Arbitration Regional Overview: Europe
Arbitration Regional Overview: Europe
Arbitration Newsletter - April 2018
The most relevant European updates from the global International Arbitration and ADR practice group at Garrigues.
The ECJ rules against validity of arbitration clause contained in EU BIT
In a much-anticipated ruling that affects nearly 200 bilateral investment treaties between EU member states, the European Court of Justice (ECJ) has ruled in the case of Slovak Republic v. Achmea B.V. (Case C-284/16) that the investor-state arbitration clause in a BIT between the Netherlands and Slovakia is not compatible with EU law. It is adverse to the autonomy of EU law because it establishes a mechanism that cannot ensure that disputes over the application or interpretation of EU law will be decided by a court within the judicial system of the EU.
Accordingly, in the future, investors will be forced to submit any dispute previously protected by an intra-EU BIT to the jurisdiction of their host state. The situation is particularly difficult for those that already initiated BIT arbitrations or have obtained favourable awards that are not enforced yet.
Rare committal order
In a rare example of a committal order being issued in support of arbitration, an English court has held a Mongolian state-owned mining company in contempt of court for breaching an order in proceedings to enforce two LCIA awards.
In a judgment issued late last year, the Commercial Court in London found Erdenet Mining Corporation to be in contempt of court for failing to comply with an earlier order from August last year requiring it to disclose details of its assets worth more than US$500,000 by affidavit.
The affidavit had been requested by a syndicate of four banks to assist the enforcement of two partial final awards in related LCIA proceedings against Erdenet that have been ongoing since 2013.
New ICSID claim from an Amsterdam-based mining company
The claim against Macedonia was brought by Amsterdam-based mining company, Cunico Resources under the 1998 Netherlands – Macedonia BIT. The dispute concerns Cunico’s wholly owned subsidiary FENI, a company that operates a ferronickel-producing plant in the city of Kavadarci in south-central Macedonia.
Cunico agreed to sell the subsidiary to a purchaser in 2017. The company, however, alleges that the Macedonian government began a campaign against Cunico and FENI at the time of the sale, which culminated in bankruptcy proceedings against FENI and investigations it describes as “unwarranted.”
E.ON wins nuclear tax dispute
German energy group, E.ON, has won an ICC award in a Geneva-seated dispute with a subsidiary of French power utility, Engie, over nuclear power tax payments. According to E.ON, the tribunal issued an award “almost entirely in favour” of it and subsidiary PreussenElektra against Belgian-based Electrabel. It said the tribunal found E.ON was not obliged to pay a Belgian nuclear tax totalling €321 million, dismissing part of a counterclaim filed by Electrabel.
Nuclear power dispute ends in settlement
France’s Areva has agreed to pay €450 million to Finnish power company TVO for delays to the construction of a nuclear power plant on an island in the Gulf of Bothnia in southwest Finland, ending a decade-long €6 billion ICC dispute between the Areva-Siemens consortium and TVO that has given rise to four partial awards. Once completed, the plant is expected to operate for 60 years and to deliver 1,650MW to Finland’s electricity grid. According to TVO, regular electricity production is scheduled to begin in May 2019.
New ICSID claim from the CEO of a chain of hotels in Budapest
Hungary is facing a claim from Mazen Al Ramahi, the CEO of a chain of hotels in Budapest. Mr Ramahi, a Jordanian national who has lived in Budapest for over 20 years, also owns offices and retail outlets and is head of the Palestinian Communities Union in Europe. He has brought the claim under the 2007 Jordan-Hungary BIT.
Treaty award in Poland dispute set aside in London
In what is believed to be the first set aside of an investor-state award by an English court, a judge has ruled that an eminent tribunal hearing a private equity group's dispute with Poland interpreted an investment treaty too narrowly when it declined jurisdiction over certain claims.
A win against Chevron
An ICC tribunal has rejected claims that Chevron brought against a Romanian state agency over the termination of three shale gas concessions, while upholding the agency’s counterclaim for more than US$73 million for terminating the concessions without complying with financial obligations set out in the country’s petroleum law.
Chevron also has to pay interest from October 2014 and the agency’s costs. The dispute centred on a trio of agreements for the development and exploitation of the “Costinesti”, “Vama Veche” and “Adamclisi” shale gas concessions in eastern Romania, signed by Chevron and Romania in 2011. These included minimum exploration requirements before the oil company could withdraw.
Spain held liable in renewables case over solar reforms
On 15 February 2018 an arbitral tribunal under the Stockholm Chamber of Commerce issued its award in the Novenergia v. Spain case. The tribunal found that Spain violated Article 10(1) of the Energy Charter Treaty, containing the fair and equitable treatment standard, and on this basis it has ordered Spain to pay to the Claimant EUR 53.3 million as damages, plus legal costs and interest.
Arbitration provision of the Spanish Insurance Contract Act declared unconstitutional
The Spanish Constitutional Court has declared provision 76e) of the Act on Insurance as null and void after finding that it breaches insurers’ constitutional right to due process.
According to the Constitutional Court, the article seeking to transpose “Solvency II” Directive was unsuccessful, although it grants an insured the right to choose between arbitration and court litigation for their claims. The article therefore provides a one-way scenario in which insurers are obliged to arbitrate if their insured decides to, and thus prevented from seeking judicial protection before normal Spanish courts.
New investment arbitration over bank sale
Spain has received notice of a dispute from the Mexican businessmen Antonio del Valle, former director of Banco Popular, over the State’s role in the sale of Banco Popular to Banco Santander for a price of one euro. The claim is aimed to recover the amount of the investment that Sr. del Valle had in the Bank at the time of the sale.
The notice has been brought under the Spain-Mexico bilateral investment treaty and has triggered a cooling off period to allow the parties to negotiate. The announced claim is to be added to the claims that Sr. del Valle brought before the European instances (against the Single Resolution Board and the European Commission) for their role in the sale.
ICC claim against other shareholders in gambling group
Two brothers from the family that founded Spanish gambling group Codere have launched an ICC arbitration to wrest back control of the company after they were ousted from their executive positions on the board by US and UK shareholders, with the matter to go before an emergency arbitrator initially.
The Martinez Sampedro brothers accuse US investment funds Silver Point Capital, Contrarian Capital Management and Abrams Capital and the UK’s M&G Investments of breaching Codere’s shareholder agreement and conspiring to merge the company with Spain’s largest casino operator, Cirsa. The funds deny the allegation.
Enea loses bulk of its royalties claim
Swedish software company Enea has lost the bulk of a US$113 million royalties claim against one of its largest customers, heard under SCC rules. The tribunal denied its main claim for royalties but had accepted another, smaller claim.
As the majority of the claim was rejected, the tribunal ordered it to pay 10 million Swedish krona (US$1.26 million) to cover 80% of the defendant’s legal costs and a further 3 million krona (US$380,000) towards the costs of the arbitration.
Enea filed for arbitration in November 2016, under a contract allowing the customer use of its operating system in telecommunication equipment. The parties disagreed over the interpretation of provisions of the contract on the calculation of royalties.
Enea’s shares fell almost 15% on the day the award was announced.
Turkey faces claim over media crackdown
Belgian company, Cascade Investments, has filed an ICSID claim against Turkey alleging that President Recep Tayyip Erdoğan’s crackdown on press freedom led to its investment in Turkey’s largest newspaper being unlawfully expropriated by the state.
Cascade's claim under an investment treaty between Belgium, Luxembourg and Turkey was registered on the ICSID website on 28 February 2018. The treaty provides for a one-year cooling off period, which has already expired.
Naftogaz claims victory in gas transit dispute
Ukraine's state-owned gas company Naftogaz says it has secured a mostly favourable award against Russia’s Gazprom that may end a US$125 billion dispute between the two parties over the supply and transit of gas.
On 28 February 2018, an SCC tribunal awarded Naftogaz US$4.63 billion in damages after finding that Gazprom had breached its obligations to transport sufficient volumes of gas under a 2009 transit agreement between the parties.
Gazprom, however, will only have to make a net payment of US$2.56 billion as a result of residual payments owed by Naftogaz for gas that was delivered in 2014 and 2015. The residual payments are part of a final award issued by the tribunal last December in a separate arbitration between the parties over a 2009 gas supply agreement.