A dispute between Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. against the Kingdom of Spain relates to certain measures undertaken by Spain in the renewable energy sector and alleged breaches of international obligations under the Energy Charter Treaty (ICSID Case No. ARB/13/31).
An ICSID tribunal composed of Christopher Thomas, Eduardo Zuleta and Francisco Orrego Vicuna found that it had jurisdiction to hear an intra-EU investment dispute (an investor incorporated in the EU member state against another EU member state) and concluded that Spain had failed to accord fair and equitable treatment to foreign investor pursuant to Article 10 of the Energy Charter Treaty. Spain was ordered to pay EUR 112 million as a compensation plus interest.
Antin Infrastructure Services Luxembourg S.à.r.l., incorporated in Luxembourg and Antin Energia Termosolar B.V., incorporated in the Netherlands, acquired two operational concentrated solar power (CSP) plants located in southern Spain in 2011 (acquisition of shareholding participation).
In 2001, Directive 2001/77/EC on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market recognized the need for public support in favour of renewable energy sources, including mechanisms such as green certificates, investment incentives, tax exemptions or reductions, etc. These measures were expected to encourage investment in renewable energy projects and significantly contribute towards achieving EU energy and climate objectives.
In this context, Spain adopted, inter alia, Royal Decree 661 of 2007 (RD661/2007), under which renewable energy generators would benefit from a premium set by the Spanish government above the wholesale market price. The basis of remuneration for generators was a feed-in tariff (FIT) for the lifetime of the installation. However, since new technologies significantly reduced the costs of development, support schemes became very attractive and solar energy frameworks in many European countries including Spain became unsustainable and led to rising of electricity prices. In December 2012, Spain enacted Law 15/2012, introducing certain changes to the Special Regime applicable to CSP producers and eliminated the application of the RD 661/2007 economic regime and imposed a tax on the value of electrical energy produced.
Spain argued that the ECT does not apply to an intra-EU dispute in relation to an investment made in the territory of the EU and since Luxembourg, the Netherlands and Spain had been Member States of the EU before ratifying the ECT, they could not acquire obligations related to the internal energy market amongst themselves. Spain further noted that there was no incompatibility between the ECT and EU law. As regards the awards in PV Investors v. Spain and Charanne v. Spain, Spain claimed that they both had failed to consider the principle of primacy of EU law, which is the essential element of its jurisdictional objection. The tribunal did not elaborate on the implications of the Court of Justice of the EU’s judgment in Achmea v. Slovakia (in March 2018, the CJEU concluded that investor-state dispute mechanism in intra-EU bilateral treaties is incompatible with EU law).
Antin Infrastructure Services and Antin Energia Termosolar asserted that the ECT grants EU investors rights that are different from and additional to those provided by EU law, rather than contradicting them and thus there is no inconsistency between the two regimes (as acknowledged by the tribunals in Electrabel v. Hungary or Eastern Sugar v. Czech Republic). Moreover, even if there were a contradiction, provisions of the ECT on investment arbitration (ISDS) would prevail due to the application of the principle of lex posterior. In other words, protection of foreign investments is not part of the CJEU’s competences and the pursuit of protection of investor rights as is sought in this arbitration is not an option under EU law. Thus, EU law cannot not deprive the tribunal of jurisdiction under the ECT.
The tribunal hold that it did not find anything within the provisions of EU law, as invoked and pleaded by Spain, that overrides the rights granted in Article 26 of the ECT regarding the settlement of disputes. In addition, identical intra-EU objections have been already addressed by arbitral tribunals in three cases Charanne v. Spain Isolux v. Spain, and Eiser v. Spain.
The tribunal also addressed an objection to its jurisdiction in relation to the TVPEE – a 7% levy on the income of all electricity produced and fed into the national grid during a calendar year imposed by the Law 15/2012. Since Article 21 of the ECT specifically excludes taxation measures from the scope of the ECT, the tribunal had to determine whether the TVPEE is a taxation measure and whether it falls under this carve-out. The tribunal found that the TVPEE was a tax of general application in the pursuit of a public purpose, and (thus) accepted Spain’s jurisdictional objection.
As regards claimant’s claims on merits, Antin Infrastructure Services and Antin Energia Termosolar argued that the regulatory regime had changed considerably since the moment when Antin had made its investment. Antin invested in renewable energy sector based on the expectation that its CSP plants would generate regular and sustainable income and would be subject to the FiT regime for their entire operational life since they complied with all applicable registration requirements. Antin claimed that Spain had breached investor’s legitimate expectations and the measures it adopted were disproportionate, unreasonable and not transparent - central features of the fair and equitable treatment obligation under Article 10 of the ECT.
Spain claimed that there was no stabilization clause under Spanish law and Spain had not made any specific commitments favouring Antin. Investors could not have legitimately expected the freezing of the regulatory regime.
The tribunal concluded that the obligation under Article 10 of the ECT means that a regulatory regime specifically created to induce investments in the energy sector cannot be radically altered —i.e., stripped of its key features— as applied to existing investments in ways that affect investors who invested in reliance on those regimes.
It is worth mentioning that the tribunal in Charanne v. Spain concluded that the claimants had not proved that Spain violated its obligation to grant FET due to the modifications to the regulatory regime undertaken in 2010 and rejected all claims. Noting that the Charanne tribunal’s analysis was restricted to the 2010 regulations, the tribunal in Antin v. Spain found Spain in breach of the FET standard under Article 10 of the Energy Charter Treaty. Spain was ordered it to pay EUR 112 million as a compensation plus interest.