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International Arbitration Forum

Klesch Group Holdings Limited and Raffinerie Heide GmbH v. Federal Republic of Germany

Case summary

At a glance

Parties
Klesch Group Holdings Limited (Jersey) and Raffinerie Heide GmbH (Germany) v. the Federal Republic of Germany
Case no.
ICSID Case No. ARB/23/49 (coordinated with ICSID Case No. ARB/23/48 against Denmark and ICSID Case No. ARB(AF)/23/1 against the European Union)
Forum and rules
ICSID Convention arbitration; ICSID Arbitration Rules 2022; place of proceeding Washington, D.C.
Treaty
Energy Charter Treaty of 17 December 1994
Tribunal
Mr. Cavinder Bull SC (President), Judge O. Thomas Johnson, Jr., Professor Jorge E. Viñuales
Sector
Oil refining; EU energy-crisis solidarity contribution
Outcome
Pending. The published documents are procedural. The Tribunal recommended provisional measures stopping Germany from collecting the 2022 solidarity contribution (23 July 2024). By majority, it refused to bifurcate Germany's preliminary objections (8 April 2025).
Amount
The claimants estimate the 2nd Claimant's aggregate payment obligation at no less than EUR 38 million (Request for Arbitration). The decision on provisional measures refers to EUR 47.2 million for financial year 2022 and EUR 69.4 million for financial year 2023. Across the three coordinated arbitrations, the claimants allege obligations of EUR 175.5 million. No amount has been awarded.

The dispute

Klesch Group Holdings Limited, a Jersey company, and its German co-claimant Raffinerie Heide GmbH, an oil refinery business, challenge the "solidarity contribution" that Germany imposed through Article 40 of the Annual Tax Act 2022, implementing EU Council Regulation 2022/1854. The contribution is 33% of the amount by which 2022 or 2023 profits exceed the 2018–2021 average plus 20%. The claimants say the levy is ultra vires, rests on a false premise of "windfall" refinery profits, and is arbitrary, discriminatory and punitive, in breach of Articles 10(1), 10(3), 10(7), 10(12) and/or 13 of the Energy Charter Treaty. They seek declaratory relief first, and damages if the contribution is collected. Germany, represented by the European Commission's Legal Service, objects to jurisdiction on four grounds: the intra-EU objection, that the EU is the proper respondent, the taxation carve-out in Article 21 ECT, and the essential-security exception in Article 24(3)(a)(ii) ECT.

Key holdings

  1. The Tribunal made no order on the claimants' request for a temporary restraining order. It found that urgency was not established, because the briefing schedule would likely allow a decision on provisional measures before the 31 July 2024 self-assessment deadline. It left open a renewed application. Decision on the Temporary Restraining Order, p. 1
  2. The Tribunal denied Germany's application for an order that the claimants waive confidentiality over their tax documents. A general waiver was unnecessary and likely overbroad. Access to such documents is to be handled through specific document requests. Costs were reserved. Decision on the Respondent's Application for Waiver, pp. 1–2
  3. The Tribunal has prima facie jurisdiction. Whether the solidarity contribution is a "Taxation Measure" under Article 21 ECT is left for a full jurisdictional challenge. ICSID's registration of the case is relevant to prima facie jurisdiction but not determinative. Decision on Provisional Measures ¶¶ 22–26
  4. Provisional measures are necessary to protect the exclusivity of ICSID arbitration under Article 26 of the ICSID Convention and to preserve the status quo under Rule 47(1)(b). The contribution is the very subject matter of the arbitration, so the claimants should not be forced to pay it, or to contest it in German proceedings, while the case is pending. The European Commission's letter of 14 November 2023, in which the EU accepted financial responsibility, did not sufficiently reassure the Tribunal. Decision on Provisional Measures ¶¶ 39–62
  5. Urgency was met only for the EUR 47.2 million contribution for financial year 2022, which follows the 31 July 2024 self-assessment deadline. It was not met for the EUR 69.4 million due for 2023, which falls due in 2025. The measures were also proportionate: Germany showed no material risk that delayed collection could not be compensated. Decision on Provisional Measures ¶¶ 67–79
  6. The Tribunal recommended that Raffinerie Heide may file its self-assessment on time. Germany and its authorities shall refrain from demanding, or taking action to collect, any amount for financial year 2022 under the Annual Tax Act 2022. Costs were reserved. Decision on Provisional Measures ¶¶ 80–81
  7. By majority, the Tribunal refused to bifurcate any of the four preliminary objections (intra-EU consent, proper respondent, Article 21 taxation carve-out, Article 24(3)(a)(ii) security exception). Bifurcation would not materially save time or cost, and the objections are bound up with the merits. Arbitrator Viñuales dissented and would have bifurcated all four. The parties are to follow Scenario 2 of Annex B to Procedural Order No. 1, and costs were reserved. Decision on Bifurcation ¶¶ 28, 41, 47, 58, 63–64

Procedural history

  1. 30 September 2023Request for Arbitration filed.
  2. 29 March 2024Tribunal constituted. The same tribunal is constituted in the parallel cases against Denmark and the European Union.
  3. 6 June 2024Claimants apply for provisional measures and an immediate temporary restraining order.
  4. 14 June 2024Procedural Order No. 1 (procedural rules and coordination of the three cases) and Procedural Order No. 2 (transparency and confidentiality) issued. Germany applies for a tax-confidentiality waiver.
  5. 15 June 2024Tribunal makes no order on the temporary restraining order for lack of urgency.
  6. 24 June 2024Germany's application for a confidentiality waiver is denied.
  7. 23 July 2024Decision on Provisional Measures: Germany is to refrain from collecting the 2022 solidarity contribution.
  8. 9 December 2024The respondents in the three coordinated arbitrations file a joint Request for Bifurcation.
  9. 19 March 2025Joint hearing on bifurcation at the World Bank in Paris, closed to the public, organised by Procedural Order No. 3 of 13 February 2025.
  10. 8 April 2025Decision on Bifurcation: request dismissed by majority, with Arbitrator Viñuales dissenting.

Tribunal, counsel and experts

Decided by
For the claimant
Plesner Advokatpartnerselskab · Mayer Brown · Klesch Group (in-house)
For the respondent
European Commission, Legal Service · Federal Ministry for Economic Affairs and Climate Action · Hanefeld Rechtsanwälte

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Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
ICSID Case No. ARB/23/49
Country
Treaty
Energy Charter Treaty
Section