Encavis et al. v. Italy

Case summary

At a glance

Parties: Encavis AG (Germany) and 58 Italian operating companies it owns v. the Italian Republic
Case no.: ICSID Case No. ARB/20/39
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding Paris (hearing held in London)
Treaty: Energy Charter Treaty
Tribunal: Prof. Juan Fernández-Armesto (President), Ms. Wendy Miles KC, Mr. Alexis Mourre
Sector: Renewable energy; solar photovoltaic
Outcome: Unanimous award of 11 March 2024: jurisdiction upheld, all claims dismissed on the merits, no compensation due.
Amount: No damages awarded. Total administrative costs of USD 828,426.91 split equally (USD 414,213.45 per side); each party bears its own legal costs. Claimed costs: claimants EUR 2,431,566 plus USD 525,000; Italy EUR 1,765,000 plus USD 500,000.

The dispute

Encavis AG, a German investment company, and 58 Italian companies it owns invested between 2009 and 2013 in about 78 photovoltaic plants. The plants were enrolled in Italy's Conto Energia feed-in incentive programme and, for most of them, in the Minimum Guaranteed Price (MGP) scheme. The claimants challenged two measures. The first was the December 2013 measures: the New MGP Resolution and the Destinazione Italia Decree, which cut the MGP and then ended it for plants that also received Conto tariffs. The second was the June 2014 Spalma-incentivi Decree, which reduced tariffs for existing plants; most plants defaulted into Option C, a cut of 6–8%. The claimants alleged breaches of Article 10(1) ECT: the stable-conditions obligation, the non-impairment rule, fair and equitable treatment (legitimate expectations) and the umbrella clause. Italy raised three jurisdictional objections (no diversity of nationality, the exclusive Rome forum clauses in the GSE Convenzioni together with the ECT fork-in-the-road clause, and the intra-EU objection). On the merits it argued that the measures were a proportionate exercise of its right to regulate.

Key holdings

Diversity-of-nationality objection rejected. Encavis is organised under German law, and Germany is a Contracting Party distinct from Italy. The Italian subsidiaries qualify under Art. 26(7) ECT because Encavis controls them. That the EU is also a Contracting Party, and that EU citizenship exists, does not matter. Award ¶¶ 149–159
The exclusive Rome forum clause in the Convenzioni does not bar the treaty claims. It is not a "previously agreed dispute settlement procedure" under Art. 26(2)(b). It covers contract claims against the GSE, not ECT claims against Italy. Award ¶¶ 205–209
The fork-in-the-road clause was not triggered. Italy's Annex ID statement allows an investor to drop a pending domestic case and arbitrate instead, and the Lazio administrative cases had been withdrawn or had lapsed. Applying a triple-identity test, the Tribunal also found that the parties, causes of action and relief sought were not the same. Award ¶¶ 221–247
No breach of the stable-conditions obligation in the first sentence of Art. 10(1), which the Tribunal treats as a free-standing obligation. The 7–8% tariff cut and the MGP changes did not radically alter the regime. The claimants still receive fair remuneration. "Costante in moneta corrente" means only that tariffs are not indexed to inflation. The measures pursued legitimate public interests (cutting the cost of incentives borne by consumers, sustainability of the scheme), were proportionate, and were adopted transparently. Award ¶¶ 665–713
No breach of the non-impairment rule. The measures were not arbitrary or retroactive: they affected only future payments and did not touch incentives already received. They were not discriminatory, because other energy producers are not valid comparators for solar producers. Award ¶¶ 722–743
No breach of fair and equitable treatment. Neither the 2003 Legislative Decree, the Conti, the Tariff Confirmation Letters, the Convenzioni (accessory contracts) nor public statements contained a stabilisation commitment, and the MGP scheme gave no guarantee of price levels. The umbrella-clause claim was also rejected. The Tribunal relied on SunReserve, Silver Ridge and Prof. Sacerdoti's dissent in Greentech. Award ¶¶ 799–847
Costs. Italy won overall, but its jurisdictional objections all failed and the claims were not frivolous. Each side therefore bears half of the administrative costs (the claimants also bear the lodging fee) and its own legal costs. Award ¶¶ 859–863