Brexit Silver Lining? Enforcement of Intra-E.U. Treaty Awards in the High Court

Lawyers and Funders Assisting Claimants in European Green Power Projects

There was a time when lawyers and funders flocked to assist claimants whose investments in European green power projects had been frustrated by host member states. Treaty claims against offending sovereigns became de-rigueur, whether under specific bilateral investment treaties – ‘BITs’ – or the behemothic Energy Charter Treaty – ‘ECT’ – to which the E.U. was itself a signatory.

These claims often had compelling narratives, exhibiting the classic ‘moving of the goal-posts’ by sovereigns with respect to ‘feed-in’ energy tariffs, sounding in significant sunk and future losses for investors. Many of them resulted in tribunals awarding claimants significant monetary damages against sovereigns for the latter’s breach of relevant investor protections under the relevant BITs or the ECT.

The Impact of Achmea vs Slovakia

But the winds hinted at potential change in 2018. In March that year, the Court of Justice of the European Union (‘CJEU’) handed down its judgment in the case of Achmea vs Slovakia (‘Achmea’). It ruled that the arbitration provisions of the relevant BIT between The Netherlands and Slovakia were incompatible with European law as enshrined in the Treaty on the Functioning of the European Union (‘TFEU’), and in particular, article 344 TFEU, which provided for the exclusive jurisdiction of the CJEU for disputes concerning the interpretation or application of the EU Treaties.

There was much grousing about Achmea in the corridors of international arbitration. The prevailing view was that the CJEU had overreached given the established norms of arbitration and public international law. Arbitral tribunals nevertheless continued to find their own jurisdiction when presented with claims brought under the myriad intra-EU BITs.

Moreover, claims brought under the ECT were perceived to be at little risk of a similar challenge, given that the EU had itself adopted that treaty (albeit pausing there, the ECT is itself seemingly on borrowed time, the European Commission having recently called on the EU and its members to exit the treaty as a result of the failure to negotiate a modernised green version).

The Impact of Republic of Moldova vs Komstroy LLC

Enter stage left Republic of Moldova vs Komstroy LLC (2021) (‘Komstroy’). In Komstroy, the CJEU took it upon itself to widen the scope of the reference it had received from the Paris court and to rule that, consistently with its earlier decision in Achmea, ECT based intra-EU arbitrations were contrary to EU law.

The death knell for pursuing (and funding) intra-EU BIT claims? Not quite.

First, and despite the CJEU’s stance, almost all arbitral tribunals faced with what has become known as the ‘Intra-EU Objection’ have determined that they still have jurisdiction to hear the disputes in front of them. The only recorded exception is the tribunal in Green Power Partners K/S and SCE Solar Don Benito APS vs Spain (2022), an arbitration governed by the SCC rules in Sweden.

Secondly, the recent decision of the English and Welsh High Court in Infrastructure Services vs Spain [2023] EWHC 1226 (Comm) (‘Infrastructure’) may provide comfort to claimants (and putative claimants) looking beyond BIT/ECT awards to their eventual enforcement. Enforcement is of course the first stage to collection of an award i.e., recovery, and ought to be high on the list of priorities of a claimant considering embarking on a claim; it is without doubt, a vital facet of a funder’s due diligence when presented with a potential fundable opportunity.

The Impact of Infrastructure Services vs Spain

In Infrastructure, Luxembourgish and Dutch claimants sought enforcement of their ICSID award against Spain (worth around USD120 million) in England and Wales. They did so as part of a broader strategy of non-EU enforcement, hopefully avoiding the Intra-EU Objection. The UK’s position with respect to the EU has of course changed since 2018 and Achmea; whilst at that time a fully paid up (albeit outgoing) member state, by the beginning of 2021, the UK had become a fully-fledged non-member, albeit with certain legacy obligations remaining. The burning question was whether an English court would cock a snook at the CJEU jurisprudence.

In its judgment of 24 May 2023, the High Court (Mr Justice Fraser) upheld an order for the recognition of the award, finding that there were ‘no proper grounds’ for setting it aside. Fraser J. adopted the reasoning of the Supreme Court in Micula v Romania [2020] UKSC 5, that EU law did not override the UK’s pre-accession treaty obligations to implement the ICSID Convention as enacted in the Arbitration (International Investment Disputes) Act 1966. There were no ‘exceptional or extraordinary circumstances’ at play that might alter that conclusion, despite Spain’s prolix submissions based on the Intra-EU Objection. In forthright terms Fraser J. stated that it simply could not be correct that:

‘by reason of the terms of the EU Treaties, and by reason of the rulings of the CJEU and its supremacy over EU law matters, the EU and the CJEU […] unilaterally changed – if not removed – all the existing treaty obligations of all the Contracting Parties to the ICSID Convention’.

Consequent upon Fraser J.’s decision, on 2 August 2023, Master Thornett, sitting in the High Court, issued an interim charging order allowing the Infrastructure claimants to seize the freehold title to a property Spain owns at 317 Portobello Road in London.

Commentators have noted that the ‘potential significance of the High Court’s judgment (in Infrastructure) cannot be overstated’. A number of green power award creditors – including the claimants in Infrastructure – have sought to enforce elsewhere, including in the US

SDGs, Targets, and Indicators in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 7: Affordable and Clean Energy
• SDG 16: Peace, Justice, and Strong Institutions

The article discusses the issues related to investments in European green power projects and the legal disputes that arise from them. These issues are connected to SDG 7, which focuses on ensuring access to affordable, reliable, sustainable, and modern energy for all. The article also mentions the legal challenges faced by investors and the role of international arbitration, which relates to SDG 16, which aims to promote peaceful and inclusive societies for sustainable development, provide access to justice for all, and build effective, accountable, and inclusive institutions at all levels.

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 7.2: Increase the share of renewable energy in the global energy mix
• SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all

The article highlights the challenges faced by investors in green power projects, which can hinder the increase in the share of renewable energy in the global energy mix (SDG 7.2). It also discusses the legal disputes and the role of international arbitration in resolving them, which relates to promoting the rule of law at the international level and ensuring equal access to justice for all (SDG 16.3).

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Investment in renewable energy projects
• Percentage of renewable energy in the global energy mix
• Number of legal disputes related to green power projects
• Number of international arbitration cases involving investment disputes

The article mentions investments in European green power projects and the legal disputes that arise from them. These can be indicators to measure progress towards the targets of increasing the share of renewable energy in the global energy mix (SDG 7.2) and promoting the rule of law and equal access to justice (SDG 16.3). The number of investments in renewable energy projects and the percentage of renewable energy in the global energy mix can be used as indicators for SDG 7.2. The number of legal disputes related to green power projects and the number of international arbitration cases involving investment disputes can be used as indicators for SDG 16.3.

Table: SDGs, Targets, and Indicators

Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.

Source: lexology.com

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