Latvia has won international arbitration proceedings in the field of renewable energy, in which Latvia was represented by the State Chancellery and the international law firm “Squire Patton Boggs”.

On 28 May 2025, the international arbitration tribunal dismissed the claim brought against the Latvian state* by R.S.E. Holdings AG (RSE), a company registered in Switzerland, finding it inadmissible for consideration on the merits.

At the end of 2021, RSE lodged a claim against the Latvian state, alleging that the changes made to the electricity support framework between 2012 and 2016 breached international obligations. In 2023, Latvia argued that the arbitration tribunal had no jurisdiction to hear the case, as RSE did not meet the criteria laid down in the Energy Charter Treaty (ECT).

The arbitration tribunal agreed with Latvia's position on the key questions concerning the application of the ECT and found that RSE was not entitled to protection under the ECT, because it is controlled by a Russian citizen, whereas Russia is not a party to the ECT. It was also established that RSE does not carry out substantial business activity in Switzerland.

This ruling marks a significant turning point in the practice of applying the ECT, as the tribunal declined to follow the previous practice — unfavourable to states — that had been established back in 2005 in the case of Plama v Bulgaria**.

Drawing on the arguments put forward by Latvia and on a careful analysis of the drafting history of the ECT, the tribunal rejected the earlier interpretation of the ECT as inconsistent with the text, purpose and substance of the treaty. The tribunal concluded that Latvia's refusal to grant the benefits of the ECT was justified and took effect retroactively — from the moment the investment was made. The arbitrator appointed by RSE, Dr Richard Happ, has appended a separate opinion.

The tribunal also ruled that the claimant must cover all the costs incurred by the Latvian state in connection with the proceedings, totalling EUR 678,545.20, and must also pay interest at the 6-month EURIBOR rate.

This arbitration award not only prevents substantial losses to the state budget, but will also serve as an important precedent for the future, deterring other companies in similar situations from bringing unfounded claims against Latvia.

RSE's litigation was funded by third parties, including two Latvian nationals connected with the industry and a company registered in Latvia.

* Case No. 2022-41 registered with the Permanent Court of Arbitration
** ICSID Case No. ARB/03/24