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

Final Award

A TABLE OF ABBREVIATIONS

Abbreviation Definition
2010 Agreement An alleged agreement entered into between Spain and the wind and thermosolar associations which led to the implementation of RD 1614/2010.
2011 SPA Share purchase and share agreement Renovalia Energy S.A. and Renovalia Wind 2 S.L. and FREIF Eurowind Holdings Limited as Vendor and New Leads Investment, S.L.U. as Purchaser dated 14 October 2011.
2019 SPA "Project Castilla" Share Sale and Purchase Agreement between RENOVALIA RESERVE SL (Seller), ARDIAN (Purchaser) and GEPIF and RENOVALIA WIND 2 (Shareholders) dated 1 May 2019.
Achmea Judgment of ECJ, Case C-284/16, Republic of Slovakia/Achmea BV. 6 March 2018.
AEE Spanish Wind Energy Association
AET Average Electricity Tariff
APPA Association of Renewable Energy Producers
Arbitration The present dispute before the Tribunal
Ardian Ardian Infrastructure Fund V S.C.A., SICAR, and Ardian Infrastructure Fund V B S.C.S., SICAV-RAIF together.
Asset Sale The sale of FREIF and Renovalia's shares and shareholder loan interests in Renovalia Reserve to Ardian Infrastructure Fund V S.C.A., SICAR, and Ardian Infrastructure Fund V B S.C.S., SICAV-RAIF on 1 May 2019.
BIT Bilateral Investment Treaty
Claimant FREIF Eurowind Holdings Ltd
CNE National Energy Commission. The Regulatory Body of the energy systems in Spain (as from 7 October 2013, its functions have been assumed by the National Markets and Competition Commission).
CPI Consumer Price Index
DCF Discounted cash flow
EC European Commission
ECJ European Court of Justice
ECT Energy Charter Treaty
EU European Union
FET Fair and equitable treatment under Article 10(1) of the ECT
FREIF FREIF Eurowind Holdings Ltd
IAC International Arbitration Centre, London
ICC International Chamber of Commerce
ICSID International Centre for Settlement of Investment Disputes
IDAE Institute for the Diversification and Saving of Energy
IRR Internal Rate of Return
Linklaters Memorandum Linklaters Regulatory Risk Memorandum dated 8 June 2011
New Regulatory Regime RDL 9/2013, Law 24/2013, RD 413/2014, and MO IET/1045/2014
ORIE Regional Economic Integration Organisation
Original Regulatory Regime Law 54/1997 and related laws and regulations including, RD 2818/1998, RD 436/2004, RDL 7/2006, and RD 661/2007, RDL 6/2009, RD 1565/2010, RD 1614/2010, and RDL 14/2010.
PANER National Renewable Energy Action Plan in Spain 2011-2020
Parties FREIF and Spain
PER Renewable Energy Plan in Spain 2005-2010
RAIPRE Administrative Registry for Special Regime Generation Facilities
RD Royal Decree
RDL Royal Decree-Law
Respondent The Kingdom of Spain
SCC Arbitration Institution of the Stockholm Chamber of Commerce
SCC Board Board of Directors of the SCC
SCC Rules Arbitration Rules of the SCC in force as from 1 January 2017.
SES Spanish Electricity System
Spain The Kingdom of Spain
Spanish Lawsuits Contentious-Administrative Appeal Application dated 9 September 2014 filed by DEMEPI before the Spanish Supreme Court against Royal Decree 413/2004 and Ministerial Order 1045/2014.13, and Contentious-Administrative Appeal Application filed by EACLM and ENERDUERO on 9 September 2014 before the Spanish Supreme Court against Royal Decree 413/2004 and Ministerial Order 1045/201416.
Special Regime A regime governing electricity generators from renewable energy sources, cogeneration, and waste facilities under 100 MW, created by RD 2366/1994.
TEU Treaty on European Union
TFEU Treaty on the Functioning of the European Union
Tribunal Professor Douglas Jones AO, Professor Thomas Clay and Professor Dr Kaj Hobér until 14 December 2019. Professor Douglas Jones AO, Professor Thomas Clay and Mr C. Mark Baker from 7 January 2020.
TVPEE Tax on the value of the production of electrical energy. Created with validity beginning 1 January 2013 by Act 15/2012, and governed by Articles 1 to 11 of said Act 15/2012.
VCLT Vienna Convention on the Law of Treaties

 

B SUMMARY OF AWARD

1.
This Arbitration concerns legislative and regulatory guarantees and commitments that Spain implemented from 2004 through 2010 to incentivise substantial investment in its renewable energy sector, and changes to its regulatory regime thereafter.
2.
In December 2011, FREIF Eurowind Holdings Ltd. (FREIF) purchased a 50% preferred equity interest in a portfolio of six operating wind parks with a total capacity of 244 MW. In 2012, the Spanish Government made alterations to the legal framework which had supported the scheme of economic incentives. This led FREIF to file a Request for Arbitration on 21 March 2017, pursuant to the terms of the Energy Charter Treaty (ECT).
3.
FREIF's position is that the Kingdom of Spain (Spain) reneged on its guarantees and commitments once it had reaped the benefits of the investments it had attracted. These actions resulted in substantial detriment to FREIF and many other investors in the renewable energy sector that had similarly relied upon Spain's promises. In so doing, Spain is alleged to have violated the ECT and related rules of international law that protected FREIF's investments. FREIF's claim focuses on three principal legal standards which it says were violated: (i) the ECT's "fair and equitable treatment" provision; (ii) its "impairment" clause; and (iii) its "umbrella" clause. Spain is therefore liable to FRIEF for the damages it caused to the investments as a result of its conduct.
4.
Spain, in defence, contends that it has not in any way breached the obligations which it assumed at an international level under the ECT. It contends that Spain has always exercised its regulatory power fairly and proportionately to ensure the sustainability and balance of the Spanish Electricity System (SES) and the reasonable return for renewable energy plants. Spain has thus not violated the ECT or any other rules of international law. Additionally, it contends that the Tribunal does not have jurisdiction to decide this dispute on three separate grounds.
5.
For the reasons set out in this Award at Parts N4, O3, P5, Q6, R5 and S3, and pursuant to the Tribunal's dispositive orders at Part T, the Tribunal finds that:

(a) it has jurisdiction under the ECT for all of FREIF's claims, with the exception that it has no jurisdiction to determine whether the tax imposed by Law 15/2012 violates Spain's obligations to FREIF's investment under the ECT.

(b) Spain has not violated Part III of the ECT and international law with respect to FREIF's investments.

(c) FREIF is to pay Spain the costs it has incurred and Spain's share of the Costs of the Arbitration. Simple interest shall accrue from the date of the award to the date of payment at the rate of the Spanish Government 10-year bond yield.

C PARTIES

6.
The Parties to this Arbitration are as follows.

C1 Claimant

7.
The Claimant is FREIF Eurowind Holdings Ltd (either "FREIF" or "the Claimant"), a private limited liability company incorporated under the laws of England under registration number 7803962, whose address is 12 Throgmorton Ave, London EC2N 2DL, United Kingdom.1

C2 Respondent

8.
The Respondent is the Kingdom of Spain (either "Spain" or "the Respondent").

D PARTIES' LEGAL REPRESENTATIVES

9.
The Parties' legal representatives in this Arbitration are as follows.

D1 FREIF's Legal Representatives

10.
FREIF is represented by:2

(a) Mr Kenneth R. Fleuriet;
(b) Mr Reginald R. Smith;
(c) Mr Kevin D. Mohr;
(d) Ms Amy Roebuck Frey;
(e) Ms Héloïse Hervé;
(f) Mr Christopher S. Smith;
(g) Mr Enrique J. Molina; and
(h) Ms Isabel San Martín

of King & Spalding, with its offices at 1700 Pennsylvania Ave., NW 2nd Floor Washington, D.C. 20006, USA; 1100 Louisiana Street, Suite 4000, Houston, Texas, 77002, USA; and 12 Cours Albert 1er, 75008, Paris, France; and

(i) Ms Verónica Romaní Sancho;
(j) Mr Luis Gil Bueno;
(k) Ms Inés Vázquez García;
(l) Ms Teresa Gutiérrez Chacón;
(m) Ms Inés Puig-Samper; and
(n) Ms Cristina Matia Garay.

of Gómez-Acebo & Pombo, Castellana, 216, 28046, Madrid, Spain.

D2 Spain's Legal Representatives

11.
Spain is represented by:3


(a) Mr José Manuel Gutiérrez Delgado;
(b) Ms Gabriela Cerdeiras Megias;
(c) Mr Pablo Elena Abad;
(d) Ms Lorena Fatas Pérez;
(e) Mr Antolín Fernández Antuña;
(f) Mr Roberto Fernández Castilla;
(g) Ms Ana Fernández-Daza Alvarez;
(h) Ms Patricia Froehlingsdorf Nicolás;
(i) Ms María del Socorro Garrido Moreno;
(j) Mr Rafael Gil Nievas;
(k) Ms Lourdes Martinez de Victoria Gómez;
(l) Ms Mónica Moraleda Saceda;
(m) Ms Elena Oñoro Sainz;
(n) Mr Mariano Rojo Pérez;
(o) Mr Diego Santacruz Descartín;
(p) Ms Alicia Segovia Marco; and
(q) Mr Alberto Torró Molés

of the Attorney General's Office of the Ministry of Justice, with its offices at Marqués de la Ensenada, 14-16, 2ª planta, 28004, Madrid, Spain.

E ARBITRATION AGREEMENT

12.

This Arbitration is brought pursuant to Article 26(4)(c) of the ECT, in which the Parties consented to submitting disputes to international arbitration at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). Article 26 of the ECT provides in full:

Article 26: Settlement of Disputes Between an Investor and a Contracting Party

(1) Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably.

(2) If such disputes can not be settled according to the provisions of paragraph (1) within a period of three months from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution:

(a) to the courts or administrative tribunals of the Contracting Party party to the dispute;

(b) in accordance with any applicable, previously agreed dispute settlement procedure; or

(c) in accordance with the following paragraphs of this Article.

(3) (a) Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of this Article.

(b) (i) The Contracting Parties listed in Annex ID do not give such unconditional consent where the Investor has previously submitted the dispute under subparagraph (2)(a) or (b). (ii) For the sake of transparency, each Contracting Party that is listed in Annex ID shall provide a written statement of its policies, practices and conditions in this regard to the Secretariat no later than the date of the deposit of its instrument of ratification, acceptance or approval in accordance with Article 39 or the deposit of its instrument of accession in accordance with Article 41.

(c) A Contracting Party listed in Annex IA does not give such unconditional consent with respect to a dispute arising under the last sentence of Article 10(1).

(4) In the event that an Investor chooses to submit the dispute for resolution under subparagraph (2)(c), the Investor shall further provide its consent in writing for the dispute to be submitted to:

(a) (i) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States opened for signature at Washington, 18 March 1965 (hereinafter referred to as the "ICSID Convention"), if the Contracting Party of the Investor and the Contracting Party party to the dispute are both parties to the ICSID Convention; or

(ii) The International Centre for Settlement of Investment Disputes, established pursuant to the Convention referred to in subparagraph (a)(i), under the rules governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre (hereinafter referred to as the "Additional Facility Rules"), if the Contracting Party of the Investor or the Contracting Party party to the dispute, but not both, is a party to the ICSID Convention;

(b) a sole arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (hereinafter referred to as "UNCITRAL"); or

(c) an arbitral proceeding under the Arbitration Institute of the Stockholm Chamber of Commerce.

(5) (a) The consent given in paragraph (3) together with the written consent of the Investor given pursuant to paragraph (4) shall be considered to satisfy the requirement for:

(i) written consent of the parties to a dispute for purposes of Chapter II of the ICSID Convention and for purposes of the Additional Facility Rules;

(ii) an "agreement in writing" for purposes of article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, 10 June 1958 (hereinafter referred to as the "New York Convention"); and

(iii) "the parties to a contract [to] have agreed in writing" for the purposes of article 1 of the UNCITRAL Arbitration Rules.

(b) Any arbitration under this Article shall at the request of any party to the dispute be held in a state that is a party to the New York Convention. Claims submitted to arbitration hereunder shall be considered to arise out of a commercial relationship or transaction for the purposes of article I of that Convention.

(6) A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law.

(7) An Investor other than a natural person which has the nationality of a Contracting Party party to the dispute on the date of the consent in writing referred to in paragraph (4) and which, before a dispute between it and that Contracting Party arises, is controlled by Investors of another Contracting Party, shall for the purpose of article 25(2)(b) of the ICSID Convention be treated as a "national of another Contracting State" and shall for the purpose of article 1(6) of the Additional Facility Rules be treated as a "national of another State".

(8) The awards of arbitration, which may include an award of interest, shall be final and binding upon the parties to the dispute. An award of arbitration concerning a measure of a sub-national government or authority of the disputing Contracting Party shall provide that the Contracting Party may pay monetary damages in lieu of any other remedy granted. Each Contracting Party shall carry out without delay any such award and shall make provision for the effective enforcement in its Area of such awards.

13.
Pursuant to Article 25(1) of the SCC Rules in force as from 1 January 2017 (SCC Rules) and in accordance with the decision of the SCC Board of Directors (SCC Board), the Seat of the Arbitration is Stockholm.4
14.
The Parties agreed that English (selected by FREIF) and Spanish (selected by Spain) are the languages of the Arbitration.5

F ARBITRAL TRIBUNAL

15.
Pursuant to Articles 12 and 13 of the SCC Rules, the Parties agreed that the Tribunal should consist of three arbitrators.
16.
The Tribunal consists of:

(a) Mr C. Mark Baker, who was appointed as Co-Arbitrator by FREIF on 7 January 2020 pursuant to Article 21(1) of the SCC Rules.6

(b) Professor Thomas Clay who was appointed as Co-Arbitrator by Spain on 22 May 2017, pursuant to Article 17(4) of the SCC Rules;7 and

(c) Professor Douglas Jones AO who was appointed as Chairperson by the SCC Board on 10 October 2017, pursuant to Article 17(4) of the SCC Rules.8

17.
Professor Douglas Jones AO, Professor Thomas Clay and Mr C. Mark Baker together constitute the Tribunal.
18.
Professor Dr Kaj Hobér was a member of the Tribunal from the time of his appointment as Co-Arbitrator by FREIF on 21 March 2017 until 19 December 2019, when the SCC Board released him from appointment following a successful challenge made by Spain.9

G PROCEDURAL HISTORY

19.
In this portion of the Award, the Tribunal sets out the procedural history of this Arbitration. For the sake of clarity and economy, minor matters such as discussions on logistics and schedule adjustments have been omitted, and the procedural history has been organised thematically rather than on a strictly chronological basis.

G1 Commencement of the Arbitration

G1.1 Exchange of Initial Notice of Arbitration and Answer

20.
On 21 March 2017, FREIF submitted its Request for Arbitration to Spain and the SCC.
21.
On 22 May 2017, Spain submitted its Answer to the Request for Arbitration to FREIF and the SCC.

G1.2 Constitution of the Tribunal

22.
As already noted, the Parties' nominated arbitrators, Professor Thomas Clay and Professor Dr Kaj Hobér were appointed as Co-Arbitrators. The Chairperson, Professor Douglas Jones AO, was appointed by the SCC Board pursuant to Article 17(4) of the SCC Rules.

G1.3 Establishing the Conduct of the Arbitration and Drafting Procedural Order No.1

23.
On 25 October 2017, the Tribunal made its first communication to the Parties.10 Amongst other things, this communication requested the Parties to:

(a) provide comments on certain matters for procedural directions; and

(b) provide the Tribunal with proof of authority granted to its representatives in these proceedings in the form of a duly executed power of attorney.

24.
FREIF provided its Power of Attorney on 27 October 2017.11 On 2 November 2017, Spain notified the Tribunal that its State Attorneys held an express mandate to represent the Kingdom of Spain under Spanish legislation and did not require a power of attorney.12
25.
FREIF wrote to the Tribunal on behalf of the Parties on 2 November 2017 requesting an extension of the deadline to provide the Parties' responses on the matters for procedural direction.13 The Parties provided their positions on the matters for procedural direction on 6 November 2017.14
26.
After receipt of the Parties' responses, on 10 November 2017, the Tribunal provided a draft Procedural Order No. 1 for the Parties' consideration and comment by 30 November 2017.15 After a short delay,16 the Parties provided their comments on draft Procedural Order No. 1 on 1 December 2017.17

G1.4 Case Management Conference and Finalisation of Procedural Order No. 1

27.
In the light of the Parties' remaining areas of disagreement on the procedural matters, the Tribunal proposed that an initial Case Management Conference ('CMC') be held via teleconference.18 After confirming the Parties' availabilities,19 the Tribunal scheduled the CMC for 12 December 2017.20 Spain informed the Tribunal on 23 November 2017 that it intended to use the Spanish language during the CMC and requested that translation services be available to conduct the CMC.21
28.
Subsequently, the Tribunal requested that the Parties agree on the provision of translation and the preparation of transcripts in English and Spanish.22 These services were provided by the International Centre for Settlement of Investment Disputes (ICSID) translation services which resulted in moving the date for the call23 to 13 December 2017.24 The Tribunal also requested clarification as to whether ICSID would provide transcript services.25
29.
On 7 December 2017, the Tribunal issued a draft agenda for the CMC26 and requested the Parties' comments. These comments were provided by FREIF on 11 December 2017.27 After again requesting comments from Spain,28 Spain provided its comments on the draft agenda and confirmed that transcript services would be provided by ICSID on 12 December 2017.29 On the same day, the Tribunal issued a finalised agenda for the CMC.30
30.
Following the CMC, the Tribunal issued Tribunal's Communication No. 15 on 14 December 2017, detailing the outcomes of the CMC.31 The Tribunal enclosed a draft of Procedural Order No. 1 and invited the Parties to comment by 20 December 2017. After some delay,32 the Parties both advised on 22 December 2017 that they had no further comments.33 On 23 December 2017, the Tribunal issued Procedural Order No. 1.34
31.
Among other procedural matters, Procedural Order No. 1 confirmed that the Main Evidentiary Hearing was to occur in Paris from 30 September to 4 October 2019. The Tribunal also enquired as to whether the Parties would be agreeable to bearing the expense of a higher per diem equivalent to that provided by the ICC, should the Main Evidentiary Hearing be held in Paris.35 The Parties confirmed that they had no objections.36
32.
The Tribunal also requested that Spain provide the transcript of CMC proceedings, produced by ICSID.37 After some technical delays,38 the English transcript was provided on 4 January 2018.39

G1.5 Respondent's Request for Chairperson's Resignation

33.
At the CMC on 13 December 2017, the Respondent made a request that Professor Jones resign as Chairman of the Tribunal on the basis that he is unable to speak the Spanish language. The Parties subsequently provided written submissions on the topic of the request.40
34.
On 5 January 2018, Professor Jones provided his decision on his continued role as Tribunal Chairperson under cover of Tribunal's Communication No. 21 and decided not to resign unless the Parties jointly agreed to appoint a replacement Chairperson bilingual in English and Spanish.41 An extract of Professor Jones' decision is provided below:

I am unconvinced that the interests of the Parties or the fair and proper conduct of the arbitration require me to step down. In any event, I consider that there are some major matters of relevance which tend towards the conclusion that I should remain as Chairman.

First, there is an inevitable cost and delay associated with my resignation. The Parties or the SCC would then have to agree to a new Chairman, at a time when Procedural Order No. 1 has just been formally issued, dates have been set and reserved for various matters, and the arbitration is commencing. Restarting this whole process could delay the proceedings by many months, and as the adage goes, 'justice delayed is justice denied'.

Second, there is no guarantee that if I resign, another Spanish-speaking Chairman will be found. In this regard, it is noted that the SCC unsuccessfully attempted to find a Spanish-speaking arbitrator.

Consequently, when I weigh together the high likelihood that my resignation would cause inconvenience together with the low likelihood of finding a new Chairman proficient in Spanish, alongside the matters discussed above regarding both Parties' ability to receive a fair Hearing, I conclude that it would not be in the interests of the efficient, economical and expeditious resolution of the arbitration for me to resign my position.

I should however make it clear that were the Parties to agree upon a replacement Chair bilingual in English and Spanish, I would accede readily to their joint request to resign.

G1.6 Confidentiality and Procedural Order No. 2

35.
On 4 January 2018, FREIF provided its response to Spain's allegations relating to confidentiality of proceedings, which were initially raised during the CMC of 13 December 2017.42 The Tribunal invited Spain to comment43 and received those comments on 18 January 2018.44 On 23 January 2018, the Tribunal wrote to the Parties, drawing the Parties attention to confidentiality provisions in the SCC Rules.45
36.
After receiving further submissions from the Parties,46 the Tribunal issued its ruling on the confidentiality provisions in favour of Spain.47 The Tribunal proposed to formalise its ruling in Procedural Order No. 2 and requested the Parties' comment on the proposed text. The Parties confirmed that they had no comments48 and Procedural Order No. 2 was issued on 9 February 2018,49 containing the following provisions:

2.1 Pursuant to Article 3 of the SCC Arbitration Rules, the SCC, the Arbitral Tribunal and any administrative secretary of the Arbitral Tribunal shall maintain the confidentiality of the arbitration and the award.

2.2 The Parties, the SCC, the Arbitral Tribunal and Administrative Secretary of the Arbitral Tribunal shall maintain the confidentiality of all oral and written submissions by the Parties or their witnesses and experts and their accompanying documents but not of the Arbitration and the award.

G1.7 Appointment of Administrative Secretary

37.
After consulting with the Parties and receiving no objection,50 the Tribunal confirmed the appointment of Ms Kathleen Morris as Administrative Secretary on 6 November 2017.51 Subsequently, the Parties also agreed upon the proposed tasks that the Administrative Secretary may perform.52
38.
On 21 January 2020, the Tribunal wrote to the Parties proposing Ms Anne Wang as a replacement to Ms Kathleen Morris in the role of Administrative Secretary.53 Spain stated on 27 January 2020 that it had no objection to the appointment of an Administrative Secretary as a general principle. However, it was concerned with Ms Wang's lack of knowledge of the Spanish language. Spain therefore requested that the Tribunal to consider the possibility of appointing a person who is able to use both procedural languages as working languages.54 The Tribunal notified the Parties that due to the SCC policy, whereby the Administrative Secretary is compensated from the fees of the Tribunal, the Tribunal is not in a position to fund the appointment of a person who is able to use both procedural languages as working languages.55 Accordingly, the Tribunal indicated that it would not appoint a replacement Administrative Secretary if Spain maintained its objection to Ms Wang.
39.
Spain clarified that it did not intend to raise its concerns as an "all or nothing" discussion56 and the Tribunal provided additional explanation of its position.57 Spain subsequently withdrew its objection to the appointment of Ms Wang but clarified that this withdrawal must not be interpreted as a waiver of Spain's position regarding the need for the tribunals Hearing its cases to be able to use Spanish as a working language.58 Accordingly, Ms Wang's appointment as Administrative Secretary was confirmed on 31 January 2020, on the basis that the Chairperson will bear her fees and that the Parties agree to meeting her accommodation expenses in Paris for the Evidentiary Hearing.59 Ultimately, no such accommodation expenses were incurred as the Hearing was held by virtual means as recounted in Part G5 below.

G2 Exchange of Pleadings

G2.1 Primary Exchanges of Case

40.
On 5 April 2018, FREIF wrote to the Tribunal requesting an extension to the deadline for submission of FREIF's Statement of Claim, which had been scheduled for the following day.60 Both Parties confirmed that the request was sought with the agreement of Spain61 and on that basis, the Tribunal granted the extension.62
41.
FREIF filed its Statement of Claim on 9 April 2018.63 This was accompanied by the Witness Statements of Mr Mark Florian and Mr Eduard Fidler, the Expert Witness Statement of Mr José Alberto Ceña Lázaro, the Regulatory Expert Report of The Brattle Group, and the Financial Expert Report of The Brattle Group.
42.
On 19 September 2018, Spain wrote to the Tribunal requesting an extension of time to submit its Counter Memorial on the Merits and Memorial on Jurisdiction, which was to be due on 21 September 2018.64 FREIF confirmed that it had agreed to an extension until 25 September 2018.65 On that basis, the Tribunal granted the extension.66
43.
Spain filed its Counter-Memorial on 25 September 2018.67 This was accompanied by the Witness Statement of Mr Juan Ramon Ayuso, and the Expert Report of Dr Daniel Flores and Mr Jordan Heim, who at the time were employed by ECON ONE Research, INC.
44.
On 19 February 2019, FREIF wrote to the Tribunal on behalf of the Parties and requested an agreed extension of two weeks for the submission of the Reply Memorial and Rejoinder.68 The Tribunal issued an amended Procedural Order No. 1, on the same day, reflecting the Parties' agreement.69
45.
On 9 March 2019, FREIF tendered its Reply on the Merits and Counter-Memorial on Jurisdiction.70 This was accompanied by the Second Witness Statement of Mr Eduard Fidler, the Second Expert Witness Statement of Mr José Alberto Ceña Lázaro, the Rebuttal Regulatory Expert Report of The Brattle Group, and the Rebuttal Financial Expert Report of The Brattle Group.
46.
On 11 June 2019, Spain wrote to the Tribunal requesting an extension of the deadline to submit Spain's Statement of Rejoinder on Merits and Reply on Jurisdiction from 5 July 2019 to 12 July 2019.71 FREIF confirmed that it agreed to this extension but noted that as a result, FREIF would likely need an extension as well to file its Rejoinder on Jurisdiction.72 The Tribunal subsequently confirmed that the date of submission for Spain's Rejoinder on Merits and Reply on Jurisdiction was revised to 12 July 2019.73 Spain noted that it would agree to a similar extension for the submission of the Rejoinder on Jurisdiction by FREIF.74
47.
On 20 June 2019, FREIF wrote to the Tribunal noting that its experts had realised they had submitted the wrong version of one of their workpapers with the Reply Memorial on the Merits and Counter-Memorial on Jurisdiction. FREIF therefore filed a corrected version on the same day.75
48.
On 12 July 2019, Spain filed its Rejoinder on the Merits and Reply on Jurisdiction.76 This was accompanied by the Second Witness Statement of Mr Juan Ramon Ayuso and the Second Expert Report of Dr. Daniel Flores and Mr. Jordan Heim, who by this time were employed by Quadrant Economics LLC.
49.
On 17 July 2019, FREIF notified the Tribunal that the Parties had agreed to extend the deadline for submission of the Rejoinder on Jurisdiction from 22 July 2019 to 2 August 2019, with Spain making its best efforts to provide its English translation of the jurisdictional section of its Reply Memorial by 26 July 2019.77 This extension was confirmed by the Tribunal.78
50.
On 2 August 2019, Spain submitted the English translations of its Rejoinder on the Merits and Reply on Jurisdiction and associated witness statement, expert report and list of exhibits and authorities.79
51.
On 2 August 2019, FREIF filed its Rejoinder on Jurisdiction.80

G2.2 Application from European Commission for Leave to Intervene

52.
On 15 November 2018, the Tribunal received an application from the European Commission for leave to intervene as a non-disputing party in this Arbitration.81 On 19 November 2018, the Tribunal requested the Parties' positions as to how the Tribunal should deal with the application.82 The Parties agreed to submit simultaneous submissions addressing the European Commission's application83 and these were submitted on 5 December 2018.84
53.
The Parties were invited to provide responses to each other's submissions by 19 December 2018.85 The Tribunal also invited the Parties to address specific issues of interest to it.86 On 19 December 2018, the Parties simultaneously filed their response to the European Commission's application and to the Tribunal's questions.87
54.
On 4 January 2019, the Tribunal issued its ruling on the European Commission's request for leave to intervene and determined that it should not allow the Commission's request for leave.88

G2.3 Supplementary Jurisdictional Objection

55.
On 18 November 2019, Spain submitted a supplementary jurisdictional objection and made an application requesting its admission.89 The Tribunal issued a communication on 23 November 2019, stating that it did not consider that it was in a position to evaluate the appropriateness of Spain's request. The Tribunal accordingly asked FREIF to provide a response to Spain's application by 29 November 2019.90 This response was duly provided. FREIF did not oppose the raising of this supplementary objection subject to the pleadings being expedited. The Parties also agreed that this round of pleadings would be submitted in English only.91
56.
FREIF also requested that Spain bear all the costs associated with this round of pleadings as it considered itself "forced" to agree to a "meritless and unnecessary round of additional pleadings".92 This request was contested by Spain. On 6 December 2019, the Tribunal resolved to note the submissions made by the Parties so far and reserved any decision in relation to costs to the Tribunal's Final Award.93
57.
Eventually, the Parties agreed on deadlines for the submission of the additional pleadings.94 FREIF submitted its Counter-Memorial on Spain's Supplementary Jurisdictional Objection on 20 December 2019.95 Spain submitted its Reply to its Supplementary Jurisdictional Objection on 8 January 2020.96 FREIF submitted its Rejoinder on the Supplemental Jurisdictional Objection on 22 January 2020.97

G3 Disclosure of Documents

G3.1 Initial Round of Document Disclosure

58.
Spain wrote to the Tribunal on 25 October 2018, advising that the Parties had agreed to submit their Redfern Schedules for document production in English only. Spain noted that, for the avoidance of doubt, this agreement only affects the submission of the Parties' Redfern Schedules, and Spanish and English will both continue to be the procedural languages of this Arbitration.98 After confirmation of their agreement by FREIF,99 the Tribunal accepted the Parties' agreement regarding the submission of the Parties' Redfern Schedules in English only100 and amended Procedural Order No. 1 to incorporate this agreement on 30 October 2018.101
59.
On 16 November 2018, the Parties each submitted their applications for production of documents in the form of a Redfern Schedule.102 The Tribunal provided its rulings on the contested document requests on 29 November 2018.103

G3.2 Further Requests for Document Disclosure

60.
Following the submissions regarding the sale of the wind farms invested in by FREIF (the Asset Sale) and the vacation of the September 2019 Hearing, discussed below at Part G4.2, the Parties were requested to inform the Tribunal of logistical arrangements and further directions on 30 September 2019. On 23 September 2019, Spain proposed a calendar for a brief document production phase.104 Subsequently, FREIF noted that its consent to a further round of document requests was conditional upon those requests being cast narrowly and directed only to the issue of the Asset Sale.105 On that basis, the Tribunal requested that the Parties confer and seek agreement on proposed procedural directions by 3 October 2019.106
61.
On 3 October 2019, Spain wrote to the Tribunal confirming that the Parties had conferred and agreed on a timetable for the submission of final requests for document disclosure. The Parties maintained a single point of difference as to the scope of the documents to be requested. Spain understood that the requests may include the Asset Sale and any facts derived from the sale that are reflected in the partially disclosed documents while FREIF considered that the requests should be narrowly tailored and limited to the Asset Sale issue. The Parties agreed that FREIF would object to any requests if necessary and the Tribunal may decide on a case-by-case basis.107
62.
In accordance with the Parties' agreement, the Tribunal made the following orders:108

• On 11 October 2019, Spain will submit its final requests for document production.

• On 28 October 2019, FREIF will produce documents pursuant to those requests to which it has no objection. FREIF will also communicate to the Tribunal its objections to any contested document requests on this date.

• The Tribunal will decide on any contested document requests on 6 November 2019.

• Documents which remain to be produced following the Tribunal's orders will be produced on 13 November 2019.

• On 25 November 2019, the Parties may submit a brief update on quantum and on any other relevant issues arising from the asset sale. The brief update may include an updated valuation of the quantum claimed by the Parties' experts.

63.
On 11 October 2019, Spain submitted its request for document production. On 28 October 2019, FREIF provided its response to Spain's request. It also shared with Spain the documents requested by Spain to which it had no objection.109 On 6 November 2019, the Tribunal issued its rulings on Spain's additional document requests.110

G4 Events Prior to the Main Evidentiary Hearing

G4.1 Preparation for September 2019 Hearing and Procedural Order No. 3

64.
On 14 April 2019, the Tribunal wrote to the Parties requesting information regarding the arrangements made for the venue of the Hearing in Paris.111 FREIF responded to confirm that the Parties were making the necessary arrangements to book a venue at the International Chamber of Commerce (ICC) Hearing Centre.112 The Tribunal responded on 18 April 2019113 and on 4 August 2019.114 On 9 August 2019, FREIF confirmed that a Hearing room at the ICC was reserved for this Arbitration.115
65.
On 2 August 2019, the Parties each notified the Tribunal of the other Party's witnesses and experts whom it wished to examine during the Hearing.116
66.
On 20 August 2019, the Tribunal wrote to the Parties with regard to the Pre-Hearing Teleconference referred to in paragraph 15.1 of Procedural Order No. 1 and scheduled to be held on 6 September 2019. The Tribunal proposed to hold the call at 1700 London Time and requested that the Parties confer regarding the procedural matters to be addressed at the Teleconference.117 The Parties both confirmed their availability for a teleconference at that time.118
67.
On 27 August 2019, FREIF wrote to the Tribunal on behalf of the Parties to provide the Parties' agreed Hearing schedule, draft Procedural Order No. 3 governing the protocol of the Hearing, and list of Hearing attendees.119 On the following day, Spain confirmed FREIF's communication and provided its provisional list of Hearing attendees.120
68.
The Tribunal wrote to the Parties on 28 August 2019 providing revised versions of the draft Procedural Order No. 3 and draft Hearing Schedule. The Tribunal provided preliminary views on the issues of scheduling of closing submissions, time allocation, and hard copy Hearing bundles. The Tribunal also invited the Parties to provide their views on whether or not the Pre-Hearing Teleconference should proceed.121
69.
FREIF wrote on behalf of the Parties on 29 August 2019 to confirm that the Parties had conferred and agreed on a number of aspects regarding the draft Procedural Order No. 3 and Hearing schedule. The Parties also confirmed their agreement to vacate the Pre-Hearing Teleconference.122
70.
On 30 August 2019, the Tribunal once again provided the Parties with a revised draft of Procedural Order No. 3, having considered the Parties' comments and suggestions.123 The Parties subsequently confirmed that they had no other comments to make on the revised draft of Procedural Order No. 3.124 Accordingly, the Tribunal issued a finalised Hearing Schedule and Hearing Protocol (as Procedural Order No. 3) on 3 September 2019 and confirmed that the Pre-Hearing Teleconference would not be held.125
71.
On 10 September 2019, the Tribunal wrote to the Parties requesting clarification regarding whether the Parties intended to provide hard copy core Hearing bundles in advance of the Hearing.126 The Parties replied stating that, since the core Hearing bundles would comprise only documents that would not be completed until the week of the Hearing, the Parties would not be in a position to send hard copies to the Tribunal in advance of the Hearing. However, a USB containing the full Hearing bundle could be supplied in advance.127 On 16 September 2019, FREIF confirmed that USB keys to each of the Tribunal members had been dispatched.128
72.
On 11 September 2019, the Parties reached an agreement on the additional documents they each wished to add to the record.129

G4.2 Asset Sale and Vacation of September 2019 Hearing

73.
On 9 September 2019, Spain wrote to the Tribunal informing it that it had come across a piece of news which suggested that FREIF's wind farms had been sold (the Asset Sale). Spain requested the Tribunal to formally seek confirmation from FREIF as to the sale of its interest in the wind farms the subject of this Arbitration.130 The Tribunal requested FREIF to provide a response by 11 September 2019,131 which was duly provided.132 Spain wrote to the Tribunal the following day requesting leave to comment on FREIF's letter.133 On 13 September 2019, without formal leave having been granted, Spain nonetheless submitted its observations on FREIF's letter, "given the urgency and relevance of the debated issue".134 In Spain's letter, it made an application for:

(a) the suspension of the scheduled Hearing;

(b) FREIF to provide complete and exhaustive information regarding the sale of the wind farms; and

(c) a subsequent and limited document production phase followed by a single round of written submissions.

74.
Subsequently, the Tribunal requested FREIF to provide its response to Spain's application by that same date.135 FREIF replied later that day and accepted that Spain may be entitled to additional disclosure regarding the sale material.136
75.
On 14 September 2019, the Tribunal urgently issued a communication to the Parties, stating that it was not clear to the Tribunal the nature of the additional work that may need be undertaken by the Quantum Experts in relation to the contents of the Share Sale and Purchase Agreement dated 1 May 2019 (2019 SPA), and in respect of the additional documents that may be further disclosed.137 The Tribunal was thus not prepared to accede to Spain's application to vacate the Hearing dates at that time. It requested that the Parties undertake the document disclosure process first and issued directions for a timetable for this process in Tribunal's Communication No. 52.138
76.
On 15 September 2019, Spain submitted a request for the Tribunal to reconsider its decision not to postpone the Hearing.139 The Tribunal directed FREIF to respond by 1200 Paris time on 16 September 2019 and instructed Spain to comply with the Tribunal's previous directions pending the Tribunal's consideration of Spain's application.140
77.
On 16 September 2019, FREIF submitted its response to Spain's request for reconsideration.141 The Tribunal responded, stating that it was considering the Parties' submissions but that in the meantime, it repeated its direction that both Parties comply with the directions set out in Tribunal's Communication No. 52.142
78.
Later that same day, Spain contacted the Tribunal and FREIF, stating that, in order to be as accommodating as possible, it suggested keeping the Hearing but limiting it to the jurisdictional objections and to two or three days.143
79.
On 16 September 2019, the Tribunal issued its decision on Spain's application for reconsideration. The Tribunal concluded that the appropriate and fair course was to require the Parties to proceed according to the Tribunal's orders made in Tribunal's Communication No. 52.144
80.
Following this ruling, Spain finally submitted its request for disclosure of further documents from FREIF regarding the 2019 SPA.145 The following day, FREIF responded to Spain's request for disclosure and produced a number of the requested documents.146 Five requests for document disclosure were still pending. On 19 September 2019, Spain wrote to the Tribunal once again, requesting the postponement of the Hearing. The basis for Spain's request was that FREIF had already produced almost 1800 pages of new evidence which would be materially impossible for Spain to properly analyse a mere five business days prior to the commencement of the Hearing.147
81.
On receipt of this correspondence from Spain, the Tribunal requested the Claimant to respond by 1300 Paris Time on 20 September 2019. At the same time, it requested that the Parties advise of their availability for a CMC teleconference early the following week.148 FREIF's counsel responded, stating that it was seeking to reach its client to take instructions.149 FREIF subsequently confirmed its availability for a teleconference between 0800 and 1100 Paris time on Tuesday or Wednesday of the following week.150 Spain also advised of its availability later that day.151
82.
On 20 September 2019, FREIF responded to Spain's third application to postpone the Hearing. FREIF unequivocally maintained that Spain had not made out a case for postponement. Nevertheless, FREIF agreed to a postponement assuming the Hearing could be rescheduled within a fairly short time frame.152 The Parties then proceeded to attempt to reschedule the Main Evidentiary Hearing.153 Eventually, the dates on 25- 29 April 2020 were identified as the only available dates to reschedule the Hearing.154
83.
On 30 September 2019, FREIF confirmed the availability of one of its Hearing rooms during the new scheduled dates. The interpreters would also be available on the new Hearing dates. FREIF informed the Tribunal that the Parties were still in the process of confirming the availability of the English and Spanish court reports that were initially retained for the Hearing.155
84.
On 25 November 2019, the Parties simultaneously submitted updates on quantum arising from the Asset Sale that had been prepared by the Parties' respective experts.156

G4.3 Challenge of Professor Dr Kaj Hobér and Appointment of Mr C. Mark Baker

85.
On 4 August 2017, prior to the appointment of the Chairperson, Spain wrote to the SCC Board challenging Professor Dr Hobér's appointment as Co-Arbitrator on the basis that he is at the same time the President of the SCC Board. Spain submitted that this duality affected Professor Dr Hobér's independence as an arbitrator.157 On 14 September 2017, the SCC Board dismissed Spain's challenge of Professor Hobér, noting that he had recused himself from the SCC Board with respect to this case and all other arbitrations involving Spain.158
86.
On 21 October 2019, Spain wrote to the Tribunal referring to recently published news that Professor Dr Hobér had been appointed counsel to a claimant, Nord Stream 2 AG, in another ECT arbitration against the European Union (EU). According to Spain, this news raised concerns as to the ability of Professor Dr Hobér to act as an independent arbitrator in the present arbitral proceedings. As such, Spain requested further information regarding Professor Dr Hobér's role as counsel of the claimant in a different Energy Charter Treaty arbitration against the EU.159 On 27 October 2019, Professor Dr Hobér provided his response to Spain's letter.160
87.

On 12 November 2019, Spain formally submitted its challenge to Professor Dr Hobér.161 The SCC instructed FREIF to respond to Spain's challenge to Professor Dr Hobér.162 On 22 November 2019, FREIF provided its response and supporting documentation.163 On the same day, Professor Dr Hobér provided his comments on Spain's challenge.164 On 5 December 2019, Spain filed a supplementation to its challenge to Professor Dr Hobér, contending that Professor Dr Hobér's Dissenting Opinion in the recently released ICSID Award in Stadtwerke München GmbH, RWE Innogy GmbH and Others v. Kingdom of Spain (Stadtwerke München) resulted in him having a prejudgment of the issues of this Arbitration in a previous arbitration.165

88.
On 19 December 2019, the SCC transmitted a letter to the Parties in which it confirmed that Spain's challenge to Professor Dr Hobér was successful. Professor Dr Hobér was therefore released from appointment and FREIF was requested to appoint a new arbitrator by 30 December 2019.166 On 7 January 2020, FREIF notified the SCC that it had appointed Mr C. Mark Baker as FREIF's replacement arbitrator.167
89.
On 24 February 2020, Mr C. Mark Baker advised the Parties of a disclosure he wished to make due to his position as a US partner of Norton Rose Fulbright.168 The disclosure pertained to the retention of the separate verein partnership of Norton Rose Fulbright Australia in local Australian enforcement actions involving Spain. Spain requested further information in respect of his disclosure on 10 March 2020,169 which was provided by Mr Baker.170 Spain took no further action after this additional information.

G4.4 Procedural Order Nos. 4 and 5

90.
On 12 January 2020, the Tribunal wrote to the Parties to organise procedural arrangements in view of Mr Baker's appointment. The Tribunal provided its preliminary view that it was not necessary to repeat any stage of the proceedings. It also confirmed its availability for the allocated Hearing dates of 25 to 29 April 2020 in Paris.171
91.
The Tribunal also provided to the Parties a draft of Procedural Order No. 4, designed to be a convenient reference points for the deadlines which remained in the Arbitration. The Tribunal also requested the Parties to update Procedural Order No. 3, concerning the logistical and procedural arrangements of the Main Evidentiary Hearing. The Parties confirmed that they had no objections to the Tribunal's view that there was no need for any phase of the proceedings to be repeated after the reconstitution of the Tribunal.172 The Tribunal therefore confirmed that the Main Evidentiary Hearing would proceed in Paris from 25 to 29 April 2020.173
92.
On 23 January 2020, the Parties provided their comments on the draft Procedural Order No. 4 and on the revised Procedural Order No. 3.174 In response, the Tribunal requested the Parties to confer further on a number of points in respect of the Hearing schedule, time keeping, ruling on submission of new evidence and Hearing bundle.175 The Parties provided their further joint comments on 20 January 2020.176 The Tribunal finalised Procedural Order No. 4 and Procedural Order No. 3 (re-issued as Procedural Order No. 5) on 1 February 2020.177 The Tribunal also confirmed that it did not intend to proceed with scheduling a pre-Hearing teleconference.
93.
On 24 February 2020, the Tribunal wrote to the Parties advising that it planned to meet in Paris on 24 April 2020 to prepare for the Main Evidentiary Hearing and in the evening of 29 April 2020 for the purposes of deliberations. It requested that the Parties organise room access at the ICC Hearing Centre on these dates,178 which was later confirmed by FREIF.179
94.
On 6 March 2020, pursuant to Procedural Order No. 4, the Parties each informed the Tribunal of the witnesses it wished to cross-examine at the Main Evidentiary Hearing.180

G4.5 Vacation of April 2020 Hearing

95.
On 5 March 2020, the Tribunal wrote to the Parties concerning the difficulties created by the COVID-19 outbreak and seeking an assurance that all members of the Parties' respective teams would comply with any quarantine guidance that may be applicable.181 This assurance was duly provided by the Parties.182
96.
Subsequently, on 10 March 2020, the Tribunal wrote to the Parties and requested the Parties' views on reconsideration of the dates fixed for the Hearing, of a venue other than Paris, or of a virtual Hearing, given the deteriorating COVID-19 situation in Paris.183 Following receipt of the Parties' views on the matter,184 the Tribunal proposed that, in the absence of any agreement between the Parties as to a virtual Hearing, the best course of action would be to postpone the in-person Hearing until later in 2020.185 The Parties agreed to postpone the Hearing to 28 September 2020 to 2 October 2020.186
97.
As such, the Tribunal formally vacated the Hearing dates of 25 to 29 April 2020 and issued amended versions of Procedural Order No. 4, Procedural Order No. 5 and Hearing Schedule reflecting the new Hearing dates.187

G4.6 Preparation for September 2020 Hearing and Procedural Order No. 6

98.
On 23 April 2020, the Tribunal requested the Parties' views on a virtual Hearing contingency plan, on the basis that the possibility that an in-person Hearing in Paris may not be able to proceed on the adjourned Hearing dates could not be discounted.188 The Parties conferred and jointly agreed that although an in-person Hearing was the preferred option, it would be prudent to make a contingency plan to proceed with a virtual Hearing.189
99.
In order to assist with this contingency planning, the Tribunal prepared a draft Virtual Hearing Protocol for the Parties' comment, known as Procedural Order No. 6.190 On 15 June 2020, the Parties submitted their joint comments on the draft Virtual Hearing Protocol, including points of disagreement.191 On 17 June 2020, the Tribunal provided its responses to the comments on the draft Procedural Order No. 6192 to which both Parties responded on 23 June 2020.193 On the basis of these responses, the Tribunal issued a third draft of Procedural Order No. 6 on 28 June 2020.194 Following a further exchange of comments regarding the circumstances in which a witness or expert may testify in the presence of another person,195 the Parties disagreements on this matter were resolved in Procedural Order No. 6 issued on 10 July 2020.196
100.
At the same time, the Tribunal confirmed that, based on the Parties' availability, the Pre-Hearing Conference would take place via videoconference on 2 September 2020.197 On 18 August 2020, the Tribunal advised that due to unavoidable and unexpected court commitment, the date of the Pre-Hearing Conference would need to be rescheduled.198 It was later confirmed to take place on 8 September 2020.199
101.
On 17 July 2020, the Tribunal also confirmed that, should the Hearing proceed virtually, a final virtual Hearing test run for all participants would take place on 24 September 2020.200 On 10 August 2020, the Parties confirmed that the factual and expert witnesses they each intended to cross-examine had not changed.201
102.
On 31 August 2020, FREIF provided an update on the logistics agreed by the Parties for a potential virtual Hearing.202 The Parties had agreed to hire the London International Arbitration Centre (IAC) to host and conduct the virtual platform through their platform. The Parties had also hired three interpreters to conduct simultaneous interpretation, as well as OPUS2 and Stenotype to provide live transcripts. As a result, the Parties made some changes to the draft Virtual Hearing Protocol to reflect their agreed logistics.
103.
The Tribunal requested further details in preparation for the Pre-Hearing Conference,203 which was provided by the Parties on 4 September 2020, with the exception of the proposed Hearing Schedule which was still the subject of discussion between the Parties.204 On the basis of the information provided, the Tribunal circulated an amended version of Procedural Order No. 6 and a draft Pre-Hearing Conference agenda on 6 September 2020.205 On 7 September 2020, the Parties provided a further update on their positions to the Tribunal, including comments on the draft agenda and their disagreements on the Hearing Schedule.206 Thereafter, the Tribunal circulated a finalised agenda for the Pre-Hearing Conference.207
104.
The Pre-Hearing Conference was duly held on 8 September 2020. The Conference was conducted solely in English, without waiving the rights of the Parties in respect of Spanish being a language of the Arbitration. A recording of the Pre-Hearing Conference was taken and distributed by the London IAC. During the Pre-Hearing Conference, the Parties agreed that the Hearing would be held virtually. This was due to the inability of Professor Jones and Mr Baker to travel to Paris on the dates of the Hearing and the Parties' agreement that all three members of the Tribunal must either attend in person together or all attend virtually.
105.
On 9 September 2020, the Parties advised that they had reached agreement regarding a list of new documents they wished to add to the record208 and requested the postal addresses of the Tribunal members in order to send an electronic Hearing bundle via USB and a hard copy core Hearing bundle.
106.
On 10 September 2020, The Tribunal wrote to the Parties, circulating a summary of the outcomes of the Pre-Hearing Conference.209 This was accompanied by amended versions of Procedural Order No. 4, Procedural Order No. 6 and the Hearing Schedule, which the Parties were invited to comment on. Subsequently, based on the comments received,210 the Tribunal re-issued Procedural Order No. 4 and Procedural Order No. 6 on 18 September 2020.211

G5 Main Evidentiary Hearing

107.
The Main Evidentiary Hearing was held virtually using Zoom on the London IAC Online Platform from Monday, 28 September 2020 to Friday, 2 October 2020.

G5.1 Attendees

108.
The following persons were in attendance.
109.
For FREIF:

(a) Mr Reginald Smith of King & Spalding;
(b) Mr Kevin D. Mohr of King & Spalding;
(c) Ms Amy Roebuck Frey of King & Spalding;
(d) Ms Isabel San Martin of King & Spalding;
(e) Ms Ines Vazquez Garcia of Gómez-Acebo & Pombo;
(f) Ms Teresa Gutiérrez Chacón of Gómez-Acebo & Pombo;
(g) Ms Inés Puig-Samper of Gómez-Acebo & Pombo;
(h) Ms Cristina Matia of Gómez-Acebo & Pombo;
(i) Mr Ignacio Soria Petit of Gómez-Acebo & Pombo;
(j) Ms Violeta Valicenti of King & Spalding;
(k) Mr Eduard Fidler formerly of BlackRock Investment Management (UK) Limited and First Reserve International Limited;
(l) Mr José Alberto Ceña Lázaro of the AEE;
(m) Dr José Antonio Garcia of Brattle Group;
(n) Mr Carlos Lapuerta of Brattle Group;
(o) Mr Richard Caldwell of Brattle Group;
(p) Ms Annika Opitz of Brattle Group;
(q) Mr Andrés Child of Brattle Group; and
(r) Mr Christian Synetos of BlackRock.

110.
For Spain:

(a) Mr José Manuel Gutiérrez Delgado of the Attorney General's Office;
(b) Mr Pablo Elena Abad of the Attorney General's Office;
(c) Mr Alberto Torró Molés of the Attorney General's Office;
(d) Mr Roberto Fernández Castilla of the Attorney General's Office;
(e) Ms Gabriela Cerdeiras Megías of the Attorney General's Office;
(f) Ms María de Lourdes Martínez de Victoria Gómez of the Attorney General's Office;
(g) Ms Elena Oñoro Sainz of the Attorney General's Office;
(h) Mr Juan Antonio Quesada Navarro of the Attorney General's Office;
(i) Ms Gloria de la Guardia Limeres of the Attorney General's Office;
(j) Ms Carmen Roa Tortosa of the Attorney General's Office;
(k) Mr Juan Ramón Ayuso Ortiz of the Insitute for the Diversification and Saving of Energy (IDAE);
(l) Dr Daniel Flores of Quadrant Economics;
(m) Mr Jordan Heim of Quadrant Economics; and
(n) Mr Andrés León of Quadrant Economics.

111.
As interpreters:

(a) Mr Jesus Gaetan Bornn;

(b) Ms Amalia Thaler; and

(c) Ms Anna Sophia Chapman.

112.
Court reporters from Opus 2 (for the English transcript) and Stenotype (for the Spanish transcript) were also present as well as Ms Demi Robinson from the London IAC.

G5.2 Hearing Timetable and List of Witnesses

113.
The Parties made oral opening submissions on 28 September 2020. The Parties opening presentations were circulated to the Tribunal and other Party upon the commencement of their opening submissions.212 Due to the need to ensure adequate break times for transcribers and interpreters, agreed amendments were made to the Hearing timetable on certain days of the Hearing.213
114.
On the following days, the following witnesses and experts were called to give evidence:

(a) 29 September 2020: Mr Eduard Fidler for FREIF; Mr Juan Ramón Ayuso for Spain;

(b) 30 September 2020: Mr José Alberto Ceña Lázaro for FREIF; Messrs José Antonio Garcia and Carlos Lapuerta for FREIF;

(c) 1 October 2020: Messrs José Antonio Garcia, Carlos Lapuerta and Richard Caldwell for FREIF; and

(d) 2 October 2020: Messrs Daniel Flores and Jordan Heim for Spain.

115.
FREIF's factual witness, Mr Mark Florian, was not requested to be called for cross- examination. In accordance with paragraph 10(c) of Procedural Order No. 6, the presentations of all experts were submitted to the Tribunal prior to the commencement of the presentation of the first experts, the regulatory experts from Brattle.214 Cross-examination bundles were uploaded to the Box cloud sharing application prior to the commencement of each witnesses' cross-examination.
116.
Although the Hearing timetable allowed time for a witness conferencing session on 2 October 2020, the Tribunal decided that it would not be necessary. Instead, the Tribunal used some of this reserved time to discuss with the Parties the form, content and timing of the Parties' Post Hearing Briefs.215

G5.3 Application for Adverse Inferences

117.
On 30 September 2020, in light of the testimony of Mr Ayuso, FREIF made an application for adverse inferences.216 The Tribunal requested that written submissions be made on the application,217 which were received from FREIF on 1 October 2020.218 The Tribunal requested that Spain provide its written response on the same day so that any matters arising could be dealt with prior to the conclusion of the Hearing.219 Spain duly provided its opposition to FREIF's request for adverse inferences.220 FREIF's request was reaffirmed in its Post Hearing Brief.221
118.
The Tribunal will briefly summarise the Parties' submissions regarding this application. Its ruling will be integrated into the Tribunal's reasoning later in this Award.
119.
FREIF's application requested that the Tribunal draw the following adverse inferences:222

(a) that because Respondent has failed to produce the data and calculations underlying RD 436/2004, RD 661/2007, as well as Law 54/1997, such data would demonstrate that the regulator never established a limit on returns at 7%; and

(b) that had those documents been produced, they would support Claimant's position that Spain both knew and intended that returns could go well above 7% for wind facilities, as provided in the regulator's Renewable Energy Plans, the CNE's reports, and understood by the entire sector at the time.

120.
FREIF says that although the SCC Rules give the Tribunal broad discretion to determine any issues related to evidence, it refers to the "Sharpe test" as the most comprehensive and widely accepted test on adverse inferences in arbitration. The Sharpe test provides five elements for finding adverse inferences which it says are all present in this case:223

(a) The party seeking the inference must produce all available evidence corroborating the inference sought.

(b) The evidence is accessible to the inference opponent.

(c) The inference sought is reasonable; that is, it must be consistent with facts and other evidence.

(d) Prima facie evidence of the requesting party has to be reasonably consistent with the inference sought.

(e) The non-producing party must be aware of its obligation to produce rebuttal evidence.

121.
FREIF submits that during the document production phrase of the proceedings, it requested that Spain produce the data that Spain used to calculate and establish the incentives in RD 436/2004 and RD 661/2007. Spain objected, arguing that the requests were too broad and burdensome. The Tribunal ordered the production of this data however Spain produced nothing in response, stating that the data could not be found. During the Hearing, Spain's witness, Mr Ayuso testified as to the existence of this data in response to two different questions from the Tribunal.224
122.
First, in response to Mr Baker, Mr Ayuso stated:225

To clarify things further, at that time the plan that was in force was the revision of the renewable energy plan for 2005-2010, wherein you saw a certain number of standard facilities and you saw some proposals for tariffs and premiums on the basis of the 436 remunerative system. Therefore, since the 661 is going to have a different approach to remuneration, then you have to make sure that the calculations that we had included for the standard installations in the renewable energy plan would turn out to be consistent with the 661 new remunerative scheme, so as to make sure that there would be a reasonable return, more or less around 7 per cent, as mentioned in the renewable energy plan.

123.
Second, in response to Prof Clay, Mr Ayuso stated:226

[A]s I said before, I was involved in the calculations that lay behind Royal Decree 661, in order to be consistent with the standard facilities of the current Renewable Energy Plan that in this case was the Renewable Energy Plan of 2005-2010.

124.
These responses, in addition to Mr Ayuso's repeated testimony that the Spanish regulator always envisioned a target rate of return of 7% when setting incentives, are said to give rise to FREIF's request that the Tribunal draw adverse inferences regarding Spain's failure to produce the data underlying the RD 661/2007 tariffs. FREIF further casts doubt on the prospect that Spain has lost the data since Spain claimed it was equivalent to data pertaining to the calculations behind the 2005 PER and had also managed to produce other documents that were much older.227
125.
Spain instead asks the Tribunal to dismiss FREIF's application and take the application into consideration when allocating costs.228 Spain agrees with the application of the Sharpe test.229 However, it does not accept that the elements of the Sharpe test are satisfied when applied to the present facts.
126.
According to Spain, FREIF has not produced evidence corroborating the inference sought because the evidence on the record does not support it. Mr Ayuso's testimony never stated that at present, there are specific documents that contain the calculations behind RD 436/2004 and RD 661/2007. Mr Ayuso explained that the calculations if they existed are "maybe 15 years old". He explained that in any case, those calculations behind the RDs were in fact those underlying the 2005 PER, which have been produced in these proceedings, under a different category of requests.
127.
Furthermore, the requested evidence is not accessible to Spain. Spain says that its counsel made a request to the IDAE, the agency in the Spanish Administration that might have the requested documents, however IDAE said it were not aware of the requested documents being in its custody.230
128.
Finally, the inference sought is not reasonable or consistent with the facts on the record because based on FREIF's own expert evidence, FREIF accepts that neither RD 436/2004 nor RD 661/2007 targeted a return higher than 7%.231

G6 Events Subsequent to the Main Evidentiary Hearing

G6.1 Corrections to Hearing Transcript

129.
On 5 November 2020, the Tribunal wrote to the Parties enquiring as to the timing of the submission of proposed corrections to the Hearing transcript, as the time frame provided for in Procedural Order No. 6 had elapsed.232 Spain advised that there had been a delay in receiving the audio recordings of the Hearing in order to proceed with the transcript revision, but the Parties would be in a position to submit corrected versions to the Tribunal by 24 November 2020.233
130.
On 25 November 2020, FREIF advised that the Parties had reviewed the Hearing transcripts and had been able to agree on corrected versions, which were supplied to the Tribunal.234

G6.2 Filing of Post Hearing Briefs

131.
On 6 October 2020, the Tribunal provided the Parties with a list of questions which it would like the Parties to address in their Post Hearing Briefs, in addition to templates for a joint chronology and list of issues for the Parties to complete.235 On 9 October 2020, the Parties advised that they anticipate submitting their Post Hearing Briefs according to their originally agreed date of 21 December 2020,236 which was accepted by the Tribunal.237
132.
On 17 December 2020, FREIF wrote to the Tribunal on behalf of the Parties advising that the Parties had agreed to extend the deadline for Post Hearing Briefs to 28 December 2020.238 The Tribunal approved this extension.239
133.
The Parties submitted their respective Post Hearing Briefs to the Tribunal first without circulation to the other Party.240 After both Parties' Post Hearing Briefs were received by the Tribunal, the Administrative Secretary simultaneously circulated them to both Parties.241
134.
On 8 January 2021, FREIF wrote to the Tribunal submitting three new legal authorities labelled CL-213 through CL-215 which it said had been necessary to refer to in its Post Hearing Brief in order to respond to the Tribunal's question regarding the relevance of the law of the seat to the awarding of post-award interest.242 Spain confirmed on the same day that it did not object to FREIF's three new legal authorities.243

G6.3 Award Translation

135.
On 18 December 2020, the Tribunal wrote to the Parties seeking their comments regarding the translation of the Award. It noted that the Section 19 of Procedural Order No. 4 prescribed that the Award shall be rendered in English simultaneously with a Spanish translation and any translation costs will be borne solely by the Parties.244
136.
Upon submission of its Post Hearing Brief on 28 December 2020, Spain advised that it accepts the Award being rendered initially in English, with a Spanish translation to be produced subsequently.245 The Tribunal requested the Parties' views regarding amendments to Procedural Order No. 4 and the method of payment for the translation, given that it would be conducted after the rendering of the Award and the finalisation of costs.246
137.
On 8 January 2021, Spain wrote on behalf of the Parties to inform the Tribunal of their agreed amendments to Section 19 of Procedural Order No. 4.247 The Tribunal issued an amended version of Procedural Order No. 4 on 9 January 2021 adopting the Parties' agreed wording such that the Award could be rendered initially in English with a Spanish translation produced subsequently.248 The Tribunal offered to introduce the Parties to two translators regularly used by ICSID for English to Spanish translation,249 which FREIF accepted.250

G6.4 Filing of Costs Submissions

138.
On 11 January 2021, the Tribunal wrote to the Parties with a proposed timetable for the filing of costs submissions and sought the Parties' views on this proposal.251 Spain requested an additional week for the filing of costs submissions,252 and as FREIF did not object,253 the deadline was set for 4 February 2021.254
139.
On 4 February 2021, the Parties submitted their respective Costs Submissions to the Tribunal first without circulation to the other Party.255 After both Parties' Costs Submissions were received by the Tribunal, the Administrative Secretary simultaneously circulated them to both Parties.256
140.
On 13 February 2021, the Tribunal wrote to the Parties with respect to their respective submissions in relation to interest on the cost claims that each Party made and requested additional submissions from the Parties.257 These were received on 17 February 2021.258

G6.5 Closure of Proceedings

141.
On 11 January 2021, the Tribunal wrote to the Parties informing them that it is satisfied that the Parties have had a reasonable opportunity to present their cases and it does not require any further submissions or evidence from the Parties on any issue other than costs. It asked for any objections from the Parties to the closure of proceedings on all issues aside from costs.259
142.
Neither Party objected to the closure of proceedings on all issues aside from costs.260 On that basis, the Tribunal declared the proceedings closed under Article 40 of the SCC Rules on all issues aside from costs on 15 January 2021.261
143.
On 23 February 2021, The Tribunal asked the Parties whether they objected to the closure of proceedings on all issues including costs.262 The Parties advised that they had no objections263 and the Tribunal formally closed proceedings under Article 40 of the SCC Rules on 25 February 2021.264

G6.6 Time Limit for Final Award

144.
On 26 March 2018, the SCC advised that the time limit for rendering the Final Award was 24 April 2018.265 Upon the Tribunal's request this was extended to 1 March 2020.266 Following the two postponements of the Hearing, the time limit was extended to 25 September 2020267 and then to 1 March 2021.268 On 1 March 2021, the SCC approved a further extension of the time limit to 22 March 2021.269

H MATERIALS PROVIDED

145.
The following materials were filed by the Parties (in addition to factual exhibits and legal authorities relied upon by the Parties which are not listed).

H1 Pleadings

146.
The pleading and submissions provided by the Parties in this Arbitration were:

(a) FREIF's Statement of Claim dated 9 April 2018;
(b) Spain's Counter-Memorial on the Merits and Memorial on Jurisdiction dated 25 September 2018;
(c) FREIF's Reply Memorial on the Merits and Counter-Memorial on Jurisdiction dated 20 March 2019;
(d) Spain's Rejoinder on the Merits and Reply on Jurisdiction dated 12 July 2019;
(e) FREIF's Rejoinder on Jurisdiction dated 2 August 2019;
(f) Spain's Supplementation of the Jurisdictional Objections dated 18 November 2019;
(g) FREIF's Brief Comments on Sale of Assets dated 25 November 2019;
(h) Spain's Brief Comments on Sale of Assets dated 25 November 2019;
(i) FREIF's Counter-Memorial on the Supplementary Jurisdictional Objection dated 20 December 2020;
(j) Spain's Reply on its Supplementary Jurisdictional Objection dated 8 January 2020;
(k) FREIF's Rejoinder on the Supplementary Jurisdictional Objection dated 22 January 2020;
(l) FREIF's Post Hearing Brief dated 28 December 2020;
(m) Spain's Post Hearing Brief dated 28 December 2020;
(n) FREIF's Costs Submission dated 4 February 2021;
(o) Spain's Costs Submission dated 4 February 2021;
(p) FREIF's Submission on Interest on Costs dated 17 February 2021;270 and
(q) Spain's Submission on Interest on Costs dated 17 February 2021.

H2 Witness Statements

147.
The witness statements provided by FREIF in this Arbitration were:

(a) Witness Statement of Mr Mark Florian dated 5 April 2018;
(b) Witness Statement of Mr Eduard Fidler dated 5 April 2018;
(c) Expert Witness Statement of Mr José Alberto Ceña Lázaro dated 9 April 2018;
(d) Second Witness Statement of Mr Eduard Fidler dated 7 March 2019; and
(e) Second Expert Witness Statement of Mr José Alberto Ceña Lázaro dated 8 March 2019.

148.
The witness statements provided by Spain in this Arbitration were:

(a) Witness Statement of Mr Juan Ramón Ayuso dated 25 September 2018; and
(b) Second Witness Statement of Mr Juan Ramón Ayuso dated 12 July 2019.

H3 Expert Reports

149.

The expert reports provided by FREIF in this Arbitration were:

(a) Regulatory Expert Report of The Brattle Group dated 6 April 2018 (First Brattle Regulatory Report);
(b) Financial Expert Report of The Brattle Group dated 6 April 2018 (First Brattle Quantum Report) ;
(c) Rebuttal Regulatory Expert Report of The Brattle Group dated 8 March 2019 (Second Brattle Regulatory Report) ;
(d) Rebuttal Financial Expert Report of The Brattle Group dated 8 March 2019 (Second Brattle Quantum Report); and
(e) Asset Sale Memorandum of The Brattle Group dated 25 November 2019.

150.
The expert reports provide by Spain in this Arbitration were:

(a) Report of ECON ONE Research, INC., prepared by Dr. Daniel Flores and Mr. Jordan Heim dated 25 September 2018 (First Quadrant Report);
(b) Report of Quadrant Economics LLC., prepared by Dr. Daniel Flores and Mr. Jordan Heim (Second Quadrant Report); and
(c) Update to the Second Expert Report of Dr Daniel Flores and Mr Jordan Heim of Quadrant Economics dated 25 November 2019 (Update to the Second Quadrant Report).

H4 Translated Documents

151.
The Parties frequently submitted their own English translations of various regulations and documents and their respective translations are not always identical. Nonetheless, neither Party maintains any objection with respect to the English translations. There are no relevant discrepancies in the translations that impact on the Parties' positions or substantive issues for determination.271

I RELIEF SOUGHT

152.
FREIF sought the following relief:272

(a) a declaration that the Tribunal has jurisdiction under the ECT for all of FREIF's claims, thereby rejecting Spain's jurisdictional objections in full;
(b) a declaration that Spain has violated Part III of the ECT and international law with respect to FREIF's investments;
(c) compensation to FREIF for all damages it has suffered as set forth and as may be further developed and quantified during the course of this proceeding;
(d) all costs of this proceeding, including (but not limited to) FREIF's attorneys' fees and expenses, the fees and expenses of FREIF's experts, and the fees and expenses of the Tribunal and SCC;
(e) pre- and post-award compound interest at the highest lawful rate from the Date of Assessment until Spain's full and final satisfaction of the Award; and
(f) any other relief the Tribunal deems just and proper.

153.
Spain sought the following relief:273

(a) a declaration that there is no jurisdiction to hear the complaints of FREIF or, as appropriate, the inadmissibility thereof;
(b) in the alternative, in the event that the Tribunal decides that it does have jurisdiction to hear the present dispute, the dismissal of all of FREIF's claims on the merits, due to the fact that Spain has not in any way failed to comply with the ECT;
(c) In the alternative, the dismissal of all claims for compensation of FREIF as it is not entitled to compensation; and
(d) an order that FREIF pays all costs and expenses arising from this arbitration, including administrative expenses and SCC fees, as well as the fees of the legal representation of Spain, its experts and advisers, and any other costs or expenses that may have incurred, all of which include a reasonable interest rate from the date these costs are incurred until the date of its actual payment.

J OUTLINE OF TRIBUNAL'S APPROACH

154.
The Tribunal will:

(a) first, set out the legal and factual background to the dispute by summarising the history and factual context of the dispute, extracting relevant provisions of the ECT and providing an overview of relevant case law from other renewable energy arbitrations brought under the ECT against Spain (Parts K, L and M);
(b) second, summarise the pleadings and submissions of both Parties on each of Spain's three jurisdictional objections and set out the Tribunal's reasoning and determination of the issues (Parts N, O and P);
(c) fourth, summarise the pleadings and submissions of both Parties on the merits of case regarding breaches of the ECT and international law, and set out the Tribunal's reasoning and determination of the issues (Part Q);
(d) fifth, summarise the pleadings and submissions of both Parties on the issue of quantum and set out the Tribunal's reasoning and determination of the issues (Part R);
(e) sixth, summarise the Parties' costs submissions and provide the Tribunal's determination as to costs (Part S); and
(f) finally, make dispositive orders (Part T).

K BACKGROUND TO THE DISPUTE

155.
While the Parties have agreed upon a chronology of events at Part K7, they disagree on the characterisation and impact of many of these events. This section of the Award is not to be read as the Tribunal's findings of fact but as a non-exhaustive summary of the Parties' submissions on the relevant facts which support their arguments on the merits of the dispute. It reflects the structure adopted in the Parties' pleadings which placed a heavy emphasis on contesting the factual narrative presented by the other Party.
156.
The present dispute concerns investments made by FREIF in the Spanish renewable energy sector. In the mid-2000s, Spain, alongside other European countries, implemented a series of policies aimed at reducing CO2 emissions. The policies were enacted in response to an EU directive which required Member States to reduce their carbon emissions in line with obligations committed to under the Kyoto Protocol. The relevant policy mechanism employed to affect these reductions sought to promote investments in the renewable energy sector.
157.
The EU directive required Spain to generate nearly 30% of its electricity production from renewable energy sources by 2010.274 In 2001, when the directive was issued, renewable energy sources in Spain were modest,275 comprising two large-scale hydro-electric projects. It was therefore necessary for Spain to attract significant investments in other renewable energy sources, such as wind, solar photovoltaic and 'mini-hydro' projects.
158.
One difficulty which Spain faced was the fact that renewable energy was typically more expensive than energy sourced from fossil fuels.276 Financial support schemes therefore became necessary for Spain to meet its ambitious targets. Those schemes were, according to FREIF, essential, considering that such projects are capital intensive, with the vast majority of cost being incurred up front. Coupled with the quickly declining cost of wind technology, significant financial support was necessary to incentivise investment and placate investor uncertainty.277
159.
Spain's legislative response to its EU obligations was to implement Royal Decree (RD) 436/2004: a subsidy on renewable energy production.278 The "tariffs" were set for an initial term of 20 years, after which point they would reduce in value to 83% of the tariff initially granted.
160.
The regime was later replaced by a new decree, RD 661/2007, which (among other measures) amended the algorithm by which the Average Electricity Tariff (AET) was calculated, and added a 'floor' and 'ceiling' to the premiums payable to investors on the wholesale price of power.
161.
According to FREIF, both RD 436/2004 and RD 661/2007 contained a guarantee that once a wind farm qualified for the special regime, Spain could not and would not alter the benefits for that facility at a later date.
162.
In the period following the decrees, power generation attributable to renewable energy sources increased significantly. For instance, wind capacity increased from 8.181MW to 16.646MW in 2008.279
163.
A further change to the regime was enacted in 2010. In the midst of the financial crisis, FREIF alleges that Spain entered into an agreement with the wind and thermosolar associations seen through the implementation of RD 1614/2010 (the 2010 Agreement). The substance of the alleged agreement is as follows:280

"[T]he industry agreed to accept (1) temporary decreases in the levels of compensation available to some facilities… and (2) a limitation on operating hours in years with unusually high production. In exchange, Spain committed to maintain wind and thermosolar facilities' option of electing to receive a premium on top of market prices throughout the operating lives, of all registered facilities, and not to apply any other changes to the remuneration for existing wind plants in the future. Spain implemented the 2010 Agreement through [RD 1614/2010]. True to Spain's word, Article 5 of RD 1614/2010 reiterated its promise that all future adjustments in remuneration would not be applied retroactively to already built and operational facilities."

164.
In December 2011, FREIF purchased a 50% preferred equity interest in a portfolio containing six wind parks. Linklaters performed due diligence into both the assets and any extant regulatory risk. With respect to the latter point, FREIF submits that Linklaters advised that regulatory risks were low, considering the regime had only recently been revised in 2011.
165.
However, in 2012, Spain began to wind back the economic support promised under RD 1614/2010 in contradiction of what FREIF says were promises it made in the 2010 Agreement.281 The effect of RD 661/2007 was "canceled… for new facilities".282 This occurred, in FREIF's submission, "despite the significant investment costs that had gone into those developments and despite Spain having encouraged that very investment in additional facilities".283
166.
Subsequently, in December 2012, Law 15/2012 was enacted which imposed a new 7% tax on both the value of electricity, and the value of incentives provided under RD 661/2007. In addition, the Government allegedly retroactively prohibited renewable energy providers from "selling their production to the market and receiving a premium on top of the market price".284 Tariffs also ceased to be indexed to movements in the Consumer Price Index (CPI), introducing instead an "amended CPI". In the year that followed, further changes were enacted which "abolish[ed] RD 661/2007 in its entirety (along with the rest of the legal structure governing the so-called "special regime" of renewable electricity generation, which had existed since 1997)".285 The incentives which took its place were, in FREIF's view, "far less valuable".286
167.
It is FREIF's case that these measures caused significant harm to its investments, which had the effect that: (i) its ability to meet debt covenants was impaired; and (ii) it risked defaulting on its debt. In sum, it alleges that, as a result of Spain's measures, FREIF's wind farms are no longer able to earn anything close to a reasonable return.287
168.
The differences between the Parties' cases are apparent and are discussed in greater depth in the following sections. FREIF goes so far as to label Spain's recount of events as a "total revision of history".288 It is however essential to draw out two key matters which the Parties dispute which are foundational issues in this dispute:

(a) First, FREIF denies that the Original Regulatory Regime was subject to the dual principles of "economic sustainability" and "reasonable return"; and
(b) Secondly, FREIF disputes Spain's argument that RD 1614/2010 did not embody an Agreement struck between the energy sector and the Government.

169.
The Tribunal will set out the Parties' positions as to the factual background of this Arbitration concerning the following issues:

(a) The original regulatory regime;
(b) The development of the law;
(c) The tariff deficit;
(d) The status of RD 1614/2010;
(e) FREIF's investment; and
(f) The new regulatory regime.

K1 The Original Regulatory Regime

170.
The series of legislative and regulatory amendments relevant to this dispute have their genesis in the liberalisation of the Spanish energy market in the 1990s. While the Government retained control of the transmission and distribution of electricity, generation and supply were liberalised, thereby "allowing electricity producers to sell electricity to larger consumers in bilateral contracts or into a wholesale pool through an auction process".289
171.
At the same time, the Spanish government took early steps to attract investment in renewable energy production. This was essential, given that renewable energy production (particularly at that time) was uncompetitive as against conventional methods. High per-unit production costs and high upfront capital costs of infrastructures also meant that, absent government intervention, capital investments were particularly vulnerable to (among other things) movements in price.290 This vulnerability is aggravated by the intermittency of renewable energy sources.
172.
Beyond codifying Spain's commitment to emissions reduction, Law 54/1997 set down its aim to encourage investment in renewables. It maintained a 'Special Regime' for renewable energy facilities, affording producers certain rights and privileges.291 Among these measures, the law gave the Spanish General Administration a broad discretion to implement the economic elements of the legislation. Article 30.4 required the government to "fix a premium that maintained the price of renewable power within a 'band' between 80-90% of the average consumer electricity price".292 In setting the tariff payable to producers, Article 30.4 required the administration to take account of the following:293

To determine the premiums, voltage levels delivered to the grid shall be considered, as well as the actual contribution to environmental improvement, primary energy savings and energy efficiency, and the investment costs incurred to obtain reasonable rates of return with regard to the cost of money in the capital markets.

173.
Spain focuses its account of Law 54/1997 on the two key principles which it says govern the SES: (i) that Energy supply is a service of strategic importance; and (ii) guaranteeing the supply requires the financial sustainability of the system.294
174.
Spain explains that "the main objective of the SES established by Law 54/1997 [was] to ensure that all consumers have access to electricity in conditions of equality and quality, ensuring that it is produced at the lowest possible cost, taking into account environmental protection."295 The implication of this principle is a policy approach which seeks to ensure the long term "economic sustainability" of the system, an integral part of which is the SES' financial self-sufficiency.

Financial self-sufficiency, as reflected in Act 40/1994, of 30 December, on planning of the National Electricity System (hereinafter, "Act 40/1994") was expressly reaffirmed in 2011 by an Act that FREIF omitted to mention to the Arbitral Tribunal. Act 1/2011, on the Sustainable Economy of 2011, explicitly established the need for any planning to be done on the basis of a sustainable system.296

175.
Similarly demonstrative of this principle is the applicable remunerative regime of "reasonable returns". Under Law 54/1997, remuneration was calculated so as to "achieve reasonable rates of return with reference to the cost of money on the capital market."297 Spain's position is that:

the pairing market price [sic] plus subsidy in Law 54/1997 has a clear and precise objective: to give a reasonable return on investment, according to the cost of money in the capital market.298

176.
FREIF disputes another central plank of Spain's case: that the legal framework guaranteed a "reasonable return". The provision relied upon by Spain is Article 30.4 of Law 54/1997 – specifically where it reads:

To determine the premiums, voltage levels delivered to the grid shall be considered, as well as the actual contribution to environmental improvement, primary energy savings and energy efficiency, and the investment costs incurred to obtain reasonable rates of return with regard to the cost of money in the capital markets.

177.
FREIF agrees that enabling a reasonable return was one objective of the premiums introduced by the law. However, it says that it does not follow, however, that such premiums were guaranteed.

K2 The Development of the Law

178.
RD 2828/1998 represented the "first attempt to implement the specific parameters of Law 54/1997."299 It introduced a fixed, per-unit, feed-in tariff for renewables producers (or alternatively a premium on the market price of energy production). These rates would be revised every four years by taking into account the evolution of the price of electric power on the market, the participation of these facilities in coverage of demand, and their impact on the technical management of the system. However, the rates could be modified for existing plants within the broad limitations set down in Law 54/1997.
179.
FREIF's commentary on this law is that it "unsurprisingly" failed to attract the desired level of investment, with the result that in the four years following its enactment, Spain was far from achieving its 2006 renewable energy target.300
180.
Spain takes a different focus. It notes that RD 2828/1998 demonstrated that the regulations which could be enacted were subordinated to the dual principles of economic sustainability and reasonable return.301 This is shown in two respects. First, as energy producers were accountable to the Administrative Registry, this evidenced an "intention of the legislator to verify, in any case, compliance with the planning targets for renewable energy sources." Secondly, Article 32 ensured that premiums were reviewed every four years based on, among other criteria, the change in the energy price, thereby maintaining the financial sustainability of the system.
181.
RD 436/2004 replaced RD 2828/1998. The Preamble to the regulations expressed that its aim was to provide "security and stability" and to establish a "long-lasting, transparent regulatory framework".
182.
The salient changes to the regime effected were as follows:

(a) the tariff rate scale was revised, and set as a percentage of AET. The AET was an index published annually by the Ministry of the Economy, which set different tariff rates for facilities of different sizes. The tariff rate was to remain consistent for a period of 15 years, at which time it would reduce.302

(b) Crucially, Article 40 authorised the revision of the "tariffs, premiums, incentives and supplements" only in respect of plants built after the entry into force of that law.303

183.
FREIF characterises these measures as being directly responsive to consultations with the energy sector. The deficiency in the previous regime, it says, was the absence of a long-term and stable framework. Accordingly, "[i]ndustry representatives… pushed for a legal framework that would offer greater legal security, regulatory stability, and predictability in the incentives granted and the returns on investment."304
184.
Spain takes a different view of matters again. It says that the rationale underpinning the changes was referable only to the "reasonable return principle".305 The same is said to be evidenced by the 'Financial Report of RD 436/2004, which explained that the tariff rates and the AET were calculated by reference to this principle. To this end, Spain contends:306

The subsidies established in RD 436/2004 are not intended to grant an indeterminate return. These subsidies respond to a specific methodology aimed at granting a standard facility a reasonable return over a given period of time.

185.
Similarly, the requirement to register production facilities with the Administrative Registry "was not… a State commitment to maintain indefinitely and unalterably the future return of the facilities registered therein, but a way to control and know those involved in the [SES]".307
186.
Importantly, Spain objects to FREIF's explanation of one aspect of the new regulation. The conflict concerns Article 40.3 of RD 436/2004 which provides as follows:

Article 40. Revision of tariffs, premiums, incentives and supplements for new facilities

1. In 2006, in view of the results of monitoring reports on the degree of compliance with the Development plan for renewable energy, the tariffs, premiums, incentives, and supplements defined in this RD will be reviewed, attending the costs associated with each of these technologies, the degree of participation of the special regime in covering demand and its impact on the system's technical and economic management. Every four years starting from 2006, a new review shall be performed…

3. The tariffs, premiums, incentives and supplements resulting from any of the revisions referred to in this section shall apply only to the facilities that become operational after the date of entry into force referred to in the preceding paragraph, without retroactivity to previous tariffs and premiums.

187.
FREIF contends that this measure operates to confine the scope of the provision so as only to apply to new plants. Spain on the other hand submits that this provision limits the application of the provision only to the terms of payment and not other aspects of the regime, including, the lifespan of the subsidies and the hours of subsidised production. It says that the Government retained the power to alter these terms at will.308
188.
Lending further support to its submission that the RD did not operate to preserve the previous regime for existing plants, Spain refers to a number of decisions of the Supreme Court which impress the fact that the Government retains power to adopt further regulations, which take precedence over those previously enacted.309
189.
In 2007, Spain replaced RD 436/2004 with RD 661/2007. The purpose of RD 661/2007, stated in its Preamble, was to "increase investment in renewable energy to meet Spain's global targets".
190.
FREIF highlights how the new RD increased tariff rates and, significantly to its case, "incorporate[d] greater, long-term stability and predictability into the regime".310 It submitted:311

Incentives were no longer linked to a formula (the AET) that would vary from year to year in the Government's discretion, but were guaranteed against future revisions to endure throughout the operating lives of the facilities.

191.
The amended regime achieved its objective in two primary ways: (i) it implemented attractive tariff rates that guaranteed a predictable level of profitability for renewable energy investors; and (ii) it guaranteed the duration of those incentives throughout the operating lives of those facilities registered under the regime.312 Further, as something of a compromise measure with the Government, a "cap and floor" mechanism was implemented with respect to the premium option (which also afforded to investors greater certainty).
192.
Specifically, with respect to the fixed tariff rates, RD 661/2007 enacted the following measures:

(a) it guaranteed that the market premium would remain in effect for twenty years, and that the fixed tariff would remain in effect for the life of a facility.313

(b) it maintained that the remuneration rates could not be adjusted in respect of existing plants, per Article 44.3.

193.
The latter feature, FREIF says, was an inclusion which was directly responsive to the concerns of investors as to the certainty of future returns.

The combination of (i) a perfectly known price… and (ii) a clear and easy method of automatic adjustment (in line with the indexed rate of inflation), together with (iii) the guarantee of continued support throughout the entire life of each facility and (iv) the guarantee of no retroactive effect of future revisions, offered investors an attractive degree of security.

194.
This key aspect of the new regime was emphasized by Spanish government officials, who made public statements saying that there was no legal uncertainty under the new regime.314
195.
Spain rejects this characterisation, submitting that the laws were not passed to afford greater stability to investors. It contends that such a characterisation fails to appreciate that the principal legislation granting the authority to regulate by RD, mandates observance of the principle of economic stability. Accordingly, RD 661/2007 was passed to " correct situations of windfall profits and to safeguard the economic sustainability of the SES."315
196.
The Preamble to the RD is quoted in support of this position: the aim being to "maintain the security of the SES" and address the fact that "some variables… make it necessary to modify the remuneration regime and de-link it from the [AET], or Reference Tariff, which has been used to date."316 The Preamble also explains its purpose of "ensuring reasonable remuneration on investments and a likewise reasonable allocation of the costs attributable to the electricity system".317
197.
Spain further rejects the position that RD 661/2007 sought to stabilise the tariffs conferred for existing plants. It refers to Article 40 of RD 436/2004 and Article 44 of RD 661/2007.
198.
Article 40 of RD 436/2004 reads as follows:

In 2006, in light of the results of the follow-up reports on the degree of compliance with the Development Plan for renewable energies, the tariffs, premiums, incentives and supplements defined in this royal decree shall be revised.

199.
Article 44 of RD 661/2007 then provides:

During the year 2010, on the sight of the results of the monitoring reports on the degree of fulfilment of the Renewable Energy Plan (PER) 2005-2010, and of the Energy Efficiency and Savings Strategy in Spain (E4), together with such new energy targets as may be included in the subsequent renewable Energies Plan 2011-2020, there shall be a review of the tariffs, premiums, supplements and lower and upper limits defined in this Royal Decree.

200.
In Spain's submission, these provisions related only to compliance with the planning objectives.318 Its submission on this point reads:319

As regards the effects of these specific revisions and not others, article 40 of RD 436/2004 stipulated that: "The tariffs, primes, incentives and supplements resulting from any of the revisions referred to in this section shall apply only to the facilities that become operational after the date of entry into force referred to in the preceding paragraph, without retroactivity to previous tariffs and primes".

The same caution remains in RD 661/2007, where it states that the effects of revisions that take place as a result of having achieved the planned objectives, and only these revisions, cannot affect existing facilities: "The reviews referred to in this section of the regulated tariff and the upper and lower limits will not affect facilities whose commissioning certificate was awarded by 1 January of the second year following the year in which the review was carried out."

In other words, article 44 of RD 661/2007, just like article 40 of RD 436/2004, limits the effects of the revisions of the specific revisions provided for in these articles, the ordinary revisions linked to planning objectives, and not to others.

201.
It argues that two conclusions must necessarily be drawn from these provisions: (i) scope of the preservation of benefits is confined; and (ii) "the incentive system will always be subject to the principle of reasonable rate of return".320
202.
In the same vein, Spain disputes FREIF's claims that the renewable energy industry viewed the Regulations as affording investors superior stability.321 It refers to statements issued by the Association of Renewable Energy Producers (APPA) and other industry organisations such as the Spanish Wind Energy Association (AEE) who made public statements variously expressing their view that they "did not consider that the last drafting of RD 661/2008 guaranteed the immutability of the remunerative framework".322
203.
Spain concludes its position on the new RD, stating:323

These changes are justified and admissible in an attempt to correct situations of windfall profits and to guarantee the economic sustainability of the SES. Starting in 2006 and 2007, no investor could have had the expectation that RD 661/2007 or any of its articles or similar articles contained in a regulation could prevent the implementation of regulatory measures that would affect existing facilities by reducing their remuneration when such measures were justified by the need to guarantee the economic sustainability of the SES and/or to correct situations of excess remuneration.

K3 The Tariff Deficit

204.
If FREIF's narrative of events is to be accepted, there was a flood of investment following the introduction of RD 661/2007. With the confidence of the Government's vocal assurances of the stability afforded to investors under the Regime,324 investment in renewable energies, and by extension wind energy installed capacity, grew substantially.325
205.
In FREIF's submission, Government ministries, state agencies, and the National Energy Commission (CNE) were vocal about the assurances enshrined in RD 661/2007. In particular, they guaranteed that: (i) the new legal framework was stable, (ii) future changes would not apply retroactively to existing facilities, and (iii) the incentives would endure throughout the operating lives of the facilities.326
206.
What began to emerge in this period was a concern about what is called the "tariff deficit", described concisely by FREIF as "a gap between the regulated costs of the system and the revenues that the system collected from electricity consumers to pay those costs." The growth of the deficit is shown in the figure below:327
207.
Spain contends that the emergence of this tariff deficit was a serious economic issue, and one which threatened to undermine the foundational legal principle of "economic sustainability". It described the measure subsequently adopted to correct the deficit as "extraordinarily urgent and necessary".328 FREIF's attitudes are more muted. In its view, these increases in the cost to the electricity system were "no surprise" and could be anticipated easily, as the cost of renewables was set precisely under RD 661/2007.329 As to its cause, FREIF's experts contend that:

the tariff deficit emerged for the simple reason that Spain failed to set consumer charges at a level sufficient to cover the costs of the electricity system.330

208.
In any event, in a collaborative process conducted between the energy sector and the Spanish government, regulatory amendments were formulated to bring the growing tariff deficit under control.
209.
The measures were embodied in RD-Law 6/2009, the aim of which was to eliminate the deficit by 1 January 2013.
210.
The primary mechanism by which this would be achieved was by raising the tariff, and imposing new conditions of entry to participate in the scheme.331 FREIF maintains that these changes:

merely established an additional administrative pre-requisite for new facilities to be eligible for Special Regime incentives; it did not make any changes to the rights of facilities already part of the Special Regime.332

211.
To the contrary, Spain argues that the laws represented an important step to adjust the expectations of investors. First, it says that the law made clear that the tariff deficit required an urgent response, having the potential to cause "serious problems" and endanger the system's sustainability. Second, the law put investors on notice that the Regulator would adopt legal measures:333

that were necessary to achieve the above-mentioned objective [to reduce the tariff deficit]. In other words, until this objective was attained, all costs and revenues of the SES would be subject to its achievement.

212.
Further amendments were implemented in RD 1614/2010 which pursued the dual objectives of reducing the tariff deficit while addressing "several inefficiencies in the application of RDL 6/2009 to wind and CSP facilities, and guaranteeing the application of the economic regime set forth in RD 661/2007 to existing projects".334
213.
The latter clause is crucial in FREIF's submission. After a period of negotiation,335 the renewables industry settled on a range of measures which involved the renewables producers "accept[ing] a reduction in the number of equivalent operating hours of operation".336 However, this concession was made in exchange for Spain's guarantee of stability and no further modifications of the tariffs for the existing plants in the future.337 In Mr Ceña's witness statement, he explained this quid pro quo:

In exchange for these revisions to the regulatory framework, Article 5.3 of RD 1614/2010 expressly excluded the possibility of any future revisions to the incentive regime for existing facilities.338

214.
The important aspect of these amendments which FREIF stresses is that RD 1614/2010 essentially represented an agreement between the Government and the renewable energy sector, which it calls the "2010 Agreement". The process of the negotiation is described in some detail in the submissions, and it will be sufficient to note the following.

K4 Status of RD 1614/2010

215.
The context discussed in the following section is of great relevance to the merits of the dispute, particularly with respect to FREIF's submission that Spain breached the FET standard required by Article 10 of the ECT. FREIF submits that Spain is incorrect to deny the existence of the 2010 Agreement with the wind sector.339
216.
It is not correct, in FREIF's submission, that the discussions with the Government were mere consultations with associations, conducted in an ordinary process mandated by law.
217.
At the commencement of the negotiations, the Government sought to reduce the incentives available to producers so as to address the worsening tariff deficit (which had become worse as a result of a drop in demand). The sector showed fierce resistance to such changes, as it would impair its rights under the 2007 regulations.
218.
FREIF describes the negotiations which took place as being "intense". Mr Ceña devoted much of his First Statement to describing the negotiations between the Minister of Energy and the AEE (the wind industry association) with the "purpose of reaching an agreement on a temporary reduction to the remuneration for wind facilities."340 Throughout the course of at least nine meetings between the two, a series of detailed proposals were exchanged between the Parties.
219.
Mr Ceña describes the AEE's priority in the discussions as being to shelter the existing legal framework from any retrospective change. However, by way of compromise, the AEE agreed to a reduction in the "number of equivalent operating hours of operation".341
220.
At the culmination of these discussions, according to the Ministry's press release:342

an agreement was finally reached on July 2, 2010. On that same day, the Ministry issued a press release announcing that it had "entered into an agreement with the wind and CSP sectors to review their remuneration framework".

221.
The Ministry noted the following features of the agreement: (i) there was an agreed reduction in remuneration for both wind and CSP plants which was temporary; and (ii) the Agreement included "long term measures" "that strengthened the stability of the remuneration for wind and CSP facilities."343 FREIF submits these features were directly referable to the Government's negotiations with the sector.
222.
Whilst implementing the Agreement, the Ministry worked "very closely" with the AEE. FREIF notes that:344

The AEE received a first draft of the Royal Decree from the Ministry on July 14, 2010, and submitted its comments and edits to each of the versions it received from the Ministry. Mr Jose Ceña Lazaro directly participated in this process, preparing the AEE's comments and edits to each of the drafts to make sure the decree accurately reflected the content of the Agreement.

223.
When the RD was finally released, the Official Notice published by the Council of Ministers stated that it "had been agreed with both [the wind and CSP] sectors last July".345 These facts, FREIF submits, make clear the status of the Agreement struck between the Parties.
224.
Spain casts a different light on the regulation. It says, first, that the measures were a further response to the tariff deficit which had worsened owing to an "exceptional drop in electricity demand".346 Secondly, and crucially to its case:347

FREIF's arguments aimed at turning RD 1614/2010 into a kind of contract resulting from the negotiations are simply nonsense. There are many examples that can be given regarding dialogues with associations carried out by the Government of Spain for the purposes of developing a regulation.

225.
Spain expressly disavows any knowledge of the so-called "2010 Agreement", employing in support a statement of the Minister of Industries which does not refer to an agreement (although noting the 'dialogue' with the industry), and stating that the objective of the laws was to manage the tariff deficit.348
226.
Finally, Spain submits that RD 1614/2010 "contains no evidence of any commitment or agreement between the Government of Spain and the wind energy sector [to freeze the remuneration regime]."349 It says that the Regulation constitutes a unilateral action of the regulator in the exercise of its powers that does not include a guarantee of future freezing of a specific remuneration regime.350
227.
Further, it argues that RD 1614/2010 impairs the stabilisation measures which remained applicable to certain energy producers. Therefore, the regulatory measures necessary to ensure the economic sustainability of the SES will not be applicable thereto, nor the regulatory measures aimed at avoiding situations of over-remuneration in the event they are detected.351

K5 FREIF's Investment

228.
FREIF submits that in reliance on the legal framework that had developed, and the Spanish government's sustained assurances as to the stability of that regime, it entered into the joint venture with Spanish company, Renovalia. FREIF and Renovalia created a Spanish company called Renovalia Reserve S.L and invested in the wind farms the subject of this Arbitration in December 2011. FREIF owns 50% minus one share of the equity of the joint venture, although its equity is a preferred class that is entitled to higher equity distributions up to 2021.
229.
FREIF sought, in its view, a low-risk investment which would most desirably service its clients, who were primarily on pension plans. For this reason, it was strategically advantageous to "invest in long-lived infrastructure assets with contracted or regulated revenues that generate steady cash flows with minimal risk."352
230.
Prior to entering the Joint Venture, FREIF retained Linklaters LLP to perform an exhaustive due diligence process of the Spanish legal system and any regulatory risks. In its assessment, the risk of government change to the economic regime was very low. Based on this advice and FREIF's own analysis, FREIF understood that RD 1614/2010:353

meant that the government had already made all the adjustments that would affect windfarms and promised that no future revisions would apply to existing plants in a law that had been agreed with the wind industry.

231.
Crucially, Linklaters considered that Spain could not unilaterally alter the remuneration applicable to the windfarms. It was therefore in reliance on this advice, Spain's regulatory regime, its commitment to the energy sector, and the guarantees of long-term stability that FREIF entered into a joint venture with Renovalia.

K6 The New Regulatory Regime

232.
FREIF then contends that, in a "non-transparent and unfair process"354, the legal framework embodied in RD 661/2007 and RD 1614/2010 was overhauled between 2012 and 2014. In its place, a series of measures of retrospective application were implemented, which caused its investments considerable harm.
233.
Spain allegedly adopted the following measures:355

(a) an "arbitrary" reduction in the promised tariffs, effected by the introduction of a 7% tax on all renewable energy producers.
(b) modification of the CPI adjustment employing an 'adjusted CPI' formula; and
(c) regulation to eliminate the option to accept a premium on the market sale price of electricity production (an option which had been in force since 1998).

234.
These changes stood as a precursor to further changes implemented between July 2013 and June 2014, which operated to revoke in its entirety the Original Regulatory Regime. FREIF contends these changes abolished its incentive to invest, providing "substantially less compensation and vastly less stability".356
235.
Before proceeding to address the Parties' positions on the merits of the dispute, it is necessary to identify the salient features of New Regulatory Regime that was implemented.
236.
The first measure to consider is the implementation of a 7% tax on energy production. Spain says the tax is a non-discriminatory measure representing an entirely legal and justified exercise of the Spanish government's legislative power. This is particularly so when it is understood that this measure was implemented to decisively resolve the issue of the tariff deficit.
237.
FREIF argues that to label the measure as a "tax" is misleading. More than that, the label obscures what it says is the discriminatory effect of the law. Law 15/2012, which introduced the tax, levied a 7% tax on all electricity producers in respect of all revenues earned by the producer. Not only were renewable energy producers taxed on the value of the energy they produced, they also had to pay 7% on the value of any incentive payments received. This, in effect, reduced the value of the subsidies they earned.
238.
The peculiar position in the market of renewable energy producers, FREIF submits, exacerbated the effect of this measure. Given that wind farms could not generate power at competitive market rates, they lacked the capacity to transfer the burden of the tax to consumers.357 FREIF submits that for this reason the measures were discriminatory towards renewables producers.
239.
Additional reductions to the incentives receivable by investors were: (i) RDL 2/2013, which retrospectively abolished the option for non-photovoltaic producers to be paid a premium on top of the market price for the electricity their facilities produced; and (ii) incentives were indexed to an "amended CPI" which dampened the year-to-year increases in the nominal value of the incentives. According to FREIF, these measures transformed the remuneration framework from being one that was fixed to being variable.358 Under the previous RD 661/2007, the government did not increase tariffs when interest rates rose during the economic crisis in 2010-2012.359
240.
The collective aim of these measures was made apparent in the provisions of RDL 9/2013 : "On Urgent Measures to Guarantee the Financial Stability of the Electricity System". Express provision was made in the Act which reads:360

This remuneration scheme does not exceed the minimum level necessary to cover the costs that allow for the facilities to compete equally with the rest of technologies in the market and that would lead to a reasonable rate of return by reference to the standard facility applicable in each case.

241.
To this end, the principle which guided the New Regulatory Regime was the principle of reasonable return (which Spain contends was at all times applicable). The new scheme ensured that producers should receive no more than a reasonable return. That rate was set in RDL 9/2013 so that producers would achieve an after-tax return of 5.56% (which FREIF submits falls below that the return contemplated by the 2007 laws, which precipitated its investment).361
242.
Another aspect of the New Regime was to calculate the rate of remuneration applicable to individual plants by reference to a "Standard Facility". FREIF's issue with this measure is that facilities are grouped not by reference to electricity output, but by size. Moreover, as Brattle explained, the new regime "made financial support contingent on certain thresholds of 'equivalent hours of operation'". Below an "operating threshold", plants receive no incentive at all. According to FREIF:362

Above the 'operating threshold', but below the 'minimum operating hours' level, plants receive a percentage of the maximum investment incentive (in proportion to the hours of operation compared to the minimum). Above the minimum operation hours level, plants receive no additional incentives, and only receive the wholesale price for all additional electricity. Thus, the "minimum operation hours" acts as a cap on the incentives that a wind plant can receive under the New Regulatory Regime.

243.
The above does not comprehensively account for all the changes enacted into the system. Of the new scheme, FREIF submitted the following:363

The New Regulatory regime is astonishingly complex and uncertain, in stark contradiction to the simplicity and transparency that investors demanded, and that RD 661/2007 provided, in order to attract widespread investment in Spain's renewable energy sector. More importantly, the New Regulatory Regime is a "sea change" in the regulatory framework that fundamentally altered the risk and reward framework under which investors committed their valuable capital.

244.
FREIF submits that the New Regulatory Regime exacted significant harm upon its investments. The 7% energy tax reduced its incentive remuneration and capped the amount it could produce in exchange for incentives payments. It argues that the measures rendered FREIF vulnerable to downside protection against wholesale prices,364 increased the risk of default and insolvency,365 and subjected its investments to heightened regulatory risks.366 In the final consideration, FREIF submits that:

none of the six projects is now able to achieve the returns it would have generated under the regulatory framework that Spain had originally guaranteed and that induced FREIF's investment.367

245.
The theme of Spain's submission continues in respect of the measures implemented subsequent to FREIF's investment. Spain asks the Tribunal not to forget that "the activity of subsidized production from renewable source is an integral part of the SES and, therefore, is subject to its principles and purposes".368 It submits the policies served to stem the losses under the Regime were exacerbated by the economic crisis suffered by Spain at that time. The situation led to an overwhelming divergence between the revenues and costs of the SES, resulting in the so-called tariff deficit.369
246.
This deficit, it contends, was unsustainable. And so, "[f]aced with this situation, a comprehensive and proportionate response was required for the unsustainable imbalance issue in the SES."370
247.
The "Tax on the Value of the Production of Electrical Energy" (TVPEE), it submits, was a tax of general application. It does not accept FREIF's submission that it impacts renewables producers unduly because its tax base applies to revenues from production and from incentives payments. It argues that impact has been "neutralised, since the TVPEE is one of the costs remunerated to such producers through the specific remuneration they receive".371
248.
With regard to the amended measure of indexation (termed the CPI-CT by Spain), Spain argues that the measure is justified "scientifically and legally" and has in fact benefited FREIF. The new measures avoid distortions of the conventional CPI "unrelated to the fundamentals of the economy".372
249.
Considering the New Regulatory Regime in a more holistic way, Spain contends that the framework preserves many existing elements. In fact, it says it perpetuates these essential elements, whilst correcting inefficiencies "in order to guarantee the economic sustainability of the SES in the framework of EU law".
250.
Furthermore, Spain contends that "[a]ll of the rules included in the new legal framework have been adjusted to the procedures set out by Spanish law. All reports needed to guarantee the full compliance of the new text of the rules with the Spanish legal system have been collected."373 In short, both legally and substantively, Spain's position is that it has consulted closely with the energy sector before enacting these laws.
251.
Finally, in conformity with the essential principles which underpin the renewable energy regime, Spain argues that the challenged measures maintain the objective of providing investors with a reasonable rate of return.

K7 Joint Chronology

252.
The Parties submitted a joint chronology as Schedule 1 of their Post Hearing Briefs, a summarised version of which is provided below.

DateEvent
1980 Spain adopted Law 82/1980, which had the goal of promoting renewable energy and increasing energy efficiency as part of a strategy to reduce dependence on imported hydrocarbons.
1981 Spain adopted Royal Decree (RD) 1217/1981 to promote "mini" hydro facilities.
1982 Spain adopts RD 1544/1982, expanding the incentive regime to hydro facilities over 5 MW.
1986 Spain enacts the 1986 Renewable Energy Plan.
1989 Spain enacts the 1989 Renewable Energy Plan.
1991 Spain enacts a National Energy Plan for the next decade, which specified Spain's goal of increasing the share of total primary energy consumption from non-hydro renewable sources.
1994 Spain enacts RD 2366/1994, which created the Special Regime for electricity generators from renewable energy sources, cogeneration, and waste facilities under 100 MW.
1994 The EU issues the Declaration of Madrid, which called on the EU to establish a goal that renewable energy would satisfy 15% of the EU's energy requirements by 2010.
1994.12.30 Spain enacts Law 40/1994, of 30 December, on planning of the National Electricity System.
1997 EC publishes a White Paper that calls for the EU to satisfy 12% of its total energy requirements from renewable resources by 2010.
1997.11.27 Spain enacts Law 54/1997.
1998.04.28 EU agrees to binding emission-reduction goals in the Kyoto Protocol, wherein the EU committed to an emissions reduction of 8% below 1990 levels in the period from 2008-2012.
1998.06 EU meets in Luxembourg to establish national emissions targets for Member States to meet targets under the Kyoto Protocol. Spain's emissions increase was capped at 15% above its 1990 output.
1998.12.23 Spain enacts Royal Decree 2818/1998.
1999.12 The Development Plan of Renewable Energies 2000-2010 is delivered.
2001.02.03 The European Commission publishes the "Community Guidelines on State Aid for environmental protection" in the Official Journal of the European Union.
2001.09 EU adopts Directive 2001/77 EC on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market, establishing a target to satisfy 12% of total EU energy consumption and 22.1% of EU electricity production from renewable resources by 2010.
2004.03.12 Spain enacts Royal Decree 436/2004.
2005.08 The Renewable Energy Plan in Spain 2005-2010 is delivered.
2005.12.15 The Spanish Supreme Court renders a Judgment.
2006.03.09 One of the projects that Claimant would later acquire, La Fuensanta, receives its RAIPRE registration confirming its right to Special Regime tariffs.
2006.06.23 Spain enacts Royal Decree-Law ("RDL") 7/2006.
2006.10.25 The Spanish Supreme Court renders a Judgment.
2007.05.25 Spain enacts RD 661/2007.
2007.05.25 Spain issues a press release on RD 661/2007. Spain's Council of Ministers issues a similar notice on RD 661/2007.
2007.07 Pöyry issues a report called "Current and future state of wind energy in Spain and Portugal".
2007.10.09 The Spanish Supreme Court issues a Judgment.
2004-2009 Spain gives a number of presentations to the investment community on the RD 436/2004 and RD 661/2007 incentive regimes.
2008.03.07 Two other of the wind projects that Claimant would later acquire, Casa del Aire I and Casa del Aire II, receive their RAIPRE registrations.
2008.05.09 Three other of the wind projects that Claimant would later acquire, La Muñeca, Alconada, and Cuesta Mañera, receive their RAIPRE registrations.
2008.09.26 Spain enacts RD 1578/2008.
2009.04.30 Spain enacts RD-Law 6/2009.
2009.05.20 The Draft of a future Renewable Energy Law is presented jointly by APPA and Greenpeace, who also issued a press release.
2009.12.03 and 2009.12.09 The Spanish Supreme Court renders three Judgments.
"Late" 2009 First Reserve, Claimant's then-parent company, is introduced to Renovalia, which will become its JV partner for the acquisition of the wind projects at issue in this arbitration.
2010.04.22 Renovalia, Claimant's JV partner, issues an offer for the subscription and admission to trading of shares.
June 2010 Reports and/or summaries of conversations between the Spanish Ministry and the wind sector (and/or a related agreement, from Claimant's perspective, which Respondent disputes) are issued.
2010.06.30 Spain adopted the National Renewable Energy Action Plan for 2011-2020 (PANER).
2010.07.02 The Ministry of Industry issues a press release.
2010.07.29 The AEE submits allegations to the CNE during the Spanish National Energy Commission public consultation process on the Proposed RD 1565/2010.
2010.11.19 Spain enacts RD 1565/2010.
2010.12.07 Spain enacts RD 1614/2010.
2010.12.23 Spain enacts RD-Law 14/2010 which established urgent measures for the correction of the tariff deficit in the electricity sector.
2011.01.26 The Minister of Industry (Mr. Sebatian) gives a speech to the Congress of Deputies during the session held to approve RD-Act 14/2010.
2011.01-06 Linklaters provides ongoing advice to First Reserve regarding Claimant's potential investment in Spain.
2011.03.04 Spain enacts Law 2/2011, of 4 March, on Sustainable Economy.
2011.03 Pöyry issues a report entitled "Current state and future trends of solar power in Spain".
2011.05.18 First Reserve addressed an indicative offer to Renovalia to establish a joint venture to own a portfolio of wind assets in Spain and to possibly acquire further assets under development once they were fully developed and ready to build.
2011.09.22 First Reserve completed the "Renovalia JV Infrastructure Investment Committee Final Memo," recommending that Claimant proceed with the Renovalia JV.
2011.10.14 Claimant and Renovalia enter into a share sale and purchase agreement (2011 SPA) to acquire the wind projects.
2011.12.01 Shareholders agreement between Claimant and Renovalia comes into effect.
2011.12.19 The candidate for Prime Minister makes its inaugural address at Congress.
2011.12.28 The CNE issues a press release.
2012.01.27 Spain enacts Royal Decree-Law 1/2012, of 27 January, proceeding to the suspension of remuneration pre-allocation procedures and the elimination of the economic incentives for new electric energy production plants using cogeneration, renewable energy sources and waste.
2012.01.27 The Ministry of Industry, Energy and Tourism issues a press release.
2012.03.07 The CNE issues Report 2/2012 On the Spanish Energy Sector on 7 March 2012, the first part of which is dedicated to the Measures to Ensure the Economic and Financial Sustainability of the Electricity System.
2012.04.25 Claimant acquired an additional 12.5% indirect interest in ENERDEURO
2012.04.27 The government approves the National Reform Program 2012.
2012.07.06 The European Union Council makes a statement.
2012.07.20 The Kingdom of Spain subscribed with the EU the Memorandum of Understanding on Financial-Sector Policy Conditionality.
2012.11.12 Spanish Supreme Court issues a judgment.
2012.12.27 Spain enacts Law 15/2012.
2013.02.01 Spain enacts RDL 2/2013.
2013.07.13 Spain enacts RDL 9/2013
2013.12.26 Spain enacts Law 24/2013.
June 2014 Spain enacts RD 413/2014 and Ministerial Order IET/1045/2014.
2016.04.20 Spanish Supreme Court issues a judgement.
2017.11.13 The European Commission ("EC") issues its Decision in State Aid procedure SA.40348.
2019.05.01 Claimant sells its interests in the wind plants at issue in this arbitration, while retaining its rights to pursue this arbitration.
2019.11.22 Spain enacts RDL 17/2019.

L RELEVANT ECT PROVISIONS

253.
This part of the Award sets out the key provisions of the ECT which form the basis of the Parties' dispute.

L1 Jurisdictional Objections

254.

Part I, Article 1 sets out definitions of key terms which are relevant to the intra-EU objection and the "electa una via" provision. These definitions include:

(2) "Contracting Party" means a state or Regional Economic Integration Organization which has consented to be bound by this Treaty and for which the Treaty is in force.

(3) "Regional Economic Integration Organization" means an organization constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them in respect of those matters.

[…]

(7) "Investor" means:

(a) with respect to a Contracting Party:

(i) a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law;

(ii) a company or other organization organized in accordance with the law applicable in that Contracting Party;

(b) with respect to a "third state", a natural person, company or other organization which fulfils, mutatis mutandis, the conditions specified in subparagraph (a) for a Contracting Party.

255.

Part III, Article 16 on "Relation to Other Agreements", which is relevant to the intra-EU objection, provides:

Where two or more Contracting Parties have entered into a prior international agreement, or enter into a subsequent international agreement, whose terms in either case concern the subject matter of Part III or V of this Treaty,

(1) nothing in Part III or V of this Treaty shall be construed to derogate from any provision of such terms of the other agreement or from any right to dispute resolution with respect thereto under that agreement; and

(2) nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty, where any such provision is more favourable to the Investor or Investment.

256.

Part V, Article 25, entitled "Economic Integration Agreements" provides:

(1) The provisions of this Treaty shall not be so construed as to oblige a Contracting Party which is party to an Economic Integration Agreement (hereinafter referred to as "EIA") to extend, by means of most favoured nation treatment, to another Contracting Party which is not a party to that EIA, any preferential treatment applicable between the parties to that EIA as a result of their being parties thereto.

(2) For the purposes of paragraph (1), "EIA" means an agreement substantially liberalising, inter alia, trade and investment, by providing for the absence or elimination of substantially all discrimination between or among parties thereto through the elimination of existing discriminatory measures and/or the prohibition of new or more discriminatory measures, either at the entry into force of that agreement or on the basis of a reasonable time frame.

(3) This Article shall not affect the application of the WTO Agreement according to Article 29.

257.

Part V, Article 26, concerning the "Settlement of Disputes between an Investor and a Contracting Party" is set out in full above at [12].

258.

Part VII, Article 36(7) provides for the voting procedure of a Regional Economic Integration Organization, which is referred to during submissions on the intra-EU objection:

A Regional Economic Integration Organization shall, when voting, have a number of votes equal to the number of its Member States which are Contracting Parties to this Treaty; provided that such an Organization shall not exercise its right to vote if its Member States exercise theirs, and vice versa.

259.

Part IV, Articles 21(1) and 21(7) concern "Taxation Measures" relevant for the Second Jurisdictional Objection:

(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.

[…]

(7) For the purposes of this Article:

(a) The term "Taxation Measure" includes:

(i) any provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein;

and

(ii) 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.

L2 Merits of the Case

260.

Part III, Article 10(1) on the "Promotion, Protection and Treatment of Investments" is the key provision which contains obligations that FREIF submit have been breached by Spain. It provides:

Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party. (footnotes omitted)

M RELEVANT DECISIONS

261.
This Arbitration occurs within the context of a series of investment treaty arbitrations filed against Spain by various investors concerning the regulatory framework of Spain's renewable energy sector. More than 25 previous Awards and Decisions in such cases against Spain have been submitted by the Parties as legal authorities in this Arbitration. The Tribunal has carefully considered these authorities in addition to other legal authorities submitted by the Parties and considers them to be relevant and valuable arbitral jurisprudence which, while not binding, informs the Tribunal's reasoning.
262.
In particular, the Tribunal has collated in tabular form below the conclusions of previous Awards and Decisions on the three jurisdictional objections and the breach of the FET standard due to frustration of legitimate expectations, as these issues constitute substantial portions of the Parties' pleadings in this Arbitration.
263.
It goes without saying that the table is intended as a concise overview of the jurisprudence and there are variations and nuances in the reasoning of the tribunals which the Tribunal will draw upon where relevant in in its reasoning in Parts N, O, P, Q and R of this Award.

M1 Jurisdictional Objections

264.

The party listed in each of the final three columns is the party that succeeded on the issue.

 

Date Exhibit Award/Decision Tribunal Intra-EU Taxation Electa Una Via
2014.10.13 CL-203 The PV Investors v. Kingdom of Spain, PCA Case No. 2012-14, Preliminary Award on Jurisdiction Prof. Gabrielle Kaufmann-Kohler (President); The Hon. Charles N. Brower; Judge Bernardo Sepulveda-Amor Claimant Issue not raised Claimant
2016.01.21 RL- 0025 Charanne B.V. & Constr. Invs. S.à.r.l. v. Kingdom of Spain, SCC Arb. No. 062/2012, Award Alexis Mourre (President); Guido Santiago Tawil; Claus von Wobeser Claimant Issue not raised Claimant
2016.06.06 2018.11.30 CL-95 CL-164 RREEF Infra. (G.P.) Ltd. & RREEF Pan European Infra. Two Lux S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction RREEF Infra. (G.P.) Ltd. & RREEF Pan-European Infra. Two Lux S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum Prof. Alain Pellet (President); Prof. Pedro Nikken; Prof. Robert Volterra Claimant Respondent374 Issue not raised
2016.07.12 RL- 0005 Isolux Infra. Netherlands B.V. v. Kingdom of Spain, SCC 2013/153, Award Mr Yves Derains (Chairman); Prof. Guido Santiago Tawil; Mr Claus Von Wobeser Claimant Claimant did not contest that TPVEE was a taxation measure. Issue not raised
2017.05.04 CL-76 Eiser Infrastructure Ltd & Energia Solar Luxembourg S.A.R.I. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award NB: Annulled due to conflict of interest Prof. John R Crook (President); Dr Stanimir A. Alexandrov; Prof. Campbell McLachlan QC Claimant Claimant did not contest that TPVEE was a taxation measure. Issue not raised
2018.02.15 CL-19 Novenergia II – Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Kingdom of Spain, SCC Arbitration (2015/063), Final Arbitral Award Mr Johan Sidklev (Chairperson); Prof. Antonio Crivellaro; Judge Juez Bernardo Sepulveda-Amor Claimant Respondent Issue not raised
2018.05.16 CL-103 Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award Mr John Beechey CBE (President); Mr Gary Born; Prof. Brigitte Stern Claimant Respondent Issue not raised
2018.06.15 CL-104 Antin Infra. Servs. Lux. S.à.r.l. & Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award Dr Eduardo Zuleta (President); Mr J Christopher Thomas QC; Prof. Francisco Orrego Vicuna Claimant Respondent Issue not raised
2018.11.14 CL-106 Foresight Luxembourg Solar 1 S.A.R.L, Foresight Luxembourg Solar 2 S.A.R.L., Greentech Energy Systems A/S et al. v. Kingdom of Spain, SCC Arbitration V (2015/150), Final Award Dr Michael Moser (Chairperson); Prof. Dr Klaus Michael Sachs; Dr Raul Emilio Vinuesa Claimant Respondent Issue not raised
2019.02.19 CL-171 Cube Infra. Fund SICAV et al. v. Kingdom of Spain, ICSID Case No. ARB/15/20, Decision on Jurisdiction, Liability and Partial Decision on Quantum Professor Vaughan Lowe (President); The Hon. James Spigelman; Prof. Christian Tomuschat Claimant Respondent Issue not raised
2019.02.25 CL-205 Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on the "Intra-EU" Jurisdictional Objection Sir Christopher Greenwood QC (President); Mr Rodrigo Oreamuno; Dr Charles Poncet Claimant Issue not raised or not yet decided. Issue not raised or not yet decided.
2019.03.12 CL-165 NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Jurisdiction, Liability and Quantum Principles
Prof. Donald M McRae (President); The Hon. L. Yves Fortier; Prof. Laurence Boisson de Chazournes Claimant Respondent Issue not raised
2019.05.31 CL-167 9REN Holding S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/15/15, Award The Hon. Ian Binnie QC (President); Mr David R Haigh QC; Mr VV Veeder QC Claimant Respondent Issue not raised
2019.07.31 CL-185 SolEs Badajoz GMBH v. Kingdom of Spain, ICSID Case No. ARB/15/38, Award Judge Joan E Donoghue (President); Prof. Giorgio Sacerdoti; Sir David AR Williams QC Claimant Respondent Issue not raised
2019.08.02 CL-202 InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain, ICSID Case No. ARB/14/12, Award Mr Stephen L. Drymer (President); Prof. William W Park; Prof. Pierre-Marie Dupuy Claimant Respondent Issue not raised
2019.09.06 CL-200 OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain, ICSID Case No. ARB/15/36, Award Prof. Dr Karl-Heinz Bockstiegel (President); Prof. Mmag. Dr August Reinisch; Prof. Philippe Sands QC Claimant Respondent Issue not raised
2019.12.02 RL- 0147 Baywa R.E. Renewable Energy GMBH and Other v. Kingdom of Spain, ICSID Case No. ARB/15/16. Decision on Jurisdiction, Liability and Directions on Quantum and Dissent Judge James R. Crawford (President); Dr Horacio A. Grigera Naón; Ms Loretta Malintoppi Claimant Respondent Issue not raised
2019.12.02 RL- 0149 Stadtwerke München GMBH, Rweinnogy GMBH, and Others v. Kingdom of Spain, ICSID Case No. ARB/15/1. Award and Dissent Prof. Jeswald W. Salacuse (President); Prof. Kaj Hobér; Prof. Zachary Douglas QC Claimant Respondent Issue not raised
2019.12.30 RL- 0151 RWE Innogy GMBH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain, ICSID Case No. ARB/14/34. Decision on Jurisdiction, Liability and Certain Issues of Quantum Mr. Samuel Wordsworth QC, (President); Ms. Anna Joubin-Bret; Mr. Judd L. Kessler Claimant Respondent Issue not raised
2020.01.21 RL- 0159 Watkins Holding S.à.r.l. et al. v. Kingdom of Spain, ICSID Case No. ARB/15/44, Award Tan Sri Dato' Cecil W.M. Abraham (President); Dr. Michael C. Pryles AO; Prof. Dr. Hélène Ruiz Fabri Claimant Respondent Issue not raised
2020.03.09 RL- 0155 Hydro Energy 1 S.À R.L. And Hydroxana Sweden Ab v. Kingdom of Spain ICSID Case No. ARB/15/42, Decision on Jurisdiction, Liability and Directions On Quantum Lord Collins of Mapesbury (President); Prof. Rolf Knieper; Mr Peter Rees, QC Claimant Respondent Issue not raised
2020.08.31 RL- 0162 Cavalum SGPS, S.A. v. The Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum and Dissent Lord Collins of Mapesbury (President); Mr. David R. Haigh QC; Sir Daniel Bethlehem QC Claimant Respondent Issue not raised

M2 Frustration of Legitimate Expectations

Date Exhibit Award/Decision Tribunal Dissent FET Liability375
2016.01.21 CL-96 Charanne B.V. & Constr. Invs. S.à.r.l. v. Kingdom of Spain, SCC Arb. No. 062/2012, Award Alexis Mourre (President); Guido Santiago Tawil; Claus von Wobeser Prof. Guido Santiago Tawil dissented on approach to 'legitimate expectations' regarding the standard of "fair and equitable treatment" Spain not liable
2016.07.12 CL-97 Isolux Infra. Netherlands B.V. v. Kingdom of Spain, SCC 2013/153, Award Mr Yves Derains (Chairman); Prof Guido Santiago Tawil; Mr Claus Von Wobeser Prof. Guido Santiago Tawil dissented on approach to 'legitimate expectations' regarding the standard of "fair and equitable treatment" Spain not liable
2017.05.04 CL-76 Eiser Infrastructure Ltd & Energia Solar Luxembourg S.A.R.I. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award -Annulled due to conflict of interest Prof. John R Crook (President); Dr Stanimir A. Alexandrov; Prof. Campbell McLachlan QC N/A Spain liable for failing to honour specific incentive guarantees
2018.02.15 CL-19 Novenergia II – Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Kingdom of Spain, SCC Arbitration (2015/063), Final Arbitral Award Mr Johan Sidklev (Chairperson); Prof. Antonio Crivellaro; Judge Juez Bernardo Sepulveda-Amor N/A Spain liable for failing to honour specific incentive guarantees
2018.05.16 CL-103 Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award Mr John Beechey CBE (President); Mr Gary Born; Prof. Brigitte Stern N/A Spain liable for failing to honour specific incentive guarantees
2018.06.15 CL-104 Antin Infra. Servs. Lux. S.à.r.l. & Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award Dr Eduardo Zuleta (President); Mr J Christopher Thomas QC; Prof. Francisco Orrego Vicuna N/A Spain liable for failing to honour specific incentive guarantees
2018.11.14 CL-106 Foresight Luxembourg Solar 1 S.A.R.L, Foresight Luxembourg Solar 2 S.A.R.L., Greentech Energy Systems A/S et al. v. Kingdom of Spain, SCC Arbitration V (2015/150), Final Award Dr Michael Moser (Chairperson); Prof. Dr Klaus Michael Sachs; Dr Raul Emilio Vinuesa Dr Raul Emilio Vinuesa dissented on the applicable law to the merits of the dispute and claimant's due diligence, and thus the finding on Spain's liability. Spain liable for failing to honour specific incentive guarantees
2018.11.30 CL-164 RREEF Infra. (G.P.) Ltd. & RREEF Pan-European Infra. Two Lux S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum Prof. Alain Pellet (President); Professor Pedro Nikken; Prof. Robert Volterra Prof Robert Volterra partially dissented on quantum. He considered that the scope of legitimate expectations is different and Spain is liable for more than a reasonable rate of return. Spain liable for failing to ensure a reasonable rate of return
2019.02.19  CL-171 Cube Infra. Fund SICAV et al. v. Kingdom of Spain, ICSID Case No. ARB/15/20, Decision on Jurisdiction, Liability and Partial Decision on Quantum Prof. Vaughan Lowe (President); The Hon. James Spigelman; Prof. Christian Tomuschat Prof. Christian Tomuschat issued partial dissent on merits and quantum on the basis that claimants are not entitled to claim compensation for hydro activities. Spain liable for failing to honour specific incentive guarantees
2019.07.15    Cube Infra. Fund SICAV et al. v. Kingdom of Spain, ICSID Case No. ARB/15/20, Award      
2019.03.12  CL-165 NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Decision on Jurisdiction, Liability and Quantum Principles Prof. Donald M McRae (President); The Hon. L. Yves Fortier; Prof. Laurence Boisson de Chazournes N/A Spain liable for failing to ensure a reasonable rate of return
2019.05.31    NextEra Energy Global Holdings B.V. and NextEra Energy Spain Holdings B.V. v. Kingdom of Spain, ICSID Case No. ARB/14/11, Award      
2019.05.31 CL-167 9REN Holding S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/15/15, Award The Hon. Ian Binnie QC (President); Mr David R Haigh QC; Mr VV Veeder QC One unspecified member dissented on quantum (i.e., appropriate valuation). Spain liable for failing to honour specific incentive guarantees
2019.07.31 CL-185 SolEs Badajoz GMBH v. Kingdom of Spain, ICSID Case No. ARB/15/38, Award Judge Joan E Donoghue (President); Prof. Giorgio Sacerdoti; Sir David AR Williams QC N/A Spain liable for failing to honour specific incentive guarantees
2019.08.02 CL-202 InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain, ICSID Case No. ARB/14/12, Award Mr Stephen L. Drymer (President); Prof. William W Park; Prof. Pierre- Marie Dupuy Prof. Pierre-Marie Dupuy dissented on quantum regarding regulatory risk and illiquidity discount. Spain liable for failing to honour specific incentive guarantees
2019.09.06 CL-200 OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain, ICSID Case No. ARB/15/36, Award Prof. Dr Karl-Heinz Bockstiegel (President); Prof. Mmag. Dr August Reinisch; Prof. Philippe Sands QC Prof. Philippe Sands' dissent is not public. Spain liable for failing to honour specific incentive guarantees
2019.12.02 RL- 0147 Baywa R.E. Renewable Energy GMBH and Other v. Kingdom of Spain, ICSID Case No. ARB/15/16. Decision on Jurisdiction, Liability and Directions on Quantum and Dissent Judge James R. Crawford (President); Dr. Horacio A. Grigera Naón; Ms. Loretta Malintoppi Dr Horacio A Grigera Naón partially dissented on FET claim and quantum. He considered that claimant is entitled to full compensation. Spain liable for failing to ensure a reasonable rate of return
2019.12.02 RL- 0149 Stadtwerke München GMBH, Rweinnogy GMBH, and Others v. Kingdom of Spain, ICSID Case No. ARB/15/1. Award and Dissent Prof. Jeswald W. Salacuse (President); Prof. Kaj Hobér; Prof. Zachary Douglas QC Professor Kaj Hobér dissented on liability, finding Spain liable for failing to honour specific incentive guarantees. Spain not liable
2019.12.30 RL- 0151 RWE Innogy GMBH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain, ICSID Case No. ARB/14/34. Decision on Jurisdiction, Liability and Certain Issues of Quantum Mr. Samuel Wordsworth QC, (President); Ms. Anna Joubin-Bret; Mr. Judd L. Kessler N/A Spain liable for failing to ensure a reasonable rate of return
2020.01.21 CL-201 Watkins Holding S.à.r.l. et al. v. Kingdom of Spain, ICSID Case No. ARB/15/44, Award Tan Sri Dato' Cecil W.M. Abraham (President); Dr. Michael C. Pryles AO; Prof. Dr. Hélène Ruiz Fabri Prof. Dr. Hélène Ruiz Fabri dissented on liability and quantum. Spain liable for failing to honour specific incentive guarantees
2020.02.28 CL-204 The PV Investors v. Kingdom of Spain, PCA Case No. 2012-14, Award and Concurring and Dissenting Opinion of Charles N. Brower Prof. Gabrielle Kaufmann-Kohler (President); The Hon. Charles N. Brower; Judge Bernardo Sepulveda-Amor Charles N. Brower dissented on the tribunal's acceptance of the alternative claim over primary claim for damages. Spain liable for failing to honour specific incentive guarantees
2020.03.09 RL- 0155 Hydro Energy 1 S.À R.L. And Hydroxana Sweden Ab v. Kingdom of Spain ICSID Case No. ARB/15/42, Decision on Jurisdiction, Liability And Directions on Quantum Lord Collins of Mapesbury, (President); Prof. Rolf Knieper; Mr Peter Rees, QC N/A Spain liable for failing to honour specific incentive guarantees
2020.08.31 RL- 0162 Cavalum SGPS, S.A. v Kingdom of Spain, ICSID Case No. ARB/15/34, Decision on Jurisdiction, Liability and Directions on Quantum and Dissent Lord Collins of Mapesbury, (President); Mr. David R. Haigh QC; Sir Daniel Bethlehem QC Mr. David R. Haigh QC dissented on liability, finding Spain liable for failing to honour specific incentive guarantees. Spain liable for failing to ensure a reasonable rate of return

N FIRST JURISDICTIONAL OBJECTION: INTRA-EU OBJECTION

265.

Spain's first jurisdictional objection concerns the application of the ECT to intra-EU disputes. The issues raised under this objection can be understood to fall within three broad categories:

(a) whether FREIF is an investor of "another" Contracting Party when Spain and the United Kingdom are both members of the EU;

(b) whether EU law should apply, in the present case, in priority to the ECT; and

(c) whether the effect of the decision of the European Court of Justice (ECJ) in Slovakia v. Achmea (' Achmea ') is to deprive the Tribunal of jurisdiction in this intra-EU dispute.

266.
These arguments are grounded in Article 26 of the ECT, which concerns the "Settlement of Disputes Between an Investor and a Contracting Party" and is extracted above at [12].

N1 Investor of "Another" Contracting Party

N1.1 Spain's Submissions

267.
Spain first draws the Tribunal's attention to Article 26(1) of the ECT which requires that a dispute commenced under that Article be between a "Contracting Party" and an "investor of another Contracting Party".376
268.
It contends that this jurisdictional requirement is not satisfied. The Parties, each EU Member States, transferred their powers to the then EU Communities upon signing up to the EU. Obligations under the framework of the Internal European Energy Market had therefore been transferred to the EU. Advocating for a "literal interpretation" of the ECT,377 Spain submits:378

Neither the Kingdom of Spain nor the United Kingdom could be bound under Part III [of the ECT] because their inclusion in the European Union entailed their acceptance of the primacy of EU law and the concession of their competences thereto in this area of intra-EU investment protection.

269.
The language used in the ECT definition of "Contracting Party" is said to support this conclusion, specifying that such a Party "has consented to be bound by this Treaty…", the suggestion being that, as the EU as a supranational body consented to the ECT, the Parties did not each consent to be bound as amongst themselves.379
270.
Spain contends that this conclusion is supported by the fact that a Contracting Party may also be a Regional Economic Integration Organisation (ORIE), which is defined as:380

[an] organisation constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them in respect of those matters.

271.
Spain contends that these provisions mean that the ECT expressly recognises that there are matters governed by the ECT that should be negotiated by the EU because its Member States do not have the competence over them. That competence had been given to the then-European Communities, the sole ORIE that has signed the ECT.381
272.
As a final point, it is noted that Article 36(7) of the ECT provides that a Regional Economic Integration Organization, when voting, has a number of votes equal to the number of its members "provided that such an Organization shall not exercise its right to vote if its Member States exercise theirs".382 This is said to show that the EU and its Member States may not vote simultaneously. Each one will vote within the scope of their respective competencies. The implication of this, Spain submits, is that "in some areas covered by the ECT the Contracting Party is the EU and in other areas, its Member States".383

N1.2 FREIF's Submissions

273.
FREIF rejects this interpretation of the ECT, arguing that there is no basis for that argument, and it enjoys no legal support.384 Referring to the cases brought against Spain and other EU Member States which are explored later in these reasons, FREIF points out that multiple tribunals have rejected the same argument.
274.
FREIF says that the United Kingdom and Spain are both Parties to the ECT and that FREIF meets the definition of an "investor" under the ECT as "a company or other organization organized in accordance with the law applicable in that Contracting Party".385 It claims Spain has failed to point to anything in either the text of the Treaty, or in the authorities, which would support its preferred reading.386 The absence of any express provision effecting such a significant carve-out from the Treaty, and the absence of a "disconnection clause", affirms that conclusion.
275.
In response to its argument that under the ECT the EU is an ORIE, FREIF submits that the ECT definition "merely acknowledges that some Contracting Parties are also members of regional organizations".387 The definition says nothing of the capacity of individual Contracting States to commence an arbitration under the ECT, nor does the definition mean that as amongst an ORIE the rights afforded under a treaty to which they are party cannot be exercised.
276.

FREIF explains that the ECT draws careful distinctions between Contracting Parties that are individual States and those Contracting Parties that are also ORIEs (like the EU) so that all Contracting Parties have equal representation.388 For example, Article 36(7) carefully maintains a State's voting rights in circumstances when it is also part of an ORIE. FREIF concludes that:389

These provisions confirm the desire of the ECT Contracting Parties to preserve the autonomy of EU Member States to exercise their individual rights as ECT Contracting Parties and not to relegate the views of those EU Member States to a position subordinate to that of the EU. In other words, all Contracting Parties to the ECT are represented equally, regardless of whether they may belong to other organizations or international agreements.

N2 Primacy of EU Law

N2.1 Spain's Submissions

277.
Spain submits that EU law should have primacy in a dispute between an EU Member State and an investor from another EU Member State. Spain's argument begins with Article 26(6) ECT, which provides:

A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law.

(emphasis added)

278.

Spain suggests that EU law is a matter which must be considered when interpreting the dispute resolution provision in Article 26 as it is "international law". The effect of using EU law to interpret Article 26 is to expressly exclude the application of the dispute resolution mechanisms in Part III ECT in the case of intra-EU disputes. It is submitted that this conclusion is intended, "since the ECT, promoted and signed by the EU, safeguards EU law and its autonomy."390 In its Post Hearing Brief, Spain emphasises that EU law is the foundation of the Spanish support scheme for renewable energy that is the subject of the present case and that by investing in an EU Member State, FREIF was very aware of the implications this has in terms of application of EU law and regulations.391 Spain therefore submits that EU law creates a disconnection from international treaties for intra-EU relations, and therefore, the Tribunal lacks jurisdiction.392

279.
Spain contends that the primacy of EU law means that the present case does not meet the requirements for the application of Article 16 of the ECT, which concerns the relationship between the ECT and other agreements of the same subject matter. Instead, any conflict between the ECT and EU law should be resolved in favour of EU law either upon the "principle of supremacy of EU Law", or by operation of the most favoured nation clause in Article 25 of the ECT.
280.

In Spain's submission, EU investor protections are more favourable and therefore take precedence. Spain observes that EU members are afforded special protections under the various extant Treaties. An example of one such protection is that in Article 54 of the TFEU, which prohibits any kind of legal standard which dissuades an investor of the EU from establishing itself in another Member State.393 Other protections include: "remedies to actions that are contrary to the legitimate expectations of investors, disproportionate and/or that amount to an expropriation of their investment".394

281.
Furthermore, Spain submits that the right of EU investors to bring disputes before European courts is more favourable than the rights granted under the ECT to submit matters to arbitration for two reasons.395 First, while both options might be equally favourable, to interpret the provision as preferring arbitration (i.e. to denigrate EU courts) adopts an interpretive approach that is incompatible with EU law, displaying an objective lack of confidence in the judicial system.396 Second, there is no indication in the text of the ECT itself that arbitration is to be preferred.397
282.
Spain's submission is therefore that these protections take priority over rights contained in the ECT to the extent of any incompatibility. The Electrabel S.A. V Hungary (Electrabel) decision is cited in support of this proposition,398 noting the tribunal's findings that "it would have made no sense for the European Union to promote and subscribe to the ECT if that had meant entering into obligations inconsistent with EU law."399 Spain characterises the incompatibility in its Counter-Memorial in the following way:400

Accepting that EU Member States should consent to intra-EU arbitration under Article 26 of the ECT would generate a conflict between the ECT and the principles of autonomy, primary and mutual trust of EU Law that must be resolved in favour of the latter pursuant to EU Law.

283.
As such, Spain submits that pursuant to Article 26(6), EU law applies to the present dispute and prevails over the ECT's dispute resolution clause. On that basis, the Tribunal lacks jurisdiction.

N2.2 FREIF's Submissions

284.
It is FREIF's case that based on the plain language of Article 26 of the ECT, the Tribunal has jurisdiction to hear this dispute.401 That Article provides that a dispute may be submitted to arbitration arising "between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in an Area of the former."402 As was found in Eiser,403 if those express terms are satisfied, that is the end of the inquiry. Spain would have the Tribunal look through that express language by taking account of international law – and by extension, EU law – so as to supplant the ECT's terms.
285.
FREIF submits that the reference to "international law" in Article 26(6) of the ECT does not overcome the ECT's dispute resolution provision. It denies that Article 26(6) resembles anything like a disconnection clause, a view also held by the General Counsel to the Energy Charter Secretariat. To illustrate, the Tribunal is invited to consider, by contrast, the explicit language used in other disconnection clauses such as in the 1988 Convention on Mutual Administrative Assistance in Tax Matters.404
286.
Instead, FREIF argues that the effect of Article 16 of the ECT means that when two international agreements between the same Contracting Parties are in force, Article 16 gives preference to more favourable provisions for investors and investments. Thus, by its terms, Article 16 cannot be used to deny a right or benefit that the ECT affords to investors.405
287.
FREIF contends that the rights afforded under the ECT are more favourable than those under EU laws. Its position is distilled in the following extract from its Reply Memorial:406

Its right under the ECT to submit its dispute to a neutral arbitration forum is more favourable than a rule that would require it to resort to the domestic courts of Spain before continuing through the EU legal system. This right to ECT arbitration is absent from the EU legal framework, which is only one way the EU system is demonstrably less favourable than the ECT.

288.
In support of this point, FREIF notes that "several dozen investors of other foreign investors have reached the conclusion that arbitration is far more favourable than litigation in the EU court system and have commenced arbitration against Spain."407
289.
Many tribunals have also agreed that investment arbitration is more favourable. A number of authorities cited adopt the position that arbitration is more favourable, because it "obviate[s] the need to bring [a] claim in Spanish courts",408 allows recourse to a neutral forum,409 and, most importantly, ensures the rights of investors to seek a remedy in Investor-State arbitration.410
290.
In addition to the specific rule found in Article 16 of the ECT, FREIF also contends that ECT provisions prevail under the general rule of international law. According to the principle in Article 30 of the Vienna Convention on the Law of Treaties (VCLT), when two treaties share the same subject matter, an earlier-in-time treaty (e.g., the ECT) applies unless it is found to be incompatible with the later-in-time treaty (e.g., the EU Lisbon Treaty).411
291.
The application of that provision, it argues, does not arise because the ECT and EU Treaties do not share the same subject matter, in a view shared by "[m]any scholars and jurists". However, even if they did share the same subject matter, there is said to be no incompatibility between the two. A number of tribunals have arrived at that same conclusion, including in Electrabel, in which the tribunal in that case rejected Hungary's/the Commission's intra-EU objection.412 For that reason, Article 26 of the ECT is not overcome by EU law.

N3 Applicability of Achmea

N3.1 Spain's Submissions

292.
Prominent in the Parties' submissions is a dispute regarding the principle arising from, and applicability of, the decision of the ECJ in The Republic of Slovakia v. Achmea (Achmea).413
293.
The Parties have recalled in their submissions in some detail the facts of the case and so it is unnecessary to repeat those details here.414 It suffices to note that the case concerned the dispute resolution clause in a bilateral investment treaty (BIT) concluded between two EU States. The court ultimately found that:415

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States…, 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.

294.
Spain summarises the principles applied by the ECJ in Achmea as follows:416

(a) It is essential that, in order to protect integrity of the judicial system established under the various EU treaties, measures be taken to "ensure consistency and uniformity in the interpretation of EU legislation".

(b) Member States are therefore obligated under Article 19 TFEU to ensure the "full application" of EU Law.

(c) As arbitral tribunals are not fora forming part of the EU legal system (subject to no appellate jurisdiction nor oversight from the ECJ) they fall outside the purview of Article 19 TEU and Article 344 TFEU, which govern the interpretation and application of EU legislation.

(d) As investor-state arbitration does not guarantee that EU law is fully enforced, it is therefore incompatible with Articles 267 and 344 of the TFEU, which guarantee the "essential values of the European Union such as the autonomy and primacy of its legal order, distribution of powers, mutual trust between Member States (article 2 TEU) and the duty of sincere cooperation (article 4 TEU), and it removes from the EU judicial system disputes concerning Treaties of the EU."417

295.
Acknowledging that Achmea concerned an intra-EU BIT, Spain argues that the "prerequisites" of its application are nonetheless met in this case because:418

(a) First, Spain submits that to decide the dispute, the Tribunal is called upon to interpret/apply EU law -- in this case, the 'central institution' of State Aid (among other matters of EU law).

(b) Secondly, the ECJ is not empowered to "exercise its function of guaranteeing the full application of EU law in all Member States" as required by Article 267 TFEU.

(c) Finally, any award rendered in this arbitration is not appealable and thus is not subject to review by a Member State.419

296.
Spain therefore concludes that:420

all the prerequisites established by the Achmea judgment are met in order to establish the incompatibility of the ECT's Article 26(4) Clause (interpreted by FREIF) and EU Law, which is International Law, that this Court must apply with primacy to resolve the present dispute (Article 26(6) of the ECT). Both Spain and United Kingdom [sic] have been bound internationally, by virtue of the TFEU's Articles 267 and 344 to give primacy to EU Law and not to submit disputes concerning the interpretation and application of that right to bodies other than its own judicial system.

297.
Spain devotes a sizable portion of its pleadings to critiquing the decision in Vattenfall AB et al. v. Federal Republic of Germany (Vattenfall), which rejected the jurisdictional objection based on the Achmea decision. It argues that the reasoning in the decision was not based on arbitral precedent and that, were they given proper regard, a different approach would have been adopted. Spain then argues Vattenfall adopts an incorrect interpretive approach. The approach, it says, was one which fails to accord with the requirement of Art 31 VCLT to interpret the ECT "in good faith in line with the literal meaning of its terms, in accordance with its aim and context",421 with the effect that the ECT was 'harmonised' with EU law.
298.
It is also contended that an award which grants compensation to an investor would not be enforceable due to the incompatibility between intra-EU arbitration under the ECT and EU law. The Tribunal is therefore asked to be mindful of its duty to render awards that are compatible with international law and the Parties' international obligations.

N3.2 FREIF's Submissions

299.
FREIF's position is that nothing in the Achmea decision deprives this Tribunal of the jurisdiction to hear this dispute. Three submissions are made in support. First, it argues that Achmea does not affect the jurisdictional analysis under the ECT. Second, the authorities overwhelmingly support this position. Third, and finally, the Achmea decision is in any event distinguishable from the present circumstances. Each submission will be considered in turn.
300.
First, FREIF argues that Achmea does not impact the Tribunal's jurisdictional analysis under the ECT. Spain invites the Tribunal to disregard the plain language of the ECT, using Article 26(6) as a so-called "back door" by which to apply EU law in priority. FREIF contends in response that Achmea turned on the precise wording of the governing law provision in the Netherlands-Slovakia BIT, which is materially different from Article 26 of the ECT.
301.
It remains that to supplant the express language of the ECT would contravene the principles of treaty interpretation expounded in Article 31(1) VCLT which provides that a treaty "shall be interpreted in good faith and in accordance with the ordinary meaning to be given to [its terms]".422 The point was aptly explained by the tribunal in Vattenfall,423 which found:

It is not the proper role of Article 31(3)(c) [of the VCLT] to rewrite the treaty being interpreted, or to substitute a plain reading of a treaty with other rules of international law, external to the treaty being interpreted, which would contradict the ordinary meaning of its terms.

302.
FREIF denies misapplying Vattenfall and accuses Spain of creating confusion.424 In reference to the other cases that Spain says should be preferred, FREIF points out that "Spain inexplicably disregards the fact that every one of these tribunals unanimously rejected the intra-EU objection, notwithstanding the fact that their reasoning might have varied somewhat from that of the Vattenfall tribunal".425 FREIF further argues that, contrary to Spain's position, it does not follow that simply because the ECT has become part of EU Law, that EU law has become part of the ECT.
303.
FREIF then cites the weight of arbitral authority in favour of its position. 28 tribunals have rejected jurisdictional objections which are substantially the same as those raised by Spain. Notably, seven such tribunals did so following the decision in Achmea.426 FREIF therefore submits that Spain has failed to demonstrate why the present Tribunal should decline to follow the reasoning of 28 (and counting) other investment treaty tribunals on this issue.
304.

It is unnecessary to recall all the authorities discussed by FREIF in its submissions. The thread linking each is captured however in the following extract from the decision in Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain (Masdar):427

The Achmea Judgment is of limited application—first, and specifically, to the [Netherlands-Slovakia BIT] and, second, in a more general perspective, to any "provision in an international agreement concluded between Member States, such as Article 8 of the [Netherlands-Slovakia BIT]." The ECT is not such a treaty. Thus, the Achmea Judgment does not take into consideration, and thus it cannot be applied to, multilateral treaties, such as the ECT, to which the EU itself is a party.

305.
FREIF launches a final line of attack, arguing that Achmea does not apply in the circumstances considered in the present arbitration in any event. Contrary to the reading contended for by Spain, the case is said not to stand for the proposition that all arbitrations brought under an investment treaty involving an EU Member State, considering EU law, are prohibited.428 Rather, the ECJ sought only to "limit recourse to international arbitration in the context of certain intra- EU BITs to which the EU is not a party."429 Moreover, the court found its ruling would not apply to an investment treaty to which the EU is a Contracting Party. FREIF cites the following extract of Achmea in its support:430

It is true that, according to settled case-law of the Court, an international agreement providing for the establishment of a court responsible for the interpretation of its provisions and whose decisions are binding on the institutions, including the Court of Justice, is not in principle incompatible with EU law. The competence of the EU in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court which is created or designated by such agreements as regards the interpretation and application of their provisions, provided that the autonomy of the EU and its legal order is respected

In the present case, however, apart 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 the Member States. (emphasis added)

306.
The situation contemplated in the excerpt above is said to be distinguishable from those currently in consideration, given that the EU is a Party to the ECT. It is therefore empowered to enter agreements to "submit to the decisions of a court which is created or designated by such agreements as regards the interpretation and application of their provisions".431
307.
FREIF further submit that the case is distinguishable because the relevant governing law clause required the Tribunal to apply EU law. Given that the Tribunal did not constitute a court able to refer questions to the ECJ per Article 267 TFEU, it would operate to "prevent the full effectiveness of EU law".432 That issue does not arise in the case of the ECT because the Tribunal is not tasked with deciding the dispute on the basis of EU law.
308.
Finally, FREIF notes that any theoretical future impact that Achmea may have on the enforceability of the Tribunal's award is not a relevant issue for the Tribunal. The Tribunal has no grounds upon which to decline jurisdiction solely on the basis of enforcement concerns where jurisdictional requirements of the ECT have otherwise been met. This is said to be the same conclusion reached by the tribunals in Ioan Micula v Romania (Micula) and Vattenfall.433

N4 Tribunal's Decision

309.
The Tribunal's determination is that the ECT applies to intra-EU disputes and that Spain's first jurisdictional objection fails. The starting point of Spain's argument is that the arbitration provision of Article 26 of the ECT does not apply to disputes between an EU Member State and an Investor from another EU Member State because FREIF should not be considered an investor of "another" Contracting Party. Article 26 concerns the settlement of "disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former".
310.
According to Article 1(2) of the ECT, a "Contracting Party" means "a state or Regional Economic Integration Organisation which has consented to be bound by this Treaty and for which the Treaty is in force". Although the United Kingdom and Spain were already members of the EU at the time of their ratification of the ECT, it is evident to the Tribunal that the United Kingdom, Spain and the European Union are all separately and individually "Contracting Parties" of the ECT. This information is presented publicly for example on the ECT website.434 There is no evidence before the Tribunal that Spain did not consent to be bound by the ECT and or that it would fall outside the ECT's definition of a "Contracting Party". The inclusion of both states and ORIEs in the definition of a "Contracting Party" is merely an acknowledgement that some Contracting Parties are regional organisations or are members of a regional organisation. Nonetheless, each is a separate Contracting Party with its own legal standing in an action based on the ECT.
311.

Similarly, the definition of "Area" in Article 1(10) with respect to an ORIE does not detract from the fact that the sovereign territory of a state Contracting Party is also defined in the same article as an "Area". In fact, in defining an ORIE's "Area" as "the Areas of the Member States of such Organisation", the ECT expressly clarifies that the ORIE's territory is simply a collection of defined "Areas" within state Contracting Parties, which are still individually recognised and defined under the ECT. Disputes brought under Article 26 "in the Area of" a Contracting Party do not, therefore, refer only to the Area of the ORIE to the exclusion of Areas of state Contracting Parties such as Spain and the United Kingdom.

312.
In support of their respective positions, both Parties refer to Article 36(7) which provides that an ORIE shall have a number of votes equal to the number of its Member States which are Contracting Parties to the ECT provided that its Member States have not exercised their right to vote. Spain argues that the fact that the EU and its Member States may not vote simultaneously shows that "in some areas covered by the ECT, the Contracting Party is the EU and in others its Member State".435 FREIF, on the other hand, relies on the same provision to argue that a state's voting right is maintained when it is part of an ORIE.
313.

In the Tribunal's analysis, the Article is designed to maintain equal representation between Contracting Parties such as to recognise the equal status of Contracting Parties who are members of an ORIE and other Contracting Parties. If the ECT had intended for multiple Contracting Parties of the same ORIE to be denied the possibility of seeking arbitration under Article 26(3), a voting regime more consistent with this intention would have entitled the ORIE to only one vote on issues which fell within its competence.

314.

Spain's reliance on Article 25, concerning Economic Integration Agreements, is also of no assistance to its argument because that provision merely clarifies that the ECT does not require any preferential treatment between EU Member States under EU treaties to be extended to non-EU Contracting Parties of the ECT. It has no bearing upon the application of ECT provisions to Contracting Parties and Investors from within the EU. It stretches logic to conclude on basis of Article 25 that "the ECT expressly recognises the principle of primacy of EU law in intra-EU relationships"436 and that therefore Article 26 does not apply to the present dispute.

315.
As for Article 26 itself, regardless of whether the EU has taken over competence of certain matters governed by the ECT, there is no express carve-out or disconnection clause restricting the Tribunal's jurisdiction in cases where the Contracting Parties in the dispute concerned are members of the same ORIE. The wording of Article 26 simply provides for the settlement of disputes "between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in an Area of the former" which has been satisfied in the present case.
316.
The lack of any express carve out is of particular note given that the ECT allows ORIEs such as the EU to become Contracting Parties and defines an ORIE as an "organisation constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty".437 If the ECT intended to exclude the jurisdiction of arbitral tribunals when competence over certain matters governed by the ECT has been transferred to an ORIE, Spain's complaints ought to have been front of mind in the drafting of Article 26 in order to prevent situations such as the present jurisdictional objection.
317.
Instead, Article 26 allows an Investor of any Contracting Party to raise a dispute with any other Contracting Party that it believes has breached an obligation owed to it under Part III of the ECT. Spain is entitled to argue on the merits, and indeed it has argued, that it has not breached any provision of the ECT because it was acting in compliance with EU law. In that scenario a claimant investor could consider submitting a dispute for resolution against the EU if it felt that the obligations breached under Part III of the ECT were breached by the EU. This does not however detract from the Tribunal's jurisdiction to determine Spain's liability for breach of Part III provisions.
318.
As such, the Tribunal agrees with the Eiser tribunal on this issue. As referred to by FREIF,438 that tribunal stated that:439

[A]lthough the EU is a party to the ECT, EU Member States also remain contracting parties to the ECT. Both the EU and [its] Member States can have legal standing as respondents in a claim under the ECT. Investors organized in accordance with the law of any Contracting Party satisfy Article (1)(7)(a)(ii)'s literal requirement to be an "Investor" of a "Contracting Party." And, a dispute involving such an Investor and another Contracting Party regarding an Investment in that Contracting Party's "Area" satisfies the literal requirements for compulsory dispute settlement under ECT Article 26(1) and (2).

319.
A second component of Spain's objection is that Article 26(3) of the ECT cannot be interpreted as a valid offer to arbitration in the case of intra-EU disputes due to the primacy of EU law. Spain contends Article 26(6) of the ECT disassociates EU Member States from the ECT's dispute resolution provisions. Article 26(6) provides that "A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law". It therefore contends that the "principles of international law" include EU law which must be applied to rule on issues of jurisdiction.
320.

The Tribunal is not persuaded by this interpretation of Article 26(6). Article 26(6) asks the Tribunal to decide issues in accordance with the ECT and "applicable" rules and principles of international law. Even if EU law can be characterised as a form of international or supranational law, its applicability to the present arbitration has not been established. As the tribunals in Novenergia and Eiser concluded, arbitral tribunals formed under the ECT are not constituted on the basis of the "European legal order".440 Furthermore, the phrase "issues in dispute" referred to in Article 26(6) has been understood as referring to the law relevant to resolving the merits of the dispute.441 In the present case, as the Tribunal will elaborate further on its reasoning on the merits at Part Q6 of the Award, the claims brought by FREIF do not concern any alleged breaches of EU law. As the Novenergia tribunal observed after analysing a series of other arbitral awards and the EC Decision dated 10 November 2017 on whether Spain's New Regulatory Regime constitutes "State Aid" under EU law:442

a foreign investor who initiates an ECT arbitration towards a host State invoking protection under the FET standard does not abuse its rights nor incorrectly bypasses EU law. This is because EU law does not recognise, nor prohibit, a similar right. Simply said, the two legal orders do not share the same subject matter, but may easily coexist to the extent that they do not interfere with each other.

321.
Even if the subsidies claimed by FREIF under RD 661/2007 constituted State Aid under EU law, the Tribunal would not be required to make any legal determinations under EU law. It would, at most, be a "fact that must shape the legitimate expectations of any investor".443 Similarly, although Spain makes the point that "EU law is the very foundation of the Spanish support scheme for renewable energy that is subject of the present case"444 and suggests that Spain's support schemes were encouraged by EU Directives, the disputed measures in this Arbitration are ultimately Spanish domestic laws. As a multilateral treaty with 25 state Contracting Parties that are not EU Member States, it is difficult to envision a context in which EU law was intended to apply to a dispute under the ECT. As the tribunal stated in RREEF :445

this Tribunal has been established by a specific treaty, the ECT, which binds both the EU and its Member States on the one hand and non-EU States on the other hand. As for the latter, EU law is res inter alios acta and it cannot be upheld that, by ratifying the ECT, those non-EU States have accepted the EU law as prevailing over the ECT. The ECT is the "constitution" of the Tribunal… This is what the Parties to the ECT agreed amongst themselves; it is not within the jurisdiction of the Tribunal to alter this.

322.
Therefore, there is no basis in the Tribunal's view to invoke EU law to interpret the ECT or to suggest that EU law overrides the ECT.
323.
Should EU Member States consent to arbitration under Article 26 of the ECT, Spain then contends that this would generate a conflict between the ECT and EU law that must be resolved in favour of the latter pursuant to EU law. Like many tribunals in previous cases, this Tribunal has difficulty accepting the argument that any incompatibility exists between the ECT's dispute resolution provision and EU law. Spain has contended that Article 344 of the TFEU obliges EU Member States to submit their disputes exclusively to the European judicial system. However, on the Tribunal's reading of Article 344, that provision applies only to disputes concerning the interpretation or application of "the Treaties". Similarly, Article 267 of the TFEU states that the ECJ shall have jurisdiction to give preliminary rulings concerning the interpretation of "the Treaties". Article 1(2) of the TFEU clearly states that "the Treaties" refers to the TFEU and the TEU only. Submitting disputes under the ECT via the ECT's dispute resolution provisions is thus not prohibited by the TFEU.
324.
Other tribunals have similarly concluded that Spain's interpretation of Article 344 of the TFEU is unconvincing. Relevantly, the Charanne B.V. & Constr. Invs. S.à.r.l. v. Kingdom of Spain (Charanne) tribunal concluded that:446

If the Respondent's theory were true, no domestic court would ever be able to decide on anything concerning the interpretation of EU treaties at any time that the liability of a Member State was at stake. Notwithstanding, the truth is that many claims have been filed against Member States before domestic courts, in which the interpretation or the application of EU treaties could be at stake. Similarly, a Member State can enter into arbitration agreements to resolve disputes that may involve issues concerning EU law. Finally, it is now universally accepted that an arbitration tribunal does not only have the power, but also the duty, to apply EU law.

Therefore, the scope of Article 344 TFEU cannot be so broad as to prevent Member States from submitting any dispute concerning the interpretation of EU treaties to a dispute settlement procedure different from those provided in EU legislation.

(references omitted)

325.
The Tribunal finds assurance for its position on two other bases. First, according to Article 16 of the ECT, when two international agreements between the same Contracting Parties are in force and concern the same subject matter as Part III or V of the ECT, preference should be given to the more favourable provisions for investors and investments. Although the Tribunal does not accept that the ECT and EU law relate to the same subject-matter, it is persuaded that FREIF's reliance on Article 16 is justified and that it has established more favourable provisions under the ECT compared to under EU law in both a procedural and substantive sense.
326.
Spain provides little rebuttal on this point aside from its claim that Article 16 does not apply because it has been trumped by EU law, which it says must apply by virtue of Article 26(6). Thus, it presents a circular argument which does not adequately justify the application of EU law to the Tribunal's jurisdiction or interpretation of the ECT. Spain argues that even if Article 16 were to apply, international arbitration is no more favourable than domestic litigation in the courts of the Contracting Party. The Tribunal is attracted to FREIF's arguments to the contrary regarding the benefits of a neutral arbitration forum. However, it is not necessary for the Tribunal to conclusively compare the two fora. Article 26 provides the Investor with options for the settlement of their dispute which include domestic litigation or international arbitration. Therefore, the Investor's ability to choose a forum is itself a more favourable provision and should therefore apply pursuant to Article 16 of the ECT.
327.
Second, both Parties have referred to Article 30 of the VCLT which provides that when two treaties share the same subject matter, an earlier-in-time treaty applies unless it is found to be incompatible with the later-in-time treaty. The later-in-time treaty in the present case is Declaration 17 Annex to the Final Act from the Lisbon Treaty of 2007 which Spain alleges confirms the principle of supremacy of EU law. As the Tribunal does not consider the ECT to be incompatible with EU law, the ECT applies under international law as the earlier-in-time treaty. Spain has relied heavily on the decision in Electrabel in order to establish the applicability of EU law and its primacy over the ECT in the event of a conflict. Nonetheless, the Electrabel decision ultimately rejected the jurisdictional challenge, stating that "there is in this case no material inconsistency between the ECT and EU law".447 Similarly, considering the issues in dispute in this Arbitration, EU law is not applicable and cannot be relied upon to deprive the Tribunal of the jurisdiction it derives from the ECT.
328.
Finally, the Tribunal declines Spain's request for it to follow the decision in Achmea and extend Achmea 's principle from an intra-EU BIT to the ECT. At the outset, Spain placed a caveat on its argument, stating:448

It is true that Achmea refers to a case in which the dispute is subject to arbitration in accordance with a BIT entered into by two Member States. However, the Judgment's principles should apply to the ECT if the dispute raised under it requires the interpretation and/or application of EU law, thus affecting the latter's autonomy.

329.
As the Tribunal has explained above, it does not consider that Article 26(6) or any claim made by the Parties in this Arbitration "requires the interpretation and/or application of EU law".449 As such, unlike the governing law provisions in the Netherlands – Slovakia BIT which required an arbitral tribunal to interpret and apply EU law, the EU's autonomy is not affected by Article 26(6) of the ECT.
330.
In any event, Article 26 of the ECT is markedly different from Article 8 of the Netherlands – Slovakia BIT. Unlike the Netherlands – Slovakia BIT, the ECT is a multilateral agreement to which the EU is itself a signatory. The EU therefore consented to its dispute resolution provisions. It is difficult to see how the ECT would violate EU principles of mutual trust, sincere cooperation or the autonomy of EU law in such circumstances. The ECJ in Achmea stated in support of this sentiment that:450

The competence of the EU in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court which is created or designated by such agreements as regards the interpretation and application of their provisions, provided that the autonomy of the EU and its legal order is respected.

331.
Spain argues that the fact that the EU signed the ECT is an insufficient argument because international agreements would only be compatible with EU law "providing that the autonomy of the EU and its legal order is respected".451 It points to Opinion 1/09 and Opinion 2/13 as two cases in which the ECJ deemed an international treaty to be incompatible with provisions of the TEU and TFEU. Opinion 1/09 concerned a treaty for the proposed establishment of a European and Community Patents Court and Opinion 2/13 concerned the accession of the EU to the European Convention on Human Rights. Both cases concerned situations where the EU had not yet become party to the treaty, the scope of the treaty was limited to European Member States, and the dispute resolution forum would have been called upon to interpret and apply European Union directives, regulations and other instruments of law on a regular basis.
332.
These facts are not present for the ECT. The Tribunal instead finds greater weight in the recent ECJ decisions referred to by FREIF concerning investor state dispute settlement mechanisms in agreements that the EU is party to. In ECJ Opinion 1/17 the ECJ noted:452

with respect to international agreements entered into by the Union, the jurisdiction of the courts and tribunals specified in Article 19 TEU to interpret and apply those agreements does not take precedence over either the jurisdiction of the courts and tribunals of the non-Member States with which those agreements were concluded or that of the international courts or tribunals that are established by such agreements.

333.
A similar outcome was reached in Case 2/15 concerning the EU-Singapore Free Trade Agreement.453 The Tribunal recognises, however, that not all decisions and opinions on this issue are aligned. The European Commission in its Communication COM(2018) 547/2 stated that Article 26 of the ECT is incompatible with EU primary law and is inapplicable for intra-EU relations.454 In 2019, 22 of the 28 EU Member States opined that arbitrations between investors of a Member State and another Member State raised under the protection of the ECT are incompatible with EU law.455 The Tribunal notes however, that unlike intra-EU BITs, there is yet to be any agreement between EU Member States to terminate or withdraw from the ECT's dispute resolution provisions.
334.
This inconsistency of opinion between various national governments and EU bodies, and the speculative possibility of complications in the enforcement of the Award does not impact this Tribunal's finding on its own jurisdiction. If any aspect of this uncertainty were to be taken into account, it would be the issue of Brexit, which corroborates the competence of this Tribunal. While the weight of past ECJ decisions as precedents remains uncertain in practice in spite of the European Union (Withdrawal Agreement) Act 2020, their weight will likely be considerably tarnished. Given that FREIF is a company established under the laws of the United Kingdom, the relevance of the Achmea case may be much diminished.
335.
Accordingly, as every other tribunal has concluded to date in the context of ECT renewable energy arbitrations against Spain, this Tribunal rejects the intra-EU objection and finds that it does not lack jurisdiction on this basis.

O SECOND JURISDICTIONAL OBJECTION: TAXATION OBJECTION

336.
Spain's second jurisdictional objection is that the Tribunal does not have jurisdiction to hear FREIF's claim regarding Law 15/2012.456 Spain notes that, in FREIF's Statement of Claim, the TVPEE introduced by Act 15/2012 is included among the disputed measures. As it is said to be a "taxation measure", absent Spain's consent, this dispute is subject to the carve-out provision contained in Article 21 of the ECT.
337.
Article 21(7) of the ECT provides:

(7) For the purposes of this Article:

a) The term "taxation measure" includes:

i) Any provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein; and;

ii) any provision relating to taxes of any convention for the avoidance of double taxation or of any other international agreement by which the Contracting Party is bound.

338.

Spain's case is that the TVPEE is a tax under either Spanish domestic law or international law. This conclusion is supported by:457

(a) the reference to "domestic law" in Article 21(7)(a)(i), which is said to import the application of Spanish domestic law; and

(b) Article 26(6) of the ECT, which requires that a tribunal established under the ECT apply "principles of international law".

339.
If it is established that the TVPEE is a "taxation measure", Spain submits that the Tribunal lacks jurisdiction as a consequence. This is because, pursuant to Article 26 of the ECT, Spain has only consented to submit to investment arbitration for disputes emerging from Part III of the ECT.458 Absent a breach arising from the correct Part of the Treaty, the dispute falls beyond the scope of those disputes which Spain agreed might be submitted to arbitration.459
340.

Article 21(1) of that same Part makes clear that the Treaty creates no rights or obligations concerning Taxation Measures "[e]xcept as otherwise provided in this Article".460 As there is no applicable exception in the present case and Article 10(1) of the ECT does not create obligations with respect to taxation measures, Spain argues that there are no rights for investors to bring a claim with respect to taxation measures.

341.
Both Parties agree that should Spain succeed on this objection, the Tribunal lacks jurisdiction to assess whether the TVPEE was a lawful measure under the ECT. There will also be an impact on the quantum claimed by FREIF. Brattle's DCF quantum calculations include losses attributable to the TVPEE that would need to be subtracted from an award of damages.461
342.
FREIF focuses its defence on whether or not the TVPEE is a "taxation measure", without contesting the existence of the carve-out for taxation measures under the ECT. As such, the summary of the Parties' positions below will focus on the question of whether the TVPEE imposed by Law 15/2012 is a "taxation measure".

O1 Status of Law 15/2012 Under Law

O1.1 Spain's Submissions

343.
Spain first ventures to establish why the TVPEE, introduced in Act 15/2012, is a taxation measure under the domestic law of Spain. Article 1 of Act 15/2012 specifies that it is a "direct tax on the performance of activities of production and incorporation into the electrical system of electrical energy".462
344.
Secondly, by reference to the definition of a tax under Spanish law, in Article 2 of Act 58/2003, the TVPEE is a tax. In accordance with the definition, the TVPEE:463

applies to all facilities for electricity production, both from renewable and conventional sources. The tax base for the TVPEE consists of the total amount that the taxpayer is to receive for the production of electrical energy and its incorporation into the electricity system, measured in power plant busbars, at each facility, in the taxable period. The applicable tax rate is 7%.

345.
Thirdly, its status as a tax was recognised by the Institute of Accounting and Auditing and is "a deductible expense on the Corporations Tax of the TVPEE taxpayers".464 The General Directorate of Taxation also wrote in a written tax consultation that:465

"…the taxpayer of the [TVPEE] must record an expense for it, in the month of November of each year, an expense that will be fiscally deductible in the taxable period when it was recorded."

346.
Fourthly, the TVPEE is said to be a taxation measure because "the Spanish Constitutional Court has ratified the taxation nature and the legality of the TVPEE" and found provisions relating to the "taxable event, the taxpayers and the tax rate of the TVPEE" to be constitutional.466 Any limited doubts that the Spanish Supreme Court had over the constitutionality of the TVPEE have been resolved by the Spanish Constitutional Court, which is the highest interpreter of the Spanish Constitution, and by the Supreme Court itself. The Spanish Audiencia Nacional (National Court) has also declared that regulations relating to the payment of the TVPEE are in accordance with the law.
347.
Finally, Spain notes that the European Commission has ratified the taxation nature of the TVPEE and its conformity with EU Law. Spain notes that the TVPEE was subject to an EU Pilot procedure where the European Commission analyses whether a particular measure of a Member State complies with EU Law. After receiving information provided by Spain, the European Commission concluded that there were no grounds for considering that the TVPEE infringed EU Law.467 Therefore, Spain submits that this provides evidence for the acceptance of the TVPEE as a taxation measure in compliance with EU Law.
348.
Therefore, Spain submits that the domestic interpretation of the TVPEE as a tax is undeniable and the wording of Article 21(7) of the ECT can be interpreted as a referral to domestic law for the determination of whether the TVPEE is a taxation measure. In the annulment decision in Hussein Nuaman Soufraki v. the United Arab Emirates, the Committee stated that "[i]t is the view of the Committee that the Tribunal had to strive to apply the law as interpreted by the State's highest court, and in harmony with its interpretative (that is, its executive and administrative) authorities" and "the domestic characterisation of a disputed measure may be helpful in ascertaining its nature".468

O1.2 FREIF's Submissions

349.
FREIF argues that, notwithstanding whether the measure qualifies as a tax under domestic law, investment treaty tribunals have consistently confirmed that while the domestic characterization of a disputed measure may be helpful in ascertaining its nature, domestic law is not determinative.469 An approach that looks only at domestic law to define what taxation measures are under bilateral or multilateral investment agreements would allow host States to legitimize what otherwise would qualify as an abusive legislative provision by simply calling it a "tax".
350.
FREIF therefore considers it necessary to "look behind the label"470 and determine whether the measure is in substance a tax, or whether it is a covert means of revoking incentives previously granted.471
351.
In any event, with respect to the characterisation of the law under Spanish law, FREIF says that the validity and constitutionality of the measure is still in doubt before the Spanish Supreme Court in subsequent decisions in 2016 and 2018.472 Furthermore, Declarations by the Audiencia Nacional and Spanish fiscal authorities are also said to be irrelevant because they do not address questions of substance or the application of the measure.473

O2 Status of Law 15/2012 As Bona Fide Taxation Measure

O2.1 Spain's Submissions