This article highlights significant legal developments relevant to international investment and development that took place in 2022.
In 2022, environmental, social, and governance (ESG) disputes continued to receive high attention. In particular, two Energy Charter Treaty (ECT) cases are notable within the energy sector for their impact on the environment and society.
In May 2022, a divided International Centre for Settlement of Investment Disputes (ICSID) tribunal rendered a final award against Spain for its breach of the ECT in RENERGY S.à r.l. v. Kingdom of Spain and granted the Luxembourg-based claimant nearly thirty-three million EUR. This dispute concerned Claimant’s investment in Spanish wind farms and concentrated solar power plants. A majority of the tribunal held that Spain’s modifications of its renewable energy incentive framework breached the Claimant’s legitimate expectation of relative stability and violated the fair and equitable treatment standard set in Article 10(1) of the ECT. In September 2022, Spain filed an application for annulment of the award. The case is still pending.
In August 2022, in another energy dispute, Rockhopper Italia S.p.A. et al. v. Italian Republic, an ICSID tribunal held that Italy breached the ECT and awarded the British claimants more than 190 million EUR. This dispute concerned the concession and exploitation of the Ombrina Mare oil field. The tribunal found that the Claimants were entitled to a concession, and as a consequence Italy’s adoption of a stricter drilling ban which prohibited claimants’ exercise of that concession violated the ECT. The tribunal clarified that this award “was not passing judgment on the legitimacy of the contested measures, or contesting Italy’s sovereign right to adopt the drilling ban,” but only to address “whether the fact demonstrated an ECT breach by Italy, and whether damages (and what amount of) should be awarded.”
The tribunal had previously denied Italy’s intra-EU jurisdictional objection to the Investor-State Dispute Settlement mechanism provided by the ECT. The tribunal had also dismissed Italy’s request to reconsider its previous objection, concluding that the Court of Justice of the European Union’s (CJEU) decision in Republic of Moldova v. Komstroy was not applicable as Komstroy referred to “investment” rather than “anticipatory or advisory discussion” of the investment.
In addition to the cases that have been decided, a number of ESG-related cases are ongoing. Among these is the Chevron Corp. v. The Republic of Ecuador (II) case that has been pending since 2009. Within the energy sector, there are continued efforts to adopt international arbitration to reconcile public ESG interest with private investment interest. Further modernization of the ECT should lead to more developments in ESG-related dispute resolution.
