Commission opens in-depth investigation into arbitration award ordering Bulgaria to pay compensation to ACF

This article is brought to you in association with the European Commission.

The European Commission has opened an in-depth investigation to assess whether an arbitration award, in which Bulgaria is ordered to pay compensation to ACF Renewable Energy Limited for changes to a renewable electricity support measure, is in line with EU State aid rules.

The Commission’s investigation

In 2011, Bulgaria established a scheme to support the production of electricity from renewable sources. In 2013, 2014 and 2015, Bulgaria changed the scheme. In March 2016, the scheme in place was notified to the Commission, which approved it under EU State aid rules on 4 August 2016.

ACF is a company established in Malta. In 2012, ACF invested in Bulgaria’s renewable energy sector by purchasing a solar photovoltaic power plant, that benefitted from the renewable energy support scheme that Bulgaria implemented in 2011. Following the modifications introduced by Bulgaria in 2013 and 2014, ACF continued to receive support under the modified scheme and initiated arbitration proceedings. The company claimed compensation for the support it would have received on the basis of the scheme, had it not been modified.

An arbitral award of 5 January 2024 found that Bulgaria infringed the Energy Charter Treaty (‘ECT’) and ordered Bulgaria to compensate ACF for losses allegedly suffered due to the modifications of the Bulgarian support scheme. The compensation amounts to €61.04 million, plus interest. Bulgaria notified this award to the Commission under State aid rules, but until today has not paid any compensation.

At this stage, the Commission’s preliminary view is that the arbitration award and its implementation would constitute State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the EU (‘TFEU’), which is incompatible with the internal market. The Commission will investigate further the measure and its compatibility with the internal market, and in particular a possible breach of the EU Treaties by the aid measure.

State aid is prohibited unless it is approved by the Commission as compatible with the functioning of the internal market. A measure that breaches other provisions of EU law cannot be declared compatible under State aid rules.

The dispute leading to the arbitration award was an intra-EU dispute. Therefore, the Commission will assess further whether the award and its implementation could be in breach of Article 19(1) of the Treaty on European Union, Articles 267 and 344 TFEU, regarding the ultimate jurisdiction of the Court of Justice of the European Union (‘CJEU’), and the general principles of autonomy of the EU legal order.

The opening of an in-depth investigation gives Bulgaria and interested third parties the opportunity to submit comments. It does not prejudice in any way the outcome of the investigation.

Background

Case-law from the CJEU sets out that Intra-EU investor-State arbitration based on Bilateral Investment Treaties are contrary to EU law (2018 Achmea judgment C-284/16).The Commission’s July 2018 Communication on the protection of investments explains that this also applies to the investor-State arbitration clause in the ECT. In 2019, 22 EU Member States signed a declaration on the consequences of the Achmea judgment and its application to the ECT.

In 2021, the CJEU in the Komstroy judgment ruled that the ECT is an integral part of EU law and that the ECT’s arbitration clause cannot apply intra-EU. In 2024, EU Member States signed a declaration on the legal consequences of the judgment of the Court of Justice in Komstroy and common understanding on the non-applicability of the ECT as a basis for intra-EU arbitration proceedings. This was followed by the EU’s withdrawal from the ECT, effective as of 27 June 2025.

Reliable and transparent provisions for supporting production of electricity from renewable energies are important to ensure investor confidence and enable investments necessary for the Clean Industrial Deal and to reach the Union’s decarbonisation objectives. The fact that EU law precludes intra-EU investment arbitration under bilateral investment treaties or the ECT does not mean that investors do not enjoy investment protection in the EU. Actions by individual investors seeking the annulment of national measures or claiming financial compensation are in the competence of national courts. Investors from the EU enjoy the protection granted by EU law.

If an investor considers its investment is wrongly jeopardised by a Commission State aid decision, it may challenge the decision directly before the General Court. Finally, the Renewable Energy Directive (2018/2001) provides for an obligation of Member States to ensure that the support granted to renewable energy projects is not revised in a way that negatively affects the rights conferred to companies and undermines the economic viability of projects that already benefit from support. No such provision existed in 2013.

For More Information

The non-confidential version of the decision will be made available under the case number SA.114457 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.