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International Arbitration Forum

Klesch Group Holdings Limited, Klesch Refining Denmark A/S and Kalundborg Refinery A/S v. Kingdom of Denmark

Case summary

At a glance

Parties
Klesch Group Holdings Limited, Klesch Refining Denmark A/S and Kalundborg Refinery A/S v. Kingdom of Denmark
Case no.
ICSID Case No. ARB/23/48 (coordinated with ICSID Case No. ARB(AF)/23/1 against the European Union and ICSID Case No. ARB/23/49 against Germany)
Forum and rules
ICSID Convention arbitration; ICSID Arbitration Rules 2022; place of proceeding Washington, D.C.
Treaty
Energy Charter Treaty
Tribunal
Cavinder Bull SC (President), Judge O. Thomas Johnson, Jr., Professor Jorge E. Viñuales
Sector
Oil refining; EU energy-crisis solidarity contribution
Outcome
Pending. On 8 April 2025 the Tribunal, by majority, refused the request to bifurcate the four preliminary objections. Professor Viñuales would have bifurcated all of them.
Amount
The Claimants allege current and future payment obligations of EUR 175.5 million in aggregate under the solidarity contribution. The costs of the bifurcation application are reserved.

The dispute

Klesch Group Holdings Limited and its Danish companies Klesch Refining Denmark A/S and Kalundborg Refinery A/S challenge the "solidarity contribution". The EU created this levy in Council Regulation 2022/1854 of 6 October 2022, and Denmark implemented it by Danish Act No. 502 of 16 May 2023. The Claimants allege that the levy breaches Articles 10(1), 10(3), 10(7) and 13 of the Energy Charter Treaty. Parallel claims were brought against the European Union and Germany, and the three cases are heard together by the same Tribunal. Denmark raised four preliminary objections. Objection A is the intra-EU objection, based on Achmea and Komstroy and on the position of an investor from Jersey while the UK was an EU Member State. Objection B is that the EU, not Denmark, is the proper respondent. Objection C is that the levy is a Taxation Measure under Article 21 ECT. Objection D is that the levy falls within the security exception in Article 24(3)(a)(ii) ECT, adopted in response to Russia's war against Ukraine.

Key holdings

  1. The Request for Bifurcation is dismissed by majority. The parties must follow the timetable in Scenario 2 of Annex B to Procedural Order No. 1, and the costs of the application are reserved. Decision on Bifurcation ¶¶ 28, 64
  2. Objection B (proper respondent) is not bifurcated. Even if it succeeded, the Danish and German measures would remain at the heart of the dispute in the EU Arbitration, so little time or cost would be saved. Overall the dispute would take longer to resolve. The question of how the EU is treated in cases against its Member States has no ICSID precedent, its scope is still unclear, and it should be decided on the full facts with the merits. Decision on Bifurcation ¶¶ 31–41
  3. Objection A (intra-EU objection) is not bifurcated. There are at least three possible outcomes, and only one would materially reduce time and cost. The objection is also linked to Objection B. The majority noted that almost every tribunal considering the intra-EU objection has joined it to the merits. Decision on Bifurcation ¶¶ 42–50
  4. Objection C (Taxation Measures, Article 21 ECT) is not bifurcated. Even if it succeeded, the Article 13 expropriation claim would survive. That claim targets the same conduct and would require similar facts, including whether the levy was arbitrary and discriminatory. Decision on Bifurcation ¶¶ 51–58
  5. Objection D (essential security interests, Article 24(3)(a)(ii) ECT) is not bifurcated. Its issues are a subset of those raised by the Article 10 and Article 13 claims, so no efficiency would be gained. Decision on Bifurcation ¶¶ 59–63
  6. Professor Viñuales disagreed on every objection. In his view, Objection B could dispose of the whole Denmark and Germany cases. Objection A is detachable from the merits and could end all three cases. Objections C and D could remove a substantial portion of the dispute. Decision on Bifurcation ¶¶ 30, 42, 55, 63
  7. Under the transparency order, ICSID publishes orders and decisions, and the Award is published under ICSID Arbitration Rule 62. Written submissions and supporting documents are not published, and hearings are closed to the public, unless the parties agree otherwise. Procedural Order No. 2 ¶¶ 11–18

Procedural history

  1. 24 October 2023After registering the Request for Arbitration, ICSID asks for an advance of US$400,000 and requests US$200,000 from the Claimants.
  2. 29 March 2024Tribunal constituted. The same Tribunal is constituted in the parallel EU and Germany cases.
  3. 28 May 2024First session held by video conference.
  4. 14 June 2024Procedural Order No. 1 issued on procedure and coordination of the three cases.
  5. 14 June 2024Procedural Order No. 2 issued on transparency and confidentiality.
  6. 9 December 2024The respondents in the three cases file a single Request for Bifurcation. The Claimants answer on 23 January 2025.
  7. 13 February 2025Procedural Order No. 3 issued on the organisation of the Hearing on Bifurcation.
  8. 19 March 2025Joint Hearing on Bifurcation held at the World Bank in Paris, closed to the public.
  9. 8 April 2025Decision on Bifurcation: request dismissed by majority, with Professor Viñuales disagreeing.
  10. December 2025Procedural Orders No. 4 (10 December 2025) and No. 5 (18 December 2025) issued; their texts are not included here.

Tribunal, counsel and experts

Decided by
For the claimant
Plesner Advokatpartnerselskab · Mayer Brown · Klesch Group (in-house)
For the respondent
European Commission, Legal Service · Ministry of Taxation (Skatteministeriet), Denmark

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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/23/48
Country
Treaty
Energy Charter Treaty
Section