Dutch and Luxembourgish energy companies invested billions in Spanish solar projects relying on government subsidies. When Spain cut those subsidies following the 2008 financial crisis, the companies initiated arbitration under the Energy Charter Treaty and the ICSID Convention, securing multi-million euro awards. Spain refused to pay, arguing that under recent rulings by the Court of Justice of the European Union, intra-EU arbitration agreements are invalid. Spain then filed lawsuits in Dutch and Luxembourgish courts seeking anti-suit injunctions to stop the companies from enforcing the awards in the United States. The companies responded by asking U.S. district courts to issue anti-anti-suit injunctions to block Spain's foreign lawsuits. The district courts issued conflicting rulings: one found jurisdiction and granted the injunctions, while another found Spain immune and dismissed the case. These appeals consolidated the conflicting decisions.
The court addressed two primary issues. First, regarding jurisdiction, the court held that the Foreign Sovereign Immunities Act's arbitration exception applies. The court reasoned that the Energy Charter Treaty constitutes an agreement 'for the benefit' of private investors, satisfying the statutory requirement. The court clarified that Spain's argument that EU law voided the arbitration agreement was a defense on the merits regarding the scope of the treaty, not a jurisdictional question. Under binding precedent, disputes over whether a treaty covers a specific dispute do not strip the court of jurisdiction; they are defenses to be raised during the enforcement phase. Second, regarding the anti-suit injunctions, the court found the district court abused its discretion. While the district court sought to protect its jurisdiction, the appellate court emphasized that issuing an injunction against a foreign sovereign is an extraordinary remedy that strains international comity. The court noted that the United States has no direct interest in the underlying EU law dispute and that the injunctions could provoke reciprocal actions against U.S. interests. The court concluded that the domestic interest in encouraging arbitration was insufficient to justify the diplomatic friction caused by enjoining a sovereign nation from accessing its own courts.
The companies can now proceed to have their arbitration awards confirmed into U.S. judgments, as the jurisdictional barrier has been removed. However, they no longer have the protective injunction preventing Spain from seeking relief in European courts. Spain remains free to litigate the validity of the awards in the Netherlands and Luxembourg, which could result in orders preventing the companies from collecting the money or requiring them to return funds if they do. The unresolved question is whether the companies can successfully enforce the U.S. judgment against Spanish assets in the face of potential conflicting European court orders.