In today’s interconnected world, governments and companies face increasingly complex legal and regulatory terrain, which often generates high-stakes international disputes. They depend on a professional and experienced team to help them navigate complex rules and contracts to harness business opportunities and mitigate risk.

Sidley Austin achieved a significant victorythe complete dismissal of US$1.3 billion in investment treaty claimson behalf of Colombia in an UNCITRAL arbitration brought by the Spanish energy group Gas Natural (now Naturgy).

This month, Jus Mundi is pleased to bring light to Sidley Austin’s Global Arbitration team along with an interview with the lead partner on the case Jennifer Haworth McCandless and senior associate María Carolina Durán.

Recent victory case analysis: Naturgy Energy Group et al. (formerly Gas Natural et al.) v. Colombia

In an award dated March 12, 2021, an UNCITRAL tribunal dismissed a US$1.3 billion claim brought by Naturgy against Colombia over the government’s decision to intervene an electricity distribution company, Electricaribe, which subsequently led to the company’s liquidation.

The main issue in this arbitration refers to the scope of Colombia’s obligations under the Colombia – Spain BIT, specifically concerning the regulation of the electricity sector within its borders.


  • Electricaribe was the electricity distribution company for the Caribbean region in Colombia, serving approximately ten million people.
  • In 2009, Gas Natural acquired Electricaribe from Unión Fenosa, another Spanish energy company, and became the majority shareholder.
  • Starting in 2014, Electricaribe began experiencing serious financial difficulties. At the end of the summer of 2016, Electricaribe’s financial situation was so dire that it risked defaulting on its payment obligations and failing to meet its obligation under Colombian law to provide quality, reliable electricity to its customers in the Caribbean.
  • In October and November 2016, the Superintendency of Residential Public Services (Superintendencia de Servicios Públicos Domicialiarios, “SSPD”) learned from third parties and Electricaribe itself about the severity of the company’s financial situation. For example, Electricaribe’s auditors said there was a risk of “financial unviability”; the wholesale energy market administrator (XM) warned of a potential “systemic risk”; and Electricaribe warned that in the near future, it would not be able to obtain bank guarantees or have sufficient cash flow to comply with its commercial obligations.
  • On November 14, 2016, consistent with Colombian law, the SSPD ordered that the assets and businesses of Electricaribe be administratively intervened.
  • On March 14, 2017, after reviewing in depth the financial health of Electricaribe and discovering that it was in an even worse financial condition than initially thought, the SSPD, again consistent with Colombian law, decided to liquidate the company.
  • On March 21, 2017, the Claimants commenced an arbitration pursuant to the Colombia – Spain BIT under the 1976 UNCITRAL Arbitration Rules.

Tribunal constitution

Tribunal’s decision

The tribunal upheld jurisdiction over the dispute and concluded on the merits that the Republic of Colombia did not breach any of its obligations under the Colombia – Spain BIT.

Legal rationale

  • Before analyzing Claimants’ legal claims, the tribunal reviewed the circumstances in which Gas Natural invested in Electricaribe and observed that:
    • The general regulatory framework applicable to residential public service companies was already established at the time that Gas Natural invested in Electricaribe.
    • Gas Natural appears to have performed limited due diligence, if any, to understand Electricaribe’s operations prior to its investment.
    • The tribunal concluded these elements constituted “important context relevant to assessing the specific claims based on the [Fair and Equitable Treatment (FET)] standard.”
  • The tribunal then turned to government commitments allegedly contained in what Claimants called the 2014 Action Plan and the Barranquilla Summit to determine if there had been a breach of Colombia’s FET obligations. The so-called Action Plan was in the form of an exchange of letters in December 2014 between Electricaribe and Colombia in which Colombia allegedly committed to adopting measures to ensure Electricaribe’s viability. The tribunal concluded that:
    • Colombia did not undertake any binding commitments to amend Colombia’s regulatory framework, nor did Colombia acknowledge that it had an obligation to amend the regulatory framework in order to improve Electricaribe’s financial situation.
    • Colombia’s conduct did not violate any legitimate expectations on which the Claimants allegedly relied to make their investment because the contested measures emerged after Claimants’ initial investment in Electricaribe.
    • Applying the standard for arbitrariness set in the ELSI case, the tribunal found that Colombia did not act in a manner incompatible with the rule of law.
  • With regard to Claimants’ FET claim on Colombia’s alleged failure to update the distribution tariff formula:
    • The tribunal held that, while it may be true as a general matter that an investor is entitled to expect regulatory conditions that allow a reasonable return on its investment in keeping with certain economic principles, such a proposition must be considered in the circumstances and context of each case.
    • The tribunal stressed that the regulatory framework in Colombia did not change during the time in which Claimants invested in Colombia; thus, the tribunal found that Colombia had not violated Claimants’ legitimate expectations.
    • The tribunal considered that violations of domestic law do not necessarily or automatically constitute the basis for a breach of international obligations. In any case, the tribunal found that, contrary to Claimants’ allegations, Colombian law did not obligate Colombia’s regulatory body overseeing the electricity sector (the CREG) to update tariffs every five years; thus, Colombia’s conduct was consistent with its obligations under the existing regulatory framework in Colombia.
    • The tribunal concluded that the conduct of a State that simply follows a regulatory process ordered by law is not discriminatory.
  • The tribunal went on to analyze Claimants’ FET claims related to the non-payment of debts of public entities, “subnormal (informal) neighborhoods,” and subsidies, and concluded that:
    • The debts of the public entities in question could not be attributed to the national government.
    • The non-payment of debts was not contrary to Claimants’ legitimate expectations and did not constitute arbitrary conduct in violation of Colombia’s obligations under the BIT.
  • As for Claimants’ FET claim related to Colombia’s decision to intervene Electricaribe, alleging it was unreasonable, disproportionate, and conducted for “political expediency”:
    • The tribunal found that Claimants failed to establish that “political expediency” was the underlying motive that prompted Colombia’s decision to intervene Electricaribe.
    • The tribunal held that the contested measure was not disproportionate in the sense that it was reasonably related to the objective it pursued, it was necessary (e.g., it was the least restrictive measure available to achieve the State’s aim), and it was not excessive in relation to the interest involved.
    • The tribunal stressed that it was not its role to second-guess the substantive regulatory decisions of State bodies.
  • The tribunal then analyzed Naturgy’s claims on unlawful expropriation. It concluded that the SSPD’s decision to intervene Electricaribe constituted a valid and good faith exercise of its regulatory power.
  • Regarding Naturgy’s claims on Full Protection and Security (FPS), even though the tribunal did not decide whether the FPS standard extends to “legal security,” as Claimants alleged, it found that the evidence submitted by Claimants did not support a claim that Colombia had breached its treaty obligations. It also stressed that the FPS provision is not an absolute liability standard, where a State would be automatically liable if there is a physical injury, but rather is a standard of due diligence.
  • Finally, Naturgy’s claim made under the Most Favored Nation (MFN) clause was dismissed for the same reasons as non-discrimination under the FET standard.

Interview with Jennifer Haworth McCandless (Partner) and María Carolina Durán (Senior Associate):

  1. Congratulations on winning the Gas Natural v. Colombia case! What does this significant victory mean for the firm?

This latest victory demonstrates Sidley Austin’s effectiveness and tradition of excellence in handling complex investment treaty arbitrations such as the Naturgy case.  We are proud of this result, which adds to Sidley’s historical and ongoing winning streak when defending our sovereign clients.

  1. What do you think of the approach that the tribunal took on the weight to give to pre-investment due diligence in determining the merits of the case?

For purposes of determining whether Colombia had violated its international obligations (including Claimants’ alleged legitimate expectations with respect to the regulatory framework), the tribunal needed to assess what Claimants knew or should have known at the time of their investment in Electricaribe.  As the tribunal found, Naturgy had performed limited due diligence, if any, and Colombia’s regulatory framework had not changed fundamentally during Naturgy’s tenure in Electricaribe. Thus, the tribunal struck a good balance in finding that, while not dispositive, Claimants’ pre-investment due diligence provided important context to analyze and decide the merits of the case.

  1. What makes Sidley the prime choice for its clients in international arbitration?

Sidley has one of the most prominent and respected international arbitration practices in the world, with a long and successful roster of cases. Sidley has handled successfully some of the biggest and most complex cases in investment treaty arbitration, in particular.  In addition, Sidley regularly represents both types of parties in investment arbitrationgovernments and state-owned companies as well as multinational companieswhich gives us a balanced approach when advocating on behalf of a client.  We have also represented parties in all of the main forums for such cases. The experience gained by representing both investors and governments gives Sidley’s treaty arbitration practice valuable insights and often a strategic advantage when formulating a litigation strategy.

  1. What challenges did you face in the course of the Naturgy case?

The Naturgy case was a highly politicized and complex case for Colombia.  It involved multiple government entities, high-ranking government officials, and a company that served and impacted the livelihood of over 10 million people.  In addition, this case is the largest claim that has been brought against Colombia in an investor-State arbitration.

We worked closely together with the Agencia Nacional de Defensa Jurídica, to whom we are very grateful, as they helped us to gather all the facts, coordinate among various government agencies, and obtain the thousands of documents we needed to build Colombia’s defense. The result we obtained was the result of intense teamwork and sound legal strategy among the Agencia, Sidley’s arbitration team, and our co-counsel Stanimir A. Alexandrov.

  1. Jennifer, you have worked almost 20 years now at Sidley; what is your favorite memory at the firm?

Of course, I have had many great experiences while working at Sidley, but I think my favorite memories are of the arbitration team in those moments after we have finished a hearing on behalf of a client, and we are confident that we have done our very best.  We assess the success of a hearing based on whether we believe the client’s case is better positioned after the hearing than before it started.  When the answer is a clear “yes”, and we know we have advanced the client’s interest—that is a great feeling.

  1. María, can you share tips/lessons learned based on your working experience that you think might be helpful for young practitioners?

Based on my experience, I have five main tips for young practitioners: (1) work hard; (2) never stop learning and stay updated on the recent developments in the field; (3) develop your writing skills; (4) learn how to adapt quickly to changing environments; and (5) most of all, value teamwork—you will not achieve success without the help of others.

Presentation of the firm

Sidley’s global arbitration team boasts a diverse group of advocates with in-depth knowledge of international law, practice, and culture in various jurisdictions. A key aspect of Sidley’s thriving multi-office International Arbitration practice involves the representation of clients in high-stakes investment treaty disputes before a wide array of international tribunals. Sidley also helps clients leverage international law to deal successfully with the legal and diplomatic challenges of cross-border disputes.

In the area of investment treaty arbitration, Sidley has one of the largest dockets of high-profile investor-State cases. Sidley represents multinational companies as claimants and sovereign governments as respondents in disputes arising under international trade agreements and investment treaties. Our International Arbitration practice regularly provides representation and advice to clients in investor-State proceedings pending before all major international arbitral institutions, including the International Centre for Settlement of Investment Disputes (ICSID) and the Permanent Court of Arbitration (PCA) at The Hague. In addition, Sidley has extensive experience handling ad hoc investor-State arbitration proceedings (i.e., non-administered cases) under the UNCITRAL Rules.

The firm’s global arbitration practice is co-led by Marinn Carlson, Tai-Heng Cheng, David Roney, Andrew Shoyer, and Friven Yeoh.

Key clients

For sovereign States: Costa Rica, Colombia, Peru, and Turkey.

For private clients: Airbus, Atomstroyexport, Philip Morris, Veolia, and TransCanada.

Track-record highlights

  • The firm helped Peru defeat a US$123 million ICSID claim brought by a Spanish company, Lidercón. The State was also granted US$4 million in costs.
  • The firm’s team in Geneva and DC helped Atomstroyexport win €600 million in an ICC claim against Bulgaria’s national electricity company NEK.
  • The firm obtained a US$65 million award for Peruvian state agency Perupetro in a dispute with the Camisea consortium over royalties on gas exports from the country’s largest natural gas project.
  • The firm secured a double victory on behalf of Peru in a US$7 billion claim brought by French national Renée Levy over her family’s investments in a liquidated bank and also a US$41 billion claim over her real estate investments.

Sidley Austin’s recent instructions

Sidley continues to represent Peru in five other ICSID cases: two ICSID claims by a US mining company and a subsidiary of a Japanese mining company after their joint venture was handed a demand for US$316 million in royalties and taxes; a dispute over the cancellation of a 40-year concession to build an airport for tourists traveling to Machu Picchu under the Argentina – Peru BIT; a US$100 million claim by a subsidiary of a Spanish construction company over delays to improve part of the Pan-American Highway renovation project; and a US$150 million third party-funded claim under the Peru-Singapore FTA concerning the electricity sector.

On the claimant side, the firm represents a Canadian technology company in a US$2 billion NAFTA claim against Mexico over a digital taximeter installation project in Mexico City; a Singaporean marine services provider pursuing a treaty claim against Mexico; Qatari sports and entertainment broadcaster beIN in a US$1 billion treaty claim against Saudi Arabia under the OIC Investment Agreement and the Austria – Saudi Arabia BIT; French utility company Veolia with a €100 million claim against Lithuania under the France – Lithuania BIT over heating and electricity services.

Table of public international law cases involving Sidley Austin

To see all types of cases (investor-State, inter-State, and commercial arbitration) involving Sidley Austin available on Jus Mundi, please click here.

We selected a few victories and ongoing cases of Sidley Austin in the table below.

CaseTypeInstitutionYear of IntroLatest UpdateRoleStatus
PT Pani Bersama Tambang v. PT J Resources NusantaraCommercialSIAC20202021 AprilRespondentPending
Naturgy Energy Group, S.A. and Naturgy Electricidad Colombia S.L. (formerly Gas Natural SDG, S.A. and Gas Natural Fenosa Electricidad Colombia, S.L.) v. Republic of ColombiaInvestor-StateICSID2017 March2021 MarchStateDecided in favor of the State
SMM Cerro Verde Netherlands B.V. v. Republic of PeruInvestor-StateICSID2020 May2021 MarchStatePending
Espiritu Santo Holdings, LP v. United Mexican StatesInvestor-StateICSID2020 May2021 MarchInvestorPending
LSF-KEB Holdings SCA and others v. Republic of KoreaInvestor-StateICSID2012 December2020 OctoberInvestorPending
Freeport-McMoRan Inc. v. Republic of PeruInvestor-StateICSID2020 March2021 MarchStatePending
Lidercón, S.L. v. Republic of PeruInvestor-StateICSID2017 April2020 MarchStateDecided in favor of the State
IC Power Ltd and Kenon Holdings Ltd v. Republic of PeruInvestor-StateICSID2019 June2021 FebruaryStatePending
PACC Offshore Services Holdings Ltd v. United Mexican StatesInvestor-StateICSID2018 May2021 AprilInvestorPending
Sociedad Aeroportuaria Kuntur Wasi S.A. and Corporación América S.A. v. Republic of PeruInvestor-StateICSID2018 July2020 OctoberStatePending
LSF-KEB Holdings SCA v. Hana Financial Group Inc.CommercialICC2016 August2019 MayClaimantConcluded
Autopista del Norte S.A.C. v. Republic of PeruInvestor-StateICSID2018 May2021 AprilStatePending
beIN Corporation v. Kingdom of Saudi ArabiaInvestor-StateAd hoc2018 October2018 OctoberInvestorPending
Veolia Environnement and Vilnius Energija v. Vilnius City Municipal Administration and Vilniaus Silumos TinklaiCommercialSCC2016Not AvailableClaimantPending
Veolia Environnement S.A., Veolia Energie International S.A., UAB Vilniaus Energija and UAB Litesko v. Republic of LithuaniaInvestor-StateICSID2016 February2021 AprilInvestorPending
Aaron C. Berkowitz, Brett E. Berkowitz and Trevor B. Berkowitz v. Republic of Costa RicaInvestor-StateICSID2013 October2017 MayStateDiscontinued in favor of the State
TransCanada Corporation and TransCanada PipeLines Limited v. United States of AmericaInvestor-StateICSID2016 July2017 MarchInvestorSettled
Atomstroyexport JSC v. Natsionalna Elektricheska Kompania EADCommercialICC2011 July2016 JuneClaimantDecided in favor of Claimant
Pluspetrol Perú Corporation S.A. and others v. Perupetro S.A.Investor-StateICSID2012 September2015 MayStateDecided in favor of the State
Renée Rose Levy and Gremcitel S.A. v. Republic of PeruInvestor-StateICSID2011 May2015 JanuaryStateDecided in favor of the State
Renée Rose Levy de Levi v. Republic of PeruInvestor-StateICSID2010 June2014 FebruaryStateDecided in favor of the State

(Note*: This table is not exhaustive.)

 Spotlight – the Naturgy et al. v. Colombia case team

Marinn co-leads the firm’s Global Arbitration, Trade and Advocacy practice. She focuses her practice on international investment disputes, with an emphasis on investor-State arbitration. She represents both cross-border investors and respondent governments in ICSID and UNCITRAL arbitrations under BITs and FTAs. She counsels clients in financial services, energy, infrastructure development sectors on the implications of international trade and investment rules for their global operations.

Jennifer is an International Arbitration Partner managing complex international arbitration cases with a focus on investment treaty arbitration in the Americas. She has advised and represented private companies and sovereign clients in proceedings before ICSID, ICC, and other arbitral institutions, including ad hoc arbitrations. Jennifer has also advised and represented governments and private parties in WTO disputes. In addition, she counsels clients on the implications of investment rules for their global operations.

María Carolina Durán focuses her practice on international dispute settlement, particularly investment treaty arbitration and international commercial arbitration. She has represented governments, as well as cross-border investors, in multi-billion dollar proceedings before ICSID and under the UNCITRAL Rules. She has advised clients on disputes in sectors including infrastructure development projects, energy and mining. In addition, she has advised clients assessing potential investment claims and the implementation of BITs and FTAs.

For more information on Sidley Austin’s international arbitration practice, click here.

Congratulations to the team again, and Jus Mundi wishes them good luck for the future!