Eskosol S.p.A. in liquidazione v. Italian Republic

Case summary

At a glance

Parties: Eskosol S.p.A. in liquidazione (Italy; 80% owned by Blusun S.A. of Belgium) v. Italian Republic
Case no.: ICSID Case No. ARB/15/50
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceedings Paris
Treaty: Energy Charter Treaty (Article 26(7) for the locally incorporated, foreign-controlled claimant)
Tribunal: Jean E. Kalicki (President), Guido Santiago Tawil, Brigitte Stern (who replaced Pierre-Marie Dupuy)
Sector: Renewable energy; solar photovoltaic feed-in tariffs
Outcome: Jurisdiction upheld, including over Italy's intra-EU objection, but all claims dismissed on the merits (Award dispatched 4 September 2020).
Amount: Claimed: at least EUR 196,717,000 in lost profits, or in the alternative EUR 37.9 million in sunk costs, plus interest. Awarded: nothing. Each party bears 50% of the arbitration costs (total USD 765,634.54) and its own legal costs.

The dispute

Eskosol is an Italian company, 80% owned by the Belgian company Blusun S.A. It planned a 120 MW solar photovoltaic project in Italy made up of 120 plants held through 12 special purpose vehicles. It says it spent about EUR 38.5 million on the project and signed an EPC Contract with Siemens on 29 December 2010. The project was designed to qualify for the feed-in tariffs of Conto Energia III. In 2011 Italy adopted the Romani Decree (Legislative Decree No. 28 of 3 March 2011), which ended Conto Energia III early and restricted incentives for plants on agricultural land, and then Conto Energia IV (5 May 2011), which cut the tariffs. Eskosol never built a plant, was declared insolvent on 12 November 2013, and brought this claim through its bankruptcy receiver. It alleged breach of fair and equitable treatment, the umbrella clause, constant protection and security, and the bar on unreasonable measures (ECT Article 10(1)), and indirect expropriation (Article 13). Italy objected that Eskosol had lost foreign control through bankruptcy, that the earlier Blusun case (ICSID Case No. ARB/14/3, award of 27 December 2016 dismissing the claims) barred this one, and that the ECT does not apply to intra-EU disputes. On the merits it denied any breach and any causal link.

Key holdings

Italy's application to dismiss the claims as manifestly without legal merit under Rule 41(5) was denied. The Tribunal held that it was not manifest that bankruptcy under Italian law removed the foreign control Blusun held as 80% shareholder. Whether foreign control must persist up to the date of consent is a novel question and unsuitable for summary dismissal. Decision on Rule 41(5), ¶¶ 98, 108
Blusun and Eskosol cannot be treated as the same party or the same 'Investor', because Blusun owns only 80% of Eskosol and did not sue on its behalf. The fork-in-the-road, res judicata and collateral estoppel objections therefore failed. Italy was ordered to produce the Blusun award in full if it wished to rely on it. Decision on Rule 41(5), ¶¶ 135, 168–173
Italy's request that Eskosol post USD 250,000 as security for costs was denied. Eskosol's after-the-event insurance policy covered up to EUR 1 million of Italy's costs, so security was neither necessary nor urgent. PO3, ¶¶ 37–39
The intra-EU objection and Italy's request for immediate termination were unanimously denied. The Achmea Judgment does not reach the ECT, whose applicable-law clause (Article 26(6)) does not include EU law. In any event, CJEU rulings do not bind an ECT tribunal, and they cannot invalidate treaty consent without the procedures of the Vienna Convention on the Law of Treaties (VCLT). Nor can they apply retroactively to consent perfected before the judgment. Decision on Termination, ¶¶ 177, 186, 198–206, 236
The January 2019 Declaration by 22 EU Member States is not a binding interpretation of the ECT. It is not an agreement of all the ECT parties, it reads more like a reservation prohibited by Article 46, and it cannot apply retroactively to end a pending case. Decision on Termination, ¶¶ 218–226
No breach of fair and equitable treatment. The 2011 measures were rational, proportionate and transparent: plants already in operation kept their tariffs, and grace periods were provided. Conto Energia III gave rights only to plants that actually entered into operation. Eskosol built none, so it had no protected legitimate expectation, and the statements by officials and the GSE letter were not specific commitments. Award, ¶¶ 402, 415, 422, 440–449
The umbrella clause, expropriation, constant protection and security, and unreasonable measures claims all failed. Eskosol never entered the class to whom any commitment was made, and it held no vested property right to the tariffs. Costs were split equally because Italy won on the merits while Eskosol won the Rule 41(5), termination, suspension and jurisdictional disputes. Award, ¶¶ 463, 472–473, 481–482, 488, 494–498

Procedural history

9 December 2015Request for Arbitration dated 9 December 2015 and received by ICSID on 11 December; registered on 22 December 2015.
19 October 2016Tribunal constituted. Prof. Dupuy, Italy's first appointee, had withdrawn in June 2016 and was replaced by Prof. Stern.
20 March 2017Decision denying Italy's Rule 41(5) application.
12 April 2017Procedural Order No. 3 denies Italy's request for security for costs and disclosure of the funding documents.
1 August 2017Procedural Order No. 4 rejects Italy's requests for bifurcation and suspension.
24–26 September 2018Hearing on jurisdiction and the merits in Paris.
7 May 2019Decision denying Italy's termination request and its intra-EU objection.
4 September 2020Award: jurisdiction upheld, all claims dismissed, arbitration costs split equally.