Procedural Background

This Award concludes an ICSID arbitration (Case No. ARB/18/20) initiated by Veolia Propreté SAS, a French company, against the Italian Republic under the Energy Charter Treaty (ECT). The dispute concerned Claimant's investments in the construction and operation of integrated waste-to-energy systems in Italy. The Tribunal, composed of Eduardo Zuleta (President), Judith Gill (appointed by Claimant), and Laurence Boisson de Chazournes (appointed by Respondent), addresses issues of jurisdiction, merits, and quantum.

Jurisdictional Analysis

The Tribunal dismissed all of Italy's jurisdictional objections. First, it rejected the ratione personae objection that the dispute was an intra-EU matter lacking diversity of nationality. The Tribunal held that France and Italy are distinct Contracting Parties to the ECT, irrespective of their concurrent EU membership. Second, it dismissed the ratione materiae objection, finding that the ECT applies to intra-EU disputes and that Claimant's activities constituted a protected investment under both the ECT and the ICSID Convention. The Tribunal determined that Claimant's investment satisfied the definitional requirements of the ECT and, even if the Salini test were applied as a guideline, its criteria were met. Third, the Tribunal rejected the fork-in-the-road objection, concluding that prior domestic proceedings (including bankruptcy filings and administrative actions) did not constitute the "same dispute" as they lacked identity of parties, object, and cause of action required to trigger the clause in ECT Article 26(3)(b)(i).

Findings on the Merits

The Tribunal found that Italy had breached its obligations under the ECT. It upheld Claimant's claims under the umbrella clause (Article 10(1)), finding that Italy failed to observe contractual obligations related to two key waste management concessions (the TEC and TEV Concessions). Specific breaches included the failure to: (i) timely pay and update gate fees; (ii) pay the public contribution known as the Contributo; and (iii) meet guaranteed waste quantities.

The Tribunal also found a breach of the Fair and Equitable Treatment (FET) standard under Article 10(1) of the ECT. This finding was based on Italy's frustration of the completion of the TEC2 and the Reggio Calabria MBT (Sambatello 2) plants, which resulted from incoherent and inconsistent actions by various state entities. However, the Tribunal rejected the claim for indirect expropriation under Article 13, reasoning that the established breaches, while significant, did not rise to the level of a substantial deprivation or "taking" of the investment.

Decision on Damages and Costs

The Tribunal awarded damages for the established breaches. It rejected Respondent's argument that compensation should be limited to sunk costs, finding that an income-based approach was appropriate for an ongoing concern. The Tribunal quantified the losses resulting from the breaches of the umbrella clause and the FET standard, awarding a total of €85,832,011. This amount included compensation for lost revenues from gate fees, failure to meet waste quantities, and costs associated with the frustrated plant constructions. The Tribunal, however, denied compensation for the unpaid Contributo, finding that Claimant had assumed this specific risk through a subsequent commercial agreement (the MSA).

The Tribunal awarded pre-award and post-award interest at the average 12-month EURIBOR rate plus a 2% spread, compounded annually. It ordered Italy to bear the full costs of the arbitration proceedings, requiring it to reimburse Claimant for its share of the advances paid to ICSID, amounting to USD 580,958.1. Each party was ordered to bear its own legal fees and expenses.