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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

STRABAG SE, ERSTE NORDSEE-OFFSHORE HOLDING GMBH
AND ZWEITE NORDSEE-OFFSHORE HOLDING GMBH

V.

FEDERAL REPUBLIC OF GERMANY

(ICSID CASE NO. ARB/19/29)

I hereby certify that the attached documents are true copies of the Tribunal’s Award dated December 18, 2024, and the Partial Dissenting Opinion of Prof. Dr. Maria Chiara Malaguti.

Signature

Martina Polasek
Secretary-General

Washington, D.C., December 18, 2024

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

STRABAG SE, ERSTE NORDSEE-OFFSHORE HOLDING GMBH AND
ZWEITE NORDSEE-OFFSHORE HOLDING GMBH

Claimants

and

FEDERAL REPUBLIC OF GERMANY

Respondent

ICSID Case No. ARB/19/29

AWARD

Members of the Tribunal
Dr Veijo Heiskanen, President of the Tribunal
Ms Judith Gill KC, Arbitrator
Prof Dr Maria Chiara Malaguti, Arbitrator

Secretary of the Tribunal
Mr Govert Coppens

Date of dispatch to the Parties:

18 December 2024

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REPRESENTATION OF THE PARTIES

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TABLE OF ABBREVIATIONS/DEFINED TERMS

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I. INTRODUCTION AND PARTIES

1. The case has been submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre") under Article 37(1) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention") and Article 26(3) of the Energy Charter Treaty (“ECT”).¹

2. The parties to this arbitration are Strabag SE (“Strabag” or the “First Claimant”), Erste Nordsee-Offshore Holding GmbH (“NOH 1” or the “Second Claimant”) and Zweite Nordsee-Offshore Holding GmbH (“NOH 2” or the “Third Claimant"), companies organized under the laws of the Republic of Austria (“Austria”) (the “Claimants”), and the Federal Republic of Germany (“Germany” or the “Respondent,” and together with the Claimants, the “Parties”).

3. The dispute arises out of regulatory measures taken by the Respondent regarding the Claimants' development of installations for the production of offshore wind energy. The Claimants contend that the Respondent's measures undermined the Claimants' development of a new technology for installation of offshore wind farms (“OWFs”) and their right to develop offshore wind energy projects in certain areas of the North Sea, resulting in a loss of their investments, in breach of the ECT.

4. The Respondent argues that the Claimants' claims fall outside the Tribunal's jurisdiction on a number of grounds, including because the Respondent never agreed to arbitrate intra-EU investor-State disputes under the ECT. The Respondent also denies any breach of the ECT and contends that it merely exercised its right to regulate in the public interest, which cannot give rise to any valid claims under the ECT.

¹ The ECT entered into force for both the Republic of Austria and the Federal Republic of Germany on 16 April 1998; the ICSID Convention entered into force for Austria on 24 June 1971 and for Germany on 18 May 1969. ↩

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II. PROCEDURAL HISTORY

5. On 10 September 2019, the Claimants filed a request for arbitration dated 5 September 2019 with the ICSID Secretariat, together with Exhibits C-0001 through C-0049 and Legal Authorities CL-0001 through CL-0003 (the “Request” or the “RfA”).

6. On 20 September 2019, the Secretary-General of ICSID registered the Request in accordance with Article 36(3) of the ICSID Convention. On the same day, she notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.

7. The Parties subsequently agreed to constitute the Tribunal in accordance with Article 37(2)(a) of the ICSID Convention. According to the Parties' agreement, the Tribunal would consist of three arbitrators, one to be appointed by each Party and the third, presiding arbitrator to be appointed by agreement of the Parties.

8. In the Request, the Claimants had appointed Ms Judith Gill KC, a national of the United Kingdom, as arbitrator. On 28 November 2019, the Respondent appointed Prof Dr Maria Chiara Malaguti, a national of the Italian Republic, as arbitrator. Ms Gill and Prof Dr Malaguti subsequently accepted their appointments.

9. By communications of 6 May 2020 from the Claimants and 7 May 2020 from the Respondent, the Parties agreed to appoint Dr Veijo Heiskanen, a national of the Republic of Finland, as President of the Tribunal.

10. On 7 May 2020, the Secretary-General of ICSID, in accordance with Rule 6(1) of the 2006 ICSID Rules of Procedure for Arbitration Proceedings (the “ICSID Arbitration Rules”), notified the Parties that all three arbitrators had accepted their appointments, and that the Tribunal was therefore deemed to have been constituted on that date. Ms Anna Holloway, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal. On 3 March 2022, Ms Holloway was replaced by Mr Govert Coppens, ICSID Legal Counsel.

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11. On 8 June 2020, the Respondent filed an application under Rule 41(5) of the ICSID Arbitration Rules (the “Respondent's Rule 41(5) Application”), together with Legal Authorities RL-0001 through RL-0013, requesting that the Tribunal dismiss the Claimants' claims on the basis that they were manifestly without legal merit.

12. On 9 June 2022, the Tribunal invited the Claimants to submit their observations on the Respondent's Rule 41(5) Application by 23 June 2020.

13. In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 15 June 2020 by video conference.

14. On 23 June 2020, the Tribunal issued Procedural Order No. 1, recording the agreement of the Parties on procedural matters. Procedural Order No. 1 provides, inter alia, that the applicable ICSID Arbitration Rules would be those in effect from 10 April 2006, that the procedural language would be English, and that the place of proceeding would be Washington, D.C., United States of America. In the letter to the Parties of the same date transmitting Procedural Order No. 1, the Tribunal requested that the Parties continue their efforts to reach an agreement on a procedural calendar and provided directions.

15. Also on 23 June 2020, the Claimants filed their observations on the Respondent's Rule 41(5) Application (the “Claimants’ Observations on Rule 41(5)"), together with Exhibit C-0050 and Legal Authorities CL-0004 through CL-0063.

16. On 1 July 2020, following the Respondent's request of 30 June 2020, the Tribunal granted the Respondent leave to reply to the Claimants' observations on the Respondent's Rule 41(5) Application by 6 July 2020. The Tribunal also provided the Claimants with an opportunity to comment on the Respondent's reply by 10 July 2020.

17. In accordance with the Tribunal's directions, on 6 July 2020, the Respondent submitted its reply on the Rule 41(5) Application (the “Respondent's Reply on 41(5)”), together with Legal Authorities RL-0014 and RL-0015; and on 10 July 2020, the Claimants submitted their comments thereon, together with Exhibit C-0051 and Legal Authorities CL-0064 through CL-0070.

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18. Also on 6 July 2020, the Parties submitted a joint proposal regarding the procedural calendar. On 14 July 2022, the Tribunal issued Procedural Order No. 2 adopting the procedural calendar agreed by the Parties.

19. On 24 July 2020, the Tribunal issued its Decision on the Respondent's Rule 41(5) Application, dismissing the Application.

20. On 11 December 2020, pursuant to the procedural calendar set out in Procedural Order No. 2, the Claimants filed their Memorial (the “Claimants’ Memorial”), together with the Witness Statement of Mr Felix Koselleck dated 11 December 2020; the Witness Statement of Mr Klaus Weber dated 11 December 2020; the Expert Report of Dr Tomas Haug dated 11 December 2020, with Exhibits TH-0001 through TH-0411; the Expert Report of Dr Richard Hern dated 10 December 2020, with Exhibits RH-0001 through RH-0109; the Expert Report of Dr Jerome Guillet dated 11 December 2020, with Exhibits JG-0001 through JG-0116; the Expert Report of Mr Trevor Hodgson and Mr Andreas Zilles dated 11 December 2020, with Exhibits THD-0001 through THD-0084; Exhibits C-0052 through C-0317; and Legal Authorities CL-0071 through CL-0223.

21. On 14 December 2020, the European Commission (the “Commission”) filed a submission seeking leave to intervene in the proceeding, pursuant to ICSID Arbitration Rule 37(2) (the “Commission's Application”).

22. Upon invitation from the Tribunal, on 23 December 2020, each Party submitted observations on the Commission's Application.

23. On 28 December 2020, the Respondent wrote to the Tribunal requesting leave to comment on certain of the Claimants' observations.

24. By letter of 6 January 2021, the Tribunal informed the Parties, inter alia, that it had no need for further submissions concerning the Commission's Application.

25. On 12 January 2021, the Tribunal issued Procedural Order No. 3, granting the Commission's Application in part and ruling, inter alia, that the Commission could file a written submission on certain issues on the condition that it bear its own costs and provide,

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by 20 January 2021, a written undertaking that it would comply with any decision on costs that might be ordered by the Tribunal.

26. On 18 January 2021, the Commission filed a request that the Tribunal alter Procedural Order No. 3 insofar as the Commission was directed to provide an undertaking regarding costs. Upon invitation from the Tribunal, on 21 January 2022, each Party filed observations on the Commission's request.

27. On 27 January 2021, the Tribunal issued Procedural Order No. 4 dismissing the Commission's request to alter Procedural Order No. 3.

28. On 11 March 2021, the Respondent filed its Memorial on Jurisdiction (the “Respondent's Memorial"), including a request to address its objections to jurisdiction as a preliminary question (the “Request for Bifurcation”), together with Legal Authorities RL-0018 through RL-0075.

29. On 1 April 2021, the Claimants filed observations on the Request for Bifurcation, together with Legal Authorities CL-0232 through CL-0270.

30. On 19 April 2021, the Tribunal issued Procedural Order No. 5, denying the Respondent's Request for Bifurcation and joining the objections to jurisdiction to the merits of the dispute.

31. On 9 August 2021, the Respondent filed its Counter-Memorial on the Merits (the "Respondent's Counter-Memorial”), together with: the Witness Statement of Dr Manfred Zeiler dated 28 July 2021, with Exhibits MZ-0001 through MZ-0004; the Expert Report of Mr Alexander Demuth dated 6 August 2021, with Exhibits AD-0001 through AD-0148; the Expert Report of Mr Michael Lüders and Mr Andreas Lessmeister dated 5 August 2021, with Exhibits RD-0002 through RD-0018; the Expert Report of Mr Richard Slark dated 8 August 2021, with Exhibits RS-0001 through RS-0256; the Expert Opinion of Dr Frank Knappe, Dr Falk Lüddecke and Prof Dr Martin Skiba dated 3 August 2021, with Exhibits R82-0001 through R82-0048; the Expert Opinion of Prof Dr Jelena Bäumler and Prof Dr Thomas Schomerus dated 5 August 2021, with

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Exhibits SB-0001 through SB0247; Exhibits R-0002 through R-0153; and Legal Authorities RL-0076 through RL-0353.

32. Following exchanges between the Parties concerning production of documents, the Parties submitted their document production requests to the Tribunal on 11 October 2021. On 1 November 2021, the Tribunal issued its decisions on document production in the form of rulings set out in the Parties' respective document production schedules and indicated that a reasoned decision in the form of a procedural order would be issued at a later date.

33. On 9 November 2021, the Tribunal issued Procedural Order No. 6 containing its reasoned decisions on the Parties' document production requests.

34. On 6 December 2021, following a joint request from the Parties, the Tribunal issued Procedural Order No. 7 directing that all documents exchanged between the Parties in relation to document production would remain confidential and not be made public.

35. On 14 March 2022, the Claimants filed their Reply on the Merits and Counter-Memorial on Jurisdiction (the “Claimants' Reply"), together with the Witness Statement of Mr Alexander Dierkes dated 14 March 2022; the Second Witness Statement of Mr Felix Koselleck dated 14 March 2022; the Second Witness Statement of Mr Klaus Weber dated 11 March 2022; the Expert Report of Prof Dr Jörg Gundel dated 14 March 2022, with Exhibits JG-0001 through JG-0128; the Expert Report of Prof Dr Charlotte Kreuter-Kirchhof dated 14 March 2022, with Exhibits KK-0001 through KK-0114; the Second Expert Report of Dr Tomas Haug dated 12 March 2022, with Exhibits TH2-0001 through TH2-0091; the Second Expert Report of Dr Richard Hern dated 11 March 2022, with Exhibits RH-0110 through RH-0179; the Second Expert Report of Mr Trevor Hodgson and Mr Andreas Zilles dated 11 March 2022, with Exhibits THD-0085 through THD-0110; Exhibits C-0318 through C-0424; and Legal Authorities CL-0271 through CL-0331.

36. On 1 June 2022, pursuant to an agreement of the Parties, the Tribunal confirmed that the upcoming hearing would be held in London, the United Kingdom.

37. On 27 June 2022, the Respondent filed its Rejoinder on the Merits and Reply on Jurisdiction (the “Respondent's Rejoinder”), together with: the Witness Statement of

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Dr Nico Nolte dated 23 June 2022, with Exhibits NN-0001 through NN-0016; the Second Witness Statement of Dr Manfred Zeiler dated 23 June 2022, with Exhibits MZ-0005 through MZ-0023; the Second Expert Report of Mr Michael Lüders and Mr Andreas Lessmeister dated 24 June 2022, with Exhibits RD-0019 through RD-0046; the Second Expert Report of Dr Frank Knappe, Dr Falk Lüddecke and Prof Dr Martin Skiba dated 24 June 2022, with Exhibits R82-0049 through R82-0079; the Second Expert Report of Mr Richard Slark dated 24 June 2022, with Exhibits RS2-0001 through RS2-0026; the Second Expert Report of Prof Dr Thomas Schomerus, Prof Dr Jelena Bäumler and Prof Jörg Terhechte dated 27 June 2022, with Exhibits SB-0248 through SB-0338; the Second Expert Report of Mr Alexander Demuth dated 24 June 2022, with Appendices AD-0010 through AD-0019 and Exhibits AD-0149 through AD-0223; Exhibits R-0154 through R-0221; and Legal Authorities RL-0370 through RL-0506.

38. On 27 July 2022, the Claimants filed their Rejoinder on Jurisdiction (the “Claimants’ Rejoinder on Jurisdiction”), together with Exhibits C-0425 through C-0427 and Legal Authorities CL-0332 through CL-0371.

39. By letter of 23 August 2022, the Claimants requested leave from the Tribunal to submit additional documents into the record pursuant to Section 16.3 of Procedural Order No. 1.

40. Pursuant to Section 19.1 of Procedural Order No. 1, on 24 August 2022, the Tribunal held a pre-hearing organizational meeting with the Parties by video conference. During the meeting, the Tribunal, inter alia, invited the Respondent to comment on the Claimants' request of 23 August 2022 to submit additional documents.

41. On 30 August 2022, the Respondent commented on the Claimants' request for leave to submit additional documents into the record, arguing that the request should be denied.

42. On 5 September 2022, the Tribunal decided to grant the Claimants' request for leave of 23 August 2022 and directed that the Claimants file the additional documents by 6 September 2022, while inviting the Respondent to submit any observations and/or responsive evidence thereon by 13 September 2022.

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43. By letter of 6 September 2022, the Respondent, inter alia, objected to the Tribunal's decision of the previous day.

44. In accordance with the Tribunal's directions, also on 6 September 2022, the Claimants submitted the additional documents into the record as Exhibits C-0428 through C-0440.

45. Further on 6 September 2022, the Tribunal invited the Claimants to comment on the Respondent's letter of the same date. The Claimants provided their comments by letter of 7 September 2022.

46. On 8 September 2022, the Tribunal reaffirmed its rulings of 5 September 2022.

47. In accordance with the Tribunal's directions, on 13 September 2022, the Respondent provided observations on the additional documents filed by the Claimants, together with Exhibit R-0222.

48. A hearing on jurisdiction and the merits was held at the International Dispute Resolution Centre in London, United Kingdom, from 19 to 30 September 2022 (the “Hearing”). The following individuals participated in the Hearing:²

² [R] denotes Remote Participant. ↩

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49. In the course of the Hearing, the following individuals were examined:

On behalf of the Claimants:
Mr Felix Koselleck
Mr Alexander Dierkes
Mr Klaus Weber
Dr Tomas Haug
Mr Trevor Hodgson

Party Representative
MEC Energy
Ed. Züblin AG
NERA Economic Consulting
Kent

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Mr Andreas Zilles
Prof Dr Jörg Gundel
Prof Dr Charlotte Kreuter-Kirchhof
Dr Richard Hern
Dr Jerome Guillet

On behalf of the Respondent:
Dr Nico Nolte
Dr Manfred Zeiler
Mr Richard Slark
Mr Michael Lüders
Dr Frank Knappe
Dr Falk Lüddecke
Prof Dr Martin Skiba
Mr Stefan Kleinhansl
Prof Dr Thomas Schomerus
Prof Dr Jörg Terhechte
Mr Alexander Demuth

Atkins
University of Bayreuth
Heinrich Heine University Düsseldorf
NERA Economic Consulting
Green Giraffe B.V.

Federal Maritime and Hydrographic Agency
Federal Maritime and Hydrographic Agency
Alvarez & Marsel
DESIOS
8.2 Consulting AG
8.2 Consulting AG
8.2 Consulting AG
8.2 Consulting AG
Leuphana University Lüneburg
Leuphana University Lüneburg
Alvarez & Marsal

50. On 23 January 2023, the Parties filed simultaneous Post-Hearing Briefs (the “Claimants' First Post-Hearing Brief” and the “Respondent's First Post-Hearing Brief," respectively); the Respondent also filed Legal Authorities RL-0513 through RL-0515. In their transmittal email, the Claimants requested leave from the Tribunal to introduce into the record six documents issued by Germany's Federal Maritime and Hydrographic Agency (the “Bundesamt für Seeschifffahrt und Hydrographie,” or the “BSH,” an authority of the Federal Ministry of Transport, Building and Urban Development, or the “Ministry of Transport"), pursuant to Section 16.3 of Procedural Order No. 1. Upon invitation from the Tribunal, the Respondent commented on the Claimants' request by letter of 26 January 2023. The Respondent did not object to the Claimants' request; however, in its letter, the Respondent objected to a graph that had been included in the Claimants' First Post-Hearing Brief and requested that the Tribunal strike it from the record.

51. On 29 January 2023, the Tribunal (i) informed the Parties that it had granted the Claimants' request of 23 January 2023 to introduce additional documents to the record; and (ii) invited the Claimants to comment on the Respondent's request of 26 January 2023 to strike. The Claimants submitted their comments by letter of 1 February 2023. Also on 1 February 2023, the Claimants filed the additional documents into the record as Exhibits C-0441 through C-0446.

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52. On 6 February 2023, the Tribunal informed the Parties that it had rejected the Respondent's request of 26 January 2023 to strike from the record the graph included with the Claimants' First Post-Hearing Brief.

53. The Parties filed simultaneous Reply Post-Hearing Briefs on 17 March 2023 (the "Claimants' Second Post-Hearing Brief” and the “Respondent's Second Post-Hearing Brief," respectively). In their transmittal email, the Claimants requested leave from the Tribunal to introduce into the record five documents issued by the BSH, pursuant to Section 16.3 of Procedural Order No. 1. Upon invitation from the Tribunal, the Respondent commented on the Claimants' request by letter of 24 March 2023; the Respondent did not object to the Claimants' request but requested leave to comment on the documents once filed.

54. On 29 March 2023, the Tribunal informed the Parties that it had granted the Claimants' request of 17 March 2023 to introduce additional documents into the record and invited the Parties to make a round of submissions on the new documents. On the same day, the Claimants filed the additional documents into the record as Exhibits C-0441 through C-0446. Pursuant to the Tribunal's instructions, the Respondent commented on the new exhibits by letter of 19 April 2023, requesting leave to file nine additional documents into the record relating to the ongoing compensation proceedings in the German domestic courts. The Claimants responded by letter of 28 April 2023 stating that they did not object to the Respondent's request. In their letter, the Claimants also requested that the Tribunal close the proceeding.

55. The Parties filed their Statements of Costs on 14 April 2023 (the “Claimants' First Statement of Costs” and the Respondent's “First Statement of Costs,” respectively). The Claimants also filed Exhibits C-0452 through C-0455 and Legal Authorities CL-0372 through CL-0375, and the Respondent filed Legal Authorities RL-0516 through RL-0528. In its transmittal email, the Respondent requested leave from the Tribunal to comment on the Claimants' Statement of Costs.

56. Further to the Respondent's request of 14 April 2023, on 16 April 2023, the Tribunal invited each Party to submit a Reply Statement of Costs by 28 April 2023. The Parties filed

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their Reply Statements on that date (the “Claimants' Second Statement of Costs” and the "Respondent's Second Statement of Costs,” respectively); the Claimants also filed Legal Authorities CL-0376 through CL-0383.

57. On 16 May 2023, the Tribunal (i) informed the Parties that it had granted the Respondent's request of 19 April 2023 to introduce additional documents into the record and invited the Parties to make a round of submissions on the new documents; and (ii) indicated that it was not in the position to grant the Claimants' request of 28 April 2023 to close the proceeding. Pursuant to the Tribunal's instructions, on 22 May 2023, the Respondent filed the additional documents into the record as Exhibits R-0223 through R-0231 and commented on their alleged relevance and materiality. In its letter, the Respondent also requested leave to introduce further four documents into the record relating to the ongoing compensation proceedings in the German domestic courts. The Claimants responded by letter of 26 May 2023, objecting to the Respondent's request to introduce additional documents; the Claimants also filed Legal Authorities CL-0384 through CL-0386.

58. On 1 June 2023, the Tribunal informed the Parties that it had granted the Respondent's request of 22 May 2023 to introduce additional documents into the record and invited the Parties to make a round of submissions on the new documents. The Tribunal also stated that it "[did] not envisage granting any further requests for supplementing the record relating to the German domestic compensation proceedings unless it considers [...] that it would benefit from a further update of the status of the proceedings.”

59. Pursuant to the Tribunal's instructions, on 6 June 2023, the Respondent filed the additional documents into the record as Exhibits R-0232 through R-0235 and commented on their alleged relevance and materiality. The Claimants responded by letter of 12 June 2023.

60. On 12 June 2023, the Claimants filed their comments on the Respondent's letter of 12 June 2023 and the accompanying exhibits, contending that the Respondent's evidence was neither relevant nor material to the outcome of the arbitration.

61. On 13 September 2023, the Respondent sought a leave to introduce new documents relating to the ongoing compensation proceedings in the German domestic courts and supporting

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legal authorities into the record. On 20 September 2023, the Claimants commented on the Respondent's request, contending that “none of the documents add anything novel or material to this arbitration” and that they also fell short of the “exceptional circumstances" standard in paragraph 16.3 of Procedural Order No. 1; however, “in the interest of full transparency,” the Claimants did not object to the Respondent's request.

62. On 26 September 2023, the Tribunal informed the Parties that it had granted the Respondent's request of 13 September 2023 to introduce new documents into the record and invited the Parties to make a round of submissions on the new documents.

63. On 2 October 2023, pursuant to the Tribunal's directions, the Respondent filed the additional documents into the record as Exhibits R-0236 through R-0239 and Legal Authorities RL-0529 through RL-0531, and commented on their relevance and materiality. The Claimants filed their comments by letter dated 9 October 2023, while also updating Exhibit RH-0111, which contained a pre-award interest analysis.

64. On 10 October 2023, the Tribunal provided the Respondent with an opportunity to comment on the Claimants' updated pre-award interest calculation.

65. On 23 October 2023, the Respondent submitted its comments on the Claimants' updated damages calculation of 2 October 2023, arguing that the calculation was “overstated and unjustified."

66. On 30 October 2023, the Claimants wrote to the Tribunal, contending that the Respondent's comments of 2 October 2023 exceeded the scope permitted by the Tribunal and requesting that “the last two paragraphs on page 2 of Germany's Letter be struck from the record.” Pursuant to the Tribunal's directions, on 6 November 2023, the Respondent commented on the Claimants' letter of 30 October 2023.

67. On 8 November 2023, the Tribunal denied the Claimants' application of 30 October 2023 to strike certain passages of the Respondent's letter of 23 October 2023 from the record.

68. On 9 November 2023, the Claimants wrote to the Tribunal, commenting on “the factual situation underlying the Tribunal's ruling” and arguing that the Respondent could have

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raised the arguments it raised in the relevant passages of its letter earlier. The Claimants indicated that they were “in the Tribunal's hands with respect to how it deems fit to proceed" in light of the Claimants' comments.

69. Upon the Tribunal's invitation, on 14 November 2023 the Respondent commented on the Claimants' letter of 9 November 2023 and requested that the Tribunal uphold its decision of 8 November 2023.

70. On 21 November 2023, the ICSID Secretariat wrote to the Parties on behalf of the Tribunal, stating that the Tribunal had taken note of the Claimants' email dated 9 November 2023, including the Claimants' statement that they did not seek reconsideration of the Tribunal's ruling of 8 November 2023, as well as of the Respondent's response of 14 November 2023. The Tribunal stated it would “take a view on the issue in the Award, taking into account the procedural positions as now clarified by the Parties.”

71. On 6 August 2024, the Claimants wrote to the Tribunal, providing a further update on the status of payments under the German domestic compensation scheme, together with an updated version of Exhibit RH-0111, which contained the Claimants' pre-award interest analysis.

72. On the same day, the Tribunal invited the Respondent to provide its observations on the Claimants' letter by 12 August 2024; on 10 August 2024, the Tribunal granted the Respondent's request for an extension of time to provide its observations by 19 August 2024.

73. On 19 August 2024, the Respondent provided its comments on the Claimants' letter of 6 August 2024 and the Claimants' updated damages calculations.

74. On 22 August 2024, the Tribunal wrote to the Parties, taking note of the Claimants' updated damages calculations as well as the Respondent's comments of 19 August 2024. The Tribunal indicated that it would consider the Parties' positions in the course of its deliberations, which were now in a final stage.

75. The Tribunal declared the proceeding closed on 9 September 2024.

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III. FACTUAL BACKGROUND

76. This Section summarizes in a non-exhaustive manner the factual background of the dispute, focusing on events and developments that appear to be undisputed between the Parties. Where the Parties disagree, the corresponding event or development has been identified as an allegation or argument.

77. Disputed factual issues will be discussed and addressed in more detail in the relevant context in Sections IV, V and VI below.

A. THE EVOLUTION OF THE REGULATORY FRAMEWORK GOVERNING OFFSHORE WIND ENERGY IN GERMANY (1997–2012)

(1) The Development of the Regulatory Framework between 1997 and 2009

a. The 1997 Offshore Installations Ordinance

78. Germany was one of the pioneers in the development of renewable energy sources in Europe, including wind energy, as part of the transition from fossil fuels to renewable energy.³ The initial regulatory steps governing offshore wind energy projects in Germany's exclusive economic zone (the “EEZ”) were taken on 23 January 1997, when the offshore installations ordinance (the “1997 Offshore Installations Ordinance") was adopted.⁴ Pursuant to the Ordinance, developers were required to obtain approval to build and operate an offshore wind energy project from the BSH.⁵

79. In accordance with the 1997 Offshore Installations Ordinance, the BSH adopted an administrative procedure that required developers to file an initial application, participate in various public participation rounds and hold an application conference with various public stakeholders, and finally participate in a public hearing. The BSH would approve

³ Resp. Rej., para. 291. ↩

⁴ Offshore Installations Ordinance (Verordnung über Anlagen seewärts der Begrenzung des deutschen Küstenmeeres), 23 January 1997 (“1997 Offshore Installations Ordinance”), C-0008. Germany had introduced feed-in tariffs already in 1991: see Cl. Mem., paras. 35-36; Resp. C-Mem., para. 195; Slark ERI, paras. 273 et seq. ↩

⁵ 1997 Offshore Installations Ordinance, C-0008, Sec. 2, Sentence 1. ↩

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the application once a developer had successfully completed each of these steps and complied with all administrative requirements.⁶

80. The BSH operated on a “first-come, first-served” basis. Accordingly, if the developer complied with all the formal requirements, the BSH approved the project, granting an exclusive right to develop a particular area in the EEZ; subsequent applications relating to the same area were not accepted. While further approvals, such as a construction permit and an operation permit were required, the Claimants argue that a developer's initial application had economic value which increased with the completion of each additional step, and that the related rights were freely transferable.⁷

b. The 2000 Renewable Energy Sources Act

81. On 1 April 2000, Germany enacted the first Renewable Energy Sources Act (the “2000 Renewable Energy Sources Act”), which set new renewable energy expansion targets and introduced a more favorable feed-in tariff and the right for offshore wind energy projects to be connected to the transmission grid.⁸

82. As to the feed-in tariff, the 2000 Renewable Energy Sources Act introduced a fixed feed-in tariff for electricity produced from wind, including additional incentives for projects further from the coast through a mechanism that envisaged a higher feed-in tariff for the first five years of operation, and nine years for wind farms located at least three nautical miles from the coast.⁹ The feed-in tariffs were also degressive, i.e. the later the commissioning date, the progressively lower the tariff.¹⁰

83. As to the right to grid connection, the 2000 Renewable Energy Sources Act required that the transmission system operators (the “TSOs”) provide a connection to the transmission

⁶ Cl. Mem., paras. 27, 36 et seq. ↩

⁷ Cl. Mem., paras. 41-42. ↩

⁸ Renewable Energy Sources Act, 1 April 2000 (excerpts) (“2000 Renewable Energy Sources Act”), C-0012 / RL-0157. ↩

⁹ Cl. Mem., para. 63; Resp. C-Mem., para. 195; Cl. Reply, para. 27; 2000 Renewable Energy Sources Act, C-0012 / RL-0157, Sec. 7(1), Sentences 1 and 4. ↩

¹⁰ Resp. C-Mem., para. 195. ↩

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system as a matter of right, at the developer's request.¹¹ According to the Act, while the cost of the connection was to be borne by the operator, the obligation to provide a grid connection for a particular wind farm belonged to the TSO whose network was located closest to the installation.¹² The TSO responsible for providing grid connection to OWFs in the EEZ in the North Sea was TenneT TSO GmbH (“TenneT”), the national electricity transmission system operator of the Netherlands, which was owned and controlled by the Dutch government.

c. The 2002 Offshore Installations Ordinance

84. In 2001, the European Parliament and the Council of the European Union (the “EU”) issued Directive 2001/77/EC (the “2001 Directive”) on the promotion of electricity produced from renewable sources.¹³ The EU Member States, including Germany, were required to take steps to promote renewable energy in line with indicative national targets.¹⁴

85. In 2002, on the basis of the 2001 Directive, the German federal government adopted a strategy for sustainable development, including for the increased development of offshore wind energy production. The strategy adopted an expansion target for offshore wind energy of 20 to 25 GW by 2025-2030.¹⁵

86. In this connection, Germany also adopted an Offshore Installations Ordinance, amending the 1997 Ordinance (the “2002 Offshore Installations Ordinance”).¹⁶ In an effort to streamline the approval process for new offshore wind projects, the 2002 Offshore Installations Ordinance introduced the concept of “designated areas" and amended the

¹¹ 2000 Renewable Energy Sources Act, C-0012 / RL-0157, Sec. 3(1), Sentence 1. ↩

¹² 2000 Renewable Energy Sources Act, C-0012 / RL-0157, Sec. 3(1), Sentences 1-2. ↩

¹³ Directive 2001/77/EC of the European Parliament and of the European Council on the promotion of electricity produced from renewable energy sources in the internal electricity market, 27 September 2001 (“2001 Directive"), C-0013 / RL-0162, Annex. ↩

¹⁴ 2001 Directive, C-0013/ RL-0162, Art. 3(1) (“Member States shall take appropriate steps to encourage greater consumption of electricity produced from renewable energy sources in conformity with the national indicative targets"). ↩

¹⁵ Federal Government's Strategy for using Offshore Wind Energy (Strategie der Bundesregierung zur Windenergienutzung auf See), January 2002 (“Strategy for using Offshore Wind Energy”), C-0014 / R-0020, p. 7. ↩

¹⁶ Strategy for using Offshore Wind Energy, C-0014 / R-0020, p. 2; Offshore Installations Ordinance (Verordnung über Anlagen seewärts der Begrenzung des deutschen Küstenmeeres), 4 April 2002 (“2002 Offshore Installations Ordinance"), C-0015 / RL-0175. ↩

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developers' exclusivity rights. While under the 1997 Ordinance it was for each applicant to assess the suitability of the potential areas for the project, the 2002 Offshore Installations Ordinance provided that the Federal Ministry of Transport was to identify in advance the areas within the EEZ that were considered suitable for offshore wind energy installations.¹⁷ As for the exclusivity right, or "priority principle," the 2002 Offshore Installations Ordinance provided that applicants' rights would be protected only once an application was capable of being finally approved, i.e. in the last phase of the approval procedure.¹⁸ The Claimants contend that, nonetheless, in practice the BSH continued to refuse processing subsequent applications for the same area.¹⁹ This is disputed by the Respondent, who contends that the applicable rule was “equal treatment and fair procedure.”²⁰

d. The 2004 Renewable Energy Sources Act

87. In 2004, Germany amended the Renewable Energy Sources Act (the “2004 Renewable Energy Sources Act”). Effective as of 21 July 2004, the 2004 Renewable Energy Sources Act introduced into law the target for the share of renewable sources of Germany's overall electricity supply of 12.5 percent by 2010 and 20 percent by 2020.²¹ The Act also extended the higher initial feed-in tariff renumeration period to twelve years and confirmed that the minimum remuneration was to be paid for twenty years from the start of operations.

88. The 2004 Renewable Energy Sources Act also amended the provisions regarding the start date of the tariff degression, i.e. the gradual decrease of the feed-in tariff depending on the start date of the operation. The Act also increased the period over which OWFs could enjoy the initial higher feed-in tariff for projects that were located further from the coastline, and

¹⁷ 2002 Offshore Installations Ordinance, C-0015 / RL-0175, Sec. 3a, Sentence 1. ↩

¹⁸ See Strategy for using Offshore Wind Energy, C-0014 / R-0020, p. 13; 2002 Offshore Installations Ordinance, C-0015 / RL-0175, Sec. 5(1), Sentence 4. ↩

¹⁹ Cl. Mem., para. 69. ↩

²⁰ Resp. Rej, para. 344; see also paras. 342-352. ↩

²¹ Cl. Mem., para. 70; Resp. C-Mem., para. 197; Renewable Energy Sources Act (Gesetz für den Vorrang Erneuerbarer Energien), 1 August 2004 (“2004 Renewable Energy Sources Act”), C-0016 / RL-0155, Sec. 1(2). ↩

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further postponed the start date of tariff degression on the same basis – the further the OWF from the coastline, the later the start of the degression (the “Coastal Distance Bonus").²²

e. The 2006 Energy Act

89. In 2006, the Energy Act (the “2006 Energy Act”), which deals with the regulation of the electricity grid, was amended to include a new provision that addressed the increasing cost and timing of providing grid connections.

90. While under the 2000 Renewable Energy Sources Act OWF developers had to bear the cost of the grid connection, the new provision, Section 17(2)(a) of the 2006 Energy Act, which applied exclusively to the offshore wind energy sector but not to other sources of renewable energy, required the TSOs to bear the cost of establishing the grid connection.²³ The provision also required that the TSOs complete the grid connection by the time the relevant OWF was ready to enter into operation.²⁴

f. The 2009 Renewable Energy Sources Act

91. In January 2009, Germany further amended its Renewable Energy Sources Act (the “2009 Renewable Energy Sources Act"). The amendment increased the target share of renewable energy of Germany's overall energy supply in 2020 from 20 to 30 percent, and in parallel increased by over 40 percent the initial feed-in tariff, which was to be paid for the first twelve years from entry into operation, while further postponing the tariff degression.²⁵

92. Germany also introduced a so-called “Sprinter Bonus” to support the development of offshore wind, which was made available for projects that entered into operation by

²² Cl. Mem., para. 71; Cl. Reply, paras. 58-67; Resp. C-Mem., paras. 267-276; Resp. Rej., paras. 319-324; 2004 Renewable Energy Sources Act, C-0016 / RL-0155, Sec. 10(3), Sentence 4. ↩

²³ Cl. Mem., para. 72. See 2000 Renewable Energy Sources Act, C-0012 / RL-0157, Sec. 10(1); Energy Act, 17 December 2006 (“2006 Energy Act”), C-0018, Sec. 17(2a). ↩

²⁴ Cl. Mem., para. 73; Resp. CM, para. 520. See 2006 Energy Act, C-0018, Sec. 17(2a), Sentence 1. ↩

²⁵ Cl. Mem., para. 91. See Renewable Energy Sources Act, 1 January 2009 (“2009 Renewable Energy Sources Act”), C-0059 / RL-0154, Secs. 1, 31. ↩

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1 January 2016. The Act also confirmed the availability of the Coastal Distance Bonus introduced under the 2004 Renewable Energy Sources Act.²⁶

g. The 2009 BNA Position Paper

93. In 2009, the Federal Network Agency (Bundesnetzagentur or the “BNA”) published a position paper (the “2009 BNA Position Paper”), which was intended, like other position papers, to provide interpretations of legal rules and indicate how the BNA would exercise its discretion in applying them. The Parties disagree on whether the 2009 BNA Position Paper was binding; according to the Claimants, under German law, in practice it was binding,²⁷ indeed a "guarantee,”²⁸ whereas the Respondent submits that it “has no legally binding value per se but rather provides an interpretation of the law by the authority still being subject to a potential review by state courts.”²⁹

94. One of the issues addressed in the 2009 BNA Position Paper was what was referred to at the time as the “chicken-and-egg” problem: on the one hand, banks were unwilling to finance the development of OWFs if there was no commitment to a grid connection by a TSO; and on the other hand, TSOs were unwilling to grant a grid connection without the developer having secured the necessary financing.³⁰

95. The 2009 BNA Position Paper set out four criteria for granting a grid connection for an offshore wind project: (i) the required approvals (or corresponding commitments) for the project; (ii) a plausible construction schedule; (iii) completion of the necessary inspections of the building site; and (iv) binding agreements for ordering the turbines.³¹ If a developer met three of the four criteria, it was entitled to obtain a “conditional” grid commitment, which could be relied upon to obtain financing. When all four criteria were met, the

²⁶ Cl. Mem., para. 91; 2006 Energy Act, C-0018, Sec. 31(2). ↩

²⁷ RfA, fn. 37. ↩

²⁸ Tr. Day 1, 31:21-24. ↩

²⁹ Resp. C-Mem., para. 378. ↩

³⁰ Cl. Mem., para. 101; Resp. C-Mem., paras. 371-372. ↩

³¹ BNA, Position Paper, October 2009 (“2009 BNA Position Paper”), C-0019 / R-0018, p. 5. ↩

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developer was entitled to an “unconditional” grid connection, which triggered a 30-month deadline for the TSO to provide a grid connection.³²

96. In March 2010, the German federal government stated in Parliament (Bundestag) that it was “committed to ensuring that grid operators implement the timely connection of offshore wind farms to the power grid quickly and effectively,"³³ adding that "[t]he BNA Position Paper by the BNA pursuant to Section 17(2a) Sentence 1 Energy Act contributed to a significant clarification and hence investment certainty for the individual projects.”³⁴ The government noted that it would “review whether the realization of an offshore grid in the North Seat will require further measures,” including as to whether the integrated grid system "will require an adjustment of the grid connection conditions.”³⁵

h. The 2009 Spatial Planning Ordinance

97. In 2009, Germany introduced the Spatial Planning Ordinance for the EEZ of the North Sea (the "2009 Spatial Planning Ordinance").³⁶ The objective of the Ordinance, which entered into force on 25 September 2009, was to facilitate the economic (including offshore wind) and scientific uses of the EEZ while ensuring the safety and ease of maritime navigation and protection of the marine environment. The 2009 Spatial Planning Ordinance noted that it was based, inter alia, on the “Strategy of the Federal Government for the Use of Wind Energy at Sea," which was part of the federal government's sustainability strategy.³⁷

³² See 2009 BNA Position Paper, C-0019 / R-0018, pp. 19, 21. ↩

³³ Government Response, “The current status of the Expansion of OWFs in the North Sea and the Baltic Sea,” Bundestag Drucksache 17/1283, 31 March 2010, C-0112 / R-0022, p. 7. ↩

³⁴ Cl. Mem., para. 113; Government Response, “The current status of the Expansion of OWFs in the North Sea and the Baltic Sea," Bundestag Drucksache 17/1283, 31 March 2010, C-0112 / R-0022, p. 7. ↩

³⁵ Resp. Rej., para. 1221; Government Response, “The current status of the Expansion of OWFs in the North Sea and the Baltic Sea," Bundestag Drucksache 17/1283, 31 March 2010, C-0112 / R-0022, p. 7. ↩

³⁶ Ordinance on Spatial Planning in the German Exclusive Economic Zone in the North Sea, 21 September 2009, RL-0172 (attaching "Spatial Plan for the German Exclusive Economic Zone in the North Sea" ("2009 Spatial Planning Ordinance")), RL-0198. ↩

³⁷ 2009 Spatial Planning Ordinance, RL-0198, p. 4. ↩

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98. The Ordinance identified three priority areas for the development of offshore wind projects, each of which were located relatively close to the coastline.³⁸ In these areas, the production of wind energy was granted priority over other spatially significant uses, and spatially significant planning, measures and projects that were not compatible with the function of the wind energy priority areas were prohibited.³⁹

(2) The Development of the Regulatory Framework in Germany between 2010 and mid-2012

99. In 2010, the German federal government published a further strategy paper which stated that renewable energy was to be a “supporting pillar of future energy supply” and would "form the major portion" of Germany's future energy mix.⁴⁰ The government stressed that wind energy would play "a decisive role in energy production in 2050,” and that this would require "a massive extension of wind energy capacities on- and offshore."⁴¹ The government also reiterated its expansion target of 25 GW in offshore wind energy output by 2030.

100. The German federal government continued to support the development of offshore wind energy in the course of 2011 and 2012,⁴² including as a result of its decision to phase out nuclear power following the Fukushima accident on 11 March 2011.

101. On 7 November 2011, TenneT wrote an “urgent letter” to the German federal government, stating that the construction of grid connection lines to OWFs in the North Sea “[was] no longer possible” in accordance with the 2009 BNA Position Paper. TenneT invoked the “lack of financial, personal and material resources,” and in particular the “massive

³⁸ Resp. C-Mem., paras. 241, 361-369; 2009 Spatial Planning Ordinance, RL-0198, pp. 4, 19-24, 38. ↩

³⁹ 2009 Spatial Planning Ordinance, RL-0198, p. 19. ↩

⁴⁰ Federal Government, Energy Concept for an Environmentally Friendly, Reliable and Affordable Energy Supply (Energiekonzept für eine umweltschonende, zuverlässige und bezahlbare Energieversorgung), 28 September 2010, C-0020 / R-0012, pp. 5, 9. ↩

⁴¹ Cl. Mem., para 104; Federal Government, Energy Concept for an Environmentally Friendly, Reliable and Affordable Energy Supply, 28 September 2010, C-0020 / R-0012, p. 8. ↩

⁴² Seventh Maritime Conference in Wilhelmshaven, 27 and 28 May 2011, C-0021, p. 101 (Speech by Federal Chancellor Dr Angela Merkel). See also Speech by Federal Chancellor Dr Angela Merkel (during the official commissioning of the offshore wind farm EnBW Baltic in Zingst), 1 and 2 May 2011, C-0022, pp. 2-3 (where Dr Merkel addressed industry insiders and potential investors, emphasizing the importance of offshore wind to Germany's future, stressing that it was important for the government and private sector to work together and promising public funds to help promote cutting-edge technology). ↩

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problems with the acquisition of the necessary finances.” According to TenneT, in the circumstances, fundamental changes to the legal framework were required, including “an orderly offshore grid expansion and development plan.”⁴³

102. On 1 January 2012, an amendment to the Renewable Energy Sources Act entered into force (the “2012 Renewable Energy Sources Act”), setting the target of at least 35 percent for renewable energy sources as a share of Germany's overall energy supply by 2020.⁴⁴ The Act also increased and extended the feed-in tariffs applicable to offshore wind, including by (i) increasing the initial feed-in tariff; (ii) postponing the tariff degression and (iii) introducing options available for OWFs that entered into operation before 1 January 2018. The Coastal Distance Bonus, which was initially introduced by the 2004 Renewable Energy Sources Act and maintained when the Act was amended in 2009, also remained in place.⁴⁵

103. Also in 2012, Germany adopted a revised offshore installations ordinance (the “2012 Offshore Installations Ordinance”).⁴⁶ The 2012 Offshore Installations Ordinance aimed to streamline the approval process under the 1997 Offshore Installations Ordinance by adopting a more centralized plan approval process (Planfeststellungsverfahren or the “Plan Approval Process") for approval of OWFs.⁴⁷ The Plan Approval Process is not a procedure that was specifically designed for the OWFs; it is generally used in Germany to approve complex infrastructure projects that require reconciling several concurrent and potentially conflicting interests. The 2012 Offshore Installations Ordinance also made the BSH the central approval authority, which eliminated the need to obtain additional approvals from other authorities.⁴⁸

⁴³ Letter from TenneT to Federal Chancellery, 7 November 2011, R-0019. ↩

⁴⁴ Renewable Energy Sources Act (Gesetz für den Vorrang Erneuerbarer Energien), 1 January 2012 (“2012 Renewable Energy Sources Act”), C-0023 / RL-0159, Sec. 1(2). ↩

⁴⁵ Cl. Mem., para. 185. ↩

⁴⁶ Offshore Installations Ordinance (Verordnung über Anlagen seewärts der Begrenzung des deutschen Küstenmeeres), 31 January 2012, C-0027 / RL-0147 (“2012 Offshore Installations Ordinance"). The 2012 Ordinance has also been referred by the Parties with the German acronym “SeeAnlV 2012” (Seeanlagenverordnung 2012). ↩

⁴⁷ Cl. Mem., para. 185; 2012 Offshore Installations Ordinance, C-0027 / RL-0147. ↩

⁴⁸ Cl. Mem., para. 187. ↩

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104. The 2012 Offshore Installations Ordinance also formalized and reinforced the priority principle by advancing the point in time in the approval process when it would be given effect. According to the Ordinance, if the formal requirements were met, the priority principle was now given effect as from the date when a request to hold an application conference was made.⁴⁹

105. In 2011, in connection with the 2011 Energy Act, the BSH had been tasked to develop a federal spatial offshore grid plan (Bundesfachplan Offshore or the “BFO”); under the 2012 Offshore Installations Ordinance, the BSH was given the competence to reserve a specific area in the EEZ for grid connection facilities by issuing a development freeze.⁵⁰

B. THE CLAIMANTS' BUSINESS VENTURES IN THE GERMAN OFFSHORE WIND SECTOR

(1) The Gravity Foundation Technology

106. As of 2008, having followed the developments in the regulation of offshore wind in Germany, Strabag began developing a gravity foundation technology (the “Gravity Foundation Technology” or the “GFT”) for use in offshore wind energy projects, focusing on the development of a concept of serial production and installation of offshore wind turbines. According to the Claimants, Strabag planned to cover “the entire OWF construction process, including design, engineering, onshore production of foundations, onshore pre-installation and testing of offshore wind turbines, and final transport and installation of the complete unit offshore.”⁵¹

107. In May 2009, Strabag established Strabag Offshore Wind GmbH (“SOW”), based in Cuxhaven, Germany, for the purposes of research and development of the GFT.⁵² SOW held the know-how and the intellectual property rights in the technology. In 2011, Strabag established Windkraft FiT GmbH (“FiT”), another German-incorporated entity, in order

⁴⁹ Cl. Mem., para. 194; 2012 Offshore Installations Ordinance, Sec. 3(4). ↩

⁵⁰ 2012 Offshore Installations Ordinance, C-0027 / RL-0147, Sec. 10(1), Sentence 1. At the time, the plan was called "offshore netplan" ("Offshore-Netzplan"); the term “BFO” was introduced by the Energy Act, 28 December 2012 ("2012 Energy Act”), C-0035: see Cl. Mem., fn. 453. ↩

⁵¹ Cl. Mem., paras. 78-79. ↩

⁵² Strabag Offshore Wind GmbH, extract from the Commercial Registry, District Court Stuttgart, 22 May 2019, C-0028, p. 1. ↩

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to build the first test field for gravity foundations at the location of one of its offshore wind projects.⁵³

108. In early 2011, Strabag informed the BSH that it planned to use the GFT in the offshore wind projects, which it was then in the process of acquiring (see the next section). At the BSH's request, Strabag selected OWP Albatross, which was closest to receiving the BSH's approval, as a test field for the purposes of testing the GFT.⁵⁴ Strabag's plan was to apply for a modification of the approval, once granted, to deploy the GFT on the Albatross test field (the "Albatross Test Field”).⁵⁵

109. On 17 August 2011, the BSH approved the Albatross Test Field.⁵⁶ On 8 September 2011, the BSH accepted that FiT would be able to use gravity-based foundations in the test field,⁵⁷ and on 31 October 2011, TenneT provided the test field with a conditional grid connection commitment, indicating that it would be able to provide the grid connection within 45 months.⁵⁸ On 28 February 2012, the BSH granted approval for the construction of the ten installations of the Albatross Test Field using gravity-based foundations.⁵⁹

110. The Claimants state that local German authorities and the EU supported the development of the GFT. The local German authorities facilitated access to a suitable port location and facilities in Cuxhaven, and the state of Lower Saxony also financially supported the construction of the Cuxhaven industrial facility by investing some EUR 113 million for the preparation of the site and the construction of the port facilities.⁶⁰ The EU awarded a grant of EUR 58 million in the context of the planned construction of an OWF project named GlobalTech I.⁶¹

⁵³ Cl. Mem., para. 159; Windkraft FiT GmbH, extract from the Commercial Registry, District Court Hamburg, 22 May 2019, C-0029, p. 1. ↩

⁵⁴ Cl. Mem., para. 128. ↩

⁵⁵ Cl. Mem., para. 129. ↩

⁵⁶ Cl. Mem., para. 160. ↩

⁵⁷ Cl. Mem., para. 161. ↩

⁵⁸ Cl. Mem., para. 163. ↩

⁵⁹ Cl. Mem., para. 200. ↩

⁶⁰ Cl. Mem., paras. 92-93, 108-09, 111. ↩

⁶¹ Cl. Mem., para. 109. ↩

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111. The development of the GFT required substantial up-front investment, in particular because it envisaged the use of a custom-made vessel and extensive offshore testing in the context of an actual offshore wind project. Strabag acknowledged that it would have to develop a pipeline of OWF projects for the purposes of a roll-out, and to demonstrate the GFT's viability. Against this background, in 2009, Strabag started a search for a suitable German OWF to purchase and enable further development.⁶²

(2) The Establishment of NOH 1 and NOH 2 for the Development of the Offshore Wind Projects

112. In the course of 2009, Strabag conducted further research into the German market and came to the view that, given the favorable regulatory framework, the acquisition and development of a pipeline of OWF projects “was an attractive investment in its own right."⁶³ In September 2009, Strabag decided to commit some EUR 400 million for both the development of the GFT and the OWF project pipeline.⁶⁴

113. In late 2009, Strabag identified the original developers (the “Original Developers") of the offshore wind projects that it subsequently purchased as potential cooperation partners.⁶⁵ As of early 2010, the Original Developers had established and were developing a number of offshore wind projects (the “Offshore Wind Projects”) in the EEZ in the North Sea, which were in various stages of development, between (and including) the application phase and public hearing.⁶⁶ These projects were the following:

i. OWP West: Application in September 2006; 80 wind turbines;

ii. OWP Albatros: Application in November 2007; 80 wind turbines;

iii. SeaWind I: Application in December 2007; 80 wind turbines;

⁶² Cl. Mem., paras. 94-95. ↩

⁶³ Cl. Mem., para. 97. ↩

⁶⁴ Cl. Mem., para. 99. ↩

⁶⁵ Cl. Mem., para. 119. ↩

⁶⁶ Cl. Mem., paras. 120-121. The definition of "Offshore Wind Projects" does not include SeaWind I and SeaWind II as the Claimants are not bringing any claims in relation thereto; see below paragraph 117. ↩

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iv. SeaWind II: Application in December 2007; 60 wind turbines;

v. SeaStorm I: Application in December 2007; 80 wind turbines;

vi. SeaWind IV: Application in May 2008; 80 wind turbines;

vii. GAIA II: Application in May 2008; originally 80 wind turbines;

viii. GAIA III: Application in May 2008; originally 80 wind turbines;

ix. GAIA IV: Application in May 2008; 80 wind turbines;

x. GlobalTech II: Application in July 2008; 80 wind turbines;

xi. GlobalTech III; Application in July 2008; 21 wind turbines;

xii. SeaStorm II: Application in August 2008; 38 wind turbines;

xiii. SeaWind III: Application in August 2008; 80 wind turbines;

xiv. GAIA I Nord: Application in February 2010; 80 wind turbines; and

xv. GAIA V Nord: Application in February 2010; 80 wind turbines.

114. On 1 December 2010, Strabag and the Original Developers signed a head of terms for a share purchase agreement of the project companies that were operating the above Offshore Wind Projects (the “Head of Terms”), and on 19 May 2011, the parties concluded a shareholder agreement (the “Shareholder Agreement”) to enter into a joint venture to develop the projects. The Shareholder Agreement envisaged that the parties would establish two joint venture companies, NOH 1 and NOH 2, as owners and developers of the projects, and that Strabag would purchase from Etanax Beteiligungsverwaltungs GmbH ("Etanax") 51 percent of the shares in each NOH 1 and NOH 2. Etanax was an Austrian incorporated company into which Northern Energy Project GmbH, the owner of the project companies of NOH 1 and NOH 2, would be merged. The parties also agreed to set up

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Strabag OW EVS GmbH (“OWEVS”) to deal with day-to-day management of the Offshore Wind Projects,⁶⁷ and agreed on the financing of NOH 1 and NOH 2.⁶⁸

115. In November 2011, Strabag and the Original Developers established NOH 1 and NOH 2.⁶⁹

116. On 22 December 2011, NOH 1 purchased the following companies (the “NOH 1 Project Companies") from their parent company (and former owner of the projects), Etanax, for a total of EUR 30.1 million:⁷⁰

i. OWP Albatros (EUR 11.35 million);

ii. OWP West (EUR 3.55 million);

iii. GlobalTech II (EUR 6.1 million);

iv. GlobalTech III (EUR 4.8 million);

v. SeaWind I (EUR 4.2 million); and

vi. SeaWind II (EUR 0.1 million).

117. The Claimants are not bringing any claims in this arbitration in relation to SeaWind I and SeaWind II.⁷¹

118. On 10 January 2012, NOH 2 purchased the following companies (the “NOH 2 Project Companies" and, together with the NOH 1 Project Companies, the “Project Companies”) for a total of EUR 55.85 million:⁷²

i. GAIA I (EUR 4.9 million);

⁶⁷ Cl. Mem., paras. 135-138. ↩
⁶⁸ Cl. Mem., paras. 139-140. ↩
⁶⁹ Cl. Mem., para. 174. ↩
⁷⁰ Cl. Mem., para. 180. ↩
⁷¹ Cl. Mem., para. 21. ↩
⁷² Cl. Mem., para. 180. ↩

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ii. GAIA II (EUR 4.5 million);

iii. GAIA III (EUR 8.2 million);

iv. GAIA IV (EUR 7.7 million);

v. GAIA V (EUR 4.0 million);

vi. SeaStorm I (EUR 7.35 million);

vii. SeaStorm II (EUR 5.7 million);

viii. SeaWind III (EUR 6.5 million); and

ix. SeaWind IV (EUR 7.0 million).

119. On the same dates, 12 December 2011 and 10 January 2012, Strabag acquired 51 percent of shares in NOH 1 and NOH 2 against a payment of EUR 13.87 million and EUR 25.98 million, respectively.⁷³ According to the Claimants, taking into account debt and working capital, NOH 1 and NOH 2 acquired the Offshore Wind Projects for a total of EUR 122.2 million.⁷⁴

C. THE CHANGES TO THE REGULATORY REGIME UNDERLYING THE DISPUTE

120. The Claimants argue that, as of mid-2012, a few months after the Claimants' acquisition of the Offshore Wind Projects, Germany started modifying the regulatory framework governing offshore wind in a manner that significantly harmed the Claimants' interests. According to the Claimants, these changes resulted in substantial delays to the expected grid connection dates of the Offshore Wind Projects and caused significant loss and damage to the value of the Claimants' investments.

⁷³ Share Purchase Agreement entered into, among others, Erste NEP.ÖZ Holding GmbH as Vendor and Strabag SE as Purchaser for the sale and purchase of 51 percent of the shares in NOH 1, 22 December 2011, C-0033, pp. 2, 4; Share Purchase Agreement entered into, among others, Zweite NEP.ÖZ Holding GmbH as Vendor and Strabag SE as Purchaser for the sale and purchase of 51 percent of the shares in NOH 2, 10 January 2012, C-0034, pp. 2, 4. ↩
⁷⁴ Cl. Mem., para. 180. ↩

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121. The Respondent argues, in response, that the changes to the regulatory regime were foreseen by market participants, and that the regulatory regime was subject to “constant review of the status of market introduction and cost development.”⁷⁵ According to the Respondent, at the time the Claimants made their alleged investments, the offshore energy sector was immature and faced significant challenges; the Respondent merely exercised its right to regulate in dealing with those challenges and developing the regulatory regime. In the circumstances, the Claimants themselves are to blame for the consequences of their risky business decisions.⁷⁶

122. In this Section, the Tribunal summarizes the changes to the regulatory regime during the period from mid-2012 to 2017, without however taking a view on any disputed factual or legal issues, including whether such changes amounted to a breach of the ECT. These issues will be addressed below in Section V.

(1) The Regulatory Changes during the Period from mid-2012 to 2016

123. On 15 June 2012, the BSH enacted a development freeze for the EEZ in the North Sea (Veränderungssperre or the “Development Freeze").⁷⁷ The coordinates of the sea areas subject to the Development Freeze were identified in Annex 1 to the document.

124. The Development Freeze, which was initially set for three years, identified areas in the EEZ that were reserved to accommodate future grid infrastructure, including the grid connection facilities and telecommunication cables, in the anticipated federal spatial offshore grid plan, or the BFO, which was to be adopted in 2013, and therefore to be kept clear from any OWFs.⁷⁸ According to the Claimants, the Development Freeze had a “material impact” on the Claimants' Offshore Wind Projects, in particular the NOH 2 projects, some 40 percent of which were affected. Pending the adoption of the grid plan, applications for offshore wind installations in these areas were put on hold.⁷⁹

⁷⁵ Resp. C-Mem., para. 7. ↩
⁷⁶ Resp. C-Mem., paras. 8-9. ↩
⁷⁷ Development Freeze (Veränderungssperre), 15 June 2012 (“Development Freeze”), C-0197. ↩
⁷⁸ Cl. Mem., paras. 209, 218-219. ↩
⁷⁹ Cl. Mem., paras. 209, 220. ↩

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125. On 28 December 2012, amendments to the Energy Act (the “2012 Energy Act") introduced a central planning system for the development of offshore wind and offshore grid expansion – the offshore grid development plan (Offshore-Netzentwicklungsplan, or the “O-NEP”). The O-NEPs, which were to be adopted annually by the BNA based on a proposal made by the TSOs, set out the timeframe for grid expansion, including by establishing connection dates for each offshore wind energy project.⁸⁰ According to the Claimants, as a result of the new system, the developers lost the right to request and obtain a grid connection at the time of their choosing.⁸¹

126. The Claimants contend that, although the purported goal of the 2012 Energy Act was to synchronize the development of OWF projects and the expansion of the grid by the TSOs, the new system in effect slowed down the development of OWFs across the board.⁸² According to the Claimants, as a result of the system change, including TenneT's announcement in the spring of 2012 that it was not in a position to provide a grid connection to the Albatross Test Field until 2017, some 60 months after the approval date, the Claimants decided to suspend any further investments in the Albatross Test Field.⁸³ After failed efforts to acquire another OWF project in the North Sea with an earlier grid connection, in December 2012, the Claimants decided to halt any further large-scale investments in the development of the GFT, including the production facility in Cuxhaven and the installation vessel.⁸⁴ The Claimants argue that Germany's adverse regulatory measures “collectively destroyed the basis upon which STRABAG's business plan for the Gravity Foundation Technology rested."⁸⁵ While the Claimants made efforts to market the

⁸⁰ 2012 Energy Act, C-0035, Sec. 17b(1), Sentence 1, and Sec. 17c, Sentence 1. ↩
⁸¹ Cl. Mem., paras. 210, 248-252. ↩
⁸² Cl. Mem., para. 253. ↩
⁸³ On 31 October 2012, TenneT issued conditional grid connection commitment for the remaining 69 installations of OWP Albatross. The commitment contained reservations, including that TenneT could not commit to deliver grid connections for the full capacity of 414 MW (but only 350 MW), and that it could not guarantee implementation by January 2018, as envisaged in the Claimant's construction schedule: see Cl. Mem., para. 245. ↩
⁸⁴ Cl. Mem., paras. 204-205, 211, 244, 258, 260; Strabag, Press Release, 15 January 2013, C-0198; Strabag Offshore Wind GmbH, Restructuring Concept, 8 February 2013, C-0202; Strabag Offshore Wind GmbH, Status Report, May 2014, C-0203. ↩
⁸⁵ Cl. Mem., para. 259. ↩

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GFT elsewhere in Europe, including in the United Kingdom, these efforts failed, mainly because the technology had not been tested in an actual project.⁸⁶

127. On 22 February 2013, the BSH published the final 2012 BFO for the North Sea (“BFO-N 2012"), identifying clusters of OWF projects suitable for a joint grid connection based on their proximity.⁸⁷ The BFO included in the clusters those OWF projects that had already (i) been constructed; (ii) received an approval; or (iii) submitted their application and no obvious grounds to deny the application existed. Conversely, the BFO-N 2012 excluded all OWFs that were either completely affected by the Development Freeze or located more than 180 km away from the shore. These OWF projects were not assigned any cluster.⁸⁸

128. In accordance with the 2012 Energy Act, the O-NEPs for 2013, 2014 and 2015, as confirmed by the BNA, fixed the timeframe for grid expansion by identifying connection dates for each offshore wind project. The connection dates for many of the Claimants' Offshore Wind Projects were substantially delayed from those allegedly expected by the Claimants when making their investments, the earliest NOH 1 projects until 2018 and the NOH 2 projects until 2025-2029; some of the projects were not provided any connection dates.⁸⁹ In this connection, the BNA gave particular weight to the “distance to shore” criterion, giving priority to OWF projects that were located closer to the shore.⁹⁰

⁸⁶ Cl. Mem., paras. 304-305. ↩
⁸⁷ Cl. Mem., para. 276; BSH, Offshore Gridplan for the Exclusive Economic Zone in the German North Sea 2012 and Environmental Report (Bundesfachplan Offshore für die deutsche ausschliessliche Wirthschaftzone der Nordsee 2012 und Umweltbericht), 22 February 2013 (“BFO-N 2012”), C-0199 / R-0032. ↩
⁸⁸ Cl. Mem., para. 277. The BSH however stressed that the prioritization of areas that were predominantly closer to shore did not mean that OWFs could not be developed in other areas: see BFO-N 2012, C-0199 / R-0032, p. 20. ↩
⁸⁹ Cl. Mem., paras. 210, 213, 280-284. See Offshore-Netzentwicklungsplan 2013 zweiter Entwurf der Übertragungsnetzbetreiber, 24 June 2013 (“Second Draft of O-NEP 2013 (2023)”), C-0036 / R-0072, pp. 63, 88, 91; Offshore-Netzentwicklungsplan 2014 zweiter Entwurf der Übertragungsnetzbetreiber), 4 November 2014 ("Second Draft of O-NEP 2014 (2024)”), C-0037 / R-0073, pp. 43, 49, 57; Offshorenetzentwicklungsplan 2025, Version 2015, zweiter Entwurf der Übertragungsnetzbetreiber, 29 February 2016 (“Second Draft of O-NEP 2015 (2025)"), C-0038 / R-0074, pp. 43, 46, 54. The second draft of each O-NEP contains the expected grid connection dates for each project. Despite that the final version of the O-NEP approved by the BSH only includes the forthcoming connections dates, the whole second draft is considered to be accepted once approved by the BSH: see Bestätigung Offshore-Netzentwicklungsplan 2013, 19 December 2013 (“O-NEP 2013 (2023)"), C-0039 / R-0033, p. 5; Bedarfsermittlung 2024 Bestätigung des Offshore-Netzentwicklungsplan (Zieljahr 2024), 4 September 2015 (“O-NEP 2014 (2024)"), C-0040, p. 5; Bestätigung des Offshore-Netzentwicklungsplans 2025, 25 November 2016 (“O-NEP 2015 (2025)"), C-0041, p. 1. ↩
⁹⁰ Cl. Mem., paras. 212, 288; Offshore-Netzentwicklungsplan 2013 Erster Entwurf der Übertragungsnetzbetreiber – Teil 1), 2 March 2013 (“First Draft of O-NEP 2013 (2023)”), C-0200 / R-0184. ↩

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129. The Claimants illustrate the effect of the O-NEP 2013 on the Claimants' Offshore Wind Projects with the following table:⁹¹

130. The Claimants contend that they sought to mitigate their losses by moving certain locations of the planned installations to areas unaffected by the Development Freeze. They also sought to prioritize securing approval for the NOH 1 projects so as to make them suitable for sale, allegedly to mitigate their losses, while taking steps “to ensure the NOH 2 Projects would not lose their position within the Plan Approval Process, while reducing their

⁹¹ Cl. Reply, para. 408. See also Cl. Opening Statement, slides 77-78. ↩
⁹² The expected grid connected dates are set out in Koselleck WSI, para. 37. See also PwC, Commercial Due Diligence Report, 14 April 2011, C-0118, para. 448. ↩

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expenses to a minimum.”⁹³ According to the Claimants, they also sought to advance the NOH 2 projects, but “in vain.” The BSH specifically rejected the Claimants' request for an application conference for GAIA I Nord on the basis that a grid connection was not expected for the projects in the relevant cluster until 2027.⁹⁴

131. In 2014, after the 2013 federal elections and in response to public dissatisfaction with high electricity prices, Germany adopted a new energy policy, set out in amendments to the Renewable Energy Sources Act (the “2014 Renewable Energy Sources Act”). The 2014 Renewable Energy Sources Act reduced the expansion targets and adopted a tender system for the allocation of grid capacity which the Claimants contend had constituted “an important basis" for their investment decision.⁹⁵

132. In August 2014, the BNA adopted new rules for the allocation of grid capacity, based on a tender system,⁹⁶ which eliminated OWF project developers' right to obtain grid connection when needed. According to the Claimants, faced with grid capacity constraints, they had to sell OWP Albatross and the Albatross Test Field, to avoid the risk of not receiving a grid connection or having to incur additional costs in connection with the tender.⁹⁷

133. In February 2015, Germany announced further forthcoming changes to the regulatory framework governing offshore wind, which envisaged making the Plan Approval Process, grid connection and the remuneration mechanism dependent on a centralized tender process. In this connection, according to the Claimants, the BSH “effectively stopped processing the ongoing Plan Approval Processes with reference to the delayed grid connection dates under the O-NEP system.”⁹⁸ In a letter to the Claimants, the BSH stated that it would no longer process the applications of the NOH 2 projects and GlobalTech II, as these projects could not expect to receive a grid connection within the next ten years,

⁹³ Cl. Mem., paras. 214, 222, 294. ↩
⁹⁴ Cl. Mem., paras. 301-302; Letter from BSH to GAIA I, 2 June 2014, C-0263. ↩
⁹⁵ Cl. Mem., paras. 216, 266, 307-313; 2014 Renewable Energy Sources Act, 1 August 2014 (“2014 Renewable Energy Sources Act”), C-0207 / RL-0160, Sec. 3(2). ↩
⁹⁶ Cl. Mem., paras. 308-309. ↩
⁹⁷ Cl. Mem., paras. 216, 314-318. ↩
⁹⁸ Cl. Mem., para. 320. ↩

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according to the applicable O-NEP.⁹⁹ In the circumstances, as an alleged damage mitigation measure, the Claimants sold their remaining NOH 1 projects, OWP West and GlobalTech II (into which GlobalTech III had been merged).¹⁰⁰

134. On 15 June 2015, Germany extended the Development Freeze for another three years and confirmed O-NEP 2014, which further delayed the grid connection dates for the NOH 2 projects until 2027-2031.¹⁰¹

135. On 25 November 2016, the BNA confirmed O-NEP 2015, which further postponed the grid connection dates for the Claimants' NOH 2 projects until 2031-2035.¹⁰²

(2) The New Regulatory Framework Introduced in 2017

136. On 1 January 2017, the Offshore Wind Energy Act (the “Offshore Wind Energy Act")¹⁰³ and an amended Renewable Energy Sources Act (the “2017 Renewable Energy Sources Act")¹⁰⁴ entered into force. These laws introduced a new regulatory regime for offshore wind energy based on a compulsory tendering system, which replaced the earlier feed-in tariffs, and rules on eligibility to participate in the transitional tenders, which replaced the earlier Plan Approval Process.¹⁰⁵

137. In order to be eligible to participate, an offshore wind project had to be located in clusters 1 to 8 of the North Sea (as defined by the BFO and the applicable O-NEP), and it either had to have received approval or a permit for the relevant area, or have had its public hearing prior to 1 August 2016.¹⁰⁶ Projects that were eligible to participate in the transitional

⁹⁹ Cl. Mem., para. 327; Letter from BSH to GAIA I, 6 March 2015, C-0273; Strabag, Board Information on UB4W Energie, 15 April 2015, C-0274. ↩
¹⁰⁰ Cl. Mem., paras. 321, 364-367. ↩
¹⁰¹ Cl. Mem., paras. 331-344; BSH, Prolongation of the Development Freeze, 15 June 2015, C-0275. ↩
¹⁰² Cl. Mem., para. 368; O-NEP 2015 (2025), C-0041. See also Order of Projects, Comparison between O-NEPs 2013 (2023), 2014 (2024), 2015 (2025), C-0042; Second Draft of O-NEP 2015 (2025), C-0038 / R-0074. ↩
¹⁰³ Offshore Wind Energy Act (Gesetz zur Entwicklung und Förderung der Windenergie auf See), 1 January 2017 ("2017 Offshore Wind Energy Act”), C-0045 / RL-0148. The Offshore Wind Energy Act is referred by the Parties also with the German acronym “WindSeeG” (Windenergie-auf-See-Gesetz). ↩
¹⁰⁴ Renewable Energy Sources Act (Gesetz für den Ausbau erneuerbarer Energien), 1 January 2017 ("2017 Renewable Energy Sources Act”), C-0044, Sec. 2(3), Sentence 1, Sec. 28(4). ↩
¹⁰⁵ Cl. Mem., paras. 350 et seq; Resp. C-Mem., paras. 1214 et seq. ↩
¹⁰⁶ 2017 Offshore Wind Energy Act, C-0045 / RL-0148, Sec. 26(2). ↩

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tenders, but were eventually unsuccessful, were assigned a step-in right for any future awarded right to develop a project in the area in which they had held rights prior to the 2017 Renewable Energy Sources Act. Pursuant to the step-in right, the developers of these projects were entitled to take over the positions of the respective winners of the yearly auctions.¹⁰⁷

138. Offshore wind projects that were not eligible to participate in the tender process lost their legal position in the Plan Approval Process.¹⁰⁸ These included all of the Claimants' NOH 2 projects.

D. THE 2020 DECISIONS OF THE GERMAN CONSTITUTIONAL COURT

139. In July 2017, a number of offshore wind project developers, including each of the Claimants' NOH 2 Project Companies, challenged the constitutionality of the 2017 Offshore Wind Energy Act before the German Constitutional Court (the “Constitutional Court" or the "Court”).¹⁰⁹

140. In a decision issued on 30 June 2020, the Court held that the termination of the Plan Approval Processes and the deprivation of the positions held by the offshore wind projects in the Plan Approval Processes without any form of compensation for investment costs incurred by the developers was unconstitutional.¹¹⁰ By contrast, the Court found that the relevant provisions of the Offshore Wind Energy Act were not in principle incompatible with Article 14 of the Constitution, which deals with protection of property rights, as neither the approval of an offshore wind project nor its position in the approval process constituted a property right under the Constitution.¹¹¹

141. The Court held that the termination of the Plan Approval Processes and the deprivation of the positions held by the offshore wind projects in the Plan Approval Processes violated the German constitutional law principle of protection of legitimate expectations. According

¹⁰⁷ 2017 Offshore Wind Energy Act, C-0045/ RL-0148, Sec. 39. ↩
¹⁰⁸ 2017 Offshore Wind Energy Act, C-0045/ RL-0148, Sec. 46. ↩
¹⁰⁹ Cl. Mem., para. 386. ↩
¹¹⁰ Cl. Mem., para. 387; Resp. C-Mem., paras. 123-125. ↩
¹¹¹ Resp. C-Mem., para. 125; German Constitutional Court, Case No. BvR 1679/17, Decision, 30 June 2020 (“June 2020 Constitutional Court Decision”), C-0305 / RL-0145, para. 74. ↩

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to the Court, legitimate expectations are created if the state encourages and induces investment, and once such expectations have been created, the fundamental features of the legislative basis of the developer's investment cannot be substantially changed to the developer's detriment without any compensation. Applying this standard, the Court held that the regulatory regime that was in place prior to the introduction of the Offshore Wind Energy Act, including the priority principle, had created on the part of the applicants the legitimate expectation that they would be in a position to develop, build and operate their offshore wind projects, if they continued to progress the various steps in the Plan Approval Process, or its predecessor, the approval process under the 2002 Offshore Installations Ordinance.¹¹²

142. On this basis, the Court held that the termination of the Plan Approval Process by way of a tender system without compensation violated the legitimate expectations that the prior regulatory regime had created. This was in particular the case because the applicants' position in the Plan Approval Process had been deprived of any value. The Court ordered the German government to provide compensation for the wasted investment costs that the applicants had incurred in relying on the applicable regulatory framework. The Court, however, only ordered the German government to provide compensation for necessary planning and site investigation expenses, to the extent that such expenses related to data and documentation that could be used for the preparatory investigation of sites to be carried out under the new tender system.¹¹³

143. In November 2020, Germany introduced a new Section 10a to the Offshore Wind Energy Act, adopting the following requirements for eligibility for compensation based on the guidelines provided by the Court:

i. the offshore wind projects must be located in clusters 9 to 13, i.e. zone 3;

ii. the investigations conducted must have been necessary for obtaining an approval under the 2012 Offshore Installations Ordinance; and

¹¹² Cl. Mem., paras. 388-389; June 2020 Constitutional Court Decision, C-0305 / RL-0145, paras. 140, 163. ↩
¹¹³ Cl. Mem., para. 390; June 2020 Constitutional Court Decision, C-0305 / RL-0145, paras. 159, 173. ↩

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iii. the results and documents of these investigations are capable of being used in the preparatory investigation to be carried out under the new legislation.¹¹⁴

144. The Claimants contend that the legislation provides the BSH with discretion in determining which costs are to be considered “necessary,” and that the BSH will only have to determine whether the investigations conducted are still capable of being used in the new system when it starts pre-developing the relevant sites for purposes of a tender, which is likely to be far in the future. According to the Claimants, the delay will ensure that “almost all conducted studies during the Approval Process will have become obsolete and thus ineligible for compensation."¹¹⁵

145. The Respondent submits that the German legislator has established a rule for compensation that is “comparable to Sec. 41 Offshore Wind Energy Act, the provision applicable to existing projects which were not rewarded in the transitional auctions.”¹¹⁶ According to the Respondent, the Court's decision “has been implemented on time, meaning before 30 June 2021, which was also the date by which the application for compensation must have been filed to the BSH, alongside with the submission of the documents.”¹¹⁷

E. REGULATORY DEVELOPMENTS AFTER 2017

146. In June 2019, Germany amended the Offshore Wind Energy Act, introducing the area development plan (Flächenentwicklungsplan or the “FEP”), which incorporates the BFO and parts of the O-NEPs.¹¹⁸ The amended Act eliminated the role of TSOs in the regulatory process and assigned the development of the FEP, including the timing of tenders and grid connections, to the BSH.¹¹⁹

¹¹⁴ Cl. Mem., para. 391; Amendment to the Offshore Wind Energy Act, 27 November 2020 (“2020 Offshore Wind Energy Act"), C-0306 / RL-0148; Resp. C-Mem., paras. 6, 144-146. ↩
¹¹⁵ Cl. Mem., paras. 393-394. ↩
¹¹⁶ Resp. C-Mem., para. 149. ↩
¹¹⁷ Resp. C-Mem., para. 150 [footnotes omitted]. ↩
¹¹⁸ Cl. Mem., para. 381; Resp. C-Mem., paras. 617-618; 2017 Offshore Wind Energy Act, C-0045/RL-0148, Sec. 6(7). ↩
¹¹⁹ Cl. Mem., para. 381; BSH, Area Development Plan 2019 for the German North Sea and Baltic Sea (Flächenentwicklungsplan), 28 June 2019 (“2019 FEP”), C-0301 / R-0183, p. 17. ↩

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147. In the 2019 FEP, the BSH declared zone 3, which included all of the NOH 2 projects, to be an “area for the construction and operation of wind energy plants offshore,”¹²⁰ as this was “necessary in order to reach [the] expansion targets.”¹²¹ In the 2020 FEP, the BSH announced that certain project areas in zone 3 were open for auction before 2024 and could become operational before 2030. The 2020 FEP includes all former NOH 1 and NOH 2 sites with the exception of OWP SeaStorm I and II, which were eliminated as a result of the Development Freeze.¹²² The draft FEP of December 2021, in turn, foresees the development of all project sites in zone 3.¹²³

148. In November 2021, Germany increased its expansion targets to 30 GW by 2030, and 40 GW and 70 GW by 2035 and 2045, respectively.¹²⁴

IV. THE PARTIES' CLAIMS AND REQUESTS FOR RELIEF

A. THE CLAIMANTS

149. In their Second Post-Hearing Brief, the Claimants make the following prayer for relief:

For the foregoing reasons, the Claimants respectfully request that the Tribunal:

(a) DECLARE that Germany has:

(i) breached Article 10(1) ECT by failing to accord fair and equitable treatment to the Claimants and their investments;

(ii) breached Article 10(1) ECT by impairing through unreasonable and discriminatory measures the management, maintenance, use, enjoyment or disposal of the Claimants' investments;

¹²⁰ The FEP is a new instrument for area development, issued by the BSH, incorporating the BFO and O-NEPs to determine the timeline for tenders and grid connection dates: see 2017 Offshore Wind Energy Act, C-0045 / RL-0148, Secs. 4(1), 5(1) No. 3, 6(7). ↩
¹²¹ Cl. Reply, para. 572; Resp. Rej., para. 748; 2019 FEP, C-0301 / R-0183, p. 146. ↩
¹²² Cl. Reply, para. 150. ↩
¹²³ Cl. Reply, para. 612; BSH, Draft FEP, 17 December 2021, C-0397, p. 6. ↩
¹²⁴ Cl. Reply, para. 611. ↩

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(iii) breached Article 10(1) ECT by failing to afford the Claimants and their investments the most constant protection and security;

(iv) breached Article 13(1) ECT by expropriating NOH 2 and STRABAG's investments without compensation;

(b) ORDER Germany:

(i) to compensate

(1) NOH 1 for damages caused to its investment in the NOH 1 Project Companies and the NOH 1 Projects as a result of Germany's ECT violations, in the sum of €64,400,000.00 or any other amount the Tribunal determines to be appropriate; or

(2) in the alternative, STRABAG in the sum of €32,844,000.00 or any other amount the Tribunal determines to be appropriate for said ECT violations, commensurate with STRABAG's 51 percent interest in NOH 1;

(ii) to compensate

(1) NOH 2 for damages caused to its investment in the NOH 2 Project Companies and the NOH 2 Projects as a result of Germany's ECT violations, in the sum of €234,700,000.00 or any other amount the Tribunal determines to be appropriate; or

(2) in the alternative, STRABAG in the sum of €119,697,000.00 or any other amount the Tribunal determines to be appropriate for said ECT violations, commensurate with STRABAG's 51 percent interest in NOH 2;

(iii) to compensate STRABAG for damages caused to its investment in the Gravity Foundation Technology as a result of Germany's ECT violations, in the sum of €206,200,000.00 or any other amount the Tribunal determines to be appropriate;

(iv) to pay pre-and post-award interest on all amounts awarded at a commercially reasonable rate established on a market basis;

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(v) to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and ICSID's other costs; and

(c) AWARD any other relief to the Claimants as the Tribunal considers appropriate.¹²⁵

150. As to the Respondent's objections to jurisdiction, in their Rejoinder on Jurisdiction the Claimants request that the Tribunal:

(a) DISMISS the jurisdictional objections raised by Germany;

(b) DISMISS the admissibility objection raised by Germany;

(c) DECLARE that it has jurisdiction over all the claims raised in this dispute; and

(d) ORDER Germany to pay all of the costs and expenses of this arbitration, including the Claimants' legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and ICSID's other costs.¹²⁶

B. THE RESPONDENT

151. In its First Post-Hearing Brief, the Respondent requests that the Tribunal:

1. Dismiss all Claimants' claims for lack of jurisdiction, in eventu, dismiss all, or any remaining, Claimants' claims due to the lack of jurisdiction or for the lack of merit.

2. Order Claimants to reimburse Respondent all its costs of the proceedings, with interest.¹²⁷

V. JURISDICTION

152. The Respondent contends that the Tribunal lacks jurisdiction ratione voluntatis, ratione materiae and ratione personae. According to the Respondent, there is no valid arbitration agreement between the Parties under Article 25(1) of the ICSID Convention or Article 26

¹²⁵ Cl. Second PHB, para. 234; Cl. Reply, para. 1008. ↩
¹²⁶ Cl. Rej., para. 246. ↩
¹²⁷ Resp. Rej., para. 1806. ↩

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of the ECT (Section V.A); the Claimants did not make a qualifying investment under either Article 1(6) of the ECT or Article 25(1) of the ICSID Convention (Section V.B); and the Claimants do not qualify as protected investors because they are not nationals of another Contracting State as required by Article 26(3) and (4) of the ECT and Article 25(1) of the ICSID Convention (Section V.C).

153. The Respondent also objects to the admissibility of the First Claimant's claim regarding its participation in the Second and Third Claimants, and contends that the First Claimant's participation does not qualify as an investment under the ICSID Convention; this objection is also addressed in Section V.B below.

154. The Tribunal summarizes below the Parties' positions on jurisdiction, as set out in their submissions and at the Hearing. The summary is not exhaustive, however, when making its determinations, the Tribunal has considered the Parties' submissions in detail and with care, even if not specifically mentioned below. This caveat also applies to sections VI, VII and VIII below.

A. JURISDICTIONAL OBJECTION RATIONE VOLUNTATIS

(1) The Parties' Positions

a. The Respondent's Position

155. The Respondent submits that the Tribunal lacks jurisdiction ratione voluntatis under both Article 25(1) of the ICSID Convention and Article 26(4) of the ECT. According to the Respondent, there is no valid arbitration agreement between the Parties because the Respondent has not given a valid consent to arbitrate under the ECT.¹²⁸

156. In support of its contention, the Respondent raises two main arguments: (i) there is no valid arbitration agreement between the Parties because the present case involves an intra-EU dispute, and the Respondent has not given its consent to arbitrate intra-EU disputes under the ECT such that there is no jurisdiction under Article 26 of the ECT or Article 25(1) of the ICSID Convention; and (ii) recent developments in the EU, including decisions taken

¹²⁸ Resp. Mem., paras. 4, 12. ↩

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by the Court of Justice of the European Union (“CJEU”), establish that the Tribunal does not have jurisdiction under the ECT.¹²⁹

(i) There is no jurisdiction under the ECT properly interpreted

157. By way of a preliminary argument, the Respondent submits that it has not given a valid consent to arbitrate because Article 26(1) and (3) of the ECT only provide for consent to arbitrate disputes with an investor of “another ECT Contracting Party.” Both Austria, the Claimants' state of incorporation, and Germany are Member States of the EU. Moreover, the EU itself is an ECT Contracting Party. On this basis, the Respondent argues that since both Austria and Germany are “part of the greater unit of the EU,” the Claimants are not investors of "another ECT Contracting Party," as required under Article 26(1) and (3) of the ECT.¹³⁰

158. It follows, according to the Respondent, that since Germany has not given a valid offer to arbitrate under the ECT, the Tribunal lacks jurisdiction ratione voluntatis.¹³¹ The Respondent only consented to arbitration when it was in line with EU law and therefore could not have given a standing offer to arbitrate intra-EU disputes.¹³² The Respondent notes that the European Commission shares this opinion: “Article 26 of the Energy Charter Treaty does not contain an offer for arbitration by the Federal Republic of Germany to investors from other EU Member States. It is directed only to investors from third countries."¹³³

159. The Respondent submits that the ECT must be interpreted in accordance with Articles 31 and 32 of the Vienna Convention on the Law of Treaties (“VCLT”) and in light of the principle of effectiveness.¹³⁴ When the ECT was negotiated, the EU and its Member States acted as a single entity.¹³⁵ This is reflected in the ECT as the EU is itself a “Contracting

¹²⁹ Resp. Mem., paras. 19-23. ↩
¹³⁰ Resp. Mem., para. 21. ↩
¹³¹ Resp. Mem., para. 80. ↩
¹³² Resp. Mem., para. 84. ↩
¹³³ Resp. Mem., para. 84; Commission Application, RL-0018, para. 25. ↩
¹³⁴ Resp. Mem., paras. 81, 86; Cl. Mem., para. 406. ↩
¹³⁵ Resp. Mem., para. 86. ↩

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Party" to the ECT and its Member States are treated as a single territory in the ECT – the territory of the EU.¹³⁶ The Respondent argues that this means that an investment made by an investor from an EU Member State in another EU Member State is not an investment in the "Area" of another Contracting Party, but in the “Area” of the same Contracting Party. As the EU is a single investment area for its Member States, the offer of arbitration made by the EU is only made to investors from Contracting Parties that are not EU Member States.¹³⁷ As a result, the plain wording of the ECT excludes intra-EU arbitration under Article 26 of the ECT.¹³⁸

160. The Respondent further argues that the interpretation of Article 26(3) of the ECT in light of its object and purpose, and in the context of Article 26 as a whole, confirms that the EU and its Member States are bound by their obligations under the ECT vis-à-vis other Contracting Parties but not as between themselves.¹³⁹ The ECT was never meant to influence the EU's internal - intra-EU – energy market, and this has always been the understanding of the European Commission. This interpretation is supported by the language of Article 26(3) of the ECT, when interpreted in the context of Article 26(6), which makes clear that “issues in dispute” must be resolved “in accordance with this Treaty and applicable rules and principles of international law.” Such rules and principles include EU law, which is part of international law, and therefore include EU treaties.¹⁴⁰

161. The Respondent contends that EU law also prevails in accordance with the supplementary means of interpretation in Article 31 of the VCLT.¹⁴¹ The Respondent relies on Electrabel v. Hungary, which in the Respondent's view confirms that EU law prevails over any conflicting provisions of the ECT under Article 351 of the Treaty on the Functioning of the European Union (“TFEU”) whenever a harmonious interpretation with the ECT is not

¹³⁶ Resp. Mem., para. 86; Resp. Reply on 41(5), para. 44. ↩
¹³⁷ Resp. Mem., para. 95; Resp. Reply on 41(5), para. 43. ↩
¹³⁸ Resp. Mem., para. 100. ↩
¹³⁹ Resp. Mem., paras. 101-107; Commission Application, RL-0018, para. 28. ↩
¹⁴⁰ Resp. Mem., paras. 101-108; Resp. Reply on 41(5), para. 51. ↩
¹⁴¹ Resp. Mem., paras. 109-115; Resp. Rule 41(5) Application, para. 131. ↩

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possible.¹⁴² The Respondent adds that, even though the ECT is a multilateral agreement, it consists of a series of bilateral relationships and accordingly, in the bilateral relationship between two EU Member States, EU law must prevail.¹⁴³

(ii) There is no jurisdiction in view of recent EU legal developments

162. The Respondent argues that recent developments in investment arbitration in the EU, in particular EU measures reaffirming the inadmissibility of intra-EU arbitration, combined with recent decisions of the CJEU and other courts and tribunals, establish that the Tribunal lacks jurisdiction ratione voluntatis.¹⁴⁴

163. According to the Respondent, this is the case even assuming that Article 26 of the ECT initially contained a consent to arbitrate intra-EU investment disputes, since such position has become incompatible with EU law in light of recent developments. In particular, the adoption by the EU Member States of the Lisbon Treaty and the CJEU's judgment of 6 March 2018 in Slovak Republic v. Achmea (the “Achmea Judgment”) establish that international agreements between two EU Member States must be interpreted in compliance with EU law.¹⁴⁵

164. The adoption of the Lisbon Treaty in 2009, in particular, reinforced the role of the CJEU and the legal understanding of the EU as a “legal union” within the meaning of Article 19 of the Treaty on European Union (“TEU”) and provided the EU with exclusive competence regarding foreign direct investment.¹⁴⁶ Declaration 17, annexed to the Lisbon Treaty,

¹⁴² Resp. Mem., paras. 109-111, citing Electrabel v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012 (“Electrabel v. Hungary"), CL-0042 / RL-0262, para. 4.130. ↩
¹⁴³ Resp. Mem., paras. 112-115. ↩
¹⁴⁴ Resp. Mem., paras. 116 et seq. ↩
¹⁴⁵ Resp. Mem., para. 6; Slovak Republic v. Achmea B.V., CJEU Case No. C-284/16, Judgment, 6 March 2018 ("Achmea Judgment”), RL-0006. ↩
¹⁴⁶ Resp. Mem., paras. 27-30, 121-122. ↩

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establishes in the Respondent's view that “[t]he [EU] Treaties and the law adopted by the Union on the basis of the [EU] Treaties have primacy over the law of Member States.”¹⁴⁷

165. In the Achmea Judgment, the CJEU established that arbitration clauses in bilateral investment treaties (“BITs”) concluded between EU Member States are incompatible with EU law.¹⁴⁸ As a result of this decision, 22 EU Member States issued a written Declaration of the Representatives of the Governments of the Member States in January 2019 (the “January 2019 Declaration”), explicitly confirming that the Achmea Judgment applies to intra-EU investor-State cases brought under the ECT.¹⁴⁹ Both the Respondent and Austria, where the Claimants are incorporated, signed this declaration.¹⁵⁰ In May 2020, 23 EU Member States agreed to terminate all BITs concluded between them due to the “common understanding that intra-EU arbitration was inadmissible” (the “2020 Termination Agreement").¹⁵¹

166. The Respondent further relies on the judgment in Moldova v. Komstroy (the “Komstroy Judgment") of 2 September 2021, in which the CJEU confirmed that the principles set forth in the Achmea Judgment apply to intra-EU investor-State arbitration conducted under Article of the 26 of the ECT.¹⁵² The CJEU confirmed in a further judgment issued on 26 October 2021 in Poland v. PL Holdings (the “PL Holdings Judgment”) that intra-EU investor-State arbitration is also inadmissible in ad hoc investment arbitration.¹⁵³ The CJEU found in particular that a Member State court has an obligation to grant an application for the setting aside of an arbitral award that is incompatible with EU Treaties. Furthermore, on 25 January 2022, the CJEU held in European Commission v. European

¹⁴⁷ Resp. Mem., para. 30; Declarations Annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, 13 December 2007, Doc. No. 2008/C 115/01, RL-0019, Declaration 17. ↩
¹⁴⁸ Resp. Mem., paras. 32-33; Achmea Judgment, RL-0006. ↩
¹⁴⁹ Resp. Mem., para. 34; Declaration of the Representatives of the Governments of the Member States, 15 January 2019, RL-0008. ↩
¹⁵⁰ Resp. Mem., para. 35; Commission Application, RL-0018, para. 19. ↩
¹⁵¹ Resp. Mem., para. 46; Agreement for the Termination of Bilateral Investment Treaties between the Member States of the European Union, 29 May 2020, RL-0025; Resp. Rule 41(5) Application, para. 88. ↩
¹⁵² Resp. Rej., paras. 54, 57-72; Republic of Moldova v. Komstroy LLC, CJEU Case No. C-741/19, Judgment, 2 September 2021 (“Komstroy Judgment”), C-0398 / RL-0378. ↩
¹⁵³ Resp. Rej., paras. 55, 73-83; Republic of Poland v. PL Holdings S.à.r.l., CJEU Case No. C-109/20, Judgment, 26 October 2021 (“PL Holdings Judgment"), C-0399 / RL-0379. ↩

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Food (the “European Food Judgment”) that the principles underpinning the Achmea Judgment are relevant in ICSID arbitration and that compliance with an arbitral award granting damages to an investor may constitute state aid in violation of Article 108 TFEU.¹⁵⁴

167. In addition to CJEU case law, the Respondent relies on the arbitral award in Green Power v. Spain to argue that the application of EU law is “inescapable” in the present case.¹⁵⁵ According to the Respondent, the tribunal in Green Power found, relying on Electrabel, that EU law is part of the international legal order and relevant to its analysis of Article 26 of the ECT,¹⁵⁶ and that Article 26 of the ECT must be interpreted in accordance with EU law since EU Treaties are lex superior between EU Members States.¹⁵⁷ On this basis, the Green Power tribunal ruled that Spain's offer to arbitrate under the ECT is not applicable in intra-EU relations and there was no valid offer to arbitrate that the claimants could have accepted.¹⁵⁸

168. The Respondent also refers to decisions of national courts that have stayed the enforcement of intra-EU awards, to support their position that Article 26 of the ECT does not constitute a valid offer to arbitrate intra-EU disputes.¹⁵⁹

¹⁵⁴ Resp. Rej., paras. 56, 84-97; European Commission v. European Food and others, CJEU Case No. C-638/19 P, Judgment, 25 January 2022 (“European Food Judgment”), RL-0380. ↩
¹⁵⁵ Resp. Rej., paras. 39-42, 121-138, Green Power Partners K/S and SCE Solar Don Benito APS v. Kingdom of Spain, SCC Arbitration V2016/135, Award, 16 June 2022 (“Green Power v. Spain"), RL-0370. ↩
¹⁵⁶ Resp. Rej., para. 40 citing Green Power v. Spain, RL-0370, para. 170; Electrabel v. Hungary, CL-0042 / RL-0262. ↩
¹⁵⁷ Resp. Rej., paras. 137-138, citing Green Power v. Spain, RL-0370, para. 469. ↩
¹⁵⁸ Green Power v. Spain, RL-0370, para. 445. ↩
¹⁵⁹ Resp. Mem., paras. 40-45; Resp. First PHB, paras. 7-10; Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Kingdom of Spain, SCC Case No. 2015/063, Final Award, 15 February 2018 ("Novenergia II v. Spain"), CL-0035, paras. 438-442; Cube Infrastructure Fund SICAV and others v. Kingdom of Spain, ICSID Case No. ARB/15/20, Decision on Jurisdiction, Liability and Partial Decision on Quantum, 19 February 2019 (“Cube v. Spain"), CL-0027 / RL-0283, para. 413; Ioan Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013, CL-0123 / RL-0084, para. 669; DA v. Romanian Air Traffic Services Administration (Romania) and others and FC and others v. Romanian Air Traffic Services Administration (Romatsa) and others, CJEU Case No. C-333/19, Judgment, 21 September 2021, RL-0513; Kingdom of the Netherlands v. Uniper SE, Uniper Benelux Holding B.V. and Uniper Benelux N.V., Higher Regional Court of Cologne, Case No. 19 SchH 14/21, Decision, 1 September 2022 (“Netherlands v. Uniper”), RL-0507; Kingdom of the Netherlands v. RWE AG and RWE Eemshaven Holding II BV, Higher Regional Court of Cologne, Case No. 19 SchH 15/21, Decision, 1 September 2022 (“Netherlands v. RWE"), RL-0508; PL Holdings Judgment, C-0399 / RL-0379; Republic of Poland v. PL Holdings S.à.r.l., Supreme Court of Sweden, Case No. T-1569-19, Decision, 14 December 2022 ↩

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("Poland v. PL Holdings"), RL-0514; Kingdom of Spain v. Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR, Svea Court of Appeal, Case No. T-4658-18, Decision, 13 December 2022 (“Spain v. Novenergia II"), RL-0515.
¹⁶⁰ Resp. Mem., para. 125.
¹⁶¹ Resp. Mem., para. 126.
¹⁶² Resp. Mem., paras. 134-135.
¹⁶³ Resp. Mem., para. 145.
¹⁶⁴ Resp. Mem., para. 146; CJEU, Opinion 2/13, 18 December 2014, RL-0045, para. 194.

169. The Respondent submits that its position that Article 26 of the ECT has been superseded by the relevant provisions of the TEU and TFEU is also supported by the conflict rules in Articles 30(2), 30(4)(a) and 41(1)(b) of the VCLT. By adopting the Lisbon Treaty, Austria and Germany reaffirmed the autonomy of the EU legal order in Articles 4(3) and 19 of the TEU and Articles 267 and 344 of the TFEU subsequent to the ratification of the ECT and prior to the commencement of this arbitration.¹⁶⁰ Article 344 of the TFEU and Article 19(1) of the TEU therefore establish an obligation of EU Member States to submit disputes exclusively to the judicial system of the EU whenever EU law is to be interpreted or applied.¹⁶¹

170. The Respondent submits that Article 41(1) of the VCLT, which allows the modification of a multilateral treaty by certain parties only, also bars the application of Article 26(4) of the ECT. According to the Respondent, the January 2019 Declaration constitutes such an agreement, modifying the ECT between EU Member States, while not affecting the rights and obligations of other Contracting States.¹⁶²

(iii) Analogy to other international agreements shows that the ECT is inapplicable in an intra-EU context

171. The Respondent submits that the incompatibility of Article 26(4) of the ECT with Article 344 of the TFEU is supported by the CJEU's reasoning in its Opinion 2/13 concerning the European Convention of Human Rights (“ECHR").¹⁶³

172. When addressing the question of whether the EU itself could accede to the ECHR, the CJEU considered that this was not possible under the principle of mutual trust applicable under the EU law.¹⁶⁴ The CJEU also noted that the dispute resolution mechanism in Article 33 of the ECHR would allow the application of EU law in intra-EU disputes, and

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in disputes between EU Member States, which would undermine Article 344 of the TFEU.¹⁶⁵ The Respondent submits that this reasoning is also applicable in this case, precluding the Tribunal's jurisdiction.¹⁶⁶

(iv) There is no jurisdiction based on an arbitration agreement pursuant to private law

173. The Respondent further argues that, separately from its position under Article 26 of the ECT, the Respondent has "not consented to arbitrate on the basis of private law."¹⁶⁷

174. As an EU Member State, the Respondent cannot consent to arbitrate intra-EU disputes as its jurisdictional objections cannot be waived under EU law, and it does not agree to waive them in the present case.¹⁶⁸ Accordingly, in the absence of "common will" of the Parties, the Tribunal cannot found its jurisdiction on Article 26 of the ECT or any other basis.¹⁶⁹

b. The Claimants' Position

175. The Claimants submit that the Tribunal has jurisdiction ratione voluntatis because (i) Article 26 of the ECT contains the Contracting Parties' (including Germany's) valid standing offer to arbitrate disputes arising under the ECT with investors of other Contracting Parties (including Austria); and (ii) recent developments under EU law do not affect the meaning and scope of Article 26 of the ECT.

(i) The Parties have given their consent to ICSID jurisdiction under Article 26 of the ECT

176. The Claimants submit that in Article 26 of the ECT, Germany gave its consent to arbitrate disputes concerning an “investment” made in its territory by “Investors” of another Contracting Party.¹⁷⁰ Since both Austria and Germany are Contracting Parties to the ICSID

¹⁶⁵ Resp. Mem., para. 147. ↩
¹⁶⁶ Resp. Mem., paras. 149-151. ↩
¹⁶⁷ Resp. Mem., para. 152. ↩
¹⁶⁸ Resp. Mem., paras. 152-153. ↩
¹⁶⁹ Resp. Mem., para. 154. ↩
¹⁷⁰ Cl. Mem., paras. 400-402. ↩

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Convention, the Tribunal has jurisdiction under both the ECT and the ICSID Convention.¹⁷¹

177. The Claimants provided their consent to arbitrate this dispute in the Notice of Dispute notified to the Respondent on 16 June 2017¹⁷² and in the Claimants' RfA dated 5 September 2019 and registered by the Secretary-General of ICSID on 20 September 2019.¹⁷³

178. The Claimants argue that Article 26 of the ECT contains the Respondent's “unconditional” consent to arbitrate investment disputes with investors that are nationals of any other Contracting Party to the ECT, including Austria or any other EU Member State.¹⁷⁴ According to the Claimants, this position has been endorsed by no less than 39 other ECT tribunals that have addressed the issue.¹⁷⁵ A total of 47 arbitral tribunals have “unanimously rejected" the arguments raised by the Respondent in this case, and the Respondent has failed to raise any other arguments than those “which have already been unanimously dismissed by every single ECT tribunal that confronted them.”¹⁷⁶ As a result, any objection to the Tribunal's jurisdiction based on Austria's or Germany's membership of the EU or on EU law lack any merit.¹⁷⁷

179. The Claimants submit that the jurisdiction of the Tribunal is exclusively governed by the ECT, not the EU legal framework, and that the relevant ECT provisions must be interpreted according to the rules of treaty interpretation in Articles 31 and 32 of the VCLT.¹⁷⁸ The correct interpretation of Article 26 of the ECT leads to the conclusion that the provision

¹⁷¹ Cl. Mem., paras. 397-398. ↩
¹⁷² Cl. Mem., paras. 396, 403; Letter from the Claimants to Germany, 16 June 2017 (“Notice of Dispute"), C-0049, p. 6. ↩
¹⁷³ Cl. Mem., paras. 396, 403; RfA, para. 83. ↩
¹⁷⁴ Cl. Mem., para. 404; Energy Charter Treaty, 17 December 1994 (entered into force 16 April 1998) (“ECT”), CL-0001, Art. 26(3)(a); Cl. Reply, para. 618. ↩
¹⁷⁵ Cl. Mem., para. 404; see also Cl. Mem., fn. 893. ↩
¹⁷⁶ Cl. Reply, paras. 620-621. ↩
¹⁷⁷ Cl. Mem., para. 405. ↩
¹⁷⁸ Cl. Mem., para. 406; Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, 31 August 2018 (“Vattenfall v. Germany, Decision on Achmea"), CL-0032, paras. 131-132. ↩

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does not carve out intra-EU arbitrations from its scope of application.¹⁷⁹ The Claimants maintain that there is no incompatibility between EU law and the ECT and that, even if there were, the interpretation of conflicting treaty obligations is regulated by Article 30 of the VCLT.¹⁸⁰

180. According to the Claimants, in order for Article 30 of the VCLT to be applicable, two requirements must be met: (i) the treaties must relate to the same subject matter; and (ii) the treaties must be in conflict with one another.¹⁸¹ The Claimants argue that in this dispute, neither requirement is met.¹⁸² The Claimants further argue that even if there were a conflict, Article 16 of the ECT directs the interpreter of the treaties to apply the treaty provisions that grant more extensive treaty protections to investors and their investments.¹⁸³ However, there is no need for such analysis here as the plain wording of the ECT contains all of the relevant terms and “there is no need to interpret that which has no need of interpretation.”¹⁸⁴

(ii) Recent developments do not affect the meaning and scope of Article 26 of the ECT

181. The Claimants reject the Respondent's claim that recent developments, such as the Lisbon Treaty, the CJEU's judgments in Achmea, Komstroy and PL Holdings, the January 2019 Declaration and the CJEU's Advocate Generals' opinions, affect the meaning and scope of Article 26 of the ECT. According to the Claimants, ICSID arbitrations belong to a self-contained regime within international law and therefore are not affected by CJEU decisions

¹⁷⁹ Cl. Reply, para. 628. ↩
¹⁸⁰ Cl. Mem., para. 407; Cl. Observations on Rule 41(5), paras. 32-38; Vienna Convention on the Law of Treaties dated 23 May 1969 and entered into force 27 January 1980 (“VCLT”), CL-0050, Art. 30. ↩
¹⁸¹ Cl. Mem., para. 407; M. E. Villiger, “Article 30,” in Commentary on the 1969 Vienna Convention on the Law of Treaties (2009), CL-0048, pp. 401-402, para. 5; Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Termination Request and Intra-EU Objection, 7 May 2019, CL-0025, para. 135. ↩
¹⁸² Cl. Mem., para. 407; Cl. Observations on Rule 41(5), paras. 39-43. ↩
¹⁸³ Cl. Mem., para. 407; ECT, CL-0001, Art. 16. ↩
¹⁸⁴ Cl. Reply, para. 630. ↩

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and developments under EU law.¹⁸⁵ In this context, CJEU case law is only relevant within the EU legal order.¹⁸⁶

182. According to the Claimants, the Respondent's own conduct before the CJEU in relation to the Achmea Judgment demonstrates that Article 26 of the ECT provides a valid basis for this Tribunal's jurisdiction. The Respondent alleges that “Germany's case [as a preliminary matter is] that the ECT was from the very beginning inapplicable in intra-EU relations.”¹⁸⁷ However, the Claimants note that in another ECT proceeding brought against Germany in 2012, Germany never raised the intra-EU objection.¹⁸⁸ The failure to raise this objection is “a major obstacle to Germany's proposition that Article 26 [of the] ECT reflects all ECT Contracting Parties' understanding” when the ECT was ratified and that “EU Member States did not intend to create inter se obligations between the EU Member States themselves."¹⁸⁹

183. The Claimants deny that the Lisbon Treaty amended or suspended the application of the ECT between EU Member States.¹⁹⁰ First, the Claimants argue that the principle of primacy of EU law, codified in Declaration 17 annexed to the Lisbon Treaty, operates as a conflict rule within the EU law legal order but cannot have any bearing on the ECT.¹⁹¹ Second, according to the Claimants, the ECT should not be considered as having the same subject matter as, or as being incompatible with, the EU Treaties. The Respondent's reliance on Article 30(2) and (4) is therefore “misplaced."¹⁹²

184. The Claimants further contend that Article 40(1) of the VCLT is inapplicable. The Claimants point out that the Lisbon Treaty does not refer to the ECT. Furthermore, neither the EU nor the EU Members States ever notified the other Contracting Parties to the ECT

¹⁸⁵ Cl. Reply, para. 664. ↩
¹⁸⁶ Cl. Reply, paras. 666-675. ↩
¹⁸⁷ Cl. Reply, para. 623. ↩
¹⁸⁸ Cl. Reply, para. 623; Vattenfall v. Germany, Decision on Achmea, CL-0032, para. 18. ↩
¹⁸⁹ Cl. Reply, para. 624; Resp. Rule 41(5) Application, para. 4; Resp. Mem., para. 11. ↩
¹⁹⁰ Cl. Reply, paras. 651-653. ↩
¹⁹¹ Cl. Reply, para. 654. ↩
¹⁹² Cl. Reply, para. 656. ↩

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of their intention to modify the ECT among the EU Member States.¹⁹³ As to the January 2019 Declaration, the Claimants claim that it is “merely political in nature" and has no effect on the ECT.¹⁹⁴

185. Additionally, the Claimants highlight the lack of consensus within the EU legal framework regarding whether EU investors' resorting to arbitration against an EU Member State is incompatible with EU law.¹⁹⁵ First, the Claimants note that the Achmea Judgment does not extend to multilateral treaties to which the EU is also party, including the ECT.¹⁹⁶ Second, the Claimants note that EU Member States have not been uniform in their political declarations regarding the effects of the Achmea Judgment on the applicability of Article 26 of the ECT in intra-EU disputes.¹⁹⁷ Third, the Claimants argue that the Komstroy and PL Holdings Judgments have no impact on the Tribunal's jurisdiction as both decisions only operate within the EU legal order, while the Tribunal is constituted under the international legal order.¹⁹⁸

186. In response to the Respondent's reliance on Green Power v. Spain, the Claimants raise three arguments. First, the Green Power award does not support the Respondent's case because the tribunal relied on the premise that EU law applied to issues of jurisdiction because the seat of arbitration was in Stockholm.¹⁹⁹ The Claimants note that this is not the case here as this is an ICSID arbitration. Second, the set aside decisions by the Swedish Supreme Court in Poland v. PL Holdings and the Svea Court of Appeal in Spain v. Novenergia II do not advance the Respondent's case because the decisions rest upon the application of Swedish law to the underlying arbitrations, again because their seats were in

¹⁹³ Cl. Reply, para. 657. ↩
¹⁹⁴ Cl. Reply, paras. 676-677. ↩
¹⁹⁵ Cl. Mem., para. 408; Cl. Observations on Rule 41(5), paras. 44-47. ↩
¹⁹⁶ Cl. Mem., para. 408; Achmea Judgment, RL-0006, para. 58. See also Masdar Solar & Wind Cooperatief UA v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, 16 May 2018 (“Masdar v. Spain"), CL-0034, para. 679. ↩
¹⁹⁷ Cl. Mem., para. 408; Declaration of the Representatives of the Governments of the Member States on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union, 15 January 2019, C-0314. ↩
¹⁹⁸ Cl. Reply, para. 622; Komstroy Judgment, C-0398 / RL-0378; Cl. Reply, para. 622; PL Holdings Judgement, C-0399 / RL-0379. ↩
¹⁹⁹ Cl. Second PHB, paras. 16-17; Cl. Rej., paras. 130-146; Resp. First PHB, para. 6; Green Power v. Spain, RL-0370. ↩

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Stockholm.²⁰⁰ Similar to the Green Power award, the location of the seat of arbitration within the EU was dispositive. As a result, the rulings have no bearing on this ICSID arbitration.²⁰¹ Third, the decisions of the Higher Regional Court of Cologne in Netherlands v. RWE and Netherlands v. Uniper are also irrelevant to the Respondent's intra-EU objection because those decisions were rendered under German and EU law, which do not form part of the law applicable to the Tribunal's jurisdiction.²⁰²

187. The Claimants further submit that, in any event, by virtue of Article 25(1) of the ICSID Convention, no legal or factual development after the filing of the Claimants' RfA on 5 September 2019 could affect the Tribunal's jurisdiction over this dispute.²⁰³

(2) The Tribunal's Analysis

188. The Tribunal recalls that the Respondent previously raised an objection to the Tribunal's jurisdiction ratione voluntatis in its Rule 41(5) Application. When rejecting the Respondent's Application, the Tribunal determined as follows:

Having carefully considered the Parties' positions and the legal authorities on which the Parties rely, the Tribunal is unable to conclude that the Claimants' case on jurisdiction manifestly lacks legal merit. Article 26 of the ECT does not, on its face, exclude from its scope of application disputes between member States of the EU. Nor is there any indication in Article 26 that the provision is subject to exceptions or exclusions in any other provision of the ECT, except for purposes of Annexes IA and ID, which are not at issue in this case. In the circumstances, there is no basis, pursuant to the legal standard applicable under Rule 41(5), for the Tribunal to engage in a more elaborate analysis to determine whether disputes between member States of the EU would be excluded from the scope of application of Article 26 of the ECT on grounds of any subsequent legal developments. These include developments such as (i) any new international treaties or any amendments to existing international treaties, entered into since the conclusion of the ECT by the member States of the EU, (ii) any other subsequent legal developments such

²⁰⁰ Cl. Second PHB, para. 18; Spain v. Novenergia II, RL-0515, pp 36-40; Poland v. PL Holdings, RL-0514, paras. 30-31, 58-59. ↩
²⁰¹ Cl. Second PHB, para. 18. ↩
²⁰² Cl. Second PHB, para. 19; Cl. First PHB, paras. 17-18; Netherlands v. Uniper, RL-0507, p. 6; Netherlands v. RWE, RL-0508, pp. 5-6. ↩
²⁰³ Cl. Reply, para. 650, 678-681. ↩

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as the Achmea Judgment of the CJEU, or indeed (iii) on any other grounds, including the intentions of the EU and the EU member States when negotiating the ECT, insofar as such grounds are not reflected in the language of Article 26. Indeed, if such further analysis is required, which is the case here, the Tribunal's asserted lack of jurisdiction under Article 26 of the ECT cannot be considered manifest.²⁰⁴

189. The Tribunal must now engage in the “more elaborate analysis” that it was not required to undertake in connection with the Respondent's Rule 41(5) Application, insofar as the Respondent continues to rely on the arguments it raised in support of its Rule 41(5) Application or indeed raises new arguments.

190. As summarized above, the Claimants rely, for the purposes of the Tribunal's jurisdiction ratione voluntatis, on Article 26(3) of the ECT which provides that, “[s]ubject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration [...] in accordance with the provisions of this Article.”²⁰⁵

191. It is undisputed that the two exceptions referred to in subparagraphs (b) and (c) of Article 26(3) of the ECT are not applicable in this case.²⁰⁶

192. It is also undisputed that the Claimants gave their consent to arbitrate in the Notice of Dispute and in the RfA. Thus the Claimants have complied with Article 26(4)(a)(1) of the

²⁰⁴ Decision on Rule 41(5) Application, para. 65 [footnote omitted]. ↩
²⁰⁵ While the ICSID Convention sets out criteria for the Tribunal's jurisdiction ratione materiae and ratione personae (as will be discussed further below), it does not contain the Contracting States's consent to arbitrate disputes falling under ICSID jurisdiction. Article 25(1) of the ICSID Convention provides that such consent is to be provided in a separate undertaking: “The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally" [emphasis added]. ↩
²⁰⁶ Article 26(3)(b)(i) refers to Annex ID, which lists the Contracting Parties which do not give their unconditional consent "where the Investor has previously submitted the dispute under subparagraph 26(a) or (b)" (which refer to the courts or administrative tribunals of the Contracting Party to the dispute and any previously agreed dispute settlement procedure, respectively; under Article 26(3)(b)(ii), each such Contracting Parties shall provide a written statement "of its policies, practices and conditions" by the date of the deposit of its instrument of ratification, acceptance or approval, or the deposit of its instrument of accession. Article 26(3)(c) refers, in turn, to Annex IA, which lists the Contracting Parties that do not give unconditional consent with respect to “a dispute under the last sentence of Article 10(1),” i.e. the so-called umbrella clause. ↩

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ECT, which provides that “[i]n the event an Investor chooses to submit the dispute for resolution under subparagraph (2)(c) [i.e. international arbitration], the Investor shall further provide its consent in writing for the dispute to be submitted to [...] [t]he International Centre for Settlement of Investment Disputes [...] if the Contracting Party of the Investor and the Contracting Party party to the dispute are both parties to the ICSID Convention [...].”

193. It is further undisputed that both Austria, the home jurisdiction of the Claimants, and Germany are Contracting Parties to the ECT and Contracting States to the ICSID Convention.

194. As summarized above, the Respondent argues that, regardless of the language of Article 26 of the ECT, there is no valid arbitration agreement between the Parties because Article 26 is incompatible with EU law. The Respondent submits that, while in its view the ECT “was and is inapplicable to intra-EU disputes ab initio,” even assuming this were not the case, "the progressive development of EU Treaties again established such inapplicability."²⁰⁷ According to the Respondent, by adopting the Lisbon Treaty in 2009, the EU Member States “reaffirmed” the understanding, subsequently confirmed by the CJEU in the Achmea Judgment, that arbitration clauses in investment treaties are inapplicable between member states of the EU.²⁰⁸ As noted by the Respondent, the Komstroy Judgment of the CJEU extended this interpretation to the ECT,²⁰⁹ and Article 26 of the ECT “has therefore been superseded by the applicable provisions of the TEU and TFEU.”²¹⁰

195. The Respondent also invokes, in support of its position, Article 30 of the VCLT, which deals with the “Application of successive treaties relating to the same subject matter,” and Article 41 of the VCLT, which deals with “Agreements to modify multilateral treaties between certain of the parties only,” as well as the subsequent developments of EU law and policy since the conclusion of the ECT.

²⁰⁷ Resp. Mem., para. 120. ↩
²⁰⁸ Resp. Mem., para. 4. ↩
²⁰⁹ Komstroy Judgment, C-0398 / RL-0378, para. 66. ↩
²¹⁰ Resp. Mem., para. 125. ↩

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196. The Tribunal will deal with each of these arguments in turn.

a. The Interpretation of Article 26 of the ECT in accordance with the VCLT

197. The relevant provision of the ECT for the purposes of the Tribunal's jurisdiction ratione voluntatis is Article 26, which provides, in relevant part:

(1) Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably.

(2) If such disputes cannot be settled according to the provisions of paragraph (1) within a period of three months from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution:

[...]

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

(3) (a) Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of this Article.

(b)(i) The Contracting Parties listed in Annex ID do not give such unconditional consent where the Investor has previously submitted the dispute under subparagraph (2)(a) or (b).

(ii) For the sake of transparency, each Contracting Party that is listed in Annex ID shall provide a written statement of its policies, practices and conditions in this regard to the Secretariat no later than the date of the deposit of its instrument of ratification, acceptance or approval in accordance with Article 39 or the deposit of its instrument of accession in accordance with Article 41.

(c) A Contracting Party listed in Annex IA does not give such unconditional consent with respect to a dispute arising under the last sentence of Article 10(1).

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(4) In the event that an Investor chooses to submit the dispute for resolution under subparagraph (2)(c), the Investor shall further provide its consent in writing for the dispute to be submitted to:

(a)(i) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States opened for signature at Washington, 18 March 1965 (hereinafter referred to as the “ICSID Convention”), if the Contracting Party of the Investor and the Contracting Party party to the dispute are both parties to the ICSID Convention;

[...]

(5) (a) The consent given in paragraph (3) together with the written consent of the Investor given pursuant to paragraph (4) shall be considered to satisfy the requirement for:

(i) written consent of the parties to a dispute for purposes of Chapter II of the ICSID Convention and for purposes of the Additional Facility Rules[.]²¹¹

198. There is no dispute between the Parties that the relevant rules of treaty interpretation are codified in Articles 31 and 32 the VCLT. Article 31 (“General rule of interpretation") provides:

1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) Any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b) Any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

²¹¹ ECT, CL-0001, Art. 26. ↩

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3. There shall be taken into account, together with the context:

(a) Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) Any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) Any relevant rules of international law applicable in the relations between the parties.

4. A special meaning shall be given to a term if it is established that the parties so intended.²¹²

199. Article 32 (“Supplementary means of interpretation”) further provides:

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) Leaves the meaning ambiguous or obscure; or

(b) Leads to a result which is manifestly absurd or unreasonable.²¹³

200. The Claimants argue that Article 26 of the ECT contains Germany's “unconditional" consent to arbitrate investment disputes with investors that are nationals of any other ECT Contracting Party, including Austria. According to the Claimants, “[t]he plain wording of Article 26 ECT leaves no doubt as to its meaning or scope: Germany gave its ‘unconditional consent' to arbitrate investment disputes with any investor from any ECT Contracting Parties, including EU Member States and Austria.”²¹⁴ The Claimants note that

²¹² VCLT, CL-0050, Art. 31. ↩
²¹³ VCLT, CL-0050, Art. 32. ↩
²¹⁴ Cl. Reply, para. 625. ↩

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this position has been consistently upheld by ECT tribunals that have considered the issue.²¹⁵

201. The Respondent invokes Articles 31 and 32 of the VCLT, arguing that, according to the ordinary meaning of the terms of the ECT, the EU and its Member States must be considered as a single territory under the ECT, that is, the territory of the EU.²¹⁶ The Respondent refers, specifically, to Article 1(2) of the ECT, which defines the term “Contracting Party” to the ECT as “a State or Regional Economic Integration Organization which has consented to be bound by the ECT and for which that treaty is in force," and Article 1(3) of the ECT, which defines “Regional Economic Integration Organization” (“REIO”) as “an organization constituted by states to which they have transferred competence over certain matters a number of which are governed by the ECT, including the authority to take decisions binding on them in respect of those matters.” The Respondent further refers to Article 1(10) of the ECT which provides that “[w]ith respect to a Regional Economic Integration Organization which is a Contracting Party, Area means the Areas of the member states of such Organization, under the provisions contained in the agreement establishing that Organization.” According to the Respondent, “[t]herefore, an investment by an investor from an EU Member State in another EU Member State is not an investment in the area of another Contracting Party, but in the area of the same Contracting Party."²¹⁷ It follows that “[t]he EU being a single investment area for its Member States, the offer for arbitration made by the EU is hence only made to investors from Contracting Parties that are not EU Member States."²¹⁸ The Respondent submits that, since the EU is a Contracting Party to the ECT, an investor of an EU Member State that invests in another Member States invests “in one and the same ‘Contracting Party.” Accordingly, in the absence of a conflict rule in the ECT providing that in such event the single EU Member States prevail as “Contracting Parties,” “[d]ue to the lack of

²¹⁵ Cl. Mem., para. 404. ↩
²¹⁶ Resp. Mem., para. 81, 86. ↩
²¹⁷ Resp. Mem., para. 95. See ECT, CL-0001, Arts. 1(2)-(3), and 1(10). ↩
²¹⁸ Resp. Mem., para. 95. ↩

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a clear conflict rule, Art. 1(2), 1(3) 26(1) ECT are ‘ambiguous or obscure' in the sense of Art. 32(a) VCLT and there is room for interpretation."²¹⁹

202. The Respondent further contends that the same conclusion is reached when the ECT is interpreted in its context and in light of its object and purpose, including Article 26(6) of the ECT, which provides that “[a] tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law.” According to the Respondent, the applicable rules and principles of international law in this context “include EU law which constitutes part of international law and therefore, inter alia, include the TFEU and TEU as international treaties.”²²⁰

203. The Claimants submit, in response, that EU law does not form part of the law applicable to determine the Tribunal's jurisdiction under the ECT. The jurisdiction of the Tribunal “is governed exclusively by its constitutive instrument, the ECT.” The Claimants argue that the relevant provisions of the ECT ought to be interpreted in accordance with the rules of treaty interpretation in Articles 31 and 32 of the VCLT.²²¹

204. The Parties thus agree that the relevant provisions of the ECT should be interpreted in accordance with the rules of treaty interpretation in the VCLT. However, they reach conflicting positions when applying those rules.

205. The Tribunal is not persuaded by the Respondent's interpretation of Article 26. The wording of Article 26(3) of the ECT is not ambiguous or obscure, and it makes no exception for, or mention of, rules specifically applicable to disputes between an EU Member State and a national of another EU Member State; on the contrary, it provides that “[s]ubject only to subparagraphs (b) and (c), each Contracting Party” – that is, including Austria and Germany – “gives its unconditional consent to the submission of a dispute to international arbitration in accordance with [Article 26].” As noted above, it is undisputed between the Parties that the two exceptions referred to in subparagraphs (b) and (c) of Article 26(3) of the ECT are not applicable in this case. The ordinary meaning of the term

²¹⁹ Resp. Rej., para. 27. ↩
²²⁰ Resp. Mem., para. 107. ↩
²²¹ Cl. Mem., para. 406. ↩

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“unconditional” is that there are no other conditions attaching to a Contracting Party's consent to international arbitration than those mentioned in subparagraphs (b) and (c) of Article 26(3).

206. Nor is there anything in the context of Article 26 or in the object and purpose of the ECT that would suggest otherwise. While the Respondent is correct in stating that an investment made by an investor of an EU Member State in another EU Member State is an investment made “in the area of the same Contracting Party” (because the EU is also a Contracting Party to the ECT), this does not mean that such investments are not covered by the ECT; it simply means that they are investments made in the Area of both an EU Member State and the EU. This is reflected in the language of Article 1(10) of the ECT, which defines “Area" with respect to a state that is a Contracting Party as “the territory under its sovereignty,” and with respect to a REIO, as “the Areas of the member states of such Organization.” In the absence of any indication in the ECT that one of the “Areas" should be given priority over the other, Article 26 cannot be interpreted so as to exclude its applicability to Contracting Parties that are EU Member States.

207. The Parties also disagree on whether Article 26(6) of the ECT, which deals with the applicable law, applies to the merits of the dispute (which is the Claimants' position) or whether it also governs issues of jurisdiction (which is the Respondent's position). Article 26 does not address the issue specifically, although the language and the context of the provision, including the language of Article 26(1) of the ECT (which provides that “[d]isputes between a Contracting Party and an Investor of another Contracting Party [...], which concern an alleged breach of an obligation of the former under Part III [...]"),²²² suggest that the provision governs the law applicable to the merits.²²³

²²² Part III of the ECT deals with "Investment Promotion and Protection." ↩
²²³ The Tribunal notes that there is no consistent arbitral jurisprudence on this issue; thus, the Electrabel tribunal specifically held that “under Article 26(6) ECT, these rules [i.e. the rules of international law agreed by the parties under Article 42(1) of the ICSID Convention] comprise the ECT and principles of international law” (Electrabel v. Hungary), CL-0042 / RL-0262, para. 4.192) whereas the Vattenfall tribunal held that “Article 26(6) ECT [...] applies only to the merits of a dispute between the Parties. It does not apply to issues or questions relating to the Tribunal's jurisdiction" (Vattenfall v. Germany, Decision on Achmea, CL-0032, para. 121). ↩

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208. However, the Tribunal need not take a final view on the issue since the Tribunal's jurisdiction ratione voluntatis does not turn on it (as it is undisputed that the question of whether the ECT contains a consent to arbitrate is a matter of treaty interpretation and as such is governed by international law), and moreover, under Article 31(3)(c) of the VCLT, when interpreting the ECT, the Tribunal must take into account, together with the context, “any relevant rules of international law applicable in the relations between the parties.” The rules of EU law qualify as such “relevant rules of international law applicable in the relations between” the Parties to this case, insofar as they are consistent with the ECT, interpreted in accordance with the rules of treaty interpretation under the VCLT, as the Tribunal's jurisdiction (if any) is founded on the ECT. Moreover, there are other provisions in the VCLT that deal specifically with the application of successive treaties relating to the same subject matter, as well as amendment of multilateral treaties between certain of the parties only, which the Respondent also invokes in support of its position. The Tribunal therefore next turns to these issues.

b. The applicability of VCLT rules regarding the application of successive treaties and amendment of multilateral treaties between certain of the parties only

209. The Respondent contends that the Tribunal lacks jurisdiction ratione voluntatis in light of recent developments under EU law. Specifically, as summarized above, the Respondent relies on the Lisbon Treaty, including Declaration 17 annexed to the Treaty, which in the Respondent's view provides the applicable conflict rule, and the Achmea and Komstroy Judgments, to argue that Article 26 of the ECT has been “superseded by the applicable provisions of the TEU and TFEU.”²²⁴ According to the Respondent, the applicable provisions include Article 344 of the TFEU and Article 19(1), second sentence of the TEU, which establish “an exclusive obligation of EU Member States to submit disputes to the judicial system of the EU whenever EU law is interpreted or applied."²²⁵ In support of its position under the ECT, the Respondent refers to Articles 30(2), 41(1)(b) and 30(4)(a) of

²²⁴ Resp. Mem., para. 125. ↩
²²⁵ Resp. Mem., para. 126. Article 344 of the TFEU provides: “Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein." Article 19(1), second sentence of the TEU provides that “Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law." ↩

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the VCLT, without however elaborating on its position regarding the application of Articles 30 or 41 of the VCLT.²²⁶

210. The Claimants submit that under international law, the interpretation of conflicting treaty provisions is governed by Article 30 of the VCLT (“Application of successive treaties relating to the same subject matter"). According to the Claimants, the application of Article 30 is subject to “two distinct and cumulative requirements, ie (i) the relevant treaties must relate to the ‘same subject-matter' and (ii) such treaties must be in conflict with one another.”²²⁷ The Claimants argue that these requirements are not met since the TFEU and the TEU do not deal with the same subject matter as the ECT and there is no conflict between them, even in light of the Lisbon Treaty.²²⁸ In any event, according to the Claimants, “Article 16 ECT directs the interpreter to apply whichever treaty provisions grant a more extensive treaty protection to investors and their investments.”²²⁹

211. Article 30 of the VCLT provides, in relevant part:

1. Subject to Article 103 of the Charter of the United Nations, the rights and obligations of States to successive treaties relating to the same subject matter shall be determined in accordance with the following paragraphs.

2. When a treaty specifies that it is subject to, or that it is not to be considered incompatible with, an earlier or later treaty, the provisions of that other treaty prevail.

3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.

4. When the parties to the later treaty do not include all the parties to the earlier one:

²²⁶ It is not clear whether the Respondent continues to rely on its position as set out in its Rule 41(5) Application (where it did set out its position under these provisions). ↩
²²⁷ Cl. Mem., para. 407. ↩
²²⁸ The Claimants rely on Novenergia II v. Spain, CL-0035, paras. 438-442; and Vattenfall v. Germany, Decision on Achmea, CL-0032, para. 214. ↩
²²⁹ Cl. Mem., para. 407. ↩

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(a) As between States Parties to both treaties the same rule applies as in paragraph 3[.]²³⁰

212. As noted above, the Respondent relies on Articles 30(2) and 30(4)(a) of the VCLT in support of its position that the ECT has been superseded by subsequent EU treaties, including the TFEU and the TEU. Although the Respondent does not elaborate on its position in its submissions on jurisdiction, it appears that the Respondent's case is that the ECT, on the one hand, and the TFEU and TEU, on the other, relate to “the same subject matter,” and that accordingly the ECT applies to the parties of the ECT that are also parties to the TFEU and the TEU only to the extent that the provisions of the ECT are compatible with the TFEU and the TEU.²³¹

213. The Tribunal is unable to agree that the ECT, on the one hand, the TFEU and the TEU, on the other, relate to “the same subject matter.” While the Respondent argues that “EU law comprehensively governs and protects such [i.e. foreign direct] investments, it does not cite to any specific provisions of the EU Treaties in support of its position; indeed, it acknowledges elsewhere that “the EU provisions on internal market technically do not address promotion and protection of investments” (while stressing that “they share the same efforts of integration").²³² There is therefore, in substance, no dispute between the Parties that, while the EU Treaties contain provisions regarding free movement of capital, unlike the ECT, they do not contain any specific provisions regarding the promotion and protection of investments or the settlement of investment disputes. The Tribunal therefore finds that Article 30 of the VCLT does not apply in the circumstances of this case and does not support the Respondent's objection to jurisdiction ratione voluntatis.

214. The Respondent also relies on Article 41(1)(b) of the VCLT in support of its position that “EU Member States effectively modified the ECT by adhering to the Lisbon Treaty."²³³ Article 41 (“Agreements to modify multilateral treaties between certain of the parties only") provides, in relevant part:

²³⁰ VCLT, CL-0050, Art. 30. ↩
²³¹ This is the position taken by the Respondent in its Rule 41(5) Application, paras. 153 et seq. ↩
²³² Resp. Rule 41(5) Application, para. 162. ↩
²³³ Resp. Rule 41(5) Application, para. 163. ↩

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1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:

[...]

(b) the modification in question is not prohibited by the treaty and

(i) does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;

(ii) does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.

2. Unless a case falling under paragraph ((a) of the treaty otherwise provides, the parties in question shall notify the other parties of their intention to conclude the agreement and of the modification to the treaty for which it provides.²³⁴

215. The Tribunal is unable to accept the Respondent's argument. The Lisbon Treaty makes no reference to the ECT, and the EU member states never notified the Contracting Parties to the ECT of their intention to conclude a treaty – the Lisbon Treaty – that would modify the ECT, as required by Article 41(2) of the VCLT. Nor is it clear which precise provisions of the ECT would have been modified by the Lisbon Treaty – apart, apparently, from Article 26 of the ECT. Finally, even assuming the ECT and the Lisbon Treaty related to “the same subject matter,” which in the Tribunal's view is not the case, Article 16 of the ECT (“Relation to other agreements”) specifically precludes a subsequent agreement between the Contracting Parties to the ECT that would derogate from any provision of Parts III or V of the ECT or from any right to dispute resolution under the ECT “where any such provision is more favourable to the Investor or Investment:"

Where two or more Contracting Parties have entered into a prior international agreement, or enter into a subsequent international agreement, whose terms in either case concern the subject matter of Part III or V of this Treaty,

²³⁴ VCLT, CL-0050, Art. 41. ↩

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(1) nothing in Part III or V of this Treaty shall be construed to
derogate from any provision of such terms of the other
agreement or from any right to dispute resolution with
respect thereto under that agreement; and

(2) 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.²³⁵

216. In the Tribunal's view, having the option of being able to choose between the fora listed in
Article 26(2) and (4) of the ECT is “more favourable” to the Investor and the Investment
than having only one forum available, i.e. the competent domestic court.

217. The Tribunal takes note that the CJEU has taken the position that Article 26 of the ECT is
in conflict with the EU Treaties as a matter of EU law. In the Komstroy Judgment, the
CJEU determined that “Article 26(2)(c) ECT must be interpreted as not being applicable
to disputes between a Member State and an investor of another Member State concerning
an investment made by the latter in the first Member State.”²³⁶ Although the CJEU's ruling
is based on the finding that under Article 26(2)(c) of the ECT an investor of an EU Member
State cannot submit a dispute with another EU Member State arising under Part III of the
ECT to international arbitration (rather than a finding that an EU Member State cannot
have given an unconditional consent to arbitrate in Article 26(3) of the ECT), the end result
is the same – EU law does not allow arbitration of intra-EU investment disputes under the
ECT, thus giving effect to the transfer of competence over foreign investment within the
EU from the Member States to the EU.

218. In light of the above, the Tribunal accepts that, while there is, under rules of international
law governing treaty interpretation, no conflict between Article 26(3) of the ECT and EU
Treaties, there is such a conflict as a matter of EU law. This conflict cannot be eliminated
by way of systemic or harmonious interpretation in accordance with Article 31(3)(c) of the

²³⁵ ECT, CL-0001, Art. 16. ↩
²³⁶ Komstroy Judgment, C-0398 / RL-0378, para. 66. Article 26(2)(c) creates a right for an investor to submit a dispute ↩
arising under Part III of the ECT to international arbitration or conciliation.

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VCLT since international law is not the source of the conflict; the conflict originates from
the interpretation of EU law. The Tribunal is mindful that treaty conflicts are undesirable
from a legal policy perspective, however, they cannot always be fully eliminated and may
also arise as between other legal systems, including between international law and
municipal law. Moreover, the elimination of treaty conflicts is a matter for makers of
international policy, not for an international tribunal established under the ICSID
Convention and the ECT, which must apply these treaties, as properly interpreted in light
of the applicable rules of treaty interpretation, even if the application of such rules may not
fully eliminate a treaty conflict.²³⁷

c. Conclusion

219. In conclusion, the Tribunal rejects the Respondent's objection to the Tribunal's jurisdiction
ratione voluntatis.

B. JURISDICTIONAL OBJECTION RATIONE MATERIAE

(1) The Parties' Positions

a. The Respondent's Position

220. The Respondent argues that the Claimants have not made any investments in Germany
within the meaning of the ECT or the ICSID Convention and therefore the Tribunal lacks
jurisdiction ratione materiae.

221. The Respondent raises five arguments in support of its position: (i) the Tribunal must
consider both Article 1(6) of the ECT as well as Article 25(1) of the ICSID Convention
when deciding whether there was a qualifying investment on behalf of the Claimants;²³⁸
(ii) Strabag's activities do not qualify as an investment under the ECT; (iii) Strabag's
activities do not qualify as an investment under Article 25(1) of the ICSID Convention;
(iv) Strabag's participation in NOH 1 and NOH 2 does not constitute an investment under

²³⁷ The Respondent also argues that the Tribunal lacks jurisdiction under private law, however, as the Claimants ↩
themselves note, they have not argued that the Tribunal's jurisdiction may be founded on private law: see Cl. Reply,
fn. 1478.
²³⁸ Resp. C-Mem., para. 158. ↩

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Article 25(1) of the ICSID Convention; and (v) NOH 1 and NOH 2's operations do not
constitute an investment under Article 25(1) of the ICSID Convention.

222. In support of its position, the Respondent contends that, although Article 25(1) of the
ICSID Convention does not contain a definition of “investment,” ICSID tribunals have
developed a test, which has come be known as the Salini test, which defines the
characteristics of an “investment:” (i) the project in question must have a certain duration;
(ii) there must be an element of risk; (iii) there must be a substantial commitment; and (iv)
the project must constitute a significant contribution to the host State's development.²³⁹

223. In summary, the Respondent claims that “none of the Claimants' activities pass the Salini
test” and the Tribunal does not have ratione materiae jurisdiction over the Claimants'
claims.²⁴⁰

(i) The Tribunal must consider Article 1(6) of the ECT and
Article 25(1) of the ICSID Convention together when
determining whether the Claimants made an investment

224. According to the Respondent, the Tribunal must consider both Article 25(1) of the ICSID
Convention and Article 1(6) of the ECT when determining whether the Claimants have
made an “investment.” According to Article 25(1) of the ICSID Convention, the
jurisdiction of an arbitral tribunal established under the ICSID Convention depends on the
existence of a dispute “arising directly out of an investment.” The Respondent argues that
since the ICSID Convention does not define the term “investment,” the Tribunal should
consider, in general terms, Article 1(6) of the ECT to determine its meaning.²⁴¹ According
to the Respondent, Article 25(1) of the ICSID Convention works as a controlling and
corrective element to the definition of an investment in Article 1(6) of the ECT and thus,

²³⁹ Resp. Mem., paras. 186-188, referring to Salini Construttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ↩
ICSID Case No. ARB/00/4, Decision on Jurisdiction, 23 July 2001 (“Salini v. Morocco”), CL-0090 / RL-0054.
²⁴⁰ Resp. Mem., para. 264. ↩
²⁴¹ Resp. Mem., para. 162. ↩

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for instance, ordinary commercial transactions were never meant to be covered by the
ICSID Convention.²⁴²

(ii) Strabag's activities do not qualify as an investment under the
ECT

225. The Respondent claims that Strabag's activities, in particular the development of the
Gravity Foundation Technology, do not qualify as an investment under Articles 1(4) to
1(6) of the ECT.

226. The Respondent points out that, under Articles 1(4) to 1(6) of the ECT, “an investment
activity must be connected to an economic activity concerning energy within Annexes EM I
and EM II to the ECT.” However, “these Annexes do not mention offshore wind energy as
energy materials or products.”²⁴³ While the Respondent acknowledges that according to
Understanding 2 to Article 1(5) of the ECT “construction and operation of power
generation facilities, including those powered by wind and other renewable energy
sources," shall be considered an “economic activity in the energy sector" within the
meaning of Article 1(5) of the ECT, it argues that “research and development of technology
that only potentially might be used in power generation facilities does not qualify as
economic activity in the energy sector.”²⁴⁴ According to the Respondent, “[d]eveloping a
new technology without knowing whether it could ever be used [...] is preparatory and
guess work, pre-investment work at most." Accordingly, in the Respondent's view,
research and development are not covered by the definition of “Investment” in Article 1(6)
of the ECT, read in conjunction with Articles 1(4) and 1(5) of the ECT.²⁴⁵

227. The Respondent argues that the Tribunal is bound by the CJEU's findings in the Komstroy
Judgment regarding the definition of “Investment” in Article 1(6) of the ECT.²⁴⁶ According
to the Respondent, this is the case because in inter se relations between two EU Member

²⁴² Resp. Mem., paras. 164-165; C. Schreuer, The ICSID Convention: A Commentary (2009) (excerpt), RL-0048, ↩
p. 117; R. Dolzer and C. Schreuer, Principles of International Investment Law (2012), RL-0049, pp. 245 et seq.
²⁴³ Resp. Mem., para. 174. ↩
²⁴⁴ Resp. Mem., paras. 175-176. ↩
²⁴⁵ Resp. Mem., para. 176. ↩
²⁴⁶ Resp. Rej., para. 151; Komstroy Judgment, C-0398 / RL-0378, paras. 23, 49. ↩

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States, the ECT forms part of EU law.²⁴⁷ In the Komstroy Judgment, the CJEU specifically
found that the definition of “Investment” in Article 1(6) of the ECT “includes two
cumulative conditions:” (i) the investment must concern an asset of a type owned or
controlled directly or indirectly by an investor and (ii) the asset must include at least one
of the elements mentioned in points (a) to (f) of that provision.²⁴⁸ In the CJEU's view, in
order to qualify as an “Investment” under the ECT, the asset must also be an “investment
associated with an Economic Activity in the Energy Sector” in accordance with
Article 1(6), third sub-paragraph, of the ECT.²⁴⁹

228. The Respondent notes that Strabag only held shares in companies set up for the purpose of
developing the GFT. According to the Respondent, Strabag's shareholding in these
companies does not constitute a “company or business enterprise [...] associated with an
Economic Activity in the Energy Sector" pursuant to Article 1(6)(b) of the ECT.²⁵⁰ The
mere existence of a company is not enough to qualify as an “Investment” within the
meaning of Article 1(4) to (6) of the ECT or even to prove a contribution of money or
assets.²⁵¹ Rather, it is the activities developed by companies that determine whether a
qualifying investment has been made.²⁵²

229. The Respondent submits that Articles 1(4) to 1(6) of the ECT requires that a company must
develop an economic activity in the energy sector. According to the Respondent, the only
real activity that Strabag has been engaged in is the development of the GFT, which is a
research and development activity only; Strabag did not construct or operate any power
generation facilities.²⁵³ A research and development activity is an activity with an open-

²⁴⁷ Resp. Rej., para. 152; Komstroy Judgment, C-0398 / RL-0378, paras. 23, 49. ↩
²⁴⁸ Resp. Rej., para. 153; Komstroy Judgment, C-0398 / RL-0378, para. 69. ↩
²⁴⁹ Resp. Rej., para. 154; Komstroy Judgment, C-0398 / RL-0378, para. 67. ↩
²⁵⁰ Resp. First PHB, para. 111; Resp. Rej., paras. 156-157; Resp. Mem., para. 172. ↩
²⁵¹ Resp. Mem., paras. 177-179; Resp. First PHB, para. 111; Quiborax SA, Non Metallic Minerals SA and Allan Fosk ↩
Kaplun v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012
(“Quiborax v. Bolivia”), RL-0052, para. 232.
²⁵² Resp. Mem., para. 180. ↩
²⁵³ Resp. Mem., paras. 181-182; Cl. Mem., para. 428. ↩

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ended outcome and does not qualify as an “Investment” under Articles 1(4) to 1(6) of the
ECT.²⁵⁴

(iii) Strabag's activities do not qualify as an investment under
Article 25(1) of the ICSID Convention

(a) Strabag's development of the GFT does not qualify as an investment under
Article 25(1) of the ICSID Convention

230. The Respondent submits that the development of the GFT does not qualify as an investment
under Article 25(1) of the ICSID Convention. In the Respondent's view, the limits of what
constitutes an “investment” under Article 25(1) of the ICSID Convention “worthy of
protection” under the ICSID regime have been developed by ICSID tribunals and have
come to be known as the Salini test.²⁵⁵ This test consists of four elements: (i) the project in
question must have a certain duration; (ii) there must be an element of risk; (iii) there must
be a substantial commitment; and (iv) the project must constitute a significant contribution
to the host State's development.²⁵⁶

231. The Respondent contends that Strabag's activities fail to meet the Salini criteria because
the development of the GFT does not involve any contribution to the economic
development of the Respondent as the host State.²⁵⁷ In support of its position, the
Respondent makes five arguments: (i) Strabag's specific activities did not contribute to the
economic development of the Respondent as a host State; (ii) Strabag's activities did not
contribute to the Respondent's economic development on the basis of a relationship
between the Respondent and Strabag; (iii) Strabag's activities did not contribute to the
Respondent's economic development on the basis of official statements; (iv) Strabag's
activities did not de facto contribute to the Respondent's economic development; and

²⁵⁴ Resp. Mem., para. 182. ↩
²⁵⁵ Resp. Mem., para. 186; Salini v. Morocco, CL-0090 / RL-0054. ↩
²⁵⁶ Resp. Mem., para. 188; Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case No. ARB/03/11, ↩
Award, RL-0050, para. 53; Ceskoslovenska Obchodni Banka, A.S. v. Slovak Republic, ICSID Case No. ARB/97/4,
Decision on Jurisdiction, 24 May 1999, RL-0053.
²⁵⁷ Resp. Mem., para. 187; Resp. First PHB, para. 12 (“when assessing a possible investment, the existence of a ↩
contribution was a true jurisdictional requirement”); Nova Scotia Power Incorporated (Canada) v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB(AF)/11/1, Award, 30 April 2014, RL-0412, para. 84.

[Page 75]

(v) Strabag's activities did not form an integral part of the Claimants' Offshore Wind
Projects.²⁵⁸

232. While every economic activity will make some economic contribution to the host State,
the Respondent argues that not every activity in the territory of a host State can be
considered an “investment.”²⁵⁹ In order to qualify as an investment, the activity in question
must have some positive impact on the host State's economic development; consequently,
setting up a business without contributing to the economic development of the host State
does not qualify as an investment.²⁶⁰

233. The Respondent argues that the States that participated in the drafting of the ICSID
Convention only agreed to investment protection “in consideration of economic
development;" they did not agree to protection of every business set up in their
territories.²⁶¹ The Respondent argues that ICSID case law reflects the proposition that “an
agreement or consent of the host government to receive or admit the investment in question
is required in order to find in favor of a contribution to the host [S]tate."²⁶² According to
the Respondent, this implies that only when the host State “agrees to consider the activities
as investment” and “makes some kind of legally binding and dependable promise in this
regard," can the host State be held responsible.²⁶³

234. The Respondent alleges that, where an investor has only undertaken “preparatory activities
and expenditures without a clear commitment on the part of the host State to consider these
operations as an investment, there is no contribution to the economic development of the

²⁵⁸ Resp. Mem., paras. 187-190. ↩
²⁵⁹ Resp. Mem., para. 191. ↩
²⁶⁰ Resp. Mem., paras. 191, 193; C. Schreuer, The ICSID Convention: A Commentary (2009) (excerpt), RL-0055, ↩
pp. 128 et seq.; Malaysian Historical Salvors SDN BHD v. Government of Malaysia, ICSID Case No. ARB 05/10,
Award, 17 May 2007 (“Malaysian Historical Salvors v. Malaysia"), RL-0056, para. 125; Patrick Mitchell v.
Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision on Annulment, 1 November 2006, RL-0051,
para. 29 ("It is thus quite natural that the parameter of contributing to the economic development of the host State has
always been taken into account, explicitly or implicitly, by ICSID arbitration tribunals in the context of their reasoning
in applying the Convention, and quite independently from any provisions of agreements between parties or the relevant
bilateral treaty").
²⁶¹ Resp. Mem., para. 193. ↩
²⁶² Resp. Mem., para. 198. ↩
²⁶³ Resp. Mem., para. 198. ↩

[Page 76]

host [S]tate."²⁶⁴ In the present case, the Respondent never committed to consider Strabag's
financial expenditures as investments and, as a result, Strabag's activities are not protected
investments.²⁶⁵

235. The Respondent claims that Strabag made no contribution to the Respondent's economic
development “because there was no consent on behalf of Respondent to consider Strabag
activities as investment."²⁶⁶ In support of its position, the Respondent contends that:
(i) there was no legally binding endorsement or relationship between the Respondent and
Strabag;²⁶⁷ (ii) there was no agreement or consent on the part of the Respondent to receive
or admit Strabag's activities as an investment;²⁶⁸ (iii) the Respondent was not involved in
the development of the project in any way;²⁶⁹ (iv) the Respondent did not ask Strabag to
develop a new technology;²⁷⁰ (v) there was no auction for the best technology and Strabag
did not win a bid;²⁷¹ (vi) Strabag gave up the project of its own accord without any coercion
or other prompts by the Respondent;²⁷² and (vii) the Respondent and Strabag never
negotiated nor signed a contract relating to the development of the GFT.²⁷³

236. The Respondent argues that expenditures made by an investor of its own accord, without
any promise or consent on the part of the host State, are not “investments” within the
meaning of Article 25(1) of the ICSID Convention.²⁷⁴ The host State can assume
responsibility for such costs only with its consent, and in this case the Respondent never
gave such consent. In this context, it does not matter that the GFT might have been of

²⁶⁴ Resp. Mem., para. 206. ↩
²⁶⁵ Resp. Mem., para. 207. ↩
²⁶⁶ Resp. Mem., para. 209. ↩
²⁶⁷ Resp. Mem., para. 209. ↩
²⁶⁸ Resp. Mem., para. 209. ↩
²⁶⁹ Resp. Mem., para. 210. ↩
²⁷⁰ Resp. Mem., para. 211. ↩
²⁷¹ Resp. Mem., para. 211. ↩
²⁷² Resp. Mem., para. 211. ↩
²⁷³ Resp. Mem., paras. 209-212. ↩
²⁷⁴ Resp. Mem., paras. 209-213. ↩

[Page 77]

relevance to the Respondent's energy sector as it did not make a significant contribution to
the Respondent's economic development.²⁷⁵

237. The Respondent alleges that the “positive remarks” made by German politicians and
officials in relation to offshore wind energy cannot be considered as inviting a contribution
to the Respondent's economic development because they were made in public “without the
will on the part of the Respondent to be bound.”²⁷⁶ The Respondent acknowledges that
there was general support for offshore wind energy but that such statements “were not calls
to invest.”²⁷⁷ In any event, any such calls were made only after Strabag had already started
the development of the GFT and thus Strabag could not have been relied upon them when
making its investment.²⁷⁸

238. The Respondent claims that Strabag did not de facto contribute to the Respondent's
economy in any significant way. Strabag's research and development activities ended long
before a viable technology had been developed; the GFT was never useable and it was
never used by the Respondent or in the Respondent's territory.²⁷⁹ According to the
Respondent, Strabag's research and development efforts never reached a sufficiently
advanced stage for the GFT to be used in the construction and operation of any offshore
wind farm.²⁸⁰ Strabag's efforts did not involve anything more than “the registration of a
few intellectual property rights which expired or were abandoned."²⁸¹

239. According to the Respondent, Strabag did not create any permanent value and its activities
were not instrumental in developing Respondent's wind energy sector.²⁸² Rather, Strabag's

²⁷⁵ Resp. Mem., para. 217. ↩
²⁷⁶ Resp. Mem., para. 219. ↩
²⁷⁷ Resp. Mem., para. 221. ↩
²⁷⁸ Resp. Mem., para. 221. ↩
²⁷⁹ Resp. Mem., para. 223. ↩
²⁸⁰ Resp. First PHB, para. 112. ↩
²⁸¹ Resp. First PHB, para. 112; Resp. Rej., paras. 160, 975, 1561. ↩
²⁸² Resp. Mem., para. 224. ↩

[Page 78]

activities were normal commercial activities with no positive impact on the Respondent's
development.²⁸³

240. The Respondent asserts that Strabag's activities do not constitute an investment because
they did not form an integral part of an overall operation that could qualify as an
investment. The OWFs held by NOH 1 and NOH 2 did not require the development of a
new technology and the development of the GFT was not connected to the OWFs at all.²⁸⁴
Nor was the development of the GFT vital to the Claimants' investments in the OWFs;
indeed, the development of the GFT started before NOH 1 and NOH 2 even existed.²⁸⁵
Strabag's activities therefore do not qualify as investments within the meaning of either
Article 1(4) to (6) of the ECT or Article 25(1) of the ICSID Convention.

(b) Strabag's participation in NOH 1 and NOH 2 does not qualify as an
investment under Article 25(1) of the ICSID Convention

241. The Respondent argues that Strabag's participation in NOH 1 and NOH 2 does not
constitute an investment under the ICSID Convention as it fails to meet the Salini test, in
particular the requirement of significant contribution to the Respondent's economic
development.²⁸⁶

242. The Respondent maintains that Strabag did not establish NOH 1 and NOH 2 or the Project
Companies that were in charge of the development of the offshore wind projects. The
Project Companies had already been set up by the Original Developers before their
acquisition by Strabag, and before Strabag entered into a joint venture with the Original
Developers in 2010.²⁸⁷ In May 2011, the Original Developers restructured their ownership
of the Project Companies by merging the German company Northern Energy Projekt
GmbH, which was the owner of the Project Companies, into an Austrian incorporated

²⁸³ Resp. Mem., para. 226; Resp. C-Mem., para. 1060; Resp. First PHB, para. 13; Cl. Rej., paras. 210, 240, 1082; ↩
Raymond Charles Eyre and Montrose Developments (Private) Limited v. Democratic Socialist Republic of Sri Lanka,
ICSID Case No. ARB/16/25, Award, 5 March 2020, RL-0418, para. 301; William Nagel v. Czech Republic, SCC Case
No. 049/2002, Final Award, 9 September 2003, RL-0441, para. 328.
²⁸⁴ Resp. Mem., para. 228. ↩
²⁸⁵ Resp. Mem., paras. 229-230. ↩
²⁸⁶ Resp. Mem., para. 241. ↩
²⁸⁷ Resp. Mem., para. 242; Cl. Mem., para. 31. ↩

[Page 79]

company.²⁸⁸ In a further step, in November 2011, NOH 1 and NOH 2 were incorporated
in Austria, to hold all Project Companies in charge of the offshore wind projects. Since
NOH 1 and NOH 2 were set up Austria, there was no contribution to the Respondent's
economic development.²⁸⁹

243. The Respondent recalls that, on 22 December 2011, Strabag purchased 51 percent of the
shares in NOH 1,²⁹⁰ and in January 2012, Strabag purchased 51 percent of the shares in
NOH 2.²⁹¹ The purchase price in these transactions was paid to an Austrian company.²⁹²
According to the Respondent, the transfer of funds thus took place within Austria only,
without any contribution to the Respondent's economy.²⁹³

244. The Respondent also argues that Strabag's claim for damages for its participation in NOH 1
and NOH 2 should be dismissed on the basis that the Claimants explicitly excluded the
claim in the RfA, but then reintroduced it in their Memorial.²⁹⁴ According to the
Respondent, this is contrary to Article 26(1) of the ECT as the claim was not part of the
negotiations between the Parties in 2017. In the absence of any attempt to settle the claim
amicably, the Claimants' obligation to settle the dispute amicably thus arises de novo.²⁹⁵

(c) The operations of NOH 1 and NOH 2 do not qualify as an investment under
Article 25(1) of the ICSID Convention

245. The Respondent alleges that the operations of NOH 1 and NOH 2 do not constitute an
investment under the ICSID Convention because they do not pass the Salini test.
Specifically, the operations of NOH 1 and NOH 2 (i) did not have a sufficient duration; (ii)
did not meet the risk criterion; and (iii) did not contribute to the economic development of
the Respondent as the host State.²⁹⁶

²⁸⁸ Resp. Mem., para. 243. ↩
²⁸⁹ Resp. Mem., para. 244. ↩
²⁹⁰ Resp. Mem., para. 245. ↩
²⁹¹ Resp. Mem., para. 246. ↩
²⁹² Resp. Mem., para. 247. ↩
²⁹³ Resp. Mem., para. 247. ↩
²⁹⁴ Resp. Mem., paras. 234-240. ↩
²⁹⁵ Resp. Mem., para. 239. ↩
²⁹⁶ Resp. Mem., para. 249. ↩

[Page 80]

246. The Respondent contends that, in order to satisfy the durational requirement of the Salini
test, a claimant needs to invest for “at least two to five years.”²⁹⁷ The operations of NOH 1
and NOH 2 do not satisfy this criterion: NOH 1 and NOH 2 were incorporated in November
2011, and they purchased the offshore wind projects in December 2011 and January 2012,
respectively.²⁹⁸ The Respondent claims that the companies did not engage in any
substantial activities, and NOH 1 offered their projects “for sale” in April 2013, just over
one year after they were originally acquired. The first NOH 1 project, OWP Albatros, was
sold in 2014, within three years of the incorporation of the companies, and the last project
was sold in August 2016, before the five-year mark of their incorporation. According to
the Respondent, as a result of the limited duration of ownership and activity, there was no
long-term commitment and accordingly the Salini test is not met.²⁹⁹

247. The Respondent further argues that the activities of NOH 1 and NOH 2 do not meet the
risk element of the Salini test as they only incurred normal project development risks that
“did not surpass commercial risks."³⁰⁰ In addition, the Respondent contends that the
activities of NOH 1 and NOH 2 did not contribute to the economic development of the
Respondent as the host State. The Claimants also cannot rely on Germany's calls for
investments in the offshore wind energy sector since such “political remarks” are not
binding and were not specifically aimed at the Claimants.³⁰¹

248. The Respondent submits that in order to determine whether the activities of NOH 1 and
NOH 2 contributed to the Respondent's economy in a significant way, one must look at
the facts.³⁰² NOH 1 and NOH 2 “did nothing substantially with the Offshore Wind Projects
after purchasing the shares in an all Austrian-related transaction;”³⁰³ NOH 1's and

²⁹⁷ Resp. Mem., para. 250; Salini v. Morocco, CL-0090 / RL-0054, para. 54; Malaysian Historical Salvors v. ↩
Malaysia, RL-0056, para. 110; C. Schreuer, The ICSID Convention: A Commentary (2009) (excerpt), RL-0055,
p. 130.
²⁹⁸ Resp. Mem., para. 251. ↩
²⁹⁹ Resp. Mem., paras. 251-253. ↩
³⁰⁰ Resp. Mem., para. 255. ↩
³⁰¹ Resp. Mem., para. 257. ↩
³⁰² Resp. Mem., para. 258. ↩
³⁰³ Resp. Mem., para. 259. ↩

[Page 81]

NOH 2's activities “never left the stage of pre-investment;”³⁰⁴ none of the offshore wind
projects obtained the necessary approval;³⁰⁵ and within a short period of time, all of
NOH 1's projects were sold, “with the money going to an Austrian-incorporated
company."³⁰⁶ The Respondent did not benefit from the sale of these companies.

249. As a result, the Respondent argues that the activities of NOH 1 and NOH 2 remained in a
pre-investment phase and “were not different from activities by other applicants in any
other approval process.”³⁰⁷ As a result, they also did not contribute to the economic
development of the Respondent as the host State.

b. The Claimants' Position

250. The Claimants submit that the Tribunal has jurisdiction ratione materiae since the assets
owned and controlled by the Claimants in the Respondent's offshore wind energy sector
and the GFT qualify as investments under both the ECT and the ICSID Convention. The
Claimants put forward four arguments: (i) Article 1(6) of the ECT is wide in scope; (ii) the
Claimants' assets in Germany constitute an investment associated with an Economic
Activity in the Energy Sector under Article 1(6) of the ECT; (iii) Article 25(1) of the ICSID
Convention does not restrict the ECT definition of investment – and even if the Salini
criteria limited the scope of the ECT definition, the Claimants' investments would still
meet the criteria; and (iv) Strabag's subsidiary claim is admissible.

(i) Article 1(6) of the ECT is wide in scope

251. The Claimants argue that the ordinary meaning of Article 1(6) of the ECT contains a broad,
inclusive definition of “Investment” for purposes of ECT protection.³⁰⁸ The only
requirement of Article 1(6) of the ECT for an asset owned or controlled by an investor to
qualify as a protected investment is that it has to be associated with an “Economic Activity
in the Energy Sector.”³⁰⁹ The Claimants note that Article 1(5) of the ECT defines

³⁰⁴ Resp. Mem., para. 260. ↩
³⁰⁵ Resp. Mem., para. 260. ↩
³⁰⁶ Resp. Mem., para. 261. ↩
³⁰⁷ Resp. Mem., para. 262. ↩
³⁰⁸ Cl. Mem., para. 419. ↩
³⁰⁹ Cl. Mem., para. 420. ↩

[Page 82]

“Economic Activity in the Energy Sector” as an economic activity concerning various
activities that include the “construction and operation of power generation facilities,” and
accordingly “anything owned or controlled by an investor that can be freely bought and
sold" constitutes a protected investment under the ECT if it is related to one of the activities
mentioned in Article 1(5) of the ECT.³¹⁰

252. The Claimants further argue that Article 1(6) of the ECT includes an illustrative but non-
exhaustive list of categories of assets falling within the scope of protection of the ECT.³¹¹
According to the Claimants, Article 1(6) of the ECT is “extremely broad” and covers “any
asset owned or controlled by a qualifying investor having a financial value and being
associated with an economic activity in the energy sector.”³¹²

(ii) The Claimants' assets constitute an investment associated with
an Economic Activity in the Energy Sector under Article 1(6) of
the ECT

253. The Claimants submit that they directly and indirectly acquired and developed assets in
Germany in the offshore wind energy industry for the purpose of developing the Offshore
Wind Projects and researching, developing, testing and then marketing the GFT.³¹³
According to the Claimants, these assets are therefore related to economic activity in
Germany's energy sector under Article 1(6) of the ECT.³¹⁴ The Claimants' assets were the
Offshore Wind Projects at their respective points in the approval process.³¹⁵ According to
the Claimants, the Constitutional Court's finding that the procedural position of the
offshore wind projects did not qualify as property rights under German law does not impact
the ratione materiae analysis under Article 1(6) of the ECT as the ECT's definition of
investment is much broader than the domestic German law notion of property.³¹⁶

³¹⁰ Cl. Mem., para. 420. ↩
³¹¹ Cl. Reply, para. 687. ↩
³¹² Cl. Reply, para. 688. ↩
³¹³ Cl. Mem., para. 424. ↩
³¹⁴ Cl. Mem., para. 425; Cl. Reply, para. 685. ↩
³¹⁵ Cl. First PHB, para. 3. ↩
³¹⁶ Cl. First PHB, paras. 331-334. ↩

[Page 83]

(a) The Offshore Wind Projects owned by NOH 1 and NOH 2 are an investment
under Article 1(6) of the ECT

254. The Claimants argue that NOH 1's and NOH 2's direct shareholding in the Project
Companies in conjunction with the Project Companies' shareholder loans constitute
qualifying investments under Article 1(6) of the ECT.³¹⁷ Article 1(6)(b) of the ECT
expressly lists interests in companies as qualifying forms of investment, and NOH 1 and
NOH 2 have an interest in the Project Companies. The Project Companies own a bundle
of “tradeable and money-worth assets and rights.”³¹⁸ In December 2011 and January 2012,
NOH 1 and NOH 2 acquired 100 percent of shares in the individual German-incorporated
Project Companies³¹⁹ for the purpose of developing the offshore wind projects in Germany.
These assets and rights fall under Article 1(6)(a) of the ECT, under the language of “every
kind of asset" having an economic value.³²⁰

255. According to the Claimants, the Respondent's arguments must fail as the record
demonstrates that after acquisition, Strabag provided millions of Euros to the Germany-
based Project Companies.³²¹ The Claimants assert that ECT tribunals have commonly
accepted that the acquisition of already established locally-incorporated companies from
foreign nationals qualifies as a protected investment.³²²

(b) The GFT owned by Strabag is an investment under Article 1(6) of the ECT

256. The Claimants argue that in addition to Strabag's indirect stake in the Offshore Wind
Projects through its shareholding in NOH 1 and NOH 2, Strabag also established two fully
owned subsidiaries incorporated in Germany for the development of the GFT. Strabag's
direct ownership of the entire shareholding of these two companies constitutes
“Investments” under Article 1(6) of the ECT.³²³

³¹⁷ Cl. Reply, para. 690; Cl. Mem., paras. 425-426. ↩
³¹⁸ Cl. Reply, para. 691. ↩
³¹⁹ Cl. Mem., para. 425; BSH, Approval of OWP Albatros, 17 August 2011, C-0076 / R-0029; Weber WS, para. 73. ↩
³²⁰ Cl. Reply, para. 691; ECT, CL-0001, Art. 1(6). ↩
³²¹ Cl. Reply, para. 693; Hern ERI, paras. 155-157, Table 4.8; Shareholders Agreement, 19 May 2011, RH-0002, ↩
Sec. 14.
³²² Cl. Reply, para. 694. ↩
³²³ Cl. Mem., paras. 427-428. ↩

[Page 84]

257. Strabag indirectly owns and controls the bundle of assets and rights of these subsidiaries
as well as the GFT through these subsidiaries. The GFT is composed of intellectual
property rights, which are tradeable, have economic value, are associated with an economic
activity in the energy sector and are specifically enumerated in the fourth asset class under
Article 1(6)(d) of the ECT. Additionally, in connection with the development of the GFT,
Strabag set up research and development and production facilities through one of its
subsidiaries in Cuxhaven, to build and test the technology, which led to employment of a
local work force and the transfer of knowledge to Germany.³²⁴ According to the Claimants,
it is irrelevant for the Tribunal's jurisdiction that a number of these patents have expired.
The Claimants explain that throughout the lifetime of Strabag's investment in the GFT, the
composition of the bundle of assets that constitutes the investment changed, including due
to Germany's measures, but this has no bearing on whether the Claimants made an
investment.³²⁵

258. Contrary to the Respondent's argument, the technology developed by the Claimants was
not merely “preparatory and guess work” as significant work was specifically performed
to test the GFT for the Albatros Test Field.³²⁶ Rather, the Claimants enterprise spanned
several companies with dozens of employees at a facility constructed specifically for that
purpose, and the technology attracted millions of Euros in support from Germany and the
EU.³²⁷

(iii) Article 25(1) of the ICSID Convention does not restrict the
ECT definition of investment

259. The Claimants argue that the requirements for ICSID jurisdiction are met because the
dispute is of a legal nature and arises directly out of their investments.³²⁸

260. The Claimants point out that the Parties agree that the ICSID Convention does not define
the term “investment;” however, the Claimants argue that Article 25(1) of the ICSID

³²⁴ Cl. Mem., para. 428. ↩
³²⁵ Cl. Reply, para. 697. ↩
³²⁶ Cl. Reply, paras. 697, 702. ↩
³²⁷ Cl. Reply, para. 702. ↩
³²⁸ Cl. Mem., paras. 429-435; Cl. Reply, paras. 703-706. ↩

[Page 85]

Convention does not allow ICSID tribunals to replace or restrict the definition of
investment that was agreed upon by the Parties – in this case, the term “Investment” as
defined in the ECT.³²⁹ In response to the Respondent's arguments, the Claimants argue
that the Salini criteria are not jurisdictional requirements but “descriptive investment
features,"³³⁰ and that the contribution to the development of the host State is not part of the
definition of investment.³³¹

261. The Claimants argue that the Salini criteria are not “fixed or mandatory as a matter of law;"
rather, they merely provide guidance and need not be identified in each and every case.³³²
The Salini tribunal itself explained that “the various criteria are deeply intertwined and
hence cannot constitute cumulative jurisdictional requirements."³³³ The Claimants
contend, relying on case law and the changes between the first and second edition of
Prof Schreuer's Commentary on the ICSID Convention, that the Respondent is wrong to
claim that the lack of one of the Salini criteria causes an activity not to be considered an
investment under Article 25 of the ICSID Convention.³³⁴

262. The Claimants further allege that the contribution to the host State's development should
not be considered to be a requirement for a qualifying investment. Relying on arbitral
decisions, the Claimants assert that it cannot be inferred from the preamble of the ICSID
Convention that the economic development of the host State is a condition of a qualifying
investment; rather, it is a desired consequence of foreign investment.³³⁵ According to the
Claimants, it cannot be inferred from this general aim that each and every private foreign
investment must, on its own, make a significant, or even measurable, contribution to the
development of the economy of the host State.³³⁶

³²⁹ Cl. Reply, para. 705. ↩
³³⁰ Cl. Reply, paras. 710-715. ↩
³³¹ Cl. Reply, paras. 716-722. ↩
³³² Cl. Reply, paras. 710, 713. ↩
³³³ Cl. Reply, para. 714; Salini v. Morocco, CL-0090 / RL-0054, para. 52. ↩
³³⁴ Cl. Reply, para. 713, citing C. Schreuer, The ICSID Convention: A Commentary (2009) (excerpt), RL-0055, pp. 128 ↩
et seq., p. 133, para. 171.
³³⁵ Cl. Reply, paras. 717-719. ↩
³³⁶ Cl. Reply, para. 719, citing İçkale İnşaat Limited Şirketi v. Turkmenistan, ICSID Case No. ARB/10/24, Award, ↩
8 March 2016, CL-0302, para. 291.

[Page 86]

(iv) Even if the Salini criteria were to apply, the Claimants'
investments meet these criteria

263. The Claimants claim that even if the Salini criteria did apply as strict jurisdictional
requirements under Article 25(1) of the ICSID Convention, the Claimants' Offshore Wind
Projects and the GFT would satisfy these requirements.³³⁷

(a) The Offshore Wind Projects fulfill the Salini criteria

264. The Claimants argue that their interest in the fifteen Offshore Wind Projects satisfies the
Salini test because (i) the Claimants acquired NOH 1 and NOH 2 in 2011 and 2012,
respectively, for EUR 122 million and incurred development expenses; (ii) the Claimants
worked according to a business plan; (iii) the Claimants assumed risk when committing
significant resources over a long term; (iv) the Claimants expected to make profits from
marketing, constructing and operating the Offshore Wind Projects; and (v) the Claimants'
investments were made in response to Germany's call for investments in its offshore wind
energy sector.³³⁸

265. As to the duration requirement, the Claimants argue that the Tribunal should analyze the
investment's intended duration but for the Respondent's measures in order to prevent the
Respondent, and States generally, from benefiting from their own wrongdoing.³³⁹ The
projects held by NOH 1 were acquired in December 2011 and were sold between 2014 and
2016, and NOH 2's projects were acquired in January 2012. NOH 2 exercised control over
the projects until their “value [was] eroded by Germany's Adverse Measures [...] until
being completely taken away” on 1 January 2017.³⁴⁰

266. As to the risk requirement, the Claimants argue that the assumption of risk can be
considered “inherent in any long-term commercial contract.”³⁴¹ Risk is a broad concept

³³⁷ Cl. Mem., paras. 432-434; Cl. Reply, paras. 723-745. ↩
³³⁸ Cl. Mem., para. 433. ↩
³³⁹ Cl. Reply, para. 727; KT Asia Investment Group BV v. Republic of Kazakhstan, ICSID Case No. ARB/09/8, Award, ↩
17 October 2013, CL-0269 / RL-0410, para. 209.
³⁴⁰ Cl. Reply, para. 727. ↩
³⁴¹ Cl. Reply, para. 730; C. Schreuer, The ICSID Convention: A Commentary (2009) (excerpt), RL-0055, pp. 128 et ↩
seq., p. 131, para. 163; Bayindir Insaat Turizm Ticaret Ve Sanayi AS v. Islamic Republic of Pakistan, ICSID Case
No. ARB/03/29, Decision on Jurisdiction, 14 November 2005, CL-0307 / RL-0423, para. 136.

[Page 87]

that encompasses commercial, financial, market, political and sovereign risk and tribunals
have found "mere commercial risk” to satisfy the risk requirement.³⁴² The Claimants argue
that risk was present in their long-term project, which saw the Claimants spending
approximately EUR 122 million.

267. As to the requirement of contribution to the economic development of the host State, as
noted in paragraph 262 above, the Claimants maintain that this requirement is not a pre-
condition for their assets to be considered an “investment” under the ICSID Convention.³⁴³
The Claimants argue that, in any event, investments in Germany's offshore wind energy
sector and the Claimants' subsequent acquisition and further investment of resources into
this sector is a contribution to the development of Germany's offshore wind energy
sector.³⁴⁴ The Offshore Wind Projects therefore meet this criterion.

(b) The GFT fulfils the Salini criteria

268. According to the Claimants, the GFT also fulfils all of the Salini features of an investment
because (i) Strabag invested more than EUR 55 million of its own funds; (ii) Strabag
envisaged a business existing for over ten years; (iii) Strabag assumed entrepreneurial,
environmental and market risks by committing significant resources; (iv) Strabag expected
to make profits by marketing the GFT in Germany and beyond; and (v) Strabag's
investment was made in response to Germany's call to invest in its offshore wind energy
sector.³⁴⁵

269. According to the Claimants, the final outcome of an economic venture is irrelevant when
assessing its contribution to the economic development of the host State.³⁴⁶ In particular,
the Claimants argue that their investments were adversely affected by the Respondent's
measures and therefore cannot be judged by their success or lack thereof.³⁴⁷

³⁴² Cl. Reply, para. 729; Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of Albania, ICSID Case ↩
No. ARB/11/24, Award, 30 March 2015 (“Mamidoil v. Albania”), CL-0133 / RL-0272, para. 286.
³⁴³ Cl. Reply, para. 732. ↩
³⁴⁴ Cl. Reply, para. 732; Cl. Mem., para. 433(e). ↩
³⁴⁵ Cl. Mem., para. 434. ↩
³⁴⁶ Cl. Reply, para. 735; Quiborax v. Bolivia, RL-0052, para. 220. ↩
³⁴⁷ Cl. Reply, para. 736; Cl. Mem., paras. 7-12. ↩

[Page 88]

270. The Claimants note that the Respondent's argument that Germany had not officially
recognized the Claimants' investments is irrelevant.³⁴⁸ According to the Claimants, the
cases cited by the Respondent concern investment treaties that did not include protections
for pre-contractual activities and expenditures.³⁴⁹ In the case at hand, however, the
Claimants' assets are plainly included in the ECTs definition of investment and meet the
Salini criteria.³⁵⁰

(c) The Offshore Wind Projects and the GFT must be considered together as a
single economic operation

271. According to the Claimants, despite the fact that the Offshore Wind Projects and the GFT
each constitute a qualifying investment under Article 25(1) of the ICSID Convention, both
investments also constitute “one single ‘overall'operation" and must be considered
together. The Claimants argue that the rule of “general unity of an investment operation”
applies to their investments.³⁵¹ An ICSID tribunal does not need to examine each element
of the overall transaction to examine whether each transaction, standing alone, satisfies the
applicable requirements.³⁵²

272. The Claimants argue that the application of the rule of general unity of an investment
operation in this dispute leads to the result that the entire bundle of rights and assets that
formed the GFT and the Offshore Wind Projects constitutes a qualifying investment.³⁵³

(v) Strabag's subsidiary claim is admissible

273. The Claimants submit that, contrary to the Respondent's argument, Strabag's claim for
compensation based on its participation in NOH 1 and NOH 2 and, through NOH 1 and
NOH 2, in the Project Companies and the Offshore Wind Projects is admissible.³⁵⁴
According to the Claimants, Strabag's claim is subsidiary to NOH 1's and NOH 2's claims

³⁴⁸ Cl. Reply, para. 737; Resp. Mem., para. 198. ↩
³⁴⁹ Cl. Reply, paras. 738-739. ↩
³⁵⁰ Cl. Reply, para. 739. ↩
³⁵¹ Cl. Reply, paras. 742-743. ↩
³⁵² Cl. Reply, para. 744; Inmaris Perestroika Sailing Maritime Services GmbH and others v. Ukraine, ICSID Case ↩
No. ARB/08/8, Decision on Jurisdiction, 8 March 2010, CL-0309, para. 92.
³⁵³ Cl. Reply, para. 745. ↩
³⁵⁴ Cl. Reply, para. 746; Cl. Mem., para. 641(b)(i)(2). ↩

[Page 89]

and is admissible under both the ICSID Convention and the ICSID Arbitration Rules since,
under both instruments, claims are crystallized in a claimant's memorial, not in the request
for arbitration.³⁵⁵

274. Article 36 of the ICSID Convention only establishes that the request for arbitration “shall
contain information concerning the issues in dispute,”³⁵⁶ while ICSID Arbitration Rule 31
establishes that the memorial “shall contain: a statement of the relevant facts; a statement
of law; and the submissions.”³⁵⁷ The Claimants argue that the phrase “the submissions” in
ICSID Arbitration Rule 31 refers to claims and highlights that ancillary claims, if any, can
and must be raised at the latest in a claimant's reply under ICSID Arbitration Rule 40.³⁵⁸

275. According to the Claimants, the Respondent's objection under Article 26(1) of the ECT is
without merit because the Claimants included Strabag's subsidiary claim in the Claimants'
Notice of Dispute.³⁵⁹ As a result, there is no issue with the required cooling-off period
requirement in the ECT and the claim can be settled by this Tribunal.³⁶⁰

(2) The Tribunal's Analysis

276. As summarized above, the Respondent objects to the Tribunal's jurisdiction ratione
materiae, contending that the Claimants' activities qualify as investments neither under the
ICSID Convention nor under the ECT, whereas the Claimants' case is that both the
Offshore Wind Projects and the GFT qualify as investments within the meaning of
Article 25(1) of the ICSID Convention and Article 1(6) of the ECT, and indeed together
constitute “a single economic operation.”

277. It is undisputed between the Parties that, for the purposes of establishing the Tribunal's
jurisdiction over their claims, the Claimants must show that they have made a qualifying

³⁵⁵ Cl. Reply, para. 748. ↩
³⁵⁶ Cl. Reply, para. 748; ICSID Convention, CL-0279, Art. 36(2). ↩
³⁵⁷ Cl. Reply, para. 748; ICSID Convention, CL-0279, ICSID Arbitration Rules, Rule 31(3). ↩
³⁵⁸ Cl. Reply, para. 749. ICSID Arbitration Rule 40(2) states: “An incidental or additional claim shall be presented ↩
not later than in the reply and a counter-claim no later than in the counter-memorial, unless the Tribunal, upon
justification by the party presenting the ancillary claim and upon considering any objection of the other party,
authorizes the presentation of the claim at a later stage in the proceeding."
³⁵⁹ Cl. Reply, para. 750; Resp. Mem., para. 239; Notice of Dispute, C-0049, p. 2. ↩
³⁶⁰ Cl. Reply, para. 750. ↩

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investment under both the ICSID Convention and the ECT. The Tribunal will deal with
these two issues in turn, addressing first the question of whether the Claimants' activities
qualify as an Investment” under the ECT.

a. Whether the Claimants have shown that they have made an “Investment"
under the ECT

278. The term “Investment” is defined, for the purposes of the ECT, in Article 1(6)
(“Definitions”), which provides:

“Investment” means every kind of asset, owned or controlled
directly or indirectly by an Investor and includes:

(a) tangible and intangible, movable and immovable, property,
and any property rights such as leases, mortgages, liens, and
pledges;

(b) a company or business enterprise, or shares, stock, or other
forms of equity participation in a company or business
enterprise, and bonds and other debt of a company or
business enterprise;

(c) claims to money and claims to performance pursuant to
contract having an economic value and associated with an
investment;

(d) Intellectual Property;

(e) Returns;

(f) any right conferred by law or contract or by virtue of any
licenses and permits granted pursuant to law to undertake
any Economic Activity in the Energy Sector.

[...]

“Investment" refers to any investment associated with an Economic
Activity in the Energy Sector and to investments or classes of
investments designated by a Contracting Party in its Area as
"Charter efficiency projects” and so notified to the Secretariat.³⁶¹

279. “Economic Activity in the Energy Sector” is defined in Article 1(5) as

³⁶¹ ECT, CL-0001, Art. 1(6). ↩

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an economic activity concerning the exploration, extraction,
refining, production, storage, land transport, transmission,
distribution, trade, marketing, or sale of Energy Materials and
Products except those included in Annex NI, or concerning the
distribution or heat to multiple premises.³⁶²

280. According to the Understanding with respect to Article 1(5) of the ECT, agreed and
adopted in connection with the signing of the Final Act of the European Energy Charter
Conference, “construction and operation of power generation facilities, including those
powered by wind and other renewable energy sources” is considered “illustrative” of
Economic Activity in the Energy Sector. The Claimants' activities are thus, in principle,
governed by the ECT.

281. The Claimants argue that their assets in Germany constitute “an investment associated with
an Economic Activity in the Energy Sector” in accordance with Article 1(6) of the ECT.
The Claimants' alleged investments include, with respect to NOH 1 and NOH 2 (and
indirectly Strabag), the Offshore Wind Projects, and with respect to Strabag, the GFT.

282. As to NOH 1 and NOH 2, the Claimants assert that in December 2011 and January 2012,
NOH 1 and NOH 2 acquired, for approximately EUR 122 million, the entire direct
shareholding in the Project Companies.³⁶³ According to the Claimants, “NOH 1 and NOH
2 Project Companies, together with shareholder loans extended to such companies,
constitute a qualifying investment under Article 1(6) ECT, being assets having an economic
value.”³⁶⁴ The Claimants further argue that “NOH 1 and NOH 2 indirectly own and control
Project Companies' assets and rights.”³⁶⁵ The Project Companies' position in the Plan
Approval Process was “a freely transferrable asset having an economic value,” which was
driven by the right to receive a grid connection, once approved by the BSH, and the right
to receive a feed-in tariff once the OWFs entered into operation.³⁶⁶ According to the
Claimants, they have produced evidence showing that Strabag spent approximately

³⁶² ECT, CL-0001, Art. 1(5). ↩
³⁶³ Cl. Mem., para. 425. ↩
³⁶⁴ Cl. Mem., para. 425 [footnote omitted]. ↩
³⁶⁵ Cl. Mem., para. 426. ↩
³⁶⁶ Cl. Mem., para. 426. ↩

[Page 92]

EUR 122 million in the acquisition of the Project Companies and incurred additional costs,
in the amount of approximately EUR 10.2 million, in developing the projects.³⁶⁷

283. As to Strabag, in addition to its shareholding in NOH 1 and NOH 2 (and through them, its
indirect stake in the Offshore Wind Projects), it also established a number of German-
incorporated fully owned subsidiaries for the development of GFT – SOW, Offshore
Logistik GmbH and FiT. According to the Claimants, Strabag's direct ownership of the
entire shareholding of these companies constitutes an “Investment” within the meaning of
Article 1(6) of the ECT, since its shareholdings are an asset having an economic value and
are associated with Economic Activity in the Energy Sector within the meaning of the ECT.
Strabag also indirectly owns and controls the assets of these companies, including the GFT,
owned by SOW.³⁶⁸ The evidence shows that, over time, Strabag spent more than EUR 55
million in the development of the GFT.³⁶⁹

284. The Tribunal is satisfied that the Claimants' Offshore Wind Projects and the GFT fall
within the scope of the definition of “Investment” in Article 1(6) of the ECT, and that both
the Offshore Wind Projects and the GFT are associated with Economic Activity in the
Energy Sector, as required by Article 1(6) [in fine] of the ECT, in accordance with the
Understanding with respect to Article 1(5) of the ECT.

285. As to the Offshore Wind Projects specifically, the Tribunal notes that, while the list of
assets in Article 1(6) of the ECT that qualify as “Investments” is not exhaustive, it does
specifically mention, in Article 1(6)(b), assets such as “a company or business enterprise,
or shares, stock, or other forms of equity participation in a company or business
enterprise." The Project Companies owned and controlled by NOH 1 and NOH 2 directly,
and by Strabag indirectly, through NOH 1 and NOH 2, fall under this category of assets.
The fact that the payments for the acquisition of the Project Companies were made in
Austria is irrelevant in this context, since they were made for the purposes of acquiring
companies incorporated in Germany, and it is this acquisition that constitutes the

³⁶⁷ Hern ERI, paras. 34, 155-157; Purchase Price Analysis, RH-0004. ↩
³⁶⁸ Cl. Mem., para. 427. ↩
³⁶⁹ Cl. Mem., para. 434; see also Hern ERI, paras. 200-201. ↩

[Page 93]

investment. As a result, the Claimants “owned or controlled directly or indirectly”
companies incorporated in Germany, within the meaning of Article 1(6) of the ECT.³⁷⁰
Moreover, Article 1(8) of the ECT provides that “Make Investments” or “Making
Investments” means “establishing new Investments” as well as “acquiring all or part of
existing Investments.”

286. As to the GFT, the Tribunal notes that Strabag established German-incorporated companies
such as SOW and FiT to research and develop the GFT and to set up test fields for gravity
foundations at the location of one of its Offshore Wind Projects, the Albatros Test Field.
SOW also held the know-how and intellectual property rights, including patents, relating
to the GFT, which fall under the category of “Intellectual Property” in Article 1(6)(d) of
the ECT. Whether the Claimants' investments in the GFT had created any value as of the
date of the alleged breach of the ECT, or whether the GFT merely constituted research and
development activity as alleged by the Respondent, is a matter for the merits and does not
concern the Tribunal's jurisdiction. The Claimants have indisputably “invested” in the
development of the GFT.

b. Whether the Claimants have shown that they have made an “investment"
under the ICSID Convention

287. Article 25(1) of the ICSID Convention does not define the term “investment,” and merely
provides that “[t]he jurisdiction of the Centre shall extend to any legal dispute arising
directly out of an investment.” The term “investment,” as employed in the ICSID
Convention, must therefore be interpreted in accordance with its ordinary meaning,
pursuant to the VCLT.

288. The Tribunal agrees with the Claimants that the so-called “Salini test,” developed in
arbitral jurisprudence to spell out the term's ordinary meaning, is not a true legal test but
rather an attempt to characterize the elements that should be considered in determining
whether a claimant has made an “investment” within the meaning of Article 25(1) of the
ICSID Convention. Indeed, the key elements of the Salini test – capital contribution,
duration and risk – cannot be considered separate or independent requirements but rather

³⁷⁰ See, e.g., Quiborax v. Bolivia, RL-0052, para. 229. ↩

[Page 94]

intertwined elements of an “investment.” Contribution of capital to a business venture,
regardless of type or category of assets contributed and regardless of the legal form of the
business venture, in particular when it involves direct (rather than portfolio) investment,
which is the case here, necessarily involves assumption of risk and a certain duration, and
thus constitutes the defining element of an "investment" within the meaning of
Article 25(1) of the ICSID Convention.

289. The Respondent does not appear to dispute that the Claimants have made capital
contributions to the development of both the NOH 1 and NOH 2 projects, as well as the
GFT, investing significant amounts in the operation of both NOH 1 and NOH 2, and in the
development of the GFT. Instead, the Respondent argues, as summarized above, that the
Claimants' investments do not meet the required duration and do not involve assumption
of risk.³⁷¹ The Tribunal is satisfied that, even though the Claimants put the NOH 1 projects
"for sale" some fourteen months after their acquisition, this was in an effort to mitigate the
damage caused by the Respondent's measures that the Claimants allege amount to a breach
of the ECT. The Tribunal notes that, in any event, the NOH 1 projects were only sold
between 2014 and 2016, i.e. some three to five years after their acquisition, which the
Respondent acknowledges meets the required duration for the purposes of constituting an
"investment."

290. The Tribunal further agrees with the Claimants that contribution to the economic
development of the host State, which the Salini tribunal considered could be added as “an
additional condition," is not part of the definition of “investment.”³⁷² The Tribunal notes
that, while the preamble of the ICSID Convention refers to “the need for international
cooperation for economic development, and the role of private international investment
therein," this is not a definition of the term “investment;" the clause rather sets out one of
the objects and purposes of the ICSID Convention – promotion of economic development
by way of private foreign investment. While private foreign investment, as a whole, tends
to contribute to the economic development of the host State, an investor cannot reasonably
be required to demonstrate, for the purposes of showing that it has made an “investment”

³⁷¹ See Resp. Mem., para. 249. ↩
³⁷² Salini v. Morocco, CL-0090 / R-0054, para. 52. ↩

[Page 95]

within the meaning of Article 25(1) of the ICSID Convention, that its investment has made
a “contribution” to the economic development of the host State. As noted by several ICSID
tribunals, contribution to the economic development of the host State is a consequence of
foreign investment, rather than a material element in determining whether an investment
has been made.³⁷³

291. The Tribunal is therefore satisfied that the Claimants' Offshore Wind Projects and the GFT
qualify as "investments” within the meaning of Article 25(1) of the ICSID Convention.

c. Whether Strabag's claim is admissible

292. The Respondent also argues that Strabag's claim in relation to its indirect shareholding in
the Project Companies should be dismissed because the Claimants explicitly excluded the
claim in the RfA, but then reintroduced it in their Memorial. Thus, according to the
Respondent, the claim was never subject to negotiations between the Parties, as required
under Article 26(1) of the ECT, and is therefore inadmissible.³⁷⁴

293. The Claimants note, in response, that Strabag's claim is subsidiary to NOH 1's and
NOH 2's claims and contends that the claim is admissible because under both the ICSID
Convention and the ICSID Arbitration Rules, claims are crystallized in a claimant's
memorial, not in the request for arbitration.³⁷⁵ Moreover, the Claimants raised the claim in
their Notice of Dispute and as such it was subject to the cooling-off period in the ECT.³⁷⁶

294. The Tribunal notes that the relevant issue is not whether Strabag's claim was included in
the Claimants' RfA, but whether it was included in the Notice of Dispute, since it is the
latter, and not the former, that triggers the obligation to attempt to settle the dispute

³⁷³ See, e.g. Victor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case No. ARB/98/2, ↩
Award, 8 May 2008, CL-0303, para. 232; LESI SpA and Astaldi SpA v. People's Democratic Republic of Algeria,
ICSID Case No. ARB/05/3, Decision on Jurisdiction, 12 July 2006, CL-0304, para. 72; Saba Fakes v. Republic of
Turkey, ICSID Case No. ARB/07/20, Award, 14 July 2010, CL-0305 / RL-0413, paras. 110-111; Quiborax v. Bolivia,
RL-0052, para. 220.
³⁷⁴ Resp. Mem., paras. 235-240. ↩
³⁷⁵ Cl. Reply, para. 748. ↩
³⁷⁶ Cl. Reply, para. 750; Resp. Mem., para. 239; Notice of Dispute, C-0049, p. 2. ↩

[Page 96]

amicably under Article 26(1) and (2) of the ECT. It is undisputed that the Claimants' Notice
of Dispute did include Strabag's indirect claim.

295. Moreover, while Strabag had indicated in the RfA that it did not make a separate claim in
relation to its indirect shareholding in NOH 1 and NOH 2, this is irrelevant since the
cooling-off period had already expired by then. Moreover, pursuant to Article 36(2) of the
ICSID Convention and Rule 2(1)(e) of the ICSID Rules of Procedure for the Institution of
Conciliation and Arbitration Proceedings, an RfA must “contain information concerning
the issues in dispute,” whereas pursuant to Rule 31(3) of the ICSID Arbitration Rules, the
“submissions” of the Parties, as well as “a statement of the relevant facts” and “a statement
of law" are required to be set out in detail in the memorial. The submission where a
claimant's claims must be set out in detail is thus the memorial, not the request for
arbitration.

d. Conclusion

296. In conclusion, the Tribunal rejects the Respondent's objections to the Tribunal's
jurisdiction ratione voluntatis and to the admissibility of Strabag's claim.

C. JURISDICTIONAL OBJECTION RATIONE PERSONAE

(1) The Parties' Positions

a. The Respondent's Position

297. In its First Post-Hearing Brief, the Respondent objected to the Tribunal's jurisdiction
ratione personae on the basis that in the present case, there is no dispute between a
Contracting State and a national of another Contracting State. According to the
Respondent, the Claimants do not qualify as nationals of another Contracting State as
required by Article 26(3) and (4) of the ECT and Article 25(1) of the ICSID Convention
as they were, on the day of filing of the RfA, under Russian control.³⁷⁷ The Russian

³⁷⁷ Resp. First PHB, para. 15. ↩

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Federation is neither a Contracting Party to the ECT nor a Contracting State to the ICSID
Convention.³⁷⁸

298. The Respondent contends that the Claimants' own witness, Mr Felix Koselleck, confirmed
that Strabag is owned partly by MKAO Rasperia Trading Ltd. (“Rasperia”), which is
incorporated in Moscow, Russian Federation.³⁷⁹ Rasperia, in turn, is ultimately controlled
by Mr Oleg Deripaska, a Russian national who has held shares in Strabag since 2007.³⁸⁰

b. The Claimants' Position

299. According to the Claimants, the Tribunal has jurisdiction ratione personae because (i) the
Claimants qualify as Austrian investors under Article 1(7) of the ECT; (ii) the Claimants
qualify as Austrian investors under Article 25(2)(b) of the ICSID Convention; (iii) the
Respondent failed to contest jurisdiction ratione personae in a timely manner; and
(iv) Strabag has never been under Russian control.

300. First, the Claimants argue that, as companies incorporated in Austria, which is an ECT
Contracting Party, they qualify as Austrian investors under Article 1(7)(a)(ii) of the ECT
and are therefore entitled to initiate arbitration against the Respondent pursuant to the
“clear terms” of Article 26(1) of the ECT.³⁸¹ Article 1(7) of the ECT defines the term
“Investor” as a “company [...] organized in accordance with the law applicable in that
Contracting Party.”³⁸² As a result, in the Claimants' view, it is clear that they qualify as
“Investors” of another Contracting Party.

301. Second, the Claimants contend that they qualify as nationals of another Contracting State
under Article 25(1) of the ICSID Convention, as they are companies incorporated in
Austria, an ICSID Contracting State. The Claimants' claims therefore fall under ICSID

³⁷⁸ Resp. First PHB, paras. 15-16. The Russian Federation notified pursuant to Article 45(3)(a) of the ECT that it had ↩
no intention of becoming a member of the ECT: see Russian Federation, Decree No. 1055-r, 30 July
2009https://www.energychartertreaty.org/fileadmin/DocumentsMedia/Founding_Docs/Letter_Russian_Federation_
2009.pdf); ICSID, List of Contracting States (available at: https://icsid.worldbank.org/about/member-states/database-
of-member-states).
³⁷⁹ Resp. First PHB, para. 16; Tr. Day 2, 16:21-23. ↩
³⁸⁰ Resp. First PHB, para. 16; Tr. Day 2, 16:21-23. ↩
³⁸¹ Cl. Second PHB, Sec. C. ↩
³⁸² Cl. Second PHB, para. 29. ↩

[Page 98]

jurisdiction ratione personae, which extends to “any legal dispute arising directly out of
an investment between a Contracting State [...] and a national of another Contracting
State."³⁸³

302. Third, the Claimants argue that the Respondent's ratione personae objection is
inadmissible because it was not timely.³⁸⁴ The Respondent only raised the objection in its
First Post-Hearing Brief and, accordingly, the objection is late.³⁸⁵ According to ICSID
Arbitration Rule 41(1), any jurisdictional objection must be made “as early as possible”³⁸⁶
and in any event cannot be filed later than the date fixed for the filing of the counter-
memorial unless the relevant facts on which the objection is based were unknown at the
time. Here, the facts relied on by the Respondent were known on 9 August 2021, when the
Respondent filed its Counter-Memorial, and the Respondent has not alleged otherwise.³⁸⁷
Therefore, the Respondent's jurisdictional objection ratione personae is belated and as
such inadmissible.

303. Finally, the Claimants assert that, contrary to the Respondent's allegations, Strabag has
never been controlled by Russian entities or persons because Rasperia, which is controlled
by Mr Oleg Deripaska, a Russian national, has never held more than 28 percent of
Strabag's shares.³⁸⁸ Moreover, Rasperia's shareholding is currently frozen so any exercise
of rights linked to Rasperia's shareholding in Strabag is blocked.³⁸⁹

(2) The Tribunal's Analysis

304. The relevant provisions for the purposes of the Tribunal's jurisdiction ratione personae are
Article 1(7) of the ECT and Article 25(1) of the ICSID Convention. Article 1(7) of the ECT
defines “Investor,” inter alia, as “a company or other organization organized in
accordance with the law applicable in that Contracting Party.” Article 25(1) of the ICSID

³⁸³ Cl. Mem., para. 416; ICSID Convention, CL-0279, Art. 25. ↩
³⁸⁴ Cl. Second PHB, para. 27. ↩
³⁸⁵ Cl. Second PHB, para. 27. ↩
³⁸⁶ Cl. Second PHB, para. 28; ICSID Convention, CL-0279, ICSID Arbitration Rules, Rule 41(5). ↩
³⁸⁷ Cl. Second PHB, para. 28. ↩
³⁸⁸ Cl. Second PHB, para. 30. ↩
³⁸⁹ Cl. Second PHB, para. 30. ↩

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Convention provides, in turn, that the jurisdiction of the Centre extends to any dispute
“between a Contracting State [...] and a national of another Contracting State.”

305. It is undisputed that Austria is a Contracting Party to the ECT and a Contracting State to
the ICSID Convention. The Respondent contends, however, that the Claimants cannot be
considered qualified “Investors” under the ECT or “nationals” of Austria under the ICSID
Convention because, on the day of filing of the RfA, Strabag was “under Russian control,”
and the Russian Federation is not a Contracting Party to the ECT or a Contracting State to
the ICSID Convention.³⁹⁰

306. The Tribunal notes that the Respondent raised its objection only in its First Post-Hearing
Brief. According to ICSID Arbitration Rule 41(1) “[a]ny objection that the dispute [...] is
not within the jurisdiction of the Centre or, for other reasons, is not within the competence
of the Tribunal shall be made as soon as possible,” and “no later than the expiration of the
time limit fixed for the filing of counter-memorial, [...] unless the facts on which the
objection is based are unknown to the party at that time.”

307. The Respondent has not offered any justification for the late filing of its objection. The
Respondent's objection is thus made belatedly and is rejected.

308. Moreover, and in any event, the Respondent has failed to produce any evidence to support
its allegation that Strabag was “under Russian control.” The sole support for the
Respondent's allegation is Mr Koselleck's evidence during the Hearing that, in addition to
two Austrian entities, Rasperia was one of the three main shareholders of Strabag, and that
Rasperia was “49% owned indirectly by Oleg Deripaska,” a national of the Russian
Federation who was subsequently placed on the European Union sanctions list. However,
contrary to what the Respondent alleges, Mr Koselleck did not “confirm” that Strabag was
“under Russian control.”³⁹¹

³⁹⁰ Resp. First PHB, para. 15. ↩
³⁹¹ Tr. Day 2: 16:15–17:2 (testimony of Mr Felix Koselleck). ↩

[Page 100]

309. In conclusion, the Tribunal rejects the Respondent's objection to the Tribunal's jurisdiction
ratione personae.

****

310. Having rejected each of the Respondent's objections to jurisdiction and admissibility, the
Tribunal determines that it has jurisdiction over the entirety of the Claimants' claims, and
that the Claimants' claims are admissible.

VI. LIABILITY

311. The Claimants raised in their Memorial four heads of claim under the ECT: (i) breach of
the fair and equitable treatment standard (Article 10(1) of the ECT); (ii) expropriation
(Article 13 of the ECT): (iii) breach of the full protection and security standard
(Article 10(1) of the ECT); and (iv) breach of the non-impairment standard (Article 10(1)
of the ECT). While the order in which the Claimants raised these claims and the related
arguments evolved in the course of the arbitration, the Tribunal will address and determine
the Claimants' claims in this order.

312. The Respondent denies that it committed any breach of the ECT, for reasons set out in
detail in its submissions and as summarized below.

A. THE ALLEGED BREACH OF THE FAIR AND EQUITABLE TREATMENT STANDARD

(1) The Parties' Positions

a. The Claimants' Position

(i) Applicable legal standard

313. The Claimants argue that under Article 26(6) of the ECT, the Tribunal must decide the
issues in dispute “in accordance with [the ECT]” and “any applicable rules and principles
of international law."³⁹² The Claimants also refer to Article 42(1) of the ICSID
Convention, which provides that the Tribunal shall decide a dispute “in accordance with
such rules of law as may be agreed by the parties” and, in the absence of any such rules,

³⁹² Cl. Mem., para. 439. ↩

[Page 101]

"the law of the Contracting State party to the dispute (including its rules on the conflict of
laws) and such rules of international law as may be applicable.”³⁹³

314. The Claimants submit that, in light of these provisions, “German law ‘is relevant to this
dispute only as a matter of fact or background context, and that it should not influence the
legal standards that the Tribunal applies to determine whether the Respondent violated the
ECT."³⁹⁴

315. For the purposes of their fair and equitable treatment (“FET”) claim, the Claimants rely on
Article 10(1) of the ECT, which provides, in relevant part, that each Contracting Party shall
“encourage and create stable, equitable, favourable and transparent conditions for
Investors of other Contracting Parties to make Investments in its Area,” and that “[s]uch
conditions shall include a commitment to accord at all times to Investments of Investors of
other Contracting Parties fair and equitable treatment.”³⁹⁵

316. The Claimants contend that the FET standard in Article 10(1) of the ECT is autonomous
and broad, and “is not assimilated to, or limited by, the minimum standard of treatment
under customary international law."³⁹⁶ According to the Claimants, the Contracting
Parties' obligation to maintain legal stability and transparency is particularly important in
the energy sector, which is highly regulated and in which investments are characterized by
“high capital intensity and long duration of capital recovery.”³⁹⁷ The Claimants argue that,
when interpreted in accordance with the VCLT, the first two sentences of Article 10(1) of
the ECT establish the obligations to (i) honor legitimate expectations; (ii) ensure legal
stability and transparency; and (iii) act reasonably and proportionately in relation to
protected investments and investors.³⁹⁸

³⁹³ Cl. Mem., para. 437. ↩
³⁹⁴ Cl. Mem., para. 440, quoting ESPF Beteiligungs GmbH, ESPF Nr. 2 Austria Beteiligungs GmbH, and InfraClass ↩
Energie 5 GmbH & Co. KG v. Italian Republic, ICSID Case No. ARB/16/5, Award, 14 September 2020, CL-0072 /
RL-0253, para. 401.
³⁹⁵ ECT, CL-0001, Art. 10(1). ↩
³⁹⁶ Cl. Mem., para. 445. ↩
³⁹⁷ Cl. Mem., para. 449. ↩
³⁹⁸ Cl. Mem., para. 453. ↩

[Page 102]

(ii) The Claimants' reliance on the German regulatory regime

317. The Claimants argue that the Respondent frustrated the Claimants' legitimate expectations
by (i) radically changing the essential features of the regulatory framework governing
offshore wind energy; and (ii) failing to treat the Claimants reasonably and
proportionately.³⁹⁹

318. The Claimants submit that they invested in the Offshore Wind Projects and in the
development of the GFT in reliance on the regulatory framework governing the
development, construction and operation of OWFs. According to the Claimants, the
German legal framework granted investors legal certainty in terms of (i) a predictable
permitting process that provided a subjective public law right to approval and control over
the location and pace of development; (ii) an exclusive right to develop an OFW in the area
on which their Application rested; (iii) an unrestricted right to a timely grid connection
once the developer met certain objective criteria; and (iv) a remuneration mechanism,
including feed-in tariffs, and specific incentives for faster and further from shore
development.⁴⁰⁰

319. The Claimants assert that they also expected to be able to develop their OWFs in areas
further away from shore, as “the development of OWF further from shore was necessary to
achieve Germany's 25 GW expansion target.”⁴⁰¹ The future offshore expansion was
“central to the Claimants' business plan, particularly in light of the Coastal-Distance
Bonus," as explained by the Claimants' witnesses Mr Koselleck and Mr Weber.⁴⁰²

320. The Claimants submit that Germany “induced” the Claimants to invest in the Offshore
Wind Projects and the GFT, for which Germany expressed "specific support."⁴⁰³
According to the Claimants, Germany invited the offshore wind industry to develop
innovative foundation technologies that would help bring down the cost of offshore wind

³⁹⁹ Cl. Mem., para. 475. ↩
⁴⁰⁰ Cl. Mem., para. 477; Cl. First PHB, paras. 72-86. ↩
⁴⁰¹ Cl. First PHB, para. 102. ↩
⁴⁰² Cl. First PHB, para. 103. ↩
⁴⁰³ Cl. First PHB, para. 72. ↩

[Page 103]

energy and allow OWF installations in deeper water depths.⁴⁰⁴ Germany further granted
Strabag access to a suitable port in Cuxhaven, which was favorably located and allowed
easy access to the EEZ for offshore works.⁴⁰⁵ Strabag was also granted EU funding of up
to EUR 58.54 million for the development of the GFT.⁴⁰⁶

321. The Claimants argue that their reliance on the stability of the German regulatory framework
was reasonable.⁴⁰⁷ According to the Claimants, they were entitled to rely on the 30-month
deadline for a grid connection in the 2009 BNA Position Paper when making their
investments, as the 2009 BNA Position Paper was authored by Germany's central
regulatory authority for the energy sector.⁴⁰⁸ Indeed, Germany's own agencies also relied
upon the 2009 BNA Position Paper.⁴⁰⁹

322. For the same reason, the Claimants were also entitled to invest in offshore wind projects
located further away from shore (i.e. in areas that were subsequently designated as zones
3 to 5 of the EEZ in the North Sea). The Claimants' reliance was reasonable as Germany's
expansion target was set at 25 GW by 2030,⁴¹⁰ and reaching this target required
development in areas further away from shore, including areas that were later designated
as zone 3.⁴¹¹ The need to develop zone 3 was confirmed by Germany's subsequent conduct,
including the reopening of zone 3 for development in 2021, after termination, in 2017, of
all OWF projects located in that zone.⁴¹²

323. The Claimants maintain that they were also entitled to pursue the implementation of a
project pipeline as a route to market the GFT, in reliance on the German legal
framework.⁴¹³

⁴⁰⁴ Cl. First PHB, para. 88. ↩
⁴⁰⁵ Cl. First PHB, para. 91. ↩
⁴⁰⁶ Cl. First PHB, para. 92. ↩
⁴⁰⁷ Cl. First PHB, para. 109. ↩
⁴⁰⁸ Cl. First PHB, para. 111. ↩
⁴⁰⁹ Cl. First PHB, paras. 110, 112-113. ↩
⁴¹⁰ Cl. First PHB, para. 121. ↩
⁴¹¹ Cl. First PHB, para. 122. ↩
⁴¹² Cl. First PHB, paras. 123-124. ↩
⁴¹³ Cl. First PHB, paras. 126-127. ↩

[Page 104]

(iii) The Respondent's frustration of the Claimants' legitimate
expectations and breach of commitment to regulatory stability

324. The Claimants argue that Germany's adverse measures removed the key features of the
regulatory framework which formed the basis of the Claimants' investments in Germany's
offshore wind energy sector. According to the Claimants, the changes to the regulatory
regime were “so radical as to constitute per se a violation of the [FET] standard under
Article 10(1) ECT.”⁴¹⁴

325. The fundamental changes included (i) the Development Freeze, which significantly
reduced the Claimants' planned offshore installations; (ii) the implementation of a
centralized grid connection system, which gave the TSOs control over offshore wind
expansion; (iii) the reduction of the expansion targets and halting the development in areas
further away from shore; and (iv) the introduction of a compulsory tender procedure, which
“destroyed all key features of the regulatory framework previously established.”⁴¹⁵

(a) The Development Freeze

326. The Claimants argue that the Development Freeze, adopted on 15 June 2012, resulted in
putting on hold all applications for offshore wind installations in areas in the EEZ that were
considered necessary to accommodate future grid infrastructure.⁴¹⁶

327. The Development Freeze had a major impact on the NOH 2 projects, as it affected
approximately 40 percent of NOH 2 projects' planned installations, i.e. 244 out of 611
installations. Two of the NOH 2 projects, OWP SeaStorm I and II, were effectively
terminated by the Development Freeze.⁴¹⁷

(b) The Centralized Grid Connection System

328. The Claimants submit that the second adverse measure was the 2012 Energy Act, together
with the O-NEPs for 2013, 2014 and 2015, which eliminated the TSOs' obligation to
provide OWF developers with grid connection and implemented a central planning system

⁴¹⁴ Cl. First PHB, para. 128; see also Cl. Mem., paras. 468-469. ↩
⁴¹⁵ Cl. First PHB, para. 129. ↩
⁴¹⁶ Cl. Mem., para. 485. ↩
⁴¹⁷ Cl. Mem., para. 485; Cl. First PHB, para. 131. ↩

[Page 105]

for grid connections. Instead of OWP developers, the TSOs were given the authority to fix
binding grid connection timelines for OWF projects, which not only took away the
Claimants' control over the development timeline, but also severely delayed – by over ten
years – the entry into commercial operation of the Claimants' Offshore Wind Projects.⁴¹⁸

329. The Claimants contend that, since TSOs had an interest in “simplifying and reducing their
own obligation to provide grid connections,” they prioritized grid connections for projects
closer to shore and delayed those further away, in particular those in the newly established
zone 3, where most of the Claimants' projects were located.⁴¹⁹ According to the Claimants,
the 2012 Energy Act “completely reversed the system of grid connection on which the
Claimants had relied."⁴²⁰

(c) Reduction of expansion targets and halting the development in areas further
away from shore

330. In 2012, Germany announced that it intended to reduce its expansion targets for offshore
wind energy, and in 2014 it took a formal decision to that effect, reducing its target for
offshore wind energy from 25 GW to 15 GW by 2030.⁴²¹

331. The Claimants contend that, once the development target was reduced, Germany
abandoned the OWF projects located in zone 3 without any legal basis, by way of a BSH
circular halting the Plan Approval Processes for all projects located in zone 3.⁴²²

(d) Compulsory Tender Procedure

332. In 2017, Germany enacted the 2017 Renewable Energy Sources Act and the Offshore Wind
Energy Act, which dismantled the remaining elements of Germany's original regulatory
framework, by irrevocably terminating ongoing Plan Approval Processes of most existing
projects and replacing them with a compulsory central tender procedure.⁴²³ The Claimants

⁴¹⁸ Cl. First PHB, paras. 135-136. ↩
⁴¹⁹ Cl. First PHB, para. 136. ↩
⁴²⁰ Cl. First PHB, para. 137. ↩
⁴²¹ Cl. First PHB, para. 138. ↩
⁴²² Cl. First PHB, para. 140; Letter from BSH to GAIA I, 6 March 2015, C-0273, pp. 2-3. ↩
⁴²³ Cl. First PHB, para. 141. ↩

[Page 106]

submit that these measures frustrated their legitimate expectations regarding “the Offshore
Wind Projects' (i) position in the (Plan) Approval Process, (ii) site control and (iii)
renumeration mechanism.”⁴²⁴

333. The Claimants explain that, under the transitory rules for existing projects in zones 1 and
2, their original developers had the right to participate in two transitional tenders conducted
in 2017 and 2018 and, if they were unsuccessful, they would obtain step-in rights for
previously developed sites as a form of compensation. According to the Claimants,
however, “projects located in zone 3 were excluded from both mechanisms as Germany no
longer deemed their development ‘necessary at the time to reach the reduced expansion
targets."⁴²⁵ As a result, the Plan Approval Processes for these projects were terminated as
of 1 January 2017, “without adequate compensation,” and the Claimants were prevented
from developing the NOH 2 sites, lost their positions and “had to write off their remaining
market value as well as the stranded investments for necessary site investigations.”⁴²⁶

334. According to the Claimants, the 2017 measures thus “frustrated the Claimants' expectation
to recover their investments in planning and exploratory work and to profit from the
operable windfarms."⁴²⁷

(e) At the time of the Claimants' investments, Germany's breaches were not
foreseeable

335. The Claimants submit that, contrary to the Respondent's argument, “foreseeability is only
relevant in the context of the Claimants' fair and equitable treatment claim to assess
whether the Claimants' subjective expectations were objectively reasonable.”⁴²⁸ The
Respondent has also failed to prove that the 2012 and 2017 measures were foreseeable.
More specifically, according to the Claimants, the Respondent's attempt to argue that the
introduction of the suitability and priority areas in 2002 and 2009, respectively, was
foreseeable, is unfounded since the purpose of these designations was to make it easier for

⁴²⁴ Cl. Mem., para. 490; Cl. First PHB, paras. 141-145. ↩
⁴²⁵ Cl. First PHB, para. 143, quoting Tr. Day 7, 17:25–18:6 1 (testimony of Prof Dr Jörg Gundel). ↩
⁴²⁶ Cl. First PHB, para. 143. ↩
⁴²⁷ Cl. First PHB, para. 143. ↩
⁴²⁸ Cl. First PHB, para. 146. ↩

[Page 107]

investors to develop these areas and not to exclude development outside of such areas. The
Claimants note that this was confirmed by the Respondent's own legal expert,
Prof Dr Schomerus, at the Hearing.⁴²⁹

336. The Claimants further contend that, contrary to the Respondent's case, the EEG Progress
Reports issued in 2002, 2007 and 2011 “did not foreshadow the 2012 and 2017 Measures,”
and thus those measures were not foreseeable.⁴³⁰ According to the Claimants, there was no
reference in the EEG Progress Reports to the specific measures that were subsequently
implemented. In particular, there was no reference to a reduction in the offshore wind
development targets, or the O-NEPs or the distance to shore being a relevant criterion for
development to be permitted, or the termination of the Plan Approval Processes.⁴³¹

(f) Germany breached its obligation to refrain from radically changing its
regulatory framework

337. The Claimants submit that the Respondent's 2012 and 2017 measures also constitute a
breach of “the self-standing obligation of stability of the regulatory framework under
Article 10(1) ECT, irrespective of the Claimants' legitimate expectations.”⁴³² According
to the Claimants, both sets of measures “constitute a radical change of the applicable legal
framework at the detriment of qualifying investors and investments.”⁴³³

338. The Claimants contend that as a result of the regulatory shift in 2012, Germany moved
away from a developer-driven system, “with a fully predictable development schedule and
an automatic right to a grid connection to a fully Germany-driven central planning system
where grid connections exclusively depended upon Germany's discretion.”⁴³⁴ However,
these had been “the two essential features" of the legal framework applicable at the time

⁴²⁹ Cl. First PHB, paras. 150-151. ↩
⁴³⁰ Cl. First PHB, para. 152. ↩
⁴³¹ Cl. First PHB, paras. 152-153. ↩
⁴³² Cl. Mem., para. 503. ↩
⁴³³ Cl. Mem., para. 503. ↩
⁴³⁴ Cl. Mem., para. 504. ↩

[Page 108]

of the Claimants' investments, and their elimination “caused severe damages to the
Claimants' investments.”⁴³⁵

339. Similarly, according to the Claimants, the 2017 measures also constituted a fundamental
change of the regulatory framework governing OWFs. The Respondent “fundamentally
altered two further essential pillars of its regulatory regime,” that is, the permitting
process, which was replaced by a tender process, and the fixed feed-in tariff granted by
law, which was replaced by “a totally unpredictable bid-driven remuneration
mechanism.”⁴³⁶ These measures destroyed the residual value of the Claimants'
investments. The fact that Germany in 2019 again adjusted the regulatory framework, this
time by increasing its offshore wind energy targets and by offering the former NOH 2
project sites for development, highlights the “continuous oscillation and unpredictability”
of the applicable legal regime.⁴³⁷

(g) Germany failed to treat the Claimants fairly and equitably by placing
disproportionate effects of its adverse measures on the Claimants' investments

340. The Claimants argue that the 2012 and 2017 measures had a disproportionate effect on the
Claimants' investments and were thus in breach of the FET standard under Article 10(1)
of the ECT. The measures “did not rationally further Germany's policies” and their effect
on the Claimants “went well beyond the burden any qualifying investor and investment may
legally bear under the ECT.”⁴³⁸

341. The Claimants contend that the 2012 and 2017 measures reduced the value of the
Claimants' Offshore Wind Projects, while “the true beneficiary” of the system change was
the TSOs, at the expense of the OWF developers.⁴³⁹

342. The Claimants argue that two of the Claimants' Offshore Wind Projects, SeaStorm I and
II, lost their fair market value already as a result of the 2012 Development Freeze, which

⁴³⁵ Cl. Mem., para. 504. ↩
⁴³⁶ Cl. Mem., para. 505. ↩
⁴³⁷ Cl. Mem., para. 506, quoting Mamidoil v. Albania, CL-0133 / RL-0272, para. 621. ↩
⁴³⁸ Cl. Mem., para. 507; Cl. First PHB, para. 155. ↩
⁴³⁹ Cl. First PHB, para. 156. ↩

[Page 109]

also significantly reduced the number of installations of the remaining NOH 1 and NOH 2 projects, effectively stalling their development. The 2012 measures also resulted in a significant delay to the grid connection dates, which further reduced their value. In order to mitigate their damage, the Claimants were forced to sell OWP West and OWP GlobalTech II, “at a fraction of their former market value.”⁴⁴⁰ The 2017 measures ultimately irrevocably destroyed the remaining value of the Claimants’ NOH 2 projects.⁴⁴¹

343. The Claimants contend that Germany prioritized TSOs’ interests at the expense of the developers’ interests, and introduced a transitional rule that disregarded the investments that the developers had already made. According to the Claimants, Germany effectively “reversed its policy and placed the entire burden of the system change on OWF developers.”⁴⁴²

b. The Respondent’s Position

344. The Respondent denies that it breached the FET standard under Article 10(1) of the ECT. According to the Respondent, “Claimants did not have legitimate expectations for Respondent’s regulatory framework to remain unchanged or only change to their benefit,” and “there is no self-standing prohibition of ‘radical changes’ under Article 10(1).”⁴⁴³ In any event, the Respondent “never instituted any changes to its regulatory regime that could be considered ‘radical;” the regulatory changes that were introduced were “reasonable and proportionate.”⁴⁴⁴

(i) Applicable legal standard

345. The Respondent argues that Article 10(1) of the ECT “does not stipulate any particular restrictions of the right to regulate.”⁴⁴⁵ The first sentence of Article 10(1), which refers to encouragement and creation of “stable, equitable, favourable and transparent conditions

⁴⁴⁰ Cl. First PHB, paras. 157-160. ↩
⁴⁴¹ Cl. First PHB, para. 161. ↩
⁴⁴² Cl. First PHB, paras. 163-167. ↩
⁴⁴³ Resp. First PHB, para. 158. ↩
⁴⁴⁴ Resp. First PHB, para. 158. ↩
⁴⁴⁵ Resp. C-Mem., para. 1078. ↩

[Page 110]

for Investors of other Contracting Parties to make Investments in its Area”⁴⁴⁶ only has “a programmatic character as it informs and defines the FET standard in the second sentence” of Article 10(1) of the ECT.⁴⁴⁷

346. The Respondent submits that the State’s right to regulate “includes the right to change [the] existing legal framework, even if the change results in the deterioration of the individual situation for one of the actors involved.”⁴⁴⁸ This principle applies in the field of investment protection and is not excluded by investment treaties, “as long as [States] have not entered into public international law obligations that prevent them from exercising [the right to regulate] in a particular manner.”⁴⁴⁹ The right to regulate thus forms part of the “context” of the ECT and must be taken into account in treaty interpretation in accordance with Article 31(2)(a) of the VCLT.⁴⁵⁰

347. The Respondent submits that the first sentence of Article 10(1) of the ECT does not create any binding obligation of regulatory stability; the provision only deals with “the pre-investment phase,” i.e. the promotion and making of investments, but not with the post-investment phase. This reading is consistent with the definition of the terms “Make Investments” and “Making Investments” in Article 1(8) of the ECT, which refer to “establishing new Investments.” The obligations of the first sentence of Article 10(1) are therefore obligations “to facilitate and to make best efforts concerning the pre-investment phase, only.” This is not an obligation that can be invoked by investors; it can only be invoked by other Contracting Parties.⁴⁵¹ Consequently, according to the Respondent, “once an investment has been made, [...] the first sentence of Art. 10(1) ECT no longer directly applies, but only has a programmatic character.”⁴⁵²

⁴⁴⁶ ECT, CL-0001, Art. 10(1). ↩
⁴⁴⁷ Resp. C-Mem., para. 1079. ↩
⁴⁴⁸ Resp. C-Mem., para. 1084. ↩
⁴⁴⁹ Resp. C-Mem., paras. 1087-1088, citing Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, 11 September 2007, CL-0115 / RL-0243, para. 332. ↩
⁴⁵⁰ Resp. C-Mem., para. 1089. ↩
⁴⁵¹ Resp. C-Mem., paras. 1093-1095. ↩
⁴⁵² Resp. C-Mem., para. 1099. ↩

[Page 111]

348. The Respondent contends that in the Claimants’ view the first sentence of Article 10(1) of the ECT is effectively a stabilization clause, which cannot be correct. According to the Respondent, “[o]ne simply cannot presume that states are willing to be restricted in their sovereign right to regulate without clear evidence of such intent.”⁴⁵³ Given the novelty of the underlying technology of renewable energy, and the challenge posed by climate change, “the renewable energy sector is characterized by a need for continuous evolution of the legislative framework.”⁴⁵⁴

349. The Respondent submits that the obligation to provide fair and equitable treatment in Article 10(1) of the ECT is not as broad as the Claimants suggest. Under the provision, the investors’ interests need to be balanced against the host State’s right to regulate. A breach of the FET standard is “only conceivable where an investor has legitimate expectations of regulatory continuity,” which is the case if the host State has made specific commitments that it will not change its legislative framework.⁴⁵⁵ General legislation cannot give rise to legitimate expectations, nor can investors legitimately rely on policy statements or general policies “aimed at inviting investments.”⁴⁵⁶ The circumstances prevailing in the host State, in particular when investment is made in a field that is subject regulatory change, must also be taken into account.⁴⁵⁷

350. The Respondent submits that there is no basis in the text of the ECT or in arbitral practice for a “self-standing” prohibition of radical change. In any event, according to the Respondent, the Claimants have failed to provide “even a hint of an indication as to what is to be regarded as ‘radical change.’”⁴⁵⁸ Indeed, there are circumstances in which a radical change of the regulatory framework may be necessary.⁴⁵⁹

⁴⁵³ Resp. C-Mem., para. 1108; Resp. First PHB, para. 164. ↩
⁴⁵⁴ Resp. C-Mem., para. 1114. ↩
⁴⁵⁵ Resp. C-Mem., paras. 1121-1128. ↩
⁴⁵⁶ Resp. C-Mem., paras. 1134-1135. ↩
⁴⁵⁷ Resp. C-Mem., paras. 1136-1147. ↩
⁴⁵⁸ Resp. C-Mem., paras. 1168-1169; Resp. First PHB, paras. 248-257. ↩
⁴⁵⁹ Resp. C-Mem., para. 1170. ↩

[Page 112]

351. Finally, the Respondent contends that, while the impact of the host State’s measure on an investment “must obviously be considered,” it only forms part of the overall assessment. In order to determine whether a host State’s regulatory measure is disproportionate, the impact of the measure on the investment must be weighed against other relevant circumstances, including “competing public interests and the host state’s right to regulate.”⁴⁶⁰ It is well established in arbitral practice that “states enjoy a wide margin of appreciation with a view to both, the setting of policy objectives and the choice of the means with which to pursue such objectives.”⁴⁶¹

(ii) Germany did not breach the FET standard

352. The Respondent argues that the Claimants have the burden of proof to establish the allegation that their legitimate expectations were frustrated, and that the Claimants have failed to meet this burden. Moreover, even assuming the Claimants had legitimate expectations, they did not rely on any such expectations when making their business decisions.⁴⁶²

(a) The Respondent did not frustrate the Claimants’ legitimate expectations

353. The Respondent argues that it has the sovereign right to regulate as it sees fit; it never committed to a “regulatory standstill.”⁴⁶³ The Claimants bear the burden of proof on this issue, but they have failed to discharge it. There was no “general permit or license issued from which Claimants could derive any expectation of regulatory stasis” and the German regulatory framework “did not contain a specific commitment towards regulatory standstill.”⁴⁶⁴ Nor is there is any evidence that German officials made any commitments to maintain a “regulatory stasis.”⁴⁶⁵ According to the Respondent, “broad policy-related

⁴⁶⁰ Resp. C-Mem., para. 1172. ↩
⁴⁶¹ Resp. C-Mem., para. 1174, citing Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016 (“Philip Morris v. Uruguay”), RL-0287, para. 399. ↩
⁴⁶² Resp. First PHB, para. 159. ↩
⁴⁶³ Resp. First PHB, paras. 161-163. ↩
⁴⁶⁴ Resp. First PHB, para. 163. ↩
⁴⁶⁵ Resp. First PHB, paras. 165-170. ↩

[Page 113]

statements by politicians are not suited to give rise to legitimate expectations of investors.”⁴⁶⁶

354. The Respondent submits that 2009 BNA Position Paper “did not promise any regulatory standstill” and in any event was not binding.⁴⁶⁷ The Respondent further points out that the Claimants’ legal expert confirmed that the 2009 BNA Position Paper was merely an “interpretive paper.” The German courts would not have been bound by it, and the Claimants therefore could not have based any expectations on it.⁴⁶⁸

355. The Respondent also argues that the Claimants had no “objective reason” to develop legitimate expectations regarding a regulatory standstill.⁴⁶⁹ According to the Respondent, “the regulatory framework was constantly evolving, with changes being clearly communicated well in advance,”⁴⁷⁰ and there was “no alternative” to the reforms taken by the Respondent, as confirmed by the Respondent’s experts.⁴⁷¹ The Respondent contends that the Claimants were aware of the upcoming imminent regulatory changes, “as confirmed by [the] Claimants’ witnesses.”⁴⁷² Indeed, according to the Respondent, in light of TenneT’s “urgent letter” of 7 November 2011 to the German federal government, in which it had set out the challenges it faced in providing timely grid connections, “there could not be any question anymore that significant changes towards a coordinated and efficient grid connection system would be needed.”⁴⁷³

356. The Respondent maintains that the Claimants’ alleged expectations were not reasonable in light of “long-standing jurisprudence of the German Constitutional Court on investor protection.”⁴⁷⁴ The Respondent’s position is supported by the June 2020 decision of the Constitutional Court, which (i) “widely confirmed the constitutionality of the Offshore

⁴⁶⁶ Resp. First PHB, para. 165, citing Mamidoil v. Albania, CL-0133 / RL-0272, para. 643. ↩
⁴⁶⁷ Resp. First PHB, para. 171. ↩
⁴⁶⁸ Resp. First PHB, para. 173. ↩
⁴⁶⁹ Resp. First PHB, para. 175. ↩
⁴⁷⁰ Resp. First PHB, para. 175. ↩
⁴⁷¹ Resp. First PHB, paras. 176-180. ↩
⁴⁷² Resp. First PHB, para. 184. ↩
⁴⁷³ Resp. C-Mem., para. 241. ↩
⁴⁷⁴ Resp. First PHB, para. 190. ↩

[Page 114]

Wind Energy Act;” (ii) “found no violation of property rights” under the German Constitution;⁴⁷⁵ and (iii) “confirmed [...] that legitimate expectations have been protected under Art. 2 (1) German Constitution well before the June 2020 Decision.”⁴⁷⁶

357. The Respondent contends that, for a number of reasons, “[t]he basic elements of the legal framework applicable at the time of Claimants’ purported investments prevented Claimants from having the alleged expectations with regard to their purported investments.”⁴⁷⁷

358. First, according to the Respondent, the approval procedure was “a long and unpredictable process,” as confirmed by the Parties’ experts regarding the legal requirements and the costs to be incurred in undertaking the process,⁴⁷⁸ and “the mere fact that there were expansion targets did not guarantee that any developer could successfully develop an OWF.”⁴⁷⁹ Second, the priority principle only applied during the year 2012, and therefore “there was no security with regard to obtaining an Approval unless it was actually obtained.”⁴⁸⁰ Third, “an OWF developer was only entitled to receive a grid connection after an Approval had been granted,” and since most of the Claimants’ NOH 1 and NOH 2 projects never obtained approvals, the Claimants “cannot have formed any legitimate expectations regarding grid connection.”⁴⁸¹ Fourth, the regulatory framework’s remuneration system provided that “only operational OWFs enjoyed a right to receive feed-in tariffs.”⁴⁸²

359. The Respondent further argues that the Claimants did not rely on their alleged expectation of a regulatory standstill in making their investment decisions.⁴⁸³ The Respondent refers, in support, to the Claimants’ conduct, including (i) the Claimants’ chronology, noting that

⁴⁷⁵ Resp. First PHB, para. 193. ↩
⁴⁷⁶ Resp. First PHB, para. 195. ↩
⁴⁷⁷ Resp. First PHB, para. 203. ↩
⁴⁷⁸ Resp. First PHB, paras. 204-210. ↩
⁴⁷⁹ Resp. First PHB, para. 214. ↩
⁴⁸⁰ Resp. First PHB, para. 216. ↩
⁴⁸¹ Resp. First PHB, para. 219. ↩
⁴⁸² Resp. First PHB, para. 223. ↩
⁴⁸³ Resp. First PHB, para. 228. ↩

[Page 115]

the Shareholder Agreement was signed “before the [Commercial Due Diligence Report (the “CDDR”)] was completed and could be taken into account;”⁴⁸⁴ (ii) “the fact that Strabag’s management apparently did not take the findings of the CDDR into account;” “[t]he CDDR contained no specific information on existing regulatory risks;”⁴⁸⁵ and (iii) “the fact that Claimants executed the share purchase agreement on 22 December 2011 despite knowing that TenneT’s Urgent Letter had been made public in November 2011 and after having received TenneT’s letter dated August 2011 alerting individual developers to the massive delay regarding grid connection.”⁴⁸⁶

(b) The Respondent’s changes to the regulatory framework were not radical

360. The Respondent argues that its changes to the regulatory framework were not radical and “were an improvement and further development of the previously existing provisional framework.”⁴⁸⁷ In the Respondent’s view, the regulatory framework was “[f]rom the very beginning [...] of provisional nature.”⁴⁸⁸ Relying on the testimony of expert witnesses, the Respondent argues that the system was subject to “ongoing evaluation, adjustments and improvements.”⁴⁸⁹

361. The Respondent contends that “[i]t is perfectly legitimate for a host State to resort to central strategic planning, even if it applied another system before,”⁴⁹⁰ and that the Respondent’s decision to introduce a central planning procedure can also not be considered “radical” as the system was “well-known under German law.”⁴⁹¹ According to the Respondent, “there was no guarantee under the old system for a developer to obtain Approval and to operate an OWF at some point.”⁴⁹²

⁴⁸⁴ Resp. First PHB, para. 229. ↩
⁴⁸⁵ Resp. First PHB, para. 230. ↩
⁴⁸⁶ Resp. First PHB, para. 237. ↩
⁴⁸⁷ Resp. First PHB, para. 248. ↩
⁴⁸⁸ Resp. First PHB, para. 249. ↩
⁴⁸⁹ Resp. First PHB, paras. 249-253, quoting Tr. Day 8, 3:11-12 (testimony of Prof Dr Thomas Schomerus). ↩
⁴⁹⁰ Resp. First PHB, para. 254. ↩
⁴⁹¹ Resp. First PHB, para. 255. ↩
⁴⁹² Resp. First PHB, para. 256. ↩

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(c) The Respondent’s changes to the regulatory framework were reasonable and proportionate

362. The Respondent argues that the changes to the regulatory framework were reasonable and proportionate and, given the State’s right to regulate, must be presumed to be legal.⁴⁹³ According to the Respondent, the changes introduced in 2012 and 2017 “successfully pursued the legitimate goal of speeding up the expansion of the offshore wind energy sector,”⁴⁹⁴ and were confirmed as being necessary by the Respondent’s experts.⁴⁹⁵ Thus the Development Freeze of 2012 “enabled coordinated planning and prevented uncontrolled proliferation of offshore installations,” and was “necessary to ‘secure the preparation of the federal spatial offshore grid plan.’”⁴⁹⁶

363. The Respondent submits that there were “no reasonable alternatives that would have resulted in a better or even same outcome.”⁴⁹⁷ Moreover, since the Respondent’s measures were taken in pursuit of legitimate policy objectives, the Respondent enjoyed “a wide margin of appreciation as to what measures it would take.”⁴⁹⁸ In the circumstances, given that the offshore wind industry was a relatively new field, “the margin of appreciation was particularly wide.”⁴⁹⁹

364. The Respondent submits that the Claimants were “not overly burdened by Respondent’s changes to the regulatory framework.”⁵⁰⁰ The Claimants were well aware of the problems in the offshore wind energy sector, including that TenneT “was de facto incapable of providing timely grid access,” as acknowledged by the Claimants’ witnesses.⁵⁰¹ Indeed, the Claimants “could not have had the legitimate expectation to receive Approvals at all,” as their projects were in the very early stages of the approval procedure.⁵⁰² The Respondent

⁴⁹³ Resp. First PHB, para. 258. ↩
⁴⁹⁴ Resp. First PHB, para. 259. ↩
⁴⁹⁵ Resp. First PHB, paras. 262-264. ↩
⁴⁹⁶ Resp. First PHB, para. 261, quoting Tr. Day 3, 93:21-22 (testimony of Dr Nico Nolte). ↩
⁴⁹⁷ Resp. First PHB, para. 265. ↩
⁴⁹⁸ Resp. First PHB, para. 265, citing Philip Morris v. Uruguay, RL-0287, para. 399. ↩
⁴⁹⁹ Resp. First PHB, para. 265. ↩
⁵⁰⁰ Resp. First PHB, para. 267. ↩
⁵⁰¹ Resp. First PHB, paras. 267-273. ↩
⁵⁰² Resp. First Post-Hearing Brief, paras. 274-276. ↩

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points out that, apart from OWP Albatros and OWP West, none of the Claimants’ Offshore Wind Projects ever reached the public hearing stage.⁵⁰³

(2) The Tribunal’s Analysis

a. Applicable legal standard

365. The Claimants’ FET claim is based on Article 10(1) of the ECT, which provides, in relevant part:

Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment.⁵⁰⁴

366. The Parties disagree on whether the first sentence of Article 10(1) creates a binding legal obligation. The Respondent submits that the first sentence is merely “programmatic” and creates a “best efforts obligation.” As such, it only applies in the pre-investment phase, but not after an investment has been made.

367. The Tribunal notes that the first sentence of Article 10(1) provides that each Contracting Party to the ECT “shall” take action described in the clause, i.e. “encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area.” According to the ordinary meaning of the term “shall,” the provision creates a legal obligation to “encourage” and “create” the conditions referred to in the provision for making investments in their respective Areas. Thus, the provision cannot be considered merely “programmatic” or as creating a “best efforts obligation.”

368. In terms of the general rule of treaty interpretation in Article 31 of the VCLT, the first sentence of Article 10(1) rather forms part of the “context” of the second sentence of Article 10(1). In this sense, the Tribunal agrees with the Respondent that the first sentence

⁵⁰³ Resp. First PHB, para. 275. ↩
⁵⁰⁴ ECT, CL-0001, Art. 10(1). ↩

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“informs and defines the FET standard in the second sentence of Art. 10(1) ECT;” that the two sentences are meant to be read together is also reflected in the wording of the second sentence (“Such conditions”). In the Tribunal’s view, therefore, the obligation in the first sentence of Article 10(1) of the ECT to “encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area” includes the obligation to accord fair and equitable treatment in accordance with the second sentence of Article 10(1).⁵⁰⁵ The obligation referred to in the first sentence of Article 10(1) of the ECT therefore cannot be considered to be confined to the pre-investment phase.

369. While the Parties disagree on the scope of the FET standard in Article 10(1) of the ECT, it is undisputed that the FET obligation constitutes an autonomous standard and is not co-extensive with the minimum standard of treatment under customary international law.⁵⁰⁶ The Parties’ positions are consistent with the language of Article 10(1), which makes no reference to the minimum standard of treatment or indeed customary international law.

b. The alleged breaches of the FET standard

370. The Claimants raise, in substance, two different claims: one relating to the GFT and the other to the Offshore Wind Projects. However, since the Claimants rely, in part, on the same events as the factual basis for their claims, the Tribunal will first address the evidence relating to both the GFT and the Offshore Wind Projects claims and will then determine, on the basis of its factual findings and the applicable legal standard as set out above, the Claimants’ GFT claim, before turning to the evidence and legal argument relating to the Offshore Wind Projects claim, which covers a longer period of time.

371. As summarized above, the Claimants’ case is that the Respondent breached the FET standard, in relation to both the GFT and the Offshore Wind Projects, by dismantling the

⁵⁰⁵ Other ECT tribunals have adopted a similar view: see, e.g., SunReserve Luxco Holdings S.À.R.L., SunReserve Luxco Holdings II S.À.R.L., SunReserve Luxco Holdings III S.À.R.L. v. Italian Republic, SCC Case No. 2016/32, Final Award, 25 March 2020, CL-0012 / RL-0251, para. 677. ↩
⁵⁰⁶ The Claimants argue in their submissions, including in their Memorial, that “the [FET] standard enshrined in Article 10(1) ECT is not assimilated to, or limited by, the minimum standard of treatment under customary international law:” Cl. Mem., para. 445. The Respondent does not make any reference to the minimum standard of treatment in its submissions. ↩

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key components of the regulatory framework governing offshore wind energy. According to the Claimants, these changes were implemented by four sets of measures: (i) the Development Freeze; (ii) the shift to a centralized grid connection system; (iii) the reduction of expansion targets and halting the development in areas further away from shore; and (iv) the introduction of a compulsory tender procedure by way of the 2017 Renewable Energy Sources Act and the Offshore Wind Energy Act.

372. The Claimants contend that the Development Freeze introduced in June 2012 stalled the development process for most of the NOH 2 projects, affecting 40 percent of the planned NOH 2 installations, while the development of two NOH 2 projects (SeaStorm I and SeaStorm II) was stalled entirely.⁵⁰⁷ The 2012 Energy Act delegated to the TSOs the right to determine, with the BNA’s approval, binding grid connection dates for OWF developers, contrary to the earlier system which vested the developers with the right to trigger the grid connection obligation. The 2013, 2014 and 2015 O-NEPs that were subsequently issued pursuant to the new regime “delayed the NOH2 Projects by over a decade.”⁵⁰⁸ The compulsory tender procedure introduced in 2017 delivered, according to the Claimants, “the final knock-out blow” and, as a result, “[t]he Claimants lost their exclusive rights to develop [the NOH 2] projects, thereby destroying their entire value, without receiving any form of compensation.”⁵⁰⁹

373. The Respondent denies, on a number of grounds, that it breached the FET standard, including that (i) the Claimants did not have any legitimate expectation of a “regulatory standstill;” (ii) there were no “radical” changes to the regulatory framework but rather an improvement and further development of the existing system; and (iii) the changes were foreseeable, reasonable and proportionate. The Respondent raises further, more specific arguments in relation to each of these points, which will be addressed below.

⁵⁰⁷ Cl. Mem., para. 220; Cl. First PHB, para. 45; Strabag, Statement to the Draft of the Offshore Gridplan North Sea, 18 July 2012, C-0210, p. 3. ↩
⁵⁰⁸ Cl. First PHB, para. 46. ↩
⁵⁰⁹ Cl. Mem., para. 10. ↩

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(i) The Development Freeze

374. The Tribunal notes that it was generally acknowledged during the period from 2010 to 2012, including in the offshore wind industry, that TenneT, which was the TSO dealing with construction of grid connections in the EEZ in the North Sea, was unable to provide grid connections within the 30-month period envisaged in the 2009 BNA Position Paper, and that action was necessary to address the causes of delay.⁵¹⁰ The Claimants were aware of the delays and acknowledged at the time, in 2011-2012, that “problems [with regard to the grid connection of the planned test field] are emerging,” and that grid connections could be delayed by up to 45 months.⁵¹¹

375. As noted above in Section III.A(2), on 7 November 2011, TenneT wrote an “urgent letter” to the German federal government, stating that the construction of grid connection lines to OWFs in the North Sea “[was] no longer possible” in accordance with the 2009 BNA Position Paper. In its letter, TenneT referred to the lack of financial and other resources, including “massive problems with the acquisition of the necessary finances.” In TenneT’s view, fundamental changes to the legal framework were therefore required, including “an orderly offshore grid expansion and development plan.”⁵¹²

376. The German authorities sought to address the issue. In January 2012, in connection with the 2012 Renewable Energy Sources Act, the German government issued the 2012 Offshore Installations Ordinance, which introduced the Plan Approval Process for the construction and operation of offshore installations and nominated the BSH as the plan approval authority. The BSH was also given the competence to enact a temporary development freeze; according to Section 10 of the 2012 Offshore Installations Ordinance, the BSH “may define sea areas within the exclusive economic zone of the Federal Republic of Germany in which certain installations are temporarily not subject to plan approval,

⁵¹⁰ See, e.g., German Offshore Wind Foundation, Position Paper, 4 August 2010, R-0038; German Association of Energy and Water Industries, Statement, 30 January 2012, R-0070. ↩
⁵¹¹ See Letter from TenneT to Windkraft FIT GmbH, 26 October 2011, C-0170; Minutes of Strabag Board Meeting, 15 February 2012, R-0167; Minutes of Strabag Board Meeting, 30 March 2011, R-0176; Minutes of Strabag Board Meeting, 9 November 2011, R-0172. ↩
⁵¹² Letter from TenneT to Federal Chancellery, 7 November 2011, R-0019. ↩

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planning permission or licensing (development freeze).”⁵¹³ BSH had been previously, in July 2011, tasked with the development of a federal spatial offshore grid plan, or the BFO.⁵¹⁴

377. On 15 June 2012, the BSH exercised its competence and imposed the Development Freeze for certain sea areas in the EEZ in the North Sea, as specified in Annexes 1 and 2 of its decision. In these areas, all technical installations “may not be subject to plan determination, plan approval or approval for the duration of the development freeze if they could impede the construction of grid infrastructure due to their size and location.” The Development Freeze did not apply to installations “for which the public announcement pursuant to Section 2a Offshore Installations Ordinance as amended by the end of 30 January 2012, was made before 31 January 2012.”⁵¹⁵

378. The Development Freeze was set to expire in three years and “in any event no later [than when] [...] the offshore grid plan has been secured by the spatial arrangements.” The offshore grid plan would also define “the necessary routes for the connection services of the offshore wind farms,” as well as the “locations for converter platforms, routes for cross-border power lines and a presentation of possible interconnections that can help to ensure system security and are compatible with efficient grid expansion.”⁵¹⁶

379. On 28 December 2012, Germany enacted the 2012 Energy Act, which substantially modified the system for obtaining grid connections. According to Section 17b of the Act, the TSOs were to submit to the regulatory authority (the BNA) for its confirmation each year, starting on 3 March 2013, a joint offshore grid development plan, or the O-NEP, for the EEZ. The plan was to establish criteria and timing of implementation, taking into account, inter alia, “spatial proximity to the coast.”⁵¹⁷ According to the transitional provisions of the 2012 Energy Act, the previous regime would continue to apply to offshore

⁵¹³ 2012 Offshore Installations Ordinance, C-0027 / RL-0147, Sec. 10. ↩
⁵¹⁴ Energy Act, 27 July 2011, C-0081. See also paragraph 105 above. ↩
⁵¹⁵ Development Freeze, C-0197. ↩
⁵¹⁶ Development Freeze, C-0197. ↩
⁵¹⁷ 2012 Energy Act, C-0035, Sec. 17b. ↩

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installations that had received “an unconditional or a conditional grid connection commitment by 29 August 2012.”⁵¹⁸

(a) Gravity Foundation Technology

380. The Claimants argue that their investments in the GFT were undermined by the German regulatory developments that took place in 2012. According to the Claimants, while in the first half of 2012 Germany “stood by the enforcement of its regulations,” Germany’s commitment subsequently “evaporated” and the 2012 Energy Act “radically changed the regulatory framework and delegated to TenneT the power to determine grid connection dates.”⁵¹⁹

381. According to the Claimants, these developments “destroyed the Gravity Foundation Technology’s commercial viability and its business rationale.” In the circumstances, the Claimants decided “to temporarily halt further large-scale investment in the Gravity Foundation Technology.”⁵²⁰ The 2012 Energy Act and the adoption of the O-NEPs of 2013, 2014 and 2015 pursuant to the Act “served to cement the fate of the Gravity Foundation Technology.”⁵²¹

382. The contemporaneous evidence regarding the impact of the relevant regulatory developments includes the minutes of meetings of Strabag’s board held in the second half of 2012. At the meeting held on 12 September 2012, the board discussed, inter alia, the competitiveness of the GFT and potential further investments in the Cuxhaven facilities. The presentation attached to the minutes notes that “[g]rid connection problem was brought to a political solution,” and that “STRABAG’s GBF is designed ready for execution and market-ready.”⁵²² The presentation refers to the Development Freeze, noting that approximately one third of Strabag’s pipeline is affected by the Development Freeze, and that administrative complaints had been filed on behalf of the most affected projects.⁵²³

⁵¹⁸ 2012 Energy Act, C-0035, Sec. 118. ↩
⁵¹⁹ Cl. Mem., para. 499. ↩
⁵²⁰ Cl. Mem., para. 500. ↩
⁵²¹ Cl. Mem., para. 501. ↩
⁵²² Minutes of Strabag Board Meeting, 12 September 2012, R-0154, p. 39. ↩
⁵²³ Minutes of Strabag Board Meeting, 12 September 2012, R-0154, p. 50. ↩

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The presentation also refers to the delays caused by TenneT’s financing and delivery times, “[c]urrent grid connection problems,” including “[p]roblems with [...] financing,” “[d]elays caused by Approval and planning procedures,” “[l]ong delivery and construction times for cables and converter stations” and “[s]ignificant delays of grid connections (from 30 to 60 months).”⁵²⁴

383. The Claimants state that Strabag’s board took the decision to halt any large-scale investment in the development of the GFT in December 2012.⁵²⁵ However, the Tribunal notes that there is no indication in the (redacted) board meeting minutes in December 2012 (or indeed in the minutes of the November 2012 meeting) that a decision was taken at the December meeting to suspend the GFT project (although it does appear from the minutes that the matter was discussed). The minutes of the November meeting briefly note that, at the next meeting of the board in December 2012, “[a]gainst the background of the currently unsolvable general conditions (delays in the grid connection, non-recourse financing ...) only a short verbal report should be submitted and a written report can therefore be omitted.”⁵²⁶ In the December 2012 meeting minutes there is a reference to a draft press release which apparently was meant to inform the market of the decision to suspend the GFT project, and the minutes also refer to an annex dealing with “Offshore Wind - capitalised initial costs / preliminary work.”⁵²⁷

384. Both Mr Koselleck and Mr Weber state in their first witness statements that at its December 2012 meeting, Strabag’s board indeed decided to halt any large-scale investments into the development of the GFT, including the production facility in Cuxhaven and the installation vessel (although neither Mr Koselleck nor Mr Weber attended the board meetings or were involved in the board’s decision-making).⁵²⁸ Similarly, the “Restructuring Concept” of SOW dated 8 February 2013 recorded that “[i]n December 2012, the Executive Board of

⁵²⁴ Minutes of Strabag Board Meeting, 12 September 2012, R-0154, p. 52. ↩
⁵²⁵ See, e.g., Cl. Mem., para. 211. ↩
⁵²⁶ Minutes of Strabag Board Meeting, 7 November 2012, AD-0213; Minutes of Strabag Board Meeting, December 2012, R-0221. ↩
⁵²⁷ Minutes of Strabag Board Meeting, 5 December 2012, R-0221. ↩
⁵²⁸ Koselleck WSI, para. 72; Weber WSI, para. 77; Tr. Day 2, 70:5–72:24 (testimony of Mr Felix Koselleck). ↩

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STRABAG SE decided to suspend investments in this project for the time being, due in part to the unclear legal situation in Germany.”⁵²⁹

385. In light of this evidence, the Tribunal finds that the decision to suspend the development of the GFT was indeed taken at Strabag’s board meeting in December 2012.

386. On 7 January 2013, Strabag informed the EU, which had financially supported the development of the GFT, that it had decided to suspend investments in further development of the technology. Strabag explained that it would be “excessively difficult to proceed” with the GFT project in the circumstances:

The German offshore wind market in 2012 has seen a lot of setbacks for the industry. TenneT, the grid provider for all North Sea projects has informed not to be able to provide grids within the timeframes foreseen by the German State, without having given clear new dates since then. The status of onshore grids to distribute future offshore wind power to their potential users is unclear to the public. On the other hand new regulations have been implemented to support offshore wind on a long-term perspective, but do increase uncertainty for the time being. Consequently the financial market has become more hesitant in financing offshore-wind projects in Germany.⁵³⁰

387. Strabag went on to state that it expected that the German authorities would be able to “bring more clarity” and allow Strabag to resume the GFT project:

We all expect that the currently ongoing development of master schedules for the development of the German “AWZ” and the intentions of the German government, the Federal Maritime and [Hydrographic] Agency and the Federal Network Agency to bring all regulations to an overall fit will bring more clarity to all market players and will allow us to resume our activities in the field. Depending on these “legal clarifications” for the German offshore market, our target is to have the project suspended for not more than one year.⁵³¹

⁵²⁹ Strabag Offshore Wind GmbH, Restructuring Concept, 8 February 2013, C-0202. ↩
⁵³⁰ Letter from Strabag to the Commission, 7 January 2013, C-0235. ↩
⁵³¹ Letter from Strabag to the Commission, 7 January 2013, C-0235. ↩

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388. On 15 January 2013, Strabag issued a press release stating that it was “postponing its planned investments in the field of gravity-based foundation technology for offshore wind for the time being.” The press release quoted Mr Haselsteiner, chairman of Strabag’s board, stating that there were currently “too many reasons not to do so [i.e. “to invest for the moment in constructing factories and special ships in the field of offshore wind”] – from the unclear legal situation and unclear future of energy policy in the German market to the lack of storage technology for electricity from renewable sources and the lack of ability to transport energy from the producer to the consumer.” The press release noted that “STRABAG’s 51% stake in 15 project companies for the development of offshore wind farms remains unaffected by the decision.”⁵³²

389. The Tribunal accepts, on the basis of the evidence before it, that the Development Freeze applied to a substantial part of the Claimants’ NOH 2 projects. As noted above, the Development Freeze affected 40 percent of the planned NOH 2 installations, while two NOH 2 projects (SeaStorm I and SeaStorm II) were effectively stalled “in their entirety.”⁵³³ The Respondent does not dispute the Claimants’ evidence on the effect of the Development Freeze on the NOH 2 projects.

390. However, the Tribunal notes that the Development Freeze was intended to be temporary and did not prevent the Claimants from progressing the NOH 2 projects that were not affected by the Development Freeze – or indeed the NOH 1 projects, which were not directly affected by the Development Freeze. Moreover, it is not clear from the contemporaneous evidence that the anticipated time impact of the Development Freeze – three years, or 36 months (and possibly less) – caused any further delay in the development of the NOH 2 projects that were impacted by it. The Tribunal notes, in this connection, that already on 2 May 2012 (i.e. before the enactment of the Development Freeze), when TenneT granted an unconditional grid connection commitment for the Albatros Test Field (which was to be used as the test field for the GFT), it informally communicated to the

⁵³² Strabag, Press Release, 15 January 2013, C-0198. See also Strabag Offshore Wind GmbH, Restructuring Concept, 8 February 2013, C-0202 (referring to the Strabag board’s decision to suspend investments in GFT for the time being, due in part to the “unclear legal situation” in Germany). ↩
⁵³³ Cl. First PHB, para. 45 ↩

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Claimants that grid connection could not be expected earlier than 2017, i.e. some 60 months after the approval date. The Claimants state that “[a] delay of such magnitude [...] was a major concern for the development of the Gravity Foundation Technology” and “seriously endangered the entire business case for the Gravity Foundation Technology.” Accordingly, “in mid-2012, the Claimants internally decided to temporarily freeze any further investment in the Albatros Test Field until the situation was resolved.”⁵³⁴

391. The contemporaneous evidence also suggests that the Development Freeze was not the sole or even the primary reason for the Claimants’ decision to suspend the development of the GFT. Indeed, in early 2013, when Strabag informed the EU of its decision to suspend the GFT project, it singled out, as reasons for the decision, TenneT’s difficulties with providing grid connections in a timely manner, and regulatory uncertainty, as well as its own difficulties with obtaining financing. In its press release of 15 January 2013, Strabag referred to a host of reasons for the suspension, ranging “from the unclear legal situation and unclear future of energy policy in the German market to the lack of storage technology for electricity from renewable sources and the lack of ability to transport energy from the producer to the consumer.”⁵³⁵

392. In conclusion, the Tribunal is unpersuaded that the Claimants’ decision to suspend the development of the GFT was a consequence of the Development Freeze or the 2012 Energy Act, which was enacted some three weeks after the decision of Strabag’s board to suspend the development of the GFT in December 2012.⁵³⁶ The evidence indicates that there were many different factors being considered by Strabag at the time. The Tribunal notes, in this connection, that the minutes of Strabag’s board meeting in December 2012 are heavily redacted and do not disclose either reasons for, or even the fact of the decision to suspend the development of the GFT (although, as noted above, the Tribunal accepts, on the basis of the totality of evidence on the record, that the decision was taken at that meeting). Moreover, while the Development Freeze and other regulatory developments, including

⁵³⁴ Cl. Mem., paras. 203-205; Minutes of Strabag Board Meeting, 19 April 2012, C-0195. ↩
⁵³⁵ Strabag, Press Release, 15 January 2013, C-0198. ↩
⁵³⁶ The market was obviously aware earlier that the Act was being prepared: see Federal Ministry for the Environment, Nature Conservation and Reactor Safety, Press Release, 29 August 2012, R-0083; Discussion in the German Parliament, 29 November 2012, C-0233. ↩

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the preparation of the 2012 Energy Act, clearly created regulatory uncertainty regarding the time frame and the regulatory framework governing the development of OWFs, this cannot amount to a breach of the ECT in the circumstances, given the challenges faced by the offshore wind energy industry in Germany at the time and the inability of the TSOs to provide grid connections in a timely manner. Indeed, it is evident from the record that TenneT, the TSO responsible for grid connections in the EEZ in the North Sea, faced particularly serious challenges and had been unable to provide grid connections in a timely manner since at least 2010.⁵³⁷ In the circumstances, changes in the regulatory regime were not only justified but indeed necessary to facilitate the development of the federal spatial offshore grid plan (the BFO) and an orderly expansion of the offshore grid.

393. The Tribunal therefore does not accept that the Development Freeze or the 2012 Energy Act introduced a regime change that frustrated the Claimants’ legitimate expectations or were otherwise in breach of the FET standard in relation to the Gravity Foundation Technology. The Claimants’ claims, insofar as they relate to the Gravity Foundation Technology, are therefore rejected.

(b) Offshore Wind Projects

394. As summarized above, the Development Freeze did not come as a surprise to the offshore wind industry. The challenges faced by TenneT in particular, and its inability to comply with the 30-month time limit for providing a grid connection, were well known to the industry, including the Claimants. As a result of these issues, the Claimants’ Offshore Wind Projects were already in delay at the time the Development Freeze was enacted, and indeed the development of the Albatross Test Field had already been suspended by the Claimants.

395. The Development Freeze specifically referred to the issues justifying the measure:

The development of a strategically planned grid infrastructure for the transmission of electricity is of enormous importance for the supply of renewable energies. Without the offshore grid plan, there would be a risk that individual lines would be planned in an uncoordinated

⁵³⁷ German Offshore Wind Energy Foundation, Position Paper, 4 August 2010, R-0038, pp. 6 et seq. (stating that “several German OWP projects are in danger of failing due to delays in grid connection”); Discussion in the German Parliament, 29 November 2012, C-0233. ↩

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manner, particularly for connecting individual offshore wind farms. Compared to collective connections, significantly more planning and approval resources would be required, which could lead first to delays and second to unnecessary conflicts.⁵³⁸

396. There is no indication in the terms of the Development Freeze that it was intended to operate so as to further increase the delay in granting grid connections. While the Development Freeze was imposed for a period of three years as of the date of its announcement on 15 June 2012, it was to expire “in any event no later than [when] [...] the offshore grid plan has been secured by the spatial arrangements.”⁵³⁹ The three-year period was significantly less than the 60 months that TenneT had indicated a month earlier, in May 2012, the Claimants would have to wait for grid connection to be provided to the Albatross Test Field.

397. In the circumstances, while the Development Freeze could have had a substantial effect on the Claimants’ Offshore Wind Projects, had TenneT been able to comply with the 30-month period for granting grid connections at the time the Development Freeze was enacted, this was in reality not the case, and the Projects were already expected to be substantially delayed. Moreover, as noted above, at the time it was enacted, the Development Freeze was envisaged as being temporary, pending the development of the federal spatial offshore grid plan, or the BFO, and the Claimants’ NOH 2 projects that were most affected (SeaStorm I and II) were at an early stage of development (application conference) so they were still at least three years from approval.⁵⁴⁰ Furthermore, as noted above, the Development Freeze did not apply to OWFs that had reached the stage of formal public participation by 31 January 2012.⁵⁴¹

398. In light of the evidence before it, the Tribunal finds that the Development Freeze was a legitimate regulatory measure at the time it was enacted and did not amount to a breach of

⁵³⁸ Development Freeze, C-0197. ↩
⁵³⁹ Development Freeze, C-0197. ↩
⁵⁴⁰ Hern ERI, Table 4.4, p. 39. By the time the Development Freeze was enacted, the Claimants had spent a total of EUR 0.42 million on SeaStorm I and II (EUR 0.42 million on SeaStorm I and EUR 0.00 on SeaStorm II): Hern ERI, Table 4.8, p. 49. The Claimants subsequently spent a further EUR 0.29 million on SeaStorm I and EUR 0.23 million on SeaStorm II, for a total of EUR 0.94 million. ↩
⁵⁴¹ Development Freeze, C-0197. ↩

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the FET standard in relation to the Claimants’ Offshore Wind Projects, regardless of whether the applicable FET standard is stated in terms of legitimate expectations, regulatory stability or proportionality.

399. This finding is limited to the immediate impact of the Development Freeze. The Tribunal will address in the next section the impact on the Claimants’ Offshore Wind Projects of the 2012 Energy Act and of the 2013, 2014 and 2015 O-NEPs, as well as of the further extension of the Development Freeze in 2015 and the 2017 regulatory reform.

(ii) The 2012 Energy Act, the 2013, 2014 and 2015 O-NEPs, the 2017 Energy Act and the Offshore Wind Energy Act

(a) The factual background as established by the evidence

400. As noted above, the 2012 Energy Act substantially modified the system for obtaining grid connections by introducing the annual O-NEPs for the EEZ in the North Sea.⁵⁴² The O-NEPs were to be developed by the TSOs and confirmed by the BNA.

401. On 22 February 2013, the BSH published the final 2012 BFO-N for the North Sea, identifying clusters of OWF projects suitable for a joint grid connection.⁵⁴³ The BFO included in the clusters those OWF projects that had already (i) been constructed; (ii) received an approval; or (iii) submitted their application and no obvious grounds to deny the application existed. The BFO-N 2012 excluded all OWFs that were either in their entirety affected by the Development Freeze or located more than 180 km away from the shore, and these OWF projects were not assigned any cluster.⁵⁴⁴

402. On 19 December 2013, the BNA confirmed the first O-NEP (O-NEP 2013) proposed by the TSOs. The BNA agreed that the “distance to shore” criterion proposed by the TSOs was “appropriate” for “the timely order of the offshore grid connections.”⁵⁴⁵ In the BNA’s view, “[a] priority weighting of the criterion ‘realization progress of the OWP to be connected’ would contradict the path decided by the legislator, away from an individual

⁵⁴² See above paragraph 379. ↩
⁵⁴³ Cl. Mem., para 276; BFO-N 2012, C-0199 / R-0032. ↩
⁵⁴⁴ Cl. Mem., para. 277. ↩
⁵⁴⁵ O-NEP 2013 (2023), C-0039 / R-0033, p. 44. ↩

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connection claim of the OWP towards a wind farm-unspecific expansion planning of the grid connection system.”⁵⁴⁶ On this basis, O-NEP 2013 divided the EEZ into zones that extended from 1 to 5, depending on their distance from shore:⁵⁴⁷

[Map of the German North Sea EEZ]

Labels on Map:

• Zone 5
• Zone 4
• Zone 3
• Zone 2
• Zone 1
• Numbers within zones: 5, 13, 9, 12, 11, 10, 8, 6, 7, 2, 3
• Place Names: Dänemark, Sylt, Flensburg, Schleswig, Husum, Kiel, Helgoländer Bucht, Cuxhaven, Bremerhaven, Wilhelmshaven, Emden, Hamburg, Lüneburg, Bremen, Oldenburg, Nordsee, Nordfriesische Inseln, Ostfriesische Inseln, Nieder-.

Legend/Source Information:

• Scale: 0 50 100 km
• Herausgeber: Bundesnetzagentur
• Quellennachweis: GeoBasis-DE / BKG 2013
• Datenbasis: Übertragungsnetzbetreiber / BSH
• Stand: 26.08.2013

403. On 2 June 2014, the BSH responded to GAIA I Nord’s request for an application conference, noting that the project was located in cluster 13 according to the BFO-N 2012, and according to O-NEP 2013, “a grid connection is not expected to be commissioned in the cluster until 2027 at the earliest.” On this basis, the BSH stated that “holding an Application Conference at the present time and the associated scoping meeting [...] does not appear to be reasonable.”⁵⁴⁸

⁵⁴⁶ O-NEP 2013 (2023), C-0039 / R-0033, p 50. ↩
⁵⁴⁷ O-NEP 2013 (2023), C-0039 / R-0033, p. 41. See also First Draft of O-NEP 2013 (2023), C-0200 / R-0184, p. 70. ↩
⁵⁴⁸ Letter from BSH to GAIA I, 2 June 2014, C-0263. ↩

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404. On 1 August 2014, Germany amended the Renewable Energy Sources Act (the “2014 Renewable Energy Sources Act”), which reduced the target for offshore wind by 2030 from 25 GW to 15 GW and adopted a tender system for the allocation of the previously unrestricted grid capacity.⁵⁴⁹

405. On 6 March 2015, the BSH issued a circular (the “March 2015 Circular”) addressed to “all offshore wind energy projects planned far from the coast in zones 3, 4 and 5 of the Offshore Grid Development Plan (O-NEP) of the [BNA].”⁵⁵⁰ The purpose of the circular was “to inform [the offshore wind energy projects] about the BSH’s position in this regard [i.e. in light of recent political and legal developments regarding the construction and operation of offshore wind projects] with respect to a possible plan approval of offshore wind farm projects in the above-mentioned zones.”⁵⁵¹ The circular reminded that “[i]n principle, a plan approval decision may only be issued if the plan is justified,” which is the case “if the project is reasonably required according to the objectives of the specialized planning law,” and then went on to state:

For the following reasons, I do not currently consider the necessary plan justification or necessity for offshore wind farms in zones 3, 4 and 5 to be given and will therefore not conduct any plan approval procedures for projects located there until further notice; in particular, no application conferences and public hearings will be held. [...]

1. Consideration of the O-NEP

After the system change in the [2012 Energy Act], grid expansion planning is based on the specifications of the O-NEP, so that it is no longer the individual offshore wind farm that triggers the grid connection. [...] The O-NEP contains details of the planned completion date for all the above-mentioned measures and provides binding dates for the start of implementation.

[...]

Consequently, a project is not justified in planning terms if the grid connection measure has not been confirmed in the O-NEP by the

⁵⁴⁹ 2014 Renewable Energy Sources Act, C-0207 / RL-0160. ↩
⁵⁵⁰ Letter from BSH to GAIA I, 6 March 2015, C-0273, p. 1. ↩
⁵⁵¹ Letter from BSH to GAIA I, 6 March 2015, C-0273, p. 1. ↩

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BNetzA for the following ten years. Furthermore, there is no interest in a decision if the purpose of an offshore wind farm – production and transmission of the electricity generated – cannot be achieved due to the lack of a foreseeable grid connection. Moreover, I assume that such a project cannot be objectively realized or financed without a confirmed grid connection.

As a precautionary measure, I would like to point out that the O-NEP 2014, second draft of the TSO, which can currently be viewed on the Internet, does not envisage a line in zones 3, 4 and 5 in any scenario over the next ten years. In addition, the second draft of the TSO was prepared on the basis of the 2014 scenario framework and does not yet take into account the amendment to the EEG 2014 that has since been made, in particular the expansion path of 6.5 GW in 2020 and 15 GW in 2030 provided for therein. [...]

2. Consideration of the expansion path [...]

According to Section 3 No. 2, the amended [Renewable Energy Sources Act] provides for an expansion path of 6.5 GW in 2020 and 15 GW in 2030. [...] I assume that the potential of the coastal sea and zones 1 and 2 basically cover the expansion targets. [...]

Of the capacity limits of 6.5 GW in 2020 and 15 GW in 2030 provided for in Section 17d (3) Sentence 2 EnWG, Section 118 (14) EnWG provides for the exception that the BNetzA, in consultation with the BSH, may allocate a maximum of 7.7 GW of connection capacity before January 1, 2018, taking into account all existing unconditional grid connection commitments. This option was opened up in order to achieve the target of 6.5 GW in 2020 even in the event of non-implementation.

This capacity limit of 7.7 GW by 2020, taking into account all approved offshore wind farms in the North Sea and Baltic Sea that already have an unconditional grid connection commitment or a capacity allocation pursuant to Section 17d (3) EnWG, is expected to be exhausted by the time the capacity allocation procedures are completed in 2015 and can therefore no longer be open to projects located in zones 3, 4 and 5.⁵⁵²

⁵⁵² Letter from BSH to GAIA I, 6 March 2015, C-0273. ↩

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406. On 15 June 2015, the BSH extended the Development Freeze for three more years, until 15 June 2018, redefining in part the sea areas in the EEZ in the North Sea that were affected.⁵⁵³

407. On 1 July 2015, the Federal Ministry of Economics and Energy announced a planned shift to a tender procedure for offshore wind installations in accordance with a “central model.”⁵⁵⁴ According to the announcement, wind farm projects in zones 1 and 2 that had valid approvals or plan approvals would be eligible to participate, if located on a network connection system already commissioned or confirmed in the current O-NEP 2013. Developers of projects that were not awarded a project in the auction were to be granted financial compensation based on the average costs of project development if they “waive[d] the rights from approval and ma[de] the data generated during project development [...] available to the central state authority.”⁵⁵⁵

408. On 4 September 2015, the BNA confirmed O-NEP 2014 proposed by the TSOs.⁵⁵⁶ O-NEP 2014 pushed the expected grid connection dates for the NOH 1 projects further into the future – from 2018 to 2019 for OWP Albatros, from 2021 to 2022 for OWP West and from 2022 to 2023 for GlobalTech II (which had in the meantime been merged with GlobalTech III).⁵⁵⁷ The expected grid connection dates for the NOH 2 projects were similarly delayed, each of them by two years, i.e. projects with an expected grid connection date in 2025 were delayed to 2027, those with an expected grid connection date in 2027 to 2029 and those with an expected grid connection date in 2029 to 2031.⁵⁵⁸

⁵⁵³ BSH, Prolongation of the Development Freeze, C-0275. The Development Freeze was initially set to “expire three years after announcement, and in any event no later than as soon as the offshore grid plan has been secured by the spatial arrangements;” however, the right to extend the term of validity was reserved: Development Freeze, C-0197. As noted above, the offshore grid plan, or the BFA, had been adopted in the meantime, in 2013. ↩
⁵⁵⁴ Federal Ministry of Economics and Energy, Key Points Paper on Tender Procedure, C-0277, p. 6. ↩
⁵⁵⁵ Federal Ministry of Economics and Energy, Key Points Paper on Tender Procedure, C-0277, p. 19. ↩
⁵⁵⁶ O-NEP 2014 (2024), C-0040. ↩
⁵⁵⁷ Order of Projects, Comparison between O-NEPs 2013 (2023), 2014 (2024), 2015 (2025), C-0042; Second Draft of O-NEP 2013 (2023), C-0036 / R-0072, p. 89. ↩
⁵⁵⁸ Order of Projects, Comparison between O-NEPs 2013 (2023), 2014 (2024), 2015 (2025), C-0042; Second Draft of O-NEP 2013 (2023), C-0036 / R-0072, p. 89. ↩

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409. In the meantime, the Claimants sold the NOH 1 projects: OWP Albatros was sold in December 2014, whereas OWP West was sold in December 2015, three months after the confirmation of O-NEP 2014, and GlobalTech II/III was sold in August 2016.⁵⁵⁹

410. On 25 November 2016, the BNA confirmed O-NEP 2015,⁵⁶⁰ which further delayed the grid connection dates for the NOH 2 Projects: GAIA I Nord and GAIA V Nord were delayed from 2027 to 2031, GAIA II, GAIA III and GAIA IV were delayed from 2029 to 2034, and SeaWind III and SeaWind IV were delayed from 2031 to 2035.⁵⁶¹

411. On 1 January 2017, the 2017 Offshore Wind Energy Act was enacted, introducing the tender system announced by the Federal Ministry of Economics and Energy in July 2015. According to Section 46(1) of the Act, “[t]he application for the implementation of the planning approval procedure for the construction and operation of offshore wind energy installations can only be submitted by a party whose tender bid has been accepted by the [BNA] for the location to which the plan refers.”⁵⁶² Pursuant to Section 46(3) of the Act, as of 1 January 2017, “all ongoing planning approval procedures or approval procedures to construct and operate offshore wind energy installations shall end unless the projects fall within the scope of the tenders for existing projects pursuant to Section 26 Subsection 2.”⁵⁶³

412. On the same day, 1 January 2017, the 2017 Renewable Energy Sources Act abolished the feed-in tariff system and confirmed that “[t]he amount of payments for electricity generated from renewable sources is intended to be determined by tenders.”⁵⁶⁴

413. On 29 June 2017, the NOH 2 Project Companies (SeaStorm I, SeaStorm II, SeaWind III, SeaWind IV, GAIA I Nord, GAIA II, GAIA III, GAIA IV and GAIA V Nord) and a number of other investors in the German offshore wind energy sector filed complaints with

⁵⁵⁹ Cl. Mem., para. 368. ↩
⁵⁶⁰ O-NEP 2015 (2025), C-0041. ↩
⁵⁶¹ Order of Projects, Comparison between O-NEPs 2013 (2023), 2014 (2024), 2015 (2025), C-0042; Second Draft of O-NEP 2015 (2025), C-0038 / R-0074, p. 46. ↩
⁵⁶² 2017 Offshore Wind Energy Act, C-0045/ RL-0148, Sec. 46(1). ↩
⁵⁶³ 2017 Offshore Wind Energy Act, C-0045/ RL-0148, Sec. 46(3). Section 26(2) defines “existing projects” that are allowed to participate in the tenders. ↩
⁵⁶⁴ 2017 Renewable Energy Sources Act, C-0044, Sec. 2(3). ↩

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the Constitutional Court, challenging the constitutionality of Article 2, Section 46(3), first sentence, of the 2017 Offshore Wind Energy Act.

414. On 30 June 2020, the Court issued its decision in the matter, finding that the 2017 Offshore Wind Energy Act was incompatible with the provisions of the German Constitution protecting legitimate expectations, and that “providing for a compensation regime is necessary.”⁵⁶⁵ More specifically, having determined that the provisions governing the transition from the 2012 Offshore Installations Ordinance to the 2017 Offshore Wind Energy Act did not apply to the complainants, the Court ruled that the complaints were in part well-founded:

Insofar as the Offshore Wind Energy Act introduces a fundamentally revised legal framework for the approval of offshore wind farms that renders invalid procedural steps completed in the process under the previously applicable law, including permits and planning approvals, this is compatible with Art. 14(1) GG [...]. It does not violate Art. 12(1) GG either [...]. However, the quasi-retroactive effects following from the transition are not entirely compatible with the general principle of the protection of legitimate expectations (Art. 2(1) in conjunction with Art. 20(3) GG) [...]. There has been no violation of Art. 3(1) GG.⁵⁶⁶

415. The Court also determined that, as a result of the quasi-retroactive effect of the Act, the complainants’ legal positions had lost their value:

In the present case, the affected legal position in this sense is the sum of procedural steps taken under the old law to meet approval requirements then in force, in particular the planning work and explorations carried out by the complainants. [...] The complainants had therefore not simply expected that a law that was favourable to them will not change but had instead gone through the approval process provided for by law and had carried out separate procedural steps, such as base line surveys of the marine environment and preparatory explorations of the ground of the building site as well as, in some cases, attending hearings as part of the planning approval procedure. [...]

These procedural positions have lost their value. The value of the procedural steps taken was to satisfy the necessary requirements for

⁵⁶⁵ June 2020 Constitutional Court Decision, C-0305 / RL-0145, p. 3. ↩
⁵⁶⁶ June 2020 Constitutional Court Decision, C-0305 / RL-0145, para. 73. ↩

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the putting into operation of the planned wind farms. Their value has been lost in that they no longer contribute to satisfying the requirements for putting the wind farms into operation. This applies to all procedural steps taken by all complainants. The steps taken under the old law have become futile because the processes have been terminated and the position reached in those processes cannot be transferred or taken into account under the new law. [...]

The principle of the protection of legitimate expectations is only affected insofar as the quasi-retroactive effects of the Act cause the loss of value of the legal positions in question.⁵⁶⁷

416. By contrast, the Court found that the Article 14(1) of the Constitution, which deals with protection of property rights, had not been violated:

Art. 14(1) GG has not been violated. The challenged provisions do not affect protected property rights. In principle, the constitutional guarantee of property protects all rights constituting assets (vermögenswerte Rechte) that the legal order assigns to those entitled to these rights in such a way that they may exercise the associated powers at their own choice for their private benefit [...]. The permit granted to the complainant in proceedings 1 BvR 2190/17 does not, however, constitute property within the meaning of Art. 14(1) GG, and nor do the procedural positions reached by the complainants in proceedings 1 BvR 1679/17 under previously applicable law.⁵⁶⁸

417. As noted above (see paragraph 143), in November 2020, pursuant to the Court’s decision, the German government amended the Offshore Wind Energy Act, providing compensation to reimburse the owners of offshore wind projects whose plan approval process had been terminated, or whose approval had been lost in accordance with the earlier version of the Offshore Wind Energy Act, for certain costs they had incurred in site investigations.⁵⁶⁹

(b) The Tribunal’s determinations

418. As summarized above, the Claimants submit that (i) the centralized grid connection system introduced by the 2012 Energy Act; (ii) the halting of development in areas further away from shore by way of the O-NEPs and related measures, together with the “abrupt”

⁵⁶⁷ June 2020 Constitutional Court Decision, C-0305 / RL-0145, paras. 140-142. ↩
⁵⁶⁸ June 2020 Constitutional Court Decision, C-0305 / RL-0145, para. 74. ↩
⁵⁶⁹ 2020 Offshore Wind Energy Act, C-0306 / RL-0148. ↩

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reduction of Germany’s renewable energy expansion targets; and (iii) the introduction of a compulsory tender procedure by way of the 2017 Energy Act and the Offshore Wind Energy Act, amount to a breach of the FET standard in Article 10(1) of the ECT.

419. The Claimants contend that the 2012 Energy Act deprived the OWF developers of control over their grid connections, which were no longer a matter of legal right. Instead of the OWFs, it was now the TSOs that were able to fix, with the BNA’s approval, binding grid connection dates. According to the Claimants, the 2013, 2014 and 2015 O-NEPs that were subsequently issued pursuant to the new regime “delayed the NOH 2 Projects by over a decade” and also adopted “distance to shore” as the primary regulatory criterion, thus giving priority to grid connections for OWF projects located nearer to the coast. As a result, the earliest possible grid connection dates for the NOH 1 projects were pushed back to 2018 (for OWP Albatros), and the NOH 2 projects, which were located further away from shore, were delayed even further, with some scheduled initially, by O-NEP 2013, for 2025-2029 and then eventually, by O-NEP 2015, for 2031-2035.⁵⁷⁰ Finally, according to the Claimants, the compulsory tender procedure introduced in 2017 delivered “the final knock-out blow” and, as a result, “[t]he Claimants lost their exclusive right to develop [the NOH 2] projects, thereby destroying their entire value, without receiving any form of compensation.”⁵⁷¹

420. As noted above, the Respondent denies any breach of the FET standard. According to the Respondent, the German government never committed to a regulatory standstill vis-à-vis the Claimants, did not frustrate the Claimants’ legitimate expectations and did not make any radical changes to the applicable legal framework. Germany merely exercised its right to regulate, which should be respected.

421. The Tribunal analyzes below the Parties’ arguments in light of facts that the Tribunal finds established, based on the evidentiary record.

⁵⁷⁰ Cl Mem., paras. 280-284, 368. See also Order of Projects, Comparison between O-NEPs 2013 (2023), 2014 (2024), 2015 (2025), C-0042; Second Draft of O-NEP 2015 (2025), C-0038 / R-0074. ↩
⁵⁷¹ Cl. Mem., para. 10. ↩

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422. The Tribunal notes that, while the centralized grid connection system introduced by the 2012 Energy Act was on its face a justified and legitimate measure in view of the challenges faced by the offshore wind energy industry at the time, and did not necessarily have to result in additional delay in granting grid connections, the way in which the O-NEPs were in fact implemented did result in substantial additional delay. Thus, as discussed above, O-NEP 2013 established binding grid connection dates that resulted in substantial delays for the Claimants’ Offshore Wind Projects, in particular for the NOH 2 projects (with grid connection dates between 2025-2029), when compared with the 30-month delay set out in the 2009 BNA Position Paper.⁵⁷² While the Tribunal does not consider that the 2009 BNA Position Paper was legally binding, or created a legal right to a 30-month delivery time for a grid connection, it was an authoritative indication, based on the BNA’s interpretation of the 2009 Energy Act, of the expected timeframe at the time of its adoption.

423. Moreover, although it was clear by 2010-2011 at the latest that the Claimants’ Offshore Wind Projects would be delayed in any event, in view of the difficulties faced by TenneT, in March 2010, the German federal government stated that it was “committed to ensuring that grid operators implement the timely connection of offshore wind farms to the power grid quickly and effectively.” The government further noted that “[t]he Position Paper by the BNA pursuant to Section 17(2a) Sentence 1 Energy Act contributed to a significant clarification and hence investment certainty for the individual projects.”⁵⁷³ The Claimants thus reasonably expected at the time they made their investments that the delivery time for a grid connection indicated in the 2009 BNA Position Paper would not be unreasonably delayed, even if some delay was to be expected.

424. However, this expectation was frustrated when O-NEPs 2013, 2014 and 2015 established grid connection dates that were much later than the delayed dates envisaged by TenneT at the time when the Development Freeze was introduced, including for the NOH 1 projects,

⁵⁷² See above paragraphs 128 et seq. ↩
⁵⁷³ Cl. Mem., para. 113; Government Response, “The current status of the Expansion of OWFs in the North Sea and the Baltic Sea,” Bundestag Drucksache 17/1283, 31 March 2010, C-0112 / R-0022, p. 7. ↩

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which were first postponed to 2018-2022 and then to 2019-2023, and for the NOH 2 projects, which were ultimately pushed back to 2031-2035.⁵⁷⁴

425. The additional delay appears to have been largely a consequence of the O-NEPs’ hard-coding of the distance to shore criterion, which according to the 2012 Energy Act was only one of the criteria and not the main criterion, for the implementation of the offshore grid development plan. Indeed, in the 2012 Energy Act, it was listed as the third of four criteria, together with “the progress of realization of the offshore plants to be connected, the efficient use of the connection capacity to be built” and “the planned commissioning of the grid connection points.”⁵⁷⁵ By contrast, the O-NEP 2013, as proposed by the TSOs, confirmed a weighting and ranking of criteria that established “the distance from the coast” as one of “particular importance” and as the “first/primary selection criterion” for determining the timing of offshore grid expansion.⁵⁷⁶ For the projects in zones 3-5, it effectively became the sole criterion applied, producing massive delays to these projects. The change also destroyed the Coastal Distance Bonus, which was introduced by the 2004 Renewable Energy Sources Act and was maintained in the 2009 and 2012 amendments of the Act, and which provided specific incentives to projects that were to be developed further away from shore and in deeper waters.⁵⁷⁷ The O-NEPs deprived the Coastal Distance Bonus of any relevance given the delays they caused to the projects.

426. Moreover, the March 2015 Circular announced that the BSH would “not conduct any plan approval procedures for projects located [in zones 3, 4 and 5] until further notice,” and confirmed that “no application conferences and public hearings will be held.”⁵⁷⁸ The circular thus endorsed the priority being given to projects closer to shore, regardless of their stage of development, in accordance with the O-NEPs, rather than any provisions of the 2012 Energy Act or the terms of the 2012 Renewable Energy Sources Act, which had,

⁵⁷⁴ See above paragraph 126 (TenneT announcing in the spring of 2012 that it was not in a position to provide a grid connection to the Albatross Test Field until 2017, some 60 months after the approval date). ↩
⁵⁷⁵ 2012 Energy Act, C-0035, Sec. 17b(2). ↩
⁵⁷⁶ O-NEP 2013 (2023), C-0039 / R-0033, p. 49. ↩
⁵⁷⁷ 2004 Renewable Energy Sources Act, C-0016 / RL-0155, Sec. 10(3), Sentence 4; 2012 Renewable Energy Sources Act, C-0023 / RL-0159, Sec. 31(2), Sentence 2; 2009 Renewable Energy Sources Act, 1 C-0059 / RL-0154, Sec. 31(2), Sentence 2. ↩
⁵⁷⁸ Letter from BSH to GAIA I, 5 March 2015, C-0273. ↩

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inter alia, maintained the Coastal Distance Bonus. As a result, the Claimants were effectively prevented from progressing their projects to the approval stage.

427. Strabag’s board noted in its meeting held on 15 April 2015 that the circular meant “an immediate development stop by BSH for all projects of Strabag pipeline.”⁵⁷⁹ These included one of the NOH 1 projects (GlobalTech II) and all of the NOH 2 projects. The board further noted that “the BSH’s statement can be interpreted as a preparation for a further system change in the German North Sea and Baltic Sea – namely to introduce a tendering system for offshore capacities,” and that “[w]hether compensation will be paid for the previous upfront costs cannot be estimated at present and will become a core topic of system change 2.”⁵⁸⁰

428. While the March 2015 Circular also referred to the 2014 Renewable Energy Sources Act, which reduced the target for offshore wind energy by 2030 from 25 GW to 15 GW, the Tribunal is not persuaded that such a policy change would amount, in itself, to a breach of the FET standard under the ECT.⁵⁸¹ The Contracting States’ right to regulate is not limited by the ECT, so long as such regulations, or the way in which they are implemented, remain compatible with the terms of the ECT, including those providing for exceptions from the obligations imposed by the ECT, such as Articles 21 and 24.⁵⁸² The reduction of the offshore wind energy target falls under this category.

429. Finally, the 2017 Offshore Wind Energy Act formalized as a matter of law the effects of the March 2015 Circular by terminating the plan approval processes to construct and operate offshore wind energy installations for all projects that did not fall under the transitional provisions in Section 26(2) of the Offshore Wind Energy Act and thus were not entitled to participate in the tenders and did not obtain any step-in rights. This included all NOH 2 projects.

⁵⁷⁹ Strabag, Board Information on UB4W Energie, 15 April 2015, C-0274, p. 1. ↩
⁵⁸⁰ Strabag, Board Information on UB4W Energie, 15 April 2015, C-0274, pp. 1-2. ↩
⁵⁸¹ 2014 Renewable Energy Sources Act, C-0207 / RL-0160. ↩
⁵⁸² Article 21 (“Taxation”) carves out “Taxation Measures” (as defined in the ECT) from its scope of obligations, with the conditions and limitations set out in the provision, whereas Article 24 (“Exceptions”) contains a series of exceptions similar to those included in the General Agreement on Tariffs and Trade. ↩

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430. The 2017 Offshore Wind Energy Act thus in part merely formalized the effects of measures already taken earlier, as the approval processes had de facto been suspended already since 2013-2014 for projects located further away from shore,⁵⁸³ by terminating the plan approval processes for all projects that did not fall under the transitional provisions of the Act. The 2017 Wind Energy Act also introduced a further regime change by substantially modifying the remuneration regime as it eliminated the feed-in tariff and introduced a tender-based system.

431. The Tribunal finds that, while the regulatory measures taken by Germany as of late 2012, including the 2012 Energy Act, are not on their face incompatible with the FET standard, the way they were implemented – including by way of O-NEPs and other communications by the German authorities, including the March 2015 Circular and the BSH’s rejection, on 2 June 2014, of the Claimants’ request for an application conference for GAIA I Nord – frustrated the Claimants’ legitimate expectation that the legal framework under which they had made their investments, and indeed which had been specifically enacted to support the kinds of investments the Claimants had made, would not be effectively dismantled.⁵⁸⁴ Dr Guillet aptly summarized these developments in his expert report:

[T]hese Regulatory Changes effectively introduced a “rationing” of offshore wind development by making grid connection a regulatory bottleneck and explicitly using it to control the overall capacity of offshore wind farms developed. What was a temporary bottleneck (the capacity of the TSOs to actually build the first wave of grid connections, as per their obligation towards the developers under

⁵⁸³ Letter from BSH to GAIA I, 2 June 2014, C-0263; Letter from BSH to GAIA I, 6 March 2015, C-0273; Letter from BSH to GAIA I, 4 August 2016, C-0281; Tr. Day 3, 109:4-13 (testimony of Dr Nico Nolte). ↩
⁵⁸⁴ For a case adopting a similar approach on the level of principle see, e.g., Cube v. Spain, CL-0027 / RL-0283, para. 388: ↩

The Tribunal does not consider it necessary that a specific commitment be made to each individual claimant in order for a legitimate expectation to arise. At least in the case of a highly-regulated industry, and provided that the representations are sufficiently clear and unequivocal, it is enough that a regulatory regime be established with the overt aim of attracting investments by holding out to potential investors the prospect that the investments will be subject to a set of specific regulatory principles that will, as a matter of deliberate policy, be maintained in force for a finite length of time. Such regimes are plainly intended to create expectations upon which investors will rely; and to the extent that those expectations are objectively reasonable, they give rise to legitimate expectations when investments are in fact made in reliance upon them.

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the previous regime) turned into a regulatory bottleneck managed by the German government and subject to party politics.⁵⁸⁵

432. In view of the above, the Tribunal finds that the Respondent’s conduct thus undermined the “stable, equitable, favourable and transparent conditions for Investors” that it committed to encourage and create under Article 10(1) of the ECT and resulted in a denial of the Claimants’ right to fair and equitable treatment.

433. The Tribunal’s finding governs both the NOH 1 and NOH 2 projects. While the Claimants had sold the NOH 1 Project Companies by the time the 2017 Offshore Wind Energy Act was enacted, each of the NOH 1 Project Companies – OWP Albatros (which had been sold in December 2014), OWP West (which had been sold in December 2015) and GlobalTech II/III (which had been sold in August 2016) – had been adversely affected by O-NEP 2013, which was first issued in draft form on 2 March 2013 and again on 24 June 2013, and was confirmed by the BNA on 19 December 2013.⁵⁸⁶ While the O-NEPs were developed and proposed by the TSOs, they were confirmed by the BNA, a governmental agency whose decisions are indisputably attributable to Germany under international law.⁵⁸⁷

434. In conclusion, the Tribunal is satisfied that the Claimants have established that the Respondent is in breach of the FET standard under the ECT as regards the Offshore Wind Projects. While the Respondent’s breach was a result of a series of acts beginning on 19 December 2013, when the BNA confirmed the first O-NEP (O-NEP 2013) proposed by the TSOs, the Tribunal determines that the Respondent’s conduct amounted to a breach of the FET standard at the latest by 6 March 2015, when the BSH issued the March 2015 Circular and confirmed that it would not conduct any plan approval procedures for projects

⁵⁸⁵ Guillet ER, para. 123; see also para. 124 (the term “party politics” referring to the debate surrounding the surcharges paid by consumers to support the feed-in tariff, “following its substantial increase caused by the large volumes of solar capacity installed in 2009-2011 under very high [feed-in tariff].”). ↩
⁵⁸⁶ Cl. Mem., para. 368. ↩
⁵⁸⁷ That the BNA is an organ of the German state is undisputed. See Cl. Mem., para. 56 (defining BNA as “governmental agency within the Federal Ministry of Economics and Technology;” and Resp. Rej., para. 569 (defining the BNA as “the competent regulatory authority”) and para. 576 (noting that “the TSOs had to draft the ONEPs, while the BNetzA took the final decision on the grid connection and their implementation dates, after conducting extensive public consultations several times each planning cycle.”) ↩

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located in zones 3, 4 and 5, and that it would not hold any application conferences and public hearings for such projects.

B. THE ALLEGED EXPROPRIATION OF THE CLAIMANTS’ INVESTMENTS

(1) The Scope of the Claimants’ Expropriation Claim

435. The Claimants claim that the Respondent expropriated both the GFT and the NOH 2 projects; however, they do not bring an expropriation claim for the NOH 1 projects, which were all sold during the period 2014-2016, albeit (according to the Claimants) at a substantially decreased price.⁵⁸⁸

436. As to the Claimants’ claim for expropriation of the GFT, the Tribunal has found above that the Claimants’ decision to suspend the development of the GFT in December 2012 was not a consequence of the Development Freeze or the 2012 Energy Act and, accordingly, the Respondent’s treatment of the GFT did not amount to a breach of the FET standard. Since the Claimants have not shown that Germany’s measures caused the suspension of the development of the GFT, the Tribunal rejects the Claimants’ expropriation claim in relation to the GFT for the same reasons as the Claimants’ FET claim.

437. Accordingly, this Section is limited to an analysis of the Claimants’ expropriation claim in relation to the NOH 2 projects, and the Respondent’s defense thereto.

(2) The Parties’ Positions

a. The Claimants’ Position

(i) Applicable legal standard

438. The Claimants argue that the Respondent expropriated the NOH 2 projects in breach of Article 13(1) of the ECT. According to the Claimants, Article 13 of the ECT establishes “a cumulative set of requirements” and covers, by its terms, both direct and indirect, or de facto, expropriations. The Claimants submit that “[t]he core element of an indirect expropriation is the economic effect that State actions or omissions have on a specific

⁵⁸⁸ See Cl. Mem., paras. 513-552; and Cl. Reply, paras. 824 et seq. ↩

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investment,” and therefore an indirect expropriation “cannot be identified through an abstract set of legal principles but rather require[s] a case by case analysis.”⁵⁸⁹

439. The Claimants submit that regulatory measures may amount to an indirect expropriation, to the extent that such measures result in a substantial deprivation of the investment. In other words, what is relevant is not the State’s intent or the form of the measure or its underlying purpose, but the economic impact.⁵⁹⁰ According to the Claimants, “[a] series of acts may cumulatively result in such substantial deprivation of value, even when no single act is per se tantamount to expropriation.”⁵⁹¹

440. The Claimants also disagree with the Respondent’s argument that the Claimants’ expropriation claim fails under the police powers doctrine. According to the Claimants, the police powers doctrine is simply not applicable in this case, and in any event, the Respondent’s measures would not fall within the police powers doctrine, even if it did apply.⁵⁹² The Claimants submit, citing Pope & Talbot v. Canada, that the police powers doctrine “has a very limited scope and is not a ‘gaping loophole’ providing a ‘blanket exception for regulatory measures.’”⁵⁹³ The doctrine only covers two specific fields – “neutralising threats to the environment or public order and health” and “enforcing existing regulations against wrongdoings such as the imposition of sanctions or revocation of licenses.”⁵⁹⁴

441. Finally, the Claimants submit that the ECT is “lex specialis” and “carves out any exception from the duty to compensate under Article 13 ECT.”⁵⁹⁵ The Claimants refer, specifically, to Article 24 of the ECT which incorporates “a closed list of exceptions which partially overlap with the scope of the police powers doctrine.”⁵⁹⁶ The Claimants point out that

⁵⁸⁹ Cl. Mem., paras. 514-516. ↩
⁵⁹⁰ Cl. Mem., para. 518. ↩
⁵⁹¹ Cl. First PHB, para. 40. ↩
⁵⁹² Cl. Reply, para. 824. ↩
⁵⁹³ Cl. Reply, para. 828(i), citing Pope & Talbot Inc. v. Government of Canada, UNCITRAL, Interim Award, 26 June 2000, CL-0172 / RL-0303, para. 99. ↩
⁵⁹⁴ Cl. Reply, para. 835. ↩
⁵⁹⁵ Cl. Reply, para. 837. ↩
⁵⁹⁶ Cl. Reply, para. 837. ↩

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Article 24(1) specifically provides that the provision “shall not apply to Articles 12, 13 and 29.”⁵⁹⁷

(ii) Germany expropriated the NOH 2 projects without prompt and adequate compensation

442. The Claimants submit that Germany expropriated the NOH 2 projects by first eroding their value through a series of measures that impeded their advancement in the Plan Approval Process and delayed their grid connections by a decade, before eliminating all remaining value by extinguishing their rights in the Plan Approval Process altogether. These measures not only destroyed the NOH 2 projects, “but also a large part of Germany’s offshore wind market.”⁵⁹⁸

443. The Claimants state that it is uncontested that NOH 2 paid “a total amount of €78.46 million cash-free and debt-free to acquire the NOH2 Project companies on 10 January 2012.”⁵⁹⁹ The Claimants continued to carry out the necessary site investigations and progress the Projects in the approval process. The Claimants’ expectation to be able to rely on the existing regulatory framework was frustrated by Germany.⁶⁰⁰

444. First, the Development Freeze by the BSH in June 2012 stalled the development of most of the NOH 2 projects. Moreover, while the Development Freeze was initially a temporary measure, it effectively became permanent for projects located in zones 3-5 as a result of Germany’ subsequent measures.⁶⁰¹ Second, Germany’s subsequent measures, including the 2013, 2014 and 2015 O-NEPs, severely delayed the expected grid connection dates for the NOH 2 projects. By way of the March 2015 Circular Germany then halted development of projects further away from the shore altogether, including all NOH 2 projects.⁶⁰² Finally, Germany’s 2017 measures irrevocably destroyed any remaining value of the Claimants’

⁵⁹⁷ Cl. Reply, para. 837. ↩
⁵⁹⁸ Cl. First PHB, para. 6. ↩
⁵⁹⁹ Cl. First PHB, para. 44. ↩
⁶⁰⁰ Cl. First PHB, paras. 44-45. ↩
⁶⁰¹ Cl. First PHB, para. 45. ↩
⁶⁰² Cl. First PHB, para. 46. ↩

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NOH 2 projects, as their Plan Approval Processes were terminated and they were not allowed to participate in the transitional tenders and did not obtain any step-in rights.⁶⁰³

445. The Claimants further refer to the June 2020 decision of the Constitutional Court, which determined that the procedural positions of the complainants, including those of the NOH 2 Project Companies, “have lost their value.”⁶⁰⁴

446. The Claimants contend that “Germany’s compensation scheme does not provide prompt, and much less adequate, compensation for the NOH 2 Projects’ fair market value as of the Valuation Dates.”⁶⁰⁵ According to the Claimants, the scope of the compensation scheme is limited to “futile expenditure (ie ‘negatives Interesse’) as opposed to full reparation in the form of putting the Claimants in the position but for the measures.”⁶⁰⁶

447. Finally, the Claimants submit that the expropriation of the NOH 2 projects was also discriminatory (although they acknowledge that this has no practical effect on damages in this case) because the 2017 Offshore Wind Energy Act treated projects located in zones 1 and 2 more favorably than those located in zones 3, 4 and 5, regardless of their stage of development.⁶⁰⁷

b. The Respondent’s Position

448. The Respondent denies that the Claimants’ expropriation claim has any merit. According to the Respondent, “[w]itnesses and experts alike confirmed that Respondent did not indirectly expropriate NOH 2’s purported investments.”⁶⁰⁸ Moreover, a mere loss in value is not sufficient to establish expropriation and, in any event, regulatory measures taken by the host State in the normal exercise of its regulatory powers, and in the public interest, do not amount to an indirect expropriation.⁶⁰⁹

⁶⁰³ Cl. First PHB, para. 47. ↩
⁶⁰⁴ Cl. PHB, para. 48; June 2020 Constitutional Court Decision, C-0305 / RL-0145, para 141. ↩
⁶⁰⁵ Cl. First PHB, para. 49. ↩
⁶⁰⁶ Cl. First PHB, para. 49 ↩
⁶⁰⁷ Cl. Second PHB, para. 40. ↩
⁶⁰⁸ Resp. First PHB, para. 279. ↩
⁶⁰⁹ Resp. C-Mem., para. 1297. ↩

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449. The Respondent submits that expropriation only occurs “if there is not only loss in value, but veritable loss of control over the investment.”⁶¹⁰ The determination of whether a regulatory measure constitutes an indirect expropriation is a balancing act between the degree of interference by the host State with the investor’s right of ownership and the host State’s right to exercise its regulatory powers.⁶¹¹ The former does not trump the latter.

(i) Applicable legal standard

450. The Respondent contends that expropriation presupposes that the investor had protected rights under the domestic law of the host State; if there are no such rights, there can be no expropriation. This is the case here: the position of the NOH 2 projects in the approval process was not a legal position recognized under German law, as also confirmed by the Constitutional Court. According to the Respondent, the fact that an asset or a position can be sold on the market “is not sufficient to render this a constitutionally protected asset or position, which could be expropriated.”⁶¹²

451. In this case, the NOH 2 projects were located in the EEZ, over which Germany does not exercise sovereignty; the Claimants therefore cannot procure any property rights over those sites either. In any event, an administrative license or permit granted by State authorities, or the steps taken to obtain such license or permit, cannot be equated with a property right.⁶¹³ The definition of “Investment” in Article 1(6) of the ECT is consistent with this position: while it refers to “any right conferred [...] by virtue of any licenses and permits granted pursuant to law to undertake any Economic Activity in the Energy Sector,” it does not refer to any “position in the Approval Procedure.”⁶¹⁴

452. The Respondent submits that the Claimants’ expropriation claim is excluded by the police powers doctrine, which is “the primary test” for distinguishing between indirect expropriation and legitimate non-compensable regulation, not a justification for indirect

⁶¹⁰ Resp. C-Mem., para. 1303. ↩
⁶¹¹ Resp. C-Mem., para. 1303. ↩
⁶¹² Resp. C-Mem., para. 1309. ↩
⁶¹³ Resp. C-Mem., paras. 1311-1312. ↩
⁶¹⁴ Resp. First PHB, para. 288; ECT, CL-0001, Art. 1(6)(f). ↩

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expropriation.⁶¹⁵ According to the Respondent, the police powers doctrine is part of customary international law, and as such applies in the present case by virtue of Article 26 of the ECT, and should also be taken into account in the interpretation of Article 13 of the ECT as a “relevant rule[] of international law applicable in the relations between the parties” to the ECT, in accordance with Article 31(1)(c) of the VCLT.⁶¹⁶ The Respondent submits that the police powers doctrine is broader than claimed by the Claimants; the doctrine “is not limited to regulatory measures that aim to protect public health, public order or the environment,” but “also encompasses regulatory measures that are adopted in furtherance of other public purposes or interests.”⁶¹⁷

453. Finally, the Respondent disagrees with the Claimants’ argument that the police powers doctrine is excluded by virtue of Article 24 of the ECT. The Respondent submits that the police powers doctrine “is only concerned with establishing whether or not a particular state conduct can be characterized as indirect expropriation,” and not with derogation from treaty obligations.⁶¹⁸ Accordingly, in the Respondent’s view, Article 24 of the ECT “has no bearing whatsoever on the question whether or when regulatory conduct can be characterized as indirect expropriation under Art. 13 ECT.”⁶¹⁹

(ii) There was no governmental interference or discrimination

454. The Respondent submits that the regulatory changes invoked by the Claimants cannot amount to an expropriation since the Claimants did not have any legitimate expectation that the regulations would not change. The Claimants’ expectations can only be legitimate if the host State has made a specific commitment not to amend its legislation, and there was no such commitment in this case.⁶²⁰

455. Moreover, there was no governmental interference with the Claimants’ alleged investments because the Claimants did not lose control of their investments. The Claimants remained

⁶¹⁵ Resp. Rej., paras. 1308, 1357. ↩
⁶¹⁶ Resp. Rej., paras. 1358-1361. ↩
⁶¹⁷ Resp. Rej., para. 1369. ↩
⁶¹⁸ Resp. Rej., para. 1381. ↩
⁶¹⁹ Resp. Rej., para. 1381. ↩
⁶²⁰ Resp. First PHB, paras. 292-293. ↩

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free to conduct their day-to-day business and have not complained about loss of control, or that they had to “clos[e] down the NOH2 Projects.”⁶²¹ Even assuming the sole effects doctrine (i.e. which only considers the effect of a measure taken) applied, this would not help the Claimants since the Respondent's measures did not have any effect on the value of the NOH 2 projects. Moreover, given the NOH 2 projects were still far away from obtaining approval, let alone a grid connection, “their value was relatively low,” and accordingly there was no “severe depreciation.”⁶²²

456. The Respondent also denies that it discriminated against the Claimants. The measures applied equally to all developers in the EEZ, and the criteria for the scope of application of the transitional rules were not discriminatory either. Indeed, the Claimants' experts were unable to come up with alternative criteria at the Hearing. The Constitutional Court also did not find that the Offshore Wind Energy Act contained any discriminatory provisions.⁶²³

(3) The Tribunal's Analysis

457. The relevant provision of the ECT in connection with the Claimants' expropriation claim is Article 13(1), which provides in relevant part:

Investments of Investors of a Contracting Party in the Area of any other Contracting Party shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation (hereinafter referred to as “Expropriation”) except where such Expropriation is:

(a) for a purpose which is in the public interest;

(b) not discriminatory;

(c) carried out under due process of law; and

(d) accompanied by the payment of prompt, adequate and effective compensation.⁶²⁴

⁶²¹ Resp. First PHB, paras. 295-299. ↩
⁶²² Resp. First PHB, paras. 300-302. ↩
⁶²³ Resp. First PHB, paras. 303-307. ↩
⁶²⁴ ECT, CL-0001, Art. 13(1). ↩

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458. It is undisputed that Article 13(1) governs both direct and indirect expropriations; however, the Parties disagree as to what constitutes an indirect expropriation. The Claimants argue that regulatory measures may amount to an indirect expropriation, and whether or not they do, depends solely on the effect of the measure on the value of the investment; the State's intent or the form of the measure or its underlying purpose are not relevant. Moreover, according to the Claimants, an indirect expropriation may also be “creeping,” that is, it may involve a series of acts that cumulatively result in a substantial deprivation of value, even when no single act is per se tantamount to expropriation.

459. The Respondent argues, in response, that liability for substantial deprivation can be assumed only in exceptional circumstances, and that this cannot be the case if the host State has legitimately exercised its right to regulate. Moreover, according to the Respondent, a creeping expropriation did not take place in this case since the Claimants retained control over the NOH 2 projects and were able to continue the day-to-operations of the NOH 2 Project Companies. The Respondent further relies on the police power doctrine, contending that the measures at issue in this case fall within the police powers doctrine as the Claimants' investments were made in a “highly regulated industry that underwent constant regulatory change and technological evolution.”⁶²⁵ More specifically, the Respondent contends that “[t]he police powers doctrine is not limited to regulatory measures that aim to protect public health, public order or the environment,” but “also encompasses regulatory measures that are adopted in furtherance of other public purposes or interests.”⁶²⁶

460. The Tribunal notes at the outset that, while it has determined above that the Respondent is in breach of the FET standard under Article 10(1) of the ECT, this does not entail that the measures that were found to amount to a breach of the FET standard also amount, ipso jure, to an unlawful expropriation. Whether an expropriation has occurred within the meaning of Article 13(1) of the ECT is a separate determination as a matter of fact and law.

⁶²⁵ Resp. Rej., para. 1367. ↩
⁶²⁶ Resp. Rej., para. 1369. ↩