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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

LSG BUILDING SOLUTIONS GMBH, GREEN SOURCE CONSULTING GMBH,
SOLLUCE ROMANIA 1 B.V., RISEN ENERGY SOLAR PROJECT GMBH,
CORE VALUE INVESTMENTS GMBH & CO. KG GAMMA,
CORE VALUE CAPITAL GMBH, SC LJG GREEN SOURCE ENERGY BETA S.R.L.,
ANINA PRO INVEST LTD., GIUST LTD., AND PRESSBURG UK GMBH

Claimants

and

ROMANIA

Respondent

ICSID CASE NO. ARB/18/19

DECISION ON JURISDICTION, LIABILITY AND PRINCIPLES OF
REPARATION

Members of the Tribunal
Prof. Juan Fernández-Armesto, President of the Tribunal
Judge O. Thomas Johnson, Jr., Arbitrator
Prof. Dr. Pierre-Marie Dupuy, Arbitrator

Secretary of the Tribunal
Ms. Aïssatou Diop

Assistant to the Tribunal
Ms. Sofia de Sampaio Jalles

Date of dispatch to the Parties: 11 July 2022

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REPRESENTATION OF THE PARTIES

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GLOSSARY OF TERMS AND ABBREVIATIONS

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LIST OF CASES

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I. INTRODUCTION

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes [“ICSID” or the “Centre”] on the basis of the Energy Charter Treaty which entered into force on 16 April 1998 [the “ECT” or “Treaty”] and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 [the “ICSID Convention”].

1. THE PARTIES

2. The claimants consist in four companies incorporated under the laws of Austria: LSG Building Solutions GmbH [“LSG”], Green Source Consulting GmbH [“Green Source”], Core Value Investments GmbH & Co. KG Gamma [“CVI”] and Core Value Capital GmbH [“CVC”]; two companies incorporated under the laws of Cyprus: Anina Pro Invest Ltd. [“Anina”] and Giust Ltd. [“Giust”]; two companies incorporated under the laws of Germany: Risen Energy Solar Project GmbH [“Risen”] and Pressburg UK GmbH [“Pressburg”]; one company incorporated under the laws of Netherlands: Solluce Romania 1 B.V. [“Solluce”]; and one company incorporated under the laws of Romania: SC LJG Green Source Energy BETA S.R.L [“Beta”] [together, the “Claimants”].

3. The Respondent is Romania.

4. Claimants and Respondent are collectively referred to as the “Parties”. The Parties' representatives and their addresses are listed above on page (ii) supra.

2. THE DISPUTE

5. The dispute arose from allegations of an alteration and discontinuation by Respondent of an incentive scheme that it had put in place to encourage renewable energy production and induce Claimants to invest in the Romanian renewable energy sector. According to Claimants, the measures allegedly were unlawful and led to the destruction of Claimants' investments in Romania, in violation of Part III of the ECT, in particular Art. 10, which protects Claimants and their investments. As a consequence, the Claimants request full compensation for damages caused by Romania's supposed breaches.

6. Respondent argues that the Tribunal lacks jurisdiction over the dispute and over some of the Claimants. Respondent contends that, in any event, Romania has not breached its obligations under the ECT, and Claimants are not entitled to damages.

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II. PROCEDURAL HISTORY

1. REQUEST FOR ARBITRATION

7. On 23 May 2018, ICSID received a Request for Arbitration from Claimants against Respondent [the "Request"].

8. On June 12, 2018, the Secretary-General of ICSID registered the Request in accordance with Art. 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.

2. CONSTITUTION OF THE ARBITRAL TRIBUNAL

9. The Parties agreed to constitute the Tribunal in accordance with Art. 37(2)(a) of the ICSID Convention as follows: the Tribunal would consist of three arbitrators, one arbitrator to be appointed by each Party and the third, presiding arbitrator to be appointed by agreement of the two co-arbitrators in consultation with the Parties.

10. The Tribunal is composed of:

- Professor Juan Fernández-Armesto, a national of the Kingdom of Spain, President, appointed by the co-Arbitrators in consultation with the Parties;

- Judge O. Thomas Johnson, a national of the United States, appointed by Claimants; and

- Professor Dr. Pierre-Marie Dupuy, a national of the French Republic, appointed by Respondent.

11. On 24 January 2019, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings [the “Arbitration Rules"], notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. Ms. Aïssatou Diop, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.

3. FIRST SESSION

12. In accordance with ICSID Arbitration Rule 13(1), the Tribunal held its first session with the Parties on 18 March 2019 by telephone conference.

13. Following the first session, on 28 March 2019, the Tribunal issued Procedural Order [“PO”] No. 1 recording the agreement of the Parties on procedural matters and decisions of the Tribunal on disputed issues. Procedural Order No. 1 sets out the agreed procedural schedule and provides, inter alia, that:

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- The applicable Arbitration Rules would be those in effect from 10 April 2006;

- The procedural language would be English; and

- The place of proceeding would be Paris.

4. EUROPEAN COMMISSION APPLICATION

14. On 5 February 2019, the European Commission [“EC” or “Commission”] filed an application for leave to intervene in the proceeding to address the legal consequences of the Court of Justice of the European Union's [“CJEU”] Achmea Judgment and the Declaration signed by 22 European Union [“EU”] Member States on 15 January 2019, as they relate to this Tribunal's jurisdiction under the ECT. Specifically, the EC requested leave to file an amicus curiae submission, have access to the case file to the extent necessary for its intervention, attend hearings, and present oral arguments, should the Tribunal and the Parties deem that useful [the "NDP Application"].

15. In accordance with the timetable annexed to Procedural Order No. 1, each party filed observations on the NDP Application on 19 April 2019. Claimants opposed the EC's requests but conceded that in the event that the Tribunal decided to allow it, the EC's intervention should be limited, and security posted by the EC for additional costs incidental to its intervention. Respondent supported the EC's requests and asked that the Tribunal grant the EC ample access to the proceeding.

16. On 13 May 2019, the Tribunal issued its Decision on the EC's Application in the form of Procedural Order No. 2, granting the Commission's request to file a written submission as an NDP in accordance with Arbitration Rule 37(2) on the EU law issues on 24 January 2020, if the proceeding was not bifurcated, or on 27 December 2019, if the proceeding was bifurcated. Additionally, the Tribunal:

- Rejected the EC's request to access the case file, subject to the possibility of requesting specific documents;

- Postponed its decision on the EC's request to attend and present oral arguments at the hearing; and

- Rejected pro tem the Claimants' request to order the EC to bear the costs associated with its intervention in the proceeding.

17. Accordingly, as the proceeding was not bifurcated (see paragraph 21 infra), on 24 January 2020, the Commission filed an amicus curiae submission [“Amicus Curiae Brief"], together with annexes EC-1 to EC-24, inviting the Tribunal to decline jurisdiction.

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5. MAIN SUBMISSIONS

A. Claimants' Memorial

18. In accordance with the procedural calendar, as amended on 15 July 2019, Claimants filed their Memorial on the Merits on 25 July 2019 [“C-I”], together with:

- The Witness Statement of Mr. Rolf Theuer [“Theuer I"], the Witness Statement of Ms. Anna Hofmann [“Hofmann”], the Witness Statement of Mr. Gerhard Lipkovich [“Lipkovich I"], the Witness Statement of Mr. HyungHoon Lim [“Lim”] and the Witness Statement of Mr. Ferry Tahan ["Tahan"];

- The Expert Report of Dr. Fabien Roques of Compass Lexecon [“Roques I"] and the Expert Report of Mr. Richard Edwards of FTI Consulting ["Edwards I"];

- Exhibits C-32 to C-293; and

- Legal Authorities CL-52 to C-129.

B. Request for Bifurcation

19. In accordance with the procedural calendar annexed to Procedural Order No. 1, Respondent filed a Request for Bifurcation on 14 August 2019, together with Legal Authorities RL-14 through RL-35, regarding three objections: an EU Law Objection, a multi-party objection and a nationality objection.

20. Claimants filed a Response to the Request for Bifurcation on 11 September 2019, together with Exhibit C-294 and Legal Authorities CL-130 through CL-170.

21. On 16 September 2019, the Tribunal decided that a hearing on bifurcation would not be necessary and vacated the hearing day reserved for that purpose. The Tribunal issued its Decision on Bifurcation in the form of Procedural Order No. 3 on 9 October 2019. The Tribunal decided not to grant the Request for Bifurcation in the interest of procedural economy and efficiency. Simultaneously, the Tribunal issued an amended procedural calendar.

C. Respondent's Counter-Memorial

22. In accordance with the procedural calendar, as revised on 4 February 2020, Respondent filed its Counter-Memorial on the Merits and Memorial on Jurisdiction on 22 February 2020 [“R-I”], together with:

- The Witness Statement of Ms. Maria Manicuta [“Manicuta I”], the Witness Statement of Mr. Viorel Alicus [“Alicus”];

- The Expert Report of Mr. Wynne Jones of Frontier Economics [“Jones I"] with exhibits WJ-1 to WJ-55, the Expert Report of Dr. Daniel Flores of Quadrant Economics [“Flores I"] with exhibits QE-1 to QE-38;

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- Exhibits R-1 to R27; and

- Legal Authorities RL-36 to RL-224.

D. Document production

23. The Parties exchanged document production requests [“DPRs”] in accordance with the procedure set forth in Procedural Order No. 1. Subsequently, each Party submitted its responses and objections to the other Party's DPS. This was followed by each Party submitting its reply to the other Party's objections and application to the Tribunal to decide on contested DPS. On 21 April 2020, the Tribunal issued Procedural Order No. 4, deciding each Party's DPRs.

Ε. Claimants' Reply

24. In accordance with the procedural calendar, as amended on 22 June 2020, Claimants filed a Reply on the Merits and Counter-Memorial on Jurisdiction on 3 July 2020 [“C-II"], together with:

- The Second Witness Statement of Mr. Gerhard Lipkovich [“Lipkovich II"] and the Second Witness Statement of Mr. Rolf Theuer [“Theuer II”];

- The Second Expert Report of Dr. Fabien Roques of Compass Lexecon [“Roques II"] with annexes FR-104 to FR-159 and the Second Expert Report of Mr. Richard Edwards of FTI Consulting [“Edwards II”] with appendices 4b, 5 to 9 and annexes RE-198 to RE-237;

- Exhibits C-295 to C-312; and

- Legal Authorities CL-171 to CL-240.

F. Respondent's Rejoinder

25. On 30 October 2020, Respondent filed a Reply on Jurisdiction and Rejoinder on the Merits ["R-II”], together with:

- The Second Witness Statement of Ms. Maria Manicuta [“Manicuta II”];

- The Second Expert Report of Mr. Wynne Jones [“Jones II"] with exhibits WJ-56 to WJ-113 and the Second Expert Report of Dr. Daniel Flores ["Flores II"] with exhibits QE-39 to QE-86;

- Exhibits R-28 to R-48; and

- Legal Authorities RL-225 to RL-312.

G. Claimants' Rejoinder

26. On 21 December 2020, Claimants filed a Rejoinder on Jurisdiction [“C-III”] together with Exhibits C-313 to C-316 and Legal Authorities CL-241 to CL-251.

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6. HEARING

27. In advance of the hearing, the Tribunal held a pre-hearing organizational meeting and, on 27 January 2021, issued Procedural Order No. 5 concerning the organization of the hearing.

28. A hearing on jurisdiction and the merits was held remotely by Zoom from 15 to 23 February 2021 [the “Hearing"]. In addition to the Members of the Tribunal the Secretary of the Tribunal and the Assistant to the Tribunal, the following persons participated in the Hearing:

29. During the Hearing, the following persons were examined:

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7. POST-HEARING PHASE

30. Following the Hearing, the Tribunal issued Procedural Order No. 6 on 2 March 2021 regarding the post-Hearing phase of the arbitration.

31. In accordance with P.O. No. 6, Claimants and Respondent filed simultaneous post-hearing briefs on 31 May 2021 [“C-PHB” and “R-PHB”, respectively], and simultaneous submissions on costs on 30 June 2021.

8. KOMSTROY SUBMISSIONS

32. On 3 September 2021, Romania requested that the Tribunal authorize the submission of a new exhibit to the record: the Judgment of the CJEU in case C-741/19, Republic of Moldova v. Komstroy [“Komstroy Judgment”]. On 10 September 2021, Claimants opposed Romania's request.

33. On 20 September 2021, the Tribunal decided to admit the Komstroy Judgment into the record and granted the Parties an opportunity to provide comments regarding the Komstroy Judgment.

34. Accordingly, Romania filed its comments on 12 October 2021 [“R-Komstroy”] and Claimants on 12 November 2021 [“C-Komstroy”].

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III. FACTS

35. The general background of this case is not disputed by the Parties: as part of its international commitments to reduce greenhouse gas emissions, Romania created a support scheme for investments in the production of electricity from renewable energy sources based on the award of tradable "green certificates” [“Green Certificates” or “GC”]. Claimants are ten project developers, who invested in five solar photovoltaic [or “PV”] plants in the south of Romania between 2011 and 2013 and benefitted from the GC support scheme.

36. The dispute between the Parties revolves around the changes enacted by Romania to its GC support scheme first in 2013-2014 and later between 2017-2018.

37. Claimants allege that they were induced to invest in Romania on the basis of specific guarantees contained in Romania's GC program, which ensured a certain revenue for Claimants' PV plants for 15 years. And that from mid-2013 to 2018, Romania changed the “rules of the game" and took a series of harmful measures that had a devastating impact on the value of Claimants' investments, in violation of Romania's obligations under the ECT¹.

38. Romania, on the other hand, denies that it ever induced Claimants to invest on the guarantee that its support scheme would not be amended. Romania claims that considering the disproportion between the high level of support afforded to solar PV investments and the drop in the actual cost of such investments, Claimants should have expected that Romania would intervene to rebalance the support scheme. Romania submits that the measures it adopted were proportionate, reasonable, and addressed legitimate public policy concerns².

39. In the following sections, the Tribunal will first explain why Romania decided to implement a scheme to support renewable energies (1.) and the main features of this scheme prior to 2013 (2.). The Tribunal will then outline Claimants' investments in Romania (3.). Thereafter, the Tribunal will describe the measures adopted by Romania in 2013 and 2014 (4.), and briefly mention the relevant events of 2015-2016 (5.). Lastly, the Tribunal will turn to the measures adopted by Romania in 2017 and 2018 (6.).

1. BACKGROUND TO THE ROMANIAN RES SUPPORT SCHEME

40. Romania is located at the crossroads of central, eastern, and southern Europe.

41. From 1948 to 1989, Romania was under Communist rule. After ousting Nicolae Ceauşescu, in 1990 Romania held free elections and started its transition to a democracy and market-based economy³. Around that same time, Romania began efforts to join the European Union [“EU”] and formally applied for membership on

¹ C-I, paras. 13-15; C-PHB, paras. 2-6.
² R-II, para. 13.
³ C-I, para. 60; Doc. C-33, p. 3.

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22 June 1995⁴. In preparation for its accession, Romania implemented a series of reforms⁵, including with regards to its energy policy⁶.

42. The turn of the 21st century was accompanied by an increased concern for climate change, an issue that started to be placed on the political agendas. Greenhouse gas emissions – which are primarily generated by burning fossil fuels (e.g., coal, oil, natural gas, etc.) to produce energy in power plants, cars, or homes – came to be seen as one of the main drivers of climate change⁷. The fight to reduce greenhouse gas emissions thus gained momentum among the international community⁸.

A. The Kyoto Protocol

43. The first important development came with the Kyoto Protocol to the United Nations Framework Convention on Climate Change [the “Kyoto Protocol”], an international treaty that imposes national targets to reduce greenhouse gas emissions⁹, which Romania signed and ratified¹⁰ in 1999 and 2001, respectively.

44. The Kyoto Protocol provides, inter alia, that States parties to the Protocol must “implement and/or further elaborate policies and measures” such as “[r]esearch on, and promotion, development and increased use of, new and renewable forms of energy"¹¹. This is because renewable sources of energy [or “RES"] (e.g., wind, solar, geothermal, or biomass) generate much lower levels of greenhouse gas than fossil fuels.

B. The 2001 Directive

45. The EU quickly followed-through and in 2001 issued Directive 2001/77/EC “on the promotion of electricity produced from renewable energy sources in the internal electricity market” [the “2001 Directive”], pursuant to which it recognized the need to promote RES to comply with the Kyoto Protocol and to protect the environment¹².

46. EU Member States were required to transpose the provisions of this Directive by 2003 and to encourage greater consumption of electricity from renewable energy sources [or "RES-E"]¹³. The Directive further instructed Member States to establish national indicative RES targets in terms of a percentage of electricity consumption for the next 10 years and set out an indicative target of a 12% share of RES in the EU's gross energy consumption by 2010¹⁴.

⁴ Doc. C-53.
⁵ Doc. C-54, pp. 121-124.
⁶ Doc. C-54, pp. 80-83; Doc. C-64, p. 3.
⁷ Roques I, paras. 3.2-3.3; Jones I, paras. 2.5.b, 3.2-3.3.
⁸ Roques I, paras. 3.7-3.9.
⁹ Doc. C-55, Art. 3.1.
¹⁰ Doc. C-56; Doc. C-57.
¹¹ Doc. C-55, Art. 2.1(a)(iv); Doc. C-57, Art. 2.
¹² Doc. C- 59/FR-15, Recitals 1 and 3.
¹³ Doc. C-59/FR-15, Arts. 3.1 and 9.
¹⁴ Doc. C-59/FR-15, Art. 3.

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47. Furthermore, although EU State aid rules remained applicable, the Directive recognized the possibility for Member States to implement support schemes to encourage investments in RES-E¹⁵.

C. Romania's efforts to comply with the 2001 Directive

48. Following the adoption of the 2001 Directive, all EU Member States took steps to promote RES-E¹⁶. Even though the 2001 Directive was not binding upon it, Romania also adopted a series of measures to align itself with the European renewable energy targets¹⁷.

49. Historically, Romania had covered its energy needs through the domestic production of coal, oil, and gas¹⁸. Production of energy from renewable sources, other than hydropower (which was widespread), was practically inexistent until 2008¹⁹:

Structure of power generation in 2004 – 2011
(MW)

50. Thus, in April 2003, Romania passed Government Decision [“GD"] 443/2003 regarding the promotion of electricity generated from renewable sources of energy²⁰, transposing the 2001 Directive. Romania set out to achieve by 2010:

- A 30% share of RES-E on the national gross consumption of electricity, and

- An 11% share of RES-E on the national gross consumption of energy.

51. Only a few months later, Romania issued GD 890/2003 approving an “Energy Roadmap", which foresaw that Romania's energy development would pass by the large-scale use of RES²¹.

¹⁵ Doc. C-59/FR-15, Recital 12 and Art. 4.
¹⁶ Roques I, para. 3.24.
¹⁷ In a report of that same year regarding “Romania's progress towards accession”, the EU noted that “[w]hile Romania has achieved a certain level of alignment further progress is still needed. The national authorities should now focus on [...] improved energy efficiency; the greater use of renewable energy [...]." (Doc. C-54, pp. 83-84).
¹⁸ C-I, para. 62; Doc. C-33, p. 8.
¹⁹ Doc. C-33, p. 8; Roques I, para. 3.28.
²⁰ Doc. C-60.
²¹ Doc. C-74, p. 2.

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52. By the end of 2003, Romania issued GD 1535/2003, adopting a Strategy for Promoting Renewable Energy Sources²². Romania reiterated its commitment to reach a share of 30% of RES-E on the national gross consumption of electricity, and an 11% share of RES-E in the total consumption of energy. In addition, Romania set as general objectives²³:

"- promoting the private investments and creating the conditions to facilitate the access of the foreign capital on the market of the renewable energy sources; [...]

- creating the conditions for Romanian participation to the European market of "Green Certificates” for the energy from renewable sources."

53. Accordingly, in November 2004, Romania adopted GD 1892/2004, which established the first system for promoting the production of RES-E through a mandatory quota system²⁴ combined with the trading of Green Certificates²⁵ – which will be analyzed in further detail in section 2 infra.

2007 access to the EU

54. When in January 2007 Romania finally acceded to the EU, it became bound by the 2001 Directive and formally undertook to reach a 33% (and no longer a 30%) share of RES-E in the national gross consumption of electricity by 2010²⁶.

55. Yet, by 2008, there were only 23 RES producers in Romania and there was no installed photovoltaic capacity whatsoever²⁷ – making such target ambitious to achieve²⁸.

D. RES support schemes

a. The need for support schemes

56. In the first decade of the 21st century the technology behind renewable sources of energy, other than hydro-electric power²⁹, was incipient. The upfront costs of investing in renewable energy solar or wind plants were considerably higher than those of conventional energy plants³⁰. This fact, coupled with technological

²² Doc. C-61, p. 5.
²³ Doc. C-61, p. 14.
²⁴ Defined as “a mechanism to promote the production of electricity from renewable energy sources through the purchase by the suppliers of mandatory electricity quotas produced from these sources for sale to consumers in the country. The amount of electricity purchased is proven on the basis of the green certificates purchased." (Doc. С-76, р. 1).
²⁵ Doc. C-76, Arts. 1 and 3. See also Doc. C-75, p. 8.
²⁶ Doc. C-62, p. 2.
²⁷ Doc. C-78, slides 9 and 12; C-I, para. 12.
²⁸ Roques II, Figure 1.
²⁹ See Jones I, paras. 2.5.g.i, 3.5 and 3.11.
³⁰ Roques I, paras. 2.11 and 4.5-4.9; Doc. C-74, p. 5; CD-2, slide 5. See also Doc. C-64, p. 5.

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limitations and the reliance on natural elements, did not make renewable energy attractive to investors³¹.

57. Therefore, when the EU passed the 2001 Directive it recognized that renewable energy producers would have difficulties competing against conventional energy generators and would need incentives to enter the market³². This required State intervention through the creation of support schemes for producers of RES³³. As explained by Claimants' regulatory expert, Dr. Roques³⁴:

"The renewable support schemes implemented in Europe generally consisted in ensuring that renewable producers receive remuneration above the electricity market price which would attract investment and help achieving the RES development targets underlying such schemes."

58. The objective of RES support schemes is to achieve the required RES deployment – to meet RES targets – at a minimum cost. The European Commission assesses support schemes using two main criteria³⁵:

- Effectiveness: the ability of the support scheme to deliver an increased share of consumed RES-E, through increased deployment of RES-E; and

- Efficiency: the comparison between the level of support and the production cost; in other words, the extent to which the support scheme achieves deployment of RES-E at a minimum cost for consumers.

59. Given that the EU has granted its Member States broad discretion on how to reach their RES targets, support schemes have varied throughout Europe³⁶. There are broadly four categories of incentives³⁷:

- Price-based market instruments, which include feed-in tariffs [“FiT”] and price premia [“FiP”]; in the case of FiT, the RES producer receives a fixed price for the production of electricity, which is defined ex ante and applies over a predetermined period, irrespective of the price of electricity on the wholesale market; in the case of FiP, the RES producer receives the wholesale market price plus a premium that is defined ex ante;

- Quantity-based market instruments, which contrary to price-based incentives, ensure a set volume of RES consumption over a period, instead of a RES production price; this is the case of Green Certificates (GC) that are awarded to producers of RES-E and which electricity suppliers are obligated to purchase;

³¹ Roques I, para. 2.11; Doc. C-64, p. 6.
³² Doc. C-59/FR-15, Recitals 12-19; Roques I, para. 4.5.
³³ Jones I, paras. 2.5.d and 3.11; RD-2, slide 4.
³⁴ Roques I, paras. 2.16 and 4.35.
³⁵ Doc. FR-28, pp. 8-9; Roques I, para. 4.7; Jones I, para. 3.36.
³⁶ Roques I, para. 4.35; Jones I, para. 3.32.
³⁷ Roques I, para. 2.16; Jones I, paras. 2.5.e and 3.12 et seq; Doc. C-75, p. 6; Doc. FR-28, pp. 4-5. See also Doc. C-59, Recital 14.

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- Investment subsidies, such as soft loans, grants, etc.; and

- Fiscal incentives, including tax rebates, levies on non-renewable sources, etc.

60. In a 2008 report on the RES-E support schemes throughout the EU, the Commission noted that there were 27 different national support schemes. The majority of EU Member States (including Spain, Italy, and Germany) had opted for price-based incentives, sometimes mixed with other types of schemes³⁸. Nevertheless, Romania – like seven other Member States (e.g., Poland or Sweden)³⁹ – introduced quota obligations through a Green Certificates scheme, which is the object of the present arbitration.

61. In its 2008 report the Commission further noted that⁴⁰:

"Comparing the two main types of support schemes, namely quota obligations and feed-in tariffs, historic observations from EU Member States suggest that feed-in tariffs achieve greater renewable energy penetration, and do so at lower costs for consumers."

62. The Commission also observed that Member States were “continuously fine-tuning existing policy measures with the aim of improving the performance of these measures"⁴¹.

b. Differences in support schemes

63. In recent years, multiple investors in RES have started investment arbitrations against different EU Member States based on changes to their support schemes – the most well-known ones against the Kingdom of Spain and the Republic of Italy. Considering that most of these cases concerned FiT or FiP schemes⁴², it is worth explaining what differentiates them from GC schemes.

FiT scheme

64. In a FiT scheme, the producer of RES-E [or “Generator”] is shielded from market variations in the price of electricity. Upon commissioning of the plant, Generators are given access to a fixed preferential tariff for the production of electricity, defined ex ante, which applies over a pre-determined period. The Generator will sell its electricity output to a designated counterparty, who will pay a fixed price per megawatt per hour [“MWh"] of RES-E, regardless of the actual market price of electricity. The counterparty is compensated for the cost of electricity paid above market price from the proceeds of a levy or surcharge on the end consumers' bills⁴³. Different tariffs may apply to different eligible technologies.

³⁸ Doc. C-75, p. 7; Doc. FR-28, pp. 5-6; Roques I, Figure 8; Jones I, para. 3.35.
³⁹ Doc. C-75, p. 7; Doc. FR-28, p. 5; Roques I, Figure 8; Jones I, para. 3.35.
⁴⁰ Doc. FR-28, p. 8.
⁴¹ Doc. FR-28, p. 6.
⁴² Annex A to C-PHB; Annex 1 to R-PHΒ.
⁴³ See Roques I, paras. 4.35.a, 4.36-4.37 and Jones I, paras. 3.14-3.18.

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65. Contrary to other support schemes, Generators under FiT schemes are not affected by variations in supply and demand of electricity, given that they are always guaranteed a fixed tariff for the electricity they produce.

FiP scheme

66. Unlike FiT and like GC, a FiP scheme exposes the Generators of RES-E to the electricity market price risk. The Generator sells its output in the electricity market at the wholesale market price, but is entitled to receive a premium, defined ex ante, for each MWh of generated RES-E. The total remuneration for the Generator can be unconstrained or capped from above and/or from below. This exposure to the market gives an incentive for Generators to produce electricity when their output is the most valuable⁴⁴.

GC scheme

67. Similarly, under a GC scheme, RES-E Generators bear the electricity market price risk: Generators sell the electricity they produce at market prices, in the same manner as conventional electricity generators; they are, however, compensated by receiving a pre-defined number of GCs per MWh of generated electricity⁴⁵.

68. This is a quota obligation incentive scheme⁴⁶, which operates through trading of GCs between suppliers and demanders of RES-E⁴⁷:

- On the supply side, regulators periodically allocate a number of GCs per MWh of generated electricity to the RES-E Generators that meet the eligibility criteria;

- On the demand side, regulators set a purchase obligation (quota) for retail suppliers to procure a percentage of their electricity from RES in a given period; this translates into the obligation for these suppliers to acquire a number of GCs per MWh of electricity sales, throughout a defined period (usually a year); the costs of this purchase are then passed on to the final consumer, through the wholesale price or a fee added to the consumers' bill;

- The GCs are traded on organized markets or through bilateral trades, where retail suppliers have the obligation to acquire GCs from RES-E Generators (or from intermediaries, who may have acquired GCs from Generators)⁴⁸; generally, if retail suppliers fail to purchase the required number of GCs in each period (i.e., to meet their quotas) they pay a penalty price in respect of each GC that they failed to acquire (such penalty will usually be higher than the maximum GC price, to deter suppliers from not meeting their quotas)⁴⁹.

⁴⁴ See Roques I, paras. 4.35.a, 4.36-4.37 and Jones I, paras. 3.19-3.21, 3.42-3.43.
⁴⁵ Roques I, para. 4.40; Doc. C-64, p. 88.
⁴⁶ CD-1, slide 65; Jones I, para. 3.22.
⁴⁷ Roques I, para. 4.39; Jones I, paras. 3.22-3.24.
⁴⁸ Jones I, para. 3.26.
⁴⁹ Jones I, para. 3.27.

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69. This trading mechanism is what drives the price of the GCs, which is determined by a delicate market equilibrium between supply and demand of RES-E⁵⁰:

- If supply of RES-E is insufficient (i.e., if there is not enough generation of RES-E and there are not sufficient GCs on the market) and there is plenty of demand (i.e., if the retail suppliers' quota obligations have not been met and there is demand for GCs), the GC price will go up;

- If supply of RES-E exceeds demand (and therefore there are more GCs on the market than demand for them), the GC price will go down.

70. Regulators can add several features to GC schemes, e.g.⁵¹:

- By setting minimum and maximum prices for GCs, to prevent the GC price from falling below or rising above certain thresholds, thereby ensuring a minimum revenue for investors and limiting the costs of the support scheme for end consumers, respectively⁵²;

- By placing expiration dates on the GCs awarded to Generators; or

- By awarding a different number of GCs per MWh depending on the type of RES technology (wind, solar, etc.); this is known as “banding” and ensures that less mature technologies receive a higher number of GCs, making them attractive to new investors despite their higher costs and risks; by contrast, if regulators were to award the same number of GCs regardless of technology, they would incentivize investment in the most efficient technology at the time.

***

71. Comparing the different support schemes, the remuneration received by Generators of RES-E per MWh of electricity relative to the market price is as follows⁵³:

- FiT: Generators will obtain a fixed revenue regardless of the market price of electricity;

- FiP: Generators will obtain the market electricity price plus a fixed premium, where the total remuneration can be unconstrained or capped from above and/or from below;

- GC: Generators will obtain the market price of electricity plus the price of the GCs, which is determined by the trading of GCs.

⁵⁰ Roques I, paras. 4.40-4.42. See also Doc. C-63, para. 25.
⁵¹ Roques I, paras. 4.47 et seq; Jones I, paras. 3.24, 3.34.
⁵² See also Doc. C-85, slide 3.
⁵³ Roques I, para. 4.36 and Figure 7; Doc. C-64, p. 88.

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72. A GC system involves greater risks for investors when compared to a FiT scheme, given that both the price of electricity and the price of the GCs are subject to market variations⁵⁴.

2. THE ROMANIAN GC SCHEME PRIOR TO 2013

73. Of the different schemes available, Romania chose to implement a system of mandatory quotas combined with the trading of GCs⁵⁵ to encourage investment in RES-E.

A. The Romanian electricity market and main regulatory players

74. To understand the Romanian GC scheme, it is necessary to comprehend how the Romanian electricity market works. Electricity is supplied by generators, who own plants where they generate electric energy that they provide to the grid⁵⁶. Transelectrica S.A. [“Transelectrica”], the transmission and system operator [or “TSO”], manages and operates the electricity transmission system⁵⁷. Distributors⁵⁸ oversee the distribution of electric energy into the wholesale market, where retail suppliers⁵⁹ sell electricity to consumers on the regulated and competitive markets⁶⁰. The market is managed by OPCOM, the gas and electricity market operator⁶¹.

75. Additionally, since the GC support scheme constitutes a market intervention in which State administrative and regulatory bodies play a crucial role⁶², it is worth mentioning who these are. Both the legislative and executive branches set the Romanian energy policy through the adoption of various laws and regulations⁶³:

- The Parliament enacts ordinary laws and Government Ordinances (normative acts enacted on the basis of a special law passed by the Parliament); and

- The Government adopts decisions (the so-called “GD”) that consist of normative acts that determine how the law will be implemented, and, in cases of urgency, Emergency Government Ordinances [“EGO”], which must be justified by the Government and approved by the Parliament within 30 days.

76. Until 2013, the Ministry of Economy⁶⁴ was in charge of drawing up and implementing the national energy strategy⁶⁵. In 2013 a subdivision of the Ministry

⁵⁴ Doc. C-63, para. 24.
⁵⁵ Initially, Romania's scheme also provided for FiT (see Doc. C-83, Art. 4(1)). However, this was later abandoned.
⁵⁶ E.g., Hidroelectrica, Nuclearelectrica, Electrocentrale Bucuresti, etc.
⁵⁷ Doc. C-33, pp. 10-11; Doc. C-45.
⁵⁸ E.g., ENEL Distributia Banat, E.ON Moldova Distribue, etc.
⁵⁹ E.g., ENEL Energie, E.ON Moldova Furnizare, etc.
⁶⁰ Doc. C-33, p. 10; Doc. C-91, slide 4.
⁶¹ Doc. C-33, p. 11; Doc. C-91, slide 4.
⁶² Jones I, para. 3.31.
⁶³ Doc. C-38, Arts. 73-79, 108 and 115(1), (4) and (5); C-I, paras. 65-66.
⁶⁴ Formerly designated as Ministry of Economy, Trade and Business Environment.
⁶⁵ Doc. C-33, p. 11.

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of Economy – the Agency for Energy – took that role until finally, in April 2013, the Ministry of Energy was created⁶⁶.

77. Since 2014 the Ministry of Energy has the power to draw up and implement Romania's national energy strategy and governmental energy policies⁶⁷. The Ministry of Economy retains some competence, such as governing electricity transportation and the partial exemptions enjoyed by energy-intensive users from the GC support scheme⁶⁸.

78. Both Ministries are supported by the National Energy Regulatory Authority [“ANRE”] created in 1998, which since 2012⁶⁹:

"[...] is an autonomous administrative body under Parliamentary control, entirely self-financed and independent as regards its decision-making process, organisation and functioning, whose scope of activity is to issue, approve and monitor the implementation of the national-wide binding regulatory framework required for the proper functioning of the electricity, heat and natural gas sectors and markets in terms of efficiency, competition, transparency and consumer protection."

79. The ANRE has the power to enact orders and decisions, which are binding normative acts⁷⁰.

B. The implementation of a GC scheme in Romania

80. In its GD 1535 of 2003, the Romanian Government set the creation of conditions for Romania to participate in the European market of GCs as one of the objectives of its RES strategy⁷¹.

81. Hence, in 2004, the GC scheme was officially introduced in Romania through GD 1892/2004⁷² (subsequently amended and supplemented⁷³), which created an obligatory quota system combined with the trading of GCs, as support for the production of RES-E.

82. GD 1892/2004 defined a Green Certificate as “a document evidencing a quantity of [one] MWh of electricity produced from renewable energy sources”⁷⁴.

83. The beneficiaries of the support scheme were installations producing electricity from RES (the so-called “Generators”), put into operation or upgraded starting in

⁶⁶ C-I, para. 67.
⁶⁷ Doc. C-42.
⁶⁸ Doc. C-39; Doc. C-40; Doc. C-41.
⁶⁹ Doc. C-44, p. 2. See also Doc. С-33, p. 11.
⁷⁰ Doc. C-44, pp. 3-4.
⁷¹ Doc. C-61.
⁷² Doc. C-76. See also Doc. C-64, p. 83.
⁷³ See, e.g., GD 958/2005 (Doc. C-77).
⁷⁴ Doc. C-76, Art. 2(b).

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2004⁷⁵. Significantly, hydroelectric power plants with installed capacity of over 10 MW were excluded from the benefits of this scheme⁷⁶.

84. Pursuant to this system, Transelectrica, as the TSO, was in charge of monthly issuing GCs to Generators for the amount of electricity produced and supplied to the grid. Generators were entitled to one GC per MWh of electricity supplied to the grid, irrespective of the type of RES technology employed. In turn, electricity suppliers had the obligation to buy annually a defined number of GCs from Generators, equal to the product of the value of the mandatory annual quota and the amount of electricity supplied annually to end-users⁷⁷.

85. ANRE, on the other hand, oversaw whether electricity suppliers were fulfilling their quotas, and established the minimum and maximum trading value of GCs – which were set at EUR 24/GC and EUR 42/GC, respectively.

86. This system, however, did not prove sufficient to attract investments in RES-E and to meet the renewable energy targets defined by the EU⁷⁸.

a. Law 220/2008

87. Therefore, on 27 October 2008, the Romanian Parliament enacted Law no. 220/2008⁷⁹ [“Law 220/2008”] in order to accelerate the production of RES-E⁸⁰. This Law, with its further amendments between 2009 and 2012, defined the legal framework for the GC support scheme on which Claimants allegedly relied upon when making their investments⁸¹.

88. Law 220/2008 provided that Generators could benefit from the support scheme if they commissioned their plants before the end of 2014. Such scheme would be applied for a period of “15 years for electricity produced by new power groups”, from the moment they started to produce RES-E⁸².

89. Under this scheme, Transelectrica remained in charge of monthly granting GCs to Generators⁸³.

90. However, contrary to GD 1892/2004, Law 220/2008 introduced a banding system, pursuant to which each type of renewable energy technology received a different number of GCs per MWh; thus, while solar PV plants were granted four GCs per MWh of RES-E fed into the power grid, small hydro-electric producers obtained

⁷⁵ Doc. C-76, Art. 1(2).
⁷⁶ Doc. C-76, Art. 1(2).
⁷⁷ Doc. C-76, Arts. 5 and 6.
⁷⁸ Doc. C-36, p. 2; Doc. C-78, slides 9-12.
⁷⁹ Doc. C-83.
⁸⁰ Doc. C-64, p. 8; Doc. C-36, pp. 2-3.
⁸¹ Roques I, para. 5.4; Lipkovich I, paras. 4, 13-14; Theuer I, para. 15. See also Jones I, paras. 5.9 et seq and Doc. C-307, p. 6.
⁸² Doc. C-83, Art. 3(2)(a) and 3(3).
⁸³ Doc. C-83, Art. 5(1).

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only one GC⁸⁴. This sought to encourage investment in less mature technologies, other than hydro-electric power, which was already widely available in Romania.

91. Law 220/2008 established that Generators would sell their electricity on the wholesale electricity market at market price⁸⁵; they could then obtain an additional income from the sale of their GCs to electricity suppliers either⁸⁶:

- On a centralized GC market, administered by OPCOM; or

- By entering into bilateral contracts for the sale of GCs [so-called “green certificate purchase agreements” or “GCPAs"].

92. Furthermore, the Romanian Parliament changed the way in which the GC trading values would be established: ANRE was no longer responsible for setting those values; in fact, they were now enacted in the law itself. Thus, Law_220/2008 provided that GCs would trade between a minimum of EUR 27/GC and a maximum of EUR 55/GC for the period between 2008 and 2014⁸⁷, adjusted annually in line with consumer price indices⁸⁸. The Law also established that for the period of 2015-2030 the minimum trading value could not be less than the minimum trading value for 2014⁸⁹.

National targets

93. The Romanian Parliament set Romania's national targets for RES-E in the national consumption of electricity for the years 2010, 2015 and 2020 at 33%, 35% and 38%, respectively⁹⁰. To help meet these targets, Romania introduced two concepts⁹¹:

94. (i) The concept of an annual mandatory quota, corresponding to the maximum share of RES-E that could benefit from the GC scheme [“Annual Mandatory Quota"]⁹² (excluding electricity produced by hydroelectric power plants with an installed capacity of over 10 MW). This Quota was set at⁹³:

- A maximum of 5.26% for 2008,

- A maximum of 6.28% for 2009,

- A maximum of 8.30% for 2010 to 2012,

- Increasing up to a maximum of 16.8% by 2020.

⁸⁴ Doc. C-83, Art. 5(2).
⁸⁵ Doc. C-83, Art. 14(1).
⁸⁶ Doc. C-83, Art. 9. See also Doc. C-63, para. 21.
⁸⁷ Doc. C-83, Art. 10(1).
⁸⁸ Doc. C-83, Art. 10(3).
⁸⁹ Doc. C-83, Art. 10(4).
⁹⁰ Doc. C-83, Art. 4(3).
⁹¹ Doc. C-83, Art. 4.
⁹² Doc. C-83, Art. 4(5), (6) and Appendix.
⁹³ Doc. C-83, Appendix.

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95. (ii) The concept of annual mandatory quotas for the acquisition of GCs [“Acquisition Quota”], which required electricity suppliers to purchase yearly a defined number of GCs. The number of GCs would be determined each year by ANRE⁹⁴. Furthermore, ANRE was in charge of imposing, and Transelectrica of collecting⁹⁵, penalties for suppliers of electricity who failed to meet their Acquisition Quota. The penalty was established at EUR 70 for each unpurchased GC⁹⁶.

96. Considering State aid rules in force in the EU, Romania notified Law 220/2008 to the Commission and requested approval of its support scheme. Pending such approval - which would only be given in 2011 – Romania continued to grant only one GC per MWh of electricity produced to all RES-E Generators⁹⁷.

b. The 2009 Directive

97. Before the target year of 2010, established under the 2001 Directive, had been reached, the EU saw the need for further action to support the development of renewable energy, not just in the electricity sector⁹⁸. This led the EU to adopt Directive 2009/28/EC in April 2009 [“2009 Directive”]⁹⁹. The 2009 Directive¹⁰⁰:

- Set a target of 20% of energy from renewable sources in the Community's gross final consumption of energy – not just electricity – for 2020; and

- Assigned Romania a mandatory RES target of at least 24% in its total consumption of energy – not just electricity – for 2020.

98. The 2009 Directive established that Member States should adopt “National Renewable Energy Action Plans”, setting out their national targets for the share of energy from renewable sources consumed in electricity, transport, and heating and cooling in 2020, and the measures to be taken to achieve such targets¹⁰¹. Additionally, the Directive once again encouraged Member States to implement support schemes to reach their RES targets¹⁰².

c. Law 139/2010

99. In July 2010, the Romanian Parliament enacted Law no. 139/2010, transposing the 2009 Directive, and amending and supplementing Law 220/2008 [“Law 139/2010"]¹⁰³. In its statement of reasons, the Parliament stated that¹⁰⁴:

⁹⁴ Doc. C-83, Art. 4(7).
⁹⁵ Doc. C-83, Art. 11(4).
⁹⁶ Doc. C-83, Art. 11(2).
⁹⁷ Doc. C-63, paras. 1, 6-7.
⁹⁸ Doc. C-87/FR-21, Recitals 7-14 and Art. 1; Roques I, para. 3.16; Jones I, para. 3.7.
⁹⁹ Doc. C-87/FR-21.
¹⁰⁰ Doc. C-87/FR-21, Art. 3 and Annex I.
¹⁰¹ Doc. C-87/FR-21, Art. 4.
¹⁰² Doc. C-87/FR-21, Art. 3.
¹⁰³ Doc. C-89 and Doc. C-90, p. 1.
¹⁰⁴ Doc. C-90, p. 2.

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"[...] this law contributes to the strengthening of the business environment by the increase of trust of possible investors in the stability of the E-RES support scheme."

100. Law 139/2010 introduced some significant changes to Law 220/2008:

- First, although it still provided that new Generators of RES-E would benefit from the support scheme for 15 years, Generators could now qualify to obtain support from the GC scheme until the end of 2016¹⁰⁵ – two years more than established in Law 220/2008;

- Second, it increased the maximum share of RES-E that could benefit from the GC support scheme (i.e., the Annual Mandatory Quotas defined under Law 220/2008) as follows¹⁰⁶:

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Law 220/2008	8.3%	8.3%	8.3%	9%	10%	10.8%	12%	13.2%	14.4%	15.6%	16.8%
Law 139/2010	8.3%	10%	12%	14%	15%	16%	17%	18%	19%	19.5%	20%

- Third, it increased the number of GCs available for solar PV plants from four to six GCs per MWh of electricity produced and delivered to the grid¹⁰⁷;

- Fourth, it extended the duration for which the GC price would be trading between a minimum of EUR 27/GC and a maximum of EUR 55/GC until 2025 (instead of 2014), indexed annually to European inflation¹⁰⁸; and

- Lastly, it increased the penalty for suppliers of electricity who failed to meet their Acquisition Quota from EUR 70 to EUR 110 for each unpurchased GC¹⁰⁹; this penalty would be collected by Transelectrica and allocated to an “Environment Fund” to finance further production of energy from renewable sources¹¹⁰.

¹⁰⁵ Doc. C-89, Art. I, para. 14 (Art. 3(3)).
¹⁰⁶ Doc. C-83, Appendix; Doc. C-89, Art. I, para. 15.4. See also Doc. C-63, Table 3, p. 6; C-I, para. 136.
¹⁰⁷ Doc. C-89, Art. I, para. 17 (Art. 5(2)(e)).
¹⁰⁸ Doc. C-89, Art. I, para. 24 (Art. 10(1)).
¹⁰⁹ Doc. C-89, Art. I, para. 25 (Art. 11(2)).
¹¹⁰ Doc. C-89, Art. I, para. 25 (Art. 11(5)).

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101. Thus, by early 2011, the GC support scheme could be summarized as follows¹¹¹:

• Flowchart Content:
  • Box: Romanian State
    • Sub-box: ANRE
      • Arrow to Electricity suppliers: Defines annual mandatory quotas for acquisition of GCs
      • Arrow to Electricity suppliers: Imposes penalties for failure to meet quotas
    • Sub-box: Transelectrica (TSO)
      • Arrow to Generators of RES-E: Issues monthly GCs
  • Box: Electricity suppliers
    • Arrow from Electricity suppliers: Pay penalties for failing to meet quotas
    • Arrow to Environment Fund: Penalties
    • Arrow to Generators of RES-E: Buy GCs for the GC trading price
  • Box: Generators of RES-E
    • Arrow to Electricity suppliers: Sell GCs on the GC market or through GCPAs
  • Box: Environment Fund

d. The Romanian National Renewable Energy Action Plan

102. Under the 2009 Directive, Romania's mandatory target for 2020 was ambitious: it had to achieve at least a 24% share of energy from RES in its gross total energy consumption. However, Romania was free to decide how to reach such target, between electricity, transport, and heating and cooling.

103. In September 2010¹¹², Romania adopted its National Renewable Energy Action Plan ["NREAP"]¹¹³ and set its RES electricity target at 43% by 2020¹¹⁴. The NREAP described in detail Romania's GC scheme¹¹⁵ and recognized that further legislative incentives might be needed to make investment in RES-E more attractive¹¹⁶. In particular, the NREAP acknowledged that Romania would need to guarantee a minimum GC price over a reasonable period, so that investments in RES could be recovered¹¹⁷.

C. State aid decision and subsequent regulation

a. Romania's application to the Commission

104. In accordance with State aid rules, Romania submitted Law 220/2008 with its subsequent amendments to approval by the Commission¹¹⁸.

105. In its application, Romania explained that it expected to have between 100 and 500 beneficiaries of the GC support scheme¹¹⁹. The estimated total value of the support

¹¹¹ Scheme prepared by the Arbitral Tribunal on the basis of Docs. C-83, C-89 and C-63, Figure 1, p. 7. See also Doc. C-265, Figure 1, p. 4.
¹¹² See Doc. C-307, p. 5.
¹¹³ Doc. C-64.
¹¹⁴ Doc. C-64, Tables 3.2 and 3.5, p. 28.
¹¹⁵ Doc. C-64, pp. 83 et seq.
¹¹⁶ Doc. C-64, pp. 14 and 16.
¹¹⁷ Doc. C-64, p. 16.
¹¹⁸ Doc. C-63, para. 1. See also Doc. C-307; Doc. C-311; Doc. C-312.
¹¹⁹ Doc. C-307, para. 18; Doc. C-63, para. 16.

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scheme budget would be RON 80.713 billion (approximately EUR 19.5 billion) for the whole duration of the scheme¹²⁰.

106. Among the requested information, the Commission wanted Romania to demonstrate that the GC scheme would not result in an overcompensation for renewable energy Generators. Romania explained that after performing an analysis of the internal rates of return [“IRR”] calculated for each type of technology, the results (ranging from 9.9% to 11.8%) showed the absence of overcompensation at the aggregate level¹²¹. For Generators of RES-E from solar energy, Romania calculated an IRR of 11.6%¹²² and explained that¹²³:

"The resulting IRR values for solar [...], slightly higher compared to other technologies, reflect the need to stimulate the development of production based on this resource in Romania. It is specified that so far, in Romania no investments have been made in solar power plants and since even after the issuance of the initial version of Law no. 220/2008 no solar power plant projects had appeared, it was considered that the level of support with 4 CV did not cover the costs and a reasonable profit, and the support was increased to 6 CV; under these conditions, it has been considered that this technology involves increased risks and as a result, for its development, it is necessary to ensure a higher IRR than for other technologies."

The risk of overcompensation

107. Romania undertook to monitor (through ANRE) the costs/revenues of the Generators benefitting from the GC scheme and to implement measures to mitigate the risk of overcompensation for renewable energy.

108. If it were to find the existence of overcompensation, ANRE would suggest to the Government measures to reduce the number of GCs for the economic operators entering the GC scheme after the announcement of such measures¹²⁴ – i.e., Romania did not envision implementing measures with a retroactive effect.

b. The EC Decision

109. On 13 July 2011, the Commission issued its decision [“EC Decision"] approving the Romanian GC scheme. As to whether the support scheme consisted of State aid, the Commission noted that although the GC scheme did not on its own involve State resources, the State did provide free GCs to green electricity Generators¹²⁵. However, the transactions on GC markets were carried out between private entities, without State resources – the State was only responsible for establishing minimum and maximum prices for GCs¹²⁶. In any event, the Commission concluded that it was not necessary to take a definitive position on the existence of State aid, because

¹²⁰ Doc. C-312, p. 3; Doc. C-63, para. 11.
¹²¹ Doc. C-307, pp. 38-39.
¹²² Doc. C-311, p. 12; Doc. C-63, para. 33.
¹²³ Doc. C-311, p. 13.
¹²⁴ Doc. C-307, p. 39; Doc. C-63, para. 37.
¹²⁵ Doc. C-63, paras. 48-49.
¹²⁶ Doc. C-63, para. 50.

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even if State aid were involved, the measures were compatible with the internal market¹²⁷.

110. On that same day, the Commission issued a press release in which it explained that it had found Romania's support scheme in line with EU State aid rules¹²⁸:

"[...] in particular, because it creates clear incentives for an increased use of renewable energy, while containing safeguards to limit distortions of competition. The scheme is designed to assist Romania in reaching by 2020 the mandatory national renewable energy target set under EU legislation."

с. ANRE Order 45/2011

111. To implement the GC support scheme, now approved by the EU Commission, ANRE issued a series of regulations regarding, inter alia, the accreditation of Generators, the issuance of GCs, the organization of the GC market, etc.¹²⁹.

112. In October 2011, ANRE issued Order no. 45/2011 [“ANRE Order 45/2011"], approving a methodology for setting the electricity suppliers' Acquisition Quotas¹³⁰ – i.e., the number of GCs that suppliers were required to purchase for each MWh of electricity sold to end consumers. The Acquisition Quota corresponded to the ratio between the total number of GCs issued and the final electricity consumption in the year of analysis.

113. Pursuant to the methodology defined by ANRE, in December of each year ANRE¹³¹:

- Projected the total number of GCs to be issued for the following year, by estimating the amount of RES-E that would be produced and would benefit from the GC scheme; this depended on the power installed in the different types of available RES power plants and the ones to be put into operation in the following year, and the average capacity factor¹³² by type of technology¹³³; and

¹²⁷ Doc. C-63, paras. 54-55.
¹²⁸ Doc. C-95.
¹²⁹ Doc. C-75, slide 9. These include ANRE Orders no. 42/2011, no. 43/2011, no. 44/2011, no. 45/2011, and no. 06/2012.
¹³⁰ Doc. C-101. See also Jones I, para. 5.10(c).
¹³¹ Doc. C-101. See also Jones I, para. 5.10(c).
¹³² Defined as: "[...] the ratio between the electricity delivered from the plant during the analysis period and the electricity that would be produced if the plant was operating throughout the duration at installed power, expressed as a percentage.” (Doc. C-101, Art. 5(1)(c)). Additionally, pursuant to Art. 6 of the Order, “(1) For existing power plants/generating sets, the capacity factors used in the calculations will be the average annual outputs of each plant/group over the last 3 years of operation. (2) For the power plants / groups to be commissioned during the following year, the capacity factors used in the calculations shall be the same as those used for the authorization of the promotion system, depending of the type of technology, and for the estimation of the electricity produced, the installed electrical powers and the start-up time of the power plants / groups shall be considered." (Doc. C-101, Art. 6).
¹³³ Doc. C-101, Art. 5(1).

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- Estimated the gross electricity consumption for the following year.

114. Based on these two factors, ANRE estimated the Acquisition Quota, as follows¹³⁴:

"The estimated quota for purchase of green certificates in the year t-1 for the following year t shall be calculated as the ratio of the total number of GCs expected to be issued in the following year, and the final consumption of electricity estimated for the same period of time, expressed as a percentage."

115. This methodology applied from November 2011 until July 2014¹³⁵.

d. EGO 88/2011

116. In line with the commitments undertaken before the EU Commission, in October 2011, the Romanian Government passed its Emergency Ordinance no. 88/2011 ["EGO 88/2011"]¹³⁶, with the aim of imposing safeguards against overcompensation to mitigate the impact of the support scheme on the price of energy for end consumers¹³⁷. This EGO amended and supplemented Law 220/2008 (as amended and supplemented in 2010) in several important aspects¹³⁸:

- First, it introduced the concept of overcompensation, defined as a¹³⁹:

"[...] situation when, considering the specific average technical and economic indicators achieved for a period of minimum 3 years for each technology, from the cost-benefit analysis performed for the set of generation capacities using the same technology, it results an [IRR] higher by 10% than the value considered for the relevant technology when authorizing the promotion system.”
(Pro memoria, at the time of EGO 88/2011 the IRR considered for solar PV plants was 11.6%);

- Second, it set out that ANRE would monitor the costs/revenues of Generators for overcompensation, and, if needed, would propose measures to reduce the number of GCs allocated to Generators; however, such measures would only be applicable to Generators who “begin production of electricity” after the measures were adopted¹⁴⁰ – in other words, it would not apply to Generators who were already producing at the time of adoption of any measures;

- Third, it established that Generators needed to be “accredited” by ANRE in order to benefit from the support scheme, and that the commissioning of their plants had to be completed by the end of 2016¹⁴¹; and

¹³⁴ Doc. C-101, Art. 10.
¹³⁵ Roques I, fn. 98 and Appendix C, para. A.6.
¹³⁶ Doc. C-97.
¹³⁷ Doc. C-98, pp. 2 and 4.
¹³⁸ Doc. C-97. See also Jones I, para. 5.10(b).
¹³⁹ Doc. C-97, Art. I, para. 1 (Art. 2(af)) [Emphasis added].
¹⁴⁰ Doc. C-97, Art. I, para. 23 (Arts. 29(2) and (3)).
¹⁴¹ Doc. C-97, Art. I, paras. 4 (Art. 3(3)) and 8 (Art. 4(6)).

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- Lastly, it determined that GCs issued to Generators would expire 16 months after their date of issuance – after which they could no longer be traded¹⁴².

e. Law 134/2012

117. In July 2012, the Romanian Parliament enacted Law no. 134/2012 [“Law 134/2012"]¹⁴³ by which it approved EGO 88/2011¹⁴⁴. In its statement of reasons, the Parliament noted that¹⁴⁵:

"[...] the trading of green certificates allows all renewable energy producers who satisfy the conditions stipulated by the law to benefit indirectly from the guaranteed demand for the produced energy for a higher price than the market price, which is likely not to discourage renewable energy producers from investing in technologies specific to this type of energy."

118. Law 134/2012 again envisaged the possibility for Romania to reduce the number of GCs for solar PV plants accredited after 1 January 2014, in case of overcompensation¹⁴⁶.

119. Additionally, Romania announced that it would create a guarantee fund managed by OPCOM [“Guarantee Fund”]. This Guarantee Fund would buy any unsold GCs - which under EGO 88/2011 were valid for 16 months – resulting from the unfulfilled Acquisition Quotas, at least at the minimum legal GC price. In turn, the Fund would be funded by the penalties paid by the suppliers of electricity who failed to meet their Acquisition Quotas in each quarter¹⁴⁷.

3. CLAIMANTS' INVESTMENTS IN ROΜΑΝΙΑ

120. In the early phases of the promotion of RES, Romania, like most EU Member States, chose to support a mix of technologies¹⁴⁸: due to its location in south-eastern Europe, Romania is able to exploit different sources of renewable energy with substantial potential for electricity generation, including solar electricity¹⁴⁹.

121. However, at the start of the millennium, there was only limited deployment of solar PV plants in Europe, mainly because it was a very costly technology¹⁵⁰. In its 2011 State aid submission to the EC, Romania explained that until then “no investments" had been made in solar PV plants, and that in 2010 it had amended its Law 220/2008, increasing the level of support from four to six GCs per MWh of

¹⁴² Doc. C-97, Art. I, para. 9 (Art. 6(9)).
¹⁴³ Doc. C-109.
¹⁴⁴ Doc. C-109, Art. I.
¹⁴⁵ Doc. C-110.
¹⁴⁶ Doc. C-109, Art. I, para. 14.
¹⁴⁷ Doc. C-109, Art. I, para. 8.
¹⁴⁸ Doc. FR-16, p. 17; Roques I, para. 4.10.
¹⁴⁹ Doc. C-33, p. 28.
¹⁵⁰ Jones I, paras. 4.4, 4.9-4.11. The installed capacity throughout Europe only began to grow in 2008.

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electricity supplied to the grid¹⁵¹, hoping to attract further investment in this technology.

122. In parallel, however, the cost of solar PV plants began to fall, mainly due to a significant drop in the price of modules between 2008 and 2013¹⁵². This fall in prices, coupled with an interesting support scheme, attracted new investors to solar energy in Romania.

123. Claimants are ten project developers who invested in five solar PV plants in southern Romania¹⁵³ after 2010, at different points in time. These five PV plants are¹⁵⁴:

- CEF Slobozia, a PV facility of 45 Megawatt-peak [“MWp"]¹⁵⁵ installed capacity in Giurgiu, Romania [“Alpha PV Facility”];

- CEF Izvoarele, a PV plant of 20 MWp installed capacity in Giurgiu, Romania [“Beta PV Facility"];

- CEF Izvoarele, a PV plant of 50 MWp installed capacity also in Giurgiu, Romania [“Gamma PV Facility"];

- CEF Frăsinet 2, a PV facility of 9.5 MWp installed capacity in Călărași, Romania ["Frăsinet 2"]; and

- CEF Frăsinet 3, a PV plant of 5.4 MWp installed capacity also located in Călărași, Romania [“Frăsinet 3"].

• Map Content:
  • Title: Romanian Plants
  • Cities/Locations:
    • Timişoara
    • Cluj-Napoca
    • Iaşi
    • Bucharest
    • Beta
    • Gamma
    • Alpha
    • Frăsinet 2 & Frăsinet 3

¹⁵¹ Doc. C-311, p. 13.
¹⁵² Jones I, para. 4.10; RD-2, slide 5.
¹⁵³ C-I, paras. 13 and 172; R-I, para. 513; CD-1, slide 99.
¹⁵⁴ Edwards I, Table 1-2 and Figure 1-1.
¹⁵⁵ Claimants explain that: “Megawatt peak (“MWp”) typically refers to the production capacity of a PV plant in direct current (DC), while megawatt (“MW”) refers to the production capacity of a PV plant after the inversion to alternating current (AC). The difference is usually fairly small (a few percent), and only relevant to technical issues that are not material in this dispute." (C-I, fn. 13).

[Page 28]

124. These five PV plants can be divided into two sets of projects¹⁵⁶:

- On the one hand, the Alpha, Beta, and Gamma PV Facilities, located in the Giurgiu county and initially developed by Claimants LSG Building Solutions GmbH ["LSG"] and Green Source Consulting GmbH [“Green Source"], before selling a portion of their shares to Claimants Solluce Romania 1 B.V. ["Solluce"], Core Value Capital GmbH [“CVC”], Core Value Investments GmbH & Co KG Gamma [“CVI”], and Risen Energy Solar Project GmbH [“Risen”], in this latter case through Claimant SC LJG Green Source Energy Beta SrL [the "Beta"] (A.);

- On the other hand, the Frăsinet 2 and 3 plants [“Frăsinet PV Facilities”], located in the Călărași county and developed by Claimants Anina Pro Invest Limited ["Anina"], Giust Limited [“Giust"], and Pressburg UK GmbH [“Pressburg”] (B.).

125. Claimants acknowledge that the seven Claimants that invested in the Alpha, Beta, and Gamma PV Facilities are unrelated to the three Claimants that invested in the Frăsinet PV Facilities¹⁵⁷.

126. In the following sections, the Tribunal will describe how each of the ten Claimants came to invest in Romania.

A. The Alpha, Beta and Gamma PV Facilities

a. January 2011: Green Source and LSG's investment in Romania

127. LSG is a limited liability company incorporated in Austria¹⁵⁸ that specializes in electrical and infrastructure engineering, and develops projects in different market sectors, including renewable energy. Besides investing in Romania, LSG developed projects in several other European countries¹⁵⁹.

128. Green Source, on the other hand, is a limited liability company incorporated in Austria, founded in 2006 by Canadian and German investors. The company operates in the central and eastern European renewable markets, with a focus on PV projects¹⁶⁰. In the words of Ms. Anna Hofmann, one of the company's co-founders¹⁶¹:

"[Green Source's] core mission is to develop energy projects in Central and Eastern Europe, with a focus on ground-mounted PV parks. Working alone or with other developers, we buy or lease the land for each project; prepare the necessary project documents, including grid access and construction permit applications; and conclude the engineering, procurement, and construction, financing, and other contracts. We then sell all or part of the project to outside

¹⁵⁶ C-I, paras. 173-174; CD-1, slide 99; C-PHB, paras. 57 and 151.
¹⁵⁷ C-PHB, para. 59.
¹⁵⁸ Doc. C-2.
¹⁵⁹ C-I, para. 28; Lipkovich I, paras. 5-6.
¹⁶⁰ C-I, para. 29; Hofmann, paras. 5-6.
¹⁶¹ Hofmann, para. 6.

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investors just before the project begins construction or, in some cases, operation.”

129. In 2010, before the Commission had even approved the Romanian GC support scheme, the founders of LSG and Green Source decided to join forces to invest in a renewable energy project in Romania¹⁶².

130. LSG and Green Source agreed to incorporate a local company to hold and develop a PV facility. The project would pass through the acquisition or lease of land by the local company, followed by the obtainment of the necessary permits and authorizations for construction and operation of the PV facility. Thereafter, both companies intended to sell their interests in the project to outside investors, who would reimburse them for their expenses, with a profit. LSG would be in charge of the engineering, procurement and construction [“EPC”], while both companies would act as operations and maintenance providers¹⁶³.

131. Although initially LSG and Green Source had intended to develop a single PV project, they eventually decided to develop two more¹⁶⁴. Thus, in January 2011, LSG and Green Source incorporated three companies in Romania, in which they each held 50% of the shares¹⁶⁵:

- LJG Green Source Energy Alpha SA [the “Alpha Project Company”]¹⁶⁶;

- The Beta Project Company – one of the Claimants in this arbitration¹⁶⁷; and

- LJG Green Source Energy Gamma SA [the “Gamma Project Company”]¹⁶⁸.

Alpha

132. When in January 2011, Green Source and LSG registered the Alpha Project Company in Romania, they each held 50% of the company’s shares.

133. In January 2011, LSG arranged for the Alpha Project Company to purchase a 62-hectare [“ha.”] plot to accommodate a 25 to 30 MW PV facility¹⁶⁹.

134. In April 2011, Green Source entered discussions with banks potentially interested in financing the PV project and with investors potentially interested in acquiring the totality or a share of the Alpha Project Company. Green Source also prepared a series of proposals describing the project for potential outside investors¹⁷⁰. One of

¹⁶² Lipkovich I, paras. 10-11; Hofmann, paras. 9, 13-14. ↩
¹⁶³ Lipkovich I, para. 18; Hofmann, paras. 14-16. ↩
¹⁶⁴ Lipkovich I, para. 17; Hofmann, para. 15. ↩
¹⁶⁵ Lipkovich I, para. 19; Hofmann, para. 15. ↩
¹⁶⁶ Doc. C-138. ↩
¹⁶⁷ Doc. C-8. ↩
¹⁶⁸ Doc. C-140. ↩
¹⁶⁹ Doc. C-141; Hofmann, para. 17. ↩
¹⁷⁰ Hofmann, paras. 18-20. ↩

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these investors would be Samsung C&T Corp., through its subsidiary Solluce, as will be seen in further detailed in section b infra.

135. In August 2011, the Alpha Project Company obtained approval to connect a 45 MW PV plant to the electric grid from Enel Distributie Muntenia, the local energy distributor¹⁷¹. Therefore, in February 2012, the Alpha Project Company acquired an additional 37 ha. plot of land to accommodate a further 17 MW of operations¹⁷².

Beta and Gamma

136. Given investors’ interest in the Romanian PV sector, Green Source and LSG decided to develop two other PV projects, Beta and Gamma, in parallel to the Alpha project. Thus¹⁷³:

- In April 2012 Beta acquired a 44 ha. plot of land for the Beta PV Facility; and

- Between July and September 2012, the Gamma Project Company purchased a 96 ha. plot of land for the Gamma PV Facility, with the help of Risen, one of the Claimants in this arbitration, as will be seen in section c infra.

137. LSG prepared all the applications for the administrative permits and authorizations necessary to build and operate these PV Facilities¹⁷⁴.

138. LSG and Green Source were particularly aware of the need to build and accredit the Alpha, Beta, and Gamma PV Facilities before the deadline of 1 January 2014 to be entitled to receive six GCs per MWh of RES-E¹⁷⁵.

b. May 2012: Solluce's investment in Romania

139. Solluce is a business entity incorporated in the Netherlands, which is a subsidiary of Samsung C&T Corp. [“Samsung”]¹⁷⁶. Samsung, founded in South Korea in 1938, is at the origin of the Samsung Group, a multinational conglomerate¹⁷⁷.

140. At the time of its investment in Romania, Samsung covered two main areas of business: engineering and construction, on the one hand, and trading and investment, on the other. It is in this latter that solar power falls. Since 2007 Samsung has been actively involved in the PV industry, having developed PV projects in several central and eastern European countries¹⁷⁸.

¹⁷¹ Doc. C-142. ↩
¹⁷² Doc. C-143; Hofmann, para. 17. ↩
¹⁷³ Lipkovich I, para. 19. ↩
¹⁷⁴ Lipkovich I, para. 21. ↩
¹⁷⁵ Lipkovich I, para. 23; Hofmann, para. 32. See also Tahan, para. 11. ↩
¹⁷⁶ Doc. C-4; C-I, para. 31. ↩
¹⁷⁷ Lim, para. 4; C-I, para. 31. ↩
¹⁷⁸ Lim, paras. 4-6; C-I, para. 31. ↩

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141. In May 2011, Samsung started discussing with LSG and Green Source the possibility of investing in the PV project that they were developing in Romania¹⁷⁹.

142. By the end of the summer 2011, LSG and Green Source had already acquired the first plot of land that would be used in the Alpha project, obtained the construction permit for the first phase of construction, and secured permission to connect to the electricity grid from Enel Distributie Muntenia, the local electricity distributor¹⁸⁰. Thus, during the second half of 2011, Samsung worked with Green Source and LSG to¹⁸¹:

- Complete the development of the PV facility;

- Identify potential off-takers for the project’s electricity and purchasers for the plant’s GCs – including by entering into negotiations with off-takers for long-term GCPAs; and

- Identify lenders who would be willing to fund the project.

143. In October 2011, Green Source, LSG, and Samsung agreed that Samsung would buy a majority share of the Alpha Project Company, of which Green Source and LSG would remain minority shareholders¹⁸².

144. In April 2012, LSG and Green Source broke ground on the Alpha project. That same month, the Alpha Project Company entered into a binding term sheet with Enel Trade S.p.A. governing the terms of a power purchase agreement [“PPA”] and a GCPA¹⁸³. Finally, by 15 May 2012, the Alpha Project Company secured all necessary approvals and permits to construct the 45 MW Alpha PV Facility¹⁸⁴.

145. Therefore, on 22 May 2012, Green Source, LSG, Samsung, and its Dutch subsidiary Solluce – Claimant in this arbitration – signed an investment agreement with the Alpha Project Company¹⁸⁵. The parties agreed that Solluce would become a shareholder in the Alpha Project Company through a combination of share capital increase and share sale transfers that would ultimately result in Solluce holding a 78% share in the capital of the Company and Green Source and LSG remaining each with an 11% share¹⁸⁶.

146. Solluce started by acquiring a 62.3% in the Alpha Project Company, for EUR 14.18 million, and, in January 2013, increased its participation to 78%, with a further EUR 8.6 million investment¹⁸⁷.

¹⁷⁹ Lim, para. 7. ↩
¹⁸⁰ Lim, para. 9. ↩
¹⁸¹ Lim, paras. 15-16. ↩
¹⁸² Lim, para. 17; Hofmann, para. 23. ↩
¹⁸³ Lim, para. 19. ↩
¹⁸⁴ Lim, para. 19; Hofmann, para. 25. ↩
¹⁸⁵ Doc. C-166. ↩
¹⁸⁶ Doc. C-166, Recitals (B) – (K). See also Hofmann, para. 26; Lim, para. 20. ↩
¹⁸⁷ Lim, paras. 20-22; Hofmann, para. 27. ↩

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147. In January 2013, the Alpha Project Company signed a GCPA with Enel Trade Romania, pursuant to which Enel committed to purchase all the GCs generated by the Alpha PV Facility for ten years at the following price¹⁸⁸:

• EUR 43 until 31 December 2014;
• EUR 32.55 or the Minimum Price (as defined in Annex 1) whichever is higher after 1 January 2015 until 31 December 2017;
• EUR 33 or the Minimum Price whichever is higher after 1 January 2018 until the end of the Term of this Agreement.

148. On 6 February 2013, the Alpha Project Company entered into a facilities agreement pursuant to which a group of international banks led by UniCredit agreed to fund EUR 64.3 million of construction costs and RON 95.6 million of related VAT¹⁸⁹.

c. January 2013: Risen's investment in Romania

149. Risen, a company incorporated in Germany¹⁹⁰, is a subsidiary of Risen Energy (Hong Kong) Co., Ltd. [“Risen Energy”], a Chinese hi-tech enterprise specialized in the production and sale of PV modules, listed on the Shenzen Stock Exchange¹⁹¹.

150. Therefore, on 20 April 2012, Green Source, LSG, and Risen Energy executed a “project investment contract”, pursuant to which Risen Energy agreed to loan Green Source and LSG EUR 900,000 to purchase land for the Gamma PV Facility – the construction of which was scheduled to begin in July 2012¹⁹². Pursuant to this contract, Green Source and LSG had to repay the loan by 15 July 2012, after which, Risen Energy would fund the Gamma Project Company through a bridge loan until the PV Facility was complete and could be sold to a third party. In exchange, Risen Energy would be the module supplier for the Beta and Gamma PV Facilities¹⁹³.

151. On 24 January 2013, Risen – Claimant in this arbitration and a subsidiary of Risen Energy – entered into

- A share purchase agreement with Green Source and LSG¹⁹⁴, and

- Two share transfer agreements, one with Green Source¹⁹⁵ and another one with LSG¹⁹⁶,

pursuant to which Risen acquired 90% of Beta’s shares from Green Source and LSG for EUR 900,000 – an amount which was offset against the outstanding sums owed by LSG and Green Source for the Gamma Project Company loan¹⁹⁷. Green

¹⁸⁸ Doc. C-167, Clauses 4 and 6.1. ↩
¹⁸⁹ Lim, para. 23; Hofmann, para. 28. ↩
¹⁹⁰ Doc. C-5. ↩
¹⁹¹ Doc. C-267. ↩
¹⁹² Doc. C-171; Hofmann, para. 35. ↩
¹⁹³ Doc. C-171. ↩
¹⁹⁴ Doc. C-173. ↩
¹⁹⁵ Doc. C-174. ↩
¹⁹⁶ Doc. C-175. ↩
¹⁹⁷ Hofmann, para. 37. ↩

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Source and LSG each retained a 5% share of the capital of Beta. In addition, Risen Energy lent Beta EUR 9.1 million to finance construction¹⁹⁸.

152. On 20 February 2013, Risen entered into a module supply agreement with Beta for the price of EUR 12.8 million¹⁹⁹.

d. June 2013: CVC and CVI's investment in Romania

153. In September 2012, Green Source decided to approach Mr. Tahan. Mr. Tahan is the founder of Core Value Capital GmbH [one of the Claimants in this arbitration and previously defined as “CVC”], a Vienna-based investment fund in renewable energies²⁰⁰ that has invested exclusively in solar power plants since its creation in 2013²⁰¹.

154. Mr. Tahan was interested in the project and presented this opportunity also to Mr. Viktor Falk, an Austrian national and one of CVC’s most important investors²⁰².

155. By early 2013, Mr. Tahan informed Green Source that CVC would be interested in investing in the Beta and Gamma Project Companies and started to perform a financial and legal due diligence²⁰³.

156. In February 2013, Core Value Investments GmbH [one of the Claimants in this arbitration, previously defined as “CVI” and together with CVC “Core Value”] was established as a limited partnership in Austria. CVI’s shares are held by BDO Financial Advisory Services GmbH in trust for an investment vehicle that belongs to Mr. Falk²⁰⁴.

157. However, as will be seen in further detail in section 4 infra, at the same time rumors started to circulate that Romania might enact changes to its GC support scheme. Mr. Tahan testified in this arbitration that, although the prospect of the changes to the GC scheme concerned Core Value, they were confident that Beta and Gamma would remain bankable and could succeed even if the rumored changes took place²⁰⁵.

158. On 15 May 2013, the Beta and Gamma Project Companies each signed a memorandum of understanding [“MoU”] with Tinmar-Ind S.A. and S.C. Lord Energy S.R.L., regarding the future sale of the projects’ electricity and GCs²⁰⁶. These MoU set out the terms pursuant to which the parties intended to enter into a service agreement and a GCPA. They provided that the projects would sell all their

¹⁹⁸ Hofmann, para. 37. ↩
¹⁹⁹ Hofmann, para. 37. ↩
²⁰⁰ Hofmann, para. 36; Tahan, paras. 2 and 7. ↩
²⁰¹ Tahan, para. 4. ↩
²⁰² Tahan, para. 8. ↩
²⁰³ Hofmann, para. 36; Tahan, para. 8. ↩
²⁰⁴ Tahan, para. 5. ↩
²⁰⁵ Tahan, paras. 9-11. See also Hofmann, para. 38. ↩
²⁰⁶ Doc. C-225; Doc. C-226. See also Hofmann, para. 39; Tahan, para. 13. ↩

[Page 34]

electricity to Tinmar-Ind S.A. at a fixed price of RON 140 per MWh, and that Tinmar would also purchase 80% of the projects’ GCs at the OPCOM market price, while Lord Energy S.R.L would act as GC broker in return for 10% of the GC price²⁰⁷.

159. As will be seen in section 4 infra, two weeks thereafter, on 4 June 2013, the Romanian Government issued EGO no. 57/2013, a measure that, according to Claimants, represented a first change in the GC support scheme for the worse²⁰⁸. Irrespective of this, the Core Value Claimants did not abandon their project to invest in the Beta and Gamma Project Companies²⁰⁹.

Failed investment in Beta

160. Therefore, on 6 June 2013, Core Value entered into a framework agreement with Green Source, LSG, Risen, and Risen Energy, with a view of acquiring 55% of the share capital of Beta. Pursuant to this agreement²¹⁰:

- CVI would purchase 50% of the shares of Beta from Risen for a price of EUR 1.45 million; and

- CVC would purchase 5% of the shares of Beta from Green Source and LSG (2.5% from each) for a total price of EUR 145,000.

161. In parallel, Green Source and LSG signed separate share transfer agreements with Risen to purchase back 20% of Beta’s shares, for an amount that would be set-off against the amounts due under the call options specified in the January 2013 share purchase agreement²¹¹.

162. However, when the condition subsequent of the framework agreement of 6 June 2013 was not met, CVI’s 50% share in Beta reverted to Risen on 18 March 2014²¹².

163. Later, in February 2015, Risen acquired all of the remaining shares in Beta held by Green Source, LSG, and CVC. Therefore, Risen is currently the sole shareholder of Beta²¹³.

Investment in the Gamma Project Company

164. Additionally, on 26 June 2013, the Core Value Claimants entered into a share purchase and investment agreement with LSG and Green Source, pursuant to which CVI became a 76% shareholder of the Gamma Project Company and CVC a 3% shareholder²¹⁴. In return, LSG and Green Source each received EUR 3.55

²⁰⁷ Doc. C-225; Doc. C-226. See also Hofmann, para. 39; Tahan, para. 13. ↩
²⁰⁸ Hofmann, para. 40; Tahan, para. 14. ↩
²⁰⁹ Tahan, para. 14. ↩
²¹⁰ Doc. C-227. See also Tahan, para. 15; Hofmann, para. 41. ↩
²¹¹ Hofmann, para. 41. ↩
²¹² Doc. C-235. See also Hofmann, para. 42; Tahan, para. 18; C-PHB, para. 153. ↩
²¹³ Doc. C-236. See also Tahan, para. 18. ↩
²¹⁴ Doc. C-228. See also Tahan, paras. 4-5 and 16. ↩

[Page 35]

million²¹⁵, while they each retained a 10.5% share in the Gamma Project Company. The Gamma Project Company received RON 1,000 for the newly issued shares and CVI agreed to grant a EUR 18.16 million shareholder loan to the Gamma Project Company²¹⁶.

165. In July 2013, the Gamma Project Company obtained approval to connect a 50 MW PV plant to the electric grid from Enel Distributie Muntenia, the local energy distributor²¹⁷.

B. The Frăsinet PV Facilities

a. Pressburg

166. Pressburg is a company incorporated under the laws of Germany²¹⁸ and an affiliate of Pressburg Partners GmbH [“Pressburg Partners”]. Founded in 2009, Pressburg Partners is a privately held investment firm based in Vienna that focuses on developing and investing in renewable energy assets and technology²¹⁹.

167. According to Mr. Rolf Theuer’s testimony, founder of Pressburg Partners, starting in 2010, Pressburg Partners worked with a research analyst and with the law firms DLA Piper and Wolf Theiss to understand and monitor the Romanian support scheme. Upon the approval of the GC support scheme by the Commission, Pressburg Partners gained increased interest in investing in Romania²²⁰.

168. Pressburg Partners started to look for PV projects in which to invest. However, these were scarce, given that most local developers had advanced little at that stage. Finally, in July 2012 Pressburg Partners met Mr. Gheorghe Cătălin-Liviu²²¹.

b. Anina and Giust

169. Anina²²² and Giust²²³ are two companies incorporated in Cyprus in September and November 2011, respectively²²⁴, whose sole shareholder is Mr. Cătălin-Liviu, a Romanian entrepreneur²²⁵.

²¹⁵ Green Source and LSG each received EUR 3.42 million from CVI and EUR 135,000 from CVC (Doc. C-228, Clause 3). ↩
²¹⁶ Tahan, para. 16. ↩
²¹⁷ Doc. C-232. ↩
²¹⁸ Doc. C-11. ↩
²¹⁹ Theuer I, paras. 2 and 7-8. ↩
²²⁰ Theuer I, paras. 11-17. ↩
²²¹ Theuer I, paras. 19-20. ↩
²²² Doc. C-9. ↩
²²³ Doc. C-10. ↩
²²⁴ Doc. C-9; Doc. C-10; Edwards I, Table 1.1. ↩
²²⁵ C-I, fn. 17; Doc. R-1, p. 20; Doc. R-2, p. 19; Doc. R-5, p. 20; Doc. R-6, p. 19; Edwards I, para. 3.34. ↩

[Page 36]

170. Mr. Theuer explains that, in 2012, Mr. Cătălin-Liviu had been developing a portfolio of PV projects throughout Romania, two of which were in an advanced development stage in the southern county of Călărași: the Frăsinet PV Facilities²²⁶.

171. The Frăsinet 2 plant was owned entirely by Solar Electric Frăsinet S.R.L. [“Solar Frăsinet”], a special purpose vehicle, in turn owned at 95% by Giust – while the remaining 5% were the property of Mr. Cătălin-Liviu²²⁷.

172. In turn, the Frăsinet 3 plant was owned entirely by Solar Electric Mostistea S.R.L. [“Solar Mostistea” and together with Solar Frăsinet, the “Frăsinet Project Companies”], a special purpose vehicle, in turn owned at 95% by Anina. The remaining 5% were again the property of Mr. Cătălin-Liviu²²⁸.

173. According to Mr. Theuer’s testimony, Mr. Cătălin-Liviu had initially planned to develop the two projects through to the permitting stage and then to sell them to outside investors for them to complete and operate. However, Mr. Cătălin-Liviu eventually agreed to build and operate the Frăsinet PV Facilities with Pressburg²²⁹.

c. September 2012: Pressburg, Anina, and Giust SPAs

174. Therefore, on 19 September 2012, Pressburg entered into two share purchase agreements [“SPA”]²³⁰:

- An SPA with Mr. Cătălin-Liviu and Giust pursuant to which Pressburg acquired 50% of Solar Frăsinet’s shares in return for a nominal payment of RON 10 per share and a promise to provide a shareholder loan of EUR 2.2 million; Giust retained the remaining 50% of Solar Frăsinet’s shares²³¹; and

- An SPA with Mr. Cătălin-Liviu and Anina pursuant to which Pressburg acquired 50% of Solar Mostistea’s shares in return for a nominal payment and a promise to provide a shareholder loan of EUR 1.25 million; Anina retained the remaining 50% of Solar Mostistea’s shares²³².

175. On 20 September 2012, each of the Frăsinet Project Companies entered into EPC and operation and management agreements with Alpine-Energie Deutschland GmbH, contingent on the project companies entering into a binding term sheet with the Raiffeisen International Bank AG [“Raiffeisen”]. Alpine-Energie was willing to pre-finance part of the EPC price until Raiffeisen disbursed the loan²³³.

²²⁶ Theuer I, para. 20. ↩
²²⁷ Doc. C-123, Art. 1.2; Theuer I, para. 20; C-I, para. 37. ↩
²²⁸ Doc. C-124, Art. 1.2; Theuer I, para. 20; C-I, para. 37. ↩
²²⁹ Theuer I, para. 21. ↩
²³⁰ Theuer I, para. 22. ↩
²³¹ Doc. C-123. ↩
²³² Doc. C-124. ↩
²³³ Doc. C-123; Doc. C-124; Theuer I, para. 23. ↩

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176. The Frăsinet Project Companies commenced construction in November 2012²³⁴ and by January 2013 construction was near completion²³⁵.

* * *

177. The structure of Claimants’ projects can be summarized as follows (as of 2015)²³⁶:

[Start of Diagram Transcription]

• Alpha Project:
  • Alpha Project Company (Romania) is owned by:
    • Solluce (Samsung) (Netherlands): 78%
    • Green Source (Austria): 11%
    • LSG (Austria): 11%
  • Alpha Project Company owns 100% of Alpha PV Facility.
• Beta Project:
  • Beta Project Company (Romania) is owned by:
    • Risen (Germany): 100%
  • Beta Project Company owns 100% of Beta PV Facility.
• Gamma Project:
  • Gamma Project Company (Romania) is owned by:
    • CVI (Austria): 76%
    • CVC (Austria): 3%
    • Green Source (Austria): 10.5%
    • LSG (Austria): 10.5%
  • Gamma Project Company owns 100% of Gamma PV Facility.
• Frăsinet Projects:
  • Solar Frăsinet (Romania) is owned by:
    • Giust (Cyprus): 50% (Giust is 100% owned by Mr. Catalin-Liviu (Romania))
    • Pressburg (Germany): 50%
  • Solar Frăsinet owns 100% of Frăsinet 2.
  • Solar Mostistea (Romania) is owned by:
    • Anina (Cyprus): 50% (Anina is 100% owned by Mr. Catalin-Liviu (Romania))
    • Pressburg (Germany): 50%
  • Solar Mostistea owns 100% of Frăsinet 3.

[End of Diagram Transcription]

178. The Alpha, Beta, Gamma, and the Frăsinet Project Companies shall be referred to as the “Operating Companies”.

C. June to December 2013: Accreditation of PV Facilities

179. To benefit from the GC support scheme, Generators first had to obtain an accreditation granted by ANRE. This accreditation consisted of an individual decision for each plant, specifying the period, the number of GCs, and the date from which the Generator would receive monthly GCs from Transelectrica²³⁷. Significantly, Law 134/2012 envisaged the possibility for Romania to reduce the number of GCs for solar PV plants accredited after 1 January 2014, in case of overcompensation²³⁸. Therefore, all Claimants had interest in accrediting their PV Facilities before January 2014 to benefit from six GCs per MWh.

180. Throughout 2013, ANRE issued all the necessary licenses and accreditations for the five PV Facilities of Claimants:

- ANRE issued the Frăsinet PV Facilities’ preliminary accreditation on 29 March 2013²³⁹, and the Facilities were each permitted to start production on 29 May 2013 and 3 June 2013²⁴⁰; on 21 June 2013, ANRE issued the final

²³⁴ Theuer I, para. 23. ↩
²³⁵ CD-1, slide 110. ↩
²³⁶ Diagram prepared by the Arbitral Tribunal. Claimants are highlighted in red. See also Edwards I, Table 1-1 and Figures 3-1 and 3-2; Flores I, Figure 1; RD-4, slide 5. ↩
²³⁷ Doc. C-312, p. 2. ↩
²³⁸ Doc. C-109, Art. I, para. 14. ↩
²³⁹ Theuer I, para. 26. ↩
²⁴⁰ Theuer I, para. 31. ↩

[Page 38]

accreditation, granting six GCs per MWh until 31 May 2028²⁴¹; however, as will be seen in section 4.A infra, two of these GCs were deferred;

- ANRE issued the establishment permit for the Alpha PV Facility on 27 February 2013 and the operating license on 2 August 2013²⁴²; on this latter date, ANRE granted the Alpha Project Company its final accreditation for six GCs per MWh of RES-E until 19 June 2028²⁴³; again, as will be explained in section 4.A infra, two of these GCs were deferred;

- ANRE issued the establishment permit for the Beta PV Facility on 14 August 2013²⁴⁴ and the operating license on 25 September 2013²⁴⁵; two days later, Beta obtained its accreditation for six GCs per MWh until 27 September 2028²⁴⁶; again, two of these GCs were deferred;

- ANRE issued the establishment permit for the Gamma PV Facility on 11 September 2013 and the operating license on 20 December 2013²⁴⁷; on that same day, ANRE issued the final accreditation for the Gamma Project Company, giving it the right to obtain six GCs per MWh until 27 September 2028²⁴⁸, again with deferral of two of these GCs.

4. 2013-2014 MEASURES

Pro memoria

181. By late 2012, the Romanian GC support scheme had the following characteristics:

- New Generators of RES-E could qualify until the end of 2016 for the GC support scheme, from which they would benefit for 15 years;

- Solar PV plants accredited prior to 2014 were entitled to receive six GCs per MWh;

- Suppliers of electricity were obligated to purchase annually a number of GCs; the penalty for failing to meet the Acquisition Quota amounted to EUR 110 per unpurchased GC;

- Generators and suppliers of electricity could trade GCs on the GC market or through bilateral contracts (also known as GCPAs); GCs had a validity of 16 months, after which they could no longer be traded; and

²⁴¹ Doc. C-216; Doc. C-217. See also Theuer I, para. 33. ↩
²⁴² Doc. C-223. ↩
²⁴³ Doc. C-224; Lipkovich I, paras. 24-25. ↩
²⁴⁴ Doc. C-229. ↩
²⁴⁵ Doc. C-230. ↩
²⁴⁶ Doc. C-231; Lipkovich I, paras. 24, 26. ↩
²⁴⁷ Doc. C-233. ↩
²⁴⁸ Doc. C-234; Lipkovich I, paras. 24, 26. ↩

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- Although the prices of GCs fluctuated according to market competition, they could not fall below EUR 27/GC or rise above EUR 55/GC, indexed annually to European inflation.

182. While, in 2011, Romania had no installed PV capacity²⁴⁹, by 2013, it had approximately 1,100 MW of capacity in the pipeline (1,341% higher than projected in Romania’s NREAP)²⁵⁰, and was well placed to meet its 2020 target of a 43% share of RES in the total electricity consumption (defined in its NREAP²⁵¹), by as early as 2015²⁵².

Rumors of changes to the GC support scheme

183. In late 2012 and early 2013, rumors started to circulate among RES-E Generators that Romania might enact changes to the GC support scheme, through a potential new amendment of Law 220/2008²⁵³.

184. Preoccupied with these rumors, the Romanian Photovoltaic Industry Association held a meeting with the Deputy Minister of Energy²⁵⁴ in February 2013. According to a report prepared by this Association after the meeting, the Deputy Minister explained that it was necessary to adjust the GC scheme in order to “rebalance the ratio between the RES-E producers and consumers” and due to complaints “from the large industrial consumers regarding the increased price of electricity” caused by the impact of the GCs²⁵⁵. However, the Association noted that the Ministry had explained that²⁵⁶:

• eventual amendment to the Law 220/2008 will not be retroactive;
• necessity to find a way to ensure the functionality of all electricity production facilities irrespective of the source;
• eventual readjustment should be done in order to ensure sustainability of the support scheme;
• rules should not be changed during the game;
• the manner in which the readjustment should be done, not established yet.

185. The rumors were officially confirmed when, in March 2013, the Deputy Minister of Energy formally announced a future change to the GC law²⁵⁷. According to the Deputy Minister, Romania was caught in an impasse, having to consider, on the one hand, the concerns of domestic and industrial consumers with higher electricity prices and, on the other, those of investors who had risked and invested in RES-E²⁵⁸.

²⁴⁹ Doc. C-311, p. 13. ↩
²⁵⁰ C-I, para. 12; Flores I, Figure 6; Doc. C-64, p. 197. ↩
²⁵¹ Doc. C-64, Tables 3.2 and 3.5, p. 28. ↩
²⁵² Doc. FR-103, Table and Figure 19 prepared by Dr. Fabien Roques. ↩
²⁵³ Doc. C-177; Doc. C-178; Theuer I, para. 27; Hofmann, para. 38; Lim, para. 24; Tahan, para. 9. ↩
²⁵⁴ At the time, the Minister of Energy was still a branch of the Ministry of Economy (C-I, para. 217). ↩
²⁵⁵ Doc. C-177, p. 1. ↩
²⁵⁶ Doc. C-177, p. 1. ↩
²⁵⁷ Doc. C-179, p. 1. ↩
²⁵⁸ Doc. C-179, p. 1; Doc. C-183, p. 2. ↩

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The ANRE Overcompensation Report

186. On 29 March 2013, ANRE published a report “on the overcompensation analysis of the green certificates support system for renewable energy sources for the year 2012” [the “Overcompensation Report”]²⁵⁹. ANRE had performed a cost-benefit analysis at the aggregated level for different types of RES-E technology and had reached the conclusion that there was an overcompensation in the number of GCs for wind, PV, and small hydro facilities. For solar PV plants ANRE estimated that Generators were being overcompensated by obtaining three GCs per MWh in excess²⁶⁰.

A. First attempt to control the cost of the GC scheme for consumers: EGO 57/2013

Draft EGO 57/2013

187. Only a few days later, on 2 April 2013, the Romanian Government issued a draft EGO pursuant to which Law 220/2008 would be amended and supplemented with the aim of²⁶¹:

“[...] stopping the effect of the uncontrolled growth of prices for final customers of electricity that can block also the investments in production of electricity from renewable sources and therefore making inapplicable the Law 220/2008, as well as to maintain predictable the legal framework for promoting electricity produced from renewable sources and to maintain the competitiveness of key energy-intensive sectors, elements aimed at the general public and being considered emergencies and extraordinary, the regulation of which can not be postponed [...].” [Emphasis added]

188. Pursuant to this draft, from 1 July 2013 to 30 June 2016 a certain number of GCs issued per MWh would be “temporarily postponed” – i.e., the number of GCs would be temporarily reduced – depending on the type of RES-E technology. For instance, solar Generators would see two out of their six GCs deferred²⁶². The recovery of the deferred GCs would be done gradually, following a methodology which was to be defined in a GD upon ANRE’s proposal²⁶³.

189. On that same day, the Romanian Deputy Minister of Energy was quoted by the media explaining that²⁶⁴:

“The scheme will return on its course starting 2017. The investor has some revenues (from green certificates) that will not be generated now, but from 2017,” said Nita, quoted by

and

²⁵⁹ Doc. C-182/R-9. ↩
²⁶⁰ Doc. C-182/R-9. ↩
²⁶¹ Doc. C-185. ↩
²⁶² Doc. C-185, Art. I(2). ↩
²⁶³ Doc. C-185, Art. I(2). See also Doc. C-186. ↩
²⁶⁴ Doc. FR-48. ↩

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“Romania’s support scheme is the most generous, but we can’t make everyone happy, we can’t risk an exit of large industrial producers from Romania,” said Nita, quoted by Mediafax newswire.

EGO 57/2013

190. Despite protests by various actors in the renewable energy sector, including the Romanian Photovoltaic Industry Association²⁶⁵, on 4 June 2013, the Romanian Government formally issued EGO no. 57/2013 [“EGO 57/2013”]²⁶⁶.

191. In the recitals the Government explained that it adopted this EGO²⁶⁷:

“[...] to cease the effect of uncontrolled growth of prices for end consumers of energy, which may result into a blockage of investments in the production of energy from renewable sources field and, implicitly, the inapplicability of provisions of Law no. 220/2008, as republished, with subsequent amendments and supplementing, as well as to maintain the predictability of the legislative background concerning the promotion of energy from renewable energy sources, as well as to maintain the competitivity of main economic sectors that are great energy consumers, whereas not taking any immediate measures would have irreversible consequences on the competitiveness of industrial products and would result into the relocation outside Romania of large production units, would result into price increases over the estimated index, into social consequences by the sudden growth of energy price invoiced above bearable limits, into the overcompensation of producers of energy from renewable resources in contradiction with the decision for the approval of the state aid scheme, would influence the operational safety of the national energy system and would influence the estimated budget allotted for the implementation of the support scheme and resources intended for the operation of the support scheme, thus resulting into the blocking of investments in this area, aspects that refer to the general public interest and that are considered emergency and extraordinary situations, whose regulation cannot be delayed, according to art. 115 par. (4) of the Constitution of Romania, as republished, the Government of Romania adopts this emergency ordinance.” [Emphasis added]

192. Claimants in this arbitration recognize that the measure was not as harmful as they, and other investors, initially feared²⁶⁸. Yet, EGO 57/2013 introduced some significant modifications to Law 220/2008:

193. First, as already announced in the draft EGO, Romania deferred the issuance of two out of the six GCs per MWh awarded to PV plants between 1 July 2013 and 31 March 2017 (instead of 2016, as provided in the draft EGO), to decrease the expected GC revenue of PV plants²⁶⁹. These deferred GCs were expected to be recovered gradually by PV facilities between 1 April 2017 and 31 December 2020,

²⁶⁵ Doc. C-183, p. 2; Doc. C-187; Doc. C-192; Doc. C-193; Doc. C-194; Doc. C-195. ↩
²⁶⁶ Doc. C-196. ↩
²⁶⁷ Doc. C-196, p. 1. ↩
²⁶⁸ C-I, para. 225; Tahan, para. 14. ↩
²⁶⁹ Doc. C-196, Art. I(3). See also Roques I, para. 6.28. ↩

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at the latest²⁷⁰. This measure would apply to any PV plants accredited by ANRE after the enactment of the EGO – i.e., after 4 June 2013²⁷¹.

194. Second, for PV plants above 5 MW (which was the case of all of Claimants’ plants), the issuance of GCs for electricity beyond the projection that Generators made to the grid operator in the day-ahead hourly forecast was prohibited²⁷². This meant that if the Generators’ actual production was higher than predicted, Generators would receive only the projected number of GCs. Claimants say that this rule provoked additional balancing costs²⁷³.

195. Third, EGO 57/2013 provided that GCs could only be traded between Generators of RES-E and electricity suppliers on the centralized market managed by OPCOM²⁷⁴ – thus casting doubts on the validity of GCPAs entered into between Generators and energy traders.

196. Lastly, EGO 57/2013 proposed to exempt a percentage (to be defined) of the electricity consumed by energy-intensive users [“EIUs”] from the support scheme. However, this exemption was conditioned on the approval of the Commission²⁷⁵.

197. These changes to the GC scheme were met with significant dissatisfaction by renewable energy Generators, who submitted several complaints to the Commission throughout 2013 and 2014²⁷⁶.

198. Pro memoria: All of Claimants’ PV Facilities received their accreditations from ANRE on or after 21 June 2013, i.e., after the Government passed EGO 57/2013.

199. Although ANRE’s accreditations granted Claimants’ PV Facilities six GCs per MWh of RES-E, two of these GCs were automatically deferred in accordance with EGO 57/2013²⁷⁷. According to Claimants, this measure reduced the cash flows that their PV facilities were expected to receive²⁷⁸.

GD 994/2013

200. In December 2013, the Romanian Government passed GD 994/2013 pursuant to which it decreased the number of GCs for new PV plants from six to three, starting on 1 January 2014²⁷⁹ – a possibility already envisaged by Law 134/2012. According to ANRE, the goal of this measure was “to avoid overcompensation”²⁸⁰.

²⁷⁰ Doc. C-196, Art. I(3). ↩
²⁷¹ Doc. C-196, Art. I(13)(3). ↩
²⁷² Doc. C-196, Art. I(1). See also Doc. C-197, Art. 3(6)(f). ↩
²⁷³ C-I, para. 227. ↩
²⁷⁴ Doc. C-196, Art. I(7)(9). ↩
²⁷⁵ Doc. C-196, Art. I(7)(8). ↩
²⁷⁶ Doc. C-265, para. 3. ↩
²⁷⁷ See C-I, paras. 234, 237, 245, 246. ↩
²⁷⁸ Lim, para. 30; Theuer I, para. 30. ↩
²⁷⁹ Doc. C-203. As explained by Mr. Wynne Jones: “Such new plants were not subject to GC deferral; rather, they were not eligible to receive the same number of GCs as existing plants” (Jones I, para. 6.6). ↩
²⁸⁰ Doc. C-78, slide 15. ↩

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201. This measure, however, did not affect Claimants, since their PV Facilities had all been accredited before the end of 2013.

B. The approval of EGO 57/2013: Law 23/2014

202. On 14 March 2014, the Romanian Parliament enacted Law No. 23/2014 [“Law 23/2014”], approving EGO 57/2013 with certain amendments²⁸¹. In its statement of reasons, the Parliament declared that it was faced with an “extraordinary” and “emergency” situation, caused, in part, by the “uncontrolled increase in prices for end consumers of energy”²⁸²:

“Considering the effect of uncontrolled increase in prices for end consumers of energy, the assumptions concerning the exceeding in 2013 of connection and balancing of the national energy system capacities, the negative impact on the competitivity in the industrial sector and the overlapping of price increases with cumulated effects over the energy price liberalization calendar, the taking of measures to maintain the predictability of the legal framework concerning the promotion of energy from renewable sources is an extraordinary situation whose regulation cannot be delayed.

The emergency situation consists in the existing problems related to the over- compensation of producers that benefit from the support scheme and the creation of a competitive undue advantage as well as signals related to the impossibility of the energy-intensive industry to bear any additional increases in the electricity price. Moreover, the emergency situation is imposed by the need of a preventive action, as the accreditation of new units from renewable sources influences the price and the connection capacities which will be cumulated for the next 10-15 years.” [Emphasis added]

203. The Romanian Parliament went further than EGO 57/2013:

204. First, Law 23/2014 introduced a new methodology for setting the GC Annual Mandatory Quotas (i.e., the maximum share of RES-E in the gross electricity consumption eligible to benefit from the GC scheme). Pro memoria, Law 139/2010 had defined the following Annual Mandatory Quotas²⁸³:

205. Law 23/2014 departed from these targets and established that starting in 2014, the Annual Mandatory Quotas would be set each year by the Government, upon ANRE’s proposal. The maximum share of RES-E eligible to benefit from the GC scheme would henceforth depend on the achievement of Romania’s RES targets under EU law and “on the impact on the end consumer”²⁸⁴.

²⁸¹ Doc. C-238. See also Jones I, para. 6.1.a. ↩
²⁸² Doc. C-240. ↩
²⁸³ Doc. C-89, Art. I, para. 15(4)(4). See also Doc. C-63, Table 3, p. 6. ↩
²⁸⁴ Doc. C-238, Art. I(3)(1³)(4¹). ↩

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“Starting with 2014, ANRE monitors each year annual quota of energy produced from renewable energy sources that benefits from the promotion systems through green certificates and, depending on the achievement degree of the national target and on the impact on the end consumer, estimates, publishes on its own website and informs the Government by 30 June of the current year about the level of the mandatory annual quota of energy produced from renewable energy sources that benefits from the promotion systems through green certificates for the next year.” [Emphasis added]

206. Second, Law 23/2014 reduced the GC validity, from 16 to 12 months from their date of issuance by Transelectrica²⁸⁵. Thus, after one year any untraded GCs would lose their validity.

207. Third, Law 23/2014 repealed the measures adopted in Law 134/2012 for the establishment of a Guarantee Fund managed by OPCOM that would buy any GCs that failed to be bought by electricity suppliers²⁸⁶. Any GCs unsold within 12 months would thus automatically lose their validity.

ANRE information note

208. Three days after the adoption of Law 23/2014 ANRE published an information note with its calculation of the Annual Mandatory Quota (the maximum share of RES-E of the gross final electricity consumption eligible to benefit from the GC scheme)²⁸⁷. For 2014, ANRE proposed to set the Annual Mandatory Quota at 11.1% (instead of the 15% initially defined by Law 139/2010) since²⁸⁸:

- The most recent progress report to the EU on the achievement of the binding RES targets showed that Romania had exceeded its national objectives (in 2010 Romania had almost achieved the national target undertaken for 2020 of 24% of RES in its final gross consumption of energy); and

- This would maintain the impact of GCs in the end consumer’s invoice at the level registered in the second semester of 2013, i.e., approximately RON 35/MWh (approximately EUR 7.9/MWh).

GD 224/2014

209. On 28 March 2014, the Romanian Government passed GD 224/2014, in which it confirmed that the Annual Mandatory Quota for 2014 was set at 11.1%²⁸⁹.

C. Exemption of energy-intensive users

210. Since 2013, EIUs had declared their dissatisfaction with the costs of the Romanian GC support scheme. In November 2013, the Association of Big Industrial Energy Consumers had claimed that the amount paid by EIUs in eco-taxes was threatening

²⁸⁵ Doc. C-238, Art. I(8)(5¹)(9). ↩
²⁸⁶ Doc. C-238, Art. I(12). ↩
²⁸⁷ Doc. FR-51b. ↩
²⁸⁸ Doc. FR-51b; Roques I, para. 6.16; Jones I, para. 6.8. ↩
²⁸⁹ Doc. C-253. ↩

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the future of local industry²⁹⁰. This had led the Romanian Government to adopt EGO 57/2013 and the Parliament to enact Law 23/2014 – which specifically provided for a partial exemption (with contours yet to be defined) of EIUs from the GC scheme.

211. In March 2014, Alro Steel – one of Romania’s biggest electricity consumers – voiced its difficulty to “survive” on the Romanian market if the Government did not reduce the level of ecotaxes payable by EIUs²⁹¹. This was echoed by ArcelorMittal, who threatened to abandon Romania²⁹².

GD 495/2014

212. Faced with these pressures, on 11 June 2014, the Government adopted its Decision no. 495/2014 [“GD 495/2014”] to “create a State aid scheme” partially exempting EIUs from the GC support scheme²⁹³. In early July 2014, Romania submitted its planned aid scheme to the approval of the Commission²⁹⁴.

EC's approval of State aid

213. In its submission to the EU, Romania explained that the State aid measure would benefit around 300 EIUs, who mainly produced energy-intensive goods (e.g., ferrous and non-ferrous metal producers, paper industries, chemical industry, cement producers, etc.)²⁹⁵. These accounted for approximately 20% of Romania’s gross final consumption of electricity and were the largest generators of jobs in the country, providing directly approximately 760,000 jobs and indirectly approximately 1,500,000²⁹⁶. Consequently, Romania argued, the relocation of these EIUs to another country would have a significantly adverse impact on its economy²⁹⁷.

214. The partial exemption implied that, until the end of 2024, when calculating the Acquisition Quota, a part of the electricity supplied to EIUs would be excluded (under ANRE Order 45/2011 the Quota was calculated as the ratio between the total number of GCs estimated for a given year and the estimated final electricity consumption)²⁹⁸. The EIUs benefitting from the exemption would only have to pay (i.e., cover the cost of) the GCs for a small percentage of their electricity consumption, depending on their electro-intensity, namely²⁹⁹:

- 15% in the case of electro-intensities greater than 20%,

²⁹⁰ Doc. C-245. ↩
²⁹¹ Doc. C-246 and Doc. C-247. ↩
²⁹² Doc. C-244, p. 213. ↩
²⁹³ Doc. C-243. ↩
²⁹⁴ Doc. C-248, para. 1. ↩
²⁹⁵ Doc. C-248, paras. 45-46. See also Doc. C-249. ↩
²⁹⁶ Doc. C-248, paras. 10-11. See also Doc. C-249. ↩
²⁹⁷ Doc. C-248, para. 11. ↩
²⁹⁸ Doc. C-248, paras. 13 and 29. ↩
²⁹⁹ Doc. C-248, para. 18. See also Doc. C-249. ↩

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- 40% in the case of an electro-intensity between 10%-20%, and

- 60% in the case of an electro-intensity between 5%-10%.

215. In other words, EIUs would be exempted from the payment of GCs corresponding to 85%, 60% or 40% of the electricity they consumed, depending on the intensity of their electric consumption³⁰⁰.

216. In October 2014, the EC approved the partial exemption for EIUs, finding the State aid measure compatible with the internal market³⁰¹. This exemption applied to approximately nine TW per year (out of a total electricity consumption of approximately 50 TW per year)³⁰².

217. Claimants argue in this arbitration that the cost of this exemption was neither borne by the State budget nor by other end-consumers – rather, it fell entirely on the shoulders of renewable energy producers³⁰³.

D. New methodology for calculating Acquisition Quotas

218. On 26 June 2014, ANRE issued its Order No. 49/2014, defining a new methodology for setting the Acquisition Quotas for electricity suppliers³⁰⁴ (modifying the initial methodology set out in ANRE Order 45/2011³⁰⁵). This new methodology was further amended by ANRE’s Order No. 144/2014³⁰⁶.

5. 2015-2016: SCRUTINY OF THE 2013-2014 MEASURES

A. Report of the Romanian Court of Accounts

219. In early 2015, the Romanian Court of Accounts issued an audit report which analyzed the Romanian electricity market between 2010 and 2014. The Court of Accounts noted that there was a growing number of unpurchased GCs – the outstanding amount had exponentially increased from 406 GCs in 2010 to 76,552 GCs in 2014³⁰⁷.

220. The Court observed that, although the Environment Fund Administration had issued invoices to collect penalties for the unpurchased GCs in the amount of RON 57,040,000, only RON 2,181,000 had been recovered. This led the Court of Accounts to conclude that the Environment Fund Administration had³⁰⁸:

³⁰⁰ Doc. C-248, para. 19. ↩
³⁰¹ Doc. C-248, p. 14. ↩
³⁰² Doc. C-248, paras. 14, 31; CD-1, slide 121. ↩
³⁰³ C-I, para. 266; CD-1, slide 121. ↩
³⁰⁴ Doc. C-250. ↩
³⁰⁵ See Roques I, para. 6.15; Jones I, para. 6.9. ↩
³⁰⁶ Doc. C-251. See also Doc. C-265, para. 20. ↩
³⁰⁷ Doc. C-261. ↩
³⁰⁸ Doc. C-261. ↩

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“[...] not pursued with celerity the collection of the revenues representing the equivalent value of the unpurchased green certificates, thus registering a low degree of collection of these revenues, of only 3.82%.” [Emphasis added]

B. EU Commission's decision of May 2015

221. By 2015, Romania had 514 solar PV plants and a total of 698 RES-E Generators³⁰⁹. RES-E power plants benefitting from the GC support scheme accounted for approximately 14% of the total electricity produced (8.18 TWh)³¹⁰. But many of these Generators were disillusioned by the changes introduced by Romania to its GC scheme and voiced their concerns to the Commission³¹¹.

222. On 4 May 2015, the EC issued a decision regarding the changes introduced by Romania to its GC scheme in 2014³¹² (except for the changes concerning the EIUs, which were the object of a separate decision). The Commission noted that³¹³:

Romania provided a table with all the amendments done to the law since 2011 and for each amendment their opinion on whether it affects the support scheme or not. In the view of the Romanian authorities some amendments can be clearly considered administrative changes. For the rest of the amendments introduced in 2013, Romania considered they needed to be notified, as tightening of criteria for granting the support.

223. The Commission recognized that the amendments enacted by Romania did indeed “tighten the criteria for granting the support” and found that “their effect can be the reduction of the support for the producers” of RES-E³¹⁴.

224. The Commission further acknowledged that for most types of RES technologies the amendments would have “a negative impact on the [IRR] of the beneficiaries”³¹⁵. As far as solar PV plants were concerned, the IRR was no longer 11.6% as initially forecasted, but rather 8.3%³¹⁶.

225. However, despite manifesting its disappointment with the fact that Romania had put the amendments to its GC scheme into effect prior to the Commission’s final decision, the Commission ultimately decided “not to raise objections to the aid on the grounds that it is compatible with the internal market”³¹⁷.

³⁰⁹ Doc. C-78, slide 12. ↩
³¹⁰ Doc. C-78, slide 13. ↩
³¹¹ Doc. C-265, para. 3 ↩
³¹² Doc. C-265. ↩
³¹³ Doc. C-265, para. 22. ↩
³¹⁴ Doc. C-265, para. 26. ↩
³¹⁵ Doc. C-265, para. 29. ↩
³¹⁶ Doc. C-265, Table 1, p. 7. ↩
³¹⁷ Doc. C-265, p. 20. ↩

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C. Complaints by civil society

Complaints by RES-E Generators

226. In November 2015, several Romanian renewable energy associations, including the Romanian Photovoltaic Industry Association, wrote a letter to the Vice-President of the European Commission for Energy Union asking for the Commission’s support. These associations asked the Commission to back an amendment to the Romanian GC support scheme, to guarantee that RES-E investors would not lose further value of their investments. These associations warned that³¹⁸:

“[...] the practice of the Romanian authorities will bring the renewable sector into financial collapse.

Now the financial collapse is evident and a recent study (executive summary attached to this letter) done for the Romanian Wind Energy Association by Ernst & Young using publicly available financial data shows that the wind producers have lost in 2014 about half a billion EUR, and the industry expects that this figure will rise in 2015 and 2016 if no corrective actions to the legislation will be implemented. The same financial situation characterizes the results of other technologies present in Romania, which are all actually today losing money, in total contradiction with the IRR figure communicated in November 2014 by the Romanian Authorities [...].”

Ambassadors' letter

227. In September 2016, the Ambassadors of Austria, Denmark, France, Germany, Italy, and Spain to Romania wrote a letter to the Romanian Prime Minister expressing their concern regarding the changes to the RES support scheme³¹⁹.

228. The Ambassadors warned that the measures adopted by Romania were making the GC market ever less attractive and would likely bring about defaults and bankruptcies, putting in jeopardy investments of several billion euros³²⁰. Therefore, the Ambassadors encouraged Romania to reach a balanced solution with foreign companies, in a way that could preserve its “international reputation [...] as an attractive country for foreign investments”³²¹.

GD 1015/2015

229. By the end of 2015, the Romanian Government set the Annual Mandatory Quota at 12.1% of the final gross energy consumption for 2016³²² (again a small increase with regard to the previous year, but well below the 17% defined under Law 139/2010).

³¹⁸ Doc. C-263. ↩
³¹⁹ Doc. C-269. ↩
³²⁰ Doc. C-269. ↩
³²¹ Doc. C-269, p. 2. ↩
³²² Doc. C-255. ↩

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D. ECA Report of October 2016

230. In October 2016, Economic Consulting Associates [“ECA”] – a consulting firm commissioned by the Romanian Ministry of Energy³²³ – issued its final report on potential changes to the Romanian RES legislation [“ECA Report”]³²⁴. After analyzing the initial GC scheme and its subsequent modifications, ECA reached the following conclusions³²⁵:

“The GC scheme began with a probably over-generous payout to generators, based on expectations of high IRRs, likely compounded by higher wholesale market price expectations. This led to high generator expectations and rapid investment. This inevitably had a cost to be borne by consumers.

Subsequent policy adjustments to reduce the impact on consumers had the effect of negatively impacting generator cash flows, with an additional adverse effect of many certificates being unsaleable, because demand had reduced faster than supply.”

231. Asked to propose alternative policy solutions, ECA found that³²⁶:

“In terms of policy measures, this means playing off reasonable expectations of generators against reasonable cost expectations of consumers. The negative cash flows faced by generators generally in recent years (which is unevenly split with some generators facing a disp[rop]ortionate share of unsold GCs and so a much worse income than others) will almost certainly have to be alleviated to the extent that policy changes against their reasonable expectations were instituted, but this can only be done at the expense of consumers (or taxpayers).

The most likely policy combinations will see improved cash flow for generators, but at a reduced return as compared to initial expectations; for consumers it would be through delaying payments into later years. To achieve positive but steady cash flows requires a combination of increasing the quota and either forced banking of certificates (through deferred trading of them) or voluntary banking by extending the tradable life of certificates. The “targeted obligation” methodology in combination with extended reinsertion of deferred GCs indicates positive cash flows are just about achieved from 2017 or 2018 for all technology and year-of-accreditation groups with the exception of wind plant accredited in 2014 and 2015 (comprising under 12% of wind capacity). Even this case, however, requires a substantial increase in the impact of the GC scheme as a proportion of consumer bills, peaking at over 11% in 2017, while real MIRRs for many technology-year groups remain under 4.5%.

Should such an impact on consumers be deemed unacceptable then a similar approach could be adopted but a reduced minimum price of certificates added to the mix. [...]”

³²³ Jones I, para. 6.102. ↩
³²⁴ Doc. C-284. ↩
³²⁵ Doc. C-284, p. 85. ↩
³²⁶ Doc. C-284, pp. 85-86. ↩

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Target for 2017

232. In November 2016, ANRE recognized that the measures adopted by Romania to avoid overcompensation had reduced investors’ interest in RES-E and had led to an oversupply of GCs³²⁷.

233. Nevertheless, by the end of 2016, the Romanian Government reduced the Annual Mandatory Quota for 2017 to 8.3%³²⁸ from 12.1% in 2015, and again well below the 18% threshold provided for under Law 139/2010. In a June 2016 report to the Government, ANRE had alerted that such a reduction of the Quota might prevent Romania from reaching the target of 24% of RES in the gross final energy consumption for 2020 and might also contribute to the insolvency of several RES-E producers³²⁹:

“However, ANRE mentions that, by setting the E-RES mandatory quota benefiting from the promotion system through green certificates to 8.3%, [...] it risks not contributing to reaching the national target in 2020 of 24% energy from renewable sources in the gross final energy consumption, as result of the possible decrease of E-RES producers’ gains and, therefore, to enhance the risk of insolvency thereof.”

234. Notwithstanding ANRE’s warning, the Government set the Annual Quota for 2017 at 8.3% (which in fact was ANRE’s proposal).

6. 2017-2018 MEASURES

A. EGO 24/2017

235. Faced with the conclusions of the ECA Report³³⁰, in March 2017, the Romanian Government passed EGO No. 24/2017³³¹ [“EGO 24/2017”], the first of the second set of measures which are the object of the present arbitration.

236. In its statement of reasons, the Government declared that it wished to ensure “the stability of the business environment, and maintain and pursue the development of investments in the field of renewable energy production in Romania”³³². That said, EGO 24/2017 introduced some additional amendments to Law 220/2008³³³:

237. First, the Government extended the GC deferral period for solar PV plants accredited before 31 December 2013 (i.e., all of Claimants’ PV Facilities) until 31 December 2024. Initially, the deferral period was meant to last only until 2017)³³⁴. This meant that solar PV plants would continue to receive only four (and not six, as originally provided for) GCs per MWh until the end of 2024. The

³²⁷ Doc. C-78, slide 15. ↩
³²⁸ Doc. C-256. ↩
³²⁹ Doc. C-252. ↩
³³⁰ Jones I, para. 6.102. ↩
³³¹ Doc. C-270. ↩
³³² Doc. C-271. ↩
³³³ Doc. C-272; Jones I, para. 6.104. ↩
³³⁴ Doc. C-270, Art. I(11)(2⁵). ↩

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deferred GCs would be recovered from 1 January 2025 until 31 December 2030, in equal monthly instalments³³⁵.

238. Second, the Government again modified the methodology for calculating the Acquisition Quotas for electricity suppliers. The annual Acquisition Quota was now to be set on the basis of³³⁶:

- A fixed quantity of GCs, equal to the aggregate number of GCs estimated to be issued until the end of the GC scheme, divided by the number of years remaining until 2031; and

- A maximum cost for consumers of EUR 11.1/MWh.

239. The Government set the GC demand for 2017-2018 at 14,910,140 GCs³³⁷.

240. Third, EGO 24/2017 altered the minimum and maximum prices at which GCs could be traded until 2032: EUR 29.4/GC and EUR 35/GC, respectively³³⁸ (pro memoria, under Law 139/2010, Romania had set the GC minimum and maximum prices at EUR 27/GC and EUR 55/GC, respectively, until 2025). These prices also ceased to be indexed to European inflation.

241. Fourth, EGO 24/2017 lowered the penalty to be paid by electricity suppliers who failed to meet their Acquisition Quotas, from EUR 110 to EUR 70 per unpurchased GC³³⁹.

242. Lastly, the Government confirmed that GCs could only be traded between the Generator, as seller, and the electricity supplier, as purchaser³⁴⁰. Additionally, the Government restricted the sale of GCs to the regulated OPCOM market by deciding that³⁴¹:

- GCPAs concluded after the entry into force of EGO 24/2017 would only have a maximum validity until 31 August 2017;

- GCPAs concluded before the entry into force of EGO 24/2017 would produce effects until their expiry but could not be renewed; and

- After the entry into force of EGO 24/2017, it would be forbidden to sign addenda to existent GCPAs to increase the number of traded GCs.

³³⁵ Doc. C-270, Art. I(11)(2⁶). ↩
³³⁶ Doc. C-270, Art. I(8). ↩
³³⁷ Doc. C-270, Art. VII. ↩
³³⁸ Doc. C-270, Art. XIII. ↩
³³⁹ Doc. C-270, Art. XVII. ↩
³⁴⁰ Doc. C-270, Arts. I(18)(5) and XII. ↩
³⁴¹ Doc. C-270, Arts. X and XI. ↩

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243. Finally, the Government decided to extend the validity of GCs issued after 2017 until 31 March 2032 (reversing the previous decision by Parliament, which in Law 23/2014 had reduced the validity period of GCs to 12 months)³⁴².

B. Claimants' notification of dispute and request for arbitration

244. As a result of these latest measures, on 28 August 2017, each of the Claimants notified Romania of a legal dispute arising out of the ECT and offered to amicably settle this dispute³⁴³. There is no evidence in this arbitration that Romania ever responded to Claimants’ offer – and, in any case, no resolution was achieved³⁴⁴.

245. Therefore, on 23 May 2018, Claimants filed a request for arbitration against Romania, arguing that the measures adopted by Romania starting in 2014 severally impacted the profitability of Claimants’ investments, by directly and indirectly reducing the demand for the sale of GCs and artificially driving down GC prices³⁴⁵. Claimants added, referring to the 2017 measures, that³⁴⁶:

“As a result of these recently adopted measures, the GC market for renewable energy producers has become even more moribund and artificially depressed, and it will remain so in years to come. The consequence is that the value of Claimants’ investments in Romania has been substantially destroyed.”

C. Law 184/2018

246. While this arbitration was already ongoing, the Romanian Parliament enacted Law No. 184/2018 [“Law 184/2018”], approving EGO 24/2017, but introducing certain amendments³⁴⁷.

247. First, the Parliament decided that two out of six GCs granted to solar PV plants would continue to be deferred, but only until 31 December 2020³⁴⁸ – and no longer until the end of 2024, as envisaged in EGO 24/2017.

248. Second, Law 184/2018 repealed the measure adopted in 2013 which provided that no GCs would be granted to the quantity of electricity sold as a positive imbalance³⁴⁹ (i.e., electricity sold in excess of the hourly quantities notified to Transelectrica on the day-ahead market³⁵⁰). Thus, starting in August 2018, each RES-E MWh produced by an eligible plant received the corresponding number of GCs³⁵¹.

³⁴² Doc. C-270, Arts. I(3)(3³)(b) and IX. ↩
³⁴³ Doc. C-21; Doc. C-22; Doc. C-23; Doc. C-24. ↩
³⁴⁴ Request for Arbitration, para. 61. ↩
³⁴⁵ C-I, paras. 15, 291. ↩
³⁴⁶ Request for Arbitration, para. 44. ↩
³⁴⁷ Doc. C-199/R-19. ↩
³⁴⁸ Doc. R-19, Art. I(9). ↩
³⁴⁹ Doc. C-199/R-19, Art. I(5). ↩
³⁵⁰ Roques I, para. 6.34. ↩
³⁵¹ Roques I, para. 6.35. ↩

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249. Third, the Parliament introduced a new methodology for calculating the Acquisition Quotas, based on the final electricity consumption in the previous year and a predetermined maximum annual average consumer impact, which could not be exceeded³⁵²:

- EUR 11.7/MWh in 2018;

- EUR 12.5/MWh in 2019;

- EUR 13/MWh in 2021 and 2021; and

- EUR 14.5/MWh from 2022 onwards.

250. Lastly, Law 184/2018 required electricity suppliers to purchase at least 50% of their mandatory Acquisition Quota on the OPCOM-operated GC spot market³⁵³.

ANRE Order 157/2018

251. Accordingly, on 27 July 2018, ANRE once again updated its methodology for establishing the Acquisition Quotas³⁵⁴.

D. EGO 114/2018

252. Claimants take issue with a final measure adopted by Romania after the start of this arbitration: EGO 114/2018³⁵⁵.

253. The ANRE generally charges an annual monetary contribution to economic operators that carry out activities in the electrical, thermal power, and natural gas sectors. In line with previous years, on 20 December 2018, the ANRE set the contribution of license holders at 0.1% of their turnover³⁵⁶.

254. However, on 28 December 2018, the Romanian Government passed EGO 114/2018, increasing this contribution: RES-E Generators became obliged to pay 2% of their turnover to cover for the regulator’s budget³⁵⁷.

³⁵² Doc. C-199/R-19, Art. I(8). ↩
³⁵³ Doc. C-199/R-19, Art. I(14). ↩
³⁵⁴ Doc. WJ-55. ↩
³⁵⁵ See C-I, para. 290; C-PHB, para. 173. ↩
³⁵⁶ Doc. C-277. ↩
³⁵⁷ Doc. C-274. ↩

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IV. REQUEST FOR RELIEF

255. In the following sections, the Tribunal reproduces the Parties’ prayers for relief as set out in their main Written Submissions.

1. CLAIMANTS' REQUEST FOR RELIEF

256. In their Memorial, Reply, Rejoinder on Jurisdiction, and Post-Hearing Brief Claimants request the following relief³⁵⁸:

“a. a declaration that the Tribunal has jurisdiction under the ICSID Convention and the Energy Charter Treaty;

b. a declaration that Romania 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;

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 ICSID;

e. pre-award and post-award compound interest at the highest lawful rate from the Date of Assessment until Romania’s full and final satisfaction of the Award (including any Award on costs); and

f. any other relief the Tribunal deems just and proper.”

2. RESPONDENT'S REQUEST FOR RELIEF

257. In its Rejoinder and Post-Hearing Brief, Respondent requests that the Tribunal³⁵⁹:

“i. Hold that it lacks jurisdiction over the present dispute or, in the alternative, hold that Claimants’ claims are inadmissible, and dismiss all of Claimants’ claims in their entirety;

ii. In the event that it finds that it has jurisdiction over the present dispute, hold that it lacks jurisdiction over the two Claimants, Anina Pro Invest Ltd and Giust Ltd, and dismiss the claims of Anina Pro Invest Ltd and Giust Ltd on this basis;

³⁵⁸ C-II, para. 702; C-III, para. 259; C-PHB, para. 315. Claimants’ request for relief in the Memorial is practically identical, save for minor wording differences (see C-I, para. 415). ↩
³⁵⁹ R-PHB, para. 444. See also R-II, para. 1113 and R-I, para. 1159. Respondent’s request for relief in the Rejoinder is practically identical to that of the Post-Hearing Brief, save for minor wording differences. Respondent’s prayers for relief in the Counter-Memorial are identical to the ones of the Rejoinder save for two requests regarding damages. ↩

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iii. In the event that the Tribunal finds that it has jurisdiction over the present dispute, hold that Romania has not breached its obligations under the ECT and dismiss all of Claimants’ claims in their entirety on this basis;

iv. In the event that the Tribunal finds that Romania has breached its obligations under the ECT, reject Claimants’ damage claims for alleged lost profits in their entirety;

v. In the event that the Tribunal were to consider awarding damages for alleged lost profits to Claimants using the DCF method, reject the DCF calculations proposed by Claimants and adopt the corrected DCF calculation proposed by Romania, which further confirms that no damages are due;

vi. In the event that the Tribunal awards any damages to Claimants, reject Claimants’ interest claim, as formulated by Claimants, and award only post- award, simple interest at a risk-free rate;

vii. Order Claimants, jointly and severally, to pay all of Romania’s costs and fees incurred in connection with this Arbitration, including, but not limited to, the Tribunal’s fees and expenses, ICSID costs, experts’ fees and expenses, witnesses’ expenses, and attorneys’ fees and expenses; and

viii. Grant any additional remedies to the benefit of Romania that the Tribunal may consider to be appropriate.”

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V. JURISDICTIONAL OBJECTIONS

258. Claimants argue that pursuant to Art. 25 of the ICSID Convention and Art. 26 of the ECT there are five basic requirements for jurisdiction³⁶⁰:

- Claimants must be covered “Investors” that are nationals or companies of a Contracting Party to the ECT and of a Contracting State to the ICSID Convention;

- Respondent must be a “Contracting Party” to the ECT and a “Contracting State” to the ICSID Convention;

- The dispute must arise directly out of a covered “Investment”;

- The dispute must be a legal dispute concerning an alleged breach of Part III of the ECT; and

- The Parties must have consented to ICSID Convention arbitration.

259. It is Claimants’ position that these requirements are met in the present case, given that³⁶¹:

- Claimants are each a protected “Investor” of a Contracting Party to the ECT and a “National of another Contracting State” to the ICSID Convention;

- Romania is a “Contracting Party” to the ECT and a “Contracting State” to the ICSID Convention;

- Claimants own covered “Investments”;

- This is a legal dispute relating to Part III of the ECT; and

- Claimants offered to settle this dispute amicably and the Parties consented to ICSID Convention arbitration.

260. Respondent, on the other hand, challenges the Tribunal’s jurisdiction on three grounds³⁶²:

- First, Respondent argues that it has not given its consent to arbitrate the claims of all ten Claimants in one proceeding (V.1.);

- Second, Respondent finds that the Tribunal lacks jurisdiction over two of the Claimants, Anina and Giust, since the ultimate shareholder of these Claimants is a Romanian national; thus, the jurisdictional requirements of the ECT and

³⁶⁰ C-I, para. 23. ↩
³⁶¹ C-I, paras. 24 et seq. ↩
³⁶² R-I, paras. 4-7; R-II, paras. 5-12; R-PHB, para. 6. ↩

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the ICSID Convention are not met with regards to these two Claimants (V.2); and

- Third, Respondent submits that the arbitration clause of the ECT is inapplicable to the present intra-EU dispute (V.3).

261. In the following sections, the Tribunal will examine Respondent’s jurisdictional objections. For each of these objections, the Tribunal will start by summarizing Respondent’s position, followed by Claimants’ position, and finally make its decision.

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V.1. MULTIPLE CLAIMANTS OBJECTION

1. RESPONDENT'S POSITION

262. Romania submits that consent is the cornerstone of investment arbitration, and that Romania has not consented to arbitrate a collective action brought by multiple claimants under either the ICSID Convention or the ECT (A.). In any case, if express consent to arbitration with multiple claimants were found to exist, Romania argues that only claims by multiple claimants that constitute a single dispute may be brought against a respondent State (B.)³⁶³.

A. Romania never consented to arbitrate multiple claims with multiple claimants

263. Romania argues that consent to arbitrate, as the cornerstone of investment arbitration, must be “clear and unambiguous”. Additionally, consent cannot be presumed, as it must be in writing³⁶⁴. Romania does not dispute that multi-party arbitration may take place. However, for this to happen, Respondent must have given its explicit consent in writing to that effect³⁶⁵. Indeed, most rules of arbitration permit multiple parties only if all the parties have clearly consented thereto, in a binding arbitration agreement³⁶⁶.

264. Romania therefore affirms that a State’s consent to arbitration in a treaty must include explicit language expressly allowing multiple claimants to bring claims against it; otherwise, no collective arbitration can go forward. Thus, if the treaty contains no offer of multi-party arbitration, there is no acceptance of it and there can be no arbitration agreement with the necessary mutual consent to multi-party arbitration³⁶⁷.

265. It is Romania’s position that it has never consented, either under the ICSID Convention or the ECT, to the adjudication of multiple claims brought by ten different Claimants in one single arbitration³⁶⁸. Romania contends that the texts of both the ICSID Convention and the ECT demonstrate that the scope of consent thereunder covers only disputes involving one investor and one respondent State. This is supported by the use of the singular throughout these texts, which must be given a meaning³⁶⁹.

266. According to Romania, interpreting the ICSID Convention and the ECT in accordance with Art. 31(1) of the Vienna Convention on the Law of Treaties requires taking into consideration the distinction made by signatory States when using the singular form of “investor”, “party”, “investment” or any other relevant

³⁶³ R-II, para. 352; R-PHB, para. 36. ↩
³⁶⁴ R-II, paras. 353-355; R-PHB, para. 38. ↩
³⁶⁵ R-II, paras. 356-357. ↩
³⁶⁶ R-II, paras. 358-364. ↩
³⁶⁷ R-II, para. 366. ↩
³⁶⁸ R-PHB, para. 37. ↩
³⁶⁹ R-II, paras. 369-371; R-PHB, paras. 39-43. ↩

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word³⁷⁰. Additionally, neither the ICSID Convention nor the ECT contain a provision that extends the singular to the plural³⁷¹.

B. If there were express consent, only cases involving a single dispute may proceed

267. Romania argues that if the Tribunal were to find that the ICSID Convention and the ECT provide express consent in writing to multi-party arbitration, then nonetheless only cases involving one single dispute may proceed³⁷². Romania’s argument rests on three elements:

268. One, in the Alemanni case the tribunal found that only a “single dispute” may be brought by multiple claimants against a respondent State³⁷³. According to Respondent, the “single dispute” test is appropriate since a State, absent an agreement to that effect, may not be forced to defend itself with respect to several different disputes brought in one single arbitration³⁷⁴. Romania notes that the Alemanni test requires that the “interest represented on each side of the dispute” be identical in “all essential respects” “for all those involved on that side of the dispute”³⁷⁵.

269. Two, Art. 5 of the Resolution on Equality of Parties before International Investment Tribunals of the Institute of International Law [“IIL Resolution”] – which has persuasive value of doctrine³⁷⁶ – provides that where several investors seek to institute their claims in a single proceeding against the same State, the tribunal must be satisfied that the claim as a whole advances a single dispute, and that the interest represented by the claimants is in all respects identical³⁷⁷.

270. Three, the Abaclat and Ambiente Ufficio tribunals have recognized that the multiple claims brought by claimants can only go forward if they meet the “identity or homogeneity requirement”³⁷⁸.

* * *

271. Romania argues that Claimants’ claims do not meet the Alemanni single dispute test nor the Abaclat homogeneity test³⁷⁹:

272. First, Romania notes that Claimants’ claims concern five different PV plants, located in different Romanian regions. These distinct plants have different outputs. This leads to different amounts of GCs being received at any given time. Each plant has different contractual obligations for the sale of electricity and GCs, through

³⁷⁰ R-II, paras. 372-373. ↩
³⁷¹ R-II, paras. 374-379; R-PHB, para. 44. ↩
³⁷² R-II, para. 388; R-PHB, para. 45. ↩
³⁷³ R-II, para. 389; R-PHB, para. 46. ↩
³⁷⁴ R-II, para. 391. ↩
³⁷⁵ R-II, paras. 398-399; R-PHB, para. 46, quoting Alemanni, para. 292. ↩
³⁷⁶ R-II, para. 402. ↩
³⁷⁷ R-II, para. 400; R-PHB, para. 47. ↩
³⁷⁸ R-II, paras. 405-408, quoting Abaclat, para. 541. ↩
³⁷⁹ R-II, paras. 410 and 417; R-PHB, paras. 48, 50. ↩

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different GCPAs and PPAs entered into by the plants. Finally, the financing arrangements entered into by each project company for each plant have different counterparties and different commercial terms³⁸⁰.

273. Second, Claimants made their respective investments at different points in time. Therefore, the investments were not all subject to the same regulatory measures. This results in very different liability determinations, since the various Claimants will have had different alleged legitimate expectations, depending on the applicable law and regulations at the time of the investment³⁸¹.

274. Third, Romania avers that Claimants do not have similar types of claims against Romania. Some Claimants are direct owners of a PV power plant (e.g., Beta), while others are only shareholders in parent companies of the operational entities (e.g., CVC and CVI)³⁸².

275. Finally, Romania argues that there is no unity or identity in the quantum determinations for each claim, since the quantum calculations are necessarily plant- specific and claimant-specific. The shareholding interest held in the relevant plant by each Claimant, as well as the amount of capital that each Claimant extended to the plants in the form of shareholder loans are different³⁸³.

276. Romania asserts that this is not the paradigm single dispute situation where ten joint owners of a single plot of land are suing for the expropriation of that plot of land. Romania contends that there are concrete factual differences among Claimants and there is a clear lack of identity of Claimants’ interests in all essential respects³⁸⁴.

277. For these reasons, Romania requests that the Tribunal dismiss the claims brought by Claimants³⁸⁵.

2. CLAIMANTS' POSITION

278. Claimants aver that Respondent’s objection is meritless and devoid of legal support: Romania consented to arbitrate multiple claims with multiple claimants in one arbitration under the ICSID Convention and the ECT (A.), and Romania’s contentions regarding a “single” or “homogenous” dispute are baseless. In any case, Claimants have brought a single dispute (B.)³⁸⁶.

³⁸⁰ R-II, para. 411; R-PHB, paras. 51-53. ↩
³⁸¹ R-II, para. 412; R-PHB, para. 54. ↩
³⁸² R-II, para. 413; R-PHB, para. 55. ↩
³⁸³ R-II, para. 414; R-PHB, para. 56. ↩
³⁸⁴ R-II, para. 416; R-PHB, para. 57. ↩
³⁸⁵ R-II, para. 418; R-PHB, para. 57. Romania argues that Claimants’ attempt to bring a collective action is inappropriate also for reasons of competition law. Indeed, several Claimants are unrelated competitors and are sharing sensitive information in this proceeding, which could constitute an infringement of EU and Romanian competition law – although there is nothing to be asked from the Tribunal in this respect, other than to find that it lacks jurisdiction over this collective action (R-II, paras. 419-421). ↩
³⁸⁶ C-II, para. 224; C-PHB, para. 45. ↩

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A. No restriction to multi-party arbitration

279. Claimants agree that consent is the cornerstone of arbitration. However, they submit that, in the present case, Romania’s consent to arbitrate Claimants’ claims is clear and unambiguous³⁸⁷.

280. First, Claimants argue that under Art. 26 of the ECT Romania has given its “unconditional consent” to arbitrate disputes. ECT and other investor-State tribunals have confirmed repeatedly that³⁸⁸:

“[...] a joint acceptance of a state’s offer by a multitude of claimants cannot result in the tribunal losing jurisdiction that it would have if the claimants had commenced separate arbitrations.”

281. Second, Claimants note that the ICSID Secretariat has expressly confirmed that multi-party arbitration is permitted under the ICSID Convention and Rules. In fact, ICSID’s 2018 proposal to revise its Arbitration Rules did not include an express rule on this point, because the ICSID Convention and Rules already permit multiparty claims and ancillary claims. To clarify this point, ICSID merely proposed to amend its Arbitration Rules to define a “party” as including several claimants or respondents³⁸⁹.

282. Third, Claimants submit that it is common for investment treaties to use the singular and plural forms interchangeably, as is the case of the ECT³⁹⁰. Additionally, tribunals have recognized that the singular in international conventions can be used to include the plural. Thus, the use of the singular form in the ICSID Convention cannot serve to exclude multi-party arbitration³⁹¹.

283. Fourth, and in any event, permitting multi-party arbitration is consistent with the object and purpose of the ICSID Convention and the ECT, which is to permit investors to enforce their rights³⁹².

284. Fifth, Claimants contend that there is no restriction in the ICSID Convention or the ECT against “multi-party” claims. Multi-party arbitrations are a common practice in investment treaty arbitration, including under the ECT and ICSID Convention³⁹³.

285. Claimants aver that this is not an issue of jurisdiction, but one of procedure: whether the Tribunal is able to decide all of Claimants’ claims in a single proceeding. There is no doubt that the Tribunal can do so, and it would be less efficient and more costly for the Parties not to have all the claims resolved in one proceeding;

³⁸⁷ C-III, para. 197. ↩
³⁸⁸ C-II, para. 230; C-PHB, para. 46. ↩
³⁸⁹ C-III, para. 199. ↩
³⁹⁰ C-II, para. 234; C-III, para. 200. ↩
³⁹¹ C-III, paras. 201-202. ↩
³⁹² C-III, para. 200. ↩
³⁹³ C-II, para. 225; C-III, para. 203; C-PHB, para. 47. ↩

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otherwise, Romania would see multiple cases brought against it, by different investors, in relation to the same subject matter³⁹⁴.

286. Lastly, Claimants submit that there is no case law supporting Romania’s view regarding consent. Tribunals have consistently recognized that a State’s consent under a BIT is wide enough in scope to cover multi-party arbitration³⁹⁵.

B. Claimants' dispute can and should proceed in a single arbitration

Claimants' claims are homogeneous

287. Claimants argue that the proper standard for assessing whether multi-party claims are sufficiently similar is the one adopted by the Abaclat, Ambiente Ufficio and PV Investors tribunals, all of which accepted multi-party claims after finding that the claimants had invoked the same treaty protections, had challenged the same measures from the host State, and had requested the same type of relief³⁹⁶.

288. According to Claimants, that standard is met here, given that Claimants are a small number of investors who³⁹⁷:

- Invested in RES in the same type of technology (PV plants) and under the same regulatory regime (Romania’s GC support scheme);

- Complain of the same measures taken by Romania;

- Invoke the same two ECT provisions (violation of the fair and equitable treatment and the impairment clauses) as the basis of their legal claims;

- Claim the same type of relief and use the same approach to the calculation of compensation.

289. Claimants submit that the present case is even more homogenous than PV Investors, for two reasons³⁹⁸:

290. One, the present case involves ten Claimants, many of which have shared interests in the same investments. In fact, while there are ten named Claimants, they are part of only two groups of companies and hold investments in only two groups of PV plants (the two Frăsinet plants, on the one hand, and the three Alpha, Beta, and Gamma plants on the other). By contrast, the PV Investors case involved 88 claimants, forming 14 corporate groups, that had invested in over 65 different PV plants³⁹⁹.

³⁹⁴ C-II, para. 225; C-PHB, para. 47. ↩
³⁹⁵ C-III, paras. 205-206. ↩
³⁹⁶ C-PHB, para. 48. See also C-II, paras. 257-260. ↩
³⁹⁷ C-II, para. 264; C-PHB, paras. 49, 62-71 and 205. ↩
³⁹⁸ C-PHB, para. 49. ↩
³⁹⁹ C-PHB, paras. 50 and 57. See also C-II, para. 261. ↩

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291. Claimants recognize that the three Claimants that invested in the Frăsinet plants (Pressburg, Anina, and Giust) are unrelated to the seven Claimants that invested in the Alpha, Beta, and Gamma plants (LSG, Green Source, Solluce, Risen, Beta, Core Value Capital, and CVI Gamma). However, Claimants submit that this is an insufficient reason to require their claims to be resolved in two separate arbitrations. No tribunal has ever required all claimants to jointly own exactly the same investment in order to conclude that the claims are sufficiently similar or that the dispute is essentially identical. Claimants aver that the relevant question is how homogenous the claims and disputes are, and in this case, they are essentially identical among the limited number of investors and investments⁴⁰⁰.

292. Two, several Claimants invested jointly in the same plants, and it would not make sense to separate their claims into different arbitrations. LSG and Green Source are partners in their three plants with Solluce, Risen, and the Core Value Claimants, respectively. It would not make sense to advance claims in separate arbitrations. By contrast, in the PV Investors case there were 14 groups of claimants truly unrelated, who did not jointly invest in the same plants with other claimants⁴⁰¹.

293. In any case, Claimants note that minor variations in fact patterns between the different Claimants and their investments (e.g., the timing of the investment, the different strategies of investors, the compensation owed to each Claimant, etc.), while potentially relevant to the merits and/or quantum of the case, are irrelevant to jurisdiction generally and to the issue of consent specifically⁴⁰².

No case of mass claims

294. Claimants aver that the Alemanni test relied upon by Respondent is inapposite: the tribunal, faced with claims from 183 unrelated Italian individuals and legal entities, created a test to determine whether mass claims are “essentially identical”. However, the Alemanni tribunal conflated merits issues in its jurisdictional analysis, and ultimately did not apply its own test⁴⁰³.

295. Claimants accept that the situation of mass claims arguably demands a somewhat stricter test than a situation of multi-party claims, due to the sheer number of claimants involved. However, a “mass claims” test is inappropriate here, since this is a case involving a small number of mostly related investors⁴⁰⁴.

296. Claimants submit that the very limited number of cases in which an objection like the one raised by Respondent has ever been discussed involve dozens, hundreds or even thousands of investors, in so-called “mass arbitrations” – and even in those cases tribunals have rejected this objection⁴⁰⁵. Significantly, the Adamakopoulos tribunal, which analyzed a case involving 956 unrelated investors, arising out of

⁴⁰⁰ C-PHB, para. 59. ↩
⁴⁰¹ C-PHB, paras. 51 and 58. ↩
⁴⁰² C-II, paras. 261-263; C-PHB, paras. 61-70. ↩
⁴⁰³ C-II, paras. 247-248; C-PHB, para. 52. ↩
⁴⁰⁴ C-PHB, para. 53. ↩
⁴⁰⁵ C-II, para. 240. ↩

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two different investment treaties, applied the Alemanni test and still found that the claims were “in all essential respects” the same⁴⁰⁶.

297. In the present case, Claimants argue that there is no doubt that their “interests” are the same in all the essential respects of the case⁴⁰⁷.

298. In light of the above, Claimants submit that the Tribunal may and should decide Claimants’ multi-party dispute in this single arbitration, and thereby dismiss Respondent’s objection⁴⁰⁸.

3. DECISION OF THE TRIBUNAL

299. The Parties discuss whether multiple Claimants can bring a claim against Romania.

300. The Parties do not dispute, and the Tribunal agrees, that consent is the cornerstone of arbitration, and that a State can only be bound to arbitrate disputes to which it has given its consent. The Tribunal must determine whether Romania gave its consent to arbitrate a dispute with multiple claimants both under the ECT and under the ICSID Convention (A.). The Tribunal will further assess whether Claimants’ claims are sufficiently homogeneous that they can be solved in a single proceeding (B.).

A. Romania consented to arbitrate multi-party claims

301. Pursuant to Art. 26 of the ECT, as a Contracting Party to the ECT, Romania gave its unconditional consent to submit disputes relating to protected investments to international arbitration under the ICSID Convention⁴⁰⁹:

“(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 can not 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: [...] (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. [...]

⁴⁰⁶ C-PHB, paras. 52, 54. ↩
⁴⁰⁷ C-II, paras. 252-253; C-PHB, para. 54. ↩
⁴⁰⁸ C-PHB, paras. 71 and 205. ↩
⁴⁰⁹ Doc. CL-1, Art. 26(1) to (4). ↩

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(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 [...]” [Emphasis added]

302. Art. 26(5) of the ECT further determines that the unconditional consent given by Romania, as Contracting Party, and that of an investor, when choosing to submit a dispute to the Centre, satisfy the requirement for written consent of the Parties to a dispute for the purposes of Art. 25(1) of the ICSID Convention⁴¹⁰, which provides as follows⁴¹¹:

“(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.” [Emphasis added]

303. The above provisions demonstrate that Romania gave its unconditional and irrevocable consent to submit disputes concerning an alleged breach of its obligations under the ECT to the jurisdiction of the Centre.

304. Romania, however, argues that it did not consent to arbitrate a claim with multiple claimants because⁴¹²:

- Neither the ECT nor the ICSID Convention include explicit language that expressly allows multiple investors to bring claims against a respondent State; and

- The texts of both the ICSID Convention and the ECT demonstrate that the scope of consent thereunder covers only disputes involving one investor and one respondent State.

305. Claimants, on the other hand, aver that this is not a question of consent or jurisdiction, given that Romania’s consent is unconditional and not limited in any way. Rather, Claimants submit that this is a question of procedure, and the ICSID

⁴¹⁰ Doc. CL-1, Art. 26(5)(a). ↩
⁴¹¹ ICSID Convention, Art. 25(1). ↩
⁴¹² R-PHB, paras. 37 et seq. ↩

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Convention empowers the Tribunal to decide all of Claimants’ claims in a single proceeding⁴¹³.

306. Irrespective of whether this objection is considered a matter of jurisdiction, admissibility or procedure, insofar as Respondent has framed its objection as an issue of consent, the Tribunal will determine whether the scope of Romania’s consent under the ECT and the ICSID Convention is broad enough to cover proceedings brought by the multiple Claimants in this case. Considering that none of these treaties refers explicitly to multi-party arbitration, the Tribunal must interpret the relevant provisions of the ECT (a.) and the ICSID Convention (b.).

Rules on treaty interpretation

307. Pursuant to Art. 31 of the Vienna Convention on the Law of Treaties [“VCLT”] the Tribunal must interpret a treaty in “good faith” and in accordance with the “ordinary meaning to be given to its terms” in their “context” and in light of the treaty’s “object and purpose”⁴¹⁴. In addition to the text, the context for the purpose of the interpretation of a treaty shall comprise⁴¹⁵:

“(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.”

308. Furthermore, a tribunal construing the terms of a treaty should also take into account “[a]ny subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions”, as well as “[a]ny subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation”⁴¹⁶.

309. Finally, in accordance with Art. 32 of the VCLT, “[r]ecourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion” only “to confirm the meaning” resulting from the textual approach required by Art. 31, or in the event the textual approach leaves a meaning “ambiguous or obscure” or would lead to a result that is “manifestly absurd or unreasonable”⁴¹⁷.

a. Interpretation of the ECT

310. According to Romania, the provisions of Art. 26 of the ECT show that the respondent State’s consent is limited to arbitrations brought by a single Investor in relation to one Investment against one Contracting Party, as demonstrated by the

⁴¹³ C-PHB, paras. 45-47. ↩
⁴¹⁴ Doc. CL-33, Art. 31(1). ↩
⁴¹⁵ Doc. CL-33, Art. 31(2). ↩
⁴¹⁶ Doc. CL-33, Art. 31(3). ↩
⁴¹⁷ Doc. CL-33, Art. 32. ↩

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use of the singular throughout the text (“[d]isputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment [...]”)⁴¹⁸. Absent explicit language that clearly allows multiple claimants to bring claims against the State, no collective arbitration can go forward⁴¹⁹.

311. The Tribunal is unconvinced that a reading of Art. 26 of the ECT in accordance with the VCLT interpretation rules leads to the conclusion that Romania has not consented to multi-party arbitrations.

312. First, an interpretation of Art. 26 in good faith, in accordance with the “ordinary meaning” of the text, which can be ascertained in light of the context and the Treaty’s object and purpose, leads to the opposite conclusion. The ECT uses the singular and plural forms throughout the text interchangeably, referring either to “Investor” or to “Investors” without distinction; it also refers to “Investment” or “Investments” indistinctively. If Romania’s argument were correct, claims relating to multiple investments of a single investor would equally be barred, which cannot be the correct interpretation of Art. 26, considering that Art. 1(6) provides in unequivocal terms that “[a] change in the form in which assets are invested does not affect their character as investments and the term ‘Investment’ includes all investments [...]”⁴²⁰.

313. The Tribunal coincides with the following finding of the PV Investors tribunal⁴²¹:

“[...] the Tribunal does not see how the reference in Article 26 to ‘an Investor’ in the singular would bar jurisdiction over a multiplicity of claimants. Quite apart from the fact that elsewhere in Part III the Treaty uses ‘Investors’ in the plural (see, e.g., Article 10 of the ECT), the Tribunal does not believe that the use of the singular in the dispute settlement clause means that the individual disputes have to be heard separately. What matters is that disputes between one of the Contracting Parties and an investor be adjudged in their individual dimension, i.e., in the same way as they would be in an ECT arbitration with a single claimant.”

314. Furthermore, the Tribunal sees no reason to construe the silence of Art. 26 regarding multi-party arbitrations as limiting the scope of the consent given by the Contracting Party.

315. Second, a broader interpretation of the scope of consent is consistent with the context, as well as with the object and purpose of the ECT, which inter alia aims at protecting foreign energy investments. As noted by the tribunal in PV Investors, consent in investment treaty arbitration has a peculiar nature: the host State extends a standing offer to arbitrate to an indefinite number of previously unidentified investors falling within the jurisdictional requirements of the treaty; if there is

⁴¹⁸ R-I, paras. 300-303; R-PHB, paras. 42-43. ↩
⁴¹⁹ R-II, para. 366. ↩
⁴²⁰ Doc. CL-1, ECT, Art. 1(6). ↩
⁴²¹ Doc. CL-172, PV Investors, para. 99. ↩

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consent by the host State, the fact that the offer is then accepted by one single claimant or multiple claimants jointly is immaterial⁴²².

316. Finally, subsequent practice in the application of the ECT further confirms that multi-party claims fall within the scope of consent of the Contracting Parties to the ECT. There have been numerous arbitrations conducted under the ECT involving multiple claimants⁴²³ (to name but a few, Hydro Energy, Watkins, OperaFund, InfraRed⁴²⁴, etc.).

317. If Romania’s interpretation were correct, in the vast majority of these arbitrations, respondent States, Contracting Parties to the ECT, should have objected to claims brought by multiple claimants on the basis that they had not consented to arbitrate such claims. Likewise, the tribunals deciding such disputes should have determined sua sponte, in application of the Kompetenz-Kompetenz principle, that they lacked jurisdiction to decide the dispute, due to the alleged lack of consent by the respondent States⁴²⁵. In fact, however, Romania has not pointed to a single case in which a tribunal declined jurisdiction on the basis that the Contracting Party to the ECT had not given its consent to multi-party arbitration.

318. In sum, the Tribunal concludes that Romania gave its unconditional consent to arbitrate claims with multiple claimants under Art. 26 of the ECT.

b. Interpretation of the ICSID Convention

319. Like the ECT, the ICSID Convention lacks an explicit reference to the Contracting State’s consent to arbitrate multi-party claims. Respondent avers that the use of the singular form in Art. 25(1) of the ICSID Convention (“a national of another Contracting State”) limits the scope of the Convention to single-party disputes⁴²⁶.

320. The Tribunal is not persuaded by Romania’s position.

321. First, the Tribunal should begin by interpreting the relevant provisions in good faith in accordance with the “ordinary meaning” of the terms. As noted by the Alemanni⁴²⁷ tribunal, there is no reason to conclude that the wording of Art. 25(1) cannot encompass a plurality of investors. Likewise, there is⁴²⁸:

“[...] no reasonable basis for implying into the text as it stands of Article 25(1) the additional words ‘but only one’.”

⁴²² Doc. CL-172, PV Investors, para. 100. ↩
⁴²³ In PV Investors the tribunal noted: “[...] investment treaty arbitration practice is replete with examples of proceedings which have involved more than one claimant.” (Doc. CL-172, para. 103). ↩
⁴²⁴ Doc. RL-225, Hydro Energy; Doc. CL-200, Watkins; Doc. CL-173, OperaFund; Doc. CL-174, InfraRed. ↩
⁴²⁵ See also Doc. CL-172, PV Investors, para. 104. ↩
⁴²⁶ R-II, paras. 368-371; R-PHB, paras. 39-40. ↩
⁴²⁷ Doc. CL-156, Alemanni, para. 270. ↩
⁴²⁸ Doc. CL-156, Alemanni, para. 271. ↩

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322. As noted by the Adamakopoulos tribunal⁴²⁹,

"[...] while [the ICSID Convention] does not expressly provide for individual claims to be brought on a multi-party basis, neither does it preclude such claims from being so brought."

323. Second, when considering the terms “a national of another Contracting State" in their context and in light of the object and purpose of the ICSID Convention, it becomes clear that a restrictive interpretation of this provision is not appropriate. As previously mentioned, “context” for treaty interpretation shall comprise any agreement or instrument related to the conclusion of the treaty. The 2018 Working Paper with "Proposals for Amendments of the ICSID Rules", prepared by the ICSID Secretariat after receiving topics for rule amendments from Contracting States and the public, sheds light on the present discussion⁴³⁰.

324. Schedule 7 to this Working Paper, entitled “Multiparty Claims and Consolidation" explains that multi-party claims are those “[...] brought by two or more claimants that initiate a single proceeding by jointly filing a single Request for arbitration”. Schedule 7 affirms in unequivocal terms that the ICSID Convention already permits multi-party claims⁴³¹:

“The ICSID Convention, [Arbitration Rules] and [Additional Facility Arbitration Rules] already permit multiparty claims and ancillary claims, including counter-claims. As a result, the proposed amendments to the Rules related to these mechanisms are minimal." [Emphasis added]

325. Thus, ICSID merely proposed to amend its Arbitration Rules to define a “party” as including several claimants or respondents⁴³².

326. Third, pursuant to Art. 31(3) of the VCLT, a tribunal construing the terms of a treaty may also consider “any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation”.

327. In this regard, the Tribunal notes that multi-party claims have been generally accepted under the ICSID Convention⁴³³. Among the cases that have recognized that the ICSID Convention permits multi-party claims are the Abaclat⁴³⁴, Ambiente Ufficio⁴³⁵ or Alemanni⁴³⁶. The tribunal in Ambiente Ufficio pointed out that⁴³⁷:

"[...] a look at ICSID's case list reveals that 38 out of the 398 reported cases include the phrase "and others” on the claimant's side, i.e. they are multi-party

⁴²⁹ Doc. RL-40, Adamakopoulos, para. 200. ↩
⁴³⁰ Doc. CL-137, p. 1, para. 4. ↩
⁴³¹ Doc. CL-137, p. 833, para. 4. ↩
⁴³² Doc. CL-137, p. 835, para. 20. ↩
⁴³³ Doc. RL-103, Schreuer, p. 163, para. 278. ↩
⁴³⁴ Doc. CL-157. ↩
⁴³⁵ Doc. CL-154. ↩
⁴³⁶ Doc. CL-156. ↩
⁴³⁷ Doc. CL-154, Ambiente Ufficio, paras. 135 and 141. ↩

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cases. Already this simple fact manifests that multi-party arbitration is a common feature in ICSID arbitration.

[...] it is evident that multi-party arbitration is a generally accepted practice in ICSID arbitration, and in the arbitral practice beyond that, and that the institution of multi-party proceedings therefore does not require any consent on the part of the respondent Government beyond the general requirements of consent to arbitration."

328. This view is supported by the ICSID Working Paper, which notes that⁴³⁸.

"In practice, Tribunals have consistently found that the ICSID Convention and [Arbitration Rules], and the [Additional Facility Arbitration Rules], allow multiparty proceedings and current procedural rules have accommodated such claims."

329. Lastly, in accordance with Art. 32 of the VCLT,

"[r]ecourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion".

The travaux préparatoires show that multi-party procedures were already anticipated by the drafters of the ICSID Convention⁴³⁹ and thus confirm what could be inferred from the interpretation of the ICSID Convention in accordance with Art. 31 of the VCLT, i.e., that a Contracting State's consent to arbitrate under the Convention should not be interpreted restrictively to exclude multi-party claims.

330. In view of the above, the Tribunal concludes that consent to arbitrate under the ICSID Convention includes consent to arbitrate claims brought by multiple claimants.

B. Homogeneity threshold

331. Romania submits that even if the Tribunal were to consider that Romania somehow consented under the ECT and the ICSID Convention to arbitrate claims by multiple claimants in one single arbitration, the Tribunal would still be required to dismiss those claims because they do not constitute a “single dispute” in application of the "single dispute test” set forth by the Alemanni tribunal⁴⁴⁰.

332. Claimants, on the other hand, argue that the proper standard for assessing whether multi-party claims are sufficiently similar is the one adopted by the Abaclat, Ambiente Ufficio and PV Investors tribunals, all of which accepted multi-party claims after finding that the claimants had invoked the same treaty protections, had challenged the same measures from the host State, and had requested the same type of relief⁴⁴¹.

⁴³⁸ Doc. CL-137, p. 833, paras. 6-7. ↩
⁴³⁹ History of the ICSID Convention, Vol. II, part 1, pp. 400, 413. ↩
⁴⁴⁰ R-PHB, para. 45. ↩
⁴⁴¹ C-PHB, para. 48. See also C-II, paras. 257-260. ↩

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333. The Tribunal has found that Romania consented to arbitrate claims brought by multiple claimants. As pointed out by Romania, a different question is whether the present multi-party claims have been properly submitted and can be adjudicated in a single proceeding. According to the ICSID 2018 Working Paper, tribunals considering whether a multi-party claim can proceed have considered various factors, in particular whether the multiple claims have a factual connection or whether a single dispute exists⁴⁴².

334. The Abaclat⁴⁴³ (2011) and Ambiente Ufficio⁴⁴⁴ (2013) tribunals have both found that claims brought by multiple claimants could only go forward if they could “be considered identical or at least sufficiently homogeneous”. For the Abaclat tribunal majority, a case involving initially 180,000 and later 60,000 claimants⁴⁴⁵.

"The only relevant question is whether Claimants have homogeneous rights of compensation for a homogeneous damage caused to them by potential homogeneous breaches by Argentina of homogeneous obligations provided for in the BIT."

335. Prof. Georges Abi-Saab, who dissented from the Abaclat majority on the possibility of bringing "collective mass claims actions” in the ICSID context, did recognize that "limited multiparty arbitrations” were possible to the extent they permitted "an individual, detailed and adversarial examination of every claim and claimant”⁴⁴⁶.

336. In Ambiente Ufficio the tribunal also stressed the importance that there be a link among claimants in terms of the treaty claim they jointly submit in the arbitration⁴⁴⁷.

"[...] [Claimants] are right to point out that they complain about the same illegality which the Respondent is said to have committed against them all. They base their claim on the same provisions of the Argentina-Italy BIT as well as the ICSID Convention and they have made identical prayers of relief, i.e. indemnification under the BIT for the acts allegedly committed by the Respondent. In addition, they claim that the factual background on the basis of which the Claimants seek to establish their claim is virtually the same for all Claimants.

162. In contrast, the fact – which Respondent has highlighted repeatedly and intensively - that there are certain differences between the Claimants as to the dates and the series of bonds under which the different security entitlements were acquired, or regarding the currency or interest rate which would apply to them, etc., are not relevant here since they relate to the contractual claims the Claimants may have, but not to the treaty claims with which the Tribunal is dealing here." [Emphasis added]

⁴⁴² Doc. CL-137, p. 834, paras. 11-13. ↩
⁴⁴³ Doc. CL-157, Abaclat, para. 540. ↩
⁴⁴⁴ Doc. CL-154, Ambiente Ufficio, paras. 159-161. ↩
⁴⁴⁵ Doc. CL-157, Abaclat, para. 541. ↩
⁴⁴⁶ Doc. RL-111, Abaclat, Dissenting Opinion of Prof. Georges Abi-Saab, paras. 170-171. ↩
⁴⁴⁷ Doc. CL-154, Ambiente Ufficio, paras. 161-162. ↩

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337. The majority of the tribunal in the more recent Alemanni (2014) case (involving 183 Italian individuals and legal entities), invoking the decisions in Abaclat and Ambiente Ufficio, decided to go further and to strengthen the requirement, by establishing that a "single dispute" is necessary to meet the requirement of Art. 25(1) of the ICSID Convention⁴⁴⁸.

"In searching, therefore, for an element that more satisfactorily defines the link that must exist between a group of claimants and between their claims, in the absence of consent by the respondent to the hearing of their claims together, the Tribunal has come to the conclusion that the answer lies in the notion of a ‘dispute'. To go back to basics, the jurisdiction created by Article 25(1) of the ICSID Convention 'extends to' (which in context means, is confined to) 'any legal dispute arising directly out of an investment'. ICSID tribunals have always treated this requirement with deliberate importance. They have considered whether the parties are in fact in dispute; whether the dispute is a legal dispute; whether the dispute arises out of an investment; and whether it arises 'directly' out of an investment. The cases are listed in Schreuer's Commentary at pp. 93 ff. The rubric in Article 25(1) contains however a further condition which may not be as immediately obvious, namely that it must be 'a' dispute. The focus on 'a' dispute is continued in both the ICSID Institution Rules (Article 2) and the ICSID Arbitration Rules (Rule 1)." [Emphasis added]

338. The Alemanni tribunal went on to point out that the dispute settlement clause of the BIT applicable in that particular case also referred to “any dispute”, “a dispute” and "the dispute", which would lead to the conclusion that a “single dispute" would be necessary for the claims of the multiple claimants to proceed⁴⁴⁹. However, ultimately the Alemanni tribunal did not apply its own test.

339. Recently, the tribunal in Adamakopoulos (2020), a case involving 956 claimants, decided to apply the Alemanni standard in order to determine whether the claims could be regarded as a “single dispute". It went on to find that⁴⁵⁰.

"In the view of the Tribunal there is ‘substantial unity' or similarity in the claims that are being made and the breaches alleged. The claims arise out of the actions by the Republic of Cyprus in respect of the Laiki Bank and the Bank of Cyprus in 2013 as a consequence of the economic crisis Cyprus faced in the early 2000s. The Claimants were deposit holders or bondholders in one or both of these banks. With respect to the bondholders, it is claimed, the actions taken by Cyprus had the same effect – the bonds were made worthless either by being transferred into equity in the case of Bank of Cyprus bonds or through the demise of the Laiki Bank. In the case of deposit holders in both banks, they were all subject to the same ‘haircut'. Uninsured deposits, that is those over $100,000, were ‘bailed-in'. In short, all of the claims are about the measures that were taken against the two banks, which in key respects are identical measures." [Emphasis added]

⁴⁴⁸ Doc. CL-156/RL-30, Alemanni, para. 292. ↩
⁴⁴⁹ Doc. CL-156/RL-30, Alemanni, para. 292. ↩
⁴⁵⁰ Doc. RL-40, Adamakopoulos, para. 210. ↩

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340. Furthermore, in 2019, the Institute of International Law adopted a resolution on Equality of Parties (previously defined as the “IIL Resolution”), which provides that where several investors seek to institute their claims in a single arbitration against the same State, when determining its jurisdiction, the tribunal must be satisfied that the “claim as a whole advances a single dispute”, in the sense that “the interest represented by the claimants is in all respects identical”⁴⁵¹:

"(a) Each claimant individually satisfies the jurisdictional requirements (both of the instrument of consent and, where applicable, Article 25 of the ICSID Convention) in order to bring its claim; and

(b) The claim as a whole advances a single dispute, in that the interest represented by the claimants is in all respects identical, so that the respondent is not prejudiced by having to defend itself against claims that differ materially in the interest to be vindicated.

The tribunal may hold a claim brought by multiple claimants to be inadmissible if it finds that the manner in which the claim is brought would adversely affect the tribunal's ability to ensure that both sides of the dispute are treated with equality in the presentation of their case or in their defence of the claims."

341. While the Tribunal is not entirely convinced that the Alemanni test of a “single dispute" should be applied in the present case (for the main reason that the BIT applicable in Alemanni referred only to a “dispute”, while Art. 26 of the ECT refers in general to “disputes”), all the relevant legal authorities point to the fact that there must be a certain degree of homogeneity between multiple claimants who seek to bring joint claims against a host State (whether it is called a "single dispute”, an “identical interest” or an “identity” between claims).

342. Indeed, it would seem unfair to have a State fight off in a single arbitration claims by multiple claimants relating to a completely heterogeneous set of facts and treaty claims. Ultimately, as noted by the tribunal in the PV Investors case (2014), there must be a "sufficient connection” between the different claimants “to justify hearing [their] claims in one single arbitration”⁴⁵².

343. The Tribunal must start by establishing the proven facts (a.) so it can then make its determination (b.).

a. Proven facts

Claimants' investments in Romania

344. Claimants are ten project developers who invested in five solar PV plants in southern Romania⁴⁵³ after 2010, at different points in time. These five PV plants

⁴⁵¹ Doc. RL-124, IIL Resolution, Art. 5(2). ↩
⁴⁵² Doc. CL-172, PV Investors, para. 117. ↩
⁴⁵³ C-I, paras. 13 and 172; R-I, para. 513; CD-1, slide 99. ↩

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are⁴⁵⁴:

- The Alpha PV Facility, a PV facility of 45 MWp installed capacity in Giurgiu, Romania;

- The Beta PV Facility, a PV plant of 20 MWp installed capacity in Giurgiu, Romania;

- The Gamma PV Facility, a PV plant of 50 MWp installed capacity also in Giurgiu, Romania;

- Frăsinet 2, a PV facility of 9.5 MWp installed capacity in Călărași, Romania; and

- Frăsinet 3, a PV plant of 5.4 MWp installed capacity also located in Călăraşi, Romania.

345. These five PV plants can be divided into two sets of projects⁴⁵⁵:

- On the one hand, the Alpha, Beta, and Gamma PV Facilities, located in the Giurgiu county and initially developed by Claimants LSG and Green Source, before selling a portion of their shares to Claimants Solluce, Core Value, and Risen, in this latter case through Claimant Beta;

- On the other hand, the Frăsinet PV Facilities, located in the Călărași county and developed by Claimants Anina, Giust, and Pressburg.

346. Claimants acknowledge that the seven Claimants that invested in the Alpha, Beta, and Gamma PV Facilities are unrelated to the three Claimants that invested in the Frăsinet PV Facilities⁴⁵⁶.

Claimants' prayers for relief in this arbitration

347. In this arbitration Claimants jointly request inter alia the following relief:

- A declaration that the Tribunal has jurisdiction under the ICSID Convention and the ECT;

- A declaration that Romania has violated the ECT and international law with respect to Claimants' investments; and

- Compensation to Claimants for all damages they have suffered, as set forth in Claimants' submissions.

⁴⁵⁴ Edwards I, Table 1-2 and Figure 1-1. ↩
⁴⁵⁵ C-I, paras. 173-174; CD-1, slide 99; C-PHB, paras. 57 and 151. ↩
⁴⁵⁶ C-PHB, para. 59. ↩

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348. Claimants jointly argue that Romania breached Art. 10(1) of the ECT, inter alia by failing to accord Fair and Equitable Treatment to Claimants' investments, and by unreasonably impairing their investments.

b. Claimants' claims are sufficiently connected

349. Romania contends that there are concrete factual differences among Claimants and there is a clear lack of identity of Claimants' interests in all essential respects⁴⁵⁷. In particular:

- Claimants' claims concern five different PV plants, located in different Romanian regions, with different outputs and amounts of GCs being received at any given time, as well as different financial arrangements;

- Claimants made their respective investments at different points in time;

- Claimants do not have similar types of claims against Romania, since some Claimants are direct owners of PV Facilities (Beta), while others are only shareholders in parent companies; and

- There is no unity or identity in the quantum determinations for each claim, since the quantum calculations are necessarily plant-specific and claimant- specific.

350. Claimants, on the contrary, argue that they are a small number of investors who⁴⁵⁸:

- Invested in RES in the same type of technology (PV plants) and under the same regulatory regime (Romania's GC support scheme);

- Complain of the same measures taken by Romania;

- Invoke the same two ECT provisions (violation of the fair and equitable treatment and the impairment clauses) as the basis of their legal claims; and

- Claim the same type of relief and use the same approach to the calculation of compensation.

351. Applying the sufficient connection or homogeneity standard developed by the Abaclat, Ambiente Ufficio and PV Investors tribunals, the Tribunal finds that Claimants' claims are sufficiently homogeneous and can be brought in a single arbitration.

352. First, Claimants are a group of investors in the exact same sector of economic activity, RES-E and particularly PV plants. Although Claimants have invested in five different PV Facilities, several Claimants held interests across the same PV

⁴⁵⁷ R-II, para. 416; R-PHB, para. 57. ↩
⁴⁵⁸ C-II, para. 264; C-PHB, paras. 49, 62-71 and 205. ↩

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Facilities. Furthermore, Claimants' allegations with respect to their investments relate to the same set of measures adopted by Romania: the Disputed Measures.

353. Second, Claimants bring their claims under the same Treaty, the ECT, and invoke the same Treaty protections, by claiming that Romania violated Art. 10(1) of the ECT.

354. Third, all Claimants seek the same remedy: compensation for damages. The only difference lies in the quantification of the remedy, because the valuation of damages is asset-specific (since each plant had a different output and was consequently entitled to a different number of GCs). It is not uncommon that investments cover several assets, and thus, multiple valuations are involved in the quantum phase – this does not give rise to distinct claims or disputes. Hence, the multiplicity of damage quantifications should have no bearing on the possibility for Claimants to bring their claims in a single proceeding⁴⁵⁹.

355. Overall, the Tribunal finds that it would be inefficient for the Claimants in this case to start separate arbitrations against Romania for almost the exact same factual background, same Disputed Measures, same alleged violations of the ECT and same requests for relief. The Tribunal considers that Romania is not prejudiced by having to defend itself in this case, since the interest to be vindicated does not differ materially⁴⁶⁰.

356. That said, the Tribunal will make sure to ascertain whether the jurisdictional requirements are satisfied for each of these individual Claimants⁴⁶¹ and whether the provisions of the Treaty have been breached in respect of each of them (if any).

***

357. In view of the above, the Tribunal concludes that Romania has consented to arbitrate the present dispute with multiple Claimants. Consequently, the Tribunal rejects Romania's jurisdictional objection.

⁴⁵⁹ See Doc. CL-154, Ambiente Ufficio, para. 162; Doc. CL-157, Abaclat, para. 543; Doc. RL-40, Adamokopoulos, para. 219. ↩
⁴⁶⁰ Doc. RL-124, Art. 5(2)(b). ↩
⁴⁶¹ See Doc. RL-124, Art. 5(2)(a); Doc. RL-40, Adamakopoulos, para. 202. ↩

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V.2. OBJECTION TO JURISDICTION OVER CLAIMS OF ANINA AND GIUST

1. RESPONDENT'S POSITION

358. Romania submits that the Tribunal should decline jurisdiction over and dismiss the claims brought by Anina and Giust because these two Claimants do not meet the nationality requirements of both the ICSID Convention and the ECT (A.)⁴⁶². Additionally, Romania considers that, pursuant to Art. 17 of the ECT, it may validly deny Anina and Giust the benefits of the ECT (B.)⁴⁶³.

A. Anina and Giust do not meet the necessary nationality requirements

a. Nationality requirements under Art. 25 of the ICSID Convention

359. Romania notes that Art. 25(1) of the ICSID Convention includes a nationality requirement to the effect that a national of a given Contracting State may bring claims under the ICSID Convention only against another Contracting State – in other words, such national may not bring claims against its own Contracting State⁴⁶⁴. Thus, Romania affirms that this Tribunal cannot entertain a claim by a claimant that has the nationality of the host Contracting State⁴⁶⁵.

360. Romania argues that under Art. 31(1) of the VCLT the Tribunal must interpret the terms of the ICSID Convention in light of its object and purpose. Romania observes that the Preamble of the ICSID Convention makes it clear that the object and purpose of the ICSID Convention is to foster foreign, cross-border investment, and to facilitate the resolution of international (not domestic) disputes⁴⁶⁶. Thus, the terms “national of another Contracting State” in Art. 25 of the ICSID Convention must not be interpreted in such a way as to allow a national to effectively sue its own State⁴⁶⁷.

361. Romania avers that if an entity that is wholly owned and controlled by a national of the host Contracting State were allowed to sue that State, the object and purpose of the ICSID Convention would be undermined⁴⁶⁸.

362. It is Romania's position that, in the present case, allowing Anina and Giust to sue Romania would violate the object and purpose of the ICSID Convention, and would thus be inconsistent with the rules of treaty interpretation of the VCLT. This is because Anina and Giust, although incorporated in Cyprus, are entirely owned, controlled, and operated by a Romanian national, Mr. Cătălin-Liviu. Additionally,

⁴⁶² R-II, para. 422; R-PHB, para. 60. ↩
⁴⁶³ R-II, para. 423. ↩
⁴⁶⁴ R-II, para. 426; R-PHB, para. 61. ↩
⁴⁶⁵ R-PHB, para. 62. ↩
⁴⁶⁶ R-II, paras. 427-429; R-PHB, para. 63. ↩
⁴⁶⁷ R-II, paras. 433-434; R-PHB, para. 63. ↩
⁴⁶⁸ R-II, para. 464; R-PHB, para. 63. ↩

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Romania asserts that Anina and Giust do not conduct business nor maintain a proper registered office in Cyprus⁴⁶⁹.

363. This leads Romania to submit that Anina and Giust are merely flow-through entities, that have been used by a Romanian national to invest in Romania and now sue his own State. Thus, the claims brought by Anina and Giust are effectively domestic claims⁴⁷⁰.

364. Lastly, Romania argues that the Tokios Tokelės decision on jurisdiction is inapposite. It was reached by a majority of the tribunal, with a strong dissenting opinion by its president, Prof. Prosper Weil. This decision did not take into consideration the object and purpose of the ICSID Convention, and thereby failed to correctly interpret this treaty in accordance with the VCLT⁴⁷¹. Cases that followed the steps of the majority in Tokios Tokelės were equally wrong⁴⁷².

b. Nationality requirements under Art. 26 of the ECT

365. Furthermore, Romania argues that Anina and Giust do not meet the nationality requirements of the ECT⁴⁷³.

366. Romania submits that like the ICSID Convention, Art. 26 of the ECT makes it clear that only disputes between a Contracting Party and a foreign investor may be brought⁴⁷⁴. Moreover, the ECT's object and purpose is to foster foreign investment in the energy sector and to afford protection to international investors, not domestic investors. Therefore, Romania contends that ECT claims can only be brought by entities that are genuinely foreign. Accordingly, entities that are owned and controlled by a national of the host State must not be allowed to bring claims under the ECT against said host State⁴⁷⁵.

367. Romania argues that just as the signatories of the ICSID Convention did not intend it to be used for domestic disputes, ECT Contracting Parties did not intend it to apply to their own nationals. Accordingly, foreign entities owned and controlled by nationals of the host State should not be allowed to bring claims against said host State under the ECT⁴⁷⁶.

368. As mentioned above, Romania asserts that Anina and Giust are wholly owned, controlled, and operated by a Romanian national. Romania submits that the evidence on the record shows that they are empty shells created by a Romanian national to circumvent the principle that no national may sue his own State in the

⁴⁶⁹ R-II, paras. 437 and 459; R-PHB, para. 64. ↩
⁴⁷⁰ R-II, paras. 458 and 463; R-PHB, para. 65. ↩
⁴⁷¹ R-II, paras. 440-441. See also R-II, paras. 438-439. ↩
⁴⁷² R-II, paras. 442 et seq. ↩
⁴⁷³ R-PHB, para. 67. ↩
⁴⁷⁴ R-II, para. 467; R-PHB, para. 68. ↩
⁴⁷⁵ R-II, paras. 467-469; R-PHB, para. 69. ↩
⁴⁷⁶ R-II, para. 471. ↩

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international legal order. Thus, Anina and Giust do not meet the nationality requirement of the ECT⁴⁷⁷.

369. In view of the above, Romania requests that the Tribunal dismiss the claims brought by Claimants Anina and Giust against Romania, for lack of jurisdiction, since Claimants fail to satisfy the nationality requirements of the ICSID Convention and the ECT⁴⁷⁸.

B. Art. 17 of the ECT enables Romania to deny benefits

370. Furthermore, Romania avers that Art. 17 of the ECT grants host States the right to deny ECT benefits to claimants that are either third country controlled, or host State controlled. This provision must be interpreted in a manner that is consistent with the ECT's object and purpose, which consists in affording protection to international investors in the energy field. Therefore, Art. 17 allows respondent States to deny ECT benefits to entities that are not foreign owned⁴⁷⁹.

371. Contrary to Claimants' submission, Romania contends that Art. 17 of the ECT can be invoked retrospectively. Applying Art. 17 in a solely prospective manner would deprive this provision of its effet utile. This is because no State would be able or willing to preventively deny benefits to entities the existence of which it ignores, unless it engaged in a monitoring activity of all foreign entities. This would place an unreasonable burden on States, given the dissymmetry of information between putative investors and States⁴⁸⁰.

372. Moreover, Romania suggests that denial of benefits clauses are meant to prevent free riders from benefiting from protections afforded in a given treaty. Applying them prospectively only would defeat the object and purpose of such clauses⁴⁸¹.

373. In sum, Romania concludes that Art. 17 of the ECT should be applied retrospectively and wishes to deny benefits to Anina and Giust since they are 100% owned, controlled, and operated by a Romanian national⁴⁸².

2. CLAIMANTS' POSITION

374. Claimants sustain that Romania's objection is without merit because Anina and Giust qualify as investors under both the ICSID Convention and the ECT (A.)⁴⁸³. In any case, Romania cannot deny Anina and Giust the benefits of the ECT (B.).

⁴⁷⁷ R-II, paras. 476-477; R-PHB, para. 70. ↩
⁴⁷⁸ R-PHB, paras. 66, 71, 73-74. ↩
⁴⁷⁹ R-II, paras. 479-486. ↩
⁴⁸⁰ R-I, para. 494; R-II, paras. 488-489, 491. ↩
⁴⁸¹ R-II, para. 490. ↩
⁴⁸² R-II, para. 515. ↩
⁴⁸³ C-III, paras. 228-229; C-PHB, para. 73. ↩

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A. Anina and Giust qualify as investors

375. Claimants note that Romania urges the Tribunal to disregard the proven, undisputed Cypriot nationality of Anina and Giust and instead to consider them as Romanian nationals, based only on the fact that their upstream shareholder is Romanian. Claimants aver that there is no legal basis for Romania's position, either under the ICSID Convention (a.) or the ECT (b.)⁴⁸⁴.

a. Nationality requirement of the ICSID Convention

376. Claimants contend that with regard to the ICSID Convention, Art. 25(1) specifies that jurisdiction extends to any legal dispute between a Contracting State and a national of another Contracting State. Art. 25(2)(b) defines “national of another Contracting State” to include companies having “the nationality of a Contracting State other than the State party to the dispute"⁴⁸⁵. Claimants argue that it is undisputed that Anina and Giust are incorporated in Cyprus and have the nationality of Cyprus, another Contracting State. Nothing further is required; Anina and Giust therefore meet the nationality requirements of Art. 25(2) of the ICSID Convention⁴⁸⁶.

377. Claimants disagree with Romania's argument that in light of the ICSID Convention's object and purpose, the Tribunal should look for the true owner of the claimant, and that Anina and Giust are “shams used by a Romanian national" for the purpose of trying to get around the nationality requirement of the ICSID Convention. Claimants argue that this is patently untrue, and that Romania has provided no evidence to support this claim. Claimants note that Romania acknowledges that Anina and Giust acquired the interests in the Frăsinet plants in 2012, well before any dispute arose. Claimants submit that it is only in cases of perceived treaty-shopping that tribunals have been willing to look beyond the nationality of the named claimants, to the upstream shareholders⁴⁸⁷.

378. Claimants argue that, as juridical persons incorporated in another Contracting State that invested in and hold an investment in Romania, Anina and Giust are entitled to bring their claims against Romania. The ICSID Convention does not require that Anina and Giust satisfy any additional requirements⁴⁸⁸. Claimants point to the opinion of the tribunal's majority in Tokios Tokelės, which has been cited in many other decisions⁴⁸⁹.

379. Claimants further aver that cases of “foreign control” are inapposite, because there is no reference to “control" in the first limb of Art. 25(2)(b) of the ICSID Convention, which applies to the present case⁴⁹⁰.

⁴⁸⁴ C-III, para. 228; C-PHB, para. 74. ↩
⁴⁸⁵ C-III, para. 230; C-PHB, para. 75. ↩
⁴⁸⁶ C-III, paras. 231 and 242; C-PHB, para. 75. ↩
⁴⁸⁷ C-III, para. 231; C-PHB, para. 76. ↩
⁴⁸⁸ C-III, para 231; C-PHB, para. 77. ↩
⁴⁸⁹ C-III, paras. 232-233; C-PHB, para. 78. ↩
⁴⁹⁰ C-III, paras. 239-241; C-PHB, para. 80. ↩

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b. Nationality requirement of the ECT

380. Claimants submit that Romania's position is also untenable in light of the clear language of Art. 1(7)(a) of the ECT, which defines “Investor” as “a company or other organization organized in accordance with the law applicable in that Contracting Party”. Claimants argue that under the ordinary meaning of those terms, an investor need only be incorporated or organized in a Contracting's Party's territory. Nothing more is required. Because Anina and Giust are properly organized in accordance with the laws of Cyprus, they are covered “investors” for purposes of the ECT⁴⁹¹.

381. Claimants point out that ECT tribunals unanimously have found that if a corporate claimant is incorporated under the laws of a Contracting State, the tribunal should not look further into the corporate structure⁴⁹².

382. In light of the above, Claimants conclude that Anina and Giust meet the nationality requirements of the ICSID Convention and the ECT. Therefore, Romania's objection should be rejected⁴⁹³.

B. Romania cannot deny Anina and Giust the benefits of the ECT

383. Claimants contend that Romania cannot invoke Art. 17 of the ECT to deny Anina and Giust the advantages of the Treaty.

384. The plain language of the Treaty contradicts Romania's position. The terms “third state” in Art. 17(1) of the ECT clearly refer to a State that is not a Contracting Party to the ECT. It does not refer to the host State, which is necessarily a Contracting Party to the ECT. Thus, Art. 17(1) of the ECT has no application in this dispute, because Anina and Giust are owned and controlled by a Romanian citizen, and Romania is not a third State⁴⁹⁴.

385. In any case, Claimants aver that Romania's argument must also fail because its invocation of Art. 17 of the ECT is untimely. Every ECT tribunal that has considered Art. 17 has held that a State may not invoke the denial of benefits clause after a dispute has arisen, or at least after it is submitted to arbitration⁴⁹⁵. A jurisprudence constante demonstrates that Romania's objection has no merit⁴⁹⁶.

386. For the foregoing reasons, Claimants submit that the Tribunal has jurisdiction over Anina and Giust⁴⁹⁷ and that Romania's objection should be dismissed⁴⁹⁸.

⁴⁹¹ C-III, para. 243; C-PHB, para. 81. ↩
⁴⁹² C-III, paras. 244-245; C-PHB, para. 82. ↩
⁴⁹³ C-III, para. 246. ↩
⁴⁹⁴ C-III, paras. 248-249; C-PHB, paras. 84-86. ↩
⁴⁹⁵ C-III, para. 253; C-PHB, para. 87. ↩
⁴⁹⁶ C-III, paras. 255 et seq. ↩
⁴⁹⁷ C-PHB, para. 88. ↩
⁴⁹⁸ C-III, para. 258. ↩

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3. DECISION OF THE TRIBUNAL

387. The Parties do not discuss that Anina and Giust, two companies incorporated in Cyprus in 2011⁴⁹⁹, have as sole shareholder Mr. Catalin-Liviu, a Romanian national⁵⁰⁰.

388. Romania argues that given that they are owned and controlled by a Romanian national, Anina and Giust do not meet the nationality requirements under the ICSID Convention and the ECT, and that, consequently, the Tribunal lacks ratione personae jurisdiction to hear their claims. Claimants hold the opposite view.

389. The Tribunal must once again interpret the relevant provisions of the ICSID Convention (A.) and the ECT (B.), in light of the principles established in Arts. 31 and 32 of the VCLT, previously defined in paras. 307-309 supra.

A. Anina and Giust qualify as investors under the ICSID Convention

a. Interpretation of Art. 25(2)(b) of the ICSID Convention

390. Claimants argue that Anina and Giust qualify as investors because they have the nationality of Cyprus, another Contracting State to the ICSID Convention, and nothing further is required by Art. 25(2)(b) of the ICSID Convention⁵⁰¹.

391. Romania, on the contrary, submits that pursuant to Art. 31(1) of the VCLT, the Tribunal must interpret the terms of the ICSID Convention in light of its object and purpose; and that if entities – such as Anina and Giust – that are wholly owned and controlled by a national of the host Contracting State were allowed to sue that State, the object and purpose of the ICSID Convention would be undermined⁵⁰².

392. Art. 25(1) of the ICSID Convention provides that the jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a “Contracting State” and a “national of another Contracting State”. Art. 25(2) goes on to define "national of another Contracting State”, inter alia, as:

"(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention."

393. Therefore, for the Centre's jurisdiction to extend to an investor, in accordance with Art. 25(1) of the ICSID Convention, the investor must be:

⁴⁹⁹ Doc. C-9; Doc. C-10; Edwards I, Table 1.1. ↩
⁵⁰⁰ C-I, fn. 17; R-I, para. 428. See also Doc. R-1, p. 20; Doc. R-2, p. 19; Doc. R-5, p. 20; Doc. R-6, p. 19; Edwards I, para. 3.34. ↩
⁵⁰¹ C-III, paras. 231 and 242; C-PHB, para. 75. ↩
⁵⁰² R-III, para. 464; R-PHB, para. 63. ↩

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- A juridical person;

- Which has the nationality of a Contracting State other than the State party to the dispute;

- On the date on which the parties consented to submit such dispute to arbitration.

394. An interpretation of the terms of the treaty in “good faith”, in accordance with the “ordinary meaning to be given to its terms” in their “context” shows that the ICSID Convention sets a single limit to the jurisdiction of the Centre: the investor must have the "nationality” of a Contracting State other than the State party to the dispute at the time of submitting the dispute to arbitration.

Nationality requirement

395. However, the ICSID Convention does not define the concept of "nationality”⁵⁰³.

396. Prof. Schreuer explains that under traditional international law, there are several possible criteria for the determination of a juridical person's nationality; the most widely used test looks at the place of incorporation or registered office⁵⁰⁴. Prof. Schreuer goes on to explain that even though they amply debated the concept of corporate nationality (hesitating between including criteria either of seat or place of incorporation or looking at the “controlling interest” behind the company), the drafters of the ICSID Convention ultimately chose not to define the term. Instead, they left it to the Contracting States to delimit the concept of corporate nationality in their bilateral and multilateral treaties.

397. Nevertheless, according to Prof. Schreuer⁵⁰⁵:

“A systematic interpretation of Art. 25(2)(b) would militate against the use of the control test for a corporation's nationality. The second clause of Art. 25(2)(b) provides that a juridical person, even though it possesses the nationality of the host State, may be treated as a foreign investor by way of a special agreement ‘because of foreign control'. By relying on control for the exception to host State nationality, the provision implies that host State nationality is not based on control. Therefore, it is clear that the control test cannot be applied to explain the word 'nationality' in the second clause of Art. 25(2)(b). It is unlikely that the word 'nationality' used earlier on in the same sentence in a more general context has a different meaning."

398. Rather than looking at who holds a controlling interest in the company, investment tribunals and legal doctrine have consistently found that the place of incorporation of the juridical person is sufficient to satisfy the nationality requirement under Art. 25(2) of the Convention⁵⁰⁶. Mr. Aron Broches, former Secretary-General of ICSID and one of the architects of the ICSID Convention, observed that "it is fair

⁵⁰³ Doc. RL-146, p. 340. ↩
⁵⁰⁴ Doc. RL-103, p. 279, para. 694. ↩
⁵⁰⁵ Doc. RL-103, pp. 279-280, para. 697. ↩
⁵⁰⁶ Doc. RL-103, p. 281, para. 699. ↩

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to concede that [Art. 25(2)(b)] implicitly assumes that incorporation is a criterion of nationality"⁵⁰⁷.

399. Likewise, in Soabi, a 1984 decision signed by Mr. Broches himself, the tribunal noted that to determine the nationality of an investor under the ICSID Convention, most States applied either the criterion of the registered office or that of the place of incorporation.

400. In Rompetrol, a case against Romania, the tribunal found that⁵⁰⁸:

"It does not, in the Tribunal's view, require any extended discussion to conclude that, within the framework of Article 25(2)(b) of the Convention, it is open to the Contracting Parties to a BIT to adopt incorporation under their own law as a necessary and also sufficient criterion of nationality for purposes of ICSID jurisdiction, without requiring in addition an examination of ownership and control, of the source of investment funds, or of the corporate body's effective seat. Incorporation in a given jurisdiction is a widely used criterion internationally for determining the nationality of corporate bodies, and States determine corporate nationality by a wide variety of criteria in a wide variety of contexts, as indeed the Respondent acknowledged at the oral hearing."

401. Likewise, in H&H Entreprises, the tribunal considered that the claimant in that case was a "legal entity incorporated in the State of California” and thus fulfilled “the objective criteria for ratione personae provided for in Article 25(2)(b) of the ICSID Convention"⁵⁰⁹.

Application to the facts

402. In the present case, Anina and Giust are both juridical persons, incorporated in Cyprus in September and November 2011, respectively⁵¹⁰, which continued to be incorporated in Cyprus on the date the Parties consented to submit the dispute to arbitration (May 2018), as demonstrated by the certificates issued by the Cypriot Registrar of Companies and marshalled into the record of this arbitration as exhibits C-9 and C-10.

403. Considering that Cyprus is a Contracting State to the ICSID Convention, other than the State party to the present dispute (Romania), Anina and Giust meet the nationality requirement under the ICSID Convention.

b. Counter-arguments by Romania

404. Romania argues that in light of the ICSID Convention's object and purpose, the Tribunal should look beyond the nationality of Anina and Giust, because even though they are incorporated in Cyprus, they are entirely owned, controlled, and

⁵⁰⁷ Doc. RL-146, p. 360. ↩
⁵⁰⁸ Doc. CL-159, Rompetrol, para. 83. ↩
⁵⁰⁹ Doc. CL-161, H&H Entreprises, para. 68. ↩
⁵¹⁰ Doc. C-9; Doc. C-10. ↩

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operated by a Romanian national, they do not conduct business in Cyprus and they only conduct business in Romania⁵¹¹.

405. Claimants disagree that in light of the ICSID Convention's object and purpose, the Tribunal should look for the true owner of the claimant; it is only in cases of perceived treaty-shopping that tribunals have been willing to look beyond the nationality of the named claimants, to the upstream shareholders⁵¹².

Tokios Tokelės

406. Looking beyond the nationality of Anina and Giust would amount to "piercing the corporate veil” between these legal entities and their shareholder.

407. The Parties have amply debated the seminal Tokios Tokelės case (2004) and whether the Tribunal should follow the opinion of the tribunal majority or the dissenting opinion of its chairman, Prof. Prosper Weil⁵¹³:

- While Romania argues that the tribunal majority's decision is flawed, and that the Tribunal should look to Prof. Weil's opinion and interpret Art. 25 of the Convention in light of its object and purpose;

- Claimants contend that Prof. Weil's opinion is an outlier and disregards the Convention's express desire of leaving the Contracting Parties to agree on any nationality requirements.

408. Tokios Tokelės is an ICSID case that involves certain Ukrainian nationals who had a corporation in Lithuania – constituted six years before the entry into force of the BIT – which in turn owned a Ukrainian subsidiary operating a publishing business in Ukraine. The Lithuanian claimant sued Ukraine under the Lithuania-Ukraine BIT, alleging that the State had seized the assets of its Ukrainian subsidiary. Ukraine opposed jurisdiction on the grounds that the Lithuanian company was not a genuine foreign investor, because it was owned and controlled by Ukrainian nationals and the company did not maintain substantial business activity in Lithuania. Ukraine requested the tribunal to pierce the corporate veil to determine that the real nationality of the investors was Ukrainian, and accordingly, dismiss the case for lack of jurisdiction⁵¹⁴.

409. Tokios Tokelės synthetizes the status quaestionis regarding investments made by companies controlled by nationals of the host State:

- While the majority of the tribunal upheld jurisdiction, finding that ICSID tribunals had consistently applied a test of incorporation when determining the nationality of a corporate person, without anything else being required⁵¹⁵;

⁵¹¹ R-PHB, para. 64. ↩
⁵¹² C-III, para. 231; C-PHB, para. 76. ↩
⁵¹³ Doc. CL-164, Tokios Tokelės, Decision on Jurisdiction and Dissent. ↩
⁵¹⁴ Doc. CL-164, Tokios Tokelės, Decision on Jurisdiction and Dissent. ↩
⁵¹⁵ Doc. CL-164, Tokios Tokelės, Decision on Jurisdiction, paras. 40-52. ↩

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- The Chairman, Prof. Weil, issued a dissenting opinion, arguing, inter alia, that⁵¹⁶:

"[t]he ICSID mechanism and remedy are not meant for, and are not to be construed as, allowing – and even less encouraging – nationals of a State party to the ICSID Convention to use a foreign corporation, whether preexistent or created for that purpose, as a means of evading the jurisdiction of their domestic courts and the application of their national law”.

410. The Tokios Tokelės decision and the dissenting opinion offer the two alternative solutions to the subject-matter.

411. However, Prof. Weil's dissent has not been followed in treaty practice. In fact, the tendency in ICSID arbitrations has been exactly the opposite⁵¹⁷: the principles laid down by the Tokios Tokelės majority have been followed by many other investment tribunals. According to Prof. Schreuer⁵¹⁸:

"The President's Dissenting Opinion reflects a particular appreciation of the ICSID Convention's object and purpose. But it is not supported by the text of Art. 25. The majority decision, on the other hand, is respectful of the clear terms of the parties' consent to use ICSID as expressed in the Lithuania- Ukraine BIT. The majority declared that they would be loath to undermine the basic principle that the cornerstone of ICSID's jurisdiction is party consent."

TSA Spectrum

412. Romania has also sought to rely on the decision in TSA Spectrum to aver that the Tribunal should look beyond Anina and Giust's corporate structure⁵¹⁹. The question put before the TSA Spectrum tribunal was whether TSA Spectrum, an Argentinian company, could institute arbitration under the ICSID Convention against the Republic of Argentina, by application of the second limb of Art. 25(2)(b) of the ICSID Convention⁵²⁰, which provides that an “Investor of a Contracting State” is:

"(b) [...] any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention."

413. In other words, under the second limb of Art. 25(2)(b) of the ICSID Convention, a juridical person, even though it has the nationality of the host State, may be treated as a foreign investor by way of a special agreement “because of foreign control”.

414. In TSA Spectrum, the applicable framework explicitly required the tribunal to establish who exerted control over the Argentinian subsidiary, in order to assess whether such company had standing to bring a claim. This discussion, however, is

⁵¹⁶ Doc. CL-164, Tokios Tokelės, Dissent, para. 30. ↩
⁵¹⁷ Doc. CL-163, KT Asia, para. 121. ↩
⁵¹⁸ Doc. RL-103, p. 290, para. 733. ↩
⁵¹⁹ R-I, paras. 408 et seq.; R-II, para. 456. ↩
⁵²⁰ Doc. RL-149, TSA Spectrum, para. 122. ↩

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of no assistance in the present case, not only because Anina and Giust did not have the nationality of Romania when the dispute started, but also because there is no allegation that Anina and Giust should be treated as nationals of another Contracting State due to foreign control.

***

415. Ultimately, as pointed out by Claimants, ICSID tribunals do not pierce the corporate veil, because the nationality of the upstream shareholders is irrelevant to the nationality requirement in Art. 25(2) of the ICSID Convention⁵²¹.

416. The Contracting States to the ICSID Convention could have imposed an additional requirement of control, effectively barring corporations controlled by nationals of the State party to the dispute from submitting disputes to arbitration⁵²²; however, they did not do so.

417. Romania has not provided any compelling evidence that would justify piercing the corporate veil and disregarding Anina and Giust's nationality, and there seems to be no reason to do so. Anina and Giust were incorporated in Cyprus in September and November 2011, respectively, and acquired their interests in the Frăsinet Project Companies in 2012, long before the present investment dispute arose. There is no evidence of fraud or of an abuse of treaty.

B. Anina and Giust qualify as investors under the EСТ

a. Interpretation of Art. 1(7) of the ECT

418. As previously noted, the drafters of the ICSID Convention left it to the Contracting States to set the parameters of nationality in their bilateral and multilateral treaties⁵²³.

419. Romania submits that like the ICSID Convention, the ECT's object and purpose is to foster foreign investment in the energy sector and to afford protection to international investors. Thus, ECT claims can only be brought by entities that are genuinely foreign. Accordingly, entities that are owned and controlled by a national of the host State must not be allowed to bring claims under the ECT against said host State⁵²⁴.

420. Claimants, on the other hand, aver that Romania's position is untenable in light of Art. 1(7)(a) of the ECT. Under the ordinary meaning of the terms of this provision, an investor need only be incorporated or organized in a Contracting's Party's territory; nothing else is required.

421. Art. 26 of the ECT provides that disputes between a “Contracting Party" and an “Investor of another Contracting Party” relating to an “Investment of the latter in

⁵²¹ Doc. CL-161, H&H Entreprises, para. 68; Doc. CL-165, Burimi, paras. 131-132. ↩
⁵²² Doc. RL-103, p. 279, paras. 695-696. ↩
⁵²³ Doc. CL-163, KT Asia, para. 121. ↩
⁵²⁴ R-II, paras. 467-469; R-PHB, para. 69. ↩

[Page 88]

the Area of the former” may be submitted to arbitration⁵²⁵. “Investor of a Contracting Party” is a term defined under Art. 1(7)(a) of the ECT⁵²⁶:

““Investor' means: (a) with respect to a Contracting Party: [...] (ii) a company or other organization organized in accordance with the law applicable in that Contracting Party;"

422. Therefore a “company [...] organized in accordance with the law applicable in that Contracting Party” can be considered an “Investor of another Contracting Party” for purposes of Art. 26 of the ECT. Contrary to other treaties, the ECT contains no additional requirements, such as that of “seat” or “permanent seat”⁵²⁷.

423. An interpretation of this provision, in good faith in accordance with the ordinary meaning to be given to its terms, demonstrates that for a Cypriot company to qualify as a protected investor under the ECT, it must simply be “organized in accordance with the law applicable" in Cyprus.

Case-law

424. Investment tribunals interpreting Art. 1(7) of the ECT have consistently found that it is irrelevant who owns or controls the company at any material time⁵²⁸; it is equally irrelevant whether the company is “in fact, an enterprise from an economic point of view"⁵²⁹; all that matters is that the investor is constituted in accordance with the law applicable in the Contracting Party⁵³⁰.

425. Ultimately, this Tribunal concurs with the opinion of the Saluka tribunal, although it is not an ECT case⁵³¹:

“240. The Tribunal has some sympathy for the argument that a company which has no real connection with a State party to a BIT, and which is in reality a mere shell company controlled by another company which is not constituted under the laws of that State, should not be entitled to invoke the provisions of that treaty. Such a possibility lends itself to abuses of the arbitral procedure, and to practices of 'treaty shopping' which can share many of the disadvantages of the widely criticised practice of 'forum shopping.'

241. However that may be, the predominant factor which must guide the Tribunal's exercise of its functions is the terms in which the parties to the Treaty now in question have agreed to establish the Tribunal's jurisdiction. In the present context, that means the terms in which they have agreed upon who is an investor who may become a claimant entitled to invoke the Treaty's

⁵²⁵ Doc. CL-1, Art. 26. ↩
⁵²⁶ Doc. CL-1, Art. 1(7)(a). ↩
⁵²⁷ For instance, in CEAC v. Montenegro the BIT defined investor as a legal entity not only incorporated, constituted or otherwise duly organized according to the laws and regulations of one Contracting Party, but also "having its seat" in the territory of that same Contracting Party (Doc. RL-162, CEAC). The tribunal found that CEAC did not have a registered office in Cyprus and therefore declined jurisdiction. ↩
⁵²⁸ Doc. CL-34, Plama, para. 128. ↩
⁵²⁹ Doc. RL-85, Isolux, para. 667. ↩
⁵³⁰ Doc. CL-15, Charanne, para. 414. ↩
⁵³¹ Doc. CL-62, Saluka, paras. 240-241. ↩

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arbitration procedures. The parties had complete freedom of choice in this matter, and they chose to limit entitled 'investors' to those satisfying the definition set out in Article 1 of the Treaty. The Tribunal cannot in effect impose upon the parties a definition of ‘investor' other than that which they themselves agreed. That agreed definition required only that the claimant- investor should be constituted under the laws of (in the present case) The Netherlands, and it is not open to the Tribunal to add other requirements which the parties could themselves have added but which they omitted to add."

Application to the facts

426. In the present case, Art. 3 of the Cypriot Companies Law provides that⁵³²:

“Any seven or more persons, or, where the company to be formed will be a private company, any one or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Law in respect of registration, form an incorporated company, with limited liability."

427. As proven by the affidavit of one of Romania's lawyers, the registers of both Anina and Giust are kept in the Trade Registry in Cyprus and available for public access⁵³³. Claimants have marshalled into the record the certificates of incorporation of Anina and Giust, by which the Cypriot Registrar of Companies attests that these two companies have been incorporated “under the Companies Law" as limited liability companies⁵³⁴.

428. It follows that Anina and Giust are companies organized in accordance with the law applicable in Cyprus, a Contracting Party to the ECT; consequently, they qualify as investors under Art. 1(7) of the ECT.

b. Art. 17 of the ECT is not applicable to the present case

429. Art. 17 of the ECT is a denial of benefits clause, under which a Contracting Party reserves the right to deny the advantages of Part III of the ECT (regarding “Investment Promotion and Protection") to certain entities and investments. In particular, Art. 17(1) provides that a Contracting Party may deny the Treaty's protections to⁵³⁵:

"a legal entity if citizens or nationals of a third state own or control such entity and if that entity has no substantial business activities in the Area of the Contracting Party in which it is organized;"

430. According to Romania, a “realistic" application of the ECT, taking into consideration its object and purpose, leads to the conclusion that respondent States may deny benefits to legal entities owned or controlled by their own nationals.

⁵³² Doc. RL-161, p. 30. ↩
⁵³³ Doc. R-8, para. 39. ↩
⁵³⁴ Doc. C-9; Doc. C-10. ↩
⁵³⁵ Doc. CL-1, Art. 17(1). ↩

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Romania wishes to rely on Art. 17 to deny benefits to Anina and Giust, since they are entirely owned, controlled and operated by a Romanian national⁵³⁶.

431. Claimants, on the contrary, argue that Art. 17 is not applicable to the present case, since it only concerns “third states", i.e., States that are not Contracting Parties to the ECT. In any case, Claimants argue that the denial of benefits clause cannot be invoked retrospectively⁵³⁷.

432. The Tribunal decides in favor of Claimants.

433. Nothing in Art. 17 of the ECT suggests that respondent States may deny ECT benefits to legal entities that are owned or controlled by citizens or nationals of the host State, when such host State is a Contracting Party to the ECT. A plain reading of Art. 17, in “good faith” and in accordance with the “ordinary meaning” of its terms, shows that this provision applies to legal entities which are owned or controlled by citizens or nationals of “third states”. Under the ECT, a “third state" is any State that is not a Contracting Party to the ECT. This becomes clear in Art. 1(7) of the ECT, which distinguishes between investors of a “Contracting Party", on the one hand, and investors of a “third state”, on the other hand.

434. The Charanne tribunal made the exact same finding⁵³⁸:

"To adopt the argument of Spain would amount to denial of benefits whenever an investor, legal entity incorporated under the applicable law of a Contracting Party in accordance with Article 1(7)(a)(ii), was controlled by citizens or nationals of the State receiving the investment. However, the drafters of the ECT did not intend to include this hypothesis in the denial of benefits clause of Article 17, which relates to the situation of a legal entity controlled by shareholders of a third country (a third country being a country not party to the ECT)." [Emphasis added]

435. This is further supported by the object and purpose of the ECT, which is to confer certain benefits upon investors of Contracting Parties to this multilateral instrument. A contrario, third states do not necessarily benefit from those protections, in application of the general rules regarding third States reflected in Art. 34 of the VCLT⁵³⁹:

"A treaty does not create either obligations or rights for a third State without its consent."

436. Having reached this conclusion, the issue of whether the denial of benefits clause can or not be invoked retrospectively has become moot.

***

⁵³⁶ See R-II, paras. 479-515. ↩
⁵³⁷ C-PHB, paras. 84-87. ↩
⁵³⁸ Doc. CL-15, Charanne, para. 416. ↩
⁵³⁹ Doc. CL-33, Art. 34. ↩

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437. In view of the above, the Tribunal confirms that it has jurisdiction ratione personae over Anina and Giust and dismisses Romania's objection.

[Page 92]

V.3. INTRA-EU OBJECTION

1. RESPONDENT'S POSITION

438. Romania avers that the Tribunal lacks jurisdiction over the present dispute because the arbitration clause of the ECT is inapplicable to intra-EU disputes. Romania submits that its objection is based exclusively on international law⁵⁴⁰: the Tribunal must determine whether intra-EU disputes are within the scope of the ECT arbitration clause (Art. 26); this requires the Tribunal to interpret the ECT in accordance with the rules of interpretation of the VCLT (A.)⁵⁴¹.

439. Romania avers that if the Tribunal were to find that it has jurisdiction under the ECT, next the Tribunal would be called upon to address, as a matter of international law, the interrelationship of concurrent treaties signed by the same parties (the ECT and the EU Treaties). In particular, the Tribunal must establish whether Art. 26 of the ECT ceased to apply to intra-EU disputes as a result of the entry into force of the Treaty of Lisbon (B.). If the ECT and EU Treaties are found to be in conflict, the conflict must be resolved under international law pursuant to the applicable conflict-resolving rules (C.)⁵⁴².

440. Romania contends that, in any event, the Tribunal should decline to exercise jurisdiction on the ground that its award would be unenforceable in the EU and potentially elsewhere (D.)⁵⁴³.

A. Intra-EU disputes are outside the scope of Art. 26 of the ECT

441. Romania notes that the Tribunal's jurisdiction over this dispute stems from the arbitration clause of Art. 26 of the ECT. Thus, the Tribunal must first determine whether the present intra-EU dispute falls within the scope of this provision. To do so, the dispute must meet the three conditions for jurisdiction under Art. 26(1) of the ECT⁵⁴⁴:

- That the investor has “another" nationality or citizenship than that of the respondent State to the dispute;

- That the investment has a cross-border character with respect to the “Area” of the respondent to the dispute; and

- That the obligation allegedly breached is an obligation “of” the respondent Contracting Party under Part III of the ECT.

⁵⁴⁰ R-II, para. 28; R-PHB, para 7. ↩
⁵⁴¹ R-II, paras. 6, 20; R-PHB, para. 7. ↩
⁵⁴² R-II, paras. 6, 21-22; R-PHB, para. 7. ↩
⁵⁴³ R-II, paras. 8, 23; R-PHB, paras. 7-9. ↩
⁵⁴⁴ R-II, para. 61. ↩

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442. Romania submits that intra-EU disputes fail to meet any of these three conditions⁵⁴⁵.

443. First, there is no diversity of citizenship between EU investors and EU Member States. When EU investors invest in other EU Member States, they do so as EU citizens⁵⁴⁶.

444. Second, intra-EU investments are not cross-border investments. This is because the EU's internal market is an area without internal frontiers⁵⁴⁷.

445. Third, with respect to intra-EU investments, obligations under Part III of the ECT (including, inter alia, the fair and equitable treatment [“FET”] obligation) are not obligations "of” EU Member States. Rather, they are obligations “of” the EU because competence over intra-EU foreign investments has been transferred by the Member States to the EU⁵⁴⁸.

446. As a result, for failure to meet any one or all three of the conditions for jurisdiction, intra-EU disputes are outside the scope of the arbitration clause in Art. 26 of the ECT, and the Tribunal must decline jurisdiction over the present dispute⁵⁴⁹.

B. If found to cover intra-EU disputes, Art. 26 of the ECT has ceased to apply after the Treaty of Lisbon

447. Romania submits that if the Tribunal were to find that this intra-EU dispute is within the scope of the arbitration clause of Art. 26 of the ECT, it must then determine whether, pursuant to Art. 41 of the VCLT, the Treaty of Lisbon constitutes an agreement to modify the ECT, with the effect of disapplying the arbitration clause in Art. 26 of the ECT as between EU Member States⁵⁵⁰.

448. Romania argues that if the Tribunal were to find that Romania has had any intra-EU obligations under Part III of the ECT, those obligations would necessarily have become obligations “of” the EU and not “of” Romania pursuant to the Lisbon Treaty. As a result, the third condition for jurisdiction under Art. 26 of the ECT would not be met as of the entry into force of the Lisbon Treaty, and the Tribunal should decline jurisdiction⁵⁵¹.

C. If interpreted as applying to intra-EU disputes, Art. 26 of the ECT conflicts with the TFEU and must be disapplied

449. Respondent avers that if the Tribunal were to find that this dispute is within the scope of the ECT arbitration clause, it must then examine whether there is a treaty conflict between the ECT and the Treaty on the Functioning of the European Union

⁵⁴⁵ R-PHB, para. 10. ↩
⁵⁴⁶ R-PHB, para. 10. ↩
⁵⁴⁷ R-PHB, para. 10. ↩
⁵⁴⁸ R-II, paras. 63-64; R-PHB, para. 10. ↩
⁵⁴⁹ R-PHB, para. 10. ↩
⁵⁵⁰ R-PHB, para. 11. ↩
⁵⁵¹ R-PHB, para. 11. ↩

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[“TFEU”] (a.). And if the Tribunal finds that there is a treaty conflict, then the Tribunal must determine which treaty prevails under the applicable conflict- resolving rules of international law (b.)⁵⁵².

a. There is a conflict between Art. 26 of the ECT and Arts. 267 and 344 of the TFEU

450. According to Romania, to determine whether a treaty conflict exists, the Tribunal must ascertain whether Romania can comply simultaneously with its obligations under Art. 26 of the ECT, on the one hand, and under Arts. 267 and 344 of the TFEU, on the other⁵⁵³.

451. Romania avers that the nature of the obligations under Arts. 344 and 267 of the TFEU has been defined by the Court of Justice of the European Union [previously defined as “CJEU”] in its settled case law, including the Achmea Judgment⁵⁵⁴. According to Romania, an international agreement is incompatible with Arts. 267 and 344 of the TFEU if it displays the three following characteristics⁵⁵⁵:

- The international agreement allows a court or tribunal to interpret or apply the EU Treaties;

- Such court or tribunal is outside the EU judicial system and thus does not qualify under Art. 267 of the TFEU as a court or tribunal of an EU Member State; and

- Decisions rendered by such court or tribunal are not subject to a review by a court or tribunal of an EU Member State or by the CJEU.

452. Romania argues that Art. 26 of the ECT has all the characteristics of incompatibility under the Achmea standard⁵⁵⁶.

453. Therefore, it is Romania's position that there is a clear treaty conflict between the ECT and the TFEU⁵⁵⁷.

454. Romania avers that pursuant to Arts. 267 and 344 of the TFEU, Romania and all the other States relevant to this arbitration cannot submit an intra-EU dispute to a dispute resolution mechanism outside of the EU judicial system that would result in an arbitral tribunal interpreting or applying the EU Treaties. Art. 26 of the ECT is precisely that type of mechanism and therefore is not compatible with the TFEU⁵⁵⁸.

⁵⁵² R-PHB, para. 12. ↩
⁵⁵³ R-PHB, para. 13. ↩
⁵⁵⁴ R-PHB, para. 13. ↩
⁵⁵⁵ R-II, para. 183. ↩
⁵⁵⁶ R-II, paras. 186-197; R-PHB, para. 13. ↩
⁵⁵⁷ R-PHB, para. 13. ↩
⁵⁵⁸ R-PHB, para. 13. ↩

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455. Romania argues that its conclusion is shared by the EC and most EU Member States (including all the States in which Claimants are incorporated – all of which are parties to the ECT and the EU Treaties)⁵⁵⁹.

Opinion of the Advocate General of the CJEU and the Komstroy Judgment

456. Romania further points out to the recent opinion of the Advocate General of the CJEU, Mr. Maciej Szpunar, of 3 March 2021, and the subsequent Judgment of the CJEU, of 2 September 2021, in case C-741/19 between the Republic of Moldova and Komstroy [previously defined as the “Komstroy Judgment”].

457. Regarding the Opinion, Respondent notes that the Advocate General:

- Confirmed that the standard of incompatibility established in the Achmea Judgment applies to Art. 26 of the ECT;

- Observed that, since the EU Treaties establish rules of international law, an ECT arbitral tribunal may be called upon to interpret and apply the EU Treaties pursuant to Art. 26(6) of the ECT;

- Noted that an ECT arbitral tribunal cannot refer preliminary questions on the interpretation of the EU Treaties to the CJEU pursuant to Art. 267 of the TFEU and is thus outside the EU judicial system;

- Found that it is irrelevant that the ECT is a multilateral treaty to which the EU is a party; and

- Concluded that the arbitration of intra-EU disputes under the ECT is incompatible with the EU Treaties and that such disputes could be brought in the national courts of EU Member States.

458. Respondent notes that the Komstroy Judgment also confirmed that the Achmea Judgment standard of incompatibility applies to Art. 26 of the ECT, as arbitral tribunals constituted in accordance with such provision⁵⁶⁰:

- Are required to interpret, and even apply, EU law;

- Do not constitute a component of the judicial system of an EU Member State within the meaning of Art. 267 of the TFEU; and

- Although their decisions may be subject to review by intra-EU courts in certain cases (ad-hoc tribunals), such review is limited in scope and does not constitute the kind of review requested for its compatibility.

⁵⁵⁹ R-PHB, para. 14. ↩
⁵⁶⁰ R-Komstroy, paras. 12-15. ↩

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459. Romania finds that the Opinion of the Advocate General and the Komstroy Judgment are highly relevant to the present dispute because⁵⁶¹:

- The Advocate General has clearly and expressly confirmed that the standard of incompatibility of the Achmea Judgment applies to Art. 26 of the ECT; this is so irrespective of the factual background of the case brought before the CJEU, since the Advocate General is presenting an opinion of principle;

- There is a debate as to whether a tribunal in establishing its jurisdiction must rely on the law in force when it renders its award or when the arbitration commences; this question does not arise in the present case as the law has not changed since the commencement of this arbitration (at the time when Claimants submitted their Request for Arbitration, the ECT, the TFEU and the Achmea Judgment were all in force); the Advocate General's Opinion is just another element that confirms the correctness of Romania's interpretation of the law; and

- The CJEU has confirmed in the Komstroy Judgment that intra-EU arbitration clauses are incompatible with EU Treaties, even if enshrined in mixed agreements to which the EU is a party.

460. Romania further argues that, by means of the Komstroy Judgment, the CJEU has not created any new law; the Komstroy Judgment simply clarifies the meaning and application of existing treaty provisions and judgments of the CJEU itself⁵⁶².

461. Romania submits that in light of the Achmea and the Komstroy Judgments, the analysis of the EU Commission (including its Amicus Curiae Brief before the Tribunal), the Declaration of the EU Member States who are parties to the ECT and the TFEU, and the recent Opinion of the Advocate General, the ECT and the TFEU are clearly conflicting⁵⁶³.

b. The TFEU prevails over the ECT under conflict-resolving rules

462. Romania submits that given that a treaty conflict has been established, the Tribunal must determine which treaty prevails under the applicable conflict-resolving rules of international law. In the ECT and the TFEU, Art. 16 and Art. 351, respectively, establish those rules⁵⁶⁴.

Art. 16 of the ECT

463. First, Romania argues that the Tribunal must turn to Art. 16, the ECT's conflict-resolving clause.

464. Romania avers that the Tribunal must first determine whether Art. 16 can be applied at all given that it is incompatible with Art. 4(3) of the TEU because it allows for

⁵⁶¹ R-PHB, paras. 15-17; R-Komstroy, para. 17. ↩
⁵⁶² R-Komstroy, para. 28. ↩
⁵⁶³ R-PHB, para. 18. ↩
⁵⁶⁴ R-PHB, para. 19. ↩

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derogation from the EU Treaties⁵⁶⁵. If the Tribunal were to find that Art. 16 of the ECT can be applied, then the Tribunal must determine whether the precondition for the application of Art. 16 is met, i.e., whether the two conflicting treaties relate to the same subject-matter⁵⁶⁶.

465. If the Tribunal finds that Art. 16 does not apply either because it is incompatible with Art. 4(3) of the TEU or because its same-subject matter precondition is not met, then the Tribunal must resolve the conflict based exclusively on Art. 351 of the TFEU⁵⁶⁷.

466. If, to the contrary, the Tribunal finds that Art. 16 does apply, the Tribunal must then determine whether the provisions of the ECT or those of the TFEU are more favorable to the investor or the investment, since the most favorable treaty prevails under Art. 16 of the ECT. According to Romania, the provisions of the TFEU are more favorable and thus prevail over Art. 26 of the ECT (for instance, the judicial system under the TFEU provides predictability in the application of the rule of law, whereas the ISDS system produces contradictory decisions by different tribunals). Thus, if Art. 16 applies, the TFEU prevails⁵⁶⁸.

Art. 351 of the TFEU

467. Romania submits that under the conflict-resolving rule in Art. 351 of the TFEU, the TFEU prevails over the ECT in the relations of EU Member States, pursuant to the settled case law of the CJEU⁵⁶⁹.

468. In short, Romania argues that⁵⁷⁰:

- If Art. 16 of the ECT applies and provides that the TFEU prevails, both conflict-resolving rules would give priority to the same treaty, namely the TFEU, and the TFEU must prevail over the ECT;

- If Art. 16 does not apply at all, then the TFEU must prevail over the ECT pursuant to Art. 351 of the TFEU, which would be the only applicable lex specialis conflict-resolving rule; and

- If Art. 16 does apply but is found to provide that the ECT prevails, then the two applicable conflict-resolving rules would not give priority to the same treaty; it is in that case only that the Tribunal must turn to the general conflict- resolving rule under Art. 30 of the VCLT in order to resolve the conflict.

⁵⁶⁵ R-PHB, para. 20. ↩
⁵⁶⁶ R-PHB, para. 20. ↩
⁵⁶⁷ R-PHB, para. 20. ↩
⁵⁶⁸ R-PHB, para. 20. ↩
⁵⁶⁹ R-PHB, para. 21. ↩
⁵⁷⁰ R-PHB, para. 22. ↩

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Art. 30 of the VCLT

469. Romania notes that Art. 30 of the VCLT applies only if the conflicting treaties relate to the same subject-matter.

470. Art. 16 of the ECT can only apply if the conflicting treaties concern the same subject-matter; otherwise, Art. 16 will be found not to apply. Thus, if the Tribunal needs to resolve the conflict pursuant to Art. 30 of the VCLT, it will necessarily have found already that the treaties concern the same subject-matter⁵⁷¹.

471. Romania argues that under Art. 30 of the VCLT, the treaty that is lex posterior prevails. Romania avers that the TFEU is the later treaty and thus also prevails in application of Art. 30 of the VCLT⁵⁷². The TFEU postdates the ECT and this is unaffected by the fact that the conflicting obligations in the TFEU existed in older versions of EU Treaties that predated the ECT. In fact, those older versions have been superseded by later amending treaties. The only EU treaties that are now applicable and that were applicable at all times relevant to the present dispute are the TEU and the TFEU, as amended by the Treaty of Lisbon⁵⁷³. Additionally⁵⁷⁴:

- The lex posterior rule in Art. 30 of the VCLT by its express terms gives priority to the “later treaty” and not to later incompatible provisions; thus, there is no basis under Art. 30 for determining the lex posterior according to the date when the conflicting obligations were originally adopted instead of the date of the applicable conflicting treaty;

- To take the view that the conflicting obligations were frozen at the time of their original adoption would require dividing up the conflicting treaty so that different provisions in the same treaty would have different dates; amended provisions would be lex posterior, while unamended provisions in the same treaty would be lex priori; nothing in the VCLT suggests this;

- The amended treaty, and not the original one, is the applicable treaty among the State parties to the treaty; the TFEU as amended by the 2007 Treaty of Lisbon is the applicable treaty among EU Member States, and older versions are no longer applicable; as a result, for purposes of the lex posterior rule, the date of the TFEU is that of the 2007 Treaty of Lisbon; it is thus the later treaty under Art. 30 of the VCLT, irrespective of whether the conflicting obligations existed in prior versions of EU treaties that predated the ECT; and

- To find otherwise, in this case, would bind Romania to versions of the EU treaties that it was never a party to, which cannot be accepted under international law.

⁵⁷¹ R-PHB, para. 23. ↩
⁵⁷² R-PHB, para. 23. ↩
⁵⁷³ R-PHB, paras. 24-26. ↩
⁵⁷⁴ R-PHB, paras. 27-30. ↩

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472. In sum, Romania submits that the TFEU is the later treaty pursuant to the lex posterior rules. As a result, it must prevail over the ECT if the conflict is resolved pursuant to Art. 30 of the VCLT⁵⁷⁵.

D. The Tribunal should decline jurisdiction on grounds of unenforceability

473. Finally, Romania submits that the Tribunal has a duty to render an enforceable award. Thus, should the Tribunal find that it has jurisdiction, it should nonetheless decline to exercise it given that an award rendered in this arbitration would be unenforceable in the EU and potentially elsewhere⁵⁷⁶. The courts of the EU Member States will not enforce an ICSID award rendered in an intra-EU dispute, given that such award would violate Arts. 267 and 344 of the TFEU⁵⁷⁷.

***

474. Romania notes that the previous intra-EU decisions on which Claimants rely to argue that Romania's arguments have been rejected by other international arbitral tribunals are inapposite. Those decisions adopted inconsistent reasoning, were incorrectly decided and, in any case, are not binding on the Tribunal since there is no stare decisis in international arbitration⁵⁷⁸.

475. In sum, Romania requests that the Tribunal find that it lacks jurisdiction over this intra-EU dispute.

476. Romania recalls that States and/or the EU, and not investors, are the contracting parties to the treaties here in question. Most EU Member States have signed a formal Declaration in which they agreed with the EC that Art. 26 of the ECT does not cover intra-EU disputes. Those States have further indicated in the same Declaration that, if applied to intra-EU disputes, Art. 26 would negatively affect the autonomy of the EU and would be in conflict with the EU Treaties. These same States agreed that Art. 26, if so interpreted, would have to be disapplied. They further stated that any award applying Art. 26 of the ECT to intra-EU disputes would be unenforceable in the courts of all EU Member States. Thus, those Member States have expressly stated how they understand the treaties that they themselves entered into⁵⁷⁹ and this Tribunal should consider the will of the State parties to the treaties.

2. CLAIMANTS' POSITION

477. Claimants note that no less than 34 arbitral tribunals constituted under the ECT unanimously rejected the argument that the ECT's dispute resolution provisions do

⁵⁷⁵ R-PHB, para. 31. ↩
⁵⁷⁶ R-PHB, para. 33. ↩
⁵⁷⁷ R-II, paras. 337-350. ↩
⁵⁷⁸ R-II, paras. 31-39. ↩
⁵⁷⁹ R-II, para. 30; R-PHB, paras. 34-35. ↩

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not apply to "intra-EU" disputes – including 26 tribunals that have issued their decisions after the CJEU's decision in Achmea⁵⁸⁰.

478. According to Claimants, Romania's argument contains three fundamental errors⁵⁸¹:

- First, the ECT does not recognize or permit an “intra-EU” objection (A.);

- Second, the ECT does not conflict with EU law; even if it did, the ECT would prevail over EU law (B.); and

- Third, the Achmea Judgment does not apply to ECT, while the Komstroy Judgment is not relevant to the Tribunal's determination of its jurisdiction over this dispute (C.).

A. The ECT does not recognize or permit an “intra-EU” objection

479. Claimants aver that, properly interpreted, the ECT does not envision or permit an “intra-EU" objection. The ECT exclusively governs and determines the Tribunal's jurisdiction. Since it derives from a binding instrument of international law, the Tribunal's jurisdiction does not arise from and is not subject to the EU legal order⁵⁸².

480. Claimants argue that, under Art. 26(3)(a) of the ECT, Romania gave its unconditional consent to arbitrate disputes. The only question is whether Art. 26(3), interpreted in accordance with Art. 31 of the VCLT, grants the Tribunal jurisdiction to hear the dispute. And in the present case it does (as several arbitral tribunals have recognized). There is no need for interpretation when treaty terms are clear⁵⁸³.

481. It is Claimants' position that the Contracting Parties to the ECT could not have intended for Art. 26(3) of the ECT to exclude intra-EU disputes. If the Contracting Parties had wished to exclude intra-EU disputes from the scope of Art. 26(3), they could have included a disconnection clause in the ECT, much as they did in relation to the Svalbard archipelago⁵⁸⁴. More importantly, the fact that the Commission tried, but failed to include a disconnection clause providing for an intra-EU exception during the negotiation of the ECT conclusively proves that intra-EU disputes are included within the scope of Art. 26(3)⁵⁸⁵.

482. Accordingly, Claimants submit that Romania's intra-EU objection fails on the plain and express terms of Art. 26(3) of the ECT⁵⁸⁶.

⁵⁸⁰ C-PHB, para. 10. ↩
⁵⁸¹ C-PHB, para. 11. ↩
⁵⁸² C-PHB, para. 12. ↩
⁵⁸³ C-PHB, paras. 13-14; C-Komstroy, paras. 3-9. ↩
⁵⁸⁴ C-PHB, paras. 16-17. ↩
⁵⁸⁵ C-PHB, para. 18. ↩
⁵⁸⁶ C-PHB, para. 19. ↩

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B. The ECT does not conflict with EU Law (but even if it did, ECT would prevail)

483. Furthermore, Claimants contend that, contrary to Romania's position, there is no conflict between the ECT and EU law, particularly between Art. 26 of the ECT and Arts. 267 and 344 of the TFEU. Claimants note that ECT tribunals have uniformly and repeatedly rejected Romania's argument⁵⁸⁷.

484. Claimants argue that there is little overlap – and certainly no conflict – between the ECT and EU law. Claimants' claims in this arbitration are based on the ECT and the interpretation of its standards under public international law. Claimants are not asserting any claims under or based on EU law. Thus, this Tribunal is not called upon to apply or interpret EU law. At most, EU law is relevant as part of the factual matrix of the dispute, like any other relevant domestic law⁵⁸⁸.

485. In any case, Claimants assert that if there was a conflict between the ECT and EU law – quod non – the ECT would prevail. This is because the Tribunal is bound to operate within its own legal sphere and apply its own rules for resolving the conflict⁵⁸⁹. Claimants note that Art. 16 of the ECT is the relevant applicable provision. Art. 16 privileges the “more favorable” provision to the investor in case of treaty conflict. Claimants submit that forcing an investor to litigate before a host country's local courts is less favorable than affording an investor the choice of resorting to international arbitration. Having a choice is always better than not having a choice⁵⁹⁰.

486. Therefore, Claimants submit that Romania's objection must fail even if there were a conflict between the ECT and EU law (which there is not)⁵⁹¹.

C. The Achmea and Komstroy Judgments are irrelevant

487. It is Claimants' position that the Achmea Judgment, the Opinion of the Advocate General of the CJEU in case C-741/19 between the Republic of Moldova and Komstroy, and the subsequent Komstroy Judgment, are all unavailing⁵⁹².

488. First, the opinions of the Advocate General of the CJEU on matters of EU law, as well as CJEU's Judgments in this regard⁵⁹³, are entirely irrelevant to any issue before this Tribunal, including its jurisdiction. The Tribunal's jurisdiction is governed by the ECT, a binding instrument of public international law. The Tribunal is a creature of public international law, and its jurisdiction is not and may not be governed nor impacted by developments within the regional legal order of

⁵⁸⁷ C-PHB, paras. 20-22. ↩
⁵⁸⁸ C-PHB, para. 23. ↩
⁵⁸⁹ C-PHB, para. 24. ↩
⁵⁹⁰ C-PHB, para. 25. ↩
⁵⁹¹ C-PHB, para. 26. ↩
⁵⁹² C-PHB, paras. 35-36; C-Komstroy, para. 45. ↩
⁵⁹³ C-Komstroy, para. 10. ↩

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the EU⁵⁹⁴. In any case, Claimants contend that the Advocate General's Opinion is not reliable since it reveals incomplete and contradictory reasoning⁵⁹⁵.

489. Second, the Komstroy Judgment has no conflict analysis under international law, something which this Tribunal would be required to do in order to determine whether any conflict exists⁵⁹⁶. Claimants aver that the CJEU did not undertake an international law analysis to ascertain the meaning of the ECT, and it did not employ or even refer to the international principles of treaty interpretation or the VCLT⁵⁹⁷. Claimants further contend that the Komstroy Judgment has been criticized as improper⁵⁹⁸ and has been considered irrelevant by several arbitral tribunals⁵⁹⁹.

490. In any event, Claimants argue that even if the Komstroy Judgment had some bearing on how this Tribunal is to view its jurisdiction (quod non), Romania's jurisdictional objection would be bound to fail. A tribunal's jurisdiction is determined by reference to the date on which judicial proceedings are instituted, which is recognized as the date on which the request for arbitration is filed⁶⁰⁰. Therefore, the Tribunal would still have jurisdiction, because the Komstroy Judgment has no automatic effect on EU Member States' international commitments under the ECT: their unconditional consent to arbitration under ECT remains in effect unless and until EU Member States remove any conflict created by the Komstroy Judgment, by amending or withdrawing from the ECT⁶⁰¹.

***

491. In conclusion, Claimants submit that the ECT applies to intra-EU disputes, as unanimously decided by at least 34 ECT arbitral tribunals, and Romania's objection should be dismissed⁶⁰².

3. DECISION OF THE TRIBUNAL

492. Romania argues that the Tribunal lacks competence over the present dispute because the arbitration clause of the ECT is inapplicable to intra-EU disputes⁶⁰³. According to Romania, the Tribunal should analyze this objection pursuant to the following tree of arguments⁶⁰⁴:

- First, Romania avers that intra-EU disputes are outside the scope of Art. 26 of the ECT, since they fail to meet the necessary conditions;

⁵⁹⁴ C-PHB, para. 36; C-Komstroy, para. 15. ↩
⁵⁹⁵ C-PHB, para. 43. ↩
⁵⁹⁶ C-Komstroy, para. 20. ↩
⁵⁹⁷ C-Komstroy, para. 20. ↩
⁵⁹⁸ C-Komstroy, para. 42. ↩
⁵⁹⁹ Claimants' submission of 13 December 2021. ↩
⁶⁰⁰ C-PHB, para. 41. ↩
⁶⁰¹ C-Komstroy, para. 37. ↩
⁶⁰² C-PHB, para. 44. ↩
⁶⁰³ R-II, para. 22; R-PHB, para 7. ↩
⁶⁰⁴ R-II, p. 8. ↩

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- Second, if the Tribunal were to find that intra-EU disputes fall within the scope of Art. 26 of the ECT, Romania submits that, pursuant to Art. 41 of the VCLT, the Treaty of Lisbon constitutes an agreement to modify the ECT, with the effect of disapplying the arbitration clause in Art. 26 of the ECT between EU Member States;

- Third, if the Tribunal were to interpret that Art. 26 of the ECT applies to intra- EU disputes, Art. 26 conflicts with Arts. 267 and 344 of the TFEU, and must be disapplied; indeed, the TFEU prevails over the ECT under conflict- resolving rules; and

- Finally, if the Tribunal were to find that it has jurisdiction, the Tribunal should decline to exercise such jurisdiction given that an award rendered in this arbitration would be unenforceable in the EU and potentially elsewhere.

493. Claimants disagree and submit that the ECT does not recognize or permit an “intra-EU" objection. In any event, Claimants contend that the ECT does not conflict with EU law, and even if it did, the ECT should prevail over EU law, as unanimously decided by at least 34 ECT tribunals.

494. Upon careful examination of the Parties' submissions, the Tribunal finds that Claimants and Romania have validly given their consent to adjudicate this investment dispute through ICSID arbitration. In short, the Centre's jurisdiction and the Tribunal's competence derive from such consent, this consent remains in force, and, consequently, Romania's intra-EU objection must be dismissed.

495. The Tribunal will first turn to the facts underlying Romania's jurisdictional objection and provide pro memoria a chronology of events (3.1). The Tribunal will then address Romania's tree of arguments, establishing the reasons that support its decision to dismiss this jurisdictional objection (3.2).

3.1 CHRONOLOGY OF RELEVANT EVENTS

496. The present dispute opposes Romania and Claimants, which consist in ten companies incorporated under the laws of Austria, Cyprus, Germany, the Netherlands and Romania. All of these States are Members of the EU.

497. The Tribunal will summarize chronologically a number of events which are relevant for the adjudication of Romania's jurisdictional objection.

A. 1952-1958: The creation of the European Communities

498. In 1952, six European countries, including the Netherlands and West Germany, created the European Coal and Steel Community [“ECSC”] by signing the Treaty of Paris. Five years later, in 1957, building on the success of the ECSC, these six founding countries signed two other treaties (known as the Treaties of Rome), establishing the European Economic Community [“EEC”] and the European Atomic Energy Community ["Euratom"]. This gave rise to the “European Communities".

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B. 1966-1975: ICSID Convention

499. The ICSID Convention entered into force for the Netherlands on 14 October 1966, for Germany on 18 May 1969, for Austria on 24 June 1971, and for Romania on 12 October 1975.

C. 1992: Treaty of Maastricht

500. In 1992, the members of the European Communities concluded the Treaty on the European Union [“TEU” or “Treaty of Maastricht”], thereby merging the three communities into one. The Treaty, which entered into force on 1 November 1993, officially created the “European Union”.

D. 1995: Austria accedes to the EU

501. In 1994, Austria signed and ratified the Treaty of Accession to the EU, and officially acceded to the EU in 1995.

Ε. 1994-1998: ECT

502. After the end of the Cold War, Western and Eastern European States began to negotiate a framework to promote East-West cooperation in the energy sector⁶⁰⁵. This led to the signature on 17 December 1991 of a “European Energy Charter", a non-binding declaration of principles negotiated among more than 50 States (including some non-European States, such as Canada, the United States, Australia and Japan) and the European Communities⁶⁰⁶.

503. However, before this European Energy Charter was even signed, the Charter Conference had already begun negotiating an agreement to implement its principles and objectives on a binding basis – this project became the ECT⁶⁰⁷.

504. After long negotiations, on 17 December 1994, more than 50 States and the "European Communities”⁶⁰⁸ signed the ECT in Lisbon, with the goal of ensuring⁶⁰⁹:

"[...] the creation of a 'level playing field' for energy sector investments throughout the Charter's constituency, with the aim of reducing to a minimum the non-commercial risks associated with energy-sector investments.”

⁶⁰⁵ Doc. CL-216, paras. 2.06-2.07. ↩
⁶⁰⁶ Doc. CL-216, para. 2.07. ↩
⁶⁰⁷ Doc. CL-216, para. 2.08. ↩
⁶⁰⁸ Doc. CL-1, p. 224. As explained by Dr. Crina Baltag, “When the European [Energy] Charter [predecessor of the ECT] was concluded in 1991, there were three European Communities [...]. Between the conclusion of the European [Energy] Charter in 1991 and the signature of the ECT in 1994, the Member States of the European Communities created the EU. [...] With the establishment of the EU, the TEU changed the name of the EEC to the European Community (EC). The TEU also established the concept of citizenship of the EU for persons holding the nationality of the Member States. [...] In 1994, the ECT was signed by the European Communities [...]. With the entry into force of the Treaty on the Functioning of the European Union in December 2009 (TFEU), EU replaced and succeeded the EC." (C. BALTAG, The Energy Charter Treaty, The Notion of Investor, Kluwer Law International (2012), pp. 58-60). ↩
⁶⁰⁹ Doc. CL-1, p. 14; Doc. CL-216, para. 2.08. ↩

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505. Romania, Germany, Austria, the Netherlands and Cyprus ratified the ECT on 10 March 1996⁶¹⁰, 14 March 1997⁶¹¹, 12 August 1997⁶¹², 11 December 1997⁶¹³ and 2 January 1998⁶¹⁴, respectively. When submitting their ratification instrument to the ECT Secretariat in 1998, the European Communities expressly affirmed that⁶¹⁵:

"The European Communities and their Member States have both concluded the Energy Charter Treaty and are thus internationally responsible for the fulfilment of the obligations contained therein, in accordance with their respective competences.

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."

506. A footnote to this latter statement reads that “[t]his is without prejudice to the right of the investor to initiate proceedings against both the Communities and their Member States”⁶¹⁶.

507. The ECT entered into force on 16 April 1998.

F. 2004: Cyprus accedes to the EU

508. On 1 May 2004, the largest single enlargement of the EU took place, leading the so-called A10 countries, including Cyprus, to join the EU.

G. 2006-2007: The Commission's position in Eastern Sugar

509. The issue of the compatibility between intra-EU BITs and EU law was raised for the first time in the case of Eastern Sugar v. Czech Republic⁶¹⁷. The partial award rendered in 2007 appears to be the first published investment arbitration award addressing this issue.

510. Eastern Sugar was an UNCITRAL arbitration seated in Paris, under the Czech-Netherlands BIT of 1991. The Dutch investor, Eastern Sugar, alleged that certain regulatory measures adopted by the Czech Republic between 2000 and 2003 had breached the underlying BIT. The Czech Republic raised the objection that upon the Republic's accession to the EU in May 2004, the EU Treaties had superseded the intra-EU BIT, since both agreements regulated the same subject-matter.

⁶¹⁰ Doc. C-15. ↩
⁶¹¹ Doc. C-19. ↩
⁶¹² Doc. C-18. ↩
⁶¹³ Doc. C-17. ↩
⁶¹⁴ Doc. C-20. ↩
⁶¹⁵ Doc. EC-15, p. 1. ↩
⁶¹⁶ Doc. EC-15, fn. 1. ↩
⁶¹⁷ Doc. CL-36, Eastern Sugar. ↩

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511. The Eastern Sugar tribunal dismissed the jurisdictional objection raised by the Czech Republic, noting that the BIT had not been expressly terminated by the Accession Treaty of the Czech Republic, nor by the Contracting States pursuant to the termination procedure of the BIT⁶¹⁸.

512. During this arbitration, the Czech Republic consulted the EC, who filed an opinion in January 2006. In its opinion, which is reproduced in the Eastern Sugar partial award⁶¹⁹, the EC stated the following:

"a) EC law prevails in a Community context as of accession

Given that the rights and obligations of membership come into force on accession rather than on signature or ratification, the applicable date can be considered as 1 May 2004.

Based on ECJ jurisprudence Article 307 EC is not applicable once all parties of an agreement have become Member States. Consequently, such agreements cannot prevail over Community law.

For facts occurring after accession, the BIT is not applicable to matters falling under Community competence. Only certain residual matters, such as diplomatic representation, expropriation and eventually investment promotion, would appear to remain in question.

Therefore, where the EC Treaty or secondary legislation are in conflict with some of these BITs' provisions – or should the EU adopt such rules in the future - Community law will automatically prevail over the non-conforming BIT provisions.

As you mention correctly, the application of intra-EU BITs could lead to a more favourable treatment of investors and investments between the parties covered by the BITs and consequently discriminate against other Member States, a situation which would not be in accordance with the relevant Treaty provisions.

The [C]ommission therefore takes the view that intra-EU BITs should be terminated in so far as the matters under the agreements fall under Community competence.

b) Effect on existing BITs

However, the effective prevalence of the EU acquis does not entail, at the same time, the automatic termination of the concerned BITs or, necessarily, the non-application of all their provisions.

Without prejudice to the primacy of Community law, to terminate these agreements, Member States would have to strictly follow the relevant

⁶¹⁸ Doc. CL-36, Eastern Sugar, paras. 143-146 and 153. ↩
⁶¹⁹ Doc. CL-36, Eastern Sugar, para. 119. ↩

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procedure provided for this in regard in the agreements themselves. Such termination cannot have a retroactive effect.

c) Dispute settlement procedures

As mentioned above, Community law, including the jurisdiction of the Court of Justice, in principle prevails from the date of accession. However, the transitional situation until the BITs are formally terminated may result in complex questions of interpretation with regard to jurisdiction in particularly [sic] with regard to pending arbitration procedures but also in relation to rules such as Article 13 in the BIT between the Czech Republic and the Netherlands, which provides for an extended application of the agreement in a certain period after termination.

In so far as conflicts between Member States are concerned, it follows from Article 292 EC that the Member States cannot apply the settlement procedures provided for in the BITs in so far as the dispute concerns a matter falling under Community competence.

On the other hand, if the dispute concerns an investor-to-state claim under a BIT, the legal situation is more complex. Since Community law prevails from the time of accession, the dispute should be decided on basis of Community law (which indirectly also follows from Article 8(6) first bullet point in the agreement between the Czech Republic and the Netherlands). However, it may be argued that the private investor could continue to rely on the settlement procedures provided for in the agreement until formal termination of the BIT if the dispute concerns facts which occurred before accession. The primacy of Community law should in such instance be considered by the arbitration instance.

The primacy of EU law and its definite interpretation by the European Court of Justice would not necessarily preclude a legal instance (arbitration) in another jurisdiction arriving at a different conclusion, even in an international agreement between two Member States.

In particular, in order to avoid any legal problem with regard to an arbitration procedure, existing BITs between Member States should, as mentioned above, therefore be terminated. The formal termination can only be done according to the provisions of the agreement in question. I would note that this principle would not only apply to the Czech BIT with the Netherlands, which would seem to have given rise to a significant amount of litigation, but also those of the Czech Republic with 21 other Member States. Without prejudice to the primacy of Community law, termination of the BIT would take effect according to the respective provisions of each such BIT.” [Emphasis added]

513. The view of the Commission was that, although EU law prevails over international agreements between Member States, accession to the EU does not entail the automatic termination of BITs. Moreover, the Commission noted that Member States should terminate these agreements, as far as those BITs interfere with EU

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competences, by "strictly” following the relevant procedure. The Commission further acknowledged that “such termination cannot have a retroactive effect”⁶²⁰.

514. This opinion was ratified in a Note of the EC dated November 2006 (from the Internal Market Services DG to the Economic and Financial Committee), by which the Commission recommended that Member States “exchange notes to the effect that such [intra-EU] BITs are no longer applicable, and also formally rescind such agreements"⁶²¹.

H. 2007: Romania accedes to the EU

515. Romania signed and ratified the Accession Treaty in 2005, and officially acceded to the EU on 1 January 2007.

I. 2009: Treaty of Lisbon

516. The last substantial EU reform was implemented through the “Treaty of Lisbon”, which was signed in December 2007 and entered into force in December 2009. The Treaty of Lisbon amended the two treaties which formed the constitutional basis of the EU: it amended the Treaty of Maastricht (or TEU), and it replaced the Treaty of Rome with the Treaty for the Functioning of the European Union [“TFEU”].

J. 2011-2013: Claimants' investment in Romania

517. Claimants' investment in Romania is explained in detail under section III.3 supra. For the purposes of this section, the Tribunal notes the following:

- In January 2011, LSG and Green Source incorporated the Alpha, Beta and Gamma Project Companies⁶²²;

- In September 2011, Giust and Anina incorporated Solar Frăsinet and Solar Mostistea, respectively⁶²³;

- In May 2012, Solluce acquired a 62.3% share in the Alpha Project Company⁶²⁴;

- In September 2012, Giust and Anina each entered into a SPA with Pressburg, under which Pressburg acquired 50% of each of the Frăsinet Project Companies⁶²⁵;

⁶²⁰ This position was reiterated by the EC and the Netherlands in the Achmea arbitration (see Doc. CL-39, Achmea Jurisdiction, paras. 156, 180 and 187). ↩
⁶²¹ Doc. CL-36, Eastern Sugar, para. 126. ↩
⁶²² Lipkovich I, para. 19; Hofmann, para. 15. ↩
⁶²³ Edwards I, Table 1.1; Doc. C-123, Art. 1.2; Doc. C-124, Art. 1.2; Theuer I, para. 20; C-I, para. 37. ↩
⁶²⁴ Doc. C-166; Lim, paras. 20-22; Hofmann, para. 27. ↩
⁶²⁵ Doc. C-123; Doc. C-124; Theuer I, para. 22. ↩

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- In January 2013, Risen entered into a SPA with Green Source and LSG, pursuant to which Risen acquired 90% of Beta⁶²⁶; and

- In June 2013, CVI, CVC, LSG and Green Source entered into a SPA pursuant to which Core Value acquired a 79% share in the Gamma Project Company⁶²⁷.

K. March 2018: The Achmea Judgment

a. Background

518. The Achmea Judgment concerns a preliminary ruling submitted to the CJEU on 23 May 2016 by the German Bundesgerichtshof (Supreme Court) ["BGH"]⁶²⁸, after the BGH was asked to decide an appeal from the Slovak Republic regarding an application to set aside the award rendered in the UNCITRAL arbitration between Achmea B.V. [“Achmea"], a Dutch insurance company, and Slovakia, under the Czechoslovakia-Netherlands BIT (in force since March 1992)⁶²⁹.

b. Arbitration

519. Following the liberalization of the insurance market in the Slovak Republic in 2004⁶³⁰, Achmea established a subsidiary in Slovakia to market private health insurance products⁶³¹. In 2006, the Slovak Republic reversed the liberalization process of the insurance sector, allegedly affecting Achmea’s investment⁶³².

520. Achmea initiated an arbitration against the Slovak Republic pursuant to the Czechoslovakia-Netherlands BIT (in force since October 1992⁶³³) and the UNCITRAL Rules. The parties agreed on Frankfurt as the seat of the arbitration.

521. On 28 October 2010 the tribunal in the Achmea arbitration issued a partial award on jurisdiction, dismissing Slovakia's jurisdictional objections according to which:

- The Czechoslovakia-Netherlands BIT had been terminated or was inapplicable pursuant to Arts. 59 and 30 of the VCLT, because of Slovakia's accession to the EU in 2004⁶³⁴; and

- The Czechoslovakia-Netherlands BIT was incompatible with the EU Treaties, the autonomy of the EU legal order and the supremacy of EU law⁶³⁵.

⁶²⁶ Edwards I, para. 3.24. ↩
⁶²⁷ Edwards I, para. 3.32. ↩
⁶²⁸ Doc. C-30, Achmea Judgment, para. 13. ↩
⁶²⁹ Doc. CL-39, Achmea Jurisdiction, para. 46 ↩
⁶³⁰ Doc. CL-39, Achmea Jurisdiction, paras. 7 and 51-53. ↩
⁶³¹ Doc. CL-39, Achmea Jurisdiction, paras. 7 and 51-53. ↩
⁶³² Doc. CL-39, Achmea Jurisdiction, para. 54. ↩
⁶³³ Doc. CL-39, Achmea Jurisdiction, para. 46. ↩
⁶³⁴ Doc. CL-39, Achmea Jurisdiction, paras. 265 and 277. ↩
⁶³⁵ Doc. CL-39, Achmea Jurisdiction, paras. 278-283. ↩

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522. On 7 December 2012, the tribunal issued its final award, finding Slovakia liable for breaching the FET standard and the free transfer of payments provision of the Czechoslovakia-Netherlands BIT⁶³⁶.

с. Set aside proceeding

523. During an action to set aside the award in the German courts, the Slovak Republic raised doubts as to the compatibility of the arbitral clause in Art. 8 of the Czechoslovakia-Netherlands BIT⁶³⁷ with Arts. 18, 267 and 344 of the TFEU⁶³⁸. Although the BGH did not consider such an incompatibility to exist⁶³⁹, in light of the fact that the CJEU had not yet had the chance to rule on the questions raised by the Slovak Republic, the BGH decided to stay the set aside proceedings and refer certain questions to the CJEU for a preliminary ruling⁶⁴⁰.

d. The Achmea Judgment

524. On 6 March 2018, the CJEU (Grand Chamber) issued its ruling on the Achmea case, after hearing submissions from Achmea, the Slovak Republic, the Advocate General, the Commission and 15 EU Member States. The CJEU found that⁶⁴¹:

"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."

525. The CJEU thus found that arbitral clauses in intra-EU BITs that provide jurisdiction to investment arbitration tribunals such as in the Czechoslovakia-Netherlands BIT are precluded by Arts. 267 and 344 of the TFEU.

526. According to the CJEU, an international agreement cannot affect the allocation of powers fixed by the EU Treaties or the autonomy of the EU legal system, observance of which is ensured by the CJEU⁶⁴². The CJEU additionally recalled that EU law is characterized by the fact that it stems from an independent source of law, has primacy over the domestic laws of Member States, and its provisions have

⁶³⁶ Doc. RL-81, Achmea Award, paras. 278-286. ↩
⁶³⁷ Significantly, Art. 8(6) of the Czechoslovakia-Netherlands BIT provides that: “The arbitral tribunal shall decide on the basis of the law, taking into account in particular though not exclusively: the law in force of the Contracting Party concerned; the provisions of this Agreement, and other relevant agreements between the Contracting Parties; the provisions of special agreements relating to the investment; the general principles of international law." (Doc. C-30, Achmea Judgment, para. 4). ↩
⁶³⁸ Doc. C-30, Achmea Judgment, para. 14. ↩
⁶³⁹ Doc. C-30, Achmea Judgment, paras. 15-23. ↩
⁶⁴⁰ Doc. C-30, Achmea Judgment, para. 23. ↩
⁶⁴¹ Doc. C-30, Achmea Judgment, para. 62. ↩
⁶⁴² Doc. C-30, Achmea Judgment, para. 32. ↩

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a direct effect on nationals and Member States⁶⁴³. National courts and tribunals and the CJEU have an obligation to ensure the full application and respect of EU law in all Member States⁶⁴⁴. To ensure the uniform interpretation of EU law, courts and tribunals of Member States can request a preliminary ruling from the CJEU, pursuant to Art. 267 of the TFEU⁶⁴⁵.

527. In light of these principles, the CJEU examined whether arbitral tribunals in arbitrations based on intra-EU BITs apply or interpret EU law. The CJEU found that, although investment arbitration tribunals are called upon to rule on alleged breaches of the Czechoslovakia-Netherlands BIT provisions, to do so they must, in accordance with Art. 8(6) of the Czechoslovakia-Netherlands BIT, take into account “the law in force in the Contracting State concerned” and “other relevant agreements between the Contracting [States]”. As EU law forms a part of the law in force in every Member State and derives from an international agreement between Member States⁶⁴⁶, it follows that investment arbitration tribunals may be called upon to interpret or apply EU law⁶⁴⁷.

528. In answering the second question – whether an investment tribunal is a court or tribunal of a Member State within the meaning of Art. 267 of the TFEU – the CJEU concluded that an investment arbitration tribunal does not form part of the judicial system of the respective Member States and therefore does not qualify as a court or tribunal of a Member State for the purposes of Art. 267 of the TFEU⁶⁴⁸.

529. The CJEU also turned to the subsidiary question: whether an award made by an investment arbitration tribunal is subject to review by a court of a Member State, which could ensure that the questions of EU law addressed by the tribunal can be submitted to the CJEU through a reference for a preliminary ruling⁶⁴⁹.

530. The CJEU acknowledged that, whilst in the case under review German law permitted the German court to request a preliminary ruling from the CJEU, such judicial review could only be exercised if and to the extent that the national law in question so permits⁶⁵⁰.

531. Therefore, in light of the foregoing characteristics of an investment arbitration tribunal, the CJEU concluded that⁶⁵¹:

“[B]y concluding the BIT, the Member States parties to it established a mechanism for settling disputes between an investor and a Member State which could prevent those disputes from being resolved in a manner that

⁶⁴³ Doc. C-30, Achmea Judgment, para. 33. ↩
⁶⁴⁴ Doc. C-30, Achmea Judgment, para. 36. ↩
⁶⁴⁵ Doc. C-30, Achmea Judgment, para. 37. ↩
⁶⁴⁶ Doc. C-30, Achmea Judgment, paras. 40-41. ↩
⁶⁴⁷ Doc. C-30, Achmea Judgment, para. 42. ↩
⁶⁴⁸ Doc. C-30, Achmea Judgment, paras. 45-46 and 48-49. ↩
⁶⁴⁹ Doc. C-30, Achmea Judgment, para. 52. ↩
⁶⁵⁰ Doc. C-30, Achmea Judgment, para. 53. ↩
⁶⁵¹ Doc. C-30, Achmea Judgment, para. 56. ↩

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ensures the full effectiveness of EU law, even though they might concern the interpretation or application of that law.” [Emphasis added]

532. In addition, the CJEU added that BITs concluded between two Member States without participation of the EU that provide the possibility to submit investment disputes to a body which does not form part of the EU judicial system⁶⁵²:

"[C]all 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, and is not therefore compatible with the principle of sincere cooperation referred to in paragraph 34 above [which references Article 4(3) TEU].

In those circumstances, Article 8 of the BIT has an adverse effect on the autonomy of EU law."

533. Based on this reasoning, the CJEU concluded that⁶⁵³:

"Consequently, the answer to Questions 1 and 2 is that 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 BIT, 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."

534. In view of the answers to Questions 1 and 2, the CJEU found that there was no need to answer Question 3⁶⁵⁴.

L. May 2018: Claimants' Request for Arbitration

535. On 23 May 2018, Claimants filed their Request for Arbitration against Romania.

M. July 2018: The EC's post-Achmea position

536. In July 2018, following the Achmea Judgment, the EC issued a communication to the European Parliament and the Council noting that⁶⁵⁵:

"Following the Achmea judgment, the Commission has intensified its dialogue with all Member States, calling on them to take action to terminate the intra-EU BITs, given their incontestable incompatibility with EU law. The Commission will monitor the progress in this respect and, if necessary, may decide to further pursue the infringement procedures. [...]

This implies that all investor-State arbitration clauses in intra-EU BITS are inapplicable and that any arbitration tribunal established on the basis of such

⁶⁵² Doc. C-30, Achmea Judgment, paras. 58-59. ↩
⁶⁵³ Doc. C-30, Achmea Judgment, para. 60. ↩
⁶⁵⁴ Doc. C-30, Achmea Judgment, para. 61. ↩
⁶⁵⁵ Doc. RL-10, pp. 2-3. ↩

[Page 113]

clauses lacks jurisdiction due to the absence of a valid arbitration agreement. As a consequence, national courts are under the obligation to annul any arbitral award rendered on that basis and to refuse to enforce it. Member States that are parties to pending cases, in whatever capacity, must also draw all necessary consequences from the Achmea judgment. Moreover, pursuant to the principle of legal certainty, they are bound to formally terminate their intra-EU BITs." [Emphasis added]

537. However, the EC went further and made a specific finding regarding the ECT, even though the Achmea Judgment contained no reference to the ECT⁶⁵⁶:

"The Achmea judgment is also relevant for the investor-State arbitration mechanism established in Article 26 of the Energy Charter Treaty as regards intra-EU relations. This provision, if interpreted correctly, does not provide for an investor-State arbitration clause applicable between investors from a Member States of the EU and another Member States of the EU. Given the primacy of Union law, that clause, if interpreted as applying intra-EU, is incompatible with EU primary law and thus inapplicable. Indeed, the reasoning of the Court in Achmea applies equally to the intra-EU application of such a clause which, just like the clauses of intra-EU BITs, opens the possibility of submitting those disputes to a body which is not part of the judicial system of the EU. The fact that the EU is also a party to the Energy Charter Treaty does not affect this conclusion: the participation of the EU in that Treaty has only created rights and obligations between the EU and third countries and has not affected the relations between the EU Member States." [Emphasis added]

538. The position of the Commission in 2018 is significantly different from that which it held in 2006 in Eastern Sugar. Although in 2006, the Commission called Member States to formally terminate their intra-EU BITs, it considered that "[s]uch termination cannot have retroactive effect”, so that investors could continue to rely on BITs as instruments to protect their investments. In 2018, the Commission took a Copernican turn: it held that arbitral tribunals in pending arbitrations were required, as a matter of law, to decline jurisdiction and that national courts “are under an obligation to annul any arbitral award” – and that this would apply to any agreements between Member States (not only BITs), including multilateral agreements such as the ECT.

Ν. 2019: The EU Member States' Declarations

539. On 15 January 2019, 22 EU Member States (including Romania) issued a joint "Declaration of the representatives of the Governments of the Member States, on the legal consequences of the judgment of the Court of Justice in Achmea and on investment protection in the European Union”⁶⁵⁷.

540. The Declaration was not signed by all EU Member States due to divergences regarding the application of the Achmea Judgment to the ECT; consequently, two

⁶⁵⁶ Doc. RL-10, pp. 3-4. ↩
⁶⁵⁷ Doc. RL-11. ↩

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additional declarations were issued on 16 January 2019: one signed jointly by Finland, Luxembourg, Malta, Slovenia and Sweden⁶⁵⁸, and another by Hungary⁶⁵⁹.

541. The declaration of 15 January 2019 expressed the position that EU law takes precedence over intra-EU BITs, and consequently, all arbitral clauses providing for investor-State arbitration in such BITs are contrary to EU law and are thus inapplicable and do not produce effects, with the result that arbitral tribunals established on the basis of such clause lack jurisdiction on account of an invalid offer of consent in the treaty⁶⁶⁰. Regarding the application of the Achmea Judgment to the ECT, the declaration expressed that⁶⁶¹:

"Arbitral tribunals have interpreted the Energy Charter Treaty as also containing an investor-State arbitration clause applicable between Member States. Interpreted in such a manner, that clause would be incompatible with the Treaties and thus would have to be disapplied. [...]

Beyond actions concerning the Energy Charter Treaty based on this declaration, Member States together with the Commission will discuss without undue delay whether any additional steps are necessary to draw all the consequences from the Achmea judgment in relation to the intra-EU application of the Energy Charter Treaty.” [Emphasis added]

542. More skeptical, the 16 January 2019 declaration by Finland, Luxembourg, Malta, Slovenia and Sweden indicated the following⁶⁶²:

"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.” [Emphasis added]

543. Similarly, Hungary declared that⁶⁶³:

"8. [...] in its view, the Achmea judgment concerns only the intra-EU bilateral investment treaties. The Achmea judgment is silent on the investor-state

⁶⁵⁸ Doc. RL-82. ↩
⁶⁵⁹ Doc. C-1/Doc. RL-83. ↩
⁶⁶⁰ Doc. RL-11, p. 1. ↩
⁶⁶¹ Doc. RL-11, pp. 2 and 4. ↩
⁶⁶² Doc. RL-82, p. 3. ↩
⁶⁶³ Doc. C-1/Doc. RL-83, p. 3. ↩

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arbitration clause in the [ECT] and it does not concern any pending or prospective arbitration proceedings initiated under the ECT.

9. Against this background, Hungary underlines the importance of allowing for due process and considers that it is inappropriate for a Member State to express its view as regards the compatibility with Union law of the intra-EU application of the ECT. The ongoing and future applicability of the ECT in intra-EU relations requires further discussion and individual agreement amongst the Member States."

Ο. 2018-2020: ECT decisions after the Achmea Judgment

544. Following the CJEU's Achmea Judgment, at least 25 investment arbitration tribunals decided that the CJEU's findings in such case did not extend to the ECT's dispute resolution provision⁶⁶⁴.

P. January 2020: EC's Amicus Curiae Brief

a. Background

545. On 24 January 2020, the EC filed its Amicus Curiae Brief in the current proceedings, in accordance with the calendar set out in Procedural Order No. 2. In its Amicus Curiae Brief, the EC invited the Tribunal to decline jurisdiction on the grounds that Romania did not validly consent to arbitration⁶⁶⁵.

b. Application of Art. 26 of the ECT to intra-EU disputes

546. The EC submits that the question of whether Art. 26 of the ECT constitutes a valid arbitration offer from one EU Member State to investors of all other EU Member States is a hotly debated topic in arbitral practice⁶⁶⁶. But, in its opinion, the rules of customary international law on treaty interpretation favor the conclusion that the ECT does not apply in intra-EU situations⁶⁶⁷.

547. The EC considers that investment tribunals, which have been entrusted with their mission by the EU Member States as Contracting Parties to the ECT, owe deference to interpretative declarations made by those same EU Member States.

548. According to the EC⁶⁶⁸:

"A system of dispute resolution introduced in a situation covered by Union law but set up outside the system of effective legal protection established by the Treaties, unjustifiably calls, or risks calling into question that principle of mutual trust. Union law already protects all forms of cross border intra-EU investment, throughout the entire life cycle of that investment. There is simply

⁶⁶⁴ C-III, para. 193. ↩
⁶⁶⁵ Amicus Curiae Brief, para. 81. ↩
⁶⁶⁶ Amicus Curiae Brief, para. 3. ↩
⁶⁶⁷ Amicus Curiae Brief, para. 34. ↩
⁶⁶⁸ Amicus Curiae Brief, para. 17. ↩

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no space – or need, for that matter – for a separate avenue providing other substantive rights or protection than those afforded by the Union legal order.”

549. The EC further submits that the ordinary meaning of the terms of Art. 26 of the ECT, when read in their proper context, must be understood as excluding EU investors investing in the “Area” of the EU: they are investors investing in their own economic area.

550. According to the EC, the EU is a Regional Economic Integration Organisation [“REIO”], as defined in Art. 1(2) and (3) of the ECT. The EC submits that it is recognized by the common practice of the international community, through the REIO clause, that the EU and the EU Member States, when acting together on the international scene – like in the case of the ECT – only create legal obligations vis-à-vis third countries⁶⁶⁹.

551. Therefore, it is entirely within the general rule of interpretation under Art. 31 of the VCLT to conclude that an investor from one EU Member State investing in another Member State is not covered by the notion of “Investor” making an investment in the “Area” of “another Contracting Party”, and thus falls outside the scope of the dispute resolution mechanism provided for in Art. 26 of the ECT.

552. The EC argues that the Tribunal has an obligation, pursuant to Art. 31(3)(c) of the VCLT, to consider the statement made by the European Communities to the ECT Secretariat when submitting their ratification to the ECT (see para. 505 supra). According to the EC, when stating that 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”, the Member States considered that only investors from other Contracting Parties (i.e., outside the EU) could bring a case against the EU or the EU Member States.

553. Considering this statement together with the context and purpose of the ECT, there is no reason to conclude that Art. 26 of the ECT applies to intra-EU disputes.

554. The EC emphasizes that this interpretation is shared both by the home State of the investors and the host State in this case. The Arbitral Tribunal cannot ignore the clear will of the relevant Contracting Parties.

с. The TFEU must prevail in case of conflict with the ECT

555. The EC submits that, if the Tribunal were to find that Art. 26 of the ECT applies to intra-EU disputes, such provision would be in conflict with Arts. 267 and 344 of the TFEU and, in accordance with the hierarchy of norms that characterizes the EU's legal order, it would have to be set aside, or "disapplied” in intra-EU disputes, for four reasons.

556. First, because the CJEU confirmed in the Achmea Judgment that the TFEU prohibits Member States from offering to resolve intra-EU investor-State disputes

⁶⁶⁹ Amicus Curiae Brief, paras. 23, 26, 37. ↩

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before international arbitration tribunals. The EC submits that these considerations also apply to the ECT⁶⁷⁰:

- EU law is international law applicable between all EU Member States;

- EU law is covered by the term “applicable rules and principle of international law" used in Art. 26(6) of the ECT, and is explicitly recognized as binding under the ECT in an intra-EU context in Art. 1(3) of the ECT;

- Arbitral tribunals are not “national courts or tribunals” within the meaning of Art. 267 of the TFEU; and

- There is no full review of the award by a court in a Member State.

557. Second, the principle of primacy extends to any intra-EU application of multilateral treaties, even where third countries are parties to those treaties⁶⁷¹. The EC argues that Art. 16(2) of the ECT does not reverse the primacy of EU law and give precedence to the ECT. Instead⁶⁷²:

- Art. 16(2) of the ECT is a rule of construction, not a conflict rule; the applicable rule on resolving a conflict between the ECT and the EU Treaties is the primacy of EU law; and

- Even if Art. 16(2) of the ECT could be interpreted as a conflict rule, it would yield to the primacy of the EU Treaties, which is a special and mandatory conflict rule applicable to all conflicting treaties, whenever concluded: EU law forbids Member States from setting aside the rules arising out of the EU Treaties by concluding an international agreement or convention.

558. Third, regarding intra-EU relations, the TFEU regulates its relationship with EU Member States' other inter se international obligations in favor of the absolute precedence of EU law in case of conflict. This includes Member States' obligations under multilateral treaties⁶⁷³.

559. Finally, the EC argues that the sunset or grandfather clause set forth in Art. 47(3) of the ECT cannot operate to “cure” the fact that a particular situation (i.e., intra-EU application) never benefitted from that protection in the first place⁶⁷⁴.

560. In light of the above, the EC considers that the Tribunal should decline jurisdiction in the current proceedings.

⁶⁷⁰ Amicus Curiae Brief, para. 60. ↩
⁶⁷¹ Amicus Curiae Brief, para. 70. ↩
⁶⁷² Amicus Curiae Brief, paras. 73-75. ↩
⁶⁷³ Amicus Curiae Brief, para. 79. ↩
⁶⁷⁴ Amicus Curiae Brief, para. 80. ↩

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Q. May 2020: Termination Treaty

561. On 5 May 2020, 23 EU Member States (including Germany, the Netherlands, Cyprus and Romania) signed an “Agreement for the termination of bilateral investment treaties between the Member States of the European Union" [the “Termination Treaty”]⁶⁷⁵.

562. The Termination Treaty is an international agreement that purports to terminate all intra-EU BITs, together with their sunset clauses, “as soon as this Agreement enters into force for the relevant Contracting Parties”, i.e., 30 days after their ratification by the particular EU Member State. However, the Termination Treaty expressly provides that⁶⁷⁶:

"[it] addresses intra-EU bilateral investment treaties; it does not cover intra-EU proceedings on the basis of Article 26 of the Energy Charter Treaty. The European Union and its Member States will deal with this matter at a later stage." [Emphasis added]

R. 2021: The Komstroy Judgment

a. Background

563. The Komstroy Judgment concerns a request for a preliminary ruling submitted to the CJEU on 24 September 2019 by the Cour d'appel de Paris [“Court of Appeal"], after it was asked – for the second time – to set aside the award rendered in an UNCITRAL arbitration between Energoalians (predecessor in law of Komstroy) and the Republic of Moldova, under the ECT⁶⁷⁷.

564. The background for the Komstroy Judgment arises from a series of contracts concluded between 1999 and 2000: Energoalians, a Ukrainian distributor, signed a contract with Ukrenegro, a Ukrainian State-owned enterprise, for the purchase of electricity. Energoalians resold this energy to Derimen, a company registered in the British Virgin Islands, which in turn resold that electricity to Moldtranselectro, a Moldavian State-owned company. In May 2000, Derimen assigned to Energoalians a claim it had against Moldtranselectro for payments due for the purchase of electricity. Moldtranselectro settled this debt in part, by assigning to Energoalians certain claims that it held⁶⁷⁸.

b. Arbitration

565. After unsuccessfully attempting to collect these claims before Moldovan and Ukrainian courts, Energoalians initiated an ad hoc arbitration procedure against the Republic of Moldova, arguing a breach of certain undertakings under the ECT during Energoalians' attempt to obtain payment of the assigned claims. In October 2013, the arbitral tribunal seated in Paris issued its award, holding that it had

⁶⁷⁵ Doc. CL-184. ↩
⁶⁷⁶ Doc. CL-184, p. 6. ↩
⁶⁷⁷ Doc. RL-314, Komstroy Judgment. ↩
⁶⁷⁸ Doc. RL-314, Komstroy Judgment, paras. 8-11. ↩

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jurisdiction and finding Moldova liable for breaching its obligations under the ECT⁶⁷⁹.

с. First set aside proceeding

566. During an action to set aside the award in the French courts, Moldova invoked a breach of a compulsory public policy provision, arguing that the arbitral tribunal lacked jurisdiction⁶⁸⁰.

567. By a decision of 12 April 2016, the Paris Court of Appeal annulled the arbitral award on the ground that the tribunal had wrongly declared that it had jurisdiction ["Annulment"]. The Court of Appeal found that the dispute between Energoalians and the Republic of Moldova concerned a claim that was assigned to Energoalians, for the sale of electricity and that in the absence of any economic contribution by Energoalians in Moldova, such claim could not be regarded as an “investment”, within the meaning of the ECT⁶⁸¹.

d. Appeal on a point of law

568. Komstroy, as successor in law to Energoalians, lodged an appeal on a point of law before the French Cour de cassation [“Court of Cassation”]. On 28 March 2019, the Court of Cassation set aside the Annulment, after finding that the Court of Appeal had interpreted the concept of investment by adding conditions which were not provided for in the ECT. The Court of Cassation referred the parties back to the Court of Appeal, sitting in a different composition⁶⁸².

e. Second set aside proceeding

569. During a second action to set aside the award, Moldova submitted that the arbitral tribunal should have declined jurisdiction for three reasons⁶⁸³:

- First, Moldova alleged that the claim acquired by Energoalians from Derimen was not an investment within the meaning of the ECT;

- Second, even if the claim could constitute an investment, it was not an investment of a company of a Contracting Party to the ECT, as Derimen was a company registered in the British Virgin Islands;

- Third, that the claim related to a transaction for the sale of electricity that was not made in the “Area” of Moldova, as the electricity was sold and transported only to the border between Ukraine and Moldova, on the Ukrainian side.

⁶⁷⁹ Doc. RL-314, Komstroy Judgment, paras. 12-13. ↩
⁶⁸⁰ Doc. RL-314, Komstroy Judgment, para. 14. ↩
⁶⁸¹ Doc. RL-314, Komstroy Judgment, para. 15. ↩
⁶⁸² Doc. RL-314, Komstroy Judgment, para. 16. ↩
⁶⁸³ Doc. RL-314, Komstroy Judgment, para. 17. ↩

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570. The Court of Appeal decided to stay the proceedings and refer the following questions to the CJEU for a preliminary ruling⁶⁸⁴:

"[(1)] Must [Article 1(6) ECT] be interpreted as meaning that a claim which arose from a contract for the sale of electricity and which did not involve any economic contribution on the part of the investor in the host State can constitute an “investment” within the meaning of that article?

[(2)] Must [Article 26(1) ECT] be interpreted as meaning that the acquisition, by an investor of a Contracting Party, of a claim established by an economic operator which is not from one of the States that are Contracting Parties to that treaty constitutes an investment?

[(3)] Must [Article 26(1) ECT] be interpreted as meaning that a claim held by an investor, which arose from a contract for the sale of electricity supplied at the border of the host State, can constitute an investment made in the area of another Contracting Party, in the case where the investor does not carry out any economic activity in the territory of that latter Contracting Party?"

571. It is somewhat uncertain why the Court of Appeal (during the second set aside proceeding) decided to resort to a preliminary ruling: the parties to the Komstroy case do not involve EU Member States (Moldova is not a member of the EU and Komstroy is a Ukrainian investor) and the questions referred to a preliminary ruling do not affect any issues related to intra-EU disputes.

f. The preliminary ruling procedure

572. During the preliminary ruling procedure, the CJEU heard submissions from Komstroy, the Republic of Moldova, the Council of the EU, the EC, the Advocate General and nine EU Member States, including Germany and the Netherlands.

573. Both Germany and the Netherlands supported the position that the CJEU's reasoning in the Achmea Judgment could apply to the compatibility of the dispute settlement mechanism provided for in Art. 26 of the ECT.

Opinion of the Advocate General

574. The Advocate General, Mr. Maciej Szpunar, delivered his opinion to the CJEU on 3 March 2021. The Advocate General started by analyzing the jurisdiction of the CJEU, because the case was unprecedented⁶⁸⁵:

- The questions raised by the Court of Appeal concerned the interpretation of certain provisions of the ECT which had never been analyzed by the CJEU; and

⁶⁸⁴ Doc. RL-314, Komstroy Judgment, para. 20. ↩
⁶⁸⁵ Doc. RL-313, paras. 1-3. ↩

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- The dispute did not concern EU Member States (since it was between Moldova and a Ukrainian company) and therefore appeared to be unconnected with the EU.

575. Although the Advocate General acknowledged that CJEU case-law would lead to the conclusion that the CJEU had no jurisdiction over this matter, he argued that where a provision can apply both to situations falling within the scope of EU law and to situations falling outside its scope, it is clearly in the EU's interest that such provision be interpreted uniformly⁶⁸⁶.

576. According to the Advocate General, the Court of Appeal was asking the CJEU to interpret provisions of an international agreement (the ECT) that are not interpreted uniformly and which could, in principle, also be applied to situations in the EU legal order. Thus, the Advocate General found that the CJEU should assume jurisdiction to answer the questions referred for a preliminary ruling⁶⁸⁷.

577. The Advocate General further considered that, following the Achmea Judgment, the CJEU should take this opportunity to examine the implications of the Achmea Judgment on the applicability of Art. 26 of the ECT. Whilst examining this question, the Advocate General submitted that the dispute settlement mechanism provided for in Art. 26 of the ECT, insofar as it allows recourse to an arbitral tribunal, undoubtedly leads to a similar result as in Achmea, for several reasons⁶⁸⁸:

- First, Art. 26 allows disputes which may involve the interpretation of EU law to be brought before an investment arbitration tribunal; and

- Second, the arbitral tribunal established under Art. 26 of the ECT falls outside the EU judicial system and is not entitled to make a reference to the CJEU for a preliminary ruling as it cannot be regarded as a “court or tribunal of a Member State”, within the meaning of Art. 267 of the TFEU.

578. This led the Advocate General to conclude that Art. 26 of the ECT had an adverse effect on the autonomy of EU law and was incompatible with EU law.

g. The Komstroy Judgment

(i) CJEU's jurisdiction to consider the questions raised by the Court of Appeal

579. On 2 September 2021, the CJEU found that it had jurisdiction to hear the case as the agreement to join the ECT was an act of an EU institution and⁶⁸⁹:

- In accordance with Art. 267 of the TFEU, the Court has jurisdiction to interpret the acts of the institutions, bodies, offices or agencies of the EU; and

⁶⁸⁶ Doc. RL-313, paras. 28 et seq. ↩
⁶⁸⁷ Doc. RL-313, para. 45. ↩
⁶⁸⁸ Doc. RL-313, paras. 73-76. ↩
⁶⁸⁹ Doc. RL-314, Komstroy Judgment, paras. 22-38. ↩

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- An agreement concluded by the Council, pursuant to Arts. 217 and 218 of the TFEU constitutes an act of an EU institution; this grants the CJEU jurisdiction to give a preliminary ruling on the interpretation of said agreement.

580. The CJEU acknowledged that, in principle, it seemed that the CJEU did not have jurisdiction to interpret an international agreement in the context of a dispute not covered by EU law. However, the CJEU found that, where a provision of an international agreement can apply both to situations falling within the scope of EU law and to situations falling outside its scope, such provision should be interpreted uniformly, whatever the circumstances in which it is to apply. The CJEU noted that the questions raised by the Court of Appeal could be relevant for a case falling directly within the scope of EU law.

581. Additionally, the CJEU observed that the parties to the dispute agreed that the seat of the arbitration was Paris. The CJEU found that the establishment of the seat of arbitration on the territory of a Member State entails the application of EU law. Courts of the underlying Member State are obliged to ensure compliance with EU law, in accordance with Art. 19 of the TEU⁶⁹⁰.

582. Therefore, the CJEU concluded that it had jurisdiction to provide answers to the questions referred to it by the Court of Appeal.

(ii) Consideration of the first question

583. When addressing the first question, the CJEU found it necessary to specify which disputes between one Contracting Party and an investor of another Contracting Party concerning an investment made by the latter in the area of the former may be brought before an arbitral tribunal pursuant to Art. 26 of the ECT⁶⁹¹.

584. To answer this question, the CJEU reiterated the principles that it applied in the Achmea Judgment⁶⁹²:

- An international agreement cannot affect the allocation of powers laid down by the European treaties, and hence, the autonomy of the EU legal system, observance of which is ensured by the Court;

- EU law is characterized by the fact that it stems from an independent source of law (the European treaties), by its primacy over the laws of the Member States and by the direct effect of a series of provisions which are applicable to the Member States and to their nationals;

- National courts, tribunals and the CJEU have an obligation to ensure the full application of EU law in all Member States; and

⁶⁹⁰ Doc. RL-314, Komstroy Judgment, paras. 32-34. ↩
⁶⁹¹ Doc. RL-314, Komstroy Judgment, para. 40. ↩
⁶⁹² Doc. RL-314, Komstroy Judgment, paras. 42 et seq. ↩

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- To this end, the system includes the preliminary ruling procedure provided for in Art. 267 of the TFEU, allowing the CJEU to exercise its exclusive jurisdiction to interpret EU law.

585. In light of these principles, the CJEU sought to answer the same questions as the ones raised in the Achmea Judgment, arriving to the following conclusion:

586. First, in accordance with Art. 26(6) of the ECT, an arbitral tribunal constituted under the ECT is to rule on disputed issues in accordance with the ECT and with the applicable rules and principles of international law. As the ECT itself is an act of EU law, the CJEU concluded that an arbitral tribunal constituted under the ECT is required to interpret, and even apply, EU law⁶⁹³.

587. Second, a tribunal constituted under the ECT does not constitute a component of the judicial system of a Member State, in this case the French Republic. This means that arbitral tribunals are not subject to mechanisms capable of ensuring the full effectiveness of the EU rules. If an arbitral tribunal were to be considered a court of a Contracting Party to the ECT, it would have been included within the courts referred to in Art. 26(2)(a) of the ECT and thus Art. 26(2)(c) of the ECT would lose any effectiveness. Thus, arbitral tribunals cannot be classified as a court or tribunal "of a Member State” within the meaning of Art. 267 of the TFEU and; therefore, are not entitled to make a reference to the CJEU for a preliminary ruling⁶⁹⁴.

588. Third, the CJEU argued that it remained to be ascertained whether an award made by an arbitral tribunal is, in accordance with Art. 19 of the TEU, subject to review by a court of a Member State, and whether such review is capable of ensuring full compliance with EU law. The CJEU acknowledged that the case at hand permitted a judicial review, as the parties to the dispute had chosen to submit the dispute to an ad hoc arbitration tribunal, with a seat of the arbitration in Paris. However, the CJEU submitted that such judicial review could be carried out only insofar as the domestic law of the Member State permitted it⁶⁹⁵.

589. As such, the CJEU found that in light of the characteristics of an investment arbitration tribunal, it should be concluded – by analogy with the Achmea Judgment - that⁶⁹⁶:

"[...] if the provisions of Article 26 ECT allowing such a tribunal to be entrusted with the resolution of a dispute were to apply as between an investor of one Member State and another Member State, it would mean that, by concluding the ECT, the European Union and the Member States which are parties to it established a mechanism for settling such a dispute that could exclude the possibility that that dispute, notwithstanding the fact that it concerns the interpretation or application of EU law, would be resolved in a manner that guarantees the full effectiveness of that law." [Emphasis added]

⁶⁹³ Doc. RL-314, Komstroy Judgment, paras. 48-50. ↩
⁶⁹⁴ Doc. RL-314, Komstroy Judgment, paras. 51-53. ↩
⁶⁹⁵ Doc. RL-314, Komstroy Judgment, paras. 54-57. ↩
⁶⁹⁶ Doc. RL-314, Komstroy Judgment, para. 60. ↩

[Page 124]

590. The CJEU stressed that, although the ECT may require Member States to comply with the arbitral mechanisms set forth in the ECT in their relations with investors "from third States” who are also Contracting Parties to the ECT as regards investments made by the latter in those Member States, preservation of the autonomy and of the particular nature of EU law precluded the same obligations under the ECT from being imposed on Member States as between themselves⁶⁹⁷.

591. Therefore, the CJEU concluded that⁶⁹⁸:

"In the light of the foregoing, it must be concluded that Article 26(2)(c) ECT must be interpreted as not being applicable to disputes between a Member State and an investor of another Member State concerning an investment made by the latter in the first Member State."

592. Following this interpretation, the CJEU provided its answer to the first question, by stating that Art. 1(6) and Art. 26(1) of the ECT must be interpreted as meaning that:

- The acquisition of a claim by an investor of a Contracting Party to the ECT,

- Arising from a contract for the supply of energy, which is not connected with an investment,

- Held by an investor of a third State,

- Against a public entity of another Contracting Party to the ECT,

does not constitute an “investment” within the meaning of those provisions⁶⁹⁹. Having reached this decision, the CJEU found that there was no need to answer the second and third questions submitted for preliminary ruling the Paris Court of Appeal⁷⁰⁰.

S. 2022: ECT decisions after the Komstroy Judgment

593. Since the CJEU's Komstroy Judgment, several investment arbitration tribunals constituted under the ECT have been asked to reconsider their decisions on jurisdiction by EU Member States. So far, these tribunals have all concluded that the Komstroy Judgment did not warrant a reconsideration of their decisions⁷⁰¹.

⁶⁹⁷ Doc. RL-314, Komstroy Judgment, para. 65. ↩
⁶⁹⁸ Doc. RL-314, Komstroy Judgment, para. 66. ↩
⁶⁹⁹ Doc. RL-314, Komstroy Judgment, paras. 67-85. ↩
⁷⁰⁰ Doc. RL-314, Komstroy Judgment, para. 86. ↩
⁷⁰¹ Doc. CL-252, Kruck; Doc. CL-253, referring to Landesbank. See also Rockhopper v. Italy; Beheer v. Spain; Cavalum v. Spain; Infracapital v. Spain (available in Investment Arbitration Reporter, https://www.iareporter.com/). ↩

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T. 2022: Romania ratifies the Termination Treaty

594. On 22 February 2022, Romania ratified the Termination Treaty, which entered into force on 24 March 2022⁷⁰².

3.2 DISCUSSION

595. The Parties discuss whether the Centre has jurisdiction and the Tribunal competence over this dispute.

596. Upon careful examination of the Parties' submissions and the Commission's Amicus Curiae Brief, the Tribunal finds that Claimants and Romania have validly consented to this investment dispute being adjudicated through arbitration and that such consent remains in force. Thus, Romania's Intra-EU Objection must be dismissed.

597. The Tribunal's conclusion is supported by the following findings:

- Romania has given its unconditional consent to arbitration (A.);

- The present dispute falls within the scope of Art. 26 of the ECT (B.);

- Art. 26 of the ECT has not ceased to apply as a result of the Treaty of Lisbon (C.);

- Art. 26 of the ECT does not conflict with the TFEU (D.); and

- The potential unenforceability of the award is immaterial (E.).

598. These conclusions are reinforced by several customary international law doctrines (F.).

A. Consent to arbitration

599. The Tribunal has already established, in section V.1.3.A supra, that, under Art. 26 of the ECT and Art. 25(1) of the ICSID Convention, Romania gave its unconditional consent to submit disputes concerning an alleged breach of its obligations under the ECT to the jurisdiction of the Centre. Romania's offer was perfected on 23 May 2018, when Claimants filed their Request for Arbitration against Romania. Pursuant to Art. 25(1) of the ICSID Convention, once consent has been given it becomes irrevocable (a.). Furthermore, any future termination of or withdrawal from the ECT can only operate ex nunc (b).

⁷⁰² Status of the Agreement for the Termination of Bilateral Investment Treaties between Member States of the European Union, available at: https://www.consilium.europa.eu/en/documents-publications/treaties-agreements/agreement/?id=2019043&cl=en&lang=en. ↩

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a. Consent to arbitration was perfected on 23 May 2018

600. The present Arbitral Tribunal is an international arbitration tribunal, constituted under the ICSID Convention and the ECT – two international multilateral treaties validly entered into by Romania, Germany, Austria, Cyprus and the Netherlands.

601. Pursuant to Art. 41(1) of the ICSID Convention:

"The Tribunal shall be the judge of its own competence."

602. The Tribunal is thus in charge of establishing the jurisdiction of the Centre and its own competence. The Centre's jurisdiction and the Tribunal's competence derive directly from the Parties' consent.

603. Art. 25(1) of the ICSID Convention provides that consent must be given in writing:

"The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State [...] and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. [...]." [Emphasis added]

604. The Parties in this case have consented in writing to submit this dispute to the jurisdiction of the Centre and the competence of the Tribunal.

(i) Consent by Romania

605. On 16 April 1998, when the ECT entered into force, Romania, who had ratified this Treaty on 10 March 1996⁷⁰³, gave its express and unconditional consent in writing to submit disputes relating to protected investments to international arbitration under the ICSID Convention, pursuant to Art. 26 of the ECT⁷⁰⁴:

"(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 can not 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: [...] (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. [...]

⁷⁰³ Doc. C-15. ↩
⁷⁰⁴ Doc. CL-1, Art. 26(1) to (4). ↩

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(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; [...]." [Emphasis added]

606. Art. 26 constitutes an offer of consent by the Contracting Parties to the ECT⁷⁰⁵ that can be accepted by any "Investor of another Contracting Party" to the ECT. Particularly relevant is Art. 26(3) which states that:

"Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to arbitration [...]." [Emphasis added]

607. As noted by the Eskosol tribunal, the central question in interpreting Art. 26(3) is thus the scope of the covered “disputes”, for which Romania has provided its "unconditional" consent to ICSID arbitration⁷⁰⁶. The scope of "dispute" is described in Art. 26(1) of the ECT, which will be analyzed in further detail in section B. infra.

608. Art. 26(5) of the ECT further determines that the unconditional consent given by Romania, as Contracting Party, and that of an investor, when choosing to submit a dispute to the Centre, satisfies the requirement for written consent of the Parties to a dispute for the purposes of Art. 25(1) of the ICSID Convention⁷⁰⁷, which provides that⁷⁰⁸:

"(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. [...]" [Emphasis added]

No withdrawal from ECT

609. Art. 47 of the ECT provides that after five years from the date on which the ECT has entered into force for a Contracting Party, such Contracting Party may notify the Depository of its withdrawal from the Treaty⁷⁰⁹.

⁷⁰⁵ C. BALTAG, The Energy Charter Treaty, The Notion of Investor, Kluwer Law International (2012), p. 17, fn. 82. ↩
⁷⁰⁶ Doc. CL-147, Eskosol, para. 84. ↩
⁷⁰⁷ Doc. CL-1, Art. 26(5)(a). ↩
⁷⁰⁸ ICSID Convention, Art. 25(1). ↩
⁷⁰⁹ Doc. CL-1, Art. 47. ↩

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610. Romania does not allege that it has withdrawn or initiated the procedure to withdraw from the ECT.

No invalidity of relevant treaties

611. Romania is not pleading that the ICSID Convention is invalid, neither in part nor as a whole. Romania, Germany, Austria, Cyprus and the Netherlands validly concluded the ICSID Convention and its application to the present case is undisputed.

612. Romania, Germany, Austria, Cyprus and the Netherlands validly signed the ECT, and Romania is not arguing that this Treaty is affected by the causes for invalidity established in the VCLT (Arts. 46 et seq. of the VCLT).

No termination of relevant treaties

613. Romania is also not arguing that the ECT or the ICSID Convention have been terminated.

614. None of the EU Member States, nor the EU for that matter, have taken steps to terminate the ECT, or to amend it by withdrawing their offer to ICSID arbitration; on the contrary, the Termination Treaty expressly provides that⁷¹⁰:

"[it] addresses intra-EU bilateral investment treaties; it does not cover intra-EU proceedings on the basis of Article 26 of the Energy Charter Treaty. The European Union and its Member States will deal with this matter at a later stage." [Emphasis added]

615. Art. 42 of the VCLT, concerning the “Validity and continuance in force of treaties", provides that⁷¹¹:

"1. The validity of a treaty or of the consent of a State to be bound by a treaty may be impeached only through the application of the present Convention.

2. The termination of a treaty, its denunciation or the withdrawal of a party, may take place only as a result of the application of the provisions of the treaty or of the present Convention. The same rule applies to suspension of the operation of a treaty."

616. Termination of a treaty under the VCLT is also subject to a specific procedure, set out in Art. 65⁷¹²:

"Procedure to be followed with respect to invalidity, termination, withdrawal from or suspension of the operation of a treaty

1. A party which, under the provisions of the present Convention, invokes either a defect in its consent to be bound by a treaty or a ground for impeaching

⁷¹⁰ Doc. CL-184, p. 6. ↩
⁷¹¹ Doc. CL-33, Art. 42. ↩
⁷¹² Doc. CL-33, Art. 65. ↩

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the validity of a treaty, terminating it, withdrawing from it or suspending its operation, must notify the other parties of its claim. The notification shall indicate the measure proposed to be taken with respect to the treaty and the reasons therefor.

2. If, after the expiry of a period which, except in cases of special urgency, shall not be less than three months after the receipt of the notification, no party has raised any objection, the party making the notification may carry out in the manner provided in article 67 the measure which it has proposed.

3. If, however, objection has been raised by any other party, the parties shall seek a solution through the means indicated in Article 33 of the Charter of the United Nations.

4. Nothing in the foregoing paragraphs shall affect the rights or obligations of the parties under any provisions in force binding the parties with regard to the settlement of disputes.

5. Without prejudice to article 45, the fact that a State has not previously made the notification prescribed in paragraph 1 shall not prevent it from making such notification in answer to another party claiming performance of the treaty or alleging its violation."

617. As noted by the arbitral tribunal in Achmea⁷¹³:

"In the view of the Tribunal, it is therefore clear from the text of the VCLT that the invalidity or termination of a treaty must be invoked, according to the Article 65 procedure. The VCLT does not provide for the automatic termination of treaties by operation of law (with the exception of treaties that conflict with rules of jus cogens).”

618. The Tribunal has no doubt that, in accordance with Arts. 42 and 65 of the VCLT, the ECT - and Romania's consent to arbitration embedded therein – was validly entered into in 1998, and that it continues to be in force to this day.

(ii) Consent by Claimants

619. On 23 May 2018, Claimants submitted their Request for Arbitration. In doing so, they accepted Romania's offer to arbitrate under the ECT, in writing, as required by Art. 25(1) of the ICSID Convention.

620. At that time (and the situation has not changed in the meantime), the ICSID Convention and the ECT were international treaties concluded by Romania, which had not been invalidated or terminated in accordance with the requirements of the VCLT (which, as Romania acknowledges, codifies international customary law⁷¹⁴). The unconditional offer to arbitration made by Romania remains valid until this day.

⁷¹³ Doc. CL-39, Achmea Jurisdiction, para. 235. ↩
⁷¹⁴ R-I, fn. 5. ↩

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621. Consequently, when Claimants accepted Romania's offer to arbitrate on 23 May 2018 by filing the Request for Arbitration, consent was perfected.

* * *

622. Once consent was perfected on 23 May 2018, it became irrevocable under Art. 25(1) in fine of the ICSID Convention:

"When the parties have given their consent, no party may withdraw its consent unilaterally." [Emphasis added]

623. The present Intra-EU Objection is incompatible with the obligation assumed by Romania when it ratified the ICSID Convention and accepted the prohibition embedded in Art. 25(1). If the Tribunal were to accept Romania's objection, it would permit Respondent to unilaterally withdraw its consent, once it had been validly accepted by the investor.

b. Future termination of or withdrawal from the ECT can only operate ex nunc

624. The Termination Treaty provides that the EU and Member States will deal with the issue of termination or amendment of the ECT “at a later stage”⁷¹⁵. One of the consequences of the Komstroy Judgment may be that, to comply with the CJEU's ruling, EU Member States are required to adopt a decision to terminate or to withdraw from the ECT.

Termination

625. Art. 70 of the VCLT provides for the consequences of the termination of a treaty⁷¹⁶:

"1. Unless the treaty otherwise provides or the parties otherwise agree, the termination of a treaty under its provisions or in accordance with the present Convention:

(a) Releases the parties from any obligation further to perform the treaty;

(b) Does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.” [Emphasis added]

626. Termination operates ex nunc: its effects apply from the moment the treaty is terminated, but not retroactively.

627. If and when Romania, Germany, Austria, Cyprus and/or the Netherlands decide to terminate the ECT, in accordance with international law, such termination will operate ex nunc and will “not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination”.

⁷¹⁵ Doc. CL-184, p. 6. ↩
⁷¹⁶ Doc. CL-33, Art. 70(1). ↩

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628. Since in the present case consent to investment arbitration was locked in 2018 "through the execution of the treaty”, any eventual future termination will not affect Claimants' present “right or legal situation": the right to have the investment dispute adjudicated by an ICSID Tribunal.

Withdrawal

629. Likewise, pursuant to Art. 47 of the ECT, any withdrawal from the ECT only takes effect one year after the notification of withdrawal. Furthermore, the provisions of the Treaty continue to apply for a period of 20 years, irrespective of the withdrawal⁷¹⁷:

"The provisions of this Treaty shall continue to apply to Investments made in the Area of a Contracting Party by Investors of other Contracting Parties or in the Area of other Contracting Parties by Investors of that Contracting Party as of the date when that Contracting Party's withdrawal from the Treaty takes effect for a period of 20 years from such date."

B. Interpretation of Art. 26(1) of the ECT

630. The Tribunal has already found that pursuant to Art. 26(3) of the ECT, Romania has given its unconditional consent to submit a “dispute” to ICSID Arbitration. Romania contends that to fall within the scope of Art. 26(3), the present “dispute” must meet all three conditions set forth in Art. 26(1), which provides that⁷¹⁸:

"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."

631. Romania argues that, by their nature, “intra-EU” disputes do not meet any of the three conditions of Art. 26(1)⁷¹⁹:

- First, that the investor must have “another” nationality or citizenship than that of the respondent to the dispute (a.);

- Second, that the investment must have a cross-border character with respect to the "Area" of the respondent to the dispute (b.); and

- Third, that the obligation allegedly breached must be an obligation “of” the respondent Contracting Party under Part III of the ECT (c.).

632. The Tribunal is unconvinced.

⁷¹⁷ Doc. CL-1, Art. 47(3). ↩
⁷¹⁸ Doc. CL-1, Art. 26(1). ↩
⁷¹⁹ R-II, para. 61; R-PHB, para. 10. ↩

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633. An interpretation of Art. 26(1) of the ECT, in accordance with the VCLT interpretation rules defined in paras. 307-309 supra, leads to the conclusion that the present dispute falls within its scope.

a. Claimants are Investors of another Contracting Party

634. First, Romania argues that there is no diversity of citizenship between EU investors and EU Member States, because when EU investors invest in other EU Member States they do so as EU citizens. Accordingly, Claimants do not meet the first requirement of Art. 26(1) of the ECT⁷²⁰.

635. The terms that the Tribunal must interpret are “Investor of another Contracting Party”. Pursuant to Art. 31 of the VCLT, the ECT is to be interpreted and applied in accordance with the “ordinary meaning” of its terms, in their context. As explained by the International Court of Justice, this means that “[i]f the relevant words in their natural and ordinary meaning make sense in their context, that is the end of the matter"⁷²¹. It is only if⁷²²:

"[...] the words in their natural and ordinary meaning are ambiguous or lead to an unreasonable result, then, and then only, must the Court, by resort to other methods of interpretation, seek to ascertain what the parties really did mean when they used these words."

636. In the present case, there are no ambiguous terms. On the contrary, the Contracting Parties themselves clearly defined what they understood by “Investor” and "Contracting Party".

"Investor"

637. Art. 1(7)(a) of the ECT defines “Investor” with respect to a Contracting Party as follows⁷²³:

"(i) a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law;

(ii) a company or other organization organized in accordance with the law applicable in that Contracting Party."

638. Since in the present case Claimants are not natural persons, the relevant factor is a company “organized in accordance with the law applicable in that Contracting Party".

639. According to Art. 26(7), investor is also the company owned or controlled at all relevant times by Investors of another Contracting State.

⁷²⁰ R-PHB, para. 10. ↩
⁷²¹ Doc. CL-171, Advisory Opinion of the ICJ, p. 8. ↩
⁷²² Doc. CL-171, Advisory Opinion of the ICJ, p. 8. ↩
⁷²³ Doc. CL-1, Art. 1(7)(a). ↩

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“Contracting Party”

640. Art. 1(2) of the ECT defines a “Contracting Party” as “a state or Regional Economic Integration Organization which has consented to be bound by this Treaty and for which the Treaty is in force”⁷²⁴. Therefore, a Contracting Party is either a State party to the Treaty or an REIO (as the EU).

"Another"

641. The only word that has been not defined by the Contracting Parties themselves is “another”, which in this case is used as an adjective. In this sense, “another” can be defined as “different or distinct from the one first considered”⁷²⁵ – i.e., different from the Contracting Party to the dispute.

Analysis

642. The ordinary meaning of the words used, in their context, does not leave room for discussion: for the first requirement of Art. 26(1) of the ECT to be met, the investor must be:

- A company “organized in accordance with the law applicable",

- In "a state which has consented to be bound by [the ECT] and for which [the ECT] is in force”, and

- That is different or distinct from the State that is involved in the dispute.

Nothing else is required.

643. In the present case, Claimants (except for Beta) are all companies organized in accordance with the law applicable in States that have consented to be bound by the ECT and are distinct from Romania:

- LSG⁷²⁶, Green Source⁷²⁷, CVI⁷²⁸ and CVC⁷²⁹ are all companies duly organized in accordance with Austrian law;

- Solluce is a company duly organized in accordance with Dutch law⁷³⁰;

- Risen⁷³¹ and Pressburg⁷³² are both companies duly organized in accordance with German law; and

⁷²⁴ Doc. CL-1, Art. 1(2). ↩
⁷²⁵ Merriam-Webster Dictionary, available at: https://www.merriam-webster.com/. ↩
⁷²⁶ Doc. C-2. ↩
⁷²⁷ Doc. C-3. ↩
⁷²⁸ Doc. C-6. ↩
⁷²⁹ Doc. C-7. ↩
⁷³⁰ Doc. C-4. ↩
⁷³¹ Doc. C-5. ↩
⁷³² Doc. C-11. ↩

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- Anina⁷³³ and Giust⁷³⁴ are both companies duly organized in accordance with Cypriot law.

644. Although Beta is a company incorporated under the law of Romania⁷³⁵, it has been owned and controlled at all relevant times (i.e., before a dispute between it and Romania arose) by Investors of another Contracting Party; therefore, pursuant to Art. 26(7) of the ECT⁷³⁶, it shall, for the purpose of Art. 25(2)(b) of the ICSID Convention, be treated as a “national of another Contracting State".

645. As pointed out by the Stadtwerke tribunal⁷³⁷, the fact that Claimants, by virtue of conducting their activities within the EU, are operating to some degree under EU law, does not mean that they were created or organized under EU law – rather, they were created and are organized under the laws of their respective States (Germany, Austria, Cyprus and the Netherlands).

646. In sum, a plain reading of Art. 26(1) of the ECT, in accordance with the ordinary meaning of its terms, leads to the conclusion that Claimants qualify as “Investors of another Contracting Party".

b. There are Investments of Investors of a Contracting Party in the Area of another Contracting Party

647. Romania further contends that intra-EU investments are not cross-border investments because the EU's internal market is an “area without internal frontiers", as defined in Art. 26 of the TFEU⁷³⁸. This means that investments made in Romania are investments made in the EU, with the result that the second condition of Art. 26(1) is not satisfied. This argument has been supported by the Commission in its Amicus Curiae Brief⁷³⁹.

648. The Tribunal must turn to the interpretation of the terms “Investment of the latter in the Area of the former”.

649. Art. 1(10) of the ECT defines the term “Area” as follows:

""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

⁷³³ Doc. C-9. ↩
⁷³⁴ Doc. C-10. ↩
⁷³⁵ Doc. C-8. ↩
⁷³⁶ Doc. CL-1, Art. 26(7): “An Investor other than a natural person which has the nationality of a Contracting Party party to the dispute on the date of the consent in writing referred to in paragraph (4) and which, before a dispute between it and that Contracting Party arises, is controlled by Investors of another Contracting Party, shall for the purpose of article 25(2)(b) of the ICSID Convention be treated as a 'national of another Contracting State' [...]". ↩
⁷³⁷ Doc. RL-196, Stadtwerke, para. 128. ↩
⁷³⁸ R-PHB, para. 10. ↩
⁷³⁹ Amicus Curiae Brief, paras. 40-41. ↩

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(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 Organization which is a Contracting Party, Area means the Areas of the member states of such Organization, under the provisions contained in the agreement establishing that Organization." [Emphasis added]

650. Romania argues that the second prong of this provision, concerning the REIO, shows that the Contracting Parties viewed the Area of the EU as one single zone, deprived of internal borders⁷⁴⁰.

651. The Tribunal is unconvinced.

652. Romania's reading of Art. 1(10) obviates the first prong of this provision and concentrates solely on the part concerning the REIO. Yet, Art. 1(10) clearly provides that “Area” with respect to a “[S]tate that is a Contracting Party [includes] the territory under its sovereignty [...]”. Thus, Art. 1(10) clearly distinguishes between the "Area” when the Contracting Party is a State, and when it is a REIO. There is no reason to read the Areas of EU Member States and the EU in Art. 1(10) of the ECT as interchangeable terms.

653. What is relevant when interpreting Art. 26(1) is to determine who the Contracting Party in question is, against whom the claim has been filed. As demonstrated by the wording:

"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” [Emphasis added]

in Art. 26(1) of the ECT, the relevant Area is that of the Contracting Party to the dispute. Since in the present case the Contracting Party to the dispute is Romania, what is relevant is that the investment is made in the territory of Romania.

654. In the present case, there is no contention between the Parties that Claimants have made "Investments" in the territory of Romania. Nothing else is required by Art. 26(1) of the ECT.

655. If the EU were the respondent Contracting Party to the dispute, or if the EU Member States were not Contracting Parties to the ECT in their own right, and only the EU were a Contracting Party, the conclusion might be different⁷⁴¹ – but this is not the case.

⁷⁴⁰ R-I, para. 35. ↩
⁷⁴¹ See Doc. CL-172, PV Investors, paras. 179-180. ↩

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Case-law

656. Although the decisions of other arbitral tribunals are not binding, the Tribunal finds it compelling that several other investment tribunals have reached this exact same conclusion.

657. In PV Investors, the tribunal observed that it was unable to follow Spain's argument regarding the need for a diversity of Areas⁷⁴²:

"While it is true that the second sentence of Article 1(10) of the ECT defines Area with respect to a REIO as 'the Areas of the member states of such Organization', the first sentence of Article 1(10) of the ECT defines Area with respect to a state that is a Contracting Party as the territory under the state's sovereignty. In the Tribunal's view, the two components of the definition must be clearly distinguished and correctly related to the notion of Area that is referred to in Article 26."

658. Likewise, in Charanne, the Tribunal found that Spain's argument⁷⁴³:

"[...] ignores that, although the EU is a Contracting Party of the ECT, the States that compose it have not ceased to be Contracting Parties as well. Both the EU, as its Member States, may have legal standing as Respondent in an action based on the ECT.

Article 1(10) of the ECT, in order to define the concept of 'area' refers to both the territory of the Contracting States (Article 1(10)(a)) and the EU territory (Article 1(10) second paragraph). Therefore, it appears reasonable to deduce that, in referring to investments made “in the territory" of a contracting party, Article 26(1) refers to both, in the case of a EU member State, to the territory of a national State as well as the territory of the EU. There is no rule in the ECT according to which a different interpretation can be inferred.

To know if the term 'territory' refers to one or the other depends on the content of the claim and the entity against which the claim is directed. An investor may well sue the EU based on allegedly unlawful acts committed by it. In this case, it could be considered that for the purposes of Article 26 of the ECT, the dispute is related to an investment made in the territory of the EU. [...]"

659. The Isolux tribunal observed that⁷⁴⁴:

"[...] the fact that the ‘area' of the EU, according to ECT Article 1.10, covers the territories of the Netherlands and the Kingdom of Spain, does not prevent each of them from retaining an ‘area' as well within the scope of the ECT. Only an interpretation of ECT Article 26.1 allows determining what 'area' should be referred to in order to verify that the requirement of diversity of territories is met.

⁷⁴² Doc. CL-172, PV Investors, para. 178. ↩
⁷⁴³ Doc. CL-15, Charanne, paras. 429-431. ↩
⁷⁴⁴ Doc. RL-85, Isolux, paras. 634, 636. ↩

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[...]

Article 26.1 refers to 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'. This clearly implies that the area in question is the territory of the Contracting Party against which the investor is acting. [...]"

660. To name only a few, the tribunals in InfraRed⁷⁴⁵, Eskosol⁷⁴⁶, RWE⁷⁴⁷ and Vattenfall⁷⁴⁸ have all reached similar decisions.

с. The dispute concerns obligations of Romania under Part III of the ECT

661. In the present case, Claimants invoke an alleged breach by Romania of Art. 10(1) of the ECT, a provision which falls under Part III of the ECT. Consequently, the present dispute concerns “an alleged breach of an obligation” of Romania under Part III of the ECT.

662. Romania, however, submits that obligations under Part III of the ECT cannot be obligations "of” EU Member States, but rather “of” the EU, because competence has been transferred by EU Member States to the EU⁷⁴⁹.

663. The terms that the Tribunal must interpret are:

"Disputes between a Contracting Party and an Investor of another Contracting Party [...] which concern an alleged breach of an obligation of the former under Part III [of the ECT]". [Emphasis added]

664. To sustain its argument that obligations under Part III of the ECT are not obligations “of” EU Member States, but rather of the EU, Romania⁷⁵⁰ points to the fact that the EU is the only REIO signatory of the ECT and that Art. 1(3) of the ECT defines an REIO as⁷⁵¹:

"[...] an organization 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." [Emphasis added]

665. Romania's argument, however, can be rapidly disposed of.

666. First, as noted by the Eskosol tribunal, Art. 1(3) of the ECT alludes only in abstract to "certain matters” competence of which have been transferred to the EU, without defining what such matters might be. Consequently⁷⁵²:

⁷⁴⁵ Doc. CL-174, InfraRed, paras. 263-265. ↩
⁷⁴⁶ Doc. CL-147, Eskosol, para. 90. ↩
⁷⁴⁷ Doc. RL-172, RWE, paras. 327-328. ↩
⁷⁴⁸ Doc. CL-6, Vattenfall, paras. 181-183. ↩
⁷⁴⁹ R-PHB, para. 10. ↩
⁷⁵⁰ R-II, paras. 63-64. ↩
⁷⁵¹ Doc. CL-1, Art. 1(3). ↩
⁷⁵² Doc. CL-147, Eskosol, para. 88. ↩