Summary

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3. Cases initiated against the Union under the Energy Charter Treaty

To date, there has been one investment dispute settlement proceeding initiated against the Union under the Energy Charter Treaty. In addition, there have been a few requests for consultations received by the Union pursuant to Article 26 of the ECT, which have not so far advanced to the stage of formal litigation. All these proceedings are described in more detail below.

a. Claims by Prosisa and Risteel Corporation on the Spanish renewables support scheme (2015)

In 2015, the Commission received two requests for consultation pursuant to Article 26 of the ECT, respectively from the Swiss company Prosisa AG and the Dutch company Risteel Corporation BV. The Commission informed the European Parliament and the Council in accordance with Articles 4 and 7 of the Financial Responsibility Regulation on 7 October 2015.

Both companies had made investments in the photovoltaic and wind sectors and in the production of renewable energy with biomass in the territory of Spain, and their claims related to Spain's decision to amend the support scheme for renewable energy. The companies had also in parallel launched proceedings against Spain. They essentially argued that the Commission has violated the fair and equitable treatment standard enshrined in Article 10 of the ECT by intervening before arbitration tribunals constituted under the ECT and by arguing that the ECT did not apply in the relationships between an EU Member State and an investor from another EU Member State.

Consultations pursuant to Article 26(1) of the ECT took place on 1st December 2015 between the investors and the Commission. The Commission clarified that it considered there was no valid legal basis allowing the companies to proceed with their disputes against the Union.

The companies did not pursue further their claims against the EU.

b. Claims by Nord Stream 2 on the amendment of the Gas Directive (2019)

On 12 April 2019, Nord Stream 2 AG, a subsidiary of Gazprom incorporated in Switzerland, addressed a letter to the Commission seeking clarification on the application of the derogation regime contained in Directive (EU) 2019/692 of 17 April 2019 amending the Gas Directive 2009/73/EC ("Amending Gas Directive).[1] In the letter, Nord Stream 2 also provided notice to the Commission of an alleged breach of the ECT, and requested the EU to attempt to reach an amicable settlement in accordance with Article 26(1) of the ECT. In accordance with Article 4 of the Financial Responsibility Regulation, the Council and the European Parliament were informed of these developments on 13 May 2019.

Nord Stream 2 AG argued that it should be entitled to a derogation under the amended Gas Directive from the rules on unbundling, third party access and tariff regulation applicable pursuant to the Gas Directive, as such derogation would allow it to recover the investment made, thus respecting its legitimate expectations. It claimed that should it not be eligible for a derogation under the Amending Directive and no other steps be taken to put it in an equivalent position, this would amount to a breach of the EU's obligation under the ECT, in particular Articles 10 and 13 of the ECT. Nord Stream 2 AG also argued that it qualifies as an investor of a Contracting Party under the ECT being a company headquartered and having substantial business operations in Zug, Switzerland.

Consultations between the Commission and Nord Stream 2 took place on 25 June 2019. The European Commission reserved its position on whether it considers Nord Stream 2 to have standing to bring a claim under the ECT pending submission of concrete evidence by the investor of its business operations in Switzerland. It also informed the investor that it considers Directive 2019/692 to be non-discriminatory and in line with the EU's international obligations under the ECT. On the question of whether Nord Stream 2 would be eligible for a derogation, the Commission recalled the rules of the Amending Gas Directive, notably that the relevant Member States' authorities will decide on the granting of derogations based on national rules transposing the Directive and upon individual applications.

The Commission had further written exchanges with Nord Stream 2 on 8 July, 26 July and 6 August 2019. On 25 July 2019, Nord Stream 2 lodged an application for annulment of Directive (EU) 2019/692 before the General Court (Case T-526/19). On 26 September 2019, Nord Stream 2 submitted a notice of arbitration against the Union pursuant to Article 26(2)(c) and 26(4)(b) of the ECT. The Commission informed the European Parliament and the Council in accordance with Articles 4 of the Financial Responsibility Regulation on 1 October 2019.

In the notice of arbitration, Nord Stream 2 AG alleges that Directive (EU) 2019/692 (the "Amending Directive") and the EU's action in connection with the Amending Directive breach the EU's obligations under the ECT, in particular Articles 10(1), 10(7) and 13 of the ECT.

c. Claims by UK investors on behalf of AS PNB Banka against regulatory requirements established by the European Central Bank (2019)

On 2 May 2019, the Commission received a letter, pursuant to Article 26(1) ECT, from Russian investors (with UK nationality) on behalf of the Latvian bank AS PNB Bank, in relation to certain decisions of the European Central Bank (ECB) which imposed regulatory requirements on the bank and allegedly impact on their investment in a wind power plant in Latvia, Winergy.

In particular, the investors claimed that a draft decision by the ECB of 17 May 2019 which imposed deadlines on AS PNB Bank to resolve its exposure to Winergy and to meet certain capital adequacy thresholds, led to the withdrawal of the bank's licence, and to the deprivation of their investments in Winergy. The investors argued that with its actions the Union was threatening the continued existence and security of their investments in Winergy in breach of the EU's obligations under Part III of the ECT, along with Latvia.

The European Parliament and the Council were informed of these allegations on 24 May 2019.

On 28 June 2019, the Commission addressed a letter to the investors setting out the view that they do not have standing to initiate proceedings against the EU under the ECT, the investors being EU nationals, and suggesting the withdrawal of the claims.

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[1] Directive (EU) 2019/692 of the European Parliament and of the Council of 17 April 2019 amending Directive 2009/73/EC concerning common rules for the internal market in natural gas, OJ L 117, 3.5.2019, p. 1.

Letter available on:

• OGEL here Letter from Nord Stream 2 to European Commission - Request for clarification on the application of the derogation regime to the Nord Stream 2 Pipeline ("Nord Stream 2") and notification of possible breach of the Energy Charter Treaty ("ECT") - 12 April 2019, and
• TDM here Letter from Nord Stream 2 to European Commission - Request for clarification on the application of the derogation regime to the Nord Stream 2 Pipeline ("Nord Stream 2") and notification of possible breach of the Energy Charter Treaty ("ECT") - 12 April 2019