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Lawyers, other representatives, expert(s), tribunal’s secretary

Decision on Jurisdiction, Liability and Directions on Quantum



2000 Renewable Energy Plan Plan de Fomento de las Energías Renovables en España 2000-2010
2005 Supreme Court judgment Judgment issued by the Spanish Supreme Court on 15 December 2005
2005-2010 Renewable Promotion Plan Plan de Energías Renovables en España 20052010 approved by the Council of Ministers of Spain of 26 August 2005
2006 Supreme Court judgment Judgment issued by the Spanish Supreme Court on 25 October 2006
2010 Regulatory Impact Report Explanatory Report of draft Royal Decree 1614/2010
2016 Refinancing Claimants refinancing of their loans in 2016
9REN v. Spain (Award) Award rendered on 31 May 2019 in the case 9REN Holding S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/15/15
Achmea Judgment of Court of Justice of the European Union in the case Slowakische Republik (Slovak Republic) v. Achmea, BV, Case C 284/16, 6 March 2018
AEE Spanish acronym for Spanish Wind Energy Association ("Asociación Empresarial Eólica")
AES Summit v. Hungary (Award) Award rendered on 23 September 2010 in the case AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary, ICSID Case No. ARB/07/22
Antaris v. Czech Republic (Award) Award rendered on 2 May 2018, in the case Antaris GMBH (Germany) and Dr. Michael Göde (Germany) v. The Czech Republic, PCA Case No. 2014-01
Antin v. Spain (Award) Award rendered on 15 June 2018, in the case Antin Infrastructure Services Luxembourg S.à r.l. and Antin Energia Termosolar B.V. v Kingdom of Spain, ICSID Case No. ARB/13/31
APPA Spanish acronym for Renewable Energies' Producers Association ("Asociación de Productores de Energías Renovables")
ASIF Spanish acronym for the Association of Photovoltaic Producers ("Asociación de la Industria Fotovoltaica")
Babcock Babcock & Brown GmbH
BayWa AH BayWa r.e. Asset Holding GmbH
BayWa RE BayWa r.e. Renewable Energy GmbH
BCG Boston Consulting Group
Bemm Report Due Diligence Report prepared by the Madrid law firm Bemm & Asociados concerning the projects in Spain, dated 1 September 2009
Blusun v. Italy (Award) Award rendered on 27 December 2016, in the case Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case ARB/14/3
C-# Claimants' Exhibit
Charanne v. Spain (Final Award) Final Award rendered on 21 January 2016, in the case Charanne B.V. Construction Investments S.à r.l. v. Kingdom of Spain, SCC Arbitration, Arbitration No. 062/2012
CJEU Court of Justice of the European Union
CL-# Claimants' Legal Authority
Cl. Mem. Claimants' Memorial on the Merits, dated 3 March 2016
Cl. Rej. Claimants' Rejoinder on Jurisdiction, dated 24 May 2017
Cl. Reply Claimants' Reply on the Merits and CounterMemorial on Jurisdiction, dated 6 February 2017
CNE Spanish acronym for National Energy Commission ("Comisión Nacional de Energía")
CNE Report 3/2007 Report 3/2007 issued by the CNE regarding the Proposed Royal Decree [RD 661/2007] Regulating Electricity Generation in the Special Regime and Specific Technological Facilities Equivalent to the Ordinary Regime of 14 February 2007
CNMC Spanish acronym for National Markets and Competition Commission ("Comisión Nacional de los Mercados y la Competencia")
Continental v. Argentina (Award) Award rendered on 5 September 2008 in the case Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9,
CPI Consumer Price Index
CWS-ES Claimants' Witness Statement by Mr. Errol Schulz, February 1, 2016
CWS-MT Claimants' Witness Statement by Mr. Matthias Taft dated 24 February 2016
DCF Discounted Cash Flow
EC European Commission
EC's Decision on State Aid Decision C(2017) 7384 of the European Commission dated 10 November 2017
EC's First Application EC's Application for Leave to Intervene as a Non-Disputing Party dated 16 February 2016
EC's Second Application EC's Second Application for Leave to Intervene as a Non-Disputing Party dated 17 January 2017
ECJ European Court of Justice
Ecolgás Elcogás S.A. v. Administración del Estado and Iberdrola S.A. [2014] ECLI:EU:C:2014:2314, Case No. 275/13
Econ One First Report Econ One Research Inc., Expert Report dated 15 June 2016
Econ One Second Report Econ One Research Inc., Expert Report dated 7 April 2017
ECT Energy Charter Treaty signed in December 1994 and in force since 16 April 1998
Eiser v. Spain (Award) Award rendered on 4 May 2017 in the case Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36
Electrabel v. Hungary (Decision on Jurisdiction) Decision on Jurisdiction, Applicable Law and Liability, issued on 30 November 2012, in the case Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19
Eureko v. Poland (Partial Award) Partial Award rendered on 19 August 2005 in the case Eureko B.V. v. Republic of Poland, UNCITRAL, Partial Award
European Commission's State Aid Decision Decision issued by the European Commission on the Spanish State Aid Framework for Renewable Resources dated 23 November 2017
FiP Feed-in Premium
FiT Feed-in Tariff
FPS Full Protection and Security
Greentech v. Spain (Final Award) Award rendered on 14 November 2018, in the case (1) Foresight Luxembourg Solar 1 S.à r.l., (2) Foresight Luxembourg Solar 2 S.à r.l., (3) Greentech Energy Systems A/S, (4) GWM Renewable Energy I S.P.A., (5) GWM Renewable Energy II S.P.A. v. Kingdom of Spain, SCC Arbitration V (2015/150)
Hulley v. Russia (Final Award) Final Award rendered on 18 July 2014, in the case Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No. AA 226
ICSID or the Centre International Centre for Settlement of Investment Disputes
IDAE Spanish acronym for Institute for Diversification and Saving of Energy ("Instituto para la Diversificación y ahorro de la Energía")
IRR Internal Rate of Return
Isolux v. Spain (Award) Award rendered on 17 July 2016, in the case Isolux Netherlands, BV v. Kingdom of Spain, SCC Case V2013/153
JSW Solar v. Czech Republic (Award) Award rendered on 11 October 2017, in the case Mr. Jürgen Wirtgen, Mr. Stefan Wirtgen, Mrs. Gisela Wirtgen, JSW Solar (zwei) GmbH & Co. KG v. The Czech Republic, PCA Case No. 2014-03
KPMG First Damages Report KPMG's Expert Report on Damages dated 3 March 2016
KPMG First Regulatory Report KPMG's First Expert Witness Report dated 3 March 2016
KPMG Second Damages Report KPMG's Complementary Expert Report on Damages dated 6 February 2017
KPMG Second Regulatory Report KPMG's Second Expert Witness Report dated 6 February 2017
KWh Kilowatts hour
Law 15/2012 Law 15/2012 of 1 January 2013 introducing the TVPEE
Law 54/1997 Law 54/1997 on the Electricity Sector of 27 November 1997
LG&E v. Argentina (Decision on Liability) Decision on Liability issued on 3 October 2006 in the case LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1
March 2007 Supreme Court judgment Judgment issued by the Spanish Supreme Court on 20 March 2007, concerning an amendment to RD 436/2004 with regard to the methodology for updating premiums
Masdar v. Spain (Award) Award rendered on 16 May 2018, in the case Masdar Solar & Wind Cooperatief UA v. Kingdom of Spain, ICSID Case No. ARB/14/1
May 2018 Hearing Hearing held at the Peace Palace in The Hague from 22 to 23 May 2018
Ministry of Energy Ministry of Industry, Energy and Tourism
MO Ministerial Order
Mohammad Al-Bahloul v. The Republic of Tajikistan (Award) Partial Award on Jurisdiction and Liability rendered on 2 September 2009 in the case Mohammad Ammar Al-Bahloul v. The Republic of Tajikistan, SCC Case No V (064/2008)
MW Megawatts
MWh Megawatts hour
Nations Energy v. Panama (Award) Award rendered on 24 November 2010 om the case Nations Energy Inc v. Republic of Panama, ICSID Case No. ARB/06/19
NextEra v. Spain (Award) Award rendered on 31 May 2019 in the case NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11
NextEra v. Spain (Decision on Jurisdiction) Decision on Jurisdiction, Liability and Quantum Principles issued on 12 March 2019 in the case NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11
Noble Energy v. Ecuador (Decision on Jurisdiction) Decision on Jurisdiction issued on 5 March 2008 in the case Noble Energy Inc. and Machala Power Cia. Ltda. v. Republic of Ecuador and Consejo Nacional de Electricidad, ICSID Case No. ARB/05/12
Noble Ventures v. Romania (Award) Award rendered on 12 October 2005 in the case Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11
November 2017 Hearing Hearing on Jurisdiction and the Merits held at the ICC hearing facilities in Paris from 6 to 10 November 2017
October 2007 Supreme Court judgment Judgment issued by the Spanish Supreme Court on 9 October 2007
PDF Project Development PDF Project Development Fund GmbH & Co KG
Plana de Jarreta Plana de Jarreta Wind Farm ("Parque Eólico Plana de Jarreta")
PO2 Procedural Order No. 2 dated 23 May 2016
PO6 Procedural Order No. 6 dated 4 April 2017
PreussenElektra Judgment of the European Court of Justice, PreussenElektra v. Schleswag, Case C-379/98, dated 13 March 2001
Project Companies Parque Eólico La Carracha, S.L. and Parque Eólico Plana de Jarreta, S.L.
R-# Respondent's Exhibit
RAIPRE Spanish acronym for the State Register of Production Facilities under the Special Regime ("Registro administrativo de instalaciones de producción en régimen especial")
RB Roland Berger
RD 1565/2010 Royal Decree 1565/2010 of 23 November 2010
RD 1578/2008 Royal Decree 1578/2008 of 26 September 2008
RD 1614/2010 Royal Decree 1614/2010 of 7 December 2010
RD 2818/1998 Royal Decree 2818/1998 of 23 December 1998
RD 436/2004 Royal Decree 436/2004 of 12 March 2004
RD 661/2007 Royal Decree RD 661/2007 of 25 May 2007
RDL 1/2012 Royal Decree-Law 1/2012 of 27 January 2012
RDL 14/2010 Royal Decree Law 14/2010 of 23 December 2010
RDL 2/2013 Royal Decree Law 2/2013 of 1 February 2013
RDL 6/2009 Royal Decree Law 6/2009 of 30 April 2009
RDL 7/2006 Royal Decree Law of 23 June 2006
RDL 9/2013 Royal Decree Law 9/2013 of 12 July 2013
REIO Regional Economic Integration Organisations
Renerco RENERCO Renewable Energy Concepts AG
Renewable Promotion Plans 2000 and 2005 Plans prepared by the Ministry of Energy and IDAE
Resp. C-Mem. Respondent's Counter-Memorial on the Merits and Memorial on Jurisdiction, dated 15 June 2016
Resp. Rej. Respondent's Rejoinder on the Merits and Reply on Jurisdiction, dated 7 April 2017
RfA Request for Arbitration dated 16 April 2015
RL-# Respondent's Legal Authority
Roland Berger's Report Roland Berger's Report "Análisis de estándares de proyectos de producción de electricidad en régimen especial", dated 31 October 2014
RREEF v. Spain (Decision on Responsibility) Decision on Responsibility and on the Principles of Quantum issued on 30 November 2018, in the case RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom Spain, ICSID Case No. ARB/13/30
RWS-JRA2 Respondent's Second Witness Statement by Mr. Juan Ramón Ayuso, dated 7 April 2017
Shell Shell Overseas Holdings Limited
SPVs Parque Eólico La Carracha, S.L. and Parque Eólico Plana de Jarreta, S.L.
Supplement for Reactive Energy Bonus (or discount) introduced by RD 2818/1998 applied to revenue from the sale of energy for maintaining (or failing to maintain) certain power factors on an hourly basis, which are required for the proper functioning of the electricity system
TMR Spanish acronym for the average or reference electricity tariff ("Tarifa eléctrica Media o de Referencia")
Tr-E Day [#] [Speaker(s)] [page:line] English Transcript of the Hearing
TVPEE A 7 % charge on the value of the electric power production, established by Act 15/2012
UP and C.D Holding v. Hungary (Award) Award rendered on 9 October 2018, in the case UP and C.D Holding v. Hungary, ICSID Case No. ARB/13/35
Vattenfall AB v. Germany (Decision on Achmea) Decision on the Achmea Issue issued on 31 August 2018, in the case Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12
VCLT Vienna Convention on the Law of Treaties
Wind Farms or the Projects Parque Eólico La Carracha and Parque Eólico Plana de Jarreta.
Yukos v. Russia (Final Award) Final Award rendered on 18 July 2014, in the case Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. AA 227



This case has been submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") under the Energy Charter Treaty, which entered into force for the Kingdom of Spain and the Federal Republic of Germany on 16 April 1998 (the "ECT")1 and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the "ICSID Convention").
It concerns a dispute between two German investors and the Kingdom of Spain arising out of measures implemented by the Government of Spain modifying the regulatory and economic regime of renewable energy projects.


The Claimants are BayWa r.e. Renewable Energy GmbH ("BayWa RE")2 and BayWa r.e. Asset Holding GmbH ("BayWa AH"),3 companies incorporated under the laws of Germany (together, the "Claimants"). The Respondent is the Kingdom of Spain ("Spain" or the "Respondent").
The Claimants and the Respondent are collectively referred to as the "Parties." The Parties' representatives and their addresses are listed above on page (i).



On 16 April 2015, the Claimants submitted a Request for Arbitration against Spain (the "RfA").
On 8 May 2015, the Secretary-General of ICSID registered the RfA in accordance with Article 36.3 of the ICSID Convention and so notified the Parties.
On 9 July 2015, the Parties informed the Centre of their agreement as to the number of arbitrators and the method for the Tribunal's constitution. Pursuant to this agreement, the Tribunal shall consist of three arbitrators; one appointed by each Party and the third, the presiding arbitrator, to be appointed by agreement of the Parties. If no such agreement could be reached by 7 September 2015, either Party could request the Secretary-General to appoint the President after consulting both Parties through a ballot procedure. As further agreed, the presiding arbitrator need not necessarily be selected from the Panel of Arbitrators.
On 10 July 2015, the Centre invited the Parties to clarify certain aspects of the proposed ballot procedure. The Claimants and the Respondent provided such clarifications by communications sent on 15 and 16 July, respectively.
In accordance with the Parties' agreement, the Claimants appointed Dr. Horacio A. Grigera Naón, an Argentine national, on 17 July 2017, and the Respondent appointed Ms. Loretta Malintoppi, an Italian national, on 27 July 2017, as arbitrators.
On 8 September 2015, the Claimants informed the Centre that no agreement had been reached. They thus requested the Secretary-General to propose a ballot of possible candidates as per the Parties' agreement. On 17 September 2015, the Secretary-General sent such ballot to the Parties.
On 5 October 2015, the Centre informed the Parties that the ballot procedure had not resulted in any mutually agreeable candidate, and that the Secretary-General would proceed with the appointment of the presiding arbitrator pursuant to the default method agreed by the Parties.
By letter of 28 October 2015, the Secretary-General communicated that she intended to appoint Judge James R. Crawford and invited the Parties to send their comments, if any, by 4 November 2015. On 5 November 2015, after not having received any comments, the Secretary-General informed the Parties that the Centre would proceed with the proposed appointment of Judge Crawford as President of the Tribunal.
On 6 November 2015, the Secretary-General notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "Arbitration Rules"). Mr. Francisco Grob, ICSID Legal Counsel, was designated Secretary of the Tribunal. Mr. Grob's legal and professional background was communicated to the Parties by a letter sent on 26 May 2015.


In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 10 December 2015, by teleconference.
Following the first session, on 29 December 2015, the Tribunal issued Procedural Order No. 1 recording the agreements of the Parties on procedural matters and the decisions of the Tribunal on disputed issues. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules are those in effect from 10 April 2006 and the procedural languages would be English and Spanish. In addition, Procedural Order No. 1 set out a schedule for the written and oral proceedings.


On 16 February 2016, the European Commission ("EC") submitted an Application for Leave to Intervene as a Non-Disputing Party pursuant to Article 37.2 of the ICSID Arbitration Rules ("EC's First Application"). The EC sought to intervene on the question whether the Tribunal had jurisdiction over intra-EU investment disputes under the ECT.

Following observations from both Parties, the Tribunal issued Procedural Order No. 2 ("PO2"), dated 23 May 2016. The Tribunal found the application premature as the Respondent had not raised any jurisdictional objections at that point, nor had it filed its Counter-Memorial. In the Tribunal's view:

Due to the absence so far of submissions by the Respondent on the very matter on which the Commission seeks to intervene, the Tribunal considers that it is not in a position to determine whether the Commission's intervention would assist the Tribunal in the terms of ICSID Arbitration Rule 37(2)(a). In the Tribunal's opinion, this criterion can only be sensibly assessed after the Respondent has had the opportunity to address the Tribunal's jurisdiction (i.e. after the Counter-Memorial, due on June 15, 2016).4

Accordingly, the Tribunal rejected the EC's First Application without prejudice to a further application by the EC following the filing of the Counter-Memorial.


On 3 March 2016, the Claimants filed their Memorial on the Merits ("Cl. Mem.") accompanied by the witness statements of Mr. José Alberto Ceña Lázaro, Mr. Andreas Helber, Mr. Errol G. Schulz ("CWS-ES"), and Mr. Matthias Taft ("CWS-MT"), and by KPMG's First Expert Witness Report ("KPMG First Regulatory Report") and Damages Expert Report ("KPMG First Damages Report").
On 15 June 2016, the Respondent filed a Counter-Memorial on the Merits and Memorial on Jurisdiction ("Resp. C-Mem."), accompanied by the witness statement of Mr. Juan Ramón Ayuso and Econ One's Expert Report ("Econ One First Report").


On 12 September 2016, each Party filed a document production application as per Section 15.2.5 of Procedural Order No. 1.
On 3 October 2016, the Tribunal issued Procedural Order No. 3 concerning the Parties' document production applications.
On 18 November 2016, the Respondent requested permission to introduce the final award rendered on 17 July 2016, in the case Isolux Netherlands, B.V. v. Kingdom of Spain, SCC Case V2013/153 (the "Isolux v. Spain (Award)").
Following the Tribunal's invitation, the Claimants filed their observations on 2 December 2016. They objected to Respondent's application, contending that it was inconsistent with Respondent's refusal to produce other ECT decisions and awards during document production and also with the Tribunal's conclusion that such rulings were not relevant or material to this case. In addition, the Respondent would breach the presumed confidentiality of the Isolux arbitration proceeding if it was allowed to introduce that award without the consent of the Claimants in that case, Isolux Netherlands BV.

On 21 December 2016, the Tribunal issued Procedural Order No. 4 concerning the Respondent's 18 November application. It held that it is not for it to decide whether the Respondent should or should not submit a certain authority in support of its case; as a general rule, no prior leave of the Tribunal is required for submitting an authority with scheduled pleadings provided that the applicable rules of procedure are otherwise met. Nor is it for the Tribunal to enforce alleged confidentiality obligations involving a nonparty to the proceeding:

Without prejudice to the discretion of this Tribunal to decline ordering production of a confidential document or otherwise exclude from the file information that is to be kept confidential between the parties, it is generally for the person by whom such confidentiality is owed to seek any necessary consent to the release of protected information and for the person to whom such confidentiality is owed to ensure that such information is not improperly released and to seek appropriate remedies if need be.5

The Tribunal therefore denied the Respondent's application, without prejudice to the right of either Party in the course of pleadings to cite decisions on file or in the public domain which they judge to be relevant to this case, and the right of the other Party to respond thereto.6
In the meantime, on 13 December 2016, the Claimants filed an application by which they challenged the Respondent's compliance with Procedural Order No. 3. The Claimants asserted that the Respondent had failed to conduct proper searches for, or to produce complete copies of, documents which the Tribunal ordered be produced.7
By invitation of the Tribunal, the Respondent filed comments on Claimants' application on 20 December 2016.
On 23 January 2017, the Tribunal issued Procedural Order No. 5 concerning the Claimants' 13 December application. Among others, the Tribunal ordered the Respondent to produce the requested documents concerning the work performed by Roland Berger ("RB") and Boston Consulting Group ("BCG") for the Respondent as well as those relating to Invest in Spain's engagement of German international business development agency, AHP Gruppe.


On 17 January 2017, the EC submitted a Second Application for Leave to Intervene as a Non-Disputing Party pursuant to Article 37.2 of the ICSID Arbitration Rules ("EC's Second Application").

After receiving observations from the Parties, the Tribunal issued, on 4 April 2017, Procedural Order. No. 6, by which it rejected the EC's Second Application ("PO6"). The Tribunal was not convinced that a submission by the EC would add to the sum total of available information as to intra-EU jurisdiction under the ECT in the terms of Rule 37(2)(a), while it would most likely cause additional costs to the Parties. In the Tribunal's view:

[…] A non-disputing party permitted to file a submission under that Rule does not thereby become a party to the proceedings, and the Tribunal has no jurisdiction to award costs against it. No doubt permission to file might be made subject to a prior condition of the provision of security for costs, but the Tribunal understands that the Commission, faced with such a condition, has declined to file or to provide security.8

[…] The questions [on which the EC seeks to intervene] have been extensively discussed in a number of published awards, and have been well ventilated in the literature. The parties in the present case are fully capable of presenting the legal issues at stake.9


The Claimants filed a Reply on the Merits and a Counter-Memorial on Jurisdiction ("Cl. Reply ") on 6 February 2017, accompanied by the second witness statement of Mr. José Alberto Ceña Lázaro and KPMG's Rebuttal Expert Witness Report ("KPMG Second Regulatory Report") and Complementary Report on Damages ("KPMG Second Damages Report")
The Respondent filed a Reply on Jurisdictional Objections and a Rejoinder on the Merits ("Resp. Rej.") on 7 April 2017, accompanied by the witness statement of Mr. Daniel Lacalle and the second witness statement of Mr. Juan Ramón Ayuso ("RWS-JRA2"), and by Econ One's Second Expert Report ("Econ One Second Report").
On 24 May 2017, the Claimants filed a Rejoinder on Jurisdiction ("Cl. Rej.").


As scheduled, each Party notified the Tribunal of the witnesses and experts it wished to call for cross-examination on 13 September 2017.
Pursuant to Section 19.1 of Procedural Order No. 1, a pre-hearing conference call was held on 5 October 2017, between the President of the Tribunal and the Parties.
Following the pre-hearing conference call, the Tribunal issued Procedural Order No. 7, dated 10 October 2017. This Order reflects the Parties' agreements and the Tribunal's decisions on other issues pertaining to the organization of the hearing.
On 23 October 2017, the Parties informed that they couriered to the Secretary of the Tribunal five USB drives with a joint electronic bundle containing a full hyperlinked copy of the case file. The USB drives included new documents and translations agreed by the Parties to be incorporated into the record per Section 25 of Procedural Order No. 7, as well as updated lists of factual exhibits and legal authorities.
On 25 October 2017, the Claimants sent a letter to the Tribunal seeking to clarify their prayer for relief in respect of the tax treatment of the claim for damages, a request to which the Respondent objected by a letter of 30 October. On 1 November the Claimants responded and, on 3 November the Respondent replied. The Parties were informed that the Tribunal would hear them on this issue at the hearing and would then rule on it by a communication sent on 5 November.


A first hearing on Jurisdiction and the Merits was held at the ICC hearing facilities in Paris from 6 to 10 November 2017 (the "November 2017 Hearing"). The following persons were present at the November 2017 Hearing:

Tribunal :
Judge James R. Crawford President
Dr. Horacio A. Grigera Naón Arbitrator
Ms. Loretta Malintoppi Arbitrator

ICSID Secretariat :
Mr. Francisco Grob Secretary of the Tribunal

For the Claimants :
Mr. Alberto Fortún Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Luis Pérez de Ayala Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Miguel Gómez Jene Cuatrecasas, Gonçalves Pereira, S.L.P.
Ms. Maribel Rodríguez Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Antonio Delgado Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. José Ángel Rueda Cuatrecasas, Gonçalves Pereira, S.L.P.
Ms. Mónica Lasquibar Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. José Ángel Sánchez Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Ignacio Frutos Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Kai Peters BayWa r.e. renewable energy GmbH
Mr. Tobias Steegmann BayWa r.e. Asset Holding GmbH

For the Respondent :
Ms. Amaia Rivas Kortazar State Attorney's Office
Mr. Antolín Fernández Antuña State Attorney's Office
Mr. Roberto Fernández Castilla State Attorney's Office
Ms. Patricia Froehlingsdorf Nicolás State Attorney's Office
Ms. María José Ruiz Sánchez State Attorney's Office
Ms. Carmen Roa Tortosa IDEA

During the November 2017 Hearing, the following persons were examined:

On behalf of the Claimants :
Mr. Andreas Helber BayWa AG
Mr. Matthias Taft BayWa r.e. renewable energy GmbH
Mr. Errol Schulz NAB
Mr. José Alberto Ceña Lázaro Asociación Empresarial Eólica
Mr. Carlos Solé KPMG Asesores S.L.
Mr. Gregorio Mednik KPMG Asesores S.L.
Mr. Fernando Cuñado KPMG Asesores S.L.
Mr. Alberto Rabano KPMG Asesores S.L.
Mr. Alfonso Manzano KPMG Asesores S.L.

On behalf of the Respondent :
Mr. Juan Ramón Ayuso Ortíz
Mr. Daniel Lacalle
Mr. Daniel Flores Econ One
Mr. Andrés León Econ One
Mr. Juan Riveros Econ One

The Tribunal ruled during the hearing on the Claimants' request to clarify their prayer for relief. It stated "[...] we do not regard the Claimants' letter as an additional or responsive document within the meaning of section 16.3 of Procedural Order No. 1, nor do we regard the request for clarification as a modification of the petitum."10
The request was therefore noted and the Tribunal informed the Parties that it would consider the substantive questions associated to it, if any, as they arise.


On 23 November 2017, the Respondent requested leave to submit into the record a decision issued by the European Commission on the Spanish State Aid Framework for Renewable Resources. Following an exchange between the Parties, the Tribunal authorized the Respondent to submit this document and set a schedule for the Parties to comment on it.
On 13 December 2017, the Parties submitted their agreed corrections to the November Hearing's transcripts, which the Tribunal approved by letter dated 13 January 2018.
On 12 January 2018, the Respondent filed its comments on the European Commission's State Aid Decision, which were followed by Claimants' comments on 29 January 2018.
On 13 February 2018, the Respondent requested permission to submit the award rendered in JSW Solar v. Czech Republic. Upon the Tribunal's invitation, the Claimants responded on 21 February 2018. They accepted the introduction of the JSW Solar award provided that the dissenting opinion attached thereto by arbitrator Gary Born was also added to the record. Additionally, they requested that the award in Novenergia II v. Spain be produced by the Respondent. They did not believe that further submissions concerning these decisions were necessary.

On 7 March 2018, the Tribunal wrote to the Parties as follows:

Since the hearing last year, a number of developments have occurred. On November 10, 2017, the European Commission issued its decision on State aid, which is now part of the record (RL-0117). In February 2018, the awards in JSW Solar vs. The Czech Republic (PCA Case No. 2014-03) and Novenergia II v. the Kingdom of Spain (SCC Case No. V 063/2015) became public. The Respondent has applied to introduce the first of these decisions and the Claimants the second. Moreover, [yesterday] the Court of Justice of the European Union (CJEU) issued its decision in the proceeding of Slowakische Republik (Slovak Republic) v. Achmea BV, Case C 284/16, which has been referred to in both parties' pleadings (e.g. Resp. Rej. Jur., paras 36-38; Cl. Rej. Jur., paras 38 and 51; exhibits CL-143 & CL-220).

Without prejudice to any final decision, the Tribunal considers appropriate to be informed of these developments, and have the Parties' views in relation thereto, while still in session. The Tribunal is therefore prepared to admit the aforementioned decisions not yet in the record.

In addition, the Tribunal invited the Parties to comment, both orally and in writing, on (1) the implications (if any) of the CJEU decision for the Tribunal's jurisdiction under the ECT; (2) the relevance (if any) of the recent investment treaty decisions; and (3) the implications (if any) of the European Commission's State Aid Decision for jurisdiction and merits. A subsequent schedule and hearing were set.
On 4 May 2018, the Parties submitted their comments on the three points referred to in the previous paragraph.
On 23 October 2018, the Tribunal invited comments on two recent jurisdictional decisions potentially relevant to the Achmea issue.11 The Parties provided their comments on 13 November 2018.


On 16 May 2018, the EC wrote "to inform the Tribunal that in case the Tribunal would deem that useful for its deliberations, the Commission would still be available to present written observations or attend any hearing, in the light of the recent judgment of the European Court of Justice in Case C-284/16 Achmea v. Slovak Republic, and in particular to set out its view on the consequences of that judgment for pending arbitration cases based on the Energy Charter Treaty".
On 18 May 2018, each Party filed observations on the EC's proposal. The Respondent urged the Tribunal to let the EC intervene. The Claimants objected to it.


A second hearing was held at the Peace Palace in The Hague from 22 to 23 May 2018 (the "May 2018 Hearing"). The following persons were present at the May 2018 Hearing:

Tribunal :
Judge James R. Crawford President
Dr. Horacio A. Grigera Naón Arbitrator
Ms. Loretta Malintoppi Arbitrator

ICSID Secretariat :
Mr. Francisco Grob Secretary of the Tribunal

For the Claimants :
Mr. Alberto Fortún Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Iñigo Quintana Aguirre Cuatrecasas, Gonçalves Pereira, S.L.P.
Ms. Maribel Rodríguez Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. Miguel Gómez Jene Cuatrecasas, Gonçalves Pereira, S.L.P.
Mr. José Ángel Rueda Cuatrecasas, Gonçalves Pereira, S.L.P.

For the Respondent :
Ms. Amaia Rivas Kortazar State Attorney´s Office
Mr. Antolín Fernández Antuña State Attorney´s Office
Ms. Patricia Froehlingsdorf Nicolás State Attorney´s Office
Ms. María José Ruiz Sánchez State Attorney´s Office

The Parties filed their submissions on costs on 2 July 2018.
On 28 January 2019, the Respondent requested the Tribunal to introduce as an additional legal authority a Declaration of the Representatives of the Governments of the Member States of 15 January 2019, on the legal consequences of the judgment of the Court of Justice in Achmea and on Investment Protection in the European Union. The declaration was signed by 22 EU Members. By invitation of the Tribunal, the Claimants filed their response on 6 February 2019, opposing the production. The Tribunal issued its decision on 6 February 2019, stating that pursuant to Section 16.3 of Procedural Order No. 1, no exceptional circumstances existed to admit the proposed document at an advanced stage of the proceedings. It therefore denied the request.
By letters of 17 May and 5 June 2019, the Tribunal invited the Parties to comment on five new decisions that had come into the public domain.12 These, and several subsequent cases, are analysed below.



The Claimants are two German companies, BayWa RE and BayWa AH. BayWa RE owns 100% of the shares in BayWa AH. BayWa RE, in turn, is a wholly owned subsidiary of BayWa AG ("BayWa AG"), a related company incorporated under the laws of Germany, which is not, however, a Claimant in this proceeding.
Between 2009 and 2012, BayWa RE acquired the total capital of Renerco Renewable Energy Concepts AG ("Renerco").
Renerco at the time held shares and other interests in the projects at stake in this arbitration. Following this acquisition, Renerco changed its name to BayWa AH on 27 March 2013, and its legal corporate form to a German limited liability company (GmbH).



The Claimants hold shares and participative loans in two companies incorporated in Spain, Parque Eólico La Carracha, S.L. and Parque Eólico Plana de Jarreta, S.L. (collectively the "SPVs"). These companies own and manage two wind farms with an installed capacity of about 49 MWs each, located in La Muela, province of Zaragoza, Spain: La Carracha and Plana de Jarreta (the "Wind Farms" or the "Projects").

The Wind Farms were developed in 1997 by a German company, Thyssen Rheinstahl Technik GmbH in cooperation with a Danish wind turbine manufacturer.
In 1999, Thyssen along with other four firms sponsoring the Projects incorporated in Germany a company named PDF Project Development Fund GmbH & Co. KG ("PDF Project Development"). On 11 March 1999 PDF Project Development formed the SPVs in Spain, whose purpose was to run the Wind Farms.
The Wind Farms were provisionally registered in the Registro administrativo de instalaciones de producción en régimen especial ("RAIPRE") on 28 June 1999.14 Pursuant to the applicable regulations, they were authorized to benefit from the Special Regime set out in RD 2818/1998 subject to the execution of the Projects and the completion of final registration in the RAIPRE.
On 28 December 2001, the main participants to the Projects at the time entered into a financing agreement ("Framework Agreement for the investment in the WindFarms").15 The Wind Farms were to be financed with a ratio of approximately 25% capital and 75% debt. The capital was provided by the participants / investors using a combination of equity and subordinated loans. A syndicate of banks provided the bank financing.
On 25 November 2002, the installations were commissioned.16 The Diputación General de Aragón attested their Final Registration at the RAIPRE, with effect as of 22 November 2002, through Certificates issued on 26 March 2003.17 Around the same dates the Wind Farms started commercial operation.
On 28 July 2003, PDF Project Development, then an indirect shareholder to the Projects, and two other German companies including another shareholder merged to create Renerco (subsequently renamed BayWa AH).18 Renerco was incorporated in Germany on 7 November 2003. From the date of its inception up until 2009, it owned approximately a 32.6% interest in the SPVs, inheriting the project portfolio of its founding parents.
On 30 June 2006, the Projects' owners agreed with the lenders to refinance the debt.19 The Projects distributed nearly EUR 17.3 million to shareholders. The funds were distributed in the form of dividends, reduction in share capital, and principal payments on shareholder loans.20 After the refinancing, debt represented 91% of the total capital as opposed to around 75% initially.21
On 3 November 2009, BayWa RE (at the time BayWa Green Energy GmbH) purchased 87.7% of Renerco's share capital from Babcock & Brown GmbH ("Babcock") and became the majority shareholder.22 BayWa RE would acquire the remaining 12.2% from the remaining minority shareholders by way of a "squeeze out" in October 2012.23 At the time, Renerco's share in the SPVs remained at around 32.6%.24
On 8 September 2011, Renerco (then under control of BayWa) purchased the participation of Shell Overseas Holdings Limited ("Shell"), which was at the time a shareholder in the SPVs.25 As a result of this transaction, Renerco became the majority shareholder in the Projects, holding a 73.1% in Parque Eólico La Carracha and 72.2% in Parque Eólico Plana de Jarreta.26
On 12 March 2012, Renerco acquired the equity holding that Corporación Empresarial Pública de Aragón had in both Projects (0.9% in La Carracha and 1.8% in La Plana de Jarreta).27

As a result, Renerco acquired a 74% shareholding interest in each of the SPVs, which corresponds to the share capital investment currently owned by it in the Projects.28 The evolution of Renerco's investments is shown in the following table.

Renerco / BayWa AH 2003-2008 2009 2010 2011 2012
Interest in the Projects 32.6% 32.6% 32.6% 72.6% 74%

Source: Econ One Presentation, November 2017 Hearing, Slide 8


In 2013, Renerco changed its name to BayWa AH. The following table shows the interests of BayWa AH and BayWa RE, respectively, in the SPVs:

BayWa RE 2003-2008 2009 2010 2011 2012
Direct Interest in Renerco / BayWa AH 0% 87.8% 87.8% 87.8% 100%
Indirect Interest in the Projects 0% 28.7% 28.7% 63.4% 74%

Source: Econ One Presentation, November 2017 Hearing, Slide 9


BayWa RE made a first offer for Babcock's shares in Renerco in August 2009. The Claimants state that this offer was based on an analysis and presentation made by the financial firm Goetzpartners Corporate Finance Gmbh, which reviewed the project (then called "Nova" or "Nova Group") and suggested "a conservative valuation at the lower end of the range of €42 million to €45 million as the purchase price for an 88% share [...]".29 The presentation points to "[c]hanges in legal conditions" as "[p]ossible [r]isks", affecting Renerco's business segment of "[p]roject development", a risk that was considered "[m]edium to high". With respect to the "[p]ower generation" segment, the presentation states that "[f]ixed compensation models (such as the Renewable Energies Act) contribute significantly" to business planning.30 For Respondent, this shows that Claimants knew about the risk of legal changes.31 Claimants contend that such risk concerned the project development segment of Renerco's business; however, La Muela had been developed more than six years before and should be considered as falling within the power generation segment. The presentation made no reference to state aid issues.
In September 2009, Renerco made a presentation in Munich with the purpose of introducing the company to BayWa AG.37 The presentation contained information about Renerco's portfolio of European assets, including the Wind Farms.
On 8 October 2009, BayWa RE proposed the acquisition of Renerco's shares to the Management Board of BayWa AG. At the time, it reported that "[i]n the course of due diligence, no issues were identified that would preclude the potential purchase of the Nova Group".41 Its business model was considered of "low to medium" risk based on two considerations: "Readily foreseeable and uniform business performance based on fixed feed-in fees [and] Feed-in fees for existing projects guaranteed for 20 years."42 The presentation points to a "[c]hange in the legal environment (e.g. feed-in fee for future projects)" as one of the "[s]pecific project risks".43 Profitability was assessed in "about > 7% to 9% for equity capital".44 On 3 November 2009, BayWa AG approved the acquisition of 87.8% of Renerco for EUR 50 million.
On 1 April 2011, Renerco – already under BayWa's control – considered the acquisition of a controlling stake in the Wind Farms. An internal document remarked at the time that "[t]he regulatory framework for renewable energies in Spain [had] experienced significant changes in the last 12 months…[n]evertheless, as before, RENERCO does not classify the local long-term potential in the wind sector for existing installations as vulnerable."45
On 8 September 2011, Renerco acquired Shell's stake in the Wind Farms, becoming the majority shareholder in the Projects.


(1) Basic features

The Spanish legal system has a hierarchical structure. The Constitution is the supreme law. Subordinate to the Constitution are laws enacted by Parliament. Royal Decree Laws are measures promulgated by the Government to cope with emergency situations which have immediate effect but require parliamentary ratification. Royal Decrees are executive acts promulgated by Ministries in the exercise of regulatory powers. They are implemented by Ministerial Orders and Resolutions. Supreme Court case law complements this normative regime.46
As a Member of the European Union, Spain is bound by the EU treaties (notably the TFEU), EU regulations, directives and decisions. Regulations are generally self-executing and do not require implementing measures. Directives require Member States to achieve a specific result although without dictating the means to achieve such result. Decisions are binding upon the parties to which they are addressed.
Other interpretative tools relied upon by the parties in respect of the application of Spanish law include preambles of legal statutes (also referred to as explanatory statements); Renewable Energy Plans and press releases issued by the Council of Ministers; financial and regulatory dossiers of impact reports on draft decrees; additional reports of and studies prepared by various authorities such as the Ministry of Industry, Trade and Tourism, since 2011 renamed as Ministry of Industry, Energy and Tourism (the "Ministry of Energy"), the Secretary of State for Energy, the National Energy Commission ("CNE"), since 2013 the National Markets and Competition Commission ("CNMC"), and the Instituto para la Diversificación y Ahorro de la Energía (Institute for Diversification and Saving of Energy or "IDAE"). Reference has also been made to presentations made by some of these authorities, particularly CNE and IDAE officers, and employees of the Spanish agency "Invest in Spain".

(2) State actors

The Council of Ministers is an administrative body that comprises the President, the Prime Minister and individual ministers. Among other things, the Council enacts royal decrees. The Ministry of Energy is responsible for the Government's policies on electricity and regulation of energy matters. It proposes royal decrees to the Council of Ministers and approves the Ministerial Orders that implement energy legislation. It is divided into Secretariats, one of which is the Secretariat of Energy presided over by the State Secretary of Energy. Subordinated to the Secretariat of Energy is IDAE, which contributes to the definition of the energy policy, advises on technical and economic issues and prepares national renewable energy plans. It also liaises with the industry. The President of IDAE is the State Secretary for Energy. "Invest in Spain", on the other hand, is a public agency dependent on the Ministry of Economy and Competitiveness, which promotes foreign investments in Spain. Finally, the CNE, replaced later by the CNMC, advises the Government on energy matters. It issues non-binding reports and opinions on proposed legislative measures concerning energy regulation.

(3) Law 54/1997

In 1997 Spain liberalized its electricity market, enacting Law 54/1997 on the Electricity Sector ("Law 54/1997"). The promotion of renewable energy production was one of the objectives of the new legal framework which included specific renewable energy targets.47 This was in line with international commitments adopted by Spain at the time (and later) to reduce greenhouse gas emissions and increase the share of renewable energy sources. These included the Kyoto Protocol and multiple EU directives.48
Power generation activities were organized in two separate regimes: ordinary and special. The "Ordinary Regime" applied to conventional generation facilities using non-renewable energy sources. They were required to sell their electricity output in the wholesale market for electricity at market price (also known as "pool price"). The "Special Regime", by contrast, applied to qualifying electricity generators using renewable sources of energy such as wind with an installed capacity of less than 50 MW like the Claimants' Wind Farms.49 Special Regime facilities were entitled to remuneration in the form of market price and "where applicable" a supplementary premium for the electricity delivered into the grid.50 Remunerations for the electricity market participants were to be set against tariff rates, prices, transportation and distribution charges.51
To qualify for either regime, enrolment in an administrative registry (known as RAIPRE for its Spanish acronym) was required.52 Although the definition of the specific financial incentives under the Special Regime was left to implementing regulations, Law 54/1997 directed the Government to take into account factors such as voltage level, environmental contribution, energy efficiency and investment costs so as "to achieve reasonable profitability rates with reference to the cost of money on capital markets".53 Special Regime producers were also given priority of access to distribution and transmission networks.54

(4) RD 2818/1998

In addition, RD 2818/1998 provided for a supplement or penalty, depending on the circumstances, for reactive energy ("Supplement for Reactive Energy"). This is a bonus (or discount) applied to revenue from the sale of energy for maintaining (or failing to maintain) certain power factors on an hourly basis, which are required for the proper functioning of the electricity system. This supplement/penalty applied under RD 2818/1998 and subsequent royal decrees irrespective of the selected remuneration scheme.
In accordance with the sixteenth transitory provision of Law 54/1997, the Spanish Government approved in December 1999 a Plan de Fomento de las Energías Renovables en España 2000-2010 ("2000 Renewable Energy Plan"). This Plan laid out the Government's policy to attain the renewable energy target of 12% by year 2010, as set by the European Union.58 As far as wind energy is concerned, no change was considered necessary, on the basis that their "economic profitability is assured by merely maintaining the current policy on premiums for electricity production".59

The Plan makes reference to a "[s]tandard project profitability: calculated on the basis of maintaining an Internal Rate of Return (IRR), measured in current pesetas and for each standard project, at a minimum of 7%, with own capital, before financing and after tax".60 Reference is also made to a projected annual increase of the electricity demand of around 2%, a lifetime of wind power facilities like the Claimants' Wind Farms of 20 years and an estimate of 2,400 of operating hours a year.61 The Plan explains the methodology used as follows:

Taking as a baseline the proposed energy targets, the financing requirements have been determined for each technology according to its profitability, defining a range of standard projects for the calculation model. These standard projects have been characterised by technical parameters relating to their size, equivalent operating hours, unit costs, periods of implementation, lifespan, operating and maintenance costs and sale prices per final unit of energy. Similarly, some financing assumptions have been applied, as well as a series of measures or financial aid.62

28 July 2003 - Renerco is formed (BayWa not yet a shareholder)

(5) RD 436/2004

On 1 January 2003, Spain put into effect RD 1432/2002, of 27 December. This regulation established a new methodology to calculate the average or reference electricity tariff ("Tarifa Eléctrica Media" or "TMR"), one of the inputs to determine the remuneration of renewable energy installations. The TMR would be set by the Government annually and published in advance based on estimated costs needed to remunerate projected electricity supply and consumer demand.

On 22 January 2004, the CNE issued a report on a draft that later became Royal Decree 436/2004. Among others, the report states:

Production facilities included under the special regime hold the right to receive a determined compensation for any energy sold, but logically only hold the acquired right to receive such compensation concerning the energy already sold, but not in regard to the energy that is projected to be sold in the future, which solely constitutes an expectation.63


In respect of project financing, the economic memorandum of RD 436/2004 prepared by the Ministry of Energy states that:

[…] in all cases, 100% of the financing is assumed to have been through equity capital. Leveraging and the percentage between equity capital and external funds are decisions specific to each project and each promoter. If made wisely, they should provide better ratios than those estimated here.64

Under both options producers could sell the full net amount of energy generated although the TMR's specific percentages of the fixed tariff decreased progressively after the 5th year of operation and therewith the installation's remuneration (Article 34, sub.b.2.1)66
This is one of the provisions relied on by the Claimants as a purported grandparent clause. It is discussed below.
Finally, installations subject to RD 2818/1998, which had already obtained final registration in the RAIPRE, were granted a transitional period during which they could choose between remaining subject to RD 2818/1998 for a limited time, or switching to RD 436/2004 immediately.68 An alleged amendment to this and other provisions of RD 436/2004 prompted an appeal which was decided by the Spanish Supreme Court in a judgment rendered on 25 October 2006.69
The new regulation was criticized by some renewable energy producers. In April 2004, the Asociación de Productores de Energías Renovables ("APPA") made a presentation in which it discussed RD 436/2004. Among the "negative aspects" of the new regulation, APPA pointed out to its ʽretroactivityʼ because of "[d]eadlines starting from 'commissioning' instead of after the date of entry into force of the decree."70
Around the same time, on 24 May 2005, IDAE prepared an informative brochure called "The Sun Can Be Yours". This brochure outlined key features of the Spanish regulatory framework for PV technology. Reference is made to an internal rate of return ("IRR") between 5.5% and 13.5%, depending on the type of PV installation, although the brochure points out that the return may "at times […] reach 15%".71 Financing alternatives are also mentioned.72
On 30 September 2005, the Wind Farms elected to sell their net electricity output under the Pool Price plus Premium and Incentive option of RD 436/2004, with the option to switch on an annual basis and receive the Supplement for Reactive Energy. With respect to this Supplement, the Wind Farms remained under RD 2818/1998 until January 2007.
On 26 August 2005, Spain's Council of Ministers approved the Plan de Energías Renovables en España 2005-2010 ("2005-2010 Renewable Promotion Plan"). The new plan reassessed the standing of renewable energies in Spain, including the costs involved in their support. No change to the remuneration regime was deemed necessary to achieve the targets set in the 2000-2010 Renewable Energy Plan for wind energy,73 which by then had reached 91% of the capacity set for 2010 under the 2000 Renewable Energy Plan.74 A more ambitious target for wind power was established instead.75 Calculations were, as in the 2000 Renewable Energy Plan, predicated upon "technical-financial assumptions" for "standard projects",76 including, as regards wind installations like the Claimants' Wind Farms, a 20-year operational life,77 2,350 operating hours,78 and demand forecasts.79 The plan was based on "[r]eturn on Project Type: calculated on the basis of maintaining an Internal Rate of Return (IRR), measured in legal tender and for each standard project, around 7%, on equity (before any financing) and after taxes."80 Among others, the existence of a "stable regulatory framework" was credited with the success of the regime in promoting renewable energies.81 The plan estimated that around 77% of the investment in renewables would likely be debt-financed and refers to "project finance" as one of the financing alternatives available to investors.82

In October 2005, a report by the Asociación de la Industria Fotovoltaica ("ASIF"), was published. Regarding the new regulation, the Report points out:

[…] [RD 436/2004] provides a reasonable return on investment for an average standard facility. This reasonable rate of return is considered [...] by the Plan for Renewable Energies, as […] an internal rate of return on the own equity invested of between 5 and 7%.83

On 6 October 2005, the Spanish and German Governments made a joint declaration in Madrid whereby they committed to "promote renewable energies" and "improve the feedin system in their respective countries".84 In addition, the two Governments created the International Feed-in Cooperation, an international platform to promote feed-in systems of remuneration among other countries and to fund research projects through IDAE (for Spain) and Fraunhofer ISI (for Germany).

On 15 December 2005, the Spanish Supreme Court issued a judgment concerning an appeal brought by an association of renewable energy producers against RD 436/2004 (the "2005 Supreme Court judgment"). Among other arguments, the association contended that RD 436/2004 did not provide for an updating mechanism in respect of one of the two pricing options (i.e. the Fixed Tariff), while it set out stricter technical requirements applicable to not only new installations but also existing installations. The Supreme Court dismissed the appeal on all counts. Drawing upon an earlier judgment from July 2005, the Court did not consider updates to be mandated by Law 54/1997, but rather a procedure devised by RD 2818/1998: "[g]iven the normative rank of this Royal Decree, nothing prevents another norm of the same hierarchical rank from modifying it."85 Regarding the additional requirements, the Supreme Court held:

There is no legal obstacle that exists to prevent the Government, in the exercise of its regulatory powers and of the broad entitlements it has in a strongly regulated issue, such as electricity, from modifying a specific system of remuneration, provided that it remains within the framework established in the [Law 54/1997]. And even though it might be necessary on the basis of the principle of legitimate expectations to include transitory provisions for the adaptation to the new system of existing companies, in no way this demand reaches the point of respecting the previous regime without the slightest change during a more or less prolonged period.86

(6) RDL 7/2006

On 23 June 2006, the Government passed Royal Decree Law 7/2006, adopting urgent measures for the energy sector ("RDL 7/2006"). Among others, RDL 7/2006 suspended the remuneration's revisions for renewable energy technologies including wind power until a new remuneration scheme dissociated from the TMR was developed (second transitory provision) and called the Government to do so as soon as possible (second final provision).87 Respondent contends that RDL 7/2006 was enacted to remedy the perverse feed-back effect of the TMR ("tariffs are not to pay for a party").88

The Preamble reads:

The regulation in force since 2003 setting out the methodology for the approval or modification of the average or reference electricity tariff identifies a maximum annual limit for any increase to such tariff and certain costs to be included in its calculation. The experience concerning its application, especially since 2005 [...], makes it necessary to authorize the Government to modify the costs to be considered, as well as to make the limits of tariff variation and the different tariff groups more flexible. And this with the urgency determined by the tariff revision scheduled for July 1, 2006, as the deadline.89

30 June 2006, the Wind Projects are refinanced (BayWa not yet a shareholder)

In response to this new regulation, the main associations of the renewables sector, led by APPA, the Asociación Empresarial Eólica (Spanish Wind Energy Association or "AEE") and ASIF, addressed a joint letter to the Minister of Energy dated 26 July 2006. The letter reads:

"[these] business associations can only state their rejection, their most profound discontent and their most serious concern about how and why the process is being carried out. […] RD-L 7/2006 substantially breaches the regulation of renewable energies established in the Energy Sector Act […]".90


In a note published shortly after, APPA criticized the new regulation:

Royal Decree-Act 7/2006 was approved last June, which contains a frontal assault on the national policy for the promotion of renewables: it eliminates the 80-90% bracket and the mechanisms of remuneration stability [of Royal Decree 436/2004], without also considering the established guarantees and time periods. The standard, which changes the game rules mid-game, introduces retroactivity and very seriously damages the legitimate expectations of investors. […] Royal Decree-Act 7/2006 has been published like in old times: at night and with aforethought: without prior consultations of the agents involved and, contrary to what has been repeatedly stated, the rules of the game have been changed in the middle of the match. Acquired rights have been modified retroactively.91


On 26 October 2006, the Minister of Energy appeared before the Senate. He stated in relation to renewable energy:

[…] It is important for all operators to receive this message and to be aware that our road map entails adapting to this framework as quickly as possible, which involves generating more market that we hope will be efficient, because it is not always so, and obviously, the tariffs are not going to pay for anyone's party. Tariffs by law can only take into account energy costs, and shareholder ventures are not energy costs.94


On 8 November 2006, the Secretary of Energy also appeared before the Parliament. He stated:

[...] The regulation of wind power in 2004 was rather unfortunate. In 2004, the current Royal Decree, 436, established premiums based on market price expectations. […] What has happened? That the price of market now is of 55 or of 60 and the wind power has a total remuneration of almost 100 Euros/MW-hour. This remuneration has an IRR of around 20 percent. I believe in renewable energies as much as anyone, but I also believe that we have to do things reasonably. Technologies, that is my opinion, whose investment is guaranteed through a premium […] they cannot have returns of 20 per cent; nobody has those. Some speculators do have them. We must be reasonable [...]95

(7) RD 661/2007


The initial draft of what would become RD 661/2007 was released on 28 November 2006. It did not contain explicit language protecting existing plants from quadrennial revisions. Draft article 40.3 provided:

During 2010, in view of the results of the monitoring reports on the degree of compliance with the 2005-2010 Renewable Energies Plan (PER), and of the Energy Efficiency and Savings Strategy in Spain (E4), together with such new targets as may be included in the subsequent Renewable Energies Plan for the period 2011-2020, there will be a revision of the tariffs, premiums, supplements and lower and upper limits defined in this royal decree, application which shall start from January 2011, considering the costs associated with each of these technologies, the degree of participation of the Special Regime in covering the demand and its impact upon the technical and economic management of the system. Every four years, a new revision shall be performed.96


The final version added a paragraph stating:

The revisions of the regulated tariff and the upper and lower limits indicated in this section shall not affect facilities for which the commissioning certificate had been granted prior to January 1 of the second year following the year in which the revision had been performed.


On 19 January 2007, AEE published a note in which it criticized this draft:

[…] the proposal is puzzling as it even advocates amending [the predefined remuneration] for facilities already in operation and for investments in progress, while removing the right to receive the remuneration established, recognised by the current regulation, which would seriously affect the legal certainty and legitimate expectations that were generated based on the sustainability that this regulation guarantees.97


On 14 February 2007, the CNE issued a report on this draft ("CNE Report 3/2007"). It noted that economic incentives are an essential regulatory instrument to reach the renewable energy targets set by the Government. It also highlighted the importance of legal stability for investors and financers, and suggested that any future revisions to the incentive's regime should be predefined as in RD 436/2004 and must not affect existing facilities.98 It pointed out at the same time:

As stated by both scientific and jurisprudence doctrine [...] these principles [of legal certainty and legitimate expectation] do not prevent the dynamic innovation of the same, or new regulatory provisions from being applied in the future to situations that commenced prior to their entry into force, but which continue following the entry into force of the new rules.99

The preliminary version of this Report refers specifically to the Supreme Court Judgment of 25 October 2006 and reproduces a large portion of it. The CNE characterized it as "very illustrative" in relation to the legality under Spanish law of regulatory changes.100
On 19 March 2007, the Government presented a new draft royal decree for consultation.101

On 21 March 2007, the Ministry of Energy prepared a report on the proposed new regulation, which the Claimants contend is an internal document which was only released during document production.103 According to the Report:

The regulated tariff has been calculated to guarantee a return between 7% and 8%, depending on the technology. Premiums have been calculated according to the same criteria established in Royal Decree 436/2004, that is, the premium has been calculated as the difference between the regulated tariff and the average market price considered for these technologies. […]

With the remuneration provided, the return would be 7% for the regulated tariff option, and between 5% and 9% for the market sale option.104


The draft RD 661/2007 was criticized by APPA. In its comments (alegaciones) on the draft RD 661/2007 APPA contended that the new regulation "breach[ed] the principle[s] of legal certainty and legitimate expectations: changing the economic regime retroactively" in respect of installations which had entered into operation under RD 436/2004, in circumstances where, in their view, Article 40.3 only contemplated quadrennial revisions while ruling out any other adjustment to remunerations. It also complained about the Government's use of subsequent decrees to change remuneration's regimes through the back door, circumventing Article 40.3 of RD 436/2004. It further stated that, should the Government go ahead with the proposed regulation, it will…

no longer be credible: any rational investor, when planning facilities of this type, must bear in mind not only the costs and the foreseeable remuneration, but it also must consider the risk that such remuneration could be lowered [in the future].105


On 9 May 2007, AEE issued a press release criticizing the draft:

For AEE, today the important thing is to ensure the door is not left open to changes in remuneration parameters at the halfway point, as is the case with the current wording of the decree. The "stable" nature of the twenty-year period proposed by the new Royal Decree for the allocation of remuneration is fictional if the premium amendments are retroactive as is contradictorily regulated now.106


A transitory provision, which the Claimants contend (by reference to the witness statement of Mr. Ceña109) was agreed upon between AEE and the Government along with caps and floors, was included in RD 661/2007. This provision granted existing wind farms (i.e., those commissioned before 1 January 2008, like the Claimants' Wind Farms) the possibility to opt among three alternative remuneration schemes:

(i) Keep the Fixed Tariff of RD 436/2004 and continue to receive this form of remuneration during all the wind farm's remaining operational life;

(ii) Receive the feed-in remuneration values set in RD 661/2007;

(iii) Opt before 1 January 2009 for a transitional period of approximately 5 years (i.e., until 31 December 2012), during which wind farms would be remunerated under the previous Premium option available under RD 436/2004. Once this transitional period ended (i.e., from 1 January 2013), feed-in remuneration values and the option to choose between the Regulated Tariff and Premium options of RD 661/2007 would apply for existing wind farms, although without TMR revisions which, as the Respondent states, were eliminated permanently by RDL 7/2006.110

The Wind Farms selected the third option and were remunerated under the Premium option of RD 436/2004 until 31 December 2012.111 Thereafter, they would no longer benefit from the premium updates set out in RD 436/2004 because that option was removed by RDL 7/2006. Respondent argues that RD 661/2007 was therefore publicly criticized by RE producers.112 Claimants contend that these criticisms were directed at the previous draft of RD 661/2007, not the one approved, which was balanced.113 Virtually all wind installations opted for the transitory premium option under RD 436/2004.114 By contrast, RD 661/2007 eliminated the right to choose between fixed tariff and pool plus premium for PV installations over 100 kW with no transitional period, on which basis it was challenged by a PV investor. The Spanish Supreme Court ruled upon this challenge in a judgment issued on 3 December 2009 referred to below.115
RD 661/2007 also established installed capacity targets per technology by reference to the 2005-2010 Renewable Energy Plan.117 Once 85% of a technology target was reached, a period of no less than 12 months would be established by the Secretariat of Energy for all existing projects using that technology (under development and/or construction) to be finished so that they could benefit from the economic regime of RD 661/2007. Facilities included in the RAIPRE after this period would not be entitled to the remuneration scheme. PV installations reached the 85% target and therefore the Government enacted a new regulation applicable to PV facilities registered thereafter. This was RD 1578/2008, which is discussed below.118

The same day, 25 May 2007, the Government issued a press release, which is one of the press releases relied on by Claimants to support its legitimate expectations and umbrella clause claims.119 The press release reads:

The Government assigns priority to profitability and stability in the new Royal Decree on renewable energy and cogeneration.

The purpose of this Royal Decree is to improve the remuneration of those less mature technologies, such as biomass and thermosolar, so as to be able to meet the objectives of the 2005-2010 Renewable Energies Plan […].

The new regulation guarantees a return of 7% for wind and hydraulic installations opting to cede their output to distributors, and between 5% and 9% if they participate in the electric energy generation market […].

[…] The government's commitment to these energy technologies has been the reason why in the new regulation stability in time is sought allowing business owners to plan in the medium and long term, as well as a sufficient and reasonable return which, like the stability, makes the investment and engagement in this activity attractive.

Any revisions of tariffs to be carried out in the future will not affect the facilities already in operation. This guarantee provides legal certainty for the producer, providing stability for the sector and promoting its development.120

On 4 July 2007, the Spanish Government enacted Law 17/2007. This regulation amended Article 18.1 of Law 54/1997 to read: "tariffs of last resort will be established in such a way that the calculation thereof will respect the principle of sufficient revenue and not cause any distortion to competition."121 This is one of the provisions relied upon by Respondent to support the existence of a principle of sustainability and/or self-sufficiency of the electricity system. It also updated transitional provision sixteenth of Law 54/1997 to reflect the new 20% renewable energy target set by the European Union.122

In July 2007, Pöyry issued a report on the Spanish renewable energy market, focusing on wind energy. It noted that:

The Spanish Government has been historically concerned with the increases on the regulated tariff as they affect Spanish inflation and competitiveness. The average reference tariff (TMR – tarifa media de referencia) was one of the key components to a wind farm's remuneration, representing around 50% of the revenues for wind farms on the Market Option or almost all of its revenue on the Fixed Tariff Option under RD 436. Hence higher average tariffs were beneficial for wind generators.

However, owing to the tariff deficit, and windfall profits for wind farms during 2005 and 2006, the Spanish government has reviewed the legal framework for the Special Regime (co-gen and renewables).

Wind generators received (under RD 436) a payment linked to the TMR. However, this had an unfortunate side effect of a feedback (as outlined in Pöyry's wind reports from 2004). In essence, this meant higher system costs as a result of wind farms led to higher TMRs, which in turn raised remuneration to wind farms, leading to higher system costs and higher TMRs etc.

Given the likelihood of ongoing tariff deficits in the future the government decided to de-link remuneration from the TMR permanently. Since the introduction of RD 7/2006 on June 2006, wind generators have collected the 50% (40% as premium and 10% as incentive) of the January 2006 TMR, which is €76,588/MWh.

[…] As tends to be the case in Spain, the resulting legislation, RD 661/2007, is a negotiated compromise which is seen as positive by most of the industry, although key members of the major Spanish wind association (AEE) have not been too complimentary of the changes contained within it.123


Also in 2007, ASIF published an article in which it discussed RD 661/2007. After noting that the regulation seeks to provide a reasonable return to investors, the article states:

[...] but, what is a reasonable rate of return for an investment in renewable energy, specifically in photovoltaic energy? […] It is considered quite reasonable for an investment payback period to be around ten years, and an internal rate of return on a project (without financial leverage) around 7%, which is in line with other regulated investments. […]124


In the same year, AEE criticized RD 661/2007 in its industry yearbook:

From a regulatory perspective, the new R.D. 661/2007 strays from the path marked by the regulator and not only revises remuneration by reducing the premium, but also basically modifies the mechanisms involved in its allocation and repeals all aspects of the above-mentioned R.D. 436/2004, regulating on the very same issues just two years after its approval […]. On the other hand, the new decree removes the incentive to participate in the electricity market and annuls the non-retroactivity of this revision and of future revisions concerning premiums and remuneration supplements, thereby applying it universally to all installations regardless of when they are commissioned. The proposal also entails a high level of uncertainty with regard to the indices for the annual updating of all parameters. […] The measure clearly contradicts the allocation of these values over a 20-year period, rendering the concept of durability completely fictitious, insofar as subsequent changes to these values have also been planned that, as a result, would be applied retroactively.130

Between 2007 and 2008, Invest in Spain, a State-owned entity, carried out a series of presentations in foreign countries (including Germany) about "opportunities in Renewable Energy in Spain". These presentations point to Spain as the "most attractive country in the world for investment projects in renewable energies";131 offering "one of the most attractive combinations of incentives, low costs, political stability and economic transparency";132 and "one of the top five countries in terms of newly installed wind capacity".133 Reference is also made to the "the "Renewable Energy Plan – PER 20052010" and to the "premium system guaranteed" under RD 661/2007.134

On 10 January 2008, AEE issued a press note assessing the impact of the RD 661/2007 in respect of wind facilities. It states:

the remuneration of wind energy fell in 2007 to the levels of 2003 and 2004. In the seven months during which the new RD 661/2007 has been in effect, the premium has been lower than that of RD 436/2004 by 5.07 E/MWh. All the wind farms have remained under RD 436/2004 with an average remuneration of €77.62/MWh throughout 2007, given that if they had changed to RD 661/2007, it would have been €74.11/MWh.135

(8) RD 1578/2008


On 26 September 2008, Royal Decree 1578/2008 ("RD 1578/2008") put in place a new remuneration regime applicable to PV installations that were not registered by the deadline provided by RD 661/2007. The new regime offered lower remunerations and created a pre-allocation remuneration register (Registro de Preasignacion de Retribución) which, among others, gave the Government the power to scale entry into operation of new installations. RDL 6/2009 (discussed below) did something similar with respect to other renewable energy technologies including wind power.136 The Preamble states:

The growth of installed capacity experienced by photovoltaic solar technology has been much greater than expected. [...] Just as insufficient compensation would make the investments nonviable, excessive compensation could have significant repercussions on the costs of the electric power system and create disincentives for investing in research and development [...]. Therefore, it is felt that it is necessary to rationalize compensation and, therefore, the royal decree that is approved should modify the economic regime downward, following the expected evolution of the technology, with a long-term perspective.137


On 16 October 2008, the Secretary of Energy appeared before the Senate and stated:

[…] The tariff deficit generated for the first time in the year 2000 is becoming increasingly large and, therefore, more unsustainable. Its elimination is one of the major challenges that we propose to resolve during the term. [...] We want to obtain investments that create wealth, not those that just absorb consumer resources. [...] we must be aware of the financial sustainability of the cost of energy […].138


On 29 October 2008, Mr. Fernando Martí Scharfhausen, Vice President of CNE, made a power point presentation entitled "The Legal and Regulatory Framework of Renewable Energies". Reference was made to:

b. Regulatory stability. Predictability and certainty of economic incentives over the lifetime of the facility (encourage investors and lower financial costs): non-retroactivity.139


During 2009, Spanish Government officials participated in events overseas where they highlighted Spain's regulatory framework for renewable energies. For instance, Mr. Sebastián stated at the International Renewable Energy Agency Conference in Bonn:

Spain has made a clear commitment to attain the maximum contribution of renewable energies to our energy system. As a result of this commitment, Spain is among the world leaders regarding installed capacity in technologies such as wind, photovoltaic, solar thermal, and biofuels. Renewable facilities amount to 34 GB out of a total 91 GB installed capacity, generating around 20% of our total output. Our wind sector is especially remarkable. Wind contribution to our power generation already exceeds 10%. […]

In our experience, one of the key factors to this success is the design of an adequate regulatory framework that grants the long-term stability required to undertake the necessary investments.140

On 9 and 13 February 2009, CNE officials Messrs. Carlos Solé and Luis Jesús Sánchez de Tembleque made a presentation entitled "Economic Study of Renewable Energies", where they analysed the economic profitability of renewables.141 The presentation states that "[a]llowing a remuneration to investments with a profitability higher than the WACC implies that the business will be able to develop the project with profitability."142 They also discussed the financing of renewable projects through "project finance", mentioning a "financial leverage between 55% and 90% of the investment."143

(9) RDL 6/2009


Royal Decree Law 6/2009 of 30 April 2009 adopted new measures in the energy sector ("RDL 6/2009"). Its preamble reads:

The growing tariff deficit (that is, the difference between the amounts collected from the regulated tariffs established by the Administration and the rates paid by consumers for their regulated supply, and the access tariffs that are established by the deregulated market and the real costs associated to such tariffs) is provoking serious problems that, in the context of the current international financial crisis, is seriously affecting the system and not only putting the financial situation of the companies in the electric power sector at risk, but also the sustainability of the system itself. This imbalance is unsustainable [...]144

RDL 6/2009 imposed on prospective investors additional conditions to access the Special Regime. It set up a Pre-Allocation Register akin to that put in place by RD 1578/2008 for PV installations, with stricter requirements to achieve pre-registration, and gave the Government power to scale entry into operation of pre-registered installations where the economic or technical sustainability of the SES so required (Fifth Transitory Provision). This power was exercised through the Council of Minister's Agreement of 13 November 2009, referred to below. It also prescribed that from 2013 onwards, access tolls had to be sufficient to satisfy all of the costs of the regulated activities without any ex-ante deficit (Article 1).145

RDL 6/2009 was not welcomed by renewable energy producers. For example, the renewable energy association APPA commented that:

That is how Miguel Sebastián, who has never met with or considered the sector regarding the regulatory changes, confirmed his declared commitment to meeting the European objectives. Meanwhile, in Spain he had created another obstacle for Spanish renewables. Two days later, Royal Decree-Law 6/2009 was published in the BOE, passed by the Council of Ministers on 30 April, adopting diverse measures to reduce the tariff deficit and to increase the administrative obstacles for clean energy. The measures under the RDL […] will make the sector's development even more difficult, while, as in other sectors, it suffers from funding issues arising from the crisis.146


On 20 May 2009, APPA and Greenpeace submitted to the Ministry of Energy a proposal for a draft bill on a Renewable Energies Development Act.147 The draft proposed economic incentives to achieve "reasonable rates of return", which were in line with feedin regulations already in place. Calculations were based on estimated costs per type of facility and "an annual percentage rate equivalent to the previous year's average yield on 10-year Spanish government bonds, plus a spread of 300 basis points". Grandfathering provisions were included.

3 November 2009 - BayWa RE purchases 87.8% of Renerco
On 13 November 2009, the Council of Ministers issued a resolution concerning renewable energy facilities subject to RDL 6/2009. The Spanish Government decided to accept in the Special Regime new capacity above the initial wind and CSP's objectives based on two technical reports that concluded that this was technically and economically feasible, although not without risks in view of the decline in the electricity demand.148 According to the resolution, overall benefits of additional renewable installations "greatly exceed the costs and justify the support for renewable energy of the regulatory framework".149
In response to Directive 2009/28/EC, which set new renewable energy targets for Spain, the Government approved on 30 June 2010 the Plan de Acción Nacional de Energías Renovables de España. Calculations in this Plan are again predicated upon technical/financial assumptions for standard projects including forecasts to achieve reasonable rates of return with reference to the cost of money in the capital market. Reference was also made to "sustainability criteria", the need for "stability" and to "minimising the speculative risks posed in the past by excessive rates of return, which not only hurts consumers but it is also damaging to the industry in general".155

On 31 December 2009, MO ITC/3519/2009 was published. This order contained the updated feed-in values applicable to wind facilities pursuant to Article 44.1 of RD 661/2007. The Claimants state that these are the values that would have applied to their facilities as of 2013 (i.e. the end of the RD 661's transitory period), including the option to choose between the Regulated Tariff or the Premium, had Spain not abrogated the feedin regime in 2013:156

Term Regulated Tariff
Reference Premium
Upper Limit
Lower Limit
First 20 years 7.7471 3.0988 8.9866 7.5405
Thereafter 6.4746 0 0 0

Source: MO ITC/3519/2009, Annex III, sub.b.2.1157


In February 2010, a study of the Supreme Court's case law was published on a renewable energy sector magazine. The study recounts that:

[..] retroactivity on premiums was indeed granted and explained by the Supreme Court [...]. As we have been saying, it is nothing new, and we will now look at why: Recently, the [...] ruling of 3 December 2009, [...] based on a ruling of 15 December 2005, stated literally that: 'the appellant commercial entities have no right to the remuneration regimen of the electricity sector remaining unchanged, [...] and 'does not guarantee the perpetuation of the existing situation'; which can be modified at the discretion of the institutions and public authorities to impose new regulations taking into account the needs of the general interest. [The appeal was overturned as] the return of the activity of generation from this technology was higher than that considered as sufficient and reasonable remuneration.158


In April 2010, APPA published another report on the Supreme Court's case law on renewables. The report states:

Supreme Court case-law is conclusive: it openly and emphatically justifies retroactivity of the rules that regulate or which could regulate the economic regime of the special regime, whilst respecting the principles established in Law [...]

[…] these 'reasonable rates of return' that the Supreme Court itself has fixed, based on IDAE indications, at Internal Rate of Return of 7 percent.

[it is worth] fleeing from any optimism [...] a certain modification to the premiums [...] beneath that 7 percent [...] could perfectly be validated by the court [...] maintaining that the 'reasonable nature' of the rates of return in the year 2006 or 2007 may have stood at the aforementioned 7 percent, but there is no reason why this figure should be matched at the time the modification is made.159

(10) RD 1614/2010


Also in April 2010, the Ministry of Energy released a set of files including one eight-page document titled "Elementos para un acuerdo sobre la política energética".160 Among other measures, this document proposed:

Adapting renewable energy remuneration mechanisms to advances in technology, ensuring facilities receive reasonable earnings in all cases and that complying with renewable share targets is compatible with sufficiency principles concerning costs and energy system efficiency. […] Deadline: Before July 1, [2010]

Several contacts and proposals followed from April to July 2010 between Government officials from the Ministry and Secretariat of Energy, and AEE representatives.161 In these exchanges, various aspects of the proposed regulation were discussed, particularly, the limitation of hours subject to premium, premium values, transitional periods and the scope of future revisions.

On 2 July 2010, the Secretary of Energy sent a draft to Mr. José Donoso, AEE chairman, entitled "Agreement with the Wind Sector". It reported that the Ministry of Energy had "reached an agreement with the wind sector whereby it undertakes to promote the following actions":

1. Temporary and extraordinary 35% reduction of the reference premium currently in force for wind farms subjected to Royal Decree 661/2007, applicable from the entry into force of the new Royal Decree and until 12/31/2012, notwithstanding the annual updates of the reference premium in accordance with Royal Decree 661/2007. The rules established in First Transitional Provision remain unchanged until 12/31/2012 and thereafter shall be subject to the provisions of Royal Decree 661/2007, with annual updates.

2. Amendment of Art. 44.3 of Royal Decree 661/2007 stating that future revisions of the premiums should not affect existing facilities, in precisely the same manner as currently established for regulated tariffs and upper and lower limits, nor those facilities, upon approval of the review, that were already registered into the Pre-allocation Remuneration Register established by Royal DecreeLaw 6/2009, of April 30.

3. For those years in which the average production values of the industry as a whole exceed the provisions of PER2005-2010 (2,350 hrs), the hours of each plant exceeding 2,589 hrs (2,345 +10%) shall be remunerated at the pool price. […]162


The same day, 2 July 2010, a press release was issued whereby the Respondent announced the following:

July 2, 2010 The Ministry of Industry, Tourism and Commerce has closed agreements with wind and thermosolar energy industry representatives, the Spanish Wind Energy Association (AEE) and the Spanish Thermosolar Industry Association, Protermosolar, respectively, for the revision of the regulatory frameworks of electric power production from these technologies.

The agreements [with the CSP and wind sectors] include short-term measures that will reduce the impact of these technologies on the price of electricity, as well as long-term measures which will provide these technologies with stability and certainty for their future development.

The wind energy premiums established in RD 661/2007 will be reduced by 35% until January 1, 2013. […]

[...] the number of hours entitled to the remuneration above the market price is limited for wind and thermosolar plants, taking into account the different technologies and what was set out in the 20052010 Renewable Energies Plan for the calculation of the facilities' profitability.

This measure, which does not compromise the profitability of existing facilities will guarantee that renewable production above the one foreseen benefits consumers and does not compromise the economic sustainability of the system.

Also, this agreement strengthens the visibility and stability of the regulation of these technologies for the future, guaranteeing the current premiums and tariffs of RD 661/2007 for facilities in operation (and for those included in the pre-register) after 2013. […]

Industry will immediately begin the process which will allow the content of the agreement to be converted into a law.163


On 9 July 2010, AEE issued a bulletin reporting on the agreement reached with the Government.164 The bulletin noted:

The Spanish Association of Wind Power Businesses [...], in representation of the wind power sector, has finally reached an agreement with the Spanish Ministry of Industry, Commerce and Tourism (MICyT) under which there will be a temporary reduction in the remuneration for operating installations in exchange for greater regulatory stability.165


On 13 July 2010, a legal opinion about case law on renewables was published in a Spanish law review. The opinion stated:

As has been explained, we understand that a modification of the tariffs established in RD 1578/2008 (ACT 13234/2008) applicable to authorised facilities that are operational prior to such amendment, could be interpreted by the courts as "foreseeable" and in no case diminishing the principle of legitimate expectations.166

A first draft of what became RD 1614/2010, dated 14 July 2010, was disclosed to AEE on 15 July 2010.167 AEE suggested specific changes to this draft by a communication sent on 20 July.168 A new draft followed on 30 July 2010, which was circulated for observations along with a first explanatory report (Memoria) of the same date.169

On 30 August 2010, AEE made formal observations (alegaciones) to this new draft. They stated:

The proposed modification of the remuneration regime of the reactive energy, if approved, would have a level of retroactivity such that, according to the Jurisprudence of the Constitutional Court, it may be considered of a "minimum degree" as it only has an impact on the economic effects that in a future would be produced although the basic situation or relation has arisen in accordance with the previous one.

It is true that the Supreme Court has declared, in relation to this type of retroactive modification, that it is not an "unchangeable right" that the economic regime remains unaltered [...] thus recognizing a relatively broad margin to the "ius variandi" of the Administration in a regulated sector involving general interests.[...] the jurisprudence has established limits [...] with regard to the retroactive modification of this remuneration framework, in particular "that the requirements of the Law on the Electrical Sector are observed with regard to the reasonable return of investments.

Lastly, the sector is sensitive to the economic situation in Spain and the exceptional fall in the demand for electricity, which may require measures of joint responsibility that, in the case of wind energy, must be limited in time and scope, in proportion to the specific needs of this technology and its contribution to the electrical system.170


On 26 October 2010, the Ministry of Energy issued a report in which it stated in reference to what would become Article 5.3 of the proposed regulation:

Article 4 of the project, to compensate the above restriction, also guarantees to the thermoelectric facilities covered by the Royal Decree 661/2007 and affected by it, that future quadrennial reviews rates, bonuses and upper and lower limits for this kind of technology, provided in Article 44.3 thereof, shall not apply to them.171


On 4 November 2010, after the Government decided to divide the new regulation into two decrees (i.e. RD 1614/2010 and RD 1565/2010), a new explanatory report (Memoria) of the draft Royal Decree (1614/2010) ("2010 Regulatory Impact Report") was issued. It states:

The installed power objectives set out under the Renewable Energy Plan 2005-2010 have been reached or exceeded for the solar thermal and wind power technologies. While this development can be considered a major achievement for all actors involved [...] it has also caused problems that need to be addressed before they pose an irreversible threat to the economic and technical sustainability of the system.

[…] This Royal Decree provides a series of austerity measures to contribute to transferring to society the gain from the proper evolution of these technologies in terms of competitiveness in relative costs, reducing the deficit of the power system, while safeguarding the legal security of investments and the principle of reasonable profitability.172


In relation to the limit introduced for operating hours for which premiums would be payable, the 2010 Regulatory Impact Report noted that:

The remuneration values of Royal Decree 661/2007 were calculated in order to obtain reasonable profitability rates and by taking the installations' average operating hours of these three technologies as an initial hypothesis. These operating hours can be found in the Renewable Energy Plan 2005-2010, for all technologies. Subsequently, during actual system operation, it was shown that the hours of operation of the installations, in some cases, exceed those initially expected, for various reasons, technological improvement, over-installation, etc. In any case, this means that, for them, the remuneration obtained exceeds that which is considered reasonable.173


Regarding future revisions, it stated that:

[…] as compensation for the reduction in remuneration for the given period, the wording of Article 44 of Royal Decree 661/2007 is amended, thereby guaranteeing the installations in operation, and those pre-allocated, that the value of the regulated and maximum tariffs, as well as the value of the bonus [premium], will stay the same over time.174

On 23 November 2010, Royal Decree 1565/2010 was enacted ("RD 1565/2010"). RD 1565/2010 affected mostly PV facilities (including RAIPRE pre-registered facilities). It capped the quantity of electricity produced by PV plants that was eligible to receive incentive tariffs and eliminated such tariffs after 25 years of operation (Article 1. Tenth), later extended to 28 years and then to 30 years. As noted above, RD 661/2007 set a tariff rate for the first 25 years of operation of a PV installation and then 80% of the feed-in-tariff for the remaining life of the facility (both adjusted for inflation). RD 1565/2010 also modified Article 18 of RD 661/2007 to impose additional technical requirements and reduced the tariff rate available to PV facilities under the RD 1578/2008 regime. Under RD 1578/2008 (as enacted), tariff rates decreased from year to year, in line with the maturing of the sector, and a formula was set out to calculate future tariff rates. RD 1565/2010 enacted a new level of tariffs that, according to the Claimants, resulted in "another major cutback to the Feed-in remuneration scheme applicable to the PV subsector".175
RD 1565/2010, along with RDL 14/2010 referred to below, were challenged under the ECT in Charanne B.V. and Construction S.A.R.L v. Kingdom of Spain, where the Tribunal ruled in favour of Spain.

On 3 December 2010, the Government announced the approval of RD 1614/2010 with the following press release:

The Council of Ministers has approved a Royal Decree that regulates remuneration of electricity production by the wind and concentrated solar power technologies.

The new regulations, which were agreed with both sectors last July, have the main objectives of obtaining savings to benefit consumers and to make the objectives of promotion of renewable energies compatible with those of limiting electricity production costs to guarantee the sustainability of the electricity system.

The regulation also involves reinforcement of the visibility and stability of the regulation of these technologies in the future, and guarantees the present premiums and tariffs of Royal Decree 661/2007 as of 2013 for facilities in operation and for those included on the pre-register.


The premiums are reduced by 35 per cent for wind technology installations adhered to said Royal Decree of 2007 and those with a power exceeding 50 MW linked to those of the special regime, for the period between the date of this Royal Decree coming into force and December 31, 2012.

From January 1, 2013, these installations shall recover the premium values, as the premiums set in the Ministerial Order of 2009 that reviews the tariffs and premiums of the special regime installations, shall be applicable.176

(11) RDL 14/2010


A few days later, on 23 December 2010, a new access toll was introduced by Royal Decree Law 14/2010 on urgent measures for the correction of the tariff deficit in the electricity sector ("RDL 14/2010"). All electricity producers, both under the Ordinary and Special Regimes, were required to pay a toll to use the transportation and distribution grids. RDL 14/2010 also limited the annual operating hours amenable to premium for which PV installations could receive feed-in-tariffs. The Preamble contained the following recitals:

The impact of the global crisis, which traverses the Spanish economy, has led to a significant decline in the demand for electric energy […] Thus, a set of provisions is established, so that all industry agents contribute, in a further and combined effort, to the reduction of the deficit of the electricity system. Special attention and care has been taken not to affect the economic-financial balance of companies within the sector […] to ensure that […] power generation companies under the special regime receive adequate and reasonable compensation. […]

[…] it seems reasonable that producers under the special regime also make a contribution to mitigate the extra costs of the system; this contribution should be proportional to the characteristics of each technology, […] and the existing margin in remuneration, while guaranteeing in any case a reasonable profitability. This method has been used with the same purpose during the approval in recent months by the Government of regulatory measures aimed at electricity producers using wind turbine, thermosolar and cogeneration technologies.183


After the Council of Ministers' meeting at which RDL 14/2010 was approved, the Government issued the following press release:

The Council of Ministers has adopted a Royal Decree Law containing a number of measures to reduce the regulated costs of the electric power system; the primary goal of this Royal Decree Law is to ensure the system's economic sustainability and help eliminate the so-called tariff deficit according to the schedule established in 2009.

The electric power sector is going through an exceptional situation caused by a sudden drop in electricity demand. [...]

The direct consequence of this situation has been a loss of revenue for the whole system, as well as an increase in total regulated costs, due to the effects of the fall in demand.

Since 2009, the Government has adopted a series of measures to rationalize regulated costs and reduce the tariff deficit. […]

In 2010, the Government has continued to work on cost reduction and has adopted a number of technical measures to improve quality:

-Agreement with the wind sector, which temporarily reduces their premiums by 35%, limits the number of hours eligible for premiums, [...] eliminates the option to pay market price plus premium (more advantageous than the regulated tariff option) for all plants registered in the pre-registry for one year; delays the entry into operation of plants registered in the preregistry; and limits the number of hours with the right to receive premiums based on the different technologies in place.184


On 26 January 2011, the Minister of Energy, Miguel Sebastián Gascón, appeared before the Lower House of the Parliament. He stated:

[…] since 2009, the Government has been working to adopt a set of measures whose common denominator is the streamlining of regulated costs and the reduction of the tariff deficit […]185

These actions in 2009, [...] have continued to be used in 2010, first, after reaching an agreement with the wind farm sector, reducing their premiums temporarily by 35 percent and permanently limiting the number of hours they are entitled to premiums. […]186

All these measures have come about from dialogue, both with the sectors affected as well as with the main political forces. But these measures of 2009 and 2010 have not been enough. The imbalances have been accentuated as a consequence of the appearance of a series of adverse circumstances, in some cases exceptional, of which I should like to highlight two. Firstly, the above forecast growth of some of the regulatory costs during 2010, in particular the premiums of the special regime, and secondly, the evolution of electricity demand, which in 2009 fell 4.7%. This is the first fall in electricity demand after 25 years of sustained increases of around 4% per year. These decreases in electricity demand reduce the income of the system and entail fixed costs that have to be paid by fewer users of electricity, which raises the cost per user. These two circumstances have increased the tariff deficit and have meant that the measures adopted thus far to guarantee the progressive reduction of the tariff deficit in a balanced way among all sector agents proved to be inefficient. Consequently, the need to urgently approve new measures.187

As noted above, RDL 14/2010 (along with other measures affecting PV investors) was challenged and upheld in Charanne. Claimants here deny it to be a breach of the ECT because Article 17 of Law 54/1997 allowed the Respondent to impose access tolls. It was known and accepted.188

In March 2011, the consulting firm Pöyry published a report on the "Current and Future Trends in the Spanish Solar Industry". The report states:

[…] the zero deficit target is unlikely to be met by the end of 2012 […]. If the zero tariff deficit target by end of 2012 is postponed, it will open up the opportunity to more deficit generation. Considering the Government behaviour, it is likely that future changes might be implemented if considered needed. […] We feel that the Government is in a position to continue with the same energy policy, if considered a requirement, including implementation of further reductions in remuneration to renewables and non – renewable technologies.189


In June 2011, APPA lodged an appeal against RD 1565/2010 in which it stated:

A number of judgments by that High Court [i.e. Supreme Court] have rested on the argument that changing the special remuneration regime for electricity generation to reflect changing circumstances over time is in the hands of the legislator, subject solely to the requirement that such changes respect the provisions of section 30.4 of the Electricity Sector Act, so that the modifications do not affect "reasonable rates of return with regard to the cost of money in capital markets" as guaranteed in the aforementioned Act. These Supreme Court judgments are those handed down on 25 October 2006; 20 March 2007; 3 December 2009; 9 December 2009 (Tarragona Power, S.L.) and another of the same date.190

8 September 2011 - Renerco [under BayWa's control] buys shares from Shell and brings its own participation in the SPVs from 32.6% up to 73%. The purchase price was not disclosed to the Tribunal.
In December 2011, the Partido Popular took office after a general election.

(12) RDL 1/2012


On 27 January 2012, the new Spanish Government passed Royal Decree-Law 1/2012 ("RDL 1/2012").191 RDL 1/2012 suppressed the feed-in remuneration regime of RD 661/2007 for new Special Regime facilities. Facilities which, at the time of the entry into force of RDL 1/2012, had been finally registered in the RAIPRE – such as the Claimants' Wind Farms – were excluded from its scope of application. The preamble summarises the efforts made by RDL 6/2009 and RDL 14/2010 to address the tariff deficit. It then states:

[…] the measures adopted so far have not been sufficient, and the final purpose of eliminating the tariff deficit as from 2013 is still in jeopardy.

In light of the above, it was considered appropriate to withdraw the economic incentives for certain special regime facilities and for certain ordinary regime facilities using similar technologies, as well as to suspend the remuneration pre-allocation procedures established for them, in order to address the problem of the electricity sector high tariff deficit in a more favourable environment. By adopting this measure [RDL 1/2012], the Government has chosen to limit its scope to special regime facilities not yet registered in the Remuneration Pre-Allocation Registry, except where such condition is due to the Administration's failure to comply with the relevant time limit for making a decision. Along these lines, it has been decided to limit the scope of this measure in order to prevent it from affecting investments already made with regard to ordinary regime facilities, not subject to the pre-allocation scheme.

This Royal Decree-Law maintains the remuneration regime established in the legal system for facilities already in operation and for those already registered on the Remuneration Pre-Allocation Registry.192


On the same day the Government issued a press release, stating that further measures needed to be taken to correct the tariff deficit, reaffirming the need for renewable energy support, and noting that…

The regulation is not retroactive, i.e., it will not affect facilities already in operation, premiums already authorised or facilities already registered in the pre-allocation registries.193


On the same day RDL 1/2012 was approved, a press conference was held. The new Minister of Energy, Mr. José Manuel Soria López, affirmed that the new regulation would not affect vested rights:

[…] this Royal Decree-Law does not in any way affect any vested rights, not only of the holders of renewable energy plants already in operation, but also of the companies which have been granted a preallocation, regardless whether they have started to operate the plant or not. By this, I mean that this provision does not foresee any kind of retroactivity; we only consider it from now onwards.194

12 March 2012: Renerco gets to the current 74% of shares in the SPVs


Starting in December 2012, the Respondent adopted the following measures which are challenged by the Claimants in this case (the "Disputed Measures").

(1) Law 15/2012

On 1 January 2013, Law 15/2012 entered into force. It introduced a 7% tax on all revenue from the generation of electricity ("TVPEE"), whether from conventional or renewable sources. The preamble states that this measure was introduced to address the tariff imbalance and out of environmental concerns. It also provides that an amount equal to that collected through the TVPEE would be allocated to finance the costs of the Electricity System (Second Additional Provision).
Law 15/2012 created three additional taxes, which are not disputed in this arbitration: (i) a tax on production of spent nuclear fuel and radioactive waste, (ii) a tax on storage of spent nuclear fuel and radioactive waste, and (iii) a levy on use of continental waters for electricity production.

(2) RDL 2/2013

On 1 February 2013, Royal Decree Law 2/2013 ("RDL 2/2013") was issued, effective as of 1 January. It fixed the premium under the Premium option of RD 661/2007 at 0 EUR/kWh (thereby effectively eliminating this option) (Article 2). According to Respondent's Witness Mr. Ayuso, this led to all existing wind facilities opting for the fixed tariff as of that date.201
In addition, RDL 2/2013 cancelled the mechanism for updating tariffs, premiums and remaining elements of remuneration in accordance with the Consumer Price Index, substituting a different index, the CPI at constant tax rates, which excluded unprocessed foods and energy products (Article 1). It also eliminated the possibility to choose on a yearly basis the feed-in remuneration option (Article 3), meaning that those Special Regime facilities that after the entry into force of RDL 2/2013 on 2 February 2013 opted to sell their electricity under the "new" Premium at 0 EUR/kWh option would no longer be entitled to choose the fixed tariff option during the remainder of their operational life.202

(3) RDL 9/2013

On 12 July 2013, Spain adopted Royal Decree Law 9/2013 ("RDL 9/2013"), effective from 1 January 2013. RDL 9/2013 amended Article 34 of Law 54/1997 (which created the Special Regime for renewables producers) and repealed RD 661/2007 altogether. It eliminated the regime of feed-in incentives (i.e. fixed tariffs and premiums) both for new and existing installations, and substituted a system providing for incentives by way of "specific remuneration" based on "standard" costs per unit of installed power, plus standard amounts for operating costs depending on the type of technology and facility.
RDL 9/2013 set the target rate of return at 300 points above the ten-year average yield of Spanish Government ten-year bonds.204 Further details were left to be determined by implementing decrees.
Pending such regulations, RDL 9/2013 provided for a system of "payments on account". Renewable energy facilities would continue to receive remuneration under RD 661/2007 as amended, but subject to "final regularization and set-off at a future undefined date" when the new regime entered into force (Third Transitory Provision).205 In addition, RDL 9/2013 abolished the provisions of RD 661/2007 relating to the supplement for reactive energy but kept the related penalty.

(4) Law 24/2013


In December 2013, Respondent adopted Law 24/2013, which superseded Law 54/1997. The purpose of this Law was to implement the new renewable energy framework envisaged by RDL 9/2013. It provided that remuneration under the new renewables support scheme should be "compatible with the economic sustainability of the electrical [sic] system" and would:

not exceed the minimum level required to cover costs which allow production installations from renewable energy sources [...] to compete on an equal footing with the other technologies on the market and which allows a reasonable return to be earned on the installation type in each applicable case.206

Law 24/2013 also established a mechanism to have renewable energy producers finance any tariff imbalance up to a limit of 2% for a given financial year (and 5% in terms of accumulated imbalance).207
Between July 2013 and 31 May 2014, while the Respondent was drafting RD 413/2014 and MO IET/1045/2014, renewable producers were paid remuneration on an interim basis.

(5) RD 413/2014

In June 2014, Spain announced the precise terms of the new regime, when it enacted RD 413/2014 (establishing the new regime) and MO IET/1045/2014 (publishing details of the new compensation formulas).

(6) MO IET/1045/2014

This Ministerial Order, made on 16 June 2014, set the remuneration parameters for "standard" facilities, including the estimated "standard costs" and "regulatory useful life" to be applied under the new regulatory regime. For purpose of identification, a standard facility code is assigned to each eligible facility ("IT" in the Spanish acronym).
Under Annex III of MO IET/1045/2014, the "reasonable return" announced in RDL 9/2013 was set at 7,398% (pre-tax) for existing renewable energy facilities on the basis of a predefined "regulatory useful life", which in the case of wind facilities such as the Claimants' was set at 20 years. This meant that any wind farm would not receive special remuneration after year 20 from its commissioning, but only the pool price regardless of their costs.
Under RD 413/2014, this target return is set to apply until 31 December 2019 (i.e., until the end of the First Regulatory Period, running from 12 July 2013 to 31 December 2019), and it would then be subject to periodic reviews for subsequent regulatory periods of 3 to 6 years each. After the end of these periods, many of the assumptions on which the incentives are calculated will be reviewed based on the performance of actual indicators, including market price and the target return,208 and the incentives may consequently be revised up or down too. By contrast, the initial CAPEX and the regulatory useful life of standard plants are not subject to later reviews.209

IT-00652 facilities are considered to have covered their estimated CAPEX (and OPEX) and to have obtained a rate of return higher than 7,398% prior to the end of the 20-year regulatory life.210 To make this determination, payments received under the Special Regime are computed. Thus, as the table below shows, these facilities do not receive an "investment incentive" under MO IET/1045/2014. Nor do they receive an "operating incentive", because their estimated OPEX is lower than expected market revenues.211

Código de Identificación Vida Útil Regulatoria (años) Retribución a la Inversión Rinv 2013 (*) (€/MW) Retribución a la Operación Ro 2013 (€/MWh) Horas de funcionamiento máximo para la percepción de Ro 2013 (h) Nº Horas equivalentes de funcionamiento mínimo Nh 2013 (**) (h) Umbral de funcionamiento Uf 2013 (**) (h)
IT-00647 20 0 0,000 - - -
IT-00648 20 0 0,000 - - -
IT-00649 20 0 0,000 -   -
IT-00650 20 0 0,000 -   -
IT-00651 20 0 0,000 -   -
IT-00652 20 0 0,000 - - -
IT-00653 20 0 0,000 - - -
IT-00654 20 3,609 0,000 - 210 126
IT-00655 20 8,557 0,000 - 219 131

Source: MO IET/1045/2014, p. 46531, R-0115 (SPA Original), C-0216

Consequently, since 2014 the income of BayWa's wind farms comes solely from market revenues; they receive no subsidies.

(7) MO IET/1168/2014

Ministerial Order IET/1168/2014 of 3 July 2014 supplemented RDL 9/2013 and particularly RD 413/2014 by providing that facilities formerly entitled to feed-in remuneration would automatically be registered in the new registry, RRRE, as of 9 July 2014.212


The Tribunal is not aware of any specific decision on Article 44 (tariff reviews) or Article 36 (the tariff rate term). It seems that the Supreme Court considered that these issues were settled by its previous jurisprudence. With these qualifications, the legality of the Disputed Measures overall was upheld under Spanish law, with passing reference also to EU law.

For instance, the Constitutional Court held in various decisions that the Disputed Measures did not breach the Spanish principle of legislative expectations or the prohibition against retroactivity. The Court reiterated its previous jurisprudence on the distinction between the proscribed and permissible retroactivity of a norm. It considered that RDL 9/2013 was not impermissibly retroactive as it "does not affect economic rights already consolidated and definitively incorporated into the assets of the recipient, or expired or consummated favourable legal situations."214 It also stressed that the changes were not unforeseen if one considers the growing tariff deficit, the economic crises and the changes already introduced. For the Court:

[...] the disputed measures certainly involve a change from the previous system, a decision that the legislature adopted as urgent in view of the situation in which the electricity system found itself. The change that has taken place cannot be described as unexpected, since the changing circumstances affecting that sector of the economy, made it necessary to make adjustments to this regulatory framework, as a result of the difficult circumstances of the sector as a whole and the need to guarantee the required economic balance and proper management of the system. There are, therefore, no grounds for arguing that changing the compensation system under review was unforeseeable for a 'prudent and diligent economic operator', based on the economic circumstances and the insufficient measures taken to reduce persistent and continuously rising deficits in the electricity system not sufficiently tackled with previous provisions.215


For its part, the Supreme Court found in one of the first judgments concerning an appeal against RD 413/2014 and MO IET/1045/2014, handed down by majority on 1 June 2016 and often referred to in subsequent decisions, as follows:

[…] this Court has insisted when faced with the succession of regulatory changes, that it was simply not possible to recognise an 'unchangeable entitlement' pro futuro for titleholders of facilities for production of electricity subject to the special system, thereby guaranteeing the unchanging nature of the remuneration framework passed into law by the regulatory legislator. The proviso in this regard was that prescriptive entitlements of the Electricity Sector Act should be adhered to in relation to reasonable profitability of investments. [...] the jurisprudence of this Court has been consistent over the years.216


In another majority decision issued by the Supreme Court on 12 July 2016, with regard to a challenge brought by AEE (the wind energy association), the Court held:

[…] of course there does not exist, or at least it is not invoked in the claim, any kind of commitment or external sign, directed by the Administrative authority to the appellants, in relation to the immutability of the regulatory framework in place at the time when the renewable energy production began.

Nor do we believe that the system in place at that time could alone be deemed to be a conclusive enough external sign to generate the legitimate expectation in the appellant; i.e. the rational and well-founded belief that the electrical power remuneration regime that it produced could not be altered in the future, as no provision of the RD 661/2007, by which its facilities were protected, guaranteed that the regulated tariff would not be subject to change.

In this regard, the jurisprudence of this Court has been constant over the years on pointing out, in the interpretation and application of the authorising rules of the legal and economic system applicable to electricity production using renewable energy sources, which guarantee the right to the reasonable rate of return on investments made by the owners of these facilities, but do not recognise their unalterable right to maintain the remuneration framework approved by the holder of regulatory power unaltered [...]217

Three out of the seven judges of the Administrative Law Chamber dissented.218 They considered that the new system as implemented by RD 413/2014 and MO IET/1045/2014 breached the Spanish law proscription against retroactivity and the Spanish principles of legal certainty and legitimate reliance. This was so, as one of them put it, because the new system reduces the level of remuneration that plants are otherwise entitled to by reference to past earnings and it "applies as if it had been in force from the very first moment that each facility commenced its regulatory life".219 Two of them also opined that "Ministerial Order IET/1045/2014, of 16 June, should have been declared void ab initio as there was no technical justification for the values and parameters of various kinds established in that Order as the defining values and parameters of the remuneration system for each standard facility."220



A relevant fact during the years of Claimants' investments was the increasing tariff deficit, which was publicly funded. This was exacerbated by the world financial downturn of 2008, although it was not caused by it. By 2013, the accumulated deficit was almost EUR 30 billion, as shown in the following tables published by the International Energy Agency based on figures from the Ministry of Energy.221

For IT-00652 facilities such as the Claimants' Wind Farms, Spain states that about 47% of their income during the first 10 years of operation came from subsidies.222
According to the Claimants, the "Disputed Measures have been effective in eliminating the Tariff Deficit".223 But they complain that "the Respondent is trying to recover the accumulated Tariff Deficit over time" in breach of its obligations under the ECT.224


It is also necessary to refer to certain decisions taken at European level. This includes decisions on the specific subject of state aid in the renewable energy sector and on the general issue of incompatibility of the ECT with European law.

(1) European state aid law

It is acknowledged by Spain that the Special Regime under Law 54/1997 was never notified by Spain to the EC under Article 108.3 TFEU, for reasons never explained to the Tribunal. This was despite the fact that successive EC Directives on Renewable Energy were expressly stated to be "without prejudice to Articles 87 and 88 of the Treaty".225

In March 2001, the CJEU found in the case PreussenElektra v. Schleswag that the obligation imposed by German Law on regional electricity distribution companies to purchase electricity from renewable energy sources at fixed minimum prices did not constitute state aid:

In this case, the obligation imposed on private electricity supply undertakings to purchase electricity produced from renewable energy sources at fixed minimum prices does not involve any direct or indirect transfer of State resources to undertakings which produce that type of electricity.

Therefore, the allocation of the financial burden arising from that obligation for those private electricity supply undertakings as between them and other private undertakings cannot constitute a direct or indirect transfer of State resources either.

In those circumstances, the fact that the purchase obligation is imposed by statute and confers an undeniable advantage on certain undertakings is not capable of conferring upon it the character of State aid within the meaning of Article 92(1) of the Treaty.226

In September of 2001, the EU issued Directive 2001/77/EC on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market. The Directive recited that public aid for renewable energy sources should be set by EU Member States consistently with the obligations imposed in Articles 87 and 88 of the Treaty on state aid.227 The Directive obliged them to "take appropriate steps to encourage greater consumption of electricity produced from renewable energy sources" in order to "meet Kyoto targets more quickly", and required "all Member States … to set national indicative targets for the consumption of electricity produced from renewable sources", and to report regularly to the EU on their progress in meeting those targets. Spain's specific indicative target was to draw 24.9% of its electricity from renewable sources by 2010. The Tribunal understands that notified schemes were generally approved by the EC.228

In April 2009, the EU issued Directive 2009/28/EC, which repealed Directive 2001/77/EC and increased the EU's community-wide target for total energy from renewable sources from 12% by 2010 to 20% by 2020.229 Member States were directed to follow the Guidelines on state aid for environmental protection and energy, approved the year before.230 These Guidelines provided that "the aid amount must be limited to the minimum needed to achieve the environmental protection sought."231 To do so:

Member States may grant operating aid to compensate for the difference between the cost of producing energy from renewable sources, including depreciation of extra investments for environmental protection, and the market price of the form of energy concerned. Operating aid may then be granted until the plant has been fully depreciated according to normal accounting rules. Any further energy produced by the plant will not qualify for any assistance. However, the aid may also cover a normal return on capital.232

In December 2013, the CJEU ruled in Vent de Colère! that support mechanisms financed by consumers constitute state aid if a public body is involved in managing the funds, a position that it reaffirmed in the 2014 Elcogás case in respect of the Spanish renewable energy regime.233
On 10 November 2017, the EC issued a decision in which it found Spain's new regulatory regime to be compatible with EU state aid regulations.234 The Commission reviewed a sample of 21 standard facilities. It observed that new "scheme replaces and supersedes the premium economic scheme [...], which was governed by Royal Decrees 661/2007 and 1578/2008. Payments under the premium economic scheme are covered by the decision in order to assess proportionality, i.e. the absence of overcompensation".235 To be proportional, according to the EC, the aid must be limited both in time (i.e. it cannot last longer than the depreciation period of the facility) and amount; it should be restricted to minimum required to achieve a "level playing field"236

The EC added:

As a general comment, the Commission recalls that there is ʽno right to State Aidʼ. A Member State may always decide not to grant an aid, or to put to an end to an aid scheme [...]237

In the very specific situation of the present case, where a Member State grants State aid to investors, without respecting the notification and stand-still obligation of Article 108(3) TFEU, legitimate expectations with regard to those State aid payments are excluded. That is because according to the case-law of the Court of Justice, a recipient of State aid cannot, in principle, have legitimate expectations in the lawfulness of aid that has not been notified to the Commission.238

[…] In an intra-EU situation, Union law is part of the applicable law, as it constitutes international law applicable between the parties to the dispute. As a result, based on the principle of interpretation in conformity, the principle of fair and equitable treatment cannot have a broader scope than the Union law notions of legal certainty and legitimate expectations in the context of a State aid scheme. [...] This has been expressly recognised by Arbitration Tribunals.239

[...] If they award compensation, such as in Eiser v Spain, or were to do so in the future, this compensation would be notifiable State aid pursuant to Article 108(3) TFEU and be subject to the standstill obligation.240

(2) Compatibility of the ECT with European Union law


On 6 March 2018, the CJEU issued its Achmea decision. The CJEU concluded that the arbitration clause in Article 8 of the Netherlands-Slovakia BIT is incompatible with Articles 267 and 344 TFEU:

[…] Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the BIT, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.241

Achmea concerned the status of an UNCITRAL award in favour of Dutch Claimants against the Slovak Republic under a BIT concluded between the Kingdom of the Netherlands and the Czech and Slovak Federal Republic, which was succeeded to by Slovakia on independence. It did not involve the ECT. Slovakia became an EU member in 2004. It applied to the German courts (Germany being the place of arbitration) to set aside the award on the ground that arbitration under Article 8 of the BIT was incompatible with EU law.

The Court held that it was incompatible, on the grounds that:

(1) In deciding a claim under the BIT, the tribunal could be required to apply EU law "as forming part of the law in force in every Member State and as deriving from an international agreement between the Member States".242

(2) The tribunal was not "situated within the judicial system of the EU" …in that its decisions are subject to mechanisms capable of ensuring the "full effectiveness of EU law".243

(3) "[A]part from the fact that the disputes falling within the jurisdiction of the arbitral tribunal referred to in Article 8 of the BIT may relate to the interpretation both of that agreement and of EU law, the possibility of submitting those disputes to a body which is not part of the judicial system of the EU is provided for by an agreement which was concluded not by the EU but by Member States". Thus Article 8 of the BIT "has an adverse effect on the autonomy of EU law".244

(4) In the circumstances, "Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the BIT, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept".245

The CJEU decision has been and is being followed by other decisions and developments, which will be referred to as relevant and necessary. Two of these require specific mention here.

(3) Vattenfall AB v. Germany, Decision on the Achmea Issue

The tribunal in Vattenfall AB v. Germany upheld its jurisdiction under the ECT notwithstanding Achmea.
As to the applicable law, the tribunal decided that the law determining its jurisdiction is Article 26 of the ECT in conjunction with Article 25 of the ICSID Convention.246 The tribunal held that Article 26.6 constitutes a choice of law pursuant to Article 42.1 of the ICSID Convention and applies to the merits only.247 Hence, EU law is not applicable to the jurisdiction of the tribunal. Although under Article 31.3.c VCLT any relevant rules of international law applicable in the relations between the parties shall be taken into account, "(i)t is not the proper role of Article 31(3)(c) VCLT to rewrite the treaty being interpreted, or to substitute a plain reading of a treaty provision with other rules of international law, external to the treaty being interpreted, which would contradict the ordinary meaning of its terms."248 Thus EU law cannot be taken into account under Article 31 VCLT to interpret Article 26 of the ECT, as a departure from the ordinary meaning of Article 26 is not foreseen.249
Moreover, the tribunal rejected the EC's contentions that (i) the relationships between the Contracting Parties that are members of Regional Economic Integration Organisations ("REIO ") are governed for ECT purposes by the provisions contained in the agreement establishing the REIO; (ii) investments by investors from one EU Member State in the area of another EU Member State are made within the "Area" of the same party; and (iii) the EU's offer to arbitrate is only made to investors from non-EU Member States.250 Articles 1.2, 1.3 and 1.10 of the ECT do not exclude intra-EU arbitrations.251 Further, it would have been possible to expressly exclude intra-EU arbitrations, which was envisaged but ultimately dropped.252 Article 16 of the ECT confirms the tribunal's analysis. The ordinary meaning of Article 26.6 and Article 16 both make it clear that it is not possible to read into Article 26 an interpretation whereby certain investors would be deprived of their right to dispute resolution.253
Finally, the Vattenfall tribunal analysed, albeit briefly, whether EU law prevails under a conflict of laws analysis. It reached three conclusions: first, the rules contained in the TFEU do not constitute a lex posterior to the ECT;254 second, the ECT has not been modified by Germany and Spain inter se,255 and third, Article 16 of the ECT is lex specialis to Article 351 TFEU.256

(4) UP and CD Holding v. Hungary

Vattenfall is to be contrasted with the decision of an ICSID tribunal in UP and CD Holding v. Hungary, which was based on the exclusivity of jurisdiction under the ICSID Convention. The tribunal identified three fundamental differences as between its situation and that of the tribunal in Achmea. First, in Achmea (an UNCITRAL arbitration), the seat was Frankfurt with the result that German law applied to the arbitration proceedings, whereas the UP tribunal was a delocalised ICSID tribunal with the result that the ICSID Convention and ICSID Arbitration Rules were exclusively applicable to the proceedings. Second, whereas in Achmea the German courts had the right to exercise judicial review of the validity of the award, in UP judicial review was subject exclusively to the annulment procedure under Article 52 of the ICSID Convention. Thirdly, whereas in Achmea, the German Bundesgerichtshof submitted a preliminary question to the ECJ, in UP no other judicial review by any other court was possible.257
Hungary had argued that its accession to the EU implied its withdrawal pro tanto from the ICSID Convention.258 But the tribunal held that, even if Hungary had actually withdrawn from the ICSID Convention, both Article 72 of the ICSID Convention259 as well as the survival clause in Article 12.2 of the France-Hungary BIT would have allowed UP to maintain their claim.260




The Claimants' request for relief as stated in their Memorial on the Merits is as follows:

(i) DECLARING that the Respondent's actions and omissions with respect to the Claimants' Investment in the Wind subsectors in Spain amount to breaches of the Respondent's obligations under Part III of the Energy Charter Treaty, as well under the applicable rules and principles of international law;

(ii) ORDERING the Respondent to pay to the Claimants compensation in the amount of EUR 61,931,524; compensation which may be increased;

(iii) ORDERING the Respondent to pay the entire costs of the arbitration and all legal costs incurred by the Claimants;

(iv) ORDERING the Respondent to pay to the Claimants pre-and post-award interest accrued on all amounts claimed, compounded monthly, until full payment thereof; and,

(v) ORDERING any such further relief as the Arbitral Tribunal may deem appropriate.


Claimants' request for relief as stated in the Claimants' Reply on the Merits and Counter Memorial on Jurisdiction is as follows:

(i) DECLARING that the Arbitral Tribunal has jurisdiction to hear all claims submitted by the Claimants under the Energy Charter Treaty and, consequently, rejecting each of the preliminary objections that the Respondent raised against the jurisdiction of the Arbitral Tribunal in its Memorial on Jurisdictional Objections of June 15, 2016;

(ii) DECLARING that the Respondent's actions and omissions with respect to the Claimants' Investment in the Wind subsector in Spain amount to breaches of the Respondent's obligations under Part III of the Energy Charter Treaty, as well as under the applicable rules and principles of international law;

(iii) ORDERING the Respondent to pay to the Claimants compensation in the amount of EUR 67,347,516 (amount that may be increased);

(iv) ORDERING the Respondent to pay the entire costs of the arbitration and all legal costs incurred by the Claimants;

(v) ORDERING the Respondent to pay to the Claimants pre-and post-award interest accrued on all amounts claimed, compounded, until full payment thereof, at the rates specified by the Claimants;

(vi) DECLARING that the Arbitral Tribunal's Award is made net of all taxes, and that the Respondent may not impose any tax on the Claimants arising from the Arbitral Tribunal's Award;

(vii) ORDERING the Respondent to indemnify the Claimants for the amount of any additional tax liability in Germany and/or elsewhere, in relation to the compensation awarded in the Arbitral Tribunal's Award;

(viii) ORDERING any such further relief as the Arbitral Tribunal may deem appropriate.


The Claimants' request for relief as stated in the Claimants' Rejoinder on Jurisdiction is as follows:

(i) DECLARING that the Arbitral Tribunal has jurisdiction to hear all claims submitted by the Claimants under the Energy Charter Treaty and, consequently, REJECTING each of the preliminary objections that the Respondent raised against the jurisdiction of the Arbitral Tribunal in its Counter-Memorial on the Merits and Memorial of Preliminary Objections of June 15, 2016 and kept in its Reply on Preliminary Objections of April 7, 2017;

(ii) DECLARING that the Respondent's actions and omissions with respect to the Claimants' Investment in the Wind subsector in Spain amount to breaches of the Respondent's obligations under Part III of the Energy Charter Treaty, as well as under the applicable rules and principles of international law and, consequently, ORDERING the Respondent to pay compensation in the terms set out in the Claimants' Reply on the Merits of February 6, 2017 (points (iii) to (viii) of the Reply's Petitum);

(iii) ORDERING the Respondent to pay the entire costs of the arbitration and all legal costs incurred by the Claimants, in particular the legal costs incurred by the Claimants to address (i) the preliminary objections raised by the Respondent in its Memorial of June 15, 2016 and (ii) the requests to submit an amicus curiae brief by the European Commission on February 16, 2016 and January 17, 2017.

(iv) ORDERING the Respondent to pay to the Claimants pre-and post-award interest accrued on all amounts claimed, compounded, until full payment thereof, at the rates specified by the Claimants; and,

(v) ORDERING any such further relief as the Arbitral Tribunal may deem appropriate.

By communication dated 25 October 2017, the Claimants offered to clarify one of their petitions, namely their request "for granting compensation net of taxes". After considering the Parties' positions on this matter, the Tribunal decided on this matter as stated in paragraph 42 above.



The Respondent requests the Tribunal in its Counter-Memorial on the Merits and Memorial on the Jurisdiction (reiterated in its Rejoinder on the Merits and Reply on Jurisdiction) to:

a) Declar[e] lack of jurisdiction for hearing the Claimants' claims or, if applicable, their inadmissibility, pursuant to that laid down in the Memorials of Jurisdictional Objections and Reply to the Jurisdictional Objections;

b) Secondarily in the event that the Arbitration Tribunal were to decide that it has jurisdiction to hear the present dispute, that it should reject all the claims of the Claimants on the merits, since the Kingdom of Spain has not breached in any way, the ECT, in accordance with what is set forth in sections II and III of the present Writ;

c) Secondarily, dismiss all of the Claimants' compensatory claims, as the Claimants have no right to compensation, pursuant to that stated in section IV herein; and

d) It condemns the Claimants to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators' fees, and the arbitrators' fees and the fees of the legal representatives of the Kingdom of Spain, their experts and advisors, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred and the date of their actual payment.


The Respondent contests the jurisdiction of the Tribunal on two grounds, one general, one specific. First, it denies that the ECT applies as between EU Member States; as a corollary the Tribunal lacks jurisdiction with respect to claims under the ECT brought by German investors against Spain. Secondly, even if the Tribunal has jurisdiction with respect to some of the Disputed Measures, this does not extend to Law 15/2012 imposing the TVPEE, which is specifically excluded as a taxation measure by Article 21 of the ECT.


(1) The Respondent's Position

According to Spain, under the principle of primacy, EU Law puts aside the application of any other regulation in issues arising between EU Member States and their citizens.261 Further, Spain argues that investment treaties between EU Member States are incompatible with EU law.262 Spain points out that the Claimants are EU national investors, and that as such they are granted particular protection which is preferential to that provided for by the ECT and by any BIT.263 Since this is an intra-EU dispute,264 Spain argues that EU law is the international law applicable for the resolution of the dispute,265 and that the ECT has no application in intra-EU disputes.

(2) The Claimants' Position

For the Claimants, Articles 26.6 of the ECT and 42.1 of the ICSID Convention are the provisions determining the law that the Tribunal must apply to the merits of the dispute. Article 42.1 of the ICSID Convention provides that the Tribunal "shall decide a dispute in accordance with such rules of law as may be agreed by the parties." Article 26.6 of the ECT requires the Tribunal to apply "this Treaty [ECT] and applicable rules and principles of international law."266
EU Law is part and parcel of Spanish law and is, therefore, subordinate to international law, which must prevail.267 The regulations and decisions issued by EU bodies are not "international law". They are simple facts, which cannot override Spain's international law obligations and commitments. In this regard, the "CJEU is no more no less than the supreme court of a Contracting Party".268
Even if one were to accept the proposition that EU law could be considered as applicable international law, rather than a fact, the application of EU law would be subordinated to the ECT by virtue of Article 16 of the ECT.269

(3) The Tribunal's Analysis


Before Achmea, the intra-EU objection had been repeatedly raised before investment tribunals, both in the context of the ECT and of intra-EU BITs, and repeatedly rejected.270 It was equally rejected, for detailed reasons given, by Advocate-General Wathelet in Achmea.271 It was however accepted by the CJEU in that case, leading this Tribunal to order further written and oral briefing as described in paragraphs 49, 50, 51, 55, 57, and 58 above.

On analysis, the intra-EU objection raises two distinct questions. The first is whether the ECT had inter se application prior to the adoption of the TFEU. The second is whether the TFEU changed anything in this regard. Since the CJEU in Achmea relied on the TFEU as the basis for its conclusion, it is principally relevant to the second issue.

(a) The original scope of the ECT

Spain argues that that when the ECT was signed, the Member States of the European Community were unable to contract obligations between them regarding the Internal Market and that this is why the EU is a contracting party to the ECT.272
For these reasons the Tribunal holds that the ECT had inter se application prior to the TFEU. The question is whether this position has changed since the adoption of the TFEU.

(b) Subsequent EU Treaties and Decisions

(i) The Respondent's position

The Respondent argues that, even if the ECT had originally applied inter se, this changed in 2007 with the Treaty of Lisbon.281 In its view this Treaty "expressly speaks in favour of EU jurisdiction in matters of foreign investments" and overrides the ECT by virtue of the lex posterior rule in Articles 30 and 59 of the VCLT,282 whereby "successive treaties relating to the same subject matter" will prevail over the earlier to the extent that the treaties are not compatible.
Turning first to the substantive investment obligations, Spain argues that these are incompatible with the investment rights protected under European law. Spain points to the rules establishing the European internal market, with free movement of goods, persons, services and capital.283 Spain states that discriminatory measures are not permitted under European law.284
As far as concerns dispute resolution, the Respondent argues that the dispute resolution clause, Article 26 of the ECT, prevents an intra-EU investor from bringing arbitration proceedings against an EU Member State regarding its investment, and that the clause is itself incompatible with Article 344 of the TFEU,285 which provides that "Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein."
Respondent also says that under Article 16 of the ECT's rules for compatibility between previous and subsequent treaties and the ECT, treaties that regulate the EU prevail over the ECT in intra-EU relations.286
The Respondent argues that EU law must be applied by the Tribunal in accordance with Article 26.6 of the ECT as "international law". EU law is also part of the laws of Spain and a relevant fact for deciding the dispute.287
Moreover, the core of the dispute in this case revolves around issues of state aid. Public subsidies are the largest component of feed-in tariffs. This is a matter regulated by EU law, which is thus decisive in determining the scope of investors' rights under the regulatory framework of renewable energies in Spain.
EU Law is not confined to the treaties between EU Member States. It also includes the relevant legal acts of EU institutions such as regulations, directives and decisions as provided for by Article 288 TFEU.288

(ii) The Claimants' position

For the Claimants, Articles 26.6 of the ECT and 42.1 of the ICSID Convention are the provisions determining the law that the Tribunal must apply to the merits of the dispute. Article 42.1 of the ICSID Convention provides that the Tribunal "shall decide a dispute in accordance with such rules of law as may be agreed by the parties." Article 26.6 of the ECT requires the Tribunal to apply "this Treaty [ECT] and applicable rules and principles of international law."289
EU Law is part and parcel of Spanish law and is, therefore, subordinate to international law, which must prevail.290 The regulations and decisions issued by EU bodies are not "international law". They are simple facts, which cannot override Spain's international law obligations commitments. In this regard, the "CJEU is no more no less than the supreme court of a Contracting Party".291
Even if one were to accept the proposition that EU law could be considered as applicable international law, rather than a fact, the application of EU law would be subordinated to the ECT by virtue of Article 16 of the ECT.292

(4) Conclusions


(1) The Respondent's Position

The Respondent contends that the Tribunal lacks jurisdiction to determine whether the 7% tax on the value of electric energy production introduced by Law 15/2012 constitutes a breach of Spain's obligations under Article 10.1 of the ECT, since the TVPEE is a taxation measure exempt from the ECT by means of the carve-out of Article 21 of the ECT.310
The Respondent argues that it has not consented to submit to arbitration the resolution of disputes deriving from tax measures as the TVPEE. Pursuant to Article 26.3 of the ECT, Spain consented only to submit to arbitration disputes arising out of alleged breaches of Part III of the ECT. While Article 10.1 of the ECT is included in Part III, the TVPEE – whose introduction allegedly breaches Spain's obligations under Article 10.1 – is a taxation measure exempt from the scope of protection of Article 10.1 by virtue of Article 21.1 of the ECT, which provides that "nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties". Article 21.5 then reapplies Article 13 to taxation measures, subject to a process of preliminary referral to "the relevant Competent Tax Authority", a matter to which the Tribunal will return. But Article 10.1 is not reapplied.
The Respondent maintains that the TVPEE is a 'Taxation Measure' as defined by Article 21.7.a.i of the ECT. In accordance with this definition, the TVPEE is a domestic law of Spain, enacted by the Spanish Parliament in accordance with the relevant procedures under Spanish law,311 and is recognized as a tax under Spanish and international law.312
Besides, contrary to Claimants' argument,313 the TVPEE is a bona fide taxation measure. It is a tax of general application to renewable and conventional energy producers, which are granted the same treatment without according tax benefits to renewable energy procedures not accorded to others.314 The Constitutional Court of Spain confirmed the legislator's right to enact the TVPEE, dismissing the appeal brought by the Government of Andalusia against the alleged unconstitutionality of Law 15/2012.315
Spain further argues that, in the case Yukos v. Russia,316 referenced by the Claimants as examples of non- bona fide taxes,317 the taxation measures imposed pursued a purpose entirely unrelated to that of obtaining revenue for the State, such as the destruction of a company and the elimination of a political opponent. Such extraordinary circumstances are not present here.318
In addition, the economic effects of the TVPEE on producers of renewable energy is neutralized, as renewable energy producers subject to the payment of the TVPEE receive a special remuneration to recover the costs of the TVPEE, which, unlike conventional producers, they cannot recover in the market, thereby allowing a reasonable return and putting them on equal footing with conventional energy producers.319
Also, the purpose of the TVPEE is to raise revenue for Spain and contribute to the State resources that finance public expenses. The revenues from the TVPEE are accounted in Spain's annual General Budget; it is not a disguised tariff cut targeting producers of renewable energy.320
Finally, the Respondent refers to the arbitral jurisprudence of Isolux v. Spain321 where the tribunal declared that it lacked jurisdiction to decide the claim for alleged breach of Article 10.1 of the ECT through the introduction of the TVPEE by Law 15/2012.322

(2) The Claimants' Position

The Claimants argue that the carve-out of Article 21.1 of the ECT only applies to taxation measures that are bona fide, i.e. not actions disguised as a tax but aiming at achieving a different purpose.323 In this regard, the tribunal in Yukos decided that the tax carve-out does not apply to measures that are carried out under the guise of taxation and that have another objective than raising revenue for the State.324
Furthermore, the Claimants explains that the TVPEE established by Law 15/2012 is, in its view, not a bona fide tax; instead it is a disguised requirement that the producers of renewable energy reimburse Spain for the tariff deficit.325
The Claimants maintain that even the Spanish Government explained that the real purpose of the TVPEE "was to slash the remuneration guaranteed by RD 661/2007 to Special Regime producers to reduce the tariff deficit".326
Moreover, the Claimants contend that the arguments of the claimants in Isolux v. Spain are not the same as those used by the Claimants in this arbitration. This is for two reasons. First, in Isolux, the claimants argued that the TVPEE was not a bona fide tax because "(1) there was a contradiction between the environmental purpose that Act 15/2012 assigns to the TVPEE and its true purpose, to reduce the tariff deficit; and (2) the TVPEE discriminated photovoltaic producers".327 As to these arguments, the tribunal decided that only because there is a contradiction between the TVPEE's theoretical environmental purpose and its real one, does not render the TVPEE mala fide.328 Second, the claimants in Isolux failed to observe that even if the TVPEE were considered a tax for the purposes of Article 21 of the ECT, it would fall under the terms of a tax "other than those on income or on capital".329 This is because the TVPEE imposes a charge on "gross revenues", which is not included in the definition of "income" under Article 21 of the ECT.330
The Claimants also argue that they are entitled to MFN treatment pursuant to Article 10.7 of the ECT in connection with the Respondent's taxation of foreign investments. Article 10.7 of the ECT requires the Respondent to provide MFN treatment to German investors in the Spanish energy sector. In other investment treaties, the Respondent has agreed to observe also in relation to taxation measures the standard range of investment protections (umbrella clause, fair and equitable treatment, constant protection and security and nonimpairment). Thus, the Claimants are entitled to the same investment protection in relation to the TVPEE by virtue of Articles 21.3 and 10.7 of the ECT.331

(3) The Tribunal's Analysis


In agreement with all other tribunals which have faced this issue, the Tribunal holds that the TVPEE is a taxation measure excluded from its jurisdiction under Article 10.1 of the ECT by Article 21.1 of the ECT, which provides:

(1) Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties. In the event of any inconsistency between this Article and any other provision of the Treaty, this Article shall prevail to the extent of the inconsistency.332

The term "taxation measure" is not defined in the ECT, although Article 21.7.a includes "any provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein" as well as "any provision relating to taxes of any convention for the avoidance of double taxation or of any other international agreement or arrangement by which the Contracting Party is bound."

In the Tribunal's view, the term "taxation measure" should be given its normal meaning in the context of the ECT. According to the tribunal in EnCana v. Ecuador :

The question whether something is a tax measure is primarily a question of its legal operation, not its economic effect. A taxation law is one which imposes a liability on classes of persons to pay money to the State for public purposes. The economic impacts or effects of tax measures may be unclear and debatable; nonetheless a measure is a taxation measure if it is part of the regime for the imposition of a tax. A measure providing relief from taxation is a taxation measure just as much as a measure imposing the tax in the first place.333

The tribunal was interpreting the term "tax measure" in a BIT, but there seems no reason not to apply its definition here. For the purposes of Article 21.1 of the ECT, it suffices to demonstrate that the TVPEE constitutes a tax, i.e. a compulsory exaction of money by law for public purposes.
Prima facie, the TVPEE is a tax. It was upheld as such by the Spanish courts. The Spanish High Court dismissed a challenge to Ministerial Order HAP/703/2013 of April 2013,334 which approved Form 583 by which taxpayers self-assess and pay the TVPEE to the Spanish Treasury. The High Court declared the Order lawful.335 Second, the Constitutional Court on 6 November 2014336 dismissed a claim that Articles 4, 5 and 8 of the TVPEE were unconstitutional.337 The Court ruled that "the challenged provisions do not exceed the freedom of configuration of the legislator, who is in no way prevented from employing taxation [...]"338 and referred to the TVPEE as "the tax in question".339
As to the second limb of the definition of the term "taxation measure", namely whether the TVPEE constitutes a compulsory exaction of money by law for public purposes, this Tribunal agrees with the tribunal's conclusion in Isolux v. Spain.340 The TVPEE was collected by the Spanish State and was compulsory for all producers of electric energy for the purpose of raising funds for the State. The objective of Law 15/2012 was to address the efficient production of energy that respects the environment and sustainability.341 On its face, the TVPEE constitutes a compulsory exaction of money by law for public purposes.

In the Claimants' view, however, for a taxation measure to fall within Article 21.1 of the ECT it must have been enacted in good faith. This additional bona fide test was applied by the tribunals in Yukos v. Russia and in Hulley v. Russia. In Yukos the tribunal found that:

[…] the carve-out of Article 21 (1) can apply only to bona fide taxation actions, i.e. actions that are motivated by the purpose of raising general revenue for the State. By contrast, actions that are taken only under the guise of taxation, but in reality aim to achieve an entirely unrelated purpose (such as the destruction of a company or the elimination of a political opponent) cannot qualify for exemption from the protection standard of the ECT under the taxation carve-out in Article 21(1).342

The Yukos tribunal, like the tribunal in Hulley, distinguished between bona fide measures and measures aimed at destroying a company or political opponent.343
The Tribunal is not confronted with a similar scenario. There is no evidence that Spain intended to destroy the Claimants by means of the TVPEE. As stated by the tribunal in Isolux v. Spain, the "economic repercussions or effects of the [T]VPEE may be obscure and debatable, but that does not constitute a sufficient argument to conclude that the [T]VPEE is a tax measure that was promulgated in bad faith."344
In Eiser v. Spain the tribunal did not decide whether there is a bad faith exception to Article 21.1:345 it held that the bad faith allegation "could be maintained only if Spain knew or should have known that the RD 661/2007 tariffs cannot be substantially altered, and so knowingly violated its obligations under the ECT by adopting Law 15/2012. The evidence is not sufficient to sustain this contention."346 Likewise in the present case: there was a concern as to the burgeoning tariff deficit, but it was a legitimate concern and it was reasonable that the energy sector as a whole should bear at least part of the fiscal burden.
The decision in Antaris v. Czech Republic is not inconsistent with this conclusion. There the tribunal held that a levy chargeable only on the recipients of subsidies and collected by way of an offset against subsidy entitlements was not a tax. The decision on that point is distinguishable inter alia on the basis that the Czech Supreme Administrative Court found that the "Solar Levy is not a tax for the purposes of the prohibition against double taxation under Czech law"347. The levy's avowed purpose was to reduce the feed-in tariffs for certain investors and not to raise revenue for the State budget.348

By contrast the Spanish Constitutional Court in its decision of 4 December 2014 upheld the TVPEE on the ground that:

[…] the challenged provisions do not exceed the freedom of configuration of the legislator, who is in no way prevented from employing taxation as an economic policy instrument in particular sectors … which means for ordinance or extra-fiscal purposes … The widespread application of the tax in question responds to an option open to the legislator, who while respecting constitutional principles, has a broad margin for establishing and setting up the tax. This margin cannot be constrained by demands for a differentiation that is not constitutionally obligatory, however much the appellant feels this is appropriate or necessary, nor by expectations of the maintenance of the pre-existing tax scheme – which in itself, would prevent any kind of legislative innovation.349

For these reasons, the Tribunal finds that the TVPEE constitutes a taxation measure for the purposes of Article 21.1 and the claim falls outside the Tribunal's jurisdiction insofar as it involves an alleged breach of Article 10.1 of the ECT.
The Claimants seek to avoid the exclusionary consequences of classifying the TVPEE as a "taxation measure" by relying on Article 21.3 of the ECT, which provides that, with certain irrelevant exceptions, "Article 10(2) and (7) shall apply to Taxation Measures… other than those on income or on capital". Article 10.7 contains an MFN provision under which the Claimants may invoke other international investment treaties to which Spain is a party. These agreements contain the standard range of investment protections, including umbrella clauses, fair and equitable treatment provisions and constant protection and security and non-impairment provisions. Thus, the Claimants argue, Article 21.3 lets in by the back door the protections excluded by Article 21.1 in relation to "Taxation Measures".350

But it only does so if the TVPEE is not a "tax measure on income or on capital". Article 21.7.b of the ECT defines this term broadly as:

[…] all taxes imposed on total income, on total capital or on elements of income or of capital, including taxes on gains from the alienation of property, taxes on estates, inheritances and gifts, or substantially similar taxes, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.

The question is then whether the TVPEE is a "tax measure on income or on capital". In which case the MFN clause in Article 10.7 would not apply. According to the KPMG Expert Witness Report, Law 15/2012 introduced a 7% tax on the "total revenue… for the production and incorporation of energy into the electricity system."351 The term "total income" used in Article 21.7.b can be equated to the term "total revenue" used by the Claimants' experts. Even if the two terms are not co-extensive, Article 21.7.b states that taxes imposed on "elements of income" also constitute tax measures on income or on capital. If "total revenue" does not constitute the "total income" it undoubtedly constitutes "elements of income".
Article 6 of Law 15/2012 states that the "tax base" is the "total amount that is to be received by the taxpayer".352 Further, the "calculation of the total amount will take into account the remuneration […]". The tax is therefore imposed at least on "elements of income".
As a result, the TVPEE is a tax on income in the sense of Article 21.7.b of the ECT. Consequently, the Claimants cannot invoke any other protection standards by means of the MFN clause in Article 10.7 of the ECT. This further basis of claim must also fail.




The Claimants allege five causes of action arising under the ECT:

(a) indirect expropriation (Art. 13 of the ECT);

(b) breach of the umbrella clause (Art. 10(1) of the ECT, last sentence);

(c) breach of fair and equitable treatment (Art. 10(1) of the ECT, second sentence);

(d) breach of the obligation of most constant protection (Art. 10(1) of the ECT, third sentence);

(e) impairment of the investment by unreasonable or discriminatory measures (Art. 10(1) of the ECT, third sentence).

Before turning to the merits of these claims, insofar as they fall within the Tribunal's jurisdiction, it is relevant to observe that a large number of parallel claims have been filed against the Respondent arising out of the Disputed Measures, producing somewhat discrepant results.
As a general matter, investment tribunals (like other international tribunals) are not bound by a strict doctrine of precedent, but are charged to make their own appreciations based on the evidence and argument presented to them. On the other hand, in practice tribunals regularly cite previous, publicly available awards and pay careful attention to them. In the Tribunal's view, concordant decisions on the interpretation and application of the ECT are entitled to respect, especially if they rise to the level of a jurisprudence constante. On the other hand, where they diverge, a later tribunal has no choice but to form its own view of the relevant law and its application to the facts. This the Tribunal has done.


This section sets out the Parties' positions regarding (a) the evolution of the regulatory framework for renewable energies in Spain; (b) the scope and legal effect (if any) of the 2010 Agreement; (c) the approval of the new remuneration regime; (d) the impact of the Disputed Measures on the Wind Farms; and (e) Claimants' asserted expectations. Section VI(C) below addresses the claims submitted under the ECT and the arguments of the Parties in relation thereto.

(1) Claimants' positions

(a) The evolution of the regulatory framework

According to the Claimants, Spain committed under EU law and other international instruments to ambitious renewable energy targets.353 To meet such targets, it put in place a system of feed-in incentives specifically designed to induce "qualifying investors" to invest in Spain354 and to facilitate their access to project finance.355 This system, which was promoted by Government officials overseas to attract foreign investment from various countries including Germany (home State of the Claimants) guaranteed, among others, "a price per kWh of electricity produced during lifetime of their RES installations (FiT or FiP)"356, a right that "ran with the installation, benefitting subsequent investors".357
According to the Claimants, Article 30.4 of Law 54/1997 granted Special Regime producers a general entitlement to a premium (i.e. remuneration "shall" be supplemented by a premium).358 Successive regulations gave content to this entitlement by establishing specific rights, which were meant to be permanent and to remain stable over time. As set out in RD 661/2007, these rights included: (i) to choose on an annual basis between Regulated Tariff or the Pool Price plus a Premium Option; (ii) to sell under both options the full net amount of the electricity produced; (iii) to receive the Feed-in remuneration scheme for an unlimited period of time, thus including the entire lifespan of the Wind Farms; (iv) to receive a Feed-in remuneration scheme in which Tariffs, Premiums and upper and lower limits had to be annually updated in accordance with the general CPI less 0.25% until the end of 2012 and less 0.50% onwards; (v) to priority access to the transmission and distribution grid and energy dispatch priority; and, (vi) to receive, regardless of the sale option elected under Article 24.1 of RD 661/2007, a Supplement for Reactive Energy for the maintenance of certain stipulated power factor values, which was established at 0.082954 EUR/kWh.359
According to the Claimants, only "qualifying renewable energy producers who managed to successfully build, commission and register their installation in RAIPRE and contributed to the objectives set out in the Renewable Promotion Plans, were entitled to the FiTs and FiPs guaranteed in the Feed-in Regulations."360 A legal relationship was at that point formed between the investor and the Spanish Government.361 Spain thus "made a regulatory compact with investors by offering a vested economic right to earn a FiT or FiP in exchange for committing investments that materialized in renewable installed capacity in Spanish territory".362
Neither Law 54/1997 nor the Feed-in Regulations established that Special Regime incentives could be modified or eliminated as a result of macro-economic variables,363 based on any kind of "sustainability principle" or "self-sufficiency principle".364 Between 1997 and 2007, Article 15 of the Law 54/1997 simply provided that the Government shall fix electricity prices against tariffs, transportation and distribution tolls.365 It was only in 2007 – ten years after Law 54/1997 – that a principle of "self-sufficiency" was introduced in Article 18.1 of Law 54 by Law 17/2007, and it was not the broad "sustainability" principle described by the Respondent; it only concerned the very specific situation of tariffs of last resort in order to avoid distorting competition.366 If there was ever a more encompassing principle of self-sufficiency of the Spanish electricity system, that was only introduced as a binding parameter in December 2012, through Law 15/2012, one of the Disputed Measures.367 Before then, the Respondent had funded part of the electricity system's costs through general State revenues, which disproves the existence of any such principle.
Renewable Energy Plans were not adopted to estimate the costs of increasing renewable energies nor did they set up any discernible limits to an investor's returns. Rather, they estimated the amount of money required to fund the desired increase in installed capacity and decide on effective regulatory stimuli to attract that capital in the form of investments.368 As noted above, RD 661/2007 guaranteed the right to sell all electricity produced (priority of dispatch), the purpose of which was that investors would not bear the electricity demand risk.369 The Renewable Energy Plans' estimation of future demand cannot be used to defeat that purpose. Nor can the underlying assumptions concerning returns and operational life prevail over the terms of the applicable royal decrees.
Contrary to Respondent's assertions, Articles 40.3 of RD 436/2004 and Art. 44.3 of RD 661/2007 are not confined to scheduled revisions of the "regulated tariff and the upper and lower limits" of RD 661/2007, or the "tariff, premiums, incentives and supplements" of RD 436/2004. Their scope is much broader. They protect existing installations from any "detrimental adjustment" or "downward revision" (other than those envisioned in the applicable updating and revision provisions) or, at the very least, they created justifiable expectations to that effect.370 This interpretation flows from the context in which these provisions were issued and the conduct of Spanish authorities in reliance of them.371
Until 2012 the Respondent had "constantly sought to improve the regulatory stability of renewable energy projects"372, negotiating any proposed amendment with the renewable energy sector before putting it in place. RD 661/2007 was not introduced following the adoption of RDL 7/2006 to remedy the "perverse effects" of RD 436/2004 and protect the sustainability of the electricity system as the Respondent contends. As a matter of fact, the changes made by RD 661/2007 enabled the Government to "establish even higher FiTs and FiPs",373 which were increased for those technologies having the lower levels of growth such as biomass and thermosolar. Regulated tariffs were also raised for wind installations374 and the cap & floor mechanism introduced with respect to premiums for all technologies did not benefit the Spanish Government only (i.e. no FiP if market price above the cap) but also investors (i.e. minimum FiP if market price below the floor), strengthening price stability under the FiP option.375 These changes were all coherent with the Feed-in model. Moreover, a transitional period was established to protect existing installations.376
Nor was RDL 6/2009 adopted to rebalance the sustainability of the electricity system. It was just another "[failed] attempt to deal with the Tariff Deficit in a manner compatible with [Spain's] renewable energy policies, without using renewable investors as scapegoats."377 It only affected prospective investors. Even so, investors who managed to get pre-registration and to build on time would benefit from the remuneration's regime under RDL 6/2009. Therefore, "through RD-L 6/2009, the Respondent incentivized prospective investors to make stronger investment commitments in exchange for specific guarantees of stability and legal certainty".378 Moreover, Spain eventually accepted additional installed capacity above the initial objectives on the basis of studies that concluded that this was economically feasible,379 which disproves that RDL 6/2009 had been necessary to ensure the sustainability of the electricity system.
Properly understood, FiTs and FiPs were not subsidies but costs to correct market failures and ensure the correct functioning of the electricity market, diversifying and strengthening energy supplies.380 They are therefore not covered by the EU state aid legislation.

(b) The 2010 Agreement

If there was ever some degree of regulatory risk, Respondent made it disappear in 2010 when it entered into an agreement with the Wind sector to guarantee the stability of the feed-in regulations. After lengthy negotiations, both parties agreed to reciprocal concessions "leading to a compromise solution recorded in writing and described by the Ministry itself as an Agreement without inverted commas".381 So did multiple Spanish authorities and the AEE.382 The Respondent subsequently included the provisions of this agreement into the first draft RD 1614/2010 released on 30 July 2010, the relevant date for purposes of Article 24.1.c. of Law 50/1997 on the Spanish Government.
Contrary to Respondent's contentions, these negotiations were not part of any ordinary consultative process under Article 24 of Law 50/1997; they preceded the draft royal decree and cannot be subsumed under that provision. The result of this agreement was Article 5.3, pursuant to which Respondent committed "not to approve regulatory changes that affected the remuneration to be received by La Muela",383 as reported in contemporaneous documents. This was "an additional guarantee of legal stability to the one existing in Article 44.3 RD 661/2007, which did not include a specific guarantee on the Premiums,"384 its purpose being to serve as a "cláusula de intangibilidad".385 In addition, the Government included Article 2.4 in fine, under which the number of equivalent hours of operation would not be revised for wind farms already registered on RAIPRE, like the Wind Farms.
The access toll introduced by RDL 14/2010 does not in any way disprove the existence of this agreement nor its binding force. Article 17 of Law 54/1997 empowered Respondent to establish access tolls, a factor which was not new for the Claimants when they decided to invest in the Wind Farms. For the Wind subsector this toll, whose economic impact was minimal, was not considered a breach of the Agreement.

(c) The approval of the Disputed Measures

The changes to the regulatory framework started in 2012, after a new Government took office. The purpose of these changes was to reduce the tariff deficit, a problem of Spain's own creation. Its essential cause lies in "the Government's repeated failure to set regulated retail consumer tariffs that would recover the full costs of the electricity services that Spain regulates"387 as well as its decision to include in the system costs that do not belong to it, such as support schemes for Spanish insular territories. Financial incentives to the wind sector played only a limited role in the accumulation of the tariff deficit. Even though the Respondent had multiple alternatives available to address this problem, it decided to adopt the Disputed Measures which were neither necessary nor proportionate.
First, Law 15/2012 introduced a 7% cut on the remuneration of energy producers under the guise of an environmental tax, the TVPEE.388 This measure had a disproportionate effect on wind installations which have generally higher costs. It is also discriminatory because renewable energy producers, unlike conventional (non-renewable) producers, cannot pass the tax over to consumers and the Claimants' Wind Farms do not receive specific remuneration under the new regime; therefore, the fact that the amounts paid for TVPEE are considered recoverable costs under such regime is of no avail.
RDL 2/2013 then eliminated de facto the FiP option by reducing premium values to zero, and therewith the "right" to choose annually between FiP or FiT under RD 661/2007. Contrary to Respondent's contentions, this measure did not follow a recommendation made by the CNE to reduce premium by 12% in order to remedy an inconsistency in the premium's calculation; it went far beyond. Nor are the effects of this measure comparable to the termination of the Premium option for PV producers introduced in 2007. RD 661/2007 increased the Regulated Tariff as compensation for such measure, making PV investments more attractive. Additionally, the substitution of the CPI, another change brought about by RDL 2/2013, had a negative impact on the Wind Farm's profitability from January 2013 to mid-July 2013.
Just a couple of months later, RDL 9/2013 repealed the Special Regime of Law 54/1997 altogether. It then took a year for the Respondent to substitute the specific remuneration parameters, a period during which producers were left in uncertainty. Such parameters were only set out in RD 413/2014, later supplemented by MO IET/1045/2014. To make things worse, they were to apply retroactively from the date of enactment of RDL 9/2013, in July 2013. Meanwhile, payments were made on account of a final regularization under the new regime, leading to the "compulsory payment to the Respondent of EUR 460,000 'unduly' received [by the Wind Farms] between July 2013 and June 2014".389
This whole process was the product of "grossly arbitrary and non-transparent conduct by the Respondent".390 The draft RD 413/2014 was submitted for fast-track consultation without the remunerative parameters which came later, when MO IET/1045/2014 was approved. This prevented renewable agents from assessing the economic implications arising from the new system. Meanwhile, the Respondent hired two consulting firms, BCG and RB, in an obscure tender process to calculate the remunerative parameters and verify IDAE's estimates and methodology. BCG and RB handed over two reports. The reports criticized IDAE's hypotheses and methodology, especially when applicable to existing installations. Among others, BCG considered that a standard installation type benchmark should not be applied to existing installations because of their heterogeneity. It also noted that IDAE failed to gather accurate data to adopt the New Remuneration Model. They both concluded that the Respondent considered standard investment costs for each installation type lower than their real costs. BCG also stressed that the Respondent overlooked extensive construction and financing costs incurred by existing projects in defining the standard installation type.
Notwithstanding repeated requests by stakeholders and its own transparency regulations, the Respondent refused to disclose the BCG and RB reports or any other internal studies. Instead, it requested changes to the BCG and RB reports. Pending implementation of these changes, the Respondent adopted the New Remuneration Model behind closed doors disregarding the experts' technical advice and the renewable sector's recommendations. After putting it in place, the Respondent terminated BCG's contract, threatened to execute bank guarantees against BCG and refused to disclose any of the BCG-RB material to investors.

(d) The impact of the Disputed Measures

According to the Claimants, the new regime is an unprecedented system based on regulatory principles radically different from the previous regime; more akin to natural monopolies than traditional Feed-in regulations.392 It is a "paradigm change" and a "clear cut case of opportunistic regulatory behavior."393
The old regime was designed to increase energy output by offering investors higher rates of return on an ex-ante basis if electricity production was maximized efficiently – even if this came at a higher cost.394 Neither Article 30.4 of Law 54/1997 nor the Feed-in Regulations capped potential returns; they only set a floor.
Under the new regime, renewable energy installations are no longer entitled to incentives and have very few reasons to maximize electricity output.395. Specific remuneration is available only if the cap of 7,398% on pre-tax returns is not surpassed, a cap that does not reflect the WACC of the industry, as the CNE has pointed out.396 To figure this out, past earnings are computed from the start of each plant's regulatory life (hence retroactively), even though none of the Disputed Measures existed before 2012. If the installation qualifies, it receives specific remuneration for a maximum period of 20 years, regardless of the installation's actual operational life. Plants such as the Wind Farms can operate up to 41.4 years subject to minimum repair and they would have been entitled to feed-in incentives for this whole period under RD 661/2007. KPMG estimates that this would require adding around EUR 67.5 million of CAPEX in 2028397 (a sum Econ One considers excessive as the total initial CAPEX of the plants was between EUR 94 and 99 million. It proposes to use a figure of EUR 17.2 million instead, which corresponds to the costs of replacing the rotor blades).398
The New Remuneration Model applies retroactively to erase the Special Regime de facto.399 The "reasonable rate of return" is calculated taking into account the standard plant's earnings under previous regulatory framework. If the remuneration received prior to July 2013 exceeds the level determined under the new regime, the excess is offset by a reduction in the remuneration to be received from July 2013 onwards. This aspect of the new regime was even criticized by Supreme Court judges.400
In addition, TVPEE and penalties for reactive energy continue to apply although the supplement has been erased, and the new obligation imposed on renewable producers to finance situations of tariff imbalance has led to significant delay in payments. For instance, by 30 June 2015, renewable producers had collected only 82.68% of the payments they were entitled to under the new regime corresponding to the first half of 2015.405
In the case of the Claimants' Wind Farms, they have been "stripped of every single incentive based on the argument that [they] had already achieved the standard 7,398% pre-tax return, even though this cap did not exist [before]".406 Cash flows have come down by 81.2% resulting in damages to the Claimants of around EUR 70 MM.407 As a result of this, the New Remuneration Model has substantially reduced La Muela's IRR from 9.40% to only 7.08% (after-tax), which means an "impact and an effect on IRR, with a difference of 2.33% (post tax)"408. The New Remuneration Model thus deprives the Claimants of their legitimate rewards under the former regulatory regime.409 The Claimants undertook technological and construction risks because that regime offered the possibility of earning returns higher than what the Respondent now considers to be reasonable.
Because of the impact of the Disputed Measures, the Claimants had to refinance their loans in onerous terms (the "2016 Refinancing"). BayWa AG stepped in as guarantor (which is at odds with the non-recourse nature of the original financing arrangement); the payment schedule was prolonged from 19 to 23 years; financial ratios are now much stricter; the ordinary interest rate increased from 0.75% to 1.60%; dividends cannot be distributed to shareholders until debt is fully repaid and the Project's credit rating has dropped significantly.
Lastly, the New Remuneration Model is the antithesis of stability. It contemplates deep regulatory changes every three and six years: "Today the 'reasonable rate of return' is 7,398%. But tomorrow it could be 6% or even 5%. It all depends on the Respondent's mood, since the methodology (if any) for updating the 'reasonable rate of return' or, more specifically, the spread that will apply in future regulatory periods has not been disclosed."410

(e) The Claimants' expectations

Claimants state that they did not expect that a particular royal decree would remain frozen, but they did expect, and were entitled to expect, that any change would preserve "the essential conditions that were guaranteed when they invested (FiT or FiP during the entire lifetime of La Muela)."411
The original investors built up the Wind Farms under this understanding.412 Upon its incorporation on 7 November 2003, BayWa AH (formerly RENERCO) "inherited the expectations of its founding companies."413 These expectations "evolved as Spain developed the Special Regime in line with its renewable policies":414 first, by the enactment of RD 436/2004 which improved the conditions of RD 2818/1998 and included a express grandfathering commitment (i.e. Article 40.3); and then by RD 661/2007 which kept the essentials of the previous royal decree and included an additional grandfathering commitment. Claimants' expectations were further confirmed after the Spanish Government and AEE reached the July 2010 Agreement in which further promises of stabilization were made. Thus, when the opportunity arose on 8 September 2011, to acquire a controlling stake in La Muela from Shell, the Claimants did not hesitate to increase their investments in the Spanish renewable sector. This is the relevant date for legitimate expectation purposes. It was in reliance of the regulatory framework as it stood at the time, that BayWa AH (through BayWa RE) decided to acquire a controlling stake in the Wind Farms.415 For due diligence purposes, however, the relevant date should be November 2009, when BayWa AH acquired most shares of Renerco (later renamed BayWa RE).416
The Supreme Court decisions cited by the Respondent are irrelevant to the assessment of Claimants' expectations.417 The vast majority of them were issued "after the Claimants invested in La Muela (i.e. …from September 2011 onwards)".418 Those issued before cannot simply "override the numerous statements made by the Spanish Government regarding the meaning of Regulatory Framework No. 1 and the express assurances made under the Agreement […]".419 First of all, these decisions concerned appeals under Spanish law seeking annulment of royal decrees for violation of Spanish law's hierarchy of norms. They did "not consider the reasonable expectations of investors and the liability of the Spanish administration as a result of these expectations being frustrated."420 The subject-matter of these proceedings is therefore very different from this arbitration. Second, they deal with relatively "minor modifications to specific features of an installations' remuneration"421 the extent of which was tempered by grandfather clauses and transitory provisions. They did not concern a complete change of paradigm eliminating all incentives, as in