In the cases of NextEra Energy Global Holdings B.V. v. Kingdom of Spain, 9REN Holding S.A.R.L. v. Kingdom of Spain, and Blasket Renewable Investments LLC v. Kingdom of Spain,[1]the U.S. Court of Appeals for the District of Columbia Circuit addressed two issue: (1) whether arbitration agreements based on the Energy Charter Treaty (“ECT”) in an intra-EU investment context exist for the purpose of the arbitration exception under the Foreign Sovereign Immunities Act (“FSIA”), and (2) whether the U.S. Courts could grant defensive anti-suit injunctions preventing Spain from seeking from foreign courts anti-suit injunctions against the proceedings in the United States. The Court of Appeals decided that the arbitration agreements exist, irrespective of the EU courts’ rulings, but the issuance of the anti-suit injunctions by the district court was an abuse of discretion.

Background

The cases arose after Spain altered its renewable energy law, leading foreign investors, including NextEra and AES—both Dutch companies, as well as 9REN—a Luxembourgish company, to claim that these changes violated the ECT—a multilateral agreement aimed at promoting energy cooperation among its signatories. In case of disputes between investors and states pertaining to the breach of the ECT, the ECT allows investors to refer the dispute to arbitration.

Each of these investors initiated separate arbitration proceedings against Spain, and, over the jurisdictional objections of the State, secured favorable awards. In the awards, each of the tribunals decided that Spain breached its obligations under the relevant bilateral investment treaties and for that reason awarded damages, ranging from €26.5 million to €290 million.

Following the issuance of the awards, each investor filed its own petition in a United States District Court for the District of Columbia, seeking their enforcement. Spain challenged the jurisdiction of the district court, claiming that it enjoys immunity under the FSIA. Spain argued that as the investors are EU companies, there is no arbitration agreement between them and Spain, as the arbitration provision from the ECT does apply in the intra-EU context. At the same time, Spain filed petitions with the courts in Luxembourg and the Netherlands in which it requested the local courts tissue anti-suit injunctions enjoining the investors from pursuing their petitions in the US courts. 

In response, the investors argued that Spain is not protected by sovereign immunity as both the waiver and arbitration exception apply, despite Spain’s position. Furthermore, the investors requested that the court issues a defensive anti-suit injunction preventing Spain from pursuing the injunctions in Luxembourg and the Netherlands.

The district court heard each of the cases were separately, which lead to differences in the issued decisions:

1. In the case brought by NextEra, the district court held that it had jurisdiction under the arbitration exception, denied Spain’s motion to dismiss for lack of jurisdiction, and granted the defensive anti-suit injunction requested by NextEra.[2]
2. In the case brought by 9REN, the district court held that it had jurisdiction under the arbitration exception, and granted the defensive anti-suit injunction requested by 9REN.[3]
3. In the case brought by AES (which in course of the proceedings was substituted by Blasket), the district court held Spain was immune under the FSIA, and denied as moot the defensive anti-suit injunction requested by Blasket.[4]

Spain appealed from the court’s decisions in the NextEra and 9REN cases, as has Blasket in its own case.

The D.C. Circuit’s opinion

On Appeal, the D.C. Circuit decided to hear arguments in all three appeals on the same day and issue a single decision, as the issues raised were similar. The opinion was issued on August 16, 2024.

On the issue of the FSIA immunity from jurisdiction, the D.C. Circuit decided to focus only on the arbitration exception.

Under this exception, a sovereign is not immune from jurisdiction of the US courts in a case “in which the action is brought” “to confirm an award made pursuant to” “an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States,” if “the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.”[5]

The D.C.  Circuit, reiterated that for the arbitration exception to apply, there following three jurisdictional facts must be established: (1) existence of an arbitration agreement, (2) existence an arbitration award, and (3) existence of a treaty potentially governing the enforcement of the award. In this case, the only disputed requirement was the existence of the arbitration agreement.  And in the D.C. Circuit’s view, arbitration agreements between Spain and all three investors exist.

The D.C. Circuit reasoned that:

1. The FSIA arbitration exception applies to all arbitration agreements, irrespective of their source being a direct agreement between a state and a private investor, or an offer to arbitrate included in an investment treaty.
2. In case of treaty-based arbitration agreements, the court must consider the text of the treaty that includes the offer to arbitrate.
3. The wording of the ECT supports the view that the offers to arbitrate included therein apply in the intra-EU context. The offer to arbitrate refers to disputes between a “Contracting Party” and an “Investor of another Contracting Party.” Spain is a “Contracting Party,” and AES, NextEra and 9REN are “Investors of another Contracting Party”, as they are Dutch and Luxembourgish companies respectively.
4. If the ECT was to exclude the application of the offers to arbitrate in the intra-EU context, it would have included a language to this effect. It does not include such language.
5. The Court of Justice of European Union’s Komstroy opinion, which in Spain’s view confirmed that “the Energy Charter Treaty does not permit intra-EU arbitration,” and as such precluded the conclusion of individual arbitration agreements “with” the investor, is not relevant. This is because the ECT itself is an arbitration agreement, as it us “for the benefit” of the investors, which is sufficient for the FSIA arbitration exception to apply.
6. Based on the binding precedents of Chevron[6] and Stileks,[7] the question as to the scope of an arbitration agreement is not a jurisdictional question under the FSIA, but a question to be considered as part of review under the relevant international treaty governing the enforcement. In this case, the investors have shown that Spain has concluded an agreement to arbitrate in the ECT and this for the purpose of establishing jurisdiction is sufficient.

The D.C. Circuit made two reservations to its reasoning:

1. Not every arbitration provision in an investment treaty represents a completed agreement “for the benefit” of a private party, as some treaties provide that disputes shall be submitted to arbitration upon the agreement of both parties.
2. The opinion addresses only the question of jurisdiction under the FSIA. IT does not address the merits of Spain’s argument that the ECT arbitration provision does not extend to EU nationals.

On the issue of the defensive anti-suit injunction, the D.C. Circuit decided that in granting the requested injunction the district court abused its discretion. The D.C. Circuit reasoned that:

1. The courts have a right to grant defensive anti-suit injunctions, but “only after a case-specific evaluation of the equities makes clear that it is necessary ‘to prevent an irreparable miscarriage of justice.’”[8] Before issuing an anti-suit injunction, a court “should focus on (1) whether an action in the foreign jurisdiction prevents United States jurisdiction or threatens a vital United States policy, and (2) whether the domestic interests outweigh concerns of international comity.”[9]
2. The district court in issuing the anti-suit injunctions overlooked that they are against a foreign sovereign. This is relevant as such a situation entails questions of comity, which is not a case when the litigants are private parties. Here, the defensive anti-suit injunction affects not only the sovereignty of Spain as a litigant but also the independence of Dutch and Luxembourgish courts.
3. The US interest goes against the issuance of the defensive anti-suit injunction as it could result in reciprocal injunctions against the US. And the issuance of anti-suit injunctions in such circumstances is unprecedented.
4. There are no domestic interests important enough to outweigh the international comity concerns. While there is a public interest in encouraging arbitration, no law requires the US to remove all obstacles that may impact the enforcement of arbitral awards that arise outside the US. The US law is not applicable to the merits of the dispute nor is it at play in the foreign courts. US also ha no interest in the interpretation of the ECT, as it is not a party to it.
5. The interests of the ICSID Convention are sufficiently protected by Article 64 of the Convention that would allow Luxembourg or the Netherlands to address a dispute concerning the application of the Convention against Spain, should they choose to do so. The fact that the Netherlands declined to pursue this remedy, but supported the vacating if the district court injunctions cannot be ignored, as it shows that Spain by its actions is not breaching the international comity.

The decision on the injunctions was not unanimous. Circuit Judge Pan issued a dissenting opinion. In this opinion the dissenting judge highlighted that:

1.  The district court did not abuse its discretion when granting the requested injunctions. The district court analyzed the law and facts as required in the circumstances. The district court (1) properly applied the Laker Airways precedent, (2) considered the US’ interests in protecting the jurisdiction of its courts and upholding the ICSID framework, (3) assessed Spain’s actions and prerogatives in a detailed discussion of “comity” concerns, and (4) gave appropriate weight to the irreparable harm that would be done to the Investors if the requested injunctions were denied.
2. On the question of US interest, it is important to note that the US has a statutory obligation to enforce ICSID awards with “the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States.” As US investors regularly benefit from the ICSID Convention’s framework, upholding this obligation is relevant to the US interests.
3. On the issue of comity, Spain’s own actions undermined its position as it was Spain who started the discussions on anti-suit injunctions by trying to avoid the US courts’ jurisdiction through the anti-suit injunction from Luxembourg and the Netherlands.
4. The narrow tailoring of the injunction granted by the district court addressed the issues raised in the majority opinion. The injunction was limited, to prevent Spain only from seeking relief in foreign courts preventing the investors from continuing the US proceedings. It did not stop Spain from obtaining a declaratory relief as to the merits of EU law.  
5. As the district court’s decision to grant the injunctions did not abuse the discretion, the decision should not have been vacated, even if the majority would have chosen differently had it been in the shoes of the district court.

Takeaways

This opinion is important for investors and sovereigns, in particular those entangled in the intra-EU investment disputes.

For investors, it shows that the courts of the D.C Circuit will not be quick to refuse conducting the enforcement proceedings for lack of jurisdiction when an investor seeks to enforce an intra-EU investment award. This decision could be also relevant to enforcement proceedings where there is a dispute over the existence of arbitration agreement, for example for reasons of its improper termination. The opinion however does not mean that the D.C. Circuit will enforce all intra-EU awards. As explicitly stated in the opinion, the question of validity of the arbitration agreement is different from the question of its existence. And the opinion only addresses the latter. At the same time, it may be difficult to obtain a defensive anti-suit injunctions against sovereign states. As such, investors should consider this as a risk when deciding on their strategy for the proceedings.

For sovereigns, this opinion means that they must prepare for longer proceedings in the courts of the D.C. Circuit, should investors initiate such cases. This is because it may be harder for the sovereigns to avoid the dispute by relying on jurisdictional immunity, unless the case entails different circumstances than discussed in the NextEra case. At the same time, this opinion does not have bearing on the ground that states could invoke against enforcement under the relevant treaties.

This decision sets a binding precedent for federal courts in the D.C. Circuit. However, it may also be relied on as a persuasive authority in other courts.

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[1] NextEra Energy Global Holdings B.V. v. Kingdom of Spain, 23-7031 (D.C. Cir. 2024)

[2] NextEra Energy Global Holdings B.V. v. Kingdom of Spain, 656 F. Supp. 3d 201 (D.D.C. 2023).

[3] 9REN Holding S.A.R.L. v. Kingdom of Spain, No. 19-cv-1871, 2023 WL 2016933 (D.D.C. 2023).

[4] Blasket Renewable Investments, LLC v. Kingdom of Spain, 665 F. Supp. 3d 1 (D.D.C. 2023).

[5] 28 U.S.C. § 1605(a)(6)

[6] Chevron Corp. v. Ecuador, 795 F.3d 200, 206 (D.C. Cir. 2015). In this opinion, the D.C. Circuit decided that “[t]he dispute over whether the lawsuits were ‘investments’ for purposes of the treaty is properly considered as part of review under the New York Convention.”

[7] LLC SPC Stileks v. Republic of Moldova, 985 F.3d 871, 877 (D.C. Cir. 2021). In this opinion, the D.C. Circuit, relying on Chevron, noted that arguments pertaining to scope or arbitrability of the dispute “conflate the jurisdictional standard of the FSIA with the standard for review under the New York Convention.” As such, the “arbitrability argument” is “a defense under [New York Convention].”

[8] Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984).

[9] Goss Int’l Corp. v. Man Roland Druckmaschinen Aktiengesellschaft, 491 F.3d 355, 361 & n.4 (8th Cir. 2007).