Summary

Petition to Recognize and Enforce an ICSID Arbitral Award

INTRODUCTION

Petitioners respectfully seek recognition and enforcement of an arbitral award pursuant to 22 U.S.C. § 1650a and Article 54 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 159 (the "ICSID Convention"). The arbitral award (the "Award") was rendered on December 18, 2024, against Respondent, the Federal Republic of Germany ("Germany"), following an arbitration pursuant to the ICSID Convention and the arbitration rules of the International Centre for the Settlement of Investment Disputes ("ICSID"). In the Award, the arbitral tribunal ("Tribunal") found that Germany had breached its obligations to Petitioners under the Energy Charter Treaty, Dec. 17, 1994, 2080 UNTS 100 (the "ECT"), and awarded Petitioners damages and attorney's fees, with interest. On January 21, 2025, Petitioners demanded payment from Germany in accordance with the Award; Germany has chosen not to respond to Petitioners' letter.

Respondent is a foreign State within the meaning of the Foreign Sovereign Immunities Act ("FSIA"). See 28 U.S.C. § 1603(a). Germany is currently a signatory to the ICSID Convention and was also a signatory to the ICSID Convention on September 10, 2019, the date that Petitioners initiated the Arbitration.

THE DISPUTE AND THE AWARD

The dispute underlying the Award arose from a series of German legislative and regulatory measures that negatively affected the development and value of Petitioners' offshore wind projects in Germany's exclusive economic zone in the North Sea.

Beginning in 1997, Germany required prospective offshore wind developers to obtain approval from its Federal Maritime and Hydrographic Agency to build and operate offshore wind projects. Germany also, however, implemented a regulatory framework designed to encourage and induce investments in offshore wind. For example, starting in 2000, such projects could benefit from a favorable feed-in tariff and the right to connect to the energy grid. Between 2002 and 2006, Germany streamlined the approval process, extended feed-in tariff periods and shifted grid connection costs from project developers to the transmission system operators. In 2009, Germany increased its renewable energy targets and introduced incentives for the early completion of offshore wind projects. Finally, to address financing and grid connection challenges, Germany's Federal Network Agency (the "BNA") set out the criteria which, once met, gave developers an unconditional right to connect to the energy grid within 30 months from the date that a project fulfilled all requirements for an unconditional grid connection. Id. at ¶¶ 91-96.

The attractiveness of Germany's regulatory framework led the Petitioner's parent company STRABAG SE to invest into a pipeline of offshore wind projects between December 2011 and January 2012. Specifically, Petitioners were incorporated to develop a total of 15 offshore wind projects in the German North Sea.

But after Petitioners made investments totaling around EUR 122 million in these offshore wind projects, Germany began to withdraw the favorable regulatory framework that had induced Petitioners' investments in the first place. First, on December 28, 2012, Germany amended the Energy Act (the "2012 Energy Act"), introducing a new central planning system for offshore wind and grid expansion, built around annual development plans adopted by the BNA. The development plans for the years 2013- 2015 delayed the grid connection dates for all of Petitioners' projects by at least several years and delayed some of those projects indefinitely. As a result, the value of the Petitioners' projects decreased significantly.

Then, in 2014, Germany adopted a new energy policy that reduced offshore wind expansion targets and introduced a tender system for grid capacity allocation. At the same time, the BNA adopted new rules for the allocation of grid capacity, which eliminated developers' (including Petitioners') right to obtain grid connections when needed. Id. In 2015, Germany informed Petitioners that it would no longer process any of NOH2's projects, as well as one of NOH1's projects, because they would not receive a grid connection within 10 years under the new development plan. Faced with this unreasonably long and unexpected wait to connect to the energy grid (which, under the initial framework, would have been required within just 30 months of a project fulfilling all relevant criteria), NOH1 sold its remaining projects to mitigate its damages.

Finally, in 2017, Germany began to use a mandatory tendering system for developing offshore wind projects. Under this new system, on 1 January 2017, Germany terminated all ongoing approval procedures for NOH2's projects such that NOH2 lost its legal position for all its projects. As a result, the investments of around EUR 55 million made by NOH2 in the development of these projects were lost without compensation.

Seeking to obtain compensation for the significant losses they had suffered, on September 10, 2019, Petitioners filed a request for arbitration against Germany under the ECT. Petitioners argued that Germany had breached the ECT through measures that unexpectedly and fundamentally changed the process for developing offshore wind farm projects in the North Sea, frustrating their legitimate expectations and depriving the project companies of their economic value. Petitioners' parent company STRABAG SE also alleged that these measures had destroyed the value of its investment into the development of a novel, environmentally friendly technology to install foundations for wind turbines in the German North Sea (the "Gravity Foundation Technology").

On May 7, 2020, the Tribunal was constituted in accordance with Article 37(2)(b) of the ICSID Convention.

The arbitration proceedings were extensive, and Petitioners and Germany participated fully at every stage. In its pre-hearing written submissions, Germany vigorously contested the Tribunal's jurisdiction, the merits of the dispute, and the damages claimed by Petitioners.

Petitioners likewise submitted substantial pre-hearing written submissions on jurisdiction, the merits, and damages. The Tribunal also ordered both parties to produce documents. In September 2023, the Tribunal held two weeks of hearing on jurisdiction, merits, and damages in London, United Kingdom, at which the parties made oral submissions and examined witnesses. The parties subsequently submitted post-hearing briefs.

On December 18, 2024, the Tribunal issued a thorough and well-reasoned 226-page Award. The Tribunal unanimously found that it had jurisdiction over Petitioners' claims. In that context, the Tribunal considered and rejected Germany's objection that there was no valid arbitration agreement under the ECT and the ICSID Convention because Petitioners were nationals of another European Union Member State. A majority of the Tribunal found that Germany had breached the standard of fair and equitable treatment under Article 10(1) of the ECT. The Tribunal unanimously found that Germany had also expropriated Petitioners' investments in violation of Article 13(1) of the ECT.

The Tribunal ordered Germany to pay NOH1 EUR 61,400,000, plus pre-Award interest at a rate equal to 3% compounded annually from 18 December 2013, for the diminished value at which NOH1 divested its project companies because of Germany's measures. The Tribunal awarded NOH2 EUR 179,546,773.55 plus pre-Award interest at a rate equal to 3% compounded annually from 18 December 2013, for the entire fair market value of NOH2's project companies but for Germany's unlawful measures.

The Tribunal also ordered Germany to pay 67% of Petitioners' legal costs and Petitioners to pay 33% of Germany's legal costs. The Tribunal set-off the sums owed by Petitioners to Germany from the sums owed by Germany to Petitioners, and thus ordered Germany to pay Petitioners USD 368,500, GBP 548,577.33, and EUR 4,879,218.32. The Tribunal ordered Germany to pay interest at a rate of 3%, compounded annually on damages and legal costs awarded from 60 days following the date of the Award (February 16, 2025) to the date of payment.

On January 31, 2025, Germany applied for rectification of the Award pursuant to Article 49(2) of the ICSID Convention and Rule 49 of the 2006 ICSID Arbitration Rules. In its application, Germany requested a stay of enforcement of the Award until the rectification decision has been rendered. On March 10, 2025, the Tribunal unanimously rejected Germany's request for this stay of enforcement.

Germany requests the rectification of an operative part of the Award only in relation to an alleged calculation error of reimbursable amounts in the Tribunal's cost decision, that is, ¶ 689(j) of the Award. The remainder of the Tribunal's monetary award at ¶¶ 689(e)-(h) is unaffected by Germany's rectification application and will, in all circumstances, remain unaffected by the Tribunal's forthcoming rectification decision.

Given that the Tribunal's costs decision is subject to a request for rectification, Petitioners do not presently seek recognition and enforcement of the Award insofar as it relates to the costs amount (as set out at paragraph 689(j) of the Award) - but rather only in relation to the damages and interests amounts (as set out at paragraphs 689(e)-(h) of the Award). Petitioners will amend this Petition to reflect the Tribunal's decision on rectification of the costs decision, once rendered.

It is undisputed that the Tribunal granted (i) a total amount of damages of EUR 240,946,773.55; (ii) plus pre-Award interest on this amount as of December 18, 2013 at a rate of 3% per annum until the date of the Award (i.e., December 18, 2024), compounded yearly; and (iii) post-Award interest at a rate of 3% per annum, payable as of February 16, 2025 until the date of payment of such amounts in full, compounded yearly. As of April 4, 2025, the total amount of damages granted in the Award is EUR 334,477,269.51, consisting of: (i) EUR 240,946,773.55, plus (ii) EUR 92,579,911.43 in pre-Award interest on the damages, and (iii) EUR 950,584.53 in post-Award interest on the damages.5 See Wendler Decl. ¶ 14. Germany has not paid Petitioners any of those damages.

...