ENERGY SECURITY V. PUBLIC HEALTH?
NUCLEAR ENERGY IN INTERNATIONAL
INVESTMENT LAW AND ARBITRATION
VALENTINA VADI*
A nation that cannot control its energy sources cannot control its future.
Barack Obama1
ABSTRACT
Energy security, meant as the availability of energy sources at an affordable
price, has become essential to the functioning of modern economies and plays a
crucial role in international relations. In the accelerating global race for energy
resources and security, nuclear power raises a number of questions. On the one
hand, nuclear power plants are perceived as constituting a reliable source of
energy and playing an important role in energy security. On the other hand,
nuclear power is perceived as controversial because of the health and environmental risks associated with it.
After briefly discussing the importance of energy security and the relative
fragmentation of energy governance at the international level, this Article
highlights the potential clash between energy security (i.e. the need for states to
secure energy supply) and public safety (i.e. the protection of public health and
human life) in relation to foreign investments in the nuclear sector. It then
illustrates this with some nuclear energy-related investment disputes, focusing on
the Vattenfall II case. In Vattenfall II, a Swedish energy company has filed for
arbitration against Germany at the International Center for the Settlement of
Investment Disputes (ICSID) to obtain compensation for losses arising out of
government decision to phase nuclear energy out. The case, still pending, raises
interesting questions: Does the government decision breach international investment treaty provisions? Are arbitral tribunals a suitable forum to adjudicate this
type of dispute? This Article discusses the grassroots movement, which led to
* Valentina Vadi is Professor in International Economic Law at Lancaster University, United
Kingdom. The author wishes to thank Alice Barrett, Weronika Bukowski, Emily Den, Susan
Handke, Jarrod Hepburn, Michael Labelle, Roberta Raffaetà, Mavluda Sattorova, Benjamin
Sovacool for their comments on an earlier draft. The views expressed in this article are the
author’s only and need not reflect those of her institution. The article has an academic nature and
does not constitute legal advice. The author completed this article in April 2015. © 2016,
Valentina Vadi.
1. BARACK OBAMA, THE AUDACITY OF HOPE, THOUGHTS ON RECLAIMING THE AMERICAN DREAM
171 (2006).
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widespread opposition to nuclear energy in Germany and the ICSID arbitration.
It highlights that neither international law nor European Union (EU) law
requires states to opt for nuclear energy; rather, both regimes leave this choice to
the states. Therefore, the decision to opt for nuclear energy remains a sovereign
one. Arbitrators should not question the legitimate power of states to regulate in
the public interest, but should review the procedural appropriateness, good faith,
and reasonableness of the adopted measures.
TABLE OF CONTENTS
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. ENERGY AND PUBLIC HEALTH: MAKING THE CONNECTION . . . . .
III. THE REGIME COMPLEX GOVERNING NUCLEAR ENERGY . . . . . . . .
A. International Treaties Governing Nuclear Energy. . . . . . . .
B. Regional Instruments Governing Nuclear Energy . . . . . . . .
C. The Energy Charter Treaty and Its Investor–State
Arbitration Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. NUCLEAR ENERGY-RELATED INVESTMENT DISPUTES . . . . . . . . . .
A. Disputes Directly Relating to Nuclear Energy . . . . . . . . . . .
B. Disputes Relating to Nuclear Energy Indirectly . . . . . . . . . .
C. Peripheral Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
V. VATTENFALL V. GERMANY II . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. The Rise and Fall of Nuclear Power in Germany. . . . . . . . .
B. The ICSID Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Jurisdiction and Admissibility . . . . . . . . . . . . . . . . . . . . .
1. Questionability of ICSID Jurisdiction over
State-Owned Enterprises . . . . . . . . . . . . . . . . . . . .
2. Applicable ICSID Legal Tests Conferring
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Fair and Equitable Treatment in the Context of Energy Reform. . .
1. Legitimacy of Expectations of Constant Energy
Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. The Role of Policy Rationality and
Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Indirect Expropriation or Legitimate Exercise of Police
Powers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Two Conflicting Arbitral Doctrines. . . . . . . . . . . .
2. Potential Application to Vattenfall II . . . . . . . . . . .
F. Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G. Amici Curiae: Friends or Foes . . . . . . . . . . . . . . . . . . . . .
1. The Potential Role of the World Health
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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2. The Potential Role of the European Union . . . . .
VI. LOCAL COMMUNITIES, GRASSROOTS MOVEMENTS AND
INVESTOR–STATE ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . .
A. Public Campaigns as Legitimizing State Action . . . . . . . . .
B. Lesser Relevance Assigned to Public Participation. . . . . . . .
C. Potential Impact of the Grassroots Movement Leading to
German Energy Reform . . . . . . . . . . . . . . . . . . . . . . . . . .
VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I.
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INTRODUCTION
Energy security, meant as the availability of energy sources at an
affordable price, has become essential to the functioning of modern
economies and plays a crucial role in international relations. An
excessive reliance on foreign countries for energy supply can jeopardize energy security. In fact, energy exporters may have political or
economic incentives to limit their foreign sales and disrupt the supply
chain causing political and economic instability. For instance, the
Ukrainian conflict and Russian annexation of Crimea has encompassed major energy implications for the European Union (EU).2
While the EU imports more than half of all the energy it consumes, its
import dependency is especially high for natural gas (sixty-six percent).3 As the conflict between Russia and transit-country Ukraine left
many EU countries with severe shortages,4 the EU launched its Energy
Security Strategy in May 2014.5 The Energy Security Strategy aims “to ensure
2. Frank Umbach, Russian-Ukrainian-EU Gas Conflict: Who Stands to Lose Most?, NATO REV.
MAGAZINE (2014), http://www.nato.int/docu/review/2014/nato-energy-security-running-onempty/Ukrainian-conflict-Russia-annexation-of-Crimea/EN/index.htm.
3. Energy, Imports and Secure Supplies, EUROPEAN COMM’N, https://ec.europa.eu/energy/en/
topics/imports-and-secure-supplies (last updated Feb. 25, 2016) [hereinafter Energy, Imports and
Secure Supplies] (noting that “some [countries] rely entirely on Russia for their natural gas” and
that “[t]his dependence leaves them vulnerable to supply disruptions . . . .”).
4. Umbach, supra note 2 (noting that “energy experts have often claimed a mutual interdependence between the EU and Russia: the EU is dependent on Russian gas and other energy
exports; Russia is dependent on the EU as its most important gas export market,” but Russian
officials “have always called this an ‘asymmetric interdependency’” because of the different
elasticity of demand).
5. Communication from the Commission to the European Parliament and the Council on, European
Energy Security Strategy, at 2, COM (2014) 330 final (May 28, 2014) [hereinafter European Energy
Security Strategy] (acknowledging that the “temporary disruptions of gas supplies . . . in some of the
eastern Member States . . . w[ere] a stark ‘wake-up call’ pointing to the need for a common
European energy policy.”).
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a stable and abundant supply of energy” for the European Union,6
laying out measures to increase energy efficiency as well as local energy
production and link energy infrastructures to redirect energy to where
it is needed during a crisis.7
In parallel, in the United States, hurricane Katrina constituted an
analogous wake-up call. As the cyclone caused the evacuation and
closure of Gulf refineries,8 it also raised concerns about security of
supply.9 In fact, in the case of an eventual conflict or war, lack of
domestic resources and dependence on foreign countries could
threaten national security.10 President Obama’s energy policy focuses
on making the United States more energy independent and reducing
carbon emissions.11 In a famous speech, President Barack Obama
stated: “a nation . . . cannot control its future as long as it cannot
control the source of energy that keeps it running.”12
In the spiraling global race for energy security, nuclear power raises a
number of issues. On the one hand, nuclear power plants are perceived
as constituting a reliable source of energy and playing an important
role in energy security.13 Although most countries import uranium for
the operation of nuclear power plants,14 uranium is mined in diverse
and politically stable countries, including Canada and Australia.15
Moreover, being essentially carbon-emission free, nuclear energy is
6. Energy, Imports and Secure Supplies, supra note 3.
7. European Energy Security Strategy, supra note 5, at 2.
8. Barack Obama, U.S. President, Speech at the White House: Resources for the Future
(Sept. 15, 2005), http://obamaspeeches.com/030-Resources-for-the-Future-Obama-Speech.htm
(noting that “Gulf refineries that made up one-eighth of [the] country’s total capacity were
evacuated and shut down” and that hurricane Katrina showed that “[t]he days of running a twenty
first century economy on a twentieth century fossil fuel [we]re numbered.”).
9. Id.
10. Id.
11. Advancing American Energy, THE WHITE HOUSE, https://www.whitehouse.gov/energy/
securing-american-energy (last visited May 25, 2015).
12. Obama, supra note 8.
13. European Energy Security Strategy, supra note 5, at 16 (highlighting that “[e]lectricity
produced from nuclear power plants constitutes a reliable base-load electricity supply of emission
free supply and plays an important role in energy security.”); Emily Hammond, Nuclear Power, Risk,
and Retroactivity, 48 VAND. J. TRANSNAT’L L. 1059, 1063 (2015) (noting that “[d]espite the many
concerns about nuclear power, it fills an important need for electricity reliability by providing
steady baseload power, comprising 20 percent of U.S. electricity generation.”).
14. European Energy Security Strategy, supra note 5, at 2 (noting that the EU imports forty
percent of its needed nuclear fuel).
15. Id. at 16 (noting that “[t]he worldwide uranium supply market is stable and well
diversified.”).
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seen as one of the tools for reducing greenhouse emissions to mitigate
climate change.16
On the other hand, as the discussion of the nuclear power option
moves forward, it is critically important to consider the perceived
health and environmental risks associated with it.17 Some epidemiologists point out the statistically significant increase of risk of cancer
among workers in the nuclear fuel cycle and people living close to
nuclear waste reprocessing plants.18 Some public health scholars suggest that nuclear power plants expose people to “low-level ionizing
radiation, with increased health risks attendant to this exposure.”19
Environmental justice advocates also argue that “low income and
minority communities suffer from unequal protection in environmental risk, enforcement and remediation.”20 Potential disastrous accidents, terrorist and cyber-attacks pose additional risks21 together with
the issues of “permanent and secure storage of high level radioactive
waste.”22
Foreign investments in the energy sector are seen as a key factor
to promote the energy industry. In addition to the employment
and capital inflows that accompany foreign investments, multinationals can transfer technology23 and promote key development
16. Id.; see also Hammond, supra note 13, at 1063 (pinpointing that the “lifecycle carbon
emissions [of nuclear energy] are comparable to hydro and wind power, making it an important
player in climate change policy.”).
17. Richard W. Clapp, Nuclear Power and Public Health, 113 ENVTL. HEALTH PERSPECTIVES 720
(2005) (highlighting a link between uranium mining and lung cancer).
18. Carlos Alvarez-Dardet, Nuclear Waste as a Public Health Challenge, 55 J. EPIDEMIOLOGY &
CMTY. HEALTH 449 (2001).
19. Clapp, supra note 17, at 720.
20. See Virginia A. Sharpe, “Clean” Nuclear Energy? Global Warming, Public Health, and Justice, 38
HASTINGS CTR. REP. 16, 16 (2008) (illustrating the legacy of uranium mining in Navajo lands in the
United States). See also Claire Spiegel, Uranium under the Sand, Anger Above, WASH. POST (Apr. 27,
2008), http://www.washingtonpost.com/wp-dyn/content/article/2008/04/25/AR20080425031
02_pf.html (illustrating the consequences of uranium extraction by multinational corporations
on the nomadic Tuareg people in Niger).
21. Jeffrey Donovan, IAEA’s Amano Calls for Strengthened Computer Security in a Nuclear World,
INT’L ATOMIC ENERGY AGENCY OFF. PUB. INFO. & COMMUNICATION (June 1, 2015), https://www.iaea.
org/newscenter/news/iaea%E2%80%99s-amano-calls-strengthened-computer-security-nuclearworld (reporting “call[s] for an international response to tackle the global threat posed by
criminals and terrorists bent on launching cyberattacks against nuclear facilities.”).
22. Clapp, supra note 17, at 720.
23. Brian J. Aitken & Ann E. Harrison, Do Domestic Firms Benefit from Direct Foreign Investment?
Evidence from Venezuela, 89 AM. ECON. REV. 605, 605 (1999).
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goals.24 If they introduce new products or processes to a given local
market, national companies can benefit from the accelerated diffusion
of new technology.25 Nonetheless, policy makers are confronted with
two competing needs: 1) attracting capital to develop energy resources,
and 2) addressing the impact that energy resources may have on
climate change, environmental protection, and public safety, among
others. Can states promote foreign direct investment in the energy
sector without jeopardizing their authority to protect fundamental
goals such as public health?
This Article examines some of the legal issues raised by foreign
investment in the energy sector in relation to public safety. First, it
clarifies the linkage between energy and public health. Second, it
describes the regime complex governing nuclear energy. Third,
it discusses some nuclear energy-related investment disputes, focusing
on Vattenfall v. Germany II (Vattenfall II) concerning the nuclear phaseout recently adopted by Germany. The selected case study epitomizes
the clash of values between the private interests of foreign companies
and the public policy objectives of the host state. The question of
whether the German government’s decision breaches international
investment treaty provisions is addressed. Vattenfall II is also used to
analyse the suitability of arbitral tribunals as fora to adjudicate this type
of dispute, given criticisms that they are “expropriating” environmental
governance26 and moving states into a stage of “post-democracy” where
democratic institutions formally continue to exist but the advance of
economic globalization is undermining democratic processes.27 The
Article discusses the grassroots movement that led to widespread
opposition to nuclear energy in Germany and examines the ICSID
arbitration. Fourth, the article explores the interaction between local
communities, grassroots movements and investor–state arbitration.
Finally, it concludes that arbitrators should not question the legitimate
power of states to regulate in the public interest, but should review the
procedural appropriateness, good faith, and reasonableness of the
adopted measures.
24. Ann Florini & Benjamin K. Sovacool, Bridging the Gaps in Global Energy Governance, 17
GLOB. GOVERNANCE 57, 67 (2011) (highlighting that “modern energy services have multiplier
effects on health, education, transportation, telecommunications, safe water, sanitation and
economic growth.”).
25. Aitken and Harrison, supra note 23, at 605.
26. See generally KYLA TIENHAARA, THE EXPROPRIATION OF ENVIRONMENTAL GOVERNANCE (2009).
27. See generally COLIN CROUCH, POST-DEMOCRACY (2004).
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II.
ENERGY AND PUBLIC HEALTH: MAKING THE CONNECTION
While energy law and public health law are distinct fields of study,
they increasingly intersect and sit at the epicentre of a clash of values
between economic (private) interests and other (public) values. After
briefly describing the two fields, this section maps their connections.
There can be mutual supportiveness between energy supply and public
health, yet the development of energy resources can also negatively
affect public health in some cases. The section concludes that energy
law and politics comprise social, economic, and cultural issues in
addition to pure technical considerations due to the profound implications that access to energy has on society.
Energy law and policy are undergoing major challenges and changes.
Defined as “the allocation of rights and duties concerning the exploitation of all energy resources between individuals, between individuals
and governments . . . and between states,”28 energy law constitutes an
example of multilevel governance. Currently, the regulation of energy
resources takes place at national, regional and international levels.29
While states retain much regulatory autonomy in the energy sector,
state regulation must comply with state obligations under regional and
international law.30
In parallel, public health law has been defined as “the study of the
legal powers and duties of the state . . . to ensure the conditions for
people to be healthy . . . , and of the limitations on the power of the
state to constrain for the common good the autonomy, privacy, liberty,
proprietary, and other legally protected interests of individuals.”31 The
main objective of public health law is “to pursue the highest possible
level of physical and mental health in the population, consistent with
the values of social justice.”32
Crucially, energy law and public health law sit at the epicentre of a
clash of values between economic (private) interests and other (public)
values. Authors have noted that “despite their large public health
28. Adrian J. Bradbrook, Energy Law as an Academic Discipline, 14 J. ENERGY & NAT. RESOURCES
L. 193, 194 (1996).
29. The Energy Charter Treaty pmbl., opened for signature Dec. 17, 1994, 34 I.L.M. 360
(entered into force Apr. 16, 1998).
30. See, e.g., Vienna Convention on the Law of Treaties, preamble, May 23, 1969, 1155
U.N.T.S. 331 (affirming that “the principles of free consent and of good faith and the pacta sunt
servanda rule are universally recognized.”); id. at art. 26 (stating that “[e]very treaty in force is
binding upon the parties to it and must be performed by them in good faith.”).
31. LAWRENCE O. GOSTIN, PUBLIC HEALTH LAW 4 (2d ed. 2008).
32. Id.
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implications, most energy policies . . . are considered as components of
overall economic development, without explicit assessment of their
health benefits or hazards.”33 Closer integration of public health
considerations in other legal realms has emerged only in the past
decades.34
Energy and public health relate to each other in many ways. Undoubtedly, there is a positive synergy between access to energy services and
public health. Access to energy services has been one of the major
factors improving public health in industrialized countries and constitutes a key element for increasing living standards all around the
world.35 As a U.N. Report highlighted, “Energy services are a crucial
input to the primary development challenge of providing adequate
food, shelter, . . . water, sanitation, medical care, schooling and access
to information.”36 Modern energy services enhance the delivery of key
social services.37 Arguably, the achievement of the highest attainable
standard of physical and mental health—as required by Article 12 of
the International Covenant on Economic, Social and Cultural
Rights38—is impossible without access to sustainable energy services.
Analogously, the African Commission on Human and Peoples’ Rights
held that the failure of the Democratic Republic of the Congo to supply
basic services, including safe drinking water and electricity amounted
33. Majid Ezzati et al., Energy Management and Global Health, 29 ANNU. REV. ENVTL. RESOURCES
383 (2004).
34. See Lawrence O. Gostin, Health of the People: the Highest Law?, J. L. MED. & ETHICS 509
(2004) (highlighting that public health law is undergoing a renaissance); Allyn L. Taylor, Global
Governance, International Health Law and WHO: Looking towards the Future, 80 BULLETIN OF THE
WORLD HEALTH ORGANIZATION [WHO] 975, 976 (2002).
35. Adrian J. Bradbrook & Judith G. Gardam, Placing Access to Energy Services within a Human
Rights Framework, 28 HUM. RTS. Q. 389, 390 (2006) (highlighting that “The provision of such
services many decades ago was the major factor lifting the standard of development in developed
countries and is a key ingredient to providing a sustainable way of living for all the world’s
population.”).
36. Amulya K. Reddy, United Nations Development Programme, Energy and Social Issues, in
WORLD ENERGY ASSESSMENT REPORT—ENERGY AND THE CHALLENGE FOR SUSTAINABILITY 44 (2000).
37. Id. (noting that electricity makes it possible to refrigerate vaccines, use medical equipment and provide lighting after sunset and highlighting that energy is used for providing clean
and safe water to households and communities). See also Michael T. Osterholm and Nicholas S.
Kelley, Energy and the Public’s Health: Making the Connection, 124 PUB. HEALTH REP. 20, 21 (2009)
(noting that with electric-based refrigeration, food supply becomes safer, reducing illnesses
related to poorly stored raw food.).
38. International Covenant on Economic, Social and Cultural Rights, Dec. 19, 1966, G.A.
Res. 2200 (XXI), U.N. GAOR, 21st Sess., Supp. No. 16, U.N. Doc A/6316 (1966) 993 UNTS 3
(entered into force Jan. 3, 1976).
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to a violation of the right to health under Article 16 of the African
Charter of Human and Peoples’ Rights.39 Energy access might be
recognized as a human right in the future.40 Certainly, access to energy
services is linked to poverty eradication and the attainment of other
socio-economic rights.41
On the other hand, the development of energy resources can
negatively affect public health in a variety of ways. For instance, the
residue of underground mining for locating coal may pollute streams
rendering the water non-potable. Similarly, coal combustion generates
carbon dioxide and air pollutants including sulphur oxide, nitrogen
oxide, and particulate matters.42 While the mentioned pollutants can
cause human health problems or hazards, carbon dioxide causes the
greenhouse effect, thus contributing to global warming.43 There is
evidence that global warming determines drought, unhealthy conditions and famine, thus affecting public health.44 Finally, the exploration and production of oil and gas may have negative environmental
health effects.45
Likewise, nuclear energy raises public health concerns with regard to
uranium mining46 and reactor safety, as well as transport and disposal
39. Free Legal Assistance Group and Others v. Zaire, Communication Nos. 25/89, 47/90,
56/91, 100/93 (joined), African Commission on Human and Peoples’ Rights, ¶ 47 (1995),
http://www1.umn.edu/humanrts/africa/comcases/25-89_47-90_56-91_100-93.html.
40. Stephen R. Tully, The Contribution of Human Rights to Universal Energy Access, 4 NW. J. INT’L
HUM. RTS. 518 (2006).
41. Adrian J. Bradbrook, Judith G. Gardam, & Monique Cormier, A Human Dimension to the
Energy Debate: Access to Modern Energy Services, J. ENERGY & NAT. RESOURCES L. 26, 526, 552 (2008).
42. JAMES G. SPEIGHT, THE CHEMISTRY AND TECHNOLOGY OF COAL, 403 (2d. ed. 1994) (noting
that “the three major types of pollutants emitted by a coal-fired power plant are particulate matter,
sulphur dioxide and nitrogen oxides”.); WMO–UNEP INTERGOVERNMENTAL PANEL ON CLIMATE
CHANGE, CARBON DIOXIDE CAPTURE AND STORAGE, 114 (2005) (highlighting that “flue gases coming
from coal combustion will contain not only CO2 [carbon dioxide], N2 [nitrogen gas], O2 [oxygen],
and H2O [water], but also air pollutants such as SOx [solfur oxide], NOx [nitrogen oxide],
particulates, HCI [hydrochloric acid], HF [hafnium], mercury [and] other metals.”).
43. JOSEPH P. TOMAIN & RICHARD D. CUDAHY, ENERGY LAW IN A NUTSHELL 240-41 (2004).
44. See, e.g., Howard Frumkin et al., Climate Change: The Public Health Response, 98 AM. J. PUB.
HEALTH 435 (2008); Jonathan A. Patz et al., The Effects of Changing Weather on Public Health, ANNU.
REV. PUBLIC HEALTH 21, 271 (2000).
45. See Bernard D. Goldstein et al., The Gulf Oil Spill, 364 NEW ENG. J. MEDICINE 1334-48 (2011)
(stressing that “the full magnitude of the environmental, economic, and human health effects of
this major disaster remain unknown.”) .
46. On the public health implications of uranium mining, see INT’L ATOMIC ENERGY AGENCY,
ENVIRONMENTAL CONTAMINATION FROM URANIUM PRODUCTION FACILITIES AND THEIR REMEDIATION 4
(2005).
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of nuclear waste.47 Harvard and MIT scholars have stressed that “modern reactor designs can achieve a very low risk of serious accidents,”48
but admitted that “[they] do not believe there is a nuclear plant design
that is totally risk free.”49 While technological progress has made
nuclear fission safer, the risk of a reactor leak can never be dismissed
completely.50 Disposal of radioactive waste also remains an unresolved
problem.51 Additional risks are posed by human error, natural disasters
and terrorism.52 As “the potential for large scale damage to human
health and the environment is vastly greater than for fossil fuel systems,”53 nuclear technology is seen as “inherently hazardous.”54 Nuclear
risk per se “has a low probability that is difficult to estimate, but its
foreseen damages are of an extreme magnitude in the event that it
occurs.”55 In other words, whereas “[t]he risk of a nuclear catastrophe
is low”, its impact on public health remains unknown.56
Furthermore, because “nuclear power development involves a unique
combination of risk remoteness yet potentially catastrophic damages,”57 should an accident occur, arguably no adequate insurance
coverage would fully compensate an injured public.58 The operator’s
liability is “of a strict or objective nature, that is, a victim does not need
to prove fault or negligence to establish the operator’s liability.”59
However, the operator’s liability “is limited in amount . . . and in time.
47. MASS. INST. OF TECH., THE FUTURE OF NUCLEAR POWER 2 (2003).
48. Id. at ix.
49. Id. at 9.
50. See Richard Anderson, Nuclear Power: Energy for the Future or Relic of the Past?, BBC NEWS
(Feb. 27, 2015), http://www.bbc.com/news/business-30919045.
51. Adam Arnold, The Quest for Sustainable Energy: Germany’s Nuclear Scrutiny vs. “All of the
Above,” 15 SUSTAINABLE DEVELOPMENT L & POL’Y 26, 26 (2015).
52. Id.
53. John G. Palfrey, Energy and the Environment: The Special Case of Nuclear Power, 74 COLUM. L.
REV. 1375, 1382 (1974) (internal citation omitted).
54. Id. at 1395.
55. Evelyne Ameye & Iñigo Igartua Arregui, National Nuclear Third Party Insurance Pools
Revisited from a European Union Competition Law Perspective, 30 J. ENERGY & NAT. RESOURCES L. 265,
266 (2012).
56. Damian Carrington, Unsure about Nuclear Power? Here are the Five Questions you must Answer
to Decide, GUARDIAN (Apr. 21, 2011), http://www.theguardian.com/environment/damiancarrington-blog/2011/apr/21/chernobyl-nuclear-power-fukushima (noting that “[the] impact
[of a nuclear catastrophe] on well-being is largely unknown.”).
57. Palfrey, supra note 53, at 1399.
58. Marco Morosini, Nous ne vivons pas dans le meilleur de mondes (technologiques), LE MONDE
(Apr. 6, 2011), http://www.lemonde.fr/idees/article/2011/04/06/nous-nevivons-pas-dans-lemeilleur-des-mondes-technologiques_1503446_3232.html.
59. Ameye & Igartua Arregui, supra note 55, at 270.
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These amounts vary according to the international conventions to
which countries have adhered.”60 As none of the existing insurance
companies would be capable of providing the required coverage on an
individual basis, pools of insurers have been set up worldwide to
underwrite the risk jointly.61 As the European Commission pointed
out, “without the pooling agreements there would be no supply of
nuclear liability insurance with adequate coverage for the risks involved.”62 In 1957, the US Congress passed the Price-Anderson Act, which
limits a nuclear utility’s liability in the event of a nuclear accident to ten
billion dollars, with the remainder of liability borne by U.S. taxpayers.
The act has been criticized “as an inappropriate government subsidy
that externalizes . . . the real cost of nuclear power.”63
Certainly the linkage between energy and public health cannot be
limited to a pure risk assessment, i.e., a mere scientific quantification of
the risks involved, but requires risk management, which is based on
political negotiations at the national level.64 Ensuring access to energy
supply is “one of the central functions of . . . political systems. Shortages of energy . . . quickly become political problems and often have
political antecedents.”65
Energy politics comprise social, economic, and cultural issues in
addition to pure technological considerations.66 The social dimension
of energy policies is due to the profound implications that access to
energy has on society. As anthropologists point out, “the flow of energy
in a place tends to be part of the . . . ordinary social life.”67 The economic
dimension of energy policies lies in the fact that access to energy
60. Id. at 270.
61. Id. at 266.
62. European Union XXXI Report on Competition Policy, at 46 (2001), http://ec.europa.eu/
competition/publications/annual_report/2001/en.pdf.
63. Sharpe, supra note 20, at 16.
64. See generally BRUNO LATOUR, COGITAMUS. SEI LETTERE SULL’UMANESIMO SCIENTIFICO (2013)
(linking science to politics and contesting the idea of science as a neutral process). See also Sarah
Strauss, Stephanie Rupp, & Thomas Love, Powerlines: Cultures of Energy in the Twenty-first Century, in
CULTURES OF ENERGY: POWER, PRACTICES, TECHNOLOGIES 10 (Sarah Strauss, Stephanie Rupp, &
Thomas Love eds., 2013) (noting that despite the importance of “energy use and conservation”
“for both the United States and the world, yet the degree of social science engagement with this
topic— especially in terms of human values, beliefs, and behaviors— has so far been minimal and
uneven” and conceptualizing “energy” “as a cultural artifact in particular contexts, and as a broad,
cross-cultural concept and concern.”).
65. Id. at 10.
66. Id. at 9 (highlighting “the relationships between energy and social, political, and
economic values.”).
67. Id. at 10.
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enables technological progress and leads to economic development.
Access to energy grants societies a competitive edge; “[s]ocieties that
organized themselves to harness more energy per capita outcompeted
societies that did not.”68 The cultural dimension of energy politics is
given by the conceptualization of energy as “a cultural artifact”: “how
people describe, discuss, and debate energy as a substance reflects their
fundamental values.”69 The following section will describe the regime
complex governing nuclear energy.
III.
THE REGIME COMPLEX GOVERNING NUCLEAR ENERGY
Nuclear energy law is a paradigmatic example of multipolar law:
national, regional, and international law govern this field. At the
national level, nuclear energy is usually governed by extensive regulation in those jurisdictions that exploit this type of energy.70 Specific
regulations generally address the licensing requirements of nuclear
installations and the transportation, decommissioning, and disposal of
radioactive waste.71 At the international level, different domains of
public international law govern different aspects of nuclear energy. For
instance, the 1968 Treaty on the Non-Proliferation of Nuclear Weapons (Non-Proliferation Treaty or NPT)72 aims at preventing the spread
of nuclear weapons and weapons technology, achieving nuclear disarmament and promoting cooperation in the peaceful uses of nuclear
energy. The NPT asserts that parties to the treaty have an “inalienable
right” to develop, research, produce, and use nuclear energy for
peaceful purposes.73 This does not mean, however, that they have an
obligation to use nuclear energy. The following subsections will explore the international and regional instruments governing nuclear
energy and the Energy Charter Treaty.
68. Id. at 10.
69. Id. at 12. See also LIVING WITH NATURE ENVIRONMENTAL POLITICS AS CULTURAL DISCOURSE
(Frank Fischer & Marteen A. Hajer eds., 2005) (highlighting the underlying cultural dynamics of
ecological politics).
70. Bradbrook, supra note 28, at 196.
71. Id.
72. Treaty on the Non-Proliferation of Nuclear Weapons, open for signature June 12, 1968, 729
U.N.T.S. 161 (entered into force Mar. 5, 1970) [hereinafter NPT]. A total of 191 states have joined
the Treaty, though North Korea announced its withdrawal in 2003. India, Israel, Pakistan, and
South Sudan have never joined the NPT. On May 11, 1995, the Treaty was extended indefinitely.
See UNITED NATIONS OFFICE FOR DISARMAMENT AFFAIRS, Treaty on the Non-Proliferation of Nuclear
Weapons, http://www.un.org/disarmament/WMD/Nuclear/NPT.shtml (last visited June 8, 2015).
73. NPT, supra note 72, art. IV(1).
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A.
International Treaties Governing Nuclear Energy
In the aftermath of the Chernobyl incident,74 two international
treaties were ratified to alert other countries of potential radiation
problems.75 The Convention on Nuclear Safety76 was also adopted in
1994. It contains the world’s first binding international standards
concerning the siting, design, construction, and operation of landbased nuclear power plants. The Convention also requires its contracting parties to establish a regulatory framework for the safety of nuclear
installations, quality assurance, and emergency preparedness.77
However, “the Convention is only an ‘incentive’ instrument. It does
not contain any mechanism for enforcement or sanction in case of
noncompliance. Instead, it depends for its effectiveness on a process of
peer review and by extension, peer pressure.”78 Each contracting party
has reporting duties, and other contracting parties can comment on
the measures and seek clarifications.79
Other treaties were subsequently amended and/or adopted.80 In
addition, despite their nonbinding character, International Atomic
74. In 1986, an explosion at the Chernobyl nuclear power plant caused the release of large
amounts of radiation in the atmosphere. On the health effects of the accident, see UNITED NATIONS
SCIENTIFIC COMMITTEE ON THE EFFECTS OF ATOMIC RADIATION, Exposures and Effects of the Chernobyl
Accident (2000), http://www.unscear.org/docs/reports/2000/Volume%20II_Effects/AnnexJ_
pages%20451-566.pdf. The WHO and other UN agencies have also been involved in the
assessment and mitigation of the impact of the Chernobyl accident on health through a number
of projects. See U.N. Secretary General, Optimizing the International Effort to Study, Mitigate and
Minimize the Consequences of the Chernobyl Disaster, ¶¶ 25-40, U.N. Doc. A/65/341 (Sept. 1, 2010).
75. Convention on Early Notification of a Nuclear Accident, 25 I.L.M. 1370 (entered into
force Oct. 27, 1986); Convention on Assistance in the Case of a Nuclear Accident or Radiological
Emergency, 25 I.L.M. 1377 (enteredenter into force Feb. 26, 1987).
76. Int’l Atomic Energy Agency, Convention on Nuclear Safety, 33 I.L.M. 1514 (1994). For
commentary, see Menno Kamminga, The IAEA Convention on Nuclear Safety, 44 INT’L & COMP. L.Q.
872 (1995).
77. Ana Stanic, EU Law on Nuclear Safety, 28 J. ENERGY & NAT. RESOURCES L. 145, 148 (2010).
78. Id.
79. Id.
80. Convention on Third Party Liability in the Field of Nuclear Energy, Jul. 29, 1960, 1988
U.N.T.S. 329 (amended Jan. 28, 1964 & Nov. 19, 1982), http://www.oecd-nea.org/law/nlparis_
conv.html. The 2004 Protocol to Amend the Paris Convention (http://www.oecd-nea.org/law/
paris_convention.pdf) is not yet in force. See Consolidated Text of the Vienna Convention on Civil
Liability for Nuclear Damage of 21 May 1968 as Amended by the Protocol on Civil Liability for
Nuclear Damage (Vienna) of 12 September 1997, 36 I.L.M. 1462 (1997); Int’l Atomic Energy
Agency, Convention on Supplementary Compensation for Nuclear Damage, 12 September 1997,
36 I.L.M. 1473 (1997); Int’l Atomic Energy Agency, Joint Convention on the Safety of Spent Fuel
and Radioactive Waste Management, 36 I.L.M. 1436 (entered into force June 18, 2001)(1997).
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Energy Agency (IAEA) health and safety standards have contributed
significantly to controlling the risks of nuclear energy.81 In fact, Members of the IAEA tend to comply with the soft law safety standards
adopted by the agency.82 The Nuclear Energy Agency (NEA), a specialized agency within the Organisation for Economic Co-operation and
Development (OECD) and a forum for exchange of experience concerning nuclear energy, has adopted consensus positions on nuclear
safety, radioactive waste management, and radiological protection.83
This regime complex84 governing nuclear energy has brought a “significant harmonisation of national nuclear safety rules.” However, significant divergences remain across countries, and “there is no mechanism
of enforcement or sanction in case of lack of compliance.”85
B.
Regional Instruments Governing Nuclear Energy
At the regional level, atomic power has always been placed at the
heart of European energy policy. The 1957 Euratom Treaty governs the
peaceful use of nuclear energy within the EU.86 The treaty constitutes a
lex specialis vis-à-vis general EU law as its provisions prevail over the
provisions of the Treaty on the European Union (TEU) and the Treaty
on the Functioning of the European Union (TFEU).87 The Treaty aims
to contribute to the “establishment and growth of nuclear industries”88
so as to ensure security of supply.89 At the same time, it guarantees high
safety standards for the public90 and prevents nuclear materials intended principally for civilian use from being diverted to other uses.91
81. PATRICIA BIRNIE ET AL., INTERNATIONAL LAW & THE ENVIRONMENT 496 (3d ed. 2009).
82. Stanic, supra note 77, at 147. See also L. Veuchelen, The Legal Value of General Principles,
Technical Norms and Standards in European Nuclear Safety Law: the Imbalance between Soft and Hard Law
and the Need for Global Regulatory Governance, 18 EUR. ENERGY & ENVTL. L. REV. 215, 215-28 (2009).
83. Stanic, supra note 77, at 150.
84. Kal Raustiala & David G. Victor, The Regime Complex for Plant Genetic Resources, 58 INT’L
ORG. 277 (2004) (elaborating the notion of “regime complex” as “a collective of partially
overlapping and non-hierarchical regimes.”).
85. Stanic, supra note 77, at 150.
86. Consolidated Version of the Treaty Establishing the European Atomic Energy Community, Oct. 26, 2012, 2012 O.J. (C 327) 01 [hereinafter Eurotom Treaty].
87. Id. at art. 106(a)(3) (providing that “The provisions of the Treaty on the European
Union and the Treaty on the Functioning of the European Union shall not derogate from [its]
provisions . . .”).
88. Id. at art. 1.
89. Id. at art. 2(d).
90. Id. at art. 2(b).
91. Id. at art. 2(e).
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Although the European Atomic Energy Community (Euratom) established by the Euratom Treaty is a separate legal entity from the EU, it is
governed by the EU’s institutions.92 Each Member State remains free to
decide whether to include nuclear power in its energy mix or not. In
fact, the Euratom Treaty “does not commit the member States to use
nuclear energy nor does it authorise the Community legislator to
prescribe the use of nuclear energy.”93 Analogously, the Treaty on the
Functioning of the EU (TFEU or Lisbon Treaty)94 grants the EU
general competence on matters of energy policy but gives the member
states a substantial amount of latitude to choose between different
energy sources and supply structures.95 However, the EU Energy
Security Strategy has recently clarified that “national decisions . . . to
support investment in (or decommissioning of) nuclear generation . . . need to be discussed at European and/or regional level to
ensure that decisions in one Member State do not undermine security
of supply in another Member State.”96
Attempts to harmonize safety standards met some initial resistance
from certain Member States, including the United Kingdom and
Germany, due to concerns that the adoption of common EU nuclear
safety standards could reduce the regulatory autonomy of national
authorities in this strategically important sector.97 Today, the Nuclear
Safety Directive establishes an EU framework for the safety of nuclear
plants.98 As the directive incorporates the provisions of the Convention
on Nuclear Safety as well as some of the IAEA’s safety standards,99 and
Member States as well as Euratom are parties to the Convention, most
of the provisions of the directive are not new to them.100 Rather, the
innovative element lies in imposing legally binding and enforceable
obligations on member states.101 In fact, the Commission and Member
92. See Nuclear Energy, EUROPEAN COMM’N,http://ec.europa.eu/energy/en/topics/nuclearenergy (last updated Apr. 6, 2016).
93. Gerd Winter, The Rise and Fall of Nuclear Energy Use in Germany: Processes, Explanations and
the Role of Law, 25 J. ENVTL. L. 95, 101 (2013).
94. Consolidated Version of the Treaty on the Functioning of the European Union, May 9,
2008, 2008 O.J. (C 115) 47 [hereinafter TFEU].
95. Id. at art. 194(2)(2).
96. European Energy Security Strategy, supra note 5, at 8.
97. Stanic, supra note 77, at 152.
98. Council Directive 2009/71/Euratom of 25 June 2009 establishing a Community Framework for the Nuclear Safety of Nuclear Installations, 2009 O.J. (L 172) 18-22 (EC).
99. Stanic, supra note 77, at 153.
100. Id.
101. Id.
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States can commence proceedings against a Member State before the
Court of Justice of the European Union (CJEU) should it fail to
implement the directive and comply with safety standards.102 However,
independent verifications will continue to be undertaken by national
rather than Community institutions.103
In 2013, an additional directive was adopted laying down basic safety
standards for protection against the dangers arising from exposure to
ionizing radiation.104 In parallel, the Nuclear Waste Directive105 establishes an EU framework for the management of spent fuel and radioactive waste. The harmonization of nuclear third-party liability remains a
priority in the agenda of the European Commission.106
C.
The Energy Charter Treaty and its Investor–State Arbitration Provisions
An additional layer of regulation of nuclear energy is provided by the
Energy Charter Treaty (ECT).107 The ECT aims to foster “energy
cooperation between Eastern and Western Europe”108 and contains
provisions regarding trade, investment protection, energy transit and
efficiency, as well as environmental protection and dispute resolution.109 It was signed in December 1994 and entered into force in April
1998. The ECT provides “a legal framework in order to promote
long-term cooperation in the energy field, based on complementarities
and mutual benefits, in accordance with the objectives and principles
of the [1991 European Energy] Charter [(EEC)].”110
102. Euratom Treaty, supra note 86, arts. 141-43.
103. Stanic, supra note 77, at 158.
104. Council Directive 2013/59/Euratom of 5 December 2013 Laying Down Basic Safety
Standards for Protection against the Dangers arising from Exposure to Ionising Radiation, and
repealing Directives 89/618/Euratom, 90/641/Euratom, 96/29/Euratom, 97/43/Euratom and
2003/122/Euratom, 2014 O.J. (L13) 1 (EC).
105. Council Directive 2011/70/Euratom of 19 July 2011 establishing a Community Framework for the Responsible and Safe Management of Spent Fuel and Radioactive Waste, 2011 O.J.
(L 199) 48, 56 (EC).
106. Ameye & Igartua Arregui, supra note 55, at 297.
107. Energy Charter Treaty, supra note 29.
108. Kaj Hobér, Investment Arbitration and the Energy Charter Treaty, 1 J. INT’L DISP. SETTLEMENT
153, 154 (2010) (pinpointing that while “Russia and many of its neighbouring countries were rich
in energy but in great need of investment to be able to reconstruct their economies, . . . West
European countries were trying to diversify their sources of energy supplies to decrease their
potential dependence on other parts of the world.”).
109. Id. at 155.
110. The Energy Charter Treaty, supra note 29, at 385.
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The EEC is a nonbinding declaration111 establishing a political
framework for international cooperation between European countries
and other industrialized countries with the aim of ensuring energy
security and cooperation in the energy sector.112 While members of the
ECT include the European Union, Euratom and a range of states
stretching across Eurasia,113 the EEC has a potentially global reach
being signed by sixty-six parties including the United States and
Canada.114 The EEC has been recently updated by the International
Energy Charter (IEC), a political declaration adopted by 75 countries
and organizations (including the EU and Euratom) that maps out
common principles for international cooperation in the field of energy. Although the IEC contains no legal obligations, it is expected to
facilitate global dialogue on energy issues and to serve as the common
basic framework for cooperation to settle energy disputes.115
111. THOMAS ROE & MATTHEW HAPPOLD, SETTLEMENT OF INVESTMENT DISPUTES UNDER THE
ENERGY CHARTER TREATY 9 (James Dingemans ed., 2011).
112. Council and Commission Decision 98/181/EC, ECSC, Euratom of 23 September 1997
on the conclusion, by the European Communities, of the Energy Charter Treaty and the Energy
Charter Protocol on energy efficiency and related environmental aspects, http://www.
energycharter.org/fileadmin/DocumentsMedia/Legal/ECTC-en.pdf [hereinafter 1991 Energy
Charter].
113. Members of the ECT include Afghanistan, Albania, Armenia, Austria, Azerbaijan,
Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia,
European Union and Euratom, Finland, France, Georgia, Germany, Greece, Hungary, Ireland,
Italy, Japan, Kazakhstan, Kyrgyzstan,Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Mongolia, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
Switzerland, Tajikistan, The Former Yugoslav Republic of Macedonia, Turkey, Turkmenistan,
Ukraine, United Kingdom, and Uzbekistan. In Australia, Belarus, Iceland, and Norway ratification
of the ECT is still pending. The Russian Federation signed the Energy Charter Treaty and was
applying it provisionally until October 18, 2009 (inclusive). The United States of America has
observer status. See INTERNATIONAL ENERGY CHARTER, Energy Charter Treaty, http://www.energycharter.
org/process/european-energy-charter-1991/ (last visited June 7, 2015). Italy has recently withdrawn from the ECT because of cost-cutting efforts. Under Article 47 of the ECT, the withdrawal
will take effect one year after date of notification. However, the Treaty will continue to apply to
investments made before such date for a period of further twenty years. See Carsten Steinhauer,
Italy Withdraws from Energy Charter Treaty, NAT’L L. REV. (Apr. 21, 2015), http://www.natlawreview.
com/article/italy-withdraws-energy-charter-treaty.
114. 1991 Energy Charter, supra note 112.
115. INTERNATIONAL ENERGY CHARTER, INTERNATIONAL ENERGY CHARTER—CHAIR’S SUMMARY (May
25, 2015), https://www.government.nl/binaries/government/documents/publications/2015/
05/21/international-energy-charter-chair-s-summary/energy-charter-chair-s-summary.pdf (accessed (noting that “[o]n 20 and 21 May 2015 the Ministerial Conference on the International
Energy Charter . . . was held in The Hague, the Netherlands. At the conference 75 countries, the
European Union, the European Atomic Energy Community and the Economic Community of
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The ECT is the most important multilateral treaty governing, inter
alia, foreign direct investment in the energy sector. Part III of the ECT
governs the protection and promotion of investments in the energy
sector. Moulded on provisions in existing international investment
agreements,116 this part of the treaty is regarded as the “cornerstone” of
the ECT.117 The “foreign investment regime” aims to establish “a ‘level
playing field’ for investments in the energy sector” and to decrease the
political risks associated with such investments.118
By signing the ECT, states grant to foreign investors certain substantive and procedural rights.119 Substantive provisions cover matters such
as the prohibition against unlawful expropriation,120 constant protection and security,121 fair and equitable treatment,122 non-discrimination123 and so forth. The treaty distinguishes between a pre-investment
phase and a post-investment phase.124 Whereas “the provisions concerning the pre-investment phase primarily set up a ‘soft’ regime of ‘best
endeavour’ obligations”, the provisions concerning the post-investment phase constitute “a ‘hard’ regime . . . with binding obligations for
the contracting states.”125 Article 10(1) of the ECT states that “[e]ach
Contracting Party shall observe any obligation it has entered into with
an investor or an investment of an investor of any other Contracting
Party.” However, the ECT also contains exceptions.126
Whereas Article 27 of the ECT provides for dispute settlement
between two contracting states by diplomatic means, and failing that,
by ad hoc arbitration, Article 26 of the ECT provides procedures for
resolving disputes arising under the Treaty between an investor of a
Contracting State and another Contracting State. Disputes can be
submitted for international arbitration either to the ICSID, the Arbitra-
West African States (ECOWAS) adopted the new International Energy Charter, which modernises
the 1991 European Energy Charter . . . .”).
116. ROE AND HAPPOLD, supra note 111, at 15.
117. Hobér, supra note 108, at 155.
118. Id.
119. For a general overview, see e.g., Edna Sussman, The Energy Charter Treaty’s Investor
Protection Provisions: Potential to Foster Solutions to Global Warming and Promote Sustainable Development,
14 J. INT’L & COMP. L. 391, 404 (2008).
120. The Energy Charter Treaty, supra note 29, at 391.
121. Id. at 389.
122. Id.
123. Id.
124. Hobér, supra note 108, at 156.
125. Id.
126. The Energy Charter Treaty, supra note 29, at 398.
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tion Institute of the Stockholm Chamber of Commerce, or ad hoc
arbitration under the UNCITRAL Arbitration Rules.127 Therefore, the
ECT grants aggrieved foreign investors access to investor–state arbitration and the possibility to obtain monetary compensation from the host
state for any breach of their rights under the treaty.128 Investor–state
arbitration is a powerful mechanism for reviewing the exercise of
public authority by the host state.
IV.
NUCLEAR ENERGY-RELATED INVESTMENT DISPUTES
To date, nuclear energy-related investment disputes have represented “only a scarce part of investment jurisprudence”.129 In fact, only
six arbitrations appear to be directly or indirectly connected to the
nuclear energy sector. This contrasts significantly with the growing
arbitral jurisprudence relating to the renewable energy sector130 and
the traditionally consistent number of energy-related disputes.131 However, the scarcity of nuclear energy-related cases may be due to the
relative opacity of some arbitral venues, rather than lack of litigation in
the sector. Moreover, given the existing diverging trends whereby some
states are decommissioning nuclear power plants, while others pursue
a nuclearization program, it is foreseeable that more cases will emerge
in the near future.
Nuclear energy-related disputes can be classified into three distinct
categories: 1) disputes relating to nuclear energy directly; 2) disputes
relating to nuclear energy indirectly; and 3) “peripheral disputes” that
bear a mere connection to the nuclear energy sector.132 Disputes
directly relating to nuclear energy indicate “those cases where the
investment is closely connected to a nuclear power plant or is the
127. Id. at 400.
128. Id. (“Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its
unconditional consent to the submission of a dispute to international arbitration or conciliation
in accordance with the provisions of this Article.”).
129. Odysseas Repousis, Investment Arbitration in the Nuclear Energy Sector: A Brief Note on
Investors and Investments, KLUWER ARB. BLOG (June 3, 2014), http://kluwerarbitrationblog.com/
2014/06/03/investment-arbitration-in-the-nuclear-energy-sector-a-brief-note-on-investors-andinvestments/.
130. See generally Valentina Vadi, Beyond Known Worlds: Climate Change Governance by Arbitral
Tribunals?, 37 VAND. J. TRANSNAT’L L. 1285, 1351 (2015).
131. According to The ICSID Caseload Statistics, twenty-six percent of the disputes adjudicated
at ICSID in 2015 related to the oil, gas and mining, while 14 per cent related to the electric power
and other energy. INTERNATIONAL CENTER FOR SETTLEMENT OF INVESTMENT DISPUTES, The ICSID
Caseload Statistics, 12, Issue 2015-1.
132. This categorization follows Repousis, supra note 129.
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nuclear power plant itself.”133 Disputes indirectly relating to the nuclear
energy sector, on the other hand, can relate to a variety of economic
activities such as contractual claims relating to the running of a nuclear
power plant or even uranium mining.134 Finally, the third category of
“peripheral disputes” includes those disputes that bear a mere connection to the nuclear energy sector such as those arising in the aftermath
of nuclear disasters. The next subsections will explore some relevant
case studies.
A.
Disputes Directly Relating to Nuclear Energy
As mentioned, disputes directly relating to nuclear energy are “those
cases where the investment is closely connected to a nuclear power
plant or is the nuclear power plant itself.”135 Foreign investors filed
claims for matters concerning the operation of nuclear power plants in
arbitrations like Hrvatska Elektroprivreda d.d. (HEP) (Croatia) v. Slovenia;136
Vattenfall II v. Germany;137 Khan Resources Inc., Khan Resources B.V., and
Cauc Holding Company Ltd. v. Mongolia;138 and James Russell Baird v.
United States.139
In HEP v. Slovenia, the republics of Slovenia and Croatia agreed in
the 1970s to jointly construct and operate a nuclear power plant in
Slovenia, the Krsko Nuclear Power Plant (Krsko NPP).140 However, a
dispute arose between Hrvatska elektroprivreda, d.d. (HEP), the national electric company of Croatia, and Slovenia concerning the owner-
133. Id.
134. Id.
135. Id.
136. Hrvatska Elektroprivreda d.d. (HEP) (Croatia) v. Republic of Slovenia, ICSID Case No.
ARB/05/24, Decision on the Treaty Interpretation Issue (Jun. 12, 2009) [hereinafter HEP v.
Slovenia]; HEP v. Slovenia, ICSID Case No. ARB/05/24, Award (Dec. 17, 2015), https://icsid.
worldbank.org/apps/icsidweb/cases/pages/casedetail.aspx?CaseNo⫽ARB/05/24&tab⫽DOC.
The Arbitral tribunal was composed of David A. R. Williams (chair), Judge Charles N. Brower, and
Jan Paulsson.
137. Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12
(May 31, 2012). The Arbitral Tribunal is composed of Albert Jan Van Den Berg (Chair), Vaughan
Lowe and Charles N. Brower.
138. Khan Res. Inc., Khan Res. B.V., & Cauc Holding Company Ltd. v. Government of
Mongolia and Monatom Co. Ltd., PCA Case No. 2011-09, Award (Mar. 2, 2015), http://www.italaw.
com/sites/default/files/case-documents/italaw4267.pdf. The Arbitral Tribunal was composed of
David A.R. Williams (Chair), L. Yves Fortier, and Bernard Hanotiau.
139. James Russell Baird v. United States of America, Notice of Intent to File a Claim (Mar.
15, 2002), http://www.naftaclaims.com/disputes/usa/Baird/BairdNoticeOfIntent.pdf.
140. HEP v. Slovenia, Decision on the Treaty Interpretation, ¶ 3.
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ship and operation of the Krsko NPP.141 The financing, construction,
and operation of the nuclear power plant was regulated by four
agreements whose fundamental principle required that the “coinvestors were to be fifty-fifty partners in all aspects of the plant
construction, management, and operations.”142 After the independence of Slovenia and Croatia from the former Federal Republic of
Yugoslavia, however, “differences began to emerge between the Government of Slovenia on the one hand, and HEP and the Government of
Croatia on the other, with regard to the operation and status of the
Krško NPP.”143 The Slovenian Government adopted a series of measures “that were viewed by HEP as inconsistent with the parity principle,” concerning inter alia the creation of a decommissioning fund,144
nuclear safety,145 suspending delivery of electricity, etc.146 The Parties
settled these issues signing and ratifying the 2001 Agreement.147 However, new disagreement on the implementation of the Agreement led
HEP to file an ICSID claim against Slovenia. The company claimed that
Slovenian measures were an expropriation in breach of Article 10 of
the ECT and also breached one of the agreements between Slovenia
and Croatia.148 The arbitral tribunal dismissed all claims asserted by
HEP against the Republic of Slovenia as arising under the ECT.149
However, it found a violation of the 2001 Agreement between Croatia
and Slovenia, and held that the respondent should pay to HEP compensation for the breach.150 In Vattenfall II, a Swedish energy company is
suing Germany at ICSID to obtain compensation for losses arising out
of a nuclear phase-out.151
141. Id. ¶ 6.
142. Id. ¶¶ 8-9.
143. HEP v. Slovenia, ICSID Case No. ARB/05/24, Award ¶ 106 (Dec. 17, 2015), https://icsid.
worldbank.org/apps/icsidweb/cases/pages/casedetail.aspx?CaseNo⫽ARB/05/24&tab⫽DOC.
144. Id. ¶ 109.
145. Id. ¶¶ 135-37.
146. HEP v. Slovenia, Decision on the Treaty Interpretation Issue, ¶ 10.
147. HEP v. Slovenia, Award, ¶ 167.
148. HEP v. Slovenia, Decision on the Treaty Interpretation, ¶ 14.
149. HEP v. Slovenia, Award, ¶ 202.
150. Id. ¶ 213 (“The Tribunal therefore concludes that in making the 2002 Offers, Slovenia
had not complied with its obligations under the 2001 Agreement due to the material differences
between the Offers and the Agreement, Slovenia therefore remains liable for any loss suffered by
the Claimant as a result of its breach.”).
151. The Vattenfall II arbitration will be examined in section 5 below.
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The Khan Resources B.V. v. Mongolia case152 concerned a uranium
mining project in Mongolia. Khan, a Canadian mining company,
obtained licenses to exploit radioactive mineral resources in the Dornod uranium deposit.153 Shortly afterwards, the Mongolian government passed the 2009 Nuclear Energy Law, which gave 51 percent
ownership of the company to the state.154 Later, Mongolia suspended
and then cancelled Khan’s mining licenses.155 According to the claimants, “Russia and Mongolia became interested in developing the Dornod Project to the exclusion of Khan.”156 The Claimants contended
that the Respondent “unlawfully deprived the Claimants of both their
investment, in the form of the Mining and Exploration Licenses, and
their contractual rights under the Agreements,”157 in breach of Article
13 of the ECT (expropriation),158 Article 10.7 ECT (non-discrimination), and Article 10.1 (fair and equitable treatment) among others.159
The Respondents argued that Mongolia enacted the National Energy Law “in an exercise of its sovereignty in the uranium industry,
which was both potentially profitable and potentially detrimental to the
environment.”160 They contended that “international law does not
oblige States to compensate foreign investors for the enactment of
non-discriminatory bona fide regulations that pursue a legitimate purpose.”161 The respondents also alleged that the Claimants were in
breach of national law alleging, inter alia, that the Exploration License
area overlapped with the protected Yakhi Lake reserve, “a reserve set
aside for grazing animals,”162 and that radioactive materials were stored
in the protected Yakhi Lake reserve.163
The ad hoc arbitral tribunal held that the rights under the Mining
and Exploration Licenses constituted intangible property and a pro-
152. Khan Resources Inc., Khan Resources B.V., and Cauc Holding Company Ltd. v.
Government of Mongolia and Monatom Co. Ltd., PCA Case No. 2011-09, Award (Mar. 2, 2015),
http://www.italaw.com/sites/default/files/case-documents/italaw4267.pdf.
153. Id. ¶ 54.
154. Id. ¶ 81.
155. Id. ¶ 94.
156. Id. ¶ 93.
157. Id. ¶ 101.
158. Id. ¶ 110.
159. Id. ¶ 111.
160. Id. ¶ 198.
161. Id. ¶ 209.
162. Id. ¶ 322.
163. Id. ¶ 160.
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tected investment,164 and that “the Claimants were substantially deprived of their rights.”165 In the tribunal’s view, “the Respondents were
not able to point to any breaches of Mongolian law that would justify
the decisions to invalidate . . . [the] licenses.”166 In fact, the tribunal
noted that, “the boundary coordinates of the protected area were
unclear, and that Khan made a good faith attempt to remedy the
potential violation.”167 Moreover, the tribunal noted that “Khan did
not violate the law in its storage of the drill core” on the basis of the
assessment of the Nuclear Energy Commission.168 The tribunal concluded that the Mongolian government’s actions breached the ECT.169
In James Russell Baird v. United States,170 James Baird, a Canadian
inventor and businessman, challenged the U.S. policy of disposing
nuclear waste at Yucca Mountain in Nevada, rather than in subducting
tectonic plates.171 The investor claimed to have patents for alternative
waste disposal methods involving sub-seabed disposal.172 Accordingly,
toxic and nuclear waste would be disposed in repositories under the
ocean floor in subducting tectonic plates by means of an access tunnel
constructed from land.173 However, the investor argued that the decision of the U.S. Congress and Department of Energy to rule out
sub-seabed disposal was “discriminatory,” adopted “for political (as
opposed to legitimate, scientific) reasons,” and prevented the investor
from making the patent profitable.174 Therefore, he filed a Notice of
Intent to File a Claim, the first step in the NAFTA investor–state process
when an investor notifies a government that it intends to bring a
NAFTA Chapter 11 suit against that government, contending that the
respondent was in breach, inter alia, of the nondiscrimination provision,175 the fair and equitable treatment,176 and the expropriation
164. Id. ¶ 308.
165. Id. ¶ 310.
166. Id. ¶ 319.
167. Id. ¶ 323.
168. Id. ¶ 325.
169. Id. ¶ 366.
170. James Russell Baird v. United States of America, supra note 139.
171. PUBLIC CITIZEN’S GLOBAL TRADE WATCH, NAFTA’S THREAT TO SOVEREIGNTY AND DEMOCRACY: THE RECORD OF NAFTA CHAPTER 11 INVESTOR–STATE CASES 1994 –2005, 69-70 (2005).
172. Patents are considered to be a form of investment in most investment treaties.
173. James Russell Baird v. United States of America, supra note 139, at ¶¶ 1, 6.
174. Id. ¶¶ 8, 14.
175. Id. ¶ 28(a).
176. Id. ¶¶ 19-20.
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provision under NAFTA Chapter 11.177 However, arbitration never
began. As little is known about this claim apart from the Notice of
Intent, it is unclear why the arbitration never began. Certainly, the ban
on all sub-seabed disposal of nuclear weapons and nuclear material
more generally was seen as being necessary “because of increasing
concerns about pollution of marine environments.”178 Moreover, these
domestic policies seemed supported by international law.179
B.
Disputes Relating to Nuclear Energy Indirectly
Disputes indirectly relating to nuclear energy sector, on the other
hand, can relate to a variety of economic activities such as contractual
claims relating to the running of a nuclear power plant or even
uranium mining. For instance, both Amto v. Ukraine180 and Remington v.
Ukraine,181 constitute examples of investor–state disputes that are “indirectly related” to the nuclear energy sector.182 In both cases, private
investors supplied electrical equipment to a state-owned Ukrainian
nuclear power plant.
Reportedly, when the nuclear power plant did not pay, Remington, a
Gibraltar-based company, filed claims before the Commercial Court of
Saint Petersburg and the Leningrad Region.183 However, Ukraine
177. Id. ¶ 21.
178. Id. ¶ 16.
179. The Convention on the Prevention of Marine Pollution by Dumping of Wastes and
Other Matter, opened for signature Dec. 29, 1972, 1046 U.N.T.S. 120, 11 I.L.M. 1294 (entered into
force Aug. 30, 1975); Protocol to the Convention on the Prevention of Marine Pollution by
Dumping of Wastes and Other Matter (London Protocol), opened for signature Nov. 7, 1996, 36
I.L.M. 1 (entered into force Mar. 24, 2006).
180. Amto v. Ukraine, Arbitration Institute of the Stockholm Chamber of Commerce,
Arbitration No. 080/2005, Award, (Mar. 26, 2008), http://www.italaw.com/documents/Amto
Award.pdf. The Arbitral Tribunal was composed of Bernardo Cremades (chair), Per Runeland,
and Christer Söderlund.
181. Remington Worldwide Limited (UK) v. Ukraine, Arbitration Institute of the Stockholm
Chamber of Commerce, Award (Apr. 28, 2011) (unpublished). The Arbitral Tribunal was
composed of Professor Gabriele Crespi Reghizzi (Chair), Alexander S. Komarov, and Evgeny
Kubko.
182. Repousis, supra note 129.
183. The SCC award remains unpublished. For a report on the facts of the case, see Olena
Perepelynska, “Remington Worldwide Limited v Ukraine” Saga: The First ECT Arbitration Conducted in
Russian, CIS ARBITRATION FORUM (Aug. 19, 2012), http://www.cisarbitration.com/2012/08/19/
remington-worldwide-limited-v-ukraine-the-first-ect-arbitration-conducted-in-russian/. See also Luke
Eric Peterson, Energy Charter Claim against Ukraine Moves forward Quietly, INVESTMENT ARBITRATION
REPORTER, May 27, 2009, http://www.iareporter.com/articles/energy-charter-claim-against-ukrainemoves-forward-quietly-tribunal-picked-in-separate-bosh-case-at-icsid/.
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failed to execute the judgment in favor of Remington.184 Therefore,
the company filed investor–state arbitration claiming that state conduct violated provisions of the ECT.185 Reportedly, the Remington
Tribunal held that Ukraine had breached the fair and equitable
treatment standard.186
In Amto v. Ukraine, Amto, a Latvian company had bought shares in a
local Ukrainian company supplying services to a Ukrainian NPP.187
The local Ukrainian company “commenced court proceedings” before
the local commercial courts “in respect of amounts pursuant to eleven
contracts” between the same company and the NPP and was successful
in its claims.188 However, when it “sought execution on the basis of its
judgments[,] [e]xecution was stayed because of bankruptcy proceedings against the NPP.”189 Amto filed an investor–state arbitration,
alleging that Ukraine has breached various provisions of the ECT,
including the fair and equitable treatment.190 The Amto Tribunal noted
that “The origin of the Claimant’s claims is the non-payment of
contractual debts.”191 However, it held that the claimant had failed to
establish any liability under the ECT for the host state.192 Scholars
suggest that the Amto award seemingly diverged from the Remington
award because of its different interpretation of the scope of the
umbrella clause.193 However, since the Remington award remains
confidential, it is not possible to compare the two awards on the basis of
the limited information publicly available.
C.
Peripheral Disputes
The third category of “peripheral disputes” includes those cases that
bear a mere connection to the nuclear energy sector. Such disputes
184. Perepelynska, supra note 183.
185. Id.
186. Id.
187. Amto v. Ukraine, Arbitration Institute of the Stockholm Chamber of Commerce,
Arbitration No. 080/2005, Award, ¶¶ 18-19 (Mar. 26, 2008), http://www.italaw.com/documents/
AmtoAward.pdf.
188. Id. ¶ 21.
189. Id.
190. Id. ¶ 25.
191. Id. ¶ 107.
192. Id. ¶ 108 (noting that “[t]hese decisions did not involve puissance publique and it has not been
shown that they were made on the instructions of, or under the direction or control of Ukraine.”).
193. See id. ¶ 110 (noting that “in the present case the contractual obligations have been
undertaken by a separate legal entity, and so the umbrella clause has no direct application”).
Repousis, supra note 129.
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deal with various subject matters. For instance, after the Fukushima
Daiichi disaster, China, Hong Kong, Russia, Taiwan and South Korea
adopted food import bans against Japan.194 However, Japan is challenging these measures before the Dispute Settlement Mechanism of the
World Trade Organization (WTO) arguing that it is not trading
contaminated food, that available scientific studies do not require
additional risk assessments, and that the measures adopted by South
Korea violate the WTO’s Sanitary and Phytosanitary (SPS) Agreement.195 While this trade dispute centers on the possible public health
consequences of a nuclear disaster, commentators have pointed out
that “it would not be unlikely to imagine that such or similar disputes
can also be pressed in investment fora.”196 For example, a Japanese
company with subsidiaries in China or Korea whose business is importing Japanese food in China or Korea could file an investment treaty
claim challenging the regulatory measures adopted by these countries
in the aftermath of the Fukushima Daiichi disaster.
V.
VATTENFALL V. GERMANY II
A case that is bringing nuclear energy-related investment disputes to
the forefront of public debate is Vattenfall II. In Vattenfall II,197 a
Swedish energy company is suing Germany at the International Center
194. Gijs Berends, Food Fights or a Recipe for Cooperation? EU-Japan Relations and the Development
of Norms in Food Safety Policy, in THE EUROPEAN UNION AND JAPAN 123 (Paul Bacon, Hartmut Mayer,
& Hidetoshi Nakamura eds., 2015).
195. Tom Miles, Japan Takes South Korea to WTO Over Fukushima–related Food Import Restrictions,
REUTERS (May 21, 2015), http://www.reuters.com/article/us-japan-southkorea-wto-nuclear-idUS
KBN0O615F20150521.
196. Repousis, supra note 129.
197. It is not the first time Vattenfall has taken Germany to arbitration. In 2009, Vattenfall
filed a claim over stricter environmental regulations on its coal-fired power plant in HamburgMoorburg. Local opposition to the plant emphasized its impacts on climate change and the Elbe
River. According to Vattenfall, this delayed the issuance of permits for emissions and led to the
denial of a water use permit. The case was then settled and the terms of the agreement embodied
in an award. The Hamburg government issued permits required for the plant to proceed and
relieved Vattenfall of earlier commitments to the local government which aimed at reducing the
plant’s environmental impact on the Elbe River. Vattenfall AB, Vattenfall Europe AG, Vattenfall
Europe Generation AG v. Federal Republic of Germany, ICSID Case No. ARB/09/6, Settled
by Agreement Among the Parties Embodied in an Award (Mar. 11, 2011). The Arbitral
Tribunal was composed of Marc Lalonde QC (Chair), Sir Franklin Berman QC and Gabrielle
Kaufmann-Kohler.
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for the Settlement of Investment Disputes (ICSID)198 to obtain compensation for losses arising out of a nuclear phaseout. The case, still
pending, raises interesting questions: Does the phaseout breach international investment treaty provisions? Are arbitral tribunals a suitable
forum to adjudicate this type of dispute or, rather, are they expropriating environmental governance?
This section first discusses the rise and fall of nuclear power in
Germany, illustrating the grassroots movement which led to widespread opposition to nuclear energy in the country. It then discusses
the ICSID arbitration, exploring issues of jurisdiction, the protection of
fair and equitable treatment, the claim of expropriation, the availability
of exceptions, and the possible participation of friends of the courts
(amici curiae).
A.
The Rise and Fall of Nuclear Power in Germany
Over time, Germany has moved from an energy policy favouring
nuclear power to a complete phaseout thereof in response to persistent
public protests. In the aftermath of WWII, Germany opted for using
nuclear power peacefully to foster societal welfare.199 The 1959 Nuclear
Energy Act (Atomgesetz, AtG)200 established the possibility to erect nuclear
power plants.201 In the following decades, nuclear energy was heavily
subsidized and subject to several tax exemptions.202
In the 1970s, however, grassroots movements emerged protesting
nuclear energy.203 Decades of demonstrations followed, including
temporary occupations of nuclear power plants and mass rallies.204 In
1986, after the Chernobyl disaster, clashes between anti-nuclear protesters and German police became frequent. In some instances, police
“used water cannons and dropped tear-gas grenades from helicopters
to subdue protesters armed with slingshots, crowbars and Molotov
198. Convention on the Settlement of Investment Disputes Between States and Nationals of
Other States (ICSID Convention), Mar. 18, 1965, 575 U.N.T.S. 159 (entered into force on Oct. 14,
1966).
199. Winter, supra note 93, at 96.
200. Atomgesetz [AtG] [Act on the Peaceful Utilization of Nuclear Energy and the Protection
against its Hazards], Dec. 23, 1959, BGBL I at 814 (Ger.).
201. Winter, supra note 93, at 96.
202. Bernhard Nagel, European Energy Law Initiatives, in THE LAW OF ENERGY FOR SUSTAINABLE
DEVELOPMENT 370, 374 (Adrian J. Bradbrook et al. eds., 2012).
203. Winter, supra note 93, at 96.
204. Id.
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cocktails.”205 Despite the quelling of these protests, Germany’s antinuclear energy movement has proven “one of the most enduring and
successful mass movements in contemporary Europe.”206 In fact,
“it . . . change[d] the way Germans thought about the atom as an
energy source, g[a]ve birth to a political party committed to its goals
and, ultimately, l[aid] the groundwork for Germany’s decision to
embrace a future based on . . . renewable energy.”207
The reasons behind the particularly vehement opposition to nuclear
power of the German grassroots movements and their ultimate coalescence in formal political parties208 may ultimately rest on cultural
factors. Historically, Germany has been the birthplace of the Romanticism, a cultural movement that conceptualized nature in a holistic
fashion.209 Moreover, the German approaches to nuclear energy would
reflect a process of “reflexive modernization.”210 Technological progresses have promoted economic development, but also led societies to
elaborate ways “of dealing with hazards and insecurities induced and
introduced by modernization itself.”211 According to the German
sociologist, Ulrich Beck, who has theorized the notion of “risk society”
(in German Risikogesellschaft), when societies assess the level of risk that
is being produced, this sort of reflexive introspection can alter the
planned economic activities themselves to decrease the level of risk.
Broad sectors of civil society ranging from “left intellectuals” to “conservative farmers” have supported the anti-nuclear movement,212 which
has become “a new and important political phenomenon.”213
205. John Greenwald, Energy and Now, the Political Fallout, TIME, Jun. 2, 1986.
206. Paul Hockenos, How Germany Learned to Hate Nuclear Power, CHINA DIALOGUE (Oct. 23,
2012), https://www.chinadialogue.net/article/show/single/en/5232-How-Germany-learned-tohate-nuclear-power.
207. Id.
208. On the institutionalization of environmentalism, see Klaus Eder, The Institutionalisation
of Environmentalism: Ecological Discourse and the Second Transformation of the Public Sphere, in RISK,
ENVIRONMENT AND MODERNITY: TOWARDS A NEW ECOLOGY (Scott Lash et al. eds., 1996) (noting the
institutionalization of ecological discourse and its shaping of the public sphere).
209. Hockenos, supra note 206, at 124.
210. Ulrich Beck, Wolfgang Bonss & Christoph Lau, The Theory of Reflexive Modernization:
Problematic, Hypotheses and Research Programme, 20 THEORY, CULTURE, & SOCIETY 1 (2003).
211. ULRICH BECK, RISK SOCIETY: TOWARDS A NEW MODERNITY 21, 23 (Mark Rotter trans. 1992)
(also theorizing the existence of “a boomerang effect” of modernization: in addition to increasing
wealth, modernization can pose significant environmental health risks.).
212. Winter, supra note 93, at 102 (considering the anti-nuclear movement as “broad-based
and un-ideological”).
213. PHIL BROWN, TOXIC EXPOSURES: CONTESTED ILLNESSES AND THE ENVIRONMENTAL HEALTH
MOVEMENT XIV (2007).
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In 2000, a coalition between the Social Democrats and the Greens
“established a timeline for removing nuclear power from [its] power
grid by 2022,”214 concluding an agreement with the four largest German energy supply companies.215 The phaseout, known as Nuclear
Consensus I, was endorsed in a law that amended the AtG.216 According
to Nuclear Consensus I, no new nuclear power plants would be authorized and the existing plants would only be allowed to produce individually allocated quantities of electricity.217
The nuclear phaseout was subsequently interrupted when the Conservative/Liberal coalition came to power. Reportedly, the new coalition
conceived nuclear power “as a ‘bridging technology’ that could be used
to reduce carbon dioxide emissions on a transitional basis until such
time as renewables provided the bulk of the country’s energy.”218
Despite anti-nuclear rallies in Berlin and elsewhere demanding the
closure of all German nuclear plants219 and attempts to derail train
transports of nuclear waste,220 an amendment to the AtG, known as
Nuclear Consensus II, extended the lifespan of nuclear power plants by
an average of 12 years.221 In exchange, the energy suppliers agreed to
pay a tax from which the transition to renewable energies would be
funded.222 Negotiations with the nuclear industry preceded both amendments.223 Reportedly “[i]n each case, . . . the lower chamber of the
German Parliament [the Bundestag] was involved only after an
agreement had been reached, and its role was limited to adopting
parliamentary acts to lend legislative force to the substance of these
agreements.”224 Critics contended that this procedure could be unconstitutional as breaching the principles of democracy and of separation
214. Arnold, supra note 51, at 26.
215. Winter, supra note 93, at 99.
216. Gesetz zur geordneten Beendigung der Kernenergienutzung zu friedlichen Zwecken
[Law on the Structured Phasing Out of Nuclear Energy Use for Peaceful Purposes], 2002, BGBL. I
at 1357 (Ger.).
217. Winter, supra note 93, at 99.
218. Thomas Mann, The Legal Status of Nuclear Power in Germany, 94 NUCLEAR LAW BULLETIN
43, 45 (2014).
219. David Stamp, Germany Suspends Deal to Extend Nuclear Plants’ Life, REUTERS (Mar. 14,
2011), http://uk.reuters.com/article/us-germany-nuclear-extension-idUSTRE72D5WX20110
314.
220. Roger Boyes, German Nuclear Programme Threatened by Old Mine Housing Waste, TIMES (Jan.
2010), http://www.thetimes.co.uk/tto/news/world/europe/article2601664.ece.
221. Mann, supra note 218, at 45.
222. Winter, supra note 93, at 100.
223. Id.
224. Mann, supra note 218, at 46.
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of powers. However, other scholars have deemed such criticism unfounded, as the “parliament was theoretically able to amend the details
of the agreement[s] when making [them] law.”225
After the Fukushima Daiichi nuclear power plant accident on March
11, 2011,226 anti-nuclear opposition intensified in Germany,227 with
opinion polls indicating that eighty percent of Germans opposed the
government’s extension of nuclear power.228 On March 14, 2011, the
Federal Chancellor Angela Merkel announced an initial “moratorium,”229 a three-month suspension of operation of Germany’s seven
oldest nuclear power plants.230 Reportedly, a later amendment “rescinded the previous increases in residual electricity volumes, permanently decommissioned the nuclear power plants shut down under the
moratorium and set a date for the final shutdown of each of the nine
remaining power plants.”231
Certainly the Fukushima disaster was the ultimate element in a long
chain of circumstances that triggered the U-turn. The argument went
as follows: “if such big accidents could not be avoided in a technically
advanced country like Japan, the use of nuclear power for generating
electricity needed to be questioned fundamentally.”232 However, the
German nuclear phaseout also seems the outcome of decades-long
democratic debates. Bottom-up critical views coalesced in the activities
of political parties.233 Moreover, the political system could phase out
nuclear energy because “power supply appeared to be secured without
nuclear energy.”234 In fact, the nuclear phaseout is but a component of
a larger transition—the so-called Energy Transformation (Energiewende)— by Germany to an energy portfolio dominated by renewable
225. Id. at 46-47.
226. Japan: Nuclear Crisis Rose to Chernobyl Level, BBC NEWS (Apr. 12, 2011), http://www.bbc.
com/news/world-asia-pacific-13045341.
227. See, e.g., Thousands Protest against Germany’s Nuclear Plants, BBC NEWS (Mar. 12, 2011),
http://www.bbc.com/news/world-europe-12724981 (reporting that on March 12, 2011, protesters formed a forty five kilometer human chain from Stuttgart to a nuclear power plant.).
228. Hockenos, supra note 206.
229. Germany to Reconsider Nuclear Policy: Merkel Sets Three-Month ’Moratorium’ on Extension of
Lifespans, DER SPIEGEL (Mar. 14, 2011), http://www.spiegel.de/international/world/germany-toreconsider-nuclear-policy-merkel-sets-three-month-moratorium-on-extension-of-lifespans-a-75091
6.html.
230. Mann, supra note 218, at 47.
231. Id.
232. Winter, supra note 93, at 100.
233. Id. at 103.
234. Id. at 105.
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energy235 as an alternative to fossil fuels (oil, coal, natural gas) and
nuclear fuel (uranium).236
B.
The ICSID Arbitration
In May 2012, the energy company Vattenfall, wholly owned by the
Swedish State,237 filed an investor–state arbitration against Germany at
the ICSID regarding the government’s closure in early 2012 of two of
the company’s nuclear plants, both located near Hamburg. The media
reported that while the government had agreed to extend the life of
these nuclear power stations in 2010, in the aftermath of the Fukushima events, the two plants were shut down permanently.238 According to the press, Vattenfall is claiming that Germany’s policy reversal
has breached the country’s legal obligations under the ECT and is
asking for 3.5 billion euros for both past and future lost profits.239 No
details have been made public regarding the exact provisions of the
ECT that Vattenfall claims have been infringed. The ICSID website has
provided several procedural updates since the tribunal’s constitution.240 However, none of the party submissions or orders issued by the
tribunal has been published to date.241 While ICSID Rules do not
require confidentiality, whether details will be kept confidential de-
235. See generally Olaf Däuper and Jan Ole Voss, The Transformation of the German Power
Generation Market—Legal Challenges of the Shift from Nuclear Baseload Generation to Flexible Production
and Capacity Rewards, 11 GLOB. ENERGY L. & REG. 1 (2013).
236. Tim Smedley, Goodbye Nuclear Power: Germany’s Renewable Energy Revolution, GUARDIAN
(May 10 2013), http://www.theguardian.com/sustainable– business/nuclear–power– germany–
renewable– energy (stressing that the new policy involves some nudging, i.e. motivating individual
consumers to reduce their own consumption of energy, investing in insulation of buildings and
combining it with smart and appropriate behaviour).
237. Gerd Winter, The Rise and Fall of Nuclear Energy Use in Germany: Processes, Explanations and
the Role of Law, 25 J. ENVTL. L. 95, 118 n.130 (2013) (noting that “Vattenfall Europe is owned by
Vattenfall AB which again is 100% owned by the Swedish State.”).
238. Vattenfall vs. Germany: Nuclear Phase-Out Faces Billion-Euro Lawsuit, DER SPIEGEL (Feb. 11,
2011), http://www.spiegel.de/international/germany/vattenfall-vs-germany-nuclear-phase-outfaces-billion-euro-lawsuit-a-795466.html.
239. Germany is Sued at ICSID by Swedish Energy Company in Bid for Compensation for Losses Arising
out of Nuclear Phase Out, INV. ARB. REP. (June 1, 2012), http://www.iareporter.com/articles/germanyis-sued-at-icsid-by-swedish-energy-company-in-bid-for-compensation-for-losses-arising-out-ofnuclear-phase-out/; Nathalie Bernasconi-Osterwalder & Martin Dietrich Brauch, The State of Play
in Vattenfall v. Germany II: Leaving the German Public in the Dark 2 (Int’l Inst. for Sustainable Dev.,
2014).
240. See Case Details, INT’L CTR. FOR SETTLEMENT INV. DISP., https://icsid.worldbank.org/apps/
ICSIDWEB/cases/Pages/casedetail.aspx?CaseNo⫽ARB/12/12 (last visited Jan. 22, 2016).
241. Bernasconi-Osterwalder & Brauch, supra note 239, at 3.
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pends on whether parties to the dispute request it.242 The ICSID
website reports that the tribunal has issued four confidentiality orders.
However, it is impossible to know who argued for confidentiality and
on what grounds.243 The ICSID website also reports that “a nondisputing party [has] file[d] an application to file a written submission
pursuant to ICSID Arbitration Rule 37(2).”244
In parallel, Vattenfall also brought a complaint (Verfassungsbeschwerde) before the Federal Constitutional Court of Germany (Bundesverfassungsgericht) alleging that the closure of nuclear plants is tantamount to
expropriation and that the lack of compensation for the nuclear
phaseout required by the German Atomic Energy Act is inconsistent with
German constitutional law.245 This double-track strategy—previously
adopted by some foreign investors in other sectors246—allows Vattenfall to attempt to benefit from the different applicable law and compensation standards available in the two fora. The outcomes of the two
procedures are independent albeit they may reverberate on each
other.247
There is a historical precedent that bears similarities to the German
case. In Sweden, a comparable case arose when—in the aftermath of
the Chernobyl accident—the Swedish Parliament enacted the 1997 Act
on Phasing-Out Nuclear Power, empowering the Swedish government
to close nuclear reactors.248 Unlike the German measure, the Swedish
regulation provided for compensation; nonetheless, one affected company challenged the legality of the measure under Article 13 of the
ECT, the then EC law and the European Convention for the Protection
of Human Rights.249 Although the Swedish Supreme Court rejected
242. Id. at 4.
243. Robert Haydock, Jr., Some Evidentiary Problems Posed by Atomic Energy Security Requirements,
61 HARV. L. REV. 468, 468-91 (1948) (noting that national security interests may require some
confidentiality).
244. See Case Details, supra note 240.
245. NATALIE BERNASCONI-OSTERWALDER & REA TAMARA HOFFMANN, THE GERMAN NUCLEAR
PHASE-OUT PUT TO THE TEST IN INTERNATIONAL INVESTMENT ARBITRATION? (2012), http://www.
s2bnetwork.org/fileadmin/dateien/downloads/Vattenfall-ICSID-case_v2.pdf.
246. Philip Morris Asia Ltd. v. The Commonwealth of Austl. (Perm. Ct. Arb., pending),
http://www.pcacases.com/web/view/5; JT International SA v Commonwealth, and British American
Tobacco Australasia Ltd. V Commonwealth [2012] HCA 43 (Austl.).
247. Don’t Mention the Atom, THE ECONOMIST (June 23, 2012), http://www.economist.com/
node/21557363/ (reporting that two German companies, E.ON and RWE have also filed
analogous cases with the federal constitutional court).
248. For details of the dispute, see Tore Wiven-Nilsson, Phasing-Out of Nuclear Power in Sweden,
24 J. ENERGY NAT. RESOURCES L. 355 (2006).
249. Id. at 355.
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the claims, an agreement was reportedly reached among the parties
containing provisions for compensation.250
As the arbitration filed by Vattenfall is still in an early phase, it is not
possible to predict how this case will be decided or whether it will be
settled. More generally, the mentioned case epitomizes the tension
between investor rights and public policies and raises a number of
questions including the preliminary question as to whether this and
similar arbitrations may have a chilling effect on policy makers, preventing them from adopting regulatory measures for the public good.251
Several scholars have cautioned against the risk of “regulatory chill” i.e.
the use by multinationals of international investment law and arbitration to discourage governments from engaging in given social policies.252
More substantively, other relevant questions arise. These include
whether the phaseout of nuclear energy constitutes an indirect expropriation under Article 13 of the ECT and whether the reversal of
previous nuclear policy amounts to a violation of the fair and equitable
treatment under Article 10 of the ECT. It might also be questioned
whether an indemnity should be paid to companies that invested in the
nuclear energy sector at all, and whether additional damages for future
lost profits are warranted. Did Vattenfall have a legitimate expectation
that its power plants would not be closed in the near future? Are the
regulatory measures adopted by Germany reasonable? Are arbitrators
expropriating environmental governance by adjudicating this type of
disputes? More broadly, the case raises the concern of whether public
and private interests can be accommodated adequately in investor–
state arbitration.
The next sub-sections address these questions focusing on issues of
jurisdiction and admissibility, the questions as to whether the nuclear
phaseout constitutes a breach of the fair and equitable treatment
standard and/or an unlawful expropriation, the availability of exceptions, and the possible participation of friends of the court (amici
curiae) in the proceedings. The aim of the following analysis is not to
guess at the outcome of the arbitration (which might eventually be
settled as was the case for Vattenfall I) but to highlight what types of
legal issues may arise in the context of nuclear energy-related disputes
250. Id. at 359.
251. BERNASCONI-OSTERWALDER & HOFFMANN, supra note 245, at 3.
252. Jeffrey Waincymer, Investor-State Arbitration: Finding the Elusive Balance between Investor
Protection and State Police Powers, 17 INT’L TRADE & BUS. L. REV. 261, 265-66 (2014).
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in general and the Vattenfall case in particular.253
C.
Jurisdiction and Admissibility
In any investment treaty arbitration, the arbitral tribunal must ascertain two preliminary issues before considering the merits of the dispute. First, the tribunal must verify whether it has jurisdiction in respect
of the claim brought by the claimant. Second, it must assess whether
the claim is admissible. With regard to the first issue, the fundamental
question is whether the tribunal is entitled to adjudicate. Jurisdiction
refers to the power of an arbitral tribunal to entertain an action.254 The
jurisdiction of investment tribunals is based on the consent of states.255
As Roe and Happold explain,
The issue of jurisdiction breaks down into three questions: does
the tribunal have jurisdiction over the subject matter of the
dispute (sometimes called jurisdiction ratione materiae); does
the tribunal have jurisdiction to determine the claim between
these particular parties (jurisdiction ratione personae); and does
the tribunal have jurisdiction to determine the claim in the
light of the dates on which the relevant events occurred (jurisdiction ratione temporis)?256
With regard to admissibility, the fundamental question is “whether
the claim is ready for decision” at a certain stage.257 In fact, admissibility
refers to the capacity of a claim to be examined at a given point in
time.258 Admissibility covers a wide range of matters including whether
local remedies have been exhausted, and whether the claimant has the
253. For an examination of the relevant standards of review, see Valentina Vadi, Foreign
Investment in the Energy Sector and Public Health, in FOREIGN INVESTMENT IN THE ENERGY SECTOR:
BALANCING PRIVATE AND PUBLIC INTERESTS 238 (Eric De Brabandere & Tarcisio Gazzini eds., 2014)
(pinpointing that in the clash between investment protection and the pursuit of public interest
objectives by the host state, the standard of review plays a fundamental role because the degree of
deference given by arbitral tribunals in reviewing a given decision of the relevant authorities
influences the outcome of the proceedings).
254. Michael Waibel, Investment Arbitration: Jurisdiction and Admissibility, 2 (Univ. Cambridge
Faculty Law, Legal Studies Research Paper No. 9, 2014).
255. Id.
256. THOMAS ROE & MATTHEW HAPPOLD, SETTLEMENT OF INVESTMENT DISPUTES UNDER THE
ENERGY CHARTER TREATY 40 (2011).
257. Waibel, supra note 254, at 2.
258. Id. at 5.
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right to bring a particular claim.259 While the concepts of jurisdiction
and admissibility are theoretically distinct, they tend to mix in the
arbitral practice. In fact, the ICSID Convention and the UNCITRAL
Arbitration Rules do not even refer expressly to ‘admissibility’.260 The
fact that Vattenfall went to German courts in parallel to the arbitral
proceedings may be relevant as some investment treaties subject arbitrability to the exhaustion of local remedies or include a fork-in-the-road
provision.
1.
Questionability of ICSID Jurisdiction over State-Owned
Enterprises
An issue of particular relevance to jurisdiction and admissibility
arises with State-owned enterprises (SOEs) given their standing under
the ICSID Convention. SOEs have traditionally been the key players in
the highly regulated nuclear energy sector261 and have increasingly
expanded their range of activities investing in nuclear energy projects
not only in their home states but also overseas. For instance, Russia’s
State Atomic Energy Corporation (Rosatom) has invested in a nuclear
energy project in Turkey262 while the Italian Enel has interests in
nuclear power plant operations in Slovakia.263 Because of their size and
governance structures, “SOEs can tolerate high risk and make longterm investments.”264 However, due to the political ties of SOEs with
home states and the strategic, political and military importance of the
nuclear sector, several states have controlled265 and, sometimes, ex-
259.
260.
261.
262.
Id. at 8.
Id.
Repousis, supra note 129.
Anna Shiryaevskaya, Rosatom Offers EDF Partnership in Turkey’s First Nuclear Plant,
BLOOMBERG (May 8, 2013), http://www.bloomberg.com/news/articles/2013-05-08/rosatom-offersedf-partnership-in-turkey-s-first-nuclear-plant.
263. ENEL, NUCLEAR SPAIN: PLANT POWER AND SHARE OWNERSHIP (2015), http://www.enel.com/
en-GB/group/technologies/nuclear_power/enel/ (last visited June 10, 2015) (noting that “Enel
has an interest in Nuclear Power Plant Operations in Slovakia through its controlling 66% holding
in Slovenske Elektrarne as which owns and operates the Bohunice 3 & 4 Units and Mochovce 1 & 2
Units . . . .”).
264. Ji Li, State-Owned Enterprises in the Current Regime of Investor–State Arbitration, in THE ROLE
OF THE STATE IN INVESTOR-STATE ARBITRATION 380, 381 (Shaheeza Lalani & Rodrigo Polanco Lazo
eds., 2015).
265. Claudia Annacker, Protection and Admission of Sovereign Investment under Investment
Treaties, 10 CHINESE J. INT’L L. 531, 545 (2011) (referring to a 2008 Russian law on strategic
industries subjecting takeovers of domestic companies in the nuclear energy sector to prior
approval).
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cluded sovereign investment.266
Whether sovereign investors benefit from protection under investment treaties generally designed for private investors not only depends
on the definition of “investor” and “investment” in the relevant international investment agreement but also on the ICSID Convention, if the
parties bring their case before an ICSID Tribunal. While the issue of
the standing of SOEs before other arbitral fora has not given rise to any
particular issue,267 questions arise as to whether an investor state lacks
standing to file claims before ICSID tribunals. The preamble268 and the
travaux préparatoires of the ICSID Convention highlight that the ICSID
was designed to settle disputes between private investors and the host
states.269 Under Article 25 of the ICSID Convention, the jurisdiction of
the Center extends to disputes “between a Contracting State . . . and a
national of another Contracting State.”270 Arguably, the ICSID Convention was designed to settle investor–state disputes, rather than state-tostate disputes.271
Concerns arise that “allowing SOEs from powerful states will politicize the arbitration process.”272 More fundamentally, one may wonder
why such companies would use the investor-state arbitration mechanism, when they can use state-to-state arbitration before other fora.273
266. See, e.g., Elliot L. Richardson, United States Policy Toward Foreign Investment: We Can’t Have
It Both Ways, 4 AM. U. INT’L L. REV. 281, 301 (1989) (noting that the United States prohibit tout
court foreign investments in the nuclear energy sector for security concerns).
267. See, e.g., Kaliningrad v. Lithuania, Final Award, (Jan. 28, 2009), http://www.italaw.com/
cases/593. For commentary, see Claudia Priem, International Investment Treaty Arbitration as a
Potential Check for Domestic Courts Refusing Enforcement of Foreign Arbitration Awards, N.Y.U. J. L. & BUS.
189, 215 (2013) (highlighting that in the Kaliningrad case, “the question was whether the actual
enforcement of an arbitral award could constitute a breach of a BIT.”) and Annacker, supra note
265, at 536 (noting that the “award held that the regional Government of Kaliningrad [wa]s an
‘investor’ for purposes of Article 1(1) of the Russia–Lithuania BIT.”).
268. Convention on the Settlement of Investment Disputes between States and Nationals of
Other States, Preamble, opened for signature Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 159
[hereinafter ICSID Convention] (“[c]onsidering the need for international cooperation for
economic development, and the role of private international investment therein . . .”).
269. Annacker, supra note 265, at 555.
270. ICSID Convention, supra note 268, at art. 25(1).
271. Li, supra note 264, at 402 (noting that “The issue of standing for SOEs under the ICSID
Convention reflects a structural tension between the institution’s jurisdictional requirements and
State capitalism.”); Annacker, supra note 265, at 539 (noting that “Under intra-communist BITs,
such as the China-North Korea BIT, exclusion of State entities from coverage would leave the
investment treaty with no meaningful application.”).
272. Li, supra note 264, at 401.
273. On state-to-state investment treaty arbitration, see generally Anthea Roberts, State-to-State
Investment Treaty Arbitration: A Hybrid Theory of Interdependent Rights and Shared Interpretive Authority,
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The states could reach a settlement. If they cannot reach an agreement,
they could issue a binding interpretation of the treaty that would be
binding not only on the arbitral tribunal for the purposes of the
particular case, but also for all future similar disputes arising between
the parties. Binding interpretations are issued by states as a kind of
stipulated agreements and constitute supplementary means of treaty
interpretation.
2.
Applicable ICSID Legal Tests Conferring Jurisdiction
To date, ICSID Tribunals have upheld jurisdiction even when the
defendant raised objections on the standing of SOEs.274 Arbitral tribunals have adopted the so-called Broches’ test, distinguishing between
(ICSID-arbitrable) commercial activities and (non-arbitrable) governmental activities. Aron Broches, “the main architect of the ICSID
Convention”275 and the first Secretary-General of the ICSID, stated that
a SOE would have standing “unless it [wa]s acting as an agent for the
government or is discharging an essentially governmental function”
(Broches’ test).276 In Ceskoslovenska Obchodni Banka, A.S. (CSOB) v. Slova-
55 HARV. INT’L L.J. 1 (2014); Michele Potestà, Towards a Greater Role for State-to-State Arbitration in the
Architecture of Investment Treaties?, in THE ROLE OF THE STATE IN INVESTOR-STATE ARBITRATION 249,
250 (Shaheeza Lalani & Rodrigo Polanco Lazo eds., 2015) (noting that “despite being incorporated in almost every BIT, State-to-State dispute settlement clauses have attracted very little
attention . . . due to [their] limited use in practice.”).
274. See Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No.
ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction, ¶¶ 20-21 (May 24, 1999); CDC
Group plc v. Republic of the Sey., ICSID Case No. ARB/02/14, Award, ¶ 19 (Dec. 17, 2003),
https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&actionVal⫽showD
oc&docId⫽DC696_En&caseId⫽C219 (noting that “Although the Republic initially contested
CDC’s claim that the Loan Agreements and Guarantees were ‘investments’ within the meaning of
Art. 25(1), the Republic subsequently withdrew its objection to jurisdiction . . . .”); Telenor
Mobile Commc’ns A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award, ¶ 16
(Sept. 13, 2006), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&action
Val⫽showDoc&docId⫽DC652_En&caseId⫽C240 (the fact that the claimant was 75 per cent
owned by the State of Norway did not give rise to jurisdictional difficulties); Rumeli Telekom A.S.
v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, ¶¶ 325-28 (July 29, 2008),
http://www.italaw.com/sites/default/files/case-documents/ita0728.pdf (noting that “The record also confirms that the TSDIF is not the owner of Claimants’ shares. It is also incorrect to state
that if Claimants are successful, the Turkish State will be the only beneficiary of the moneys
allocated to Claimants by the award. The moneys will be used to pay all Claimants’ creditors,
according to the relevant rules of Turkish law.”).
275. Li, supra note 264, at 383.
276. ARON BROCHES, SELECTED ESSAYS, WORLD BANK, ICSID, AND OTHER SUBJECTS OF PUBLIC
AND PRIVATE INTERNATIONAL LAW 201-02 (1995).
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kia, the Slovak Republic objected to the jurisdiction of the Centre, inter
alia, on the ground that the dispute was not between “a Contracting
State . . . and a national of another Contracting State” within the
meaning of Article 25 of the ICSID Convention because CSOB was a
state agency of the Czech Republic.277 The tribunal followed the
Broches’ test,278 examining whether CSOB’s activities were commercial
“rather than governmental in nature.”279 Whereas an additional inquiry has been proposed, namely that the purpose of the given activities should be taken into consideration when determining the standing
of SOEs under the ICSID Convention (Feldman’s test),280 the distinction
between acta jure imperii and acta jure gestionis does not preclude
jurisdiction of ICSID tribunals in most cases. As Annaker pinpoints,
“investments Jure Imperii are rare.”281
A slightly different approach can be noted in another ICSID arbitration where the arbitral tribunal did not find any objection to establishing its jurisdiction, provided that the investment contract contemplated this possibility or the applicable bilateral investment treaty
(BIT) included SOEs as possible investors. In Government of the Province
of East Kalimantan v. PT Kaltim Prima Coal and Others, the tribunal held
that
[G]iven that the main basis for jurisdiction is an arbitration
clause contained in a contract, the Tribunal finds that nothing
in the ICSID Convention prevents a state or its subdivisions or
agencies from appearing as claimant in an arbitration based on
a contract. The question might receive a different response if
the basis for jurisdiction were an investment treaty which, in
principle, reserves the right to bring an arbitration to investors
and does not grant substantive protections to States.282
To date, the ICSID has been seized of two claims that were filed by
SOEs and are related to the nuclear energy industry: HEP v. Slovenia
277.
278.
279.
280.
Ceskoslovenska Obchodni Banka v. Slovakia, ¶ 15.
Id. ¶ 17.
Id. ¶ 20.
Mark Feldman, The Standing of State-Owned Entities Under Investment Treaties, in YEARBOOK
ON INTERNATIONAL INVESTMENT LAW & POLICY 2010-2011 615, 630 (Karl P. Savant ed., 2012).
281. Annacker, supra note 265, at 543 (noting that “the Swiss Ministry of Foreign Affairs
refers to real estate used for diplomatic purposes.”).
282. Gov’t of the Province of E. Kalimantan v. PT Kaltim Prima Coal, ICSID Case No.
ARB/07/3, Award on Jurisdiction, ¶ 174 (Dec. 28, 2009), https://icsid.worldbank.org/ICSID/
FrontServlet?requestType⫽CasesRH&actionVal⫽showDoc&docId⫽DC1791_En&caseId⫽C93.
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and Vattenfall v. Germany II both filed under the Energy Charter Treaty
(ECT).283 In HEP v. Slovenia, the ICSID Tribunal upheld its jurisdiction. However, in that case the applicable law included the ECT, the
ICSID Convention, and a bilateral treaty that governed the relations of
the two states with regard to the Krsko nuclear power plant. This
bilateral treaty provided for investor–state arbitration under the ICSID
and specifically listed the states’ electric companies as potential investors.284 Therefore, “the tribunal did not specifically examine the standing of HEP under the ICSID Convention . . . since the parties had
expressly consented to the bringing of claims by their electric utilities.”285
With regard to Vattenfall II v. Germany, due to the extremely limited
information that is available to the public, it is not possible to know
whether Germany is contesting the standing of Vattenfall under the
ICSID Convention. Nonetheless, “if such objection was raised and the
tribunal applied Broches’ test, this SOE would probably fail to meet
the jurisdictional conditions of the ICSID Convention as it could be
argued that Vattenfall is an agent of Sweden. If however [the] . . . Feldman’s test were applied, the answer could potentially be different.”286
D.
Fair and Equitable Treatment in the Context of Energy Reform
The obligation of a host state to accord fair and equitable treatment
(FET) to foreign investors has been defined as a basic norm of the
international investment regime.287 In Article 10 of the ECT, the FET
standard is embedded in a complex provision that also includes, inter
alia, constant protection and security, and the prohibition of unreasonable measures.288 The FET standard comprises a number of different
components, including procedural fairness–meaning due process in
administrative and judicial proceedings–transparency, good faith, and
the protection of legitimate expectations.289 These “administrative law
values” of due process, “participation, deliberation, and transparency”
283. Repousis, supra note 129.
284. Id.
285. Id.
286. Id.
287. Jeswald Salacuse, The Emerging Global Regime for Investment, 51 HARV. INT’L L. J. 427, 453
(2010).
288. For commentary, see Christoph Schreuer, Fair and Equitable Treatment (FET): Interactions
with Other Standards, in INVESTMENT PROTECTION AND THE ENERGY CHARTER TREATY 63 (Graham
Coop & Clarisse Ribeiro eds., 2008).
289. Katia Yannaca-Small, Fair and Equitable Treatment Standard: Recent Developments, in STANDARDS OF INVESTMENT PROTECTION 111 (August Reinisch ed., 2008).
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are of “particular importance in a field where safety is paramount, risk
perceptions run high, and disasters can never be fully predicted.”290
In this respect, if a state makes a specific or implicit representation to
a foreign investor, the investor relies on such representation in making
his or her investment, and the state then frustrates the expectation it
previously raised, this has been considered by some tribunals to be a
breach of the FET standard.291 However, in assessing whether legitimate expectations exist, arbitral tribunals should scrutinize the relevant circumstances in the respondent country at the time the investment was made “including not only the facts surrounding the
investment, but also the political, socioeconomic, cultural and historical conditions prevailing in the host state.”292 After addressing the
question as to whether expectations of constant energy policies are
legitimate, this section explores the role of policy rationality and
reasonableness for assessing state compliance with the FET standard.
1.
Legitimacy of Expectations of Constant Energy Policies
Do investors have legitimate expectations that the host states will not
change their nuclear energy policies? Building and maintaining nuclear
power plants is expensive, as the capital costs, i.e., the total costs
needed to bring a nuclear power plant project to a commercially
operable status, are higher than costs for conventional fossil-fueled
energy sources.293 Reportedly, expenses incurred on the purchase of
land, buildings, construction, and equipment used in the production
290. Hammond, supra note 13, at 1064.
291. See, e.g., EDF (Servs.) Ltd. v. Romania, ICSID Case No. ARB/05/13, Award, ¶ 216 (Oct.
9, 2009), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&actionVal⫽
showDoc&docId⫽DC1215_En&caseId⫽C57 (holding that “[protection of legitimate expectations] comes into consideration whenever the treatment attributable to the state is in breach of
representations made by it which were said to be reasonably relied upon by the claimant.”);
Sempra Energy Int’l v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, ¶ 298 (Sept.
28 2007), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&actionVal⫽
showDoc&docId⫽DC694_En&caseId⫽C8 (noting that “[t]his requirement to protect legitimate
expectations becomes particularly meaningful when the investment has been attracted and
induced by means of assurances and representations.”). See also Grand River Enters. Six Nations
Ltd. v. United States of America, Award, ¶ 140 (NAFTA Chapter 11 Arb. Trib. Jan. 12, 2011),
http://www.state.gov/documents/organization/156820.pdf.
292. Suez, Sociedad General de Aguas de Barcelona SA v. Argentine Republic, ICSID Case
No. ARB/03/19, Decision on Liability, ¶ 230 (July 30, 2010), www.italaw.com/documents/
SuezVivendiAWGDecisiononLiability.pdf (internal quotations omitted).
293. Michael E. Stern & Margaret M. Stern, Does Nuclear Power Have a Future?, 32 UTAH ENVTL.
L. REV. 431, 443 (2012).
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of nuclear power are high. In addition, “the costs of extraction,
disposal . . . insurance, and externalities associated with nuclear power
are also considerable.”294 An adequate timeframe may be needed to
allow the investor to recover the costs and make the nuclear power
plant profitable.
On the other hand, “[t]o be protected, the investor’s expectations
must be legitimate.”295 Certainly, “[c]hanges in regulatory frameworks
alone are not sufficient grounds for creating legitimate expectations
protected by the fair and equitable treatment standard.”296 Informal
representations or lack of representations do not usually give rise to
legitimate expectations that the host state should not change its
regulatory framework. In Nagel v. Czech Republic, the Czech authorities
informally encouraged the foreign company to invest, but because
these encouragements were informal, no legitimate expectations could
arise.297 Analogously, the Methanex Tribunal held that because the
investor “did not enter the United States market because of special
representations made to it,” the state was not required to pay compensation for the regulatory changes.298
Unless a stabilization clause was inserted in the investment agreement or an explicit promise made by the state, it would be difficult to
argue that any change in the law gives rise to compensation.299 As the
Parkerings Tribunal put it, “[an] expectation is legitimate if the investor
received an explicit promise or guaranty from the host state.”300 Only
official and formal assurances generally shift the risk from an investor
294. Arnold, supra note 51, at 26.
295. See Marcin Kałduński, The Element of Risk in International Investment Arbitration, 13 INT’L
CMTY. L. REV.111, 116 (2011).
296. Teerawat Wongkaew, The Transplantation of Legitimate Expectations in Investment Treaty
Arbitration—A Critique, in THE ROLE OF THE STATE IN INVESTOR-STATE ARBITRATION 69, 94-95
(Shaheeza Lalani & Rodrigo Polanco Lazo eds., 2015).
297. Nagel v. Czech Republic, Case No. 49/2002, Final Award (Arb. Inst. SCC 2003),
http://arbitration.org/sites/default/files/awards/arbr-2005-278-1.pdf.
298. Methanex Corp. v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 44 I.L.M. 1345, 1456 (NAFTA Chapter 11 Arb. Trib. Aug. 3, 2005).
299. Micula v. Romania, ICSID Case No. ARB/05/20, Award, ¶ 673 (Dec. 11, 2013),
http://www.italaw.com/sites/default/files/case-documents/italaw3036.pdf (noting that “when
he alleged legitimate expectation is one of regulatory stability, the reasonableness of the
expectation must take into account the underlying presumption that, absent an assurance to the
contrary, a state cannot be expected to freeze its laws and regulations.”).
300. Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award,
¶ 331 (Sept. 11, 2007), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH
&actionVal⫽showDoc&docId⫽DC682_En&caseId⫽C252 (also noting, at ¶ 332, that “save for the
existence of an agreement, in the form of a stabilisation clause or otherwise, there is nothing
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to the host state.301
Moreover, “[t]he assessment of the . . . legitimacy [of such expectations] must take into account all circumstances, including not only the
facts surrounding the investment, but also the political, socioeconomic, [and] cultural . . . conditions prevailing in the host state.”302
It is generally assumed that foreign investors are “experienced” actors.303 When an investor enters a sector that is heavily regulated, the
investor should reasonably expect that further regulations are likely to
occur.304 For instance, in Methanex v. United States, the tribunal acknowledged that “Methanex entered a political economy in which it was
widely known, if not notorious, the governmental environmental and
health protection institutions at the federal and state level . . . continuously monitored the use and impact of chemical compounds and
commonly prohibited or restricted the use of some of these compounds
for environmental and/or health reasons.”305 The nuclear power sector is
highly regulated and regulation has stiffened through the past decades. In
such sector regulatory changes are not only possible but also probable,
especially in the aftermath of a nuclear disaster.
In Vattenfall II, in the light of the controversy and uncertainty raised
by the use of nuclear power, it does not seem that the state acted
unreasonably in the exercise of its regulatory powers. The modifications do not seem to have been adopted in bad faith nor do they seem
targeting foreign investors or involving an unreasonable or discriminatory change.306 The difficulty posed by the Vattenfall case, however, lies
in the uncertainty as to whether the host state may have made specific
representations to the investors.
objectionable about the amendment brought to the regulatory framework existing at the time an
investor made its investment.”).
301. Kałduński, supra note 295, at 117.
302. See id. at 116.
303. Id. at 114.
304. Ryan Mellske, “For Greater Certainty”: Calibrating Investment Treaties to Protect Foreign
Investment and Public Health, 30 MD. J. INT’L L. 82, 90, 99 (2015) (noting that “an investor’s
expectations depend on the degree to which the relevant industry is already heavily regulated.”).
305. Methanex Corp. v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 44 I.L.M. 1345, 1456 (NAFTA Chapter 11 Arb. Trib. Aug. 3, 2005).
306. TECO Guat. Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/17,
Award, ¶ 616 (Dec. 19, 2013), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽
CasesRH&actionVal⫽showDoc&docId⫽DC4012_En&caseId⫽C1280 (noting at ¶ 629 that “in
absence of a stabilization clause, it is perfectly acceptable that the state amends the relevant laws
and regulations as appropriate. It is only if a change to the regulatory framework is made in bad
faith or with the intent to deprive the investor of the benefits of its investment that it could entail
the state’s international responsibility.”).
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2.
The Role of Policy Rationality and Reasonableness
An important factor to determine whether a given state measure
breaches FET is the rationality and reasonableness of the measure.307
An investor has legitimate expectations to be protected against “unreasonable modifications of [the] legal framework.”308 Arguing a contrario,
reasonable modifications of the legal framework do not amount to a
breach of the fair and equitable treatment. While reasonableness is a
fluid and dynamic concept,309 its essence lies in the balance between
private and public interests. According to Rawls, reasonable citizens
must “recognize the right of others to develop, pursue and . . . realize
their own vision of the good life.”310 This means that “individuals . . . accept the ineliminable presence and public accommodation of
(reasonable) views with which they disagree . . . .”311 Transposing this
framework to the context of investment treaty arbitration entails that
arbitrators must evaluate the reasonableness of investors’ expectations
against the reasonableness of the state regulatory actions. As the Saluka
Tribunal put it, “[t]he standard of reasonableness . . . requires . . . a
showing that the State’s conduct bears a reasonable relationship to
some rational policy . . . .”312 Arbitral tribunals have acknowledged the
state duty to regulate and to respond to the emerging needs of their
population.313 In fact, states are the “primary guardians of the public
order on their territory.”314 According to Wongkaew, “reasonable
307. Wongkaew, supra note 296, at 97 (noting that “The fundamental element in the analysis
of legitimate expectations is to determine which expectations are reasonable.”).
308. Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Award, ¶ 291
(June 21, 2011), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&action
Val⫽showDoc&docId⫽DC2171_En&caseId⫽C109.
309. Valentina Vadi, Proportionality, Reasonableness and Standards of Review in Investment Treaty
Arbitration, YEARBOOK OF INTERNATIONAL INVESTMENT LAW AND POLICY 2013–2014 201(Andrea K.
Bjorklund ed., 2015).
310. Shaun P. Young, Rawlsian Reasonableness: A Problematic Presumption?, 39 CANADIAN J. POL.
SCI./REVUE CANADIENNE DE SCIENCE POLITIQUE 159, 161 (2006) (referring to JOHN RAWLS, POLITICAL
LIBERALISM 50 (1996).
311. Young, supra note 310, at 162.
312. Saluka Investments BV v. Czech Republic, ICGJ 367 PCA Case Repository, Partial Award,
¶ 460 (Perm. Ct. Arb. 2006).
313. See Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability,
¶ 115 (Dec. 27, 2010) (states may have “to amend their legislation in order to adapt it to change
and the emerging needs and requests of their people in the normal exercise of their prerogatives
and duties.”).
314. Laurence Boisson de Chazournes, Fundamental Rights and International Arbitration:
Arbitral Awards and Constitutional Law, in ARBITRATION ADVOCACY IN CHANGING TIMES 309, 310 (ICCA
Congress Ser. No. 15, 2010).
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agents have to recognize that in some circumstances . . . States may
have to take draconian measures to protect public interests.”315
In addition, a comparative assessment can provide an arbitral tribunal with parameters about the legitimacy of a given state measure.316
Arbitral tribunals have held that “a rule cannot be said to be unfair,
inadequate, inequitable or discriminatory when it has been adopted by
many countries around the world.”317 This comparative approach can
build coherence at the international law level, helping arbitrators to
reach results in harmony with what may have achieved the status of
general principles of international law or even customary law.
Reportedly, as of 1 January 2011, “only 442 nuclear power plants
were in operation throughout the world.”318 While, historically, “nuclear
energy has experienced varying levels of public . . . support,”319 the
long-term role that it will play in the global energy market remains
uncertain.320 In the EU, 130 nuclear reactors operate in fourteen
member states, generating almost thirty percent of the electricity
produced in the EU.321 However, a number of EU Member States
adopted nuclear phaseout policies even before the Fukushima events.
For instance, after the Three Mile Island accident in 1979 and a
referendum about the future of nuclear power, the Swedish Parliament
decided in 1980 that no further nuclear power plants should be built.
In 2010, however, the phaseout policy was halted, allowing for new
reactors to replace existing ones.322 Reportedly, the Swedish economy
315. Wongkaew, supra note 296, at 98.
316. On the need of comparative surveys of best regulatory practices, see Piet Eeckhout, The
Scales of Trade—Reflections on the Growth and Functions of the WTO Adjudicative Branch, 13 J. INT’L
ECON. L. 3 (2010).
317. Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability,
¶ 506 (Jan. 14, 2010).
318. Evelyne Ameye & Iñigo Igartua Arregui, National Nuclear Third Party Insurance Pools
Revisited from a European Union Competition Law Perspective, 30 J. ENERGY & NAT. RESOURCES L. 265,
266 (2012).
319. Robert C. Volpe, The Role of Advanced Cost Recovery in Nuclear Energy Policy, 15 SUSTAINABLE
DEV. L. & POL’Y 28, 31 (2015).
320. Per F. Peterson et. al., Nuclear Freeze—Why Nuclear Power Stalled—and How to Restart It, 93
FOREIGN AFFS. 27 (2014).
321. Nuclear Energy, EUR. COMMISSION, http://ec.europa.eu/energy/en/topics/nuclearenergy (last visited May 23, 2015); European Energy Security Strategy, supra note 5, at 3 (noting that
the EU is producing 50 percent of its electricity without greenhouse gas emissions and that 27 per
cent of this comes from nuclear energy).
322. Sweden to Replace Existing Nuclear Plants with New Ones, BBC NEWS (June 18, 2010),
http://www.bbc.com/news/10347187.
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still relies on nuclear energy to a large extent.323 Since 1987, Italy has
phased out nuclear energy, and recent “public opposition has forced
[it] to abandon any plans for reigniting its nuclear industry” in 2011.324
Since 2003, Belgium has planned a gradual phaseout of nuclear
energy.325 Reportedly, even France is reducing its dependency on
atomic energy.326
However, other countries, such as the United States, have incorporated nuclear power into their energy policies to minimize their
reliance on fossil fuels, diversify their energy portfolio and address
climate change.327 Reportedly, the United States has the largest number of nuclear power plants in the world.328 The Russian Federation is
currently the third largest nuclear power country— behind the United
States and France—with thirty-three reactors in operation.329 India and
China are fast growing nuclear energy markets.330 Other governments,
including Saudi Arabia, the United Arab Emirates, Hungary, Romania
and Ukraine, look to nuclear power “to meet growing energy demand
and increase energy security while reducing carbon dioxide emissions
linked with global warming.”331
323. Nuclear Power in Sweden, WORLD NUCLEAR ASS’N, http://www.world-nuclear.org/info/
Country-Profiles/Countries-O-S/Sweden/ (last visited June 4, 2015) (noting that “nuclear power
reactors provid[e] about 40% of [Sweden’s] electricity.”).
324. See Richard Anderson, Nuclear Power: Energy for the Future or Relic of the Past?, BBC NEWS
(Feb. 27, 2015), http://www.bbc.com/news/business-30919045.
325. See, e.g., Loi sur la sortie progressive de l’energie nucléaire à des finds de production
industrielle d’électricité [Law on the Phase-out of Nuclear Energy for the Purposes of the
Industrial Production of Electricity] of Jan. 31, 2003, Moniteur Belge [M.B.] [Official Gazette of
Belgium], Feb. 28, 2003, 9879.
326. INTERNATIONAL ENERGY AGENCY (IEA), TECHNOLOGY ROADMAP—NUCLEAR ENERGY 15
(2015) (noting that “France, which today generates 75% of all its electricity from nuclear, still
plans to reduce this share to 50% by 2025.”).
327. Arnold, supra note 51, at 26; Volpe, supra note 319, at 31 (noting the “Nuclear
Renaissance” which is taking place in the US since the inception of the Energy Policy Act in 2005).
328. IEA, supra note 326, at 16.
329. Id. at 17.
330. Gal Luft, Strategic Implications of Chinese Energy Policy, AM. INT. (Feb. 3, 2015), http://www.
the-american-interest.com/2015/02/03/strategic-implications-of-chinese-energy-policy/ (noting
that “China’s vast coal reserves and system of hydroelectric dams, as well as eighty nuclear reactors
currently under construction or planned, will enable it to provide for its electricity needs, albeit
with some non-trivial environmental consequences.”); IEA, supra note 326, at 18 (noting that
“Local air pollution concern from coal-fired plants is one of the main drivers today of nuclear
power development in China. Other key drivers include improved energy security, and stable and
economic electricity production costs.”).
331. Anderson, supra note 324.
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These diverging trends show that nuclear power-related policies are
necessarily political. Risks posed by nuclear energy production are very
difficult or even impossible to quantify, and the question as to whether
such risks outweigh its benefits requires not only a scientific but also a
political assessment. It is uncontroversial that any evaluation as to
whether to proceed with the development of nuclear energy must
address a number of issues, including health and safety.332 As a
complex matter, nuclear energy must necessarily be entrusted to
examination by experts in the field, but such experts “must always
ultimately be accountable to citizens for the necessarily political choices
they make.”333
Certain states may phase out nuclear energy for precautionary
reasons. As noted, reliance on nuclear power poses a number of
perceived risks.334 It would be difficult for arbitrators to second-guess
such policies. Article 19 of the ECT expressly refers to the precautionary principle.335 Moreover, the precautionary concept has acquired the
status of general principle of law in some regional contexts, including
the EU.336 The precautionary principle requires state authorities to
take action even in the absence of clear or compelling scientific
evidence to prevent or minimize given risks and protect the public
from exposure to harm.337
E.
Indirect Expropriation or Legitimate Exercise of Police Powers?
There can be a tension between the state regulatory autonomy to
pursue given social objectives and the economic interests of foreign
investors. In general terms, states have a right to regulate business
activities within their territories under the principle of territorial
332. See, e.g., Joseph P. Tomain, Nuclear Futures, 15 DUKE ENVTL. L. & POL’Y F. 221, 237 (2005)
(deeming that “[T]he nuclear future depends not only on private investment considerations of
the sort that individual investors make all of the time. The nuclear future also depends on . . . the
valuation of imponderables as well as uncertainties affecting the public at large.”).
333. James Flett, If in Doubt, Leave it Out? EU Precaution in WTO Regulatory Space, 1 EUR. J. RISK
REG. 20, 21 (2010).
334. Arnold, supra note 51, at 26.
335. The Energy Charter Treaty, supra note 29, at art. 19 (“In its policies and actions each
Contracting Party shall strive to take precautionary measures to prevent or minimize environmental degradation.”).
336. Both Sweden and Germany are members of the EU.
337. See generally Caroline E. Foster, Adjudication, Arbitration and the Turn to Public Law
‘Standards of Review’: Putting the Precautionary Principle in the Crucible, J INT. DISP. SETTLEMENT 525
(2012).
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sovereignty.338 However, the exercise of such regulatory powers “is not
unlimited and must have its boundaries.”339 In some cases, state
regulation may interfere with the exercise of investor’s rights to such an
extent as to deprive the investment of its economic value. The critical
issue is determining whether such state action constitutes a legitimate
exercise of the state police powers (and thus is non-compensable) or
whether it amounts to an indirect expropriation (and thus is compensable). Claims of indirect expropriation arising under international
investment agreements against a host state by a foreign investor have
become increasingly common.340 After exploring the two conflicting
arbitral approaches to the detection of indirect expropriation, the
sole-effects doctrine and the police powers doctrine, the section investigates the potential application of this analysis to the Vattenfall case.
1.
Two Conflicting Arbitral Doctrines
In the growing tide of arbitral jurisprudence,341 two main doctrines
have emerged concerning indirect expropriation: the sole effects
doctrine and the police powers doctrine.342 While the first concentrates on the effects of the state measure on the foreign property, and
thus favors the investor’s perspective,343 the second focuses on the
alleged goal of the state measure and thus favors the right of the state to
regulate. Thus far, neither of the two doctrines can be characterized as
dominant or as representing mainstream international investment law.
338. Stephen Olynyk, A Balanced Approach to Distinguishing Between Legitimate Regulation and
Indirect Expropriation in Investor–State Arbitration, 15 INT’L TRADE & BUS. L. REV. 254, 265 (2012).
339. ADC Affiliate Ltd. v. Hung., ICSID Case No. ARB/03/16, Award, ¶ 423 (Oct. 2, 2006),
https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&actionVal⫽show
Doc&docId⫽DC648_En&caseId⫽C231.
340. Olynyk, supra note 338, at 269.
341. While arbitral jurisprudence is not binding on arbitrators in the same way as common
law case holdings are, the jurisprudence is nevertheless often referred to as precedent and as
defining procedural and legal standards in arbitration, making jurisprudence analysis an important task for parties and scholars alike. See Andrea K. Bjorklund, Investment Treaty Arbitral Decisions
as Jurisprudence Constante, in INTERNATIONAL ECONOMIC LAW: THE STATE AND FUTURE OF THE
DISCIPLINE 265 (Colin Picker et al. ed., 2008); Gabrielle Kaufmann-Kohler, Arbitral Precedent:
Dream, Necessity or Excuse?, 23 ARB. INT’L 357, 364 (2007); VALENTINA VADI, ANALOGIES IN INTERNATIONAL INVESTMENT LAW AND ARBITRATION 92 (2016) (noting that “[a]lthough the rule of stare
decisis, or binding precedent, does not apply to international arbitration and awards are binding
inter partes only, previous arbitral awards have influenced, if not shaped, much of contemporary
investment law.”).
342. Maurizio Brunetti, Indirect Expropriation in International Law, 5 INT’L L. F. 151 (2003).
343. Rudolf Dolzer, Indirect Expropriations: New Developments?, 11 N.Y.U. ENVTL. L.J. 90 (2003).
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The sole effects doctrine focuses on the negative impact of regulation on the foreign investment. The underlying assumption of this
doctrine is that regulatory measures are generally adopted for the
public good and can result in some burdens being imposed on private
property. However, if the burden imposed on certain properties is
overwhelming or almost entirely deprives them of any economic benefit, the owner is entitled to compensation. The bona fide public
purpose of the taking may be presumed, but it still requires compensation.344 Several cases lend support to such a doctrine.345
The police powers doctrine gives weight to the purpose and the
circumstances of governmental action. According to this doctrine, bona
fide non-discriminatory regulation within the police powers of the state
does not require compensation.346 The doctrine focuses on the inherent authority of a government to impose restrictions on personal
freedom and property for the sake of public order, safety, security,
health, morals, and general welfare. Under international law, there is
no comprehensive and categorical definition of police powers, but this
concept is generally understood to include measures taken by government to protect public goods against harm or nuisance. According to
such doctrine, “harm prevention” ought not be compensated because
the proscribed use was not part of the investor’s title to begin with, but
“benefit extraction” should, generally, be compensated.347
While some authors deem this theory to be a justification of state
action, which would otherwise amount to a deprivation that can be
compensated,348 in sum, “once applied, the police powers doctrine
344. Barry Appleton, Regulatory Takings: The International Law Perspective, 11 N.Y.U. ENVTL. L.J.
35 (2003).
345. See, e.g., Telenor Mobile Commc’ns v. Hung., ICSID Case No. ARB/04/15, Award, ¶ 67
(Sept. 13, 2006); Tippetts v. Iran, 6 Iran-U.S. Cl. Trib. Rep. 219, 225-26 (1986) (holding that
“[T]he intent of the government is less important than the effects of the measures on the owner of
the assets . . . , and the form of the measures of control or interference is less important than the
reality of their impact.”); Metalclad Corp. v. United Mexican States, ICSID Case No. ARB
(AF)/97/1, Award, ¶¶ 111, 103 (Aug. 30, 2000), https://icsid.worldbank.org/ICSID/Front
Servlet?requestType⫽CasesRH&actionVal⫽showDoc&docId⫽DC542_En&caseId⫽C155 (holding that “[t]he Tribunal need not decide or consider the motivation or intent of the adoption of
the Ecological Decree . . .” and adding that indirect expropriation could occur “even if not
necessarily to the obvious benefit of the host State.”).
346. Andrew Newcombe, The Boundaries of Regulatory Expropriation in International Law, 20
ICSID REV. 1, 3 (2005).
347. Susan Rose-Ackerman & Jim Rossi, Disentangling Deregulatory Takings, 86 VA. L. REV. 1435
(2000); Joseph L. Sax, Takings and the Police Power, 74 YALE L.J. 36 (1964).
348. Newcombe, supra note 346, at 21; Mellske, supra note 304, at 100 (noting that “police
powers may excuse the State from liability for indirect expropriations, not merely in the public
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excludes liability,”349 others deem it to be a necessary corollary of
property.350 For instance, Montt argues that such measures constitute
an “internal limit of property,” as “property rights are conferred . . . by
the legal system under the explicit or implicit condition of not causing
harm to third parties.”351 Howard Mann and Konrad von Moltke note:
Under the traditional international law concept of the exercise
of police powers, when a state acted in a non-discriminatory
manner to protect public goods such as its environment, the
health of its people or other public welfare interests, such
actions were understood to fall outside the scope of what was
meant by expropriation . . . Such acts were simply not covered
by the concept of expropriation, were not a taking of property,
and no compensation was payable as a matter of international
law.352
The introduction of the police powers doctrine in investment treaty
arbitration has been successful in a number of cases.353
interest, but more specifically to protect public health, safety and the environment from the harmful
use of an investor’s property.”).
349. Jorge E. Viñuales, Foreign Investment and the Environment in International Law: An
Ambiguous Relationship, 2010 BRIT. Y.B. INT’L L. 244, 319.
350. M. SORNARAJAH, THE INTERNATIONAL LAW ON FOREIGN INVESTMENT 371 (3d ed. 2010)
(highlighting that “a theory of absolute protection of foreign investment . . . sits uneasily with the
constitutional systems that are recognised in different parts of the world.”).
351. SANTIAGO MONTT, STATE LIABILITY IN INVESTMENT TREATY ARBITRATION: GLOBAL CONSTITUTIONAL AND ADMINISTRATIVE LAW IN THE BIT GENERATION 192-93 (2009).
352. HOWARD MANN & KONRAD VON MOLTKE, PROTECTING INVESTOR RIGHTS AND THE PUBLIC
GOOD: ASSESSING NAFTA’S CHAPTER 11, 16 (2003).
353. Saluka Investments BV v. Czech Republic, ICGJ 367 PCA Case Repository, Partial Award,
¶ 262 (Perm. Ct. Arb. 2006) (finding that it is a part of customary international law that the State
does not commit indirect expropriation nor should it be liable to pay an investor when it adopts
measures that are “commonly accepted as within the police powers of States.”); Methanex Corp. v.
U.S., Final Award of the Tribunal on Jurisdiction and Merits, 44 I.L.M. 1345, 1456 (NAFTA
Chapter 11 Arb. Trib. Aug. 3, 2005) (holding that “[a]s a matter of general international law, a
non-discriminatory regulation for a public purpose, which is enacted in accordance with due
process and, which affects, inter alios, a foreign investor or investment is not deemed to be
expropriatory and compensable . . .”); Chemtura Corp. v. Canada, Award, ¶ 266 (Ad Hoc NAFTA
Trib. 2010), http://www.italaw.com/sites/default/files/case-documents/ita0149_0.pdf (holding
that a ban on lindane, a chemical used in pesticides, “motivated by increasing awareness of the
dangers presented by lindane for human health . . . is a valid exercise of the State’s police powers
and, as a result, does not constitute an expropriation.”).
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However, while international investment law acknowledges the police powers doctrine,354 there is no commonly accepted formula that
enables a clear distinction to be drawn between non-compensable
regulation and compensable expropriation.355 As an arbitral tribunal
put it, international investment law “has yet to identify in a comprehensive and definitive fashion precisely what regulations are considered
‘permissible’ and ‘commonly accepted’ as falling within the police or
regulatory power of States and, thus, non-compensable.”356
Doctrinal studies have attempted to clarify the distinction between
indirect expropriation and the right to regulate. Notably, some authors
and arbitrators have elaborated a twofold test to analyze whether
regulatory measures may be deemed to be indirect expropriation or a
legitimate exercise of police power. According to the proposed procedure, first, it must be ascertained whether a deprivation of property has
occurred because of the effect of the measure taken. The answer to this
question would be given through an essentially quantitative approach.
Second, the conclusion that a given measure is potentially expropriatory may be modified through an essentially qualitative approach. In
other words, this third position considers that “one should take into
account both sides of the coin and that the challenge is precisely to
know where to draw the line in balancing the conflicting interests of
investors and states.”357 In conclusion, while the identification of
indirect expropriation will depend on the case-by-case analysis of the
specific facts, a balanced approach based on both qualitative and
quantitative tests seems preferable to the sole effects doctrine.
2.
Potential Application to Vattenfall II
While it is not clear whether Germany’s nuclear phase-out may be
considered indirect expropriation, the fact that it was exercised in the
354. See, e.g., Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case
No. ARB(AF)/00/2, Award, ¶ 119 (May 29, 2003), http://www.italaw.com/sites/default/files/casedocuments/ita0854.pdf (holding that “[t]he principle that the State’s exercise of its sovereign
powers within the framework of its police power may cause economic damage to those subject to its
powers as administrator without entitling them to any compensation whatsoever is undisputable.”).
355. SORNARAJAH, supra note 350, at 368.
356. Saluka Investments, ICGJ 367 PCA Case Repository, ¶ 263; Chemtura, Award; Methanex
Corp., 44 I.L.M. at 1345.
357. Brigitte Stern, In Search of the Frontiers of Indirect Expropriation, in CONTEMPORARY ISSUES IN
INTERNATIONAL ARBITRATION AND MEDIATION 44 (Arthur Rovine ed., 2008). See also Olynyk, supra
note 338, at 274; L. Yves Fortier & Stephen L. Drymer, Indirect Expropriation in the Law of
International Investment: I Know It When I See It, or Caveat Investor, 19 ICSID REV. 293, 297 (2004).
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public interest and without physical takings of any property interests
may suggest it was a legitimate exercise of the country’s police powers.
In the absence of any direction in the relevant investment treaty and
the ECT, therefore, one might wonder whether the nuclear phase-out
is (or should be) exempted from potential allegations of indirect
expropriation on the basis of the police powers doctrine. The nuclear
phase-out does not transfer or eliminate property interests in the plant.
Therefore, it does not seem to be a case of direct expropriation.
However, it does affect the economic interests of the investors. Thus,
the key question is whether it constitutes an indirect expropriation or a
legitimate exercise of the police powers of the state.
It has been pointed out that “the threshold for establishing an
expropriation or a measure tantamount to expropriation is high and it
is especially difficult to establish such a claim where the investor
remains in control of the physical asset.”358 The nuclear phaseout
serves public interests, i.e., the planned transition to other renewable
sources of energy and the protection of public health. It is nondiscriminatory as it affects both national and foreign investors. It
appears to respect due process as it seems to be the outcome of
legitimate political decision-making. Can it be considered a regulation
of private property? Nuclear power plants are not phased out immediately, but gradually. No nuclear power plant is eternal; rather the usual
lifespan is usually forty years.359 Given the limited publicity of the case,
it is not known whether the investors were given a sufficient transitional
period to switch to other economic activities.
F.
Exceptions
Even if an arbitral tribunal were to find a breach of the relevant treaty
provisions, the host state may be able to justify its actions under a
security or public health exception. Regulatory measures that affect
investments in the nuclear energy sector can be justified by reference
to environmental and public health exceptions available in some BITs.
While “[t]his may be rare in indirectly related disputes that . . . mainly
involve cases of contractual breach that are somehow connected to the
nuclear energy industry,” when host state measures affect investments
358. Nigel Bankes, Decarbonising the Economy and International Investment Law, 30 J. ENERGY &
NAT. RESOURCES L. 497, 508 (2012).
359. Matthew L. Wald, Nuclear Plants, Old and Uncompetitive, Are Closing Earlier Than Expected,
N.Y. TIMES (June 14, 2003), http://www.nytimes.com/2013/06/15/business/energy-environment/
aging-nuclear-plants-are-closing-but-for-economic-reasons.html.
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in the nuclear energy sector by reference to the above concerns, it
becomes particularly relevant to examine the exceptions . . . that may
be included in investment treaties.”360 Moreover, some BITs expressly
exclude the nuclear energy sector from the application of the national
treatment361 or “include specific exceptions that arguably enhance
their regulatory interference in this field.”362
In the Vattenfall case, at the national level under Article 19(3)(No.3)
AtG, a temporary shutdown can be ordered without any compensation
if circumstances have emerged “which may constitute a danger to life,
health and property.”363 Nonetheless, companies are challenging the
measure before the German constitutional court (BVerfG), alleging
that “Fukushima had not changed the state of German NPPs.”364
However, the defendant might invoke the precautionary principle that
is a general principle of EU law and is expressed in several provisions of
the AtG.
Under international investment law, the relevance of domestic law
depends on the applicable law. If the applicable law to the given
dispute is national law, national provisions such as Article 19(3)(no. 3)
AtG will be relevant. If the applicable law is international law, then
under international law, “municipal laws are merely facts.”365. In any
case, “compliance with municipal law and compliance with the provisions of a treaty are different questions.”366 In fact, Article 27 of the
Vienna Convention on the Law of Treaties provides that “[a] party may
not invoke the provisions of its internal law as justification for its failure
to perform a treaty.”367 Not even constitutional provisions justify a
breach of international law.368 For instance, in Bernardus Henricus
360. Repousis, supra note 129.
361. Id. (referring to the Japan-Vietnam BIT, Annex I).
362. James D. Fry & Odysseas G. Repousis, Investment Arbitration in the Nuclear Energy Sector:
Environmental Protection versus Investor Protection, in BRIDGING THE GAP BETWEEN INTERNATIONAL
INVESTMENT LAW AND THE ENVIRONMENT (Ige Dekker & Martijn Scheltema eds., 2014).
363. Winter, supra note 237, at 110.
364. Id.
365. Case Concerning Certain German Interests in Polish Upper Silesia, Judgment, 1926
P.C.I.J. (ser. A) No. 7, at 19. (May 25).
366. Case concerning Elettronica Sicula S.p.A. (ELSI) (U.S./Italy), Judgment, 1989 I.C.J.
Rep. ¶ 73 (July 20).
367. Vienna Convention on the Law of Treaties, supra note 30, at art. 27.
368. Treatment of Polish Nationals and Other Persons of Polish Origin or Speech in the
Danzig Territory, Advisory Opinion, 1932 P.C.I.J. (ser. A/B) at 24 (Feb. 4) (holding that “a State
cannot adduce as against another State its own Constitution with a view to evading obligations
incumbent upon it under international law or treaties in force.”).
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Funnekotter v. Zimbabwe, after expropriating the claimants’ investments
without paying compensation, Zimbabwe tried to rely on relevant
provisions of its Constitution, which provided for acquisition of land
without compensation.369 However, the arbitral tribunal held that the
respondent violated the obligation to pay just compensation under the
Netherlands–Zimbabwe BIT for the expropriatory measures it had
adopted.370
Therefore, if an arbitral tribunal found a breach of a relevant
investment treaty provision and the applicable law was international
law, a subsequent question would be whether the breach is justified
under an exception provided by the applicable international investment agreement. The ECT includes both security and public health
exceptions. None of these exceptions applies with regard to Article 13
(expropriation).371 Article 24.2 of the ECT, titled “Exceptions”, applies
to measures, inter alia, “necessary to protect human, animal or plant
life or health,” provided that they are non-discriminatory, do not
constitute a disguised restriction and do not unnecessarily impair
benefits reasonable expected under the Treaty.372 However, exceptions for the protection of human, animal or plant life or health do not
apply to investment protection provisions.373
Article 24.3 of the ECT provides that the ECT is not to be construed
to prevent a Contracting Party from taking “any measure which it
considers necessary . . . for the protection of its essential security interests . . . relating to . . . non-proliferation of nuclear weapons or . . . for
the maintenance of public order.”374 Questions arise as to whether the
exceptions are “self-judging”, i.e. at the discretion of the state party,
and the meaning and scope of “essential security interests” and the
“maintenance of public order.” According to most scholars, the set of
security exceptions should be considered self-judging.375 This confers
significant latitude to national policy-makers and, accordingly, arbitral
369. Funnekotter v. Republic of Zimbabwe, ICSID Case No. ARB/05/6, Award, ¶ 61 (Apr.
22, 2009), http://www.italaw.com/documents/ZimbabweAward.pdf.
370. Id. ¶ 98.
371. ECT, supra note 29, at art. 24.1.
372. Id. at art. 24.2.
373. Id. at art. 24.2(b)(i) (affirming that “The provisions of this Treaty other than . . . with
respect to subparagraph (i), Part III of the Treaty [on “investment promotion and protection”]
shall not preclude any Contracting Party from adopting or enforcing any Measure (i) necessary to
protect human, animal or plant life or health . . .”).
374. Id. at art. 24.3.
375. See, e.g., Craig S. Bamberger, An Overview of the Energy Charter Treaty, in THE ENERGY
CHARTER TREATY: AN EAST-WEST GATEWAY FOR INVESTMENT AND TRADE 1, 22 (Thomas Walde ed.,
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tribunals have interpreted security exceptions and analogous provisions broadly to justify measures adopted to protect the public order.376
G.
Amici Curiae: Friends or Foes?
Friends of the court (amicus curiae) are non-parties to a dispute who
offer information that bears on the case to assist the adjudicators.
Amicus curiae briefs create possibilities for regime interaction, supply
the tribunals with additional information,377 and can infuse the arbitral
process with some elements of democracy and public scrutiny.378
However, they can have some pitfalls, increasing costs, causing delay for
the parties, and reducing party autonomy.379 Their potential lack of
independence also fosters concerns that “political or ideological views
may be introduced,” eventually “push[ing] tribunals towards ‘Courts of
public opinion’.”380 Arbitral tribunals can accept non-party submissions, if they consider that such briefs “would assist the tribunal in the
determination of a factual or legal issue— by bringing a perspective,
particular knowledge or insight that is different from that of the
disputing parties” or “would address a matter within the scope of the
dispute.”381 Given the relative opacity of the Vattenfall II arbitration, it is
impossible to foresee whether the World Health Organization,382 the
European Commission, or Euratom will be willing to intervene as
friends of the court, though each of them could play a relevant role in
the dispute. The next subsections will explore the potential role that
the World Health Organization and EU institutions could play in
nuclear energy-related investment disputes respectively.
1996) (noting that “A set of other three, essentially self-judging exceptions is contained in
paragraph three of [Article 24 of the ECT].”).
376. See, e.g., Continental Casualty Co. v. Argentine Republic, ICSID Case No. ARB/03/9,
Award (Sept., 5, 2008), http://www.italaw.com/sites/default/files/case-documents/ita0228.pdf.
For an analysis of the case, see VADI, supra note 341, at 213-17.
377. Lucas Bastin, The Amicus Curiae in Investor–State Arbitration, 1 CAMBRIDGE J. INT’L & COMP.
L. 208, 223 (2012).
378. Barnali Choudhury, Recapturing Public Power: Is Investment Arbitration’s Engagement of the
Public Interest Contributing to the Democratic Deficit? 41 VAND. J. TRANSNAT’L L. 775, 807, 818 (2008).
379. Bastin, supra note 377, at 225.
380. Id. at 226.
381. Int’l Centre for Settlement of Investment Disputes [ICSID] Rules of procedure for
Arbitration Proceeding rule 37.2 (2006), https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/
CRR_English-final.pdf.
382. Constitution of the World Health Organization, July 22, 1946, 62 Stat. 2679, 14 U.N.T.S.
185 (entered into force Apr. 7, 1948).
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1.
The Potential Role of the World Health Organization
The World Health Organization (WHO) has rarely intervened as
amicus curiae before international economic courts, but it could be a
particularly helpful player in clarifying the links and tensions between
nuclear energy and public health. In particular, the WHO has intervened in cases in which trading nations or investors challenged the
compatibility of tobacco control measures adopted by the defendant
with international economic law.383 The relative lack of participation of
the WHO in these proceedings is regrettable as the WHO could play a
more active and meaningful role in clarifying the interaction between
the protection of public health and economic globalization. This is
even more the case if one considers the pivotal role played by the WHO
in nuclear-related international matters.384 For instance, it was the
WHO that “requested the International Court of Justice to give an
advisory opinion on whether the use of nuclear weapons by a State in
war or other armed conflict would be a breach of its obligations under
international law, including the Constitution of the World Health
Organization.”385
The World Health Organization has traditionally privileged nonlegal approaches to health issues.386 Perceiving itself as a sort of
“transnational Hippocratic society,”387 the institution, mainly composed of health specialists,388 has principally if not exclusively developed medical guidelines and other nonbinding tools. It has developed
“an ethos that looks at global health problems as medical-technical
issues to be resolved by the application of the healing arts.”389 Instruments adopted by the WHO have been described as “limited in scope
383. Panel Report, Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes:
Report of the Panel adopted on 7 November 1990, WTO Doc. WT/DS10/R (adopted Nov. 7, 1990),
https://www.wto.org/english/tratop_e/dispu_e/90cigart.pdf; Philip Morris Brand Sàrl v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Procedural Order No. 3 (Feb. 17, 2015),
http://www.italaw.com/sites/default/files/case-documents/italaw4161.pdf.
384. Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, 1996 I.C.J. Rep.
226 (July 26).
385. Id. at 6.
386. David P. Fidler, International Law and Global Public Health, 48 KAN. L. REV. 1, 22 (1999)
(noting the “historical penchant [of the WHO] for dealing with public health problems within a
narrow ‘medical-technical’ approach”).
387. Id. at 23.
388. Id. at 22 (highlighting that “WHO has historically been staffed predominantly by
physicians, medical scientists, and public health experts”).
389. David P. Fidler, The Future of the World Health Organization: What Role for International
Law?, 31 VAND. J. TRANSNAT’L L. 1079, 1099 (1998).
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and application”390 as well as “historically, politically and structurally
inadequate to do what is needed.”391 Such instruments lack coordination and the effectiveness of those of other international organizations.392 International health law has not been an effective system due
to its mainly non-legal approach, lack of enforcement powers, and
consequent states’ failure to comply with its rules.393 Only in the past
decade did the WHO adopt a binding convention in the field of
tobacco control.394 Rarely has the WHO participated in trade negotiations or the resolution of international disputes even when such are
linked to public health.395 Only recently has the WHO cautiously
started intervening in investment treaty arbitration as a friend of the
court.396
In conclusion, the participation of the WHO as amicus curiae can
benefit the decision-making process in arbitrations involving nuclear
energy and public health by providing scientific evidence and data,
thus potentially supporting the arbitral scrutiny of the due process,
soundness, and reasonableness of state conduct.
2.
The Potential Role of the European Union
The EU could potentially intervene as amicus curiae in nuclear energy
related disputes among EU member states, as it has in many arbitrations involving two EU parties, on the basis that the dispute should be
390. Shawn H.E. Harmon, International Public Health Law: Not so Much WHO as Why, and Not
Enough WHO and Why Not?, 12 MED. HEALTH CARE & PHIL. 245, 251 (2009).
391. Id. (internal citation omitted).
392. Id.
393. Jennifer Prah Ruger, Normative Foundations of Global Health Law, 96 GEO. L.J. 423, 438
(2008) (noting that “international health law has been viewed as ‘ineffective’”).
394. WHO Framework Convention on Tobacco Control, opened for signature June 16, 2003,
2302 U.N.T.S. 166 (entered into force Feb. 27, 2005), http://www.who.int/tobacco/framework/
WHO FCTCenglish.pdf.
395. Harmon, supra note 390, at 251.
396. Clovis Trevino & Luke Eric Peterson, World Health Organization is Given Green-Light by
Arbitrators to Intervene in Philip Morris v. Uruguay Arbitration, INV. ARB. REP. (Feb. 20, 2015),
https://www.iareporter.com/articles/world-health-organization-is-given-green-light-by-arbitratorsto-intervene-in-philip-morris-v-uruguay-arbitration/ (noting that “[i]n their request to intervene,
the WHO and the FCTC Secretariat contended that their submission ‘may assist the tribunal in the
determination of factual and legal issues’ as it w[ould] provide evidence of the relation between
health warnings and labeling and the protection of public health, on tobacco control globally
which, in their view, may assist the tribunal in assessing the claimant’s legitimate expectations and
the legal relation between the FCTC and the Switzerland-Uruguay BIT”). For a commentary on
the specific arbitration, see Valentina Vadi, Global Health Governance at a Crossroads: Trademark
Protection v. Tobacco Control in International Investment Law, 48 STAN. J. INT’L L. 93 (2012).
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resolved in EU courts and under EU law. Unlike the WHO, the EU has
played an active and ambitious, albeit controversial, role in energyrelated disputes, seeking permission to intervene as amicus curiae in a
number of arbitrations.397 The proactive approach of the European
Commission is grounded in two converging recent developments in
the fields of renewable energy and foreign investments.
In recent years, the European Commission has attempted to centralize power in the hands of the EU in matters related to both renewable
energy and foreign direct investments. The renewable energy directive,
Directive 2009/28,398 “establishes a common framework for the promotion of energy from renewable resources and targets for 2020.”399 The
directive aims at increasing the percentage share of energy from
renewable sources in the EU’s final consumption of energy to twenty
percent by 2020.400 Key drivers of the renewable energy policy include
economic competitiveness, climate change mitigation, and energy
security.401 Under the framework, “mandatory national targets have
been adopted,”402 and there is “a clear incentive for member states to
create the necessary stable policy framework.”403 The Commission can
bring infringement proceedings against a member state if it fails to
implement the directive or falls below its target.404 To meet the targets,
the Union acknowledges that investments are necessary.405
397. See, e.g., AES Summit Generation Ltd. v. The Republic of Hungary, ICSID Case No.
ARB/07/22, Award (Sept. 23, 2010), http://www.italaw.com/sites/default/files/case-documents/
ita0014_0.pdf; Electrabel S.A. v. Republic of Hung., ICSID Case No. ARB/07/19, Award (Nov. 25,
2015), http://www.italaw.com/sites/default/files/case-documents/italaw4495.pdf; Antin Infrastructure Servs. Lux. S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/31 (pending); Eiser
Infrastructure Ltd. v. Kingdom of Spain, ICSID Case No. ARB/13/36 (pending); RENERGY
S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/14/18 (pending).
398. Directive 2009/28, of the European Parliament and of the Council of 23 April 2009 on
the promotion of the use of energy from renewable sources and amending and subsequently
repealing directives 2001/177/EC and 2003/30/EC, 2009 O.J. (L140) 16.
399. Philip Lowe, Regulating Renewable Energy in the European Union, 1 RENEWABLE ENERGY L. &
POL’Y REV. 17, 17 (2010).
400. Arno Behrens, The Role of Renewables in the Interaction Between Climate Change Policy and
Energy Security in Europe, 1 RENEWABLE ENERGY L. & POL’Y REV. 5, 12 (2010).
401. Id. (noting that “the increasing deployment of renewable energy technologies can
benefit the security of European energy supplies in several ways. Being largely domestically
available . . . they have the potential to replace imported fossil . . . energy carriers, thus reducing
import dependency.”).
402. Lowe, supra note 399, at 17.
403. Id. at 17-18.
404. Id.
405. Id. at 19.
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In parallel, since the inception of the 2007 Lisbon Treaty, the
European Union has acquired exclusive competence over foreign
direct investment.406 In addition, the EU, Euratom, and their Member
States are parties to the ECT.407 The participation of the EU in a
number of proceedings between EU Member States and third countries is required by Regulation (EU) No. 1219/2012 of the European
Parliament and of the Council of 12 December 2012 establishing
transitional arrangements for BITs between Member States and third
countries.408 Although the EU does not enjoy a “special procedural
status” in investment arbitration, it is clear that “[it] is not a mere third
party to the proceedings concerning EU Member States and EU
law.”409 In fact, the EU can act in furtherance of the public interest, and
it seems to have a clear interest in that international investment law is
interpreted in conformity with EU law.410
As mentioned, the European Commission has intervened in a number of intra–EU investor–state arbitrations as amicus curiae. What legal
arguments has the Commission brought to the proceedings? In some
cases, the Commission has challenged either the arbitral tribunal’s
jurisdiction or the enforcement of its award. For instance, in Electrabel
SA (Belgium) v. Hungary, the Commission intervened as amicus curiae
and challenged the tribunal’s jurisdiction under the ECT. The Commission argued that Electrabel, in its capacity as an EU investor challenging an EU measure, should have brought its case before EU courts. The
tribunal dismissed the EU Commission’s argument that questions of
interpretation of EU law fell exclusively under the jurisdiction of EU
courts. It acknowledged that EU Member States had agreed to submit
406. August Reinisch, The EU on the Investment Path—Quo Vadis Europe? The Future of EU BITs
and Other Investment Agreements, 12 SANTA CLARA J. INT’L L. 111, 114 (2013).
407. Graham Coop, Energy Charter Treaty and the European Union: Is Conflict Inevitable?, 27 J.
ENERGY & NAT. RESOURCES L. 404, 415 (2009).
408. Regulation (EU) No. 1219/2012 of the European Parliament and of the Council of 12
December 2012 establishing transitional arrangements for BITS between Member States and
third countries, Article 13(b), 2012 O.J. (L 351) 40, 44 (requiring Member States to “immediately
inform the Commission of any request for dispute settlement lodged under the auspices of the
bilateral investment agreement as soon as the Member State becomes aware of such request” and
adding that “[t]he Member State and the Commission shall fully cooperate and take all necessary
measures to ensure an effective defence which may include, where appropriate, the participation
in the procedure by the Commission.”).
409. Carlos Gonzalez-Bueno & Laura Lozano, More than a Friend of the Court: The Evolving Role
of the European Commission in Investor–State Arbitration, KLUWER ARB. BLOG (Jan. 26, 2015), http://
kluwerarbitrationblog.com/2015/01/26/more-than-a-friend-of-the-court-the-evolving-role-of-theeuropean-commission-in-investor-state-arbitration/.
410. Id.
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questions of interpretation of EU law to the European Court of Justice
(ECJ), now the CJEU. This, however, was not relevant to the case at
hand as the claim was brought for a breach of the ECT not of EU law.411
While some member states have bought the European Commission’
arguments that the ECT should not apply to intra-EU disputes and have
raised similar arguments before arbitral tribunals, other states have not
raised such arguments in arbitral proceedings. So far, arbitral tribunals
have generally upheld their jurisdiction, despite the doctrinal debate
over the interplay between ECT and EU law.412
More recently, the European Commission has formally sought leave
to present arguments in six parallel claims against the Czech Republic
being arbitrated under the UNCITRAL procedural rules.413 These
proceedings are brought by investors from the EU and are based on the
ECT and various intra-EU BITs.414 The Commission has raised “the
possibility that these arbitrations may touch upon questions of EU law,
411. Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on
Jurisdiction, Applicable Law and Liability, ¶ 5.35 (Nov. 30, 2012), http://www.italaw.com/sites/
default/files/case-documents/italaw1071clean.pdf.
412. In the case EDF v. Hungary, an UNCITRAL Tribunal has affirmed its jurisdiction in
relation to intra-EU claims concerning the violation of the ECT, despite the Commission’s
intervention and opposition to the tribunal’s jurisdiction. See Luke Eric Peterson, Intra-EU Treaty
Claims Controversy: New Decisions and developments in Claims Brought by EU Investors vs. Spain and
Hungary, INV. ARB. REP. (Dec. 24, 2014), https://www.iareporter.com/articles/intra-eu-treaty-claimscontroversy-new-decisions-and-developments-in-claims-brought-by-eu-investors-vs-spain-andhungary/.
413. The six proceedings are: Antaris Solar v. Czech Republic (Perm. Ct. Arb., pending),
http://www.pcacases.com/web/view/24; Natland Investment Group NV v. Czech Republic
(UNCITRAL Ad Hoc, pending), http://www.energycharter.org/what-we-do/dispute-settlement/
investment-dispute-settlement-cases/44-natland-investment-group-nv-natland-group-limited-gihglimited-and-radiance-energy-holding-sarl-v-czech-republic/; Voltaic Network GmbH v. Czech Republic (UNCITRAL Ad Hoc, pending), http://www.energycharter.org/what-we-do/disputesettlement/investment-dispute-settlement-cases/45-voltaic-network-gmbh-v-czech-republic/; ICW
Europe Investments Ltd. v. Czech Republic (UNCITRAL Ad Hoc, pending), http://www.
energycharter.org/what-we-do/dispute-settlement/investment-dispute-settlement-cases/46-icweurope-investments-limited-v-czech-republic/; Photovoltaik Knopf Betriebs-GmbH v. Czech Republic
(UNCITRAL Ad Hoc, pending), http://www.energycharter.org/what-we-do/dispute-settlement/
investment-dispute-settlement-cases/47-photovoltaik-knopf-betriebs-gmbh-v-czech-republic/; WA
Investments-Europa Nova Ltd. v. Czech Republic (UNCITRAL Ad Hoc, pending), http://www.
energycharter.org/what-we-do/dispute-settlement/investment-dispute-settlement-cases/48-wainvestments-europa-nova-limited-v-czech-republic/. See Luke Eric Peterson, Brussels’ Latest Intervention Casts Shadow over Investment Treaty Arbitrations Brought by Jilted Solar Energy Investors, INV. ARB.
REP. (Sept. 8, 2014), https://www.iareporter.com/articles/brussels-latest-intervention-casts-shadowover-investment-treaty-arbitrations-brought-by-jilted-solar-energy-investors/.
414. Peterson, supra note 414, at 1.
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and that former benefits and incentives accorded to solar investors
could constitute . . . state aid that needed to be eliminated in order for
the Czech Republic to remain in compliance with EU law.”415 In other
words, the measures challenged by foreign investors as breaches of the
relevant BIT, could, according to the Commission, be measures that
were in accordance with the country’s EU law obligations. Accordingly,
concerns arise that “any arbitral award compensating solar investors for
losses arising out of the recent rollback of the earlier series of incentives could itself constitute state aid.”416 In an earlier ICSID arbitration,
Micula and Others v. Romania, the EU Commission intervened to
support Romania’s defense stating that “any payment of compensation
arising out of this award would constitute illegal state aid under EU law
and render the award unenforceable within the EU.”417
However, the tribunal dismissed the argument, pinpointing that any
ICSID award is binding and should be recognized and enforced
without review by national courts.418 After failing to persuade arbitral
tribunals to decline jurisdiction over this intra-EU claim, the Commission enjoined the host state not to pay the relevant arbitral award
because of the alleged incompatibility with EU state aid rules.419 While
the Commission has never published any of its applications to intervene or briefs themselves, reportedly, it has argued that “the ECT
cannot provide a basis for arbitration of intra–EU disputes because the
treaty should be read as not applying between the various EU Member
States.”420 Rather, in the Commission’s view, the ECT would create
obligations “only between the Union and its Member States on the one
hand and each of the other non-EU countries on the other.”421
The ECT, however, “contains no explicit disconnection provision”422
providing that the ECT does not apply in the relations between the EU
415. Id. at 2.
416. Id.
417. Micula v. Romania, ICSID Case No. ARB/05/20, Award, ¶ 330 (Dec. 11, 2013),
http://www.italaw.com/sites/default/files/case-documents/italaw3036.pdf.
418. Id. ¶ 340.
419. See Christian Tietje & Clemens Wackernagel, Outlawing Compliance? The Enforcement of
Intra-EU Investment Awards and EU State Aid Law 2 (Transnational Econ. Law Research Ctr., Policy
Paper No. 41, 2014).
420. Peterson, supra note 414, at 3.
421. Id.
422. Luke Eric Peterson, Investigation: In Recent Briefs, European Commission Casts Doubt on
Application of Energy Charter Treaty to Any Intra-EU Dispute, INV. ARB. REP. (Sept. 8, 2014), https://www.
iareporter.com/articles/investigation-in-recent-briefs-european-commission-casts-doubt-onapplication-of-energy-charter-treaty-to-any-intra-eu-dispute/.
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and its Member States. Therefore, the question is whether there may be
an implicit disconnection clause, i.e. a disconnection clause that should
be inferred in the ECT based on treaty interpretation. While both EU
member states and the EU have ratified the ECT, the Commission
seems to suggest that this was due to the fact that, at the time, the EU
did not have competence in the field of foreign direct investment.
According to the Commission, the ratification of the ECT does not
relieve member states from the obligations of EU law and from the
jurisdiction of EU courts in settling energy disputes arising within the
EU.423 The argument of an implicit disconnection clause has not
persuaded arbitral tribunals. For instance, in Electricité de France
(EDF) v. Hungary, a still-unpublished award, the tribunal reportedly
“affirmed jurisdiction over and awarded damages in relation to alleged
violations of the ECT . . . notwithstanding an intervention by the European Commission that had contested the tribunal’s jurisdiction over
the claims.”424
The divergent approaches adopted by arbitral tribunals and the EU
are due to differing conceptions of the place of the EU in the
international legal order. From the EU perspective, the EU constitutes
a new legal order. From an international law perspective, however, EU
law remains part of international law. Therefore, its primacy remains
contested.
In conclusion, some further reflexion is needed on the strengths and
limits of the participation as amicus curiae of the EU in investment
disputes. On the one hand, the participation of the EU as a friend of
the court is understandable, because energy-related disputes can affect
matters at the core of EU law. Additional information can also lead
arbitrators to reach better awards. On the other hand, however, it is
debatable whether participation as amicus curiae is the best available
tool for the EU for promoting its key interests. Procedurally, the EU is a
third party only when no EU member state is involved. More substantively, while some arbitral tribunals have upheld the primacy of EU law,
others have adopted a less deferential approach.
423. See Nikolaos Lavranos, The MOX Plant Judgment of the ECJ: How Exclusive is the Jurisdiction
of the ECJ? 15 EUR. ENVTL. L. REV. 291, 292 (2006) (discussing the possibility of parallel disputes
brought before different international fora).
424. Peterson, supra note 413.
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VI.
LOCAL COMMUNITIES, GRASSROOTS MOVEMENTS AND INVESTOR–STATE
ARBITRATION
Without the right to protest, and the capacity for it, there is . . . no
justice, there are no ends worth pursuing.425
Arbitral tribunals have adopted diverging approaches when dealing
with local communities, public participation, and social protests. While
some tribunals have considered public campaigns leading up to allegedly expropriatory or unfair legislation to be a mitigating factor favouring the state, others have approached the role of public participation
with caution. It remains to be seen whether in Vattenfall II, Germany’s
protests supporting the adoption of a non-nuclear energy policy could
lead to arbitral deference in the country’s favour.
A.
Public Campaigns as Legitimizing State Action
Certain arbitrations were settled in the aftermath of successful public
campaigns.426 For instance, in Aguas del Tunari S.A. v. Republic of Bolivia,
the Bolivian government had privatized the water sector in the town of
Cochabamba.427 “Significant opposition to the Concession” arose “in
various parts of Bolivia, and particularly in Cochabamba.”428 “The
Concession was terminated in early April 2000 after major violent
protests.”429 As the so-called “Bolivian Water War” attracted the international media and public attention worldwide, the case was subsequently
withdrawn due to global public campaign.430 Reportedly, in 2003, a
British company withdrew an investment treaty claim against the
425. ISAIAH BERLIN, FOUR ESSAYS ON LIBERTY 206 (1969).
426. See, e.g., Aguas del Tunari S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, Order
taking note of the discontinuance pursuant to ICSID Arbitration Rule 44 (Mar. 28, 2006) (taking
note of the Settlement agreed by the parties and discontinuing the proceeding at the request of
the Respondent).
427. Aguas del Tunari S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on
Respondent’s Objections to Jurisdiction, ¶¶ 52-56 (Oct. 21, 2005), https://icsid.worldbank.org/
apps/ICSIDWEB/cases/Pages/casedetail.aspx?CaseNo⫽ARB/02/3&tab⫽DOC.
428. Id. ¶ 73.
429. Id.
430. Damon Vis-Dunbar & Luke Eric Peterson, Bolivian Water Dispute Settled, Bechtel Forgoes
Compensation, INV. TREATY NEWS (Jan. 20, 2006), http://www.iisd.org/pdf/2006/itn_jan20_2006.
pdf. See also Erik J. Woodhouse, The “Guera del Agua” and the Cochabamba Concession: Social Risk and
Foreign Direct Investment in Public Infrastructure, 39 STAN. J. INT’L L. 295, 324-37 (2003); Ibironke T.
Odumosu, The Law and Politics of Engaging Resistance in Investment Dispute Settlement, 26 PENN. ST.
INT’L L. REV. 251, 259-60 (2008).
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Government of Guyana at the ICSID, after intense media criticism.
Activists had decried the company’s attempt to collect on a debt dating
back a quarter-century at a time when Guyana was seeking debt-relief
from the International Monetary Fund and struggling to cope with a
domestic public health crisis.431
In Vattenfall I, the Swedish company challenged some environmental
requirements adopted by Germany with regard to its Moorburg coalfired power plant. In their request for arbitration, the claimants
asserted that the restrictions to and delays in the award of their permits
were “politically motivated” and contrary to the relevant provisions of
the ECT.432 Germany, on the other hand, contended that the City of
Hamburg relied on substantive environmental standards required
under EU law as a defense against liability.433 However, the case was
settled. According to the settlement agreement, Germany agreed that
Vattenfall would receive the required permits and would be released
from additional requirements that would make the project uneconomical.434 As no award was released on the matter, it is not possible to
evaluate whether and how the arbitral tribunal would have considered
the political issues surrounding the case. However, that the environmental arguments raised by Germany were not spurious seems shown by
the fact that the European Commission is taking Germany to the
CJEU “over its failure to apply the requirements of the Habitats
Directive in relation to the authorisation of a coal power plant in
Hamburg/Moorburg.”435
431. Vis-Dunbar & Peterson, supra note 430, at 2.
432. Vattenfall AB v. The Federal Republic of Germany, ICSID Case No. ARB/09/6, Request
for Arbitration, ¶ 54(i) (Mar. 30, 2009), http://www.italaw.com/sites/default/files/casedocuments/ita0889.pdf.
433. See Cornel Marian, The European Union Investment Arbitration Regime and Local Governance,
in THE ROLE OF THE STATE IN INVESTOR–STATE ARBITRATION 361, 367 (Shaheeza Lalani & Rodrigo
Polanco Lazo eds., 2015).
434. Vattenfall AB v. The Federal Republic of Germany, ICSID Case No. ARB/09/6, Award
(Mar. 11, 2011), http://www.italaw.com/sites/default/files/case-documents/ita0890.pdf.
435. European Commission Press Release IP/15/4669, Environment: Commission Refers
Germany to Court over Coal Power Plant in Moorburg (Mar. 26, 2015) (noting that “The project
in question risks having a negative impact on a number of protected fish species . . . which pass
near the power plant when migrating from the North Sea to some . . . sites on the Elbe, upstream
of Hamburg. The species are harmed by the water abstraction process used to cool the power
plant. When authorising the plant, Germany failed to carry out an appropriate assessment as
required by the Directive, and to assess alternative cooling processes which could avoid the killing
of the protected species concerned.”); Jarrod Hepburn, European Commission to Pursue Germany
under EU Law for Failing to Enforce Environmental Laws at Vattenfall Power Plant, INV. ARB. REP. (Mar.
31, 2015), http://www.iareporter.com/articles/european-commission-to-pursue-germany-under-
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Certain arbitral tribunals have also shown a deferential approach to
measures adopted after public consultations and participation. For
instance, in Methanex, a case concerning the ban on methanol in
California for the related contamination of groundwater, the arbitral
tribunal considered that the public consultations preceding the adoption of the ban constituted evidence of the good faith and soundness of
the adopted measures. The Methanex Tribunal ascertained the sound
character of the measure by looking at the procedure through which
the national measure had been adopted.436 The tribunal held that the
scientific study carried out by the University of California reflected a
serious, objective and scientific approach, and that it was also subjected
to open and informed debate such as public hearings, testimony and
peer-review.437 The award did not suggest that the report was scientifically correct, nor did it take a position on its scientific truths.438
Nonetheless, the reasoning highlights that governments may regulate
risks where there are competing scientific views: in this context, emphasis will be put on due process.
B.
Lesser Relevance Assigned to Public Participation
On the other hand, other arbitral tribunals have found that public
participation and/or social protests do not necessarily legitimize state
conduct. The idea behind this approach lies in the perceived vulnerability of foreign investors and their nonparticipation in the decisionmaking processes that ultimately affect their economic interests. In
legal terms, domestic law does not justify a breach of international law
commitments requiring the promotion of foreign direct investments.
eu-law-for-failing-to-enforce-environmental-laws-at-vattenfall-power-plant/ (reporting that “According to the Commission’s Directorate-General for the Environment, when authorising the power
plant’s construction, Germany failed to carry out an appropriate assessment of the effects of the
Moorburg plant on protected fish species in the Elbe River, from which the power plant draws
water for cooling.”).
436. Methanex Corp. v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 44 I.L.M. 1345, 1427 (NAFTA Chapter 11 Arb. Trib. Aug. 3, 2005) (stating that
“the Tribunal accepts the UC Report as reflecting a serious, objective and scientific approach to a
complex problem in California. Whilst it is possible for other scientists and researchers to disagree
in good faith with certain of its methodologies, analyses and conclusions, the fact of such
disagreement, even if correct, does not warrant this Tribunal in treating the UC Report as part of a
political sham by California.”).
437. Id. (noting that “its emergence as a serious scientific work from such an open and
informed debate is the best evidence that it was not the product of a political sham engineered by
California”).
438. Id.
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For instance, in Tecnicas Medioambientales Tecmed S.A. v. United Mexican States, which concerned the replacement of an unlimited license by
a license of limited duration for the operation of a landfill, the arbitral
tribunal found that Mexico’s designation of an investor’s landfill site as
an ecological area was not for the good faith purpose of protecting the
environment and public health, but instead was designed primarily to
respond to domestic political pressure.439 The Tecmed Tribunal took
the public protests into account but denied that they sufficiently
reflected a “genuine social crisis” or “public emergency” that would
have justified Mexico’s measures.440 Rather, it found that Mexico had
breached the FET standard. In Metalclad Corp. v. United Mexican States,
local opposition to the operation of a hazardous waste landfill led the
relevant authority not to renew Metalclad operation permit. However,
the arbitral tribunal found that Mexico had failed to ensure a “transparent and predictable framework,” thus breaching the fair and equitable
treatment standard.441
Moreover, investors have tried to depict public protests (and the
alleged lack of state intervention to repress them) as evidence of
breach of the full protection and security standard. Most international
investment treaties contain clauses requiring full protection and security for foreign direct investment.442 Traditionally, the primary objective of the standard has been to protect the investor against the various
types of physical violence and adverse effects that may stem from
actions of the host state and its organs, or from third parties.443 In
Burlington v. Ecuador, the claimant sought, inter alia, to hold Ecuador
liable for failing to provide physical protection and security for the
company’s hydrocarbon concession in Blocks twenty-three and twenty-
439. Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case No.
ARB(AF)/00/2, Award, ¶¶ 125, 132 (May 29, 2003), http://www.italaw.com/sites/default/files/
case-documents/ita0854.pdf.
440. Id. ¶¶ 124, 133.
441. Metalclad Corp. v. United Mexican States, ICSID Case No. ARB (AF)/97/1, Award, ¶ 99
(Aug. 30, 2000), https://icsid.worldbank.org/ICSID/FrontServlet?requestType⫽CasesRH&action
Val⫽showDoc&docId⫽DC542_En&caseId⫽C155.
442. See, e.g., U.S. DEP’T OF STATE, 2012 U.S. MODEL BILATERAL INVESTMENT TREATY art. 5
(2012), https://ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf
(“Each Party shall accord to covered investments treatment in accordance with customary
international law, including fair and equitable treatment and full protection and security.”).
443. RUDOLPH DOLZER & CHRISTOPH SCHREUER, PRINCIPLES OF INTERNATIONAL INVESTMENT LAW
149 (2008).
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four of the Amazonian rain forests.444 Burlington complained, inter
alia, that the opposition of indigenous communities to oil development
had impeded its business and that Ecuador’s purported failure to
provide physical security violated the standard of full protection and
security under the U.S.–Ecuador BIT.445 In its decision on jurisdiction,
the arbitral tribunal dismissed this specific claim on jurisdictional
grounds, stressing the importance of states being put on notice of
disputes so that they have the opportunity to remedy a possible breach
and thereby avoid arbitration proceedings.446 Because Burlington failed
to give clear notice to Ecuador of its claims for denial of full protection
and security, arbitrators ruled that the treaty’s mandatory six-month
waiting period before arbitration can be initiated, had not run. As a
result the claim was declared inadmissible.447
C.
Potential Impact of the Grassroots Movement Leading to German
Energy Reform
In light of the above analysis, the existence of grassroots movements
and widespread anti-nuclear protests in Germany could be seen as
indirectly supporting the argument that the decision of the German
government was not arbitrary, unreasonable or unforeseeable, but
grounded in decade-long debates as to the nuclear phaseout. The
phaseout of nuclear energy could be seen as a legitimate exercise of
sovereignty on matters of general concern typical of a democratic
government. After all, democracy empowers and encourages people to
engage in issues that shape their life. In turn, public participation
facilitates informed and arguably better decision-making. On the other
hand, political reasons alone cannot justify a breach of international
law, and therefore legal analysis is needed when contrasting the position of the claimant with that of the host state.
More generally, because of the relative lack of transparency, some
authors have criticized investment treaty arbitration for “the shrinking
of the structured deliberative space for domestic constituencies.”448 In
444. Burlington Res., Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on
Jurisdiction, ¶¶ 27-37 (June 2, 2010), https://icsid.worldbank.org/ICSID/FrontServlet?request
Type⫽CasesRH&actionVal⫽showDoc&docId⫽DC2777_En&caseId⫽C300.
445. Id. ¶¶ 26, 53.
446. Id. ¶ 315.
447. Id. ¶¶ 317, 336.
448. Doreen Lustig & Eyal Benvenisti, The Multinational Corporation as “The Good Despot”: The
Democratic Costs of Privatization in Global Settings 12 (Glob. Tr. Research Project, Glob. Tr. Working
Paper No. 1, 2013).
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fact, they pinpointed that “[w]hereas domestic institutions are designed by the community for the community, and reflect communal
perspectives and goals, [arbitral tribunals] typically insulate the foreign
actor from adverse judicial . . . proceedings.”449 In other words, there is
a perceived risk that arbitral proceedings will not give proper consideration to the preferences and values of the local communities.450
Moreover, asymmetric information, lack of transparency and public
participation in the proceedings can impoverish the quality of the
decision-making process, decreasing the quantity and quality of the
information available to arbitrators.451
VII.
CONCLUSION
Energy lies at the heart of current geopolitics and security concerns.452 Nuclear energy constitutes but one part of the energy governance jigsaw puzzle. While nuclear energy can provide “a response
both to soaring energy demand and to the need to develop less
carbon-intensive sources,”453 given the fragmented nature of global
energy governance,454 it may raise more questions than it answers.
Nuclear meltdowns and the “nuclear heritage” constituted by radioactive nuclear waste remain topical issues.
Health is a paramount objective. It constitutes a fundamental element of the social contract between a state and its citizens. Only
recently has the linkage between energy policies and public health
come to the fore, and policy makers have increasingly taken this
relationship into account when regulating energy.
Nonetheless, some public health-related regulatory measures have
been challenged before arbitral tribunals. As Cheng puts it, international investment law transfers power and authority from states to a
wide range of decision makers including arbitral tribunals.455 In this
context, arbitral tribunals have the important duty to strike the line
between the legitimate exercise of the state regulatory autonomy and
infringements of investor’s rights.
449. Id. at 16.
450. Id.
451. Id. at 17. For analogous criticism, see also Choudhury, supra note 378.
452. Ann Florini & Benjamin K. Sovacool, Bridging the Gaps in Global Energy Governance, 17
GLO. GOVERNANCE 57, 59 (2011).
453. Id. at 60.
454. Id. at 58.
455. Tai-Heng Cheng, Power, Authority and International Investment Law, 20 AM. U. INT’L L.
REV. 465, 492 (2005).
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While a complete deference to state measures would go against an
important purpose of international investment law; a complete disregard of the state’s sovereignty in public health matters would challenge
an important purpose of general international law. Therefore, an
intermediate solution, which combines scrutiny and respect for the
state regulatory autonomy, is needed. Due respect should be paid to
the regulatory autonomy of the state (laissez régler). The decision of how
to legislate in light of scientific uncertainty is one of policy. Policy
makers have to consider both economic risks on the one hand and
public health concerns on the other. As one author puts it, when
adjudicators “are presented with unanswered or unanswerable scientific questions, there is a profound temptation to try to answer those
questions, based on the mistaken belief that the scientific answer will
provide the legal answer.”456 However, scientific answers may not be
decisive; and legal values also matter. The international instruments
governing nuclear energy do not require the adoption of uniform
one-size-fits-all policies. Therefore, in the case of nuclear energy,
deference should be given to state policy making and regulatory
autonomy. Yet, arbitrators should assess the reasonableness of the
measure adopted by the host state.
456. Emily Hammond Meazell, Scientific Avoidance: Toward More Principled Judicial Review of
Legislative Science, 84 IND. L.J. 239, 242 (2009).
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