World leaders call for an international treaty to respond to future pandemics
On 30 March 2021, the leaders of 25 States, the European Union and the World Health Organization published an article endorsing the idea of a treaty to coordinate international responses to pandemics. This proposal will be considered at a special session of the World Health Assembly in November.
Since the early days of the COVID-19 pandemic, Volterra Fietta has been proud to provide thought leadership in support of the creation of an effective multilateral treaty to facilitate effective global responses to future pandemics (see here, here and here).
The World Health Organization’s International Health Regulations (the “IHRs”) are not designed to ensure the kind of legally binding global cooperation and coordination required to control and confront global pandemics. The IHRs have failed to prevent States from: (i) withholding vital information; (ii) sealing off their borders; and (iii) engaging in uncooperative actions in relation to vaccines and other medical supply. Whilst the IHRs discourage that type of behaviour, its provisions are not actually enforceable. For example, a number of its provisions are not mandatory, and others are so broadly phrased that they effectively allow States to interpret them at will. What is more, the IHRs lack mechanisms to ensure compliance.
In April 2020, Volterra Fietta proposed the creation of an effective treaty on pandemic suppression so as to redress those deficiencies. The Convention on Pandemic Suppression first envisaged by the firm would contain clear, mandatory and enforceable standards for global cooperation in pandemic suppression. It would reference science-based standards and interpretations. Its implementation would involve binding third-party monitoring. And it would provide for binding mechanisms to settle disputes and ensure enforcement of its provisions. Public international law has the tools required to fashion such an instrument, as long as there is sufficient political will on the part of governments.
Perhaps the time has come.
In a closely watched decision, the CJEU rules that cutting-edge hybrid satellite and terrestrial systems can be authorised under EU regulations pursuant to an overarching requirement not to hold back technological progress
On 15 April 2021, the Court of Justice of the European Union (“CJEU”) handed down its highly anticipated decision in Eutelsat SA v. Autorité de régulation des communications électroniques et des postes (“ARCEP”) and Inmarsat Ventures SE (“Inmarsat”). In what was the main thrust of the decision, the CJEU ruled that telecommunication regulations should not be read in a way that “hold[s] back innovation and technological progress”. The CJEU therefore found that, under relevant European Union (“EU”) regulations, a hybrid terrestrial-satellite system does not have to be principally based on the satellite component of that system, as long as it does not distort competition.
In particular, the CJEU clarified how and when complementary ground components (“CGCs”) can be used for the operation of a hybrid terrestrial-satellite system. CGCs are terrestrial components of an overall hybrid satellite-terrestrial communications system that are designed, primarily, to overcome the interference that can occur with signals from a satellite by blocking objects like mountains and buildings. The use of CGCs to buttress satellite-based communications is of particular importance. CGCs represent technology that can make satellite-based data transmission more viable, especially in profitable urban areas. At the same time, CGCs can be controversial because they can cause competition with incumbent terrestrial operators and others.
The decision is instructive for States and regulators around the world considering similar applications for hybrid terrestrial-satellite communication systems. It is also relevant for those litigations and other disputes where issues of hybrid satellite communications systems can arise.
Background
Inmarsat, a UK domiciled company, developed a system called the European Aviation Network to provide in-flight connection services to planes flying over the EU.
On 22 February 2018, ARCEP authorised Inmarsat to operate CGCs within the framework of the European Aviation Network. The decision of the French Regulatory Authority (ARCEP) followed a European Commission (“EC”) decision (Decision 2009/449/EC) selecting Inmarsat as one of the operators of mobile satellite systems authorised to use 2 GHz frequency band (the so-called S-band).
Eutelsat, a European satellite operator based in France and a competitor of Inmarsat, brought an action before the Conseil d’État (French Council of State) seeking annulment of the ARCEP decision. Eutelsat claimed that the system put in place by Inmarsat, particularly its ground component, was not consistent with the 30 June 2008 decision of the European Parliament (Decision 626/2008/EC) setting out the criteria for the selection and authorisation of systems providing mobile satellite services (“MSS decision”).
The Conseil d’État asked the CJEU to determine, by way of preliminary ruling: (a) whether a mobile satellite system needs to be principally based on a satellite component and whether CGCs may be installed to cover the entire EU territory; (b) the legal criteria that are to be used in identifying a mobile earth station; and (c) whether the competent authorities of the Member State are entitled to refuse authorisation to operate CGCs if the selected operator has not complied with the commitments as to geographical coverage of mobile satellite systems within the time limit provided in the MSS decision.
The CJEU’s ruling
The CJEU significantly ruled that “that the principle of technological neutrality. . . requires that the interpretation of the provisions at issue does not hold back innovation and technological progress.”
The CJEU also made the following significant rulings:
- First, that, under relevant EU regulations, a mobile satellite system does not have to be principally based on the satellite component of the system, at least in terms of the capacity to transmit data.
- Second, that, nonetheless, the satellite component needs to have a “real and specific usefulness” for the functioning of the system as a whole.
- Third, that there is no upper limit on the number of CGCs that can be used in a hybrid system, at least under relevant EU regulations.
- Fourth, that a “mobile earth station”, as defined in the EU regulations, does not have to be able to communicate with the satellite without the use of separate equipment.
Finally, the Court determined that, in the event an operator has failed to provide mobile satellite services by the deadline set in the MSS decision, the competent authorities of Member States are not entitled to refuse to grant the authorisations necessary for the provision of CGCs of mobile satellite systems to that operator on the ground that that operator has failed to honour the commitment given in its application.
As such, the CJEU rejected Eutelsat’s challenge against ARCEP’s authorisation.
Effect of the CJEU’s ruling
Applications to develop CGC-based hybrid systems are now a common element of many private space operator’s business plans. They have also been at issue in various litigations and arbitrations (for instance, in paragraph 386 of the decision of quantum of the tribunal in CC/Devas v. India, which discusses potential hybrid uses for S-band spectrum in India in the context of that dispute). The CJEU’s decision confirms that an imperative of EU law in this space is to permit technological progress, albeit without affecting competition and in line with EU regulations.
For more information on this client alert, please contact Gunjan Sharma (gunjan.sharma@volterrafietta.com) or Robert G. Volterra (robert.volterra@volterrafietta.com).
International Energy Agency calls for a ban on all new oil and gas projects and sets other radical new targets in its “Net Zero by 2050” report
On 18 May 2021, the International Energy Agency (“IEA”) set out far-reaching proposals as part of “Net Zero by 2050”, its roadmap for decarbonising the energy sector.
The most controversial proposal will likely be a complete halt by 2021 to all new oil and gas projects and coal mines beyond those already committed. The IEA also called for an end to the opening of new coal-fired power stations after 2021, no new sales of fossil fuel boilers after 2025, an end to the sale of internal combustion engine cars after 2035 and massive investment in renewable energy.
The report marks a radical change in approach for the IEA, which has historically been aligned with hydrocarbon-consuming economies and has advocated new fossil fuel projects to support the development of emerging economies. The IEA’s new report embraces the aim of achieving carbon neutrality by 2050.
The IEA calls for a virtually immediate halt to all new coal mines, coal mine extensions, new oil and gas field exploration and new unabated coal plants
The IEA’s most far-reaching proposal is to end, after 2021, all new coal mines, coal mine extensions, new oil and gas field exploration and new unabated coal plants beyond those already committed. The IEA has also called for no new sales of fossil fuel boilers after 2025.
Assuming its proposals are adopted, the IEA estimates that by 2050 oil consumption could fall by 75% and coal consumption by 90% compared to current levels. Wind and solar power could provide 70% of the world’s electricity, compared to just 10% today. According to the IEA, solar energy could become the world’s leading source of energy production by 2050.
Speaking on 18 May 2021, Fatih Birol, the IEA’s Executive Director, noted that the road to carbon neutrality in 2050 is “narrow” but still “achievable”. The IEA anticipates that, although the adoption of its recommendations would result in a decline in oil production, the share of oil production controlled by OPEC would increase, from 37% today to 52% in 2050.
The IEA also calls for investment in renewable energy and innovation and an end to new internal combustion engine car sales
The IEA notes that massive investments are needed for existing solutions such as the electrification of the automobile sector and the deployment of renewable energies, as well as to accelerate innovations in technologies that are in the prototype phase today. This is the case, for example, with CO2 capture systems or green hydrogen electrolysers.
The IEA’s “Net Zero by 2050” report proposes 400 milestones, which it sees as crucial if the goal of net zero emissions by 2050 is to be met. Among them, by 2040, 60% of the stock of cars on the road worldwide will have to be electric, compared to 1% today. As to renewable energy, by 2030, the report recommends the deployment of four times more solar and wind capacity than in 2020. By 2030, all new buildings are to be zero-carbon ready and by 2050, 50% of existing buildings are to be retrofitted to zero-carbon ready levels. In the IEA’s ideal scenario, in 2050, renewables would produce 90% of the world’s electricity, as compared to 29% in 2020.
According to the agency’s projections, the current rate of investment in the energy sector of $2 trillion per year will have to be increased to nearly $5 trillion per year by 2030. This would add 0.4 percentage points of growth per year to global GDP, says the IEA in an analysis conducted with the IMF. In addition, it would create tens of millions of jobs.
The IEA’s recommendations, if implemented, may give rise to calls for compensation by existing energy industry participants
The IEA’s report is not formally binding even on its 30 member States, which include Australia, Canada, France, Germany, the United Kingdom and the United States. It a fortiori does not bind non-member States.
If implemented by its member States or others, the IEA’s roadmap would promote investment opportunities in the renewable energy sector.
At the same time, the IEA’s call to suspend new oil and gas projects, new coal mines and coal mine extensions could, if implemented, have severe ramifications for investors already engaged in exploration and pre-approval activities. To the extent that such policy changes renege on existing commitments to investors or on their legitimate expectations, they might constitute violations by States of their public international law obligations under international investment treaties. Foreign investors that consider that such violations have occurred will in certain circumstances be entitled to seek compensation from the responsible State through international investment arbitration.
Given the fast-moving and highly politicised nature of energy regulation, investors in both traditional and renewable energies should ensure that they are familiar with the public international law protections available to them. Government policymakers should equally pay close attention to the past, present and future commitments that they make, expressly or by implication, to energy investors.
For further information about these developments, please contact Graham Coop (Graham.Coop@volterrafietta.com) or Gunjan Sharma (Gunjan.Sharma@volterrafietta.com).
Netherlands launches litigation in German Court to preclude investor-State arbitrations
On 17 May 2021, the Dutch Government announced that it has initiated proceedings before a German Court to determine whether the ICSID claims bought by RWE and Uniper are inadmissible in light of the judgment in Slovak Republic v Achmea BV (“Achmea”).
The outcome of the court proceedings initiated by the Dutch Government could be of significance to other investors in the energy sector who are or will be facing similar threats to their investments in light of States’ renewed and vigorous pro-environmental policies.
Background
In December 2019, the Netherlands adopted legislation seeking to phase out the use of coal in the production of electricity by 2030. This was in line with the Dutch Government’s commitment to reduce greenhouse gas emissions by 49%, compared to 1990 levels, by 2030. The relevance of such measures was further emphasised in a decision of the Dutch Supreme Court in 2019 which recognised climate change as a human rights issue.
RWE and Uniper, two German energy companies operating coal-fired power plants in the Netherlands, lodged ICSID arbitration claims challenging the coal ban and invoking their rights under the ECT. According to RWE and Uniper, the impugned law failed to provide adequate compensation for their stranded investments in coal-fired production facilities.
In response, the Netherlands initiated anti-arbitration proceedings in a German court against RWE and Uniper (“German proceedings”) claiming that the investor-State dispute settlement (“ISDS”) provisions in the Energy Charter Treaty (“ECT”), with respect to intra-EU investment disputes, are not compatible with EU law.
The Achmea decision
On 6 March 2018, the Court of Justice of the European Union (“CJEU”) ruled in the Achmea case that the ISDS provisions in treaties between EU member States are incompatible with EU law and hence precluded by Articles 267 and 344 of the Treaty on the Functioning of the European Union. The applicability of this ruling to the provisions of the ECT has been a bone of contention ever since. In December 2020, Belgium sought legal clarification from the CJEU on whether the ISDS mechanism of the draft modernised ECT is compliant with the Achmea judgment.
Legal basis for the German proceedings
The Dutch Government appears to have taken advantage of a unique provision under German law, which empowers domestic courts to determine whether or not arbitral proceedings are admissible, prior to the constitution of an arbitral tribunal.
The Dutch Government is also relying on a recent judgment by the Higher Regional Court of Frankfurt which held that the Achmea decision is transferable to other intra-EU-BITs (“Croatia case”). In that case, a UNCITRAL arbitration commenced against Croatia under the Croatia-Austria BIT was declared to be inadmissible on the ground that the arbitration clause in the relevant BIT violates EU law.
Procedural and legal issues
The question whether the German Court has jurisdiction to hear the Netherlands’ challenge is yet to be determined. Unlike the UNCITRAL regime, the ICSID system is insulated from the law of the place of arbitration, which has no relevance in determining the substantial and procedural law applicable to ICSID proceedings. Moreover, several investment tribunals have already ruled that the Achmea decision does not deprive them of their jurisdiction under intra-EU BITs.
Although the Dutch Government is expecting a relatively quick ruling from the Court, the German proceedings could be delayed if an appeal is lodged or the question is referred to the CJEU for a preliminary ruling. Meanwhile, the ICSID arbitration could continue in parallel, requiring parties to participate in both proceedings simultaneously. Even if the German Court rules that it is competent to determine this issue, the possibility of parallel proceedings raises challenging questions regarding the impact of the Court’s decision on the ICSID arbitration proceedings and on any award that may be issued.
Potential implications for intra-EU investor-State arbitration
The outcome of the German proceedings, whatever it may be, is of significance to EU Member States and investors alike. Recently, States have come under increased pressure to accelerate their efforts to combat climate change and meet their targets under the Paris Agreement. On 18 May 2021, the International Energy Agency unveiled a roadmap for decarbonising the energy sector. This included a number of proposals, some of which have been described as radical. Similarly, in response to a decision of the Constitutional Court, the German Government has indicated a potential plan to achieve net zero emissions by 2045, five years earlier than initially planned. Such measures by States to implement climate change policies could adversely impact investments in the fossil fuel sector, triggering investor-State arbitration claims such as those by RWE and Uniper.
For further information about these developments and other issues related to climate change litigation, please contact Graham Coop (Graham.Coop@volterrafietta.com) or Florentine Vos (Florentine.Vos@volterrafietta.com).
Recent developments on climate change litigation
Recent decisions issued by German, Dutch, Australian and Belgian courts regarding climate change have placed energy transition in the spotlight. The decisions demonstrate future developments in the area of climate change litigation, and in particular, an increase in the frequency of this type of case.
Decision of the German Federal Constitutional Court
In a decision dated 24 March 2021, the German Federal Constitutional Court held that the provisions of the Federal Climate Change Act of 12 December 2019 (the “Act”), which regulates Germany’s national climate targets and annual emissions up to 2030, do not provide for adequate specifications for emission reductions beyond 2031 and are therefore incompatible with fundamental rights.
Decision of the Hague District Court
Secondly, on 26 May 2021, the Hague District Court ruled, in a claim brought against Royal Dutch Shell PLC (“RDS”), that RDS is obliged to reduce its CO2 emissions by 45%, compared to 2019 levels, by end of 2030. This obligation extends to the whole energy portfolio of the Shell group and its combined volume of emissions.
The claimants argued that RDS has the obligation, arising from the unwritten standard of care under Section 162 of the Dutch Civil Code (the “standard of care”), to participate in the prevention of climate change and reduce emissions attributable to the Shell group. In interpreting the standard of care, the court assessed and considered factors and principles such as RDS’s position in the determination of the Shell group’s general policy, the right to private and family life, as well as international soft law principles such as the United Nations Guiding Principles.
Decision of the Federal Court of Australia
Thirdly, in a decision issued on 27 May 2021, the Federal Court of Australia found that Australia’s Minister for the Environment owes a duty of care to Australian children to protect them from the effects of climate change. As with the German Federal Constitutional Court decision, this decision emphasised the consequences for future generations of failure to take action against climate change.
Decision of the Brussels Court of First Instance
More recently, the Brussels Court of First Instance found that the failure of the federal and regional governments to implement adequate climate change policies constituted a breach of their duties of care and human rights obligations under the European Convention on Human Rights.
Commentary
Campaigners in England have followed a similar course of action to those in Germany, Netherlands, Australia and Belgium, and recently submitted an application to the High Court for a judicial review of the government’s support of the Oil and Gas Authority’s strategy with respect to the North Sea.
The launching of these proceedings demonstrates that the above decisions are not isolated cases. They illustrate the rise in legal activism related to climate change and energy transition. They also put stakeholders on notice that similar actions may be taken in other jurisdictions.
Human rights law and principles of soft law embodied in environmental, social and corporate government guidelines, such as the UN Guiding Principles, have been a common thread in these decisions.
Investors in the energy industry should ensure that they are familiar with this body of law and the role it plays in their activities. Equally, Governments will have to pay heed, in exercising their regulatory powers, to ensure that this is done consistently with both their international climate change commitments and their obligations to investors.
For further information about these developments, please contact Graham Coop (Graham.Coop@volterrafietta.com).
