Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, No. 18-cv-2254, (D.D.C. Sept. 18, 2019) [click for opinion]
Petitioner Masdar Solar & Wind Cooperatief U.A. ("Masdar") initiated ICSID arbitration against Spain in 2014 under the Energy Charter Treaty (the "ECT"). In 2007, Spain began to offer financial inducements and regulatory incentives to spur investment in renewable energy. Masdar invested €79.37 million in three solar projects in Spain in reliance on those incentives. In 2012, Spain revoked these incentives, and issued decrees that reformed the energy sector in detriment to Masdar's interests.
After the hearing, but before the Tribunal's decision, Spain made additional submissions that Achmea had divested the Tribunal of its jurisdiction because the European Court of Justice ("ECJ") had declared intra-EU arbitration agreements null and void. On May 16, 2018, the ICSID Tribunal rejected Spain's jurisdictional argument, and concluded it was liable for €64.5 million plus interest.
On September 28, 2018, Masdar sought to enforce the award in the D.C. district court. On March 28, 2019, Spain brought an annulment action before an ICSID ad hoc tribunal which stayed enforcement of the award. Spain moved to dismiss the U.S. action on jurisdictional grounds, and in the alternative, to stay enforcement pending the outcome of the ICSID ad hoc tribunal.
The court noted that Spain moves to dismiss enforcement on several grounds, most prominently that the court lacked subject matter jurisdiction because none of the exceptions under the Foreign Sovereign Immunities Act (the "FSIA") applied. The court considered that "[c]ourts appear to be unanimous in their assessment that petitions brought against foreign sovereigns seeking to enforce ICSID awards qualify for either the arbitral exception or the waiver exception." Spain argued, however, that it had never entered into a valid arbitration agreement because Achmea clarified that Article 26 of the ECT does not apply to inter-EU disputes. Instead of wading into this issue prematurely, the court decided to allow a stay of the proceedings pending the outcome of annulment proceedings.
The stay of a petition to enforce an arbitral award is a threshold issue that can be considered before jurisdiction. When deciding whether to stay proceedings, the court must balance the competing interests of judicial economy and hardship to the parties, as well as the goals of international arbitration and international comity. With respect to judicial efficiency, the court asserted that the delay from a stay is still far shorter than if the Court were to confirm, then eventually set aside, the award. If ICSID annuls or modifies the award, more complex issues will arise because the same issue will be litigated in two forums—frustrating the swift and simple disposition of litigation that arbitration attempts to promote. Other factors supporting the issuance of a stay included the intricacies of the international issues, as well as considerations of comity in the resolution of older treaties and newer EU case law. The balance of hardships between the parties also tipped in favor of Spain because Spain would be forced to attack the validity of the ICSID award in two separate forums, and potentially later have to recover assets seized due to enforcement should the annulment proceedings succeed.