Reading an Intra-EU Disconnection Clause into the ECT to Deny Jurisdiction: The ICSID Tribunals’ Decisions in European Solar Farms and Sapec

This case-note analyses two recent decisions rendered by ICSID tribunals under the Energy Charter Treaty (ECT), whereby the majorities upheld Spain’s intra-EU law objection by adopting a novel approach and reasoning to reading into the ECT, an implicit disconnection clause, such that investor-state disputes between EU nationals and EU Member States cannot be arbitrated under the ECT. Moreover, the same chair was selected for both tribunals, although he previously had never acted as arbitrator in any intra-EU ECT-based arbitrations prior to these cases. In short, the tribunals’ majorities concluded that the definition of a Regional Economic Integration organization (‘REIO’), such as the European Union under Article 1(3) of the ECT, was a key contextual element for the interpretation of the dispute resolution provision under Article 26 of the ECT. Under Article 1(3), a REIO may take binding decisions on matters over which it has been transferred competence. The tribunals found this provision to be of significance and held that they lacked jurisdiction as the EU had been transferred competence by the EU Member States over the matters in issue, i.e., energy, the internal market and state aid. The claimants’ appointees disagreed on major points with the respective majorities. This case-note critically explores the possible implications of these decisions under public international law and intra-EU investor-state arbitration.