The most relevant European updates from the global International Arbitration and ADR practice group at Garrigues.
European Commission limits intra-EU treaty arbitration
In a communication dated 19 July 2018 directed to the European Parliament and Council, the European Commission has confirmed, following the Achmea case, that “EU investors cannot invoke intra-EU BITs, which are incompatible with Union law and no longer necessary in the single market. They cannot have recourse to arbitration tribunals established by such intra-EU BITs, or for intra-EU litigation, to arbitration tribunals established under the Energy Charter Treaty.”
English Commercial Court denies Ukraine´s state immunity plea
In a judgment dated 13 July 2018, the English Commercial Court denied Ukraine’s application to overturn an ex parte enforcement order issued in favour of Russian oil producer Tatneft against Ukraine, rejecting arguments based on state immunity and the claimant’s alleged failure to make full and frank disclosure.
Tatneft won the UNCITRAL award in 2014 in a dispute over its investment in Ukrtatnafa, a joint venture with the Ukrainian government that owned the country’s largest oil refinery. In its application to set aside that order, Ukraine first argued that it had not waived the immunity to which it is otherwise entitled under the UK State Immunity Act 1978 as it did not agree to submit the disputes addressed in the award to arbitration. Ukraine said it had not agreed to arbitrate any claim for breach of a fair and equitable treatment (FET) provision, which was lacking from the Russia-Ukraine BIT and which the tribunal had improperly imported via a most-favoured nation clause from the Ukraine-UK BIT.
The judge found that Ukraine had agreed in the BIT to arbitrate “any dispute” in connection with the relevant investments, including disputes over what protections were conferred by the BIT. The issue of whether Tatneft could import FET via a most-favoured nation clause was for the tribunal to decide on the merits.
US Court allows enforcement of ICSID award against Kyrgyzstan
In a an order dated 18 July 2018 the US Court of Appeals for the Second Circuit in New York has affirmed a decision recognising and enforcing a US$8.5 million ICSID award in favour of a Turkish hotel investor against Kyrgyzstan filed under the 1992 bilateral investment treaty between Turkey and Kyrgyzstan.
The dispute related to a claim of compensation for the loss of its investment in Hotel Pinara in the Kyrgyz capital of Bishkek over the expropriation of its hotel during the Tulip Revolution of 2005 – saying that the ICSID additional facility rules were correctly applied.
The court ordered Kyrgyzstan to pay the ICSID additional facility award to Turkish hotel investor Sistem Mühendislik Insaat Sanayi ve Ticaret, affirming a decision made by the US District Court of the Southern District of New York in November 2016.
Naftogaz launches fresh tariff SCC arbitration claim against Gazprom
Ukrainian state entity Naftogaz has announced that it has launched a fresh arbitration claim worth more than US$11 billion against Russian gas giant Gazprom before the Stockholm Chamber of Commerce, once again seeking a revision of the tariff it charges for transporting Russian gas. The claim has been brought under a 2009 gas transit agreement under which Gazprom pays Naftogaz to transport Russian gas across Ukraine for delivery to customers in Europe. According to Naftogaz, the agreement permits the parties to seek a revision of the tariff in the event of significant changes in the European gas market and where the tariff no longer corresponds to the level of tariffs in Europe.
Spain hit by another ICSID Energy Charter Treaty claim
On 13 July 2018 Japanese Itochu Corporation registered by ICSID a new Energy Charter Treaty claim against Spain over reforms to its renewable energy regime, relating to the largest solar photovoltaic power station in Europe.The claim relates to one of the largest solar photovoltaic power stations in Europe acquired by Itochu and Abengoa Solar in 2010 in the Extremadura Solar Complex in the city of Logrosan north of Seville.
Spain made changes to the feed-in tariff regime for the photovoltaic solar power sector, introducing a first set of reforms in 2010 and phasing in further reforms from 2012 to address a €26 billion electricity tariff deficit. The entire renewable energy subsidies regime was eventually modified in 2013, triggering a sheer number of claims under the ECT.
UK investment fund behind Eiser seeks ICSID award enforcement against Spain in Washington D.C.
An UK investment fund has asked a court in Washington, DC, to enforce a €128 million ICSID award issued in May 2017 against Spain and obtained by Eiser Infrastructure and its Luxembourg subsidiary Energia Solar Luxembourg in an Energy Charter Treaty claim over the country’s solar reforms.Despite a New York court reversing the confirmation of the award last November 2017, and Spain had asked for a stay of enforcement while the ICSID proceedings were pending, Eiser´s petition states that the ad hoc committee denied Spain’s request, resulting in a lifting of a provisional stay of enforcement and the award becoming binding.
Naftogaz defeated in SCC arbitration collusion claim
On 11 July 2018 a Stockholm Chamber of Commerce tribunal has issued a partial award rejecting claims brought against its subsidiaries Misen Enterprises and Karpatygaz by Ukrgasvydobuvannya (UGV) – a subsidiary of Ukrainian state entity Naftogaz.The dispute concerned a joint activity agreement signed in 2002 and amended in 2011, the same year that Misen Energy acquired Misen Enterprises and Karpatygaz via a reverse takeover. UGV alleged that the agreement was procured through collusion or corruption since Misen’s ultimate beneficial owner was controversial Ukrainian businessman Dmytro Firtash.The tribunal rejected UGV’s arguments regarding the invalidity of the parties’ agreement and most of UGV’s arguments concerning the respondents’ alleged breaches of the agreement.