CEF Energia BV v. Italian Republic

At a glance

Parties

CEF Energia B.V. (Netherlands) v. the Italian Republic

Case no.

SCC Arbitration V (2015/158); Svea Court of Appeal Case No. T 4236-19; US District Court for the District of Columbia, Civil Action No. 19-3443

Forum and rules

Arbitration Institute of the Stockholm Chamber of Commerce, SCC Rules 2010; seat Stockholm, Sweden (hearing held in Paris)

Treaty

Energy Charter Treaty (Articles 10(1), 21 and 26)

Tribunal

Mr. Klaus Reichert, S.C. (Presiding Arbitrator), Prof. Dr. Klaus Sachs, Prof. Giorgio Sacerdoti

Court

Svea Court of Appeal (set-aside); US District Court for the District of Columbia (recognition)

Sector

Renewable energy; photovoltaic feed-in tariffs

Outcome

The Tribunal held by majority that the Spalmaincentivi tariff cut breached fair and equitable treatment for the Enersol plant and dismissed all other claims (16 January 2019). The Svea Court of Appeal declared the award invalid on 27 May 2024. The US recognition proceeding was still pending in the published documents.

Amount

Remaining claim: EUR 10,300,000 (excluding interest). Awarded: EUR 9,600,000 plus compound interest at LIBOR plus 2%, compounded annually, from 1 January 2015. Costs: Italy to pay EUR 100,000 towards the costs of the arbitration and EUR 900,000 of the claimant's costs (claimed: EUR 2,370,126.33). In the set-aside case, CEF was ordered to pay Italy EUR 140,852.42 and SEK 3,416 plus interest.

The dispute

CEF Energia B.V., a Dutch company, owned in whole or in majority three Italian companies that operated photovoltaic plants under Italy's Conto Energia incentive decrees. The three plants were Megasol (about 13 MW, Montalto di Castro), Sugarella, held through a 70% stake in Phenix (about 24 MW, Canino), and Enersol (about 48 MW, Canaro, acquired on 30 March 2012). Each plant held tariff recognition letters and GSE Agreements granting a constant incentive tariff for twenty years. Italy later adopted the Spalmaincentivi (Article 26 of Law Decree 91/2014, converted into Law 116/2014), which reduced these tariffs. It also imposed administrative fees and imbalance costs, extended the Robin Hood tax to renewable producers and raised IMU/TASI charges. CEF claimed breaches of fair and equitable treatment, the umbrella clause, transparency and non-impairment under Article 10(1) ECT. Italy objected that the ECT does not apply to intra-EU disputes, invoked the taxation carve-out in Article 21 ECT, and argued that its measures were reasonable and left the investments profitable.

Key holdings

1. The intra-EU objection is rejected. The Tribunal adopted the Blusun reasoning in full: the ECT contains no disconnection clause, and later EU law does not supersede it. Achmea is confined to Article 8 of the Netherlands–Slovakia BIT and does not apply to the ECT. The Commission's Communication of 19 July 2018 is not an authoritative statement of EU law. Award ¶¶ 64–67, 96–101
2. The administrative fees, imbalance costs, Robin Hood tax and IMU/TASI charges are Taxation Measures under Article 21 ECT, read according to the Italian Constitutional Court's test for tributi. Claims based on them fall outside the Tribunal's jurisdiction. Award ¶¶ 198–207
3. No legitimate-expectation claim for Megasol and Phenix. When CEF invested in them, the plants were not yet connected to the grid and no tariff letters or GSE Agreements existed, so its rights had not crystallised. Award ¶¶ 187–189
4. Fair and equitable treatment was breached for Enersol (majority: Reichert and Sachs). On 30 March 2012 CEF had a specific legitimate expectation of constant-currency incentives for twenty years under contracts that could be changed only by mutual agreement. The Clifford Chance due diligence warning did not displace that expectation. All three Spalmaincentivi options frustrated it, even though the measure was reasonable and the investment stayed profitable. The change in payment terms (90% paid, 10% deferred) was not covered by the expectation. Award ¶¶ 217–246
5. Prof. Sacerdoti dissented on the FET breach. In his view, a modest tariff cut adopted in the public interest, as the Italian Constitutional Court held in judgment 16/2017, did not breach Article 10(1) ECT. Award ¶ 247
6. The umbrella clause claims fail. The GSE Agreements are governed by Italian law, under which, as the Constitutional Court held in Decision 16/2017, they are accessory to the public measures and may be changed unilaterally. The transparency and unreasonable-impairment claims fail because the Spalmaincentivi was reasonable. Award ¶¶ 254–259
7. Damages follow Chorzów Factory, assessed by the DCF method of the claimant's expert. The Tribunal adjusted his key assumptions to its findings and awarded EUR 9,600,000 with compound interest at LIBOR plus 2% from 1 January 2015. CEF was the prevailing party, but only partly, and costs were reduced accordingly. Award ¶¶ 275–293
8. Set-aside: the Svea Court of Appeal declared the award invalid under section 33(1)(2) of the Swedish Arbitration Act. Relying on Achmea, Komstroy, PL Holdings and NJA 2022 s. 965, it held that upholding an intra-EU award made under Article 26 ECT would be manifestly incompatible with the basic principles of the Swedish legal system. It did not examine Italy's other grounds and did not allow an appeal. Svea Court of Appeal judgment, p. 14

Procedural history

1. 20 November 2015CEF files its Request for Arbitration under Article 26(4)(c) ECT and the SCC Rules.
2. 6 April 2016The SCC refers the case to the Tribunal.
3. 7 April 2017Procedural Order No. 2 refuses bifurcation and suspension and allows the European Commission one written submission.
4. 19–22 February 2018Hearing in Paris. Post-hearing submissions on Achmea, Masdar, Antin and Antaris follow.
5. 16 January 2019Award: breach of Article 10(1) ECT as to Enersol only; EUR 9,600,000 plus interest; Prof. Sacerdoti dissents on liability.
6. 24 April 2019The Svea Court of Appeal stays enforcement of the award pending Italy's challenge.
7. 16 August 2019CEF petitions the New York Supreme Court to confirm the award. The case is later removed to federal court, transferred to the District of Columbia and consolidated with the Greentech petition.
8. 23 July 2020The US District Court for the District of Columbia (Judge Ketanji Brown Jackson) stays the case pending the Svea proceedings.
9. 27 May 2024The Svea Court of Appeal declares the award invalid and orders CEF to pay Italy's costs.
10. 10 February 2025The District Court (Judge Colleen Kollar-Kotelly) finds Italy's immunity argument colorable and orders briefing limited to jurisdiction first. The published documents do not show the outcome.

Tribunal, counsel and experts

Decided by

• Klaus Reichert President — chosen by the co-arbitrators
• Klaus Sachs Co-arbitrator — appointed by the claimant
• Giorgio Sacerdoti Co-arbitrator — appointed by the respondent (dissented on the FET breach)
• Kazimir Åberg Judge, Svea Court of Appeal
• Carin Häckter Judge, Svea Court of Appeal
• Carl Johan Sundqvist Judge, Svea Court of Appeal
• Per Carlson Judge, Svea Court of Appeal
• Karin Kussak Judge, Svea Court of Appeal
• Ketanji Brown Jackson Judge, US District Court for the District of Columbia
• Colleen Kollar-Kotelly Judge, US District Court for the District of Columbia

For the claimant

King & Spalding LLP · Orrick, Herrington & Sutcliffe · Mannheimer Swartling Advokatbyrå AB

For the respondent

Avvocatura Generale dello Stato · Advokatfirman Vinge KB · Herbert Smith Freehills New York LLP

Experts

Richard Edwards (claimant) · Boaz Moselle (claimant) · Dora Grunwald (claimant) · Antonio D'Atena (claimant) · Giacomo Rojas Elgueta (respondent) · Cesare Pozzi (respondent) · Giuseppe Melis (respondent) · Umberto Monarca (respondent) · Ernesto Cassetta (respondent) · Davide Quaglione (respondent)

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Keywords

• Energy Charter Treaty
• intra-EU objection
• Achmea
• Komstroy
• renewable energy
• photovoltaic
• Conto Energia
• Spalmaincentivi
• feed-in tariff
• legitimate expectations
• fair and equitable treatment
• umbrella clause
• taxation carve-out Article 21 ECT
• Robin Hood tax
• GSE Agreements
• set-aside
• public policy
• enforcement
• foreign sovereign immunity

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