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ARBITRATION INSTITUTE
OF THE STOCKHOLM CHAMBER OF COMMERCE

Box 16050, 103 21 Stockholm, Sweden
Phone: +46 8 555 100 00, E-mail: [email protected]
https://sccinstitute.com/

FINAL AWARD

Date: 25 March 2020

Seat of the Arbitration: Stockholm, Sweden

Arbitration No.: SCC ARBITRATION V (2016/32)

MEMBERS OF THE ARBITRAL TRIBUNAL:

Professor Dr. Albert Jan VAN DEN BERG (Chairperson)
Prof. Dr. Klaus SACHS
Prof. Andrea GIARDINA

SECRETARY OF THE ARBITRAL TRIBUNAL:

Mr. Pratyush PANJWANI

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REPRESENTATION OF THE PARTIES

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FREQUENTLY USED ABBREVIATIONS AND ACRONYMS

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I. INTRODUCTION

1. This is a Final Award concerning a dispute between SunReserve Luxco Holdings S.À.R.L, SunReserve Luxco Holdings II S.À.R.L and SunReserve Luxco Holdings III S.À.R.L, on the one hand, and the Italian Republic, on the other hand.

2. These proceedings were instituted pursuant to the Energy Charter Treaty 1994 (“ECT”). It is not disputed that the the ECT entered into force for the home State of the three Claimants, i.e., the Grand Duchy of Luxembourg, on 16 April 1998.¹ It is also not disputed that the ECT had entered into force for the Italian Republic also on 16 April 1998.²

II. PARTIES

A. CLAIMANTS

3. The claimants in these proceedings are SunReserve Luxco Holdings S.À.R.L (“First Claimant"), SunReserve Luxco Holdings II S.À.R.L (“Second Claimant") and SunReserve Luxco Holdings III S.À.R.L (“Third Claimant"), all of which are limited liability companies duly established under the laws of the Grand Duchy of Luxembourg.³ Their corporate structure is explained in detail in Section IV.E(1) below. Together, First Claimant, Second Claimant and Third Claimant are referred to as “Claimants”.

4. The corporate address of Claimants is:

6, rue Eugène Ruppert
L-2453 Luxembourg

B. RESPONDENT

5. The respondent in these proceedings is The Italian Republic (“Italy” or “Respondent”).

¹ CEX-6, Excerpt from the Energy Charter website – Luxembourg. ↩

² CEX-5, Excerpt from the Energy Charter website – Italy. Although the Italian Republic has since withdrawn from the ECT, pursuant to Article 47(3) ECT, the provisions of the ECT continue to apply to investments made in the territory of the Italian Republic as of the date when the said withdrawal took effect for a period of 20 years. ↩

³ SoC, ¶ 19; CEX-2, Claimants' Registration Certificates in the Luxembourg Commercial Register and Board Resolutions on Subsequent Name Changes. ↩

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6. Claimants and Respondent are hereinafter collectively referred to as the “Parties”. The Parties' respective representatives and their addresses are listed above on page 2.

III. PROCEDURAL HISTORY

7. On 26 August 2016, Claimants filed a Request for Arbitration (“RfA”) with the Arbitration Institute of the Stockholm Chamber of Commerce, (“SCC”) pursuant to Article 26(4)(c) of the ECT and Article 2 of the Arbitration Rules of the SCC 2010 (“SCC Rules”). The SCC confirmed receipt of the RfA by correspondence of the same date.

8. In its RfA, Claimants proposed that the Tribunal should consist of three arbitrators. Claimants appointed Prof. Dr. Klaus Sachs as their party-appointed arbitrator pursuant to Article 13 SCC Rules. Further, Claimants proposed that the Chairperson of the Tribunal be selected by the two party-appointed arbitrators, with agreement of the parties. In addition, Claimants proposed Geneva, Switzerland as the seat of arbitration, and English as the procedural language for the arbitration.⁴

9. By correspondence dated 29 August 2016, the SCC sent a copy of the RfA to Respondent, inviting it to submit its Answer by 29 September 2016.

10. By correspondence dated 8 September 2016, Respondent acknowledged receipt of the RfA and requested the SCC to extend the deadline for submission of its Answer to 30 November 2016.

11. Upon being invited by the SCC to comment on Respondent's request for extension, on 15 September 2016, Claimants informed the SCC that they considered Respondent's request for a two-month extension to be unreasonable, and were instead prepared to agree to an extension until 31 October 2016.

12. On 16 September 2016, the SCC granted Respondent an extension of time until 31 October 2016 to submit its Answer, stating that the Answer may be brief.

⁴ RfA, ¶¶ 79-83. ↩

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13. On 31 October 2016, Respondent submitted its Answer to Claimants' RfA, together with a Request for Dismissal under Article 10 SCC Rules, on the ground that the SCC manifestly lacked jurisdiction over the dispute (“Answer and Request for Dismissal”).⁵

14. In its Answer and Request for Dismissal, Respondent stated that in the event the case was not dismissed under Article 10 SCC Rules, it would agree with Claimants' proposals that the Tribunal be composed to three arbitrators, and that the Chairperson of the Tribunal be selected by the two party-appointed arbitrators with agreement of the parties (see ¶ 8 above). Respondent requested until 7 November 2016 to indicate its party-appointed arbitrator. In addition, Respondent proposed Rome, Italy as the seat of arbitration, and Italian as the procedural language.⁶

15. On 7 November 2016, Respondent appointed Prof. Andrea Giardina as its party-appointed arbitrator pursuant to Article 13 SCC Rules.

16. On 9 November 2016, Claimants provided their comments to Respondent's Answer and Request for Dismissal, requesting that the SCC Board of Directors (“SCC Board") dismiss Respondent's Request for Dismissal under Article 10 SCC Rules. Further, Claimants rejected Respondent's proposal of Rome, Italy as the seat of arbitration and Italian as the procedural language.

17. By correspondence dated 17 November 2016, the SCC informed the Parties that the SCC Board had decided that (i) the SCC did not manifestly lack jurisdiction under Article 10 SCC Rules; and (ii) the seat of arbitration shall be Stockholm, Sweden. In the same correspondence, the SCC stated that it shall proceed to give the two party-appointed arbitrators the opportunity to appoint the Chairperson of the Tribunal. The SCC wrote to the party-appointed, in this regard, on 17 November 2016, requesting them to provide the SCC with the selected Chairperson's name by 2 December 2016.

18. On 13 January 2017, the SCC informed the Parties that the party-appointed arbitrators had jointly appointed Prof. Albert Jan van den Berg as the Chairperson of the Tribunal, and that the SCC shall refer the case to the Tribunal shortly.

⁵ Answer and Request for Dismissal, ¶¶ 5-12. ↩

⁶ Answer and Request for Dismissal, ¶¶ 15-17. ↩

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19. Pursuant to Article 18 SCC Rules, the SCC referred the case to the Tribunal on 16 January 2017.

20. By correspondence dated 27 January 2017 to the Tribunal, the European Commission ("EC") filed an Application for leave to intervene as a non-disputing party in this arbitration (“EC Intervention Application”). In the EC Intervention Application, it questioned the Tribunal's jurisdiction to arbitrate the present case, inter alia, on the ground that the case pertains to obligations of European Union (“EU”) Member States inter se, which cannot be resolved by way of investor-State dispute settlement under the ECT.⁷ The EC invoked the Tribunal's “case-management powers” under Article 19 SCC Rules to grant its request for intervention as a non-disputing party.⁸ On this basis, it requested the Tribunal to (i) set a deadline for the EC to file a written submission; (iii) allow the EC access to the documents filed in the case, to the extent necessary for its intervention; and (iv) grant the EC leave to present its views at an oral hearing, if any takes place.⁹

21. By correspondence dated 31 January 2017, the Tribunal wrote the Parties (i) proposing to hold a Preparatory Telephone Conference (“PTC”) to consult the Parties on the preliminary procedural issues and a procedural calendar for the case; (ii) circulating a draft Agenda for the PTC; (iii) transmitting the EC Intervention Application to the Parties; and (iv) inviting the Parties to provide any comments on the draft Agenda for the PTC and the EC Intervention Application.

22. On 10 February 2017, Claimants submitted their Response to the EC Intervention Application, in which they requested the Tribunal to (i) not grant the EC Intervention Application, on the ground that the EC does not meet the standard for intervention and that its submissions were meritless; or (ii) alternatively, to restrict the EC's role in the proceedings, if the EC Intervention Application is granted.

23. On 13 February 2017, Respondent submitted its position on the EC Intervention Application, in which it requested the Tribunal to (i) admit the EC as a non-disputing party in these proceedings and to allow adequate time for discussing the issues raised by the EC;

⁷ EC Intervention Application, ¶¶ 1-6, 16-26. ↩

⁸ EC Intervention Application, ¶ 10. ↩

⁹ EC Intervention Application, ¶ 27. ↩

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and (ii) permit the EC to access the relevant documents and to participate in the hearing (as limited to the jurisdiction issue that the EC raised).

24. Further to the Tribunal's correspondence of 31 January 2017 (see ¶ 21 above), the PTC was conducted between the Parties and the Tribunal on 22 February 2017. In light of the discussions that ensued during the PTC, the Tribunal circulated to the Parties a draft Timetable for the proceedings on 22 February 2017 itself. Thereafter, on 3 March 2017, the Tribunal circulated a draft Procedural Order No. 1 to the Parties, which was also based on the discussions that ensued during the PTC concerning the procedural rules applicable to these proceedings. The Parties were invited to provide any comments on the draft Timetable and the draft Procedural Order No. 1 by 14 March 2017.

25. After having received and taking into account the Parties' respective comments on the draft Timetable and the draft Procedural Order No. 1, the Tribunal issued the final Procedural Order No. 1 (By Consent), together with the Timetable attached as Annex A, on 16 March 2017 (“PO 1”).

26. Notably, in PO 1, the Tribunal decided to (i) grant the EC Intervention Application, in part, fixing 10 May 2018 as the date for the EC to file a Written Submission as a non-disputing party; and (ii) determine at a subsequent date, after consultation with the Parties, whether and to what extent the EC shall be given access to the documents filed in these proceedings.¹⁰ The Tribunal informed the EC of its decision to partially grant the EC Intervention Application by correspondence dated 17 March 2017.

27. Thereafter, by correspondence dated 21 March 2017, the Tribunal, pursuant to Article 37 SCC Rules, requested the SCC Board to extend the time limit for rendering the Final Award, in light of the fact that the Timetable for these proceedings, established with the Parties' consent, extended at least until mid-2019.

28. On the same date, i.e., 21 March 2017, the SCC granted the Parties an opportunity to submit any comments on the Tribunal's request for extension of the time limit for rendering the Final Award. By correspondences of the same date, Claimants and Respondent confirmed that they had no objection to the Tribunal's request.

¹⁰ PO 1, ¶ 6. ↩

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29. Accordingly, by correspondence dated 22 March 2017, the SCC fixed 1 July 2019 as the time limit for rendering the Final Award.

30. In accordance with the Timetable established in PO 1, albeit with an eight-day extension agreed to by Respondent, Claimants submitted their Statement of Claim on 28 July 2017 ("SoC").

31. In accordance with the Timetable established in PO 1, Respondent submitted its Statement of Defence on 22 December 2017 (“SoD”).

32. On 6 March 2018, the Court of Justice of the European Union (“ECJ”) rendered its ruling in Case C-284/16, Slowakische Republik v Achmea BV (“ECJ Judgment”).¹¹

33. On 8 March 2018, the Tribunal wrote to the Parties in reference to the ECJ Judgment. In particular, in this correspondence, the Tribunal (i) mentioned that it considered it appropriate to invite the Parties to provide their respective positions on the implications of the ECJ Judgment on the present case, prior to receiving the EC's Written Submission as a non-disputing party scheduled on 10 May 2018 (see ¶ 26 above); (ii) invited Claimants to include in their Reply Memorial, due on 27 March 2018, any comments on the implications of the ECJ Judgment on the present case; and (iii) invited Respondent to provide any comments, limited to the implications of the ECJ Judgment on the present case, by 3 April 2018, without prejudice to Respondent's right to submit the Rejoinder Memorial due on 2 July 2018. The Parties' comments were invited by the Tribunal, explicitly without making any amendments to the other deadlines provided in the Timetable established in PO 1.

34. By correspondences dated 22 and 23 March 2018, the Parties agreed to modify the above prescribed deadlines and the Timetable established in PO 1, in the following manner, while confirming that the other deadlines mentioned in the Timetable established in PO 1 shall remain unaltered:

(i) Claimants' Reply Memorial on the Merits and Counter-Memorial on Jurisdiction to be filed on 30 March 2018 (previously 27 March 2018);

¹¹ CL-125, Slowakische Republik v. Achmea B.V., ECJ Case C-284/16, Preliminary Ruling, Mar. 6, 2018. ↩

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(ii) Respondent's comments on the implications of the ECJ Judgement to be filed on 6 April 2018 (previously 3 April 2018);

(iii) Respondent's Rejoinder on the Merits and Reply on Jurisdiction to be filed on 5 July 2018 (previously 2 July 2018).

35. On 23 March 2018, the Tribunal approved the Parties' agreed modifications to the Timetable established in PO 1.

36. In accordance with the Timetable established in PO 1, as modified by the Parties' agreement on 23 March 2018 (see ¶¶ 34-35 above), Claimants submitted their Reply on the Merits and Counter-Memorial on Jurisdiction on 30 March 2018 (“SoRy").

37. On 6 April 2018, Respondent submitted its comments on the implications of the ECJ Judgement on the present case (“Respondent's Comments on ECJ Judgment”).

38. On 9 April 2018, the Parties informed the Tribunal that, further to the Tribunal's directions in PO 1 (see ¶ 26 above),¹² the Parties had consulted amongst each other and agreed to provide to the EC certain relevant documents filed in this arbitration, prior to the EC's Written Submission as a non-disputing party scheduled on 10 May 2018.

39. By correspondence dated 9 April 2018, the Tribunal (i) informed the Parties that it considered it appropriate that the EC receive the relevant documents from the Tribunal itself, as opposed to the Parties; and (ii) requested the Parties to prepare one consolidated bundle of the relevant documents in a PDF format, and provide the same to the Tribunal by email, no later than 12 April 2018.

40. Having received the consolidated bundle of the relevant documents from the Parties, the Tribunal transmitted these documents to the EC on 13 April 2018.

41. In accordance with the Timetable established in PO 1, the EC submitted an “Amicus Curiae Brief” on 9 May 2018 (“EC NDP Submission”), which the Tribunal transmitted to the Parties on 14 May 2018.

42. Thereafter, on 23 May 2018, the Tribunal invited the Parties to (i) consult amongst each other and reach an agreement in respect of their preferred location and venue for the

¹² PO 1, ¶ 6. ↩

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Hearing scheduled in the week of 26-30 November 2018 as per the Timetable established in PO 1; and (ii) approve, or provide any comments on the engagement of Mr. Trevor McGowan as court reporter for the hearing.

43. By correspondence dated 31 May 2018, Claimants informed the Tribunal that the Parties had agreed to hold the Hearing at the hearing facilities of the International Chamber of Commerce in Paris, France. Further, Claimants confirmed their approval of Mr. Trevor McGowan's engagement as court reporter for the hearing.

44. The Tribunal granted Respondent until 7 June 2018 to provide its approval of, or comments on, Mr. Trevor McGowan's engagement as court reporter for the hearing, absent which, the Tribunal would confirm the appointment of Mr. McGowan as court reporter.

45. Having received no objection from Respondent until 7 June 2018, and in light of Claimants' express approval, the Tribunal confirmed the appointment of Mr. McGowan as court reporter on 8 June 2018.

46. In accordance with the Timetable established in PO 1, as modified by the Parties' agreement on 23 March 2018 (see ¶¶ 34-35 above), and with a further extension agreed to by Claimants, Respondent submitted its Rejoinder on the Merits and Reply on Jurisdiction on 6 July 2018 (“R-SoRj”).

47. Thereafter, on 24 July 2018, Respondent submitted to the Tribunal, pursuant to ¶ 10.10 of PO 1, a request to introduce into the record a new document, which was released after the submission of its R-SoRj (“Respondent's Request to Supplement the Record”). This new document was the EC Communication to the Parliament and the Council, bearing number COM(2018) 547/2, dated 19 July 2018 (“EC Communication 2018").

48. The Tribunal invited Claimants to provide any comments on Respondent's Request to Supplement the Record by 26 July 2018. Claimants provided their comments on the said date, objecting to Respondent's Request to Supplement the Record.

49. On 30 July 2018, the Tribunal issued Procedural Order No. 2, in which the Tribunal (i) granted Respondent's Request to Supplement the Record; (ii) granted Claimants liberty to provide any comments on the EC Communication 2018, in Claimants' Rejoinder on

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Jurisdiction; and (iii) granted Claimants a two-day extension to file their Rejoinder on Jurisdiction, which was originally scheduled for 1 August 2018 (“PO 2”).

50. In accordance with the Timetable established in PO 1, as modified by the Tribunal in PO 2, Claimants submitted their Rejoinder on Jurisdiction on 3 August 2018 (“C-SoRj”).

51. In accordance with the Timetable established in PO 1, on 1 October 2018, Claimants and Respondent notified the Tribunal of the other side's witnesses and experts they wished to cross-examine at the Hearing.

52. Thereafter, pursuant to ¶ 20.1 of PO 1, on 9 October 2018, the Tribunal submitted a proposal to the SCC to appoint Mr. Pratyush Panjwani, one of the Chairperson's law firm's associates, as the Arbitral Secretary in this case. The Tribunal also provided a proposed stipulation containing a description of the functions that it envisaged the Arbitral Secretary to perform under the Tribunal's supervision. The Tribunal requested the SCC to transmit the Tribunal's proposal to the Parties, and invite their comments on the same.

53. The SCC transmitted the Tribunal's proposal concerning the appointment and functions of the Arbitral Secretary to the Parties on 10 October 2018.

54. By correspondences dated 15 October 2018, Claimants and Respondent confirmed that they had no objections to the appointment of Mr. Pratyush Panjwani as Arbitral Secretary in this case.

55. By the same correspondences, and in accordance with the Timetable established in PO 1, the Parties submitted a Joint Chronological List of Exhibits.

56. Subsequently, by correspondence dated 20 October 2018, the Tribunal sent to the Parties a draft Agenda for the Pre-Hearing Organizational Meeting (“PHOM”) scheduled to be conducted between the Tribunal and the Parties on 8 November 2018. The Parties were invited to confer on the Draft Agenda for the PHOM and to provide their joint or individual comments on the same by 29 October 2018.

57. By correspondence dated 29 October 2018, Claimants sent to the Tribunal their comments on the draft Agenda for the PHOM, including on points where the Parties had reached agreement.

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58. On 8 November 2018, the PHOM was conducted between the Tribunal and the Parties. Further to the PHOM, the Tribunal circulated a draft of the Procedural Order No. 3 to the Parties for their comments. This draft Procedural Order No. 3 recorded the discussions that ensued during the PHOM.

59. By their respective correspondences dated 22 November 2018, Claimants and Respondent confirmed that they had no comments on draft Procedural Order No. 3. Accordingly, on 22 November 2018, the Tribunal issued Procedural Order No. 3 (By Consent) (“PO 3”). In PO 3, it was, inter alia, determined that the Parties shall make corrections to the trancripts of the hearing in consultation with each other one month after the hearing ends, i.e., by 31 December 2018.¹³

60. The hearing was conducted from 26 to 29 November 2018 in Paris, France (“Hearing”), in accordance with the Parties' agreement (see ¶ 43 above). The following witnesses were examined during the Hearing:

(i) Mr. Mark Florian (Claimants' fact witness);

(ii) Mr. Ryan Shockley (Claimants' fact witness);

(iii) Mr. Adi Blum (Claimants' fact witness);

(iv) Mr. Robert Hanna (Claimants' fact witness);

(v) Mr. Daniele Bacchiocchi (Respondent's fact witness);

(vi) Mr. Luca Miraglia (Respondent's fact witness);

(vii) Prof. Antonio D’Atena (Claimants' legal expert on Italian law);

(viii) Prof. Anna Romano (Respondent's legal expert on Italian law);

(ix) Dr. Boaz Moselle and Dr. Dora Grunwald (Claimants' regulatory experts);

(x) Mr. Richard Edwards (Claimants' quantum expert); and

(xi) Prof. Cesare Pozzi, Prof. Giuseppe Melis, Prof. Umberto Monarca and Prof. Ernesto Cassetta (Respondent's quantum experts).

¹³ PO 3, ¶ 8(e). ↩

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61. During the Hearing, the Parties agreed to the procedure and timetable for submitting post-hearing briefs. In particular, it was determined, with the agreement of the Parties, that the post-hearing briefs shall be simultaneously submitted by the Parties on 25 January 2019, followed by reply post-hearing briefs to be simultaneously submitted on 1 March 2019. Further, the cost submissions were scheduled for submission on 8 March 2019, and it was agreed that the Parties shall not submit Reply Cost Submissions.¹⁴

62. By Claimants' email dated 28 December 2018, the Parties jointly requeted for an extension of the deadline to provide corrections to the transcripts of the Hearing until 15 January 2019. On 1 January 2019, the Tribunal approved the Parties' joint request for extension.

63. Accordingly, on 15 January 2019, the Parties provided the revised transcripts of the Hearing, having agreed upon the corrections to the transcripts of Day 1 to 3 of the Hearing. With respect to Day 4 of the Hearing, Claimants pointed out that they disagreed with certain edits made by Respondent, but did not believe that the disagreements were material or would interfere with the Tribunal's general understanding of the transcript.

64. In accordance with the procedure and timetable for the submission of post-hearing briefs agreed upon during the Hearing (see ¶ 61 above), Claimants and Respondent simultaneously submitted their respective Post-Hearing Briefs on 25 January 2019 (“C-PHB” and “R-PHB” respectively).

65. Together with the R-PHB, Respondent also submitted a Request for Termination of these proceedings ("Request for Termination”), in light of the Declarations of the Representatives of the Governments of the European Union Member States dated 15-16 January 2019 (“January 2019 Declarations”). In its Request for Termination, Respondent also alternatively requested the Tribunal to suspend these arbitration proceedings.

66. By email dated 28 January 2019, the Tribunal invited Claimants to provide any comments on Respondent's Request for Termination by 4 February 2019. Accordingly, Claimants provided their comments on the Request for Termination on 4 February 2019, wherein they requested the Tribunal to reject Respondent's primary request for termination and the alternative request for suspension of the proceedings.

¹⁴ Hr. Tr. Day 4, pp. 222:14-224:4. ↩

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67. On 7 February 2019, the Tribunal issued Procedural Order No. 4, in which the Tribunal rejected Respondent's Request for Termination in its entirety, including the alternative request for suspension of the proceedings (“PO 4”).

68. In accordance with the procedure and timetable for the submission of post-hearing briefs agreed upon during the Hearing (see ¶ 61 above), Claimants and Respondent simultaneously submitted their respective Reply Post-Hearing Briefs on 1 March 2019 (“C-RPHB” and “R-RPHB” respectively).

69. Together with the C-RPHB, Claimants also submitted their Costs Submission on 1 March 2019 (“C-CS"). Respondent submitted its Costs Submission subsequently on 8 March 2019 (“R-CS").

70. In the meantime, on 7 March 2019, Claimants submitted a letter requesting for an opportunity to submit brief comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158), or alternatively, strike it from the record, on the ground that Respondent had submitted the said confidential award inti the record with the R-RPHB, and had also made submissions in respect of the same therein (“Claimants' Letter on CEF Award").

71. By email dated 7 March 2019, the Tribunal invited Respondent to provide any comments on Claimants' Letter on CEF Award by 8 March 2019. Accordingly, on 8 March 2019, Respondent provided its comments on Claimants’ Letter on CEF Award, wherein it objected to Claimants' request for an opportunity to submit brief comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158).

72. By email dated 8 March 2019, the Tribunal granted Claimants until 15 March 2019 to submit brief comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158).

73. By email dated 14 March 2019, Claimants requested the Tribunal for an extension to submit their comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158). The Tribunal granted Claimants the requested extension until 20 March 2019.

74. By email dated 20 March 2019, Claimants submitted their comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158).

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75. Thereafter, by its email dated 5 June 2019, the Tribunal requested the SCC Board for an extension of the time limit to render the award, pursuant to Article 37 of the SCC Rules, due to, inter alia, the intervening procedural developments in the case. This request was transmitted to the Parties by the SCC's letter dated 5 June 2019, wherein the Parties were invited to provide their comments by 12 June 2019. After having consulted the Parties, the SCC Board, on 13 June 2019, granted the Tribunal's request for an extension of the time limit to render the award, and extended the same until 1 October 2019.

76. On 18 June 2019, Respondent submitted a Request for Suspension, requesting the Tribunal to suspend these arbitration proceedings on the ground that the Tribunale Amministrativo Regionale per il Lazio in Italy had referred certain preliminary questions to the ECJ in two consolidated proceedings initiated by certain investors, which related to issues involved in the present arbitration (“Request for Suspension”).

77. By email dated 19 June 2019, the Tribunal invited Claimants to provide any comments on Respondent's Request for Suspensionby 24 June 2019. Accordingly, on 24 June 2019, Claimants submitted their comments, wherein they objected to the Request for Suspension for being belated, inaccurate and unwarranted.

78. On 4 July 2019, the Tribunal issued Procedural Order No. 5, in which the Tribunal rejected Respondent's Request for Suspension (“PO 5").

79. Thereafter, on 9 August 2019, Respondent requested to introduce the award rendered in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40) into the record.

80. By email dated 12 August 2019, the Tribunal invited Claimants to provide any comments on Respondent's request to introduce the award rendered in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40) into the record. Accordingly, on 14 August 2019, Claimants confirmed that they had no objection to the introduction of the said award into the record, but requested that the Parties be granted the opportunity to submit their comments on the award by 30 August 2019.

81. By email dated 14 August 2019, Respondent confirmed that they had no objection to Claimants' request to submit comments on the award in Belenergia S.A. v. Italy (ICSID

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Case No. ARB/15/40), but requested that the Parties be granted time until mid-September 2019 to submit such comments.

82. By email dated 14 August 2019, the Tribunal endorsed the Parties' agreement, and directed them to file simultaneous submissions on the award in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40) by 13 September 2019. Accordingly, Claimants and Respondent filed their submissions on this matter on 13 September 2019.

83. Thereafter, by its email dated 17 September 2019, the Tribunal requested the SCC Board for an extension of the time limit to render the award, pursuant to Article 37 of the SCC Rules, due to, inter alia, the intervening procedural developments in the case. This request was transmitted to the Parties by the SCC's letter dated 19 September 2019, wherein the Parties were invited to provide their comments by 23 September 2019. After having consulted the Parties, the SCC Board, on 24 September 2019, granted the Tribunal's request for an extension of the time limit to render the award, and extended the same until 31 March 2020.

84. By emails dated 6 December 2019, Respondent requested to introduce the awards rendered in Baywa R.E. v. Spain (ICSID Case No. ARB/15/16) and Stadtwerke München GmbH v. Spain (ICSID Case No. ARB/15/1) into the record.

85. By email dated 10 December 2019, the Tribunal forwarded Respondent's emails dated 6 December 2019 to all counsel and also invited Claimants to provide any comments on Respondent's emails.

86. Accordingly, by email dated 13 December 2019, Claimants informed the Tribunal that they had no objection to Respondent's request to introduce the awards rendered in BayWa R.E. v. Spain (ICSID Case No. ARB/15/16) and Stadtwerke München GmbH v. Spain (ICSID Case No. ARB/15/1) into the record. Simultanously, Claimants also requested that the following additional awards, decisions and dissenting opinions relating to Spain's feed-in tariff program be included into the record:

(i) the Dissenting Opinions of Prof. Kaj Hobér in Stadtwerke München GmbH v. Spain and of Prof. Horacio Grigera Naón in BayWa R.E. v. Spain;

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(ii) RREEF Infra. (G.P.) Ltd. & RREEF Pan-European Infra. Two Lux S.à.r.l. v. Kingdom of Spain (ICSID Case No. ARB/13/30), Decision on Responsibility and Principles of Quantum and Dissenting Opinion;

(iii) Cube Infra. Fund SICAV et al. v. Kingdom of Spain (ICSID Case No. ARB/15/20), Award;

(iv) NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain (ICSID Case No. ARB/14/11), Decision on Jurisdiction, Liability and Quantum Principles;

(v) NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain (ICSID Case No. ARB/14/11), Final Award;

(vi) SolEs Badajoz GmbH v. Kingdom of Spain (ICSID Case No. ARB/15/38), Award;

(vii) InfraRed Environmental Infrastructure GP Ltd et al. v. Spain (ICSID Case No. ARB/14/12), Award and Dissenting Opinion (not public, see Tom Jones, Spain Liable Again in Solar Cases, Global Arbitration Review, Aug. 5, 2019); and

(viii) OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain (ICSID Case No. ARB/15/36), Award and Dissenting Opinion.

87. By email dated 16 December 2019, the Tribunal invited Respondent to provide any comments on Claimants' email of 13 December 2019. Accordingly, by email dated 17 December 2019, Respondent informed the Tribunal that it had no objection to Claimants' request to introduce the above listed awards, decisions and dissenting opinions into the record.

88. In light of the agreement between the Parties, the Tribunal, by its email dated 19 December 2019, admitted the awards, decisions and dissenting opinions identified in Respondent's emails of 6 December 2019 (see ¶ 84 above) and Claimants' email of 13 December 2019 (see ¶ 86 above) into the record. The Parties were directed to file these documents into the record by 23 December 2019. By emails dated 21 and 22 December 2019, Respondent and Claimants filed the said awards, decisions and dissenting opinions into the record.

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89. On 10 March 2020, the Tribunal requested the SCC Board to finally determine the Costs of the Arbitration, pursuant to Article 43(2) SCC Rules.

90. By email dated 11 March 2020, the Tribunal declared these arbitration proceedings closed, pursuant to Article 34 SCC Rules.

91. On 24 March 2020, the SCC Board finally determined the Costs of the Arbitration, pursuant to the Tribunal's request under Article 43(2) SCC Rules (see ¶ 89 above).

IV. FACTUAL BACKGROUND

A. EVOLUTION OF ITALY'S GENERAL POLICIES ON RENEWABLE ENERGY

92. Italy started taking steps towards promoting energy consumption through non-fuel energy sources in the 1980s and 1990s. This was motivated, at least in part, by the EU's objective to move towards harmonizing the energy market of its Member States, while simultaneously endorsing production of electricity through renewable energy. This evolution of Italy's and the EU's initial polices relating to renewable energy shall be discussed in Sections (1) and (2) below, respectively.

(1) Italy's Policies through 1980s and Early 1990s

93. In 1982, Italy enacted the Law No. 308/1982, which aimed to promote, “consistently with the European Community energy policy, the limitation of energy consumptions and the use of renewable energy sources”.¹⁵ To this end, Italy committed to provide certain capital contributions and other financial incentives to promote renewable energy.¹⁶ In this connection, Law No. 308/1982 also envisaged the sale, trade and dispatch of the electricity generated by renewable energy plants under the capacity of 3000 kW shall be “regulated by ad hoc agreements” with the National Entity for Electricity, which was a state-owned company then. The sale price of electricity was to be established by an Inter-Ministerial Committee of Prices.¹⁷

¹⁵ CEX-9, Law No. 308/1982, 29 May 1982, article 1. ↩

¹⁶ CEX-9, Law No. 308/1982, 29 May 1982, articles 6-12; see SoC, ¶ 39. ↩

¹⁷ CEX-9, Law No. 308/1982, 29 May 1982, article 4; see SoC, ¶ 39. ↩

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94. The general framework contained in Law No. 308/1982 was followed by the National Energy Plan of 1988 in Italy (“1988 Energy Plan"). The 1988 Energy Plan laid out specific aims and strategies concerning Italy's energy plan until the year 2000.¹⁸ In particular, the 1988 Energy Plan laid out five primary objectives for Italy's energy policy. These were (i) energy savings; (ii) environmental protection; (iii) development of natural resources; (iv) diversification in the use of the various import sources and the geographic and political diversification of procurement areas; and (v) the competitiveness of the production system.¹⁹

95. Thereafter, Italy introduced the first specific incentive regime in support of renewable energy facilities by way of Law No. 9/1991.²⁰ Law No. 9/1991 crucially removed the capacity limit of the Law No. 308/1982 of 3000 kW (see ¶ 93 above), so that the competitive pricing of electricity established by the Inter-Ministerial Committee of Prices could benefit all renewable energy facilities in the country.²¹

96. Further to this, the Inter-Ministerial Committee of Prices established a new price regime on 29 April 1992.²² This price regime of 1992 specifically provided for a three-fold incentive scheme for renewable energy facilities as well as for the “assimilated” sources including thermal and gas facilities. First, these facilities were entitled to the so-called “avoided costs" for a period of 15 years since the entry into operation.²³ Second, they were entitled to an incentivizing component for a period of eight years differentiated based on the source

¹⁸ CEX-10, National Energy Plan 1988, ¶ 12. ↩

¹⁹ CEX-10, National Energy Plan 1988, ¶ 3; see SoC, ¶ 40; see also CEX-11, Italian Chamber of Representatives, La programmazione energetica in ambito nazionale. ↩

²⁰ CEX-12, Law No. 9/1991, 9 January 1991; SoC, ¶ 41. ↩

²¹ SoC, ¶ 41. ↩

²² CEX-18, The National Agency for New Technologies, Energy, and Sustainable Economic Development ("ENEA") website research communication "Italia - Meccanismi di incentivazione”. ↩

²³ CEX-13, CIP Measure n. 6/1992, § II, article 2; see SoC, ¶ 42; see also CEX-17, AEEG website, "Analisi e valutazioni relative al provvedimento Cip n. 6/92, come successivamente modificato e integrato". ↩

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of energy.²⁴ Third, there was an entitlement of a bonus for new plants that were constructed after 30 January 1991 for a period of eight years.²⁵

(2) EC's Directives and Italy's Policies through 1990s and Early 2000s

97. Italy's early steps towards safer and environmentally friendly energy sources in the 1980s and early 1990s was followed by the EU taking steps towards the harmonization and liberalisation of the electricity market of EU Member States.

98. In 1996, the EC issued the EC Directive 96/92/EC, which entered into force in February 1997.²⁶ The EC Directive 96/92/EC primarily aimed at liberalising the common electricity market of the EU, but it also mentioned that “priority may be given to the production of electricity from renewable sources” by EU Member States for reasons of environmental protection.²⁷

99. In February 1998, the EC prepared a report in relation to this EC Directive 96/92/EC, specifically concerning renewable energy and the EU's targets under the Kyoto Protocol, which had been adopted in December 1997.²⁸ In this connection, the EC's report, inter alia, stated that pursuant to "[t]he ‘Third Conference of the Parties to the United Nations framework on Climate Change' . . . held in Kyoto in December 1997 . . . the [EC] agreed to a commitment of an 8% reduction of greenhouse gas emissions for the period 2008 to 2012 compared to 1990.” This would require “[m]ajor energy policy decisions, focusing on reducing energy and carbon intensity”, and “[a]ccelerating the penetration of renewable energy sources in the production of electricity".²⁹

²⁴ CEX-13, CIP Measure n. 6/1992, § III, article 2; see SoC, ¶ 42; see also CEX-14, Ministerial Decree of 25 September 1992; CEX-20, First Report to Directive 96/92/EC. ↩

²⁵ CEX-13, CIP Measure n. 6/1992, § II, articles 1-2; see SoC, ¶ 43; see also CEX-15, Camera dei deputati XVI Legislatura Dossier di documentazione, Incentivi CIP6 Energie rinnovabili ed assimilate, n. 41 of 13 January 2009; CEX-20, First Report to Directive 96/92/EC. ↩

²⁶ CEX-19, Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (“EC Directive 96/92/EC"). ↩

²⁷ CEX-19, EC Directive 96/92/EC, recital 28, articles 8 and 11; see SoC, ¶¶ 45 et seq. ↩

²⁸ CEX-20, First Report to Directive 96/92/EC; see SoC, ¶¶ 46-47. ↩

²⁹ CEX-20, First Report to Directive 96/92/EC, p. 2; see SoC, ¶¶ 46-47. ↩

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100. Italy signed the Kyoto Protocol in 1998.³⁰ Shortly thereafter, in April 1999, Italy's National Agency for New Technologies, Energy and Sustainable Economic Development issued a White Paper for the development of renewable energy sources.³¹ The White Paper considered numerous principle and strategy matters relating to the growth of renewable energy in Italy, while recognizing the EU's targets as well.

101. Pertinently, the White Paper laid out a target of “additional contribution of renewables of approximately 8.6 Mtoe running from 11.7 Mtoe to 20.3 Mtoe for 2008-2012 in terms of substituted conventional fuel".³² Further, in respect of photovoltaic solar energy, while recognizing that significant research is required in this field, which was still in its “young” stage, the White Paper, inter alia, stated the following:

At this time in fact, the cost of electric energy from photovoltaic plants connected to the network is comprised between 500 and 1000 L/kWh, and the margins for further reductions seem limited if we take into account only scale economies. Therefore, for the time being, it is not appropriate to build other large plants with public intervention.³³

...

Photovoltaic is, in principle, the most attractive renewable energy.

....

Considering its own characteristics and the great potential, even in the absence of sure prospects on cost reduction, we believe that photovoltaic must be developed to the highest levels possible, if anything so as to pre-establish a “reserve" option, in order to face undesirable environmental and energetic emergencies, always possible for the decades to come.³⁴

102. Thus, during this time, Italy was moving towards the objectives of enhancing energy security through independence and liberalization of the market, while simultaneously achieving environmental targets.³⁵ In this connection, Italy also implemented the EC

³⁰ SoC, ¶ 48. ↩

³¹ CEX-21, ENEA's White Paper on the valorization of renewable energy sources; see CEX-22, National Energy and Environment Conference, Final Document, 1998; see also SoC, ¶¶ 48-49. ↩

³² CEX-21, ENEA's White Paper on the valorization of renewable energy sources, p. 21. ↩

³³ CEX-21, ENEA's White Paper on the valorization of renewable energy sources, ¶ 3.6.1, p. 25. ↩

³⁴ CEX-21, ENEA's White Paper on the valorization of renewable energy sources, ¶ 5.6.2, pp. 61-62. ↩

³⁵ CEX-22, National Energy and Environment Conference, Final Document, 1998; see SoC, ¶ 49. ↩

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Directive 96/92/EC in March 1999, by way of the Legislative Decree No. 79/1999.³⁶ This was motivated towards the above-mentioned two objectives. First, the Legislative Decree No. 79/1999 liberalized the electricity market by implementing anti-monopoly rules and requiring the National Entity for Electricity, the state-owned electricity company in Italy monopolizing electricity generation until then, to sell off 15,000 MW of its capacity in the year 2000.³⁷ On a related note, the Decree established a state-owned company, i.e., Gestore della rete di transmission nazionale Spa (“GRTN”), for dealings with renewable energy producers.³⁸

103. The second important step taken under this Legislative Decree No. 79/1999 was to give renewable energy facilities priority access to the grid.³⁹ Further, to support renewable energy, the Legislative Decree No. 79/1999 also provided for what was called a green certificate incentive program. This program, inter alia, required the importers and producers of energy in Italy, who produce more than 100 GWh per year from non-renewable sources of energy, to introduce into the national electric grid a certain percentage of electricity produced by renewable sources.⁴⁰

104. With the advent of the new millennium, on 27 September 2001, the European Parliament and Council issued EC Directive 2001/77/EC. This EC Directive, for the first time, dealt specifically and in detail with production of electricity through renewable energy sources in order to meet the international targets set by the Kyoto Protocol.⁴¹ Thus, it formed a significant component of the EU's overall attitude towards renewable energy. Some of the principal objectives pursued by this EC Directive 2001/77/EC were laid down in the preamble, inter alia, in the following terms:

³⁶ CEX-23, Legislative Decree 79/1999, 16 March 1999; see SoC, ¶ 50. ↩

³⁷ CEX-23, Legislative Decree 79/1999, 16 March 1999, articles 8 and 13. ↩

³⁸ CEX-23, Legislative Decree 79/1999, 16 March 1999, article 3(12). ↩

³⁹ CEX-23, Legislative Decree 79/1999, 16 March 1999, article 11(4). ↩

⁴⁰ CEX-23, Legislative Decree 79/1999, 16 March 1999, articles 11(1) and 11(2). The percentage was fixed at 2% until 2002, after which it was increased annually; see SoC, ¶¶ 50-52. ↩

⁴¹ CEX-24, Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market ("EC Directive 2001/77/EC"); see SoC, ¶¶ 54-55. ↩

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The Community recognises the need to promote renewable energy sources as a priority measure given that their exploitation contributes to environmental protection and sustainable development.

....

Member States operate different mechanisms of support for renewable energy sources at the national level, including green certificates, investment aid, tax exemptions or reductions, tax refunds and direct price support schemes. One important means to achieve the aim of this Directive is to guarantee the proper functioning of these mechanisms, until a Community framework is put into operation, in order to maintain investor confidence.

It is too early to decide on a Community-wide framework regarding support schemes, in view of the limited experience with national schemes and the current relatively low share of price supported electricity produced from renewable energy sources in the Community all Member States should be required to set national indicative targets for the consumption of electricity produced from renewable sources.⁴²

105. The EC Directive 2001/77/EC also spoke about setting “national indicative targets" for each of the Member States for consumption of energy through renewable sources, keeping in mind the global target of 12% of consumption through renewable sources by 2010, with which the EU's target aligned. The EC envisaged the possibility of setting mandatory targets in future based on the extent of progress made by Member States.⁴³ In this connection, the Member States were required to set national indicative targets by 27 October 2002 (and then every five years) for future consumption of energy produced from renewable sources in terms of a percentage, by taking into account, inter alia, reference values set in the Annex to the EC Directive 2001/77/EC. Italy was ascribed the reference value for a national indicative target of 25% of the total energy consumption from renewable sources.⁴⁴

106. Thereafter, the EC was to assess by 2004-2005, inter alia, (i) the progress made by the Member States in achieving their national indicative targets; (ii) whether the national indicative targets were still consistent with the global indicative target of 12% of

⁴² CEX-24, EC Directive 2001/77/EC, recitals (1), (14) and (15); see SoC, ¶ 54; SoRy, ¶ 213; SoD, ¶ 221. ↩

⁴³ CEX-24, EC Directive 2001/77/EC, recitals (5), (6) and (7); see SoD, ¶ 222. ↩

⁴⁴ CEX-24, EC Directive 2001/77/EC, Annex; see SoC, ¶ 55; SoRy ¶ 211. ↩

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consumption through renewable sources of energy;⁴⁵ and (iii) the overall experience gained with the application and coexistence of the different support schemes for renewable energy, “including cost-effectiveness, of the support systems . . . in promoting the consumption of electricity produced from renewable energy sources”.⁴⁶

107. On 1 March 2002, Italy enacted Law No. 39/2002, wherein it took steps towards implementing EC Directive 2001/77/EC. In Law No. 39/2002, it was, inter alia, envisaged that within the following 18 months, the government will issue one or more legislative decrees that would provide incentive policies for renewable energy. In this regard, Law No. 39/2002 specifically provided that these incentives should (i) be based on mechanisms that promoted both competitiveness and cost reduction; and (ii) not create greater or new burdens on the State budget.⁴⁷

108. Also in 2002, Italy enacted Law No. 120/2002 for the ratification and implementation of the Kyoto Protocol in Italy, which it had signed in 1998 (see ¶ 100 above).⁴⁸

109. On 26 June 2003, the EC replaced its earlier EC Directive 96/92/EC (see ¶¶ 98-99 above) with EC Directive 2003/54/EC containing new rules on the internal electricity market of the EU.⁴⁹ In this connection, the EC Directive 2003/54/EC mentioned that:

Experience in implementing [EC Directive 96/92/EC] shows the benefits that may result from the internal market in electricity, in terms of efficiency gains, price reductions, higher standards of service and increased competitiveness. However, important shortcomings and possibilities for improving the functioning of the market remain, notably concrete provisions are needed to ensure a level playing field in generation and to reduce the risks of market dominance and predatory behaviour, ensuring non-discriminatory transmission and distribution tariffs, through access to the network on the basis of tariffs published prior to their entry into force, and ensuring that the rights of small and vulnerable customers are protected and that information on energy sources

⁴⁵ CEX-24, EC Directive 2001/77/EC, article 3(4). ↩

⁴⁶ CEX-24, EC Directive 2001/77/EC, article 4(2); see SoD, ¶ 223. ↩

⁴⁷ SoC, ¶ 56. ↩

⁴⁸ CEX-25, Law No. 120/2002, 1 June 2002; see SoC, ¶ 56. ↩

⁴⁹ CEX-26, Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC (“EC Directive 2003/54/EC"); see SoC, ¶ 57. ↩

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for electricity generation is disclosed, as well as reference to sources, where available, giving information on their environmental impact.⁵⁰

110. To this end, the EC Directive 2003/54/EC required Member States to designate regulatory authority(s) to monitor, inter alia, “the terms, conditions and tariffs for connecting new producers of electricity to guarantee that these are objective, transparent and non-discriminatory, in particular taking full account of the costs and benefits of the various renewable energy sources technologies, distributed generation and combined heat and power".⁵¹

111. The EC Directive 2003/54/EC and the Law No. 39/2002 laid the foundation for many specific regulatory decrees passed by the concerned Ministries in Italy regulating the incentive tariff regime for renewable energy facilities, and in particular photovoltaic/solar facilities.

B. CONTO ENERGIA DECREES REGARDING PHOTOVOLTAIC ENERGY FROM 2005 TO 2013

112. Further to Law No. 39/2002, on 29 December 2003, Italy enacted the Legislative Decree No. 387/2003 implementing the EC Directive 2001/77/EC (see ¶¶ 104-105 above). In this Legislative Decree, instructions were issued to the Ministry of Productive Activities to work with the Ministry of the Environment to establish specific criteria to incentivize electricity produced from photovoltaic/solar energy, which was to be done by the adoption of one or more decrees within six months of the date of entry into force of Legislative Decree No. 387/2003. These new decrees were required to take into account many enlisted criteria, including to "provide a specific incentive rate, decreasing amount and duration as

⁵⁰ CEX-26, EC Directive 2003/54/EC, recital (2); see R-SoRj, ¶¶ 261-262; see also REX-059, Commission Staff Working Document, European Commission guidance for the design of renewables support schemes, accompanying the document "Communication from the Commission Delivering the internal market in electricity and making the most of public intervention” (“While such measures are necessary to correct market failures and achieve the desired level of renewables, public interventions need to be well designed and proportionate to avoid additional market distortions. With growing renewables shares, poor design and implementation of public intervention has led to unnecessary distortions with regards to energy production, trade and investment in renewables. This raises the cost of the promotion of renewables and risks hampering both the further growth of renewables and the completion of the internal electricity market.") ↩

⁵¹ CEX-26, EC Directive 2003/54/EC, article 23(1)(f). ↩

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to ensure fair remuneration of each investment and operating costs” for solar energy facilities.⁵²

113. As mentioned in Law No. 39/2002, this Legislative Decree No. 387/2003 reiterated that no incentive scheme could create greater or new burdens on the state budget.⁵³

114. Contemporaneously, the Productive Activities Committee affirmed the Legislative Decree No. 387/2003 at the Parliament by stating, inter alia, that increasing the production of electricity from renewable sources was an “absolute priority” in Italy, and that the same would require a “stability of the regulatory framework which the investors shall rely on in the medium to long term period".⁵⁴

115. Thereafter, on 18 April 2005, the Italian Parliament directed the implementation of the EC Directive 2003/54/EC (see ¶¶ 109-111 above) by way of Law No. 62/2005, which, inter alia, provided for the introduction of incentive mechanisms in the renewable energy sector "based on tenders for the promotion of the most advanced technological solutions that are still far from being commercially competitive".⁵⁵

116. These Legislative Decrees implementing the EC Directives were followed by the enactment of the five Ministerial Decrees, known as “Conto Energia” or “Energy Accounts", which established the terms and conditions for the incentive tariff regime specifically for photovoltaic facilities. These Conto Energia Decrees are discussed individually in this Section, and shall progressively be referred to as “First Conto Energia", "Second Conto Energia”, “Third Conto Energia”, “Fourth Conto Energia", and "Fifth Conto Energia".

117. The First, Second and Third Conto Energia Decrees were enacted by Italy's the Ministry for Productive Activities or the Ministry for Economic Development in consultation with

⁵² CEX-27, Legislative Decree No. 387/2003, 29 December 2003, article 7; see SoD, ¶¶ 231-233 (Notably, Respondent's translation of article 7 of the Legislative Decree No. 387/2003 varies from Claimants'. Specifically, Respondent uses the term “fair return” instead of “fair remuneration”, which usage is disputed between the Parties); see also SoRy, ¶ 258. ↩

⁵³ CEX-27, Legislative Decree No. 387/2003, 29 December 2003, articles 1, 7 and 20; see SoC, ¶¶ 64-65. ↩

⁵⁴ CEX-28, Favorable opinion of the Productive Activities Committee (Commission X) on the scheme of Legislative Decree no. 387/2003 of 11 November 2003; see SoRy, ¶¶ 231, 258. ↩

⁵⁵ CEX-29, Law No. 62/2005, 18 April 2005, article 15.1(f); see SoC, ¶ 66. ↩

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the Ministry for Environment, as per the principles and standards established in Legislative Decree No. 387/2003.⁵⁶

118. Subsequently, the Fourth and Fifth Conto Energia Decrees were enacted by the concerned ministries pursuant to the principles and standards established under the Romani Decree, which was enacted to implement the EC Directive 2009/28/EC that replaced the EC Directive 2003/54/EC (discussed in Section (4) below).⁵⁷

(1) First Conto Energia Decree

119. The First Conto Energia Decree contained the first incentive tariff program and was enacted on 28 July 2005 in furtherance of the Legislative Decree No. 387/2003 and Law No. 62/2005.⁵⁸ It was directed towards photovoltaic facilities with individual capacity between 1 kW and 1 MW, granting them the right to receive specific incentive tariff for every kilowatt-hour of electricity produced.⁵⁹ The cumulative threshold for granting incentive tariffs under the First Conto Energia was initially set at 100 MW.⁶⁰

120. The incentive tariff rates established by the First Conto Energia ranged between 0.445-0.490 EUR/kWh, subject to the nominal capacity of the plants.⁶¹ These tariffs were to reduce on an annual basis by 2% after 2006 based on the date of entry into operation of a plant. Further, the duration for which these tariff rates would apply was twenty years, subject to any adjustments based on the ISTAT inflation index.⁶²

121. In order to qualify for the incentive tariffs under the First Conto Energia Decree, the photovoltaic plants had to provide preliminary project proposals for the plant in question, including, inter alia, technical specifications, capacity and a commitment to obtain the

⁵⁶ SoD, ¶¶ 235, 254; SoRy, ¶ 262. ↩

⁵⁷ SoD, ¶ 254; SoRy, ¶¶ 259-261; see CEX-27, Legislative Decree No. 387/2003, 29 December 2003, article 7; see also CEX-158, Legislative Decree 28/2011, 3 March 2011, article 25(10). ↩

⁵⁸ CEX-31, Ministerial Decree No. 18908 from the Ministry for Productive Activities, 28 July 2005 ("First Conto Energia Decree"), recitals (1) and (3). ↩

⁵⁹ CEX-31, First Conto Energia Decree, articles 5.2, 6.2 and 6.3; see SoC, ¶¶ 69-70. ↩

⁶⁰ CEX-31, First Conto Energia Decree, article 12.1. ↩

⁶¹ CEX-31, First Conto Energia Decree, articles 5.2(a), 6.2(a) and 6.3(a); see SoC, ¶ 71; see also SoD, ¶ 237. ↩

⁶² CEX-31, First Conto Energia Decree, articles 5.2(b), 6.2(b), 6.3(b) and 6.6; see SoC, ¶ 71; see also SoRy, ¶¶ 230-231. ↩

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necessary authorizations relating to construction and operation of the plant.⁶³ Thereafter, the “implementing body”, which was a company called the Gestore dei Servizi Energetici (“GSE”), i.e., the successor of GRTN,⁶⁴ had 90 days to communicate the outcome of the plant operators' preliminary project proposal by way of a formal letter.⁶⁵ After the letter from GSE, the plant operators had the authorization to commence construction within 6-12 months and connect the plant to the grid within 12-24 months.⁶⁶ GSE also entered into contracts with the photovoltaic plants that qualified for the incentive tariffs based on a sample agreement prescribed in this regard.⁶⁷

122. After the enactment of the First Conto Energia Decree, there was an increase in investments and number of photovoltaic facilities overall, such that the “cumulative capacity for all plants in respect of which an application has been submitted for the purpose of obtaining incentive tariffs under the [First Conto Energia Decree was] in excess of 100 MW".⁶⁸ Thus, on 6 February 2006, Italy amended the First Conto Energia Decree to raise the overall threshold of 100 MW to 500 MW.⁶⁹ This enhanced threshold capacity of 500 MW was exhausted in July 2006, after which Italy accepted another 387 MW of photovoltaic capacity into the program of the First Conto Energia. This was followed by the Second Conto Energia Decree.⁷⁰

⁶³ CEX-31, First Conto Energia Decree, articles 7.1 and 7.2. ↩

⁶⁴ CEX-30, Italian Electrical Energy Authority (“AEEG”) Resolution no. 188/05, 14 September 2005; see SoC, ¶ 68. ↩

⁶⁵ CEX-31, First Conto Energia Decree, articles 7.7 and 8.6; see SoC, ¶ 73; see also SoD, ¶ 234. ↩

⁶⁶ CEX-31, First Conto Energia Decree, articles 8.3 and 8.6; see SoC, ¶ 72. ↩

⁶⁷ CEX-32, Sample GSE agreement under the First Conto Energia Decree, articles 8 and 10; see SoC, ¶ 73 (The value of these contracts entered into by GSE is disputed by Respondent, on the ground that they were not private law instruments and were instead accessory instruments of regulation entered into by a supporting authority of public administration ) see, inter alia, REX-064, Court of Cassation Order No. 10795/2017; REX-032, Italian Constitutional Court Decision No. 16/2017 of 7 December 2016; R-SoRj, ¶¶ 15, 318; First Opinion of Prof. Anna Romano, 22 December 2017 ("First Romano Opinion"). ↩

⁶⁸ CEX-31B, Ministerial Decree No. 20998 from the Ministry for Productive Activities of 6 February 2006, recital (2). ↩

⁶⁹ CEX-31B, Ministerial Decree No. 20998 from the Ministry for Productive Activities of 6 February 2006, recital (2), article 2; see SoC, ¶ 74 ↩

⁷⁰ CEX-49, GSE Report "Le attività del Gestore dei Servizi Elettrici – Rapporto 2006"; see CEX-53, GSE press release, “Esaurita la Potenza icentivabile per l'anno 2006"; see also SoC, ¶ 80. ↩

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(2) Second Conto Energia Decree

123. On 19 February 2007, the Second Conto Energia Decree was enacted by the Ministry for Economic Development, in consultation with the Ministry for Environment. It entered into force on 13 April 2007 with the Italian Electrical Energy Authority's Resolution No. 90/07.⁷¹

124. The Second Conto Energia was also enacted in furtherance of, inter alia, the Legislative Decree No. 387/2003, which had implemented the EC Directive 2001/77/EC.⁷² The Second Conto Energia altered the regime under the First Conto Energia in a few major respects.

125. First, the preliminary authorization phase, which authorized GSE to qualify photovoltaic plants for incentive tariff prior to their entry into operation (see ¶ 121 above), was eliminated, and authorization for incentive tariff was granted only after the facility's entry into operation.⁷³ Now, the implementing body, i.e., GSE, was to “verify compliance with the provisions of this [D]ecree” after the preliminary project proposal was made by a plant operator, and not already communicate the outcome concerning the tariff awarded, which was done after the entry into operation of a plant.⁷⁴

126. Second, while the minimum threshold of individual capacity of a plant to be entitled to the incentive tariff was maintained at 1 kW by the Second Conto Energia Decree,⁷⁵ the upper limit of 1 MW prescribed in the First Conto Energia (see ¶ 119 above) was removed. Further, the cumulative capacity threshold was increased from 500 MW to 1200 MW, with a possibility for facilities that were connected to the grid 14 months after the date on which Italy reached the 1200 MW threshold to also receive incentive tariffs under the Second Conto Energia.⁷⁶

⁷¹ CEX-54, Decree from the Ministry for Economic Development and the Ministry for Environment, Land and Sea, 19 February 2007 (“Second Conto Energia Decree"); see SoC, ¶ 82; see also SoD, ¶ 238. ↩

⁷² CEX-54, Second Conto Energia Decree, recital (1). ↩

⁷³ CEX-55, Press Release, “In sei anni di Conto Energia installati 480,000 impianti”; SoC, ¶ 82. ↩

⁷⁴ CEX-54, Second Conto Energia Decree, article 5.5. ↩

⁷⁵ CEX-54, Second Conto Energia Decree, article 4.2. ↩

⁷⁶ CEX-54, Second Conto Energia Decree, articles 13.1 and 13.2; see SoC, ¶¶ 83-84. ↩

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127. Third, the Second Conto Energia Decree introduced multiple criteria for affixing tariff rates for any eligible photovoltaic plant facility, including the facility's nominal capacity, the plant's size and architectural integration, and whether it was partially or totally integrated into the grid.⁷⁷ Such criteria did not exist under the First Conto Energia Decree, which considered only capacity of the plant (see ¶ 120 above).

128. Fourth, the tariff rates were reduced in comparison to the First Conto Energia Decree. The new tariff rates ranged between 0.346-0.490 EUR/kWh, which would be reduced on an annual basis based on the date of entry into operation of a plant.⁷⁸

129. The above aside, with respect to the duration of the incentive tariffs, the Second Conto Energia Decree stated that “[t]he tariff identified . . . is awarded for a period of twenty years commencing from the date of entry into operation of the plant and shall remain constant in current currency for the entire twenty year period".⁷⁹ This was also mentioned in the confirmation letter to be sent by the GSE to notify the plant operator of the tariff it was awarded,⁸⁰ and in the contracts to be entered into between GSE and the photovoltaic plant operators, as was evident from the sample agreement also prescribed under the Second Conto Energia Decree.⁸¹

130. The Second Conto Energia envisaged the enactment of another decree revising the incentive tariffs for photovoltaic plants connected to the grid after 2010.⁸² However, in the interim, Legislative Decree No. 3/2010 was enacted on 25 January 2010 (“Salva Alcoa Decree"), and converted into Law No. 129/2010 on 22 March 2010. The Salva Alcoa Decree extended the Second Conto Energia tariffs to the plants that were built by 31 December 2010, but connected to the grid later, i.e., until 30 June 2011.⁸³ The Second

⁷⁷ CEX-54, Second Conto Energia Decree, articles 2.1(b) and 6.1; see SoC, ¶ 83; see also SoD, ¶ 238. ↩

⁷⁸ CEX-54, Second Conto Energia Decree, article 6.1; see SoC, ¶ 83; see also SoRy, ¶¶ 219-220. ↩

⁷⁹ CEX-54, Second Conto Energia Decree, articles 6.1 and 6.2; see SoRy, ¶¶ 230-231. This 20 year period has been interpreted by the Italian Federation for Rational Use of Energy to mean that it “shall not be updated with the inflation rate"; see CEX-123, Publication "Le tariffe incentivanti per la produzione di energia elettrica da fonte rinnovabile"; see also SoD, fn 97. ↩

⁸⁰ CEX-54, Second Conto Energia Decree, article 5.5; see SoRy, ¶¶ 225-226. ↩

⁸¹ CEX-57, Sample GSE Agreement under the Second Conto Energia Decree, articles 1 and 2; SoC, ¶ 86 ↩

⁸² CEX-54, Second Conto Energia Decree, article 6.3. ↩

⁸³ SoC, ¶ 85, fn 157; SoD, fn 94; see CEX-390, Law No. 129/2010, 13 August 2010. ↩

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Conto Energia subjected the grid manager to penalties in the event plants were not connected to the grid in a timely manner.⁸⁴ This context behind the enactment of the Salva Alcoa Decree is reflected in the legislative history and also endorsed in Decision No. 51/2017 of the Italian Constitutional Court.⁸⁵

131. This was followed by GSE explaining, in a report on “Operating Procedure for Managing Communication to GSE for Works Completion”, the various steps that photovoltaic plant operators had to take from their end in order to ensure that there were no gaps in respect of connection of new plants to the grid. This included the procedure for a specific request by a plant operator for grid connection to be made to grid operators, in order to have a starting point for the deadline for grid operators and/or manager to connect a plant to the grid.⁸⁶

132. In 2009, the installed capacity of photovoltaic facilities was double of the capacity added in 2008, and by then, Italy became the second largest photovoltaic market in the world as per GSE’s estimate.⁸⁷

133. This, together, with further expected growth in the installed capacity, lead to the GSE Managing Director, Mr. Nando Pasquali, stating in an interview in May 2010 that 2010 will be a “record breaking year” in the photovoltaic sector in Italy, requiring a new Conto Energia Decree to be enacted, which will reduce the incentive tariffs further.⁸⁸

134. In June 2010, the target of 1200 MW capacity under the Second Conto Energia Decree was reached, as mentioned in a GSE presentation of 7 July 2010.⁸⁹

⁸⁴ CEX-54, Second Conto Energia Decree, article 5.2. ↩

⁸⁵ CEX-389, Stenographic and Partial Record, House of Deputies, Session no. 364 (Parliamentary Debate on Salva Alcoa); CEX-391, EcodalleCittà, press article, “Conto Energia: approvata in via definitiva la proroga al 30 giugno 2011”; CEX-392, Italian Constitutional Court Decision No. 51/2017, dated 10 March 2017; see also SoRy, ¶¶ 428-430. ↩

⁸⁶ CEX-393, GSE, “Technical Procedure for Managing Communications to GSE of Works Completion for PV Plants (Law No. 129 of 13/8/2010); see SoRy, ¶ 433. ↩

⁸⁷ CEX-113, GSE Presentation “II Progetto di un nuovo conto energia II regime fiscale del Fotovoltaico”, slides 15 and 19; CEX-114, GSE Presentation “II conto energia. Risultati e prospettive”; see SoC, ¶¶ 93, 96. ↩

⁸⁸ SoC, ¶¶ 97-99; see CEX-129, Economy: il business magazine di Mondadori, Interview with N. Pasquali, “In 2010, photovoltaics could double”; see also SoRy, ¶ 231. ↩

⁸⁹ CEX-131, GSE Press Release “Raggiunti i 1.200 MW di potenza incentivabile prevista dal Nuovo Conto Energia”; see SoC, ¶101. ↩

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(3) Third Conto Energia Decree

135. On 6 August 2010, the Italian Ministry for Economic Development jointly with the Ministry for Environment enacted the Third Conto Energia Decree. The Third Conto Energia Decree reduced the existing tariff rates due to a corresponding reduction in the costs of photovoltaic technology since the entry into force of the Second Conto Energia. The new tariff rates ranged between 0.251-0.402 EUR/kWh,⁹⁰ which were to now be reduced on a tri-annual basis based on the date of entry into operation of a plant,⁹¹ as opposed to the earlier annual revision provided in the Second Conto Energia (see ¶ 128 above). This change in tariff regime was motivated, according to Respondent, by “the evolution of photovoltaic technology recorded . . . and in particular the significant reduction of costs components and photovoltaic systems . . . in order to respect the principle of fair return on the costs” established by Legislative Decree No. 387/2003.⁹²

136. The Third Conto Energia Decree also introduced nuanced categories of photovoltaic plants in order to diversify the incentive tariffs available to them. These categories included (i) photovoltaic plants, further divided into (a) works on buildings and (b) other photovoltaic systems; (ii) integrated photovoltaic systems with innovative features; and (iii) concentrated photovoltaic plants, photovoltaic systems with technological innovation.⁹³

137. The cumulative threshold of the capacity of photovoltaic plants admitted to the program was increased from 1200 MW in the Second Conto Energia Decree to 3,000 MW in the Third Conto Energia, extendable to the plants that were connected to the grid within 14 months of the date on which this threshold was reached by Italy.⁹⁴

⁹⁰ CEX-132, Decree from the Ministry for Economic Development and the Ministry for Environment, Land and Sea, 6 August 2010 (“Third Conto Energia Decree”), article 8.2. ↩

⁹¹ CEX-132, Third Conto Energia Decree, preamble, at 29-30, ¶¶ first, second, fifth, fourteenth-seventeenth; SoC, ¶ 102; see SoD, ¶ 239; see also SoRy, ¶ 219. ↩

⁹² SoD, ¶ 239. ↩

⁹³ SoD, ¶ 240. ↩

⁹⁴ CEX-132, Third Conto Energia Decree, articles 3.2 and 3.6; see SoC, ¶ 103. ↩

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138. Similar to the previous two Conto Energia Decrees, the 20 year duration for the incentive tariffs remained,⁹⁵ as did the regime for GSE to enter into contracts with the producers of the facilities accepted under the Third Conto Energia.⁹⁶

139. The Third Conto Energia Decree was originally intended to apply to facilities that entered into operation from 2011 to 2013, with the tariffs reducing by 6% for plants that entered into operation in 2012 and 2013. The Third Conto Energia envisaged the enactment of a subsequent decree establishing the rate for incentive tariffs for plants that would enter the grid after 2013.⁹⁷

140. In January 2011, it was reported that Italy had already achieved 4.5 GW in new photovoltaic installations in the year 2010.⁹⁸ Its overall normalised electricity production through renewable energy sources in 2010 was 69 TWh.⁹⁹

(4) EC Directive 2009/28/EC and the Romani Decree

141. In the interregnum between the Second and the Third Conto Energia Decrees, the EC issued another significant Directive, being EC Directive 2009/28/EC on 23 April 2009 for the promotion of use of energy from renewable sources. The EC Directive 2009/28/EC repealed its predecessor EC Directive 2001/77/EC with effect from 1 January 2012.¹⁰⁰

142. The national indicative targets (see ¶¶ 104-105 above) set by the EC Directive 2001/77/EC were thus replaced with “mandatory national overall targets” for electricity consumption based on renewable energy in the new EC Directive 2009/28/EC.¹⁰¹ Italy’s mandatory

⁹⁵ CEX-132, Third Conto Energia Decree, articles 1.2, 7.2 and 8; see CEX-133, GSE website, “II Conto Energia 2011/2013”; CEX-134, AEEG, Deliberazione 20 ottobre 2010 – ARG/ELT 181/10; CEX-135, AEEG Investigation, “Indagine Conoscitiva sulla strategia energética nazionale”. ↩

⁹⁶ CEX-270, Sample GSE Agreement under the Third Conto Energia Decree, articles 1-2, 10, 15; see SoC, ¶ 104; see also SoRy, ¶¶ 230-231. ↩

⁹⁷ CEX-132, Third Conto Energia Decree, articles 8.2 and 8.3; see SoC, ¶ 103. ↩

⁹⁸ CEX-157, Ernst&Young Press Report, “Renewable energy county attractiveness indices”; see SoC, ¶ 106. ↩

⁹⁹ CEX-176, GSE Report “Statistical report 2011 – Renewable energy power plants in Italy”, p. 7; see SoRy, ¶ 287. ↩

¹⁰⁰ CEX-115, EC Directive 2009/28/EC, 23 April 2009, article 26.3; see SoD, ¶ 224. ↩

¹⁰¹ CEX-115, EC Directive 2009/28/EC, article 3. ↩

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target was to have a gross consumption of 17% through energy produced from renewable sources by 2020.¹⁰²

143. Further, the EU’s overall target was revised from 12% to 20% of gross energy consumption to be achieved through renewable sources by 2020, together with 10% of transport fuels to be sourced from renewable energy. This came to be known as the EU’s 20-20-20 plan.¹⁰³ In this connection, the notable recitals of the EC Directive 2009/28/EC, stated the following:

The Commission communication of 10 January 2007 entitled ‘Renewable Energy Roadmap – Renewable energies in the 21st century: building a more sustainable future’ demonstrated that a 20% target for the overall share of energy from renewable sources and a 10% target for energy from renewable sources in transport would be appropriate and achievable objectives, and that a framework that includes mandatory targets should provide the business community with the long-term stability it needs to make rational, sustainable investments in the renewable energy sector which are capable of reducing dependence on imported fossil fuels and boosting the use of new energy technologies. Those targets exist in the context of the 20 % improvement in energy efficiency by 2020.

. . .

For the proper functioning of national support schemes it is vital that Member States can control the effect and costs of their national support schemes according to their different potentials. One important means to achieve the aim of this Directive is to guarantee the proper functioning of national support schemes, as under Directive 2001/77/EC, in order to maintain investor confidence and allow Member States to design effective national measures for target compliance.¹⁰⁴

144. While calling upon the EU Member States to adopt national renewable energy plans, the EC Directive 2009/28/EC required the Member States to take into account, inter alia, “the effects of other policy measures relating to energy efficiency on final consumption of energy” and “energy saving”.¹⁰⁵

¹⁰² CEX-115, EC Directive 2009/28/EC, article 3 and Annex I; see SoC, ¶ 94. ↩

¹⁰³ The EU Member States have already agreed to new renewable energy target of 27% of overall electricity consumption through renewable energy sources by 2030; see SoD, ¶ 218. ↩

¹⁰⁴ CEX-115, EC Directive 2009/28/EC, recitals (8), (14) and (25); see SoD, ¶¶ 224, 229; see also SoRy, ¶¶ 213, 309. ↩

¹⁰⁵ CEX-115, EC Directive 2009/28/EC, articles 3.1 and 4.1; see SoD, ¶ 225. ↩

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145. Like its predecessor EC Directive 2001/77/EC, the Directive 2009/28/EC also envisaged the possibility of “support schemes” to be established by Member States in order to achieve their renewable energy targets.¹⁰⁶ By definition, these “support schemes” could include “any instrument, scheme or mechanism applied by a Member State . . . that promotes the use of energy from renewable sources by reducing the cost of that energy, increasing the price at which it can be sold, or increasing, by means of a renewable energy obligation or otherwise, the volume of such energy purchased. This includes, but is not restricted to, investment aid, tax exemptions or reductions, tax refunds, renewable energy obligation support schemes including those using green certificates, and direct price support schemes including feed-in tariffs and premium payments.”¹⁰⁷

146. In June 2010, pursuant to the EC Directive 2009/28/EC, Italy finalized a National Action Plan to reach the EU’s revised renewable energy targets.¹⁰⁸ The National Action Plan shared the burden of renewable energy consumption between the electricity, hearing, cooling and transport sectors. Specifically for the electricity sector, the target was equal to 26.4% consumption by 2020, which would require a normalized generation of 99 TWh per year.¹⁰⁹ In the National Action Plan, Italy further stated, inter alia, the following:

The current incentive systems . . . represent consolidated instruments of the national energy system, which one can also take into consideration, with the necessary adjustments, for the upcoming period as an important element of continuity for the achievement of the new EU objectives.¹¹⁰

. . .

Compared with the current situation, the introduction is envisaged of certain corrections to the existing framework, in a logic aimed at increasing energy production, but making the support tools more efficient, in order to avoid a parallel growth of production and of burden of the incentives.¹¹¹

¹⁰⁶ CEX-115, EC Directive 2009/28/EC, article 3.3; see SoD, ¶¶ 226-231. ↩

¹⁰⁷ CEX-115, EC Directive 2009/28/EC, article 2.2; see SoD, ¶ 227. ↩

¹⁰⁸ CEX-130, National Action Plan for Renewables of Italy; see SoC, ¶ 100. ↩

¹⁰⁹ CEX-176, GSE Report “Statistical report 2011 – Renewable energy power plants in Italy”, p. 15; see SoRy, ¶ 284. ↩

¹¹⁰ CEX-130, National Action Plan for Renewables of Italy, p. 7. ↩

¹¹¹ CEX-130, National Action Plan for Renewables of Italy, p. 98. ↩

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The feed-in tariff [Conto Energia] is a support scheme which guarantees constant remuneration at current currency values for the electricity produced by plants for a set period of time . . . Moreover, the scheme is subject to regular adjustments which take into account the trends in the prices of energy products and components for photovoltaic plants . . . with the intention of limiting the medium- and long-term costs to the community. In any case, the incentive tariff paid when the plant becomes operation[al] remains fixed for the whole entitlement period.¹¹²

147. On 3 March 2011, Italy implemented the EC Directive 2009/28/EC by way of the Legislative Decree No. 28/2011 (“Romani Decree”). The Romani Decree specifically envisaged the maintenance of the incentives for renewable energy, which had the purpose of ensuring a fair remuneration or return of the investment and operating costs.¹¹³ In this connection, Article 24 of the Romani Decree is worth quoting, in its relevant part:

Article 24 Incentive mechanisms

(1) The production of electricity from plants using renewable sources that enter into operation after December 31, 2012, will be promoted through the instruments and according to the general criteria set out in paragraph 2 and the specific criteria set out in paragraphs 3 and 4. The safeguard of non-incentivized plants is ensured through the mechanisms under art. 8 hereof.

(2) The production of electricity by the plants referred to in paragraph 1 is supported on the basis of the following general criteria:

1. the incentive has the purpose of ensuring a fair remuneration of the investment and operating costs;
2. the period one is entitled to receive the incentive all through is equal to the average conventional lifecycle of specific kind of plant, and starts from the date of entry into operation thereof;
3. the incentive remains constant throughout the support period to which one is entitled under the law and may take into consideration the economic value of energy produced;

. . .¹¹⁴

¹¹² CEX-130, National Action Plan for Renewables of Italy, p. 102. ↩

¹¹³ CEX-158, Legislative Decree No. 28/2011, 3 March 2011 (“Romani Decree”), articles 23.1 and 24.2(b); see SoC, ¶ 108. ↩

¹¹⁴ CEX-158, Romani Decree, article 24; see also CEX-158, Romani Decree, article 23. Notably, the Parties produce different translations of the above provision, which is a disputed issue between them. While Respondent uses the phrase “fair return” in Article 24(2)(a), Claimants use “fair remuneration” instead (see SoC, ¶ 108; SoD, ¶¶ 242-243; see also SoRy, ¶¶ 263-273; see also R-SoRj, ¶¶ 267-278) ↩

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148. With respect to the remunerations and the rate of incentives, the Romani Decree specifically mentioned that “the period one is entitled to receive the incentive all through is equal to the average conventional lifecycle of specific kind of plant, and starts from the date of entry into operation thereof.”¹¹⁵

149. Like the Legislative Decree 387/2003, which had implemented the previous EC Directive 2001/77/EC in Italy (see ¶¶ 112-116 above), the Romani Decree also tasked certain ministries, i.e., the Ministry for Economic Development and the Ministry for Environment an Sea Protection, to determine the incentive regime for renewable energy investments by way of specific legislative decrees.¹¹⁶ Notably, while Legislative Decree 387/2003 tasked the Ministry for Productive Activities in this regard, to, inter alia, “provide a specific incentive tariff, decreasing amount and duration as to ensure fair remuneration of each investment and operating costs”,¹¹⁷ the Romani Decree required the concerned Ministries to promote renewable energy on the basis of incentives that have “the purpose of ensuring a fair remuneration of the investment and operating costs”.¹¹⁸

150. Further, the Romani Decree also contained other specific provisions relating to photovoltaic energy. In this connection, the Romani Decree limited the applicability of the Third Conto Energia to plants that were connected to the grid by 31 May 2011, as opposed to the originally envisaged end-date of 31 December 2013. Also, the Romani Decree added further conditions to the eligibility of plants receiving incentive tariffs, based on size, organization, and zoning of land.¹¹⁹

151. Moreover, the Romani Decree added provisions relating to sanctions for investors that submitted false declarations to GSE regarding their eligibility to receive the Conto Energia incentive tariffs, and also generally empowered the GSE to control and monitor facilities operating under this regime.¹²⁰

¹¹⁵ CEX-158, Romani Decree, article 24, article 24.2; see SoD, ¶ 464. ↩

¹¹⁶ CEX-158, Romani Decree, article 24, articles 24 and 25(10); see SoRy, ¶¶ 260-261. ↩

¹¹⁷ CEX-27, Legislative Decree No. 387/2003, 29 December 2003, article 7(2)(d). ↩

¹¹⁸ CEX-158, Romani Decree, article 24, article 24; see SoD, ¶¶ 233 et seq., 254, 256, 462, 480; see also SoRy, ¶¶ 263 et seq. ↩

¹¹⁹ CEX-158, Romani Decree, article 24, article 25.9; see SoC, ¶ 109. ↩

¹²⁰ CEX-158, Romani Decree, article 24, articles 23.3, 42 and 43; see SoC, ¶ 110. ↩

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152. Lastly, the Romani Decree envisaged the enactment of a new decree by the Ministry for Economic Development establishing revised incentive tariffs for plants connected to the grid after 31 May 2011. In this connection, it further prescribed the establishment of annual limits for installed capacities that could benefit from the incentive tariffs, and adjustment of tariff values based on reductions in cost of technology and equipment as well as incentives applied in other EU Member States.¹²¹

153. It is worth noting that some photovoltaic plant operators who were unable to obtain benefits under the Third Conto Energia Decree as a result of the Romani Decree, instituted complaints in Italian courts against the Romani Decree and its prescription of a new tariff regime with effect from 31 May 2011.¹²² In one of these cases, the Consiglio di Stato decided against one such renewable energy producer, who had intended to register its photovoltaic facilities under the Third Conto Energia Decree, but had not yet received a written confirmation of the incentive tariffs it was entitled to from the GSE when the Romani Decree was enacted.¹²³ The Consiglio di Stato made certain relevant findings, relating to the EC Directive 2009/28/EC and the general regulatory regime concerning the electricity market. In particular, it found, inter alia, that “the sector of renewable energies in general and photovoltaics in particular is not a free or liberalized market, but subject to programming, planning, targets compatible with burdens upon the users to be in fact reduced, decreasing profitability commensurate to actual overhead and technology costs as applied internationally.” It further noted that the EC Directive 2009/28/EC did not rule out that “the interest in the promotion of energy production” needs to be reconciled with “the preservation of other values of obvious internal constitutional relevance (purposes of the national plan, respect of quotas between the various energy components, installed power, size of the achieved flows, protection of the territory, environment and landscape.”¹²⁴

¹²¹ CEX-158, Romani Decree, article 24, articles 25.10; see SoC, ¶ 111. ↩

¹²² SoD, ¶¶ 269 et seq. ↩

¹²³ SoRy, fn 164. ↩

¹²⁴ REX-024, Consiglio di Stato, decision of 8 August 2014 n 4233/2014, point 4; see SoD, ¶¶ 270-272. ↩

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(5) Fourth Conto Energia Decree

154. Pursuant to the stipulations of the Romani Decree, on 5 May 2011, the Ministry for Economic Development enacted the Fourth Conto Energia Decree.¹²⁵ The preamble of the Fourth Conto Energia Decree mentioned that within a few years Italy would achieve “grid parity”, i.e., a situation where generation of power through photovoltaic plants would be at an equal or lower cost than the price of purchasing power form the electricity grid.¹²⁶

155. The Fourth Conto Energia Decree applied to plants that would be connected to the grid between 31 May 2011 and 31 December 2016.¹²⁷ Further, for the first time, a “national indicative installed capacity target” for photovoltaic plants was introduced, which was set at 23 GW. The installed capacity target corresponded to a yearly indicative cumulative cost of incentives between EUR 6 to 7 billion.¹²⁸ The incentive regime was thus tied to this yearly cumulative cost threshold, and the Ministry for Economic Development was now entitled to revise the incentive tariffs for future plants when Italy reached the lower end of this yearly threshold, i.e., EUR 6 billion.¹²⁹ Respondent attributes this realignment of tariff rates to the rise in the costs of maintaining the incentive regimes under the first three Conto Energia Decree, due to the rise in “producability” of solar energy, resulting in “excess remuneration” being received by photovoltaic plants.¹³⁰

156. Akin to its predecessors, the Fourth Conto Energia Decree also stated that the incentive tariffs granted to qualifying photovoltaic plants would be constant for a 20 year period starting from the date of the plant’s connection to the grid.¹³¹ The regime relating to the

¹²⁵ CEX-161, Decree from the Ministry for Economic Development and the Ministry for Environment, Land and Sea, 5 May 2011 (“Fourth Conto Energia Decree”), preamble at 103-104; see SoC, ¶ 112. ↩

¹²⁶ CEX-161, Fourth Conto Energia Decree, p. 3; see SoC, ¶ 113. ↩

¹²⁷ CEX-161, Fourth Conto Energia Decree, articles 1.2, 12.1 and 12.2. ↩

¹²⁸ CEX-161, Fourth Conto Energia Decree, articles 1.2; see SoC, ¶ 115; see also SoRy, ¶ 211. ↩

¹²⁹ CEX-161, Fourth Conto Energia Decree, article 2.3; see SoC, ¶ 115. ↩

¹³⁰ First Witness Statement of Mr. Luca Miraglia, 22 December 2017 (“Miraglia First Witness Statement”), ¶¶ 22-24; Report GRIF, Gruppo di Ricerche Industriali e Finanziarie “Fabio Gobbo”, 18 December 2017 (“GRIF Economic Report”), pp. 10-11. ↩

¹³¹ CEX-161, Fourth Conto Energia Decree, articles 1.2, 12.1 and 12.2; see SoD, ¶¶ 255-256. ↩

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contracts entered into between GSE and producers whose plants qualified for incentives was also maintained under the Fourth Conto Energia Decree.¹³²

157. The above aside, the Fourth Conto Energia Decree was different from the previous three in certain respects. For instance, the Fourth Conto Energia built on the nuanced distinctions created in the Third Conto Energia Decree between different kinds of photovoltaic plants (see ¶ 136 above) and created a further demarcation between “small plants” and “large plants”. “Small plants” were defined as “photovoltaic plants realised on buildings with capacity no greater than 1000 kW, any other photovoltaic plants with capacity no greater than 200 kW, operating according to the net-metering scheme (regime di scambio sul posto), and photovoltaic plants with any capacity realised on buildings and in areas owned by the Public Administrations under article 1 (2) of [L]egislative [D]ecree [N]o. 165, 2001”.¹³³ “Large plants” were any photovoltaic plant other than the ones which were “small plants”.¹³⁴

158. In this regard, the Fourth Conto Energia Decree established other checks and controls on the entitlement of incentive tariffs in order to regulate the costs. For instance, a registry for “large plants” was established, which was to be maintained by the GSE.¹³⁵ Further, photovoltaic plant operators were now required to “notify GSE about completion of works for the realisation of the plant, enclosing a certified expert report certifying compliance with” certain requirements contained in Annex 3-B to this Conto Energia.¹³⁶ If a plant enrolled in the register fell with the cost threshold envisaged under the Fourth Conto Energia, but had not provided such a certificate of completion of works, its registration was considered forfeited.¹³⁷ Also, the Fourth Conto Energia Decree established different

¹³² CEX-164, Sample GSE Agreement under the Fourth Conto Energia Decree, articles 1-2, 10 and 15; see SoC, ¶ 116; see also SoRy, ¶¶ 230-231. ↩

¹³³ CEX-161, Fourth Conto Energia Decree, article 1(u); see SoD, ¶ 248. ↩

¹³⁴ CEX-161, Fourth Conto Energia Decree, article 1(v); see SoD, ¶ 248. ↩

¹³⁵ CEX-161, Fourth Conto Energia Decree, articles 8 and 12.2 and Annex 5; see SoC, ¶ 114. ↩

¹³⁶ CEX-161, Fourth Conto Energia Decree, article 9; see SoD, ¶ 248. ↩

¹³⁷ CEX-161, Fourth Conto Energia Decree, article 8.4. ↩

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tariff limits for the “large plants” for every semester, beyond which limit the incentive tariffs would no longer be available for new facilities during that semester.¹³⁸

159. The Fourth Conto Energia Decree had foreseen that the total cost would likely reach EUR 3.5 billion per annum by 2011.¹³⁹ By the end of 2011, Italy had reportedly added over 4.3 GW of additional installed photovoltaic capacity under the Fourth Conto Energia,¹⁴⁰ and by early 2012, Italy was approaching the cost threshold of the Fourth Conto Energia, i.e., EUR 6 billion.¹⁴¹ In light of the cost threshold being reached, Italy was entitled by the Fourth Conto Energia Decree to revise incentive tariffs, and this was done by the enactment of the Fifth Conto Energia Decree.

(6) Fifth Conto Energia Decree

160. On 5 July 2012, the Italian Ministry for Economic Development enacted the Fifth and last Conto Energia Decree, which was to enter into force 45 days after a resolution by the Italian Electrical Energy Authority that the cost threshold of EUR 6 billion for incentive tariffs under the Fourth Conto Energia Decree was reached.¹⁴² That resolution was issued on 12 July 2012.¹⁴³

161. In light of the technological progress and decrease in cost of photovoltaic plants and a corresponding increase in the number of plants connected to the grid, the renewable energy production, by the end of 2011, was at 94 TWh, i.e., only 6 TWh short of the 2020 target

¹³⁸ CEX-161, Fourth Conto Energia Decree, article 4; see SoC, ¶ 115. ↩

¹³⁹ CEX-161, Fourth Conto Energia Decree, p. 3. ↩

¹⁴⁰ CEX-186, GSE, PV Support Results, “Plants that Begin Operating in 2011 (Fourth Conto Energia); SoC, ¶ 119. ↩

¹⁴¹ CEX-188, Decree from the Minister of Economic Development and the Minister of the Environment, Land and Sea, 5 July 2012 (“Fifth Conto Energia Decree”); CEX-189, GSE website, Article “Contatore fotovoltaico, raggiunti i 6 miliardi de euro”; REX-026, Assoelettrica, Presentation at the 10^th hearing of the Senate Industry Commission, 25 September 2013; see SoC, ¶ 120; see also SoD, ¶¶ 249, 282. ↩

¹⁴² CEX-188, Fifth Conto Energia Decree, articles 1.1-1.3; see SoC, ¶ 121; see also SoD, ¶ 250. ↩

¹⁴³ CEX-190, AEEG Resolution no. 292/2012/r/efr. ↩

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set by the EU.¹⁴⁴ Accordingly, the Fifth Conto Energia Decree reduced the cost threshold of incentive tariffs to EUR 700 million per year.¹⁴⁵

162. In this connection, the Fifth Conto Energia Decree provided for two different incentive regimes based on the photovoltaic plants’ capacities. The first regime applied to plants up to the 1 MW capacity, and awarded them an “all-inclusive tariff”, which included the price of the electricity and the value of the incentive.¹⁴⁶ The second regime applied to plants of capacity exceeding 1 MW, and awarded them an amount equal to the difference between the all-inclusive tariff and the market price of electricity plus the revenues deriving from the sale of the energy to the market.¹⁴⁷ In addition, all plants, regardless of their capacity were entitled to a bonus tariff on the electricity produced and consumed by them.¹⁴⁸

163. The Fifth Conto Energia Decree was similar to its predecessors inasmuch as the incentive tariffs therein also applied for a period of 20 years. The contracts to be executed between the GSE and the producers also retained a similar form, except in respect of a specific stipulation entitling GSE to unilaterally modify the contracts.¹⁴⁹

164. Lastly, the Fifth Conto Energia Decree stated that it would cease to apply to new photovoltaic plants 30 days after a resolution by the Italian Electrical Energy Authority that the cost threshold of EUR 700 million (bringing the total cost to EUR 6.7 billion per year) for incentive tariffs was reached.¹⁵⁰ This resolution was passed on 6 June 2013, and after 6 June 2013, no incentive tariffs were made available by Italy to any new photovoltaic plant installed and connected to the grid.¹⁵¹ The rise towards this total cost threshold of EUR 6.7

¹⁴⁴ CEX-188, Fifth Conto Energia Decree, preamble, at 2; see SoC, ¶ 120. ↩

¹⁴⁵ CEX-191, Ministry of Economic Development website, “Rinnovabili, al via nuovi incentive per sviluppo settore oltre obiettive UE 2020”; see SoC, ¶¶ 122 et seq. ↩

¹⁴⁶ CEX-188, Fifth Conto Energia Decree, articles 5.1 and 5.4; see SoC, ¶ 123. ↩

¹⁴⁷ CEX-188, Fifth Conto Energia Decree, articles 5.1 and 5.4; see SoC, ¶ 123. ↩

¹⁴⁸ CEX-188, Fifth Conto Energia Decree, articles 5.1 and 5.4; see SoC, ¶ 124; see also SoD, ¶ 251. ↩

¹⁴⁹ CEX-194, Sample GSE Agreement under Fifth Conto Energia Decree, articles 2 and 4.1; see SoC, ¶ 126; see also SoRy, ¶¶ 230-231. ↩

¹⁵⁰ CEX-188, Fifth Conto Energia Decree, article 1.5; see also CEX-195. ↩

¹⁵¹ CEX-209, AEEG Resolution 250/2013; see SoC, ¶ 130. ↩

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billion is evidenced in the following graph, which was part of the Assoelettrica presentation at the Senate Industry Commission on 25 September 2013:¹⁵²

ASSOELETTRICA

Evoluzione della componente A3

2013-% Breakdown:

• A3 destinata al fotovoltaico: 60%
• A3 destinata alle fonti rinnovabili diverse dal fotovoltaico: 38%
• A3 destinata alle fonti assimilate: 2%

Fonte: Elaborazioni ASSOELETTRICA su dati AEEG e GSE

165. The blue graph in the above slide is representative of the rise from 2005 until 2013 in the total costs relating to incentives provided to photovoltaic plants. These costs constituted a component (Component A3) of the general revenue charges, which were ultimately borne by the end consumers.

166. On a separate note, a speech by the Minister of Environment in September 2012 lauded the Conto Energia regime for having been a “healthy part of the Italian economy” and for having created around 120,000 jobs between 2009 and 2011.¹⁵³

¹⁵² REX-026, Assoelettrica, Presentation at the 10^th hearing of the Senate Industry Commission, 25 September 2013, slide 11; SoD, ¶¶ 282-283. ↩

¹⁵³ CEX-187, Greenstyle website, “Rinnovabili elettriche, Clini: obbiettivo al 30%. Ma siamo già al 27%”; see SoRy, ¶ 291. ↩

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C. OFF-TAKE REGIME AND MINIMUM GUARANTEED PRICE

167. In addition to the Conto Energia based incentive regime, Italy created another regime, through Legislative Decree No. 387/2003, by virtue of which grid managers and GSE were required to purchase all electricity injected into the grid by renewable energy producers, if the producers so requested.¹⁵⁴

168. This regime, categorized by the Parties as the “off-take regime”, operated in the alternative to or to the exclusion of the free market prices.¹⁵⁵ It entitled eligible producers, specifically renewable energy producers with capacity under 10 MW, to benefit from a fixed price per kilowatt at which they could sell their electricity to grid managers and/or the GSE.¹⁵⁶

169. The Italian Electrical Energy Authority was tasked with establishing the modalities of this regime,¹⁵⁷ and further to this, it laid down principles for this regime primarily in Resolutions No. 34/2005 and 280/2007.¹⁵⁸ Each of these Resolutions was preceded by a consultation process initiated through Consultative Documents dated 20 October 2005 and 4 July 2007 respectively, by which comments of the stakeholders were invited.¹⁵⁹

170. By way of Resolution No. 34/2005, a minimum price was guaranteed for small photovoltaic plants (together with hydroelectric plants and other renewable energy plants) with the capacity up to 1 MW to ensure the coverage of their production costs.¹⁶⁰ This Resolution applied only to the first two million kWh of electricity produced and injected into the grid by such plants.

¹⁵⁴ CEX-210, AEEG Consultation for consultation proposing a regime for the “ritiro”, § 1, ¶ 1.1; see CEX-27, Legislative Decree No. 387/2003, 29 December 2003; see also CEX-211/REX-033, Law No. 239/2004, 20 October 2004, article 1(41); SoD, ¶ 342. ↩

¹⁵⁵ SoD, ¶¶ 342-343. ↩

¹⁵⁶ SoC, ¶ 132; see CEX-211/REX-033, Law No. 239/2004, 20 October 2004. ↩

¹⁵⁷ CEX-27, Legislative Decree No. 387/2003, 29 December 2003, articles 13(3) and 13(4). ↩

¹⁵⁸ CEX-212/REX-035, AEEG Resolution No. 34/2005; CEX-213/REX-034, AEEG Resolution No. 280/2007; see SoC, ¶ 133. ↩

¹⁵⁹ REX-039, Consultative doc. of 20 October 2004, Modalità di ritiro dell'energia elettrica; REX-040, Consultative doc. 26/07 OF 4 July 2007, Revisione delle modalità e delle condizioni economiche per il ritiro dell'energia elettrica; see SoD, fn 147. ↩

¹⁶⁰ CEX-210, AEEG Consultation for consultation proposing a regime for the “ritiro”; CEX-212/REX-035, AEEG Resolution No. 34/2005, Annex A; see SoC, ¶ 135; see also SoD, ¶ 352. ↩

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171. Thereafter, in the interim, Resolution No. 317/2006 was passed by the Italian Electrical Energy Authority, which sought to propose revised values of minimum guaranteed prices, based, inter alia, on consultations with some producer groups in relation to factors such as production costs of electricity from renewable sources, the implementation of the incentive tariff regime etc.¹⁶¹

172. This was followed by Resolution 280/2007, which replaced Resolution 34/2005. Resolution 280/2007 confirmed this minimum guaranteed price regime for photovoltaic plants contained in its predecessor. In particular, Resolution 280/2007 provided that from 2008 onwards, the minimum guaranteed price would be revised each year and distinguished based on the source of the renewable energy, so as to account for the peculiarities of each kind of renewable energy facility.¹⁶²

173. Further, Resolution 280/2007 implemented the compensation regime for situations where the free market price of the electricity rose higher than the minimum guaranteed price, in which case GSE was obliged to pay the difference between the two to the producers.¹⁶³ Accordingly, the minimum guaranteed price was the hourly zonal price that was determined on a daily basis further to negotiations within the Italian Power Exchange.¹⁶⁴ Respondent categorizes GSE’s role in this regime as that of a “commercial broker between the producer and the other operators within the electricity system”.¹⁶⁵

174. The motivation behind this minimum guaranteed price regime was “to ensure the economic survival of the smaller plants . . . even if market prices were to fall significantly”, and to “provide dedicated simplifications” of the market by virtue of guaranteed remunerations.¹⁶⁶

175. In furtherance of Resolution 280/2007, GSE entered into agreements with each qualifying photovoltaic plant producer that opted for this minimum guaranteed price regime, which

¹⁶¹ REX-036, AEEG Resolution No. 317/06; see SoD, ¶¶ 353-354, fn 141. ↩

¹⁶² SoC, ¶ 137; SoD, ¶ 350; for the minimum guaranteed prices for photovoltaic plants from 2008 to 2013, see CEX-219, AEEG, Press Releases on the minimum guaranteed prices for years 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016. ↩

¹⁶³ CEX-212/REX-035, AEEG Resolution No. 34/2005, article 7.4 of Annex A. ↩

¹⁶⁴ SoC, ¶ 134; SoD, fn 143. ↩

¹⁶⁵ SoD, ¶¶ 344-345. ↩

¹⁶⁶ CEX-213/REX-034, AEEG Resolution No. 280/2007, article 7; see SoD, ¶ 349, fn 138; see also SoRy, ¶ 447. ↩

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agreements were valid for one-year terms renewable automatically unless the producers indicated otherwise.¹⁶⁷

176. In 2011, this Italian Electrical Energy Authority issued Resolution No. 103/2011, which was preceded by a consultation process similar to the ones conducted for Resolutions No. 34/2005 and 280/2007.¹⁶⁸ Resolution No. 103/2011 sought to differentiate the minimum guaranteed prices between different power plants based on the source of renewable energy with effect from 2012.¹⁶⁹

177. For the interim period, Resolution No. 103/2011 fixed a “basic” minimum guaranteed price of EUR 76.2/MWh.¹⁷⁰ This “basic” minimum guaranteed price was the price for electricity purchased after the first 25,000 kWh and until 2 MWh. The minimum guaranteed price was higher for the first 3750 kWh of electricity purchased (100 EUR/MWh) and then progressively reduced for the electricity purchased between 3750 kWh and 25,000 kWh (90 EUR/MWh).¹⁷¹ Other than that, Resolution No. 103/2011 maintained the minimum guaranteed price regime as per the earlier situation with a provision for annual review.

178. The Romani Decree, which was enacted on 3 March 2011, i.e., a few months prior to Resolution No. 103/2011 (mentioned in ¶¶ 141-152 above), also contained a provision relating to this regime of minimum guaranteed prices, which provided as follows:

[B]y 31 December 2012, on the basis of the Ministry of Economic Development’s guidelines, the [Italian Electrical Energy Authority] defines the minimum guaranteed prices, that is the integration of the revenues deriving from the participation to the electric market, in relation to the production of renewable energy systems which continue to be operated without incentives and for which . . . the production’s safeguard is not ensured by the participation to the market.¹⁷²

179. The Italian Electrical Energy Authority clarified, in the Resolution No. 103/2011, that the above provision in the Romani Decree concerning minimum guaranteed prices refers to

¹⁶⁷ SoC, ¶ 138; SoD, ¶¶ 346-347. ↩

¹⁶⁸ REX-038, Consultative doc. 9/11, Ridefinizione dei prezzi minimi garantiti per impianti di produzione di energia elettrica fino a 1 MW alimentati da fonti rinnovabili; see SoD, ¶¶ 356-357. ↩

¹⁶⁹ CEX-216/REX-037, AEEG Resolution 103/11; see SoD, ¶ 356. ↩

¹⁷⁰ SoD, ¶ 357, fn 148. ↩

¹⁷¹ CEX-219E and CEX-219F, AEEG, Press Releases on the minimum guaranteed prices. ↩

¹⁷² CEX-158, Romani Decree, article 24.8; see SoC, ¶ 140. ↩

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new incentivizing instruments to be defined as of 2013, and does not limit the scope of application of the minimum guaranteed price regime to facilities already in operation until 2013.¹⁷³

D. RESOLUTION 111/06 REGARDING IMBALANCE COSTS

180. In order to prevent an imbalance between the supply and demand of electricity, Italy maintained some reserve capacity from gas-fired turbines that could increase and decrease production rapidly subject to the demand. In order to regulate the costs of maintaining such reserve capacity of energy,¹⁷⁴ the Italian Electrical Energy Authority passed a Resolution on 9 June 2006 (“Resolution 111/06”), which required energy producers to provide in advance a projected figure of the amount of electricity they could inject into the grid. In the event that a producer deviated from its injection projections, it was required to pay what were known as “imbalance costs” or “imbalance compensation” under this Resolution 111/06.¹⁷⁵ In this connection, the following provisions of the Resolution 111/06 are important to note:

39.2. In the event in which the actual imbalance for a dispatching point in a relevant period were to be negative, the dispatching user pays . . . an actual imbalance compensation for the electric energy purchased within the ambit of the dispatching service.

. . .

40.4. The imbalance compensation for the measurement of the negative actual imbalances of which in paragraph 40.1, letter b), is equal:

(a) in each relevant period in which the aggregate imbalance by zone is positive, to the assessment price of the sales offers accepted in the market on the day before the relevant period in the zone in which the dispatching point is located;

(b) in each relevant period in which the aggregate imbalance by zone is negative, to the maximum value of the following:

(i) the highest price among those of the sales offers accepted in the market for the dispatching service for the purposes of balancing in real

¹⁷³ CEX-216/REX-037, AEEG Resolution 103/11, p. 7; see SoC, ¶¶ 141-142. ↩

¹⁷⁴ SoC, ¶ 197; SoD, ¶ 373. ↩

¹⁷⁵ CEX-226, Resolution 111/06, and Annex A, articles 39 and 40; see SoC, ¶ 199. ↩

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time in that relevant period, in the zone in which the dispatch point is located, and

ii) the measurement price of the sales offers accepted in the market on the preceding day in the relevant period, in the same zone.¹⁷⁶

181. In respect of “non-programmable renewable energy sources”, Resolution 111/06 mentioned the following:

40.6. For the dispatching points by production unit powered by non-programmable renewable energy sources, as well as for the import or export dispatching points relating to electric frontiers belonging to a connection network for which there is no implemented verification of the programmed exchanges, the imbalance compensation is equal to the assessment price of the sales offers of electric energy accepted in the market on the day before the relevant period and in the zone in which the dispatch point is located.¹⁷⁷ (emphasis added)

182. In essence, renewable energy producers were effectively exempted from paying imbalance costs under this regime because of their non-programmable nature.¹⁷⁸ Further, the Parties agree that until 2012, all imbalance costs were passed on to end-consumers via electricity bills under Italy’s socialized electricity regime.¹⁷⁹

E. CLAIMANTS’ INVESTMENTS IN ITALY

183. Claimants began investing in Italy’s photovoltaic energy market in 2010, and by 2011, they contend that they had invested over EUR 100 million to acquire and develop a total of nine photovoltaic plants.¹⁸⁰ These investments were made by each of the three Claimants, all of which form part of the same corporate structure that shall be explained in (1) below. Thereafter, Claimants’ investments shall be delineated between (2) First Claimant, (3) Second Claimant, and (4) Third Claimant, followed by (5) a tabulated representation of the Claimants’ investments.

¹⁷⁶ CEX-226, Resolution 111/06, articles 39.2 and 40.4. ↩

¹⁷⁷ CEX-226, Resolution 111/06, article 40.6; see SoC, ¶ 200. ↩

¹⁷⁸ SoC, ¶ 200; SoD, ¶ 373. ↩

¹⁷⁹ SoC, ¶ 200; SoD, ¶ 386. ↩

¹⁸⁰ SoC, ¶¶ 148, 173. ↩

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(1) Claimants’ Corporate Structure

184. The three Claimants are wholly owned subsidiaries of SunReserve International, LP. SunReserve International, LP was created as a joint venture between First Reserve Energy Infrastructure Fund, LP (“First Reserve”), a Cayman Islands private equity firm, and SunEdison LLC, a developer of solar photovoltaic facilities.¹⁸¹

185. This joint venture was formed pursuant to a Framework Agreement dated 21 May 2010, entered into by and between SunEdison LLC, a Delaware limited liability company (“SunEdison”), FREI Sun Holdings (Cayman) Ltd., a Cayman Islands exempted company (“FR Holdings”), FREI Sun Holdings (US) LLC, a Delaware limited liability company, SunEdison Reserve International, L.P., a Cayman Islands exempted limited partnership formed by SunEdison and FR Holdings, and SunEdison Reserve US, L.P., a Delaware limited partnership formed by SunEdison and FR Holdings US (“Framework Agreement”).¹⁸²

186. Attached with this Framework Agreement as Exhibit F was a Fund Guarantee that First Reserve executed and delivered to SunEdison, simultaneously with the execution of the Framework Agreement.¹⁸³ In the Fund Guarantee, First Reserve promised to “absolutely, unconditionally and irrevocably guarantees to SunEdison, on the terms and subject to the conditions set forth herein, the due and punctual payment, as and when due, of all Capital Contributions required to be made by FR Holdings . . .”¹⁸⁴ Under the Framework Agreement, FR Holdings, whose capital contributions First Reserve had guaranteed, was committed to capital contributions of USD 150 million.¹⁸⁵

¹⁸¹ RfA, ¶ 24; First Witness Statement of Mr. Mark Florian, 28 July 2017 (“Florian First Witness Statement”), ¶¶ 2 et seq.; Witness Statement of Mr. Ryan Shockley, 28 July 2017 (“Shockley Witness Statement”), ¶ 2. ↩

¹⁸² CEX-346, Framework Agreement By And Among Sun Edison LLC, FREI Sun Holdings (Cayman) Ltd., FREI Sun Holdings (US) LLC, SunEdison Reserve US, L.P., and SunEdison Reserve Internaitonal, L.P. (“Framework Agreement”), Preamble; Shockley Witness Statement, ¶ 7. ↩

¹⁸³ CEX-346, Framework Agreement, Preamble and Exh. F. ↩

¹⁸⁴ CEX-346, Framework Agreement, Exh. F, Article 1. ↩

¹⁸⁵ CEX-346, Framework Agreement, Article 1 (“Capital Commitments” shall mean the commitments of each Investor to provide the capital contributions to the JV Entities as required by Article 2 hereof, which (i) in the case of FR Holdings shall equal $150,000,000 . . .”), see also Schedule I. ↩

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187. Mr. Ryan Shockley explains this joint venture relationship in his Witness Statement on behalf of Claimants, dated 28 July 2017, in the following terms:

Discussions between the two companies took place over many months and resulted in the execution of a Framework Agreement in May 2010. For its part, First Reserve agreed to commit US $150 million to renewable energy projects in the targeted countries. SunEdison would propose specific renewable energy projects to be included in the joint venture i.e., that SunEdison would construct and that a joint venture company would then purchase and, by the time the framework agreement was concluded, SunEdison had developed an impressive list of potential projects.¹⁸⁶

188. The First, Second and Third Claimants were amongst the joint venture companies created to acquire and develop photovoltaic projects pursuant to the above described arrangement.¹⁸⁷ The joint venture companies envisaged investments in various countries, including the United States and Canada,¹⁸⁸ but 50% of the total capital investments was to be used in Italy due to the favourable conditions created by the Conto Energia regime and the off-take and minimum guaranteed price regime.¹⁸⁹ It is in reliance of this regime that Claimants contend they began investing in Italy’s photovoltaic energy market.

(2) First Claimant’s Investments

189. Between 2010 and 2011, the First Claimant, i.e., SunReserve Luxco Holdings S.À.R.L, acquired a total of seven photovoltaic plants in Italy, which constituted a portfolio of 27.7 MW. In this process, according to Claimants, the First Claimant invested more than EUR 61 million.¹⁹⁰

190. The acquisition of the seven photovoltaic plants by the First Claimant was done in four batches. Each of these acquisitions was a result of the First Claimant acquiring the special purpose vehicles (“SPVs”) that had developed and/or was operating the photovoltaic plant

¹⁸⁶ Shockley Witness Statement, ¶ 7; see Florian First Witness Statement, ¶ 11; see also CEX-44, GRTN Presentation “Le attività del nuovo GRTN focalizzate sull'energie rinnovabili,” SINERGY, Rimini; CEX-45, GRTN Presentation “Le attività del GRTN per le fonti rinnovabili”. ↩

¹⁸⁷ SoC, ¶¶ 146, 148. ↩

¹⁸⁸ Florian First Witness Statement, ¶ 12. ↩

¹⁸⁹ SoC, ¶ 146; see Shockley Witness Statement, ¶¶ 8-10. ↩

¹⁹⁰ SoC, ¶ 162. ↩

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in consideration. This acquisition of SPVs was in turn done by wholly owned Italian subsidiaries of the First Claimant.¹⁹¹

191. The first batch of acquisitions occurred on 30 June 2010, when the First Claimant acquired three SPVs controlled by SunEdison Italia S.r.l., i.e., SunEdison Apulia 007 S.r.l., SunEdison Apulia 008 S.r.l. and Sunny Lenare S.r.l.¹⁹² These SPVs had developed the following three solar power plants: (i) a 985.71 kW plant located in the Municipality of Lequile, owned by SunEdison Apulia 007 S.r.l. (“San Marco”); (ii) a 968.31 kW plant located in the Municipality of Soleto, owned by SunEdison Apulia 008 S.r.l. (“Santoro”); and (iii) a 997.92 kW plant located in the Municipality of Lequile, owned by Sunny Lenare S.r.l. (“Lenare”).

192. Claimants executed the acquisition of these plants after a due diligence was carried out by the international law firm Ashurst, which confirmed, inter alia, that “the authorisation process for the construction and operation” of these plants was completed.¹⁹³ Further, these SPVs had also secured the requisite land rights of the three plants by virtue of sale and purchase agreements.¹⁹⁴

193. The Santoro plant entered into operation on 12 August 2010 and the other two plants, i.e., San Marco and Lenare, entered into operation on 22 December 2010. Each of them was covered within the incentive scheme provided in the Second Conto Energia Decree (see Section B(2) above), and qualified for an incentive tariff of 0.3460 EUR/kWh. This tariff, together with its temporal scope of 20 years as of the date of entry into operation of the plant, was specified in the letter from GSE dated 3 March 2011 concerning the San Marco

¹⁹¹ SoC, ¶ 148. ↩

¹⁹² SoC, ¶¶ 149-150; CEX-288, SunEdison Apulia 007, SunEdison Apulia 008 and Sunny Lenare S.r.l. Quota Transfer Deeds. ↩

¹⁹³ CEX-214, Ashurst due diligence report “Legal Due Diligence Report in relation to the following photovoltaic plants: San Marco, Santoro, Lenare”, pp. 20-22, 25, 26-28, 29-31, 33. ↩

¹⁹⁴ SoC, fn 252; CEX-284, San Marco Sale and Purchase, and Easement right Agreement; CEX-285, Santoro Sale and Purchase, and Easement right Agreement; CEX-286, Monaci Sale and Purchase, and Easement right Agreement; CEX-287, Lenare Surface and Easement Right Agreement. ↩

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plant,¹⁹⁵ and in the three contracts entered into on 31 January 2011 and 15 March 2011 between GSE and the plants’ operators.¹⁹⁶

194. In addition to the incentives under the Second Conto Energia, these three plants were also entitled to the minimum guaranteed price under the off-take regime provided by Italy, since these plants were each under the capacity of 1 MW (see Section C above).¹⁹⁷ According to Claimants, the GSE paid this minimum guaranteed price for each of the three plants for a period of six years.¹⁹⁸

195. The second batch of acquisitions by the First Claimant occurred in January 2011, and consisted of only one solar power plant. In this connection, the First Claimant acquired the SPV, Saniso S.r.l.,¹⁹⁹ through its subsidiary SunReserve Luxco Parent III S.à.r.l.²⁰⁰ This SPV had developed a 20.41 MW plant called Campania located in the Municipality of Gugliano (Province of Naples), and had also already secured the requisite land rights of the plant (“Campania”).²⁰¹

196. Claimants executed the acquisition of this plant after a due diligence was carried out by the law firm Gianni, Orrigoni, Grippo & Partners in October 2010, which confirmed, inter alia, that “the authorization for the construction and operation of [the Campania plant] seems not affected by any critical issues” and that “[t]he formal process for securing the interconnection to the electricity grid has been completed”.²⁰²

197. The Campania plant entered into operation on 24 November 2010, and was thus covered within the incentive scheme of the Second Conto Energia (see Section B(2) above), i.e., an

¹⁹⁵ CEX-290, San Marco GSE Incentive Tariff Letter. ↩

¹⁹⁶ CEX-293, Santoro GSE Agreement n. I08F13381307; CEX-294, San Marco GSE Agreement n. I08F15697007; CEX-295, Lenare GSE Agreement n. I0F15697307; see SoC, ¶¶ 150-152. ↩

¹⁹⁷ CEX-296, Santoro Off-take Regime Agreement, articles 1 and 4; CEX-297, Lenare Off-take Regime Agreement, articles 1 and 4; CEX-298, San Marco Off-take Regime Agreement, articles 1 and 4. ↩

¹⁹⁸ SoC, ¶ 153. ↩

¹⁹⁹ CEX-303, Saniso S.r.l. Quota Transfer Agreement article 2; CEX-304, Saniso S.r.l. Quota Transfer Deed article 1; see SoC, ¶¶ 154-155. ↩

²⁰⁰ CEX-302, SunEd Reserve Luxco Parent III S. à r.l. Deed of Incorporation, 29 November 2010; see SoC, fn 260. ↩

²⁰¹ CEX-299, Campania Single Authorization (Autorizzazione Unica) issued by Calabria Region on 26 March 2009 (Determina 78/09); see SoC, ¶ 154. ↩

²⁰² CEX-301, Gianni, Orrigoni, Grippo & Partners, Legal Due Diligence Report for the Photovoltaic Project in Campania, pp. 6-11, 12, 26, 29. ↩

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incentive tariff of 0.3460 EUR/kWh for a period of 20 years. This tariff, together with its temporal scope of 20 years as of the date of entry into operation of the plant, was specified in the letter from GSE concerning the Campania plant, and in the contract entered into on 5 March 2011 between GSE and the plant’s operator.²⁰³

198. The acquisition of the Campania plant was succeeded immediately thereafter by the third batch of acquisitions by the First Claimant, which occurred by the acquisition of another SPV, SunEd Parco Solare 5 S.r.l., which had already developed and was operating a 998.13 kW plant called Monaci located in the Municipality of Lequile (“Monaci”).²⁰⁴ This acquisition was also preceded by a due diligence by Ashurst.²⁰⁵ Further, the SPV had also already secured the requisite land rights concerning the Monaci plant by virtue of a sale and purchase agreement and the authorizations filed with the Municipality of Lequile.²⁰⁶

199. The Monaci plant entered into operation on 30 December 2010, and was thus covered within the incentive scheme of the Second Conto Energia (see Section B(2) above), i.e., an incentive tariff of 0.3460 EUR/kWh for a period of 20 years. This tariff was specified in the letter from GSE dated 10 May 2011 concerning the Monaci plant,²⁰⁷ and in the contract entered into on 18 May 2011 between GSE and the plant’s operator.²⁰⁸ This was supplemented by another contract between GSE and the plant’s operator, entitling the Monaci plant to the minimum guaranteed price in Italy’s off-take regime.²⁰⁹

200. This was followed on 31 March 2011, by the First Claimant’s fourth and last batch of acquisitions, which constituted the acquisition of the following two solar plants: (i) a 1.8 MW plant called Rustico located in Sicily, owned by SunEdison Sicily 006 S.r.l. (“Rustico”); and (ii) a 1.66 MW plant called Milana also located in Sicily, owned by SunEdison Sicily 008 S.r.l. (“Milana”).

²⁰³ CEX-306, Campania plant GSE Agreement n. I08F13988007, articles 1 and 2; see SoC, ¶ 156. ↩

²⁰⁴ CEX-310, SunEd Parco Solare 5 S.r.l. Quota Transfer Deed; see SoC, ¶¶ 157-158. ↩

²⁰⁵ CEX-307, Ashurst due diligence report “Legal Due Diligence Report in relation to the following photovoltaic plants: Monaci and Fiumicino”, pp. 18-27, 31-33; see SoC, ¶ 157. ↩

²⁰⁶ CEX-308, Monaci Simplified Authorization (DIA) filed with the Municipality of Lequile in August 2008; see SoC, fn 262. ↩

²⁰⁷ CEX-309, Monaci GSE Incentive Tariff Letter; see SoC, ¶ 158. ↩

²⁰⁸ CEX-311, Monaci GSE Agreement n. I0F17928907, articles 1 and 2; see SoC, ¶ 158. ↩

²⁰⁹ CEX-312, Monaci Off-take Regime Agreement, articles 1 and 4; see SoC, ¶ 159. ↩

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201. The SPVs, i.e., SunEdison Sicily 006 S.r.l. and SunEdison Sicily 008 S.r.l., were acquired through the First Claimant’s subsidiary, i.e., SunReserve Luxco Parent V S.à.r.l.²¹⁰ This acquisition was also preceded by a due diligence by Gianni, Orrigoni, Grippo & Partners,²¹¹ and by the SPVs’ acquisition of the requisite land rights.²¹²

202. The Rustico and Milana plants entered into operation on 28 and 29 April 2011, respectively, and were thus covered within the incentive scheme provided in the Third Conto Energia (see Section B(3) above). Each of them qualified for a tariff of 0.313 EUR/kWh for a period of 20 years. This tariff was specified in GSE’s tariff confirmation letters,²¹³ and in corresponding contracts entered into between GSE and the operators.²¹⁴

(3) Second Claimant’s Investments

203. The Second Claimant, i.e., SunReserve Luxco Holdings II S.À.R.L, acquired one photovoltaic plant in Italy, which constituted a portfolio of 70.5 MW. In this process, according to Claimants, the Second Claimant invested more than EUR 83 million.²¹⁵

204. The plant acquired by the Second Claimant was called Rovigo, and was located in the Municipality of San Bellino, Veneto Region (“Rovigo”). The acquisition of the Rovigo plant occurred through the acquisition of another SPV, Emmezeta Solar Energy S.r.l. on 30 September 2010, which was developing the said plant and had already secured the requisite land rights.²¹⁶ This acquisition was also preceded by a due diligence by Ashurst.²¹⁷

²¹⁰ CEX-323, SunEd Reserve Luxco Parent V S. à r.l. Deed of Incorporation; CEX-324, SunEdison Sicily 006 S.r.l. Quota Transfer Deed; CEX-325, SunEdison Sicily 008 S.r.l. Quota Transfer Deed; see SoC, ¶ 161(2), fn 271. ↩

²¹¹ CEX-322, Gianni, Orrigoni, Grippo & Partners law firm report “Legal Due Diligence Report on Photovoltaic Projects in the Sicily Region Project Milana - Project Rustico”, pp. 6, 15, 19, 29, 42-44; see SoC, ¶ 161. ↩

²¹² CEX-318, Rustico Single Authorization (Autorizzazione Unica) (D.R.S. n. 472/2010); CEX-319, Milana Single Authorization (Autorizzazione Unica) (D.R.S. 473/2010); CEX-320, Rustico Surface and Easement Right Agreement; CEX-321, Milana Surface and Easement Right Agreement; see SoC, ¶ 161, fn 269. ↩

²¹³ CEX-327, Rustico GSE Incentive Tariff Letter; CEX-328, Milana GSE Incentive Tariff Letter; see SoC, ¶ 161. ↩

²¹⁴ CEX-329, Rustico GSE Agreement n. O03M27266207, articles 1, 2 and 10; CEX-330, Milana GSE Agreement n. O03M28467707, articles 1, 2 and 10; see SoC, ¶ 161. ↩

²¹⁵ SoC, ¶¶ 163, 168. ↩

²¹⁶ CEX-331, Rovigo Single Authorization (Autorizzazione Unica) n. 3622/2009; CEX-333, Rovigo Works Commencement Notice, filed with the Region of Veneto Urban Authority; CEX-335, Emmezeta Solar Energy S.r.l. Quota Transfer Deed; CEX-336, SunReserve Luxco Parent II S. à r.l. Deed of Incorporation; see SoC, ¶¶ 163-164. ↩

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205. The Rovigo plant entered into operation on 22 November 2010, and was thus covered within the incentive scheme of the Second Conto Energia (see Section B(2) above), i.e., an incentive tariff of 0.3460 EUR/kWh for a period of 20 years. This tariff was specified in the letter from GSE dated 11 January 2011 concerning the Rovigo plant,²¹⁸ and in the contract entered into on 11 February 2011 between GSE and the plant’s operator.²¹⁹

206. The Rovigo plant was the “largest plant that SunReserve acquired”.²²⁰ After the Second Claimant acquired the Rovigo plant, in October 2010, the SPV, Emmezeta Solar Energy S.r.l., entered into a loan agreement with a few banks for the development and construction of the project.²²¹ The Second Claimant also arranged an intercompany loan for the SPV.²²²

(4) Third Claimant’s Investments

207. The Third Claimant, i.e., SunReserve Luxco Holdings III S.À.R.L, acquired one photovoltaic plant in Italy, which constituted a portfolio of 2.97 MW. In this process, according to Claimants, the Third Claimant invested approximately EUR 5 million.²²³

208. The photovoltaic plant acquired by the Third Claimant was called Fiumicino, and was located in the Municipality of Fiumicino, Lazio Region (“Fiumicino”).²²⁴ The acquisition of the Fiumicino plant occurred through the acquisition of the SPV, SunEdison Apulia 009 S.r.l. on 22 June 2011, much after the completion of the authorization and connection procedures and after the plant had already entered into operation, which occurred in 15 March 2011.²²⁵ The acquisition of the SPV, SunEdison Apulia 009 S.r.l. was effected through one of the Third Claimant’s wholly owned subsidiaries, i.e., SunReserve Luxco

²¹⁷ CEX-334, Ashurst, Legal Due Diligence Report in relation to the Rovigo Photovoltaic Plant, pp. 18, 21, 26; see SoC, ¶ 164. ↩

²¹⁸ CEX-340, Rovigo GSE Incentive Tariff Letter; see SoC, ¶ 167. ↩

²¹⁹ CEX-341, Rovigo GSE Agreement n. T03F13776207, articles 1 and 2; see SoC, ¶ 167. ↩

²²⁰ Florian First Witness Statement, ¶¶ 17-18. ↩

²²¹ CEX-337, Emmezeta Solar Energy S.r.l. Facility Agreement, article 3; see SoC, ¶ 165. ↩

²²² CEX-338, Rovigo Equity Contribution Agreement, article 2.1(b); CEX-339, Rovigo Intercompany Loan article 2; see SoC, ¶¶ 165-166. ↩

²²³ SoC, ¶¶ 169, 172. ↩

²²⁴ SoC, ¶ 163. ↩

²²⁵ CEX-342, Carnelutti Memorandum titled “Project Fiumicino: Executive Summary Memorandum, p. 6; see SoC, ¶¶ 170-171. ↩

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Parent VI S.à.r.l.. This acquisition was preceded by the SPV entering into a loan facility agreement with a bank for an amount of EUR 6.3 million for project construction costs.²²⁶

209. The Fiumicino plant had already qualified, under the Second Conto Energia (see Section B(2) above), for an incentive tariff of 0.443 EUR/kWh for a period of 20 years, prior to the Third Claimant’s acquisition of the same. This tariff was specified in the letter from GSE dated 17 June 2011 concerning the Fiumicino plant,²²⁷ and in the contract entered into on 28 June 2011 between GSE and the plant’s operator.²²⁸

(5) Conclusion

210. In light of the above, Claimants had acquired the a total of nine photovoltaic plants in Italy, which are enlisted below together with the corresponding Conto Energia regime and/or off-take regime that they were covered under.

²²⁶ CEX-300, SunEdison Apulia 009 S.r.l. Quota Transfer Deed; CEX-305, Facility Agreement by and between SunEdison Apulia 009 S.r.l. and Natixis SA, article 3.1; CEX-332, SunEdison Apulia 009 S.r.l. Shareholder Loan article 2; see SoC, ¶ 171. ↩

²²⁷ CEX-400, Fiumicino GSE Incentive Tariff Letter; see SoC, ¶ 170. ↩

²²⁸ CEX-343, Fiumicino GSE Agreement n. I08F19354507, articles 1 and 2; see SoC, ¶ 170. ↩

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F. ITALY’S MEASURES AFTER THE FIFTH CONTO ENERGIA FROM 2012 TO 2014

211. As mentioned in Section B(6) above, the Fifth Conto Energia Decree was enacted on 5 July 2012, and provided for a cost threshold of incentive tariffs upto EUR 700 million per year, so as to reach the total cost of EUR 6.7 billion for the incentive program. In this connection, the Preamble of the Fifth Conto Energia contained the following relevant recitals:

IT BEING HELD that, due to the high level of charges accrued and the state of and prospects for technologies, it is sufficient to commit a further 700 million €/year approximately in incentive costs, for the purpose of accompanying [photovoltaic] energy in its progress towards competitiveness, outside the scope of support schemes. This amount will cover charges for plants on the register, those which access tariffs freely and plants which become operational during transitional periods . . .²²⁹

212. According to the report of Claimants’ regulatory expert, FTI Consulting, Italy surpassed the level of photovoltaic production projected for 2020, by 2012 itself, i.e., 8 years in advance of the objective.²³⁰

213. From 2012 onwards, i.e., since and including the enactment of the Fifth Conto Energia Decree, until 2014, Italy undertook certain additional administrative and/or fiscal measures, which are under challenge by Claimants, and thus, a subject of dispute between the Parties. In brief, these measures include (1) an Administrative Management Fee imposed on photovoltaic energy producers; (2) changes to the Minimum Guaranteed Prices under the Off-Take Regime; (3) an obligation on the photovoltaic energy producers to pay “imbalance costs”; (4) the resolution of domestic complaints relating to one “Robin Hood Tax”; and (5) the classification of photovoltaic plants as “immovable property”.

(1) Administrative Management Fee in the Fifth Conto Energia

214. Together with provisions relating to the incentive tariff regime, the Fifth Conto Energia also contained a provision requiring photovoltaic energy producers to pay an annual administrative fee of EUR 0.0005/kWh of incentivized energy (“Administrative

²²⁹ CEX-188, Fifth Conto Energia Decree, Preamble. ↩

²³⁰ Expert report of Dr Boaz Moselle and Dr Dora Grunwald, 27 July 2012 (“First FTI Regulatory Report”), ¶ 5.56; see SoC, ¶ 177. ↩

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Management Fee”). This provision applied, as of 1 January 2013, to all photovoltaic energy producers benefitting from the incentive tariffs under any of the Conto Energia Decrees. It stated the following:

To cover GSE management costs, and the cost of checks and controls by GSE, the plant operators that access incentive tariffs under this decree and decrees issued in implementation of article 7 of legislative decree no. 387, 2003 [Off-Take Regime] and article 25 (10) of legislative decree no. 28, 2011 [Romani Decree], are under an obligation, commencing from 1 January 2013, to pay GSE a contribution of 0.05 euro cents for each kWh of subsidised energy, also by means of offset with incentives owed.²³¹

215. Articles 10.5 and 10.6 of the Fifth Conto Energia provided that GSE will specify “the application rules for . . . access to the incentive tariffs under this decree” and “[t]he procedures for payment of the contributions”. Pursuant to this, GSE clarified on its website in 2013 that the annual Administrative Management Fee shall be offset against GSE’s first payment of incentive tariffs to any producer in a given year.²³²

216. This policy decision to impose Administrative Management Fee found a mention in the subsequently enacted Spalma-incentivi Decree dated 24 June 2014²³³ as well (discussed in Section IV.G below). In particular, Articles 25(1) and 25(2) of the Spalma-incentivi Decree provided, in their relevant part, as follows:

Article 25(1): Charges incurred by the GSE for the conduct of management, audit and control activities, related to the incentive and support mechanisms, are to be borne by the beneficiaries of the same activities . . . .

Article 25(2)(3): Within 60 days from the date of entry into force of this Legislative Decree, and every three years thereafter, the GSE proposes to the Minister of economic development the size of tariffs for the activities referred to in paragraph 1 to be applied as from 1 January 2015 and valid for three years. Rates are set by the GSE on the basis of costs, of planning and of development forecasts of the same activities. The proposal includes the methods of payment of the fees.²³⁴

217. Further, the GSE submitted a report to the Ministry for Economic Development on 21 August 2014, wherein it estimated, according to Respondent, that the Administrative

²³¹ CEX-188, Fifth Conto Energia Decree, article 10.4. ↩

²³² CEX-217, GSE website, “Conto V”, p. 5. ↩

²³³ CEX-266, Legislative Decree No. 91/2014, converted into law by Law No. 116/2014 dated 11 August 2014. ↩

²³⁴ SoD, fn 168-169. ↩

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Management Fee would constitute 0.17% of the incentives received by the beneficiaries under the Fifth Conto Energia.²³⁵

(2) Changes to the Minimum Guaranteed Price under Off-Take Regime

218. As mentioned in Section IV.C above, Italy had established an Off-Take Regime, which constituted, inter alia, a minimum guaranteed price for electricity produced by small photovoltaic plants with capacity up to 1 MW. This entitlement to a minimum guaranteed price operated in conjunction with the incentive regime under the Conto Energia Decrees, except in respect of the all-inclusive tariff provided for in the Fifth Conto Energia, which Respondent submits was incompatible with the minimum guaranteed price regime.²³⁶ The modalities of this Off-Take Regime were formulated by the Italian Electrical Energy Authority, which fixed the minimum guaranteed price on a yearly basis.

219. In this connection, the Italian Electrical Energy Authority established the minimum guaranteed price for the year 2013 as EUR 105.8/MWh up to 3,750 kWh of annual energy purchase; EUR 95.2/MWh for annual energy purchase between 3,750 kWh to 25,000 kWh; and EUR 80.6/MWh for annual energy purchase from 25,000 kWh to 2,000,000 kWh.²³⁷

220. In the meantime, the Italian Electrical Energy Authority had invited Politecnico di Milano to prepare a report based on (i) the analysis of average electricity production costs from different sources of renewable energy, depending on data from power plants with a capacity up to 1 MW, and (ii) the analysis on the scale of progressive brackets that could be used to ensure coverage of operating costs and fuel costs for each source. The data relating to operating costs and fuel costs was provided by electricity producer associations in Italy, including, inter alia, Assoelettrica,²³⁸ which Claimants contest was incomplete and unclear.²³⁹ The report was prepared by Politecnico di Milano in July 2013, and provided,

²³⁵ REX-45, GSE Technical Report, “Modalità di copertura di oneri sostenuti dal gestore dei servizi energetici GSE SpA per il triennio 2015-2017, ai sensi del Decreto Legge 24 giugno 2014, n. 91, articolo 25”; see SoD, ¶¶ 411-412. ↩

²³⁶ SoD, ¶ 343. ↩

²³⁷ CEX-219, AEEG, Press Releases on the minimum guaranteed prices. ↩

²³⁸ SoD, ¶¶ 359-361. ↩

²³⁹ First FTI Regulatory Report, ¶¶ 5.8-5.12. ↩

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inter alia, that operating costs are only significant in comparison to the market electricity prices in the case of very small scale power plants such as household installations upto 3 kW, and not for the medium scale or large scale power plants.²⁴⁰

221. Thereafter, on 31 October 2013, the Italian Electrical Energy Authority issued a document for public consultation bearing No. 486, inviting the stakeholders’ comments by 25 November 2013.²⁴¹ The public consultation document proposed a new formula for the calculation of minimum guaranteed prices amounting to the average operating costs of renewable energy facilities plus 8%. Applying this formula, Claimants submit that the minimum guaranteed price for photovoltaic plants would be EUR 37.8 per MWh of electricity produced.²⁴²

222. This public consultation document was followed by a Resolution No. 618/2013/R/EFR dated 19 December 2013 by the Italian Electrical Energy Authority (“Resolution 618”). This Resolution revised the minimum guaranteed price for photovoltaic plants with a capacity beyond 20 kW for the year 2014 to EUR 38.9/MWh, i.e., applying a 10% increase of the average operating costs, which were calculated as 35 EUR/MWh.²⁴³ The press release corresponding to this Resolution 618 stated that “the consumer prices index for families and workers has increased by 1.1% in 2013 compared to 2012.”²⁴⁴

223. Further, the Resolution 618 stated that limited the minimum guaranteed prices to the first 1.5 million kWh of energy purchased per year (instead of the earlier threshold of 2 million kWh per year). On a related note, the distribution based on the amount of electricity purchased, resulting in a progressive decrease of the minimum guaranteed price (see ¶ 219 above), and consequently a “basic” minimum guaranteed price (see ¶ 177 above), was

²⁴⁰ REX-041, Costi di produzione di energia elettrica da fonti rinnovabili, Rapporto commissionato da AEEG al Politecnico di Milano - Dipartimento di Energia, July 2013, Annex 1 to 486/2013/R/EFR; see SoD, ¶¶ 366-367. ↩

²⁴¹ CEX-413/REX-042, AEEG Document for public consultation no. 486, Oct. 31, 2013; see SoC, ¶ 186, fn 293; see also SoD, ¶¶ 362-363. ↩

²⁴² SoC, ¶ 187; see CEX-413/REX-042, AEEG Document for public consultation no. 486, Oct. 31, 2013, pp. 9-10; see also CEX-219, AEEG, Press Releases on the minimum guaranteed prices. ↩

²⁴³ CEX-219G2, AEEG, Press Release on the minimum guaranteed prices.for 2014; CEX-220, AEEG Resolution No. 618/2013/R/EFR; see SoD, ¶¶ 363, 368. ↩

²⁴⁴ CEX-219G1, AEEG, Press Release on the minimum guaranteed prices.for 2013. ↩

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abolished. One common minimum guaranteed price was fixed for all electricity purchased upto this new limit of 1.5 million kWh.²⁴⁵

224. This was followed by minimum guaranteed prices for 2015 and 2016 to be established at 39 EUR/MWh.²⁴⁶ According to Claimants, the minimum guaranteed prices established by the Italian Electrical Energy Authority for photovoltaic plants since 2014 onwards were lower than the average market price of electricity.²⁴⁷

225. Four days after Resolution 618 was issued by the Italian Electrical Energy Authority, the Italian Government enacted the Legislative Decree No. 145/2013, which was known as the Destinazione Italia (“Destinazione Italia”). This Legislative Decree, inter alia, provided that the minimum guaranteed price for all photovoltaic plants benefiting from the Conto Energia Decrees would be equal to the hourly zonal price, with the exception for photovoltaic plants with a capacity below 100 kW.²⁴⁸

226. The Destinazione Italia was subjected to criticism by the President of the Italian Electrical Energy Authority, Mr. Guido Bortoni, and by Members of Parliament, during a session discussing the enactment of the Decree.²⁴⁹ For instance, Mr. Bortoni mentioned the following in a speech before the Parliament:

The Legislative Decree, instead, provides for the minimum guaranteed prices to be always equal to the energy market prices, thus basically neutralizing the goals for which [the minimum guaranteed prices] had been introduced in the first place. These measures would require deep analysis of costs. Additionally, this measure might compromise the economic balance of those plants only partially benefiting from support regimes (as for example in case of repowering or revamping) which would be excluded from the application of minimum guaranteed prices in relation to the entire quantity of energy generated. In

²⁴⁵ CEX-220, AEEG Resolution No. 618/2013/R/EFR; see SoD, ¶ 365. ↩

²⁴⁶ CEX-219, AEEG, Press Releases on the minimum guaranteed prices; see SoC, ¶ 189. ↩

²⁴⁷ SoC, ¶ 189. ↩

²⁴⁸ CEX-262/CEX-221, Law Decree No. 145/2013, 23 December 2013, article 1(2); see SoC, ¶ 191; see also SoD, ¶ 369. ↩

²⁴⁹ CEX-223, Chamber of Representatives – Session no. 168, Transcript of the discussion about the so called Destinazione Italia Decree (Allegato 1); CEX-224, Summary of the Chamber of Representative VI and X Committees joint meeting; CEX-225, Senate of the Republic – Session no. 195 (Allegato 2 and 3), Senator Giorno; see SoC, ¶ 193. ↩

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conclusion, in light of the foregoing considerations, we ask to restore the framework existing before the issue of the Legislative Decree.²⁵⁰

227. On 21 February 2014, the Destinazione Italia was enacted into Law No. 9/2014 by the Parliament establishing the minimum guaranteed price regime established under the Destinazione Italia.²⁵¹

228. Thereafter, on 17 April 2014, the Italian Electrical Energy Authority issued Resolution 179/2014, which envisaged that the minimum guaranteed price would be allocated for the first 1.5 million kWh of electricity purchased by photovoltaic plants having a capacity above 100 kW.²⁵²

(3) The Imbalance Costs

229. As mentioned in Section IV.D above, the “imbalance costs” that renewable energy producers were required to pay in Italy was equal to the market price of energy on the day before the relevant period and in the zone in which the dispatch point was located.²⁵³

230. With respect to these “imbalance costs”, the Italian Electrical Energy Authority passed a Resolution 281/2012/R/EFR on 5 July 2012 (“Resolution 281”). In this Resolution 281, it was, inter alia, mentioned that the treatment of “non-programmable renewable energy sources” in respect of the obligation to pay “imbalance costs” should be equated with the treatment “provided for other production units not entitled to participation in the Market for Dispatching Services”.²⁵⁴

231. This implied that the non-programmable renewable energy power plants would have to pay imbalance costs over and above the hourly zonal price (which was the previously fixed imbalance costs as mentioned in ¶ 182 above) if the “modified and corrected binding

²⁵⁰ CEX-222, AEEG, Memoria 9 gennaio 2014 per l'audizione presso la 6a e la 10a Commissione della Camera dei Deputati (1/2014/I/COM) ↩

²⁵¹ CEX262/CEX-221, Law Decree No. 145/2013, 23 December 2013; SoC, ¶ 194; see SoD, ¶ 386. ↩

²⁵² REX-043, AEEG, Delibera 17 aprile 2014 - Aggiornamento dell'ambito di applicazione dei prezzi minimi garantiti per gli impianti alimentati da fonti rinnovabili, per i quali è consentito l'accesso al ritiro dedicato; SoD, ¶ 370. ↩

²⁵³ CEX-226, Resolution 111/06, and Annex A, article 40.6. ↩

²⁵⁴ CEX-227, AEEG Resolution 281/2012/R/EFR, p. 6; see SoC, ¶ 201. ↩

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program” was 20% beyond the amount of electricity actually fed into the grid.²⁵⁵ The “modified and corrected binding program” refers to the amount of electricity that the dispatching user undertook to feed into the grid (as against the amount of electricity actually fed into the grid).²⁵⁶

232. Resolution 281 also provided for a “scouting period of at least 6-12 months” before the same was appropriately implemented.²⁵⁷ In this regard, on 22 November 2012, Resolution 281 was followed by a Resolution 493/2012/R/EFR issued by the Italian Electrical Energy Authority (“Resolution 493”). This Resolution 493, inter alia, provided for “the modalities of allocation of the imbalance compensation and payments covering the administrative costs to be attributed to the producers”.²⁵⁸

233. Both these Resolutions, i.e., Resolutions 281 and 493 were challenged by renewable energy producers before Italian administrative courts. On 9 June 2014, the Consiglio di Stato, Italy’s highest administrative court ruled, in its Decision No. 2936/2014, that Resolution 281 was unlawful in part. In particular, in the following passage, it found that the Resolution discriminated against non-programmable renewable energy by treating it in the same way as other kinds of energy:

Non-programmable sources of electricity production are characterized by the fact that, while it is not objectively impossible to predict the [amount of] energy produced and fed into the grid, this prediction cannot reach the same level of precision as for programmable sources, by reason of the type of source and the variables that condition its operation . . . the first judge . . . has affirmed that the imposition of such costs must take account of the specificity of the source.²⁵⁹

234. Further, in the following passage, the Consiglio di Stato clarified the scope of its findings on discrimination:

The foregoing does not mean that the imbalance costs caused by these production units should, as it was the case in the previous regime, be

²⁵⁵ CEX-227, AEEG Resolution 281/2012/R/EFR, p. 12; see SoD, ¶ 389. ↩

²⁵⁶ SoD, ¶ 378. For the possibility of non-programmable renewable energy providers to predict the grid injection, see SoD, fn 157. ↩

²⁵⁷ SoD, ¶ 393. ↩

²⁵⁸ CEX-228, AEEG Resolution 493/2012/R/EFR, see SoC, ¶ 201. ↩

²⁵⁹ CEX-229, Decision Consiglio di Stato, Sez. VI, ruling no. 2936; see SoC, ¶¶ 201-202. ↩

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socialized. This mechanism would lend itself to similar criticisms, as would achieve discrimination between operators to the benefit, not so clearly justifiable, of those who produce programmable energy.

The economic and technical regulatory power by the Authority must, therefore, be exercised in a manner that permits to reach a solution that, on the one hand, could protect the market in its entirety by imposing imbalance costs also to the production units in question [nonprogrammable sources], and, on the other, could introduce calibrated mechanisms, based on the specificity of the source, that could take into account the methods of electricity production and the resulting difficulties in making a prediction as to input into the grid, which could achieve the same degree of reliability that the programmable energy production units must guarantee.²⁶⁰

235. After this decision by the Consiglio di Stato, GSE apparently reimbursed certain sums wrongfully charged to renewable energy producers under Resolutions 281 and 493, but did not reimburse all such wrongfully charged sums.²⁶¹

236. Subsequently, the Italian Electrical Energy Authority passed another Resolution 522/2014/R/EEL on 23 October 2014 (“Resolution 522”), which also pertained to a regulation of imbalance costs in respect of non-programmable renewable energy producers. In this connection, Resolution 522 provided the following:

The production units fed by non-programmable renewable sources must be subject to regulation of imbalances . . . the burdens deriving from the imbalances imputable to nonprogrammable renewable sources must not be socialized in order to avoid unjustifiable discrimination, and in order not to continue to allocate burdens on the community . . . it is appropriate to review the guidelines on imbalances for non-programmable renewable sources on the basis of the second option presented in the document . . .²⁶²

237. Pursuant to Resolution 522, dispatching users were given the option to choose between two courses of action. First, they could chose to pay imbalance costs based on regulations already in force for other unauthorized production units, and in turn, to modify their market supply strategies accordingly. Alternatively, they could chose to apply the new regulations that were specifically aimed at non-programmable renewable energy sources having created distinct bands for different sources of renewable energy with the option of

²⁶⁰ CEX-229, Decision Consiglio di Stato, Sez. VI, ruling no. 2936, point 7; see SoD, ¶ 395. ↩

²⁶¹ SoC, ¶¶ 202, 204. ↩

²⁶² CEX-230, AEEG Resolution 522/2014/R/EEL; see SoC, ¶ 203. ↩

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commercial aggregation.²⁶³ For photovoltaic plants, the band constituted a threshold for the modified and corrected binding program as 31%.²⁶⁴

238. Further to Resolution 522, renewable energy producers continue to pay new imbalance costs since 1 January 2015 onwards.²⁶⁵ Respondent relies on data until 31 December 2015 to state that 66% of the dispatching points associated with renewable energy producers have opted for the first option mentioned in ¶ 237 above, in order to pay imbalance costs.²⁶⁶

(4) The Robin Hood Tax and Constitutional Court Proceedings

239. By way of Legislative Decree No. 112/2008 dated 25 June 2008, which was converted into Law No. 133/2008 on 6 August 2008, Italy imposed taxes on windfall profits of oil, gas and other traditional energy companies, known as the “Robin Hood Tax” This was done by increasing the corporate income tax rate for companies with an annual gross income of over EUR 25 million to 33% from the original 27.5%.²⁶⁷ The rate of corporate income tax was further increased in July 2009 to 34% by Law No. 99/2009.²⁶⁸ According to contemporaneous press reports, the Robin Hood Tax was motivated to tap the hike in prices of traditional energy sources, such as oil and gas.²⁶⁹

240. In respect of renewable energy producers, Legislative Decree No. 112/2008 provided that “[t]he same disposition does not apply to subjects producing electricity by primarily using biomass and solar-photovoltaic and wind energy sources”.²⁷⁰ The Italian Revenue Agency had further confirmed in a Circular No. 35/E dated 18 June 2010 that “the application of the supplement is excluded for subjects which simultaneously . . . primarily produce

²⁶³ SoD, ¶¶ 398-405. ↩

²⁶⁴ SoD, fn 164. ↩

²⁶⁵ SoC, ¶ 203. ↩

²⁶⁶ SoD, ¶ 399. ↩

²⁶⁷ CEX-231, Law Decree No. 112/2008, 25 June 2008, converted into law by Law No. 133/2008; see SoC, ¶ 206. ↩

²⁶⁸ CEX-232, Law No. 99/2009, 23 July 2009. ↩

²⁶⁹ CEX-233, Paul Betts, “Italy’s ‘Robin Hood’ swoops again,” Financial Times; CEX-234, IlSole24Ore, press article, “Wall Street Journal: Robin Hood Tax, Italia prima ad agire”; see SoC, ¶ 207; see also SoD, ¶ 427. ↩

²⁷⁰ CEX-231, Law Decree No. 112/2008, 25 June 2008, converted into law by Law No. 133/2008, article 81(6) (Note: Note: Respondent’s translation of article 81(6) is at variance from Claimants’; see SoD, ¶ 422). ↩

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electricity from renewable sources, using biomass and solar-photovoltaic or wind sources, with respect to the total amount of energy produced.”²⁷¹ The exclusion of renewable energy producers from Legislative Decree No. 112/2008 is not disputed in these proceedings, except to the extent that Italy argues that this exclusion was based on certain conditions.²⁷²

241. On 13 August 2011, Italy passed the Legislative Decree No. 138/2011, which was converted into Law No. 148/2011 on 14 September 2011. This Law made, inter alia, two amendments to the scheme of Law No. 133/2008. First, it extended the scope of the Robin Hood Tax to also apply to renewable energy producers by deleting the stipulation excluding the renewable energy producers from the Robin Hood Tax. Second, it increased the corporate income tax rate from 34% to 38%, and reduced the threshold gross annual income required for coverage by the Robin Hood Tax to an annual income of EUR 10 million (and taxable income of over EUR 1 million), as opposed to the original EUR 25 million.²⁷³

242. This was followed in June 2013, by Italy further extending the scope of the Robin Hood Tax through Legislative Decree No. 69/2013, which was converted into Law No. 98/2013 dated 9 August 2013.²⁷⁴ In particular, by this amendment to the Legislative Decree No. 112/2008, the threshold gross annual income required for coverage by the Robin Hood Tax was further reduced to EUR 3 million (and taxable income of over EUR 300,000).²⁷⁵ After this extension of the Robin Hood Tax, Claimants’ photovoltaic plants also fell within its purview, which was not the case previously.

243. Thereafter, renewable energy producers challenged the constitutionality of such extensions of the Robin Hood Tax before the Italian Constitutional Court.

244. On 11 February 2015, the Italian Constitutional Court rendered its Decision No. 10/2015 declaring the Robin Hood Tax as unconstitutional (“Decision No. 10/2015”). In this

²⁷¹ CEX-239, Circular No. 35/E, pp. 9-10. ↩

²⁷² CEX-239, Circular No. 35/E, point 3.2; see SoD, ¶¶ 422-424; see also SoRy, ¶¶ 482 et seq. ↩

²⁷³ CEX-240, Law Decree No. 138/2011, 13 August 13 2011, articles 7.1(a) and (c), 7.3, preamble; see SoC, ¶ 209. ↩

²⁷⁴ CEX-248, Law Decree No. 69/2013, 21 June 2013; see SoC, ¶ 212. ↩

²⁷⁵ CEX-248, Law Decree No. 69/2013, 21 June 2013, article 5.1. ↩

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connection, the Constitutional Court specifically declared the “unconstitutionality of Article 81, paragraphs 16, 17 and 18, of [Legislative Decree] No. 112 of June 25, 2008”.²⁷⁶

245. The motivation behind the Constitutional Court’s Decision No. 10/2015 was, inter alia, “the incongruity of the means conceived by the legislature to the aim pursued”.²⁷⁷ This incongruity was, in turn, premised on the ground that the legislature established an increase of the corporate income tax that affected the whole income of an entity being taxed, without the support of “a mechanism making it possible to tax separately only a part of the income eventually connected to those activities pursued by the taxpayer”.²⁷⁸

246. Further, the Constitutional Court, in the following passage, found that the measure in question, i.e., the Robin Hood Tax, was violative of the requirement of ensuring that the entities in question have the “capacity to contribute” the taxes being assessed:

Under Article 53 of the Constitution, the capacity to contribute (“capacità contributiva”) represents the precondition and the limit to the taxation powers of the State and, at the same time, the duty of the taxpayer to take its share of the public expenditure, having to interpret this principle as a sectoral specification of the broader principle of equality under Article 3 of the Constitution . . . It is true that this Court has repeatedly stressed that “the Constitution does not impose a uniform taxation, with absolutely identical criteria and proportional for all types of tax”; rather it demands “an unfailing link with the ability to contribute, in a system framework informed to criteria of progression, as a further articulation, in the specific field of taxation, of the principle of equality, connected to the duty to remove the economic and social obstacles factually limiting the freedom and equality of citizens-human beings, in a spirit of political, economic and social solidarity (arts. 2 and 3 of the Constitution) . . . [A]ny diversification of the tax system, for economic areas or by type of taxpayers, must be supported by adequate justification, without which the differentiation might become arbitrary discrimination.²⁷⁹

²⁷⁶ CEX-253, Italian Constitutional Court Decision No. 10/2015, p. 16. ↩

²⁷⁷ SoD, ¶ 429; see SoRy, ¶ 484. ↩

²⁷⁸ CEX-253, Italian Constitutional Court Decision No. 10/2015, ¶ 6.5.1; see SoD, ¶ 431. ↩

²⁷⁹ CEX-253, Italian Constitutional Court Decision No. 10/2015, ¶ 6.2; see SoD, ¶¶ 21, 430; see also SoRy, ¶ 484. ↩

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247. aIn respect of the temporal scope of its Decision No. 10/2015, the Constitutional Court ruled that its Decision would not have retroactive effect.²⁸⁰ The rationale behind this finding of non-retroactivity was provided, inter alia, in the following terms:

The role entrusted to the Court as the guardian of the Constitution in its entirety requires avoiding constitutional declarations of illegality that determine, paradoxically, “effects even more incompatible with the Constitution” . . . of those that have led to declare unconstitutional the provision at stake. To avoid this, it is the duty of the Court to modulate its own decisions, even in terms of time, so as to avoid that the affirmation of a constitutional principle determines the sacrifice of another.²⁸¹

248. Following the Constitutional Court Decision No. 10/2015, Claimants, amongst other similar producers, were allegedly not reimbursed the amounts they had paid as Robin Hood Tax, nor were these amounts set off against future payments. Further, Italy confirmed by its Circular No. 18/E of 28 April 2015 that renewable energy producers would have to pay the Robin Hood Tax for the fiscal year 2014.²⁸²

(5) Classification of Photovoltaic Plants as “Immovable Property”

249. On 19 December 2013, Italy issued a Circular No. 36/E that classified the majority of photovoltaic plants as “immovable property”.²⁸³ Such classification as “immovable property” impacted the overall tax liability of photovoltaic plant owners, since for immovable properties the applicable depreciation rate was 4% instead of the 9% they previously used as movable property. Further, it impacted the municipal charges that photovoltaic plant owners had to pay, since they were now subjected to an additional municipal charge on buildings (“IMU Charge”),²⁸⁴ and charges relating to municipal services such as road maintenance and public lighting (“TASI Charge”).²⁸⁵

²⁸⁰ CEX-253, Italian Constitutional Court Decision No. 10/2015, p. 15 ↩

²⁸¹ CEX-253, Italian Constitutional Court Decision No. 10/2015; see SoD, ¶¶ 21, 433-435; R-SoRj, ¶¶ 554-562; relying on REX-46, Decisions n. 423 and 13 of 2004, n. 370 of 2003, n. 416 of 1992, n. 124 of 1991, n. 50 of 1989, n. 501 and n. 266 of 1988. ↩

²⁸² CEX-254, Circular No. 18/E; see SoC, ¶¶ 215-216. ↩

²⁸³ CEX-258, Circular No. 36/E, §s 2.1, 3.1.2. ↩

²⁸⁴ CEX-259, Legislative Decree No. 23/2011; see SoC, ¶ 219. ↩

²⁸⁵ CEX-260, Law no. 147/2013 of 27 December 2013; see SoC, ¶ 219. ↩

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250. The Parties dispute whether Circular No. 36/E was a reversal of the traditional position, whereby photovoltaic plants were considered “movable property”, which Claimants contend,²⁸⁶ or whether Circular No. 36/E was only a non-contradictory clarification of the existing legal regime in Italy, which Respondent argues.²⁸⁷ In this connection, the previous circulars issued by the Revenue Agency assume relevance.²⁸⁸ These circulars defined movable property as something that is not fixed into the ground and can be easily moved to another seat. Photovoltaic “systems” were considered to fall within the category of movable property,²⁸⁹ to the extent they constituted plants and machinery that can be “removed and placed in another place, while maintaining their original features”.²⁹⁰

251. Also relevant is a Resolution 3/T dated 6 November 2008 by the Agency for Territory, which clarified that photovoltaic panels qualify as immovable property, since “the substantial nature of the power plant”’ qualify as such for cadastral categories.²⁹¹

252. Respondent considers that the Circular No. 36/E only confirmed the above understanding of movable and immovable properties in Italian fiscal and cadastral regimes, and was, in turn, in line with Italian Corti di Cassazione or the Constitutional Court’s case law,²⁹² the OECD Model Tax Convention on Income and on Capital 2014 and the Italian Legislative Decree No. 44/2005.²⁹³

253. Thereafter, Italy’s 2016 Budget Law altered the classification of photovoltaic plants again, and according to Claimants, brought it almost in line with the position prior to the 2013 Circular No. 36/E. Pursuant to this, as of 1 January 2016, the determination of the value of real estate would carried out “taking into account the ground space and the buildings, as well as the elements structurally connected to them which increase their quality and usefulness” but excluding “machinery, devices, equipment and other systems, which are

²⁸⁶ SoC, ¶ 217. ↩

²⁸⁷ SoD, ¶ 22. ↩

²⁸⁸ CEX-256/CEX-399, Circular No. 38/E, 11 April 2008; CEX-257, Circular No. 38/E, 23 June 2008; see SoC, ¶ 217; see also SoD, ¶ 444; fn 184. ↩

²⁸⁹ CEX-257, Circular No. 38/E, 23 June 2008. ↩

²⁹⁰ CEX-256/CEX-399, Circular No. 38/E, 11 April 2008. ↩

²⁹¹ REX-048, Resolution 3/T of 6 November 2008 of the Agency for Territory; see SoD, ¶ 445. ↩

²⁹² REX-050, Italian Constitutional Court, decision No. 162 of 20 May 2008; see SoD, ¶¶ 449-440. ↩

²⁹³ SoD, ¶ 451 and fn 187; REX-014, OECD Model Law 2014, article 6.2 ↩

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operational to the specific production process”.²⁹⁴ The 2016 Budget Law also provided municipalities the right to be indemnified to the extent that they were receiving reduced income because of such favourable treatment in respect of the calculation of the value of real estate.²⁹⁵

254. Similar to the situation resulting from the Italian Constitutional Court Decision No. 10/2015 relating to the Robin Hood Tax (see ¶ 247 above), Claimants have not been reimbursed nor compensated for the additional amounts of taxes and/or charges they paid due to the classification of their plants as “immovable property”.²⁹⁶

G. THE SPALMA-INCENTIVI DECREE AND THE EVENTS THEREAFTER

255. Contemporaneous with the above described administrative and/or fiscal measures, Italy had enacted the Destinazione Italia Legislative Decree (discussed in ¶¶ 225-227), which was converted into law on 21 February 2014.²⁹⁷

256. In addition to modulating the minimum guaranteed price regime, the Destinazione Italia also gave renewable energy power plant operators who were benefiting from incentive regimes such as green certificates, all-inclusive feed-in tariffs or premium tariffs, the option between (i) continuing the existing incentive scheme for the 20 year period without any additional benefits after the expiration of this period; and (ii) accepting a reduced percentage of tariff incentives under the Conto Energia Decrees, in exchange for an extension in the duration of the incentive period by seven years.²⁹⁸ This option was introduced in the Destinazione Italia “[f]or the purpose of containing the annual burden on prices and on the electric rates of the incentives for renewable energy and for the purpose of maximizing the medium-long term production contribution from the existing power

²⁹⁴ CEX-261, Law No. 208/2015, 28 December 2015, article 1.21; see SoC, ¶¶ 221-222; see also SoD, ¶ 452. ↩

²⁹⁵ SoD, ¶ 453. ↩

²⁹⁶ SoC, ¶ 222; see SoD, fn 194. ↩

²⁹⁷ CEX262/CEX-221, Law Decree No. 145/2013, 23 December 2013. ↩

²⁹⁸ CEX262/CEX-221, Law Decree No. 145/2013, 23 December 2013, article 1(3). Claimants submit that photovoltaic plants were not covered by the Destinazione Italia, since it was applicable to incentives other than the Conto Energia; see SoRy, ¶¶ 317 et seq.; see also CEX-385, QualEnergia, “Spalma-incentivi, in Gazzetta Ufficiale il decreto per le rinnovabili non FV” ↩

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plants”. Claimants contend that few, if any, investors accepted this offer for a remodulation of tariffs under the Destinazione Italia.²⁹⁹

257. Six months after the Detinazione Italia, on 24 June 2014, Italy enacted the Legislative Decree No. 91/2014 and converted it into law by Law No. 116/2014 on 11 August 2014 (“Spalma-incentivi Decree”). The Spalma-incentivi Decree is discussed in (1) below, followed by (2) a discussion of the Italian Constitutional Court’s decision in relation to the Spalma-incentivi Decree, and (3) the events following the Spalma-incentivi Decree.

(1) The Spalma-incentivi Decree

258. The Spalma-incentivi Decree sought to, inter alia, “remodulate” the incentive tariffs under the Conto Energia Decree, and to provide for altered “modalities” for disbursement of the incentive tariffs “[s]tarting from 1 January 2015”.³⁰⁰ This, according to Article 26(1) of the Spalma-incentivi Decree, was “[i]n order to optimize the management of the timing for the gathering and the disbursement of the incentive tariffs and for the purpose of implementing a better sustainability of the renewable energy support policy".³⁰¹ In addition, Article 23(1) of the Spalma-incentivi Decree stated that the Decree was motivated towards achieving “a more equitable distribution of the tariff burden among the various categories of energy consumers” and accordingly reducing “electricity rates for customers of medium voltage and low voltage electricity".³⁰²

259. The Spalma-incentivi Decree is the principal regulatory measure at issue in this case, and numerous factual aspects concerning the same are disputed between the Parties. Claimants claim, inter alia, that the Spalma-incentivi Decree effectively abrogated the Conto Energia Decrees in a retroactive manner,³⁰³ and such retroactive regulatory modifications did not

²⁹⁹ CEX262/CEX-221, Law Decree No. 145/2013, 23 December 2013, article 1(3); see SoC, ¶ 224; see also SoD, ¶¶ 289-291 (Note: Respondent’s translation of article 1(3) is at variance with Claimants’.). ↩

³⁰⁰ CEX-266, Law Decree No. 91/2014, 24 June 2014, articles 26(1) and 26(3). ↩

³⁰¹ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(1); see SoD, ¶ 299 (Respondent’s translation of article 26(1) is at variance with Claimants’.). ↩

³⁰² SoD, ¶ 300. ↩

³⁰³ SoC, § G; SoRy, § A(4)(c); CEX-381, Communication from the Commission to the European Parliament and the Council, COM (2011) 31, 31 January 2011; CEX-382, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM ↩

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serve to decrease costs of electricity for “residential customers and public lighting”,³⁰⁴ nor was a drop in electricity consumption a “relevant” motivation behind the Spalma-incentivi Decree.³⁰⁵ On the contrary, Respondent categorizes the Spalma-incentivi Decree as a “fine-tuning” of the tariff regime, which was a non-discriminatory and prospective policy choice within the State’s regulatory powers. As per Respondent, this was motivated by legitimate considerations relating to the rise in the A3 Component of the total electricity costs borne by the end consumers attributable to the incentive tariffs.³⁰⁶

260. The A3 Component of the total electricity costs was projected, by the GSE, to reduce from EUR 6.7 billion in 2013 (see ¶¶ 164-165) to EUR 6.05 billion by 2018 as a result of the Spalma-incentivi Decree.³⁰⁷ On a related note, a decision was issued by the Corte dei Conti in Italy in November 2015, which had highlighted the delays in payment of the amounts pertaining to the A3 Component. In this regard, the decision stated that such delays “take the GSE to undertake a greater risk for the fulfilment of all payments to producers of electricity from renewable energy sources, and the consequent ned to resort to credit lines of GSE . . . leaving the Company without the necessary financial flexibility to deal with possible additional requirements.”³⁰⁸

261. The Spalma-incentivi Decree’s remodulation of the incentive tariff regime was applicable for photovoltaic plants with a capacity above 200 kW, which constituted 4% of the total beneficiaries under the Conto Energia scheme, but amounted to 60% of the total expenditure relating to the incentives.³⁰⁹ This remodulation of the incentive tariff regime

(2012) 271, June 6, 2012; CEX-383, EC Commission Memo 13/948 of 5 November 2013; CEX-384, Italian Procurer General’s Brief submitted to the Court of Cassation, 20 September 2016.

³⁰⁴ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 23(1); see SoRy, ¶¶ 294, 301. ↩

³⁰⁵ SoRy, ¶¶ 297-298. ↩

³⁰⁶ SoD, ¶¶ 15-16, 294-296, 472-476; R-SoRj, ¶¶ 313-316, 322-326; SoRy, ¶ 297; CEX-368, ENEA, Rapporto Annuale Efficienza Energetica, 2015, energy efficiency implementation in residential, industry, transportation and services sector generated for the period 2005-2013; CEX-370, ENEA, Domanda e offerta di energia in Italia e nel mondo; REX-027, Illustrative Report to the project of law converting the Law Decree 91/2014 presented to the Parliament (A.S. n. 1541); REX-060, Supreme Court of Spain, No. 2810/2016, p. 5-6, citing Constitutional Court of Spain, No. 270/2015; REX-061, Italian Constitutional Court, decision No 236/2009, § 6.3. ↩

³⁰⁷ CEX-365, GSE Report on prospective developments for RES (2013–2018), Speciale Energie Rinnovabili; see SoRy, ¶ 295. ↩

³⁰⁸ REX-063, Determinazione e relazione sul risultato del controllo eseguito sulla gestione finanziaria della G.S.E. S.p.A. “Gestore dei Servizi Energetici” – 2014, p. 23; see R-SoRj, ¶ 335. ↩

³⁰⁹ SoD, ¶ 313. ↩

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came in the form of three options provided to the photovoltaic plant operators, which they could choose from:

(i) The first option provided under the Spalma-incentivi spread out reduced incentive tariffs over a period of 24 years starting from the entry into operation of a photovoltaic plant, instead of the original 20 year period. The incentive tariffs would be reduced pursuant to a percentage of reduction set out in the following table:³¹⁰

(ii) The second option maintained the original 20 year period of incentive tariffs, but prescribed a remodulation of the incentive tariffs by dividing the tariffs between “a first period in which a reduced incentive tariff is disbursed”, i.e. between 2015-2019; and “a second period in which the incentive tariffs [shall be] equally incremented”.³¹¹ Under this option, the remodulation percentages were to be established by the Ministry for Economic Development by 1 October 2014, “with the aim of allowing a yearly saving, with respect to the current disbursements and on the assumption of the

³¹⁰ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(3)(a) and Annex 2; see SoC, ¶ 228; see also SoD, ¶ 314. ↩

³¹¹ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(3)(b). ↩

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adhesion of all the producers to this option, of at least [EUR] 600 [m]illion for the period 2015-2019”.³¹²

These remodulation percentages were prescribed in the Decree of the Ministry for Economic Development dated 17 October 2014.³¹³ On 27 October 2014, the GSE’s website published the “Tables containing the values of the coefficients of remodulation (1-Xi) to be multiplied with the previous incentives . . . in the event of selection of option b) identified in Article 26, paragraph 3, Law No. 116 of August 11, 2014".³¹⁴ Based on these Tables, for the years 2015-2019, the remodulation percentages range from 68.61% of the original tariff under the Conto Energia tariff regime, for photovoltaic plants having 11 years out of the 20 year incentive period remaining, to 90.30% for photovoltaic plants having 19 years or more remaining. Correspondingly, during the last five years of the 20 year incentive period, the remodulation percentages range from 131.39% of the original tariff under the Conto Energia tariff regime, for photovoltaic plants having 11 years of these 20 years remaining, to 109.70% of the original tariff for photovoltaic plants having 19 years or more remaining.³¹⁵

(iii) The third option also maintained the original 20 year incentive period, but prescribed for a progressive reduction of incentive tariffs for the residual incentive period based on the capacity of a photovoltaic plant. This progressive reduction was stipulated in the following terms:

(a) 6% for photovoltaic plants having a capacity between 200 and 500 kW;

(b) 7% for photovoltaic plants having a capacity between 500 and 900 kW; and

(c) 8% for photovoltaic plants having a capacity higher than 900 kW.³¹⁶

³¹² CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(3)(b). ↩

³¹³ REX-030, Ministerial Decree 17 October 2014, Laying down the mode for the restructuring of tariffs for electricity produced by photovoltaic plants, in compliance with article 26, paragraph 3, letter. b) of Decree-Law 24 June 2014, n. 91; see SoD, ¶ 314. ↩

³¹⁴ CEX-267, GSE, Tables reshaping values of coefficient; see SoC, ¶ 229. ↩

³¹⁵ CEX-267, GSE, Tables reshaping values of coefficient; see SoC, fn 344. ↩

³¹⁶ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(3)(c); see SoC, ¶ 230; see also SoD, ¶ 314. ↩

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262. The Spalma-incentivi Decree granted the photovoltaic plant operators until 30 November 2014 to communicate to the GSE which of the above three options they select. The Spalma-incentivi Decree also mentioned that “[i]n the absence of a communication from the producer”, the default option that shall be applied by the GSE is the third one.³¹⁷ It was estimated that this remodulation of the incentive tariff regime would bring about savings to the total cost of the incentive regime in the amount of EUR 420 million per year.³¹⁸

263. Based on data provided by the GSE, Respondent submits that by 30 November 2014, 37.29% photovoltaic plant operators chose the second option of tariff remodulation, whereas 1.39% chose the first option. To all the remaining plants, the third option was assigned by default.³¹⁹ All of Claimants’ photovoltaic plants were assigned the third option by default.

264. In addition to the above tariff remodulation scheme, the Spalma-incentivi Decree also provided for the following options to the photovoltaic plant operators:

The recipients of the incentive tariffs mentioned in paragraphs 3 and 4 may access to bank loans amounting up to the difference between the expected incentive tariff as of 31 December 2014 and the remodulated incentive tariff pursuant to paragraphs 3 and 4. Such loans can benefit, cumulatively or alternatively, on the basis of agreements with the banking system, of funding or guarantees by Cassa depositi e prestiti S.p.A . . .³²⁰

Should it be necessary in relation to the remodulated duration of the disbursement of the incentive tariffs, the Regions and the local entities adapt, each in relation to their competences, the duration of the permits, however named, issued for the construction and operation of the [photovoltaic] plants falling within the scope of application of this Article 26.³²¹

³¹⁷ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(3)(c); see SoC, ¶ 231; see also SoD, ¶ 315. ↩

³¹⁸ SoD, ¶ 301. ↩

³¹⁹ SoD, ¶ 316. ↩

³²⁰ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(5); see REX-031, Ministerial Decree 29 December 2014, State guarantee on the exposure of Cassa Depositi e Prestiti S.p.A for bank loans to the beneficiaries of the incentives under Article 26, paragraph 5, of Law Decree 24 June 2014, No. 91; see also SoD, ¶ 318 (The loan guarantee scheme mentioned in article 26(7) of the Spalma-incentivi has not yet entered into force. A photovoltaic industry association in Italy, Assorinnovabili, maintains a rolling clock on its website counting the days that have elapsed since Italy first promised the loan guarantees involving Cassa depositi e prestiti S.p.A; see, in this regard, CEX-387, Ritardometro or rolling clock of the PV industry association Assorinnovabili: http://www.assorinnovabili.it/Scopri-le-rinnovabili/Ritardometro_126.html; SoRy, ¶ 334). ↩

³²¹ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(6); see SoD, ¶ 319. ↩

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The recipients of long-term incentive tariffs, however named, for the production of renewable energy, can sell up to 80% of such incentives to a buyer selected amongst the “primary European financial players”.³²²

265. The Spalma-incentivi Decree also brought about alterations in payment modalities. Whereas previously the GSE would pay incentive tariffs to photovoltaic plant operators on a monthly basis, at least for plants with capacity over 20 kW, based on the plant’s actual production,³²³ the Spalma-incentivi Decree provided that from the second semester of 2014, the GSE would pay tariffs in monthly instalments of 90% of the plant’s estimated yearly average production. Thereafter, the GSE would make the requisite adjustments by 30 June of the following year.³²⁴

266. Moreover, the Spalma-incentivi Decree, together with a Decree of the Minister of Economic Development dated 24 December 2014, altered the Administrative Management Fee of EUR 0.0005/kWh of incentivized energy prescribed in the Fifth Conto Energia (see Section F(1) above). It was estimated that this alteration in the Administrative Management Fee would bring about savings to the total cost of the incentive regime in the amount of EUR 30 million per year. The Administrative Management Fee was made contingent on the photovoltaic plant’s capacity in the following terms:

(a) 2.20 EUR/kW for photovoltaic plants having a capacity between 3 and 6 kW;

(b) 2 EUR/kW for photovoltaic plants having a capacity between 6 and 20 kW;

(c) 1.80 EUR/kW for photovoltaic plants having a capacity between 20 and 200 kW;

(d) 1.40 EUR/kW for photovoltaic plants having a capacity between 200 and 1000 kW; and

³²² CEX-266, Law Decree No. 91/2014, 24 June 2014, articles 26(7)-26(12); see SoD, ¶ 320. ↩

³²³ CEX-30, AEEG Resolution no. 188/05, 14 September 2005, article 4; CEX-32, Sample GSE agreement under First Conto Energia Decree, article 3; CEX-268, AEEG Resolution No. 90/2007, 13 April 2007, article 8.5; CEX-164, Sample GSE agreement under the Fourth Conto Energia Decree, article 4; CEX-194, Sample GSE agreement under the Fifth Conto Energia Decree, article 6. ↩

³²⁴ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 26(2); REX-029, Ministerial Decree 16 October 2014, Approval of operating procedures for the disbursement by the GSE of tariffs for electricity produced by PV plants, in implementation of Article 26, paragraph 2 of the Law Decree No 91 of 24 June 2014; see SoD, ¶ 306; see SoC, ¶ 232; see also SoD, ¶ 305;. ↩

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(e) 1.20 EUR/kW for photovoltaic plants having a capacity above 1 MW.³²⁵

267. In addition the above major changes, the Spalma-incentivi Decree also introduced other regulatory alterations, such as (i) introduction of a contribution of 5% to the system costs for power plants having capacity between 20 to 500 kW operating under the “regime of exchange in proximity”;³²⁶ (ii) revision of the remuneration of electrical systems in the smaller Italian islands that are not interconnected;³²⁷ and (iii) reduction in the preferential electricity tariff enjoyed by the Italian Railway Network S.p.A to the effect of savings in the total cost estimated at EUR 80 million.³²⁸

268. After these measures were introduced in the Spalma-incentivi, a cumulative savings of almost EUR 2.7 billion on electricity bills was recorded by the Ministry for Economic Development, of which approximately EUR 1.7 billion were for the benefit of small and medium enterprises (with an average percentage decrease of 8.5% for small voltage enterprises and of 10% for the medium voltage enterprises) and the remaining EUR 1 billion benefitted the consumers.³²⁹

269. Claimants highlight that the Spalma-incentivi Decree was enacted amidst criticism from various factions, including committees or ambassadors writing on behalf of international investors,³³⁰ associations of renewable energy producers at the national level in Italy,³³¹ and most notably by Italian Senators and members the Italian House of Representatives

³²⁵ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 25; CEX-271, Decree of the Minister of Economic Development, 14 December 2014, § 1; CEX-272, GSE Note, “Modalità operative per il riconoscimento delle tariffe a copertura dei costi sostenuti dal GSE per il sostegno alle fonti rinnovabili e all’efficienza energetica”; see SoC, ¶ 233; see also SoD, ¶ 301. ↩

³²⁶ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 25bis; see SoD, ¶ 301. ↩

³²⁷ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 28; see SoD, ¶ 301. ↩

³²⁸ CEX-266, Law Decree No. 91/2014, 24 June 2014, article 29; see SoD, ¶ 301. ↩

³²⁹ REX-028A, MISE Press Release of 6 February 2015, Bollette elettriche, vanno a segno misure governo: risparmi per 2,7 miliardi; see SoD, ¶¶ 302-303. ↩

³³⁰ CEX-279, Christopher Prentice, Ambassador of the United Kingdom in Rome, Letter to the President of the Senate Committee, Massimo. Mucchetti; CEX-280, Foreign Investors Solar Committee, letter to President Matteo Renzi, published in Quale Energia, press article, “Spalma-incentivi, 30 investitori internazionali scrivono a Renzi”; see SoC, ¶¶ 238-239; see also SoRy, ¶ 245. ↩

³³¹ CEX-281, Energy Magazine, press article, “Oettinger no ai tagli retroattivi agli incentive”; CEX-282, AssoRinnovabili, Letter to Günther Oettinger, European Energy Commissioner, 26 June 2014, see SoC, ¶ 240. ↩

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during discussions surrounding the enactment of the Spalma-incentivi Decree.³³² In this regard, one of the senators, Senator Piccoli, mentioned the following in respect of the alteration of the regime under the Conto Energia Decree:

Intervention on the photovoltaic, by changing the terms of the agreements between the State and individuals, implies less credibility and worst international reputation . . . in the eyes of investors, then we cannot forget that many disputes are predictable both internal and in international fora. Indeed, such a mechanism . . . seems to conflict with the protection of investment forecasts contained in the European Energy Charter Treaty.³³³

270. Similarly, Senator Arrigoni criticized the Spalma-incentivi Decree stating that it had “three negative features: it is retroactive, discriminatory, and likely to be challenged as it violates essentially the certainty of international and national law and thus the credibility of our country before Italians and foreign investors . . .”³³⁴

(2) The Italian Constitutional Court Decision

271. On 24 January 2017, the Italian Constitutional Court released its Decision No. 16/2017 originally dated 7 December 2016 on the legitimacy of Articles 26(2) and 26(3) of the Spalma-incentivi Decree (“Constitutional Court Decision”).³³⁵

272. Renewable energy producers challenged the constitutionality of these provisions of the Spalma-incentivi Decree, on the ground that they were contrary to Articles 3 and 41 of the Italian Constitution, “for violation on the principle of reliance on firm grounds of advantage, recognized by agreements qualified as of ‘private law’” and for “their unreasonableness and because of the disparity of treatment between different operators of

³³² CEX-273, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 291, pp. 74-78; CEX-274, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 292; CEX-275, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 278; CEX-276, Congress of Deputies of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 279; CEX-277, Congress of Deputies of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 280; CEX-278, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 304; see SoC, ¶¶ 234-237; see also SoRy, ¶ 245. ↩

³³³ CEX-273, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 291, pp. 74-75; CEX-278, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 304. ↩

³³⁴ CEX-275, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 278; see SoC, ¶ 235; see also SoRy, ¶¶ 245; 247-248. ↩

³³⁵ REX-032, Italian Constitutional Court Decision No. 16/2017, 7 December 2016. ↩

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the sector”.³³⁶ As per Respondent, these involved issues relating to legitimate expectations, reasonableness and equality and lack of proportionality.³³⁷

273. The Constitutional Court denied the challenges to the constitutionality of Articles 26(2) and 26(3) of the Spalma-incentivi Decree. Notable findings of the Constitutional Court Decision, in this regard, were, inter alia, as follows:

As a matter of principle, the reliance of citizens in legal certainty is “a fundamental and indispensable element of the rule of law . . . However – as the firm case-law of this Court, in coherence also with that of the ECtHR, has clarified – protection of reliance does not entail, in our legal system, that the legislature may not enact provisions which change unfavorably the regulation of long-term relationships, and this even if their object are perfect legal rights . . . The only exception is, in matters of criminal law, that of the prohibition of retroactive norms, set by article 25, second para., of the Constitution”. It remains firm that such provisions, “as any other legal norm, must not result in an irrational regulation, arbitrarily effecting substantial rights created by the previous law, frustrating in such way also the reliance of citizens in legal certainty” . . .

The analysis of the ratio of the contested norm excludes that it has unreasonably and unforeseeably affected the long-term relations, arising from the agreements reached by the percipients of the incentives with GSE, therefore violating the principle of legal certainty.

In fact, the legislature in 2014 has intervened in a general context in which, on the one hand, the remuneration of incentivizing fees for energy produced through photovoltaic apparatus was gradually increasing, taking into account both the costs of production as a result of the considerable technological development of the sector, and the overall European framework. But on the other hand, and correlatively, one registered the growing economic burden of such incentives on the final users of electric energy, especially on SMEs which are the fabric of national industry.³³⁸

274. Further, in respect of the GSE contracts and the reliance placed by renewable energy producers on them, the Constitutional Court, inter alia, found:

[T]he guarantee of stability of the incentive for all the due period does not imply, however, as a necessary consequence, that the measure should remain

³³⁶ REX-032, Italian Constitutional Court Decision No. 16/2017, 7 December 2016, p. 1. ↩

³³⁷ SoD, ¶¶ 8, 322. ↩

³³⁸ REX-032, Italian Constitutional Court Decision No. 16/2017, 7 December 2016, ¶¶ 8.1 and 8.2; see SoD, ¶¶ 327-331. ↩

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unchanged for 20 years, unchanged and unaffected by the variations which are common to long-term contracts.

This is even truer if one considers that the agreements reached with GSE cannot be qualified as contracts meant to determine the exclusive profit of the operator, with terms and conditions blocked at the initial conditions, for twenty years, even if technological conditions may change profoundly. They are instead regulatory instruments, aimed at reaching the objective of incentivizing certain sources of energy in equilibrium with other sources of renewable energy, and with the minimum sacrifice for the users who ultimately bear the economic burden.³³⁹

(3) Events following the Spalma-incentivi Decree

275. Claimants’ position is that the reduction of incentive tariffs had a “dramatic impact”, and resulted in a reduction in value of Claimants’ investments by 19%, and when coupled with the other regulatory measures taken by Italy, the reduction in value amounted to 27%.³⁴⁰ This allegedly resulted, inter alia, in Claimants having to restructure the debts they had undertaken for financing their investments, and also impacted the payment of dividends to investors. In this connection, Claimants’ witness, Mr. Mark Florian states as follows:

Indeed, prior to Italy’s retroactive amendment of the tariff regime, we had been distributing dividends to our investors, as expected when we made the original investment. The tariff reduction eliminated our ability to pay any substantive dividends and made it difficult, without a restructuring, to pay the debt service payments on the PV plants. This change eliminated any substantive return to our investors on the investment, and put the ability to even return the capital invested in the PV plants at substantial risk.³⁴¹

276. Ultimately, in 2016, Claimants’ parent company (SunReserve International, LP, created by SunEdison and FirstReserve as discussed in Section E(1) above) decided to sell the entire investment portfolio in photovoltaic plants in Italy. Claimants concluded this sale in

³³⁹ REX-032, Italian Constitutional Court Decision No. 16/2017, 7 December 2016, ¶ 8.3; see SoD, ¶¶ 332-334; see also R-SoRj, ¶¶ 318-320. ↩

³⁴⁰ Second Witness Statement of Mr. Mark Florian, 29 March 2018 (“Second Florian Witness Statement”), ¶ 16; First Expert Report of Richard Edwards, 28 July 2017 (“First FTI Quantum Report”), ¶ 2.21. ↩

³⁴¹ Second Florian Witness Statement, ¶ 17. ↩

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August 2016, while specifically reserving and retaining their ownership over the present ECT claim against Italy.³⁴²

277. Prior to this, on 4 May 2016, Claimants sent a letter to Respondent notifying it of the dispute, and inviting it to settle the dispute amicably.³⁴³ Absent any amicable settlement, Claimants proceeded to commence these arbitration proceedings.

V. SUMMARY OF THE PARTIES’ CLAIMS AND RELIEFS SOUGHT

278. In these arbitration proceedings, Claimants claim that Respondent breached the ECT by first promising fixed incentive tariffs under the Conto Energia regime and consistent minimum guaranteed prices under the off-take regime, and subsequently, backing out of its promises by undertaking various regulatory measures culminating in the Spalma-incentivi Decree that came into effect on 1 January 2015.

279. Claimants claim that Italy’s actions resulted in a breach of the ECT on three counts: (i) failure to grant Claimants’ investments fair and equitable treatment, (ii) impairing Claimants’ investments by unreasonable or discriminatory measures, and (iii) violating the ECT’s Umbrella Clause.

280. Using the Date of Assessment of 1 January 2015, Claimants updated assessment of damages, including interest, is EUR 40.89 million.³⁴⁴

281. In their SoC and SoRy, Claimants request the Tribunal to issue an Award containing the following relief:

(a) a declaration that the Tribunal has jurisdiction over this dispute;

(b) a declaration that Italy has violated the Energy Charter Treaty and international law with respect to Claimants’ investments;

(c) compensation to Claimants for all damages they have suffered, as set forth in Claimants’ submissions and as may be further developed and quantified in the course of this proceeding;

³⁴² First Florian Witness Statement, ¶¶ 27-28; RE-128, Share Purchase Agreement with Tages Capital SGR S.p.A., 5 August 2016. ↩

³⁴³ CEX-7, Notice of Legal Dispute Arising Under the Energy Charter Treaty and Offer of Amicable Settlement. ↩

³⁴⁴ SoRy, ¶ 562; Second Expert Report of Richard Edwards, 29 March 2018 (“Second FTI Quantum Report”), Table 1-2. ↩

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(d) all costs of this proceeding, including (but not limited to) Claimants’ attorneys’ fees and expenses, the fees and expenses of Claimants’ experts, and the fees and expenses of the Tribunal and SCC;

(e) pre-award and post-award compound interest at the highest lawful rate from the Date of Assessment until Italy’s full and final satisfaction of the Award; and

(f) any other relief the Tribunal deems just and proper.³⁴⁵

282. In their Post-Hearing Brief and Reply Post-Hearing Brief, Claimants amended their request for relief in the following manner:

• a declaration that the Tribunal has jurisdiction under the ECT for all of Claimants’ claims, thereby rejecting Respondent’s jurisdictional objections in full;
• a declaration that Italy has violated Part III of the ECT and international law with respect to Claimants’ investments;
• compensation to Claimants for all damages they have suffered as set forth in their Statement of Claim and in their Reply Memorial on the Merits and as may be further developed and quantified during the course of this proceeding;
• all costs of this proceeding, including (but not limited to) Claimants’ attorneys’ fees and expenses, the fees and expenses of Claimants’ experts, and the fees and expenses of the Tribunal and SCC;
• pre- and post-award compound interest at the highest lawful rate from the Date of Assessment until Italy’s full and final satisfaction of the Award; and
• any other relief the Tribunal deems just and proper.³⁴⁶

283. Respondent challenge the Tribunal’s jurisdiction over the entirety of Claimants’ claims on the ground that this is a dispute between European investors against an EU Member State, and such intra-EU disputes cannot be resolved under the ECT. Alternatively, Respondent challenge the Tribunal’s jurisdiction over parts of Claimants’ claims that (i) are allegedly exempted under Article 21 ECT; (ii) were not part of Claimants’ offer to resolve disputes amicably; and (iii) that are covered by the dispute resolution clauses in the agreements entered into between GSE and Claimants’ subsidiaries.

284. In the alternative, Respondent contests all of Claimants’ claims on the merits and also disputes Claimants’ calculation of damages.

³⁴⁵ SoC, ¶ 347; SoRy, ¶ 563. ↩

³⁴⁶ PHB, ¶ 141; C-RPHB, ¶ 61. ↩

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285. In its updated requests for relief, contained in the R-SoRj, Respondent requests the Tribunal to:

(a) Decline jurisdiction to decide, as the ECT does not cover intra-EU disputes.

(b) Alternatively, decline jurisdiction over the totality of claims, since:

- Some of the attacked measures are exempted under Article 21 ECT;
- No amicable solution has been attempted for some further measures; and
- The exclusivity forum choice contained in the GSE Agreements bans this Tribunal from judging under the Umbrella Clause.

(c) In a further alternative, decline admissibility of protection of the Claimants’ alleged interests since these are barred from seeking relief, as they did not seek amicable solution for a number of claims.

(d) Should the Tribunal consider to have jurisdiction over the case and that claims are either totally or partially admissible, declare on the merits that:

- The Respondent did not violate Article 10(1) ECT, first and second sentence, since it did not fail to grant fair and equitable treatment to the Claimants’ investment.
- The Respondent did not violate Article 10(1) ECT, fourth sentence, either, since it always adopted reasonable and non-discriminatory measures to affect Claimants’ investment.
- Article 10(1) ECT, last sentence (the so-called “Umbrella Clause”) does not apply in the case at stake, or, alternatively, that the Respondent did not violate it neither through statutory or regulatory measures, nor the GSE Conventions.
- Consequently, declare that no compensation is due.

(e) In the unfortunate event that the Tribunal were to recognize legitimacy to one of the Claimants’ griefs:

- Declare that damages were not adequately proved.
- In addition, declare that both the methods for calculation and calculation itself of damages proposed by the Claimants are inappropriate and erroneous.
- Order the Claimant[s] to pay all relevant expenses and disbursements by the Respondent because of these proceedings in accordance with [SCC] Arbitration Rules.³⁴⁷

³⁴⁷ R-SoRj, ¶¶ 633-635. ↩

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286. In its Post-Hearing Brief and Reply Post-Hearing Brief, Respondent “reiterates all its objections and defences concerning jurisdiction, the admissibility of the claim and its merits.”³⁴⁸

VI. JURISDICTION ISSUE RELATING TO EU LAW AND ACHMEA

A. RELEVANT TREATY PROVISIONS

287. The following provisions of the ECT are relevant for the Tribunal’s analysis of the jurisdiction issue relating to EU law and the ECJ Judgment. The dispute resolution provision, contained in Article 26 ECT, is reproduced only to the extent relevant:

Article 1(2) ECT
“Contracting Party” means a state or Regional Economic Integration Organisation which has consented to be bound by this Treaty and for which the Treaty is in force.

Article 1(3) ECT
“Regional Economic Integration Organisation” means an organisation constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them in respect of those matters.

Article 1(10) ECT
“Area” means with respect to a state that is a Contracting Party:
(a) the territory under its sovereignty, it being understood that territory includes land, internal waters and the territorial sea; and
(b) subject to and in accordance with the international law of the sea: the sea, sea-bed and its subsoil with regard to which that Contracting Party exercises sovereign rights and jurisdiction.
With respect to a Regional Economic Integration Organisation which is a Contracting Party, Area means the Areas of the member states of such Organisation, under the provisions contained in the agreement establishing that Organisation.

Article 16: Relation to Other Agreements

³⁴⁸ R-PHB, ¶ 228; R-RPHB, ¶ 68. ↩

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Where two or more Contracting Parties have entered into a prior international agreement, or enter into a subsequent international agreement, whose terms in either case concern the subject matter of Part III or V of this Treaty,
(1) nothing in Part III or V of this Treaty shall be construed to derogate from any provision of such terms of the other agreement or from any right to dispute resolution with respect thereto under that agreement; and
(2) nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty,
where any such provision is more favourable to the Investor or Investment.

Article 25: Economic Integration Agreements
(1) The provisions of this Treaty shall not be so construed as to oblige a Contracting Party which is party to an Economic Integration Agreement (hereinafter referred to as “EIA”) to extend, by means of most favoured nation treatment, to another Contracting Party which is not a party to that EIA, any preferential treatment applicable between the parties to that EIA as a result of their being parties thereto.
(2) For the purposes of paragraph (1), “EIA” means an agreement substantially liberalising, inter alia, trade and investment, by providing for the absence or elimination of substantially all discrimination between or among parties thereto through the elimination of existing discriminatory measures and/or the prohibition of new or more discriminatory measures, either at the entry into force of that agreement or on the basis of a reasonable time frame.
(3) This Article shall not affect the application of the WTO Agreement according to Article 29.

Article 26: Settlement of Disputes between an Investor and a Contracting Party
(1) Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably.
(2) If such disputes cannot be settled according to the provisions of paragraph (1) within a period of three months from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution:

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(a) to the courts or administrative tribunals of the Contracting Party party to the dispute;
(b) in accordance with any applicable, previously agreed dispute settlement procedure; or
(c) in accordance with the following paragraphs of this Article.
(3) (a) Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of this Article.
(b)
(i) The Contracting Parties listed in Annex ID do not give such unconditional consent where the Investor has previously submitted the dispute under subparagraph (2)(a) or (b).
(ii) For the sake of transparency, each Contracting Party that is listed in Annex ID shall provide a written statement of its policies, practices and conditions in this regard to the Secretariat no later than the date of the deposit of its instrument of ratification, acceptance or approval in accordance with Article 39 or the deposit of its instrument of accession in accordance with Article 41.
(c) A Contracting Party listed in Annex IA does not give such unconditional consent with respect to a dispute arising under the last sentence of Article 10(1).
(4) In the event that an Investor chooses to submit the dispute for resolution under subparagraph (2)(c), the Investor shall further provide its consent in writing for the dispute to be submitted to:
(a)
(i) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States opened for signature at Washington, 18 March 1965 (hereinafter referred to as the “ICSID Convention”), if the Contracting Party of the Investor and the Contracting Party party to the dispute are both parties to the ICSID Convention; or

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(ii) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention referred to in subparagraph (a)(i), under the rules governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre (hereinafter referred to as the “Additional Facility Rules”), if the Contracting Party of the Investor or the Contracting Party party to the dispute, but not both, is a party to the ICSID Convention;
(b) a sole arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (hereinafter referred to as “UNCITRAL”); or
(c) an arbitral proceeding under the Arbitration Institute of the Stockholm Chamber of Commerce.
...

288. The relevant provisions of the Treaty of the Functioning of the European Union (“TFEU”) are as follows:

Article 267
The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of the Treaties;
(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union;
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon.
Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court.
If such a question is raised in a case pending before a court or tribunal of a Member State with regard to a person in custody, the Court of Justice of the European Union shall act with the minimum of delay.

Article 344

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Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein.

Article 351
The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties.
To the extent that such agreements are not compatible with the Treaties, the Member State or States concerned shall take all appropriate steps to eliminate the incompatibilities established. Member States shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude.

289. Finally, Articles 30, 31, 32 and 41 of the Vienna Convention on the Law of Treaties 1969 (“VCLT”) are also relevant for the Tribunal’s analysis:

Article 30. Application of Successive Treaties Relating to the Same Subject-Matter
1. Subject to Article 103 of the Charter of the United Nations, the rights and obligations of States parties to successive treaties relating to the same subject-matter shall be determined in accordance with the following paragraphs.
2. When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail.
3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.
4. When the parties to the later treaty do not include all the parties to the earlier one:
(a) As between States parties to both treaties the same rule applies as in paragraph 3;
(b) As between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations.

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5. Paragraph 4 is without prejudice to article 41, or to any question of the termination or suspension of the operation of a treaty under article 60 or to any question of responsibility which may arise for a State from the conclusion or application of a treaty the provisions of which are incompatible with its obligations towards another State under another treaty.

Article 31. General Rule of Interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
(a) Any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;
(b) Any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a) Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) Any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) Any relevant rules of international law applicable in the relations between the parties.
4. A special meaning shall be given to a term if it is established that the parties so intended.

Article 32. Supplementary Means of Interpretation
Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) Leaves the meaning ambiguous or obscure; or
(b) Leads to a result which is manifestly absurd or unreasonable.

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Article 41. Agreements to Modify Multilateral Treaties between Certain of the Parties Only
1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:
(a) The possibility of such a modification is provided for by the treaty; or
(b) The modification in question is not prohibited by the treaty and:
(i) Does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;
(ii) Does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.
2. Unless in a case falling under paragraph 1(a) the treaty otherwise provides, the parties in question shall notify the other parties of their intention to conclude the agreement and of the modification to the treaty for which it provides.

B. THE PARTIES’ POSITIONS

290. Respondent raised the jurisdictional objection relating to the ECT’s non-application to intra-EU disputes in its Statement of Defence for the first time. However, prior to any other submissions by the Parties on this jurisdictional objection, the ECJ released the ECJ Judgment in Case C-284/16, Slowakische Republik v Achmea BV on 6 March 2018 (see ¶ 32 above). Thereafter, the Parties’ submissions dealt with this jurisdictional objection taking into account considerations arising out of the ECJ Judgment. Since the Parties’ submissions relating to the ECJ Judgment reflect their most recent position on the issues relating to EU law, the Tribunal considers them to have updated their prior submissions taking into account the ECJ Judgment, and shall primarily focus on those more recent submissions in the following Sections.

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(1) Respondent’s Position

291. Respondent’s position is that the ECJ Judgment is of direct relevance in these proceedings, and that the Judgment confirms the lack of jurisdiction of tribunals under Article 26 ECT in intra-EU investment disputes.

a. Applicable Law

292. According to Respondent, EU law is part of or a “subsystem” of international law, and its rules and principles assume relevance in international law due to the principle of primacy or primauté of EU law. Thus, it has to be applied by a tribunal established pursuant to Article 26 ECT, “both with regard to the validity of the arbitration agreement and its merits”. Further, as per Respondent, EU law also applies as part of the national law of EU Member States.³⁴⁹

293. With respect to the applicable law to jurisdictional issues, while Respondent primarily considers that cases in the ICSID regime are similar to cases such as the present one, being administered by the SCC with the seat in Stockholm, Respondent, in the alternative, endorses this distinction. This is on the ground that awards rendered in the latter kind of regime, i.e., with their seat in Stockholm, will have to be considered under EU public order, when being reviewed by annulment courts in Sweden or enforcing courts under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“New York Convention”). As per Respondent, the ECJ Judgment forms part of the EU public order, and thus any award not in compliance with the same could be annulled for being contrary to the basic principles of the Swedish legal system (see ¶ 315 below).³⁵⁰

b. The Reasoning of the ECJ Judgment applies to ECT

294. It is Respondent’s position that the offer of a Member State to an investor to arbitrate disputes as per Article 26 ECT is “exactly identical” to the situation of Article 8 of Agreement on encouragement and reciprocal protection of investments between the

³⁴⁹ Respondent’s Comments on ECJ Judgment, ¶¶ 4-5; Hr. Tr. Day 1, pp. 158(4)-158(19); R-RPHB, ¶¶ 37-39; relying, inter alia, on CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶¶ 4.120-4.124; CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, Dec. 27, 2016. ↩

³⁵⁰ Hr. Tr. Day 4, pp. 225(6)-226(21); R-PHB, ¶¶ 51-58. ↩

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Kingdom of the Netherlands and the Czech and Slovak Federative Republic (“Slovak-Dutch BIT”).³⁵¹

295. What is relevant in the present case is that the obligations that Italy assumed towards Luxembourg are in the nature of intra-EU obligations. The bilateral nature of these obligations, and consequently the offer to arbitrate, is not altered either by the fact that the ECT is a multilateral treaty, or by the fact that the EU is a party to the ECT.³⁵²

296. Respondent contends that the ECJ Judgment has confirmed the proposition that any agreement entered into between Member States has to respect the autonomy of the EU legal order. This autonomy requires that dispute resolution in respect of intra-EU rights and obligations be carried out by bodies that can make a reference to the ECJ for a preliminary ruling on questions of interpretation and application of EU law, as per Article 267 TFEU, in order to preserve the monopoly of the ECJ on matters of EU law, and in turn, the full effectiveness of EU law. Such bodies would constitute only courts and tribunals of EU Member States, which are state-established permanent institutions capable of deciding disputes with res judicata effect, even those relating to the ECT. These do not include arbitral tribunals of the nature sitting under the ECT. Not only can such tribunals not make a reference to the ECJ, but their awards, upon being rendered, are also subjected only to very limited grounds of review by courts. Thus, even under the ECT, as under the Slovak-Dutch BIT, the Member States established a mechanism of settling investment disputes that is not capable of ensuring the proper application or full effectiveness of EU law.³⁵³

297. Respondent supports its submissions by relying on recent blog articles that have endorsed the extension of the reasoning of the ECJ Judgment to ECT cases.³⁵⁴ Respondent also places reliance on the recent Declarations of the Representatives of the Governments of the

³⁵¹ Respondent’s Comments on ECJ Judgment, ¶ 11. ↩

³⁵² Respondent’s Comments on ECJ Judgment, ¶¶ 13-15. ↩

³⁵³ Respondent’s Comments on ECJ Judgment, ¶¶ 18-20; 26-32; R-PHB, ¶¶ 56-58; see also for submissions relating to Article 344 TFEU, SoD, ¶¶ 134-142; Hr. Tr. Day 1, pp. 164(2)-166(3); relying on REX-009, Case C-459/03, judgment of 30 May 2006. ↩

³⁵⁴ Respondent’s Comments on ECJ Judgment, ¶¶ 12, 25; relying on RLA-014, Steffen Hindelang, “The Limited Immediate Effects of CJEU’s Achmea Judgement”, https://verfassungsblog.de/the-limited-immediate-effects-of-cjeus-achmea-judgement/; RLA-015, Nikos Lavranos, “Black Tuesday: the end of intra-EU BITs” http://arbitrationblog.practicallaw.com/black-tuesday-the-end-of-intra-eu-bits/. ↩

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EU Member States dated 15-16 January 2019 as confirmation that the principles established in the ECJ Judgment were not specifically linked to the Slovak-Dutch BIT and also extend to the ECT. Respondent considers these Declarations, specifically the one Italy signed on 15 January 2019, to hold binding value.³⁵⁵ Further, in Respondent’s view, all previous arbitral case law that has rejected the argument that intra-EU BITs and application of the ECT in the intra-EU context is incompatible with the TFEU, is rendered irelevant in light of a final judgment on this proposition rendered by the ECJ.³⁵⁶

298. According to Respondent, the application of the ECJ Judgment to intra-EU ECT cases is not inhibited by either (i) the absence of a disconnection clause, which was unnecessary as per Respondent, or (ii) the presence of the EU as a party to the ECT, which only reinforces the applicability of the ECJ Judgment to ECT, in Respondent’s view.³⁵⁷

299. With respect to the opinion of Advocate General Wathelet dated 19 September 2017 preceding the ECJ Judgment (“AG Opinion”), Italy’s argument is that the AG Opinion does not hold any more than pure academic or scholarly value after the ECJ Judgment has already decided the relevant issues. As per Italy, in any event, the AG Opinion was based on the wrong assumption of arbitral tribunals, on certain occasions, being able to refer questions for the preliminary ruling of the ECJ under Article 267 TFEU, which possibility has been definitively ruled out by the ECJ Judgment.³⁵⁸

300. Respondent also criticizes the recent award rendered in Masdar v. Spain, whereby the tribunal assumed jurisdiction over an intra-EU investment dispute under the ECT after the ECJ Judgment was rendered. Respondent’s criticism focuses on the fact that the Masdar tribunal did not account for how the ECJ Judgment’s reasoning extends also to multilateral

³⁵⁵ R-PHB, ¶¶ 5-6; R-RPHB, ¶¶ 8-13, 23-35; relying on CL-191, Declaration of the Representatives of the Governments of the Members States on the Legal Consequences of the Judgment of the Court of Justice in Achmea on Investment Protection in the European Union, 15 January 2019; CL-192, Declaration of the Representatives of the Governments of the Members States on the Enforcement of the Judgment of the Court of justice in Achmea and on Investment Protection in the European Union, 16 January 2019; RLA-019, 2011 International Law Commission (ILC) Guide to Practice on Reservations to Treaties, ¶ 1.2; RLA-020, 2006 ILC Guiding Principles applicable to unilateral declarations of States capable of creating legal obligations, Principles 1 and 4. ↩

³⁵⁶ Respondent’s Comments on ECJ Judgment, ¶ 24. ↩

³⁵⁷ Hr. Tr. Day 1, pp. 166(15)-167(16); Hr. Tr. Day 1, pp. 170(10)-170(18). ↩

³⁵⁸ Respondent’s Comments on ECJ Judgment, ¶¶ 39-43. ↩

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treaties such as the ECT, and placed excessive reliance on the AG Opinion.³⁵⁹ In this connection, Respondent points out that the questions referred to the ECJ, the principles relied on by the ECJ to arrive at its conclusions and the issues addressed by the ECJ, specifically about the characteristics of EU law, all apply equally to multilateral conventions. Further, a tribunal “such as” the one established under Article 8 Slovak-Dutch BIT includes the present Tribunal sitting under the ECT, since it operates within a comparable procedural framework, in particular relating to the law applicable to its procedure and the judicial review and finality of its award.³⁶⁰

c. Intra-EU Arbitration is in violation of Articles 267 and 344 TFEU and the general autonomy of EU law

301. Respondent’s position is that arbitration under the ECT of intra-EU investment disputes violates Article 267 and 344 TFEU and the general principle of autonomy of EU law, the consequence of which is that the Member State’s offer to arbitrate under Article 26 ECT becomes inapplicable vis-à-vis investors of another Member State.³⁶¹ According to Respondent, as a result of the sui generis nature of EU law and its primacy in the EU legal order, Member States are prevented from allowing a dispute that potentially involves EU law aspects to be resolved by an international arbitral tribunal. The appropriate forum, instead, would be competent national court or tribunal in the Italian Republic, which could decide disputes relating to the EU law contained either in the primary or secondary EU legislations.³⁶²

302. In this connection, Respondent posits two arguments concerning the relationship between EU law and the ECT. First, Respondent contends that it is possible to interpret the ECT, as per international law, as not applying between EU Member States. Second, in the

³⁵⁹ R-SoRj, ¶¶ 138-142, 169-183; R-PHM, ¶ 177; relying on CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award. ↩

³⁶⁰ R-SoRj, ¶¶ 143-168. ↩

³⁶¹ Respondent’s Comments on ECJ Judgment, ¶¶ 6-10. ↩

³⁶² SoD, ¶¶ 39-40; Hr. Tr. Day 1, pp. 159(25)-163(10); relying on REX-001A, Charter of Fundamental Rights of the European Union; REX-001B, Treaty on European Union; REX-001C, Treaty on the Functioning of the European Union. ↩

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alternative, any conflict between the ECT and EU law should, in Respondent’s view, be resolved in favour of EU law.³⁶³

303. With respect to the interpretation of the ECT, Respondent relies on Articles 31 and 32 of the Vienna Convention on the Law of Treaties 1969 (“VCLT”), and on the principle of harmonious interpretation. Respondent highlights five provisions of the ECT, i.e., Article 1(2) (definition of “Contracting Party”), Article 1(3) (definition of “Regional Economic Integration Organisation”), Article 1(10) (definition of “Area”), Article 25 (Economic Integration Agreements) and Article 16 (Relation to Other Agreements).

304. Concerning Articles 1(2), 1(3) and 1(10) ECT, Respondent contends that given that the ECT itself recognizes Regional Economic Integration Organisations (“REIO”) as Contracting Parties and also envisages an overlap of territories between the REIO and its Member States, the allocation of competences within an REIO, such as the EU, is not a question of geographical boundaries, but instead one of substantive competences.³⁶⁴

305. Concerning Article 25 ECT, Respondent argues that the definition of an Economic Integration Agreement (“EIA”) perfectly fits the EU, and that more preferential treatment between the Parties to such EIAs is compatible with the ECT.³⁶⁵

306. In addition, relying on Article 16 ECT, Italy argues that nothing in Part III or V of the ECT can be construed to derogate from any provision of EU law, specifically the Treaty of the European Union (“TEU”) and the TFEU (referred to together as the “EU Treaties”), or any right to dispute resolution therein. This is on the ground that the system of investment protection established under EU law is “doubtless more favourable and offers more articulated forms of protection to the investors and their investments” than the ECT. Even when it comes to access to justice, while the option of international arbitration is not available to EU citizens against EU Member States, EU citizens are entitled to non-

³⁶³ Respondent’s Comments on ECJ Judgment, ¶¶ 22-23. ↩

³⁶⁴ SoD, ¶¶ 46-48; Hr. Tr. Day 1, pp. 158(25)-159(7). ↩

³⁶⁵ SoD, ¶¶ 49-51. ↩

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discriminatory and consistent court jurisdiction across the EU, and are also entitled to the final recourse of the ECJ.³⁶⁶

307. In support of the above interpretative arguments, Italy relies on context offered by (i) the Decision, included in Annex 2 to the Final Act of the European Energy Charter Conference, with respect to Articles 24(4)(a) and 25 ECT, which offers investors from non-Member States of an EIA access to treatment accorded under the EIA when the said investors have a registered office, central administration or principle place of business in the Area of a party to that EIA; and (ii) the EU and its Member States’ declaration with respect to Article 25 ECT.³⁶⁷

308. Further, Italy produces preparatory works and documents relating to the circumstances of adoption of the ECT, including contemporaneous EU Directives in the energy sector, to contend that the ECT was never formulated to regulate the EU internal market.³⁶⁸ In the same vein, it relies on investment arbitration case law to reflect the consistency in judicial behaviour and practice of EU Member States on this issue.³⁶⁹ Concerning the findings of these investment arbitration case law, which Claimants rely on extensively (see ¶ 319 below), Respondent submits that none of the published awards or decisions have addressed systematically all the relevant issued under international law.³⁷⁰

309. Respondent’s alternative argument proceeds under the assumption of a conflict between the ECT and EU law, specifically the EU Treaties. In this connection, Respondent contends that EU Treaties, as they stand after amendment by the Lisbon Treaty in December 2007, prevail over the ECT, as per (i) the conflict rule of primacy of EU law; (ii) Article 30 VCLT, and/or (iii) Article 16 ECT.

310. With respect to the Lisbon Treaty, Respondent explains the allocation of competences between the EU and its Member States, pointing out that Article 207 TFEU, which defines

³⁶⁶ SoD, ¶ 53; Respondent’s Comments on ECJ Judgment, ¶¶ 34-38; see also R-SoRj, ¶¶ 124-130. ↩

³⁶⁷ SoD, ¶¶ 55-61. ↩

³⁶⁸ SoD, ¶¶ 62-65; relying on REX-003, Commission Proposal for a Council Directive concerning common rules for the internal market in electricity, COM (91)548 final, OJ No C65 of 14 March 1992; see also R-SoRj, ¶¶ 131-132. ↩

³⁶⁹ SoD, ¶¶ 66-70; relying on CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award. ↩

³⁷⁰ R-SoRj, ¶¶ 133-135. ↩

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the “common commercial policy” now includes foreign direct investment after the Lisbon Treaty’s entry into force. Whereas a number of matters covered in the ECT still have mixed competences of the EU and/or its Member States, the EU has exclusive competence over the common commercial policy, and specifically, foreign direct investment.³⁷¹

311. Respondent argues that the principle of primacy of EU law is a “specific conflict rule” under the public international law that follows from Article 351(1) TFEU. This principle applies to give priority to the EU Treaties regardless of the bilateral or multilateral character of the ECT or the fact that the EU is a party to the ECT.³⁷²

312. In Respondent’s view, as a result of the subsequent entry into force of the Lisbon Treaty, it is lex posterior and prevails over the ECT with respect to EU Member States as per Articles 30(3) and 30(4) VCLT. In this connection, Respondent advocates for a liberal interpretation of “same subject matter” in Article 30 VCLT, and goes on to explain the protections available to investors under the EU legal regime.³⁷³

313. The same result is arrived at, as per Respondent, if one applies Article 16 ECT as a conflict rule. This is on the ground, as mentioned above, that EU law provides for a more favourable and more articulated level of protection to the investors than the ECT, in light of, inter alia, the internal market rules, the principle of non-discrimination of nationals, the Charter of Fundamental Rights, and the case law of the ECJ.³⁷⁴ Lastly, Respondent, in any event, submits that the Lisbon Treaty amounts to a modification of the ECT as per Article 41 VCLT.³⁷⁵

³⁷¹ SoD, ¶¶ 74-80; relying on REX-002, Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007. ↩

³⁷² R-PHB, ¶¶ 45-50; R-RPHB, ¶¶ 45-49; relying on CL-191, Declaration of the Representatives of the Governments of the Members States on the Legal Consequences of the Judgment of the Court of Justice in Achmea on Investment Protection in the European Union, 15 January 2019; CL-192, Declaration of the Representatives of the Governments of the Members States on the Enforcement of the Judgment of the Court of justice in Achmea and on Investment Protection in the European Union, 16 January 2019. ↩

³⁷³ SoD, ¶¶ 81-85; § II.1.C; Hr. Tr. Day 1, pp. 159(12)-159(24). relying on REX-004, Report of the Study Group of the International Law Commission, Fragmentation of International Law. Difficulties arising from the diversification and expansion of international law, 13 April 2006, A/CN.4/L.682. ↩

³⁷⁴ SoD, ¶¶ 86-91; relying on CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶ 4.178. ↩

³⁷⁵ SoD, ¶¶ 92-98. ↩

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314. In general, in addition to the above, Respondent expresses its agreement with the observations made by the EC in the EC NDP Submission.³⁷⁶

d. Non-enforceability of Award rendered contrary to the ECJ Judgment

315. It is Respondent’s submission that any award assuming jurisdiction over intra-EU disputes under the ECT would not be enforceable within the EU, be it awards rendered within or outside the EU, or rendered under an institutional (ICSID or SCC) or ad hoc setting. As per Respondent, there is no diversification based on where such an award is ultimately rendered or under which set of procedural rules. In this connection, Respondent cites the decisions of the EC against Spain and Czech Republic, wherein it was clearly stated that awards rendered by tribunals under the ECT in intra-EU cases constitute State aids to be authorized by the EC before being executed. Further, Respondent also relies on the stay of enforcement granted by the Swedish Court of Appeal based on the ECJ Judgment in Novenergia II v. Spain. Lastly, Respondent argues that any award non-compliant with EU law could be at risk of a potential annulment based on Articles 33(1) and 33(2) of the Swedish Arbitration Act (SFS 1999:116) (“Swedish Arbitration Act”) (see ¶ 293 above).³⁷⁷

(2) Claimants’ Position

a. Applicable Law

316. According to Claimants, the applicable law for the Tribunal does not include EU law. In this connection, Claimants contend that Article 26(6) ECT can only be interpreted as referring to the substantive rules governing the Tribunal’s analysis of Italy’s liability, and does not address the applicable law to this Tribunal’s jurisdiction. The Tribunal’s jurisdiction is governed only by the provisions of the ECT, specifically Article 26 thereof, and nothing beyond. Claimants alternatively submit that even if Article 26(6) ECT were

³⁷⁶ R-SoRj, fn 45. ↩

³⁷⁷ Respondent’s Comments on ECJ Judgment, ¶¶ 44-45; R-SoRj, ¶ 186; R-PHB, ¶¶ 51-58; R-RPHB, ¶¶ 39-44; relying on RLA-016, EC Decision State aid SA.40348 (2015/NN) – Spain; RLA-017, EC Decision State Aid SA.40171 (2015/NN) – Czech Republic; German Federal Supreme Court, Decision of 31 October 2018, reference I ZB 2/15, ECLI:DE:BGH:2018:311018BIZ2.15.0, ¶¶ 25-28. ↩

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relevant for the Tribunal’s jurisdiction, the phrase “applicable rules and principles of international law” only covers public international law and does not encompass a regional legal order such as EU law. Further, as per Claimants, EU law does not apply in the present case since Claimants have specifically chosen to bring claims under the ECT and not under EU law. In addition, Claimants state that EU law cannot be used as general principles of international law under Article 31(3)(c) VCLT.³⁷⁸

317. In this connection, Claimants also maintain that the outcome does not differ between cases in the ICSID regime and cases being administered by the SCC or ad hoc arbitrations under the UNCITRAL Rules. Under Swedish law, which applies as the lex arbitri in the present case, there is no external principle that would limit this Tribunal’s jurisdiction, and any question of jurisdiction would have to be answered with reference to the arbitration agreement alone.³⁷⁹

b. This Tribunal has jurisdiction over intra-EU investment cases under the ECT

318. Claimants dispute Respondent’s submissions relating to the interpretation of the ECT, and its alternative argument relating to the resolution of any conflict between the ECT and EU law in favour of the latter. Claimants also disagree with the observations made by the EC in this connection.

319. In respect of the interpretation of the ECT, Claimants emphasise the plain letter of the ECT confirms that it applies to intra-EU disputes. The distinction between intra-EU and extra-EU disputes that Respondent attempts to read into the ECT does not exist in its text, which, as per Claimants provides no limitations concerning investors from certain Contracting

³⁷⁸ SoRy, ¶¶ 116-123; C-SoRj, ¶¶ 38-44; Hr. Tr. Day 1, pp. 112(5)-113(15); relying on CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶¶ 459, 461; CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 198-199; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue. ↩

³⁷⁹ Hr. Tr. Day 1, pp. 107(24)-108(11); C-PHB, ¶ 15-37; C-RPHB, ¶¶ 4-7, 15; relying, inter alia, on CL-180, Foresight Luxembourg Solar 1 S.A.R.L, Foresight Luxembourg Solar 2 S.A.R.L., Greentech Energy Systems A/S et al. v. The Kingdom of Spain, SCC Arbitration V (2015/150), Final Award; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award; CL-183, Decision in the Svea Court of Appeal, Case No. T-6247-15; CL-184, Decision in the Svea Court of Appeal, Case No. T 2675-14. ↩

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Parties not being able to resolve disputes against certain other Contracting Parties. Further, in the instant case, neither the home State, i.e., Luxembourg, nor the host State, i.e., Italy, could have made any reservations to the ECT as a result of Article 46 ECT. Claimants also mention the absence of a specific disconnection clause in the ECT, which was originally envisaged, but never included, during the treaty drafting process of the ECT. Similarly, Claimants contest Respondent’s reliance on Article 16 ECT, emphasising that due to the option of international arbitration provided to investors in the ECT, the same is more favourable than the legal regime under EU law. Claimants support their arguments by relying on “unanimous” ECT case law, i.e., 24 decisions and/or awards rendered by ECT tribunals that have rejected jurisdictional objections relating to EU law.³⁸⁰

320. With respect to the EU’s position as an REIO in the ECT, Claimants contend that the ECT only recognizes that some Member States are also members of regional organizations, while ensuring that the Member States are distinguished from the REIO’s independent candidacy as a party to the ECT.³⁸¹

³⁸⁰ SoRy, ¶¶ 47-58, 67-81; C-SoRj, ¶¶ 28-36; C-PHB, ¶¶ 4-14; relying on CL-9, Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015; CL-120, Jan Oostergetel and Theodora Laurentius v. Slovak Republic, UNCITRAL, Decision on Jurisdiction, Apr. 30, 2010, ¶ 109; CL-121, European American Investment Bank AG (EURAM) v. Slovak Republic, UNCITRAL, Award on Jurisdiction, Oct. 22, 2012, ¶¶ 236–38; CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, Dec. 27, 2016; CL-115, WNC Factoring Ltd. v. Czech Republic, UNCITRAL, PCA Case No. 2014-34, Award, Feb. 22, 2017; CL-113, I.P. Busta & J.P. Busta v. Czech Republic, SCC Case V 2015/014, Final Award, Mar. 10, 2017; CL-116, Anglia Auto Accessories Ltd. v. Czech Republic, SCC Case V 2014/181, Final Award, Mar. 10, 2017; CL-117, CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017; CL-4, Charanne B.V. & Construction Investments S.a.r.l. v. Kingdom of Spain, SCC Arb. No. 062/2012, Award, Jan. 21, 2016; CL-8, EDF International S.A. v. Republic of Hungary, UNCITRAL (award not public), Republic of Hungary v. EDF International S.A., Swiss Federal Supreme Court Case 4A_34/2015, Judgment, Oct. 6, 2015; CL-43, RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016; CL-122, Isolux Infrastructure Netherlands B.V. v. Kingdom of Spain, SCC V2013/153, July 17, 2016; CL-118, JSW Solar (zwei) GmbH & Co. KG v. Czech Republic, PCA Case No. 2014-03, Final Award, Oct. 11, 2017; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018; CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, May 16, 2018; CL-169, Antin Infra. Servs. Lux. S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award, June 15, 2018; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, ¶¶ 192-196, 229; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award; CEX-462, Note for the Attention of Ambassador Rutten from Secretary General Clive Jones, Feb. 19 1993. ↩

³⁸¹ C-SoRj, ¶¶ 90-94; relying on CL-177, Johann Basedow, “The European Union’s International Investment Policy. Explaining Intensifying Member State Cooperation in International Investment Regulation”, PhD Thesis, The London School of Economics and Political Science (2014). ↩

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321. Similarly, Claimants consider Respondent’s arguments relating to Article 25 ECT and the Decision, included in Annex 2 to the Final Act of the European Energy Charter Conference, with respect to Articles 24(4)(a) and 25 ECT (see ¶ 307 above), to be “misplaced”. This is on the ground that Article 25 ECT does not address how EU Member States should treat investors from other EU Member States, nor does the said Decision require anything other than a parity of treatment by EU Member States for investors from within the EU and investors from outside the EU, who maintain business activities within the EU.³⁸²

322. Claimants also rebut Respondent’s alternative argument relating to the resolution of any conflict between the ECT and EU law (see ¶¶ 309-313 above). In this connection, Claimants contend, at the outset, that the ECT and EU law, specifically the EU Treaties after the Lisbon Treaty, do not share the same subject matter.³⁸³

323. Claimants alternatively also submit that even assuming that the EU Treaties and the ECT had the same subject matter, the former would not prevail over the latter as per Articles 30(3) and 30(4) VCLT, since there was no incompatibility between the substantive protections of the ECT and EU law. Similarly, the Lisbon Treaty could not be considered a modification of the ECT under Article 41 VCLT, since a “deactivation” of investor protection between Italy and Luxembourg would eliminate the rights of these Member States (being exercised by investors) under the ECT. Further, Claimants emphasise on the absence of any concrete intention to modify the ECT, which could also have been done through the process for amendment prescribed in Article 42 ECT. Claimants question Respondent’s argument relating to consistent State practice by EU Member States, by

³⁸² SoRy, ¶¶ 59-63. ↩

³⁸³ SoRy, ¶¶ 83-85; C-SoRj, ¶ 16; relying on CL-9, Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015, ¶¶ 4.146-4.176; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶ 460; CL-124, Tomas Fecák, Chapter 5: Intra-EU International Investment Agreements, in International Investment Agreements and EU Law, KLUWER L. INT’L 467-68 (2016); CL-14, Ioan Micula et al. v. Romania, ICSID Case No. ARB/05/20, Award, Dec. 11, 2013; CL-38, AES Summit Generation Ltd. and AES-Tisza Erömü Kft. v. Republic of Hungary, ICSID Case No. ARB/07/22, Award, Sept. 23, 2010; CL-13, Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004, Partial Award, Mar. 27, 2007 ¶ 159; CL-10, Achmea B.V. (formerly Eureko) v. Slovak Republic, PCA Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension, Oct. 26, 2010; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶¶ 346-351. ↩

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pointing out that at least five EU Member States intervened and supported the position that EU law did not bar intra-EU arbitration during the proceedings surrounding the ECJ Judgment.³⁸⁴

324. Lastly, Claimants dispute Respondent’s understanding of Article 16 ECT’s conflict rule, on the ground that the ECT offers a stronger level of investor protection, as exemplified primarily by the right to resolve disputes by international arbitration under Article 26 ECT, which is a fundamental protection not available in EU law. This is also true for substantive protections, for which Claimants rely on the proposals in the AG Opinion and on instances where domestic courts have denied violations of investors’ rights, which have subsequently been upheld by investment tribunals.³⁸⁵ Similarly, Claimants contest the EC’s reliance on Article 351 TFEU as a conflict rule (see ¶ 347 above), on the ground that it applies only to agreements concluded prior to 1 January 1958 or before a Member State’s date of accession into the EU, which does not include the ECT in the instant case.³⁸⁶

с. The ECJ Judgment does not apply to the present case

325. It is Claimants’ contention that the ECJ Judgment does not have any implications on the present Tribunal’s jurisdiction. Claimants posit this argument for the following reasons.

326. First, Claimants submit that since this Tribunal’s jurisdiction is governed only by the provisions of the ECT, and the conditions for jurisdiction emanating therefrom, the ECJ

³⁸⁴ SoRy, ¶¶ 86-95; C-SoRj, ¶¶ 16-20, 32-33; relying on CL-9, Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015, ¶¶ 4.146-4.147; CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 199, 205-206; CL-43, RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016, ¶¶ 72-75; CL-10, Achmea B.V. (formerly Eureko) v. Slovak Republic, PCA Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension, Oct. 26, 2010, ¶¶ 245, 281-282; CL-12, Binder v. Czech Republic, UNCITRAL, Award on Jurisdiction, June 6, 2007, ¶ 63; CL-13, Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004, Partial Award, Mar. 27, 2007 ¶¶ 168-171. ↩

³⁸⁵ SoRy, ¶¶ 96-102; C-SoRj, ¶¶ 22-26; Hr. Tr. Day 1 pp. 114(15)-115(2); relying on CL-35, Plama Consortium Ltd. v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, Feb. 8, 2005 ¶ 141 (quoting Thomas Wälde); CL-33, Christian Tietje, The Applicability of the Energy Charter Treaty in ICSID Arbitration of EU Nationals vs. EU Member States, Beiträge zum Transnationalen Wirtschaftsrecht, Sept. 1, 2008, at 12-13; CL-4, Charanne B.V. and Constr. Invs. S.à.r.l. v. Kingdom of Spain, SCC Arb. No. 062/2012, Award, Jan. 21, 2016 ¶ 435; see also CL-161, Opinion of Advocate General Wathelet, Slowakische Republik v. Achmea B.V., Case C-284/16, Sept. 19, 2017, ¶¶ 77, 181, 215; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue. ↩

³⁸⁶ C-SoRj, ¶¶ 95-96. ↩

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Judgment cannot enter the Tribunal’s applicable law framework through any “backdoor”, much less through Article 26(6) ECT, since this provision is neither relevant for the Tribunal’s jurisdiction, nor includes the ECJ Judgment, or EU law in general (see ¶ 316 above).³⁸⁷

327. Second, Claimants submit that the reasoning of each of the 23 investment tribunals, which denied the EU law related jurisdictional objection under the ECT prior to the ECJ Judgment (see ¶ 319 above), continues to hold value even after the ECJ Judgment.³⁸⁸ Further, Claimants rely on all decisions or awards rendered after the ECJ Judgment, which have rejected the jurisdictional objections relating to EU law, and in particular place reliance on Greentech v. Italy.³⁸⁹

328. Third, in Claimants’ view, even in the alternative that the ECJ Judgment forms part of the applicable law to the Tribunal’s jurisdiction, the same is clearly distinguishable from the instant case for two reasons.

329. Firstly, the ECJ Judgment restricts its own application to BITs concluded “between” EU Member States, and accordingly does not apply to multilateral investment treaties, especially those to which the EU itself is a party. The ECT is such a multilateral agreement, having 54 signatories, in addition to the EU itself. As per Claimants, the ECJ Judgment did not condemn resolution of disputes arising from investment treaties through international arbitration per se, but only precluded such international arbitration when the EU was not party to the underlying agreement or treaty. Claimants contend that the EC cannot ague on these lines now when the EU had already signed the ECT in 1997. In this

³⁸⁷ SoRy, ¶¶ 116-123. ↩

³⁸⁸ SoRy, ¶ 124; Hr. Tr. Day 1, pp. 104(18)-104(24). ↩

³⁸⁹ Hr. Tr. Day 1, pp. 104(18)-105(12); C-PHB, ¶¶ 4-11, 31-33; relying on CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award; CL-169, Antin Infra. Servs. Lux. S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award. ↩

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connection, Claimants also dispute the binding value of the EC Communication 2018 (see ¶ 47 above).³⁹⁰

330. Secondly, the ECJ Judgment was rendered in the context of the governing law provision of the Slovak-Dutch BIT, contained in Article 8(6) thereof, which was different from Article 26(6) ECT. Article 8(6) Slovak-Dutch BIT left open the scope for the tribunal in Achmea v. Slovakia to interpret and apply EU law, by including the “law in force of the Contracting Party concerned” and “other relevant Agreements between the Contracting Parties” in the applicable law framework. As per Claimants, these broad stipulations in Article 8(6) Slovak-Dutch BIT do not exist in Article 26(6) ECT, since the same only covers rules and principles of international law as the applicable law in ECT arbitrations.³⁹¹

331. Claimants support the above arguments by relying on the recent award of the tribunal in Masdar v. Spain, which denied the relevance of the ECJ Judgment on its jurisdiction under the ECT, stating that the same had “no bearing” and “cannot be applied to, multilateral treaties, such as the ECT, to which the EU itself is a party”.³⁹² In addition, Claimant submits that any extension of the ECJ Judgment to the ECT is inhibited by the presence of Article 16 ECT, which ensures that the ECT prevails over the EU Treaties.³⁹³

d. The Tribunal need not be concerned with the future enforceability of the Award

332. Lastly, Claimants contend that due to the recency of the ECJ Judgment, its specific impact upon the actual enforcement of awards is uncertain and clouded by numerous unresolved questions. In any event, any such impact on enforcement of awards is likely to be “minimal to non-existent” as per Claimants.

333. In this connection, Claimants seek to distinguish the procedural framework of these arbitration proceedings from the procedural framework of an ICSID arbitration. This is on

³⁹⁰ SoRy, ¶¶ 127-131; C-SoRj, ¶¶ 47-50; C-PHB, ¶¶ 8-0; relying on CL-125, ECJ Judgment, ¶¶ 57-58, 62; CL-126, European Court of Justice, Opinion, Case 2/15, May 16, 2017, ¶ 293. ↩

³⁹¹ SoRy, ¶¶ 127-131; C-SoRj, ¶¶ 51-52; relying on CL-125, ECJ Judgment, ¶¶ 4, 40-42. ↩

³⁹² C-SoRj, ¶¶ 72-76; relying on CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, May 16, 2018, ¶¶ 678-682. ↩

³⁹³ C-PHB, ¶ 32; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, ¶¶ 192-194. ↩

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the ground that the present arbitration proceedings are governed by the Swedish law on arbitration (Stockholm being the seat) and the New York Convention. The latter instrument mandates signatory states to confirm and execute foreign arbitral awards with only a few limited exceptions, which, in Claimants’ view, Italy has not established. Thus, whether and to what extent Italy’s obligation under the New York Convention may subsequently conflict with any of its obligations under the EU Treaties are not questions that should concern the Tribunal at this stage. Accordingly, this Tribunal need not predict or speculate about the enforceability of its ultimate Award.³⁹⁴

334. On a related note, Claimants challenge Respondent’s reliance on the EC’s communications to Spain and Czech Republic regarding the ECT awards constituting State aids to be authorized by the EC before being executed (see ¶ 315 above). In Claimants’ view, these communications are irrelevant to this Tribunal’s jurisdiction, and also do not impact the merits of these proceedings, which have been brought under the ECT and not under EU law. Claimants point to a number of arbitral awards that have awarded relief to investors aggrieved by Spanish measures after the EC’s communication to Spain relating to state aid. Claimants also submit, in this regard, that neither has Italy reported its incentive regime regarding photovoltaic energy to the EC as constituting state aid, nor has the EC initiated a state aid review of the incentive regimes in Italy, despite having been aware of the same since 2008.³⁹⁵

335. In any event, Claimants argue that any award rendered by this Tribunal upholding jurisdiction will not carry the risk of being annulled pursuant to Sections 33(1) and 33(2) of the Swedish Arbitration Act, since (i) investor-State disputes are considered arbitrable in Swedish law; and (ii) intra-EU investor-State arbitration is not contrary to the basic principles of Swedish law, as is implicitly confirmed by the Declaration of the

³⁹⁴ SoRy, ¶¶ 139-142; C-SoRj, ¶¶ 54-57; C-PHB, ¶ 24; C-RPHB, ¶ 10; relying on CL-14, Ioan Micula et al. v. Romania, ICSID Case No. ARB/05/20, Award, Dec. 11, 2013, ¶¶ 330, 340-341.; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, ¶ 230. ↩

³⁹⁵ C-SoRj, ¶¶ 60-71; relying on CL-117, Eiser Infra. Ltd. and Energia Solar Lux. S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017; CL-119, Novenergia II – Energy & Env’t (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018; CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, May 16, 2018; CL-169, Antin Infra. Servs. Lux. S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award, June 15, 2018. ↩

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Representatives of the Governments of EU Member States signed by Sweden on 16 January 2019.³⁹⁶

C. THE EC’S OBSERVATIONS

336. In this Section, the Tribunal summarises the EC’s observations regarding (i) the applicability of EU law for the Tribunal’s assessment of its jurisdiction; (ii) the implications of the ECJ Judgment for these proceedings; and (iii) the interaction between the ECT and EU law, specifically the EU Treaties.

(1) Applicability of EU law for the Tribunal’s Jurisdiction

337. In the EC’s view, EU law forms part of the “applicable rules and principles of international law” under Article 26(6) ECT, and the “relevant rules of international law applicable in the relations between the parties” pursuant to Article 31(3)(c) VCLT. The EC states that nothing in the ECT indicates that it operates as lex specialis vis-à-vis EU law. Rather, reference to EU law should form a part of the task of interpretation of the ECT pursuant to Article 31(3)(c) VCLT. For this proposition, the EC relies on Article 38 of the Statute of the International Court of Justice, the jurisprudence of the International Court of Justice and academic writing. Incidentally, the EC also states that EU law is applicable also as the national law of EU Member States.³⁹⁷

338. Further, according to the EC, the fact that EU law is part of international law, and is therefore applicable as such under Article 26(6) ECT for matters of validity of the arbitration and the merits, has not been disputed by investment arbitral tribunals after the

³⁹⁶ C-RPHB, ¶¶ 11-16; relying on CL-184, Decision in the Svea Court of Appeal, Case No. T 2675-14; CL-192, Declaration of the Representatives of the Governments of the Members States on the Enforcement of the Judgment of the Court of justice in Achmea and on Investment Protection in the European Union, 16 January 2019; C-467, Analysis: A full run-down of the Svea Court of Appeal’s reasoning in the recent PL Holdings v. Poland set-aside decision, IA Reporter; C-468, Arbitral awards in investment protection dispute remain mainly unchanged, Svea Hovrätt Press Release. ↩

³⁹⁷ EC NDP Submission, ¶¶ 17, 32, 42-48; citing, inter alia, Antonio Parra, “Applicable Law in Investor-State Arbitration”, in Rovine (ed.), Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (2008), pp. 7-8; Thomas Eilmansberger, “Bilateral Investment Treaties and EU Law”, 46 Common Market Law Review (2009), p. 421; Hervé Ascencio, “Article 31 of the Vienna Conventions on the Law of Treaties and International Investment Law”, 31 ICSID Review 2 (2016), p. 371; Tunisia v. Libyan Arab Jamahiriya (Case Concerning Application for Revision and Interpretation of the Judgment of 24 February 1982 in the Case Concerning the Continental Shelf), Merits, Judgment, 10 December 1985, ICJ Reports 15(1985), ¶ 43. ↩

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award in Electrabel v. Hungary. The disputed issue between tribunals instead concerns whether the ECT prevails over EU law or vice-versa.³⁹⁸

339. In this regard, the EC’s position is that the process of “systemic coherence” requires the ECT to be interpreted in such a way as to avoid any conflict with EU law, and not the other way around. For that purpose, according to the EC, an interpretation of Article 26 ECT taking into account the general principle of autonomy of EU law (Articles 4(3) and 19 TEU and Articles 267 and 344 TFEU) leads to the conclusion that there is no offer to arbitrate by Germany to Swedish investors.³⁹⁹

(2) Implications of the ECJ Judgment

340. In the EC’s view, the ECJ Judgment, which confirms the position that the EC took in the EC Intervention Application, renders the offer to arbitrate in Article 26 ECT “precluded”.⁴⁰⁰ According to the EC, this is on the ground of the general principle of EU law of autonomy of the EU legal order, which is enshrined in the liberally interpreted Article 344 TFEU, and on the keystone of the EU judicial system, i.e., the preliminary ruling procedure, provided in Article 267 TFEU. In addition, the EC relies on Articles 4(3) and 19 TEU for the principle of autonomy of EU law.⁴⁰¹

341. It is the EC’s position that the ECJ Judgment applies equally to intra-EU investor-State arbitrations under the ECT since (i) intra-EU investment arbitral tribunals are not “national courts or tribunals” in the sense of Article 267 TFEU, which proposition applies to tribunals under the ECT as well, regardless of whether the tribunal is an ICSID tribunal or an UNCITRAL tribunal; and (ii) there is no complete review of arbitral awards by such tribunals through national courts within the EU. This is the case even for ongoing

³⁹⁸ EC NDP Submission, ¶¶ 42-48; citing Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015 (same as CL-9), ¶¶ 4.111-4.199; Charanne B.V. and Construction Investments S.A.R.L. v. Kingdom of Spain, SCC Case No. 062/2012, Award, 21 January 2016 (same as CL-4), ¶ 439; RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016 (same as CL-43), ¶¶ 74, 75, 87. ↩

³⁹⁹ EC NDP Submission, ¶¶ 48-52; citing Oil Platforms (Iran v. USA), Merits, Judgment, 6 November 2003, ICJ Reports 161 (2003), ¶¶ 41 and 78; Council of the European Union v. Front populaire pour la libération de la saguia-el-hamra et du rio de oro (Front Polisario), ECJ Case No. C-104/16 P, Judgment, 21 December 2016, ¶ 86. ↩

⁴⁰⁰ EC NDP Submission, ¶ 7. ↩

⁴⁰¹ EC NDP Submission, ¶¶ 15-16, 31; citing ECJ Judgment, ¶¶ 32, 36-37. ↩

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investment cases, since the ECJ’s judgments, unless specifically limited in time, apply ex tunc.⁴⁰²

342. Further, concerning the fact that the EU is a Contracting Party to the ECT, the EC submits that (i) the ECJ, in its findings in the ECJ Judgment, intended to carve out only those international courts that are set up by agreements signed by the EU that respect the autonomy of the EU and its legal order; and (ii) the Tribunal has been set up as a result of bilateral commitments between Italy and Luxembourg, and not as a result of the EU’s participation in the ECT.⁴⁰³

(3) Interaction between the ECT and EU law

343. Regarding the interaction between the ECT and the EU Treaties, i.e., the TEU and the TFEU, the EC offers two solutions: first, a harmonious interpretation of the ECT in conformity with EU law, or second, in the event of a conflict, the primacy of EU law as lex posterior.

344. With respect to the harmonious interpretation of the ECT, the EC, in addition to its submission that EU law forms part of relevant rules of international law under Article 31(3)(c) VCLT (see ¶ 337 above), also puts forth an interpretation on the basis of other means of interpretation under Articles 31 and 32 VCLT. In this regard, the EC relies, inter alia, on (i) the definition of “Contracting Party” under Article 1(2) ECT, which includes an REIO such as the EU; (ii) the definition of an REIO in Article 1(3) ECT; and (iii) other provisions relating specifically to an REIO, such as Article 36(7) ECT and Article 1(10) ECT, the latter of which defines the term “Area” with respect to an REIO. On this basis, the EC states that the ECT recognises that the relationships between Member States to an REIO and the REIO are governed by the provisions of the agreement establishing the REIO itself. Further, according to the EC, in light of these provisions of the ECT, investments within the REIO are investments within the same Contracting Party, to which the offer to arbitrate under Article 26 ECT does not apply. In this regard, the EC

⁴⁰² EC NDP Submission, ¶¶ 32-39. ↩

⁴⁰³ EC NDP Submission, ¶¶ 32-40; citing Association Vent De Colère! Fédération nationale and Others v. Ministre de l'Écologie, du Développement durable, des Transports et du Logement and Ministre de l'Économie, des Finances et de l'Industrie, ECJ Case No. C-262/12, Judgment, 19 December 2013, ¶¶ 39-43. ↩

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also criticises the interpretation of Article 26 ECT offered by certain arbitral tribunals for depriving certain provisions of the ECT of their full effect or importance.⁴⁰⁴

345. Moreover, the EC derives context to support its interpretation from the Statement made by the European Communities under Article 26(3)(b)(ii) ECT, specifically stating that “[t]he Communities and the Member States will . . . determine among them who is the respondent party to arbitration proceedings initiated by an Investor of another Contracting Party” (emphasis added by the EC). The use of the term “another”, according to the EC, restricts the offer to arbitrate in Article 26 ECT to investors from non-EU Member States. Additionally, the context for interpretation of Article 26 ECT is also derived by the EC from the fact that the EU and its Member States negotiated the ECT as one single block, pursuant to the EU law principle of unity in the international representation of the EU.⁴⁰⁵

346. The EC does not consider the absence of a “disconnection clause” in the ECT to affect its interpretation of Article 26 ECT, since a “disconnection clause” is “superfluous” in respect of intra-EU relations between Member States, even more so since the EU is already a Contracting Party to the ECT. In this regard, the EC advocates of the “liability follows competence” principle to allocate liability between the EU and its Member States, deriving support from the Draft Articles on the Responsibility of International Organizations and the jurisprudence of the International Tribunal for the Law of the Sea. It highlights that since renewable energy falls within the EU’s exclusive competence, the EU is the one responsible towards investors and not its Member States. In light of this demarcation of

⁴⁰⁴ EC NDP Submission, ¶¶ 54-66; criticizing the interpretations of the tribunals in, inter alia, Charanne B.V. and Construction Investments S.A.R.L. v. Kingdom of Spain, SCC Case No. 062/2012, Award, 21 January 2016 (same as CL-4), ¶ 439; RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016 (same as CL-43), ¶¶ 74, 75, 87. ↩

⁴⁰⁵ EC NDP Submission, ¶¶ 67-86; citing European Commission v. Kingdom of Sweden, ECJ Case No. C-246/07, Judgment, 20 April 2010, ¶ 73; Eleftheria Neframi, “The Duty of Loyalty: Rethinking its Scope through its Application in the Field of EU External Relations” 47 Common Market Law Review 2 (2010), p. 335, fn. 45; Pieter Kuijper, “The Conclusion and Implementation of the Uruguay Round Results by the European Community”, 6 European Journal of International Law 1 (1995), pp. 228-229; Johann Basedow, “The European Union’s International Investment Policy. Explaining Intensifying Member State Cooperation in International Investment Regulation”, PhD Thesis, The London School of Economics and Political Science (2014), pp. 136, 156, 164, 166; Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015 (same as CL-9), ¶¶ 4.130-4.142; Communication from the Commission on European Energy Charter COM(91) 36 final of 14 February 1991; Council and Commission Decision of 23 September 1997 on the Conclusion, by the European Communities, of the Energy Charter Treaty and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects, Official Journal of the EU L69, 9 March 1998, p. 1. ↩

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responsibilities between the EU and its Member States, a disconnection clause or its absence is not material for the interpretation of the ECT.⁴⁰⁶

347. The EC’s alternative proposal, with respect to the rules relating to conflict between treaties, is that the conflict rule in Article 351(1) TFEU does not apply to multilateral treaties where only the rights and obligations of EU Member States is at stake. Instead a “special conflict rule”, i.e., the general principle of primacy of EU law, arrived at based on an a contrario reading of Article 351 TFEU, applies with the result that the EU Treaties take absolute precedence over Article 26 ECT.⁴⁰⁷

348. The EC also contends that the same result is achieved pursuant to Articles 30 (successive treaties) and 41 (modification of multilateral treaties) VCLT, since either (i) Germany and Sweden’s reaffirmation of Articles 4(3) and 19 TEU and Articles 267 and 344 TFEU after their ratification of the ECT can be construed as an amendment for the purposes of Article 41 VCLT; or (ii) the TEU and TFEU constitute “later treaties” on the same subject matter as the ECT, and the ECT applies only to the extent it is compatible with these later treaties. Similarly, Article 16 ECT does not inhibit this conclusion, since it is only a rule of “interpretation” and not one of conflict and, in any event is overruled by a later conflict rule in Article 351 TFEU, together with the principle of primacy of EU law.⁴⁰⁸

⁴⁰⁶ EC NDP Submission, ¶¶ 87-101; citing Maja Smrkolj, “The Use of the ‘Disconnection Clause’ in International Treaties: What does it tell us about the EC/EU as an Actor in the Sphere of Public International Law?”, Paper presented at the GARNET Conference, “The EU in International Affairs”, Brussels, 24-26 April 2008; Raphael Oen, Internationale Streitbeilegung im Kontext gemischter Verträge der Europäischen Gemeinschaft und ihrer Mitgliedstaaten (2005), p. 72; Christoph Herrmann, “Rechtsprobleme der parallelen Mitgliedschaft von Völkerrechtssubjekten in Internationalen Organisationen – Eine Untersuchung am Beispiel der Mitgliedschaft der EG und ihrer Mitgliedstaaten in der WTO” in Bauschke et al. (eds.), Pluralität des Rechts – Regulierung im Spannungsfeld der Rechtsebenen (2003), p. 159; Frank Hoffmeister, “Litigating against the European Union and Its Member States, 21 European Journal of International Law (2010), issue 3, pp. 724-747, at p. 728; ITLOS Advisory opinion of 2 April 2015, case no 21, ¶¶ 151-174; Regulation (EU) No 912/2014 of the European Parliament and of the Council of 23 July 2014, OJ L 257, 28.8.2014, p. 121. ↩

⁴⁰⁷ EC NDP Submission, ¶¶ 107-110; citing, inter alia, European Commission v. Slovak Republic, ECJ Case No. C-264/09, Judgment, 15 September 2011, ¶ 41; Commission of the European Communities v. Republic of Austria, ECJ Case No. C-147/03, Judgment, 7 July 2005, ¶ 58; Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015 (same as CL-9), ¶ 4.183. ↩

⁴⁰⁸ EC NDP Submission, ¶¶ 111-112; citing United Nations International Law Commission, Martti Koskenniemi, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law (2006), ¶¶ 21 et seq. ↩

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(4) Non-enforceability of Award rendered by the Tribunal

349. The EC qualifies the measures contested by Claimants as “state aid” in the sense of Article 107(1) TFEU, which has not been authorized by the EC. Given that the EC has the exclusive authority to authorize such state aid, this Tribunal is not competent to conduct this assessment, especially since a determination of the fair and equitable treatment breach will require EU law principles of state aid to be looked into. Accordingly, as per the EC, if this Tribunal was to grant compensation to Claimants, it would be authorizing state aid, hence violating the distribution of competence set out in EU law, which may hinder the enforcement of any award as a violation of EU law. However, in the event the Tribunal does assume jurisdiction, the EC offers its availability to explore ways for safeguarding the EU law on state aid in this case.⁴⁰⁹

D. THE TRIBUNAL'S ANALYSIS

350. In this Section, the Tribunal shall examine the Parties' submissions with respect to Respondent's jurisdictional objection pertaining to EU law, and shall, to the extent possible, follow the Parties' order of submissions while laying out its determinations. In the process, the Tribunal shall also address the EC's observations on this matter, to the extent relevant and appropriate.

351. At the outset, the Tribunal shall determine the disputed issues relating to the applicable law to this Tribunal's jurisdiction (1). Thereafter, based on its findings on the applicable law, the Tribunal shall determine whether EU law limits or precludes this Tribunal's jurisdiction in these proceedings under Article 26 ECT (2). Lastly, the Tribunal shall address the Parties' submissions on the matters of interpretation of the ECT and the

⁴⁰⁹ EC NDP Submission, ¶¶ 123-129; citing ECJ, Judgment in Athinaiki, Case C-362/09 P, EU:C:2010:783; ECJ, Judgment in Deutsche Lufthansa, EU:C:2013:755, C-284/12, ¶ 28; ECJ, Judgment in SFEI and Others, C- 39/94, EU:C:1996:285, ¶ 42; ECJ, Judgment in SFEI and Others, C-39/94, EU:C:1996:285, ¶ 36; Bernard Hanotiau, "L'arbitrage et le droit européen de la concurrence", in: Robert Briner (ed.), L'arbitrage et le droit européen, Reports of the International Colloquium of CEPANI April 25, 1997, Bruylant, 1997, pp. 31 to 64, at p. 47; Bernard Hanotiau, "Competition Law issues in international commercial arbitration: An arbitrator's viewpoint", in: 6 The American Review of International Arbitration [1995], pp. 287 to 299, at p. 294; PCA Case No. AA 227, Yukos v Russia, ¶ 1352; ICSID Case No. ARB/03/24, Plama v Bulgaria, ¶¶ 138, 140, and 143; Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015 (same as CL-9), ¶¶ 4.137-4.142. ↩

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resolution of any conflicts between the different treaties in question, i.e., the ECT on the one side and the EU Treaties on the other side (3).

(1) Applicable Law

352. The Parties have made extensive submissions concerning the applicable law to this Tribunal's jurisdiction, specifically directed towards whether EU law falls within this sphere of applicable law in these proceedings. In order to determine this foundational question, the Tribunal shall (a) first, determine whether the applicable law regime in the ECT, prescribed in Article 26(6) ECT applies to questions of this Tribunal's jurisdiction; (b) second, address the interaction between Article 26 ECT and the Swedish legal order, in light of Stockholm, Sweden being the seat of this arbitration; and (c) lastly, based on the determinations of the first two issues, determine the nature and applicability of EU law for questions of jurisdiction.

a. Whether Article 26(6) ECT applies to Questions of Jurisdiction

353. The Parties are in dispute about whether the applicable law to questions of jurisdiction can be derived from Article 26(6) ECT. To recall, Article 26(6) ECT provides that “[a] tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law.” (emphasis added)

354. Respondent's position is that Article 26(6) ECT applies equally to the “issues in dispute" pertaining to the merits of the case and the jurisdiction of the Tribunal. The EC is of the same view. Claimants, however, submit that Article 26(6) ECT only refers to the substantive rules governing the Tribunal's analysis of Italy's liability, and does not address the applicable law to this Tribunal's jurisdiction, which is governed solely by the provisions of the ECT.

355. The Tribunal is persuaded by Claimants' submissions.

356. In order to appropriately understand the scope of Article 26(6) ECT, the phrase “issues in dispute" is instrumental. Interpreting this phrase as per Article 31(1) VCLT, i.e., “in accordance with the ordinary meaning to be given to the terms of the treaty in their context", it is relevant to consider Article 26(1) ECT as part of the context of Article 26(6)

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ECT. Article 26(1) ECT delineates the types of “disputes” covered within Article 26 ECT generally. It provides as follows:

Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably. (emphasis added)

357. It is evident from this provision that the only “disputes” that Article 26 ECT applies to are those that concern an alleged breach of an obligation of the host State as prescribed in Part III of the ECT. Part III of the ECT is titled "Investment Promotion and Protection". Article 26 ECT itself is contained in Part V of the ECT titled “Dispute Settlement". Thus, the specific qualification of the term “disputes” in Article 26(1) ECT to cover only disputes relating to investment promotion and protection (Part III of the ECT), and not disputes relating to dispute settlement itself (Part V of the ECT), entails that Article 26(1) ECT addresses only “disputes” relating to the substantive obligations of the host State concerning investment promotion and protection. By implication, the phrase “issues in dispute" in Article 26(6) ECT should also be understood as covering only those issues that relate to alleged breaches of such substantive obligations of the host State.

358. Therefore, the applicable law framework provided in Article 26(6) ECT, i.e., “the Treaty and applicable rules and principles of international law” is only relevant for the substantive issues in dispute concerning Respondent's liability under the ECT. This provision does not prescribe the applicable law framework for questions relating to this Tribunal's jurisdiction.

b. Article 26 ECT and Swedish Law

359. In light of the Tribunal's finding that Article 26(6) ECT does not apply to questions of this Tribunal's jurisdiction, the Tribunal shall now examine which law(s) applies to such questions.

360. The starting point for this examination is the dispute resolution provision in the ECT, i.e., Article 26 ECT itself. Given that Article 26 ECT is a provision contained in an international treaty, its interpretation and application should be in accordance with the

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broad framework of the VCLT. This uncontroversial proposition finds endorsement in case law, including a decision of the Svea Court of Appeal in Kazakhstan v. Stati.⁴¹⁰

361. Article 26 ECT, inter alia, contains Respondent's expression of its “unconditional consent” to arbitrate investor-State disputes, and the terms and conditions for the exercise of such consent (see Article 26(3) ECT). This consent to arbitrate materializes into an arbitration agreement when the concerned investor(s) accepts this offer. In this regard, the investor(s) has a choice of four regimes to submit its dispute: (i) arbitration under the ICSID Convention; (ii) arbitration under the ICISD Additional Facility Rules; (iii) ad hoc arbitration under the UNCITRAL Rules; and (iv) arbitration administered by the SCC (see Article 26(4) ECT).

362. In the instant case, Claimants' acceptance of Respondent's offer to arbitrate came in the form of Claimants' RfA dated 26 August 2016, whereby Claimants opted for the fourth regime, i.e., arbitration administered by the SCC (see ¶ 7 above). The SCC Board determined Stockholm, Sweden to be the seat of this arbitration (see ¶ 17 above). As a result, Swedish law relating to arbitration may also be a relevant consideration when examining this Tribunal's jurisdiction as the law of the seat or lex arbitri. Whether and to what extent the law of the seat is relevant for a determination of this Tribunal's jurisdiction is a disputed issue between the Parties.

363. The Parties were questioned about this specific matter during the Hearing, specifically in the context of the Decision on the Achmea Issue rendered by the tribunal in Vattenfall v. Germany ("Vattenfall Decision").⁴¹¹ The Parties also made extensive submissions about this matter in their post-hearing submissions.⁴¹²

364. In general terms, the Parties disagree about the relevance of the Vattenfall Decision, rendered in the context of the ICSID Convention regime, in the present case being administered by the SCC with the seat of arbitration in Stockholm. On the one hand, Respondent considers that “the whole reasoning behind the Vatte[n]fall award, that ICSID

⁴¹⁰ CL-184, Svea Court of Appeal, Judgment in Case T 2675-14, Dec. 9, 2016, pp. 47-48. ↩

⁴¹¹ CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue; see Hr. Tr. Day 1, pp. 106:7-107:23, 166:4-166:13; Hr. Tr. Day 3, pp. 246:22-247:3. ↩

⁴¹² C-PHM, ¶¶ 15-37; C-RPHM, ¶¶ 4-21; R-PHM, ¶¶ 38-58; R-RPHM, ¶¶ 36-49. ↩

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would represent an autonomous legal order insulated from application of EU law, cannot apply in a situation where exactly the reverse has to be stated".⁴¹³ On the other hand, Claimants submit that “the Tribunal should not hesitate to extend the reasoning of Vattenfall to this SCC arbitration seated in Stockholm”.⁴¹⁴

365. In particular, amongst other aspects, the Parties' submissions have focussed on the finding of the Vattenfall tribunal that “in cases where the investor opts for another forum, such as an ad hoc UNCITRAL arbitration or arbitration under the SCC Rules, that tribunal's jurisdiction may be circumscribed by the local arbitration law of the place of arbitration."⁴¹⁵ This finding was rendered in the Vattenfall Decision, after the tribunal found, while examining the relation between Article 26 ECT and the ICSID Convention, that “the terms of the ICSID Convention do not add to the Tribunal's jurisdiction, but rather provide its ‘outer limits”'.⁴¹⁶

366. Neither Claimants nor Respondent question the propriety of the Vattenfall Decision's above quoted finding that in investor-State arbitrations under the UNCITRAL regime or the SCC regime, a tribunal's jurisdiction may be circumscribed by the local arbitration law of the seat of the arbitration (see ¶ 365 above). Respondent quotes the above referenced findings of the Vattenfall Decision (see ¶ 365 above) and characterizes the Tribunal's questions during the Hearing about the relevance of the Vattenfall Decision as being "extremely well posed".⁴¹⁷ Claimants also do not dispute the role played by Swedish law on arbitration on this Tribunal's jurisdiction, i.e., of circumscribing or providing outer limits to the Tribunal's jurisdiction. They only contend that there exists no such circumscription that emanates from any principle in Swedish law.⁴¹⁸

367. Whether or not there is any circumscription or limitation on this Tribunal's jurisdiction that emanates from Swedish law is a question the Tribunal will address subsequently (see

⁴¹³ R-RPHM, ¶ 37. ↩

⁴¹⁴ C-PHM, ¶ 37. ↩

⁴¹⁵ CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, ¶ 127. ↩

⁴¹⁶ CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, ¶ 126. ↩

⁴¹⁷ R-RPHM, ¶ 37. ↩

⁴¹⁸ C-PHM, ¶ 15 et seq. ↩

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Section D(2) below). However, at this stage, the only relevant question for the Tribunal to determine is whether Swedish law as the lex arbitri is part of the applicable law framework for questions relating to this Tribunal's jurisdiction, and if so to what extent. The Tribunal answers that question in the affirmative, with the qualification that the lex arbitri circumscribes this Tribunal's jurisdiction and does not add to the Tribunal's jurisdiction. In other words, the lex arbitri would provide the “outer limits” to a tribunal's jurisdiction, just as the ICSID Convention does for arbitrations under the ICSID regime.

368. To this limited extent that the outer limits to this Tribunal's jurisdiction stem from Swedish law, as opposed to the ICSID Convention that plays this circumscribing role in the ICSID regime, there does exist a distinction between the present case and an arbitration in the ICSID regime.⁴¹⁹ Thus, to this extent, the Tribunal is not persuaded by Claimants' and Respondent's primary submissions that there is no distinction whatsoever between arbitrations under the ICSID Convention regime and the SCC regime.

369. As mentioned above (see ¶ 293 above), Respondent's alternative contention is that there is a distinction between arbitrations under the ICSID Convention regime and the present arbitration. In support of this distinction, Respondent argues, inter alia, that (i) pursuant to Section 33 of the Swedish Arbitration Act and Article V of the New York Convention, the validity and enforceability of the Award of this Tribunal will be threatened if EU public order, a constituent part of Swedish law, is not respected;⁴²⁰ and (ii) consequently, the reasoning of the Vattenfall Decision should not be extended to the present case, due to the distinct legal settings of both the cases.⁴²¹ Claimants also respond to each of these arguments, submitting, inter alia, that (i) the future validity and enforceability of the Award of this Tribunal should not concern the Tribunal at this jurisdictional stage, and in

⁴¹⁹ The Tribunal notes that the outer limits that stem from the ICSID Convention relate to the autonomous understanding of what qualifies as an "investment", whereas the outer limits that stem from the Swedish legal order are of a different nature. This is explained in further detail in ¶ 372 below. However, in both the ICSID and the SCC regimes, the role played by these outer limits remains the same, i.e., the circumscription of the Tribunal's jurisdiction. ↩

⁴²⁰ R-PHM, ¶¶ 51-58; R-RPHM, ¶¶ 36-49; citing Section 33 of the Swedish Arbitration Act 1999; Article V of the New York Convention; German Federal Supreme Court, Decision of 31 October 2018, reference I ZB 2/15, ECLI:DE:BGH:2018:311018BIZ2.15.0, ¶¶ 25-28; Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Decision of the Nacka District Court in Stockholm, 23 January 2019. ↩

⁴²¹ R-RPHM, ¶ 37. ↩

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any event, there will no threat to the validity or enforceability of the Award since investor- State disputes are arbitrable under Swedish law;⁴²² and (ii) the reasoning of the Vattenfall Decision should be extended to the present case, and there is no substantive distinction between arbitrations under the ICSID Convention regime and the present arbitration.⁴²³

370. At this stage, the Tribunal does not consider it appropriate or necessary to examine the Parties' dispute about whether the overall reasoning of the Vattenfall Decision should apply to the present case. It suffices to state that the Tribunal is not bound by any prior case law that has addressed jurisdictional objections arising out of EU law, be it under the ICSID Convention regime or otherwise.

371. Similarly, the Tribunal also does not consider it appropriate or necessary to examine the Parties' disagreements about how Swedish courts or other enforcing courts may review the Tribunal's Award in future, and whether the Tribunal's Award will be considered valid or enforceable under Section 33 of the Swedish Arbitration Act or Article V of the New York Convention. The Tribunal is mindful of its duty to render an enforceable Award. In the present situation, the Tribunal does not foresee any hindrances to the validity or enforceability of this Award. In any event, at this stage, the Tribunal is not in a place to predict the future validity or enforceability of its Award before Swedish courts or other enforcing courts. Currently, the Tribunal is only concerned with determining the applicable law framework for questions over this Tribunal's jurisdiction over this intra-EU investor- State dispute. In other words, it is the validity and enforceability of the arbitration agreement between the disputing parties that is in question at this stage and not the future validity and enforceability of the Award.

372. Consequently, the Tribunal determines that the applicable law framework for questions of jurisdiction includes (i) Article 26 ECT; (ii) to be interpreted and applied in accordance with the VCLT; and (iii) in light of the circumscription or outer limits provided by Swedish

⁴²² C-PHB, ¶ 24; C-RPHB, ¶¶ 10-16; relying on CL-14, Ioan Micula et al. v. Romania, ICSID Case No. ARB/05/20, Award, Dec. 11, 2013, ¶¶ 330, 340-341.; CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, ¶ 230; CL-184, Decision in the Svea Court of Appeal, Case No. T 2675-14; C-467, Analysis: A full run-down of the Svea Court of Appeal's reasoning in the recent PL Holdings v. Poland set-aside decision, IA Reporter; C-468, Arbitral awards in investment protection dispute remain mainly unchanged, Svea Hovrätt Press Release. ↩

⁴²³ C-PHM, ¶ 37; C-RPHM, ¶¶ 4-7. ↩

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law, which applies as lex arbitri. These outer limits to the Tribunal's jurisdiction can take the form of (i) any restrictions to the arbitrability of the dispute emanating from Swedish law, i.e., whether or not the dispute may be determined by arbitrators (see Section 49(2) of the Swedish Arbitration Act and Article II(1) of the New York Convention⁴²⁴); and (ii) any other restrictions that could render the arbitration agreement unenforceable, for being invalid, inoperative or incapable of being performed (see Section 49(1) of the Swedish Arbitration Act and Article II(3) of the New York Convention⁴²⁵).

c. The Nature and Applicability of EU Law

373. In light of the Tribunal's delineation of the scope of the applicable law to jurisdictional issues in the previous sections, the Tribunal shall next examine whether and where EU law falls within this applicable law framework.

(i) Nature of EU Law

374. In this regard, at the outset, the Tribunal considers it appropriate to analyse the nature of EU law, i.e., whether it qualifies as international law and/or constitutes a part of the

⁴²⁴ Section 49 of the Swedish Arbitration Act: "Where foreign law is applicable to the arbitration agreement, section 4 shall apply to issues which are covered by the agreement, except when: 1. in accordance with the applicable law, the agreement is invalid, inoperative, or incapable of being performed; or 2. in accordance with Swedish law, the dispute may not be determined by arbitrators." ↩

Section 4 of the Swedish Arbitration Act: "A court may not, over an objection of a party, rule on an issue which, pursuant to an arbitration agreement, shall be decided by arbitrators. A party must invoke an arbitration agreement on the first occasion that a party pleads his case on the merits in the court. The invocation of an arbitration agreement raised on a later occasion shall have no effect unless the party had a legal excuse and invoked such as soon as the excuse ceased to exist. The invocation of an arbitration agreement shall be considered notwithstanding that the party who invoked the agreement has allowed an issue which is covered by the arbitration agreement to be determined by the Debt Enforcement Authority in a case concerning expedited collection procedures ...."

Article II(1) of the New York Convention: "Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration."

⁴²⁵ Article II(3) of the New York Convention: "The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed." ↩

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domestic law of the EU Member States. Claimants have consistently argued that EU law is distinct from “public international law”, since it constitutes a regional legal order (see ¶ 316 above). Respondent's position is that EU law is applicable as international law and as the national law of the EU Member States (see ¶ 292 above). The EC is of the same view (see ¶ 337 above).

375. The Tribunal is not persuaded by Claimants' characterization of EU law as a regional legal order distinct from public international law. Claimants themselves recognize, at another point in their submissions, that “EU law is a collection of treaties – nothing more."⁴²⁶ To the extent that EU law is comprised of international treaties between sovereign States such as the EU Treaties, i.e., the TEU and the TFEU, it is indisputably a source of international law. In this regard, the Tribunal agrees with the EC's invocation of Article 38 of the Statute of the International Court of Justice (see ¶ 337 above), which enlists the sources of international law, the primary amongst them being international conventions or treaties.

376. In addition, EU law also constitutes part of the domestic legal order of the EU Member States. Due to its sui generis nature, EU law has been described by the Advocate General in the Kadi case as a “municipal legal order of translation dimension.”⁴²⁷ This sui generis nature of EU law was explained in the ECJ Judgment in the Slowakische Republik v Achmea BV case in the following terms:

Also according to settled case-law of the Court, the autonomy of EU law with respect both to the law of the Member States and to international law is justified by the essential characteristics of the EU and its law, relating in particular to the constitutional structure of the EU and the very nature of that law. ... Given the nature and characteristics of EU law ... that law must be regarded both as forming part of the law in force in every Member State and as deriving from an international agreement between the Member States.⁴²⁸

⁴²⁶ C-SoRj, ¶ 45. ↩

⁴²⁷ Opinion of the Advocate General Maduro in Case C-402/05, paragraph 21, [2008] ECR I-6351; see Respondent's Comments on ECJ Judgment, f.n. 4; CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶ 4.118. ↩

⁴²⁸ ECJ Judgment, ¶¶ 33, 43. ↩

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377. Investment arbitration case law has also endorsed the dual or multiple nature of EU law, i.e., constituting international law, to the extent that it is sourced from treaties, and constituting a part of the domestic legal order of the EU Member States. The following findings of the tribunal in Electrabel v. Hungary clearly explain this "multiple nature of EU law":

(i) The Multiple Nature of EU Law: EU law is a sui generis legal order, presenting different facets depending on the perspective from where it is analysed. It can be analysed from the perspectives of the international community, individual Member States and EU institutions. Given those perspectives, EU law has a multiple nature: on the one hand, it is an international legal regime; but on the other hand, once introduced in the national legal orders of EU Member States, it becomes also part of these national legal orders.⁴²⁹

378. In light of the above, the Tribunal is persuaded by Respondent's submissions and the EC's observations that EU law has a dichotomous nature. To the extent that it is sourced from international treaties, it constitutes part of international law. Simultaneously, it also constitutes a part of the domestic legal order of EU Member States.

(ii) Applicability of EU Law

379. Having established the nature of EU law, the Tribunal shall now examine its applicability to the questions of this Tribunal's jurisdiction under Article 26 ECT. As determined above (see ¶ 372 above), the Tribunal considers the applicable law framework for such questions to be constituted by (i) Article 26 ECT; (ii) the principles of the VCLT pertaining to the interpretation of Article 26 ECT, which emanate from Articles 31 and 32 VCLT; and (iii) Swedish law, which applies as lex arbitri to provide the circumscription or outer limits to this Tribunal's jurisdiction.

380. Given the dichotomous nature of EU law (see ¶ 378 above), there are two possible gateways for it to enter the Tribunal's analysis of its jurisdiction. First, EU law may potentially enter this jurisdictional analysis through Article 31(3)(c) VCLT, if it qualifies as “relevant rules of international law applicable in the relations between the parties” (item

⁴²⁹ CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶¶ 4.117-4.118 and et seq.; see also CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, Dec. 27, 2016, ¶ 278. ↩

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(ii) of the applicable law framework). Second, EU law may potentially become applicable as a constituent part of the Swedish legal order, which operates to create outer limits to this Tribunal's jurisdiction under the ECT (item (iii) of the applicable law framework). The Tribunal shall examine both these gateways in turn.

EU law as relevant rules of international law under Article 31(3)(c) VCLT

381. Article 31(3)(c) VCLT, quoted in ¶ 289 above, requires that while interpreting a treaty provision in accordance with its ordinary meaning in its context and in light of the treaty's object and purpose, together with the context shall be taken into account “[a]ny relevant rules of international law applicable in the relations between the parties”.

382. The EC proposes that EU law should be considered as part of such relevant rules of international law while interpreting the ECT “in a situation between two EU Member States”⁴³⁰ (see ¶¶ 337-339 above). In support of this, the EC relies on the process of systemic coherence in interpretation of treaties, apparently evidenced in case law of the ICJ,⁴³¹ and on other investment arbitration case law that recognizes EU law as a manifestation of international law.⁴³² Further, the EC also states that the specific requirements of Article 31(3)(c) VCLT are fulfilled, i.e., (i) EU law qualifies as “international law”; (ii) EU law is "directly applicable to the subject-matter of the case", which involves EU Member States; and (iii) EU law is binding on the disputing parties before this Tribunal.⁴³³

383. Respondent supports the EC's observations, albeit not specifically on this issue relating to Article 31(3)(c) VCLT.⁴³⁴ As per Claimants, since EU law does not qualify as public international law, it falls beyond the realm of “relevant rules of international law applicable

⁴³⁰ EC NDP Submission, ¶ 48. ↩

⁴³¹ In particular, Oil Platforms (Iran v. USA), Merits, Judgment, 6 November 2003, ICJ Reports 161 (2003), ¶¶ 41 and 78. ↩

⁴³² Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015 (same as CL-9), ¶¶ 4.111-4.199; Charanne B.V. and Construction Investments S.A.R.L. v. Kingdom of Spain, SCC Case No. 062/2012, Award, 21 January 2016 (same as CL-4), ¶ 439; RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016 (same as CL-43), ¶¶ 74, 75, 87. ↩

⁴³³ EC NDP Submission, f.n. 42. ↩

⁴³⁴ R-SoRj, f.n. 45. ↩

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in the relations between the parties" under Article 31(3)(c) VCLT (see ¶ 316 above). Further, Claimants also supplement their argument by stating that applying EU law under Article 31(3)(c) VCLT in the manner that the EC proposes would result in the undesirable consequence that “the same words in the same treaty hav[e] different meanings depending on the independent legal obligations entered into by one state or another, depending on the parties to a particular dispute".⁴³⁵

384. In order to examine if EU law enters the interpretative analysis through Article 31(3)(c) VCLT, the Tribunal is required to examine whether (i) EU law qualifies as international law; (ii) EU law is relevant and applicable in the relations between the parties; and (iii) systemic coherence requires EU law to be considered while interpreting Article 26 ECT.

385. The Tribunal has already answered the first question in ¶ 384 above in the affirmative. EU law, to the extent that it is sourced from the EU Treaties, does constitute international law (see ¶ 375 above).

386. With respect to the second and third questions in ¶ 384 above, the Tribunal is not persuaded by the EC's observations. The Tribunal does not consider the EU Treaties to be relevant rules that are applicable in the relations between the parties, such that systemic coherence requires taking them into account for a harmonious interpretation of Article 26 ECT. This is for three reasons.

387. First, as a general matter, it is important to remember that Article 31(3)(c) VCLT requires that the relevant rules of international law be “taken into account, together with the context” (emphasis added). The general rule for interpretation is laid down in Article 31(1) VCLT, which requires an interpretation “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."

388. The EC proposes that the interpretation of Article 26 ECT commence by taking into account EU law under Article 31(3)(c) VCLT, which it recognizes as an “element extrinsic

⁴³⁵ Hr. Tr. Day 1, pp. 113(19)-113(23); relying on CL-179, Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue. ↩

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to the [ECT]".⁴³⁶ Only subsequently does the EC support its interpretation of the ECT based on Article 31(3)(c) VCLT with the “other means of interpretation".⁴³⁷ The EC's proposal reverses the logical order of the interpretation process. The rules of international law to be accounted for together with the context under Article 31(3)(c) VCLT, while essential, are not the logical starting point of the interpretation process. Instead, the starting point of the interpretation process is the general rule in Article 31(1) VCLT, which prioritizes the text of the treaty provision under interpretation over any other elements of treaty interpretation. In other words, Article 31(3)(c) VCLT and the relevant rules of international law applicable thereunder cannot rewrite the treaty being interpreted, or substitute a plain reading of a treaty provision with other rules of international law, external to the treaty being interpreted.

389. Second, the EC suggests that introducing EU law into the interpretative analysis of Article 26 ECT under Article 31(3)(c) VCLT, when the ECT is being applied between two EU Member States, results in a harmonious interpretation through a process of systemic coherence. As mentioned in ¶ 382 above, the EC limits its proposed interpretation of Article 26 ECT to “a situation between two EU Member States”. However, what the EC proposes is in contradiction to the objective of harmonious interpretation or system coherence between different bodies of international law. The ECT is a multilateral convention, to which sovereign States other than the EU Member States are also parties. Claimants rightly submit that allowing EU law into the interpretation process of the ECT when the ECT is being applied between EU Member States would result in the same provision in the ECT (in this case, Article 26 ECT) having different interpretations for different Contracting Parties depending on the origins of the disputing parties in a particular case.

390. Contrary to the EC's proposal, the condition for applicability under Article 31(3)(c) VCLT is not whether EU law is “directly applicable to the subject-matter of the case” or whether a conflicting interpretation would lead to an EU Member State conflicting its own "obligations at different levels of international law”.

⁴³⁶ EC NDP Submission, ¶ 47. ↩

⁴³⁷ EC NDP Submission, §§ 2.1 and 2.2, ¶ 52 in particular. ↩

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391. To make the interpretation of a multilateral convention dependent on a case-by-case consideration of the factual subject matter or on the origins of the disputing parties does not achieve the objective of affording a consistent and universal interpretation to a treaty provision. If the interpretation of a treaty were to be made contingent on the factual subject-matter of every case, Article 31(3)(c) VCLT would have specifically permitted a consideration of “subject matter of the case” when determining which rules of international law are relevant and applicable. The VCLT aspires for the “universal recognition” of “the principles of free consent and of good faith and the pacta sunt servanda rule”. This aspiration of the universal recognition of these principles underlines the need for coherence, and, in turn, for a single unified interpretation of each treaty provision.

392. In light of the above, while the objectives of harmonious interpretation and systemic coherence proposed by the EC are well-intentioned, they are not achieved by rendering EU law relevant and applicable to the interpretation of Article 26 ECT through Article 31(3)(c) VCLT.

393. Third, on a related note, none of the cases mentioned in the EC's observations support the EC's proposed understanding of Article 31(3)(c) VCLT. The investment arbitration cases relied upon by the EC do not support the proposition that EU law should be considered, under Article 31(3)(c) VCLT, together with the context of the ECT while interpreting Article 26 thereof.⁴³⁸ Similarly, in its judgment in the Oil Platforms case, the ICJ invoked Article 31(3)(c) VCLT to interpret a particular treaty provision in the 1955 Treaty of Amity, Economic Relations and Consular Rights between the United States and Iran in light of the "relevant rules of international law on the use of force ... that is to say the provisions of the Charter of the United Nations and customary international law.”⁴³⁹ To take into account the such universal rules of international law on use of force under Article 31(3)(c) VCLT is different from taking into account the very specific provisions of the EU

⁴³⁸ Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, Nov. 25, 2015 (same as CL-9), ¶¶ 4.111-4.199; Charanne B.V. and Construction Investments S.A.R.L. v. Kingdom of Spain, SCC Case No. 062/2012, Award, 21 January 2016 (same as CL-4), ¶ 439; RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016 (same as CL-43), ¶¶ 74, 75, 87. ↩

⁴³⁹ In particular, Oil Platforms (Iran v. USA), Merits, Judgment, 6 November 2003, ICJ Reports 161 (2003), ¶¶ 41-42. ↩

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Treaties that the EC proposes. The two situations are not comparable, and thus the ICJ's judgment in the Oil Platforms case also does not support the EC's reliance on the objectives of systemic coherence and harmonious interpretation.

394. In light of the above, the Tribunal does not consider EU law to be relevant or applicable to the interpretation of Article 26 ECT, pursuant to Article 31(3)(c) VCLT. In any event, in order for any rule of international law to be applicable under Article 31(3)(c) VCLT, it is also imperative that such rule be a clearly determinable rule. The need for such clarity is implicitly reflected in the primacy of the text of the treaty under interpretation, as per the general rule in Article 31(1) VCLT. The Tribunal shall address this further, to the extent relevant, in the context of the applicability of EU law as part of the Swedish legal order.

EU Law as a part of the Swedish legal order

395. As mentioned above (see ¶¶ 378-380 above), the second gateway for EU law to enter the Tribunal's analysis of questions of jurisdiction is through the Swedish legal order, which operates to create outer limits to this Tribunal's jurisdiction as the lex arbitri.

396. The Tribunal has already found that EU law has a dichotomous nature, i.e., it is a manifestation of international law to the extent it is sourced from the EU Treaties, and is simultaneously also a constituent part of the EU Member States' domestic legal order (see ¶ 378 above). Since Sweden is an EU Member State, EU law does form a part of the Swedish legal order, and thus could potentially create outer limits to this Tribunal's jurisdiction as a part of the lex arbitri.

397. The role of the lex arbitri as creating outer limits to the Tribunal's jurisdiction is discussed in Section D(1)(b) above. As mentioned in ¶ 372 above, these outer limits can take the form of (i) any restrictions to the arbitrability of the dispute emanating from Swedish law; and (ii) any other restrictions that could render the arbitration agreement invalid, inoperative or incapable of being performed.

398. The Tribunal considers that such restrictions to the Tribunal's jurisdiction cannot be lightly assumed. Any restriction to jurisdiction should emanate from a clearly determinable rule. This is for the following two reasons.

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399. First, under Swedish law, as Claimants rightly point out, the language of the dispute resolution provision is crucial, and a departure from its express terms is usually not permitted. This is true for commercial as well as investor-State cases.⁴⁴⁰ For instance, the following findings of the Svea Court of Appeal in Case No. T-2675-14, while interpreting Article 26 ECT as per Article 31 VCLT are reflective of the sanctity of the clear text of the arbitration agreement, in particular one contained in the dispute resolution clause of a treaty:

In order for an arbitral tribunal to be competent to try a dispute, a valid arbitration agreement must be in place between the parties to the dispute. In the present case, the question of whether there was an arbitration agreement between the Investors and Kazakhstan is to be assessed on the basis of Art. 26 ECT, which the Investors invoked as basis for the arbitral tribunal's jurisdiction in their request for arbitration . . . ... The wording of the treaty always constitutes the starting point for the interpretation. If the wording is clear, it in principle also constitutes the end point for the interpretation.⁴⁴¹

400. Second, given that Article 26 ECT contains, in explicit terms, the “unconditional consent” of a State to arbitrate investor-State disputes (see ¶ 361 above), any conditions or restrictions to be imposed on such consent are required to be clear and explicit as well. It cannot be doubted that when the creation of the arbitration agreement is unequivocal as a matter of form, any substantive restrictions on its existence, be it legal restrictions on arbitrability or any other restrictions on the enforceability of the arbitration agreement should be clearly established in order to inhibit the effect of the arbitration agreement.

401. In light of the above, the Tribunal finds that any outer limits that the Swedish legal order may impose on this Tribunal's jurisdiction require to be clearly determinable. Given that EU law, due to its dichotomous nature, is a constituent part of Swedish law, at least to the extent of the EU Treaties, it may also theoretically create such outer limits. In the next Section, the Tribunal shall determine whether any such clear outer limits emerge from EU law, as it stands currently, i.e., after the ECJ Judgment.

⁴⁴⁰ C-PHB, ¶¶ 18-23; relying on CL-183, Decision in the Svea Court of Appeal, Case No. T-6247-15; CL-184, Decision in the Svea Court of Appeal, Case No. T 2675-14. ↩

⁴⁴¹ CL-184, Decision in the Svea Court of Appeal, Case No. T 2675-14, pp. 47-48. ↩

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402. Before concluding this Section, the Tribunal considers it important to clarify the precise scope of the Tribunal's determinations that shall follow in light of the delineation of the precise applicable law framework. Given that the Tribunal has found that the first gateway for the entry of EU law into the applicable law framework is closed, EU law does not enter the Tribunal's applicable law framework through Article 31(3)(c) VCLT (see ¶ 394 above). Thus, the question to be resolved is no longer about the interpretation of Article 26 ECT taking into account EU law as part of the relevant context for such interpretation. Instead, the analysis that will follow in the forthcoming Section shall only relate to the application of EU law to questions of this Tribunal's jurisdiction as a constituent part of the Swedish legal order, which comprises the lex arbitri. Thus, the question, to which the Tribunal next turns, is whether EU law provides any limitations to this Tribunal's jurisdiction.

(2) Whether EU Law provides a Limitation to this Tribunal's Jurisdiction

403. The question of whether Swedish law, through EU law, creates any limitation to this Tribunal's jurisdiction under Article 26 ECT shall be examined from two related perspectives: (a) first, the Tribunal shall analyse whether any clearly discernible limitations arise from the EU Treaties and/or the principle of autonomy of EU law relied upon by Respondent; and (b) second, the Tribunal shall determine whether the ECJ Judgment and the EU Member States' January 2019 Declarations provide or confirm any such limitations.

a. The EU Treaties and the Principle of Autonomy

404. Respondent invokes Articles 267 and 344 TFEU (quoted in ¶ 288 above) and the general principle of autonomy of EU law to argue that EU law does not permit intra-EU investor- State arbitration. Articles 267 and 344 TFEU are requoted below for ease of reference:

Article 267 The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties;

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(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union; Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon. Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court. If such a question is raised in a case pending before a court or tribunal of a Member State with regard to a person in custody, the Court of Justice of the European Union shall act with the minimum of delay.
Article 344 Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein.

405. In particular, as per Respondent, Article 267 TFEU, which provides for the preliminary ruling mechanism before the ECJ, is essential for preserving the basic character of the EU Treaties' legal order, since it aims to ensure consistency in the understanding of EU law. Since this Tribunal is not a “court or tribunal of a Member State" under Article 267 TFEU, it cannot invoke this preliminary ruling mechanism.⁴⁴² In respect of Article 344 TFEU, Respondent's view is that disputes relating to the interpretation or application of EU law cannot be submitted to any dispute resolution mechanism not provided for in the EU Treaties itself. In this context, Respondent invokes the principle of mutual trust between the EU Member States' legal and judicial institutions and the principle of autonomy of EU law (see ¶¶ 296 and 301 above).

406. The EC also invokes the need for preserving the autonomy of the EU legal order, along the above lines (see ¶¶ 339-340 above).

407. Claimants dispute the existence of any prohibition of intra-EU investor-State arbitration emanating from the above treaty provisions or legal principles. In this connection,

⁴⁴² SoD, ¶ 102 et seq.; Respondent's Comments on ECJ Judgment, ¶¶ 26-32. ↩

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Claimants primarily rely on unanimous case law from investor-State arbitral tribunals that have rejected jurisdictional objections relating to EU law (see ¶ 319 above).

408. The Tribunal shall examine the implications of the ECJ Judgment and the recent legal developments thereafter separately in the next Section. In this Section, the Tribunal is only concerned with whether the above quoted provisions of the TFEU together with the principles of a mutual trust and autonomy of EU law serve to create clearly discernible limits to this Tribunal's jurisdiction under Article 26 ECT. The Tribunal answers this question in the negative. The Tribunal notes the following in this connection.

409. First, neither Article 267 TFEU nor Article 344 TFEU contains an explicit prohibition of investor-State arbitration. None of the Parties nor the EC disputes that. Instead, these provisions are concerned with the preliminary ruling mechanism for the ECJ and the jurisdiction over disputes relating to the interpretation or application of the EU Treaties themselves.

410. This mechanism and the jurisdictional limitation for disputes relating to the EU Treaties cannot create any express or implied limitations to this Tribunal's jurisdiction over an investor-State dispute under Article 26 ECT. Articles 267 and 344 TFEU certainly do not pertain to investor-State arbitration specifically. In fact, Respondent itself recognizes that “Article 344 TFEU expresses a more general principle”.⁴⁴³ However, Respondent uses this general principle, together with Article 267 TFEU, to implicitly invoke the principle of autonomy of EU law, and thereby derives a prohibition of investor-State arbitrations under EU law.

411. The Tribunal finds Respondent's reading of these provisions to be overly expansive. For instance, Respondent submits that the general principle in Article 344 TFEU pertains to disputes concerning the interpretation or application of EU law overall, and not only the EU Treaties.⁴⁴⁴ However, that is inconsistent with the language of Article 344 TFEU, which clearly applies only to disputes between EU Member States relating to the interpretation or application of the EU Treaties, and thus has no direct application in the

⁴⁴³ SoD, ¶ 135. ↩

⁴⁴⁴ SoD, ¶ 135. ↩

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present case. In this regard, the Greentech v. Italy tribunal correctly found that an investor- State arbitration under Article 26 ECT does not “concern the interpretation or application of the EU treaties, but instead concerns rights and obligations under the ECT.”⁴⁴⁵ In fact, the ECJ in its earlier Opinion No. 1/2009, upon which Respondent relies,⁴⁴⁶ had found that Article 344 TFEU “merely prohibits Member States from submitting a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for in the Treaties” and does not prohibit disputes involving private persons.⁴⁴⁷

412. Similarly, with respect to Article 267 TFEU, the Tribunal is mindful that the preliminary ruling mechanism may be important to ensure a uniform understanding of the EU Treaties and EU law in general, including the ECT, which forms part of EU law since the EU is a party to it. However, the Tribunal notes that this mechanism is neither the only manner in which a uniform understanding of EU law can be achieved, nor a mandatory procedure that all courts and tribunals even within the EU legal order are required to adhere to. This is evidenced by the fact that courts in the EU legal order have often rejected requests to refer questions relating to the ECT for a preliminary ruling. As obiter dictum, the Tribunal notes that this happened most recently in the Svea Court of Appeal's rejection, in the Novenergia II v. Spain case, to refer to the ECJ the question of “whether Article 26 of the ECT is applicable between the [M]ember [S]tates of the European Union, and if that is the case, whether Article 26 of the ECT is compatible with the European Union's primary law”. In this regard, the tribunal in Electrabel v. Hungary rightly noted under this provision that “there is no automatic reference to or seizure by the ECJ, as soon as any question of EU law arises in a dispute before an EU national court.”⁴⁴⁸

413. Furthermore, the principle of autonomy of EU law has nothing to do with this Tribunal's jurisdiction over intra-EU investor-State arbitrations under the ECT. The principle of

⁴⁴⁵ CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶ 350. ↩

⁴⁴⁶ Hr. Tr., Day 1, pp. 160(12)-161(9). ↩

⁴⁴⁷ See, in this regard, CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶¶ 4.154-4.155; see also CL-43, RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016, ¶ 80. ↩

⁴⁴⁸ CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶ 4.148. ↩

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autonomy is best explained by the ECJ Judgment itself, where the ECJ qualified this autonomy as being "with respect both to the law of the Member States and to international law", and stated that this autonomy “is justified by the essential characteristics of the EU and its law, relating in particular to the constitutional structure of the EU and the very nature of that law.”⁴⁴⁹ The fact that EU law has a sui generis nature of being autonomous with respect to domestic law and international law does not, in any manner, inhibit the jurisdiction of investor-State arbitral tribunals.

414. Second, as mentioned in ¶ 408 above and as rightly submitted by Claimants, it has been unanimously accepted in investment arbitration case law that there is no conflict between intra-EU investor-State arbitration under Article 26 ECT and the above discussed provisions of the TFEU and the principles of autonomy and mutual trust in EU law. In other words, EU law, until before the ECJ Judgment, was unanimously understood to not create any limitations on arbitral tribunals' jurisdiction.

415. In the words of the tribunal in Electrabel v. Hungary, there was “no legal rule or principle of EU law that would prevent [it] from exercising its functions in this arbitration under Article 26 ECT.”⁴⁵⁰ Along the same lines, the tribunals in RREEF v. Spain and more recently in Novenergia II v. Spain noted that there is no “disharmony or conflict”⁴⁵¹ or no "incompatibility”⁴⁵² between the ECT and EU law. These, and many other tribunals,⁴⁵³ have made similar findings in the context of Article 26 ECT or other BIT dispute

⁴⁴⁹ CL-125, ECJ Judgment, ¶ 33. ↩

⁴⁵⁰ CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶ 4.166; see also ¶¶ 4.146 and 4.153 ("There is indeed no rule in EU law that provides, expressly or impliedly, that such an international arbitration is inconsistent with EU law."). ↩

⁴⁵¹ CL-43, RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, June 6, 2016, ¶ 82. ↩

⁴⁵² CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶¶ 438-442. ↩

⁴⁵³ See, for instance, CL-120, Jan Oostergetel and Theodora Laurentius v. Slovak Republic, UNCITRAL, Decision on Jurisdiction, Apr. 30, 2010, ¶ 109; CL-121, European American Investment Bank AG (EURAM) v. Slovak Republic, UNCITRAL, Award on Jurisdiction, Oct. 22, 2012, ¶¶ 236–38; CL-116, Anglia Auto Accessories Ltd. v. Czech Republic, SCC Case V 2014/181, Final Award, Mar. 10, 2017, ¶¶ 126-128; CL-115, WNC Factoring Ltd. v. Czech Republic, UNCITRAL, PCA Case No. 2014-34, Award, Feb. 22, 2017; CL-113, I.P. Busta & J.P. Busta v. Czech Republic, SCC Case V 2015/014, Final Award, Mar. 10, 2017; CL-8, EDF International S.A. v. Republic of Hungary, UNCITRAL (award not public), Republic of Hungary v. EDF International S.A., Swiss Federal Supreme Court Case 4A_34/2015, Judgment, Oct. 6, 2015; CL-122, Isolux Infrastructure Netherlands B.V. v. Kingdom of Spain, SCC V2013/153, July 17, 2016; CL-118, JSW Solar (zwei) GmbH & Co. KG v. Czech Republic, PCA Case No. 2014-03, Final Award, Oct. 11, 2017. ↩

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resolution clauses, after examining the provisions of the TFEU and other principles of EU law discussed above. All found that there were no limitations provided by EU law on intra- EU investor-State arbitral tribunals' jurisdiction.

416. The above conclusions were not inhibited by the fact that the EU is a party to the ECT. As stated by the tribunal in Charanne v. Spain:

[T]he competence of the Arbitral Tribunal to decide on a claim filed by an investor of an EU Member State against another EU Member State on the basis of the alleged illegal nature of the actions carried out in the exercise of its national sovereignty, is perfectly compatible with the participation of the EU as a REIO in the ECT. And, as we shall see in subsequent sections of the present award, there is no rule of EU law which prevents EU Member States to resolve through arbitration their disputes with investors from other Member States through arbitration. Nor is there any EU law rule that prevents an arbitral tribunal to apply EU law to resolve such a dispute.⁴⁵⁴

417. The tribunal in Blusun v. Italy summarized the consistent line of jurisprudence in investor- State arbitration in the following terms:

Overall the effect of these decisions is a unanimous rejection of the intra-EU objection to jurisdiction. The tribunal in each case has found that the relevant BIT or the ECT was intended to bring about binding obligations between EU Member States. The tribunals found no contradiction between the substantive provisions of EU law and the substantive or dispute resolution provisions of the BITs. No such system for investor-State arbitration exists in EU law, and it would be incorrect to characterise such disputes as inter-State disputes such that Article 267 of the TFEU could be said to preclude jurisdiction.⁴⁵⁵

418. This Tribunal finds no reason to depart from this consistent line of jurisprudence. The bare provisions of the EU Treaties in consideration, specifically Articles 267 and 344 TFEU, and the ensuing principles of autonomy and mutual trust, do not create any limitations to this Tribunal's jurisdiction under Article 26 ECT.

419. Next, the Tribunal shall examine whether this conclusion is affected or altered by the ECJ Judgment of 6 March 2018 and the legal developments that followed thereafter.

⁴⁵⁴ CL-4, Charanne B.V. & Construction Investments S.a.r.l. v. Kingdom of Spain, SCC Arb. No. 062/2012, Award, Jan. 21, 2016, ¶ 438; see also CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 199, 204. ↩

⁴⁵⁵ CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, Dec. 27, 2016, ¶ 303. ↩

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b. The ECJ Judgment, the Declarations and other Issues

420. On 6 March 2018, the ECJ Judgment was rendered in Case C-284/16, Slowakische Republik v Achmea BV. The Parties' submissions thereafter have focussed on the implications of the ECJ Judgment on this jurisdictional objection relating to EU law. Before considering those submissions, the Tribunal recalls below the key findings of the ECJ Judgment that are disputed between the Parties. The conclusion reached by the ECJ Judgment was as follows:

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.⁴⁵⁶ (emphasis added)

421. Prior to reaching this conclusion, the ECJ also, inter alia, stated the following:

It is true that, according to settled case-law of the Court, an international agreement providing for the establishment of a court responsible for the interpretation of its provisions and whose decisions are binding on the institutions, including the Court of Justice, is not in principle incompatible with EU law. The competence of the EU in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court which is created or designated by such agreements as regards the interpretation and application of their provisions, provided that the autonomy of the EU and its legal order is respected ... In the present case, however, apart from the fact that the disputes falling within the jurisdiction of the arbitral tribunal referred to in Article 8 of the BIT may relate to the interpretation both of that agreement and of EU law, the possibility of submitting those disputes to a body which is not part of the judicial system of the EU is provided for by an agreement which was concluded not by the EU but by Member States. Article 8 of the BIT is such as to call into question not only the principle of mutual trust between the Member States but also the preservation of the particular nature of the law established by the Treaties, ensured by the preliminary ruling procedure provided for in Article 267 TFEU,

⁴⁵⁶ CL-125, Slowakische Republik v. Achmea B.V., ECJ Case C-284/16, Preliminary Ruling, Mar. 6, 2018, ¶ 62, see also ¶ 60. ↩

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and is not therefore compatible with the principle of sincere cooperation . . . .⁴⁵⁷ (emphasis added)

422. The Parties have not debated the propriety of the reasoning behind the ECJ Judgment. Accordingly, the Tribunal, in its determinations below, also shall not examine whether the ECJ Judgment's interpretation of Articles 267 and 344 TFEU was appropriate and properly motivated. Instead, the central dispute between the Parties concerns the scope and implications of the ultimate conclusion of the ECJ Judgment, i.e., whether the above conclusion (quoted in ¶ 420 above) reached in the context of Article 8 of the Slovak-Dutch BIT, also extends to the ECT. In other words, as per the emphasised part in the above- quoted conclusion of the ECJ Judgment, is Article 26 ECT also “preclude[ed]" as a result of the ECJ Judgment's interpretation of Articles 267 and 344 TFEU for being a provision "such as" Article 8 of the Slovak-Dutch BIT?

423. In this regard, Respondent is of the view that the ECJ Judgment has confirmed the importance of the autonomy of the EU legal order, which derives from Articles 267 and 344 TFEU. Respondent argues that due to the generic and expansive language used in the ECJ Judgment, its conclusion extends to the ECT when it is being applied for bilateral intra-EU obligations, regardless of the fact that the ECT is a multilateral treaty or that the EU is a party to the ECT. In this connection, Respondent also relies on the January 2019 Declarations by the EU Member States in support of its submission that the principles established in the ECJ Judgment were not specifically linked to the Slovak-Dutch BIT. Respondent considers all prior investment arbitration case law rejecting the EU law related jurisdictional objection to now be irrelevant, and criticizes all subsequent decisions and awards for not recognizing the breadth of the ECJ Judgment (see ¶¶ 294-300 above).

424. The EC's views align with that of Respondent (see ¶¶ 340-342 above).

425. Claimants submit that the reasoning of each of the investor-State tribunals that rejected the EU law relating jurisdictional objection continues to hold value even after the ECJ Judgment. Further, they rely on the more recent decisions by tribunals that have also upheld jurisdiction even in the face of the ECJ Judgment. In any event, Claimants

⁴⁵⁷ CL-125, Slowakische Republik v. Achmea B.V., ECJ Case C-284/16, Preliminary Ruling, Mar. 6, 2018, ¶¶ 57-58. ↩

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distinguish the ECJ Judgment from the present case on the ground that the ECJ Judgment itself restricted its conclusion only to BITs concluded “between” EU Member States, and did not address, much less condemn, multilateral conventions such as the ECT. Further, Claimants highlight that the ECJ Judgment was rendered in the context of a different governing law provision, i.e., Article 8(6) of the Slovak-Dutch BIT, than what Article 26(6) ECT provides (see ¶¶ 325-331 above).

426. Before examining the Parties' submissions, the Tribunal considers it important to recall its findings above to establish the appropriate context for the determinations that follows. The Tribunal has found that the only manner in which EU law is applicable to questions of this Tribunal's jurisdiction is as a constituent part of the Swedish legal order, which constitutes the lex arbitri. Accordingly, EU law can only apply to the extent and in a manner that it provides for any outer limits to this Tribunal's jurisdiction. Such outer limits, if any, are required to be contained in clearly determinable rules (see ¶¶ 395-402 above).

427. In light of this context, and having reviewed the ECJ Judgment and the Parties' submissions in this regard, the Tribunal finds that the ECJ Judgment does not provide any clearly determinable outer limits to this Tribunal's jurisdiction under Article 26 ECT. This is for the following three reasons.

428. First, the Tribunal finds that the manner in which the ECJ Judgment's conclusion is worded makes it unclear whether the ECJ intended for the same to apply to multilateral conventions such as the ECT. In its conclusion, quoted in ¶ 420 above, the ECJ Judgment found that its interpretation of Articles 267 and 344 TFEU precludes “a provision in an international agreement concluded between Member States, such as Article 8 [of the Slovak-Dutch BIT]". (emphasis added) The emphasised part in the conclusion already appears to indicate that the conclusion was intended only for international agreements that were concluded between the EU Member States, i.e., agreements to which only EU Member States are parties.⁴⁵⁸ This would usually include bilateral agreements between EU

⁴⁵⁸ In this regard, see the findings in CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶ 398 ("[T]he ECJ in Achmea was careful to confine its ruling to agreements “concluded between Member States"489, thereby leaving open the possibility of dispute resolution pursuant to international agreements that are not "intra-EU" in the sense of being concluded by Member States as among themselves.") ↩

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Member States "such as" the Slovak-Dutch BIT. It is unclear whether multilateral conventions, to which non-EU Member States are also parties, are also covered within the ambit of this conclusion. The ECT is such a multilateral convention.

429. This lack of clarity is deepened in light of the immediately preceding findings of the ECJ, emphasised in the extract quoted in ¶ 421 above. Herein, the ECJ concluded that international agreements “providing for the establishment of a court responsible for the interpretation of its provisions and whose decisions are binding on the institutions, including the Court of Justice, is not in principle incompatible with EU law”, provided that such international agreements are “concluded ... by the EU”. The EU is a party to the ECT and is recognized as a REIO under Articles 1(2) and 1(3) ECT. In this connection, the Tribunal is not persuaded by Respondent's and the EC's emphasis on the division of competences between the EU and its Member States under EU law, and the assertion that EU's position as a REIO under the ECT only serves to confirm such division of competences. This division of competences in EU law or the fact that the ECT may be a so-called “mixed agreement” based on the EU's and its Member States' respective external competences,⁴⁵⁹ does not add any clarity to the question of whether the ECJ Judgment was intended to apply to intra-EU arbitrations under the ECT.

430. Second, the Tribunal considers it important that the AG Opinion rendered, pursuant to Article 252 TFEU, by Advocate General Wathelet on 19 September 2017 prior to the ECJ Judgment had specifically mentioned the ECT.⁴⁶⁰ Despite being presented with an AG Opinion that discussed the ECT and sought to distinguish its dispute resolution mechanism from those in BITs, the ECJ was silent about the ECT in the Judgment.

431. It is notable that the ECJ Judgment discussed the binding value of the AG Opinion, finding that "[t]he Court is not bound either by the Advocate General's conclusion or by the reasoning which led to that conclusion.”⁴⁶¹ In the present case, Respondent also challenges the binding value and the propriety of the AG Opinion (see ¶¶ 299-300 above). However,

⁴⁵⁹ SoD, ¶¶ 74-80. ↩

⁴⁶⁰ CL-161, Opinion of Advocate General Wathelet, Slowakische Republik v. Achmea B.V., Case C-284/16, Sept. 19, 2017, ¶ 43. ↩

⁴⁶¹ CL-125, Slowakische Republik v. Achmea B.V., ECJ Case C-284/16, Preliminary Ruling, Mar. 6, 2018, ¶ 27. ↩

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the Tribunal does not consider it appropriate or necessary to examine the propriety the AG Opinion. Further, the Tribunal is mindful of the lack of binding value of the AG Opinion. Notwithstanding these considerations, the only point that the Tribunal considers important for the purposes of its present determinations is that the ECJ had the opportunity to render more expansive findings that would explicitly cover multilateral conventions such as the ECT, but did not do so.

432. In light of this, the Tribunal considers that the ECJ Judgment's conspicuous silence on the ECT clouds the question of whether its conclusions extend to the ECT with greater lack of clarity. To this extent, the Tribunal is in agreement with the following findings of the tribunal in Masdar v. Spain:

Had the CJEU seen it necessary to address the distinction drawn by the Advocate General between the ISDS provisions of the ECT and the investment protection mechanisms to be found in bilateral investment treaties made between Member States within the ambit of its ruling, it had the opportunity to do so. In fact, the Tribunal notes that the CJEU did not address this part of the Advocate General's Opinion, much less depart from, or reject, it. The Achmea Judgment is simply silent on the subject of the ECT.⁴⁶²

433. Third, the Tribunal finds that this lack of clarity about the scope of the ECJ Judgment is further compounded by the January 2019 Declarations. As per Respondent, the first of the January 2019 Declarations, signed on 15 January 2019 by 22 EU Member States including Italy, is binding and “conclusively determine[s] the issue of jurisdiction” under the ECT.⁴⁶³ The second of these Declarations, signed on 16 January 2019 by 5 EU Member States including Sweden, does not differ from the 15 January 2019 Declaration, but only refrains from making a "binding declaration as for the ECT as yet".⁴⁶⁴ The third of these Declarations, signed only by Hungary, is considered by Respondent to be identical to the second Declaration.⁴⁶⁵ Respondent's position is that these January 2019 Declarations are not intended only to inform arbitral tribunals about the EU Member States' position but

⁴⁶² CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, ¶ 682. ↩

⁴⁶³ R-RPHB, ¶¶ 28-35. ↩

⁴⁶⁴ R-RPHB, ¶¶ 18-22. ↩

⁴⁶⁵ R-RPHB, f.n. 7. ↩

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intended to be binding interpretations of the ECT in light of the ECJ Judgment, which "once [and] for all settles the issue”.⁴⁶⁶

434. The Tribunal is not persuaded by Respondent's characterization of the January 2019 Declarations for two reasons.

435. Firstly, although the Tribunal is not at a juncture where it is interpreting the ECT in light of the ECJ Judgment but is only focussed on determining whether the ECJ Judgment applies to the present case (see ¶ 402 above), the Tribunal nonetheless notes that the January 2019 Declarations cannot operate as binding interpretations of the ECT. While there is no doubt that such Declarations may be issued and are consistent with the ECT, they do not replace the process of interpreting a treaty provision that has to be conducted in accordance with the principles in Articles 31 and 32 VCLT. If and to the extent the January 2019 Declarations fall within any of the tenets of interpretation under Articles 31 or 32 VCLT, they may be taken into account in the interpretative process. Indeed, the January 2019 Declarations themselves do not state that they provide interpretations that are binding on arbitral tribunals, but instead clarify their scope as being intended to “inform investment arbitration tribunals about the legal consequences of the Achmea judgment".⁴⁶⁷

436. Secondly, and in any event, the Tribunal finds that the contents of these January 2019 Declarations do not add clarity in respect of the question of whether the ECJ Judgment extends to the ECT. The primary reason for this continuing lack of clarity is the incongruity between the 15 and 16 January 2019 Declarations. While the 15 January 2019 Declaration states that in light of the ECJ Judgment, Article 26 ECT “would be incompatible with the [EU] Treaties and thus would have to be disapplied",⁴⁶⁸ the 16 January 2019 Declaration signed by 5 Member States including Sweden, specifically refrains from taking any position on whether the ECJ Judgment extends to the ECT. In the

⁴⁶⁶ R-RPHB, ¶ 33. ↩

⁴⁶⁷ CL-191, Declaration of the Representatives of the Governments of the Members States on the Legal Consequences of the Judgment of the Court of Justice in Achmea on Investment Protection in the European Union, 15 January 2019, ¶ 1, p. 3; CL-192, Declaration of the Representatives of the Governments of the Members States on the Enforcement of the Judgment of the Court of justice in Achmea and on Investment Protection in the European Union, 16 January 2019, ¶ 1, p. 3. ↩

⁴⁶⁸ CL-191, Declaration of the Representatives of the Governments of the Members States on the Legal Consequences of the Judgment of the Court of Justice in Achmea on Investment Protection in the European Union, 15 January 2019, p. 2. ↩

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following passage, it appears to acknowledge that the ECJ Judgment only related to BITs and was silent on the ECT:

The Achmea case concerns the interpretation of EU law in relation to an investor-state arbitration clause in a bilateral investment treaty between Member States. The Member States note that the Achmea judgment is silent on the investor-state arbitration clause in the Energy Charter Treaty. A number of international arbitration tribunals post the Achmea judgment have concluded that the Energy Charter Treaty contains an investor-State arbitration clause applicable between EU Member States. This interpretation is currently contested before a national court in a Member State. Against this background, the Member States underline the importance of allowing for due process and consider that it would be inappropriate, in the absence of a specific judgment on this matter, to express views as regards the compatibility with Union law of the intra EU application of the Energy Charter Treaty.⁴⁶⁹ (emphasis added)

437. Further, both the January 2019 Declarations specifically refer to the pending annulment proceedings in the Novenergia II v. Spain case before the Svea Court of Appeal concerning the interpretation of Article 26 ECT.⁴⁷⁰ While these annulment proceedings are yet to be concluded, the Tribunal notes, as obiter dictum, that in the interim period, in April 2019, the Svea Court of Appeal refused Spain's request to refer the following question for a preliminary ruling of the ECJ: “whether Article 26 of the ECT is applicable between the [M]ember [S]tates of the European Union, and if that is the case, whether Article 26 of the ECT is compatible with the European Union's primary law” (see ¶ 412 above). In light of this recent development, Respondent's submission that “it is expected that the question [will] be referred to the CJEU soon, and these 5 Member States will be allowed to sign the 22 Member States Declaration once the CJEU pronounce[s] on the issue"⁴⁷¹ is clouded with uncertainty at this stage.

⁴⁶⁹ CL-192, Declaration of the Representatives of the Governments of the Members States on the Enforcement of the Judgment of the Court of justice in Achmea and on Investment Protection in the European Union, 16 January 2019, p. 3. The Tribunal notes that the third Declaration, signed only by Hungary on 16 January 2019, in fact uses stronger language to state that “the Achmea judgment concerns only the intra-EU bilateral investment treaties ... and it does not concern any pending or prospective arbitration proceedings initiated under the ECT.” ↩

⁴⁷⁰ CL-191, Declaration of the Representatives of the Governments of the Members States on the Legal Consequences of the Judgment of the Court of Justice in Achmea on Investment Protection in the European Union, 15 January 2019, f.n. 3; CL-192, Declaration of the Representatives of the Governments of the Members States on the Enforcement of the Judgment of the Court of justice in Achmea and on Investment Protection in the European Union, 16 January 2019, f.n. 8. ↩

⁴⁷¹ R-RPHB, ¶ 19. ↩

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438. Fourth, in addition to the diverging January 2019 Declarations, the fact that EU Member States are themselves requesting for the question of the relationship between Article 26 ECT and EU law, particularly after the ECJ Judgment, to be referred to the ECJ is indicative of the prevailing lack of clarity on this question. In fact, during the Hearing, upon being questioned, Respondent informed the Tribunal that it had also requested the Italian Consiglio di Stato for a referral to the ECJ of question(s) relating to the interpretation of the ECT:

PROF. GIARDINA: Why don't you think it would be preferable to obtain a specific rule from the European Court on the ECT, for instance, or another kind of arbitration? Because it is reasonable also to think of this way of solving the problem. Now we have to decide, of course, so we cannot wait for another decision by the European Court interpreting the Energy Charter Treaty. But it's my question: why do you ask us to make this difficult exercise to interpret the Achmea decision? MR. GIORDANO: We actually raised a preliminary ruling under Articles 267 and 344 in a specific issue concerning energy as well, so under the ECT as well. So we are actually waiting for a decision in that sense from the Consiglio di Stato, which is of course the main judge in the administrative system. Being a final and ultimate jurisdiction of the administrative Italian system, it is of course obliged to raise the preliminary ruling before the European Court of Justice. So we did it in one case.⁴⁷²

439. The above response by Respondent upon being questioned about why this Tribunal, and not the ECJ itself, should clarify whether the ECJ Judgment extends to the ECT implicitly indicates that even Respondent believes that there is currently a lack of clarity on the question of the scope of the ECJ Judgment vis-à-vis the ECT, and that such lack of clarity should be explicitly resolved by the ECJ.

440. While Respondent has since not informed the Tribunal of the status of its request for referral before the Italian Consiglio di Stato, for the purposes of the current proceedings, Respondent's implicit admission of a lack of clarity regarding the relationship between Article 26 ECT and EU law further persuades the Tribunal to find that there are currently no clearly discernible limitations to this Tribunal's jurisdiction emanating from EU law.

⁴⁷² Hr. Tr. Day 1, pp. 171(12)-172(5). ↩

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441. The Tribunal is therefore convinced by Claimants' characterization of the question of the applicability of the ECJ Judgment to the ECT as currently being “theoretical and speculative".⁴⁷³ This theoretical and speculative question is not for this Tribunal to conclusively resolve. The ECJ Judgment could have or any subsequent ruling by the ECJ may in future resolve this question conclusively. For the purposes of this Tribunal's current jurisdictional analysis, it suffices to state, at this stage, that absent any clearly discernible limitations to its jurisdiction under Article 26 ECT, EU law does not inhibit this Tribunal from exercising jurisdiction over Claimants' claims.

442. This lack of clearly discernible limitations is rendered even more conspicuous by a recent court decision in the Swedish legal order, whereby intra-EU investor-State disputes were recognized as being arbitrable. In a decision of the Svea Court of Appeal in PL Holdings v. Poland from February 2019, referred to by Claimants,⁴⁷⁴ the Court refused to annul an award rendered under the BIT between the Belgium-Luxembourg Economic Union and Poland on jurisdictional grounds relating to EU law. Specifically, the Svea Court of Appeal found that intra-EU investor-State disputes were not per se non-arbitrable, and that an award rendered under the intra-EU investor-State arbitration would not violate Swedish ordre public.⁴⁷⁵ Thus, the Court refused to annul the award on these grounds under Section 33 of the Swedish Arbitration Act, although it did partially annul the award on other unrelated grounds.

443. On a related note, the Tribunal also agrees with the distinction Claimants draw between an earlier judgment of the Nacka District Court in Stockholm in the Micula v. Romania case of January 2019 and the present case. Respondent relies on this judgment as an example of a case where a Swedish court refused to enforce an ICSID award in an intra-EU BIT case.⁴⁷⁶ However, as Claimants rightly point out, the Micula v. Romania case pertained to the enforceability of an award, the payment of which the EC had declared to be

⁴⁷³ C-PHB, ¶ 25. ↩

⁴⁷⁴ C-RPHB, ¶¶ 12-16; citing C-467, Analysis: A full run-down of the Svea Court of Appeal's reasoning in the recent PL Holdings v. Poland set-aside decision, IA Reporter; C-468, Arbitral awards in investment protection dispute remain mainly unchanged, Svea Hovrätt Press Release. ↩

⁴⁷⁵ C-467, Analysis: A full run-down of the Svea Court of Appeal's reasoning in the recent PL Holdings v. Poland set-aside decision, IA Reporter. ↩

⁴⁷⁶ R-PHB, ¶ 53; R-RPHB, ¶ 44. ↩

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incompatible State aid.⁴⁷⁷ In the instant case, none of the payments or amounts claimed by Claimants have been declared as impermissible State aid, nor does Respondent's jurisdictional objection under EU law raise State aid issues.

444. The only relevant issue for this Tribunal's jurisdiction is whether the Swedish legal order, and through it EU law, creates any clearly discernible limitations to this Tribunal's jurisdiction under Article 26 ECT. The Tribunal has not found any such clearly discernible limitations arising from Swedish and/or EU law. Thus, absent any clear indication about whether the ECJ Judgment's interpretation of Articles 267 and 344 TFEU extends to the ECT, the present case falls within the outer limits of this Tribunal's jurisdiction.

(3) Interpretation of Article 26 ECT and Conflict of Treaties

445. With respect to Respondent's jurisdictional objection relating to EU law, the only issues left for the Tribunal to determine stem from the Parties' expansive submissions concerning (a) the interpretation of Article 26 ECT independent of EU law entering this process of interpretation, and (b) the alleged conflict between the ECT and the EU Treaties as two regimes of international law, and how this conflict should be resolved using international law rules such as Articles 30 and 41 VCLT, Article 351 TFEU and/or Article 16 ECT. The Tribunal shall briefly examine the Parties' submissions on these topics below.

a. Interpretation of Article 26 ECT

446. To recall, the Tribunal has already found that on an application of EU law as it exists currently, there appear to be no clearly discernible limitations on this Tribunal's jurisdiction under Article 26 ECT (see ¶ 444 above). However, this still leaves open the question of interpreting Article 26 ECT in its context and in light of the ECT's object and purpose, and whether such interpretation of the ECT excludes intra-EU investor-State arbitration from the purview of Article 26 ECT. This interpretation will, of course, not take into account EU law under Article 31(3)(c) VCLT, in light of the Tribunal's earlier finding that EU law does not qualify as relevant or applicable under Article 31(3)(c) VCLT (see ¶ 394 above).

⁴⁷⁷ C-RPHB, ¶¶ 18-19. ↩

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447. Under Article 31 VCLT (quoted in ¶ 289 above), the primary indication of the intention of the Parties to a treaty is the text of the treaty provision being interpreted. That treaty provision is Article 26 ECT (quoted in ¶ 287 above). In particular, the question in this interpretation exercise is whether the term “Contracting Party” in the phrase "[d]isputes between a Contracting Party and an Investor of another Contracting Party” in Article 26(1) ECT can be read as excluding EU Member States in so far as intra-EU investor-State arbitrations are concerned.

448. Text of Article 26 ECT: The Tribunal finds the text of Article 26 ECT to be clear and unambiguous. It contains no explicit indication of any exclusion of EU Member States from the scope of the term “Contracting Party” in Article 26 ECT. Further, the provision does not expressly recognize any distinction between intra-EU and extra-EU disputes whatsoever. Neither Respondents nor the EC contests these uncontroversial propositions.

449. Context: As part of the context of Article 26 ECT, Respondent (see ¶¶ 304-308 above) and the EC (see ¶¶ 344-345 above) rely on many provisions of the ECT to propose that EU Member States are excluded from the term “Contracting Party” in Article 26 ECT. Each of these provisions are quoted in ¶ 287 above. These include:

1. The EU's position as a REIO under Article 1(3) ECT, and the fact that as such, the EU is a "Contracting Party” of the ECT under Article 1(2) ECT and has its own demarcated definition of “Area” under Article 1(10) ECT.
2. Article 25 ECT, which permits more preferential treatment between the Parties to EIAs (Economic Integration Agreements), and the Decision, included in Annex 2 to the Final Act of the European Energy Charter Conference, with respect to Articles 24(4)(a) and 25 ECT, and the EU's and EU Member States' Declaration under Article 25 ECT.⁴⁷⁸
3. Article 16 ECT, which as per Respondent prohibits derogation from any more favourable provision in EU law, including its access to justice mechanism, for the benefit of an investor from an EU Member State.

⁴⁷⁸ The Decision and the Declaration are available at: https://energycharter.org/fileadmin/DocumentsMedia/Legal/ECTC-en.pdf. ↩

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4. The Statement made by the European Communities under Article 26(3)(b)(ii) ECT, which as per the EC restricts the offer to arbitrate under Article 26 ECT only to investors from non-EU Member States, since the Statement uses the term “another” the following phrase: “[t]he Communities and the Member States will . . . determine among them who is the respondent party to arbitration proceedings initiated by an Investor of another Contracting Party.” (emphasis added by the EC)

450. The Tribunal considers that none of the above contextual matters warrants that the term “Contracting Party” in the clear text of Article 26 ECT should be interpreted as excluding a reference to EU Member States, and thereby excluding intra-EU arbitrations. In this regard, the Tribunal notes the following:

1. The EU's position as a REIO under Article 1(3) ECT does not indicate that Article 26 ECT is not applicable between EU Member States. The fact that Article 1(3) ECT recognizes the transfer of “competence over certain matters” by the EU Member States to the EU also does not reflect that the provisions of the ECT become inapplicable between the Member States. Similarly, the two definitions of the term “Area" in Article 1(10) ECT are not mutually exclusive, and the reference to “the agreement establishing the [REIO]” appears to only be relevant for the geographical demarcation of the “Area" in question. The Tribunal agrees with Claimants' contention that these provisions, taken together with Article 1(2) ECT, only indicate that the ECT recognizes that some Member States are also members of REIOs, while ensuring that both the REIO and the Member States maintain their independent positions as Contracting Parties to the ECT (see ¶ 320 above). This is also in line with consistent jurisprudence of investor-State tribunals.⁴⁷⁹
2. The same can be said for Respondent's reliance on Article 25 ECT, and the corresponding Decision with respect to Articles 24(4)(a) and 25 ECT and the EU's and EU Member States' Declaration under Article 25 ECT. Article 25 ECT, the Decision and the Declaration also only recognize that a Contracting Party to the ECT

⁴⁷⁹ CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 194-195; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶ 143. ↩

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can simultaneously be party to an EIA. However, this does not indicate that ECT and its dispute resolution mechanism is inapplicable between EU Member States.

3. Article 16 ECT, although relied upon extensively by Respondent, in reality runs counter to Respondent's proposal. In essence, Article 16 ECT provides that between the ECT and any other international agreement between two or more ECT Contracting Parties on the same subject matter as Parts III or V of the ECT, the “more favourable” provisions shall prevail. Assuming that the ECT and the EU Treaties pertain to the same subject matter, the Tribunal considers that, to the extent of the dispute resolution mechanism, the ECT provides for a more favourable regime since it envisages multiple options for dispute resolution, including investor-State arbitration, which the EU Treaties do not specifically provide for. Thus, in this regard too, the Tribunal finds Claimants' position convincing (see ¶ 319 above). Respondent's submission that Article 26 ECT is not applicable between EU Member States as a result of Article 16 ECT fails.
4. Only the EC makes observations with respect to the Statement made by the European Communities under Article 26(3)(b)(ii) ECT. The only passage that the EC relies upon is the following:

   The Communities and the Member States will, if necessary, determine among them who is the respondent party to arbitration proceedings initiated by an Investor of another Contracting Party. In such case, upon the request of the Investor, the Communities and the Member States concerned will make such determination within a period of 30 days. (emphasis added)

   According to the EC, the use of the term “another” before Contracting Party excludes disputes brought by EU investors against an EU Member State from the purview of the ECT. This proposition does not follow from the language of the above Statement. If the intention was to exclude intra-EU disputes from the purview of Article 26 ECT, that could and should have been mentioned in the ECT itself. While the above Statement may hold interpretative significance under Article 31(2)(b) VCLT, it cannot be used to override the clear text of Article 26 ECT. Further, upon reading the Statement in context, it also appears

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to only recognize a demarcation of competences between the EU and the Member States, but not to completely exclude the application of ECT provisions between EU Member States.

451. Disconnection Clause: Another contextual matter discussed by the Parties and the EC is the absence of a disconnection clause in the ECT. Whereas Respondent and the EC consider that the inclusion of such a disconnection clause would have been superfluous (see ¶¶ 298 and 346 above), Claimants emphasize this absence, which they deem conspicuous in light of the EC's prior treaty practice and the ECT's travaux préparatoires (see ¶ 319 above).

452. The Tribunal finds Claimants' argument on the absence of a disconnection clause convincing. The consequence that Respondent and the EC attempt to derive from a strained contextual interpretation of the ECT would have been convenient to achieve had a disconnection clause existed therein. A disconnection clause would have achieved the purpose of limiting the application of the ECT, which is a mixed agreement, such that it was only applicable vis-à-vis third parties and not between EU Member States. Thus, in essence, Respondent and the EC attempt to implicitly read into the ECT a disconnection clause when none exists. It is unanimously accepted in investment arbitration case law that this cannot be done.⁴⁸⁰

453. What makes the absence of a disconnection clause more telling is the fact that during the negotiations of the ECT, the European Communities had in 1993 proposed the inclusion of a disconnection clause.⁴⁸¹ While this proposal did not ultimately materialize, it does reflect that at that time a disconnection clause was not considered to be superfluous as the EU and Respondent submit currently. This is not surprising considering that until the ECT's entry

⁴⁸⁰ CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶ 186; CL-4, Charanne BV and Construction Investments v. Spain, SCC Case No. 062/2012, ¶¶ 433-439; CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, Final Award, 27 December 2016, ¶¶ 280, 301. ↩

⁴⁸¹ CEX-462, Note for the Attention of Ambassador Rutten from Secretary General Clive Jones, Feb. 19, 1993. ↩

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into force, disconnection clauses were common practice in international agreements entered into by the EU, as Claimants rightly point out.⁴⁸²

454. In light of the above, the Tribunal does not find any contextual support for excluding EU Member States from the term “Contracting Party” in Article 26 ECT or for excluding intra- EU investor-State disputes from the purview of Article 26 ECT.

455. Object and Purpose of the ECT and Travaux Préparatoires: The Tribunal also finds no indication in the ECT's object and purpose that would justify abandoning the clear text of Article 26 ECT. Likewise, there is no such indication in the travaux préparatoires submitted by Respondent, which the Tribunal shall address only for the sake of completeness.

456. The EC suggests that the ECT was always intended to create an international framework of cooperation in the energy sector between the EU and its Member States on the one side participating as one consolidated block, and Russia, the CIS and the countries of Central and Eastern Europe, on the other side.⁴⁸³ Respondent also relies on a document from the travaux préparatoires to make arguments to the same end.⁴⁸⁴

457. This purported object and purpose of the ECT does not come across from within the ECT, nor from the solitary and unrelated travaux document submitted by Respondent. Instead, Article 2 ECT stipulates a liberally worded object and purpose of the ECT, when it states that "[t]his Treaty establishes a legal framework in order to promote long-term cooperation in the energy field, based on complementarities and mutual benefits, in accordance with the objectives and principles of the Charter.” The Charter also does not at any point demonstrate a demarcation of this object and purpose between the EU Member States and the non-EU Member States.

⁴⁸² C-SoRj, ¶ 83; relying on CL-31, Marise Cremona, Disconnection Clauses in EU Law and Practice, in MIXED AGREEMENTS REVISITED: THE EU AND ITS MEMBER STATES IN THE WORLD 160, at 164-170 (Christophe Hillion & Panos Koutrakos eds. 2010). ↩

⁴⁸³ EC NDP Submission, ¶¶ 71-86, specifically, ¶ 82; relying, inter alia, on relying on CL-177, Johann Basedow, "The European Union's International Investment Policy. Explaining Intensifying Member State Cooperation in International Investment Regulation", PhD Thesis, The London School of Economics and Political Science (2014). ↩

⁴⁸⁴ SoD, ¶¶ 62-65; relying on REX-003, Commission Proposal for a Council Directive concerning common rules for the internal market in electricity, COM (91)548 final, OJ No C65 of 14 March 1992; see also R-SoRj, ¶¶ 131-132. ↩

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458. Accordingly, the Tribunal considers that the object and purpose of the ECT or its travaux préparatoires do not warrant a counter-textual conclusion that Article 26 ECT does not apply between EU Member States for intra-EU investor-State disputes.

b. Conflict of Treaties

459. The Parties have made extensive submissions on how a conflict, if any, between the ECT and the EU Treaties, specifically Articles 267 and 344 TFEU, should be resolved. In this regard, their submissions deal with the application of Articles 30 and 41 VCLT, Article 351 TFEU and/or Article 16 ECT (see for Respondent's submissions ¶¶ 309-313 above; for Claimants' submissions ¶¶ 323-324 above; and for the EC's observations ¶¶ 347-348 above).

460. In light of the Tribunal's earlier findings, the Tribunal does not consider it appropriate or necessary to examine these submissions. This is for two reasons.

461. First, the Tribunal has concluded above (see ¶ 401 above) that the only manner through which EU law, including the EU Treaties, enters this Tribunal's applicable law framework is through the application of Swedish domestic law as lex arbitri. Thus, there is no possible conflict between two sources of international law, i.e., the ECT and EU Treaties, to be resolved in this case. Instead, the only question with respect to the interaction between the ECT and EU law, which the Tribunal has already answered, is whether EU law, as a constituent part of Swedish law, creates any outer limits to this Tribunal's jurisdiction. This question has been answered in the negative (see ¶ 444 above).

462. Second, and in any event, the Tribunal's finding that EU law does not create any limitations or restrictions on this Tribunal's jurisdiction under Article 26 ECT is also dispositive of the question as to whether there is any conflict between Article 26 ECT and Articles 267 and 344 TFEU. The latter question is also, by implication, answered in the negative. The Tribunal has already found that Articles 267 and 344 TFEU have a different sphere of application than Article 26 ECT, and do not expressly address or prohibit intra- EU investor-State arbitration (see ¶¶ 409-413 above). Accordingly, there is no conflict to be resolved by the application of any international law rules relating to conflict of treaties.

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(4) Conclusion on the Jurisdiction Issue relating to EU Law

463. The Tribunal has found in the above Sections that (i) the only manner through which EU law enters this Tribunal's applicable law framework for questions of jurisdiction is through the application of Swedish domestic law as lex arbitri, and not as a manifestation of international law (see ¶ 401 above); (ii) Swedish and/or EU law does not create any clearly discernible outer limits to this Tribunal's jurisdiction under Article 26 ECT, even after the ECJ Judgment (see ¶ 444 above); and (iii) an interpretation of Article 26 ECT, in accordance with Articles 31 and 32 VCLT, does not lead to the conclusion that intra-EU investor-State disputes were excluded from the scope of Article 26 ECT (see ¶¶ 454 and 458 above).

464. In light of these reasons, Respondent's jurisdictional objection relating to EU law and the ECJ Judgment is rejected.

VII. OTHER ISSUES OF JURISDICTION AND ADMISSIBILITY

465. In addition to the jurisdictional objection relating to EU law, Respondent raises three separate objections relating to the Tribunal's jurisdiction and, alternatively, the admissibility of Claimants' claims. These are as follows:

1. Some of the measures taken by Italy that are at stake in these proceedings are “taxation measures” under Article 21 ECT, and thereby excluded from the jurisdiction of the Tribunal;
2. Respondent's consent to arbitrate under Article 26 ECT is excepted by the exclusive jurisdiction clause in favour of the Court of Rome in the GSE contracts entered into with respect to Claimants' photovoltaic plants; and
3. The requirement of a prior request for amicable solution under Article 26(1) ECT has not been fulfilled with respect to some of Claimants' claims.

466. In the forthcoming Sections, the Tribunal shall examine each of these jurisdictional and admissibility objections in turn.

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B. RELEVANT TREATY PROVISIONS

467. Apart from Article 26 ECT (quoted in ¶ 287 above), Article 21 ECT is relevant for the Tribunal's analysis of the other issues of jurisdiction and admissibility. It is reproduced below to the extent relevant:

Article 21: Taxation

(1) Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties. In the event of any inconsistency between this Article and any other provision of the Treaty, this Article shall prevail to the extent of the inconsistency.

....

(7) For the purposes of this Article:

1. The term “Taxation Measure" includes:
   1. any provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein; and
   2. any provision relating to taxes of any convention for the avoidance of double taxation or of any other international agreement or arrangement by which the Contracting Party is bound.
2. There shall be regarded as taxes on income or on capital all taxes imposed on total income, on total capital or on elements of income or of capital, including taxes on gains from the alienation of property, taxes on estates, inheritances and gifts, or substantially similar taxes, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.
3. A "Competent Tax Authority” means the competent authority pursuant to a double taxation agreement in force between the Contracting Parties or, when no such agreement is in force, the minister or ministry responsible for taxes or their authorized representatives.
4. For the avoidance of doubt, the terms “tax provisions” and “taxes” do not include customs duties

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C. THE PARTIES' POSITIONS

(1) Respondent's Position

a. Taxation Measures excluded from the Tribunal's Jurisdiction

468. According to Respondent, a number of measures contested by Claimants in these proceedings qualify as “taxation measures”, which term is defined in an open-ended manner in Article 21(7) ECT. For these measures, Claimants claim a breach of Article 10(1) ECT, which is not mentioned in the exceptions to the rule provided in Article 21 ECT.⁴⁸⁵ As a result of this, Claimants' claims in respect of these taxation measures are beyond the Tribunal's jurisdiction as per Respondent.

469. Respondent submits that as per the definition of “taxation measure” in Article 21(7) ECT, the two qualifying features for such measures are that (i) they must be sourced either in domestic legislation or in international treaties; and (ii) they must generally relate to fiscal measures.⁴⁸⁶

470. With respect to what qualifies as a fiscal measure and what does not, Respondent contends that the ECT defers to domestic laws of Contracting Parties. Accordingly, Respondent supports its submission by relying on Italian law, according to which taxes (imposta), fees (tassa) and contributions (contributo) qualify as measures of a fiscal nature (tributi). In addition, relying on the Italian Constitutional Court's jurisprudence, Italy submits that the characteristics of a fiscal nature (tributi) in Italian law are four-fold: (i) dutifulness of the withdrawal or payment, i.e., whether or not the payment of the measure is mandatory; (ii) absence of exact reciprocity between the concerned parties; (iii) connection of the withdrawal or payment to public spending; and (iv) establishment of the fiscal measures by way of law.⁴⁸⁷ In Respondent's view, these criterion of fiscal measures in Italian law align with the criterion prescribed in the definitions of “tax” or “tax law” in the glossary of the

⁴⁸⁵ SoD, ¶¶ 144-148. ↩

⁴⁸⁶ SoD, ¶¶ 148-149; relying on REX-011, Mena Chambers, Note 13 of 22 July 2015. ↩

⁴⁸⁷ SoD, ¶¶ 150-152; relying on REX-013, Italian Constitutional Court Decision No. 238/2009; article 23, Italian Constitution. ↩

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Organisation for Economic Co-operation and Development (“OECD”), and in turn with the OECD's Model Law 2014.⁴⁸⁸

471. In any event, to rebut Claimants' contentions regarding the interpretation of the Article 21(7) ECT under international law (see ¶ 491 above), Respondent contends that the provision should be interpreted in broad terms, in light of the application of Articles 31-33 VCLT. Specifically, in Respondent's view, the term “imposte” in the Italian version of the ECT should not be equated to the term “imposta” used in Italian law to refer to “wealth that is drawn from the citizens in relation to the production of income for the provision of general services provided by the State".⁴⁸⁹ Respondent supports its contentions by relying on the language used by the other versions of the ECT, specifically, the English, French and Spanish versions, which also support a wider scope of the term “taxation measures”. Also, Respondent juxtaposes the use of “misure fiscali” in other parts of Article 21 ECT (Articles 21(3) and 21(5) specifically) to the term “imposte”, arguing that the latter is broader than and includes the former.⁴⁹⁰

472. Respondent submits that four of the Italian measures under challenge qualify as measures of a fiscal nature, and are thus beyond the Tribunal's jurisdiction. These include Claimants' claims relating to (i) the Administrative Management Fee; (ii) the imbalance costs regime; (iii) the Robin Hood Tax; and (iv) classification of photovoltaic plants as immovable property. In support of this, Respondent places reliance on a recent award rendered by a tribunal in CEF v. Italy.⁴⁹¹

473. With respect to the Administrative Management Fee imposed by the Fifth Conto Energia Decree (see Section IV.F(1) above), Italy submits that this fee was mandatory in the sense that the GSE could directly offset it against the tariffs to be paid to photovoltaic producers. Further, Italy contends that the Fee was established as an annual contribution corresponding to a fixed amount per kWh, and was meant for the overall management of

⁴⁸⁸ SoD, ¶¶ 153-156; relying on REX-014, OECD Model Law 2014, articles 2 and 3(2); OECD's website: www.oecd.org. ↩

⁴⁸⁹ R-SoRj, ¶ 211. ↩

⁴⁹⁰ R-SoRj, ¶¶ 208-216; relying on REX-011, Mena Chambers, Note 13 of 22 July 2015. ↩

⁴⁹¹ R-PHB, ¶¶ 12-13; R-RPHB, ¶ 67; relying on RLA-018, CEF v. Italian Republic, SCC Arbitration V (2015/158), 16 January 2019, ¶ 294. ↩

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the incentivization scheme by covering GSE's management, audit and control expenses. Accordingly, Italy highlights the absence of reciprocity and the connection to public spending.⁴⁹²

474. With respect to the imposition of imbalance costs on non-programmable energy sources by Italian Electrical Energy Authority's Resolutions 281 and 522 (see Section IV.F(3) above), Respondent contends that the payment of imbalance costs is mandatory in nature. Further, in Respondent's view, these costs were imposed for the general mechanism of storage of electricity by the Italian system operator, i.e., Terna, which has a monopoly over the activities relating to transmission and dispatching of energy. Wherever there is a monopoly over such a public function reserved for the State, contributions made in that connection qualify as fiscal contributions under Italian law. On this basis, Italy submits that the criteria of absence of reciprocity and the connection to public spending are met by imbalance costs. In this regard, Italy also relies on the submissions of renewable energy producers before Italian courts during the challenge to Resolution 281, wherein they admitted that these imbalance costs qualify as “withdrawal of fiscal nature”.⁴⁹³

475. Italy supports its above contentions relating to the Administrative Management Fee and the imbalance costs by arguing that if these fiscal contributions was not imposed on energy producers, they would be allocated to the consumers under the A3 Component of the electricity bills. When such allocation would characterize the measure as one of a fiscal nature relating to public spending, this characterization is not altered when the costs are allocated to a different set of stake-holders, i.e., the photovoltaic producers.⁴⁹⁴ Additionally, Respondent contends that the Administrative Management Fee and imbalance costs also satisfy the criterion of what constitutes “taxation measures" in investment arbitration case law, particularly, Murphy v. Ecuador, which is relied on by

⁴⁹² SoD, ¶¶ 164-167; relying on CEX-188, Fifth Conto Energia Decree, article 10 and Recital 22; REX-017, AEEG Resolution of 26 May 2016, 266/2016/R/EEL, Determinazione a consuntivo del corrispettivo a copertura dei costi riconosciuti per il funzionamento del Gestore dei Servizi Energetici – GSE S.P.A., per l'anno 2015; REX-018, Italian Constitutional Court decision No. 30/1957. ↩

⁴⁹³ SoD, ¶¶ 168-174; relying on REX-019, Legislative Decree 16 March 1999, No 79, implementing Directive 96/92/CE concerning common rules for the internal market in electricity articles 1(1) and 2(10); REX-020; TAR Lombardia, decision of 24 June 2013, No. 1613. ↩

⁴⁹⁴ SoD, ¶¶ 166, 169, 173; relying on CEX-230, AEEG Resolution 522/2014/R/EEL. ↩

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Claimants (see ¶ 491 below). This is on the grounds that they are both mandatory levies not corresponding to specific services imposed by the Government for public purposes on a class of persons.⁴⁹⁵

476. To rebut Claimants' arguments regarding VAT being payable on the imbalance costs, or the jurisdiction of tax courts and applicability of Italian double-taxation treaties of Administrative Management Fee and imbalance costs, Italy states that such labels and titles are irrelevant to qualify as a measure as a fiscal or taxation measure.⁴⁹⁶ Further, Italy explains the Italian Constitutional Court case law, relied on by Claimants, to submit that an important requirement for qualifying a measure as a fiscal measure was that it should not be based on a synallagmatic relationship between the parties, the existence of which would qualify any payment as a contractual consideration, as opposed to a mandatory contribution towards public spending.⁴⁹⁷

477. With respect to the Robin Hood Tax imposed by Legislative Decree No. 138/2011 (see Section IV.F(4) above), Italy states that the same is “unequivocally" a taxation measure, both as per Italian law, as clarified by the Italian Constitutional Court, and as per the OECD's criterion.⁴⁹⁸

478. Concerning Claimants' characterization of its claims relating to the Robin Hood Tax, which implicates the ex nunc application of the Italian Constitutional Court Decision No. 10/2015 (see ¶ 496 below), Respondent states that the Constitutional Court rendered the Robin Hood Tax invalid because of the violation of the principle of equality in contributive capacity, and not due to its extension to renewable energy facilities. Thus, the propriety of an ex nunc application of the Constitutional Court Decision and Italy's alleged refusal to

⁴⁹⁵ R-SoRj, ¶¶ 218-226; relying on CL-127, Murphy Exploration & Prod. Co. Int'l v. Republic of Ecuador, Partial Final Award, ¶ 159. ↩

⁴⁹⁶ R-SoRj, ¶ 229; relying on CL-129, EnCana Corp. v. Republic of Ecuador, LCIA Case No. UN3481, Award ¶ 155. ↩

⁴⁹⁷ R-SoRj, ¶¶ 227-237; relying on CEX-354, Italian Constitutional Court, Decision No. 335; CEX-355, Italian Constitutional Court, Decision No. 238. ↩

⁴⁹⁸ SoD, ¶¶ 157-159; relying on REX-015, Italian Constitutional Court, Decision No 131/2015 of 27 May 2015, point 4. ↩

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reimburse the wrongfully charged Robin Hood Tax would de facto go back to becoming a claim about the propriety of the “taxation measure” itself, i.e., the Robin Hood Tax.⁴⁹⁹

479. Similarly, for the classification of photovoltaic plants as immovable property done through Circular No. 36/E by the Revenue Agency in Italy (see Section IV.F(5) above), reliance is placed by Respondent on the OECD Model Law and the very nature of the measure to submit that such a classification has the sole function of defining the scope of taxation, and is at least an ancillary to a taxation measure.⁵⁰⁰

480. Further, Respondent disputes Claimants' characterization of its claims relating to this classification as one that does not relate to the taxation measures per se, i.e., the IMU or TASI Charges, but instead only alleges arbitrariness vis-à-vis the decision to classify photovoltaic plants as immovable property. According to Respondent, Claimants guise their claims behind the classification issue, but the substance or “actual target" of their claim are the IMU and TASI Charges. Moreover, Respondent contends that Claimants voluntarily chose to file their tax returns (which are self-assessed) by adhering to the classification of photovoltaic plants as immovable property. Such classification, having been laid down by circulars of the Revenue Agency, were not binding and compliance with them was voluntary. In any event, in Respondent's view, had Claimants had an issue with the classification of photovoltaic plants as immovable property and its fiscal implications, they could have sought an “interpello”, i.e., a binding interpretation of fiscal laws from the concerned local authorities, or should at least have claimed for the refund of the IMU and TASI Charges from the tax authorities in Italy. Without claiming such a refund, Claimants could not have been entitled to receive the same automatically by Italy.⁵⁰¹

b. Exclusive jurisdiction clause in GSE contracts

481. Respondent further submits that the existence of an exclusive jurisdiction clause in the contracts entered into between the GSE and the power plant operators of Claimants'

⁴⁹⁹ R-SoRj, ¶¶ 190-191. ↩

⁵⁰⁰ SoD, ¶¶ 160-162; relying on REX-016, Agenzia delle Entrate, Circolar No 36E/2013; REX-014, OECD Model Law 2014, article 6(2). ↩

⁵⁰¹ R-SoRj, ¶¶ 193-198. ↩

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photovoltaic plants, being subsidiaries or SPVs acquired by Claimants, exclude this Tribunal's jurisdiction under Article 26 ECT.

482. These contracts were entered into between 2011 and 2012, i.e., when Claimants were making their investments in Italy, and each of them, in Article 9, provided for exclusive jurisdiction in favour of the Court of Rome "[f]or any dispute arising out of or in any way connected to the interpretation and execution of this Agreement and the documents referred to therein".⁵⁰² In Respondent's view, these exclusive jurisdiction clauses in the GSE contracts are broadly worded and cover not only pure breach of contract disputes, but also apply to any issue related to the incentives received by the investors, through even the Conto Energia Decrees.⁵⁰³

483. Further, according to Respondent, these jurisdiction clauses are specific in nature and applicability, inasmuch as they create rights and obligations between specific parties, and cannot be overridden by the generic stipulation of State consent in Article 26 ECT, unless the ECT itself provides for such priority. The ECT, instead, permits dispute resolution through any agreed dispute settlement procedure other than international arbitration, including dispute resolution by way of courts.⁵⁰⁴

484. Respondent supports the above submissions by relying on investment arbitration case law, in which tribunals denied jurisdiction over (or the admissibility of) claims covered by contractual exclusive jurisdiction clauses for considerations such as generalia specialibus non derogant, or the priority of specifically negotiated contractual clauses over generic expressions of consent in treaties.⁵⁰⁵ Further, Respondent highlights that the administrative

⁵⁰² CEX-293, Santoro GSE Agreement n. I08F13381307; CEX-294, San Marco GSE Agreement n. I08F15697007; CEX-295, Lenare GSE Agreement n. I0F15697307; see SoC, ¶¶ 150-152; CEX-306, Campania plant GSE Agreement n. I08F13988007; CEX-311, Monaci GSE Agreement n. I0F17928907; CEX-329, Rustico GSE Agreement n. O03M27266207; CEX-330, Milana GSE Agreement n. O03M28467707; CEX-341, Rovigo GSE Agreement n. T03F13776207; CEX-343, Fiumicino GSE Agreement n. I08F19354507. Notably, Respondent's translation is at variance from Claimants' ("For any dispute arising out of, or in any way related to the interpretation and/or execution of this Convention and the acts it refers to ..."); see SoD, ¶ 178. ↩

⁵⁰³ SoD, ¶¶ 179, 182; R-SoRj, ¶¶ 238-242; R-PHB, ¶¶ 8-11. ↩

⁵⁰⁴ Articles 26(2)(b) and 26(3) ECT; SoD, ¶¶ 175-181. ↩

⁵⁰⁵ SoD, ¶¶ 183-187; R-SoRj, ¶ 243; relying on RLA-002, ICSID Case No. ARB/02/6, SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, ¶¶ 141, 150, 153; RLA-003, ICSID Case No. ARB/02/3, Aguas del Tunari S.A. v. Republic of Bolivia, Decision on Respondent's Objections to Jurisdiction, 21 October 2005, ¶¶ 118-119; RLA-004, ICSID Case No. ↩

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complaints initiated by investors against the Spalma-incentivi Decree, resulting in the Constitutional Court Decision (see Section IV.G(2) above) included Article 26 ECT as one of the legal bases for the claims made in the domestic fora in Italy, which further proves that the ECT (unlike other treaties) is agreeable to dispute resolution by alternative methods of dispute resolution than international arbitration.⁵⁰⁶

485. Notably, Respondent also alternatively raise the above objections as arguments relating to the inadmissibility of Claimants' claims, in the event the Tribunal does not consider them to affect its jurisdiction.⁵⁰⁷

с. The requirement of amicable settlement under Article 26(1) ECT has not been fulfilled

486. Respondent also raises the argument that the requirement of an amicable settlement under Article 26(1) ECT has not been fulfilled in respect of certain of Claimants' claims in this arbitration. While Respondent does not dispute the existence of Claimants' letter dated 4 May 2016, by way of which they attempted to amicably resolve their disputes with Italy,⁵⁰⁸ it challenges the scope of that letter vis-à-vis the claims raised in the Request for Arbitration.

487. According to Respondent, Claimants raised two new claims in these arbitration proceedings, which were not mentioned in Claimants' letter of 4 May 2016 to Italy. These are the claims relating to (i) the ex nunc application of the Constitutional Court Decision No. 10/2015 relating to the Robin Hood Tax, and Italy's failure to reimburse the taxes wrongly imposed on, and paid by, Claimants under this regime; and (ii) Italy's failure to reimburse or offset payments made by Claimants as a result of the wrongful classification of photovoltaic plants as immovable property (the IMU and TASI Charges), which

ARB/07/9, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, Decision on Objections to Jurisdiction, 29 May 2009, ¶¶ 142-158.

⁵⁰⁶ SoD, ¶¶ 182, 186; relying on REX-032, Italian Constitutional Court Decision No. 16/2017, 7 December 2016. ↩

⁵⁰⁷ SoD, ¶¶ 196-203. ↩

⁵⁰⁸ CEX-7, Notice of Legal Dispute Arising Under the Energy Charter Treaty and Offer of Amicable Settlement. ↩

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classification was later “corrected" by Italy with effect from 1 January 2016 by way of Law No. 208/2015, which was mentioned for the first time in the Statement of Claim.⁵⁰⁹

488. Notably, Respondent also alternatively raise the above objections as arguments relating to the inadmissibility of Claimants' claims, in the event the Tribunal does not consider them to affect its jurisdiction.⁵¹⁰

(2) Claimants' Position

a. None of Claimants' claims contest the Application of “Taxation Measures"

489. Claimants dispute Respondent's jurisdictional objection relating to Article 21 ECT on the grounds that (i) the Administrative Management Fee and the imbalance costs are not “taxation measures” as per Article 21(7) ECT; and (ii) Claimants' claims relating to the Robin Hood Tax and the classification of photovoltaic plants as immovable property are not claims against the “taxation measures” per se.

490. With respect to the Administrative Management Fee and the imbalance costs, Claimants submit that Italy's argument is based on a flawed premise of equating “taxes” or “taxation measures” to “fiscal measures”. Such expansion of the definition of “taxation measures” is not supported in the text of Article 21(7)(a) ECT, the official Italian version of which uses the term “imposte” instead of the term used by Respondent for “fiscal measures”, i.e., "tributi".⁵¹¹

491. Alternatively, Claimants submit that the reliance on domestic law for characterization of measures as “taxation measures", while helpful, is not determinative of this issue. In this connection, Claimants rely on investment arbitration case law to enlist an independent criterion for determining what is a “taxation measure” under international investment law. This criterion require (i) taxation measures to be “related to the imposition of a liability on classes of persons to pay money to the State for public purposes and without any direct benefit to the taxpayer”; (ii) accounting for the plain text of the legal provision imposing

⁵⁰⁹ SoD, ¶¶ 191-195; R-SoRj, ¶¶ 244-251. ↩

⁵¹⁰ SoD, ¶¶ 204-205. ↩

⁵¹¹ SoRy, ¶¶ 152-153; relying on ECT, article 50. ↩

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the taxation measure in addition to the domestic constitutional framework; and (iii) bona fide actions motivated by the purpose of raising State revenue.⁵¹²

492. It is Claimants' position that none of these criteria are met by the Administrative Management Fee or the imbalance costs. Claimants contend that both these measures are not motivated towards increasing State revenue, nor are they intended for a public purpose. Instead, they are to be paid by photovoltaic producers for exchange of specific services of either "GSE's management, monitoring and verification tasks” or “to assume the dispatching services costs” of Terna. Further, Claimants highlight that the sources of these measures, be it the Fifth Conto Energia Decree or the Italian Electrical Energy Authority's Resolutions 281 and 522, do not use the term “taxes” to describe these measures in their plain text, but instead use terms such as “contributions” or “compensations”. In this regard, Claimants also place reliance on the findings of the Greentech v. Italy tribunal, which found these that these two measures in question did not qualify as “taxation measures”.⁵¹³

493. In addition, Claimants allege that the Administrative Management Fee and the imbalance costs are not bona fide taxation measures, since they were enacted to reduce incentive payments previously guaranteed to renewable energy producers.⁵¹⁴

494. In the further alternative, Claimants submit that the purely domestic understanding of “imposte” or taxes under Italian law also does not support Respondent's categorization. In addition to disputing the criterion relied on by Respondent for determining what qualifies as a “taxation measure” in Italian law,⁵¹⁵ Claimants make three further arguments. First,

⁵¹² SoRy, ¶¶ 154-157; relying on CL-127, Murphy Exploration & Prod. Co. Int'l v. Republic of Ecuador, Partial Final Award, ¶¶ 159, 185; CL-128, Thomas Wälde & Abba Kolo, Investor-State Disputes: The Interface Between Treaty-Based International Investment Protection and Fiscal Sovereignty, in INTERTAX, KLUWER L. INT'L 430, Volume 35, Issue 8/9; CL-129, EnCana Corp. v. Republic of Ecuador, LCIA Case No. UN3481, Award; CL-130, Occidental Petroleum Corp. & Occidental Exploration and Prod. Co. v. Republic of Ecuador, ICSID Case No. ARB/06/11, Award, ¶¶ 492-495; CL-131, Yukos Universal Ltd. v. Russian Federation, Award, ¶ 1407. ↩

⁵¹³ SoRy, ¶¶ 159-162; C-SoRj, ¶¶ 120-122; C-PHB, ¶ 39; relying on CEX-188, Fifth Conto Energia Decree, article 10.4; CEX-227, AEEG Resolution 281/2012/R/EFR, at 10; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶¶ 244, 251. ↩

⁵¹⁴ C-SoRj, ¶ 119. ↩

⁵¹⁵ SoRy, ¶ 164; relying, inter alia, on CEX-348, P. Boria, a cura di A. Fantozzi, Il diritto tributario, III ed. Torino; CEX-349, P. Russo, Manuale di diritto tributario, II ed., Milan; CEX-350, G. Tinelli, Istituzioni di diritto tributario, IV ed., Milano CEX-351, Enciclopedia Giuridica Treccani – Istituto della Enciclopedia Italiana fondata da Giovanni Treccani, ed. 2009. ↩

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Claimants submit that imbalance costs fall within the “network and dispatching service” constituent of the A3 Component, and not the separate “taxes” constituent. Second, Claimants rely on GSE's balance sheet to highlight that imbalance costs are treated as “income from sales and services”, which in turn are subjected to corporate income tax and VAT. Third, Claimants point out that the Administrative Management Fee and the imbalance costs are not included in the type of fiscal measures over which Italian tax courts have jurisdiction, primarily because, as clarified in Italian Constitutional Court jurisprudence, measures covering service costs and liable for VAT are excluded from the jurisdiction of tax courts. Similarly, neither the Administrative Management Fee and the imbalance costs are covered under Italian double-taxation treaties.⁵¹⁶

495. With respect to the Robin Hood Tax and the classification of photovoltaic plants as immovable property, Claimants' position is that their claims concerning these measures do not dispute "taxation measures” as defined by the ECT, nor do they dispute the existence or application of these taxes. Instead, the taxes in question are only relevant to the background of these claims.⁵¹⁷

496. Claimants' only claim concerning the Robin Hood Tax, which has already been declared unconstitutional by the Italian Constitutional Court in Decision No. 10/2015 (see ¶¶ 244-248 above), is that the Constitutional Court Decision's ex nunc, rather than ex tunc, application was unfair. Similarly, for the classification of photovoltaic plants as immovable property, Claimants contest the fact that Italy's correction of this classification in 2016 did not result in a refund of the wrongly imposed IMU and TASI Charges under the earlier arbitrary classification of photovoltaic plants as immovable property, which Claimants had paid in good faith.⁵¹⁸

⁵¹⁶ SoRy, ¶¶ 165-169; relying on CEX-353, GSE Reports and Financial Statements; CEX-354, Italian Constitutional Court, Decision No. 335; CEX-355, Italian Constitutional Court, Decision No. 238; CEX-357, Italian Constitutional Court, Decision No. 39; see also C-SoRj, ¶¶ 114-115. ↩

⁵¹⁷ SoRy, ¶ 147. ↩

⁵¹⁸ SoRy, ¶ 148; C-SoRj, ¶¶ 107-110. ↩

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b. Exclusive jurisdiction clause in GSE contracts

497. In response to Respondent's jurisdictional (and alternatively, admissibility) objection relating to the exclusive jurisdiction clause in the GSE contracts, Claimants make two arguments.

498. First, Claimants challenge the relevance of that argument on the ground that none of the Claimants was a signatory to, or bound by, the contracts entered into with the GSE. The contracts were instead executed by entities separate from Claimants. Thus, the exclusive jurisdiction clauses in the GSE contracts do not apply to Claimants, nor do they amount to a previously agreed dispute resolution mechanism between Claimants and Italy, i.e., the two Parties in this ECT arbitration. On this basis, Claimants also distinguish the cases relied on by Respondent, particularly the SGS v. Philippines case and the BIVAC v. Paraguay case, in both of which the claimants were party to the contracts being considered.⁵¹⁹ Instead, Claimants place reliance on the Greentech v. Italy award, which, as per Claimants, was factually closer to the present case and was correctly decided.⁵²⁰

499. Second, Claimants contend that they are not seeking a resolution of a breach of contract claim in these ECT proceedings. Instead, their claims pertain strictly to a breach of treaty, in which the GSE contracts are merely incidentally relevant as evidence of specific obligations that Italy entered into but failed to fulfil in violation of the ECT's Umbrella Clause.⁵²¹

⁵¹⁹ SoRy, ¶¶ 171-173; C-SoRj, ¶ 130; relying on RLA-002, ICSID Case No. ARB/02/6, SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, ¶¶ 1, 13-14; RLA-003, ICSID Case No. ARB/02/3, Aguas del Tunari S.A. v. Republic of Bolivia, Decision on Respondent's Objections to Jurisdiction, 21 October 2005, ¶ 119; RLA-004, ICSID Case No. ARB/07/9, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, Decision on Objections to Jurisdiction, 29 May 2009, ¶¶ 7, 127. ↩

⁵²⁰ Claimants' PHB, ¶¶ 38-39; relying on CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶¶ 204-221. ↩

⁵²¹ SoRy, ¶¶ 174-177; C-SoRj, ¶¶ 125-18; relying on RLA-002, ICSID Case No. ARB/02/6, SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, ¶¶ 157-159; RLA-004, ICSID Case No. ARB/07/9, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, Decision on Objections to Jurisdiction, 29 May 2009, ¶ 127; CL-132, Compañia de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, July 3, 2002, ¶¶ 96, 101; CL-135, Tenaris S.A. and Talta Trading E Marketing Sociedade Unipessoal LDA v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/26, Award, ↩

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c. The requirement of amicable settlement under Article 26(1) ECT has been fulfilled

500. Claimants rebut Respondent's jurisdiction (and alternatively, admissibility) objection concerning the requirement of amicable settlement by making two arguments.

501. First, Claimants point out that their letter of 4 May 2016 specifically mentioned the harmful impact that Italy's expansion of the Robin Hood Tax and the measures exposing Claimants' plants to the IMU and TASI Charges had on their investments. Thus, these claims cannot be considered as "new" ones.⁵²²

502. Second, Claimants submit that claims develop over time and over the course of the arbitration proceeding. With such development of claims, claimants cannot be required to initiate fresh disputes by notifying respondents and requesting an amicable settlement on every occasion. So long as the initial notice of dispute and amicable settlement was "related to the same dispute” or concerned “substantially the same subject matter”, the formal requirement of amicable settlement should not inhibit a tribunal's jurisdiction. This is even more so when attempts at amicable resolution are unlikely to succeed, and when the notice period for amicable settlement is likely to expire prior to the tribunal having the chance to look at its jurisdiction, as is the case here.⁵²³

January 29, 2016, ¶ 306; CL-178, Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, April 4, 2016, ¶ 480 (emphasis in original).

⁵²² SoRy, ¶ 181; C-SoRj, ¶ 134; CEX-7, Notice of Legal Dispute Arising Under the Energy Charter Treaty and Offer of Amicable Settlement, p. 4. ↩

⁵²³ SoRy, ¶¶ 182-200; C-SoRj, ¶¶ 135-137; C-PHB, ¶ 39; relying, inter alia, on CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 317–19; CL-133, Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, Sept. 16, 2003, ¶ 14.5; CL-69, Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, Apr. 8, 2013, ¶ 339; CL-135, Tenaris S.A. and Talta Trading E Marketing Sociedade Unipessoal LDA v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/26, Award, Jan. 29, 2016, ¶ 245; CL-88, Ltd. Liab. Co. AMTO v. Ukraine, SCC Arb. No. 080/2005, Award, Mar. 26, 2008, ¶¶ 55-58; CL-136, CMS Gas Transmission Co. v. Argentine Republic, ICSID Case No. ARB01/8, Decision on Jurisdiction, July 17, 2003, ¶ 109; CL-138, Christoph Schreuer, Traveling the BIT Route: Of Waiting Periods, Umbrella Clauses and Forks in the Road, 5 J. WORLD INVEST. & TRADE 231, 238 (2005); CL-139, Ethyl Corp. v. Gov't of Canada, UNCITRAL, Award on Jurisdiction, June 24, 1998, ¶ 87; CL-140, Case Concerning Military and Paramilitary Activities in and Against Nicaragua (Nicaragua v. United States), Jurisdiction and Admissibility, Judgment, I.C.J. Reports 1984, p. 392, at 427-29; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶ 213. ↩

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D. THE TRIBUNAL'S ANALYSIS

503. In this Section, the Tribunal shall determine Respondent's other objections relating to the Tribunal's jurisdiction and to the admissibility of Claimants' claims. This determination shall be made simultaneously for the issues of jurisdiction and admissibility, to the extent they overlap.

504. The Tribunal shall determine (1) first, Respondent's jurisdictional objection relating to Article 21 ECT; (2) second, Respondent's jurisdictional and admissibility objections relating to the exclusive jurisdiction clause in the GSE Contracts; and (3) third, Respondent's jurisdictional and admissibility objections relating to the requirement of amicable settlement of the disputes in Article 26 ECT prior to initiation of arbitration proceedings.

(1) Taxation Measures under Article 21 ECT

505. Respondent objects to the jurisdiction of this Tribunal on the basis of the exclusion of “taxation measures” in Article 21 ECT, arguing that since a number of the measures challenged by Claimants amount to “taxation measures”, the ECT does not create any rights or impose any obligations in their respect.

506. In this regard, Claimants and Respondent are in dispute about the (a) the legal standard to be applied for a determination of what qualifies as a “taxation measure”; (b) whether the Administrative Management Fee imposed by the Fifth Conto Energia (see Section IV.F(1) above) amounts to a “taxation measure”; (c) whether the Imbalance Costs imposed by the Italian Electrical Energy Authority's Resolutions 281 and 522 (see Section IV.F(3) above) amount to "taxation measures”; (d) whether Claimants' claims in relation to the Robin Hood Tax imposed by Legislative Decree No. 138/2011 (see Section IV.F(4) above) constitute disputes relating to “taxation measures”; and (e) whether Claimants' claims in relation to the classification of photovoltaic plants as immovable property done through Circular No. 36/E by the Revenue Agency in Italy (see Section IV.F(5) above) constitute disputes relating to “taxation measures”. The Tribunal shall address these disputed issues in turn below.

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a. Legal Standard

507. The contested matter between the Parties concerning the legal standard for a determination of what qualifies as a “taxation measure” is whether this standard should be derived from domestic law or from international law.

508. To resolve this matter, the Tribunal considers is beneficial to reproduce the text of Article 21(7)(a) ECT below, which defines the term “taxation measure”:

For the purposes of this Article:
(a) The term “Taxation Measure” includes:

1. any provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein; and
2. any provision relating to taxes of any convention for the avoidance of double taxation or of any other international agreement or arrangement by which the Contracting Party is bound.

509. Interpreting this provision in accordance with Article 31 VCLT (quoted in ¶ 289 above), the Tribunal delineates two key characteristics of a “taxation measure", based on the ordinary meaning of the terms used in the provision: (i) a taxation measure shall be in the form of a provision, either in the domestic law of the Contracting Party in question or in an international convention or agreement of that Contracting Party; and (ii) that provision shall be related to taxes.

510. Given that the provision that contains the taxation measure should either be codified by the Contracting Party in question (or by a political subdivision thereof or a local authority therein) or be part of an international convention or agreement of that Contracting Party, the Tribunal considers it important to look at the law of that Contracting Party for an answer to the question of what constitutes a provision “relating to taxes”, and, in turn, a “taxation measure". This is particularly in light of the object and purpose behind treaty provisions such as Article 21 ECT, which the Tribunal considers are intended for the

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Contracting Parties to preserve fiscal sovereignty over tax related matters.⁵²⁴ In the instant case, the Contracting Party in question is Italy.

511. In this connection, it is also important to note that neither Claimants nor Respondent argue that domestic law is immaterial to the question of what constitutes a “taxation measure”. The dispute lies in the extent of importance that the Parties afford to domestic law. While Respondent places exclusive reliance on the Italian domestic law understanding of "taxation measures”, Claimants rely primarily on an autonomous international law standard, but simultaneously admit that domestic law “may be helpful in ascertaining” the nature of the measure (see ¶ 491 above).⁵²⁵

512. The Tribunal further notes that the cases relied upon by Claimants to derive an international law standard for “taxation measures” also recognize the relevance of domestic law for this issue. Although none of those cases involved Article 21 ECT, their respective analyses of the tax carve-outs in the BITs in question did consider domestic law while determining whether the measure in question was a “taxation measure” or a “matter of taxation".

513. For instance, the tribunal in Murphy Exploration v. Republic of Ecuador found that:

The purpose of Article X specifically is to preserve the States' sovereignty in relation to their power to impose taxes in their territory. Most governments view these powers as a central element of sovereignty.
...
The Tribunal finds that, for it to assess whether a measure is one which was meant to be excluded from an international arbitral tribunal's purview because it concerns a State's sovereign power of taxation, it is necessary for the Tribunal to examine whether that measure comes within the State's domestic tax regime.⁵²⁶

⁵²⁴ CL-127, Murphy Exploration & Prod. Co. Int'l v. Republic of Ecuador, Partial Final Award, ¶ 165; CL-128, Thomas Wälde & Abba Kolo, Investor-State Disputes: The Interface Between Treaty-Based International Investment Protection and Fiscal Sovereignty, in INTERTAX, KLUWER L. INT'L 430, Volume 35, Issue 8/9, p. 431. ↩

⁵²⁵ SoRy, ¶ 154. ↩

⁵²⁶ CL-127, Murphy Exploration & Prod. Co. Int'l v. Republic of Ecuador, Partial Final Award, ¶¶ 165-166. ↩

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514. Similarly, even the tribunals in EnCana v. Republic of Ecuador and Occidental v. Republic of Ecuador when interpreting the tax carve-out provision of the respective BITs, examined Ecuador's domestic legal tax regime.⁵²⁷

515. Accordingly, without conclusively deciding at this stage whether and to what extent domestic law has to be supplemented by an autonomous international law understanding of taxation measures, the Tribunal considers that Italian domestic law is the appropriate starting point to examine whether the measures in question fall within the carve out for taxation measures in Article 21 ECT. However, it is important to clarify that this does not entail declaring a measure as a tax measure simply on the basis that the domestic legal system calls it or characterizes it as such. The Tribunal considers it imperative to look at the criteria prescribed in domestic law for what qualifies as a taxation measure thereunder, and examine the measures in question against this criteria.

516. With respect to the criteria in Italian law for a measure to qualify as a taxation measure, both Claimants and Respondent have made distinct submissions. Respondent uses the understanding of “fiscal measures” (tributi, in Italian) in Italian law and extends it to taxation measures.⁵²⁸ To this end, Respondent advances the following four criteria for measures of a fiscal nature based on the Italian Constitutional Court's jurisprudence⁵²⁹ (see ¶ 470 above):

1. dutifulness of the withdrawal or payment, i.e., whether or not the payment of the measure is mandatory;
2. absence of exact reciprocity between the concerned parties;
3. connection of the withdrawal or payment to public spending; and
4. establishment of the fiscal measures by way of law.

⁵²⁷ CL-129, EnCana Corp. v. Republic of Ecuador, LCIA Case No. UN3481, Award, ¶¶ 146-150; CL-130, Occidental Petroleum Corp. & Occidental Exploration and Prod. Co. v. Republic of Ecuador, ICSID Case No. ARB/06/11, Award, ¶¶ 492-495. ↩

⁵²⁸ SoD, ¶¶ 148-149; relying on REX-011, Mena Chambers, Note 13 of 22 July 2015. ↩

⁵²⁹ SoD, ¶¶ 150-152; relying on REX-013, Italian Constitutional Court Decision No. 238/2009; article 23, Italian Constitution; REX-014, OECD Model Law 2014, articles 2 and 3(2); OECD's website: www.oecd.org. ↩

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517. On the other hand, Claimants submit that Respondent's premise of comparing taxation measures to fiscal measures is flawed, since the concept of fiscal measures is very broad, whereas Article 21(7)(a) ECT clearly applies only to one aspect of such fiscal measures, i.e., those that relate to taxes (imposte in Italian) (see ¶ 490 above). With respect to the understanding of measures that relate to taxes or imposte, Claimants rely on scholarly writings to enlist the following criteria:⁵³⁰

1. the measure is based on the principle of societal solidarity and on the financial ability of the taxpayer to contribute to the general public expenditure;
2. the payment is involuntary;
3. the payment is not related to any specific benefit, service, or activity provided by public institutions;
4. the payment is generally intended for public and social purposes that are not specifically identified;
5. the payment is based on the principle of redistribution; and
6. the payment is conceived of as the ultimate expression of State sovereignty.

518. With respect to the distinction between fiscal measures (tributi) and taxation measures (imposte), the Tribunal agrees with Claimants' submission that the former term appears to much broader than the latter. Apart from the fact that the term “fiscal measures” does not appear in Article 21(7)(a) ECT, even conceptually, fiscal measures could include a number of measures, including but not limited to measures relating to taxes. Moreover, even from the Italian version of the ECT, which is an authentic text as per Article 50 ECT, it appears that the language used in Article 21(7)(a) ECT corresponding the English phrase “any provision relating to taxes" is “qualsiasi disposizione sulle imposte” (emphasis added). Claimants and Respondent agree that the term “imposte” or “imposta” is a literal

⁵³⁰ SoRy, ¶ 164; relying, inter alia, on CEX-348, P. Boria, a cura di A. Fantozzi, Il diritto tributario, III ed. Torino; CEX-349, P. Russo, Manuale di diritto tributario, II ed., Milan; CEX-350, G. Tinelli, Istituzioni di diritto tributario, IV ed., Milano CEX-351, Enciclopedia Giuridica Treccani – Istituto della Enciclopedia Italiana fondata da Giovanni Treccani, ed. 2009 ↩

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translation of the English word “taxes”,⁵³¹ whereas the translation of “fiscal measures” appears to be "tributi",⁵³² which term is not mentioned in the Italian version of Article 21(7) ECT. Accordingly, the Tribunal considers the term “fiscal measures” to be broader than, but inclusive of, taxation measures.

519. That being said, in respect of the distinct criteria that Claimants and Respondent enlist for what qualifies as a measure relating to taxes (or taxation measure) in Italian law (see ¶¶ 516-517 above), the Tribunal considers a number of these criterion to overlap with one another. For instance, Respondent's first criteria relating to the dutifulness of the payment, i.e., whether or not the payment of the measure is mandatory, is parallel to Claimants' second criteria, i.e., the payment is involuntary. Similarly, Respondent's second criteria, i.e., the absence of exact reciprocity between the concerned parties, overlaps, in essence, with Claimants' third criteria, i.e., the payment is not related to any specific benefit, service, or activity provided by public institutions. Respondent's third criteria, i.e., the connection of the payment to public spending, aligns, to some extent, with Claimants' first criteria, i.e., the measure is based on the principle of societal solidarity and on the financial ability of the taxpayer to contribute to the general public expenditure. There is also a significant overlap between Respondent's second and third criteria and Claimants' fourth criteria, i.e., the payment is generally intended for public and social purposes that are not specifically identified. Respondent's fourth criteria, i.e., the establishment of the fiscal measures by way of law, is a criteria that already finds place in the bare text of Article 21(7)(a) ECT, as discussed in ¶¶ 508-510 above.

520. In light of the above, the Tribunal considers Claimants' and Respondent's respective criterion for what qualifies as a taxation measure in Italy to be in agreement in many respects. Accordingly, in addition to examining the legal source that imposes the measure in question, the Tribunal shall analyse each of the contested measures in question based on

⁵³¹ SoD, ¶ 150; SoRy, ¶ 165; R-SoRj, ¶ 211. Although Respondent attempts to distinguish the term “imposte" from "imposta", stating that the former is broader in meaning than the latter, the Tribunal does not consider it appropriate to engage in a linguistic dissection of these two terms. It suffices to state that regardless of any distinction between these terms “imposte” and “imposta”, the definition of “taxation measures” (or “misura fiscale") in Article 21(7) ECT does not include all kinds of "fiscal measures” (or “tributi"). ↩

⁵³² SoD, ¶ 150; SoRy, ¶ 152. ↩

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the common denominator in the Parties' respective criterion, which the Tribunal enlists as follows:

1. Whether the payment is involuntary or mandatory in nature, i.e., dutifulness of the payment;
2. Whether the payment is made in exchange of any specific benefit, service, or activity provided by public institutions, i.e., whether the relationship between the payer and the public institution in question evidences reciprocity; and
3. Whether the payment is made as a contribution to public spending or public expenditure, and is generally intended for a public purpose.

In order for any measure to qualify as a “taxation measure”, the first and third questions above should be answered in the affirmative, whereas the second one should be answered in the negative.

521. The Tribunal also incidentally notes that the above three criteria align with the autonomous international law understanding of a "taxation measure” relied upon by Claimants (see ¶ 491 above). For instance, the tribunal in Murphy v. Ecuador, defined a “matter of taxation" (the equivalent phrase in question in the BIT at issue in that case) as being “related to the imposition of a liability on classes of persons to pay money to the State for public purposes and without any direct benefit to the taxpayer".⁵³³ This definition, which as per Claimants is extendable to the term “taxation measures” in Article 21(7) ECT, includes within itself the three requirements enlisted in ¶ 520 above, i.e., (i) the mandatory nature of the payment ("imposition of a liability"); (ii) the absence of reciprocity (“without any direct benefit to the taxpayer"); and (iii) contribution to public spending or expenditure (“for public purposes").

522. During the Hearing, Respondent stated that the most essential criteria amongst the ones discussed above are the mandatory nature of the payment and the absence of reciprocity.⁵³⁴

⁵³³ CL-127, Murphy Exploration & Prod. Co. Int'l v. Republic of Ecuador, Partial Final Award, ¶ 159; see generally CL-129, EnCana Corp. v. Republic of Ecuador, LCIA Case No. UN3481, Award; CL-130, Occidental Petroleum Corp. & Occidental Exploration and Prod. Co. v. Republic of Ecuador, ICSID Case No. ARB/06/11, Award. ↩

⁵³⁴ Hr. Tr. Day 1, pp. 180(25)-181(16). ↩

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The Tribunal agrees with this proposition. With respect to the remaining criterion Claimants have advanced (see ¶ 517 above), i.e., (i) the payment being based on the principle of redistribution; and (ii) the payment being the ultimate expression of State sovereignty, the Tribunal shall consider them only if and to the extent it deems necessary and appropriate, after its examination of the three criteria enlisted in ¶ 520 above.

b. Administrative Management Fee

523. As mentioned in Section IV.F(1) above, the Administrative Management Fee was imposed in the Fifth Conto Energia Decree. In particular, the relevant provisions in the Fifth Conto Energia Decree imposing the Administrative Management Fee on the photovoltaic power plant operators were Articles 10.4 to 10.6, which are reproduced below:

Article 10

(Management of incentive system and application rules)

....

4. To cover GSE management costs, and the cost of checks and controls by GSE, the plant operators that access incentive tariffs under this decree and decrees issued in implementation of article 7 of legislative decree no. 387, 2003 [Off-Take Regime] and article 25 (10) of legislative decree no. 28, 2011 [Romani Decree], are under an obligation, commencing from 1 January 2013, to pay GSE a contribution of 0.05 euro cents for each kWh of subsidised energy, also by means of offset with incentives owed.

5. GSE will publish the application rules for enrolment in the registers and access to the incentive tariffs under this decree within thirty days of the effective date of the decree.

6. The procedures for payment of the contributions under paragraphs 1 and 4 are specified by GSE in the context of the application rules under paragraph 5.⁵³⁵ (emphasis added)

524. Other legal provisions dealing with Administrative Management Fee that Respondent has specified include (i) Chapter II of Legislative Decree No. 28/2011, i.e., the Romani Decree, which was the chapter titled “Audit and Sanctions”;⁵³⁶ and (ii) Articles 25(1) and 25(2) of

⁵³⁵ CEX-188, Fifth Conto Energia Decree, articles 10.4-10.6. ↩

⁵³⁶ SoD, ¶ 409; CEX-158, Romani Decree. ↩

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the Spalma-incentivi Decree of 2014, which provides, inter alia, for the imposition, rates and method of payment for such Administrative Management Fee that were imposed "by the GSE for [its] conduct of management, audit and control activities, related to the incentive and support mechanisms . . .”⁵³⁷

525. Having laid out the relevant legal provisions dealing with the Administrative Management Fee, the Tribunal shall examine whether this Fee satisfies the three-fold criteria prescribed in ¶ 520 above, in order to qualify as a taxation measure.

526. First, with respect to the mandatory nature of the payment, the Tribunal notes that Claimants have not specifically contested the fact that the Administrative Management Fee is mandatory or involuntary in nature. It is evident that the Administrative Management Fee was legislatively imposed by way of the Fifth Conto Energia Decree as a mandatory contribution. This is demonstrated, inter alia, by the use of the phrase "the plant operators . . . are under an obligation" in Article 10.4 of the Fifth Conto Energia Decree, which is emphasised in the quotation in ¶ 523 above. Accordingly, the Tribunal considers this requirement concerning the mandatory nature of the payment to have been satisfied by the Administrative Management Fee.

527. Second, with respect to the absence of reciprocity requirement, i.e., whether the Administrative Management Fee is paid in exchange of any specific benefit, service, or activity provided by the concerned public institutions, the Parties are in dispute. Respondent's position is that the motivations behind the imposition of the Administrative Management Fee, i.e., covering GSE's management, audit and control expenses, evidences the absence of reciprocity in the imposition of this Fee (see ¶ 473 above). Claimants argue that since the Administrative Management Fee are to be paid by photovoltaic producers for exchange of specific services of either GSE's management, monitoring and verification tasks, there is an absence of reciprocity characterizing the payment (see ¶ 492 above).

528. The Tribunal considers that the Parties' respective characterizations of the motivations behind the imposition of the Administrative Management Fee are not at divergence.

⁵³⁷ SoD, fn 168-169; CEX-266, Legislative Decree No. 91/2014, converted into law by Law No. 116/2014 dated 11 August 2014, article 25(1). ↩

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Claimants and Respondent agree that the Administrative Management Fee was intended to cover GSE's management. In fact, as per Respondent, the Administrative Management Fee was meant to sustain GSE's management costs in the face of increase in its functions.⁵³⁸

529. The question to be determined is whether against the payment of this Administrative Management Fee, GSE would be providing any benefit, service, or activity for the photovoltaic plant operators. In this regard, the Tribunal considers it appropriate to refer to the legal instruments imposing the Administrative Management Fee, to examine its precise purpose in order to determine whether the same was to be paid in exchange of any benefit, service, or activity to be provided by the GSE. The following indicators are available in these legal instruments:

1. Article 10.4 of the Fifth Conto Energia Decree provides that the Administrative Management Fee was intended “[t]o cover GSE management costs, and the cost of checks and controls by GSE” (see ¶ 523 above);
2. One of the Recitals in the preamble of the Fifth Conto Energia indicates that the reason for imposing the Administrative Management Fee on the photovoltaic plant operators, as opposed to attributing them entirely to the end consumers, was that it was "advisable and fair that coverage of charges for the management of the photovoltaic incentive system shall involve contributions from persons that benefit from the photovoltaic incentive tariffs . . .”⁵³⁹ (emphasis added);
3. Articles 25(1) and 25(2) of the Spalma-incentivi Decree, which confirms that the Administrative Management Fee was imposed “by the GSE for [its] conduct of management, audit and control activities, related to the incentive and support mechanisms, are to be borne by the beneficiaries of the same activities . . ."⁵⁴⁰ (emphasis added).

⁵³⁸ SoD, ¶¶ 20, 374-375, 406. ↩

⁵³⁹ CEX-188, Fifth Conto Energia Decree, recital 22; see SoD, ¶ 408 (Note: Respondent's translation of recital 22 is at variance from Claimants'.). ↩

⁵⁴⁰ SoD, fn 168-169; CEX-266, Legislative Decree No. 91/2014, converted into law by Law No. 116/2014 dated 11 August 2014, article 25(1). ↩

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530. From the above quoted legal stipulations in the Fifth Conto Energia Decree and the Spalma-incentivi Decree, it becomes evident that the Administrative Management Fee was (i) imposed only on the photovoltaic plant operators and not the end consumers, since they were the direct beneficiaries of the incentive tariff regime; and (ii) intended to cover GSE's management, audit and control/verification services specifically related to this incentive tariff system. Accordingly, the Administrative Management Fee was imposed specifically in exchange of GSE's services relating to the management of the incentive tariff regime. GSE, as mentioned in ¶ 121 above, was the implementing body for this incentive tariff regime.

531. Further evidence of this link between the Administrative Management Fee and the GSE's services towards the photovoltaic plant operators comes from the fact that, pursuant to its powers in Articles 10.5 and 10.6 of the Fifth Conto Energia Decree to determine the method of payment of, inter alia, the Administrative Management Fee, GSE clarified on its website in 2013 that the Administrative Management Fee shall be offset against GSE's first payment of incentive tariffs to any producer in a given year.⁵⁴¹ Respondent also admits that “GSE can directly offset [the Administrative Management Fee] against the tariffs to be paid to producers”.⁵⁴² Given that the Administrative Management Fee can be directly offset against the incentive tariffs paid as per the Conto Energia Decrees, it amounts to a mere adjustment of these incentive tariffs, which are in the nature of subsidies, and does not qualify as a measure related to taxes.

532. In this connection, Respondent did not dispute this link between the Administrative Management Fee and the GSE's services upon being questioned about the same during the Hearing:

THE CHAIRMAN: Now, you can look at it in two ways. One is to say: the whole apparatus of the state, anything you have to contribute to make it work is a tax. Or you say: in order to make the payment of the tariffs and also the management of the tariffs work, you have to pay a fee. That could have been included in the tariff as part of the tariff, that the money was on that side. Or you say: now you have to pay something extra for managing the tariff. But

⁵⁴¹ CEX-217, GSE website, "Conto V", p. 5. ↩

⁵⁴² R-SoRj, ¶ 222(a). ↩

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why would that be elevated to a tax? It's simply a question I have, because if you say that a subsidy is a tax, then it's something new.
...
MR GIORDANO: Just that they have a mandatory aspect. But I will cover it later.⁵⁴³

533. In light of the above, the Tribunal considers that Administrative Management Fee is characterized by a reciprocal relationship between the photovoltaic plant operators and the concerned public institution, i.e., GSE, whereby GSE performs services concerning the management of the incentive tariff regime in exchange of this Fee. Respondent's arguments that the Administrative Management Fee are not “related to a particular activity from GSE”⁵⁴⁴ or do not "imply a specific synallagmatic relation with a single market operator"⁵⁴⁵ do not convince the Tribunal otherwise. For the absence of reciprocity requirement, it is not necessary that the benefit, service or activity being performed by the public institution concerned arise out of a direct and specific synallagmatic relation between the public institution and the party obliged to pay the concerned fee. It suffices that the payment in question, i.e., the Administrative Management Fee in the present case, is paid in exchange of services or activities rendered for the direct benefit of the party/parties making the payment, i.e., the photovoltaic plant operators including Claimants' SPVs, and in turn Claimants.

534. Another indicator of the Administrative Management Fee not being a taxation measure under Italian law is that the same is excluded from the jurisdiction of Italian tax courts on the grounds that it (i) covers service costs through tariff components; and (ii) is itself liable for VAT.⁵⁴⁶ The Tribunal is persuaded by Claimants' submission (see ¶ 494 above), and their reliance on the Italian Constitutional Court jurisprudence in this regard.⁵⁴⁷ Respondent, apart from reiterating its arguments on the absence of reciprocity already rejected in preceding paragraphs, and proposing that the nomenclature of a measure is not

⁵⁴³ Hr. Tr. 1, pp. 179(25)-180(14). ↩

⁵⁴⁴ Hr. Tr. 1, p. 179(14). ↩

⁵⁴⁵ Hr. Tr. 1, pp. 178(5)-178(6). ↩

⁵⁴⁶ See CEX-460, Administrative Fees and Imbalance Costs Sample of Invoices. ↩

⁵⁴⁷ CEX-354, Italian Constitutional Court, Decision No. 335; CEX-355, Italian Constitutional Court, Decision No. 238. ↩

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determinative of whether it qualifies a tax under Italian law, does not per se contest Claimants' submission about the jurisdiction of Italian tax courts over measures such as the Administrative Management Fee (see ¶ 476 above).

535. In support of the Tribunal's findings regarding the Administrative Management Fee, reference may be made to the following conclusions of the tribunal in the recently decided Greentech v. Italy case:

In this connection, the Tribunal notes that the administrative fee was established specifically to cover the GSE's costs of managing the incentive programs from which PV producers benefited. This suggests a degree of reciprocity. The Tribunal also notes that Respondent does not deny that the GSE paid value added taxes (VAT) on amounts received from PV producers, and that the fee was not collected for the general revenue of Italy. Taken together, these factors indicate that the administrative fee is not a Taxation Measure under the ECT.⁵⁴⁸

536. Accordingly, the Tribunal concludes that since the relationship between GSE and Claimants evidences reciprocity, the Administrative Management Fee does not qualify as a taxation measure for failure of satisfying the second criteria enlisted in ¶ 520 above, and thus does not fall within the definition of “taxation measure" in Article 21(7) ECT. Therefore, Claimants' claims in relation to the Administrative Management Fee are not excluded from the protection of the ECT pursuant to Article 21(1) ECT, and Respondent's jurisdictional objection in this regard fails.

537. On account of the above findings, the Tribunal need not examine the third criteria enlisted in ¶ 520 above, i.e., whether the Administrative Management Fee qualifies as a payment that is made as a contribution to public spending or public expenditure, and is generally intended for a public purpose. It suffices to state that the above findings regarding the absence of reciprocity requirement (¶¶ 527-536 above) are dispositive of this issue, even in respect of this third criteria.

⁵⁴⁸ CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶ 244. ↩

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с. Imbalance Costs

538. With respect to the imbalance costs imposed on non-programmable energy sources by the Italian Electrical Energy Authority's Resolutions 281 and 522 (see Section IV.F(3) above), Respondent correctly states that “[t]he same reasoning” as for the Administrative Management Fee “should apply”,⁵⁴⁹ albeit advocating for the opposite conclusion. Indeed. the Tribunal considers that a number of factors, discussed in Section VII.D(1)(b) above concerning the Administrative Management Fee, are equally relevant for and determinative of Respondent's jurisdictional challenge concerning the imbalance costs under Article 21 ECT.

539. Again, to determine whether the imbalance costs qualify as a taxation measure excluded from the purview of the ECT pursuant to Article 21(1) ECT, it shall be determined whether they satisfy the three-fold criteria enlisted in ¶ 520 above.

540. First, similar to the Administrative Management Fee, there is no dispute between the Parties that the imbalance costs, which were imposed by the Italian Electrical Energy Authority first in the 2012 Resolution 281 and subsequently in the 2015 Resolution 522, were mandatory or non-voluntary in nature. Indeed, the mandatory nature of this payment is evidenced from the language used in Resolution 522, which states that “[t]he production units fed by non-programmable renewable sources must be subject to regulation of imbalances".⁵⁵⁰ (emphasis added)

541. Second, with respect to the absence of reciprocity requirement, the Tribunal finds significant overlaps in the situations of the Administrative Management Fee and the imbalance costs. For instance:

1. Imbalance costs constitute payments that are made in exchange for the dispatching services provided by Terna, which is the Italian system operator that manages the wholesale electricity market and fixes the prices.⁵⁵¹ Respondent has admitted the same in clear terms in its submissions and during the Hearing. As per Respondent,

⁵⁴⁹ SoD, ¶ 168. ↩

⁵⁵⁰ CEX-230, AEEG Resolution 522/2014/R/EEL. ↩

⁵⁵¹ Hr. Tr. Day 1, pp. 61(7)-61(19); see also SoD, ¶ 168. ↩

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imbalance costs were imposed “for the general mechanism of storage of electricity by Terna”⁵⁵² and thus “relate to the dispatching of energy . . . [which] is reserved to the State and granted in concession to Terna".⁵⁵³ During the Hearing, Respondent confirmed that “imbalance costs are linked to the organisation of the supply of [photovoltaic] electricity into the national grid by Terna, which executes such activities in a regime of monopoly, and whose functions are of general interest."⁵⁵⁴ Indeed, the language of Resolution 281 clearly confirms that the imbalances costs relate to "dispatching services".⁵⁵⁵

2. Further, imbalance costs are enlisted as “income from sales and services” in the balance sheets of GSE, and are subjected to corporate income tax and to ordinary VAT, just as any commercial income derived from services would be.⁵⁵⁶ Similar to the Administrative Management Fee, imbalance costs would thus not fall within the jurisdiction of Italian tax courts for reasons mentioned in ¶ 534 above.⁵⁵⁷ Respondent does not dispute any of this.
3. The Tribunal is not persuaded by Respondent's counter-arguments that there is no specific service that the photovoltaic plant operators obtain from Terna,⁵⁵⁸ or that Terna has a monopoly over the dispatch services, and thus any fee paid in that regard should be considered as a fiscal measure.⁵⁵⁹ As mentioned in ¶ 533 above, a reciprocal relationship based on services performed by a public institution such as Terna does not require that the said services be derived from a specific synallagmatic relation, or be specifically directed at certain photovoltaic plant operators. Further, the fact that Terna does not have a competitor also does not alter the nature of the

⁵⁵² SoD, ¶ 168. ↩

⁵⁵³ R-SoRj, ¶ 222(b). ↩

⁵⁵⁴ Hr. Tr. Day 1, pp. 245(12)-245(16). ↩

⁵⁵⁵ AEEG Resolution 281/2012/R/EFR, at 3 and 10. ↩

⁵⁵⁶ CEX-352, GSE Reports and Financial Statements, 2012, pp. 75, 155-156; CEX-353, GSE Reports and Financial Statements, 2016, pp. 71-72, 146-150. ↩

⁵⁵⁷ CEX-354, Italian Constitutional Court, Decision No. 335; CEX-355, Italian Constitutional Court, Decision No. 238. ↩

⁵⁵⁸ R-SoRj, ¶ 223. ↩

⁵⁵⁹ SoD, ¶ 170. ↩

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payment being made by photovoltaic plant operators in exchange of the services being performed by Terna.

542. In light of the above, the Tribunal concludes that imbalance costs cannot be considered as measures that are, or in any way relate to, taxes under Italian law, since they are predicated on a reciprocal relationship. This conclusion also finds support in the following passages from the award in Greentech v. Italy case:

In reaching this conclusion, the Tribunal notes that the imbalance costs relate to electricity dispatching services, an identified service, and thus are not allocated to the State's general revenue. Further, Respondent did not deny Claimants' assertion that corporate income taxes and VAT were paid on amounts received from PV producers, that the AEEG did not categorize imbalance costs under the category of “taxes” but instead categorized them as "network and dispatching services”, and that Italy has not otherwise treated imbalance costs as a tax. Taken together, these factors minimize the significance of Respondent's assertion that the mandatory nature of the charges make them similar to charges for municipal waste services, which themselves might not constitute a Taxation Measure under the ECT.⁵⁶⁰

543. Accordingly, Claimants' claims in relation to the imbalance costs are not excluded from the protection of the ECT pursuant to Article 21(1) ECT, and Respondent's jurisdictional objection in this regard fails.

544. On account of the above findings, the Tribunal need not examine the third criteria enlisted in ¶ 520 above, i.e., whether the imbalance costs qualify as a payment that are made as a contribution to public spending or public expenditure, and are generally intended for a public purpose. It suffices to state that the above findings regarding the absence of reciprocity requirement (¶¶ 541-542 above) are dispositive of this issue, even in respect of this third criteria.

d. Robin Hood Tax

545. The dispute between the Parties in respect of the Robin Hood Tax does not pertain to whether the said Tax qualifies as a taxation measure as per the criteria under Italian law

⁵⁶⁰ SoRy, ¶¶ 159-162; C-SoRj, ¶¶ 120-122; C-PHB, ¶ 39; relying on CEX-188, Fifth Conto Energia Decree, article 10.4; CEX-227, AEEG Resolution 281/2012/R/EFR, at 10; CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶¶ 244, 251. ↩

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enlisted in ¶ 520 above, and/or any other criteria that may be relevant for the purposes of Article 21(7) ECT. For Respondent, the Robin Hood Tax is “unequivocally” a taxation measure.⁵⁶¹ Claimants, too, do not present any objections to the proposition that the Robin Hood Tax, which was imposed by Law No. 133/2008 on 6 August 2008 as a tax on windfall profits and later extended to photovoltaic plants by Law No. 148/2011 on 14 September 2011, was a taxation measure.

546. Instead, Claimants' opposition to Respondent's jurisdictional objection under Article 21(1) ECT is limited to the argument that their claim in these arbitration proceedings concerns only the propriety and implications of an Italian Constitutional Court's Decision No. 10/2015 concerning the Robin Hood Tax (see ¶ 244 in Section IV.F(4) above), and not the Tax itself. This Constitutional Court Decision No. 10/2015 declared the Legislative Decree No. 112/2008, upon which the Law No. 133/2008 was based, unconstitutional in part. The Constitutional Court Decision was applicable ex nunc, i.e., prospectively.⁵⁶² While, at this stage, it is not necessary or appropriate to revisit the precise motivations behind the Constitutional Court Decision No. 10/2015, it suffices to state that the two aspects that are disputed between the Parties in this regard are (i) firstly, whether the Decision should or should not have been applied ex nunc, instead of ex tunc, by the Constitutional Court; and (ii) secondly, whether the Constitutional Court invalidated the Robin Hood Tax for violation of the principle of equality in contributive capacity or was the finding of unconstitutionality influenced by the extension of the Tax to renewable energy facilities.

547. With respect to the above disputed issues about the Constitutional Court Decision No. 10/2015, Claimants' position is that none of these issues pertains to or implicates a taxation measure under Article 21(7) ECT, and thus Respondent's jurisdictional objection under Article 21(1) ECT must fail (see ¶ 496 above). To the contrary, Respondent contends that Claimants' characterization of their claims relating to the Robin Hood Tax, i.e., concerning the propriety of an ex nunc application of the Constitutional Court Decision and Italy's alleged refusal to reimburse the Robin Hood Tax that was wrongfully imposed on

⁵⁶¹ SoD, ¶ 157. ↩

⁵⁶² CEX-253, Italian Constitutional Court Decision No. 10/2015, p. 16. ↩

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photovoltaic plants, would de facto go back to becoming a claim about the propriety of the taxation measure itself, i.e., the Robin Hood Tax (see ¶ 478 above).

548. For the purposes of Respondent's jurisdictional objection under Article 21(1) ECT, the Tribunal is only required to determine the Parties' disagreement about Claimants' characterization of their claim relating to the Robin Hood Tax. This entails, in particular, the question of whether Claimants' claim will inevitably require a determination of the propriety of the Robin Hood Tax itself.

549. Based on a review of the Parties' submissions, the Tribunal is convinced by Respondent's submission that the Tribunal's examination of Claimants' claim on the Robin Hood Tax, as presented by Claimants, “would go back to the evaluation of the substantive content of the Robin Hood Tax and become de facto a claim on the taxation measure itself.”⁵⁶³ Indeed, it is not possible to decide the two disputed issues emanating from the Constitutional Court's Decision No. 10/2015, mentioned in ¶ 546 above, without also determining, or at least addressing, the substantive propriety of the Robin Hood Tax itself and its subsequent extension to photovoltaic facilities.⁵⁶⁴

550. It is apparent from Claimants' own submissions on the merits that their claim relating to the Robin Hood Tax is not restricted only to the propriety and implications of the Constitutional Court Decision No. 10/2015. At the centre of Claimants' claim is their contention that the Constitutional Court Decision was directed at the unlawful application of the Robin Hood Tax to photovoltaic facilities.⁵⁶⁵ Regardless of whether or not that was indeed one of the motivations behind the Constitutional Court Decision, in order to establish their claim, Claimants predicate their arguments on the merits on the impropriety of the Robin Hood Tax's extension to photovoltaic facilities. To this end, Claimants, inter alia, submit that they had legitimate expectations that the Robin Hood Tax would not be applied to renewable energy facilities. Once the Robin Hood Tax was so applied, these

⁵⁶³ R-SoRj, ¶ 191. ↩

⁵⁶⁴ ; R-SoRj, ¶ 191. ↩

⁵⁶⁵ SoRy, ¶ 147. ↩

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legitimate expectations were breached, resulting in a breach of the ECT.⁵⁶⁶ In Claimants' own words:

When Claimants first invested in Italy, they reasonably expected that the Robin Hood [T]ax would not apply to their plants. Italy had explicitly affirmed the exclusion of renewable energy producers from the Robin Hood [T]ax in a 2010 circular issued by the Italian Revenue Agency.
However, in August 2011, Italy unexpectedly and arbitrarily broadened the scope of the Robin Hood [T]ax by extending it to all energy producers, including renewable energy producers, with a gross annual income of over [EUR] 10 million and taxable income of over [EUR] 1 million.
...
[I]n June 2013, Italy again unexpectedly and arbitrarily extended the scope of the Robin Hood [T]ax by reducing the applicable income thresholds to gross annual income over [EUR] 3 million and taxable income over [EUR] 300,000. This resulted in the application of the Robin Hood [T]ax to Claimants' photovoltaic plants.⁵⁶⁷

551. The above arguments of Claimants evidence that in order to adjudicate Claimants' claim, the Tribunal will need to examine the nature of the Robin Hood Tax and whether it should have been extended to photovoltaic facilities. Accordingly, Claimants' characterization of their claim as relating only to the propriety and implications of the Constitutional Court Decision No. 10/2015 is contradicted by their own submissions on the merits. The Tribunal considers that any determination on the Constitutional Court Decision, which was a sequel to the imposition of the Robin Hood Tax, will implicitly entail a decision on the preceding incidence of the Robin Hood Tax itself. In this regard, the Tribunal agrees with Respondent's argument that “[i]t is not possible to separate the application of a decision regarding a tax from the same tax measure.”⁵⁶⁸

552. Further evidence of the fact that Claimants' claim, in reality, relates to the propriety and application of the Robin Hood Tax and not the ensuing Constitutional Court Decision No. 10/2015, comes from Claimants' request for relief on this issue. Claimants request this Tribunal, as part of their damages claim, to compensate them for sums they paid to Italy

⁵⁶⁶ SoRy, ¶¶ 481-485. ↩

⁵⁶⁷ SoC, ¶¶ 208-212. ↩

⁵⁶⁸ Hr. Tr. Day 1, pp. 234(25)-235(4). ↩

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under an unconstitutional taxation regime. Thus, Claimants' requested relief on this issue directly relates to and requests the reimbursement of the Robin Hood Tax itself, and does not concern the Constitutional Court's Decision No. 10/2015 per se, which Claimants themselves laud as a correct decision, barring its ex nunc or prospective effect.⁵⁶⁹ In light of this, Claimants cannot dissociate their claim, which they unsuccessfully attempt to root in the Constitutional Court Decision, from the underlying taxation measure at issue, i.e., the Robin Hood Tax.

553. Accordingly, the Tribunal finds that Claimants' claim concerning the Robin Hood Tax is a claim with respect to taxation measures. Therefore, Respondent's jurisdictional objection under Article 21(1) ECT succeeds, insofar as it concerns Claimants' claim relating to the Robin Hood Tax.

554. In light of the fact that none of the Parties disputes that the Robin Hood Tax and its imposition on the photovoltaic facilities is a taxation measure (see ¶ 545 above), the Tribunal need not separately examine whether the specific requirements for qualifying as a taxation measure under Article 21(7) ECT (see ¶ 520 above) are satisfied by the Robin Hood Tax. The above findings of the Tribunal about the nature and characterization of Claimants' claim on the Robin Hood Tax (see ¶¶ 547-553 above) are conclusively determinative of this issue.

e. Classification of Photovoltaic Plants as Immovable Property

555. With respect to the (re)classification of photovoltaic plants as immovable property, Claimants primarily take issue with the Circular No. 36/E of the Italian Revenue Agency dated 19 December 2013, but also more generally complain about the inconsistent positions adopted by the Italian Revenue Agency and Cadastral/Land Agency prior to 2013 in this regard (see Section IV.F(5) above). In its jurisdictional objection under Article 21(1) ECT, Respondent argues that Claimants guise their claims in these proceedings behind the issue concerning the classification of photovoltaic plants as immovable property, but the substance or "actual target” of their claims are the IMU and TASI Charges that are a consequence of such classification. In essence, classification of a property as immovable

⁵⁶⁹ See, inter alia, SoC, ¶ 214; SoRy, ¶¶ 484-485. ↩

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property allegedly subjects it to municipal charges on buildings and road maintenance known as IMU and TASI Charges, respectively, which are not applicable for movable property.

556. Thus, similar to the Robin Hood Tax, here too the principal dispute between the Parties on the jurisdictional issue under Article 21(1) ECT pertains to the characterization of Claimants' claims, i.e., whether they pertain only to the classification of photovoltaic plants as immovable property by the Italian Revenue Agency or in the process also implicate and require a determination on certain taxation measures. In other words, none of the Parties disputes that the IMU and TASI Charges qualify as taxation measures under the criteria in Italian law enlisted in ¶ 520 and/or under any other criterion that may be relevant for the purposes of Article 21(7) ECT. In the course of their submissions, both Claimants and Respondent refer to the IMU and TASI Charges as "taxes".⁵⁷⁰ Accordingly, the Tribunal's findings below are limited to a determination of whether Claimants' claims pertaining to the classification of photovoltaic plants as immovable property, as characterized by them, are implicitly claims relating to taxation measures that fall beyond this Tribunal's jurisdiction.

557. Based on a review of the Parties' submissions, the Tribunal considers that Respondent has convincingly demonstrated that Claimants' claims concerning the classification of photovoltaic plants as immovable property are, in essence, claims relating to the underlying taxation measures, i.e., the IMU and TASI Charges. In this regard, Respondent correctly points out that the very nature of such a measure classifying any property as movable or immovable property has the function of defining the scope of taxation (see ¶ 479 above).

558. Therefore, notwithstanding Claimants' characterization of their claims in their arguments on jurisdiction, the Tribunal derives the real nature of Claimants' claims from their pleadings on the merits of the case. In these pleadings, Claimants themselves highlight that the reason they object to the classification of photovoltaic plants as immovable property in these proceedings relates directly to the imposition of the IMU and TASI Charges. In

⁵⁷⁰ See SoRy, ¶ 148 where, with reference to the IMU and TASI Charges, Claimants clarify that they "are not contesting the existence or application of those taxes" (emphasis added). ↩

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Claimants' words, “[t]he characterization of photovoltaic plants is important, because immovable and movable property are subject to different depreciation rates and thus different effective tax rates, as well as different municipal charges."⁵⁷¹ These municipal charges constitute the IMU and TASI Charges.⁵⁷² From the following passage of Claimants' submissions, it is evident that while they present their claims as being against only the “arbitrary and unfair" classification of photovoltaic plants as immovable property, at bottom, their complaint pertains to the fact that such a classification results in the charging of unwarranted municipal charges:

The “consolidated" position from Italy's fiscal authority in 2013 was clearly arbitrary and unfair, as Claimants explained in their Statement of Claim. PV facilities – which can comprise panels installed on a residential rooftop – are clearly not themselves “immovable” real property that should be subject to municipal charges for services normally due on such property, including road maintenance and public lighting.⁵⁷³

559. Moreover, the fact that the IMU and TASI Charges lie at the centre of Claimants' claims is also reflected from the relief they request from this Tribunal in respect of this issue. While Italy reversed the classification of photovoltaic plants in 2016, classifying them as movable property again prospectively, Claimants take issue with the fact that the IMU and TASI Charges they paid since 2013 until 2016 were neither offset nor credited by Italy or its concerned authorities. Thus, Claimants' request for damages from this Tribunal includes a reimbursement of the IMU and TASI Charges that Claimants were charged from 2013 until 2016. In other words, Claimants' requested relief from this Tribunal on this issue relates only to these IMU and TASI Charges and does not relate to the classification of photovoltaic plants as immovable property per se, which in Claimants' own admission was rightly reversed by Italy in 2016.⁵⁷⁴ This itself shows that Claimants' claims on the classification issue are directly related to these IMU and TASI Charges.

560. Therefore, the Tribunal finds that Claimants' claim concerning the classification of the photovoltaic plants as immovable property is a claim with respect to taxation measures,

⁵⁷¹ SoC, ¶ 218. ↩

⁵⁷² SoC, ¶ 219. ↩

⁵⁷³ SoRy, ¶ 492. ↩

⁵⁷⁴ See, inter alia, SoC, ¶ 222; SoRy, ¶¶ 493-494. ↩

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i.e., the IMU and TASI Charges. Consequently, Respondent's jurisdictional objection under Article 21(1) ECT succeeds, insofar as it concerns this claim.

561. Given that none of the Parties disputes that the IMU and TASI Charges are taxation measures (see ¶ 555 above), the Tribunal need not separately examine whether the specific requirements for qualifying as a taxation measure under Article 21(7) ECT (see ¶ 520 above) are satisfied by these Charges. The above findings of the Tribunal about the nature and characterization of Claimants' claim on the IMU and TASI Charges (see ¶¶ 556-560 above) are conclusively determinative of this issue.

f. Conclusion on Article 21 ECT

562. For the reasons discussed in the preceding sub-sections, the Tribunal concludes that Respondent's jurisdictional objection under Article 21(1) ECT succeeds in respect of Claimants' claims relating to the (i) Robin Hood Tax; and (ii) the classification of photovoltaic plants as immovable property. Therefore, the Tribunal does not have jurisdiction over these matters. On the remaining aspects, i.e., (i) the Administrative Management Fee; and (ii) the imbalance costs, Respondent's jurisdictional objection under Article 21(1) ECT fails, since these measures do not qualify as taxation measures.

(2) Exclusive Jurisdiction Clause in GSE Contracts

563. It is not disputed between the Parties that the GSE contracts were executed between GSE on the one side and the SPVs acquired by the First, Second or Third Claimants on the other side, as the case may be (see Section IV.E above). It is also not disputed between the Parties that Article 9 of each of the seven GSE contracts under the Second Conto Energia and Article 13 of the two GSE contracts under the Third Conto Energia relating to Rustico and Milana Plants contained an exclusive jurisdiction clause in favour of the Court of Rome, providing as follows:

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For any dispute arising out of or in any way connected to the interpretation and execution of this Agreement and the documents referred to therein, the Parties agree on the exclusive jurisdiction of the Court of Rome.⁵⁷⁵

564. The Tribunal notes that Respondent's translation of the above exclusive jurisdiction clause is at variance from Claimants', inasmuch as Respondent's translation of the first part of the clause provides: "[f]or any dispute arising out of, or in any way related to the interpretation and/or execution of this Convention and the acts it refers to ...”⁵⁷⁶ However, the Tribunal also notes that throughout the Hearing, Respondent relied on Claimants' translation of the GSE contracts.⁵⁷⁷ Accordingly, without prejudice to the accuracy of the Parties' respective translations, the Tribunal's findings below shall also rely on Claimants' translation of the exclusive jurisdiction clause in the GSE contracts. In any event, the Tribunal considers that its conclusions would not be any different if Respondent's translation were to be used.

565. The disputed issues between the Parties pertain to (a) the fact that Claimants were not party to the GSE contracts and the implications thereof; and (b) the nature of the claims brought by Claimants before this Tribunal under Article 26 ECT. The Tribunal shall address these disputed issues in turn below.

a. Implications of Claimants and Respondent not being party to the GSE Contracts

566. In relation to item (a) in ¶ 565 above, the Tribunal is persuaded by Claimants' argument that since Claimants were not party to any of the GSE contracts, the exclusive jurisdiction clauses in question do not apply to them. In fact, given that Respondent was also not party to any of the GSE contracts, the exclusive jurisdiction clauses do not apply to Respondent either. Accordingly, these exclusive jurisdiction clauses could not be resorted to for resolving any disputes between Claimants and Respondent. Instead, these clauses could only be relied upon for disputes arising between GSE and whichever one of Claimants'

⁵⁷⁵ CEX-293, Santoro GSE Agreement n. I08F13381307, Article 9; CEX-294, San Marco GSE Agreement n. I08F15697007, Article 9; CEX-295, Lenare GSE Agreement n. I0F15697307, Article 9; CEX-306, Campania plant GSE Agreement n. I08F13988007, Article 9; CEX-311, Monaci GSE Agreement n. I0F17928907, Article 9; CEX-329, Rustico GSE Agreement n. O03M27266207, Article 13; CEX-330, Milana GSE Agreement n. 003M28467707, Article 13; CEX-341, Rovigo GSE Agreement n. T03F13776207, Article 9; CEX-343, Fiumicino GSE Agreement n. I08F19354507, Article 9. ↩

⁵⁷⁶ SoD, ¶ 178. ↩

⁵⁷⁷ Hr. Tr. Day 2, pp. 115(4)-115(6). ↩

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SPVs is a party to the relevant contract. Therefore, the Tribunal finds that the presence of the exclusive jurisdiction clauses in the GSE contracts does not per se inhibit this Tribunal's jurisdiction to resolve the dispute between Claimants and Respondent, pursuant to Article 26 ECT.

567. In this regard, Article 26(2)(b) ECT assumes relevance. The Tribunal agrees with Respondent that this provision indicates that the ECT is agreeable to dispute resolution by alternative methods of dispute resolution than international arbitration (see ¶ 484 above). However, Article 26(2)(b) ECT limits this alternative option to resolve disputes “in accordance with any applicable, previously agreed dispute settlement procedure”. Given that Claimants and Respondent were not parties to the GSE contracts, the exclusive jurisdiction clauses therein are neither “applicable” between them, nor do they qualify as “previously agreed” dispute settlement procedures under Article 26(2)(b) ECT.

568. Further, in respect of the case law relied upon by the Parties, the Tribunal notes, as rightly pointed out by Claimants (see ¶ 498 above), that two of the three cases relied upon by Respondent in support of its arguments were factually distinct from the present case. Those cases, i.e., SGS v. Philippines and BIVAC v. Paraguay, involved contracts (containing exclusive jurisdiction clauses) that were signed by the claimant(s) and the respondent-State (or the concerned Ministry of the respondent-State) in those cases.⁵⁷⁸ This, as mentioned in ¶ 566 above, is not the situation in the present case.

569. The third case relied upon by Respondent, i.e., Aguas del Tunari v. Bolivia, saw the tribunal denying respondent-State's jurisdictional objection, while recognizing that “in order for the [Concession] raised by the Respondent to be in conflict with this Tribunal's exercise of jurisdiction, that [Concession] must both deal with the same matters and Parties".⁵⁷⁹ Along the same lines, most recently, in Greentech v. Italy, which Claimants correctly point out was a case factually close to the present case (see ¶ 498 above), the

⁵⁷⁸ RLA-002, ICSID Case No. ARB/02/6, SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, ¶¶ 13-14; RLA-004, ICSID Case No. ARB/07/9, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, Decision on Objections to Jurisdiction, 29 May 2009, ¶ 7. ↩

⁵⁷⁹ RLA-003, ICSID Case No. ARB/02/3, Aguas del Tunari S.A. v. Republic of Bolivia, Decision on Respondent's Objections to Jurisdiction, 21 October 2005, ¶¶ 111, 114. ↩

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tribunal rejected a similar jurisdictional objection on the ground that claimants there were not party to the GSE contracts.⁵⁸⁰

570. Accordingly, case law confirms this Tribunal's understanding that the exclusive jurisdiction clauses in the GSE contracts do not inhibit this Tribunal's jurisdiction under the ECT, since the GSE contracts were not signed and executed between Claimants and Respondent (see ¶ 566 above). The Tribunal's understanding is not affected by Respondent's attempt to distinguish between the ECT and the GSE contracts on the ground that the GSE contracts were specifically negotiated documents and would prevail over the generic expression of consent in the ECT, pursuant to the doctrine of generalia specialibus non derogant (see ¶ 484 above). Notwithstanding the merit of this argument, the fact that the GSE contracts were specifically negotiated between the parties to those contracts does not vest any procedural right or obligation upon entities that were not parties to those contract, such as Claimants or Respondent, to resolve disputes between them under the contractual exclusive jurisdiction clauses.

b. The Nature of the Claims brought by Claimants before this Tribunal

571. In relation to item (b) in ¶ 565 above, i.e., the nature of the claims brought by Claimants before this Tribunal under Article 26 ECT, the Tribunal is persuaded by Claimants' submission that they are not seeking a resolution of a breach of contract claim in these ECT proceedings. In fact, Respondent does not directly contest that Claimants' allegations in these proceedings do not relate to a breach of the GSE contracts. Instead, Respondent's submission is that the claims that Claimants are raising in these proceedings, pertaining to the incentives received by investors under the Conto Energia Decrees, are also covered by the broadly worded exclusive jurisdiction clauses in the GSE. This overlap, as per Respondent, renders Claimants' treaty claims in these proceedings beyond this Tribunal's jurisdiction and/or inadmissible (see ¶ 482 above).

572. There is no doubt that since Claimants are not party to the GSE contracts, they cannot claim a breach of those contracts before this Tribunal. Indeed, the Tribunal need not go any

⁵⁸⁰ CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, ¶¶ 220-221. ↩

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further in its considerations on this issue. However, for the sake of completeness, the Tribunal shall briefly address Respondent's submission relating to the potential overlap between the scope of the present dispute and a theoretical dispute that can be initiated under the exclusive jurisdiction clauses in the GSE contracts.

573. In this regard, the Tribunal is mindful that the same set of facts and circumstances can simultaneously give rise to claims for breach of municipal law brought before national courts and claims for breach of a treaty brought before an international tribunal. However, with respect to this potential overlap of claims, the Tribunal agrees with findings of the ad hoc annulment committee in Vivendi I v. Argentina and the other awards and decisions relied upon by Claimants. In each of these cases, it was found that when the “essential” or "fundamental basis of a claim” is a breach of a treaty, an international tribunal constituted under that treaty can exercise its jurisdiction over such a claim.⁵⁸¹ Even the cases relied upon by Respondent agree with this general principle.⁵⁸²

574. In the instant case, Claimants' claims, while touching upon the GSE contracts, in reality deal with a number of other factual and regulatory aspects beyond those contracts. To name a few, Claimants' claims under Article 10(1) ECT deal with aspects such as the alleged application of Administrative Management Fee to photovoltaic plants, the alleged imposition of “imbalance costs" on photovoltaic plants, and the alleged remodulation of the entire Conto Energia framework with the Spalma-incentivi Decree.

575. Therefore, it is apparent that Claimants' claims in these proceedings address a number of Respondent's alleged actions or inactions going beyond the GSE contracts, and present them as violations of Respondent's international obligations under Article 10(1) ECT. In other words, Claimants' claims trigger Respondent's obligations under international law.

⁵⁸¹ CL-132, Compañia de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, July 3, 2002, ¶¶ 98-101; CL-178, Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, April 4, 2016, ¶¶ 475-480; CL-85, Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, October 12, 2005, ¶ 53; CL-135, Tenaris S.A. and Talta Trading E Marketing Sociedade Unipessoal LDA v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/26, Award, January 29, 2016, ¶ 306. ↩

⁵⁸² RLA-002, ICSID Case No. ARB/02/6, SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, ¶ 158; RLA-004, ICSID Case No. ARB/07/9, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, Decision on Objections to Jurisdiction, 29 May 2009, ¶ 127. ↩

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These claims do not require this Tribunal to make a finding regarding either a breach of the GSE contracts, not least because Claimants or Respondent are not parties to them, or a violation of Italian law. Thus, the Tribunal considers that the claims that are at issue in these proceedings are fundamentally and essentially in the nature of breach of treaty claims, i.e., claims that implicate an alleged breach of treaty obligations, particularly those under Article 10(1) ECT.

576. The fact that the factual context behind some or all of these claims may also theoretically be presented before the Court of Rome under the exclusive jurisdiction clauses in the GSE contracts does not come in the way of the existence or the exercise of this Tribunal's jurisdictions over Claimants' claims in these proceedings. In this connection, the Tribunal agrees with the findings of various tribunals, relied on by Claimants,⁵⁸³ and in particular the following extract from the award in Crystallex v. Venezuela:

As explained in Vivendi I, the same set of facts can give rise to different claims grounded on differing legal orders, i.e. the municipal and the international legal orders. However, an exclusive jurisdiction clause in relation to disputes concerning possible contractual breaches, such as Clause 19 of the MOC, may not divest an international tribunal of its jurisdiction under an international treaty in relation to possible treaty breaches.⁵⁸⁴ (emphasis in the original)

577. The above considerations apply equally to the jurisdiction of this Tribunal and the admissibility of Claimants' claims. In conclusion, the Tribunal finds that the presence of the exclusive jurisdiction clauses in the GSE contracts does not take away this Tribunal's jurisdiction under Article 26 ECT, nor does it render Claimants' claims under the ECT inadmissible. Therefore, Respondent's objections to this end are rejected.

(3) The Requirement of Amicable Settlement under Article 26(1) ECT

578. This jurisdictional objection, which Respondent also raises as a challenge to the admissibility of Claimants' claims, relates to the requirement of amicable settlement of the disputes prior to the initiation of the arbitration proceedings. This requirement emanates from Articles 26(1) and 26(2) ECT (quoted in ¶ 287 above), which provide that disputes

⁵⁸³ CL-85, Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, October 12, 2005, ¶ 53. ↩

⁵⁸⁴ CL-178, Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, April 4, 2016, ¶ 480. ↩

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between the investor(s) and the State concerning an alleged breach of an obligation of the former under Part III “shall, if possible, be settled amicably”, and if the disputes “cannot be settled [amicably] within a period of three months from the date on which either party to the dispute requested amicable settlement”, the investor(s) may choose to initiate arbitration.

579. From the aforementioned regime, three conditions are required to be met for this requirement of amicable settlement to be satisfied: (i) there shall be an attempt to settle the disputes amicably; (ii) the disputes for which amicable settlement is sought are the disputes ultimately referred to arbitration; and (iii) arbitration cannot be initiated until three months have expired from the date on which the request for amicable settlement was provided by any of the disputing parties. Each of these conditions appears to be mandatory in nature.

580. Respondent's jurisdictional and admissibility objections do not dispute that the first and the third of the above three conditions were satisfied.

581. Claimants sent a “Notice of Legal Dispute Arising under the Energy Charter Treat and Offer of Amicable Settlement" on 4 May 2016 to various Ministries of the Italian Republic.⁵⁸⁵ Respondent does not dispute that this notice qualified as an attempt to settle the disputes amicably (see ¶ 486 above). Further, Claimants filed their RfA on 26 August 2016 (see ¶ 7 above), which was more than three months expired since the letter of 4 May 2016 was sent to Respondent. Thus, there is no dispute that the third condition enlisted in ¶ 579 above was also satisfied.

582. Respondent objects to the satisfaction of the second requirement enlisted in ¶ 579 above. Specifically, as per Respondent, Claimants raised two new claims in these arbitration proceedings, which were not mentioned in Claimants' letter of 4 May 2016 to Italy. The new claims that Respondent's jurisdictional and admissibility objections pertain to are the claims relating to (i) the ex nunc application of the Constitutional Court Decision No. 10/2015 relating to the Robin Hood Tax, and Italy's failure to reimburse the taxes wrongly imposed; and (ii) Italy's failure to reimburse or offset payments made by Claimants as a result of the wrongful classification of photovoltaic plants as immovable property (the

⁵⁸⁵ CEX-7, Notice of Legal Dispute Arising Under the Energy Charter Treaty and Offer of Amicable Settlement. ↩

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IMU and TASI Charges). For these two claims, due to the incongruity between Claimants' letter of 4 May 2016 and its subsequent submissions in these arbitration proceedings, Respondent submits that the requirement of amicable settlement under Article 26 ECT has not been satisfied (see ¶¶ 487 above).

583. However, the Tribunal has already found in Section VII.D(1) above that it does not have jurisdiction over the aforementioned two claims, since they qualify as “taxation measures” under Article 21 ECT (see ¶¶ 553 and 560 specifically). Having already denied jurisdiction over these two claims on other grounds, the Tribunal no longer considers it appropriate or necessary to examine Respondent's additional jurisdictional and admissibility objections pertaining to the requirement of amicable settlement. Specifically, it is no longer required to compare the scope of Claimants' letter of 4 May 2016 with its submissions in these arbitration proceedings to determine whether the second requirement enlisted in ¶ 579 above was satisfied for these two claims. Accordingly, this issue is rendered moot by the Tribunal's previous findings.

(4) Conclusion on Other Issues of Jurisdiction and Admissibility

584. In light of the reasons discussed in the preceding Sections, the Tribunal concludes that Respondent's jurisdictional objections and its objections relating to the admissibility of Claimants' claims must be rejected, except in respect of Claimants' claims relating to the (i) Robin Hood Tax; and (ii) the classification of photovoltaic plants as immovable property. These two issues fall outside the Tribunal's jurisdiction for being “taxation measures” under Article 21 ECT. The remainder of the disputed issues between the Parties fall within the Tribunal's jurisdiction, and Claimants' claims in those respects are not inadmissible.

VIII. RESPONDENT'S BREACH OF ANY OBLIGATIONS UNDER THE ECT OR INTERNATIONAL LAW

585. Claimants allege that Respondent breached its obligations under Article 10(1) ECT on three counts. First, Claimants allege that Respondent failed to accord to its investments fair and equitable treatment, as per the first and second sentences of Article 10(1) ECT.

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Second, Claimants allege that Respondent impaired Claimants' investments through unreasonable and discriminatory measures, and thereby breached the so-called “impairment clause" in the third sentence of Article 10(1) ECT. Third, Claimants claim that Italy failed to observe all its obligations entered into with respect to Claimants' investments, and thereby breached the so-called “Umbrella Clause” or “observance of undertakings" clause in the fifth sentence of Article 10(1) ECT.

586. The Tribunal shall first reproduce the Parties' submissions on these three allegations in turn, following which it shall lay down its considerations on each of them.

A. RELEVANT TREATY PROVISIONS

587. Article 10(1) ECT provides as follows:

Article 10: Promotion, Protection and Treatment of Investments

(1) Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party.

B. ARTICLE 10(1) ECT: FAIR AND EQUITABLE TREATMENT

(1) Claimants' Position

588. According to Claimants, Respondent has violated its obligation to provide fair and equitable treatment (“FET”) to Claimants' investment in the following three distinct ways: (i) by undermining Claimants' legitimate expectation of predictable and stable support for their photovoltaic facilities; (ii) by failing to treat Claimants' investments transparently and

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consistently; and (iii) by failing to act in good faith towards Claimants and their investments.⁵⁸⁶

a. The Legal Standard

589. Claimants contend that the FET standard is to be applied in accordance with the treaty's object and purpose. In this connection, Claimants submit that the “fundamental aim” of the ECT is "to strengthen the rule of law on energy issues”, and in turn to catalyse economic growth by promoting long-term cooperation. Claimants further contend that the ECT Contracting Parties accepted limitations on their power to alter the legislative or regulatory framework governing an investment when their acts have given rise to legitimate expectations of stability on the part of foreign investors.

590. Further, Claimants do not endorse the view that the FET standard requires a fundamental or radical change in the regulatory regime, or that the host State's conduct should be manifestly unfair or unreasonable.⁵⁸⁷ In this regard, they also dispute the articulation of the FET legal standard by the tribunal in AES v. Hungary, characterizing it as an “outlier” for being closer to the customary international law minimum standard, which is not applicable under Article 10(1) ECT.⁵⁸⁸

(i) Legitimate Expectations

591. Claimants contend that the protection of legitimate expectations is one of the "major components" of the FET standard.⁵⁸⁹

592. According to Claimants, such legitimate expectations can be created through, both, explicit and implicit promises, assurances or guarantees, and even by the overall circumstances

⁵⁸⁶ SoC, ¶ 252. ↩

⁵⁸⁷ SoC, ¶ 251; Hr. Tr. Day 1, pp. 89:20-90:2; relying on CL-45, Anatolie Stati et al. v. Kazakhstan, SCC Arbitration No. 116/2010, Award, Dec. 19, 2013, ¶ 942; CL-48, Energy Charter Secretariat, "An Introduction to the Energy Charter Treaty" in The Energy Charter Treaty and Related Documents (2004), at 14. ↩

⁵⁸⁸ Hr. Tr. Day 4, pp. 198:5-200:10; C-RPHB, ¶ 29; distinguishing CL-38, AES Summit Generation Ltd. and AES-Tisza Erömü Kft. v. Hungary (ICSID Case No. ARB/07/22), Award. ↩

⁵⁸⁹ SoC, ¶¶ 253-254, relying on CL-52, EDF (Services) Limited v. Romania, ICSID Case no. ARB/05/13, Award, October 8, 2009, ¶ 216; CL-53, Saluka Investments BV v. Czech Republic, UNCITRAL-PCA, Partial Award, March, 17, 2006, ¶ 302; CL-54, Waste Management v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award, 30 April, 30, 2004, ¶ 98; CL-54, Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, May 29, 2003, ¶ 154. ↩

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surrounding an investment. In this regard, Claimants rely on investment arbitration case law, particularly the Parkerings v. Lithuania and Total v. Argentina cases, to contend that explicit promises of the host State include: (i) the legal framework of the host State at the time the investor made its investment; (ii) contractual undertakings by the host State; (iii) public statement or declarations by the host State; and (iv) State conduct and policy goals. The key question, as per Claimants, is whether the host State through any of the above forms of conduct as induced investments.⁵⁹⁰

593. Claimants also contend that it is only in the absence of specific promises in contracts or otherwise that the investors' alleged expectations are required to be balanced against the host State's regulatory authority. On this basis, Claimants seek to distinguish the various cases relied upon by Respondent and the cases relating to the Spanish renewable energy framework, on the ground that none of those cases involved specific commitments, either by way of a contract or otherwise, regarding the investments in question, as the present case allegedly does.⁵⁹¹

594. For Claimants, legitimate expectations do not, however, indispensably require specific representations or guarantees from the host State. Such expectations can be inferred from promises or representations in framework legislation. In any event, Claimants contend that in the present case legitimate expectations were created by the promises in the overall

⁵⁹⁰ SoC, ¶¶ 255-264, Hr. Tr. Day 1, pp. 83:11-85:14; Hr. Tr. Day 1, pp. 86:23-87:7; relying, inter alia, on CL- 58, Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/08, Award, September 11, 2007, ¶ 331; CL-14, Ioan Micula et al. v. Romania, ICSID Case No. ARB/05/20, Award, Dec. 11, 2013, 2013, ¶ 669; CL- 60, Enron Corporation Ponderosa Assets, L.P. v. Argentina, ICSID Case. No. ARB/01/3, Award, May, 22, 2007, ¶¶ 260-266; CL-61, LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, Oct. 3, 2006, ¶¶ 130-133; CL-63, Continental Casualty Company v. Argentina, ICSID Case No. ARB/03/9, Award, September 5, 2008, ¶ 261; CL-47, Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability, Dec. 27, 2010 ¶ 119; Perenco Ecuador Ltd. v. The Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/6, Decision on Remaining Issues of Jurisdiction and Liability, Sept., 12, 2014, ¶ 563. ↩

⁵⁹¹ SoRy, ¶¶ 364-369; Hr. Tr. Day 1, pp. 88:25-89:16; CL-14, Ioan Micula et al. v. Romania, ICSID Case No. ARB/05/20, Award, Dec. 11, 2013, 2013, ¶ 669; and distinguishing CL-82, Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, Award; CL-9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award; CL-53, Saluka Investments BV v. Czech Republic, UNCITRAL-PCA, Partial Award; CL-4, Charanne BV and Construction Investments v. Spain, SCC Case No. 062/2012. ↩

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regulatory framework and by specific commitments in the GSE tariff confirmation letters and/or contracts.⁵⁹²

595. Furthermore, while Claimants admit the broad proposition that investors' legitimate expectations should be assessed at the time of investment, they submit that limiting the investors' legitimate expectations only to rights that have been “crystallised” at the time of the investment would be inappropriate. According to Claimants, investment arbitration case law recognizes that an examination of investors' legitimate expectations is to be grounded on the overall legal order or conditions offered by the host State, and need not focus on rights, contractual or otherwise, that have been formally crystallized at the date of the investment. Accordingly, legitimate expectations arising after the date of the investment, in the form of crystallized rights have also been respected by arbitral tribunals.⁵⁹³ Moreover, as per Claimants, such a limitation to crystallized rights would create a distinction between investors in development projects and subsequent acquirers of the same projects, which distinction would be inconsistent with the ECT, transparency and economic rationality.⁵⁹⁴ Thus, Claimants' contention is that even absent the crystallised contractual rights, statutory regulatory frameworks can also create legitimate expectations.⁵⁹⁵

⁵⁹² C-RPHB, ¶¶ 22-29; Hr. Tr. Day 4, pp. 204:2-206:5; relying on CL-171, Antaris GmbH and Dr. Michael Göde v. Czech Republic, PCA Case No. 2014-01, Award, May 2, 2018, ¶¶ 360, 366, 399. ↩

⁵⁹³ C-PHB, ¶¶ 62-67; relying on CL-181, Greentech Energy Systems A/S, NovEnergia II Energy & Environment (SCA) SICAR, and NovEnergia II Italian Portfolio SA v. Italy, SCC Arbitration V (2015/095), Award, Dec. 23, 2018, ¶¶ 131-142; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, ¶¶ 154, 165; CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, May 16, 2018, ¶¶ 92-95, 344, 362, 512; CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, ¶¶ 120-121; CL-193, Kardassopoulos and Ron Fuchs v. Georgia, Award of March 3, 2010, ¶ 441. ↩

⁵⁹⁴ C-PHB, ¶¶ 68-71, 87; C-RPHB, ¶¶ 46-49; relying on CL-178, Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, April 4, 2016, ¶ 557; CL-69, Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, April8, 2013, ¶¶ 542-544; CL-185, U. Kriebaum; C.H. Schreuer; “At What Time Must Legitimate Expectations Exist?”, A Liber Amicorum: Thomas Wälde - Law Beyond Conventional Thought, TDM 1 (2012), p. 274, available at: https://www.transnational- disputemanagement.com/downloads/tw-liberamicorum.pdf. ↩

⁵⁹⁵ Claimants' Comments on the Belenergia S.A. v. Italy Award, 13 September 2019, ¶ 10; relying on CL-196, Cube et al. v. Spain, Decision on Jurisdiction, Liability and Partial Decision on Quantum, Feb. 19, 2019; CL-51, El Paso Energy v. Argentina, ICSID Case No. ARB/03/15, Award, Oct. 31, 2011; CL-119, 9Ren v. Spain, Award; CL- 169, Antin v. Spain, ICSID Case No. ARB/13/31, Award. ↩

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596. In this connection, Claimants also submit that investments should be considered as a process, and not as a one-stop occurrence. To this end, Claimants rely on the broad definition of "Investment” in the ECT (including the definition of “making of investments" in Article 1(8) ECT), and submit that the investment is a complex process involving multiple steps that must be viewed as part of an integrated whole.⁵⁹⁶ Further, they also criticize the CEF v. Italy tribunal's restrictive understanding of legitimate expectations standard as covering only "crystallised rights” on the date of the first investment in that case, as opposed to treating the investment as a multi-staged process.⁵⁹⁷

(ii) Transparency and Consistency

597. Additionally, according to Claimants, a State's duty of transparency and consistency is another distinct facet of the FET standard, separate from the obligation to preserve investors' legitimate expectations.⁵⁹⁸

598. It is Claimants' position that this duty of transparency and consistency requires the absence of any ambiguity, i.e., it, inter alia, requires (i) the legal framework for the investor's operations to be readily apparent at the outset of the investment; (ii) the State to correct or clarify uncertainties that develop in a regime; (iii) the State to adequately inform investors regarding possible changes to a legal regime to enable the investor to plan accordingly; and

⁵⁹⁶ C-PHB, ¶¶ 81-87; relying on CL-185, U. Kriebaum; C.H. Schreuer; "At What Time Must Legitimate Expectations Exist?", A Liber Amicorum: Thomas Wälde - Law Beyond Conventional Thought, TDM 1 (2012), pp. 269-271, available at: https://www.transnational-disputemanagement.com/downloads/tw-liberamicorum.pdf; CL- 168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, May 16, 2018, ¶¶ 344, 362, 93; CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 120-21; CL-69, Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, April8, 2013, ¶¶ 542-544; CL-193, Kardassopoulos and Ron Fuchs v. Georgia, Award of March 3, 2010, ¶ 441. ↩

⁵⁹⁷ Claimants' Comments on CEF Energia B.V. v. Italy (SCC Arb. No. 2015/158), 20 March 2019. ↩

⁵⁹⁸ SoC, ¶¶ 277-278; SoRy, ¶¶ 370-371; relying, inter alia, on CL-49, Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, Sept. 22, 2014, ¶ 570; CL-66, Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability, Jan. 14, 2010, ¶ 284; CL-60, Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, May, 22, 2007, ¶¶ 267-268; CL-68, PSEG Global Inc. and Konya Ilgin Elektrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, Jan. 19, 2007 ¶ 250; CL-61, LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, Oct. 3, 2006, ¶ 131; CL-56, Occidental Exploration and Production Co. v. Republic of Ecuador, UNCITRAL, LCIA Case No. UN3467, Final Award, July 1, 2004 ¶ 185; CL-14, Ioan Micula et al. v. Romania, ICSID Case No. ARB/05/20, Award, Dec. 11, 2013, 2013, ¶ 872. ↩

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(iv) the State to consistently apply the legal framework or rules governing an investment.⁵⁹⁹

(iii) Good Faith

599. Regarding the good faith obligation of a State under the FET standard, Claimants contend that it entails “a sincere intention to deal fairly with others”. Claimants rely on investment arbitration case law to contend that the duty of good faith includes a duty to treat investors in an “even-handed and non-discriminatory” manner. Further, as per Claimants, reliance on internal structure to excuse non-compliance with contractual obligations could also amount to a violation of good faith. In this connection, Claimants contend that the FET standard "imposes obligations beyond customary international requirements of good faith treatment".⁶⁰⁰

b. Italy's Alleged Breach of the FET Standard

(i) Legitimate Expectations

600. Claimants contend that Italy breached the FET standard under the ECT by violating Claimants' legitimate expectations of predictable and stable support for their photovoltaic facilities.

Basis of Claimants' Legitimate Expectations

601. According to Claimants, their legitimate expectations regarding the level of support that would be afforded to their photovoltaic facilities in Italy was based on the following factors:⁶⁰¹

⁵⁹⁹ SoC, ¶¶ 279-280; relying, inter alia, on CL-71, Metalclad Corp. v. United Mexican States, ICSID Case No. ARB/96/3, Award, Aug. 30, 2000, ¶ 76; CL-73, Frontier Petroleum v. Czech Republic, UNCITRAL, Final Award, Nov. 12, 2010, ¶ 285; CL-54, Tecmed Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, May 29, 2003, ¶ 154; CL-74, MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/07, Award, May 25, 2004, ¶ 165. ↩

⁶⁰⁰ SoC, ¶¶ 286-287; relying, inter alia, on CL-75, Sempra Energy International v. Argentina, ICSID Case No. ARB/02/16, Award, Sept. 28, 2007, ¶¶ 298-299; CL-53, Saluka Investments B.V. v. The Czech Republic, Partial Award, March 17, 2006, ¶¶ 303-307; CL-73, Frontier Petroleum v. Czech Republic, UNCITRAL, Final Award, Nov. 12, 2010, ¶ 300; CL-77, CME v. Czech Republic, UNCITRAL, Partial Award, Sept. 13, 2001, ¶ 156. ↩

⁶⁰¹ SoC, ¶¶ 267-271; C-RPHB, ¶¶ 25, 30. ↩

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1. Respondent's policy goals, which as per Claimants, created reasonable expectations of stability. According to Claimants, the fundamental purpose of Respondent's support framework was to encourage substantial investment in the photovoltaic sector and ensure that Respondent would meet binding EU targets for renewable energy;⁶⁰²
2. The five Conto Energia Decrees enacted by Respondent from 2005 to 2012, containing explicit promises to investors that the support that they would receive through the Conto Energia incentives and other elements of the regime would remain constant for 20 years;⁶⁰³
3. GSE's tariff confirmation letters and the GSE contracts entered into with respect to each photovoltaic plant receiving the tariffs, which expressly confirmed that the tariff rate granted to a particular facility would be applicable for a period of 20 years. Claimants submit that the Conto Energia Decrees themselves did not automatically convey a specific right on any particular investor. Rather, according to Claimants, the specific rights emanated from tariff confirmation letters sent by GSE confirming the operator's right to receive tariff at a fixed rate for 20 years, and subsequently, from the “contractual relationship” with the GSE that was created by contracts entered into with the plant operators. Claimants rely on the opinion of their expert, Professor Antonio D'Atena to contend that the GSE contracts were "individual and actual measures", on which investors” “legitimate expectations" of fixed tariffs for 20 years were based;⁶⁰⁴
4. The numerous public statements made by Respondent's officials confirming the stability of the incentive rates and their fixed 20 year duration, specifically, the statements of the Italian Minister of Environment confirming that “the system

⁶⁰² CEX-24, EC Directive 2001/77/EC; CEX-115, EC Directive 2009/28/EC. ↩

⁶⁰³ SoRy, ¶¶ 212-218. ↩

⁶⁰⁴ SoRy, ¶¶ 223-229; Supplementary Opinion of Professor Antonio D'Atena, Mar. 19, 2018 (“Second D'Atena Opinion"), Section 2.2.2. ↩

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guarantees a certain income for 20 years for those who produce electricity from solar panels";⁶⁰⁵

5. The confirmation by Respondent's agencies at every level of the Government, including the Ministries of Environment and Economic Development, the Italian Electrical Energy Authority, as well as municipal, provincial, and regional authorities, and even the GSE, regarding the fundamental aspects of constant tariff rates and fixed duration of the Conto Energia regime to investors.⁶⁰⁶

602. Claimants contend that Respondent's (i) explicit promises of fixed incentive tariff to be paid for a duration of 20 years; (ii) policy goals of encouraging photovoltaic investment and ensuring that the photovoltaic facilities would be competitive with other types of electricity producers in the State; and (iii) requirement to meet its domestic and international energy target, formed the basis for Claimants' investment in Italy.⁶⁰⁷

603. Claimants further dispute Respondent's assertion that no legitimate expectation regarding a fixed tariff rate for a 20 year period can be derived from the Conto Energia Decrees as the underlying legislative framework surrounding the Decrees only promised investors a “fair return" on their investment. Claimants contend that the underlying legislative framework to the Conto Energia Decrees, namely, Legislative Decrees 387/2003 and the Romani Decree explicitly instructed the relevant Ministries to establish specific rates for various types of facilities, which according to Claimants, was done in the Conto Energia Decrees.⁶⁰⁸ Claimants submit that these Legislative Decrees promised fair remuneration to investors, which Respondent incorrectly interprets to mean “fair return”.⁶⁰⁹

The Timing of Claimants' Investment made in reliance of Legitimate Expectations

⁶⁰⁵ SoC, ¶¶ 269-270; relying, inter alia, on CEX-67, Statement from Minister for the Environment, Land and Sea, Alfonso Pecoraro Scanio, pamphlet called "Il Sole In Casa". ↩

⁶⁰⁶ SoRy, ¶¶ 232-233, relying, inter alia, on CEX-42, GRTN, Presentation “GRTN, the Italian Body who will manage photovoltaic system"; CEX-43, GRTN Presentation “Incentivazione degli impianti alimentati da fonti rinnovabili," Padova University CEX-45, GRTN Presentation “Le attività del GRTN per le fonti rinnovabili”.. ↩

⁶⁰⁷ SoC, ¶¶ 271-272; C-RPHB, ¶¶ 30-31. ↩

⁶⁰⁸ SoRy, ¶¶ 252-262. ↩

⁶⁰⁹ SoRy, ¶¶ 263-273. ↩

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604. Although Claimants began investing in Italy before many of their plants formally received the GSE letters or contracts, Claimants submit that this fact should not impact the Tribunal's determinations on Claimants' legitimate expectations from a factual or legal standpoint. These determinations should be common for all of Claimants' photovoltaic plants, regardless of the timing of investment in each of them.⁶¹⁰

605. According to Claimants, even though Italy's offer to grant incentive tariffs had not yet crystallized into enforceable rights for some of the plants that Claimants invested in, Claimants' reliance on the conditions offered by Italy when they acquired their shares for these plants should nonetheless be protected as legitimate expectations. These conditions offered by Respondent entailed the performance of subsequent acts by Respondent that would eventually entitle all of Claimants' plants to receive the tariffs upon entry into operation. Claimants also dispute, from a legal and factual standpoint, Respondent's submission that there was no discussion between Italian authorities and Claimants for their individual investments, and thus, there could be no specific undertaking or promises that Italian authorities made to Claimants (see ¶ 641 below).⁶¹¹

606. Claimants, in any event, submit that the effective date when the tariff rights crystallised for each of Claimants' plants was the date of entry into operation of the concerned plant. That is how the “effective date” of the GSE contracts was stipulated, and consequently the GSE contracts executed after a plant's entry into operation backdated the payment of tariffs to the effective date. As part of this “integrated and sequential” regulatory framework, Claimants characterise the delay between the entry into operation of a plant and the receipt of the tariff confirmation letters or the GSE contracts as “bureaucratic delay” that had no material impact on tariff payments.⁶¹²

⁶¹⁰ C-PHB, ¶¶ 42, 46 et seq. ↩

⁶¹¹ C-PHB, ¶¶ 57-67; C-RPHB, ¶¶ 33-35. ↩

⁶¹² C-PHB, ¶¶ 72-80; relying, inter alia, on CEX-293, Santoro GSE Agreement n. I08F13381307; CEX-294, San Marco GSE Agreement n. I08F15697007; CEX-295, Lenare GSE Agreement n. I0F15697307; see SoC, ¶¶ 150-152; CEX-306, Campania plant GSE Agreement n. 108F13988007; CEX-311, Monaci GSE Agreement n. I0F17928907; CEX-329, Rustico GSE Agreement n. O03M27266207; CEX-330, Milana GSE Agreement n. 003M28467707; CEX-341, Rovigo GSE Agreement n. T03F13776207; CEX-343, Fiumicino GSE Agreement n. 108F19354507. ↩

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607. Furthermore, Claimants also submit that the relevant time of investment in the present case should be considered as the time when each plant's tariff rights crystallized and not the time of the share acquisition. In the present case, Claimants' investments, in their submission, comprise, inter alia, (i) their shares in the companies or SPVs operating the photovoltaic plants; (ii) those companies' claims to money pursuant to the Conto Energia regime; and (iii) their claims to performance pursuant to the GSE contracts. Claimants also support their submission in this regard by emphasising that the Framework Agreement, which was the basis for Claimants' parent joint venture (see ¶¶ 184-185 above), envisaged the investments to be structured such that the payments would be made in a stage-wise manner in three milestones. Since the majority of the payments were reserved until after the plants would enter into operation, the time of the share acquisition would not function as the relevant time of investment in this case. Instead, the most relevant time for considering would be the time for entry into operation of each plant.⁶¹³

608. Moreover, Claimants dispute Respondent's submission that Claimants did not exercise sufficient due diligence prior to investing in the Italian photovoltaic market, on the grounds that reasonable due diligence suffices to meet the standard of due diligence required, and that Respondent has not been able to establish that such reasonable due diligence would have revealed the possibility regulatory change of which Claimants complain in these proceedings. As per Claimants, the due diligence they conducted prior to investing “far exceeds" the standard of reasonability (see, in this regard, Sections IV.E(2) and IV.E(3) above).⁶¹⁴

Frustration of Claimants' Legitimate Expectations by Italy

609. It is Claimants' case that Respondent breached Claimants' legitimate expectations regarding the fixed duration of the Conto Energia tariffs and the stable economic support to be granted to Claimants' photovoltaic facilities, by implementing the following specific

⁶¹³ SoC, ¶ 31; RfA, ¶ 68; C-PHB, ¶¶ 81-87; relying on CEX-346, Framework Agreement, Articles 2 and 3, Exhibit D. ↩

⁶¹⁴ C-RPHB, ¶¶ 41-45; relying on CL-119, Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. the Kingdom of Spain, SCC Arbitration (2015/063), Final Award, Feb. 15, 2018, ¶ 679; Claimants' Closing Presentation, slide 12; disputing Respondent's reliance on CEX-322, Gianni, Orrigoni, Grippo & Partners law firm report "Legal Due Diligence Report on Photovoltaic Projects in the Sicily Region Project Milana - Project Rustico", p. 2. ↩

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measures: (i) the imposition of the retroactive Administrative Management Fee on all existing photovoltaic facilities through the enactment of the Fifth Conto Energia Decree (see Section IV.F(1) above); (ii) the creation of a requirement for photovoltaic producers to pay "imbalance costs" (see Section IV.F(3) above); and (iii) the enactment of the Spalma- incentivi Decree which forced Claimants to accept a reduction of the tariff rates granted under the Conto Energia regime (see Section IV.G above).⁶¹⁵

610. Claimants contend that the Spalma-incentivi Decree was the “most egregious measure” carried out by Respondent against the photovoltaic investors, as it both reduced and delayed, retroactively, the constant tariffs that Respondent had generated to photovoltaic investors under the five successive Conto Energia Decrees for a fixed period of 20 years.⁶¹⁶ Claimants dispute Respondent's assertion that the Spalma-incentivi Decree was not a retroactive measure because it only reduced tariffs to be paid in the future. Claimants maintain that the Spalma-incentivi Decree was tantamount to a retroactive modification of the incentive framework that Respondent guaranteed to investors, because Respondent applied it to facilities that were already operating after substantial fixed costs had been invested and for which Respondent had promised payment of specific tariff rates over a period of 20 years to induce those upfront investments. In this connection, Claimants point out that several Italian senators, including Senator Arrigioni and Senator Piccolo, the UK ambassador Christopher Prentice, the EC and the European Parliament have recognized the Spalma-incentivi Decree to be retroactive in nature.⁶¹⁷

611. Claimants dispute Respondent's assertion that they were earning excessive returns on their investment or that the Spalma-incentivi Decree only had a minimal impact on Claimants and their investments, and not a radical or fundamental one. Claimants rely on the opinion of their expert, FTI Consulting, to contend that they suffered a loss of EUR 28 million

⁶¹⁵ SoC, ¶ 272. ↩

⁶¹⁶ SoRy, ¶ 203. ↩

⁶¹⁷ SoRy, ¶¶ 242-248; CEX-273, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 291, pp. 74-78; CEX-274, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 292; CEX-275, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 278; CEX-276, Congress of Deputies of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 279; CEX-277, Congress of Deputies of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 280; CEX-278, Senate of the Italian Republic, XVII Legislature, Assembly, Transcript of Session no. 304; see SoC, ¶¶ 234-237. ↩

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approximately on account of the Spalma-incentivi Decree alone. In this regard, Claimants also rely on the testimony of their witnesses, Mr. Florian and Mr. Blum.⁶¹⁸

612. Claimants reject Respondent's argument that the Spalma-incentivi Decree was necessary due to the increased monetary burden on consumers attributable to the photovoltaic support costs. Claimants further argue that such increased expenditure for the consumers had been foreseen and factored in by Respondent at the time of implementing the Conto Energia regime.⁶¹⁹

613. Claimants disagree that the alleged options offered by Respondent to photovoltaic producers at the time of implementation of the Spalma-incentivi Decree made the enactment of the Decree reasonable or proportional. Claimants also dispute the existence and efficacy of the alleged safeguard measures built in the Spalma-incentivi to assist photovoltaic investors.⁶²⁰

614. With respect to the Italian Constitutional Court Decision No. 16/2017 upholding the legitimacy of the Spalma-incentivi Decree (see Section IV.G(2) above), Claimants contend that the Decision was not a “firm” or conclusive determination of the constitutionality of the Spalma-incentivi Decree. Claimants rely on Professor D'Atena's opinion to contend that the Constitutional Court Decision is a sentenza di rigetto or decision to dismiss, meaning that “Italian judges were not bound to follow it”. Claimants further contend that Respondent's reliance of this Decision was inappropriate as Italian law is not the law governing the present dispute. Similarly, Claimants consider Respondent's assertions regarding the Salva Alcoa Decree being an unexpected benefit for Claimants as being factually and contextually incorrect.⁶²¹

615. Claimants contend that Respondent's reliance on the Blusun v. Italy tribunal's decision is misplaced as that case did not concern the Spalma-incentivi Decree. Rather it concerned the Romani Decree, which, according to Claimants, unlike the Spalma-incentivi Decree,

⁶¹⁸ SoRy, ¶¶ 274-279; C-RPHB, ¶¶ 36-39; see Hr. Tr. Day 2, pp. 5(3)-5(9) (Florian Testimony); Hr. Tr. Day 2, pp. 13(3)-13(18) (Florian Testimony); Florian Second Witness Statement, ¶¶ 14, 16; Hr. Tr. Day 2, pp. 93(19)- 94(19) (Blum Testimony); Hr. Tr. Day 3, pp. 183(11)-183(17) (Dr. Moselle Testimony). ↩

⁶¹⁹ SoRy, ¶¶ 280-303. ↩

⁶²⁰ SoRy, ¶¶ 304-339. ↩

⁶²¹ SoRy, ¶¶ 409-423; see Second D'Atena Opinion, Section 2.1. ↩

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did not abolish incentives for which plant operators had already qualified.⁶²² Similarly, Claimants also attempt to factually distinguish the Antaris v. Czech Republic case.⁶²³

Other Legitimate Expectations and their Frustration by Italy

616. In addition to their alleged expectations regarding the stability and duration of the Conto Energia regime, Claimants challenge the Italian Electrical Energy Authority's Resolution 618/2013 fixing the minimum guaranteed price for 2014 at EUR 38.9/MWh as being violative of Claimants' legitimate expectations (see Section IV.F(2) above). Claimants contend that they had legitimate expectations regarding the availability of minimum guaranteed prices in the off-take regime, based, inter alia, on Resolution 280/2007.⁶²⁴

617. As per Claimants, Resolution 280/2007 had advocated the policy goal of establishing minimum guaranteed prices to ensure the “economic survival” of photovoltaic facilities under 1 MW, notwithstanding market conditions, thereby creating a legitimate expectation for Claimants that the minimum guaranteed prices would remain available and above a certain competitive threshold. Claimants argue that their expectations, in this regard, were also strengthened by the Italian Electrical Energy Authority's practice of fixing the minimum guaranteed price between EUR 72/MWh and EUR 106/MWh for a period of six years. In this regard, Claimants dispute Respondent's assertions that there was a reduction in the operating costs of the plant operator, which justified the reduction of minimum guaranteed prices as being factually incorrect and unproven.⁶²⁵

618. Moreover, Claimants also argue that the imposition of the Administrative Management Fee and the imbalance costs on Claimants' plants constituted another violation of their legitimate expectations, since these costs, in essence, altered the promise of fixed tariffs for twenty years.⁶²⁶

619. Claimants maintain that Respondent's aforementioned measures are invalid under international law. In this regard, Claimants (i) dispute Respondent's argument that the

⁶²² SoRy, ¶¶ 422-427. ↩

⁶²³ C-RPHB, ¶¶ 27-28. ↩

⁶²⁴ SoC, ¶¶ 274-275. ↩

⁶²⁵ SoRy, ¶ 470; see CEX-213/REX-034, AEEG Resolution No. 280/2007. ↩

⁶²⁶ SoRy, ¶¶ 512-515. ↩

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measures were valid in view of the regulatory public policy powers of the State, since such powers are limited by a State's international legal obligations and commitments towards investors; (ii) challenge the relevance of the arbitral decisions relied upon by Respondent in support of its assertion, since in none of those cases did the State make specific promises or commitments to the investors; and (iii) contest Respondent's entitlement to rely on the "necessity" defence under international law.⁶²⁷

(ii) Transparency and Consistency

620. In addition to its arguments relating to legitimate expectations, Claimants contend that Respondent's conduct of (i) retroactively applying an Administrative Management Fee to all photovoltaic plants; (ii) imposing “imbalance costs"; and (iii) “remodulation" of the entire Conto Energia framework with the Spalma-incentivi Decree, was inconsistent with the framework established under the Conto Energia Decrees, which should have governed Claimants' facilities for 20 years. On this basis, Claimants contend that Respondent repeatedly violated its duty to provide transparent and consistent conditions for Claimants' investments in the Respondent State.⁶²⁸

621. Claimants contend that Respondent replaced what was once a stable, transparent regime with uncertainty that undermined the economic predictions that had Claimants made when deciding to invest. According to Claimants, the Spalma-incentivi in particular, made the investment environment in the Respondent State impossible to predict, because investors could no longer rely in future on the legal framework that was to govern their facilities for more than a decade.⁶²⁹

622. Claimants further contend that the drastic reduction of the minimum guaranteed prices to EUR 38.9 EUR/MWh was also inconsistent, in light of the Italian Electrical Energy Authority's past practice (see ¶ 617 above).⁶³⁰

⁶²⁷ SoRy, ¶¶ 340-357. ↩

⁶²⁸ SoC, ¶¶ 281-282. ↩

⁶²⁹ SoC, ¶ 282. ↩

⁶³⁰ SoC, ¶ 283; see CEX-219, AEEG, Press Releases on the minimum guaranteed prices for years 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016. ↩

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(iii) Good faith

623. Claimants contend that Respondent reneged on its commitments to Claimants in bad faith. Claimants argue that Respondent's decision to reap the full benefits of the photovoltaic plants and the energy capacity that Claimants developed and in which they invested, while denying Claimants the full, originally-promised support scheme that induced those investments, was not in good faith. Claimants challenge Respondent's purported political justification for the retroactive “redistribution” of Conto Energia incentives, namely, to bring down the costs of electricity bills for end-consumers, as being in bad faith and an excuse for unilaterally abrogating the support framework or breaching the contracts plant operators had with GSE.⁶³¹

624. In this regard, Claimants contend that several members of parliament, recognized that the Spalma-incentivi Decree was “retroactive, discriminatory, and likely to be challenged as it violates essentially the certainty of international and national law".⁶³² According to Claimants, the Spalma-incentivi Decree, in fact, targeted the photovoltaic sector. Claimants argue that the Spalma-incentivi Decree produced no meaningful savings and, therefore, its alleged end did not justify the means undertaken by Respondent to achieve that end.⁶³³ Claimants further contend that the imposition of the Administrative Management Fee and the imbalance costs was also in bad faith.⁶³⁴

(2) Respondent's Position

a. The Legal Standard

625. Respondent contends that Article 10(1) of the ECT does not define FET and, therefore, reliance must be placed on customary law principles to determine the meaning and scope of the FET standard under the ECT. Respondent contends that the meaning of FET under the ECT is to be derived from the practices developed in the field of international treatment of foreign investments and from the application of general principles of international law.

⁶³¹ SoC, ¶¶ 288-289. ↩

⁶³² SoC, ¶¶ 290-291. ↩

⁶³³ SoRy, ¶ 375. ↩

⁶³⁴ SoC, ¶¶ 292-293, 515. ↩

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According to Respondent, the FET standard should be understood as a sort of general clause, having a composite meaning and operating in continuous evolution, according to general principles such as good faith and proportionality.⁶³⁵

626. Further, as per Respondent, only manifestly unfair, unreasonable or inequitable regulatory modifications can create a breach of the FET standard, such that these regulatory modifications cause a disruptive change to the investments.⁶³⁶

(i) Legitimate Expectations

627. Respondent agrees with Claimants that the protection of legitimate expectations of an investor is an element of the host State's FET obligation. However, it disputes the "latitude and scope" of legitimate expectations proposed by Claimants.⁶³⁷

628. Respondent emphasizes that the legitimacy of the investors' expectations is the qualifying condition for protection to be offered under the FET standard. According to Respondent, the legitimacy of investors' expectations must be assessed by taking into account and balancing the positions of, both, the foreign investor and the host State, by giving due relevance to the right of States to enact their legislations pursuant to their regulatory powers.⁶³⁸

629. Respondent's position is that this consideration of the overall circumstances implies that the FET standard under Article 10(1) ECT cannot be equated to a stabilization or freezing clause. In this connection, Respondent relies, inter alia, on the arbitral tribunal decisions in Plama v. Bulgaria, Electrabel v. Hungary, Charanne v. Spain, Antaris v. Czech Republic,

⁶³⁵ SoD, ¶¶ 497-498; relying on CL-92, Amoco International Finance vs. Iran, Iran-US Claim Tribunal Award; RLA-007, ICJ Judgment in the ELSI case (case concerning Electronica Sicula S.p. A. (ELSI) – United States of America v. Italy, 20 July 1989, § 50. ↩

⁶³⁶ SoD, ¶¶ 526-528; R-SoRj, ¶¶ 42-53; R-PHB, ¶¶ 76, 161-162; relying on CL-58, Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/08, Award, September 11, 2007, ¶ 332; CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 362-365; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶ 654; CL-4, Charanne BV and Construction Investments v. Spain, SCC Case No. 062/2012, ¶ 503; CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, Final Award, 27 December 2016; CL-195, Belenergia S.A. v. Italy, ICSID Case No. ARB/15/40, Award; CL-118, JSW Solar (zwei) GmbH & Co. KG v. Czech Republic, PCA Case No. 2014-03, Final Award, ¶ 469. ↩

⁶³⁷ SoD, ¶ 499. ↩

⁶³⁸ SoD, ¶¶ 506-511. ↩

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Blusun v. Italy and Belenergia v. Italy, which according to Respondent, confirm that the legal standard for legitimate expectations may not be interpreted as requiring the host State to freeze its regulatory activity. Instead, it requires tribunals to take into account factors such as reasonableness, proportionality and public interest while making its determinations of investors' legitimate expectations. In support of this proposition, Respondent also relies on Italian law, specifically the Constitutional Court Decision No. 16/2017.⁶³⁹

630. Amongst the various factors to be considered, Respondent also emphasises the importance of due diligence to be conducted by prudent investors before investing in any regime that is prone to regulatory changes, which the Italian renewable energy market allegedly was.⁶⁴⁰

631. Another factor that Respondent highlights is the timing of the investment in consideration. With respect to the investors' expectations, Respondent contends that the protection offered under the FET standard is limited to those expectations of the investors that existed at the time when they made their investment. In this regard, the relevant time of making of the investment, in Respondent's view, is when the investor acquired the relevant assets or a controlling stake thereof.⁶⁴¹

632. Further, it is Respondent's position that in the absence of a specific commitment to investors such as a stabilization clause, changes to regulatory framework established by means of general legislation do not qualify as a breach of legitimate expectations. Along these lines, Respondent attempts to distinguish the Spanish laws that promised incentives to investors from the Italian regime in this regard, since the former contained stabilization

⁶³⁹ SoD, ¶¶ 513-525; R-SoRj, ¶¶ 376-379, 386-388; Hr. Tr. Day 1, pp. 217:20-219:17; Hr. Tr. Day 4, pp. 228:4- 229:25; Respondent's Brief Comments on the Belenergia Award and its Consequence on this Case, 13 September 2019, ¶¶ 5-9; relying on CL-82, Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, Award; CL- 9, Electrabel S.A. v. Republic of Hungary (ICSID Case No. ARB/07/19), Award, ¶ 219; CL-53, Saluka Investments BV v. Czech Republic, UNCITRAL-PCA, Partial Award, ¶ 305; CL-58, Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/08, Award, September 11, 2007, ¶ 332; CL-4, Charanne BV and Construction Investments v. Spain, SCC Case No. 062/2012, ¶ 503; CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, Final Award, 27 December 2016; CL-195, Belenergia S.A. v. Italy, ICSID Case No. ARB/15/40, Award; REX-032, Italian Constitutional Court Decision No. 16/2017 of 7 December 2016. ↩

⁶⁴⁰ Hr. Tr. Day 4, pp. 234:13-235:18; R-PHB, ¶¶ 81-89; relying, inter alia, on CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, ¶ 494. ↩

⁶⁴¹ SoD, ¶ 507; R-SoRj, ¶ 373; Hr. Tr. Day 4, pp. 230:1-230:10; R-PHB, ¶¶ 96-97, 170; R-RPHB, ¶¶ 50-57; relying on RLA-18, CEF Energia B.V. v. Italy, SCC Arbitration No. 2015/158, Award, ¶¶ 186-189; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶ 686. ↩

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clauses and also, on certain occasions, involved specific assurances given by Spanish authorities in discussions or meetings held with investors.⁶⁴²

633. Moreover, while Respondent acknowledges that a State's regulatory powers cannot protect any and all modifications made by the State to its legal regime, according to Respondent, such regulatory powers do preserve a State's authority to fairly, equitably and reasonably modify its legislative regimes.⁶⁴³

(ii) Transparency and Consistency

634. Respondent disputes that a State's duty to assure transparency and/or consistency is an autonomous obligation of the host State under its FET obligations. For Respondent, the State's duty to maintain stability and/or consistency forms a part of its duty to protect the legitimate expectations of the investor, whereas the State's duty to maintain transparency is part of the general standard of FET. Accordingly, Respondent disputes that there is a relation between consistency and transparency, on the basis of which Claimants have put forth an autonomous argument under the FET standard. According to Respondent, the case law relied upon by Claimants does not support their assertions in this regard.⁶⁴⁴

(iii) Good Faith

635. Respondent disagrees with Claimants that good faith constitutes an autonomous category of a State's FET obligations. For Respondent, the principle of good faith along with the principle of proportionality, are essential to correctly interpret and apply the FET standard and are not autonomous categories of the FET standard.⁶⁴⁵

636. According to Respondent, the very concept of "fairness" that qualifies FET is an expression of good faith. Further, “reasonableness” as a parameter to assess the legitimacy

⁶⁴² SoD, ¶¶ 585-595; R-PHB, ¶¶ 61-63, 90-93, 148-149; relying on CL-114/RLA-011, Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award, Dec. 27, 2016, ¶ 372; CL-168, Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award. ↩

⁶⁴³ SoD, ¶¶ 526-528; R-SoRj, ¶¶ 380-387; Hr. Tr. Day 4, pp. 2217:19-228:9; R-PHB, ¶¶ 76, 161-162; relying on CL-58, Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/08, Award, September 11, 2007, ¶ 332; CL-117, Eiser Infrastructure Ltd. and Energia Solar Luxembourg S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, May 4, 2017, ¶¶ 362-365; CL-119, Novenergia II – Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Arb. 2015/063, Final Award, Feb. 15, 2018, ¶ 654. ↩

⁶⁴⁴ SoD, ¶¶ 500-502, 648-658; R- SoRj, ¶¶ 390-391. ↩

⁶⁴⁵ SoD, ¶ 503; R-SoRj, ¶ 392. ↩

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of the host State's conduct is in turn a fundamental expression of good faith. On this basis, Respondent contends that good faith cannot be considered as an autonomous obligation under the FET standard, distinct from a State's other obligations under FET standard.⁶⁴⁶

b. Italy's Alleged Breach of the FET Standard

(i) Legitimate Expectations

637. Respondent disputes that Claimants could have any legitimate expectations based on the overall legal regime in Italy, and in particular the Conto Energia Decrees or the GSE letters and contracts that followed.

Lack of any Basis for Claimants' Legitimate Expectations

638. At the outset, Respondent disputes that the GSE contracts relied upon by Claimants, can constitute a basis for Claimants' FET claims. In the alternative to its jurisdictional and/or inadmissibility objection in this regard (see Section VII.C(2)b above), Respondent contends that the nature of the GSE contracts precludes it from forming a basis for Claimants' alleged legitimate expectations. According to Respondent, the GSE contracts are “accessory contracts” to public acts. GSE did not have any autonomy in signing those contracts as their essential elements were pre-determined by regulatory acts, specifically the applicable Conto Energia Decrees. GSE was only administering the implementation of these legislative mechanisms and had a purely executory role, and despite being a public limited company was a body governed by public law. In support of this contention, Respondent also submits that the incentives being disbursed by GSE did not originate from money owed by GSE, but instead originated from public funds, specifically the A3 component of the consumers' electricity bills (see ¶ 165 above). Thus, Respondent contends that such contracts entered into by GSE for broader public interest, in themselves, cannot form the basis of the investors' legitimate expectations as their role was exclusively to support and confirm what has resulted from the Italy's public acts, and to regulate the modalities of these legislative acts.⁶⁴⁷

⁶⁴⁶ SoD, ¶¶ 664-665. ↩

⁶⁴⁷ SoD, ¶¶ 535-536; R-PHB, ¶¶ 107-129; Respondent's Brief Comments on the Belenergia Award and its Consequence on this Case, 13 September 2019, ¶¶ 20-27; relying on CEX-30, AEEG Resolution no. 188/05, 14 ↩

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639. Regarding Claimants' other alleged bases for their legitimate expectations, namely, (i) the overall legal environment in Italy supporting the photovoltaic sector; (ii) public statements by politicians and authorities in the Respondent State regarding Respondent's policy goals; and (iii) Conta Energia Decrees, Respondent contends that these factors, at best, could only create a reasonable expectation of stability of the system as a whole, and of the fact that specific measures would be apt always to guarantee a “fair return". Respondent, however, disputes that Claimants could have a legitimate expectation that the specific incentives granted by Respondent would be ironclad (in the nature of a stabilization clause).⁶⁴⁸

640. In this regard, Respondent contends that the Conto Energia Decrees were secondary rules, which were to be interpreted and applied according to the principles and standards set forth in the “hierarchically superordinate" Legislative Decrees 387/2003 (see ¶¶ 112-116 above) and the Romani Decree (see ¶¶ 147-152 above), and the EC Directives they implemented.⁶⁴⁹

641. Along the same lines, Italy also highlights the lack of any specific assurances given to Claimants, the absence of any specific discussions with Claimants or their SPVs and the fact that the entire incentive tariffs regime was directed towards investors in general, and not towards specific investors. Thus, Respondent disputes Claimants' reliance on the public statements and presentations made by the Italian authorities, since they were only intended to repeat what was already mentioned in the Conto Energia Decrees.⁶⁵⁰

The Relevant Point in Time to examine Claimants' alleged Legitimate Expectations

642. Respondent submits that the point in time in reference to which the existence of Claimants' alleged legitimate expectations should be examined is the time of making the investment. In the present case, that point in time, in Respondent's view, is when the investor acquired

September 2005; REX-032, Italian Constitutional Court Decision No. 16/2017, 7 December 2016; REX-064, Italian Court of Cassation Order No. 10795/2017, 11 April 2017; RLA-018, CEF v. Italian Republic, SCC Arbitration V (2015/158), 16 January 2019, ¶¶ 254-255; relying on CL-195, Belenergia S.A. v. Italy, ICSID Case No. ARB/15/40, Award, ¶¶ 579-580; Hr. Tr. Day 2, pp. 204:5-204-13 (Bacchiocchi Testimony); Hr. Tr. Day 3, pp. 21:10-21:20 (Miraglia Testimony); Hr. Tr. Day 3, pp. 93:10-93:12 (D'Atena Testimony).

⁶⁴⁸ SoD, ¶¶ 538-539; R-PHB, ¶ 16. ↩

⁶⁴⁹ SoD, ¶¶ 564-565; R-PHB, ¶ 70. ↩

⁶⁵⁰ R-PHB, ¶¶ 71-73. ↩

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the relevant assets or a controlling stake thereof, which for Claimants happened when they invested 80% of their money upfront.⁶⁵¹

643. Accordingly, Respondent disputes the existence of any of Claimants' alleged legitimate expectations on the basis of the GSE tariff confirmation letters and/or the GSE contracts, since for eight out of the nine power plants Claimants had made the majority of their investments prior to receiving these letters and/or contracts from GSE. Thus, Claimants could not rely upon these letters and/or contracts for their alleged legitimate expectations while investing in the Italian renewable energy market. For the only photovoltaic plant wherein Claimants invested after having received the GSE tariff confirmation letter, i.e., Fiumicino, Respondent argues that the said letter was only an administrative letter that could not by itself create any guarantee of non-modifiability of tariffs.⁶⁵²

Claimants' Legitimate Expectations were not frustrated by Italy's Subsequent Conduct

644. Under the assumption that Claimants did have any legitimate expectations, Respondent also makes the following arguments to submit that none of the Italian measures in issue breached or violated such legitimate expectations:

645. Administrative Management Fee: For the Administrative Management Fee, Respondent submits that the same did not affect Claimants' expectations regarding the subsistence of the Conto Energia regime. Rather, according to Respondent, the scope and ratio of such measure was completely outside Claimants' alleged expectations regarding the payment of Conto Energia tariffs.⁶⁵³