By Elizabeth Whitsitt
March 11, 2010
Despite snow storm interruptions a tribunal, composed of Mr. V.V. Vedeer, Ms. Gabrielle Kaufmann-Kohler, and Ms. Brigitte Stern, heard the merits of the dispute between Belgium-based energy firm Electrabel SA and Hungary last month.
Along with AES Summit Generation Limited v. Republic of Hungary, the Electrabel SA v. Republic of Hungary arbitration is one of two Energy Charter Treaty (ECT) disputes, arising from Hungary’s efforts to restructure its electric power sector in the wake of its accession to the European Union (EU).
With claims totaling in excess of US$ 700 million, both arbitrations address the Hungarian government’s efforts to minimize the anti-competitive effects of long-term power purchase agreements entered into before Hungary’s accession to the EU on May 1, 2004.
While the parties written submissions are not publicly available, reports indicate that Hungary is defending itself in part on the ground that it was obliged to make changes to those long-term contracts. Apparently, the European Commission determined that those agreements were illegal under EU law because they unnecessarily impeded competition. Specifically, the Commission found that the power purchase agreements provided state aid to power generators and prevented new entrants into Hungary’s energy sector.
Interestingly, in both cases the ECT tribunals have permitted participation by the European Commission, a non-participating party in the dispute.
While the Commission’s intervener submissions are not publicly available, it is widely known that the Commission intervened to defend Hungary’s actions as being required by EU Community law. Apparently the Commission also sought to challenge the jurisdiction of the tribunal, on grounds that portions of the dispute, and the underlying contracts from which the dispute arose, were subject to EU law, and thus subject to Commission’s jurisdiction.
The European and Middle Eastern Arbitration Review 2010 (Global Arbitration Review)
“European Commission to intervene in ICSID dispute,” 15 December 2008 (Global Arbitration Review)
“ICSID tribunal will permit European Commission to file legal brief in Energy Charter Treaty arbitration,” Investment Arbitration Reporter, 11 December 2008.
“European Commission moves to intervene in another ICSID arbitration,” Investment Arbitration Reporter, 11 May 2009.
Previous ITN Reporting on Non-Disputing Party Procedure:
“Innovative Steps are Introduced Into Non-Disputing Party ICSID Procedure,” By Elizabeth Whitsitt, Investment Treaty News, 3 November 2009, available here: