DENMARK Trends and Developments Contributed by: Johannes Grove Nielsen, Jakob Lentz, Anne Buhl Bjelke and Daniel Myhre Engell, Bech-Bruun Law Firm P/S
and Denmark’s “solidarity contribution” imposed on certain energy companies, aimed at targeting windfall profits. The facts of the case The ICSID tribunal has recorded that the dispute “aris- es out of the ‘solidarity contribution’” under the EU Regulation and the Danish Act. The case challenges Denmark’s implementation of the EU-wide “solidar- ity contribution” on certain fossil fuel sector profits adopted by Council Regulation (EU) 2022/1854 and implemented in Denmark by Act No 502 of 16 May 2023. Parallel cases by the same claimants were filed against Germany (ICSID case no ARB/23/49) and the EU (ICSID case no ARB(AF)/23/1). Key legal issues in dispute According to the publicly available Procedural Orders from the tribunal, the claimants allege breaches of Articles 10 (1), 10 (7), 10 (3) and 13 of the ECT, including “fair and equitable treatment” and expro- priation-related claims. Broadly, Klesch alleges that EU-level measures (and national implementing acts) that impose or enable a “solidarity contribution” on extraordinary energy sector profits unlawfully expro- priate or otherwise breach investor protections under the ECT, while seeking relief and damages. According to a public Decision on Bifurcation, the respondents raised preliminary “intra-EU” objections (relying on previous case law from the Court of Justice of the European Union) to contend that Article 26 of the ECT is inapplicable intra-EU, and also advanced defences linked to “essential security interests”/ necessity in light of the energy crisis. The tribunal addressed these in a public consolidated Decision on Bifurcation governing the Denmark, Ger- many and EU cases, deciding against the request for bifurcation. Another key preliminary question in the case accord- ing to these sources is whether Article 24 (3)(a)(ii) of the ECT (exemption due to essential security interests taken in time of war, armed conflict or other emer-
gency in international relations) can be invoked by the respondents. In the sister case against Germany, an ICSID tribunal granted provisional measures in July 2024, ordering Germany not to enforce certain collection actions while the arbitration was still ongoing. This was a noteworthy use of provisional relief to protect the sta- tus quo and the arbitration’s efficacy, and underpins the protection conferred upon investors under ICSID arbitrations. Denmark voluntarily decided to suspend the collection of the solidarity contribution from the investor, pending the outcome of the legal challenge. The case is a live indicator of the capabilities of inves- tor–state arbitration – and a potential landmark exam- ple of investor–state arbitration in Denmark, as a final award rendered from the tribunal would constitute the first ever example of investor–state arbitration coming to an end in Denmark. The case will also give valuable input to the protection offered under the ECT vis-à-vis emergency situations, for instance, and other specific legal questions arising under the ECT. The current framework: Danish and international anchors Treaty protection today Denmark still remains fully capable of being a seat for investor–state cases despite the move to eliminate intra-EU BITs and despite a historically low frequency of such cases. After the end of intra-EU BIT arbitration, Denmark’s extra-EU BITs remain the principal treaty vehicle for investor–state protection and claims. For new treaties covering Denmark, the EU now sets the template; several agreements use the Invest- ment Court System model (with a standing tribunal and appellate review) rather than ad hoc investor– state dispute settlement, and some recent free trade agreements omit investor–state arbitration altogether (eg, the EU–New Zealand free trade agreement). As an example, in its opinion 1/17 of 30 April 2019, the European Court of Justice confirmed that the Invest- ment Court System model in the recent Comprehen-
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