECT was invalid. The dispute was between Spain and a Luxembourg-based fund and related to energy reforms in Spain, including a tax on power generators’ revenues and a reduction in subsidies for renewable energy producers. The investor was successful in arbitration before the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) but the court declared the award invalid after applying EU case law, which established that investment disputes between a member state and an investor from another member state may not be resolved through arbitration.

The antithesis outside the EU

Courts outside the EU have predominantly adopted a pro-enforcement stance towards the enforcement of intra-EU awards, notwithstanding the rulings by the CJEU in the Achmea and Komstroy cases. Recent decisions in the UK, Switzerland, the US, Australia and Singapore have enforced ICSID awards, unanimously holding that article 54 of the ICSID Convention constitutes a waiver of sovereign immunity. Even in the sole decision where a Swiss court refused enforcement, the refusal was not due to the intra-EU nature of the award but rather stemmed from the particularities of Switzerland’s domestic legislation.

In Ioan Micula, Viorel Micula, and others v Romania, enforcement of an ICSID award was considered by both the UK and US courts. In that case, Romanian businessmen were issued an award against Romania under the Sweden-Romania BIT relating to matters that preceded Romania’s accession to the EU.

While the European Commission had intervened in the case in an effort to preclude Romania from paying the award on EU state aid grounds, both the UK Supreme Court and the US district court sided with the Romanian businessmen on the question of enforcement, essentially determining that they were bound to recognise and enforce the award under the ICSID Convention. The European Commission initiated legal action against the UK in relation to the Supreme Court’s decision, which it was able to do as the case pre-dated the Brexit cut-off for doing so, and the CJEU held that the UK had breached its obligations under EU law.

In a separate case Infrastructure Services Luxembourg S.à.r.l. and Energia Termosolar B.V. v Kingdom of Spain ruled on by the Commercial Court of England in Wales in 2024, Spain was unsuccessful in claiming state immunity against the enforcement of an ICSID award issued against it under the ECT over changes to solar energy policy in the country.

In that case, the court held that its obligations under the ICSID Convention trump the obligations the UK had as an EU member state. This meant that the CJEU’s ruling in the Achmea case was not considered binding by the court, despite Spain’s arguments to the contrary. It also found that Spain had waived any rights to sovereign immunity against enforcement of the award through its signing of the ICSID Convention. Like in the Romanian case, the European Commission has ordered Spain not to pay compensation on state aid grounds.

Spain has been at the centre of US proceedings relating to the enforcement of arbitral awards made under investor-state treaties in cases that delivered very different outcomes.

In NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v Kingdom of Spain and 9Ren Holding S.a.r.l. v Kingdom of Spain, a US district court rejected Spain’s attempts to stop investors enforcing an ICSID award issued against it over the country’s imposition of renewable energy tariffs, among other things highlighting that it did not have any authority to consider Spain’s argument that the arbitral award itself violated EU law. However, in a different case, Blasket Renewable Investments LLC (PV Investors) v Kingdom of Spain, the same district court upheld Spain’s claims of immunity against an UNCITRAL award in an intra-EU case after determining that no valid arbitration agreement existed. In reaching that decision, the court acknowledged the CJEU’s Achmea and Komstroy rulings and accepted that their effect is that EU member states are legally incapable of agreeing to arbitrate disputes with other EU parties under investment treaties like the ECT.

Spain has questioned the US district courts’ jurisdiction to consider investor-state treaty disputes under the US Foreign Sovereign Immunities Act, seeking the US Supreme Court’s intervention on the matter. In June 2025, in in CC/Devas (Mauritius) Ltd. et al. v Antrix Corp, the US Supreme Court clarified that there is broad basis for the US courts to rule on investor-state treaty disputes.

Like the UK and US courts, the Australian courts have also considered the obligations arising under the ICSID Convention to override the CJEU’s case law in respect of enforcement of awards in intra-EU cases. In a 2023 decision, Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l., the High Court of Australia, the country’s highest court, definitively established that state parties cannot rely on state immunity as a defence against enforcement of ICSID awards in Australia – a position that was reaffirmed by the Federal Court of Australia in other cases decided in August 2025 (the Blasket, 9Ren and NextEra cases).

Again, those cases involved Spain and its arguments concerning the effects of the Achmea and Komstroy rulings, but with its 2025 rulings the court also considered Spain had waived its sovereign immunity by ratifying the ICSID Convention and could not rely on the primacy of EU law to resist enforcement.

In a very recent decision handed down in January 2026, the Singapore High Court followed the Federal Court of Australia’s decision and enforced an ECT arbitration award against Poland, rejecting the state’s jurisdictional objection based on the two CJEU decisions.

The commercial impact

Both states and investors are exploring new avenues to pursue or resist enforcement. Investors, for example, have adopted strategies such as assigning intra-EU awards to third parties to facilitate enforcement. However, in Operafund Eco-invest SICAV Plc v the Kingdom of Spain (2025) the English Commercial Court ruled that arbitration awards made pursuant to the ICISD Convention or the ECT were not capable of assignment. Interpreting the ECT and the ICSID Convention, the court found that arbitration awards rendered under these instruments could not be assignable. Furthermore, according to the court there was no rule of customary international law providing that assignment could be possible. UK court finds ICSID and ECT awards are not assignable - Global Arbitration Review. While Spain has not yet satisfied any assigned intra-EU awards, it has satisfied other awards assigned to EU-based investors by non-European parties.

Spain’s attempts to block enforcement through multiple iterations of its EU law objections also represent a noteworthy development. Although the vast majority of courts outside the EU have rejected Spain’s arguments, it is yet to be seen if the US Supreme Court will hear Spain’s jurisdictional case.

What all the cases highlight is the value of investment treaties and the arbitral awards they generate, despite the challenges surrounding enforcement. It is essential that both current and prospective foreign investors take these enforcement trends into account when structuring their investments.

This article is based on a contribution to Enforcement of Investment Treaty Arbitration Awards: Third Edition, published by Globe Law and Business.