The last quarter of 2023 was as eventful as the rest of the year which has witnessed the “meltdown” of the Energy Charter Treaty, the adoption of the Code of Conduct for Arbitrators and the reform of the arbitration acts by the UK, Japan, Nigeria, and Luxembourg. From the Australian and UK courts granting enforcement of intra-EU awards to the US taking contradictory positions on the topic. Whether it is the sanctions against Russia, new clusters of investor-state arbitration proceedings on the horizon, or the cases concerning fossil fuels phase outs – the ISDS universe continues to change and evolve, with our Quarterly Review series reporting on these developments for a year now!
The ECT Meltdown and the Road Ahead
As we reported throughout the year – 2023 witnessed the “meltdown” of the Energy Charter Treaty with several EU Member States refusing to sign the modernised ECT and, together with the European Commission, declaring their intention to withdraw from the current treaty.
In 2024, we are looking forward to seeing whether the ECT meltdown would leave, as some authors put it, a “legal mess” behind, or whether the combined modernisation and withdrawals of the EU Member States would further green investments and help reach the Paris Agreement goal. For the time being, the ECT will continue to apply to all investments made until the withdrawal of these countries through the 20 years sunset clause of the ECT. At the same time, more than 20 non-EU member states will be called to decide whether to pursue the modernisation of the ECT, or remain with the old treaty. What should be set in stone is the understanding that at stake here is not just the future an international treaty, which some may have considered obsolete for a while (especially in light of the most recent geopolitical changes), but the impact that the absence of an international treaty in the fashion of the ECT will have on green investments in Europe.
Investor-states arbitration cases brought under the ECT have reportedly increased during the fiscal year 2023 according to the annual statistics posted by the ICSID Secretariat in October 2023. Indeed, they constitute 13% of all cases registered at ICSID during the fiscal year 2023, increasing by 2 points from 2022. We cannot predict whether this strand would remain the same in 2024, but what would most likely increase next year is the debate on the use of the European Court of Human Rights (ECtHR) as a new international forum (and residual remedy) for European investors after having exhausted all domestic remedies. This topic was discussed year during the 9th Annual EFILA Lecture on 9 November, by Robert Spano who analysed the potential effects of the intra-EU BIT Achmea-line of case-law of the CJEU on investors’ rights to property under Article 1 of Protocol No. 1 of the European Convention on Human Rights. The discussion is especially timely given many intriguing developments in the field – not least RWE’s November decision to reportedly withdraw its ECT claim against the Netherlands.
Enforcing Intra-EU Awards Outside of the EU
On the front of enforcement of intra-EU awards outside of the EU, 2023 was the year in which Australia and the United Kingdom reaffirmed their favourability on upholding the ICSID Convention, and the impracticability of intra-EU objections and immunity pleas in the context of intra-EU awards within their territories – Aleksander Kalisz has helpfully analysed one of these decisions by the English High Court in his piece “Intra-EU Objections and Enforcement of ICSID Awards: English High Court Takes a Pro-arbitration Stance”.
At the same time, 2023 has seen contradictory decisions on the topic coming from the US. As a reminder, in February 2023, in the decision in Nextera Energy v. Spain, the US District Court for the District of Columbia (“DDC”) rejected Spain’s intra-EU objection because the intra-EU objection is “a question of arbitrability and therefore an issue of the award’s merits” and as such shielded from the DDC’s examination because of Article 54 ICSID Convention. However, on 29 March 2023, the DDC refused to enforce the award rendered in Blasket v. Spain deferring to the interpretation provided by the EU member states (in this case Spain and the Netherlands, the investor’s Home State) according to which the ISDS provision in the ECT is incompatible with EU law and holding that the member states lacked the legal capacity to enter into an agreement to arbitrate pursuant to Article 26 ECT.
In mid-2024, we should expect a first resolution of this split approach with the judgement on the appeal of these two contradictory decisions currently pending before the United States D.C. Circuit Court of Appeals. In the meantime, the split approach of the DDC is not stopping investors from seeking enforcement of intra-EU awards in the United States. On 30 November 2023, Mercuria has filed the petition to confirm its $32 million SCC award against Poland.
Unsurprisingly, this timely topic formed the subject of this year’s Young EFILA Panel Discussion hosted by Herbert Smith Freehills on 10 November in London (for the report see here).
New ISDS Cases on the Horizon
Outside of the sphere of the Energy Charter Treaty, and intra-EU BITs, 2023 has provided us with some hints on potential investor-state arbitration cases to follow in 2024. Without venturing out too far from the old continent, Portugal and Spain have shown what new investor-State claims could look like in 2024.
New cases may involve the Chinese giant Huawei. A number of countries, including the UK, Sweden, Norway, Denmark, Estonia, Latvia, Lithuania, Australia and Japan, have already excluded Huawei from their 5G networks or imposed restrictions due to various security grounds. Huawei has submitted a notice of dispute to the UK, and a similar claim was brought in January 2022 against Sweden under the China-Sweden BIT. Furthermore, legal actions over a ban on supplying 5G equipment have also been initiated against Portugal before the Lisbon administrative court. It would be no surprise to see an increase of ISDS claims brought under the 2005 China-Portugal BIT in the near future as analysed in further details by Pacôme Ziegler on our blog in his contribution: “Is Portugal’s Huawei Ban Compatible with its Investment Treaty Obligations?”.
Another cluster of cases seems to be (re)emerging from cold waters. They are investor-State disputes involving rights to fish snow crabs in the Arctic waters granted by EuropeanStates to foreign investors. On 29 September 2023, a Moldovan investor filed a notice of arbitration against Spain under the 2006 Moldova-Spain BIT for the alleged, as the notice reads, “suspensions and ultimate revocation of the snow-crab catching permits for the Svalbard and the NEAFC zones amounting to an expropriation of the Moldovan citizen’s investments in Spain”. On the same day, a Russian investor brought a similar case against Spain under the 1990 Russia-Spain BIT. However, this is not the first time snow crabs are included in ISDS claims. We all remember the cases of UAB Arctic Fishing v. Norway and SIA Baltjura-Serviss v. Norway – both currently suspended by agreement of the parties.
Given the ever-expanding scope of topics and host States involved in ISDS claims we are looking forward to reporting on the new developments in case law in 2024!
Continuing ISDS Reform
The last quarter of 2023 has also brought new developments vis-a-vis ISDS reform: the 46th Session of UNCITRAL Working Group III took place in Vienna between 9 and 13 October with EFILA in attendance in its capacity as an observer organisation. As reported by Tetyana Makukha, the three first days of the Session were fully devoted to discussing the proposed Advisory Centre on International Investment Law, the work on which will continue at the next session of Working Group III in Vienna in January 2024.
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The last quarter of 2023 passed at a startling speed. Our aim here at the EFILA Blog has been to keep you updated on recent developments, and raise the debate in the field of ISDS and international investment law as well as European and international policz. The blog and its audience have grown exponentially in the past year, but this would not have been possible without the contribution of EFILA Blog’s authors and the kind availability of all scholars and practitioners that have participated in the “Young EFILA in Conversation with…” interview series. This quarter, special thanks go to our guests: Eliana Maria Tornese, Mary Mitsi and Velimir Zivkovic.
We hope you enjoyed our contents and we optimistically look forward to 2024, and await your 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.
With Best Wishes for 2024!
EFILA Blog Editorial Board
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***This quarterly review was prepared by Agata Daszko, Cristian Gallorini and Guofang Xue***