INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
1818 H STREET, NW | WASHINGTON, DC 20433 | USA
TELEPHONE +1 (202) 458 1534 | FACSIMILE +1 (202) 522 2615
WWW.WORLDBANK.ORG/ICSID
CERTIFICATE
SEVILLA BEHEER B.V. AND OTHERS
v.
KINGDOM OF SPAIN
(ICSID CASE NO. ARB/16/27)
ANNULMENT PROCEEDING
I hereby certify that the attached documents are true copies of the English and Spanish versions of the ad hoc Committee's Decision on Annulment dated 11 June 2025.
Signature
Martina Polasek
Secretary-General
Washington, D.C., 11 June 2025
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
In the annulment proceeding between
Sevilla Beheer B.V. and others
and
Kingdom of Spain
ICSID Case No. ARB/16/27
Members of the ad hoc Committee
Mr. Fernando Piérola-Castro, President of the ad hoc Committee
Ms. Bertha Cooper-Rousseau, Member of the ad hoc Committee
Ms. Louise Reilly SC, Member of the ad hoc Committee
Secretary of the ad hoc Committee
Ms. Anna Toubiana
Date of dispatch to the Parties: 11 June 2025
[Page i]
REPRESENTATION OF THE PARTIES
| Representing Sevilla Beheer B.V. and others: | Representing the Kingdom of Spain: |
| Ms. Marie Stoyanov A&O Shearman 32 Rue François 1er 75008 Paris France Mr. Antonio Vázquez-Guillén Mr. Pablo Torres Mr. Gary Smadja Ms. Lucinda Critchley Ms. Tatiana Olazábal A&O Shearman Serrano 73 28006, Madrid Spain |
Ms. María Andrés Moreno Mr. Guillermo Blanco Cenjor Mr. Jaime Campmany Márquez de Prado Ms. Inés Guzmán Gutiérrez Ms. Lourdes Martínez de Victoria Gómez Ms. Amparo Monterrey Sánchez Ms. Amparo Sánchez Aguilar Ms. Elena Oñoro Sainz Ms. Marina Adela Porta Serrano Mr. Eduardo Tahoces López Abogacía General del Estado Departamento de Arbitrajes Internacionales c/ Marqués de la Ensenada, 14-16, 2ª planta 28004, Madrid Spain |
[Page ii]
1 Application for Annulment, ¶¶ 59 and 61(b). ↩
[Page 2]
Bahamas; and Ms. Louise Reilly SC, a national of Ireland. Ms. Anna Toubiana, ICSID Legal Counsel, was designated to serve as Secretary of the Committee.
5. On 14 November 2023, the Committee informed the Parties that, pursuant to Arbitration Rule 54(2), it extended the stay of the enforcement of the Award until it reached a final decision on the continuation of the stay of enforcement. It further invited the Parties to confer regarding the timetable for the exchange of relevant written submissions (and the number of such submissions).
6. On 20 November 2023, the Parties informed the Committee that they had agreed to exchange four written submissions regarding Spain’s request for the stay of the enforcement of the Award and proposed a filing calendar.
7. On 27 November 2023, the Committee informed the Parties that it had adopted as its own the calendar agreed by them.
8. On 20 December 2023, Spain submitted its Application for Continuation of the Stay of Enforcement of the Award.
9. On 9 January 2024, the Committee held a First Session with the Parties by video conference. An audio recording of the session was distributed to the Parties and the Members of the Committee. During the First Session, the Committee and the Parties considered: (i) the draft procedural order circulated by the Secretary of the Committee on 27 November 2023; and (ii) the Parties’ comments and respective positions on the draft procedural order submitted on 7 December 2023. The Parties also confirmed the proper constitution of the Committee and a timetable for the proceeding.
10. On 15 January 2024, the Committee issued Procedural Order No. 1 (“PO1”) governing the procedural matters of the annulment proceeding, including the calendar for the filing of submissions and the conduct of the hearing.
11. On 18 January 2024, Sevilla filed its Response to the Application for the Continuation of the Stay of Enforcement of the Award.
[Page 3]
12. On 1 February 2024, Spain filed its Reply on the same matter.
13. On 15 February 2024, Sevilla filed its Rejoinder on the same matter.
14. On 8 March 2024, Spain submitted its Memorial on Annulment (“Spain’s Memorial”).
15. By letters of 2 and 11 April 2024, Sevilla raised observations, pursuant to Sections 15.3 and 15.4 of PO1, to the submission of certain documents with Spain’s Memorial.
16. On 5 April 2024, Spain submitted a response to Sevilla’s observations.
17. On 3 May 2024, Sevilla filed its Counter-Memorial on Annulment (“Sevilla’s Counter-Memorial”).
18. On 6 May 2024, Spain requested leave, pursuant to Section 15.4 of PO1, to submit an expert report on European Union (“EU”) law.
19. On 9 May 2024, Sevilla submitted observations to Spain’s request for the submission of an EU law expert report.
20. On 20 May 2024, the Committee issued Procedural Order No. 2 admitting certain documents identified as legal authorities and rejecting others identified as exhibits or legal authorities.
21. On 20 May 2024, the Committee issued Procedural Order No. 3 authorizing Spain to submit the expert report requested.
22. On 20 May 2024, the Committee issued its Decision on the Stay of Enforcement of the Award, lifting the stay of enforcement with immediate effect as of the date of the decision.
23. On 12 June 2024, Spain requested a postponement in the next steps of the procedural calendar. On 17 June 2024, Sevilla agreed to the requested postponement.
24. On 6 September 2024, Spain filed its Reply on Annulment (“Spain’s Reply”). Together with it, Spain also filed the Expert Declaration of Professor Steffen Hindelang on EU law
[Page 4]
(“Spain’s Expert” and the “Expert Report”). Spain also requested leave to introduce certain documents with both submissions.
25. On 13 September 2024, the European Commission (“EC”) submitted an Application for Leave to Intervene as Non-Disputing Party in the Annulment Proceedings (“EC Application”).
26. On 16 September 2024, Sevilla submitted its observations to Spain’s request for leave to introduce new documents with its Reply and the Expert Report.
27. On 20 September 2024, Spain submitted its comments on Sevilla’s observations regarding the submission of new documents with Spain’s Reply.
28. On 20 September 2024, both Parties submitted their comments on the EC Application.
29. On 23 September 2024, Sevilla submitted its reply to Spain’s comments regarding the submission of new documents with Spain’s Reply.
30. On 29 October 2024, the Committee issued Procedural Order No. 4 authorizing the admittance of certain documents as legal authorities and rejecting the submission of others submitted with Spain’s Reply and the Expert Report.
31. On 29 October 2024, the Committee issued Procedural Order No. 5 rejecting the EC Application.
32. On 15 November 2024, Sevilla submitted its Rejoinder on Annulment (“Sevilla’s Rejoinder”).
33. On 12 December 2024, the Parties and the Committee held a pre-hearing organizational meeting to discuss the proposed Procedural Order No. 6 on the organization of the hearing. On the same date, the Committee issued that Order.
34. On 21 January 2025, the Parties and the Committee held the Hearing in person and virtually, at the Paris Arbitration Center by Delos in Paris. The Parties agreed not to file post-hearing submissions.
[Page 5]
35. On 17 February 2025, the Parties filed their submissions on costs.
36. The proceeding was closed on 20 May 2025.
37. The Committee proceeds below with its assessment of the case.
38. Spain’s Application for Annulment has been filed pursuant to Article 52(1)(b) of the ICSID Convention. Spain claims that the Tribunal manifestly exceeded its powers in its Award by,
(i) asserting jurisdiction despite the applicability of EU law, and
(ii) failing to apply the correct law, i.e., in Spain’s view, EU law.
39. The Committee proceeds to address first preliminary issues that the Parties have raised and the question of the applicable legal standard on annulment. It addresses subsequently the main claims on annulment.
40. In this section, the Committee addresses the various legal issues that the Parties have raised regarding the scope of this proceeding and the applicable legal standard to evaluate the merits of the annulment request.
41. Spain claims that the Committee has the authority to determine the annulment of the Award even on grounds other than those raised by the Parties.2 Sevilla opposes that claim, arguing that it would be procedurally improper for the Committee to proceed as Spain requests. In particular, Sevilla indicates that if the Committee proceeded as suggested by
2 Spain’s Memorial, ¶ 343; Spain’s Reply, ¶ 197. ↩
[Page 6]
Spain, Sevilla would never have an opportunity to respond to issues that Spain has not raised.3
42. The Committee agrees with Sevilla. Given the exceptional character of an annulment proceeding under Articles 52(1) and 53 of the ICSID Convention, the annulment review in this case is confined to those specific grounds raised by Spain in its Application for Annulment and subsequent submissions.
43. Spain submits that if the Committee finds grounds for annulment, it is obliged to annul the Award. To the contrary, Sevilla argues that the Committee has discretion not to annul the Award even if it finds reasons to do so.4
44. The Committee considers that it need not take a position on this matter unless it upholds any of Spain’s claims based on the assessment below.
45. The Parties agree that this proceeding has a limited scope and is not an appeal on the substance of the Award.5 Sevilla notes however that reviewing the underlying Tribunal’s findings suggests a quality control that would convert an annulment proceeding into an appeal,6 and that Spain’s annulment application, including Professor Hindelang’s expert report on the law of the EU, essentially acts as an appeal inconsistent with the ICSID Convention.7 Spain questions Sevilla’s use of the term “appeal.” It urges the Committee to engage with the substance of Spain’s case and not to be misled by Sevilla’s repetitive use of that term.8
3 Sevilla’s Rejoinder, ¶¶ 41-43. ↩
4 Sevilla’s Rejoinder, ¶¶ 44-49. ↩
5 Sevilla’s Counter-Memorial, ¶ 23; Spain’s Reply, ¶ 12. ↩
6 Sevilla’s Counter-Memorial, ¶¶ 64-65, relying on Iberdrola Energía, S.A. v. Republic of Guatemala, ICSID Case, No. ARB/09/5, Decision on the Request for Annulment of the Award Submitted by Iberdrola Energía, S.A., 13 January 2015 (RL-0196), ¶ 98; and OI European Group B.V. v Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment of the Bolivarian Republic of Venezuela, 6 December 2018 (CL-0199), ¶ 186. ↩
7 Sevilla’s Rejoinder, ¶¶ 8, 72. ↩
8 Spain’s Reply, ¶ 12. ↩
[Page 7]
46. The Committee understands the concern that reviewing the underlying Tribunal’s findings could risk turning an annulment review into an appeal, which is expressly prohibited by Article 53(1) of the ICSID Convention. However, as demonstrated below, this has not occurred in this proceeding. The Committee further considers that the standard of review cannot be one of full deference nor one of appellate scrutiny. Accordingly, the Committee has thus conducted an objective assessment of the Tribunal’s conduct in light of the specific grounds for annulment raised by Spain under Article 52(1) of the ICSID Convention.
47. The Committee has examined the relevant findings of the Tribunal to assess whether the Tribunal manifestly exceeded its powers within the meaning of Article 52(1)(b) of the ICSID Convention. The Committee does not find it necessary to rule on whether Spain’s claims amount to an appeal, as they will, in any event, be assessed under the more stringent annulment standard applicable in this proceeding – i.e. whether the Tribunal committed a “gross” or “egregious” error in applying the appropriate law that amounts to a failure to apply that law.
48. Spain notes that a manifest excess of powers exists when a tribunal acts beyond its own jurisdiction.9 That excess may result from the misapplication of the appropriate law “so gross or egregious as substantially to amount to failure to apply the proper law:”10 for example if the tribunal “did not effectively apply the principles it recognized,”11 “in fact
9 Spain’s Reply, ¶ 15. ↩
10 Spain’s Memorial, ¶¶ 60-61, citing Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, 5 June 2007 (RL-0078), ¶ 86; Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, 29 June 2010 (RL-0151), ¶¶ 164-165; M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Decision on Annulment, 19 October 2009 (RL-0207), ¶¶ 43, 49, 51; Occidental Petroleum Corporation & Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment of the Award, 2 November 2015 (RL-0195), ¶ 56; Spain’s Reply, ¶ 33. ↩
11 Spain’s Memorial, ¶ 62, relying on Iberdrola Energía, S.A. v. Republic of Guatemala, ICSID Case, No. ARB/09/5, Decision on the Request for Annulment of the Award Submitted by Iberdrola Energía, S.A., 13 January 2015 (RL-0196), ¶ 97, citing Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, 5 June 2007 (RL-0078), ¶ 86; and Klöckner ↩
[Page 8]
applies a different standard,”12 or “applies standards that are not included in th[e relevant] provision.”13 Sevilla agrees that a manifest excess of powers may exist “where the court does not apply the appropriate law.”14 However, it notes that such an error must consist of “a gross or egregious misapplication of the law,”15 which is an “exceptional circumstance” that imposes a “very high” threshold that Spain has to meet.16 Respecting the principle of Kompetenz-Kompetenz, “it is only where the Tribunal’s jurisdictional decision is untenable or unreasonable,” that an award may be annulled.17
49. Sevilla notes that Spain’s Expert Report submits that the governing standard of this annulment proceeding is contained in EU law and that the finality of ICSID awards is displaced by the need for consistency of awards with EU law.18 Spain states that the interpretation of the annulment standard under the ICSID Convention must be governed by Article 31 of the Vienna Convention on the Law of Treaties (VCLT), and given that EU law is part of the applicable law, it must also be interpreted in line with EU law.19 In turn, Spain’s Expert states that the Committee must apply EU law in this proceeding either through: (i) an interpretation of Article 52(4) in conjunction with Articles 42(1) or 44 of the ICSID Convention; (ii) the EU Treaties themselves; (iii) the assumption that the EU Treaties have modified the ICSID Convention between EU member States only; (iv) the use of the principle of primacy of EU law in the interpretation of Article 52; or (v) the
Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Decision on the Application for Annulment Submitted by Klöckner, 3 May 1985 (RL-0208), ¶ 79.
12 Spain’s Memorial, ¶ 65, relying on Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, 29 June 2010 (RL-0151), ¶¶ 208-209. ↩
13 Spain’s Memorial, ¶ 67, relying on Enron Creditors Recovery Corp. and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic, 30 July 2010 (RL-0211), ¶ 377; Venezuela Holdings B.V. and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Annulment, 9 March 2017 (RL-0212), ¶¶ 179-188. ↩
14 Sevilla’s Counter-Memorial, ¶ 40, citing Spain’s Memorial, ¶ 59. ↩
15 Sevilla’s Counter-Memorial, ¶ 62. ↩
16 Sevilla’s Counter-Memorial, ¶ 62; Sevilla’s Rejoinder, ¶¶ 60-61. ↩
17 Sevilla’s Counter-Memorial, ¶ 52, relying on OI European Group B.V. v Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment of the Bolivarian Republic of Venezuela, 6 December 2018 (CL-0199), ¶¶ 182-183. ↩
18 Sevilla’s Rejoinder, ¶¶ 25 and following. ↩
19 Spain’s Answer to the Tribunal’s Question 1, transcript from the Hearing, at p. 145. ↩
[Page 9]
consideration of the Judgements of the Court of Justice of the European Union (CJEU) as binding on the Committee.20
50. The Committee notes that the Parties agree that a claim of a manifest excess of powers based on the alleged misapplication of the applicable law must involve an error so gross or egregious that it substantially amounts to a failure to apply the proper law. The Parties use the terms “appropriate,” “proper” or “applicable” interchangeably, and the Committee understands these terms refer to the “applicable law” in the relevant context – i.e. either for the determination of jurisdiction or for the assessment of the merits. The Parties thus agree that the relevant standard in this dispute implies that:
(i) the misapplication of the law must involve errors “so gross or egregious” that they substantially amount to a “failure to apply the proper law,”21
(ii) such errors must be clearly distinguishable from “simple” errors in the application of the law.22
51. Regarding the position of Spain’s Expert, the Committee notes that Spain endorses the Expert Report as “an inseparable and necessarily complementary part of” Spain’s Reply.23 However, Spain has not explained how the Expert’s position aligns with Spain’s stance that the manifest excess of powers must be assessed based on a gross error in the application of the appropriate law. In any event, the Committee rejects the suggested reading of EU law into Article 52(1) of the ICSID Convention, finding no basis for it. Unlike arbitral tribunals, annulment committees are not concerned with determining the “applicable law” to the merits of a case under Article 42(1). This proceeding is governed by Article 52, which establishes a closed list of five annulment grounds, agreed upon by all ICSID Contracting Parties, including Spain and the Netherlands, to regulate annulment reviews of arbitral awards within the ICSID system. This is the “applicable law” governing this
20 Expert Report, ¶¶ 124-157. ↩
21 Spain’s Memorial, ¶¶ 60-61; Spain’s Reply, ¶ 33; Sevilla’s Counter-Memorial, ¶ 62. ↩
22 Spain’s Memorial, ¶ 61, citing Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, 5 June 2007 (RL-0078), ¶ 86; Sevilla’s Answer to the Tribunal’s Question 4, transcript from the Hearing, at p. 152. ↩
23 Spain’s Reply, ¶ 9. ↩
[Page 10]
proceeding, and Spain has not explained how EU law, as the applicable public international law of a superior rank between EU member States, could replace or complement Article 52(1) with rules for the conduct of “annulment” in the ICSID context.
52. Furthermore, as presented by Spain, the principle of primacy of EU law is a conflict rule that applies when two legal regimes are in conflict, one of which is EU law. Spain has failed to indicate any provision of EU law that would conflict with the five annulment grounds listed in Article 52(1), thus making the principle of primacy of EU law applicable in the annulment context. Additionally, the argument that the ICSID Convention has been modified by EU law appears to be based solely on the Expert Report, with no legal instrument submitted to the Committee to this effect or any notification of modification procedures under Article 65 of the ICSID Convention by EU member States.
53. Regarding the Expert’s assertion that the Committee is bound by the CJEU’s jurisprudence, the Committee notes that under public international law, international judicial decisions are a subsidiary means for the determination of rules of law,24 and the Expert himself acknowledges that there is no system of precedent in public international law.25 In any event, the Committee’s authority derives from Article 52 of the ICSID Convention, not from EU law.
54. Sevilla argues that Spain omits to mention that the excess of powers must be “manifest,”26 which means “clearly discernible from the award.”27 Extensive argumentation, elaborate
24 Statute of the International Court of Justice, Article 38.1: The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply: a. international conventions, whether general or particular, establishing rules expressly recognized by the contesting states; b. international custom, as evidence of a general practice accepted as law; c. the general principles of law recognized by civilized nations; d. subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law. ↩
25 Cross Examination of Spain’s Expert, transcript of the Hearing, p. 107. ↩
26 Sevilla’s Counter-Memorial, ¶ 40. ↩
27 Sevilla’s Counter-Memorial, ¶ 44, citing Alapli Elektrik B.V. v Republic of Turkey, ICSID Case No. ARB/08/13, Decision on Annulment, 10 July 2014 (CL-0301), ¶¶ 230-231; CDC Group plc v. Republic of Seychelles, ICSID Case No. ARB/02/14, Decision on Annulment, 29 June 2005 (CL-0267), ¶ 41; Wena Hotels Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on the Application by the Arab Republic of Egypt for Annulment of ↩
[Page 11]
interpretations or the assessment of evidence to demonstrate that “excess” would show that the alleged excess is not “manifest.”28 The review should be limited to establishing whether the tribunal’s findings are tenable; not whether they are “correct.”29 Spain replies that the term “manifest” must be interpreted in accordance with its ordinary meaning in the light of the context and object and purpose of the treaty.30
55. The Committee agrees with both Parties. It further clarifies that the term “manifest [excess]” must be understood in light of the “exceptional” nature of annulment proceedings.31 The excess of powers concerned must be evident and speak for itself. An alleged excess that appears “debatable” or “possible” would not meet the threshold for being manifest. Similarly, a tribunal’s conduct that could be considered “reasonable” or “tenable” in the light of the surrounding circumstances would not qualify as a manifest excess of powers.32
56. Spain notes that annulment committees have interpreted the applicable standard in different ways. In this sense, the Committee must take its own position in the light of the rulings of relevant annulment committees, such as those that Spain refers to as follows:
the Arbitral Award, 5 February 2002 (CL-0284-ENG), ¶ 25; Daimler Financial Services A.G. v. Argentine Republic, ICSID Case No. ARB/05/1, Decision on Annulment, 7 January 2015 (CL-0313-ENG), ¶ 186; OI European Group B.V. v Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment of the Bolivarian Republic of Venezuela, 6 December 2018 (CL-0199), ¶ 187.
28 Sevilla’s Counter-Memorial, ¶¶ 46-49, relying on Wena Hotels Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on the Application by the Arab Republic of Egypt for Annulment of the Arbitral Award, 5 February 2002 (CL-0284), ¶ 25; Tenaris S.A. and Talta - Trading e Marketing Sociedade Unipessoal Lda. v. Bolivarian Republic of Venezuela (II), ICSID Case No. ARB/12/23, Decision on Annulment, 28 December 2018 (CL-0203), ¶¶ 77, 80; and NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Annulment, 18 March 2022 (CL-0205), ¶ 233. ↩
29 Sevilla’s Rejoinder, ¶ 51. ↩
30 Spain’s Reply, ¶ 34. ↩
31 ICSID Convention, Articles 52(1) and 53(1). ↩
32 See, OI European Group B.V. v Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment of the Bolivarian Republic of Venezuela, 6 December 2018 (CL-0199), ¶¶ 182-183. ↩
[Page 12]
33 Spain’s Reply, ¶ 20, citing Amco Asia Corporation, et al. v. Republic of Indonesia, ICSID Case No. ARB/81/1, Decision on the Application for Annulment, 16 May 1986 (RL-0210), ¶ 23. ↩
34 Spain’s Reply, ¶ 21, citing Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Decision on the Application for Annulment Submitted by Klöckner, 3 May 1985 (RL-0208), ¶ 22. ↩
35 Spain’s Reply, ¶ 22; Compañía de Aguas del Aconquija S.A. and Vivendi Universal (formerly Compagnie Générale des Eaux) v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002 (CL-0305), ¶ 115. ↩
36 Spain’s Reply, ¶ 23, citing Mr. Patrick Mitchell v. The Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2006 (RL-0227), ¶¶ 46-47. ↩
37 Spain’s Reply, ¶ 24, citing Enron Creditors Recovery Corp. and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic, 30 July 2010 (RL-0211), ¶ 67, 68. ↩
38 Spain’s Reply, ¶ 25, citing Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, 29 June 2010 (RL-0151), ¶¶ 164-165. ↩
[Page 13]
39 Spain’s Reply, ¶ 26, citing Malaysian Historical Salvors SDN BHD (“MHS”) v. The Government of Malaysia, ICSID Case No. ARB/05/10, Decision on the Request for Annulment, 16 April 2009 (RL-0234), ¶ 80. ↩
40 Spain’s Reply, ¶ 27, citing Helnan International Holtes A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Decision of the ad hoc Committee, 14 June 2010 (RL-0205), ¶¶ 40, 41. ↩
41 Spain’s Reply, ¶ 28, citing Occidental Petroleum Corporation & Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment of the Award, 2 November 2015 (RL-0195), ¶ 56, 59. ↩
42 Spain’s Reply, ¶ 31, citing Venezuela Holdings B.V. and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Annulment, 9 March 2017 (RL-0212), ¶ 188(a). ↩
43 Spain’s Reply, ¶ 32, citing Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, 5 June 2007 (RL-0078), ¶ 86. ↩
[Page 14]
57. Sevilla notes that most committees have interpreted the term “manifest” as meaning clear, self-evident, or obvious from a plain reading of the award, including those in UP and C.D., Antin, SolEs Badajoz, and NextEra.46 In the light of Tenaris II and other cases, Sevilla questions Spain’s submission that extensive argumentation and analysis do not preclude a finding of a manifest excess of powers.47 Sevilla also notes that the annulment decisions invoked by Spain have been either discredited or are completely unrelated to the facts at issue.48 Sevilla criticizes four decisions referred to by Spain as straying beyond the boundaries of annulment (Amco I, Klöckner I, Enron, and Sempra). In addition, Sevilla notes that:
44 Spain’s Reply, ¶ 32, citing M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Decision on Annulment, 19 October 2009 (RL-0207), ¶ 43. ↩
45 Spain’s Reply, ¶ 32, citing Víctor Pey Casado and Foundation Presidente Allende v. Republic of Chile, ICSID Case No. ARB/98/2, Decision on the Application for Annulment of the Republic of Chile, 18 December 2012 (RL-0197), ¶ 70. ↩
46 Sevilla’s Rejoinder, ¶ 54. ↩
47 Sevilla’s Rejoinder, ¶ 56. ↩
48 Sevilla’s Counter-Memorial, ¶ 66. ↩
49 Sevilla’s Rejoinder, ¶ 63(a), citing Amco Asia Corporation, et al. v. Republic of Indonesia, ICSID Case No. ARB/81/1, Decision on the Application for Annulment, 16 May 1986 (RL-0210), ¶ 23. ↩
[Page 15]
50 Sevilla’s Rejoinder, ¶ 63(b), citing Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Decision on the Application for Annulment Submitted by Klöckner, 3 May 1985 (RL-0208), ¶ 52(e). ↩
51 Sevilla’s Rejoinder, ¶ 63(c), citing Enron Creditors Recovery Corp. and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic, 30 July 2010 (RL-0211), ¶ 68. ↩
52 Sevilla’s Rejoinder, ¶ 63(d), citing Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, 29 June 2010 (RL-0151), ¶¶ 164-165. ↩
53 Sevilla’s Rejoinder, ¶ 64, citing Compañía de Aguas del Aconquija S.A. and Vivendi Universal (formerly Compagnie Générale des Eaux) v. Argentine Republic, ICSID CaseNo. ARB/97/3, Decision on Annulment, 3 July 2002 (CL-0305), ¶ 112; and Malaysian Historical Salvors SDN BHD (“MHS”) v. The Government of Malaysia, ICSID Case No. ARB/05/10, Decision on the Request for Annulment, 16 April 2009 (RL-0234), ¶ 80. ↩
54 Sevilla’s Rejoinder, ¶ 65(a), citing Mr. Patrick Mitchell v. The Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2006 (RL-0227), ¶ 46. ↩
55 Sevilla’s Rejoinder, ¶ 65(b), citing Helnan International Holtes A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Decision of the ad hoc Committee, 14 June 2010 (RL-0205), ¶ 55. ↩
[Page 16]
corresponded to a non-protected investor.56 In Venezuela Holdings, the committee annulled the award because the tribunal had applied customary international law instead of the relevant international instrument.57
58. The Committee acknowledges the decisions cited by the Parties. While these decisions are not binding on it, the Committee will refer to them, if necessary, when evaluating the merits of the case.
59. Spain submits that the Tribunal manifestly exceeded its powers by asserting jurisdiction in the dispute. Pursuant to Article 25 of the ICSID Convention, an ICSID tribunal has jurisdiction to address any legal dispute arising directly out of an investment between “a Contracting State” and “a national of another Contracting State,” when the parties have given their “consent” in writing. In Spain’s view, the Tribunal lacked jurisdiction ratione personae and ratione voluntatis.58
60. The ratione personae objection is based on the argument that Spain and Sevilla are both part of the same Contracting Party of the Energy Charter Treaty (ECT), i.e., the European Union.59 Article 26 of the ECT is available for disputes involving “a Contracting Party” and “an investor of another Contracting Party” that made an investment in the territory of the former. Under the ECT, a Contracting Party includes a “Regional Economic Integration Organisation” (REIO), and a REIO territory is “the ‘territories’ of Member States of such an organization, in accordance with the provisions of the agreement establishing such an organization.”60 In Spain’s view, Article 26 is not available for disputes in which the
56 Sevilla’s Rejoinder, ¶ 65(c), citing Occidental Petroleum Corporation & Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment of the Award, 2 November 2015 (RL-0195), ¶ 590. ↩
57 Sevilla’s Rejoinder, ¶ 65(d). ↩
58 Spain’s Memorial, ¶¶ 77-79; Spain’s Reply, ¶ 43. ↩
59 Spain’s Memorial, ¶ 80. ↩
60 Spain’s Memorial, ¶¶ 98-100, citing the following Articles 26, 1(6), 1(7), 1(2), 1(3) and 1(10) of the ECT; Spain’s Reply, ¶¶ 53-55. ↩
[Page 17]
investment is made in the territory of the “same” Contracting Party.61 At the time of negotiating the ECT, the EU was the only entity qualifying as a REIO. Thus, given the special REIO character of the EU, any investment made by EU investors in the territory of an EU member State cannot be regarded as an investment made in the territory of “another Contracting Party.”62 This implies that the ECT was not designed to accommodate disputes between EU member States. In certain parts of the ECT, the Contracting Party was the EU (with delegated competence by the EU member States), whereas in others it was the EU member States individually.63
61. Spain notes that Sevilla is incorporated in The Netherlands and that both The Netherlands and Spain are member States of the EU (which is also a Contracting Party to the ECT). They were so at the time of negotiation, ratification and entry into force of the ECT.64 It was certainly not possible for them to assume obligations that would affect their EU internal market; that was an area in which they had already ceded sovereignty to the European Community. For this reason, the EU had to be an ECT Contracting Party along with its member States, and hence Article 26 cannot be construed as creating obligations between EU member States.65
62. Rather, Article 25 of the ECT recognizes that REIO members shall govern their mutual relations by the law applicable to those members – in the case of EU member States (being the EU the only REIO that signed the ECT), that applicable law is EU law.66
63. Even if ECT Article 26 were to be read as covering intra-EU disputes, that interpretation would be inconsistent with EU law, and that interpretative dispute would be resolved in favour of EU law by way of the principle of primacy of EU law67, as explained below.
61 Spain’s Memorial, ¶ 101; Spain’s Reply, ¶ 56. ↩
62 Spain’s Memorial, ¶ 102; Spain’s Reply, ¶ 57. ↩
63 Spain’s Memorial, ¶¶ 103-105; Spain’s Reply, ¶ 58. ↩
64 Spain’s Memorial, ¶ 106; Spain’s Reply, ¶ 59. ↩
65 Spain’s Memorial, ¶ 107. ↩
66 Spain’s Memorial, ¶ 108; Spain’s Reply, ¶ 60. ↩
67 Spain’s Memorial, ¶ 109; Spain’s Reply, ¶ 60. ↩
[Page 18]
64. Regarding the ratione voluntatis objection, Spain submits that based on a proper reading of the ECT, neither Spain nor The Netherlands (of which the Claimants are nationals) made a valid offer for arbitration to investors from other EU member States.68 The ECT was not conceived as an instrument to govern the settlement of intra-EU disputes.69 Rather, the EU promoted the ECT as a forum to further energy-related cooperation between the EU and the Soviet bloc states. At no point was the ECT conceived as a special regime that would modify the rules and principles governing intra-EU disputes under EU law. While the ECT contains mechanisms for the protection of investments, these were not designed to cover disputes between EU investors and EU member States.70
65. Spain argues that Article 26 of the ECT cannot serve as the basis of an arbitration agreement as it is inapplicable in intra-EU relations.71 This inapplicability arises from its inconsistency with EU law.72 According to Spain, EU law prohibits disputes over matters governed by EU law from not being ultimately reviewed by the CJEU. Article 267 of the TFEU provides that, should a question of EU law arise at the national level, the highest judicial instance of each member State must refer the question to the CJEU for a “preliminary ruling” that binds the courts of that member State. Furthermore, Article 344 of the TFEU prohibits member States from submitting a dispute concerning the interpretation or application of the EU law to dispute settlement means other than their national tribunals.73
66. The underlying principle in intra-EU relations is that of “mutual trust” between EU member States. Thus, the autonomy and uniform application of EU law is guaranteed by the powers conferred on the CJEU.74 As confirmed in the CJEU’s Achmea decision, EU law and in particular Articles 267 and 344 of the TFEU have always prohibited Spain or any other EU member State to issue a valid offer to submit to arbitration a dispute between an
68 Spain’s Memorial, ¶¶ 80, 92, 110; Spain’s Reply, ¶¶ 45, 50, 62, 86. ↩
69 Spain’s Memorial, ¶ 91; Spain’s Reply, ¶¶ 49, 52. ↩
70 Spain’s Memorial, ¶¶ 95-97; Spain’s Reply, ¶ 52. ↩
71 Spain’s Memorial, ¶ 92; Spain’s Reply, ¶ 50. ↩
72 Spain’s Memorial, ¶ 89. ↩
73 Spain’s Memorial, ¶¶ 88-89; Spain’s Reply, ¶¶ 42, 47, 51. ↩
74 Spain’s Memorial, ¶¶ 93, 111. ↩
[Page 19]
EU company and an EU member State.75 Disputes of this character have an internal EU dimension that must be governed by EU law.76
67. As this potential inconsistency was already evident as of the time of conclusion of the ECT, the EU informed the ECT Secretariat in 1998 of an implied disconnection clause in the ECT.77 It noted that the EU is a REIO; that there is a division of competences between the EU and its member States; that the CJEU has exclusive competence within the EU to examine any matter related to the application and interpretation of EU Treaties, including the ECT; that given the comprehensiveness of the EU judicial system, neither the EU nor its member States gave an unconditional consent to submit any intra-EU investment dispute to international arbitration; and that ECT Article 26 could only apply to disputes involving non-EU third country investors.78
68. In any event, in situations of inconsistency with EU law, the applicable rule of conflict in relation to two EU member States is the principle of primacy of EU law.79 It applies whether the conflict concerns an EU member State’s national law and EU law80 or an international instrument (such as the ECT) and EU law.81 As confirmed by the Achmea and Komstroy decisions, the provisions of international instruments cannot apply in the relations between Member States if they are found to be contrary to the EU Treaties.82 Therefore, in accordance with the principle of primacy of EU law, any case of interpretative conflict would always have to be resolved in favour of EU law.83 Thus, ECT Article 26 is not applicable in intra-EU disputes and therefore cannot give rise to a valid arbitration agreement.84
75 Spain’s Memorial, ¶¶ 75-82, 94, 114; Spain’s Reply, ¶¶ 42, 47, 51. ↩
76 Spain’s Memorial, ¶ 112. ↩
77 Spain’s Memorial, ¶ 112; Spain’s Reply, ¶ 63. ↩
78 Spain’s Memorial, ¶¶ 112-113. ↩
79 Spain’s Memorial, ¶ 85. ↩
80 Spain’s Memorial, ¶ 81; Spain’s Reply, ¶ 44. ↩
81 Spain’s Memorial, ¶¶ 84-86; Spain’s Reply, ¶ 46. ↩
82 Spain’s Memorial, ¶ 86; Spain’s Reply, ¶¶ 42-43. ↩
83 Spain’s Memorial, ¶ 109; Spain’s Reply, ¶ 61. ↩
84 Spain’s Memorial, ¶¶ 89-90; Spain’s Reply, ¶ 48. ↩
[Page 20]
69. This understanding is now reflected in the 2024 Joint Declaration and an Inter-Sessional Agreement made by the EU, the European Atomic Energy Community and its member States, including Spain and The Netherlands.85 These instruments state that Article 26 of [the ECT] cannot and could never serve as a legal basis for intra-EU arbitration proceedings. The understanding is premised on the CJEU’s interpretations of ECT Article 26 and the principle of primacy of EU law, which render ECT Article 26 inapplicable to intra-EU investment disputes.86 These instruments apply not only to future but also to pending proceedings, with the immediate mandate to terminate these proceedings as “manifestly inadmissible due to lack of consent to arbitrate.”87 Spain requests the Committee not to ignore this understanding, which in its view reflects “what the relevant ECT Contracting Parties in these proceedings consider ‘manifest.’”88 The fact that these instruments postdate the initiation of the underlying arbitration is irrelevant. Both Spain and The Netherlands consider that CJEU’s interpretations are made “as since the adoption” of the relevant EU Treaties.89
70. In support of these basic objections, Spain develops more specific arguments.
71. Spain submits that there was no need to introduce an express disconnection clause in the ECT. When the ECT was negotiated, the signatories knew that the European Communities were in a more advanced integration process than that intended to be achieved through the ECT. Therefore, it was understood that for intra-EU relations, the instruments of EU integration would prevail over the ECT.90 When they acceded to the ECT, Spain and The Netherlands were already EU member States and had already subscribed to the principle of primacy of EU law. They could have never accepted Part III of the ECT or investor-State arbitration (nor could the European Commission have promoted anything contrary to
85 Spain’s Reply, ¶ 64. ↩
86 Spain’s Reply, ¶ 66. ↩
87 Spain’s Reply, ¶ 76, citing the Agreement on the interpretation and application of the Energy Charter Treaty between the European Union, the European Atomic Energy Community and their Member States, p. 10 (RL-0232) and the Declaration on the legal consequences of the judgement of the court of justice in Komstroy and common understanding on the non-applicability of Article 26 of the Energy Charter Treaty as a basis for intra-EU arbitration proceedings, p. 5 (RL-0233). ↩
88 Spain’s Reply, ¶¶ 74-75. ↩
89 Spain’s Reply, ¶ 77. ↩
90 Spain’s Memorial, ¶¶ 127-129. ↩
[Page 21]
the principles of EU law that justify its existence).91 Had the EU member States assumed individually ECT Part III, they would have acted inconsistently with the principle of autonomy of the EU.92
72. Furthermore, there was no need for an express disconnection clause as EU law prevails over the ECT provisions. ECT Articles 1(3), 36(7) and Article 25 reflect the principle of primacy of EU law.93 The Achmea decision has also confirmed that any arbitral clause that may compromise the principle of intra-EU mutual trust, the preservation of the own character of EU law and the principle of legal cooperation would be contrary to EU law.94 Spain submits that the Tribunal in this case has contravened EU law by addressing issues of exclusive competence to the European judicial system under EU law, such as disputes on investments relating to State aid in the internal market, in which EU law had to prevail.95
73. Even if the interpretative conflict were to be resolved under the general categories of public international law, the application of Articles 30 and 59 of the VCLT would resolve the conflict in favour of EU law.96
74. Furthermore, as suggested by the European Commission in a CJEU’s advisory opinion, there is no need for a disconnection clause if the agreement at issue “covers areas where there has been complete harmonisation [of the Community rules].”97
75. In addition, even under the application of ECT Article 16, EU law would prevail over the ECT because the ECT does not introduce substantive rights more favourable to investors than those provided for in EU law, nor does ECT Article 26 provide that arbitration is a better means for investors than others, including conciliation or recourse to national courts of the Contracting Party.98 Moreover, by providing that ECT-related disputes must be settled on the basis of the ECT and other principles of international law, Article 26(6)
91 Spain’s Memorial, ¶¶ 115, 133. ↩
92 Spain’s Memorial, ¶ 134. ↩
93 Spain’s Memorial, ¶¶ 117-121. ↩
94 Spain’s Memorial, ¶ 122; Spain’s Reply, ¶ 87. ↩
95 Spain’s Memorial, ¶ 123; Spain’s Reply, ¶ 88. ↩
96 Spain’s Memorial, ¶¶ 125-128; Spain’s Reply, ¶ 89. ↩
97 Spain’s Memorial, ¶ 129, citing CJEU’s Advisory Opinion 1/03 (R-0298), ¶ 84. ↩
98 Spain’s Memorial, ¶ 131; Spain’s Reply, ¶ 90. ↩
[Page 22]
places EU law and the ECT on equal footing, thereby allowing the resolution of any potential conflict on the basis of Article 25.99 In short, there is no consent to arbitrate intra-EU disputes because EU member States cannot be bound by Part III of the ECT and because ECT Article 25 recognises the primacy of EU law over the other provisions of the ECT.100
76. Spain states that the 2018 Achmea judgment of the CJEU noted that EU member States are prohibited from having recourse to mechanisms outside the EU judicial system to resolve intra-EU disputes.101 According to the CJEU, an investment arbitration tribunal does not form part of the EU system of justice or of the national system of the EU member States.102 However, disputes before these tribunals can affect the application or interpretation of EU law and should therefore be subject to the EU judicial system.103 Rather, through an arbitration clause EU member States may agree to remove themselves from the jurisdiction of their own courts and from the EU system of judicial remedies, which renders those proceedings without a guarantee of full compliance with EU law.104 Finally, the decision given by an arbitral tribunal is final and not subject to review by a national court unless the national law so permits.105 As a result of the Achmea judgment, the German Federal Court annulled an arbitral award that was issued on the basis of an arbitration clause contained in an international investment protection agreement between two EU member States.106
77. Spain notes that the Komstroy judgment confirms the reasoning of Achmea in the context of the ECT.107 The CJEU construed ECT Article 26 as effectively regulating bilateral relations between two ECT Contracting Parties, analogously to the bilateral investment treaty at issue in the Achmea decision.108 In Komstroy, the CJEU made it clear that international agreements concluded by the EU and its members States have a scope
99 Spain’s Memorial, ¶ 132; Spain’s Reply, ¶ 91. ↩
100 Spain’s Memorial, ¶ 134. ↩
101 Spain’s Memorial, ¶ 135; Spain’s Reply, ¶ 93. ↩
102 Spain’s Memorial, ¶ 140; Spain’s Reply, ¶ 96. ↩
103 Spain’s Memorial, ¶ 140; Spain’s Reply, ¶ 96. ↩
104 Spain’s Memorial, ¶ 140; Spain’s Reply, ¶ 96. ↩
105 Spain’s Memoiral, ¶ 140; Spain’s Reply, ¶ 96. ↩
106 Spain’s Memorial, ¶ 141. ↩
107 Spain’s Memorial, ¶¶ 144, 150; Spain’s Reply, ¶¶ 98, 101. ↩
108 Spain’s Memorial, ¶ 145; Spain’s Reply, ¶ 99. ↩
[Page 23]
constrained legally and institutionally by the EU Treaties.109 The CJEU also notes that a tribunal constituted under ECT Article 26 will have to interpret and apply EU law without being part of the EU judicial system and without being able to guarantee the uniform application of EU law.110 ECT Arbitration is binding on EU member States in relation to investors from third ECT parties. However, the ECT cannot impose the same obligations with respect to EU member States in relation to each other as that would be inconsistent with the principle of autonomy of EU law.111
78. Spain also notes that the decision in PL Holdings confirms the CJEU’s reasoning in Achmea and Komstroy.112 It adds that an arbitral agreement, whether ad hoc or contained in a treaty provision, in which an EU member State withdraws from its own jurisdiction and from the EU system of judicial remedies to offer arbitration on investment disputes would be inconsistent with the principles of mutual trust, loyal cooperation, and autonomy of EU law.113 In those circumstances, the member State is obliged to challenge the validity of the arbitration clause upon which the dispute is brought, and national courts are obliged to uphold any request to set aside an arbitration award made on that basis.114 If there is a lacuna in the protection of the individual rights of an EU investor, that lacuna must be filled within the domestic judicial system of the EU member State concerned. 115
79. Spain notes that the CJEU’s rulings in Achmea, Komstroy and PL Holdings follow a continuous line of EU case law aimed at ensuring the observance of the principle of autonomy of EU law.116 The reasoning stated in these decisions is not a new argument before this Committee as it was made available to the Tribunal in the underlying arbitration.117 The CJEU’s rulings on the interpretation of an EU law provision “in general and in non-specific terms” are binding for any other case in which the same provision is to
109 Spain’s Memorial, ¶ 146. ↩
110 Spain’s Memorial, ¶ 148; Spain’s Reply, ¶ 100. ↩
111 Spain’s Memorial, ¶ 149. ↩
112 Spain’s Memorial, ¶ 152; Spain’s Reply, ¶¶ 103-104. ↩
113 Spain’s Memorial, ¶¶ 156-159; Spain’s Reply, ¶¶ 105-107. ↩
114 Spain’s Memorial, ¶¶ 160-161; Spain’s Reply, ¶¶ 108-109. ↩
115 Spain’s Memorial, ¶ 163; Spain’s Reply, ¶¶ 109-110. ↩
116 Spain’s Memorial, ¶¶ 165-167. ↩
117 Spain’s Reply, ¶ 113. ↩
[Page 24]
be interpreted.118 The Achmea ruling is consistent with other pronouncements in which international agreements concluded by the EU were declared inconsistent with EU law because they did not respect the principle of autonomy of EU law.119
80. Spain also informs that there are pending annulment proceedings before the Svea Court of Appeal in Sweden.120 One of those cases is Greentech and Novenergia, in which Italy raised a ratione personae objection based on arguments analogous to those raised in the underlying arbitration. The objection was rejected by the arbitral tribunal and this rejection was challenged on annulment.121 In addressing the annulment request, the Svea Court of Appeal submitted to the CJEU a request for a preliminary ruling regarding the applicability of ECT Article 26. However, in the light of the decisions in Komstroy and PL Holdings, the Svea Court of Appeal withdrew the request. It considered that a preliminary ruling on such a request was not necessary because the previous CJEU’s decisions addressed the relevant questions regarding the applicability of ECT Article 26 in intra-EU disputes.122
81. Spain submits the award rendered by the arbitral tribunal in Green Power and SCE Solar Don Benito as an example of a case in which the intra-EU objection has been accepted. In this arbitration, the tribunal endorsed Spain’s arguments and declined jurisdiction to hear an intra-EU claim based on the ECT.123 The reason was the understanding that accepting jurisdiction would infringe EU law and the principle of autonomy of EU law.124 The tribunal would have had to deal with renewable energy subsidies, which according to EU law are State aid, a basic and fundamental institution of EU law.125 As the EU has always been based as an economic integration agreement, the tribunal rejected the argument that there was a need for a disconnection clause. Special consideration was thus given to ECT Article 25. Spain submits that this provision acknowledges the role of the EU as a REIO.126
118 Spain’s Memorial, ¶ 168. ↩
119 Spain’s Memorial, ¶¶ 165-171. ↩
120 Spain’s Memorial, ¶ 172. ↩
121 Spain’s Memorial, ¶ 173. ↩
122 Spain’s Memorial, ¶ 175. ↩
123 Spain’s Memorial, ¶¶ 182, 189. ↩
124 Spain’s Memorial, ¶ 189. ↩
125 Spain’s Memorial, ¶ 189. ↩
126 Spain’s Memorial, ¶ 193. ↩
[Page 25]
The tribunal also understood ECT Article 1(3) as implying the recognition of the transfer of competences between the EU and its member States and the binding character of EU institutions’ decisions on member States, including issues on State aid and the cross-sectoral applicability of TFEU Article 344. Relying on Achmea, the tribunal underscored: (i) the applicability of EU law to address the validity of offers to arbitrate intra-EU disputes; (ii) the inconsistency of TFEU Articles 267 and 344 with intra-EU arbitration clauses (whether relating to State-to-State or investor-State disputes); and (iii) the relevance of the “rationale” underlying its reasoning, which is the principle of autonomy of EU law. The effect of the CJEU’s judgments is ex tunc.127
82. Spain also submits for consideration the decisions of the Svea Court of Appeal of 13 December 2022 and of the Swedish Supreme Court of 14 December 2022, annulling two arbitration awards because they concerned intra-EU disputes. The Svea Court of Appeal resolved the issue on the basis of conclusions it drew from the CJEU’s decisions in Achmea, Komstroy and PL Holdings. It noted that according to the CJEU, no international agreement can interfere with the system of competences established under the EU Treaties and with the autonomy of EU law. Thus, ECT Article 26 does not apply to disputes between an EU member State and an investor of another member State, and the CJEU’s pronouncement leaves no room for any different conclusion. 128
83. The Swedish Supreme Court also annulled the PL Holdings award as contrary to EU law, which is part of Swedish international public order. According to the Court, arbitration clauses in investor-State arbitration agreements are inconsistent with EU law as any resulting award is not reviewable and EU law cannot be given “plain efficacy” although it forms part of public order under Swedish law.129
84. Spain also notes that in its Opinion 1/20, the CJEU has confirmed the applicability, relevance and binding character of the Komstroy decision in the context of re-negotiating the ECT.130 The Komstroy decision related to the version of ECT Article 26.2(c) prior to
127 Spain’s Memorial, ¶ 199. ↩
128 Spain’s Memorial, ¶ 203. ↩
129 Spain’s Memorial, ¶¶ 205-209. ↩
130 Spain’s Memorial, ¶ 210. ↩
[Page 26]
re-negotiation of the ECT. The CJEU confirmed the binding character of Komstroy in any subsequent negotiation of Article 26. EU member States cannot agree on a revised Article 26 that deviates from what the CJEU stated in Komstroy and cannot foresee arbitration for intra-EU disputes.131 Opinion 1/20 is particularly important given that requesting an opinion from the CJEU prior to concluding the negotiation of a treaty is the appropriate way to prevent ab initio any inconsistency between that Treaty and EU law; hence the significance of the CJEU referring to Komstroy. Opinion 1/20 thus confirms the validity of Komstroy under EU law and the fact that the Sevilla Tribunal lacked competence to deal with any intra-EU dispute.132
85. Spain also refers to two French judicial decisions that annulled awards based on the CJEU’s decisions in Achmea and PL Holdings. The Paris Court of Appeal has annulled two awards in proceedings that are analogous to the current proceeding; the first was handled by ICSID, whereas the second by the Permanent Court of Arbitration. The fact that the Achmea decision was rendered after the initiation of the underlying arbitrations was considered irrelevant as the CJEU’s interpretation in that case was given ex tunc effects.133 The French court relied on the principle of primacy of EU law and the inconsistency of this with arbitral clauses in investment treaties, as confirmed in Achmea, Komstroy and PL Holdings decisions.134 In Slot Group v. Poland, the Paris Court of Appeal noted that EU member States cannot choose not to apply EU law in their inter se relations, and that the CJEU jurisprudence is a coherent chain of case law that has decided the question of jurisdiction in intra-EU disputes. It further noted that the relevant arbitration clause conflicted with EU law and saw no need to interpret it in the light of the VCLT.135
86. In Strabag v. Poland, the Paris Court of Appeal also relied on the Achmea decision. It considered that the reasoning in this decision applies (i.e., that intra-EU arbitration clauses are inconsistent with EU law) irrespective of any express reference to EU law as the “applicable law.” It also noted that the fact that the arbitration was initiated before the
131 Spain’s Memorial, ¶¶ 211-213. ↩
132 Spain’s Memorial, ¶¶ 214-215. ↩
133 Spain’s Memorial, ¶¶ 216-217. ↩
134 Spain’s Memorial, ¶¶ 219-221. ↩
135 Spain’s Memorial, ¶¶ 230-231. ↩
[Page 27]
issuance of the Achmea ruling is irrelevant as the interpretation stated in Achmea has ex tunc effects.136 No individual agreement can be accepted to circumvent the Achmea ruling.137 The two decisions of the Paris Court of Appeal confirm the binding effect for EU member States (e.g. The Netherlands and Spain) and EU citizens of the case law established by the CJEU.138
87. Spain also invokes further developments in support of its position, such as the opinion of a U.S. judge relating to enforcement proceedings in the United States and communications submitted by EU member States and the United States in other similar proceedings, certain judicial decisions in Germany, and the decision of investors to decline bringing complaints against Spain outside the EU judicial system.139
88. Spain further argues that the Achmea decision leaves no doubt that ECT Article 26(4) does not apply to intra-EU disputes.140 ICSID arbitral tribunals must resolve disputes in accordance with the ECT and the applicable rules and principles of international law, which include EU law. The Committee should correct the Tribunal’s determination of the applicable law.141
89. Spain recalls that the European Commission has stated that the Achmea judgment rules out intra-EU arbitration clauses and that national courts are obliged to annul arbitral awards rendered on that basis. Intra-EU investment protection treaties are no longer necessary in a single market.142 Further actions, including a statement made by almost all EU member States clarifying that no arbitration clauses can be understood as consenting to submit intra-EU disputes to arbitration, provides evidence of the excess of jurisdiction by the Tribunal. Furthermore, several EU member States have decided to withdraw from the ECT.143
136 Spain’s Memorial, ¶¶ 237-240. ↩
137 Spain’s Memorial, ¶ 239. ↩
138 Spain’s Memorial, ¶¶ 243-246. ↩
139 Spain’s Memorial, ¶¶ 247-250. ↩
140 Spain’s Memorial, ¶ 251. ↩
141 Spain’s Memorial, ¶¶ 253-254. ↩
142 Spain’s Memorial, ¶ 256. ↩
143 Spain’s Memorial, ¶¶ 257-260. ↩
[Page 28]
90. Thus, Spain submits that the Tribunal erred in addressing its lack of jurisdiction; there was no proper link between the exercise of its powers and the consent accorded by the Parties.144 The Tribunal interpreted EU law erroneously and in such a biased manner that concluded it had jurisdiction to hear the case.145 Spain claimed the applicability of EU law, which would have deprived the Tribunal of its jurisdiction, but the Tribunal refused to accept that applicability and to apply EU law.146 The CJEU had confirmed that EU law precludes the resolution of intra-EU disputes through arbitration.147 However, the Tribunal concluded that it was not convinced of the existence of a conflict between ECT Article 26 and EU law.148 Even assuming arguendo that such a conflict existed, the Tribunal concluded that ECT Article 16 would resolve the conflict in favour of the ECT.149 It also assessed the case in the light of Article 41 of the VCLT to conclude that such a provision cannot exclude the application of ECT Article 26. 150 In Spain’s view, the Tribunal read the Achmea decision erroneously to mean that its reasoning is not applicable to investor-State arbitrations under the ECT. It also read the Komstroy decision to signify simply an obiter dictum.151
91. In conclusion, Spain argues that even if ECT Article 26 were to be interpreted to cover intra-EU disputes, that interpretation would contravene EU law, and that conflict could only be resolved in favour of EU law because of its primacy as a special conflict rule under international law. Thus, Spain has not made a valid offer of arbitration to investors from other EU member States and hence no valid arbitration agreement exists between Sevilla and Spain under ECT Article 26.152
92. Spain further submits that the Tribunal did not reconsider its decision on jurisdiction despite the several arbitral decisions that have endorsed Spain’s jurisdictional objection.153
144 Spain’s Reply, ¶ 117. ↩
145 Spain’s Memorial, ¶¶ 261-262; Spain’s Reply, ¶ 118. ↩
146 Spain’s Memorial, ¶ 263; Spain’s Reply, ¶ 119. ↩
147 Spain’s Memorial, ¶ 264; Spain’s Reply, ¶ 120. ↩
148 Spain’s Memorial, ¶ 265; Spain’s Reply, ¶ 121. ↩
149 Spain’s Memorial, ¶ 266; Spain’s Reply, ¶ 122. ↩
150 Spain’s Memorial, ¶ 267; Spain’s Reply, ¶ 123. ↩
151 Spain’s Memorial, ¶¶ 268-269; Spain’s Reply, ¶¶ 124-125. ↩
152 Spain’s Memorial, ¶¶ 271-273; Spain’s Reply, ¶¶ 127-131. ↩
153 Spain’s Memorial, ¶ 275; Spain’s Reply, ¶ 132. ↩
[Page 29]
It further ignored the meaning of ECT Article 26(1) in the light of ECT Article 1(2), and the fact that there are two different categories of ECT Contracting Parties (State or REIO) with different consequences under each category.154 In Spain’s view, there is an implicit disconnection clause in the ECT and hence Article 26 is not applicable to intra-EU relations, as confirmed by several CJEU pronouncements.155 One manifestation of the autonomy of EU law, as recognized by the international community, is the disconnection from international treaties without a disconnection clause.156 Spain and The Netherlands are bound by the CJEU’s rulings and the Claimants cannot have rights different from the rights and legal framework that is applicable in the country of which they are nationals.157
93. In Sevilla’s view, Spain’s alleged excess of powers is not manifest. Spain’s case rests on an alleged biased interpretation of EU law by the Tribunal. However, Spain fails to elaborate on the notion of bias. In any event, an allegation of this type (which would be more appropriate for a claim under Article 52(1)(d) of the ICSID Convention) is irrelevant for purposes of a claim of manifest excess of power.158
94. Spain also claims that the Tribunal’s interpretation of EU law is erroneous. However, the question of assessing “correctness” of an award falls outside the scope of annulment review under Article 52(1)(b) of the ICSID Convention.159 In any event, the Tribunal’s finding that EU law does not govern jurisdiction is correct and at least tenable.160
95. In Sevilla’s view, the fact that most of Spain’s argumentation is devoted to substantiate its “intra-EU objection” shows that Spain requires “extensive argumentation” to present its case; it also means that any purported excess of power cannot be “manifest.”161 In fact, Spain is relitigating its intra-EU objection on the basis of decisions that have already been
154 Spain’s Memorial, ¶ 276; Spain’s Reply, ¶ 133. ↩
155 Spain’s Memorial, ¶¶ 277-278; Spain’s Reply, ¶¶ 134-138. ↩
156 Spain’s Memorial, ¶ 286; Spain’s Reply, ¶¶ 140-141, 145. ↩
157 Spain’s Reply, ¶ 143. ↩
158 Sevilla’s Counter-Memorial, ¶¶ 69-70. ↩
159 Sevilla’s Counter-Memorial, ¶ 71. ↩
160 Sevilla’s Rejoinder, ¶ 68. ↩
161 Sevilla’s Counter-Memorial, ¶ 72. ↩
[Page 30]
dealt with by the Tribunal (e.g. the CJEU’s decisions in Achmea, Komstroy y PL Holdings).162
96. Spain also attempts to bolster its failed objection by relying on documents and new developments that were not submitted to the Tribunal. The fact that Spain needs to rely on authorities of this kind suggests that the Tribunal’s decision was not “manifestly” incorrect.163 Sevilla further notes that Spain failed to submit to the Tribunal a report on EU law. Thus, regarding the report submitted by Professor Hindelang in this proceeding, Sevilla submits that the Committee cannot determine a manifest excess of powers based on that report because the Tribunal did not see it. Furthermore, that expert report is “nothing more than a fully-fledged appeal against the Tribunal’s jurisdictional determinations.”164
97. Sevilla argues that there is no manifest excess of power in the Tribunal’s finding that ECT Article 26 applies to intra-EU disputes. Now Spain submits Professor Hindelang’s proposition that the EU Treaties preclude intra-EU arbitration under Article 26. This cannot however evidence a manifest excess of powers in a context in which the vast majority of ECT tribunals have confirmed that Article 26 applies to intra-EU disputes.165 Spain has not even demonstrated that its intra-EU objection qualifies as an issue on which “reasonable minds might differ.”166
98. Spain also places reliance on the 2024 Declaration and the Inter-Sessional Agreement, which postdate the Award and merely reflect the argument already made that EU law and the CJEU’s decisions in Achmea and Komstroy preclude intra-EU arbitration under the ECT.167 Sevilla also notes that Spain omits reference to the Hungary Declaration related to the 2024 Declaration. In Sevilla’s view, this declaration implies that there was never any agreement between the EU member States that ECT Article 26 did not apply to intra-EU
162 Sevilla’s Counter-Memorial, ¶ 73. ↩
163 Sevilla’s Counter-Memorial, ¶ 74. ↩
164 Sevilla’s Rejoinder, ¶¶ 71-72. ↩
165 Sevilla’s Counter-Memorial, ¶ 75; Sevilla’s Rejoinder, ¶ 72. ↩
166 Sevilla’s Counter-Memorial, ¶ 75. ↩
167 Sevilla’s Rejoinder, ¶ 73. ↩
[Page 31]
disputes, nor any agreement between those member States that would modify the ECT pursuant to the rules of the VCLT.168
99. Sevilla submits that, in any event, the Tribunal’s jurisdictional findings are at the very least tenable. There is no manifest excess of powers in the Tribunal’s finding that EU law did not govern its jurisdiction and its consequent refusal to apply EU law when upholding it. While the Tribunal acknowledged that EU law sets forth rules and “principles of international law” within the meaning of Article 26(6), it considered that this provision governs only the law applicable to the merits. This is consistent with the position of numerous other tribunals, rendering thereby the Tribunal’s finding at least tenable.169 Sevilla also notes that the Green Power Award, on which Spain bases its allegation, rather reinforces the Tribunal’s position that EU law is not relevant for its determination of jurisdiction. The Award emphasizes that, unlike the decision in Sevilla Beheer, in Green Power, EU law is considered part of the law applicable to the determination of jurisdiction because of the selection of the arbitration seat in an EU member State and Swedish law (hence EU law) as lex arbitri. There are differences in the legal framework applicable to ICSID proceedings and proceedings seated within an EU member State.170
100. In this context, Sevilla argues that there is no manifest excess of power in the Tribunal’s rejection of Spain’s argument that the investment at issue was not made in the territory of “another Contracting Party.” Spain and The Netherlands are part of the same REIO. Contrary to Spain’s assertion, the Tribunal did not overlook the definition of a REIO. However, it considered that Spain and The Netherlands retained their status as ECT Contracting Parties and that a Dutch investment made in Spain would still qualify as made in the “Area” of another ECT Contracting Party. Article 26 does not prevent an EU member State from being subject to claims because of its affiliation to a REIO.171 The Tribunal agreed with the finding in Cube that Article 26(1) does not differentiate between different classes of ECT Contracting Parties and concluded that a good faith reading of that
168 Sevilla’s Rejoinder, ¶ 75. ↩
169 Sevilla’s Counter-Memorial, ¶¶ 77-78. ↩
170 Sevilla’s Counter-Memorial, ¶¶ 80-82. ↩
171 Sevilla’s Counter-Memorial, ¶¶ 83-84. ↩
[Page 32]
provision does not exempt intra-EU disputes from the scope of Article 26. This reasoning shows that the Tribunal’s interpretation of the ECT was at the very least tenable.172
101. Sevilla notes that the REIO definition is only relevant if an investor wants to bring a claim against a REIO, and not against one of its constituent States. This has been confirmed by multiple tribunals, which shows that the Tribunal’s approach was at least tenable.173
102. Likewise, Sevilla also submits that there is no manifest excess of power in the Tribunal’s finding that a disconnection clause would be required if ECT Article 26 were to exclude intra-EU disputes. Both Spain and Sevilla agreed that the ECT has no such a clause, but Spain now claims that the Tribunal should have found that the ECT contains an implied disconnection clause.174 Sevilla argues that this is a new argument that cannot be entertained in this proceeding. In any event, it does not undermine the Tribunal’s finding. Not a single ECT tribunal has ever adhered to the notion of an implied disconnection clause in the ECT, while several tribunals have stressed the point that any exclusion of intra-EU disputes from the scope of ECT Article 26 should have been made express.175
103. Furthermore, Sevilla also notes that the Tribunal did not exceed manifestly its powers when it rejected Spain’s argument on the “primacy” of EU law. Spain assumes a conflict between the ECT and EU law that must be resolved in favour of EU law. It asserts that the Tribunal found that conflict.176 However, Spain misrepresents the Tribunal’s finding. The Tribunal never found such a conflict. Only ad cautelam did the Tribunal assume a normative conflict and found that the ECT would prevail in that case.177
104. While the Tribunal considered that the ECT Article 16 is not applicable to the dispute (because it found that the ECT and EU law “are not concerned with the same subject matter”), it found that even if applicable “[quod non],” Article 16 resolves the alleged
172 Sevilla’s Counter-Memorial, ¶¶ 85-86. ↩
173 Sevilla’s Counter-Memorial, ¶ 87. ↩
174 Sevilla’s Counter-Memorial, ¶¶ 89-90. ↩
175 Sevilla’s Counter-Memorial, ¶¶ 91-92. ↩
176 Sevilla’s Counter-Memorial, ¶¶ 93-94. ↩
177 Sevilla’s Counter-Memorial, ¶¶ 95-97. ↩
[Page 33]
conflict in favour of the ECT “as it applies to both prior and subsequent agreements entered into by the Contracting Parties.”178
105. Sevilla notes that the Tribunal also looked at the VCLT to address Spain’s conclusion that EU law had primacy over the ECT. It found the relevant VCLT provisions as inapplicable: Article 30 (because of differing subject-matters between the ECT and EU law), Article 41 (as there is no evidence of a Contracting Party’s intention to modify the ECT) and Article 59 (because the ECT includes non-EU Contracting Parties).179 It agreed that VCLT Article 31(3)(c) could be of assistance unless the provision examined under Article 31(3)(c) were to alter the explicit terms of ECT Article 26 or were to negate its effects.180 Thus, the Tribunal examined every avenue possible to determine whether the principle of primacy of EU law could apply. It concluded that there was no reason to decline its jurisdiction on this basis. In Sevilla’s view, this reasoning is tenable.181
106. Sevilla also argues that the Tribunal did not incur a manifest excess of power when it found that the Achmea and Komstroy decisions did not affect its jurisdiction. It considers that the Tribunal’s conclusions on these rulings cannot give rise to a manifest excess of powers.182 Sevilla asserts that Spain attempts to re-litigate an issue extensively discussed before the Tribunal and not to satisfy the requirements for annulment under Article 52(1)(b) of the ICSID Convention.183 The Tribunal’s decision to uphold its jurisdiction notwithstanding the Achmea and Komstroy decisions was tenable. It was not convinced that the Achmea reasoning applied to disputes under a treaty like the ECT because the ECT is multilateral and does not have a disconnection clause.184 Nor did it consider that the Komstroy decision affected its jurisdiction as that decision did not concern the compatibility of intra-EU dispute settlement provisions with EU law or the involvement of an EU member State or an EU national. In any event, the Tribunal found the CJEU’s conclusion in Komstroy an
178 Sevilla’s Counter-Memorial, ¶¶ 98-99. ↩
179 Sevilla’s Counter-Memorial, ¶ 100 (a), (b) and (c). ↩
180 Sevilla’s Counter-Memorial, ¶ 100 (d). ↩
181 Sevilla’s Counter-Memorial, ¶¶ 101-104. ↩
182 Sevilla’s Counter-Memorial, ¶ 105. ↩
183 Sevilla’s Counter-Memorial, ¶ 106. ↩
184 Sevilla’s Counter-Memorial, ¶ 107(a). ↩
[Page 34]
obiter dictum, and not part of its dispositive reasoning.185 The Tribunal was not convinced by the CJEU’s interpretation of ECT Article 26(2)(c) because it lacked analysis of the provision and its alleged intra-EU inapplicability.186
107. Spain asserts that the Tribunal manifestly exceeded its powers in establishing jurisdiction by failing to apply EU law.187 It contends that the Tribunal affirmed jurisdiction despite lacking it, both ratione personae and ratione voluntatis.188 Specifically, ratione materiae, the Tribunal asserted jurisdiction even though the matter involved investors and a respondent State from the “same” ECT Contracting Party, i.e. the EU.189 Ratione voluntatis, Spain argues that the Tribunal asserted jurisdiction despite the fact that Spain (and the Netherlands, of which the Claimants are nationals) did not make a valid offer to arbitrate with investors from other EU member States.190
108. The Committee notes that the Tribunal addressed the intra-EU objection without separating the ratione personae and ratione voluntatis components, as Spain has done in its annulment claim. Instead, the Tribunal followed a sequential reasoning: (i) determining the applicable law to assess jurisdiction; (ii) evaluating the jurisdictional requirements under Article 26(1)-(3) of the ECT, including Spain’s argument that a disconnection clause was not necessary in the ECT context; (iii) addressing Spain’s claim that EU law prohibits intra-EU arbitrations under Article 26 of the ECT; (iv) assuming arguendo that the ECT is inconsistent with EU law to determine whether EU law would prevail over the ECT; (v) considering the impact of the CJEU’s jurisprudence cited by Spain (the Achmea and Komstroy judgments); and (vi) discussing enforcement issues, which the Tribunal concluded did not affect its jurisdiction. The following chart summarizes the steps, key considerations, and conclusions reached by the Tribunal at each stage.
185 Sevilla’s Counter-Memorial, ¶ 107(b). ↩
186 Sevilla’s Counter-Memorial, ¶ 107(d). ↩
187 Spain’s Memorial, ¶¶ 6-8, 57(1), 76. ↩
188 Spain’s Memorial, ¶ 79. ↩
189 Spain’s Memorial, ¶ 80. ↩
190 Spain’s Memorial, ¶¶ 80, 92, 110; Spain’s Reply, ¶¶ 45, 50, 62, 86. ↩
[Page 35]
| Step | Key Considerations | Conclusions |
|---|---|---|
| 1. Applicable law and general principles | Article 26(6) addresses the law applicable to the merits, and not the determination of jurisdiction, as is made clear by Article 26(1) of the ECT. | The determination of jurisdiction must be made “first and foremost” pursuant to Article 26(1)-(5) of the ECT; and EU law is not relevant to this effect.191 |
| 2. Interpretation of the jurisdictional requirements of Article 26 of the ECT | (i) Articles 1 and 26(7) of the ECT provide relevant definitions192, (ii) Spain’s or the Netherlands’s status as a Contracting Party is not questioned193. (iii) Claimants qualify as “investors of another Contracting Party”194, (iv) The dispute concerns obligations under Section III of the ECT195. |
The Article 26 jurisdictional requirements are satisfied.196 |
| (Spain’s argument that Claimants are not investors from “another Contracting Party” and that a disconnection clause was necessary) | There is no “disconnection clause” in the ECT, exempting intra-EU relations from the application of the ECT rules, and a contextual reading of another disconnection clause in the ECT context197 and the travaux préparatoires of the ECT198 (as discussed by other tribunals) indicate that, when the ECT was concluded, the EU did not consider Article 26 inapplicable among its member States. | “[T]he ECT does not exclude, either expressly or by implication, intra-EU investor-State disputes from the application of its Article 26(3).”199 |
| 3. Is there a conflict between Article 26 of the ECT and EU law? | Reading of Article 344 of the TFEU (which was the EU law provision cited by Spain as allegedly prohibiting ECT arbitration), applies only to disputes between EU member | “[T]he TFEU does not seem to contain an explicit prohibition to refer investor-State disputes |
191 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 620. ↩
192 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 621-622. ↩
193 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 623. ↩
194 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 625-627. ↩
195 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 627. ↩
196 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 628, 678. ↩
197 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 629. ↩
198 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 630. ↩
199 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 631-632, 678. ↩
[Page 36]
| States and does not cover investor-State arbitration.200 | to arbitration under an investment treaty.”201 | |
| 4. Assuming, arguendo, that EU law prohibits intra-EU investment arbitration under the ECT, which “law” should prevail? | Neither Article 16 of the ECT (if applicable), nor Articles 30, 41, 59 of the VCLT would resolve the potential conflict in favour of EU law.202 Article 31(3)(c) of the VCLT cannot be used to “re-write” the terms of Article 26 of the ECT. | “[E]ven if there was a prohibition …, EU law would not have been able to displace the terms of Article 26 of the ECT … either by virtue of Article 30 or Article 41 of the VCLT. The Intra-EU Objection is therefore rejected.”203 |
| 5. The impact of the CJEU’s jurisprudence (Achmea and Komstroy Judgements) | The Achmea Judgment is not binding on the Tribunal.204 Regarding its relevance in the ECT context, the Tribunal is not convinced that the judgment implies incompatibility of the ECT’s investment arbitration regime with EU law, and that it applies to multilateral treaties, such as the ECT. It also notes that there is no disconnection clause in the ECT.205 Regarding the Komstroy Judgment, the Tribunal notes that it was issued following a preliminary ruling request on questions that did not relate to the alleged incompatibility of intra-EU investor-State dispute settlement clauses with the TFEU, nor did it involve an EU member State or national, and the statement that Article 26(2)(c) of the ECT is inapplicable to intra-EU disputes was not set out in the operative paragraph of the judgment. Consequently, the Komstroy Judgment could only be |
The “Achmea Judgment is ‘of limited application’ to ECT-based arbitrations.”208 The Komstroy Judgment could only be regarded as an obiter dictum209 (The Tribunal also addressed other arguments raised by Spain in connection with the judgments, none of which the Tribunal considered “feature[d] in the Komstroy Judgement’s reasoning” and thus affected its conclusion regarding the compatibility of the ECT’s investor-State dispute settlement mechanism with EU law.) 210 |
200 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 636-637. ↩
201 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 638, 678. ↩
202 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 640-652. ↩
203 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 653, 678. ↩
204 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 657. ↩
205 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 656. ↩
208 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 663. ↩
209 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 667. ↩
210 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 671. ↩
[Page 37]
| regarded as an obiter dictum.206 In addition, the CJEU’s interpretation of Article 26(2)(c) is not persuasive.207 | ||
| 6. Issues of enforcement do not affect the Tribunal’s jurisdiction | Whether the characterization of any award as State aid under EU law, and the potential refusal to be enforced on public policy grounds by EU national courts, affects the jurisdiction of the Tribunal.211 | “[T]he enforceability issues are irrelevant for the purposes of deciding on this jurisdictional objection.”212 |
109. In addressing Spain’s annulment claim, the Committee will examine the ratione personae and ratione voluntatis objections in the light of the Tribunal’s approach, as it considers appropriate. As agreed by the Parties,213 the Committee will focus on identifying a misapplication of the applicable law of such a gross or egregious character that it amounts to an actual “failure” to apply that law.214
a) Applicable Law for the Determination of Jurisdiction
110. While Spain’s main annulment case focuses on the Tribunal’s application of the Article 26 jurisdictional requirements and the relevance of EU law in that application, Spain also questions the Tribunal’s determination of the “law governing its jurisdiction” (step 1 in the chart above) albeit not in a clear fashion. In its Memorial, Spain states:
The first thing to note is that, after the Kingdom of Spain had invoked the applicability of EU law, both to jurisdiction and to the merits of the dispute, the Sevilla Tribunal refused to apply EU law.215
111. Spain further notes that:
206 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 665-666. ↩
207 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 668-670. ↩
211 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 677. ↩
212 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 677. ↩
214 Spain’s Memorial, ¶¶ 60-61, citing Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, 5 June 2007 (RL-0078), ¶ 86; Spain’s Reply, ¶ 33; Sevilla’s Counter-Memorial, ¶ 62; Sevilla’s Answer to the Tribunal’s Question 4, transcript from the Hearing, at p. 152. ↩
215 Spain’s Memorial, ¶ 263. ↩
[Page 38]
The arbitral tribunals constituted under the ICSID Convention are called upon to resolve the dispute by applying the rules agreed by the parties [footnote omitted], since according to the ECT, disputes shall be resolved in accordance with the ECT and the applicable rules and principles of international law199.
EU law is international law applicable to the underlying arbitration under Article 26 of the ECT. This Committee must correct the incorrect determination of the applicable law by the Sevilla Tribunal. The application of the CJEU’s position in its Achmea judgement to the present case is undisputed: clauses such as Article 26(6) ECT cannot apply among EU Member States, as is the case here.
199 (RL-0008 Energy Charter Treaty. Spanish version. 17 December 1991. consolidated), Article 26(6).216
112. Spain’s Expert questions the Tribunal’s determination of the applicable law for jurisdiction arguing that EU law was incorrectly excluded. The Expert’s position is based on the following points: (i) EU law is applicable whenever it is “relevant;” (ii) arbitral tribunals are capable of applying EU law and; (iii) the fact that EU law is not binding on non-EU Contracting Parties does not impact the determination of the applicable law.217
113. In its Counter-Memorial, Sevilla assumes that Spain takes issue with the Tribunal’s finding that EU law does not govern its jurisdiction and its consequent “refusal” to apply EU law. Sevilla argues that this issue does not rise to the level of a manifest excess of powers:
(i) the Tribunal’s finding that EU law is not relevant to determine its jurisdiction is consistent with that of every other ICSID tribunal that had previously ruled on the intra-EU objection, and Article 26(6) does not address the applicable law for the purposes of the determination of jurisdiction218 and,
(ii) the Green Power Award, on which Spain relies, is not relevant or analogous to an ICSID tribunal’s decision because the lex arbitri in Green Power, which was Swedish law, made EU law relevant for the determination of jurisdiction, whereas
216 Spain’s Memorial, ¶¶ 253-254. ↩
217 Expert Report, ¶¶ 163-164. ↩
218 Sevilla’s Sevilla’s Counter-Memorial, ¶¶ 77-78. ↩
[Page 39]
an ICSID tribunal does not have a seat and is not subject to a lex arbitri that would require the consideration of EU law.219
114. The Committee finds that Spain has not sufficiently articulated its challenge to the Tribunal’s interpretation of Article 26 and its conclusion regarding the applicable law for the determination of jurisdiction. While Spain disagrees with the Tribunal’s conclusion, it fails to explain how the Tribunal exceeded its interpretative functions by determining that the interpretation of Article 26(6), in the light of Article 26(1), rendered the former inapplicable to the determination of jurisdiction - implicitly excluding the application of EU law in this context.
115. Under the principle of compétence de la compétence, the Tribunal was obliged to establish the applicable law for determining its own jurisdiction.220 The Tribunal logically began its analysis with Article 26 of the ECT, under which it was constituted. It then interpreted Article 26(6) in light of Article 26(1), concluding that Article 26(6) was not applicable to its jurisdictional determination.221 Spain has not demonstrated how this interpretative exercise was erroneous to the extent that it would amount to an excess of powers, much less a manifest one.
116. Regarding the arguments raised by Spain through its Expert, the Committee considers that the claim that EU law is applicable to the determination of jurisdiction because it is “relevant” and that arbitral tribunals can apply EU law, does not present any manifest errors in the Tribunal’s determination of the applicable law for jurisdiction. The third argument, that it is irrelevant that EU law is not binding on non-EU Contracting Parties, pertains to the Tribunal’s reasoning for not considering the CJEU’s judgments as a “subsequent practice” under Articles 31.3(a) and (b) of the VCLT. This point does not relate to the Tribunal’s determination of the law governing its jurisdiction.
219 Sevilla’s Sevilla’s Counter-Memorial, ¶ 80. ↩
220 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 616. ↩
221 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 620. ↩
[Page 40]
117. Based on the foregoing, the Committee rejects Spain’s claim that the Tribunal manifestly exceeded its powers in determining the applicable law for the purpose of establishing its jurisdiction, within the meaning of Article 52(1)(b) of the ICSID Convention.
b) Ratione Personae Objection
118. Spain’s annulment case regarding the ratione personae objection is based on the Tribunal’s interpretation of Article 26 of the ECT in the light of the EU’s status as a REIO Contracting Party. Spain argues that the Tribunal “completely ignore[d] that the literal wording of Article 26(1) ECT is not sufficient in the light of Article 1(2) ECT and [did] not make any effort to analyse which of these two meanings [State or REIO] should prevail.”222 Spain contends that the Tribunal should have interpreted the term “an investor of another Contracting Party” to exclude investments made by EU investors in EU territory because the Claimants and Respondent are part of the same ECT Contracting Party.223
119. This is due to the EU’s status as a REIO Contracting Party. In Spain’s view, this “implies that the ECT was not designed to accommodate disputes between EU member States.”224 Since Sevilla is incorporated in the Netherlands (which together with Spain, is an EU member State), its investments could not be considered as investments made by investors of “another Contracting Party;” and therefore Article 26 of the ECT would be inapplicable.225 Moreover, Spain argues that there is no need for an express disconnection clause in the ECT as international law allows for an implicit disconnection clause.226 This is appropriate because the autonomy of EU law is recognized not only by EU member States, “but also by all States in the international community,” and “one manifestation of this [EU autonomy] is the disconnection from international treaties without a disconnection clause to apply EU law to intra-EU matters.”227
222 Spain’s Memorial, ¶ 276. ↩
223 Spain’s Memorial, ¶¶ 98-102; Spain’s Reply, ¶¶ 53-57. ↩
224 Spain’s Memorial, ¶ 103. ↩
225 Spain’s Memorial, ¶ 106; Spain’s Reply, ¶¶ 56-59. ↩
226 Spain’s Reply, ¶¶ 134, 145. ↩
227 Spain’s Reply, ¶¶ 140-141. ↩
[Page 41]
120. In contrast, Sevilla argues that the Tribunal did not overlook the ECT terms, but strictly applied them and determined that the EU’s involvement in the ECT as a REIO does not invalidate Spain’s and the Netherlands’ status as individual ECT Contracting Parties; that a Dutch investment made in Spain would still qualify as made in the “Area” of another ECT Contracting Party; and that Article 26 does not prevent an EU member State from being subject to claims because of its affiliation to a REIO.228 For the Tribunal, Article 26(1) does not differentiate between different classes of ECT Contracting Parties and does not exempt intra-EU disputes from its scope.229
121. The Committee recalls that after establishing the applicable law for jurisdiction, the Tribunal proceeded to interpret and apply the jurisdictional requirements to the facts of the case. In particular, the Tribunal: (i) considered the definitions in Articles 1 and 26(7) of the ECT;230 (ii) found that neither Spain’s nor the Netherlands’s status as an ECT Contracting Party was questioned in the arbitration;231 (iii) determined that the Claimants qualified as “investors of another Contracting Party;”232 (iv) concluded that the dispute concerned obligations under Section III of the ECT,233 and (v) found that the jurisdictional requirements of Article 26 “appear[ed] to have been fully satisfied.”234
122. Among these different steps, Spain takes issue with the Tribunal’s determination that the Claimants qualified as “investors of another Contracting Party.” As previously noted, Spain believes that, given the EU’s state as a REIO, an investment made by an EU investor in the territory of an EU member State should be regarded as an investment made in the territory of the “same” Contracting Party, i.e. the EU.235 Spain thus suggests that the term “of another Contracting Party” should be interpreted differently from “the literal wording of Article 26(1) ECT [which] is not sufficient in the light of Article 1.2 ECT.”236
228 Sevilla’s Counter-Memorial, ¶¶ 83-84. ↩
229 Sevilla’s Counter-Memorial, ¶¶ 85-86. ↩
230 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 621-622. ↩
231 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 623. ↩
232 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 625-627. ↩
233 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 627. ↩
234 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 628. ↩
235 Spain’s Memorial, ¶¶ 98-102; Spain’s Reply, ¶¶ 53-57. ↩
[Page 42]
123. The Committee notes that this argument was already presented in the underlying arbitration and the Tribunal rejected it. Spain disagrees with the Tribunal’s handling of the issue but does not identify an action that would amount to an excess of powers. Spain seems to argue that the Tribunal misinterpreted the term “investor of another Contracting Party” because the Tribunal should have limited the scope of “Contracting Party” to a REIO when the Contracting States form part of that REIO.237 In interpreting Article 26(1)-(3), the Tribunal started with the “literal wording” of the provision, which is the expected way of approaching a treaty interpretation task as laid out in Article 31 of the VCLT. Spain argued that the literal wording of Article 26 was insufficient, and the Tribunal examined the need for a “disconnection clause” in the ECT that would align the literal wording of Article 26(1) with the special meaning suggested by Spain. The Tribunal noted that the ECT does not contain such a disconnection clause, and Spain agreed. However, Spain argued that such a clause was “not necessary” due to the significance of the EU integration process,238 which according to Spain, explains why “the ECT was not designed to accommodate disputes between Member States of the European Union.”239
124. Although not explicitly stated, it is clear from the Award that, in assessing Spain’s argument, the Tribunal did not find it self-evident. To address Spain’s point – namely, that a disconnection clause was not necessary in the ECT context – the Tribunal turned to additional interpretative resources. It considered the findings of two other tribunals in ECT disputes,240 as well as the travaux préparatoires of the ECT,241 neither of which supported Spain’s position. These enquiries helped the Tribunal conclude that, at the time of the ECT’s conclusion, the EU did not consider that Article 26 was inapplicable among its member States.242
125. Upon reviewing the Tribunal’s actions, the Committee finds no excessive use of powers in its interpretative work. It is expected that the Tribunal was entitled to rely on additional
237 Spain’s Memorial, ¶ 276. ↩
238 Spain’s Rejoinder on the Merits and Reply on Jurisdiction (R-0339EN), ¶¶ 168-172. ↩
239 Spain’s Memorial, ¶ 103. ↩
240 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 629. ↩
241 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 630. ↩
242 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 632. ↩
[Page 43]
means of treaty interpretation in response to Spain’s challenge to the literal wording of Article 26 of the ECT. This is consistent with the generally accepted customary rules of treaty interpretation, and the Tribunal was aware of these rules.243
126. On annulment, Spain and its Expert argue that the absence of a disconnection clause should not be considered as determinative of the EU’s acceptance of the ECT’s applicability in the intra-EU context. Spain referenced a European Commission’s explanation on why a disconnection clause is not necessary for full harmonization between parties.244 Spain’s Expert also referenced EC statements, a CJEU’s opinion on the European Court of Human Rights’ dispute settlement process, and EU secondary law regarding the Apostille Convention.245 The Committee considers these arguments (and related authorities) to be an implied request to revisit the Tribunal’s final conclusion. However, the scope of annulment review does not allow the Committee to reassess the correctness of the Tribunal’s conclusion.
127. Whether these findings were correct is outside the scope of this proceeding. The Committee concludes that, regarding the ratione personae objection, Spain has not demonstrated that the Tribunal manifestly exceeded its powers under Article 52(1)(b) of the ICSID Convention.
c) Ratione Voluntatis Objection
128. As noted above, Spain’s argument regarding the irrelevance of an express disconnection clause in the ECT is based on the assumption that, due to the advanced state and prominence of the EU integration process, individual EU member States do not require such a clause to deem Article 26 inapplicable. To suggest otherwise would imply that, in 1994, the EU member States and the European Commission agreed to an intra-EU arbitration regime that was clearly inconsistent with EU law.
243 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 620. ↩
244 Spain’s Memorial, ¶ 129. ↩
245 Expert Report, ¶¶ 187-190. ↩
[Page 44]
129. Thus, under the ratione voluntatis objection, Spain argues that neither Spain nor the Netherlands made a valid offer to arbitrate under Article 26 of the ECT, as they could not have validly agreed to a provision that was already in conflict with EU law. Article 344 of the TFEU prohibits intra-EU dispute settlement outside the EU judicial system. In the event of a conflict with EU law, the rule of primacy of EU law resolves it, leading to the inapplicability of Article 26 of the ECT in the intra-EU context.246 The 2024 Joint Declaration and the Inter-Sessional Agreement made by the EU, the European Atomic Energy Community and its member States, including Spain and the Netherlands247 confirm this understanding. They reflect what the relevant ECT Contracting Parties in these proceedings consider to be “manifest.”248 Spain and the Netherlands maintain that the CJEU’s jurisprudence (which declares the conflict between the ECT and EU law) has been established “since the adoption” of the relevant EU Treaties.249 Spain also submits a CJEU’s Judgment of 14 March 2024, which asserts that a misinterpretation of EU law resulting in the failure to apply it, disregards the principle of EU law primacy and constitutes a serious breach of it.250
130. Spain’s position that Article 26 of the ECT is inconsistent with EU law is further reinforced by the CJEU’s judgments in Achmea, Komstroy and PL Holdings. In these cases, the CJEU found that the principles of EU law autonomy, mutual trust and loyal cooperation prevent EU member States from utilizing dispute resolution mechanisms outside the EU judicial system.251 Since investment arbitration tribunals do not form part of this system, they
246 Spain’s Reply, ¶¶ 129-131. ↩
247 Spain’s Reply, ¶¶ 66, 76, citing the Agreement on the interpretation and application of the Energy Charter Treaty between the European Union, the European Atomic Energy Community and their Member States, p. 10 (RL-0232), and the Declaration on the legal consequences of the judgement of the court of justice in Komstroy and common understanding on the non-applicability of Article 26 of the Energy Charter Treaty as a basis for intra-EU arbitration proceedings, p. 5 (RL-0233). ↩
248 Spain’s Reply, ¶¶ 74-75. ↩
249 Spain’s Reply, ¶ 77. Spain also notes that both the Inter se Agreement and the Declaration have been properly communicated to other ECT Contracting Parties, with no known objections. These instruments clarify that third-party rights remain unaffected due to the bilateral nature of relations between REIO members. Additionally, the Intersessional Agreement mandates informing arbitral tribunals and annulment committees about its existence in intra-EU disputes, ensuring they can determine their lack of jurisdiction or authority to annul awards. The overarching goal is to prevent any misrepresentation or misinterpretation of the consent given by ECT Contracting Parties; Spain’s Reply, ¶¶ 78-79. ↩
251 Spain’s Memorial, ¶¶ 135, 149, 152, 156-159; Spain’s Reply, ¶¶ 93, 102-107. ↩
[Page 45]
cannot ensure the full effectiveness and uniform application of EU law. 252 These rulings reflect a consistent line of case law safeguarding EU law’s autonomy,253 which must be understood and applied as of its entry into force, including to “legal relationships which arose and were established before the judgement ruling on the request for interpretation.”254 According to Spain, “there is no doubt as to the applicability of the rulings of the CJEU [Achmea and Komstroy] to the present case.”255 The Tribunal in the underlying arbitration was fully aware of these judgements and had the opportunity to analyse them carefully.256 Spain asserts that “[i]t is for the CJEU to interpret the EU legal framework and its decisions are binding upon the Tribunal, as well as on the Netherlands and Spain.”257 However, the Tribunal examined these judgments only after it had already “settled the judgment, and with the question pre-decided.”258 The CJEU’s rulings submitted to the Tribunal contain no obiter dicta.259
131. Spain also references developments such as the award in Green Power v. Spain, the Judgment of the Court of Appeal of Svea of 14 December 2022, Opinion 1/20 of the CJEU and a statement from almost all EU member States asserting that no arbitration clauses should be interpreted as consenting to submit intra-EU disputes to arbitration.260
132. Consequently, Spain maintains that no valid arbitration agreement exists under Article 26 of the ECT for disputes involving investors from other EU member States.261
133. Sevilla, on the other hand, argues that the Tribunal did not manifestly exceed its powers when it rejected Spain’s argument based on the “primacy” of EU law. Spain presumes a conflict between the ECT and EU law, but the Tribunal did not find such a conflict.262 Even assuming that a conflict existed, the Tribunal considered that Article 16 of the ECT (if
252 Spain’s Memorial, ¶¶ 140-141; Spain’s Reply, ¶ 96. ↩
253 Spain’s Memorial, ¶¶ 165-167; Spain’s Reply, ¶ 113. ↩
254 Spain’s Reply, ¶¶ 135, 144. ↩
255 Spain’s Memorial, ¶ 283. ↩
257 Spain’s Memorial, ¶ 246. ↩
260 Spain’s Memorial, ¶¶ 180-257. ↩
261 Spain’s Memorial, ¶¶ 271-273; Spain’s Reply, ¶¶ 127-131. ↩
262 Sevilla’s Counter-Memorial, ¶¶ 95-97. ↩
[Page 46]
applicable) would resolve the alleged conflict in favour of the ECT.263 The Tribunal also turned to the VCLT to address Spain’s position that EU law should prevail over the ECT, concluding that Articles 30, 41 and Article 59 were inapplicable,264 and that VCLT Article 31(3)(c) could not be invoked to alter the explicit terms of Article 26 of the ECT.265 Sevilla contends that the Tribunal explored all avenues to determine whether the principle of EU law primacy could apply. In the absence of a definitive conclusion, the Tribunal decided that there was no reason to decline jurisdiction based on the alleged conflict with EU law, and this reasoning is tenable.266
134. Sevilla also argues that the Tribunal did not exceed its powers when it found that the Achmea and Komstroy decisions did not affect its jurisdiction.267 Sevilla asserts that Spain is now attempting to re-litigate an issue that was already considered by the Tribunal, but does not meet the annulment requirements under Article 52(1)(b) of the ICSID Convention.268 The Tribunal’s decision to uphold its jurisdiction, despite the Achmea and Komstroy judgments, was at least tenable because the Tribunal was not persuaded by the reasoning of either case, and this does not constitute a manifest excess of powers.269
135. The Committee notes that Spain’s ratione voluntatis objection involves two closely related issues:
(i) the Tribunal’s handling of the argument that Spain was not bound by Article 26 of the ECT due to its alleged conflict with EU law and the application of the rule of EU law primacy (the “normative conflict” issue) and,
(ii) the Tribunal’s treatment of the CJEU’s judgments in Achmea and Komstroy, which explains why Article 26 is inapplicable in the intra-EU dispute settlement context (the treatment of the CJEU’s judgments).
263 Sevilla’s Counter-Memorial, ¶¶ 98-99. ↩
264 Sevilla’s Counter-Memorial, ¶ 100 (a), (b) and (c). ↩
265 Sevilla’s Counter-Memorial, ¶ 100 (d). ↩
266 Sevilla’s Counter-Memorial, ¶¶ 101-104. ↩
267 Sevilla’s Counter-Memorial, ¶ 105. ↩
268 Sevilla’s Counter-Memorial, ¶ 106. ↩
269 Sevilla’s Counter-Memorial, ¶ 107(a), (b) and (d). ↩
[Page 47]
136. The Committee observes that, to support its ratione voluntatis claim, Spain has presented legal authorities that either postdate the issuance of the Award or were not submitted to the Tribunal. Sevilla takes issue with the relevance of these documents as they were unavailable to the Tribunal at the time it made its decision. The Committee will address these authorities in due course.
137. Regarding the normative conflict issue, Spain argues that there is a clear conflict between the ECT and EU law, and that the applicable conflict rule is the principle of EU law primacy, which renders Article 26 of the ECT inapplicable as declared by the CJEU in Achmea.270 The Committee notes that this argument was raised before the Tribunal, and was addressed in the Award.271 Spain now claims that the Tribunal assessed the existence of the conflict with a biased interpretation of EU law.272 According to Spain, the CJEU has clarified that Articles 267 and 344 of the TFEU preclude member States from settling intra-EU disputes through arbitration.273 Yet, the Tribunal concluded that it was not persuaded that a conflict exists between Article 26 of the ECT and the TFEU.274
138. Spain effectively challenges the Tribunal’s decision not to follow the CJEU’s judgments, which is discussed further below. However, Spain does not specify how the Tribunal’s assessment of the conflict between the ECT and TFEU was biased or grossly erroneous in the application of the applicable law to jurisdiction, i.e., Article 26(1)-(5) of the ECT, not EU law. The Tribunal exercised its judgement in assessing whether the alleged conflict existed. Thus, Spain’s claim of “bias” in interpreting “EU law” is bound to fail, as EU law was not technically part of the applicable law for determining jurisdiction.
139. The Committee finds nothing unusual in how the Tribunal addressed the normative conflict issue. The Tribunal was compelled to address the issue due to Spain’s argument that
270 Spain’s Memorial, ¶¶ 89-90, 109; Spain’s Reply, ¶¶48, 61. ↩
271 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 634-638. ↩
272 Spain’s Memorial, ¶ 262; Spain’s Reply, ¶ 118. ↩
273 Spain’s Memorial, ¶ 264; Spain’s Reply, ¶ 120. ↩
274 Spain’s Memorial, ¶ 265; Spain’s Reply, ¶ 121. ↩
[Page 48]
Article 26 of the ECT is inapplicable in intra-EU disputes. The Tribunal, as it was not bound by the CJEU’s judgments, chose not to accept them at face value.
140. The Tribunal considered it most appropriate to examine whether Article 344 of the TFEU, invoked by Spain as the EU law provision prohibiting intra-EU investor-State arbitration, covered investor-State disputes the same way as Article 26. It concluded that Article 344 did not apply, as its scope did not align with that of Article 26. The Tribunal thus concluded that it was not persuaded of the existence of the normative conflict between EU law and the ECT.275
141. Regardless of the level of deference that the Tribunal accorded to the CJEU’s judgments, Spain has failed to show that by relying on the “plain reading of Article 344 TFEU,”276 the Tribunal committed a gross or egregious error. Even assuming arguendo that EU law were the “proper” law for jurisdictional purposes, the egregious error that Spain seems to claim is the Tribunal’s decision to exercise its judgement and not to follow the reasoning of the CJEU in Achmea and Komstroy. The Committee notes, however, that the Tribunal exercised its legitimate discretion. Therefore, it is difficult for the Committee to see how this amounts to a manifest excess of power.
142. Since the Tribunal found no normative conflict between Article 26 of the ECT and EU law, it did not need to address the conflict rule proposed by Spain, i.e., the principle of primacy of EU law. However, “out of an abundance of caution,” the Tribunal assumed arguendo the existence of a normative conflict and explored whether EU law should prevail over the ECT under Articles 16, 30, 41, 59 and 31(3)(c) of the VCLT. It did not consider the principle of EU law primacy as relevant to resolve this normative conflict in arguendo. Spain now takes issue with this alleged omission. However, given that the Committee has already concluded that there was no manifest excess of powers in the manner in which the Tribunal resolved the normative conflict, there is no need to explore any further arguments
275 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 637-638. ↩
276 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 636, citing Award, AES Solar and others (PV Investors) v. Spain, ¶ 189. ↩
[Page 49]
that would be relevant only if the Committee were to find that the Tribunal’s findings on the normative conflict were annullable, which is not the case.
143. In this annulment proceeding, Spain suggests that the primacy of EU law over the ECT is embedded in the ECT itself, under Article 25.277 However, a plain reading of Article 25 reveals that it pertains to an exception to the principle of most-favoured nation (MFN), in the sense that any preferential treatment that may be accorded among members of an economic integration organization need not be extended by means of the MFN principle to the other non-regional ECT Contracting Parties. To consider that Article 25 effectively embodies the rule of EU law primacy under any scenario, it would seem reasonable to expect that the provision also accords regional law prevalence over the ECT rules in situations in which the treatment provided by the economic integration organization is “less favourable” than that provided under the ECT. However, this reading seems to be contrary to Article 16(2) of the ECT, which states that: “nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty, where any such provision is more favourable to the Investor or Investment.”278 On this basis, the Committee considers that Spain’s argument that Article 25 of the ECT embodies already the principle of primacy of EU law does not add any further indication that the Tribunal “erred” in how it treated the normative conflict issue.
144. Spain’s objection to the Tribunal’s conclusion on the normative conflict and the non-application of the principle of EU law primacy is closely-linked to Spain’s challenge to the Tribunal’s treatment of the CJEU’s judgments in Achmea and Komstroy, which will be addressed in the following paragraphs.
145. Regarding the treatment of the CJEU’s judgments, as noted above, the Tribunal proceeded on the understanding that it was not bound by such judgments, a position explicitly acknowledged by Spain during the arbitration hearing.279 However, on annulment, Spain
277 Spain’s Memorial, ¶¶ 115-118. ↩
278 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 641. ↩
279 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 657. ↩
[Page 50]
asserts that CJEU’s judgments are binding on the Tribunal280 and contends that there is “no doubt” as to their applicability to the case at hand.281 Spain’s Expert supports this view, arguing that the CJEU’s interpretations are binding,282 and leave no room for “speculat[ion] on the content and interpretation of the judgments, as the CJEU has provided unambiguous guidance on this matter.”283 Spain and its Expert further emphasize that the CJEU is the sole institution with the competence to interpret EU law “authoritatively.”284
146. The Committee observes that Spain’s change of position on annulment alters a fundamental premise upon which the Tribunal had based its determination that it was not bound by the CJEU’s judgments. However, the Tribunal cannot be said to have exceeded its powers on account of a change in the position of the party that raises the claims of excess of powers. Spain’s shift in position implies an implicit request to reconsider the Tribunal’s finding that the CJEU’s judgments before it were not binding. The Committee has no powers to do that as that would fall out of the scope of its limited review. Moreover, the Committee notes that neither Spain nor its Expert identifies any specific error in the Tribunal’s application of the relevant law. Rather, they simply imply that the Tribunal should have disregarded the law it applied and substituted it with EU law, without demonstrating any manifest error in the Tribunal’s reasoning. At this stage, the Committee has already addressed and rejected Spain’s challenge to the Tribunal’s determination of the applicable law governing its jurisdiction.285
147. Regarding the argument presented by Spain’s Expert, asserting that the CJEU has the exclusive authority to determine the meaning of EU law, the Committee notes that the Tribunal was well within its authority to interpret the jurisdictional requirements of Article 26 of the ECT, particularly in light of the claim that the provision was inconsistent with another international legal regime. The Tribunal was also mindful of its prerogative
280 Spain’s Memorial, ¶ 246. ↩
281 Spain’s Memorial, ¶ 283. ↩
284 Expert Report, ¶ 197; Spain’s Answer to Committee’s Question, transcript of the Hearing, p. 158. ↩
[Page 51]
to do so under the principle of compétence de la compétence. Had it failed to undertake this task, it would have been in breach of its duty.
148. Regarding the Achmea Judgment, the Tribunal found that it did not apply to the dispute. The Tribunal examined the judgment and concluded that it did not imply an incompatibility between the ECT’s investor-state arbitration regime and EU law, particularly due to the multilateral and “mixed” nature of the ECT, whereas the Achmea Judgment concerned a bilateral investment treaty. Additionally, the Tribunal recalled that the ECT does not include a disconnection clause, exempting intra-EU relations from its scope, and that the Achmea Judgment did not consider the opinion of the EU Advocate General, who had suggested that the ECT was compatible with EU law.286 The Committee observes that the Tribunal’s assessment of the relevance of the legal authority before it, especially given its discretion to do so, cannot constitute an excess of powers, much less a manifest excess.
149. Regarding the Komstroy Judgment, the Tribunal analysed the context in which the CJEU’s preliminary ruling was sought, the specific questions posed to the CJEU, the fact that the underlying dispute was not an intra-EU dispute, and the role of the CJEU’s position regarding the relationship between Article 26(2) of the ECT and EU law within the broader context of the judgment. Adopting a holistic approach, the Tribunal concluded that the CJEU’s statement regarding the inapplicability of Article 26 to intra-EU disputes was obiter dictum. The Committee agrees that once the Tribunal determined that it was unbound by the CJEU’s rulings, it had the discretion to assess the relevance of the judgment and to consider its underlying facts as it deemed appropriate under the circumstances. These actions do not amount to an excess of power, manifest or otherwise. Even if one might disagree with the Tribunal’s final conclusion on the significance of the CJEU’s judgments for intra-EU investment dispute settlement, the Committee does not view the Tribunal’s conduct as constituting a manifest excess of power in its treatment of the CJEU’s judgments.
286 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶¶ 658-663. ↩
[Page 52]
150. Accordingly, the Committee concludes that, regarding the ratione voluntatis objection, Spain has not demonstrated that the Tribunal manifestly exceeded its powers under Article 52(1)(b) of the ICSID Convention.
151. The Committee also notes that Spain has submitted legal authorities that postdate the issuance of the Award. The Committee reiterates that its mandate is confined to ensuring the legitimacy and integrity of the underlying process. It has reviewed the legal authorities submitted by Spain in this regard. However, it considers that they cannot serve to “confirm” errors that do not appear to have existed in the first place. Furthermore, it would be inappropriate to assess the Tribunal’s conduct in light of developments that occurred only after the issuance of the Award, or based on knowledge that was not available to the Tribunal at the time.
C. MANIFEST EXCESS OF POWERS IN THE APPLICATION OF EU LAW
1. Spain
152. Spain claims that the Tribunal exceeded its powers manifestly by disregarding the application of EU law as applicable international law with respect to the merits of the dispute.287 EU law had to be applied, not only as a “particular form of international law,” but also as a fact shaping the investors’ legitimate expectations.288 Its application was critical given that fundamental principles and institutions of EU law were at stake, such as State Aid, and it forms part of the domestic rules that investors must consider when establishing their investment expectations in EU territory.289
153. Spain recalls that the Tribunal stated “that, as a matter of principle, EU law establishes ‘applicable rules of international law’ in the terms of Article 26(6) ECT.”290 However, it only made a short statement disregarding the applicability of the EU State Aid rules in its Decision on Jurisdiction, Liability and the Principles of Quantification of Damages.291 The
287 Spain’s Memorial, ¶¶ 292-293; Spain’s Reply, ¶¶ 147-151. ↩
288 Spain’s Memorial, ¶ 295. ↩
289 Spain’s Memorial, ¶ 296; Spain’s Reply, ¶ 156. ↩
290 Spain’s Memorial, ¶ 297, citing Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 545; Spain’s Reply, ¶ 158. ↩
291 Spain’s Memorial, ¶ 298; Spain’s Reply, ¶ 159. ↩
[Page 53]
Tribunal noted that the relevance of a European Commission’s statement made in its 2017 EC State Aid Decision was contingent upon the possibility of awarding compensation on the basis of a claim regarding an immutable FIT scheme, a claim that was rejected in this case.292
154. Spain claims that the Tribunal erred in drawing the appropriate implications from EU law. The Tribunal was aware of the relevance of the EU State Aid rules in this case when it rejected the Claimants’ argument that EU law was irrelevant.293 However, it circumvented the application of these rules (and overlooked the fact that EU law requires the recovery of illegal aid) based solely on the notion that the dispute had to be resolved primarily in accordance with the ECT.294 Thus, although it accepted EU law as applicable international law under the ECT, it analysed it (presumably) in a superficial manner, and ignored it when resolving the merits of the dispute.295 In reply to Sevilla’s argument, Spain submits that the Tribunal misinterpreted the 2017 EC State Aid Decision, which covers “any compensation granted for the modification of the Special Regime through the New Regime.”296
155. Spain submits that while the Tribunal may have considered EU State Aid rules as not applicable (because in its view the ECT shall primarily apply instead), these rules were indeed fully applicable to the dispute and fully binding upon Spain. As the case relates to the EU State Aid rules, the use of a subterfuge to avoid applying these special rules is a serious error of law and a manifest excess of powers. 297
156. ICSID tribunals have recognized EU law as an equally valid source of international law.298 However, the Tribunal in this case failed to analyse adequately the EU State Aid regime as an essential feature modulating the Claimants’ legitimate expectations. Had the Tribunal applied it properly in accordance with EU law, it would have arrived to a different
292 Spain’s Memorial, ¶ 299. ↩
293 Spain’s Memorial, ¶ 300. ↩
294 Spain’s Memorial, ¶ 301. ↩
295 Spain’s Memorial, ¶ 301; Spain’s Reply, ¶ 183. ↩
297 Spain’s Memorial, ¶¶ 302-303. ↩
298 Spain’s Memorial, ¶ 304. ↩
[Page 54]
conclusion.299 Thus, as the tribunals in Electrabel and JSW noted, ECT Article 10 cannot be infringed if there is another international law rule – recognized also under ECT Article 1(3) – that excludes legitimate expectations.300 Even if EU law were to be considered only a question of domestic law (quod non), there can be no violation of the fair and equitable treatment obligation if the investors concerned have relied on a submission that violates mandatory provisions of domestic law.301 According to Spain, there can be no connection between investors’ legitimate expectations and the existence of a State aid scheme.302
157. Spain notes that the 2017 EC Decision on State Aid is itself part of EU law and binding upon Spain and the Netherlands. This means that is also “applicable law” to the dispute, being the Tribunal bound under EU law to find no violation of ECT Article 10.303 Spain asserts that “it is up to the European Commission to decide whether or not to apply the State Aid rules …The European Commission has been very clear on the mandatory application of State Aid rules.”304 Had the Tribunal considered the correct law, it would have found that the subsidies granted to energy producers were State Aid that had a direct impact on the investors’ legitimate expectations.305 Thus, the application (or proper application of) of EU law to the dispute would prevent Spain from having to pay any compensation.306
158. Spain explains that its support scheme for renewable energy is based on the EU regulatory framework for State Aid, which recognized the need for public support for renewable energy in line with the EU guidelines on State Aid for environmental protection.307 According to this scheme, public support would have to be fixed by the EU member States and should be necessary as long as prices in the internal market do not reflect the
299 Spain’s Memorial, ¶ 305; Spain’s Reply, ¶ 154. ↩
300 Spain’s Memorial, ¶ 306; Spain’s Reply, ¶ 187. ↩
301 Spain’s Memorial, ¶ 307. ↩
302 Spain’s Reply, ¶¶ 159, 190. ↩
303 Spain’s Memorial, ¶ 308; Spain’s Reply, ¶¶ 188-189. ↩
305 Spain’s Memorial, ¶¶ 309-310. ↩
306 Spain’s Reply, ¶¶ 186, 193. ↩
307 Spain’s Memorial, ¶¶ 311-312; Spain’s Reply ¶ 169. ↩
[Page 55]
environmental and social costs and benefits of these energy sources. In this sense, fixed prices to be paid by end-users to a private electricity-producing undertaking would be regarded as State Aid.308
159. While the purpose of renewable subsidies under EU law is to make renewable energy production competitive, they may not lead to over-remuneration that could distort free competition in the EU internal market.309 If so, EU member States are obliged to correct that distortion.310
160. The European Commission has recognized the Spanish support scheme and the awards that recognize compensation in favour of specific investors on the basis of this scheme as State Aid subject to EU rules.311 Support measures are intended to cover the difference between the market price and the cost of renewable energy production, may include a “normal return” on the investment, and must be limited to the amortization of the investment.312 EU law requires prior notification and authorization by the EC of any State Aid scheme.313
161. The EC’s preliminary decision in Antin deemed the amounts awarded by the tribunal in that case as illegal state aid under EU law. It mandates its non-payment despite Articles 53 and 55 of the ICSID Convention. These types of payments would violate rules of international law to which primacy has been accorded, i.e., the EU Treaties.314 Spain submits that this approach has been obliterated by the Tribunal. Otherwise, had it been properly considered, it would have led the Tribunal to a different outcome.315
162. Spain also argues that EU law was relevant in determining the scope of the investors’ rights in the arbitration.316 Under the CJEU’s case law, EU law does not provide a right to State Aid and EU member States retain the right to modify or terminate any state aid at any
308 Spain’s Memorial, ¶¶ 313-315. ↩
309 Spain’s Memorial, ¶ 317; Spain’s Reply, ¶ 169. ↩
310 Spain’s Memorial, ¶ 317. ↩
311 Spain’s Memorial, ¶ 318. ↩
312 Spain’s Memorial, ¶ 319; Spain’s Reply, ¶ 171. ↩
313 Spain’s Memorial, ¶ 320. ↩
314 Spain’s Memorial, ¶ 321; Spain’s Reply, ¶¶ 161, 163-164, 179. ↩
315 Spain’s Memorial, ¶ 323. ↩
316 Spain’s Memorial, ¶ 328; Spain’s Reply, ¶¶ 167-168. ↩
[Page 56]
time.317 In a situation involving some producers in the Czech Republic, which complained about regulatory modifications that affected existing installations, Spain recalls that the European Commission concluded that “the modifications to the support scheme and the tax measures were not retroactive, and did not violate the principle of legitimate expectations.”318 Thus, in the present case, had the Tribunal applied EU law, it would have found that Sevilla’s claim constituted State Aid inconsistent with EU law.319
163. Indeed, the Spanish scheme under Royal Decree 661/2007 had not been notified to the EC, and thus was contrary to the requirements of the EU State Aid rules.320 According to Spain, it could not give rise to legitimate expectations.321 The need to consider the legality of the claimed subsidies under EU law has also been considered in other arbitrations, such as Blusun, BayWa and Eurus.322
164. Even if the subsidies had been notified correctly, EU member States retain all times the possibility to modify or terminate State Aid in order to avoid situations of over-remuneration or unexpected events.323 Furthermore, as the Spanish scheme pursued a very specific goal, i.e. obtaining so-called level playing field, had the Tribunal applied EU law, it would have had to apply the principle of proportionality to assess the extent of the compensation awarded.324
165. Spain also notes that the European Commission has ordered the suspension of payment by Romania of the award rendered in the ICSID arbitration, Micula v. Romania. The ground for such a suspension is the assumption that such payment would constitute an advantage to two Swedish investors that would be contrary to EU State Aid rules and would eventually require recovery from the beneficiary companies.325
317 Spain’s Memorial, ¶ 328; Spain’s Reply, ¶¶ 167-168. ↩
318 Spain’s Reply, ¶ 172, citing European Commission C (2016) 7827 (final), 28 November 2016 (RL-0051). ↩
319 Spain’s Memorial, ¶ 328; Spain’s Reply, ¶¶ 167-168, 173. ↩
320 Spain’s Memorial, ¶ 335. ↩
321 Spain’s Memorial, ¶ 337. ↩
322 Spain’s Reply, ¶¶ 174-178. ↩
323 Spain’s Memorial, ¶ 336. ↩
324 Spain’s Memorial, ¶¶ 337-339. ↩
325 Spain’s Memorial, ¶¶ 325-326. ↩
[Page 57]
166. In short, had EU law applied to the present case, there would have been very significant consequences for the resolution of the merits of the dispute. The Award ignored however the applicable law and its application to assess the case. 326 In reply to Sevilla’s position that the Tribunal did not ignore EU law, Spain submits that the Tribunal did not apply EU law as international law, but only analysed it (presumably) in a superficial manner, without addressing the issue in detail.327
167. The Tribunal’s failure to apply these rules constitutes an excess of powers that is manifest because of the seriousness of the matter at issue and because it manifestly contravenes the literal wording of the European Commission’s repeated statements on the matter.328
2. Sevilla
168. For Sevilla, Spain’s claim that the Tribunal failed to consider EU law to the merits of the case is incorrect as a matter of fact.329 The Tribunal actually found that EU law, including the 2017 EC Decision on State Aid, was applicable to the merits of the case and that there was no dispute on this point.330 The Tribunal further noted that EU law had to be applied as part of international law or as part of domestic law, as appropriate, and decided to confine this application to Spain’s arguments on jurisdiction and legitimate expectations.331
169. Sevilla points out that the Tribunal did not disregard EU State Aid rules. It considered them when assessing Sevilla’s legitimate expectations. On this basis, it rejected Sevilla’s primary claim that there was a legitimate expectation that the feed-in tariff regime would not be altered, recognizing Spain’s prerogative to modify the regime in the exercise of its regulatory powers. The Tribunal upheld however the claim that a reasonable rate of return could be expected, setting that rate at 7%, which was Spain’s proposed rate in the arbitration.332
329 Sevilla’s Counter-Memorial, ¶ 113. ↩
330 Sevilla’s Counter-Memorial, ¶ 114; Sevilla’s Rejoinder, ¶ 79(a). ↩
331 Sevilla’s Counter-Memorial, ¶ 115; Sevilla’s Rejoinder, ¶ 79(b). ↩
332 Sevilla’s Counter-Memorial, ¶ 116; Sevilla’s Rejoinder, ¶ 79(c). ↩
[Page 58]
170. Sevilla notes that the Tribunal acknowledged that the European Commission had approved the aid under Spain’s regulatory framework, provided that the returns were reasonable.333 The Tribunal did consider the implications of EU law on the merits of the dispute and concluded that its own determination was in line with EU law.334 In reply to Spain’s criticism, Sevilla argues that the Tribunal’s assessment was neither superficial nor incorrect. The Tribunal was correct in concluding that the European Commission did not make a finding on whether Spain’s feed-in tariff scheme was compatible with State aid rules, but the European Commission did find that the “new scheme” was compatible with the internal market as it did not exceed what was required for investors to recover the investment and operational costs plus a “reasonable return.”335 Thus, it is clear that the Tribunal’s decision to uphold Sevilla’s alternative claim was consistent with the 2017 EC Decision on State Aid. According to that decision, Spain’s aid under the new scheme provided a “reasonable return” on investment that was compatible with the internal market.336 The Tribunal’s finding is thus consistent with the European Commission’s State Aid Guidelines, which establish that support measures are intended to cover the difference between the market price and the costs of renewable energy production, may include a “normal return” on investment, and must be limited in time to the amortization of the investment. The return of 7% was what Spain guaranteed under the relevant regulatory framework and what the Tribunal found Sevilla was entitled to.337
171. Even if the Tribunal’s determination was incorrect in its reading of EU law (i.e., the 2017 EC Decision on State Aid), Sevilla argues that this alleged failure does not amount to a cause for annulment. An erroneous application of the law is not a ground on which an award must be annulled under Article 52(1)(b) of the ICSID Convention.338 For Spain to prevail on this ground, Spain must show that the Tribunal’s interpretation of the applicable law under the ECT was a “gross and consequential misinterpretation or misapplication of the proper law which no reasonable person (‘bon père de famille’) could accept.” In other
333 Sevilla’s Counter-Memorial, ¶ 117; Sevilla’s Rejoinder, ¶ 79(d)(i)(ii). ↩
334 Sevilla’s Counter-Memorial, ¶ 118. ↩
335 Sevilla’s Rejoinder, ¶ 81. ↩
336 Sevilla’s Counter-Memorial, ¶ 118; Sevilla’s Rejoinder, ¶¶ 79(d)(iii), 81. ↩
337 Sevilla’s Rejoinder, ¶ 82. ↩
338 Sevilla’s Rejoinder, ¶ 83. ↩
[Page 59]
words, Spain must show that the alleged excess is manifest, self-evident, clear or obvious.339 Sevilla further notes that the dispute had to be resolved primarily under the ECT (and not under EU law). In this sense, Spain’s allegation that the Tribunal used a “subterfuge to avoid applying this Special Scheme” becomes moot.340
172. Furthermore, Spain’s argument that EU member States retain at all times the possibility to modify and terminate State Aid schemes does not advance Spain’s position. The Tribunal had already recognized this regulatory prerogative.341 Spain also raises the argument that the Tribunal should have considered the principle of proportionality under EU law when awarding damages. However, as the committee in RREEF v. Spain reasoned in that case, the tribunal’s task was not to prevent distortions in the EU market, but to award compensation based on the principles informing the obligation of fair and equitable treatment.342
173. Regarding Spain’s invocation of the 2016 EC Decision on the Czech Republic’s renewable energy promotion scheme, the EC’s preliminary decision in Antin, and the decisions in Blusun, BayWa and Eurus, Sevilla notes that they are invoked in “an attempt to appeal the Tribunal’s findings” and the EC’s preliminary decision in Antin is in any event a document that was never put before the Tribunal. On these grounds alone, the arguments made on this basis must fail.343
174. In any event, the 2017 EC Decision on State Aid did not determine that the feed-in tariff regime under Royal Decree 661/2007 was unlawful. It merely assessed the “new scheme” under Spain’s disputed measures and found that the remuneration was limited to providing a “reasonable return” on investment. The European Commission has not assessed thus far the feed-in tariff schemes under Royal Decree 661/2007 or Royal Decree 1578/2008;
339 Sevilla’s Rejoinder, ¶ 84; Sevilla’s Counter-Memorial, ¶ 121. ↩
340 Sevilla’s Counter-Memorial, ¶ 120. ↩
341 Sevilla’s Counter-Memorial, ¶ 123. ↩
342 Sevilla’s Counter-Memorial, ¶ 124, citing RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Annulment Application, 10 June 2022 (CL-0207), ¶¶ 143-146. ↩
343 Sevilla’s Rejoinder, ¶¶ 86-89, 93. ↩
[Page 60]
otherwise, it would have been obliged to seek recovery from all recipients, which is something that has never occurred.344
175. Regarding the EC’s preliminary decision in Antin, Sevilla notes that it constitutes merely the initiation of a formal investigation and not a final determination on the matter. According to Sevilla, the underlying facts in Antin were markedly different from those in the present dispute. In Antin, the tribunal upheld the claimants’ expectations to receive the feed-in tariffs under Royal Decree 661/2007, whereas in this case, the Tribunal rejected those expectations and upheld instead the alternative claim based on a reasonable rate of return.345
176. Regarding Spain’s reliance on the awards in BayWa and Eurus, Sevilla notes that despite the tribunals’ acceptance of EU law on State Aid as part of the applicable law, they found that Spain was nonetheless liable under ECT Article 10(1). No ECT tribunal thus far has absolved Spain of its liability through the application of EU law.346
3. The Committee
177. Spain claims that the Tribunal failed to apply EU law in assessing the merits, asserting that EU law forms part of international law and is applicable to the merits of the dispute. However, Spain’s submissions reveal that its claim actually concerns the Tribunal’s application of EU law in the context of determining the investors’ legitimate expectations, which is a question of “fact.” Spain argues that the Tribunal:
(i) made only a single statement on the applicability of EU law to the merits;347
(ii) sought to avoid the application of the EU State Aid regime and ignored that that EU law mandates the recovery of unlawful aid;348
344 Sevilla’s Rejoinder, ¶¶ 91-92. ↩
345 Sevilla’s Rejoinder, ¶ 93. ↩
346 Sevilla’s Rejoinder, ¶ 95. ↩
347 Spain’s Memorial, ¶ 298. ↩
348 Spain’s Memorial, ¶¶ 301, 303. ↩
[Page 61]
(iii) failed to analyse adequately the European State Aid regime as a critical factor in modulating the Claimants’ legitimate expectations;349
(iv) disregarded the caveat in the Antin preliminary decision by the European Commission, which held that amounts granted by the Tribunal in that case under Spain’s feed-in-tariff (FIT) regime constituted an unlawful State Aid scheme under Articles 107 and 108 of the TFEU;350
(v) did not apply EU law to the merits, which would have led to the conclusion that the Claimants’ claims for certain subsidies constituting State Aid were incompatible with EU law;351
(vi) failed to consider that Royal Decree 661/2007 had not been notified to the European Commission in accordance with Articles 107 and 108 of the TFEU, thereby placing the subsidies “in a weak position” for the purposes of the investors’ legitimate expectations;352 and
(vii) ought to have applied the principle of proportionality in the assessment of the compensation awarded.353
178. A review of the Award indicates that the Tribunal assessed Spain’s liability under Article 10(1) of the ECT, which establishes the fair and equitable treatment (FET) obligation.354 Spain’s claim does not challenge the “misapplication” of Article 10(1) or the Tribunal’s failure to consider EU law as an integral part of this legal standard. Rather, Spain challenges the Tribunal’s alleged failure to properly consider EU law in its factual determination under a legal concept derived from Article 10(1) of the ECT, namely, “legitimate expectations.” Before the Tribunal, both Parties agreed on the application of Article 10(1) and the concept of legitimate expectations, and neither argued that EU law
349 Spain’s Memorial, ¶ 305. ↩
350 Spain’s Memorial, ¶ 321. ↩
351 Spain’s Memorial, ¶ 328. ↩
352 Spain’s Memorial, ¶ 335. ↩
353 Spain’s Memorial, ¶ 339. ↩
[Page 62]
should modify, redefine or provide a special reading of the scope of Article 10(1) of the ETC.355
179. Rather, Spain invoked the 2017 EC State Aid Decision in the context of establishing the relevant facts under Article 10(1) of the ECT. It argued that, according to this decision, there is no right to State Aid, and consequently, no investor could expect a specific amount of State Aid to remain unchanged.356 The Tribunal assessed the impact of the 2017 EC State Aid Decision on investors’ legitimate expectations within this factual context.357
180. The Committee has reviewed Spain’s submissions before the Tribunal to determine whether the Tribunal failed to consider EU law as part of the “applicable law” in assessing the merits of the case. It found that Spain itself described the relevance of EU law for this assessment in the following terms:
Both legal systems - EU Law and Spanish Law - are of great importance for: 1) configure the objective Legitimate Expectations of the Claimants; and 2) appreciate the inexistence of commitments assumed by the Spanish State with the Claimant or its investment; and 3) assess the reasonability and proportion of the measures in dispute.358
181. Accordingly, the Committee considers that Spain invoked EU law to establish a fact under the applicable ECT standard. It must be recalled that the type of manifest excess of power under review concerns the egregious or gross misapplication of the applicable law. It does not extend to disputes on the manner in which the Tribunal established facts, even if that process involved considering the regulatory framework prevailing where the investment was made.
182. Thus, the Committee considers that Spain’s challenge falls outside the scope of review in this annulment proceeding. The claim does not concern the misapplication of the “proper law,” which is ECT Article 10. The Committee will not reassess how the Tribunal
355 As noted in the Award, “the Respondent does not appear to be taking issue with the elements of the FET standard identified by the Claimants,” Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 707. ↩
356 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 771. ↩
357 Award, Section VII.B.1(e). ↩
358 Spain’s Rejoinder before the Tribunal, ¶ 33. ↩
[Page 63]
established the facts. For the sake of completeness, however, it notes that the debate on the impact of the 2017 EC State Aid Decision arose in connection with the Claimants’ secondary claim. The Tribunal addressed the issue consistently with its earlier statement that it would refer to EU law in the context in which Spain had invoked it.359 In its analysis of the 2017 EC State Aid Decision, the Tribunal treated EU law as a factual element relevant to assessing whether the investors’ expectations were legitimate.
183. Contrary to Spain’s argument, the Tribunal did not address the 2017 EC State Aid Decision in a single statement. Rather, it examined the decision in detail, as is reflected in the “Factual Background” section of the Award.360 In assessing the impact of the 2017 EC Decision on the investors’ legitimate expectations, the Tribunal noted that the European Commission had decided “not to raise objections to the aid scheme envisaged by the New Regime on the grounds that it was compatible with the internal market pursuant to Article 107(3)(c) of the TFEU.”361 This finding was based on the premise that “the guaranteed returns remain within the range of reasonableness.”362 On this basis, the Tribunal reached the conclusion it deemed appropriate. The Committee thus finds no indication that the Tribunal exceeded its competence as the trier of facts.
184. Regardless of whether the Tribunal’s conclusion was appropriate, this issue falls outside the scope of review in this annulment proceeding. Even if the conclusion were deemed “erroneous,” the consideration given to EU law as part of the regulatory framework shaping the investors’ expectations pertains to the Tribunal’s appreciation of the facts, which is beyond the scope of annulment review.
185. During the hearing, Spain argued that the Tribunal failed to address or apply the criteria included in the 2017 EC Decision on State Aid on reasonable return concerning the concept of “claw-back,” which it had criticized Spain for.363 The Committee notes that Spain did not raise this argument in any of its previous submissions. While Procedural Order No. 6
359 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 547. ↩
360 Award, Section III (c)14. ↩
361 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 915. ↩
362 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 915. ↩
363 Spain’s Opening Statements, transcript of the Hearing, p. 33. ↩
[Page 64]
does not prohibit a party from presenting an argument at the hearing, due process considerations and the need to ensure that the other party has a fair opportunity to respond warrants a cautious approach – especially given that the Parties have agreed not to submit post-hearing submissions. Since the Committee is rejecting Spain’s claim on the ground that it falls outside the scope of review regarding a misapplication of the proper law, it sees no need to address this argument further.
186. Spain’s Expert also argues that the Tribunal contradicted itself and merely paid lip service to its statement that EU law would apply to the dispute. On the one hand, the Tribunal stated that EU law could be considered either as a fact or as applicable international law; on the other hand, it held that the dispute must be resolved “first and foremost pursuant to the ECT.”364 The Committee finds no contradiction. The Tribunal considered EU law within the specific context in which Spain invoked it: the factual assessment of whether expectations were legitimate under the regulatory system prevailing where the investment was made. The dispute was ultimately resolved under Article 10 of the ECT, with the agreement of both Parties, including Spain.
187. Spain also challenges the Tribunal’s determination of compensation, arguing that it failed to consider EU law in adjusting the compensation in light of the principle of proportionality.365 As noted above by the Committee, the Tribunal limited its analysis of EU law to the instances where Spain had invoked it: the question of the Tribunal’s jurisdiction and the question of the existence of legitimate expectations.366 Moreover, under the relevant standard for a manifest excess of powers, the misapplication of the law that the Committee must assess concerns the ECT, not EU law.
188. Based on the foregoing, the Committee concludes that, regarding the claim of manifest excess of powers in the treatment of the applicable law to the merits of the dispute, Spain has not demonstrated that the Tribunal manifestly exceeded its powers under Article 52(1)(b) of the ICSID Convention.
365 Spain’s Memorial, ¶ 339. ↩
366 Decision on Jurisdiction, Liability and the Principles of Quantum, ¶ 547. ↩
[Page 65]
III. COSTS
189. Spain notes that the Committee enjoys a “degree of discretion” to decide the allocation of costs and acknowledges that, in principle, the Committee should be guided by the cost-follow-the-event principle.367 Sevilla should be responsible for the costs incurred by the Applicant in these proceedings as it is the party that initiated the overall dispute; Spain was left with no choice but to initiate this annulment proceeding against an award issued by a Tribunal that lacked jurisdiction.368 Spain submits that Sevilla should be ordered to pay for the legal, arbitration and annulment costs incurred by Spain in this proceeding. Spain estimates these costs at the level of EUR 1,347,104.14.
190. Sevilla agrees that the Committee should follow the costs-should-follow-the-event principle and decide that Spain bear the entirety of the costs.369 Spain should pay interest on the Claimants’ incurred costs at a commercial market rate or at the applicable interest rate awarded by the Tribunal from the date of the Committee’s decision until full payment.370 Sevilla claims the reimbursement of legal fees and translation costs and disbursements for the amount of EUR 512,898.60.
191. The costs of the annulment proceeding, including the Committee’s fees and expenses, ICSID’s administrative fees and direct expenses, amount to (in USD):
| Committee Members’ fees and expenses | |
| Mr. Fernando Piérola-Castro | 121,647.28 |
| Ms. Louise Reilly | 42,248.51 |
| Ms. Bertha Cooper-Rousseau | 59,776.99 |
| ICSID administrative fees | 104,000.00 |
| Direct expenses | 79,554.32 |
| Total | 407,227.10 |
367 Spain’s Cost Submission, ¶¶ 5-6. ↩
368 Spain’s Cost Submission, ¶¶ 7-8. ↩
369 Sevilla’s Cost Submission, ¶¶ 2, 7, 10. ↩
370 Sevilla’s Cost Submission, ¶ 12. ↩
[Page 66]
192. The Committee sees no specific reason to deviate from the generally-accepted principle of “costs follow the event.” Given the rejection of Spain’s claims by the Committee, the Committee decides that:
(i) Spain shall bear its own legal fees and expenses; and
(ii) Spain shall reimburse Sevilla for the entirety of its legal fees and expenses. The Committee has examined Sevilla’s statement of costs, has compared it with Spain’s costs statement, and thus finds it appropriate to order the payment of EUR 512,898.60 to Sevilla. The Committee also orders interest on this amount at the applicable interest rate awarded by the Tribunal371 from the date of issuance of this decision until full payment.
IV. DECISIONS AND ORDERS
193. For the reasons stated above, the Committee unanimously decides:
(i) to reject Spain’s Application for Annulment;
(ii) to order Spain to bear all the costs of the annulment proceedings, including the fees and expenses of the Committee and ICSID’s administrative fees and direct expenses, which amount to USD 407,227.10, as reflected in paragraph 191 above; and
(iii) to order Spain to reimburse Sevilla for its legal fees and expenses incurred in this annulment proceeding, amounting to EUR 512,898.60, along with the applicable interest rate as specified at paragraph 192 above, from the date of this decision until full payment is made.
194. The stay of enforcement of the Award is automatically terminated in accordance with ICSID Arbitration Rule 54(3).
[Page 67]
|
Signature Ms. Bertha Cooper-Rousseau Date: 9/6/2025 |
Ms. Louise Reilly SC Date: |
Mr. N. Fernando Piérola Castro
President of the ad hoc Committee
Date:
[Page 68]
|
Ms. Bertha Cooper-Rousseau Date: |
Signature Ms. Louise Reilly SC Date: 9/6/2025 |
Mr. N. Fernando Piérola Castro
President of the ad hoc Committee
Date:
[Page 69]
|
Ms. Bertha Cooper-Rousseau Date: |
Ms. Louise Reilly SC Date: |
Signature
Mr. N. Fernando Piérola Castro
President of the ad hoc Committee
Date: 9/6/2025