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Ad Hoc Arbitration Under the Rules of Arbitration of the United Nations Commission on International Trade Law and Pursuant to the Energy Charter Treaty

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Ad Hoc Arbitration Under the Rules of Arbitration of the United Nations Commission on International Trade Law and Pursuant to the Energy Charter Treaty AD HOC ARBITRATION UNDER THE RULES OF ARBITRATION OF THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW AND PURSUANT TO THE ENERGY CHARTER TREATY NORD STREAM 2 AG (Claimant) VS EUROPEAN UNION (Respondent) EUROPEAN UNION COUNTER-MEMORIAL ON THE MERITS Legal Service European Commission Rue de la Loi/Wetstraat 200 1049 Bruxelles/Brussel Christophe BONDY External Counsel Steptoe & Johnson LLP 3 May 2021 Ad Hoc Arbitration between Nord Stream 2 AG European Union and the European Union Counter-Memorial on the Merits ____________________________________________________________________________________ TABLE OF CONTENTS 1. INTRODUCTION AND SUMMARY ............................................................................................................... 1 1.1. THE CLAIMANT HAS FAILED TO PROVE ITS FACTUAL ALLEGATIONS ................................................................................ 4 1.1.1. The Amending Directive pursues legitimate and achievable public policy objectives ............................. 4 1.1.2. The Amending Directive did not involve a “dramatic and radical regulatory change” ........................... 5 1.1.3. The Amending Directive will not have the alleged on NSP2AG’s investment ..... 6 1.1.4. The NS2 pipeline project was not “deliberately excluded” from the Derogation Regime ....................... 7 1.1.5. The Claimant has failed to prove that the Amending Directive underwent an improper legislative process .................................................................................................................................................... 8 1.1.6. The European Commission acted transparently ...................................................................................... 9 1.2. NSP2AG’S CLAIMS THAT THE EUROPEAN UNION HAS BREACHED THE ECT ARE BASELESS ................................................ 9 1.2.1. There is no breach of the Fair and Equitable Treatment (FET) Standard in Article 10(1) of the ECT ..... 10 The European Union ensured due process and justice ........................................................................... 10 The European Union did not breach legitimate expectations ................................................................. 10 The European Union acted proportionately ........................................................................................... 11 The European Union did not impair the investment by arbitrary or discriminatory measures .............. 12 The European Union acted transparently ............................................................................................... 12 The European Union acted in good faith................................................................................................. 13 1.2.2. The European Union has not breached its obligations under the Constant Protection and Security (CPS) standard in Article 10(1) of the ECT. ............................................................................................ 13 1.2.3. The European Union has not breached its obligations under Article 13 of the ECT. ............................. 13 1.3. THE RELIEF SOUGHT BY NSP2AG IS INAPPROPRIATE .............................................................................................. 14 2. THE CLAIMANT HAS FAILED TO PROVE ITS FACTUAL ALLEGATIONS ......................................................... 15 2.1. THE AMENDING DIRECTIVE PURSUES LEGITIMATE AND ACHIEVABLE POLICY OBJECTIVES ................................................. 15 2.1.1. Introduction ........................................................................................................................................... 15 The objectives of the Gas Directive ......................................................................................................... 16 ENSURING COMPETITION ................................................................................................................................................................. 16 ENSURING SECURITY OF SUPPLY ......................................................................................................................................................... 18 Key provisions of the Gas Directive ......................................................................................................... 19 UNBUNDLING ................................................................................................................................................................................ 19 TARIFF REGULATION ........................................................................................................................................................................ 19 THIRD PARTY ACCESS ....................................................................................................................................................................... 20 The objectives of the Amending Directive .............................................................................................. 20 2.1.2. General benefits of the Amending Directive ......................................................................................... 21 2.1.3. Specific benefits of the Amending Directive .......................................................................................... 24 Third-Party Access (TPA) ......................................................................................................................... 24 Rights related to the connection to the pipeline .................................................................................... 24 Obligations for NSP2AG as a TSO – Article 13 of the Gas Directive ......................................................... 26 Transparency rules – Article 16 of the Gas Directive .............................................................................. 26 Rules in the Gas Regulation on transparency, congestion management and capacity allocation procedures ......................................................................................................................................................... 27 Tariff regulation....................................................................................................................................... 28 Unbundling rules ..................................................................................................................................... 28 2.2. THE CLAIMANT HAS FAILED TO PROVE THAT THE AMENDING DIRECTIVE INVOLVES A “DRAMATIC AND RADICAL REGULATORY CHANGE” ...................................................................................................................................................... 31 2.2.1. Introduction ........................................................................................................................................... 31 2.2.2. The Claimant could have understood that the Gas Directive applied to gas pipelines importing gas into the European Union from third countries.............................................................................................. 31 2.2.3. There were indications that the Gas Directive would apply to the NS2 pipeline ................................... 34 2.2.4. EU competition law prohibits abuses of a dominant position with the result that remedies such as unbundling, tariff regulation and TPA could be imposed prior to the adoption of the Amending Directive ................................................................................................................................................ 37 2.3. THE CLAIMANT HAS FAILED TO PROVE THAT THE AMENDING DIRECTIVE WILL HAVE THE ALLEGED ON NSP2AG’S INVESTMENT .................................................................................................................................. 40 -ii- Ad Hoc Arbitration between Nord Stream 2 AG European Union and the European Union Counter-Memorial on the Merits ____________________________________________________________________________________ 2.3.1. Introduction ........................................................................................................................................... 40 2.3.2. Preliminary considerations: identification of the relevant alleged “impacts” for the purposes of this dispute ................................................................................................................................................... 42 The effects of the Amending Directive on Gazprom’s or on the Financial Investors’ investments in NSP2AG are outside the scope of this arbitration ............................................................................................. 42 The Claimant seeks to rely on the effects of extraneous factors that are not attributable to the European Union ................................................................................................................................................. 43 The delays in the construction of the NS2 pipeline, and the ensuing additional costs for NSP2AG, cannot be attributed to the Amending Directive ............................................................................................... 44 2.3.3. The practical “impact” of the Amending Directive, as transposed and implemented by Germany, on NSP2AG’s investment remains highly uncertain at this stage............................................................... 45 Article 49a derogations ..........................................................................................................................
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