Turkey: Review Of ICSID Decision On Rockhopper Italia S.P.A., Rockhopper Mediterranean LTD And Rockhopper Exploration PLC v. Italian Republic

Review of ICSID Decision on Rockhopper Italia S.P.A., Rockhopper Mediterranean LTD and Rockhopper Exploration PLC v. Italian Republic¹ under the European Union's Interpretation of International Arbitration Regarding Intra-EU Disputes Under Energy Charter Treaty and Recent Developments on Energy Charter Treaty

Abstract

The matter of whether the international arbitral tribunals have jurisdiction over the "disputes arisen between European investors and member states of the European Union (EU)", as known as "intra-EU" disputes, is widely discussed during the past years. EU member states repeatedly claimed that the international arbitral tribunals do not have jurisdiction on intra-EU disputes. However, the international tribunals continuously argued that they do. Rockhopper Italia S.P.A., Rockhopper Mediterranean LTD and Rockhopper Exploration PLC v. Italian Republic² (Rockhopper) is one of the examples of this matter. There, the tribunal decided in favour of the latter argument. However, in the Republic of Moldova v. Komstroy LLC³ (Komstroy), The Court of Justice of the European Union (CJEU) has extended the interpretation of its decision in Slovak Republic v. Achmea B.V.⁴ (Achmea) and ruled that Energy Charter Treaty (ECT) does not apply to and international tribunals do not have jurisdiction on intra-EU disputes. The essay will summarise the Rockhopper Italia S.P.A., Rockhopper Mediterranean LTD and Rockhopper Exploration PLC's (Claimants) and Italian Republic's (Respondent) arguments regarding the objection to jurisdiction and the tribunal of Rockhopper's (Tribunal) decision. Following that, it will discuss the Claimants' and the Respondent's (Parties) arguments and focus on the relevant case law, including CJEU's Achmea and Komstroy decisions. Lastly, it will give a brief summary of the recent developments on the ECT following Komstroy decision.

1. Rockhopper Italia S.P.A., Rockhopper Mediterranean LTD and Rockhopper Exploration PLC v. Italian Republic

1.1. Procedural History

On 14 April 2017, the Claimants requested for arbitration under the ECT and The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). On 28 March 2018, the Respondent objected to jurisdiction by claiming ECT and ICSID Convention lack of jurisdiction regarding intra-EU disputes. Following that, the Claimants submitted their response to the intra-EU jurisdictional objection.

On 29 January 2019, the Respondent submitted the Declaration of the Representatives of the Governments of the Member States, of 15 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (Declaration).

The Tribunal held the hearing to issue a ruling on the Intra-EU jurisdictional objection considering Parties' all arguments prior to any other ruling.

1.2. Arguments Regarding the Tribunal's Jurisdiction

1.2.1. Applicability of the ECT to Intra-EU Disputes

(1) Respondent's Arguments

The Respondent claims that, where Parties are subjects of EU law, protection of investments are governed by EU law, and EU law forbids concluding agreements which might affect EU legal order. In addition to that, the Respondent gives examples such as the Opinion 1/09 of the CJEU of 8 March 2011 (Opinion 1/09) and the Judgment of the CJEU of 30 May 2006 (MOX Plant Case).

Moreover, the Respondent refers to articles 1, 16 and 25 of the ECT and claims article 1 of ECT defines EU as a single and unified territory and article 25 of ECT proves EU has a preferential treatment.

The Respondent also claims that the fact that ECT lacks an express clause limiting its application does not definitively mean the lack of contracting states' aim to limit the scope of ECT under articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT).

Furthermore, the Respondent argues the aim for ECT is to regulate the energy sector of east of Europe and the Union of Soviet Socialist Republics, not the internal EU. Also, the Respondent claims that the regulations regarding the energy sector in the EU which were already adopted (or about the be adopted) certify EU's intention for intra-EU disputes to be without the scope of ECT.

Also, the Respondent states that EU and EU member states usually object to the jurisdiction of arbitral tribunals and the European Commission requested to intervene when it came to intra-EU disputes. And it argues that the practice of EU member states, which has been the same since the first intra-EU investment dispute arose under the ECT⁵, confirms that EU and EU member states do not want for intra-EU disputes to be covered by ECT.

Additionally, the Respondent claims that under the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community (Lisbon Treaty), EU member states cannot enter into inter se agreements since the direct foreign investments are part of the common commercial policy of EU and only can be regulated by EU.

More than that, the Respondent claims that both ECT and Lisbon Treaty apply to the same subject matter. And based on article 30 of the VCLT "the same subject matter" should be interpreted as to compare the scopes of the treaties, not the provisions. Therefore, the Respondent rejects the Claimants' argument that for article 16 of the ECT is applicable. In addition, the Respondent claims that article 41 of the VCLT protects the rights of other contracting parties which do not enter into the new agreement as a response to the Claimants' argument that article 41 of the VCLT bans EU member states from establishing a different system between EU member states to protect the other contracting states' right to provide international arbitration to their investors.

Lastly, the Respondent claims that EU law is more favourable both for investors and the investment since it offers a more "developed and articulated legal system".

(2) Claimants' Arguments

First, the Claimants claim that since Opinion 1/09 is about the aim to create a united legal order regarding the patents, it requires for EU law to be applicable, however, the Respondent's approach is irrelevant to this case since ECT does not require for EU law to be applied for particular kinds of disputes. In addition to that, the Claimants point out that parties still have the right to apply to EU courts.

Secondly, the Claimants state that their claims are not based on the EU law, but international law and articles 10 and 13 of the ECT; and under ECT, the applicable law regarding this dispute is international law and the provisions of ECT. Since MOX Plant Case is about the disputes which require for EU law to be applied, it is also irrelevant to Rockhopper.

Moreover, the Claimants argue that there is no provision in ECT which limits the disputes to be resolved under ECT where one of the parties is an investor from a specific contracting state. The Claimants also claim that the situation in the ECT is the exact opposite since article 46 of the ECT forbids making reservations to the ECT.

Furthermore, the Claimants claim that articles 16 and 25 of the ECT do not mean that article 26 of the ECT does not apply to intra-EU disputes. Firstly, The Claimants state that article 16 of the ECT covers the situations when there are two different international agreements applicable on the same matter between the same parties and one of the agreements is more favourable regarding the investors and investment. Secondly, the Claimants explain that article 25 of the ECT does not discuss anything regarding the intra-EU disputes. The Claimants also state that EU member states had the opportunity to add a disconnection clause to the ECT while it was being drafted, as they did add to more than twenty treaties, which could prevent article 26 of the ECT to be applied for intra-EU disputes, however, they did not.

Also, the Claimants claim that the term "Europe" which is used in ECT only means a "geographical area", therefore the use of this term should not be interpreted as if it generates an exclusive regime for EU.

Then, the Claimants remind that nineteen investment arbitral tribunals rejected the intra-EU objections. Additionally, the Claimants submit that a various number of tribunals and commentators have reached the same conclusion that the scope of the subject matter of EU law and intra-EU investment treaties is different and the article 30 of the VCLT is not applicable regarding the objection of jurisdiction to intra-EU disputes. In addition to that, the Claimants state that even if the Lisbon Treaty and ECT share the same subject, even if it is agreed that the scope of these two treaties is the same, according to articles 30(3) and 30(4)(a) of the VCLT, ECT would nevertheless be applied. Furthermore, the Claimants state that article 30 of the VCLT should be interpreted with the article 41 of the VCLT which prevents the interpretation of the Lisbon Treaty as a way to eliminate investors' right to apply to international arbitration. Also, the Respondent's suggested method of interpretation would be irrelevant and, more importantly, opposite of the ECT's purpose.

Also, the Claimants claim that article 16 of the ECT ensures that ECT supersedes other agreements which are less favourable regardless of whether they are prior or subsequent, and the Respondent could not prove EU law is more favourable than the ECT. Additionally, the Claimants state that EU law does not include sufficient provisions to provide extensive and fair treatment as much as ECT does. The Claimants also add that EU law also does not grant the right to investors to apply to international arbitration. Finally, the Claimants also state that EU law does not provide the right for investors to bring claims against a state directly in international arbitration, where ECT does.

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Footnotes

1. ICSID Case No. ARB/17/14, Decision on the Intra-EU Jurisdictional Objection, 29 June 2019.

2. ibid

3. Case C-741/19, [2021].

4. Case C-284/16, [2018].

5. Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Award, 25 November 2015 ("Elektrabel")

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