Paris Court of Appeal, No. 18/14721 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, Pole 1 - First Chamber, 24 September 2019, No. 18/14721

Judicial chronology:

Award issued in Paris on 25 October 2013

Paris Court of Appeal, Pole 1 - First Chamber, 12 April 2016, No. 13/22531

Court of Cassation, First Civil Chamber, 28 March 2018, No. 16-16,568

THE REPUBLIC OF MOLDAVA

vs.

KOMSTROY coming under the rights of ENERGOALIANS

Ukraine and the Republic of Moldova are former Soviet republics with interconnected electricity grids. The collapse of the Soviet Union required the establishment of legal structures adapted to the economic relations between these two states that had become sovereign.

The legal formalisation of economic relations between Ukraine and the Republic of Moldova in the field of electricity began in 1993 with the conclusion of an agreement on cooperation in the electricity sector between the two governments. On 1 January 1995, a contract was signed for the parallel and reciprocal operation of the electricity networks of the two states. A regulation on commercial metering of electricity and power transits came into force in each country in June and July 1998.

A tripartite contract No. 01/01 was signed on 1 February 1999 between three companies, Ukrenergo, a Ukrainian electricity producer, Energoalians, a private Ukrainian company specialising in the production and distribution of electricity, and Moldtranselectro, a Moldovan public company created in 1997. Under the terms of the contract, Energoalians purchased electricity from Ukrenergo for export into Moldova. The amount of electricity to be supplied was decided each month between Ukrenergo and Moldtranselectro.

Pursuant to Tripartite Electricity Supply Contract No. 24/02 signed in Kiev on 24 February 1999, Energoalians, Derimen (a company registered in the British Virgin Islands) and Moldtranselectro entered into an electricity sales contract under the terms of which:

Energoalians, as the supplier, undertook to supply electricity to Derimen,
Derimen, as the buyer, bought the electricity sold by Energoalians and paid the price of the electricity to Energoalians,
Moldtranselectro, as “beneficiary”, undertook to submit to Ukrenergo, before the 25th of each month, an order form indicating the quantity of electricity required for the following month,
Ukrenergo then supplied electricity under “DAF Incoterms 1990” conditions, i.e. up to the Ukraine/Moldova border on the Ukrainian side,
Derimen recovered the price of the electricity sold from Moldtranselectro.

This contract, initially concluded for 1999 and contract no. 1/01 of 1 February 1999, was renewed until 31 December 2000. For each month of supply, Energoalians was to receive payment from Derimen within 80 calendar days of delivery, while Derimen was to receive payment from Moldtranselectro. The prices applicable to the payments were fixed by the various amendments to contract no. 24/02. According to the general provisions of these amendments and depending on the month, the price paid by Moldtranselectro was approximately twice the price paid by Derimen to Energoalians.

Electricity was supplied in both years 1999 and 2000, except from May to July 1999. Moldtranselectro paid Derimen partly for the year 1999 (January and partly February 1999) and for the whole of 2000. Most of these settlements were made in kind, including the supply of generating equipment and the assignment of debt claims. The remainder of the electricity supplied in 1999 remained unpaid. On 1 January 2000, Moldtranselectro’s cumulative debt to Derimen amounted to USD 18,132,898.94. However, there was no debt to Energoalians, as Derimen had paid all the electricity supplied to it.

On 19 May 2000, Energoalians and Derimen signed a document stating the amount of Moldtranselectro’s debt as at 1 May 2000.

Pursuant to contract no. 06/20 signed in Kiev on 30 May 2000, Derimen then assigned to Energoalians the claim it held against Moldtranselectro under contract no. 24/02.

Moldtranselectro partially settled its debt by assigning to Energoalians several claims it held against other companies and thus reduced Energoalians' claim against it to USD 16,287,185.94.

Energoalians tried, in vain, to obtain payment of this sum by applying to the Moldovan and then Ukrainian courts.

Energoalians initiated an ad hoc arbitration procedure because it considered that the interventions of the Republic of Moldova, in particular an administrative decision of October 2000 on the creation of public enterprises in the electricity sector and an order of the Court of Auditors of 4 July 2002, constituted manifest breaches of the commitments made under the Energy Charter Treaty (ECT).

By an award issued in Paris on 25 October 2013 by a majority, the ad hoc arbitral tribunal composed of Mr. S and Mr. V, arbitrators, and Mr. X, Chairman, recognised its jurisdiction and, considering that the Republic of Moldova had failed to comply with its international commitments, ordered it to pay the total sum of 592,880,395 Moldovan lei to Energoalians on the basis of the ECT. On the other hand, the Chairman of the Arbitral Tribunal, expressed a dissenting opinion as to the jurisdiction of the Arbitral Tribunal.

The Republic of Moldova filed an action for annulment against this award on 25 November 2013.

By a transfer dated 6 October 2014, the Ukrainian company Komstroy acquired the rights of Energoalians.

In a decision issued on 12 April 2016, the Paris Court of Appeal set the award aside. The decision essentially held that the arbitral tribunal had erroneously declared itself to have jurisdiction even though the dispute between Energoalians and the Republic of Moldova, which related to an assigned claim by Derimen under contract no. 24/02, the sole purpose of which was the sale of electricity, in the absence of a contribution, did not involve an investment within the meaning of the EC Treaty.

Komstrom appealed this decision. The First Civil Chamber of the Court of Cassation therefore issued a judgment dated 28 March 2018, in which it reversed and annulled in its entirety the decision of the Paris Court of Appeal and transmitted the parties to the current court, composed of other judges.

The cassation under Article 1520-1 of the Code of Civil Procedure took place on the grounds that:

“In order to annul the award, the judgment holds that the acquisition of a right of claim originating in a contract for the supply of electrical energy cannot, in the absence of a contribution, constitute an investment within the meaning of the Energy Charter Treaty;

That in so ruling, while the provisions of this treaty do not specify the criterion characterising an investment, but only list, in a non-exhaustive manner, assets considered as investments, the court of appeal, which added a condition that the treaty does not provide for, violated the above-mentioned text."

The referring Court of Appeal (the current one) case was petitioned on 7 June 2018.

In its final submissions notified on 13 May 2019, the Republic of Moldova requests the court to:
-order the annulment of the arbitral award of 25 October 2013 in so far as the arbitral tribunal wrongly declared that it had jurisdiction and in so far as the recognition or enforcement of the award is contrary to international public policy;
-order Komstroy to pay the sum of EUR 100,000 pursuant to Article 700 of the Code of Civil Procedure and to pay all the costs of the proceedings;

In the alternative:

requests the Court of Justice of the European Union to answer any preliminary question on the interpretation of the Energy Charter Treaty which the Court of Appeal considered decisive for the resolution of the dispute, and in particular the following questions:
– Can a debt arising from a contract for the sale of electricity and not having involved any contribution from the investor in the host state constitute an “investment” within the meaning of Article 1(6) and/or 1(6)(c) of the Energy Charter Treaty?
– Can a debt belonging to an investor of one contracting party, resulting from a contract for the sale of electricity (DAF), constitute an “investment made in the area” of another contracting party within the meaning of Article 26(1) of the Energy Charter Treaty in the absence of any economic activity carried out on the territory of the latter’?
stay the proceedings pending the response of the Court of Justice of the European Union, pursuant to Article 378 of the Code of Civil Procedure.

In its final conclusions, notified on 26 May 2019, Komstroy, as successor in title to Energoalians, requested the court to reject the action for annulment brought by the Republic of Moldova against the arbitral award of 25 October 2013, to dismiss all of its claims, to order the Republic of Moldova to pay the sum of EUR 250,000 under Article 700 of the Code of Civil Procedure and to order it to pay all of the costs in accordance with the provisions of Article 699 of the Code of Civil Procedure.

UPON WHICH

On the ground of annulment based on the lack of jurisdiction of the arbitral tribunal (1520-1 of the code of civil procedure):

The Republic of Moldova argues that the arbitral tribunal should have declined its jurisdiction in the absence of an investment made by Energolians in the area of Moldova on the grounds that:

the claim acquired by Energoalians, which arose from a contract for the sale of electricity, is not an “investment” within the meaning of the EC Treaty and therefore could not be the subject of arbitration proceedings;
even if the debt acquired by Energoalians could constitute an investment within the meaning of the Treaty, it was not “made by” a company of a Contracting State, since Derimen is a company of the British Virgin Islands;
in any event, the claim acquired by Energoalians from Derimen could not be the subject of arbitration, since the sale of electrocity to which it related was not “carried out in the Zone' of Moldova as required by the text of the Treaty. Thus, the arbitral tribunal should have drawn from its analysis of the same issue from the point of view of the IPA (Agreement Between the Republic of Moldova and Ukraine for the Promotion and Protection of Investments).

Energoalians (to whose rights Komstroy is a party) concludes in response to the jurisdiction of the arbitral tribunal, which is based on the offer of arbitration contained in Article 26 of the EC Treaty to which Moldova is a party, all the conditions for the jurisdiction of the arbitral tribunal being in its view fulfilled.

The annulment judge shall review the decision of the arbitral tribunal on its jurisdiction, whether it has declared itself competent or not, by seeking all elements of law and fact allowing to assess the scope of the arbitration agreement. This is no different when, as in the present case, the arbitrators are petitioned on the basis of the Energy Charter Treaty.

Part I of this Treaty, to which the Republic of Moldova is a party, is devoted to the definitions and purpose of the Treaty which “establishes a legal framework to promote long-term cooperation in the field of
energy”.
Part II entitled “Commerce” under which the contracting parties act with a view to developing an open and competitive energy market.
Part III deals with “Investment Promotion and Protection”,
Part IV deals with to “Miscellaneous Provisions”,
Part V deals with the “Dispute Settlement”,
Part VI deals with the “Transitional Provisions”
Part VII deals with the “Structure and Institutions” and Part VIII to “Final Provisions” (ratification, entry into force, provisional application).

Within Part III, Article 10 provides, inter alia, that each Contracting Party shall accord to investments of investors of other Contracting Parties treatment that is fair, equitable and as favourable as that accorded to investments of its own investors, and shall refrain from interfering with their management, enjoyment or disposal by discriminatory or unreasonable measures. Article 13 stipulates that such investments shall not be nationalised, expropriated or subjected to measures having effect equivalent, except where such measures are for reasons of public interest, are not discriminatory, are carried out under due process of law; and accompanied by the payment of prompt, adequate and effective compensation.

Within Part V, Article 26(1) provides that “Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably” and in the absence of an amicable solution, shall be submitted, in accordance with the following provisions of the same Article, at the choice of the investor, to the courts of the defendant State or to arbitration either before the International Centre for Settlement of Investment Disputes (ICSID), or before an ad hoc arbitral tribunal constituted under the rules of the United Nations Commission on International Trade Law (UNCITRAL), or before an arbitral tribunal constituted under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce.

Pursuant to Article 26(3), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of this Article.

According to Article 1(7) of the ECT, the term “Investor” means:

“(a) with respect to a Contracting Party: (i) a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law; (ii) a company or other organisation organised in accordance with the law applicable in that Contracting Party.”

The investor status, within the meaning of this Article, of Energoalians, a company incorporated under Ukrainian law, is established by the arbitral tribunal.

In order to decide the dispute on the jurisdiction of the arbitral tribunal to which the parties are opposed, the court must determine whether, within the meaning of the Treaty, the dispute between the Republic of Moldova and Energolians relates to an investment, whether the investment was made by Energoalians and whether it was made in the area of Moldova.

On the first part of the ground (the dispute between the parties does not concern an investment):

The Republic of Moldova points out that the terms of the ECT, in particular Article 26(1) which sets out the conditions of the offer of arbitration, must be interpreted by application of the general principles of customary international law on the subject as set out in Article 31 of the 1969 Vienna Convention on the Law of Treaties.

It argues that the ECT refers to the ordinary meaning of the term ‘investment’ which requires the existence of a contribution, under the terms of the treaty, taken in context and in the light of its object and purpose. It considers that the particularly broad interpretation given by Energoalians to the terms of the ECT is not in line with the principles of interpretation of international law, considering that the definition of the ECT is evasive and refers to “any kind of assets” held by an investor, the list of examples given for information purposes shows on the contrary that “all assets” do not necessarily constitute an investment.

Considering therefore that Article 1(6) of the ECT is not sufficient on its own and must be interpreted, it observes on the one hand, that the ECT distinguishes between Commerce (Part II) and Investments (Part III), which is entitled “Protection and Promotion of Capital Investments” in the authentic version of the ECT in Russian language which was authentic between the parties in the arbitral proceedings. On the other hand, it argues that Article 14(1) explicitly sets out the obligation of States to protect the initial or additional capital contribution necessary for the constitution of the investment or for its maintenance and development.

It concludes that, both in its ordinary meaning and in its context and in the light of the objectives and purpose of the ECT set out in its preamble, the term “investment” is necessarily linked to the action by the investor to contribute or transfer capital or other resources necessary for the development and maintenance of an investment activity, a meaning which has been adopted by the chairman of the arbitral tribunal in his dissenting opinion and which is in line with the arbitral case law.

It also notes that the ECT stipulates that a debt is an investment only on two conditions, namely that it is “pursuant to contract having an economic value and associated with an Investment”. However, it observes that Energoalians' debt towards Moldtranselectro, which results from contract no. 24/02 did not involve a contribution. It also observes that the contract with which the debt is associated is not itself an investment, having as its sole object the sale of electricity, as Energoalians supplied electricity, which constitutes an act of commerce. Finally, it notes that Derimen’s activity consisted of factoring services, which are purely financial transactions and that the debt in question does not therefore correspond to any of the categories listed under Article 1(6), in particular paragraphs (c) and (f) thereof.

In response, Energoalians submits that its debt must be qualified as an investment associated with an economic activity in the energy sector within the meaning of Article 1(6) of the EC Treaty, the broad notion of investment as understood by the ECT - the list contained therein is not exhaustive but only indicative - makes it possible to conclude that any type of investment controlled or held by an investor is likely to constitute an investment within the meaning of the Charter. It also notes that the financing transaction of electrical energy, from which Energoalians' debt results, constitutes a transaction ‘associated with an economic activity in the energy sector’, in that it has issued the supply of energy to Moldtranselectro.

Energoalians considers that, in any event, the arbitral tribunal ensured that the notion of investment under the ECT does not depart unduly from the common meaning attributed to the term investment and has rightly taken into account the objective of the ECT, which is the promotion of investments in the energy sector and the resolution of disputes through arbitration, and that its interpretation reflects the will of the signatories and contributes to the effectiveness of the ECT.

Energoalians notes that the arbitral tribunal could have based its jurisdiction on a broad appreciation of the notion of investment - which is common in practice - according to which investments are, in most cases, complex transactions consisting of a multitude of separate operations (manufacturing, delivery, financing), any component of which can be qualified as an investment. In the present case, Derimen’s involvement and Moldtranselectro’s obligation to pay to the latter the sums due in respect of the supply of energy constitute an integral component of the investment transaction consisting in the supply of energy to Moldova. It also adds that Article 26(1) of the ECT provides for a flexible and broad connection between the dispute and the investment in question, which would be sufficient to establish the jurisdiction of the arbitral tribunal.

In accordance with the international custom expressed in Article 31 of the Vienna Convention on the Law of Treaties of 23 May 1969: “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."

According to Article 1(6) of the ECT, “Investment” means “every kind of asset, owned or controlled directly or indirectly by an Investor and includes: (a) tangible and intangible, and movable and immovable, property, and any property rights such as leases, mortgages, liens, and pledges; (b) a company or business enterprise, or shares, stock, or other forms of equity participation in a company or business enterprise, and bonds and other debt of a company or business enterprise; (c) claims to money and claims to performance pursuant to contract having an economic value and associated with an Investment; (d) Intellectual Property; (e) Returns; (f) any right conferred by law or contract or by virtue of any licences and permits granted pursuant to law to undertake any Economic Activity in the Energy Sector.”

A change in the form in which the assets are invested does not affect their nature as investments, and the term “investment” covers all investments, whether existing on the date of entry into force or made after the date of entry into force of this Treaty for the Contracting Party from which the investor originates or for the Contracting Party in whose area the investment is made, hereinafter referred to as the “effective date”, provided that the Treaty applies only to matters affecting such investments after the effective date.

The term “investment” refers to any investment associated with an economic activity in the energy sector and any investment or category of investments made in its area by a contracting party, designated by it as “Charter Efficiency Projects” and notified as such to the Secretariat.

Article 1(8) states that “Make Investments” or “Making of Investments” means “establishing new Investments, acquiring all or part of existing Investments or moving into different fields of Investment activity.”

Before the arbitral tribunal, the parties debated the interpretation to be given to “Investment” within the meaning of the ECT and continue to debate this issue before this Court of Appeal, petitioned after the decision issued on 28 March 2018 by the 1st civil chamber of the Court of Cassation.

The arbitral tribunal, adopting the solution supported by Energolians and after having detailed the circumstances established in the course of the proceedings (Award § 185-205 and § 248), ruled in its award that Energolians held an “Investment” within the meaning of the ECT towards the public company (Moldtranselectro) operating in the energy sector. This conclusion results from the rather broad definition of this term adopted by the ECT and supported by recognised authors, adopted also by arbitral awards issued in investment disputes, in which arbitral tribunals have recognised themselves as having jurisdiction to settle such disputes in very similar circumstances (Award § 227 et seq.).

The arbitral tribunal referred in particular to a series of arbitral awards relating to the ECT which pointed out that the very broad list of assets contained in Article 1(6) is not exhaustive (Award § 231) and in which it was concluded that the definition of “Investment” in Article 1(6) TEC had a “global and neutral conception” and extended to “all types of contributions”. It considered that the case before it was directly described by point (c) of paragraph 6 of Article 1 of the TEC.

Before the Court of Appeal, Energolians agrees with the broad interpretation given by the arbitral tribunal to the term “Investment” and with the position of the 1st Civil Chamber of the Court of Cassation (decision issued on 28 March 2018) according to which the ECT does not lay down any criterion relating to the existence of a contribution, and claims that it is indifferent whether its alleged investment results from an assignment of debt.

On the contrary, the Republic of Moldova argues that both the ordinary meaning of the term ‘investment’ and its interpretation in the light of the objectives and purpose of the ECT as set out in the preamble of the ECT and in recent arbitral awards (in particular, Masdar Solar & Wind Cooperatief U.A. v. Spain, Final Award of 16 May 2018, ICSID Case No. ARB/14/1) necessarily requires a contribution.

To answer the question whether Energolians made an “Investment” by acquiring on 30 May 2000 from Derimen the right to the debt on Moldtranselectro, the president of the arbitral tribunal considered in his dissenting opinion, that although Article 1(6) defines the term ‘Investment’ as any asset, “interpreted correctly, Article 1(6) and the TEC in general require that the acquisition of such an asset is the result or one of the effects of an economic process of (capital) investment” (dissenting opinion §11). His opinion is based on the fact that Derimen was not an investor within the meaning of Article 1(7), being incorporated in the British Virgin Islands.

To conclude that the debt acquired by Energolians does not constitute an investment neither under Article 1(6)(c) nor under Article 1(6)(f) of the EC Treaty, the president of the arbitral tribunal notes that the purpose of Part III is to protect capital investments and not merely to protect ownership of the assets. He bases his opinion on the general and usual meaning of the word ‘investment’, the use of this term in Articles 1(8), 9(3) and 19(1)i of the ECT and the purpose of Article 1(6) being to establish the forms which investments may take (dissenting opinion § 18). He concludes that the usual meaning of the word investment corresponds to an investment of capital or effort with the expectation of a certain return, that the same word implies a certain period of time before the return is realised (i.e. duration) and a certain uncertainty as to the amount of the return (i.e. commercial risk).

The answer to the first branch of the ground thus depends on the interpretation of the concept of “Investment” within the meaning of Article 1(6) of the ECT.

On the second part of the ground (the investment was not made by Energoalians):

The Republic of Moldova claims that Energoalians, which did not itself make this investment, cannot submit the dispute relating thereto to arbitration under the terms of Article 26(1) of the EC Treaty. Il also asserts that an investor cannot submit to arbitration a dispute over an investment which it did not itself make, the expression “make an investment” being defined by Article 1(8) of the EC Treaty.

It claims that by acquiring Derimen’s debt, Energoalians did not acquire an ‘existing investment’ within the meaning of the ECT, because Derimen’s place of registration, the British Virgin Islands, is not a contracting party to the ECT. Thus, the Republic of Moldova considers that Energoalians is not an investor within the meaning of the ECT and that its assets cannot constitute an ‘Investment’ within the meaning of the ECT.

It argues that the finding that Derimen, not being an investor, was unable to transfer an investment (which it did not have) to Energoalians is in accordance with the adage nemo plus juris ad alium transferre potest quam ipse habet (one cannot assign more rights than one has).

It adds that Energolians did not participate in any other area of investment activity. It points out that, at the time of the acquisition by Energoalians of the right to the debt held by Derimen, the debt had matured and that Energoalians did not grant any additional rights to Moldtranselectro which could have been considered as a contribution.

Energoalians further replies that the Republic of Moldova is trying to add to the ECT a condition which does not exist: the fact that the investor, in order to benefit from the protection of the ECT, acquires the investment from a company which is itself “protected” by the Treaty. Moreover, Energoalians asserts that its debt originates from an investment and not from an operation of a commercial nature, and that the fact of holding an asset associated with an economic activity in the energy sector allows the existence of an investment to be inferred, regardless of the manner in which that investment was acquired.

It points out that according to Article 1(6) of the ECT, an investment “means every kind of asset, owned or controlled directly or indirectly by an Investor”, so it does not matter whether Energoalians has made the investment or not, as long as it controls the investment.

Finally, it notes that only the French version of Article 26 of the ECT mentions that the investment must be “made” by the investor, producing sworn translations in French of the same article in its Russian, English, German, Italian, and Spanish versions.

Article 26 of the ECT in its official French version relating to the settlement of disputes between an investor and a contracting party concerns disputes which bind a contracting party and an investor of another contracting party concerning an investment “made by the latter”.

The arbitral tribunal rejected the arguments put forward by the Republic of Moldova (Award § 147 et seq.) on the grounds that there was “nothing in the text of the ECT which indicates that the former owners of the alleged ‘Investment’ have the requisite standing to determine whether its current owner is an ‘Investor’ or not”.

The terms ’d’investissement réalisé' used in Article 26(1) of the French version of the ECT refer, on the one hand, to the definition of investment in Article 1(6) and, on the other hand, to the definition of ‘Make investments’ or ‘Making of investments’ contained in Article 1(8), referring to “establishing new Investments, acquiring all or part of existing Investments or moving into different fields of Investment activity.”

The answer to the second part of the ground requires prior interpretation of Article 1(6) of the Treaty, if necessary of Article 1(8).

On the third part of the ground (the ratione loci criterion has not been met):

The Republic of Moldova clarifies that Article 26(1) includes a ratione loci criterion, as the jurisdiction of the arbitral tribunal under the ECT is limited to investments made by an investor “on the territory” of the host State, i.e., within its borders, according to the ordinary meaning to be given to these terms and the context of the other terms of the ECT. Since the delivery of electricity took place before the border with Moldova and the companies Energoalians and Derimen did not carry out economic activity in the energy sector on the territory of Moldova, the claimant claims that no investment was made ‘in the area’ of Moldova. It adds that the acquisition of the debt right could not itself be considered as an investment made ‘in the area’ of Moldova by Energoalians and Derimen. The only compensation paid by Energoalians for this acquisition, which is not evidenced by the payment, shall be paid to Derimen, an entity located in the British Virgin Islands.

Energolians replies that the condition of territoriality (i.e ratione loci criterion), which shall be assessed more flexibly than in the case of “physical” investments, is met. Energolians adds that there are many criteria for territorial connection to Moldova, and that its debt on Moldtranselectro originates from the supply of electricity on the territory of Moldova, that the sole purpose of the complex investment transaction is to supply Moldtranselectro, a Moldovan state-owned company, with electricity. In that sense, Energolians refers to the arbitral tribunal which correctly pointed out that, ‘during the contractual supply period, the electricity to be supplied was in high-voltage power grids both on the territory of Ukraine and on the territory of Moldova’.

It further replies that the Republic of Moldova cannot seriously claim that the investment was not made in the area of Moldova when the investment invoked by Energoalians is the debt held on Moldtranselectro, not the underlying electricity supply contract, and that the mere presence of the term DAF in the electricity supply contract does not exclude its connection to the area of Moldova.

Article 26 ECT is applicable to disputes binding a contracting party and an investor of another contracting party concerning an investment made by the latter “in the area of the former”.

The term “Area” is defined in Article 1(10) ECT as follows:

““Area” means with respect to a state that is a Contracting Party:
(a) the territory under its sovereignty, it being understood that territory includes land, internal waters and the territorial sea; and
(b) subject to and in accordance with the international law of the sea: the sea, sea-bed and its subsoil with regard to which that Contracting Party exercises sovereign rights and jurisdiction.”

Articles 11, 12, 13, 14, and 40 of the ECT refers to this ratione loci criterion in order to authorise the entry and residence of the staff of investors in the territory of a Contracting State and to protect the investments made in that territory.

The Republic of Moldova points out that the facts established by the arbitration tribunal, acknowledged by Energolians, which itself points out that the electricity was delivered before the customs border between Ukraine and Moldova was crossed (DAF Delivered At Frontier contract, Issued at the Border) are incompatible with an investment made on the territory of Moldova and that, in respect of the assignment of the debt, the consideration due by Energoalians for the acquisition of the debt, which is presumed to have been paid, without evidence thereof, would not have been paid to Derimen on the territory of Moldova.

Energolians replied that the investment it refers to is the debt held on Moldtranselectro, and not the underlying electricity supply contract, and that the territoriality test should be assessed differently and more flexibly in the case of a liquid debt.

The third part of the ground thus raises the question whether the debt, belonging to an investor, arising from an electricity sales contract, may constitute an investment made in the area of another contracting party within the meaning of Article 26(1) of the ECT, in the absence of any economic activity carried out by the investor in the territory of the latter.

On the referral to the Court of Justice of the European Union:

The ECT was concluded by the European Communities by Council and Commission Decision 98/181/EC of 23 September 1997.

Under Article 267 of the Treaty on the Functioning of the European Union:

“The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of the Treaties;
(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union;
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon."

The criterion for the application of this procedure is based exclusively on the characterisation of the act whose interpretation is sought, to the exclusion of any consideration relating to the nature of the dispute in the main proceedings or the nature of the parties before the domestic court.

Mixed agreements concluded by the Union and the Member States with third parties are among the acts taken by the institutions, bodies, offices or agencies of the Union (CJEC 30 Sept. 1987, case 12/86 Demirel; CJEU 18 Jul. 2013, case C 414/11 Sanofi-Aventis Deutschland).

Contrary to what Energolians therefore claims, the CJEU has jurisdiction over these questions of interpretation relating to the provisions of the ECT, pursuant to Article 267 of the Treaty on the Functioning of the European Union in so far as they aim to ensure the uniform application of European Union law and the Paris Court of Appeal, The Court of Justice, having to apply the provisions of the ECT in order to assess the competence of the arbitral tribunal, has the power to refer such questions of interpretation to the Court of Justice, regardless of whether the dispute between the parties has been submitted in the first place to an arbitral tribunal.

It is therefore appropriate to refer the questions referred for a preliminary ruling set out in the enacting terms to the ECJ.

The proceedings will therefore be suspended until the Court of Justice has given its ruling.

FOR THESE REASONS

Before stating law,

Refers the following questions to the Court of Justice of the European Union for a preliminary ruling:

Shall Article 1(6) of the Energy Charter Treaty be interpreted as meaning that a debt arising from a contract for the sale of electricity, which did not involve any contribution by the investor in the host state, may constitute an ‘investment’ within the meaning of that Article?
Shall Article 26(1) of the Energy Charter Treaty be interpreted as meaning that the acquisition by an investor of a Contracting Party of a debt constituted by an economic operator foreign to the Contracting States constitutes an investment?
Shall Article 26(1) of the Energy Charter Treaty be interpreted as meaning that a debt owned by an investor, arising from a contract for the sale of electricity delivered at the State border host country, may constitute an investment made in the area of another Contracting Party, in the absence of any economic activity carried out by the investor in the territory of the latter?

Stays the proceedings until the Court of Justice gives its opinion.

Holds that the Registry of that Court shall transmit this decision and the case-file by registered letter with a request for acknowledgement of receipt to the Court of Justice of the European Union, Registry of the Court, rue du Fort Niedergrünewald, L - 2925 Luxembourg.

Holds that the case shall be suspended (in French: retirée du rôle) and reinstates at the request of the most diligent party as soon as the above-mentioned event occurs.

Makes no decision as to the costs.