Landesbank Baden-Württemberg and others v. Kingdom of Spain

Case summary

At a glance

Parties: Landesbank Baden-Württemberg (LBBW), HSH Nordbank AG, Landesbank Hessen-Thüringen Girozentrale (Helaba) and Norddeutsche Landesbank-Girozentrale (NORD/LB) (Germany) v. Kingdom of Spain
Case no.: ICSID Case No. ARB/15/45
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding Washington, DC
Treaty: Energy Charter Treaty
Tribunal: Sir Christopher Greenwood (President), Rodrigo Oreamuno, Charles Poncet
Sector: Renewable energy; bank financing
Outcome: Intra-EU jurisdictional objection rejected (25 February 2019). Spain's second proposal to disqualify all three arbitrators rejected by the Chair of the ICSID Administrative Council (15 December 2020). The published documents do not show the final award.
Amount: The claimants say they financed 78 renewable energy plants through 225 loans worth about EUR 1.76 billion. Costs of the intra-EU phase: Spain EUR 296,441.45, claimants EUR 327,359.84; the Tribunal deferred the decision on these costs to the final award.

The dispute

Four German Landesbanks financed 78 renewable energy plants in Spain between 2006 and 2011, through 225 loans worth about EUR 1.76 billion. They say they relied on Spain's special regime, which guaranteed fixed prices for electricity sold to the grid. They claim that Spain's later changes to that regime, and finally its abolition, breached Article 10(1) of the Energy Charter Treaty; the Request for Arbitration also invoked Article 13 (expropriation). Spain objected that an EU Member State cannot validly offer ECT arbitration to investors from another Member State. It relied on EU law, Article 344 TFEU and the CJEU's Achmea Judgment. It also argued that the claimants, as banks owned by the German Länder, should be equated with Germany. Spain later sought to disqualify the whole Tribunal over its decision to hold the hearing by video conference during the COVID-19 pandemic. It also sought to disqualify two arbitrators because they had taken part in events organised by the claimants' counsel.

Key holdings

The Tribunal's compétence de la compétence covers every aspect of Spain's objection, including whether EU law overrides the ECT so that Spain made no offer to arbitrate. Decision on Intra-EU Objection ¶¶ 91–92
The claimants are juridical persons separate from Germany. They are investors of a Contracting Party and cannot be equated with the German State, so this is not an inter-State case. The EU and its Member States are not a single entity for the purpose of 'another Contracting Party' or 'Area'. Decision on Intra-EU Objection ¶¶ 95–99, 124–127
Neither the Achmea Judgment nor the line of earlier awards settles the question. A CJEU preliminary ruling binds only the referring court, and arbitral precedent is not binding. On its ordinary meaning, Article 26 ECT is an offer by each Contracting Party to investors of any other Contracting Party, with no intra-EU carve-out and no disconnection clause. Decision on Intra-EU Objection ¶¶ 102–109, 117, 132
Achmea does not make intra-EU arbitration under the ECT incompatible with EU law. The ECT is a mixed multilateral agreement to which the EU itself is a party, and an ICSID tribunal has no national seat. There is therefore no conflict between EU law and the Tribunal's reading of Article 26. Decision on Intra-EU Objection ¶¶ 146–155
Even if there were a conflict, it would not change the interpretation. Article 26(6) governs the law applicable to the merits, not jurisdiction. Article 31(3)(b)–(c) VCLT and the January 2019 Member State declarations do not establish any agreement of the ECT parties. Article 16 ECT keeps the more favourable right to dispute resolution. If EU law and the ECT were incompatible, the Tribunal would have to give priority to the ECT; the lex posterior rule, Article 41 VCLT and Article 351 TFEU do not displace it. Decision on Intra-EU Objection ¶¶ 159–176, 183–194
The intra-EU objection was rejected and the case proceeds to Spain's other objections and the merits. The costs of this phase are reserved for the final award. Decision on Intra-EU Objection ¶ 202
Second disqualification proposal rejected. Ordering a virtual hearing in PO No. 20 was a reasoned risk assessment made during the pandemic and shows no manifest lack of high moral character or impartiality. The ground based on Greenwood's and Poncet's attendance at the Frankfurt Investment Arbitration Moot and related events was untimely. It also failed on the merits: these were academic events (on the IBA Green List), no relationship with counsel was shown, and non-disclosure alone is not a ground for disqualification. Decision on Second Proposal ¶¶ 124, 137–154

Procedural history

12 November 2015Request for Arbitration (dated 20 October 2015) registered by ICSID.
7 June 2016Tribunal constituted. Sir Christopher Greenwood was appointed President by the Secretary-General.
6 November 2017PO No. 5 rejects Spain's request for bifurcation.
16 October 2018At the parties' joint request, PO No. 14 bifurcates the intra-EU objection. PO No. 15 (12 November 2018) refuses the European Commission's request to intervene, but its submissions form part of the record.
20 December 2018Hearing on the intra-EU objection in London.
25 February 2019Decision on the Intra-EU Jurisdictional Objection: the objection is rejected.
28 July 2020PO No. 20 orders the hearing set for 27 August–5 September 2020 to be held by video conference. Reconsideration is refused on 30 July 2020.
12 August 2020Spain files its second proposal to disqualify all members of the Tribunal, and the proceeding is suspended.
15 December 2020The Chair of the ICSID Administrative Council, David Malpass, rejects the second disqualification proposal.

Tribunal, counsel and experts

Decided by: Christopher Greenwood President — appointed by the institution (challenge rejected)
Rodrigo Oreamuno Co-arbitrator — appointed by the respondent (challenge rejected)
Charles Poncet Co-arbitrator — appointed by the claimant (challenge rejected)
David Malpass Chair of the ICSID Administrative Council, Chair of the ICSID Administrative Council (decided the second disqualification proposal)
For the claimant: McDermott Will & Emery · Morgan, Lewis & Bockius LLP · In-house (company employee)
For the respondent: Abogacía General del Estado
Experts: Laura Hardin (claimant) · Econ One Research Inc. (respondent)