Esokol Vs Italy

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
In the arbitration proceeding between
ESKOSOL S.P.A. IN LIQUIDAZIONE
Claimant
and
ITALIAN REPUBLIC
Respondent
ICSID Case No. ARB/15/50
DECISION ON
ITALY’S REQUEST FOR IMMEDIATE TERMINATION
AND
ITALY’S JURISDICTIONAL OBJECTION BASED ON INAPPLICABILITY

OF THE ENERGY CHARTER TREATY TO INTRA-EU DISPUTES
Members of the Tribunal

Ms. Jean E. Kalicki, President
Prof. Brigitte Stern, Arbitrator
Prof. Dr. Guido Santiago Tawil, Arbitrator
Secretary of the Tribunal

Mr. Francisco Abriani
7 May 2019
TABLE OF CONTENTS
INTRODUCTION ................................................................................................................. 1
THE RELEVANT PROCEDURAL HISTORY .................................................................... 2
THE PARTIES’ POSITIONS ................................................................................................ 5
Italy’s Position ................................................................................................................ 5
1. Interpretation of the ECT ........................................................................................ 5
2. EU Law Developments ........................................................................................... 8
a. Progressive Development of EU Treaties ....................................................... 8
b. The Achmea Judgment .................................................................................. 10
c. The January 2019 Declaration ....................................................................... 12
Eskosol’s Position ........................................................................................................ 14
1. Interpretation of the ECT ...................................................................................... 14
2. EU Law Developments ......................................................................................... 17
a. Progressive Development of EU Treaties ..................................................... 17
b. The Achmea Judgment .................................................................................. 18
c. The January 2019 Declaration ....................................................................... 20
THE COMMISSION’S POSITION .................................................................................... 22
Interpretation of the ECT ............................................................................................. 22
EU Law Developments ................................................................................................ 25
1. Progressive Development of EU Treaties ............................................................. 25
2. The Achmea Judgment .......................................................................................... 27
THE TRIBUNAL’S ANALYSIS ........................................................................................ 28
Interpretation of the ECT As of Its Entry Into Force ................................................... 29
1. ECT Article 26(3), in the Context of ECT Articles 1(2), (3) and (10) ................. 31
2. Additional “Context” Provided by ECT Articles 16, 25, and 26(6) ..................... 39
3. The ECT’s History and Circumstances................................................................. 43
EU Law Developments ................................................................................................ 46
1. Progressive Development of the EU Treaties ....................................................... 46
a. EU Treaties as Part of Applicable Law: ECT Article 26(6) .......................... 48
b. EU Treaties in Interpreting the ECT: VCLT Article 31(3)(c) ....................... 53
c. EU Treaties as “Successive Treaties”: VCLT Article 30(2) ......................... 55
d. EU Treaties as “Successive Treaties”: VCLT Article 30(4)(a) ..................... 57
e. EU Treaties as “Agreements to Modify” ECT: VCLT Article 41(1) ............ 65
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2. The Achmea Judgment .......................................................................................... 67
a. Summary of the Achmea Judgment ............................................................... 68
b. Whether the Achmea Judgment Reaches the ECT ........................................ 74
c. Whether the Achmea Judgment Binds This Tribunal .................................... 80
d. Whether the Achmea Judgment Invalidates ECT Provisions ........................ 85
e. Whether the Achmea Judgment Retroactively Invalidates Consent .............. 91
3. The January 2019 Members’ Declaration ............................................................. 94
The Duty to Render An Enforceable Award .............................................................. 103
DECISION ......................................................................................................................... 106
ii
TABLE OF ABBREVIATIONS/DEFINED TERMS
The bilateral investment treaty between the

Achmea BIT Netherlands and the Czech and Slovak Federative
Republic, discussed in the Achmea Judgment
The judgment of the CJEU issued on 6 March 2018

Achmea Judgment
in Case C-284/16, Achmea v. Slovak Republic
Italy’s request for bifurcation, as contained in

Section V of Italy’s Memorial on Jurisdiction and
Bifurcation Request
Requests for Bifurcation and Suspension, dated 7
July 2017
Eskosol’s Response to Respondent’s Bifurcation

Bifurcation Response
Request, dated 28 July 2017
CJEU or ECJ The Court of Justice of the European Union
Commission The European Commission
The European Commission’s Application for

Commission Application Leave to Intervene as a Non-Disputing Party dated
16 January 2017
The European Commission’s Amicus Curiae Brief

Commission Submission
dated 6 March 2017
The European Commission’s Update of Amicus

Commission Update
Curiae Brief dated 26 October 2018
Italy’s Counter-Memorial on the Merits dated 27

Counter-Memorial
October 2017
ECT The 1994 Energy Charter Treaty
Eskosol Eskosol S.p.A in liquidazione
Eskosol’s Post-Hearing Brief dated 21 December

Eskosol PHB
2018
EU European Union
Hearing on Jurisdiction and the Merits held from

Hearing
24 September through 26 September 2018
ICJ International Court of Justice
ILC International Law Commission
iii
Italy The Italian Republic
Italy PHB Italy’s Post-Hearing Brief dated 21 December 2018
The Declaration of 15 January 2019 by 22 EU

Member States, entitled “Declaration of the
Governments of the Member States on the legal
January 2019 Declaration (or Declaration)
consequences of the judgment of the Court of
Justice in Achmea and on investment protection in
the European Union”
Memorial Eskosol’s Memorial dated 9 May 2017
Italy’s Memorial on Jurisdiction and Requests for

Memorial on Jurisdiction
Bifurcation and Suspension, dated 7 July 2017
Reply Eskosol’s Statement of Reply dated 2 March 2018
Rejoinder Italy’s Rejoinder dated 25 May 2018
Eskosol’s Rejoinder on Jurisdiction dated 15 June

Rejoinder on Jurisdiction
2018
Eskosol’s Request for Arbitration dated 9

RFA
December 2015
Italy’s Article 41(5) Objection for Manifest Lack

Rule 41(5) Request
of Legal Merits, dated 18 November 2016
Eskosol’s submission dated 1 March 2019, in

Termination Rejoinder
further opposition to Italy’s Termination Request
Italy’s submission dated 26 February 2019, in

Termination Reply
further support of its Termination Request
Italy’s request for an award declaring immediate

Termination Request termination of this arbitration, dated 4 February
2019
Eskosol’s response to the Termination Request,

Termination Response
dated 18 February 2019
Tr. Day [#], [page:line] Transcript of the Hearing
TFEU Treaty on the Functioning of the European Union
VCLT Vienna Convention on the Law of Treaties
iv
INTRODUCTION
1. This Decision addresses the request filed on 4 February 2019 by the Respondent, the Italian Republic
(“Italy”), “for an award declaring immediate termination” of this arbitration (the “Termination
Request”). Italy’s Termination Request seeks dismissal of all claims brought by the Claimant,
Eskosol S.p.A. in liquidazione (“Eskosol”), on the basis of a Declaration dated 15 January 2019 by
22 Member States of the European Union (“EU”), which is entitled “Declaration of the Governments
of the Member States on the legal consequences of the judgment of the Court of Justice in Achmea
and on investment protection in the European Union” (the “January 2019 Declaration”).
2. As the title of the January 2019 Declaration reveals, its principal subject is the judgment of the Court
of Justice of the European Union (“CJEU”) issued on 6 March 2018 in Case C-284/16, Achmea v.
Slovak Republic (the “Achmea Judgment”). The Achmea Judgment also features prominently in
Italy’s pending jurisdictional objection (the “intra-EU objection”) based on the alleged
inapplicability of the Energy Charter Treaty (the “ECT”) to disputes between investors of one EU
Member State and another EU Member State (“intra-EU disputes”). As discussed further in the
procedural summary in Section II below, Italy lodged this jurisdictional objection long before the
Achmea Judgment, but both it and Eskosol (the “Parties”) subsequently addressed the implications of
the Achmea Judgment in both written and oral submissions. The Parties also submitted their respective
views of the January 2019 Declaration.
3. In addition, the European Commission (the “Commission”) sought and was granted the opportunity,
pursuant to Rule 37(2) of the ICSID Arbitration Rules, both to file a written submission as a non-
disputing party prior to the Achmea Judgment (the “Commission Submission,” dated 6 March 2017),
and later to file an updated submission addressing the legal consequences of the Achmea Judgment for
an intra-EU dispute under the ECT (the “Commission Update,” dated 26 October 2018).
4. The Tribunal acknowledges that early in these proceedings, through its Procedural Order No. 4 dated
1 August 2017, it denied Italy’s request to bifurcate these proceedings in order to address its
jurisdictional objections prior to the merits, and to suspend these proceedings until the CJEU rendered
its decision in the Achmea case. The case has thus proceeded in a plenary fashion, through a full
hearing on jurisdiction and the merits and full post-hearing briefs.
5. The Tribunal nonetheless has decided to address now both the Termination Request and Italy’s closely
related intra-EU objection. First, there is no question that these should be addressed in tandem. While
1
the two developments at issue in the Termination Request – the January 2019 Declaration and the
Achmea Judgment on which it is based – certainly are new developments since the time the Tribunal
previously decided to join the intra-EU objection to the merits, the Tribunal does not believe they
fundamentally change the jurisdictional questions that already were before it, based on Italy’s intra-
EU objection and the Commission’s submissions. However, explaining why that is so requires the
Tribunal to set out its views on the substance of the intra-EU issue under the ECT, and not just its
views on the more recent events (the Achmea Judgment and the January 2019 Declaration). For this
reason, it is not procedurally efficient to rule only on the Termination Request, without also ruling at
the same time on the underlying jurisdictional objection.
6. Second, the alternative to deciding both issues now in a stand-alone Decision would be to defer
addressing even the Termination Request for some time, until the issuance of the Final Award.
Numerous factors weigh against that approach, including the sense of urgency claimed by Italy in its
Termination Request, the Tribunal’s readiness now to announce its ruling on Italy’s related intra-EU
objection, and the important attention that the Commission, as well as the other EU Member States
and the investment arbitration community as a whole, have paid to these issues both before and even
more after the Achmea Judgment. On balance, the Tribunal therefore considers it more appropriate to
rule expeditiously on these important jurisdictional issues, rather than holding that aspect of its
decision for later while it continues to work on other unrelated issues to be addressed in the Final
Award.
THE RELEVANT PROCEDURAL HISTORY
7. The Tribunal sets out here only the procedural history relevant to the two issues addressed in this
decision, namely Italy’s Termination Request and its related intra-EU objection. A more
comprehensive procedural history of this arbitration will be set out in the Award.
8. First, on 11 December 2015, ICSID received Eskosol’s Request for Arbitration dated 9 December
2015 (the “RFA”). The Secretary-General registered the RFA on 22 December 2015, in accordance
with Article 36(3) of the ICSID Convention. The Tribunal was subsequently deemed constituted on
19 October 2016, in accordance with Rule 6(1) of the ICSID Arbitration Rules. In accordance with
ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 2 December 2016,
by teleconference.
2
9. On 18 November 2016, Italy filed a request under ICSID Arbitration Rule 41(5), asking that the
proceedings be dismissed for manifest lack of legal merits (the “Rule 41(5) Request”). This request
raised four objections of a jurisdictional nature, but not the intra-EU objection. Pursuant to an agreed
schedule, Eskosol filed its response to the Rule 41(5) Request on 23 December 2016, Italy filed its
reply on 13 January 2017, and Eskosol filed its rejoinder on 1 February 2017. The Tribunal held a
hearing in Paris on 8 February 2017 in connection with the Rule 41(5) Request, and subsequently
rendered its decision on that Request on 20 March 2017.
10. In the meantime, on 16 January 2017, the Commission had filed its Application for Leave to Intervene
as a Non-Disputing Party (the “Commission Application”), on which the Parties submitted their
respective observations on 3 February 2017. On 10 February 2017, the Tribunal issued Procedural
Order No. 2 granting the Commission permission to file a written submission as a non-disputing party.
The Commission Submission was filed on 6 March 2017.
11. On 9 May 2017, Eskosol filed its Memorial (the “Memorial”), which addressed inter alia the
Commission Submission and the intra-EU nature of this dispute.
12. On 7 July 2017, Italy filed its Memorial on Jurisdiction and Requests for Bifurcation and Suspension
(the “Memorial on Jurisdiction”), which provided further briefing on the jurisdictional objections
Italy had raised in its Rule 41(5) Request, and also presented out its intra-EU objection, i.e., that the
ECT does not apply to intra-EU disputes. Section V of the Memorial on Jurisdiction set out Italy’s
request for bifurcation to address its jurisdictional objections as a preliminary matter, and an additional
request to suspend these proceedings until the CJEU issued its decision in the then-pending Achmea
case (the “Bifurcation Request”). Pursuant to an agreed schedule, Eskosol filed its Response to
Respondent’s Bifurcation Request on 28 July 2017 (the “Bifurcation Response”). On 1 August 2017,
the Tribunal issued Procedural Order No. 4, dismissing Italy’s Bifurcation Request with detailed
reasons to follow, pursuant to an agreement on such an expedited procedure reflected in Procedural
Order No. 1, Annex A, n.3. On 15 September 2017, the Tribunal issued Procedural Order No. 5,
providing the detailed reasoning for its decision in Procedural Order No. 4.
13. Also on 15 September 2017, the Tribunal issued Procedural Order No. 6, in which it provided the
detailed reasoning for its decision on the Commission’s Application in Procedural Order No. 2.
14. On 27 October 2017, Italy filed its Counter-Memorial on the Merits (the “Counter-Memorial”),
which maintained (but did not further brief) the jurisdictional objections filed in its Memorial on
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Jurisdiction.1 On 2 March 2018, Eskosol filed its Statement of Reply (the “Reply”), which
incorporated by reference (but did not further brief) its position on the jurisdictional objections set
forth in its Bifurcation Response.2 On 25 May 2018, Italy filed its Rejoinder (the “Rejoinder”), which
addressed both jurisdiction and the merits, including among other things a discussion of the CJEU’s
Achmea Judgment rendered on 6 March 2018. On 15 June 2018, Eskosol filed its Rejoinder on
Jurisdiction (the “Rejoinder on Jurisdiction”), which completed the written stage of proceedings
prior to the oral hearing. The Parties nonetheless agreed to add to the record, before the hearing,
certain recent legal authorities including decisions of other investment arbitration tribunals on intra-
EU objections.3
15. A hearing on jurisdiction and the merits was held in Paris from 24 through 26 September 2018 (the
“Hearing”). Both Parties presented oral argument on the jurisdictional issues in the case, including
the intra-EU objection.
16. On 3 October 2018, the Commission offered to update its prior submission in light of the Achmea
Judgment. The Parties filed observations on this offer on 15 October 2018. On 18 October 2018, the
Secretariat communicated the Tribunal’s decision to accept the Commission’s offer subject to certain
page and time limitations, and with the understanding that the Parties would be able to comment on
its updated submission within the framework of their post-hearing briefs, subject to reasonable
schedule adjustments. On 26 October 2018, the Commission filed the Commission Update.
17. On 3 December 2018, the Tribunal resolved certain disputes regarding transcript correction, and the
final corrected transcripts were circulated on 14 December 2018.
18. On 17 December 2018, the Parties again agreed to add to the record certain additional legal authorities
reflecting decisions of other investment arbitration tribunals on intra-EU objections.
19. The Parties then filed their respective post-hearing briefs, dated 21 December 2018 (“Eskosol PHB”
and “Italy PHB”), followed by cost submissions dated 11 January 2019 and responses to certain
questions about the cost submissions on 15 and 18 January 2019.
20. On 4 February 2019, Italy filed its Termination Request, citing the January 2019 Declaration. Eskosol
responded by letter dated 18 February 2019 (the “Termination Response”), Italy replied on 26
1
Counter-Memorial, ¶ 226.
2
Reply, ¶ 17.
3
See ICSID Secretariat letter to the Parties, dated 18 September 2018.
4
February 2019 (the “Termination Reply”), and Eskosol further responded on 1 March 2019 (the
“Termination Rejoinder”).
THE PARTIES’ POSITIONS
21. The Parties’ positions with respect to the intra-EU issues in this case have developed during the course
of the proceedings in response to each other’s arguments, the Commission’s two submissions, and
various supervening events including the Achmea Judgment and the January 2019 Declaration. Not
surprisingly, the Parties also organized their submissions differently, emphasizing different themes set
out under different subtopic headers. In order to provide some analytical logic to the summary of their
positions, the Tribunal organizes this summary not by the Parties’ varying structures but rather by the
same analytical structure that the Tribunal adopts for its analysis in Section V. This begins with the
Parties’ arguments about interpretation of the ECT itself; followed by their arguments about the
implications of various EU law developments, including in chronological order the progressive
development of the EU Treaties, the Achmea Judgment and the January 2019 Declaration; and finally
concludes with a few words on the subject of enforceability of awards.
22. As always in a synthesis of lengthy submissions, it is possible that the Tribunal will not reflect each
point the Parties made. This summary is not intended to be all-inclusive, but simply to provide some
high-level background about the Parties’ arguments to lay the groundwork for the analysis that
follows. The fact that a particular argument may not be reflected here should not be taken as an
indication that the Tribunal did not consider it. The Tribunal has carefully reviewed and considered
all aspects of their written and oral submissions and considered all contentions presented in the course
of these proceedings.
ITALY’S POSITION
1. Interpretation of the ECT
23. Italy begins from the proposition that all States relevant to this dispute were EU Member States at the
time they ratified the ECT,4 and therefore the relevant question is “to what extent the EU and EU
Member States bound themselves signing the ECT,” which is an “issue … of intent.”5 Italy accepts
4
Eskosol invokes the ECT on the basis of the Belgian nationality of Blusun S.A., its 80% shareholder. Memorial, ¶¶
5-6. Italy, Belgium and the EU (at that time known as the European Communities) each signed the ECT in 1994 and
ratified it in 1997.
5
Memorial on Jurisdiction, ¶ 165.
5
that its intent should be determined by interpretation of the ECT consistent with Articles 31 and 32 of
the Vienna Convention on the Law of Treaties (“VCLT”), beginning with an assessment “in good
faith, in accordance with the ordinary meaning to be given to its terms in their context and in the light
of its object and purpose,”6 but also taking into account preparatory works and subsequent State
practice.
24. Beginning with the “letter” of the ECT, Italy emphasizes that under its Article 1, the Contracting
Parties are both individual States and the EU as a “regional economic integration organization”
(“REIO”) to whom EU Member States “have transferred competence over certain matters a number
of which are governed by this Treaty, including the authority to take decisions binding on them in
respect of those matter[s].”7 Since the ECT defines an REIO’s “Area” as “the Areas of the member
states of such Organization, under the provisions contained in the agreement establishing that
Organization,” this means that “an allocation of competences within the Union … cannot rely on
geographical boundaries, but rather on competences by matter.”8 Article 25 of the ECT further
recognizes that Contracting Parties who extend certain trade and investment liberalization to one
another by virtue of an “Economic Integration Agreement” (“EIA”) like the EU are not required by
the ECT to extend the same benefits to non-EIA States.9 Finally, Italy interprets the conflict rule for
successive treaties set out in Article 16 of the ECT as requiring deference from the outset to the earlier
EU Treaties, since those “represent[] a more developed and articulated legal system, which is doubtless
more favorable and offers more articulated forms of protection” than does the ECT.10 As a result,
nothing in the ECT’s Part III (on investment promotion and protection) or Part V (on dispute
settlement) may be “construed to derogate from any provision of the EU Treaties as for investment
promotion and protection, or from any right to dispute resolution with respect thereto under the EU
Treaties.”11 In Italy’s view, all of these provisions lead to “the conclusion that … Contracting Parties
signed the ECT under the mutual understanding that this would not apply to [an] intra-EU situation.”12
25. Italy contends that the same conclusion is required by the context, purpose and objectives of the ECT.13
It refers in particular to a decision at the Energy Charter Conference with respect to ECT Articles
6
Memorial on Jurisdiction, ¶¶ 166-168.
7
Memorial on Jurisdiction, ¶ 169 (quoting ECT Article 1(3)).
8
Memorial on Jurisdiction, ¶¶ 171-172 (quoting ECT Article 1(10)).
9
Memorial on Jurisdiction, ¶¶ 173-175 (referring to ECT Article 25).
10
11
12
13
6
24(4)(a) and 25, permitting a non-EIA investor to obtain EIA benefits by virtue of registered offices
in or certain other links to EIA territory, and a related Declaration by the EU and its Member States
with respect to Article 25. In Italy’s view, these steps “define[d] the criteria under which a legal entity
of a non-EU Member State could benefit of the rules internal to the EU,” and “[i]n order to avoid
double protection to the same situations,” it follows that the intent must have been that such investors
could only pursue remedies available under EU law, with “no right to apply” alternatively the ECT’s
own dispute resolution mechanism set forth in its Article 26. Italy suggests that it would be “fully
redundant” to regulate access to EU law protections if the ECT’s own dispute resolution procedures
were available equally to both EU investors and non-EU investors, “since the EU law … already
contemplates protection for entities established in the Union.”14
26. With reference to Article 32 of the VCLT, Italy invokes the “preparatory work of the [ECT] and the
circumstances of its conclusion,” which confirm a goal of integrating the energy sectors of the former
Soviet Union and Eastern Europe with those of Europe, and “surely not to regulate the EU internal
market for energy,” which already was under way through other instruments.15 Finally, Italy refers to
“the practice of EU Member States and the EU,” which “has always been consistent” with a reading
of the ECT as not extending investor-State arbitration to “a purely intra-EU situation.”16
27. Italy concludes from all the above that “the ECT does not apply ab initio to intra-[EU] situations
because this was not the intention of the Contracting Parties,” and therefore Eskosol cannot invoke
Article 26 of the ECT as the basis for jurisdiction in this dispute.17 Put simply, in Italy’s Rejoinder,
“it did not intend to include intra-EU disputes within the scope of Article 26,” and “it never acquiesced,
let alone agree[d], to the arbitration of ECT claims in intra-EU scenarios.”18
28. In its Rejoinder, Italy adds that the offer in Article 26(3) to arbitrate ECT disputes must also be
interpreted in light of the applicable law provision of Article 26(6), under which “[a] tribunal … shall
decide the issues in dispute in accordance with this Treaty and applicable rules and principles of
international law,” a governing law provision that in Italy’s view applies equally to matters of
jurisdiction as to matters of merits.19 As EU law forms part of international law, EU law must apply
14
15
16
17
18
Rejoinder, ¶¶ 97-98.
19
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“when a tribunal assesses the applicability of the arbitration agreement and of the ECT at large in
intra-EU disputes.”20 It follows that even as a matter of ECT interpretation itself, since EU law
“prevents Member States from contracting the obligation to arbitrate claims that could have
repercussions on EU law issues,” then “Italy’s offer to arbitrate investment disputes has thus always
been inapplicable … to intra-EU disputes,” based on propositions of EU law that have been codified
“from the very beginning.”21
2. EU Law Developments
a. Progressive Development of EU Treaties
29. Italy argues that even if the Tribunal does not accept its interpretation of the “intention ab initio of the
Contracting Parties” to the ECT, the progressive development of the EU Treaties – and in particular
the adoption of the Lisbon Treaty in 2009 – requires the exclusion of intra-EU disputes from the ECT’s
scope.22 Italy emphasizes that under the Lisbon Treaty, direct foreign investment was “added to the
common commercial policy, that is traditionally an exclusive competence” of the EU, with the result
that EU Member States “cannot undertake inter se agreements in those matters …, which only EU law
can regulate.”23 Otherwise stated, the Lisbon Treaty “strongly modified the balance of external
competences of Member States and the Union, respectively, and affected the general understanding of
external commitments, since it is necessary to ensure uniformity of rules within the Union, of which
international treaties signed by the Union become a part.”24
30. Italy invokes the international law conflict of rules mechanism in Article 30(4)(a) of the VCLT, under
which a subsequent treaty between some of the parties to an earlier treaty prevails over a prior one
relating to the “same subject matter” to the extent of any incompatibility.25 Italy contends that in order
for Article 30 to have “concrete utility,” the concept of “same subject matter” must be viewed
expansively and not as requiring an “exact coincidence of provisions or even of objectives.”26 It argues
that “[a]lthough the EU provisions on internal market … do not ‘deal’ technically with promotion and
20
Rejoinder, ¶ 90; see also Tr. 1, 104:10-14.
21
Rejoinder, ¶¶ 91-92 (emphasis added).
22
23
24
Memorial on Jurisdiction, ¶ 200; see also id., ¶¶ 201-202.
25
Memorial on Jurisdiction, ¶¶ 205-206, 214.
26
Memorial on Jurisdiction, ¶ 207 (discussing a 2006 ILC Report on Fragmentation of International Law).
8
protection of investments …, they share the same efforts of integration,” and thus VCLT Article
30(4)(a) should apply in this case.27
31. Italy also invokes VCLT Article 30(2), which provides that “[w]hen a treaty specifies that it is subject
to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of
that other treaty prevail.”28 It recalls Article 16 of the ECT, which by its terms applies to subsequent
and not just prior international agreements, and contends that nothing in Part III or V of the ECT
therefore may be construed to derogate from EU law as developed through the Lisbon Treaty.29
32. Finally, Italy suggests that “by adhering to the Lisbon Treaty,” EU Member States effectively
“modified” the ECT, to the extent of any intra-EU obligations they might be viewed as having
undertaken.30 It invokes Article 41 of the VCLT, referring to agreements by certain parties to a
multilateral treaty to modify it inter se, and contends that the modifications effected by the Lisbon
Treaty as among EU Member States did not affect the enjoyment of ECT rights by any other ECT
parties, and that no notification of such modifications was required.31
33. Accordingly, Italy contends that as a matter of international law, the ECT cannot be viewed in the
wake of the Lisbon Treaty as covering disputes “internal to the EU,”32 which are “regulated by Union
law and heard within the European judicial system.”33 The same conclusion would be warranted under
EU law, under which EU law has primacy over any national law, the CJEU and Member State courts
cooperate on matters of EU law by way of the preliminary ruling mechanism established by Article
267 of the Treaty on the Functioning of the European Union (“TFEU”), and only these authorities
have jurisdiction to hear claims against Member States that acted in violation of Union law.34 In the
specific context of investment, Italy repeats that in the wake of the Lisbon Treaty, the Union has
exclusive competence to conclude agreements on foreign direct investment;35 EU law
comprehensively governs and protects all steps of the life cycle of an investment;36 and EU law does
27
28
Memorial on Jurisdiction, ¶¶ 210-213; see also Tr. 1, 105:5-8 (invoking the “lex posterior principle” in favor of the
Lisbon Treaty).
29
30
31
Memorial on Jurisdiction, ¶¶ 216, 218-222.
32
33
34
35
36
9
not allow Member States to agree to investment protection rules inter se, outside the EU legal order.37
This includes any agreement to dispute settlement outside the EU judicial framework, which is “not
conceivable in the relationship between Member States.”38 Italy adds that pursuant to Article 344
TFEU, Member States cannot submit a dispute concerning interpretation or application of the EU
Treaties to any method of settlement other than provided by EU law, including to arbitral tribunals
which may not refer a preliminary question to the CJEU.39 It is for that reason, Italy explains, that the
Commission expressly declared – when signing the International Energy Charter of 2015 on behalf of
the EU – that the Charter’s dispute settlement mechanisms “cannot be construed so as to mean that
any such [arbitral] mechanism would become applicable in relations” between EU Member States.40
The same conclusion necessarily must apply to arbitration under the ECT.41
b. The Achmea Judgment
34. Italy contends that the Achmea Judgment “sealed the debate” that ECT arbitration is “unavailable
when a EU company sues a EU host State,”42 because the CJEU “confirmed that the legal order of
European Union does not permit intra-EU investor-State disputes to be resolved through arbitration of
the kind envisaged in investment protection treaties.”43 This conclusion is binding in an arbitration
governed by international law, because under that law, the jurisdiction of an arbitral tribunal can arise
only when there has been a “valid offer[] to arbitrate” made by each party and subsequently accepted
by the other.44 Italy’s offer to arbitrate under the ECT could not validly have extended to intra-EU
disputes. Moreover, the ECT requires EU law to be taken into account for jurisdictional purposes,
because “EU law, being based on a treaty, forms part of international law,” as the tribunal in Electrabel
v. Hungary found, and Article 26(6) requires tribunals to “decide the issues in dispute in accordance
with this Treaty and applicable rules and principles of international law.”45
37
38
39
Memorial on Jurisdiction, ¶¶ 258-260; see also Rejoinder, ¶¶ 59-64 (discussing the CJEU’s decision in the Mox
Plant case), ¶¶ 66-67 (discussing the CJEU’s opinion 1/09 regarding an international court for patent disputes).
40
41
42
Rejoinder, ¶ 8.
43
Rejoinder, ¶¶ 45, 73.
44
Rejoinder, ¶ 87.
45
Rejoinder, ¶¶ 89-90 (quoting Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/18, Decision on Jurisdiction,
Applicable Law and Liability, § 4.136 (30 November 2012) (RL-58) (“Electrabel”)).
10
35. Italy also contends that “in the application of the principles confirmed in Achmea no distinction can
be drawn between treaties exclusively undertaken by member States (like the BITs) and agreements
signed also by the EU (like the ECT).”46 First, while Italy accepts that the Achmea Judgment does not
discuss the ECT, Italy rejects any attempt to draw inferences from the CJEU’s silence.47 Italy
emphasizes that in Achmea, “the CJEU was not even seised with a question regarding the compatibility
with EU law of the ECT,” and “[t]his is the only reason why there is no reference to the ECT in
Achmea.”48
36. Nonetheless, the CJEU’s core reasoning is “exactly transposable to the ECT.”49 Italy describes the
Achmea Judgment as concluding that “application of EU law by a body which cannot request a
preliminary ruling from the CJEU inherently prevents those disputes from being resolved in a manner
that ensures the full effectiveness of EU law.” In its view, “[t]his conclusion holds true irrespective
of whether the claim is based on, and the arbitration is established under, a bilateral or multilateral
treaty.”50 Italy emphasizes that “the main element to take into consideration is whether EU law can
apply,” and under the ECT “EU law inevitably comes into play both as international law and as the
law of the host State.”51
37. Moreover, “[w]hen the Achmea judgment refers to agreements concluded between member States, this
language clearly indicates all obligations reciprocally undertaken between member States, irrespective
of the kind of source.”52 The ECT establishes just such reciprocal obligations, since the commitment
to arbitrate is “only owed to the State of nationality of the investor, they are not owed erga omnes
partes of a multilateral source.”53 As for the fact that the EU itself is a party to the ECT, this is
“immaterial,” because “the obligations that are relevant to the present dispute are those obligations
that Italy assumed towards Belgium for the benefit of Belgian investors,” and the EU’s ratification of
46
Rejoinder, ¶ 107; Tr. 1, 111:13-19 (“the Achmea case applies to any kind of international agreement,” because it
adopts “a very general, wide and broad perspective”).
47
Rejoinder, ¶ 52 (disagreeing with the Masdar tribunal’s analysis based on the CJEU’s decision not to address
Advocate General Wathelet’s statements about the ECT); Italy PHB, ¶¶ 134-135.
48
Rejoinder, ¶ 53.
49
Italy PHB, ¶ 135.
50
Rejoinder, ¶ 74; Italy PHB, ¶¶ 138, 140, 144-146.
51
Rejoinder, ¶ 117; Italy PHB, ¶ 152.
52
Rejoinder, ¶ 108.
53
Rejoinder, ¶ 109.
11
the ECT “does not affect the bilateral nature of the offer to enter into arbitration at stake in these
proceedings.”54
38. Finally, Italy rejects any suggestion that “the principles confirmed in Achmea would only concern the
phase of enforcement,” emphasizing that “a valid award must be based on a functioning arbitration
agreement, which here does not exist.”55 Italy does however insist that lack of enforceability “should
warrant the Tribunal’s refusal to exercise jurisdiction,” because a tribunal should not proceed where
it is unable to “discharge the essential mandate to produce an enforceable award.”56
c. The January 2019 Declaration
39. With respect to the January 2019 Declaration, Italy observes that both Italy and Belgium have joined
the 22 EU Member States signing that document, which contains inter alia the following statements:
[I]nternational agreements concluded by the Union, including the Energy Charter

Treaty, are an integral part of the EU legal order and must therefore be compatible
with the Treaties. Arbitral tribunals have interpreted the Energy Charter Treaty as
also containing an investor-State arbitration clause applicable between Member
States. Interpreted in such a manner, that clause would be incompatible with the
Treaties and thus would have to be disapplied. …
… With regard to agreements concluded between Member States … [t]he same

result [on primacy of Union law] follows also under general public international
law, in particular from the relevant provisions of the Vienna Convention on the
Law of the Treaties and customary international law (lex posterior). …
… By the present declaration, Member States inform investment arbitration

tribunals about the legal consequences of the Achmea judgment, as set out in this
declaration, in all pending intra-EU investment arbitration proceedings brought
either under bilateral investment treaties concluded between Member States or
under the Energy Charter Treaty.57
Italy further observes that footnote 2 of the Declaration specifies, for the sake of clarity, that “[f]or the
Energy Charter Treaty, its systemic interpretation in conformity with the Treaties precludes intra-EU
investor-State arbitration.”58
54
55
Rejoinder, ¶ 121.
56
Rejoinder, ¶ 122.
57
Termination Request, pp. 1-2 (quoting the January 2019 Declaration).
58
Termination Reply, ¶ 3.
12
40. Italy contends that “[g]iven that arbitral tribunals are bound by the will of the Contracting Parties,”
the Tribunal should “duly take the abovementioned Declaration into account in conformity with
Article 31(2)(b) VCLT and Article 31(3)(a) VCLT, and consequently … terminate the proceedings
accordingly.”59 In its view, the Declaration is “a binding instrument emanating from sovereign States,”
amounting to a “shared understanding … regarding the interpretation of the ECT,” and such
“interpretative declarations … provide an authentic interpretation” of Article 26 of the ECT “as far as
the Contracting Parties signing the Declaration are concerned.”60 As a result, it is no longer “a matter
of discussion how to interpret Achmea,” but rather a requirement to acknowledge that the Member
States signing the Declaration interpret the Achmea Judgment as applying to the ECT, with the
“consequence of prohibiting any pending or future arbitration procedure concerning the ECT.”61
41. Italy adds that it is irrelevant that several EU Member States have chosen not to sign, since both Italy
and Belgium did so, and “each declaration can be formally broken down into a bundle of unilateral
declarations amounting to a shared understanding between” them.62 Even multilateral treaties like the
ECT reflect “reciprocal obligations,” and here the two relevant States have confirmed reciprocally
their interpretation of the ECT’s dispute settlement clause,63 with the effect that “the binding nature of
the Declaration affecting reciprocal obligations … cannot be challenged.”64 According to Italy, this
also must be taken as having “been always their understanding of such clause,”65 since the exercise of
“interpreting” is not the same as revising, but rather involves clarifying the meaning and scope
attributed to a particular provision.66 Such a clarification does not constitute a retroactive withdrawal
of consent, but simply “confirm[s] how the ECT should have always been interpreted in their
understanding.”67
59
Termination Request, p. 2.
60
61
62
63
64
Termination Reply, ¶ 20; see also id., ¶¶ 22-23 (referring to certain reports by the International Law Commission
(“ILC”), RL-102 and RL-103).
65
66
Termination Reply, ¶ 31 (citing RL-103), ¶ 38.
67
13
42. It follows, in Italy’s view, that an arbitration tribunal “has to interpret the treaty acknowledging the
existence of a specific interpretative declaration by one or more Contracting Party/ies.”68 Stated most
plainly, “[s]uch reading is binding on the Tribunal.”69
ESKOSOL’S POSITION
1. Interpretation of the ECT
43. Eskosol rejects Italy’s contention that it never agreed in the ECT to arbitrate disputes with investors
from other EU Member States. Eskosol starts with “the plain terms” of Article 26 of the ECT, and in
particular the “interplay between” Article 26(1), which identifies the scope of “disputes” covered by
the Article, and Article 26(7), which offers arbitration to resolve those disputes.70 Under Article 26(1),
the relevant “disputes” are those between a “Contracting Party” and an investor of “another
Contracting Party.” Under the definition of “Contracting Party” in Article 1(2) – under which a
“Contracting Party means a state or Regional Economic Integration Organization” – the individual
EU Member States “are each considered to be Contracting Parties.”71 In other words, Italy and
Belgium “each voluntarily signed, ratified, and agreed to be bound by the ECT ….”72
44. In Eskosol’s view, this conclusion is not affected by the fact that the EU is also a “Contracting Party”
to the ECT, by virtue of being an REIO,73 since “[t]he fact that the EU is a Contracting Party does not
deprive Italy and Belgium of their own status … as a Contracting Party in their own right.”74 Rather,
in the words of the tribunal in Eiser v. Spain, “[b]oth the EU and [its] Member States can have legal
standing as respondents in a claim under the ECT.”75
45. Nor does Article 26(1)’s reference to “disputes … relating to an Investment … in the Area” of the
relevant Contracting Party lead to a conclusion, either (a) as the Commission argues, that since “[t]he
‘Area’ of the EU comprises the entirety of the areas of the EU Member States,” then “an investment
by … an EU investor in Italy is not an investment in the area of another Contracting Party, but in the
68
69
70
Memorial, ¶ 228.
71
Memorial, ¶ 229; Eskosol PHB, ¶ 72.
72
Bifurcation Response, ¶ 66.
73
Memorial, ¶ 231.
74
Memorial, ¶ 232 (citing decisions in several ECT cases); Bifurcation Response, ¶ 66.
75
Bifurcation Response, ¶ 69 (quoting Eiser Infrastructure Limited and Energia Solar Luxembourg S.à.r.l. v. Kingdom
of Spain, ICSID Case No. ARB/13/36, Award ¶ 94 (4 May 2017) (CL-149) (“Eiser”)).
14
area of the same Contracting Party,”76 or (b) as Italy argues, that there is an overlap of “Areas” where
“competences” should be allocated by subject matter, with the EU having exclusive competence on
investment issues.77 To the contrary, Eskosol endorses the reasoning of the tribunal in Charanne v.
Spain that “Article 1(10) of the ECT, when defining the term ‘Area’, refers to both the area of the
[ECT] Contracting States … as well as the area of the EU …. Thus, it seems reasonable to conclude
that, when referring to investments made ‘in the area’ of one Contracting Party, Article 26(1) refers to
both …. Whether ‘area’ refers to one or the other depends on the content of the claim and the entity
against which the claim is pursued ….”78 In this case, Eskosol notes, it “is not suing the EU and thus
there is and cannot be identity of ‘Areas’.”79
46. Eskosol argues that “[h]ad the drafters of the ECT intended to exclude [intra-EU] disputes … from the
ambit of Article 26 they easily could have made an exception to this effect,” but “[t]here is no such
exception anywhere in the treaty, and certainly none in Article 26.”80 Eskosol observes that the ECT
Contracting Parties did include an express exception for the Svalbard Treaty, but did not do so for
ECT dispute settlement.81 There is thus “no way to read the ambit of Article 26(1) of the ECT so as
to exclude intra-EU disputes without doing violence to the plain terms of the ECT.”82 Taking the point
further, Eskosol observes that a carve-out for intra-EU disputes “would be a very significant exception,
normally necessitating specific wording.”83 In that case, “the treaty would have said so,” most likely
by means of a “disconnection clause,” i.e., an “express provision … stating that ‘EU Member States
will apply EU law in their relations inter se rather than the convention in which it is inserted’.”84 The
76
Memorial, ¶ 231 (quoting Commission Submission, ¶ 22).
77
Bifurcation Response, ¶ 65 (quoting Memorial on Jurisdiction, ¶ 172).
78
Memorial, ¶ 233 (quoting Charanne and Construction Investments v. Spain, SCC Arbitration No. 062/2012, Award
¶¶ 430-431 (21 January 2016) (CL-82) (“Charanne”)).
79
Memorial, ¶ 234; Bifurcation Response, ¶ 74; see also Eskosol PHB, ¶ 78 (endorsing with respect to this issue the
reasoning in Vattenfall AV et al. v. Federal Republic of Germany, ICSID Case No. ARB/1212, Decision on the Achmea
Issue, ¶ 182 (31 August 2018) (CL-193) (“Vattenfall”)).
80
Memorial, ¶ 229; see also Tr. 1, 70:15-17 (describing Article 26 as “an opportunity for the drafters of the treaty to
exclude intra-EU disputes; it’s not here”), 70:18-71:7 (describing the Article 1 definitions of “Contracting Party,”
“REIO,” and “Area” as further “opportunities” for carve-outs that were not used).
81
Eskosol PHB, ¶ 74; Tr. 1, 73:6-17.
82
Memorial, ¶ 229; see also Eskosol PHB, ¶ 65 (“The heart of the VCLT interpretation exercise is an analysis of the
express words used in Article 26 ECT and related provisions. The simple fact is that nowhere in Article 26 EC nor
the remaining provisions of the ECT is there a carve-out for intra-EU disputes.”).
83
Bifurcation Response, ¶ 67; Rejoinder on Jurisdiction, ¶ 67; Eskosol PHB, ¶ 74.
84
Memorial, ¶ 236 (quoting RREEF Infrastructure (GP) Limited and RREEF Pan-European Infrastructure Two Lux
S.a.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction ¶ 82 (6 June 2016) (CL-101)
(“RREEF”)).
15
EU had included such disconnection clauses in other treaties before the ECT, but did not do so here.85
In Eskosol’s view, the lack of such a clause “was no coincidence as there was never any intention to
carve out intra-EU disputes from the jurisdictional ambit of the ECT.”86 Eskosol cites several prior
investment arbitration decisions concluding as much.87
47. Eskosol rejects Italy’s reliance on Article 25 of the ECT regarding EIAs, which it considers “plainly
not on point,” since “[n]owhere does this provision refer to the relationship between EU law and the
ECT,” much less “support[] the proposition that EU law ousts the application of the ECT.”88 Likewise,
Eskosol deems Article 16 of the ECT to be “of no assistance to Italy.”89 Eskosol interprets Article 16
“[q]uite the opposite,” as providing that “both regimes would be able to co-exist peacefully, to the
benefit of relevant investors,” in the sense that (as the Eiser tribunal found) “Article 16 assures
Investors or their Investments the greatest protection available under either the ECT or the other
agreement.”90 Eskosol points in particular to the “very clear language at Article 16(2) ECT which
protects the rights of Investors under parts III and V (and in particular Article 26 ECT) in the event of
any conflicting prior or subsequent international treaties.”91 It notes that “the Vattenfall tribunal in
particular found this provision to be a complete answer” to intra-EU objections in that case.92
48. Eskosol further rejects Italy’s suggestion that the ECT’s history and circumstances show an intent not
to apply it to intra-EU disputes. Since Article 26 of the ECT “on its face, does not exclude intra-EU
disputes,” resort to supplementary materials cannot be said to “confirm” such exclusion “within the
meaning of Article 32 of the VCLT.”93 Nor is there anything “ambiguous or obscure” in the ECT that
even permits resort to supplementary materials under Article 32(a) of the VCLT. Eskosol quotes the
85
Eskosol PHB, ¶ 75 (citing inter alia Vattenfall, ¶ 203 (CL-193)). Eskosol also argues that the fact that the EU took
steps in 2005 to carve out intra-EU disputes from the International Energy Charter that might replace the ECT
“underscores the fact that there is no such carve-out within the ECT or its ancillary documents.” Eskosol PHB, ¶ 76.
86
Memorial, ¶ 236.
87
Bifurcation Response, ¶¶ 67-68 (quoting RREEF, ¶¶ 84-85 (CL-101) and Eiser, ¶ 86 (4 May 2017) (CL-149));
Rejoinder on Jurisdiction, ¶¶ 68-71 (quoting the same and also Novoenergia II – Energy & Environment (SCA) Grand
Duchy of Luxembourg), SICAR v. Kingdom of Spain, SCC Arbitration (2015/063), Award ¶ 454 (15 February 2018)
(CL-191) (“Novoenergia”) and Masdar Solar & Wind Cooperatief U.A. v. Spain, ICSID Case No. ARB/14/1, Award
¶ 311 (16 May 2018) (RL-90) (“Masdar”)); Eskosol PHB, ¶ 78 (also citing Vattenfall, ¶ 202 (CL-193), for the absence
of an disconnection clause).
88
Bifurcation Response, ¶ 70 (discussing Eiser, ¶ 194 (CL-149)). Eskosol similarly rejects as “completely irrelevant”
Italy’s reliance on the Energy Charter Conference Decision relating to the EIA issue. Bifurcation Response, ¶ 72.
89
90
Bifurcation Response, ¶ 71 (quoting Eiser, ¶ 202 (CL-149)); Rejoinder on Jurisdiction ¶ 73; Tr. 1, 71:13-17.
91
Eskosol PHB, ¶¶ 77, 85.
92
Eskosol PHB, ¶ 77 (citing Vattenfall, ¶ 192 (CL-193)); Tr. 1, 72:20-73:5.
93
16
Charanne tribunal to the effect that “the terms of the [ECT] are clear and do not justify recourse to
supplementary means of interpretation that could lead to add to the ECT an implied disconnection
clause in respect of intra-EU disputes.”94 Moreover, application of the ECT to intra-EU disputes does
not amount to “a result which is manifestly absurd or unreasonable” under Article 32(b) of the VCLT.95
49. Finally, with respect to Italy’s invocation of the “practice” of EU Member States to protest intra-EU
claims under the ECT, Eskosol asserts that this cannot “lead to an interpretation that is at odds with
the terms of the ECT.”96
2. EU Law Developments
a. Progressive Development of EU Treaties
50. In Eskosol’s view, subsequent EU treaties, including “the adoption of the Lisbon Treaty in 2007,
roughly 13 years after the signing of the ECT,” are “immaterial.”97 Eskosol emphasizes that under
Article 30 of the VCLT, a subsequent treaty may only abrogate provisions of an earlier treaty if the
treaties relate to the same subject matter, and then only to the extent the treaties are incompatible. In
its view, the ECT and the Lisbon Treaty “do not relate to the same subject matter, nor are they
incompatible.”98 Further, even if the two were considered as having the same subject matter, the
conflict rule in Article 16(2) of the ECT – and not the general conflict rule in Article 30(4)(a) of the
VCLT – would apply “by operation of the lex specialis principle.”99 Eskosol in any event questions
which is really the later treaty, given that “Articles 267 and 344 TFEU have existed in the same form
prior to the ECT,” and “[t]herefore it is not clear that the EU Treaties and specifically those provisions
are the successive treaties to the ECT, nor for that matter that this is truly the type of situation in which
Article 30(4)(a) VCLT was intended to apply.”100
94
Bifurcation Response, ¶ 74 (quoting Charanne, ¶ 437 (CL-82)); see also Eskosol PHB, ¶ 68 (“Any reading of an
implicit carve-out would significantly depart from the original meaning of the text used in the ECT and related
instruments”) and ¶ 79 (rejecting resort to “selected travaux preparatoires … given the clarity of the terms of the
ECT”).
95
96
97
Bifurcation Response, ¶ 77 & V.C; see also Tr. 1, 67:15-68:5 (contending that Italy is “inviting this Tribunal to look
through the wrong end of the telescope, meaning to start with EU law, and then to use EU law to inform and govern
the Tribunal’s interpretation of the ECT … The approach should be to analyse the source of this Tribunal’s jurisdiction,
meaning the Energy Charter Treaty and Article 25 of ICSID, as a matter of international law ….”).
98
Bifurcation Response, ¶ 79 (citing Blusun S.A. et al. v. Italy, ICSID Case ARB/14/3, Final Award ¶¶ 285-286 (27
December 2016) (RL-56) (“Blusun”)); Eskosol PHB, ¶ 88(i).
99
Eskosol PHB, ¶ 88(ii) (citing Vattenfall, ¶ 217 (CL-193)).
100
Eskosol PHB, ¶ 88(iii) (citing Vattenfall, ¶ 218 (CL-193)).
17
51. Eskosol also rejects Italy’s suggestion that the Lisbon Treaty amounted to an agreement to modify the
ECT under Article 41 of the VCLT, noting that under that provision a “partial agreement” to modify
a multilateral treaty between certain parties is effective only if it is not prohibited by the treaty and
“does not relate to a provision, derogation from which is incompatible with the effective execution of
the object and purpose of the treaty as a whole.”101 In Eskosol’s view, a “modification” resulting in a
carve-out for intra-EU disputes is prohibited by the ECT, given that Article 16 of the ECT prevents
another treaty from derogating from more favorable rights in Parts III and V of the ECT, including the
right to dispute resolution.102 Moreover, Italy’s argument would lead to “the effective derogation” of
the ECT’s substantive protections to qualifying investors despite those protections being “certainly
superior to, or more protective than, those under EU law,” including by affording access to an
independent ICSID tribunal rather than the courts of the very host State whose actions are being
challenged.103
52. Finally, Eskosol rejects Italy’s attempt to demonstrate incompatibility between the ECT and EU law
“based solely on EU law principles,” which supposedly would “entail that this Tribunal lacks
jurisdiction to resolve the present dispute.”104 Eskosol’s view is that “there is no conflict between the
ECT and EU law,” since Article 344 of the TFEU is “immaterial to the dispute in hand,” relating only
to State-to-State disputes and not investor-State disputes.105 In any event, if there was a conflict
between the ECT and EU law, “the ECT should prevail” as a matter of public international law.106
b. The Achmea Judgment
53. In Eskosol’s view, the Achmea Judgment in no way compels a finding that this Tribunal lacks
jurisdiction. First, as a threshold matter, “a decision by the ECJ is not binding upon this Tribunal,
which under the ICSID framework operates on an international plane, insulated from the intervention
of other courts.”107 Indeed, Eskosol warns against Italy’s effort to “persuade the Tribunal to abdicate
its decision-making function and defer to a decision of a regional judicial body formed under a
different treaty.”108 Eskosol emphasizes that the Tribunal’s mandate is to interpret and apply the ECT,
101
102
Eskosol PHB, ¶ 91.
103
Bifurcation Response, ¶¶ 82, 91.
104
105
Bifurcation Response, ¶¶ 85-86.
106
Bifurcation Response, ¶¶ 85, 89.
107
Bifurcation Response, ¶ 90; Rejoinder on Jurisdiction, ¶ 76; Tr. 1, 77:2-10.
108
Rejoinder on Jurisdiction, ¶ 61.
18
and it “is not bound by EU law any more than it is bound by the domestic law of any given state.”109
To the contrary, “each of this Tribunal and the ECJ are judicial decision-making entities created by
virtue of the provisions of the respective treaties from which they each derive their jurisdiction and
authority,” and the decisions of one are not binding on the other.110
54. Second, even if the Tribunal were required to take regard of the Achmea Judgment, “that judgment
does not extend to intra-EU disputes under the ECT for good reason.”111 Eskosol notes that the
question referred to the ECJ by the German Federal Court of Justice was: “Does Article 344 TFEU
preclude the application of a provision in a bilateral investment protection agreement between Member
States of the European Union (a so-called intra-EU BIT) …,” and the ECJ’s response was to find that
“Articles 257 and 344 TFEU must be interpreted as precluding a provision in an international
agreement concluded between Member States …,”112 making no reference to the ECT even though the
Advocate General had expressly commented on the ECT in his opinion.113 That is significant, in
Eskosol’s view, and no doubt reflects that unlike intra-EU BITs (such as the BIT in issue in Achmea),
“[t]he EU is a party to the ECT and, as such, the ECJ could not seriously contend that the ECT is
contrary to EU law.”114 Eskosol invokes the Masdar tribunal’s finding on this basis that the Achmea
Judgment “does not take into consideration, and thus it cannot be applied to, multilateral treaties, such
as the ECT, to which the EU itself is a party.”115 It similarly cites the decisions of the Vattenfall and
Greentech tribunals that the Achmea Judgment at most extends only to intra-EU BITs.116
55. Eskosol also argues that the Achmea Judgment post-dates its acceptance (by virtue of initiating this
case) of Italy’s offer to arbitrate contained in the ECT. Eskosol emphasizes that under Article 25(1)
of the ICSID Convention, “[w]hen the parties have given their consent, no party may withdraw its
consent unilaterally.” Eskosol notes that Italy filed a notice to withdraw from the ECT on 31
December 2014, and “yet – of course – [it] has not pursued an argument that such withdrawal could
109
Rejoinder on Jurisdiction, ¶ 61; see also Tr. 1, 68:18-22 (“Achmea changes nothing for the purposes of this
Tribunal’s jurisdictional analysis. It is a pronouncement by a judicial body within the EU legal order applying EU
law. Achmea does not change the rules of interpretation of international treaties.”).
110
111
Rejoinder on Jurisdiction, ¶¶ 76, 81; Eskosol PHB, ¶¶ 69, 80; Tr. 1, 69:13-17, 77:11-14.
112
Rejoinder on Jurisdiction, ¶¶ 82-83.
113
Eskosol PHB, ¶ 83.
114
Rejoinder on Jurisdiction, ¶ 62; Eskosol PHB, ¶ 83.
115
Rejoinder on Jurisdiction, ¶ 85 (quoting Masdar, ¶ 679 (RL-90)).
116
Eskosol PHB, ¶ 84 (citing Vattenfall, ¶¶ 160-164, 212-214 (CL-193) and Foresight Luxembourg Solar 1 S.À.R.L.,
Foresight Luxembourg Solar 2 S.À.R.L., Greentech Energy Systems A/S, GWM Renewable Energy I S.PA., GWM
Renewable Energy II S.PA. v. The Kingdom of Spain, SCC Arbitration V (2015/150), Final Award, ¶ 220 (14
November 2018) (CL-195) (“Greentech”)).
19
amount to a withdrawal of [Italy]’s consent to these proceedings. Similarly, by no stretch could a
decision of the ECJ pursuant to the TFEU amount to withdrawal of consent by [Italy] under the
ECT.”117
56. Finally, Eskosol rejects Italy’s reference to the issue of enforceability in the face of the Achmea
Judgment, deeming it “pure speculation” that an award issued by this Tribunal under the ECT would
not be enforceable within the EU. “However, more fundamentally, questions of enforceability in
certain jurisdictions should not impact a tribunal’s jurisdictional analysis.”118
c. The January 2019 Declaration
57. Eskosol rejects Italy’s interpretation of the January 2019 Declaration. It observes that the Declaration
contains “no analysis” of the Achmea Judgment, but simply a “self-serving” statement of view about
the “alleged consequences” of that Judgment.119 That statement is “extraneous to the ECT,” in the
sense that it is not authorized by any provision of the ECT, and Italy’s invocation of it constitutes an
“effort to retroactively invalidate its consent to arbitrate, which has already been accepted by Claimant
here, … inconsistent with international law.”120
58. Eskosol adds that not all EU Member States have signed the Declaration, and in fact six other EU
Member States have declared it inappropriate to express a view on the compatibility of EU law and
the ECT at this time, based on the Achmea Judgment’s silence about the ECT.121 In any event, even
for the States signing the Declaration, at most that document reflects an interpretation of Achmea,
which the Tribunal can interpret for itself. Moreover, the Tribunal’s jurisdiction is governed by the
ECT and ICSID, and the Member States signing the Declaration “do not purport to issue [it] … on the
basis of any authority or right granted to Contracting States under the ECT or ICSID.” 122 As for the
“so-called will of Belgium and Italy to self-declare that their offer to arbitrate under the present
circumstances is invalid,” Eskosol contends that this does not bind the Tribunal for purposes of
jurisdiction, but rather “[i]n accordance with the principle of compétence-compétence, the Tribunal
has the power to determine its own jurisdiction in accordance with the ECT and ICSID.”123
117
118
Eskosol PHB, ¶ 99 & n. 152 (quoting Vattenfall, ¶¶ 230-231 (CL-193)); Tr. 1, 78:15-25.
119
Termination Response, p. 1.
120
121
122
123
20
59. Eskosol also rejects the suggestion that Articles 31(2)(b) and 31(3)(a) of the VLCT could guide the
Tribunal’s analysis with respect to the January 2019 Declaration. Those provisions involve
interpretation of treaties, but the Declaration “does not purport to interpret a single provision or term
of the relevant treaty, the ECT,” but merely declares the invalidity of one of its provisions.124 This is
“at most a political declaration,”125 which in Eskosol’s view “cannot overcome the plain meaning of
the terms and provisions of the ECT, which provide no carve out for intra-EU disputes” and moreover
already regulates any possible conflict with EU law, by virtue of its own Article 16(2).126 Eskosol
characterizes Italy’s attempt to apply the January 2019 Declaration to bind the Tribunal in interpreting
Article 26 of the ECT as “highly remarkable, and a significant departure from a common-sense VCLT-
led process of interpretation.”127 In fact, Eskosol contends that the January 2019 Declaration is not an
interpretation at all, but rather an “attempted late-stage ‘reservation,’” which is prohibited by the
unambiguous prohibition on reservations set forth in Article 46 of the ECT.128 Eskosol contrasts the
January 2019 Declaration with those issued at the time the ECT was concluded, which in its view were
intended at the time of signing to be the “final word” on the ECT’s scope and obligations. These were
far different from a “declaration issued 25 years after concluding a treaty in circumstances where a
State seeks to absolve itself from liability in on-going arbitration proceedings.”129
60. With respect to such ongoing proceedings, Eskosol finally emphasizes that it accepted Italy’s offer to
arbitrate in the ECT in 2015, more than three years before the January 2019 Declaration was issued.
“The idea that a Respondent could retroactively withdraw or vitiate its consent to arbitration on the
eve of an award through a self-serving declaration would clearly run contrary to the investor
protections contained in the ECT.”130 For this reason, Eskosol “queries the relevance and
applicability” of ILC guidelines on interpretative declarations, which were “produced for the purposes
of determination of State-to-State obligations in the sphere of public international law” and “cannot
be directly transposed” to investment treaty arbitration, where investors are relying on treaty
provisions to assert their rights and have accepted consent by commencing an arbitration. In that
context, allowing States power to issue “self-serving ‘interpretative declarations’ … would have the
124
Termination Response, p. 3; Termination Rejoinder, p. 1.
125
Termination Rejoinder, p. 1.
126
Termination Response, p. 3; Termination Rejoinder, p. 5.
127
128
Termination Rejoinder, pp. 2, 3.
129
Termination Rejoinder, pp. 3, 4.
130
21
potential to undermine the investor-State system of rights and protections.”131 Such a result also would
be contrary to Article 25(1) of the ICSID Convention, under which “no party may withdraw its consent
unilaterally” once the consent has been given previously by both parties.132
THE COMMISSION’S POSITION
INTERPRETATION OF THE ECT
61. The Commission contends that from the date of Italy’s ratification of the ECT, its “offer for arbitration
… was only addressed to investors from Contracting Parties other than EU Member States.”133 That
is because the ECT “created international obligations only between third countries and the competent
subject of international law of the area of Union law,” i.e., “either the Union (for areas of Union
competence) or the EU Member States (for areas of Member State competence).”134 This in turn is so
because EU Member States “can only enter into international obligations inter se to the extent that
they have not transferred their external competence to the Union.”135
62. The Commission accepts that Article 26 of the ECT is to be interpreted in accordance with the
VCLT.136 It notes that Articles 1(2) and 1(3) allow a REIO to be a Contracting Party with respect to
matters over which States have “transferred competence …, including the authority to take decisions
binding on them,” and contends that Article 36(7) further reflects “the division of competences and
foresees that the Union votes on matters falling in its competence, and the Member States on matters
falling in their competence ….”137 Moreover, Article 1(10)’s reference to the “Area” of a REIO cross-
references “the agreement establishing that Organization,” which in this case are “the EU Treaties, i.e.
the TEU, the TFFEU and the Euratom Treaty.”138 In consequence, since the “Area” of the EU
“comprises the entirety of the areas of the EU Member States,” an investment by an EU investor in
Italy is “not an investment in the area of another Contracting Party, but in the area of the same
Contracting Party.”139 Starting from this proposition that “[t]he Union [is] a single investment area
131
132
133
Commission Submission, p. 3, section heading 2.
134
Commission Submission, ¶ 13.
135
136
137
Commission Submission, ¶¶ 17-18; Commission Update, ¶¶ 14-15.
138
Commission Submission, ¶¶ 20-21.
139
22
for its Member States,” the Commission concludes that “the offer for arbitration made by the Union
(comprising, among others, Italy) is hence only made to investors from Contracting Parties that are
not EU Member States.”140
63. The Commission rejects the contrary notion, adopted by the Charanne and RREEF tribunals, that the
term “Area” instead should be “defined depending on who is the respondent.”141 That view, which
would remove any assessment of whether a Member State or the Union “has the external competence
for the matter in question,” would deprive Article 1(10)’s reference to “the agreement establishing that
Organization” of any effectiveness or effet utile.142 It also “disregards the importance that the ECT
places in Article 1(3) on the transfer of competence” from individual States to the REIO. 143 Finally,
only the Commission’s interpretation would avoid “respondent shopping,” under which investors
could always avoid bringing claims against the EU itself simply by challenging the “national acts of
execution of Union law” on which the Union generally relies in the absence of its own direct
enforcement tools.144
64. The Commission contends that its view of these provisions was clear from the outset, when it
submitted a statement to the ECT Secretariat pursuant to ECT Article 26(3)(ii), referring to
determinations “if necessary” between the EU and its Member States as to “who is the respondent
party to arbitration proceedings initiated by an Investor of another Contracting Party.” The
Commission contends that the word “another” in this context “clearly excludes disputes brought by
EU investors against a Member State,” and thus illustrates the understanding from the beginning that
only investors from non-EU States could bring a case against the EU or its Member States.145
65. The Commission further argues that its interpretation is “supported by the context, object and purpose
of the ECT.”146 First, EU law is a “relevant rule of international law applicable in the relations between
the parties” in the sense of Article 31(3)(c) of the VCLT, particularly as the ECT was initiated by the
EU and incorporates by reference the Charter of Paris and the European Energy Charter, which refer
to the EU’s special role and status.147 As a matter of EU law, both the EU and its Member States are
140
141
142
143
Commission Submission, ¶ 28; Commission Update, ¶¶ 14-16.
144
145
146
Commission Submission, ¶ 32; Commission Update, ¶ 22.
147
23
“bound by the general principle of … unity in the international representation of the Union,”148 and
accordingly they “acted throughout the [ECT] negotiations like one single block.”149 Indeed, the ECT
was proposed by the Commission and initially conceived as a European treaty, to promote cooperation
“between the European Communities, on the one hand, and Russia, the CIS and the countries of
Central and Eastern Europe, on the other hand.”150 This “historical process” confirms that the ECT
was “perceived as part of the European Communities’ external energy policy” and “never intended …
[to] influence their internal energy policy,” which was already “well under way when the ECT was
negotiated.”151
66. In the Commission’s view, the absence of a “disconnection clause” in the ECT is of no significance,
since such a clause is “only needed where the application of Union law between the Member States is
not in line with Article 41(1)(b) VCLT. Where, on the contrary, as in the present case, the rights and
obligations of third countries are not affected, ‘the insertion of the EU-specific ‘disconnection clause’
seems to be entirely superfluous’.”152 Moreover, disconnection clauses have “traditionally been used
in international treaties where the Union could not become a Contracting Party itself,” so
“disconnection clauses may indeed be useful, as … a ‘reminder of [the Union’s] existence’.”153 This
is unnecessary in treaties like the ECT where the EU itself is a party and its role as a REIO is explicitly
recognized.154
67. The Commission acknowledges in its updated submission the fact that the EU nonetheless had
attempted during the ECT negotiations to introduce a disconnection clause, but that clause in the end
was removed from the relevant ministerial declaration.155 In its view, the Vattenfall tribunal was
wrong to “attach[] particular importance” to this history,156 for two reasons. First, there was “no legal
need for a disconnection clause,” which would have had “purely declaratory, but no constitutive
character.” Second, the ECT’s language on the REIO itself “evolved over time in the negotiations,
turning into a disconnection clause itself, because it recognizes the transfer of competences” to the
148
149
150
Commission Submission, ¶¶ 39, 42.
151
152
Commission Submission, ¶ 49 (citation omitted).
153
154
155
Commission Update, ¶ 24.
156
Commission Update, ¶ 24 (citing Vattenfall, ¶ 205 (CL-193)).
24
REIO and the fact that “in such a situation, the relevant territory of the Contracting Party is that of the
[REIO], and not that of its members.”157
EU LAW DEVELOPMENTS
1. Progressive Development of EU Treaties
68. For the reasons above, the Commission submits that Italy cannot be viewed as ever having made an
offer of arbitration to investors of other EU Member States. However, even if arguendo Member
States had entered into certain inter se obligations through the ECT, “those obligations would only
cover areas where EU Member States retain external competence.”158
69. However, by virtue of the progressive development of the EU Treaties, EU law internal market rules
now “govern and protect all steps of the life-cycle of an investment,”159 including through provisions
on freedom of establishment and free movement of capital and payments, which forbid discriminatory
measures and other restrictions on investment, and also govern expropriation.160 EU law also
“provides for a complete set of remedies that ensure its proper application.”161 In consequence of these
EU law rules on investment protection, EU Member States now lack the “external competence” to
conclude an investment protection treaty between themselves, since this “might affect common rules
or alter their scope” within the meaning of Article 3(2) TFEU.162 Only “the Union has exclusive
external competence to conclude agreements … for areas where the EU Treaties expressly stipulate
such exclusive competence.”163
70. The Commission concludes that because “all provisions in Part III and Article 26 ECT fall within the
external competence of the Union,” only the EU – and not its Member States – are bound by those
provisions.164 Any opposite conclusion would place the ECT into conflict with Article 19(1) TEU
and Articles 267 and 344 TFEU with respect to interpretation and application of EU law.165 That is
because, pursuant to Article 26(6) of the ECT, EU law is part of the “applicable rules of international
157
158
159
160
161
162
163
164
165
Commission Submission, Section 3.1.2 and ¶¶ 95-96.
25
law” to be applied by any arbitral tribunal, and under Article 26(8) of the ECT any arbitral decision
should be “final and binding.” Yet, EU law does not permit the creation of dispute settlement systems
to interpret EU law that are outside the “complete system” created by Article 19(1) TEU and Articles
267 and 344 TFEU.166
71. The Commission urges the Tribunal to resolve any ambiguity with respect to intra-EU disputes
through “harmonious interpretation,” in other words in a way that does not conflict with Union law.167
In the event of any “open conflict” between the ECT and the EU Treaties, however, the Commission
considers that the EU Treaties “take precedence over the ECT.”168 The Commission rejects the notion
that the ECT was intended to apply as lex specialis to EU law,169 and in particular the view (adopted
by the Vattenfall tribunal) that Article 16 of the ECT “qualifie[s] … as a special conflict rule applicable
to this conflict, to the detriment of the primacy of Union law.”170 To the contrary, in its view, Article
16 of the ECT “does not contain a rule of conflict, but only a rule of interpretation,” and in any event
any conflict rule reflected in ECT Article 16 “would have been overruled by the later special conflict
rule” of the primacy of EU law within intra-EU relations, reflected in Article 351 TFEU and “re-
affirmed” in the Lisbon Treaty.171 The Commission considers Article 351 TFEU to prevail even over
the general conflict rules in Article 30 of the VCLT, since the latter “were conceived as residual rules,”
whereas “EU law foresees a special conflict rule” involving the primacy of EU law.172 The
Commission emphasizes that under Article 351 TFEU (formerly 307 EC), “in matters governed by
the EU Treaties, EU law takes precedence over international treaties concluded between Member
States, regardless of whether they were concluded before or after EU accession.”173 The Commission
invokes the Electrabel decision in support of this argument.174
72. In any event, the Commission argues, the same result would be obtained even if the Tribunal instead
were to start with the general international law conflict rules contained in Articles 41(1)(b) and
166
167
Commission Submission, ¶¶ 89, 91, 110 (2), ¶ 116; Commission Update, ¶ 8.
168
Commission Submission, ¶¶ 91, 110(3), 113 (citing Electrabel, ¶¶ 4.178-4.191 (RL-58)); Commission Update, ¶
8.
169
170
Commission Update, ¶¶ 27, 48.
171
172
173
Commission Update, ¶ 32 (citing CJEU case law).
174
Commission Update, ¶¶ 33, 36.
26
30(4)(a) of the VCLT, rather than with EU law.175 First, since the Treaties of Amsterdam, Nice and
Lisbon “re-affirmed” the investment protection rules of EU law as well as general principles
concerning competences and judicial protection, this “could be interpreted as an amendment [of the
ECT] pursuant to Article 41(1)(b) VCLT.”176 Alternatively, since the Member States have “reaffirmed
their commitment to Union law” by these three Treaties, the EU Treaties constitute the “subsequent”
treaty for a lex posterior analysis under VCLT Article 30(4)(a).177 The result is that the ECT would
apply only to the extent the EU Treaties did not relate to the same subject matter and their respective
provisions were not incompatible.178 The Commission contends, however, that the ECT and the EU
Treaties do relate to the same subject matter, since the ECT “established a legal framework in order
to promote long-term cooperation in the energy field, based on complementarities and mutual benefits,
in accordance with the objectives and principles of the European Energy Charter,” and the EU Treaties
“establish a European Union to achieve European unity, including an internal market that also covers
energy,” including a “dedicated competence for energy” introduced by the Lisbon Treaty “for the first
time.”179 Moreover, the provisions of the ECT on investment protection (Chapter III) and dispute
settlement (Article 26) are not compatible with EU law when applied between EU Member States.
For this reason, the Commission concludes, “they are, pursuant to Article 30(4)(a) VCLT, not
applicable.”180
2. The Achmea Judgment
73. According to the Commission, the Achmea Judgment is an “authoritative and binding interpretation
of the relevant provisions of Union law,” not just for all EU Member States and any investor
established in those States, but also for this Tribunal.181
74. The Commission moreover interprets the Achmea Judgment as precluding intra-EU arbitration
“independently of the type of investment protection agreement it is based on (bilateral or
175
176
177
178
179
180
Commission Submission, ¶ 133. In the Commission’s Update, it urges the Tribunal to consider “same subject
matter” and “incompatibility” as a single condition rather than “two separate conditions,” contending based on the
ILC drafting history of VCLT Article 30 that “conflict is the necessary and sufficient condition,” and that the rule
“applies to all situations where there is a conflict between the earlier and the later treaty.” Commission Update, ¶¶
39-41.
181
27
plurilateral).”182 It notes that the operative part of the judgment refers to “a provision in an
international agreement concluded between Member States …,” and further observes that “all
considerations set out in Achmea apply equally to intra-EU investment arbitration based on Article 26
ECT.”183 That conclusion “cannot be put into question” by paragraph 57 of the Achmea Judgment,
addressing agreements concluded by the Union, because the EU case law referenced in that paragraph
addresses relationship with non-EU States, and the possibility of creating international courts under
which the autonomy of the EU legal order will be respected, unlike the ECT where an intra-EU arbitral
tribunal would have to apply EU law as part of the “applicable rules and principles of international
law.”184
75. The Commission notes that CJEU judgments “apply, as a matter of principle, ex tunc, because the
Court only interprets the law, and does not create new law.”185 Although the CJEU in exceptional
cases can limit the application of judgments in time, it has not done so in Achmea. Accordingly, “there
should be no doubt that the judgment in Achmea applies to all pending investment arbitration cases.”186
In addition, “when applied on an intra-EU basis, any grandfathering or sunset clause, such as Article
47(3) of the ECT, would be ineffective because it cannot extend the ratione temporis application of a
treaty clause which is unlawful.”187 The Commission rejects any concern, such as that expressed by
the tribunal in UP and CD Holding v. Hungary, that an immediate application of the Achmea Judgment
to pending cases would result in a retroactive withdrawal of consent in violation of Article 25(1) of
the ICSID Convention.188 In its view, that concern “overlooks the fundamental point that consent did
not have to be withdrawn, because … no consent to arbitration in the concrete case had ever been
validly given. The judgment in Achmea applies ex tunc.”189
THE TRIBUNAL’S ANALYSIS
76. Although Italy’s Termination Request filed earlier this year invokes most proximately the Achmea
Judgment and the January 2019 Declaration, the Tribunal considers it appropriate to begin its analysis
182
183
Commission Update, ¶¶ 3-4.
184
185
186
187
188
Commission Update, ¶ 51 (citing UP and CD Holdings v. Hungary, ICSID Case No. ARB/13/35, Award ¶ 252 (9
October 2018) (CL-194) (“UP and CD Holdings”)).
189
28
not with these recent EU law developments, but rather with the underlying issue of ECT interpretation
on which both Parties, and the Commission itself, centered their jurisdictional submissions. This
reflects the reality, not disputed in this case, that the source of the Tribunal’s jurisdiction is in the
international legal order, not the EU legal order. The Tribunal has been constituted as an international
tribunal following Eskosol’s presentation of an RFA under the ECT and the ICSID Convention. The
Commission itself acknowledges that in these circumstances, “[t]he starting point of your analysis is
therefore necessarily one of international law.”190 Italy likewise acknowledges that as an ECT
signatory, it is “bound by the obligations arising out of the ECT as established under international
law,” and therefore the specific question – whether it and other EU Member States “bound themselves”
to intra-EU arbitration under the ECT – is equally one of international law, to be determined by use
of traditional VCLT treaty interpretive tools.191
77. The Tribunal therefore begins in the same place, with the goal of assessing whether – as of when the
ECT entered into force for Italy and Belgium in 1998 – these States thereby reciprocally consented to
arbitration of potential ECT claims by qualified investors of the other, notwithstanding their common
membership in the EU. Following this analysis, the Tribunal examines the implications on Italy’s
consent of various subsequent developments in the EU legal order, including chronologically (a) the
progressive development of the EU Treaties, (b) the Achmea Judgment, and (c) the January 2019
Declaration. This sequence mirrors the organizing principle the Tribunal used in the preceding
Sections III and IV to summarize the positions of the Parties and of the Commission. The Tribunal
finally addresses briefly the issue of enforcement, to which the Parties alluded in their submissions on
jurisdiction.
INTERPRETATION OF THE ECT AS OF ITS ENTRY INTO FORCE
78. As a threshold matter, there is no dispute that both Italy and Belgium are Contracting States to the
ICSID Convention, and accordingly under Article 25(1) of that Convention, jurisdiction “shall extend
to any legal dispute arising directly out of an investment, between [Italy] and a national of [Belgium],
which the parties to the dispute consent in writing to submit to the Centre.”192 The relevant question
for this Decision is whether Italy and Belgium so consented by virtue of their ratification of the ECT.
190
191
Bifurcation Request, ¶ 165 and Section IV.A.A (“Interpretation of the Contracting Parties’ Intent Under Articles
31 and 32 VCLT”).
192
ICSID Convention, Article 25(1).
29
79. In resolving this question, the Parties broadly agree that the ECT should be interpreted by means of a
traditional VCLT analysis, in particular according to the principles set forth in VCLT Articles 31 and
32. VCLT Articles 31 and 32 provide as follows:
Article 31
General rule of interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary

meaning to be given to the terms of the treaty in their context and in the light of its
object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in
addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the parties
in connection with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connection with
the conclusion of the treaty and accepted by the other parties as an instrument
related to the treaty.
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation
of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes
the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between
the parties.
4. A special meaning shall be given to a term if it is established that the parties so

intended.
Article 32
Supplementary means of interpretation
Recourse may be had to supplementary means of interpretation, including the

preparatory work of the treaty and the circumstances of its conclusion, in order to
confirm the meaning resulting from the application of article 31, or to determine
the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable.193
193
VCLT, Articles 31 and 32 (CL-57).
30
80. In conducting such a VCLT analysis, the Tribunal bears in mind several propositions. First, the ECT,
like all other treaties, is to be interpreted and applied in accordance with the “natural and ordinary
meaning” of its terms, in the context in which they occur. As the International Court of Justice (“ICJ”)
has explained, this means that “[i]f the relevant words in their natural and ordinary meaning make
sense in their context, that is the end of the matter,”194 since the Contracting Parties’ use of
unambiguous terms should be taken as reflecting their clear intent. Second, the relevant “context” for
construing any given passage in a treaty includes both the words and sentences found in close
proximity to that passage, including definitional terms, and other provisions of the same treaty which
help illuminate its object and purpose.195 Third, in accordance with Article 32 of the VCLT, only if
the approach required by Article 31 leaves a meaning “ambiguous or obscure,” or leads to a result that
is “manifestly absurd or unreasonable,” may recourse be had to supplementary means of
interpretation.196 The ICJ has explained that even in these circumstances, “a decisive reason” (such as
unmistakable evidence of the State Parties’ intentions from such supplementary materials) would be
required “[t]o warrant an interpretation other than that which ensues from the natural meanings of the
words” of a provision.197
1. ECT Article 26(3), in the Context of ECT Articles 1(2), (3) and (10)
81. In this case, the obvious place to begin is with Article 26 of the ECT, which is the provision directly
addressing the Contracting Parties’ consent to arbitration of ECT disputes. Article 26 provides in
relevant part as follows:
SETTLEMENT OF DISPUTES BETWEEN AN INVESTOR

AND A CONTRACTING PARTY
(1) Disputes between a Contracting Party and an Investor of another Contracting

Party relating to an Investment of the latter in the Area of the former, which
concern an alleged breach of an obligation of the former under Part III shall,
if possible, be settled amicably.
(2) If such disputes can not [sic] be settled according to the provisions of
paragraph (1) within a period of three months from the date on which either
194
Competence of the General Assembly for the Admission of a State to the United Nations, Advisory Opinion, ICJ
Reports 1950, p. 8 (CL-59).
195
See generally Kiliç Ĭnşaat Ĭthalat Ĭhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No
ARB/10/1, Award ¶ 5.2.6 (2 July 2013) (“Treaty terms are obviously not drafted in isolation, and their meaning can
only be determined by considering the entire treaty text. The context will include the remaining terms of the sentence
and of the paragraph; the entire article at issue; and the remainder of the treaty […].”).
196
VCLT, Article 32 (CL-57) (emphasis added).
197
Admission of a State to Membership in the United Nations (Charter, Art. 4), Advisory Opinion: I.C.J Reports 1948,
pp. 57, 63.
31
party to the dispute requested amicable settlement, the Investor party to the
dispute may choose to submit it for resolution:
(a) to the courts or administrative tribunals of the Contracting Party party to

the dispute;
(b) in accordance with any applicable, previously agreed dispute settlement

procedure; or
(c) in accordance with the following paragraphs of this Article.
(3) (a) Subject only to subparagraphs (b) and (c), each Contracting Party hereby
gives its unconditional consent to the submission of a dispute to
international arbitration or conciliation in accordance with the provisions
of this Article.
(4) In the event that an Investor chooses to submit the dispute for resolution under
subparagraph (2)(c), the Investor shall further provide its consent in writing
for the dispute to be submitted to:
(a) (i) The International Centre for Settlement of Investment Disputes …; or
(6) A tribunal established under paragraph (4) shall decide the issues in dispute in
accordance with this Treaty and applicable rules and principles of international
law.198
82. Beginning with the opening words of Article 26(1) (“Disputes between a Contracting Party and an
Investor of another Contracting Party”), there is no question that both Italy and Belgium were
Contracting Parties to the ECT at the times relevant to this dispute. The ECT entered into force for
both States in 1998, and Belgium remains a Contracting Party.199 Italy by contrast made a formal
notification of its withdrawal from the ECT on 31 December 2014. Article 47(2) of the ECT however
provides that “[a]ny such withdrawal shall take effect upon the expiry of one year after the date of
receipt of the notification by the Depository …,”200 and according to the ECT Secretariat, Italy’s
withdrawal from the ECT took effect only on 1 January 2016.201 This was several weeks after Eskosol
198
ECT, Article 26 (C-1).
199
For purposes of this Decision, the Tribunal assumes arguendo that Eskosol qualifies under the ECT as an investor
of Belgium by virtue of Blusun’s 80% shareholding, notwithstanding Eskosol’s eventual entry into liquidation
proceedings in Italy. The Tribunal addressed that question preliminarily in its Decision on Italy’s Rule 41(5) Request,
and will address it further in its Final Award.
200
ECT Art. 47(2) (C-1).
201
ECT Secretariat, Members and Observers: Italy (C-90).
32
had filed its Request for Arbitration on 9 December 2015. Even had it not done so until later, the
sunset provision in Article 47(3) of the ECT provides that “[t]he provisions of this Treaty shall
continue to apply to Investments made in the Area of a Contracting Party by Investors of other
Contracting Parties … as of the date when that Contracting Party’s withdrawal from the Treaty takes
effect for a period of 20 years from such date.”202 Notably, Italy has never contested Eskosol’s
contention in its Memorial that based on these ECT provisions, “Italy’s withdrawal is of no
consequence to the present dispute.”203 To the contrary, Italy acknowledged in its Post-Hearing Brief
that “under the ECT a decision to withdraw[] takes effect after one year.”204 Accordingly, the Tribunal
takes it as agreed that Italy, like Belgium, meets the definition of an ECT “Contracting Party” for
purposes of this case.
83. Articles 26(2) and (3) then address the procedures for resolution of certain types of “disputes.” Under
Article 26(2), subject to a three-month amicable settlement period, “the Investor party to the dispute
may choose to submit it for resolution” through various mechanisms, one of which is as stated in
Article 26(2)(c), namely “in accordance with the following paragraphs of this Article.” The
immediately following provision, Article 26(3)(a), in turn provides that “[s]ubject only to
subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the
submission of a dispute to international arbitration.” Here, three expressions are important: the
reference again to “a dispute,” the words “unconditional consent,” and the words “subject only.” The
natural and ordinary meaning of the word “unconditional” is “without conditions.” The words “subject
only” indicate that there are certain exceptions to this unconditional consent, but these are a finite
universe, consisting solely of the exceptions expressly referenced in Articles 26(3)(b) and (c), neither
of which Italy or the Commission has invoked in this case. Accordingly, the plain text of Article
26(3)(a) provides that, unless this case does not qualify in the first place as a covered “dispute” within
the meaning of Article 26(3), Italy – a Contracting Party – consents to submission of the matter to
international arbitration, and does so without conditions, i.e., unequivocally. Article 26(4)(a)(i)
confirms that ICSID arbitration is one procedural option available at the investor’s election.
84. The central question in interpreting Article 26(3) is thus the scope of the covered “disputes,” for which
Italy has provided its “unconditional” consent, inter alia, to ICSID arbitration. That scope is described
in Article 26(1), which refers to “[d]isputes between a Contracting Party and an Investor of another
202
ECT Art. 47(3) (C-1).
203
Memorial, n.8.
204
Italy PHB, n. 34.
33
Contracting Party relating to an Investment of the latter in the Area of the former, which concern an
alleged breach of an obligation of the former under Part III ….” On its face, this provision would
seem to apply here, because Eskosol presents a claim against Italy for alleged breach of several ECT
Part III obligations, relating to its investments within the physical territory of Italy. According to Italy
and the Commission, however, a deeper analysis is required of Article 26(1), including of the defined
terms “Contracting Party” and “Area” that it incorporates, which properly should result in a
conclusion that even from the moment of its entry into force, the ECT never reflected consent for
arbitration of intra-EU disputes.
85. Before turning to these particular arguments, the Tribunal observes that nothing in the text of Article
26 itself suggests its scope was intended to be restricted to disputes involving either an investor or a
Contracting Party outside the EU. The argument thus depends on reading the provision in the context
of other provisions of the ECT, pursuant to Article 31(1) of the VCLT, to see if an intent to exclude
intra-EU disputes fairly can be located there and imported back into Article 26, as a significant implied
constraint on Article 26(3)(a)’s otherwise “unconditional consent” to arbitration.
86. According to Italy and the Commission, such an exclusion is implicit both in the definitions of
“Contracting Party” and “Area,” provided in ECT Articles 1(2) and 1(10), respectively. Article 1(2)
confirms that a Contracting Party may be either an individual State or a REIO, which is defined in
Article 1(3) as an organization to which various States have “transferred competence over certain
matters a number of which are governed by this Treaty, including the authority to take decisions
binding on them in respect of those matters.” Article 1(10) defines the “Area” of an individual State
in terms of the physical “territory under its sovereignty,” and the “Area” of a REIO as the collective
“Areas of the member states of such Organization, under the provisions contained in the agreement
establishing that Organization.” Italy and the Commission suggest that by using these terms in Article
26, the ECT Contracting Parties demonstrated an intent ab initio to eliminate any possibility of an
intra-EU claim, or at least any possibility of such a claim relating to a “matter” for which Member
States had “transferred competence” to the EU. The Commission additionally frames this as an
absence of geographic diversity, arguing in essence that an EU national’s investment in Italy is not a
foreign investment as such, i.e., “not an investment in the area of another Contracting Party, but in the
area of the same Contracting Party.”205
205
34
87. The principal difficulty with this argument is that nothing in the ECT so states. Beginning with Article
1(2), there is no doubt that this expands the universe of ECT Contracting Parties by enabling REIOs
(and not just States) to ratify the treaty, but nothing in its language suggests a concomitant intent to
curtail the obligations of States which choose to become Contracting Parties in their own right. As
for Article 1(3), this does refer to States having “transferred competence” to a REIO “over certain
matters,” and the word “transfer” in its natural and ordinary meaning is capable of denoting the
conveyance of exclusive (and not simply concurrent) powers. The effect of such a reading would be
that for the “certain matters” over which the transferee (the REIO) gains authority, the transferor (the
States) concomitantly cedes all residual authority. This notion of a transfer of exclusive competence
is consistent with Article 1(3)’s reference to the REIO thereby obtaining “authority to take decisions
binding on [the States] in respect of those matters.”
88. The fact remains, however, that Article 1(3) alludes only in the abstract to “certain matters” where
such an exclusive transfer may occur, without elucidation as to which matters those may be. In
particular, nothing in this Article remotely suggests a shared understanding, as of the date the ECT
entered into force, that either the entirety of Part III’s substantive obligations, or the entirety of Part
V’s procedural obligations with respect to dispute settlement, were the contemplated subjects of such
an exclusive transfer.206 If such a wholesale transfer of exclusive competence for major parts of the
ECT, among a large group of the ECT’s original Contracting Parties, already had been completed or
was directly contemplated as of the ECT’s entry into force, one would expect that this major
development would have been expressly referenced somewhere.
89. Moreover, the Commission itself acknowledges that as a matter of EU law, “in theory, EU Member
States have the international capacity to enter into inter se obligations when negotiating a multilateral
agreement for those areas of the agreement for which they retain competence ….”207 The same point
is recognized by prominent EU law scholars, for example Pieter Jan Kuijper, who notably summarized
this in his account of the negotiations and conclusion of the WTO agreement:
It is clear as a matter of international law that a mixed Community agreement,

concluded simultaneously between the Community, its Member States and third
206
See Vattenfall, ¶ 180 (CL-193) (“The mere mention in Article 1(3) that EU Member States have ‘transferred
competence over certain matters’ to the EU does not convey that there is no application of the provisions of the ECT
between EU Member States”); Blusun, ¶ 281 (RL-56) (“The mere fact that the EU is party to the ECT does not mean
that the EU Member States did not have competence to enter into inter se obligations in the Treaty. Indeed, the ECT
seems to contemplate that there would be overlapping competences,” with “nothing in Article 1, nor any other
provision in the ECT, suggest[ing] that the EU Member States had then transferred exclusive competence for all
matters of investment and dispute resolution to the EU.”).
207
Commission Submission, ¶ 37; see also id., ¶ 46 (“in theory a possibility”).
35
States, is in principle capable of creating rights and obligations between all the
parties and hence also between the Member States inter se.208
While the Commission insists that “in practice” this is never done,209 in fact it is the obvious conclusion
from the fact that both the Member States and the EU separately became Contracting Parties to the
ECT, with no declaration that in doing so, the Member States’ competence was restricted only to
obligations vis-à-vis third States and specifically to the exclusion of any inter se obligations
whatsoever. It seems undisputed, as the Blusun tribunal observed, that “[n]o limitation on the
competence of the EU Member States was communicated at the time that the ECT was signed,”
leading to a conclusion that “[t]he inter se obligations in the ECT are not somehow invalid or
inapplicable because of an allocation of competence that the EC says can be inferred,” without having
been stated anywhere at all. The Blusun tribunal concluded that “[t]he more likely explanation,
consistent with the text of the ECT, is that, at the time the ECT was signed, the competence was a
shared one.”210
90. For these reasons, Article 26’s incorporation by reference of Article 1(2)’s definition of “Contracting
Party,” which in turn incorporates Article 1(3)’s definition of REIO, does not support the reading
proffered by Italy and the Commission. Nor do the definitions of “Area” provided in Article 1(10)
meaningfully assist their case. The “Area” of a REIO is defined in terms of the “Areas of the member
states of such Organization,” and their particular “Areas” in turn are defined in terms of the “territory
under [their] sovereignty.” The natural and ordinary meaning of the word “territory” is a geographical
one, which is different in kind from the subject-related word “matters” that is used in Article 1(3) to
describe the possible transfer of “competence” from States to a REIO. Moreover, while the term
“territory” is qualified in one respect (“territory under their sovereignty”), it is difficult to accept that
the transfer of certain powers to a REIO renders the “territory” in which those powers may be exercised
any less “sovereign” for the States involved. The notion of “sovereignty” is a profound concept in
public international law, which is not coextensive with the notion of “authority to take decisions
binding on them in respect of [designated] matters,” the description of “competence” used in Article
1(3) in the context of an REIO. Furthermore, the cross-reference in Article 1(10) to “the provisions
contained in the agreement establishing” the REIO does not transform the meaning of the constituent
“Areas” of the REIO’s member states, rendering those Areas any less “territory under [their]
208
Pieter Jan Kuijper, “The Conclusion and Implementation of the Uruguay Round Results by the European
Community,” (1995) 6, European Journal of International Law, issue 1, pp. 228-229 (attached as Annex EC-3 to the
Commission Submission).
209
210
Blusun, ¶ 283 (RL-56).
36
sovereignty.” There is no suggestion in this phrase of an exclusionary intent, i.e., that the “Area” of a
particular State may cease to qualify as such once that “Area” also becomes part of the broader “Areas”
relevant to a REIO.211 There is certainly no stated link between this provision and the subject of
dispute settlement, suggesting a contemporaneous intent to restrict Article 26 consent for any
Contracting Party that avails itself of a REIO procedure.
91. As several tribunals have now concluded, the ECT Contracting Parties could have explicitly
referenced an intent (had they in fact so intended at the time) that the ECT as a whole be exclusively
an outward-looking document, to regulate only the relations between EU Member States and third
States, but not the rights and obligations of EU Member States to one another. Alternatively, the ECT
Contracting Parties could have incorporated a narrower exclusion clause, limited specifically to the
subject of dispute settlement. As the ILC has noted, the very function of a “disconnection clause” is
that it “seek[s] to replace a treaty in whole or in part with a different regime that should be [] applicable
between certain parties only,” with such clause “agreed to by all the parties of the treaty.”212
92. The Tribunal agrees with the Eiser tribunal that an express provision in the ECT addressing intra-EU
disputes would have been the proper way for “treaty makers … to carry out their function in good
faith, and not try to lay traps for the unwary with hidden meanings and sweeping implied
conclusions.”213 The RREEF tribunal likewise considered an express warning, such as that contained
in an “unequivocal disconnection clause,” to be required.214 It is notable that before the ECT entered
into force the EU already had incorporated express disconnection clauses into other treaties, to ensure
that the provisions of a mixed agreement would not apply as between EU Member States.215 This
confirms the obvious, that it knew how to provide for these when it wished to do so. Indeed, as the
Vattenfall tribunal observed, the EU in fact had proposed the insertion of a disconnection clause, but
211
See Vattenfall, ¶ 181 (CL-193) (concluding that “Within the EU’s ‘Area’, the Contracting Parties being members
of the REIO do not cease to have their own Area”); see also Eiser, ¶¶ 195-196 (CL-149) (suggesting an additional
“difficulty with this analysis,” namely that also implies “an Investor loses its national character and becomes
predominantly an Investor of the EU, because its home country is also an EU Member State and subject to EU law,”
but it is “not evident how there can be an ‘Investor of the EU’ satisfying Article 1(7)(a)(ii)’s definition” of investors,
since “[t]here is no trans-national body of European law regulating the organization of business units, a matter that
remains subject to member countries’ domestic law.”).
212
ILC 2006 Report on Fragmentation of International Law, ¶ 294 (R-8).
213
Eiser, ¶ 186 (CL-149).
214
RREEF, ¶¶ 84-85 (CL-101). See also Blusun, ¶ 280(2) (RL-56) (“Prima facie at least, a treaty applies equally
between its parties. It would take an express provision or very clear understanding between the negotiating parties to
achieve any other result.”).
215
See Vattenfall, ¶ 203 (CL-193).
37
that clause ultimately was not included in the final treaty.216 The Commission’s contention that this
decision should be interpreted as confirmation that no such clause was needed after the REIO language
was finalized is not supported by anything in the text of the ECT.217 There is no suggestion anywhere
in the treaty, nor for that matter in any supplementary material submitted to this Tribunal, that the
REIO language was intended to function as some form of implicit disconnection clause whose
inclusion obviated the need for the explicit clause that the EU originally had sought to include.
93. In these circumstances, the Tribunal finds that the inclusion of REIOs within the definition of
“Contracting Party” means no more for purposes of Article 26 than what the Eiser tribunal found,
namely that “[b]oth the EU and [its] Member States can have legal standing as respondents in a claim
under the ECT.”218 The same is true for the reference to “Area” in Article 26, as the Charanne and
Masdar tribunals found.219 In particular, whether a particular “dispute” relates to a State or to the EU
depends both on the entity against whom the claim is brought and on the content of the claim,220 in the
sense of whether that claim in substance challenges a decision taken by State authorities or one
emanating from the EU itself. In that regard, it is notable that the EU’s 1998 statement submitted to
the ECT Secretariat as part of its ratification process221 expressly affirmed that “the European
Communities and their Member States have both concluded the Energy Charter Treaty and are thus
internationally responsible for the fulfilment of the obligations contained therein, in accordance with
their respective competences.”222 The document went on to explain, in this context of “respective
competences,” that the EU and the relevant Member State would determine, if needed for a particular
case initiated by an investor of “another Contracting Party,” which of them should go forward as “the
respondent party to arbitration proceedings” to defend a challenge to a particular act.223 Nothing in
this procedure to allocate the respondent’s role, however, suggests a jurisdictional limitation
preventing an EU investor from invoking the ECT’s protections in the first place. In particular, the
216
Vattenfall, ¶ 205 (CL-193); see also Blusun, ¶ 280(4) (RL-56).
217
218
Eiser, ¶ 94 (CL-149).
219
Charanne, ¶¶ 427-431 (CL-82); Masdar, ¶¶ 318-323 (RL-90) (quoting with approval the conclusions of several
prior tribunals).
220
Charanne, ¶ 431 (CL-82).
221
Pursuant to VCLT Article 31(2)(b), the “context for the purpose of the interpretation of a treaty shall comprise, in
addition to the text, … [a]ny instrument which was made by one or more parties in connection with the conclusion of
the treaty and accepted by the other parties as an instrument related to the treaty.” CL-57, Article 31(2)(b).
222
Statement by the European Communities to the Secretariat of the Energy Charter pursuant to Article 26(3)(b)(ii)
of the ECT, 9.3.98, OJ L 69/115 (Annex EC-1 to the Commission Submission).
223
Statement by the European Communities to the Secretariat of the Energy Charter pursuant to Article 26(3)(b)(ii)
of the ECT, 9.3.98, OJ L 69/115 (Annex EC-1 to the Commission Submission).
38
Tribunal agrees with the Vattenfall tribunal that “[t]here is no basis to read a qualification that ‘another’
Contracting Party only includes non-EU Member States.”224
2. Additional “Context” Provided by ECT Articles 16, 25, and 26(6)
94. Aside from its arguments based on Article 26’s use of the defined terms “Contracting Party” and
“Area,” Italy presents additional arguments based on the “context” supposedly provided by other ECT
Articles.
95. The first of these is Article 25, which immediately precedes Article 26.225 The Tribunal however does
not consider Article 25 relevant to the analysis. The provision states that the ECT “shall not be so
construed as to oblige a Contracting Party which is party to an Economic Integration Agreement … to
extend, by means of most favoured nation treatment,” any equivalent “preferential treatment” to other
States that are not members of the same EIA. Italy points to a related Declaration by the EU and its
Member States that nonetheless permitted certain third-State entities access to EU law protections, by
virtue of registered offices or other substantial activities in EU territory.226 But these provisions fall
far short of demonstrating a wholesale intent that the ECT’s substantive protections and investment
arbitration procedures not apply among EU Member States. If anything, Article 25 demonstrates that
the EU had the ability, as part of the ECT drafting process, to incorporate provisions specific to its
circumstances, in order to delineate precisely any desired limitations to the reach of particular ECT
provisions, such as the MFN provision addressed in Article 25. As discussed above, there is no similar
provision expressing any limitations on the reach of the investor-State dispute resolution mechanisms
of Article 26.227
96. Nor does the governing law provision in ECT Article 26(6) demonstrate, as Italy suggests, that its
“offer to arbitrate investment disputes has … always been inapplicable … to intra-EU disputes,” based
on propositions of EU law that have been codified “from the very beginning.”228 As a threshold matter,
a governing law clause would be a highly unusual place to signal an intent to exclude numerous
Contracting Parties from the reach of express treaty provisions, including the treaty’s dispute
resolution mechanisms, based on an ostensible supposition that readers of the clause would understand
the jurisdictional implications of any bodies of law thus incorporated. It would be particularly curious
224
Vattenfall, ¶ 189 (CL-193).
225
226
227
See Eiser, ¶ 192 (CL-149); Greentech, ¶ 215 (CL-195).
228
Rejoinder, ¶¶ 91-92 (emphasis added).
39
to use a governing law clause in this way, without ever mentioning the particular body of law said to
result in such a sweeping carve-out from the otherwise clear meaning of the arbitral submission clause.
In this case, Article 26(6) provides simply that “[a] tribunal … shall decide the issues in dispute in
accordance with this Treaty and applicable rules and principles of international law.”
97. The Tribunal will discuss this particular phrase further in Section V.B.1 and V.B.2 below, in the
context of examining the potential implications for ECT cases of the progressive development of the
EU Treaties and certain interpretations of those Treaties now authoritatively rendered by the CJEU in
the Achmea Judgment. As developed further there, the Tribunal does not consider this phrase in
Article 26(6) to be a broad renvoi to EU law as part of the ECT’s own governing law, and particularly
not for issues of jurisdiction. For present purposes, however, it is noteworthy that nothing in the phrase
“applicable rules and principles of international law” signaled an intent ab initio, when the ECT
entered into force in 1998 for the EU and its various Member States, that the provision thereby
excluded any possible form of intra-EU arbitration. Had this proposition been such an obvious and
unmistakable proposition of EU law as of 1998, one would have expected it to be referenced more
explicitly somewhere in the treaty, or at least expressly in the preparatory works or the declarations
submitted at the time, not simply left to future interpretations of a general provision on applicable
law.229 In these circumstances, even if (arguendo) Article 26(6) of the ECT could be said to require
some attention to EU law for purposes of interpreting the original intent of the ECT Contracting Parties
at the time the ECT entered into force, “no persuasive case has been made out for applying it so as to
yield an interpretation of Article 26 … that departs so radically from the ordinary meaning of the terms
of that Article,” as to exclude intra-EU disputes from the scope of Italy’s consent to arbitration in that
provision.230
98. The final ECT provision that Italy invokes, in support of its contention that even as of the date of its
entry into force the ECT did not apply to intra-EU disputes, is the conflict rule reflected in Article 16.
Article 16 provides as follows:
229
See similarly Eiser, ¶ 198 (CL-149) (rejecting an “argument [that] Article 26(6) seeks to introduce a major, if
unwritten, exception into the coverage of the ECT on the back of a somewhat intricate argument regarding choice of
law,” absent any evidence that the ECT’s drafters “either intended or accomplished this result”).
230
40
RELATION TO OTHER AGREEMENTS
Where two or more Contracting Parties have entered into a prior international
agreement, or enter into a subsequent international agreement, whose terms in
either case concern the subject-matter of Part III or V of this Treaty,
(1) nothing in Part III or V of this Treaty shall be construed to derogate from any
provision of such terms of the other agreement or from any right to dispute
resolution with respect thereto under that agreement; and
(2) nothing in such terms of the other agreement shall be construed to derogate
from any provision of Part III or V of this Treaty or from any right to dispute
resolution with respect thereto under this Treaty,
where any such provision is more favourable to the Investor or Investment.
99. The Tribunal will discuss in Section V.B.1 the implications of Article 16 with respect to the
relationship between the ECT and later treaties, including the possibility that Article 16 may have
been superseded by subsequent conflict rules established through the progressive development of the
EU Treaties. For present purposes, it suffices to conclude that nothing in Article 16 remotely supports
the contention that the ECT itself, as of its entry into force for Italy and Belgium in 1998, already
excluded the possibility of claims by their respective investors by virtue of the requirements of the
then-existing EU Treaties. First, Article 16 is a general conflict rule, making no specific reference to
any particular treaty, and is thus different in kind from a treaty-specific conflict rule like the one the
ECT incorporates for the Svalbard Treaty through its annexed Decision 1.231 It would be exceedingly
odd for the negotiators of a new multilateral treaty to exclude its application as among a major block
of intended Contracting Parties, not by means of an express provision like Decision 1 that addresses a
specific instrument governing the relationship among those parties, but instead through a general
provision regulating globally the new treaty’s relationship with all other potential past and future
treaties. As previous tribunals have found, this is hardly the obvious way to provide notice of an
intended exclusion, particularly one of such potentially sweeping significance.232
231
C-1, p. 227, Decision 1 (“In the event of a conflict between the treaty concerning Spitsberger of 9 February 1920
(the Svalbard Treaty) and the Energy Charter Treaty, the treaty concerning Spitsbergen shall prevail to the extent of
the conflict, without prejudice to the positions of the Contracting Parties in respect of the Svalbard Treaty. In the
event of such conflict or a dispute as to whether there is such conflict or as to its extent, Article 16 and Part V of the
Energy Charter Treaty shall not apply.”).
232
See, e.g., Masdar, ¶ 311 (RL-90) (quoting with approval the following text from PV Investors v. Spain, PCA Case
No. 2012-14, Preliminary Award on Jurisdiction, ¶ 183 (13 October 2014): “It would seem striking that the
Contracting Parties made an express exception for the Svalbard Treaty, which concerns an archipelago in the Arctic,
but somehow omitted to specify that the ECT’s dispute settlement system did not apply in all of the EU member states’
relations. Compared to the Svalbard Treaty Exception, an exception with regard to intra-EU relations would be of
much greater significance. It would be extraordinary that an essential component of the Treaty, such as investor-State
41
100. Second, and in any event, Article 16(2) provides the inverse of what Italy contends, by making clear
that its provisions on dispute resolution were intended to apply notwithstanding any prior treaties
among Contracting Parties with which it arguably might conflict. Thus, even in circumstances where
the prior treaty might be found arguendo to “concern the subject-matter of Part III or V of this Treaty”
– the predicate for the rest of Article 16 to apply at all233 – Article 16(2) confirms nonetheless that
“nothing in such terms of the other agreement shall be construed to derogate from any provision of
Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this
Treaty … where any such provision is more favourable to the Investor or Investment.” This provision
co-exists with Article 16(1), which provides similarly that “nothing in Part III or V of this Treaty shall
be construed to derogate from any provision of such terms of the other agreement or from any right to
dispute resolution with respect thereto under that agreement,” again in circumstances “where any such
provision is more favourable to the Investor or Investment.” Articles 16(1) and 16(2) are connected
by an “and,” not an “or,” which in its natural and ordinary meaning indicates that they are to be read
cumulatively, not in the alternative. As other tribunals have found, the plain reading of the two in
conjunction is that an investor is entitled to the dispute resolution benefits of whichever of the ECT
and a prior or posterior treaty is “more favourable.”234
101. As to that issue, Italy contends that “EU law, as representing a more developed and articulated legal
system, is doubtless more favorable to the investor and the investment than the ECT.”235 Eskosol
contends that EU law is not “more protective” than the ECT, “in particular with regard to the right of
investors to bring arbitral claims directly against Contracting Parties under the ECT.”236 In the view
arbitration, would not apply among a significant number of Contracting Parties without the Treaty drafters addressing
this exception.”); see also Eiser, ¶ 187 (CL-149) (noting that the ECT “includes multiple limiting decisions and
understandings,” including the conflict rule about the Svalbard Treaty, but “no similar clarifying provisions regarding
what Respondent now contends is a major exclusion in the ECT’s coverage”).
233
The Tribunal addresses the same “subject-matter” issue later in this Decision, in the context of Italy and the
Commission’s arguments that the progressive development of the EU Treaties leads to an alternate conflict rule than
Article 16, under VCLT Article 30(4)(a)’s regulation of incompatible provisions in successive treaties relating to the
same subject matter. There is no need to discuss the issue in the context of Article 16 of the ECT itself, given Article
16(2)’s express “saving” of an ECT arbitration option even in circumstances where another treaty is found to relate to
the same “subject-matter.”
234
See, e.g., Eiser, ¶ 202 (CL-149) (“To the extent that provisions of European law may in some manner provide
protections more favorable to Investors or Investments than those under the ECT, Article 16(2) makes clear that they
do not detract from or supersede other ECT provisions, in particular the right to dispute settlement under ECT Part V.
By its terms, Article 16 assures Investors or their Investments the greatest protection available under either the ECT
or the other agreement. Thus, an agreement covered by Article 16(2) may improve upon particular protections
available to Investors or their Investments, but it cannot lessen rights or protections under the ECT that are in other
respects more favorable.”).
235
236
42
of the Tribunal, there is no need to opine abstractly on the comparative “favourability” of these two
bodies of law, since the obvious object and purpose of Article 16 is to expand rather than curtail
investor protections in the circumstance of multiple applicable treaties. It is therefore entirely logical
to read the provision as allowing the investor itself to make the choice, in any particular circumstance,
as to which treaty’s dispute resolution mechanism it prefers to invoke.
102. The bottom line is that the “favourability” of a particular mechanism, like the beauty of a particular
person in the classic idiom, is very much “in the eye of the beholder.” Nothing in Article 16 suggests
an intent for any particular body – be it the Contracting Parties, a REIO, an international arbitration
tribunal, or otherwise – to make sweeping pronouncements at the level of theory about which dispute
resolution mechanisms are “more favourable” than others, much less to have such pronouncements
bind all future investors in all future cases, notwithstanding their own possibly different views of the
comparative benefits and drawbacks of the various alternatives offered by the treaties in force. If a
particular investor in its own wisdom prefers to invoke the ECT’s arbitration mechanism rather than a
different dispute resolution mechanism offered through a different treaty, that choice alone suggests
the investor considers ECT arbitration to be “more favourable” in its particular circumstances.237
There is nothing in Article 16 which requires this choice to be overridden, in favor of a one-size-fits-
all conclusion that a different forum might be “more favourable” to a different investor in other
circumstances.
3. The ECT’s History and Circumstances
103. The analysis puts to rest Italy’s arguments regarding the non-applicability of the ECT by its own terms,
either under Article 26 itself or in the context of other provisions. In these circumstances, the Tribunal
sees no need to delve deeply into Italy and the Commission’s additional arguments based on the
historical circumstances of the ECT’s conclusion, including references from its preparatory work to a
goal of integrating the energy sectors of the former Soviet Union and Eastern Europe.238 There is
nothing “ambiguous or obscure” in the ECT that permits resort to supplementary materials under
237
See generally Masdar, ¶ 332 (RL-90) (explaining that a Claimant availing itself of the provisions of Article 26 of
the ECT, over alternative mechanisms available under EU law, evidently considers this “more favourable, not least,
because they obviate the need to bring the claim” in the national courts of the host State); Vattenfall, ¶¶ 194-195 (CL-
193) (concluding that “Article 26 ECT, granting the possibility to pursue arbitration, would be understood as ‘more
favourable to the Investor’, insofar as the EU Treaties are interpreted to prohibit that avenue of dispute resolution,”
and accordingly “by the terms of Article 16 ECT itself, it would be prohibited for a Contracting Party to construe the
EU Treaties so as to derogate from an Investor’s right to dispute resolution under Article 26 ECT,” even “assuming
for the sake of argument” that provisions of the EU Treaties are understood to concern the same subject matter).
238
Memorial on Jurisdiction, ¶¶ 186-189; Commission Submission, ¶¶ 39-44.
43
Article 32(a) of the VCLT.239 In any event, even if the historical materials were consulted and the
proposition about integration accepted on face value, this still would not prove Italy’s point, since an
intent to include third parties in a network of relationships to be governed by common legal obligations
does not necessarily denote a concomitant intent to exclude existing partners from the same network
governed by the same legal obligations.240
104. If anything, several aspects of the contemporaneous history suggest the contrary. First, as Advocate
General Wathelet has observed, the ECT “was concluded not as an agreement between the Union and
its Member States, of the one part, and third countries, of the other part, but as an ordinary multilateral
treaty in which all the Contracting Parties participate on an equal footing. In that sense, the material
provisions for the protection of investments provided for in that Treaty and the ISDS mechanism also
operate between Member States.”241 Moreover, it is notable that “no EU institution and no Member
State sought an opinion from the Court on the compatibility of that treaty with the EU and FEU
Treaties,” presumably indicating that “none of them had the slightest suspicion that it might be
incompatible.”242 While the Tribunal accepts that Advocate General Wathelet’s Opinion is in no way
binding as an interpretation of EU law, the observations above are nonetheless compelling as a
recitation of historical fact, from which the Tribunal can draw its own conclusions regarding the
contemporaneous understanding and intent of the ECT Contracting Parties.
105. It is equally useful to recall the legal basis on which the EU became a party to the ECT, which is set
out in Council Decision 94/998/EC (as to signature) and Council and Commission Decision
98/181/EC, ECSC, Euratom (as to ratification).243 This last decision authorizing the ratification was
approved by all the interested European institutions, and stated inter alia that the EU and Member
States signed the ECT and the Energy Charter Protocol “in order to provide a secure and binding
international legal framework for the principles and objectives set out in that Charter,” and that the
EU considered it necessary for it “to participate fully in the implementation” of the ECT and the
Energy Charter Protocol by becoming a Contracting Party itself.244 This reference to the EU’s joining
239
See similarly Charanne, ¶ 437 (CL-82); Eiser, ¶ 205 (CL-149); Greentech, ¶ 213 (CL-195).
240
See Vattenfall, ¶ 200 (CL-193) (noting that “the stated purpose of the ECT under Article 2 is framed generally, and
without the geographical distinction argued by the EC. Moreover, even if the EC is correct that this was indeed one
purpose behind the Treaty, it does not follow that the ECT was not intended to cover other kinds of investment”).
241
Case No. C-284/16, Slovak Republic v. Achmea BV, Opinion of Advocate General Wathelet, 19 Sep. 2017, ¶ 43
(RL-91).
242
(RL-91).
243
OJ 1994 L 380/1-2 and OJ 1998 69/1-3.
244
Council and Commission Decision 98/181/EC, OJ 1998 69/1-3 (emphasis added).
44
in order to “participat[e] fully” in the ECT’s “implementation” in no way suggests an intent that any
particular ECT provision – in this case, the core dispute settlement provision in Article 26 – would
accordingly not be implemented with respect to the subset of ECT Contracting Parties who were also
EU Member States. To the contrary, the language suggests that at the time the ECT was ratified, the
European institutions considered the treaty, interpreted according to its natural and ordinary meaning,
to be in perfect conformity with EU law.
106. Equally important, and as clearly stated in Electrabel, is “the important legal fact that the European
Commission itself, in signing the ECT, accepted the possibility of international arbitrations under the
ECT,”245 notwithstanding the Commission’s responsibility under EU law for ensuring that all such
treaties negotiated “are compatible with internal Union policies and rules.”246 As the Electrabel
tribunal reasoned, it can be presumed that the Commission did not at the time consider EU law to
conflict or otherwise be inconsistent with the ECT:
The Tribunal notes the still more important fact that the European Union also
accepted in signing the ECT to submit itself to international arbitration, thereby
accepting the possibility of an arbitration between the European Union and private
parties, whether nationals of EU or Non-EU Member States and whether held
within or without the EU.
In the Tribunal’s view, if the European Union has itself accepted to submit to
arbitration a dispute with a private investor concerning the application of the ECT
(as it did), it cannot properly argue that such an arbitration is not similarly available
to the same private investor advancing a claim under the ECT against an EU
Member State, including an arbitration under the ICSID Convention.247
107. Finally, neither Italy nor the Commission have pointed to any materials in the historical record that
suggest a different objective and understanding at the time they ratified the ECT. As the Eiser tribunal
noted, it is “[o]f perhaps greater significance” that “there is no evidence showing that any such
objective was shared by all EEC members, or was communicated to and accepted by the other parties
to the treaty.”248 In these circumstances, the Tribunal is unable to conclude that anything in the ECT’s
history and circumstances demonstrates a contemporaneous intent and agreement by Contracting
245
Electrabel, ¶ 4.158 (RL-58).
246
Electrabel, ¶ 4.135 (RL-58). The relevant EU rule at the time was contained in Article 133 EC (now Article 207(3)
TFEU).
247
Electrabel, ¶¶ 4.163, 4.164 (RL-58).
248
Eiser, ¶ 206 (CL-149).
45
Parties not to apply it to intra-EU disputes, particularly given the clear terms otherwise reflected in
ECT Article 26.
EU LAW DEVELOPMENTS
108. Italy argues that even if the Tribunal does not accept its interpretations of the “intention ab initio of
the Contracting Parties” to the ECT, certain developments in EU law – in particular, the progressive
development of the EU Treaties, as now interpreted by the CJEU in the Achmea Judgment – require
intra-EU disputes to be excluded from the ECT’s scope.249
109. As a threshold matter, the Tribunal emphasizes that this Decision does not seek to interpret EU law as
such, much less express any judgment regarding the correctness of particular interpretations rendered
by others on matters of EU law. Rather, the focus for this Tribunal is the relationship between the EU
Treaties and the ECT, as a matter of international law. The Tribunal addresses below the Parties’
arguments about that relationship, starting with the later EU Treaties (Section V.B.1) and then turning
to the Achmea Judgment (Section V.B.2).
1. Progressive Development of the EU Treaties
110. First, Italy argues that the progressive development of the EU Treaties, and in particular the adoption
of the Lisbon Treaty, requires intra-EU disputes to be excluded from the ECT’s scope.250 Italy
emphasizes that the Lisbon Treaty added direct foreign investment to the EU’s common commercial
policy, with the result that this area is now considered to be within the EU’s exclusive competence as
a matter of EU law.251 This is relevant to the REIO issue discussed above, based on the Commission’s
argument that even if EU Member States initially may have undertaken inter se obligations through
the ECT, those obligations could only cover areas where EU Member States thereafter continue to
“retain external competence.”252 Italy and the Commission contend that as a result of the Lisbon
Treaty, however, EU Member States no longer have such competence for foreign direct investment,
which is now part of the core sphere of matters for which EU law demands uniformity of rules and
interpretations.253 This applies both to substantive obligations regarding investment, which are
249
250
251
Memorial on Jurisdiction, ¶¶ 196, 235.
252
253
46
covered by EU law internal market rules, and to procedural remedies.254 With respect to the latter, the
primacy of EU law over any national law is ensured through the CJEU preliminary ruling mechanism
established by Article 267 TFEU,255 and pursuant to Article 344 TFEU, Member States cannot submit
any dispute concerning interpretation or application of EU law to any forum (including arbitration)
where the preliminary ruling procedure is inapplicable.256 Thus, Italy and the Commission contend,
the consequence of the Lisbon Treaty is that only the EU now may conclude international agreements
in this area of exclusive competence; EU Member States may not conclude agreements between
themselves which “might affect common rules or alter their scope.”257 It follows as a matter of EU
law, they suggest, that any prior consent to intra-EU arbitration, even if granted under an earlier treaty,
no longer can be applicable.
111. Both Italy and the Commission recognize, however, that this Tribunal derives its powers from
international law (the ICSID Convention and the ECT) rather than directly from EU law.258 They
contend that the progressive development of the EU Treaties is nonetheless relevant, for two separate
reasons, each with several subparts. First, they contend that the ECT itself must be interpreted with
reference to EU law, either because (a) ECT Article 26(6) directly incorporates EU law as part of the
law applicable to an intra-EU dispute, or (b) VCLT Article 31(3)(c) commands that treaty
interpretation “take[] into account … any relevant rules of international law applicable in the relations
between the parties.”259 Second, they contend that the EU Treaties are “successive treaties” to the
ECT, within the meaning of VCLT Article 30(2) and/or Article 30(4)(a), or alternatively are
“[a]greements to modify” the ECT within the meaning of VCLT Article 41(1). Whichever analytical
path is followed, Italy and the Commission argue that it leads to the same result, namely non-
applicability of any prior consent to ECT arbitration by virtue of the subsequent Lisbon Treaty. The
Tribunal addresses these issues below.
254
255
256
Memorial on Jurisdiction, ¶¶ 258-260; Rejoinder, ¶¶ 59-64.
257
258
Memorial on Jurisdiction, ¶ 197 (“From an international point of view, the issue is whether this subsequent
agreement [the Lisbon Treaty] among only some of the Contracting Parties of the ECT, is compatible with the previous
(general) treaty (the ECT). The answer can be derived from Articles 30 and 41 of the VCLT, as codifying customary
international law.”); Commission Submission, ¶ 7 (“your Tribunal applies as its rules of procedure the ICSID
Convention, another treaty of international law, which is not part of Union law. The starting point of your analysis is
therefore necessarily one of international law.”).
259
VCLT, Article 31(3)(c) (CL-57).
47
a. EU Treaties as Part of Applicable Law: ECT Article 26(6)
112. First, as noted above, Italy and the Commission contend that the applicable law provision of the ECT
itself requires application of the EU Treaties as progressively developed through the Lisbon Treaty,
since Article 26(6) provides that “[a] tribunal … shall decide the issues in dispute in accordance with
this Treaty and applicable rules and principles of international law.” In their view, this provision
applies equally to matters of jurisdiction as merits, since jurisdiction is frequently an “issue[] in
dispute,” the phrase used in Article 26(6). Moreover, according to their reading, this provision
incorporates by reference any body of international law applicable as between particular ECT
Contracting Parties, which would include EU law as derived from the EU Treaties in force for Belgium
and Italy. Thus, since the EU Treaties are a part of international law as among these EU Member
States, EU law must apply “when a tribunal assesses the applicability of the arbitration agreement and
of the ECT at large in intra-EU disputes.”260 Essentially, the argument is that ECT Article 26(6)
operates as a direct and broad renvoi to the EU Treaties, with the result that there is no need to look
elsewhere for potential rules regulating the relationship between successive treaties.
113. As a threshold matter, the Tribunal notes the Vattenfall tribunal’s conclusion that Article 26(6) in toto
“applies only to the merits of a dispute between the Parties. It does not apply to issues or questions
relating to the Tribunal’s jurisdiction.”261 The Vattenfall tribunal reached this conclusion on a
construction of the opening words of Article 26(6), namely that “[a] tribunal established under
paragraph (4) shall decide the issues in dispute in accordance with ….” In its view, the expression
“issues in dispute” referred back to Article 26(1), which describes “disputes” under the ECT as those
“which concern an alleged breach of an obligation of [a Contracting Party] under Part III,” i.e., the
part of the ECT that “sets out the substantive standards of treatment and protection to which
investments are entitled.” Since Part III “does not include the provisions on dispute settlement, which
appear in Part V of the ECT,” the Vattenfall tribunal concluded that Article 26(6)’s provision
concerning the applicable law “is not relevant to issues concerning the dispute settlement clause in
Article 26 ECT.”262 This Tribunal finds that reasoning persuasive. It also is consistent with the text
of ECT Article 26(3)(a), which states that the Contracting Parties’ “unconditional consent to the
submission of a dispute to international arbitration” is “[s]ubject only to subparagraphs (b) and (c)”
260
Rejoinder, ¶¶ 88-90; see also Commission Submission, ¶ 97 (contending that pursuant to Article 26(6) of the ECT,
EU law is part of the “applicable rules of international law” to be applied by any arbitral tribunal).
261
Vattenfall, ¶ 121 (CL-193); see also Greentech, ¶ 218 (CL-195) (similarly concluding that “Article 26(6) ECT
applies to the merits of the case and not to jurisdiction”).
262
Vattenfall, ¶¶ 114-116 (CL-193).
48
of Article 26(3),263 and by exclusion therefore not to any additional restrictions on jurisdiction
potentially lurking in Article 26(6).
114. However, even if arguendo that were not the case – and therefore Article 26(6) were considered
relevant to issues of jurisdiction as well as the merits – the Tribunal does not agree that the effect
would be to incorporate EU law as part of the applicable law. This is based both on the “natural and
ordinary meaning” of the terms in Article 26(6), and on the “context” of those terms in relation to
other provisions of the ECT.
115. First, focusing on the text of the provision, the Tribunal will analyze the specific phrase “applicable
rules and principles of international law.” The Tribunal considers that, although EU law is
undoubtedly international law, it is not general international law, but rather a special species of
international law. The narrower question with which the Tribunal is faced here is whether EU law is
encompassed in the expression “rules and principles of international law.”
116. The sources of international law are authoritatively listed in Article 38(1) of the ICJ Statute as follows:
a. international conventions, whether general or particular, establishing rules

expressly recognized by the contesting states;
b. international custom, as evidence of a general practice accepted as law;
c. the general principles of law recognized by civilized nations;
d. subject to the provisions of Article 59 [of the ICJ Statute], judicial decisions
and the teachings of the most highly qualified publicists of the various nations,
as subsidiary means for the determination of rules of law.
117. Similar to the Vattenfall tribunal, this Tribunal has no doubt that the EU Treaties qualify as one type
of international law, namely the one described in Article 38(1)(a) of the ICJ Statute as “international
conventions, whether general or particular, establishing rules expressly recognized by the contesting
states.”264 But that is not the operative question, since ECT Article 26(6) does not state that all other
international treaties concluded as between the host State and the investor’s home State are
automatically incorporated into the applicable law of the ECT. Rather, Article 26(6) uses the particular
phrase “applicable rules and principles of international law.” Textually, this phrase incorporates two
263
ECT, Article 26(3)(a) (C-1) (emphasis added).
264
Vattenfall, ¶¶ 140-141, 145-146 (CL-193) (agreeing with the finding of the Electrabel tribunal that “EU law is
international law because it is rooted in international treaties”) (quoting Electrabel, ¶ 4.120 (RL-58)).
49
different notions: (a) “principles of international law,” and (b) “rules … of international law.” These
phrases have particular meanings in public international law.
118. Starting with the former, the reference to “principles of international law” encompasses two types of
principles: (i) principles accepted by “international custom, as evidence of a general practice accepted
as law,” referred to in Article 38(1)(b) of the ICJ Statute, and (ii) “general principles of law recognized
by civilized nations,” referred to in Article 38(1)(c) of the ICJ Statute. The first of these two, general
principles accepted as customary international law, has an unambiguously narrow scope, as described
by the Permanent Court of International Justice in the Lotus case:
… the Court considers that the words ‘principles of international law’, as ordinarily
used, can only mean international law as it is applied between all nations belonging
to the community of States.
… it is impossible – except in pursuance of a definite stipulation – to construe the

expression ‘principles of international law’ otherwise than as meaning the
principles which are in force between all independent nations.265
Examples of such universally applied principles are the norms of jus cogens, from which no derogation
by treaty is possible under VCLT Article 53;266 the fundamental principle pacta sunt servanda, from
which the entire international order flows;267 the principle of good faith;268 and other principles of
interpretation of international law, reflected in the VCLT itself.
265
SS Lotus (France v Turkey), (1927) PCIJ Ser A No 10, pp. 16-17 (emphasis added).
266
See VCLT Article 53, entitled “Treaties conflicting with a peremptory norm of general international law (‘jus
cogens’) (providing that “[a] treaty is void if, at the time of its conclusion, it conflicts with a peremptory norm of
general international law. For the purposes of the present Convention, a peremptory norm of general international
law is a norm accepted and recognized by the international community of States as a whole as a norm from which no
derogation is permitted and which can be modified only by a subsequent norm of general international law having the
same character.”) (CL-57) (emphasis added).
267
See ILC Draft Articles on the Law of Treaties with Commentaries, 1966, p. 211 (Art. 23, Commentary, item 1)
(“Pacta sunt servanda – the rule that treaties are binding on the parties and must be performed in good faith – is the
fundamental principle of the law of treaties”).
268
(noting that the principle of good faith “is enshrined in the Preamble to the Charter of the United Nations”); Border
and Transborder Armed Actions (Nicaragua v. Honduras), ICJ, Judgment on Jurisdiction, 20 December 1988, 1988
ICJ Rep. 69, ¶ 94 (stating that “[t]he principle of good faith is one of the basic principles governing the creation and
performance of legal obligations”).
50
119. As far as the “general principles of law recognized by civilized nations” are concerned, these are
international principles stemming from the convergence of national legal orders. The ICJ explained
this concept in Barcelona Traction as follows:
In turning now to the international legal aspects of the case, the Court must, as
already indicated, start from the fact that the present case essentially involves
factors derived from municipal law – the distinction and the community between
the company and the shareholder – which the Parties however widely their
interpretations may differ, each take as the point of departure of their reasoning. If
the Court were to decide the case in disregard of the relevant institutions of
municipal law it would, without justification, invite serious legal difficulties. It
would lose touch with reality, for there are no corresponding institutions of
international law to which the Court could resort. Thus the Court has, as indicated,
not only to take cognizance of municipal law but also to refer to it. It is to rules
generally accepted by municipal legal systems which recognize the limited
company whose capital is represented by shares, and not to the municipal law of a
particular State, that international law refers.269
The ICJ’s reference in Barcelona Traction to “rules generally accepted by municipal legal systems”
is a clear reference to what Article 38(1)(c) of the ICJ Statute referred to as the “general principles of
law recognized by civilized nations,” but with less historically fraught terminology (i.e., eliding the
reference to “civilized” nations). The ICJ’s point was that just as customary international law
principles can be created by the universal behavior of States considered to have ripened into law, such
principles also may emanate from the convergence in their national laws of generally accepted
principles.
120. These two accepted concepts, delineating the origins of general principles of international law,
encompass the scope of the reference in ECT Article 26(6) to “applicable … principles of international
law.” They are quite distinct from the far broader concept of incorporating by reference all other
treaties between ECT Contracting Parties, on which Italy and the Commission’s arguments about ECT
Article 26(6) depend. The same is true with respect to the word “rules” in Article 26(6), in the context
of the expression “applicable rules … of international law.” For this word, it is useful to refer to a
Report of the International Law Association:
Some commentators draw a distinction between “principles” and “rules”. Their

definitions vary, but the general idea is that principles operate at a higher level of
generality than rules. So, for example, one might speak of the “principle” of the
freedom of the high seas, but of the “rule” that submarines, in passing through the
269
Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain), ICJ, Judgment, 5 February 1970,
[1970] ICJ 1, ¶ 50.
51
territorial sea, must navigate on the surface and show their flag. However, in
ordinary (legal) usage the two terms are often used interchangeably …. 270
In other words, like “principles of international law,” the phrase “rules of international law” refers also
to rules applicable to all States, i.e., to general rules.
121. For these reasons, the phrase “rules and principles in international law” cannot be interpreted as
encompassing EU law, which is a regional and not a worldwide system of law. This was well
understood by the Eiser tribunal, when it rejected the argument that “the treaties creating the EEC and
the EU […] constitute ‘applicable rules and principles of international law’ for purposes of Article
26(6).”271 The Vattenfall tribunal likewise concluded that “EU law does not constitute principles of
international law which may be used to derive meaning from Article 26 ECT, since it is not general
law applicable as such to the interpretation and application of the arbitration clause in another treaty
such as the ECT.”272 This Tribunal reaches the same conclusion with respect to Article 26(6), based
on the “natural and ordinary meaning” of its terms, as they are understood within the broader field of
public international law.
122. The same conclusion is reinforced, moreover, by a review of these terms “in their context,” pursuant
to the interpretative principles of VCLT Article 31(1). Specifically, the ECT contains another article,
Article 16, for the specific purpose of addressing (as its title reflects) the ECT’s “RELATION TO
OTHER AGREEMENTS.”273 If the effect of Article 26(6) were that other treaties between the
relevant Contracting Parties were directly incorporated into the ECT as applicable law – and indeed,
in such a way as to override any contrary reading of other provisions of the ECT, which is what Italy
and the Commission suggest as the necessary outcome of their Article 26(6) argument – then there
would be no reason to have a specific article, Article 16, to regulate the impact of potentially
overlapping treaties. By definition, there would be nothing to regulate, by the simple fact that other
treaties already had been interpolated into the ECT by virtue of Article 26(6). In other words, the
natural effect of an overbroad reading of Article 26(6) would be to render Article 16 superfluous. This
would run counter to the accepted notion of effet utile, namely that the words of a treaty should be
interpreted so as not to deprive them of all independent meaning and effect. The requirement to give
270
International Law Association, Final Report of the Committee. Statement of principles applicable to the formation
of general customary international law, London Conference 2000, pp. 10-11 (emphasis added).
271
Eiser, ¶¶ 197-198 (CL-149) (stating that “Respondent’s argument from Article 26(6) … seeks to introduce a major,
if unwritten, exception in to the coverage of the ECT on the back of a somewhat intricate argument regarding choice
of law. The Tribunal does not agree that the drafters of the ECT either intended or accomplished this result.”).
272
Vattenfall, ¶ 133 (CL-193)
273
ECT, Article 16 (title) (C-1).
52
Article 16 independent purpose reinforces and confirms the Tribunal’s interpretation of the natural
and ordinary meaning of the terms of Article 26(6).
123. For the avoidance of doubt, the Tribunal’s conclusion that EU law is not part of the ECT’s applicable
law, and particularly not for determining the scope of the Tribunal’s jurisdiction under Article 26 of
the ECT, does not mean that an ECT tribunal could not consider EU law as a matter of fact if
potentially relevant to the merits of a dispute, just as an ECT tribunal may consider a State’s domestic
law as part of the factual matrix of a case. For example, while the Tribunal does not consider this case
to involve a challenge to any acts that Italy was required to take under applicable EU directives, nor
to involve a defense by Italy that it was required by EU law to take the challenged acts, in theory both
types of arguments could be presented in an ECT case. In such situations, an ECT tribunal would be
entitled to take into account, as did the Electrabel tribunal in its analysis of such issues, whether the
respondent State had any legal discretion to act otherwise in accordance with its other international
obligations.274 The absence of any such discretion could be a relevant factor in applying certain of the
ECT’s substantive standards in Part III, to the extent for example they incorporate restrictions on
arbitrary or irrational conduct. Considering EU law to that extent, as a fact relevant to the application
of international law standards, would be perfectly consistent with the Tribunal’s interpretation of
Article 26(6). It also for that matter would be consistent with the CJEU’s interpretation of EU law in
its Opinion in the Commission v. Ireland case, under which “it is not sufficient, in order to establish a
breach of Article 344 TFEU, that an arbitration tribunal takes account of EU law as a criterion for
interpreting a provision not forming part of EU law. There could be an infringement of Article 344
TFEU only if the subject-matter of the decision of the arbitration tribunal were the interpretation and
application of provisions of EU law themselves.”275
b. EU Treaties in Interpreting the ECT: VCLT Article 31(3)(c)
124. The second basis on which Italy and the Commission contend that the ECT itself must be interpreted
with reference to the later EU Treaties, including the Lisbon Treaty, is the statement in VCLT Article
31(3)(c) that interpretation of a treaty “take[] into account, together with the context … any relevant
274
See Electrabel, ¶¶ 6.70, 6.72 (RL-58) (concluding that “[i]n the Tribunal’s view, that Final Decision required
Hungary under EU law to terminate Dunamenti’s PPA,” and “[w]here Hungary is required to act in compliance with
a legally binding decision of an EU institution, recognized as such under the ECT, it cannot (by itself) entail
international responsibility for Hungary. Under international law, Hungary can be responsible only for its own
wrongful acts. The Tribunal considers that it would be absurd if Hungary could be liable under the ECT for doing
precisely that which it was ordered to do by a supranational authority whose decisions the ECT itself recognises as
legally binding on Hungary.”).
275
Opinion of the Council Legal Service of 22 June 2007 (emphasis added).
53
rules of international law applicable in the relations between the parties.”276 As the Commission
frames the argument:
When both the Union and EU Member States become parties to a multilateral
agreement, it is the Union legal order that informs the latter’s behavior and actions.
The Union legal order therefore constitutes a “relevant rule of international law
applicable in the relations between the parties” in the sense of Article 31(3)(c)
VCLT.277
125. In the Tribunal’s view, this argument requires little discussion. The critical phrase in VCLT Article
31(3)(c) is “between the parties,” meaning all parties to the treaty in question. It is hardly an
exceptional proposition that where all parties to a given treaty have agreed to a particular “rule[] of
international law,” then that rule may inform an understanding of their mutual intent in agreeing to
particular treaty text. However, the ECT is not a treaty exclusively among EU Member States, but
rather a much broader multilateral treaty that includes non-EU Member States. This prevents the
application of EU law for the interpretation of specific provisions within the ECT. The text of a
multilateral treaty must have a consistent and objective meaning, not different meanings determined
separately and subjectively for each different subset of States that may be involved in a particular
future dispute. As the Vattenfall tribunal cogently observed in rejecting a similar argument:
The EC’s approach is unacceptable as it would potentially allow for different

interpretations of the same ECT treaty provision. The Tribunal considers that this
would be an incoherent and anomalous result and inconsistent with the object and
purpose of the ECT and with the rules of international law on treaty interpretation
and application. …
When States enter into international legal obligations under a multilateral treaty,
pacta sunt servanda and good faith require that the terms of that treaty have a
single consistent meaning. States parties to a multilateral treaty are entitled to
assume that the treaty means what it says, and that all States parties will be bound
by the same terms. It cannot be the case that the same words in the same treaty
provision have a different meaning depending on the independent legal obligations
entered into by one State or another, and depending on the parties to a particular
dispute.278
126. Moreover, VCLT Article 31(3)(c) addresses what should be “taken into account, together with the
context” of particular terms of a treaty. This provision itself must be viewed in the context of the core
preceding proposition in Article 31(1), that “[a] treaty shall be interpreted in good faith in accordance
276
VCLT, Article 31(3)(c) (CL-57).
277
278
Vattenfall, ¶¶ 155-156 (CL-193).
54
with the ordinary meaning to be given to the terms of a treaty in their context and in the light of its
object and purpose.”279 This Tribunal agrees with the Vattenfall tribunal that Article 31(1), and not
Article 31(3)(c), is the “correct starting point for the interpretation of Article 26 ECT,” and also that
“[t]he need for coherence, and for a single unified interpretation of each treaty provision, is reflected
in the priority given to the text of the treaty itself over other contextual elements under Article 31
VCLT.”280 In these circumstances, “[i]t is not the proper role of Article 31(3)(c) VCLT to rewrite the
treaty being interpreted, or to substitute a plain reading of a treaty provision with other rules of
international law, external to the treaty being interpreted, which would contradict the ordinary meaning
of its terms.”281 And yet this would be the natural result of the Commission’s arguments, by overriding
as between some ECT Contracting Parties, but not others, the “unconditional consent” to international
arbitration clearly reflected in ECT Article 26(3). The Tribunal rejects the notion that VCLT Article
31(3)(c) can be used in this way.
c. EU Treaties as “Successive Treaties”: VCLT Article 30(2)
127. For the reasons stated above, the Tribunal is unable to accept the notion that the ECT itself requires a
renvoi to the Lisbon Treaty for purposes of determining jurisdiction in intra-EU disputes, either by
virtue of ECT Article 26(6) or by operation of the interpretative principle in VCLT Article 31(3)(c).
If the Lisbon Treaty is to be relevant at all for jurisdictional purposes, it would have to be because of
some alternate rule of international law regulating the relationship between multiple treaties
concluded between the same sovereign States. The Tribunal turns below to the three provisions of the
VCLT – specifically, VCLT Articles 30(2), 30(4)(a) and 41(1) – that Italy and the Commission have
invoked in the alternative, to support their argument that the Lisbon Treaty must be deemed to override
any consent to intra-EU arbitration that EU Member States earlier provided through the ECT.
128. First, Italy invokes VCLT Article 30(2), which provides (together with Article 30(1)) as follows:
Application of successive treaties relating to the same subject matter
1. Subject to Article 103 of the Charter of the United Nations, the rights and
obligations of State Parties to successive treaties relating to the same subject matter
shall be determined in accordance with the following paragraphs.
279
VCLT, Articles 31(1), (3) (CL-57).
280
Vattenfall, ¶¶ 153, 156 (CL-193).
281
55
2. When a treaty specifies that it is subject to, or that it is not to be considered as
incompatible with, an earlier or later treaty, the provisions of that other treaty
prevail. ... 282
129. Italy contends that the ECT Article 16 itself requires deference to subsequent treaties, in the same
fashion as VCLT Article 30(2) does with respect to “successive treaties.” In particular, Italy invokes
Article 16(1), stating in relevant part that where the terms of a subsequent treaty “concern the subject-
matter” of Part III or V of the ECT, “nothing in Part III or V of this Treaty shall be construed to
derogate from any provision of such terms of the other agreement or from any right to dispute
resolution with respect thereto under that agreement … where any such provision is more favourable
to the Investor or Investment.”283 Italy argues, in essence, that this is functionally equivalent to Article
30(2)’s statement that the ECT is “subject to” the Lisbon Treaty, since the provisions of the ECT
cannot be construed to derogate from the terms of the Lisbon Treaty.284
130. The Tribunal does not agree with this interpretation. A statement that a particular treaty is “subject
to” another treaty is clearly a declaration of priority as between the two, in the event of any conflict.
The natural and ordinary meaning of “subject to” connotes a giving way by the subordinate treaty, in
the face of the other dominant treaty. It is only logical that where a treaty so provides, the will of the
Contracting Parties should be respected, with the result (in the language of VCLT Article 30(2)) that
“the provisions of that other treaty prevail.” This is not, however, what ECT Article 16 says. Nowhere
in its text does it indicate that the ECT is “subject to,” and accordingly always subordinate to, any
other treaty, whether prior or subsequent. To the contrary, as already discussed, Articles 16(1) and
16(2) read together clearly provide that where the ECT and another treaty concern “the same subject-
matter,” neither treaty is absolutely dominant over the other. Rather, under Article 16(1), where the
other treaty is “more favourable to the Investor or Investment,” the investor may invoke its benefits,
notwithstanding anything in the ECT, and under Article 16(2), where the ECT is considered “more
favourable,” the investor in turn may invoke its benefits, notwithstanding anything in the other treaty.
Given the inherently subjective nature of “favourability,” as also discussed above, the decision about
which path to pursue is logically left to the investor. There is no suggestion in Article 16 of a process
by which some higher authority must first weigh the abstract “favourability” of the two regimes, and
then impose its comparative valuation on the investor. In this light, the evident object and purpose of
282
VCLT, Articles 30(1), (2) (CL-57).
283
ECT, Article 16(1) (C-1).
284
56
the provision, emanating from the natural and ordinary meaning of its terms, is to provide the investor
with a choice between two possible avenues, not to preclude one or the other.
131. ECT Article 16 is thus the very opposite of the type of treaty provision addressed in Article 30(2) of
the VCLT, namely a clause that removes ex ante any choice as between two possible treaty regimes,
by expressly stating that one is intended to be “subject to” the other. The negotiators of the ECT could
have chosen to include such a clause, but they did not do so, except in a declaration specific to the
Svalbard Treaty, as discussed above.285 In these circumstances, VCLT Article 30(2) is simply not
applicable to provide a rule of priority as between the ECT and the Lisbon Treaty, even if those two
treaties were considered to “relat[e] to the same subject matter,” which is the threshold condition
specified in VCLT Article 30(1).
d. EU Treaties as “Successive Treaties”: VCLT Article 30(4)(a)
132. The Tribunal accepts, of course, that while ECT Article 16 purports to regulate its relationship with
subsequent treaties, that treaty provision, like any other, is capable in principle of being superseded by
a later agreement which provides an alternate rule of priority. The Tribunal therefore turns next to the
lex posterior arguments Italy and the Commission present under VCLT Article 30(4)(a). Under their
theory, the “primacy of EU law” principle that was reaffirmed in the Lisbon Treaty operates as a “later
special conflict rule” that overrules any conflict rule reflected in ECT Article 16.286 Specifically, the
Commission argues that under Article 351 TFEU (formerly Article 307 EC), “in matters governed by
the EU Treaties, EU law takes precedence over international treaties concluded between Member
States, regardless of whether they were concluded before or after EU accession.”287
133. Article 30 provides in relevant part as follows:
Application of successive treaties relating to the same subject matter
1. Subject to Article 103 of the Charter of the United Nations, the rights and
obligations of State Parties to successive treaties relating to the same subject matter
shall be determined in accordance with the following paragraphs.
2. ….
285
ECT, p. 227, Decision 1 (“In the event of a conflict between the [Svalbard Treaty] … and the Energy Charter
Treaty, the treaty concerning Spitsbergen shall prevail to the extent of the conflict …. In the event of such conflict or
a dispute as to whether there is such conflict or as to its extent, Article 16 and Part V of the Energy Charter Treaty
shall not apply.”) (C-1).
286
287
57
3. When all the parties to the earlier treaty are parties also to the later treaty but
the earlier treaty is not terminated or suspended in operation under article 59, the
earlier treaty applies only to the extent that its provisions are compatible with those
of the later treaty.
4. When the parties to the later treaty do not include all the parties to the earlier
one:
(a) as between State Parties to both treaties the same rule applies as in
paragraph 3; ….288
134. There is a threshold question, of course, as to whether the EU Treaties should be considered the “later
treaty” for purposes of any Article 30(4) analysis. Eskosol contends not, on the basis that “Articles
267 and 344 TFEU have existed in the same form prior to the ECT,”289 whereas the Commission
considers that the EU Treaties do constitute the “subsequent” treaty, on the basis that the EU Member
States “reaffirmed” these principles in the Amsterdam, Nice and Lisbon Treaties that postdate the
ECT.290 Italy also emphasizes that the Lisbon Treaty did introduce at least one relevant further change,
in the sense of extending the common commercial policy to include foreign direct investment.291 For
present purposes, the Tribunal assumes arguendo that the principles included in the Lisbon Treaty can
be said to postdate the ECT at least with respect to foreign direct investment, even if many of these
principles were drawn from the much earlier founding treaties of the European legal order.
135. The second threshold question raised by the Parties’ submissions is whether VCLT Article 30 contains
two distinct conditions for application of the lex posterior principle, or just one. Textually, the
provision refers to two conditions: (a) that the “successive treaties relat[e] to the same subject matter,”
a phrase that is referenced both in Article 30’s title and in Article 30(1), and (b) that the “provisions”
of the two treaties are not “compatible,” which is referenced in Article 30(3) and made applicable in
this particular context by Article 30(4). Nonetheless, the Commission urges the Tribunal to consider
“same subject matter” and “incompatibility” as a single condition rather than “two separate
conditions,” with the former essentially collapsing into the latter. In its view, “conflict is the necessary
and sufficient condition,” and the lex posterior rule “applies to all situations where there is a conflict
between the earlier and the later treaty.”292
288
VCLT, Articles 30(1), (3), 4(a) (CL-57).
289
Eskosol PHB, ¶ 88(iii).
290
291
Memorial on Jurisdiction, ¶¶ 200, 235.
292
Commission Update, ¶¶ 39-41.
58
136. The Tribunal disagrees. First, adopting the Commission’s interpretation would effectively require
rewriting the text, to ignore a threshold provision (“the rights and obligations of State Parties to
successive treaties relating to the same subject matter”) which is expressly stated to be the foundational
requirement for any of the following provisions of Article 30 even to apply (“shall be determined in
accordance with the following paragraphs …”). Adherence to the natural and ordinary meaning of the
terms does not permit the requirements of Article 30(1) to be skipped over, allowing direct recourse
to Article 30(3).
137. It is notable, moreover, that the comparators in Articles 30(1) and 30(3) are different: Article 30(1)
examines the relationship between treaties as a whole (whether they “relat[e] to the same subject
matter”), while Article 30(3) examines the relationship between particular provisions within such
related treaties (whether they are “compatible”). While in principle it could be possible to reason from
the whole to a part (i.e., that if two treaties at their macro-level do relate to the same subject matter,
their particular provisions may well contain overlaps which require scrutiny for compatibility), it is
not equally possible to reason in reverse, from a part to a whole (i.e., that treaties necessarily relate to
the same subject matter because specific provisions in different treaties might have different effects).
The Commission’s argument thus fails at the level of logic, in light of the different comparators set
out in Article 30’s plain text.
138. Finally, the Commission has offered only limited jurisprudential support for its interpretation that
VCLT Article 30 reflects a single test rather than two cumulative tests. It relies largely on a
construction of the ILC’s drafting history of VCLT Article 30, in which a prior version did not contain
the phrase “relating to the same subject matter,” but the ILC final draft inserted this concept. The
Commission cites the following explanation in the commentary:
The rules set out in the text of this article provisionally adopted in 1964 were
formulated in terms of the priority of application of treaties having incompatible
provisions. On re-examining the article at the present session the Commission felt
that, although the rules may have particular importance in cases of incompatibility,
they should be stated more generally in term of the application of successive
treaties to the same subject-matter. One advantage of this formulation of the rules,
it thought, would be that it would avoid any risk of [the provision] being interpreted
as sanctioning the conclusion of a treaty incompatible with obligations undertaken
towards another State under another treaty. Consequently, while the substance of
the article remains the same as in the 1964 text, its wording has been revised in the
manner indicated.293
293
Commission Update, ¶ 40 (quoting Annex EC-49 at p. 232).
59
139. In the Tribunal’s view, however, even if recourse to such supplementary materials were appropriate
under VCLT Article 32, this commentary cannot be read to suggest that the “same subject matter”
proviso added to the final text should be treated as merely superfluous and given no meaning
whatsoever. This is particularly the case given the difference in comparators discussed above, namely
that the phrase relates to the “subject matter” of the treaties as such and not simply the compatibility
of particular provisions.
140. Consequently, the Tribunal interprets Article 30(4) of the VCLT consistent with the ordinary and
natural meaning of its terms, which apply the lex posterior principle only where (a) there are
“successive treaties relating to the same subject matter,” and (b) there exists an incompatibility
between certain provisions of the two related treaties. In this case, as discussed further below, there
is no need to reach the second question (compatibility as a matter of international law), because in the
Tribunal’s view, the ECT and the Lisbon Treaty as a whole do not relate to the same subject matter.
141. The Tribunal acknowledges that VCLT Article 30(1) does not define what it means for two treaties to
be “successive treaties relating to the same subject matter.” Nonetheless, content must be given to
these terms. The first observation is that a treaty is not “successive” to all treaties that came before it,
simply because it is later in time; to “succeed” a prior treaty implies some intended relationship
between the two, such that an inference may be drawn from the sequence regarding the Contracting
Parties’ intent for provisions of the latter to supplant those of the former. Otherwise, the lex posterior
notion would be fatally broad, inconsistent with the right of States to enter into various different
treaties for different purposes, without the earlier ones being negated each time a later one entered into
force. The “same subject matter” test provides the description of the type of relationship that must be
established between distinct treaties, before any inferences regarding intent may be drawn based on
temporal considerations. This test accordingly must be given some positive meaning.
142. For this purpose, Italy itself suggests the Tribunal have recourse to the ILC’s 2006 Report on
Fragmentation of International Law, which examined the challenge of defining a treaty’s “subject
matter” for purposes of determining when various conflict rules (lex specialis, lex posterior, etc.) may
be applied.294 The ILC Report is indeed an important document, but its analysis does not necessarily
support the result Italy suggests. It is true that the ILC expressed concern that if too narrow a test for
subject matter were adopted, based simply on “informal labels” or characterizations, then the
regulation of potential conflicts between treaties might be “dependent on argumentative success in
294
60
pigeon-holing legal instruments,” including through the assignment of “arbitrary labels on forms of
professional specialization” such as trade law, human rights law, or environmental law.295 At the same
time, if too broad a test for “subject matter” were adopted, such that many quite different treaties could
be swept into the same subject matter bucket, then arguably there would be no place any more for
application of the important principle of lex specialis; the principle of lex posterior would supply an
automatic rule of priority merely as a function of chronology, without allowing any deeper
examination of the underlying scope and purposes of the various instruments. The ILC noted that the
lex specialis principle would thus have “an unclear relationship to other maxims of interpretation or
conflict-solution techniques, such as, for instance, the principle … [that] later law overrides prior law
….”296 Yet, lex specialis is “widely accepted” as having an independent role to play, since “[a] special
rule is more to the point … than a general one and it regulates the matter more effectively … than
general rules.”297 At the same time, lex specialis itself “can only apply where both the specific and
general provisions concerned deal with the same substantive matter”; indeed, the ILC’s own Draft
Articles on State Responsibility limit the lex specialis principle to the context of treaties involving the
“same subject-matter.”298 This again suggests the need for the “same subject matter” construct to be
given independent meaning, ideally one that is neither too narrow nor too broad.
143. Importantly, in the ILC’s view, “the question of the relationship between two treaties cannot be
resolved completely in abstraction from any institutional relationship between them.” The ILC
suggests the possibility of looking for “an institutional connection between ‘chains’ or clusters of
treaties that are linked institutionally and that States parties envisage as part of the same concerted
effort.”299 The ILC further explained that “the notion of a ‘regime’ points to the institutional
arrangements that may have been established to link sets of treaties to each other,” which then allows
more reasonable inferences regarding the intent of the States parties in regulating potential overlaps
or conflicts as among those treaties.300 In particular, the ILC explained, the identification of such
295
ILC 2006 Report on Fragmentation of International Law, ¶¶ 21-22, 254 (R-8).
296
297
298
ILC 2006 Report on Fragmentation of International Law, ¶ 116 (citing Article 55 of the Draft articles on
responsibility of States for internationally wrongful acts) (R-8). That Article, entitled “Lex specialis,” states that
“[t]hese articles do not apply where and to the extent that the conditions for the existence of an internationally wrongful
act or the content or implementation of the international responsibility of a State are governed by special rules of
international law.” The Commentary explains that “[f]or the lex specialis principle to apply it is not enough that the
same subject matter is dealt with by two provisions; there must be some actual inconsistency between them, or else a
discernable intention that one provision is to exclude the other.” CL-143, Article 55 and Commentary ¶ 4.
299
300
61
“treaty regimes” aids in application of principles of lex posterior or lex specialis, since “the argument
from [such principles] seems clearly more powerful between treaties within a regime than between
treaties in different regimes.”301 Thus, while lex posterior may be logically applied to successive
treaties within a given regime, as across different regimes “a straightforward priority of one treaty over
another (that is in fact, of one regime over another) cannot be reasonably assumed on a merely
chronological basis.”302 To the contrary, the ILC emphasizes that where different treaties are not part
of the same regime – that is, they are not “institutionally linked and intended to realize parallel
objectives” – then “[t]hose are also situations where the lex posterior rule has least application. In
such situations, emphasis should be on guaranteeing the rights set up in the relevant conventions.”303
144. For purposes of the present debate, the Tribunal considers this notion of “treaty regimes,” involving
“‘clusters’ of treaties that are linked institutionally and that States parties envisage as part of the same
concerted effort,” to be a useful way of considering the VCLT Article 30(1) inquiry into whether the
ECT and the Lisbon Treaty are “successive treaties relating to the same subject matter.” Under this
approach, the Lisbon Treaty certainly would qualify as such with respect to the prior EU Treaties,
since all such treaties were adopted through the same institutional processes and were envisaged by
the EU as part of a single concerted effort, to regulate the EU internal market by reference to EU law.
By contrast, while Italy and the Commission argue that the ECT likewise was an “effort[] of
integration,”304 in the sense that it “establish[ed] a legal framework in order to promote long-term
cooperation in the energy field,”305 this integration goal is insufficient on its own to qualify the ECT
and the EU Treaties as having the same “subject matter” from the standpoint of international law.
Numerous treaties pursue efforts of integration, as part of a general purpose of international law of
bringing diverse States into greater legal and policy alignment through the adoption of common norms
and procedures. Yet, the reality remains that the ECT was a quite different instrument from the EU
Treaties, adopted on a multilateral level and for certain distinct purposes.
145. Thus, as the ECT’s Preamble reflects, its many signatories not only “undertook to pursue the objectives
and principles” of an EU document, the European Energy Charter, but also to “broaden their
cooperation” multilaterally in support of various specifically stated goals, including inter alia “the
effective implementation of full national treatment and most favoured nation treatment,” the
301
302
303
304
305
62
“progressive liberalization of international trade and … avoidance of discrimination in international
trade” in the energy sector, and more generally encouraging steps towards “the most efficient
exploration, production, conversion, storage, transport, distribution and use of energy.” 306 In support
of these objectives, the ECT signatories agreed to detailed rules for “Investment Promotion and
Protection” set out in Part III, and to equally detailed rules for “Dispute Settlement” set out in Part V,
to apply on a broad multilateral basis. The objective of Part III of the ECT evidently was to provide
for specific guarantees, defined in terms of international law rather than domestic law principles, in
order to encourage international flows of investment into the energy sectors of at least certain ECT
Contracting Parties. The objective of Part V in turn was to provide specific mechanisms, again at an
international level and removed from domestic law, for resolving disputes about whether the Part III
guarantees had been observed. This was no doubt a “concerted effort,” to use the ILC’s terminology,
but it is not one that can be considered part of the same “treaty regime” or “cluster” of treaties as the
various EU Treaties. For this reason, the later EU Treaties (such as the Lisbon Treaty) do not qualify
as a “successive treaty related to the same subject matter” as the ECT.
146. The Tribunal thus arrives at the same place as several prior tribunals, even if it adopts Italy’s
suggestion to examine the “same subject matter” issue by way of the ILC’s 2006 Report on
Fragmentation. For example, similarly to the analysis of VCLT Article 59 by the EURAM v. Slovak
Republic tribunal, the Tribunal considers that a good faith interpretation of VCLT Article 30 does not
support the conclusion that two treaties deal with the same subject matter simply because they may
apply simultaneously to the same set of facts.307 Two different treaties may apply simultaneously to
the same set of facts, or even share very broadly stated goals (such as “integration” or “cooperation”
with other States) but approach the achievement of those goals from different perspectives.308 The
Tribunal likewise agrees with the EURAM tribunal that the subject matter of a treaty “is inherent in
the treaty itself and refers to the issues with which its provisions deal, i.e. its topic or substance.”309
Using those standards, however, the Tribunal likewise sees no reason to depart from consistent case
law finding that the EU Treaties deal with a different subject matter than investment treaties.310 As
306
ECT, Preamble (C-1).
307
European American Investment Bank AG v. Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction, ¶¶
168-169 (22 October 2012) (“EURAM”).
308
EURAM, ¶¶ 168-171.
309
EURAM, ¶ 172.
310
See, e.g., EURAM, ¶¶ 178, 184 (“To accede to an economic community is simply not the same as to set up a special
investment protection regime providing for investor-State arbitration”); Eastern Sugar B.V. v. Czech Republic, SCC
No. 088/2004, Partial Award, ¶¶ 164-165 (27 March 2007) (CL-84); Oostergetel v. Slovak Republic, UNCITRAL,
Decision on Jurisdiction, ¶¶ 74-79 (30 April 2010) (CL-102); Electrabel, ¶ 4.176 (RL-58).
63
noted above, the topic or substance of the EU Treaties was the creation of a common market between
EU Member States, governed by EU law, whereas the topic or substance of the ECT was the creation
of a broader multilateral network of energy cooperation, liberalization and investment, including
through embracing certain reciprocal undertakings as a matter of international law. Moreover,
although the “same subject matter” test in Article 30 is stated in terms of treaties as a whole, the key
parts of the ECT for present purposes (ECT Parts III and V) address very specific topics of investment
promotion and protection, and involve substantive and procedural protections that are not coincident
with (or arguably, even of the same nature as) those offered under the EU Treaties’ internal market
provisions, which Italy itself admits “do not ‘deal’ technically with promotion and protection of
investments.”311 Not surprisingly given these different regimes, the content of the standards is far
from coextensive.312 The mere fact that protections under both regimes could be afforded in certain
circumstances to the same investors – at least in the context of direct rather than indirect investment313
– does not conclusively demonstrate that the ECT and the EU Treaties themselves have the same
subject matter for purposes of international law.
147. For these reasons, the Tribunal concludes that the EU Treaties, and in particular the Lisbon Treaty,
are not “successive treaties relating to the same subject matter” within the meaning of VCLT Article
30(1). Given this conclusion, there is no need for the Tribunal to reach the further question of whether
specific provisions of the Lisbon Treaty are “incompatible” with those of the ECT as a matter of
international law under VCLT Article 30(4). Nonetheless, the Tribunal observes that this would be
unlikely given its conclusion in Section V.B.1.a above that the ECT does not command application of
EU law in order to resolve disputes. As the Tribunal discusses further below in Section V.B.2, in the
context of the Achmea Judgment, it is entirely possible to have two coexisting systems of law
applicable to a particular fact scenario, in which the State conduct’s may be adjudged independently
by different authorities assessing obligations owed under different bodies of law. Indeed, this is
frequently the case for States that are party to investment treaties, and as such have undertaken
obligations to foreign investors governed by international law, separate from whatever obligations
311
312
See, e.g., Eureko B.V. v Slovak Republic, PCA Case No. 2008-13, Award on Jurisdiction, ¶¶ 245-266 (26 October
2010) (CL-86) (concluding that the fair and equitable treatment protections afforded by a BIT were not exhausted by
existing EU law provisions prohibiting discrimination; similar doubts could be raised as to whether the standard is co-
extensive with the EU fundamental freedoms, or whether EU law provisions regarding expropriatory takings extend
comparable protections to indirect expropriations or to “every kind of asset”).
313
From the standpoint of EU law, the CJEU distinguishes between “foreign direct investment,” for which it considers
the EU now to have exclusive competence to enter into treaties with non-EU States, and indirect investment, for which
it considers individual EU Member States to have shared competence. See CJEU, Opinion 2/15 of the Court (Full
Court), 16 May 2017, ¶¶ 225-226, 238.
64
they already may owe such investors under their own domestic laws. The two regimes (international
law and domestic law) exist independently, with neither necessarily usurping the role of the other.
e. EU Treaties as “Agreements to Modify” ECT: VCLT Article 41(1)
148. Finally, Italy contends that “by adhering to the Lisbon Treaty,” EU Member States effectively
“modified” the ECT pursuant to VCLT Article 41(1), to the extent of any intra-EU obligations they
might previously have undertaken.314 The Commission presents an equivalent argument, stating that
since the Treaties of Amsterdam, Nice and Lisbon “re-affirmed” the investment protection rules of
EU law as well as general principles concerning competences and judicial protection, this “could be
interpreted as an amendment [of the ECT] pursuant to Article 41(1)(b) VCLT.”315 These arguments
relate to the notion that under international law, a multilateral treaty may be modified not only
collectively by all of its Contracting Parties, but also by a subset of those parties as between
themselves, subject however to certain specified conditions. With respect to these conditions, Article
41 provides as follows:
Agreements to modify multilateral treaties between certain of the parties only
1. Two or more of the parties to a multilateral treaty may conclude an agreement

to modify the treaty as between themselves alone if:
(a) the possibility of such a modification is provided for by the treaty; or
(b) the modification in question is not prohibited by the treaty and:
(i) does not affect the enjoyment by the other parties of their rights under
the treaty or the performance of their obligations;
(ii) does not relate to a provision, derogation from which is incompatible

with the effective execution of the object and purpose of the treaty as a
whole.
2. Unless in a case falling under paragraph 1(a) the treaty otherwise provides, the
parties in question shall notify the other parties of their intention to conclude the
agreement and of the modification to the treaty for which it provides.316
149. Italy contends that the conditions of VCLT Article 41(1)(b) are met in this case, because the Lisbon
Treaty did not affect the enjoyment of ECT rights by any other ECT Contracting Parties.317 Eskosol
314
315
316
VCLT, Article 41 (CL-57).
317
Memorial on Jurisdiction, ¶¶ 216, 218-222.
65
contends that the conditions of Article 41(1)(b) are not met, both because the ECT (in its Article 16(2))
prohibits any modification that would result in derogation from ECT Parts III and V,318 and because
such a modification would undermine the object and purpose of the ECT as a whole, which was to
provide qualifying investors substantive protections and access to independent arbitration.319
150. The Tribunal rejects the Article 41(1) argument at a more fundamental level, which is that nothing in
the Lisbon Treaty even purported to be an exercise of powers to “conclude an agreement to modify”
the ECT as among EU Member States, which must be the starting point of any Article 41(1) analysis.
Nothing in the Lisbon Treaty refers to the ECT at all, much less expresses an intent to modify the
ECT’s reach or application. In that scenario, as the Vattenfall tribunal observed, “[i]t is unclear what
precise modification of the ECT is alleged to have taken place.”320 Nor is there any suggestion that in
enacting the Lisbon Treaty, the EU followed the procedures set out in Article 41(2) for advance
notification of other ECT Contracting Parties of their intention to conclude an agreement which
henceforth would legally modify ECT obligations among EU Member States. A useful contrast is
provided by the Commission’s approach to the International Energy Charter of 2015, where it formally
declared, upon signing the document on behalf of the EU, that the Charter’s dispute settlement
mechanisms “cannot be construed so as to mean that any such [arbitral] mechanisms would become
applicable in relations” between EU Member States.321 Yet the modification of an existing multilateral
treaty under VCLT Article 41, no less than the conclusion of a new multilateral treaty, is intended to
be a formal process, which the ILC describes as “subject[] … to strict conditions” both of substance
and of procedure.322 The procedural conditions require notification to all other Contracting Parties “in
time for those parties to react.”323 It is not consistent with that process for States to make no reference
in an inter se agreement to any intention to formally modify or withdraw from prior commitments
made through a multilateral instrument, and then subsequently claim – in the context of a challenge to
compliance with obligations imposed by the multilateral instrument – that the inter se agreement
modified the multilateral treaty sub silentio and without any prior notice to the other Contracting
Parties.
318
Bifurcation Response, ¶ 81; Eskosol PHB, ¶ 91.
319
Bifurcation Response, ¶¶ 81-82, 91.
320
321
Declaration of the European Union at the signing of the International Energy Charter (2015) (Annex EC-16 to the
Commission Submission).
322
323
66
151. In these circumstances, the Tribunal cannot conclude that the Lisbon Treaty was an “agreement to
modify” the ECT within the sense of VCLT Article 41(1), nor that it complied with the procedural
conditions for such a modification as set forth in Article 41(2). Moreover, the Tribunal further agrees
with the Vattenfall tribunal that the particular modification of the ECT proposed in this case would be
“prohibited by the treaty” contrary to VCLT Article 41(1)(b), because ECT Article 16(2) expressly
prevents a later treaty from being construed so as to derogate from the “more favourable” rights
granted to investors in Parts III and V of the ECT.324
2. The Achmea Judgment
152. For all the reasons stated above, the Tribunal does not accept the argument that the progressive
development of the EU Treaties, and in particular the conclusion of the Lisbon Treaty, requires as a
matter of international law that intra-EU disputes be excluded from the ECT’s scope. The Tribunal
turns next to the argument that the CJEU’s authoritative interpretation of EU law in the Achmea
Judgment nonetheless compels such a result.
153. In conducting this analysis, the Tribunal emphasizes that it offers no criticism here of the Achmea
Judgment as such. Whatever views may be held individually or collectively of a particular line of
reasoning, the Tribunal accepts that the judgments of the CJEU constitute settled and decisive
interpretations of the particular issues of EU law that they actually reach. However, the implications
of such EU law decisions for proceedings in the broader international order, governed not by EU law
but by multilateral agreements like the ICSID Convention and the ECT, remain open to assessment.
The Tribunal focuses on these issues in the Section below.
154. In particular, the Tribunal addresses in this Section several different reasons why it ultimately
concludes that the Achmea Judgment, accepted as a valid decision concerning certain intra-EU BITs
in the European legal order, does not disturb its jurisdiction to decide a dispute in the international
legal order under the ECT. These points stand independently, and therefore the Tribunal could have
chosen to rest on any one of them. Nonetheless, given the extensive attention that the Parties and the
Commission have given to the Achmea Judgment in their most recent submissions, as well as the
broader interest in this issue in the international community, the Tribunal addresses each point in the
alternative, demonstrating why its jurisdiction would not be affected even if the other points were not
also established or were later called into question by subsequent developments. First, however, the
324
67
Tribunal provides a summary of the Achmea Judgment, reproducing relevant passages in the CJEU’s
own words.
a. Summary of the Achmea Judgment
155. The matter came before the CJEU on a request by the German Bundesgerichtshof for a preliminary
ruling. In December 2012, an UNCITRAL tribunal had issued an arbitration award in favor of Achmea
B.V., a Dutch company, finding that the Slovak Republic had violated certain obligations owned to
the company under a bilateral investment treaty between the Netherlands and the Czech and Slovak
Federative Republic (the “Achmea BIT”). As the seat of the arbitration was in Frankfurt, the Slovak
Republic brought a set-aside action before the Oberlandesgericht Frankfurt am Main, and when that
court dismissed its action, the Slovak Republic appealed to the Bundesgerichtshof on a point of law.
156. The Bundesgerichtshof in turn decided to stay the appeal and sought a preliminary ruling from the
CJEU on the following questions, referring to the text of Articles 18,325 267326 and 344327 of the TFEU:
(1) Does Article 344 TFEU preclude the application of a provision in a bilateral
investment protection agreement between Member States of the European
Union (a so-called intra-EU BIT) under which an investor of a Contracting
State, in the event of a dispute concerning investments in the other Contracting
State, may bring proceedings against the latter State before an arbitral tribunal
where the investment protection agreement was concluded before one of the
325
The first paragraph of Article 18 TFEU (formerly Article 12 TEC) provides as follows:
Within the scope of application of the Treaties, and without prejudice to any special provisions
contained therein, any discrimination on grounds of nationality shall be prohibited.
326
Article 267 TFEU (formerly Article 234 TEC) provides as follows:
The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings
concerning:
(a) the interpretation of the Treaties;
(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union;
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal
may, if it considers that a decision on the question is necessary to enable it to give judgment, request
the Court to give a ruling thereon.
Where any such question is raised in a case pending before a court or tribunal of a Member State
against whose decisions there is no judicial remedy under national law, that court or tribunal shall
bring the matter before the Court.
If such a question is raised in a case pending before a court or tribunal of a Member State with regard
to a person in custody, the Court of Justice of the European Union shall act with the minimum of
delay.
327
Article 344 TFEU (formerly Article 292 TEC) provides as follows:
Member States undertake not to submit a dispute concerning the interpretation or application of the
Treaties to any method of settlement other than those provided for therein.
68
Contracting States acceded to the European Union but the arbitral proceedings
are not to be brought until after that date?
If Question 1 is to be answered in the negative:
(2) Does Article 267 TFEU preclude the application of such a provision?
If Questions 1 and 2 are to be answered in the negative:
(3) Does the first paragraph of Article 18 TFEU preclude the application of such
a provision under the circumstances described in Question 1?328
157. Advocate General Wathelet proposed that the CJEU should answer these questions as follows:
Articles 18, 267 and 344 TFEU must be interpreted as not precluding the
application of an investor/State dispute settlement mechanism established by
means of a bilateral investment agreement concluded before the accession of one
of the Contracting States to the European Union and providing that an investor
from one Contracting State may, in the case of a dispute relating to investments in
the other Contracting State, bring proceedings against the latter State before an
arbitral tribunal.329
158. The CJEU did not, however, accept Advocate General Wathelet’s proposed resolution.
159. Instead, it began by reformulating the questions posted by the Bundesgerichtshof, into a combined
first and second questions framed as follows:
31. By its first and second questions, which should be taken together, the referring
court essentially asks whether Articles 267 and 344 TFEU must be interpreted as
precluding a provision in an international agreement concluded between Member
States, such as Article 8 of the BIT, under which an investor from one of those
Member States may, in the event of a dispute concerning investments in the other
Member State, bring proceedings against the latter Member State before an arbitral
tribunal whose jurisdiction that Member State has undertaken to accept.330
160. The CJEU’s reformulation included a specific reference to Article 8 of the Achmea BIT. That clause
provided first, in Article 8(1), that “[a]ll disputes between one Contracting Party and an investor of
the other Contracting Party concerning an investment of the latter shall, if possible, be settled
amicably.” Failing such a settlement, Article 8(2) of the Achmea BIT provided that “[e]ach
Contracting Party hereby consents to submit a dispute referred to in paragraph 1 of this Article to an
328
Achmea Judgment, ¶ 23 (RL-85).
329
(RL-91).
330
Achmea Judgment, ¶ 31 (RL-85) (emphasis added).
69
arbitral tribunal.” The Achmea BIT then provided as follows in Article 8(6), regarding the law
applicable to such a dispute:
The arbitral tribunal shall decide on the basis of the law, taking into account in
particular though not exclusively:
- the law in force of the Contracting Party concerned;
- the provisions of this Agreement, and other relevant agreements between the
Contracting Parties;
- the provisions of special agreements relating to the investment;
- the general principles of international law.331
161. Beginning its analysis, the CJEU set out various EU law considerations which it considered relevant:
32. In order to answer those questions, it should be recalled that, according to

settled case-law of the Court, an international agreement cannot affect the
allocation of powers fixed by the Treaties or, consequently, the autonomy of the
EU legal system, observance of which is ensured by the Court. That principle is
enshrined in particular in Article 344 TFEU, under which the Member States
undertake not to submit a dispute concerning the interpretation or application of
the Treaties to any method of settlement other than those provided for in the
Treaties ….
33. Also according to settled case-law of the Court, the autonomy of EU law with
respect both to the law of the Member States and to international law is justified
by the essential characteristics of the EU and its law, relating in particular to the
constitutional structure of the EU and the very nature of that law. EU law is
characterised by the fact that it stems from an independent source of law, the
Treaties, by its primacy over the laws of the Member States, and by the direct effect
of a whole series of provisions which are applicable to their nationals and to the
Member States themselves. Those characteristics have given rise to a structured
network of principles, rules and mutually interdependent legal relations binding
the EU and its Member States reciprocally and binding its Member States to each
other ….
34. EU law is thus based on the fundamental premiss that each Member State
shares with all the other Member States, and recognises that they share with it, a
set of common values on which the EU is founded, as stated in Article 2 TEU. That
premiss [sic] implies and justifies the existence of mutual trust between the
Member States that those values will be recognised, and therefore that the law of
the EU that implements them will be respected. It is precisely in that context that
the Member States are obliged, by reason inter alia of the principle of sincere
cooperation set out in the first subparagraph of Article 4(3) TEU, to ensure in their
respective territories the application of and respect for EU law, and to take for
331
Achmea Judgment, ¶ 6 (RL-85) (quoting Article 8 of the Achmea BIT).
70
those purposes any appropriate measure, whether general or particular, to ensure
fulfilment of the obligations arising out of the Treaties or resulting from the acts
of the institutions of the EU ….
35. In order to ensure that the specific characteristics and the autonomy of the EU
legal order are preserved, the Treaties have established a judicial system intended
to ensure consistency and uniformity in the interpretation of EU law ….
36. In that context, in accordance with Article 19 TEU, it is for the national courts
and tribunals and the Court of Justice to ensure the full application of EU law in
all Member States and to ensure judicial protection of the rights of individuals
under that law ….
37. In particular, the judicial system as thus conceived has as its keystone the
preliminary ruling procedure provided for in Article 267 TFEU, which, by setting
up a dialogue between one court and another, specifically between the Court of
Justice and the courts and tribunals of the Member States, has the object of securing
uniform interpretation of EU law, thereby serving to ensure its consistency, its full
effect and its autonomy as well as, ultimately, the particular nature of the law
established by the Treaties ….
38. The first and second questions referred for a preliminary ruling must be
answered in the light of those considerations.332
162. The CJEU then organized its analysis into three intermediary questions. The first was “whether the
disputes which the arbitral tribunal mentioned in Article 8 of the BIT is called on to resolve are liable
to relate to the interpretation or application of EU law.”333 The CJEU answered this question in the
affirmative, reasoning as follows:
40. Even if, as Achmea in particular contends, that tribunal, despite the very broad
wording of Article 8(1) of the BIT, is called on to rule only on possible
infringements of the BIT, the fact remains that in order to do so it must, in
accordance with Article 8(6) of the BIT, take account in particular of the law in
force of the contracting party concerned and other relevant agreements between
the contracting parties.
41. Given the nature and characteristics of EU law mentioned in paragraph 33

above, that law must be regarded both as forming part of the law in force in every
Member State and as deriving from an international agreement between the
Member States.
42. It follows that on that twofold basis the arbitral tribunal referred to in Article 8
of the BIT may be called on to interpret or indeed to apply EU law, particularly the
332
Achmea Judgment, ¶¶ 32-38 (RL-85) (citations omitted).
333
71
provisions concerning the fundamental freedoms, including freedom of
establishment and free movement of capital.334
163. The second intermediate question was “whether an arbitral tribunal such as that referred to in Article
8 of the BIT is situated within the judicial system of the EU, and in particular whether it can be
regarded as a court or tribunal of a Member State within the meaning of Article 267 TFEU.”335 The
CEJ answered this question in the negative, on the basis that an international arbitral tribunal is neither
part of the judicial system of a single EU Member State nor a court common to a number of such
States.336
164. The CJEU’s third intermediate question was “whether an arbitral award made by such a tribunal is, in
accordance with Article 19 TEU in particular, subject to review by a court of a Member State, ensuring
that the questions of EU law which the tribunal may have to address can be submitted to the Court by
means of a reference for a preliminary ruling.”337 It noted that under the UNCITRAL Arbitration
Rules, a tribunal may choose its own seat, and it was only by virtue of the chosen seat in this instance
being Frankfurt that a set-aside proceeding was brought in the German courts.338 Even in these
circumstances, moreover, judicial review was limited by German law to the validity of the arbitration
agreement and the consistency of the award with public policy.339 While the CJEU had accepted the
notion of limited review of commercial awards, “provided that the fundamental provisions of EU law
can be examined in the course of that review and, if necessary, be the subject of a reference to the
Court for a preliminary ruling,”340 it considered that “arbitration proceedings such as those referred to
in Article 8 of the BIT are different from commercial arbitration proceedings.” The CJEU explained
as follows:
While the latter originate in the freely expressed wishes of the parties, the former
derive from a treaty by which Member States agree to remove from the jurisdiction
of their own courts, and hence from the system of judicial remedies which the
second subparagraph of Article 19(1) TEU requires them to establish in the fields
covered by EU law …, disputes which may concern the application or
interpretation of EU law. In those circumstances, the considerations set out in the
334
Achmea Judgment, ¶¶ 40-42 (RL-85).
335
336
337
338
339
340
72
preceding paragraph relating to commercial arbitration cannot be applied to
arbitration proceedings such as those referred to in Article 8 of the BIT.341
165. Based on this analysis, the CJEU considered as follows:
56. Consequently, having regard to all the characteristics of the arbitral tribunal
mentioned in Article 8 of the BIT …, it must be considered that, by concluding the
BIT, the Member States parties to it established a mechanism for settling disputes
between an investor and a Member State which could prevent those disputes from
being resolved in a manner that ensures the full effectiveness of EU law, even
though they might concern the interpretation or application of that law.
57. It is true that, according to settled case-law of the Court, an international

agreement providing for the establishment of a court responsible for the
interpretation of its provisions and whose decisions are binding on the institutions,
including the Court of Justice, is not in principle incompatible with EU law. The
competence of the EU in the field of international relations and its capacity to
conclude international agreements necessarily entail the power to submit to the
decisions of a court which is created or designated by such agreements as regards
the interpretation and application of their provisions, provided that the autonomy
of the EU and its legal order is respected ….
58. In the present case, however, apart from the fact that the disputes falling within
the jurisdiction of the arbitral tribunal referred to in Article 8 of the BIT may relate
to the interpretation both of that agreement and of EU law, the possibility of
submitting those disputes to a body which is not part of the judicial system of the
EU is provided for by an agreement which was concluded not by the EU but by
Member States. Article 8 of the BIT is such as to call into question not only the
principle of mutual trust between the Member States but also the preservation of
the particular nature of the law established by the Treaties, ensured by the
preliminary ruling procedure provided for in Article 267 TFEU, and is not
therefore compatible with the principle of sincere cooperation referred to in
paragraph 34 above.
59. In those circumstances, Article 8 of the BIT has an adverse effect on the
autonomy of EU law.342
166. The CJEU accordingly concluded as follows:
60. Consequently, the answer to Questions 1 and 2 is that Articles 267 and 344
TFEU must be interpreted as precluding a provision in an international agreement
concluded between Member States, such as Article 8 of the BIT, under which an
investor from one of those Member States may, in the event of a dispute concerning
investments in the other Member State, bring proceedings against the latter
Member State before an arbitral tribunal whose jurisdiction that Member State has
undertaken to accept.
341
Achmea Judgment, ¶ 55 (RL-85) (citations omitted).
342
73
62. … On those grounds, the Court (Grand Chamber) hereby rules:
Articles 267 and 344 TFEU must be interpreted as precluding a provision in an

international agreement concluded between Member States, such as Article 8 of
the Agreement on encouragement and reciprocal protection of investments
between the Kingdom of the Netherlands and the Czech and Slovak Federative
Republic, under which an investor from one of those Member States may, in the
event of a dispute concerning investments in the other Member State, bring
proceedings against the latter Member State before an arbitral tribunal whose
jurisdiction that Member State has undertaken to accept.343
b. Whether the Achmea Judgment Reaches the ECT
167. The first issue the Tribunal must address is whether the Achmea Judgment even reaches, from the
standpoint of EU law, the jurisdiction of an ECT tribunal. It is common ground that there is no explicit
reference in the Achmea Judgment to any application of its principles to the ECT, even though
Advocate General Wathelet had expressly discussed the ECT in his Opinion submitted to the CJEU.344
The question is whether the CJEU nonetheless indirectly addressed ECT issues by the breadth of its
analysis. The Parties disagree on this issue.345 The Tribunal considers that the decision does not reach
the ECT, for several reasons.
168. First, the vocabulary used by the CJEU in its dispositif is an undeniable reference only to bilateral
treaties among EU Member States, not multilateral treaties to which the EU itself gave imprimatur by
virtue of ratification. It is true that the CJEU did not adopt the precise formulation presented by the
Bundesgerichtshof, which had expressly referenced “a bilateral investment protection agreement
between Member States,”346 and instead replaced it with a formulation that does not expressly
reference BITs. Nonetheless, consistent with the general principle that the CJEU usually answers the
question asked to it and not others, the dispositif in two respects still clearly references bilateral
treaties. The relevant language is italicized below:
343
Achmea Judgment, ¶¶ 60, 62 (RL-85).
344
(RL-91).
345
See Italy PHB, ¶ 135 (“the Respondent does accept that Achmea does not directly address the ECT, but firmly
affirms that the very same language and reasoning of the Achmea decision is exactly transposable to the ECT. The
CJEU reasoning does apply to multilateral treaties like the ECT.”): Rejoinder on Jurisdiction, ¶¶ 81, 88 (Eskosol
contending that “the possible influence of the decision in Achmea is, rightly, limited in scope at most to intra-EU
bilateral investment treaties and its reasoning does not extend to the ECT” and that “[e]ven the ECJ in Achmea
recognized that international treaties to which the EU is a party are entirely different from BITs concluded between
Member States”).
346
See Achmea Judgment, ¶ 23 (RL-85) (reflecting the Bundesgerichtshof question, “[d]oes Article 344 TFEU
preclude the application of a provision in a bilateral investment protection agreement between Member States of the
European Union (a so-called intra-EU BIT) under which ….”) (emphasis added)
74
On those grounds, the Court (Grand Chamber) hereby rules:
Articles 267 and 344 TFEU must be interpreted as precluding a provision in an

international agreement concluded between Member States, such as Article 8 of
the Agreement on encouragement and reciprocal protection of investments
between the Kingdom of the Netherlands and the Czech and Slovak Federative
Republic, under which an investor from one of those Member States may, in the
event of a dispute concerning investments in the other Member State, bring
proceedings against the latter Member State before an arbitral tribunal whose
jurisdiction that Member State has undertaken to accept.347
169. As can be seen from the text, the phrase “a provision in an international agreement concluded between
Member States” is immediately qualified by the phrase “such as,” followed by a reference to Article
8 of the BIT at stake in the Achmea case. Taking that qualification into account, the Tribunal considers
that the evident goal was not to restrict the Achmea Judgment to a single BIT, but rather to encompass
comparable provisions in other international agreements of a similar nature. As to which features of
an agreement supply the requisite similarities, the first evidently concerns the nature of the Contracting
Parties. Here, the Tribunal refers to an agreement “between Member States,” rather than among States
in general, including EU Member States. More importantly, it refers to an agreement under which “an
investor from one of those Member States” has rights in the event of a dispute concerning investments
in the other Member State,” not an other Member State. The other language versions contain the same
references: in French, it is referred to as “un investisseur de l’un de ces Etats membres concernant des
investissements dans l’autre Etat membre,” not “dans un autre Etat membre”; in German, as “ein
Investor eines dieser Mitgliedstaaten in Fall einer Streitigkeit uber Investitionen in dem anderen
Mitgliedstaat,” not “in ein anderen Mitgliedstaat”; and in Spanish, as “un inversor de uno de esos
Estados miembros … en caso de controversia en el otro Estado miembro,” not “en otro Estado
miembro.” In the view of this Tribunal, these references refer only to a bilateral treaty, and cannot be
simply presumed to extend mutatis mutandis to multilateral treaties involving non-EU Member States.
The Tribunal notes that the Masdar and Vattenfall tribunals have reached the same conclusion.348
170. Second, other language used by the CJEU suggests an intent not to address a situation in which the
EU itself is a Contracting Party to the same international agreement as its various Member States. In
a paragraph almost immediately preceding its conclusion, the CJEU describes the situation before it
as follows:
In the present case, however, apart from the fact that the disputes falling within the
jurisdiction of the arbitral tribunal referred to in Article 8 of the BIT may relate to
347
348
See Masdar, ¶¶ 679-680 (RL-90); Vattenfall, ¶ 162 (CL-193).
75
the interpretation both of that agreement and of EU law, the possibility of
submitting those disputes to a body which is not part of the judicial system of the
EU is provided for by an agreement which was concluded not by the EU but by
Member States.349
If the CJEU did not consider this to be a relevant distinguishing feature, there would have been no
reason to mention at all the absence of the EU as a Contracting Party to the Achmea BIT. The fact
that the CJEU drew attention to the EU’s absence as a party to the Achmea BIT, particularly in the
wake of Advocate General Wathelet’s discussion of the ECT in his Opinion, suggests an awareness
that the EU’s presence as a party to a different treaty (such as the ECT) could be a relevant factor.
While the CJEU evidently did not consider it necessary to fully assess the implications of the
distinction, it clearly was leaving room in the passage above for a possible distinction. This Tribunal
should not assume that having done so, the CJEU nonetheless intended this to be a distinction without
a difference.350
171. Third and most important, the CJEU was at pains throughout its analysis – as indicated inter alia in
the passage above – to emphasize a concern about submission to arbitration of disputes requiring
application of EU law. The issue of applicable law had been front and center in the Commission’s
own 2016 submission to the CJEU prior to the Judgment, and interestingly the Commission in that
submission had used applicable law as its basis for distinguishing between (on the one hand) a bilateral
treaty between two EU Member States, and (on the other hand) a treaty that the EU itself might
conclude with non-EU Member States such as Singapore, Vietnam or Canada. The Commission
presented its position on the latter by way of written observations to the CJEU as follows:
157. This case concerns only an international investment protection agreement

between two Member States.
158. For the sake of completeness and to prevent any misunderstanding, the
Commission stresses once more ... that the considerations set out in this
memorandum are not transposable to the Union’s international investment
protection agreements with third countries, such as those that it is about to
conclude with Singapore, Vietnam and Canada.
159. The Union’s international investment protection agreements with third

countries concern relations between the Union and those countries. They are very
different, in many ways, from BITs concluded between Member States.
349
350
See Masdar, ¶¶ 681-682 (RL-90); Vattenfall, ¶¶ 162-163, 213 (CL-193); Greentech, ¶ 220 (CL-195).
76
160. First, the Court has explicitly recognized the compatibility of the
establishment of dispute settlement mechanisms in agreements with third
countries.
161. Secondly, in relationships with third countries, neither Article 344 TFEU nor
the premise of mutual trust in the jurisdiction of the Member States, which
complete the Union's system of judicial protection, are applicable.
162. Thirdly, the Union’s investment protection agreements with third countries,
such as those with Singapore, Vietnam and Canada, regularly state in explicit
terms that Union law does not apply, not as part of the law of the host country, nor
as international law. This last point is almost a self-evident fact since the third
country is not a member of the Union. The dispute settlement mechanisms
established by these agreements thus concern only the application and
interpretation of the Agreement and not the rest of Union law. Its interpretation
plays a role only as a factual element in the context of the finding of a possible
breach of the agreement and in no way binds the courts of the Union.
163. Arbitral tribunals operating on the basis of these agreements must therefore
only apply the investment protection rules enshrined in international law between
the Union and the third country, and not those provided for by Union law.
Therefore, in the case of an investment protection agreement with third countries,
the problem of material overlap with the protection of investments provided for by
Union law does not arise in the same way as it does with the international
investment protection agreements concluded between Member States.351
While the Commission did not refer to the ECT in the passages above, its reasoning logically would
extend to the ECT as well, since the EU treaties with Singapore, Vietnam or Canada likewise were
envisioned as multilateral ones to which the individual EU Member States (and not just the EU itself)
also would be Contracting Parties.
172. In any event, the CJEU evidently shared the Commission’s concern about applicable law. Its
reasoning in the Achmea Judgment emphasized that under the particular terms of Article 8(6) of the
Achmea BIT, an arbitral tribunal would have little choice but to interpret and apply EU law to the
dispute, since EU law was incorporated by reference as mandatory law within the BIT’s own
applicable law clause. As indicated above, Article 8(6) provided that “[t]he arbitral tribunal shall
decide on the basis of the law, taking into account in particular though not exclusively” four types of
applicable law: (a) “the law in force of the Contracting Party concerned,” (b) “the provisions of this
Agreement, and other relevant agreements between the Contracting Parties,” (c) “the provisions of
351
European Commission, Written Observations regarding a Prejudicial Decision, submitted pursuant to Article 23,
second paragraph, of the protocol of the Court of Justice’s statute (Ref. sj.c(2016) 5385926 - 30/08/2016).
Unofficial translation from French original, available at available at:
http://ec.europa.eu/dgs/legal service/submissions/c2016 284 obs fr.pdf (emphasis added); no official English
version provided by the European Commission.
77
special agreements relating to the investment,” and (d) the general principles of international law.352
The CJEU considered the first two of these provisions to be problematic, stating that in order to “rule
… on possible infringements of the BIT,” a tribunal applying the BIT “must, in accordance with Article
8(6) of the BIT, take account in particular of the law in force of the contracting party concerned and
other relevant agreements between the contracting parties.”353 Yet, the CJEU observed that EU law
has a dual nature which qualifies it as falling in both of these categories, namely as both “part of the
law in force in every Member State and as deriving from an international agreement between the
Member States.”354 The CJEU concluded that “on that twofold basis the arbitral tribunal referred to
in Article 8 of the BIT may be called on to interpret or indeed to apply EU law.”355 The dispositif of
the Achmea Judgment then referred back to “a provision … such as Article 8” of the Achmea BIT,
making clear that its Judgment related to the specific content of Article 8,356 i.e., the “twofold” respects
in which Article 8 commanded that EU law be applied.
173. The Tribunal has no quibble with the CJEU’s observations about the dual nature of EU law, which has
been recognized as well by prior investment tribunals, including in AES v. Hungary.357 Importantly,
however, the CJEU did not consider EU law to come into the Achmea BIT on a third basis, namely by
virtue of Article 8(6)’s incorporation by reference also of “the general principles of international law.”
This too was a proper conclusion, because as the Tribunal explained in detail in Section V.B.1(a)
above, the phrase “general principles of international law” is a term of art in international instruments,
referring to customary international law accepted by all States and to principles of law generally
recognized by all States in their municipal legal systems. The CJEU quite rightly did not contend that
EU law qualified for inclusion in this rarified category of universally accepted norms. Nor did it
express any concern about the authority of EU Member States to consent to adjudication of issues
under “general principles of international law.” Rather, its stated concern was that beyond such
general principles of international law, an arbitral tribunal empaneled under the Achmea BIT
necessarily would have to apply EU law, by virtue of Article 8(6)’s mandate that a tribunal also apply
352
Achmea Judgment, ¶ 4 (RL-85) (quoting Article 8 of the Achmea BIT) (emphasis added).
353
354
355
356
357
See AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary, ICSID Case No.
ARB/07/22, Award, ¶ 7.6.6 (23 September 2010) (RL-82) (“Regarding the Community competition law regime, it
has a dual nature: on the one hand, it is an international law regime, on the other hand, once introduced in the national
legal orders, it is part of these legal orders.”).
78
the national law of the host State and the provisions of other relevant agreements between the
Contracting Parties.
174. This is a critical distinction, because the ECT contains no equivalent incorporation into its applicable
law of either category of law that the CJEU found offending in Article 8(6) of the Achmea BIT. As
discussed at length in Section V.B.1(a), ECT Article 26(6) provides that tribunals shall decide disputes
only under “this Treaty and applicable rules and principles of international law,” neither of which
categories incorporates EU law. In these circumstances, the CJEU’s concern about an arbitral tribunal
applying EU law under the Achmea BIT is not directly transposable to the ECT. EU law simply is not
part of the applicable law of any ECT dispute, under the very different provisions of ECT Article
26(6). As such, there is no equivalent risk that the arbitration mechanism in the ECT could endanger
the CJEU’s ultimate control on the application of EU law, which was the driving force in the Achmea
Judgment about its decision about a “provision in an international agreement … such as Article 8” of
the Achmea BIT.358
175. In this context, it bears emphasis that nothing in the CJEU’s Judgment suggested that EU Member
States were barred from offering to arbitrate disputes under treaties not governed even in part by EU
law, but only by express treaty provisions and by general principles of international law. The Achmea
Judgment was not predicated on the exclusive competence of the EU to enter into such treaties on its
Member States’ behalf. Rather, the Tribunal understands the Achmea Judgment more narrowly, as
objecting only to treaty provisions that by their terms give tribunals the authority (or indeed the
mandate) to decide a dispute among other things by reference to EU law, in either or both of the
“twofold” aspects the CJEU identified.359 Put otherwise, it appears that EU Member States may bring
arbitral tribunals into being for the purposes of deciding treaty disputes under general principles of
international law, but are no longer allowed to authorize such disputes to apply EU law in addition.
The ECT does not offend this limitation imposed by the Achmea Judgment.
176. Finally, and for avoidance of doubt, the Tribunal sees no likelihood in this particular case that it even
will need to interpret EU law as a matter of fact, relevant to its application of international law to
decide the dispute in question. As noted above, there is no claim in this case by either Eskosol or Italy
that the challenged government conduct by Italy was necessitated by EU directives. The case in that
sense is similar to Charanne and Novoenergia, where the tribunals found that their cases did “not
involve any assessment of the validity of Community acts or decisions adopted by organs of the
358
359
79
European Union,” and did “not concern in any way allegations … of violations of EU law nor claims
directed against such organisation.”360
177. In conclusion, the Tribunal sees no basis for finding that the Achmea Judgment extends to ECT cases,
much less to this particular ECT case, even by the CJEU’s own analysis. The CJEU’s stated concern
in paragraph 42 of the Achmea Judgment was about a circumstance in which an arbitral tribunal “may
be called on to interpret or indeed to apply EU law,”361 a scenario that the CJEU found to exist based
on the applicable law clause in the particular BIT before it. But it would be inappropriate to extend
that reasoning about a possible risk into a blanket ban on all investment arbitration, even under
different scenarios where no equivalent risk arises. A concern that arbitration in some cases could
endanger CJEU control over application of EU law does not logically support a finding that the
mechanism of arbitration itself is improper; rather, the CJEU’s logic suggests a need to determine
whether the danger actually arises in the context of a particular treaty. Some intra-EU BITs, like the
Achmea BIT, may require application of EU law, but other intra-EU BITs by their terms may not. In
the context of the ECT, which the CJEU has not even discussed, it would be particularly surreal to
interpret the CJEU as already having decided that the arbitral mechanism is contrary to EU law, when
that mechanism as discussed above does not actually command the application of EU law, and thus
decidedly does not pose the particular risk that the CJEU identified as its basis for concern.
c. Whether the Achmea Judgment Binds This Tribunal
178. A second and independent reason why the Achmea Judgment does not preclude this Tribunal from
exercising jurisdiction – even arguendo, if it were deemed to extend to ECT cases as a matter of EU
law – is that the decisions of the CJEU with respect to EU law are not binding on an international
investment tribunal empaneled under a different legal order.
179. The Tribunal starts by noting that the CJEU did not purport to conduct any international law conflicts
analysis. It concluded that an incompatibility existed between Article 8 of the Achmea BIT and the
EU legal system, in particular Articles 267 and 344 TFEU. But the CJEU did not indicate by what
means such an incompatibility should be resolved. It made no reference either to an alleged hierarchy
of norms between EU law derived from the TFEU and general international law norms contained in
an international investment treaty. The CJEU accordingly did not discuss any of the conflict of norms
360
Charanne, ¶ 448 (CL-82); Novoenergia, ¶ 462 (CL-191) (quoting Charanne and stating that “[t]his situation is
similar”).
361
80
principles this Tribunal carefully examined in Section V.B.1 above, including application of VCLT
Article 30, which is not even mentioned in the Achmea Judgment.
180. This Tribunal, by contrast, cannot simply skip over the relevant analysis, in blind deference to the
CJEU’s analysis under EU law. As the Electrabel tribunal clearly stated, a tribunal that “has been
seized as an international tribunal by a Request for Arbitration … under the ECT and the ICSID
Convention” is required accordingly to apply the ECT and “applicable rules and principles of
international law,” because it “is placed in a public international law context and not a national or
regional context.”362
181. It is useful to recall that the international legal system is a general system without any central authority
from whom the entire system flows. It is composed of different legal sub-systems which have
independent life, even if at times there may be interactions between them. As a whole, the international
legal system is bound by general principles of international law, i.e., by customary international law,
including norms such as jus cogens and pacta sunt servanda as discussed above. But below this level
of general principles there exist various sub-systems of international law, with no precise hierarchy
between the different norms established in each sub-system. Rather, each of these sub-systems is
governed by its own applicable norms, and vests dispute resolution authority in particular bodies
obligated to proceed under those norms. The EU Treaties are one such sub-system, vesting authority
in various organs including the Commission, the CJEU, etc. But the EU Treaties are not general
international law displacing all other sub-systems of international law; rather, they exist side-by-side
with other sub-systems, including those created by various multilateral treaties. The ECT is one such
other sub-system of law, and it vests authority in arbitral tribunals such as this one. Each authority is
empowered in its sub-system to render decisions within its sphere, such as the CJEU’s Achmea
Judgment under the EU Treaties and the awards of various arbitral tribunals under the ECT. A given
State may be subject to obligations arising from both types of decisions. This structure of international
law may be graphically illustrated as below:
362
Electrabel, ¶¶ 4.111, 4.112 (RL-58).
81
182. In the Achmea Judgment, the CJEU recognized that EU law exists in its own sub-system, which is
“autonom[ous] … with respect both to the law of the Member States and to international law.”363 This
autonomy means that EU law is different and separate not only from the national legal orders of its
constituent States, but also from general international law, including other sub-systems of international
law in the broader international legal order. Essentially, and as the CJEU itself has recognized, EU
law is a regional sub-system of law. The CJEU explained many years ago in the famous Van Gend en
Loos case, and has frequently reiterated since then,364 that “[t]he Community constitutes a new legal
order of international law for the benefit of which the states have limited their sovereign rights …”365
In the Kadi case, Advocate General Maduro’s Opinion also described EU law as a “municipal legal
order of transnational dimension.” It is even more accurately expressed in the French version: “un
363
Achmea Judgment, ¶ 33 (RL-85) (stating that “the autonomy of EU law with respect both to the law of the Member
States and to international law is justified by the essential characteristics of the EU and its law, relating in particular
to the constitutional structure of the EU and the very nature of that law. EU law is characterised by the fact that it
stems from an independent source of law, the Treaties, by its primacy over the laws of the Member States, and by the
direct effect of a whole series of provisions which are applicable to their nationals and to the Member States
themselves.”) (emphasis added).
364
See, e.g., Opinion 2/13 of the Court (Full Court) of 18 December 2014, given to the Commission on the
compatibility of draft agreement providing for the accession of the European Union to the Convention for the
Protection of Human Rights and Fundamental Freedoms with the European Treaties (“As the Court of Justice has
repeatedly held, the founding treaties of the EU, unlike ordinary international treaties, established a new legal order,
possessing its own institutions, for the benefit of which the Member States thereof have limited their sovereign rights,
in ever wider fields, and the subjects of which comprise not only those States but also their nationals.”).
365
Case 26/62, NV Algemene Transporten Expeditie Onderneming van Gend & Loos v Netherlands Internal Revenue
Administration [1963] ECR 1, at Section B.
82
ordre juridique interne de dimension transnationale.”366 This means that EU law certainly has
primacy over the national laws of EU Member States,367 but not in the same fashion over independent
rules of international law.
183. Arbitration tribunals sitting in the general international legal order, for example in Electrabel, have
considered that at the procedural level, there is no contradiction between investment arbitration
(whatever its source) and EU law, in part because there remain mechanisms that guarantee the CJEU’s
control on the interpretation and application of EU law on the merits when there is a link with the EU
legal order.368 The CJEU, sitting in the European regional legal order, evidently now considers to the
contrary, i.e., that the control it can exercise on investment arbitral awards is insufficient to satisfy its
monopoly of application and interpretation of EU law. This creates a clear contradiction of positions.
However, faced with such a contradiction, a tribunal situated on the international plane is not bound
by the views adopted by the CJEU, i.e., within a regional sub-system of international law. As the ILC
itself recognized in its 2006 Report on Fragmentation of International Law, “when conflicts emerge
between treaty provisions that have their home in different regimes, care should be taken so as to
guarantee that any settlement is not dictated by organs exclusively linked with one or the other of the
conflicting regimes.”369 Nor can the notion of “harmonious interpretation,” while no doubt “a
desirable outcome” in the words of the Electrabel tribunal, be transformed into a principle that compels
an international law tribunal to abandon an international law conflicts analysis in favor of a very
different conflicts analysis derived from EU law.370 Rather, if different rules deal with an issue in a
way that seems contradictory, a tribunal empaneled under international law must do the best it can
under the tools of interpretation provided by international law, including those “regarding chronology
(lex posterior derogat priori), specificity (lex specialis generalibus derogat) and identity of the Parties
366
Opinion of the Advocate General Maduro in Case C-402/05, Kadi, ¶ 21, [2008] ECR I-6351 (RL-96).
367
CJEU case law has confirmed that primacy of EC law over the domestic law of EU Member States is a cornerstone
principle of Community law. According to the Court, this principle is inherent to the specific nature of the European
Community, as stated in the judgment of Costa and Enel, 6/64, EU:C:1964:66, p. 594: “It follows … that the law
stemming from the treaty, an independent source of law, could not, because of its special and original nature, be
overridden by domestic legal provisions, however framed, without being deprived of its character as Community law
and without the legal basis of the Community itself being called into question.”
368
Electrabel, ¶¶ 4.162 (“In other words, even when disputes raising issues of EU law are decided by international
arbitration, if the resulting award is honored voluntarily by the EU Member State or enforced judicially within the
European Union against that Member State, the ECJ retains the possibility, through different mechanisms for both
ICSID and non-ICSID awards under the EU Treaties, to exercise its traditional role as the ultimate guardian of EU
law.”) (RL-58).
369
ILC 2006 Report on Fragmentation of International Law, p. 252 (R-8).
370
Electrabel, ¶ 4.130 (stating that while “harmonious interpretation of different treaties … may be a desirable
outcome … the end does not establish the means to that end”) (RL-58).
83
to the agreements (same or different Parties) …. However, these rules do not always apply or can
only be applied with difficulty.”371
184. Ultimately, the bottom line is that in a case of contradiction, each legal order remains bound by its
own rules, for purposes of its own judgments. The CJEU’s conclusions regarding the EU legal order
are addressed to EU Member States and European institutions, and they accordingly may have no
choice but to take steps consistent with the CJEU’s ruling, including submitting arguments to
international tribunals based on the EU legal order. But the CJEU’s conclusions derived from EU law
do not alter this Tribunal’s mandate to proceed under the legal order on which its jurisdiction is
founded, namely the ECT. This means that an international investment tribunal empaneled under the
ECT is not bound by the jurisprudence of the CJEU, just as the CJEU is not bound by decisions taken
by ECT tribunals. Eskosol has quite rightly described this situation as follows:
… this Tribunal’s jurisdiction is derived from the ECT and its corresponding
mandate is to interpret the terms of that international treaty and apply them to the
facts of this case. By contrast, the ECJ derives its jurisdiction from the TFEU,
specifically Article 267 which grants the ECJ jurisdiction to give preliminary
rulings concerning (a) the interpretation of the TFEU and the Treaty on European
Union; and (b) the validity and interpretation of acts of the institutions, bodies,
offices or agencies of the Union.
Therefore, each of this Tribunal and the ECJ are judicial decision-making entities
created by virtue of the provisions of the respective treaties from which they each
derive their jurisdiction and authority. The decisions of the ECJ are thus not
binding upon this Tribunal.372
185. This conclusion is entirely consistent with those of many other investment tribunals, starting with the
Electrabel tribunal, which emphasized that:
This Tribunal is an international tribunal established under the ECT and the ICSID
Convention. From its perspective under international law, the Tribunal notes the
establishment under international law of the Parties’ consent to international
arbitration under the ICSID Convention and also the effect of Article 26 of the
ICSID Convention, providing for ICSID arbitration “to the exclusion of any other
remedy”. It is therefore no answer for the European Commission to submit that the
“proper avenue” for the Claimant lies only in “the Community courts”, whether
the Respondent’s own national courts or the EC.373
371
372
Rejoinder on Jurisdiction, ¶¶ 78-79.
373
84
The Eiser and Novoenergia tribunals observed to the same effect that their jurisdiction was based on
the express terms of the ECT, that they were not constituted on the basis of the “European legal order,”
and accordingly that they were not subject to the requirements of that legal order.374 The Vattenfall
tribunal noted that there was “no principle of public international law … which would permit the
Tribunal to interpret the words of the ECT, being its foundational jurisdictional instrument, so as to
give priority to external treaties (the TFEU and the TEU), and a court judgment interpreting those
treaties.”375 Finally, the RREEF tribunal explained the point as follows:
75. … if there must be a “hierarchy” between the norms to be applied by the

Tribunal, it must be determined from the perspective of public international law,
not of EU law. Therefore, the ECT prevails over any other norm (apart from those
of ius cogens – but this is not an issue in the present case). In this respect, this
Tribunal fully agrees with the position of the tribunal in Electrabel.
87. The Tribunal observes, however, that should it ever be determined that there
existed an inconsistency between the ECT and EU law … and absent any
possibility to reconcile both rules through interpretation, the unqualified obligation
in public international law of any arbitration tribunal constituted under the ECT
would be to apply the former. This would be the case even were this to be the
source of possible detriment to EU law. EU law does not and cannot “trump”
public international law.376
186. In conclusion, even if the Achmea Judgment were to be construed as a matter of EU law to extend to
the ECT, and not just to BITs similar to the one actually before the CJEU, that would not deprive this
Tribunal of jurisdiction to decide this case. Indeed, the Tribunal not only has the right to exercise its
jurisdiction under the ECT, it is under a duty to do so. The Tribunal is required to operate in the
international legal framework of the ECT and the ICSID Convention, outside the EU and the dictates
of EU law.
d. Whether the Achmea Judgment Invalidates ECT Provisions
187. Even if, arguendo, the Achmea Judgment were construed so as to reach issues under the ECT and to
be binding on international arbitration tribunals, there is a third alternative reason why it nonetheless
would not divest this Tribunal of jurisdiction. That is because as a matter of international law, a court
374
Eiser, ¶ 199 (CL-149); Novoenergia, ¶ 461 (CL-191).
375
376
RREEF, ¶¶ 74, 87 (CL-101).
85
judgment of any scope or authority cannot without more automatically invalidate a treaty or an
individual provision of a treaty.
i. There is no accepted ground for invalidation under the VCLT
188. First, there is no accepted ground for invalidation, as enumerated in the VCLT. Article 26 of the
VCLT provides that “[e]very treaty in force is binding upon the parties to it and must be performed by
them in good faith.”377 This provision, a codification of the customary international law principle
pacta sunt servanda, implies that a judgment of the CJEU cannot by itself put an end to the ECT, or
even to one of its Articles. For that purpose, certain procedures have to be followed by States wishing
to invalidate provisions, whether on the basis of a CJEU judgment that the ECT should be considered
incompatible with EU law, or on any other basis.
189. In this respect, pursuant to Article 42 of the VCLT (to which both Italy and Belgium are parties), the
validity of Italy’s consent to be bound by a particular treaty can be challenged solely on the basis of
the grounds set forth in the VCLT:
Validity and continuance in force of treaties
1. The validity of a treaty or of the consent of a State to be bound by a treaty may

be impeached only through the application of the present Convention.
2. The termination of a treaty, its denunciation or the withdrawal of a party, may

take place only as a result of the application of the provisions of the treaty or of
the present Convention. The same rule applies to suspension of the operation of a
treaty.378
190. The grounds for invalidating a treaty are set out in Articles 46 through 53 of the VCLT: (a) provisions
of internal law regarding competence to conclude treaties (Article 46); (b) specific restrictions on
authority to express consent of the State (Article 47); (c) error (Article 48); (d) fraud (Article 49); (e)
corruption of a representative of a State (Article 50); (f) coercion of a representative of a State (Article
51); (g) coercion of a State by the threat or use of force (Article 52); and (h) conflict with a peremptory
norm of general international law (Article 53). Of these, the only possible ground for invalidating
Italy’s consent to arbitration under the ECT would be the first, i.e. provisions of internal law regarding
competence to conclude treaties, on the reasoning that the EU law, as interpreted by the CJEU, is part
of the internal law of all EU Member States. But even analyzed from this angle, the VCLT is not of
great assistance to Italy’s case, as Article 46(1) of the VCLT specifies that provisions of a State’s
377
378
86
internal law may not be invoked to invalidate its consent to be bound by a treaty, unless the violation
of internal law was “manifest” and concerned a “rule of fundamental importance”:
Provisions of internal law regarding competence to conclude treaties
1. A State may not invoke the fact that its consent to be bound by a treaty has been
expressed in violation of a provision of its internal law regarding competence to
conclude treaties as invalidating its consent unless that violation was manifest and
concerned a rule of its internal law of fundamental importance.
2. A violation is manifest if it would be objectively evident to any State conducting

itself in the matter in accordance with normal practice and in good faith.379
191. In this case, the Tribunal need not engage in discussion of the second factor in Article 46(1), namely
whether the rule of EU law at issue is “of fundamental importance.” That is because, in its view, any
incompatibility between Article 26 of the ECT and Articles 267 and 344 of the TFEU could not be
considered as “manifest” before the Achmea Judgment, as required by VCLT Article 46(1) and as this
this term is defined in VCLT Article 46(2).380
192. First, the Tribunal recalls that, in the Achmea Judgment, the CJEU framed the incompatibility between
intra-EU investment arbitration clauses and the TFEU in terms of the mere potential to threaten the
full effectiveness of EU law, not as a blatant violation of EU law:
56. Consequently, having regard to all the characteristics of the arbitral tribunal
mentioned in Article 8 of the BIT and set out in paragraphs 39 to 55 above, it must
be considered that, by concluding the BIT, the Member States parties to it
established a mechanism for settling disputes between an investor and a Member
State which could prevent those disputes from being resolved in a manner that
ensures the full effectiveness of EU law, even though they might concern the
interpretation or application of that law …
[…]
59. […] Article 8 of the BIT has an adverse effect on the autonomy of EU law.”381
193. Second, the Tribunal recalls that the question of the compatibility of intra-EU investment treaties with
EU law has been the subject of considerable debate. The position of the Commission itself has shifted.
When the EU expanded to the East in 2004, the purported incompatibility between intra-EU arbitration
379
380
Indeed, even after the Achmea Judgment it could be considered that incompatibility with the ECT was not
“manifest,” considering the diverging Declarations of EU Member States with respect to the ECT that were made in
January 2019, as discussed further in Section V.B.3 below.
381
Achmea Judgment, ¶¶ 56, 59 (RL-85) (emphasis added).
87
clauses and EU law was not raised as an issue. Subsequently, the Commission took the view that
Member States should begin proceedings to terminate intra-EU BITs according to their own terms. At
that time, however, the Commission was careful to note that these agreements did not terminate or
cease to apply automatically. Later, the Commission began arguing that intra-EU BITs already had
ceased to apply on account of being incompatible with EU law, but this position was by no means
universally accepted. Before the CJEU rendered its Achmea judgment, for example, Advocate General
Wathelet expressed the opinion that no incompatibility existed between either intra-EU BITs and the
ECT on the one hand and the EU Treaties on the other. The Tribunal considers that the shift in the
Commission’s own position, and the differing opinion of Attorney General Wathelet, perfectly
illustrate that the issue of the arbitration clauses’ compatibility with EU law – whether in bilateral or
in multilateral treaties – remained very much an open and complex question until the CJEU rendered
its first decision on the subject in the Achmea Judgment. In these circumstances, it was certainly not
“objectively evident to any State conducting itself in the matter in accordance with normal practice
and good faith”382 that the CJEU eventually would find an incompatibility to exist. In other words,
the violation was not “manifest” within the meaning of VCLT Article 46(2) before the Achmea
Judgment, and accordingly VCLT Article 46(1) is not a ground upon which Article 26 of the ECT can
be invalidated, at least for purposes of disputes where the investor invoked that Article long before the
Achmea Judgment was rendered.383
ii. The procedures of the VCLT have not been followed
194. Moreover, even if the statement of preclusion in the Achmea Judgment were considered as a viable
ground of invalidation under VCLT Article 46(2), such invalidation still must follow the established
procedures in the VCLT. The only circumstance in which a treaty may be deemed automatically
terminated under international law is where it is contrary to a norm of jus cogens, according to Article
64 of the VCLT : “If a new peremptory norm of general international law emerges, any existing treaty
which is in conflict with that norm becomes void and terminates.”384 It is quite evident, however, that
EU law does not qualify as a peremptory norm of general international law (or jus cogens) such that a
conflict with its norms and principles would invalidate Italy’s consent to be bound by the ECT.
382
VCLT, Article 46(2) (CL-57).
383
With respect to this temporal issue, see also Section V.B.2.e below.
384
88
195. In all other situations, procedures have to be followed to effectuate invalidation. These procedures are
set forth in Articles 65 to 67 of the VCLT as follows:
Article 65
Procedure to be followed with respect to invalidity,

termination, withdrawal from or suspension of the operation of a treaty
1. A party which, under the provisions of the present Convention, invokes either
a defect in its consent to be bound by a treaty or a ground for impeaching the
validity of a treaty, terminating it, withdrawing from it or suspending its operation,
must notify the other parties of its claim. The notification shall indicate the
measure proposed to be taken with respect to the treaty and the reasons therefor.
2. If, after the expiry of a period which, except in cases of special urgency, shall
not be less than three months after the receipt of the notification, no party has raised
any objection, the party making the notification may carry out in the manner
provided in article 67 the measure which it has proposed.
3. If, however, objection has been raised by any other party, the parties shall seek
a solution through the means indicated in Article 33 of the Charter of the United
Nations.385
4. Nothing in the foregoing paragraphs shall affect the rights or obligations of the
parties under any provisions in force binding the parties with regard to the
settlement of disputes.
5. Without prejudice to article 45, the fact that a State has not previously made the
notification prescribed in paragraph 1 shall not prevent it from making such
notification in answer to another party claiming performance of the treaty or
alleging its violation.
Article 66
Procedures for judicial settlement, arbitration and conciliation
If, under paragraph 3 of article 65, no solution has been reached within a period of
12 months following the date on which the objection was raised, the following
procedures shall be followed:
(a) any one of the parties to a dispute concerning the application or the
interpretation of article 53 or 64 may, by a written application, submit it to the
International Court of Justice for a decision unless the parties by common consent
agree to submit the dispute to arbitration;
385
Article 33 of the UN Charter provides: “The parties to any dispute, the continuance of which is likely to endanger
the maintenance of international peace and security, shall, first of all, seek a solution by negotiation, enquiry,
mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peaceful
means of their own choice.”
89
(b) any one of the parties to a dispute concerning the application or the
interpretation of any of the other articles in part V of the present Convention may
set in motion the procedure specified in the Annex to the Convention by submitting
a request to that effect to the Secretary-General of the United Nations.
Article 67
Instruments for declaring invalid, terminating, withdrawing

from or suspending the operation of a treaty
1. The notification provided for under article 65, paragraph 1, must be made in
writing.
2. Any act of declaring invalid, terminating, withdrawing from or suspending the

operation of a treaty pursuant to the provisions of the treaty or of paragraphs 2 or
3 of article 65 shall be carried out through an instrument communicated to the other
parties. If the instrument is not signed by the Head of State, Head of Government
or Minister for Foreign Affairs, the representative of the State communicating it
may be called upon to produce full powers.386
196. In other words, successive steps have to be followed. The first step, pursuant to Article 65(1) of the
VCLT, involves a notification to the other party or parties to the treaty in question of its view that
there was a “defect in its consent to be bound” by that treaty or another recognized ground for
impeaching the validity of the treaty. The notice should include a proposal for the measure to be taken
as a consequence of such defect. Second, pursuant to Article 65(2) of the VCLT, if the party thus
notified does not react after a period of at least three months, then the party invoking invalidity can
adopt the measure it proposed to rectify the situation. By contrast, if the party notified objects, then
(pursuant to Article 65(3) of the VCLT) the two parties have to resort to some means of dispute
settlement, like mediation or arbitration. The third step is that, if no solution has been found in 12
months after the objection was raised, then the parties should present their dispute to the ICJ, pursuant
to Article 66 of the VCLT. In the meantime, Article 65(4) states that “[n]othing in the foregoing
paragraphs shall affect the rights or obligations of the parties under any provisions in force binding
the parties with regard to the settlement of disputes.”
197. In this case, none of these steps required to invalidate the ECT or its Article 26 have been completed.
As previously noted in Section V.A.1, Italy did take steps to withdraw entirely from the ECT, but this
is subject to the 20-year sunset provision of ECT Article 47(3),387 and is far different from claiming
an invalidity in its original consent to be bound by the ECT based on an incompatibility with its internal
law. It results that unless and until Italy or other EU Member States pursue the procedures established
386
VCLT, Articles 65-67 (CL-57).
387
ECT Art. 47(3) (C-1).
90
by the ECT for declaring invalidity of their consent, the ECT remains in full effect for them, subject
to the timetable provided by the sunset provision for those who (like Italy) have given notice of an
intent to withdraw.
198. For all these reasons, the Tribunal concludes that whatever the scope and reach of the Achmea
Judgment may be, it cannot be considered as a matter of international law to automatically invalidate,
for Italy or any under EU Member State, either the ECT as a whole or the consent to arbitration
reflected in Article 26 of the ECT. The Tribunal considers that the principle of legal certainty entitles
investors to rely legitimately upon a State’s written consent to arbitrate disputes, as long as that consent
has not been withdrawn or invalidated through the proper procedures, including those set forth in the
underlying treaty and the express provisions in the VCLT.
e. Whether the Achmea Judgment Retroactively Invalidates Consent
199. Finally, even if all of the prior grounds established in Sections V.B.2.b, V.B.2.c and V.B.2.d were not
an issue with respect to the Achmea Judgment’s possible invalidation of EU Member State consent to
ECT arbitration generally, they still would not divest this Tribunal of jurisdiction to resolve this
particular case. That is because any invalidation of ECT Article 26 could not be applied retroactively
to invalidate a consent to arbitration given before the Achmea Judgment, but only prospectively for
purposes of investors who have not yet initiated an ECT arbitration. In the Tribunal’s view, this
conclusion holds whether the Achmea Judgment itself is considered under EU law to be applied ex
nunc (i.e., for the future, starting from the date of the Judgment) or alternatively ex tunc (i.e., from the
outset, dating back to ratification of the ECT allegedly without proper consent).
i. The analysis if the Achmea Judgment is prospective only under EU

law
200. The outcome in the first scenario, in which as a matter of EU law the Achmea Judgment is considered
as having only prospective effects, is straightforward to explain.
201. The jurisdiction of an international tribunal must be evaluated as of the date when the parties have
given their consent to submit a dispute to arbitration. In this case, Article 26(3) of the ECT states that
“each Contracting Party hereby gives its unconditional consent to the submission of a dispute to
international arbitration or conciliation in accordance with the provisions of this Article,” including
various procedural options, one of which is ICSID arbitration.388 Eskosol has chosen ICSID arbitration
388
ECT, Article 26(3) (C-1) (emphasis added).
91
as among the options available to it. Article 25(1) of the ICSID Convention in turn provides that
“[w]hen the parties have given their consent, no party may withdraw its consent unilaterally.”389 In
other words, once consent for arbitration under the ICSID Convention has been given, it becomes
irrevocable, and no posterior event can annul such consent retroactively.
202. It is not controversial that the jurisdiction of an ICSID tribunal is fixed at the moment the proceedings
are deemed to have commenced. This has been stated repeatedly by ICSID tribunals. For example,
the tribunal in the CSOB case stated that “it is generally recognized that the determination whether a
party has standing in an international judicial forum for purposes of jurisdiction to institute
proceedings is made by reference to the date on which such proceedings are deemed to have been
instituted.”390 Support for this proposition also can be found in the Vivendi case, where the tribunal
explained as follows:
61. This is not only a principle of ICSID proceedings; it is an accepted principle

of international adjudication that jurisdiction will be determined in the light of the
situation as it existed on the date when the proceedings were instituted. Events
that take place before that date may affect jurisdiction; events that take place after
that date do not. The ICJ developed cogent case law to this effect in the Lockerbie
case. There, in a preliminary objection, Libya relied on the Montreal Convention
to establish the Court’s jurisdiction. The United States and the United Kingdom
contended that Security Council Resolutions adopted after the initiation of the
proceedings deprived the Court of jurisdiction. The Court rejected categorically
the arguments of the United States and the United Kingdom, deciding that:
“The Court cannot uphold this line of argument. Security Council

Resolutions 748 (1992) and 883 (1993) were in fact adopted after the filing
of the Application on 3 March 1992. In accordance with its established
jurisprudence, if the Court had jurisdiction on that date, it continues to do
so. The subsequent coming into existence of the above-mentioned
Resolutions cannot affect its jurisdiction once established ...”
62. The Court confirmed this rule in the Arrest Warrant case, where it stated:
“The Court recalls that, according to its settled jurisprudence, its

jurisdiction must be determined at the time that the act instituting
proceedings was filed. Thus, if the Court has jurisdiction on the date the
case is referred to it, it continues to do regardless of subsequent events.
Such events might lead to a finding that an application has subsequently
become moot and to a decision not to proceed to judgment on the merits,
but they cannot deprive the Court of jurisdiction ...”
389
ICSID Convention, Article 25(1) (emphasis added).
390
Ceskoslovenska Obchodni Banka, A.S. v. Slovak Republic, ICSID Case No. ARB/97/4, Decision of the Tribunal
on Objections to Jurisdiction, ¶ 3 (24 May 1999) (CL-157).
92
63. The consequence of this rule is that, once established, jurisdiction cannot be
defeated. It simply is not affected by subsequent events. Events occurring after the
institution of proceedings (other than, in a case like this, an ad hoc Committee’s
Decision to annul the prior jurisdictional finding) cannot withdraw the Tribunal’s
jurisdiction over the dispute.391
203. There is no question that the Achmea Judgment itself was an event posterior to the commencement of
these proceedings. Accordingly, if that Judgment is itself deemed to be prospective only, it cannot
affect the consent granted by both Parties prior to the date on which it was rendered.
ii. The analysis if the Achmea Judgment is retroactive under EU law
204. Even if as a matter of EU law the Achmea Judgment is considered to be ex tunc, in the sense that Italy
lacked consent from the inception to agree to Article 26 of the ECT, this still would not imply that
Eskosol’s acceptance – prior to the Achmea Judgment – of Italy’s apparent offer of ECT arbitration is
considered to be void. This follows from Article 69 of the VCLT regarding the consequences under
international law of the invalidity of a treaty because of lack of consent.
205. Article 69 of the VCLT provides as follows:
Consequences of the invalidity of a treaty
1. A treaty the invalidity of which is established under the present Convention is

void. The provisions of a void treaty have no legal force.
2. If acts have nevertheless been performed in reliance on such a treaty:
(a) each party may require any other party to establish as far as possible in their
mutual relations the position that would have existed if the acts had not been
performed;
(b) acts performed in good faith before the invalidity was invoked are not rendered
unlawful by reason only of the invalidity of the treaty.
3. In cases falling under articles 49, 50, 51 or 52, paragraph 2 does not apply with
respect to the party to which the fraud, the act of corruption or the coercion is
imputable.392
206. Under Article 69(1), the general rule is that invalidation of a treaty based on the absence of consent
operates retroactively, with the effect that the provisions of that treaty are “void”
391
Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No.
ARB/97/3 (formerly Compañía de Aguas del Aconquija, S.A. and Compagnie Générale des Eaux v. Argentine
Republic), Decision on Jurisdiction, ¶¶ 61-63 (14 November 2005) (RL-37) (emphasis added).
392
93
and “have no legal force.” Consistent with the general rule, the parties to the treaty may require each
other to restore the situation that existed as between them ex ante (restitutio in integrum). However,
there is an important exception to this rule stated in Article 69(2)(b), under which acts that have been
performed “in good faith before the invalidity was invoked” are not considered unlawful simply
because of invalidity of the treaty. In the Tribunal’s view, this is the case for arbitration agreements
perfected before the Achmea Judgment, in reliance on EU Member States’ apparent offer of consent
to investor-State arbitration under the ECT or other treaties. The conclusion that investors accepted
that apparent offer in good faith follows from the point, discussed above, that any invalidity in the
offer of consent was far from “manifest” prior to the Achmea Judgment. Indeed, lack of consent was
neither manifested in the text of the ECT itself; the contemporaneous conduct of the Commission and
EU Member States, none of which “sought an opinion from the Court on the compatibility of that
treaty with the EU and FEU Treaties”;393 and the subsequent shifting positions of the Commission
regarding whether additional action by EU Member States would be required in order to terminate
intra-EU treaties. It was not until the CJEU actually issued the Achmea Judgment that, at the very
earliest, given persisting debate about whether that Judgment even reaches the ECT, it could be said
that investors were placed on notice about the risks of relying on Member States’ apparent consent to
arbitration in Article 26 of the ECT.
3. The January 2019 Members’ Declaration
207. The Tribunal turns now to Italy’s Termination Request on 4 February 2019, by which it requested “an
award declaring immediate termination” of this arbitration, by virtue of the January 2019 Declaration
filed by 22 EU Member States, including Italy and Belgium.
208. As it will be recalled, the January 2019 Declaration was entitled “Declaration of the Governments of
the Member States on the legal consequences of the judgment of the Court of Justice in Achmea and
on investment protection in the European Union.” Citing the Achmea Judgment, the January 2019
Declaration first stated that “Member States are bound to draw all necessary consequences from that
judgment pursuant to their obligations under Union law.”394 The rest of the Declaration may be
divided into two parts, the first expressing views on certain legal issues in the wake of the Achmea
393
(RL-91).
394
January 2019 Declaration, p. 1.
94
Judgment,395 and the second declaring that in accordance with those views, the 22 EU Member States
“will undertake the following actions without undue delay.”396
209. Regarding the legal issues, the signatories state inter alia as follows:
Union law takes precedence over bilateral investment treaties concluded between
Member States.1 As a consequence, all investor-State arbitration clauses contained
in bilateral investment treaties concluded between Member States are contrary to
Union law and thus inapplicable. They do not produce effects including as regards
provisions that provide for extended protection of investments made prior to
termination for a further period of time (so-called sunset or grandfathering
clauses). An arbitral tribunal established on the basis of investor-State arbitration
clauses lacks jurisdiction, due to a lack of a valid offer to arbitrate by the Member
State party to the underlying bilateral investment Treaty.
Furthermore, international agreements concluded by the Union, including the

Energy Charter Treaty, are an integral part of the EU legal order and must therefore
be compatible with the Treaties.2 Arbitral tribunals have interpreted the Energy
Charter Treaty as also containing an investor-State arbitration clause applicable
between Member States.3 Interpreted in such a manner, that clause would be
incompatible with the Treaties and thus would have to be disapplied.4 397
210. The passages above contain several footnotes. The first footnote, following the statement that “Union
law takes precedence over bilateral investment treaties concluded between Member States,” cites
certain CJEU judgments and then asserts, without any analysis or citations, that “[t]he same result
follows also under general public international law, in particular from the relevant provisions of the
Vienna Convention on the Law of the Treaties and customary international law (lex posterior).”398
The second footnote, following the statement that the ECT “must be compatible with the Treaties,”
states that “[f]or the Energy Charter Treaty, its systemic interpretation in conformity with the Treaties
precludes intra-EU investor-State arbitration.”399 The fourth footnote, following the statement that if
the ECT’s investor-State arbitration clause were interpreted as applicable between Member States,
“that clause would be incompatible with the Treaties and thus would have to be disapplied,” cites only
to the Commission’s own 2018 Communication on “Protection of intra-EU investment.”400
395
January 2019 Declaration, pp. 1-2.
396
397
398
January 2019 Declaration, p. 1, n. 1.
399
400
95
211. Regarding the actions to be taken by the 22 signatories, the January 2019 Declaration pledges that they
will “undertake the following,” inter alia:
1. By the present declaration, Member States inform arbitration tribunals about

the legal consequences of the Achmea judgment, as set out in this declaration, in
all pending intra-EU investment arbitration proceedings brought either under
bilateral investment treaties concluded between Member States or under the
Energy Charter Treaty.
2. In cooperation with a defending Member State, the Member State, in which an

investor that has brought such an action is established, will take the necessary
measures to inform the investment arbitration tribunals concerned of those
consequences. Similarly, defending Member States will request the courts,
including in any third country, which are to decide in proceedings relating to an
intra-EU investment arbitration award, to set these awards aside or not to enforce
them due to a lack of valid consent.
3. By the present declaration, Member States inform the investor community that
no new intra-EU investment arbitration should be initiated.
...
5. In light of the Achmea judgment, Member States will terminate all bilateral
investment treaties concluded between them by means of a plurilateral treaty or,
where that is mutually recognised as more expedient, bilaterally.
...
8. Member States will make best efforts to deposit their instruments of ratification,
approval or acceptance of that plurilateral treaty or of any bilateral treaty
terminating bilateral investment treaties between Member States no later than 6
December 2019.
9. Beyond actions concerning the Energy Charter Treaty based on this declaration,
Member States together with the Commission will discuss without undue delay
whether any additional steps are necessary to draw all the consequences from the
Achmea judgment in relation to the intra-EU application of the Energy Charter
Treaty.401
212. Italy has now followed through on the first undertaking above, by virtue of informing this Tribunal
about the January 2019 Declaration in its letter of 4 February 2019. Having been so informed, the
question for the Tribunal is whether the January 2019 Declaration has legal significance for its
jurisdiction to proceed in this case.
401
96
213. The Tribunal’s first observation is that in their statements regarding legal issues on the first pages of
the January 2019 Declaration, the signatories have gone far beyond the actual holding in the Achmea
Judgment. First, as discussed in Section V.B.2.b above, it is far from clear whether the Achmea
Judgment stands for the proposition that “all investor-state arbitration clauses contained in bilateral
investment treaties … are contrary to Union law,”402 or simply those with a “provision … such as
Article 8” of the Achmea BIT,403 i.e., clauses that make EU law part of the applicable law of the treaty
and thus require tribunals to apply EU law in reaching their decision.
214. Second, even if the Achmea Judgment did stand for a proposition regarding “all” intra-EU BITs, it
does not address the ECT, much less state that the ECT’s arbitration clause – which contains no
command about applying EU law, and to which the EU also agreed by becoming a Contracting State
– itself “would be incompatible with the Treaties.”404 There is nothing in the Achmea Judgment that
even purports to reach the conclusion in the second footnote of the January 2019 Declaration, namely
that a “systemic interpretation [of the ECT] in conformity with the Treaties precludes intra-EU
investor-State arbitration.”405 This reality was emphasized by the six other EU Member States that
have declined to express a view at this time regarding the compatibility of EU law and the ECT, based
on the Achmea Judgment’s complete silence about the ECT in its analysis.406
215. Finally, and most importantly, the Achmea Judgment was restricted to a discussion of EU law, and
nowhere purported to discuss the broader international law consequences of its findings regarding EU
law. There is no discussion whatsoever in the Achmea Judgment of the points asserted in the first
footnote of the January 2019 Declaration, namely that “[t]he same result follows also under general
public international law, in particular from the relevant provisions of the Vienna Convention on the
Law of the Treaties and customary international law (lex posterior).”407 It certainly did not explain,
as a matter of either VCLT conflicts analysis or VCLT rules on invalidity of treaty provisions, that
402
403
404
405
406
For example, in a Declaration signed on 16 January 2019, Hungary stated that “in its view, the Achmea Judgment
concerns only intra-EU bilateral treaties. The Achmea Judgment is silent on the investor-state arbitration clause in the
[ECT] and it does not concern any pending or prospective arbitration proceedings initiated under the ECT. Against
this background, Hungary underlines the importance of allowing for due process and considers that it is inappropriate
for a Member State to express its views as regards the compatibility with Union law of the intra-EU application of the
ECT.” Finland, Luxembourg, Malta, Slovenia and Sweden expressed a similar position in another Declaration signed
on 16 January 2019.
407
97
intra-EU arbitration clauses are “inapplicable” and “would have to be disapplied,” with the effect that
an “arbitral tribunal established on the basis of [such] clauses lacks jurisdiction, due to a lack of a valid
offer to arbitrate.”408
216. In other words, these particular assertions by the 22 Member State signatories are not grounded in the
express findings of the CJEU in the Achmea Judgment, but merely reflect the signatories’ own
interpretation of the further “legal consequences of the judgment,” as the title of the January 2019
Declaration reflects. Moreover, in expressing that interpretation the signatories made no reference to
any international law analysis. There is no attempt in the January 2019 Declaration to work through,
for example, the impact of the numerous VCLT provisions this Tribunal has carefully analyzed above.
217. The Tribunal further notes that important language in the signatories’ undertakings is stated in the
future tense. For example, in undertaking numbers 5 and 8 the signatories state that they “will
terminate” all bilateral investment treaties concluded between them, and “will make best efforts” to
complete this process by 6 December 2019. With respect to the ECT, the signatories state in
undertaking number 9 they state that they “will discuss … whether any additional steps are necessary
to draw all the consequences from the Achmea judgment in relation to the intra-EU application of the
Energy Charter Treaty.”409 The use of the future tense suggests that the signatories do not believe their
intra-EU BITs already have been terminated for invalidity of the underlying consent, much less that
an equivalent result already has been accomplished with respect to the intra-EU application of the
ECT. As discussed above in Section V.B.2.d, the VCLT provides specific procedures in this regard,
yet there is no assertion in the January 2019 Declaration that these procedures have been commenced,
much less completed.
218. In these circumstances, the Tribunal is unable to accept Italy’s assertion that the mere fact that Italy
and Belgium both signed the 2019 Declaration requires termination of these proceedings. The
proposition would require a finding that even with no analysis to support its key assertions regarding
international law, the 2019 Declaration qualifies simply by its existence as a “binding instrument”
amounting to a “shared understanding … regarding the interpretation of the ECT,”410 and moreover
one that applies even to cases that were filed years before any such interpretation was declared, based
on the plain meaning of a treaty text that has been in force for decades. Yet, neither VCLT Article
408
409
January 2019 Declaration, pp. 3-4 (emphasis added).
410
Termination Reply, ¶¶ 4, 7.
98
31(2)(b) or VCLT Article 31(3)(a), which Italy invokes in support of this position,411 requires such a
result.
219. First, VCLT Article 31(2)(b) provides that “[t]he context for the purpose of the interpretation of a
treaty shall comprise, in addition to the text, … any instrument which was made by one or more parties
in connection with the conclusion of the treaty and accepted by the other parties as an instrument
related to the treaty.”412 Yet, the January 2019 Declaration was not “made … in connection with the
conclusion” of the ECT, in the sense that various instruments deposited as part of its ratification
process were, and thus hardly can be considered a reliable record of the contemporaneous
understanding of the relevant Contracting Parties at the time the ECT came into force. To the contrary,
it was issued 25 years after the “conclusion” of the ECT, in the context of pending arbitrations against
various EU Member States. The Tribunal does not interpret VCLT Article 31(2)(b) as requiring
obedience to post-hoc statements of this sort as relevant (much less determinative) “context” for
interpreting the original intent of these Contracting Parties.
220. Different considerations apply to VCLT Article 31(3)(a), which does address a “subsequent
agreement” as distinct from one made “in connection with the conclusion” of a treaty. Article 31(3)(a)
states that “[t]here shall be taken into account, together with the context … any subsequent agreement
between the parties regarding the interpretation of the treaty or the application of its provisions.”413
The first point here is that there is a significant distinction in international law between interpretations
agreed by all Contracting Parties to a multilateral treaty, and those offered unilaterally by only a subset
of such Parties. This point is firmly established by the very authority Italy invokes in support of its
arguments, namely the ILC’s 2001 Guide to Practice on Reservations to Treaties, which distinguishes
between “interpretative declarations” made unilaterally by one or more States or international
organizations and those accepted by all signatories to a particular treaty. In particular, “[t]he joint
formulation of an interpretative declaration by several States or international organizations does not
affect the unilateral character of that interpretative declaration,”414 whereas “[a]n interpretative
declaration that has been approved by all the contracting States and contracting organizations may
constitute an agreement regarding the interpretation of the treaty.”415
411
Termination Request, p. 2.
412
VCLT, Article 31(2)(b) (CL-57) (emphasis added).
413
VCLT, Article 31(3)(a) (CL-57) (emphasis added).
414
ILC 2011 Guide to Practice on Reservations to Treaties, Guideline 1.2.1, p. 2 (RL-102).
415
ILC 2011 Guide to Practice on Reservations to Treaties, Guideline 4.7.3, p. 27 (RL-102); see also id., Comments
(1) and (2) to Guideline 4.7.3, p. 559 (“Assent to an interpretive declaration by all the other parties to the treaty …
99
221. The Tribunal is unable to accept Italy’s suggestion that the critical requirement of unanimity in a
subsequent agreement on interpretation can be dispensed with in the ECT context, since any particular
arbitration will involve only two interested States (the investor’s home State and the host State of the
investment), who have “reciprocal” obligations.416 While it may be true that only Belgium and Italy
have any stake specifically in this arbitration, this does not mean that the terms of the ECT can be
transformed simply by their bilateral agreement. As previously discussed, the terms of a multilateral
treaty must be given a consistent meaning, not varying meanings depending which particular States
may have concrete interests in the outcome of a particular dispute and/or subsequently agree to
particular interpretations.
222. A further difficulty with Italy’s reliance on the January 2019 Declaration is that it does not actually
purport to “interpret” any particular term of the underlying treaty, such as the terms “Contracting
Party,” “REIO” or “Area” that the Tribunal assessed through a detailed VCLT Article 31 analysis in
Section V.A. above. To the contrary, while denominated as “interpretation,” the Declaration is more
a statement of current political will. This is quite different from the types of “subsequent agreements”
that VCLT Article 31(3)(a) was intended to address. As the ILC’s 1966 Commentaries on the Draft
VCLT Articles discuss regarding this provision, “[a] question of fact may sometimes arise as to
whether an understanding reached during the negotiations concerning the meaning of a provision was
or was not intended to constitute an agreed basis for its interpretation.”417 The January 2019
Declaration does not assert, however, that any understanding regarding ECT Article 26(6)’s
application to intra-EU disputes actually was reached during the ECT negotiations. To the contrary,
it seems that the issue was not discussed at all, likely because (as Advocate General Wathelet has
suggested) neither the EU Member States nor the Commission at the time “had the slightest suspicion
that [Article 26(6)] might be incompatible” with EU law.418
223. The goal of the January 2019 Declaration thus appears less to confirm a shared understanding at the
time, but rather to offer a new understanding (as among the 22 signatories) for the purposes of
overriding interpretations of the ECT that arbitral tribunals have reached in various intra-EU
radically alters the situation. … Unanimous agreement by all the parties therefore constitutes a true interpretative
agreement which represents the will of the ‘masters of the treaty’ and thus an authentic interpretation.”).
416
417
(emphasis added).
418
(RL-91).
100
disputes.419 VCLT Article 31(3)(a) is not, however, a trump card to allow States to offer new
interpretations of old treaty language, simply to override unpopular treaty interpretations based on the
plain meaning of the terms actually used. Indeed, the ILC was quite clear in its 1966 Commentaries
that even a contemporaneous document “made … in connection with the conclusion of the treaty,”
within the meaning of what became VCLT Article 31(2)(b), is “not … necessarily to be considered as
an integral part of the treaty,” but simply as “part of the context for the purpose of arriving at the
ordinary meaning of the terms of the treaty.”420 This is all the more true for an interpretative
declaration, which “does not modify treaty obligations,” but “may only specify or clarify the meaning
or scope which its author attributes to a treaty … and may, as appropriate, constitute an element to be
taken into account in interpreting the treaty in accordance with the general rule of interpretation of
treaties.”421
224. In particular, an interpretative declaration may “corroborate or ‘support’ an interpretation that has
already been determined by other methods,” such as “the objective elements listed in articles 31 and
32 of the Vienna Convention,” but it cannot override the application of those elements. 422 The ILC
explains that:
It is therefore clear from practice and doctrinal analyses that interpretative

declarations come into play only as an auxiliary or complementary means of
interpretation corroborating a meaning revealed by the terms of the treaty,
considered in light of its object and purpose. As such, they do not produce an
autonomous effect: when they have an effect at all, interpretive declarations are
associated with another instrument of interpretation, which they usually uphold.423
The ILC explains the bottom line as follows: “Whether or not the interpretation is correct, its author
remains bound by the provisions of the treaty.”424
225. As Eskosol notes,425 there can also be a fine line between an interpretive declaration and an attempted
reservation to a treaty, which becomes particularly important in cases where a treaty unambiguously
prohibits the latter. This is the case for the ECT, which states authoritatively in Article 46: “No
419
See January 2019 Declaration, p. 2 (“Arbitral tribunals have interpreted the Energy Charter Treaty as also
containing an investor-State arbitration clause applicable between Member States.”)
420
See ILC Draft Articles on the Law of Treaties with Commentaries, 1966, p. 221 (Art. 27, Commentary, item 13).
421
ILC 2011 Guide to Practice on Reservations to Treaties, Guideline 4.7.1.1, p. 26 (RL-102).
422
ILC 2011 Guide to Practice on Reservations to Treaties, Comment (26) on Guideline 4.7.1, p. 555 (RL-102).
423
424
425
Termination Rejoinder, pp. 2-3.
101
reservations may be made to this Treaty.”426 The ILC cautions not to defer to mere labels in
distinguishing between the two.427 Rather, its Guideline 1.3.3 offers a practical distinction, namely
that “[w]hen a treaty prohibits reservations to all or certain of its provisions, a unilateral statement
formulated in respect of those provisions … nevertheless constitutes a reservation if it purports to
exclude or modify the legal effect of certain provisions of the treaty, or of the treaty as a whole with
respect to certain specific aspects, in their application as to its author.”428 In other words:
In determining the legal nature of a statement formulated in connection with a

treaty, the decisive criterion lies in the effective result that implementing the
statement has (or would have). If it results (or would result) in modifying or
excluding the legal effect of the treaty or certain of its provisions, it is a reservation
“however phrased or named”; if the statement simply clarifies the meaning or
scope that its author attributes to the treaty or certain of its provisions, it is an
interpretative declaration.429
Applying this standard, the ultimate effect of the 2019 Declaration would be to significantly modify
the legal reach of Article 26(6) of the ECT as otherwise interpreted pursuant to the ordinary meaning
of its terms, with the effect of excluding that reach entirely in any intra-EU dispute brought against
any of the 22 signatories. That is more in the nature of an attempted reservation to the ECT than a
simple clarification in support of the plain meaning of the text.
226. Finally, even if the January 2019 Declaration were to be treated as a binding joint interpretation of
ECT Article 26(6) on a prospective basis, the Tribunal is unable to accept that it should be given
retroactive effect to require the termination of a pending arbitration, initiated in good faith by an
investor years before the Declaration was issued, and indeed already sub judice as of its issuance.
Giving it such effect in a pending case would go against the security of the legal order intended to be
achieved by Article 25(1) of the ICSID Convention, namely that “[w]hen the parties have given their
consent, no party may withdraw its consent unilaterally.” The ECT itself contains protections against
revocation of specific assurances provided to investors, through the concept of legitimate expectations
embodied in fair and equitable treatment. In the Tribunal’s view, it would be inconsistent with general
notions of acquired rights under international law to permit States effectively to non-suit an investor
part-way through a pending case, simply by issuing a joint document purporting to interpret long-
standing treaty text so as to undermine the tribunal’s jurisdiction to proceed. Such a result would be
426
ECT Article 46 (C-1).
427
See ILC 2011 Guide to Practice on Reservations to Treaties, pp. 63-65 (Comment (5)) (RL-102).
428
ILC 2011 Guide to Practice on Reservations to Treaties, Guideline 1.3.3, p. 3 (RL-102).
429
ILC 2011 Guide to Practice on Reservations to Treaties, p. 76, Comment (3) (RL-102).
102
particularly inappropriate to condone, where the express words of the joint document reveal that the
signatories themselves do not believe the treaty has yet been terminated, but simply plan to “discuss
without undue delay whether any additional steps are necessary” to achieve the desired result.430
227. The Tribunal adds, as a final note, that the January 2019 Declaration seems to be, by its own word,
only a means of information of the position of the EU Member States signatories of this Declaration,431
which have now aligned with the Commission position. It indicates also, as already mentioned, that
no EU Member State considers that its intra-EU BITs or the ECT have automatically been terminated
by virtue of either the Achmea Judgment or the January 2019 Declaration itself,432 which is precisely
the conclusion to which this Tribunal has arrived in the course of its analysis.
THE DUTY TO RENDER AN ENFORCEABLE AWARD
228. Finally, the Tribunal briefly addresses the issue of enforceability of its eventual Award, which the
Parties have raised in their submissions. In so doing, the Tribunal emphasizes that this Section does
not imply any conclusion that there necessarily will be any Award that requires enforcement, either
against Italy (if Eskosol prevails on the remaining jurisdiction and merits issues, and obtains an award
of either damages or costs), or by Italy (if Italy prevails on either jurisdiction or the merits, and obtains
a costs award against Eskosol). By including this Section in the discussion, the Tribunal is not
signaling anything about its current thinking on the remaining jurisdictional, liability, damages or costs
issues in the case.
229. Rather, the Tribunal discusses enforcement only because the Parties have raised the issue as ostensibly
relevant to the Tribunal’s consideration of Italy’s intra-EU jurisdictional objection. As noted in the
summary of their positions, Italy contends that the Tribunal should “refus[e] to exercise jurisdiction”
because any award it would issue would be unenforceable due to a lack of a “functioning arbitration
agreement,” and a tribunal should not proceed where it is unable to “discharge the essential mandate
to produce an enforceable award.”433 Eskosol deems the issue of enforceability to be “pure
speculation,” and states that “more fundamentally, questions of enforceability in certain jurisdictions
should not impact a tribunal’s jurisdictional analysis.”434
430
January 2019 Declaration, p. 4, ¶ 9.
431
See January 2019 Declaration, p. 3, ¶¶ 1-3.
432
See January 2019 Declaration, p. 4, ¶¶ 5, 9.
433
Rejoinder, ¶ 122.
434
Eskosol PHB, ¶ 99 & n. 152 (quoting Vattenfall, ¶¶ 230-231 (CL-193)).
103
230. The Tribunal of course acknowledges that the Achmea Judgment is binding in the European legal
order, including on EU Member States (including Italy and Belgium) and in their respective judicial
systems. The CJEU has not yet clarified whether it considers the reasoning in that Judgment to be
applicable to the ECT, as a matter of EU law. If the CJEU ultimately finds the ECT distinguishable
from the intra-EU BIT that it discussed in the Achmea Judgment – for example, because an ECT
tribunal does not apply EU law to resolve the dispute, as this Tribunal has found in interpreting ECT
Article 26(6) – then ultimately no enforcement issue may arise even within Europe.
231. Nonetheless, the Tribunal accepts that if the Achmea Judgment ultimately is determined to be
applicable to the ECT, a court subject to the EU legal order could eventually question the
enforceability under EU law of an ECT award rendered in an intra-EU case. In non-ICSID arbitrations,
this might happen because the seat of the arbitration was in an EU Member State, but that possibility
does not arise in ICSID cases such as this one, which are de-nationalized, i.e., with no legal seat in
any individual State. In ICSID cases, therefore, the concern about enforceability would arise
principally in the scenario in which enforcement is sought in an EU Member State. Logically, that
would not occur if Italy prevails: Eskosol would have no damages or cost award to enforce against
Italy, and Italy may be unlikely to seek enforcement through the EU courts of any costs award against
Eskosol that is not paid voluntarily, given its position that this Tribunal has no proper authority to
render any award. Thus, it seems that any enforcement challenge in this case could arise only in a
scenario under which Eskosol prevails on both jurisdiction and merits and obtains a damages award
and/or a costs award against Italy. The Tribunal accepts that there could be a risk in that scenario that
a European court might not grant enforcement of such an award.
232. The Tribunal also accepts that Eskosol could face certain challenges in enforcing an award against
Italy in a non-EU country, beyond the common problem that investors face of locating appropriate
overseas assets that are not immune from execution. Article 54(1) of the ICSID Convention obligates
all Contracting States to “recognize an award rendered pursuant to this Convention as binding and
enforce the pecuniary obligations imposed by that award within its territories as if it were a final
judgment of a court in that State.” Nonetheless, non-EU courts may face certain pressure not to
enforce an intra-EU investment arbitration award, based on the undertaking by Italy and others in the
January 2019 Declaration that “defending Member States will request the courts, including in any
third country, which are to decide in proceedings relating to an intra-EU investment arbitration award,
104
to set these awards aside or not to enforce them due to a lack of valid consent.”435 Alternatively, if a
non-EU court proceeds to enforce an award against Italy, the Commission eventually could deem any
amounts collected to be unlawful State aid, and require Italy to seek recovery from Eskosol in an
equivalent amount.
233. The Tribunal expresses no views on the appropriateness of such potential developments as a matter of
international law. It identifies these possibilities only to illustrate that while the scenarios are limited
in which issues of enforcement of an award could arise, it accepts that there are at least some scenarios
where enforcement could be challenging and/or create further residual disputes. Nonetheless, a
tribunal has not rendered an “unenforceable award” simply because its award may prove challenging
to enforce, or is capable of enforcement only in certain jurisdictions but not in others. The issue of a
categorically “unenforceable award” would seem to arise only if an award is issued in violation of the
mandatory rules of the arbitral seat. That possibility does not arise in ICSID cases such as this one.
234. The Tribunal of course accepts that it is preferable to render an award that is easily enforceable. But
the Tribunal does not agree with the proposition that it is restricted in its jurisdiction simply because
there may be some limitations or complexities that arise at the enforcement stage. This Tribunal’s
jurisdiction is not determined by any national rules governing the enforceability of arbitral awards, but
rather by the ICSID Convention and the ECT, neither of which subordinates jurisdiction to issues of
enforcement.
235. Based on these considerations, the Tribunal rejects Italy’s contention that any award it may render (in
either Party’s favor) necessarily would be unenforceable. The Tribunal has found that it has
jurisdiction under the ECT, notwithstanding Italy’s intra-EU jurisdictional objection, the Achmea
Judgment, and the Termination Request based on the January 2019 Declaration. In these
circumstances, a tribunal finding that it has jurisdiction under the ICSID Convention and the ECT
should not decline to exercise that jurisdiction, simply because there are certain scenarios under which
one or the other Party might face challenges in enforcement in certain jurisdictions, based on their
national laws and/or their other treaty obligations. This Tribunal has a duty to exercise the jurisdiction
it has found to exist, and will proceed to do so with respect to the issues remaining in this case.
435
January 2019 Declaration, p. 4, ¶ 2 (emphasis added). It remains to be seen how the courts of such third countries
(i.e., courts not seated in EU Member States) would react to such requests, which effectively ask them to accept the
extraterritorial application of EU law at the enforcement stage of disputes that arbitral tribunals already have found
not to be governed by EU law.
105
DECISION
236. For the reasons set forth above, the Tribunal unanimously decides as follows:
(1) Italy’s request of 4 February 2019 for an award declaring immediate termination of this
arbitration, on the basis of the January 2019 Declaration of 22 EU Member States, is hereby
denied;
(2) Italy’s related jurisdictional objection, based on the alleged inapplicability of the ECT to
disputes between investors of one EU Member State and another EU Member State, is hereby
denied;
(3) The Tribunal will address separately in its Award the other jurisdictional and/or merits issues
remaining in this case; and
(4) Decisions regarding costs are deferred for resolution in the context of the forthcoming
Award.
106
[Signed] [Signed]
[Signed]
107

Esokol Vs Italy

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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

ESKOSOL S.P.A. IN LIQUIDAZIONE

ICSID Case No. ARB/15/50

ITALY’S REQUEST FOR IMMEDIATE TERMINATION

ITALY’S JURISDICTIONAL OBJECTION BASED ON INAPPLICABILITY

Members of the Tribunal

Secretary of the Tribunal

The bilateral investment treaty between the

The judgment of the CJEU issued on 6 March 2018

Italy’s request for bifurcation, as contained in

Eskosol’s Response to Respondent’s Bifurcation

CJEU or ECJ The Court of Justice of the European Union

Commission The European Commission

The European Commission’s Application for

The European Commission’s Amicus Curiae Brief

The European Commission’s Update of Amicus

Italy’s Counter-Memorial on the Merits dated 27

ECT The 1994 Energy Charter Treaty

Eskosol Eskosol S.p.A in liquidazione

Eskosol’s Post-Hearing Brief dated 21 December

Hearing on Jurisdiction and the Merits held from

ICJ International Court of Justice

ILC International Law Commission

Italy PHB Italy’s Post-Hearing Brief dated 21 December 2018

The Declaration of 15 January 2019 by 22 EU

Memorial Eskosol’s Memorial dated 9 May 2017

Italy’s Memorial on Jurisdiction and Requests for

Reply Eskosol’s Statement of Reply dated 2 March 2018

Rejoinder Italy’s Rejoinder dated 25 May 2018

Eskosol’s Rejoinder on Jurisdiction dated 15 June

Eskosol’s Request for Arbitration dated 9

Italy’s Article 41(5) Objection for Manifest Lack

Eskosol’s submission dated 1 March 2019, in

Italy’s submission dated 26 February 2019, in

Italy’s request for an award declaring immediate

Eskosol’s response to the Termination Request,

Tr. Day [#], [page:line] Transcript of the Hearing

TFEU Treaty on the Functioning of the European Union

VCLT Vienna Convention on the Law of Treaties

THE RELEVANT PROCEDURAL HISTORY

THE PARTIES’ POSITIONS

1. Interpretation of the ECT

a. Progressive Development of EU Treaties

b. The Achmea Judgment

c. The January 2019 Declaration

[I]nternational agreements concluded by the Union, including the Energy Charter

… With regard to agreements concluded between Member States … [t]he same

… By the present declaration, Member States inform investment arbitration

1. Interpretation of the ECT

a. Progressive Development of EU Treaties

b. The Achmea Judgment

c. The January 2019 Declaration

THE COMMISSION’S POSITION

INTERPRETATION OF THE ECT

1. Progressive Development of EU Treaties

2. The Achmea Judgment

THE TRIBUNAL’S ANALYSIS

INTERPRETATION OF THE ECT AS OF ITS ENTRY INTO FORCE