Sun Reserve Luxco Holdings SRL v. Italy

Case summary

At a glance

Parties: SunReserve Luxco Holdings S.à r.l., SunReserve Luxco Holdings II S.à r.l. and SunReserve Luxco Holdings III S.à r.l. (Luxembourg) v. the Italian Republic
Case no.: SCC Arbitration V (2016/32), as printed on the award (the case record gives SCC Case No. 132/2016)
Forum and rules: Arbitration Institute of the Stockholm Chamber of Commerce; SCC Arbitration Rules 2010; seat Stockholm, Sweden
Treaty: Energy Charter Treaty (1994)
Tribunal: Prof. Albert Jan van den Berg (Chairperson), Prof. Klaus Sachs, Prof. Andrea Giardina
Sector: Renewable energy (solar photovoltaic)
Outcome: All claims dismissed (25 March 2020). Jurisdiction upheld except for the Robin Hood Tax and the classification of PV plants as immovable property, which are excluded as taxation measures.
Amount: Claimed: EUR 40.89 million including interest. Awarded: nothing. Claimants bear the costs of the arbitration, EUR 393,169.44 plus VAT, and must pay 75% of Italy's costs of EUR 990,000. Claimants' own claimed costs were USD 3,895,283.80 plus EUR 1,274,072.33.

The dispute

The three Luxembourg claimants are wholly owned subsidiaries of SunReserve International, LP, a joint venture between First Reserve and SunEdison. In 2010–2011 they acquired nine Italian photovoltaic plants through special-purpose companies. Seven plants qualified for feed-in tariffs under the Second Conto Energia Decree and two under the Third; four small plants also received minimum guaranteed prices under the off-take regime. The claimants challenged a series of Italian measures: the Spalma-incentivi Decree (Law Decree No. 91/2014), which cut their tariffs by 8% under the default option; an administrative management fee; imbalance costs; lower minimum guaranteed prices (Resolution 618/2013 and Destinazione Italia); the extension of the Robin Hood Tax; and the classification of PV plants as immovable property. They claimed breaches of the fair and equitable treatment standard, the impairment clause and the umbrella clause in Article 10(1) ECT. Italy objected to jurisdiction on the basis of Achmea and EU law (intra-EU objection), Article 21 ECT on taxation, the forum clauses in the GSE contracts, and the amicable-settlement requirement. On the merits it argued that the regime always allowed changes as long as producers received a "fair remuneration".

Key holdings

Jurisdiction upheld over all claims except those concerning the Robin Hood Tax and the classification of PV plants as immovable property. These two measures are taxation measures excluded by Article 21 ECT. The intra-EU/Achmea objection was rejected. ¶ 1043(i)
Legitimate expectations are assessed at the date the investor decides to invest. For each plant, that date is the acquisition of shares in the SPV. Later milestone payments under the Framework Agreement were not separate investment decisions. ¶¶ 753–768
The Conto Energia Decrees, the framework legislation and official statements did not promise tariffs fixed for 20 years. The phrase "constant in current currency" only excluded inflation adjustment. The only possible expectation was a "fair remuneration" under Legislative Decree No. 387/2003. GSE letters and contracts are "accessory" instruments under Italian law. For eight plants no GSE tariff letter existed when the shares were acquired, so even that expectation lacked objective certainty; only the Fiumicino plant met the threshold of legitimacy. ¶¶ 789–840
No breach of fair and equitable treatment. The 8% tariff reduction under the Spalma-incentivi Decree did not deprive the plants of a fair remuneration. The Tribunal weighed the rise in the A3 charge borne by consumers, the fall in O&M costs, the 19% loss in investment value shown by the claimants' own expert, the EUR 104 million sale of the portfolio in 2016, and tariff levels elsewhere in Europe. The fee, the imbalance costs and the minimum-price changes were also not breaches, and Italy acted transparently and in good faith. ¶¶ 849–871, 886, 905, 917–921
No breach of the impairment clause. A breach requires a significant impairment and a measure that is unreasonable or discriminatory. The measures had a limited impact, pursued rational policies, and treated PV producers and plants of different sizes differently on objective grounds. ¶¶ 948–958
No breach of the umbrella clause. The clause requires privity: obligations entered into with the investor, or legislative acts aimed at a small and well-defined class of investors. The Conto Energia Decrees applied to domestic and foreign producers alike. Following Italian Constitutional Court Decision No. 16/2017, which the Tribunal may take into account even though it post-dates the dispute, the GSE contracts and off-take agreements were accessory instruments that could be modified unilaterally. ¶¶ 985–1010
Costs: the claimants bear all the costs of the arbitration (EUR 393,169.44 plus VAT). Because they won most of the jurisdictional issues and the case was complex and efficiently run, they pay 75% of Italy's reasonable costs of EUR 990,000, not all of them. ¶¶ 1029–1042, 1043(iv)–(v)

Procedural history

4 May 2016The claimants notify Italy of the dispute and invite amicable settlement.
26 August 2016Request for Arbitration filed with the SCC.
17 November 2016The SCC Board decides that the SCC does not manifestly lack jurisdiction and fixes Stockholm as the seat.
13–16 January 2017The party-appointed arbitrators appoint Prof. van den Berg as Chairperson; the SCC refers the case to the Tribunal on 16 January 2017.
16 March 2017Procedural Order No. 1 partly grants the European Commission's application to intervene as a non-disputing party.
9 May 2018The European Commission files its amicus curiae brief, after the ECJ's Achmea judgment of 6 March 2018.
26–29 November 2018Hearing in Paris.
7 February 2019Procedural Order No. 4 rejects Italy's request to terminate or suspend the proceedings based on the January 2019 Declarations of EU Member States.
4 July 2019Procedural Order No. 5 rejects Italy's request to suspend the proceedings pending ECJ references.
25 March 2020Final Award: all claims dismissed and costs ordered against the claimants.