RWE AG and RWE Eemshaven Holding II BV v. Kingdom of the Netherlands

Case summary

At a glance

Parties: RWE AG (Germany) and RWE Eemshaven Holding II BV (Netherlands) v. Kingdom of the Netherlands
Case no.: ICSID Case No. ARB/21/4
Forum and rules: ICSID Convention arbitration (ICSID Arbitration Rules)
Treaty: Energy Charter Treaty, Article 26
Tribunal: Ms. Lucy Reed (President), Mr. James Boykin, Mr. Toby Landau KC
Courts: Higher Regional Court of Cologne (19 SchH 15/21); German Federal Court of Justice (I ZB 75/22); related Dutch case: Hague Court of Appeal (200.324.875/01)
Sector: Coal-fired power generation; energy
Outcome: The German courts declared the ICSID arbitration inadmissible under EU law. RWE then discontinued the arbitration, and the Tribunal took note of the discontinuance on 12 January 2024 without ruling on jurisdiction or the merits.
Amount: Claimed: EUR 1.4 billion (as recorded by the German Federal Court of Justice). Awarded: nothing. The Tribunal denied the Netherlands' request for costs, so each side bears its own costs. In the German proceedings the value of the appeal was set at EUR 30 million, and costs were split 2/3 RWE AG and 1/3 the Netherlands.

The dispute

RWE AG, a German company, and its Dutch subsidiary RWE Eemshaven Holding II BV invested in the Eemshaven coal-fired power plant in the Netherlands. They claimed that the Netherlands' regulatory decision to phase out coal-fired electricity generation by 2030 breached Part III of the Energy Charter Treaty, and they sought compensation. They also claimed that the Netherlands had violated the ICSID Convention by petitioning the Higher Regional Court of Cologne, under Section 1032(2) of the German Code of Civil Procedure (ZPO), to declare the arbitration inadmissible. The Netherlands raised an intra-EU objection based on the CJEU judgments in Achmea, Komstroy and PL Holdings. It argued that EU law obliged it to challenge the arbitration agreement before a competent EU court and that the German proceedings concerned EU law only. In parallel, RWE Eemshaven Holding II BV sued the Netherlands for compensation before the District Court of The Hague.

Key holdings

Bifurcation refused. The intra-EU objection was suitable for separate decision. But the application came from the Claimants, over the Respondent's opposition, and their concerns about procedural integrity were not justified at that stage. The Tribunal relied on the Netherlands' assurances that it would not interfere with the Tribunal's kompetenz-kompetenz. PO2 ¶¶ 46–51, 57–59
Provisional measures refused, with some hesitation. The Tribunal found that the risks posed by the Section 1032(2) ZPO proceedings were not merely theoretical. But given the Netherlands' assurances, harm was not yet urgent or necessary. The Tribunal recommended that the Netherlands give notice before seeking to restrain RWE from participating in the arbitration, reconsider whether to continue the Cologne proceedings, and communicate the Decision to the Cologne court. Decision on Provisional Measures ¶¶ 81–93
The Higher Regional Court of Cologne declared the ICSID arbitration inadmissible. It also declared inadmissible any arbitration between RWE AG and the Netherlands based on Article 26(3) and (4) ECT, because the ECT arbitration clause is incompatible with EU law in intra-EU disputes. RWE AG was ordered to pay the costs. Cologne decision, p. 2
The German Federal Court of Justice upheld the declaration that the ICSID arbitration is inadmissible. It held that Article 41(1) of the ICSID Convention normally blocks court proceedings once an ICSID case has been registered. But that provision must be disapplied in intra-EU cases because EU law takes precedence, and Article 26 ECT does not apply to intra-EU disputes. The court saw no need for a reference to the CJEU and found no ultra vires act. BGH ¶¶ 55, 68–83, 97–120
The German Federal Court of Justice set aside the second declaration, covering any future ECT arbitration between the parties, as inadmissible. A Section 1032(2) ZPO petition requires an existing arbitration agreement; the Netherlands' standing offer under Article 26(3) ECT is not enough. BGH ¶¶ 139–147
The Tribunal took note of the discontinuance and denied the Netherlands' request for costs. The Netherlands had challenged the Tribunal's jurisdiction outside the ICSID system, so it could not then invoke that jurisdiction to claim costs (allegans contraria non est audiendus). Its evidence of costs was also skeletal. Each side bears its own costs. Order on Discontinuance ¶¶ 61–72
In a related Dutch case, the Hague Court of Appeal held that the 2019 Coal Ban Act, as applied to the Amer plant of RWE Generation NL B.V., regulates property rather than depriving the owner of it. The court found that the measure was foreseeable when RWE acquired the plant in 2009 and that it strikes a fair balance without compensation. There was therefore no breach of Article 1 of Protocol No. 1 to the ECHR or of Article 17 of the EU Charter. Hague Court of Appeal ¶¶ 6.12, 6.39, 6.49–6.50