Summary

Source: icsid.worldbank.org

Decision on the Respondent's Request for Bifurcation

Table of Contents

I. PROCEDURAL BACKGROUND
II. ICSID RULES - BIFURCATION OF PRELIMINARY OBJECTIONS
III. THE PARTIES' REQUESTS FOR RELIEF ON BIFURCATION
IV. THE RESPONDENT'S OBJECTIONS TO JURISDICTION/ADMISSIBILITY FOR WHICH BIFURCATION IS SOUGHT
FIRST OBJECTION: DENIAL OF BENEFITS TO SAUNA
SECOND OBJECTION: LIS PENDENS OBJECTION
THIRD OBJECTION: ABUSE OF PROCESS OBJECTION
FOURTH OBJECTION: FORK-IN-THE-ROAD OBJECTION
FIFTH OBJECTION: INADMISSIBILITY
V. THE PARTIES' POSITIONS ON BIFURCATION
THE RESPONDENT'S POSITION
1. The Applicable Test for Bifurcation
2. Application of the Test
3. Response to Claimant's Arguments About Procedural Efficiency
4. Relevance of the SPN Decision on Bifurcation
THE CLAIMANT'S POSITION
1. The Applicable Test for Bifurcation
2. Application of the Test
3. Relevance of the SPN Decision on Bifurcation
4. Final Comments
VI. THE TRIBUNAL'S ANALYSIS
THE APPLICABLE TEST FOR BIFURCATIONN
APPLICATION OF THE TEST
1. Denial of Benefits Objection
2. Lis Pendens Objection
3. Abuse of Process Objection
4. Fork-in the-Road Objection
5. Inadmissability Objection
TIMETABLE
COSTS
VII. DECISION

I. PROCEDURAL BACKGROUND

1. This Procedural Order No. 3 addresses the Respondent's request for bifurcation of various preliminary issues.

2. Disputes arose in relation to the alleged investments of Sauna UK BidCo Limited ("Sauna" or the "Claimant") in the Republic of Finland ("Finland" or the "Respondent").

3. The Claimant initiated this arbitration on the basis of the Energy Charter Treaty ("ECT"), by filing a Request for Arbitration dated 7 August 2024 ("RfA").

4. The ICSID Acting Secretary-General registered the case on 23 August 2024, and the Tribunal was constituted on 6 March 2025.

...

III. THE PARTIES' REQUESTS FOR RELIEF ON BIFURCATION

15. The Respondent requests that the Tribunal rule as follows:

For the foregoing reasons, Finland respectfully requests that the Tribunal bifurcate the proceedings such that Finland's preliminary objections shall be determined in a first phase, in accordance with the timetable set down in the Schedule at Annex B of Procedural Order No. 1 dated 14 May 2025.1

16. The Claimant requests that the Tribunal rule as follows:

Sauna respectfully requests that the Tribunal reject Finland's Request for Bifurcation and award Sauna its full costs and expenses incurred for this phase of the proceedings.2

IV. THE RESPONDENT'S OBJECTIONS TO JURISDICTION/ADMISSIBILITY FOR WHICH BIFURCATION IS SOUGHT

17. The Respondent's request to suspend the merits relates to five objections to jurisdiction/admissibility. In this section, the Tribunal briefly summarizes those objections to provide the necessary context for the discussion on bifurcation. This summary is not intended to be comprehensive.

18. The Tribunal acknowledges the Claimant's statement that in its submissions it did not address the substance of the Respondent's objections in detail, but provided "high-level preliminary comments, focusing principally on the character and inherent weakness of the objections to highlight their unsuitability for bifurcation".3 That was the appropriate approach to take for this bifurcation application.

FIRST OBJECTION: DENIAL OF BENEFITS TO SAUNA

19. Article 17 of the ECT allows a Contracting Party to deny the advantages of Part III of the ECT (often referred to as "denial of benefits" and "DoB") to a legal entity if "nationals of a third [S]tate own or control such entity" and "if that entity has no substantial business activities in the Area of the Contracting Party in which it is organised."4 The Respondent asserts that Finland issued an effective denial of benefits notice on 15 July 2024 ("DoB Notice").

20. The Respondent argues that both limbs of Article 17(1) are satisfied vis-à-vis Sauna:

i.. ..

ii.. ..

21. The Respondent notes that Article 17(1) provides no guidance as to the timing of the exercise of an ECT Contracting Party's right to deny benefits, and refers to jurisprudence holding that there is no temporal limitation to this provision. In the Respondent's view, a Contracting Party therefore may deny benefits under Article 17(1) "at any time and without formality, including after the commencement of an arbitration," provided that the conditions for doing so are met.6 Here, Finland indicated its intention to deny benefits in March 2024 (two months after the Notice of Dispute) and issued the DOB Notice in July 2024 (the month before the Request for Arbitration was filed with ICSID).7

22. The Respondent contends that its DoB Notice denying Sauna the benefits of the ECT renders the Claimant's claims inadmissible.8

SECOND OBJECTION: LIS PENDENS OBJECTION

23. The Respondent points out that the Claimant filed its RfA on the same day as its alleged privy, SPN, filed a separate Request for Arbitration in the SPN Arbitration ("SPN RfA"). The Respondent asserts that the two RfAs are nearly identical, and the Memorials filed in each arbitration are substantially verbatim. Moreover, in both arbitrations, restitution is the primary remedy sought, with full compensation for losses sought in the alternative. As a 40% shareholder in SPN,. .. The Respondent argues that, by causing SPN to pursue an ECT claim against Finland and to pursue an identical ECT claim in this proceeding, Sauna is trying to have a second "bite at the apple."

24. This, the Respondent contends, is prohibited under the doctrine of lis pendens and the Claimant's claims must for this reason be ruled inadmissible. This doctrine, which has as its purpose relieving parties of the costs and vexation of multiple lawsuits and prevention of inconsistent decisions, will apply where "two judicial organs have equal title to make a determination over the same dispute." This will be the case where the different proceedings are: (a) based on the same, or substantially the same, legal grounds (i.e., causes of action); (b) directed at obtaining the same, or substantially the same, relief; and (c) pending between the same parties or those who are in privity of interest with them. Relying, inter alia, on the Award in Frenkel v. Croatia, the Respondent emphasizes that strictly identical parties, causes of action and relief (i.e., "the triple identity test") is not required - the analysis should be guided by substance over form.10

25. Here, the conditions for the application of lis pendens are satisfied: the causes of action and relief sought in the two cases are exactly the same (they impugn the same measure, rely on the same treaty, and seek the same relief), and Sauna and SPN are in privity of interest. In this regard, the Respondent emphasizes that Sauna and SPN jointly issued the Notice of Dispute and retained the same counsel, that Sauna has participated in the conduct of the SPN Arbitration, and that Sauna's claims in this arbitration are entirely derived from its 40% shareholding in SPN.11

26. In its Reply, the Respondent addresses the Claimant's contention that lis pendens cannot be applied because the third element - the requirement that there be privity of interest between the parties in the two arbitrations - cannot be met. The Respondent contends that it has "provided ample case law and academic authority to demonstrate that it is preferable to adopt a substance- over-form approach and focus on whether SPN is in privity of interest with Sauna." Moreover, the Claimant's contention that ultimate control over the SPN Arbitration cannot be imputed to Sauna is without basis; the record clearly shows that Sauna exercises control over SPN, and there is no basis for requiring that it exercise "independent" control, as RSM v. Grenada established.12 The Respondent also points (again) to the Award in Frenkel v. Croatia, where the tribunal held that the test is "whether the parties. .. have the same substantive interest in the two proceedings and. .. participated in the preparation and conduct of each proceeding," factors which are said to be satisfied here.13

THIRD OBJECTION: ABUSE OF PROCESS OBJECTION

27. Having a further "bite at the apple" is also, the Respondent contends, prohibited under the doctrine of abuse of process, again rendering Sauna's claims inadmissible.14 This doctrine, derived from the principle of good faith, has been held applicable where an investor "engages in the `double pursuit of the same claim in respect of the same interest' or `the multiplication of arbitral proceedings to maximize chances of success'."15

28. In the Respondent's view, Sauna's pursuit of the same relief in two parallel treaty arbitrations constitutes an abuse of process: there is "privity of interest between Sauna and SPN"; the two arbitrations "pertain to the exact same dispute;" the dispute was "notified to Finland in a single joint Notice of Dispute under the same treaty;" and "if SPN prevails in the SPN Arbitration and Sauna prevails in this arbitration, Sauna would obtain the same relief twice."16 The Respondent rejects, in this context, Sauna's suggestion that there are important substantive differences between the two proceedings: a redline comparison of the two memorials makes it obvious that there are no substantive differences.17

29. Finally, the Respondent rejects Sauna's suggestion that an undertaking that it will not recover twice resolves the point. Finland will still be required to defend itself in two separate arbitrations at additional expense, and to bear the risk of inconsistent decisions. Further, any undertaking will not be enforceable once the Tribunal becomes functus officio and so double recovery remains a risk.18

FOURTH OBJECTION: FORK-IN-THE-ROAD OBJECTION

30. The Respondent asserts that another privy of the Claimant, Caruna, is presently pursuing the same relief from Finnish courts, thus "depriving the Tribunal of jurisdiction under Article 26(3) of the ECT or, alternatively, rendering the Claimant's claims inadmissible."19

31. Specifically, Caruna, wholly owned by SPN, which in turn is 40% owned by Sauna, is currently pursuing a claim in the Finnish Market Court under "domestic Finnish [] law." While the Claimant is not a named party, the Claimant's executives also serve, or have served, on the Caruna Board of Directors, establishing that the Claimant is "directing and controlling Caruna's prosecution of its claim in that proceeding."20 In the Respondent's view, the claims are not wholly independent; rather, the claims overlap in "all relevant respects" (challenging the same measures, requesting the same relief, running the same arguments, and relying on much of the same documentary, witness and expert evidence).21

32. Hence, the Respondent argues, the Tribunal has no jurisdiction because of the precondition to consent to arbitration in the ECT. Article 26(3)(b)(i) of the ECT provides that "[t]he Contracting Parties listed in Annex ID do not give such unconditional consent where the Investor has previously submitted the dispute" to the Contracting Party's domestic courts "under subparagraph (2)(a) or (b)" (often referred to as a "fork-in-the-road" objection). Finland is one of the Annex ID listed Contracting Parties.22 Thus, Finland's consent is conditioned on the Investor not having previously submitted the dispute to the Finnish courts; here, the Claimant "acting through its privies" elected to pursue local remedies in Finnish courts.23

33. On the Respondent's case, Article 26(3)(b)(i)'s reference to an "Investor" having submitted the dispute to the local courts can be satisfied where that action is formally taken by an Investor's privies that are part of the same corporate chain, as is the case here.24 Moreover, the fact that the relief sought was sought on the basis of domestic law does not preclude the application of Article 26(3)(b)(i), as has been established in other cases. Rather, properly construed, the provision "is engaged when the claims in the parallel proceedings impugn the same measures and pursue the same or equivalent relief..."25

34. In its Reply, the Respondent addresses Sauna's contention that the fork-in-the-road objection should fail because Finland has not sought to establish the "triple identity test." The Respondent argues that this test is not the only test applicable, and that its objection does not become frivolous because it disagrees with Sauna on the applicable test. It notes that in Suffolk v. Portugal, bifurcation was granted even though the respondent State had not applied the triple-identity test.

Contrary to Sauna's assertions, the substance-over-form approach contended for by the Respondent is endorsed by other tribunals addressing a fork-in-the-road objection under Article 26(3)(b).26

FIFTH OBJECTION: INADMISSIBILITY

35. In the alternative, the Respondent frames the relevance of the pursuit of domestic proceedings in Finland in terms of an inadmissibility objection: it argues that the Claimant's claims of breach of Article 10(1) of the ECT require an assessment of the totality of Finland's conduct in respect of the investment which necessarily extends to the treatment by the Finnish courts in the domestic action. The Tribunal cannot assess the totality of Finland's conduct until a final decision of the Finnish court has been rendered. As such, the Claimant's claim is premature and must be dismissed as inadmissible.27

36. In its Reply, the Respondent rejects Sauna's argument that Finland is seeking to impose a requirement of "exhaustion of local remedies." Rather, the objection arises because of Sauna's choice to cause its privies to institute the domestic proceedings (seeking the same restitutionary relief sought in this proceeding). It is because of that election that the Tribunal in this proceeding must now await the outcome of those Finnish proceedings, in order to be able to consider the totality of Finland's treatment of Sauna's investment. It emphasizes in this regard that the Alghanim decision provides support for this approach, demonstrating the seriousness of this objection.28 While the facts in Alghanim differ from those here, as Sauna has pointed out, the general principle articulated by that tribunal remains of relevance. The Respondent also emphasizes that Sauna itself has asked the Tribunal to consider the "impact" of the 2023 Confirmation Decision in monetary terms as part of its assessment of the legality of Finland's conduct, and states that sheer logic dictates that the outcome of these Finnish proceedings must be relevant to the Tribunal's assessment.29

...

VII. DECISION

128. On the basis of the foregoing, the Tribunal makes the following decisions:

i. The Respondent's Request for Bifurcation is granted in part:

a) The Respondent's denial of benefits objection to be heard in a preliminary phase;

b) The remaining objections are joined to the merits;

ii. The procedural calendar for determination of the denial of benefits objection shall be in accordance with that set out in Annex A; and

iii. Costs of the Request for Bifurcation incurred by either party shall be costs in the arbitration.

On behalf of the Tribunal, ...

Footnotes omitted