International Arbitration Newsletter - October 2021 | Regional Overview: Europe
The most relevant European updates from the global International Arbitration and ADR practice group at Garrigues.
France's Eutelsat loses the battle against Mexico
The origin of the dispute dates back to 2014, when the French company Eutelsat, one of the world's leading satellite operators, invested US$831 million to acquire Satmex, a Mexican company that provided telecom coverage to a large part of the American continent. As a result, Eutelsat took over the concessions, previously held by the Mexican company, to occupy geostationary orbital positions in Mexico.
In 2016, the French company informed the Mexican government of its disagreement with the satellite regulations. Eutelsat considered it abusive to have to provide satellite capacity to the State free of charge, simply because it operates via Mexican satellites (Satmex).
In 2017 Eutelsat brought its claim under the 1998 France-Mexico Bilateral Investment Treaty. Eutelsat claimed that the Ministry of Communications and Transport had acted arbitrarily by refusing to reduce the "state reserve".
The French company claimed that in several meetings with government representatives both before and after the Satmex acquisition, they were told that the “state reserve” would be reduced.
The case was pursued under ICSID's Additional Facility Rules, as Mexico did not ratify the ICSID Convention until 2018. After four years the tribunal issued its award dismissing Eutelsat's claim for more than US$120 million, and ordering the French company to bear the costs of the arbitration.
ICC award overcomes challenge before the Italian Courts
The Milan Courts recently confirmed a partial and final award issued by an ICC tribunal against KT-Kinetics Technology (KT) an engineering company subsidiary to Italian Tecnimont responsible for the installation of a process gas heater in an ore processing plant located in Louisiana and deemed to be liable for the triggering point of a fire that destroyed part of the plant.
The challenge was filed on the basis that the chair arbitrator (appointed by the co-arbitrators) and the wining party’s arbitrator failed to disclose that both had worked previously together at the same firm.
The ICC tribunal had previously dismissed the challenge presented by KT on the basis that the prior work connection and its specific circumstances did not compromise the arbitrator’s impartiality and independence. The Court of Milan, composed by a collective court of three judges, confirmed the tribunal’s decision and refused to set aside the partial and final awards issued against the challenging party.
Spain now facing 50 renewable claims
The 50th Energy Charter Treaty (ECT) arbitration against Spain has been registered at ICSID. The numerous disputes, which started over a decade ago, currently face two challenges.
First, the Royal Decree-Law 17/2021, passed by the Spanish government and aimed at curtailing electricity prices, obliges wind and solar power generators to return profits obtained over wholesale (regardless of whether the prices areestablished by PPAs).
Second, the effects of the recent Komstroy case on intra-EU cases are still uncertain. It seems very likely that Spain will relay on the doctrine established in the case to invalidate intra-EU claims based on the ECT. In short, these new variables can either spark new ECT claims against Spain; or rather discourage those investors whose case is intra-EU.
Russia strives to set aside Yukos award in Switzerland
The Russian Federation is seeking to set aside a Yukos UNCITRAL award issued in Switzerland. The award in question is the latest iteration of the Yukos saga, where several foreign investors brought arbitration claims under the Energy Charter Treaty (ECT) against Russia. They claim that the Russian government intentionally drove Yukos, previously Russia's largest oil company, into bankruptcy by subjecting it to multibillion-dollar retroactive tax demands, which the investors view as tantamount to a breach of the expropriation and FET provisions contained in the ECT. One of such investors, Yukos Capital, a former affiliate of Yukos and registered in the British Virgin Islands, brought claims under the UNCITRAL rules against Russia and obtained a favourable award in 2017, with the Switzerland-seated tribunal awarding the Claimant over US$5 billion in damages.
The Russian government is looking to have the award annulled on two grounds. First, it claims that Yukos Capital’s assets, a loan granted to Yukos, do not constitute a protected investment under the ECT. Second, Russia argues that the ECT provisions do not bind it, given that it had signed the treaty, but not ratified it. These two grounds in Russia’s view preclude the tribunal from establishing jurisdiction.