G.I.H.G. Limited, Natland Group Limited, Natland Investment Group NV, and Radiance Energy Holding S.A.R.L. v. Czech Republic

Case summary

At a glance

Parties: G.I.H.G. Limited, Natland Group Limited, Natland Investment Group NV and Radiance Energy Holding S.A.R.L. v. the Czech Republic
Case no.: PCA Case No. 2013-35; Swiss Federal Tribunal 4A_80/2018 and 4A_66/2024
Forum and rules: Ad hoc arbitration under the UNCITRAL Arbitration Rules, administered by the PCA; seat Geneva
Treaty: Energy Charter Treaty; Netherlands–Czech Republic BIT; Cyprus–Czech Republic BIT; Belgium-Luxembourg Economic Union–Czech Republic BIT
Court: Swiss Federal Tribunal, First Civil Law Division: Kiss (presiding), Hohl, Niquille, Rüedi, May Canellas (2020); Kiss (presiding), Rüedi, May Canellas (2024)
Underlying award(s): Partial Award of 20 December 2017; Final Award of 15 December 2023
Sector: Renewable energy (solar photovoltaic)
Outcome: The Swiss Federal Tribunal dismissed both of the Czech Republic's challenges, leaving in place the finding of a breach of fair and equitable treatment and the damages award.
Amount: Claimed: at least CZK 1,769.8 million (as amended). Awarded: CZK 350.1512 million plus interest. Swiss court costs against the Czech Republic: CHF 200,000 plus CHF 250,000 to the claimants (2020); CHF 42,000 plus CHF 52,000 to the claimants (2024).

The dispute

Four companies invested in a Czech company, founded in 2007, that holds eleven Czech companies owning and operating photovoltaic plants. The investors were incorporated in the Netherlands, Cyprus (two companies) and Luxembourg. The investments took the form of shares and loans. After the "solar boom" of 2009–2010, the Czech Republic cut its support for solar power. Among other measures, a law of 28 December 2010 introduced a 26% "solar levy" on feed-in tariff payments to plants commissioned in 2009–2010. It also abolished an income tax holiday and changed the rules on tax depreciation. The investors claimed that these measures breached fair and equitable treatment and other standards under the Energy Charter Treaty and three BITs. The Czech Republic made seven jurisdictional objections, including the ECT taxation carve-out (Article 21), the allegedly domestic character of the Dutch and Cypriot investors' investments, and abuse of right. It later added an objection based on the CJEU's Achmea judgment and arguments on the primacy of EU state-aid law.

Key holdings

In the Partial Award, the Tribunal declined jurisdiction over the claims on the income tax holiday and the tax depreciation regime, which were taxation measures. It also declined jurisdiction over the claims under the Cyprus BIT brought by the third claimant and under the Luxembourg BIT. It found only one breach, of fair and equitable treatment: under Article 10 ECT for all claimants, and under the Cyprus BIT and the Netherlands BIT for the two Natland-group entities. 4A_80/2018, Facts B.c
The solar levy is not a 'Taxation Measure' under Article 21 ECT. Following the Czech Supreme Administrative Court's judgment of 10 July 2014, the levy is in substance a reduction of government subsidy, not a tax. It was designed to cut, and did cut, the support paid to solar producers. The Federal Tribunal held that the arbitrators' analysis did not breach Article 21 ECT or the rules of treaty interpretation. 4A_80/2018, consid. 3.4–3.7
Under the ECT and both BITs, the requirement that the investment be foreign attaches to the investor, and legal persons are treated as nationals of their State of incorporation. The Dutch and Cypriot entities were protected investors. The facts in the award did not show that the three Czech beneficial owners controlled the assets in fact. The Czech Republic had not invoked the denial-of-benefits clause in Article 17 ECT. 4A_80/2018, consid. 4.6–4.7
No abuse of right. The Cypriot and Dutch entities were set up on 29 October and 8 December 2009. At that time the dispute over the solar levy was not foreseeable, because the government had publicly limited the feed-in tariff cuts to installations connected after 1 January 2011. The Federal Tribunal also refused to consider the Achmea judgment, which was raised for the first time in the reply after the time limit for appeal had expired. 4A_80/2018, consid. 2.4.2, 4.8
The Final Award cannot be challenged for lack of jurisdiction. That objection had to be raised against the Partial Award. The Tribunal's decision of 22 July 2021 declaring the Achmea objection inadmissible was an interim decision on jurisdiction, and the Czech Republic had not challenged it. 4A_66/2024, consid. 4.2
There was no violation of the right to be heard. The Tribunal did address the Czech Republic's arguments on the primacy of EU law and EU state-aid rules. It considered them relevant to quantum but rejected the claim that they excluded liability or compensation. 4A_66/2024, consid. 5.3

Procedural history

8 May 2013The investors commenced arbitration under Article 26 ECT, three BITs and the UNCITRAL Rules.
20 December 2017Partial Award: jurisdiction upheld in part, and liability found for breach of fair and equitable treatment, with quantum reserved for a later phase.
1 February 2018The Czech Republic challenged the Partial Award before the Swiss Federal Tribunal for lack of jurisdiction.
7 February 2020Swiss Federal Tribunal judgment 4A_80/2018 dismissed the challenge.
4 March 2021The Czech Republic raised a new jurisdictional objection based on the Achmea judgment.
22 July 2021The Tribunal declared the Achmea objection inadmissible.
23–25 May 2022Oral hearing held in Vienna.
15 December 2023Final Award: the Czech Republic was ordered to pay CZK 350.1512 million plus interest.
13 June 2024Swiss Federal Tribunal judgment 4A_66/2024 dismissed the challenge to the Partial and Final Awards, to the extent it was admissible.