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Final Award

FREQUENTLY USED ABBREVIATIONS AND ACRONYMS

AG Opinion Opinion of the Advocate General Wathelet dated 19 September 2017 in Case C-284/16, Slowakische Republik v Achmea BV
Answer and Request forDismissal Respondent's Answer to Claimants' RfA, together with a Request for Dismissal under Article 10 SCC Rules dated 31 October 2016
BITs Bilateral Investment Treaties
Campania A 20.41 MW plant located in the Municipality of Gugliano (Province of Naples) acquired by First Claimant
C-CS Claimants' Costs Submission dated 1 March 2019
Claimants First Claimant, Second Claimant and Third Claimant (collectively)
Constitutional CourtDecision Italian Constitutional Court's Decision No. 16/2017 dated 24 January 2017
C-PHB Claimants' Post-Hearing Brief dated 25 January 2019
C-RPHB Claimants' Reply Post-Hearing Brief dated 1 March 2019
C-SoRj Claimants' Rejoinder on Jurisdiction dated 3 August 2018
Decision No. 10/2015 Italian Constitutional Court's Decision No. 10/2015 dated 11 February 2015
Destinazione Italia Legislative Decree No. 145/2013 dated 23 December 2013
EC European Commission
EC Communication EC Communication to the Parliament and the Council, bearing number COM(2018) 547/2, dated 19 July 2018
EC InterventionApplication EC's Application for leave to intervene as a non-disputing party in this arbitration dated 27 January 2017
EC NDP Submission EC's Amicus Curiae Brief dated 9 May 2018
ECJ Court of Justice of the European Union
ECJ Judgment ECJ's Judgment dated 6 March 2018 in Case C-284/16, Slowakische Republik v Achmea BV
ECT Energy Charter Treaty 1994
EIA Economic Integration Agreement
EU European Union
EU Treaties Treaty of the European Union and Treaty of the Functioning of the European Union (collectively)
FET Fair and Equitable Treatment
Fifth Conto Energia Decree dated 5 July 2012 enacted by the Ministry for Economic Development in consultation with the Ministry for Environment
First Claimant SunReserve Luxco Holdings S.À.R.L
First Conto Energia Decree dated 28 July 2005 enacted by the Ministry for Productive Activities in consultation with the Ministry for Environment
First Reserve First Reserve Energy Infrastructure Fund, LP
Fiumicino A 2.97 MW plant located in the Municipality of Fiumicino, Lazio Region acquired by Third Claimant
Florian First WitnessStatement First Witness Statement of Mr. Mark Florian dated 28 July 2017
Fourth Conto Energia Decree dated 5 May 2011 enacted by the Ministry for Economic Development in consultation with the Ministry for Environment
FR Holdings FREI Sun Holdings (Cayman) Ltd
Framework Agreement Framework Agreement by And among Sun Edison LLC, FREI Sun Holdings (Cayman) Ltd., FREI Sun Holdings (US) LLC, SunEdison Reserve US, L.P., and SunEdison Reserve Internaitonal, L.P.
GRTN Gestore della rete di transmission nazionale Spa
GSE Gestore dei Servizi Energetici
Hearing Hearing conducted from 26 to 29 November 2018 in Paris, France
IMU Charge A municipal charge on buildings
January 2019 Declarations Declarations of the Representatives of the Governments of the European Union Member States dated 15-16 January 2019
Lenare A 997.92 kW plant located in the Municipality of Lequile acquired by First Claimant
Milana A 1.66 MW plant located in Sicily acquired by First Claimant
Monaci A 998.13 kW plant located in the Municipality of Lequile acquired by First Claimant
OECD Organisation for Economic Co-operation and Development
Parties Claimants and Respondent (collectively)
PHOM Pre-Hearing Organizational Meeting conducted on 8 November 2018
PO 1 Procedural Order No. 1 (By Consent) issued on 16 March 2017
PO 2 Procedural Order No. 2 issued on 3 August 2018
PO 3 Procedural Order No. 3 (By Consent) issued on 22 November 2018
PO 4 Procedural Order No. 4 issued on 7 February 2019
PO 5 Procedural Order No. 5 issued on 4 July 2019
PTC Preparatory Telephone Conference conducted on 22 February 2017
R-CS Respondent's Costs Submission dated 8 March 2019
REIO Regional Economic Integration Organisations
Request for Suspension Respondent's Request for Suspension dated 18 July 2019
Request for Termination Respondent's Request for Termination dated 25 January 2019
Resolution 111/06 Resolution dated 9 June 2006 issued by the Italian Electrical Energy Authority
Resolution 281 Resolution 281/2012/R/EFR dated 5 July 2012 issued by the Italian Electrical Energy Authority
Resolution 493 Resolution 493/2012/R/EFR dated 22 November 2012 issued by the Italian Electrical Energy Authority
Resolution 522` Resolution 522/2014/R/EEL dated 23 October 2014 issued by the Italian Electrical Energy Authority
Resolution 618 Resolution No. 618/2013/R/EFR dated 19 December 2013 issued by the Italian Electrical Energy Authority
Respondent/Italy The Italian Republic
RfA Request for Arbitration dated 26 August 2016
Romani Decree Legislative Decree No. 28/2011 dated 3 March 2011
Rovigo A 70.5 MW plant located in the Municipality of San Bellino, Veneto Region acquired by Second Claimant
R-PHB Respondent's Post-Hearing Brief dated 25 January 2019
R-RPHB Respondent's Reply Post-Hearing Brief dated 1 March 2019
R-SoRj Respondent's Rejoinder on the Merits and Reply on Jurisdiction dated 6 July 2018
Rustico A 1.8 MW plant located in Sicily acquired by First Claimant
San Marco A 985.71 kW plant located in the Municipality of Lequile acquired by First Claimant
Santoro A 968.31 kW plant located in the Municipality of Soleto acquired by First Claimant
SCC Arbitration Institute of the Stockholm Chamber of Commerce
SCC Board SCC's Board of Directors
SCC Rules Arbitration Rules of the SCC 2010
Second Claimant SunReserve Luxco Holdings II S.À.R.L
Second Conto Energia Decree dated 19 February 2007 enacted by the Ministry for Economic Development in consultation with the Ministry for Environment
Shockley Witness Statement Witness Statement of Mr. Ryan Shockley dated 28 July 2017
SoC Claimants' Statement of Claim dated 28 July 2017
SoD Respondent's Statement of Defence dated 22 December 2017
SoRy Claimants' Reply Memorial on the Merits and Counter-Memorial on Jurisdiction dated 30 March 2018
Spalma-incentivi Decree Legislative Decree No. 91/2014 dated 24 June 2014 converted into Law No. 116/2014 dated 11 August 2014
SPV Special Purpose Vehicle
SunEdison SunEdison LLC
Swedish Arbitration Act Swedish Arbitration Act (SFS 1999:116)
TASI Charge A charge on municipal services such as road maintenance and public lighting
TEU Treaty of the European Union
TFEU Treaty of the Functioning of the European Union
Third Claimant SunReserve Luxco Holdings III S.À.R.L
Third Conto Energia Decree dated 6 August 2010 enacted by the Ministry for Economic Development in consultation with the Ministry for Environment
Vattenfall Decision Vattenfall et al. v. Federal Republic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue
VCLT Vienna Convention on the Law of Treaties 1969

I. INTRODUCTION

1.
This is a Final Award concerning a dispute between SunReserve Luxco Holdings S.À.R.L, SunReserve Luxco Holdings II S.À.R.L and SunReserve Luxco Holdings III S.À.R.L, on the one hand, and the Italian Republic, on the other hand.
2.
These proceedings were instituted pursuant to the Energy Charter Treaty 1994 ("ECT"). It is not disputed that the the ECT entered into force for the home State of the three Claimants, i.e., the Grand Duchy of Luxembourg, on 16 April 1998.1 It is also not disputed that the ECT had entered into force for the Italian Republic also on 16 April 1998.2

II. PARTIES

A. C laimants

3.
The claimants in these proceedings are SunReserve Luxco Holdings S.À.R.L ("First Claimant"), SunReserve Luxco Holdings II S.À.R.L ("Second Claimant") and SunReserve Luxco Holdings III S.À.R.L ("Third Claimant"), all of which are limited liability companies duly established under the laws of the Grand Duchy of Luxembourg.3 Their corporate structure is explained in detail in Section IV.E(1) below. Together, First Claimant, Second Claimant and Third Claimant are referred to as "Claimants".
4.
The corporate address of Claimants is:

6, rue Eugène Ruppert
L-2453 Luxembourg

B. R espondent

5.
The respondent in these proceedings is The Italian Republic ("Italy" or "Respondent").
6.
Claimants and Respondent are hereinafter collectively referred to as the "Parties". The Parties' respective representatives and their addresses are listed above on page 2.

III. PROCEDURAL HISTORY

7.
On 26 August 2016, Claimants filed a Request for Arbitration ("RfA") with the Arbitration Institute of the Stockholm Chamber of Commerce, ("SCC") pursuant to Article 26(4)(c) of the ECT and Article 2 of the Arbitration Rules of the SCC 2010 ("SCC Rules"). The SCC confirmed receipt of the RfA by correspondence of the same date.
8.
In its RfA, Claimants proposed that the Tribunal should consist of three arbitrators. Claimants appointed Prof. Dr. Klaus Sachs as their party-appointed arbitrator pursuant to Article 13 SCC Rules. Further, Claimants proposed that the Chairperson of the Tribunal be selected by the two party-appointed arbitrators, with agreement of the parties. In addition, Claimants proposed Geneva, Switzerland as the seat of arbitration, and English as the procedural language for the arbitration.4
9.
By correspondence dated 29 August 2016, the SCC sent a copy of the RfA to Respondent, inviting it to submit its Answer by 29 September 2016.
10.
By correspondence dated 8 September 2016, Respondent acknowledged receipt of the RfA and requested the SCC to extend the deadline for submission of its Answer to 30 November 2016.
11.
Upon being invited by the SCC to comment on Respondent's request for extension, on 15 September 2016, Claimants informed the SCC that they considered Respondent's request for a two-month extension to be unreasonable, and were instead prepared to agree to an extension until 31 October 2016.
12.
On 16 September 2016, the SCC granted Respondent an extension of time until 31 October 2016 to submit its Answer, stating that the Answer may be brief.
13.
On 31 October 2016, Respondent submitted its Answer to Claimants’ RfA, together with a Request for Dismissal under Article 10 SCC Rules, on the ground that the SCC manifestly lacked jurisdiction over the dispute ("Answer and Request for Dismissal").5
14.
In its Answer and Request for Dismissal, Respondent stated that in the event the case was not dismissed under Article 10 SCC Rules, it would agree with Claimants’ proposals that the Tribunal be composed to three arbitrators, and that the Chairperson of the Tribunal be selected by the two party-appointed arbitrators with agreement of the parties (see 8 above). Respondent requested until 7 November 2016 to indicate its party-appointed arbitrator. In addition, Respondent proposed Rome, Italy as the seat of arbitration, and Italian as the procedural language.6
15.
On 7 November 2016, Respondent appointed Prof. Andrea Giardina as its party-appointed arbitrator pursuant to Article 13 SCC Rules.
16.
On 9 November 2016, Claimants provided their comments to Respondent’s Answer and Request for Dismissal, requesting that the SCC Board of Directors ("SCC Board") dismiss Respondent’s Request for Dismissal under Article 10 SCC Rules. Further, Claimants rejected Respondent’s proposal of Rome, Italy as the seat of arbitration and Italian as the procedural language.
17.
By correspondence dated 17 November 2016, the SCC informed the Parties that the SCC Board had decided that (i) the SCC did not manifestly lack jurisdiction under Article 10 SCC Rules; and (ii) the seat of arbitration shall be Stockholm, Sweden. In the same correspondence, the SCC stated that it shall proceed to give the two party-appointed arbitrators the opportunity to appoint the Chairperson of the Tribunal. The SCC wrote to the party-appointed, in this regard, on 17 November 2016, requesting them to provide the SCC with the selected Chairperson’s name by 2 December 2016.
18.
On 13 January 2017, the SCC informed the Parties that the party-appointed arbitrators had jointly appointed Prof. Albert Jan van den Berg as the Chairperson of the Tribunal, and that the SCC shall refer the case to the Tribunal shortly.
19.
Pursuant to Article 18 SCC Rules, the SCC referred the case to the Tribunal on 16 January 2017.
20.
By correspondence dated 27 January 2017 to the Tribunal, the European Commission ("EC") filed an Application for leave to intervene as a non-disputing party in this arbitration ("EC Intervention Application"). In the EC Intervention Application, it questioned the Tribunal’s jurisdiction to arbitrate the present case, inter alia, on the ground that the case pertains to obligations of European Union ("EU") Member States inter se, which cannot be resolved by way of investor-State dispute settlement under the ECT.7 The EC invoked the Tribunal’s "case-management powers" under Article 19 SCC Rules to grant its request for intervention as a non-disputing party.8 On this basis, it requested the Tribunal to (i) set a deadline for the EC to file a written submission; (iii) allow the EC access to the documents filed in the case, to the extent necessary for its intervention; and (iv) grant the EC leave to present its views at an oral hearing, if any takes place.9
21.
By correspondence dated 31 January 2017, the Tribunal wrote the Parties (i) proposing to hold a Preparatory Telephone Conference ("PTC") to consult the Parties on the preliminary procedural issues and a procedural calendar for the case; (ii) circulating a draft Agenda for the PTC; (iii) transmitting the EC Intervention Application to the Parties; and (iv) inviting the Parties to provide any comments on the draft Agenda for the PTC and the EC Intervention Application.
22.
On 10 February 2017, Claimants submitted their Response to the EC Intervention Application, in which they requested the Tribunal to (i) not grant the EC Intervention Application, on the ground that the EC does not meet the standard for intervention and that its submissions were meritless; or (ii) alternatively, to restrict the EC’s role in the proceedings, if the EC Intervention Application is granted.
23.
On 13 February 2017, Respondent submitted its position on the EC Intervention Application, in which it requested the Tribunal to (i) admit the EC as a non-disputing party in these proceedings and to allow adequate time for discussing the issues raised by the EC; and (ii) permit the EC to access the relevant documents and to participate in the hearing (as limited to the jurisdiction issue that the EC raised).
24.
Further to the Tribunal’s correspondence of 31 January 2017 (see 21 above), the PTC was conducted between the Parties and the Tribunal on 22 February 2017. In light of the discussions that ensued during the PTC, the Tribunal circulated to the Parties a draft Timetable for the proceedings on 22 February 2017 itself. Thereafter, on 3 March 2017, the Tribunal circulated a draft Procedural Order No. 1 to the Parties, which was also based on the discussions that ensued during the PTC concerning the procedural rules applicable to these proceedings. The Parties were invited to provide any comments on the draft Timetable and the draft Procedural Order No. 1 by 14 March 2017.
25.
After having received and taking into account the Parties’ respective comments on the draft Timetable and the draft Procedural Order No. 1, the Tribunal issued the final Procedural Order No. 1 (By Consent), together with the Timetable attached as Annex A, on 16 March 2017 ("PO 1").
26.
Notably, in PO 1, the Tribunal decided to (i) grant the EC Intervention Application, in part, fixing 10 May 2018 as the date for the EC to file a Written Submission as a non-disputing party; and (ii) determine at a subsequent date, after consultation with the Parties, whether and to what extent the EC shall be given access to the documents filed in these proceedings.10 The Tribunal informed the EC of its decision to partially grant the EC Intervention Application by correspondence dated 17 March 2017.
27.
Thereafter, by correspondence dated 21 March 2017, the Tribunal, pursuant to Article 37 SCC Rules, requested the SCC Board to extend the time limit for rendering the Final Award, in light of the fact that the Timetable for these proceedings, established with the Parties’ consent, extended at least until mid-2019.
28.
On the same date, i.e., 21 March 2017, the SCC granted the Parties an opportunity to submit any comments on the Tribunal’s request for extension of the time limit for rendering the Final Award. By correspondences of the same date, Claimants and Respondent confirmed that they had no objection to the Tribunal’s request.
29.
Accordingly, by correspondence dated 22 March 2017, the SCC fixed 1 July 2019 as the time limit for rendering the Final Award.
30.
In accordance with the Timetable established in PO 1, albeit with an eight-day extension agreed to by Respondent, Claimants submitted their Statement of Claim on 28 July 2017 ("SoC").
31.
In accordance with the Timetable established in PO 1, Respondent submitted its Statement of Defence on 22 December 2017 ("SoD").
32.
On 6 March 2018, the Court of Justice of the European Union ("ECJ") rendered its ruling in Case C-284/16, Slowakische Republik v Achmea BV ("ECJ Judgment").11
33.
On 8 March 2018, the Tribunal wrote to the Parties in reference to the ECJ Judgment. In particular, in this correspondence, the Tribunal (i) mentioned that it considered it appropriate to invite the Parties to provide their respective positions on the implications of the ECJ Judgment on the present case, prior to receiving the EC's Written Submission as a non-disputing party scheduled on 10 May 2018 (see ¶ 26 above); (ii) invited Claimants to include in their Reply Memorial, due on 27 March 2018, any comments on the implications of the ECJ Judgment on the present case; and (iii) invited Respondent to provide any comments, limited to the implications of the ECJ Judgment on the present case, by 3 April 2018, without prejudice to Respondent's right to submit the Rejoinder Memorial due on 2 July 2018. The Parties' comments were invited by the Tribunal, explicitly without making any amendments to the other deadlines provided in the Timetable established in PO 1.
34.
By correspondences dated 22 and 23 March 2018, the Parties agreed to modify the above prescribed deadlines and the Timetable established in PO 1, in the following manner, while confirming that the other deadlines mentioned in the Timetable established in PO 1 shall remain unaltered:

(i) Claimants' Reply Memorial on the Merits and Counter-Memorial on Jurisdiction to be filed on 30 March 2018 (previously 27 March 2018);

(ii) Respondent's comments on the implications of the ECJ Judgement to be filed on 6 April 2018 (previously 3 April 2018);

(iii) Respondent's Rejoinder on the Merits and Reply on Jurisdiction to be filed on 5 July 2018 (previously 2 July 2018).

35.
On 23 March 2018, the Tribunal approved the Parties' agreed modifications to the Timetable established in PO 1.
36.
In accordance with the Timetable established in PO 1, as modified by the Parties' agreement on 23 March 2018 (see ¶¶ 34-35 above), Claimants submitted their Reply on the Merits and Counter-Memorial on Jurisdiction on 30 March 2018 ("SoRy").
37.
On 6 April 2018, Respondent submitted its comments on the implications of the ECJ Judgement on the present case ("Respondent's Comments on ECJ Judgment").
38.
On 9 April 2018, the Parties informed the Tribunal that, further to the Tribunal's directions in PO 1 (see ¶ 26 above),12 the Parties had consulted amongst each other and agreed to provide to the EC certain relevant documents filed in this arbitration, prior to the EC's Written Submission as a non-disputing party scheduled on 10 May 2018.
39.
By correspondence dated 9 April 2018, the Tribunal (i) informed the Parties that it considered it appropriate that the EC receive the relevant documents from the Tribunal itself, as opposed to the Parties; and (ii) requested the Parties to prepare one consolidated bundle of the relevant documents in a PDF format, and provide the same to the Tribunal by email, no later than 12 April 2018.
40.
Having received the consolidated bundle of the relevant documents from the Parties, the Tribunal transmitted these documents to the EC on 13 April 2018.
41.
In accordance with the Timetable established in PO 1, the EC submitted an "Amicus Curiae Brief" on 9 May 2018 ("EC NDP Submission"), which the Tribunal transmitted to the Parties on 14 May 2018.
42.
Thereafter, on 23 May 2018, the Tribunal invited the Parties to (i) consult amongst each other and reach an agreement in respect of their preferred location and venue for the Hearing scheduled in the week of 26-30 November 2018 as per the Timetable established in PO 1; and (ii) approve, or provide any comments on the engagement of Mr. Trevor McGowan as court reporter for the hearing.
43.
By correspondence dated 31 May 2018, Claimants informed the Tribunal that the Parties had agreed to hold the Hearing at the hearing facilities of the International Chamber of Commerce in Paris, France. Further, Claimants confirmed their approval of Mr. Trevor McGowan's engagement as court reporter for the hearing.
44.
The Tribunal granted Respondent until 7 June 2018 to provide its approval of, or comments on, Mr. Trevor McGowan's engagement as court reporter for the hearing, absent which, the Tribunal would confirm the appointment of Mr. McGowan as court reporter.
45.
Having received no objection from Respondent until 7 June 2018, and in light of Claimants' express approval, the Tribunal confirmed the appointment of Mr. McGowan as court reporter on 8 June 2018.
46.
In accordance with the Timetable established in PO 1, as modified by the Parties' agreement on 23 March 2018 (see ¶¶ 34-35 above), and with a further extension agreed to by Claimants, Respondent submitted its Rejoinder on the Merits and Reply on Jurisdiction on 6 July 2018 ("R-SoRj").
47.
Thereafter, on 24 July 2018, Respondent submitted to the Tribunal, pursuant to ¶ 10.10 of PO 1, a request to introduce into the record a new document, which was released after the submission of its R-SoRj ("Respondent's Request to Supplement the Record"). This new document was the EC Communication to the Parliament and the Council, bearing number COM(2018) 547/2, dated 19 July 2018 ("EC Communication 2018").
48.
The Tribunal invited Claimants to provide any comments on Respondent's Request to Supplement the Record by 26 July 2018. Claimants provided their comments on the said date, objecting to Respondent's Request to Supplement the Record.
49.
On 30 July 2018, the Tribunal issued Procedural Order No. 2, in which the Tribunal (i) granted Respondent's Request to Supplement the Record; (ii) granted Claimants liberty to provide any comments on the EC Communication 2018, in Claimants' Rejoinder on Jurisdiction; and (iii) granted Claimants a two-day extension to file their Rejoinder on Jurisdiction, which was originally scheduled for 1 August 2018 ("PO 2").
50.
In accordance with the Timetable established in PO 1, as modified by the Tribunal in PO 2, Claimants submitted their Rejoinder on Jurisdiction on 3 August 2018 ("C-SoRj").
51.
In accordance with the Timetable established in PO 1, on 1 October 2018, Claimants and Respondent notified the Tribunal of the other side's witnesses and experts they wished to cross-examine at the Hearing.
52.
Thereafter, pursuant to ¶ 20.1 of PO 1, on 9 October 2018, the Tribunal submitted a proposal to the SCC to appoint Mr. Pratyush Panjwani, one of the Chairperson's law firm's associates, as the Arbitral Secretary in this case. The Tribunal also provided a proposed stipulation containing a description of the functions that it envisaged the Arbitral Secretary to perform under the Tribunal's supervision. The Tribunal requested the SCC to transmit the Tribunal's proposal to the Parties, and invite their comments on the same.
53.
The SCC transmitted the Tribunal's proposal concerning the appointment and functions of the Arbitral Secretary to the Parties on 10 October 2018.
54.
By correspondences dated 15 October 2018, Claimants and Respondent confirmed that they had no objections to the appointment of Mr. Pratyush Panjwani as Arbitral Secretary in this case.
55.
By the same correspondences, and in accordance with the Timetable established in PO 1, the Parties submitted a Joint Chronological List of Exhibits.
56.
Subsequently, by correspondence dated 20 October 2018, the Tribunal sent to the Parties a draft Agenda for the Pre-Hearing Organizational Meeting ("PHOM") scheduled to be conducted between the Tribunal and the Parties on 8 November 2018. The Parties were invited to confer on the Draft Agenda for the PHOM and to provide their joint or individual comments on the same by 29 October 2018.
57.
By correspondence dated 29 October 2018, Claimants sent to the Tribunal their comments on the draft Agenda for the PHOM, including on points where the Parties had reached agreement.
58.
On 8 November 2018, the PHOM was conducted between the Tribunal and the Parties. Further to the PHOM, the Tribunal circulated a draft of the Procedural Order No. 3 to the Parties for their comments. This draft Procedural Order No. 3 recorded the discussions that ensued during the PHOM.
59.
By their respective correspondences dated 22 November 2018, Claimants and Respondent confirmed that they had no comments on draft Procedural Order No. 3. Accordingly, on 22 November 2018, the Tribunal issued Procedural Order No. 3 (By Consent) ("PO 3"). In PO 3, it was, inter alia, determined that the Parties shall make corrections to the trancripts of the hearing in consultation with each other one month after the hearing ends, i.e., by 31 December 2018.13
60.
The hearing was conducted from 26 to 29 November 2018 in Paris, France ("Hearing"), in accordance with the Parties' agreement (see ¶ 43 above). The following witnesses were examined during the Hearing:

(i) Mr. Mark Florian (Claimants' fact witness);

(ii) Mr. Ryan Shockley (Claimants' fact witness);

(iii) Mr. Adi Blum (Claimants' fact witness);

(iv) Mr. Robert Hanna (Claimants' fact witness);

(v) Mr. Daniele Bacchiocchi (Respondent's fact witness);

(vi) Mr. Luca Miraglia (Respondent's fact witness);

(vii) Prof. Antonio D'Atena (Claimants' legal expert on Italian law);

(viii) Prof. Anna Romano (Respondent's legal expert on Italian law);

(ix) Dr. Boaz Moselle and Dr. Dora Grunwald (Claimants' regulatory experts);

(x) Mr. Richard Edwards (Claimants' quantum expert); and

(xi) Prof. Cesare Pozzi, Prof. Giuseppe Melis, Prof. Umberto Monarca and Prof. Ernesto Cassetta (Respondent's quantum experts).

61.
During the Hearing, the Parties agreed to the procedure and timetable for submitting post-hearing briefs. In particular, it was determined, with the agreement of the Parties, that the post-hearing briefs shall be simultaneously submitted by the Parties on 25 January 2019, followed by reply post-hearing briefs to be simultaneously submitted on 1 March 2019. Further, the cost submissions were scheduled for submission on 8 March 2019, and it was agreed that the Parties shall not submit Reply Cost Submissions.14
62.
By Claimants' email dated 28 December 2018, the Parties jointly requeted for an extension of the deadline to provide corrections to the transcripts of the Hearing until 15 January 2019. On 1 January 2019, the Tribunal approved the Parties' joint request for extension.
63.
Accordingly, on 15 January 2019, the Parties provided the revised transcripts of the Hearing, having agreed upon the corrections to the transcripts of Day 1 to 3 of the Hearing. With respect to Day 4 of the Hearing, Claimants pointed out that they disagreed with certain edits made by Respondent, but did not believe that the disagreements were material or would interfere with the Tribunal's general understanding of the transcript.
64.
In accordance with the procedure and timetable for the submission of post-hearing briefs agreed upon during the Hearing (see ¶ 61 above), Claimants and Respondent simultaneously submitted their respective Post-Hearing Briefs on 25 January 2019 ("C-PHB" and "R-PHB" respectively).
65.
Together with the R-PHB, Respondent also submitted a Request for Termination of these proceedings ("Request for Termination"), in light of the Declarations of the Representatives of the Governments of the European Union Member States dated 15-16 January 2019 ("January 2019 Declarations"). In its Request for Termination, Respondent also alternatively requested the Tribunal to suspend these arbitration proceedings.
66.
By email dated 28 January 2019, the Tribunal invited Claimants to provide any comments on Respondent's Request for Termination by 4 February 2019. Accordingly, Claimants provided their comments on the Request for Termination on 4 February 2019, wherein they requested the Tribunal to reject Respondent's primary request for termination and the alternative request for suspension of the proceedings.
67.
On 7 February 2019, the Tribunal issued Procedural Order No. 4, in which the Tribunal rejected Respondent's Request for Termination in its entirety, including the alternative request for suspension of the proceedings ("PO 4").
68.
In accordance with the procedure and timetable for the submission of post-hearing briefs agreed upon during the Hearing (see ¶ 61 above), Claimants and Respondent simultaneously submitted their respective Reply Post-Hearing Briefs on 1 March 2019 ("C-RPHB" and "R-RPHB" respectively).
69.
Together with the C-RPHB, Claimants also submitted their Costs Submission on 1 March 2019 ("C-CS"). Respondent submitted its Costs Submission subsequently on 8 March 2019 ("R-CS").
70.
In the meantime, on 7 March 2019, Claimants submitted a letter requesting for an opportunity to submit brief comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158), or alternatively, strike it from the record, on the ground that Respondent had submitted the said confidential award inti the record with the R-RPHB, and had also made submissions in respect of the same therein ("Claimants' Letter on CEF Award").
71.
By email dated 7 March 2019, the Tribunal invited Respondent to provide any comments on Claimants' Letter on CEF Award by 8 March 2019. Accordingly, on 8 March 2019, Respondent provided its comments on Claimants' Letter on CEF Award, wherein it objected to Claimants' request for an opportunity to submit brief comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158).
72.
By email dated 8 March 2019, the Tribunal granted Claimants until 15 March 2019 to submit brief comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158).
73.
By email dated 14 March 2019, Claimants requested the Tribunal for an extension to submit their comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158). The Tribunal granted Claimants the requested extension until 20 March 2019.
74.
By email dated 20 March 2019, Claimants submitted their comments on the award in CEF Energia B.V. v. Italy (SCC Arbitration No. 2015/158).
75.
Thereafter, by its email dated 5 June 2019, the Tribunal requested the SCC Board for an extension of the time limit to render the award, pursuant to Article 37 of the SCC Rules, due to, inter alia, the intervening procedural developments in the case. This request was transmitted to the Parties by the SCC's letter dated 5 June 2019, wherein the Parties were invited to provide their comments by 12 June 2019. After having consulted the Parties, the SCC Board, on 13 June 2019, granted the Tribunal's request for an extension of the time limit to render the award, and extended the same until 1 October 2019.
76.
On 18 June 2019, Respondent submitted a Request for Suspension, requesting the Tribunal to suspend these arbitration proceedings on the ground that the Tribunale Amministrativo Regionale per il Lazio in Italy had referred certain preliminary questions to the ECJ in two consolidated proceedings initiated by certain investors, which related to issues involved in the present arbitration ("Request for Suspension").
77.
By email dated 19 June 2019, the Tribunal invited Claimants to provide any comments on Respondent's Request for Suspensionby 24 June 2019. Accordingly, on 24 June 2019, Claimants submitted their comments, wherein they objected to the Request for Suspension for being belated, inaccurate and unwarranted.
78.
On 4 July 2019, the Tribunal issued Procedural Order No. 5, in which the Tribunal rejected Respondent's Request for Suspension ("PO 5").
79.
Thereafter, on 9 August 2019, Respondent requested to introduce the award rendered in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40) into the record.
80.
By email dated 12 August 2019, the Tribunal invited Claimants to provide any comments on Respondent's request to introduce the award rendered in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40) into the record. Accordingly, on 14 August 2019, Claimants confirmed that they had no objection to the introduction of the said award into the record, but requested that the Parties be granted the opportunity to submit their comments on the award by 30 August 2019.
81.
By email dated 14 August 2019, Respondent confirmed that they had no objection to Claimants' request to submit comments on the award in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40), but requested that the Parties be granted time until mid-September 2019 to submit such comments.
82.
By email dated 14 August 2019, the Tribunal endorsed the Parties' agreement, and directed them to file simultaneous submissions on the award in Belenergia S.A. v. Italy (ICSID Case No. ARB/15/40) by 13 September 2019. Accordingly, Claimants and Respondent filed their submissions on this matter on 13 September 2019.
83.
Thereafter, by its email dated 17 September 2019, the Tribunal requested the SCC Board for an extension of the time limit to render the award, pursuant to Article 37 of the SCC Rules, due to, inter alia, the intervening procedural developments in the case. This request was transmitted to the Parties by the SCC's letter dated 19 September 2019, wherein the Parties were invited to provide their comments by 23 September 2019. After having consulted the Parties, the SCC Board, on 24 September 2019, granted the Tribunal's request for an extension of the time limit to render the award, and extended the same until 31 March 2020.
84.
By emails dated 6 December 2019, Respondent requested to introduce the awards rendered in Baywa R.E. v. Spain (ICSID Case No. ARB/15/16) and Stadtwerke München GmbH v. Spain (ICSID Case No. ARB/15/1) into the record.
85.
By email dated 10 December 2019, the Tribunal forwarded Respondent's emails dated 6 December 2019 to all counsel and also invited Claimants to provide any comments on Respondent's emails.
86.
Accordingly, by email dated 13 December 2019, Claimants informed the Tribunal that they had no objection to Respondent's request to introduce the awards rendered in BayWa R.E. v. Spain (ICSID Case No. ARB/15/16) and Stadtwerke München GmbH v. Spain (ICSID Case No. ARB/15/1) into the record. Simultanously, Claimants also requested that the following additional awards, decisions and dissenting opinions relating to Spain's feed-in tariff program be included into the record:

(i) the Dissenting Opinions of Prof. Kaj Hobér in Stadtwerke München GmbH v. Spain and of Prof. Horacio Grigera Naón in BayWa R.E. v. Spain ;

(ii) RREEF Infra. (G.P.) Ltd. & RREEF Pan-European Infra. Two Lux S.à.r.l. v. Kingdom of Spain (ICSID Case No. ARB/13/30), Decision on Responsibility and Principles of Quantum and Dissenting Opinion;

(iii) Cube Infra. Fund SICAV et al. v. Kingdom of Spain (ICSID Case No. ARB/15/20), Award;

(iv) NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain (ICSID Case No. ARB/14/11), Decision on Jurisdiction, Liability and Quantum Principles;

(v) NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain (ICSID Case No. ARB/14/11), Final Award;

(vi) SolEs Badajoz GmbH v. Kingdom of Spain (ICSID Case No. ARB/15/38), Award;

(vii) InfraRed Environmental Infrastructure GP Ltd et al. v. Spain (ICSID Case No. ARB/14/12), Award and Dissenting Opinion (not public, see Tom Jones, Spain Liable Again in Solar Cases, Global Arbitration Review, Aug. 5, 2019); and

(viii) OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain (ICSID Case No. ARB/15/36), Award and Dissenting Opinion.

87.
By email dated 16 December 2019, the Tribunal invited Respondent to provide any comments on Claimants' email of 13 December 2019. Accordingly, by email dated 17 December 2019, Respondent informed the Tribunal that it had no objection to Claimants' request to introduce the above listed awards, decisions and dissenting opinions into the record.
88.
In light of the agreement between the Parties, the Tribunal, by its email dated 19 December 2019, admitted the awards, decisions and dissenting opinions identified in Respondent's emails of 6 December 2019 (see ¶ 84 above) and Claimants' email of 13 December 2019 (see ¶ 86 above) into the record. The Parties were directed to file these documents into the record by 23 December 2019. By emails dated 21 and 22 December 2019, Respondent and Claimants filed the said awards, decisions and dissenting opinions into the record.
89.
On 10 March 2020, the Tribunal requested the SCC Board to finally determine the Costs of the Arbitration, pursuant to Article 43(2) SCC Rules.
90.
By email dated 11 March 2020, the Tribunal declared these arbitration proceedings closed, pursuant to Article 34 SCC Rules.
91.
On 24 March 2020, the SCC Board finally determined the Costs of the Arbitration, pursuant to the Tribunal's request under Article 43(2) SCC Rules (see ¶ 89 above).

IV. FACTUAL BACKGROUND

A. E VOLUTION OF I TALY ' S G ENERAL P OLICIES ON R ENEWABLE E NERGY

92.
Italy started taking steps towards promoting energy consumption through non-fuel energy sources in the 1980s and 1990s. This was motivated, at least in part, by the EU's objective to move towards harmonizing the energy market of its Member States, while simultaneously endorsing production of electricity through renewable energy. This evolution of Italy's and the EU's initial polices relating to renewable energy shall be discussed in Sections (1) and (2) below, respectively.

(1) Italy's Policies through 1980s and Early 1990s

93.
In 1982, Italy enacted the Law No. 308/1982, which aimed to promote, "consistently with the European Community energy policy, the limitation of energy consumptions and the use of renewable energy sources".15 To this end, Italy committed to provide certain capital contributions and other financial incentives to promote renewable energy.16 In this connection, Law No. 308/1982 also envisaged the sale, trade and dispatch of the electricity generated by renewable energy plants under the capacity of 3000 kW shall be "regulated by ad hoc agreements" with the National Entity for Electricity, which was a state-owned company then. The sale price of electricity was to be established by an Inter-Ministerial Committee of Prices.17
94.
The general framework contained in Law No. 308/1982 was followed by the National Energy Plan of 1988 in Italy ("1988 Energy Plan"). The 1988 Energy Plan laid out specific aims and strategies concerning Italy's energy plan until the year 2000.18 In particular, the 1988 Energy Plan laid out five primary objectives for Italy's energy policy. These were (i) energy savings; (ii) environmental protection; (iii) development of natural resources; (iv) diversification in the use of the various import sources and the geographic and political diversification of procurement areas; and (v) the competitiveness of the production system.19
95.
Thereafter, Italy introduced the first specific incentive regime in support of renewable energy facilities by way of Law No. 9/1991.20 Law No. 9/1991 crucially removed the capacity limit of the Law No. 308/1982 of 3000 kW (see ¶ 93 above), so that the competitive pricing of electricity established by the Inter-Ministerial Committee of Prices could benefit all renewable energy facilities in the country.21
96.
Further to this, the Inter-Ministerial Committee of Prices established a new price regime on 29 April 1992.22 This price regime of 1992 specifically provided for a three-fold incentive scheme for renewable energy facilities as well as for the "assimilated" sources including thermal and gas facilities. First, these facilities were entitled to the so-called "avoided costs" for a period of 15 years since the entry into operation.23 Second, they were entitled to an incentivizing component for a period of eight years differentiated based on the source of energy.24 Third, there was an entitlement of a bonus for new plants that were constructed after 30 January 1991 for a period of eight years.25

(2) EC's Directives and Italy's Policies through 1990s and Early 2000s

97.
Italy's early steps towards safer and environmentally friendly energy sources in the 1980s and early 1990s was followed by the EU taking steps towards the harmonization and liberalisation of the electricity market of EU Member States.
98.
In 1996, the EC issued the EC Directive 96/92/EC, which entered into force in February 1997.26 The EC Directive 96/92/EC primarily aimed at liberalising the common electricity market of the EU, but it also mentioned that "priority may be given to the production of electricity from renewable sources" by EU Member States for reasons of environmental protection.27
99.
In February 1998, the EC prepared a report in relation to this EC Directive 96/92/EC, specifically concerning renewable energy and the EU's targets under the Kyoto Protocol, which had been adopted in December 1997.28 In this connection, the EC's report, inter alia, stated that pursuant to "[t]he 'Third Conference of the Parties to the United Nations framework on Climate Change'... held in Kyoto in December 1997... the [EC] agreed to a commitment of an 8% reduction of greenhouse gas emissions for the period 2008 to 2012 compared to 1990." This would require "[m]ajor energy policy decisions, focusing on reducing energy and carbon intensity", and "[a]ccelerating the penetration of renewable energy sources in the production of electricity".29
100.
Italy signed the Kyoto Protocol in 1998.30 Shortly thereafter, in April 1999, Italy's National Agency for New Technologies, Energy and Sustainable Economic Development issued a White Paper for the development of renewable energy sources.31 The White Paper considered numerous principle and strategy matters relating to the growth of renewable energy in Italy, while recognizing the EU's targets as well.
101.
Pertinently, the White Paper laid out a target of "additional contribution of renewables of approximately 8.6 Mtoe running from 11.7 Mtoe to 20.3 Mtoe for 2008-2012 in terms of substituted conventional fuel".32 Further, in respect of photovoltaic solar energy, while recognizing that significant research is required in this field, which was still in its "young" stage, the White Paper, inter alia, stated the following:

At this time in fact, the cost of electric energy from photovoltaic plants connected to the network is comprised between 500 and 1000 L/kWh, and the margins for further reductions seem limited if we take into account only scale economies. Therefore, for the time being, it is not appropriate to build other large plants with public intervention.33

Photovoltaic is, in principle, the most attractive renewable energy.

Considering its own characteristics and the great potential, even in the absence of sure prospects on cost reduction, we believe that photovoltaic must be developed to the highest levels possible, if anything so as to pre-establish a "reserve" option, in order to face undesirable environmental and energetic emergencies, always possible for the decades to come.34

102.
Thus, during this time, Italy was moving towards the objectives of enhancing energy security through independence and liberalization of the market, while simultaneously achieving environmental targets.35 In this connection, Italy also implemented the EC Directive 96/92/EC in March 1999, by way of the Legislative Decree No. 79/1999.36 This was motivated towards the above-mentioned two objectives. First, the Legislative Decree No. 79/1999 liberalized the electricity market by implementing anti-monopoly rules and requiring the National Entity for Electricity, the state-owned electricity company in Italy monopolizing electricity generation until then, to sell off 15,000 MW of its capacity in the year 2000.37 On a related note, the Decree established a state-owned company, i.e., Gestore della rete di transmission nazionale Spa ("GRTN"), for dealings with renewable energy producers.38
103.
The second important step taken under this Legislative Decree No. 79/1999 was to give renewable energy facilities priority access to the grid.39 Further, to support renewable energy, the Legislative Decree No. 79/1999 also provided for what was called a green certificate incentive program. This program, inter alia, required the importers and producers of energy in Italy, who produce more than 100 GWh per year from non-renewable sources of energy, to introduce into the national electric grid a certain percentage of electricity produced by renewable sources.40
104.
With the advent of the new millennium, on 27 September 2001, the European Parliament and Council issued EC Directive 2001/77/EC. This EC Directive, for the first time, dealt specifically and in detail with production of electricity through renewable energy sources in order to meet the international targets set by the Kyoto Protocol.41 Thus, it formed a significant component of the EU's overall attitude towards renewable energy. Some of the principal objectives pursued by this EC Directive 2001/77/EC were laid down in the preamble, inter alia, in the following terms:

The Community recognises the need to promote renewable energy sources as a priority measure given that their exploitation contributes to environmental protection and sustainable development.

Member States operate different mechanisms of support for renewable energy sources at the national level, including green certificates, investment aid, tax exemptions or reductions, tax refunds and direct price support schemes. One important means to achieve the aim of this Directive is to guarantee the proper functioning of these mechanisms, until a Community framework is put into operation, in order to maintain investor confidence.

It is too early to decide on a Community-wide framework regarding support schemes, in view of the limited experience with national schemes and the current relatively low share of price supported electricity produced from renewable energy sources in the Community all Member States should be required to set national indicative targets for the consumption of electricity produced from renewable sources.42

105.
The EC Directive 2001/77/EC also spoke about setting "national indicative targets" for each of the Member States for consumption of energy through renewable sources, keeping in mind the global target of 12% of consumption through renewable sources by 2010, with which the EU's target aligned. The EC envisaged the possibility of setting mandatory targets in future based on the extent of progress made by Member States.43 In this connection, the Member States were required to set national indicative targets by 27 October 2002 (and then every five years) for future consumption of energy produced from renewable sources in terms of a percentage, by taking into account, inter alia, reference values set in the Annex to the EC Directive 2001/77/EC. Italy was ascribed the reference value for a national indicative target of 25% of the total energy consumption from renewable sources.44
106.
Thereafter, the EC was to assess by 2004-2005, inter alia, (i) the progress made by the Member States in achieving their national indicative targets; (ii) whether the national indicative targets were still consistent with the global indicative target of 12% of consumption through renewable sources of energy;45 and (iii) the overall experience gained with the application and coexistence of the different support schemes for renewable energy, "including cost-effectiveness, of the support systems... in promoting the consumption of electricity produced from renewable energy sources".46
107.
On 1 March 2002, Italy enacted Law No. 39/2002, wherein it took steps towards implementing EC Directive 2001/77/EC. In Law No. 39/2002, it was, inter alia, envisaged that within the following 18 months, the government will issue one or more legislative decrees that would provide incentive policies for renewable energy. In this regard, Law No. 39/2002 specifically provided that these incentives should (i) be based on mechanisms that promoted both competitiveness and cost reduction; and (ii) not create greater or new burdens on the State budget.47
108.
Also in 2002, Italy enacted Law No. 120/2002 for the ratification and implementation of the Kyoto Protocol in Italy, which it had signed in 1998 (see ¶ 100 above).48
109.
On 26 June 2003, the EC replaced its earlier EC Directive 96/92/EC (see ¶¶ 98-99 above) with EC Directive 2003/54/EC containing new rules on the internal electricity market of the EU.49 In this connection, the EC Directive 2003/54/EC mentioned that:

Experience in implementing [EC Directive 96/92/EC] shows the benefits that may result from the internal market in electricity, in terms of efficiency gains, price reductions, higher standards of service and increased competitiveness. However, important shortcomings and possibilities for improving the functioning of the market remain, notably concrete provisions are needed to ensure a level playing field in generation and to reduce the risks of market dominance and predatory behaviour, ensuring non-discriminatory transmission and distribution tariffs, through access to the network on the basis of tariffs published prior to their entry into force, and ensuring that the rights of small and vulnerable customers are protected and that information on energy sources for electricity generation is disclosed, as well as reference to sources, where available, giving information on their environmental impact.50

110.
To this end, the EC Directive 2003/54/EC required Member States to designate regulatory authority(s) to monitor, inter alia, "the terms, conditions and tariffs for connecting new producers of electricity to guarantee that these are objective, transparent and non-discriminatory, in particular taking full account of the costs and benefits of the various renewable energy sources technologies, distributed generation and combined heat and power".51
111.
The EC Directive 2003/54/EC and the Law No. 39/2002 laid the foundation for many specific regulatory decrees passed by the concerned Ministries in Italy regulating the incentive tariff regime for renewable energy facilities, and in particular photovoltaic/solar facilities.

B. C ONTO E NERGIA D ECREES REGARDING P HOTOVOLTAIC E NERGY FROM 2005 TO 2013

112.
Further to Law No. 39/2002, on 29 December 2003, Italy enacted the Legislative Decree No. 387/2003 implementing the EC Directive 2001/77/EC (see ¶¶ 104-105 above). In this Legislative Decree, instructions were issued to the Ministry of Productive Activities to work with the Ministry of the Environment to establish specific criteria to incentivize electricity produced from photovoltaic/solar energy, which was to be done by the adoption of one or more decrees within six months of the date of entry into force of Legislative Decree No. 387/2003. These new decrees were required to take into account many enlisted criteria, including to "provide a specific incentive rate, decreasing amount and duration as to ensure fair remuneration of each investment and operating costs" for solar energy facilities.52
113.
As mentioned in Law No. 39/2002, this Legislative Decree No. 387/2003 reiterated that no incentive scheme could create greater or new burdens on the state budget.53
114.
Contemporaneously, the Productive Activities Committee affirmed the Legislative Decree No. 387/2003 at the Parliament by stating, inter alia, that increasing the production of electricity from renewable sources was an "absolute priority" in Italy, and that the same would require a "stability of the regulatory framework which the investors shall rely on in the medium to long term period".54
115.
Thereafter, on 18 April 2005, the Italian Parliament directed the implementation of the EC Directive 2003/54/EC (see ¶¶ 109-111 above) by way of Law No. 62/2005, which, inter alia, provided for the introduction of incentive mechanisms in the renewable energy sector "based on tenders for the promotion of the most advanced technological solutions that are still far from being commercially competitive".55
116.
These Legislative Decrees implementing the EC Directives were followed by the enactment of the five Ministerial Decrees, known as "Conto Energia" or "Energy Accounts", which established the terms and conditions for the incentive tariff regime specifically for photovoltaic facilities. These Conto Energia Decrees are discussed individually in this Section, and shall progressively be referred to as "First Conto Energia", "Second Conto Energia", "Third Conto Energia", "Fourth Conto Energia", and "Fifth Conto Energia".
117.
The First, Second and Third Conto Energia Decrees were enacted by Italy's the Ministry for Productive Activities or the Ministry for Economic Development in consultation with the Ministry for Environment, as per the principles and standards established in Legislative Decree No. 387/2003.56
118.
Subsequently, the Fourth and Fifth Conto Energia Decrees were enacted by the concerned ministries pursuant to the principles and standards established under the Romani Decree, which was enacted to implement the EC Directive 2009/28/EC that replaced the EC Directive 2003/54/EC (discussed in Section (4) below).57

(1) First Conto Energia Decree

119.
The First Conto Energia Decree contained the first incentive tariff program and was enacted on 28 July 2005 in furtherance of the Legislative Decree No. 387/2003 and Law No. 62/2005.58 It was directed towards photovoltaic facilities with individual capacity between 1 kW and 1 MW, granting them the right to receive specific incentive tariff for every kilowatt-hour of electricity produced.59 The cumulative threshold for granting incentive tariffs under the First Conto Energia was initially set at 100 MW.60
120.
The incentive tariff rates established by the First Conto Energia ranged between 0,445-0.490 EUR/kWh, subject to the nominal capacity of the plants.61 These tariffs were to reduce on an annual basis by 2% after 2006 based on the date of entry into operation of a plant. Further, the duration for which these tariff rates would apply was twenty years, subject to any adjustments based on the ISTAT inflation index.62
121.
In order to qualify for the incentive tariffs under the First Conto Energia Decree, the photovoltaic plants had to provide preliminary project proposals for the plant in question, including, inter alia, technical specifications, capacity and a commitment to obtain the necessary authorizations relating to construction and operation of the plant.63 Thereafter, the "implementing body", which was a company called the Gestore dei Servizi Energetici ("GSE"), i.e., the successor of GRTN,64 had 90 days to communicate the outcome of the plant operators' preliminary project proposal by way of a formal letter.65 After the letter from GSE, the plant operators had the authorization to commence construction within 6-12 months and connect the plant to the grid within 12-24 months.66 GSE also entered into contracts with the photovoltaic plants that qualified for the incentive tariffs based on a sample agreement prescribed in this regard.67
122.
After the enactment of the First Conto Energia Decree, there was an increase in investments and number of photovoltaic facilities overall, such that the "cumulative capacity for all plants in respect of which an application has been submitted for the purpose of obtaining incentive tariffs under the [First Conto Energia Decree was] in excess of 100 MW".68 Thus, on 6 February 2006, Italy amended the First Conto Energia Decree to raise the overall threshold of 100 MW to 500 MW.69 This enhanced threshold capacity of 500 MW was exhausted in July 2006, after which Italy accepted another 387 MW of photovoltaic capacity into the program of the First Conto Energia. This was followed by the Second Conto Energia Decree.70

(2) Second Conto Energia Decree

123.
On 19 February 2007, the Second Conto Energia Decree was enacted by the Ministry for Economic Development, in consultation with the Ministry for Environment. It entered into force on 13 April 2007 with the Italian Electrical Energy Authority's Resolution No. 90/07.71
124.
The Second Conto Energia was also enacted in furtherance of, inter alia, the Legislative Decree No. 387/2003, which had implemented the EC Directive 2001/77/EC.72 The Second Conto Energia altered the regime under the First Conto Energia in a few major respects.
125.
First, the preliminary authorization phase, which authorized GSE to qualify photovoltaic plants for incentive tariff prior to their entry into operation (see ¶ 121 above), was eliminated, and authorization for incentive tariff was granted only after the facility's entry into operation.73 Now, the implementing body, i.e., GSE, was to "verify compliance with the provisions of this [D]ecree" after the preliminary project proposal was made by a plant operator, and not already communicate the outcome concerning the tariff awarded, which was done after the entry into operation of a plant.74
126.
Second, while the minimum threshold of individual capacity of a plant to be entitled to the incentive tariff was maintained at 1 kW by the Second Conto Energia Decree,75 the upper limit of 1 MW prescribed in the First Conto Energia (see ¶ 119 above) was removed. Further, the cumulative capacity threshold was increased from 500 MW to 1200 MW, with a possibility for facilities that were connected to the grid 14 months after the date on which Italy reached the 1200 MW threshold to also receive incentive tariffs under the Second Conto Energia.76
127.
Third, the Second Conto Energia Decree introduced multiple criteria for affixing tariff rates for any eligible photovoltaic plant facility, including the facility's nominal capacity, the plant's size and architectural integration, and whether it was partially or totally integrated into the grid.77 Such criteria did not exist under the First Conto Energia Decree, which considered only capacity of the plant (see ¶ 120 above).
128.
Fourth, the tariff rates were reduced in comparison to the First Conto Energia Decree. The new tariff rates ranged between 0,346-0.490 EUR/kWh, which would be reduced on an annual basis based on the date of entry into operation of a plant.78
129.
The above aside, with respect to the duration of the incentive tariffs, the Second Conto Energia Decree stated that "[t]he tariff identified... is awarded for a period of twenty years commencing from the date of entry into operation of the plant and shall remain constant in current currency for the entire twenty year period".79 This was also mentioned in the confirmation letter to be sent by the GSE to notify the plant operator of the tariff it was awarded,80 and in the contracts to be entered into between GSE and the photovoltaic plant operators, as was evident from the sample agreement also prescribed under the Second Conto Energia Decree.81
130.
The Second Conto Energia envisaged the enactment of another decree revising the incentive tariffs for photovoltaic plants connected to the grid after 2010.82 However, in the interim, Legislative Decree No. 3/2010 was enacted on 25 January 2010 ("Salva Alcoa Decree"), and converted into Law No. 129/2010 on 22 March 2010. The Salva Alcoa Decree extended the Second Conto Energia tariffs to the plants that were built by 31 December 2010, but connected to the grid later, i.e., until 30 June 2011.83 The Second Conto Energia subjected the grid manager to penalties in the event plants were not connected to the grid in a timely manner.84 This context behind the enactment of the Salva Alcoa Decree is reflected in the legislative history and also endorsed in Decision No. 51/2017 of the Italian Constitutional Court.85
131.
This was followed by GSE explaining, in a report on "Operating Procedure for Managing Communication to GSE for Works Completion", the various steps that photovoltaic plant operators had to take from their end in order to ensure that there were no gaps in respect of connection of new plants to the grid. This included the procedure for a specific request by a plant operator for grid connection to be made to grid operators, in order to have a starting point for the deadline for grid operators and/or manager to connect a plant to the grid.86
132.
In 2009, the installed capacity of photovoltaic facilities was double of the capacity added in 2008, and by then, Italy became the second largest photovoltaic market in the world as per GSE's estimate.87
133.
This, together, with further expected growth in the installed capacity, lead to the GSE Managing Director, Mr. Nando Pasquali, stating in an interview in May 2010 that 2010 will be a "record breaking year" in the photovoltaic sector in Italy, requiring a new Conto Energia Decree to be enacted, which will reduce the incentive tariffs further.88
134.
In June 2010, the target of 1200 MW capacity under the Second Conto Energia Decree was reached, as mentioned in a GSE presentation of 7 July 2010.89

(3) Third Conto Energia Decree

135.
On 6 August 2010, the Italian Ministry for Economic Development jointly with the Ministry for Environment enacted the Third Conto Energia Decree. The Third Conto Energia Decree reduced the existing tariff rates due to a corresponding reduction in the costs of photovoltaic technology since the entry into force of the Second Conto Energia. The new tariff rates ranged between 0,251-0.402 EUR/kWh,90 which were to now be reduced on a tri-annual basis based on the date of entry into operation of a plant,91 as opposed to the earlier annual revision provided in the Second Conto Energia (see ¶ 128 above). This change in tariff regime was motivated, according to Respondent, by "the evolution of photovoltaic technology recorded... and in particular the significant reduction of costs components and photovoltaic systems... in order to respect the principle of fair return on the costs" established by Legislative Decree No. 387/2003.92
136.
The Third Conto Energia Decree also introduced nuanced categories of photovoltaic plants in order to diversify the incentive tariffs available to them. These categories included (i) photovoltaic plants, further divided into (a) works on buildings and (b) other photovoltaic systems; (ii) integrated photovoltaic systems with innovative features; and (iii) concentrated photovoltaic plants, photovoltaic systems with technological innovation.93
137.
The cumulative threshold of the capacity of photovoltaic plants admitted to the program was increased from 1200 MW in the Second Conto Energia Decree to 3,000 MW in the Third Conto Energia, extendable to the plants that were connected to the grid within 14 months of the date on which this threshold was reached by Italy.94
138.
Similar to the previous two Conto Energia Decrees, the 20 year duration for the incentive tariffs remained,95 as did the regime for GSE to enter into contracts with the producers of the facilities accepted under the Third Conto Energia.96
139.
The Third Conto Energia Decree was originally intended to apply to facilities that entered into operation from 2011 to 2013, with the tariffs reducing by 6% for plants that entered into operation in 2012 and 2013. The Third Conto Energia envisaged the enactment of a subsequent decree establishing the rate for incentive tariffs for plants that would enter the grid after 2013.97
140.
In January 2011, it was reported that Italy had already achieved 4.5 GW in new photovoltaic installations in the year 2010.98 Its overall normalised electricity production through renewable energy sources in 2010 was 69 TWh.99

(4) EC Directive 2009/28/EC and the Romani Decree

141.
In the interregnum between the Second and the Third Conto Energia Decrees, the EC issued another significant Directive, being EC Directive 2009/28/EC on 23 April 2009 for the promotion of use of energy from renewable sources. The EC Directive 2009/28/EC repealed its predecessor EC Directive 2001/77/EC with effect from 1 January 2012.100
142.
The national indicative targets (see ¶¶ 104-105 above) set by the EC Directive 2001/77/EC were thus replaced with "mandatory national overall targets" for electricity consumption based on renewable energy in the new EC Directive 2009/28/EC.101 Italy's mandatory target was to have a gross consumption of 17% through energy produced from renewable sources by 2020.102
143.
Further, the EU's overall target was revised from 12% to 20% of gross energy consumption to be achieved through renewable sources by 2020, together with 10% of transport fuels to be sourced from renewable energy. This came to be known as the EU's 20-20-20 plan.103 In this connection, the notable recitals of the EC Directive 2009/28/EC, stated the following:

The Commission communication of 10 January 2007 entitled 'Renewable Energy Roadmap – Renewable energies in the 21st century: building a more sustainable future' demonstrated that a 20% target for the overall share of energy from renewable sources and a 10% target for energy from renewable sources in transport would be appropriate and achievable objectives, and that a framework that includes mandatory targets should provide the business community with the long-term stability it needs to make rational, sustainable investments in the renewable energy sector which are capable of reducing dependence on imported fossil fuels and boosting the use of new energy technologies. Those targets exist in the context of the 20 % improvement in energy efficiency by 2020.

For the proper functioning of national support schemes it is vital that Member States can control the effect and costs of their national support schemes according to their different potentials. One important means to achieve the aim of this Directive is to guarantee the proper functioning of national support schemes, as under Directive 2001/77/EC, in order to maintain investor confidence and allow Member States to design effective national measures for target compliance.104

144.
While calling upon the EU Member States to adopt national renewable energy plans, the EC Directive 2009/28/EC required the Member States to take into account, inter alia, "the effects of other policy measures relating to energy efficiency on final consumption of energy" and "energy saving".105
145.
Like its predecessor EC Directive 2001/77/EC, the Directive 2009/28/EC also envisaged the possibility of "support schemes" to be established by Member States in order to achieve their renewable energy targets.106 By definition, these "support schemes" could include "any instrument, scheme or mechanism applied by a Member State... that promotes the use of energy from renewable sources by reducing the cost of that energy, increasing the price at which it can be sold, or increasing, by means of a renewable energy obligation or otherwise, the volume of such energy purchased. This includes, but is not restricted to, investment aid, tax exemptions or reductions, tax refunds, renewable energy obligation support schemes including those using green certificates, and direct price support schemes including feed-in tariffs and premium payments."107
146.
In June 2010, pursuant to the EC Directive 2009/28/EC, Italy finalized a National Action Plan to reach the EU's revised renewable energy targets.108 The National Action Plan shared the burden of renewable energy consumption between the electricity, hearing, cooling and transport sectors. Specifically for the electricity sector, the target was equal to 26.4% consumption by 2020, which would require a normalized generation of 99 TWh per year.109 In the National Action Plan, Italy further stated, inter alia, the following:

The current incentive systems... represent consolidated instruments of the national energy system, which one can also take into consideration, with the necessary adjustments, for the upcoming period as an important element of continuity for the achievement of the new EU objectives.110

Compared with the current situation, the introduction is envisaged of certain corrections to the existing framework, in a logic aimed at increasing energy production, but making the support tools more efficient, in order to avoid a parallel growth of production and of burden of the incentives.111

The feed-in tariff [Conto Energia] is a support scheme which guarantees constant remuneration at current currency values for the electricity produced by plants for a set period of time... Moreover, the scheme is subject to regular adjustments which take into account the trends in the prices of energy products and components for photovoltaic plants..., with the intention of limiting the medium- and long-term costs to the community. In any case, the incentive tariff paid when the plant becomes operation[al] remains fixed for the whole entitlement period.112

147.
On 3 March 2011, Italy implemented the EC Directive 2009/28/EC by way of the Legislative Decree No. 28/2011 ("Romani Decree"). The Romani Decree specifically envisaged the maintenance of the incentives for renewable energy, which had the purpose of ensuring a fair remuneration or return of the investment and operating costs.113 In this connection, Article 24 of the Romani Decree is worth quoting, in its relevant part:

Article 24 Incentive mechanisms

(1) The production of electricity from plants using renewable sources that enter into operation after December 31, 2012, will be promoted through the instruments and according to the general criteria set out in paragraph 2 and the specific criteria set out in paragraphs 3 and 4. The safeguard of non-incentivized plants is ensured through the mechanisms under art. 8 hereof.

(2) The production of electricity by the plants referred to in paragraph 1 is supported on the basis of the following general criteria:

a) the incentive has the purpose of ensuring a fair remuneration of the investment and operating costs;

b) the period one is entitled to receive the incentive all through is equal to the average conventional lifecycle of specific kind of plant, and starts from the date of entry into operation thereof;

c) the incentive remains constant throughout the support period to which one is entitled under the law and may take into consideration the economic value of energy produced;

....114

148.
With respect to the remunerations and the rate of incentives, the Romani Decree specifically mentioned that "the period one is entitled to receive the incentive all through is equal to the average conventional lifecycle of specific kind of plant, and starts from the date of entry into operation thereof."115
149.
Like the Legislative Decree 387/2003, which had implemented the previous EC Directive 2001/77/EC in Italy (see ¶¶ 112-116 above), the Romani Decree also tasked certain ministries, i.e., the Ministry for Economic Development and the Ministry for Environment an Sea Protection, to determine the incentive regime for renewable energy investments by way of specific legislative decrees.116 Notably, while Legislative Decree 387/2003 tasked the Ministry for Productive Activities in this regard, to, inter alia, "provide a specific incentive tariff, decreasing amount and duration as to ensure fair remuneration of each investment and operating costs",117 the Romani Decree required the concerned Ministries to promote renewable energy on the basis of incentives that have "the purpose of ensuring a fair remuneration of the investment and operating costs".118
150.
Further, the Romani Decree also contained other specific provisions relating to photovoltaic energy. In this connection, the Romani Decree limited the applicability of the Third Conto Energia to plants that were connected to the grid by 31 May 2011, as opposed to the originally envisaged end-date of 31 December 2013. Also, the Romani Decree added further conditions to the eligibility of plants receiving incentive tariffs, based on size, organization, and zoning of land.119
151.
Moreover, the Romani Decree added provisions relating to sanctions for investors that submitted false declarations to GSE regarding their eligibility to receive the Conto Energia incentive tariffs, and also generally empowered the GSE to control and monitor facilities operating under this regime.120
152.
Lastly, the Romani Decree envisaged the enactment of a new decree by the Ministry for Economic Development establishing revised incentive tariffs for plants connected to the grid after 31 May 2011. In this connection, it further prescribed the establishment of annual limits for installed capacities that could benefit from the incentive tariffs, and adjustment of tariff values based on reductions in cost of technology and equipment as well as incentives applied in other EU Member States.121
153.
It is worth noting that some photovoltaic plant operators who were unable to obtain benefits under the Third Conto Energia Decree as a result of the Romani Decree, instituted complaints in Italian courts against the Romani Decree and its prescription of a new tariff regime with effect from 31 May 2011.122 In one of these cases, the Consiglio di Stato decided against one such renewable energy producer, who had intended to register its photovoltaic facilities under the Third Conto Energia Decree, but had not yet received a written confirmation of the incentive tariffs it was entitled to from the GSE when the Romani Decree was enacted.123 The Consiglio di Stato made certain relevant findings, relating to the EC Directive 2009/28/EC and the general regulatory regime concerning the electricity market. In particular, it found, inter alia, that "the sector of renewable energies in general and photovoltaics in particular is not a free or liberalized market, but subject to programming, planning, targets compatible with burdens upon the users to be in fact reduced, decreasing profitability commensurate to actual overhead and technology costs as applied internationally." It further noted that the EC Directive 2009/28/EC did not rule out that "the interest in the promotion of energy production" needs to be reconciled with "the preservation of other values of obvious internal constitutional relevance (purposes of the national plan, respect of quotas between the various energy components, installed power, size of the achieved flows, protection of the territory, environment and landscape."124

(5) Fourth Conto Energia Decree

154.
Pursuant to the stipulations of the Romani Decree, on 5 May 2011, the Ministry for Economic Development enacted the Fourth Conto Energia Decree.125 The preamble of the Fourth Conto Energia Decree mentioned that within a few years Italy would achieve "grid parity", i.e., a situation where generation of power through photovoltaic plants would be at an equal or lower cost than the price of purchasing power form the electricity grid.126
155.
The Fourth Conto Energia Decree applied to plants that would be connected to the grid between 31 May 2011 and 31 December 2016.127 Further, for the first time, a "national indicative installed capacity target" for photovoltaic plants was introduced, which was set at 23 GW. The installed capacity target corresponded to a yearly indicative cumulative cost of incentives between EUR 6 to 7 billion.128 The incentive regime was thus tied to this yearly cumulative cost threshold, and the Ministry for Economic Development was now entitled to revise the incentive tariffs for future plants when Italy reached the lower end of this yearly threshold, i.e., EUR 6 billion.129 Respondent attributes this realignment of tariff rates to the rise in the costs of maintaining the incentive regimes under the first three Conto Energia Decree, due to the rise in "producability" of solar energy, resulting in "excess remuneration" being received by photovoltaic plants.130
156.
Akin to its predecessors, the Fourth Conto Energia Decree also stated that the incentive tariffs granted to qualifying photovoltaic plants would be constant for a 20 year period starting from the date of the plant's connection to the grid.131 The regime relating to the contracts entered into between GSE and producers whose plants qualified for incentives was also maintained under the Fourth Conto Energia Decree.132
157.
The above aside, the Fourth Conto Energia Decree was different from the previous three in certain respects. For instance, the Fourth Conto Energia built on the nuanced distinctions created in the Third Conto Energia Decree between different kinds of photovoltaic plants (see ¶ 136 above) and created a further demarcation between "small plants" and "large plants". "Small plants" were defined as "photovoltaic plants realised on buildings with capacity no greater than 1000 kW, any other photovoltaic plants with capacity no greater than 200 kW, operating according to the net-metering scheme (regime di scambio sul posto), and photovoltaic plants with any capacity realised on buildings and in areas owned by the Public Administrations under article 1 (2) of [L]egislative [D]ecree [N]o. 165, 2001".133 "Large plants" were any photovoltaic plant other than the ones which were "small plants".134
158.
In this regard, the Fourth Conto Energia Decree established other checks and controls on the entitlement of incentive tariffs in order to regulate the costs. For instance, a registry for "large plants" was established, which was to be maintained by the GSE.135 Further, photovoltaic plant operators were now required to "notify GSE about completion of works for the realisation of the plant, enclosing a certified expert report certifying compliance with" certain requirements contained in Annex 3-B to this Conto Energia.136 If a plant enrolled in the register fell with the cost threshold envisaged under the Fourth Conto Energia, but had not provided such a certificate of completion of works, its registration was considered forfeited.137 Also, the Fourth Conto Energia Decree established different tariff limits for the "large plants" for every semester, beyond which limit the incentive tariffs would no longer be available for new facilities during that semester.138
159.
The Fourth Conto Energia Decree had foreseen that the total cost would likely reach EUR 3.5 billion per annum by 2011.139 By the end of 2011, Italy had reportedly added over 4.3 GW of additional installed photovoltaic capacity under the Fourth Conto Energia,140 and by early 2012, Italy was approaching the cost threshold of the Fourth Conto Energia, i.e., EUR 6 billion.141 In light of the cost threshold being reached, Italy was entitled by the Fourth Conto Energia Decree to revise incentive tariffs, and this was done by the enactment of the Fifth Conto Energia Decree.

(6) Fifth Conto Energia Decree

160.
On 5 July 2012, the Italian Ministry for Economic Development enacted the Fifth and last Conto Energia Decree, which was to enter into force 45 days after a resolution by the Italian Electrical Energy Authority that the cost threshold of EUR 6 billion for incentive tariffs under the Fourth Conto Energia Decree was reached.142 That resolution was issued on 12 July 2012.143
161.
In light of the technological progress and decrease in cost of photovoltaic plants and a corresponding increase in the number of plants connected to the grid, the renewable energy production, by the end of 2011, was at 94 TWh, i.e., only 6 TWh short of the 2020 target set by the EU.144 Accordingly, the Fifth Conto Energia Decree reduced the cost threshold of incentive tariffs to EUR 700 million per year.145
162.
In this connection, the Fifth Conto Energia Decree provided for two different incentive regimes based on the photovoltaic plants' capacities. The first regime applied to plants up to the 1 MW capacity, and awarded them an "all-inclusive tariff", which included the price of the electricity and the value of the incentive.146 The second regime applied to plants of capacity exceeding 1 MW, and awarded them an amount equal to the difference between the all-inclusive tariff and the market price of electricity plus the revenues deriving from the sale of the energy to the market.147 In addition, all plants, regardless of their capacity were entitled to a bonus tariff on the electricity produced and consumed by them.148
163.
The Fifth Conto Energia Decree was similar to its predecessors inasmuch as the incentive tariffs therein also applied for a period of 20 years. The contracts to be executed between the GSE and the producers also retained a similar form, except in respect of a specific stipulation entitling GSE to unilaterally modify the contracts.149
164.
Lastly, the Fifth Conto Energia Decree stated that it would cease to apply to new photovoltaic plants 30 days after a resolution by the Italian Electrical Energy Authority that the cost threshold of EUR 700 million (bringing the total cost to EUR 6.7 billion per year) for incentive tariffs was reached.150 This resolution was passed on 6 June 2013, and after 6 June 2013, no incentive tariffs were made available by Italy to any new photovoltaic plant installed and connected to the grid.151 The rise towards this total cost threshold of EUR 6.7 billion is evidenced in the following graph, which was part of the Assoelettrica presentation at the Senate Industry Commission on 25 September 2013:152
165.
The blue graph in the above slide is representative of the rise from 2005 until 2013 in the total costs relating to incentives provided to photovoltaic plants. These costs constituted a component (Component A3) of the general revenue charges, which were ultimately borne by the end consumers.
166.
On a separate note, a speech by the Minister of Environment in September 2012 lauded the Conto Energia regime for having been a "healthy part of the Italian economy" and for having created around 120,000 jobs between 2009 and 2011.153

C. O FF -T AKE R EGIME AND M INIMUM G UARANTEED P RICE

167.
In addition to the Conto Energia based incentive regime, Italy created another regime, through Legislative Decree No. 387/2003, by virtue of which grid managers and GSE were required to purchase all electricity injected into the grid by renewable energy producers, if the producers so requested.154
168.
This regime, categorized by the Parties as the "off-take regime", operated in the alternative to or to the exclusion of the free market prices.155 It entitled eligible producers, specifically renewable energy producers with capacity under 10 MW, to benefit from a fixed price per kilowatt at which they could sell their electricity to grid managers and/or the GSE.156
169.
The Italian Electrical Energy Authority was tasked with establishing the modalities of this regime,157 and further to this, it laid down principles for this regime primarily in Resolutions No. 34/2005 and 280/2007.158 Each of these Resolutions was preceded by a consultation process initiated through Consultative Documents dated 20 October 2005 and 4 July 2007 respectively, by which comments of the stakeholders were invited.159
170.
By way of Resolution No. 34/2005, a minimum price was guaranteed for small photovoltaic plants (together with hydroelectric plants and other renewable energy plants) with the capacity up to 1 MW to ensure the coverage of their production costs.160 This Resolution applied only to the first two million kWh of electricity produced and injected into the grid by such plants.
171.
Thereafter, in the interim, Resolution No. 317/2006 was passed by the Italian Electrical Energy Authority, which sought to propose revised values of minimum guaranteed prices, based, inter alia, on consultations with some producer groups in relation to factors such as production costs of electricity from renewable sources, the implementation of the incentive tariff regime etc.161
172.
This was followed by Resolution 280/2007, which replaced Resolution 34/2005. Resolution 280/2007 confirmed this minimum guaranteed price regime for photovoltaic plants contained in its predecessor. In particular, Resolution 280/2007 provided that from 2008 onwards, the minimum guaranteed price would be revised each year and distinguished based on the source of the renewable energy, so as to account for the peculiarities of each kind of renewable energy facility.162
173.
Further, Resolution 280/2007 implemented the compensation regime for situations where the free market price of the electricity rose higher than the minimum guaranteed price, in which case GSE was obliged to pay the difference between the two to the producers.163 Accordingly, the minimum guaranteed price was the hourly zonal price that was determined on a daily basis further to negotiations within the Italian Power Exchange.164 Respondent categorizes GSE's role in this regime as that of a "commercial broker between the producer and the other operators within the electricity system".165
174.
The motivation behind this minimum guaranteed price regime was "to ensure the economic survival of the smaller plants... even if market prices were to fall significantly", and to "provide dedicated simplifications" of the market by virtue of guaranteed remunerations.166
175.
In furtherance of Resolution 280/2007, GSE entered into agreements with each qualifying photovoltaic plant producer that opted for this minimum guaranteed price regime, which agreements were valid for one-year terms renewable automatically unless the producers indicated otherwise.167
176.
In 2011, this Italian Electrical Energy Authority issued Resolution No. 103/2011, which was preceded by a consultation process similar to the ones conducted for Resolutions No. 34/2005 and 280/2007.168 Resolution No. 103/2011 sought to differentiate the minimum guaranteed prices between different power plants based on the source of renewable energy with effect from 2012.169
177.
For the interim period, Resolution No. 103/2011 fixed a "basic" minimum guaranteed price of EUR 76.2/MWh.170 This "basic" minimum guaranteed price was the price for electricity purchased after the first 25,000 kWh and until 2 MWh. The minimum guaranteed price was higher for the first 3750 kWh of electricity purchased (100 EUR/MWh) and then progressively reduced for the electricity purchased between 3750 kWh and 25,000 kWh (90 EUR/MWh).171 Other than that, Resolution No. 103/2011 maintained the minimum guaranteed price regime as per the earlier situation with a provision for annual review.
178.
The Romani Decree, which was enacted on 3 March 2011, i.e., a few months prior to Resolution No. 103/2011 (mentioned in ¶¶ 141-152 above), also contained a provision relating to this regime of minimum guaranteed prices, which provided as follows:

[B]y 31 December 2012, on the basis of the Ministry of Economic Development's guidelines, the [Italian Electrical Energy Authority] defines the minimum guaranteed prices, that is the integration of the revenues deriving from the participation to the electric market, in relation to the production of renewable energy systems which continue to be operated without incentives and for which... the production's safeguard is not ensured by the participation to the market.172

179.
The Italian Electrical Energy Authority clarified, in the Resolution No. 103/2011, that the above provision in the Romani Decree concerning minimum guaranteed prices refers to new incentivizing instruments to be defined as of 2013, and does not limit the scope of application of the minimum guaranteed price regime to facilities already in operation until 2013.173

D. R ESOLUTION 111/06 R EGARDING I MBALANCE C OSTS

180.
In order to prevent an imbalance between the supply and demand of electricity, Italy maintained some reserve capacity from gas-fired turbines that could increase and decrease production rapidly subject to the demand. In order to regulate the costs of maintaining such reserve capacity of energy,174 the Italian Electrical Energy Authority passed a Resolution on 9 June 2006 ("Resolution 111/06"), which required energy producers to provide in advance a projected figure of the amount of electricity they could inject into the grid. In the event that a producer deviated from its injection projections, it was required to pay what were known as "imbalance costs" or "imbalance compensation" under this Resolution 111/06.175 In this connection, the following provisions of the Resolution 111/06 are important to note:

39.2. In the event in which the actual imbalance for a dispatching point in a relevant period were to be negative, the dispatching user pays... an actual imbalance compensation for the electric energy purchased within the ambit of the dispatching service.

40.4. The imbalance compensation for the measurement of the negative actual imbalances of which in paragraph 40.1, letter b), is equal:

(a) in each relevant period in which the aggregate imbalance by zone is positive, to the assessment price of the sales offers accepted in the market on the day before the relevant period in the zone in which the dispatching point is located;

(b) in each relevant period in which the aggregate imbalance by zone is negative, to the maximum value of the following:

(i) the highest price among those of the sales offers accepted in the market for the dispatching service for the purposes of balancing in real time in that relevant period, in the zone in which the dispatch point is located, and

ii) the measurement price of the sales offers accepted in the market on the preceding day in the relevant period, in the same zone.176

181.
In respect of "non-programmable renewable energy sources", Resolution 111/06 mentioned the following:

40.6. For the dispatching points by production unit powered by non-programmable renewable energy sources, as well as for the import or export dispatching points relating to electric frontiers belonging to a connection network for which there is no implemented verification of the programmed exchanges, the imbalance compensation is equal to the assessment price of the sales offers of electric energy accepted in the market on the day before the relevant period and in the zone in which the dispatch point is located.177 (emphasis added)

182.
In essence, renewable energy producers were effectively exempted from paying imbalance costs under this regime because of their non-programmable nature.178 Further, the Parties agree that until 2012, all imbalance costs were passed on to end-consumers via electricity bills under Italy's socialized electricity regime.179

E. C LAIMANTS ' I NVESTMENTS IN I TALY

183.
Claimants began investing in Italy's photovoltaic energy market in 2010, and by 2011, they contend that they had invested over EUR 100 million to acquire and develop a total of nine photovoltaic plants.180 These investments were made by each of the three Claimants, all of which form part of the same corporate structure that shall be explained in (1) below. Thereafter, Claimants' investments shall be delineated between (2) First Claimant, (3) Second Claimant, and (4) Third Claimant, followed by (5) a tabulated representation of the Claimants' investments.

(1) Claimants' Corporate Structure

184.
The three Claimants are wholly owned subsidiaries of SunReserve International, LP. SunReserve International, LP was created as a joint venture between First Reserve Energy Infrastructure Fund, LP ("First Reserve"), a Cayman Islands private equity firm, and SunEdison LLC, a developer of solar photovoltaic facilities.181
185.
This joint venture was formed pursuant to a Framework Agreement dated 21 May 2010, entered into by and between SunEdison LLC, a Delaware limited liability company ("SunEdison"), FREI Sun Holdings (Cayman) Ltd., a Cayman Islands exempted company ("FR Holdings"), FREI Sun Holdings (US) LLC, a Delaware limited liability company, SunEdison Reserve International, L.P., a Cayman Islands exempted limited partnership formed by SunEdison and FR Holdings, and SunEdison Reserve US, L.P., a Delaware limited partnership formed by SunEdison and FR Holdings US ("Framework Agreement").182
186.
Attached with this Framework Agreement as Exhibit F was a Fund Guarantee that First Reserve executed and delivered to SunEdison, simultaneously with the execution of the Framework Agreement.183 In the Fund Guarantee, First Reserve promised to "absolutely, unconditionally and irrevocably guarantees to SunEdison, on the terms and subject to the conditions set forth herein, the due and punctual payment, as and when due, of all Capital Contributions required to be made by FR Holdings..."184 Under the Framework Agreement, FR Holdings, whose capital contributions First Reserve had guaranteed, was committed to capital contributions of USD 150 million.185
187.
Mr. Ryan Shockley explains this joint venture relationship in his Witness Statement on behalf of Claimants, dated 28 July 2017, in the following terms:

Discussions between the two companies took place over many months and resulted in the execution of a Framework Agreement in May 2010. For its part, First Reserve agreed to commit US $150 million to renewable energy projects in the targeted countries. SunEdison would propose specific renewable energy projects to be included in the joint venture i.e., that SunEdison would construct and that a joint venture company would then purchase and, by the time the framework agreement was concluded, SunEdison had developed an impressive list of potential projects.186

188.
The First, Second and Third Claimants were amongst the joint venture companies created to acquire and develop photovoltaic projects pursuant to the above described arrangement.187 The joint venture companies envisaged investments in various countries, including the United States and Canada,188 but 50% of the total capital investments was to be used in Italy due to the favourable conditions created by the Conto Energia regime and the off-take and minimum guaranteed price regime.189 It is in reliance of this regime that Claimants contend they began investing in Italy's photovoltaic energy market.

(2) First Claimant's Investments

189.
Between 2010 and 2011, the First Claimant, i.e., SunReserve Luxco Holdings S.À.R.L, acquired a total of seven photovoltaic plants in Italy, which constituted a portfolio of 27.7 MW. In this process, according to Claimants, the First Claimant invested more than EUR 61 million.190
190.
The acquisition of the seven photovoltaic plants by the First Claimant was done in four batches. Each of these acquisitions was a result of the First Claimant acquiring the special purpose vehicles ("SPVs") that had developed and/or was operating the photovoltaic plant in consideration. This acquisition of SPVs was in turn done by wholly owned Italian subsidiaries of the First Claimant.191
191.
The first batch of acquisitions occurred on 30 June 2010, when the First Claimant acquired three SPVs controlled by SunEdison Italia S.r.l., i.e., SunEdison Apulia 007 S.r.l., SunEdison Apulia 008 S.r.l. and Sunny Lenare S.r.l.192 These SPVs had developed the following three solar power plants: (i) a 985.71 kW plant located in the Municipality of Lequile, owned by SunEdison Apulia 007 S.r.l. ("San Marco"); (ii) a 968.31 kW plant located in the Municipality of Soleto, owned by SunEdison Apulia 008 S.r.l. ("Santoro"); and (iii) a 997.92 kW plant located in the Municipality of Lequile, owned by Sunny Lenare S.r.l. ("Lenare").
192.
Claimants executed the acquisition of these plants after a due diligence was carried out by the international law firm Ashurst, which confirmed, inter alia, that "the authorisation process for the construction and operation" of these plants was completed.193 Further, these SPVs had also secured the requisite land rights of the three plants by virtue of sale and purchase agreements.194
193.
The Santoro plant entered into operation on 12 August 2010 and the other two plants, i.e., San Marco and Lenare, entered into operation on 22 December 2010. Each of them was covered within the incentive scheme provided in the Second Conto Energia Decree (see Section B(2) above), and qualified for an incentive tariff of 0.3460 EUR/kWh. This tariff, together with its temporal scope of 20 years as of the date of entry into operation of the plant, was specified in the letter from GSE dated 3 March 2011 concerning the San Marco plant,195 and in the three contracts entered into on 31 January 2011 and 15 March 2011 between GSE and the plants' operators.196
194.
In addition to the incentives under the Second Conto Energia, these three plants were also entitled to the minimum guaranteed price under the off-take regime provided by Italy, since these plants were each under the capacity of 1 MW (see Section C above).197 According to Claimants, the GSE paid this minimum guaranteed price for each of the three plants for a period of six years.198
195.
The second batch of acquisitions by the First Claimant occurred in January 2011, and consisted of only one solar power plant. In this connection, the First Claimant acquired the SPV, Saniso S.r.l.,199 through its subsidiary SunReserve Luxco Parent III S.à.r.l.200 This SPV had developed a 20.41 MW plant called Campania located in the Municipality of Gugliano (Province of Naples), and had also already secured the requisite land rights of the plant ("Campania").201
196.
Claimants executed the acquisition of this plant after a due diligence was carried out by the law firm Gianni, Orrigoni, Grippo & Partners in October 2010, which confirmed, inter alia, that "the authorization for the construction and operation of [the Campania plant] seems not affected by any critical issues" and that "[t]he formal process for securing the interconnection to the electricity grid has been completed".202
197.
The Campania plant entered into operation on 24 November 2010, and was thus covered within the incentive scheme of the Second Conto Energia (see Section B(2) above), i.e., an incentive tariff of 0.3460 EUR/kWh for a period of 20 years. This tariff, together with its temporal scope of 20 years as of the date of entry into operation of the plant, was specified in the letter from GSE concerning the Campania plant, and in the contract entered into on 5 March 2011 between GSE and the plant's operator.203
198.
The acquisition of the Campania plant was succeeded immediately thereafter by the third batch of acquisitions by the First Claimant, which occurred by the acquisition of another SPV, SunEd Parco Solare 5 S.r.l., which had already developed and was operating a 998.13 kW plant called Monaci located in the Municipality of Lequile ("Monaci").204 This acquisition was also preceded by a due diligence by Ashurst.205 Further, the SPV had also already secured the requisite land rights concerning the Monaci plant by virtue of a sale and purchase agreement and the authorizations filed with the Municipality of Lequile.206
199.
The Monaci plant entered into operation on 30 December 2010, and was thus covered within the incentive scheme of the Second Conto Energia (see Section B(2) above), i.e., an incentive tariff of 0.3460 EUR/kWh for a period of 20 years. This tariff was specified in the letter from GSE dated 10 May 2011 concerning the Monaci plant,207 and in the contract entered into on 18 May 2011 between GSE and the plant's operator.208 This was supplemented by another contract between GSE and the plant's operator, entitling the Monaci plant to the minimum guaranteed price in Italy's off-take regime.209
200.
This was followed on 31 March 2011, by the First Claimant's fourth and last batch of acquisitions, which constituted the acquisition of the following two solar plants: (i) a 1.8 MW plant called Rustico located in Sicily, owned by SunEdison Sicily 006 S.r.l. ("Rustico"); and (ii) a 1.66 MW plant called Milana also located in Sicily, owned by SunEdison Sicily 008 S.r.l. ("Milana").
201.
The SPVs, i.e., SunEdison Sicily 006 S.r.l. and SunEdison Sicily 008 S.r.l., were acquired through the First Claimant's subsidiary, i.e., SunReserve Luxco Parent V S.à.r.l.210 This acquisition was also preceded by a due diligence by Gianni, Orrigoni, Grippo & Partners,211 and by the SPVs' acquisition of the requisite land rights.212
202.
The Rustico and Milana plants entered into operation on 28 and 29 April 2011, respectively, and were thus covered within the incentive scheme provided in the Third Conto Energia (see Section B(3) above). Each of them qualified for a tariff of 0,313 EUR/kWh for a period of 20 years. This tariff was specified in GSE's tariff confirmation letters,213 and in corresponding contracts entered into between GSE and the operators.214

(3) Second Claimant's Investments

203.
The Second Claimant, i.e., SunReserve Luxco Holdings II S.À.R.L, acquired one photovoltaic plant in Italy, which constituted a portfolio of 70.5 MW. In this process, according to Claimants, the Second Claimant invested more than EUR 83 million.215
204.
The plant acquired by the Second Claimant was called Rovigo, and was located in the Municipality of San Bellino, Veneto Region ("Rovigo"). The acquisition of the Rovigo plant occurred through the acquisition of another SPV, Emmezeta Solar Energy S.r.l. on 30 September 2010, which was developing the said plant and had already secured the requisite land rights.216 This acquisition was also preceded by a due diligence by Ashurst.217
205.
The Rovigo plant entered into operation on 22 November 2010, and was thus covered within the incentive scheme of the Second Conto Energia (see Section B(2) above), i.e., an incentive tariff of 0.3460 EUR/kWh for a period of 20 years. This tariff was specified in the letter from GSE dated 11 January 2011 concerning the Rovigo plant,218 and in the contract entered into on 11 February 2011 between GSE and the plant's operator.219
206.
The Rovigo plant was the "largest plant that SunReserve acquired".220 After the Second Claimant acquired the Rovigo plant, in October 2010, the SPV, Emmezeta Solar Energy S.r.l., entered into a loan agreement with a few banks for the development and construction of the project.221 The Second Claimant also arranged an intercompany loan for the SPV.222

(4) Third Claimant's Investments

207.
The Third Claimant, i.e., SunReserve Luxco Holdings III S.À.R.L, acquired one photovoltaic plant in Italy, which constituted a portfolio of 2.97 MW. In this process, according to Claimants, the Third Claimant invested approximately EUR 5 million.223
208.
The photovoltaic plant acquired by the Third Claimant was called Fiumicino, and was located in the Municipality of Fiumicino, Lazio Region ("Fiumicino").224 The acquisition of the Fiumicino plant occurred through the acquisition of the SPV, SunEdison Apulia 009 S.r.l. on 22 June 2011, much after the completion of the authorization and connection procedures and after the plant had already entered into operation, which occurred in 15 March 2011.225 The acquisition of the SPV, SunEdison Apulia 009 S.r.l. was effected through one of the Third Claimant's wholly owned subsidiaries, i.e., SunReserve Luxco Parent VI S.à.r.l.. This acquisition was preceded by the SPV entering into a loan facility agreement with a bank for an amount of EUR 6.3 million for project construction costs.226
209.
The Fiumicino plant had already qualified, under the Second Conto Energia (see Section B(2) above), for an incentive tariff of 0,443 EUR/kWh for a period of 20 years, prior to the Third Claimant's acquisition of the same. This tariff was specified in the letter from GSE dated 17 June 2011 concerning the Fiumicino plant,227 and in the contract entered into on 28 June 2011 between GSE and the plant's operator.228

(5) Conclusion

210.
In light of the above, Claimants had acquired the a total of nine photovoltaic plants in Italy, which are enlisted below together with the corresponding Conto Energia regime and/or off-take regime that they were covered under.

S. No.PV PlantRegime(s)Tariff(EUR/kWh)
First Claimant
1 San Marco Second Conto Energia + Off-Take Regime 0,346
2 Santoro Second Conto Energia + Off-Take Regime 0,346
3 Lenare Second Conto Energia + Off-Take Regime 0,346
4 Campania Second Conto Energia 0,346
5 Monaci Second Conto Energia + Off-Take Regime 0,346
6 Rustico Third Conto Energia 0,313
7 Milana Third Conto Energia 0,313
Second Claimant
8 Rovigo Second Conto Energia 0,346
Third Claimant
9 Fiumicino Second Conto Energia 0,443

F. I TALY ' S M EASURES A FTER THE F IFTH C ONTO E NERGIA FROM 2012 TO 2014

211.
As mentioned in Section B(6) above, the Fifth Conto Energia Decree was enacted on 5 July 2012, and provided for a cost threshold of incentive tariffs upto EUR 700 million per year, so as to reach the total cost of EUR 6.7 billion for the incentive program. In this connection, the Preamble of the Fifth Conto Energia contained the following relevant recitals:

IT BEING HELD that, due to the high level of charges accrued and the state of and prospects for technologies, it is sufficient to commit a further 700 million €/year approximately in incentive costs, for the purpose of accompanying [photovoltaic] energy in its progress towards competitiveness, outside the scope of support schemes. This amount will cover charges for plants on the register, those which access tariffs freely and plants which become operational during transitional periods …229

212.
According to the report of Claimants' regulatory expert, FTI Consulting, Italy surpassed the level of photovoltaic production projected for 2020, by 2012 itself, i.e., 8 years in advance of the objective.230
213.
From 2012 onwards, i.e., since and including the enactment of the Fifth Conto Energia Decree, until 2014, Italy undertook certain additional administrative and/or fiscal measures, which are under challenge by Claimants, and thus, a subject of dispute between the Parties. In brief, these measures include (1) an Administrative Management Fee imposed on photovoltaic energy producers; (2) changes to the Minimum Guaranteed Prices under the Off-Take Regime; (3) an obligation on the photovoltaic energy producers to pay "imbalance costs"; (4) the resolution of domestic complaints relating to one "Robin Hood Tax"; and (5) the classification of photovoltaic plants as "immovable property".

(1) Administrative Management Fee in the Fifth Conto Energia

214.
Together with provisions relating to the incentive tariff regime, the Fifth Conto Energia also contained a provision requiring photovoltaic energy producers to pay an annual administrative fee of EUR 0.0005/kWh of incentivized energy ("AdministrativeManagement Fee"). This provision applied, as of 1 January 2013, to all photovoltaic energy producers benefitting from the incentive tariffs under any of the Conto Energia Decrees. It stated the following:

To cover GSE management costs, and the cost of checks and controls by GSE, the plant operators that access incentive tariffs under this decree and decrees issued in implementation of article 7 of legislative decree no. 387, 2003 [Off-Take Regime] and article 25 (10) of legislative decree no. 28, 2011 [Romani Decree], are under an obligation, commencing from 1 January 2013, to pay GSE a contribution of 0.05 euro cents for each kWh of subsidised energy, also by means of offset with incentives owed.231

215.
Articles 10.5 and 10.6 of the Fifth Conto Energia provided that GSE will specify "the application rules for... access to the incentive tariffs under this decree" and "[t]he procedures for payment of the contributions". Pursuant to this, GSE clarified on its website in 2013 that the annual Administrative Management Fee shall be offset against GSE's first payment of incentive tariffs to any producer in a given year.232
216.
This policy decision to impose Administrative Management Fee found a mention in the subsequently enacted Spalma-incentivi Decree dated 24 June 2014233 as well (discussed in Section IV.G below). In particular, Articles 25(1) and 25(2) of the Spalma-incentivi Decree provided, in their relevant part, as follows:

Article 25(1): Charges incurred by the GSE for the conduct of management, audit and control activities, related to the incentive and support mechanisms, are to be borne by the beneficiaries of the same activities....

Article 25(2)(3): Within 60 days from the date of entry into force of this Legislative Decree, and every three years thereafter, the GSE proposes to the Minister of economic development the size of tariffs for the activities referred to in paragraph 1 to be applied as from 1 January 2015 and valid for three years. Rates are set by the GSE on the basis of costs, of planning and of development forecasts of the same activities. The proposal includes the methods of payment of the fees.234

217.
Further, the GSE submitted a report to the Ministry for Economic Development on 21 August 2014, wherein it estimated, according to Respondent, that the Administrative Management Fee would constitute 0.17% of the incentives received by the beneficiaries under the Fifth Conto Energia.235

(2) Changes to the Minimum Guaranteed Price under Off-Take Regime

218.
As mentioned in Section IV.C above, Italy had established an Off-Take Regime, which constituted, inter alia, a minimum guaranteed price for electricity produced by small photovoltaic plants with capacity up to 1 MW. This entitlement to a minimum guaranteed price operated in conjunction with the incentive regime under the Conto Energia Decrees, except in respect of the all-inclusive tariff provided for in the Fifth Conto Energia, which Respondent submits was incompatible with the minimum guaranteed price regime.236 The modalities of this Off-Take Regime were formulated by the Italian Electrical Energy Authority, which fixed the minimum guaranteed price on a yearly basis.
219.
In this connection, the Italian Electrical Energy Authority established the minimum guaranteed price for the year 2013 as EUR 105.8/MWh up to 3,750 kWh of annual energy purchase; EUR 95.2/MWh for annual energy purchase between 3,750 kWh to 25,000 kWh; and EUR 80.6/MWh for annual energy purchase from 25,000 kWh to 2,000,000 kWh.237
220.
In the meantime, the Italian Electrical Energy Authority had invited Politecnico di Milano to prepare a report based on (i) the analysis of average electricity production costs from different sources of renewable energy, depending on data from power plants with a capacity up to 1 MW, and (ii) the analysis on the scale of progressive brackets that could be used to ensure coverage of operating costs and fuel costs for each source. The data relating to operating costs and fuel costs was provided by electricity producer associations in Italy, including, inter alia, Assoelettrica,238 which Claimants contest was incomplete and unclear.239 The report was prepared by Politecnico di Milano in July 2013, and provided, inter alia, that operating costs are only significant in comparison to the market electricity prices in the case of very small scale power plants such as household installations upto 3 kW, and not for the medium scale or large scale power plants.240
221.
Thereafter, on 31 October 2013, the Italian Electrical Energy Authority issued a document for public consultation bearing No. 486, inviting the stakeholders' comments by 25 November 2013.241 The public consultation document proposed a new formula for the calculation of minimum guaranteed prices amounting to the average operating costs of renewable energy facilities plus 8%. Applying this formula, Claimants submit that the minimum guaranteed price for photovoltaic plants would be EUR 37.8 per MWh of electricity produced.242
222.
This public consultation document was followed by a Resolution No. 618/2013/R/EFR dated 19 December 2013 by the Italian Electrical Energy Authority ("Resolution 618"). This Resolution revised the minimum guaranteed price for photovoltaic plants with a capacity beyond 20 kW for the year 2014 to EUR 38.9/MWh, i.e., applying a 10% increase of the average operating costs, which were calculated as 35 EUR/MWh.243 The press release corresponding to this Resolution 618 stated that "the consumer prices index for families and workers has increased by 1.1% in 2013 compared to 2012."244
223.
Further, the Resolution 618 stated that limited the minimum guaranteed prices to the first 1.5 million kWh of energy purchased per year (instead of the earlier threshold of 2 million kWh per year). On a related note, the distribution based on the amount of electricity purchased, resulting in a progressive decrease of the minimum guaranteed price (see ¶ 219 above), and consequently a "basic" minimum guaranteed price (see ¶ 177 above), was abolished. One common minimum guaranteed price was fixed for all electricity purchased upto this new limit of 1.5 million kWh.245
224.
This was followed by minimum guaranteed prices for 2015 and 2016 to be established at 39 EUR/MWh.246 According to Claimants, the minimum guaranteed prices established by the Italian Electrical Energy Authority for photovoltaic plants since 2014 onwards were lower than the average market price of electricity.247
225.
Four days after Resolution 618 was issued by the Italian Electrical Energy Authority, the Italian Government enacted the Legislative Decree No. 145/2013, which was known as the Destinazione Italia ("Destinazione Italia"). This Legislative Decree, inter alia, provided that the minimum guaranteed price for all photovoltaic plants benefiting from the Conto Energia Decrees would be equal to the hourly zonal price, with the exception for photovoltaic plants with a capacity below 100 kW.248
226.
The Destinazione Italia was subjected to criticism by the President of the Italian Electrical Energy Authority, Mr. Guido Bortoni, and by Members of Parliament, during a session discussing the enactment of the Decree.249 For instance, Mr. Bortoni mentioned the following in a speech before the Parliament:

The Legislative Decree, instead, provides for the minimum guaranteed prices to be always equal to the energy market prices, thus basically neutralizing the goals for which [the minimum guaranteed prices] had been introduced in the first place. These measures would require deep analysis of costs. Additionally, this measure might compromise the economic balance of those plants only partially benefiting from support regimes (as for example in case of repowering or revamping) which would be excluded from the application of minimum guaranteed prices in relation to the entire quantity of energy generated. In conclusion, in light of the foregoing considerations, we ask to restore the framework existing before the issue of the Legislative Decree.250

227.
On 21 February 2014, the Destinazione Italia was enacted into Law No. 9/2014 by the Parliament establishing the minimum guaranteed price regime established under the Destinazione Italia.251
228.
Thereafter, on 17 April 2014, the Italian Electrical Energy Authority issued Resolution 179/2014, which envisaged that the minimum guaranteed price would be allocated for the first 1.5 million kWh of electricity purchased by photovoltaic plants having a capacity above 100 kW.252

(3) The Imbalance Costs

229.
As mentioned in Section IV.D above, the "imbalance costs" that renewable energy producers were required to pay in Italy was equal to the market price of energy on the day before the relevant period and in the zone in which the dispatch point was located.253
230.
With respect to these "imbalance costs", the Italian Electrical Energy Authority passed a Resolution 281/2012/R/EFR on 5 July 2012 ("Resolution 281"). In this Resolution 281, it was, inter alia, mentioned that the treatment of "non-programmable renewable energy sources" in respect of the obligation to pay "imbalance costs" should be equated with the treatment "provided for other production units not entitled to participation in the Market for Dispatching Services".254
231.
This implied that the non-programmable renewable energy power plants would have to pay imbalance costs over and above the hourly zonal price (which was the previously fixed imbalance costs as mentioned in ¶ 182 above) if the "modified and corrected binding program" was 20% beyond the amount of electricity actually fed into the grid.255 The "modified and corrected binding program" refers to the amount of electricity that the dispatching user undertook to feed into the grid (as against the amount of electricity actually fed into the grid).256
232.
Resolution 281 also provided for a "scouting period of at least 6-12 months" before the same was appropriately implemented.257 In this regard, on 22 November 2012, Resolution 281 was followed by a Resolution 493/2012/R/EFR issued by the Italian Electrical Energy Authority ("Resolution 493"). This Resolution 493, inter alia, provided for "the modalities of allocation of the imbalance compensation and payments covering the administrative costs to be attributed to the producers".258
233.
Both these Resolutions, i.e., Resolutions 281 and 493 were challenged by renewable energy producers before Italian administrative courts. On 9 June 2014, the Consiglio di Stato, Italy's highest administrative court ruled, in its Decision No. 2936/2014, that Resolution 281 was unlawful in part. In particular, in the following passage, it found that the Resolution discriminated against non-programmable renewable energy by treating it in the same way as other kinds of energy:

Non-programmable sources of electricity production are characterized by the fact that, while it is not objectively impossible to predict the [amount of] energy produced and fed into the grid, this prediction cannot reach the same level of precision as for programmable sources, by reason of the type of source and the variables that condition its operation... the first judge... has affirmed that the imposition of such costs must take account of the specificity of the source.259

234.
Further, in the following passage, the Consiglio di Stato clarified the scope of its findings on discrimination:

The foregoing does not mean that the imbalance costs caused by these production units should, as it was the case in the previous regime, be socialized. This mechanism would lend itself to similar criticisms, as would achieve discrimination between operators to the benefit, not so clearly justifiable, of those who produce programmable energy.

The economic and technical regulatory power by the Authority must, therefore, be exercised in a manner that permits to reach a solution that, on the one hand, could protect the market in its entirety by imposing imbalance costs also to the production units in question [nonprogrammable sources], and, on the other, could introduce calibrated mechanisms, based on the specificity of the source, that could take into account the methods of electricity production and the resulting difficulties in making a prediction as to input into the grid, which could achieve the same degree of reliability that the programmable energy production units must guarantee.260

235.
After this decision by the Consiglio di Stato, GSE apparently reimbursed certain sums wrongfully charged to renewable energy producers under Resolutions 281 and 493, but did not reimburse all such wrongfully charged sums.261
236.
Subsequently, the Italian Electrical Energy Authority passed another Resolution 522/2014/R/EEL on 23 October 2014 ("Resolution 522"), which also pertained to a regulation of imbalance costs in respect of non-programmable renewable energy producers. In this connection, Resolution 522 provided the following:

The production units fed by non-programmable renewable sources must be subject to regulation of imbalances... the burdens deriving from the imbalances imputable to nonprogrammable renewable sources must not be socialized in order to avoid unjustifiable discrimination, and in order not to continue to allocate burdens on the community... it is appropriate to review the guidelines on imbalances for non-programmable renewable sources on the basis of the second option presented in the document...262

237.
Pursuant to Resolution 522, dispatching users were given the option to choose between two courses of action. First, they could chose to pay imbalance costs based on regulations already in force for other unauthorized production units, and in turn, to modify their market supply strategies accordingly. Alternatively, they could chose to apply the new regulations that were specifically aimed at non-programmable renewable energy sources having created distinct bands for different sources of renewable energy with the option of commercial aggregation.263 For photovoltaic plants, the band constituted a threshold for the modified and corrected binding program as 31%.264
238.
Further to Resolution 522, renewable energy producers continue to pay new imbalance costs since 1 January 2015 onwards.265 Respondent relies on data until 31 December 2015 to state that 66% of the dispatching points associated with renewable energy producers have opted for the first option mentioned in ¶ 237 above, in order to pay imbalance costs.266

(4) The Robin Hood Tax and Constitutional Court Proceedings

239.
By way of Legislative Decree No. 112/2008 dated 25 June 2008, which was converted into Law No. 133/2008 on 6 August 2008, Italy imposed taxes on windfall profits of oil, gas and other traditional energy companies, known as the "Robin Hood Tax" This was done by increasing the corporate income tax rate for companies with an annual gross income of over EUR 25 million to 33% from the original 27.5%.267 The rate of corporate income tax was further increased in July 2009 to 34% by Law No. 99/2009.268 According to contemporaneous press reports, the Robin Hood Tax was motivated to tap the hike in prices of traditional energy sources, such as oil and gas.269
240.
In respect of renewable energy producers, Legislative Decree No. 112/2008 provided that "[t]he same disposition does not apply to subjects producing electricity by primarily using biomass and solar-photovoltaic and wind energy sources".270 The Italian Revenue Agency had further confirmed in a Circular No. 35/E dated 18 June 2010 that "the application of the supplement is excluded for subjects which simultaneously... primarily produce electricity from renewable sources, using biomass and solar-photovoltaic or wind sources, with respect to the total amount of energy produced."271 The exclusion of renewable energy producers from Legislative Decree No. 112/2008 is not disputed in these proceedings, except to the extent that Italy argues that this exclusion was based on certain conditions.272
241.
On 13 August 2011, Italy passed the Legislative Decree No. 138/2011, which was converted into Law No. 148/2011 on 14 September 2011. This Law made, inter alia, two amendments to the scheme of Law No. 133/2008. First, it extended the scope of the Robin Hood Tax to also apply to renewable energy producers by deleting the stipulation excluding the renewable energy producers from the Robin Hood Tax. Second, it increased the corporate income tax rate from 34% to 38%, and reduced the threshold gross annual income required for coverage by the Robin Hood Tax to an annual income of EUR 10 million (and taxable income of over EUR 1 million), as opposed to the original EUR 25 million.273
242.
This was followed in June 2013, by Italy further extending the scope of the Robin Hood Tax through Legislative Decree No. 69/2013, which was converted into Law No. 98/2013 dated 9 August 2013.274 In particular, by this amendment to the Legislative Decree No. 112/2008, the threshold gross annual income required for coverage by the Robin Hood Tax was further reduced to EUR 3 million (and taxable income of over EUR 300,000).275 After this extension of the Robin Hood Tax, Claimants' photovoltaic plants also fell within its purview, which was not the case previously.
243.
Thereafter, renewable energy producers challenged the constitutionality of such extensions of the Robin Hood Tax before the Italian Constitutional Court.
244.
On 11 February 2015, the Italian Constitutional Court rendered its Decision No. 10/2015 declaring the Robin Hood Tax as unconstitutional ("Decision No. 10/2015"). In this connection, the Constitutional Court specifically declared the "unconstitutionality of Article 81, paragraphs 16, 17 and 18, of [Legislative Decree] No. 112 of June 25, 2008".276
245.
The motivation behind the Constitutional Court's Decision No. 10/2015 was, inter alia, "the incongruity of the means conceived by the legislature to the aim pursued".277 This incongruity was, in turn, premised on the ground that the legislature established an increase of the corporate income tax that affected the whole income of an entity being taxed, without the support of "a mechanism making it possible to tax separately only a part of the income eventually connected to those activities pursued by the taxpayer".278
246.
Further, the Constitutional Court, in the following passage, found that the measure in question, i.e., the Robin Hood Tax, was violative of the requirement of ensuring that the entities in question have the "capacity to contribute" the taxes being assessed:

Under Article 53 of the Constitution, the capacity to contribute ("capacità contributiva") represents the precondition and the limit to the taxation powers of the State and, at the same time, the duty of the taxpayer to take its share of the public expenditure, having to interpret this principle as a sectoral specification of the broader principle of equality under Article 3 of the Constitution... It is true that this Court has repeatedly stressed that "the Constitution does not impose a uniform taxation, with absolutely identical criteria and proportional for all types of tax"; rather it demands "an unfailing link with the ability to contribute, in a system framework informed to criteria of progression, as a further articulation, in the specific field of taxation, of the principle of equality, connected to the duty to remove the economic and social obstacles factually limiting the freedom and equality of citizens-human beings, in a spirit of political, economic and social solidarity (arts. 2 and 3 of the Constitution)... [A]ny diversification of the tax system, for economic areas or by type of taxpayers, must be supported by adequate justification, without which the differentiation might become arbitrary discrimination.279

247.
In respect of the temporal scope of its Decision No. 10/2015, the Constitutional Court ruled that its Decision would not have retroactive effect.280 The rationale behind this finding of non-retroactivity was provided, inter alia, in the following terms:

The role entrusted to the Court as the guardian of the Constitution in its entirety requires avoiding constitutional declarations of illegality that determine, paradoxically, "effects even more incompatible with the Constitution"... of those that have led to declare unconstitutional the provision at stake. To avoid this, it is the duty of the Court to modulate its own decisions, even in terms of time, so as to avoid that the affirmation of a constitutional principle determines the sacrifice of another.281

248.
Following the Constitutional Court Decision No. 10/2015, Claimants, amongst other similar producers, were allegedly not reimbursed the amounts they had paid as Robin Hood Tax, nor were these amounts set off against future payments. Further, Italy confirmed by its Circular No. 18/E of 28 April 2015 that renewable energy producers would have to pay the Robin Hood Tax for the fiscal year 2014.282

(5) Classification of Photovoltaic Plants as "Immovable Property"

249.
On 19 December 2013, Italy issued a Circular No. 36/E that classified the majority of photovoltaic plants as "immovable property".283 Such classification as "immovable property" impacted the overall tax liability of photovoltaic plant owners, since for immovable properties the applicable depreciation rate was 4% instead of the 9% they previously used as movable property. Further, it impacted the municipal charges that photovoltaic plant owners had to pay, since they were now subjected to an additional municipal charge on buildings ("IMU Charge"),284 and charges relating to municipal services such as road maintenance and public lighting ("TASI Charge").285
250.
The Parties dispute whether Circular No. 36/E was a reversal of the traditional position, whereby photovoltaic plants were considered "movable property", which Claimants contend,286 or whether Circular No. 36/E was only a non-contradictory clarification of the existing legal regime in Italy, which Respondent argues.287 In this connection, the previous circulars issued by the Revenue Agency assume relevance.288 These circulars defined movable property as something that is not fixed into the ground and can be easily moved to another seat. Photovoltaic "systems" were considered to fall within the category of movable property,289 to the extent they constituted plants and machinery that can be "removed and placed in another place, while maintaining their original features".290
251.
Also relevant is a Resolution 3/T dated 6 November 2008 by the Agency for Territory, which clarified that photovoltaic panels qualify as immovable property, since "the substantial nature of the power plant'" qualify as such for cadastral categories.291
252.
Respondent considers that the Circular No. 36/E only confirmed the above understanding of movable and immovable properties in Italian fiscal and cadastral regimes, and was, in turn, in line with Italian Corti di Cassazione or the Constitutional Court's case law,292 the OECD Model Tax Convention on Income and on Capital 2014 and the Italian Legislative Decree No. 44/2005.293
253.
Thereafter, Italy's 2016 Budget Law altered the classification of photovoltaic plants again, and according to Claimants, brought it almost in line with the position prior to the 2013 Circular No. 36/E. Pursuant to this, as of 1 January 2016, the determination of the value of real estate would carried out "taking into account the ground space and the buildings, as well as the elements structurally connected to them which increase their quality and usefulness" but excluding "machinery, devices, equipment and other systems, which are operational to the specific production process".294 The 2016 Budget Law also provided municipalities the right to be indemnified to the extent that they were receiving reduced income because of such favourable treatment in respect of the calculation of the value of real estate.295
254.
Similar to the situation resulting from the Italian Constitutional Court Decision No. 10/2015 relating to the Robin Hood Tax (see ¶ 247 above), Claimants have not been reimbursed nor compensated for the additional amounts of taxes and/or charges they paid due to the classification of their plants as "immovable property".296

G. T HE S PALMA - INCENTIVI D ECREE AND THE E VENTS T HEREAFTER

255.
Contemporaneous with the above described administrative and/or fiscal measures, Italy had enacted the Destinazione Italia Legislative Decree (discussed in ¶¶ 225-227), which was converted into law on 21 February 2014.297
256.
In addition to modulating the minimum guaranteed price regime, the Destinazione Italia also gave renewable energy power plant operators who were benefiting from incentive regimes such as green certificates, all-inclusive feed-in tariffs or premium tariffs, the option between (i) continuing the existing incentive scheme for the 20 year period without any additional benefits after the expiration of this period; and (ii) accepting a reduced percentage of tariff incentives under the Conto Energia Decrees, in exchange for an extension in the duration of the incentive period by seven years.298 This option was introduced in the Destinazione Italia "[f]or the purpose of containing the annual burden on prices and on the electric rates of the incentives for renewable energy and for the purpose of maximizing the medium-long term production contribution from the existing power plants". Claimants contend that few, if any, investors accepted this offer for a remodulation of tariffs under the Destinazione Italia.299
257.
Six months after the Detinazione Italia, on 24 June 2014, Italy enacted the Legislative Decree No. 91/2014 and converted it into law by Law No. 116/2014 on 11 August 2014 ("Spalma-incentivi Decree"). The Spalma-incentivi Decree is discussed in (1) below, followed by (2) a discussion of the Italian Constitutional Court's decision in relation to the Spalma-incentivi Decree, and (3) the events following the Spalma-incentivi Decree.

(1) The Spalma-incentivi Decree

258.
The Spalma-incentivi Decree sought to, inter alia, "remodulate" the incentive tariffs under the Conto Energia Decree, and to provide for altered "modalities" for disbursement of the incentive tariffs "[s]tarting from 1 January 2015".300 This, according to Article 26(1) of the Spalma-incentivi Decree, was "[i]n order to optimize the management of the timing for the gathering and the disbursement of the incentive tariffs and for the purpose of implementing a better sustainability of the renewable energy support policy".301 In addition, Article 23(1) of the Spalma-incentivi Decree stated that the Decree was motivated towards achieving "a more equitable distribution of the tariff burden among the various categories of energy consumers" and accordingly reducing "electricity rates for customers of medium voltage and low voltage electricity".302
259.
The Spalma-incentivi Decree is the principal regulatory measure at issue in this case, and numerous factual aspects concerning the same are disputed between the Parties. Claimants claim, inter alia, that the Spalma-incentivi Decree effectively abrogated the Conto Energia Decrees in a retroactive manner,303 and such retroactive regulatory modifications did not serve to decrease costs of electricity for "residential customers and public lighting",304 nor was a drop in electricity consumption a "relevant" motivation behind the Spalma-incentivi Decree.305 On the contrary, Respondent categorizes the Spalma-incentivi Decree as a "fine-tuning" of the tariff regime, which was a non-discriminatory and prospective policy choice within the State's regulatory powers. As per Respondent, this was motivated by legitimate considerations relating to the rise in the A3 Component of the total electricity costs borne by the end consumers attributable to the incentive tariffs.306
260.
The A3 Component of the total electricity costs was projected, by the GSE, to reduce from EUR 6.7 billion in 2013 (see ¶¶ 164-165) to EUR 6.05 billion by 2018 as a result of the Spalma-incentivi Decree.307 On a related note, a decision was issued by the Corte dei Conti in Italy in November 2015, which had highlighted the delays in payment of the amounts pertaining to the A3 Component. In this regard, the decision stated that such delays "take the GSE to undertake a greater risk for the fulfilment of all payments to producers of electricity from renewable energy sources, and the consequent ned to resort to credit lines of GSE... leaving the Company without the necessary financial flexibility to deal with possible additional requirements."308
261.
The Spalma-incentivi Decree's remodulation of the incentive tariff regime was applicable for photovoltaic plants with a capacity above 200 kW, which constituted 4% of the total beneficiaries under the Conto Energia scheme, but amounted to 60% of the total expenditure relating to the incentives.309 This remodulation of the incentive tariff regime came in the form of three options provided to the photovoltaic plant operators, which they could choose from:

(i) The first option provided under the Spalma-incentivi spread out reduced incentive tariffs over a period of 24 years starting from the entry into operation of a photovoltaic plant, instead of the original 20 year period. The incentive tariffs would be reduced pursuant to a percentage of reduction set out in the following table:310

Residual Incentivizing Period(Years)Percentage of Reduction of theIncentive
12 25%
13 24%
14 22%
15 21%
16 20%
17 19%
18 18%
above 19 17%

(ii) The second option maintained the original 20 year period of incentive tariffs, but prescribed a remodulation of the incentive tariffs by dividing the tariffs between "a first period in which a reduced incentive tariff is disbursed", i.e. between 2015-2019; and "a second period in which the incentive tariffs [shall be] equally incremented".311 Under this option, the remodulation percentages were to be established by the Ministry for Economic Development by 1 October 2014, "with the aim of allowing a yearly saving, with respect to the current disbursements and on the assumption of the adhesion of all the producers to this option, of at least [EUR] 600 [m]illion for the period 2015-2019".312

These remodulation percentages were prescribed in the Decree of the Ministry for Economic Development dated 17 October 2014.313 On 27 October 2014, the GSE's website published the "Tables containing the values of the coefficients of remodulation (1-Xi) to be multiplied with the previous incentives... in the event of selection of option b) identified in Article 26, paragraph 3, Law No. 116 of August 11, 2014".314 Based on these Tables, for the years 2015-2019, the remodulation percentages range from 68.61% of the original tariff under the Conto Energia tariff regime, for photovoltaic plants having 11 years out of the 20 year incentive period remaining, to 90.30% for photovoltaic plants having 19 years or more remaining. Correspondingly, during the last five years of the 20 year incentive period, the remodulation percentages range from 131.39% of the original tariff under the Conto Energia tariff regime, for photovoltaic plants having 11 years of these 20 years remaining, to 109.70% of the original tariff for photovoltaic plants having 19 years or more remaining.315

(iii) The third option also maintained the original 20 year incentive period, but prescribed for a progressive reduction of incentive tariffs for the residual incentive period based on the capacity of a photovoltaic plant. This progressive reduction was stipulated in the following terms:

(a) 6% for photovoltaic plants having a capacity between 200 and 500 kW;

(b) 7% for photovoltaic plants having a capacity between 500 and 900 kW; and

(c) 8% for photovoltaic plants having a capacity higher than 900 kW.316

262.
The Spalma-incentivi Decree granted the photovoltaic plant operators until 30 November 2014 to communicate to the GSE which of the above three options they select. The Spalma-incentivi Decree also mentioned that "[i]n the absence of a communication from the producer", the default option that shall be applied by the GSE is the third one.317 It was estimated that this remodulation of the incentive tariff regime would bring about savings to the total cost of the incentive regime in the amount of EUR 420 million per year.318
263.
Based on data provided by the GSE, Respondent submits that by 30 November 2014, 37.29% photovoltaic plant operators chose the second option of tariff remodulation, whereas 1.39% chose the first option. To all the remaining plants, the third option was assigned by default.319 All of Claimants' photovoltaic plants were assigned the third option by default.
264.
In addition to the above tariff remodulation scheme, the Spalma-incentivi Decree also provided for the following options to the photovoltaic plant operators:

The recipients of the incentive tariffs mentioned in paragraphs 3 and 4 may access to bank loans amounting up to the difference between the expected incentive tariff as of 31 December 2014 and the remodulated incentive tariff pursuant to paragraphs 3 and 4. Such loans can benefit, cumulatively or alternatively, on the basis of agreements with the banking system, of funding or guarantees by Cassa depositi e prestiti S.p.A...320

Should it be necessary in relation to the remodulated duration of the disbursement of the incentive tariffs, the Regions and the local entities adapt, each in relation to their competences, the duration of the permits, however named, issued for the construction and operation of the [photovoltaic] plants falling within the scope of application of this Article 26.321

The recipients of long-term incentive tariffs, however named, for the production of renewable energy, can sell up to 80% of such incentives to a buyer selected amongst the "primary European financial players".322

265.
The Spalma-incentivi Decree also brought about alterations in payment modalities. Whereas previously the GSE would pay incentive tariffs to photovoltaic plant operators on a monthly basis, at least for plants with capacity over 20 kW, based on the plant's actual production,323 the Spalma-incentivi Decree provided that from the second semester of 2014, the GSE would pay tariffs in monthly instalments of 90% of the plant's estimated yearly average production. Thereafter, the GSE would make the requisite adjustments by 30 June of the following year.324
266.
Moreover, the Spalma-incentivi Decree, together with a Decree of the Minister of Economic Development dated 24 December 2014, altered the Administrative Management Fee of EUR 0.0005/kWh of incentivized energy prescribed in the Fifth Conto Energia (see Section F(1) above). It was estimated that this alteration in the Administrative Management Fee would bring about savings to the total cost of the incentive regime in the amount of EUR 30 million per year. The Administrative Management Fee was made contingent on the photovoltaic plant's capacity in the following terms:

(a) 2.20 EUR/kW for photovoltaic plants having a capacity between 3 and 6 kW;

(b) 2 EUR/kW for photovoltaic plants having a capacity between 6 and 20 kW;

(c) 1.80 EUR/kW for photovoltaic plants having a capacity between 20 and 200 kW;

(d) 1.40 EUR/kW for photovoltaic plants having a capacity between 200 and 1000 kW; and

(e) 1.20 EUR/kW for photovoltaic plants having a capacity above 1 MW.325

267.
In addition the above major changes, the Spalma-incentivi Decree also introduced other regulatory alterations, such as (i) introduction of a contribution of 5% to the system costs for power plants having capacity between 20 to 500 kW operating under the "regime of exchange in proximity";326 (ii) revision of the remuneration of electrical systems in the smaller Italian islands that are not interconnected;327 and (iii) reduction in the preferential electricity tariff enjoyed by the Italian Railway Network S.p.A to the effect of savings in the total cost estimated at EUR 80 million.328
268.
After these measures were introduced in the Spalma-incentivi, a cumulative savings of almost EUR 2.7 billion on electricity bills was recorded by the Ministry for Economic Development, of which approximately EUR 1.7 billion were for the benefit of small and medium enterprises (with an average percentage decrease of 8.5% for small voltage enterprises and of 10% for the medium voltage enterprises) and the remaining EUR 1 billion benefitted the consumers.329
269.
Claimants highlight that the Spalma-incentivi Decree was enacted amidst criticism from various factions, including committees or ambassadors writing on behalf of international investors,330 associations of renewable energy producers at the national level in Italy,331 and most notably by Italian Senators and members the Italian House of Representatives during discussions surrounding the enactment of the Spalma-incentivi Decree.332 In this regard, one of the senators, Senator Piccoli, mentioned the following in respect of the alteration of the regime under the Conto Energia Decree:

Intervention on the photovoltaic, by changing the terms of the agreements between the State and individuals, implies less credibility and worst international reputation... in the eyes of investors, then we cannot forget that many disputes are predictable both internal and in international fora. Indeed, such a mechanism... seems to conflict with the protection of investment forecasts contained in the European Energy Charter Treaty.333

270.
Similarly, Senator Arrigoni criticized the Spalma-incentivi Decree stating that it had "three negative features: it is retroactive, discriminatory, and likely to be challenged as it violates essentially the certainty of international and national law and thus the credibility of our country before Italians and foreign investors..."334

(2) The Italian Constitutional Court Decision

271.
On 24 January 2017, the Italian Constitutional Court released its Decision No. 16/2017 originally dated 7 December 2016 on the legitimacy of Articles 26(2) and 26(3) of the Spalma-incentivi Decree ("Constitutional Court Decision").335
272.
Renewable energy producers challenged the constitutionality of these provisions of the Spalma-incentivi Decree, on the ground that they were contrary to Articles 3 and 41 of the Italian Constitution, "for violation on the principle of reliance on firm grounds of advantage, recognized by agreements qualified as of 'private law'" and for "their unreasonableness and because of the disparity of treatment between different operators of the sector".336 As per Respondent, these involved issues relating to legitimate expectations, reasonableness and equality and lack of proportionality.337
273.
The Constitutional Court denied the challenges to the constitutionality of Articles 26(2) and 26(3) of the Spalma-incentivi Decree. Notable findings of the Constitutional Court Decision, in this regard, were, inter alia, as follows:

As a matter of principle, the reliance of citizens in legal certainty is "a fundamental and indispensable element of the rule of law... However – as the firm case-law of this Court, in coherence also with that of the ECtHR, has clarified – protection of reliance does not entail, in our legal system, that the legislature may not enact provisions which change unfavorably the regulation of long-term relationships, and this even if their object are perfect legal rights... The only exception is, in matters of criminal law, that of the prohibition of retroactive norms, set by article 25, second para., of the Constitution". It remains firm that such provisions, "as any other legal norm, must not result in an irrational regulation, arbitrarily effecting substantial rights created by the previous law, frustrating in such way also the reliance of citizens in legal certainty"...

The analysis of the ratio of the contested norm excludes that it has unreasonably and unforeseeably affected the long-term relations, arising from the agreements reached by the percipients of the incentives with GSE, therefore violating the principle of legal certainty.

In fact, the legislature in 2014 has intervened in a general context in which, on the one hand, the remuneration of incentivizing fees for energy produced through photovoltaic apparatus was gradually increasing, taking into account both the costs of production as a result of the considerable technological development of the sector, and the overall European framework. But on the other hand, and correlatively, one registered the growing economic burden of such incentives on the final users of electric energy, especially on SMEs which are the fabric of national industry.338

274.
Further, in respect of the GSE contracts and the reliance placed by renewable energy producers on them, the Constitutional Court, inter alia, found:

[T]he guarantee of stability of the incentive for all the due period does not imply, however, as a necessary consequence, that the measure should remain unchanged for 20 years, unchanged and unaffected by the variations which are common to long-term contracts.

This is even truer if one considers that the agreements reached with GSE cannot be qualified as contracts meant to determine the exclusive profit of the operator, with terms and conditions blocked at the initial conditions, for twenty years, even if technological conditions may change profoundly. They are instead regulatory instruments, aimed at reaching the objective of incentivizing certain sources of energy in equilibrium with other sources of renewable energy, and with the minimum sacrifice for the users who ultimately bear the economic burden.339

(3) Events following the Spalma-incentivi Decree

275.
Claimants' position is that the reduction of incentive tariffs had a "dramatic impact", and resulted in a reduction in value of Claimants' investments by 19%, and when coupled with the other regulatory measures taken by Italy, the reduction in value amounted to 27%.340 This allegedly resulted, inter alia, in Claimants having to restructure the debts they had undertaken for financing their investments, and also impacted the payment of dividends to investors. In this connection, Claimants' witness, Mr. Mark Florian states as follows:

Indeed, prior to Italy's retroactive amendment of the tariff regime, we had been distributing dividends to our investors, as expected when we made the original investment. The tariff reduction eliminated our ability to pay any substantive dividends and made it difficult, without a restructuring, to pay the debt service payments on the PV plants. This change eliminated any substantive return to our investors on the investment, and put the ability to even return the capital invested in the PV plants at substantial risk.341

276.
Ultimately, in 2016, Claimants' parent company (SunReserve International, LP, created by SunEdison and FirstReserve as discussed in Section E(1) above) decided to sell the entire investment portfolio in photovoltaic plants in Italy. Claimants concluded this sale in August 2016, while specifically reserving and retaining their ownership over the present ECT claim against Italy.342
277.
Prior to this, on 4 May 2016, Claimants sent a letter to Respondent notifying it of the dispute, and inviting it to settle the dispute amicably.343 Absent any amicable settlement, Claimants proceeded to commence these arbitration proceedings.

V. SUMMARY OF THE PARTIES' CLAIMS AND RELIEFS SOUGHT

278.
In these arbitration proceedings, Claimants claim that Respondent breached the ECT by first promising fixed incentive tariffs under the Conto Energia regime and consistent minimum guaranteed prices under the off-take regime, and subsequently, backing out of its promises by undertaking various regulatory measures culminating in the Spalma-incentivi Decree that came into effect on 1 January 2015.
279.
Claimants claim that Italy's actions resulted in a breach of the ECT on three counts: (i) failure to grant Claimants' investments fair and equitable treatment, (ii) impairing Claimants' investments by unreasonable or discriminatory measures, and (iii) violating the ECT's Umbrella Clause.
280.
Using the Date of Assessment of 1 January 2015, Claimants updated assessment of damages, including interest, is EUR 40.89 million.344
281.
In their SoC and SoRy, Claimants request the Tribunal to issue an Award containing the following relief:

(a) a declaration that the Tribunal has jurisdiction over this dispute;

(b) a declaration that Italy has violated the Energy Charter Treaty and international law with respect to Claimants' investments;

(c) compensation to Claimants for all damages they have suffered, as set forth in Claimants' submissions and as may be further developed and quantified in the course of this proceeding;

(d) all costs of this proceeding, including (but not limited to) Claimants' attorneys' fees and expenses, the fees and expenses of Claimants' experts, and the fees and expenses of the Tribunal and SCC;

(e) pre-award and post-award compound interest at the highest lawful rate from the Date of Assessment until Italy's full and final satisfaction of the Award; and

(f) any other relief the Tribunal deems just and proper.345

282.
In their Post-Hearing Brief and Reply Post-Hearing Brief, Claimants amended their request for relief in the following manner:

• a declaration that the Tribunal has jurisdiction under the ECT for all of Claimants' claims, thereby rejecting Respondent's jurisdictional objections in full;

• a declaration that Italy has violated Part III of the ECT and international law with respect to Claimants' investments;

• compensation to Claimants for all damages they have suffered as set forth in their Statement of Claim and in their Reply Memorial on the Merits and as may be further developed and quantified during the course of this proceeding;

• all costs of this proceeding, including (but not limited to) Claimants' attorneys' fees and expenses, the fees and expenses of Claimants' experts, and the fees and expenses of the Tribunal and SCC;

• pre- and post-award compound interest at the highest lawful rate from the Date of Assessment until Italy's full and final satisfaction of the Award; and

• any other relief the Tribunal deems just and proper.346

283.
Respondent challenge the Tribunal's jurisdiction over the entirety of Claimants' claims on the ground that this is a dispute between European investors against an EU Member State, and such intra-EU disputes cannot be resolved under the ECT. Alternatively, Respondent challenge the Tribunal's jurisdiction over parts of Claimants' claims that (i) are allegedly exempted under Article 21 ECT; (ii) were not part of Claimants' offer to resolve disputes amicably; and (iii) that are covered by the dispute resolution clauses in the agreements entered into between GSE and Claimants' subsidiaries.
284.
In the alternative, Respondent contests all of Claimants' claims on the merits and also disputes Claimants' calculation of damages.
285.
In its updated requests for relief, contained in the R-SoRj, Respondent requests the Tribunal to:

(a) Decline jurisdiction to decide, as the ECT does not cover intra-EU disputes.

(b) Alternatively, decline jurisdiction over the totality of claims, since:

- Some of the attacked measures are exempted under Article 21 ECT;

- No amicable solution has been attempted for some further measures; and

- The exclusivity forum choice contained in the GSE Agreements bans this Tribunal from judging under the Umbrella Clause.

(c) In a further alternative, decline admissibility of protection of the Claimants' alleged interests since these are barred from seeking relief, as they did not seek amicable solution for a number of claims.

(d) Should the Tribunal consider to have jurisdiction over the case and that claims are either totally or partially admissible, declare on the merits that:

- The Respondent did not violate Article 10(1) ECT, first and second sentence, since it did not fail to grant fair and equitable treatment to the Claimants' investment.

- The Respondent did not violate Article 10(1) ECT, fourth sentence, either, since it always adopted reasonable and non-discriminatory measures to affect Claimants' investment.

- Article 10(1) ECT, last sentence (the so-called "Umbrella Clause") does not apply in the case at stake, or, alternatively, that the Respondent did not violate it neither through statutory or regulatory measures, nor the GSE Conventions.

- Consequently, declare that no compensation is due.

(e) In the unfortunate event that the Tribunal were to recognize legitimacy to one of the Claimants' griefs:

- Declare that damages were not adequately proved.

- In addition, declare that both the methods for calculation and calculation itself of damages proposed by the Claimants are inappropriate and erroneous.

- Order the Claimant[s] to pay all relevant expenses and disbursements by the Respondent because of these proceedings in accordance with [SCC] Arbitration Rules.347

286.
In its Post-Hearing Brief and Reply Post-Hearing Brief, Respondent "reiterates all its objections and defences concerning jurisdiction, the admissibility of the claim and its merits."348

VI. JURISDICTION ISSUE RELATING TO EU LAW AND ACHMEA

A. R ELEVANT T REATY P ROVISIONS

287.
The following provisions of the ECT are relevant for the Tribunal's analysis of the jurisdiction issue relating to EU law and the ECJ Judgment. The dispute resolution provision, contained in Article 26 ECT, is reproduced only to the extent relevant:

Article 1(2) ECT

"Contracting Party" means a state or Regional Economic Integration Organisation which has consented to be bound by this Treaty and for which the Treaty is in force.

Article 1(3) ECT

"Regional Economic Integration Organisation" means an organisation constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them in respect of those matters.

Article 1(10) ECT

"Area" means with respect to a state that is a Contracting Party:

(a) the territory under its sovereignty, it being understood that territory includes land, internal waters and the territorial sea; and

(b) subject to and in accordance with the international law of the sea: the sea, sea-bed and its subsoil with regard to which that Contracting Party exercises sovereign rights and jurisdiction.

With respect to a Regional Economic Integration Organisation which is a Contracting Party, Area means the Areas of the member states of such Organisation, under the provisions contained in the agreement establishing that Organisation.

Article 16: Relation to Other Agreements

Where two or more Contracting Parties have entered into a prior international agreement, or enter into a subsequent international agreement, whose terms in either case concern the subject matter of Part III or V of this Treaty,

(1) nothing in Part III or V of this Treaty shall be construed to derogate from any provision of such terms of the other agreement or from any right to dispute resolution with respect thereto under that agreement; and

(2) nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty,

where any such provision is more favourable to the Investor or Investment.

Article 25: Economic Integration Agreements

(1) The provisions of this Treaty shall not be so construed as to oblige a Contracting Party which is party to an Economic Integration Agreement (hereinafter referred to as "EIA") to extend, by means of most favoured nation treatment, to another Contracting Party which is not a party to that EIA, any preferential treatment applicable between the parties to that EIA as a result of their being parties thereto.

(2) For the purposes of paragraph (1), "EIA" means an agreement substantially liberalising, inter alia, trade and investment, by providing for the absence or elimination of substantially all discrimination between or among parties thereto through the elimination of existing discriminatory measures and/or the prohibition of new or more discriminatory measures, either at the entry into force of that agreement or on the basis of a reasonable time frame.

(3) This Article shall not affect the application of the WTO Agreement according to Article 29.

Article 26: Settlement of Disputes between an Investor and a Contracting Party

(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.

(b)

(i) The Contracting Parties listed in Annex ID do not give such unconditional consent where the Investor has previously submitted the dispute under subparagraph (2)(a) or (b).

(ii) For the sake of transparency, each Contracting Party that is listed in Annex ID shall provide a written statement of its policies, practices and conditions in this regard to the Secretariat no later than the date of the deposit of its instrument of ratification, acceptance or approval in accordance with Article 39 or the deposit of its instrument of accession in accordance with Article 41.

(c) A Contracting Party listed in Annex IA does not give such unconditional consent with respect to a dispute arising under the last sentence of Article 10(1).

(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

(ii) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention referred to in subparagraph (a)(i), under the rules governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre (hereinafter referred to as the "Additional Facility Rules"), if the Contracting Party of the Investor or the Contracting Party party to the dispute, but not both, is a party to the ICSID Convention;

(b) a sole arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (hereinafter referred to as "UNCITRAL"); or

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

288.
The relevant provisions of the Treaty of the Functioning of the European Union ("TFEU") are as follows:

Article 267

The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning:

(a) the interpretation of the Treaties;

(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union;

Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon.

Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court.

If such a question is raised in a case pending before a court or tribunal of a Member State with regard to a person in custody, the Court of Justice of the European Union shall act with the minimum of delay.

Article 344

Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein.

Article 351

The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties.

To the extent that such agreements are not compatible with the Treaties, the Member State or States concerned shall take all appropriate steps to eliminate the incompatibilities established. Member States shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude.

289.
Finally, Articles 30, 31, 32 and 41 of the Vienna Convention on the Law of Treaties 1969 ("VCLT") are also relevant for the Tribunal's analysis:

Article 30. Application of Successive Treaties Relating to the Same Subject-Matter

1. Subject to Article 103 of the Charter of the United Nations, the rights and obligations of States parties to successive treaties relating to the same subject-matter shall be determined in accordance with the following paragraphs.

2. When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail.

3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.

4. When the parties to the later treaty do not include all the parties to the earlier one:

(a) As between States parties to both treaties the same rule applies as in paragraph 3;

(b) As between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations.

5. Paragraph 4 is without prejudice to article 41, or to any question of the termination or suspension of the operation of a treaty under article 60 or to any question of responsibility which may arise for a State from the conclusion or application of a treaty the provisions of which are incompatible with its obligations towards another State under another treaty.

Article 31. General Rule of Interpretation

1. 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.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) Any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;

(b) Any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

3. There shall be taken into account, together with the context:

(a) Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) Any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) Any relevant rules of international law applicable in the relations between the parties.

4. A special meaning shall be given to a term if it is established that the parties so intended.

Article 32. Supplementary Means of Interpretation

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) Leaves the meaning ambiguous or obscure; or

(b) Leads to a result which is manifestly absurd or unreasonable.

Article 41. Agreements to Modify Multilateral Treaties between Certain of the Parties Only

1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:

(a) The possibility of such a modification is provided for by the treaty;

or

(b) The modification in question is not prohibited by the treaty and:

(i) Does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;

(ii) Does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.

2. Unless in a case falling under paragraph l(a) the treaty otherwise provides, the parties in question shall notify the other parties of their intention to conclude the agreement and of the modification to the treaty for which it provides.

B. THE PARTIES' POSITIONS

290.
Respondent raised the jurisdictional objection relating to the ECT's non-application to intra-EU disputes in its Statement of Defence for the first time. However, prior to any other submissions by the Parties on this jurisdictional objection, the ECJ released the ECJ Judgment in Case C-284/16, Slowakische Republik v Achmea BV on 6 March 2018 (see ¶ 32 above). Thereafter, the Parties' submissions dealt with this jurisdictional objection taking into account considerations arising out of the ECJ Judgment. Since the Parties' submissions relating to the ECJ Judgment reflect their most recent position on the issues relating to EU law, the Tribunal considers them to have updated their prior submissions taking into account the ECJ Judgment, and shall primarily focus on those more recent submissions in the following Sections.

(1) Respondent's Position

291.
Respondent's position is that the ECJ Judgment is of direct relevance in these proceedings, and that the Judgment confirms the lack of jurisdiction of tribunals under Article 26 ECT in intra-EU investment disputes.

a. Applicable Law

292.
According to Respondent, EU law is part of or a "subsystem" of international law, and its rules and principles assume relevance in international law due to the principle of primacy or primauté of EU law. Thus, it has to be applied by a tribunal established pursuant to Article 26 ECT, "both with regard to the validity of the arbitration agreement and its merits". Further, as per Respondent, EU law also applies as part of the national law of EU Member States.349
293.
With respect to the applicable law to jurisdictional issues, while Respondent primarily considers that cases in the ICSID regime are similar to cases such as the present one, being administered by the SCC with the seat in Stockholm, Respondent, in the alternative, endorses this distinction. This is on the ground that awards rendered in the latter kind of regime, i.e., with their seat in Stockholm, will have to be considered under EU public order, when being reviewed by annulment courts in Sweden or enforcing courts under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 ("New York Convention"). As per Respondent, the ECJ Judgment forms part of the EU public order, and thus any award not in compliance with the same could be annulled for being contrary to the basic principles of the Swedish legal system (see ¶ 315 below).350

b. The Reasoning of the ECJ Judgment applies to ECT

294.
It is Respondent's position that the offer of a Member State to an investor to arbitrate disputes as per Article 26 ECT is "exactly identical" to the situation of Article 8 of Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic ("Slovak-Dutch BIT").351
295.
What is relevant in the present case is that the obligations that Italy assumed towards Luxembourg are in the nature of intra-EU obligations. The bilateral nature of these obligations, and consequently the offer to arbitrate, is not altered either by the fact that the ECT is a multilateral treaty, or by the fact that the EU is a party to the ECT.352
296.
Respondent contends that the ECJ Judgment has confirmed the proposition that any agreement entered into between Member States has to respect the autonomy of the EU legal order. This autonomy requires that dispute resolution in respect of intra-EU rights and obligations be carried out by bodies that can make a reference to the ECJ for a preliminary ruling on questions of interpretation and application of EU law, as per Article 267 TFEU, in order to preserve the monopoly of the ECJ on matters of EU law, and in turn, the full effectiveness of EU law. Such bodies would constitute only courts and tribunals of EU Member States, which are state-established permanent institutions capable of deciding disputes with res judicata effect, even those relating to the ECT. These do not include arbitral tribunals of the nature sitting under the ECT. Not only can such tribunals not make a reference to the ECJ, but their awards, upon being rendered, are also subjected only to very limited grounds of review by courts. Thus, even under the ECT, as under the Slovak-Dutch BIT, the Member States established a mechanism of settling investment disputes that is not capable of ensuring the proper application or full effectiveness of EU law.353
297.
Respondent supports its submissions by relying on recent blog articles that have endorsed the extension of the reasoning of the ECJ Judgment to ECT cases.354 Respondent also places reliance on the recent Declarations of the Representatives of the Governments of the EU Member States dated 15-16 January 2019 as confirmation that the principles established in the ECJ Judgment were not specifically linked to the Slovak-Dutch BIT and also extend to the ECT. Respondent considers these Declarations, specifically the one Italy signed on 15 January 2019, to hold binding value.355 Further, in Respondent's view, all previous arbitral case law that has rejected the argument that intra-EU BITs and application of the ECT in the intra-EU context is incompatible with the TFEU, is rendered irelevant in light of a final judgment on this proposition rendered by the ECJ.356
298.
According to Respondent, the application of the ECJ Judgment to intra-EU ECT cases is not inhibited by either (i) the absence of a disconnection clause, which was unnecessary as per Respondent, or (ii) the presence of the EU as a party to the ECT, which only reinforces the applicability of the ECJ Judgment to ECT, in Respondent's view.357
299.
With respect to the opinion of Advocate General Wathelet dated 19 September 2017 preceding the ECJ Judgment ("AG Opinion"), Italy's argument is that the AG Opinion does not hold any more than pure academic or scholarly value after the ECJ Judgment has already decided the relevant issues. As per Italy, in any event, the AG Opinion was based on the wrong assumption of arbitral tribunals, on certain occasions, being able to refer questions for the preliminary ruling of the ECJ under Article 267 TFEU, which possibility has been definitively ruled out by the ECJ Judgment.358
300.
Respondent also criticizes the recent award rendered in Masdar v. Spain, whereby the tribunal assumed jurisdiction over an intra-EU investment dispute under the ECT after the ECJ Judgment was rendered. Respondent's criticism focuses on the fact that the Masdar tribunal did not account for how the ECJ Judgment's reasoning extends also to multilateral treaties such as the ECT, and placed excessive reliance on the AG Opinion.359 In this connection, Respondent points out that the questions referred to the ECJ, the principles relied on by the ECJ to arrive at its conclusions and the issues addressed by the ECJ, specifically about the characteristics of EU law, all apply equally to multilateral conventions. Further, a tribunal "such as" the one established under Article 8 Slovak-Dutch BIT includes the present Tribunal sitting under the ECT, since it operates within a comparable procedural framework, in particular relating to the law applicable to its procedure and the judicial review and finality of its award.360

c. Intra-EU Arbitration is in violation of Articles 267 and 344 TFEU and the general autonomy of EU law

301.
Respondent's position is that arbitration under the ECT of intra-EU investment disputes violates Article 267 and 344 TFEU and the general principle of autonomy of EU law, the consequence of which is that the Member State's offer to arbitrate under Article 26 ECT becomes inapplicable vis-à-vis investors of another Member State.361 According to Respondent, as a result of the sui generis nature of EU law and its primacy in the EU legal order, Member States are prevented from allowing a dispute that potentially involves EU law aspects to be resolved by an international arbitral tribunal. The appropriate forum, instead, would be competent national court or tribunal in the Italian Republic, which could decide disputes relating to the EU law contained either in the primary or secondary EU legislations.362
302.
In this connection, Respondent posits two arguments concerning the relationship between EU law and the ECT. First, Respondent contends that it is possible to interpret the ECT, as per international law, as not applying between EU Member States. Second, in the alternative, any conflict between the ECT and EU law should, in Respondent's view, be resolved in favour of EU law.363
303.
With respect to the interpretation of the ECT, Respondent relies on Articles 31 and 32 of the Vienna Convention on the Law of Treaties 1969 ("VCLT"), and on the principle of harmonious interpretation. Respondent highlights five provisions of the ECT, i.e., Article 1(2) (definition of "Contracting Party"), Article 1(3) (definition of "Regional Economic Integration Organisation"), Article 1(10) (definition of "Area"), Article 25 (Economic Integration Agreements) and Article 16 (Relation to Other Agreements).
304.
Concerning Articles 1(2), 1(3) and 1(10) ECT, Respondent contends that given that the ECT itself recognizes Regional Economic Integration Organisations ("REIO") as Contracting Parties and also envisages an overlap of territories between the REIO and its Member States, the allocation of competences within an REIO, such as the EU, is not a question of geographical boundaries, but instead one of substantive competences.364
305.
Concerning Article 25 ECT, Respondent argues that the definition of an Economic Integration Agreement ("EIA") perfectly fits the EU, and that more preferential treatment between the Parties to such EIAs is compatible with the ECT.365
306.
In addition, relying on Article 16 ECT, Italy argues that nothing in Part III or V of the ECT can be construed to derogate from any provision of EU law, specifically the Treaty of the European Union ("TEU") and the TFEU (referred to together as the "EU Treaties"), or any right to dispute resolution therein. This is on the ground that the system of investment protection established under EU law is "doubtless more favourable and offers more articulated forms of protection to the investors and their investments" than the ECT. Even when it comes to access to justice, while the option of international arbitration is not available to EU citizens against EU Member States, EU citizens are entitled to non-discriminatory and consistent court jurisdiction across the EU, and are also entitled to the final recourse of the ECJ.366
307.
In support of the above interpretative arguments, Italy relies on context offered by (i) the Decision, included in Annex 2 to the Final Act of the European Energy Charter Conference, with respect to Articles 24(4)(a) and 25 ECT, which offers investors from non-Member States of an EIA access to treatment accorded under the EIA when the said investors have a registered office, central administration or principle place of business in the Area of a party to that EIA; and (ii) the EU and its Member States' declaration with respect to Article 25 ECT.367
308.
Further, Italy produces preparatory works and documents relating to the circumstances of adoption of the ECT, including contemporaneous EU Directives in the energy sector, to contend that the ECT was never formulated to regulate the EU internal market.368 In the same vein, it relies on investment arbitration case law to reflect the consistency in judicial behaviour and practice of EU Member States on this issue.369 Concerning the findings of these investment arbitration case law, which Claimants rely on extensively (see ¶ 319 below), Respondent submits that none of the published awards or decisions have addressed systematically all the relevant issued under international law.370
309.
Respondent's alternative argument proceeds under the assumption of a conflict between the ECT and EU law, specifically the EU Treaties. In this connection, Respondent contends that EU Treaties, as they stand after amendment by the Lisbon Treaty in December 2007, prevail over the ECT, as per (i) the conflict rule of primacy of EU law; (ii) Article 30 VCLT, and/or (iii) Article 16 ECT.
310.
With respect to the Lisbon Treaty, Respondent explains the allocation of competences between the EU and its Member States, pointing out that Article 207 TFEU, which defines the "common commercial policy" now includes foreign direct investment after the Lisbon Treaty's entry into force. Whereas a number of matters covered in the ECT still have mixed competences of the EU and/or its Member States, the EU has exclusive competence over the common commercial policy, and specifically, foreign direct investment.371
311.
Respondent argues that the principle of primacy of EU law is a "specific conflict rule" under the public international law that follows from Article 351(1) TFEU. This principle applies to give priority to the EU Treaties regardless of the bilateral or multilateral character of the ECT or the fact that the EU is a party to the ECT.372
312.
In Respondent's view, as a result of the subsequent entry into force of the Lisbon Treaty, it is lex posterior and prevails over the ECT with respect to EU Member States as per Articles 30(3) and 30(4) VCLT. In this connection, Respondent advocates for a liberal interpretation of "same subject matter" in Article 30 VCLT, and goes on to explain the protections available to investors under the EU legal regime.373
313.
The same result is arrived at, as per Respondent, if one applies Article 16 ECT as a conflict rule. This is on the ground, as mentioned above, that EU law provides for a more favourable and more articulated level of protection to the investors than the ECT, in light of, inter alia, the internal market rules, the principle of non-discrimination of nationals, the Charter of Fundamental Rights, and the case law of the ECJ.374 Lastly, Respondent, in any event, submits that the Lisbon Treaty amounts to a modification of the ECT as per Article 41 VCLT.375
314.
In general, in addition to the above, Respondent expresses its agreement with the observations made by the EC in the EC NDP Submission.376

d. Non-enforceability of Award rendered contrary to the ECJ Judgment

315.
It is Respondent's submission that any award assuming jurisdiction over intra-EU disputes under the ECT would not be enforceable within the EU, be it awards rendered within or outside the EU, or rendered under an institutional (ICSID or SCC) or ad hoc setting. As per Respondent, there is no diversification based on where such an award is ultimately rendered or under which set of procedural rules. In this connection, Respondent cites the decisions of the EC against Spain and Czech Republic, wherein it was clearly stated that awards rendered by tribunals under the ECT in intra-EU cases constitute State aids to be authorized by the EC before being executed. Further, Respondent also relies on the stay of enforcement granted by the Swedish Court of Appeal based on the ECJ Judgment in Novenergia II v. Spain. Lastly, Respondent argues that any award non-compliant with EU law could be at risk of a potential annulment based on Articles 33(1) and 33(2) of the Swedish Arbitration Act (SFS 1999:116) ("Swedish Arbitration Act") (see ¶ 293 above).377

(2) Claimants' Position

a. Applicable Law

316.
According to Claimants, the applicable law for the Tribunal does not include EU law. In this connection, Claimants contend that Article 26(6) ECT can only be interpreted as referring to the substantive rules governing the Tribunal's analysis of Italy's liability, and does not address the applicable law to this Tribunal's jurisdiction. The Tribunal's jurisdiction is governed only by the provisions of the ECT, specifically Article 26 thereof, and nothing beyond. Claimants alternatively submit that even if Article 26(6) ECT were relevant for the Tribunal's jurisdiction, the phrase "applicable rules and principles of international law" only covers public international law and does not encompass a regional legal order such as EU law. Further, as per Claimants, EU law does not apply in the present case since Claimants have specifically chosen to bring claims under the ECT and not under EU law. In addition, Claimants state that EU law cannot be used as general principles of international law under Article 31(3)(c) VCLT.378
317.
In this connection, Claimants also maintain that the outcome does not differ between cases in the ICSID regime and cases being administered by the SCC or ad hoc arbitrations under the UNCITRAL Rules. Under Swedish law, which applies as the lex arbitri in the present case, there is no external principle that would limit this Tribunal's jurisdiction, and any question of jurisdiction would have to be answered with reference to the arbitration agreement alone.379

b. This Tribunal has jurisdiction over intra-EU investment cases under the ECT

318.
Claimants dispute Respondent's submissions relating to the interpretation of the ECT, and its alternative argument relating to the resolution of any conflict between the ECT and EU law in favour of the latter. Claimants also disagree with the observations made by the EC in this connection.
319.
In respect of the interpretation of the ECT, Claimants emphasise the plain letter of the ECT confirms that it applies to intra-EU disputes. The distinction between intra-EU and extra-EU disputes that Respondent attempts to read into the ECT does not exist in its text, which, as per Claimants provides no limitations concerning investors from certain Contracting Parties not being able to resolve disputes against certain other Contracting Parties. Further, in the instant case, neither the home State, i.e., Luxembourg, nor the host State, i.e., Italy, could have made any reservations to the ECT as a result of Article 46 ECT. Claimants also mention the absence of a specific disconnection clause in the ECT, which was originally envisaged, but never included, during the treaty drafting process of the ECT. Similarly, Claimants contest Respondent's reliance on Article 16 ECT, emphasising that due to the option of international arbitration provided to investors in the ECT, the same is more favourable than the legal regime under EU law. Claimants support their arguments by relying on "unanimous" ECT case law, i.e., 24 decisions and/or awards rendered by ECT tribunals that have rejected jurisdictional objections relating to EU law.380
320.
With respect to the EU's position as an REIO in the ECT, Claimants contend that the ECT only recognizes that some Member States are also members of regional organizations, while ensuring that the Member States are distinguished from the REIO's independent candidacy as a party to the ECT.381
321.
Similarly, Claimants consider Respondent's arguments relating to Article 25 ECT and the Decision, included in Annex 2 to the Final Act of the European Energy Charter Conference, with respect to Articles 24(4)(a) and 25 ECT (see ¶ 307 above), to be "misplaced". This is on the ground that Article 25 ECT does not address how EU Member States should treat investors from other EU Member States, nor does the said Decision require anything other than a parity of treatment by EU Member States for investors from within the EU and investors from outside the EU, who maintain business activities within the EU.382
322.
Claimants also rebut Respondent's alternative argument relating to the resolution of any conflict between the ECT and EU law (see ¶¶ 309-313 above). In this connection, Claimants contend, at the outset, that the ECT and EU law, specifically the EU Treaties after the Lisbon Treaty, do not share the same subject matter.383
323.
Claimants alternatively also submit that even assuming that the EU Treaties and the ECT had the same subject matter, the former would not prevail over the latter as per Articles 30(3) and 30(4) VCLT, since there was no incompatibility between the substantive protections of the ECT and EU law. Similarly, the Lisbon Treaty could not be considered a modification of the ECT under Article 41 VCLT, since a "deactivation" of investor protection between Italy and Luxembourg would eliminate the rights of these Member States (being exercised by investors) under the ECT. Further, Claimants emphasise on the absence of any concrete intention to modify the ECT, which could also have been done through the process for amendment prescribed in Article 42 ECT. Claimants question Respondent's argument relating to consistent State practice by EU Member States, by pointing out that at least five EU Member States intervened and supported the position that EU law did not bar intra-EU arbitration during the proceedings surrounding the ECJ Judgment.384
324.
Lastly, Claimants dispute Respondent's understanding of Article 16 ECT's conflict rule, on the ground that the ECT offers a stronger level of investor protection, as exemplified primarily by the right to resolve disputes by international arbitration under Article 26 ECT, which is a fundamental protection not available in EU law. This is also true for substantive protections, for which Claimants rely on the proposals in the AG Opinion and on instances where domestic courts have denied violations of investors' rights, which have subsequently been upheld by investment tribunals.385 Similarly, Claimants contest the EC's reliance on Article 351 TFEU as a conflict rule (see ¶ 347 above), on the ground that it applies only to agreements concluded prior to 1 January 1958 or before a Member State's date of accession into the EU, which does not include the ECT in the instant case.386

c. The ECJ Judgment does not apply to the present case

325.
It is Claimants' contention that the ECJ Judgment does not have any implications on the present Tribunal's jurisdiction. Claimants posit this argument for the following reasons.
326.
First, Claimants submit that since this Tribunal's jurisdiction is governed only by the provisions of the ECT, and the conditions for jurisdiction emanating therefrom, the ECJ Judgment cannot enter the Tribunal's applicable law framework through any "backdoor", much less through Article 26(6) ECT, since this provision is neither relevant for the Tribunal's jurisdiction, nor includes the ECJ Judgment, or EU law in general (see ¶ 316 above).387
327.
Second, Claimants submit that the reasoning of each of the 23 investment tribunals, which denied the EU law related jurisdictional objection under the ECT prior to the ECJ Judgment (see ¶ 319 above), continues to hold value even after the ECJ Judgment.388 Further, Claimants rely on all decisions or awards rendered after the ECJ Judgment, which have rejected the jurisdictional objections relating to EU law, and in particular place reliance on Greentech v. Italy.389
328.
Third, in Claimants' view, even in the alternative that the ECJ Judgment forms part of the applicable law to the Tribunal's jurisdiction, the same is clearly distinguishable from the instant case for two reasons.
329.
Firstly, the ECJ Judgment restricts its own application to BITs concluded "between" EU Member States, and accordingly does not apply to multilateral investment treaties, especially those to which the EU itself is a party. The ECT is such a multilateral agreement, having 54 signatories, in addition to the EU itself. As per Claimants, the ECJ Judgment did not condemn resolution of disputes arising from investment treaties through international arbitration per se, but only precluded such international arbitration when the EU was not party to the underlying agreement or treaty. Claimants contend that the EC cannot ague on these lines now when the EU had already signed the ECT in 1997. In this connection, Claimants also dispute the binding value of the EC Communication 2018 (see ¶ 47 above).390
330.
Secondly, the ECJ Judgment was rendered in the context of the governing law provision of the Slovak-Dutch BIT, contained in Article 8(6) thereof, which was different from Article 26(6) ECT. Article 8(6) Slovak-Dutch BIT left open the scope for the tribunal in Achmea v. Slovakia to interpret and apply EU law, by including the "law in force of the Contracting Party concerned" and "other relevant Agreements between the Contracting Parties" in the applicable law framework. As per Claimants, these broad stipulations in Article 8(6) Slovak-Dutch BIT do not exist in Article 26(6) ECT, since the same only covers rules and principles of international law as the applicable law in ECT arbitrations.391
331.
Claimants support the above arguments by relying on the recent award of the tribunal in Masdar v. Spain, which denied the relevance of the ECJ Judgment on its jurisdiction under the ECT, stating that the same had "no bearing" and "cannot be applied to, multilateral treaties, such as the ECT, to which the EU itself is a party".392 In addition, Claimant submits that any extension of the ECJ Judgment to the ECT is inhibited by the presence of Article 16 ECT, which ensures that the ECT prevails over the EU Treaties.393

d. The Tribunal need not be concerned with the future enforceability of the Award

332.
Lastly, Claimants contend that due to the recency of the ECJ Judgment, its specific impact upon the actual enforcement of awards is uncertain and clouded by numerous unresolved questions. In any event, any such impact on enforcement of awards is likely to be "minimal to non-existent" as per Claimants.
333.
In this connection, Claimants seek to distinguish the procedural framework of these arbitration proceedings from the procedural framework of an ICSID arbitration. This is on the ground that the present arbitration proceedings are governed by the Swedish law on arbitration (Stockholm being the seat) and the New York Convention. The latter instrument mandates signatory states to confirm and execute foreign arbitral awards with only a few limited exceptions, which, in Claimants' view, Italy has not established. Thus, whether and to what extent Italy's obligation under the New York Convention may subsequently conflict with any of its obligations under the EU Treaties are not questions that should concern the Tribunal at this stage. Accordingly, this Tribunal need not predict or speculate about the enforceability of its ultimate Award.394
334.
On a related note, Claimants challenge Respondent's reliance on the EC's communications to Spain and Czech Republic regarding the ECT awards constituting State aids to be authorized by the EC before being executed (see ¶ 315 above). In Claimants' view, these communications are irrelevant to this Tribunal's jurisdiction, and also do not impact the merits of these proceedings, which have been brought under the ECT and not under EU law. Claimants point to a number of arbitral awards that have awarded relief to investors aggrieved by Spanish measures after the EC's communication to Spain relating to state aid. Claimants also submit, in this regard, that neither has Italy reported its incentive regime regarding photovoltaic energy to the EC as constituting state aid, nor has the EC initiated a state aid review of the incentive regimes in Italy, despite having been aware of the same since 2008.395
335.
In any event, Claimants argue that any award rendered by this Tribunal upholding jurisdiction will not carry the risk of being annulled pursuant to Sections 33(1) and 33(2) of the Swedish Arbitration Act, since (i) investor-State disputes are considered arbitrable in Swedish law; and (ii) intra-EU investor-State arbitration is not contrary to the basic principles of Swedish law, as is implicitly confirmed by the Declaration of the Representatives of the Governments of EU Member States signed by Sweden on 16 January 2019.396

C. T HE EC' S O BSERVATIONS

336.
In this Section, the Tribunal summarises the EC's observations regarding (i) the applicability of EU law for the Tribunal's assessment of its jurisdiction; (ii) the implications of the ECJ Judgment for these proceedings; and (iii) the interaction between the ECT and EU law, specifically the EU Treaties.

(1) Applicability of EU law for the Tribunal's Jurisdiction

337.
In the EC's view, EU law forms part of the "applicable rules and principles of international law" under Article 26(6) ECT, and the "relevant rules of international law applicable in the relations between the parties" pursuant to Article 31(3)(c) VCLT. The EC states that nothing in the ECT indicates that it operates as lex specialis vis-à-vis EU law. Rather, reference to EU law should form a part of the task of interpretation of the ECT pursuant to Article 31(3)(c) VCLT. For this proposition, the EC relies on Article 38 of the Statute of the International Court of Justice, the jurisprudence of the International Court of Justice and academic writing. Incidentally, the EC also states that EU law is applicable also as the national law of EU Member States.397
338.
Further, according to the EC, the fact that EU law is part of international law, and is therefore applicable as such under Article 26(6) ECT for matters of validity of the arbitration and the merits, has not been disputed by investment arbitral tribunals after the award in Electrabel v. Hungary. The disputed issue between tribunals instead concerns whether the ECT prevails over EU law or vice-versa.398
339.
In this regard, the EC's position is that the process of "systemic coherence" requires the ECT to be interpreted in such a way as to avoid any conflict with EU law, and not the other way around. For that purpose, according to the EC, an interpretation of Article 26 ECT taking into account the general principle of autonomy of EU law (Articles 4(3) and 19 TEU and Articles 267 and 344 TFEU) leads to the conclusion that there is no offer to arbitrate by Germany to Swedish investors.399

(2) Implications of the ECJ Judgment

340.
In the EC's view, the ECJ Judgment, which confirms the position that the EC took in the EC Intervention Application, renders the offer to arbitrate in Article 26 ECT "precluded".400 According to the EC, this is on the ground of the general principle of EU law of autonomy of the EU legal order, which is enshrined in the liberally interpreted Article 344 TFEU, and on the keystone of the EU judicial system, i.e., the preliminary ruling procedure, provided in Article 267 TFEU. In addition, the EC relies on Articles 4(3) and 19 TEU for the principle of autonomy of EU law.401
341.
It is the EC's position that the ECJ Judgment applies equally to intra-EU investor-State arbitrations under the ECT since (i) intra-EU investment arbitral tribunals are not "national courts or tribunals" in the sense of Article 267 TFEU, which proposition applies to tribunals under the ECT as well, regardless of whether the tribunal is an ICSID tribunal or an UNCITRAL tribunal; and (ii) there is no complete review of arbitral awards by such tribunals through national courts within the EU. This is the case even for ongoing investment cases, since the ECJ's judgments, unless specifically limited in time, apply ex tunc.402
342.
Further, concerning the fact that the EU is a Contracting Party to the ECT, the EC submits that (i) the ECJ, in its findings in the ECJ Judgment, intended to carve out only those international courts that are set up by agreements signed by the EU that respect the autonomy of the EU and its legal order; and (ii) the Tribunal has been set up as a result of bilateral commitments between Italy and Luxembourg, and not as a result of the EU's participation in the ECT.403

(3) Interaction between the ECT and EU law

343.
Regarding the interaction between the ECT and the EU Treaties, i.e., the TEU and the TFEU, the EC offers two solutions: first, a harmonious interpretation of the ECT in conformity with EU law, or second, in the event of a conflict, the primacy of EU law as lex posterior.
344.
With respect to the harmonious interpretation of the ECT, the EC, in addition to its submission that EU law forms part of relevant rules of international law under Article 31(3)(c) VCLT (see ¶ 337 above), also puts forth an interpretation on the basis of other means of interpretation under Articles 31 and 32 VCLT. In this regard, the EC relies, inter alia, on (i) the definition of "Contracting Party" under Article 1(2) ECT, which includes an REIO such as the EU; (ii) the definition of an REIO in Article 1(3) ECT; and (iii) other provisions relating specifically to an REIO, such as Article 36(7) ECT and Article 1(10) ECT, the latter of which defines the term "Area" with respect to an REIO. On this basis, the EC states that the ECT recognises that the relationships between Member States to an REIO and the REIO are governed by the provisions of the agreement establishing the REIO itself. Further, according to the EC, in light of these provisions of the ECT, investments within the REIO are investments within the same Contracting Party, to which the offer to arbitrate under Article 26 ECT does not apply. In this regard, the EC also criticises the interpretation of Article 26 ECT offered by certain arbitral tribunals for depriving certain provisions of the ECT of their full effect or importance.404
345.
Moreover, the EC derives context to support its interpretation from the Statement made by the European Communities under Article 26(3)(b)(ii) ECT, specifically stating that "[t]he Communities and the Member States will... determine among them who is the respondent party to arbitration proceedings initiated by an Investor of another Contracting Party" (emphasis added by the EC). The use of the term "another", according to the EC, restricts the offer to arbitrate in Article 26 ECT to investors from non-EU Member States. Additionally, the context for interpretation of Article 26 ECT is also derived by the EC from the fact that the EU and its Member States negotiated the ECT as one single block, pursuant to the EU law principle of unity in the international representation of the EU.405
346.
The EC does not consider the absence of a "disconnection clause" in the ECT to affect its interpretation of Article 26 ECT, since a "disconnection clause" is "superfluous" in respect of intra-EU relations between Member States, even more so since the EU is already a Contracting Party to the ECT. In this regard, the EC advocates of the "liability follows competence" principle to allocate liability between the EU and its Member States, deriving support from the Draft Articles on the Responsibility of International Organizations and the jurisprudence of the International Tribunal for the Law of the Sea. It highlights that since renewable energy falls within the EU's exclusive competence, the EU is the one responsible towards investors and not its Member States. In light of this demarcation of responsibilities between the EU and its Member States, a disconnection clause or its absence is not material for the interpretation of the ECT.406
347.
The EC's alternative proposal, with respect to the rules relating to conflict between treaties, is that the conflict rule in Article 351(1) TFEU does not apply to multilateral treaties where only the rights and obligations of EU Member States is at stake. Instead a "special conflict rule", i.e., the general principle of primacy of EU law, arrived at based on an a contrario reading of Article 351 TFEU, applies with the result that the EU Treaties take absolute precedence over Article 26 ECT.407
348.
The EC also contends that the same result is achieved pursuant to Articles 30 (successive treaties) and 41 (modification of multilateral treaties) VCLT, since either (i) Germany and Sweden's reaffirmation of Articles 4(3) and 19 TEU and Articles 267 and 344 TFEU after their ratification of the ECT can be construed as an amendment for the purposes of Article 41 VCLT; or (ii) the TEU and TFEU constitute "later treaties" on the same subject matter as the ECT, and the ECT applies only to the extent it is compatible with these later treaties. Similarly, Article 16 ECT does not inhibit this conclusion, since it is only a rule of "interpretation" and not one of conflict and, in any event is overruled by a later conflict rule in Article 351 TFEU, together with the principle of primacy of EU law.408

(4) Non-enforceability of Award rendered by the Tribunal

349.
The EC qualifies the measures contested by Claimants as "state aid" in the sense of Article 107(1) TFEU, which has not been authorized by the EC. Given that the EC has the exclusive authority to authorize such state aid, this Tribunal is not competent to conduct this assessment, especially since a determination of the fair and equitable treatment breach will require EU law principles of state aid to be looked into. Accordingly, as per the EC, if this Tribunal was to grant compensation to Claimants, it would be authorizing state aid, hence violating the distribution of competence set out in EU law, which may hinder the enforcement of any award as a violation of EU law. However, in the event the Tribunal does assume jurisdiction, the EC offers its availability to explore ways for safeguarding the EU law on state aid in this case.409

D. T HE T RIBUNAL ' S A NALYSIS

350.
In this Section, the Tribunal shall examine the Parties' submissions with respect to Respondent's jurisdictional objection pertaining to EU law, and shall, to the extent possible, follow the Parties' order of submissions while laying out its determinations. In the process, the Tribunal shall also address the EC's observations on this matter, to the extent relevant and appropriate.
351.
At the outset, the Tribunal shall determine the disputed issues relating to the applicable law to this Tribunal's jurisdiction (1). Thereafter, based on its findings on the applicable law, the Tribunal shall determine whether EU law limits or precludes this Tribunal's jurisdiction in these proceedings under Article 26 ECT (2). Lastly, the Tribunal shall address the Parties' submissions on the matters of interpretation of the ECT and the resolution of any conflicts between the different treaties in question, i.e., the ECT on the one side and the EU Treaties on the other side (3).

(1) Applicable Law

352.
The Parties have made extensive submissions concerning the applicable law to this Tribunal's jurisdiction, specifically directed towards whether EU law falls within this sphere of applicable law in these proceedings. In order to determine this foundational question, the Tribunal shall (a) first, determine whether the applicable law regime in the ECT, prescribed in Article 26(6) ECT applies to questions of this Tribunal's jurisdiction; (b) second, address the interaction between Article 26 ECT and the Swedish legal order, in light of Stockholm, Sweden being the seat of this arbitration; and (c) lastly, based on the determinations of the first two issues, determine the nature and applicability of EU law for questions of jurisdiction.

a. Whether Article 26(6) ECT applies to Questions of Jurisdiction

353.
The Parties are in dispute about whether the applicable law to questions of jurisdiction can be derived from Article 26(6) ECT. To recall, Article 26(6) ECT provides that "[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." (emphasis added)
354.
Respondent's position is that Article 26(6) ECT applies equally to the "issues in dispute" pertaining to the merits of the case and the jurisdiction of the Tribunal. The EC is of the same view. Claimants, however, submit that Article 26(6) ECT only refers to the substantive rules governing the Tribunal's analysis of Italy's liability, and does not address the applicable law to this Tribunal's jurisdiction, which is governed solely by the provisions of the ECT.
355.
The Tribunal is persuaded by Claimants' submissions.
356.
In order to appropriately understand the scope of Article 26(6) ECT, the phrase "issues in dispute" is instrumental. Interpreting this phrase as per Article 31(1) VCLT, i.e., "in accordance with the ordinary meaning to be given to the terms of the treaty in their context", it is relevant to consider Article 26(1) ECT as part of the context of Article 26(6) ECT. Article 26(1) ECT delineates the types of "disputes" covered within Article 26 ECT generally. It provides as follows:

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. (emphasis added)

357.
It is evident from this provision that the only "disputes" that Article 26 ECT applies to are those that concern an alleged breach of an obligation of the host State as prescribed in Part III of the ECT. Part III of the ECT is titled "Investment Promotion and Protection". Article 26 ECT itself is contained in Part V of the ECT titled "Dispute Settlement". Thus, the specific qualification of the term "disputes" in Article 26(1) ECT to cover only disputes relating to investment promotion and protection (Part III of the ECT), and not disputes relating to dispute settlement itself (Part V of the ECT), entails that Article 26(1) ECT addresses only "disputes" relating to the substantive obligations of the host State concerning investment promotion and protection. By implication, the phrase "issues in dispute" in Article 26(6) ECT should also be understood as covering only those issues that relate to alleged breaches of such substantive obligations of the host State.
358.
Therefore, the applicable law framework provided in Article 26(6) ECT, i.e., "the Treaty and applicable rules and principles of international law" is only relevant for the substantive issues in dispute concerning Respondent's liability under the ECT. This provision does not prescribe the applicable law framework for questions relating to this Tribunal's jurisdiction.

b. Article 26 ECT and Swedish Law

359.
In light of the Tribunal's finding that Article 26(6) ECT does not apply to questions of this Tribunal's jurisdiction, the Tribunal shall now examine which law(s) applies to such questions.
360.
The starting point for this examination is the dispute resolution provision in the ECT, i.e., Article 26 ECT itself. Given that Article 26 ECT is a provision contained in an international treaty, its interpretation and application should be in accordance with the broad framework of the VCLT. This uncontroversial proposition finds endorsement in case law, including a decision of the Svea Court of Appeal in Kazakhstan v. Stati.410
361.
Article 26 ECT, inter alia, contains Respondent's expression of its "unconditional consent" to arbitrate investor-State disputes, and the terms and conditions for the exercise of such consent (see Article 26(3) ECT). This consent to arbitrate materializes into an arbitration agreement when the concerned investor(s) accepts this offer. In this regard, the investor(s) has a choice of four regimes to submit its dispute: (i) arbitration under the ICSID Convention; (ii) arbitration under the ICISD Additional Facility Rules; (iii) ad hoc arbitration under the UNCITRAL Rules; and (iv) arbitration administered by the SCC (see Article 26(4) ECT).
362.
In the instant case, Claimants' acceptance of Respondent's offer to arbitrate came in the form of Claimants' RfA dated 26 August 2016, whereby Claimants opted for the fourth regime, i.e., arbitration administered by the SCC (see ¶ 7 above). The SCC Board determined Stockholm, Sweden to be the seat of this arbitration (see ¶ 17 above). As a result, Swedish law relating to arbitration may also be a relevant consideration when examining this Tribunal's jurisdiction as the law of the seat or lex arbitri. Whether and to what extent the law of the seat is relevant for a determination of this Tribunal's jurisdiction is a disputed issue between the Parties.