As we return to our offices, hopefully feeling refreshed and recharged after a summer break, it is time to reflect on the last three months of developments in international investment law and arbitrations. The third quarter of this year has been marked by significant changes and noteworthy trends not only vis-à-vis the Energy Charter Treaty (Part I) but also with regards to recent investor state arbitration case law (Part II) and international and national policy (Part III).
The Energy Charter Treaty related developments
July was a particularly busy period for those observing the developments around the ECT. On 7 July, the European Commission issued a statement proposing coordinated withdrawal from the Treaty for the EU, its Member States, and EURATOM (the supply agency of the European Atomic Energy Community). Also, an anti-ECT sentiment kept spreading among European States while the modernisation of the ECT has been perceived as dragging on too long. Even the United Kingdom, one of the main drivers of the modernisation process, has announced its intention to withdraw unless the ongoing impasse is resolved by November. In Germany, as described in great details by Agata Daszko, the Federal Court of Justice (BGH), faced with conflicting decisions from lower courts as to the admissibility of intra-EU claims, declared that EU law takes precedence over public international law obligations stemming from the ECT. Ultimately, given the perceived incompatibility of ECT’s dispute settlement clause (Article 26) with EU law, BGH concluded that intra-EU arbitral proceedings are inadmissible for lack of an effective arbitration agreement. Similarly in Sweden, the Supreme Court refused to grant Novenergia (one of the claimants in the Spanish renewables saga under the ECT), leave to appeal an earlier decision, by the Svea Court of Appeal, which set aside the arbitral award for being incompatible with EU law.
Despite securing a win in Sweden, Spain continues to face difficulties in attempting annulment and setting aside of ICSID awards. In the United Kingdom, an interim charging order has been reportedly issued in August, permitting investors to seize a London property owned by the Spanish government. The order follows last May High Court judgment where Justice Fraser rejected Spain’s plea to set aside the recognition of the ICSID award in favour of Infrastructure Services Luxembourg SÀRL and Energia Termosolar BV. At the same time, on 19 and 22 September the ICSID Secretary-General registered two applications for annulment of the awards filed by Spain, respectively in Sevilla Beheer B.V. and others v. Kingdom of Spain, and Eurus Energy Holdings Corporation v. Kingdom of Spain. Eurus is one of the four Japanese (controlled) investors that have brought cases arising out of a series of energy reforms affecting the renewables sector against Spain (the other three being JGC Holdings Corporation, Itochu and Mitsui & Co., Ltd). The award awarding Eurus €106 million on the ground of Spain breach of the element of stability in Article 10(1) ECT already went through a rectification procedure under Article 49(2) of the ICSID Convention earlier this year. Now, we are looking forward to seeing the grounds on which the annulment is brought, especially because the case did not involve an intra-EU jurisdictional objection based on Achmea and Komstroy (which as we all know is one of the leitmotifs in the attempted annulment of intra-EU / ECT awards). We will keep you posted.
On the front of enforcement of ECT awards across the pond, the enforcement proceedings stemming from the contradictory cases of NextEra v. Spain and 9Ren v. Spain have attracted at least six amicus curiae briefs before the US Court of Appeals for the DC Columbia District. One of the briefs, authored by a group of experts (including Baltag, Desierto, Happ, Lavranos and Schreuer), calls for the Court to uphold jurisdiction over the enforcement petitions by giving deference to the ICSID Convention (and especially Articles 52-54) as a self-contained system. Conversely, a brief by the European Commission makes minimal reference to the ICSID Convention but rather concentrates on the role and responsibilities of the US courts and the standing of public international law in the EU legal order. Of interest is also a brief penned by the US Chamber of Commerce, which argues that to agree with Spain “would flout the ICSID Convention’s principle of non-interference, violate US’ treaty obligations and offer a roadmap for foreign sovereigns to avoid their own obligations”. On 15 September 2023, the Japanese JGC Holdings Corporation, started an enforcement proceeding of the €23.5 million award in front of the US District Court for the District of Columbia (Case No. 1:2023cv02701). The filing of the proceeding made public the decision in favour of JGC building and for the enthusiast of the Spanish renewable saga constitutes another small piece of the puzzle on a not-so-consistent interpretation of Art. 10(1) ECT and Fair and Equitable standard.
Notable ongoing investment arbitration claims in the region
The third quarter of 2023 has brought forth interesting developments in ongoing investment disputes in the European region. In the case of Huawei v. Sweden, a fourth procedural order (PO) was issued, shedding more light on the case that has the potential to be hugely consequential for the future of Huawei’s wider operations in Europe. Indeed, the telecommunications firm has reportedly also submitted a notice of dispute to the UK. Such a dispute would only be the second ISDS claim against the State, the first, brought by Ashok Sancheti, was terminated in 2009. Legal actions over a ban on supplying 5G equipment have been initiated by Huawei also against Portugal, even though in domestic forums. It would be no surprise to see an increase of ISDS claims brought under the 2005 China-Portugal BIT in the near future.
While the case of RWE v. The Netherlands continues to be suspended, a third PO was issued in another highly contentious fossil fuels arbitration: Discovery Global v. Slovakia. As the Kaufman-Kohler-chaired tribunal has previously issued a transparency order, we eagerly await further developments, including the publicly broadcasted hearings.
Finally, a UNCITRAL tribunal in Nord Stream 2 v. European Union has recently dismissed EU’s request to terminate the proceedings (as per Article 34(2) UNCITRAL Rules) but did order the claimant to deposit an undisclosed amount with the PCA as security for the respondent’s costs (PO 11).
On the case law front, our blog has had the privilege of hosting an insightful submission by Cristian Gallorini, revisiting the Blusun dictum as a “Roadmap for a Proportionality Analysis of the Breach of Stability in the Fair and Equitable Treatment Standard”.
New reforms and policy developments
During this trimester, the international and national arbitration landscape has witnessed several noteworthy developments and policy adjustments. On a global scale, a significant milestone was achieved in July as UN Member States adopted the Code of Conduct for Arbitrators drafted under the auspices of UNCITRAL Working Group III. The Code, under development for the past six years, aims to reinforce the duty of independence and impartiality, regulate double-hatting and strengthen disclosure requirements.
Meanwhile, at the domestic level, numerous countries have actively undertaken the modernisation of their arbitration laws. The United Kingdom is poised to follow in the footsteps of nations like Japan, Nigeria, and Luxembourg, all of which have recently reformed their arbitration acts. On 6 September, the Law Commission published its long-awaited review of the Arbitration Act 1996, together with a proposed draft bill. Rather than recommending “root and branch reform” of the Act, the Commission has made targeted recommendations in six focus areas. For example, the Bill provides that in the absence of an express choice by the parties on the governing law of the arbitration agreement, the applicable law shall be that of the seat. May this be the beginning of a heightened pro-arbitration era for those countries?
Here at EFILA Blog, we eagerly anticipate what the next quarter shall bring. As always, we welcome blog contributions on all developments pertaining to investment law and arbitration. If you are interested in having your work published, make sure to read and follow our submission guidelines.
***This quarterly review was prepared by Agata Daszko and Cristian Gallorini***