In another energy case against Italy, an ICSID tribunal rejects all claims on the merits on the basis that Italy acted reasonably and in the public interest

Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50

In an award dated September 4, 2020, an ICSID tribunal dismissed claims brought by Belgian-owned company Eskosol S.p.A. in liquidazione (Eskosol) against Italy following Italy’s amendments to its incentives scheme for investments in the photovoltaic (PV) sector provided under Conto Energia III. The tribunal found that Italy’s new measures were not in breach of Article 10 of the ECT, as Eskosol could not have expectations under the incentive regime because, by its terms, Conto Energia III did not provide benefits for any PV plant unless or until that plant actually entered into operation.

Background and claims

Between May and July 2010, Eskosol, the claimant, a locally incorporated entity majority owned by a Belgian company, acquired a 100% interest in 12 special purpose vehicles (SPVs), which in turn held land rights for the construction of PV plants in Southern Italy. To make their investment, the investors allegedly relied on guarantees provided in the various legislative decrees (Conto Energia) which formed part of Italy’s incentives for investments in the country’s PV energy sector.

In August 2010, Conto Energia III entered into force. Under its regime, power plants that entered into operation within the next 14 months would have the right to access incentivizing feed-in tariffs. However, this access was allowed only under several conditions.[1]

At the time of the investment, the claimant sought to benefit from the feed-in tariffs regime under Conto Energia III. However, as Eskosol failed to obtain financing, the plants were never built.

In 2011, Italy implemented changes to this regime and adopted the Romani Decree and Conto Energia IV, which modified the incentives under the previous legislation. According to the claimant, the changes introduced by Conto Energia IV affected its investment to the point that Eskosol became insolvent and was put into liquidation. In response, Eskosol filed for arbitration on December 9, 2015, claiming that Italy’s conduct violated the FET standard protection of the ECT. In particular, the claimant argued that the regulatory changes introduced by Italy interfered with Eskosol’s efforts to secure financing, violating its legitimate expectations.

Tribunal dismisses Italy’s objection regarding the nationality requirement under Article 25 (2)(b) ICSID: Claimant’s company remained under foreign control

Italy argued that Eskosol did not have the standing to bring a claim under Article 25 (2)(b) of the ICSID Convention because, at the time of the request, the claimant was placed under receivership in Italy, and therefore controlled by the Italian bankruptcy receiver. Therefore, Italy argued, Eskosol did not satisfy the requirement of foreign control under this article and Article 26 (7) of the ECT.

When examining the language of Article 25 (2)(b), the tribunal stressed that the wording of the convention was not without ambiguity regarding the operative date for foreign control. For this reason, it expressed that prudence should be exercised to avoid ruling on unsettled points of law that were not strictly necessary to the resolution of the case at hand. Ultimately, the tribunal concluded that the answer to that question was not essential to resolve Italy’s jurisdictional objection. By siding with Eskosol’s argument, the tribunal determined that the only critical date for foreign control purposes was the date of the challenged state measures, at which time a Belgian company indisputably controlled Eskosol.

The tribunal further explained that while companies remain in bankruptcy proceedings, the receiver has the role of a trustee who does not exercise authority on their own behalf. As such, their nationality could not govern or determine access to the ECT or the ICSID Convention, primarily because determinations of foreign control in relation to accessing these treaties must be construed consistently with the object and purpose of the treaties. “It is a reality that a substantial number of foreign investments are made through [locally incorporated] companies […], and that reality is reflected in both Article 25 (2) (b) of the ICSID Convention and Article 26(7) of the ECT.” The tribunal concluded that not considering these companies under foreign control will deprive local companies owned by a foreign investor of the ability to bring “potential well-founded ECT claims” (para. 236).

The Blusun award: No duplication of proceedings or abuse of right as claimant is not the same party

Italy made the case that Eskosol’s claims were abusive and should not be admitted because the dispute was substantially the same as the one in the Blusun case.[2] The tribunal dismissed Italy’s argument on the basis that it considered Eskosol and Blusun different parties “formally or in essence” as they did not have the same interests (para. 264).

The tribunal further explained that Blusun strongly resisted any input or participation by Eskosol when Eskosol sought to join the Blusun proceedings. Similarly, Eskosol did not rely on Blusun’s owners as witnesses. For the tribunal, the fact that the minority shareholders in Eskosol were Italian nationals, unqualified to bring an arbitration in their own names, did not affect its assessment, because when a treaty authorizes a claim to be brought by a local company, that company speaks for itself and should be entitled to seek full redress. The tribunal acknowledged that a successful result of Eskosol’s claim would eventually benefit Blusun. However, it concluded that the ultimate distribution of any recovery by the local company should not impact its right under the ECT to bring a claim on its own behalf, even if some of its shareholders may not qualify to bring a claim on their own under the ECT (para 266).

FET alleged violation: Causation can only be observed once a treaty breach has been established/proven

Eskosol claimed that under a broad or flexible reading of the FET standard, the measures that Italy adopted violated its legitimate expectations as Italy failed to provide a stable framework for its investment. The claimant argued that Italy had acted arbitrarily, unreasonably, and disproportionately when changing the incentives regime. However, the majority of the tribunal explained that the issue of causation could only become relevant if a breach of Italy’s duties was demonstrated, and Eskosol had not been able to convincingly argue that Italy’s measures targeted the claimant or were discriminatory. The tribunal clarified that “if a state has not violated its treaty obligations with respect to a particular investor and investment, then it does not matter what consequences the State’s non-wrongful action may have had for a specific business” (para. 380).

The tribunal then went on to examine whether Italy’s conduct had breached the claimant’s legitimate expectations in violation of Italy’s obligations to maintain stability and whether Italy’s conduct was non-transparent, arbitrary, disproportionate, and unreasonable.

Claimant’s allegations of arbitrariness and disproportionality dismissed: General allusions to common knowledge do not qualify as evidence

Eskosol had argued that the Romani Decree and Conto Energi IV were arbitrary and unreasonable as Italy had acted on a pretext to favour the nuclear power industry. To support this allegation, Eskosol relied on a witness who argued that it was common knowledge that the changes to the incentives regime were the result of political calculations and not based on concerns of potential budget deficit. The majority of the tribunal reasoned that this allegation was similar to alleging that Italy had acted in bad faith. Allegations of bad faith, according to the arbitrators, require a higher standard of proof which the claimant had failed to satisfy because “common knowledge does not qualify as evidence.” The majority relied on the approach taken by the tribunal in El Paso v. Argentina and concluded that arbitrariness examines not whether measures taken were the best but whether measures were based on a reasoned scheme that was itself reasonably connected to “the aim pursued” (paras. 385–386).

Italy’s measures were reasonable as they aim to address public interest matter

The majority found that Italy’s measures consistently pursued policy objectives and the public interest, and it considered the potential financial burden that the previous scheme would generate. The majority reasoned that calling into question the sustainability of the scheme was not irrational or unreasonable and explained by referencing AES v. Hungary that Italy’s measures did not lack an appropriate logical explanation as they aimed to “address a public interest matter” (para. 400).

No legitimate expectations: Eskosol did not qualify for benefits therefore it cannot avail itself of rights that it does not have

The tribunal found that public government statements and statements made directly to the claimant before Conto Energia III was adopted did not constitute a guarantee that the Conto Energia II and III would remain unchanged. They were unable to find that general public statements made to potential investors could establish broader commitments than those provided by the legislation itself: “legitimate expectations must be based on some form of State conduct, and not simply on the investor’s own subjective expectations” (para. 452). The tribunal concluded that Eskosol did not have any legitimate expectations of the permanency of the incentives scheme. The tribunal further concluded that there was no evidence of representation or assurance by Italy that could have led the claimant to expect the regime would remain in place for an indefinite period.

More fundamentally, however, the tribunal found that Conto III could not have created legitimate expectations for Eskosol given its plants were never operational. The decree only extended benefits to existing, operational plans, and thus, the tribunal opined “Eskosol simply did not fall within that defined class of beneficiaries” (para. 449).


The tribunal stated that although Italy prevailed on the merits, the claimant had won against Italy’s jurisdictional objections including Italy’s preliminary objections under ICSID arbitration rule 41(5). Therefore, the tribunal concluded that each party should bear its own cost and 50% of the cost of the arbitration.

Notes: The tribunal was composed of Jean E. Kalicki (president, U.S. national), Guido Santiago Tawil (claimant’s appointee, Argentinian national) and Brigitte Stern (respondent’s appointee, French national). The award of September 4, 2020, is available at .

Maria Bisila Torao is an international lawyer based in London. She holds an LL.M. in investment treaty arbitration from Uppsala University, an LL.M. in international commercial arbitration from Stockholm University, and a bachelor’s degree in law from the University of Malaga.

[1] See Conto Energia III, CL-99, Art. 2(c).

[2] Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3.