ESPF Beteiligungs GmbH, ESPF Nr. 2 Austria Beteiligungs GmbH, and InfraClass Energie 5 GmbH & Co. KG v. Italian Republic

Case summary

At a glance

Parties: ESPF Beteiligungs GmbH (Germany), ESPF Nr. 2 Austria Beteiligungs GmbH (Austria) and InfraClass Energie 5 GmbH & Co. KG (Germany) v. Italian Republic
Case no.: ICSID Case No. ARB/16/5
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006
Treaty: Energy Charter Treaty
Tribunal: Henri C. Alvarez (President), Michael C. Pryles, Laurence Boisson de Chazournes (partial dissent)
Sector: Renewable energy (solar photovoltaic)
Outcome: By majority, the Spalmaincentivi Decree breached Article 10(1) ECT (fair and equitable treatment, impairment clause, umbrella clause). All other measures were held lawful or outside jurisdiction. Award dispatched 14 September 2020.
Amount: Claimed: about €28.6 million for all measures, before interest. Awarded: €16,000,000, plus interest at 12-month Euribor + 4% compounded annually from 1 January 2015. Costs: Italy pays the ICSID costs of the proceeding (estimated at USD 913,142.58) and €1,758,577 of the Claimants' legal and expert costs (¶ 950; the operative part, ¶ 951(d), prints €1,758,177).

The dispute

The Claimants are German and Austrian investment funds managed by KGAL. Between 2009 and 2012 they acquired 341 photovoltaic plants in Italy, which qualified for 20-year feed-in tariffs under Conto II, III and IV. Each tariff was confirmed by a GSE letter and a GSE Agreement. The Claimants challenged several Italian measures: the Spalmaincentivi Decree of 2014, which cut the tariffs of plants above 200 kW (6–8% under default option (c)); the reduction and then exclusion of Minimum Guaranteed Prices under the Off-Take Regime; administration fees and imbalance costs; and Italy's refusal to refund the Robin Hood Tax and the IMU/TASI charges. They claimed breaches of fair and equitable treatment, the impairment clause and the umbrella clause in Article 10(1) ECT. Italy objected to jurisdiction (the intra-EU objection after Achmea, the tax carve-out in Article 21 ECT, the forum clauses in the GSE Agreements, and the notice requirement). On the merits it invoked its right to regulate, proportionality, and the 2017 Constitutional Court decision upholding the Decree.

Key holdings

Jurisdiction is upheld over all claims except those concerning the tax measures (the Robin Hood Tax and the IMU and TASI charges), which fall outside the Tribunal's jurisdiction. ¶ 951(a)
By majority: the Conto Energia Decrees, confirmed in the GSE Letters and GSE Agreements, contained a specific commitment that tariffs would remain constant for 20 years. Reducing them through the Spalmaincentivi Decree violated the Claimants' legitimate expectations and breached fair and equitable treatment. Whether the measure was reasonable or proportionate is irrelevant where such a commitment exists; in any event the majority found the Decree neither reasonable nor proportionate. Boisson de Chazournes dissented: the regulations were not specific assurances of immutability. ¶¶ 570, 577–582, 594, 645
No legitimate expectation arose against administration fees, imbalance costs or changes to the Minimum Guaranteed Prices, because no specific promise covered them. These measures did not breach fair and equitable treatment, the impairment clause or the umbrella clause. ¶¶ 615–617, 638, 715, 720, 794–795
Under the impairment clause, any impairment caused by an unreasonable measure is enough; it need not be significant. By majority, unilaterally altering the promised tariffs was unreasonable and breached the clause. Boisson de Chazournes dissented on this point. ¶¶ 698–700, 707–709
By majority: the umbrella clause covers obligations in legislation as well as in contracts if they are specific to the investment. Read together, the Conto Energia Decrees, GSE Letters and GSE Agreements created obligations entered into with each plant, and the Spalmaincentivi Decree breached them. How Italian law characterises the GSE Agreements, and the Constitutional Court decision, cannot override this. Boisson de Chazournes dissented. ¶¶ 811–818, 823, 828
Full compensation under Chorzów Factory applies; it cannot be reduced on equitable or public-purpose grounds. Damages are measured by DCF as the loss in fair market value at 1 January 2015, and the benefit of the Salva Alcoa Decree is not set off. FTI's figure of €16 million for the tariff decrease is accepted. ¶¶ 856–858, 884–897, 915
Pre- and post-award interest runs at 12-month Euribor plus 4% (the Claimants' cost of debt), compounded annually. Italy bears all costs of the proceeding; by majority, the Claimants recover 60% of their legal and expert costs. ¶¶ 929–932, 949–950

Procedural history

18 June 2014 and 4 March 2015The Claimants send notices of dispute offering amicable settlement; Italy does not reply.
29 January 2016ICSID receives the Request for Arbitration; it registers the Request on 8 March 2016.
26 July 2016Tribunal constituted.
15 August 2017Procedural Order No. 3 rejects Italy's requests for bifurcation and suspension.
22 August 2017Procedural Order No. 4 allows the European Commission to file a written amicus submission; the Commission files it on 29 September 2017.
20–23 June 2018Hearing on jurisdiction and merits in Paris.
18 March 2019Procedural Order No. 7 admits new legal authorities and defers Italy's request for termination based on the EU Member States' declaration on Achmea.
26 May 2020Proceedings closed.
14 September 2020Award dispatched: Italy liable for the Spalmaincentivi Decree; €16 million plus interest and costs awarded; partial dissent by Laurence Boisson de Chazournes.