Investment arbitration in the energy sector
In what circumstances is an investor entitled to compensation under the Fair and Equitable Treatment standard of protection in the Energy Charter Treaty as a result of the exercise by the states of the right to regulate to detriment of investors? A special analysis on photovoltaic arbitration cases in Italy, Spain and the Czech Republic.
Keywords:
Fair and Equitable Treatment, Legitimate Expectations, Investment Arbitration, Energy Charter Treaty, Regulatory ChangesAbstract
A significant development in the renewable energy field has happened in several countries like Italy, Spain and the Chez Republic over the last years mainly due to the state´s support for renewable energy projects. However, because of the financial crisis, these countries decided to review and change the policies. As a result of the changes implemented renewable investors were affected in some manner. Consequently, many arbitrations claim against these states have been brought under the Energy Charter Treaty. The present Chapter analyses this jurisprudence. Based on the results of these arbitrations the lack of consistency results evident. Different interpretations around the Fair and Equitable Treatment standard and how to find a balance between the need for a stable and predictable investment framework and the sovereign right to regulate are the principal cause of diverse decisions. The concept of the standard in the treaty is reviewed and compared with the evolution of the concept in other investment agreements. In conclusion, possible amendments to increase consistency in the arbitrations under the Energy Charter Treaty will be proposed.
Downloads
References
Table of Arbitral Awards reviewed
Awards divided by country
Italy
Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Final Award, (27/12/2016).
CEF Energía BV v. Italian Republic, SCC Case No. 158/2015, Final Award, (16/01/2019).
Greentech Energy Systems A/S, et al v. Italian Republic, SCC Case No. V 2015/095, Final Award, (23/12/2018).
Spain
Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Final Award, (15/08/2018).
Charanne and Construction Investments v. Spain, SCC Case No. V 062/2012, Final Award, (21/01/2016).
Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Final Award, (04/05/2017).
Isolux Netherlands, BV v. Kingdom of Spain, SCC Case V2013/153, Final Award, (17/07/2016).
Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Final Award, (16/05/2018)
Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. The Kingdom of Spain, SCC Case No. 2015/063, Final Award, (15/02/2018).
The Czech Republic
Antaris Solar GmbH and Dr. Michael Göde v. Czech Republic, PCA Case No. 2014-01, Final Award, (02/05/2018).
ICW Europe Investments Limited v. Czech Republic, PCA Case No.214-22, Final Award, (15/05/2019).
Photovoltaic Knopf Betriebs GMBH v. Czech Republic, PCA Case No. 2014-21, Final Award, (15/05/2019).
Voltaic Network GmbH v. Czech Republic, PCA Case No. 2014-20, Final Award, (15/05/2019).
WA Investments Europa Nova Ltd. v. Czech Republic, PCA Case No. 2014-19, Final Award, (15/05/2019).
Other Arbitration Awards
Achmea B.V. v. The Slovak Republic, UNCITRAL, PCA Case No 2008-13, Final Award, (7/12/2012).
AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary, ICSID Case No. ARB/07/22, Final Award, (23/09/2010).
AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary, ICSID Case No. ARB/07/22, Final Award, (23/09/2010).
Azurix Corp v Argentine Republic, ICSID Case No ARB/01/12, Final Award, (14/07/2006).
Continental Casualty Company v The Argentine Republic, ICSID Case No ARB 03/9, Final Award, (05/09/2008).
Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9, Final Award, (05/09/2009).
EDF Services Limited v. Romania, ICSID CASE No ARB 05/13, Final Award, (08/10/2009).
El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Final Award, (31/10/2011).
El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Final Award, (31/10/2011).
Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Final Award, (25/11/2015).
Glamis Gold Ltd v United States of America, UNCITRAL, Final Award, (8/06/2009).
Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case No. ARB/05/18, Decision on Jurisdiction, (6/07/2007).
Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award, (26/03/2008).
Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Final Award, (12/10/2002).
Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Final Award, (11/11/2007).
Robert Azinian, Kenneth Davitian, & Ellen Baca v. The United Mexican States, ICSID Case No. ARB (AF)/97/2, Final Award, (01/11/1991).
Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award, (17/03/2006).
Sempra Energy International v. The Argentine Republic, ICSID Case No ARB/02/16, Final Award, (28/09/2007).
Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Liability, (30/07/2010).
Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, (27/12/2010).
Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, (27/12/201).
Books & Journals
Abhijit, P. & Moody, S. (2010). Legitimate Expectations in Investment Treaty Arbitration: An Unclear Future. Tilburg Law Review, 1-22.
Arp, B. (2016). Charanne B.V. v. Spain. American Journal of International Law, 110, 327–333.
Arsanjani, M. H., Cogan, J., Sloane, R., & Wiessner, S. (Eds.). (2010). Looking to the Future. Leiden, The Netherlands: Brill. Nijhoff. doi: https://doi.org/10.1163/ej.9789004173613.i-1100
Baetens, F. (2010). The Kyoto Protocol in Investor–State Arbitration: Reconciling Climate Change and Investment Protection Objectives. Kluwer Law International, 681.
Baumgartner, J. (2016). Treaty Shopping in International Investment Law. International Economic Law, Oxford University-Press: http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780198787112.001.0001/acprof-9780198787112
Behn, D. & Kristian, O. (2015). Governments under Cross-Fire: Renewable Energy and International Economic Tribunals. Manchester Journal of International Economic Law, p. 117.
Belyi, A. Nappert, S. & Pogoretskyy, V. (2011). Modernising the Energy Charter Process? The Energy Charter Conference Road Map and the Russian Draft Convention on Energy Security. Journal of Energy & Natural Resources Law, volume 29, p. 383.
Boute, A. (2011). Challenging the re-regulation of liberalized electricity prices under investment arbitration. Energy Law Journal, 32(2), 497-540.
Brown, A. (2018). A Theory of Legitimate Expectations for Public Administration. Oxford University Press.
Burnett, H. and Bret, L. (2017). Arbitration of International Mining Disputes: Law and Practice. Oxford University Press.
C Chen, R. (2019). Precedent and Dialogue in Investment Treaty Arbitration. Harvard International Law, Law Journal, volume 60, p. 47.
Cameron, P. (2010). International Energy Investment Law: The Pursuit of Stability. Oxford University Press.
D’ Agostino, J. & Jones, O. (2007). Energy Charter Treaty: A Step towards Consistency in International Investment Arbitration? Journal of Energy & Natural Resources Law, volume 25 (3).
De Luca, A. (2015). Renewable Energy in the EU, the Energy Charter Treaty, and Italy’s Withdrawal Therefrom. Transnational Dispute Management, 12 (3).
Dias Simoes, F. (2017). When Green Incentives Go Pale: Investment Arbitration and Renewable Energy Policymaking. Denver Journal of International Law and Policy, 45 (2).
Dias, F. (2017). Charanne and Construction Investments v. Spain: Legitimate Expectations and Investments in Renewable Energy. Review of European, Comparative & International Environmental Law, p. 174.
Dolzer, R. and Schreuer, C. (2012). Principles of International Investment Law. Oxford University Press.
Dumitru, F. (2016). The Role of Legitimate Expectations in Establishing a Jurisprudence Constante in International Investment Law. Manchester Review Law Crime & Ethics, p. 28.
Fernandez Masia, E. (2017). Spain before the International Arbitration for the Cut to Renewable Energies: A Representation in Three Acts, for Now. Cuadernos de Derecho Transnacional, No. 666.
Gaillard, E. (2015). Sociology of International Arbitration. Arbitration International, Oxford University Press.
Gerards, J. (2018). Margin of Appreciation and Incrementalism in the Case Law of the European Court of Human Rights. Human Rights Law Review, 18 (3), p. 495-515.
Gerrard, M. (2011). The Law of Clean Energy: Efficiency and Renewables. American Bar Association publication, Section of Environment, Energy, and Resources, p.1-642.
Ghori, U. (2018). Reverse Permissibility’ in the Renewable Energy Sector: Going Beyond the US-India Solar Cells Dispute. Asian Journal of International Law, volume 8, p. 322.
Gumbis, J. & Kasparavicius, R. (2017). State’s Right to Regulate: What Constitutes Compensable Expropriation in Investor-State Arbitration. Yearbook on International Arbitration, volume 5.
Henckels, C. (2015). Proportionality and Deference in Investor-State Arbitration: Balancing Investment Protection and Regulatory Autonomy. Cambridge University Press, available in: http://ebooks.cambridge.org/ref/id/CBO9781316104378
Hober, K. (2007). The Energy Charter Treaty - Awards Rendered. Disputes Resolution International Law, Volume 1, p. 36.
Iacob, I. & Cirlig, R. (2016). The Energy Charter Treaty and Settlement of Disputes - Current Challenges. Juridical Tribunal, volume 6.
Kaufmann-Kohler, G. (2006). Arbitral Precedent: Dream, Necessity or Excuse? Arbitration International, 23 (3).
King, R. (2012). Dispute Resolution in the Energy Sector: A Practitioner’s Handbook. Globe Law and Business.
Kudrat, D. (2018). Charanne v Vpain and Eiser v Spain: Comparative Case Analysis on Legitimate Expectations and Fair and Equitable Standard. SOAS Law Journal, volume 5, p. 87.
Le Bars, B. (2015). Recent Developments in International Energy Dispute Arbitration. Journal of International Arbitration, Kluwer Law International, volume 32, Issue 5, pp.543 – 550.
Leal-Arcas, R. (2018). Commentary on the Energy Charter Treaty. Edward Elgar Publishing.
Lee, D.; Price, G.; & Vinter G. (2013). Project Finance: A Legal Guide, 4th edition, Sweet & Maxwell.
Lee, J. (2015), Putting a Square Peg into a Round Hole? Assessment of the “Umbrella Clause” from the Perspective of Public International Law. Chinese Journal of International Law, volume 14, p. 341.
Levashova, Y. (2019). Right of states to regulate in international investment law: The Search for Balance between Public Interest and Fair and Equitable Treatment. Kluwer Law International.
Levashova, Y. (2019). States to Regulate in International Investment Law: The Search for Balance Between Public Interest and Fair and Equitable Treatment. International Arbitration Law Library, volume 50, Kluwer Law International pp. 113 -172.
Lim, C.; Ho; J. & Paparinskis, M. (2018). International Investment Law and Arbitration: Commentary, Awards, and Other Materials. Cambridge University Press.
Mark, W. & Weidemaier, C. (2010). Toward a Theory of Precedent in Arbitration. William & Mary Law Review, volume 51, p. 1895.
McLachlan, C., Shore, L. & Weiniger, M. (2017). International Investment Arbitration: Substantive Principles. Oxford University Press.
Miaja de la Muela, A. (1967). Los Actos Unilaterales en las Relaciones Internacionales. Revista Española de Derecho, 20 (3), 429-464.
Nathanson, R. (2013). The Revocation of Clean-Energy Investment Economic-Support Systems as Indirect Expropriation Post-Nykomb: A Spanish Case Analysis. Iowa Law Review, No. 98, p. 863.
Nikhil, T. (2016). Legitimate Expectations in Investment Arbitration: At the End of Its Life Cycle. Indian Journal Arbitration Law, volume 5, p. 64.
Nowrot, K. (2006). Reconceptualising International Legal Personality of Influential Non-State Actors: Towards a Rebuttable Presumption of Normative Responsibilities. Philosophy Law Journal, volume 80, p.563.
Outka, U. (2012). Environmental Law and Fossil Fuels: Barriers to Renewable Energy. Vanderbilt Law Review, volume 65, p. 1679, 2012.
Pohl, J. (2018). Intra-EU Investment Arbitration after the Achmea Case: Legal Autonomy Bounded by Mutual Trust? European Constitutional Law Review, volume 14, p. 767.
Potesta, M. (2013). Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept. ICSID Review, volume 28, p. 88.
Reed, L. and Martinez, L. (2008). The Energy Charter Treaty: An Overview. ILSA Journal International Law & Comparative Law, volume 14, p.405.
Restrepo T (2017). Modification of Renewable Energy Support Schemes under the Energy Charter Treaty: Eiser and Charanne in the Context of Climate Change. Goettingen Journal International Law, volume 8, p. 101.
Rivkin, D.; Lamb, S. & Leslie, N. (2015). The Future of Investor-State Dispute Settlement in the Energy Sector: Engaging with Climate Change, Human Rights and the Rule of Law. The Journal of World Energy Law & Business, pág. 130.
Roe, T., Happold, M. & Dingemans, J. (2011). Settlement of Investment Disputes under the Energy Charter Treaty. Cambridge University Press 2011, available in: http://ebooks.cambridge.org/ref/id/CBO9780511977329
Rowley, J., Bishop, R. & Kaiser, G. (2018). The Guide to Energy Arbitrations.
Saavedra, C. (2016). The Narrow Meaning of the Legitimate Expectation Principle in State Aid Law Versus the Foreign Investor’s Legitimate Expectations. European State Aid Law Quarterly, p. 270.
Sales, P. (2006). Legitimate Expectations. Judicial Review, volume 11, p.186.
Scherer, M., (2018). International Arbitration in the Energy Sector. Oxford University Press.
Schill, S. (2012). System-Building in Investment Treaty Arbitration and Lawmaking. International Judicial Lawmaking, volume No. 236, available in: https://link.springer.com/chapter/10.1007%2F978-3-642-29587-4_5
Schønberg, S. (2000). Legitimate Expectations in Administrative Law. Oxford University Press.
Schreuer, C. (2004). Travelling the BIT Route. The Journal of World Investment & Trade.
Selivanova, Y. (2018). Changes in Renewables Support Policy and Investment Protection under the Energy Charter Treaty: Analysis of Jurisprudence and Outlook for the Current Arbitration Cases. ICSID Review - Foreign Investment Law Journal, volume 33, p. 433.
Simões, F. (2017). Blusun S.A. and Others v Italy: Legal (in)Stability and Renewable Energy Investments. Review of European. Comparative & International Environmental Law, volume 26, p. 298
Sombra, T. (2016). The Duty of Good Faith Taken to a New Level: An Analysis of Disloyal Behavior. Journal of Civil Law Studies, volume 9, p. 27.
Spielmann, D. (2012). Allowing the Right Margin: The European Court of Human Rights and The National Margin of Appreciation Doctrine: Waiver or Subsidiarity of European Review? Cambridge Yearbook of European Legal Studies, volume 14, p. 381.
Tai-Heng, C. (2007). Precedent and Control in Investment Treaty Arbitration. Fordham International Law Journal, volume 30, p. 1014.
Tellez, F. (2012). Conditions and Criteria for The Protection of Legitimate Expectations Under International Investment Law. ICSID Review, volume 27, p. 432.
Ten Cate, I. (2013). The Costs of Consistency: Precedent in Investment Treaty Arbitration. Columbia Journal Transnational Law, p. 418.
Tienhaara, K. and Downie, C., (2018). Risky Business? The Energy Charter Treaty, Renewable Energy, and Investor-State Disputes. Global Governance, volume 24, p. 451.
Van den Berg, A. (2015). Charles Brower’s Problem with 100 per Cent—Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration. Arbitration International, volume 31, p. 381.
Waelde, T. (1996). Stabilizing International Investment Commitments: International Law Versus Contract Interpretation. Texas International Law Journal, volume 31, p. 215.
Waelde, T. (1996). The Energy Charter Treaty: An East-West Gateway for Investment and Trade. Kluwer Law International.
Weiler, T. (2008). Investment Treaty Arbitration and International Law. JurisNet.
Wolfgang, P.& others (1995). Arbitration and Renegotiation of International Investment Agreements. Kluwer Law International.
Wood, T. (2015). Political Risk or Political Right? Reconciling the International Legal Norms of Investment Protection and Political Participation. ICSID Review, volume 30, p. 665.
Yannaca-Small, K., (2018). Arbitration under International Investment Agreements: A Guide to the Key Issues. Oxford University Press, 2nd edition.
Yaw, E. (2002). International Law, Sovereign Rights and Foreign Direct Investment: Directions from the Jurisprudence of International Arbitral Tribunals, U. Ghana Law Journal p. 1.
Websites and Blogs
Organization for Economic Co-operation and Development. (04 August 2019). Fair and Equitable Treatment Standard in International Investment Law http://www.oecd.org/daf/inv/investment-policy/WP-2004_3.pdf
Italaw. (01 June 2019). Newly Posted Awards, Decisions & Materials. https://www.italaw.com
Energy Charter Secretariat. (02 June 2019). List of all Investment Dispute Settlement Cases. https://energycharter.org/what-we-do/dispute-settlement/all-investment-dispute-settlement-cases/
Energy Charter Secretariat. (06 June 2019). Road Map for the Modernisation of the Energy Charter Process. https://energycharter.org/fileadmin/DocumentsMedia/CCDECS/CCDEC201010.pdf
Kluwer Arbitration Blog. (01 July 2019). Legitimate Expectations in the Absence of Specific Commitments According to the Findings in Blusun v. Italy: Is there Inconsistency Among the Tribunals in the Solar Energy Cases? http://arbitrationblog.kluwerarbitration.com/2017/08/18/legitimate-expectations-absence-specific-commitments-according-findings-blusun-v-italy-inconsistency-among-tribunals-solar-energy-cases
United Nations Climate Change. (01 July 2019). Nationally Determined Contributions. https://unfccc.int/process-and-meetings/the-paris agreement/nationally-determined-contributions-ndcs
Mena Chambers. (02 July 2019). Italy’s Withdrawal from the Energy Charter Treaty. http://www.menachambers.com/note-12-italys-withdrawal-from-the-energy-charter-treaty
International Institute for Sustainable Development (02 July 2019). State Liability for Regulatory Change: How International Investment Rules are Overriding Domestic Law. https://www.iisd.org/itn/es/2014/01/06/state-liability-for-regulatory-change-how-international-investment-rules-are-overriding-domestic-law
International Renewable Energy Agency. (29 July 2019) Renewable Energy Statistics 2019. https://www.irena.org/publications/2019/Jul/Renewable-energy-statistics-2019
Kluwer Arbitration Blog. (03 August 2019). Intra-EU Disputes under the Energy Charter Treaty: Quo Vadis? http://arbitrationblog.kluwerarbitration.com/2019/08/18/intra-eu-disputes-under-the-energy-charter-treaty-quo-vadis/
Kluwer Arbitration Blog. (03 August 2019). Legitimate Expectations in Renewable Energy Treaty Arbitrations: The Lessons So Far. http://arbitrationblog.kluwerarbitration.com/2018/03/22/legitimate-expectations-renewable-energy-treaty-arbitrations-lessons-far
Kluwer Arbitration Blog. (03 August 2019). Spanish Energy Arbitration Saga: Green Light for Investors Claiming Breach of FET?. http://arbitrationblog.kluwerarbitration.com/2017/06/17/spanish-energy-arbitration-saga-green-light-investors-claiming-breach-fet
Global Arbitration Review. (06 August 2019). Spain liable again in solar cases. https://globalarbitrationreview.com/article/1195912/spain-liable-again-in-solar-cases
Kluwer Arbitration Blog. (07 August 2019). From Iura Novit Curia to Zeno’s Paradox of Motion. http://arbitrationblog.kluwerarbitration.com/2015/04/16/from-iura-novit-curia-to-zenos-paradox-of-motion
United Nations Conference on Trade and Development. (01 August 2019). Fair and equitable treatment, Series on Issues in International Investment Agreements II. https://unctad.org/en/Docs/unctaddiaeia2011d5_en.pdf
United Nations Conference on Trade and Development. (12 August 2019). Nigeria-Morocco Bilateral Investment Treaty 2016. https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5409/download
United Nations Conference on Trade and Development. (12 August 2019). Viet Nam-EU 2019 Investment Protection Agreement. https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5868/download
