International investment arbitration – also known as investment treaty arbitration or investor-State arbitration – is a procedure whereby foreign investors may seek a binding adjudication of claims against host States that have either violated investment protection treaty obligations or, in some circumstances, breached their contractual commitments or their national foreign investment law. The countries of Europe are party to numerous bilateral and multilateral investment treaties which are intended to promote investment by ensuring fair treatment of foreign investors and which permit arbitration of investor claims before the International Centre for Settlement of Investment Disputes (ICSID) or similar fora. Although there are questions as to the long-term viability of the Eurozone, the end of 2014 brought stronger-than-expected growth. Germany led the region, growing by 7 percent in the fourth quarter of 2014. However, three Eurozone economies – Greece, Finland and Cyprus – contracted at the end of 2014. Greece’s unsettled position continues to pose a threat to confidence in the region. Outside the Eurozone, some countries (such as the United Kingdom) enjoyed steady growth in 2014. Lower energy and labor costs should encourage continued investment in Europe. The number of new investment arbitrations in the region in 2014 increased compared with 2013. Disputes are concentrated in the electric power and other energy industry, including a spate of recent cases against Spain relating to the country’s changes to subsidies for renewable energy (with five such cases filed in 2014 alone). Other industries that have given rise to significant numbers of disputes in the region include oil, gas and mining, and finance. A quarter of new disputes filed in 2014 were intra-European cases, which is lower than 2013 (where 42 percent of new claims were intra-European). Half of them were brought pursuant to the Energy Charter Treaty and the rest on the basis of intra-European bilateral investment treaties. Developments in 2014 brought the overall number of investment arbitrations involving the region to 99 (approximately 16 percent of all cases globally).1 European countries have concluded at least 1,902 investment treaties currently in force (including bilateral investment treaties, free trade agreements and other treaties containing investment-related provisions), six of which were signed in 2014 and six of which entered into force during the year. For purposes of this review, Europe includes the countries of Western, Central and Eastern Europe. We do not include Russia or other countries of the Commonwealth of Independent States (CIS), which are addressed in our separate review of investment arbitration in that region. Elevator Speeches International Investment Arbitration in Europe: Year in Review 2014 INTERNATIONAL ARBITRATION TEAM For questions about international investment arbitration, please contact a member of our International Arbitration Team, or the authors of this review: Authors: Emma Lindsay Counsel, New York +1 212 541 2121 firstname.lastname@example.org Nabeel Osman Associate, London +44 (0)20 3207 1236 email@example.com 1 The statistics in this paragraph are taken from UNCTAD IIA Issues Note, No. 1, February 2015, available at http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf. PAGE 2 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Investment Arbitration in the Region2 A total of 280 ICSID cases have involved parties from European countries as claimant investors, respondent States or both, with the first arbitration brought by an investor in the region – by Swiss and United States investors against Morocco – filed in 1972, and the first arbitration brought against a country in the region – by Swiss and Icelandic investors against Iceland – filed in 1983. Of those 280 cases, 115 were pending in 2014. Of investment arbitrations involving European countries pending in 2014, investors from the United Kingdom, the Netherlands, Spain, France and Germany have brought the greatest number of claims. Claims brought by investors from these five countries constitute a majority of all pending European cases (66 percent). Historically, Italy and Switzerland also featured among the most frequently represented home countries of investors in European cases. Top Nationalities of Investors with ICSID Arbitrations in Europe 2 This review considers only investment arbitrations brought under the auspices of ICSID, which constitute the majority of investment arbitrations in the region. PAGE 3 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Spain has faced the most investment claims in Europe, followed by Hungary and Romania. These three countries are the only European countries to have faced claims totalling in the double digits. All but one of the arbitrations brought against Spain were pending in 2014. The number of arbitrations against Spain pending in 2014 was more than twice the number of arbitrations against either Hungary or Romania. The majority of European claims (67 percent) have been brought by European investors against non-European countries. Just over a quarter of cases (26 percent) have been brought by European investors against European countries. It is comparatively rare for claims to have been brought by investors from outside the region against European countries (7 percent). In 2014, 50 percent more intraregional cases – i.e., cases brought by European investors against European countries – were initiated than in the previous two years. In previous years, claims were more commonly brought by European investors against non-European countries. Three times as many cases were brought against nonEuropean states in 2012 compared with 2014. European Countries Facing Investment Claims PAGE 4 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM in the nearest contender industry (oil, gas and mining) by more than three to one. Historically, investment disputes against European countries have arisen most frequently in the electric power, other energy, oil, gas, mining and finance industries. Of these disputes pending in 2014, disputes in the electric power and other energy industry outnumbered disputes Investment Cases by Industry Instrument Invoked to Establish ICSID Jurisdiction Inner Circle = Pending Cases Outer Circle = Total Cases Inner Circle = Pending Cases Outer Circle = Total Cases Cases Initiated Per Year European claimant* v. European respondent European claimant* v. non-European respondent Non-European claimant v. European respondent: 16 14 12 10 8 6 4 2 0 2012 2013 2014 Total Cases Initiated Per Year 25 20 15 10 5 0 2012 2013 2014 Total Cases Initiated Per Year 3 2 1 0 2012 2013 2014 Total Cases Initiated Per Year *at least one European claimant *at least one European claimant The basis for arbitral jurisdiction in most cases against European countries (89 percent) has been an investment treaty (typically a bilateral investment treaty). All but one pending case involving a European respondent are brought pursuant to an investment treaty. Of the 165 PAGE 5 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM concluded arbitrations (original proceedings), 30 cases (18 percent) have involved further proceedings seeking to annul the arbitral award. A far greater proportion of concluded arbitrations (48 percent) either settled or were discontinued. Investment Treaties Involving European Countries More than 58 percent of the nearly 3,300 investment treaties currently in existence involve European countries. Germany has signed the most investment treaties, followed by the United Kingdom, France and the Netherlands. Of the 1,902 investment treaties signed by European countries currently in force, 365 are treaties signed between or among only European countries. The United States has signed 13 investment treaties with European countries, 11 of which are bilateral investment treaties that permit investor-State arbitration (the treaties between the United States and each of Albania, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia). Six investment treaties involving the region were signed in 2014. The European Union entered into association agreements with Georgia, Moldova and Ukraine. In addition, bilateral investment treaties were concluded between Canada and Serbia, Colombia and France, and Georgia and Switzerland. Investor-State arbitration will be available under the three bilateral investment treaties following their entry into force. Among the six investment treaties that came into force in 2014, there were two free trade agreements with China (concluded by Iceland and Switzerland) and four bilateral investment treaties (Estonia/Kazakhstan, Finland/Hong Kong, France/Zambia and Netherlands/Zambia). Investor-State arbitration is permitted under all of these treaties. PAGE 6 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Other Developments in 2014 u Negotiations began between the European Union (EU) and China for a comprehensive investment treaty following the announcement of the planned treaty by the parties in November 2013. u Continuing the controversy over treaty-based claims brought by EU investors against other EU countries, on May 26, 2014, the European Commission issued an injunction to prevent Romania from honoring a US$250 million ICSID award in Micula v. Romania (ICSID Case No. ARB/05/20) on the basis that payment of the ICSID award would constitute illegal state aid under European Union law. On September 2, 2014, the Swedish investors commenced an action seeking to annul the Commission’s decision to enjoin payment of the award. The arbitral award is also the subject of an ongoing ICSID annulment proceeding, in which the Commission has been granted leave to present written arguments. u The final text of the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada was made public in September 2014 following the conclusion of negotiations between the parties. The treaty will be subject to legal revision for internal consistency before signature and ratification. It is the first trade agreement between the EU and a major world economy and provides for investor-State arbitration of investment disputes. u Negotiations for the Transatlantic Trade and Investment Partnership (TTIP) involving the European Union and the United States continued through 2014 and beyond with public consultations taking place on both sides of the Atlantic on issues including the inclusion and content of provisions permitting investor-State arbitration of investment disputes. Critical Times to Consult Counsel INVESTORS: u At the outset – when structuring an investment and negotiating project contracts u As soon as difficulties arise – when facing operational, regulatory or other issues in the host country u In discussions with the host country – when trying to resolve difficulties amicably u Before commencing a claim – when deciding whether and how to make a claim against the host country u In post-award proceedings – when seeking to collect on an award or reach a settlement with the host country u In getting the business relationship back on track – when moving forward in the wake of a dispute STATES: u At the outset – when negotiating and drafting investment treaties and national investment laws u In the pre-investment process – when inviting and accepting foreign investment u In the investment phase – when negotiating project contracts u As soon as notice of a dispute is given – when consulting with an investor about a potential investment arbitration claim u Upon receipt of a claim – when formulating an arbitral strategy in the initial stages of a dispute u In implementing or challenging an award – when considering next steps after the arbitration concludes PAGE 7 bryancave.com | A Global Law Firm BRYAN CAVE INTERNATIONAL ARBITRATION TEAM Authors Emma Lindsay Counsel, New York +1 212 541 2121 firstname.lastname@example.org Nabeel Osman Associate, London +44 (0)20 3207 1236 email@example.com Research support and data collection assistance provided by Hannah Coker, Trainee Solicitor, London Additional Contacts Pedro Martinez-Fraga Partner, Miami +1 786 322 7373 firstname.lastname@example.org Co-Leader of the International Arbitration Team Rodney Page Partner, Washington, D.C. +1 202 508 6002 email@example.com Co-Leader of the International Arbitration Team Constantin Achillas Partner, Paris +33 1 44 17 77 34 firstname.lastname@example.org Nigel Binnersley Partner, Hong Kong +852 3588 9110 email@example.com Mathew Rea Partner, London +44 (0)20 3207 1203 firstname.lastname@example.org About Our Team Bryan Cave’s International Arbitration Team provides a comprehensive service to clients around the world embracing all aspects of international dispute resolution. We handle a broad range of matters, including international commercial and investment arbitration, public international law and complex commercial litigation, for a wide variety of business, financial, institutional and individual clients, including publicly-held multinational corporations, large and mid-sized privately-held companies, partnerships and emerging enterprises. We also advise sovereign clients with regard to their particular complex legal, regulatory and commercial challenges. Our team features many practitioners who serve as both counsel and arbitrator and draws on the full range of subject-matter and industry experience across the firm, including in construction, energy, finance, manufacturing, mining and natural resources, pharmaceuticals, technology, telecommunications, tourism, transportation and many other sectors. Combining the common law and civil law traditions, members of our team are admitted to practice in many jurisdictions across the globe and speak a variety of languages. In addition, we work with an established network of law firm “friends” and colleagues in places where we do not have a direct presence, ensuring our strong market knowledge and quality of service on matters worldwide. This review is published for the clients and friends of Bryan Cave LLP. The statements made in this publication are for general educational purposes only. Information contained herein is not to be considered as legal advice or a legal opinion on any specific facts or circumstances. You are urged to seek the advice of your legal counsel if you have any specific questions as to the application of the law. The receipt of this publication does not create an attorney-client relationship between you and Bryan Cave LLP. © 2015 Bryan Cave LLP. All Rights Reserved.