The Court of Justice has handed down a very significant Opinion in Case Opinion 1/09 on the compatibility with EU law of a draft agreement which aims to set up a new European Patent Court system. We’ve written about that before.
The Opinion is significant because of the manner in which the Court examines the roles of national courts and of the EU courts in safeguarding the proper application of EU law.
The Court concluded that the system as envisaged would be incompatible with EU law because it ousts the jurisdiction of national courts to apply EU law. The envisaged agreement, by conferring on an international court which is outside the institutional and judicial framework of the EU an exclusive jurisdiction to hear a significant number of actions brought by individuals in the field of the Community patent and to interpret and apply EU law in that field, would deprive courts of member States of their powers in relation to the interpretation and application of EU law and the Court of its powers to reply, by preliminary ruling, to questions referred by those courts and, consequently, would alter the essential character of the powers which the Treaties confer on the institutions of the EU and on the member States and which are indispensable to the preservation of the very nature of EU law.
The Council drew up a draft international agreement, to be concluded between the member States, the EU and non-member countries which are parties to the European Patent Convention to create a court with jurisdiction to hear cases related to the European patent and the future Community patent. The new court system forms part of a new integrated system for the European and Community patent to be issued by the European Patents Office. Currently, although the procedure for granting that right is unitary, the European patent breaks down into a bundle of national patents, each governed by the domestic law of the States which the holder of the right has designated. By contrast, the distinguishing feature of the future Community patent is that it would be unitary and autonomous and would have equal effect throughout the European Union. It could be granted, transferred, declared invalid or lapse only in respect of that territorial area.
The draft international agreement aims to establish a European and Community Patent Court composed of a court of first instance - comprising a central division and local and regional divisions – a court of appeal and a joint registry.
The Council requested the Court to give an opinion on the compatibility of this new court system with EU law pursuant to Article 218 § 11 TFEU. 21 member States, the European Parliament and the Commission intervened. The Court dealt first with the basic question whether the TFEU prevented the creation of a new court system outside the one it already sets up.
It held that Article 262 TFEU does not preclude the creation of the patent court system envisaged. While it is true that under that provision there can be conferred on the Court of Justice some of the powers which it is proposed to grant to the Patent Court, the procedure described in that article is not the only conceivable way of creating a unified patent court. Article 262 TFEU provides for the option of extending the jurisdiction of the European Union courts to disputes relating to the application of acts of the EU which create European intellectual property rights. Consequently, that article does not establish a monopoly for the Court of Justice in the field concerned and does not predetermine the choice of judicial structure which may be established for disputes between individuals relating to intellectual property rights.
The Court also held that the creation of the patent court system was not in conflict with Article 344 TFEU: That article merely prohibits member States from submitting a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for in the Treaties. The jurisdiction which the draft agreement intends to grant to the patent court system relates only to disputes between individuals in the field of patents.
Then the Court of Justice went on to examine the envisaged court structure n the light of the fundamental elements of the legal order and judicial system of the EU, as designed by the founding Treaties and developed by the case-law of the Court.
And that is where the problem lay.....
The Court recalled that the founding treaties of the EU, unlike ordinary international treaties, established a new legal order, possessing its own institutions, for the benefit of which the States have limited their sovereign rights, in ever wider fields, and the subjects of which comprise not only member States but also their nationals (see, inter alia, Case 26/62 van Gend & Loos  ECR 1, 12 and Case 6/64 Costa v ENEL  ECR 585, 593). The essential characteristics of the EU legal order thus constituted are in particular its primacy over the laws of the member States and the direct effect of a whole series of provisions which are applicable to their nationals and to the member States themselves (see Opinion 1/91  ECR I‑6079, paragraph 21).
Article 19(1) TEU provides that the guardians of that legal order and the judicial system of the EU are the Court of Justice and the courts and tribunals of the member States.
The Court recalled that its role is to ensure respect for the autonomy of the EU legal order thus created by the Treaties (see Opinion 1/91, paragraph 35).
Member States are obliged, by reason, inter alia, of the principle of sincere cooperation, set out in the first subparagraph of Article 4(3) TEU, to ensure, in their respective territories, the application of and respect for EU law (Case C‑298/96 Oelmühle and Schmidt Söhne  ECR I‑4767, paragraph 23). Further, pursuant to the second subparagraph of Article 4(3) TEU, the member States are to take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the EU. In that context, it is for the national courts and tribunals and for the Court of Justice to ensure the full application of EU law in all member States and to ensure judicial protection of an individual’s rights under that law (Case C‑432/05 Unibet  ECR I‑2271, paragraph 38).
The national courts, in collaboration with the Court of Justice, fulfill a duty entrusted to them both of ensuring that in the interpretation and application of the Treaties the law is observed (Case 244/80 Foglia  ECR 3045, paragraph 16, and Joined Cases C‑422/93 to C‑424/93 Zabala Erasun and Others  ECR I‑1567, paragraph 15).
The judicial system of the EU is a complete system of legal remedies and procedures designed to ensure review of the legality of acts of the institutions (Case C‑50/00 P Unión de Pequeños Agricultores v Council  ECR I‑6677, paragraph 40).
The Court of Justice examined the basic characteristics of the new system. It held that the international court envisaged in the draft agreement is to be called upon to interpret and apply not only the provisions of that agreement but also the future regulation on the Community patent and other instruments of EU law and rules of the FEU Treaty concerning the internal market and competition law. Likewise, the new patent court system may be called upon to determine a dispute pending before it in the light of the fundamental rights and general principles of EU law, and even to examine the validity of an act of the EU.
Thus, the new patent court system as envisaged:
– takes the place of national courts and tribunals, in the field of its exclusive jurisdiction described in Article 15 of that draft agreement,
– deprives, therefore, those courts and tribunals of the power to request preliminary rulings from the Court in that field,
– becomes, in the field of its exclusive jurisdiction, the sole court able to communicate with the Court by means of a reference for a preliminary ruling concerning the interpretation and application of European Union law and
– has the duty, within that jurisdiction, in accordance with Article 14a of that draft agreement, to interpret and apply EU law.
The Court of Justice held that while it has no jurisdiction to rule on direct actions between individuals in the field of patents, since that jurisdiction is held by the courts of the member States, nonetheless the member States cannot confer the jurisdiction to resolve such disputes on a court created by an international agreement which would deprive those courts of their task, as ‘ordinary’ courts within the EU legal order, to implement EU law and, thereby, of the power provided for in Article 267 TFEU or the obligation to refer questions for a preliminary ruling in the field concerned.
The Court recalled the vital role of the national courts in the EU legal order. Article 267 TFEU aims to ensure that, in all circumstances, that law has the same effect in all member States. The preliminary ruling mechanism thus established aims to avoid divergences in the interpretation of EU law which the national courts have to apply and tends to ensure this application by making available to national judges a means of eliminating difficulties which may be occasioned by the requirement of giving EU law its full effect within the framework of the judicial systems of the Member States. Further, the national courts have the most extensive power, or even the obligation, to make a reference to the Court if they consider that a case pending before them raises issues involving an interpretation or assessment of the validity of the provisions of EU law and requiring a decision by them (Case 166/73 Rheinmühlen‑Düsseldorf  ECR 33, paragraphs 2 and 3, and Case C‑458/06 Gourmet Classic  ECR I‑4207, paragraph 20). The system set up by Article 267 TFEU therefore establishes between the Court of Justice and the national courts direct cooperation as part of which the latter are closely involved in the correct application and uniform interpretation of EU law and also in the protection of individual rights conferred by that legal order.
So, because the new system had the effect of ousting the jurisdiction of national courts in the application of EU law, the Court found it incompatible with the EU Treaty.
That is all well and good. But our searching minds thought about BIT arbitration..... Has the Court of Justice inadvertently affected that ?