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

Decision on Jurisdiction, Liability and Directions on Quantum

Table of Selected Abbreviations/Defined Terms

5 Member States Declaration Declaration of the Representatives of the Governments of the Member States, dated 16 January 2019, on the enforcement of the Judgment of the Court of Justice in Achmea and on the investment protection in the European Union signed by the Representatives of the Governments of Finland, Luxembourg, Malta, Slovenia and Sweden
22 Member States Declaration Declaration of the Representatives of the Governments of the Member States, dated 15 January 2019, on the legal consequences of the judgment of the Court of Justice in Achmea and on Investment Protection in the European Union signed by the Representatives of the Governments of Belgium, Bulgaria, Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Netherlands, Austria, Poland, Portugal, Romania, Slovakia and United Kingdom of Great Britain and Northern Ireland
1977 Electricity Law or Law 54/1997 Law 54/2007 on the Electricity Sector of 27 November 1997
2001 Directive Directive 2001/77/CE "on the promotion of electricity produced from renewable energy sources in the internal electricity market"
2009 Renewable Energy Directive Directive 2009/28/EC approved by the European Parliament and Council of 23 April 2009 "on the promotion of the use of energy from renewable sources and subsequently repealing Directives 2001/77/EC and 2003/30/EC"
Achmea Judgment Slovak Republic v. Achmea BV, Case C-284/16, Judgment of the Court, 6 March 2018, Exhibit CL-151
Alternative Tariff An alternative damages calculation prepared in Brattle's Second Quantum Report, presenting a reasonable return that assumes an entitlement not to the FIT Tariffs under the Original Regime, but rather to the "reasonable return" that was implicit in the FIT Tariff under Royal Decree 1578/2008
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings of 2006
BDO's First Report BDO's First Expert Report dated 9 July 2018, submitted with Respondent's Counter-Memorial
BDO's Second Report BDO's Rejoinder Expert Report dated 13 February 2019, submitted with Respondent's Rejoinder
Brattle's First Quantum Report Brattle's quantum expert report "Financial Damages to Investors" dated 29 March 2018, submitted with Claimants' Memorial
Brattle's First Regulatory Report Brattle's first regulatory expert Report entitled "Changes to the Regulation of Photovoltaic Installations in Spain since December 2012" dated 29 March 2018, submitted with Claimants' Memorial
Brattle's Rebuttal Regulatory Report Brattle's rebuttal regulatory expert report entitled "Rebuttal: Changes to the Regulation of Photovoltaic Installations in Spain since December 2012" dated 28 November 2018, submitted with Claimants' Reply
Brattle's Second Quantum Report Brattle's second expert report entitled "Report: Financial Damages to Investors" dated 28 November 2018, submitted with Claimants' Reply
C-[#] Claimants' Exhibit
CJEU European Union Court of Justice
CL-[#] Claimants' Legal Authority
Cl. Memorial Claimants' Memorial on the Merits dated 29 March 2018
Cl. PHB Claimants' Post-Hearing Brief dated 11 May 2020
Cl. Rejoinder on Jurisdiction Claimants' Rejoinder on Jurisdiction dated 25 April 2019
Cl. Reply Claimants' Reply on the Merits and Counter-Memorial on Jurisdiction dated 29 November 2018
Cl. Reply PHB Claimants' Reply Post-Hearing Brief dated 17 June 2020
Claimants Infracapital F1 S.a.r.l. and Infracapital Solar B.V.
Claimants' PV Plants Jointly, the First and Second Investment Plants
Clean Hands Objection Respondent's Objection to Jurisdiction dated 20 December 2019
CNE Comisión Nacional de Energía or National Energy Commission
CPI Consumer Price Index
Disputed Measures Measures adopted by Spain between 2012 and 2014, including Law 15/12, Royal Decree-Law 2/2013, Royal Decree-Law 9/2013, Law 24/2013, Royal Decree 413/2014 and the June 2014 Order
EC European Commission
EC's Application European Commission's Application for Leave to Intervene as a Non-Disputing Party dated 29 October 2018
EC Decision Decision C(2017) 7384 of the European Commission, rendered on 10 November 2017, regarding the Support for Electricity generation from renewable energy sources, cogeneration and waste (S.A. 40348 (2015/NN), Legal Authority RL-0060
ECT Energy Charter Treaty
EU The European Union
First Investment Plants Jointly, the Tordesillas Plants and the Valtierra I, II and & III Plants
FIT "feed-in-tariff" which represents the tariff that has a right to receive a premium payment over and above the market price per kWh produced
Fontellas Plants PV installations acquired by Claimants from OPDE Investment España S.L. (Spanish-incorporated company) via Promociones Fotovoltaicas Castanea, S.L., Promociones Fotovoltaicas Fagus, S.L., Promociones Fotovoltaicas Corylus, S.L., and Promociones Fotovoltaicas Betula, S.L.
Hearings The Hearing on Jurisdiction and the Merits held on 24-28 June 2019 in Paris (the "June Hearing"), and the Hearing held at the International Dispute Resolution Centre Ltd (IDRC) in London on 27 February 2020 (the "Second Hearing").
ICSID Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States dated 18 March 1965
ICSID or the Centre International Centre for Settlement of Investment Disputes
IDAE "Instituto de Diversificación y Ahorro de Energía" or Institute for the Diversification and Saving of Energy
Intra-EU Objection I Objection raised by Respondent to the jurisdiction of the Tribunal ratione materiae, arguing that Claimants are not investors protected under the ECT, because Article 26 of the ECT, which establishes the dispute settlement mechanism, does not apply to disputes arising between an investor of an EU Member State and an EU Member State.
Intra-EU Objection II Objection raised by Respondent to the jurisdiction of the Tribunal ratione materiae, arguing that the Tribunal is "called upon to interpret and apply" EU law since the dispute affects the EU fundamental freedoms and State Aid.
June 2014 Order Ministerial Order IET/1045/2014 issued on 16 June 2014 by the Ministry of Industry, Energy and Tourism to further implement the New Regime
June Hearing Hearing on Jurisdiction and the Merits held on 24-28 June 2019 in Paris
Lasesa Plants PV installations acquired by Claimants from Dalkia Solar, S.L, Forcimsa Empresa Constructora, S.A. and Forcimsa AOC Obra Civil, S.L. (Spanish entities), through Sariñena Solar, S.L. (Spanish-incorporated company) via its 40 Spanish subsidiaries, Lasesa Solar I 1, S.L. to Lasesa Solar I 40, S.L
Law 15/2012 Law 15/2012 adopted on 27 December 2012 "Tax Measures for Energy Sustainability," which entered into effect on 1 January 2013
Law 2/2011 Law 2/2011 on Sustainable Economy of 4 March 2010
Law 24/2013 Law 24/2013 of 26 December 2013 on the Electricity Sector, which superseded Law 54/1997
Lief WS1 Witness Statement of Mr. Mathieu Lief dated 22 March 2018, submitted with Claimants' Memorial
Lief WS2 Second Witness Statement of Mr. Mathieu Lief dated 26 November 2018, submitted with Claimants' Reply
Montoya WS Witness Statement of Mr. Carlos Montoya dated 5 July 2018, submitted with Respondent's Counter-Memorial
New Regime Regime for compensation introduced under Royal Decree-Law 9/2013 whereby renewable energy producers received: (i) a payment of the wholesale market price for the electricity produced; (ii) a possible additional "specific remuneration" based on the electricity produced to compensate operating costs not covered by the wholesale market price; and (iii) a payment per MWh of installed capacity based on the net investment costs of a "standard facility" or "instalación tipo" during its "useful life.
Ordinary Regime Chapter I of the 1997 Electricity Law, which applies to conventional electricity generation plants
R-[#] Respondent's Exhibit
RAIPRE Administrative Registry for Electricity Production Facilities ("Registro Administrativo de Instalaciones de Producción de Energía Eléctrica") kept by the Ministry of Energy and Tourism
Ratione Temporis Objection Objection made by Respondent to the jurisdiction of the Tribunal, arguing that Claimants cannot prove the ownership of their investment before the Disputed Measures were adopted
Ratione Temporis Objection Objection made by Respondent to the jurisdiction of the Tribunal to hear Claimants' claim in respect to part of their investment that was made during and after the Disputed Measures were adopted.
RD 1565/2010 Royal Decree 1565/2010 dated 19 November 2010 "regulating and modifying certain aspects of the electricity generation activity under the Special Regime"
RD 1578/2008 Royal Decree 1578/2008 dated 26 September 2008 "on the remuneration for electric energy production using photovoltaic technology for plants subsequent to the deadline for maintenance of the remuneration under RD 661/2007"
RD 1614/2010 Royal Decree 1614/2010 dated 7 December 2010 "regulating and modifying certain aspects relating to the production of electricity based on thermoelectric and wind technologies"
RD 2818/1998 Royal Decree 2818/1998 dated 30 December 1998 to promote the development of renewable energy facilities under the Special Regime
RD 413/2014 Royal Decree 413/2014 dated 6 June 2014 "regulating the activity of electric power production from renewable energy sources, cogeneration and waste"
RD 436/2004 Royal Decree 436/2004 dated 12 March 2004 "establishing the methodology for the updating and systemization of the legal and economic regime for electric power production in the Special Regime"
RD 661/2007 Royal Decree 661/2007 dated 25 May 2007 "regulating the activity of electricity production under the Special Regime"
RDL Royal Decree Law
RDL 14/2010 Royal Decree-Law 14/2010 dated 23 December 2010 on "urgent measures to correct the tariff deficit in the electricity sector"
RDL 2/2013 Royal Decree-Law 2/2013 dated 1 February 2012 concerning "urgent measures within the electricity system and the financial sector "
RDL 6/2009 Royal Decree-Law 6/2009 dated 30 April 2009, adopting certain measures within the energy sector and approving the social bond
RDL 7/2006 Royal Decree-Law 7/2006 of 24 June 2006, on the "adoption of urgent measures for the energy sector"
RDL 9/2013 Royal Decree-Law 9/2013 of 12 July 2013 on "urgent measures to ensure the financial stability of the electricity system"
RE Renewable Energy
Report 30/2008 Report 30/2008 issued by the CNE dated July 29, 2008 on "the royal decree proposal to reward the production of electrical energy using photovoltaic solar technology in plants subsequent to the cut-off date for maintaining the rewards set forth by royal decree 661/2007, of the 25th of May, for said technology"
Request for Arbitration Request for Arbitration from Claimants against Respondent dated 15 June 2016, and supplemented on 29 June 2016
Resp. C-Memorial Respondent's Counter-Memorial on the Merits and Memorial on Jurisdiction dated 9 July 2018
Resp. PHB Respondent's Post-Hearing Brief dated 3 June 2020
Resp. Rejoinder Respondent's Rejoinder on the Merits and Reply on Jurisdiction dated 14 February 2019
Resp. Reply PHB Respondent's Reply Post Hearing Brief dated 26 June 2020
RL-[#] Respondent's Legal Authority
RRR Reasonable Rate of Return
Resp. Second Submission on the New Objection Submission by Respondent on 19 March 2020 in respect to its Clean Hands Objection, entitled Lack of Clean Hands by Claimants as a Jurisdictional Objection, and subsidiarily, of Inadmission. Validity of the allegation in respect to timeliness and merits." ("Falta de manos limpias de los Demandantes como Objeción de Jurisdicción y, subsidiariamente, de Inadmisión: Procedencia de la alegación en cuanto al tiempo y al fondo ")
Second Hearing A one-day hearing held at the International Dispute Resolution Centre Ltd (IDRC) in London on 27 February 2020.
Second Investment Plants Jointly, the Fontanellas and Lasesa Plants
SES Spanish Electricity System
Special Regime Chapter II of the 1997 Electricity Law, which covers electricity generators from non-consumable renewable energies, carried out in power plants with an installed capacity that does not exceed 50 MW
TMR "tarifa media de referencia" or average electricity tariff fixed by the Spanish Government on an annual basis
Tordesillas Plants PV installations acquired by Claimants from OPDE Investment España S.L., a Spanish-incorporated company, through Tordesillas Solar, S.A. (Spanish entity) via its ten subsidiaries, Tordesillas Solar FV 1, S.L. to Tordesillas Solar FV 10, S.L.
Tr. Day [#], [page:line] [Speaker(s)] Transcript of the Hearing
Tribunal Arbitral tribunal constituted on 24 October 2017
TVPEE "Impuesto sobre el valor de la producción de energía eléctrica", a 7% tax introduced by Law 15/2012, levied on "the total amount that corresponds to the tax payer for the production of electricity and its incorporation into the electricity system, measured at power station bus bars, for each facility, in the tax period."
TVPEE Objection Objection made by Respondent to the jurisdiction of the Tribunal to hear Claimants' claim for breach of Article 10(1) deriving from Spain's introduction of the TVPEE in Law 15/2012, arguing that, pursuant to Article 21 of the ECT, Article 10(1) does not apply to tax measures
UNFCCC United Nations Framework Convention on Climate Change of 1992
Valtierra I & II Plants PV installations acquired by Claimants from Valsingula S.L. (Spanish-incorporated company) via Promociones Fotovoltaicas Azara, S.L.U. and Promociones Fotovoltaicas Articulata, S.L.U.
Valtierra III Plants PV installations acquired by Claimants from Valsingula S.L. (Spanish-incorporated company) via Promociones Fotovoltaicas Daphne, S.L.U., Promociones Fotovoltaicas Retama, S.L.U. and Promociones Fotovoltaicas Faginea, S.L.U.


 

I. INTRODUCTION AND PARTIES

1.

This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") on the basis of the Energy Charter Treaty which entered into force on 16 April 1998, for Spain, Luxembourg and the Netherlands (the "ECT") and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, dated 14 October 1966 (the "ICSID Convention").

2.
The claimants are Infracapital F1 S.a.r.l., a private limited liability company incorporated under the laws of Luxembourg, and Infracapital Solar B.V., a private limited liability company incorporated under the laws of the Netherlands (together, "Claimants").
3.
The respondent is the Kingdom of Spain ("Spain" or the "Respondent").

II. PROCEDURAL HISTORY

9.
On 5 October 2016, Claimants appointed Prof. Peter D. Cameron, a national of the United Kingdom, as arbitrator. Prof. Cameron accepted his appointment on 6 October 2016.
10.
On 3 November 2016, Respondent appointed Mr. Luis González García, a national of Mexico, as arbitrator. Mr. González García accepted his appointment on 7 November 2016.
13.
On 16 October 2017, the Centre informed the Parties of its intention to appoint Dr. José Emilio Nunes Pinto, a national of Brazil, as the presiding arbitrator. On 20 October 2017, Claimants informed the Centre that they had no objections regarding the appointment, and no comments were received from Respondent. On 23 October 2017, the Parties were informed that the Secretary-General would proceed with the appointment of Dr. Nunes Pinto as the presiding arbitrator.
14.
On 24 October 2017, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "Arbitration Rules"), notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. Mrs. Mercedes Cordido-Freytes de Kurowski, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.
40.
A hearing on Jurisdiction and the Merits was held in the World Bank Group facilities in Paris, France, from 24 June to 27 June 2019 (the "June Hearing"). The following persons were present at the June Hearing:

Tribunal:

Dr. José Emilio Nunes Pinto President
Prof. Peter D. Cameron Arbitrator
Mr. Luis González García Arbitrator

ICSID Secretariat:

Mrs. Mercedes Cordido-Freytes de Kurowski Secretary of the Tribunal

For Claimants:

Counsel:

Mr. Jeffrey Sullivan Gibson, Dunn & Crutcher UK LLP
Ms. Sarah Wazen Gibson, Dunn & Crutcher UK LLP
Ms. Nadia Wahba Gibson, Dunn & Crutcher UK LLP
Mr. Antonio Vázquez-Guillén Allen & Overy LLP (Madrid)
Mr. David Ingle Allen & Overy LLP (Madrid)
Ms. Millicent Domínguez Allen & Overy LLP (Madrid)

Parties:

Mr. Martin Lennon Infracapital
Mr. Mathieu Lief Infracapital
Mr. Nikolaus Roessner Infracapital

Experts:

Mr. Carlos Lapuerta The Brattle Group
Mr. Richard Caldwell The Brattle Group
Mr. José Antonio García The Brattle Group
Ms. Sara Vojvodic The Brattle Group
Ms. Annika Opitz The Brattle Group

For Respondent:

Counsel:

Mr. José Manuel Gutiérrez Delgado Abogacía General del Estado
Ms. Ma José Ruiz Sánchez Abogacía General del Estado
Mr. Rafael Gil Nievas Abogacía General del Estado
Ms. Alicia Segovia Marco Abogacía General del Estado
Mr. Alberto Torró Molés Abogacía General del Estado
Mr. Mariano Rojo Pérez Abogacía General del Estado
Ms. Gloria de la Guardia Limeres Abogacía General del Estado

Experts:

Mr. Gervase MacGregor BDO
Mr. Eduardo Pérez BDO
Mr. Javier Espel BDO
Mr. David Mitchell BDO
Mr. Manuel Vargas BDO
Mr. Adam Cuthbertson BDO
Ms. Susan Blower BDO

Court Reporters:

Mr. Trevor McGowan English Court Reporter
Ms. Elizabeth Cicoria Spanish Court Reporter
Ms. Luciana Sosa Spanish Court Reporter

Interpreters:

Mr. Jesus Getan Bornn English-Spanish Interpreter
Ms. Amalia Klemm-Thaler English-Spanish Interpreter
Ms. Luciana Sosa English-Spanish Interpreter

42.
By letter of 11 July 2019, the Tribunal made reference to two matters that remained pending after the June Hearing, namely: (i) Claimants' objections to the content and reliance of certain slides of Respondent's Opening PowerPoint presentations, noting that the Parties had been unable to reach an agreement in that regard; and (ii) the additional objections to jurisdiction raised for the first time by Respondent during the June Hearing. The Tribunal provided directions to the Parties with regard to the former, and as to the latter, the Tribunal informed the Parties that it would decide on this matter in an award or decision, together with the previously submitted objections.
43.
On 15 July 2019, Respondent filed an electronic copy of six slides from its Opening PowerPoint presentation, and one written submission in that regard.
45.
On 19 July 2019, Claimants filed a submission in relation to Respondent's Opening PowerPoint presentation.
46.
On 2 August 2019, Claimants filed a list of the corrections to the June Hearing transcripts where the Parties disagreed.
47.
On 13 August 2019, the Tribunal issued Procedural Order No. 4 on Claimants' request to strike certain slides from Respondent's Opening PowerPoint Presentation.
48.
On 20 August 2019, Respondent filed (i) a revised Opening PowerPoint presentation titled: "00 Abstract, 01 Facts, 03 Political and Eco Field, 04 Jurisdiction and 05 Merits", and (ii) a submission titled "Response to PO-4", including a request for exclusion of evidence (certain exhibits filed by Claimants with their Memorial and Reply, because the translations were provided much later and not within the 15-day time-limit provided under Procedural Order No. 1).
49.
On 29 August 2019, at the Tribunal's invitation, Claimants filed observations on Respondent's submission of 20 August 2019 titled "Response to PO-4".
50.
On 5 September 2019, the Tribunal issued Procedural Order No. 5 concerning Respondent's request for exclusion of evidence and further objections to jurisdiction.
51.

On 12 September 2019, Respondent filed a proposal for disqualification of arbitrator Dr. José Emilio Nunes Pinto. The proceeding was suspended in accordance with ICSID Arbitration Rule 9(6).

52.
On 13 September 2019, the Secretary of the Tribunal informed the Parties that Dr. José Emilio Nunes Pinto had submitted his resignation in accordance with ICSID Arbitration Rule 8(2), attaching his letter of resignation. The Parties were informed that pursuant to ICSID Arbitration Rule 11(1), the vacancy resulting from the resignation of Dr. Nunes Pinto was to be filled by the same method by which his appointment had been made (i.e., direct appointment by the Secretary-General).
53.
On 25 September 2019, the Parties were informed of the Secretary-General's intention to appoint Dr. Ronald E. M. Goodman, a United States national, as the third arbitrator and President of the Tribunal, to replace Dr. José Emilio Nunes Pinto. This was followed by Claimants' letter of 26 September 2019, Respondent's communication of 1 October 2019, Claimants' letter of 2 October 2019 and Respondent's email of 3 October 2019.
54.
On 3 October 2019, the Secretary of the Tribunal informed the Parties that Dr. Goodman would not be available to accept this appointment.
55.
On 9 October 2019, the Parties were informed of the Secretary-General's intention to appoint Mr. Eduardo Siqueiros, a national of Mexico, as President of the Tribunal, to replace Dr. José Emilio Nunes Pinto. This was followed by questions from Respondent to Mr. Siqueiros submitted on 15 and 21 October 2019, and by Mr. Siqueiros' responses of 16 and 22 October 2019. Claimants did not file observations on the proposal to appoint Mr. Siqueiros.
56.
On 23 October 2019, the Secretary-General informed the Parties that she would proceed with the appointment of Mr. Eduardo Siqueiros and would notify the Parties once the Tribunal was reconstituted.
57.
On 24 October 2019, following the resignation of arbitrator Dr. José Emilio Nunes Pinto, Mr. Eduardo Siqueiros accepted his appointment as arbitrator, appointed by the Secretary-General, pursuant to the Parties' agreement. The Tribunal was reconstituted, with its members being Eduardo Siqueiros (Mexican), President, appointed by the Secretary-General pursuant to the Parties' agreement; Peter D. Cameron (British), appointed by Claimants; and Luis González García (Mexican), appointed by Respondent. The proceeding was resumed pursuant to ICSID Arbitration Rule 12.
58.
On 24 October 2019, Respondent filed a submission proposing to the Tribunal to hold a new hearing, and requested that "(a) the new President of the Tribunal requires for a new hearing; (b) that a date for a new hearing [be] agreed in the next weeks between the Parties and the Tribunal; and (c) that there [be] a fair and flawless hearing where the rights of the Respondent are not openly violated". Respondent attached to its submission a copy of its Disqualification Proposal against the former President of the Tribunal.
59.
By email of 25 October 2019, Respondent supplemented its petitions of 24 October 2019, expressing its understanding (i) that there was no need to file post-hearing briefs as far as a new hearing was necessary, and (ii) that the deadline for the filing of post-hearing briefs would be stayed until the new President had taken his decision.
60.
On the same date, the Tribunal invited Claimants to comment on Respondent's request of 24 October 2019, by 1 November 2019.
61.
On 1 November 2019, Claimants filed a submission entitled 'Claimants' Response to Spain's Request for a Re-Hearing and Intention to Publish the Disqualification Proposal'.
62.
On 5 November 2019, Respondent requested leave from the Tribunal to file brief comments in response to Claimants' submission of 1 November 2019.
63.
In that regard, on 5 November 2019, the Tribunal invited Respondent to file a reply submission by 12 November 2019, to be followed by Claimants' rejoinder submission by 19 November 2019. Respondent was invited to comment in its reply on why certain allegations made were relevant and material to the outcome of the present case, to which Claimants would be allowed to respond in their rejoinder.
64.
On 11 November 2019, Respondent informed the Tribunal of the Parties' agreement to a short two-day extension of the deadlines (i.e., Respondent's reply submission would be due by 14 November 2019 and Claimants' rejoinder submission by 21 November 2019).
65.
On 14 November 2019, Respondent filed a submission entitled 'Reply Regarding the Fair Hearing Request'. This was followed on 21 November 2019 by Claimants' 'Rejoinder on Spain's Request for a Re-Hearing and Intention to Publish the Disqualification Proposal'.
66.
On 14 November 2019, the Tribunal informed the Parties of its availability for a one-day hearing, providing different options, and inviting the Parties to confirm their availability by 17 December 2019.
67.
On 11 December 2019, the Tribunal issued Procedural Order No. 6: (i) rejecting Respondent's new hearing request; (ii) ordering that a new hearing, limited to Opening Presentations by the Parties, would take place at the earliest possible date available to the Parties and the Tribunal members; (iii) noting that the new hearing should be subject to the same terms contemplated in Procedural Order No. 3, as applicable exclusively to the Opening Statements of the Parties, and that demonstrative exhibits would also be subject to the rules established in Section 16.7 of Procedural Order No. 1; those under Section 32 of Procedural Order No. 3; and Procedural Order No. 4; (iv) ordering (to avoid aggravation or exacerbation of the dispute) that both Parties abstain from publishing, during the course of this proceeding, any document produced in this arbitration that might impact the integrity or fairness of the procedure, including, but not limited to, the Disqualification Proposal; and (v) rejecting the request to reconsider and amend the terms of Procedural Order No. 5.
68.
On 14 December 2019, Respondent requested an extension of the 17 December deadline for Respondent to confirm its availability on the Tribunal's proposed dates until six days after the dispatch of the Spanish version of Procedural Order No. 6.
69.
On 16 November 2019, the Tribunal informed the Parties that (i) it deemed Procedural Order No. 6 as valid from the date it was issued in English; (ii) the selection of a date for a new hearing - requested by Respondent - was not a matter for which the translated text was needed; and (iii) it nonetheless granted both Parties until 20 December 2019 to agree on one of the proposed dates for the hearing.
70.
On 18 November 2019, Claimants informed the Tribunal of their availability during the proposed dates for the hearing.
71.
On 20 December 2019, Respondent filed a new objection to jurisdiction, together with (i) Exhibits R-385SP and R-386SP (both in Spanish); (ii) a consolidated list of exhibits; (iii) Legal Authorities Nos. RL-014 to RL-0138 (of which RL-0124 through RL-0136 were provided only in English and RL-0137 through RL-0138 were provided only in Spanish); (iv) a consolidated list of legal authorities; and four expert reports (in Spanish) of (a) Prof. Alejandro Garro, (b) Dr. Francisco Javier Álvarez García, (c) Prof. Dr. Luis Antonio Velasco San Pedro, and (d) Dr. José Carlos Fernández Rozas and Dr. Sixto Sánchez Lorenzo ("Clean Hands Objection").
72.
On the same date, the Tribunal invited Claimants to submit any initial comments that they might have on Respondent's Clean Hands Objection by 10 January 2020.
73.
On 10 January 2020, Claimants filed 'Claimants' Initial Comments on Spain's New Objection to Jurisdiction'.
74.
By letter of 16 January 2020, the Tribunal (i) informed the Parties that it admitted the Clean Hands Objection and had taken note of the Parties' submissions to date; (ii) confirmed its desire to hold the hearing ordered under Procedural Order No. 6 on either 26 or 27 February 2020, as agreed by the Parties, inviting the Parties to confirm their agreement by 21 January 2020; and (iv) informed the Parties that it would soon provide instructions on any further submissions on Respondent's Clean Hands Objection.
75.
On 21 January 2020, the Parties confirmed their agreement on holding the one-day hearing on 27 February 2020, and on changing the venue from Paris to London.
76.
On 22 January 2020, the Tribunal confirmed that the one-day hearing would be held on 27 February 2020 in London, as agreed by the Parties, with the venue to be communicated at a later date. The Tribunal circulated its proposed hearing schedule, inviting the Parties to submit any comments they might have by 27 January 2020.
77.
On 24 January 2020, the Tribunal fixed the procedural schedule for the subsequent submissions on Respondent's Clean Hands Objection.
78.
On 27 January 2020, Claimants submitted their comments on the Tribunal's proposed schedule for the subsequent submissions on Respondent's Clean Hands Objection, and Respondent filed its observations on the Tribunal's letters of 22 and 24 January 2020. The Tribunal invited Claimants to file a response by 31 January 2020 and Respondent to comment thereon by 5 February 2020.
79.
On 31 January 2020, the Parties were informed of the logistical arrangements for the one-day hearing.
80.
As scheduled, on 31 January 2020, Claimants filed 'Claimants' Response to Spain's Comments of 27 January 2020 on the Schedule for the Clean Hands Objection and the hearing', dated 31 January 2020. This was followed on 5 February 2020 by 'Respondent's Response to Claimants' Comments Regarding Schedules Proposed by the Tribunal for the Clean Hands Objection and for the hearing'.
81.
On 7 February 2020, the Parties were advised that the Tribunal (i) had decided to maintain the hearing, as scheduled, for 27 February 2020; (ii) would allow the Parties, if they so wished, to argue the Clean Hands Objection within their respective time allotted for the hearing; (iii) would allow Claimants to make a rebuttal at the end of Respondent's presentation, not to exceed 20 minutes, from their allotted time, with the possibility for Respondent to follow, if it so wished, with a response to the rebuttal from Claimants, also not to exceed 20 minutes, and from Respondent's time allotted; and (iv) that, considering Respondent's request and the arguments made, the Tribunal extended the deadline for Respondent's submission on the Clean Hands Objection until 16 March 2020, and for Claimants' submission until 6 April 2020.
82.
On 27 February 2020, the Tribunal held a one-day Hearing with the Parties, to hear the Parties' Opening Presentations, and the Parties' oral arguments on Respondent's Clean Hands Objection (the "Second Hearing"). The Second Hearing was held at the International Dispute Resolution Centre Ltd (IDRC) in London.
83.
The following persons were present at the Second Hearing:

Tribunal:

Mr. Eduardo Siqueiros T. President
Prof. Peter D. Cameron Arbitrator
Mr. Luis González García Arbitrator

ICSID Secretariat:

Mrs. Mercedes Cordido-Freytes de Kurowski Secretary of the Tribunal

For Claimants:

Mr. Jeffrey Sullivan Gibson, Dunn & Crutcher UK LLP
Ms. Sarah Wazen Gibson, Dunn & Crutcher UK LLP
Ms. Nadia Wahba Gibson, Dunn & Crutcher UK LLP
Mr. Antonio Vázquez-Guillén Allen & Overy LLP (Madrid)
Mr. David Ingle Allen & Overy LLP (Madrid)
Ms. Millicent Domínguez Allen & Overy LLP (Madrid)
Ms. Joanne Horridge Infracapital
Ms. Sara Vojvodic The Brattle Group

For Respondent:

Mr. José Manuel Gutiérrez Delgado Abogacía General del Estado
Ms. María del Socorro Garrido Moreno Abogacía General del Estado
Mr. Rafael Gil Nievas Abogacía General del Estado
Mr. David Mitchell BDO

Court Reporters:

Mr. Trevor McGowan English Court Reporter
D-R Estreno Spanish Court Reporter

Interpreters:

Mr. Juan María Pérez English-Spanish Interpreter
Ms. Marta Buján English-Spanish Interpreter
Ms. Pilar Fernández English-Spanish Interpreter

84.
On 27 February 2020, the Second Hearing transcripts were released by the court reporters.
85.
On 6 March 2020, Counsel to Claimants uploaded to the ICSID Box the opening PowerPoint slides for the Second Hearing together with certain demonstratives utilized, advising that some changes had been made, identifying those on 7 March 2020 at Respondent's request.
86.
On 9 March 2020, Respondent objected to the uploading of the PowerPoint presentation, indicating that, in Respondent's view, these were not "minor corrections to the opening slides", and further objected that Claimants should be permitted to make substantive changes or to add new "information" as they were attempting to do in certain slides. On the same date, Claimants clarified and identified the minor corrections made for correct identification and consistency.
87.
On 10 March 2020, the Tribunal took note of those slides with typographical changes where there was no objection from Respondent, and also decided that, in light of Respondent's objection to the two slides in question, and without regard to the changes introduced, the slides to be uploaded should mirror those presented at the Second Hearing. On the same date, Claimants complied.
88.
On 16 March 2020, the Parties advised the Tribunal that they had reached an agreement to extend the deadlines to file the submissions on the Clean Hands Objection until 19 March 2020 for Respondent's filing, and 14 April 2020 for Claimants' filing. On the same date, the Tribunal indicated that it had no objection to the revised schedule.
89.
On 19 March 2020, Respondent filed its submission on the jurisdictional objection regarding the lack of clean hands in Claimants' investment, entitled in Spanish, 'Falta de Manos Limpias de los Demandantes como Objeción de Jurisdicción y, Subsidiariamente, de Inadmisión: Procedencia de la Alegación en Cuanto al Tiempo y al Fondo', along with additional legal authorities and Respondent's updated list of Legal Authorities.
90.
On 1 April 2020, the Parties informed the Tribunal that they had agreed to extend the date for presenting the agreed transcript corrections, which the Tribunal acknowledged and confirmed its agreement. On the following day, the Parties submitted their agreed corrections to the English and Spanish transcripts of the Second Hearing.
91.
On 8 April 2020, Claimants requested the Tribunal's intervention in respect to the Parties' failure to agree on the number of rounds, length and format of the post-hearing briefs, noting that an agreement was reached on the same issues after the June Hearing in June 2019. On the same date, Respondent expressed its views, and indicated that the COVID-19 pandemic had seriously affected business-as-usual in Spain, for which reason an extension for filing of the post-hearing brief(s) would be required.
92.
On 11 April 2020, the Tribunal acknowledged the Parties' positions; their points of agreement and disagreement, in respect to which it decided that the Parties would be permitted to submit a second round of submissions after their respective Post-Hearing Briefs, and indicated the timetable, length and format of such submissions.
93.
On 14 April 2020, Claimants submitted their 'Response to Spain's New Objection to Jurisdiction - the Clean Hands Objection", along with new factual exhibits and legal authorities.
94.
On 4 May 2020, the President of the Tribunal communicated to the Parties the following:

I recently learned that in an non-ICSID investor-State arbitration case, administered by the ICC, where I had been appointed by Claimant, Respondent has designated Dr. José Emilio Nunes Pinto as arbitrator. I don't believe that this circumstance affects my independence and impartiality to serve as an arbitrator in this case, but I nevertheless wish to disclose it in the abundance of caution.

No observations were filed by the Parties in this regard.

95.
On 7 May 2020, Claimants offered to have the quantum experts work together to provide corrected figures in light of a question posed by Mr. Luis González García during the Second Hearing in relation to a pre-tax IRR figure proposed by BDO -Respondent's quantum expert- during the June Hearing. The Tribunal invited Respondent to submit any comments by 14 May 2020.
96.
On 11 May 2020, Claimants submitted their Post-Hearing Brief.
97.
On 14 May 2020, Respondent submitted its comments to Claimants' offer relating to the quantum experts working together to address the alleged errors in the pre-tax IRR figure proposed by BDO, and rejected the need for such new calculations.
98.
On 23 May 2020, the Tribunal advised Claimants' Counsel that it appreciated the offer included in their letter of 7 May 2020 to have the experts work together, but that the Tribunal did not require additional information from them on the subject.
99.
On 26 May 2020, the Parties informed the Tribunal that they had reached an agreement to extend the dates for submission of the Post-Hearing Briefs in light of health issues arising from the ongoing pandemic. On the same date, the Tribunal advised that it had no objection to such agreed extension.
100.
As scheduled, on 3 June 2020, Respondent submitted its Post-Hearing Brief, together with additional legal authorities and an updated list of Legal Authorities.
101.
On 17 June 2020, Claimants submitted their Reply Post-Hearing Brief, together with an updated index of Legal Authorities.
102.
On 26 June 2020, Respondent submitted its Rejoinder Post-Hearing Brief, as well as additional legal authorities and Respondent's updated list of Legal Authorities.

Legal Authorities introduced to the record post-Hearing

III. FACTUAL BACKGROUND

A. Overview

109.
The following factual summary provides an overview of the underlying facts in the present dispute. This section does not purport to be an exhaustive narrative of all the matters of fact that have been discussed in this proceeding or of all factual allegations made by the Parties. The Tribunal has considered the entirety of the Parties' submissions of fact in their Overview
110.
This case concerns investments made in photovoltaic ("PV") energy plants in Spain. The dispute revolves around measures put in place by Respondent modifying the regulatory and economic regime of renewable energy projects in Spain and their effect on Claimants' investments.
111.
The First Claimant, Infracapital F1, is a private limited liability company incorporated under the laws of Luxembourg.7 The Second Claimant, Infracapital B.V., is a private limited company incorporated under the laws of the Netherlands.8 The Second Claimant is directly and wholly owned by the First Claimant.
112.
On the basis of the materials submitted by the Parties, the Tribunal describes below the relevant Spanish legal framework (Section III.B), and Claimants' investments (Section III.C).

B. Relevant Spanish Legal Framework

(1) The Initial Regulatory Framework

113.
The development of renewable energy ("RE") in Spain dates back to the 1992 United Nations Framework Convention on Climate Change ("UNFCCC").9 The European Union ("EU") and Spain signed the 1997 Kyoto Protocol, which was negotiated to implement the UNFCCC.10 The Protocol was signed by Spain on 29 April 1998 and ratified on 31 May 2002. It entered into force on 16 February 2005.

a. The 1997 Electricity Law

114.
In the above context, on 27 November 1997, Spain adopted Law No. 54/1997 on the Electricity Sector ("Ley del Sector Eléctrico") known as "1997 Electricity Law" or "Law 54/1997".11 The 1997 Electricity Law regulated the supply of power, including generation, transmission and distribution. Anticipating the development of a specific regulatory regime applicable to RE, it reformed the electricity sector in Spain. The 1997 Electricity Law introduced two separate regulatory regimes distinguishing between electricity generation under the "Ordinary Regime" (Chapter I) and the "Special Regime" (Chapter II).
115.
Conventional generation plants became subject to the Ordinary Regime. Their remuneration derived solely from the wholesale market price of electricity. In contrast, the Special Regime covered electricity generators from non-consumable renewable energies.12 Specifically, pursuant to Article 27 of Law 54/1997, electricity generation activities were considered as falling under the Special Regime whenever they were "carried out in power plants with an installed capacity that does not exceed 50 MW."13
116.
Under the Special Regime, generators benefited from a supplementary premium over and above the market price.14 Article 30(4) of the 1997 Electricity Law provided that:

"4. [...] the production of electrical energy from non-hydro renewable energy, biomass as well as that generated by hydroelectric plants, with an operating power capacity equal or inferior to 10MW shall be subsidised with a premium established by the Government whereby the price of electricity sold by these plants shall fall into a percentage category between 80 and 90 percent of an average electricity price; this shall be calculated by dividing the revenue collected from the supply of electrical energy by the energy supplied. The items to be used in calculating said price shall be determined without the Value Added Tax and free of any other tax that might levy electrical energy consumption.

To work out the premiums, the voltage level on delivery of the power to the network, the effective contribution to environmental improvement, to primary energy saving and energy efficiency, the generation of economically justifiable useful heat and the investment costs incurred shall all be taken into account so as to achieve reasonable profitability rates with reference to the cost of money on capital markets."15

117.
Article 31 of the 1997 Electricity Law required facilities under the Special Regime to register in an Administrative Registrer of Electricity Generation Installations ("Registro Administrativo de Instalaciones de Producción de Energía Eléctrica"), in the Ministry of Industry and Energy and ,16 which became the primary regulator. The 1997 Electricity Law required that facilities specify the remunerative regime adopted in each case.17
118.
The 1997 Electricity Law also provided that a plan be drawn up to promote RE so that renewable sources would cover at least 12% of Spain's total energy demand by 2010.18 According to the law, the plan's objectives would be taken into account to set the premiums.19

b. 1998-2006 Regulations

119.
On 23 December 1998, Spain enacted Royal Decree 2818/1998 ("RD 2818/1998") to promote the development of RE facilities under the Special Regime.20 RD 2818/1998 regulated the requirements and procedures for facilities to qualify under the Special Regime, the registration procedure, the conditions for electricity delivery, and the applicable economic regime.21 RD 2818/1998 also established the Administrative Registry for Production Facilities under the Special Regime ("Registro Administrativo de Instalaciones de Producción en Régimen Especial" or "RAIPRE") to facilitate the management and control of the compensation under RD 2818/1998.22 Article 23 provided for a "premium" or "reward" in addition to the market price of electricity, for facilities with capacity equal to or less than 50MW that were registered in the RAIPRE.23 The premium would be revised every four years.24
120.
Complying with the 1997 Electricity Law's requirement that a plan be drawn up to promote renewable energy sources, on 30 December 1999, Spain's Council of Ministers approved the 2000-2010 Renewable Energy Plan.25 The Plan set forth the principal elements and guidelines to reach the 12% target by 2010.
121.
On 27 September 2001, the European Parliament and Council adopted Directive 2001/77/CE "on the promotion of electricity produced from renewable energy sources in the internal electricity market" ("2001 Directive").26 The 2001 Directive set obligations for the EU Member States to implement targets for future electricity consumption derived from RE sources.27 This Directive also recognised the "need for public support in favour of renewable energy sources in the Community guidelines for State aid for environmental protection"28
122.
In that context, on 12 March 2004, Spain enacted Royal Decree 436/2004 ("RD 436/2004"), which derogated and replaced RD 2818/1998.29 The goal of RD 436/2004 was to update and systemize the legal and economic regime for RE production. Pursuant to RD 436/2004, qualifying installations could sell electricity (i) at market prices and receive a premium "feed-in-tariff" ("FIT") payment over and above the market price per kWh produced; or (ii) at a regulated fixed tariff. Both options were calculated by reference to a percentage of the average electricity tariff or the "tarifa media de referencia" ("TMR"), fixed by the Government on an annual basis.30 Because the tariff and premium were linked to the average cost of electricity, both values were subject to market fluctuations.
123.
On 26 August 2005, Spain's Council of Ministers approved the 2005-2010 Renewable Energy Plan, revising the earlier 2000-2010 Renewable Energy Plan adopted in 1999.31 The revised Renewable Energy Plan sought to maintain Spain's commitment to cover at least 12% of the total energy demand with renewable sources by 2010 and incorporated the other two objectives for 2010, namely: (i) 29.4% electricity generation using renewable energy; and (ii) 5.75% biofuels in transport.32
124.
At the same time, in August 2005, the Ministry of Industry, Tourism and Commerce and the Institute for the Diversification and Saving of Energy ("Instituto de Diversificación y Ahorro de Energía" or "IDAE") published a summary of the 2005-2010 Renewable Energy Plan. 33
125.
On 15 December 2005, Spain's Supreme Court rejected a direct challenge against RD 436/2004, holding that:

"There is no legal obstacle that exists to prevent the Government, in the exercise of the regulatory powers and of the broad entitlements it has in a strongly regulated issue such as electricity, from modifying a specific system of remuneration."34

126.
On 24 June 2006, the Government published Royal Decree-Law 7/2006 ("RDL 7/2006"), whose objective was to "urgent[ly] introduc[e] a clear and encouraging legal regime ... in order to address the Government's ambitious energy and environmental objectives."35 Article 1(12) of RDL 7/2006 amended Law 54/1997 by affording qualifying installations priority access to the transport and distribution networks.36 The Royal Decree also temporarily removed the linkage between future reviews of the TMR and RE incentives.
127.
On 25 October 2006, the Supreme Court ruled on another challenge against some amendments to RD 436/2004.37 The Supreme Court held:

"""..." electricity producers under the special regime do have an "unalterable right" to remain in an unchanged economic regime governing the collection of premiums. The scheme is, in fact, to encourage the use of renewable energy through an incentive mechanism, like all of this genre, and cannot be guaranteed to remain unchanged in the future".

"(...) the payment regime under examination does not guarantee to special regime electricity producers that a certain level of profits or revenues will be unchanged relative to those obtained in previous years, or that the formulas for fixing the premiums will stay unchanged."38

128.
The Supreme Court's position was reiterated through later decisions dated 20 March 2007 and 9 October 2007 in which the Court held that owners of facilities under a Special Regime "are not guaranteed the intangibility of a given benefit or income regime in relation to those obtained in previous years, nor are they guaranteed the indefinite permanence of the formulas used to fix premiums."39
129.
On 14 February 2007, Spain's National Energy Commission or Comisión Nacional de Energía ("CNE") issued Report 3/2007, which addressed a draft Royal Decree "regulating electricity generation in the special regime and specific technological facilities equivalent to the ordinary regime"40 (which later became Royal Decree 661/2007). The Report noted that:

"The future application of the new special regime for the production of electricity to all facilities, including those already existing that already enjoy the tariffs, Premium, incentives and complements of the prior regime does not imply the loss of acquired or patrimonialized rights.41

[...] ... the proposed Royal Decree in terms of this criteria is positive, given that, firstly, remuneration is substantially increased for energies and technologies that are further away from the planning targets (biomass, biodigestion biogas, photovoltaic and thermoelectric solar power, and cogeneration)."42

130.
The CNE further noted:

"[...] (b) Minimising regulatory uncertainty. The [CNE] understands that transparency and predictability in the future of economic incentives reduces regulatory uncertainty, incentivising investments in new capacity and minimizing the cost of financing projects, thus reducing the final cost to the consumer. The regulation must offer sufficient guarantees to ensure that the economic incentives are stable and predictable throughout the service life of the facility."43

(2) Regulatory Developments in 2007-2009

a. Royal Decree 661/2007

131.
On 25 May 2007, Spain passed Royal Decree 661/2007 "regulating the activity of electricity production under the special regime" ("RD 661/2007").44 RD 661/2007 replaced the existing regime under RD 436/2004. The Preamble of the Decree set out the objectives of the new policy:

"[A]lthough the growth seen overall in the special regime for electricity generation has been outstanding, in certain technologies the targets posed are still far from being reached.

From the point of view of compensation, the business of the production of electrical energy under the special regime is characterised by the possibility that the compensation system can be supplemented by the receipt of a premium under the terms and conditions established in the regulations, in order to determine which such factors as the voltage level of the energy delivered into the grid, the contribution to the improvement in the environment, primary energy saving, energy efficiency, and the investment costs incurred, may all be taken into account."45

132.
Article 2.1 sets out the scope of application of RD 661/2007 and provides that the electricity production facilities under Article 27.1 of the 1997 Electricity Law "may avail themselves of the special regime" under RD 661/2007.46 PV facilities fall under "Category b)" which covers "facilities which employ any non-consumable renewable energies, biomass, or any type of biofuel, as their primary energy, upon condition that the owner does not carry out any production activity under the ordinary regime ."47 Within this category, subgroup b.1.1 refers to "facilities which use solar radiation alone as their primary energy by means of photovoltaic technology"48
133.
Pursuant to Article 9(1) of the Decree, facilities producing electricity under the Special Regime need to be registered in the RAIPRE:

"... facilities for the production of electrical energy under the special regime shall be subject to compulsory registration in Section Two of the Public Authority Register of facilities for the production of electrical energy indicated in Article 21.4 of Law 54/1997, which is a part of the Ministry of Industry, Tourism, and Trade. Section Two of the Public Authority Register indicated above shall hereinafter be known as the Public Authority Register for production facilities under the Special Regime."49

134.
Pursuant to Article 24(1) of RD 661/2007, producers under the Special Regime had the option to:

• "[s]ell the electricity to the system through the transport or distribution grid, receiving for it a regulated tariff, which shall be the same for all scheduling periods expressed in Euro cents per kilowatt/hour;" (the FIT) or

• "[s]ell the electricity in the electrical energy production market" at "the price obtained in the organised market or the price freely negotiated by the proprietor or the representative of the facility, supplemented where appropriate by a premium, in Eurocents per kilowatt/hour."50

135.
Article 25 defines the "regulated tariff" as "a fixed sum which shall be the same for all scheduling periods and ... determined as a function of the Category, Group, of Sub-Group to which the facility belongs, and the installed power, and where applicable the length of time since the date of commissioning."51
136.
For PV electricity producers (subgroup b.1.1), the regulated tariff is set out in Table 3 of Article 36:52
Group Sub-Group Power Term Regulated Tariff, c€/kWh Reference premium, c€/kWh Upper Limit, c€/kWh Lower Limit, c€/kWh
b.1 b.1.1 P≤100 kW first 25 years 44.0381      
thereafter 35.2305      
100 kW<P≤10 MW first 25 years 41.7500      
thereafter 33.4000      
100<P≤50 MW first 25 years 22.9764      
thereafter 18.3811      
137.
Article 44(1) of RD 661/2007 provides for revision of tariffs, premiums and supplements. Regarding tariff updates, the first paragraph states that:

"[...] The values of the tariffs, premiums, supplements, and lower and upper limits to the hourly price of the market as defined in this Royal Decree, for Category b) [...] shall be updated on an annual basis using as a reference the increase in the CPI less the value set out in the Additional Provision One of the present Royal Decree."53

138.
Contrary to what was established under RD 436/2004, tariffs for PV producers were de-linked from the TMR and indexed to the consumer price index ("CPI"). Article 44(3) defined the matters of tariffs, premiums, supplements and lower and upper limits as follows:

"During the year 2010 ... there shall be a review of the tariffs, premiums, supplements and lower and upper limits defined in this Royal Decree with regard to 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, and a reasonable rate of profitability shall always be guaranteed with reference to the cost of money in the capital markets. Subsequently a further review shall be performed every four years, maintaining the same criteria as previously.

The revisions to the regulated tariff and the upper and lower limits indicated in this paragraph shall not affect facilities for which the deed of commissioning shall have been granted prior to 1 January of the second year following the year in which the revision shall have been performed."54

139.
RD 661/2007 provided a limit up until which the facilities could benefit from the regulated tariffs and premiums. Pursuant to Article 22, once the PV sector reached 85% of Spain's goal of 371 MW for that sector, there would be a time limit of at least 12 months, within which PV installations would be required to register with the RAIPRE to benefit from RD 661/2007's economic regime.55 The final registration with the RAIPRE was a "necessary requirement for the application of the economic regime" under RD 661/2007.56
140.
Shortly after the enactment of RD 661/2007, Spain surpassed the 85% capacity target set out in Article 22. On 27 September 2007, the General Secretary of Energy issued a Resolution affirming that "the percentage production target for solar photovoltaic technology attained as of 31 August 2007 was 91 % and that 100 % of the target would be attained in October 2007."57 In light of that, the General Secretary for Energy decided to set the 12-month deadline for investors to register at the RAIPRE to qualify for the RD 661/2007 tariff.58 The deadline for investors to register was 29 September 2008, after which, facilities could no longer benefit from the economic regime established in RD 661/2007.59
141.
Subsequently, Spain decided to develop further regulations for facilities registered after the 29 September 2008 deadline. The CNE issued Report 30/2008 dated 29 July 2008 on "the royal decree proposal to reward the production of electrical energy using photovoltaic solar technology in plants subsequent to the cut-off date for maintaining the rewards set forth by royal decree 661/2007, of the 25th of May, for said technology" ("Report 30/2008").60 Report 30/2008 observed:

"b) Legal security and protection of legitimate expectations. Stability and predictability of economic incentives (tariffs and premiums) reduce regulatory uncertainty, which encourages investments in new capacity to address their projects, while minimizing the cost of financing and thereby reducing the final cost to the consumer. The current regulation has established annual updates of economic incentives, based on robust indexes (such as the IPC, ten-year bonds, etc.), and periodic reviews every four years, which in this case only affect the new facilities.

Certainly, the principles of legal certainty and the protection of legitimate expectations (Article 9.3 EC) do not constitute insurmountable obstacles to the innovation of the legal system and cannot therefore be used as instruments to petrify the legal framework in force at any given time. In this sense, these principles do not prevent the dynamic innovation of the regulatory frameworks, nor of new normative provisions which can be applied pro-future to situations initiated before it comes into force. But these principles do require that regulatory innovation - especially if it is abrupt, unforeseeable or unexpected - is carried out with certain guarantees and cautions (transitional periods to adapt to the new regimes, where appropriate compensatory measures, etc.) that dampen, moderate and minimize, as far as possible, the disappointing of any expectations generated by the previous regulations."61

b. Royal Decree 1578/2008

142.
In the above context, on 26 September 2008, Spain enacted Royal Decree 1578/2008 "on the remuneration for electric energy production using photovoltaic technology for plants subsequent to the deadline for maintenance of the remuneration under RD 661/2007" ("RD 1578/2008").62 The aim of RD 1578/2008 was to maintain the promotion of electricity generation through photovoltaic sources for facilities that could not benefit from RD 661/2007 but at the same time, reducing the incentives provided in RD 661/2007.
143.
The Preamble of RD 1578/2008 observed that:

"... The growth of installed capacity experienced by photovoltaic solar technology has been much greater than expected.

... It has become necessary to provide continuity and expectations to these investments, as well as to establish progressive guidelines for the implementation of this type of technology, which, in addition, can contribute to achieving the goals of the 2005-2010 Renewable Energy Plan and those set in the new 2011-2020 Renewable Energy Plan, based on the objectives assigned to Spain in the new Renewable Energy Directive. Therefore, it has been determined that it would be appropriate to raise the current goal of 371 MW of installed capacity connected to the network, set in Royal Decree 661/2007 of May 25, 2007.

To that end, it has been proposed that an annual output target be set which will evolve upwards in coordination with technological advancements instead of using the total accumulated power to set the market limits for this technology. This must be accompanied by a new economic arrangement which stimulates the long-term technological development and competitiveness of photovoltaic facilities in Spain.

... Just as insufficient compensation would make the investments nonviable, excessive compensation could have significant repercussions on the costs of the electric power system and create disincentives for investing in research and development, thereby reducing the excellent medium-term and long-term perspectives for this technology. Therefore, it is felt that it is necessary to rationalize compensation and, therefore, the royal decree that is approved should modify the economic regime downward, following the expected evolution of the technology, with a long-term perspective."63

144.
The scope of application of RD 1578/2008 covered installations of subgroup b.1.1 of RD 661/2007 Article 2 (PV facilities) registered with the RAIPRE after the 29 September 2008 deadline.64
145.
Article 4 of RD 1578/2008 provided that, to be eligible to receive the remuneration established under RD 1578/2008, "facilities w[ould] need to pre-register in the remuneration pre-assignment Registry."65 Article 8.1 added that facilities were to register with the remuneration Pre-Assignment Register and obtain a final registration with the RAIPRE within 16 months to benefit from the RD 1578/2008 regime and start selling electricity.66
146.
Unlike RD 661/2007, which established a fixed compensation, RD 1578/2008 provided for a regulated tariff that varied based on quarterly calls.67 Article 11 established a regulated tariff for the first call (32 cent € x KW/h).68 The successive tariffs were determined by a formula provided in Article 11(2) according to the results of the previous call.69
147.
RD 1578/2008 also provided that the regulated tariff applicable to a given installation was to be "maintained for a maximum period of twenty-five years after the date of the last of the following to occur: the start-up date or the date of the registration of the facility in the compensation preassignment registry. Such compensation shall never be applicable to it before the date of the registration therein."70
148.
Finally, Article 12 stated that the regulated tariff for subgroup b.1.1 (PV installations) were subject the updates provided for in Article 44.1 of RD 661/2007 "starting on January 1 of the second year after the call in which they are set."71

c. Royal Decree-Law 6/2009

149.
On 23 April 2009, the European Parliament and Council approved Directive 2009/28/EC "on the promotion of the use of energy from renewable sources and subsequently repealing Directives 2001/77/EC and 2003/30/EC" ("2009 Renewable Energy Directive").72 This new directive established "mandatory national targets consistent with a 20 % share of energy from renewable sources and a 10 % share of energy from renewable sources in transport in Community energy consumption by 2020."73
150.
Shortly after, on 30 April 2009, Royal Decree-Law 6/2009 ("RDL 6/2009") was enacted. The Preamble of RDL 6/2009 observed the existence of a "growing tariff deficit" in Spain, described as the ". the difference between that collected from the regulated tariffs set by the government and that which the consumers pay for their regulated supply and from the access tariffs set by the liberalised market, and the real costs associated with these tariffs."74 RDL 6/2009 noted that the deficit was having a "profoundly affecting the system" and putting at risk " not only the financial situation of the companies in the electricity sector, but also the sustainability of that system."75
151.
RDL 6/2009 further noted that the imbalance weakened "the security and capacity of the financing of investment needed for the supply of electricity at the levels of quality and security that Spanish society demands."76 As such, RDL 6/2009 indicated that "it has become necessary to adopt a measure of urgency to guarantee the necessary legal security for those who have made investments."77
152.
Article 4 of RDL 6/2009 also introduced a Pre-Assignment Enrolment mechanism and stated that enrolment in the Pre-Assignment Enrolment was "necessary to obtain the right to the economic scheme established in Royal Decree 661/2007, of 25 May"78 Pursuant to RDL 6/2009, projects had to meet certain criteria in order to be registered and qualify for the RD 661/2007 tariffs.79 Once registered with the Pre-Assignment Register, facilities had a limit of 36 months to have a final registration with RAIPRE and enter into commercial operation, in order to benefit from the RD 661/2007 economic regime.80

(3) Regulatory Developments in 2010-2012

a. Royal Decree 1565/2010

153.
On 19 November 2010, Spain promulgated Royal Decree 1565/2010 "regulating and modifying certain aspects of the electricity generation activity under the Special Regime" ("RD 1565/2010").81 RD 1565/2010 modified the regime under RD 661/2007 and provided that PV facilities could no longer benefit from tariffs after their 25th year of operation.82 Accordingly, PV plants would benefit from the tariffs established under RD 661/2007 for the first 25 years of operation, but would subsequently lose such benefits until the end of the facility's life.

b. Royal Decree 1614/2010

154.
On 7 December 2010, Spain enacted Royal Decree 1614/2010 on "regulating and modifying certain aspects relating to the production of electricity based on thermoelectric and wind technologies" ("RD 1614/2010").83 RD 1614/2010 concerned solar, thermoelectric and wind technologies (thus excluding PV facilities) and introduced, inter alia, a limit on operating hours benefitting from premiums or premium equivalents.84

c. Royal Decree-Law 14/2010

155.
On 23 December 2010, Spain enacted Royal Decree-Law 14/2010 on "urgent measures to correct the tariff deficit in the electricity sector" ("RDL 14/2010").85 As its title indicates, the objective behind RDL 14/2010 was to address the Tariff Deficit. This measure established, inter alia, that (i) producers of electricity in the special regime "make a contribution to mitigate the additional costs on the system;" (ii) for PV facilities, there would be a limit to the "recognised equivalent operating hours entitled by the prevailing economic system;" and (iii) "in order to ensure reasonableness for any compensation, any references with regard to the first 25-year period" established by RD 661/2007 would be extended to 28 years for PV installations.86

d. Law 2/2011

156.
On 4 March 2011, Spain adopted Law 2/2011 on Sustainable Economy ("Law 2/2011").87 Law 2/2011 amended the time limit during which a PV plant could operate and benefit from the regulated tariff. Law 2/2011 increased the limit of 28 years, which had previously been established by RDL 14/2010, to 30 years.88
157.
In addition, the Forty-fourth Final Disposition (One) of Law 2/2011 amended RDL 14/2010 in the following terms:

"4. The Government is empowered to amend the provisions of paragraph 2 by Royal Decree to adjust it to technological developments. Any amendments shall only affect the facilities that are not in operation at the time said Royal Decree enters into force, which will be considered to be the date that they are enrolled in the register of pre-allocation of payment for photovoltaic facilities."89

(4) The Disputed Measures

a. Law 15/2012

158.
On 27 December 2012, Spain adopted Law 15/2012 on "Tax Measures for Energy Sustainability," which entered into effect on 1 January 2013 ("Law 15/2012").90 Law 15/2012's objective, pursuant to its Preamble, was to "harmonise" Spain's tax system "... with a more efficient use which greater respects the environment and sustainability, values which have inspired this reform of the tax system, and as such in line with the basic principles governing the tax, energy and, of course, environmental policies of the European Union."91
159.
Among other measures, Law 15/2012 introduced a 7% tax levied on 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 station busbars, at each installation, in the taxable period."92 This levy, the "Impuesto sobre el valor de la producción de energía eléctrica" ("TVPEE") applied to all electricity production facilities, whether they were registered under the Ordinary Regime or Special Regime.

b. Royal Decree-Law 2/2013

160.
On 1 February 2012, Spain enacted Royal Decree-Law 2/2013 concerning "urgent measures within the electricity system and the financial sector" ("RDL 2/2013").93
161.
RDL 2/2013 adopted several measures, including an amendment to the inflation index applicable to the FIT. RDL 2/2013 provided that, as of 1 January 2013, tariffs applicable to the electricity sector would no longer be updated by reference to the CPI but rather, to the "CPI at constant tax rates, excluding unprocessed foods and energy products."94
162.
On 19 February 2015, the Spanish Constitutional Court dismissed a challenge against RDL 2/2013.95 In its decision, the Court upheld the constitutionality of RDL 2/2013.96

c. Royal Decree-Law 9/2013

163.
Royal Decree-Law 9/2013 on "urgent measures to ensure the financial stability of the electricity system" was enacted on 12 July 2013 ("RDL 9/2013").97 RDL 9/2013 aimed at introducing:

"as a matter of urgency, a series of measures that are balanced, proportionate and wide-ranging, aimed at ensuring the financial stability of the electricity system as indispensable premise of its economic sustainability and the security of its supply, and addressed at all the activities of the electricity sector."98

164.
RDL 9/2013 established a new remuneration regime for RE facilities, which applied to both existing and new installations. Under RDL 9/2013's regime ("New Regime"), RE producers received: (i) a payment of the wholesale market price for the electricity produced; (ii) a possible additional "specific remuneration" based on the electricity produced to compensate operating costs not covered by the wholesale market price; and (iii) a payment per MWh of installed capacity based on the net investment costs of a "standard facility" or "instalación tipo" during its "useful life"99
165.
For the purposes of calculating the specific remuneration, RDL 9/2013 provided that the following elements would be taken into account: (i) the "standard revenue for the sale of the energy generated, valued at the production market price"; (ii) the "standard operating costs;" and (iii) the "standard value of the initial investment."100 RDL 9/2013 also provided that the parameters of the remuneration regime could be revised every six years.101
166.
Pursuant to RDL 9/2013, "the reasonable rate of return" for facilities that had a right to benefit from the FIT regime as of the effective date of RDL 9/2012:

"shall focus, before taxes, on the average yield in the secondary market for ten years prior to the entry into force of this Royal Decree-Law of the Obligations of the State within ten years increased by 300 basic points, without prejudice to the revision envisaged in the last paragraph of that article."102

167.
By 14 July 2013, when RDL 9/2013 entered into effect, neither the values for the specific and investment-based remunerations nor the "standard facility" category had been defined. Thus, the FIT regime established under RD 661/2007 continued operating until June 2014. However, the payments made during this transitional period were "on account" of the payments that would be received under the New Regime.103
168.
On 17 December 2015 and 18 February 2016, Spain's Constitutional Court dismissed challenges against certain provisions of RDL 9/2013.104

d. Law 24/2013

169.
On 26 December 2013, Spain enacted Law 24/2013 on the Electricity Sector, which superseded Law 54/1997 ("Law 24/2013").105 According to Preamble of Law 24/2013, Law 54/1997 "has proven insufficient to ensure the financial balance of the system, amongst other reasons because the remuneration system for regulated activities has lacked the flexibility required for its adaptation to major changes in the electrical system or in the evolution of the economy ."106
170.
Fundamentally, Law 24/2013 eliminated the distinction between the Ordinary and Special Regimes, and reiterated and expanded the regime established by RDL 9/2013.107
171.
Article 14(4) provided that, in the New Regime, "remuneration parameters" for RE projects would remain valid for regulatory periods of six years, and could be "revised before the start of the regulatory period"108 According to Article 14(7), the remuneration mechanism would be calculated to provide a reasonable return for the installations in each case and would be based on (i) the standard revenue from the energy produced (revised every three years for the rest of the regulatory period); (ii) the standard operating costs; and (iii) the standard value of the initial investment.109

e. Royal Decree 413/2014 and Ministerial Order IET/1045/2014

172.
On 6 June 2014, Royal Decree 413/2014 "regulating the activity of electric power production from renewable energy sources, cogeneration and waste" was enacted ("RD 413/2014").110 This regulation was adopted to implement the new regime set forth by Law 23/2014. On 16 June 2014, Ministerial Order IET/1045/2014 was issued by the Ministry of Industry, Energy and Tourism to further implement the New Regime ("June 2014 Order").111
173.
The measures adopted by Spain between 2012 and 2014 described above are collectively referred to as the "Disputed Measures."

C. Claimants' Investments in PV Plants

174.
According to Claimants, they "began looking at investment opportunities in Spain in 2009"112 On 2 June 2010, Claimants signed three share purchase agreements ("SPAs") for the following PV facilities:
175.
"Tordesillas Plants:" PV installations owned by OPDE Investment España S.L., a Spanish-incorporated company, through Tordesillas Solar, S.A. (Spanish entity) via its ten subsidiaries, Tordesillas Solar FV 1, S.L. to Tordesillas Solar FV 10, S.L.113 Claimants purchased the entire share capital of the Tordesillas Plants in addition to intercompany loans through Earth and Wind Energías Renovables, S.L. ("Wind Energías"), its wholly owned Spanish subsidiary.114 RAIPRE registration was finalized on 28 September 2010.115
176.
"Valtierra I & II Plants:" PV installations owned by Valsingula S.L., (Spanish-incorporated company) via Promociones Fotovoltaicas Azara, S.L.U. and Promociones Fotovoltaicas Articulata, S.L.U (Spanish entities).116 Through the Second Claimant, Claimants purchased 50% of the share capital of Promociones Fotovoltaicas Azara, S.L.U. and Promociones Fotovoltaicas Articulata, S.L.U, in addition to intercompany loans.117 RAIPRE registration was finalized on 23 January 2009 and on 6 November 2009.118
177.
"Valtierra III Plants:" PV installations owned by Valsingula S.L., (Spanish incorporated-company), via Promociones Fotovoltaicas Daphne, S.L.U., Promociones Fotovoltaicas Retama, S.L.U. and Promociones Fotovoltaicas Faginea, S.L.U. (Spanish entities).119 Claimants purchased the entire share capital of Promociones Fotovoltaicas Daphne, S.L.U., Promociones Fotovoltaicas Retama, S.L.U. and Promociones Fotovoltaicas Faginea, S.L.U. through Wind Energías in addition to intercompany loans.120 RAIPRE registration was finalized on 7 May 2010.121
178.
The purchase of the above-listed plants (the "First Investment Plants") was conditional upon certain regulatory conditions. Specifically, (i) "a new regulation on the FIT of the First Investment Plants being enacted without any retroactivity of the FIT;" and (ii) no new regulation that could affect the First Investment Plants' value negatively by more than 0.75% (the "Regulatory Conditions").122 Claimants negotiated with the First Investment Plants' sellers a final long stop date (the "Final Longstop Date") of 28 February 2011 after which the SPAs would terminate automatically if the Regulatory Conditions were not satisfied or waived.123 This deadline was later extended until the end of October 2011.124 On 9 March 2011, Claimants finalized their investment in the First Investment Plants.125
179.
Between June and October 2011, Claimants invested in two additional groups of PV facilities:
180.
"Fontellas Plants:" PV installations owned by OPDE Investment España S.L. (Spanish-incorporated company) via Promociones Fotovoltaicas Castanea, S.L., Promociones Fotovoltaicas Fagus, S.L., Promociones Fotovoltaicas Corylus, S.L., and Promociones Fotovoltaicas Betula, S.L. (Spanish project companies).126 Claimants' investment in the Fontellas Plants was made through Wind Energías, acquiring the entire share capital of the project companies and shareholder loans. RAIPRE registration was finalized on 30 May 2011.127
181.
"Lasesa Plants:" PV installations owned by Dalkia Solar, S.L, Forcimsa Empresa Constructora, S.A. and Forcimsa AOC Obra Civil, S.L. (Spanish entities), through Sariñena Solar, S.L. (Spanish-incorporated company) via its 40 Spanish subsidiaries, Lasesa Solar I 1, S.L. to Lasesa Solar I 40, S.L.128 The First and Second Claimant purchased together 50% of the share capital of Sarinena Solar, S.L. via the 40 subsidiaries and acquired shareholder loans. RAIPRE registration was finalized on 13 May 2010.129
182.
Claimants finalized their investments in the Fontanellas Plants and the Lasesa Plants on 22 June 2011 and 18 October 2011, respectively (the "Second Investment Plants").130
183.
On 13 October 2016, Claimants sold their interest in the six PV plants.131

IV. THE PARTIES' CLAIMS AND REQUESTS FOR RELIEF

184.
Claimants ask the Tribunal to:

"[E]nter an Award in their favour and against Spain as follows:

(a) declaring that Spain has violated Article 10 of the ECT, as well as its obligations under the applicable rules and principles of international law;

(b) requiring that Spain make full reparation to the Claimants for the injury or losses to their investments arising out of Spain's violations of the ECT and international law, by way of:

(i) full restitution to the Claimants by reinstating the legal and regulatory framework in place at the time the Claimants made their investments in its territory and compensating the Claimants for their losses suffered prior to such reinstatement; or

(ii) full compensation to the Claimants for all losses suffered by them as a result of Spain's violations of the ECT and international law, in an amount to be determined, including interest on all amounts awarded at a reasonable rate;

(c) directing Spain to pay all costs incurred in connection with these arbitration proceedings, including the costs of the arbitrators and ICSID, as well as the legal and other expenses incurred by the Claimants, including but not limited to the fees of their legal counsel, experts and consultants and those of the Claimants' own employees, on a full indemnity basis, plus interest thereon at a reasonable rate;

(d) directing Spain to pay post-award interest, compounded monthly, on the amounts awarded until full payment thereof; and

(e) any other relief that the Arbitral Tribunal may deem appropriate in the circumstances."132

185.
Respondent, in turn, has asked the Tribunal in its Post-Hearing Brief133 the following:

"In view of the arguments put forward in its Memorials, during the Hearings and in the PHB, the Kingdom of Spain respectfully requests that the Arbitral Tribunal:

a) Declares its lack jurisdiction regarding two EU Claimants' claims due to the lack of notice of controversy and lack of a Claimants' good faith attempt to seek an amicable solution;

b) Declares its lack of jurisdiction due to the lack of clean hands in the Claimants as it is evidenced that they committed gross wrongdoings in their investment;

c) Declares its lack of jurisdiction due to the intra-EU objection;

d) Declares its lack of jurisdiction regarding the 50% of the Lasesa plants are they were subject to anew negotiation and agreement freely executed by the Claimants after the Disputed Measures;

e) Declares its lack of jurisdiction regarding the TVPEE;

f) In the event that the Tribunal were to decide that it has jurisdiction to hear this all or part of the controversy, it rejects all the claims of the Claimants on the merits, since (i) we are in front of an investment made with no clean hands and (ii) in front of an improperly fabricated claim that has no actual merits and, (iii) in any case, the Kingdom of Spain has not breached in any way, the ECT.

g) Secondarily, dismisses all of the compensation claims of the Claimants in as much as they do not have a right to compensation; and

h) Orders the Claimants to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators' fees, and the arbitrators' fees and the fees of the legal representatives of the Kingdom of Spain, their experts and 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 and the date of their actual payment."

186.
The Parties' positions are summarized in the various sections below. The Tribunal has considered the entirety of the Parties' positions and arguments, as stated in their written submissions and during the Hearings, irrespective of whether an argument is mentioned in the summaries of the Parties' positions included in this Decision. The Tribunal has also given due consideration to the facts of the present case, as well as to the legal arguments presented by the Parties in their written and oral submissions. Finally, in the Tribunal's analysis, the Tribunal has expressed its reasons, without repeating the arguments that have been advanced by the Parties, and only repeats certain aspects when appropriate for its conclusions.

V. JURISDICTION

187.
In its Counter-Memorial on Merits and Memorial on Jurisdiction, Respondent raised four objections to jurisdiction, and subsequently an additional three during the proceedings. These objections are:
188.
First, that the Tribunal lacks jurisdiction ratione personae because Claimants are not protected investors under the ECT, as the ECT is not applicable to disputes between an EU Member State, and nationals of another EU Member State ("Intra-EU Objection I").134
189.
Second, that the Tribunal lacks jurisdiction ratione materiae since EU Law precludes the dispute from being referred to arbitration pursuant to ECT Article 26(6) ("Intra-EU Objection II").135
190.
Third, that the Tribunal lacks jurisdiction ratione temporis because part of Claimants' investments was made during and after the Disputed Measures ("Ratione Temporis Objection").136
191.
Fourth, that the Tribunal lacks jurisdiction ratione voluntatis to hear Claimants' claim for breach of Article 10(1) of the ECT deriving from Spain's introduction of the TVPEE in Law 15/2012, because, pursuant to Article 21 of the ECT, Article 10(1) does not apply to tax measures ("TVPEE Objection").137
192.
Fifth and sixth, that the Tribunal lacks jurisdiction for breaches of pre-requirements for arbitration: (i) lack of power of attorney to represent Claimants; and (ii) lack of proper notice of controversy, the latter because Article 26(2) ECT subjects arbitration to the condition precedent of a "request for amicable settlement", and Claimants submitted their notice in English and not in Spanish, Respondent's official language.138
193.
Seventh, that the Tribunal lacks jurisdiction because Claimants' lack clean hands, insofar as they committed wrongdoings and Spanish legislation was breached at the same time that the investment was made, which is in violation of the principle of good faith and fair dealing, contrary to the principles of Article 48 of the ICSID Convention and Rule 41 of the ICSID Arbitration Rules.139
194.
Of the seven jurisdictional objections, Spain only argued five of them in its Post-Hearing Briefs, failing to address the one relating to jurisdiction ratione personae (i.e., the Intra-EU Objection I) and that of lack of power of attorney to represent Claimants. Nonetheless, the Tribunal shall examine each of them, as it should.
195.
The first four have been raised by Respondent in essentially every case that has been commenced as a consequence of Disputed Measures enacted regarding the renewable energy. Although there would appear to be a substantial number of cases that have examined equal or very similar objections under the same or analogous context, and the issues are quite similar, the Tribunal shall examine them independently, making reference to prior awards and decisions when necessary or useful.

A. First Objection: Lack of Jurisdiction Ratione Personae - Intra-EU Objection I

(1) The Parties' Positions

a. Respondent's Position

196.
Respondent contends that Claimants are not investors protected under the ECT, because Article 26 of the ECT, which establishes the dispute settlement mechanism, does not apply to disputes arising between an investor of an EU Member State and an EU Member State (i.e., "intra-European Union" or "intra-EU").140
197.
As both the Netherlands and Luxembourg were EU Member States at the time they became Contracting Parties to the ECT, and the EU is also a Contracting Party to the ECT, Respondent argues that Claimants are not investors of another Contracting Party, "which inevitably implies the exclusion" of Article 26 of the ECT.141 Respondent adds that "Article 26 of the ECT does not generate any obligations between the Member States. The intra-EU investor, with a protection level provided by EU Law, is protected by the judicial system of the EU."142
198.

Respondent argues that the Tribunal must apply Article 20 of the Treaty on the Functioning of the EU ("TFEU") to determine the nationality of EU investors.143 Pursuant to Article 20 of the TFEU, Respondent contends that "all citizens of a Member State, whether natural or legal persons, simultaneously hold European nationality. This nationality is concurrent and does not exclude the nationality of the Member State to which it belongs."144

199.
Spain adds that under the ICSID Convention, as provided in Article 25(2)(a), "investors who hold the nationality of the Host State, in addition to the nationality of another Contracting State, are excluded from the scope of protection of the treaty."145 In Respondent's view, Claimants are dual nationals who have the nationality of the respondent State and cannot seek ICSID arbitration.146
200.
Respondent contends that although the precept in Article 25.2(a) of the ICSID Convention "refers to natural persons" it "must also be extrapolated to legal entities with dual nationality, as occurs in the case of the national legal entities of the Member States of the EU, and therefore, they do not meet the dual nationality requirement of article 26 ECT by this means [sic] either."147 Respondent points out that the EU and Member States made a declaration with regard to Article 25 of the ECT on the Economic Integration Agreements to "clarify that legal persons incorporated in accordance with the legislation of any Member State should be treated in the same way as natural persons who are nationals of the Member States."148
201.
On that point, Respondent concludes that (i) any investor of the EU is a dual-national, holding both the nationality of its Member State and that of the EU; (ii) pursuant to Article 25(2)(a) of the ICSID Convention, natural and legal persons of the EU are excluded from the protection of the ICSID Convention; (iii) no EU investor which has invested in another Member State may qualify as a "foreign investor" under Article 1(7) of the ECT because it will hold a European nationality, in addition to its nationality of origin.149
202.

Respondent draws support for this argument from the award in Terra Raf Trans v. Kazakhstan, where the tribunal held that the ECT was applicable to Gibraltar because it is part of the EU, which itself is a party to the ECT.150

b. Claimants' Position

203.
Claimants oppose Respondent's objection, and reject its arguments.151
204.
In Claimants' view, the exclusion of dual nationals in Article 25(2)(a) of the ICSID Convention is irrelevant.
205.
First, Article 25(2)(a) of the ICSID Convention is only applicable to natural persons and, given that Claimants are juridical persons, the question of dual nationality is not at issue.152 Claimants argue that Article 20 of the TFEU, on which Spain relies, is also inapplicable because it establishes European citizenship only with regard to natural persons.153
206.
Further, under Article 1(7)(a)(ii) of the ECT, Claimants would have to be companies established as a "Societas Europaea" to be considered entities organized in accordance with the law applicable in the EU. However, in this case, Claimants are companies registered in Luxembourg and the Netherlands.154
207.
For Claimants, Spain' s assertion that the express declaration made to Article 25 of the ECT provides that juridical persons should be treated in the same way as natural persons who are nationals of Member States is incorrect. Claimants note that said declaration is for the purposes of the ECT, Part 3, Title III, Chapter 2, that addresses the right of establishment under EU Law.155
208.
Second, in Claimants' view, Spain's argument that Claimants are excluded under Article 25 of the ICSID Convention is flawed because it is premised on the EU being the respondent State and not the Kingdom of Spain.156
209.
Third, Claimants argue that European nationality does not constitute a "nationality of a Contracting State" as provided in Article 25 of the ICSID Convention since the EU is not a Contracting State.157
210.

Claimants contend that, had the Contracting Parties to the ECT desired to exclude intra-EU disputes from the scope of Article 26, they would have included an exception to that effect; but they did not. And this has been acknowledged by other tribunals. It adds that the "[...] objection has [...] been dismissed by all investment treaty tribunals and national courts seized of this objection, including ECT tribunals in cases involving Spain itself, such as the RREEF decision, the Eiser award and, more recently, Antin, Novenergia, Masdar and Greentech" and, add, that the fact that "Spain is persisting with a jurisdictional objection that has never succeeded is remarkable and should, in the Claimants' view, have cost consequences."158

(2) The Tribunal's Analysis

211.
The essence of Respondent's objection to the jurisdiction of the Tribunal is that Claimants do not come from the territory of another Contracting Party since the Netherlands, Luxembourg and Spain are Member States of the EU, and the ECT does not apply to disputes relating to intra-EU investments. The Tribunal shall therefore examine whether or not Claimants are deemed to be investors protected under the ECT, and can therefore benefit from the dispute settlement mechanism under Article 26 of said treaty.
216.
The terms "Contracting Party" and "Investor" are defined in Article 1(2) and 1(7)(a)(ii) of the ECT:
217.
"Contracting Party" is defined as "a state or Regional Economic Integration Organization which has consented to be bound by this Treaty and for which the Treaty is in force";162 and
218.
"Investor", with respect to a Contracting Party, is defined as "a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law" or "a company or other organization organized in accordance with the law applicable in that Contracting Party."163
219.
Since Spain, Luxembourg and the Netherlands signed, and thereafter ratified the ECT,164 they are therefore to be deemed as "Contracting Parties".
220.
Further, since Claimants are companies that have been incorporated under the laws of the Netherlands and Luxembourg, as has been evidenced in the record and not challenged by Spain, they are deemed to be "Investors" of a "Contracting Party".
221.
However, Respondent contends that Claimants should be deemed to have European nationality in addition to that of the Netherlands and Luxembourg, as may be the case with each. Hence, as holders of European nationality, they cannot sue the Kingdom of Spain, a territory of the European Union pursuant to Article 20 of the TFEU, 1(7) of the ECT and 25 of the ICSID Convention. In short, according to Respondent, because they hold European nationality Claimants cannot be deemed as "foreign investors" and seek protection under Article 1(7) of the ECT.
222.
The Tribunal believes that the European nationality argument expressed by Respondent is flawed. Stating that under Article 20 of the TFEU all citizens of a Member State, whether natural or legal persons, simultaneously hold European nationality, which is concurrent and does not exclude the nationality of the Member State to which it belongs, fails to address the fact that neither of Claimants is organized as a "Societas Europaea" in order to be considered entities organized in accordance with applicable EU Law. Claimants cannot be placed into the exclusion of dual nationality under Article 25(2)(a) of the ICSID Convention for several reasons:
223.

First, contrary to natural persons, legal persons such as Claimants cannot have the nationality of the EU, in addition to that under which laws they have been established. Article 20 of the TFEU165 provides for European nationality only in respect to natural persons. Not juridical entities. When this provision allocates the European citizenship, it does so in the context of the grant of rights to individuals, such as the right to vote and stand as a candidate, which is incompatible with legal persons.166 It is therefore without merit to argue that this article also grants the European citizenship to legal entities established with the nationality of a Member State.

224.
Further, the argument expressed by Respondent to the effect that companies established in accordance with the law of a Member State shall be treated in the same way as natural persons who are nationals of Member States (Declaration 5 to Article 25 of the ECT and Article 54 TFEU) is flawed because it misconstrues the meaning of the provision. The treatment is merely granted only for the purposes of EC Treaty Part 3, Title III, Chapter 2, now found at TFEU Part 3, Title IV, Chapter 2, that deals with the right of establishment under EU Law.
225.
Second, even assuming that Claimants were incorporated as a "Societas Europaea" or could be deemed to have both the nationality of their respective State (the Netherlands and Luxembourg) and be a Societas Europaea, it would require that Claimants bring the claim against the EU in order to be excluded. Clearly, this is not the case in this arbitration.
226.
Third, the European Union cannot be identified as a "Contracting State" for purposes of Article 25(2) of the ICSID Convention, since it has not executed the ICSID Convention.
227.
Spain is wrong when it contends that Article 25(2)(a) of the ICSID Convention provides that investors who hold the nationality of the host State, in addition to the nationality of another Contracting State, are excluded from the scope of protection of the treaty. This Tribunal believes that it is clear that Article 25(2)(a) of the ICSID Convention refers to natural persons, and the reference to "natural person" cannot be "extrapolated" to legal entities such as Claimants, when this is interpreted with section (2) "National of another Contracting State" means: (a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute."167 Had the drafters of the ICSID Convention intended to enable to "extrapolate" as Respondent suggests, they would have simply drafted the text accordingly.
228.
For the reasons stated above, the Tribunal rejects the objection to the jurisdiction based on the arguments submitted by Respondent, and shares the conclusion of the Antin tribunal, which noted that "Spain made a standing offer to 'Investors' of other 'Contracting Parties' to settle disputes through international arbitration. The Claimants in this case, as 'Investor[s] of another Contracting Party' accepted such an offer, and submitted their consent to arbitration, by filing their Request for Arbitration."168 The Tribunal notes that multiple other tribunals in re cases involving Spain as respondent where Spain has attempted this objection have equally rejected this objection.169

B. Second Objection: Lack of Jurisdiction Ratione Materiae- Intra-EU Objection II

(1) The Parties' Positions

a. Respondent's Position

(i) Primacy of EU Law and its Application in the Dispute as International Law

(ii) Intra-EU State Aid Disputes Should be Excluded from Arbitration Pursuant to Article 26(6) of the ECT

(iii) The Achmea Judgment

(iv) An Effective Interpretation of the ECT Supports the Lack of Consent to Arbitration Involving the Interpretation and Application of EU Law

b. Claimants' Position

257.
Claimants oppose Respondent's objection, which they deem meritless,227 and query the making of the objection by Spain despite having been "dismissed by all investment treaty tribunal and national courts seized of this objection, including ECT tribunals involving Spain itself [...]", citing then a few of those cases.228 They address the objection through four arguments as well: (i) EU Law is irrelevant to determine the Tribunal's jurisdiction and the merits of the dispute; (ii) the text of the ECT expresses Spain's consent to arbitrate intra-EU disputes; (iii) EU authorities do not support the objection; and (iv) the ECT would prevail over EU Law if there were a conflict.

(i) EU Law Is Irrelevant to Determine the Tribunal's Jurisdiction and the Merits of the Dispute

258.
For Claimants, Spain wrongly suggests that EU Law is international law applicable for the purposes of determining the Tribunal's jurisdiction and the merits of the dispute.229
259.
Claimants first note that the Tribunal's jurisdiction is derived from Article 26 of the ECT, which can be interpreted through the principles of treaty interpretation embodied, in particular, in Article 31 of the VCLT.230 On the contrary, as recognised by the Vattenfall v. Germany tribunal, EU Law does not contain rules of interpretation for Article 26 of the ECT.231 In addition, in the context of investment treaty law, questions of jurisdiction are not governed by the law applicable to the merits of the case, but rather, by the system established by the instruments to which the parties consented to jurisdiction.232
260.
Drawing support from the Vattenfall, Eiser, Antin and Greentech tribunals, Claimants contend that Article 26(6) of the ECT applies solely to the merits of the dispute between the Parties, contained in Part III of the ECT.233 Claimants argue that any other interpretation would "lead to an extension of a tribunal's jurisdiction in a manner patently rejected by the States party to the treaty."234 As an illustration of their argument, Claimants rely on a NAFTA decision in which the tribunal ruled that it had limited jurisdiction under NAFTA and had "no mandate to decide on claims based on treaties other than NAFTA."235 In that regard, the Tribunal in this dispute has no authority to apply EU Law because its powers are limited to determining whether there is a breach of the provisions under Part III of the ECT.236
261.
In connection with Spain's argument that the Tribunal is "called upon to interpret and apply EU Law because the dispute affects the EU fundamental freedoms and State Aid," Claimants sustain that, even assuming this were correct, it could only apply to the merits of the dispute and not to the Tribunal's determination of its jurisdiction.237 Even on the merits, Claimants argue, the record shows that "neither Spain nor the European Commission had the slightest concern that RD 661/2007 and RD 1578/2008 granted State Aid."238 Further, Claimants' claims are not based on EU Law, but rather, the ECT and customary international law.239 Therefore, the Tribunal should not be deciding on issues of EU Law to render its award, as confirmed in RREEF, Eiser, Novenergia, Greentech and Charanne.240

(ii) The Text of the ECT Expresses Spain's Consent to Arbitrate Intra-EU Disputes

262.
For Claimants, the ordinary meaning of Article 26 of the ECT demonstrates unambiguously that the ECT applies to "disputes between any Contracting Party to the ECT and an investor of any other Contracting Party"241 There is no intra-EU exception to the Contracting Parties' "unconditional consent to arbitration"242 No indication is found in the text of the ECT that the Contracting Parties have restricted their consent to arbitration based on whether the Contracting Parties belong to the same REIO.243 Article 26, by its express terms allows arbitration between a Contracting Party (Spain) and investors from another Contracting Party (Luxembourg and the Netherlands). 244 Claimants refer to the Vattenfall tribunal to conclude that any other interpretation would be contrary to the meaning of the terms of Article 26 of the ECT.245
263.
Claimants object to Spain's interpretation of the ECT according to which, EU Member States "could not obligate themselves under Part III of the ECT" because they conferred that competence on the EU.246 In that regard, Claimants indicate that the ECT is a "mixed agreement" under EU Law, which implies that the EU and its Member States have shared competence to conclude the ECT and as such, Spain signed and ratified the ECT without making any reservation to be bound by the ECT.247
264.
Claimants refute Spain's argument that the ECT's recognition of REIO's such as the EU, demonstrates that the EU Member States could not accept arbitration for intra-EU disputes.248 The tribunals in Eiser, Charanne, Isolux, Masdar, and Antin have rejected Spain's position.249 Article 1(3) of the ECT defines REIO's and Article 1(2) of the ECT lists REIO's as part of the definition of Contracting Party. For Claimants, the "simple reference in a multilateral treaty to the existence of a regional organisation that is also a party to that same treaty does not establish that the multilateral treaty does not apply within the regional organisation."250
265.
Claimants contend that Spain is wrong in arguing that Article 25 of the ECT expressly recognises the principle of primacy of EU Law.251 Article 25 of the ECT does not even refer to a REIO.252 It establishes the obligation to accord MFN treatment, in the context of the EU, and notes that "MFN treatment does not oblige EU Member States to extend the rights of the EU internal market to investors from beyond the EU."253 This proves that when the Contracting Parties meant to restrict investors' rights, they did so expressly in the context of the ECT interaction with the EU.254
266.
With relation to Article 26(1) of the ECT, Claimants note that in the phrase "in the Area of the former [Contracting Party]," "Area" refers to that of the Contracting Party "that is party to the Dispute."255 In this case, the relevant "Area" would be the territory of Spain and not the EU.256 The situation would be different if the EU would be a party to the dispute: in that case, the relevant "Area" would be the entire EU.257
267.
Claimants also observe that the ECT contains no express disconnection clause or a reservation that would allow the Tribunal to disregard the ECT provisions in an intra-EU dispute.258 Drawing support from the Eiser tribunal, Claimants dismiss Spain's position that no disconnection clause is indeed necessary because of the "complete harmonisation" between the ECT and the EU.259 Claimants note that: (i) disconnection clauses have been widely used by the EU even before the ECT was negotiated; (ii) when no disconnection clause exists, a multilateral treaty applies between all the Contracting Parties; (iii) despite the EU's experience with disconnection clauses, the ECT does not contain such clause for their inter se relationships, and therefore, it is unequivocal that the ECT applies to intra-EU disputes; and (iv) the tribunals in PV Investors, Masdar, and Electrabel have dismissed the proposition of an implicit disconnection clause contained in the ECT.260
268.
Finally, Claimants note that the ECT must be interpreted in good faith. In that sense, there would have to be an express exclusion by the ECT Contracting Parties that would indicate a limit on intra-EU disputes.261

(iii) EU Authorities Do Not Support the Objection

269.
In Claimants' view, the Achmea Judgment relied on by Spain does not apply to the ECT. Claimants contend that:

• the judgment itself makes clear that it applies only to a treaty concluded by Member States, not the EU, and the case related to a BIT concluded between the Netherlands and Slovakia before Slovakia became a Member State;

• the applicable choice of law at issue in Achmea is considerably different from that of Article 26(6) if the ECT and, contrary to Spain's assertion, the Tribunal is not called upon to apply EU Law but rather, the ECT and customary international law;

• the question referred to the CJEU in Achmea, whether the Netherlands-Slovakia BIT provisions were compatible with the TFEU, has no relevance in this arbitration as the Netherlands and Luxembourg had already acceded to the EU when they ratified the ECT;

• the present dispute has been brought before an ICSID tribunal whereas the arbitral tribunal in Achmea was subject to German law provisions and EU Law arguments have no place within the ICSID framework; and

• this Tribunal's jurisdiction derives from the ECT provisions and is not bound by the decisions of European institutions.262

270.
Claimants also dismiss Spain's reliance on Opinion 1/91, arguing that said decision also stresses that "an international dispute settlement mechanism set forth by an international treaty to which the EU is itself a party, is compatible with EU Law, and that the decisions of the court with jurisdiction to decide disputes under that treaty will be binding on the ECJ."263 Claimants equally distinguish the MOX Plant case relied upon by Spain to contend that, unlike the present dispute, the MOX Plant decision concerned the interpretation of two EC's Directives on which Ireland based its arguments. The reasoning in that case is not applicable to this dispute, given that this Tribunal is not ruling on issues of EU Law between two Member States.264
271.
Further, Spain's reliance on the Kadi judgment and Opinion 2/13 is, in Claimants' view, misplaced,265 and argue that: (i) the Kadi judgment does not "concern the interpretation of an international treaty to which the EU is a party, such as the ECT, and therefore has no bearing on the issues in dispute;"266 and (ii) that the principal concern in Opinion 2/13 related to non-EU bodies, such as the ECHR, would have a binding effect on the EU and its institutions with regard to a particular interpretation of EU Law, which is irrelevant in the context of the present dispute.267
272.
Claimants also dismiss Spain's arguments based on the EC Decision contending that the remuneration under RD 661/2007 and RD 1578/2008 constitutes State Aid under EU Law.268 For Claimants, the EC Decision does not rule on whether RD 661/2007 and RD 1578/2008 are incompatible State Aid within the meaning of Article 107(1) TFEU. 269 In addition, this Tribunal is being called upon to decide on matters deriving from the ECT and the ICSID Convention and not whether or not to grant State Aid under EU Law.270 The only binding part of the Commission's decision is its ruling on the compatibility of the New Regime with Article 107(3)(c) TFEU, and as such, the EC Decision has no relevance in the presence dispute, as confirmed by the Novenergia tribunal.271
273.
Claimants also contest Spain's reliance on Opinion 1/09, Opinion 2/15, the EC Communication of 19 July 2018 and the January 2019 Declarations by 22 EU Member States.272
274.
With regard to Opinion 1/09, Claimants note that this decision concerns a draft international agreement to create the European and Community Patents Court.273 In that context, the CJEU stated that the draft agreement was not compatible with EU Law as the Patents Court would have exclusive jurisdiction "to hear a significant number of actions brought by individuals in the field of the Community patent and to interpret and apply the European Union law in that field," depriving Member States courts of their powers in that regard.274 In Claimants' view, this decision is unrelated to the dispute before the Tribunal as the ECT does not require the Tribunal to interpret or apply EU Law.275
275.
With regard to Opinion 2/15, Claimants observe that the issues in that case concerned distribution of competences between EU Member States and the EU to conclude Free Trade Agreements between the EU and the Republic of Singapore.276 Claimants note that the CJEU found that "it is not appropriate to examine whether the dispute settlement regime laid down by [the Free Trade Agreement fulfils] the criterion relating to the autonomy of EU Law" as the Court observed that the case did not relate to the settlement of disputes on the interpretation of EU Law.277 In that context, Claimants maintain that this Opinion does not support Spain's case.278
276.
With regard to the EC Communication to the European Parliament and the Council of 19 July 2018, Claimants argue that Spain's reliance on this authority is misplaced.279 Claimants observe that although the EC participated in the ECT negotiations, "it has no particular authority to interpret the ECT."280 Claimants add that the EC Communication has no relevance to the issues at stake in the present dispute since the objective of the EC Communication is to: "(i) 'provide guidance on existing EU rules for the treatment of cross-border EU investments'; and (ii) seek to reassure investors that the absence of intra-EU investment treaties does not mean that investors within the EU are not protected."281
277.
With regard to the EU Member States Declarations, Claimants contend that none of the January 2019 Declarations are favourable to Spain's arguments.282 Claimants first argue that the 22 Member States Declaration draws distinctions between the legal consequences of the Achmea Judgment for bilateral investment treaties and the ECT (which Spain fails to mention).283 On that basis, the Member States merely announced with regard to the ECT that they "will discuss without undue delay whether any additional steps are necessary to draw all the consequences from the Achmea Judgment in relation to the intra-EU application of the Energy Charter Treaty."284 Claimants further note that Spain failed to address Hungary's Declaration of 16 January 2019 which states that the "the Achmea Judgment concerns only the intra-EU bilateral investment treaties"' and "does not concern any pending or prospective arbitration proceedings initiated under the ECT."285
278.
Claimants contend that the January 2019 Declarations are irrelevant in the context of this arbitration as they do not constitute agreements on the interpretation of Article 26 of the ECT and have not been signed by all the Contracting Parties of the ECT.286 In any event, Claimants argue, the January 2019 Declarations postdate the commencement of this arbitration proceeding and thus, can have no bearing on the Tribunal's jurisdiction.287

(iv) The ECT Would Prevail Over EU Law If There Were a Conflict

279.

For Claimants, the protection of EU Member States' nationals offered by EU Law is different from that of the ECT, in that only the ECT allows investors to bring a direct claim against Contracting States through international arbitration.288 Because of those additional rights under the ECT, there can be no conflict between the ECT and EU Law.289 Claimants refer to the decisions in Novenergia, Electrabel, Eastern Sugar, Charanne, RREEF and Vattenfall to contend that EU Law and the ECT coexist without interfering with each other.290

280.
Even if the Tribunal were to consider that there is a risk of incompatibility between the ECT and EU Treaties, the ECT would prevail.291 This is supported by (i) the plain language the ECT's conflict-of-laws clause of Article 26; (ii) the fact that treaties to which the EU is a party prevail over EU Law, as provided by the TFEU and decided by the CJEU; and (iii) the fact that ECT would also prevail under Articles 30 and 59 of the Vienna Convention.292 As found by the RREEF tribunal, the ECT would prevail over EU Law in case of a conflict because EU Law cannot "trump public international law."293
281.
Claimants dismiss Spain's argument that the protection that investors receive through EU judicial system is not less favourable than that offered by arbitration.294 Citing to the awards in Novenergia and Masdar, Claimants take the view that the right for qualifying investors to bring their claims under the ECT is more favourable because that process "de-politicises the dispute by removing it from the purview of Spain's national courts."295
282.
Claimants also highlight that Article 26(3) of the ECT is clear in that it provides that "each Contracting Party 'unconditionally consents' to international arbitration'" and in that sense, the ECT "certainly does not deprive an investor of its right to obtain redress in international arbitration."296

(2) The Tribunal's Analysis

283.
This objection has several issues to be addressed by the Tribunal, namely:
284.
Whether Article 26 of the ECT is applicable to intra-EU disputes, and whether or not it applies to breaches to obligations set forth in Part III of the ECT;
285.
Whether, in the context of Article 26(6) of the ECT, that requires the tribunal to decide the issues "in accordance with this Treaty and applicable rules and principles of international law", this implies that EU Law should be applied to determine the jurisdiction of the Tribunal;
286.
Whether the principles of autonomy and primacy of EU Law, that Respondent contends derive from Article 25 of the ECT, mean that EU courts have exclusive jurisdiction to address intra-EU disputes;
287.
Whether, in the absence of an express disconnection clause in the ECT, it should nonetheless be deemed that there is an implicit disconnection clause or reservation that would require the Tribunal to disregard the ECT dispute settlement provisions in an intra-EU dispute; and
288.
What impact, if any, do the Achmea Judgment issued by the CJEU,297 the 22 Member States Declaration and the 5 Member States Declaration have on this case.
290.
But even under Respondent's contention that Article 26(6) requires the Tribunal to "interpret and apply" EU Law since the dispute affects the EU fundamental freedoms and State Aid, this is not an argument to object to the jurisdiction of the Tribunal insofar as the provision deals with deciding on the merits of the dispute.
291.
The ECT contains no language to exclude intra-EU investor-State disputes based on the ECT, and it may not be implicitly deemed to exist from an interpretation of the ECT, as suggested by Respondent when it raises the allegation of a transfer of competence by a Regional Economic Integration Organization (or REIO) to the organization pursuant to Article 1(3) of the ECT. Indeed, the fact that the EU is also a Contracting Party and a REIO, does not bar the Tribunal's jurisdiction. Just as each of the Contracting Parties to the ECT (including, of course, Spain, the Netherlands and Luxembourg) granted their "unconditional consent to the submission of a dispute to international arbitration", so did the EU when it signed and ratified the ECT. But each such consent should be deemed to be individually granted by each Member State and the EU, and not deemed that upon adhesion by the EU the others were superseded.
292.
Regarding Respondent's allegation that Claimants cannot invoke arbitration under the ECT Article 26(1) because both Claimants and Respondent are located within the same "Area" and are not from the territory of another Contracting Party, the Tribunal rejects the argument and recalls that when the provision refers to "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 [...]"), the claim is not being brought against the EU but rather against Spain, and it should be understood that the relevant "area" is the territory of Spain. Other tribunals have reached the same conclusion. 301
293.
There is no solid support to the contention by Respondent that the Tribunal cannot examine the claims made by Claimants because (i) the terms of Article 26(6) of the ECT give primacy to EU Law, and (ii) it is only the CJEU -along with other courts of the EU- who can decide on the interpretation of EU Law, preclude the existence of a mechanism for dispute resolution between EU investors and EU Member States other than the ones provided for under EU treaties.
295.
Since the ECT was signed by both EU Member States and the EU itself, this makes it a "mixed agreement" under EU Law. But the EU only gained the exclusive competence on foreign direct investment (as part of the common commercial policy) with the Lisbon Treaty302 in December 2009 -when it entered into force. Therefore, the argument that the EU could not deal with dispute resolution of foreign investment issues at the time it entered into the ECT is wrong, since the EU signed and ratified the ECT in December 1994 and December 1997, respectively.303
297.
It is clear that the exclusion had been done before in respect to other treaties.304 Had Spain desired to make a reservation at the time it signed and later ratified the ECT as a Contracting Party, it could have done so. But there is no evidence submitted by Respondent to the effect that either Spain or any other of the signatory States made any such effort to do so through a disconnection clause, to ensure that the provisions of a mixed agreement only apply vis-à-vis third parties and not as between EU Member States.
298.
Respondent contends that there is no need for a disconnection clause since the principles of autonomy and primacy imply that they disconnect from the international convention, and supports its view by stating that an exercise of comparing the aim and purpose of the ECT with the aim and purpose of the EU Treaties and, even more so, to the Treaty of Lisbon, which acts as a "lex posterior", it is clear that the EU Treaties should prevail over the ECT under Articles 30 and 59 of the VCLT.305 In support, Spain cites Opinion 1/03 of the CJEU of 7 February 2006306 where it found that "the existence of a disconnection clause is entirely without relevance," to conclude that such "reflection by the EU Commission" is in itself sufficient to justify the reason why the introduction in the ECT, signed by the EU itself, of a disconnection clause, should not be necessary.
299.
However, contrary to that contention, the ECT expressly contains an "irrevocable consent" to arbitration. The disconnection clause would need to be express, and could not have effect if simply implied, as has been suggested by Respondent. As the Antin tribunal noted:

"The ECT's purpose does not support the Respondent's interpretation. Article 2, captioned 'Purpose of the Treaty', declares that '[t]his Treaty establishes a legal framework in order to promote long-term co-operation in the energy field, based on complementarities and mutual benefits, in accordance with the objectives and principles of the Charter.' [...] Nothing in this wording suggests the exclusion of claims by investors who are nationals of an EU Member State who is also a party to the ECT against another EU Member State. Moreover, such context does not call into question the ordinary meaning of Article 26."307

"If the arbitration clause, which is at the very heart of the Treaty to which the EU consented, were to exclude the variety of treaties and legislation mentioned by Spain, then the EU, which the Tribunal must assume acted in good faith when it negotiated and signed the ECT, would have, under international law, provided a formal warning, or an express exclusion or a reserve."308 (Emphasis added)

300.
The Tribunal also disagrees with Respondent's argument in respect to the alleged lack of consent to submit to arbitration the resolution of disputes on matters that require the interpretation and application of EU Law because: (i) EU Member States cannot not be obligated under Part III of the ECT since this represents an infringement of the EU's principle of primacy, and (ii) because the ECT itself recognises, in its Article 25, the principle of primacy of EU Law.309 The contention that Article 25 of the ECT recognises the principle of primacy of EU Law in intra-EU relations and prevents that, under the MFN clause, said right is to be extended to nationals of ECT signatory States that are not members of the EU is irrelevant to the discussion in light of the above considerations.
301.
Respondent cites the Achmea Judgment to provide ample discussion and support to its contention of lack of jurisdiction by the Tribunal. However, the Tribunal fails to find any substance to such allegations. Simply put, the Achmea and this case are totally different and there can be no analogies found.
302.
Whereas the treaty in discussion in Achmea was a bilateral investment treaty among the Netherlands and Slovakia -before the Slovak Republic acceded to the EU, this dispute arises under the ECT, and the EU is a party to the ECT. The CJEU also distinguished that case by the fact that it applies to a treaty concluded by Member States and not the EU itself.310 The CJEU also questioned the ability of Member States to submit disputes to a body which is not part of the judicial system of the EU to interpret both of the treaty and EU Law. This dispute, however, relates to the ECT where the EU accepted the terms of Article 26 to granting "unconditional consent to the submission of a dispute to international arbitration".
304.
Although the above reasoning is sufficient in the eyes of the Tribunal to reject the argument of the Achmea Judgment, the Tribunal notes that other reasons have been expressed by tribunals who have been faced with the same objection from Spain. These include the fact that, contrary to the Achmea case -where the arbitral proceedings were seated in Germany and subject to German law provisions on annulment of arbitral awards- the cases were subject to the ICSID Convention.317
305.
Multiple other tribunals have also analysed and rejected the relevance of the Achmea Judgment to disputes under the ECT. For example, the Masdar v. Spain tribunal,318 which concluded that "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", as well as the Greentech,319 and Vattenfall tribunals.320
307.
For the reasons stated above, the Tribunal rejects the objection to the jurisdiction based on the arguments submitted by Respondent and concludes that is has jurisdiction ratione materiae.

C. Third Objection: Lack of Jurisdiction Ratione Temporis

(1) The Parties' Positions

a. Respondent's Position

308.
Respondent contends that part of Claimants' investments was made during and after the Disputed Measures were adopted, which would prevent the Tribunal from exercising its jurisdiction ratione temporis if Claimants cannot prove the ownership of their investment before the dispute arose.326
309.
Respondent argues that case law is unanimous in concluding that:

"an international tribunal lacks ratione temporis jurisdiction in cases in which an investor not protected by a certain BIT restructures their investment for the purpose of being included within the scope of application of said BIT, on a date after the dispute arises against the State receiving the investment."327

310.
In support of its argument, Spain also cites to the decision in Vito G. Gallo v. Canada: "Investment arbitration tribunals have unanimously found that they do not have jurisdiction unless the claimant can establish that the investment was owned or controlled by the investor at the time when the challenged measure was adopted".328
311.
Respondent notes that, according to case law, both the abuse of process objection and an objection based on ratione temporis are based on the principle of good faith.329 Therefore, awards that have analysed the abuse of process objection based on the principle of good faith are also applicable to the ratione temporis jurisdictional objection. Spain refers to the award in Philipp Morris v. Australia, which concludes that a difference must be drawn between objections based on lack of jurisdiction ratione temporis and abuse of process.330 Respondent recalls case law addressing the principle of good faith to further contend that said principle justifies the ratione materiae objection. In that regard, it draws support from the tribunals in Phoenix v. Czech Republic,331 Cementownia v. Turkey,332 and Plama Consortium v. Bulgaria.333 In Spain's view, the good faith principle as expressed in international law must serve as a basis to determine the ratione temporis objection it invokes.334
312.
Spain contends that, to decide on a ratione temporis objection, the Tribunal must analyse the entirety of the case's circumstances, paying special attention to issues of timing.335 Particularly, emphasis must be placed on the moment in which the conflict arises and its relation to the timing of the investment. 336 Relying on the definition of a "dispute," Spain contends that the dispute in the present case arises on 7 March 2012, but the investment did not materialise until January 2014.337
313.
Respondent includes the following chronology of events, showing that the date of Claimants' investments post-dates Spain's announcements of the regulatory adjustments:

"02/06/2010: Investment in the photovoltaic plants of Tordesillas, Valtierra I, II and III

8=6[sic]/2011: Investment in the Fontellas and Lasesa plants

19/12/2011: Announcement of the reform on the SES by the Prime Minister in his inaugural address.

28/12/2011: CNE press release which reiterates the need to implement immediately, inter alia, proposals on the regulation of activities aimed at eliminating the structural deficit of the system and mitigating debt financing costs.

27/01/2012: Publication of RD-Act 1/2012, which suspended the remuneration pre-assignment procedures and the elimination of the economic incentives for new electric energy production plants based on cogeneration, renewable energy sources, and waste.

07/03/2012: CNMC report on 'Measures to guarantee the financial-economic sustainability of the electricity sector.': in which short-term measures are recommended (materialised in RD-Act 2/2013). Birth of the dispute.

30/3/2012: The Council of Ministers approved Royal Decree Act 13/2012 on Measures for correcting deviations due to imbalances between costs and revenues of the electricity and gas sectors, which is enacted as a first step towards a 'profound reform of the energy system'.

27/4/2012: The Government approved the 'National Reform Program 2012' which reaffirms the commitment of the Kingdom of Spain to eliminate the tariff deficit.

13/7/2012: Royal Decree-Act 20/2012, of 13 July, on measures to ensure budget stability and promote competitiveness, was enacted, stating in its eighth provision: 'The tariff deficit caused by the imbalances between the costs of the electricity system and the income obtained from the regulated prices set by the General State Administration is a structural problem whose solution is urgent because of the threat it poses to the system's economic sustainability'

20/07/2012: The Kingdom of Spain signed the Memorandum of Understanding with the European Union as a result of the need that certain Spanish banks had for a bailout. Said Memorandum links the financial situation with other macroeconomic imbalances and commits the Kingdom of Spain to adopt structural reform measures to correct these imbalances.

September 2012: the Government published another document 'The reforms of the Government of Spain: Determination against the crisis'. In the chapter entitled 'Planned reforms', it refers to the 'Reform of the energy sector'.

27/09/2012: The Government approved in the Spanish Cabinet Meeting Decision the 'Draft Act on State Budgets for 2013'. In that Cabinet Meeting the 'Spanish Strategy for Economic Policy' was also approved: Assessment and structural reforms over the next six months'. In this Strategy the 'Energy reform' was mentioned and structural measures were announced to correct the tariff deficit permanently, as well as the presentation of a new Electricity Sector Act, to address inefficiencies that were detected.

27/12/2012: Act 15/2012 on fiscal measures for energy sustainability is approved, as a first measure for the reforms on the Electricity Sector, which had an impact on renewable energies. First measure appealed, in execution of the short-term measures included in the CNE's 7 March 2012 report.

1/2/2013: the Government of Spain approved two more of the short-term measures recommended by the CNMC Report112, on 7 March 2012, through the publication of Royal Decree-Act 2/2013113: (i) the replacement with effect of the Consumer Price Index that governed the adjustment of the remunerations, fees and premiums of the electricity sector's activities, among them, the production of renewable energy, by the Consumer Price Index to constant taxes without food not elaborated or energy products and, (ii) the reduction of the premium amount to a value of €0 in the pool option plus premium provided for in Royal Decree 661/2007. 19/03/2013.

11/4/2013: the document of the 2013 National Reform Plan is published, in which (i) the same date expected for publishing the Reform is again stated, on 30 June of the same year, (ii) that the package of Measures provided for a preliminary draft bill for the reform of Act 54/1997 and (iii) that mechanisms to review the remuneration will be introduced: '... Before June 30 of this year, a package of regulatory measures will be presented... Preliminary Draft Bill for the Reform of Law 54/1997..., that introduces remuneration stabilisation and revision mechanisms periodically and adapted to the circumstances'.

12/7/2013: RD-Act 9/2013, of July 12, is approved. Urgent measures to guarantee the financial stability of the electricity system, the first measure and core issue of this dispute.

January 2014: Investment of the remaining 50% of the Lasesa plant"338

314.
Respondent concludes that, in light of the chronology included above, the timing of Claimants' investments "coincide[s] perfectly with the announcements and the beginning of the dispute."339

b. Claimants' Position

315.
Claimants oppose Spain's objection, both in respect to the chronology presented by Spain, and on the factual and legal analysis of the objection.340
316.

They contest Spain's presentation of the chronology of events, arguing that Spain's measures post-date Claimants' investments, which were made between March and October 2011.341 In their Reply, Claimants include their own timeline of events, highlighting the Disputed Measures in shaded text below:342

 

Date Event
Spain 2009 The Claimants begin looking at investment opportunities in Spain.
January/February 2010 The Claimants commence due diligence on the First Investment Plants.
March 2010 Rumours of potential rumours [sic] change to the RE framework emerge.
Mid-April 2010 Rumours of possible regulatory change to the RE framework intensify.
9 April 2010 The Claimants meet with the CNE. The CNE indicates that there is no risk of retroactive amendment to the tariffs for existing PV plants and emphasizes the important of stability in the economic regime.
2 June 2010 The Claimants sign conditional SPAs for the acquisition of the First Investment Plants. The closing of the SPAs is contingent upon certain Regulatory Conditions.
21 December 2010 The Claimants pay the sellers a portion of the price of the First Investment Plants, subject to the right to unwind.
21 February 2011 The Claimants meet with the Ministry of Energy. A representative of Ministry reassures the Claimants that no further retroactive changes to the regulatory regime for PV plants are planned.
March 2011 The parties complete the transactions under the SPAs in relation to the First Investment Plants.
22 June 2011 The Claimants acquire the Fontellas Plants.
18 October 2011 The Claimants acquire 50% of the Lasesa Plants. The Claimants enter into put/call option agreements for the remaining 50% with the sellers, Dalkia/Forcimsa binding them to acquire the remaining 50% at Dalkia's request.
27 December 2012 Spain enacts Law 15/2012 (entry into force on 1 January 2013).
1 February 2013 Spain enacts RDL 2/2013.
12 July 2013 Spain enacts RDL 9/2013.
December 2013 Dalkia/Forcimsa communicate their intention to exercise the Put Option for the remaining 50% shares in Lasesa.
26 December 2013 Spain enacts Law 24/2013.
29 January 2014 The Claimants acquire the remaining 50% of the Lasesa Plant as required under the Put Option signed in October 2011.
6 June 2014 Spain enacts RD 413/2014.
16 June 2014 Spain enacts the June 2014 Order.

 

317.
Claimants oppose Spain's timeline, particularly marking the Prime Minister's December 2011 speech and the March 2012 CNE report as the "birth of the dispute"343 For Claimants, those events are not Disputed Measures, have no legal effect, and in any case, did not foreshadow the "complete repeal of the RD 1578/2008 economic regime with respect to existing investments."344
318.
In addition, Claimants' challenge to Spain's objection is two-fold.
319.
First, in Claimants' view, Spain has not applied the relevant legal test to its ratione temporis objection. Claimants note that Spain addresses a number of investment arbitration case law on the abuse of process, while not alleging any abuse of process by Claimants in the current dispute.345 In addition, Spain expressly refers to the Philipp Morris v. Australia award in which the tribunal provides that a distinction must be made between an abuse of process objection and a ratione temporis objection.346 Spain further cites to case law arguing that good faith justifies the ratione temporis objection, but does not argue that Claimants acted in bad faith to manufacture jurisdiction.347 In that regard, Claimants distinguish their behaviour with the facts at issue in Phoenix v. Czech Republic and ST-AD v. Bulgaria which are relied on by Spain.348 Moreover, Claimants indicate that the other two cases cited by Spain, Cementownia v. Turkey and Plama v. Bulgaria do not address ratione temporis arguments.349
320.
Second, Claimants turn to the facts at issue, on which Spain appears to rely for its objection. As far as the Lasesa Plants are concerned, Claimants affirm that by October 2011, they had effectively committed to buy 100% of the shares in said Plants.350 To this end, on 18 October 2011, Claimants entered into a share purchase agreement to purchase 50% of the share capital of Sarinena Solar, S.L. which held the Lasesa Plants; (ii) simultaneously, Claimants entered into put option and call option agreements for the remaining 50% of the shares, which could be exercised between 1 January and 1 February 2014; and (iii) in light of the 18 October 2011 undertakings, Claimants had no choice but to acquire the 50% shareholding in the Lasesa Plants.351
321.
Therefore, contrary to what Respondent alleges, the acquisition of the remaining 50% of shares was not a separate investment in 2014, because by October 2011 Claimants were already contractually bound to acquire those shares.352 For Claimants, Spain confuses the exercise of a call option and a put option because under the latter, if the sellers were to exercise that option, Claimants had no discretion to refuse buying the shares, as reflected in the Put Option Agreement.353 Relying on witness evidence by Messrs. Mathieu Lief and Nikolaus Roessner, Claimants conclude that the investment in the Lasesa Plants was made on 18 October 2011, well before Spain enacted the Disputed Measures.354

(2) The Tribunal's Analysis

322.
Since the position of Respondent is that a portion of the investment made by Claimants (a 50% interest in the Lasesa Plants) was made in the month of January 2014, and since this was after the Disputed Measures were enacted, the protection to the investment should be rejected ratione temporis, the Tribunal therefore needs to examine: (i) when the "Disputed Measures" were enacted, and (ii) when the "investment" in the Lasesa Plants was "made" by Claimants.
323.
In respect to the first point, the Parties agree on the "measures" adopted by Spain, but the only difference among Claimants and Respondent is whether the announcement of the reform on the Spanish Electricity System ("SES") by the Prime Minister in his inaugural address on 19 December 2011 should be deemed as the first prelude to the Disputed Measures, and the effect of this. Claimants reject that this should be deemed as such, since it had no legal effect.355 Respondent did not follow in its Rejoinder with this argument, and actually acknowledged that the dispute arose on 7 March 2012 with the issuance of the CNE Report. Since such event took place after the date on which the investments were made -as seen below- the first point of this objection is mute.
324.
On the timing of the investment, neither of the Parties dispute the evidence submitted in this regard. Thus, it is not a factual dispute of whether contracts were executed, and on what date the contracts were executed and closed, but rather a dispute on the interpretation as to when said actions should be deemed to have occurred for purposes of determining the date of the investment.
325.
The evidence shows that Claimants entered on 18 October 2011 into a share purchase agreement to purchase 50% of the share capital of Sarinena Solar, S.L. -which owned the Lasesa Plants.356 On the same date, Claimants and the sellers357 simultaneously entered into a Put Option Agreement and a Call Option Agreement to respectively be bound to sell and purchase the remaining 50% of the shares, which put and options could be exercised between 1 January and 1 February 2014.
326.
Pursuant to Clause 1.3 of the Put Option Agreement, Claimant Infracapital Solar B.V. (previously, Infracapital E &W B.V.), as grantor, "expressly and irrevocably [undertook] to acquire or to ensure third parties to acquire the Shares, at the joint request of the Beneficiaries [..,]".358 There is no debate as to the date this commitment was made.
327.
Then, on 29 January 2014, Claimants (through Infracapital Solar B.V.) acquired the remaining 50% of the stock of Sarinena Solar, S.L. though a Stock Purchase Agreement.359
328.
During the two-year period comprised from (a) the date of execution of the share purchase agreement and the Put Option and Call Option Agreements, on the one hand, and (b) the closing of the purchase of the remaining stock for the Lasesa Plants, the Disputed Measures were enacted by Spain. Thus, Respondent argues that having closed the purchase after the measures were put into place this should deem that the investment was made after such measures were known to Claimants and hence not be protected ratione temporis. 360
329.
Claimants have stated that "[...] in light of the 18 October 2011 undertakings, Claimants had no choice but to acquire the 50% shareholding in the Lasesa Plants".361
330.
The evidence shows that in mid-December 2013 and early January 2014,362 representatives of the sellers and Infracapital Solar B.V. discussed sellers' intention to exercise the put option for the remaining shares in Sarinena Solar, S.L. Although there is no reference in the stock purchase agreement of January 2014 to the prior Put Option Agreement, and exercise of the put option granted to sellers, it is clear to this Tribunal that the agreement need not reflect the prior covenants of the parties leading to closure of the transaction and implementation of the obligations of the parties thereunder to be effective. The "express and irrevocable" commitment to sell -to quote the language in the Put Option Agreement-existed since this agreement was originally executed. Seller's desire to close was sufficient to have the right to force purchase on Infracapital Solar B.V.
331.
The Tribunal believes that the evidence is sufficient to dismiss Respondent's objection, not only because the acquisition of the stock representing 50% of the Lasesa Plants was not a separate transaction, but rather the conclusion of a contract that had been entered into in 2011.
332.
Despite the above factual analysis, however, Respondent has cited some precedents363 that require this Tribunal to examine whether there might have been any abuse of process or lack of good faith on the part of Claimants, i.e., when the investor restructures its investment in order to access investment arbitration, at the time when the dispute is already foreseeable, and the ratione temporis objection, which refers to those investments made when the dispute is already a reality.
333.
The Tribunal finds no elements to sustain such allegation. On the one hand, the cases Respondent has cited deal with the timing of an investment for the sole purpose of gaining access to international arbitration, or the absence of good faith in attempting to date the effectiveness of a transaction. Further, as Respondent acknowledges,364 the only "investors" able to benefit from the protection of the ECT are those who, having said condition before the dispute becomes foreseeable or before it has already taken place, can contribute to that end by making an investment under the ECT.
334.
But most relevant is the fact that there is nothing in the record to question whether the timing of the transactions entered into by Claimants leading to the purchase of the Plants was not done in good faith and with the sole purpose of gaining access to the jurisdiction of this Tribunal. The burden of proof to support this allegation rests on Respondent, and it has failed to meet it. Therefore, this line of the objection is equally rejected.
335.
For the reasons above stated, the Tribunal dismisses the ratione temporis jurisdictional objection of Respondent.

D. Fourth Objection: Lack of Jurisdiction Ratione Voluntatis Over Claims Under Article 10(1) of the ECT Arising out of the TVPEE

(1) The Parties' Positions

a. Respondent's Position

336.
Respondent objects to the Tribunal's jurisdiction to hear claims concerning breaches of Article 10(1) of the ECT as a result of tax measures, namely, the TVPEE, introduced by Law 15/2012. Spain contends that it has not given its consent to submit such dispute to arbitration, given that Article 26 of the ECT only covers claims for breaches of obligations derived from Part III of the ECT.365 Pursuant to Article 21 of the ECT, Article 10(1), although located in Part III, does not give rise to obligations between the Contracting Parties in connection to tax measures. 366
337.
In Spain's view, "[t]here cannot be an alleged breach of obligations that legitimises resorting to arbitration simply because there is no obligation regarding taxation measures, in this case, the TVPEE."367
338.
Respondent explains that Article 21 of the ECT contains a general exclusion of taxation measures from the scope of application of the ECT (a taxation "carve-out"), with a few exceptions, stipulated expressly in Article 21, which according to Spain, do not refer to Article 10(1) of the ECT.368
339.
For Spain, the TVPEE is a "Taxation Measure" within the meaning of Article 21(7)(a)(i), which includes, "[a]ny provision relating to taxes of the domestic law of the Contracting Party or of a political subdivision thereof or a local authority therein [,..]."369 Spain notes that Law 15/2012 is part of domestic law, passed by the Parliament of Spain and its provisions on the TVPEE are provisions "relating to a tax".370
340.
Under Spanish domestic law, "there is no doubt that the TVPEE is a fax" as ratified by the Spanish Constitutional Court.371 This is clear from Article 1 of Law 15/2012 which provides that the TVPEE is a "tax of a direct and real nature levied on the performance of activities of production and incorporation into the electricity system of electrical energy"372 and is confirmed by Article 2 of Law 58/2003.373 The TVPEE is a tax that applies to all electricity production facilities, covering both renewable and conventional sources. The applicable tax rate is 7% and its taxable period is generally the calendar year.374 The tax is accrued on the last day of the period.375 Spain notes that the TVPEE is a deductible expense on the corporate tax.376
341.
For Respondent, there is also no doubt that the TVPEE is a tax under the international law perspective.377 The TVPEE fits within the concept of tax as defined by arbitral tribunals because (i) it is established by law; (ii) it imposes an obligation on a class of people; and (iii) such obligation implies paying money to the State for public purposes.378
342.
In addition, Spain argues, the EC has ratified the taxation nature of the TVPEE and its conformity with EU Law through the EU Pilot procedure 5526/13/TAXU.379
343.
Finally, Respondent takes the view that the foregoing is sufficient to conclude that the TVPEE is a tax for the purposes of Article 21(7)(a)(i) of the ECT, without engaging in an analysis of the economic effects of the measure and its good faith.380 In any event, Spain argues, the TVPEE is a bona fide measure given that:

• The TVPEE is a tax of general application, covering both renewable and conventional energy production facilities.381

• The TVPEE does not discriminate against RE producers in terms of "repercussion," that is, the possibility to transfer the amount of the tax by the payer to another person.382 The TVPEE is a direct tax, which means that there is no "legal repercussion" of its amount. 383 There is also no discrimination from the perspective of the "economic repercussion"384 This is because the costs of this tax are remunerated to RE producers under the applicable regulatory regime.385

344.
Spain further notes that various arbitral tribunals have held that the TVPEE is a "Taxation Measure" for the purposes of the ECT and therefore found that they had no jurisdiction to hear claims derived from alleged breaches of obligations under Article 10(1) of the ECT.386

b. Claimants' Position

345.
Claimants oppose Respondent's objection387, and although they acknowledge that the TVPEE has the elements of a tax measure, they contend that the key issue for the Tribunal to determine is whether the TVPEE is a bona fide tax.388
346.
Claimants argue that Article 21 of the ECT only applies to bona fide taxation measures. Accordingly, Claimants maintain that (i) the Tribunal must interpret Article 21 of the ECT in good faith; (ii) Spain must comply with its obligations under the ECT in good faith; and (iii) Spain must exercise its rights under the ECT in good faith. If Spain wishes to avail itself of the exemption at Article 21 of the ECT, it can only do so if the exemption concerns bona fide tax measures.389 On the contrary, if "the disputed measure is merely a disguised tariff cut implemented to achieve an illicit purpose, the investor-protection provisions of the ECT must apply; a State cannot abuse its right to tax as an instrument to treat investors unfairly"390 Claimants draw support from the Yukos and Antaris tribunals to argue that the Article 21 carve-out is subject to limits and does not cover all measures that a State could unilaterally define as a tax.391
347.
Claimants draw a distinction between bona fide and abusive taxation measures under international law. For Claimants, "a State must not act in a way that is manifestly inconsistent; nor can it flout the principle of estoppel that is binding on it under international law."392 These are principles that the Tribunal must take into account when interpreting the ECT.393
348.
In that regard, whether a taxation measure is bona fide must be inferred from the State's conduct.394 Drawing support from the Yukos tribunal, Claimants contend that the Tribunal must determine if the implementation of the TVPEE supports the conclusion that it is part of a "scheme to deprive the Claimants of the rights they were granted under RD 1578/2008."395
349.
For Claimants, there is prima facie evidence that the TVPEE is "arbitrary, discriminatory and was intended merely to cut the FIT that Spain had promised would remain stable."396 Specifically, they argue that:

• Spain's conduct reveals that the TVPEE was intended as a tariff cut. By applying the TVPEE to all revenues generated by the plants, the measure is equivalent to a tariff cut because (i) the PV plants operate under a regulated regime and they have no choice but to absorb the decrease in those revenues; and (ii) the cost of paying the tax is higher for RE facilities.397

The TVPEE is discriminatory and unrelated to its official aim. If the measure adopted applies to all electricity installations but has the effect of unfairly targeting a particular sector, the measure cannot be in good faith.398 Spain has also not provided any link between the TVPEE and its professed aim for benefitting the environment.399

• The TVPEE is a Government scheme to dismantle the economic regime under RD 1578/2008 through which Claimants invested.400 For Claimants, the TVPEE is part of a series of interconnected measures that deprived them of the economic regime under RD 1578/2008.401

350.
Moreover, Claimants argue that the mere fact that Spain labelled the measure as a "Tax Measure" within the meaning of Article 21 of the ECT is not determinative as to whether Article 21 is applicable.402 It is also irrelevant whether the TVPEE is in compliance with Spain's domestic law and note that, in any event, the Spanish Constitutional Court did not analyse the bona fide nature of the TVPEE.403 Claimants further observe that the Superior Court of Justice of Valencia has recently raised doubts as to the bona fide nature of the TVPEE.404
351.
For Claimants, it is equally irrelevant whether the TVPEE falls within the definition of a tax under international law.405
352.
Finally, Claimants note that on 19 September 2018 Spain announced the temporary suspension of the TVPEE which "creates further uncertainty in the regulatory rollercoaster ride to which the Claimants' investments are subject"406

(2) The Tribunal's Analysis

353.
The essence of Respondent's objection is that the TVPEE should be deemed a "taxation measure" for the purposes of Article 21(7)(a)(i) of the ECT, and the Tribunal lacks jurisdiction because Spain not only expressly rejected protection in respect to taxation measures under Article 21(1) of the ECT, but also because it provided its consent to submit to investment arbitration disputes solely related to alleged breaches of obligations derived from Part III of the ECT.
354.
On the other hand, while Claimants do not dispute whether the TVPEE is a tax by nature, they strongly argue that it is not bona fide, that Article 21 of the ECT only applies to bona fide taxation measures, and that Respondent cannot exclude the measure from the jurisdiction of this Tribunal.
355.
The issues for the Tribunal to decide are, essentially: (i) whether the TVPEE should indeed be deemed to be a "taxation measure" -including whether it should be deemed as a bona fide measure- and (ii) whether Spain's consent under the ECT to submit to investment arbitration disputes under the Treaty excludes any disputes related to such measures.
356.
Section (7)(a)(i) of Article 21 of the ECT, provides that the term "taxation measure" includes any "provision relating to taxes of domestic law of the Contracting Party"'.

"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"407 (Emphasis added)

357.
Thus, the definition of "taxation measure" reverts to a tax of the domestic law of Spain.
358.
It is unquestionable that Law 15/2012 is part of the domestic law of Spain, and Claimants have not challenged this; it was enacted by the Parliament of Spain following the legislative process and has been confirmed by the Spanish Constitutional Court.408
359.
The nature of the TVPEE is stated under Article 1 of Law 15/2012:

"Article 1. Nature. The tax on the value of the production of electric energy is a tax of direct character and real nature that taxes the performance of activities of production and incorporation into the electric system of electric energy, measured in power plant busbars, through each of the facilities indicated in Article 4 of this Law" (Emphasis added)

360.
Law 58/2003,409 which deals on "General Taxation" provides in Article 2 what should be understood as a tax:

"Article 2. Concept, purposes and types of taxes:

1. The taxations are public revenue consisting in cash entitlements required by public Tax Authorities as a consequence of those qualifying conditions which the Law associates to the duty to contribute to the primary purpose of obtaining the revenue needed to sustain public expenses.

These taxations besides being means to obtain the necessary resources for sustaining public e