Summary

Ad Hoc Arbitration Under the Rules of Arbitration of the United Nations Commission on International Trade Law

and

Pursuant to the Energy Charter Treaty

European Union's Response to Nord Stream 2 AG's Notice of Arbitration

I. INTRODUCTION

1. The European Union ("EU") is in receipt of a letter of 26 September 2019 by the legal counsel of Nord Stream 2 AG ("NSP2AG") serving a Notice of Arbitration by Nord Stream 2 AG against the European Union under the Energy Charter Treaty ("ECT") ("Notice of Arbitration").

2. NSP2AG challenges the introduction and enactment of Directive (EU) 2019/692 ("Amending Directive"),1 amending Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas (the "Gas Directive").2

3. The European Union hereby responds to NSP2AG's Notice of Arbitration (the "Response"). Nothing in this Response should be construed as an implicit admission by the European Union that NSP2AG is entitled to file a request for arbitration under the Energy Charter Treaty.

4. The Claimant purported to file its Notice of Arbitration under the UNCITRAL Arbitration Rules, 1976 (the 1976 Rules). The 1976 Rules do not provide for the filing of a Response. The EU therefore files its Response without prejudice to the question whether the 1976 Rules or 2010 UNCITRAL Arbitration Rules (the 2010 Rules) appropriately apply to investment arbitration proceedings currently initiated under the Energy Charter Treaty.

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4. JURISDICTION

27. The European Union does not agree that NSP2AG fulfils all the conditions to request arbitration pursuant to Article 26(2) of the ECT.

5. THE EUROPEAN UNION DENIES ANY ALLEGED BREACHES OF THE ECT

28. The European Union does not agree that the Amending Directive and its actions in connection with the Amending Directive breach the European Union's obligations under the ECT.

i. The Amending Directive does not constitute an unreasonable or discriminatory measure and does not breach Article 10(1) of the ECT;

ii. The Amending Directive does not constitute a breach of the EU's obligation under Article 10(1) to create stable, equitable, favourable and transparent conditions for NSP2AG's investment;

iii. The Amending Directive does not constitute a breach of the EU's obligation under Article 10(1) to accord NSP2AG's investment fair and equitable treatment;

iv. The Amending Directive does not constitute a breach of the EU's obligation to provide NSP2AG's investment constant protection and security, and does not breach of Article 10(1) of the ECT;

v. The Amending Directive does not constitute a breach of the EU's obligation pursuant to Article 10(7) of the ECT to provide NSP2AG with treatment no less favourable than that which it accords to Investments of its own Investors or of the Investors of any other Contracting Party or any third states; and

vi. The application of the Amending Directive to NSP2AG and Nord Stream 2 will not have an effect equivalent to an expropriation, and does not constitute a breach of Article 13 of the ECT.

6. RELIEF AND DAMAGES

29. The European Union disputes that NSP2AG has suffered any losses as a result of any EU measure allegedly violating obligations under Part III of the ECT. The EU further denies NSP2AG's right to any declaratory or interim injunctive relief or costs in connection with this proceeding. The EU confirms it will be seeking its full costs.

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