Belenergia S.A. v. Italian Republic
ICSID · Investment (ICSID and treaty) · Italy · 28 Aug 2019
Why it matters
This award is significant as it is one of the many ICSID cases against Italy concerning retroactive changes to solar energy incentives. The Tribunal upheld jurisdiction over intra-EU claims under the ECT, rejecting Italy's objection based on EU law, but ultimately dismissed all claims on the merits, finding that Italy's modifications were not unreasonable or discriminatory. The case illustrates the high threshold for establishing a breach of legitimate expectations in the context of regulatory changes.
Summary
Belenergia S.A., a Luxembourg company, invested in photovoltaic plants in Italy through ten special purpose vehicles. The plants benefited from generous feed-in tariffs and minimum price guarantees under Italian law (the 'Energy Account' regimes). In 2014-2015, Italy introduced several legislative changes that reduced these incentives, including the 'Spalma Incentivi' decree which spread out the tariff payments over a longer period. Belenergia claimed that these changes breached the Energy Charter Treaty (ECT), specifically the fair and equitable treatment (FET) standard, the umbrella clause, the most constant protection and security obligation, and the prohibition on unreasonable and discriminatory measures. Italy objected to jurisdiction on three grounds: that the ECT does not apply to intra-EU disputes (relying on the ECJ's Achmea judgment), that exclusive jurisdiction clauses in the GSE conventions barred ICSID arbitration, and that imbalance costs were taxation measures excluded from the ECT. The Tribunal rejected the intra-EU objection, finding that the ECT remains applicable between EU member states, and also rejected the other jurisdictional objections except for the imbalance costs claim, which it declined jurisdiction over. On the merits, the Tribunal held that Italy's changes did not breach the FET standard because the investor could not have a legitimate expectation that the regulatory framework would remain unchanged, given the broad discretion of states to modify their policies. The changes were not arbitrary or discriminatory, as they applied to all producers and were justified by the need to control public spending. The umbrella clause claim failed because the GSE conventions were not 'investment agreements' under the ECT. The Tribunal dismissed all claims and ordered each party to bear its own costs.
The detail
Parties: Belenergia S.A. v. Italian Republic
Case number: ICSID Case No. ARB/15/40
Outcome: The Tribunal dismissed all of Belenergia's claims on the merits, finding no breach of the ECT. Each party bears its own costs and shares arbitration costs equally.
Applicable law: Energy Charter Treaty (ECT); ICSID Convention; Italian law (including Legislative Decrees on renewable energy incentives)
Issues in play: The case involved a conflict between Italy's sovereign right to modify its renewable energy incentive regime and the investor's legitimate expectations under the ECT's fair and equitable treatment standard. The Tribunal also addressed the intra-EU jurisdictional objection under EU law.
Read the full decision at italaw ↗
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