Strabag SE, Erste Nordsee-Offshore Holding GmbH and Zweite Nordsee-Offshore Holding GmbH v. Federal Republic of Germany
ICSID · Investment (ICSID and treaty) · Germany · 17 Nov 2024
Why it matters
This is a landmark intra-EU investment arbitration award under the ECT, issued after the CJEU's Achmea and Komstroy judgments questioned the compatibility of such arbitration with EU law. The Tribunal rejected Germany's jurisdictional objection based on EU law, asserting its jurisdiction under the ECT. It also clarified the standard for legitimate expectations in the context of regulatory changes in the renewable energy sector, awarding substantial damages for the breach of FET and expropriation.
Summary
The dispute arose from Germany's amendments to its Renewable Energy Sources Act (EEG) between 2012 and 2017, which changed the support scheme for offshore wind energy from fixed feed-in tariffs to a competitive auction system. The Claimants, Austrian companies, had invested in developing two offshore wind projects (NOH 1 and NOH 2) and a gravity foundation technology (GFT) for installing wind turbines. They argued that the regulatory changes destroyed the economic viability of their investments, breaching the ECT's fair and equitable treatment (FET), expropriation, full protection and security, and non-impairment standards. Germany objected to jurisdiction on the grounds that intra-EU arbitration under the ECT is incompatible with EU law, citing the Achmea and Komstroy judgments. The Tribunal rejected this objection, holding that the ECT's arbitration clause remains valid between EU member states as a matter of international law. On the merits, the Tribunal found that Germany breached the FET standard by failing to provide a stable and predictable regulatory framework for the Claimants' investments, as the changes were not accompanied by adequate transitional provisions. It also found that the measures had an effect equivalent to expropriation of NOH 2's investments. However, the Tribunal dismissed the claims regarding the GFT, finding that the Claimants had not made a qualifying investment in that technology. The Tribunal awarded EUR 61.4 million to NOH 1 and EUR 179.5 million to NOH 2, plus interest and costs. The award is notable for its detailed analysis of the FET standard in the context of regulatory change and its firm stance on jurisdiction despite EU law challenges.
The detail
Parties: Strabag SE, Erste Nordsee-Offshore Holding GmbH and Zweite Nordsee-Offshore Holding GmbH v. Federal Republic of Germany
Case number: ICSID Case No. ARB/19/29
Outcome: The Tribunal found Germany breached the FET standard (Article 10(1) ECT) as to both offshore wind projects and expropriated NOH 2's investments (Article 13(1) ECT). Germany was ordered to pay EUR 61,400,000 to NOH 1 and EUR 179,546,773.55 to NOH 2, plus pre- and post-award interest at 3% compounded yearly, and 67% of Claimants' legal costs.
Quantum: EUR 240,946,773.55
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, international law
Issues in play: The case involved the collision between Germany's regulatory changes to its offshore wind energy framework (moving from fixed feed-in tariffs to competitive auctions) and the ECT's protections for foreign investors, particularly fair and equitable treatment and expropriation. The Tribunal had to determine whether the regulatory changes breached the legitimate expectations of the Austrian investors.
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