Natland Investment Group N.V., Capamera Limited, G.I.H.G. Limited and Radiance Energy Holding S.À.R.L. v. The Czech Republic

Background: This case concerns investments made in the Czech Republic’s photovoltaic (PV) or solar energy sector, which were encouraged by a legal and regulatory framework established by the Respondent to promote Renewable Energy Sources (RES). This framework led to a rapid expansion in solar energy capacity, termed the “solar boom,” which subsequently created what the Tribunal acknowledged as a “legitimate policy issue” for the Czech Republic due to its financial and systemic implications. The dispute arose when the Claimants, who had invested in the solar sector through Energy 21, alleged that subsequent modifications to the RES Regime, including the introduction of a "Solar Levy," dismantled the support system and breached the Respondent's international obligations. Merits: In its reasoning on the merits, the Tribunal acknowledged that the "solar boom" presented a genuine policy challenge for the Czech Republic, stemming from the rapid growth of the PV sector encouraged by the RES regime. The Tribunal determined that the Solar Levy, despite its formal presentation, was substantively a measure designed to reduce the financial support payable to solar energy producers under the RES scheme, rather than a general tax. While recognizing the State's need to address the policy issues arising from the solar boom, the Tribunal found that the Claimants could legitimately expect the stability of the RES support for plants commissioned in 2009 and 2010, as there was no clear indication that changes would retroactively affect them until late 2010. The Tribunal concluded that amending the Act on RES Promotion to lift this stability guarantee for investments made in 2010 was incompatible with this intrinsic guarantee, thus breaching the FET standard. However, the Tribunal also considered that any investor in an EU country must be aware of potential EU Commission intervention in incentive schemes like the Czech RES regime, and factored this into the damages assessment, noting that cash flows would likely have been reduced under EU State aid rules, albeit differently than by the Solar Levy. Decision: Ultimately, the Tribunal decided that the Respondent had breached the fair and equitable treatment standard under the Energy Charter Treaty (ECT) and relevant Bilateral Investment Treaties (BITs) by imposing the Solar Levy in a manner that was incompatible with the specific stability guarantee provided under the Act on RES Promotion for solar plants commissioned in 2009 and 2010. This decision recognized the negative impact of the measure on investments made in the renewable energy sector under the expectation of a stable support framework. However, the Tribunal dismissed claims related to other measures like the repeal of an Income Tax Holiday. While finding a breach of FET concerning the Solar Levy, the Tribunal also concluded that the Respondent’s overall actions to address the consequences of the solar boom pursued a rational and legitimate governmental objective and did not constitute an "unreasonable" impairment of investments under the ECT, thus not breaching the non-impairment standard in that regard. The Claimants were awarded damages, calculated by considering a "but-for" scenario that included the likely impact of EU State aid rules on the RES support 34 26, with a total compensation amounting to CZK 249.46 million 35. Follow on proceedings: The follow-on proceedings consisted of judicial reviews by the Swiss Federal Tribunal, which in both instances upheld the original arbitral awards. The first decision, issued in French on 7 February 2020, and the second, in German on 13 June 2024, confirmed the validity and enforceability of the awards, with no successful challenge by the parties.