Encavis AG and others v. Italian Republic
ICSID · Investment (ICSID and treaty) · Italy · 11 Mar 2024
Why it matters
This award is significant as it is one of the first ICSID awards to address the intra-EU objection post-Achmea and Komstroy, and it upheld jurisdiction under the ECT despite EU law challenges. It also clarified the standard for fair and equitable treatment in the context of regulatory changes to renewable energy incentives, contributing to the growing body of case law on Italy's solar incentive reforms.
Summary
The case concerns claims by Encavis AG and other investors (collectively, 'Claimants') against the Italian Republic under the Energy Charter Treaty (ECT) regarding changes to Italy's renewable energy incentive regime. The Claimants, who invested in photovoltaic plants in Italy, alleged that Italy violated the ECT's fair and equitable treatment (FET) standard by retroactively reducing incentives (the 'Spalma-incentivi' decree and other measures). Italy raised several jurisdictional objections, including that the dispute was intra-EU and thus outside the ECT's scope following the CJEU's Achmea and Komstroy judgments. The Tribunal rejected the intra-EU objection, finding that the ECT remains applicable between EU Member States as a matter of international law. On the merits, the Tribunal analyzed whether Italy's measures breached the FET standard. It held that the FET standard requires stability and predictability of the legal framework, but that Italy's changes were not unreasonable or disproportionate given the need to control public spending. The Tribunal found that the Claimants did not have a legitimate expectation that the incentives would remain unchanged for 20 years, as the regulatory framework had always been subject to modification. Consequently, the Tribunal dismissed all claims. The award is notable for its detailed analysis of the intra-EU jurisdictional issue and its application of the FET standard to renewable energy regulatory changes.
The detail
Parties: Encavis AG and others v. Italian Republic
Case number: ICSID Case No. ARB/20/39
Outcome: The Tribunal dismissed all claims. Each party bears its own costs, and the costs of the proceeding are apportioned equally.
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, Italian law, EU law
Issues in play: The case involved a conflict between investment protections under the ECT and EU law, specifically the Achmea and Komstroy judgments which held that intra-EU investment arbitration is incompatible with EU law. The Tribunal had to decide whether it had jurisdiction over an intra-EU dispute under the ECT.
Read the full decision at italaw ↗
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