Energy & Natural Resources
In our previous four Solar Wars articles, we considered arbitral awards in respect of investors’ claims under the Energy Charter Treaty (ECT) arising out of the curtailment of renewable incentive schemes across Europe and the European Commission’s (EC) statements that those claims breached EU law.
In an article published on 5 April 2018, we commented on the decision of the Court of Justice of the European Union (CJEU) in Slovak Republic v Achmea (Case C-284/16), which held that an arbitration clause in bilateral investment treaty (BIT) between two EU states contravened EU law. In that article, we considered whether Achmea applies to intra-EU arbitrations under the ECT. A recent award has shed some light on that issue.
Achmea: a reminder of the issues
Briefly, the CJEU in Achmea reasoned:
The judgment implied that (a) arbitral tribunals constituted under an intra-EU BIT would not have jurisdiction and (b) any award rendered by such a tribunal would not be enforced by Member State courts.
However, the judgment was silent on whether it applied to multilateral treaties such as the ECT, to which EU member states and the EU itself are signatories. As summarised in our article ECJ’s Achmea judgment leaves legal questions for Energy Charter Treaty claims, there are arguments both ways.
Masdar Solar & Wind Cooperatief U.A. v Kingdom of Spain ICSID Case No. ARB/14/1
Masdar was the first ECT claim against Spain decided after Achmea, and it specifically addressed the question of whether, in light of the arguments adopted in Achmea, Article 26 ECT applied to claims between an investor from one EU Member State and an EU Member State.
The tribunal decided that it had jurisdiction to hear the claim reasoning:
On liability, the tribunal’s reasoning broadly followed that in Eiser and Novenergia (see previous Solar Wars articles), in that it held that the ECT’s fair and equitable treatment standard protected the legitimate expectations of an investor that the legal framework in which its investment was made would not be subject to ‘unreasonable or unjustified modification’, or changed contrary to specific commitments made. The tribunal found that specific commitments had been made to Masdar, including in certificates registering its investment, as well as letters from Spain’s Ministry of Industry, Tourism and Business explicitly confirming that Masdar’s solar installations would be entitled to compensation for their entire operational lifetime. The tribunal, by a majority, awarded damages of €64.5m to Masdar.
The saga continues…
Spain has now asked the Swedish Court of Appeal to seek a preliminary ruling from the CJEU on whether Achmea applies to ECT cases. In its Decision of 10 November 2017 (EC Decision C(2017) 7384), the EC expressly criticised the ECT claims brought against Spain as being contrary to EU law. If the CJEU follows the EC’s lead, one might expect the CJEU to extend Achmea to ECT claims, notwithstanding the reasoning adopted by the Masdar tribunal. The Kingdom is poised to strike back.
First published in Energy Voice