Photovoltaic Knopf Betriebs GMBH v. Czech Republic
PCA · Investment (ICSID and treaty) · Czech Republic · 15 May 2019
Why it matters
This award is one of several Czech solar arbitration cases that tested the limits of investor protection against regulatory changes in renewable energy incentives. The Tribunal rejected the investor's claims, finding that the Czech Republic's solar levy was a tax and thus excluded from ECT protection, and that the investor's legitimate expectations were not violated because the regulatory framework was not specifically promised to remain stable. The case also addressed the Achmea issue, confirming jurisdiction under the BIT despite EU law objections.
Summary
The dispute arose from the Czech Republic's amendments to its renewable energy support regime, which included a solar levy on electricity from photovoltaic plants. The German investor, Photovoltaik Knopf Betriebs-GmbH, claimed that these measures violated the Fair and Equitable Treatment (FET) standard, full protection and security, and the prohibition of arbitrary and discriminatory treatment under the Germany-Czech Republic BIT and the Energy Charter Treaty (ECT). The Tribunal first addressed jurisdiction, rejecting the Czech Republic's argument that the solar levy was a tax falling under the ECT tax carve-out, and also rejecting the argument that intra-EU BIT arbitration was incompatible with EU law following the Achmea judgment. On the merits, the Tribunal found that the Czech Republic had not made specific promises to maintain a stable legal framework for solar investors. The incentive regime was subject to change, and the investor's reliance on general statements was not reasonable. The Tribunal held that the solar levy was a legitimate regulatory measure to address the overcompensation of solar producers and was not arbitrary or discriminatory. Consequently, all claims were dismissed. The Tribunal allocated 75% of arbitration costs to the Claimant and 25% to the Respondent, but each party bore its own legal fees.
The detail
Parties: Photovoltaic Knopf Betriebs GMBH v. Czech Republic
Case number: PCA Case No. 2014-21
Outcome: The Tribunal dismissed all of the Claimant's claims. The Claimant was ordered to pay EUR 49,180.98 to the Respondent for arbitration costs, and each party bore its own legal costs.
Applicable law: Germany-Czech Republic BIT (1990), Energy Charter Treaty (1998), UNCITRAL Arbitration Rules (1976)
Issues in play: The case involved a conflict between the Czech Republic's sovereign right to regulate renewable energy subsidies and the investor's right to fair and equitable treatment under the BIT and ECT. The Tribunal also addressed the EU law issue of intra-EU BIT arbitration in light of the Achmea judgment.
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