Latvia wins international arbitration case on renewable energy

RIGA - Latvia has won an international arbitration case in the field of renewable energy, LETA was told at the State Chancellery.

On May 28 this year, the Permanent Court of Arbitration rejected the claim of the Swiss company R.S.E. Holdings AG (RSE) against the Latvian state, declaring it inadmissible on the merits.

In late 2021, RSE filed a lawsuit against Latvia, claiming that the amendments made to the electricity support regulation between 2012 and 2016 violated international obligations. In 2023, Latvia argued that the court of arbitration did not have jurisdiction to hear the case because RSE did not meet the criteria set out in the Energy Charter Treaty (ECT).

The court of arbitration agreed with Latvia's position on the key issues of the application of the ECT and found that RSE was not entitled to protection under the ECT because it was controlled by a Russian national, while Russia was not a party to the ECT. It also found that RSE does not carry out any substantial economic activity in Switzerland.

The State Chancellery stresses that this judgment marks a significant development in the practice of ECT application, as the court of arbitration refused to follow the previous practice - unfavorable to states - which was already established in 2005 in Plama v Bulgaria.

Based on the arguments presented by Latvia and a thorough analysis of the history of the development of the ECT, the tribunal rejected the previous interpretation of the ECT as inconsistent with the text, purpose and spirit of the Treaty. The court concluded that Latvia's refusal to grant the ECT benefits was justified and retroactive to the date of the investment. Richard Happ, the arbitrator appointed by the RSE, has added his dissenting opinion.

The court also ruled that the claimant should pay all costs incurred by the Latvian State in connection with the proceedings, totaling EUR 678,545, plus interest at the six-month Euribor rate.

The State Chancellery points out that this judgement not only prevents significant losses to Latvia's budget, but will also serve as an important precedent in the future, deterring other companies in similar situations from bringing unjustified claims against Latvia.

According to the State Chancellery, the RSE litigation was financed by third parties, including two Latvian nationals linked to the sector and a Latvian-registered commercial company.