International Arbitration Newsletter - March 2021 | Regional Overview: Europe

GERMANY

Germany to compensate E.On, EnBW, RWE and Vattenfall  for the closure of nuclear power plants

The German government has reached a compensation agreement with energy companies E.On, EnBW, RWE and Vattenfall worth €2.438 billion for the closure of nuclear power plants, putting an end to several years of litigation between the two parties related with an International Centre for Settlement of Investment Disputes (ICSID) claim worth up to €7 billion.

Germany will pay €1.425 billion to Vattenfall, €880 million to RWE, €80 million to EnBW and €42.5 million to PreussenElektra, E.ON's nuclear subsidiary. In return, the companies have agreed to withdraw all pending lawsuits against the state and waived the right to bring any future claims.

These payments serve both to compensate for the volumes of electricity that cannot be generated due to the shutdown and the investments made by the companies.

The agreement puts an end to the existing litigation both before the German Constitutional Court and before other international arbitration tribunals. The confrontation between the two dates back to 2011, when after the disaster at the Fukushima nuclear power plant, the German government pledged to close gradually all nuclear reactors by 2022.

SPAIN

Tribunal dismisses Blackrock´s renewables claim against Spain

A Stockholm Chamber of Commerce (SCC) arbitral tribunal has dismissed the claim by FREIF Eurowind (subsidiary of Blackrock investment fund) against the Kingdom of Spain, and awarded the defendant with € 2.7 million plus € 300k in arbitration costs.

The claim alleged that Spain first attracted investors with its previous regime and then went back on its word, after having profited from the investments, violating Energy Charter Treaty’s (ECT) standards for fair and equitable treatment as well as its impairment and its umbrella clauses. A total of € 135 million was claimed for the damages allegedly sustained by the claimant.

The tribunal dismissed Spain’s objection that investments in Spain by an investor from the UK –at the time being a Member State of the EU- could not be deemed as investments in the area of another contracting party as required under Article 26 of the ECT because the EU itself was a contracting party. Therefore, it ruled that both countries were separately and individually contracting parties. In addition, the Tribunal dismissed the objection to find the arbitration clause invalid under EU Law because its applicability to the proceedings had not been established, and also rejected the objection of the claimant having infringed the “fork in the road” provision of the ECT because the company which challenged the same measures before the Spanish courts was a parent company of the claimant.

On the merits, however, the Tribunal upheld that there was no impairment of the investment as a result of the conduct of Spain, and that the claimant was aware of the possibility of changes in the remuneration scheme, so that there was no breach of the duty of transparency and good faith by Spain. Furthermore, it upheld that there was no violation of the expectation for a reasonable rate of return. Last, but not least, the Tribunal dismissed the claim under the umbrella clause of the ECT because the panel did not find that Spain entered into any obligation it did not keep.

FRANCE

ICC Tribunal rules on pharmaceutical dispute

Pharmaceutical companies Poxel and Merck Serono, French and German based respectively, have recently received closure on the dispute filed before the ICC in 2019 by the latter, having been awarded a payment of € 1.8 million.

The two companies signed a licensing agreement under which Poxel pursued the development of an anti-diabetic drug, having agreed to pay Merck Sorono royalties on potential future sales.

Under this agreement, Poxel developed Imeglimin, a well-known type 2 diabetes drug, and succeeded in commercializing it to partners interested in launching the drug in the North American and the Southeast Asian markets.

Having received € 7.8 million in royalties, Merck Serono initiated ICC proceedings claiming the payment of an additional € 6 million. The claim was contested by Poxel and a counterclaim was filed against Merck Serono demanding the payment of € 1.7 million.

The final award was rendered in February 2021 and it awarded Merck Serono a partial payment of the amounts claimed and a portion of its costs in the proceedings. Poxel’s counterclaim was fully dismissed by the Tribunal.

ITALY

Italy’s 2011-2014 measures on solar power held to be fair and equitable

An ICSID tribunal has rejected Dutch-registered Silver Ridge Power BV’s claim, on the basis of the Energy Charter Treaty (ECT), considering that the different measures enacted by the Italian Republic between 2011 and 2014 had not amended the conditions for access to feed-in tariffs (FIT) and had not violated commitments made to the promotors of photovoltaic plants.

The claimant indirectly owned and controlled 10 Italian local development companies, which in turn owned and operated the 25 photovoltaic plants subject to the current dispute.

In the arbitration proceedings, Silver Ridge Power BV argued that Italy, by adopting: a) the Romani Decree in 2011, b) the Fifth Energy Account, and c) the Spalma-incentivi Decree in 2014, reduced the FIT the claimant received for its 25 photovoltaic plants and raised the administrative management fee introduced by the Fifth Energy Account. Thus, it alleged the breach of Articles 10 and 13 of the ECT.

Italy raised several jurisdictional objections, amongst others, that the ECT did not apply to disputes between an investor of a Member State of the European Union and another EU Member State, the so-called “intra-EU objection”. In the award, the Tribunal upheld jurisdiction over the claim and unanimously rejected all of Italy’s jurisdictional objections, not seeing any reason to refrain from exercising its jurisdiction in the case based on the European Court of Justice ruling in Achmea.

Regarding the grounds, the Tribunal unanimously rejected the claimant’s liability claims to the effect that, by the adoption of the Romani Decree, the Fourth and the Fifth Energy Accounts, the Respondent breached Articles 10 and 13 of the ECT.

However, the rejection of liability by the adoption of the Spalma incentivi Decree in 2014 was only made by majority. In this sense, it is to be noted the dissenting opinion of one of the judges, who considered that Italy did not treat claimant’s investments fairly when, through the Spalma Incentivi Decree, it unilaterally revised the terms of the Third, Fourth and Fifth Energy Accounts so as to deny those investments some of the benefits to which they were entitled under the terms of those Accounts. In this sense, and using the “scoop of ice-cream” example, the diseenting arbitrator concluded that a father “could not fairly give his daughter less ice cream than he promised to encourage her to help clean the house, and Italy cannot fairly give Claimant less-valuable benefits than it promised to encourage Claimant to expand Italy’s solar-power capacity”.

SWEDEN

€500 million claim filed by Livian GmbH against Elekta rejected

A London Court of International Arbitration (LCIA) tribunal has recently rejected all the claims against the Swedish distributor of radiotherapy products for treatment of cancer and brain disorders, Elekta, by the German medical technology supplier, Livian GmbH (formerly humediQ GmbH), in the second international arbitration process between the parties.

The tribunal held that Elekta did not breach the distribution contracts, as the company correctly accomplished its duties of promotion and advertising. The proceeding was worth over € 500 million and Elekta was awarded with its costs.