Lord Collins of Mapesbury President
Professor Rolf Knieper Arbitrator
Mr Peter Rees Arbitrator
Ms Ana C. Conover Blancas Secretary of the Tribunal
For the Claimants :
Dr Gaëtan Verhoosel Three Crowns LLP
Ms Carmen Martínez López Three Crowns LLP
Mr Manish Aggarwal Three Crowns LLP
Mr Simon Maynard Three Crowns LLP
Mr Maanas Jain Three Crowns LLP
Ms Holly Pelham-Stewart Three Crowns LLP
Ms Inés Vázquez García Gómez-Acebo & Pombo Abogados, S. L. P.
Mr Luigi Pettinicchio
Ms Emma Tinker
Mr Olivier Delpon de Vaux
Mr Rafael Cruz
Ms Rebeca Quiroga
Mr Luis Quiroga
Mr Carlos Solé KPMG
Ms Marta Serrano KPMG
Mr Samuel Vázquez KPMG
Dr Pablo Spiller Compass Lexecon
Mr Santiago Dellepiane Compass Lexecon
Mr Julian Delamer Compass Lexecon
Mr Jack Ghaleb Compass Lexecon
For the Respondent:
Mr Javier Torres Gella Abogacía General del Estado
Mr José Manuel Gutiérrez Delgado Abogacía General del Estado Mr Antolín Fernández Antuña Abogacía General del Estado
Mr Javier Castro López Abogacía General del Estado
Mr Roberto Fernández Castilla Abogacía General del Estado
Mr Juan Rodríguez de la Rúa Puig Abogacía General del Estado
Mr Antonio García García IDAE
Ms Carmen López Ocón IDAE
Dr Daniel Flores Econ One Research, Inc.
Mr Jordan Heim Econ One Research, Inc.
Ms Bridget Richardson Econ One Research, Inc.
Mr Trevor McGowan
Elizabeth Cicoria DR-Esteno
Luciana Sosa DR- Esteno
Mr Jesús Getan Bornn
Ms Roxana Dazin
Ms Anna-Sophia Chapman
(1) The Xana Portfolio, consisting of 14 plants with a total installed capacity of approximately 53,675 MW, which the Claimants acquired in May 2011; and
(2) The Ondina Portfolio, consisting of 19 plants with a total installed capacity of approximately 53,113 MW, which the Claimants acquired in December 2011.
The determination of premiums will take account of the voltage level of the delivery of energy to the network, the effective contribution to the improvement of the environment, the primary energy savings and energy efficiency, the production of economically justifiable useful heat and the investment costs incurred, in order to achieve reasonable profitability rates with reference to the cost of the money on the capital markets.12
Parameter A [Production cost: the investment, operating and maintenance costs for each technology] has a significant weighting in establishing the amount of the regulated tariff for sale to distributors. This way, any plant in Spain in the special regime, provided it is equal to or better than the standard (the standardised plant) for its group, will obtain reasonable return.
... it is assumed, in all cases, that 100% of the funding will come from equity. The leverage and percentage between equity and other sources of funding are independent decisions in each project and for each promoter that, when made wisely, should provide better ratios than those estimated in this report.25
The goal is to continue down the path begun by Royal Decree 2818/1998... with the added benefit of being able to simultaneously take advantage of the stability brought to the system as a whole by Royal Decree 1432/2002... to provide those who have decided or decide in the near future to make a commitment to the special regime of a long-lasting, objective and transparent regulatory framework.
Whatever remuneration mechanism is chosen, the Royal Decree guarantees the owners of the facilities under the special regime a reasonable remuneration for their investments and it guarantees electricity consumers a reasonable allocation of the costs attributable to the electric system...27
Article 40. Revision of tariffs, premiums, incentives and supplements for new installations.
1 In 2006, in view of the findings of the monitoring reports on the degree of compliance with the Renewable Energies Promotion Plan, the tariffs, premiums, incentives and supplements defined in this Royal Decree will undergo revision, taking into account the costs associated with each one of these technologies, their degree of participation in the special regime in demand coverage and their impact on the technical and economic management of the system. Every four years, beginning in 2006, a new revision shall take place.30
3 The tariffs, premiums, incentives and supplements resulting from any of the revisions provided for in this section shall apply solely to the facilities that commence operations subsequent to the date of the entry into force referred to in the section above and shall not be effective retroactively on any previous tariffs and premiums.31
In order to bring the targets set out here to fruition, a detailed evaluation has been made of the investment envisaged over the period as a whole, the nature of this investment and the public aid necessary to meet the targets. This analysis, based on the specific features of each technology, such as its degree of maturity and contribution to the overall target, rests on a balance between all the factors, such that a return is achieved from on public and private investments, and the necessary resources are mobilised to ensure the envisaged investments are made.37
The creation of the special regime electricity generation was an important milestone in our country’s energy policy. The targets for the promotion of renewable energies and combined heat and power, are collected in 2005-2010 Renewable Energies Plan and the Strategy of Energy Saving and Efficiency in Spain (E4), respectively. In view thereof it is found that although experienced by all the special arrangements for electricity generation has been remarkable growth in certain technologies, the objectives are still far from being achieved.
... the activity of electricity production in the special regime is characterized by the possibility that its remuneration is supplemented by charging a premium on the terms established by regulation, the determination of which takes into account factors such as the voltage level of the power delivery grid, contribution to the improvement of the environment, the primary energy savings, energy efficiency and investment costs that are incurred.
A change to the economic and legal framework governing the special regime in force to date is necessary for several reasons: Firstly, the growth experienced by the special regime in recent years, coupled with the experience gained during the implementation of Royal Decrees 2818/1998, of December 23, and 436/2004, of March 12, has revealed the need to regulate certain technical aspects in order to contribute to the growth of these technologies, safeguarding security in the electrical system and ensuring quality in the delivery of the same, and also to minimize restrictions on the production of said generation. The economic regime established by Royal Decree 436/2004, of March 12, owing to the changes experienced by market prices, which in recent times have been more greatly affected by certain variables not considered in the above remuneration scheme of the special regime, makes modification of the remuneration scheme necessary, separating it from the Average or Benchmark Electricity Tariff, used to date. Finally, the regulatory changes resulting from European legislation, as well as the Royal Decree-Act 7/2006, of June 23, must be included, by means of which urgent measures were adopted in the energy sector, introducing significant changes regarding the legal regime of the combined heat and power activity.
The present Royal Decree replaces Royal Decree 436/2004, of March 12, which defined the methodology for updating and the systematization of the legal and economic framework for electricity production activity under the special regime, while maintaining the basic structure of the regulations therein.
The economic framework established in this Royal Decree implements the principles contained in Act 54/1997, of November 27, on the Electricity Sector, guaranteeing owners of facilities in the special regime a reasonable return for their investment and the consumers of electricity an allocation of the costs attributable to the electrical system that is also reasonable, while participation is encouraged in the market, since it is considered that under this framework, government intervention on the pricing of electricity will be reduced, as well as better more efficient and allocation of costs arising from the system, especially with regard to the handling of deviations and additional services. (Emphasis added)
3. During 2010, in view of the results of the monitoring reports on the degree of compliance with the 2005-2010 Renewable Energies Plan (PER), and of the Energy Efficiency and Savings Strategy in Spain (E4), together with such new targets as may be included in the subsequent Renewable Energies Plan for the period 2011-2020, there will be a revision of the tariffs, premiums, supplements and lower and upper limits defined in this Royal Decree, considering the costs associated with each of these technologies, the degree of participation of the Special Regime in covering the demand and its impact upon the technical and economic management of the system, always guaranteeing reasonable rates of return with reference to the cost of money in the capital markets. Thereafter, every four years, a new revision shall be performed, maintaining the same criteria as previously.
The revisions of the regulated tariff and the upper and lower limits indicated in this section shall not affect facilities for which the commissioning certificate had been granted prior to January 1 of the second year following the year in which the revision had been performed.
Royal Decree 661/2007 of 26 May 2007 regulating electrical energy production under the special regime, implements the Electricity Sector Act Law 54/1997 and defines the legal and economic regime for electrical energy and cogeneration plants and plants that use renewable energies and waste as raw material, with the overarching objective of establishing a stable and predictable system that guarantees a reasonable return on electrical energy production under the special regime.51
The economic framework, currently implemented by Royal Decree 661/2007 of 25 May 2007 regulating electrical energy production under the Special Regime, and Order ITC/3519/2009 of 28 December 2009 reviewing access fees as from 01 January 2010 along with the tariffs and premiums corresponding to special regime installations, provide for electricity generation remuneration levels that afford a reasonable return on investment. In determining those levels, account is taken of the specific technical and economic aspects of each technology, installed capacity and the date operation commenced, in all cases using criteria of system economic sustainability and efficiency.52
Royal Decree 661/2007 provides for reviews of remuneration amounts every four years, which may be modified on the basis of technological developments within the sectors, market behaviour, degree of compliance with renewable energy targets, percentage of demand covered by special regime facilities and their effect on the technical and economic management of the system, while always guaranteeing reasonable rates of return. In any event, these reviews take account of cost trends associated with each technology with three objectives in mind: to see that renewable technologies become as competitive as possible with Ordinary Regime generation, to foster a technological development balance and to see that the remunerative scheme moves in the direction of minimising socio-economic and environmental costs.53
Technical parameters and investment costs incurred will be considered in determining remuneration with a view to providing a reasonable rate of return referenced to the cost of money on the capital market in accordance with the provisions of the Electricity Sector Act.
Also, effective administrative supervision is required to assure that gains from the development of these technologies in terms of relative cost competitiveness are passed on to society, thus minimising the speculative risks posed in the past by excessive rates of return, which not only hurts consumers but is also damaging to the industry in general in terms of the perception people have of it. Therefore, it will be necessary to devise sufficiently flexible and transparent systems that permit the issue and reception of economic and market signals so as to minimise the risks associated with investment and its remuneration and those caused by fluctuations in the energy markets.54
The tariff deficit, which had been accumulating since 2001, began to spiral out of control after 2005. From 2005 to 2013, the costs in the electricity system grew by 221% while revenues increased by only 100%. Subsidies for renewable electricity are the single largest cost element. By 2012, the accumulated debt in the system had reached more than EUR 20 billion and was set to expand by billions every year unless action was taken. In 2012, the government temporarily eliminated subsidies for new installations. It also reduced remuneration for transmission and distribution network activities, increased access tariffs, and introduced a 7% tax on electricity generation (22% for hydropower). Nevertheless, the deficit grew to EUR 26 billion by the end of 2012.55
Since the adoption of [RD-L 6/2009], there have been a series of supervening circumstances that have had a direct impact on the anticipated tariff deficit in the electricity system and it has been determined that the capped ex ante deficit limits, as established in the aforementioned Twenty-First Additional Provision, have been largely overcome. The impact of the global crisis, which traverses the Spanish economy, has led to a significant decline in the demand for electric energy, however, supply has been impacted by aspects such as the evolution of the price of fuels on the international markets during the current year, 2010 and the favourable climatic conditions that have led to increased electric energy production from renewable sources. The current economic situation has not had symmetrical consequences in all electric power sectors: while the ordinary regime (traditional electric power plants) have seen a reduction in their operating hours and income, due to the decline in wholesale market prices, however, producers under the special regime are found to be in a different circumstance, as this specific regime ensures the sale of generated electricity at preferential rates within the system.
the owners of electrical energy production facilities under the special regime do not have an "unmodifiable right" to maintain unchanged the way in which the collection of premiums is governed. This regime actually attempts to promote the use of renewable energies by means of an incentive mechanism which, like any of this kind, is not guaranteed to be retained without amendments in the future... In the same way that, according to factors of economic policy... the premiums and incentives for the production of electric energy under the special scheme can increase from one year to the next, they can also decrease when those same considerations make it advisable. As long as, we repeat, the variations are kept within the legal limits that govern this mode of promotion, the mere fact that the updating or financial significance of the premium may increase or decrease does not constitute, by itself, reason for nullity, nor does it affect the legitimate expectations of the recipients."63
legal certainty is not incompatible with the regulatory changes from the perspective of the validity of the latter... The same consideration applies to the principle of legitimate expectations... The appellants argue that their investments in the activity of production of electrical energy under the special regime were made at a given time "trusting that the Administration will not change the legal conditions that were decisive for... them to decide to build the facility," a premise from which they infer that the reduction of premiums subsequent to RD 2351/2004 regarding those established in RD 435/2004 would be contrary to that principle. Such reasoning, based on an incentive mechanism as that of the premiums in question, cannot be shared...
Until it is replaced by another one, the aforementioned Act (Article 30 of Electricity Sector Act) enables the corresponding companies to pursue premiums that include, as a relevant factor, the achievement of "reasonable rate of return with reference to the cost of money on the capital market" or, to once again use the words of the preamble to RD 436/2004, "fair remuneration for their investments". The remuneration regime which we examine does not guarantee, on the contrary, holders of facilities under special regime the inviolability of a certain level of returns or income in relation to those obtained in past years, nor the indefinite permanence of formulas used for fixing premiums.64
the prescriptive content of Act 54/1997... does not envisage the petrifaction or freezing of the remunerative regime of owners of electricity facilities under the special regime, nor any recognition of the right of producers under the special regime to the unmodifiability of that regime, given that the Government, as intended by the legislator, possesses a discretion power to determine the energy remunerations that are offered... taking into account, in the exercise of its regulatory powers the evident and essential general interests implied in the proper functioning of the system of production and distribution of electricity, and, in particular, the rights of users.69
it is not deduced that said regulation [RD 661/2007] does not respond to the demands of the principle of legal certainty, which does not include any right to freezing of the existent legal order...
[T]here are no grounds for challenging Transitory provision one, section 4 of the RD contested, of infringing the principle of legitimate expectations, given that the mercantile companies appealing, as companies that operate in the electricity production business... do not have a right for the remunerative regime of the electricity sector to remain unaltered.... as we upheld in the Judgement of this Chamber of Contentious-Administrative Matters of the Supreme Court of 15 December 2005, "there is no legal obstacle to prevent the Government, in the exercise of regulatory powers and broad entitlements that it has in such a strongly regulated matter as electricity, from modifying a specific system of remuneration providing that this remains within the framework established through the Electricity Sector Act".70
... [The Claimant] does not pay sufficient attention to the case-law of this Chamber issued specifically in relation to the principles of legitimate expectations and non-retroactivity applied to successive incentives regimes for electricity generation. These are the considerations expressed in our Ruling of 25 October 2006 and reiterated in that of 20 March 2007, inter alia, on the legal status of the owners of facilities producing electricity under the special regime, for whom it is not possible to recognise pro futuro an ‘unalterable right’ to the maintenance of the remuneration framework approved by the holder of regulatory power, provided that the prescriptions of the LSE regarding the reasonable rate of return of the investments are respected.72
Any companies that freely choose to enter a market such as the special regime electricity production market, knowing in advance that it is largely dependent upon economic incentives established by public authorities, are or must be aware that these may be modified, within legal guidelines, by these authorities. One of the "regulatory risks" to which they are subject, which they must necessarily take into account, is precisely the variation of the parameters of the premiums or incentives, which the Electricity Sector Act - in the sense above - tempers but does not exclude...
It should be noted that the establishment of the economic regime for facilities operating under the special electricity production regime, proposed by RD 661/2007, of 25 March, cannot be described as arbitrary, since it is conditional upon the objective of ensuring reasonable rate of return throughout the useful life of these facilities, so that the Government, pursuant to Article 15.2 of Act 54/1997, of 27 November, of the Electricity Sector, is authorised to approve the methodology for calculating and updating the remuneration of said activity with objective, transparent and non-discriminatory objectives...73
The Spanish electrical system has recorded a structural deficit in the revenues from regulated activities (tariff deficit) for a decade, due to the fact that the costs that have been recognised for the various regulated activities and costs have been (and continue to be) higher than the revenues obtained from the regulated prices paid by consumers.
... the current situation is unsustainable. The introduction of regulatory measures, as requested by the document of the SEE, is called for with immediate effect in the short term, in order to eliminate the deficit of the system, mitigate the cost of funding the yet unsecuritised debt and clearly define the access costs that will be assumed by electricity consumers, in order to determine their access tariffs in a satisfactory and stable manner.76
The information provided by [CNE] indicates new variations in the estimates for costs and revenues for 2012 and 2013 year end due to various factors which, in the current economic environment, would make it practically impossible to cover them with a charge to the electricity tariffs and to the categories envisaged in the General State Budgets.
These variations are due in large part to a significant rise in the cost of the special regime due to the operating hours increasing more than anticipated and due to an increase in the remuneration values due to their indexation to the Brent price, and a decrease in revenues from tolls due to the sharp drop in demand this year.
The alternative proposed would be a new increase in the access tolls which pay electricity consumers. This measure would directly affect household economies and the competitiveness of companies which are both in a delicate situation due to the current economic situation.
Faced with this scenario, in order to mitigate the situation, the government has contemplated adopting certain urgent cost reduction measures which prevent putting new strain on consumers, allowing them, through consumption and investment, to also collaborate in the economy’s recovery.
... for a decade the Spanish electric system has been generating a tariff deficit which, over time, has become structural due to the fact that the real costs associated with the regulated activities and the functioning of the electric sector are higher than the revenues from the tariffs set by the state and which consumers pay.
Between 2004 and 2012 the electric system’s revenues from tolls on consumers increased 122%, while the increase in the system’s regulated costs in the aforementioned period was 197%. Of the costs which have contributed to the largest extent to said increase, the special regime premiums and the annuities of accumulated deficits stand out as costs which have multiplied by six and by nine respectively over the aforementioned period.
According to the most recent data available from the Spanish National Commission for Energy [CNE] the cumulative debt balance amounted to €26,062.51 million at May 10, 2013. As a supplement to the calculation of the electric system’s debt, the CNE points out that from 2003 and until May 10, 2013, the amount to be paid to finance the electric system’s deficit through the annuities included in the access tolls on consumers, at updated prices for each year, amounts to €11,823 million.
These figures show the unsustainable nature of the electric sector’s deficit and the need to adopt urgent measures effective immediately which bring this situation to an end.85
In addition and under the terms which are determined in a regulatory manner by royal decree of the Council of Ministers, the remuneration for the sale of energy generated valued at market price, the facilities may receive a specific remuneration composed by a term per unit of installed capacity which covers, where applicable, the investment costs for a standard facility that cannot be recovered through the sale of energy and a term to the operation which covers, if applicable, the difference between the operating costs and the revenues from this standard facility participating in the market.
To calculate said specific remuneration for a standard facility throughout its regulatory useful life and based on the activity performed by an efficient and well-managed company, the following will be taken into account:
a) The standard revenues from the sale of energy generated valued at the production market price.
b) The standard operating costs.
c) The standard value of the initial investment.
For these purposes, under no circumstances will costs or investments which are determined by regulations or administrative actions which are not applicable throughout Spain be taken into account. Similarly, only the costs and investments which correspond exclusively to the activity of producing electric energy will be taken into account.
This remuneration regime will not exceed the minimum level necessary to cover the costs which allow the facilities to compete on equal footing with the other technologies on the market and which allow a reasonable profitability to be obtained with reference to the standard facility applicable in each case. Notwithstanding the foregoing, the remuneration regime may exceptionally also include an investment and execution incentive within a specific period when the facility represents a significant reduction of costs in island and nonmainland systems.
This reasonable profitability will be based on the average yield in the secondary market of ten-year government bonds applying the appropriate spread, before taxes.
The parameters of the remuneration regime may be reviewed every six years.86
First additional provision. Reasonable profitability of the production facilities with the right to a premium economic regime.
Pursuant to that envisaged in the second-to-last paragraph of article 30.4 of Electricity Act 1997, for facilities which, upon the entry into force of this royal decree-law, had the right to a premium economic regime, a profitability before taxes is established based on the average yield over the last ten years in the secondary market of ten-year government bonds, increased by 300 basis points, all of the foregoing without prejudice to the review envisaged in the last paragraph of said article.
... a crucial factor in this reform has been the accumulation of annual imbalances between revenues and costs for the electric system over the last decade, resulting in a structural deficit.
This imbalance is due to excessive growth in certain costs as a result of energy policy decisions, with no guarantee of revenues for the system. This situation has been exacerbated by the absence of growth in demand for electricity, due for the most part to the economic crisis.
... Such is this imbalance that the electric system as a whole has debts of more than twenty-six thousand million euros, a structural deficit of ten thousand million euros a year, and a failure to correct the imbalance has resulted in the prospect of the electric system going bankrupt.
Act 54/1997, of November 27, has proven insufficient to ensure the financial equilibrium of the system due, among other reasons, to the fact that the system for the remuneration of regulated activities has not had the flexibility required to adapt to important changes in the electric system or changes in the economy.
Thus, the experience of the last decade has revealed that the economic and financial instability of the electric system the result of the tariff deficit has made it impossible to guarantee the stable regulatory framework needed for the correct development of a highly investment-intensive activity such as electricity production.
Thus, the economic unsustainability of the electric system, together with the constant evolution of the sector over the last sixteen years, has forced the legislature to adapt Act 54/1997, of November 27, on the Electric Power Sector on a number of occasions, often via the approval of urgent measures by Royal Decree-Law. At present, there is a degree of normative dispersion that is undesirable in such an important sector of the economy.
In short, constant rule changes have significantly distorted the normal operation of the electric system, a distortion that must be corrected via action by the legislature that provides the regulatory stability required for electricity production. This regulatory security, together with the need to undertake the reforms required in order to ensure the sustainability of the system in the long-term and to resolve the aforementioned problems in the operation of the system, warrant approval for a reform of the sector as a whole, based on a new regime of revenue and expenditure for the electric system designed to return to the system a financial sustainability it lost long ago, and which it has not been possible to restore to date via the adoption of partial measures.
The remuneration regime for renewable energies, cogeneration, and recycling waste will be based on the necessary participation of these facilities in the market, with market revenue to be topped up with a specific level of regulated remuneration that allows these technologies to compete on a level playing field with all other technologies on the market. This specific additional remuneration will be sufficient to cover costs that, unlike conventional technologies, these technologies cannot recover from the market, and will enable them to achieve a reasonable return by reference to the standard facility applicable in each case.88
a. DECLARING that the Tribunal has jurisdiction over Claimants’ claims in the present arbitration;
b. DECLARING that Spain has breached its obligations under Articles 10 and 13 of the ECT;
c. ORDERING that Spain:
(a) compensate Claimants in full for all losses suffered as a result of Spain’s breaches of the ECT, and in particular:
1) damages for the lost income to Claimants as a result of Spain’s wrongful measures between 1 January 2013 and the date of the Tribunal’s Award, in an amount determined as at the date of the Tribunal’s Award;
2) damages in an amount equal to the diminution in the fair market value of Claimants’ debt and equity investments, determined as at the date of the Tribunal’s Award;
(b) pay, on a full indemnity basis, all of the costs and expenses of these arbitration proceedings, including, without limitation, the fees and expenses: (1) of the members of the Tribunal; (2) of ICSID; (3) relating to Claimants’ legal representation (including attorney fees and disbursements); and (4) of any experts or consultants appointed by Claimants (or the Tribunal);
(c) pay post-award interest on sums awarded pursuant to (b)(i) and b(ii) above, at a rate equal to the cost of equity for a hydro plant portfolio in Spain as at the date of the Tribunal’s Award plus an additional 2%, compounded annually, from the date of the award until full payment thereof; and
d. DECLARING the Tribunal’s Award is made net of all Spanish taxes, and that Spain may not impose any tax on Claimants arising from the Tribunal’s Award;
e. DECLARING that Spain indemnify Claimants for the amount of any additional tax liability in Luxembourg and/or Sweden in relation to the compensation awarded in the Tribunal’s Award that is attributable to Spain’s breaches; and
f. ORDERING any such other and further relief that the Tribunal may deem appropriate in the circumstances.99
a) declare its lack of jurisdiction to hear the claims of the Claimant[s], or if applicable their inadmissibility, in accordance with what is set forth in Section III of the present Memorial, referring to Jurisdictional Objections; and
b) Subsidiarily, in the event that the Arbitral Tribunal decides that it has jurisdiction to hear this dispute, to dismiss all the Claimants’ claims regarding the Merits, as the Kingdom of Spain has not breached the ECT in any way, pursuant to Sections IV and V herein, referring to the Facts and the Merits, respectively;
c) Secondarily, to dismiss all the Claimant[s’] claims for damages as the [Claimants have] no right to compensation, in accordance with Section V herein; and
d) Order the Claimant[s] to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators’ fees, and the fees of the legal representatives of the Kingdom of Spain, their experts and advisers, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred until the date of their actual payment.100
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.144
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 Member States.206
Article 21. Taxation
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.223
(a) it is not discriminatory in terms of its application and repercussion as it covers both renewable and conventional energy producers, granting the same treatment to all taxpayers;244(b) its general application is linked to the environmental nature of the tax;245 and (c) if conventional producers passed on the cost of the TVPEE to the market price of electricity, renewable energy producers would also benefit, as they would also obtain that increased market price.246
3. Article 10... shall not apply to:
a) Impose most favoured nation obligations with respect to advantages accorded by a Contracting Party pursuant to the tax provisions of any convention, agreement o arrangement described in subparagraph (7)(a)(ii)[…]262
(1) Investments of Investors of a Contracting Party in the Area of any other Contracting Party shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation (hereinafter referred to as "Expropriation") except where such Expropriation is:
(a) for a purpose which is in the public interest;
(b) not discriminatory;
(c) carried out under due process of law; and
(d) accompanied by the payment of prompt, adequate and effective compensation....314
The Respondent first considers that future returns, or loss of future income or revenues, are not an asset subject to expropriation under the ECT, Spanish law or otherwise under international law.347 In particular, the Respondent notes that both Spanish law and international law require the rights to be vested or acquired in order for their deprivation to be compensable.348 The Respondent contends that the facts of this case only establish the Claimants’ acquired right to the remuneration under RD 661/2007 with respect to the energy already sold, but not to future returns.349 The Respondent, citing Nations Energy v Panama as an illustrative case, further argues that measures that do not affect acquired rights (as in this case, which concerns future returns) cannot be considered equivalent to expropriation.350
the fundamental objectives of the ECT are to require the Contracting States to maintain a stable and transparent legal and regulatory framework for energy sector investments, and to provide substantive protections (which include, but are not limited to, national treatment) and the procedural mechanism of investor-State dispute settlement, with a view to reducing political and regulatory risks and thus facilitate investments in the energy sector.379
(a) the legitimacy of the State’s aim; (b) whether the measure adopted by the State was suitable and/or reasonably connected to the objective it pursued; (c) whether the measure adopted by the State was necessary (i.e., was it the least restrictive measure available to achieve the State’s aim); and (d) whether the effects of the measure were disproportionate or excessive in relation to the interests involved, i.e., whether the benefit of realising the State’s aim exceeded the harm to the relevant rights of investors.390