The Impact of EU State Aid Law on International Investment Law and Arbitration

This chapter examines the overlap between European Union (EU) state aid law and international investment law and arbitration. First, it enquires whether there is a systemic incompatibility between the fair and equitable treatment (FET) standard and EU state aid law. This chapter focuses in particular on the principle of legitimate expectations and the manner that it was applied by several arbitral tribunals in relation to state aid measures. For the purposes of this enquiry, this chapter sets out the basic components of the notion of state aid under EU law and points out the severely restrictive application by the Court of Justice of the European Union (CJEU) of the principle of legitimate expectations in the field of state aid. Second, this chapter examines whether arbitral awards granting damages to an investor can constitute, as such, incompatible and unlawful state aid. The chapter focuses on two key questions, namely whether arbitral awards can constitute an economic advantage and whether they are attributable to the member state in question. Third, this chapter looks at the issue of the fate of arbitral awards granting damages to investors in state aid matters. It examines what remedies are available to member states against such awards. In doing so, it takes into account the different legal regimes applicable to awards issued under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and non-ICSID awards. It also examines the possibility of safeguarding the enforcement of ICSID awards that may be incompatible with EU law under Article 351 TFEU.