Czech Republic Won in Breakthrough Solar Arbitration

Dept 10 - Minister’s Office Department
Dept 10 - Minister’s Office Department

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The Ministry of Finance succeeded in a breakthrough dispute with photovoltaic power plants operators. An arbitration court in Geneva decided on Wednesday 11 October that the Czech Republic did not harm foreign investors by introduction of the solar tax and, therefore, it does not have to pay to German investors Gisela, Jürgen and Stefan Wirtgen and JSW Solar the alleged damage and lost profit in the amount of CZK 500 million.

The Czech Republic is still being sued in six similar parallel arbitrations for additional more than CZK 3.5 billion with a threat of further claims exceeding CZK 20 billion. “However, the substance of all these disputes is the same and, despite being decided by different arbitrators, a similar result is hoped for in the other six arbitrations” states Marie Talašová, the Director of International Legal Services Department of the Ministry of Finance.

The arbitration in question was started by German investors in June 2013. The key complaint related to measures adopted by the Czech Republic at the end of 2010 consisting of the introduction of the so-called solar levy applied to electricity produced in solar installations commissioned in 2009 and 2010, the removal of income tax exemption for all RES installations and changes in tax depreciation rules for all solar installations. The Arbitral Tribunal agreed with the Czech Republic and confirmed that the guaranteed return of investments in solar power plants is still maintained and the claims were therefore unfounded.

Claimants argued that these measures constituted a violation of the Agreement between the Czech and Slovak Federal Republic and the Federal Republic of Germany for the promotion and reciprocal protection of investments dated 2 October 1990 and demanded damages in the amount of CZK 500 million.

„Behind this significant success lie years of high-quality work of experts from the Ministry of Finance who repeatedly prove their ability to professionally deal with the notorious inheritance from previous governments and thus save billions for taxpayers” stated Ivan Pilný, the Minister of Finance.

As this is the first award in what is seven parallel arbitrations concerning a substantially similar topic, and the Czech Republic is still waiting for awards in the remaining six arbitrations, the Czech Republic is in this particular situation constrained in what information it can presently release in order to maintain the integrity of the remaining arbitrations.

Claimants were represented by Luther Rechtsanwaltsgesellschaft mbH in the arbitration. The Czech Republic was represented by the internal legal team of the Ministry of Finance in cooperation with Arnold & Porter Kaye Scholer LLP and WEIL, GOTSHAL & MANGES s.r.o. advokátní kancelář. Arbitrators Peter Tomka, Gary Born and Gabrielle Kaufmann-Kohler constituted the Arbitral Tribunal. Pursuant to the arbitral award the Czech Republic did not harm foreign investors by introduction of the solar tax.