REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the operation of Regulation (EU) No 912/2014 on the financial responsibility linked to investor-to-state dispute settlement under international agreements to which the European Union is party
Date: 2024-07-22
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: European Energy Charter, direct investment, foreign investment, indemnification, international commercial arbitration, international responsibility, investment protection, settlement of disputes, trade agreement (EU), trade dispute

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 22.7.2024  COM(2024) 305 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the operation of Regulation (EU) No 912/2014 on the financial responsibility linked to investor-to-state dispute settlement under international agreements to which the European Union is party  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the operation of Regulation (EU) No 912/2014 on the financial responsibility linked to 
investor-to-state dispute settlement under international agreements to which the 
European Union is party 

1.  Introduction 

On  23  July  2014,  the  European  Parliament  and  the  Council  adopted  Regulation  (EU)  No 
912/2014  establishing  a  framework for managing  financial  responsibility linked to  investor-
to-State  dispute  settlement  tribunals  established  by  international  agreements  to  which  the 
European Union is party (the “Financial Responsibility Regulation”).  The legal basis for the 
Financial Responsibility Regulation is Article 207 TFEU concerning the common commercial 
policy, of which foreign direct investment is a component.  

The  Commission  is  the  Union  institution  in  charge  of  administering  the  Financial 
Responsibility Regulation. Within the Commission, the responsible service is the Directorate 
General  for  Trade;  the  Legal  Service  is  in  charge  of  representing  the  Union  during  dispute 
settlement proceedings and the possible subsequent stages of litigation.  

The  Financial  Responsibility  Regulation  sets  out  criteria  for  the  determination  of  the 
respondent  status  and  the  allocation  of  financial  responsibility  between  the  Union  and  the 
Member States for treatment which may result in awards for monetary compensation further 
to investor-to-State dispute settlement proceedings. 

Generally, financial responsibility is allocated to the entity responsible for the treatment that 
gives rise to compensation. This entails that the Union bears financial responsibility where the 
treatment concerned is afforded by an institution, body, agency or office of the Union, while a 
Member State bears financial responsibility when the treatment  concerned is  afforded by  it. 
However,  when  a  Member  States  acts  in  a  manner  required  by  EU  law,  for  example  by 
transposing  an  EU  directive,  the  Union  bears  the  financial  responsibility  insofar  as  the 
treatment concerned is required by EU law.  

Concerning  the  respondent  status,  the  rule  is  that  generally  the  party  which  bears  financial 
responsibility  also  acts  as  the  respondent  in  a  dispute.  However,  there  are  specific 
circumstances  where  the  Union  acts  as  the  respondent  even  when  the  Member  State  bears 
some or all of the financial responsibility. This is for instance the case when: a Member State 
requests  the  Union  to  act  as  the  respondent  (for  example  in  view  of  technical  expertise 
required in the dispute); the case also involves treatment afforded by a Member State and such 
treatment  is  required  by  EU  law;  similar  treatment  is  subject  to  WTO  dispute  settlement 
proceeding and it is necessary to ensure consistency of argumentation.  

The Financial Responsibility Regulation sets out arrangements to ensure that, when the Union 
acts as the respondent in cases concerning treatment afforded by a Member State, the Member 
State concerned and the Union work in close cooperation in the conduct of dispute settlement 
proceedings, in accordance with the duty of sincere cooperation enshrined in Article 4(3) of 
the Treaty on European Union. This includes taking into account the defence and protection 
of the interests of the Member State concerned, exchanging timely information and relevant 
documents,  engaging  in  frequent  consultations,  and  participating  in  the  delegation  to  the 
proceedings. 

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The  Financial  Responsibility  Regulation  also  lays  down  procedures  for  Member  States  and 
the  Commission  to  enter  into  arrangements  for  the  payment  of  costs  of  litigation  and  of 
awards granting monetary compensation, in order to ensure that the resources of the EU are 
not, even temporarily, unduly burdened. In particular, the Commission and the Member State 
concerned are required to enter into an arrangement for periodic payment of costs and for the 
payment of any compensation. If financial responsibility is not accepted by the Member State 
concerned, the Commission can address a decision to  it requesting it to provide the relevant 
amounts to the budget of the Union, together with applicable interests.  

Finally, the Financial Responsibility Regulation  establishes procedures and requirements for 
settling cases when settlements are in the interest of the Union. For cases that involve only the 
financial  responsibility  of  the  Union,  it  is  the  Commission  that  decides  on  the  settlement. 
When  a  case  concerns  also  treatment  afforded  by  a  Member  State,  settling  a  dispute  either 
requires the agreement of the Member State, or it can be decided by the Commission provided 
it has no financial or budgetary implications for the Member State concerned.  

Throughout the various stages of a dispute, the  Financial Responsibility Regulation imposes 
information duties on the Commission vis-à-vis the European Parliament and the Council, for 
instance  when  it  receives  from  a  claimant  of  a  third  country  a  request  for  consultation  or  a 
notice of intention to initiate dispute settlement proceedings.   

2.  Current scope of application of the Financial Responsibility Regulation 

The  Financial  Responsibility  Regulation  applies  to  investor-to-State  dispute  settlement 
proceedings  initiated  by  a  claimant  of  a  third  country  and  conducted  under  agreements  to 
which  the  EU  is  a  party.  At  present,  pending  the  ratification  and  entry  into  force  of 
agreements which contain an investor-to-State dispute settlement mechanism, e.g. the bilateral 
agreements  with  Canada  (CETA),  Singapore,  Vietnam,  Chile,  the  Financial  Responsibility 
Regulation  effectively  applies  only  to  investor-to-State  dispute  settlement  cases  initiated 
against the EU under the Energy Charter Treaty (ECT).  

3.  Cases initiated against the Union under the Energy Charter Treaty 

To date, there have been two investment dispute settlement proceedings initiated against the 
Union under the Energy Charter Treaty. These proceeding are currently pending. In addition, 
there have been a few requests for consultations received by the Union pursuant to Article 26 
of  the  ECT,  which  have  so  far  not  advanced  to  the  stage  of  formal  arbitration.  All  these 
proceedings are described in more detail below. 

a.  Claims by Prosisa and Risteel Corporation on the Spanish renewables 

support scheme (2015) 

In 2015, the Commission received two requests for consultation pursuant to Article 26 of the 
ECT,  respectively  from  the  Swiss  company  Prosisa  AG  and  the  Dutch  company  Risteel 
Corporation  BV.  The  Commission  informed  the  European  Parliament  and  the  Council  in 
accordance  with  Articles  4  and  7  of  the  Financial  Responsibility  Regulation  on  7  October 
2015.  

Both  companies  had  made  investments  in  the  photovoltaic  and  wind  sectors  and  in  the 
production of renewable energy with biomass in the territory of Spain, and their claims related 

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to  Spain’s decision to  amend the support scheme for renewable energy.  The companies had 
also  in  parallel  launched  proceedings  against  Spain.  They  essentially  argued  that  the 
Commission had violated the fair and equitable treatment standard enshrined in Article 10 of 
the ECT by intervening before arbitration tribunals constituted under the ECT and by arguing 
that the ECT did not apply in the relationships between an EU Member State and an investor 
from another EU Member State. 

Consultations pursuant to Article 26(1) of the ECT took place on 1 December 2015 between 
the investors and the Commission. The Commission clarified that it considered there was no 
valid legal basis allowing the companies to proceed with their disputes against the Union. 

The companies did not pursue further their claims against the EU.  

b.  Claims by Nord Stream 2 on the amendment of the Gas Directive (2019) 

On 12 April 2019, Nord Stream 2 AG, a subsidiary of Gazprom incorporated in Switzerland, 
addressed a letter to the Commission seeking clarification on the application of the derogation 
regime contained in Directive  (EU) 2019/692 of 17 April 2019 amending  the Gas Directive 
2009/73/EC (“Amending Gas Directive”).1 In the letter, Nord Stream 2 also provided notice 
to the Commission of an alleged breach of the ECT, and requested the EU to attempt to reach 
an  amicable  settlement  in  accordance  with  Article  26(1)  of  the  ECT.  In  accordance  with 
Article 4 of the Financial Responsibility Regulation, the Council and the European Parliament 
were informed of these developments on 13 May 2019. 

Nord Stream 2 AG argued that it should be entitled to a derogation  under the amended Gas 
Directive  from  the  rules  on  unbundling,  third  party  access  and  tariff  regulation  applicable 
pursuant  to  the  Gas  Directive,  as  such  derogation  would  allow  it  to  recover  the  investment 
made, thus respecting its legitimate expectations. It claimed that, should it not be eligible for a 
derogation  under  the  Amending  Gas  Directive  and  no  other  steps  be  taken  to  put  it  in  an 
equivalent position, this would amount to a breach of the EU’s obligation under the ECT, in 
particular Articles 10 and 13 of the ECT. Nord Stream 2 AG also argued that it qualifies as an 
investor  of  a  Contracting  Party  under  the  ECT  being  a  company  headquartered  and  having 
substantial business operations in Zug, Switzerland. 

Consultations between the Commission and Nord Stream 2 took place on 25 June 2019. The 
European  Commission  reserved  its  position  on  whether  it  considers  Nord  Stream  2  to  have 
standing  to  bring  a  claim  under  the  ECT  pending  submission  of  concrete  evidence  by  the 
investor  of  its  business  operations  in  Switzerland.  It  also  informed  the  investor  that  it 
considers  the  Amending  Gas  Directive  to  be  non-discriminatory  and  in  line  with  the  EU’s 
international obligations under the ECT. On the question of whether Nord Stream 2 would be 
eligible for a derogation, the Commission recalled the rules of the Amending Gas Directive, 
notably that the relevant Member States’ authorities will decide on the granting of derogations 
based on national rules transposing the Directive and upon individual applications. 

The Commission had further written exchanges with Nord Stream 2 on 8 July, 26 July and 6 
August  2019.  On  25  July  2019,  Nord  Stream  2  lodged  an  application  for  annulment  of  the 
Amending  Gas  Directive  before  the  General  Court  (Case  T-526/19).  The  General  Court 

1   Directive  (EU)  2019/692  of  the  European  Parliament  and  of  the  Council  of  17  April  2019  amending 
Directive 2009/73/EC concerning common rules for the internal market in natural gas, OJ L 117, 3.5.2019, 
p. 1. 

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dismissed  the  action  as  inadmissible  by  order  of  20  May  2020.2  Upon  appeal,  the  Court  of 
Justice partially set aside the order of the General Court and declared the action for annulment 
brought  by  Nord  Stream  2  AG  admissible  in  respect  of  certain  provisions  of  the  Amending 
Gas Directive.3 The Court of Justice referred the case back to the General Court for a decision 
on the merits concerning the action for annulment, which is currently pending (Case T-526/19 
RENV). 

On  26  September  2019,  Nord  Stream  2  submitted  a  notice  of  arbitration  against  the  Union 
pursuant  to  Article  26(2)(c)  and  26(4)(b)  of  the  ECT.  The  Commission  informed  the 
European  Parliament  and  the  Council  in  accordance  with  Articles  4  of  the  Financial 
Responsibility Regulation on 1 October 2019.  

In the notice of arbitration, Nord Stream 2 AG alleges that the Amending Gas Directive and 
the  EU’s  action  in  connection  with  the  Amending  Gas  Directive  breached  the  EU’s 
obligations under the ECT, in particular Articles 10(1), 10(7) and 13 of the ECT.  

On  9  December  2019,  a  challenge  by  the  EU  against  Nord  Stream  2  AG’s  nominated 
arbitrator  was  upheld.  Following  exchanges  of  written  submissions  on  questions  of 
jurisdiction and the merits during 2020 and 2021, the proceedings were suspended in March 
2022,  after  Nord  Stream  2  AG  became  the  subject  of  international  sanctions  and  entered 
composition  proceedings  (a  type  of  insolvency  procedure  under  Swiss  law)  in  Switzerland. 
On  3  October  2022,  the  EU  submitted  that  a  further  suspension  of  the  arbitration  would  be 
unwarranted, and that the Tribunal should terminate the arbitration. On 13 October 2022, the 
Tribunal held a procedural meeting with the parties by videoconference. Nord Stream 2 AG 
informed  the  Tribunal  that  the  administrator  appointed  pursuant  to  the  provisional 
composition moratorium would allow the arbitration to continue, provided that a third party 
ensures the financing necessary to pursue the arbitration. In response, the EU submitted that 
Nord Stream 2 AG failed to demonstrate a reasonable possibility of resuming the arbitration, 
and  that  the  additional  information  provided  by  it  did  not  justify  a  further  extension  of  the 
suspension  of  the  arbitration.  The  EU  also  submitted  a  Request  for  Security  for  Costs.  By 
letter  dated  24  November  2022,  Nord  Stream  2  informed  the  Tribunal  that  it  had  secured 
funding  to  continue  the  arbitration  and  asked  the  Tribunal  to  lift  the  suspension  of  the 
proceedings.  The  EU  opposed  and  reiterated  its  request  for  an  order  terminating  the 
proceedings, or in the alternative, an order rejecting the resumption of the arbitration unless 
Nord Stream 2 posts security for costs in an adequate manner and amount. By order of 14 July 
2023, the Tribunal rejected the application for the termination of the arbitration but accepted 
the EU’s application for security for costs. It consequently ordered Nord Stream 2 to deposit 
monetary  security  for  the  EU’s  costs  of  legal  representation  with  the  Permanent  Court  of 
Arbitration (PCA). The necessary security  for costs was duly  paid.  The next  steps will be a 
further exchange of written submissions and an oral hearing likely to be at the beginning of 
2025. 

The documents related to this arbitration are available on the website of the PCA.4 

2   Order of the General Court (Eighth Chamber) of 20 May 2020, Nord Stream 2 AG v European Parliament 

and Council of the European Union, Case T-526/19, ECLI:EU:T:2020:210. 

3  

Judgment of the Court (Grand Chamber) of 12 July 2022, Nord Stream 2 AG v European Parliament and 
Council of the European Union, Case C-348/20 P, ECLI:EU:C:2022:548. 

4   https://pca-cpa.org/en/cases/239/. 

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c.  Claims by UK investors on behalf of AS PNB Banka against regulatory 

requirements established by the European Central Bank (2019) 

On  2  May  2019,  the  Commission  received  a  letter,  pursuant  to  Article  26(1)  ECT,  from 
Russian  investors  (with  UK  nationality)  on  behalf  of  the  Latvian  bank  AS  PNB  Bank,  in 
relation to certain decisions of the European Central Bank (ECB) which imposed regulatory 
requirements  on  the  bank  and  allegedly  affected  their  investment  in  a  wind  power  plant  in 
Latvia, Winergy.  

In particular, the investors claimed that a draft decision by the ECB of 17 May 2019 which 
imposed deadlines on AS PNB Bank to resolve its exposure to Winergy and to meet certain 
capital  adequacy  thresholds,  led  to  the  withdrawal  of  the  bank’s  licence,  and  to  the 
deprivation of their investments  in  Winergy.  The investors  argued  that, with its actions, the 
Union was threatening the continued existence and security of their investments in Winergy in 
breach of the EU’s obligations under Part III of the ECT, along with Latvia. 

The  European  Parliament  and  the  Council  were  informed  of  these  allegations  on  24  May 
2019. 

On 28 June 2019, the Commission addressed a letter to the investors setting out the view that 
they did not have standing to initiate proceedings against the EU under the ECT, the investors 
being EU nationals, and suggesting the withdrawal of the claims. The investors did not pursue 
further their claims against the EU. 

d.  Claims by Polish investors concerning lignite mining activities at the 

Turów mine in Poland (2022) 

On 17 January 2022, the Commission received a letter, pursuant to Article 26(1) ECT, from 
the Polish investors PGE Polska Grupa Energetyczna S.A. and PGE Górnictwo i Energetyka 
Konwencjonalna S.A. (jointly referred to as “PGEs”), concerning their investments in lignite 
mining activities at the  Turów mine in Poland. The letter purported to provide notice to the 
EU of a possible breach of the ECT and contained a request to reach an amicable settlement 
between the EU and the PGEs in accordance with Article 26(1) of the ECT. In particular, the 
PGEs  referred  to  orders  by  the  Court  of  Justice  of  the  European  Union  (CJEU)  in  Case  C-
121/215, ordering the cessation of lignite mining activities at the Turów mine. 

On 8 March 2022, the Commission addressed a letter to the investors setting out the view that 
they did not have standing to initiate proceedings against the EU under the ECT, the investors 
being EU nationals, and suggested the withdrawal of the claims. The investors did not pursue 
further their claims against the EU. 

e.  Claims by SCE Solar Don Benito APS (2022) 

On 18 November 2022, the Commission received a letter from the Danish investor SCE Solar 
Don  Benito  APS,  pursuant  to  Article  26(1)  ECT.  The  investor  is  active  in  the  solar  energy 
market and was one of the claimants in the ECT arbitration case of Green Power K/S and SCE 
Solar Don Benito APS vs. Kingdom of Spain (SCC Case No. V2016/135). The Commission 

5   Case  C-121/21,  Czech  Republic  v  Poland  (Mine  de  Turów).  The  case  was  removed  from  the  register  by 

order of the President of the Court of 4 February 2022. 

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had intervened as amicus curiae in that arbitration, which concluded with an award dismissing 
the  claims  due  to  lack  of  jurisdiction  by  the  arbitral  tribunal.  In  particular,  the  tribunal 
considered  that  the  CJEU’s  Achmea  and  Komstroy  judgments  were  applicable  to  the 
arbitration  and  that  Spain’s  offer  to  arbitrate  under  the  ECT  was  not  applicable  in  intra-EU 
relations.  In  its  letter  of  18  November  2022,  the  investor  referred  to  the  CJEU’s  judgments 
and the Commission’s intervention in the earlier arbitration, claiming the EU had violated the 
ECT by preventing it from effectively asserting its legal rights in arbitration. 

On 27 January 2023, the Commission addressed a letter to the investor setting out the view 
that it did not have standing to initiate proceedings against the EU under the ECT, the investor 
being an EU national, and suggested the withdrawal of the claims. The investor did not pursue 
further its claims against the EU. 

f.  Claims by Klesch Group Holdings Limited & others concerning Council 

Regulation (EU) 2022/1854 (2023) 

On 2 October 2023, the Commission received a request for arbitration against the EU through 
the International Centre for Settlement of Investment Disputes (ICSID) in a dispute under the 
ECT by Klesch Group Holdings Limited & others (“Klesch Group”). Klesch Group is a group 
of companies active in the energy sector and incorporated in Jersey. Its request for arbitration 
follows  an  earlier  notice  of  dispute  and  request  for  consultations  in  the  same  matter.  The 
dispute  concerns  investments  in  oil  refineries  in  Denmark  and  Germany,  and  Klesch  Group 
contests  the  temporary  solidarity  contribution  under  Council  Regulation  (EU)  2022/1854.6 
The  Council  Regulation  sets  a  mandatory  temporary  solidarity  contribution  on  the  surplus 
profits  of  businesses  in  the  petroleum,  natural  gas,  coal  and  refinery  sectors,  calculated  on 
taxable  profits  in  the  fiscal  year  starting  in  2022  and/or  in  2023  which  are  above  a  20% 
increase  of  the  average  yearly  taxable  profits  between  2018  and  2021.  The  Commission 
informed  the  European  Parliament  and  the  Council  of  the  dispute  under  the  Financial 
Responsibility Regulation on 20 October 2023. 

Denmark  and Germany  received similar requests for arbitration by Klesch Group over their 
national legislation implementing the temporary solidarity contribution. The Commission is in 
close  contact  with  Denmark  and  Germany  to  coordinate  a  joint  defence.  In  particular, 
Denmark  and  Germany  confirmed,  within  the  meaning  of  Article  9(1)(b)  of  the  Financial 
Responsibility Regulation, that they do not intend to act as respondents in the cases brought 
against  them  by  Klesch  Group.  Therefore,  the  EU  shall  act  as  respondent  in  those  cases 
(Article 9(1) last sentence of the Financial Responsibility Regulation). 

4.  Transparency in investor-to-State dispute settlement proceedings against the 

Union 

The  European  Commission  is  committed  to  ensuring  the  highest  degree  of  transparency  in 
investor-State dispute settlement proceedings initiated against the Union. In recent years, the 
Commission  has  radically  reformed  the  Union’s  approach  to  investment  dispute  settlement 
through a number of initiatives. These include negotiating rules on transparency leading to the 
adoption of the UNCITRAL Transparency Rules in 2013, and the incorporation of such rules 

6   Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy 

prices, OJ L 261I, 7.10.2022, p. 1–21. 

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into  the  provisions  of  the  Investment  Court  Systems  established  in  the  EU’s  bilateral 
agreements with Canada, Singapore, Vietnam, Chile and Mexico. 

The  Union  has  also  been  involved  in  the  negotiation  of  the  United  Nations  Convention  on 
Transparency in Treaty-based Investor-State Arbitration (“Mauritius Convention”, New York, 
2014),  which  is  a  UN  Convention  providing  for  the  application  of  the  UNCITRAL 
Transparency  Rules  to  the  existing  stock  of  over  3000  bilateral  investment  treaties.  The 
Commission  had  sought  to  have  the  UNCITRAL  Transparency  rules  applied  to  the  ECT 
through the Mauritius Convention and has made a proposal for a Council decision authorising 
the  signing  of  the  Mauritius  Convention  by  the  EU  in  January  2015.  On  25  June  2024,  the 
Council adopted the  decision on the signature of the Mauritius Convention and the  EU will 
now formally sign it. The ratification of the Mauritius Convention by the EU will then follow, 
after the approval of the European Parliament. Once the EU signs and concludes the Mauritius 
Convention, Member States can proceed with national ratification. 

In the meantime, the Commission took initiatives to ensure the fullest degree of transparency 
possible in the investors’ claims that have so far been brought to its attention. It has published 
on  DG  TRADE’s  website  the  most  recent  exchanges  between  the  investors  and  the 
Commission 
(https://ec.europa.eu/trade/policy/accessing-markets/dispute-
settlement/investment-disputes/). If investors decide to submit their claims to arbitration, the 
Commission intends to continue applying transparency standards, by seeking agreement with 
the investors to publish submissions, and by organising open hearings.    

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