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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

Petitioner's Response to Spain's Motion to Dismiss the Petition or Stay the Proceeding

EXHIBIT 3

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

- - - - - - - - - - - - - - - X

- - - - - - - - - - - - - - - X

Wednesday, February 28,
2024

Washington, D.C.

The above-entitled matter came on for oral
argument pursuant to notice.

BEFORE:

CIRCUIT JUDGES PILLARD, PAN and ROGERS

APPEARANCES:

ON BEHALF OF THE APPELLANT BLASKET RENEWABLE INVESTMENTS LLC:

MATTHEW D. MCGILL, ESQ.

ON BEHALF OF THE APPELLEE KINGDOM OF SPAIN:

SARAH M. HARRIS, ESQ.

ON BEHALF OF THE AMICUS CURIAE THE EUROPEAN COMMISSION:

SALLY L. PEI, ESQ.

eScribers, LLC
7227 North 16th Street, Suite #207
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ON BEHALF OF THE AMICUS CURIAE UNITED STATES OF AMERICA:

SHARON SWINGLE (DOJ), ESQ.

eScribers, LLC
7227 North 16th Street, Suite #207
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C O N T E N T S

[Page 4]

P R O C E E D I N G S

THE CLERK: Case No. 23-7038, Blasket Renewable
Investments, LLC, Appellant v. Kingdom of Spain. Mr. McGill
for the Appellant Blasket Renewable Investments, LLC; Ms.
Harris for the Appellee Kingdom of Spain; Ms. Pei, Amicus
Curiae for the European Commission; Ms. Swingle, Amicus
Curiae for the United States of America.

JUDGE PILLARD: Good morning, Mr. McGill. You may
proceed when you're ready.

MR. MCGILL: Thank you.

JUDGE PILLARD: Technically, good afternoon.

ORAL ARGUMENT OF MATTHEW D. MCGILL, ESQ.

ON BEHALF OF THE APPELLANT BLASKET RENEWABLE

INVESTMENTS, LLC

MR. MCGILL: Good afternoon, Judge Pillard. Is
Judge Rogers joining us?

JUDGE PILLARD: Oh, good question. I believe --

JUDGE ROGERS: I've been here during the entire --

JUDGE PILLARD: There she is. Excellent.

JUDGE ROGERS: But I muted myself and I turned off
the video.

JUDGE PILLARD: Thank you.

MR. MCGILL: Thank you, Judge Pillard, and may it
please the Court, Matthew McGill for Blasket. In this round
two, I would like to start with the arbitration exception.

[Page 5]

The Supreme Court's decision in BG Group, and this
Court's decision in Stileks demonstrate that there is
jurisdiction in this case through the arbitration exception.
The central lesson of the Supreme Court's decision in BG
Group is that an investment treaty is more than just a
unilateral standing offer to investors. It is, quote, "An
already formed arbitration contract among the signatory
states."

In the language of the FSIA then, that investment
treatment is an agreement to arbitrate I states made for the
benefit of private investors. The Energy Charter Treaty is
such an investment treaty. In Stileks, Moldova argued it
did not consent to arbitrate with the investor before the
court; but this Court held that Moldova's signature on the
treaty itself sufficed to establish the arbitrator's
jurisdiction. If the, that was because in BG Group, energy,
under BG Group, excuse me, the Energy Charter Treaty itself
was a contract. If the arbitrator's jurisdiction had
depended on the existence of an agreement to, with that
particular investor, then the existence dispute would have
needed to have been resolved before the court could have
determined that Moldova agreed to delegate arbitrability
questions to the tribunal. For the

JUDGE PILLARD: Isn't this different, though,
because that had to do with the issue as opposed to the

[Page 6]

party?

MR. MCGILL: No, because Spain's argument here is
similar. It says it did not consent to arbitrate. Just as
in BG Group, its argument was it did not consent to
arbitrate. The argument is about the scope of the consent
by the investor state; and here, this is, the foreign state
here argued it didn't agree to arbitrate this dispute, but
not others, that's Stileks; and this Court says that's a
question of arbitrability.

JUDGE PILLARD: But they're saying we didn't agree
to arbitrate with any EU investors. That's a different
question. That's who we're arbitrating with as opposed to,
yeah, we agreed to arbitrate with Blasket's predecessors --

MR. MCGILL: But --

JUDGE PILLARD: -- but only on, you know, green
energy and not on fossil fuel. It's not a question of the
parties have an agreement and we're trying to figure out the
details of it. It's, I mean as --

MR. MCGILL: Well --

JUDGE PILLARD: -- as Spain is saying, no, no, no,
no agreement with Spain and its counterparty at all.

MR. MCGILL: I, I understand; so, I, I guess I
have two points in response. First, is that they are both
questions about the scope of consent, you know, different;
but they are both questions about the scope of consent. In

[Page 7]

BG Group, it was we did not consent to arbitration with
people who do not fulfill, fulfill the location litigation
requirement. That's a class of investors. In Stileks, it's
we don't consent to class with this type of investors; but
Stileks actually does involve who because the, Moldova's
argument in Stileks was that it did not agree to arbitrate
with EnerGeo Alliance because the investment actually came
through the BVI entity, (unintelligible). So, there was a
who issue in Stileks itself. It's not as neatly
compartmentalized as, as Spain would have it.

So, under BG Group, if you view the agreement here
as the agreement to arbitrate, the Energy Charter Treaty
itself is the agreement to arbitrate. It is within the
meaning of the FSIA, an agreement for the benefit of a
private, of private parties. That accords, of course, with
the whole purpose of the 1988 amendments. In the 1998
amendments that padded the arbitration exception, it was,
too, as the United States says in its amicus brief, it was
to, to streamline, to make easier the enforcement of New
York Convention Arbitral Award in U.S. courts. That was the
purpose of adding this exception. It was to eliminate doubt
that there was, that there was subject matter jurisdiction
to enforce arbitral awards in this Court.

So, that, when you have, or looking at the
language --

[Page 8]

JUDGE PILLARD: So, so, I think this is a
hypothetical from your opponent's brief. If, if North Korea
comes in and says, you know, standing agreement to
arbitrate; we want to arbitrate against Spain; and the
arbitrators wanting ever more business say, great, we'll
arbitrate that; and it's just not the case that any offer
was ever made to those investors, but the arbitrators say
there was, done.

MR. MCGILL: Under the ICSID Convention, that
doesn't get out of the, out of the gate because ICSID itself
would not initiate a proceeding. Under the New York
Convention, you would require a, under UNCITRAL Rules, a,
there would have to be an arbitral panel that would quickly
conclude that there's no jurisdiction here. Theses panels
are not staffed by, you know, by, by hacks. They are
respected international law experts.

The second point I wanted to make is that even if
you viewed the arbitration agreement as Spain does here, at
the level of the particular investor, Spain is raising a
question of validity or enforceability, not one of capacity
or formation. Spain is arguing, in essence, that EU-law
preempts its decision to enter into the Energy Charter
Treaty on the, on the text of its plain terms. Those types
of questions of preemption are questions of validity and
enforcement. I would point to the Ninth Circuit's case in

[Page 9]

Unite Here Local and the Eleventh Circuit's decision in
Addicts. These are not questions that go to formation that
must be for the court. They can be delegated to
arbitrators. The question of whether federal law preempts
arbitration can be delegated to arbitrators because it is
one of validity; and under the Supreme Court's decision in
Buckeye Check Cashing, footnote 1, validity is not
formation.

So, more, what is more when an EU member state
violates EU-law, the action of that member state is not void
ab initio. EU-law does not, in fact, have preemptive force
like U.S. law. Instead, under Article 260 of the Treaty for
the Functioning of the European Union, it requires the
member state to take steps to comply or face an infringement
action from the European Commission. That is why you have
all the EU member states saying, we're, we're going to
withdraw from the Energy Charter Treaty. You know, Spain
has not yet taken that step; but they have indicated their
intention at some point in the future to withdraw for the,
from the Energy Charter Treaty in order to comply with the
court of justices' mandate as set down in Komstroy.

JUDGE PILLARD: And is that a prolonged process?

MR. MCGILL: I, if the, you mean the, the
withdrawal itself? The withdrawal, it's effective one year
after the date of the, the notice to the Energy Charter

[Page 10]

Treaty; but the treaty obligations have a 20-year sunset.

So, finally, the, the, I guess the next point I, I would
make is that even if you rejected my validity argument, even
if you were viewing this as an issue of formation, it's not
obvious to me that Spain should not be bound by its own
voluntary submission of this question to arbitrators. Spain
itself invited the arbitrators to decide this. And I am
aware of, while this is a jurisdictional fact that this
Court must, it must find an agreement to arbitrate, I'm
aware of no precedent that would precluded this Court from
saying you are bound by your litigation choice to pursue
this in front of the arbitrators.

JUDGE PILLARD: Isn't most of the U.S. cases on,
on this are, are pre-arbitration; but wasn't First Options
v. Kaplan was a case afterwards where they went through
arbitration, but they're allowed to look back and say, no,
no, no, this person wasn't --

MR. MCGILL: So --

JUDGE PILLARD: -- bound?

MR. MCGILL: And I think that --

JUDGE PILLARD: It wasn't a signatory?

MR. MCGILL: Right, so, I, I, and I, I'm not
disputing that formation questions generally are for the
court under the FAA framework. The question is, what is
necessary to find a jurisdictional fact under the FSIA?

[Page 11]

What is necessary to find a jurisdictional fact? And my
submission would be that when a party chooses to arbitrate
the issue without reservation, they never said arbitral
panel, you cannot raise this; you cannot decide this issue.
You, you, you --

JUDGE PILLARD: They said it within there.

MR. MCGILL: They, they said that they, they
raised their intra-EU objection; but they raised no
objection to the delegation of that precise question to the
tribunal, far from it. They invited the tribunal to decide
it. So, this is different from other cases where the
jurisdictional fact has, it has not been passed upon before.
This is one that's invited the arbitrators to decide and now
it wants a second bite at the apple in enforcement courts.

JUDGE PAN: Does that have to be a factual, I
guess, finding by the arbitral tribunal to work?

MR. MCGILL: Yeah, I, so the way I was thinking of
it, Judge Pan, is that it would also apply to mixed
questions of law, in fact; but this is, I'm just using the
Court's terminology of the existence of an arbitration
agreement as to jurisdiction fact; and that, that question
clearly was litigated before the tribunal at Spain's
invitation; and now they want a different result in this
Court.

JUDGE PAN: So, you're saying even if we're

[Page 12]

responsible for determining contract formation, we can just
adopt what the tribunal said if the parties agreed that
that's --

MR. MCGILL: I am not saying that as a matter of
arbitration law generally. I'm saying that as, with respect
to the very precise and narrow question of what, what is
sufficient to demonstrate a jurisdictional fact to obtain
jurisdiction under the FSIA. And I'm not aware of any case
that says you cannot, you cannot conclude a jurisdictional
fact from a prior litigation in which you voluntary,
voluntarily participated and, indeed, invited.

JUDGE PILLARD: Arbitration?

MR. MCGILL: An, well, or, or a litigation for
that matter; but in this case, it was an arbitration.

JUDGE PILLARD: I have a choice of law question
for you. So, the New York had mentioned, authorizes actual
courts to decline to enforce an arbitral award if the
arbitral award was, if the agreement, I'm sorry, was not
valid under the law to which the parties have subjected it;
or if there's no indication about that under the law that's
cited of the arbitration itself, and so that's on the merits
we have choice of law spelled out --

MR. MCGILL: Uh-huh.

JUDGE PILLARD: -- in the New York Convention.
And I guess in, you know, evaluating whether there's an

[Page 13]

agreement in the first place, do we use that same choice of
law analysis --

MR. MCGILL: I think I, I --

JUDGE PILLARD: -- at the bottom? I'm trying to
figure --

MR. MCGILL: No, I will, I would think not, Your
Honor. I would think that under the FSI -- because you're
interpreting the FSIA here. So, I, I would think that the
question of whether there is an agreement to arbitrate would
be one that would be decided under federal law.

JUDGE PILLARD: Well, under, I mean like under the
FAA, we look to state law because it's a contract question.
So, under the FSIA in terms of the contract law that would
apply here --

MR. MCGILL: Well, I --

JUDGE PILLARD: -- what is the analogous, to the
extent that there's the same kind of question?

MR. MCGILL: Well, then I, I mean I, I think you
would look to the Energy Charter Treaty itself which,
because that is the document under which arbitration was
conducted here; and Article 26 says that you interpret the
Energy Charter Treaty in accordance with its terms and
international law. So, the, the question of whether there
is an agreement, I suppose, would fold back onto one of
international law; but I don't see that as, there's no

[Page 14]

dispute that the Energy Charter Treaty exists. So, if you
take my, my frontline argument that that is sufficient to
establish subject matter jurisdiction, then --

JUDGE PILLARD: Okay. And, and the, and Spain has
an argument that the Energy Charter Treaty means something
different than what you think it means?

MR. MCGILL: Yes.

JUDGE PILLARD: And if that's a question about the
nature of an agreement, I understand that we look for some
text; we look to international law; but international law
doesn't typically have a lot of contract law in it.

MR. MCGILL: So, let me take, I mean --

JUDGE PILLARD: Nor does even EU-law.

MR. MCGILL: I mean this goes straight to the, to
the merits of, of Spain's argument; and so, let me just
address, address the merits analysis here. I would start
first with the United States' submission that at least some
deference is due to the arbitrator's conclusion here; and,
second, Spain has based this argument before 30 different
arbitral tribunals against it and it has lost every one. It
has lost this argument, indeed, with 28 of its own appointed
arbitrators voting against it. So, it's asking this Court
to be really an outlier.

JUDGE PILLARD: Except that, I mean Ms. Harris
will say courts, every court look at this issue; every court

[Page 15]

agrees with the EU?

MR. MCGILL: That's, that's simply not true. The
U.K. certainly does not agree. The U.K. held that this --

JUDGE PILLARD: Right, every point in the EU?

MR. MCGILL: Well, even, even that is of quite
recent vintage. It is simply not true that the EU has, EU
member states have always understood this to be the case
since the founding of the Energy Charter Treaty in 1994. I
would point to Joint Appendix 398. This is the
jurisdictional decision in this case which is from 2014. In
there it talks, it is addressing the Commission's amicus
brief in, it was the Achmea case. It's called Eureko, but
that's Achmea. And it says, what is more, the views
expressed by the European Commission are not shared by the
majority of EU member states who, in fact, have expressed
different views on this matter. Suffice it to say that the
stance taken by the Dutch government in the same Eureko
case in which the Dutch government, taking a diametrically
opposed position as the one held by the Commission,
supported jurisdiction of the tribunal. It is not true that
all EU member states always understood that they were not
allowed to arbitrate under EU-law.

They, you raised a question, Judge Pillard, that I
think it's important to address that, but what, what about,
what importance does it have to non-EU members? The

[Page 16]

importance is that if arbitration is unavailable within the
EU, then EU member states have an incentive to choose EU-
based investors over non-EU-based investors who could invoke
arbitration. That is why it has to be horizontally fair.

JUDGE PILLARD: And all the EU investors will go
overseas and all the overseas investors --

MR. MCGILL: right.

JUDGE PILLARD: -- will go to the EU?

MR. MCGILL: The, I would add that the, the
implications of, of, the implications of Spain's argument
are quite stunning. It would mean that any decision of the
court of justice for the European Union could alter the
treaty obligations of all EU member states for any number of
treaties, the New York Convention, ICSID; the, just a
decision of the EU, of the EU, the court of justice for the
EU would just take the, take the entire European Union out
of these treaties which is, of course, contrary to the terms
of those treaties which provide its methods for amending
them, methods for withdrawing from them, methods for
modifying them.

JUDGE PILLARD: I wonder, you pointed to, you
know, an earlier time, I think it was 2014, when there
wasn't the kind of consensus that seems to be emerging today
within the EU; and we, we were discussing earlier this
morning Article 46 of the Vienna Convention on which a state

[Page 17]

may not invoke its internal law and its being applied to the
EU may not invoke EU-law as invalidating its consent to a
treaty unless the violation is manifest and concerns a rule
of internal law of fundamental importance. The example in
the briefing was if, you know, the President tries to sign a
treaty and doesn't have Senate consent, that would be
manifest to the world that that was not binding; and so, and
I guess my question is, given the coalescence now of, of the
EU, do you have a view on whether moving forward the Vienna
Convention at some point precludes EU investors from relying
on the ECT to form arbitrational agreements with Spain --

MR. MCGILL: Well, I, first of all, I think that's

--

JUDGE PILLARD: -- now?

MR. MCGILL: -- that would be a different argument
than the one Spain is --

JUDGE PILLARD: I --

MR. MCGILL: -- facing. It's --

JUDGE PILLARD: Oh.

MR. MCGILL: That, that Spain is not saying that
it has permission under the Vienna Convention to --

JUDGE PILLARD: Right.

MR. MCGILL: -- abrogate it.

JUDGE PILLARD: Right.

MR. MCGILL: It's saying that it never meant what

[Page 18]

it said.

JUDGE PILLARD: Right, but I'm saying, as their
view of coalescence, I'm trying to appreciate, you know,
what wiggle room other than --

MR. MCGILL: I, I --

JUDGE PILLARD: -- rewriting a --

MR. MCGILL: The main, I mean most that the, the
EU is en masse in withdrawing from the, from the Energy
Charter Treaty; and that is, that is its, that is its
remedy. If it, if it wants to actually remedy it today, it
can get the other member states to agree to the modification
that it says has always existed.

JUDGE PILLARD: Right. And my question is really,
does, is there a way under the Vienna Convention that that
occurs without sort of positive treaty --

MR. MCGILL: I'm not aware of any, of, I'm not
aware of the, the Article 46 caselaw that would permit or
would preclude that possibility.

JUDGE PILLARD: On the injunction, are you still
seeking an anti-suit injunction against Spain?

MR. MCGILL: No, so the, the, it's, so as, as the
Court is aware, our, the district court denied our motion
for, motion for preliminary injunctive relief as moot
because it found no subject matter jurisdiction. Since the
briefing, the primary briefing on this appeal concluded,

[Page 19]

Spain has withdrawn its request for anti-suit relief against
us in the Netherlands; and that makes sense because we're
now a Delaware entity. So, there, there, we don't have an
anti-suit issue at this point anymore.

I do want to address the, the fundamental basis
for the district court's decision below here which was that
Article, under Article 26, paragraph 6 of the treaty, EU-law
is international law that supervenes and alters the meaning
of the Energy Charter Treaty itself. That is not correct.

The, if, if it were correct that EU-law could
modify the meaning of the treaty, so could any bilateral
investment treatment between two member states. That is
obviously not what the EU, what the members of the Energy
Charter Treaty signed up to address. Instead, I would point
this Court to Medellin v. Texas, this, the Supreme Court's
decision in that case where it says that, you know, even if
the treaty violates U.S. law, that means that the treaty
cannot operate within the U.S. It does not mean that you,
that the United States does not have obligations within the
international law domain. EU-law operates within its own
domain. It operates on that plane alone. It does not
change the meaning or content of international law that, in
a treaty that governs not just the EU and its member states,
but 56 different member states.

If there are no further questions, I hope I

[Page 20]

reserved a little bit of time for rebuttal as I had
requested.

JUDGE PILLARD: You requested three minutes?

MR. MCGILL: I did.

JUDGE PILLARD: Do my colleagues have further
questions? Thank you --

MR. MCGILL: Thank you.

JUDGE PILLARD: -- Mr. McGill. And we will hear
again from Ms. Harris for Spain.

ORAL ARGUMENT OF SARAH M. HARRIS, ESQ.

ON BEHALF OF THE APPELLEE KINGDOM OF SPAIN

MS. HARRIS: Thank you and may it please the
Court, Sarah Harris for the Kingdom of Spain. I'd just like
to briefly touch on three points that Blasket addressed.

First of all, it doesn't matter how you view the energy
charter or the punitive agreement, however you slice or dice
it, even if you thought that the Energy Charter Treaty
itself was somehow an agreement to arbitrate among the
members, Spain couldn't and didn't consent with other EU
members to arbitrate.

Now the other side seems to treat, to assume that
agreeing with anyone is good enough to agree with everyone;
but, notably, their answer to the hypothetical of
(unintelligible) appeared to be, don't worry about that;
arbitrators are smart and we'll deal with that on the

[Page 21]

backend. That is not a satisfying answer either with
respect to the sort of, this Court's precedence saying that
whether you agreed with someone or not is a fundamental
question of formation or other circuit's cases; and I would
specifically point to the Lloyd's decision from the Eleventh
Circuit and the Al-Qarqani decision for the Fifth Circuit.

Both of those cases also involve fact patterns where the
question is, did someone form an agreement with someone
else? Yes, there might be an agreement with one person, but
not the person who is relevant to the consent. So, you
know, you can't just sort of say, oh well, you know,
agreeing with everyone will be enough.

And, and, anyways, the United States has pointed
out it would be pretty strange to think that the Energy
Charter itself is sort of a self-encompassing agreement to
arbitrate among member states given that the text of the
Foreign Sovereign Immunities Act, Arbitration Act exception,
refers to the parties having an agreement to arbitrate. The
parties really are talking about like the people before the
court trying to sue the Foreign Sovereign Immunities courts.

Second of all --

JUDGE PILLARD: So, but you do have the provision
about the parties agreeing to arbitrate or on behalf of
others?

MS. HARRIS: Yes. And so, it's the second part

[Page 22]

that I'm focusing on. It's not just an agreement made by
the foreign stage with, or for the benefit of a private
party to submit to arbitrational differences. It's
differences between the parties. So, the parties here are
investors in Spain; and I think that text shows that our
interpretation has to be correct in terms of the relevance.

JUDGE PILLARD: Except it seems like the, I mean
the FSIA, we've been talking about this all morning, but it
seems like it pivots, it's a little inexact in its wording
that the agreement between the parties, something, or for
the benefit of; and it's, if the parties to the treaty are
states of the nature of the, of the beast; but for the
benefit of are not states; and then the disagreement or the
dispute between the parties, it appears that the FSIA is
using parties in the, in the later clause describing parties
in dispute not to be the same parties as the parties to the
treaty?

MS. HARRIS: But it's, I think under, I think the
better view of the FSIA is it's more naturally talking about
the people actually before the U.S. court. So, you could
have a potential agreement maybe for the benefit of third
parties; but the parties we're actually talking about like
have to have some sort of consent; and I think that also
just more --

JUDGE PILLARD: So, what is your sort of classic

[Page 23]

case that you think that for the benefit of it is
referencing?

MS. HARRIS: I think for the benefit of, you could
have an --

JUDGE PILLARD: Could that beneficiary arbitrate
under that agreement or no?

MS. HARRIS: I mean let's say you had like, I
think the, the person would probably have to have consented
because, otherwise, they are not actually agreeing to
arbitrate at all. Like they could be hailed before they
could be subjected to arbitration they didn't agree to would
be kind of strange. I think this just tracks the nature of
the Foreign Sovereign Immunities Act itself, the idea that
foreign sovereigns actually have to have consented to be in
like courts in a pretty clear way; or had done through their
contact that sort of consent.

Anyway, regardless, just looking at the Energy
Charter Treaty one way or another, the baseline concern
remains. Under the other side's view, they seem to think
that everything reduces to a question of scope that is
always arbitrable. I'm not sure what would remain of this
Court's decision in Belize, in this Court's decision in
Mikula, even the distinction drawn in Stileks itself, their,
their piece that they rely on over and over again, it would
make no sense for this Court to have said, wait a minute,

[Page 24]

Moldova's argument is not really an argument about the
formation of an agreement. What they're trying to do there
is backdoor a question of scope, was this an investment or
not, to try to say, oh, we didn't agree to that type of
dispute; but we agreed to this one. Everyone agreed there
because there was no issue of intra-EU issues with the
parties there; that there was some sort of agreement.

Again, the only question was did they agree to this
particular investment or not? And that is what the Supreme
Court has said the dividing line is in the domestic
arbitration context in cases like Buckeye and that's what
this Court has done in the Foreign Sovereign Immunities Act
context.

So, again, it would be really hard to explain what
this Court has actually done in Foreign Sovereign Immunities
Act pieces if it just didn't matter; and if all you could do
is say any sort of dispute over who can sign an agreement or
whether they had a power to do so always reverts to
arbitrability. Just look what the arbitrator did and we're
done here.

Third of all, just the view that you should look
at the arbitrator's win-loss record and the votes for
investors as somehow probative of what treaties mean is a
crazy way to review, to, to understand what treaties mean,
certainly not the way the Supreme Court or this Court has

[Page 25]

ever interpreted a treaty; and not a good road to go down.

What a treaty means is a matter of both text and
signatories' understandings; and this is not a question for
the EU treaties of some sort of national law, like some sort
of Belize constitution at issue in Belize. This is
international law. It is the stuff of treaties between EU
members.

Now, of course, it doesn't govern relations
between, you know, non-EU members; but between EU members,
investors included that is the supreme law above all in
international law; and that is what the investors should
have known as the sort of, sort of clearest rule of the EU
system for all time. And so, the idea that you should
discount how the treaty signatories have understood the
Energy Charter Treaty, again, there is no principle of, of,
or caselaw that would suggest throw the signatories'
understandings out the window because they're at this point
in time versus the other one.

JUDGE PILLARD: Is your position that the Vienna
Convention Article 46(1) condition has been met since this
investment was made; or, you know, the, the provision
allowing, saying that, that internal law, here internal EU-
law invalidates consent to enter a treaty because it was
manifest and concerned a rule of the EU's internal law of
fundamental importance? You mentioned that this morning and

[Page 26]

I'm --

MS. HARRIS: So, our fundamental position is that
rule doesn't even apply because it involves internal law.
EU-law is emphatically international law and that is --

JUDGE PILLARD: But it's both.

MS. HARRIS: -- talking about domestic --

JUDGE PILLARD: It's really both.

MS. HARRIS: Yes, and their position discounts the
(unintelligible) which is if it's international law, you
look at other treaty conflict rules under which I think we
clearly win; however, you apply the other Vienna Convention
rules. And, look, I think we would say even if you wanted
to apply the internal law rule, we could satisfy it; but I
don't think that's the right way of looking at it because,
again, the relevant conflict rules, first and foremost,
should be the specific governing the general; or the EU
primacy principle, which is you have a dispute. One hand is
an EU member, on the other hand is an EU national, the order
of priority under international law as set forth in the EU
treaties is specifically the EU-law takes precedence, first
and foremost, over other international agreements. And,
again, if you want to look for notice of that, that is not
some sort of principle that just emerged recently. There
are a ton of European court of justice decisions
establishing that like way, way, way before these investors

[Page 27]

even stepped foot in trying to invest.

JUDGE PILLARD: And I have the same question for
you that I had for Mr. McGill, that choice of law, the New
York Convention says national courts should evaluate the
validity of an arbitration agreement under the law the
parties have agreed to; or barring that under the law of
(unintelligible) of the arbitration, do you agree that that
provision also should govern our choice of law analysis for
purpose of the threshold FSIA question or no?

MS. HARRIS: We think that what governs first and
foremost would still be EU-law. That is the law, first and
foremost, that the parties --

JUDGE PILLARD: So, we apply different choice of
law analysis to the same question when it arises under the
FSIA as a jurisdictional question than we would in the
merits?

MS. HARRIS: You might, but let me just sort of
back-up and say I don't think it matters in this case
because, first of all, I think the relevant choice of law
question is, did Spain have the power to agree to the
agreement under the FSIA? I think that's your first point
of decision because you're asking is there an agreement; and
so, under the FSIA inquiry you question would be, what law
tells me if Spain had the power to agree or not? We say,
first and foremost, EU-law, I took Blasket's brief to be

[Page 28]

saying you apply different Vienna Convention principles like
look to, you know, what's more specific; look to what's
later in time. Our position is if you applied those
conflict rules, we still win because, again, the EU treaties
are international law; they are more specific; and also,
they are later in time given the re-ratification of the
treaty on the functioning of the EU. So, those seem to us
to be the relevant rules that have been argued in the case
that would apply to this specific question.

Now, again, if we then pivoted to their other
alternative which is start off from the world where you look
at the Energy Charter Treaty, we then just get back into all
the arguments about what does it mean that the EU itself
signed this treaty?

JUDGE PILLARD: I, I think I asked you in the last
case whether the, the EU, the EU Court of Justice cases
actually spoke of Spain's incapacity as opposed to the
invalidity of, of actions taken; and I'm not sure I heard a
clear answer whether, whether there's, those are really
property understood as capacity questions.

MS. HARRIS: Our position is, yes, they are; and
let me just give you some specific language. European
Foods, I think, is the clearest in just emphasizing the line
of cases; and it talks about sort of consent, quote,
"lacking force." The German high court's decision in Achmea

[Page 29]

2 is also a good way of looking at this because it's
obviously applying the relevant EU decisions and trying to
figure out what does that mean in the posture of a court
trying to figure out like what happens to confirming the
award or not; and they are, the court said the agreement is,
quote, "Void ab initio." That's the kind of language that
means you didn't have an agreement at all, not some sort of
enforceability argument.

The other side is comparing this preemption, and I
think that's just the wrong analogy. This is much more like
do states that purport to enter into a treaty with Mexico,
is that a treaty or not? No, it's not a treaty. States
gave up the power to form treaties as part of the
Constitutional Convention; and in terms of other --

JUDGE PILLARD: That is not true with respect to
the EU.

MS. HARRIS: Respectfully, that actually, with
respect to the EU treaties, what happened is Spain and other
member states are saying they do not have the power anymore;
they're giving it to the EU to have a system in which
disputes are exclusively resolved by the European Court of
Justice when they are between members and involve EU laws.
The EU will not submit, cannot submit disputes to implicate
EU-law other ways; and that sort of distinguishes the
question we had earlier, what happens if Spain is in a forum

[Page 30]

against its will trying to deal with questions of EU-law?

The obligation there isn't just sort of throw up Spain's
hands and say, we no longer want to defendant EU-law; we no
longer want the European Court of Justices' decisions to be
bound. When Spain is in this forum, Spain is saying, apply
European law; but the obligation is, don't try to circumvent
the EU treaties that Spain agreed to follow as paramount
law; don't try to do side deals. Don't try to do side
agreements. You can't do that as part of the price of being
a member of the European Union which is a really novel
enterprise in its respect of shared sovereignty in the EU.

JUDGE PILLARD: I have a sort of practical
question. What do you make of the arbitral panels
uniformly, or almost uniformly, rejecting this view,
including international law, jurists chosen by Spain or
other EU countries? I mean this is a, you know, this is not
the kind of dispute we hear every day. So, it's helpful to
have bearings on some of these more practical questions.
What's going on there in your view?

MS. HARRIS: In our view, again, I can't speculate
like what is motivating the arbitrators in these panels to
say we, you know, essentially like we think we can keep
arbitrating because we don't want to pay attention to
European Court of Justice law. I think the problem is on
their side they have, they're pointing to a lot of

[Page 31]

arbitrator's decisions; and on our side, we're saying what
you should be looking at is what the signatories understood
and the way that the treaties play together; and I think you
just can't credit like what a bunch of arbitrators are
saying in like the free market for evaluating for how you
interpret treaties. That's just not one of the tools that
people normally turn to ever as a matter of treaty
interpretation.

So, no, I think you can say, yes, these --

JUDGE PILLARD: But those arbitrators, if they're
presumptively acting in good faith and on their best reading
of the law, they're looking at the same materials you're
looking at.

MS. HARRIS: Yes and, again, I think this shows
like in the international community, there might be like,
among law professors, an arbitrator disputes on these
questions; but it would be really strange to say you credit
those views over, in a treaty that is, has a bunch of
signatories over what the signatories themselves are
understanding the treaty to be, especially because the U.S.
isn't a signatory to that. Like that's pretty disruptive to
the treaty framework. If all of a sudden people who didn't
expect to have intra-EU arbitration, who didn't see it under
this treaty, even attempted until 2007, suddenly see, oh
well, you know, I'll, you know, what do we do with this?

[Page 32]

The European Court of Justice said this is not a thing and,
but we're supposed to defer to arbitrators and supposed to
sort of --

JUDGE PILLARD: Defer, I'm just asking you for a
sort of a, just a real world take on --

MS. HARRIS: And I --

JUDGE PILLARD: -- what universe are they
operating and from your perspective --

MS. HARRIS: I, honestly --

JUDGE PILLARD: -- so --

MS. HARRIS: And I really think it is just a
dispute among international scholars over like what to do
with EU-law; but to me, the more salient point is, has this
been a feature that the EU has done with treaties in the
past? Yes, that is now the, the EU has approached other
treaties, like the WTO, the U.N. Convention on the Law of
the Sea, those are treaties like 1995, one of them; and so,
for this Court to say, sorry, you know, if the EU joined
those treaties, it doesn't matter. You should have known
that you agree to arbitrate under those as well or had other
dispute resolutions outside of the EU system, that's a real
problem both in terms of how those treaties currently
operate and what signatories (unintelligible).

JUDGE PILLARD: Did you argue about those, those
treaties in your brief?

[Page 33]

MS. HARRIS: We argued about the WTO and then the
U.N. Convention on the Law of the Seas as subject of the
Ireland decision, which we do rely on --

JUDGE PILLARD: Right.

MS. HARRIS: -- extensively. It's from 2006.

JUDGE PILLARD: Right.

MS. HARRIS: So, yes, those are, those are
important sort of in context in terms of what people are
thinking and what might happen, and why is Spain, it
appears, really struggling about the arguments here.

JUDGE PILLARD: Thank you.

MS. HARRIS: Thank you.

JUDGE PILLARD: Questions? Judge Rogers?

(No affirmative response.)

JUDGE PILLARD: Great. Thank you very much, Ms.
Harris.

ORAL ARGUMENT OF SALLY L. PEI, ESQ.

ON BEHALF OF THE AMICUS CURIAE THE EUROPEAN COMMISSION

MS. PEI: Thank you, may it please the Court,
Sally Pei for the European Commission. I have just three
points to make at this, at this stage. The first is that EU
law is absolutely internation law and I just wanted to make,
make sure that there's no confusion about the European
Commission's position on this point.

It's well-accepted that EU member states can enter

[Page 34]

into agreements regulating the relationships between present
and future treaties; and that is precisely what they have
done in the EU treaties. The relevant principle is that of
primacy; and that's what governs the relationship between EU
law and any contrary international agreements. And this is
very important to the structure and the integrity of the EU
legal order because if the, if the rule were otherwise,
member states could simply enter into other international
agreements that would undermine and circumvent EU-law
itself.

JUDGE PILLARD: So, if the EU-law, if the EU came
up with principles that were in variance with the Vienna
Convention, those would be primary over the principles of
the Vienna Convention; or in --

MS. PEI: So, this, we're discussing here an
intra-EU situation; so, as --

JUDGE PILLARD: When you say primacy, it's, it's
like, not only is it international law, but it's, it's above
all international law? I'm just having trouble
understanding --

MS. PEI: Yeah, so, so EU law and the EU treaties
have primacy over other international law as far as they,
insofar as they are regulating intra-EU --

JUDGE PILLARD: So, that would be true of the
Vienna Convention?

[Page 35]

MS. PEI: -- circumstances. That would be true of
the Vienna Convention with respect to internal EU
application of it; but that's, that's the, the whole way
that the, the European system has been constituted.

JUDGE PAN: So, what about your friend on the
other side's hypothetical about NATO? What if the EU
decided that it violates internal EU policy and norms for
members to be in NATO? Would that just take them out of
NATO?

MS. PEI: Well, I think that in that case there
would be potentially a question about the rights and
obligations of third parties that are not EU member states
to, to that, to the NATO agreement; and so, just to be
clear, the primacy of international, of EU-law is with
respect to the international obligations owed to, to,
between member states. It's --

JUDGE PAN: But I guess under the ECT, you agreed
in a multi-lateral treaty which included people not living
in the EU, that there would be this unconditional consent to
arbitration? So, isn't it like NATO in that respect, that
you agree to a multi-lateral, international treaty --

MS. PEI: So, with --

JUDGE PAN: -- to do something?

MS. PEI: -- with respect to the, the Energy
Charter Treaty, yes, it has, it has implications for

[Page 36]

relations outside the EU; and that is, in fact, the, that
was the sole purpose of the Energy Charter Treaty. It was
never intended to govern intra-EU relations; and so, it's
within those intra-EU relationships that EU-law has primacy.

JUDGE PAN: So, I guess my question is, if the EU
and EU countries agree to something in the context of an
international, multi-lateral treaty to do something that
affects intra-EU relations, you're saying that they're not
bound by those international treaty obligations; that they
can trump it?

MS. PEI: So, I would put it instead by, by saying
that when the EU and member states enter into multi-lateral
treaty, they are not creating obligations between themselves
under the treaty. Instead, the rules that govern are EU
law. So, so, the EU's position on this is that the Energy
Charter Treaty's substantive provisions do not have any
effect with respect to intra-EU relations. So, intra, so,
EU investors are supposed to bring actions if they think
that they've been wronged by, you know, an EU member state.
The remedies are in EU national courts under EU law causes
of action.

JUDGE PAN: No, I understand your position; I'm
just trying to understand how that relates to your
obligations under international bilateral treaties that
involve parties that are not just within the EU?

[Page 37]

MS. PEI: Yes, and so with respect to parties that
are outside the EU, the, there are obligations under the
Energy Charter Treaty and that's why non-EU member --

JUDGE PAN: No, but I'm trying to sort of zero-in
on if you commit in an international, multi-lateral treaty
to do things, including with respect to people within the
EU, you think you can abrogate that? Like just
hypothetically, say you did commit to that within the ECT,
you made commitments to people outside of the EU that you
would do certain things, including within the EU, you think
you can abrogate that based on EU-law?

MS. PEI: So, I do think that EU-law would have
primacy within the EU if, if it's not affecting the rights
of third countries or third country parties. The rule of
primacy really is about the, the, the --

JUDGE PAN: So, what if it does affect the third-
party countries because there was an argument that it
creates incentives for EU states to favor EU investors
because you don't have to arbitrate them?

MS. PEI: So, if we're talking about the rights of
third countries or the rights of third country investors,
those, those rights are, are valid and they're alive within
the treaty.

JUDGE PAN: So, so what if your position
contradicts the rights of these third-party investors?

[Page 38]

MS. PEI: The primacy would not, would not apply
in that particular situation.

JUDGE PILLARD: But it's, wouldn't, so it's, it's
not, I think what Judge Pan is arguing is, is, arguably,
it's not fair and equal treatment as between potential,
within EU investors and foreign investors. They're coming
to Spain to invest on, with different, different procedural
recourse; and that that itself might have implications to
the, not to --

MS. PEI: Right.

JUDGE PILLARD: -- to the non-EU parties?

JUDGE PAN: Yeah, I think you just conceded that
your position would not hold if it affects non-EU parties;
and I gave you the hypothetical where it does; and you're
saying then --

JUDGE PILLARD: Under this very treaty?

JUDGE PAN: -- under this very treaty, and so now
you're saying that EU-law isn't, doesn't have primacy?

MS. PEI: So, I just want to make sure that I
actually, that I am understanding the question that, that
you're asking.

JUDGE PAN: The, the issue is, I said, what if you
make promises that affect people who are not within the EU
in the context of this multi-lateral, international treaty,
and you've promised to do things under this treaty that do

[Page 39]

affect intra-EU relations, but that would affect the third
parties? And you said then EU-law wouldn't have primacy.

MS. PEI: And so who in this hypothetical, the,
the parties that are trying to invoke the protections of the
Energy Charter Treaty are the third country investors, or
are they --

JUDGE PAN: No, that what your friend on the other
side said was that if there's, if your view is true, it does
affect the non-EU members of the treaty because EU nations
will favor EU investors because they don't have arbitrate
with them. So, that is detrimental to all the other non-EU
parties to the treaty and they're affected. And I believe
you just said then EU-law would not have primacy?

MS. PEI: So, I think that's not the kind of
situation where, where we are talking, where that would be
an issue of a right or obligation owed to third country
investors under the Energy Charter Treaty itself.

JUDGE PAN: So, what's the answer to my
hypothetical?

MS. PEI: So, under the hypothetical where you
have an EU investor that is saying that, that they should be

--

JUDGE PAN: No, I'm just saying as a general
matter, EU primacy will hurt the members of the treaty who
are not from the EU

[Page 40]

MS. PEI: In a, in a more attenuated sense than, than, you know, the, the idea that the EU and its member states have not, you know, they, they must respect primacy as it applies within the European Union to intra-EU relations.

JUDGE PAN: No, but I --

MS. PEI: I can see that there are --

JUDGE PAN: -- I guess the focus of my question is why is it that the EU can abrogate terms of a treaty that affect people who are not within the EU? It's an international, multi-lateral treaty.

MS. PEI: So, the, they, it, in terms of how they are, how it is affecting members, other member states that are, other members of that treaty that are not --

JUDGE PAN: So, you agree that they can't do that if it is affecting members who are not part of the treaty?

MS. PEI: If, if it is affecting member states --

JUDGE PAN: Right, that are not part of the EU?

MS. PEI: So, if it is going to affect the, the treaty rights and obligations owed to those member states, then primacy is not (unintelligible); but I don't, I don't understand your hypothetical to be a situation where the EU rules would, would be affecting the rights and obligations owed under the --

JUDGE PAN: I'm just trying to get to a basic

[Page 41]

premise which I think you agree with, which is that if the EU has obligations under an international, multilateral treaty, it cannot unilaterally abrogate them?

MS. PEI: Yes, I think that's correct.

JUDGE PAN: Okay.

MS. PEI: All right. Moving on to the, the second point that I have wanted to make at this stage is just really about the, this theme of, of unfair surprise and unfairness to the investors here. The notion that the investors are somehow being treated unfairly and have been surprised by developments in the EU is a false narrative for at least three reasons. First of all, I think it's important to recognize the intra-EU investor state arbitration is a very recent phenomenon. The first intra-EU bilateral investment treaty case was brought in 2005 and the first intra-EU Energy Charter Treaty case was brought in 2007. That's a case called Electrabel v. Hungary. And so, when these cases started emerging, the Commission acted immediately to raise questions about at least a potential incapability between this type of dispute resolution and the EU treaties; and you can see references to some of those statements at page 477 of the Blasket Joint Appendix that's in Spain's declaration.

Regardless, at least as early as 2006, and that's already, you know, five years before any of the investors in

[Page 42]

these cases attempted to invoke Article 26, investors would have been aware and on notice of the potential incapability between intra-EU arbitration and EU-law, even based on the jurisprudence of the Court of Justice. That's the MOX Plant case involving Ireland where the Court of Justice held that Ireland had breached the EU treaties by initiating arbitration under the U.N. Convention of the Law of the Sea against the United Kingdom which, of course, at that point in time was an EU member state. And so, EU investors should have been on notice of the content of the decisions of the EU's highest court on this matter.

And, finally, there's just the, the basic point that Achmea and (unintelligible), while they are, of course, decisions of more recent vintage, they were applying principles that flow from the EU treaties themselves that have been shrined, have been enshrined in those instruments for many decades; and, of course, also the, the decisions of the Court of Justice are retroactive much in the same way as when the, when a U.S. court issues a decision about the meaning of the statute, it is saying what the statutes means and, and what it always meant.

JUDGE PAN: So, the issue about, I mean I really, this is kind of all new to me, this, all this EU law. I'm trying to understand the incentives of the EU in this case. It seems like the EU has an interest in, I guess, keeping

[Page 43]

the financial assets of its member states within the government, isn't that the whole point of this, it's a state subsidy argument? It's like I'm just trying to understand why the EU thinks it's important that things be ruled on the way you say; and I don't see the importance of uniformity in laws because it's not precedential; and I'm wondering if there's some other motivating reason for the EU to be here; and is it in the, isn't it in the EU's interests to allow these EU member states to avoid paying these judgments because it keeps the money with the governments which is better for the EU than letting it go to private parties that are energy companies and other investors?

MS. PEI: So, I, I don't think that the issue for the EU is, is exactly keeping money within the governments. For the Commission, the question really is one of exclusive competence to regulate state aid within the EU. State aid is a principle that, that, under which governments cannot provide subsidies to businesses or, or companies operating in the EU without --

JUDGE PAN: Isn't that one of the premises of the ECT, though, like to encourage investment they were giving deals to people to come --

MS. PEI: Only, only with respect to its, to, to investors who are outside the European Union. The, the Energy Charter Treaty --

[Page 44]

JUDGE PAN: But you're putting aside to who? The ECT was to encourage investment, and that included incentives.

MS. PEI: Correct, but never, it was never intended to apply with respect to intra-EU investors. It was never intended to create rights to EU, people already within the EU to --

JUDGE PAN: So, why would the EU enter the ECT if the purpose of it was to provide this state aid that's not authorized?

MS. PEI: So, it was, it was in order to extend the EU's energy policy beyond the EU's borders. So, it was creating sort of a framework that would essentially try to encourage members, non-member states who eventually might exceed to the union to bring their legal protection, their, their laws in, in line with, with the EU's internal policy; but it was never intended to authorize the granting of state aid.

JUDGE PAN: Can you explain that? Like what, what was supposed to happen from the EU's --

MS. PEI: So --

JUDGE PAN: -- perspective?

MS. PEI: So, from the EU's --

JUDGE PAN: If they signed the ECT, it's going to do what; it's going to encourage --

[Page 45]

MS. PEI: So, so --

JUDGE PAN: -- non-EU nations to join the EU?

MS. PEI: That, that was part of the picture. The, so in the 1990s, this when the Energy Charter Treaty was negotiated. The idea was that already within the EU there were certain, there, there was an existing energy policy and investment protection for EU investors; and the, the EU wished to, to try to extend some of those policies outside the EU; and then the way to do that was by negotiating an agreement with countries that were not part of the EU --

JUDGE PAN: But I thought that you said that the investment protections were unlawful state aid? So, you're saying you --

JUDGE PILLARD: There were, there were different pre-existing protections?

MS. PEI: There were, there were different, there are different rules that govern investment protection within the, within the European Union; and, and the Energy Charter Treaty was simply never intended to supplant or displace those. And so, going back to the question of, of state aid, the reason why the Commission is so concerned about these awards is that an enforcement court outside the EU, or for that matter within the EU, does not have the ability or competence to order an, to order a state to provide aid.

[Page 46]

Subsidies can only be paid to investors if the Commission has specifically authorized that; and the Commission has not authorized to date the, the payment of these awards.

So, from the, from the Commission's perspective, it's very important that, that, that it be able --

JUDGE PAN: So, it's not really, it's not really the judgments that are unlawful; it's the fact that your EU members ever gave any of these investment incentives; they weren't allowed to do that, but they did it --

MS. PEI: It is, it --

JUDGE PAN: -- and now the investors are trying to collective what was promised to them; and you're saying they never were allowed to, to do that to begin with?

MS. PEI: So, it is, it is both to the extent that, that EU member states such as Spain, but also other countries, to the extent that they offered and paid subsidies to EU or, or other, to companies without first getting approval from the Commission, that is unlawful state aid.

JUDGE PILLARD: And do you think they believe the ECT was the permission?

MS. PEI: The, to, that the investors believed the ECT was permission?

JUDGE PILLARD: Spain did?

MS. PEI: I don't, I don't know what Spain

[Page 47]

believed at that point. I think Spain should have been on notice of its obligations under EU state aid law to notify the Commission.

JUDGE PILLARD: But it did a lot of this?

MS. PEI: It did a lot of this, the payment of subsidies?

JUDGE PILLARD: The giving of subsidies?

MS. PEI: Yes, and the Commission's position is that Spain should not have done that without, without first notifying the Commission and obtaining permission to do so.

JUDGE PAN: But it's not state aid if you pay a subsidy to a non-EU investor?

MS. PEI: It also may be a question of state aid in that, and that would affect the, the identity of the beneficiary of the aid is not dispositive of the state aid analysis. It's really whether the, the payment of an amount would potentially cause distortion of competition within the, within the EU.

JUDGE PAN: Then why can Spain pay subsidies to non-EU people? It still, doesn't that still violate the state aid, I guess, doctrine?

MS. PEI: So, the question of, I think the Commission's position is that, is that there are state aid implications also for, for non-EU investors investing in, in the EU, they also should be on notice that the content of EU

[Page 48]

law and should be --

JUDGE PAN: But I just don't understand the divide that you're drawing between EU and non-EU investors. They --

JUDGE PILLARD: Is it that the ECT, as you read it and as Spain reads it, was EU authorization, notice and authorization for state aid to non-EU investors; and the mistake was Spain extending that to EU investors?

MS. PEI: So, I, I don't think that the Commission would, would agree that that's the ECT itself constitutes authorization to pay state aid.

JUDGE PILLARD: Okay.

MS. PEI: There needs to be a formal process by which the, the member state notifies the Commission of its intent to pay and, and receives a decision. And just going back to Judge Pan's question about --

JUDGE PAN: So, then why isn't your position that Spain didn't have the authority to enter any of these investment decisions within EU or external to EU investors because it's state aid?

MS. PEI: So, I think the, the state aid analysis would, would need to, if, if you're, if there's an award against Spain that's been obtained by an EU investor, I think there would still need to be a state investigation and, and analysis of whether they can actually --

[Page 49]

JUDGE PAN: But why not for the non-EU?

MS. PEI: I think there would also, I think there would also need to be an analysis of that because of the, because the state aid --

JUDGE PAN: Then why are these, why are these awards enforceable as to non-EU investors, but not EU investors?

MS. PEI: At least as, as far as the Court of Justice has, has, has left the question, and it has not yet definitively ruled on the, the scope of, you know, the principles in, as far as they apply to third country investors; but there is, the Court has left that open, but it would be something that the Court would need to address in the future.

JUDGE PAN: You know, I'm just confused by the EU's position because it just doesn't seem -- I don't understand that we're trying to keep the cases in alignment because these have no precedential value; and now I don't understand the, you know, it's important for EU order because of state aid, et cetera, because there's no reason to distinguish between intra-EU and outside of EU investors. Like --

MS. PEI: Yes, so --

JUDGE PAN: -- your position, I don't understand --

[Page 50]

MS. PEI: Yeah.

JUDGE PAN: -- the reasons for your positions.

MS. PEI: Yes. So, I'm sorry about the confusion. I mean I think that the, the fundamental point here is that the Commission is the, the Union's state aid regulator and it has an interest in making sure that its ability to evaluate and, and decide on these questions of state aid, whether they, they pertain to, especially where they pertain to EU investors where the law seems to have been focused; but also, in future cases, it's important that the EU Commission be, be the party that is able to exercise its obligations and its regulatory mandate that flow from the EU treaties itself.

JUDGE PAN: It just seems that also your interests can be vindicated by allowing these things to happen; and then moving for a stay of any execution of the judgment in the United States; and then preceding with your, what you're doing already which is determining whether Spain is allowed to pay any of these judgments.

MS. PEI: So, I think with, with respect to that, there are a couple of problems. First of all, the, the mere idea of a body other than the European Commission authorizing or ordering an EU member state to pay aid is problematic from, from the perspective of the Commission's exclusive authority in this area.

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With respect to what should happen in, in the hypothetical world in which these awards are permitted to be enforced, there would be a complicated cascade of litigation and, and other proceedings that would need to happen in the EU. So say, for example, Spain were to pay in compliance with a U.S. order, or say even that, that Spain had some of its assets attached in execution --

JUDGE PAN: No, my thought was say that's all stayed pending whatever you all decide about whether, what Spain can do, what would happen?

MS. PEI: So, you know, then, you know, that, that, then the, the EU would, would still be, I think the basic point about another entity having ordered the payment of aid, I think that is still fundamentally a problem for the, for the Commission and one that it would, it, it takes strong issue with; but I, also to your point that if, if further proceedings were to be stayed, the practical consequences might not be the same; but I, I just wanted to lay out for the Court some of the practical consequences and what they could be because if Spain were actually to, to pay anything, it would, the Commission would be required to order it to recover and claw back any such amounts. A recovery decision itself would be in principle subject to further challenge and appeal within the EU system; and that I think you can take a look at the Micula decision, and that

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case is an example of, of the very complicated machinations that, that result from a state actually paying, or being made to pay an award that, that is indisputably unenforceable within the EU as a matter of, of both EU-law and, and impermissible state aid --

JUDGE PAN: Well --

MS. PEI: -- so --

JUDGE PAN: -- I thought that the EU is deciding whether or not it's permissible?

MS. PEI: Correct, but, but was, until, unless and until the Commission actually issues a decision authorizing, it is impermissible to --

JUDGE PAN: It puts Spain in a difficult position because assuming that their assets in the United States are seized to pay the judgment, then within the EU they would be required to claw back those assets --

MS. PEI: Correct.

JUDGE PAN: -- through more litigation against the, the petitioners in this case, or the investors in this case?

MS. PEI: Correct. And, and, unfortunately, that, that is, that is the, the bind that Spain would find itself in; and that's, the Commission does not really have discretion not to order recover; and I think that's again, highlighting why, why Spain actually went to the, to the

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courts in the EU.

JUDGE PAN: So, I'm sorry, what are the proceedings going on to decide whether or not Spain can pay these judgments or not? Like how does that work?

MS. PEI: So, Spain has, has notified the EU, the Commission of these awards; and just, I think this goes back to an earlier question you had about what is, when is, what is the aid here? The aid, it's not only the, the, the original subsidies, but the court has also held that the payment of, or the, and the Commission understands that the payment of an award, an award itself, would constitute aid. So, Spain has notified the, the awards to the Commission. The Commission is, is reviewing those. While it is reviewing, it is impermissible and unlawful for Spain to pay anything. That's the, that's the law --

JUDGE PAN: But does the EU just have discretion to say you can pay these awards?

MS. PEI: It would, there are laws on, you know, factors for when it would be permissible to pay state aid. I think given the way that the, the, the Commission's decisions and the Court's jurisprudence has developed on this point, I think probably it would be quite unlikely that, that these awards could be paid just based on, on the way that the principles have been developing. And I also would, would point out that there is no principle of state

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aid law under which an order from, you know, a national court, whether it's in the EU or outside the EU, would be a reason to excuse Spain from a recovery obligation. So, again, I think the, that simply is to underscore the, the complicated questions that are posed by, by these particular awards and the notion that --

JUDGE PAN: Can this law be settled? Can the EU, and Spain, and these investors all get into a room and just settle this?

MS. PEI: In terms of, in terms of settlement, I, I, I think that that, too, and once again this all comes back to state aid, I think that, too, could, could pose some serious questions. I, I, I don't know what the, the contours of all this would be; but --

JUDGE PAN: But does --

MS. PEI: -- you know --

JUDGE PAN: -- I'm just wondering, can the EU actually, does it have authority to enter settlement negotiations along with Spain and these investors, and just work this out?

MS. PEI: In terms of the, the authority, I, I, I, I don't know for sure the answer to that, to that question; but --

JUDGE PAN: Because I guess the EU could come to the table and say, well, we'd be willing to waive or, I

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guess, allow payment of this much as state aid as part of the settlement and withdraw the claw back requirement --

MS. PEI: Under the --

JUDGE PAN: -- et cetera, or --

MS. PEI: -- under, under existing state aid law, I don't know whether that would actually be possible given the, the, the content of state aid law as it stands. I mean, you know, whether, whether the law would be, or could be amended, I mean I think then we are really straying into things that are --

JUDGE PAN: I'm only asking because it just seems, like I'm not an expert on international law, but this case cries out settlement just looking at just the complexities involved in different --

MS. PEI: I, I agree with you about, about the, the, the very high-degree of complexity of this case; and I think that, that really underscores why, again, it would be extraordinary for, I think, this Court to take the, the bold step that the investors are inviting, particularly given that the United States is not a party to the Energy Charter Treaty, in particular, in just --

JUDGE PAN: And what's the bold step we're talking about?

MS. PEI: The bold step of, of allowing the, the enforcement of these awards, and, and seeking an anti-suit

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injunction. I, I understand that Blasket is no longer seeking an anti-suit injunction; but enjoining a foreign sovereign and, and preventing the European Commission from being able to enforce and carry out its regulatory mandate under the state aid regime.

JUDGE PAN: But it's not extraordinary to just enforce an award under the ICSID, which the, you know, Spain is a party to? That's an extraordinary --

MS. PEI: Well --

JUDGE PAN: I understand the injunction --

MS. PEI: Right.

JUDGE PILLARD: But why is it a bold step, especially in this case where if it continues in the district court, the court will have a chance, you know, that there, there are more bases under the New York Convention to hold that an award is invalid on its merits even if jurisdiction is recognized? So, what would be bold about allowing this to go forward and have the arguments about validity or not be vetted before the Court?

MS. PEI: So, I think that the, the Court still needs to, even before you get to the questions about the, the merits and whether enforcement could be permitted or not under the New York Convention, you know, there's still, of course, the threshold jurisdictional question of, of whether there is an arbitration agreement. And here, where the

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Court of Justice has spoken, has, has reached that conclusion based on long-standing principles of EU law, and these are principles also that are fundamental to the EU legal order; and where, you know, I think that if, if you are choosing between two positions and two interpretations of this treaty language, one of which is consistent with the views of the European courts and every relevant sovereign here, including the home countries of the investors, if you're choosing between that and, and on the other hand an interpretation that would go against that uniform consensus, that would open the door to all sorts of disruption within the European Union. I think there is a, a role for, for deference here.

JUDGE PILLARD: You don't think Stileks effectively and Chevron effectively require us to hold that there's jurisdiction?

MS. PEI: I don't. I, I think that those cases all, in none of those cases was there a dispute about whether there was an arbitration agreement. There, nobody was arguing that there hadn't been an offer made and that, and that the offer was not to, to the, you know, that there hadn't been an agreement created between the people who were trying to arbitrate; and now here, that, the question is fundamentally different. It's a question whether Spain actually could ever have entered into an agreement with

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these people --

JUDGE PILLARD: Although --

MS. PEI: -- with these, with these parties.

JUDGE PILLARD: -- Stileks said the treaty, the award, the, you know, the ECT, the award and the ICSID, is it ICSID, or New York Convention?

MS. PEI: I think it was a New York Convention --

JUDGE PILLARD: Yeah.

MS. PEI: -- case, but --

JUDGE PILLARD: So, so there's, there, the ECT was the agreement to arbitrate in that case?

MS. PEI: Well, I think bear in mind that, that Stileks, of course, was not an intra-EU case; so, there was no argument being made there that Moldova had not, did not have the, the power to agree to arbitrate the dispute with the relevant investor.

JUDGE PILLARD: No, but the move was that you don't have to have, you don't need to get into Moldova and the investor, the intent there, the agreement to arbitrate there because the, the ECT was itself.

MS. PEI: So, I think that in the, in the Stileks case there was, in fact, you know, the, the, the, there was, there was an offer and it had been accepted by the investor; and that's, you know, simply not what the argument is here. I think it's the, they, the question there was the scope of

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the dispute that was being submitted to arbitration and whether the investment that was being sued about was an investment that was covered by the treaty; and that, again, I think, is, is a fundamentally different question from the one that we're facing here about whether there was ever an ability on the part of, of Spain and sovereign to agree to this, to arbitrate with an intra-EU investor.

JUDGE PAN: Can I ask you, I guess it was represented to us that this argument that you're making, or Spain has made, has been run up the flagpole in a bunch of different arbitration settings and has been shot down; and so, I'm just wondering, those awards, have they been paid and have you been trying to claw them back; or what has happened in those 30 other --

MS. PEI: So, in those, in those other cases, I mean I think the position is probably similar with respect to the, to the, the Spanish awards. You know, they, I don't believe that Spain has actually paid any of them yet because of the state aid implications; and the Commission will need to evaluate and issue its decision about whether or not the awards can be paid.

JUDGE PAN: All right. So, the, it's not extraordinary then because they're the other awards are out there?

MS. PEI: But they're, they haven't, there,

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there's, they are not, they haven't been enforced.

JUDGE PAN: Oh, you mean they haven't been confirmed?

MS. PEI: They, yes, that's correct. Yeah --

JUDGE PAN: You know --

MS. PEI: -- I mean, they're, I think these are the first three cases that have made it up to the --

JUDGE PAN: I see.

MS. PEI: -- Court of Appeals and I think you, you raise a good point that there are multiple other cases involving these same kind of facts. I think there are probably about a dozen others in the district court at the moment. They implicate not just Spain, but here are cases against Italy as well; cases also against, I think, Croatia and Poland. So, this is not just a, an issue that's confined to the three cases that the Court is hearing today.

JUDGE PAN: I see. Thank you.

MS. PEI: If the Court has no further questions, I thank the Court for the opportunity to present the Commission's views.

JUDGE PAN: Thank you.

JUDGE PILLARD: Thank you very much.

ORAL ARGUMENT OF SHARON SWINGLE (DOJ), ESQ.

ON BEHALF OF THE AMICUS CURIAE UNITED STATES OF AMERICA

MS. SWINGLE: I know it's been a long morning, if

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the Court has questions, I'm welcome to answer them; but, otherwise, we would just rest on our briefs.

JUDGE PILLARD: I had a question about, so, so the United States filed an amicus brief in the Nigeria case, Process & Industrial Development v. Republic of Nigeria, and you argued that it wasn't required that there be a valid arbitral award under the Foreign Sovereign Immunities Act because the New York Convention in its implementing legislation only require an arbitration award, not a valid one; and I wondered whether, you know, here the question is whether there's a valid agreement, not a valid award. Does the same principle apply or no?

MS. SWINGLE: I don't think so, Your Honor. I think there, there does need to be an actual agreement to arbitrate formed as a precondition whether to compel arbitration or to enforce a resulting award. I mean I think the point is somewhat different and I, I think it, it is consistent with and flows from the text of the FSIA as well --

JUDGE PILLARD: Oh.

MS. SWINGLE: -- which provides for an action to confirm an award made pursuant to such an agreement to arbitrate; and, you know, obviously, under the New York Convention, it retains the discretion to enforce an award that is no longer valid in the sense that it's been

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nullified perhaps by a court of the primary jurisdiction.

So, I think that that is the distinction we've addressed in our --

JUDGE PILLARD: Thank you again for --

MS. SWINGLE: Thank you, Your Honor.

JUDGE PILLARD: -- appearing at our request. Mr. McGill.

REBUTTAL ARGUMENT OF MATTHEW D. MCGILL, ESQ.

ON BEHALF OF THE APPELLANT BLASKET RENEWABLE INVESTMENTS, LLC

MR. MCGILL: Big finish. There's been no answer presented to BG Group and its holding that there is an investment treaty and already formed arbitration contract. That holding is the basis for Chevron's conclusion that the issue there in that case was a scope question to be addressed at the merits. Stileks, Chevron and BG Group all dealt with challenges to the scope of consent. To be sure, this one comes in a little different packaging, but they all were about the scope of the state's consent; and in each case this Court and the Supreme Court held that those were arbitrability issues meant for the merits. Belize, Al-Qarqani and Lloyds, none of those cases involve investment treaties. They are, instead, commercial arbitration, bi-lateral commercial arbitration agreements, and that makes all the difference. If the Prime Minister of Belize didn't

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have authority to enter into an agreement at all, this bilateral treaty, then that is indication that there would be no agreement to arbitrate. That's not the case here. There is no dispute that Spain entered into the ECT and that it remains in force and effective at least as to non-EU states.

The EU itself, apparently the CJEU that is, does not view this as a capacity or formation problem. We heard counsel for Spain say that this consent is, quote, "Lacking force," or is void ab initio. Those are not formation issues. Those are validity issues under Buckeye Check Cashing. They are arbitrable.

Judge Pillard, you asked about first options and the first opinion rule. I would point to the Second Circuit's case in Olin where it's 73 F.4th at 107; and it says there that the first options rule doesn't apply where Libya, quote, "Independently urged the tribunal to decide issues of arbitrability." That is exactly what happened here. The oddity here is that Spain is seeking a level of view at the jurisdictional phase that it cannot possibly obtain at the merits phase. That turns the whole purpose of the 1988 amendments on their head. It was supposed to streamline the path to enforcement, ensure that there was jurisdiction, not make it more difficult.

On the merits here, of course, arbitration

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decisions are highly relevant to international law arbitration. What is going on here is an overwhelming consensus that EU law does not diminish member states' treaty commitments. It's an overwhelming consensus rejecting this idea of the premises of EU-law within the international law domain.

Finally, on state aid, this court, of course, has an unflagging obligation to exercise subject matter jurisdiction where it exists, whatever the European Commission says about state aid. Treat, it also has, the United States has a treaty obligation to enforce awards; there's a statutory obligation of this Court to enforce awards; and there's been no finding that the awards in our case are state aid at all. Thank you, Your Honors.

JUDGE PILLARD: Thank you. The case is submitted.

(Whereupon, the proceedings were concluded.)

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DIGITALLY SIGNED CERTIFICATE

I certify that the foregoing is a correct transcription of the electronic sound recording of the proceedings in the above-entitled matter.

Signature

Tracy Hahn

eScribers, LLC

March 11, 2024
Date