While we slowly approach summer holidays, it is now time for a new quarterly review. In this QR, we summarised the main developments in the field of ISDS and EU law divided by topic, instead of by months. Paragraph I. provides an update on the latest news on the modernisation of the ECT and the enforcement of intra-EU Investor-State awards. Paragraph II. summarises some of the Russian Federation and Russian Investors’ related developments and awards. Last, paragraph III. illustrates how a new wave of Italian Investors is initiating Investor-State arbitration proceedings, while an old one is still pursuing its right to discovery under 28 USC section 1782. The choice of a slightly different format for this QR is made to leave some space at the end of the QR for our editors’ suggestions about their favourite, or planned, summer readings to keep you company during your vacations.
The modernisation of the ECT and the enforcement of intra-EU Investor-State awards
In the past three months, the modernisation of the ECT has been kept on life support, and no decision has been taken on its formal adoption. On the contrary, the EU Member States have continued their strategy – endorsed by the EU Institutions – to withdraw from the ECT. In this quarter, Denmark joined Germany, France, Spain, the Netherlands, Luxemburg, Poland, and Slovenia in its intention to withdraw from the ECT. Meanwhile, the ECT is still invoked by foreign investors also via the 20-year sunset clause provision. On 27 April 2023, Suntech Power International Ltd., the Swiss subsidiary of the Suntech Power group, initiated an ICSID arbitration against Italy for the seizure of solar farms in the south of Italy. Ireland might also face its first investment claim under the ECT (which Ireland has yet to exit) over its denial to grant a lease for an offshore drilling project to investors.
Turning to the Spanish renewables saga. An updated report by NL Investment Consulting illustrates that the total amount of Awards unpaid by Spain has now reached USD 1.3 billion. There are now 55 known claims against Spain, and almost all of them concern the renewable energy sector and have been brought under ECT or intra-EU BITS. Within this framework, Spain continues its battle for the annulment of the awards rendered against it. On 8 May 2023, an ad hoc committee denied Spain’s request for annulment and upheld the award in BayWa R.E. AG v. Kingdom of Spain (ICSID Case No. ARB/15/16). You can find an analysis of the annulment decision by Anastasia Choromidou and Mark Konstantinidis here.
Spain’s attempts to halt the enforcement outside of the EU of awards against it produced (recurrent) results in the last three months as well. On 24 May 2023, the Commercial Court in London – with the judgment in Infrastructure Services Luxembourg v. Kingdom of Spain  EWHC 1226 (Comm) – refused to set aside the order granting registration of the award rendered in Infrastructure Services and Energia Termosolar (formerly Antin) v. Spain (ICSID Case No. ARB/13/31). The 56-page long judgment aims to go beyond the specific case in which it is rendered. The judgment’s importance seems to be at least threefold. First, to fill a gap on the “lack of authority on enforcement of ICSID awards under the 1966 Act” in the UK ( EWHC 1226 (Comm) 162). Second, “to address Spain’s carefully advanced and argued multiple grounds of opposition to the [o]rder” (Id.). And third, the judgment appears to aim to deter “any state in a similar position to Spain” from moving to set aside recognition of the ICSID award in the UK (“[t]his should not be taken as encouragement by any state in a similar position to Spain that there is a lengthy and costly legal argument, based on wide-ranging arguments under international law, to be had on all or any attempts to obtain recognition of an ICSID award by an investor under the 1966 Act. There is not”(para. 163)). In light of this judgment, the question arises of whether its reasoning and holding become a persuasive authority in the enforcement of intra-EU awards in other (common law) countries.
Similarly, other common law countries have shown their favour for the enforcement of Intra-EU Investor-State awards and their effort to uphold the ICSID Convention. On 12 April 2023, the High Court of Australia rendered a judgment holding that ICSID awards may be recognised and enforced by Australian courts even though may not be executed there. The High Court of Australia also affirmed the principle that Spain, by being part of the ICSID Convention, cannot invoke state immunity to avoid recognition and enforcement of ICSID awards. Under this new precedent, the Florida-based NextEra has brought an action to enforce the award rendered in NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain (ICSID Case No. ARB/14/11). At present, four actions for enforcement of Intra-EU Investor-State awards are pending in front of the Federal Court of Australia: the other three investors involved are 9REN, RREEF and Watkins Holding.
In the United States, the conflicting orders regarding the enforceability of Intra-EU awards rendered by the United States District Courts, District of Columbia in 9REN v Spain and Blasket v. Spain (briefed in the last QR) are also under review in front of the United States Court of Appeals for the District of Columbia Circuit. The opposite positions against and in favour and of the applicability of Achmea, the ensuing case law and their impact on the enforceability of intra-EU investment awards should soon be reconciled.
Russian Federation and Russian Investors-related developments and awards
This first part of the year has seen several developments involving the Russian Federation and Russian investors. On 15 March 2023, Germany communicated a notice for denial of benefits under Article 17 ECT targeting Russian-affiliated investments. Even though Russia is not a signatory to the ECT, the denial of benefits is against legal entities owned or controlled by citizens or nationals of the Russian Federation and without any substantial business activities. It is also targeted against Investments of Investors of the Russian Federation as a State with which Germany has no diplomatic relations or has taken measures to prohibit transactions.
On 21 March 2023, pursuant to the 1958 New York Convention, JSC Oschadbank filed a Petition to confirm the Foreign Arbitration Award rendered in the case of Oschadbank v. Russian Federation, PCA Case No. 2016-14. On 12 April 2023, a PCA tribunal in NJSC Naftogaz of Ukraine (Ukraine) et al. v. The Russian Federation (PCA Case No. 2017-16) ordered Russia to pay Naftogaz USD 5 billion, as compensation for the expropriation of Naftogaz Group’s assets in the Autonomous Republic of Crimea in 2014. In June 2023, Naftogaz also issued enforcement proceedings against Russia in front of the United States District Courts, District of Columbia (Case Case No. 1:23-cv-01828). Both Oschadbank and NIJSC were investor-state arbitration cases brought under the Russia-Ukraine BIT (1998), the same Russia-Ukraine BIT that Ukraine has recently taken steps to terminate. Based on the change in circumstances and with the aim to “bring the legal framework in line with the actual situation”, on 18 April 2023, Ukraine informed that a draft law on the termination of the 1999 Agreement Between the Government of the Russian Federation and the Cabinet of Ministers of the Ukraine on the Encouragement and Mutual Protection of Investments would be submitted to the Verkhovna Rada of Ukraine (the parliament of Ukraine) for its adoption. Unilateral termination of the treaty may, however, still trigger the 10 years sunset clause.
On 2 June 2023, the Court of Appeal for Ontario affirmed that Russia could present new evidence in its challenge to a jurisdictional award in a USD 700 million ECT claim by a Yukos investor, Luxtona. The award was issued in 2017 by a Toronto-seated UNCITRAL tribunal, upholding jurisdiction under the ECT. Russia lodged a bid to set aside the award, arguing that the tribunal exceeded its jurisdiction.
A New wave of Italian investors is initiating Investor-State Arbitration proceedings, while an old one is still pursuing its right to discovery
This quarter has seen a surge in Italian investors bringing or threatening to bring investor-state claims against foreign countries. Moreover, on 8 May 2023, Bloomberg shared the news that ENI S.p.A. started an arbitration proceeding against Gazprom PJSC. According to the international agency, the basis of the dispute is Gazprom PJSC’s gas supplies cutoff. Meanwhile, another Italian investor in the oil sector has sent notice of arbitration, this time to the UAE under the UAE-Italy BIT. On 8 June 2023, the Secretary-General registered a request for the institution of arbitration proceedings filed by Gruppo Officine Piccini S.p.A. against the Republic of Cameroon under the 1999 Cameroon – Italy BIT. According to public sources, the dispute arose out of a cancelled contract for the construction of the Olembé Sports Complex commissioned for the Africa Cup of Nations. On 15 and 16 June, IA Reporter and GAR shared the news that a subsidiary of Minerali Industriali srl may start an arbitration proceeding against Tunisia.
In the United States, following the Southern District of New York Opinion that affirmed the principle that ICSID tribunals do not constitute a “foreign or international tribunal” for the purposes of 28 USC section 1782, Webuild S.p.A. has continued its battle in front of the United States Court of Appeals for the Second Circuit seeking to reinstate the lower court order to obtain discovery against WSP USA.
As the summer is almost here, our team is excited to share some of our top reading recommendations for the season. If you are in the mood for a thrilling page-turner, we highly recommend “The File” by Gary Born. For those who instead love non-fiction books, “Judging Iran: A Memoir of The Hague, The White House, and Life on the Front Line of International Justice” by Judge Brower will keep you inspired until the very end. If you are looking for a way to stay up to date with your arbitration knowledge, “Investment Arbitration and State-Driven Reform: New Treaties, Old Outcomes” by Wolfgang Alschner is an empirically rich work on the reform of the international investment regime. Also, “Renewable Energy Arbitration – Quo Vadis?” by Filip Balcerzak provides a great overview of the Spanish renewables saga.
Whatever your reading preference, we hope you find these recommendations helpful and enjoyable. Happy reading!
***This quarterly review was prepared by Cristian Gallorini and Anastasia Choromidou assistance from Velislava Hristova***