THE AUTHOR:
Zeyad Abouellail, Legal Content Officer at Jus Mundi
Introducing “Arbitration Aftermath” by Zeyad Abouellail: Your guide to the latest post-award developments in the evolving landscape of investor-State and commercial arbitration. Each week, Zeyad explores a range of post-award news involving sovereign States with a global perspective –– from post-award settlements, compliance with awards, to recognition and enforcement procedures, annulment, and more.
Natland v. Czech Republic
Czech Republic initiates set aside proceedings against USD 15 million UNCITRAL award
PCA Case No. 2013-35
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Alfredo Bullard González (President), John Beechey (Appointed by the claimants), J. Christopher Thomas (Appointed by the State)
Seat of Arbitration: Geneva, Switzerland
On 30 January, the Czech Republic announced in a press release that it has filed to set aside an award that ordered it to pay CZK 350 million (around USD 15 million) to a group of EU investors at the seat of arbitration in Geneva.
The announcement detailed that on 15 December 2023, the tribunal rendered its Final Award in an arbitration that has spawned over a decade, finding that the Czech Republic breached the Energy Charter Treaty along with the Czech – Cyprus BIT and the Czech – Netherlands BIT. Nevertheless, the state highlighted that the award amounts to only 15.8% of the original claim (CZK 2.21 billion).
The dispute concerned the claimants’ investment in the Czech solar power sector. The arbitration was initiated in 2013 after the Czech Republic reformed the legal and regulatory regime for renewable energy sources.
In 2017, the original tribunal – which was subsequently reconstituted following the resignations of several arbitrators – upheld a part of the investors’ claims and found that the state breached the ECT as well as the applicable BITs. The Czech Republic’s request to set aside the award was dismissed by the Swiss Federal Tribunal in 2020.
OperaFund and Schwab Holding v. Spain
UK High Court upholds registration of ICSID award against Spain pending Court of Appeals ruling on intra-EU objection
ICSID Case No. ARB/15/36
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Karl-Heinz Böckstiegel (President), August Reinisch (Appointed by the claimants), Philippe J. Sands (Appointed by the State)
Ad hoc Committee: Timothy J. Feighery (President), Fausto De Quadros, Milton Estuardo Argueta Pinto (Members)
On 25 January, Justice Fraser of the High Court of Justice of England and Wales adjourned Spain’s challenge to the registration of a EUR 30 million award pending a decision of the Court of Appeals on the intra-EU objection in Infrastructures Services (Antin) v. Spain.
Fraser J opined that this is an “unhappy case”, emphasising that “the whole purpose of the [ICSID] Convention, and of arbitration under it, was to avoid the risk of lengthy enforcement proceedings against states by parties that had succeeded in establishing awards in their favour”.
Background
The dispute arose out of Spain’s reforms of incentives offered for investments in the renewable energy sector. In 2015, Swiss Schwab Holdings and OperaFund Eco-Invest, domiciled in Malta, initiated arbitration under the Energy Charter Treaty (ECT).
In September 2019, the tribunal ruled that Spain breached its obligation under the ECT to provide fair and equitable treatment to the investors and ordered the state to pay USD 29.3 million plus interest and costs. Later, Spain’s subsequent request to annul the award was dismissed in March 2023.
The award today is worth more than EUR 33 million.
The investors sought to enforce the award in the UK and in September 2021, Cockerill J made an ex parte order registering the award (“registration order”).
Spain sought to set aside the registration order arguing that it is immune from the court’s jurisdiction, relying on the intra-EU objection under which the ICSID tribunal lacked jurisdiction to hear the dispute.
Spain also alleged non-disclosure by the investors of a “significant amount of information” pertaining to post-Achmea EU law developments in the registration application.
Adjournment of Spain’s Challenge to the Registration Order
Sovereign Immunity and the Intra-Eu Objection
Fraser J started by recalling that the arguments presented by Spain pertaining to its immunity are “almost identical” to the arguments advanced in Infrastructure Services Luxembourg [2023] EWHC 1226 (“ISL decision”). In the latter, Justice Fraser had dismissed Spain’s request to set aside an order registering an intra-EU ICSID award. Spain later obtained leave to appeal the ISL decision (“ISL appeal”).
The ISL appeal’s implications necessitated a nuanced approach from the Commercial Court, which opted for a case management hearing to expedite certain aspects of the proceedings while deferring others until the resolution of the ISL appeal. Absent the appeal, the immunity argument, according to Fraser J, would have been “dismissed for the same reasons”.
Thus, the jurisdictional challenge relating to the intra-EU objection was adjourned pending the ISL appeal.
The discussion further ventured into the implications of Schwab Holdings’ non-EU domiciliation. Schwab argued that it could proceed individually to enforce the award and applied to the Court for to lift the enforcement restrictions pending the disposal of Spain’s appeal to the registration order.
Fraser J underscored that the award ordered damages to both investors conjointly and that there wasn’t “any differentiation or division performed in respect of dealing with each of the claimants separately so far as the money sum was concerned”. He warned of the risks of Schwab benefiting from putting itself in a “better pecuniary position than OperaFund”.
He highlighted the successful appeal in the ISL case could have broad ramifications, particularly if it were determined Spain enjoyed immunity due to the tribunal’s lack of jurisdiction.
Yet, he explained that for now, the issue is “wholly academic” and “of no practical use or utility to any of the parties […]. It would be an entirely hypothetical exercise”.
Ultimately, the court denied Schwab’s request to lift enforcement restrictions and adjourned the deliberation on Spain’s claim of immunity, pending the outcome of the ISL appeal.
Full and Frank Disclosure
Spain argued that by not disclosing the relevant information relating to EU law developments, including the CJEU’s decision in Komstroy, the investors breached their duty of full and frank disclosure.
Spain also sought to rely on Gold Reserve v. Venezuela [2016] EWHC 153, where the investor was held to have breached its full and frank disclosure obligation by not drawing the court’s attention to the immunity arguments that Venezuela would likely rely upon.
Fraser J addressed these contentions by drawing parallels with his decision in the ISL case, where Spain’s similar non-disclosure arguments were dismissed (Spain opted to not appeal the findings on disclosure).
He emphasised that the Gold Reserve case did not concern registration of an ICSID award and did not follow the same rules of procedure.
He explained that the post-Achmea judgments only reinforced “the ratio of Achmea” and applied its reasoning “entirely consistently from that case across to others within the EU”. Fraser J said that the investors had indeed referred to Spain’s intra-EU arguments in their application.
The court concluded that the investors had adequately referenced Spain’s intra-EU objections in their application, thereby fulfilling the obligation of full and frank disclosure.
Failure to Enforce in Switzerland
In March 2023, the Swiss Federal Tribunal (SFT) upheld the Regional Court of Bern-Mitteland’s refusal to attach CHF 33 million in assets—including patents and securities deposits—belonging to Spain.
The SFT refused to enforce the award, finding that the investors had failed to prove that the award had a sufficient domestic connection to Switzerland, a prerequisite under Swiss law for overcoming state immunity in enforcement actions. The SFT underscored that the review of this connection does not constitute a substantive review of the award and must be carried out.
ABOUT THE AUTHOR
Zeyad Abouellail is a Legal Content Officer at Jus Mundi and a PhD candidate & teaching assistant at Paris-Saclay University. His research focuses on the post-award phase in investment arbitration, and he also lectures on civil and contract law. He holds two Master’s Degrees in International Business Law from Paris-Saclay University and Paris 1 Panthéon-Sorbonne University. Prior to joining Jus Mundi, Zeyad interned at several law firms in international arbitration and corporate law in Cairo, Egypt.
