European Commission Refers Hungary to EU Court Over Intra-EU Investor-State Arbitration Rules
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TL;DR
- The European Commission is referring Hungary to the CJEU over intra-EU investor-State arbitration.
- Hungary allegedly allowed State-controlled MOL to initiate and enforce ECT-based arbitration in violation of EU rules.
- MOL sought recognition of an intra-EU arbitral award despite the CJEU's Komstroy decision.
- Infringement procedures began in December 2025 and led to the October 2026 court referral.
Overview
The European Commission has decided to refer Hungary to the Court of Justice of the European Union (CJEU) for its failure to prevent violations of EU rules prohibiting intra-EU investor-State arbitration. The case centers on the Hungarian State's control over MOL and its subsidiaries, and their initiation and enforcement of arbitration proceedings under the Energy Charter Treaty in ways found incompatible with EU law.
What Happened
On 1 October 2026, the European Commission announced its decision to refer Hungary to the Court of Justice of the European Union (CJEU), citing Hungary's failure to comply with EU law prohibiting intra-EU investor-State arbitration.
The case relates specifically to the actions of MOL, a company effectively controlled by the Hungarian State, and its subsidiaries, which initiated arbitration proceedings under Article 26 of the Energy Charter Treaty (ECT) against another EU Member State.
After obtaining an arbitration award, MOL sought recognition and enforcement of that intra-EU arbitral award in a third-country court, despite EU law precluding such enforcement due to the CJEU's Komstroy judgment (Case C-741/19).
The European Commission initiated a formal infringement procedure against Hungary in December 2025, issued a reasoned opinion in April 2026, and proceeded with referral after Hungary did not address the alleged breaches.
Context
The Komstroy judgment (CJEU, Case C-741/19) found that Article 26 of the Energy Charter Treaty cannot be used by EU Member State investors to initiate arbitration against another Member State.
The European Commission has launched infringement proceedings in similar cases to safeguard the integrity of EU law and prevent circumvention by State-controlled companies.
Why It Matters
- The referral brings ongoing tensions around intra-EU investor-State arbitration into focus, especially regarding the enforceability of arbitral awards under the Energy Charter Treaty.
- The dispute highlights the EU's efforts to uphold its legal framework and ensure Member State compliance following CJEU rulings prohibiting intra-EU arbitration.