Quarterly Review: October – December 2022

The Editorial Board of the EFILA Blog is excited to share the first EFILA Blog Quarterly Review!

Our editors have gathered and reviewed developments, events and publications from the last quarter of 2022 to highlight some of the most relevant news in the field of international investment law, arbitration and the intersection of ISDS with EU law and policy.

Indeed, these last three months have proved rife with developments and events. Many were informed by earlier decisions (for example, Green Power v. Spain, covered on our blog in July by Ivan Levy) and policy developments (here, for example, the ongoing saga of the Modernisation of the Energy Charter Treaty, analysed back in August, by Agata Daszko and Kilian Wagner). Others concerned more traditional fields of international investment law (here, we recommend looking back to a post from September, by Danilo Ruggero Di Bella on the Untapped Potential of MFN Clauses). Still others came as big shocks and welcome surprises.

Without further ado, let’s explore them month by month in the following paragraphs.

October

October marked the start of a particularly testing period for the Energy Charter Treaty (ECT or Treaty). On 6 October, the Polish government voted with an overwhelming majority (418 v. 11) to withdraw from the Treaty. What followed was a slough of similar declarations of eagerness to exit the ECT: Spain (13 October), the Netherlands (19 October) and France (21 October, sending official notification of withdrawal on 22 December), with more States following suit in November…

Although the future of the ECT might be looking precarious, the Treaty continues to provide jurisdiction for a large number of new cases. Indeed, as reported by ICSID, in the financial year 2022, the ECT formed a basis of consent to establish jurisdiction for 11% of the new cases. This trend will likely continue in the foreseeable future. On 10 October, an ICSID tribunal suspended the first case brought against France under Art. 26 ECT by Encavis and others, on 2 September. Similarly, RSE Holdings v. Latvia (2) – another case registered against an EU Member State – resurfaced in October, with a newly re-constituted tribunal (Sabina Sacco, Richard Happ and Erica Stein) following a successful challenge to the claimant’s appointee over double-hatting. On 20 October, a decision was rendered in another ECT case: Portigon v. Spain. Here the tribunal decided on Spain’s request for reconsideration of the intra-EU objection based on the CJEU’s judgement in Komstroy. While the tribunal ultimately decided against the State, the decision is one of only a few ICSID decisions in which the dissenting opinion was rendered on an intra-EU objection. Although neither the decision nor the dissent are public it is nevertheless said (according to IAReporter) that the dissenter (Sacerdoti) found that the Decision in Komstroy was a “game changer” and that “the ECT did not contain any valid offer to arbitrate intra-EU disputes.”

October has also provided our editors and readers with heaps of great reading materials and resources. On 7 October, the advanced copy of the UNCITRAL Working Group III Report became available, outlining the work on the WGIII on the likes of the code of conduct, multilateral investment court, third-party funding, advisory centre and mediation. A week later, on 14 October, ICSID published its 2022 Annual Report, outlining its statistics on case numbers and outcomes, information on jurisdiction, the subject matter of disputes, the geographical distribution of cases and tribunal appointments. Finally, on the publication front, Happ and Wilske published their “ICSID Rules and Regulations 2022. Article-by-Article Commentary”. The Commentary not only analyses article by article the ICSID Rules and Regulation, but it is one of the first comprehensive commentaries on the updated ICSID rules for the resolution of investor-state disputes that have been welcomed by ICSID as the “most comprehensive modernization of the ICSID rules and regulations in the Centre’s 50-plus year history.”

Regarding our in-house developments, in October, we launched our “Young EFILA in conversation with…” interview series, with Amanda Lee as our first guest! EFILA has also hosted its Annual Lecture on ESG Investment Strategy with Jillian Kirn of Climate Change Counsel and Laurent Lhopitallier of Sanofi. If you missed it, you can find a recording of the event here.

November

November saw another wave of announcements of intentions to withdraw from the ECT: Germany (11 November), Luxembourg (18 November) and Slovenia (22 November). Of course, what many were eagerly awaiting was the 33rd Meeting of the Energy Charter Conference on 22 November in Mongolia, where the modernised text of the ECT was scheduled to be approved. However, following all the announcements of withdrawals and the failure of the EU Member States to agree on the modernisation during their own meeting on 18 November, the European Commission requested the removal of the adoption of the modernised text from the agenda of the meeting in Mongolia. Consequently, the vote on the adoption of the amendments to the ECT was postponed to the end of April 2023. Interestingly, what followed on 24 November was another vote in the European Parliament whereby the Parliament, by a majority of 303 to 209, passed a non-binding resolution calling on the European Commission and the Member States to start preparing a coordinated exit from the ECT and an agreement excluding the application of the sunset clause between willing contracting parties.

The ECT is not the only highly debated international treaty. On 11 November, the Irish Supreme Court surprised many when it ruled that the Irish Constitution precludes the government and parliament from ratifying the EU-Canada Trade Agreement (CETA). The Court ruled by a 4-3 majority that as the Irish law now stands, ratification of CETA would permit an international tribunal to make binding decisions enforceable in Irish Law, in turn compromising judicial sovereignty in Ireland. However, the Court also held, by a 6-1 majority, that certain amendments to the Arbitration Act 2010 would permit ratification without breaching the Constitution.

November also saw a number of interesting developments in ISDS. On 17 November, an ad hoc committee denied annulment of the 9Ren v. Spain award on the ground that intra-EU jurisdictional objection was only applicable if EU law were to apply as lex loci arbitri. This award is just one of many that Spain has tried to annul, relying on June’s Green Power v. Spain ruling. However, as held in previous annulment decisions, for example, in Cavalum v. Spain (see second decision on reconsideration rendered on 7 September), the tribunals do not see Green Power to have a binding or persuasive authority because 1) Green Power arbitration was conducted under the Rules of the Stockholm Chamber of Commerce and Swedish law, and 2) Tribunal treated Swedish law as the law applicable to the jurisdiction. Notably, the Green Power tribunal expressly stated that different considerations would be applicable to ICSID arbitrations.

Perhaps one of the most interesting domestic decisions came from the Netherlands on 30 November, when a court in Hague refused to compensate RWE and Uniper, who sought compensation for the closure of their plants due to the Dutch Coal-phase out law. The court, having assessed inter alia the ECtHR jurisprudence, decided that the two claimants were not owed compensation as the case did not concern a de facto expropriation but rather regulation of property as per Art. 1 Protocol 1 ECHR. And that compensation was not necessary as the Netherlands passed the “fair balance test”. Finally, coincidentally on the same day, Uniper confirmed that it had initiated arbitration proceedings against Russia’s Gazprom, aiming to recover around EUR 11.6 billion in damages due to undelivered gas quantities.

The November reading and events list was full of great positions to fight off the winter blues. With regards to the former, our editors have eagerly read the OECD/UNCTAD 28th Report on G20 Investment Measures and Nikos Lavranos’ Report on Compliance with Investment Treaty Arbitration Awards 2022, as well as its very helpful summary. As for the latter, some had the pleasure of attending the CIArb 2022 Congress, which took place on 9 November at the Radisson Blu Edwardian Hotel in London, and online. The congress had four great panels covering a wide range of topics: the first appointment and beyond; appointing institutions; the role of branches in getting appointments for CIArb members; and diversity.

In November, we were grateful to receive and review a number of great publications, starting with a post on “CSR in Investment Arbitration” by Ioana Maria Bratu, followed by a very interesting and timely two-part piece by Herbert Woopen on “Why Komstroy Cannot be the Last Word”. In addition, we have published two further interviews from our series “Young EFILA in conversation with…” and are incredibly thankful to our guests this month: Kabir Duggal and Crina Baltag.

December

On 7 December, the ICSID ad hoc committee of Michael Nolan (chair), Eva Kalnina, and Carita Wallgren-Lindholm was constituted to hear Italy’s application for annulment of the award rendered in Rockhopper v. Italy. After the tribunal found that Italy had violated the ECT by expropriating claimants’ “investments in the putative Ombrina Mare oil and gas field located off the Italian coast in the Adriatic Sea” (Award para. 5) and claimants were awarded EUR 190 million in damages, Italy submitted its application for annulment on October 2022, as announced in a press release of Rockhopper Exploration PLC.

On 13 and 14 December 2022, Swedish courts issued two judgments refusing awards in Novenergia II v. Spain and PL Holdings v. Poland, citing a lack of arbitrability under Swedish law in the former and a contradiction of Swedish public policy in the latter. You can read about these judgments in detail, in the piece by Anina Liebkind and Andreas Holst entitled “Landmark Judgments Rendered by Swedish Courts in the Achmea Saga”.

December has also provided a number of exciting updates and events. On 6 December, one of our Senior Editors, Mark Konstantinidis, participated in another exciting Young ITF Debate, this time with the subject of “This House believes that the approach of the Multilateral Investment Court to appointment of judges will not appropriately balance interests of States and investors”. Our editors have also welcomed the publication of the special issue of the Journal of World Investment & Trade on International Investment Law and Climate Change, as well as the seventh volume of European Investment Law and Arbitration Review published under the auspices of QMUL and EFILA, providing for a perfect Holiday Season reading! Among others, the volume of EILA Review includes the winning essay of the 2022 EFILA’s Young Practitioners and Scholars Essay Competition titled “Going Out of Business: Representing Insolvent Claimants Seeking Investment Treaty Protection in Arbitrations Brought against States”, written by our Senior Editor Velislava Hristova and Stanislav Cherkezov.

The Future

While predicting developments in international investment law has become an almost impossible exercise in recent years, we are convinced that 2023 will be just as exciting and intriguing as the previous year. Remember that you are always welcome to contribute to the Blog yourself or to enter your writing in EFILA’s Young Practitioners and Scholars Essay Competition 2023.

Most of all, we are looking forward to seeing you at the 8th EFILA Annual Conference on 16 March in Madrid and at the events organised by Young EFILA!

*** This quarterly review was prepared by Agata Daszko and Cristian Gallorini with editorial assistance from Velislava Hristova ***