LSG Building Solutions GmbH and others v. Romania

Case summary

At a glance

Parties: LSG Building Solutions GmbH, Green Source Consulting GmbH, Core Value Investments GmbH & Co. KG Gamma, Core Value Capital GmbH (Austria); Anina Pro Invest Ltd., Giust Ltd. (Cyprus); Risen Energy Solar Project GmbH, Pressburg UK GmbH (Germany); Solluce Romania 1 B.V. (Netherlands); SC LJG Green Source Energy Beta S.R.L. (Romania) v. Romania
Case no.: ICSID Case No. ARB/18/19
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding Paris
Treaty: Energy Charter Treaty
Tribunal: Prof. Juan Fernández-Armesto (President), Judge O. Thomas Johnson, Jr., Prof. Dr. Pierre-Marie Dupuy
Sector: Renewable energy; solar photovoltaic; green certificates
Outcome: Decision of 11 July 2022: jurisdiction upheld over all Claimants; Romania breached Art. 10(1) ECT; quantum, interest and costs reserved. Judge Johnson dissented on the merits.
Amount: Claimed: EUR 142.7 million (Claimants' revised expert valuation). Romania's expert put damages at nil. No amount awarded yet; the Parties were directed to try to agree quantum on the Tribunal's principles.

The dispute

Ten project developers invested between 2011 and 2013 in five solar PV plants in southern Romania: the Alpha, Beta and Gamma plants in Giurgiu and the Frăsinet 2 and 3 plants in Călăraşi. They invested under Romania's green certificate (GC) support scheme in Law 220/2008, as amended by Law 139/2010. That scheme gave solar plants six GCs per MWh for 15 years, tradable on the OPCOM market or through bilateral contracts (GCPAs) at between EUR 27 and EUR 55 per GC, indexed to European inflation. From 2013 to 2018 Romania changed the scheme. EGO 57/2013 deferred two of the six GCs and restricted trading. Law 23/2014 changed how quotas were set and shortened GC validity, and GD 495/2014 exempted energy-intensive users. EGO 24/2017 extended the deferral, froze the price floor and ceiling without indexation, and curtailed GCPAs. Law 184/2018 and EGO 114/2018 made further changes. The Claimants alleged breaches of fair and equitable treatment and of the non-impairment clause in Art. 10(1) ECT. Romania objected to jurisdiction on three grounds: the intra-EU objection, its lack of consent to a multi-party claim, and the Romanian ownership of Anina and Giust. On the merits it argued that the measures were a proportionate response to overcompensation and to rising costs for consumers.

Key holdings

Multi-party objection rejected. Romania's unconditional consent in Art. 26 ECT and Art. 25(1) of the ICSID Convention covers claims brought jointly by several claimants. The claims were sufficiently homogeneous: same sector, same measures, same treaty protections and the same relief. ¶¶ 318, 330, 351–357
The Tribunal declared that it has jurisdiction under the ICSID Convention and the ECT over all Claimants and their claims, including Anina and Giust. The intra-EU objection did not bar jurisdiction (the reasoning falls in the omitted pages). ¶ 1354(1)
The FET standard in Art. 10(1) ECT is an autonomous standard, not the customary minimum standard. It protects investors against drastic changes to the essential characteristics of a regime they relied on. For the Claimants who invested before EGO 57/2013 (Group A), Romania made a regulatory promise in Law 139/2010. It turned that promise into a Specific Commitment through the ANRE accreditations. The commitment was six GCs per MWh for 15 years, sellable on the market or through GCPAs, at a minimum of EUR 27/GC indexed to European inflation. ¶¶ 1060, 1066–1114
By majority, the scheme did not guarantee GC supply, demand, or prices near the ceiling. Measures that changed other features did not breach the ECT. These included quotas, penalties, balancing costs and the increase in the ANRE contribution under EGO 114/2018. ¶¶ 1120–1155, 1204
Romania breached Art. 10(1) ECT towards Group A in three ways: by deferring GCs without compensation (EGO 57/2013, EGO 24/2017, Law 184/2018); by limiting GCPAs (EGO 57/2013, EGO 24/2017); and by ending inflation indexation of the price floor (EGO 24/2017). The deferral and the end of indexation were also unreasonable impairments. Towards the Core Value Claimants (Group B), who invested after EGO 57/2013, the breaches lay in EGO 24/2017 and Law 184/2018. ¶¶ 1172, 1193, 1222–1226
Principles of reparation. Damages equal the difference in the value of each Claimant's equity between the actual scenario and a but-for scenario. In the but-for scenario the plants receive six undeferred GCs per MWh from 2013 to 2028 and sell them in the year of issue at no less than EUR 27/GC, indexed. Romania's proposed 25% discount was rejected. The date of assessment is 31 December 2021. Beta, controlled by Risen, may claim its whole loss. The Parties were directed to try to agree quantum; interest and costs were reserved. ¶¶ 1327–1353
Judge Johnson dissented on the merits. In his view, Romania's specific commitment also covered the demand side of the scheme, so the right was to sell GCs at market prices between EUR 27 and EUR 55, not only at the minimum price. Dissenting Opinion ¶¶ 6, 12, 36

Procedural history

28 August 2017Each Claimant notified Romania of a dispute under the ECT.
23 May 2018Request for Arbitration received by ICSID; registered on 12 June 2018.
24 January 2019Tribunal constituted.
13 May 2019Procedural Order No. 2 granted the European Commission leave to file an amicus submission. The submission was filed on 24 January 2020.
9 October 2019Procedural Order No. 3: Romania's request for bifurcation rejected; jurisdictional objections joined to the merits.
15–23 February 2021Hearing on jurisdiction and merits held remotely.
20 September 2021Tribunal admitted the CJEU Komstroy judgment into the record; the Parties commented in October and November 2021.
11 July 2022Decision on Jurisdiction, Liability and Principles of Reparation: jurisdiction upheld, breach of Art. 10(1) ECT found, quantum reserved; dissent by Judge Johnson.