5. International Economic Law as a Possible Limit to the Implementation of Unbundling and Unbundling-Related Measures: International Investment Law

Ibid 101.

See North American Free Trade Agreement (17 December 1992) 32 I.L.M. 289 (1993).

See Energy Charter Treaty (17 December 1994) 2080 U.N.T.S. 95.

For a general overview of the relevant case-law, see Achim-R. Börner, ‘Investment Law and Energy’ in Marc Bungenberg and others (eds), International Investment Law (C.H. Beck; Hart; Nomos 2015); Markus Krajewski, ‘The Impact of International Investment Agreements on Energy Regulation’ in Christoph Herrmann and Jörg P Terhechte (eds), European Yearbook of International Economic Law 2012 (European Yearbook of International Economic Law vol 3. Springer 2012).

International Centre for Settlement of Investment Disputes, ‘The ICSID Caseload – Statistics (Issue 2016-1)’ (2016) 12 <https://​icsid.​worldbank.​org/​apps/​ICSIDWEB/​resources/​Documents/​ICSID%20​Web%20​Stats%20​2016-1%20​(English)%20​final.​pdf> accessed 25 April 2016. 26% of the cases fall within the category of ‘Oil, Gas & Mining’ and another 17% of the cases relate to ‘Electric Power & Other Energy’.

United Nations Conference on Trade and Development (n 1) 106.

Nykomb Synergetics Technology Holding AB v. The Republic of Latvia, Arbitral Award (16 December 2003); Charanne and Construction Investments v. Spain, Final Award (translation) (21 January 2016) SCC Case No. 062/2012.

Ministry of Foreign Affairs of the Russian Federation, ‘Speech by the Minister of Foreign Affairs of Russia Sergey Lavrov During a Meeting with Representatives of the Association of European Businesses in the Russian Federation’ (8 October 2012) <http://​archive.​mid.​ru/​/​bdomp/​brp_​4.​nsf/​0/​52A9A0EC716E9093​44257A94002EBF18​> accessed 5 August 2016.

Sergey Lavrov, ‘State of the Union Russia–EU: Prospects for Partnership in the Changing World’ (2013) 51 Journal of Common Market Studies 6, 8.

Arnoud Willems, Jung-ui Sul and Yohan Benizri, ‘Unbundling as a Defence Mechanism Against Russia: Is the EU Missing the Point?’ in Kim Talus and Piero L Fratini (eds), EU – Russia Energy Relations (Euroconfidentiel 2010). See also August Reinisch, ‘Protection of or Protection Against Foreign Investment? The Proposed Unbundling Rules of the EC Draft Energy Directives’ in Christoph Herrmann and Jörg P Terhechte (eds), European Yearbook of International Economic Law 2010 (Springer 2010) 63; Richard Happ, ‘The Legal Status of the Investor vis-a-vis the European Communities: Some Salient Thoughts’ (2007) 10 International Arbitration Law Review 74, 74; Teresa M Moschetta, Il mercato comunitario del gas naturale: Investimenti esteri diretti e diritto internazionale (Giuffrè 2009) 82–83; Anatole Boute, ‘Energy Trade and Investment Law: International Limits to EU Energy Law and Policy’ in Martha M Roggenkamp and others (eds), Energy Law in Europe – National, EU and International Regulation (3rd edn. Oxford University Press 2016) [3.43–3.47].

Agreement between the Government of the Russian Federation and the Government of the Republic of Lithuania on the Promotion and Reciprocal Protection of Investments (29 June 1999) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​1921> accessed 20 January 2018.

See Denis Pinchuk and Nerijus Adomaitis, Gazprom takes on Lithuania in EU policy test case (Reuters 2012); Gazprom, Gazprom seeks international arbitration against Lithuanian Government (2012); Permanent Court of Arbitration, ‘OAO Gazprom v. The Republic of Lithuania’ (no date) <https://​pcacases.​com/​web/​view/​47> accessed 14 September 2016. See also the description in European Court of Justice, ‘Gazprom’ OAO, Opinion of Advocate General Wathelet (4 December 2014) C-536/13 35–36.

Юрий Барсуков and Андрей Райский, ‘“Газпром” отказался судиться с Литвой’ Kommersant (3 April 2015) <http://​www.​kommersant.​ru/​doc/​2699980>; ‘Gazprom Drops One Arbitration Case Against Lithuania’ Natural Gas Europe (5 April 2015) <http://​www.​naturalgaseurope​.​com/​gazprom-lithuania-arbitration-case-23046>.

‘Gazprom Drops One Arbitration Case Against Lithuania’ (n 19).

Ibid.

In January 2013, E.ON Ruhrgas and GDF International sold their 49% joint stake in SPP.

Ibid [10–12].

Ibid [13–14, 16, 24–25, 105].

In fact, the tribunal found that the claimant’s claim was fraudulent and brought in bad faith.

For an overview, see Marc Bungenberg, ‘Going Global? The EU Common Commercial Policy After Lisbon’ in Christoph Herrmann and Jörg P Terhechte (eds), European Yearbook of International Economic Law 2010 (Springer 2010); Wenhua Shan and Sheng Zhang, ‘The Treaty of Lisbon: Half Way toward a Common Investment Policy’ (2010) 21 European Journal of International Law 1049. There is some controversy about the exact scope of the new exclusive competence over foreign direct investment. Some legal writers argue that the usage of the term ‘foreign direct investment’ in Article 207(1) TFEU implies that portfolio investment is not covered, see for instance Christian Tietje, Die Außenwirtschaftsverfassung der EU nach dem Vertrag von Lissabon (Beiträge zum Transnationalen Wirtschaftsrecht vol 83, 2009) 15–16; Jan A Bischoff, ‘Just a Little BIT of “Mixity”? The EU’s Role in the Field of International Investment Protection Law’ (2011) 48 Common Market Law Review 1527.

See European Union, Council and Commission Decision on the conclusion, by the European Communities, of the Energy Charter Treaty and the Energy Charter Protocol on energy efficiency and related environmental aspects (23 September 1997) OJ 1998/L 69/1.

Energy Charter Secretariat, ‘The Energy Charter Treaty’ (no date) <http://​www.​energycharter.​org/​process/​energy-charter-treaty-1994/​energy-charter-treaty/​> accessed 6 August 2016.

Energy Charter Secretariat, ‘List of all Investment Dispute Settlement Cases’ (no date) <http://​www.​energycharter.​org/​what-we-do/​dispute-settlement/​all-investment-dispute-settlement-cases/​> accessed 6 August 2016.

United Nations Conference on Trade and Development (n 1) 105.

European Commission, Towards a Comprehensive European International Investment Policy (07 July 2010) COM(2010)343 final, 4. This number excludes intra-EU BITs.

Article 3 of the Regulation (EU) No 1219/2012 of the European Parliament and of the Council establishing transitional arrangements for bilateral investment agreements between Member States and third countries (12 December 2012) OJ 2012/L 351/40.

Some EU Member State BITs do not however provide unqualified access to ISDS. This applies in particular to a number of BITs with the Russian Federation, which were concluded during the Soviet-era. Under these agreements, the right to initiate arbitration proceedings is restricted to disputes relating to the amount or mode of payment of compensation for expropriation. For a full analysis, see August Reinisch, ‘How Narrow are Narrow Dispute Settlement Clauses in Investment Treaties?’ (2011) 2 Journal of International Dispute Settlement 115.

See for example Reinisch (n 16) 63 (who writes that ‘[w]here market access obligations exist, ownership unbundling … may become unlawful from an investment law perspective’).

Ibrahim F I Shihata, ‘Recent Trends Relating to Entry of Foreign Direct Investment’ (1994) 9 ICSID Review – Foreign Investment Law Journal 47, 47; Giorgio Sacerdoti, ‘The Admission and Treatment of Foreign Investment under Recent Bilateral and Regional Treaties’ (2000) 1 Journal of World Investment 105, 105.

See Articles 3 and 4 of the ‘2004 Canadian Model Foreign Investment Protection Agreement’ <http://​www.​italaw.​com/​documents/​Canadian2004-FIPA-model-en.​pdf> accessed 9 June 2015.

See Articles 3 and 4 of the ‘2012 U.S. Model Bilateral Investment Treaty’ (no date) <http://​www.​state.​gov/​documents/​organization/​188371.​pdf> accessed 24 September 2016.

‘2009 German Model Bilateral Investment Treaty’ (no date) <http://​www.​iilcc.​uni-koeln.​de/​fileadmin/​institute/​iilcc/​Dokumente/​matrechtinvest/​VIS_​Mustervertrag.​pdf> accessed 9 June 2015 (emphasis added).

See Articles I(9), II(2) and III(1) of the Agreement between the Government of the Republic of Nicaragua and the Government of the Italian Republic on the Promotion and Protection of Investments (20 April 2004) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​3591> accessed 20 January 2018.

See footnotes 41 and 42 (this chapter).

Andrea K Bjorklund, ‘National Treatment’ in August Reinisch (ed), Standards of Investment Protection (Oxford University Press 2008) 30; August Reinisch, ‘National Treatment’ in Marc Bungenberg and others (eds), International Investment Law (C.H. Beck; Hart; Nomos 2015) [57–59].

See for example Article 3 of the ‘2012 U.S. Model Bilateral Investment Treaty’ (n 42).

Nykomb Synergetics Technology Holding AB v. The Republic of Latvia (n 9) [34]; Consortium RFCC v. Royaume du Maroc, Arbitration Award (22 December 2003) ICSID Case No. ARB/00/6 [53]; Parkerings-Compagniet AS v. Republic of Lithuania, Award (11 September 2007) ICSID Case No. ARB/05/8 [369]; Total S.A. v. The Argentine Republic, Decision on Liability (27 December 2010) ICSID Case No. ARB/04/01 [213]. See also Bjorklund (n 51) 38; Newcombe and Paradell (n 49) 160–161; Nicolas F Diebold, ‘Standards of Non-Discrimination in International Economic Law’ (2011) 60 International and Comparative Law Quarterly 831, 841.

Pope & Talbot Inc. v. The Government of Canada, Award on the Merits of Phase 2 (10 April 2001) [42–72]; Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005), part IV(B), [20–21]; Loewen Group, Inc. v. United States, Award (26 June 2003) ICSID Case No. ARB(AF)/98/3 [140].

The significant differences between the ‘most favored domestic investor’ standard in international investment law and the group-based approach under the WTO/GATS arguably result from the fact that investment agreements on the one hand and the WTO agreements on the other have different purposes. Whereas the WTO agreements aim to guarantee equal conditions of competition in general, investment agreements seek to protect the individual foreign investor from nationality-based discrimination, see Nicholas DiMascio and Joost Pauwelyn, ‘Nondiscrimination in Trade and Investment Treaties: Worlds Apart or Two Sides of the Same Coin?’ (2008) 102 American Journal of International Law 48, 78, 82, 88–89, passim; Newcombe and Paradell (n 49) 187–188.

Bjorklund (n 51) 30, 37; Dolzer and Schreuer (n 50) 202–203; Newcombe and Paradell (n 49) 162, 176–180; Reinisch (n 51) [62–67].

Diebold (n 53) 839–841, 846–849.

Pope & Talbot Inc. v. The Government of Canada (n 55) [78]. This approach was also adopted by William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware Inc. v. Government of Canada, Award on Jurisdiction and Liability (17 March 2015) PCA Case No. 2009-04 [720ff].

Ibid. In the same vein, several other investment tribunals found that only ‘unreasonable’ distinctions between foreign and domestic investors in like circumstances would amount to a violation of the national treatment obligation, see Marvin Feldman v. Mexico, Award (16 December 2002) ICSID Case No. ARB(AF)/99/1 [170, 182]; Archer Daniels Midland Company v. Mexico (n 57) [205]; Total S.A. v. The Argentine Republic (n 53) [214].

Newcombe and Paradell (n 49) 178.

DiMascio and Pauwelyn (n 56) 76, 88.

Ibid 56.

See Sect. 4.​6.​2.​4.

See, for instance, William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware Inc. v. Government of Canada (n 60) [719]; Marvin Feldman v. Mexico (n 63) [181]; Parkerings-Compagniet AS v. Republic of Lithuania (n 53) [368]; Siemens A.G. v. The Argentine Republic, Award (17 January 2007) ICSID Case No. ARB/02/8 [321]; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, Award (27 August 2009) ICSID Case No. ARB/03/29 [390]; International Thunderbird Gaming Corporation v. The United Mexican States, Arbitral Award (26 January 2006) [177]; Occidental Exploration and Production Company v. The Republic of Ecuador, Final Award (1 July 2004) LCIA Case No. UN 3467 [177].

LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentine Republic, Decision on Liability (3 October 2006) ICSID Case No. ARB/02/1 [147]. The treaty provision prohibited arbitrary and discriminatory measures, which goes beyond nationality-based discrimination. See also Methanex Corporation v. United States of America (n 55), part IV(B), [12].

Gudkov (n 15) 65; Anufrieva (n 15) 86.

See Sect. 4.​9.​2.

See also Boute (n 16) [3.47] (who writes that ‘Member States that, for energy security reasons, refuse to certify existing foreign operators that comply with the unbundling requirements will have to provide strong arguments to substantiate this decision’).

In Bayindir v. Pakistan, for example, an arbitration under the Turkey-Pakistan-BIT, which lacked a fair and equitable treatment provision, the ICSID tribunal accepted that Bayindir was entitled to rely on the FET obligation contained in the Pakistan-Switzerland BIT, see Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, Decision on Jurisdiction (14 November 2005) ICSID Case No. ARB/03/29 [230ff]; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan (n 68) [153ff]. In Maffezini v. Spain, a case under the Argentine-Spain BIT, the tribunal held that the MFN clause would allow the investor to take advantage of the fact that the Chile-Spain BIT did not require a waiting period of 18 months before arbitration proceedings could be instituted, see Emilio Agustín Maffezini v. The Kingdom of Spain, Award (13 November 2000) ICSID Case No. ARB/97/7 [38ff].

United Nations Conference on Trade and Development (n 75) 26, 28.

Newcombe and Paradell (n 49) 226–227, 230.

See Sect. 4.​7.​2.​3.

The application of non-discrimination provisions to sub-(supra)national subdivisions is often difficult. For example, with respect to the national treatment obligation the question arose whether foreign investors should be granted ‘best-in-sub-state treatment’ or ‘best out-of-sub-state treatment’, see United Nations Conference on Trade and Development, National Treatment (UNCTAD Series on Issues in International Investment Agreements, United Nations 1999) 25–28; United Nations Conference on Trade and Development, Lessons from the MAI (UNCTAD Series on Issues in International Investment Agreements, United Nations 1999) 14; J. A VanDuzer, Penelope Simons and Graham Mayeda, Integrating Sustainable Development into International Investment Agreements: A Guide for Developing Country Negotiators (Commonwealth Secretariat 2013) 118; Newcombe and Paradell (n 49) 188–189.

Government of Canada, ‘2004 Canada Model Foreign Investment Promotion and Protection Agreement’ (2004) <http://​www.​italaw.​com/​documents/​Canadian2004-FIPA-model-en.​pdf> accessed 13 April 2015. See also Céline Lévesque and Andrew Newcombe, ‘Canada’ in Chester Brown (ed), Commentaries on Selected Model Investment Treaties (Oxford Commentaries on International Law. Oxford University Press 2013) 76–77.

Comprehensive Economic and Trade Agreement between the European Union and Canada – Consolidated text (2016) <http://​trade.​ec.​europa.​eu/​doclib/​docs/​2014/​september/​tradoc_​152806.​pdf> accessed 20 January 2018, 46.

Antonios Tzanakopoulos, ‘National Treatment and MFN in the (Invisible) EU Model BIT’ (2014) 15 Journal of World Investment & Trade 484, 500.

Markus Perkams, ‘The Concept of Indirect Expropriation in Comparative Public Law – Searching for Light in the Dark’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (Oxford University Press 2010) 109; United Nations Conference on Trade and Development, Expropriation (UNCTAD Series on Issues in International Investment Agreements II, United Nations 2012) 5.

Dolzer and Schreuer (n 50) 101.

Non-compliance with the OU requirements will usually be dealt with through the imposition of fines; see Article 37(4)(d) of Directive 2009/72/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (13 July 2009) OJ 2009/L 211/55; Article 41(4)(d) of Directive 2009/73/EC of the European Parliament and of the Council concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (13 July 2009) OJ 2009/L 211/94.

See Article 5(6) of the Agreement between the Government of the Republic of Slovenia and the Government of the State of Kuwait on the Promotion and Reciprocal Protection of Investments (26 April 2002) <https://​www.​uradni-list.​si/​glasilo-uradni-list-rs/​vsebina/​2002-02-0075> accessed 20 January 2018; Paragraph 4(a) of the Protocol to the Agreement between the Swiss Confederation and the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (31 October 1998) <http://​investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​4819> accessed 20 January 2018; Article 7(4) of the Agreement between the State of Kuwait and the Republic of India for the Encouragement and Reciprocal Protection of Investment (27 November 2001) <http://​investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​1569> accessed 20 January 2018; Article 6(4) of the Agreement between the Government of the Republic of Latvia and the Government of the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (05 October 2001) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​5014> accessed 20 January 2018; Article 6(2) of the Agreement between the Government of the Kingdom of the Netherlands and the Government of the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (29 May 2001) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​1851> accessed 20 January 2018; Article 6(4) of the Agreement between Bosnia and Herzegovina and the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (13 June 2001) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​478> accessed 20 January 2018; Article 6(5) of the Agreement between the Republic of Lithuania and the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (05 June 2001) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​1849> accessed 20 January 2018; Article 6(4) of the Agreement between the Republic of Croatia and the State of Kuwait for the Promotion and Reciprocal Protection of Investments (08 March 1997) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​869> accessed 20 January 2018; Article 6(4) of the Agreement between the Republic of Austria and the State of Kuwait for the Encouragement and reciprocal Protection of Investments (16 November 1996) <http://​investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​3315> accessed 20 January 2018; Article 6(4) of the Agreement between the Federal Democratic Republic of Ethiopia and the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (14 September 1996) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​1169> accessed 20 January 2018; Paragraph 3 of the Protocol to the Agreement between the Republic of Hungary and the State of Kuwait for the Encouragement and Reciprocal Protection of Investments (08 November 1989) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​1529> accessed 20 January 2018; Article 5(2) of the Agreement between the Government of the United Arab Emirates and the Government of the Kingdom of Sweden on the Promotion and Reciprocal Protection of Investments (10 November 1999) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​2306> accessed 20 January 2018; Article 6(1)(i) of the Agreement between the Government of the United Arab Emirates and the Government of Romania on the Promotion and Protection of Investments (11 April 1993) <http://​investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​2217> accessed 20 January 2018; Article 6(2) of the Agreement between the Government of the Czech Republic and the Government of the United Arab Emirates for the Promotion and Protection of Investments (23 November 1994) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​992> accessed 20 January 2018.

Emphasis added.

See Article 8.7(4) CETA – Consolidated text (n 86) 46. The provision states that ‘[s]ubstantive obligations in other international investment treaties and other trade agreements do not in themselves constitute “treatment”, and thus cannot give rise to a breach of this Article, absent measures adopted or maintained by a Party pursuant to those obligations’.

Fiona C Beveridge, ‘Taking Control of Foreign Investment: A Case Study of Indigenisation in Nigeria’ (1991) 40 International and Comparative Law Quarterly 302, 307–321.

Reuters, ‘Zimbabwe PM Says Indigenisation Not Expropriation’ (16 September 2010) <http://​af.​reuters.​com/​article/​topNews/​idAFJOE68F0EQ201​00916> accessed 30 May 2015.

Sornarajah (n 95) 381.

Ibid.

Ibid 381–382.

Beveridge (n 96) 321–328.

Ibid 322–324. Regarding the concept of ‘duress’ in relation to the question of expropriation under international law, Beveridge referred to Detlev F Vagts, ‘Coercion and Foreign Investment Rearrangements’ (1978) 72 American Journal of International Law 17.

Beveridge (n 96) 324–325.

Accord entre la Confédération suisse et la République du Zaïre relatif à la protection et à l’encouragement des investissements (10 March 1972) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​827> accessed 20 January 2018.

Agbessi (n 104) 175ff.

Ibid 100, 204.

Republic of South Africa, Mineral and Petroleum Resources Development Act (2002) No. 28.

Agreement between the Government of the Italian Republic and the Government of the Republic of South Africa on the Promotion and Protection of Investments (09 June 1997) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​3216> accessed 20 January 2018.

Agreement between the Belgo-Luxembourg Economic Union and the Republic of South Africa on the Reciprocal Promotion and Protection of Investments (14 August 1998) <investmentpolicy​hub.​unctad.​org/​download/​treatyfile/​414> accessed 20 January 2018.

Republic of South Africa, Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry (11 October 2002).

Section 23(l)(h) in conjunction with section 100 of the South African Mineral and Petroleum Resources Development Act (n 109). The Mining Charter provides: ‘In order to increase participation and ownership by HDSA’s in the mining industry, mining companies agree … [t]o achieve 26% HDSA ownership of the mining industry assets in 10 years by each mining company’, see section 4.​7 of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry (n 112). See also Peter Leon, ‘A Fork in the Investor-State Road: South Africa’s New Mineral Regulatory Regime Four Years On’ (2008) 42 Journal of World Trade 671, 681f, 685f.

Ibid [66].

Ibid [67–77].

Ibid [77].

Ibid [79]. The award notes that ‘[i]nstead, pursuant to the Offset Agreement, the Operating Companies would be deemed to have complied with the Mining Charter by (i) making a 21% beneficiation offset (i.e., beneficiating – processing and adding value to the quarried stone – in South Africa 21% of the stone that it mined in South Africa); and (ii) providing a 5% employee ownership program for employees of the Operating Companies’. The possibility to reduce the percentage of the equity ownership requirement through beneficiation activities was provided for in section 4.​8 of the Mining Charter, see Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry (n 112).

Leon (n 113) 685–686.

Reference is made to George C Christie, ‘What Constitutes a Taking of Property under International Law?’ (1994) 88 American Journal of International Law 307, 324–329.

See also Vagts (n 102) 24–25, who likewise questions the transferability of these cases.

Ibid 97.

Ibid.

But see Oliver R Jones and Chido Dunn, ‘Consent, Forced Renegotiation and Expropriation in International Law’ (2010) 26 Arbitration International 391, 401 (who write that ‘it is … evident that at the time Fedorchak transferred her title to the property she was voluntarily agreeing to that transfer’).

Burns H Weston, ‘“Constructive Takings” under International Law: A Modest Foray into the Problem of “Creeping Expropriation”’ (1975) 16 Virginia Journal of International Law 103, 148. See also the ‘general conclusion’ of Christie (n 121) 338 and Rosalyn Higgins, ‘The Taking of Property by the State’ (1982) 176 Recueil des Cours 259, 326.

Ibid [26]. See also OECD, Draft Convention on the Protection of Foreign Property (1967) 7 I.L.M. 117 (1968). The notes and comments to Article 3 (Taking of Property) of the Draft Convention state that ‘prohibiting the national to sell his property or forcing him to do so at a fraction of the fair market price’ is considered as a taking.

See Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, Award (29 May 2003) ICSID Case No. ARB (AF)/00/2 [116], footnote 134; Ronald S. Lauder v. The Czech Republic, Final Award (3 September 2001) [200]; Azurix Corp. v. The Argentine Republic, Award (14 July 2006) ICSID Case No. ARB/01/12 [311–312]; Saipem S.p.A. v. The People’s Republic of Bangladesh, Decision on Jurisdiction and Recommendation on Provisional Measures (21 March 2007) ICSID Case No. ARB/05/07 [130].

See Jürgen F Baur and others, Eigentumsentflechtung der Energiewirtschaft durch Europarecht: Mittel, Schranken und Rechtsfolgen (Veröffentlichungen des Instituts für Energierecht an der Universität zu Köln vol 138, Nomos 2008) 36; Kim Talus, EU Energy Law and Policy: A Critical Account (Oxford University Press 2013) 87; Kim Talus and Michaël Hunt, ‘Ownership Unbundling: What End to the Saga?’ in Dirk Buschle, Simon Hirsbrunner and Christine Kaddous (eds), European Energy Law: Droit européen de l'énergie (Dossier de droit européen vol 22. Helbing Lichtenhahn 2011) 38; Sabrina Praduroux and Kim Talus, ‘The Third Legislative Package and Ownership Unbundling in Light of the European Fundamental Rights Discourse’ (2008) 9 Competition and Regulation in Network Industries 3, 20–21.

Ibid [18].

Ibid [34].

Ibid [38].

See sources cited in footnote 134 (this chapter).

Ibid [56].

See also Higgins (n 129) 326 (noting that the ‘case law in this area turns very much on the particular facts and it is not easy to extrapolate general principles’).

See footnotes 129–131 (this chapter) and accompanying text.

Beveridge (n 96) 324–326.

For an overview, see L. Y Fortier and Stephen L Drymer, ‘Indirect Expropriation in the Law of International Investment: I Know It When I See It, or Caveat Investor’ (2004) 19 ICSID Review – Foreign Investment Law Journal 293, 305.

Pope & Talbot Inc. v. The Government of Canada, Interim Award (26 June 2000) [102]; Occidental Exploration and Production Company v. The Republic of Ecuador (n 68) [89]; CMS Gas Transmission Company v. The Republic of Argentina (n 12) [263]; Merrill & Ring Forestry L.P. v. The Government of Canada, Award (31 March 2010) [145, 152]; Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, Award (31 October 2012) ICSID Case No. ARB/09/2 [503]; Dolzer and Schreuer (n 50) 104.

See Ralf Müller-Terpitz and Michaela Weigl, ‘Ownership Unbundling – ein gemeinschaftsrechtlicher Irrweg?’ [2009] Europarecht 348, 363.

This option was temporarily chosen by Gazprom in the case of the gas interconnector between the United Kingdom and Belgium, see Sect. 2.​3.​1.​5.

See Stefan Storr, ‘Die Vorschläge der EU-Kommission zur Verschärfung der Unbundling-Vorschriften im Energiesektor’ [2007] Europäische Zeitschrift für Wirtschaftsrecht 232, 236.

See Rasbach (n 152) 348.

See Baur and others (n 134) 36.

See Sect. 2.​3.​1.​5.

Rasbach (n 152) 348.

Despite the fact that a ‘temporary’ measure may suffice under certain circumstances (see Consortium RFCC v. Royaume du Maroc (n 53) [68]) and that arbitral tribunals have generally taken a flexible approach regarding the required duration (see Anne K Hoffmann, ‘Indirect Expropriation’ in August Reinisch (ed), Standards of Investment Protection (Oxford University Press 2008) 159–160), it can be clearly deduced from the case-law that a lasting deprivation would more readily be considered to amount to an expropriation, see S.D. Myers, Inc. v. Government of Canada, Partial Award (13 November 2000) [283]; Generation Ukraine, Inc. v. Ukraine (n 147) [20.32]; Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States (n 132) [116]; BG Group Plc. v. The Republic of Argentina, Final Award (24 December 2007) [268].

Sornarajah (n 95) 382.

Beveridge (n 96) 321–324.

For an analysis of the notion of ‘consent’ in relation to expropriation claims, see Jones and Dunn (n 128) 396–401.

See Boute (n 16) [3.45] (who mentions that ‘tribunals are reluctant to consider specific assets in isolation from the overall investment transaction’ and then writes: ‘To be successful under the expropriation standard, companies affected by ownership unbundling will therefore have to prove that this forced restructuring destroyed their entire investment. This could be challenging to demonstrate. Only some arbitral tribunals have accepted that, when the main investment remains unaffected, a specific right associated with this investment could be individually protected under the expropriation standard. In line with this “partial expropriation” doctrine, companies affected by ownership unbundling could argue that the asset that they are forced to sell – or the vertical integration of their energy supply business – was a “key element” of their investments without which they would not have entered the market.’; footnotes omitted).

Case-law cited by ibid [3.27] includes Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, Decision on Jurisdiction (14 January 2004) ICSID Case No. ARB/01/3 [70]; Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, Decision of the Tribunal on Objections to Jurisdiction (24 May 1999) ICSID Case No. ARB/97/4 [72]; Electrabel S.A. v. Republic of Hungary (n 10) [5.52–3, 5.58, 6.53, 6.57–8]. See also cases cited in Kriebaum (n 150) [121].

Ursula Kriebaum, ‘Partial Expropriation’ (2007) 8 Journal of World Investment & Trade 69, 83–84.

For a similar argument, see ibid 83.

Burkhard Schöbener, Jochen Herbst and Markus Perkams, Internationales Wirtschaftsrecht (C.F. Müller 2010) [279–289]; Thilo Rensmann, ‘Völkerrechtlicher Enteignungsschutz’ in Dirk Ehlers, Hans-Michael Wolffgang and Ulrich J Schröder (eds), Rechtsfragen internationaler Investitionen: Tagungsband zum 13. Münsteraner Außenwirtschaftsrechtstag 2008 (Verlag Recht und Wirtschaft 2009) 45–46; Perkams (n 88) 110; Caroline Henckels, ‘Indirect Expropriation and the Right to Regulate: Revisiting Proportionality Analysis and the Standard of Review in Investor-State Arbitration’ (2012) 15 Journal of International Economic Law 223, 225.

The resulting uncertainty for both the investor and the host State has rightly been criticized in academic literature, see Perkams (n 88) 110.

See e.g. Metalclad Corporation v. The United Mexican States (n 149) [103–111]; Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, Award (20 August 2007) Award [7.5.21]; Rudolf Dolzer, ‘Indirect Expropriation: New Developments?’ (2002) 11 New York University Environmental Law Journal 64, 79ff; Fortier and Drymer (n 146) 308–309.

Ursula Kriebaum, ‘Regulatory Takings: Balancing the Interests of the Investor and the State’ (2007) 8 Journal of World Investment & Trade 717, 725.

See also Hoffmann (n 160) 168 (who writes that the sole effects doctrine ‘results in a rather one-sided focus upon the interests of and the harm done to the investor’).

Kriebaum (n 174) 726.

Schöbener, Herbst and Perkams (n 171) [285, 287]; Rensmann (n 171) 45–46; Fortier and Drymer (n 146) 298.

Ibid, Part IV, Chapter D, [7].

Kriebaum (n 174) 725–727.

In the Piero Foresti case, the South African government also attempted to invoke the police powers exception in order to argue that the 26% divestment requirement in the mining sector does not constitute an indirect expropriation. It claimed that a ‘generally applicable and non-discriminatory regulation cannot be expropriatory absent a specific, prior promise that the regulation would not be adopted’; see Piero Foresti, Laura de Carli & Others v. The Republic of South Africa (n 108) [75].

See Newcombe and Paradell (n 49) 360 (stating that ‘the extent to which regulatory powers may be used to deprive investors of their investments is unclear’).

Ibid [263, 275].

Newcombe and Paradell (n 49) 358.

Ibid 360–361.

See Sect. 1.​4.

Kriebaum (n 174) 726.

Rensmann (n 171) 46; Hoffmann (n 160) 166.

See, for example, Compañiá del Desarrollo de Santa Elena, S.A. v. The Republic of Costa Rica, Final Award (17 February 2000) ICSID Case No. ARB/96/1 [72]; Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States (n 132) [121–122]; Pope & Talbot Inc. v. The Government of Canada (n 151) [99].

See, for example, Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (n 173) [7.5.21]; El Paso Energy International Company v. The Argentine Republic, Award (31 October 2011) ICSID Case No. ARB/03/15 [234]; Azurix Corp. v. The Argentine Republic (n 132) [310].

See Herdegen (n 176) 408 (identifying a ‘strong tendency to focus on the balance between the interference with the investment and the public interest in terms of proportionality’); Henckels (n 171) 225 (stating that ‘more recent case law indicates that both purpose and effect of host state measures will be taken into account when determining whether an indirect expropriation has occurred’).

See, for example, LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentine Republic (n 70) [195]; Azurix Corp. v. The Argentine Republic (n 132) [311–312]; El Paso Energy International Company v. The Argentine Republic (n 195) [241, 243]; Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka (n 151) [522].

See Henckels (n 171) 228 (with further references).

Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States (n 132) [122]. In a footnote, the tribunal referred to European Court of Human Rights, Matos e Silva, Lda. and Others v. Portugal, Judgment (16 September 1996) Application No. 15777/89.

See Sect. 5.7.3.2.

9^th, 11^th-12^th, 16^th and 19^th recital of the preamble to Directive 2009/72/EC (n 90); 6^th, 8^th-9^th, 13^th and 16^th recital of the preamble to Directive 2009/73/EC (n 90). See also Cabau (n 38) [4.24]; Dirk Buschle, ‘Unbundling of State-owned Transmission System Operators – Effective Remedy or Eyewash?’ [2013] European Networks Law and Regulation Quarterly 49, 54, 62.

European Commission, ‘Commission Staff Working Paper – Interpretative Note on Directive 2009/72/EC concerning common Rules for the Internal Market in Electricity and Directive 2009/73/EC concerning common Rules for the Internal Market in Natural Gas – The Unbundling Regime’ (22 January 2010) 4 <https://​ec.​europa.​eu/​energy/​sites/​ener/​files/​documents/​2010_​01_​21_​the_​unbundling_​regime.​pdf> accessed 24 September 2016; European Commission, Commission Decision pursuant to Article 3(1) of Regulation (EC) No 714/2009 and Article 10(6) of Directive 2009/72/EC – Ireland – Eirgrid/ESB (12 April 2013) C(2013) 2169 final, [17]; European Commission, Commission Decision on the application of Article 9(9) of Directive 2009/72/EC to Transmission System Operation in Scotland (14 May 2012) C(2012) 3284 final, [8]; European Commission, Commission Decision pursuant to Article 3(1) of Regulation (EC) No 714/2009 and Article 10(6) of Directive 2009/72/EC – United Kingdom (Northern Ireland) – SONI/NIE (12 April 2013) C(2013) 2170 final, [11].

Although the decision-making practice of arbitral tribunals is somewhat inconsistent, it seems that the award of compensation for unlawful expropriations is governed not by the provisions on expropriation contained in IIAs but by customary international law on State responsibility for internationally wrongful acts, see Sergey Ripinsky, Damages in International Investment Law (Kevin Williams tr, British Institute of International and Comparative Law 2008) 65–66; 83ff; Dolzer and Schreuer (n 50) 100. This has important consequences for the amount of compensation. As explained by an arbitral tribunal, the ‘[damages standard under customary international law] permits, if the facts so require, a higher rate of recovery than that prescribed in Article 5(2) [of the Argentina-France BIT] for lawful expropriations’ (emphasis in the original), see Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (n 173) [8.2.5]. For a similar statement, see also Siemens A.G. v. The Argentine Republic (n 68) [352].

Ripinsky (n 207) 69. See also Dolzer and Schreuer (n 50) 100.

Ripinsky (n 207) 69.

See European Commission, ‘Reply to Questions from Mr Shmatko on the Third Package’ (29 June 2010) 10 <http://​www.​asktheeu.​org/​de/​request/​168/​response/​558/​attach/​3/​Annex%20​reply%20​GHP%20​Shmatko%20​3rd%20​package%20​2.​pdf> accessed 24 September 2016 (stating that ‘[r]equirements for unbundling do not have the same effect as expropriation’).

Kriebaum (n 150) [219]; Newcombe and Paradell (n 49) 371; Reinisch (n 208) 179.

See also Boute (n 16) [3.46].

Newcombe and Paradell (n 49) 375–376.

ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, Award of the Tribunal (2 October 2006) ICSID Case No. ARB/03/16 [435]; Ioannis Kardassopoulos v. The Republic of Georgia, Award (3 March 2010) ICSID Case No. ARB/05/18 [394–396]; United Nations Conference on Trade and Development (n 88) 36ff.

Newcombe and Paradell (n 49) 373; Kriebaum (n 150) [245].

24^th recital of the preamble to Directive 2009/72/EC (n 90); 21^st recital of the preamble to Directive 2009/73/EC (n 90).

See Ripinsky (n 207) 71–77.

United Nations General Assembly, Resolution 1803 – Permanent Sovereignty over Natural Resources (14 December 1962) A/RES/1803(XVII); United Nations General Assembly, Resolution 3281 – Charter of Economic Rights and Duties of States (12 December 1974) A/RES/3281(XXIX).

United Nations Conference on Trade and Development (n 88) 40.

See Beveridge (n 96) 325 (with respect to the indigenization measures in Nigeria). See also Boute (n 16) [3.46] (who cautiously states, with respect to OU, that the market price of the infrastructure ‘could be considered to fulfil the international law requirement of payment of prompt, adequate, and effective compensation – as required for the lawfulness of expropriation under international law’).

Ripinsky (n 207) 184. Tribunals that have relied on this definition include CMS Gas Transmission Company v. The Republic of Argentina (n 12) [402]; Azurix Corp. v. The Argentine Republic (n 132) [424]; Sempra Energy International v. The Argentine Republic, Award (28 September 2007) ICSID Case No. ARB/02/16 [405].

Baur and others (n 134) 68; Jürgen F Baur and Matthias Schmidt-Preuß, ‘Europarechtliche Grundlagen des Unbundling’ in Jürgen F Baur, Kai U Pritzsche and Stefan Simon (eds), Unbundling in der Energiewirtschaft: Ein Praxishandbuch (Carl Heymanns Verlag 2006) [80]; Matthias Schmidt-Preuß, ‘Die Zukunft der Netze – Szenarien, Modelle, rechtliche Implikationen’ in Ulrich Ehricke (ed), Die neuen Herausforderungen im Lichte des Energierechts (Nomos 2009) 93. Similar circumstances were observed in the case of indigenization measures in African countries, see Leslie L Rood, ‘Compensation for Takeovers in Africa’ (1977) 11 Journal of International Law and Economics 521, 527.

Alan Riley, ‘Ownership Unbundling – A Logic Outage for the Anti-Energy Liberalisers?’ (2008) 2 <http://​www.​ceps.​eu/​system/​files/​book/​1641.​pdf> accessed 18 July 2016.

See also the statement by the Lithuanian Prime Minister Algirdas Butkevičius made in connection with the plans of the Lithuanian government to buy Gazprom’s shares in the transmission system operator Amber Grid: ‘I think that, first of all, the value shall be the market value and next there are talks… I think we should pay as much as the shares are worth’, see ‘Lithuania Ready to Buy Amber Grid’s Shares from E.ON and Gazprom’ Lithuania Tribune (6 September 2013) <http://​www.​lithuaniatribune​.​com/​49776/​lithuania-ready-to-buy-amber-grids-shares-from-e-on-and-gazprom-201349776/​> accessed 3 June 2015.

Ripinsky (n 207) 68 (emphasis in the original).

Dolzer and Schreuer (n 50) 130.

See Article 2(2) of the ‘2009 German Model Bilateral Investment Treaty’ (n 44). Article 2(2) provides: ‘Each Contracting State shall in its territory in every case accord investments by investors of the other Contracting State fair and equitable treatment as well as full protection under this Treaty.’

See Article 5(1) of the ‘2012 U.S. Model Bilateral Investment Treaty’ (n 42).

See Article 1105(1) NAFTA (n 3).

Pope & Talbot Inc. v. The Government of Canada, Award in Respect of Damages (31 May 2002) [58–59]; ADF Group Inc. v. United States of America, Award (9 January 2003) ICSID Case No. ARB (AF)/00/1 [179]; Waste Management, Inc. II v. United Mexican States, Award (30 April 2004) ICSID Case No. ARB(AF)/00/3 [92]; Gami Investments, Inc. v. The Government of the United Mexican States (n 61) [95].

Stephan W Schill, ‘Fair and Equitable Treatment, the Rule of Law, and Comparative Public Law’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (Oxford University Press 2010) 152–154; CMS Gas Transmission Company v. The Republic of Argentina (n 12) [284]; Saluka Investments B.V. v. The Czech Republic (n 181) [291]; Occidental Exploration and Production Company v. The Republic of Ecuador (n 68) [189–190]; United Nations Conference on Trade and Development (n 232) 59–60.

Ursula Kriebaum, ‘FET and Expropriation in the (Invisible) EU Model BIT’ (2014) 15 Journal of World Investment & Trade 454, 468–469.

See Article 10(1) Energy Charter Treaty (n 4).

Kläger (n 242) 164–165.

See, for instance, LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentine Republic (n 70) [124–125, 131]; Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, Award (22 May 2007) ICSID Case No. ARB/01/3 [260]; BG Group Plc. v. The Republic of Argentina (n 160) [307].

Article 10(1) Energy Charter Treaty (n 4).

See United Nations Conference on Trade and Development (n 232) 64–67. The awards mentioned in the text above do not expressis verbis link the stability and predictability of the host State’s legal order to the obligation to protect investors’ legitimate expectations. For this reason, these awards could be interpreted to establish an ‘independent element’ of FET, which is ‘absolute’; see Newcombe and Paradell (n 49) 287; Caroline Henckels, ‘Proportionality and the Standard of Review in Fair and Equitable Treatment Claims: Balancing Stability and Consistency with the Public Interest’ (SIEL Working Paper No 2012/27 2012) 4–5 <http://​papers.​ssrn.​com/​sol3/​papers.​cfm?​abstract_​id=​2091474> accessed 12 April 2016. Nevertheless, the factual contexts in which the stability and predictability of the host State’s legal order came to play a role and the tribunals’ reasoning show that the tribunals essentially analyzed whether the change of the legal framework frustrated any legitimate expectations on the part of the affected investors; see Newcombe and Paradell (n 49) 287–288; United Nations Conference on Trade and Development (n 232) 67.

This possibility is mentioned by Gudkov (n 15) 65; Anufrieva (n 15) 85.

Ibid [274–276] (emphasis added).

Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic (n 249) [264]; Sempra Energy International v. The Argentine Republic (n 227) [303].

CMS Gas Transmission Company v. The Republic of Argentina (n 12) [277]; BG Group Plc. v. The Republic of Argentina (n 160) [310].

LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentine Republic (n 70) [133]; Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic (n 249) [264].

LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentine Republic (n 70) [139]; Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic (n 249) [264]; BG Group Plc. v. The Republic of Argentina (n 160) [304]; National Grid plc v. The Argentine Republic (n 259) [176].

National Grid plc v. The Argentine Republic (n 259) [173]; International Thunderbird Gaming Corporation v. The United Mexican States (n 68) [147]; Waste Management, Inc. II v. United Mexican States (n 237) [98]; CME Czech Republic B.V. v. The Czech Republic, Partial Award (13 September 2001) [611]; Parkerings-Compagniet AS v. Republic of Lithuania (n 53) [331]; Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic (n 249) [262]; LG&E Energy Corp. LG&E Capital Corp. and LG&E International, Inc. v. Argentine Republic (n 70) [127].

Newcombe and Paradell (n 49) 281–282 (writing that in CMS, LG&E, Enron, BG and Sempra ‘there were specific representations that were crystallized into the terms of licenses or concession contracts under which the foreign investment operated’).

Ibid [32, 134–135].

Ibid [143].

Ibid [119ff].

Ibid [184].

Moshe Hirsch, ‘Between Fair and Equitable Treatment and Stabilization Clause: Stable Legal Environment and Regulatory Change in International Investment Law’ (2011) 12 Journal of World Investment & Trade 783, 799. Hirsch, however, admits that there was additional negative behaviour by the host State, which was ‘highly significant’ to the tribunal’s finding of a FET breach (ibid 800).

United Nations Conference on Trade and Development (n 232) 67.

Similarly also Kläger (n 242) 170 (who states cautiously: ‘Whether the regulatory changes alone, without the ambiguous conduct of the tax authority, would have sufficed for a breach of fair and equitable treatment remained unanswered by the tribunal’). Cf. also Franck (n 269) 680 (who writes that ‘[u]nless Occidental is limited to its peculiar facts, the tribunal’s analysis … may inadvertently establish liability whenever governments either fail to provide clear legal and business frameworks, or change those frameworks during the life of an investment’; emphasis added).

Dolzer and Schreuer (n 50) 148–149.

Ibid [491–493].

Ibid [494–497].

Ibid [504] (citing Electrabel S.A. v. Republic of Hungary (n 10) [7.77]; CMS Gas Transmission Company v. The Republic of Argentina (n 12) [277]; El Paso Energy International Company v. The Argentine Republic (n 195) [350, 352]).

It is true that Article 10(1) of Directive 2003/54/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity and repealing Directive 96/92/EC (26 June 2003) OJ 2003/L 176/37 and Article 9(1) of Directive 2003/55/EC of the European Parliament and of the Council concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC (26 June 2003) OJ 2003/L 176/57 explicitly stated that the rules on legal and functional unbundling ‘shall not create an obligation to separate the ownership of assets of the transmission system from the vertically integrated undertaking’. However, it would be a far-fetched argument to say that this statement amounts to a ‘specific commitment’ that OU would not be introduced. The provisions were inserted exclusively for the purpose of clarifying the unbundling obligations applicable to vertically integrated undertakings, with a view to ensuring legal certainty.

See also footnote 294 (this chapter).

European Commission, Proposal for a Directive of the European Parliament and of the Council amending Directives 96/92/EC and 98/30/EC concerning common rules for the internal market in electricity and natural gas (13 March 2001) COM(2001) 125 final, 36–37; European Commission, Amended proposal for a Directive of the European Parliament and of the Council amending Directives 96/92/EC and 98/30/EC concerning rules for the internal markets in electricity and natural gas (07 June 2002) COM(2002) 304 final, 11.

European Parliament, Position of the European Parliament adopted at first reading on 13 March 2002 with a view to the adoption of European Parliament and Council Directive 2002/…/EC amending Directive 96/92/EC concerning common rules for the internal market in electricity (13 March 2002) OJ 2003/C 47 E/351, 359.

United Nations Conference on Trade and Development (n 232) 71.

Ibid [515].

Ibid [517].

Potestà (n 268) 115.

Ibid.

Ibid [250] (emphasis added).

Ibid [246–252].

This political decision is reflected in Article 10(1) of Directive 2003/54/EC (n 294); Article 9(1) of Directive 2003/55/EC (n 294). These provisions stated: ‘These rules [on legal and functional unbundling] shall not create an obligation to separate the ownership of assets of the transmission system from the vertically integrated undertaking.’ See also 8^th recital of the preamble to Directive 2003/54/EC (n 294); 10^th recital of the preamble to Directive 2003/55/EC (n 294).

See Matthias Wohlfahrt, Ownership Unbundling: Die Vereinbarkeit verschärfter Entflechtungsvorgaben für die leitungsgebundenen Sektoren Elektrizität und Gas mit dem Gemeinschaftsrecht (Berliner Wissenschafts-Verlag 2009) 212 (from the perspective of EU law). See also Rasbach (n 152) 334–335; Ulrich Büdenbender and Peter Rosin, Einführung eines Ownership Unbundling bzw. Independent System Operator in der Energiewirtschaft: Rechtliche und rechtspolitische Würdigung der wesentlichen Argumente der Europäischen Kommission (Verlag Energiewirtschaft und Technik 2007) 67ff.

See Article 30(1) of Directive 2003/54/EC (n 294); Article 33(1) of Directive 2003/55/EC (n 294).

Article 49(1) of Directive 2009/72/EC (n 90); Article 54(1) of Directive 2009/73/EC (n 90).

Saluka Investments B.V. v. The Czech Republic (n 181) [305–306]; Suez, Sociedad General de Aguas de Barcelona S.A.and InterAgua Servicios Integrales del Agua S.A. v. The Argentine Republic, Decision on Liability (30 July 2010) ICSID Case No. ARB/03/17 [216]; AWG Group Ltd. v. The Argentine Republic, Decision on Liability (30 July 2010) [236].

Apart from the cases cited in the main text, see also MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, Award (25 May 2004) ICSID Case No. ARB/01/7 [109]; El Paso Energy International Company v. The Argentine Republic (n 195) [373]; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, Award (5 October 2012) ICSID Case No. ARB/06/11 [404ff, 450, 452]; Impregilo S.p.A. v. Argentine Republic, Award (21 June 2011) ICSID Case No. ARB/07/17 [291].

EDF (Services) Limited v. Romania (n 286) [293] (quoting the ECtHR’s judgment in the case of James and Others v. The United Kingdom (n 133) [50, 63]).

Henckels, ‘Proportionality and the Standard of Review in Fair and Equitable Treatment Claims: Balancing Stability and Consistency with the Public Interest’ (n 251) 13; Kläger (n 242) 239.

Kläger (n 242) 245.

Henckels, ‘Proportionality and the Standard of Review in Fair and Equitable Treatment Claims: Balancing Stability and Consistency with the Public Interest’ (n 251) 11–19, passim.

S.D. Myers, Inc. v. Government of Canada (n 160) [255] (The proportionality analysis was conducted under Article 1102 (national treatment) of the NAFTA. However, the tribunal relied on its findings under Article 1102 NAFTA in concluding that Canada had breached the FET standard, see ibid [266]); Pope & Talbot Inc. v. The Government of Canada (n 55) [123, 125, 128, 155].

Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (n 317) [450, 452]; EDF (Services) Limited v. Romania (n 286) [293]; Total S.A. v. The Argentine Republic (n 53) [122–123, 159–165, 309, 317–318, 325–335].

See also Suez, Sociedad General de Aguas de Barcelona S.A.and InterAgua Servicios Integrales del Agua S.A. v. The Argentine Republic (n 316) [215]; AWG Group Ltd. v. The Argentine Republic (n 316) [235].

Ibid [122, 167–168, 312–313, 333].

See Henckels, ‘Proportionality and the Standard of Review in Fair and Equitable Treatment Claims: Balancing Stability and Consistency with the Public Interest’ (n 251) passim.

Baur and others (n 134) 48–49; Thomas Mayen and Ulrich Karpenstein, ‘Eigentumsrechtliche Entflechtung der Energieversorgungsnetze: Verfassungs- und gemeinschaftsrechtliche Aspekte des Eigentumsschutzes’ [2008] Recht der Energiewirtschaft 33, 39; Müller-Terpitz and Weigl (n 153) 365; Christian Koenig, Kristina Schreiber and Kristin Spiekermann, ‘Defizitäres Entflechtungsregime? Eine kritische Analyse der Entflechtungsvorschriften in dem Entwurf des dritten Liberalisierungspakets der Kommission der Europäischen Gemeinschaften’ [2008] Netzwirtschaften & Recht 7, 11; Bernd Holznagel and Pascal Schumacher, ‘Großer Eingriff, k(l)eine Wirkung – Die Pläne der Kommission zur eigentumsrechtlichen Entflechtung der Energienetzbetreiber’ [2007] Netzwirtschaften & Recht 96, 101; Jürgen Kühling and Guido Hermeier, ‘Eigentumsrechtliche Leitplanken eines Ownership Unbundlings in der Energiewirtschaft’ (2008) 58 Energiewirtschaftliche Tagesfragen 134, 137.

Kühling and Hermeier (n 333) 137; Koenig, Schreiber and Spiekermann (n 333) 11.

Baur and others (n 134) 49.

See Koenig, Schreiber and Spiekermann (n 333) 11.

Article 32 and Article 37(1)(a), (6) and (10) of Directive 2009/72/EC (n 90); Article 32 and Article 41(1)(a), (6) and (10) of Directive 2009/73/EC (n 90).

Article 32(2) of Directive 2009/72/EC (n 90); Article 35(1) of Directive 2009/73/EC (n 90).

The annex to the Gas Regulation has already been modified, see in particular European Union, Commission Decision 2012/490/EU on amending Annex I to Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks (24 August 2012) OJ 2012/L 231/16.

Article 8(6) of Regulation (EC) No 714/2009 of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (13 July 2009) OJ 2009/L 211/15; Article 8(6) of Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (13 July 2009) OJ 2009/L 211/36.

Commission Regulation (EU) No 984/2013 establishing a Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems and supplementing Regulation (EC) No 715/2009 of the European Parliament and of the Council (14 October 2013) OJ 2013/L 273/5.

OECD, ‘Restructuring Public Utilities for Competition’ (2001) 20ff, 53 <http://​www.​oecd.​org/​competition/​sectors/​19635977.​pdf> accessed 20 January 2016.

Ibid 21.

Article 66(5) of the Treaty Establishing the European Coal and Steel Community (18 April 1951) 261 U.N.T.S. 140.

Article 7 of Council Regulation (EC) No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (16 December 2002) OJ 2003/L 1/1. See also Sect. 2.​4.

Article 41 of the Federal Republic of Germany, Restriction of Competition Act (Gesetz gegen Wettbewerbsbeschränkungen) (26 June 2013) BGBl. I S. 1750, 3245.

But see Matthias Schmidt-Preuß, ‘Der Wandel der Energiewirtschaft vor dem Hintergrund der europäischen Eigentumsordnung’ (2006) 41 Europarecht 463, 485; Baur and Schmidt-Preuß (n 228) [79] (who sweepingly state that ownership unbundling has a non-market character (‘marktfremdes Mittel’) and is thus not suitable to enhance competition).

See Sect. 1.​4.

Article 30(1) of Directive 2003/54/EC (n 294); Article 33(1) of Directive 2003/55/EC (n 294).

At the end of 2005 the Commission noted that ‘most Member States have transposed the new Directives only with delay and some not yet at all’, see European Commission, Report on progress in creating the internal gas and electricity market (15 November 2005) COM(2005) 568 final, 2–3.

10^th recital of the preamble to Directive 2009/72/EC (n 90); 7^th recital of the preamble to Directive 2009/73/EC (n 90).

European Commission, Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (Final Report) (10 January 2007) COM(2006) 851 final; European Commission, DG Competition Report on Energy Sector Inquiry (10 January 2007) SEC(2006) 1724.

See Sect. 1.​4.

Baur and others (n 134) 58ff.

See, in the EU law context, Müller-Terpitz and Weigl (n 153) 366.

European Parliament, Resolution on Prospects for the Internal Gas and Electricity Market (10 July 2007) P6_TA(2007)0326, [2].

11^th recital of the preamble to Directive 2009/72/EC (n 90); 8^th recital of the preamble to Directive 2009/73/EC (n 90) (emphasis added).

Inquiry into the European gas and electricity sectors (n 356) [55]; European Commission, Prospects for the internal gas and electricity market (10 January 2007) COM(2006) 841 final, 12; European Commission, An Energy Policy for Europe (10 January 2007) COM(2007) 1 final, 7.

European Commission, ‘Commission Staff Working Paper – Interpretative Note on Directive 2009/72/EC concerning common Rules for the Internal Market in Electricity and Directive 2009/73/EC concerning common Rules for the Internal Market in Natural Gas – The Unbundling Regime’ (n 206) 4 (emphasis added).

Commission Decision – Eirgrid/ESB (n 206) [17]; Commission Decision on the application of Article 9(9) of Directive 2009/72/EC to TSOs in Scotland (n 206) [8]; Commission Decision – SONI/NIE (n 206) [11].

9^th, 11^th-12^th, 16^th and 19^th recital of the preamble to Directive 2009/72/EC (n 90); 6^th, 8^th-9^th, 13^th and 16^th recital of the preamble to Directive 2009/73/EC (n 90).

European Commission, Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/54/EC concerning common rules for the internal market in electricity (19 September 2007) COM(2007) 528 final, 22; European Commission, Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/55/EC concerning common rules for the internal market in natural gas (19 September 2007) COM(2007) 529 final, 22 (emphasis added).

11^th recital of the preamble to Directive 2009/72/EC (n 90); 8^th recital of the preamble to Directive 2009/73/EC (n 90) (emphasis added).

Cabau (n 38) [4.24]. See also Buschle (n 205) 54, 62.

Republic of Lithuania, ‘Law on the Amendment of the Law on Natural Gas and Law on the Implementation of the Law on the Amendment of the Law on Natural Gas – Explanatory Notes’ (2011) <http://​www3.​lrs.​lt/​pls/​inter2/​dokpaieska.​showdoc_​l?​p_​id=​391924&​p_​tr2=​2> accessed 17 September 2015.

See Inquiry into the European gas and electricity sectors (n 356) [53–56].

Resolution on Prospects for the Internal Gas and Electricity Market (n 362) [2].

Republic of Lithuania, ‘Law on the Amendment of the Law on Natural Gas and Law on the Implementation of the Law on the Amendment of the Law on Natural Gas – Explanatory Notes’ (n 371).

Republic of Estonia, ‘Law on the Amendment of the Natural Gas Act – Explanatory Memorandum – Original Proposal’ (2012) <http://​www.​riigikogu.​ee/​tegevus/​eelnoud/​eelnou/​5dea306a-39a3-43c7-9d74-e20d79ad6527/​Maagaasiseaduse%20​muutmise%20​seadus/​> accessed 18 September 2015.

On second reading, a proposed amendment aiming to introduce the ITO model was rejected, see Republic of Estonia, ‘Law on the Amendment of the Natural Gas Act – Explanatory Memorandum – Second Reading’ (2012) <http://​www.​riigikogu.​ee/​tegevus/​eelnoud/​eelnou/​5dea306a-39a3-43c7-9d74-e20d79ad6527/​Maagaasiseaduse%20​muutmise%20​seadus/​> accessed 18 September 2015.

Ibid.

Ibid [3.22.2].

Ibid [4.9.1].

See Christian Kahle, ‘Die Eigentumsrechtliche Entflechtung (Ownership Unbundling) der Energieversorgungsnetze aus europarechtlicher und verfassungsrechtlicher Sicht’ [2007] Recht der Energiewirtschaft 293, 296.

European Commission, Commission Staff Working Document – Report on the ITO Model (13 October 2014) SWD(2014) 312 final, 6.

Baur and Schmidt-Preuß (n 228) [79]; Baur, Pritzsche and Klauer (n 357) 84; Baur and others (n 134) 69; Mayen and Karpenstein (n 333) 40; Müller-Terpitz and Weigl (n 153) 367.

But see Müller-Terpitz and Weigl (n 153) 367.

Cf. Baur and Schmidt-Preuß (n 228) [80]; Müller-Terpitz and Weigl (n 153) 367–368 (who stress the importance of the sales price for the proportionality stricto sensu in the context of the discussion on OU and the fundamental right to property under EU law).

This is argued by Baur and others (n 134) 68 (who initially reject an analogy between structural measures as a remedy under general EU competition law and the broader discussion on OU as a regulatory instrument).

See Sect. 2.​4.