ECT Photovoltaic Award against the Czech Republic upheld in Switzerland

In a recently published French-language decision, the Swiss Supreme Court refused to set aside an investor-state arbitral award rendered in a dispute related to tariff and taxation measures introduced by the Czech Republic following the so-called "solar boom" investment rise in its renewable energy sector and concerning a dispute between Natland et al v Czech Republic.

The dispute between the Czech Republic and four investors concerned investments in photovoltaic production in the Czech Republic. Leveraging on certain benefits introduced by the Czech government to incentivise renewable energy production, the claimants made investments in 2009 by acquiring shares in a local holding company, as well as providing financing to this company. After the Czech government eliminated these incentives, the investors commenced investment arbitration proceedings against the Czech Republic. They argued that modifications to the benefits introduced by the Czech Republic and the introduction of a solar levy affected their investments, violating the standards of protection guaranteed to them by four investment treaties, namely the Energy Charter Treaty (ECT) and the relevant Czech Bilateral Investment Treaties (BITs).

Following a partial award on jurisdiction and liability on 20 December 2017 in favour of the investors by an ad hoc arbitral tribunal seated in Geneva, the Czech Republic sought to vacate the award, invoking Article 190(2)(b) of the Swiss Private International Law Act (PILA) and submitting that the arbitral tribunal erred when it assumed jurisdiction and recognised the state as liable for violation of the fair and equitable treatment (FET) standard.

In its decision, the Swiss Supreme Court dismissed the Czech Republic's application in its entirety, concluding that the solar levy had been adopted by the government as a reaction to the costs induced by the solar boom that became untenable for end consumers. Further, the investments were foreign and the Czech Republic had not discharged its burden of proof, in that it had failed to demonstrate any evidence of any abuse of rights associated with the investors' alleged treaty shopping that would justify piercing the corporate veil of the claimants' duly structured investments. (Decision 4A_80/2018 (7 February 2020).)