Executive summary: On 26 September 2024, the United States District Court for the District of Columbia granted JGC Holdings Corporation's petition for enforcement of an ICSID award of EUR 23.51 million against the Kingdom of Spain and denied Spain's motion to dismiss. The dispute arose from Spain's withdrawal of financial incentives for renewable energy investments, which led JGC to seek arbitration under the Energy Charter Treaty (ECT). Spain opposed enforcement on grounds of international comity, forum non conveniens and EU law, but the Court rejected these claims, emphasising that ICSID awards are subject to strict enforcement under US law. The Court rejected Spain's request for a stay pending related EU proceedings, concluding that the award was authentic and binding.
On 26 September 2024, the United States District Court for the District of Columbia issued a Memorandum Opinion in the case of JGC Holdings Corporation (JGC, formerly JGC Corporation) against the Kingdom of Spain. In this decision, the Court granted JGC's petition to enforce a EUR 23.51 million ICSID arbitral award issued in 2021 in the context of a dispute over electricity infrastructure investments, while denying Spain's motion to dismiss.
In its response, Spain had raised numerous arguments opposing JGC's enforcement of the arbitral Award, including:
1) Spain initially argued that the Award does not merit full faith and credit. In its opinion, the language of § 1650amirrors that of 28 U.S.C. § 1738, under which federal courts evaluate giving full faith and credit to state court judgments. Invoking established doctrines typically applied in the context of state court judgments, Spain argued that the Court should refrain from enforcing the award, as the ICSID tribunal had overstepped its jurisdiction and encroached upon the exclusive authority of the European Commission and EU courts.
2) Spain then referred to relevant doctrines used by the courts in the context of foreign relations, including doctrines of the forum non conveniens, act of state, foreign sovereign compulsion, and broader international comity doctrine.
The Respondent argued that, under the doctrine of forum non conveniens, the Spanish courts are the only appropriate forum to determine whether the judgment is ultimately enforceable under EU law. In addition, Spain argued that the act of state doctrine precluded enforcement of the judgment. Spain also claimed that the judgment should not be enforced under the doctrine of foreign sovereign compulsion as a matter of international comity. The doctrine of foreign sovereign compulsion "reflects the practice of states in the interests of comity." In raising the foreign sovereign compulsion doctrine, Spain appealed to the notion of "prescriptive comity" under which the Court should give "deference to foreign lawmakers" who have allegedly prohibited state aid.
3) Alternatively, the Kingdom of Spain requested that the Court stay the action pending the resolution of related proceedings, namely, a European Commission investigation into whether Spain's regulatory regime constituted prohibited state aid under EU law, as well as related cases before the D.C. Circuit. Spain contended that considerations of judicial economy and the potential hardship on the parties justified granting a stay in this matter.
US Court Decision Rationale
In its decision, the US Court first dealt with Spain´s request for a stay. In this regard, the Court emphasized that under 22 U.S.C. § 1650a, judicial review of ICSID awards is limited and, therefore, it could not vacate or modify the award based on claims of error in the tribunal's decision-making process. In its consideration of whether it must enforce the award, the Court did not engage with this merits argument from the underlying arbitration. The Court concluded that whether the Award itself represents state aid does not bear on whether the Award is genuine and entitled to full faith and credit. For that reason, the Court declined to stay the matter pending the outcome of further proceedings before the European Commission.
The Court was of the opinion that dismissal based on forum non conveniens was inappropriate in this case, as there was no issue of foreign law for the Court to consider, and therefore, no 'practical difficulties' in the U.S. court’s handling of the case. In the Court’s view, there was no reason to believe that a foreign court would be better suited to this task.
The Court agreed with Petitioner that it need not decline to enforce the Award as a matter of international comity. A comity analysis requires a threshold inquiry into whether a ‘true conflict' exists between the implicated legal systems. But, even assuming that a true conflict exists between EU law and 22 U.S.C. § 1650a, the Court noted that declining to enforce the Award may then place both Spain and the United States in conflict with their obligations under the ICSID Conventionto "recognize an award rendered pursuant to th[e] Convention as binding and enforce the pecuniary obligations imposed by that award." (ICSID Convention art. 54(1)). Thus, to the extent that there is a "true conflict" between EU law and 22 U.S.C. § 1650a, declining to enforce the Award would create a separate conflict with Article 54 of the Convention.
The Court considered that the comity principles did not favor barring enforcement of a judgment, however, where Petitioner seeks recognition of an ICSID award, citing the Supreme Court, the Court held that "where there has been opportunity for a full and fair trial abroad before a court of competent jurisdiction," defendants cannot "contest the validity or the effect of the judgment" in a court of the United States. Moreover, as decided in Laker Airways Ltd. v. Sabena, Belgian World Airlines, the Court concluded that it is "the central precept of comity" that "the decisions of foreign tribunals should be given effect in domestic courts, since recognition fosters international cooperation and encourages reciprocity, thereby promoting predictability and stability through satisfaction of mutual expectations."
The Court remarked that, when Congress drafted the Convention's enabling act, codified at 22 U.S.C. § 1650a, it intended for ICSID awards to be strictly enforced, deliberately excluding the statute from further remedies under the FAA.
In conclusion, as dictated in Valores Mundiales, S.L. v. Bolivarian Republic of Venezuela, the Court's role is limited to examining ICSID's jurisdiction over the dispute, the authenticity of the award, and whether ICSID would treat the award as binding.
Background
As we have previously pointed out in several similar cases against the Kingdom of Spain (see here, here and here, among others), during the late 1990s, Spain began offering financial incentives to attract investors to its renewable energy space. These included a premium to supplement the market price of electricity produced by renewable energy sources. In the ensuing years, Spain made various adjustments to the incentives, including by introducing regulated electricity tariffs. In 2007, Spain increased the premium and regulated tariff afforded to electricity produced by solar thermal plants, indicating that the rates would remain in place for at least 25 years.
In 2010, Japanese JGC invested in two Spanish companies operating solar thermal plants near Córdoba, Spain, basing its decision in part on the Spanish government's favorable remuneration regime.
Beginning in 2012, however, Spain began walking back these incentives and imposed a seven percent tax on the production of electric power.
Spain's decision to decrease the financial incentives caused most of investors in the photovoltaic sector to resort to arbitration through the Energy Charter Treaty (ECT) and the ICSID Convention.
On 8 June 2015, JGC filed a request for arbitration before the ICSID (Case No. ARB/15/27). Claimants argued that Spain had breached its obligations under Part III of the ECT and sought compensation. Spain responded that it had complied with its obligations under the ECT and that the incentives represented "state aid" forbidden under European Union (EU) law, and therefore no investor could have a legitimate expectation to receive them. The Tribunal issued its Decision on Jurisdiction, Liability, and Certain Issues of Quantum on 21 May 2021, concluding that Spain had fundamentally altered the essential features of the remuneration regime the Claimant relied on and thus frustrated the invertor´s legitimate expectations in breach of Spain's international obligations under Article 10(1) of the ECT.
Therefore, in an Award issued on 9 November 2021, the ICSID Tribunal awarded JGC EUR 23.51 million as compensation, as well as pre-award interest on that amount, arbitration costs, and legal fees.
On 9 March 2022, Spain applied for an annulment of the award. On 6 February 2024, the ad hoc Committee concluded that the Tribunal applied the appropriate law and rejected Spain's arguments for annulment.
On 15 September 2023, JGC filed a petition to enforce the ICSID award in the United States District Court for the District of Columbia. After the ICSID ad hoc Committee dismissed its application for annulment, Spain moved to dismiss the enforcement petition.
After the motion was fully briefed, JGC assigned its award to Blasket Renewable Investments, LLC (Blasket), which substituted into the action as Petitioner.
