Latvia has successfully prevailed in an international arbitration proceeding concerning the renewable energy sector. The Republic of Latvia was represented in the arbitration by the State Chancellery and the international law firm Squire Patton Boggs.
On May 28, 2025, the international arbitral tribunal dismissed the claim brought against the Republic of Latvia by R.S.E. Holdings AG (RSE), a company registered in Switzerland*, deeming it inadmissible on substantive grounds.
In late 2021, RSE initiated arbitration proceedings against Latvia, alleging that amendments made to electricity support regulations between 2012 and 2016 violated international obligations. In 2023, Latvia contended that the arbitral tribunal lacked jurisdiction to hear the case, arguing that RSE did not meet the criteria stipulated by the Energy Charter Treaty (ECT).
The arbitral tribunal concurred with Latvia's position on the essential matters regarding the application of the ECT. It determined that RSE was not entitled to protection under the ECT because it is controlled by a Russian citizen, and Russia is not a party to the ECT. Furthermore, it was found that RSE does not conduct substantial economic activity in Switzerland.
This ruling marks a significant turning point in the practice of applying the ECT, as the arbitral tribunal declined to follow previous state-unfavorable practice established in 2005 in the case of Plama v. Bulgaria**.
Based on arguments presented by Latvia and a thorough analysis of the ECT's drafting history, the tribunal rejected the previous interpretation of the ECT as inconsistent with the agreement's text, purpose, and essence. The tribunal concluded that Latvia's refusal to grant ECT benefits was justified and took effect retroactively from the moment of the investment. Dr. Richard Happ, the arbitrator appointed by RSE, has appended his separate opinion.
The tribunal also ruled that the claimant must cover all litigation-related costs incurred by the Republic of Latvia, totaling EUR 678,545.20, and pay interest in accordance with the 6-month EURIBOR rate.
This arbitration award not only prevents significant losses to the state budget but will also serve as an important precedent for the future, deterring other companies in similar situations from bringing unsubstantiated claims against Latvia.
RSE's litigation was financed by third parties, including two industry-related Latvian nationals and a commercial company registered in Latvia.
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Permanent Court of Arbitration Case No. 2022-41
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** ICSID Case No. ARB/03/24