INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
Mainstream Renewable Power Ltd and others
v.
Federal Republic of Germany
(ICSID Case No. ARB/21/26)
Antolín Fernández Antuña, FCIArb
Arbitrator
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| I. II. III. | INTRODUCTION AND SUMMARY 1 JURISDICTION RATIONE VOLUNTATIS: INTRA-EU LACK OF CONSENT 8 i) The Issue: Interpretation of Article 26 ECT 8 ii) Article 31 VCLT: The Vienna Convention Rule for Treaty Interpretation 10 iii) Article 1(3) ECT: By ECT Definition, EU Member States Are Bound Inter Se by the EU Legal Order 13 iv) Systemic Integration of EU Law: Article 31(3)(c) VCLT, Reinforced by the Applicable-Law Clause in Article 26(6) ECT 21 a. Article 31(3)(c) VCLT 21 b. Article 26(6) ECT 22 c. EU Law and CJEU Jurisprudence 24 v) Article 2 ECT: Object and Purpose of the Treaty, a European Project 27 vi) Further Instruments Confirming the Systemic Interpretation 30 a. The 1997 Statement at the Time of the ECT Ratification 30 b. The 2019 Declaration Signed by EU Member States 32 vii) Article 16 ECT 33 viii) Conclusion: Lack of Consent to Intra-EU Investor-State Arbitration 34 MERITS: THE FET AND EXPROPRIATION STANDARDS 36 i) Background 37 ii) No Liability Without Fault 38 iii) The State's Right to Regulate and the Police Powers Doctrine 39 iv) The Lack of FET Breach Precludes Expropriation 42 |
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1. I hereby express my concurring and dissenting Opinion with respect to the Award rendered in the present investor-State arbitration, a matter of considerable complexity in which a number of fundamental issues in international investment law have been addressed. I further express my appreciation to my fellow members of the Tribunal for the rigorous and insightful deliberations that have accompanied the resolution of this case.
2. I agree with my esteemed colleagues as to the final outcome of the merits part of the Award. The purpose of the German Offshore Wind Energy Act of 2017 (“WindSeeG")1 was to expand the use of wind energy in the interest of climate and environmental protection through more effective provisions, the State lawfully exercised its legitimate regulatory powers in the public interest, and the disputed measures did not breach any investment protection standard established under the Energy Charter Treaty (“ECT”).2 Accordingly, no liability on the part of the Respondent arises.
3. However, I do not join the majority in declaring jurisdiction and competence. For the reasons stated below, I respectfully dissent as to one important ratione voluntatis objection: I find that there is no consent to intra-European Union (“EU”) investor-State arbitration under the ECT (Part II of this Opinion) and that, consequently, there is no jurisdiction or competence in the present case.3
4. In investment arbitration, under public international law, jurisdiction is exceptional and the default position is the lack of it; thus, consent should not be presumed or interpreted
1 Gesetz zur Entwicklung und Förderung der Windenergie auf See. ↩
2 CL-1, Energy Charter Treaty, signed on 17 December 1994 and entered into force on 16 April 1998. ↩
3 With respect to the protected investment (jurisdiction ratione materiae), for the sake of clarity, it is my view that there is an inherent and objective notion of investment that encompasses certain criteria (e.g. contribution, duration, and risk), which the shares in the companies satisfy in the circumstances of the present case, as demonstrated by the facts in the evidentiary record. Considering the foregoing, and that the Award recognizes only the shares as a protected investment (Award, ¶ 716: “In sum, the only investment asset is the shares in the Fourth, Fifth and Sixth Claimants"), there is no need to elaborate further on this point. ↩
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broadly in the absence of a specific justification.4 International adjudicatory jurisdiction depends on the validity and scope of such consent, which must be construed through proper interpretation in light of the treaty's context, object and purpose, and not in a vacuum.
5. In my opinion, consent should not be assumed from a reading that takes the words "of another Contracting Party" in Article 26(1) ECT5 in isolation from the rest of the Treaty thereby creating an unnecessary conflict between the ECT and the EU Treaties6 requiring resolution. Instead, a systemic interpretation of consent in accordance with the rules set out in the 1969 Vienna Convention on the Law of Treaties should prevail.7
6. This systemic interpretation of consent is firmly grounded in the text of the Treaty itself. Indeed, there is no dispute that the ECT expressly: (i) acknowledges the transfer of competences from the Member States to the EU and the binding nature of the supranational EU legal order (Article 1(3) ECT); (ii) provides that the Treaty is to apply differently to relations inter se between EU Member States, in light of their legal and economic integration (Article 25 ECT); and (iii) defines its object and purpose by explicit reference to the European Energy Charter (Article 2 ECT), an instrument which the drafters expressly conceived as “[a]ware of the obligations under major relevant multilateral agreements" and as requiring implementation “in conformity with the relevant international laws”, as the Charter itself provides.
7. Under Article 31 VCLT, interpretation is a single integrated operation conducted “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”, while also taking into account “any relevant rules of international law applicable in the relations between the parties”.8
4 See Sections II.(i)-(ii) of this Opinion. ↩
5 Article 26 ECT (“Settlement of Disputes between an Investor and a Contracting Party") reads as follows: "(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 [...]." ↩
6 Primarily, the Treaty on European Union ("TEU") and the Treaty on the Functioning of the European Union ("TFEU"). ↩
7 See Section II.(viii) of this Opinion. ↩
8 See Section II.(ii) of this Opinion. ↩
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There is no hierarchy among these elements. The “ordinary meaning” of words does not exist independently of context, object, purpose, and the systemic integration. Accordingly, Article 26 cannot be read as a clause divorced from the ECT's definitional provisions, structure, and the international legal environment expressly anticipated by the ECT in its Articles 1(3) and 26(6).
8. Turning to those definitional provisions, the ECT does not define “Contracting Party" as States alone; it expressly includes an “REIO” (Regional Economic Integration Organisation, Article 1(2)) and then defines an REIO as an organisation constituted by States to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them (Article 1(3)). This is more than descriptive: it is a binding interpretative instruction applicable throughout the Treaty and must be given effet utile, consistent with good faith and effectiveness. The deliberate reference to binding decision-making authority signals that the Treaty recognises a category of Contracting Parties whose Member States are already governed, inter se, by a distinct and binding supranational legal order in the very fields addressed by the ECT. Once that definitional reality is integrated into Article 26, the expression “of another Contracting Party" can coherently be understood, in the intra-REIO setting, as referring to a Contracting Party outside the same integrated legal order, i.e., an extra-EU Contracting Party. This interpretation introduces no additional terms in the text. Rather, it delineates the semantic scope of “another Contracting Party" by reference to the Treaty's own definitional framework.
9. This structural logic is reinforced by Article 25 ECT, which provides that the Treaty shall not be construed to extend the preferential treatment enjoyed within the EU. Therefore, Article 26 must be interpreted consistently with that differentiated structure rather than as if all Contracting Parties stood in the same legal relationship to each other. The ECT does not operate on the assumption of uniform legal relations across all Contracting Parties in all respects. On the contrary: Article 25 confirms that, under the Treaty itself, internal intra-EU relations are fundamentally distinct from external extra-EU relations.
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10. Systemic integration then supplies a further step. Article 31(3)(c) VCLT requires that, together with context, interpreters take into account “any relevant rules of international law applicable in the relations between the parties”. In an intra-EU dispute, EU law is precisely such a body of binding inter se rules, and the ECT itself acknowledges the existence of binding REIO rules through Article 1(3). An interpretation of Article 26 that includes intra-EU disputes would place the Member States under treaty-based obligations incompatible with the allocation of authority and binding judicial structure of the EU legal order, notwithstanding that the ECT anticipated such a system. A harmonious alternative interpretation is available, where intra-REIO/EU disputes fall outside the scope of the “another Contracting Party” formulation, when properly interpreted through the Treaty's definitional and contextual lens.
11. This systemic approach is internal to the ECT, not an external override, because Article 26 ECT, the very provision governing dispute settlement, mandates that the Tribunal “shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law” (Article 26(6) ECT). It further confirms that the ECT's dispute settlement mechanism operates within the wider international legal system and cannot be construed to mandate outcomes that force States into breach of applicable inter se obligations.
12. Despite the above, the majority of the Tribunal (as well as the majority of prior awards addressing this issue) have adopted an expansive and decontextualised interpretation of the term “another”, and of consent, whilst adopting a restrictive interpretation of the reference to conformity with international law (or presumption against conflict).
13. Moreover, the broad interpretation presuming consent gives rise to the paradox that it is contrary even to the express interpretation adopted by the Contracting Parties concerned in the present dispute: Ireland as the home State of the investor, and Germany as the host State of the investment. While the ECT is indeed a multilateral treaty, the provision at issue, entitled “Settlement of Disputes between an Investor and a Contracting Party”, applies exclusively to “[d]isputes between a Contracting Party and an Investor of another Contracting Party” (Article 26(1) ECT). Accordingly, Article 26 is premised on
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bilateral legal relationships and only two Contracting Parties are concerned in such a dispute: the home State of the Investor; and the host State of the investment.
14. Further instruments (the 1997 Statement, forming part of the context under Article 31(2)(b) VCLT; the 2019 Declaration signed by EU Member States, including Germany and Ireland, constituting subsequent agreement and practice under Article 31(3)(a)–(b) VCLT) also confirm the systemic reading.9
15. In addition, EU law and CJEU jurisprudence evidence the binding inter se legal order recognised by Article 1(3) ECT and relevant under Article 31(3)(c) VCLT and Article 26(6) ECT. The cited line of cases10 is used to show how the EU's autonomous legal order, its primacy, and its judicial system are aimed at uniform interpretation, the rule of law, and equality before the law.
16. This connects to the ECT's object and purpose under Article 2, which frames the Treaty as promoting long-term cooperation in the energy field in accordance with the objectives and principles of the 1991 European Energy Charter. The ECT is a European project intended to complement and extend cooperation rather than to regulate or disrupt the internal legal relations of an existing supranational order and the internal energy market that the Treaty itself explicitly recognises and accommodates. It was negotiated as an instrument of the EU's external energy policy with a view to establishing a framework for energy cooperation with third countries. By contrast, the EU's internal energy policy consists of an elaborate system of rules designed to create an integrated internal market.
17. The object and purpose of the Treaty, as well as considerations of good faith (Article 31(1) VCLT), require that consent be construed strictly. A reading that isolates
9 See Section II.(vi) of this Opinion; see also the Agreement on the interpretation and application of the Energy Charter Treaty, not yet in force (Official Journal of the European Union, 27 March 2026; ELI: http://data.europa.eu/eli/agree_internation/2026/757/oj). ↩
10 See Section II.(iv).c. of this Opinion. In particular: Flamino Costa v. E.N.E.L., Case 6/64, Judgment, 15 July 1964, ECLI:EU:C:1964:66; Commission of the European Communities v. Ireland, Case C-459/03, Judgment, 30 May 2006, ECR I-04635, ECLI:EU:C:2006:345; Opinion 2/13 of the Court (Full Court), 18 December 2014, ECLI:EU:C:2014:2454; Slowakische Republik v. Achmea BV, Case C-284/16, Judgment, 6 March 2018, ECLI:EU:C:2018:158; République de Moldavie v. Komstroy LLC, Case C-741/19, Judgment, 2 September 2021, ECLI:EU:C:2021:655. ↩
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Article 26(1) from its definitional, structural and systemic context would risk disrupting the internal energy market and give rise to unfair and discriminatory outcomes, both internally and externally. In particular, it would allow some EU investors to escape the uniform interpretation of EU law while continuing to benefit from the rights derived from EU integration, in tension with the principle of equality before the law and the level playing field that the EU legal order is designed to guarantee.
18. Two readings of “another Contracting Party” are possible, but only the systemic one aligns with the Treaty's context, object and purpose. The broad reading depends on isolating Article 26 from the Treaty's definitions, structure, and object and purpose, thereby depriving key provisions of effect and creating unnecessary conflict. The systemic reading emerges from interpreting Article 26 together with Articles 1(1)–(3), 2 and 25, integrating applicable international law through Article 31(3)(c) VCLT and the ECT's own applicable-law clause (Article 26(6)), and aligning with contextual instruments and subsequent Member State declarations.
19. In any event and in the alternative, I am not persuaded that, even assuming a conflict (quod non), Article 16 ECT would be the governing conflict-resolution rule, displacing Articles 30(4) VCLT and 351 TFEU, and the primacy of EU law. Moreover, Article 16 ECT applies only "where any such provision [of the ECT] is more favourable to the Investor or Investment”, a condition neither evident in the abstract nor established in the circumstances of the present arbitration. Its application is not justified.11
20. It follows that two competing interpretations of the term “of another Contracting Party” in Article 26 ECT may be identified and compared,12 but only the systemic interpretation gives full legal effect to the Treaty as a coherent instrument operating within the international legal system, rather than as a collection of disconnected clauses. It guarantees equality before the law and preserves a level playing field where rights and obligations are properly aligned.
11 See Section II.(vii) of this Opinion. ↩
12 See the comparative table set out in Section II.(viii) of this Opinion. ↩
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21. For all these reasons, I am inclined to opine that the interpretation which complies with the mandatory rule of treaty interpretation codified in Article 31 VCLT, namely, an interpretation that integrates good faith, text, context, object and purpose, together with any relevant rules of international law applicable in the relations between the parties, is the interpretation that does not find consent to intra-EU investor-State arbitration in the ECT.
22. With regards to the merits, the Award unanimously finds no breach of the fair and equitable treatment (“FET”) or expropriation standard. Part III of this Opinion is dedicated to providing additional grounds why liability, and in particular expropriation, cannot be found in this case.
23. In my opinion, any alleged reduction in the value of the Claimants' shares would be, in the particular circumstances of this case, irrelevant.
24. The WindSeeG was enacted to promote the expansion of offshore wind energy in the interests of climate and environmental protection. Moreover, the legislature enjoys a broad margin of appreciation in regulating the common good and is not required to shield economic actors from every disadvantage arising from legal reform, particularly in a dynamic regulatory field where change is foreseeable.
25. In this context, the absence of fault is determinative.13 Compensation for loss of value does not eliminate the loss; it merely transfers it to the public purse, ultimately to the pockets of the taxpayers of the host State. Such a transfer requires a solid legal basis. Not every economic impairment is compensable: only loss occasioned by fault may generate liability. A fundamental distinction exists between private contractual relations, which cannot be altered unilaterally, and public regulation, which may be amended in the exercise of sovereign authority.
13 See Section III.(ii) of this Opinion. ↩
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26. The State's sovereign right to regulate is an essential feature. Consistently with the police powers doctrine under customary international law, proportionate and non-discriminatory regulation adopted in good faith, for a public purpose and in accordance with due process, cannot constitute indirect expropriation merely because it results in economic loss.14 To hold otherwise would render the State's regulatory powers illusory, as virtually all regulatory measures have some adverse economic effect. The WindSeeG pursued legitimate public interests, namely, the secure, efficient and environmentally compatible supply of electricity, and was enacted and implemented as a bona fide regulatory measure proportionate to those aims.
27. Finally, under the circumstances of the present case, the rejection of the FET claim precludes a finding of expropriation. The same measures that do not breach the FET standard cannot conceivably constitute an expropriation.15
28. To begin with, it is worth recalling that, in investment arbitration under public international law, jurisdiction is the exception rather than the norm.16 The default position is the lack of jurisdiction, which may be established only where consent has been given.
14 See Sections III.(ii)-(iii) of this Opinion. ↩
15 See Section III.(iv) of this Opinion. ↩
16 See Daimler Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1, Award, 22 August 2012, ¶¶ 173-175 (Section VI.C.1.b, “Consent as the cornerstone of all treaty commitments”): “While the article [31(1) VCLT] does not explicitly mention consent, the reference to “good faith” nevertheless reinforces the duty of tribunals to limit themselves to interpretations falling within the bounds of the framework mutually agreed [...] respect for State consent is also manifested by the fundamental principle of public international law according to which international courts and tribunals can only exercise jurisdiction over a State on the basis of its consent. As noted by the Permanent Court of International Justice in one of its first judgments [...] [a]gainst this background, it is not possible to presume that consent has been given by a state. Rather, the existence of consent must be established [...] [n]on-consent is the default rule [...] consent is the exception [...] [w]hat is true of the very existence of consent to have recourse to a specific international dispute resolution mechanism is also true as far as the scope of this consent is concerned"; available at: https://jusmundi.com/en/document/decision/en-daimler-financial-services-ag-v-argentine-republic-award-wednesday-22nd-august-2012#decision_540. ↩
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In the context of treaty-based jurisdiction, such consent must be clearly expressed in the relevant international instrument.
29. With regard to the powers and functions of the Tribunal, Article 41 of the ICSID Convention provides that “[t]he Tribunal shall be the judge of its own competence”. This provision embodies the cornerstone principle of kompetenz-kompetenz in international arbitration. There is no binding precedent by any court or tribunal,17 domestic or international, permanent or ad hoc, that constrains the Tribunal in the exercise of this power. Rather, the Tribunal is bound solely by the applicable law, which must be interpreted in accordance with the rules of treaty interpretation set out in the customary international law rules as codified in the Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969.
30. In the present case, the Claimants are nationals of Ireland investing in Germany. Both Ireland and Germany are Member States of the EU. The Claimants are therefore EU investors investing within the EU, rendering this dispute an intra-EU dispute. Furthermore, Ireland, Germany and the EU are all Contracting Parties to the ECT: Ireland and Germany in their capacity as States, and the EU in its capacity as an REIO, a concept incorporated and defined as a Contracting Party by the ECT in its Articles 1(2)-(3). Notably, the EU was the principal promoter of the ECT and the only REIO to have become a Contracting Party to the ECT in its more than 25 years of history.
31. Accordingly, the question arises as to whether the ECT contains an intra-EU offer to arbitrate under Article 26 of the ECT, which refers to disputes between a Contracting Party and an Investor “of another Contracting Party".18
17 While investment tribunals frequently refer to prior awards, arbitral decisions do not constitute sources of law under Article 38 of the ICJ Statute. ↩
18 The ECT provision to interpret, Article 26 ECT (“Settlement of Disputes between an Investor and a Contracting Party"), requires an Investor "of another Contracting Party" and reads as follows: "(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 [...]." ↩
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32. In order to provide a meaningful answer to that question, the relevant provision of the ECT must be interpreted in accordance with the rules of treaty interpretation set out in the VCLT.
33. An isolated and mechanical reading of the first paragraph of Article 26 ECT might, a priori, accommodate the view that an Irish investor investing in Germany may submit a dispute to arbitration, on the basis that there would be “one” Contracting Party (Ireland) and “another” Contracting Party (Germany) involved (or, strictly speaking, three, if the EU is taken into account).
34. However, a proper interpretation of the treaty terms, in accordance with the mandatory rules of public international law codified in the VCLT, requires a more elaborated exercise. Article 31(1) of the Vienna Convention requires that the Treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose:19
19 Article 31 VCLT reads as follows: ↩
"Article 31
General rule of interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties.
4. A special meaning shall be given to a term if it is established that the parties so intended.”
Article 32 VCLT contains the "supplementary means" of interpretation (preparatory work, circumstances of the conclusion) when the interpretation according to Article 31 is ambiguous or unreasonable. That is not the case here.
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"Article 31
General rule of interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. [...]
3. There shall be taken into account, together with the context: [...]
(c) any relevant rules of international law applicable in the relations between the parties."
35. Article 31 of the VCLT is entitled the “general rule” of interpretation, in the singular, underscoring that all interpretative elements must be considered together, as part of a single operation and without any hierarchy of value. The International Law Commission (“ILC”) Commentary rejects the existence of any hierarchy among the elements listed in Article 31. Accordingly, Article 31 of the VCLT codifies and consolidates the mandatory elements of treaty interpretation, including, without any order of precedence: good faith, the treaty text, context, and object and purpose. These elements must be assessed altogether, with the same status, and with no hierarchy, in order to give a coherent meaning as the outcome of the interpretative process. For this reason, the interpreter can give no meaning to the words until they are considered in conjunction with the context, object and purpose, since words have no independent material meaning. That is why Article 31(1) refers to the ordinary meaning “to be given” to the terms in their context, object and purpose.
36. As observed by the tribunal in Aguas del Tunari v. Bolivia, interpretation is not solely a matter of dictionaries:
"The meaning of a word or phrase is not solely a matter of dictionaries and linguistics. As Schwarzenberger observed, the word 'meaning' itself has at least sixteen dictionary meanings.51 Rather, the interpretation of a word or phrase involves a complex task of considering the ordinary meaning of a word or phrase in the context in which that word or phrase is found and in light of the object and purpose of the document.”20
20 CL-255, Aguas del Tunari, S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on Respondent's Objections to Jurisdiction, 21 October 2005, ¶ 91. Footnote 51 in this paragraph reads: “Georg Schwarzenberger, Myths and Realities of Treaty Interpretation: Articles 27-29 of the Vienna Draft Convention on the Law of Treaties, ↩
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37. In the same vein, the ILC has emphasised that the ordinary meaning of a term (such as “of another Contracting Party”) cannot be determined in the abstract:
“[C]ommon sense and good faith; the ordinary meaning of a term is not to be determined in the abstract but in the context of the treaty and in the light of its object and purpose.”21
38. It follows that purely formalistic interpretations are inconsistent with the Vienna Convention. The treaty interpretation exercise is a higher one, one that has to consider all those elements to produce a meaningful, consistent and coherent outcome. Single words have no prevalence over context, object and purpose. Accordingly, it is essential to analyse the context, object and purpose of the treaty to extract the proper meaning, the one fulfilling the mandatory rule for treaty interpretation of the Vienna Convention, rather than just reading isolated words of a section in an article of a treaty while disregarding other elements of a proper interpretation.
39. In the present case, i.e., an intra-EU case under the ECT, all these elements must therefore be examined within a comprehensive interpretative framework. The figure22 below depicts the interpretation of Article 26 ECT in accordance with Article 31 VCLT as a single, integrated operation. The meaning of consent to arbitration does not arise from a mechanical or word-by-word reading in isolation, but emerges from the interaction between the Treaty's text, its context, its object and purpose, and relevant rules of international law. In the specific context of the ECT, this interpretative process necessarily encompasses Articles 1(3), 2, 25, and 26(6) ECT, read together with Article 31(3)(c) VCLT, including EU law, and agreements and practice between the Contracting Parties concerned. Interpretation under Article 31 VCLT constitutes a single, non-hierarchical operation in which text, context, object, purpose, and relevant rules of international law are applied together.
22 CURRENT LEGAL PROBLEMS 205, 219 (1969). Barak writes: ‘From the standpoint of language, one meaning does not have preference over another. Any meaning which is possible in a semantic sense is also permissible semantically. It would be a mistake to base a doctrine of legal interpretation on dictates, as it were, of linguistics.' AHARON BARAK, JUDICIAL DISCRETION 341-342 (1987)."
21 ILC, “Draft Articles on the Law of Treaties with commentaries” (1966), p. 221, ¶ 12; available at: https://legal.un.org/ilc/texts/instruments/english/commentaries/1_1_1966.pdf. ↩
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| Interpretation of Article 26 ECT under Article 31 VCLT | ||
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Article 1(3) ECT Binding REIO/EU - Transferred Competences (context) |
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Article 2 ECT European Energy Charter (object and purpose) |
Article 26 ECT Lack of Consent to Intra-EU Investor-State Arbitration |
Article 25 ECT Integration Agreements (context) |
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Systemic Interpretation – Applicable Law
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40. The majority of arbitral awards addressing intra-EU arbitration under the ECT so far have tended to disregard the Treaty's definitional provisions, to treat consent as conceptually autonomous from competence, and to prioritise assumptions over a systemic interpretation of the Treaty. Those awards generally rest on the implicit assumption that Article 26 ECT may be assessed in isolation from the Treaty's definitional and structural provisions, effectively treating it as if it were contained in a treaty concluded exclusively between non-integrated States. However, that is incompatible with a Treaty that expressly includes an REIO, the EU, as a Contracting Party and devotes its very first article to defining the consequences of transferred competences.
41. Accordingly, in order to give to Article 26 ECT a meaning that is compliant with the interpretative rule codified in the VCLT, it is essential to acknowledge that the
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Contracting Parties expressly agreed, in Article 1 of the ECT, some “[d]efinitions” giving “mean[ing]” to terms “[a]s used in this Treaty”. Indeed, the ECT Contracting Parties:
"HAVE AGREED AS FOLLOWS:
Part I: Definitions and Purpose
Article 1: Definitions
As used in this Treaty:
(1) "Charter" means the European Energy Charter adopted in the Concluding Document of the Hague Conference on the European Energy Charter signed at The Hague on 17 December 1991; signature of the Concluding Document is considered to be signature of the Charter.
(2) "Contracting Party" means a state or Regional Economic Integration Organisation which has consented to be bound by this Treaty and for which the Treaty is in force.
(3) "Regional Economic Integration Organisation” means an organisation constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them in respect of those matters."
42. Pursuant to Article 31(1) VCLT, these elements, as text, context, object and purpose of the Treaty, constitute mandatory elements to integrate and to define the contours of the “meaning to be given to the terms of the treaty” when interpreting all subsequent provisions of the ECT including Part III, regulating investment promotion and protection, and Part V, regulating dispute settlement. Definitions are not merely preliminary or explanatory; they constitute binding interpretative instructions applicable to the entire Treaty, including Article 26, which contains consent to arbitration for disputes between a Contracting Party and an investor “of another Contracting Party”. That term in the Treaty must therefore be interpreted in light of the definitions contained in Article 1 ECT.
43. In other words, the Contracting Parties to the ECT agreed to commence the Treaty by setting out: (i) a series of definitions that form part of the Treaty's text and context and also constitute "special meanings";23 and (ii) the object and purpose of the Treaty.
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44. Significantly, the very first definition refers to the object and purpose of the Treaty, as it defines the meaning of “the Charter” (the 1991 European Energy Charter), a term used in Article 2 ECT to align the purpose of the Treaty with the objectives of the Charter (“Article 2: Purpose of the Treaty [...] in accordance with the objectives and principles of the Charter").
45. The second definition of the ECT incorporates the concept of an REIO and differentiates between two categories of Contracting Parties, by providing that “Contracting Party” means a State or an REIO which has “consented to be bound” by this Treaty.
46. The third definition of the ECT goes further still. Article 1(3) ECT defines an REIO as an organisation constituted by States to which they have “transferred competence” over certain matters a number of which are governed by this Treaty, “including” the authority to take decisions “binding on them" in respect of those matters.24 This provision is not limited to institutional description. It expressly characterises the legal relationship between the REIO and its member States. The reference to decisions that are “binding on them" is not linguistically necessary to define an REIO as such; its deliberate inclusion therefore carries interpretative relevance and must be given effect in accordance with the principle of effectiveness (effet utile) inherent in good-faith interpretation under Article 31(1) VCLT. Article 26 ECT cannot be interpreted independently of the structural limitation set out in Article 1(3) without rendering the definitional clause legally redundant (quod non).
47. Article 1(3) is thus not merely descriptive. By recognising the existence of organisations endowed with transferred competences and binding decision-making authority in fields covered by the ECT, the Treaty expressly acknowledges that, for certain Contracting Parties, the legal relations governing those matters are structured within a distinct and binding supranational legal order. The ECT was therefore concluded in full awareness
24 Notice here: (i) how the Treaty employs, in two consecutive paragraphs, (2) and (3), of Article 1, two forms of the same root verb "to bind”, linked explicitly to consent ("consented to be bound" in Article 1(2)); and (ii) how it expressly inserts in Article 1(3) ECT (“including") a clause that dictates, by definition, that the member States of the REIO are bound by the REIO (“binding on them"). This is an "including" that was not needed merely to define an REIO and that, in good faith, should be given effect (effet utile). ↩
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that, in the relations between Member States of such an organisation, binding rules of law already govern the same subject matter as that addressed by the Treaty. Article 1(3) ECT identifies, within the Treaty itself, a category of Contracting Parties whose mutual relations are governed by a legally binding integration framework that the Treaty explicitly recognises. This textual recognition constitutes a necessary starting point for the systemic interpretation required by Article 31 VCLT.
48. In that specific inter se context, the ordinary meaning of the phrase "of another Contracting Party”, when read together with Article 1(2) and (3), reasonably admits an interpretation whereby it refers to a Contracting Party external to the same REIO/EU legal order (that is, an extra-EU Contracting Party), rather than to a Member State whose relations are already governed, in the relevant field, by binding EU law. This interpretation does not introduce new language into the Treaty. Rather, it delineates the semantic scope of “another Contracting Party” by reference to the Treaty's own definitional framework. Article 1(3) ECT defines the legal reality and actual framework that cannot be ignored when interpreting consent. When that definition is properly integrated, as required by Article 31 VCLT, into the interpretation of Article 26 ECT, the absence of intra-EU consent to arbitration thus follows from the Treaty's internal structure.
49. In this regard, I agree with the recent opinion of Prof. Kohen in Eiser v. Spain (referring also to the awards in ESF v. Spain and Sapec v. Spain):25
"19.[...] This is not a matter of establishing the primacy of EU law or that its decisions prevail over the ECT. Rather, it is a matter of interpreting and applying the Treaty,
25 Eiser Infrastructure Limited and Energia Solar Luxembourg s.a r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36 (Resubmission Proceeding), Dissenting Opinion of Prof. Marcelo Kohen, 16 October 2025 ("Kohen Dissenting Opinion"), ¶¶ 19 and 23–24 (Section III, “A Partial Reading of the ESF and Sapec Awards"); available at: https://jusmundi.com/en/document/opinion/en-eiser-infrastructure-limited-and-energia-solar-luxembourg-s-a-r-l-v-kingdom-of-spain-dissenting-opinion-of-marcelo-g-kohen-thursday-16th-october-2025#opinion_4395. See footnote 14 citing European Solar Farms A/S v. Kingdom of Spain, ICSID Case No. ARB/18/45, Award, 11 October 2024, ¶¶ 199, 201. See further footnote 13, citing Sapec, S.A. v. Kingdom of Spain, ICSID Case No. ARB/19/23, Award, 11 October 2024, ¶¶ 218, 267 (“its primacy is mandated by the terms of the ECT itself”; “none of this is to say that EU law prevails over the ECT: it is rather the ECT itself that has incorporated by reference the constitutional structure of the EU, including the rules on the conferral and division of powers and the rules governing how the EU institutions and its judicial system are to operate"). ↩
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taking into account the existing correlation between the REIO, as a Contracting Party to the ECT, and its Member States, which are also Contracting Parties. [...]
23. I consider the following analysis -drawn from ESF v. Spain to be of vital importance in interpreting the implications of Article 1(3) of the ECT for determining the scope of Article 26, particularly with respect to the inter-se relationship among EU Member States that are Contracting Parties to the ECT.
'The transfer of competence thus entails that the Member States of the REIO no longer bear the obligations of the Treaty in respect of the subject-matter over which competence was transferred. Indeed, no coherent interpretation can allow otherwise, for the obligations that a Contracting Party owes under the ECT cannot attach to a competence that the Treaty itself does not consider it to enjoy. If a Contracting Party has transferred to a REIO a competence the subject-matter of which is governed by the ECT, this Contracting Party cannot owe obligations under the ECT in respect of this matter because, as the ECT recognizes, it has divested itself of the competence to act independently. [...] Such exercise of competence may relate to matters of substance, such as investment promotion and protection, or to other matters also governed by the Treaty, such as settlement of disputes between an investor and a State: Article 1(3) permits of a REIO making rules as to both such matters. Thus, for example, the REIO may rule that disputes between an investor of one member State against another member State are to be resolved within the institutional framework of the REIO. Such a rule is recognized by Article 1(3) to fall within the authority of the REIO, and for this reason it would bind the member States of the REIO not only as member States of the REIO but also as Contracting Parties under the ECT. Put differently, the ECT recognizes the obligation of Contracting Parties who are member States of the REIO to be bound by the rule of the REIO.'
24. I consider this interpretation of the ECT to be correct, and that it disposes of the case. However, I shall examine other elements that also support the same conclusion".
50. The Award in the present case states that “[a]s a Contracting State, an REIO (here the EU) is subject to the same rights and obligations as any other Contracting Party”26, and cites Vattenfall v. Germany when it states that “it would have been necessary to include
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explicit language".27 Possibly this flaw in the argumentation is the source of the Award's failure to integrate Article 1(3) ECT into the interpretation of Article 26.
51. First, reliance on “explicit language” alone falls short of a proper interpretation pursuant to Article 31 VCLT, particularly where all roads (i.e., text, context, object and purpose) “lead to Rome".
52. Secondly, the Contracting Parties to the ECT do not possess identical rights and obligations. The ECT, both structurally and by definition from its first article, distinguishes two categories of Contracting Parties: REIOs (the EU) and States. Moreover, among States, it expressly differentiates between those that are members of a REIO and those that are not. These categories entail distinct rights and obligations. This differentiation permeates the Treaty as a whole, and Article 25 ECT provides a clear illustration of it.
53. The absence of an express reference to dispute settlement in Article 1(3) is immaterial, since treaty interpretation does not proceed word-by-word in isolation. Definitions constitute the meaning of the terms used in operative clauses; they are not peripheral explanations but determine the ordinary meaning of treaty terms throughout the instrument. To treat Article 26 as unaffected by Article 1(3) is therefore an interpretative choice that privileges one part of the Treaty at the expense of another.
54. This structural reading of Article 1(3) ECT is reinforced by Article 25 ECT, which confirms that the Treaty expressly accommodates differentiated legal relations for Contracting Parties participating in an economic integration agreement. This provision confirms that the REIO definition in Article 1(3) is not merely descriptive but structurally operative, and that the scope of Article 26 ECT must be interpreted consistently with that architecture. The ECT does not operate on the assumption of uniform legal relations across all Contracting Parties in all respects. Rather, Article 25 confirms that, under the
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Treaty itself, internal intra-EU relations are fundamentally distinct from external extra-EU relations.
55. Given the separation of “the internal functioning of the Community from its external obligations under the [ECT],"28 after safeguarding the constitutional foundations of the EU via the definition of the REIO in Articles 1(2)-(3) ECT, the ECT contains yet another exception clause “which the Community need[ed] (as described in point 11 [of the 1993 Communication])”29 to conclude the Treaty.
56. That clause concerns the first “key principle”, i.e., the “non-extension of Community treatment to third countries"30 embodied in Article 25 ECT, entitled “Economic Integration Agreements". Article 25 establishes an exception to most-favoured-nation treatment in respect of obligations deriving from an Economic Integration Agreement and provides:
"(1) The provisions of this Treaty shall not be so construed as to oblige a Contracting Party which is party to an Economic Integration Agreement (hereinafter referred to as 'EIA') to extend, by means of most favoured nation treatment, to another Contracting Party which is not a party to that EIA, any preferential treatment applicable between the parties to that EIA as a result of their being parties thereto.
(2) For the purposes of paragraph (1), ‘EIA' means an agreement substantially liberalising, inter alia, trade and investment, by providing for the absence or elimination of substantially all discrimination between or among parties thereto through the elimination of existing discriminatory measures and/or the prohibition of new or more discriminatory measures, either at the entry into force of that agreement or on the basis of a reasonable time frame."
57. This approach is grounded in logic, since “[a]ny extension to all the other Contracting Parties of the Community's own rules on freedom of establishment and provision of
28 European Commission, Communication forwarded to the Council titled "The European Energy Charter: Fresh Impetus from the European Community" dated 4 November 1993, Document 51993DC0542; available at: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:51993DC0542. ↩
Note that the references to the European Union are to be understood also as references to its predecessor, the European Economic Community and, subsequently, the European Community, until the latter was superseded by the European Union.
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services would be tantamount to bringing them into the Community integration process".31
58. All ECT Contracting Parties thus understood that EU Member States were engaged in a process of “integration” that was significantly more advanced than the “cooperation" provided by the rights and obligations contained in the ECT framework.
59. Article 25 ECT explicitly acknowledges that the network of legal relations among the States party to an EIA/REIO (intra-REIO, i.e., intra-EU) is fundamentally different from relations external to that framework. The Treaty “shall” be construed so as to permit differential "treatment applicable between the parties” to such an agreement. Accordingly, the ECT as a whole, including Article 26, must be interpreted in a manner that accommodates differentiated treatment of intra-EU and extra-EU relations.
60. This special inter se situation of EU Member States, and the “preferential treatment applicable between the parties to that EIA”, is expressly recognised in Article 25 and necessarily informs the interpretation of Article 26, which governs investor-State dispute settlement.
61. As a further contextual element accepted by the other Contracting Parties within the meaning of Article 31(2)(b) VCLT, reference should be made to the Declaration with respect to Article 25 contained in the Final Act of the European Energy Charter Conference, adopted by the European Communities and their Member States, which provides:32
"DECLARATION
With respect to Article 25
The European Communities and their Member States recall that, in accordance with Article 58 of the Treaty establishing the European Community: [...] the application of
31 Ibid. Two points are noteworthy in this regard. First, when referring to "the other Contracting Parties", the Commission consistently excluded EU Member States, notwithstanding that they were formal signatories to the ECT. Secondly, EU integration rules were regarded as prevailing over the rights conferred by the ECT, a position considered compatible with setting "the highest possible levels of protection for investors”. ↩
32 Final Act of the European Energy Charter Conference, Declaration 5. ECT, p. 76. ↩
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Article 25 of the Energy Charter Treaty will allow only those derogations necessary to safeguard the preferential treatment resulting from the wider process of economic integration resulting from the Treaties establishing the European Communities."
62. This Declaration confirms that:
63. That wider process of economic integration includes, in particular, the internal energy market and the autonomy and primacy of EU law.
64. A further decisive interpretative step follows from Article 31(3)(c) VCLT, which provides that, together with the context, there shall be taken into account “any relevant rules of international law applicable in the relations between the parties." This requirement is mandatory and forms an integral part of the interpretative process.
65. In the present setting, Article 1(3) ECT makes it indisputable that, in the relations between Member States of an REIO, binding rules of international law govern matters covered by the Treaty. Those rules are neither incidental nor external to the ECT's operation; rather, they are expressly anticipated by the Treaty's own definition of an REIO as an organisation endowed with transferred competences and binding decision-making authority.
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66. Accordingly, where an investor-State dispute arises wholly within such an organisation, Article 31(3)(c) requires that the Treaty be interpreted in a manner that integrates those binding inter se rules into the determination of the Treaty's meaning.
67. An interpretation of Article 26 ECT that encompasses disputes between Member States bound by the same REIO legal order would place those States under obligations incompatible with the binding legal framework and allocation of authority governing their mutual relations, notwithstanding the Treaty's express recognition of that framework in Article 1(3). Such an outcome would fail to give effect to the systemic interpretation under Article 31(1) VCLT.
68. An alternative interpretation is both available and coherent with the Treaty as a whole: in disputes arising within an REIO, the term “another Contracting Party” in Article 26 ECT refers to a Contracting Party external to that same integrated legal order. This interpretation preserves the full effectiveness of Article 26 ECT in extra-REIO relations, while ensuring that the Treaty operates consistently with the binding legal system it expressly recognises in Article 1(3).
69. Article 26(6) ECT confirms that this systemic approach is not external to the Treaty but inherent in its applicable law framework since it provides in the imperative form that the Tribunal:
"[S]hall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law."
70. Indeed, the comprehensive interpretation is reinforced by Article 26(6) ECT, which requires tribunals to decide disputes in accordance with the Treaty and applicable rules and principles of international law. The systemic integration mandated by Article 31(3)(c) VCLT therefore operates not as an external override, but as a component of the applicable law framework expressly contemplated by the ECT itself.
71. Article 26(6) ECT thus confirms that the ECT's dispute settlement mechanism operates within, not outside, the broader international legal system. That mandate is hard to
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reconcile with the idea of an award inconsistent with “applicable rules and principles of international law" binding the parties to the dispute.33 In the present case, the investor is from Ireland and investing in Germany; EU law is obviously applicable and binding both States as EU Member States. An ECT award that is inconsistent with, or violates, EU law would therefore be at odds with the mandate of Article 26(6) ECT.
72. For the sake of completeness, there is debate as to whether Article 26(6) ECT applies only to the merits (since according to Article 26(1) ECT “disputes” concern a breach of an obligation under Part III) or whether it also applies to jurisdiction (since jurisdiction is too “in dispute”). The case-law is divided on this point. Nevertheless: (i) Article 26(6) ECT contains no qualification to that effect; (ii) there is no compelling reason to imply such a limitation; and (iii) the provision is included in an article, and a part of the Treaty, devoted to regulating “dispute settlement”, which is jurisdictional in nature.
73. In summary, the prominence of international law, specifically EU law, as a mandatory element of interpretation is beyond question. Under Article 26(6) ECT, the Tribunal must apply the Treaty together with applicable international law. Under Article 31(3)(c) VCLT, those applicable rules of international law must be integrated into the interpretative process. Therefore, the meaning of “another Contracting Party” and the scope of Article 26 must be determined in a manner that avoids placing the parties in breach of their binding inter se international obligations. The Treaty cannot be interpreted as conferring consent to arbitration where such consent would necessarily contradict obligations recognised by the Treaty itself through its REIO clause.
33 See RL-281, Blasket Renewable Investments, LLC v. the Kingdom of Spain, United States District Court for the District of Columbia, Memorandum Opinion dated 29 March 2023, Civil Action No. 21-3249 (RJL). The Memorandum Opinion of Richard J. Leon, United States District Judge, reflects that: “Article 26 of the ECT requires an arbitral tribunal established under its authority ‘to decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law' [...] ECT art. 26(6). The most straightforward reading of that provision is that any award issued by an arbitral tribunal established under the authority of Article 26 must be consistent with both the ECT itself and any other ‘rules and principles of international law' that apply to a dispute between the parties" (p. 14); and that “the text of Article 26 of the ECT prohibits a tribunal established under its authority from disregarding a rule of international law applicable to the parties to the dispute before it" (p.17). ↩
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74. As evidence of the EU Member States' inter se obligations, it is worthwhile to make a reference, albeit briefly, to the consistent and long-standing jurisprudence of the Court of Justice of the European Union (“CJEU”). The relevance of the CJEU's judicial reasoning lies in its articulation of the content and effects of EU law, which Article 1(3) ECT itself expressly recognises as binding inter se between EU Member States, including, in particular, the legal consequences flowing from the transfer of competences.
75. In Costa (1964), the CJEU held that, by creating a Community of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane, and transferring powers from the States to the Community, the Member States have limited their sovereign rights, and have thus created a body of law which binds both their nationals and themselves.34
76. In MOX Plant (2006), the CJEU emphasised that an international agreement cannot affect the autonomy of the Community legal system and the exclusive jurisdiction of the Court, referring to Articles 220 and 292 EC.35
77. The primacy of EU law was codified by the Declaration No. 17 annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon (2007), which states:36
"It results from the case-law of the Court of Justice that primacy of EC law is a cornerstone principle of Community law. According to the Court, this principle is inherent to the specific nature of the European Community."
34 Flamino Costa v. E.N.E.L., Case 6/64, Judgment, 15 July 1964, ECLI:EU:C:1964:66. ↩
35 Commission of the European Communities v. Ireland, Case C-459/03, Judgment, 30 May 2006, ECR I-04635, ECLI:EU:C:2006:345, ¶ 123: “The Court has already pointed out that an international agreement cannot affect the allocation of responsibilities defined in the Treaties and, consequently, the autonomy of the Community legal system, compliance with which the Court ensures under Article 220 EC. That exclusive jurisdiction of the Court is confirmed by Article 292 EC, by which Member States undertake not to submit a dispute concerning the interpretation or application of the EC Treaty to any method of settlement other than those provided for therein (see, to that effect, Opinion 1/91 [1991] ECR I-6079, paragraph 35, and Opinion 1/00 [2002] ECR I-3493, paragraphs 11 and 12)." ↩
36 Declaration No. 17 concerning primacy, annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, signed on 13 December 2007. Official Journal 115, 09/05/2008 P. 0344 – 0344. ↩
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78. With the occasion of the Accession of the EU to the ECHR, the CJEU opined (2014) that accession cannot affect the specific characteristics of the EU and EU law, which include the constitutional structure of the EU and the specific characteristics arising from the very nature of EU law, particularly its primacy. These essential characteristics of EU law have given rise to a structured network of principles, rules and mutually interdependent legal relations linking the EU and its Member States, and its Member States with each other, which are engaged in a “process of creating an ever closer union among the peoples of Europe" (Article 1 TEU). In order to ensure that the specific characteristics and the autonomy of that legal order are preserved, the EU Treaties have established a judicial system intended to ensure consistency and uniformity in the interpretation of EU law, and to ensure judicial protection of an individual's rights under that law. In particular, the judicial system has as its keystone the preliminary ruling procedure provided for in Article 267 TFEU, which has the object of securing uniform interpretation of EU law. The Court has consistently held that an international agreement cannot affect the allocation of powers fixed by the Treaties or the autonomy of the EU legal system. That principle is notably enshrined in Article 344 TFEU, according to which Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein.37
79. Finally, in Achmea (2018), concerning an intra-EU BIT, the CJEU reaffirmed that, according to settled case-law of the Court, an international agreement cannot affect the allocation of powers fixed by the EU Treaties or, consequently, the autonomy of the EU legal system which is justified by the essential characteristics of the EU and its law, relating in particular to the constitutional structure of the EU. It is for the national courts and tribunals and the Court of Justice to ensure the judicial protection of the rights of individuals. In particular, the judicial system as thus conceived has as its keystone the preliminary ruling procedure which, by setting up a dialogue between one court and
37 Opinion 2/13 of the Court (Full Court), 18 December 2014, ECLI:EU:C:2014:2454, ¶¶ 164–167, 174–176, and 183. See, also: judgment in Costa, EU:C:1964:66; judgment in van Gend & Loos, EU:C:1963:1, p. 12; Opinion 1/09, EU:C:2011:123; Opinions 1/91, EU:C:1991:490, and 1/00, EU:C:2002:231; judgments in Commission v. Ireland, C-459/03, EU:C:2006:345, and Kadi and Al Barakaat International Foundation v. Council and Commission, EU:C:2008:461. ↩
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another, specifically between the Court of Justice and the courts and tribunals of the Member States, has the object of securing uniform interpretation. Given the nature and characteristics of EU law, that law must be regarded both as forming part of the law in force in every Member State and as deriving from an international agreement between the Member States. The Achmea judgment also considers that the characteristics and effects of arbitration proceedings such as those referred to in the investment treaty are essentially different from commercial arbitration proceedings. Lastly, it concludes that Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal.38
80. In Komstroy (2021), addressing the ECT specifically, the CJEU reiterated that autonomy flows from the fact that the European Union possesses a constitutional structure and framework that is unique to it. That framework covers, inter alia, the provisions of the EU and FEU Treaties, which include, in particular, rules governing how the EU institutions and its judicial system are to operate, and fundamental rules in specific areas, structured in such a way as to contribute to the implementation of the process of integration described in Article 1 TEU.39
81. Indeed, the primacy of EU legal order is therefore not merely a legal principle but a reflection of the political and economic integration of the EU. It is necessary to ensuring the consistent and uniform intra-EU application of Union law, and guarantees that all EU citizens, irrespective of nationality, are treated equally before the law. In conclusion, the primacy of EU law is inherent to the principle of equality before the law and paramount to ensure a level playing field.40
38 Slowakische Republik v. Achmea BV, Case C-284/16, Judgment, 6 March 2018, ECLI:EU:C:2018:158, ¶¶ 32–41, 54-55 and 60. ↩
39 République de Moldavie v. Komstroy LLC, Case C-741/19, Judgment, 2 September 2021, ECLI:EU:C:2021:655, ¶¶ 43-45 and 52. ↩
40 Report on the implementation of the principle of primacy of EU law 7.11.2023 - (2022/2143(INI)). European Parliament resolution of 21 November 2023 on the implementation of the principle of primacy of EU law (2022/2143(INI)). ↩
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82. The object and purpose of the ECT further confirm that it was not designed to create any conflict with other rules of international law; on the contrary, it was conceived by the European Communities "in conformity with the relevant international laws".41 Accordingly, an interpretation premised on harmony rather than conflict should prevail.
83. The ECT was not designed to regulate the internal legal relations of States already bound by an advanced integration framework. Article 2 ECT, which is expressly devoted to the “Purpose of the Treaty”, must therefore be taken into account both as part of the context and as evidence of the object and purpose of the Treaty. It reads as follows:
"Article 2: Purpose of the Treaty
This Treaty establishes a legal framework in order to promote long-term cooperation in the energy field, based on complementarities and mutual benefits, in accordance with the objectives and principles of the Charter."
84. First, it must be observed that EU Member States already enjoyed a EU legal order that established not only “cooperation” but an integration process between them, which already includes and goes much further than mere cooperation. Consequently, the purpose of the ECT is not meant to bind EU Member States inter se with ECT obligations, or to regulate the internal functioning of the EU (States which are already bound by the EU legal order, as expressly acknowledged by Article 1(3) ECT).42
85. Secondly, Article 2 ECT specifies that the Treaty's purpose is to establish a legal framework in order to promote “cooperation” in a particular manner: in accordance with the objectives and principles of “the Charter” (namely, the 1991 European Energy Charter). The relevance of the Charter for the ECT is underscored also by its definition
41 The Charter, Title II: Implementation. ↩
42 See the Agreement on the interpretation and application of the Energy Charter Treaty, recalling “the consistently reiterated position of the European Union that the Energy Charter Treaty was not meant to apply in intra-EU relations and that it was not, and could not have been, the intention [...] that the Energy Charter Treaty would create any obligations among them since it was negotiated as an instrument of the European Union's external energy policy with a view to establishing a framework for energy cooperation with third countries whereas, by contrast, the European Union's internal energy policy consists of an elaborate system of rules designed to create an internal market in the field of energy which exclusively regulates relations between Member States in that field" (Official Journal of the European Union, 27 March 2026; ELI: http://data.europa.eu/eli/agree_internation/2026/757/oj). ↩
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in the first paragraph of the Treaty, and by the ECT Preamble (also, part of the context, according to Article 31(2) VCLT).43 The Preamble reiterates that the purpose and desire of the ECT is “to establish the structural framework required to implement the principles enunciated in the European Energy Charter”; and recalls the origins of the ECT, noting that “all signatories to the Concluding Document of the Hague Conference undertook to pursue the objectives and principles of the European Energy Charter and implement and broaden their cooperation as soon as possible by negotiating in good faith an Energy Charter Treaty.” The ECT is also explicit as to “the basic concept of the European Energy Charter” namely the adoption of measures “to liberalise” energy markets (extra-EU, since intra-EU it was already fully liberalised). In light of the consistent and repeated references to the 1991 European Energy Charter, a proper interpretation of the object and purpose of the ECT necessarily requires an examination of that instrument. The Concluding Document of the Hague Conference on The European Energy Charter where the Prime Minister of The Netherlands and the Commissioner for Energy of the European Commission addressed the Conference states as follows:
"EUROPEAN ENERGY CHARTER
43 The Preamble of the ECT reads: ↩
"The Contracting Parties to this Treaty,
Having regard to the Charter of Paris for a New Europe signed on 21 November 1990;
Having regard to the European Energy Charter adopted in the Concluding Document of the Hague Conference on the European Energy Charter signed at The Hague on 17 December 1991;
Recalling that all signatories to the Concluding Document of the Hague Conference undertook to pursue the objectives and principles of the European Energy Charter and implement and broaden their cooperation as soon as possible by negotiating in good faith an Energy Charter Treaty and Protocols, and desiring to place the commitments contained in that Charter on a secure and binding international legal basis;
Desiring also to establish the structural framework required to implement the principles enunciated in the European Energy Charter;
Wishing to implement the basic concept of the European Energy Charter initiative which is to catalyse economic growth by means of measures to liberalise investment and trade in energy;
Affirming that Contracting Parties attach the utmost importance to the effective implementation of full national treatment and most favoured nation treatment, and that these commitments will be applied to the Making of Investments pursuant to a supplementary treaty;
Having regard to the objective of progressive liberalisation of international trade and to the principle of avoidance of discrimination [...]
Recalling the United Nations Framework Convention on Climate Change [...]"
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The representatives of the signatories meeting in The Hague on 16 and 17 December 1991, [...]
Assured of support from the European Community, particularly through completion of its internal energy market;
Aware of the obligations under major relevant multilateral agreements [...]
HAVE ADOPTED THE FOLLOWING DECLARATION CONSTITUTING THE "EUROPEAN ENERGY CHARTER"
Title I: Objectives
The signatories are desirous of improving security of energy supply [...].
Within the framework of State sovereignty and sovereign rights over energy resources and in a spirit of political and economic cooperation, they undertake to promote the development of an efficient energy market throughout Europe, and a better functioning global market, in both cases based on the principle of non-discrimination and on market-oriented price formation, taking due account of environmental concerns. They are determined to create a climate favourable to the operation of enterprises and to the flow of investments and technologies by implementing market principles in the field of energy.
To this end, and in accordance with these principles, they will take action in the following fields:
1. Development of trade in energy consistent with major relevant multilateral agreements [...]
2. Cooperation in the energy field, which will entail: [...]
- formulation of stable and transparent legal frameworks [...]
Title II: Implementation
[...] 4. Promotion and protection of investments
In order to promote the international flow of investments, the signatories will at national level provide for a stable, transparent legal framework for foreign investments, in conformity with the relevant international laws and rules on investment and trade. [...]"
86. Against this background, two elements incorporated expressly into the purpose of the Treaty through Article 2 ECT require particular emphasis.
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87. First, as quoted, the Charter (and consequently, the ECT) expressly acknowledges and respects the “support from the European Community” and “its internal energy market”. It follows that the purpose of the ECT cannot include to regulate or to affect matters regarding EU's internal energy market, including via the resolution of intra-EU energy disputes.
88. Secondly, the Charter expressly notes that it is “[a]ware of the obligations under major relevant multilateral agreements". It repeatedly emphasises that cooperation in the energy field will entail “formulation of stable and transparent legal frameworks" and, in accordance with these principles, the signatories will take action “consistent with major relevant multilateral agreements”. These features of the objectives and principles of the European Energy Charter, and thus of the ECT, are difficult to reconcile with any interpretation under which the ECT would create inter se obligations among EU Member States that conflict with EU law or the EU legal order, still less an interpretation under which any such conflict would be resolved by undermining the foundations of the EU Treaties.
89. These references demonstrate that, at the time of its conclusion, the ECT's drafters were perfectly aware that certain Contracting Parties were already engaged in a process of economic and legal integration exceeding the form of cooperation it envisaged. The ECT was intended to complement and extend cooperation, particularly in external relations and in relation to States undergoing market transition, rather than to duplicate or regulate the internal functioning of an existing supranational legal order.
90. The object and purpose of the ECT therefore support an interpretation that avoids construing it as establishing obligations capable of disrupting the internal legal relations of an integrated legal order expressly acknowledged by itself.
91. A further contextual instrument accepted by the other Contracting Parties (again, mandatory element to integrate in the interpretation, under Article 31(2)(b) VCLT) is the
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Statement submitted on 17 November 1997, at the time of ratification, by the European Communities to the Secretariat of the Energy Charter pursuant to Article 26(3)(b)(ii) ECT.44 As an instrument made in connection with the conclusion of the Treaty, the Statement forms part of the context and provides:
"The Communities and the Member States will, if necessary, determine among them who is the respondent party to arbitration proceedings initiated by an Investor of another Contracting Party. In such case, upon the request of the Investor, the Communities and the Member States concerned will make such determination.
The Court of Justice of the European Communities, as the judicial institution of the Communities, is competent to examine any question relating to the application and interpretation of the constituent treaties and acts adopted thereunder, including international agreements concluded by the Communities, which under certain conditions may be invoked before the Court of Justice."
92. This 1997 Statement explicitly supports a systemic interpretation to the terms of Article 26 ECT. The reference to “an Investor of another Contracting Party” in that sentence above must be, as a matter of logic and coherence, an Investor of a different Contracting Party which is not "[t]he Communities and the Member States”. It reflects a contemporaneous understanding that, where the Communities and their Member States act within the scope of transferred competences, questions concerning the application and interpretation of the Treaty fall within the EU legal order. The Statement thus presupposes an investor of “another Contracting Party" external to that integrated framework, reinforcing the conclusion that Article 26 ECT was neither designed nor understood to generate consent to arbitration for disputes arising exclusively within an REIO.
93. Moreover, the subsequent paragraph of the 1997 Statement affirms that the CJEU “is competent to examine any question relating to the application and interpretation of [...] international agreements concluded by the Communities, which under certain conditions may be invoked before the Court of Justice.” Therefore, this confirms that in the EU legal order, intra-EU, the CJEU is also competent to examine the application of the ECT. That
44 Article 26(3)(b)(ii) ECT established that all Contracting Parties listed in Annex ID had to provide, for transparency reasons, a written statement of their policies, practices and conditions which do not allow an investor to resubmit the same dispute to international arbitration at a later stage in accordance with Article 26(3)(b)(i) (“The Contracting Parties listed in Annex ID do not give such unconditional consent where the Investor has previously submitted the dispute under subparagraph (2)(a) or (b)"). ↩
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was the understanding of the Treaty accepted by all Contracting Parties, including non-EU States.
94. In accordance with the principles of good faith interpretation, systemic integration, and the presumption against conflict, Article 31 VCLT requires preference to be given to an interpretation that avoids forcing States into mutually inconsistent international obligations, where such an interpretation is available and consistent with the Treaty's text and purpose.
95. This interpretation is further confirmed by the Declaration of 15 January 2019, signed by 22 EU Member States,45 including the two States concerned in these proceedings, namely Germany (host State) and Ireland (home State). That Declaration may be characterised as both a “subsequent agreement” and “subsequent practice” within the meaning of Article 31(3)(a) and (b) VCLT. It reflects the authentic and shared understanding of both the home and host States in this arbitration, expressed years before the commencement of these proceedings, and reads as follows:
"International agreements concluded by the Union, including the Energy Charter Treaty, are an integral part of the EU legal order and must therefore be compatible with the Treaties. Arbitral tribunals have interpreted the Energy Charter Treaty as also containing an investor-State arbitration clause applicable between Member States. [...] Interpreted in such a manner, that clause would be incompatible with the Treaties and thus would have to be disapplied [...]."
96. For the sake of completeness, it should be noted that there is some doctrinal debate as to the scope of the term “parties” in Article 31(3)(a) and (b) VCLT in the context of multilateral treaties. While the ECT is indeed a multilateral treaty, the following considerations are relevant: (i) the obligations at issue in the present dispute are bilateral or reciprocal in nature; (ii) Article 26 ECT is premised on bilateral legal relationships between Contracting Parties and investors of other Contracting Parties; (iii) in an intra-EU dispute, EU law and its legal order constitute an essential element of that relationship;
45 RL-6, Declaration of the Member States of 15 January 2019 on the legal consequences of the Achmea judgment and on investment protection. ↩
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(iv) the dispute arises between an investor from one Contracting Party and the Contracting Party receiving the investment; and (v) other Contracting Parties are not affected by the dispute, its interpretation or its outcome.
97. Indeed, the provision at issue, Article 26 ECT, entitled “Settlement of Disputes between an Investor and a Contracting Party”, applies exclusively to “[d]isputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former” (Article 26(1) ECT). Accordingly, only two Contracting Parties are concerned in such a dispute: the home State of the Investor; and the host State of the investment.
98. The Award's analysis regarding the intra-EU objection proceeds on the assumption of a conflict between the ECT and EU law, rather than seeking first to interpret the Treaty in accordance with the VCLT. This is apparent from the structure of the reasoning: the Award initially seeks to resolve the presumed conflict (in the first section of its analysis) and only thereafter turns to consider whether Article 26 ECT contains consent to intra-EU investment arbitration. Notably, it devotes substantially more attention to the former exercise than to the latter.
99. In regard to Article 16 ECT, which the Award treats as resolving the presumed treaty conflict and which forms a pivotal element of its reasoning, the Award reads: “As stated in the prior decision in Vattenfall: ‘Article 16 [ECT] poses an insurmountable obstacle to Respondent's argument that EU law prevails over the ECT’. This is because EU law is subject to EU law dispute resolution and the ECT is subject to ECT dispute resolution."46
100. First, the Award fails to acknowledge that, if consent were accepted, EU law would in effect become subject to ECT dispute resolution even in an intra-EU dispute setting. Such
46 Award, ¶ 422. Footnote omitted. ↩
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a consequence would risk undermining the uniform application of EU law within the EU and the principle of equality before the law.
101. Secondly, in any event and in the alternative, I am not persuaded that, even assuming a conflict (quod non), Article 16 would be the governing conflict-resolution rule, displacing Article 30(4) VCLT, Article 351 TFEU,47 and the primacy of EU law.48
102. Thirdly, and critically, Article 16 ECT would only apply “where any such provision [of the ECT] is more favourable to the Investor or Investment” (Article 16(2)). It is neither evident, nor explained in the Award, why or how the protections afforded by the ECT would necessarily be “more favourable” than those available under the EU legal order. Not in general terms,49 and still less so in the particular circumstances of the present arbitration.
103. To recapitulate, two competing interpretations of the term “of another Contracting Party” in Article 26 ECT, regarding consent, may be identified and compared as follows:
| A) Isolated interpretation | B) Systemic interpretation |
47 For the reasoning by which Articles 30 VCLT, 16 ECT and 351 TFEU lead to the lack of jurisdiction, see Kohen Dissenting Opinion, ¶¶ 56-83. ↩
48 See the Agreement on the interpretation and application of the Energy Charter Treaty, Article 2.1.(b): "[T]he primacy of European Union law, recalled in Declaration No 17, annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, as a rule of international law governing conflict of norms in their mutual relations, with the result that, in any event, Article 26 of the Energy Charter Treaty does not and could not apply as a basis for intra-EU arbitration proceedings” (Official Journal of the European Union, 27 March 2026; ELI: http://data.europa.eu/eli/agree_internation/2026/757/oj). ↩
The Agreement on the interpretation and application of the Energy Charter Treaty also recalls that, in line with the case-law of the Permanent Court of International Justice (Permanent Court of International Justice, Question of Jaworzina (Polish-Czechoslovakian Frontier), Advisory Opinion, [1923] PCIJ Series B, No. 8, p. 37) and of the International Court of Justice (International Court of Justice, Reservations to the Convention on the Prevention and Punishment of the Crime of Genocide, Advisory Opinion, [1951] I.C.J. Reports, 15, p. 20), the right of giving an authoritative interpretation of a legal rule belongs to the parties to an international agreement in relation to that agreement.
49 See Kohen Dissenting Opinion, in particular ¶¶ 70–80. ↩
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| 1. Relies on an isolated reading of Article 26(1) ECT which disregards other relevant provisions and deprives central elements of the Treaty of legal effect. | 1. Is based on a comprehensive reading of Articles 1(1)-(3), 2, 25, and 26(1)-(6) ECT, taking into account the text, context, object and purpose of the Treaty. |
| 2. Contradicts the interpretation of the Contracting Parties concerned and compels States to disregard binding international obligations which the Treaty itself expressly recognises. | 2. Coincides with the interpretation of the Contracting Parties concerned, who can comply with their obligations in a harmonious manner. |
| 3. Creates unnecessary conflict between legal orders and fragmentation of international law, contrary to the interpretative framework established by the Vienna Convention. | 3. Acknowledges the systemic integration of international law (Article 31(3)(c) VCLT) and the application of relevant rules of international law to the dispute (Article 26(6) ECT). |
| 4. Jeopardises the EU legal order and its constitutional integrity. | 4. Respects the EU legal order, its constitutional nature and unique judicial system. |
| 5. Discriminates between EU investors of different Member States by allowing some EU investors to escape from the uniform interpretation of EU law while continuing to benefit from economic and political integration and EU rights. | 5. Guarantees equality before the law, gives effect to the rule of law, and preserves a level playing field where rights and obligations are aligned. |
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104. The five points compared above are not isolated criticisms; they form a single, integrated objection. Only the systemic interpretation gives full legal effect to the Treaty as a coherent instrument operating within the international legal system, rather than as a collection of disconnected clauses.
105. In light of the foregoing, I am inclined to opine that the interpretation which complies with the mandatory rule of treaty interpretation codified in Article 31 VCLT, namely, an interpretation that integrates good faith, text, context, object and purpose, together with any relevant rules of international law applicable in the relations between the parties, is the interpretation that does not find consent to intra-EU investor-State arbitration in the ECT.
106. The Tribunal has unanimously found that “this asset [the shares] was neither subject to a breach of the fair and equitable treatment standard nor impaired in breach of ECT Article 10"50 and it “does not accept that the Claimants discharged the necessary legal standard to establish expropriation".51
107. Further, the expropriation section of the Award states that “[w]hilst they did not lose their shares [...] they did lose the value of those shares",52 as if this could make a difference.
108. However, in my opinion, under the particular circumstances of the present case, any alleged loss of value of the shares would be, in any event, irrelevant. Indeed, I shall set out further reasons which, from different perspectives, exclude the existence of any expropriation. Before doing so, it is appropriate to recall certain aspects of the factual and legislative background.
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109. As observed by the Federal Constitutional Court (“Bundesverfassungsgericht” or “BVerfG”), the purpose of the WindSeeG was to expand the use of offshore wind energy in the interest of climate and environmental protection.
110. Prior to the entry into force of the disputed measures, the approval of offshore wind farms (“OWF”) within the exclusive economic zone (“EEZ”) was granted without any State site planning and without coordination with the construction of the grid connection. The WindSeeG has regulated the expansion of offshore wind energy in a manner that it is now preceded by State-managed site development and a central tender process. The construction of OWF, which would be futile in the absence of a connection to the electricity grid, and the expansion of the offshore transmission lines, are now coordinated.
111. The legislative objective was to enable a steady increase in the volume of climate-friendly wind energy produced on the sites of the EEZ that is economical and provides planning certainty. In pursuing that aim, the legislature assessed the projects by type on the basis of their proximity to the coast.
112. The Claimants' interests must be balanced against the public interests pursued by the change of the law. The weight to be accorded to the Claimants' interests may be assessed by reference to the scale of the investments made. The Claimants have incurred expenditure amounting to several million Euros in connection with their projects. However, the greater part of that expenditure relates to the exploration of sea areas and to the preparation of reports concerning soil and environmental conditions. That sum stands in marked contrast to the overall costs of constructing a wind farm, which are estimated to be between EUR 1 billion and EUR1.5 billion.
113. There are no serious doubts as to the proportionality of the measures. The approval regime pursues the objectives of environmental and climate protection, which are of particular importance. The legislature enjoys a broad margin of appreciation in discharging its
53 See RL-17 / C-21, German Federal Constitutional Court, Case Nos. 1 BvR 1679/17 and 1 BvR 2190/17, Decision, 30 June 2020 ("BVerfG June 2020 Decision”), ¶¶ 1–10, 29, 106, 132–133, and 165–171. ↩
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responsibility to promote the common good within its democratic responsibility. In particular, when introducing a new legal regime or amending existing legislation, the legislature is not obliged to insulate affected persons from every burden. Furthermore, in areas of law characterised by frequent or periodic legislative amendment, individuals cannot legitimately expect the same degree of legal stability as may exist in more settled fields of law.
114. Moreover, having regard to the complexity and dynamic nature of this regulatory field, legislative reform in relation to the construction of offshore wind farms was to be expected. Given the complex processes involved in the development of a wind farm and the necessary expansion of grid infrastructure, which require close coordination, it was reasonably foreseeable that a more coordinated and market-oriented approval system would be introduced. Accordingly, the Claimants’ prospects were uncertain from the outset.
(ii) No Liability Without Fault
115. In the context of that background, the Tribunal has found unanimously no breach of the ECT.
116. In particular, with regards to the FET standard contained in Article 10(1) ECT, the Award “considers that the dissenting opinion in Kruck v. Spain in 2022 is a valuable starting point for analysis”, an opinion that considers that “[n]o legal system imposes strict liability in damages for a breach of legitimate expectations; it is always based on fault” and that “[t]here is no reason in principle for international investment law to take a radically different approach”.54
117. In my view, two considerations are of particular relevance.
118. First, when addressing the issue of loss of value, it must be borne in mind that where a tribunal orders compensation for such loss, the loss does not thereby vanish (or, to adopt
54 Award, ¶¶ 897-898, quoting CL-359, Matthias Kruck and others v. Kingdom of Spain, ICSID Case No. ARB/15/23, Dissenting Opinion of Zachary Douglas, 13 September 2022 (“Douglas Dissenting Opinion”), ¶¶ 1-6. ↩
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the language of Chorzów Factory, is not “wiped out”). Rather, it is transferred from the investor to the taxpayers of the respondent State. It follows that strong legal grounds are required to justify such a transfer from one pocket to another. By way of reductio ad absurdum, it cannot be the case that every loss, however occasioned, is compensable. Only losses that are legally wrongful, i.e., those caused with fault, may properly found a claim to compensation.
119. Secondly, there exists a fundamental distinction between public law regulation and private law contract. The default position in respect of a private law contract is that it may not be altered unilaterally by either party. By contrast, the default position in respect of public regulation is that it may be amended unilaterally by the State in the exercise of its sovereign powers.55
120. In that regard, I agree that “there is no legal or moral justification for tribunals to redistribute public funds on this basis”,56 namely on the basis of strict liability akin to that applicable in private law (strict versus fault-based liability).
121. The same fault-based conception of liability may, in principle, be applied to the expropriation standard. It is for that reason that Prof. Douglas, in his dissent, observed: “The essence of my dissent is that a State can only be condemned to pay compensation on the basis of fault under Article 10 of the ECT (or indeed under any other investment protection obligation)”.57
122. By parity of reasoning, the absence of fault in the State’s conduct in the present case entails the absence of liability under the expropriation standard.
(iii) The State’s Right to Regulate and the Police Powers Doctrine
123. An essential attribute of a State’s sovereignty is its right to regulate its own society, economy and environment. Consequently, the host State’s sovereign right to regulate forms part of the legal framework within which an investor operates. It follows that
55 See CL-359, Douglas Dissenting Opinion, ¶¶ 28–30. ↩
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expropriation must be distinguished from legitimate, non-compensable regulatory measures.
124. Contrary to the so-called “sole effects” doctrine, the predominant line of reasoning in investment arbitration recognises the State’s right to regulate and the operation of its police powers. A mere loss in value is not sufficient to constitute expropriation. The depreciation of an investment resulting from regulatory measures adopted by the host State in the normal, bona fide, proportional and non-discriminatory exercise of its regulatory powers, for the benefit of the general interest, does not amount to expropriation. Were it otherwise, the host State’s right to regulate would be rendered illusory, since virtually every State measure has some adverse effect upon investments; it is impossible to avoid all depreciation of investments within the territory of a host State.
125. By way of illustration, the tribunal in Feldman v. Mexico, already in 2002, observed:58
“[G]overnments must be free to act in the broader public interest through protection of the environment, new or modified tax regimes, the granting or withdrawal of government subsidies, reductions or increases in tariff levels, imposition of zoning restrictions and the like. Reasonable governmental regulation of this type cannot be achieved if any business that is adversely affected may seek compensation, and it is safe to say that customary international law recognizes this.”
126. The Feldman award thus distinguished compensable measures from reasonable regulation as a matter of customary international law. In a similar vein, the tribunal in Methanex v. United States referred to general international law and identified three elements characteristic of non-compensable regulation: due process, non-discrimination and public purpose:59
“[A]s a matter of general international law, a non-discriminatory regulation for a public purpose which is enacted in accordance with due process and, which affects, inter alios a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given […].”
58 RL-202, Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 December 2002, ¶ 103. ↩
59 CL-181, Methanex Corporation v. United States of America, UNCITRAL/NAFTA, Final Award of the Tribunal on Jurisdiction and Merits, 3 August 2005, Part IV, Chapter D, ¶ 7. ↩
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127. More recent awards have referred to: (i) the interpretation of the treaty pursuant to Article 31(3)(c) VCLT; (ii) the State’s police powers under customary international law; and (iii) the requirements of bona fide conduct, due process, non-discrimination, proportionality and public purpose, in order to distinguish between indirect expropriation (or a compensable taking) and legitimate regulation under international law. The tribunal in Marfin v. Cyprus stated:60
“826. The Tribunal considers that the economic harm consequent to the non-discriminatory application of generally applicable regulations adopted in order to protect the public welfare do not constitute a compensable taking, provided that the measure was taken in good faith, complied with due process and was proportionate to the aim sought to be achieved.
827. In this respect, the Tribunal notes that […] the Treaty is drafted in broad terms and does not include any exception for the exercise of a State’s regulatory powers. However, the provisions of the Treaty must be interpreted in accordance with Article 31(3)(c) of the VCLT, i.e., in light of ‘[a]ny relevant rules of international law applicable in the relations between the parties’. These rules include customary international law.
828. While every application of a regulation that causes some economic damage to an investor could be seen as giving rise to a duty to compensate, under customary international law, a distinction exists between the reasonable bona fide exercise of police powers, which does not amount to a compensable taking, and indirect expropriation. The Tribunal thus aligns itself with the long line of arbitral awards finding that the characterization of a measure as expropriatory depends on the nature and purpose of the State’s action. In this respect, ‘[i]t is… established in international law that States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt in a non-discriminatory manner bona fide regulations that are aimed at the general welfare’.
829. The Tribunal further subscribes to the view that, ‘in order for a State’s action in exercise of regulatory powers not to constitute indirect expropriation, the action has to comply with certain conditions. Among those most commonly mentioned are that the action must be taken bona fide for the purpose of protecting the public welfare, must be non-discriminatory and proportionate.”
60 Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27, Award, 26 July 2018, ¶¶ 826–829 (available at: https://jusmundi.com/en/document/decision/en-marfin-investment-group-holdings-s-a-alexandros-bakatselos-and-others-v-republic-of-cyprus-award-redacted-thursday-26th-july-2018). ↩
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128. The Marfin tribunal also referred to seminal cases such as Saluka v. Czech Republic,61 Tecmed v. Mexico,62 Invesmart v. Czech Republic,63 and Philip Morris v. Uruguay. In the latter case, the tribunal held:64
“As indicated by earlier investment treaty decisions, in order for a State’s action in exercise of regulatory powers not to constitute indirect expropriation, the action has to comply with certain conditions. Among those most commonly mentioned are that the action must be taken bona fide for the purpose of protecting the public welfare, must be non-discriminatory and proportionate.”
129. In the present case, the WindSeeG 2017 pursued genuine and legitimate public interests, namely the expansion of offshore wind energy in order to provide a secure, efficient and environmentally compatible grid-based supply of electricity to the general public. It therefore pursued legitimate policy objectives and was enacted for a valid public purpose. The expansion is now being carried out in an orderly and technically feasible manner, and the prioritisation of zones closer to the shore facilitates grid connection and contributes to the effective operation of offshore wind farms. In conclusion, the Respondent’s disputed measures consisted of a series of bona fide regulatory acts adopted in the public interest of ensuring reliable offshore wind energy.
(iv) The Lack of FET Breach Precludes Expropriation
130. An additional perspective is to consider the relationship between the FET standard and expropriation. Although being two conceptually separate treaty protection standards, frequently their analysis overlaps in practice.
131. In short, if the State has not breached the FET standard, it follows, a fortiori, that it has not expropriated the investment. If no breach of FET can be established in the present case, it is even less tenable to suggest that an expropriation has occurred, particularly in
61 CL-39, Saluka Investments BV v. Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006. ↩
62 CL-37, Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, 29 May 2003. ↩
63 RL-159, Invesmart v. Czech Republic, UNCITRAL, Award, 26 June 2009. ↩
64 RL-178, Philip Morris Brand SARL, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016, ¶ 305. ↩
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circumstances where they retain full control of the asset that constitutes the investment (the shares in this case).
132. The Award concludes that the applicable legal standard for breach of FET arising out of a change in the legal and regulatory framework “requires legitimate expectations based on a specific commitment, which the host State harmed by regulating in a manner that lacked proportionality, transparency, was in bad faith, or otherwise based on respondent fault”.65
133. After carefully assessing the factual matrix of this case, the Award has unanimously found “that there were no specific commitments” and that “[e]ven if that were not the case, the Tribunal would have found there to have been no lack of proportionality, transparency or good faith, or other fault, giving rise to breach of fair and equitable treatment”.66
134. When the facts are examined through the lens of the FET standard and are found to disclose no wrongfulness, they cannot amount to expropriation, whether individually or cumulatively. Indeed, measures which are reasonable, and consistent with FET cannot properly be characterised as measures tantamount to expropriation.
135. This approach is reflected in del Valle v. Spain, where the tribunal held:67
“755. [T]he Claimants not having shown that Spain carried out a formal taking of the Claimants’ investments, as the notion of direct expropriation normally requires.
[...]
758. […] [T]he measures alleged to constitute a creeping expropriation are those also invoked in support of a breach of FET. This being so, the Tribunal’s analysis may be relatively brief, as it has already examined each of these acts in the context of FET and found that none of them was illegitimate, unreasonable or otherwise contrary to FET. It is true that, in a creeping expropriation, the single acts composing the expropriation do
67 Antonio del Valle Ruiz and others v. Kingdom of Spain, PCA Case No. 2019-17, Final Award, 13 March 2023, ¶¶ 755, 758, and 763–764 (available at: https://jusmundi.com/en/document/decision/en-antonio-del-valle-ruiz-et-al-v-kingdom-of-spain-wednesday-26th-june-2019#lvl_355418). ↩
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not need to be expropriatory in themselves, because it is their combination that results in an expropriation. However, in the Tribunal’s opinion, a combination of legitimate acts cannot, without more, amount to an expropriation. Here, the Tribunal has held in its analysis of FET that none of the acts complained of could be validly challenged. It is thus difficult to see how the sum of these acts could constitute a ‘measure equivalent to expropriation’ within the meaning of […] the Treaty.
[...]
763. A further reason lies in the fact that the resolution was a valid exercise of police powers for which no compensation is required. […]
764. Under the circumstances, the resolution […] constituted an exercise of regulatory powers for a legitimate and urgent purpose. If an administrative action like the resolution of Banco Popular could, without more, be deemed a ‘measure equivalent to an expropriation’, then the complex legal framework on the recovery and resolution of credit institutions would be undermined and resolution authorities would be precluded or severely limited in the exercise of their powers.”
136. The final paragraph cited above reflects the broader reasoning that an exclusive focus on the sole effects would risk undermining the State’s right to regulate and unduly constraining its police powers. In the same vein, in the present case, to characterise the exercise of the State’s regulatory powers pursued for the legitimate objective of promoting the efficient generation of clean wind energy as a measure tantamount to expropriation would similarly undermine, or severely restrict, the State’s right (and indeed duty)68 to regulate in furtherance of the necessary energy transition.
137. Lastly, in Discovery Global v. Slovak Republic, the tribunal addressed claims advanced in parallel under the FET and expropriation standards and, having rejected the FET claim, proceeded to examine expropriation. It began by noting that the claimant retained ownership of its shares. In those circumstances, and having already rejected the FET
68 See, e.g., CL-375, Advisory Opinion of 23 July 2025 of the International Court of Justice on the Obligations of States in Respect of Climate Change. In addressing the content of the customary duty to prevent significant harm to the environment, the Court made clear that the obligation extends to the climate system and entails concrete regulatory duties. In particular, at ¶¶ 280–282, it opines that due diligence means that States must “put in place a national system, including legislation, administrative procedures and an enforcement mechanism necessary to regulate the activities in question, and … exercise adequate vigilance to make such a system function efficiently, with a view to achieving the intended objective” quoting the 2024 Advisory Opinion of the International Tribunal for the Law of the Sea (ITLOS) on Climate Change, ITLOS Reports 2024, p. 89, ¶ 235. ↩
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claim in respect of the same measures, the tribunal concluded that no expropriation had occurred:69
“691. The Tribunal starts by noting that Discovery still owns the shares in AOG and that AOG relinquished the Medzilaborce and Snina Exploration Licenses in April 2018 and did not seek an extension of the Svidník Exploration License, which expired in July 2021.
692. The measures which the Claimant impugns here are the same measures of which it complained in the context of its FET, arbitrary and discriminatory treatment, and effective means claims. All of these measures have been extensively examined above and none has been held to rise to the level of a treaty breach. For reasons of judicial economy, the Tribunal refers to its discussion above. A measure that does not breach FET or a similar standard cannot conceivably constitute an expropriation. The same is true of the cumulative effect of a series of measures. If none represents a breach individually, their addition will not turn them into a breach. Or, differently put, adding zeros will still give zero.”
138. The present situation is analogous. First, the Claimants continue to own the shares, which constitute their only investment (and they neither obtained a licence or permit, nor sought to participate in the relevant tender). Secondly, the measures relied upon in support of the expropriation claim are identical to those advanced under the FET claim. Thirdly, a detailed and granular analysis of the FET standard has led to the conclusion that no breach has been established.
139. Under those circumstances, measures that do not breach the FET standard cannot conceivably constitute an expropriation. Moreover, if none of the disputed measures amounts to a breach individually, their aggregation cannot transform them into one. As the above-quoted paragraphs reflect, the sum of zeros remains zero.
***
69 Discovery Global LLC v. Slovak Republic, ICSID Case No. ARB/21/51, Award, 17 January 2025, ¶¶ 691–692 (available at: https://jusmundi.com/en/document/decision/en-discovery-global-llc-v-slovak-republic-award-friday-17th-january-2025#decision_71722). ↩
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ICSID 21/26-CDO
[signed]
Signature
Mr. Antolín Fernández Antuña
Arbitrator
Date: 13 MAY 2026