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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

LSG BUILDING SOLUTIONS GMBH AND OTHERS

Respondents on Annulment

and

ROMANIA

Applicant

ICSID Case No. ARB/18/19
Annulment Proceeding

DECISION ON ANNULMENT

Members of the ad hoc Committee
Dr. Penelope Ridings, President of the ad hoc Committee
The Right Honourable Beverley McLachlin, Member of the ad hoc Committee
Ms. Carita Wallgren-Lindholm, Member of the ad hoc Committee

Secretary of the ad hoc Committee
Ms. Geraldine Fischer

Date of dispatch to the Parties: 18 February 2026

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REPRESENTATION OF THE PARTIES

[Page ii]

[Page 1]

I. INTRODUCTION AND PARTIES

1. This annulment proceeding concerns an application for annulment (the “Application”) of the award rendered on 20 February 2025 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 SrL, Anina Pro Invest Ltd., Giust Ltd., and Pressburg UK GmbH (“Claimants” or “LSG Building Solutions GmbH and others") and Romania (“Respondent”) (ICSID Case No. ARB/18/19) (the “Award”) rendered by a Tribunal composed of Prof. Juan Fernández-Armesto, President; Judge O. Thomas Johnson, Jr., appointed by Claimants; and Prof. Dr. Pierre-Marie Dupuy appointed by Respondent. This Decision will continue to use the “Claimants” and the “Respondent” as in the original proceeding. Claimants and Respondent are collectively referred to as the “Parties.” The Parties’ representatives and their addresses are listed above on page (i).

2. The Award decided on a dispute submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) on the basis of the Energy Charter Treaty ("ECT") 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").

3. The dispute in the original proceeding concerned an incentive scheme that Romania put in place to encourage investment in renewable energy production through a system of mandatory quotas combined with the trading of Green Certificates (“GC”).¹ Between 2010 and 2013 Claimants made a series of investments in five solar PV plants in Romania.² In 2013 and 2014, Romania enacted a series of changes to the GC renewable energy support scheme,³ and then again between 2017-2018⁴ (“the Disputed Measures").

¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 73, 80-103. ↩

² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 123-176. ↩

³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 187-218. ↩

⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 235-254. ↩

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4. In its Decision on Jurisdiction, Liability and Principles of Reparation, the Tribunal composed of Professor Juan Fernández-Armesto, Judge O. Thomas Johnson, and Professor Dr. Pierre-Marie Dupuy, decided as follows:

1. Declares that the Tribunal has jurisdiction under the ICSID Convention and the Energy Charter Treaty over all Claimants and their claims;

2. Declares that Romania has breached Art. 10(1) of the ECT with respect to Claimants’ investments;

3. Directs the Parties to attempt to reach an agreement on the quantum of damages to be paid by Romania to Claimants; [and]

4. Reserves its decision on damages, interest and costs for a future decision.⁵

5. Respondent applied for annulment of the Award, which includes the Decision on Jurisdiction, Liability and Principles of Reparation, on the basis of Article 52(1) of the ICSID Convention, identifying the following grounds for annulment: (i) manifest excess of powers (Article 52(1)(b)); and (ii) failure to state reasons (Article 52(1)(e)).

II. PROCEDURAL HISTORY

6. On 14 June 2024, Romania filed with ICSID an Application for Annulment of the Award accompanied by Annexes A-1 through A-13, together with legal authorities RL-315 through RL-326. The Application also contained a request under Article 52(5) of the ICSID Convention and Rule 54(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the “ICSID Arbitration Rules") for the stay of enforcement of the Award until the Application was decided (the “Request for Stay”).

7. On 26 June 2025, pursuant to Rule 50(2) of the ICSID Arbitration Rules, the Secretary-General of ICSID registered the Application. On the same date, in accordance with

⁵ Decision on Jurisdiction, Liability, and Principles of Reparation, at ¶ 1354. ↩

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Arbitration Rule 54(2), the Secretary-General informed the Parties that the enforcement of the Award had been provisionally stayed.

8. By letter dated 12 August 2024, in accordance with Rules 6 and 53 of the ICSID Arbitration Rules, the Parties were notified that an ad hoc Committee composed of Dr. Penelope Ridings, a national of New Zealand, appointed to the ICSID Panel of Arbitrators by New Zealand, and designated as President of the Committee, The Right Honourable Beverley McLachlin, a national of Canada, appointed to the Panel by Canada, and Ms. Carita Wallgren-Lindholm, a national of Finland, appointed to the Panel by Finland had been constituted (the “Committee"). On the same date, the Parties were notified that Ms. Geraldine R. Fischer, Senior Legal Counsel, ICSID, would serve as Secretary of the ad hoc Committee.

9. On 19 August 2024, the Committee invited the Parties to confer regarding the timetable, including the exchange of submissions on Romania's request for the stay of the enforcement of the Award. Further, the Committee informed the Parties that, pursuant to Arbitration Rule 54(2), it continued the stay of the enforcement of the Award until it had reached a final decision on the continuation of the stay.

10. On 23 August 2024, the Committee confirmed the schedule of submissions on the stay of enforcement of the Award proposed by the Parties on the same day.

11. On 2 September 2024, Romania filed a Request for Continuation of the Stay of Enforcement of the Award, together with exhibit R-049, and legal authorities RL-327 to RL-332.

12. On 16 September 2024, Claimants filed their opposition to Romania's Request for Continuation of the Stay of Enforcement of the Award, together with exhibits C-317 to C-321, and legal authorities CL-254 to CL-284.

13. On 27 September 2024, the European Commission (the “EC” or the “Commission”) submitted with the ICSID Secretariat an Application for Leave to Intervene as a Non-Disputing Party in the present annulment proceedings (the “EC Application”), pursuant to Rule 37(2) of the ICSID Arbitration Rules.

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14. On 30 September 2024, Romania filed its Reply on the Continued Stay of Enforcement of the Award, together with exhibits R-050 to R-057, and legal authorities RL-333 to RL-338.

15. Pursuant to the Committee's instructions of 1 October 2024, the Parties filed their observations on the EC Application on 9 October 2024.

16. On 14 October 2024, Claimants filed their Rejoinder on Romania's Request for Continuation of the Stay of Enforcement of the Award, together with legal authority CL-301.

17. In accordance with ICSID Arbitration Rules 53 and 13(1), on 15 October 2024, the Committee held a First Session by video conference. Following the first session, on 17 October 2024, the Committee issued Procedural Order No. 1 recording the agreement of the Parties on procedural matters and the Committee's decision on disputed issues. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, that the procedural language would be English, and the place of proceeding would be Paris, France. Procedural Order No. 1 also set out the agreed procedural calendar for the proceeding.

18. On 11 November 2024, the Committee issued Procedural Order No. 2 with its decision on the EC Application. The Committee accepted the EC Application provided that the EC submission was limited to twenty pages on arguments regarding the grounds for annulment in Article 52 of the ICSID Convention. The Committee further decided that the EC would have access to the Memorial on Annulment and the Counter Memorial on Annulment. The Committee denied the EC's further request to attend the oral hearing, or, in the alternative, be invited as an expert witness.

19. On 16 December 2024, Romania filed a Memorial on Annulment, together with legal authorities RL-339 to RL-351.

20. On 20 December 2024, the Committee issued Procedural Order No. 3 with its decision on Romania's request to continue the stay of enforcement of the award. The Committee decided as follows:

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(i) [...] that the stay of enforcement of the Award should be lifted provided that the Claimants jointly and severally submit to the Committee by 60 days after the date of this Decision an undertaking:

a. to set up an escrow account at a first-class international bank in the U.K. or the U.S. at the moment of enforcement into which any amounts collected from Romania in enforcement of the Award will be placed; and

b. to refrain from using or distributing the funds other than against a Decision to uphold the Award and to release those funds to Romania in case of a Decision to annul the Award in full or in part.

(ii) [...] that if the undertaking given by all Claimants provides that only one Claimant will have the right to collect under the Award, it will suffice that the escrow arrangement and related undertaking be implemented by this one award creditor only.

(iii) [...] that the stay of enforcement will be lifted once the Committee approves the undertaking and related escrow arrangement in a further Decision. If the Claimants are not willing or able to provide the above undertaking by 60 days after the date of this Decision, the stay of enforcement of the Award should be continued unconditionally until the conclusion of the annulment proceeding.

(iv) RESERVES its decision on costs for its decision on annulment.

21. On 21 February 2025, Claimants filed a Counter-Memorial on Annulment, together with exhibits C-322 through C-331 and legal authorities CL-302 to CL-353.

22. On 10 April 2025, the European Commission filed a written submission as a non-disputing party.

23. On 11 April 2025, the Committee issued Procedural Order No. 4, ordering that the stay of enforcement of the Award be continued unconditionally until the conclusion of the annulment proceedings as, despite the extension granted, Claimants failed to provide all the undertakings by the PO3 deadline. Moreover, the Committee noted that it expected to

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issue its final annulment decision promptly after the hearing, so it did not consider that the continuation of the stay would prejudice Claimants.

24. On 25 April 2025, Romania filed its Reply Memorial on Annulment.

25. On 1 July 2025, the Committee issued Procedural Order No. 5 on hearing organization.

26. On 2 July 2025, Claimants filed a Rejoinder on Annulment, together with exhibits C-332 through C-333 and legal authorities CL-354 through CL-379.

27. On 7 August 2025, the Committee issued Procedural Order No. 6 on the exclusion of evidence requested by Romania on 11 July 2025. Specifically, Romania asked that Claimants' exhibit C-333 and legal authorities CL-354 through CL-379 be excluded as they were introduced in violation of PO1. Additionally, Respondent requested paragraphs 43 to 48 of Claimants' Rejoinder on Annulment be redacted. On 17 July 2025, Claimants responded to Romania's application, objecting to the exclusion of the documents and the requested redactions. The Committee decided as follows:

(i) DECLINES Romania's request to remove from the record exhibits CL-354 through CL-379 and redact paragraph 48 of the Claimants' Rejoinder on Annulment.

(ii) GRANTS Romania leave to file as exhibits the three legal authorities referred to in paragraph 74 of its Reply on Annulment.

(iii) GRANTS Romania's request to remove Exhibit C-333 from the record, but DECLINES its request to redact paragraph 43 of Claimants' Rejoinder on Annulment.

28. On 2 September 2025, a hearing on annulment was held at the ICC Hearing Centre in Paris (the "Hearing”). The following persons were present at the Hearing:

Committee:
Dr. Penelope Ridings
The Right Honourable Beverley McLachlin
Ms. Carita Wallgren-Lindholm

President
Member of the Committee
Member of the Committee

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29. On 8 September 2025, the Committee issued Procedural Order No. 7 with its reasons for denying Romania's 21 August 2025 application to admit new documents. The Committee's decision on the application was previously relayed to the Parties on 29 August 2025 with reasons to follow.

30. The Parties filed their statements on costs on 2 October 2025.

31. The proceeding was closed on 2 February 2026.

III. THE PARTIES' REQUESTS FOR RELIEF

32. The Applicant requests the following relief from the Committee:⁶

(i) annul the Award in its entirety;

or subsidiarily,

⁶ Romania's Memorial, at ¶ 336. ↩

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(ii) annul the Award with respect to Anina and Giust;

and

(iii) order Claimants to pay the full costs of these proceedings, including attorneys' fees and expenses;

and

(iv) grant any additional remedies to the benefit of Romania that the Committee may consider to be appropriate.

33. LSG Building Solutions and Others request that the Committee grant the following relief:⁷

(a) dismiss Romania's Application for Annulment in its entirety;

(b) uphold the validity of the Decision on Jurisdiction, Liability and Principles of Reparation and of the Award;

(c) order Romania to reimburse Claimants for all of their legal costs and expenses associated with the entirety of this proceeding (including professional fees and disbursements) to be quantified;

(d) order Romania to immediately comply with the Award; and

(e) award Claimants any other relief that the Committee deems just and proper.

IV.GROUNDS FOR ANNULMENT

A. THE NATURE OF ANNULMENT

(1) Romania's Position

34. Romania submits that under Article 52(1) of the ICSID Convention, a party “has the clear right to avail itself of the remedy of annulment" on the grounds specified.⁸ While Article 53(1) establishes the binding nature of ICSID awards, it also expressly recognizes that an

⁷ Claimants' Counter Memorial, at ¶ 203. ↩

⁸ Romania's Reply, at ¶ 8. ↩

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aggrieved party has the right to seek the remedies provided for in the Convention, including annulment.⁹ Romania argues that there is nothing in the Convention to suggest that the remedies should be construed either narrowly or restrictively, or broadly.¹⁰ Furthermore, there is no presumption against annulment in the ICSID Convention.¹¹ The Committee "has the power, and indeed the obligation,” to annul the Award if it finds that one or more grounds for annulment under Article 52(1) of the ICSID Convention are applicable.¹²

(2) Claimants' Position

35. According to Claimants, the annulment procedure is not an appellate process,¹³ and the Committee's scope of review does not permit it to review the Tribunal's findings de novo.¹⁴ Claimants submit that because the annulment process is not the same as a retrial or appeal, “an annulment committee must always take care to refrain from entering into a substantive review of the underlying issues, recalling always that the arbitral tribunal was the trier of fact, the judge of its own competence, and enjoyed wide discretion to craft its award in the way that it believed responded best to the case as presented to it by the parties.”¹⁵ Thus, in the view of Claimants, annulment is "an exceptional and narrowly circumscribed remedy"¹⁶ and the burden of proof for the narrow grounds on which that remedy may rest is "high".¹⁷ Furthermore, even where a ground for annulment has been made out, committees have discretion to determine whether an award should be annulled or not.¹⁸

(3) Ad Hoc Committee's Analysis

36. Article 53(1), first sentence, of the ICSID Convention provides:

⁹ Romania's Reply, at ¶ 11. ↩

¹⁰ Romania's Reply, at ¶ 12. ↩

¹¹ Romania's Reply, at ¶ 13. ↩

¹² Romania's Reply, at ¶ 16. ↩

¹³ Claimants' Counter Memorial, at ¶ 5. ↩

¹⁴ Claimants' Counter Memorial, at ¶ 6. ↩

¹⁵ Claimants' Rejoinder, at ¶ 4. ↩

¹⁶ Claimants' Counter Memorial, at ¶ 35. ↩

¹⁷ Claimants' Rejoinder, at ¶ 3. ↩

¹⁸ Claimants' Rejoinder, at ¶ 4. ↩

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The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. [...]

37. This legal text sets forth the following principles: (i) ICSID awards are final and binding; and (ii) ICSID awards are not subject to appeal and there are a limited set of post-award remedies available under the Convention. With respect to annulment, the drafting history of the ICSID Convention shows a concern for protecting the finality of awards and a desire to only sanction fundamental errors that affected the fairness and integrity of the proceedings themselves, and not the correctness of the outcome.¹⁹

38. The Parties are in agreement that annulment is not an appeal process.²⁰ However, they differ on the extent of review that is permissible for an ad hoc committee to undertake. This Committee is of the view that an ad hoc committee may not, in considering the annulment of an award, review the correctness of an award or the adequacy of the reasoning.²¹ Neither may it substitute its own judgment for that of a tribunal or provide its own views on the merits of a dispute.²²

39. Article 52(1) of the Convention sets out the grounds for annulment. The list is a closed list and constitutes the sum total of the grounds for annulment.²³ The Committee will address the applicable legal standards for each of the grounds claimed in this annulment proceeding in the subsequent sections.

¹⁹ See Updated Background Paper on Annulment for the Administrative Council of ICSID, International Centre for Settlement of Investment Disputes (ICSID), World Bank Group, March 2024 (“ICSID Background Paper on Annulment"), at ¶¶ 7-28 (Exhibit RL-318). ↩

²⁰ Transcript, Day 1: 7:16-19 (Wolrich); Claimants' Counter Memorial, at ¶ 46. ↩

²¹ M.C.I. Power Group, L.C. and New Turbine, Inc. v. Ecuador, ICSID Case No. ARB/03/6, Decision on Annulment, at ¶ 24 (Exhibit CL-287) (“M.C.I. Decision on Annulment”); Bernhard Friedrich Arnd Rudiger von Pezold et al. v. Zimbabwe, ICSID Case No. ARB/10/15, Decision on Annulment, at ¶ 239 (Exhibit CL-299). ↩

²² Tenaris S.A. & Talta – Trading E Marketing Sociedade Unipessoal Lda. v. Venezuela, ICSID Case No. ARB/12/23, Decision on Annulment, at ¶ 44 (Exhibit CL-312) (“Tenaris Decision on Annulment"). ↩

²³ CAA & Vivendi Universal v. Republic of Argentina, ICSID Case No. ARB/97/3, Decision on Annulment at ¶ 62 (Exhibit CL-310) (“Vivendi Decision on Annulment”); Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on the Application by the Arab Republic of Egypt for Annulment of the Arbitral Award, at ¶ 18 (Exhibit CL-309) (“Wena Hotels Decision on Annulment”); CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, at ¶ 43 (Exhibit CL-288). ↩

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40. Finally, Article 52(3), last sentence, of the ICSID Convention, provides that “[t]he Committee shall have the authority to annul the award or any part thereof on any of the grounds set forth in paragraph (1).” In the view of the Committee, if it determines that a ground for annulment is present, it has the discretion to decide whether to annul the award.²⁴

B. MANIFEST EXCESS OF POWERS RELATED TO JURISDICTION

41. Romania contends that the Tribunal has “manifestly exceeded its powers by finding that it has jurisdiction that it does not have."²⁵ According to Romania this has occurred by the Tribunal incorrectly finding that it had jurisdiction in three respects: over this intra-EU dispute; over separate claims brought by ten different claimants; and over a dispute brought by the claimants Anina and Guist.

(1) Applicable Legal Standard

a. Romania's Position

42. According to Romania, a manifest excess of powers “necessarily" arises where a tribunal deviates from the parties' agreement to arbitrate and asserts jurisdiction that it does not have.²⁶ An excess of powers occurs “every time the powers exercised by the arbitrators are not those which have been granted to them.”²⁷ A tribunal's exercise of jurisdiction that it does not have “is the most obvious excess of powers" because consent is the cornerstone of arbitral jurisdiction.²⁸ Consent to jurisdiction cannot be presumed but must be objectively established.²⁹

²⁴ Orascom TMT Investments S.à.r.l. v. People's Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Decision on Annulment, at ¶ 125 (Exhibit RL-342). ↩

²⁵ Romania's Memorial, at ¶ 9; Romania's Reply, at ¶ 18. ↩

²⁶ Romania's Memorial, at ¶¶ 11, 13-14; Romania's Reply, ¶ 20. ↩

²⁷ Romania's Memorial, at ¶ 12, citing Mr. Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Decision on Annulment dated February 12, 2015, ¶ 76 (Exhibit RL-341). ↩

²⁸ Romania's Reply, at ¶¶ 22-23; Transcript: 8:25-9:3 (Wolrich). ↩

²⁹ Romania's Memorial, at ¶ 15, citing NextEra Energy Global Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Jurisdiction, Liability and Quantum Principles, at ¶ 336 (Exhibit CL-85) (“NextEra v. Spain"). ↩

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43. In response to Claimants, Romania argues that the principle of Kompetenz-Kompetenz “cannot undermine the duty of an annulment committee to determine whether the tribunal exceeded its powers by exercising jurisdiction that it did not have."³⁰ According to Romania, in order to properly determine whether there was a manifest excess of powers, the committee has to “independently determine whether the tribunal correctly found that it had jurisdiction."³¹ This requires a substantive review and verification of the Tribunal's findings on jurisdiction.³²

b. Claimants' Position

44. Claimants argue that a disagreement with the Tribunal's assessment of its own jurisdiction and its applicable law analysis is not a viable basis for annulment.³³ Rather the Committee must weigh claims that the Tribunal erred against two “paramount” principles – Kompetenz-Kompetenz and that ICSID annulment is not an appeal.³⁴ According to Claimants, by Romania's standard the Committee would have unlimited discretion to review the Tribunal's conclusions de novo.³⁵

45. Claimants submit that a two-prong test must be met to show a manifest excess of powers under Article 52(1)(b), namely whether (i) the tribunal exceeded its powers; and (ii) whether the excess was "manifest.³⁶ According to Claimants, an “excess of power" may exist if the tribunal exercises jurisdiction that it does not have, or if it fails to apply the correct legal rule. However, “it is only when a tribunal goes beyond the parties' agreement in its constitutive documents can there be an instance of the tribunal possibly exceeding its

³⁰ Romania's Reply, at ¶ 24. ↩

³¹ Romania's Reply, at ¶ 25. ↩

³² Romania's Reply, at ¶¶ 27-31. ↩

³³ Claimants' Counter Memorial, at ¶ 46. ↩

³⁴ Claimants' Counter Memorial, at ¶ 46. ↩

³⁵ Claimants' Counter Memorial, at ¶ 45. ↩

³⁶ Claimants' Counter Memorial, at ¶ 47. ↩

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power."³⁷ In addition, the discretion for annulling an award due to an “excess of its powers" is limited.³⁸

46. Claimants argue that a 'manifest' excess of powers is where the failure is “egregious",³⁹ where the error is “obvious, clear or self-evident.”⁴⁰ Claimants contend that Romania ignores the 'manifest' prong of the two-prong test for manifest excess of powers.⁴¹ A number of annulment committees have rejected the argument that an arbitral tribunal has manifestly exceeded its power by upholding jurisdiction over an intra-EU dispute or by failing to apply EU law.⁴² According to Claimants, the alleged excess of power identified by Romania is not an error to begin with and in any case does not come close to reaching the level of a "manifest" error.⁴³

47. Claimants reject that a committee may undertake “a substantive review of the underlying issues.”⁴⁴ Annulment committees are not empowered to review the question of jurisdiction de novo,⁴⁵ nor can a committee undertake its own jurisdictional or governing law analysis or substitute its findings for that of the tribunal.⁴⁶ Furthermore, Claimants argue that the ICSID Arbitration Rules have a remedy for situations in which jurisdiction is manifestly improper - Arbitration Rule 41(1), which provides for the filing of a preliminary objection that the dispute is not within the jurisdiction of ICSID, which is then determined at the

³⁷ Claimants' Counter Memorial, at ¶ 48. ↩

³⁸ Claimants' Counter Memorial, at ¶ 53 citing MINE, Decision on Annulment, ¶ 4.06, (Exhibit RL-321); CDC Decision on Annulment, ¶ 39 (quoting MINE Decision on Annulment), (Exhibit RL-343); M.C.I. Decision on Annulment, at ¶ 49 (Exhibit CL-287). ↩

³⁹ Claimants' Counter Memorial, at ¶ 49, citing MTD Equity S.d.n. Bhd and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, at ¶ 46 (Exhibit RL-186) (“MTD Decision on Annulment"). ↩

⁴⁰ Claimants' Counter Memorial, at ¶¶ 58-61. ↩

⁴¹ Claimants' Rejoinder, at ¶ 7. ↩

⁴² Claimants' Counter Memorial, at ¶ 50. ↩

⁴³ Claimants' Counter Memorial, at ¶ 51. ↩

⁴⁴ Claimants' Rejoinder, at ¶ 4. ↩

⁴⁵ Claimants' Rejoinder, at ¶ 15. ↩

⁴⁶ Claimants' Rejoinder, at ¶ 7. ↩

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outset of the arbitration proceedings.⁴⁷ Romania did not invoke that Rule in the underlying arbitration.⁴⁸

c. Ad Hoc Committee's Analysis

48. The Committee considers that ICSID Convention Article 52(1)(b), which provides that only instances of manifest excess of the tribunal's power may lead to an annulment, according to a textual interpretation involves a requirement of “excess” of the tribunal's power that is "manifest”.⁴⁹ In the Committee's view this involves a two-step inquiry: first, an assessment as to whether an excess of powers exists, and second, whether the excess of powers was 'manifest'.⁵⁰ The Committee considers that a 'manifest' excess of powers is where the error is ‘obvious, clear or self-evident'.⁵¹ If an argument in the Tribunal's reasoning is ‘reasonable', ‘tenable' or not ‘arbitrary', the standard of manifest excess of powers would not be met.⁵² The Committee agrees with Claimant that the threshold for finding a 'manifest excess of powers' is “very high".⁵³

49. An excess of power may exist if the tribunal goes beyond the parties' agreement to arbitrate in exercising powers it does not have or declines to exercise jurisdiction it does have; or if

⁴⁷ Transcript, 108:7-17 (Roebuck-Frey). ↩

⁴⁸ Transcript, 108:18-19 (Roebuck-Frey). ↩

⁴⁹ ICSID Background Paper on Annulment, at ¶ 88 (Exhibit RL-318). ↩

⁵⁰ OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment, Dec. 6, 2018 (“OΙ European Decision on Annulment”), at ¶ 180 (Exhibit CL-325); Standard Chartered Decision on Annulment, at ¶ 182, (Exhibit CL-285); Sempra Decision on Annulment, at ¶ 212, (Exhibit RL-316); CDC Decision on Annulment, at ¶ 39 (Exhibit RL-343). ↩

⁵¹ ICSID Background Paper on Annulment, at ¶ 89 (Exhibit RL-318). ↩

⁵² Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Decision on the Annulment Application of Caratube International Oil Company LLP, Feb. 21, 2014 (“Caratube Decision on Annulment"), at ¶ 144 (Exhibit RL-340); Klöckner Industrie-Anlagen GmbH et al. v. United Republic of Cameroon and Société Camérounaise des Engrais S.A., ICSID Case No. ARB/81/2, Decision on Annulment dated May 3, 1985, at ¶ 52(e) (Exhibit RL-347). ↩

⁵³ Claimants' Counter Memorial, at ¶ 52, citing AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Hungary, ICSID Case No. ARB/07/22, Decision of the ad hoc Committee on the Application for Annulment, June 29, 2012 (“AES Decision on Annulment"), at ¶ 33 (Exhibit CL-337); Caratube Decision on Annulment, at ¶ 81 (Exhibit RL-340); Micula I Decision on Annulment, at ¶ 130 (Exhibit CL-311); Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment, Nov. 2, 2015, at ¶ 56 (Exhibit CL-338). ↩

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it fails to apply the law agreed by the parties. A manifest excess of powers may therefore apply at the jurisdiction or merits phase.⁵⁴

50. The Committee recognizes the fundamental importance of the parties' consent to arbitration and the authority that is vested in a tribunal based on that consent.⁵⁵ The Committee also acknowledges the principle of Kompetenz-Kompetenz that a tribunal has competence over its own jurisdiction, which is specifically provided for in Art. 41(1) of the ICSID Convention. Nevertheless, the Committee is of the view that the principle of Kompetenz-Kompetenz “does not shield the Tribunal's decision on its own competence from scrutiny.”⁵⁶ At the same time there is a common understanding that annulment is not an appeal process. An ad hoc annulment committee's mandate is limited: it is not to undertake a review of the merits, or to review factual findings of a tribunal, which is the trier of facts. A committee should therefore be cautious not to overstep the boundaries of the annulment proceeding.⁵⁷ Any scrutiny by the Committee of the decision of the Tribunal on its jurisdiction should not extend to conducting a de novo review of the Tribunal's analysis, nor to substituting the Committee's judgment on jurisdiction for that of the Tribunal.⁵⁸ This Committee will therefore address the arguments of the Parties according to the standard of ‘manifest excess of powers' it has articulated above, namely whether the Tribunal's reasoning was reasonable, tenable and not arbitrary, and whether any excess of powers was clear, obvious or self-evident.⁵⁹

⁵⁴ Cube Infrastructure Fund SICAV and others v. Kingdom of Spain, ICSID Case No. ARB/15/20, Decision on Annulment ("Cube Decision on Annulment”), at ¶ 175 (Exhibit CL-331). ↩

⁵⁵ Caratube Decision on Annulment, at ¶ 74 (Exhibit RL-340). ↩

⁵⁶ OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on Application for Annulment, at ¶ 183 (Exhibit CL-325). ↩

⁵⁷ Cube Decision on Annulment, at ¶ 179 (Exhibit CL-331). ↩

⁵⁸ Tenaris Decision on Annulment, at ¶¶ 44, 64 (Exhibit CL-312). ↩

⁵⁹ Supra, at ¶ 48. ↩

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(2) Jurisdiction over the Intra-EU Dispute

a. Romania's Position

(i) Intra-EU disputes are not within the scope of Art. 26 (1) of the ECT

51. Romania argues that intra-EU disputes are not within the scope of Art. 26 (1) of the ECT. Interpreting Art. 26 in its context and in light of its object and purpose, Romania maintains that the Preamble to the ECT recognized the existence of the EU internal energy market,⁶⁰ and indicates that the ECT was intended to foster cooperation in the energy sector between the EU and the former Soviet bloc.⁶¹ The Preamble confirms that the ECT was not intended to apply in competition with the internal energy market, as set up in the EU Treaties.⁶² The EU Treaties establish an internal market with no internal frontiers in which all EU citizens are treated equally.⁶³ Romania claims that the EU and Member States "did not and would never have consented to an arbitration clause whose scope would allow EU citizen investors to circumvent the functioning of the internal market and thus undermine the most essential feature of the EU.”⁶⁴ As it was not intended to influence the internal energy policy,⁶⁵ nor create parallel protections for intra-EU investments, the ECT's arbitration clause cannot be interpreted as covering intra-EU disputes.⁶⁶

52. Romania contends that consistent with the context of ECT Art. 26 and the object and purpose of the ECT, intra-EU disputes do not fall within the jurisdictional requirements of Art. 26 of the ECT. First, Romania argues that investors of an EU Member State who invest into another EU Member State are not “Investors of another Contracting Party" because the EU is a Contracting Party and they are EU Investors investing in the EU.⁶⁷ Second, investments made in an EU Member State by an EU Investor are not made in the “Area” of another Contracting Party because they are investments made in the “Area” of the EU.⁶⁸

⁶⁰ Romania's Memorial, at ¶ 24. ↩

⁶¹ Romania's Memorial, at ¶ 25. ↩

⁶² Transcript, 17:10-12 (Wolrich). ↩

⁶³ Romania's Memorial, at ¶ 26. ↩

⁶⁴ Romania's Memorial, at ¶ 28. ↩

⁶⁵ Transcript, 18:24-25 (Wolrich). ↩

⁶⁶ Romania's Memorial, at ¶ 28. ↩

⁶⁷ Romania's Memorial, at ¶¶ 33-42. ↩

⁶⁸ Romania's Memorial, at ¶¶ 43-50. ↩

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Third, the obligations under Part III of the ECT are not obligations “of” Romania because only the EU, and not its Member States, assumes obligations under Part III of the ECT.⁶⁹

53. With respect to the first argument, Romania states that there is no diversity of citizenship between Claimants, who are all EU investors, and Romania, an EU Member State.⁷⁰ As such, Claimants are not “Investors of another Contracting Party" under ECT Art. 26(1).⁷¹ Romania draws on the “1998 EC Statement” as an authentic interpretation of the ECT which, in its view, “confirms that the EU and its Member States understood that arbitration proceedings under the ECT could be brought against them only by non-EU investors and not by EU nationals.”⁷² Romania argues that the Tribunal ignored the context of the ECT's arbitration clause and the object and purpose of the ECT in finding that it had jurisdiction under Art. 26(1).⁷³ Rather, investors from EU Member States investing in the EU act as EU investors under the authority of the EU and therefore the tribunal lacked jurisdiction and manifestly exceeded powers by exercising jurisdiction.⁷⁴

54. With respect to the second argument, Romania refers to the terms of Art. 1(10) of the ECT which, in its view, show that the Area of the Regional Economic Integration Organisation (“REIO”) means “the Areas of the member states”. Thus, when an EU investor invests in an EU Member Contracting State, it is investing in its own Area, the Area of the EU.⁷⁵ Romania claims that the Tribunal disregarded the intra-REIO nature of Claimants' investments,⁷⁶ and ignored the context of Art. 1(10) of the ECT and the ECT's object and purpose.⁷⁷ If the Tribunal "had applied the definition of a State Contracting Party in the context of the definition of the ‘Area' of a REIO in Article 1(10), it could only have come

⁶⁹ Romania's Memorial, at ¶¶ 51-89. ↩

⁷⁰ Romania's Memorial, at ¶ 33. ↩

⁷¹ Romania's Memorial, at ¶ 37. ↩

⁷² Romania's Memorial, at ¶ 38. ↩

⁷³ Romania's Memorial, at ¶ 41. ↩

⁷⁴ Romania's Memorial, at ¶ 42. ↩

⁷⁵ Romania's Memorial, at ¶ 46. ↩

⁷⁶ Transcript, 26:1-4 (Wolrich). ↩

⁷⁷ Romania's Memorial, at ¶ 48. ↩

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to the conclusion that the Area of Romania is subsumed in the Area of the REIO, i.e., the Area of the EU."⁷⁸

55. With respect to the third argument, Romania argues that due to the transfer of competence from the Member States to the EU, the obligations under Part III of the ECT with respect to intra-EU investments in the internal energy market are obligations of the EU as a REIO and not of the Member States.⁷⁹ It claims that the EU, and not its Member States, has competence and authority over intra-EU investments, and cites Art. 1(3) of the ECT which refers to the transfer of competence over “certain matters”.⁸⁰ Further, according to Romania, the EU Member States “have entrusted the REIO with conclusive and mandatory powers" and "ceded powers over certain matters to the REIO.”⁸¹

56. In this regard, Romania raises the context of Art. 25 of the ECT which provides for preferential treatment among EU Member States, which in Romania's view recognizes that preferential treatment is granted to investments inter-se by EU Member States.⁸² Pursuant to the principle of speciality, it is the EU, and not its Member States, that assumes all obligations relating to matters for which competence has been transferred by the EU Member States to the EU,⁸³ and it is the EU, not the Member States, that assumes the obligations relating to “transferred competence” under a mixed agreement where both the EU and Members States are party.⁸⁴ In such situations, the EU and its Member States are responsible under the ECT “in accordance with their respective competences.”⁸⁵ The obligations transferred include the obligations under Part III ECT, in particular the functioning of the internal market.⁸⁶ Thus, Member States will not have competence if the EU regulates the matter by enacting legislation to regulate investments in the internal

⁷⁸ Romania's Memorial, at ¶ 49. ↩

⁷⁹ Romania's Memorial, at ¶ 52. ↩

⁸⁰ Romania's Memorial, at ¶ 53. ↩

⁸¹ Romania's Memorial, at ¶¶ 55-56. ↩

⁸² Romania's Memorial, at ¶¶ 58-59. ↩

⁸³ Romania's Memorial, at ¶ 65. ↩

⁸⁴ Romania's Memorial, at ¶¶ 66-68. ↩

⁸⁵ Romania's Memorial, at ¶ 69. ↩

⁸⁶ Romania's Memorial, at ¶ 70. ↩

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market, i.e. intra-EU investments.⁸⁷ During the entire underlying arbitration, the EU and not its Member States had competence over intra-EU investments in the energy sector, including renewable energy sources.⁸⁸ Thus Part III of the ECT are not obligations 'of’ Romania but 'of the EU vis-à-vis EU investors.⁸⁹

57. In conclusion with respect to obligations ‘of Romania, Romania claims that the Tribunal "declared it had jurisdiction over the present dispute without making a positive determination as to whether competence over Part III obligations had been transferred to the EU.”⁹⁰ Romania alleges that rather than making a positive determination, the Tribunal assumed consent on the basis of silence, which is insufficient to establish consent.⁹¹ According to Romania, the Tribunal truncated the text of the 1998 EC Statement of the European Communities (“EC”) made on submitting its instrument of ratification to the ECT, which stated that the EC and their Member States are internationally responsible for the fulfilment of the ECT obligations "in accordance with their respective competences."⁹² Thus, according to Romania, the EU and Romania are not jointly liable for every obligation under the ECT, but are liable only in accordance with their respective competences.⁹³ Romania also responds to Claimants' recourse to the phrase "unconditional consent" in Art. 26(3) of the ECT by stating that such unconditional consent is given to the submission of a dispute "in accordance with the provisions of this Article.” This, according to Romania, means that Romania gave its unconditional consent only to arbitrate disputes within the scope of the arbitration clause, Art. 26(1), which it contends is not the case here.⁹⁴

⁸⁷ Romania's Memorial, at ¶¶ 73-74. ↩

⁸⁸ Romania's Memorial, at ¶¶ 76-79. ↩

⁸⁹ Romania's Memorial, at ¶ 80. ↩

⁹⁰ Romania's Memorial, at ¶ 89. ↩

⁹¹ Transcript, 29:10-16 (Wolrich). ↩

⁹² Transcript, 31:25-32:6 (Wolrich). ↩

⁹³ Transcript, 32:8-13 (Wolrich). ↩

⁹⁴ Transcript, 30:19-31:8 (Wolrich). ↩

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(ii) If interpreted as applying to intra-EU disputes, Art. 26 (1) of the ECT must be disapplied pursuant to applicable conflict-resolving rules of international law

58. Romania submits that there is a conflict between Art. 26 of the ECT and Art. 344 of the Treaty on the Functioning of the European Union (“TFEU”). The Court of Justice of the European Union (“CJEU”) determined that under Article 344 of the TFEU, EU Member States have a treaty obligation not to agree to submit intra-EU disputes to resolution outside the EU treaty system, including in the ECT.⁹⁵ The CJEU has the exclusive authority to bindingly interpret the EU Treaties and its decision in Komstroy which authoritatively interpreted Art. 344 of the TFEU, must therefore be followed,⁹⁶ including by this Committee.⁹⁷

59. Romania argues that even if Art. 26 of the ECT is interpreted as applying to intra-EU disputes, there would be a conflict of treaty obligations for Romania between the ECT and the EU Treaties and that conflict must be resolved in favor of the EU Treaties under the applicable conflict-resolving rules of international law.⁹⁸ According to Romania, the conflict arises between the ECT and the EU Treaties, namely the TFEU and TEU and any conflict must be resolved in favor of the EU Treaties.⁹⁹ In essence, in Romania's view, “the ECT cannot be interpreted as allowing an EU investor to circumvent the rules of that internal market. The EU would never have signed and ratified such a treaty.”¹⁰⁰ The failure to give effective meaning to Art. 1(3) of the ECT “naturally leads to a situation of conflict with the EU Treaties, since it allows ECT provisions to undercut the authority and competence of the EU, in particular over the functioning of its internal market.”¹⁰¹

60. According to Romania, under public international law, the EU Treaties prevail over conflicting ECT provisions. Art. 16 of the ECT gives priority to EU Treaties according to the “more favourable” criterion as EU Treaties “provide a wider protection to EU investors

⁹⁵ Transcript, 42:19-23 (Wolrich). ↩

⁹⁶ Romania's Memorial, at ¶¶ 97-99. ↩

⁹⁷ Transcript, 210:7-9 (Wolrich). ↩

⁹⁸ Romania's Memorial, at ¶ 92. ↩

⁹⁹ Romania's Memorial, at ¶ 96. ↩

¹⁰⁰ Romania's Memorial, at ¶ 111. ↩

¹⁰¹ Romania's Memorial, at ¶ 112. ↩

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and are thus more favorable to EU investors.”¹⁰² In particular, the EU adjudicatory system is "highly developed, complete and coherent system”, with the CJEU providing “ultimate and authoritative" rulings,¹⁰³ fostering legal certainty and predictability, which is valued by investors."¹⁰⁴ This is in contrast to the ISDS system where ad hoc tribunals are costly, there is no stare decisis nor an appeal and only narrow grounds for annulment, and no consistency or coherence in decisions.¹⁰⁵ Furthermore, Art. 351 of the TFEU gives precedence to EU Treaties over other incompatible international agreements concluded between EU Member States.¹⁰⁶

61. If Treaties are unable to resolve the treaty conflict, according to Romania, Art. 30 of the Vienna Convention on the Law of Treaties (“VCLT”) is to be applied. Under the lex posterior principle, treaties must relate to the “same subject matter” and be “successive”, in that one postdates the other. In Romania's view once these have been met, the earlier treaty, applies "only to the extent that its provisions are compatible with those of the later treaty."¹⁰⁷ Romania argues that in this instance, the treaties have the same subject matter as they regulate the same subject matter,¹⁰⁸ and both relate to the liberalization and protection of investments in the energy sector.¹⁰⁹ This is confirmed by the terms of the ECT itself including Art. 1(3) and Art. 25.¹¹⁰

b. Claimants' Position

62. Claimants argue that Romania's arguments are a repeat of Romania's pleadings in the arbitration on the intra-EU jurisdictional objection, which were not successful.¹¹¹ With respect to the three issues identified by Romania, Claimants argue the following.

¹⁰² Romania's Memorial, at ¶¶ 113-126. ↩

¹⁰³ Romania's Memorial, at ¶ 124. ↩

¹⁰⁴ Romania's Memorial, at ¶ 125. ↩

¹⁰⁵ Romania's Memorial, at ¶¶ 126-127. ↩

¹⁰⁶ Romania's Memorial, at ¶¶ 134-139. ↩

¹⁰⁷ Romania's Memorial, at ¶ 142. ↩

¹⁰⁸ Romania's Memorial, at ¶ 144. ↩

¹⁰⁹ Romania's Memorial, at ¶ 145. ↩

¹¹⁰ Romania's Memorial, at ¶ 148. ↩

¹¹¹ Claimants' Counter Memorial, at ¶ 72. ↩

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63. According to the plain text of the ECT, Claimants are ‘investors' of a Contracting Party.¹¹² The nationality of each of Claimants was a fact-specific assessment, and “the Tribunal – as the trier of fact – concluded that Claimants' nationalities satisfied the jurisdictional requirements of the ECT."¹¹³ Furthermore, the Tribunal expressly rejected Romania's argument that Claimants were – or should be treated as – EU citizens.¹¹⁴

64. Second, Claimants disagree with Romania's position that the ‘Area' is the internal market. EU itself enables individual EU Member States to choose the types of renewable energy incentives they would enact to meet individualized renewable energy targets.¹¹⁵ According to Claimants, the Tribunal rejected Romania's objection in respect of the interpretation of the word "Area,” and this Committee has no power to review that substantive finding.¹¹⁶

65. With regard to the third argument that the obligations in Art. 26(1) are not obligations ‘of Romania, Claimants argue that Romania relies on the definition of REIO contained in Art. 1(3) of the ECT, which Romania contends recognizes that these organizations may assume certain competences transferred to them by their Member States and seeks to read this provision into Art. 26 to conclude that where competences have been transferred to a REIO, so too does the allocation of responsibility under the ECT.¹¹⁷ According to Claimants, this argument contradicts the ordinary meaning of the express terms in Art. 26, namely the "unconditional consent" of Romania to arbitration. The Tribunal found that Romania's interpretation was not supported by the text and it also rejected Romania's argument which relied on Art. 25 of the ECT.¹¹⁸

66. Claimants contend that Romania's argument relies on a premise that, by joining the EU, Romania transferred all of its competences in relation to its obligations under ECT Part III to the EU, such that Romania no longer had any obligations under Part III of the ECT.¹¹⁹

¹¹² Claimants' Counter Memorial, at ¶ 78. ↩

¹¹³ Claimants' Rejoinder, at ¶ 22. ↩

¹¹⁴ Claimants' Rejoinder, at ¶ 23. ↩

¹¹⁵ Claimants' Rejoinder, at ¶ 28. ↩

¹¹⁶ Claimants' Rejoinder, at ¶ 29. ↩

¹¹⁷ Claimants' Counter Memorial, at ¶ 88. ↩

¹¹⁸ Claimants' Counter Memorial, at ¶¶ 88-89. ↩

¹¹⁹ Claimants' Rejoinder, at ¶ 30. ↩

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However, the EC 1998 Statement, which the EC made on ratification, referred to by Romania, does not demonstrate this.¹²⁰ Claimants also contend that there is no basis in the ECT for adding, as a jurisdictional requirement, an assessment of whether certain competences had been transferred to the EU, such that a division of competence under EU law would be a bar to jurisdiction.¹²¹ If a Member State has not explicitly conferred a competence over certain matter to the EU in the EU Treaties, then competence over that matter remains with the Member State.¹²² According to Claimants, Romania has pointed to no provision in the EU Treaties showing that competence over investment promotion and protection had been transferred to the EU.¹²³ Claimants note that energy was a shared competency, but this does not mean that all obligations in the energy sector are obligations owed by the EU and not the Member States.¹²⁴ Indeed, the EU had mandated that Romania enact incentive programs to meet its renewable energy targets “in the way Romania saw fit."¹²⁵

67. In the view of Claimants, the Tribunal correctly found that ECT would prevail over TFEU in the event of a conflict. Claimants noted that the Tribunal first established that to apply either ECT Art. 16 or VCLT Art. 30 on conflict of treaties, the treaties in question must “concern” or “relate” to the same “subject-matter.” The Tribunal then analyzed the ECT, the TEU, and the TFEU to conclude that the ECT did not concern the same subject matter as the EU Treaties.¹²⁶ The Tribunal went on to consider whether there was any incompatibility between Art. 267 and Art. 344 of the TFEU and ECT Art. 26, and it found none. Claimants argue that this is a finding on a substantive matter and is not open for revision in an annulment proceeding.¹²⁷ Moreover, a committee may not find a manifest

¹²⁰ Claimants' Counter Memorial, at ¶¶ 90-91. ↩

¹²¹ Claimants' Rejoinder, at ¶ 32. ↩

¹²² Claimants' Rejoinder, at ¶ 34. ↩

¹²³ Claimants' Rejoinder, at ¶ 35. ↩

¹²⁴ Claimants' Rejoinder, at ¶ 39. ↩

¹²⁵ Claimants' Rejoinder, at ¶ 39. ↩

¹²⁶ Claimants' Counter Memorial, at ¶ 97. ↩

¹²⁷ Claimants' Counter Memorial, at ¶ 100. ↩

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excess of power when the underlying issue is subject to more than one reasonable interpretation or debate.¹²⁸

c. Ad Hoc Committee's Analysis

68. The Committee notes that there are a number of findings of the Tribunal which concern substantive factual matters. The Tribunal traced the chronology of events relevant to Romania's jurisdictional objection over intra-EU claims.¹²⁹ This included the 1998 EC Statement,¹³⁰ the Achmea judgment of the CJEU,¹³¹ the statement of the European Communities relating to the ECT following Achmea,¹³² subsequent declarations made by EU Member States,¹³³ and the Komstroy judgment of the CJEU.¹³⁴ The Tribunal went on to assess the legal arguments of the Parties. The Committee notes that the arguments of Romania and the European Commission as a non-disputing Party in the underlying arbitration are very similar to the arguments presented in these annulment proceedings.

69. In relevant part, ECT Art. 26 provides:

(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 [...] the Investor party to the dispute may choose to submit it for resolution:

[...]

(c) in accordance with the following paragraphs of this Article.

¹²⁸ Claimants' Counter Memorial, at ¶ 101. ↩

¹²⁹ Decision on Jurisdiction, Liability and Principles of Reparation, section 3.1 ↩

¹³⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 505-506. ↩

¹³¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 507-534. ↩

¹³² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 536-538. ↩

¹³³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 539-543. ↩

¹³⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 563-592. ↩

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(3) (a) [...] 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. [...].¹³⁵

70. Romania argues that the Tribunal manifestly exceeded its powers in failing to apply the VCLT rules of interpretation to ECT Art. 26(1) in three respects: the interpretation of “an Investor of another Contracting Party”; the investments were not made in the “Area” of another Contracting Party because they are investments made in the “Area” of the EU; and the obligations in Art. 26(1) are not obligations “of” Romania. The Committee will address these in turn.

71. First, Romania claims that the Tribunal should have interpreted the definition of ‘investor of another Contracting Party' having regard to the context of ECT Art. 26 and the object and purpose of the ECT. The Tribunal cited the International Court of Justice statement that “if the relevant words in their natural and ordinary meaning make sense in their context, that is the end of the matter.”¹³⁶ The Tribunal then examined the definition of 'investor' and stated that as Claimants are not natural persons, the relevant factors are that a company is “organized in accordance with the law applicable in that Contracting Party".¹³⁷ The Tribunal found that according to ECT Art. 26(7), ‘investor' is also the company owned or controlled at all relevant times by Investors of another Contracting State,¹³⁸ and according to ECT Art. 1(2), a Contracting Party is either a State party to the Treaty or a REIO (as is the EU).¹³⁹ The Tribunal concluded that the first requirement of ECT Art. 26(1) was met: the investor was 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

¹³⁵ Energy Charter Treaty, Art. 26 (Exhibit CL-001). ↩

¹³⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 635, citing Advisory Opinion of the ICJ, p. 8 (Exhibit CL-171). ↩

¹³⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 638. ↩

¹³⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 639. ↩

¹³⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 640. ↩

[Page 26]

dispute.¹⁴⁰ The Tribunal therefore found that Claimants qualify as “Investors of another Contracting Party".¹⁴¹

72. Before this Committee, Romania submitted arguments that there is no diversity of citizenship between Claimants, who are all EU investors, and Romania, an EU Member State.¹⁴² The Tribunal considered this argument and found 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).”¹⁴³

73. The Committee does not consider that the Tribunal's interpretation of “investor of a Contracting Party” is arbitrary or unreasonable. Companies in the EU are organized under the laws of the Member States of the EU and there is currently no mechanism to create or organize companies under EU law. The Tribunal found as a factual matter that Claimants are investors organized under the laws applicable in certain EU Member States that are Contracting Parties to the ECT. Thus, the Tribunal concluded that Claimants are investors of another Contracting Party within the terms of ECT Art. 26(1).

74. Second, the Tribunal addressed the definition of investment in the "Area" of a Contracting Party in Art. 1(1) of the ECT and responded to Romania's argument that the “Area” of the EU included the Area of the EU Member States. Art. 26(1) of the ECT encompasses "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”. According to the Tribunal, the relevant Area for these purposes is that of the Contracting Party to the dispute and as 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.¹⁴⁴ The Tribunal considered Romania's argument that the definition of the Area of a REIO in ECT Art. 1(10) showed that the Area

¹⁴⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 642. ↩

¹⁴¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 646. ↩

¹⁴² Romania's Memorial, at ¶ 33. ↩

¹⁴³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 645. ↩

¹⁴⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 653-655. ↩

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of the EU should be seen as a single area devoid of internal boundaries, but found this unconvincing.¹⁴⁵

75. The Committee considers that the interpretation of the Tribunal is reasonable. As found by the Tribunal, ECT Art. 1(10) distinguishes between the “Area” when the Contracting Party is a State, and the “Area” when it is a REIO.¹⁴⁶ As the Tribunal indicated, to interpret the 'Area' of individual EU Member States as the ‘Area' of the REIO, as suggested by Romania, would devoid the first prong of the definition of Area in ECT Art. 1(10) of any meaning with respect to EU Member States, which are Contracting Parties to the ECT.¹⁴⁷ Each EU Member State which is a Contracting Party to the ECT has its own ‘Area' that is subject to its sovereignty and in which investments have been made that are the subject of dispute.¹⁴⁸

76. Third, the Tribunal considered Romania's arguments that the obligations in ECT Art. 26(1) are not obligations “of” Romania because competencies have been transferred by EU Member States to the EU. The Tribunal interpreted ECT Art. 1(3) which defines an REIO as:

[...] 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.

77. The Tribunal first found that the transference of competence ‘over certain matters' does not lead to the conclusion that the EU Member States decided to transfer precisely their competences and obligations under Part III of the ECT to the EU.¹⁴⁹ Second, the Tribunal considered that there is nothing in the ECT, nor in the 1998 EC Statement, which indicates that EU Member States decided to transfer their competencies over [all] the obligations in

¹⁴⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 650-651. ↩

¹⁴⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 652. ↩

¹⁴⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 652. ↩

¹⁴⁸ Isolux Infrastructure Netherlands, B.V. v. Kingdom of Spain, Arbitration SCC V2013/153, Award dated July 12, 2016 (unofficial English translation from Spanish), at ¶¶ 634, 636 (Exhibit RL-85). ↩

¹⁴⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 666-667, referring to Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Italy's Request for Termination and Intra-EU Jurisdictional Objection, at ¶ 88 (Exhibit CL-147). ↩

[Page 28]

Part III of the ECT to the EU.¹⁵⁰ The Tribunal stated that the 1998 EC Statement acknowledges that both the EC (as it was then) and Member States were internationally responsible for honoring substantive obligations contained in the ECT; and that, if a dispute arose they would determine amongst themselves who would be the respondent party. This did not happen.¹⁵¹ Third, the Tribunal noted that there was no such exception included in the denial of benefits clause in Art. 17 of the ECT.¹⁵² According to the Tribunal, its conclusion is further supported by the absence of a disconnection clause in the ECT.¹⁵³

78. The Committee recalls that Romania indicates that the ECT is a ‘mixed agreement' where both the EU and EU Members State are party. Furthermore, “the subject matter of a mixed agreement necessarily falls in part within the competence of the EU and in part within that of the Member States.”¹⁵⁴ Romania suggests that the obligations transferred include the obligations under Part III of the ECT and Member States will not have competence if the EU regulates the matter by enacting legislation to regulate investments in the internal market. Romania argues that competence over the protection of intra-EU investments was transferred to the EU by the EU Member States.¹⁵⁵

79. To support its argument, Romania points to certain provisions in the TFEU which in its view shows that competencies over Part III of the ECT have been transferred to the EU. First, Romania refers to Art. 3(1)(b) of the TFEU which provides in relevant parts:

1. The Union shall have exclusive competence in the following areas:

[...]

(b) the establishing of the competition rules necessary for the functioning of the internal market;

¹⁵⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 668-670. ↩

¹⁵¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 670. ↩

¹⁵² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 671-672. ↩

¹⁵³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 674-679. ↩

¹⁵⁴ Romania's Memorial, at ¶ 66. ↩

¹⁵⁵ Romania's Memorial, at ¶¶ 56-81; Romania's Rejoinder, at ¶¶ 112-118; Transcript: 33:18-24 (Wolrich). ↩

[Page 29]

[...]

(e) common commercial policy.

80. In addition, Romania points to Art. 4(2) of the TFEU which provides that shared competence between the Union and the Member States applies in certain areas including “internal market” and “energy”. Romania argues that ever since the EU began regulating the internal energy market, the EU has gained exclusive competence over intra-EU investments in the EU energy market.¹⁵⁶

81. Romania's principal criticism of the Tribunal's analysis is that it limited itself to observing that Art. 1(3) of the ECT itself was silent as to which matters governed by the ECT were among the “certain matters” over which the Member States had transferred competence to the EU, and in doing so, “it failed to look to the constituent instruments of the REIO to determine which matters were the subject of the transferred competence, as required by public international law."¹⁵⁷ The question for this Committee is whether this alleged failure amounts to a “manifest excess of powers” under Art. 52(1) of the ICSID Convention.

82. The Committee agrees with Romania that the renewable energy incentive programme in which Claimants invested was mandated and authorised exclusively by the EU.¹⁵⁸ However, while the EU enacted legislation concerning the energy market in the EU, it left it to Member States to determine how to implement the EU programme in their national regulations. The provisions of the TFEU cited by Romania specifically envisage the possibility of shared competencies. It is not the role of this Committee to place itself in the shoes of the Tribunal and assess for itself whether all the competency over Part III of the ECT has been transferred to the EU. Rather it is to assess whether the Tribunal committed a manifest excess of powers where any excess of powers is clear, obvious and self-evident. The Committee is of the view that Romania was not able to demonstrate to the Tribunal that all the obligations under Part III have been transferred to the EU.

¹⁵⁶ Romania's Memorial, at ¶ 75. ↩

¹⁵⁷ Romania's Memorial, at ¶ 83. ↩

¹⁵⁸ Transcript: 34:1-4 (Wolrich). ↩

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83. This position does not alter when consideration is given to the context of Art. 1(3) of the ECT. Art. 1(3) defines a REIO as an organization constituted by States “to which they have transferred competence over certain matters.” On ratification of the ECT, the European Communities stated in its 1998 EC Statement that both the European Communities and its Member States had concluded the ECT and that they will if necessary determine among themselves whether the EC or the Member States concerned is to be the respondent party in arbitration proceedings brought by an investor of another Contracting Party. The Tribunal indicated that if, as Romania suggests, Part III obligations had been assigned to the EU, it would have been incumbent upon Romania to have agreed with the EU that the latter be the respondent in the original proceedings, however this did not happen.¹⁵⁹

84. Romania also points to ECT Art. 25 as being relevant context for the interpretation of ECT Art. 1(3). ECT Art. 25 is an exception to the MFN clause which enables a Contracting Party which is party to an Economic Integration Agreement (“EIA”) to extend preferential treatment to investors of another party to the EIA, without requiring that the most favorable treatment being applied to non-EIA parties. The Tribunal was of the view that “nothing in the text of the ECT leads to conclude that the EU Member States, as Contracting Parties to the ECT, decided to transfer their competence over the obligations in Part III of the ECT to the EU."¹⁶⁰ The Committee considers that it is reasonable not to accept Romania's argument that ECT Art. 25 showed that intra-EU investments fall within the “certain matters" governed by the ECT over which States have “transferred competence” to the EU, in accordance with Art. 1(3) of the ECT.¹⁶¹

85. The Committee therefore concludes that the Tribunal did not commit a manifest excess of powers when concluding that the obligations in the ECT were obligations ‘of Romania. Any error committed by the Tribunal is not ‘obvious, clear or self-evident'.

86. The second limb to Romania's argument with respect to the intra-EU matter is that if ECT Art. 26(1) is interpreted as applying to intra-EU disputes, it must be disapplied pursuant to

¹⁵⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 670. ↩

¹⁶⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 668. ↩

¹⁶¹ Romania's Memorial, at ¶ 61. ↩

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applicable conflict-resolving rules of international law. Romania argues that the Komstroy Judgment has clarified that there is indeed a conflict between the ECT and the EU Treaties.¹⁶² It further contends that the specific conflict-resolving clauses in both Art. 16 of the ECT and in Art. 351 of the TFEU give priority to the EU Treaties.¹⁶³ In particular, according to Romania, the EU Treaties are more favorable to EU investors and should prevail over the ECT pursuant to Article 16 of the ECT.¹⁶⁴ The residual rule in Art. 30 of the VCLT would also give precedence to the EU Treaties.

87. Romania therefore concludes that the Tribunal committed a manifest excess of powers when it found it had jurisdiction under Art. 26(1) whereas even if there was a conflict between the ECT and EU Treaties, the conflict-resolving rules would resolve the conflict in favor of the EU Treaties.

88. Turning to the Tribunal's consideration of this aspect of Romania's submissions, the Tribunal found that there is no conflict between the ECT and EU law, and in any case, the application of Art. 16 of the ECT would give priority to the ECT.¹⁶⁵

89. The Tribunal considered Romania's argument that Art. 26 of the ECT was in conflict with Arts. 267 and 344 of TFEU, which deal respectively with the CJEU's exclusive jurisdiction within the EU regarding EU law matters and the submission of disputes concerning the interpretation or application of the EU Treaties.¹⁶⁶ The Tribunal found that there was no conflict for several reasons, including that the provisions of the ECT and the TFEU concern the settlement of different types of disputes, and the Tribunal will not be called upon to interpret or apply EU law.¹⁶⁷ The Tribunal went on to cite several cases in support of its position.¹⁶⁸

¹⁶² Romania's Memorial, at ¶¶ 103-112. ↩

¹⁶³ Romania's Memorial, at ¶ 115-. ↩

¹⁶⁴ Romania's Memorial, at ¶¶ 120-130. ↩

¹⁶⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 709-753. ↩

¹⁶⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 732-735. ↩

¹⁶⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 736-742. ↩

¹⁶⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 743-749. ↩

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90. Romania argues that once the CJEU had confirmed in its decision in Komstroy that there is a conflict between Art. 26 of the ECT and Art. 344 of the TFEU such that EU Member States have a treaty obligation not to agree to submit intra-EU disputes to resolution outside the EU treaty system (including in the ECT), and once the CJEU has confirmed this expressly, no other interpretation can be reasonable.¹⁶⁹ However, the Committee recalls that the Tribunal found that ECT Art. 26 concerns investor-State disputes, whereas TFEU Article 344 relates to disputes involving Member States or EU institutions.¹⁷⁰ The Tribunal was also of the view that it is entrusted with interpreting the ECT and not the EU Treaties,¹⁷¹ that it was not bound by the CJEU decision in Komstroy,¹⁷² and that the CJEU Komstroy Judgment was issued several years after the consent to arbitration had been locked.¹⁷³ In light of the Tribunal's argumentation, the Committee considers that the Tribunal's conclusion that there was no conflict between the ECT and EU Treaties was tenable and not arbitrary and any error was not ‘clear, obvious, and self-evident'. In any case, assuming that there was a conflict between these treaties, the Tribunal went on to consider the conflict-resolving provisions.

91. First, the Tribunal considered that the conflict-resolving provision in Art. 351 of the TFEU was "not applicable”.¹⁷⁴ Then the Tribunal considered that in order to apply either Art. 16 of the ECT or Art. 30 of the VCLT, the TFEU must be considered a “subsequent” or “successive treaty" to the ECT, and both treaties must “concern” or “relate to” the same "subject-matter".¹⁷⁵ The Tribunal made a finding that the ECT and TFEU do not concern the same subject matter.¹⁷⁶ Then, assuming arguendo that they do concern the same subject matter, the Tribunal found that ECT Art. 26 must prevail because it ismore favorable that the TFEU.¹⁷⁷

¹⁶⁹ Transcript, 42:19-43:1 (Wolrich). ↩

¹⁷⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 737. ↩

¹⁷¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 740. ↩

¹⁷² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 759-761. ↩

¹⁷³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 764. ↩

¹⁷⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 711-713. ↩

¹⁷⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 718. ↩

¹⁷⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 720-730. ↩

¹⁷⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 752-753. ↩

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92. The Committee has considered Romania's arguments and the Tribunal's analysis and conclusions. The Committee accepts that there may be differences of legal opinion on matters such as whether treaties conflict, whether they concern the same subject matter and whether they are more or less favorable. It is not, however, within the mandate of the Committee to substitute its own judgment for that of the Tribunal. In applying the applicable legal standard for manifest excess of powers, the Committee concludes that the Tribunal's arguments are reasonable, tenable and not arbitrary. The Committee therefore finds that the Tribunal has not committed a manifest excess of powers in relation to its finding that it had jurisdiction over intra-EU disputes.

(3) Jurisdiction over Separate Claims Brought by 10 Claimants

a. Romania's Position

93. Romania argued that the Tribunal manifestly exceeded its powers when “it exercised jurisdiction over the separate claims brought by 10 different claimants despite the absence of consent by Romania to the collective adjudication of separate claims made by multiple claimants."¹⁷⁸ In the view of Romania, consent cannot be presumed; it must be positively and objectively established through affirmative evidence; and consent cannot be derived from silence.¹⁷⁹ Romania argues that both the Tribunal and this Committee must determine “whether Romania consented, in both the ECT and the ICSID Convention, to the collective adjudication of the 10 different claimants' distinct claims in a single arbitral proceeding."¹⁸⁰ According to Romania, the Tribunal was never in fact able to establish such clear and unambiguous consent of Romania “to the collective adjudication of distinct claims by multiple claimants."¹⁸¹ Rather, in paragraph 314 of the Decision, the Tribunal expressly admits that it interpreted the silence in the ECT as consent to multiparty arbitration.¹⁸² Further, a Tribunal's reliance on the notion of “unconditional consent” found

¹⁷⁸ Romania's Memorial, at ¶ 155. ↩

¹⁷⁹ Romania's Memorial, at ¶¶ 156 and 162. ↩

¹⁸⁰ Romania's Memorial, at ¶¶ 157-158. ↩

¹⁸¹ Romania's Memorial, at ¶ 159. ↩

¹⁸² Romania's Memorial, at ¶ 161. ↩

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in Art. 26(3) of the ECT is insufficient to constitute evidence of unconditional consent to multiple disputes from multiple claimants.¹⁸³

94. Romania also relies upon the use of the singular ‘investor' in ECT Art. 26(1), arguing that the use of the singular must be given effect and means the singular, and not the plural.¹⁸⁴ Romania maintains that allegations of ‘speculative efficiency gains' with collective adjudication cannot substitute for the need to establish the consent of the State to arbitration.¹⁸⁵ It rejects the notion that the 2018 Working Paper and its Schedule 7 provide context as the Working Paper was not prepared in connection with the treaty, nor by the Parties.¹⁸⁶ Further, the Tribunal's reference to the ICSID Convention's travaux préparatoires "fails to demonstrate any consent to the collective adjudication of claims.”¹⁸⁷ Romania also rejects the Tribunal's reliance on subsequent practice as subsequent practice must be of the parties, not arbitral tribunals; the cases referred to by the Tribunal are not sufficient to constitute evidence of the subsequent practice; and there is no subsequent practice from Romania or any other States.¹⁸⁸ In response to Claimants, Romania asserts that "if the Committee cannot examine whether the Tribunal erroneously found jurisdiction over multiple claimants, the ground for annulment based upon manifest excess of powers would be rendered meaningless.”¹⁸⁹

b. Claimants' Position

95. Claimants set out the central issue regarding this claim, that for Romania, its objection turns on whether or not the ICSID Convention contains “clear and unambiguous consent to the collective adjudication of claims,” but for the Tribunal, the question was whether “a Contracting State's consent to arbitrate under the Convention should not be interpreted restrictively to exclude multi-party claims."¹⁹⁰ By signing and ratifying the ECT, Romania

¹⁸³ Romania's Memorial, at ¶¶ 163-164. ↩

¹⁸⁴ Romania's Memorial, at ¶ 165; Romania's Reply, at ¶ 105. ↩

¹⁸⁵ Romania's Memorial, at ¶ 167; Romania's Reply, at ¶¶ 107-108. ↩

¹⁸⁶ Romania's Memorial, at ¶ 168; Romania's Reply, at ¶ 110. ↩

¹⁸⁷ Romania's Memorial, at ¶ 170. ↩

¹⁸⁸ Romania's Memorial, at ¶¶ 174-178. ↩

¹⁸⁹ Romania's Memorial, at ¶ 106. ↩

¹⁹⁰ Claimants' Counter Memorial, at ¶ 115. ↩

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gave its “unconditional consent” to arbitrate claims of individual claimants except for the two exceptions listed in ECT Art. 26.¹⁹¹ This was “affirmative evidence” of Romania's consent to arbitration under ECT Art. 26, not a determination of consent “by silence".¹⁹² The Tribunal found that Romania's consent to arbitrate, under both the ECT and the ICSID Convention, included the arbitration of multi-party disputes and responded to Romania's argument to the contrary by referring to the interchangeable use in the ECT of the singular and plural 'investor' and 'investors',¹⁹³ to ICSID's 2018 Working Paper,¹⁹⁴ and to the failure of States to object in other cases.¹⁹⁵

96. Claimants also take the view that the issue of whether Romania was required to provide consent to multiple claimants was before the Tribunal, which addressed the matter, and this Committee “should not revisit the matter and improperly substitute its own views for the Tribunal's views.”¹⁹⁶ According to Claimants, a disagreement with the findings of the Tribunal is not a proper basis for seeking annulment.¹⁹⁷

c. Ad Hoc Committee's Analysis

97. Romania's central argument is that it did not give consent to a dispute brought by multiple claimants under ECT Art. 26(1). It acknowledges that the ECT and the ICSID Convention are silent on whether disputes may be brought by multiple claimants and relies on Daimler v. Argentina to the effect that international law does not construe a State's silence as consent.¹⁹⁸

98. The Committee agrees with Romania that State consent to international adjudication is a fundamental principle of international dispute settlement.¹⁹⁹ Furthermore, to quote Daimler v. Argentina, “[e]ach state's consent to submit to the jurisdiction of an international tribunal

¹⁹¹ Claimants' Counter Memorial, at ¶¶ 103, 107; Claimants' Rejoinder, at ¶ 55. ↩

¹⁹² Claimants' Rejointed, at ¶ 55. ↩

¹⁹³ Claimants' Counter Memorial, at ¶ 108. ↩

¹⁹⁴ Claimants' Counter Memorial, at ¶¶ 113-114. ↩

¹⁹⁵ Claimants' Counter Memorial, at ¶ 116. ↩

¹⁹⁶ Claimants' Counter Memorial, at ¶ 103. ↩

¹⁹⁷ Claimants' Rejoinder, at ¶ 58. ↩

¹⁹⁸ Romania's Memorial, at ¶ 156, citing Daimler v. Argentina, at ¶ 277 (Exhibit RL-90). ↩

¹⁹⁹ Status of Eastern Carelia Case, Advisory Opinion, (1923) P.C.I.J. Series B. No. 5, p. 27. ↩

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must be established on the basis of objective indicators.” The Committee will consider the indicators identified by the Tribunal to determine whether the Tribunal committed a ‘manifest excess of powers'.

99. The Tribunal first stated that 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 Convention.”²⁰⁰ This unconditional consent, according to the Tribunal, satisfies the requirement for written consent of the Parties to a dispute for the purposes of Art. 25(1) of the ICSID Convention.²⁰¹

100. The Tribunal then considered whether Romania had given its consent to arbitration by multiple complainants. It addressed Romania's arguments by undertaking a VCLT analysis of Art. 26 of the ECT and Art. 25(1) of the ICSID Convention. With respect to the ECT, the Tribunal noted that the ECT “uses the singular and plural forms throughout the text interchangeably" and considered that the use of the singular in Art. 26 would not be a bar to jurisdiction over multiple claimants.²⁰² Further, in the view of the Tribunal, a broader interpretation of the scope of consent is consistent with the context, as well as with the object and purpose of the ECT.²⁰³ Consent in international arbitration entails the host State extending a standing offer to arbitrate to an indefinite number of previously unidentified investors falling within the jurisdictional requirements of the treaty.²⁰⁴ Thus, according to the Tribunal, once the offer is made, the fact that it is accepted by one or multiple claimants is "immaterial".²⁰⁵

101. In accordance with the VCLT, the Tribunal then addressed subsequent practice of respondent States in ICSID proceedings, noting the “numerous” arbitrations involving multi-party claims where respondent States had not objected to claims brought by multiple

²⁰⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 301. ↩

²⁰¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 302. ↩

²⁰² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 312-313, referring to PV Investors, at ¶ 99 (Exhibit CL-172). ↩

²⁰³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 315. ↩

²⁰⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 315. ↩

²⁰⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 315. ↩

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claimants on the basis that they had not consented to arbitrate such claims and that Romania had not pointed to a 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.²⁰⁶

102. The Tribunal likewise considered the interpretation of the ICSID Convention and in considering the ordinary meaning of the provision, suggested that there is no reason to conclude that the wording of Art. 25(1) of the ICSID Convention “cannot encompass a plurality of investors.”²⁰⁷ The Tribunal then took into account the “context” for treaty interpretation in particular the 2018 Working Paper with “Proposals for Amendments of the ICSID Rules”,²⁰⁸ and subsequent practice of instances where there had been multi-party claims.²⁰⁹

103. The Committee is of the view that the Tribunal did not “presume” consent to arbitration from multiple claimants. Rather, it undertook an analysis of indicators that suggest that consent to jurisdiction was “unconditional” in accordance with the requirements of Art. 26(1) of the ECT and was not subject to restrictions, other than those set out in Art. 26(1). The Committee does not consider that the Tribunal committed a manifest excess of powers in respect of the issue of multiple claimants. Romania may disagree with the approach of the Tribunal, for example in relation to its interpretation of subsequent practice, but this is not sufficient to amount to an annullable error on the part of the Tribunal.

(4) Jurisdiction over the Dispute brought by Anina and Guist against Romania

a. Romania's Position

104. Romania argues that jurisdiction under the ICSID Convention and Romania’s consent to arbitration in the ECT “do not extend to disputes brought by shell companies registered in another Contracting State that are wholly owned and controlled by a national of the host State.”²¹⁰ Citing Art. 25 of the ICSID Convention and Art. 26 of the ECT, Romania argues

²⁰⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 317. ↩

²⁰⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 321, referring to Alemanni, at ¶ 270 (Exhibit CL-156) and Adamakopoulos, at ¶ 200 (Exhibit RL-40). ↩

²⁰⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 322-325. ↩

²⁰⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 325-328. ↩

²¹⁰ Romania’s Memorial, at ¶ 180. ↩

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that these exclude disputes between a national of a Contracting Party and that same Contracting Party.²¹¹ Romania also refers to the object and purpose of the ECT,²¹² which “would be subverted if a national of a Contracting State could sue its own State through the subterfuge of making the investment through a mere shell company incorporated in another Contracting State.”²¹³ According to Romania, the Tribunal “incorrectly disregarded object and purpose”,²¹⁴ which goes against the Tribunal’s interpretation,²¹⁵ and thus the Tribunal’s interpretation is a violation of Art. 31 of the VCLT “which require that the context and the object and purpose be taken into account at the same level as good faith and the ordinary meaning to be given to the terms.”²¹⁶

105. Romania maintains that there was evidence that Amina and Guist were shell companies, owned by a Romanian, which had no business activities, yet despite the evidence, the Tribunal upheld jurisdiction over the dispute brought by Anina and Giust against Romania.²¹⁷ The Tribunal “turned a blind eye” to the risk of abuse,²¹⁸ and stated that the only situations that might justify “piercing the corporate veil” and disregarding the formal nationality of a claimant are “fraud or abuse” which Romania had not argued.²¹⁹ In Romania’s view, in order to address the claim under Art. 52(1)(b) of the ICSID Convention, this Committee must determine whether the Tribunal exercised jurisdiction that it did not have.²²⁰ The Committee is not bound by what other tribunals have decided.²²¹ Furthermore, the Committee “should not allow this type of practice to prevail.”²²² In Romania’s view, the Tribunal sanctioned and encouraged a loophole that undermines the

²¹¹ Romania’s Memorial, at ¶¶ 181, 186. ↩

²¹² Romania’s Memorial, at ¶¶ 182-184. ↩

²¹³ Romania’s Memorial, at ¶ 185. ↩

²¹⁴ Romania’s Memorial, at ¶ 190. ↩

²¹⁵ Romania’s Memorial, at ¶ 193. ↩

²¹⁶ Romania’s Memorial, at ¶ 194. ↩

²¹⁷ Romania’s Memorial, at ¶¶ 189-190. ↩

²¹⁸ Romania’s Memorial, at ¶ 195. ↩

²¹⁹ Romania’s Memorial, at ¶ 196. ↩

²²⁰ Romania’s Reply, at ¶ 115. ↩

²²¹ Romania’s Reply, at ¶ 116. ↩

²²² Romania’s Reply, at ¶ 117. ↩

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basic principle that the ECT and the ICSID Convention cover international and not domestic investments and such a loophole should not be accepted.²²³

b. Claimants' Position

106. Claimants note that Romania raised the same issue before the Tribunal.²²⁴ The Tribunal utilized the most widely used test for determining jurisdiction under the ICSID Convention and looked at the place of incorporation or registered office.²²⁵ The Tribunal excluded the possibility of ‘piercing the corporate veil’ and looking at the nationality of the controlling interest, and of the shareholders.²²⁶ There was no evidence of any attempt by Anina’s or Giust’s shareholders to “circumvent” the requirements of either the ECT or the ICSID Convention.²²⁷ Further, Claimants’ argue that the Tribunal’s substantive findings are not subject to review by this Committee.²²⁸

c. Ad Hoc Committee's Analysis

107. The Committee notes that the nationality requirement is set out in Art. 25(1) of the ICSID Convention. Romania argues that the nationality requirement in the ECT should not be interpreted in such a way as to facilitate the resolution of domestic disputes. In examining this issue, the Tribunal undertook a VCLT interpretation of the relevant provisions of the ICSID Convention and the ECT. It considered that the ordinary meaning to be given to the terms in their context shows that under the ICSID Convention, 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.²²⁹ The Tribunal considered doctrine and decisions of arbitral tribunals and concluded that the place of incorporation of the juridical person is

²²³ Transcript, 71:12-15 (Wolrich). ↩

²²⁴ Claimants’ Counter Memorial, at ¶ 121; Claimants’ Rejoinder, at ¶ 59. ↩

²²⁵ Claimants’ Counter Memorial, at ¶ 122; Claimants’ Rejoinder, at ¶ 60. ↩

²²⁶ Claimants’ Counter Memorial, at ¶ 122. ↩

²²⁷ Claimants’ Rejoinder, at ¶ 60. ↩

²²⁸ Claimants’ Rejoinder, at ¶ 60. ↩

²²⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 394. ↩

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sufficient to satisfy the nationality requirement under Art. 25(2) of the ICSID Convention.²³⁰

108. The Committee has considered all of Romania’s arguments to the contrary. However, it is of the view that the Tribunal did not commit a manifest excess of powers. The Tribunal’s interpretation and arguments with respect to the interpretation of the ECT and ISCID were reasonable and confirmed by the interpretation adopted by other Tribunals. The Committee, like the Tribunal, is mindful of the potential for abuse of the ECT and ICSID nationality provisions. The Tribunal considered whether there was evidence that would warrant disregarding Anina and Giust’s nationality, but did not consider that any such evidence was compelling.²³¹ Contrary to what Romania alleges,²³² the Tribunal found “no evidence of fraud or of an abuse of treaty”.²³³ These are findings of the Tribunal that are not within the remit of the Committee to overturn. The Committee concludes that the Tribunal did not commit a manifest excess of powers when it found it had jurisdiction over a dispute brought by Anina and Guist against Romania.

C. MANIFEST EXCESS OF POWERS RELATED TO THE APPLICATION OF THE APPLICABLE LAW

(1) Applicable Legal Standard

a. Romania's Position

109. Romania submits that under Art 42(1) of the ICSID Convention, failure to apply the applicable law constitutes a manifest excess of powers.²³⁴ This includes disregard of the applicable law, or if a tribunal identifies the applicable law but applies a different standard than that of the applicable law.²³⁵ In this case, according to Romania, the Tribunal failed to apply the applicable law. Romania does not allege that the Tribunal erroneously applied

²³⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 395-414. ↩

²³¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 417. ↩

²³² Transcript, 184:16-24 (Wolrich). ↩

²³³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 417. ↩

²³⁴ Romania’s Memorial, at ¶ 200, referring to CDC v. Seychelles and MINE; Romania’s Reply, at ¶ 120. ↩

²³⁵ Romania’s Memorial, at ¶ 200, referring to Sempra v. Argentina. ↩

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the law.²³⁶ Romania considers that a committee must examine what a tribunal actually did.²³⁷ In this case, Romania asserts, the Tribunal failed to apply several provisions of the ECT and applicable rules and principles of international law both in its determination of its jurisdiction and of Romania’s liability.”²³⁸

b. Claimants' Position

110. Claimants contend that the legal standard for assessing whether there has been a manifest excess of power in relation to the applicable law “demands a high burden of proof.”²³⁹ The task of the Committee is not whether it agrees with the Tribunal’s conclusions nor whether it considers that the way in which the Tribunal applied the rule was correct.²⁴⁰ There is no question, for Claimants, that the Tribunal applied the appropriate ECT provisions to the questions of jurisdiction; conflict; and liability.²⁴¹ Claimants argue that annulment is only warranted when there has been a total failure to apply that law and that there is no basis for annulling an award when a tribunal omits some aspect of the applicable law or errs in its application.²⁴² Such a situation would be one of misapplication of law, rather than a failure to apply the correct law, which is not subject to annulment review.²⁴³ Furthermore, according to Claimants, the Tribunal “could not have applied some aspect of international law in a way that would have undermined or contradicted a proper application of the ECT”.²⁴⁴ In Claimants’ view, “Romania’s argument that the Tribunal failed to apply the correct applicable law does not meet the legal test established in annulment jurisprudence.”²⁴⁵

²³⁶ Romania’s Reply, at ¶ 121. Romania does not disagree with MINE. ↩

²³⁷ Romania’s Memorial, at ¶¶ 205-206. ↩

²³⁸ Romania’s Memorial, at ¶ 207; Romania’s Reply, at ¶ 126. ↩

²³⁹ Claimants’ Counter Memorial, at ¶ 125, referring to CMS. ↩

²⁴⁰ Claimants’ Counter Memorial, at ¶ 126. ↩

²⁴¹ Claimants’ Rejoinder, at ¶ 62. ↩

²⁴² Claimants’ Rejoinder, at ¶ 64. ↩

²⁴³ Claimants’ Rejoinder, at ¶ 64. ↩

²⁴⁴ Claimants’ Rejoinder, at ¶ 65. ↩

²⁴⁵ Claimants’ Rejoinder, at ¶ 67. ↩

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c. Ad Hoc Committee's Analysis

111. The Committee has considered the applicable legal standard with respect to manifest excess of powers in the previous section. With respect to a manifest excess of powers for failure to apply the applicable law, the Committee recalls that a difference of legal interpretation is not sufficient to rise to a failure – a complete failure – to apply the applicable law.²⁴⁶ The Committee agrees with Claimants that a tribunal does not commit an excess of power by choosing one among other available interpretations of the applicable law.²⁴⁷ The Committee sees a distinction between the non-application by a tribunal of the applicable law that constitutes a ground for annulment, and the misapplication of the applicable law, which does not.²⁴⁸ The “misapplication of a particular rule, which is part of the correctly identified applicable law, does not amount to an excess of powers”.²⁴⁹ It is only when the misapplication of the applicable law is of such a magnitude that it amounts in reality to a non-application of the proper law, that a failure to apply the applicable law may arise.²⁵⁰ Further, an annulment committee does not have the role of determining for itself whether the tribunal correctly identified all of the provisions of the applicable law relevant to the case before it.²⁵¹

112. The Committee notes that there is considerable overlap in Romania’s arguments relating to manifest excess of powers in relation to jurisdiction and manifest excess of powers for failure to apply the applicable law. The Committee will address the arguments in light of

²⁴⁶ ICSID Background Paper on Annulment, at ¶ 93 (Exhibit RL-318). ↩

²⁴⁷ Claimants’ Rejoinder, at ¶ 66, citing SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Annulment, May 19, 2014, at ¶ 122, (Exhibit CL-348). ↩

²⁴⁸ Antoine Abou Lahoud and Leila Bounafeh-Abou Lahoud v. Democratic Republic of Congo, ICSID Case No. ARB/10/4, Decision on the Application for Annulment of the Democratic Republic of the Congo, at ¶ 119 (Exhibit CL-290). ↩

²⁴⁹ Tulip Real Estate v. Turkey, ICSID Case No. ARB/11/28, Decision on Annulment, Dec. 30, 2015, at ¶ 58 (Exhibit CL-294). ↩

²⁵⁰ Victor Pey Casado and President Allende Foundation v. Republic of Chile I, ICSID Case No. ARB/98/2, Decision on Annulment, January 8, 2020, at ¶ 683 (Exhibit CL-353). ↩

²⁵¹ Continental Casualty Co. v. Argentina, ICSID Case No. ARB/03/9, Decision on Partial Annulment, Sept. 16, 2011, at ¶ 91 (Exhibit CL-351). ↩

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the legal standard for manifest excess of powers articulated above,²⁵² as well as the specific standard of failure to apply the applicable law.

(2) Applicable Law When Deciding upon Jurisdiction

a. Romania's Position

113. Romania submits that although the Tribunal correctly identified the applicable law for interpreting Art. 26(1) of the ECT, namely the general rule of treaty interpretation in Art. 31 of the VCLT, it failed to apply it.²⁵³ Specifically, when addressing the three requirements for jurisdiction set out in Art. 26(1), the Tribunal limited itself to looking for the ordinary meaning of the terms and did not interpret them in light of the ECT’s object and purpose and in their context.²⁵⁴

114. With respect to the first requirement under ECT Art. 26(1), according to Romania, the Tribunal, as mentioned above, based its interpretation only on the ordinary meaning of the terms without looking to the treaty’s object and purpose and the context of the relevant terms.²⁵⁵

115. With respect to the second requirement, Romania asserts that the Tribunal only looked at the definition of the Area of a Contracting Party and failed to apply the definition of the Area of a REIO.²⁵⁶ The Tribunal considered that the ‘Area’ of Romania is subsumed into ‘Area of an REIO’ such that investing in Romania is investing in the REIO.²⁵⁷

116. With respect to the third requirement, according to Romania, ECT Art. 1(3) required the Tribunal to make a determination as to whether the competencies transferred included Part III of ECT; the Tribunal failed to do so and therefore failed to apply Art. 1(3).²⁵⁸ The Tribunal had to apply the principle of speciality and to define the scope of the competence

²⁵² Supra, at ¶ 48. ↩

²⁵³ Romania’s Memorial, at ¶ 209. ↩

²⁵⁴ Romania’s Memorial, at ¶ 225. ↩

²⁵⁵ Romania’s Memorial, at ¶ 229; Romania’s Reply, at ¶ 131. ↩

²⁵⁶ Romania’s Memorial, at ¶¶ 234-235. ↩

²⁵⁷ Romania’s Memorial, at ¶ 237. ↩

²⁵⁸ Romania’s Memorial, at ¶ 241. ↩

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conferred upon an international organization by examining its constituent instrument. However, it failed to refer to the EU Treaties to determine the scope of “transferred competence” to the EU and to apply the international law principle of speciality.²⁵⁹ In Romania’s view, “if competence has been transferred to the REIO over an obligation, such as the Part III obligations, it cannot be an obligation of a Member State,” and thus the jurisdictional requirement will not be met against a Member State, such as Romania, “for the alleged breach of an obligation that it does not have.”²⁶⁰

117. Romania argues that the Tribunal also disregarded the context of ECT Art. 1(3) and the authentic interpretation provided in the 1998 EC Statement.²⁶¹ Thus, “by not making any determination as to what competence relevant to the ECT was transferred from the Member States to the EU, while Article 1(3) of the ECT and principles of public international law required it to do so, the Tribunal failed to apply the applicable law with regard to the third requirement, and thereby manifestly exceeded its powers.”²⁶²

b. Claimants' Position

118. In response Claimants assert that: Romania’s argument is not that the Tribunal failed to apply the correct ECT provisions; rather, Romania’s argument is that the Tribunal erred in its interpretation of those provisions according to the VCLT, i.e. the way in which the Tribunal applied the relevant rule.²⁶³ This, according to Claimants, crosses the line between appeal and annulment.²⁶⁴ A Committee may disagree with the way a Tribunal interpreted a provision, but that does not give rise to a valid ground for annulment.²⁶⁵

119. Claimants also take issue with the interpretation advocated by Romania. The Tribunal cites VCLT Art. 31 and explains how the Tribunal applies it.²⁶⁶ The ‘context’ would not have

²⁵⁹ Romania’s Memorial, at ¶¶ 242-243; Romania’s Reply, at ¶ 136. ↩

²⁶⁰ Romania’s Reply, at ¶ 134. ↩

²⁶¹ Romania’s Memorial, at ¶ 244. ↩

²⁶² Romania’s Memorial, at ¶ 245. ↩

²⁶³ Claimants’ Counter Memorial, at ¶ 128; Claimants’ Rejoinder, at ¶ 69. ↩

²⁶⁴ Claimants’ Counter Memorial, at ¶ 129. ↩

²⁶⁵ Claimants’ Counter Memorial, at ¶ 131. ↩

²⁶⁶ Claimants’ Rejoinder, at ¶ 69. ↩

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supported Romania’s interpretation.²⁶⁷ Romania’s reading of ‘Area’ of a REIO in Art. 1(10) of the ECT “tortures” the plain reading of text.²⁶⁸ Thus, the Tribunal not only considered the entirety of ECT Art. 1(10) to apply, but the Tribunal also considered Romania’s alternative interpretation and properly rejected it.²⁶⁹

120. According to Claimants, the Tribunal also rejected Romania’s argument that the definition in Art. 1(3) of the ECT deprived it of jurisdiction and provided three distinct reasons for rejecting Romania’s position, all of which fall within the Tribunal’s analysis of interpreting and applying Art. 1(3).²⁷⁰ In the view of Claimants, the Tribunal found that ECT Art. 1(3) refers in abstract to ‘certain matters’ over which competence have been transferred to the EU, and considered that neither the text of the ECT nor the 1998 EC Statement supported Romania’s position.²⁷¹

121. According to Claimants “[f]ar from being an instance of a tribunal failing to apply the correct applicable law, this is merely an example of Romania being unhappy with the result and hoping for a better outcome. That is not permitted.”²⁷²

c. Ad Hoc Committee's Analysis

122. The Committee acknowledges that the Parties differ in their interpretation of the jurisdictional requirements in Art. 26(1) of the ECT. Romania’s main contention with respect to the first two requirements is that the Tribunal failed properly to interpret Art. 26(1) as it did not sufficiently take account of the context of Art. 26(1) and the object and purpose of the ECT. Thus, in Romania’s view, the Tribunal failed to apply the VCLT rules of interpretation, which were the rules applicable in the underlying arbitration. However, the Committee notes that the Tribunal accepted the textual approach to treaty interpretation adopted by the International Court of Justice.²⁷³ Treaty interpretation is a holistic exercise

²⁶⁷ Claimants’ Counter Memorial, at ¶ 133. ↩

²⁶⁸ Claimants’ Counter Memorial, at ¶ 134. ↩

²⁶⁹ Claimants’ Counter Memorial, at ¶ 136. ↩

²⁷⁰ Claimants’ Counter Memorial, at ¶¶ 138-139. ↩

²⁷¹ Claimants’ Rejoinder, at ¶ 70. ↩

²⁷² Claimants’ Counter Memorial, at ¶ 136. ↩

²⁷³ Admission of a State to the United Nations, ICJ Reports 1950 p 4, 8: “If the relevant words in their natural and ordinary meaning make sense in their context, that is an end of the matter.” (Exhibit CL-171). ↩

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that is based upon the text of the treaty: the ordinary meaning to be given to its terms in their context and in the light of its object and purpose.²⁷⁴ However, this does not mean that recourse to the object and purpose of a treaty can drastically alter the ordinary meaning of the terms of a treaty in their context. It seems to the Committee that Romania disagrees with the way in which the Tribunal applied the VCLT rules of interpretation. However, the Committee considers that the Tribunal expressly referenced the VCLT rules as being the applicable rules to apply and applied those rules. In the view of the Committee, a difference in legal interpretation over how those rules are applied is not sufficient to conclude that there has been a manifest excess of powers for failure to apply the applicable law.

123. With respect to the third requirement, that the obligations must be obligations ‘of’ Romania, Romania makes two main arguments: that the Tribunal had to properly interpret ECT Art. 26(1) in the context of Art. 1(3); and that the Tribunal had to apply the principle of speciality and to define the scope of the competence conferred upon the EU. Both these arguments have been addressed by the Committee in the previous section.

124. The first argument is based on the notion that the Tribunal failed to take into account the context of ECT Art. 1(3) and therefore failed to apply the VCLT rules of interpretation. However, as the Committee has previously found, the Tribunal applied the VCLT rules of interpretation and Romania’s concern seems to be with how it applied those rules. Such a difference of interpretation does not amount to a failure to apply the applicable law, nor to a manifest excess of powers.

125. The second argument is that the Tribunal should have applied the principle of speciality and should have had recourse to the EU Treaties to determine whether competence over Part III of the ECT had been transferred to the EU, such that the obligations were not obligations ‘of’ Romania under Art. 1(3) of the ECT. The Tribunal considered the text of the ECT and in particular Art. 1(3) which provides that members of a REIO can transfer competence “over certain matters” to the REIO, and concluded that this does not lead to the conclusion that EU Member States decided to transfer their competences and

²⁷⁴ Territorial Dispute (Libya v. Chad), ICJ Reports 1994, at ¶ 41 (Exhibit CL-246). ↩

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obligations under Part III of the ECT to the EU.²⁷⁵ The Tribunal also considered that the 1998 EC Statement likewise does not support this conclusion.²⁷⁶ In addition, the Tribunal considered the import of Arts. 206 and 207 of the TFEU.²⁷⁷ It concluded that these provisions do not support the proposition that EU Member States transferred their competences under Part III of the ECT to the EU.²⁷⁸ The Committee agrees with Romania that the Tribunal did not refer specifically to the principle of speciality. However, it seems to the Committee that the Tribunal did consider the relevance of certain provisions of the TFEU in the interpretation of obligations ‘of’ Romania, but that Romania does not agree with the interpretation adopted by the Tribunal. Even if there were a misapplication of the applicable law, this does not equate to a manifest excess of powers for failure to apply the applicable law.

(3) Application of the Applicable Law When Determining Whether a Treaty Conflict Exists and How any Such Conflict should be Resolved

a. Romania's Position

126. Romania submits that when establishing whether a conflict exists, one must determine whether Romania’s compliance with any obligation under the ECT would result in a failure to comply with an obligation under the EU Treaties. Romania attests that CJEU judgments have binding effect erga omnes, and constitute binding precedent.²⁷⁹ In particular, the Komstroy Judgment of the CJEU, pursuant to public international law, has “authoritatively determined” the obligations of the EU Member States under Articles 344 and 267 of the TFEU and that the TFEU precludes EU Member States from having recourse to intra-EU arbitration.²⁸⁰ Romania noted that the Tribunal considered that Komstroy was “irrelevant”, which, it claims, was “surprising” when it also found that the CJEU has the last word on interpretation of EU Treaties.²⁸¹ Romania states that “by ignoring the Komstroy Judgment

²⁷⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 667-668. ↩

²⁷⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 669-670. ↩

²⁷⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 684-690. ↩

²⁷⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 691. ↩

²⁷⁹ Romania’s Memorial, at ¶¶ 248-249. ↩

²⁸⁰ Romania’s Memorial, at ¶ 250; Romania’s Reply, at ¶ 142. ↩

²⁸¹ Romania’s Memorial, at ¶¶ 251-252. ↩

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as being ‘irrelevant,’ the Tribunal failed to apply applicable public international law, which resulted in its evading the existence of a treaty conflict. In so doing, the Tribunal manifestly exceeded its powers.²⁸²

127. Romania notes that although the Tribunal found that no treaty conflict exists between the ECT and the EU Treaties, it nevertheless proceeded to determine how such treaty conflict should be resolved, if the treaty conflict were to exist. Romania claims that in examining Art. 16 of the ECT and Art. 351 of the TFEU, the Tribunal failed to apply the general rule of treaty interpretation in Art. 31 of the VCLT when interpreting and applying Art. 351 of the TFEU.²⁸³ In particular the Tribunal considered Art. 351 ‘irrelevant’,²⁸⁴ and limited itself to the first paragraph, without considering the other paragraphs, and the context, particularly paragraph 3.²⁸⁵ Neither did the Tribunal consider the object and purpose,²⁸⁶ and it ignored two decisions of the CJEU that are binding interpretations of TFEU Art. 351.²⁸⁷

b. Claimants' Position

128. Claimants submit that the Tribunal understood the relevant provisions and applied the correct rule governing treaty conflicts in the underlying arbitration.²⁸⁸ Claimants recall that the Tribunal found that there was no conflict between EU law and the ECT.²⁸⁹ This, according to Claimants, is a substantive decision that is not within the remit of annulment proceedings.²⁹⁰

129. With respect to resolving conflicts, Claimants explain that the Tribunal applied Art. 16 of the ECT: the rules that Romania considered applicable.²⁹¹ The Tribunal found Art. 351 of

²⁸² Romania’s Memorial, at ¶ 254. ↩

²⁸³ Romania’s Memorial, at ¶ 255; Romania’s Reply, at ¶ 139. ↩

²⁸⁴ Romania’s Memorial, at ¶ 256. ↩

²⁸⁵ Romania’s Memorial, at ¶ 257. ↩

²⁸⁶ Romania’s Memorial, at ¶ 258. ↩

²⁸⁷ Romania’s Memorial, at ¶ 259. ↩

²⁸⁸ Claimants’ Counter Memorial, at ¶ 143. ↩

²⁸⁹ Claimants’ Rejoinder, at ¶ 73. ↩

²⁹⁰ Claimants’ Rejoinder, at ¶ 73. ↩

²⁹¹ Claimants’ Counter Memorial, at ¶ 149. ↩

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the TFEU ‘irrelevant’ because that provision addressed agreements with EU member States and not treaties with third states.²⁹² Neither Romania nor the EU raised any issue of incompatibility with the ECT prior to accession.²⁹³ Further, according to Claimants, “Romania has not pointed to any authority requiring the Tribunal to apply EU law, there is no explicit reference to the application of EU law in the ECT,” and the Tribunal “considered that Komstroy was irrelevant for many reasons but not least because it was issued several years after the date on which the Tribunal had to determine its jurisdiction.”²⁹⁴ Claimants responded to Romania’s argument with respect to the application of the two CJEU cases, by arguing that the two cases were not relevant and that EU law (including CJEU decisions) were not part of the governing law under the ECT.²⁹⁵

c. Ad Hoc Committee's Analysis

130. The Committee will examine each of the three main arguments of Romania in turn: the relevance of the Komstroy Judgment; the interpretation of Art. 351 of the TFEU; and the relevance of the two CJEU decisions on Art. 351.

131. The Tribunal examined the Komstroy Judgment in depth, including the background, the set aside proceedings, the CJEU preliminary ruling procedure, the opinion of the Advocate General, the Judgment itself, and ECT decisions after Komstroy.²⁹⁶ It concluded that the Komstroy Judgment was “irrelevant” for a number of reasons.²⁹⁷ First, none of the parties in the case was an EU Member State or a national of an EU Member State, the questions posed to the CJEU did not address the compatibility of the ECT with the TFEU, and therefore the CJEU Judgment was obiter dictum.²⁹⁸ Second, the Tribunal is judge of its own competence and is not bound by Komstroy.²⁹⁹ According to the Tribunal, the international legal system is “composed of different and independent legal sub-systems

²⁹² Claimants’ Counter Memorial, at ¶ 145. ↩

²⁹³ Claimants’ Counter Memorial, at ¶ 146. ↩

²⁹⁴ Claimants’ Rejoinder, at ¶ 75. ↩

²⁹⁵ Claimants’ Counter Memorial, at ¶¶ 151-152. ↩

²⁹⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 563-593. ↩

²⁹⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 709, 754-764. ↩

²⁹⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 756-758. ↩

²⁹⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 759-760, referring to Eskosol, at ¶ 154 (Exhibit CL-147). ↩

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that sometimes interact”, such as the EU Treaties and the ECT, with no clear hierarchy.³⁰⁰ Third, in response to Romania’s argument that if the Tribunal departs from the authoritative interpretation of the EU Treaties provided by the CJEU, it would be failing to apply the applicable law, the Tribunal indicated that the CJEU does not have a monopoly of interpretation over the ECT, which is a multilateral treaty, to which the EU is a party, but is not an “EU Treaty” in the meaning of either Art. 19 of the TEU or Art. 267 of the TFEU.³⁰¹ Fourth, the Komstroy Judgment was issued several years after the Parties’ consent to arbitration had been locked and cannot retroactively invalidate Romania’s consent to arbitrate.³⁰²

132. In the view of the Committee, the Tribunal considered the relevance and applicability of the Komstroy Judgment. It clearly articulated the reasons why it did not consider Komstroy relevant to its decision. It is not the role of the Committee to replace the Tribunal’s assessment with that of its own. To do so would be to stray into an appeal on the merits, which is not permitted under the ICSID Convention. In any case, the central issue in relation to Komstroy was whether there was a conflict between the ECT and the EU Treaties. The Tribunal concluded there was not. Nevertheless, the Tribunal went on to consider the position if there were a conflict between the ECT and EU Treaties. Thus, in the view of Claimants, “any purported failure to apply the correct conflicts-of-law rule could not lead to annulment, because that failure would not have affected the outcome of the case.”³⁰³ Putting to one side whether any failure would have affected the outcome of the case, the Committee will proceed to consider Romania’s arguments in relation to the proper application of the conflict rules.

133. The Tribunal considered the international law rules for the resolution of conflicts between treaties. It had recourse to Art. 16 of the ECT to resolve any conflict in favor of the ECT. The Tribunal also considered Art. 351 of the TFEU but concluded that it was not applicable

³⁰⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 761. ↩

³⁰¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 762-763. ↩

³⁰² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 764. ↩

³⁰³ Claimants’ Rejoinder, at ¶ 73. ↩

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to the current case.³⁰⁴ In particular, the Tribunal considered its wording and concluded that Art. 351 “concerns agreements between EU Members States and ‘third states’, which were concluded prior to the Member State’s accession to the EU”, not as in this case agreements between EU Member States.³⁰⁵ Romania disagrees with this interpretation on the grounds that the Tribunal did not consider the context of Art. 351. However, the Committee considers that the Tribunal’s interpretation is a tenable one in light of the plain meaning of the provision.

134. Romania’s third main area of concern is over the Tribunal’s treatment of the two CJEU cases: Commission v. Italy³⁰⁶ and Commission v. Austria.³⁰⁷ According to Romania, these cases mean that EU Treaties must prevail over any previous international agreements concluded by the Member States before the EU Treaties entered into force.³⁰⁸ The Tribunal did not address these cases. However, it placed some weight on the lack of a disconnection clause, which in its view the Contracting Parties “could (or, rather, should) have inserted” to resolve any potential conflicts between the ECT and the EU Treaties at the time of the conclusion of the ECT.³⁰⁹ The Tribunal also recalled that following the Achmea decision, the EC extrapolated the CJEU’s conclusions in Achmea to the ECT, but this was only published in July 2018. Similarly, the EU Member States’ Declaration, the Termination Treaty and the Komstroy Judgment were all after May 2018 when Claimants submitted their request for arbitration. The Tribunal concluded that Claimants “were entitled to proceed on the assumption that Art. 26 of the ECT was in full force and effect.”³¹⁰

135. The Committee is of the view that the Tribunal considered the relevant applicable law, but came to a different conclusion than that of Romania. It is not the role of this Committee to

³⁰⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 711-712. ↩

³⁰⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 712-713, referring to Vattenfall, at 225 (Exhibit CL-6). ↩

³⁰⁶ Commission v. Italy, Case 10/61, Court of Justice of the European Union, Judgment dated February 27, 1962 (Exhibit RL-95). ↩

³⁰⁷ Commission v. Austria, Case C-147/03, Court of Justice of the European Union, Judgment dated July 7, 2005 (Exhibit RL-96). ↩

³⁰⁸ Romania’s Memorial, at ¶ 260. ↩

³⁰⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 742, citing Charanne B.V. & Constr. Invs. S.à.r.l. v. Kingdom of Spain, SCC Arb. No. 062/2012, Award, dated 21 January 2016, at ¶ 438 (Exhibit CL-15). ↩

³¹⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 782. ↩

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second-guess the conclusions of the Tribunal, but to assess whether it committed a manifest excess of powers. The Committee concludes that in light of the applicable legal standard, the Tribunal has not failed to apply the applicable law leading to a manifest excess of powers.

(4) Application of the Applicable Law when Deciding on Liability

a. Romania's Position

136. Romania submits that the Tribunal found that some of the Disputed Measures were in breach of the fair and equitable treatment provision of the ECT because they violated Claimants’ legitimate expectations.³¹¹ However, that principle, “as the Tribunal itself recognized,” is not to be found in the ECT or in principles of public international law, which, pursuant to Article 26(6) of the ECT, is the applicable law for liability.³¹² According to Romania, the Tribunal’s recourse to the notion of legitimate expectations was based exclusively on non-binding decisions of tribunals, including non-ECT tribunals, and is not to be found in the ECT.³¹³ Such decisions are not a source of international law and cannot create obligations for States.³¹⁴

137. Romania also alleges that the Tribunal did not find that the changes implemented by the Disputed Measures were “drastic, discriminatory or total and unreasonable”. It did not test the Disputed Measures against the factors that the Tribunal said must be taken into consideration in determining liability, specifically the public interest involved and the extent to which external circumstances justified the Disputed Measures.³¹⁵ As such, the Tribunal failed to apply the applicable law.

138. According to Romania, the Tribunal’s finding of unreasonable impairment, is also based on the application of the legitimate expectations standard, “because the Tribunal assumed that any alteration of the ‘Essential Characteristics,’ the characterization of which was

³¹¹ Romania’s Memorial, at ¶ 265 citing Award, at ¶¶ 1156-1166, 1172-1189,1193, 1219. ↩

³¹² Romania’s Memorial, at ¶ 264. ↩

³¹³ Romania’s Memorial, at ¶¶ 267-268, citing Award, at ¶ 1049; Romania’s Reply, at ¶ 152. ↩

³¹⁴ Romania’s Memorial, at ¶ 272; Romania’s Reply, at ¶ 144. ↩

³¹⁵ Romania’s Reply, at ¶ 147. ↩

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based upon the legitimate expectations standard, constitutes an unreasonable impairment, regardless of the magnitude, reasonableness or impact of the changes.”³¹⁶

139. The Tribunal therefore failed to apply what it correctly identified as the applicable law, including the VCLT.³¹⁷ In doing so, the Tribunal manifestly exceeded its powers.³¹⁸

b. Claimants' Position

140. Claimants submit that the Tribunal interpreted and applied Art. 10(1) of the ECT as the applicable law and did not limit its interpretation of the provision to only the concept of “legitimate expectations.”³¹⁹ The Tribunal did not base its interpretation of Art. 10(1) of the ECT on exclusively the decisions of other arbitral tribunals,³²⁰ but from the ECT text and object and purpose of the ECT, with support from case law and scholarly writing.³²¹ The Tribunal was interpreting and applying Art. 10 of the ECT and what it considered to be “within the FET standard”.³²² Claimants argue that the Tribunal “was not ‘deriving’ a treaty obligation from a previous arbitral decision; it was merely interpreting the FET standard in a way that is consistent with myriad previous interpretations.”³²³ Further, it explicitly confirmed Romania’s right to regulate in certain circumstances.³²⁴ According to Claimants, the Tribunal’s interpretation is a defensible one.³²⁵

141. Claimants also note that the scope of the Tribunal’s liability findings was not just legitimate expectations.³²⁶ Thus, “even if Romania were correct, [...] there would be no change in the

³¹⁶ Romania’s Reply, at ¶ 159. ↩

³¹⁷ Romania’s Memorial, at ¶¶ 271-272; Romania’s Reply, at ¶ 147. ↩

³¹⁸ Romania’s Memorial, at ¶ 274. ↩

³¹⁹ Claimants’ Counter Memorial, at ¶ 160. ↩

³²⁰ Claimants’ Counter Memorial, at ¶ 163. ↩

³²¹ Claimants’ Counter Memorial, at ¶ 159. ↩

³²² Claimants’ Rejoinder, at ¶ 82. ↩

³²³ Claimants’ Rejoinder, at ¶ 83. ↩

³²⁴ Claimants’ Rejoinder, at ¶ 86. ↩

³²⁵ Claimants’ Counter Memorial, at ¶ 159. ↩

³²⁶ Claimants’ Counter Memorial, at ¶ 165. ↩

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outcome of the case, because the Tribunal’s liability finding under the ECT’s impairment clause would still stand.”³²⁷

c. Ad Hoc Committee's Analysis

142. The Committee recalls that the applicable legal standard for manifest excess of powers, including for failure to apply the applicable law, is a high standard.³²⁸

143. In its liability analysis, the Tribunal analyzed ECT Art. 10(1) including the general obligation, fair and equitable treatment, and within this whether investors are entitled to rely on any legitimate expectations, the prohibition of impairment by unreasonable or discriminatory measures, and the minimum standard of treatment for aliens as established by customary international law.³²⁹ In examining the standard of fair and equitable treatment,³³⁰ the Tribunal considered the concept of legitimate expectations within the FET standard.³³¹ In doing so, the Tribunal considered the arguments of the Parties,³³² as well as doctrinal writings and arbitral awards on the source of legitimate expectations.³³³ It also considered the source of legitimate expectations in light of the requirement under Art. 10(1) of the ECT on host States to promote stable conditions for investors,³³⁴ and the State’s right to regulate.³³⁵ The Tribunal recalled that “both Parties recognize that the Art. 10(1) FET standard protects investors against drastic or discriminatory, fundamental or total and unreasonable changes to the legal and regulatory regime, even in the absence of a specific commitment by the host State to the stability of the legal regime.”³³⁶ It concluded:³³⁷

Art. 10(1) of the ECT thus entitles an investor to legitimately expect that, when a State has induced investments by creating a legal

³²⁷ Claimants’ Counter Memorial, at ¶ 166; Claimants’ Rejoinder, at ¶ 88. ↩

³²⁸ Supra, at ¶¶ 48, 110. ↩

³²⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1005. ↩

³³⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1016-1023. ↩

³³¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1024-1049. ↩

³³² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1032. ↩

³³³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1033-1039. ↩

³³⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1040-1044. ↩

³³⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1045-1049. ↩

³³⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1043, referring to C-PHB, para. 183; R-II, para. 758; R-PHB, paras. 120-121. ↩

³³⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1049. ↩

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regime that has certain essential features embodied in laws and regulations, the State will not drastically change the essential characteristics which existed at the time of the investment.

144. Romania has three main arguments with respect to this claim: that the Tribunal based its conclusions on legitimate expectations on tribunal decisions, which are not a source of law; that in applying legitimate expectations, the Tribunal did not take account of the standard that it articulated; and that the finding of unreasonable impairment is also based on the application of the legitimate expectations standard. The Committee will address these in turn.

145. First, the Tribunal undertook an interpretative analysis of ECT Art. 10(1), taking into account the four different components of Art. 10, including both the specific obligation to provide FET and the general obligation to promote stable conditions for investors. The Tribunal had recourse to tribunal decisions and doctrinal writings as part of the interpretative process. Irrespective of whether one might object to the Tribunal’s interpretation of ECT Art. 10(1), in the view of the Committee, the Tribunal applied the applicable law, namely the VCLT and public international law. The Committee is not convinced that the Tribunal based its analysis and findings on liability on the assumption that Romania had a duty to protect Claimants’ legitimate expectations,³³⁸ nor that the Tribunal relied solely on previous non-binding arbitral awards, rather than the interpretation of ECT Art. 10(1).³³⁹

146. Second, the Tribunal articulated the standard that it adopted as follows:³⁴⁰

In the absence of a stability clause, States may amend their legal and regulatory frameworks, in light of the public interest. Nevertheless, the FET standard embodied in Art. 10(1) of the ECT protects investors against drastic, fundamental and unreasonable changes to the essential characteristics of a legal and regulatory regime. Thus, when making their long-term investments, investors are entitled to expect that the essential characteristics of the legal

³³⁸ Romania’s Reply, at ¶ 156. ↩

³³⁹ Transcript, 77:11-14 (Wolrich). ↩

³⁴⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1064. Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1156 for a similar statement of what the Tribunal had established. ↩

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and regulatory regime on which they are reasonably relying upon will remain stable.

147. The Tribunal described the ‘Essential Characteristics’ of Romania’s PV regime: the PV Generators were entitled to sell electricity at the market price and would be entitled to receive, for a period of 15 years, a second stream of income, equal to the sale of: six GCs for each MWh produced and delivered to the grid, on the centralized GC market or through GC purchase agreements (“GCPAs”), for a minimum guaranteed price of at least EUR 27/GC, adjusted for European inflation.³⁴¹ The Tribunal then found that several of the Disputed Measures “radically altered the Essential Characteristics of the legal and regulatory framework on which Claimants reasonably relied upon when making their investments, in breach of Art. 10(1) of the ECT,” in particular by deferring a number of GCs to which Claimants were entitled; limiting the capacity of Generators to enter into GCPAs and trade their GCs and altering the guaranteed minimum trading value of GCs, particularly, by ceasing to index such value to European inflation.³⁴² This suggests to the Committee that the Tribunal set out its view of the FET standard and then applied this standard.

148. Romania alleges that the Tribunal failed to weigh Romania’s right to regulate. The Tribunal stated that “States have a sovereign right to regulate in furtherance of the public interest and tribunals must balance such right against the legitimate expectations that investors may have.”³⁴³ The Tribunal examined Romania’s counterarguments that it had the right to regulate in the public interest and that there was not a radical or fundamental change to the GC regulatory scheme.³⁴⁴ However the Tribunal was not convinced by Romania’s arguments.

149. Third, Romania argues that the Tribunal’s finding on unreasonable impairment was based on the legitimate expectations standard and did not take account of the magnitude, reasonableness or impact of the changes. The Tribunal set out its interpretation of the

³⁴¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1112 and 1155. ↩

³⁴² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1157. ↩

³⁴³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1119. ↩

³⁴⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1194-1203. ↩

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obligation not to “impair by unreasonable or discriminatory measures [the] management, maintenance, use, enjoyment or disposal” of protected investments.³⁴⁵ The Tribunal drew a distinction between unreasonable or discriminatory measures and FET, explaining that unreasonable or discriminatory measures “may, by definition, also be said to be unfair and inequitable”, although the reverse is not true.³⁴⁶ The Tribunal considered that “unreasonable measures”, included “measures adopted by the host State that are irrational in themselves or result from an irrational decision-making process” and that “all arbitrary measures are, by definition, unreasonable.”³⁴⁷ Thus, in its view, the FET standard can also be breached if the State “adopts unreasonable measures that impair the management, maintenance, use, enjoyment, or disposal of protected investments; a measure is unreasonable if it is arbitrary or results from an irrational decision-making process.”³⁴⁸

150. In applying this standard of unreasonable impairment, the Tribunal found that Romania breached the standard through (1) its decisions to defer a number of GCs; and (2) its decision to cease to index the minimum trade value to inflation.³⁴⁹

151. Regarding the decision to defer a number of GCs, the Tribunal considered Romania’s arguments that the decision was indeed reasonable.³⁵⁰ The Tribunal concluded that for the measure to be fair and reasonable, the deferral of the GCs should be accompanied by compensation to remunerate the investor for the postponement in the collection of the guaranteed minimum income.³⁵¹ With respect to the Essential Characteristic of indexing to inflation, the Tribunal noted that Romania failed to offer any explanation justifying its decision and concluded that the measure was devoid of rationale and therefore unreasonable.³⁵² While these conclusions were in relation to Group A Claimants’

³⁴⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1050-1057. ↩

³⁴⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1051. ↩

³⁴⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1054. ↩

³⁴⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1156. ↩

³⁴⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1158. ↩

³⁵⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1167-1171. ↩

³⁵¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1171. ↩

³⁵² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1192. ↩

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investments, the Tribunal extended these conclusions to the Group B Claimants, the Core Value Claimants.³⁵³

152. In summary, the Tribunal set out Romania’s arguments justifying its decisions as reasonable.³⁵⁴ The Tribunal agreed with Romania that in the exercise of its sovereign and regulatory powers and to protect public interest, it could alter the conditions under which the market operates.³⁵⁵ It considered Romania’s arguments that the measures were reasonable, but did not accept these.³⁵⁶ In the Tribunal’s conclusions on Romania’s decision to defer two of the six GCs and its decision to cease to index the minimum trade value to inflation, it linked what it considered to be drastic and fundamental changes to the Essential Characteristics of the regulatory regime, to the unreasonable impairment of Claimants’ investments,³⁵⁷ and found that Romania breached Art. 10(1) of the ECT by unreasonably impairing both Group A Claimants’ investments;³⁵⁸ and Group B Claimants’ investments.³⁵⁹ The Tribunal had recourse to the same facts to determine that Romania had drastically altered the Essential Characteristics of the GC scheme and unreasonably impaired Claimants’ investments, in breach of its obligations under Art. 10(1) of the ECT. However, it does not appear to the Committee that the Tribunal based its finding of unreasonable impairment on the application of the legitimate expectations standard.

153. Although a party may not agree with the interpretation of the applicable law adopted by a tribunal, even a misapplication of the proper law does not amount to a manifest excess of powers for failure to apply the applicable law. The Committee therefore finds that the Tribunal did not manifestly exceed its power with respect to its application of the applicable law on liability.

³⁵³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1221. ↩

³⁵⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 877-888. ↩

³⁵⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1067; 1115-1155. ↩

³⁵⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1168-1171. ↩

³⁵⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1172; 1193. ↩

³⁵⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1204; 1224. ↩

³⁵⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1226. ↩

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D. FAILURE TO STATE REASONS

(1) Applicable Legal Standard

a. Romania's Position

154. Romania submits that a failure to state reasons will occur “when the text of an award does not allow a reader to understand the way in which the tribunal reached its conclusion.”³⁶⁰ Romania considers that a tribunal fails to state reasons when the tribunal’s award provides contradictory reasons;³⁶¹ when the tribunal’s award fails to deal with a crucial or decisive argument,³⁶² where that decisive argument is one that could change the tribunal’s outcome;³⁶³ and when the award provides insufficient reasons.³⁶⁴ Romania states that Claimants do not disagree with Romania that a failure to state reasons can occur in at least these three ways.³⁶⁵ According to Romania the Tribunal exhibits all three errors.³⁶⁶ Romania also notes that the Parties agree that “the failure to state reasons must be outcome-determinative, that a failure to state reasons occurs when it is not possible to understand how the tribunal arrived at its conclusion, and that a failure to state reasons does not concern the quality or correctness of the reasoning.”³⁶⁷

b. Claimants' Position

155. Claimants “do not entirely disagree with Romania’s formulation of the standard”, however they claim that it omits “critical nuances” that the Committee should take into account, and “severely overstates the Committee’s ability to assess the “sufficiency” of the Tribunal’s reasons.”³⁶⁸ Claimants argue that a failure to state reasons only occurs when (i) the conclusion that allegedly lacks reasons is “outcome determinative” and (ii) it is

³⁶⁰ Romania’s Memorial, at ¶ 281. ↩

³⁶¹ Romania’s Memorial, at ¶¶ 282-284, citing MINE, (Exhibit RL-321), Klockner I, (Exhibit RL-347), and Tidewater, (Exhibit RL-320). ↩

³⁶² Romania’s Memorial, at ¶ 286. ↩

³⁶³ Romania’s Memorial, at ¶¶ 287-288, citing AMCO I, (Exhibit RL-346). ↩

³⁶⁴ Romania’s Memorial, at ¶¶ 290-291, citing Lucchetti v. Peru, (Exhibit RL-349), and Soufraki v. UAE, (Exhibit RL-319). ↩

³⁶⁵ Romania’s Reply, at ¶ 162. ↩

³⁶⁶ Romania’s Memorial, at ¶ 292. ↩

³⁶⁷ Romania’s Reply, at ¶ 163. ↩

³⁶⁸ Claimants’ Counter Memorial, at ¶ 169. ↩

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“impossible” to understand how the tribunal arrived at its conclusion.³⁶⁹ If the reader of an award can “follow how the tribunal proceeded from Point A to Point B, and eventually to its conclusion, even if [the tribunal] made an error of fact or of law,” then the standard is not met.³⁷⁰ In particular, annulment is not an opportunity to criticize the adequacy of the tribunal’s reasoning.³⁷¹ Furthermore, according to Claimants, it is a very high threshold.³⁷²

c. Ad Hoc Committee's Analysis

156. The Parties share similar views on the applicable test for a failure to state reasons under Article 52(1)(e). The Parties agree in general that the failure to state reasons may occur in three ways: where the award provides contradictory reasons; when the tribunal’s award fails to deal with a decisive, outcome determinative argument; and when the award provides insufficient reasons. However, the Parties differ in how these are to be applied. The Parties agree that to engage ICSID Convention Article 52(1)(e), the lack of reasons must be outcome determinative to justify annulment. Where they differ is on the standard of review to be applied and the degree to which the standard is an exacting one. Claimants argue that the legal standard requires that it must be “impossible” to understand or be “an absolute failure to explain” how the tribunal arrived at its conclusions.³⁷³ Romania does not accept such an “extremely high” standard.³⁷⁴

157. Both Parties have referred to MINE v. Guinea in their pleadings. This Committee agrees with the standard set out in MINE v. Guinea:³⁷⁵

[...] the requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A to Point B, and eventually to its conclusion, even if it made an

³⁶⁹ Claimants’ Counter Memorial, at ¶ 170; Claimants’ Rejoinder, at ¶ 92. ↩

³⁷⁰ Claimants’ Counter Memorial, at ¶ 170. ↩

³⁷¹ Claimants’ Counter Memorial, at ¶ 171, citing CMS, (Exhibit CL-288), Vivendi I, (Exhibit CL-310), MINE, (RL-321); Claimants’ Rejoinder, at ¶ 92. ↩

³⁷² Claimants’ Counter Memorial, at ¶ 171, noting that although Romania refer to Luchetti and Soufraki, neither of these cases were annulled on this ground. ↩

³⁷³ Claimants’ Counter Memorial, at ¶ 170; Claimants’ Rejoinder, at ¶ 91. ↩

³⁷⁴ Romania’s Reply, at ¶ 164. ↩

³⁷⁵ MINE v. Guinea, at ¶ 5.09 (Exhibit RL-321). ↩

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error of fact or law. The minimum requirement is in particular not satisfied by either contradictory or frivolous reasons.

158. A tribunal must therefore set out the reasons in its award in a manner which enables the reader to follow the path of the tribunal’s reasoning from the factual and legal premises to its conclusion.³⁷⁶

159. The Committee agrees with other annulment committees that in order to annul on the ground of contradictory reasons, there must be a genuine contradiction in the reasoning of the award such that it is impossible to understand how the tribunal reached its decision.³⁷⁷ Contradictory reasons must be “contradictory to a point to neutralize each other”,³⁷⁸ or the logic and reasoning so contradictory as to be “as useful as no reasons at all”,³⁷⁹ or “incapable of standing together on any reasonable reading of the decision.”³⁸⁰

160. This Committee also agrees that the remit of an annulment committee does not extend to considering the adequacy of the reasoning in the Tribunal’s decision.³⁸¹ The Committee recalls that the purpose of annulment under Art. 52 is to provide a limited exception to the finality of awards set out in Art. 53 of the ICSID Convention. This has the necessary corollary that an annulment committee is limited in its ability to characterize a tribunal’s reasoning as deficient or inadequate. In particular, it is not entitled to substitute its own judgment for that of a tribunal.³⁸²

³⁷⁶ Wena Hotels Ltd. v. Egypt, ICSID Case No. ARB/98/4, Decision on Annulment at ¶ 79 (Exhibit CL-309). ↩

³⁷⁷ Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine Republic, ICSID Case No. ARB/09/1, Decision on Argentina’s Application for Annulment, at ¶ 209 (Exhibit CL-318); Tenaris S.A. & Talta – Trading E Marketing Sociedade Unipessoal Lda. v. Venezuela, ICSID Case No. ARB/12/23, Decision on Annulment, at ¶ 112 (Exhibit CL-312). ↩

³⁷⁸ El Paso Energy International Company v. Argentina, ICSID Case No. ARB/03/15, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, at ¶ 221 (Exhibit CL-323). ↩

³⁷⁹ Malicorp Limited v. Arab Republic of Egypt, ICSID Case No. ARB/08/18, Decision on Annulment, July 3, 2013, at ¶ 45 (Exhibit CL-339), referring to Schreuer, The ICSID Convention at 1011. ↩

³⁸⁰ SolEs Badajoz GmbH v. Spain, ICSID Case No. ARB/15/38, Decision on Annulment, at ¶ 84 (Exhibit CL-333) (emphasis omitted). ↩

³⁸¹ MINE, at ¶ 5.08 (Exhibit RL-321); Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment, at ¶ 66 (Exhibit CL-338). ↩

³⁸² 9REN, Decision on Annulment, at ¶ 214 (Exhibit CL-302). ↩

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(2) Decision on Jurisdiction

a. Romania's Position

161. Romania contends that the Tribunal failed to state reasons when interpreting Art. 26(1) of the ECT. It argues first that the Tribunal adopted contradictory reasoning when it recognized the required standard in Art. 31 of the VCLT, but then failed to apply that standard when deciding on its jurisdiction under Article 26(1) of the ECT,³⁸³ in particular by ignoring the context surrounding Art. 26(1) and the object and purpose of the ECT.³⁸⁴ The reasoning was also contradictory because the Tribunal recognized that Claimants’ intra-EU investments were governed by the EU Treaties and operating under EU law, the Disputed Measures were adopted pursuant to a EU Directive, subject to EU state aid rules and subject to the EU’s competence, while at the same time finding that Part III obligations were obligations “of” Romania and not of the EU.³⁸⁵ In its Reply on Annulment, Romania contends that no reasons are provided as to why Part III obligations are in the competence of Romania rather than the EU and there was no reasoning to show how it arrived at that conclusion.³⁸⁶

162. Second, Romania argues that: “The Tribunal failed to address crucial and decisive arguments raised by Romania when it ‘rapidly disposed’ of the third requirement for jurisdiction and evaded making a determination as to whether Part III obligations were obligations ‘of’ Romania.”³⁸⁷ The Tribunal also failed to address three crucial and decisive arguments of Romania:³⁸⁸ (i) that Art. 25 of the ECT constitutes part of the context for understanding Art. 1(3) of the ECT and confirms that the treatment of intra-EU investments is governed by the EU Treaties and pursuant to those treaties, intra-EU investments fall within the “transferred competence” of the EU;³⁸⁹ (ii) the applicable international law principle of speciality which “mandated that the Tribunal refer to the EU Treaties to

³⁸³ Romania’s Memorial, at ¶ 295. ↩

³⁸⁴ Romania’s Memorial, at ¶ 297. ↩

³⁸⁵ Romania’s Memorial, at ¶¶ 298-301. ↩

³⁸⁶ Romania’s Reply, at ¶ 168. ↩

³⁸⁷ Romania’s Memorial, at ¶ 302. ↩

³⁸⁸ Transcript, 59:15-61:10 (Wolrich). ↩

³⁸⁹ Romania’s Memorial, at ¶ 305; Romania’s Reply, at ¶ 170. ↩

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determine whether the Part III obligations are covered by a transfer of competence to the EU.”³⁹⁰; and (iii) that Art. 1(3) of the ECT along with applicable principles of international law mandate the Tribunal to look to the EU Treaties in order to establish whether obligations under Part III of the ECT were part of the competence transferred from Romania to the EU.³⁹¹

163. According to Romania, by ignoring Romania’s arguments on these decisive points, the Tribunal failed to state reasons for its finding of jurisdiction under Art. 26(1) of the ECT and thus manifestly exceeded its powers.³⁹²

b. Claimants' Position

164. Claimants contend that Romania criticizes the Tribunal for not endorsing its argument that the context of ECT Art. 26 and the object and purpose of the ECT overrides the plain wording of Art. 26.³⁹³ According to Claimants, the Tribunal did apply the VCLT when determining its jurisdiction,³⁹⁴ and the Tribunal’s reasoning was not contradictory.³⁹⁵ Claimants submit that Romania “fails to refer to, or omits significant parts of, the Tribunal’s reasoning.”³⁹⁶ In its view, the Tribunal clearly explains that while to “some degree” Claimants might be operating under EU law, they are “definitely creatures of another Contracting Party to the ECT.”³⁹⁷

165. With respect to Romania’s complaint that the Tribunal failed to address Art. 25 of the ECT and the principle of specialty, Claimants contend that the Tribunal disagreed with Romania’s reading of the relevance of Art. 25 to the question of the transfer of competence.³⁹⁸ In addition, according to Claimants, the Tribunal concluded that the obligations under Part III were not EU law obligations, and found that EU law was not part

³⁹⁰ Romania’s Memorial, at ¶ 306; Romania’s Reply, at ¶ 171. ↩

³⁹¹ Romania’s Memorial, at ¶ 304. ↩

³⁹² Romania’s Memorial, at ¶ 307. ↩

³⁹³ Claimants’ Counter Memorial, at ¶ 179. ↩

³⁹⁴ Claimants’ Counter Memorial, at ¶ 180; Claimants’ Rejoinder, at ¶ 95. ↩

³⁹⁵ Claimants’ Counter Memorial, at ¶¶ 181-182. ↩

³⁹⁶ Claimants’ Rejoinder, at ¶ 95. ↩

³⁹⁷ Claimants’ Counter Memorial, at ¶ 183. ↩

³⁹⁸ Claimants’ Rejoinder, at ¶ 97. ↩

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of the applicable law, so it therefore did not need to address the EU Treaties to consider the question of the transfer of competence.³⁹⁹

166. With respect to the argument regarding obligations ‘of’ Romania, Claimants argue that the Tribunal’s Decision “demonstrates that the Tribunal did consider Romania’s argument that ECT Article 1(3) mandates that the Tribunal look to the EU Treaties in order to determine whether Part III obligations were part of the competence transferred from Romania to the EU.” Romania, however, disagrees with the Tribunal’s conclusion.⁴⁰⁰

c. Ad Hoc Committee's Analysis

167. The Committee will address the three main contentions of Romania in turn: that the reasoning was “contradictory” because the Tribunal recognized that Claimants’ intra-EU investments were governed by the EU Treaties and operating under EU law, while also finding that Part III obligations were obligations “of” Romania and not of the EU; the Tribunal failed to examine the context provided by Art. 25 and failed to consider the principle of speciality; and the Tribunal did not consider EU Treaties in order to establish whether obligations under Part III of the ECT were part of the competence transferred from Romania to the EU.

168. It is worth recalling at this juncture that the Tribunal found that Claimants and Romania have validly given their consent to adjudicate the 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.”⁴⁰¹ The Committee will set out the analysis of the Tribunal before turning to Romania’s contentions.

169. The Tribunal considered Romania’s submissions that obligations under Part III of the ECT cannot be obligations “of” EU Member States, but rather “of” the EU, because competence

³⁹⁹ Claimants’ Rejoinder, at ¶ 98. ↩

⁴⁰⁰ Claimants’ Counter Memorial, at ¶ 185. ↩

⁴⁰¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 494. See also Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 596. ↩

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has been transferred by EU Member States to the EU.⁴⁰² In doing so, the Tribunal interpreted the definition of REIO in Art. 1(3) which it said “alludes only in abstract to ‘certain matters’ competence of which have been transferred to the EU” without defining what such matters might be.⁴⁰³ This, the Tribunal said, “cannot lead to the conclusion that the EU Member States decided to transfer precisely their competences and obligations under Part III of the ECT to the EU.”⁴⁰⁴ The Tribunal went on to consider that there was nothing in the text of the ECT to conclude that the EU Member States, as Contracting Parties to the ECT, decided to transfer their competence over the obligations in Part III of the ECT to the EU, and the 1998 EC Statement on ratification acknowledges that both the EU and Member States were internationally responsible for honoring substantive obligations contained in the ECT.⁴⁰⁵

170. The Tribunal then considered whether the provisions of the TFEU, in particular Articles 206 and 207, had the effect of transferring the EU Member State’s competencies over foreign direct investment to the EU.⁴⁰⁶ The Tribunal concluded that “these rules do not support the proposition that EU Member States transferred their competences under Part III of the ECT to the EU.”⁴⁰⁷

171. With respect to Romania’s first contention, the Committee notes that in its Reply on Annulment, Romania seems to be arguing that there were insufficient reasons, rather than contradictory reasons, provided by the Tribunal to come to its conclusion.⁴⁰⁸ Irrespective of how this claim is characterized, the Committee considers that the Tribunal undertook an interpretative analysis of ECT Art. 1(3) and considered whether there was evidence that competencies under Part III of the ECT had been transferred to the EU. It is possible to follow the Tribunal’s reasoning from Point A to Point B and then to its conclusion. It was

⁴⁰² Decision on Jurisdiction, Liability and Principles of Reparation, at section V.3.2.B.c. ↩

⁴⁰³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 666, referring to Eskosol, at ¶ 88 (Exhibit CL-147). ↩

⁴⁰⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 667. ↩

⁴⁰⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 668-670. ↩

⁴⁰⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 684-691. ↩

⁴⁰⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 691. ↩

⁴⁰⁸ Romania’s Reply, at ¶ 168. ↩

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up to Romania to provide evidence as to why Part III obligations are within the competence of the EU. The Tribunal was not convinced by Romania’s arguments.

172. With respect to the second contention, the Committee agrees with Claimants that the Tribunal did not consider Art. 25 of the ECT to be relevant context for the interpretation of Art. 26(1). The Committee acknowledges that the Tribunal did not refer specifically to the principle of speciality. Nevertheless, it responded to Romania’s arguments concerning the relevance of EU Treaties to the question of the transference of competencies. In the view of the Committee, it is not necessary for a tribunal to pronounce on each and every argument raised by a party as long as key points are identified and connected to the finding or ruling.⁴⁰⁹ It must also be possible to follow the Tribunal’s arguments from Point A to Point B and then to its conclusion.

173. Finally with respect to the third contention, the Committee considers that the Tribunal did indeed consider whether competency for Part III of the ECT had been transferred to the EU, but concluded that it had not. While Romania may not have agreed with the Tribunal’s reasoning or conclusion, it is not within the Committee’s mandate to consider the adequacy of the Tribunal’s reasoning.

174. The Committee therefore does not consider that the threshold of failure to state reasons for its decision on jurisdiction has been met.

(3) Decision on Treaty Conflict and how any such Conflict should be Resolved

a. Romania's Position

175. Romania submits that the Tribunal contradicted itself in several ways in deciding there was no conflict between the ECT and EU Treaties and in determining how such conflict should be resolved, if one were to exist. The Tribunal found on the one hand, that the EU Treaties are municipal law that it has no obligation to apply and, on the other hand, that the EU Treaties are international law.⁴¹⁰ The Tribunal therefore concluded that there is no conflict

⁴⁰⁹ Watkins Holdings S.à r.l. et al. v. Spain, ICSID Case No. ARB/15/44, Decision on Annulment, at ¶ 133 (Exhibit CL-335). ↩

⁴¹⁰ Romania’s Memorial, at ¶¶ 310-311. ↩

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with the ECT, because there can be no conflict between the ECT, as a treaty, and a separate municipal law.⁴¹¹ Yet elsewhere, according to Romania, the Tribunal said that EU Treaties are a “sub-system” and therefore a part of international law; but if the EU Treaties are “municipal law,” they cannot be a part of public international law and vice versa.⁴¹² If the EU Treaties are part of international law then the Tribunal failed to explain why they do not establish “rules and principles of international law” making them part of the applicable law under Art. 26(6) of the ECT, resulting in contradictory reasoning.⁴¹³

176. Second, Romania argues that the Tribunal contradicted itself when it found that the CJEU has the exclusive authority to interpret the EU Treaties but refused to follow the CJEU’s interpretation of the EU Treaties in the Komstroy Judgment, which has the exclusive jurisdiction to issue binding interpretations.⁴¹⁴ Third, Romania argues in its Memorial on Annulment that the Tribunal contradicted itself when it found CJEU had exclusive jurisdiction to interpret EU treaties, then failed to follow two CJEU judgments on the interpretation of TFEU Art. 351.⁴¹⁵

b. Claimants' Position

177. Claimants argue that there is no contradictory reasoning. With respect to the first alleged contradiction, Claimants submit that the relevant question before the Tribunal was whether EU law forms part of the “applicable rules and principles of international law” for purposes of ECT Article 26(6). The Tribunal found that it did not, and explained the distinction between the two different legal systems and its analysis is consistent with that distinction.⁴¹⁶ Second, Claimants submit that the Tribunal found that the CJEU’s jurisdiction is confined to the realm of EU law and does not extend to ECT tribunals and therefore the Tribunal itself was not bound by CJEU rulings.⁴¹⁷ Further, the Tribunal

⁴¹¹ Romania’s Reply, at ¶ 174. ↩

⁴¹² Romania’s Reply, at ¶¶ 175-176. ↩

⁴¹³ Romania’s Reply, at ¶¶ 177-179. ↩

⁴¹⁴ Romania’s Memorial, at ¶ 311. ↩

⁴¹⁵ Romania’s Memorial, at ¶ 318. ↩

⁴¹⁶ Claimants’ Counter Memorial, at ¶ 188; Claimants’ Rejoinder, at ¶ 101. ↩

⁴¹⁷ Claimants’ Counter Memorial, at ¶ 189. ↩

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explained that it could not use the Komstroy judgment because consent locked before it was decided.⁴¹⁸

c. Ad Hoc Committee's Analysis

178. The Committee does not agree that the reasons of the Tribunal were contradictory when deciding there was no treaty conflict and in determining how such conflict should be resolved, if one were to exist. The Committee will examine each of the three arguments submitted by Romania in turn.

179. First, the Committee fails to see a contradiction between the Tribunal on the one hand stating that EU law is ‘municipal law’,⁴¹⁹ in the sense that Romania is bound by both Romanian law and EU law, and on the other hand stating that EU law is a ‘subsystem’ of international law,⁴²⁰ in the sense of being international law applicable to a group of States. The Tribunal clarified that it is not in charge of determining whether Romania breached its obligations under EU law, only of determining whether by enacting certain measures Romania breached its international obligations under the ECT.⁴²¹ The Committee does not see a contradiction in the Tribunal’s analysis.

180. Second, the Committee does not see a contradiction in the Tribunal’s reasoning in stating that the CJEU has the exclusive authority to interpret the EU Treaties, but not following the Komstroy Judgment. The Tribunal was very clear in explaining its reasoning for not following the Komstroy Judgement as it was issued several years after the Parties’ consent to arbitration had been locked and therefore, the Judgment cannot retroactively invalidate Romania’s consent to arbitrate.⁴²²

181. Third, the Tribunal explained that Art. 351 of the TFEU was not applicable to the present case as that Article concerned agreements between EU Members States and “third states”,

⁴¹⁸ Claimants’ Counter Memorial, at ¶ 189. ↩

⁴¹⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 740. ↩

⁴²⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 761. ↩

⁴²¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 741. ↩

⁴²² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 764. ↩

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which were concluded prior to the Member State’s accession to the EU.⁴²³ It follows from this conclusion that the two CJEU cases on the interpretation of Art. 351 of the TFEU were not relevant. The Committee fails to see contradictory reasoning or a failure to state reasons on the part of the Tribunal in relation to this or other aspects of its reasoning and conclusions when deciding there was no treaty conflict and in determining how such conflict should be resolved, if one were to exist.

(4) Decision on Liability for Breach of FET

a. Romania's Position

182. Romania explains that the Tribunal set out the standard for fair and equitable treatment in paragraph 1042 of the Award and elaborated on it in paragraph 1049. However, according to Romania the Tribunal failed to provide reasons as to why the breaches found by the Tribunal met the Tribunal’s own standard.⁴²⁴ Romania states that the Tribunal found that three changes in the law breached the FET obligations in Art. 10(1) of the ECT. However, it claims that the Tribunal should have provided reasons “why each of the three breaches ‘drastically change[d] the essential characteristics’ of the legal regime, taking into account the various factors that the Tribunal found must apply, including whether the changes destroyed Claimants’ investment.”⁴²⁵

183. Romania argues that first, the Tribunal found that Romania breached the FET obligation by deferring the transfer to Claimants of two out of six Green Certificates (GCs) for a certain period of time. It is undisputed that Claimants would receive all the GCs to which they were entitled. And Romania’s measure “simply delayed the transfer of a portion of them.” “Nowhere does the Tribunal provide any reasons as to why this deferral constituted a drastic change to the GC scheme.”⁴²⁶

184. Second, the Tribunal found that Romania breached the FET obligation by prohibiting Claimants from entering into GCPAs, which allowed Claimants to sell all or part of their

⁴²³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 711-713. ↩

⁴²⁴ Romania’s Memorial, at ¶ 327. ↩

⁴²⁵ Romania’s Memorial, at ¶ 328. ↩

⁴²⁶ Romania’s Memorial, at ¶ 329. ↩

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GCs to traders. It is not disputed that Claimants were always able to sell their GCs on the spot market at the market price. “Nowhere does the Tribunal provide any reasons as to why this prohibition constituted a drastic change to the GC scheme.”⁴²⁷

185. Third, the Tribunal found that Romania breached the FET obligation by ceasing to index the minimum trading value of GCs to European inflation. “Nowhere does the Tribunal provide any reasons as to why this measure constituted a drastic change to the GC scheme.”⁴²⁸

186. Romania claims that there is no reasoning in the Award to justify why these three changes met the Tribunal’s standard as to what would constitute a breach of the FET provision, and made no finding regarding whether there was a drastic change to the essential characteristics.⁴²⁹ This is “problematic” as the Tribunal found (at paragraph 1199) that the changes or Disputed Measures did not change the “general thrust” of the GC Scheme.⁴³⁰ In the absence of such reasoning, it is not possible to know how the Tribunal’s own standard was actually met, i.e., how it got from Point A (its standard) to Point B (the finding of liability).⁴³¹ The Tribunal also considered that any deviation from the “Essential Characteristic” was de facto an unreasonable impairment, yet according to Romania, the Tribunal provided no reasoning “as to why the alleged impairment of Claimants’ investments was unreasonable.”⁴³²

187. Romania also argues that the Tribunal fails to provide any reasons as to why the factors that it found must be applied, including the extent of the economic impact on the investors’ enterprise, the public interest involved and any other circumstances that could justify the change, did not preclude a finding of breach.⁴³³

⁴²⁷ Romania’s Memorial, at ¶ 330. ↩

⁴²⁸ Romania’s Memorial, at ¶ 331. ↩

⁴²⁹ Romania’s Memorial, at ¶¶ 332-333, 335; Romania’s Reply at ¶¶ 184-185. ↩

⁴³⁰ Romania’s Memorial, at ¶ 332. ↩

⁴³¹ Romania’s Reply, at ¶ 182. ↩

⁴³² Romania’s Reply, at ¶ 186. ↩

⁴³³ Romania’s Memorial, at ¶ 334. ↩

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b. Claimants' Position

188. Claimants submit that contrary to Romania’s view, which misreads the Tribunal’s Decision,⁴³⁴ an informed reader can easily understand how the Tribunal walked through its analysis and reached its conclusion.⁴³⁵ Claimants argue that the Tribunal found, as a matter of fact, that Romania had made specific commitments of stability to each of Claimants’ investments, which was fundamental to the Tribunal’s conclusion that Romania violated the FET provision.⁴³⁶ The Tribunal looked at three characteristics and found that these were essential characteristics, among other reasons, because they were enshrined in the legal framework, created distinct, predictable revenue streams, were confirmed by Romania, were backed by a specific commitment, and were revoked, “causing a direct reduction to the minimum amount of revenue to which investors were entitled.”⁴³⁷ Claimants submit that it is “evident” from the Decision that the Tribunal considered a revocation of an essential characteristics to be a drastic change by definition, “or at least harmful enough to arise to a Treaty breach.”⁴³⁸ In its Rejoinder, Claimants explain the Tribunal’s reasoning in concluding that there was a radical or fundamental change to the GC regulatory scheme.⁴³⁹

189. Claimants submit that the Tribunal also found that Romania had unreasonably impaired Claimants’ investments with respect to the Disputed Measures which were targeted at two of the “Essential Characteristics” of the regime and specifically assessed their reasonableness.⁴⁴⁰ Claimants also submit that Romania “does not contest the Tribunal’s reasoning in relation to the impairment clause” and thus even if Romania were correct in claiming that the Tribunal failed to state reasons for its conclusions in relation to FET, “the

⁴³⁴ Claimants’ Counter Memorial, at ¶ 193; Claimants’ Rejoinder, at ¶ 106. ↩

⁴³⁵ Claimants’ Counter Memorial, at ¶ 198. ↩

⁴³⁶ Claimants’ Counter Memorial, at ¶ 197; Claimants’ Rejoinder, at ¶ 107. ↩

⁴³⁷ Claimants’ Counter Memorial, at ¶¶ 199-200. ↩

⁴³⁸ Claimants’ Counter Memorial, at ¶ 201. ↩

⁴³⁹ Claimants’ Rejoinder, at ¶¶ 107-108. ↩

⁴⁴⁰ Claimants’ Rejoinder, at ¶ 109. ↩

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Award would still stand because that finding would not affect the Tribunal’s conclusion that Romania violated the ECT’s impairment clause.”⁴⁴¹

c. Ad Hoc Committee's Analysis

190. The Committee is of the view that a close analysis of the Tribunal’s decision shows that it stated the reasons for its decision and applied the standard that it articulated in coming to its decision. Central to the Tribunal’s reasoning is how it viewed the Essential Characteristics of the GC support scheme:⁴⁴²

In sum, the Essential Characteristics of the GC support scheme, reflected in the regulatory promise, which was later converted into a Specific Commitment, were fundamental to the decision to invest in the Romanian PV industry, since these Characteristics guaranteed that the stream of income resulting from the investment was reasonably foreseeable.

191. The Tribunal explained that:⁴⁴³

A drastic or fundamental change of the essential characteristics of a legal or regulatory regime can give rise to a breach of the FET standard; a protected investor can legitimately expect that, when a State has promoted investments by creating a legal regime that has certain essential features embodied in laws and regulations, the State will not drastically change the essential characteristics which existed at the time of the investment.

192. The Tribunal found that several of the Disputed Measures “radically altered the Essential Characteristics of the legal and regulatory framework” in three ways: by deferring a number of GCs to which Claimants were entitled; by limiting the capacity of Generators to enter into GCPAs and trade their GCs; and by altering the guaranteed minimum trading value of GCs, particularly, by ceasing to index such value to European inflation.⁴⁴⁴

⁴⁴¹ Claimants’ Counter Memorial, at ¶¶ 192 and 202. ↩

⁴⁴² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1203. ↩

⁴⁴³ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1156. ↩

⁴⁴⁴ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1157. ↩

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193. Regarding the first of Romania’s arguments, the Tribunal found that Romania deferred two out of the six GCs, which resulted in the deferral of the revenues the PV investors came to expect, which had a direct impact on the minimum income to which (Group A) Claimants were entitled for a period of over six years.⁴⁴⁵ The language used by the Tribunal in the heading of Section VI.3.4.C.a.i (Romania radically changed its legal framework) and in the first sentence of the section (“However, despite its repeated assurances, Romania backtracked from its commitment”),⁴⁴⁶ indicates that the Tribunal applied its standard (drastic change/commitment) to come to its conclusion. The Committee agrees with Claimants that it is apparent from the language used that the Tribunal considered this to be a drastic and fundamental change to the regulatory framework which had a deleterious impact on the investment.

194. Second, according to the Tribunal, Romania “changed the rules of the game” when it adopted laws which initially limited and subsequently prohibited Generators from entering into GCPAs.⁴⁴⁷ The Tribunal explained the ability to conclude GCPAs with both suppliers and traders of energy made the GC support scheme more attractive by reducing investment risk.⁴⁴⁸ The limitations placed on GCPAs had a deleterious impact on the ability of PV investors to enter into GCPA contracts.⁴⁴⁹ Again, the language used by the Tribunal suggests that it was evident that the Tribunal considered this was a drastic and fundamental change to the legal and regulatory framework.

195. Third, there were the changes to the minimum trading values, which the Tribunal considered was a “crucial element of any GC scheme” which provided certainty to investors.⁴⁵⁰ However, Romania “fundamentally altered this Essential Characteristic of the regulatory regime”, by modifying the minimum and maximum GC trading values and, most importantly, by removing the indexation to European inflation.⁴⁵¹ The Tribunal

⁴⁴⁵ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1166. ↩

⁴⁴⁶ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1161. ↩

⁴⁴⁷ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1177. ↩

⁴⁴⁸ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1174-1176. ↩

⁴⁴⁹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶¶ 1180-1181. ↩

⁴⁵⁰ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1184. ↩

⁴⁵¹ Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1188. ↩

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concluded that the measure “radically altered Romania’s Essential Characteristics, by reducing the minimum income that Group A Claimants could reasonably expect to receive when selling their GCs”.⁴⁵²

196. The Committee agrees with Claimants that it is possible to follow the Tribunal’s reasoning and to determine how the Tribunal proceeded from its standard to its conclusions. The Committee does not conclude that the Tribunal failed to state reasons in coming to its determination on liability.

V. COSTS

A. ROMANIA'S STATEMENT ON COSTS

197. Romania requested that the Committee order that the costs of the proceedings, amounting to USD 375,000 advanced by Romania be shared equally between the Parties and that each Party bear its own legal costs.

198. Respondent has incurred the following costs:

⁴⁵² Decision on Jurisdiction, Liability and Principles of Reparation, at ¶ 1189. ↩

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B. LSG BUILDING SOLUTIONS GMBH AND OTHERS' COST SUBMISSIONS

199. Claimants request that the Committee order Romania to reimburse all legal fees and expenses incurred by Claimants in this annulment proceeding, in the amount of USD 855,274.69 and declare Romania be responsible for all the costs of the proceedings, including the costs and expenses of ICSID and the fees and expenses of the Members of the Committee.

200. Claimants submitted the following legal fees and expenses in connection with this annulment proceeding:

C. AD HOC COMMITTEE'S DECISION ON COSTS

201. Article 61(2) of the ICSID Convention provides:

In the case of arbitration proceedings the Tribunal shall, except as the parties otherwise agree, assess the expenses incurred by the parties in connection with the proceedings, and shall decide how and by whom those expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre shall be paid. Such decision shall form part of the award.

202. This provision, together with Arbitration Rule 47(1)(j) (applied by virtue of Arbitration Rule 53) gives the Committee discretion to allocate all costs of the proceeding, including attorney’s fees and other costs, between the Parties as it deems appropriate.

203. Romania requests that the Committee order that the Cost of the Proceedings be shared equally between the Parties and that each Party bear its own legal costs. Its request is based

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on the circumstances of the case and its conduct in the proceedings.⁴⁵³ Romania requests the Committee to take into account the circumstances of the case, in particular that the proceedings raise “serious and fundamental issues” and the grounds for annulment relating to the intra-EU objection raise key concerns for Romania and all States involved in the arbitration and the EU, both as to the scope of the arbitration clause in the ECT and the interrelationship of concurrent treaties signed by the same States.⁴⁵⁴

204. Claimants request the Committee to follow the prevailing approach that costs should follow the event and requests that the Committee award Claimants the entirety of their legal fees and expenses in the present proceeding.⁴⁵⁵ In line with established jurisprudence Claimants submit that they should not be required to contribute to the costs of the proceeding.⁴⁵⁶ Furthermore Claimants state that their costs are reasonable.⁴⁵⁷ Claimants also request that Romania be ordered to pay post-decision interest on the legal fees and expenses, at a compound, commercial rate of interest to be determined by the Committee.⁴⁵⁸

205. In deciding how to allocate the costs of these annulment proceedings, the Committee has been guided by the principle that costs should follow the event if there are no indications that a different approach is called for.

206. Claimants were successful on all the grounds raised by Romania in these annulment proceedings. The Committee has considered the various indications cited by Romania in its costs submission that might lead to a different approach than ‘costs follow the event’. However, the Committee considers that there are no indications that would justify an approach where Claimants pay a portion of the cost of the proceedings or their own legal fees and expenses, as requested by Romania.

⁴⁵³ Romania’s Statement of Costs, at ¶ 7. ↩

⁴⁵⁴ Romania’s Statement on Costs, at ¶ 8. ↩

⁴⁵⁵ Claimants’ Costs Submission, at ¶¶ 2-4. ↩

⁴⁵⁶ Claimants’ Costs Submission, at ¶ 5. ↩

⁴⁵⁷ Claimants’ Costs Submission, at ¶¶ 7-9. ↩

⁴⁵⁸ Claimants’ Costs Submission, at ¶ 11. ↩

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207. The Committee therefore decides that Romania shall bear the cost of these annulment proceedings, and shall reimburse Claimants for their legal costs and expenses, which the Committee considers reasonable, in the amount of USD 855,274.69.

208. The costs of the proceeding, including the fees and expenses of the Committee, ICSID’s administrative fees and direct expenses, amount to (in USD):

Committee Members’ fees and expenses

Dr. Penelope Ridings	103,814.67
Ms. Carita Walgren-Lindholm	64,464.10
The Right Honourable Beverley McLachlin	84,957.21

ICSID’s administrative fees	104,000.00
Direct expenses459	20,783.14
Total	378,019.12

209. The above costs have been paid out of the advances made by the Applicant Party (Romania) pursuant to Administrative and Financial Regulation 14(3)(e).⁴⁶⁰

210. Accordingly, the Committee orders the Applicant Party (Romania) to bear all costs of the proceeding, including the fees and expenses of the Committee, ICSID’s administrative fees and direct expenses and USD 855,274.69 to cover Claimants legal fees and expenses.

211. As noted above, Claimants request that Romania be ordered to pay post-decision interest on the legal fees and expenses. The Committee considers that the above decision on costs adequately addresses the Parties’ success and failure in these annulment proceedings, and that no further order for interest on the amounts specified at paragraph 210 is called for. Indeed, while Romania was ultimately unsuccessful in its effort to annul the Award, the Committee considers that Romania was serious in bringing these annulment proceedings.

⁴⁵⁹ This amount includes actual charges relating to the dispatch of this Decision (printing, copying and courier). ↩

⁴⁶⁰ The remaining balance will be reimbursed to the Applicant. ↩

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VI. DECISION

212. For the reasons set forth above, the ad hoc Committee unanimously decides as follows:

1. (1) Romania’s Application for Annulment under Article 52(1)(b) and 52(1)(e) of the ICSID Convention is dismissed in its entirety;
2. (2) The stay of enforcement, which according to Procedural Order No. 4 continued until the conclusion of these annulment proceedings, is hereby terminated;
3. (3) Romania shall bear the full costs and expenses of the annulment proceeding, including ICSID’s administrative fees and direct expenses, and the fees and expenses of the Members of the ad hoc Committee;
4. (4) Romania shall bear Claimants’ legal costs and expenses, in the amount of USD 855,274.69 in connection with the annulment proceeding; and
5. (5) All other requests are dismissed.

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Dr. Penelope Ridings
President of the ad hoc Committee

Date:

[Page 80]

Dr. Penelope Ridings
President of the ad hoc Committee

Date:

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Signature

Dr. Penelope Ridings
President of the ad hoc Committee

Date: 18 February 2026