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LIST OF DEFINED TERMS

Achmea Judgement Slowakische Republik (Slovak Republic) v. Achmea BV, CJEU (Grand Chamber), Case C-284/16, Judgment, 6 March 2018
Amicus Curiae Brief European Commission’s Amicus Curiae Submission, 14 December 2018
CJEU (or in citations from sources ECJ) Court of Justice of the European Union, and its previous designations
Claimants Green Power Partners K/S and SCE Solar Don Benito APS
Claimants’ Additional Observations 2022 Claimants’ Additional Brief und (sic.) Jurisdiction following Procedural Order No. 9, 12 March 2022
Claimants’ Comments Claimants’ Response to the European Commission’s Amicus Curiae Brief, 14 January 2019
Claimants’ Comments regarding Costs Claimants’ Comments on the Respondent’s Statement of Costs, 22 April 2022
Claimants’ Comments regarding Respondent’s Answer Claimants’ Comments regarding Respondent’s Answer, 21 October 2016
Claimants’ Post-Hearing Brief Claimants’ Post-Hearing Submission, 1 March 2019
Claimants’ Rejoinder Claimants’ Rejoinder Memorial on Jurisdictional Objections, 10 September 2018
Claimants’ Reply Claimants’ Reply on Merits and Counter-Memorial on Jurisdictional Objections, 26 March 2018
Claimants’ Response to Amicus Curiae Brief Claimants’ Response to the European Commission’s Application to Intervene as a Non-Disputing Party, 23 November 2018
Claimants’ Statement of Costs Claimants’ Statement of Costs, 13 April 2022
Claimants’ Submission on Opinion 1/17 Claimant’s Additional Submission on ECJ’s Opinion 1/17, 24 May 2019
CNE Spanish National Energy Commission
CPI Consumer Price Index
CPI-CT Consumer Price Index at constant taxes, excluding unprocessed food and energy products
Declaration I Declaration of the EU Commission on behalf of the EU, 20 May 2015, made at the time of signing the International Energy Charter
Declaration II Declaration of the Representatives of the Governments of Member States of 15 January 2019 on the legal consequences of the Judgment of the Court of Justice in Achmea and on investment protection in the European Union
Declaration III Declaration of the Representatives of the Governments of the Member States, of 16 January 2019 on the enforcement of the judgment of the Court of Justice in Achmea and on investment protection on the European Union
ECT Energy Charter Treaty, executed in Lisbon on 17 December 1994
EPC Engineering, procurement and construction
EU European Union
FiT Feed-in tariff
European Commission’s Request European Commission’s Application for leave to intervene as a Non-Disputing Party, 9 November 2018
Green Power Green Power Partners K/S
Hearing (1) Hearing in Stockholm on 7 and 8 February 2019
Hearing (2) Hearing online of 22 March 2022
Hindelang Opinion Legal Opinion of Prof. S. Hindelang, 13 March 2022
Idea Institute for the Diversification and Saving of Energy
Komstroy Judgement Republic of Moldova v. Komstroy LLC, successor in law to the company Energoalians, CJEU (Grand Chamber) Case C-741/19, Judgment, 2 September 2021
Law 54/1997 Law 54/1997 of 27 November 1997 on the Electricity Sector
MO IET/1045/2014 Ministerial Order IET/1045/2014
MO ETU/130/2017 Ministerial Order ETU/130/2017
PER 2005-2010 Spain’s Renewable Energies Plan
PL Holdings Judgment Republiken Polen (Republic of Poland) v. PL Holdings Sarl, CJEU (Grand Chamber) Case C-109/20, Judgment, 26 October 2021
PV Photovoltaic
RAIPRE Registry of Assignment of Remuneration
RD 413/2014 Royal Decree 413/2014
RD 436/2004 Royal Decree 436/2004
RD 661/2007 Royal Decree 661/2007
RD 1565/2010 Royal Decree 1565/2010
RD 1578/2008 Royal Decree 1578/2008
RD 2818/1998 Royal Decree 2818/1998
RD-Law 1/2012 Royal Decree Law 1/2012
RD-Law 2/2013 Royal Decree Law 2/2013
RD-Law 6/2009 Royal Decree-Law 6/2009
RD-Law 7/2006 Royal Decree Law 7/2006
RD-Law 9/2013 Royal Decree Law 9/2013
RD-Law 13/2012 Royal Decree Law 13/2012
RD-Law 14/2010 Royal Decree Law 14/2010
REIO Regional Economic Integration Organisation
Report 2/2012 CNE’s report on the Spanish Energy Sector of 7 March 2012
Request for Arbitration Claimants’ Request for Arbitration, 8 September 2016
Respondent The Kingdom of Spain
Respondent’s Additional Comments 2022 Respondent’s additional comments on the intra-EU objection following Procedural Order No. 9, 13 March 2022
Respondent’s Answer Respondent’s Answer to the Request for Arbitration, received by the SCC on 11 October 2016
Respondent’s Comments Comments to the European Commission’s Amicus Curiae Brief and its intervention in the hearing, 15 January 2019
Respondent’s Counter-Memorial Respondent’s Counter-Memorial on the Merits and Memorial on Jurisdiction, 4 October 2017
Respondent’s Observations Respondent’s Observations on Claimants’ Comments regarding Costs, 29 April 2022
Respondent’s Post-Hearing Brief Respondent’s Post-Hearing Brief, 1 March 2019
Respondent’s Rejoinder Respondent’s Rejoinder Memorial on the Merits and Reply on Jurisdiction, 27 June 2018
Respondent’s Response on Amicus Curiae Brief Respondent’s Observations on the European Commission’s Application for leave to intervene as a Non-Disputing Party, 23 November 2018
Respondent’s Statement of Costs Respondent’s Statement of Costs, 13 April 2022
Respondent’s Submission on Opinion 1/17 Respondent’s Submission on Opinion 1/17 in relation with the dispute before the Tribunal, 24 May 2019
SAA Swedish Arbitration Act
SCC Arbitration Institute of the Stockholm Chamber of Commerce
SCC Rules SCC Arbitration Rules (2010)
SCE SCE Solar Don Benito APS
Spain The Kingdom of Spain
Statement of Claim Claimants’ Statement of Claim, 12 May 2017
TAXUD General Directorate of Taxation and Customs Union of the European Commission
TFEU Treaty on the Functioning of the European Union
TMR Reference tariff for electricity
Transcript Hearing (2) Transcript of Hearing (2), jointly submitted by the Parties on 5 April 2022
TVPEE Tax on the value of the production of electrical energy
VCLT Vienna Convention on the Law of Treaties of 23 May 1969

I. The Parties

A. The Claimants

1.
Green Power Partners K/S ('Green Power’ or 'the First Claimant’) is a Danish company ('Kommanditselskab’), with business address at Weidekampsgad 6, 2300 Copenhagen, Demnark, registered under company registration number (CVR number) 32258611 and Danish VAT number 32258611.

SCE Solar Don Benito APS ('SCE’ or 'the Second Claimant’) is a Danish private limited company ('Anpartsselskab'), with business address at Silkeborgvej, 8000 Aarhus C/Denmark, registered under company registration number (CVR number) 30834062 and without Danish VAT registration.1

The First and Second Claimant are jointly referred to as 'the Claimants’.

2.
Claimants were initially represented by Dr. Heiko Büsing and Mr. Moritz Pottek, PricewaterhouseCoopers Legal AG Rechtsanwaltsgesellschaft ('PWC Legal’), Alsterufer 1, 20354 Hamburg, Germany. On 26/27 October 2021, the Tribunal was informed that Oliver Bolthausen, DWF Germany Rechtsanwaltsgesellschaft mbH ('DWF’), Prinzregentenstraße 78, 81675 München had been entrusted with the mandate to represent Claimants in these proceedings.

B. The Respondent

3.
The Kingdom of Spain ('Spain’ or 'the Respondent’) is the Respondent in this arbitration. For the purposes of these proceedings, Respondent’s address is: Direccion del Servicio Jurídico del Estado, c/ Ayala nr. 5, 28001 Madrid (Spain).
4.
Respondent is represented by Spain’s Attorney General’s Office ('State Attorney’), Abogacía General del Estado, Dpto. Arbitrajes Internacionales, c/Marqués de la Ensenada, 14-16, 2a planta, 28004 Madrid (Spain).

II. The Dispute

5.

The current dispute pertains to different investments in photovoltaic plants ('PV plants’) in the Spanish solar energy market. The relevant investments were made between 2008 and 2011, and allegedly intended to profit from the applicable regulatory framework providing, inter alia, a favourable tariff regime based on State subsidies. As a result of different factors, the Respondent adopted several measures between 2010 and 2014 which altered this regulatory framework. The Claimants argue that these alterations violated the Respondent’s obligations under the Energy Charter Treaty ('ECT’) and international law and impacted its investments in the Spanish energy market. The Claimants accordingly claim payment of compensation.

III. The Arbitration Clause

6.

The Claimants have started the present arbitration proceedings by their Request for Arbitration of 8 September 2016, submitted to the Arbitration Institute of the Stockholm Chamber of Commerce ('SCC’), and referring to Article 26 of the ECT, which entered into force for both, the Kingdom of Denmark and the Kingdom of Spain, on 16 April 1998.2 Article 26(4)(c) ECT provides for 'arbitration proceedings under the Arbitration Institution of the Stockholm Chamber of Commerce’.

IV. Arbitration Tribunal

7.

The Arbitration Tribunal ('the Tribunal’), appointed under Article 13 of the SCC Arbitration Rules ('SCC Rules’), consists of:

Prof. Dr. Hans van Houtte
Van Houtte Partners
A.Smetsplein 3 D, # 4.02
3000 Leuven
Belgium

Chairperson

Dr. Inka Hanefeld
Hanefeld Rechtsanwälte Rechtsanwaltsgesellschaft GmbH
Brooktorkai 20
20457 Hamburg
Germany

Co-Arbitrator

Prof. Dr. Jorge E. Viñuales
Maison de la Paix, PT-715
Ch Eugene-Rigot 2, 1202.
PO Box 1672
CH-1211 Geneva 1
Switzerland

Co-Arbitrator

V. Procedural History

8.
On 8 September 2016, the Claimants submitted their Request for Arbitration ('Request for Arbitration’).
9.

On 12 September 2016, the SCC transmitted the Request for Arbitration to the Respondent, requiring it to submit an Answer to the SCC pursuant to Article 5 of the SCC Rules by 12 October 2016.

10.
On 11 October 2016, the SCC confirmed receipt of the Answer submitted by the Respondent ('Respondent’s Answer’).
11.
On 21 October 2016, the Claimants submitted their comments regarding the Respondent’s Answer ('Claimants’ Comments regarding Respondent’s Answer’).
12.

Pursuant to Article 20 of the SCC Rules, and in accordance with the letter dated 15 December 2016 of the Board of the Arbitration Institute of the Stockholm Chamber of Commerce, the seat of arbitration is Stockholm, Sweden.

13.
On 19 January 2017, the Tribunal and the Parties participated in a telephone conference to discuss the procedural modalities of the present proceedings.
14.

On 25 January 2017, the Arbitral Tribunal issued Procedural Order No. 1, confirming inter alia that the 2010 version of the SCC Rules was applicable and establishing the further procedural framework of the arbitration proceedings.

15.
On 15 February 2017, the Tribunal issued Procedural Order No. 2 to establish the procedural calendar.
16.
On 15 May 2017, the Claimants submitted their Statement of Claim ('Statement of Claim’).
17.
On 4 October 2017, the Respondent submitted its Counter-Memorial on the Merits and Memorial on Jurisdiction ('Respondent’s Counter-Memorial’)
18.
On 17 and 22 December 2017 respectively, the Tribunal issued Procedural Orders Nos. 3 and 4 with regard to the Parties’ respective requests for document production.
19.
On 26 March 2018, the Claimants submitted their Reply on the Merits and Counter-Memorial on Jurisdictional Objections ('Claimants’ Reply’).
20.
On 27 June 2018, the Respondent submitted its Rejoinder Memorial on the Merits and Reply on Jurisdiction ('Respondent’s Rejoinder’).
21.
On 10 September 2018, the Claimants submitted their Rejoinder Memorial on Jurisdictional Objections ('Claimants’ Rejoinder’).
22.
On 9 November 2018, and in light of recent developments in the law, the Tribunal suggested the Parties to bifurcate the proceedings and to limit the hearing, planned in February 2019, to issues of jurisdiction and admissibility.
23.
On 19 November 2018, following acceptance by both Parties of the Tribunal’s suggestion to bifurcate the proceedings, the Tribunal confirmed that the February 2019 hearing would only cover issues of jurisdiction and admissibility.
24.
On 9 November 2018, the European Commission filed an Application for leave to intervene as a Non-Disputing Party ('European Commission’s Request’).
25.
On 23 November 2018, the Claimants and the Respondent submitted their comments concerning the European Commission’s Request (hereafter, respectively, the 'Claimants’ Response to Amicus Curiae Brief’ and the 'Respondent’s Response to Amicus Curiae Brief’).
26.
On 30 November 2018, the Tribunal allowed the European Commission to submit an amicus curiae brief and determined the modalities of such submission.
27.
On 14 December 2018, the European Commission submitted its Amicus Curiae brief ('the Amicus Curiae Brief’).
28.
On respectively 14 and 15 January 2019, the Claimants and the Respondent submitted their comments on the Amicus Curiae brief (hereafter, respectively, the 'Claimants’ Comments’ and the 'Respondent’s Comments’).
29.
On 30 January 2019, the Tribunal issued Procedural Order No. 5 regarding the organisation of a hearing on jurisdiction and admissibility of the claim, planned for 7 and 8 February 2019.
30.
On 7 and 8 February 2019, a hearing (hereafter 'Hearing (1)’) took place at the Stockholm Hearing Center Centralen.

Present were for the Claimants: Heiko Büsing, PWC Legal
Moritz Pottek, PWC Legal
Loretta van Winkoop, PWC Legal
Lars Christian Gaarn-Larsen, Green Power
Pablo Galvan, Green Power

Present were for the Respondent: Roberto Fernandez Castillo, State Attorney
Maria José Ruiz-Sanchez, State Attorney
Ahnudena Pérez-Zurita Gutierrez, State Attorney

31.
On 8 February 2019, the Tribunal issued Procedural Order No. 6 concerning the post-hearing procedural steps.
32.
On 1 March 2019, both Parties submitted their post-hearing briefs in accordance with Procedural Order No. 6 (hereafter, respectively, 'Claimants’ Post-Hearing Brief’ and 'Respondent’s Post-Hearing Brief’).
33.

On 3 April 2019, the Tribunal with Procedural Order No. 7 closed the proceedings pursuant to Article 34 of the SCC Rules and invited the Parties to submit their costs, as defined by Article 44 of the SCC Rules.

34.

On 6 May 2019, the Claimants applied for a re-opening of the proceedings pursuant to Article 34 in fine SCC Rules. They asked to be entitled to add the Opinion 1/17 of the Court of Justice of the European Union ('CJEU’), published on 30 April 2019, and requested a hearing to discuss the relevance of Opinion 1/17 for the dispute before the Tribunal.

35.
On 9 May 2019, the Respondent replied to the Claimants’ submission concurring with the request to re-open the proceedings in the light of Opinion 1/17.
36.
On 9 May 2019, the Parties submitted their respective costs. Procedural Order No. 7 had initially invited the Parties to make this submission by 15 April 2019. Upon request from the Parties, this deadline was extended successively to 3 May and 10 May 2019.
37.
On 14 May 2019, the Parties submitted a Joint Agreement on the further course of the proceedings, in which they indicated that they would submit their observations on Opinion 1/17 by 24 May 2019. They also indicated that a decision on jurisdiction was no longer requested and that they had agreed to hold a hearing on 16-20 December 2019 covering both Opinion 1/17 and the merits of the dispute, after which the Tribunal would render an award covering jurisdiction and merits.
38.
On 20 May 2019, the Tribunal issued Procedural Order No. 8, whereby it re-opened the proceedings, invited the Parties to make additional submissions by 24 May 2019 and reserved a period in December to hold the requested hearing.
39.
On 24 May 2019, both Parties submitted their additional briefs on Opinion 1/17 (hereafter, respectively, 'Claimants’ Submission on Opinion 1/17’ and 'Respondent’s Submission on Opinion 1/17’).
40.
By agreement of the Parties communicated by emails on 30 September 2019, 20 January 2020, 14-15 October 2020 and 8 June 2021, the Parties requested the Tribunal to postpone the hearing.
42.
By emails of 26 and 27 October 2021, the Tribunal was informed that Oliver Bolthausen, DWF, had been entrusted with the mandate to represent the Claimants in these proceedings.
43.
By email of 20 January 2022, the Claimants requested the resumption of the proceedings, bifurcating the jurisdictional and merits/quantum phases and proposing one further round of parallel submissions of the Claimants and the Respondent. The same day, the Respondent agreed to resume the proceedings in a bifurcated manner, accepted the proposal for one additional simultaneous submission of the Parties, and requested the organisation of a one-day hearing.
44.
By emails of 8 and 9 February 2022, the Claimants and the Respondent sent the Tribunal their joint proposal for the procedural timetable for the jurisdiction phase.
45.
On 10 February 2022, the Tribunal issued Procedural Order No. 9, whereby it set 13 March 2022 as the deadline for the Parties to submit their additional observations on legal developments following Opinion 1/17 and confirmed the organisation of a hearing on jurisdiction to be held virtually on 22 March 2022 ('Hearing (2)’).
46.
On 13 March 2022, the Claimants submitted their additional observations ('Claimants’ Additional Observations 2022’). On 13 March 2022, the Respondent submitted its additional comments on the intra-EU objection ('Respondent’s Additional Comments 2022’) as well as a Legal opinion of Prof. Hindelang ('Hindelang Opinion’).
47.
On 22 March 2022, the Tribunal held Hearing (2) in virtual form.

Present were for the Claimants: Oliver Bolthausen (DWF)
Lea Christ (DWF)
Andreas Panzer (DWF)
Michael Zierhut (DWF)

Present were for the Respondent: Rafael Gil Nievas (State attorney)
Javier Comerón (State attorney)
Lorena Fatás Pérez (State attorney)
Maria del Socorro Garrido Moreno (State attorney)
Elena Oñoro Sainz (State attorney)
Prof. Steffen Hindelang (Legal Expert)

48.
Following Hearing (2), on 23 March 2022, the Tribunal issued Procedural Order No. 10 on post-hearing arrangements, whereby inter alia it took note that the Parties did not consider necessary to submit post-hearing briefs and requested them to submit certain additional documents by 6 April 2022 and to submit their updated submissions on costs by 13 April 2022.
49.

On 24 March 2022, as per Procedural Order No. 10, the Claimants submitted a copy of their Powerpoint Presentation, presented in the Hearing (2), the decision of the Ad Hoc Committee in SolEs Badajoz GmbH v. Kingdom of Spain, ICSID ARB/15/38, of 16 March 2020 (as CL-349) and Council and Commission Decision 98/181/EG of 23 September 1997 on the conclusion, by the European Communities, of the Energy Charter Treaty and the Energy Charter Protocol on energy efficiency and related environmental aspects (as CL-350) into the record and provided an updated comprehensive list of all exhibits and legal authorities submitted by the Claimants. On the same day, as per Procedural Order No. 10, the Respondent submitted a copy of its Powerpoint Presentation, presented in the Hearing (2).

50.
On 5 April 2022, as per Procedural Order No. 10, the Parties jointly submitted the written transcript of the Hearing (2) ('Transcript Hearing (2)’).
51.
On 13 April 2022, both Parties submitted their updated statement of costs (hereafter, respectively, 'Claimants’ Statement of Costs’ and 'Respondent’s Statement of Costs’). Claimants also submitted Exhibits C3Costs and Legal Authority CL-351 as well as an updated version of the List of Exhibits.
52.
On 22 April 2022, Claimants submitted their comments on the Respondent’s Statement of Costs (hereafter 'Claimants’ Comments regarding Costs’).
53.
On 22 April 2022, Respondent submitted the Power Point Presentation, presented at the hearing and Commission Decision AS 54155 (as RL-169) as well and an updated comprehensive list of legal authorities.
54.
On 29 April 2022, Respondent submitted its Observations on Claimants’ Comments regarding Costs (hereafter 'Respondent’s Observations’).
55.

By 4 May 2022, the Tribunal with Procedural Order No. 11 closed the proceedings pursuant to Article 34 of the SCC rules.

VI. Requests for Relief

A. The Claimants’ Requests for Relief

56.

In accordance with Article 24 of the SCC Rules, the Claimants request the following relief3:

(a) A declaration that the dispute is within the jurisdiction and competence of the Arbitral Tribunal;

(b) A declaration that Spain has violated the ECT and international law with respect to Claimants' investments, and thus engages its international responsibility;

(c) An order directing Spain to pay monetary damages to Claimant Green Power in an amount of EUR 43,204,887.00, and to Claimant SCE in an amount of EUR 31,122,645.00;

(d) An order directing Spain to pay pre- and post-award interest, including compound interest, to Claimants at the applicable rate until the date of Spain's full and effective payment;

(e) An order directing Spain to pay the costs of tins arbitration proceeding, including the costs of the Arbitral Tribunal, the SCC Registration Fee, as well as the legal and other costs, inclusive of all attorney's fees incurred by Claimants, on a full indemnity basis, together with interest on such costs, in an amount to be determined by the Arbitral Tribunal with applicable law;

(f) Any other relief the Arbitral Tribunal may deem just and appropriate, in the circumstances.

57.

In their Reply on the Merits and Counter-Memorial on Jurisdiction, the Claimants further requested the Tribunal:

(g) To dismiss Respondent’s motion lit (d) that Claimants shall pay 'ICSID administrative expenses ’;

(h) To dismiss Respondent’s motion/reservation under para. 1406 of the Counter Memorial to be allowed to 'supplement, modify or complement these allegations and present any and all additional arguments that may be necessary in accordance with the ICSID Convention, the ICSID Rules of Arbitration’.

The Claimants have reserved their rights pursuant to Article 25 of the SCC Rules to amend or supplement their claims; 'in particular Claimant Green Power reserved the right to amend the respective request made under Section IX lit (c) of the Statement of Claim, by claiming monetary damages of up to EUR 45.78 million’.4

B. The Respondent’s Requests for Relief

58.
The Respondent requests that the Tribunal5:

(a) [...] [D]eclares its lack of jurisdiction to hear the claims of the Claimants, or where appropriate, the inadmissibility of the same, [...];

(b) Secondarily [Subsidiarily] in the event that the Arbitral Tribunal were to decide that it has jurisdiction to hear the present dispute, it should reject all the claims of the Claimants on the merits, since the Kingdom of Spain has not in any way breached the ECT, [...];

(c) Secondarily [Subsidiarily], dismiss all of the Claimants’ compensatory claims, as the Claimants have no right to compensation, [...]; and

(d) Order the Claimants to pay all costs and expenses derived from this arbitration, including SCC administrative expenses, arbitrators’ fees, and the fees of the legal representatives of the Kingdom of Spain, their experts and advisors, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred and the date of their actual payment.

VII. Factual Background

A. The Policy with regard to Solar Energy

59.
Because of its geographic configuration on the Iberian Peninsula, Spain may be classified as an 'energy island’, which necessitates an independent electricity production and network structure, as it cannot rely on electricity import through interconnection.6
60.
Spain’s energy policy and corresponding regulatory framework for renewable energy started already in 1994 when the Spanish legislature introduced a Special Regime for the production of Renewable Energy in order to reduce greenhouse gas emissions from traditional energy sources.7 In pursuit of the same policy, the European Union ('EU’) and its Member States signed the Kyoto Protocol on 28 April 1998.8 To meet the objectives of the Kyoto Protocol, the European Parliament and Council adopted Directive 2001/77/EC on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market, which sets out targets for the production of electricity from renewable energy sources for each Member State. Accordingly, the Respondent was required to reach a renewable energy production level of 29.4% by 2010.9 Directive 2009/28/EC adjusted this target to 20% by 2020.10 To achieve these targets, Member States were allowed to introduce support schemes, such as subsidies, to producers of electricity.11 Over the last two decades, the Respondent implemented various measures and incentives to reach the EU targets and to establish a sustainable energy system, largely dependent on renewable energy sources.

B. Characteristics of Solar Energy Production

61.
Considering Spain’s ample wind and sunny climate, the Respondent specifically elected to pursue the development of wind and solar energy as renewable energy sources. For producing electricity out of solar energy, often PV plants, which consist of a large number of solar panels and other infrastructure, are used. PV plants require large up-front investment costs for planning, construction and installation and have relatively low operational and maintenance costs.12 The return on investment has to come from the sale of electricity over the course of the PV plant’s operational life.
62.
Due to the high capital costs of PV plants, the market price of electricity generated from conventional energy sources, such as fossil fuels, is lower than those produced by PV plants. Operators of PV plants could not cover their operating and maintenance costs, repay the up-front investments made and yield a reasonable return on investment without a regime of State subsidies, such as feed-in tariffs, which allow operators of PV plants to be competitive in spite of their relatively higher costs.13

C. Spain’s Regulatory framework for solar energy and photovoltaic facilities

63.
Like many other EU Member States, Spain decided to incentivize and facilitate the development of renewable energy projects, including PV plants, through a regime of State subsidies and other regulatory measures.
64.
The legal framework surrounding this regime was principally based upon a Statute, e.g. the Law 54/1997 of 27 November 1997 on the Electricity Sector ('Law 54/1997’). The support scheme was further implemented through a cascade of other legal instruments, namely through Royal Decree Laws, Royal Decrees and Ministerial Orders respectively. Royal Decree Laws are regulations with the force of law, which are promulgated by the government in situations of urgency, but which require subsequent parliamentary approval. Royal Decrees are regulations enacted by the government which serve to complement or implement a Law approved by Parliament, such as Law 54/1997. Ministerial Orders are regulations issued by the relevant ministerial department in affairs relating to their department, such as the energy framework.
65.
Well before the Claimants had invested in PV plants on Spanish territory in the period 2008-2010, Spain introduced several regimes to incentivize the production of solar electricity. A brief overview of the successive regulations from 1997 until 2009 is hereby given as follows:

(a) Law 54/1997

66.
The Law 54/1997 of 27 November 1997 on the Electricity Sector ('Law 54/1997’), which remained in force until 2013, provided for the legal framework of the support scheme for renewable energy sources, specifically PV energy. It transposed into Spanish law EU Directive 96/92 EC on the internal market in electricity and regulated as well as liberalised the electricity sector. It aimed at reaching 12% primary energy consumption from renewable sources in Spain by 201014 and introduced a 'Special Regime’ for energy production from non-consumable renewable energy sources, such as solar energy.15
67.
The Special Regime inter alia guaranteed access to the grid and provided for a premium complementing the normal market price in order for the investor to receive a reasonable rate of return.16 The Law 54/1997 did not specifically define the economic terms of the premium but indicated the parameters which had to be followed and left the specific determination to subsequent government regulations, such as Royal Decrees.17

(b) Regulatory implementation regimes prior to the Claimants’ investments

68.
Royal Decree 2818/1998 ('RD 2818/1998’) guaranteed PV plant operators, which had fulfilled certain prerequisites, such as registration, to either sell their electricity with a premium above the market price or at a price fixed in advance.18 The premiums for renewable energy other than solar energy were annually adjusted and every four years all premiums were completely reviewed.19 The Claimants contend that the discretion in the reviewing process and the risk of retroactive changes made RD 2818/1998 not successful in attracting the necessary investments in renewable energy.20
69.
The system introduced by RD 2818/1998 was amended in 2004 by Royal Decree 436/2004 ('RD 436/2004’).21 More specifically, the complementary premium became a percentage of the reference tariff for electricity ('TMR’). After 25 years, the applicable percentile for the tariff and premium was reduced for the rest of the operational life of the plant.22 Moreover, paragraph 3 of Article 40 RD 436/2004 excluded retroactivity: any future revisions to the tariffs, premiums and incentives would not apply to facilities already registered and in operation under the existing support scheme.23
70.
RD 436/2004 did not have the desired impact on investment in the Spanish renewable energy market. Spain’s Renewable Energies Plan 2005-2010 ('PER 2005-2010’), approved by the Council of Ministers, found that the 'growth rate in the renewable energy sector was insufficient to achieve the stated commitments’,24 i.e. to meet at least 12% of total energy use from renewable sources by 2010.25 In order to reach that target, substantial private investments from third parties would be required.26 To remunerate the investors, PER 2005-2010 suggested a new methodology which differentiated between four standard categories of PV plants, depending on the technology used and their connection to the grid. It also suggested specific parameters for feed-in tariffs ('FiT’) and premiums to allow for an approximately 7% return on investment before financing and after taxes, which PER 2005-2010 considered a reasonable return.27
71.
At the start, PER 2005-2010 was off track: where it had targeted a PV capacity of 400 MW by 2010, as of 2006 Spain’s installed PV capacity was a mere 84 MW.28 On the other hand, by mid-2006, because remuneration was coupled to the TMR, renewable wind-energy producers were apparently over-remunerated.29 As a measure of urgency, Royal Decree Law 7/2006 ('RD-Law 7/2006’) was passed on 23 June 2006 to correct the situation. It temporarily froze the tariffs, premiums and incentives set out by RD 436/2004 until a new measure would decouple these remunerations from the TMR.30
72.
In February 2007, a report from the Spanish National Energy Commission ('CNE’) considered subsidies and incentives to be necessary to promote the development of renewable energy production in Spain. It emphasised that these incentives had to be stable, predictable, transparent and had to last for the entire operational life of a facility, in order to minimise regulatory uncertainty.31

(c) Regulatory framework at the time of the investment: Royal Decrees 661/2007 and 1578/2008

73.
On 26 May 2007, RD 436/2004 was replaced by Royal Decree 661/2007 ('RD 661/2007’), introducing a new Special Regime for renewable energy production.32 It was hoped that the predictable and stable regime introduced by RD 661/2007 would promote the necessary investments in renewable energy while correcting the over-remuneration because the previous tariffs and premiums were linked to the TMR.33 RD 661/2007 aimed at a FiT which would ensure a return on investment of 7-8%.34
74.
Like RD 436/2004, the new economic regime of RD 661/2007 for energy production under the Special Regime allowed producers to annually choose between two different tariffs: (i) a fixed FiT per unit of production (kWh), or (ii) a premium on top of the market price. However, operators of PV plants were excluded from this option: they could only receive a FiT for each unit of electricity produced from solar energy.35 Such FiTs were no longer defined as a percentage of the TMR, but as a fixed amount per kWh for the whole life of a facility, depending on the capacity of the plant. The Parties’ positions differ on whether or not the new fixed FiT under RD 661/2007 resulted in an effective increase of remuneration compared to the previous tariffs and premiums under RD 436/2004.36
75.
RD 661/2007 did neither set a limit on the total operational lifetime of a plant nor on the duration of the remuneration. However, after the first 25 years from the commissioning of the PV plant, the fixed FiTs were reduced to 80% for the rest of the operational life of the plant.37
76.
RD 661/2007 further guaranteed access to the grid with the fixed FiT.38 However, as the FiTs were no longer adjusted in connection with the TMR, to counter inflation they were to be updated annually based on an adjusted Consumer Price Index ('CPI’).39
77.
To be eligible for the remuneration under RD 661/2007, PV plant operators had to obtain a 'Final Commissioning Certificate’ and to register in the Registry of Assignment of Remuneration ('RAIPRE’).40
78.
RD 661/2007, in its Article 44, also contained a revision clause to review in 2010 - and every four years thereafter - the tariffs, premiums, incentives and upper and lower limits of the economic regime according to specific criteria. These criteria were: (i) the degree of fulfilment of PER 2005-2010 and of the Energy Efficiency and Savings Strategy in Spain, (ii) the targets of the subsequent Renewable Energy Plan 2011-2020, (iii) the costs associated with each of the technologies, (iv) the degree of participation of the Special Regime in covering the electricity demand, and (v) the impact of the Special Regime on the technical and economic management of the energy system.41 The purpose of the review was to achieve 'a reasonable rate of return of the investment ... with reference to the cost of money in the capital markets', as required by Article 30(4) of Law 54/1997.42
79.
Article 44(3) of RD 661/2007 also exempted some facilities from the impact of recent revisions:

'The revisions to the regulated tariff and the upper and lower limits indicated in this paragraph shall not affect facilities for which the deed of commissioning shall have been granted prior to 1 January of the second year following the year in which the revision shall have been performed.’

80.
The Parties differ as to whether Article 44(3) of RD 661/2007 constitutes a guarantee against tariff changes for commissioned PV plants. According to the Respondent, Article 44(3) only applies to the specific revision mechanism contained in that article and cannot be read as a stabilisation clause shielding investors from other unrelated necessary changes to the economic regime applicable to PV plants, such as (i) changes arising from the adoption of macroeconomic control measures, or (ii) changes to avoid over-remuneration or unreasonable rate of return situations, or (iii) changes to guarantee the economic sustainability of the energy system.43 According to the Claimants, Article 44(3) constitutes the one and only legal basis for any tariff revision and therefore explicitly prohibits any retroactive changes to the precise remuneration regime of RD 661/2007 for commissioned PV plants.44
81.
Article 22 of RD 661/2007 contained a final mechanism to update the applicable tariffs and premiums. A target was set for the maximum capacity of each category of production technology. For PV plants, this target was 371 MW. Once 85 % of this capacity was reached, the Respondent would update the FiTs for new PV plants in a new Royal Decree. However, the new Decree could only be issued minimum 12 months after notification that the threshold was reached in order to allow investors to have their unfinished PV plants commissioned and registered before the new Royal Decree was issued so that they could still receive the former FiT.45
82.
RD 661/2007 proved to be a success. It attracted an influx of investors to the Spanish renewable energies market. Within three months after RD 661/2007 came into force, Spain had already reached 91 percent of its 371 MW target for PV capacity. By September 2008, RD 661/2007 had prompted a huge influx of installed PV capacity. The installed PV capacity exceeded 3,000 MW, i.e. more than eight times the intended target of 371 MW.46 In 2008, the yearly installed capacity had risen approximately 2,500% from the capacity installed in 2006 (i.e. before RD 661/2007 was in place).47
83.

The following diagram indicates the exponential growth of PV capacity between 2006 and 2008, which resulted in an equivalent rise in costs of the FiTs for the Respondent.

Figure 1. Annual installed capacity of PV Plants in Spain, 1999-201248

84.
This increase triggered the notification and revision mechanism of Article 22, prompting Spain to update the FiTs after 12 months in a new Royal Decree.
85.
Subsequently, in September 2008 and in application of Article 22 of RD 661/2007, the Respondent approved Royal Decree 1578/2008 ('RD 1578/2008’), which again modified the remuneration and regulatory framework for PV plants registered after 29 September 2008. The tariffs established in RD 1578/2008 were reduced by approximately 30% for these new PV plants to take into account, inter alia, their rapidly declining development costs.
86.
Apart from lowering the FiT, RD 1578/2008 also limited the maximum capacity of future PV plants. The maximum annual capacity was moreover determined by respective quarterly calls. At each call, investors could apply for registration in a newly established pre-allocation registry, which formed part of RAIPRE, until the capacity was reached.49 This way, RD 1278/2008 intended to slow down PV plant deployment and reduce costs to address concerns about the unexpectedly large growth in PV capacity which had resulted from RD 661/2007.
87.
The FiT established by RD 1578/2008 was similar - albeit lower - than the one RD 661/2007 had introduced. It consisted of a fixed amount per kWh produced but would be progressively reduced for new PV plants up to 10 percent annually after further calls. An important distinction between the remuneration regimes of RD 1578/2008 and that of RD 661/2007 was that after 25 years from the start of the operation of the PV plant or from the registration in the pre-allocation registry (whichever was the latest), the former no longer provided for FiTs whereas RD 661/2007 still provided for a reduced feed-in tariff.50
88.
RD 1578/2008 finally provided that:

'During 2012, in view of the technological development of the sector and the market and the operation of the remuneration regime, there may be modifications to the remuneration of the activity of electric energy production through solar photovoltaic technology.,51

Apart from this provision, RD 1578/2008 does not provide for a revision of the regime as Article 44 (3) RD 661/2007 did.52

89.

The difference between the legal regime under RD 661/2007 and 1578/2008 can be summarised as follows:

 

Regime RD 661/2007 RD 1578/2008
Date of application Applies from 25 May 2007; applicable to existing PV plants subject to transitory provisions Applies to installations registered after 28 September 2008
Limitation on capacity Unlimited Annual capacity quotas divided into quarterly calls
Duration of support Whole lifetime of the PV plant; reduced feed-in tariff after 25 years Feed-in tariff payments limited to 25 years
Tariff levels Fixed feed-in tariff rates Fixed feed-in tariff rates (reduced by approx. 30% compared to RD 661/2007)
Revisions of support levels Every four years from 2010 and only for new PV plants (not applicable to commissioned PV plants) Remuneration to solar PV plants can be changed during 2012 in view of the technological evolution of the sector and the market and the functioning of the remuneration scheme

 

90.
Although the annual capacity quotas that RD 1578/2008 introduced successfully slowed down the investment influx in PV plants, the registered PV capacity under its regime still increased to 1,250 MW over the next four years. Each quarterly call applications exceeded the capacity targets. In spite of lower FiTs and a 25-year limitation, investors still invested much in PV facilities under RD 1578/2008.53
91.
Between 2007 and 2009, the benefits from RD 661/2007 and later RD 1578/2008 were internationally propagated by Spanish governmental agencies and organisations, such as 'Invest in Spain’, the CNE and the Institute for the Diversification and Saving of Energy ('IDAE’) through publications, presentations and flyers.54 'Invest in Spain’, an organisation which describes itself as 'the leading government organisation that supports foreign companies seeking to set up or expand their business in Spain’, for instance, organised and attended several foreign events and seminars to promote the renewable energy framework of RD 661/2007 and RD 1578/2008.55

(d) Royal Decree Law 6/2009

92.
RD 661/2007 and RD 1578/2008, combined with the exponential growth in PV capacity, substantially increased the renewable energy 'tariff deficit’, i.e. the gap between the revenues received from consumers and the costs of the FiT paid.56 As a matter of urgency Royal Decree-Law 6/2009 ('RD-Law 6/2009’) was issued to somewhat remedy the situation. Its preamble specified:

'The growing tariff deficit [...] is causing serious problems which, in the current international context of financial crisis, is deeply affecting the system and puts not only the financial situation of the electricity sector companies at risk, but also the sustainability of the system itself.'57

And further:

'Due to its increasing incidence on the tariff deficit, mechanisms are established in regard to the repayment system of installations of the special regime. [...] Thus, it has become necessary to adopt a measure of urgency to guarantee the necessary legal security for those who have made investments, and set the basis for the establishment of new economic regimes that enhance compliance with the intended objectives.'58

93.
One of the measures to reduce the tariff deficit was to introduce for all renewable energy technologies the pre-allocation registry, which already applied to PV plants under RD 1578/2008. Moreover, measures were taken to increase the access fee for consumers.
94.
For the Respondent, although the effects of RD-Law 6/2009 on existing PV investments under RD 661/2007 and RD 1578/2008 were limited, it clearly sets out the Respondent’s intention of adopting further measures to reduce and eventually eliminate the tariff deficit existing at the time.

D. The Claimants’ investment in the Spanish electricity market

95.
The Claimants’ investments did not occur at the initial stages of the planning and development phase of the PV plants at hand. Instead, the Claimants invested by acquiring existing project companies and/or taking-over existing engineering, procurement and construction ('EPC’) contracts. These acquisitions were made either directly or through a 100% interest in different holding companies.59

Green Power’s investments

96.
Green Power is a company registered in Denmark as a so-called Kommanditselskab, which might be best characterized as a limited partnership. The general partner of Green Power is KGPP ApS. The material shareholders of Green Power are three Danish pension funds by the name of AP Pension Livsforsikringsaktieselskab, PensionDenmark, and Pædagogernes Pensionskasse.
97.
Green Power has invested in several PV projects in Spain between 16 July 2008 and 16 December 2010 through four lines of investment.60 The total investment costs amounted to approximately EUR 62.4-65.6 million.61
98.
One line of investment was the direct acquisition of five PV plant operating companies. The other three lines of investment occurred through three holding companies (Proark Solar Spanien I Aps, Solar Rooftops Spanien II Aps and Solar Rooftops Spanien II Aps) of which Green Power is the sole shareholder. These three holding companies in turn are the sole shareholders of several PV plant operating companies owning in total 10 PV plants in Spain.
99.

Green Power’s investments are structured as follows:62 

100.
Under the first line of investment, Green Power acquired (i) the company Svendborg PV III, S.L.U., which was the owner of a PV facility in Torres de Segre, on 17 September 2009; (ii) the company Tirstrup PV XII, S.L.U., which was the owner of a PV facility in La Portella, on 20 October 2009; (iii) the company Sumba PV III, S.L.U., which was the owner of a PV facility in La Vall d’Uxió, on 11 February 2010; (iv) the company Ringsted PV XI, S.L.U., which was the owner of a PV facility in Vilanova Del Cami, on 11 February 2010; and (v) the company Gadstrup PV, S.L.U., which was the owner of a PV facility in Vila Real, on 7 September 2010.63 The direct acquisition of these five companies included the takeover of the related EPC contracts for the development and completion of the relevant PV facilities.64 All these acquisitions were made through equity investments by Green Power thanks to shareholder loans from its three material shareholders (the pension funds AP Pension Livsforsikringsaktieselskab, Pension Denmark, and Paedagogernes Pensionskasse).65
101.
A second line of investment occurred through the acquisition of the Danish holding company Proark Solar Spanien I Aps on 10 June 2009.66 This holding company had acquired on 16 July 2008 all shares of three secondary holding companies, namely (i) Proark Solar Spain I, S.L., which was the sole shareholder of the owner of a PV facility in Bellvis; (ii) Suip Infone-Gocio, S.L., which was the sole shareholder of the owner of a PV facility in El Palau D’Anglesola; and (iii) Tomesa Gestion, S.L., which was the sole shareholder of the owner of a PV facility in Linyola.67 These investments were largely financed by the bank Dexia Credit Local S.A under a Term Loan Facility Agreement which was restructured in 2014 to implement a longer payback time.68
102.
The third line of investment went through a holding company, Solar Rooftop Spanien II Aps, that Green Power had established in August 2010, and a secondary holding company, Solar Rooftop S II K/S, that Solar Rooftop Spanien II Aps in turn had established on the same day. In turn, Solar Rooftop S II K/S had acquired two operating companies, which by way of purchase and EPC agreements had acquired: (i) a PV facility in Almussafes on 8 August 2010; (ii) a PV facility in Masnou on 9 May 2010; (iii) a PV facility in Griñon on 17 February 2010; (iv) a PV facility in Lorca on 9 July 2010; and a PV facility in Ibi on 7 May 2010.69 This third line of investment was made by Green Power and largely financed by shareholder loans from Green Power’s material shareholders.70
103.
In the fourth line of investment, on 10 May 2010, Green Power established a holding company, Solar Rooftop Spanien III Aps, which in turn established a secondary holding company, Solar Rooftop S III K/S. The latter, through a Spanish branch, established on 28 September 2010, acquired (i) the shares and EPC contract of an owner of a PV facility in Daganzo on 28 September 2010 and (ii) the shares and EPC contract of an owner of a PV facility in Meco on 16 December 2010.71 Green Power financed these investments with shareholder loans from its material shareholders.72
104.

To summarise, Green Power acquired, either directly or indirectly through holding companies and acquisitions of operating companies, a 100 % interest in 15 PV facilities in Spain from July 2008 until December 2010. These PV plants all came into operation after Green Power, or its holding companies, had acquired the operating companies and related EPC agreements. The 15 PV plants are subject either to the regime of RD 661/2007 or RD 15778/2008. The timing, capacity and economic regime applicable to each of these PV Plants is as follows:73

Table 1

Characteristics of the Green Power PV Plants62

Plant Name Acquisition and/or EPC Takeover Date Start Up Date Instated Nominal Capacity Tracking Technology Economic Regime
(1) (2) (3) (MW) (4) (5) (6)
1. Vila Real PV 9/7/2010 11/25/2010 0.60 Fixed RD 1578
2. La Val d'Uixó PV 2/11/2010 5/14/2010 0.50 Fixed RD 1578
3. Tones de Segre PV 09/17/2009 12/28/2009 1.00 Fixed RD 1578
4. Vilanova del CamíPV 2/11/2010 11/25/2010 1.50 Fixed RD 1578
5. La Portella PV 10/29/2009 4/8/2010 1 00 Fixed RD 1578
6. El Palau d'Aoglesola PV 7/16/2008 8/29/2008 0.69 2 axis RD661
7. Belvís PV 7/16/2000 8/8/2000 0.54 2 axis RD661
8. Linyola PV 7/16/2008 8/27/2008 0.56 2 axis RD661
9. Almussafes PV 8/8/2010 5/17/2011 1.10 Fixed RD1578
10. EI Masnou PV 5/9/2010 3/1/2011 0.44 Fixed RD 1578
11. Griñon PV 2/17/2010 6/8/2010 0.55 Fixed RD1578
12 Lorca PV 7/8/2010 11/2/2010 0.50 Fixed RD 1578
13. bi PV 5/7/2010 9/21/2010 0.60 Fixed RD 1578
14. Daganzo PV 9/28/2010 3/15/2011 1.98 Fixed RD 1578
15. Meco PV 12/16/2010 8/2/2011 2.00 Fixed RD 1578

 

SCE’s investments

105.

SCE has been established as a so-called Anpartsselskab which might be best characterized as a private limited company.74 On 24 July 2009, it acquired from Scan Energy Solar A/S the shares of what is now named SCE Solar Don Benito GmbH & Co. KG.75 The latter is a special purpose vehicle, which had acquired in 2008 100 % of the respective shares in the Spanish companies Planta Fotovoltaica Zujar I, S.L. and Planta Fotovoltaica Zujar II, S.L. Said Spanish companies have been the owners and operators of the solar park Don Benito in the Spanish province of Badajoz (Extremadura) since 2008. The diagram of SCE's investments is as follows:76

106.
According to the Claimants, the total investment costs for SCE allegedly amounted to approximately EUR 50.6 million.77

E. Measures challenged by the Claimants

107.
From 2010 onwards, the Respondent began to progressively introduce additional measures that in essence reduced the benefits of the FiT system. The Claimants suggest that this occurred once the Respondent had achieved its goals of a large state-of-the-art solar energy industry, which it had obtained very quickly as a result of very generous 2007-2008 incentives.
108.
On 19 November 2010, Spain introduced Royal Decree 1565/2010 ('RD 1565/2010'), which reduced the duration of FiTs, established in RD 661/2007, to 25 years.78
109.
The next month, on 23 December 2010, Spain enacted Royal Decree Law 14/2010 ('RD-Law 14/2010'), which created the concept of 'equivalent operating hours' to limit the production available for FiTs in function of each plant’s characteristics and location.79 RD-Law 14/2010 also introduced a toll for the transmission and distribution of energy.80
110.
After a change of govermnent in December 2011, the new Spanish government enacted Royal Decree Law 1/2012 ('RD-Law 1/2012’) on 27 January 2012. RD-Law 1/2012 suspended the ongoing pre-allocation registration for new renewable energy facilities and economic incentives for renewable energies.81 Also on 27 January 2012, the Spanish government requested the CNE to issue a report on regulatory adjustment measures to ensure the economic sustainability of the Spanish energy sector.82 In its 'Report 2/2012’, issued on 7 March 2012, the CNE recommended short-term and medium-term measures.83
111.
n 30 March 2012, the Spanish government approved Royal Decree Law 13/2012 ('RD-Law 13/2012’) to resolve the structural problem of the economic deficit with the contribution and effort of all parties involved, including businesses that carry out their activity in the electricity sector.84
112.
On 27 December 2012, the Spanish Parliament adopted Law 15/2012, introducing inter alia a new 7% 'tax on the value of production of electric energy’ ('TVPEE’). Law 15/2012 entered into force on 1 January 2013. The TVPEE - which the Claimants consider to be a tariff cut85 - applied to all income received from electricity production, regardless of whether the income was generated from the regular sale of energy or as FiT under the solar energy support regime.86
113.
On 1 February 2013, Royal Decree Law 2/2013 ('RD-Law 2/2013’) replaced as from 1 January 2013 the CPI with the 'Consumer Price Index at constant Taxes’, excluding unprocessed Food and Energy Products ('CPI-CT’), as the new basis for the annual adaption of the FiT in the renewable energy sector.87
114.
On 12 July 2013, Royal Decree Law 9/2013 ('RD-Law 9/2013’) repealed RD 661/2007 and RD 1578/2008. RD-Law 9/2013 also announced Spain’s intention to create a new regulatory regime for renewable energy facilities (the 'New Regulatory Regime’) which required PV producers to sell their electricity on the wholesale market instead of benefiting from the FiTs, granted under RD 661/2007 or RD 1578/2008.88
115.
On 26 December 2013, Law 24/2013 enabled the Respondent to defer 'specific remuneration’ payments to renewable energy plants until the details for the New Regulatory Regime were worked out. Spain’s New Regulatory Regime was effectively put in place with the introduction of Royal Decree 413/2014 ('RD 413/2014’) and Ministerial Order IET/1045/2014 ('MO IET/1045/2014’).89 The New Regulatory Regime calculates the amount of 'specific remuneration’ (on top of market revenue) on the basis of the hypothetical investment and operating cost of a 'standard installation’. Under the new regime, the operator of the hypothetical 'standard installation’ would obtain a pre-defined 'reasonable rate of return’ (or 'target rate of return’), initially valued at 300 basis points above the historical average yield (over ten years) on Spanish ten-year treasury bonds, which was 7.398% before taxes. The regime defines floors and caps regarding the investment and operating incentives which a renewable project can obtain taking into account the respective operating hour thresholds, different for the different 'standard installations’.90
116.
The New Regulatory Regime provides periodical reviews to allow Spain (i) to adjust or adapt the parameters and criteria to calculate investment and operating incentives, and (ii) to update the 'target rate of return’. On 17 February 2017, Spain thus approved Ministerial Order ETU/130/2017 ('MO ETU/130/2017’), which updated the remuneration parameters for the period between 1 January 2017 and 31 December 2019.91 The Claimants maintain that, due to Spain’s regulatory changes in the energy sector, its PV installations will have passed from an initial rate of return of 9.1% before taxes to a rate of return of 7.398% before taxes for the years 2014 to 2019 and to 4.57% before taxes for the years 2020 to 2025.92

VIII. Jurisdiction and admissibility

Section A. Preliminary matters

A. Basis of jurisdiction

117.

The Claimants rely on Article 26 ECT ['Settlement of Disputes between an Investor and a Contracting Party’] as the basis for the Tribunal’s jurisdiction. Article 26 ECT reads in relevant parts:93

'(1) Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably.

(2) If such disputes cannot be settled according to the provisions of paragraph (1) within a period of three months from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution:

(a) to the courts or administrative tribunals of the Contracting Party party to the dispute;

(b) in accordance with any applicable, previously agreed dispute settlement procedure; or

(c) in accordance with the following paragraphs of this Article.

(3) (a) Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of this Article.

[...]

(4) In the event that an Investor chooses to submit the dispute for resolution under subparagraph (2)(c), the Investor shall further provide its consent in writing for the dispute to be submitted to:

(a) (i) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States opened for signature at Washington, 18 March 1965 (hereinafter referred to as the ICSID Convention"), if the Contracting Party of the Investor and the Contracting Party party to the dispute are both parties to the ICSID Convention; or

[...]

(c) an arbitral proceeding under the Arbitration Institute of the Stockholm Chamber of Commerce.’

118.
The Claimants submit that all requirements pertaining to the Tribunal’s jurisdiction have been met.94

B. Overview of objections to jurisdiction and admissibility

119.

The Respondent has raised four objections to the jurisdiction of the Tribunal and the admissibility of certain claims. These objections were raised in the Respondent’s Counter-Memorial on the Merits and Memorial on Jurisdiction, in conformity with Article 5(1)(i) of the SCC Rules, and they were further discussed in the light of subsequent developments in the Respondent’s Submission on Opinion 1/17 and in the Respondent’s Additional Comments 2022. The first two objections were initially presented as a single general objection. In its Rejoinder on the Merits and Reply on Jurisdiction, filed after the CJEU’s Achmea Judgment, the Respondent formulated the two main dimensions of the initial objection into two separate objections. The Tribunal considers that the second formulation, which relies primarily on Articles 267 and 344 of the Treaty on the Functioning of the European Union ('TFEU’), was already contained in the first, and that it better reflects the issues that the Tribunal has to address. It therefore deems these objections timely submitted. The four objections are as follows:

120.

First, the Respondent submits that Article 26 ECT does not apply because the Claimants do not originate from the territory of another ECT Contracting Party, as both Denmark and the Kingdom of Spain are Member States of the EU. This is hence an objection for lack of jurisdiction ratione personae (infra Section C).

121.

Secondly, the Respondent submits that Article 26 ECT does not apply due to the primacy of EU law, which makes its offer to arbitrate under Article 26 ECT inapplicable and prevents this dispute from being submitted to arbitration. This is hence an objection for lack of jurisdiction ratione voluntatis (infra Section D).

122.

Thirdly, the Respondent submits that there is no consent to arbitrate as far as TVPEE is concerned. The Respondent relies on Article 21 ECT, which provides that the ECT does not generate obligations regarding taxation measures (infra Section E).

123.

Fourthly, the Respondent alleges that the expropriation claim is inadmissible since the issue has not been referred to the competent national tax authorities as required by Article 21 (5)(b) ECT (also infra Section E).

124.
The first and the second objections to the Tribunal’s jurisdiction are of a general character ('General Objections’). If one of them is sustained, the Tribunal lacks jurisdiction to hear the entire set of claims brought by the Claimants. The third objection to jurisdiction and the fourth objection, which focus on the inadmissibility of a specific claim, are of a partial character only ('Partial Objections’). For this reason, the Tribunal will begin with the analysis of the General Objections, and it will consider the Partial Objections only to the extent necessary.

C. The Tribunal determines its jurisdiction ex officio

125.
The Tribunal notes that, in the exercise of its compétence de la compétence, it must satisfy itself that it has jurisdiction over each of the claims brought by the Claimants in this arbitration. In doing so, the Tribunal must carefully consider all the arguments raised by the Parties, but it must also consider ex officio all the relevant considerations that may affect the principle and scope of its jurisdiction.
126.

The foregoing point is relevant in connection with the Tribunal’s consideration of the arguments submitted in the Amicus Curiae Brief of the European Commission. For the Claimants, the Tribunal should not take into account the Amicus Curiae Brief of the European Commission, which is not a party to the present dispute. The Claimants refer in this regard to their objection to the European Commission’s Request.95 The Respondent admits, referring to the award rendered in Wirtgen v. Czech Republic, that 'it is not open to a non-disputing party to raise a defence of lack of jurisdiction.96 However, the Respondent correctly notes that the Tribunal should review its jurisdiction ex officio.

127.

It is on this basis that the Tribunal will give due consideration to the Amicus Curiae Brief submitted by the European Commission in these proceedings. The Tribunal refers, in this regard, to the Decision on Jurisdiction, Applicable Law and Liability rendered by the tribunal in Electrabel v. Hungary, on which both Parties to the present proceedings have extensively relied. Facing a more extreme configuration of arguments, that tribunal came to the following conclusion:

'As far as jurisdiction is concerned, the Tribunal notes that the Respondent has not raised any like objection to jurisdiction as that made by the European Commission. It is however the Tribunal’s duty independently to check whether or not it has jurisdiction to decide the Parties’ dispute, particularly when such jurisdiction is contested by the European Commission based on the interpretation and application of EU law'97

128.
In the present proceedings, however, the configuration of arguments is such that, in addressing the contents of the Amicus Curiae Brief, the Tribunal is indeed addressing the objections raised or espoused by the Respondent or arguments exchanged among the disputing Parties.

Section B. The law applicable to the determination of jurisdiction

129.
The Parties disagree as to the nature and scope of the law that the Tribunal must apply to determine whether it has jurisdiction to hear the claims brought by the Claimants. Both Parties have submitted detailed arguments on different dimensions of this question.
130.
However, given the importance of the question for the analysis of the objections raised by the Respondent, the Tribunal deems it useful to address this question as a preliminary matter.
131.
The Tribunal has carefully considered all the arguments made by the Parties with respect to the law applicable to jurisdictional matters, including those made in the context of the Parties’ argumentation relating to each objection. The following summary of the Parties’ positions is not intended to be exhaustive but only to place the decision of the Tribunal on this question in its context.

A. The Respondent’s arguments

132.

Article 26(6) ECT requires the Tribunal to decide the 'issues in dispute in accordance with this Treaty and applicable rules and principles of international law’. According to the Respondent, the applicable law thus includes EU law, which is international law.98

133.

The Respondent specifies that EU law as a whole (and thus not only the EU Treaties) must be regarded as part of public international law.99 Relying on the awards in Electrabel v. Hungary100 and Blusun v. Italy,101 on the decision in Vattenfall v. Germany on the 'Achmea issue’,102 and on the judgment of the CJEU Grand Chamber in the Achmea case103 (the 'Achmea Judgment’), which all recognise that EU law operates as international law,104 the Respondent emphasises that the entire EU legal order, which stems from treaties that are part of international law, is itself part of international law.105 The Respondent also refers, in this connection, to the case law of the CJEU, inter alia Budějovický Budvar, národní podnik v. Rudolf Ammersin GmbH106 as well as to the judgment of the German Bundesgerichtshof of 31 October 2018,107 which annulled the arbitral award in Achmea v. Slovakia.108

134.
Thus, according to the Respondent, within the body of international law applicable to the dispute, the Tribunal has to apply EU law, including the EU rules governing the Internal Electricity Market as part of its implementation of the EU fundamental freedoms.
135.

The Respondent submits that under Article 26(6) ECT, international law not only applies to the merits of the dispute but also to jurisdictional matters.109 In its Additional Comments 2022, the Respondent further emphasises, by reference of the judgment of the CJEU Grand Chamber in the Komstroy case110 (the 'Komstroy Judgment’), that EU law must be necessarily applied to the determination of jurisdiction in the present proceedings because the ECT itself, as an international agreement ratified by an EU act, is part of the EU law.

136.
On this basis, the Respondent derives a number of conclusions regarding the lack of jurisdiction of the Tribunal to hear this dispute, which will be analysed in the context of each one of the objections raised by it.
137.
In addition, the Respondent observes that the present arbitration, conducted under the SCC Rules, has its seat in Sweden and is therefore governed by the Swedish Arbitration Act ('SAA’).111 This factor distinguishes the present arbitration from other arbitration proceedings, such as the Vattenfall v. Germany Decision on the Achmea Issue, governed by the ICSID Convention and not subject to the domestic lex arbitri of the seat in an EU Member State. ICSID awards are therefore less relevant for the present proceedings.112
138.
The Respondent notes that Section 2 SAA recognises the power of arbitral tribunals to decide on their own jurisdiction.113 According to the Respondent, the law governing the arbitration agreement may be different from the law governing the merits of the dispute.114 Under Section 48 SAA, the Tribunal has to decide on the validity of the arbitration agreement under the law chosen by the Parties or, in the absence of such choice, under the law of the seat of the arbitration, namely Swedish law including EU law, which is fully applicable in Sweden, Sweden being an EU Member State.115
139.
The Respondent moreover observes that the lex arbitri is relevant to determine which matters are arbitrable under Swedish law, hence under EU law, and to determine the validity of the offer to arbitrate, hence of the arbitration agreement.116 In this context, the Respondent notes by reference to the Achmea Bundesgerichtshof Judgment that exclusive competences transferred to the EU, including matters relating to State aid, are not arbitrable.117
140.

The Respondent further observes118 that it is on this basis that Swedish courts are required to apply the rulings of the CJEU and will on that basis annul decisions by arbitral tribunals asserting jurisdiction in contradiction with such rulings. This argument is made by reference to the referral by the Swedish Supreme Court to the CJEU under Article 267 TFEU in the case Poland v. PL Holdings, leading to a CJEU Judgment in this case119 (the 'PL Holdings Judgment’), and the withdrawal by the Svea Court of Appeals of another Article 267 TFEU referral, in the case Italy v. Athena120, upon reception of the CJEU’s Komstroy Judgment and PL Holdings Judgment.121 The Respondent sees these developments as an indication of the accuracy of its arguments.122

B. The Claimants’ arguments

141.
The Claimants submit that the relevant applicable law for determining the Tribunal’s jurisdiction is public international law, not EU law.123
142.
As the Tribunal has been established under a public international law instrument - the ECT- its perspective as regards its jurisdiction must be that of public international law.124 In other words, '[t]he Arbitral Tribunal is not incorporated into the EU subsystem, therefore, it must not take a vantage point from within the system [when it comes to determining its jurisdiction].125
143.
The Claimants argue that the Tribunal on the contrary must take an 'outsider’s perspective’ vis-à-vis EU law,126 and that EU law is thus not automatically to be seen as 'supreme’.127
144.

Contrary to the Respondent’s position,128 the Claimants observe that Article 26(6) ECT, which sets out the law applicable to 'the issues in dispute’,129 only refers to the law applicable to the 'merits ’. The Tribunal’s jurisdiction is, instead, determined by the general principles of international law as well as by the law that has been agreed upon by the Parties, namely the ECT.130

145.

The Claimants argue that this view is supported by Article 22 SCC Rules, which likewise only applies to the merits of the dispute.131 Thus, they contend that neither Article 22 SCC Rules nor Article 26(6) ECT are relevant to the question of the Tribunal’s jurisdiction, a position likewise supported by the Vattenfall arbitral decision.132

146.

The Claimants ascertain that even if Article 26(6) ECT referred to the law applicable to jurisdiction, rules of international law in terms of Article 26(6) ECT would not include EU law. In this regard, the Claimants rely on para. 133-134 of Opinion 1/17 in which the CJEU concluded with regard to a similarly worded provision in the CETA that "the CETA Appellate Tribunal [will not] be called upon to interpret or apply the rules of EU law other than the provisions of the CETA."133 Further, the Claimants contend that EU law cannot be qualified as public international law. While the basis for public international law is consensus of the participating states, the basis of EU law is the sovereign command or the institutionally guaranteed regulation of a superior coercive organisation.134

147.

The Claimants acknowledge that the arbitral tribunal in Vattenfall v. Germany admitted that in arbitrations subject to the SCC Rules - instead of to the ICSID Convention, as in Vattenfall 'the arbitral jurisdiction may be circumscribed by the local arbitration law of the place of arbitration'.135 However, the Claimants argue that in the present case the Parties did not choose Stockholm as the seat of arbitration but that it was the SCC Board which selected that seat after the Respondent’s arbitration offer became an arbitration agreement by the submission of the Claimants’ Request for Arbitration. In their view, since the seat in Sweden is fortuitous, the arbitration agreement should only be affected by international law, from which it emanated.

148.
In their Post-Hearing Brief, the Claimants admit that they voluntarily proposed Stockholm as the arbitration seat in a letter dated 21 October 2016.136 The Claimants also recognise that, Stockholm being the seat of the arbitration, Swedish law, particularly the SAA, is the applicable lex arbitri.137 However, the Claimants contend, relying inter alia on the work of one Swedish legal commentator, that the lex arbitri is only relevant for the proceedings but has no bearing on jurisdictional matters.138
149.
The Claimants further consider that the lex arbitri is only relevant insofar as it encompasses public international law.139 When the arbitration agreement was concluded, no other law than international law was chosen. According to the Claimants, Swedish arbitration law thus has no impact on the validity of that agreement. In investment arbitration, where jurisdiction is based upon an investment treaty, the need for coherence entails that the arbitration agreement is only governed by international law, and not by the fortuitous domestic law of the occasional seat.140 For the Claimants, the law applicable to the arbitration agreement cannot be changed later because of the determination of the seat.141
150.
Moreover, also under Section 48 SAA, the arbitration agreement is governed by the law agreed upon by the Parties for the arbitration agreement, i.e. by international law, which governs Article 26 ECT. Under international law, a unilateral offer to arbitrate which has been accepted is binding and cannot be unilaterally revoked.142
151.
The Claimants also refer to Section 2 SAA, which confirms the power of the Tribunal to decide on its own jurisdiction.143
152.

The Claimants admit that the lex arbitri provides the basis to challenge an award before Swedish courts.144 However, they do not see in some earlier developments invoked by the Respondent, such as the stay by the Svea Court of Appeals, on 16 May 2018, of the enforcement of the award rendered in Novenergia Il-Energy & Environment, SICAR vs. Kingdom of Spain, any confirmation of the accuracy of the Respondent’s arguments.145

C. The Tribunal’s decision

153.
At the outset, the Tribunal notes that it is required to determine ex officio whether it has jurisdiction to hear the claims brought by the Claimants (supra paragraphs 125-128). The principle according to which the Tribunal has compétence de la compétence includes the power to determine the law applicable to jurisdiction in the light of all the relevant circumstances of the case, particularly the existence of an agreement between the Parties on this issue.

Did the Parties agree on the law applicable to the determination of jurisdiction?

154.
The Tribunal must first ascertain whether the Parties have agreed on the law applicable to the determination of jurisdiction. In this regard, the Tribunal notes that it is common ground between the Parties that the law governing the agreement to arbitrate may not necessarily be the same as the law governing other questions, such as the merits of the dispute or the conduct of the proceedings.146
155.

The starting point of the analysis, as was mentioned in Procedural Order No. 1, paragraph 3, is Article 26 ECT. Specifically, Article 26(6) ECT contains a 'choice of law’ clause according to which 'A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law’. However, the Parties disagree on the interpretation of this provision and, specifically, as to whether this provision attracts the application of EU law into these proceedings for jurisdictional matters. For the Respondent, the ordinary meaning of the terms 'applicable rules and principles of international law’ plainly encompasses EU law as a whole, including for jurisdictional matters. Moreover, the ECT itself, including Article 26 ECT, would in all events have to be considered as EU law, as noted in the Komstroy Judgment. The Claimants argue instead that EU law, due to its specificities, would not be covered by this clause or only to a limited extent with respect to the merits of the dispute.

156.

The Tribunal considers that, although constituting a 'choice of law’ clause in the ECT, Article 26(6) ECT does not provide a conclusive answer regarding the law applicable to jurisdiction. The ordinary meaning of the terms 'issues in dispute in accordance with this Treaty and applicable rules and principles of international law’ would admit several interpretations, including those advanced by the Parties.

157.

However, a contextual interpretation of this provision relying on Article 26(1) ECT to ascertain the meaning of 'issues in dispute' clarifies the scope of Article 26(6) ECT significantly. Indeed, Article 26(1) ECT refers to disputes 'which concern an alleged breach of an obligation [...] under Part IIP of the ECT. This leads to the conclusion that Article 26(6) ECT only contains a choice of law rule for the merits of the dispute, and not for the jurisdictional assessment. The Tribunal notes that the arbitral tribunal in Vattenfall v. Germany reached the same conclusion,147 and so did the tribunal in Sevilla Beheer v. Spain,148 on which the Claimants rely to challenge the relevance of the Komstroy Judgment.149

158.

For present purposes, this conclusion means that the Parties have not agreed on the law applicable to jurisdictional matters under Article 26(6) ECT. The agreement of the Parties on the arbitration rules applicable to the present proceedings, i.e., the SCC Rules, does not assist in the resolution of this question, either. Indeed, as rightly noted by the Claimants, Article 22 SCC Rules concerns the law applicable to the merits of the dispute, as it has been noted by the Tribunal in Procedural Order No. 1, paragraph 4.

The law applicable to the Tribunal’s jurisdiction

159.

Absent an explicit or implicit choice of law in the ECT or the SCC Rules, the Tribunal must then ascertain the law applicable to its jurisdiction, taking as a starting point Article 26 ECT. This was also the position taken by the Vattenfall tribunal, which held that: 'In the absence of any choice of law clause for the law applicable to the Tribunal’s jurisdiction, it follows that questions of the Tribunal’s jurisdiction must be answered under the terms of the ECT itself, and in particular Article 26 thereof.'150

160.

However, considering Article 26 ECT as the starting point for the Tribunal’s determination does not mean that it is the only provision relevant for jurisdictional purposes. Other provisions of the ECT and of international law, whether customary or treaty law, may also be relevant and applicable. Arbitral tribunals constituted under the ICSID Convention likewise routinely rely on such Convention, particularly - but not only - on its Article 25, as part of the law applicable to the determination of jurisdiction. Such was the case of the arbitral tribunals in Electrabel v. Hungary151 and Vattenfall v. Germany,152 which both operated under the ICSID Convention, and which both Parties in this arbitration have extensively quoted in their pleadings. Similarly, the tribunal in Sevilla Beheer v. Spain, which also operated under the ICSID Convention, reasoned that the jurisdiction was to be determined under Article 26 ECT, but it also relied on Article 25 of the ICSID Convention.153

161.

The reasoning of these tribunals, as well as of some others referred to by the Parties for several purposes in their pleadings, is also noteworthy to highlight a significant difference between ICSID proceedings and arbitration proceedings such as the present one. As noted by the arbitral tribunal in Electrabel v. Hungary: 'this ICSID arbitration does not have its seat or legal place of arbitration in Hungary or elsewhere in the European Union. Such an arbitral seat could trigger the application of the lex loci arbitri and give rise to the jurisdiction of the local courts in regard to the arbitral process, including challenges to the award' (emphasis added).154 Similarly, in Vattenfall v. Germany, addressing specifically the implications of the Achmea Judgment, the arbitral tribunal observed that: 'In contrast, in cases where the investor opts for another forum, such as an ad hoc UNCITRAL arbitration or arbitration under the SCC Rules, that tribunal’s jurisdiction may be circumscribed by the local arbitration law of the place of arbitration (emphasis added).155

162.

This observation is relevant for the present case, in which the Claimants could have opted for an ICSID arbitration under Article 26(4)(a)(i) ECT, given that both Demnark and Spain are - and were at the time the arbitration was commenced - parties to the ICSID Convention. The Claimants opted instead to conduct the proceedings under the SCC Rules and, upon the Claimants’ proposal in a letter dated 21 October 2016, the seat of the arbitration was set in Stockholm.156 Both Parties agree that this determination of the seat attracts the application of Swedish arbitration law, particularly the SAA, as the applicable lex arbitri.157

163.

In point of fact, the application of this lex arbitri and the control exercised by the Swedish courts was one of the considerations for which the Claimants opted for a SCC arbitration in Stockholm. As noted in the aforementioned letter of 21 October 2016: 'The reference in Article 26 (4) (c) of the ECT to SCC arbitration at Stockholm has, at least impliedly, also granted to Claimants the advantages of the pertinent lex arbitri, i.e. the Swedish Arbitration Act as the law governing the arbitral proceedings which take place in Sweden (emphasis added).158

164.
The Claimants now argue that the lex arbitri is only relevant to govern the arbitral proceedings stricto sensu,159 although they admit that it also governs other matters such as annulment and set aside proceedings before Swedish courts.160 Importantly, however, the lex arbitri may also have implications as the law applicable to jurisdictional matters. These implications have also been noted in the aforementioned quotes from the decisions in Electrabel and Vattenfall.
165.
Specifically, pursuant to Section 48 SAA: 'Where an arbitration agreement has an international connection, the agreement shall be governed by the law agreed upon by the parties. Where the parties have not reached such an agreement, the arbitration agreement shall be governed by the law of the country in which, by virtue of the agreement, the proceedings have taken place or shall take place (emphasis added). As the Parties have not explicitly agreed on the law governing the arbitration agreement and neither the ECT nor the SCC Rules, to which the Parties have agreed, determines the law applicable to the arbitration agreement, it follows that, pursuant to Section 48 SAA, Swedish law, i.e. the law of the seat, is applicable to the determination of jurisdictional matters.
166.

The selection of the seat in Sweden, an EU Member State, also attracts the application of EU law, which is part of the law in force in every EU Member State, including Sweden. As noted by the CJEU Grand Chamber in the Achmea Judgment, where the underlying arbitration had its seat in Germany: '[g]iven the nature and characteristics of EU law [...] that law must be regarded both as forming part of the law in force in every Member State and as deriving from an international agreement between the Member States’.161 This conclusion has been confirmed by the CJEU Grand Chamber in the Komstroy Judgment, where the seat of the arbitration was in France: 'in any event, it should be noted that the parties to the dispute [...] chose [...] to submit that dispute to an ad hoc tribunal [...] and agreed [...] that the seat of the arbitration should be established in Paris. That choice, made freely by those parties, has the effect of rendering applicable French law as the lex fori to the dispute [...] under the conditions and within the limits laid down by that law. [...] EU law forms part of the law in force in every Member State. Consequently, the establishment of the seat of arbitration on the territory of a Member State, in this case France, entails, for the purposes of the proceedings brought in that Member State, the application of EU law, compliance with which the court hearing the case is obliged to ensure in accordance with Article 19 TEU.162

167.
However, that is not the end of the matter. International and domestic law, and also EU law, whether seen as part of one or the other, apply to the extent relevant to determine the issues arising in a case. In the present proceedings, the pleadings of the Parties require for instance, already at the jurisdictional stage, consideration of several questions that call for the application of more than one body of law. A non-exhaustive list of such possible questions includes the nationality of the Claimants, the capacity of the Parties to agree to arbitration, the validity and scope of the consent to arbitration given by the Respondent, the scope and effects of the acceptance of the offer by the Claimants, and whether certain measures adopted by the Respondent should be considered as taxation measures under domestic law, among others.
168.

Furthermore, it is the peculiarity of investment treaty arbitration to oppose private persons (whether physical or legal) and States, a feature which requires the determination, at the jurisdictional stage and beyond, of a range of legal questions that cannot be fully subsumed under domestic law alone. Swedish arbitration law can only to some extent deal with the matters relevant for the determination of jurisdiction in the present case. Some other matters must necessarily be analysed under international law, including - potentially - the interpretation under the law of treaties of certain provisions, such as Articles 21, 25 and 26 ECT, which have been raised in the Respondent’s jurisdictional and admissibility objections.

169.

In conclusion, the Tribunal considers that both under international law, in the exercise of its compétence de la compétence, and under the applicable lex arbitri, it is required to take as a starting point Article 26 ECT and then consider and, if necessary, apply other rules of both international law and domestic law, as relevant for each question.

EU Law and jurisdiction

170.
The main point of disagreement between the Parties at this stage concerns the application of EU law to determine jurisdictional matters. The Tribunal considers that the relevance and application of EU law to certain questions arising in these proceedings is inescapable, regardless of whether such law is characterised as part of international law or as part of domestic law.
171.

The reasoning of the arbitral tribunal in Electrabel v. Hungary on this point is apposite here: 'EU law has a multiple nature: on the one hand, it is an international legal regime; but on the other hand, once introduced in the national legal orders of EU Member States, it becomes also part of these national legal orders' (emphasis added).163 The Electrabel tribunal concluded that 'EU law as a whole is part of the international legal order'164 on the grounds that 'it would be artificial to categorise, as an international legal rule, Article 87 EC (precluding 'any aid granted by a Member State or through State resources...incompatible with the internal market’), and refuse that same status to the necessary implementation of that international rule by the non-national organ created by the same EU treaty [...] For this international rule to be translated into legal obligations binding on EU Member States, decisions have to be taken by the European Commission.'165 The tribunal thus considered EU law as a whole to be applicable as international law, including for jurisdictional purposes, but it concluded that there was 'no relevant inconsistency between EU law, the ECT and the ICSID Convention in the present case, as regards both the merits of the Parties’ dispute and the Tribunal’s jurisdiction to decide this dispute."166

172.

With respect to the application of EU law as part of domestic law, the Electrabel tribunal noted that 'when it is not applied as international rules under the ECT, EU law must in any event be considered as part of the Respondent’s national legal order, i.e. to be treated as a fact’ before this international tribunal.'167 Irrespective of whether or not considering domestic law as a 'fact’ is an appropriate approach in the specific context of ICSID arbitration proceedings, a context which the arbitral tribunal in Electrabel repeatedly recalled,168 it is certainly not so under Section 48 SAA in respect of the law governing the 'arbitration agreement’. EU law is unquestionably part of the Swedish legal system, as of that of other EU Member States, and it therefore has a bearing on some questions arising under the SAA, such as matters of arbitrability, public policy, and validity of the arbitration agreement under Sections 33 and 34 SAA. It must therefore be applied to determine the jurisdiction of the Tribunal in the present case.

Section C. General objection to jurisdiction ratione personae

A. The Respondent’s arguments

173.

The Respondent’s first argument is that the wording of Article 26(1) ECT excludes any case where an investor of one EU Member State has a dispute with another EU Member State in relation to its investment in that State because, pursuant to Article 26 ECT, a dispute must be between a 'Contracting Party' and an 'investor of another Contracting Party’.169

174.
The Respondent contends that the Tribunal does not have jurisdiction ratione personae as the EU itself is also a ' Contracting Party’ to the ECT, and both Denmark and Spain are EU Member States. Accordingly, the dispute does not involve an investor who comes from the territory of another Contracting Party, as required by Article 26 ECT.170
175.

The Respondent also contends in its Rejoinder on the Merits that the Claimants’ double Danish and European nationality excludes this dispute from the jurisdiction of the Tribunal. In particular, the Respondent argues that Article 26(1) ECT requires a diversity of nationalities in arbitration procedures.171 The Respondent makes this argument by analogy with the diversity requirement in Article 25(2) ICSID Convention.172 Because both Spain and Denmark are EU Member States, the Denmark-based Claimants hold both Danish and European nationality under Article 20 TFEU.173 Therefore, Claimants cannot be considered foreign investors in Spain as there is no diversity of nationality, Denmark and Spain sharing the European nationality.

B. The Claimants’ arguments

176.
The Claimants disagree with the Respondent’s argument that they are not investors from 'another Contracting Party’ for the purposes of Article 26(1) ECT merely because both Spain and Denmark are EU Member States.
177.
The Claimants argue that the jurisdictional requirement ratione personae in Article 26(1) ECT is met because the Respondent is a 'Contracting Party’ to the ECT and, as Danish nationals, the Claimants are 'Investor[s] of another Contracting Party ’ to the ECT, i.e. Denmark.174
178.

In support of their interpretation of Article 26(1) ECT, the Claimants rely on Article 31(1) of the VCLT, which provides that: 'A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose'.175

179.

According to the Claimants, relying, amongst others, on Kruck v. Spain, the 'ordinary meaning’ of the terms 'an Investor of another Contracting Party’ in Article 26(1) ECT does not, within an intra-EU context, exclude investors from EU Member States. Rather, if one considers the definition of 'Contracting Party’ in Article 1(2) ECT,176 each EU Member State in relation to another EU Member State is 'another Contracting Party It follows that investors from one EU Member State investing in another EU Member State are 'Investors of another Contracting Party ’ under Article 26(1) ECT.177

180.
The Claimants further argue that nothing in the 'context’ of Article 26(1) ECT suggests that 'because the European Union, as a REIO, also ratified the ECT, the Member States ceased to be distinguishable Contracting Parties’.178
181.

The Claimants also rely on the definition of 'Area’ in Article 1(10) ECT to support their position. They say that the definition of 'Area’ must be read in the context of Article 26(1) and, relying on the arbitral decision in Charanne v. Spain, they argue that the territory of the EU does not replace the territories of the Member States. The Claimants further note that this interpretation was confirmed in Isolux v. Spain, where the Respondent raised the same argument.179

182.
Rather, while the EU is a Contracting Party to the ECT and may be sued for matters within its scope of activity, its Member States have not ceased to be 'Contracting Parties’ as a result. To this end, the concept of 'Area’ in Article 1(10) ECT refers to both the territory of the Contracting States and the EU territory, meaning that an investment may still be made in the 'Area’ of Respondent (Spain), and that a claim may be brought against a respondent Member State that is not the EU in relation to an investment in response to that State exercising its sovereignty in its Area.180 Therefore, in referring to investments made 'in the territory’ of a Contracting Party, Article 26(1) ECT encompasses both possibilities. For claims against an EU Member State, it refers to the territory of a State, whereas for claims brought against the EU as an ECT Contracting Party, it refers to the territory of the EU. Which territory is relevant then depends on the claims which are brought.181

C. The Commission’s Amicus Curiae Brief

183.

For the European Commission, Article 26 ECT does not apply to intra-EU investment disputes. It notes that the ECT, as well as its predecessor, the European Energy Charter, were from the outset EU projects whereby the EU and the Member States acted as a single contracting party. Consequently, for the European Commission, it was clear from the very beginning that the ECT was not designed to apply amongst EU Member States for matters where competence was transferred to the EU.182

184.
The European Commission also refers to its Declaration at the time the ECT was concluded, according to which the European Communities and a Member State are to decide among themselves who is the defendant in a case where both are sued under Article 26 ECT by an investor from a third State. It considers this Declaration as evidence that only investors from third countries - but not from another Member State - were seen as entitled to bring claims against a Member State under the ECT.183

D. The Tribunal’s decision

185.

The Tribunal does not agree with the Respondent’s contention that the investment dispute between the Danish Claimants and the Kingdom of Spain is not a dispute between 'a Contracting Party’ and 'an investor of another Contracting Party’, as required by Article 26(1) ECT.

186.
The fact that the EU itself, as a REIO, is also a Contracting Party to the ECT and that Denmark and Spain are EU Member States, does not affect the reality that Denmark and Spain are also Contracting Parties to the ECT in their own right.
187.

Under Article 31(1) VCLT, the terms 'Contracting Party’ and 'investor of another Contracting Party’ in Article 26(1) ECT have to be interpreted 'in accordance with the ordinary meaning to be given to the terms’. In this light, there is nothing in Article 26(1) ECT that prevents Denmark and Spain as EU Member States from constituting a ' Contracting Party’ under the ECT in respect of each other. In this regard, the Tribunal takes notes of the similarly-minded decision of the arbitral tribunal in Kruck v. Spain which stated: "But nothing in the wording of ECT Article 26 points to the conclusion that because the EU is itself a Contracting Party, [Member States] cease to be distinct Contracting Parties vis-à-vis another."184

188.
The Tribunal is not convinced by the argument that Article 26 ECT does not apply to intra-EU investment disputes because the ECT, as well as its predecessor, the European Energy Charter, were from the outset EU projects whereby the EU and the Member States acted as a single Contracting Party. Both projects served several interests, including but not limited to those of the EU and its Member States. Moreover, although the EU and its Member States certainly coordinated their positions, each of them also continued to act within their own sphere.
189.
Even if the arguments of the Respondent regarding the application of EU law in the relations among EU Member States were taken at face value, that would not mean that EU Member States cease to be ECT Contracting Parties with respect to each other for a range of matters governed by the ECT. This conclusion is without prejudice to the possibility that EU law, as a key component of the network of legal relations among EU Member States, may exclude reliance on the ECT for some specific aspects in such relations.
190.

The coincidence that, under Article 20 TFEU, the Danish investors have, besides the Danish nationality, also an EU nationality, which they happen to share with Spanish nationals, does not erase their Danish nationality.

191.

Nor is it relevant that, to define the territorial application of the ECT in the EU, under Article 1(10) ECT, the EU has an 'Area’ which encompasses the territories of the EU Member States. Indeed, this does not mean that each EU Member State, for the purpose of the ECT, has ceased to have its own territory. The Tribunal agrees with the conclusions of the arbitral tribunals in Charanne v. Spain and Isolux v. Spain, according to which the territory of the EU does not replace the territory of the EU Member States.185

192.
When the ECT was concluded, the EU was aware that an investor from 'another’ ECT Contracting Party could potentially bring a claim against both the EU and an EU Member State. In the Statement submitted by the European Communities to the Secretariat of the Energy Charter pursuant to Article 26(3)(b)(ii) of the Energy Charter Treaty, which was made at the time of ratification of the ECT, the then European Communities expressly stated that '[t]he Communities and the Member States will, if necessary, determine among them who is the respondent party to arbitration proceedings initiated by an Investor of another Contracting Party.186
193.
This Statement suggests that, in addition to the EU Area, the territory of an EU Member State remains an Area for purposes of Article 1(10) ECT, and the two Areas coexist when a claim is brought against both the EU and an EU Member State. The content of the notion of 'Area’ then depends on who the defendant is: the entire EU territory is the 'Area’ whenever a claim is brought against the EU for matters within its scope of activity within the EU; the specific national territory of an EU Member State is the 'Area’ whenever a claim is brought against that Member State for alleged breaches of the ECT within its territory.
194.
In the present case, the claims concern alleged breaches of the ECT by Spain. Consequently, the relevant 'Area’ where such alleged breaches occurred is the territory of the Kingdom of Spain. The 'Area’ of Denmark, where the Claimants are established, is clearly distinct from the 'Area’ of Spain. Consequently, the Danish Claimants are 'investors from another Contracting Party’ as required by Article 26(1) ECT.
195.
As noted earlier, however, this conclusion is without prejudice to the possibility that reliance on Article 26 ECT may be precluded in some aspects of the relations among EU Member States, despite their capacity as ECT Contracting Parties.

Section D. General objection to jurisdiction ratione voluntatis

196.
Aside from the requisite jurisdiction ratione personae, the Parties have extensively argued as to whether or not Article 26 ECT provides the requisite consent for the Tribunal’s jurisdiction. Their arguments are complex and address different legal issues from the perspectives of both the ECT and EU law. Fleshing out these two perspectives and the emphasis placed by each Party on them is useful to provide context of the Tribunal’s analysis of the objection to jurisdiction ratione voluntatis. The Tribunal has carefully considered all the arguments made by the Parties in their written and oral submissions. As before, the following summary of the Parties’ positions is not intended to be exhaustive but only to identify the main questions raised and to place the decision of the Tribunal in their context.

A. The Respondent’s arguments

1. Lack of jurisdiction under EU law

(a) EU Law is applicable to the dispute

197.
The dispute before the Tribunal concerns investments made by two companies, established in one of the EU Member States, i.e. Denmark, in another EU Member State, i.e. Spain. According to the Respondent, this dispute affects one of the four fundamental freedoms of the EU, i.e. free movement of capital between Member States.
198.
Moreover, the dispute involves the granting of subsidies, which the European Commission has qualified as State aid. The Respondent observes that, in the distribution of powers between the Member States and the EU, the European Commission has the exclusive competence to decide on the lawfulness of State aid.187 The European Commission, so the Respondent observes, has already decided that the incentives provided under RD 661/2007 and 1578/2008 constitute State aid.188 The Respondent adds that the Claimants have not challenged this Decision before the CJEU.

(b) The EU legal system is autonomous

199.
The Respondent contends that EU law is an autonomous legal system with its own legislative, executive and judicial institutions. The protection provided by EU law rests on a complete system of judicial remedies to guarantee the correct application of EU law, granted by the national courts of the Member States and the CJEU.189
200.
The Respondent observes that the harmonised EU Internal Energy Market and intra-EU investments in the energy sector are thus supplemented by a system of institutional and judicial protection which provides the appropriate means and legal actions without distinguishing between investors from one Member State or another.190 Moreover, the Respondent emphasises that since the entry into force of the Treaty of Lisbon, the EU has exclusive competence over foreign direct investment.191
201.
The Respondent submits that the fact that the ECT has not only been entered into by the EU, but also by the EU Member States, does not contradict the principle of autonomy of EU law.192 For the intra-EU relations, the ECT has to be integrated with EU law. As noted by the CJEU in the Komstroy Judgment, the ECT is itself part of EU law193 and, when signing and applying the ECT, Member States have to respect the principles and obligations of the EU legal order.194
202.
The CJEU has exclusive jurisdiction to examine how the provisions of the ECT apply in relation to the commitments between Member States under EU law as a whole, i.e. whether actions of the Member States - including when based on ECT provisions - are compatible with other aspects of EU law. The CJEU is thereby entitled to examine the ECT's binding effect on Member States within the EU.
203.
The Respondent concludes that an arbitral tribunal cannot rule on the rights of a European investor in the Internal Market. Such interference by an arbitral tribunal in the EU legal order and in the EU fundamental freedoms would be incompatible with EU law. In support of this view, the Respondent refers to the CJEU’s Opinion 1/91 regarding the Agreement to create a European Economic Area.195
204.

The Respondent also refers to the Achmea Judgment,196 which it considers very clear on the matter and which excludes any further detailed consideration of the Advocate General’s contrary opinion. Indeed, for the Respondent, the Achmea Judgment implies that, when Member States submit disputes to arbitral tribunals, which are not part of the EU court system and cannot request preliminary rulings from the CJEU on the interpretation of the EU Treaties, the autonomy of EU law would be undermined. The CJEU has maintained and further clarified this position with respect to arbitral tribunals hearing disputes arising from the ECT in the Komstroy Judgment197 and with respect to domestic laws admitting ad hoc arbitration agreements between an EU Member State and an investor of another EU Member State in the PL Holdings Judgment.198 Both subsequent decisions confirm the underlying reasoning of the Achmea Judgment for the issues and contexts they discuss.199

205.

The starting point of the Achmea Judgment,200 according to the Respondent, is that the autonomy of the Union has to be ensured by the EU judicial system, with at its core the possibility to refer questions for a preliminary ruling to the CJEU under Article 267 TFEU.201 The Tribunal, the creation of which rests on Article 26 ECT, is not part of the EU judicial system and has no possibility to refer questions for preliminary rulings to the CJEU under Article 267 TFEU.

206.

The Respondent concedes that the Achmea Judgment, in paragraphs 57-58, states that an international agreement which has established a court responsible for the interpretation of its provisions and whose decisions are binding on the institutions, is not in principle incompatible with EU law when the autonomy of the EU legal order is not jeopardized.202 Such a possibility has been confirmed by the CJEU in its Opinion 1/17203 and in the Komstroy Judgment.204 However, such international agreements would only be compatible with EU law 'provided that the autonomy of the EU and its legal order is respected'. International agreements providing for their own specific dispute settlement mechanisms, which do not respect the autonomy of the EU and its legal order, are incompatible with EU law.

207.
For the Respondent, in the present proceedings, the dispute involves the free movement of capital within the EU and the granting of State aid. Because the Tribunal cannot refer questions concerning EU law or the interpretation and application of the ECT in intra-EU disputes for a preliminary ruling to the CJEU, the Tribunal’s jurisdiction is incompatible with the autonomy of EU law.205
208.
The Respondent further refers to Article 344 TFEU pursuant to which: 'The Member States undertake not to submit a dispute concerning the interpretation and application of the Treaties to any method of settlement of disputes other that those provided for therein'. The Respondent observes that it follows from Article 344 TFEU and the case law of the CJEU, that a Member State is not entitled to remove intra-EU disputes involving the interpretation or application of EU law from the judicial system organised by the Union.206
209.

Article 344 TFEU applies regardless of whether the Member State’s counterparty is another Member State or a private investor from such Member State.207 Unlike a provision such as Article 273 TFEU which expressly states that it applies 'between Member States’, the wording of Article 344 TFEU does not contain this limitation, and it therefore concerns also investment disputes between an EU Member State and an investor of another EU Member State.208 This has been confirmed by the CJEU in the Achmea Judgment and in the Komstroy Judgment to which Respondent refers.209 Article 344 TFEU prevents Spain from referring any dispute with an investor concerning the application or interpretation of EU law, including one relating to the Internal Electricity Market, to international arbitration210 because this method of dispute settlement would not guarantee the autonomy of EU law, as required under Article 344 TFEU.211

210.

The Respondent affirms that the impact of the Achmea Judgment, which concerned an intra-EU case relating to the Bilateral Investment Treaty ('BIT’) between The Netherlands and the Slovak Republic ('Netherlands-Slovakia BIT’), cannot be limited to BITs but also applies to multilateral investment treaties such as the ECT.212 Indeed, it is the circumvention of the judicial system established by the EU Treaties by a whole category of disputes, whether on the basis of a BIT or of a multilateral investment treaty, that violates fundamental EU law principles and undermines the autonomy of the EU.213

211.
In this context, the Respondent observes that the CJEU refers in the Achmea Judgment to 'a provision in an international agreement concluded between Member States' that provides for investor-State arbitration. This wording clearly includes treaties such as the ECT, if applied in an intra-EU context.214 The Respondent maintains that, if the CJEU had wanted to limit its ruling to bilateral treaties between the EU Member States, it could have said so explicitly. Yet, according to the Respondent, the CJEU did precisely the opposite. Indeed, the question from the German Bundesgerichtshof in the Achmea case referred to 'a provision in a bilateral investment protection agreement’, but the CJEU formulated its judgment in wider terms, referring to 'a provision in an international agreement concluded between Member States’. Thus, the CJEU made a conscious decision to give a ruling which is not limited to bilateral investment treaties between the Member States but also concerns the intra-EU application of the ECT.215
212.

The Respondent observes that any doubt regarding the relevance of the Achmea Judgment for arbitration proceedings based on Article 26 of the ECT has now been removed by the Komstroy Judgment, where the CJEU Grand Chamber reproduced the holdings made in Achmea and expressly noted that 'it must be concluded that Article 26, paragraph 2, letter c), of the TEC [i.e. the ECT] must be interpreted in the sense that it is not applicable to the disputes between a Member State and an investor from another Member State in relation to an investment made by the latter in the first Member State’216

213.
The Respondent concludes that the principles of the Achmea Judgment apply to the ECT, whenever the dispute requires the application or interpretation of EU law and may therefore affect the autonomy of the EU legal system.217 For the Respondent, the underlying rationale of the Achmea Judgment extends to the ECT, as confirmed in the Komstroy Judgment, because the conditions and characteristics remain the same with respect to the issue at stake, which moreover raises matters of EU public policy.218
214.

Referring to the decision of the arbitral tribunal in Vattenfall v. Germany, the Respondent points out that the CJEU’s interpretation of Articles 267 and 344 TFEU in the Achmea Judgment is part of EU law, and therefore it is binding on all instances where these provisions have to be interpreted and applied.219 The Respondent submits that the arbitration clause of the ECT excludes from the jurisdiction of the EU judicial system the dispute between an investor of an EU Member State and an EU Member State, and that it is therefore inconsistent with the autonomy of EU law.

(c) Primacy of EU Law

215.
The Respondent notes that the primacy of EU law has been recognised since the early years of European integration. This primacy has been established by leading precedents such as Van Gend & Loos220 and Costa v. Enel,221 and it is confirmed by the conclusion of the Lisbon Treaty (TFEU).222 The ECT, as a treaty entered into by the EU as well as by the Member States, is part of the EU legal order, and it is therefore subject to the primacy of EU law.223
216.

As noted earlier in connection with the law applicable to jurisdiction, the Respondent argues that EU law as a whole (and thus not only the EU Treaties) must be regarded as part of public international law.224 Referring to the Achmea Judgment225 and to the decision in Electrabel v. Hungary226 the Respondent emphasises that the entire EU legal order, which stems from treaties that are part of international law, is itself part of international law.227 The Respondent refers, in this connection, also to the case law of the CJEU, including Budějovický Budvar, národní podnik v. Rudolf Ammersin GmbH228, as well as to the judgment of the German Bundesgerichtshof of 31 October 2018.229

217.
The primacy of EU law implies that, whenever the competence of the EU over a specific matter is exclusive, Member States lose their treaty-making power.230 For 'mixed’ agreements, which cover matters within the competence of the Member States as well as of the EU, and which are signed by both, the Member States have to respect the principles and obligations of the EU legal order.231 The fact that the EU has made use of its external competence to conclude a treaty on specific matters takes away the power of the Member States to address the same matters in intra-EU relations.232
218.
The Respondent concludes that the EU’s own intra-EU investor protection system prevails over protection granted by other international treaties. For the Respondent, as confirmed by established case law of the CJEU, Member States are not allowed to exercise rights emanating from international conventions in their internal relations, because these are subject to EU law.233 In the relations between EU Member States, EU law takes precedence over the commitments by Member States under international agreements.
219.
The Respondent observes, by reference to Article 10(8) ECT, that the ECT does not regulate 'financial assistance’ granted to investments in the energy sector, while the regulation of State aid is essential for the operation of the common market within the EU.234 It follows from the Achmea Judgment that the ECT, where it is incompatible with EU law, has no legal effect in intra-EU relations.235
220.
According to the Respondent, the primacy of EU law is not affected by temporal relations between the EU Treaties and other agreements. It relies on the aforementioned judgment of the Bundesgerichtshof for the proposition that EU law prevails over the Netherlands-Slovakia BIT without temporal restrictions.236 It further relies on the CJEU’s PL Holdings Judgment with which the CJEU rejected to limit the temporal effects of its Komstroy Judgment.237 For the Respondent, the primacy of EU law remains similarly unaffected by the fact that the ECT was concluded after the Treaty of Rome, establishing the European Economic Community, and the Respondent notes that, in all events, the Lisbon Treaty which redrafted the basic principles governing the EU and allocated exclusive competence over foreign direct investment to the Union was concluded after the ECT.238
221.
For the Respondent, the Tribunal cannot assert jurisdiction over intra-EU disputes because this would imply that (i) priority would be given to the ECT regulation and protection of the energy market despite the fact that this market is regulated and protected in a far superior manner by EU law; (ii) jurisdiction over disputes with a Member State are taken away from the CJEU so that the autonomy of EU law would be at risk; and (iii) EU nationals would be denied the legal and judicial protection they enjoy under the EU legal system.239 Moreover, according to the Respondent, such consequences would also be incompatible with the ECT’s overall purpose.240
222.

Referring to the Achmea Judgment, as subsequently confirmed by the Komstroy Judgment, the Respondent contends that it could not be deemed to have offered arbitration as a means to settle the present dispute under Article 26 ECT because: (i) the dispute before the Tribunal requires the interpretation and application of EU law, including the ECT itself, matters of foreign direct investment and State aid, which are under the Union’s exclusive competence, as well as, ultimately, the fundamental freedoms of the EU241; (ii) the present arbitration proceedings could not respect the autonomy of EU law to the extent that the ECT would not be capable of 'guaranteeing the full application of EU legislation in all Member States and guaranteeing the judicial protection of people’s rights pursuant to the Law’242; and (iii) the Tribunal’s award would not be subject to a sufficient degree of review by a court of a Member State.243

223.
The Respondent further notes that the autonomy and the primacy of EU law excludes the Tribunal’s jurisdiction over the present dispute because, as noted by the CJEU in the Achmea Judgment and subsequently confirmed in the Komstroy Judgment, under EU law 'an international agreement cannot affect the allocation of powers fixed by the Treaties or, consequently, the autonomy of the EU legal system, observance of which is ensured by the [CJEU]’.244The Respondent emphasises that State aid is a central issue of EU Law and falls within the exclusive powers of the European Commission. A ruling by the Tribunal concerning State aid would thus be a radical infringement of the order of competences set by the EU Treaties and of its autonomy as a legal system. Therefore, the Respondent stresses that Denmark and Spain are obliged to preserve this autonomy and primacy and that the Tribunal lacks adjudicative power to rule on the case.245
224.
The Respondent also notes that the arbitral awards relied on by the Claimants to challenge the primacy of EU law insufficiently analyse the relevance of the primacy of EU law in intra-EU relations.246 According to the Respondent, the only valid interpretation of the ECT which is compatible with EU law is that Article 26 ECT only contains an offer to arbitrate by EU Member States to investors of third States, meaning those who are not from a EU Member State, but that this offer is not addressed to investors from EU Member States.247
225.
The Respondent also objects to the reasoning in the Novenergia award according to which the Achmea Judgment does not concern the actual application of dispute settlement mechanisms in investment treaties, but only the competence to conclude such provision. If provisions of EU law preclude the inclusion in a treaty of a dispute settlement mechanism incompatible with the EU judicial system, such provisions must not be applied. The applicability of a provision is determined by the provision’s admissibility. It is unthinkable that the CJEU would accept that a provision, which unequivocally undermines the autonomy of EU law, could still be applied without hindrance. If a provision is precluded, it must not be given effect.248
226.

In all events, and in subsidiary order, the Respondent argues that, even if it were considered that Spain may have consented to intra-EU arbitration of investment disputes in Article 26 of the ECT, such consent would not be valid, as authoritatively stated by the CJEU in its Achmea Judgment,249 and subsequently confirmed in the Komstroy Judgment.250

227.
The Respondent further refers to the judgment of the German Bundesgerichtshof setting aside the Achmea award according to which: 'By acceding to the EU the Member States limited their freedom of action in international law and renounced the exercise between themselves of rights in international law that conflicted with EU law... In that respect, the primacy of EU law has the consequence that a provision in an agreement operating between Member States inside the EU cannot apply even as a provision of international law.'251
228.
The Respondent also notes, as an indication that such position would also be followed in the seat of the present arbitration proceedings, that after receiving from the CJEU the Komstroy Judgment and the PL Holdings Judgment, the Svea Court of Appeals decided to withdraw a referral request to the CJEU made in the case Italy v. Athena.252

(d) EU law takes precedence over the ECT under international law

229.

For the Respondent, also under international law, the EU Treaties prevail over the ECT by virtue of Articles 30 and 59 VCLT.253 The Lisbon Treaty, which excludes ECT arbitration for intra-EU investment disputes in its Article 344 TFEU, was concluded in 2007, while the ECT was concluded in 1994. Under Articles 30 and 59 VCLT, Article 344 TFEU would thus prevail over a prior provision, i.e. Article 26 ECT. Consequently, also from this perspective, Article 26 ECT is no longer applicable for intra-EU investment disputes covered by Article 344 TFEU.254

230.
The Respondent moreover contends that 'because of the peculiar nature of the EU’, the EU law on transfer of capital and treatment of intra-EU investments, with its specific and detailed rules, prevails over the more general rules of the ECT, including the application in an intra-EU context of its arbitration provision of Article 26 ECT.255 Moreover, according to the Respondent, the Treaties establishing the European Community, signed before the ECT, by far exceeded the objectives of the ECT although, because of the primacy of EU law in intra-EU relations, it is irrelevant whether EU law offers a more or less favourable protection than the ECT.256
231.
The Respondent argues that, as a result, a disconnection clause within the ECT is unnecessary, as the ECT cannot affect the existing community law.257 The Respondent relies in this respect on the CJEU’s Opinion 1/03 of 7 February 2006, stating that 'given that the agreement envisaged covers areas for which a complete harmonization has been carried out, the existence of a disconnection clause is entirely without relevance’.258 It further refers to the disconnection practice of intra-EU matters in numerous cases where no express disconnection clause appears in the relevant treaty and where disconnection is achieved by means of EU legislation or by a generally recognised practice accepted as binding by EU Member States and acknowledged by third States.259

(e) Conclusion

232.
On the basis of the foregoing arguments, the Respondent concludes that the Tribunal has no jurisdiction to decide an intra-EU dispute which requires the application or interpretation of EU law.260

2. Lack of jurisdiction under the ECT

(a) The ECT does not apply to intra-EU investments

233.
The Respondent argues that there was no valid offer to arbitrate under Article 26 ECT. It refers to the judgment of the German Bundesgerichtshof setting aside the Achmea award which held with regard to Article 8 of the Netherlands-Slovakia BIT that: 'Neither of the parties could by means of Article 8(2) of the BIT give the other party a valid undertaking that it would consent to the determination of the disputes referred to in article 8(1) by the arbitral tribunal. This meant that the applicant [Slovakia] had made no offer to conclude an arbitration agreement with the investors from the Netherlands that the defendant could then accept.'261
234.

The Respondent furthermore refers to the Member States’ 'Declaration of 15 January 2019 on the legal consequences of the Judgment of the Court of Justice in Achmea and on the investment protection in the European Union’, which confirmed that Article 26 ECT was not applicable between EU Member States.262 For the Respondent, this Declaration is not only a political statement, but also, under Article 31 VCLT, an important expression of the EU Member States which signed the Declaration on their understanding of Article 26 ECT.263

235.
Regarding CJEU’s Opinion 1/17, the Respondent observes that, although in that case the investor-state dispute settlement ('ISDS’) system contained in the CETA was deemed to be compatible with the autonomy of the EU legal order, the CJEU’s reasoning is fully consistent with its previous conclusions in the Achmea Judgment and their extension to the ECT. This is because the essence of Opinion 1/17 is, according to the Respondent, that an 'international treaty can only be compatible with EU Law as far as it does not impede the application of the EU Laws. Contrario sensu, if there were rules in the CETA that would impede the application of the EU Legal Framework those rules should not be applied within the EU as it happens with Article 26 of the ECT that must not be applied for intra-EU affairs’.264
236.

The Respondent further notes that, any doubt pertaining to the application of the CJEU’s conclusions in the Achmea Judgment to Article 26 ECT has been put to rest by the CJEU’s reasoning in the Komstroy Judgment, where the Grand Chamber expressly stated that 'it must be concluded that Article 26, paragraph 2, letter c), of the TEC [i.e. the ECT] must be interpreted in the sense that it is not applicable to the disputes between a Member State and an investor from another Member State in relation to an investment made by the latter in the first Member State’ .265

(b) The ECT grants priority to EU law for intra-EU investments

237.

Relying on the reasoning of the tribunal in Electrabel v. Hungary, the Respondent observes that the ECT should be interpreted, as far as possible, in harmony with EU law. For the Respondent, several provisions within the ECT, if properly analysed, indicate that the ECT can operate in harmony with EU law as it does not apply to intra-EU investments.266

238.

The Respondent considers that the primacy of the EU legal system is recognised inter alia in the text of Article 1(3) ECT, which admits Regional Economic Integration Organisations ('REIO’) as Contracting Parties and expressly recognises the decisions taken by a REIO as 'binding on [its Member-States] in respect to those matters’. The EU is the only REIO that is party to the ECT.267 Consequently, according to the Respondent, for matters over which competence has been transferred to the EU, the Member States are inter se bound by EU law and no longer by the ECT.268

239.

Moreover, for the Respondent, Article 25 ECT, which provides that the ECT’s most-favoured-nation obligation does not extend any preferential treatment given to Member States of an Economic Integration Area ('EIA’) (such as the EU) to countries which are not part of that area, also suggests that the ECT recognises the preferential nature of the EU protection system, which is thus not extended beyond intra-EU relations.269

240.

The Respondent furthermore notes that the principle according to which the EU stands in the shoes of its Member States in areas where it has competence, is also reflected by Article 36(7) ECT, which accords a REIO, hence the EU, a number of votes equivalent to the number of its Member States for matters over which the REIO has competence.270 The Respondent finally observes that its interpretation of the ECT is confirmed by the ECT’s purpose.271

(c) The ECT grants priority to EU law as it comprises more favourable provisions

241.

The Respondent’s primary contention under this heading remains that the objectives of the EU Treaties, i.e. a common market based on the principle of non-discrimination and price formation in accordance with the rules of the market, were not similar to those of the ECT, but in fact exceeded them. However, even if the ECT could be said to cover the same subject-matter as the EU Treaties, the regime introduced by the EU Treaties would still prevail over the ECT under Article 16 ECT, because the ECT grants less favourable substantive rights to the investor than EU law does. Nor is arbitration, provided for in Article 26 ECT as one of several possibilities, a more favourable dispute resolution mechanism, because under the ECT no discrimination or illegal State aid in the investment process is sanctioned.272

(d) Under Article 26 ECT, the Tribunal has to apply EU law to the dispute and decline jurisdiction

242.

As noted earlier in the discussion of the law applicable to jurisdiction, the Respondent submits that under Article 26(6) ECT, international law not only applies to the merits of the dispute but also determines whether the Tribunal can assume jurisdiction over a dispute.273 According to the Respondent, the international law that the Tribunal is required to apply under Article 26(6) ECT comprises EU law, which is contained in or follows from an international treaty such as the TFEU.274 The Respondent extensively relies on the award in Electrabel v. Hungary275, the award in Blusun v. Italy276 and the decision of the arbitral tribunal in Vattenfall v. Germany,277 which all recognised that EU law operates as international law.278 Within the body of international law applicable to the dispute, the Tribunal therefore has to apply EU law - including the EU rules governing the Internal Electricity Market - as part of its implementation of the EU fundamental freedoms. Moreover, following the Komstroy Judgment, the Respondent also notes that EU law would apply to the present dispute because the ECT itself is part of EU law as well as because foreign direct investment and State aid law are exclusive competences of the EU.279

243.
However, the contention of the Respondent is that EU law prevails and applies as an autonomous body of law. The EU judicial system, encompassing the courts of the Member States and headed by the CJEU, is entrusted to supervise the correct implementation of EU law. The overall argument of the Respondent, as it is stated in its Additional Comments of 2022, is that: '(1) the ECT, foreign direct investment and state aid are EU Law; (2) EU Law must be exclusively interpreted by national courts and the CJEU; (3) therefore no intra-EU investment arbitrations under the ECT are possible. Consequently, it is obvious that, respectfully, the Tribunal lacks jurisdiction'.280
244.
The Respondent therefore stresses that the autonomy and primacy of EU law excludes the Tribunal’s jurisdiction under Article 26(6) ECT for intra-EU investment disputes. The Respondent moreover observes that Article 344 TFEU specifically prohibits the submission by EU Member States of disputes that concern the interpretation and application of the EU Treaties to dispute resolution mechanisms other than those foreseen in the EU Treaties (i.e. the CJEU and the Member States domestic courts).281 This prohibition not only covers disputes which directly concern the EU Treaties, but also disputes which indirectly involve such treaties.282
245.
The Respondent further adds that Article 26 ECT must be interpreted in the light of the EU’s 1997 'Statement pursuant to Article 26(3)(b)(ii) to the ECT' as part of the relevant interpretive context under Article 31(2)(b) VCLT. According to the Respondent, this interpretation leads to the result that Article 26 ECT is not applicable in intra-EU relations where EU law applies.283
246.
The Respondent also emphasises that the EU has consistently made it clear towards all ECT Contracting Parties that Article 26 ECT does not apply to intra-EU investments. According to the Respondent, this is confirmed by the 2015 formal Declaration issued by the EU on the occasion of the drafting of the International Energy Charter, the political basis for the ECT, that 'due to the nature of the EU internal order, the text in Title II, Heading 4, of the International Energy Charter on dispute settlement mechanisms cannot be construed so as to mean that any such mechanism would become applicable in relations between the European Union and its Member States, or between the said Member States, on the basis of that text' .284
247.
The Respondent further observes that the present arbitration, conducted under the SCC Rules, has its seat in Sweden and is therefore governed by the SAA.285 This is relevant because, according to the Respondent, under Sections 2, 33 and 34 SAA, Swedish courts have the final word regarding the invalidity (e.g. as a result of non-arbitrability or public policy) and the set aside of an award (e.g. when it is based on an invalid arbitration agreement).286 In this context, the Respondent emphasises that State aid is one of the 'prime examples of what is considered to be non-arbitrable issues under Section 33, first paragraph, item 1, SAA. For this reason, an award regarding this issue will be invalid’.287
248.
More generally, the Respondent emphasises by reference to the Komstroy Judgment that the selection of the seat of this arbitration in Stockholm necessarily attracts the application of EU law. Extrapolating from the specific wording in the Komstroy Judgment, where the seat of the arbitration was in Paris, the Respondent paraphrases the reasoning of the CJEU in Komstroy as applied to the present arbitration as follows: 'the establishment of the seat of arbitration on the territory of a Member States, in this case Sweden [France], entails, for the purposes of the proceedings brought in that Member State, the application of EU law, compliance with which the court hearing the case is obliged to ensure in accordance with Article 19 TEU' .288
249.
Referring to Section 34 SAA, the Respondent concludes that 'the ECT is an international agreement between EU Member States and in particular between Denmark and Spain. Because Articles 267 and 344 TFEU preclude a provision such as the arbitration clause contained in Article 26 of the ECT, this clause did not contain a valid offer to arbitrate on the part of Spain vis-à-vis the Claimants. Because Article 26 of the ECT did not contain a valid offer to arbitrate on the part of Spain, the Claimants could not accept an offer to arbitrate when it filed its request for arbitration. Consequently, there was no valid agreement to arbitrate between the parties'.289
250.

The Respondent observes that the non-arbitrability of the dispute and/or invalidity of the arbitration agreement because of EU law is part of the domestic law of the Member States and concludes that, regardless of whether the Tribunal decides its jurisdiction under international law, as Article 26 ECT suggests, under Swedish law (i.e. the law of the seat), or under Spanish and Danish law (i.e. the law of the Parties), the result is that it has no jurisdiction over the present dispute.290

(e) Conclusion: Article 26 does not grant jurisdiction to the Tribunal

251.
On the basis of the foregoing arguments, the Respondent contends that it is for the national courts of the Member States and for the CJEU to guarantee the full application of EU law in all Member States. Consequently, EU Member States cannot consent to arbitration of investment disputes with investors of other Member States under Article 26 ECT which concern the interpretation and application of EU law.291 Therefore, the dispute resolution mechanisms established in the ECT do not apply to intra-EU disputes.292

B. The Claimants’ arguments

1. The Tribunal’s jurisdiction under the ECT

(a) The ECT applies to intra-EU investment disputes

252.

For the Claimants, the ECT contains the Respondent’s offer, governed by international law, to unconditionally consent to arbitration, which is met by the Claimants’ consent through the Request for Arbitration, equally governed by international law.293 Under Article 216(2) TFEU, the EU Institutions and the Member States are bound by the ECT.294

253.
The Claimants observe that the separability of the arbitration clause implies that the arbitration agreement may be governed by a different law than the one applicable to the merits. Even in the event that EU law would be applicable to the merits the arbitration agreement continues to be governed by international law and is not affected by EU law. The decision of the German Bundesgerichtshof of 31 October 2018 failed to recognise this doctrine of separability, so the Claimants argue.295
254.

The Claimants further argue that the Tribunal, established under a public international law instrument, the ECT, has to take an 'outsider’s perspective' vis-à-vis EU law and that EU law is thus not (automatically) to be seen as 'supreme'.296 The Claimants rely on the award rendered in Electrabel v. Hungary, which indicated that 'the Tribunal is required to operate in the international framework of the ECT and the ICSID Convention, outside the European Union'.297 They moreover refer to the award rendered in RREEF v. Spain, according to which 'in case of any contradiction between the ECT and EU law, the Tribunal would have to insure the full application of its 'constitutional’ instrument upon which its jurisdiction is founded.'298 They also note that in Landesbank Baden-Württemberg et al. v. Kingdom of Spain, the Tribunal stated that "[it] does not [...] operate under EU law but under international law and, in particular, the terms of the ECT.299

255.

For the Claimants, the Respondent cannot pretend not to be bound by the ECT for intra-EU investment disputes on the grounds that the ECT is incompatible with the fundamental principles of EU law with regard to the fourth freedom and the harmonisation of the EU Internal Energy Market. Referring to Western Sahara Campaign UK,300 the Claimants submit that the CJEU itself recognised that the EU is bound by the international treaties it has concluded. According to the Claimants, the EU and the Member States cannot invalidate existing international treaties. Therefore, the Achmea Judgment cannot be interpreted to invalidate investment treaty arbitration clauses such as Article 26 ECT.301 The Claimants further note that "whenever the ECJ refers to certain international agreements being incompatible with EU law, it is necessary to check whether said agreement is already in force or not. [...] Whenever reference is made [...] with regard to the compatibility of the EEA Agreement, the Accession of the EU to the ECHR or the Opinion on the Patent Court, one has to bear in mind that the respective international agreements were subject to opinion procedures before the EU’s accession to them.302

256.

The Claimants dispute the Respondent’s contention that, when ratifying the ECT, Spain could not have made an offer to arbitrate under Article 26 ECT because of the 'prevailing’ framework of the EU Internal Energy Market. For the Claimants, Article 46 VCLT does not allow Spain to allege that it could not bind itself to the ECT because it would thereby allegedly violate provisions of internal law (including EU law).303 As stated in Article 27 VCLT, the Respondent can neither invoke its domestic law or EU law to justify its breach of ECT obligations. Indeed, EU law, in its double capacity of institutional law of the EU and domestic law of the Member States, does not allow to deviate from the principle of pacta sunt servanda.304 Referring to previous intra-EU cases,305 decisions in WTO Dispute Settlement proceedings306 and other multilateral treaties such as CETA,307 the Claimants urge the Tribunal to consider EU law as a factual element of municipal law, in an arbitration under the ECT, where international law applies to the merits. EU law thus should only be considered as a fact.308

257.
For the Claimants, any analogy with the CJEU’s considerations about the EU’s accession to the treaty regime of the ECHR or the establishment of the EEA/EFTA Court is inapplicable to the ECT’s arbitration provisions. The Claimants further submitted that the very fact that an opinion from the CJEU regarding the compatibility of the ECT has never been sought demonstrates that both the European Commission and the EU Member States were fully convinced that the ECT was compatible with EU law.309 Any finding by the CJEU that EU Treaties might be superior and primary applied, arises out of EU law, not out of international law. According to the Claimants, '[i]nternational dispute settlement bodies located outside the EU framework are free to arrive at a different conclusion '.310
258.
The Claimants moreover argue that, at the time the ECT was concluded in 1994, the exclusive competence in the field of investment protection was with the Member States. It was only in 2007 that the Treaty of Lisbon deferred in Article 207 TFEU the exclusive competence for common commercial policy to the EU. At that time, Spain did not withdraw its consent to arbitrate intra-EU disputes, as allowed by the VCLT.311 Consequently, Spain is still bound by its consent to investment arbitration under Article 26 ECT.
259.
Moreover, the Claimants argue that, at present, the competence relating to energy is still shared between the Member States and the EU, where the Member States remain competent for dispute settlement and the European Commission did not regulate the internal energy market.312
260.
Furthermore, the Claimants observe that, while specific provisions were made for the WTO313 and the Svalbard Treaty,314 the ECT does not contain a disconnection clause to limit its application in the event of intra-EU investment disputes.315 Indeed, unlike several other mixed agreements, the ECT does not contain a clause indicating that EU law shall apply in the Member States’ mutual relations.316 Referring to Verburg and Lavranos, the Claimants note that the European Commission unsuccessfully advocated for the inclusion of an explicit disconnection clause in the ECT.317 Neither does the ECT contain an implicit disconnection clause. On the contrary, according to the Claimants, both the ordinary meaning and the purpose of the ECT confirm that it grants intra-EU investment protection.318 The Claimants add that the drafting history of the ECT and a survey of legal commentary lead to the same conclusion.319
261.

The Claimants note that the absence of a disconnection clause has been acknowledged by tribunals in other intra-EU arbitrations under the ECT.320 For example, in Foresight Luxembourg Solar 1 S.A.R.L et. al. vs. Kingdom of Spain, the tribunal asserted: "The ECT does not contain a disconnection clause. Further, the Tribunal can discern no attempt in the ECT’s provisions to carve out 'intra-EU’ investor State disputes from the protections afforded by the treaty."321 More so, in FREIF Eurowind Holdings Ltd. v. Kingdom of Spain, the tribunal emphasized that "[t]he lack of any express carve out is of particular note given that the ECT allows ORIEs such as the EU to become Contracting Parties [...]. If the ECT intended to exclude the jurisdiction of arbitral tribunals when competence over certain matters governed by the ECT has been transferred to an ORIE, Spain’s complaints ought to have been front of mind in the drafting of Article 26 [...]."322

(b) Relations between the ECT and EU law

262.
Even if EU law could be considered to be part of international law - or international law sui generis as the EU institutions see it - it would not prevail over the provisions of the ECT.323 The Claimants argue that, when previous tribunals recognised EU law as international law, they meant that EU law must be applied at the same level as other treaties.324 For the Claimants, the ECT and EU law do not cover the same subject-matter. State aid, which is a major concern under EU law, is, for instance, only an ancillary matter in the present dispute and is irrelevant for the Tribunal’s jurisdiction.325
263.

EU law does not contain any rules on investor-State arbitration or a substantive protection standard such as Articles 10 and 13 ECT.326 The Claimants refer in this regard to the decision on the Achmea issue rendered by the arbitral tribunal in Vattenfall v. Germany, which noted also that Articles 267 and 344 TFEU do not concern the same subject matter as Part III and V of the ECT.327 Articles 267 and 344 TFEU are not a stumbling block for the compatibility of EU law with Article 26 ECT.328

264.
Article 267 TFEU concerns the interpretation of the EU Treaties, not of the ECT. Moreover, the CJEU could also rule on the accession by the EU to the ECT, but it has not done so.329 For the Claimants, Article 344 TFEU is equally not at stake as it only relates to disputes and proceedings between Member States with regard to EU law.330 Member States may, for instance, submit disputes with regard to the law of the sea to the International Tribunal on the Law of the Sea or with regard to international law to the International Court of Justice.331 For the Claimants, the ECT and EU law are not incompatible and can be applied together.332
265.
Besides, even if Articles 267 and 344 TFEU were incompatible with Article 26 ECT, the latter provision would be the overarching lex specialis confirming the effectiveness of Article 26 ECT and an investor’s right to dispute resolution, notwithstanding any less favourable terms under the EU Treaties.
266.

The Claimants disagree with the Respondent that, under Articles 30(3) and 59(1) VCLT, EU law would prevail over the ECT.333 They observe that for Articles 30(3) and 59(1) VCLT to apply, the ECT and EU law must cover the same subject-matter. This is not the case because the substantive protection standard granted to an investor in the ECT is far more specific than any rules available under EU law.334

267.

With respect to Article 30 VCLT, the Claimants more specifically submit that this Article does not preclude the application of ECT -provisions in intra-EU arbitrations.335 Article 30 VCLT only governs the issue of incompatible provisions in successive treaties.336 However, the Claimants reiterate that no incompatibility exists between the ECT and EU law because they cover a different subject-matter.

268.

In the event of any incompatibility, the EU and the Member States would certainly have adopted a subordination clause to indicate which body of rules prevails, as foreseen in Article 30(2) VCLT. However, neither the ECT nor the EU Treaties contain such a clause.337

269.

Finally, even assuming that the ECT and EU law were covering the same subject-matter and were incompatible, the Claimants still argue that the ECT would prevail over EU law under the explicit collision rule of Article 16 ECT.338 For the Claimants, Article 16 ECT establishes the ECT’s priority over any other prior or subsequent treaty which is less favourable for the investor (such as the EU Treaties).339 The Claimants rely in this regard on the award in RREEF v. Spain, which concluded that what is more favourable has to be 'determined from the perspective of public international law, not of EU law.’ 340

270.

In the Claimants’ view, the ECT is indeed more favourable for investors than EU law because Article 26 ECT does not limit the ability of the investor to pursue its claim before the national courts of the host State; in addition, it confers the right to bring its claim before a neutral forum, i.e. international arbitration. EU law or Spanish national law do not contain any comparable, effective and neutral dispute settlement mechanism for investor claims against sovereign States.341 Quite to the contrary, they prohibit that mechanism of dispute resolution. According to the Claimants, empirical data shows that international arbitration is clearly more favourable to the investor than court settlement.342 Moreover, for the Claimants, the SolEs Badajoz, Masdar and Oostergetel awards, and the Vattenfall v. Germany decision have confirmed that the right enjoyed by investors under the ECT to bring claims directly against the Contracting Party in international neutral arbitration proceedings is more favourable to the investor than the investor’s standing under EU law.343 Also, given that the Claimants initiated this arbitration as the legal protection procedure of their choice, it further stands to reason that they judged it to be the most favorable for them.344 The right to international arbitration under Article 26 ECT would therefore trump EU law in a conflict.

271.
The Claimants furthermore refer to Article 16 ECT, which, as they see it, endeavours to make overlapping treaties as much as possible compatible.345 The Claimants point out that the Netherlands-Slovakia BIT at stake in the Achmea Judgment did not contain a lex specialis provision like Article 16 ECT. The Achmea Judgment thus could not consider a provision like Article 16 ECT. Also for that reason, the Claimants argue that the Achmea Judgment is not a relevant precedent to assess cases arising under the ECT.346

(c) The Tribunal's jurisdiction under Article 26 ECT

272.

The Claimants first argue that Article 26(6) ECT only refers to the law applicable to the 'merits’. They rely on the Vattenfall v. Germany decision, which held that Article 26 ECT concerns investment disputes (Part III ECT), not disputes over dispute settlement (Part V ECT).347 The law applicable to the determination of the Tribunal’s jurisdiction is, instead, the general principles of international law as well as the law that has been agreed by the Parties, i.e. the ECT.348 The Claimants argue moreover that, similarly, the applicable law provision of Article 22 SCC Rules does not refer to jurisdiction but only applies to the merits of the dispute.349

273.

The Claimants submit that the Tribunal’s jurisdiction stems from Article 26 ECT. The ECT, which is a valid treaty under public international law, must be interpreted and applied in accordance with the relevant rules of the VCLT.350 Specifically, Article 31(1) VCLT requires the Tribunal to follow the ordinary meaning of Article 26(6) ECT.

274.
For the Claimants, the Respondent is not entitled to negate the binding force of the arbitration provision of Article 26 ECT in the present proceedings. The EU, as well as its Member States, are obliged under public international law to fulfil their commitments under the ECT.351 The ECT is an international treaty that binds the EU Member States, the EU institutions and non-member States that are parties to the ECT. Because of the mixed nature of the ECT, the CJEU has no competence to declare the ECT invalid, according to the Claimants. Any hypothetical finding of incompatibility between investment arbitration under the ECT and EU law would need to be sorted out through political and diplomatic means or by the mechanisms prescribed by the VCLT.352
275.
The Claimants observe that Article 26(6) ECT clearly indicates that the Tribunal has to apply the provisions of the ECT and the principles of public international law - not EU law - to the dispute, including disputes about its own jurisdiction.353 It is not bound to apply the EU law on the fundamental freedoms set forth in the European Treaties.354 It is also not bound to apply the EU law based on the premises that any possible payment on a prospective award would qualify as state aid.355
276.

In the event the Tribunal would be required to apply EU law to intra-EU investment disputes, the Claimants observe that the Respondent’s reasoning would lead to diverging levels of protection depending on whether a Contracting Party was an EU Member State or not at the moment the ECT was signed and/or ratified. Such a result would be unacceptable according to the Claimants who refer, on this point, to the Masdar v. Spain and the Vattenfall v. Germany decisions.356

277.

The Claimants argue that the historical context, emphasised by the European Commission in paragraphs 9-12 of its Amicus Curiae brief to reveal the scope of its consent under Article 26 ECT, concerns the legislative history of the ECT which, under Article 32 VCLT, merely qualifies as a supplementary means of interpretation, while under Article 31 VCLT the starting point of any interpretation is the ordinary meaning of the relevant terms in the treaty.357

278.
More specifically, the Claimants note that the Declaration the EU made in 1997 pursuant to Article 26 (3) b (ii) ECT cannot be seen as evidence that, when the ECT was concluded, the EU excluded the intra-EU application of the ECT. According to the Claimants, this Declaration only excludes the possibility of jurisdiction under Article 26 ECT against the EU when the investor has first started an action before the CJEU; it does not affect jurisdiction over a claim from an EU investor against an EU Member State. Moreover, the Declaration was not made at the moment of the conclusion or ratification of the ECT as required by the VCLT. Furthermore, it was only made by the EU, and not by the Member States.358
279.
The Claimants further note that the Declaration made by the EU at the occasion of the drafting of the International Energy Charter in 2015 is likewise irrelevant for the interpretation of the 1994 ECT. This Declaration, although more precise about the allocation of competences within the EU, has no legal impact as it was made in the context of the International Energy Charter, which itself is only a declaration of a political intention but was never intended to create legal obligations.359
280.
The Claimants furthermore object to the suggestion that the ECT is a 'European project’, steered by the EU and/or the European Commission. The Energy Charter Conference is an international organization and clearly not a derivative of the EU. Moreover, according to the Claimants, a cursory survey of the list of signatories to the ECT suffices to detect countries like Australia, Japan, Afghanistan, Uzbekistan, and Kazakhstan, which are certainly not part of a 'European project’.
281.
Furthermore, the indication in Article 26(6) ECT that the Tribunal has to apply the 'applicable rules and principles of international law’ cannot be read to include EU law. Relying on the decision in Vattenfall v. Germany, the Claimants argue that 'EU law does not constitute such principles of international law, since [EU law] is not general law applicable as such to the interpretation and application of the arbitration clause in another treaty, such as the ECT.'360 To include EU law within international law would lead to a fragmentation of the meaning and application of the ECT.361 The Claimants point out that the Vattenfall v. Germany decision stressed that consistency of interpretation and application are of paramount importance for a multilateral treaty such as the ECT.362
282.
Moreover, referring inter alia to the Vattenfall v. Germany decision, the Claimants point out that the purpose of the ECT is to protect investors and to guarantee their access to investor-state arbitration.363 In this context, the Claimants argue that the notion of 'effective interpretation’, which the Respondent applies to the EU Treaties, should apply to the ECT as well.364 The Claimants further observe that the majority of the ECT Contracting Parties are EU Member States. An effective treaty interpretation would therefore exclude an outcome which dramatically reduces the scope and the relevance of the ECT by barring intra-EU investment disputes from the ECT dispute settlement regime.365
283.

For the Claimants, Articles 16, 15, 36 and 2 ECT as well as the ECT’s purpose exclude the possibility that certain investments (i.e. intra-EU investments) may be deemed to fall outside the scope of Article 26 ECT. Such exclusion would render the ECT’s provisions ineffective.366 The Claimants observe that the Vattenfall v. Germany decision did not rule out intra-EU disputes from the scope of Article 26 ECT.367 The Claimants also refer to two decisions from arbitration tribunals, Infracapital v. Spain368 and Sevilla Beheer v. Spain369 which considered the implications of the Komstroy Judgment but nevertheless upheld their jurisdiction under the ECT.370

284.

For the Claimants, the Respondent is obliged by the principle pacta sunt servanda, contained in Article 26 VCLT, to honour its commitment to resolve disputes by international arbitration as provided under Article 26 ECT.371

285.

The Claimants further point out that no carve-out or disconnection clause has been included for the EU Treaties, even though the EU and the Member States included such clauses in other treaties, and the ECT has carved-out the Svalbard Treaty concerning Spitsbergen (Article 16 ECT) and Economic Integration Agreements (Article 25 ECT).372 The Claimants further refer to a 1993 document from the archives of the Energy Charter Secretariat referring to a proposed disconnection clause for intra-EU matters, which would have appeared in what is today Article 24 ECT, but which was apparently not retained.373

286.
For the Claimants, the statement submitted by the EU to the ECT Secretariat is not a disconnecting notification under Article 41 VCLT to exclude jurisdiction over intra-EU investment disputes. It excludes the consent of the Union itself in case the investor has previously approached the CJEU. It does not cover intra-EU investment disputes and the consent among the Member States.374
287.
The Claimants conclude that neither the EU nor the EU Member States have made any valid reservations for their allocation of internal competence to be considered for the interpretation and implementation of the ECT.375
288.

In short, for the Claimants, the ECT neither contains a disconnection clause, nor any other equivalent clause, whether express or implied, allowing the Respondent to depart from its obligation under Article 26 ECT.376 Referring to Landesbank Baden-Württemberg et al. v. Kingdom of Spain377 and Vattenfall AB et al. v. Federal Republic of Germany,378 the Claimants ascertain that the absence of such a disconnection clause becomes particularly significant, when one considers, that other treaties by the EU and its Member States with third parties do indeed include such clauses (argumentum e contrario).379

289.

The Claimants challenge the Respondent’s argument that the special regime applicable to Economic Integration Agreements, granted by Article 25 ECT, implies a preference to settle intra-EU disputes in the Member-State courts. For the Claimants, Article 25 ECT does not contain any indication on that issue.380 Nothing prevents an investor protected under the ECT from bringing claims before international neutral arbitration bodies in intra-EU disputes.381

290.
The Claimants conclude that all conditions of Article 26 ECT to establish the Tribunal’s jurisdiction are met.382

2. EU law has no bearing on Tribunal’s jurisdiction

(a) The dispute is covered by the ECT

291.
The Claimants first note that, pursuant to Articles 4(2) and 194 TFEU, the competence in the field of energy is a so-called 'shared competence’ between the EU and the Member States.383
292.
The Claimants further argue that Directive 2001/77 is not based on an external competence of the EU, but on Article 192(1) TFEU (then Article 175), and it grants regulatory freedom on matters such as the remuneration of energy investments to the Member States.384
293.
The Claimants further observe that the relevant question for the Tribunal to rule on is whether or not the enactment of Spanish legislation violates certain provisions of the ECT which protect the interests of private investors.385 The Claimants argue that the Tribunal is not asked to rule on EU State aid law or to decide on the legality, compatibility or incompatibility of the Respondent’s conduct vis-à-vis administrative bodies of the EU such as the DG Competition.386 The Claimants further add that Spain’s failure to notify the support regime to the European Commission only results in a stand-still as to the day of the Commission has taken a decision on the relevant regime.387
294.
According to the Claimants, the European Commission has never considered or qualified RD 661/2007 and RD 1578/2008 as illegal State aid.388 The Claimants further point out that the relevance of the Commission’s 2017 State Aid Decision SA.40348 2014/N on the present case is unclear. This decision only dealt with the legality of the support regime from 2014 onwards. For the Claimants, this decision implies that any arbitral award, based upon Spain’s violation of the ECT, may be subject to a State aid review by the Commission, but it does not affect the Tribunal’s jurisdiction.
295.
In addition, regarding the question of whether the Claimants were aware of the Respondent’s alleged non-compliance with EU State aid law, the Claimants observe that this is a question of fact and merits, not of jurisdiction.389 The Claimants contest the Respondent’s thesis that the Tribunal’s jurisdiction is affected by the possibility that the dispute before the Tribunal may require the application of EU State aid law.390
296.

Moreover, so the Claimants further argue, the issue whether the Tribunal had to apply the EU law on State aid and whether it did so correctly may arise after the award is rendered in the course of possible enforcement proceedings. As stated — amongst others - by the arbitral tribunals in BayWa v. Spain and Vattenfall vs. Germany, it is not in the purview of the Tribunal to look into potential enforcement issues to decide on its jurisdiction.391 The Claimants further refer, in this regard, to the decision in Sevilla Beheer v. Spain, where the tribunal observed that 'the enforceability issues are irrelevant for the purposes of deciding on this jurisdictional objection’.392

(b) No primacy of EU Law

297.
The Claimants preliminarily contend that the Respondent has not objected to the Tribunal’s jurisdiction in due time. In fact, for the Claimants, the international law principle of estoppel prevents the Respondent from pleading that EU law sets aside Article 26 ECT.393
298.
The Claimants further argue that the Respondent has failed to show how the alleged need to guarantee the autonomy and primacy of EU law are a legal basis for Respondent’s objection to the Tribunal’s jurisdiction.394
299.
For the Claimants, the Respondent has failed to establish why the internal rules of the supranational EU order should be granted primacy. Such an intention has not been incorporated in the ECT, though this would have been possible.395 The Claimants further observe that the EU, in Article 21 TFEU in fine, commits itself to promote multilateral solutions to common problems, such as international energy production and exchanges, which are addressed by the ECT.396
300.
According to the Claimants, the Declaration of 22 EU Member States of 15 January 2019 stating that the Member States should terminate the intra-EU BITs and inform arbitral tribunals that investment treaties (including the ECT) are to be Misapplied’ is only a political statement. In this Declaration, EU Member States incorrectly seek to undermine retroactively the validity of the ECT. The Claimants observe that, even if the ECT were terminated as amongst EU Member States as called for in the Declaration - such termination would not affect the application of the ECT to investments made before the termination.397 Besides, there is no consensus among the signatories with regard to the ECT as 6 Member States, including Sweden (where the seat of these arbitration proceedings is located), noted that the Achmea Judgment was silent on the investor-State arbitration clause (Article 26) in the ECT, and refused 'to express views as regards the compatibility with Union law of the intra EU application of the Energy Charter Treaty'.398
301.
The Claimants refer to CJEU’s Opinion 1/17, which assessed the compatibility of CETA’s ISDS mechanism with the autonomy of the EU legal order.399 The Claimants note that, in this decision, the CJEU considered inter alia that the CETA ISDS mechanism was outside of the EU judicial system but that it did not adversely affect the autonomy of the EU legal order. According to the Claimants, contrary to what an extrapolation of the reasoning of the Achmea Judgment to the ECT would suggest, the mechanisms established in Article 26 ECT are not incompatible with the autonomy of the EU legal order.400 This is because, as the Claimants contend, the arbitral tribunals operating on the basis of Article 26 ECT comply with the compatibility requirements set by the CJEU, i.e. that 'the envisaged arbitral tribunals must not have jurisdiction to interpret and apply rules of EU law other than the provisions of the CETA' and, even when this requirement is met, the additional requirement that 'the issued awards must not have the effect of preventing the EU institutions from operating in accordance with the EU constitutional framework' .401
302.
With respect to the Komstroy Judgment, which expressly addresses Article 26 ECT in the light of the Achmea Judgment, the Claimants argue that '[t]he CJEU rested its reasoning [...] on premises that are dogmatically unsubstantiated, unsustainable and solely politically motivated'.402 They content that, mainly because the CJEU mischaracterises the multilateral nature of the ECT, it ignores that a disconnection clause for intra-EU matters was unsuccessfully proposed during ECT negotiations, and it is contradictory in its consideration of the ECT as EU law.403 The Claimants also note that the CJEU’s discussion of intra-EU matters in the Komstroy Judgment exceeded its competence, that they are merely non-binding obiter dicta and that, in all events, relying on them would amount to a retroactive application of law.404
303.
Furthermore, the Claimants do not consider Declaration 17 to the Treaty of Lisbon, to which the European Commission refers in its Amicus Curiae brief,405 as evidence of the primacy of EU law over the ECT. That Declaration refers to 'the conditions laid down by said case law', i.e. the case law based on the Costa/ENEL judgment, where the now CJEU established for the first time the primacy principle. However, that case law does not relate to international law. Costa/ENEL concerns the primacy of EU law over the law of the Member States. For the Claimants, the ECT is not on the same level as national law but enjoys a higher rank in the hierarchy of norms.406
304.
The Claimants also disagree with the Respondent’s reference to Article 25 ECT, which states that obligations from Economic Integration Agreements (such as the EU Treaties) do not have to be extended to outside parties, as a basis to sustain the principle of primacy of EU Law in intra-EU relations.407
305.
For the Claimants, a preliminary ruling from the CJEU, such as the Achmea Judgment, is only binding upon the court which has requested the ruling. A fortiori it is not binding on the Tribunal, which is not an institution of the EU.408
306.

The CJEU has moreover no monopoly to interpret international treaties.409 Furthermore, the statement in Achmea that EU law has primacy over the laws of Member States410 does not mean that EU law also has primacy over international law in intra-EU relations, as argued by the Respondent. Indeed, the Claimants consider the reference to the Opinion 2/13, which was rendered under the Article 218(11) TFEU procedure before the accession of the EU to the ECHR, to be of no support for the contention that the autonomy of EU law would exclude intra-EU investment disputes from the remit of Article 26 ECT. The Claimants further consider that Opinion 1/17 was also rendered before the relevant parts of the CETA, notably Chapter 8 on Investment Protection, were in force.411

307.
A contrario, in all the situations in which the EU has already acceded to a treaty, for better or worse, the binding effect of an international treaty prevails over the autonomy of EU law and can only be overcome by the discontinuation of the treaty or conclusion of a new treaty under the applicable rules of the VCLT.412 Therefore, the EU cannot walk away from its international obligations.
308.
Regarding the Budějovický Budvar judgment of the CJEU, referred to in the European Commission’s Amicus Curiae brief, the Claimants consider it irrelevant. This is because it concerned a conflict between a BIT and the EC Treaties in a purely intra-EU situation, while the ECT, at stake in the present proceedings, involves also third countries. The Claimants observe that Article 307 EC (now 351 TFEU) would have applied if a third country had been party to the BIT.413
309.
For the Claimants, the TFEU and TEU do not form 'part of a single regime’ with investment treaties. They are not 'institutionally linked’. Consequently, even if the EU court system has exclusive jurisdiction over the TFEU and TEU, 'from a public international law perspective’ it has no exclusive jurisdiction to decide on investment treaties.414 The Claimants conclude that the European Commission has failed to establish how EU law, or rather State aid law, overcomes the pacta sunt servanda principle with regard to the ECT.415

(c) Irrelevance of the Achmea Judgment and the Komstroy Judgment

310.

The Claimants admit that the CJEU has jurisdiction to decide issues of interpretation and application of EU law. But it is not in its purview to nullify international treaties or some of their provisions.416 Furthermore, the ECT does not name in its Articles 42 and 47 judgments or opinions of the CJEU - or any national court for that matter - as mechanism to amend or terminate the ECT.417

311.
According to the Claimants, the Achmea Judgment is not relevant for the present case. It is limited to a specific bilateral treaty and cannot be taken out of context and transferred to a different multilateral treaty.418 In this context, the Claimants observe that Article 8 of the Netherlands Slovakia BIT, which was considered in Achmea, directs arbitration tribunals to take into account 'the law in force of the Contracting Party concerned’, i.e. national law, which would include EU law,419 whereas, under Article 26 ECT, the present Tribunal has to apply the ECT and international law, not EU law. For the Claimants, the secondary EU law, i.e. the provisions not contained in the EU Treaties themselves, such as the EU rules on the energy market and State aid, are certainly not part of international law. The Tribunal should consider these EU rules as a fact. By doing so, the Claimants argue, the Tribunal does not undermine the autonomy and primacy of the EU legal order.420
312.

The Claimants moreover observe that the Achmea Judgment concerned a BIT which was concluded by the Slovak Republic before this country joined the EU in 2003. As the German Bundesgerichtshof correctly observed,421 the issue in Achmea was therefore that once the Slovak Republic had joined the EU, this BIT became incompatible with EU law (although Article 351 TFEU (Article 307 TEC) provided for a grace period).422 The issue in the present case is different: Denmark and Spain were already Member States when they concluded the ECT together with the EU. Article 46 VCLT does not allow them to rebut their international obligations by invoking an alleged violation of internal law with regard to their competence to conclude the ECT. Moreover, the ECT - contrary to the Netherlands-Slovakia BIT - is a mixed agreement, entered into by the EU as well as by the Member States. Because the Member States were allowed to become parties to the ECT, they could assume that they had competence to do so, even for intra-EU investments. For the Claimants, any allegation that the ECT would circumvent EU law is absurd. In fact, the ECT itself became part of EU law through the accession of the EU.423 The Claimants further observe that the CJEU has confirmed that, even after conclusion of the Lisbon Treaty, the Member States retained their competence for dispute settlement in another mixed agreement, i.e. the Singapore Free Trade Agreement.424

313.

For the Claimants, the ruling of the Achmea Judgment does not apply to the ECT, which is a mixed agreement, entered into by the Member States as well as by the EU. The Claimants admit that the Achmea Judgment, in paragraphs 60 and 62, formulates its holding as applying to 'a provision in an international agreement concluded between Member States’. However, the ECT is not an agreement between Member States, but an agreement concluded between Member States, the EU and many third States.425 The fact that the EU itself partakes in an international agreement, such as the ECT, causes international law to have a direct effect in the EU legal order.426

314.

As regards the Komstroy Judgment, which extends the reasoning in the Achmea Judgment to the ECT context, the Claimants argue, as noted earlier, that '[t]he CJEU rested its reasoning [...] on premises that are dogmatically unsubstantiated, unsustainable and solely politically motivated’.427 Given its deficiencies428 and the fact that other investment tribunals acting under the ECT have upheld their jurisdiction despite the CJEU’s reasoning in the Komstroy Judgment,429 the ruling has no effect on the jurisdiction of the Tribunal in the present proceedings.430

315.
The Claimants further note that the Achmea Judgment concerned an investor’s claim regarding the BIT’s access regime, which overlaps with the EU internal market’s regime, while in the present arbitration investment protection rather than access is at stake.431 The scope of the arbitration proceedings under the ECT is, however, more limited than under the Netherlands-Slovakia BIT and are unrelated to EU law, according to the Claimants.432 The Achmea case thus clearly concerned the EU’s internal market regime on the free movement of capital, while the present claims are based upon Articles 10 and 13 ECT, with no need to interpret EU law.433 The Claimants conclude that, as the Tribunal has only to interpret the ECT, the autonomy of the EU is not at stake.

C. The Commission’s Amicus Curiae brief

316.
For the European Commission, the dispute before the Tribunal falls squarely within the scope of EU law. The contested measures not only transpose into Spanish law the Directive on Renewable Energy but the Spanish initial support system also constitutes illegal State aid under EU law. The compensation claimed before the Tribunal would equally be considered State aid which needs to be approved by the European Commission.434
317.

The European Commission’s Amicus Curiae brief notes that, under Articles 1(3) and 26 ECT, the Tribunal has to apply to the present intra-EU investment dispute EU law as part of international law.435 Referring to the Achmea Judgment, to its Decision SA 40348 of November 2017436 and to its Communication of 19 July 2018,437 the European Commission states that Articles 267 and 344 TFEU make Article 26 ECT inapplicable for intra-EU investment disputes.

318.
The European Commission observes that the Claimants enjoy complete, strong and effective protection of their intra-EU investment under EU law, including in particular the protection of legitimate expectations.438

1. No intra-EU application for Article 26 ECT

319.
The European Commission points out that the Achmea Judgment, which states EU law ex tunc, clarified that Articles 267 and 344 TFEU preclude intra-EU investment arbitration on the basis of Article 26 ECT.439 The Achmea Judgment - so the European Commission observes - does not only affect the validity of arbitration provisions in intra-EU bilateral investment treaties, but also applies to the intra-EU relations within a multilateral treaty like the ECT.440 Many Member States, such as Hungary, the Czech Republic, Spain, Italy but also Germany and the Netherlands, have confirmed that the ECT does not apply to intra-EU investments.441 -

2. The Tribunal is entitled to rule on its own jurisdiction

320.
The European Commission points out that an arbitral tribunal has the competence to decide on its own jurisdiction. In this case, Article 26 ECT instructs the Tribunal to assess its jurisdiction under international law. For the European Commission, EU law is part of international law and has to be applied by the Tribunal to rule on its jurisdiction over an intra-EU investment dispute.442

3. In case of conflict, EU Treaties prevail over the ECT under EU law

321.

The European Commission notes that EU law prevails over the ECT. It refers inter alia to the award in Electrabel v. Hungary, which established the primacy of EU law on the basis of Article 351 TFEU, which in turn reflects international customary law, as codified in Article 30 VCLT.

322.
The CJEU has also confirmed, on several occasions, that Member States have to recognise the primacy of EU law over international treaties. The European Commission points out that the EU and the Member States moreover have confirmed the unquestionable primacy of EU law over the law of the Member States in Declaration 17 to the Treaty of Lisbon.443

4. In case of conflict, EU law prevails over the ECT under Article 30(4) VCLT

323.

The European Commission considers that in all events the inter se obligations between Member States under the 1994 ECT are superseded by the 2007 Treaty of Lisbon pursuant to Article 30(4)(a) VCLT. For the European Commission, the ECT and the EU Treaties have the same subject matter and are conflicting. Consequently, the ECT does not apply to intra-EU investment disputes.444

5. Article 16 ECT does not apply

324.

For the European Commission, Article 16 ECT does not apply because this provision concerns the mutual interpretation of two treaties and does not contain a rule for conflicting treaties. However, the ECT and the EU Treaties are in conflict. Moreover, Article 16 ECT has been overtaken by the later Declaration 17 of the Treaty of Lisbon, which establishes the primacy of EU law.445

6. The ECT does not apply to intra-EU disputes where the EU has exclusive external competence

325.

Even if intra-EU investments had been covered by the ECT at the outset, the European Commission observes that this would no longer be the case when the dispute concerns matters which have become the exclusive competence of the EU. Indeed, as the European Commission sees it, Articles 1(2), 1(3) and 1(10) and 36(7) ECT, which consider the EU as well as the Member States to be parties to the ECT, recognise the transfer of competences from the Member States to the EU and the consequences thereof.446

326.
In this context, the European Commission notes that the EU has exclusive external competence with regard to the Renewable Energy Directive, as confirmed by the CJEU.447 In this situation, the EU - rather than the Member States - is the relevant party to the ECT.448
327.
The European Commission further points out that, in the event an intra-EU investment dispute could be brought before an arbitration tribunal under Article 26 ECT, the investor would be allowed to indirectly challenge EU law, as applied by the Member State in which it invested, before a non-EU tribunal, despite the fact that such challenges must be brought before EU jurisdictions.449
328.
The European Commission moreover observes that the absence of an explicit disconnection clause in the ECT cannot be taken to mean that the ECT remains applicable to intra-EU disputes. For the European Commission, the ECT has admitted the EU as a Party in its own right and the ECT no longer applies to intra-EU disputes in matters where the EU has exclusive competence.450

7. Final considerations

329.

The European Commission finally observes that the Claimants are not entitled to invoke legitimate expectations. Nor can they invoke Article 70 VCLT, which governs the consequences of the termination of a treaty, as this provision is not concerned with the rights of individuals, to rely on Article 26 ECT.451

330.
The Tribunal considers that the European Commission’s other considerations, i.e. on the merits and on the enforceability of the Tribunal’s award452, are outside of the scope of the Amicus Curiae brief, as permitted by the Tribunal in its letter of 30 November 2018. Therefore, they are not taken into account here.

D. The Tribunal’s decision

1. Preliminary Considerations

331.
The summary of the positions of the Parties provided in the foregoing paragraphs gives a sense of the complexity of the argumentative line followed by each Party. Throughout these proceedings, the Parties have reframed their arguments both in order to take into account several relevant developments occurring in parallel to this arbitration and in order to re- or de-emphasise different aspects of their argumentation in this light. Moreover, each Party has presented its arguments on two planes, the ECT and EU law, each emphasising the plane that better serves its position but also placing itself on the other plane and defending its position in the alternative.