WA Investments Europa Nova Ltd. v. Czech Republic

Case summary

At a glance

Parties: WA Investments-Europa Nova Limited (Cyprus) v. the Government of the Czech Republic
Case no.: PCA Case No. 2014-19
Forum and rules: UNCITRAL Arbitration Rules 1976, administered by the PCA; seat Geneva, Switzerland
Treaty: Cyprus–Czech Republic BIT of 15 June 2001; Energy Charter Treaty
Tribunal: Prof. Dr. Hans van Houtte (President), Mr. John Beechey CBE, Mr. Toby Landau QC
Sector: Renewable energy (solar photovoltaic)
Outcome: Award of 15 May 2019: no jurisdiction under the BIT; jurisdiction under the ECT, including over the Solar Levy; all ECT claims dismissed on the merits.
Amount: Claimed: not less than CZK 76.6 million (Memorial), later not less than CZK 72.5 million and then CZK 68 million, inclusive of pre-award interest. Awarded: nothing. Costs of the arbitration split 75% claimant / 25% respondent, so the claimant pays the respondent EUR 49,180.98; each side bears its own legal costs (claimant EUR 402,986.09; respondent USD 1,246,817).

The dispute

WA Investments-Europa Nova Limited is a Cypriot company founded and owned by Czech nationals. Through its Czech subsidiary SolarOne s.r.o., it acquired two special purpose vehicles, Tomsan s.r.o. and Sluneční park Dubí, and built two solar plants in 2009–2010 under the Czech feed-in tariff regime of Act No. 180/2005 (Act on Promotion). With effect from 1 January 2011, the Czech Republic took three measures in response to the solar boom: it imposed a 26%/28% levy on solar electricity from plants commissioned in 2009–2010 (the Solar Levy, Act No. 402/2010, later extended at 10%/11%), and it repealed the income tax holiday and the accelerated depreciation (Act No. 346/2010). The claimant alleged breaches of fair and equitable treatment, full protection and security, and the prohibition on unreasonable or discriminatory impairment under the BIT and the ECT. The Czech Republic objected that the claimant had no permanent seat in Cyprus, that the investment was not foreign, that the Solar Levy fell within the ECT tax carve-out (Article 21), and, after the CJEU's Achmea judgment, that intra-EU arbitration was precluded. On the merits it argued that it had given no stabilisation commitment and that the measures were reasonable.

Key holdings

No jurisdiction under the BIT. A registered office does not satisfy the requirement in Article 1(2)(b) of "having the permanent seat" in Cyprus. The claimant's managers, its employees, its bank activity and its tax position all pointed to the Czech Republic, not Cyprus. ¶¶ 239–252
Jurisdiction under the ECT. Article 1(6) does not require that the funds originate outside the host State or that the investor have a substantial connection with its State of incorporation. The call option over 10% of SolarOne is not an investment. The 90% stake is a protected investment, and the Tribunal's jurisdiction over it is not affected by its sale on 25 May 2016. ¶¶ 267–275, 353, 357–362
The repeal of the income tax holiday and of the accelerated depreciation are Taxation Measures excluded by Article 21 ECT. The Solar Levy is not. The respondent did not prove that the levy is a tax under Czech law; the Supreme Administrative Court's judgment of 10 July 2014 treated it as a reduction of the subsidy. In any event, the levy's main aim was to cut the feed-in tariffs rather than to raise general revenue, and it was given the form of a tax to reduce the risk of legal challenges. ¶¶ 310–340
The Achmea judgment does not affect jurisdiction. The respondent waived any intra-EU objection: it repeatedly stated that it would not raise one (Article 186(2) of the Swiss PILA; Article 21(3) of the UNCITRAL Rules). Under Swiss law, EU law does not have primacy, and the dispute is arbitrable under Article 177(1) PILA. The Tribunal did not decide whether Achmea applies to the ECT. ¶¶ 438–460
No breach of fair and equitable treatment. There was no stabilisation commitment. The Act on Promotion promised only a 15-year payback with a 7% return, and that remained available after the measures. The claimant did not rely on any assurance: it relied on its consultants, who had warned of legislative change. Any such reliance would have been unreasonable given the warning signs in 2009–2010. Because the support regime was unnotified State aid, EU law in any case excluded legitimate expectations. The respondent was as transparent as the circumstances allowed. ¶¶ 569–630
No breach of full protection and security, and no arbitrary or unreasonable impairment. The measures pursued a rational policy of lowering the burden on consumers and reducing excessive profits, and they were implemented reasonably; PV investors still earned returns at or above the promised 7%. ¶¶ 638, 684–690
Costs. The claimant won on jurisdiction and the respondent on the merits, so the costs of the arbitration are split 75% (claimant) and 25% (respondent), and the claimant pays the respondent EUR 49,180.98. Each party bears its own legal costs because the claims, though unsuccessful, were reasonable. ¶¶ 723–730

Procedural history

8 May 2013The claimant and nine other investors filed a single joint Notice of Arbitration. On 10 June 2013 the respondent split the claims into six arbitrations.
17 March 2014The co-arbitrators appointed Hans van Houtte as President, constituting the Tribunal.
22 April 2014The claimant filed its individual Notice of Arbitration, the formal date of commencement.
1 August 2014Mr. Doak Bishop resigned. On 24 September 2014 the claimant appointed Mr. Gary Born in his place.
27 February 2015Procedural Order No. 2 moved the seat from Paris to Geneva and gave the European Commission leave to intervene as amicus curiae on condition that it undertake to pay the parties' costs. The Commission's submission was disallowed on 14 April 2015 because it did not give the undertaking.
27 February – 3 March 2017Hearing in The Hague.
24 June 2018Mr. Born resigned. On 20 August 2018 the claimant appointed Mr. John Beechey CBE.
26 October 2018The SCC Arbitration Institute dismissed the respondent's challenge to Mr. Beechey.
15 May 2019Award: no jurisdiction under the BIT; ECT claims dismissed on the merits.