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Avocats, autres représentants, expert(s), secrétaire du tribunal



The Claimants are Blusun S.A. (‘Blusun’), Jean-Pierre Lecorcier and Michael Stein (collectively the ‘Claimants’).
Jean-Pierre Lecorcier is a French national. He owns 66% of Blusun.5
Michael Stein is a German national who owns 34% of Blusun.6
The Respondent is the Italian Republic (‘Italy’ or the ‘Respondent’).


AEEG Authority for the Electric Energy and Gas
AU Autorizzazione Unica (Single Authorisation)
DIA Denuncia di Inizio Attività (Declaration of Initiation of Activity)
EIA Environmental Impact Assessment
ECT Energy Charter Treaty
EPC Engineering, Procurement and Construction
EU European Union
FET Fair and Equitable Treatment
Fifth Energy Account Decrelo Ministeriale 5 luglio 2012 (Ministerial Decree of 5 July 2012)
First Renewables Directive European Directive 2001/77/EC
FIT Feed-in Tariffs
Fourth Energy Account Decreto Ministeriale 5 maggio 2011 (Ministerial Decree of 5 May 2011)
GSE Gestore dei Servizi Energetici (Manager of Electricity Services)
ICSID International Centre for Settlement of Investment Disputes
NAFTA North American Free Trade Agreement
PV Photovoltaic
Romani Decree

Decrelo Legislative 3 marzo 2011, n. 28: Attuazione della direttiva 2009/28/CE sulla promozione dell’uso dell’energia da fonti rinnovabili,recante modifi ca e successive abrogazione delle direttive 2001/77/CE e 2003/30/CE.

(Legislative Decree of 3 March 2011, No. 28: ‘Implementation of Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC’)

Second Energy Account Decreto Ministeriale 19 febbraio 2007 (Ministerial Decree of 19 February 2007)
SIB Societalnterconnessioni Brindisi S.R.L.
SPV Special Purpose Vehicle
TEU Treaty on European Union
TFEU Treaty on the Functioning of the European Union
Third Energy Account Decreto Ministeriale 6 agosto 2010 (Ministerial Decree of 6 August 2010)
VCLT Vienna Convention on the Law of Treaties
WS1 First Witness Statement
WS2 Second Witness Statement



On 4 February 2014, Blusun, Jean-Pierre Lecorcier and Michael Stein submitted a Request for Arbitration before the International Centre for Settlement of Investment Disputes (‘ICSID’) (the ‘Request’ or ‘RFA’). The Request was submitted pursuant to Article 26 of the Energy Charter Treaty ('ECT' or 'Treaty').7 The Claimants allege that their claim arises from a dispute between ‘natural person[s] having the citizenship or nationality’ of contracting parties to the ECT, with respect to ‘"Investments" associated with an "Economic activity" in the energy sector in the "Area" of a Contracting Party.’8 The dispute concerns certain regulatory measures and judicial decisions that allegedly had the effect of frustrating the Claimants’ investments in a 120-megawatt ('MW') solar energy project in the Puglia region of Italy (hereafter the Puglia Project, or the Project). The Claimants argue that measures adopted successively by the Italian Constitutional Court, by the Italian Government and by the Commune breached the fair and equitable treatment standard set forth in Article 10(1) of the ECT, and/or constituted measures ‘having effect equivalent to nationalization or expropriation’ within the meaning of Article 13(1) of the ECT.9 The Claimants estimate the damages suffered as a result of those measures at some €187.8 million.10

On 21 February 2014, ICSID’s Secretary-General registered the Request in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an Arbitral Tribunal as soon as possible in accordance with Rule 7(d) of the Centre’s Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.
The Parties agreed to constitute the Arbitral Tribunal in accordance with Article 37(2)(a) of the ICSID Convention. The Tribunal was to consist of three arbitrators, one appointed by each party and the President of the Tribunal appointed by agreement of the Parties.
On 24 March 2014, the Claimants appointed Dr. Stanimir Alexandrov, a national of Bulgaria, as an arbitrator. On 7 May 2014, the Respondent appointed Professor Pierre-Marie Dupuy, a national of France, as an arbitrator. On 12 June 2014, the Parties agreed to appoint Judge James Crawford AC, a national of Australia, as President of the Tribunal.
On 12 June 2014, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (‘Arbitration Rules'), notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date, and circulated the arbitrators’ declarations under Rule 6(2) of the Arbitration Rules. Mr. Benjamin Garel, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.
The first session of the Tribunal with representatives of the Parties was held by telephone conference on 28 July 2014. During that conference, the Parties confirmed that the Tribunal was properly constituted and that they had no objection to the appointment of any member of the Tribunal.
Also at the first session, it was agreed that this arbitration would be conducted in English and that it would proceed in accordance with the ICSID Arbitration Rules in force as of 10 April 2006. The Tribunal discussed with the Parties a previously circulated provisional agenda and draft procedural order, and established by agreement a timetable for this proceeding that was incorporated in Procedural Order No. 1.
Pursuant to the timetable established at the first session (which was amended on 28 July 2015, following letters from the Parties of 16 July 2015 and 22 July 2015), the Parties made the following written submissions:

(a) The Claimants submitted their Memorial on the Merits on 31 July 2014, accompanied by the witness statements of Jean-Pierre Lecorcier and Michael Stein, and by the expert report of Carlos Lapuerta.

(b) The Respondent submitted its Counter-Memorial on the Merits on 19 December 2014.

(c) The Claimants submitted their Reply on the Merits on 8 May 2015, accompanied by the expert report of Paolo Marino, the rebuttal expert report of Carlos Lapuerta, and the second witness statements of Jean-Pierre Lecorcier and Michael Stein.

(d) The Respondent submitted its Rejoinder on the Merits on 16 October 2015, accompanied by the expert report of Luca Benedetti.

On 22 September 2015, the Secretary-General informed the Parties that Francisco Abriani, ICSID Legal Counsel, would replace Benjamin Garel as Secretary of the Tribunal in this proceeding.
On 23 October 2015, the European Commission (the ‘EC’ or ‘Commission') filed an ‘Application for Leave to Intervene as a Non-Disputing Party’ (the ‘Commission’s Application') pursuant to Rule 37 of the ICSID Arbitration Rules.
On 24 October 2015, the Tribunal invited the Parties to submit their observations regarding the Commission’s Application by 28 October 2015.
On 28 October 2015, the Respondent submitted the statements of Mr. Benedetti and Mr. Bacchiocchi in their capacity as expert and fact witness, respectively.
On 28 October 2015, the Claimants submitted their observations regarding the Commission’s Application, and requested that the application be dismissed. On the same date, the Respondent submitted its observations regarding the Commission’s Application, and requested that it be accepted.
On 30 October 2015, the Tribunal accepted the Commission’s Application de bene esse and fixed 12 November 2015 for the filing of the Commission’s further observations, without deciding at that stage whether the Commission’s written submissions would be incorporated into the record.
On the same date, the Claimants filed a request for the Tribunal to decide on the admissibility of new evidence, specifically a further report of 2011 from Watson, Farley and Williams.
On 4 November 2015, the Respondent filed observations on the Claimants’ request of 30 October 2015.
On 5 November 2015, the Tribunal ruled that the new evidence was admissible. As a result, on the same date the Claimants filed the Opinion of Eugenio Tranchino, of Watson, Farley and Williams, dated 20 May 2011. This document was submitted as Exhibit C-357.
On 12 November 2015, the Commission filed a submission regarding the Tribunal’s jurisdiction over the Claimants’ claims (the ‘Commission’s Submission’), while purportedly reserving ‘the right to request leave to intervene also on points of substance’ in the event that the Tribunal decided it had jurisdiction.
On the same date, the Respondent submitted further observations regarding the Commission’s Application. The Respondent requested that the Tribunal ‘allow a round of written memoires by the Parties, irrespective of its final decision as for the intervention of the European Commission in the procedure’, and that the hearing scheduled to take place between 30 November and 4 December 2015 be postponed.
On 13 November 2015, the Parties and the President of the Tribunal held a pre-hearing conference in which they discussed arrangements for the hearing on jurisdiction and merits, and issues arising from the Commission’s Application.
On 18 November 2015, the Tribunal issued Procedural Order No. 2, deciding to postpone the hearing initially scheduled to take place between 30 November and 4 December 2015, and inviting the Respondent and the Claimants to submit their positions regarding the Commission’s Submission by 22 January and 26 February 2016, respectively.
On 22 January 2016, the Respondent submitted its ‘position on the jurisdiction of the Tribunal over intra-EU disputes’, substantially incorporating the EC’s views.
On 26 February 2016, the Claimants submitted their ‘observations on the EC’s amicus curiae brief’, rejecting the Commission’s Submission as to the substance.
By letter of 10 March 2016, the Respondent requested ‘to discuss jurisdictional matters and have a Tribunal decision on these, prior to any discussion on the merits of the case.’
By letter of 16 March 2016, the Claimants opposed the Respondent’s request of 10 March 2016.
On 19 March 2016, the Tribunal issued Procedural Order No. 3, allowing the introduction of the Commission’s Submission of 12 November 2015 to the record in this proceeding pursuant to Rule 37(2) of the ICSD Arbitration Rules. In the same order, the Tribunal reserved for a later date its decision regarding the costs incurred as a result of the Commission’s application.
On the same date, the Tribunal also issued Procedural Order No. 4, rejecting the Respondent’s request to bifurcate the proceeding and reserving for a later date its decision regarding the costs incurred as a result of the Respondent’s request.

A hearing on jurisdiction and the merits was held between 25 and 28 April 2016 at the World Bank in Paris, France. Attending the hearing were:

Tribunal Members

• Judge James Crawford AC, President of the Tribunal
• Dr. Stanimir Alexandrov, Arbitrator

ICSID Secretariat

• Mr. Francisco Abriani, Secretary of the Tribunal

Appearing on behalf of the Claimants:

• Mr. Barton Legum, Dentons Europe LLP
• Ms. Anne-Sophie Dufetre, Dentons Europe LLP
• Mr. Augustin Barrier, Dentons Europe LLP
• Mr. Niccolo Castagno, Dentons Europe LLP
• Mr. Pierre Esteve, Dentons Europe LLP
• Mr. Louis Helfre-Jaboulay, Dentons Europe LLP
• Mr. Giuseppe Velluto, Gianni, Origoni, Grippo, Cappelli and Partners
• Ms. Valentina Grippa, Gianni, Origoni, Grippo, Cappelli and Partners

Claimants’ Witnesses

• Mr. Jean-Pierre Lecorcier
• Mr. Michael Stein

Claimants’ Experts

• Mr. Paolo Marino, Poyry Italy S.r.l. - Business Expert
• Ms. Paola Lualdi, Poyry Italy S.r.l. - Business Expert
• Mr. Maurizio Parodi, Poyry Italy S.r.l. - Business Expert
• Mr. Carlos Lapuerta, The Brattle Group, Inc. - Damages Expert
• Mr. Pedro Marin, The Brattle Group, Inc. - Damages Expert
• Mr. Federico Melzani, The Brattle Group, Inc. - Damages Expert

Appearing on behalf of the Respondent:

• Avv. Sergio Fiorentino, Avvocatura dello Stato
• Avv. Paolo Grasso, Avvocatura dello Stato
• Prof. Dr. Maria Chiara Malaguti, External Counsel to the Ministry of Foreign Affairs
• Avv. Giuseppe Stuppia, Legal Service of the Ministry of Foreign Affairs

Respondent’s Experts

• Mr. Luca Benedetti, GSE - Gestore Servizi Energetici
• Mr. Daniele Bacchiocchi, GSE - Gestore Servizi Energetici
• Mr. Luca Miragli, GSE - Gestore Servizi Energetici
• Mr. Valerio Venturi, GSE - Gestore Servizi Energetici
• Mr. Francesco Trezza, GSE - Gestore Servizi Energetici

Court Reporter

• Mr. Trevor McGowan


• Ms. Eliza Bumhum
• Ms. Sarah Rossi
• Ms. Anne Verclytte
• Ms. Anna Collins
• Ms. Enrica Dal Santo
• Ms. Delfina Genchi

On 24 April 2016, the Parties were notified that one of the arbitrators, Professor Dupuy, had been admitted to hospital and was accordingly unavailable to attend the rescheduled hearing. At the beginning of the hearing, on 25 April 2016, the Claimants asked the other two members of the Tribunal to go forward with the hearing as planned, noting that the Parties had already given their consent to proceed with the hearing in such circumstances at paragraph 4.1 of Procedural Order No. I,11 which provides in relevant part as follows:

... in the event of unexpected health or other serious issues concerning a Member making him unable to be present, the other two Members shall exercise their judgment as to whether to sit with two Members. The Parties shall be informed of such circumstances beforehand.12

The Claimants also noted that this hearing had already been postponed once.13

The Respondent, in turn, noted as follows:

We also know, of course, the text of the Procedural Order No. 1.... in any event, we do recognise that we are in your hands. My only point at this stage would be: we are not speaking about one sitting of the Tribunal; we are speaking of the only hearing that we have, where we discuss everything at once. Of course Professor Dupuy can read the transcript, but it’s absolutely not the same thing as being able to dialogue, to see each other in our eyes, to make questions one after the other, and to interact. It’s not the same. And I think arbitration has a characteristic: the extreme relevance of this phase is especially when you speak with the witnesses and the experts. So for us, we do not feel that we really can proceed with the hearing without one of the three members. It’s too important for him to be present to really understand the way we discuss the case. So we would really oppose to that. We are in your hands, so you take the decision of course.14

In making a decision, the other two members of the Tribunal also considered the views of Professor Dupuy, who agreed that pursuant to paragraph 4.1 of Procedural Order No. 1 the other two members of the Tribunal could proceed with the hearing in his absence.
Moreover, the Tribunal noted that the Parties’ agreement, as expressed in Procedural Order No. 1, is compatible with Rules 14 and 20(1)(a) of the ICSID Arbitration Rules.
Acting in accordance with paragraph 4.1 of Procedural Order No. 1, and after hearing the Parties, the other two members decided to proceed with the opening submissions of the Parties and the hearing of witnesses but to postpone closing submissions until a date to be fixed, when all members of the Tribunal could be present. The possibility was left open that the Tribunal might recall one or more witnesses should Professor Dupuy, after reading the transcripts, wish to put further questions. Subsequently, the Tribunal informed the Parties that this would not be necessary.15

The President of the Tribunal communicated the Tribunal’s decision to the Parties as follows:

This is obviously a regrettable situation. To postpone the hearing at this stage would be a second postponement, as pointed out, and would involve extra costs. On the other hand, the Respondent is in principle entitled, subject to the rules, to a hearing by the Tribunal. But there has been agreement between the parties in a quite carefully worded provision specifically envisaging a situation in which unexpected health problems supervene. One other consideration is that the members of the Tribunal have many commitments, and scheduling another five-day hearing this side of the summer is going to be difficult.

So the Tribunal has decided, in the exercise of the discretion conferred by the rules, to go ahead, but to go ahead as a truncated Tribunal with a truncated hearing. What we propose is that we would have the openings today — it is traditional in openings that there’s not detailed questioning, but questioning more by way of clarification - to hear the witnesses, and then to adjourn. The hearing would therefore last for three and a half days as scheduled.

We would then reconvene as soon as a date can be found for the closings, which will enable Professor Dupuy to read the transcripts. If there is a compelling case for a witness to return to the chair for questions from Professor Dupuy, that can be done. So there would be a further hearing of a day, or perhaps a day and a half, in which the closings would be conducted in the presence of Professor Dupuy. That would enable him — especially if we schedule a bit longer for the closing - to fully participate.

We think that that solution, subject to the comments of the parties, addresses the problems so far as we can do so. It reduces the wasted costs of this hearing. It makes it much easier for us to schedule a resumed hearing in the next couple of months. I don’t know when that will be because we haven’t been able to get in touch with Professor Dupuy, but obviously we will correspond on that. It enables Professor Dupuy to participate fully in the closing and to ask questions, and if necessary gives him a bit more time to do that. Subject to the comments, that’s the Tribunal’s decision, unless the parties have compelling reasons not to adopt that.16

The Claimants stated that ‘the solution that the Tribunal has proposed is a reasonable one and we would endorse it.’17 Following further exchanges with the Tribunal and counsel for the Claimants, the Respondent stated:

Thank you Mr. President. We can start if you want. We spoke with our principals in Rome; they were not so happy but the decision is taken. So let’s go on."18


The hearing was resumed on 21 and 22 June in Paris, in the presence of the entire Tribunal, at which the Parties presented their closing arguments and submissions according to an agreed timetable. In doing so they addressed, inter alia, a list of questions provided in advance by the Tribunal. Attending the hearing were:

Tribunal Members

• Judge James Crawford AC, President of the Tribunal
• Dr. Stanimir Alexandrov, Arbitrator
• Professor Pierre-Marie Dupuy, Arbitrator

ICSID Secretariat

• Mr. Francisco Abriani, Secretary of the Tribunal

Appearing on behalf of the Claimants:

• Mr. Barton Legum, Dentons Europe LLP
• Ms. Anne-Sophie Dufetre, Dentons Europe LLP
• Mr. Augustin Barrier, Dentons Europe LLP
• Mr. Niccolo Castagno, Dentons Europe LLP
• Mr. Pierre Esteve, Dentons Europe LLP
• Mr. Jean-Pierre Lecorcier, Claimant
• Mr. Michael Stein, Claimant

Appearing on behalf of the Respondent:

• Avv. Gabriella Palmieri, Avvocatura dello Stato
• Avv. Sergio Fiorentino, Avvocatura dello Stato
• Avv. Paolo Grasso, Avvocatura dello Stato
• Avv. Giacomo Aiello, Avvocatura dello Stato
• Prof. Dr. Maria Chiara Malaguti, External Counsel to the Ministry of Foreign Affairs
• Avv. Giuseppe Stuppia, Legal Service of the Ministry of Foreign Affairs
• Mr. Daniele Bacchiocchi, GSE - Gestore Servizi Energetici
• Mr. Luca Benedetti, GSE - Gestore Servizi Energetici
• Ms. Marta Capriulo, GSE - Gestore Servizi Energetici
• Mr. Francesco Trezza, GSE - Gestore Servizi Energetici
• Mr. Valerio Venturi, GSE - Gestore Servizi Energetici

Court Reporter

• Mr. Trevor McGowan

During the evening of 21 June 2016, the Secretary received an application from a subsidiary of Blusun, Eskosol. Eskosol (now in liquidation and under the control of an Italian liquidator appointed by an Italian court) sought permission to intervene as a non-disputing party under Rule 37(2) of the Arbitration Rules. Eskosol had previously commenced its own ICSID arbitration, as a subsidiary of Blusun, relying on the same facts against Italy as Blusun has done. In short, it submitted that this Tribunal lacks jurisdiction and/or the Blusun claim is inadmissible because the Claimants are ‘seeking damages to which only Eskosol is entitled, which will cause prejudice to Eskosol, its creditors and the Non-Party Shareholders.’19

Having consulted the Parties and received concordant oral and written submissions from them, the Tribunal rejected Eskosol’s application, on the following grounds:

6. The Tribunal notes that, pursuant to Rule 37(2) of the ICSID Arbitration Rules, it "shall ensure that the non-disputing party submission does not disrupt the proceeding or unduly burden or unfairly prejudice either party."

7. The Tribunal also notes that Eskosol’s Application was submitted extraordinarily late and that there is no excuse for the lateness. The existence of this proceeding is public and has been known for a long time. Moreover, Eskosol itself has been aware of this proceeding for quite some time: it has initiated other ICSID proceedings against the same Respondent and, as Respondent stated at the hearing, Respondent offered to Eskosol to consolidate the two cases.

8. The Tribunal further notes that both parties agree that Eskosol’s Application should be rejected on the basis that it would disrupt the proceedings.20

The Respondent, in arguing for the rejection of Eskosol’s application, added that:

According to Rule 37(2), a non-disputing party can be admitted if this is not a party to the proceeding, or linked to this. As the Respondent has stated when justifying its proposal for consolidation to the Counsels of both the Claimants and Eskosol, and as it was reiterated in Italy’s letter to the Tribunal of March 17th to answer the Claimants’ comments to its request for bifurcation and information about request for consolidation, ‘Eskosol is that very same company that the Claimants define as their Italian vehicle for the purported investment in Italy.’ Eskosol could consequently not take advantage of Article 37(2) because it pertains to the same business entity as Blusun. As for international investment law, Blusun and Eskosol are the same entity.21

Neither Party requested post-hearing briefs, nor did the Tribunal see any need for them.
On 18 July 2016, the Claimants submitted an application for leave to introduce to the record the decision on jurisdiction in the case RREEF Infrastructure (G.P.) Limited, and RREEF Pan-European Infrastructure Two Lux S.d.r.l. v. Kingdom of Spain (ICSID Case No. ARB/13/30), dated 6 June 2016, as a new legal authority. After having heard the Respondent on the Claimants’ request, the Tribunal admitted to the record the new legal authority submitted by the Claimants as Exhibit CL-255 and invited the Parties to submit observations on its content. The Claimants submitted very brief observations on 18 August 2016. The Respondent submitted its observations on 5 September 2016.
On 1 August 2016, the Claimants filed their submission on costs. The Respondent did not make any submission on costs.
In the circumstances, the Tribunal believes the Parties have each had a full opportunity to present their case, as they each confirmed at the end of the resumed hearing.22


1. The Claimants’ request for relief

In their Reply, the Claimants requested an Award:

a. Declaring that the Italian Republic has breached its obligations under Part III of the Energy Charter Treaty;

b. Ordering the Italian Republic to pay compensation corresponding to the loss of investment made and to the capital gains that the Claimants were unable to realize on their investments, in an amount to be proven at the hearing but which the Claimants presently estimate to be EUR 187.8 million;

c. Ordering the Italian Republic to pay interest on the above sum from the date of the first breach to the date of the award at the rate for three-month Italian bonds, compounded monthly;

d. Ordering the Italian Republic to pay the expenses incurred by the Claimants in connection with these proceedings, including professional fees and disbursements, and to pay the fees and expenses of the Members of the Tribunal and the charges for the use of the facilities of the Centre, in accordance with Article 61(2) of the ICSID Convention;

e. Ordering the Italian Republic to pay interest on the sums awarded at the rate for three-month Italian bonds, compounded monthly, from the date of the Award until its full discharge by Italy;

f. Ordering that all sums awarded be paid to a subaccount established for this case by the Fund for Lawyers’ Pecuniary Payments (Caisse des reglements pecuniaires de la profession d’avocat) maintained by the Bar of Paris, France (Ordre des Avocats de Paris)',

g. Ordering such other and further relief as the Tribunal deems appropriate in the circumstances.23

In closing, the Claimants reaffirmed these submissions:

The purpose of a closing statement is to review the evidence presented at the hearing and to provide the parties’ views on the implications of that evidence for the legal issues to be decided. This will be the principal focus of our closing statement this morning. We will generally not repeat today what we said in our opening or in our written submissions, except to respond to statements made during the hearing. The Tribunal should bear in mind, however, that we continue to rely on our prior oral and written submissions.24

2. The Respondent’s request for relief

In its Rejoinder, the Respondent requested the Tribunal as follows:

a. Decline jurisdiction to decide, as the Project does not meet the conditions of an investment that can be protected under the ICSID and the ECT.

b. Alternatively, decline jurisdiction to decide, as the alleged investment was created in violation of the national law; of the national and international principles of good faith; of the ECT rules on environmental protection.

c. In a further alternative, decline admissibility of protection of the Claimants’ alleged interests since these are barred from seeking relief because of their unlawful conduct when constituting the alleged investment.

d. Should the Tribunal decide to have jurisdiction on the case, declare, on the merits, that all the claims of the Claimants, both under Article 10(1) and article 13 of the ECT, are unfounded, since there completely lacks any causal link between the challenged Respondent’s conduct and the outcomes of the Project; that, in any case, the Respondent’s conduct does not constitute a violation of such rules.

e. In this context, declare the witness statements as submitted by the Claimants both in the Memorial and the Reply as unfit to prove evidentiary facts since Mr Lecorcier and Mr Stein are party to the arbitral proceedings, and the requests for damages not supported by consistent evidence.

f. In the unfortunate event that the Tribunal were to recognize legitimacy to one of the claims of the Claimants and recognize some form of compensation to the Claimants, declare appropriate the calculations of the damage and the interest proposed by the Respondent, including for calculation of interest.

g. However exclude from the amount of compensation the part of contributory fault attributable to the conduct of the Claimants, whose responsibility in the negative outcomes of the Project is far superior to that in any way attributable to the Respondent.

h. Ordering the Claimants to pay the expenses incurred by the Italian Republic in connection with these proceedings, including professional fees and disbursements, and to pay the fees and expenses of the Members of the Tribunal and the charges for the use of the facilities of the Centre, in accordance with Article 61(2) of the ICSID Convention.25

In closing, the Respondents reaffirmed these submissions:

Italy firmly believes that this hearing has fully demonstrated the inconsistency of Blusun, Mr Lecorcier and Mr Stein’s claims. Therefore, no wrongful acts have been committed by Italy. No violations by Italy of Articles 10 and 13 of the Energy Charter Treaty have been proven. These closing statements will be devoted to summarising what emerged in the last hearing, underlying the reasons why the Respondent has no responsibility for the failure of Claimants’ project. In any case, it has to be clearly stated that the Respondent, even if in these closing statements it will not treat each single point of its written submissions, does not renounce to any of its arguments, which are entirely recalled here.26


The purpose of this section is to provide a brief account of the factual background to the dispute. There are no major differences between the Parties as to the events described in the section. There are, however, significant differences as to the legal consequences of the actions taken and not taken, as will be seen.

A. The 120 MW project

The photovoltaic plants included in the Claimants’ Project had been initially developed by 12 local companies (special purpose vehicles or ‘SPVs’) under the aegis of local investors. Between 2008 and 2009, these companies had acquired certain rights and permits for the development of the plants. As explained in more detail below, these were rights over the land where the plants would be built, construction permits, and permits for connecting each plant to the local medium-voltage grid.

B. The Claimants’ involvement in the Project

On 23 September 2009, Jean-Pierre Lecorcier and Michael Stein, through a Swiss company that they own and control named Energy Solution Concept (‘ESCO’),30 signed a non-exclusive memorandum of understanding with Oikonomia Dante and Partners (‘Oikonomia’), an Italian consultancy firm. The stated purpose of this memorandum was the development of three large scale projects for the production of energy based on photovoltaic modules in Southern Italy.31 Messrs. Lecorcier and Stein eventually decided to pursue only one of those projects: the 120 MW project in Puglia.32
In order to do so, the investors had to purchase the SPVs that held the rights and permits for the development of the plants.33 They also had to build two substations to connect the solar plants to the national grid, and medium-voltage grids (or ‘rings’) to connect the solar plants to each other and to the two substations.34
On 27 November 2009, Messrs. Lecorcier and Stein signed another memorandum of understanding pursuant to which ESCO would grant a €758,000 loan to Oikonomia in order to make certain down payments to the local developers,35 and committed funds for future payments.36
On 3 December 2009, Oikonomia entered into a series of preliminary share purchase agreements with the local developers who owned the 12 SPVs, and made partial payments pursuant to those agreements with the funds facilitated by ESCO.37
For the development of the project, the Claimants established a corporate structure consisting of a Belgian holding company (Blusun) and two Italian subsidiaries: Societa Interconnessioni Brindisi S.R.L. (SIB) and Eskosol.

Blusun was established by Messrs. Lecorcier and Stein on 10 December 2009 as a holding company. The company was registered in Belgium on 20 December 2009.38 The sole shareholders of Blusun are Messrs. Lecorcier and Stein.39 Mr. Lecorcier holds two-thirds of the shares; Mr. Stein, one third.


SIB was established by Oikonomia on 14 December 2009, and was registered in Rome on 16 December 2009.40 Oikonomia transferred the full ownership of SIB to Blusun on 18 December 2009. However, after a change in SIB’s corporate structure, Blusun retained 50% of SIB’s shares.41 According to the Claimants, SIB’s primary role was to build and manage the two substations.42

Eskosol was established on 21 December 2009 and registered in Rome on 24 December 2009. Blusun holds a controlling (80%) interest in Eskosol.43 According to the Claimants, Eskosol was established as a holding company for the 12 SPVs; it was also supposed to construct the 120 solar plants and the rings.44

C. The Italian legislative and regulatory framework for solar projects as of November 2009


One of the main legislative sources at the time the Claimants invested in the solar project in Puglia was Legislative Decree 387/2003, dated 31 January 2004, which implemented European Directive 2001/77/EC of 27 September 2001 on the promotion of electricity from renewable energy sources in the EU internal electricity market (the 'First Renewables Directive').45

The First Renewables Directive was aimed at promoting the development of energy produced from renewable sources. It provided, among other things, that Member States should adopt national indicative targets regarding the consumption of energy produced from renewable sources,46 publish reports regarding the achievement of the national indicative targets every two years,47 and simplify the authorisation procedures for renewable energy projects.48 The European Commission, in turn, would assess the cost-effectiveness of the incentives adopted by the Members States in view of the adoption of a subsequent EU framework on this matter.49
At the time of the Claimants’ initial involvement in the project, solar projects in Italy were subject to national and regional regulations. The regulations cited by the Parties in this proceeding concern (1) construction permits, (2) permits for connecting the plants to the medium- and high-voltage grids, and (3) tariffs.50 These are briefly described below.

1. Construction permits


At the national level, Legislative Decree 387/2003 established a simplified authorisation procedure for the construction of plants powered by renewable sources, according to which renewable energy projects need to obtain only a single authorisation (called ‘Antorizzazione Unica’ or ‘AU’) granted by a joint conference in which all relevant authorities participate to assess the application.51 The decree required the AU procedure to be completed within 180 days from the filing of the application.52 Moreover, the AU procedure was subject to existing regulations regarding environmental protection.53


Solar plants with capacity below 20 KW were subject to a different, declaratory procedure (the ‘Denuncia di Inizio Attivita’ or ‘DIA’). This procedure was established by Decree of the President of the Republic No. 380 of 6 June 2001, which entered into force on 1 January 2002.54 The DIA procedure consisted in the presentation of a declaration and supporting documentation by the applicant. Absent formal objection by the competent authority (i.e. the municipality concerned) within 30 days following the application, the applicant was permitted to begin work.55 The DIA authorisation was thus implicit, and the works had to be completed within three years after the expiration of the 30-day period for objection by the municipal authority.56


The Puglia region also adopted laws and regulations regarding the construction of solar plants. These included, in particular, Puglia Regional Law 1/2008 of 19 February 2008, and Puglia Regional Law 31/2008 of 21 October 2008.57 Both regional laws allowed the use of the DIA procedure for solar plants with a capacity up to 1 MW.58 They also contained specific requirements for DIA applicants for solar plants to be built on agricultural land.59 Regional Law 31/2008 added some additional requirements for this kind of project: (a) the plot of land on which the plant was located should be at least twice as large as the portion occupied by the plant; and (b) the portion not occupied by the plant should be used exclusively for agricultural activities.60 Regional Law 31/2008 also provided as follows:

Plants installed on the ground in an agricultural area which consists of lands belonging to the same owner, or which is made up of several plots resulting from the splitting of an area of greater extension carried out within two years prior to the application, are considered as a single plant for the purposes of calculating the maximum electric power for having recourse to the DIA procedure.61

The Respondent asserts that ‘the use of the DIA for plants of less than 1 MW was excluded by the mentioned regional laws if the plants established on agricultural land belonged to a single owner, or were part of a unitary project.’62 It also claims that, even though Regional Law 1/2008 did not include an express provision to this effect, ‘this has constantly been interpreted in this way.’63
The Respondent notes that ‘these principles were reiterated in further measures of the Puglia Region’,64 and inserted in the National Guidelines for the authorisation of plants powered by renewable sources.65
The Parties also refer to Circular 38/8763 of 1 August 2008. By this circular, the Puglia department of economic development recommended that the municipalities pay attention to possible connections between multiple declarations of the initiation of activity, as oversights on the part of the applicants could have led to the use of the DIA procedure for plants whose overall electric power exceeds the 1 MW limit set forth in Article 27 of Regional Law 1/2008.66

2. Permits to connect to the national transmission and local distribution grids


The national transmission grid in Italy is operated by Terna S.p.A. (‘Terna’). Most of the local distribution grids are operated by Enel.67 Connection to the national transmission and local distribution grids is regulated by the Authority for the Electric Energy and Gas (the ‘A££G’). The Claimants describe the connection procedure by reference to two AEEG Resolutions: AEEG Resolution No. 281/2005 (also called the ‘GOAL Resolution’, which was in force between 22 December 2005 and 31 December 2008) and AEEG Resolution No. 99/2008 (also called the ‘TICA Resolution’, which has been in force since 1 January 2009 to the present).68 Both resolutions addressed interconnections requests for plants of less than 10 MW.69


Under the GOAL Resolution, the applicant was required to submit an application and pay a fee to Enel, which in turn would propose a solution to the applicant in order to connect to the grid: this was called the ‘general minimum technical solution’ (‘Soluzione Tecnica Minima Generate’ or ‘STMG’). The applicant had to accept the STMG within a certain period of time. Following the acceptance of the STMG by the applicant, Enel issued a detailed minimum technical solution (‘Soluzione Tecnica Minima di Dettaglio' or ‘STMD’).70

Under the TICA Resolution, a distinction is made between applications to connect to the medium-voltage grid and to the high-voltage grid. Applicants have to submit their requests to the local grid operator and pay a fee. For requests concerning connection of plants of between 100 KW and 1 MW to the medium-voltage grid, Enel issues an interconnection estimate ('preventive di connessione’) valid for 45 days which the applicant has to accept. The interconnection estimate also indicates the amount to be paid for connection works. However, the TICA Resolution permits the interconnection works to be performed by the applicant.71
In the case of requests for connection to the high-voltage grid, Enel receives the applications and considers how to connect the plant to the grid operated by Terna.72 Enel also issues a STMG which the applicant has 60 days to accept. If the applicant accepts the STMG, Enel issues the STMD and the parties enter a service agreement (the ‘regolamento di esercizio’).73

3. Tariffs

Legislative Decree 387/2003 foresaw the adoption of decrees that would define ‘the criteria for encouraging the production of electricity from solar source.’74 It provided that ‘[f]or the electricity produced by photovoltaic conversion of solar energy, the criteria would provide for a specific incentive tariff by decreasing amount and duration as to ensure a fair remuneration of investment and operating costs.’75 The system was subject to periodic reviews in the form of reports that were to be produced for the first time in 2005 and subsequently every two years.76
Pursuant to Article 7 of Legislative Decree 387/2003, Italy adopted a remuneration system for solar plants based on fixed rates (feed-in tariffs or ‘FITs‘. This remuneration system was first implemented in 2005, through the so-called First Energy Account, and subsequently amended through the Second, Third, Fourth and Fifth Energy Accounts.77 These regulations provided that solar plants that became operational by a certain date would receive feed-in tariffs based on the nominal power of the plant, according to a scheme that would be valid for twenty years.78
The Energy Accounts in force during the period between 2008 and 2012 were the Second, Third and Fourth Energy Accounts.79 These applied to solar plants that entered into operation between certain dates, as follows:

(a) Second Energy Account: applied to solar plants that entered into operation on or before 31 December 2010.80

(b) Third Energy Account: applied to solar plants that entered into operation between 31 December 2010 and 31 December 2013.81 Its applicability, however, was subsequently limited by the so-called ‘Romani Decree’ to solar plants commencing operations before 31 May 2011.82

(c) Fourth Energy Account: applied to solar plants that entered into operation between 1 June 2011 and 31 December 2016.83


The entity in charge of regulating the renewable energy sector and purchasing and reselling electricity from renewable energy plants is Geslore dei Servizi Energelici (‘GSE’), a state-owned entity whose sole shareholder is the Italian Ministry of Economy and Finance.84

D. The Claimants’ investments

The Claimants describe a number of investments made in relation to the construction of the two substations, the acquisition of the 12 local companies and land, and the construction of the local grid.

1. The two substations


Prior to the creation of Blusun, SIB and Eskosol, the 12 local companies had obtained the relevant permits for the connection of the plants to the distribution grid and for the connection of the two substations to the national grid from Enel and Terna, the operators of the distribution and transmission grids.85 The applications had been made by Nico Energia S.r.l. (‘Nico’) on behalf of the 12 local development companies.86 On 30 November 2009, the province of Brindisi issued two decrees granting Nico two single authorisations (AUs) for the construction and operation of the Maffei and Torre Mozza substations.87


In December 2009, SIB finalized the acquisition of the land where the two substations would be built.88 On 24 February 2010, SIB signed a contract with Ansaldo Sistemi Industriali S.p.A. ('Ansaldo') for the construction of the two substations.89 On 29 April 2010, SIB signed a financing agreement with UniCredit for a total amount of €6,076,000,90 and the construction of the two substations was completed on 13 November 2010 (the one located in Torre Mozza) and on 6 January 2011 (the one located in Maffei).91

2. The local companies and the land

Blusun completed the acquisition of the 12 local companies through Eskosol between 18 May and 23 July 2010, as Eskosol signed the relevant final share purchase agreements.92 Prior to the constitution of Blusun, SIB and Eskosol, the 12 local development companies had obtained land rights through land sale and purchase agreements93 and through a series of long-term lease agreements with land owners.94

3. The local grid

From January to May 2010, Nico obtained authorisations from the Municipalities of Brindisi, Mesagne and Cellino San Marco for the works for underground cable connections.95
In May 2010, Nico requested public easements on privately-owned lands to facilitate the construction of ‘electric power lines to connect photovoltaic plants to the distribution grid.’96 This request was published in Corriere della Sera and in Corriere del Mezzogiomo, a national and a regional newspaper, on 11 May 2010.97 On 26 July 2010, the Province of Brindisi granted the requested public easements.98
On 30 July 2010, Eskosol signed a purchase order for 370 km of medium-voltage underground cables to be provided by Nexans.99
On 2 November 2010, Eskosol signed contracts with Nuovapanelectric S.R.L. and Convertino S.R.L. for the construction of the rings, and hired EOS as technical supervisor.100
On 8 November 2010, the Province of Brindisi also issued public easements for excavation works.101

4. The construction permits

Between June 2008 and June 2009, the local development companies applied for DIA authorisations for 119 solar plants pursuant to Puglia’s regional laws No. 1/2008 and 31/2008.102 The Respondent provided a map indicating the location of the plants.103
The local development companies obtained 65 certificates of expiry, confirming that the 30-day limit to raise objections had expired,104 and 53 certificates of conformity,105 which stated that the construction of the relevant solar plants was in conformity with the procedures set out in Regional Law 31/2008 and with general urban planning instruments.

E. The Constitutional Court decision of 2010 and the regulations adopted thereafter

In December 2008, the Italian Government sought to challenge the constitutionality of Puglia’s Regional Law 31/2008 before the Constitutional Court. One of the main grounds for the constitutional challenge was that, by permitting recourse to DIA authorisations for solar plants with capacity above the threshold set out in Legislative Decree 387/2003 (i.e., 20 KW), Article 3 of Puglia’s Regional Law 31/2008 (which permitted recourse to that procedure for solar plants of up to 1 MW) contradicted Legislative Decree 387/2003.106
On 26 March 2010, the Constitutional Court ruled that Article 3, paragraphs 1 and 2, of Puglia’s Regional Law 31/2008 were unconstitutional.107

On 13 August 2010, the Italian Government adopted Law 129/2010 (also called the ‘Salva-Alcoa law’), approving Law Decree 105/2010. Law 129/2010 provided as follows:

Article 1-quater Declarations of initiation of activity regarding the construction of electric power plants based on renewable sources

1. The effects related to the authorization procedures based on [DIAs] referred to in Articles 22 and 23 of the Consolidated Text set by the Decree of the President of the Republic n. 380 of 6 June 2001, for the construction of plants for the production of electricity from renewable sources, initiated in accordance with regional laws, concerning thresholds exceeding the levels set out in Table A of the Legislative Decree n. 387 of 29 December 2003 [i.e., plants with capacity above 20 kilowatts], are maintained, provided that the operation of the plants starts within one-hundred and fifty days from the date of entry into force of the present Law implementing this decree.108


On 25 November 2010, Watson Farley, acting as counsel for Eskosol, sought clarification from the GSE as to the effect of Law 129/2010 on the plants that obtained DIA authorisations between August and September 2008 and, in particular, on their eligibility for feed-in tariffs.109 On 3 December 2010, the GSE responded as follows:

If the plants referred to in the first sentence of paragraph 3 mentioned above, i.e., those authorized between August and September 2008, comply with all the requirements, including with the technical standards resulting from the applicable rules, such as the decisions of the Authority for the Electric Energy and Gas, and unless the competent administrative authorities should rule in a different manner with regard to the interpretation of Article 1- quater of the Decree Law 105/2010 approved, with its amendments, by Law 129/2010, it is held that admission to the incentives under the so-called Energy Account is possible, in accordance with the relevant provisions of the applicable legislation.110


On 15 December 2010, the Ministry of Economic Development issued a Circular regarding the scope of Law 129/2010. The Circular stated as follows:

[T]he provisions of article 1-quater are not intended in any way to have effects with respect to so-called ‘consolidated’ legal relationships, i.e., relating to those DIAs that have become ‘final’ since no longer subject to challenge due to the expiration of time-limits to file an appeal in courts and/or to submit extraordinary appeals to the President of the Republic. These DIAs are therefore not subject to the time-limit for commencement of operations of plants established by article 1-quater above.111

According to Claimants, it was only the Circular which finally cleared up the uncertainty arising from the Constitutional Court’s decision of 26 March 2010.

F. Eskosol’s EPC contract with Siemens and contacts with potential investors

On 29 December 2010, Eskosol signed an EPC contract with Siemens for the construction of the plants.112 The EPC contract provided that the plants would be built in three phases: 30 MW should be connected by 30 April 2011, an additional 60 MW should be connected by 31 August 2011, and an additional 30 MW should be connected by 15 November 2011.113
Under the EPC contract, Eskosol was responsible for: (a) providing the photovoltaic modules,114 (b) purchasing or leasing the land where the plants would be built,115 and (c) obtaining and maintaining the relevant permits and grid connection authorisations.116 Siemens was allowed to propose amendments to the scope of work in case of change in the applicable permits.117 The EPC contract also provided that Siemens would be subject to the payment of liquidated damages in the event that delays in the completion of the works resulted in Eskosol missing the subsidies.118
On 29 December 2010, Eskosol also hired Energy One S.R.L. as director of works and safety management for the construction of the 120 solar plants.119
On 20 January 2011, Eskosol and Siemens agreed to postpone the signature of the annexes to the EPC contract until 28 January 2011, and the date for the first down payment until 28 February 2011.120 On the same date, Eskosol sent a notice to Siemens requesting it to proceed with the works regarding the first group of plants.121
On 26 January 2011 and 4 February 2011, Eskosol received letters from financial investors showing interest in the Project and requesting information.122 No commitments of project financing were, however, obtained at this or any time.
On 28 February 2011, Eskosol failed to make the 20% down payment, and on 7 March 2011 Siemens suspended performance of the EPC contract and proposed conditions for the works to resume.123

G. The Romani Decree

On 3 March 2011, the Italian Government enacted Legislative Decree 28/2011 (the ‘Romani Decree' ), which entered into force on 29 March 2011.124 The stated objective of the Romani Decree was to implement Directive 2009/28/EC on the promotion of the use of energy from renewable sources, and to amend and repeal Directives 2001/77/EC and 2003/30/EC.125
Among other reforms, the Romani Decree established that the feed-in tariffs adopted by the Decree of 6 August 2010 (the Third Energy Account) applied only to plants that entered into operation before 31 May 201 1126 (and not, as originally established in the 6 August 2010 Decree, to plants that entered into operation by 31 December 2013).127
The Romani Decree also established that any solar plants to be built on agricultural land would be eligible for feed-in tariffs only if the plant had a capacity of less than 1 MW and occupied less than 10% of the parcel on which it was erected.128 This limitation, however, did not apply to those plants that entered into operation within one year of the entry into force of the Romani Decree (i.e., by 29 March 2012).129

As noted by both Parties, investors in the solar energy industry reacted against the Romani Decree.130 The Respondent notes that some investors sought to challenge it by bringing administrative proceedings. In particular, it cites a decision from a Lazio court which upheld the legality of the Romani Decree on the ground that ‘it seems rather to implement a "fine tuning" oriented to proportionality and gradual[ness], in full compliance with the directions of European law.’131

H. The Fourth Energy Account

On 19 April 2011, the Italian Government made public a draft decree containing the key components of the Fourth Energy Account.132
The Fourth Energy Account was adopted by Decree of 5 May 2011.133 The Claimants highlight three aspects:

(a) First, for the period between 1 June 2011 and 31 December 2012, the Fourth Energy Account limited to specific amounts the incentives available for ‘large plants.’134

(b) Second, it created an on-line register of plants eligible for feed-in tariffs administered by the GSE.135 Large plants that entered into operation on or before 31 August 2011 were automatically eligible for feed-in tariffs, while those entering into operation between 1 September 2011 and 31 December 2012 had to be listed in the register. Plants listed in the register would receive feed-in tariffs only if the ranking in the register so allowed, based on the costs limits established in Article 4(2).136 The deadline for submitting applications to the GSE register, for purposes of eligibility for feed-in tariffs in 2011, was 30 June 2011.137

(c) Third, the Fourth Energy Account established that, for the purposes of the allocation of feed-in tariffs, ‘several photovoltaic plants belonging, or attributable to, the same responsible entity and located either within the same or within contiguous cadastral parcels of land shall be considered a single plant of a capacity equal to the cumulative capacity of the individual plants.’138 The plants’ capacity, in turn, had an impact on the amount of the feed-in tariffs.139

Eskosol submitted all applications for the GSE register by 30 June 2011,140
In May 2011, Eskosol hired Capital Systeme Investissements S.A. (‘Capital Systeme'), an investment firm, to prepare a valuation of the Project for presentation to potential investors. According to the valuation prepared by Capital Systeme on the basis of the Romani Decree and the Fourth Energy Account, the value of the Project was €162,954,000.141

I. The GSE’s lists

On 15 July 2011, the GSE published a list ranking the solar plants eligible for the 2011 feed-in tariff under the Fourth Energy Account.142 The list included 115 of the 120 plants in the Claimants’ Project.143
On 29 July 2011, the GSE published a new list, as the first one contained errors.144 This list contained 113 of the 120 plants in the Claimants’ Project.145
The GSE subsequently published two more rankings, one on 12 August 2011146 and a final one on 16 September 2011.147 As explained by the Claimants, the second list published by the GSE was not final because, pursuant to Article 8(5) of the Fourth Energy Account, solar plants initially included that became operational before 31 August 2011 would be excluded from the list and new ones were going to be added.148 The number of plants which were part of Blusun’s Puglia Project remained throughout at 113.149

J. The project to build 27 plants

According to Messrs. Lecorcier and Stein, in the autumn of 2011, Eskosol was in a difficult financial situation. This led its shareholders to split the Project and build 27 solar plants (instead of 113) by the 29 March 2012 deadline. In their view, the sale of those plants would have allowed them to purge Eskosol’s and SIB’s debt.150
On 7 October 2011, Eskosol received a preliminary non-binding offer from Euro Catalysts Capital, proposing to purchase the 27 plants for approximately €67 million on the assumption that 11 plants would be connected to the grid by the end of November and that the other 16 would be connected by the end of December 2011.151 After receiving the non-binding offer, Eskosol negotiated a new EPC contract with two local construction companies to construct the 27 solar plants.152 This agreement provided that Eskosol assigned to its creditors the price that would be realized on the sale of the 27 plants to a final taker.153 In exchange, Eskosol’s creditors agreed to waive any claims they had against Eskosol.154 Having reached this agreement with its creditors, Eskosol still ‘had to convince Euro Catalysts (or other investors) of the feasibility of the 27-plant project, in order to finalize a purchase offer.’155
Also in November 2011, Eskosol decided to start the construction of two of the solar plants itself,156 and it obtained a loan for that purpose on 18 November 2011.157

K. The municipal stop-work order

On 17 November 2011, the environmental protection unit of the local police inspected Eskosol’s construction sites. On 21 November 2011, the police communicated observations regarding the inspection to the local prosecutor.158 On 25 November 2011, the local prosecutor informed the municipality of Brindisi that the situation as observed by the police constituted a criminal offense violating zoning regulations.159 In his letter, the prosecutor stated as follows:

[G]iven the contiguity of the planned plants and their connection to a unique centre of interests, it is obvious that the intent of the owners of this business project was to proceed with an artificial division of several plants in order to circumvent the procedure for the issuance of a construction permit by the region.160


The prosecutor referred to Puglia’s Circular of 1 August 2008 and stated that it:

invited the Municipalities to adopt an attentive surveillance in order to prevent the occurrence of this fraudulent division of a single plant into several plants having an electrical power inferior to 1 MW. In light of the above, I wonder what actions will be undertaken to revoke the DIAs.161

In fact, the Circular of 1 August 2008 provided as follows:

In consideration of the aforementioned circumstances, related to the presence of a large number of DIA procedures before the Municipal Authorities, it is recommended to the same to pay the maximum attention to possible connections between multiple declarations of the initiation of activity. Application negligence on the part of the applicants, when it is not their unlawful behaviour, could support the application to DIA even in the case of plants whose nominal overall electric power transcend the limits set by article 27 of regional Law n. 1/2008.


Therefore, it appears appropriate that the Municipal Authorities pay the maximum attention in verifying the existence of such situations, which for example may be inferred from the significant recurrence of symptomatic elements, such as a single point of connection, the uniqueness of the owner of the areas, the uniqueness of the industrial initiative (derived from the uniqueness of the applicants, or business contacts), and any other useful factual circumstance to be gathered by means of inquiry.162

On 19 December 2011, the municipality of Brindisi launched self-redress proceedings in order to review the DIA authorisations held by three of the 12 local development companies.163
On 11 January 2012, the municipality of Brindisi issued a stop-work order preventing any further work on plants in the project under construction.164 However, on 13 January 2012, the Regional Administrative Court decided to suspend the effects of the stop-work order issued by the municipality of Brindisi,165 and on 7 March 2012, the Regional Administrative Court annulled for excess of power the decisions of the municipality of Brindisi to initiate self-redress proceedings and to issue a stop-work order. According to the Claimants, this was a Pyrrhic victory, because there was not enough time to build the Project’s plants between the decision of the Administrative Court of 7 March 2012 and the expiration of the 29 March 2012 deadline imposed by the Romani Decree.166 The Regional Administrative Court’s decision is discussed in paragraph 356 below: it drew a distinction between ‘the conditions stated at the time of the submission of the application or... the previous two years’ and ‘the need for the requirement to subsist afterwards’ - in effect a distinction between fractionation of holdings at the time of lodging the DIA (prohibited) and subsequent amalgamation of holdings once the DIA procedure was complete (permitted).167

L. Law Decree 1 of 24 January 2012

This Law Decree provided that, as from 24 January 2012 (its date of entry into force), solar plants built on agricultural land would no longer benefit from the incentives set out in the Romani Decree. It also provided, however, that plants built on agricultural land could still be eligible if:

(a) a construction permit was issued before 24 January 2012;

(b) the plant started operating by 23 January 2013; and

(c) the plant complied with the conditions set forth in Article 10(4) and (5) of the Romani Decree (i.e., if they had capacity below 1 MW and occupied less than 10% of the agricultural land on which they were built, and, for plants belonging to the same owner, if they were located at least 2 km away from each other).168

The other exception foreseen by Law Decree 1 concerned solar plants installed on top of greenhouses, provided that they occupied less than 50% of the total surface of the rooftop.169
The Claimants contend that their plants could not comply with this regulation because they were all built on agricultural land. Nor did they fall within the exception, as they occupied more than 10% of the land on which they would be built.170
Law Decree 1 was subsequently ratified by Law 27 of 24 March 2012, which introduced some changes to Article 65 of Law Decree 1 (‘Photovoltaic plants built on agricultural land’).171

M. Abandonment of the Project by the Claimants

On 5 July 2012, the Italian government adopted the Fifth Energy Account.172 Messrs. Lecorcier and Stein explored the possibility of transforming the 120-MW Project into a series of single activities in order to benefit from the feed-in tariffs under the Fifth Energy Account. They also tried to sell the two substations. But they eventually decided to abandon the Project. Their decision was recorded in a resolution of SIB’s shareholders at a meeting on 18 December 2012.173


A. The Respondent’s position

In its Counter-Memorial, the Respondent raised an objection to the competence of the Tribunal and the jurisdiction of the Centre on two grounds. First, the Project did not qualify as an investment for purposes of the ICSID Convention or the ECT and instead the Claimants’ activities qualified only as pre-investment expenditures of a speculative character.174 Second, the Project was not a protected investment under the ECT because it was constituted in violation of Italian law and the principle of good faith.175
The Respondent further contends that to the extent the Tribunal upholds its jurisdiction, it should consider the Claimants’ claims inadmissible on the ground of unclean hands.176
It is to be noted that neither in its Counter-Memorial nor in its Reply did Italy raise any objection based on the law of the European Union or the suggested inapplicability of the ECT in intra-EU disputes. Those issues arose only following the EU’s request to file a non-disputing party brief, and they are dealt with below in that context (see paragraphs 206-260 and 277-309).

1. The Project was not an investment under the ICSID Convention and the ECT

(a) The ICSID Convention


The Respondent refers to the Salini test, as the ‘most widely invoked’ criterion to determine whether there is an investment for purposes of Article 25 of the ICSID Convention.177 According to the Respondent, the debate as to whether such test should include the original four elements (i.e. a contribution of money or goods, of certain duration, an element of risk and a contribution to the economic development of the State) or whether it has now evolved to only three (contribution, duration and risk), is immaterial for present purposes. The Respondent posits that under both tests, an investment shall be assessed ‘within the context and according to the purposes that the [host State] has set for the specific economic activity’ and by respecting the spirit and text of its legislation.178

The Respondent contends that to determine if there is an investment past cases have consistently considered that ‘the presence of an economic activity... in the territory of the host State shall be evaluated in the concrete case and in light of the specific context.’179
Against this background, the Respondent argues that the Claimants’ operations cannot be considered an investment because they were not carried out for purposes of building a PV plant benefiting from certain regulatory incentives.180 Instead, in the Respondent’s view, the Claimants’ activities ‘were carried out with the intent to sell the rights acquired to third parties to realize the investment.’181 In particular, it argues that the Claimants attempted to make a ‘financial transaction’ based on the sale of acquired rights, ‘in a sort of "secondary market.’"182 According to the Respondent, the Claimants alleged ‘investment’ was speculative in character.183
The Respondent also contends that the activities and operations carried out by the Claimants shall be characterized as part of a ‘pre-investment’ phase.184 It alleges that for an investment to be considered as such within the framework of the PV industry incentives, the plants must be built (executed) and the Claimants must have submitted an actual application for such incentives.185 However, in this case - the Respondent asserts - the Project never reached the execution phase and the incentives were considered part of the ‘hypothetical profitability parameters.’186 Therefore, there is no investment under the ICSID Convention.

(b) The ECT

The Respondent notes that the ECT does not protect any and all investments, but only those associated ‘with economic activity in the energy sector’ in accordance with Article 1(6). In particular, the Respondent argues that:

[a]ccording to the ECT, the investment [must] therefore satisfy two distinct criteria: it shall be an investment according to the common use of the term (and for this the non-exhaustive list applies as indicated in article 1(6), letters (a) to (b)), and it shall be functional to the carrying out of activities in the energy sector as listed. The genesis of the standard supports such reading.187

In the present context, the Respondent alleges that the ECT protects ‘investments actually intended for the construction of photovoltaic plants.’188 It considers that the ECT protects those investments that ‘fit directly into the mechanism of production of energy of the host country... immediately contributing... to the increase of plants of alternative sources in the country.’189
The Respondent further contends that the ECT distinguishes between the preinvestment and the investment phase, and explicitly provides guarantees to investors only for the latter phase.190 It concludes that the Project does not fall under the definition of investment under either the ICSID Convention or the ECT.

2. The Project is not a protected investment under the ECT

The Respondent accepts that the ECT does not contain a clause specifying that investments shall be made in accordance with the rules of the host state.191 But relying on the Yukos, Phoenix and Homester decisions, it submits that even without such a clause, the protection of investments under investment treaties, including the ECT, is subject to the legality of the investment itself and the good faith of the investor.192
The Respondent contends that the alleged investment has been made in violation of Italian law, both national and regional, and that it was made ‘in the knowledge of circumventing these rules.’193 In particular, it argues that the Claimants violated Italian law by artificially splitting the project, interposing 12 SPVs controlled by the same people when having in mind one single project, and presenting one DIA for each plant of less than 1 MW, despite some of the lands on which the plants were built being contiguous.194 In doing so, the Claimants violated the Single Authorisation procedure and circumvented the applicable rules of environmental protection for plants greater than 1 MW.195
The Respondent further considers that the Claimants ‘distorted the ratio of the instrument of the DIA’ by not having the financial or other capacity to immediately execute all the necessary work.196
In addition, the Respondent asserts that, even if one were to allege that the violations were committed by the local developers, since they originally filed the DIAs, the Claimants were fully aware of them.197 They contend, inter alia, that the Claimants had full knowledge of the illegal acts and misrepresentations and that they should have notified the public administration.198 Moreover, relying on the Yukos decision, the Respondent argues that, irrespective of who committed the illegal act, the alleged investment itself would be affected by the unlawfulness of the procedures followed to request the authorisations.199

The Respondent further alleges that even if the Claimants themselves did not commit the above mentioned violations, it remains that they acted in bad faith when the 12 SPVs were acquired by Eskosol and all the DIAs were transferred en bloc to a single project owner.200 According to the Respondent, the Claimants had full knowledge that this was an obvious violation of the law because the issue had been highlighted in the preliminary due diligence report that Watson, Farley and Williams submitted to the Claimants in January 2009.201

Relying on the Phoenix and Inceysa decisions, the Respondent asserts that the principle of good faith is recognized under both national and international law.202 In the Respondent’s view, the Claimants infringed the principle of good faith under international investment law by evading their obligation to request an Environmental Impact Assessment (EIA) in violation of Italian law, Article 19 of the ECT and general principles of international law.203
Finally, the Respondent contends that there has never been acquiescence on the part of the Italian administration, nor would the administration’s acceptance be a relevant defence against the Claimants’ bad faith.204

3. Admissibility

The Respondent considers that the arguments summarized in the preceding paragraphs also support its admissibility objection.205

B. The Claimants’ position

According to the Claimants, the Respondent has failed to adduce any proof in support of its objection to the Tribunal’s jurisdiction ratione inateriae and contends that Italy has lignore[d] evidence directly contradicting its position.’206 According to the Claimants, it is undisputable that there is an investment in this case. The investment consists of some €40 million invested by Messrs. Lecorcier and Stein, the two substations that Blusun’s subsidiaries erected and connected to the national grid, the 250 km of underground cables installed, the direct acquisition of local companies and lands and the indirect holding of project authorisations and permits, as well as related contractual rights.207
The Claimants also allege that the record shows no bad faith or illegality, but rather an investment that was made by ‘conscientious investors concerned with making a positive impact on the local community.’208
In addition, the Claimants reject the Respondent’s unclean hands arguments, alleging that they are meritless in fact and law. They argue that the unclean hands doctrine is neither a rule of customary international law nor a general principle of law, that there is no express reference to it in the ECT, and that, even if it is applicable in law, there is no evidence of it in the record.209

1. The Claimants’ investments under the ECT and the ICSID Convention

(a) The ECT

The Claimants contend that Messrs. Lecorcier and Stein indirectly owned and controlled numerous investments within the meaning of Article 1(6) of the ECT in Italy. These include a controlling stake in Eskosol, 12 local development companies, loans, parcels of land, two substations and rings, authorisations and permits, construction and supply contracts, and the amounts derived from or associated with these investments.210
The Claimants further argue that the definition of ‘Economic Activity in the Energy Sector’ provided by the ECT is not limited to industrial activities, and that their investments fall within that definition.211 They assert that, in any event, their investment was a Project ‘of an industrial scale in a classic industry: the production of electricity’,212 and the fact that the Project was not completed due to Italy’s wrongful acts does not deprive the investments of protection under the ECT.213

(b) The ICSID Convention

The Claimants ‘do not accept that Salini defines the term "investment" where the "consent of the parties" within the meaning of the ICSID Convention defines the term for purposes of the dispute, as the ECT does here.’214 In any event, the Claimants contend that their investment meets the Salini criteria.215
The Claimants further contend that the Project is not less protected because it was to be substantially financed. They assert that ‘ICSID tribunals have recognized that "it is entirely normal for investment projects to be financed by borrowed funds’",216 and that it is not uncommon for investors to finance construction in whole or in part through loans from investors.217 The Claimants assert that the record shows that they developed the Project and realized a significant part of it.218
The Claimants also argue that the Project was not ‘speculative.’ In their view, the Respondent’s position is wrong as a matter of fact and as a matter of law. The Project ‘was based on facts, scientifically ascertainable and verifiable.’219 Also, the Claimants say that, by arguing that speculative investments should not be protected under the ICSID Convention, the Respondent would be asking the Tribunal to adopt a novel approach to the Salini test, which includes the element of risk.220
The Claimants further contend that their investments were ‘established’, as they accomplished all of the main Project milestones but for the last one.221 In their view, ‘the fact that the Claimants’ project never reached the exploitation phase offers no valid jurisdictional objection or defense to Italy.’222 In making this assertion, the Claimants rely on the decisions rendered in Gold Reserve and PSEG.223

2. Good faith and the Claimants’ investments

The Claimants assert that the authorities relied upon by the Respondent are inapposite. The decisions in Phoenix and Homester addressed the alleged general principle that investments should not violate good faith and the host State laws only obiter.224 In Homester, the tribunal did not find that the investment had been obtained by fraud. As to Phoenix, the tribunal was concerned with ‘the international principle of good faith as applied to the international arbitration mechanism of ICSID.’225 In Inceysa, in turn, ‘there was... "clear and obvious" evidence that the investor had acted fraudulently in order to be awarded the bid and make the investment.’226
The Claimants also note that there is no evidence in the record showing that they artificially split the Project. In their view, they did not divide the Project but rather united 120 small solar plants initiated by a dozen local development companies.227 The Claimants also contend that the DIA authorisations were obtained in accordance with Italian law, something that was confirmed by the Watson Farley due diligence report and by the Administrative Court in Lecce in March 2012.228 The Claimants note, in particular, that under Italian law, works had to be completed before the expiry of the DIA authorisations - not immediately - and that works had to start within one year, which is what the Claimants did.229 The Claimants also deny that they failed to comply with the timetable of work, or that they breached the disclosure obligation.230
The Claimants assert that the Italian authorities were fully aware of the 120 MW Project and authorized it. They also authorized the construction of the two substations and the rings, and those authorisations were made public.231

With respect to the alleged violation of environmental provisions, the Claimants’ arguments are threefold: (a) the Tribunal would have no jurisdiction over an alleged violation of Article 19 of the ECT because it does not fall under Part III of the ECT; (b) neither the ECT nor other sources establish that environmental impact assessment is a requirement of general international law; and (c) the Claimants were not required to obtain an environmental impact assessment, since only plants with capacity above 1 MW are subject to a screening process and may be required to file one.232

3. The clean hands doctrine

The Claimants contend that the ECT does not contain any express clean hands requirement, and the Yukos decision does not support the Respondent’s ‘clean hands’ objection because the tribunal found that the investors there had clean hands.233 Moreover, the Claimants assert that ‘clean hands’ is neither a rule of customary international law nor a general principle of law.234 They finally argue that their hands are clean, as there was no illegality in the acquisition of the 12 local development companies, and there is no evidence of illegality either before or since those acquisitions.235


The Parties’ arguments on the merits concern the issue of whether the measures adopted by Italy constitute a breach of the standard of treatment provided for in Article 10(1) of the ECT (requiring ‘stable, equitable, favourable and transparent conditions for Investors’) or a breach of the expropriation provision in Article 13(1) of the ECT.

A. The Claimants’ position

1. The alleged breach of Article 10(1) of the ECT

The Claimants contend that Italy breached Article 10(1) of the ECT in two respects. They claim that: (a) Italy failed to create stable, equitable, favorable and transparent conditions in the energy sector in Italy; and (b) Italy frustrated the Claimants’ legitimate expectations in breach of the fair and equitable treatment standard.236 The Claimants rely on the Plama award to assert that these standards can be defined autonomously,237 and they contend that the reference in the first sentence of Article 10(1) to promoting ‘stable, equitable, favourable and transparent conditions’ creates binding obligations.238

(a) Italy’s alleged failure to encourage and create stable, equitable, favorable and transparent conditions

The Claimants contend that the first sentence of Article 10(1) of the ECT must be interpreted according to Articles 31 and 32 of the Vienna Convention on the Law of Treaties, that is, 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.239 They argue that the words ‘encourage’ and ‘create’ imply both an obligation of means and an obligation of result.240
In particular, the Claimants argue that this obligation must be interpreted in the light of the ECT’s object and purpose of ‘promoting best possible access to capital’, ‘formulation of stable and transparent legal frameworks creating conditions for the development of energy resources’, and promoting ‘use of new and renewable energies and clean technologies.’241
The Claimants further argue that the obligation established in the first sentence of Article 10(1) applies to all stages of the investment.242 It also contends that, even on Italy’s own case, it would apply to the Claimants’ activities as pre-investment matters.243
In the Claimants’ view, the measures adopted by Italy cannot be reconciled with the conditions that Italy ‘was obligated to encourage and create under Article 10(1).244 The Claimants assert that the events should be considered in the aggregate rather than as isolated acts.245 They complain specifically about the following measures, which, in their view, ‘followed one another in a relatively short timeframe and deeply destabilized the Italian solar market’:246

(a) the Constitutional Court’s decision of March 2010, which failed to specify its effects on pre-existing authorisations. In the Claimants’ view, this decision had a negative effect on potential debt and/or equity investors,247 as it showed uncertainty as to the decision’s impact on DIA authorisations.248 They contend that if the decision had been clear, there would have been no need for the adoption of Law 129/2010, and that the GSE’s response to Watson Farley’s request was not clear, so the uncertainty remained until December 2010;249

(b) the Romani Decree, which in the Claimants’ view constituted ‘a sudden and important change in approach for solar projects in development.’250 The Claimants complain about the changes operated by the Romani Decree with respect to the Third Energy Account. They also allege that the Romani Decree signaled that a new and different energy account would soon come into existence, and that therefore no investor was willing to commit funding until the applicable tariffs were published;251

(c) the Fourth Energy Account, which in the Claimants’ view was implemented in a way that prolonged uncertainty due to the publication of several lists, and which disrupted its negotiations with potential investors;252 and

(d) the inspections that started in November 2011 and led to the stop-work order of 11 January 2012.253

(b) Italy’s alleged breach of the fair and equitable treatment standard

The Claimants contend that ‘the most important function of the fair and equitable treatment standard is the protection of the investor’s reasonable and legitimate expectations.’254 They argue that legitimate expectations are established where the following requirements are met: (a) the authorities of the host State made explicit or implicit representations; (b) such representations were relied upon by the investor in making the investment; and (c) the investor’s expectations were legitimate and reasonable in the circumstances of the case.255 The Claimants argue that these requirements are met in the present case.
The Claimants also argue that stability and transparency are essential elements of the fair and equitable treatment standard.256
The Claimants allege that the Italian Government made multiple representations ‘that the construction of specific plants was "in accordance with the procedures set out in Regional Law n. 31/2008 and with general urban planning instruments.’"257 They also argue that for at least two years after having granted the DIA authorisations, the municipality ‘took no step to suggest that it had any doubt about the validity of the authorisations it had granted.’258 This, in the Claimants’ view, amounted to an implicit representation that gave rise to legitimate expectations.259 The Claimants further contend that Italy represented, in the Second Energy Account, that it would gradually change the level of feed-in tariffs every two years.260
The Claimants assert that they relied on these representations, as they ‘committed the bulk of their funds only after Watson Farley had conducted a due diligence review of the authorizations for the plants.’261
In the Claimants’ view, their expectations were reasonable under the circumstances. They contend that Italy adopted measures that contradicted the representations it had made and frustrated their investments. In particular, the Claimants assert that the stop-work order ‘was contrary to the very regional law with which [the municipality of Brindisi] had previously certified [the construction of the solar plant’s] compliance.’262 The Claimants also argue that by the time the order was annulled by the Regional Administrative Court, ‘no part of the project could be completed before the deadline imposed by the Romani Decree of 29 March 2012.’263
The Claimants also contend that the Romani Decree breached their legitimate expectations by putting a sudden and premature end to the Third Energy Account, which was to apply until 31 December 2013.264 In the Claimants’ view, the Romani Decree prevented them from securing the additional investment needed.265

2. The alleged breach of Article 13 of the ECT

The Claimants stress that Article 13(1) of the ECT covers both direct and indirect forms of expropriation, and they assert that their investments were subjected to measures having effect equivalent to nationalization or expropriation within the meaning of Article 13(1).266 They argue that ‘[f]or purposes of indirect expropriation, what needs to be taken into account is the effect of the measure’ on the investor’s property.267 In their view, it is not necessary to prove that the measure tantamount to expropriation is to the obvious benefit of the host State, as long as it has ‘the effect of depriving the owner, in whole or in significant part, of the use or reasonably-to-be-expected economic benefit of property.’268
The Claimants contend that the investments they made were acquired for purposes of the 120 MW Project. They argue that, as a result of the measures adopted by Italy, the land can no longer be used for that purpose, the underground cables connect nothing, the substations are disconnected and serve no purpose, the authorisations are now invalid or useless, and there is no other possible economic use for these assets.269 The Claimants note that Eskosol is now the subject of a bankruptcy order and that SIB and the local development companies are in liquidation.270 In the Claimants’ view, the effect of these measures is ‘indistinguishable from that of nationalization or expropriation without compensation.’271

B. The Respondent’s position

1. The alleged breach of Article 10(1) of the ECT

(a) Italy’s alleged failure to encourage and create stable, equitable, favorable and transparent conditions

The Respondent asserts that the first sentence of Article 10(1) of the ECT ‘shall be construed... as having the nature of a framework regulation, as such referable only to relations between Contracting States and not directly enforceable by investors.’272 Italy argues that the vagueness of the words ‘encourage’, ‘equitable’ and ‘favourable’ raises doubt on the existence of a specific obligation enforceable by the investor.273
Italy further contends that the use of the phrase ‘to make investments’ qualifies and limits the scope of application of the regulation, which would be actually aimed at attracting investment274 As such, the obligation would be placed ‘in a phase preceding the beginning of the foreign investment itself, thus before the same right to act arises for the investor.’275 In Italy’s view, its position would be confirmed by the definition contained in Article 1(8) of the ECT, which provides that "‘Make Investments" or "Making of Investments" means establishing new Investments, acquiring all or part of existing Investments or moving into different fields of Investment activity.’276
The Respondent thus rejects all of the arguments made by the Claimants as to the alleged violation of the first sentence of Article 10(1).277

(b) Italy’s alleged breach of the fair and equitable treatment standard

The Respondent’s main argument on the merits is that there is no causal link between the State’s conduct and the failure of the Claimants’ business initiative, and that therefore any further analysis in terms of legitimate expectations and fair and equitable treatment is ‘superfluous.’278 The Respondent also argues that the expectations alleged by the Claimants are not legitimate and that the regulations adopted by the State were reasonable.279

(i) The absence of a link between the State’s conduct and the failure of the Project

As a preliminary matter, the Respondent asserts that demonstrating regulatory uncertainty is not enough to prove the existence of that link. In its view, the Claimants would need to show that the alleged regulatory uncertainty is ‘indeed likely to discourage investors’, and that the State’s conduct had a concrete negative impact on the participation of third-party investors.280
With respect to the Constitutional Court’s 26 March 2010 decision, the Respondent notes that it ‘did not manifest itself suddenly.’281 It contends that the alleged situation of legal uncertainty ‘should be referred to the date on which the law was challenged.’282 That date is December 2008, and not 2009 as indicated by the Claimants in the Memorial.283 The Respondent thus asserts that ‘it is not logically possible to argue that third-party investors in 2010 were discouraged by an alleged uncertainty that dated back to the end of 2008.284 Furthermore, the Respondent explains that, under Italian law, the declaration of unconstitutionality of a law cannot affect acquired rights, so ‘it cannot even be affirmed that after the decision there was a situation of uncertainty regarding these DIAs.’285
Regarding the alleged uncertainty created by the adoption of the Romani Decree, the Respondent asserts that the Third Energy Account already provided that the objective of cumulative nominal power from solar energy in Italy by 2020 was 8,000 MW.286 By the end of 2010, that objective ‘was almost half reached, thus forcing the government to reduce the incentives provided by the Third Energy Account during 2011.’287 In the Respondent’s view, it was plausible to imagine that the expectation that the Third Energy Account would extend until 2013 ‘should be balanced with the need to meet that objective.’288 The Romani Decree was ‘merely a way to respect the Italian energy objective’ and the new EU Directive.289
The Respondent also argues that the alleged uncertainty created by the Romani Decree would have lasted less than 50 days, because on 19 April 2011 the Government indicated the salient aspects of the Fourth Energy Account.290
The Respondent further contends that the restriction regarding the percentage of agricultural land that could be used for solar plants ‘connects with the essential ratio, required by EU legislation, to reconcile the development of renewable energy with the protection of the environment, territory and landscape, and is combined with the need to gradually reduce the expansive investment trend in photovoltaic, in order to meet the quantitative targets envisaged under the EU scheme.’291 As a result, Italy argues that the change was expectable and ‘cannot be classified as a bearer of instability.’292 Moreover, the Respondent argues that the Romani Decree foresaw a one-year transitional period to complete the plants for which the relevant authorisations were already in force, such as the Claimants’ DIAs.293
With respect to the adoption of the Fourth Energy Account, the Respondent’s argument can be summarized as follows:

(a) The register created by the Fourth Energy Account actually added an essential element of certainty, as acknowledged by the Claimants.294

(b) The correction of the lists was not based on a redefinition of the regulatory framework but rather on a correction of material errors, which could not be seen as a situation that could discourage investors with respect to a project solidly founded and developed.295

(c) The period of alleged uncertainty would have been limited to 10 days, as the list was corrected on 29 April 2011,296

(d) The list published on 15 July 2011 also included almost all the Claimants’ projected plants.297

(e) More generally, it is unclear why the national and regional regulations worked well for the more than 1,400 plants which were built in the years 2010/2011, while it created unbearable uncertainty for the Claimants.298

(f) The Claimants failed to provide concrete evidence that the alleged regulatory uncertainty effectively deterred third-party investors from participating in the initiative, and its arguments are based primarily on the direct testimony of the two Claimants, who the Respondent submits ‘are clearly unsuitable to prove the existence of the alleged facts.’299

The Respondent further contends that the explanation of the failure of the Claimants’ Project falls in the category of business risk, as it is the result of the Claimants’ decision to try to prepare a mega project on paper in order to attract third-party investors instead of deciding to gradually build the plants.300
With respect to the stop-work order, the Respondent notes that the Claimants failed to mention that on 13 January 2012, i.e. two days after the issuance of the stop-work order by the municipality of Brindisi, the Regional Administrative Tribunal suspended its effects.301 The Respondent contends that these two days appear to be ‘completely irrelevant to the conclusion of the work by the deadline of 29 February 2012.’302

(ii) The FET standard and legitimate expectations

The Respondent contends that the protection of legitimate expectations ‘shall be connected with the general principles of good faith and fairness.’303 It also argues that ‘the assessment of the legitimacy of the expectations is inseparably linked to an assessment of the legitimacy of the State conduct, and in particular to the pursuit of the public interest in the exercise of sovereign prerogatives.’304
According to the Respondent, the expectations alleged by the Claimants have no legitimacy under international law ‘for the simple reason that they are based on the claim, completely unreasonable, that the State cannot evolve its own legislation according to plausible and verifiable objectives of public interest and in accordance with the fundamental principles of due process, proportionality and nondiscrimination.’305
The Respondent notes that, unlike situations observed in other investment disputes, the decision of the Constitutional Court, the Romani Decree and the Fourth Energy Account are ‘forms of exercise of regulatory power in general terms.’306 The Respondent also highlights that, unlike other cases, here the Respondent did not make any promises directed to the Claimants concerning the evolution of its legislation on photovoltaic plants. As a result, the alleged expectations are based solely on the general regulation provided by the Italian State.307
The Respondent argues that it would be necessary for the Claimants ‘to demonstrate the profound irrationality of the evolution of this regulation in the years 2010-2012.’308 However, in its view, the decision of the Constitutional Court, the Romani Decree and the Fourth Energy Account were reasonable. The Respondent notes, in particular, the objectives that had been fixed in the Third Energy Account (which would explain the adoption of the Romani Decree and the Fourth Energy Account), and the transitional scheme foreseen in the Fourth Energy Account.309
The Respondent further argues that the stop-work order could not have infringed the Claimants’ legitimate expectations because the ‘timely intervention’ of the Regional Administrative Court makes the alleged injury to the expectations non-existent.310

2. The alleged breach of Article 13 of the ECT

The Respondent argues that, to constitute expropriation, the measures shall substantially deprive the investor of the use and enjoyment of the investment. It asserts that, as a result, ‘it is necessary that there is an appropriate causal link between interference from State measures and deprivation of the benefits of the investment.’311
The Respondent contends that there is no evidence of the causal link required to establish the existence of indirect expropriation,312 and therefore the existence of expropriation is excluded.313
The Respondent further argues that, even if there were evidence of a causal link between the measures and the failure of the fate of the Claimants’ Project, the measures adopted by the Italian Government would fall in the category of non-compensable ‘regulatory takings’,314 because the measures were adopted in a non-discri minatory manner and aimed at regulating a matter of public interest.315


A. The Claimants’ position

The Claimants assert that the damages due as a result of Italy’s breach of Articles 10(1) and 13 of the ECT must be determined according to customary international law. Relying on the ICJ’s Judgment in the Chorzow Factory case and on Article 36 of the Draft Articles on State Responsibility, the Claimants argue that reparation must be sufficient to eliminate the consequences of the wrongful acts committed by the State.316 In their view, compensation is generally assessed by reference to capital value, loss of profit and incidental expenses.317 The Claimants also contend that ‘it is... accepted that the risk of wrongful acts by the State must be excluded in assessing damages caused by such wrongful acts.’318
The Claimants quantified damages using a discounted cash flow (DCF) analysis, which they claim is ‘in line with arbitral case law.’319 They offer three alternative valuations based on three different valuation dates:

(a) €187.8 million taking March 2010 as the valuation date, if the Tribunal considers that the Constitutional Court’s decision violated the ECT;320

(b) €229.5 million taking January 2011 as the valuation date, if the Tribunal considers that the Constitutional Court’s decision did not violate the ECT but all the other measures did;321 and

(c) €133.5 million taking May 2011 as the valuation date, if the Tribunal considers that only the series of administrative errors and the direct interference by the local authority breached the ECT.322

The Claimants’ calculation of damages is based on the following assumptions:

(a) the electricity generation estimate used by Capital Systeme, assuming the entry into operation of 120 MW for the two first valuations, and 113 MW for the May 2011 valuation, given the list published by the GSE in September 2011;323

(b) a 20-year operation period for each plant;324

(c) capital expenses based on the EOS report commissioned by Eskosol and on the Siemens EPC contract;325

(d) a discount rate based on the German Government bonds yield;326 and

(e) a liquidity discount of 15%.327

To justify the use of a discount rate based on German Government bonds, rather than Italian Government bonds, the Claimants contend that ‘using a discount rate that includes the risk of breaching the treaty by the Italian Republic "would be inappropriate.’"328 Similarly, the Claimants reject the application of a discount rate derived from a sample of companies specialised in renewable energy because it ‘would incorporate the same mistrust as reflected in the Italian Government bond yields.’329
The Claimants also claim pre- and post-award interest, based on Italian Government bonds.330 The prejudgment interest claimed until December 2015 is €6.7 million, assuming that the Tribunal would find that all the measures violated the ECT.331
The Claimants finally quantified their capital contributions to the Project, which they allege could serve as the basis for the calculation of reliance damages in the event that the Tribunal does not accept the DCF analysis.332 The Claimants estimate their capital contributions to the Project at €35.5 million.333
The Claimants reject the adjustments to Mr. Lapuerta’s DCF analysis proposed by the Respondent (described below). They argue that they are intended to reflect events that occurred after Italy’s breaches of the ECT. This, in their view, defeats the purpose of the DCF analysis.334
Finally, as to comparative negligence, the Claimants accept that to the extent that the failure of the Project was due conjointly (in whatever proportions) to the fault of the Claimants and the failure of the investors to proceed with the Project, damages should be reduced accordingly.335

B. The Respondent’s position

The Respondent rejects the application of the DCF method in the instant case on the basis that the 120 MW Project was never a going concern.336 The Respondent notes, among other things, that ‘several months after the date of May 2011, no construction activity of photovoltaic plants had been made at any of the 120 lots’,337 and that the Project was ‘still on paper.’338
The Respondent also contends that the application of the DCF method would result in ‘unjustified enrichment.’339 It highlights that, in the present case, the vast majority of the capital needed was not yet invested and there is no evidence of a contractual or quasi-contractual relationship with one or more potential investors.340
Furthermore, according to the Respondent, the Articles on State Responsibility require the State’s illegal conduct to be not too remotely linked to the damage allegedly caused.341 The Respondent claims that the application of the DCF method in the present case would contradict this requirement. It argues that ‘the damage that would be considered refundable is in fact largely constructed on events being completely remote with respect to the Italian conduct in question, and clearly uncertain with regard to their occurrence.’342
The Respondent finally alleges that the Tribunal should take into account the Claimants’ contributory fault in assessing the alleged damages. In particular, the Respondent highlights: (i) the Claimants’ decision to implement a 120 MW unified project instead of developing it gradually; (ii) the Claimants’ disregard of the 8,000 MW cap established by the Third Energy Account; (iii) the failure by the Claimants to acquire guarantees from lenders before embarking on the business project; and (iv) the Claimants’ overvaluation of the purchased land.343
Regarding the assumptions considered in the Claimants’ DCF analysis, the Respondent contends as follows:

(a) the minimum guaranteed price of electricity (MGP) considered by Mr. Lapuerta (which assumes a constant growth of 0.7% per year) is incorrect, because the MGP constantly decreased since May 2011 ;344

(b) Mr. Lapuerta considered a council tax of 5,000 €/MW, while a realistic assumption is to consider a tax of 15,000 €/MW;345

(c) the accounting depreciation period for PV plants in Italy is 25 years - not 15 years as assumed by Mr. Lapuerta;346

(d) it is inappropriate to use the German Government bonds yield in order to calculate the discount rate. The Respondent explains that the cost of equity represents the opportunity cost, in terms of perceived risk, of investing capital in a specific business. It is unfounded to use German bond yields to evaluate the equity cash flows of a project like a PV installation in Italy;347 and

(e) Mr. Lapuerta failed to consider the new regulations adjusting incentive tariffs pursuant to Decree 91 of 2014 (the so-called ‘spalma incentivi‘348

Taking into account these corrections, the Respondent contends that the damages valuation based on a DCF analysis should range between €19.4 million and €32.7 million, depending on which of the three options under the ‘spalma incentive regulation is considered, and €40.4 million if the ‘spalma incentivi regulation is not taken into account.349

The Respondent also challenges the Claimants’ calculation of reliance damages. It contends that the Claimants failed to consider the liquidation value of the land, and that reliance damages should be assessed on the basis of the €13.84 million effectively invested as of May 2011 (i.e., the latter of the dates considered by the Claimants for the DCF analysis), not at the end of 2012.350 The Respondent concludes that the maximum possible value of damages refundable to the Claimants is €12.64 million.351


A. The European Commission’s Amicus Brief

The circumstances in which the Tribunal accepted a late-filed EC request to make a non-disputing party submission have already been described (see paragraphs 15 to 31 above). Given that the Respondent effectively endorsed the EC’s request and arguments, the Claimants’ otherwise well-founded plea that ICSID Rule 37(2) is expressly limited to the filing by a non-disputing party of ‘a written submission... regarding a matter within the scope of the dispute’ was rendered effectively moot. Furthermore, the Tribunal has an obligation ex officio to ascertain its jurisdiction.352 The position of the EC and the Parties is set out here and subsequently analysed (see below, paragraphs 211-260 and 277-309).
The EC asserts that the Tribunal does not have jurisdiction under the ECT because Member States have only created obligations regarding investment promotion and protection with respect to third countries.353 According to the EC, investors incorporated in a Member State or citizens of a Member State are unable to bring an investment claim against a Member State under Article 26 of the ECT.354
According to the EC, an EU investor’s investment in another Member State is governed and protected by EU law.355 Article 3(2) of the TFEU prevents Member States from concluding bilateral or multilateral investment agreements that would affect or alter EU law.356
The EC contends that the Member States did not retain the competence to enter into inter se obligations with respect to investment protection at the time they ratified the ECT.357 In consequence the relevant Italian court is the appropriate forum for bringing a claim against Italy.358
The EC refers to the decision in Electrabel, which in its view is distinguishable from the present case in that Hungary was not a Member State of the European Communities when it ratified the ECT.359 The pivotal issue in that case was whether Hungary’s accession to the EU extinguished its international obligations under the ECT or whether they were superseded through Article 351 of the TFEU and Article 30 of the VCLT.360 In the present case, the EC submits that there never were inter se international obligations between the Member States ab initio.361 The EC also endorses the relevant legal findings of the tribunal in Electrabel.362

1. The legal order of the EU and investment protection under EU law

a. The constitutional order of the EU

According to the EC, the EU has been established based on the Treaty of the European Union (‘TEIT) and the TFEU, thereby creating a legal order with its own institutions in exchange for which Member States narrowed their sovereign rights.363 In the EC’s view, the European Court and Member States’ domestic courts guard the legal order of the EU, which is implemented through the preliminary ruling mechanism established under Article 267 of the TFEU.364 Furthermore, the EC argues that Member States are bound to ensure compliance with EU law, which also provides remedies for ensuring its application.365

b. The competences of the EU and its Member States

The EC asserts that competences within the EU are governed by the principle of conferral whereby the EU will act within the limits afforded by the Member States.366 According to the EC, competences are divided between external and internal.367 The latter enables the EC to legislate and adopt binding rules when it has been granted exclusive internal competence, including within the scope of common commercial policy.368 In the EC’s view, the Treaty of Lisbon extended the scope of commercial policy into the area of foreign direct investment.369
According to the EC, it has external competence to conclude international agreements on areas of internal competence, such as investment promotion and protection.370 Member States are therefore prevented from entering into international commitments outside the framework of the EU, or from concluding any international agreement that might affect common rules or impact their scope.371 Furthermore, Member States cannot invoke international agreements as a reason for failing to comply with EU law.372

c. The internal market rules

The EC explains that it is created around an internal market that represents an area without boundaries and allows the free movement of goods, persons, services and capital.373 Provisions on free movement prevent the adoption of discriminatory measures, non-discriminatory restrictions and expropriation by Member States.374
The EC explains that restrictions on these freedoms may be justified on the grounds described in Articles 52 and 65 of the TFEU, or by ‘overriding requirements in the general interest.’375 In the view of the EC, justifications must be interpreted based on the general principles of EU law, especially as enunciated in the Charter of Fundamental Rights.376
According to the EC, the protection granted by the freedom of establishment and capital, including the general principles of EU law, extend throughout the lifetime of the investment.377 These protections are complemented by provisions on the internal market and measures adopted by the EU’s legislature.378

d. Member States’ ability to agree on investment protection rules outside of the EU’s legal order

The EC contends that EU law did not, even in 1994, permit Member States to agree on investment protection rules between themselves outside of the EU’s legal order for the following reasons.
First, the EC argues that international commitments on investment protection between Member States might conflict with the scope of the EU’s common rules as enunciated from time to time.379
Second, the EC considers that the ISDS mechanism is inconsistent with the relationship between Member States because the EU does not permit the settlement of intra-EU disputes outside the framework of the EU.380

2. The lack of inter se obligations under the ECT between Member States

According to the EC, the ECT must be interpreted in accordance with Articles 31 and 32 of the VCLT, which confirm that the European Communities and its Member States have not created obligations among themselves when entering into the ECT.381 On this view, the ECT is a multilateral agreement concluded with third States.382 It is part of EU law, and the ECJ is competent to determine whether it has direct effect.383 Additionally, the EC can bring enforcement proceedings against Member States for failure to comply with their obligations under the ECT.384
According to the EC, the historical process confirms that the purpose of the ECT was to establish an international framework to cooperate in the energy sector between the European Communities and Eastern Europe, including Russia and the CIS.385 Furthermore, the ECT was already considered part of the European Communities’ external energy policy, as the internal energy market was already under development.386
In the EC’s view, Member States became Contracting Parties of the ECT because they retained competence over certain matters, but this arrangement did not create obligations between Member States.387 The EC rejects Christian Tietje’s position that obligations between Member States in the foregoing context ‘are the rule’ and that an exception is only applicable when a multilateral agreement contains a disconnection clause.388
According to the EC, the statement submitted by the European Communities to the ECT Secretariat under Article 26(3)(ii) also confirms that the ECT does not create obligations between Member States.389 The tribunal in Electrabel confirmed this understanding.390

3. The limited scope of inter se obligations between Member States

The EC submits that even if the ECT created mutual obligations between Member States, they would only extend to areas in which Member States possess external competence.391
Specifically, the EC considers that Member States are bound by the concept ‘liability follows competence’ pursuant to Article 64 of the Draft articles on the responsibility of international organizations and the relevant case law, when assessing their international liability.392
According to the EC, the ECT also recognises in several instances a division of external competence between the EU and its Member States.393 In each instance, one must determine whether the competence lies with the Member States or the EU.394 The EC clarified this division of competence through a note submitted to the ECT Secretariat pursuant to Article 26(3)(ii) of the ECT.395
The EC submits that all provisions within Part III of the ECT fall within the competence of the EU and thus they are binding on the EU396 and that, as a result, in the event of a dispute between the EU and an investor from a third country, the EU will be internationally responsible for any breach.397 The EC contends that because the ECT provisions on investment protection only bind the EU, and not the Member States inter se, an EU investor cannot bring a claim against a Member State.398 According to the EC, such a claim would not represent a dispute against another Contracting Party for the purposes of Article 26 of the ECT.399
Moreover, the EC argues, if the ECT terms are considered ambiguous regarding the mutual obligations between Member States, then the Tribunal should adopt an interpretation that would be consistent with EU law.400 According to the EC, the proper interpretation is that the ECT is inapplicable between Member States, or at least Article 26 of the ECT does not apply between them.401

4. Application of Chapter III and Article 26 ECT under VCLT Article 30

The EC submits that, for purposes of Article 30 of the VCLT, the ECT and the EU Treaties relate to the same subject matter, namely energy.402 Accordingly, while the ECT is an earlier treaty compared to the EU Treaties, the ECT only applies to the extent that its provisions are not incompatible with the EU treaties.403 On that basis, the EC argues that the Tribunal should conclude that Chapter III and Article 26 of the ECT are not applicable between Member States pursuant to Article 30 of the VCLT.404

B. The Respondent’s position

The Respondent endorses, in principle, the conclusions presented by the EC in its amicus curiae brief.405

According to the Respondent, it did not raise jurisdictional objections based on nonapplicability of the ECT between EU investors and EU Member States because it considers that no investment has been concluded under the ECT,406 or that, even if an investment is found to exist, it was established contrary to law and the principle of good faith.407 The Respondent argues that if the Tribunal considers the investment as legitimate, then it would share the EC’s conclusion that the ECT is inapplicable within the EU.408 The Respondent asserts that it was, in part, due to its awareness of the EU’s approach that it denounced the ECT in December 2014.409

In the Respondent’s view, the main issues in this case are to determine the ECT obligations that are imposed upon it as an EU Member State, the allocation of competences in light of EU treaties and the effects on the Tribunal’s jurisdiction.410 The Respondent argues that this approach was followed in the Electrabel case.411
The Respondent submits that the Electrabel case is relevant as it provides an understanding of EU law in connection with the ECT and for understanding subsequent disputes.412 Specifically, the Respondent argues that EU treaties, as international law, must be interpreted subject to the VCLT.413 According to the Respondent, EU law being international law, it must also be taken into account by the Tribunal pursuant to Article 26(6) of the ECT and Article 42(1) of the ICSID Convention.414 In sum, the Respondent asserts that the jurisdictional issues arising under EU law and raised by the EC fall within the scope of the dispute because EU law impacts the interpretation of the ECT.415
The Respondent also observes that the Claimants based their Request on their French, German and Belgian nationalities without invoking the Swiss permanent residency acquired by two of the Claimants in 2009 (Lecorcier) and 2011 (Stein).416 In addition, the Respondent argues that the Claimants must satisfy the definition of ‘Investor’ under both the ECT and the ICSID Convention, which does not contemplate the possibility for a permanent resident to be treated as a ‘national.’417 Even if permanent residents were considered ‘investors’ under Article 25(2) of the ICSID Convention (which the Respondent denies), the Respondent argues that at the time of its consent to the ECT (i.e. the date of signature), the two Claimants did not benefit from their status of Swiss permanent residents and therefore would not qualify as a protected ‘Investor’ under the ICSID Convention.418

1. Interpretation of the ECT under International Law

In the Respondent’s view, the main issue in this case is the extent to which the EU and its Member States intended to become bound inter se by the ECT when they entered into that multilateral treaty.419
The Respondent observes that the definition of ‘Contracting Party’ in the ECT ‘includefs] EU Member States, on the one side, and the EU as a regional economic integration organization, on the other.’420 It also notes that the definition of ‘regional economic integration organization’ shows that EU Member States had transferred a number of competences to the EU with respect to which the EU has regulatory power in the whole territory.421 In the Respondent’s view, the allocation of competences within the EU cannot rely on geographical boundaries but rather on competence by subject matter. This would be confirmed by the recognition of overlapping territories in the definition of ‘Area’ in Article 1(10).422
The Respondent adds that Article 25 of the ECT seems to specifically recognize that rules of an Economic Integration Agreement prevail and are recognized by the ECT.423
According to the Respondent, the declarations and understandings of the Contracting Parties to the ECT also confirm that the ECT does not apply between EU Member States.424 Specifically, the Respondent contends that Annex 2 to the Final Act of the ECT Conference425 shows that the Contracting Parties to the ECT ‘had clear in mind the issue of treatment of investors from a country that was a Contracting Party to the ECT but not a member of the EU.’426 In the Respondent’s view, in order to avoid double protection, an EU investor would not have the right to invoke Article 26 of the ECT for protecting itself, and it would rather need to invoke EU law and seek a method of redress within that context.427
The Respondent also highlights the purpose of the ECT and circumstances surrounding its adoption. It asserts that the historical context underlying the treaty illustrates that it was intended to integrate the energy sectors between the EU and Eastern European States, including Russia, and not to regulate the EU internal energy market which at that time was already under way under its own regulatory system.428
The Respondent submits that EU Member States and the EU have consistently followed this approach regarding intra-EU jurisdictional issues.429 According to the Respondent, since the Electrabel case, the EU and its Member States’ judicial practice proves that the ECT was not intended to cover intra-EU relations or situations.430
In the Respondent’s view, the Electrabel case is relevant for current purposes because it restricts the scope of Article 26 of the ECT to extra-EU disputes, whereas internal disputes must be addressed by the Member States’ domestic courts and the ECJ.431 The Respondent notes, however, that the Electrabel case is different because it did not focus on whether the ECT would be applicable in that dispute.432 In this case, the Respondent contends that the focus lies on the intent of the Member States when entering into the ECT in light of their obligations under EU treaties.433
According to the Respondent, the absence of a disconnection clause is not decisive as to the issue of inter se application. The Member States did enter into inter se agreements and their presence cannot be disregarded.434 The Respondent asserts that ‘the ECT contains Article 16, which is a conflict rule that in fact establishes priorities for both prior and subsequent inter se agreements.’435
Based on the foregoing, the Respondent contends that the ECT did not apply ab initio to intra-EU situations, as this was not the intention of the Contracting Parties. As a result, Article 26 of the ECT confers no jurisdiction over this dispute.436

2. The evolution of EU treaties and their impact on the ECT

Alternatively, the Respondent asserts that the present state of the law, especially in light of the Lisbon Treaty, shows that intra-EU disputes are not now included within the scope of the ECT.437
In the Respondent’s view, the main issue - assuming for the sake of argument that the ECT initially had inter se effect - is whether the Lisbon Treaty subsequently concluded among some of the ECT’s Contracting Parties is consistent with the ECT itself.438 The Respondent argues that this issue must be assessed in light of Articles 30 and 41 of the VCLT.439
According to the Respondent, the attribution of competences to the EU is governed by the principle of conferral: the EU acts within the competences that have been granted to it by Member States.440 The Respondent submits that common commercial policy falls within the EU’s exclusive competence, whereas energy remains a shared competence.441 The Respondent argues that while the EU’s competences have evolved, Member States retain a duty to cooperate with the EU and are bound to avoid harming the ‘effel utile' of EU law.442
In the Respondent’s view, since the Lisbon Treaty and the ECT involve the same subject matter, Article 30 of the VCLT applies to their interplay.443 The Respondent also contends that the ECT must derogate from any provision or dispute resolution mechanism of another agreement that is more favourable to the investor or investment, in accordance with Article 16 of the ECT.444 The Respondent argues that EU law guarantees better protection to an investor or an investment than the ECT,445 and therefore the coverage of intra-EU situations regarding FDI by EU law is compatible with the ECT by virtue of Article 16 of the ECT.446
According to the Respondent, regardless of Article 16 of the ECT, one would reach the same conclusion by applying Article 30(4) of the VCLT.447
Lastly, the Respondent alleges that Article 41 (1)(a) of the VCLT allows parties to an agreement to enter into another treaty which modifies the initial agreement among themselves.448 According to the Respondent, the Lisbon Treaty respects the spirit of the VCLT because it did not impact the rights of other Contracting Parties or the performance of their obligations under the ECT.449 Instead, the Respondent contends that the Lisbon Treaty simply increases economic integration, which favours the execution of the ECT,450

C. The Claimants’ position

In the first place, the Claimants maintain their objection to the admissibility of the EC’s brief for three reasons. First, the Claimants contend that the issues raised by the EC do not fall within the scope of the dispute because the Respondent did not raise it,451 and that those issues cannot be considered at the Tribunal’s own initiative under ICSID Rule 41(2) because it was untimely.452
Second, the Claimants submit that even if the EC’s objection were well-founded, it would have no bearing on the Tribunal’s ability to hear the claims under Article 25 of the ICSID Convention.453 It is true that jurisdiction under the ICSID Convention is established in this case through the respective nationality of each Claimant.454 But that nationality (which is not in dispute) simply qualifies them to access ICSID arbitration. Consent to arbitration derives from the ECT, and exists regardless of the EC’s position on inter se application of the ECT because two of the Claimants are Swiss permanent residents and Switzerland is not an EU Member State.455
Third, the Claimants argue that the Respondent is misguided when it claims that two of the Claimants were not Swiss permanent residents when Italy consented to arbitration under the ECT.456 In the Claimants’ view, the date of consent is when they accepted Italy’s offer to arbitrate, at the time the Request was filed.457 At that time, both Messrs. Stein and Lecorcier were Swiss permanent residents.
Turning to the merits of the EC’s position, the Claimants reject it for two reasons. There is no basis to claim that EU Member States lacked competence, in 1994 or now, to enter into inter se obligations with respect to investment protection by EU investors.458 EU Member States have full capacity to commit themselves to treaty obligations.459 Second, the Claimants contend that the EU and its Member States are Contracting Parties of the ECT.460 The main issue is the scope of ECT obligations assumed by the Contracting Parties, which can be determined by applying Articles 31 and 32 of the VCLT.461 Applying those provisions there is no ground for denying inter se application of the ECT.

1. The ECT creates inter se obligations among all Contracting Parties

The Claimants contend that the Member States’ lack of competence for entering into inter se obligations regarding investment protection under the ECT is inconsistent with the principles of sovereignty and pacta sunt servanda.462 The question is not their competence to act but whether it was exercised in the given case.
Thus whether Member States entered into inter se obligations under the ECT is a matter of treaty interpretation.463 While they agree that Articles 31 and 32 of the VCLT provide the rules of interpretation, the Claimants note that the Commission has not conducted a textual analysis of the ECT.464 In their view, Article 26 confirms that the ECT applies to disputes between any Contracting Party and an Investor of any other Contracting Party.465 Moreover, Part III on its face entails obligations vis-a-vis each Contracting State’s investors or investments without drawing any distinction between EU Member States and other Contracting States.466
The Claimants assert that the ECT’s preparatory works and the circumstances of its conclusion do not constitute ‘context’ pursuant to the VCLT.467 In the Claimants’ view, Articles 24 and 25 of the ECT are the relevant ‘context’ for the interpretation of Article 26 of the ECT, and they do not support the EC’s interpretation.468 Recourse to the travaux preparatoires is inadmissible when interpretation pursuant to Article 31 VCLT results in a clear and reasonable meaning. But in any event, the travaux preparatoires confirm the interpretation based on the ordinary meaning of the text.469 The EC had suggested including a ‘disconnection clause’ within the ECT, but the other negotiating States rejected that proposal.470

2. Transfer of competence does not protect EU Member States from responsibility under the ECT

In the Claimants’ view, the EC does not interpret the ECT pursuant to the VCLT but based on EU law.471 But under public international law, EU Member States may not derogate from their ECT obligations on the basis of their membership in the EU.472
The Claimants also submit that the EC has not established that Member States lack competence over investment protection and energy.473 In the Claimants’ view, the EU does not enjoy exclusive competence in those areas, which are shared competences in the internal market.474 According to the Claimants, the Lisbon Treaty’s competence over foreign direct investment is only an external competence, which does not affect EU Member States’ inter se relations.475 The Lisbon Treaty has not repealed the ECT, which remains in effect between EU Member States.476
According to the Claimants, arbitral tribunals have regularly rejected the so-called ‘intra-EU’ jurisdictional objection that has been raised by the EC.477 No fewer than eleven arbitral tribunals have addressed this argument and it has never been successful.478

3. The inapplicability of the lex posterior principle

The Claimants submit that the EC and the Respondent wrongly contend that Part III and Article 26 of the ECT are inapplicable between Member States pursuant to Article 30 of the VCLT.479 The Claimants’ arguments can be summarized as follows:

(a) The EC has not demonstrated that the ECT’s investment protections under Chapter III and Article 26 are incompatible with EU law.480

(b) Article 30 of the VCLT is not applicable because the ECT and the TFEU do not address the same subject matter.481 In the Claimants’ view, the substantive protections under the ECT and EU law are different as the ECT provides rights and protection that are more extensive than what is offered in the EU’s internal market.482

(c) The ECT has primacy over EU law pursuant to Article 216(2) of the TFEU and based on the ECJ’s jurisprudence.483

(d) The ECT’s provisions are more favourable to investors and investments than EU law; by virtue of Article 16 of the ECT they would take precedence even if they covered the same subject-matter.484

(e) The ECT should also supersede EU law on the basis of Article 30 of the VCLT given its status as lex specialis and lex posterior:485' In the Claimants’ view, it is incorrect to say that EU law should apply as lex posterior to the ECT.486

(f) The Respondent’s reliance on Article 41 of the VCLT is misplaced because it has failed to establish that the Lisbon Treaty is an inter se agreement that would enable the EU Member States to derogate from the ECT’s obligations.487


A. Issues originally raised by the Respondent

The Tribunal will first consider the issues of jurisdiction and admissibility raised by the Respondent in its Counter-Memorial and maintained in the Rejoinder.

1. The Claimants’ Investment

As noted (paragraph 125 above), the Respondent denies that the Claimants have a protected investment, whether under the ECT or the ICSID Convention. It stresses that the Claimants ‘never placed themselves in the actual condition of collaborating with the Italian development plan of photovoltaic energy through the construction (even gradual) of plants that could benefit from incentive plans, but they simply constituted the pre-conditions for the realization of an ambitious project that would produce that effect.’488
Turning first to the ECT, Article 1(6) contains a typically broad definition of ‘investment’ and states that it applies ‘to any investment associated with an Economic Activity in the Energy Sector.’ Article 1(5) of the ECT defines ‘Economic Activity in the Energy Sector’ as ‘an economic activity concerning the exploration, extraction, refining, production, storage, land transport, transmission, distribution, trade, marketing, or sale of Energy Materials and Products except those included in Annex NI, or concerning the distribution of heat to multiple premises.’ An attached understanding lists as ‘illustrative of Economic Activity in the Energy Sector’ ‘(ii) construction and operation of power generation facilities, including those powered by wind and other renewable energy sources.’ In the Tribunal’s view, the words ‘construction and operation’ do not impose a cumulative requirement; if they did, an investor purchasing an already constructed plant would not be covered. Whatever the position with merely preparatory work, e.g. in the preparation of a tender or the negotiation of a concession,489 once an active process of construction of an energy project involving substantial resources is commenced, the merely preparatory phase is over and the project qualifies as an investment. There is no doubt that, assuming the Claimants’ Project was lawful and not merely speculative, it fell squarely within the terms of Article 1(5) and (6) of the ECT.
As to Respondent’s claim that the Claimants had a merely paper project of a speculative character,499 even if this might have been initially true, it ceased to be true once the Claimants invested substantially through their financing of the sub-stations and the rings. Moreover, while there may be doubt as to the speculative character of an investment at an early stage, once this doubt is resolved by substantial measures of implementation, including assumption of financial risk, it should be presumed that the investment was a genuine one, and was correspondingly treaty-protected, from the outset.500
In this respect the Claimants point to a number of decisions, under the ECT and BITs, where projects were held to be investments despite never producing nor even being finally licensed to do so.501
Given that the Project was covered as an investment under Article 1(6) of the ECT, it needs little to show that it was equally covered by the ICSID Convention, which contains no separate definition of ‘investment.’ Even if, as the Respondent argued, one were to apply the Salini criteria as interpreted in subsequent decisions,502 the Claimants clearly had an investment for ICSID purposes.

2. ‘Clean hands’/Good faith

The Respondent also argues for the inadmissibility of the claim on the ground that the Claimants lacked ‘clean hands’ or were acting in bad faith in pursuing the Project.

This issue has already been substantially treated under the rubric of the legality of the Project. No evidence has been tendered that Eskosol was guilty of ‘deceiving the Energy Services Operator on the actual size and nominal power of the photovoltaic plant’, a key basis for the Court of Criminal Cassation decision of 5 February 2014;503 and in the absence of any such evidence, the ‘clean hands’ doctrine has nothing to operate on. It is therefore unnecessary for the Tribunal to decide whether there exists a generic ‘clean hands’ defence or ground of inadmissibility in international investment law.504

Under the ‘clean hands’ rubric, the Respondent also argues that the Project was not treaty-protected because of the Claimants’ failure to conduct an EIA:

as for the issue of the obligation of the EIA, the abusive conduct by the Claimants appears contrary to the obligation of good faith not only because it is inconsistent with the rationale of domestic law, but also because it is in conflict... with international law, and in particular with [Article 19 of] the ECT...505


Article 19 of the ECT provides, in so far as relevant:

... each Contracting Party shall strive to minimize in an economically efficient manner harmful Environmental Impacts occurring either within or outside its Area from all operations within the Energy Cycle in its Area... Contracting Parties shall accordingly:

(i) promote the transparent assessment at an early stage and prior to decision, and subsequent monitoring, of Environmental Impacts of environmentally significant energy investment projects[.]

The Claimants object that claims based on Article 19, contained in Part IV of the ECT (‘Miscellaneous Provisions’), are beyond the scope of the Tribunal’s jurisdiction, which is confined to Part III (‘Investment Promotion and Protection’). But the Respondent does not make any affirmative claim or counterclaim based on Article 19, and it is at least arguable that a tribunal constituted under Part III could take into account conduct clearly in breach of other provisions of the ECT insofar as it is relevant to the admissibility of a claim. The key point, however, is that Article 19 operates not at the level of individual investors but at the interstate level, as is equally the case with the developing general international law of EIAs.506 In so far as there is any requirement for private parties to carry out an EIA for any proposed project, this can only arise under the relevant national law. This is made clear by an Understanding of the Contracting Parties appended to Article 19(1)(i):

It is for each Contracting Party to decide the extent to which the assessment and monitoring of Environmental Impacts should be subject to legal requirements, the authorities competent to take decisions in relation to such requirements, and the appropriate procedures to be followed.

In accordance with Article 19(1)(i), it is for the law of the host state to determine the existence and extent of EIA requirements binding on private parties, and it is not enough to appeal to ‘the rationale of domestic law’ in the absence of specific legal requirements.

Under Italian law there is no EIA procedure required for small solar power plants. Large solar plants are subject to a screening process as a result of which an EIA may be imposed. No screening occurred (or seems to have been required) when the project companies obtained approval for the individual plants which would make up the Puglia Project.507 At most, there may have been some uncertainty as to the applicability of the screening procedure given the ‘aggregative’ character of the Project. But by the time Eskosol acquired the twelve development companies, the time for an EIA was, by parity of reasoning from the 2012 decision of the Puglia Court, past. At the level of the admissibility of claims, it is too late for Italy now to assert that an EIA was ‘really’ required.

B. EU Law and the inter se issue

(a) Admissibility of the inter se argument

(b) The applicable law

(c) The original scope of the ECT

(d) Subsequent modification of the ECT as to inter se matters

(e) The state of the authorities

(f) Relevance of the individual Claimants’ Swiss permanent residence


In the alternative, the two individual Claimants argue that they have standing as ‘Investors’ under the ECT as Swiss permanent residents, even if Blusun as a Belgian corporation does not. While the Tribunal has ruled that Blusun does have standing under Article 26 of the ECT as an ‘investor’, it will nevertheless consider the nationality of the other Claimants. The argument arises from the definition of ‘Investor’ in ECT Article I:

(7) ‘Investor’ means:

(a) with respect to a Contracting Party:

(i) a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law;...

Mr. Lecorcier, the majority shareholder in Blusun, became a Swiss permanent resident in January 2009, thus before the events giving rise to the present claim. Mr. Stein, holding the rest of the shares, only became a Swiss permanent resident in January 2011, at which stage most of those events had occurred and as such could not form the basis of any claim by him.

In support of this argument the Claimants rely on the decision in Feldman v. United Mexican States.540 At stake was an analogous provision concerning permanent residents in NAFTA Article 201. Feldman, a US citizen, was also a permanent resident of Mexico, which argued that as between the two, the dominant status should be treated as effective, by analogy with the principle of dominant nationality in cases of dual nationality. The tribunal rejected that view, holding that ‘permanent residents are treated like nationals in a given State Party only if that State is different from the State where the investment is made.’541 But it accepted that the investor might be a permanent resident of a third State party to the relevant treaty. Transposed to the present case, this implies that a French national could bring an ECT claim against Italy if that person was also Swiss permanent resident at the relevant times, i.e., at the time of the alleged breach and of the request for arbitration.
The EC did not address this issue in its Amicus Brief. Its key argument was that ‘Union law does not allow Member States to agree investment protection rules inter se, outside the Union legal order’,542 but this ignores the point that the relevant agreement for present purposes is between Italy and Switzerland, not an EU Member.
In its submission regarding the EC’s Amicus Brief, the Respondent argued that Mr. Lecorcier was not a Swiss permanent resident at the time of conclusion of the ECT.543 But it is settled that the relevant time for consent is the date of filing the Application.544 It also argued that ‘Article 25(2)(a) [of the ICSID Convention] is self-standing and cannot be softened by reference to the letter of the ECT: either both treaties are satisfied, and the Claimants are nationals of a Contracting State, or they cannot receive protection under an ICSID arbitration.’545 In its oral argument in closing, Italy took the different point (and took it rather diffidently) that under Article 25 of the ICSID Convention Mr. Lecorcier was appearing as a French national and that he could not thereafter rely on a different status for the purposes of application of substantive law.546 But under Article 42 of the ICSID Convention there is no necessary identity between the provision conferring jurisdiction (and standing under the Convention), on the one hand, and that determining the substantive law, on the other hand.
If it were necessary to do so, the Tribunal would be inclined to uphold Mr. Lecorcier’s standing under the ECT as a Swiss permanent resident, though that would be limited to a claim for damages suffered by him personally. But where the primary victim of a breach is a company, any remedy would normally enure to the benefit of the company, avoiding potential difficulties including double recovery.547 The Claimants made it clear that their primary claim was that of Blusun itself, which on any view is an intra-EU claim.

(g) Conclusion

For these reasons, and in common with the other investment tribunals which have considered the question, the Tribunal rejects the intra-EU objection to its jurisdiction. In its view, the ECT continues to apply inter se, as between the member states of the EU, under international law. The Tribunal accordingly has jurisdiction over the claims of all three Claimants.



The Claimants’ case on the merits is comparatively simple. It was put in opening as follows:

there was no other large solar project comparable to that of the Claimants’ built in Italy in the years 2010 and 2011. This was due to the lack of construction project financing, which in turn was the result of the legal insecurity created by the Italian State. On this record, there is thus a clear causal link between the series of measures adopted by Italy and the project’s failure. Because of the persisting legal insecurity created by the state, potential investors were deterred from investing in the project during the period from March 2010 to September 2011. Then the self-redress proceedings and stop-work orders gave the final blow to the project in late 2011/early 2012.548

As this passage in effect concedes, the immediate cause of the Project’s failure was the absence of construction financing. Lacking completely any revenue and with substantial debts, the insolvency of the project companies was inevitable. Italy is to be held responsible for this failure, according to the Claimants’ case theory, because it caused legal insecurity in the relevant period in breach of the ECT, and this was the effective cause of the failure to attract financing.

In support of this general claim, the Claimants rely separately on Articles 10(1), first sentence (legal stability), 10(1), second sentence (fair and equitable treatment, with emphasis on legitimate expectations), and 13 (expropriation) of the ECT.549 These three claims will be taken in turn.

A. The Legal Instability Claim: ECT Article 10(1)

Article 10(1) of the ECT provides as follows:

Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party.

1. The interpretation of Article 10(1)

The key obligation on which the Claimants rely for their legal instability claim is the obligation to ‘encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area’ (Article 10(1), first sentence). Reference should also be made to the following definition in Article 1(8):

(8) ‘Make Investments’ or ‘Making of Investments’ means establishing new Investments, acquiring all or part of existing Investments or moving into different fields of Investment activity.


In PSEG Global v. Turkey, the tribunal found a breach of the fair and equitable treatment (FET) standard by reference to what it described as:

... the ‘roller-coaster’ effect of the continuing legislative changes. This is particularly the case of the requirements relating, in law or practice, to the continuous change in the conditions governing the corporate status of the Project, and the constant alternation between private law status and administrative concessions that went back and forth.550

In the same vein, the tribunal, while emphasising the relevance of the changing attitudes and policies of the administration, concluded that ‘[s]tability cannot exist in a situation where the law kept changing continuously and endlessly, as did its interpretation and implementation.’551 This was not a decision under the ECT; moreover, the ‘roller-coaster’ dictum was only one among several reasons the tribunal gave for its finding of breach. It remains to be seen whether a similar analysis could be applied to Article 10(1) of the ECT.

On the basis that Article 10(1), first and second sentences, of the ECT apply to a ‘legal instability’ claim said to arise in the course of an existing investment, the next question is the scope of the host state’s obligation in that regard. The Claimants referred to a number of cases in which tribunals were supportive of such claims.558

2. The legal instability claim


The Claimants’ case as pleaded largely turns on the claim of legal instability:

Our claim is not that Italy’s legislation had to remain immutable, unchanged, written in stone. This case is not about regulatory change; it’s about regulatory turbulence. It concerns the fact that during the two years between permissible and legally impossible, the legal framework for the project constantly changed, leaving no period of stability in which the requisite capital investment for a project of this size could be realised.565

(a) Decision 119 of 26 March 2010 of the Constitutional Court

In December 2008, the central Government initiated proceedings before Italy’s Constitutional Court challenging, inter alia, the constitutionality of Article 3 of Puglia’s Regional Law 31/2008 which provided for DIA authorisations for plants with electric power capacity between 20 KW and 1 MW. The central Government argued that Article 3 of Puglia’s Regional Law 31/2008 infringed Legislative Decree 387/2003 which permitted the application of the simplified DIA procedure only to plants with capacity up to 20 KW whereas the Puglia Region contended that the Regional Law fell within Puglia’s concurrent jurisdiction under Article 117 of the Italian Constitution.566 There was no parallel challenge to Regional Law 1/2008.567
The Constitutional Court, in March 2010 (a not-unreasonable delay of 15 months), upheld the challenge. In its decision of 26 March 2010, the Constitutional Court found that Article 3(1) and (2) of Regional Law 31/2008 was contrary to Article 12(5) of Legislative Decree 387/2003 and declared it unconstitutional. The Court held:

... the regional provision is illegal, since higher thresholds of generation capacity and characteristics of the installation sites for which the DIA procedure can be used can be identified only by means of a decree of the Minister of Economic Development, in consultation with the Minister for the Environment and the Protection of the Territory and Sea, in agreement with the Joint Conference, without the possibility for the Region to identify them on its own...568

Under Article 136 of the Italian Constitution, a provision that is declared unconstitutional ceases to have effect on the day following the publication of the decision by the Constitutional Court. But according to Italian case law, Constitutional Court’s decisions declaring the unconstitutionality of a law have no retroactive effect on ‘consolidated relationships’ (‘rapporti esauriti’ or ‘rapporti consolidate‘).569 ‘Consolidated relationships’ stem from judgments or administrative acts which are final (i.e. can no longer be challenged).
The Government took the position that the DIA status of plots which had been fully processed under Regional Law 31/2008 was ‘consolidated’ and was thus unaffected by the decision. It responded in these terms to an inquiry on behalf of Eskosol.570
However, as recounted in paragraphs 93-95 above, the Salva/Alcoa law of 13 August 2010 somewhat muddied the waters: in providing a special 150-day time limit for DIA applications in progress, the Law was taken by some as impliedly abrogating the status of consolidated relationship for other applications.
Watson, Farley and Williams acting on behalf of Eskosol sought clarification on this point: in a letter of 3 December 2010, the Department of Legal Affairs of GSE responded as follows:

If the plants... authorized between August and September 2008, comply with all the requirements, including with the technical standards resulting from the applicable rules, such as the decisions of the Authority for the Electric Energy and Gas, and unless the competent administrative authorities should rule in a different manner with regard to the interpretation of Article 1 - quater of the Decree Law 105/2010 approved, with its amendments, by Law 129/2010, it is held that admission to the incentives under the so-called Energy Account is possible, in accordance with the relevant provisions of the applicable legislation.571

Shortly thereafter, the Ministry of Economic Development issued a Circular clarifying the effects of the Constitutional Court’s decision. Reciting that it was based on ‘numerous requests for Clarification’, the Circular made it clear that the decision had no effect on consolidated relationships, and as to pending DIAs it extended the time limit for connection to the grid to 16 January 2011.572 The Circular sought to set a regulatory balance between - on the one hand - the protection of the legitimate reliance of operators who have achieved a qualifying title on the basis of regional laws subsequently declared unconstitutional and - on the other hand - not allowing for an indefinite time the entry into operation of plants which do not comply with the prevailing national framework.573
The Tribunal would make the following points with respect to this episode:

(a) The Government’s challenge before the Constitutional Court was duly filed and was plainly arguable.

(b) The challenge was filed well before the Claimants made their investment. The fact of the challenge was public knowledge and was known to the Claimants.574

(c) The decision did not result in a loss of rights to Blusun or its affiliates. True, there seems to have been some initial market uncertainty, which the Government might have done more to dispel. But there was no real doubt about the applicable legal regime in case of a declaration of unconstitutionality, and the Government did not fail to act with due diligence.

(d) In any event, the content of the public law of the host state (including its process of determining the constitutionality of laws) is a matter on which investors like anyone else have access to independent advice. If it avoids outright misrepresentation, the Government does not offer warranties in that regard.

(e) To conclude, in proceeding with the Project in full knowledge of the pending constitutional challenge, the Claimants took the risk that the challenge might succeed, and that this might cause delay over the Project and its financing.575

For these reasons, the Constitutional Court decision and its aftermath did not breach Article 10(1), first sentence, of the ECT.

(b) The Romani Decree and the Fourth Energy Account

(c) The publication of the GSE lists of large plants

As noted, the Fourth Energy Account established a register of large plants eligible for feed-in tariffs (‘registro dei grandi impianti’) which would be administered by the GSE (Article 8(1)). The GSE published technical regulations588 for the enrolment of large plants to the register (Article 8(9)). The deadline for the submission of enrolment requests to the GSE register for purposes of eligibility for feed-in tariffs in 2011 was 30 June 2011 (Article 8(2)).589 The GSE was required to publish the list and ranking of photovoltaic plants admitted to the register within 15 days of the enrolment application deadline (Article 8(3)).590
Under Article 6(2), large plants that came into operation by 31 August 2011 were automatically eligible for feed-in tariffs. Large plants that entered into operation between 1 September 2011 and 31 December 2012 had to be listed in the register and would benefit from feed-in tariffs provided that their ranking on the register so allowed and that their certificate of work completion was sent to the GSE within seven months (or nine months for plants with electric power capacity above 1 MW) from the date of publication of the ranking (Article 6(3) and 8(4)).591
The GSE established the ranking of the plants listed in the register according to the following priority criteria:

a) the date of entry into operation, which had to be prior to the date of application to the GSE register;

b) the date of completion of construction works, which had to be prior to the date of application to the GSE register;

c) the precedence of the date of issuance of authorisations;

d) the lower capacity of the plants;