On 15 December 2023, a three-member tribunal of the Permanent Court of Arbitration (Professor Alfredo Bullard, John Beechey CBE, Christopher Thomas KC) handed down its final award in Natland Investment Group et al. v The Czech Republic (PCA Case No. 2013-35), awarding US$15 million in damages to the investors, together with most of their costs. 

The arbitration has been widely followed since Natland’s initial victory on liability in 2017, amidst the large number of solar energy arbitrations issued across European governments across the last decade.  Further to an announcement of the Czech Ministry of Finance dated 30 January 2024, certain details of the final award may now be published.

The claimants (“Natland”) were represented by Professor Luca Radicati di Brozolo and Nico Leslie as co-counsel at the final hearing in Vienna, instructed by the Italian firm ArbLit (Luca Radicati, Michele Sabatini, Emilio Bettoni, Flavio Ponzano and Lucia Pontremoli).  Luca and the ArbLit Team handled the submissions on regulatory risk and state aid, and Nico handled the submissions and cross-examination on quantum, including cross-examination of the defendant state’s forensic accounting expert.  Both had also represented Natland at the initial liability hearing in The Hague in 2017.

The background to the arbitration arose from changes to the Czech Republic’s regulatory regime for solar energy investments in 2010.  Specifically, following the collapse in interest rates after the global financial crisis in 2008 and 2009, the Czech Republic changed certain statutory guarantees so as to reduce the returns available to solar energy investors.  It also introduced a so-called ‘solar levy’ and rescinded an income tax holiday.

On 8 May 2013, four investors initiated ad hoc arbitration proceedings under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL Rules) against the Czech Republic, alleging breaches of the Energy Charter Treaty and various Bilateral Investment Treaties.  On 20 December 2017 the then-tribunal (Veijo Heiskanen; Gary Born; Christopher Thomas KC) held that the Czech Republic’s ‘solar levy’ was in breach of the Fair and Equitable Treatment requirement contained in Article 10 of the ECT and certain BITs.

The Czech Republic then commenced a long process before the Swiss courts (the arbitration being seated in Geneva) seeking to set aside the partial award.  That challenge reached the Swiss Federal Tribunal, the highest court in Switzerland, and was dismissed: Case 4A_80/2018.  The parties then moved to the quantum phase of the arbitration. 

At the final hearing in Vienna, the defendant state raised a number of objections to the award of damages, on the basis that any award of damages would be incompatible with EU state aid rules.  It also advanced a range of further objections on the facts.  In rejecting the state’s position, the tribunal calculated an award on damages based on the assumed compatibility of an alternative solar energy subsidy regime with EU state aid rules.  The award therefore represents an important development in the calculation of damages against the background of EU state aid rules.

The Czech Republic announced on 30 January 2024 that it has commenced fresh annulment proceedings before the Federal Supreme Court of Switzerland.  The award and announcement have been the subject of extensive reporting.

A link to the PCA case information can be found here.