Case Overview

In Veolia Propreté v. Italy, the French Claimant, Veolia Propreté SAS, brought an arbitration claim against the Italian Republic under the Energy Charter Treaty (ECT). The dispute, administered by the International Centre for Settlement of Investment Disputes (ICSID), arose from Veolia's investment in Italy's waste-to-energy sector. The investment involved the acquisition of companies holding two major public utility concessions for waste management in the regions of Calabria (the TEC Concession) and Tuscany (the TEV Concession). Veolia alleged that a series of acts and omissions by various Italian state entities—including the specially appointed government Commissioners (*Commissari*), regional governments, and municipalities—breached Italy's obligations under the ECT, ultimately leading to the failure of the investment and the bankruptcy of its Italian subsidiaries. Claimant's core allegations centered on Italy's failure to honor fundamental contractual commitments essential to the viability of the concessions. These included the failure to pay and adjust contractually agreed gate fees for waste treatment, the non-payment of a substantial public contribution (*Contributo*) intended to reduce tariffs, the failure to deliver guaranteed quantities of waste, and the frustration of the construction of new waste treatment and energy plants due to political opposition and administrative infighting. Veolia contended that these actions collectively destroyed the economic equilibrium of its investment, constituting breaches of the ECT's umbrella clause, the Fair and Equitable Treatment (FET) standard, and amounting to an indirect expropriation.

Procedural History

The arbitration was initiated on May 25, 2018, with the submission of a Request for Arbitration, which was registered by ICSID on June 20, 2018. The three-member Arbitral Tribunal was constituted with Prof. Eduardo Zuleta as President, Ms. Judith Gill as the Claimant's appointee, and Prof. Laurence Boisson de Chazournes as the Respondent's appointee. In early 2019, proceedings were stayed by agreement of the parties following the January 2019 Declaration by EU Member States concerning the implications of the Court of Justice of the European Union's judgment in *Achmea*. The European Commission subsequently filed an application to intervene as a non-disputing party, which the Tribunal ultimately disallowed after the Commission failed to provide a required undertaking on costs. Following the lifting of the stay, the case proceeded with the filing of a Memorial, Counter-Memorial, Reply, and Rejoinder between July 2020 and February 2022. A hearing on jurisdiction and the merits was held from May 15-19, 2023, at the facilities of the Madrid Court of Arbitration. The Tribunal declared the proceeding closed on September 11, 2025, and issued its final Award on September 26, 2025.

Key Issues and Positions

Italy raised several jurisdictional objections. First, on *ratione personae* grounds, it argued that as an intra-EU dispute, the Tribunal lacked jurisdiction because both France and Italy, as EU Member States, were nationals of the same ECT Contracting Party, the European Union (EU). Second, on *ratione materiae* grounds, Italy contended that the ECT was never intended to apply to intra-EU disputes, that Veolia's activities were purely commercial and not a protected "investment," and that the investment was not in the "energy sector" as required by the ECT. Third, Italy invoked the ECT's fork-in-the-road clause, arguing that Veolia or its subsidiaries had previously submitted the same dispute to Italian domestic courts, primarily through bankruptcy proceedings. Veolia countered that France and Italy were distinct Contracting Parties, the ECT's plain text did not exclude intra-EU disputes, its investment met all treaty definitions, and the domestic proceedings were fundamentally different in parties, object, and cause of action from the treaty claim. On the merits, Veolia claimed breaches of the ECT's umbrella clause (Article 10(1)), Fair and Equitable Treatment (FET) standard (Article 10(1)), and the prohibition on indirect expropriation (Article 13). The claims were based on Italy's failure to pay and adjust gate fees, non-payment of the *Contributo*, failure to supply guaranteed waste quantities, and the frustration of the construction of the TEC2 and Sambatello 2 plants. Italy denied all breaches, attributing the investment's failure to Veolia's own mismanagement, poor business judgment, pre-existing commercial risks, and a bad-faith termination of the concessions.

Tribunal/Court Reasoning and Holdings

The Tribunal dismissed all of Italy's jurisdictional objections. It found that France and Italy's individual consent to arbitration under the ECT was not extinguished by the EU's status as a regional economic integration organization. Interpreting the ECT's text, the Tribunal found no basis to exclude intra-EU disputes. It also confirmed that Veolia's activities constituted a protected "investment" associated with the energy sector. On the fork-in-the-road objection, the Tribunal applied a strict triple-identity test and concluded that the domestic proceedings were not the "same dispute" as the one before it. On the merits, the Tribunal found Italy liable for multiple breaches of the ECT. It upheld the claim under the umbrella clause, finding that Italy had breached specific contractual obligations which were elevated to treaty breaches. These included the failure to timely pay and update gate fees under the TEC Concession, the failure to meet guaranteed waste quantities under the TEC Concession, and the failure to pay and adjust the gate fee under the 2010 Agreement for the TEV Concession. The Tribunal also found a breach of the obligation to pay the *Contributo*, but ultimately found the damage was of Claimant's own making. The Tribunal also found a breach of the FET standard, holding that Italy's conduct, particularly the infighting between the *Commissario* and the Calabria Region, frustrated the completion of the TEC2 and Sambatello 2 plants in an arbitrary and unfair manner. However, the Tribunal rejected the claim for indirect expropriation, reasoning that the established breaches, while serious, did not rise to the level of a substantial deprivation or "taking" of the investment.

Disposition / Relief

The Tribunal ordered the Italian Republic to pay Veolia Propreté SAS the amount of €85,832,011 in damages for the losses derived from the identified breaches. The Tribunal also awarded pre-award interest from December 31, 2011, to the date of the Award, and post-award interest until the date of payment, both calculated at the average 12-month EURIBOR rate plus a 2% spread, compounded annually. Furthermore, Italy was ordered to reimburse the Claimant for its share of the costs of the proceeding, amounting to USD 580,958.1. The Tribunal ordered each party to bear its own legal fees and expenses and denied all other prayers for relief.