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Decision on Jurisdiction, Liability and Principles of Quantum

TABLE OF SELECTED ABBREVIATIONS

Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings 2006
C-[#] Claimants' Exhibit
CL-[#] Claimants' Legal Authority
Cl. Bif. Claimants' Observations on the Request for Bifurcation dated 2 October 2015
Cl. C-Mem. Jur. Claimants' Counter-Memorial on Preliminary Objections dated 8 August 2016
Cl. Mem. Merits Claimants' Memorial on the Merits dated 22 May 2015
Cl. Rej. Jur. Claimants' Rejoinder on Preliminary Objections dated 14 November 2016
Cl. Reply Merits Claimants' Reply on the Merits dated 10 August 2016
Cl. Skeleton Claimants' Skeleton Argument dated 9 December 2016
Cl. PH Mem. Claimants' Response to Tribunal's PostHearing Question dated 27 February 2017
Cl. PH Reply Claimants' Reply to Spain's Submission of 27 February 2017, dated 7 March 2017
Cl. Obs. Eiser Claimants' Observations on the Eiser Award dated 22 June 2017
Cl. Reply Eiser Claimants' Reply Observations on the Eiser Award dated 18 July 2017
Cl. Obs. EC Decision Claimants' Observations on the EC Decision of 10 November 2017 in Case SA.40348 (20155/NN) dated 8 January 2018
Cl. Obs. Achmea Claimants' Observations on the Achmea Judgment, the Novenergía II Award, and the Blusum Award dated 9 April 2018
CER- Claimants' Expert Report
CER-Compass Lexecon First First Expert Report of Professor Pablo T. Spiller and Dr. Manuel A. Abdala of Compass Lexecon dated 4 March 2015
CER-Compass Lexecon Second Second Expert Report of Professor Pablo T. Spiller and Dr. Manuel A. Abdala of Compass Lexecon dated 9 August 2016
CER-Compass Lexecon Third Addendum to Second Expert Report of Professor Pablo T. Spiller and Dr. Manuel A. Abdala of Compass Lexecon dated 19 August 2016
CER-Price Expert Report of Mr. Henry Price dated 9 August 2016
CWS- Claimants' Witness Statement
CWS-Arechabala First First Witness Statement of Mr. Miguel Ignacio Arechabala dated 19 May 2015
CWS-Arechabala Second Second Witness Statement of Mr. Miguel Ignacio Arechabala dated 8 August 2016
CWS-Arechabala Third Third Witness Statement of Mr. Miguel Ignacio Arechabala dated 21 November 2016
CWS-Davidson First First Witness Statement of Mr. F. Mitchell Davidson dated 21 May 2015
CWS-Davidson Second Second Witness Statement of Mr. F. Mitchell Davidson dated 2 August 2016
CWS- Kujawa First First Witness Statement of Ms. Rebecca Kujawa dated 19 May 2015
CWS- Kujawa Second Second Witness Statement of Ms. Rebecca Kujawa dated 10 August 2016
CWS- Nicolaï First First Witness Statement of Mr. George Nicolaï dated 8 August 2016
CWS- Nicolaï Second Second Witness Statement of Mr. George Nicolaï dated 14 November 2016
CWS-Sorensen Witness Statement of Mr. Mark Sorensen dated 10 November 2016
ECT Energy Charter Treaty
EC First Application European Commission's Application for Leave to Intervene as a Non-Disputing Party dated 12 November 2014
EC Written Submission European Commission's Written Submission dated 5 September 2016
Hearing Hearing on Jurisdiction and Merits held 12-19 December 2016
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
R-[#] Respondent's Exhibit
RL-[#] Respondent's Legal Authority
Resp. C-Mem. Merits Respondent's Counter-Memorial on the Merits dated 4 March 2016
Resp. Mem. Jur. Respondent's Memorial on Preliminary Objections and Request for Bifurcation dated 9 September 2015
Resp. Rej. Merits Respondent's Rejoinder on the Merits dated 20 October 2016
Resp. Reply Jur. Respondent's Reply on Preliminary Objections dated 14 October 2016
Resp. Skeleton Respondent's Skeleton Argument dated 9 December 2016
Resp. PH Mem. Respondent's Response to Tribunal's PostHearing Question dated 27 February 2017
Resp. PH Reply Respondent's Reply to Claimants' Submission of 27 February 2017 dated 7 March 2017
Resp. Obs. Eiser Respondent's Observations on the Eiser Award dated 11 July 2017
Resp. Reply Eiser Respondent's Reply Observations on the Eiser Award dated 25 July 2017
Resp. Obs. EC Decision Respondent's Observations on the EC Decision of 10 November 2017 in Case SA.40348(20155/NN)dated 8 January 2018
Resp. Obs. Achmea Respondent's Observations on the Achmea Judgment, the Novenergía II Award, and the BlusumAward dated 9 April 2018
RER- Respondent's Expert Report
RER-Accuracy First Economic First Expert "Economic Report on the Plaintiffs and their Claim" of Mr. Eduard Saura, Mr. Christophe Schmit and Mr. Stéphane Perrotto of Accuracy dated 2 March 2016
RER-Accuracy Second Economic Second Expert "Report on Claims of the Claimants" of Mr. Eduard Saura, Mr. Christophe Schmit and Mr. Stéphane Perrotto of Accuracy dated 20 October 2016
RER-Accuracy on Lack of Activity Expert "Economic Report on the Lack of Economic Activity of the Plaintiffs in the Netherlands" of Mr. Eduard Saura and Mr. Christophe Schmit dated 14 October 2016
RER-Casanova Expert Report of Mr. Jesús Casanova dated 19 October 2016
RER-Servert First First Expert Report of Mr. Jorge Servert dated 14 October 2016
RER-Servert Second Supplementary Expert Report of Mr. Jorge Servert submitted 13 December 2016
RWS- Respondent's Witness Statement
RWS-Montoya First First Witness Statement of Mr. Carlos Montoya dated 3 March 2016
RWS-Montoya Second Second Witness Statement of Mr. Carlos Montoya dated 19 October 2016
Request for Arbitration Request for Arbitration dated 12 May 2014
Tr. Day [#] [Speaker(s)] [page:line] Transcript of the Hearing (English) (as revised by the Parties in February 2017)
Tribunal Arbitral Tribunal constituted on 23 January 2015

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 the Netherlands and the Kingdom of Spain (the "ECT"), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the "ICSID Convention").
2.
The Claimants are NextEra Energy Global Holdings B.V ("NextEra Global"), and NextEra Energy Spain Holdings B.V. ("NextEra Spain"), both limited liability companies incorporated under the laws of the Netherlands (besloten vennootschap met beperkte aansprakelijkheid), (together, "Claimants").
3.
The Respondent is the Kingdom of Spain ("Spain" or "Respondent").
4.
Claimants and Respondent are collectively referred to as the "Parties." The Parties’ representatives and their addresses are listed above on page (i).
5.
This dispute relates to measures implemented by Respondent modifying the regulatory and economic regime of renewable energy projects.

II. PROCEDURAL HISTORY

A. Registration and Constitution of the Tribunal

6.
On 15 May 2014, ICSID received a Request for Arbitration dated 12 May 2014, accompanied by exhibits C-001 to C-012, from Claimants against Spain (the "Request for Arbitration"). On 21 May 2014, the Centre formulated a question to Claimants regarding the Request for Arbitration, and Claimants submitted a response on 22 May 2014.
7.
On 23 May 2014, in accordance with Article 36(3) of the ICSID Convention, the Secretary-General of ICSID registered the Request for Arbitration, as supplemented by letter of 22 May 2014, and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID’s Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (the "Institution Rules").
8.
In accordance with Article 37(2)(a) of the ICSID Convention, the Parties agreed to constitute the Tribunal as follows: three arbitrators, one to be appointed by each Party, and the third, presiding arbitrator to be appointed by agreement of the Parties. Pursuant to the Parties’ agreed method of constitution, failing an agreement of the Parties on the presiding arbitrator, s/he would be appointed by the Chairman of the ICSID Administrative Council without limitation to the ICSID Panel of Arbitrators.
9.
The Tribunal is composed of Professor Donald M. McRae, a national of Canada and New Zealand, President, appointed by agreement of the Parties; Mr. L. Yves Fortier, a national of Canada, appointed by Claimants; and Professor Laurence Boisson de Chazoumes, a national of France and Switzerland, appointed by Respondent.
10.
On 23 January 2015, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "ICSID Arbitration Rules"), the Secretary-General of ICSID 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. Ms. Luisa Fernanda Torres, ICSID Legal Counsel, was designated to serve as the Secretary of the Tribunal.

B. The First Session

11.
On 15 May 2015, a date agreed by the Parties, in accordance with ICSID Arbitration Rule 13(1) the Tribunal held a first session with the Parties in-person in Washington, DC.
12.
On 21 May 2015, following the First Session, the Tribunal issued Procedural Order No. 1, supplemented on 3 June 2015 with its Annex A (Procedural Calendar). Procedural Order No. 1 embodied the Parties’ agreements on procedural matters and the Tribunal’s decisions on the disputed issues. It established, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, that the procedural languages would be English and Spanish, that the place of proceeding would be Washington, DC, and it also set out the Procedural Calendar for this arbitration.

C. The Parties’ Written Submissions and Procedural Applications

13.
On 22 May 2015, Claimants filed their Memorial on the Merits ("Memorial on the Merits"), accompanied by exhibits C-001 to C-124; legal authorities CL-001 to CL-064; three (3) witness statements by: Mr. F. Mitchell Davidson, Mr. Miguel Ignacio Arechabala and Ms. Rebecca Kujuwa, respectively; and one (1) expert report by Dr. Manuel Abdala and Prof. Pablo Spiller of Compass Lexecon, with exhibits CLEX-001 to CLEX-106.1
14.
On 23 June 2015, pursuant to the Procedural Calendar, Respondent provided a notice of its intent to submit Objections to Jurisdiction and a Request for Bifurcation.
15.
On 9 September 2015, Respondent filed a Memorial on Preliminary Objections with Request for Bifurcation ("Memorial on Jurisdiction and Request for Bifurcation"); accompanied by exhibits R-001 to R-028; and legal authorities RL-001 to RL-019.
16.
On 18 September 2015, following a joint request by the Parties, the Tribunal amended the Procedural Calendar ("Procedural Calendar - Amendment No. 1").
17.
On 28 September 2015, Claimants filed an application asking the Tribunal to order Respondent to produce a legal authority to the Tribunal to assess its relevance, and then to Claimants if the Tribunal found the authority relevant, namely, The PV Investors v. Kingdom of Spain, PCA Case No. 2012-14, Preliminary Award on Jurisdiction (13 October 2014) ("PVInvestors Award on Jurisdiction"). On 5 October 2015, Respondent filed observations on this application, together with exhibit R-029.
18.
On 2 October 2015, Claimants filed their Observations on Respondent's Request for Bifurcation ("Response on Bifurcation"); accompanied by legal authorities CL-086 to CL-133.2
19.
On 28 October 2015, the Tribunal issued Procedural Order No. 2, dismissing Respondent's Request for Bifurcation.
20.
On 6 January 2016, the Tribunal decided not to issue the order requested in Claimants' application of 28 September 2015, but encouraged Respondent to make its best efforts to make the PV Investors Award on Jurisdiction available to the Tribunal. On 18 February 2016, Respondent submitted the PV Investors Award on Jurisdiction to the record (without a designated legal authority number), together with evidence of consent of the claimants in the PV Investors proceeding.3
21.
On 4 March 2016, Respondent filed its Counter-Memorial on the Merits ("CounterMemorial on the Merits"), accompanied by exhibits R-030 to R-231; legal authorities RL-020 to RL-098; one (1) witness statement by Mr. Carlos Montoya; and one (1) expert report by Mr. Eduard Saura, Mr. Christophe Schmit and Mr. Stéphane Perrotto of Accuracy, with exhibits ACQ-001 to ACQ-039.
22.
On 22 March 2016, Claimants informed the Centre and the Tribunal that the Spanish law firm Cuatrecasas Gonçalves Pereira had been retained as co-counsel in this matter, and on 20 May 2016 provided the corresponding power of attorney.
23.
On 13 May 2016, following exchanges between the Parties, the Parties submitted for decision by the Tribunal their respective Redfern Schedules including their Requests, Objections and Replies on Document Production.
24.
On 3 June 2016, the Tribunal issued Procedural Order No. 4 on Document Production.
25.
On 8 August 2016, Claimants filed their Counter-Memorial on Preliminary Objections ("Counter-Memorial on Jurisdiction") accompanied by exhibits C-126 to C-167; legal authorities CL-134 to CL-144; and one (1) witness statement, by Mr. George Nicolaï.4
26.
On 8 and 9 August 2016, the Parties informed the Tribunal of an agreed extension of the deadline for the Claimants' Reply on the Merits until 10 August 2016, Respondent's agreement being conditioned upon Claimants' submission of certain evidence of the circumstances causing the delay together with the Reply on the Merits.
27.
On 11 August 2016, Claimants filed their Reply on the Merits ("Reply on the Merits") accompanied by exhibits C-168 to C-271; legal authorities CL-145 to CL-175; three (3) witness statements by: Mr. F. Mitchell Davidson, Mr. Miguel Ignacio Arechabala, and Ms. Rebecca Kujawa, respectively; two (2) expert reports: one by Dr. Manuel Abdala and Prof. Pablo Spiller of Compass Lexecon, with exhibits CLEX-107 to CLEX-282, an another by Mr. Henry Price, with exhibits SD-001 to SD-024.
28.
On 11 August 2016, Claimants also filed a communication explaining the circumstances underlying the extension for the submission of the Reply on the Merits, and announcing that "[u]nless the Tribunal otherwise direct[ed], Dr Abdala and Professor Spiller w[ould] supplement their evidence with a brief further report" to take account of those circumstances, approximately within two weeks. In addition, alleging delays in Respondent's document production, Claimants requested a further opportunity to analyze the materials received during document production and to introduce them into the record at a later time, by consent or with leave from the Tribunal. On 11 August 2016, Respondent filed a response objecting to the delay in the filing of the Reply on the Merits and opposing to Claimants' requests of 11 August 2016. On 12 August 2016, Claimants submitted reply observations.
29.
On 17 August 2016, the Tribunal (i) informed the Parties that the consequences of the delay in the filing of the Reply on the Merits could be considered in the determination of costs but did not affect the admissibility of the submission, and it invited Respondent to provide comments concerning the subsequent Procedural Calendar; and (ii) indicated that it would rule on the issue of admissibility of any further reports or documents if and when an application for leave to file them was made. On 18 August 2016, Respondent filed observations on the subsequent Procedural Calendar, and Claimants filed a reply on the same day.
30.
On 19 August 2016, Claimants submitted an Addendum to the Second Expert Report of Dr. Abdala and Prof. Spiller, with exhibits CLEX-283 to CLEX-286. On 22 August 2016, the Tribunal invited Respondent to make observations on the admissibility of this report, and it informed the Parties that the report would not be transmitted to the Tribunal Members until a ruling on its admissibility had been made. On 29 August 2016, Respondent filed a response, opposing the admissibility the report, and requesting an extension for the filing of its Rejoinder on the Merits. On 30 August 2016, Claimants submitted observations on the requested extension.
31.
On 15 September 2016, the Tribunal (i) admitted into the record the Addendum to the Second Expert Report of Dr. Abdala and Prof. Spiller dated 19 August 2016; and (ii) granted Respondent an extension for the filing of the Rejoinder on the Merits ("Procedural Calendar - Amendment No. 2").
32.
On 14 October 2016, Respondent filed its Reply on Preliminary Objections ("Reply on Jurisdiction"), accompanied by exhibits R-232 to R-276; legal authorities RL-099 to RL-110; and one (1) expert report by Mr. Eduard Saura and Mr. Christophe Schmit of Accuracy, with exhibits ACQ-040 to ACQ-042.
33.
On 20 October 2016, Respondent filed its Rejoinder on the Merits ("Rejoinder on the Merits"), accompanied by exhibits R-277 to R-424; legal authorities RL-111 to RL-120; one (1) witness statement by Mr. Carlos Montoya, with exhibits R-225_CMR to R-266_CMR; three (3) expert reports by: Mr. Eduard Saura, Mr. Christophe Schmit and Mr. Stéphane Perrotto of Accuracy with exhibits ACQ-043 to ACQ-090, Mr. Jesús Casanova with five unnumbered exhibits, and Prof. Jorge Servert with exhibits JSR-001 to JSR-010 and JSRC-001 to JSRC-041, respetively.5
34.
On 27 October 2016, Respondent filed an application requesting authorization from the Tribunal to submit an additional exhibit (R-424) and certain corrected exhibits (JSR-05 and JSR-10). On the same day, Claimants consented to the request. On 28 October 2016, the Tribunal granted Respondent's application, and on 3 November 2016 the documents were submitted by Respondent.
35.
On 8 November 2016, the Tribunal held a pre-hearing organizational conference with the Parties by telephone.
36.
On 11 November 2016, the Tribunal issued Procedural Order No. 5 embodying the Parties' agreements on procedural matters pertaining to the organization of the Hearing and the Tribunal's decisions on the disputed issues.
37.
On 7 November 2016, Claimants filed an application asking the Tribunal (i) to order Respondent to produce certain documents not produced and to provide a complete copy of an exhibit already on record (R-078); and (ii) to grant Claimants leave to introduce the materials into the record if they elected to do so upon review. On 8 November 2016, Respondent (i) filed observations on Claimants' application of 7 November 2016; (ii) filed its own application asking the Tribunal to order Claimants to produce a number of documents not produced; and (iii) communicated to the Tribunal its willingness to introduce into the record a new legal authority, namely Isolux Infrastructure Netherlands BV v. Kingdom of Spain, SCC Case V2013/153, Award (12 July 2016) ("Isolux Award") subject to a guarantee of confidentiality by the present Tribunal. On 15 November 2016, Claimants provided observations on Respondent's application of 8 November 2016.6
38.
On 14 November 2016, Claimants filed their Rejoinder on Preliminary Objections ("Rejoinder on Jurisdiction"), accompanied by exhibits C-272 to C-282; legal authorities CL-176 to CL-192; and two (2) witness statements by: Mr. George Nicolaï, and Mr. Mark Sorensen, respectively.7
39.
On 16 November 2016, Respondent filed a request for clarification of Procedural Order No. 5. The Tribunal responded on the same day.
40.
On 18 November 2016, the Parties notified the witnesses and experts called for examination at the Hearing.
41.
On 23 November 2016, the Tribunal issued Procedural Order No. 6 concerning the Parties' applications of 7 and 8 November 2016 (supra, ¶ 37). The Tribunal (i) ruled on the Parties' respective requests for document production, ordering production of some documents and dismissing some requests; (ii) deferred the decision relating to one of the matters at issue (Respondent' s Request for Document Production No. 52); (iii) invited the Parties to liaise directly concerning another of the matters at issue (Respondent's Request for Document Production No. 55); (iv) authorized the introduction of the Isolux Award into the record granting confidentiality with respect to that award, and to "any other award provided to the Tribunal where confidentiality is required." On 25 November 2016, following the Tribunal's authorization, Respondent submitted the Isolux Award to the record (RL-121) in Spanish.
42.
From 21 November 2016 to 30 November 2016, the Parties filed a number of additional procedural applications and communications in response to them, as follows:

• On 21 November 2016: (i) Respondent submitted an application for leave from the Tribunal to add new documents to the record;8 (ii) Claimants filed observations concerning the production of documents relating to Respondent's Request for Document Production No. 52, and applied to introduce those documents into the record; and (iii) Claimants submitted a second application to add new documents to the record,9 to file a supplementary witness statement by Mr. Miguel Ignacio Arechabala, and to supplement certain legal authorities already on the record.10 On 22 November 2016, Respondent filed a response to Claimants' applications of 21 November 2016, and Claimants filed a communication on this matter on the same day. On 25 November 2016, the Parties filed further submissions concerning these pending applications to add new materials to the record.

• On 24 November 2016, in connection with Procedural Order No. 6, Respondent submitted a communication regarding Respondent's Request for Document Production No. 55, asking the Tribunal to order Claimants to produce complete documents. On 25 November 2016, Claimants filed a response. On 26 November 2016, Respondent filed reply observations. On 28 November 2016, Claimants filed rejoinder observations. And, on 29 November 2016, Respondent submitted a further communication addressing inter alia Claimants' communication of 28 November 2016 in connection with this issue.

• On 24 November 2016, the Parties submitted a communication to the Tribunal, indicating that they had not been able to reach an agreement on the Hearing Agenda, highlighting two specific areas of disagreement among them.

• On 26 November 2016, Claimants submitted a request that Respondent be ordered to provide an English translation of the Isolux Award by a certain date. On 28 November 2016, Respondent submitted observations regarding this request, together with an update on the document production ordered in Procedural Order No. 6. On 28 November 2016, Claimants submitted a communication addressing, inter alia, the timing for the production of the Isolux Award and the documents ordered by Procedural Order No. 6. On 29 November 2016, Respondent made further submissions concerning these matters. On 30 November 2016, Claimants filed a response.

• On 26 November 2016, Respondent made an additional application to add further documents to the record.11 On 28 November 2016, Claimants filed observations in response. On 29 November 2016, Respondent submitted a communication replying, inter alia, to Claimants' observations of 28 November 2016 relating to this application.

43.
On 1 December 2016, the Tribunal issued Procedural Order No. 7, concerning the above referenced applications (supra ¶ 42) (i) authorizing the Parties to introduce into the record the documents referred to in their respective applications of 21 November 2016; (ii) authorizing the filing of the new witness statement from Mr. Arechabala and affording Respondent additional time at the Hearing (over its already allotted time) to address this witness statement through direct examination of Prof. Servert and Mr. Montoya; (iii) inviting Claimants to use their best efforts to produce more responsive data with regard to Respondent's Request for Document Production No. 55; (iv) ruling on the Parties' disagreements concerning the Hearing Agenda; (v) asking Respondent to provide a translation of the Isolux Award; and (vi) instructing the Parties to file Skeleton Arguments by 9 December 2016.
44.
On 2 December 2016, the Parties submitted a joint application to add a number of additional documents into the record,12 observing that Respondent's exhibits referred in this application were the same at issue Respondent's application of 26 November 2016 (supra, ¶ 42, last bullet). On 2 December 2016, in light of the Parties' agreement, the Tribunal authorized the introduction of these exhibits to the record.
45.
From 5 to 9 December 2016, pursuant to Procedural Order No. 7 and the Tribunal's ruling of 2 December 2016, the Parties introduced into the record the following materials:

Claimants

• On 5 December 2016, a third witness statement by Mr. Miguel Ignacio Arechabala dated 21 November 2016.

• On 6 December 2016, exhibits C-283 to C-302.

• On 9 December 2016, exhibits C-303, and legal authorities CL-193 to CL-194.

Respondent

• On 5 December 2016, exhibits R-425 to R-458,13 and legal authorities RL-122 to RL-123.

• On 5 December 2016, an English translation of the Isolux Award (RL-121), and an additional translation of exhibit C-027.

46.
On 5 December 2016, the Parties submitted their proposed Hearing Agenda.
47.
On 6 December 2016, Respondent filed an application requesting leave from the Tribunal to introduce additional documents to the record.14 On 7 December 2016, Claimants filed a response. On 8 December 2016, Respondent filed reply observations, and requested leave from the Tribunal to submit a supplementary report by Prof. Jorge Servert. On 8 December 2016, the Tribunal ruled on this application, authorizing the submission of Prof. Servert's supplementary report and additional exhibits. Thus, on 13 December 2016, Respondent filed a Supplementary Expert Report by Prof. Jorge Servert, accompanied by exhibits JSR-011 to JSR-018, JSR-020 to JSR-030, JSRN-002, JSRN-003, JSRN-009 to JSRN-015 and JSRN-37 to JSRN-38.
48.
On 9 December 2016, the Parties submitted their respective Skeleton Arguments.
49.
On 11 December 2016, Claimants submitted corrected versions of two previously filed exhibits (C-151 and C-152). On 12 December 2016, the Tribunal heard both Parties orally on this matter during Day 1 of the Hearing, and took note that Respondent did not object.15 Accordingly, the revised versions of exhibits C-151 and C-152 were admitted.
50.
On 13 December 2016, during Day 2 of the Hearing, Claimants submitted a corrected version of Mr. Nicolaï Witness Statement. The Tribunal heard both Parties orally on this matter that day, and the corrections were introduced into the record.16
51.
On 13 December 2016, Claimants submitted corrected versions of Mr. Arechabala's three witness statements. On 14 December 2016, the Tribunal heard both Parties orally on this matter during Day 3 of the Hearing. Respondent did not object.17
52.
On 16 December 2016, Claimants filed an application to add a new document to the record (namely, a draft Renewables Energies Directive published on 30 November 2016 by the European Union). The application attached a previous exchange between the Parties on that same day, including a communication from Respondent objecting to the introduction of this document with its reasons. On 17 December 2016, the Tribunal ruled on the matter orally during Day 6 of the Hearing, allowing the introduction of the document into the record.18 Thus, on 17 December 2016, Claimants introduced the document as exhibit C-304.
53.
On 17 December 2016, Claimants filed a communication inquiring whether the Tribunal required the production of certain invoices, in connection with a question raised by one of the arbitrators during Day 2 of the Hearing (13 December 2016). On 18 December 2016, the Tribunal responded in the affirmative, inviting Claimants to provide the documents to the Tribunal and Respondent. On 20 December 2016, Claimants submitted the invoices in question (without designated exhibit numbers). On 21 December 2016, Respondent filed observations on these documents. On 22 December 2016, Claimants filed a response.

D. The Non-Disputing Party Application

54.
On 14 November 2014, the European Commission ("EC") filed an Application for Leave to Intervene as a Non-Disputing Party dated 12 November 2014 ("EC First Application"). The EC First Application was communicated to the Parties on the same day it was received, and to the Tribunal upon its constitution on 23 January 2015.
55.
Following the First Session, pursuant to ICSID Arbitration Rule 37(2) the Tribunal invited the Parties to provide comments on the EC First Application in accordance with the Procedural Calendar set forth in Procedural Order No. 1, Annex A issued on 3 June 2015 (supra, ¶ 12).
56.
On 4 June 2015, the Tribunal informed the EC that: (i) it had received the EC First Application; (ii) it had invited the Parties to provide observations thereon pursuant to ICSID Arbitration Rule 37(2); and (iii) it expected to render its decision after receipt of the Parties’ observations.
57.
On 22 September 2015, the Parties filed their respective Observations on the EC First Application. Claimants' observations were accompanied with legal authorities CL-065 to CL-085.19
58.
On 2 October 2015, Respondent filed a Reply to Claimants' Observations on the EC First Application.
59.
On 5 October 2015, Claimants filed a Reply to Respondent's Observations on the EC First Application, accompanied by exhibit C-125.
60.
On 6 January 2016, the Tribunal issued Procedural Order No. 3 ruling on the EC First Application. The Tribunal (i) authorized the EC to file a written submission on the issue of the application of the ECT to intra-EU disputes; (ii) granted the Parties an opportunity to file observations on the EC's written submission; (iii) granted the EC access to certain portions of the Parties' written pleadings relating to the issue on which the EC would make its submission, with redactions of commercially sensitive information; (iv) denied the EC's request to attend the Hearing to present oral argument, but it invited the Parties to inform the Tribunal after receipt of the EC's written submission whether they would agree to attendance of the EC to a limited portion of the Hearing for the exclusive purpose of answering any questions that the Tribunal and/or the Parties might have concerning such written submission; and (v) rejected Claimants' request that the intervention by the EC be conditioned on an undertaking to pay Claimants' costs in dealing with the EC's intervention.
61.
On 13 January 2016, the Parties communicated to the Tribunal their agreed schedule for various of the procedural steps ordered in Procedural Order No. 3. On 28 January 2016, the Tribunal approved the Parties' agreement and established additional deadlines in connection with this matter. That same day, the Tribunal communicated to the EC the calendar for its written submission and the other steps pertaining to the EC.
62.
On 15 August 2016, the Parties informed the Tribunal that the relevant excerpts of the pleadings could be transmitted to the EC without redactions. In addition, on 17 August 2016, the Parties informed the Tribunal that they would be amenable to providing to the EC copies of the legal authorities cited in their submissions, if requested.
63.
On 17 August 2016, pursuant to Procedural Order No. 3, the Tribunal transmitted to the EC certain excerpts of the Parties’ pleadings, directing that the EC could use them "exclusively for the purposes of preparing its written submission in this arbitration and shall not communicate them to third parties or use them outside this arbitration."
64.
Following a request by the EC dated 31 August 2016, agreed upon by the Parties, on 2 September 2016, the Tribunal transmitted to the EC three legal authorities and three exhibits filed by the Parties, under the same condition referred to supra, 63.
65.
On 5 September 2016, the EC submitted its written submission accompanied by exhibits EC-001 to EC-018 ("EC Written Submission").
66.
On 11 November 2016, as part of Procedural Order No. 5 and having heard the Parties’ views, the Tribunal decided that the EC would not be invited to the Hearing, in light of Claimants’ objection and ICSID Arbitration Rule 32(2).

E. The Oral Procedure

67.
The Hearing on Jurisdiction and the Merits was held in the International Dispute Resolution Centre Ltd. (IDRC), London, United Kingdom,20 from 12-19 December 2016 ("the Hearing").21
68.
The following persons were present during the Hearing:

Tribunal:

Prof. Donald M. McRae President
The Honourable L. Yves Fortier Arbitrator
Prof. Laurence Boisson de Chazournes Arbitrator

ICSID Secretariat :

Ms. Luisa Fernanda Torres Secretary of the Tribunal

For Claimants :

Counsel
Ms. Karyl Nairn QC Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Mr. David Herlihy Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Mr. George Zimmerman Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Ms. Sara Nadeau-Séguin Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Ms. Teresa Queirós Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Mr. Jacob Lefkowitz Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Ms. Paula Henin Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Mr. Aaron Shorr Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Ms. Carla Alves Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Ms. Mónica Lasquibar Cuatrecasas Gonçalves Pereira
Mr. Luis Perez de Ayala Cuatrecasas Gonçalves Pereira

Party Representatives
Mr. Mitchell S. Ross Party Representative
Mr. Robert B. Sendler Party Representative
Mr. Fernando Bergón Party Representative
Mr. Mark Sorensen Party Representative
Mr. Charlie Sieving Party Representative
Mr. George Nicolaï Party Representative

Witnesses (*)
Mr. F. Mitchell Davidson NextEra Energy Resources, LLC (Retired)
Mr. Miguel Ignacio Arechabala NextEra Energy Resources, LLC
Ms. Rebecca Kujawa NextEra Energy Resources, LLC
Mr. George Nicolaï NextEra Energy Global Holdings Coöperatieve U.A.
Mr. Mark Sorensen NextEra Energy Resources, LLC and NextEra Energy Global Holdings Coöperatieve U.A.

Experts
Dr. Manuel Abdala Compass Lexecon, LLC
Prof. Pablo Spiller Compass Lexecon, LLC
Mr. Henry Price Solar Dynamics, LLC
Mr. Julian Delamer Compass Lexecon, LLC
Mr. Alan Rozenberg Compass Lexecon, LLC
Mr. Jack Ghaleb Compass Lexecon, LLC

For Respondent :

Counsel
Ms. Mónica Moraleda Abogacía del Estado, Ministerio de Justicia
Mr. Diego Santacruz Abogacía del Estado, Ministerio de Justicia
Ms. Amaia Rivas Abogacía del Estado, Ministerio de Justicia
Mr. Javier Castro Abogacía del Estado, Ministerio de Justicia
Mr. José María Alonso Abogacía del Estado, Ministerio de Justicia
Mr. Antolín Fernández Abogacía del Estado, Ministerio de Justicia

Party Representatives
Mr. Alfonso Olivas IDAE
Ms. Raquel Vázquez IDAE

Witnesses (*)
Mr. Carlos Montoya IDAE

Experts
Mr. Eduard Saura Accuracy
Mr. Christophe Schmit Accuracy
Mr. Stéphane Perrotto Accuracy
Ms. Laura Cózar Accuracy
Mr. Alberto Fernández Accuracy
Mr. Carlos Canga Accuracy
Mr. Jesús Casanova ETSIIM
Prof. Jorge Servert STA

Court Reporters :

Mr. Paul Pelissier DR-ESTENO
Mr. Dante Rinaldi DR-ESTENO
Mr. Dionisio Rinaldi DR-ESTENO
Ms. Diana Burden Diana Burden Ltd.
Ms. Laurie Carlisle Diana Burden Ltd.

Interpreters :

Mr. Jesús Getan Bornn
Mr. Mark Viscovi
Ms. Amalia Thaler de Klem

(*) not present before their testimony

69.
The following persons were examined during the Hearing:

On behalf of Claimants :On behalf of Respondent :
Witnesses Mr. F. Mitchell Davidson Mr. Miguel Ignacio Arechabala Ms. Rebecca Kujawa Mr. George Nicolaï Mr. Mark SorensenWitnesses Mr. Carlos Montoya
Experts Mr. Henry Price Dr. Manuel Abdala Prof. Pablo SpillerExperts Mr. Jesús Casanova Prof. Jorge Servert Mr. Eduard Saura Mr. Stéphane Perrotto

70.
Throughout the Hearing, each Party submitted various demonstrative exhibits, as follows:

• Claimants: Claimants’ Opening Presentation (unnumbered); Mr. Henry Price’s Hearing Presentation (unnumbered); Compass-Lexecon Hearing Presentation (unnumbered); Claimants’ Closing Presentation (unnumbered).

• Respondent: Respondent’s Opening Presentations I to IV (R-459 to R-462); Accuracy Hearing Presentations I and II (unnumbered); Prof. Jorge Servert’s Hearing Presentation (unnumbered); and Mr. Jesús Casanova’s Hearing Presentation (unnumbered); Respondent’s Closing Presentation (R-463)

71.
On 16 December 2016, during Day 5 of the Hearing, a list of areas of agreement and disagreement among the technical experts was distributed.22
72.
On 10, 14 and 15 February 2017, the Parties submitted their agreed corrections to the Hearing transcripts. On 14 February 2017, the Tribunal informed the Parties that the agreed revised versions would stand as the final versions of the transcript.

F. The Post-Hearing Procedure

73.
On 8 February 2017, the Tribunal formulated a Post-Hearing question to the Parties.
74.
Following an extension agreed by the Parties and approved by the Tribunal, on 27 February 2017, each Party submitted its Post-Hearing Submission addressing the Tribunal’s question.
75.
Following authorization from the Tribunal, on 7 March 2017, Claimant filed its Post Hearing Reply, and 8 March 2017, Respondent filed its Post-Hearing Reply.23
76.
On 11 May 2017, Claimants submitted an application seeking authorization to add one additional legal authority to the record, namely: Eiser Infrastructure Limited and Energia Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB 13/36, Award (4 May 2017) ("Eiser Award") in Spanish, requesting an order to Spain to provide the English version, and an opportunity to file submissions on this legal authority. On 17 and 18 May 2017, Respondent filed observations in response. On 23 May 2017, the Tribunal authorized the introduction of the Eiser Award into the record, invited Respondent to introduce the English version, and afforded the Parties an opportunity to file submissions on this legal authority. Accordingly, on 30 May 2017, Respondent introduced the Eiser Award into the record in English and Spanish (without a designated legal authority number).
77.
Having considered the Parties' respective positions, on 8 June 2017, the Tribunal established a schedule for the Parties' submissions on the Eiser Award, later amended on 6 July 2017. Accordingly, the Parties filed their submissions as follows: on 22 June 2017, Claimants filed observations on the Eiser Award; on 11 July 2017, Respondent filed response observations on the Eiser Award; on 18 July 2017, Claimants filed reply observations on the Eiser Award; and on 25 July 2017, Respondent filed rejoinder observations on the Eiser Award.
78.
On 18 July 2017, Claimants also filed a communication raising a procedural matter arising out of Spain's observations on the Eiser Award. Specifically, Claimants observed " [t]hat Spain has contended that a proper application of the Eiser award on liability requires a new and different approach to quantum, excluding each of the measures referred to in this case as Regulatory Framework II." While opposing Respondent's contention as a matter of principle and substance, and raising procedural objections to the introduction of a new quantum defence at this stage of the proceeding, Claimants asserted that "should the Tribunal nonetheless wish to proceed to consider the long-term quantum impact of Regulatory Framework II, or any of its individual elements, the Claimants agree with Spain that this would require the parties to provide new expert reports addressing those calculations, following a procedure that ensures due process […]." Following an invitation by the Tribunal, on 25 July 2017, Respondent provided observations on this matter as part of its rejoinder observations on the Eiser Award. It asserted inter alia that "the expert reports […] do not reflect, in any way, the separate impact of the individual measures disputed by Claimants in this arbitration" and agreed with Claimants that the quantification of that impact would require new expert reports.
79.
On 25 July 2017, as part of its rejoinder observations on the Eiser Award, Respondent filed an application to introduce additional documents to the record. On 17 August 2017, Claimants submitted a response, and on 28 August 2017, Respondent submitted a reply. On 26 September 2017, the Tribunal authorized the introduction of only some of the documents to the record, namely: the Notice of Registration of Spain's annulment application of the Eiser Award, dated 28 July 2017 and its accompanying cover letter. Accordingly, on 28 S eptember 2017, Respondent submitted those documents to the record as exhibits R-464 and R-465.
80.
On 23 November 2017, Respondent filed an application to introduce an additional document to the record, namely, the EC Decision on State Aid, Case SA.40348 (2015/NN) (10 November 2017) ("the EC Decision"), and asked the Tribunal to afford the Parties an opportunity to file submissions in connection therewith. On 29 November 2017, Claimants submitted a response. On 5 December 2017, Respondent submitted a reply. On 14 December 2017, the Tribunal authorized the introduction of the EC Decision into the record, and it granted the Parties an opportunity to submit written submissions in connection therewith. Accordingly, on 15 December 2017, Respondent submitted the EC Decision, designated as RL-124.
81.
On 8 January 2018, each Party filed its respective submission on the EC Decision.
82.
On 5 March 2018, Claimants filed an application seeking leave to add an additional legal authority to the record, namely: Novenergía II - Energy & Environment (SCA), SICAR v. Kingdom of Spain (SCC Case No. 2015/063), Award (15 February 2018) ("Novenergía Award"). On 9 March 2018, Respondent submitted a response to Claimants' application, and in turn filed an application seeking authorization to add three additional legal authorities to the record, namely: the Ruling of the EUCJ in case C-284/16 (Achmea Case) (6 March 2018) ("Achmea Judgment"); Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award (27 December 2016) ("Blusun Award"), and Mr. Jürgen Wirtgen, Mr. Stefan Wirtgen, Mrs. Gisela Wirtgen and JSW Solar (sw ei) GmbH & Co. KG v. The Czech Republic, PCA Case No. 2014-03, Award (11 October 2017). On 15 March 2018, Claimants submitted a response to Respondent's application. On 21 March 2018, Respondent submitted a reply, which also added a request to introduce into the record Spain's request for clarification and supplementation of the Novenergía Award. On 26 March 2018, the Tribunal ruled on these applications, authorizing the introduction of the Novenergía Award, the Achmea Judgment and the Blusum Award into the record, and dismissing the other requests. The Tribunal also afforded the Parties an opportunity to file submissions on these new legal authorities. Accordingly, on 28 March 2018, Claimants submitted the Novenergía Award, as legal authority CL-195; and on 29 March 2018, Respondent submitted the Achmea Judgment and the Blusun Award, as legal authorities RL-125 and RL-126.
83.
In its application of 9 March 2018 referred to above, Respondent "reserve[d] its right to request that new expert reports be filed by both parties to determine the real impact of each of the disputed measures." This statement was repeated in the reply submission of 21 March 2018. In their 15 March 2018 response, Claimants observed they "consider that they have provided the expert evidence necessary to quantify their damages resulting from Spain's violations of the ECT."24 In its ruling of 26 March 2018, the Tribunal observed that "the Tribunal will deal with any such application if and when it is actually made."
84.
On 9 April 2018, each Party filed its respective submission on the Novenergía Award, the Blusun Award and the Achmea Judgment.
85.
On 16 April 2018, Claimants filed an application to add an additional legal authority to the record, namely: Novenergía II – Energy & Environment (SCA), SICAR v. Kingdom of Spain (SCC Arbitration 2015/063), Procedural Order No. 17 (9 April 2018) ("Novenergía PO 17"). On 19 April 2018, Respondent filed a response to Claimants' application, and in turn, it filed its own application seeking leave to (i) introduce a number of additional documents to the record; (ii) conduct a site visit to Claimants' domicile; and (iii) file a short expert report addressing the facts referred to in the application.25 On 23 April 2018, Claimants filed a reply. On 27 April 2018, Respondent filed a rejoinder. On 2 May 2018, Claimants filed a communication asking the Tribunal for a brief opportunity to respond to one of the assertions in Respondent's communication of 27 April 2018.
86.
On 4 May 2018, the Tribunal issued Procedural Order No. 8 ruling on the above referenced applications. The Tribunal (i) authorized the introduction of the Novenergía PO17, and the Novenergía Annulment Notice of Registration into the record; and (ii) it rejected the requests to add other documents to the record, conduct a site visit and to file an additional expert report. Accordingly, on 9 May 2018, Claimants submitted the Novenergía PO 17, as legal authority CL-196; and on 6 June 2018, Respondent submitted the Novenergía Annulment Notice of Registration, as exhibit R-466.
87.
On 16 May 2018, the EC submitted a communication stating that "in case the Tribunal date its written observations in the light of the recent judgment of the European Court of Justice in Case C-284/16 Achmea v Slovak Republic, and in particular to set out its view on the consequences of that judgment for pending arbitration cases based on the Energy Charter Treaty" ("EC Second Application"). The communication was transmitted to the Parties and the Tribunal on 17 May 2018.
88.
Following an invitation from the Tribunal, on 23 May 2018, each Party filed observations on the EC Second Application.
89.
On 29 May 2018, the Tribunal ruled on the EC Second Application. Noting that "the Parties have already provided comprehensive comments on the Achmea decision including comments on the implications of the decision for arbitration cases based on the Energy Charter Treaty" (supra, ¶ 84), the Tribunal ruled that it did not need an update of the EC Written Submission, and so informed the EC and the Parties.
90.
On 28 September 2018, the Parties submitted their respective Statements of Costs. On 11 October 2018, Respondent filed a request for support of certain assertions in Claimants’ Statement of Costs; on 17 October 2018, Claimants provided observations in response; and on 23 October 2018, Respondent filed a reply accepting that the matter could be resolved through a letter from Claimants’ counsel. On 26 October 2018, the Tribunal wrote to the Parties, noting that it understood the matter had been resolved and needed no ruling from the Tribunal. On 29 October 2018, Claimants’ counsel provided the letter requested by Respondent.
91.
On 25 January 2019, Respondent filed an application seeking authorization to add an additional legal authority to the record, namely, the "Declaration of the Representatives of the Government of the Member States of 15 January [2019] on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union," and to authorize the Parties to file written submissions addressing this declaration. Following an invitation from the Tribunal, on 31 January 2019, Claimants filed a response. On 5 February 2019, the Tribunal authorized Respondent to introduce into the record the full set of declarations issued by the EU Member States in January 2019. On 20 February 2019, Respondent introduced the EU Member States Declarations into the record as legal authorities RL-127 to RL-129.

III. FACTUAL BACKGROUND

92.
The section that follows provides an overview of the facts underlying this dispute. It does not purport to be an exhaustive narrative of all the facts that have been discussed in this proceeding or of all factual allegations made by the Parties. To the extent the Tribunal has deemed it appropriate, certain facts and factual allegations made by the Parties are also described and addressed in the course of the Tribunal’s legal analysis of the claims at issue. This said, the Tribunal has considered the entirety of the Parties’ submissions of fact in their written and oral submissions, whether or not they are expressly discussed in this section.

A. Introduction

93.
This case concerns a project for the construction of two concentrated solar power ("CSP") plants in Navalvillar de Pela (Badajoz) in the autonomous community of Extremadura in Spain by the Claimants, known as Termosol 1 and Termosol 2 (together, the "Termosol Plants").26 The dispute revolves around measures implemented by Respondent modifying the regulatory and economic regime of renewable energy projects in Spain and their effect on the Claimants’ investments.
94.
The Claimants were incorporated in the Netherlands in 2008. NextEra Energy Global Holdings B.V. ("NextEra Global") was incorporated on 27 March 2008;27 while NextEra Energy Spain Holdings B.V. ("NextEra Spain") was incorporated on 7 May 2008.28
95.
NextEra Global is the 100% owner of NextEra Spain, which is the 100% owner of the Spanish company NextEra Energy España S.L.U. ("NEE España"), which in turn is the 100% owner of the Spanish companies Planta Termosolar de Extremadura, S.L.U. ("PTE"), Planta Termosolar de Extremadura 2, S.L.U. ("PTE2"), and NextEra Energy España Operating Services, S.L.U ("NEEOS"). The PTEs own and operate the Termosol Plants.29
96.
Since 2011, NextEra Global has been 100% owned by the Netherlands corporation NextEra Energy Global Holdings Cooperative U.A., which in turn is a subsidiary of NextEra Energy Inc., a U.S. corporation.30 Throughout these proceedings, NextEra Energy Inc. has been treated as the parent company of the Claimants.
97.
Claimants contend that "[a]fter the Claimants’ Spanish companies had irrevocably committed to constructing the Termosol Plants and had spent around 750 million euros substantially completing construction, Spain completely and retroactively altered the remuneration regime applicable to the Termosol Plants [...]."31
98.
With this context, the Tribunal now proceeds to describe the regulatory framework for renewable energy investments in Spain, in particular for CSP investments, its evolution and the measures that have given rise to this dispute. The Tribunal will then describe the Claimants’ investments in Spain.

B. The Regulatory Framework for Renewable Energy Investments

99.
As a preliminary matter, the Tribunal notes that the Parties agree that the Spanish system is formed by different types of instruments, namely, the Spanish Constitution, Organic Laws, Ordinary Laws, Royal Decree-Laws ("RDL"), Royal-Decrees ("RD"), Ministerial Orders and Resolutions.32 It is also agreed that an RDL has the force of a Law, it may be enacted by the Executive branch in extraordinary and urgent circumstances, and it must be ratified by the Legislative branch;33 an RD also emanates from the Executive, and it is of lower hierarchy vis-à-vis Laws and RDLs;34 and a Ministerial Order is a regulation adopted by one of the different Ministries, lower in the legislative hierarchy than RDs.35 Respondent has also submitted that Resolutions are instruments which emanate from competent Government bodies, lower in the hierarchy than Ministerial Orders.36

(1) The Initial Framework

100.
Within the context of the 1992 United Nations Framework Convention on Climate Change ("UNFCC"), on 11 December 1997 a number of nations adopted the Kyoto Protocol, an international agreement committing its Parties by setting internationally binding greenhouse emission reduction targets.37 The Protocol was signed by Spain on 29 April 1998, and ratified on 31 May 2002.38 It entered into force on 16 February 2005.39
101.
On 14 May 1997, the European Commission issued Communication COM(97) 196, setting a target to reduce greenhouse gas emissions by 15% by year 2010, vis-à-vis the levels existing in year 1990.40

a. The Electricity Law

102.
In the above context, on 27 November 1997, Spain enacted Law 54/1997 on the Electricity Sector ("Electricity Law" or "Law 54/1997"),41 which regulated the activities for the provision of electricity in Spain.42 The Electricity Law distinguished between electricity generation under an "Ordinary Regime" (Title IV, Chapter I), and under a "Special Regime" (Title IV, Chapter II).
103.
Pursuant to Article 27 of the Electricity Law, electricity generation activities were considered part of the Special Regime in a number of categories listed by the law, "whenever they [were] carried out from facilities having installed capacity of no more than 50 MW." The categories listed included facilities where "non-consumable renewable energies, bio-mass or biofuels of any type are used as primary energy, provided their holder [did] not engage in generation activities under the ordinary regime43."
104.
Article 30 of the Electricity Law established the rights and obligations of producers under the Special Regime.44 Those obligations included, among others, "[t]o comply with technical generation standards as well as with the standards governing transport and the technical management of the system ;" and "[t]o provide the Authorities with information concerning the generation, consumption and sale of energy and on any other points as determined."45 Article 30(4) of the Electricity Law provided that:

"4. […] the generation of electricity via renewable energy sources (other than hydroelectric), biomass and also hydroelectric power stations with capacity of equal to or less than 10 MW will receive a premium to be set by the Government, so that the price of the electricity sold by these facilities will fall within a range of between 80% and 90% of the average electricity price, to be calculated by dividing the income generated by invoicing for electricity supplied by the energy supplied.

To calculate the premiums, consideration will be given to the voltage level where the energy enters the network, to the effective contribution to environmental improvement, primary energy savings and energy efficiency, and to any investment costs that may have been incurred, in order to achieve reasonable profitability rates by reference to the cost of money in capital markets.

[…]

On an exceptional basis, for solar energy, the Government shall be able to set a premium in addition to the limits defined in this article."46

105.
Article 31 of the Electricity Law required facilities in the Special Regime to register in an Administrative Registry for Electricity Production Facilities ("Registro Administrativo de Instalaciones de Producción de Energía Eléctrica"), in the Ministry of Industry and Energy, specifying the remunerative regime adopted in each case.47 That registry would also include information about the conditions and the power of the facility ("condiciones" y "potencia de la instalación").48 Autonomous communities were authorized to create the local registries for the facilities located in their territory.49

b. RD 2818/1998, RD 1432/2002, RD 436/2004, RDL 7/2006

106.
On 23 December 1998, Spain enacted Royal Decree 2818 ("RD 2818/1998"),50 to regulate the requirements and procedures to qualify for the Special Regime, the procedure for registration, the conditions for delivery of electricity and the applicable economic regime.51 Article 9 established the Administrative Registry for Production Facilities under the Special Regime ("Registro Administrativo de Instalaciones de Producción en Régimen Especial" or "RAIPRE").52 Article 23 provided for a "premium or incentive" in addition to the market price, for facilities with power (potencia) equal to or less than 50MW that were registered in the RAIPRE.53 Article 32 established that the premiums would be revised every four years.54
107.
The Electricity Law required that, "[i]n order for renewable energy sources to cover at least 12% of Spain's total energy demand by the year 2010," a plan should be "drawn up to promote renewable energies and whose objectives shall be taken into account in the setting of premiums."55 Accordingly, on 30 December 1999, Spain's Council of Ministers approved the 2000-2010 Renewable Energy Plan.56 That Plan set forth "the principal elements and guidelines […] relevant in the articulation of a strategy […] for the growth of each of the renewable energy areas, taken together, to cover at least 12% of primary energy in the year 2010."57
108.
On 27 September 2001, the European Parliament and Council adopted Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in the internal electricity market ("2001 Renewable Energy Directive").58 Article 3 required Member States "to take appropriate steps to encourage greater consumption of electricity produced from renewable energy sources in conformity with the national indicative targets […]."59 Spain's indicative target for the contribution of electricity produced from renewable energy sources to gross electricity consumption by 2010 was set at 29.4.60 Recital 12 noted that "[t]he need for public support in favour of renewable energy sources is recognised in the Community guidelines for State aid for environmental protection […]," adding that "the rules of the Treaty, and in particular Articles 87 and 88 thereof, will continue to apply to such public support."61
109.
The Electricity Law also required that every year, or when required by special circumstances, the Government would approve or amend a reference or average electricity tariff through a Royal Decree.62 Accordingly, on 27 December 2002, Spain enacted Royal Decree 1432/2002 ("RD 1432/2002"),63 which established the methodology to set the annual reference or average electricity tariff.64
110.
On 12 March 2004, Spain enacted Royal Decree 436/2004 ("RD 436/2004"),65 which derogated from RD 2818/1998.66 RD 436/2004 established a new "methodology for the updating and systematisation of the legal and economic regime" for production of electricity under the Special Regime. Pursuant to Article 22, producers under the Special Regime would have the option to: (i) sell to a distributor under a "regulated tariff" ("feed-in-tariff" or "FiT") or (ii) sell on the wholesale market "through the system of offers and bids managed by the market operator" at a "sale price of the electricity […] resulting in the organised market […] or the price freely traded by the plant operator or representative, supplemented by an incentive and, as the case may be, by a premium […]" ("pool + premium").67 Both options were "expressed in euro cents per kilo-watt hour ;"68 and both were established by reference to a percentage of the annual reference or average electricity tariff, and therefore subject to market fluctuations.69 In addition, Article 40 established that:

"1. During 2006, […] the tariffs, premiums, incentives and supplements defined in this Royal Decree shall undergo revision. […] . Every four years, starting from 2006, a new revision shall take place.

2. The tariffs, premiums, incentives and supplements resulting from any of the revisions provided for in this section shall come into force on January 1st of the second year subsequent to the year that the revision has been carried out.

3. The tariffs, premiums, incentives and supplements resulting from any of the revisions provided for in this section shall apply solely to the plants that commence operating subsequent to the date of the entry into force referred to in the paragraph above and shall not have a backdated effect on any previous tariffs and premiums. […]."70

111.
On 26 August 2005, Spain's Council of Ministers approved the 2005-2010 Renewable Energy Plan,71 which revised the earlier 2000-2010 Renewable Energy Plan. The revision sought to "maintain[] the commitment to cover at least 12% of the total energy consumption in 2010;" and it incorporated the other two objectives for 2010, namely "29.4% electricity generated using renewable energies and 5.75% biofuels in transport."72
112.
In August 2005, the Ministry of Industry, Tourism and Commerce and the Institute for the Diversification and Saving of Energy also produced a summary of the 2005-2010 Renewable Energy Plan.73 That summary stated that "different technical and financial hypotheses [were] considered in order to determine the profitability of typical projects" and that "[r]eturns were calculated based on an Internal Rate of Return (IRR) measured in current euros for each project type of close to 7%, financed with equity (before external finance) and after tax."74
113.
On 15 December 2005, the Spanish Supreme Court ruled and rejected a challenge against RD 436/2004.75 The Supreme Court held that:

"[…] There is no legal obstacle […] 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 so long as this is done within the framework established by the Electricity Law. […]."76

114.
On 23 June 2006, Spain enacted Royal Decree-Law 7/2006 ("RDL 7/2006"),77 which adopted certain urgent measures for the energy sector. Article 1(12) afforded producers in the Special Regime "[p]riority for access to the networks for the transport and distribution of generated energy, always maintaining the reliability and safety of the networks."78
115.
On 25 October 2006, the Spanish Supreme Court ruled on a challenge against some amendments to RD 436/2004.79 The Supreme Court held:

"THREE - [...] Article 30 of the Electricity Law [...] allows [...] companies to expect that the fixing of the premiums can be included as a factor relevant to their obtaining 'reasonable rates of return with reference the cost of money in the capital market' or [...] 'reasonable compensation for their investments.' However 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."80

116.
On 14 February 2007, the Spanish Comisión Nacional de Energía ("CNE") issued Report 3/2007. That report addressed a proposed Royal Decree "for the regulation of the generation of electricity under the special regime and of specific facilities using comparable technologies under the ordinary regime."81 The report stated:

"Minimise regulatory uncertainty. The CNE understands that transparency and predictability in the future of economic incentives reduce regulatory uncertainty, which encourages investment in new capacity and minimises the cost of financing projects, 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 life of the facility, setting in such case, both transparent annual update mechanisms associated with the evolution of robust indices (such as the average or reference rate, the CPI, ten-year bonds, etc.), as well as periodic reviews, for example, every four years, which only affect new installations, in terms of investment costs, and which may affect the reduction of costs operation also to existing plants."82

117.
On 20 March 2007, the Spanish Supreme Court ruled on a challenge against RD 2392/2004 which had set the electricity tariff for 2005. The petitioners had asked that certain provisions of RD 2392/2004 regarding the premiums for 2005 be declared null, and that RD 2818/1998 and RD 436/2004 be applied instead.83 The Supreme 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."84

(2) Regulatory Framework I85

a. RD 661/2007

118.
On 25 May 2007, Spain enacted Royal Decree 661/2007 "regulating the activity of electricity production under the Special Regime" ("RD 661/2007").86 RD 661/2007 replaced RD 436/2004.87 According to its Preamble:

"The economic framework established in the present Royal Decree develops the principles provided in Law 54/1997, of 27 November, on the Electricity Sector, guaranteeing the owners of facilities under the special regime a reasonable return on their investments, [...]."88

119.
Pursuant to Article 24(1) of RD 661/2007, producers under the Special Regime continued to have the option to (a) "[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 ;" ("feed-in-tariff" or "FiT ) or (b) "[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" ("pool + premium").89 Producers were allowed to elect either option for periods of no less than one year, and could change their selected option with notice of at least one month.90
120.
Article 2 of RD 661/2007 established categories of facilities, in relation to the primary energy used, the type of technology and the energy yield. Category b.1.2 covered "[f]acilities which use thermal processes alone for the transformation of solar energy, as the primary energy, into electricity." Those facilities were permitted to employ equipment which used "a fuel for the maintenance of the temperature of the heat transfer fluid in order to compensate for a lack of solar irradiation which may affect the planned delivery of energy," provided that the generation of electricity from such fuel was less than 12% of the total production of electricity, or up to 15% in certain circumstances.91
121.
Article 36 of RD 661/2007 dealt with the tariffs and premiums for solar energy facilities in category b. With respect to category b.1.2, it provided that "[t]he tariffs and premiums corresponding to facilities in Category b) shall be as provided in Table 3." Table 3 provided the following in the relevant portion:92
122.
According to Article 44, "[t]he 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 RPI [Consumer Price Index] less the value set out in the Additional Provision One [...]," namely, 0.25% until 31 December 2012 and 0.50% thereafter.93 Article 44(3) addressed the matter of reviews of tariffs, premiums, supplements and lower and upper limits in the following terms:

"During the year 2010, on sight of the results of the monitoring reports on the degree of fulfilment of the Renewable Energies Plan (PER) 2005-2010, and of the Energy Efficiency and Savings Strategy in Spain (E4), together with such new targets as may be included in the subsequent Renewable Energies Plan 2011-2020, 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."94

123.
For the CSP sector, the economic regime set out in RD 661/2007 would accrue to the first 500 MW of installed capacity.95
124.
Facilities for the production of energy under the Special Regime were subject to "compulsory registration" in the RAIPRE.96 Moreover, "the final registration of the facility in the [RAIPRE]" was a "necessary requirement for the application of the economic regime regulated under [RD 661/2007] to such facility, with effect from the first day of the month following the date of the final deed of entry into service of the facility."97
125.
In addition to the economic regime, RD 661/2007 afforded producers under the Special Regime the rights to "enjoy priority in access and connection to the electricity grid" under certain conditions set forth in Annex XI of RD 661/2007 or in subsequent regulations; and the right to sell their electricity output via distribution companies, or to "sell all or part of their net production by way of direct lines."98
126.
On 3 and 9 December 2009, the Spanish Supreme Court ruled and rejected various claims brought by renewable energy producers against certain provisions of RD 661/2007.99 Among others, the petitioners had argued that the first transitory provision of RD 661/2007 was in breach of Article 40(3) of RD 436/2004.100

b. RDL 6/2009

127.
On 23 April 2009, the European Parliament and Council adopted Directive 2009/28/EC on the promotion of the use of energy from renewable sources ("2009 RenewableEnergy Directive").101 This new directive set a "target of at least a 20 % share of energy from renewable sources in the Community's gross final consumption of energy in 2020."102
128.
Shortly thereafter, on 30 April 2009, Spain adopted Royal Decree-Law 6/2009 ("RDL 6/2009").103 The Preamble of RDL 6/2009 observed that the growing tariff deficit in Spain, that is, "the difference between collections based on the regulated rates set by the Administration and paid by consumers for their regulated supplies and access rates set on the deregulated market and the actual costs associated with those rates"was affecting the electricity system, putting at risk both "the financial situation of companies in the electricity sector" and the "sustainability of the system."104
129.
Referring to the growing impact of the Special Regime on the tariff deficit, one of RDL 6/2009's stated objectives was the introduction of measures to control the cost of that Special Regime and thereby the tariff deficit.105 Expressing concern for the financial viability of facilities already finalized, RDL 6/2009 also indicated that it was "necessary to adopt a measure of urgency to guarantee the necessary legal security for those who ha[d] made investments."106
130.
RDL 6/2009 put in place a Mechanism of Registration of Pre-assignment of Payment for the Special Regime Installations ("Mecanismo de Registro de Pre-asignación de Retribución para las Instalaciones del Régimen Especial") ("Pre-Assignment Registry").107 Article 4(2) of RDL 6/2009 provided that enrolment in the PreAssignment Registry was a "necessary condition to obtain the right to the economic scheme established in [RD 661/2007] […]."108 Article 4(3) established a number of detailed requirements for registration in the Pre-Assignment Registry.109 In turn, Article 4(8) provided that facilities registered in the Pre-Assignment Registry had a deadline of 36 months to be definitely registered in the RAIPRE, absent which "their economic right associated with inclusion in the [Pre-Assignment Registry] shall be revoked."110
131.
Pursuant to the 4 th transitory provision of RDL 6/2009, installations had a deadline of 30 days from entry into force of the RDL to submit their application for entry into the PreAssignment Registry (i.e. until 6 June 2009).111 In turn, the 5 th transitory provision established that if the capacity of the projects registered in the Pre-Assignment Registry exceeded the objectives set in RD 661/2007:

"[…] the economic system established in […] Royal Decree 661/2007 […] will be applicable and will be exhausted through those registered installations. In this case, by means of a resolution from the Council of Ministers at the initiative of the Ministry of Industry, Tourism and Commerce, annual restrictions may be established on the commissioning and start-up of the registered facilities and their prioritization, to avoid compromising the technical and economic sustainability of the system, appropriately extending the maximum term established in Article 4.8 of this Royal Decree-Law, if applicable. […]."112

132.
On 13 November 2009, the Spanish Council of Ministers entered into an Agreement to "establish[] the order of priority of the projects or plants presented to the administrative registry for pre-allocation of payment for the installations for the production of electrical energy, as established in [RDL 6/2009] […]." ("Agreement of the Council of Ministers").113 At the time, there had been 104 applications to the Pre-Assignment Registry for the CSP sector, for a total power capacity of 4,499 MW; which together with the capacity already installed exceeded the power targets of RD 661/2007.114
133.
According to the Agreement of the Council of Ministers, projects and facilities that had applied to the Pre-Assignment Registry were organized starting with those whose application and registration had occurred within the deadline established in RDL 6/2009, and in chronological order according to the date of their registration.115 The commissioning of the facilities was staggered in various phases, which were as follows for CSP: phase 1 (up to 850 MW); phase 2 (up to 1,350 MW); phase 3 (up to 1,850 MW) and phase 4 (rest of the power registered in the Pre-Assigned Registry).116 Annual restrictions were established with regard to the start-up and entry into operation of the facilities registered in the Pre-Assignment Registry, such that facilities could not begin delivering energy via the distribution or transportation network before certain dates, as follows: 1 January 2011 (for phase 2), 1 January 2012 (for phase 3) and 1 January 2013 (for phase 4).117 In addition, such facilities were required to obtain permanent registration in the RAIPRE and to commence selling energy prior to the following dates: 1 January 2013 (for phases 2 and 3), and 1 January 2014 (for phase 4).118

c. RD 1614/2010

134.
On 19 November 2010, Spain adopted Royal Decree 1565/2010 "regulating and modifying certain aspects in relation to the activity of electricity production under the special regime."119
135.
A few weeks later, on 7 December 2010, Spain enacted Royal Decree 1614/2010 ("RD 1614/2010"), which "regulates and amends given aspects relative to the production of electric energy from solar thermal electric and wind power."120 Article 4 of RD 1614/2010 provided that:

"For solar thermal electric technology facilities falling within [RD 661/2007] revisions of tariffs, premiums and upper and lower limits, referred to in Article 44.3 of [RD 661/2007], shall not affect those facilities definitively registered in the [RAIPRE as] of 7 May 2009, or those that shall have been registered in the [Pre-Assignment Registry] under the fourth transitional provision of [RDL 6/2009], and shall have fulfilled the obligation envisaged in Article 4.8 thereof, extended until 31 December 2013 for those facilities associated with phase 4 envisaged in the Agreement of the Council of Ministers of 13 November 2009."121

136.
Article 2 of RD 1614/2010 reduced the allowed operating hours of plants qualifying for the Special Regime. For CSP plants of 9-hour storage, those hours were set at 4,000 a year.122 Article 2(3) went on to provide that:

"[…] The equivalent hours of reference envisaged in the preceding table shall not be revisable during their operating life for those facilities registered definitively in the [RAIPRE as] of 7 May 2009 and for those registered in the [Pre-Assignment Registry] under the aegis of the fourth transitional provision of [RDL 6/2009], and which fulfil the obligation envisaged in Article 4.8 thereof, extended until 31 December 2013 for those facilities associated with phase 4 envisaged in the [Agreement] of the Council of Ministers of 13 November 2009 […]."123

137.
In turn, Article 3 required projects to opt for the regulated "feed-in-tariff" option for the first twelve months of operation.124
138.
RD 1614/2010 also allowed, under certain conditions, Special Regime facilities registered in the Pre-Assignment Registry classified under phases 2 to 4, to begin discharging energy to the grid on a trial basis 9 months before the 1 January applicable to their respective phases.125 In this case, the decree also established that the "calculation of the period during which the facility shall have the right to a premium or equivalent premium, shall take place as of the starting date of the collection of the premium or equivalent premium, as appropriate."126 RD 1614/2010 further provided that facilities registered in the Pre-Assignment Registry that had decided not to move forward with the facility, had a three-month period from the entry into force of the decree to "desist from the procedure," to avoid enforcement of the guarantees they had provided.127

(3) Other Developments in 2010-2012

a. RDL 14/2010

139.
On 23 December 2010, Spain adopted Royal Decree-Law 14/2010 ("RDL 14/2010"), to adopt certain "urgent measures for the correction of the tariff deficit in the Electricity Sector."128 According to RDL 14/2010, since RDL 6/2009 there were supervening circumstances that had a direct impact on the tariff deficit exceeding the maximum deficit limits set forth in RDL 6/2009.129 Article 1 of RDL 14/2010 (which amended Article 15 of the Electricity Law), provided that " [c]ompensation for regulated activities shall be financed through revenues collected by access fees for transmission and distribution networks, fully paid by consumers and producers."130

b. Law 2/2011

140.
On 4 March 2011, Spain enacted Law 2/2011.131 The stated purpose of the law was to "introduc [e] in the legal order the structural reforms necessary to create conditions to favour a sustainable economic development."132 Article 78 established "[a] minimum national goal of 20% [...] for the participation of renewable energies in gross energy consumption for the year 2020."133 Articles 77-79 dealt with principles of energy policy; national objectives for energy saving and efficiency and renewable energies; and aspects of indicative energy planning.134
141.
In 11 November 2011, Spain’s Council of Ministers approved the 2011-2020 Renewable Energy Plan.135 Its purpose was to "establish[] objectives in accordance with [the 2009 Renewable Energy Directive] and, pursuant to the stipulations of [RD] 661/2007, […] and of Law 2/2011 […]."136
142.
On 19 December 2011, S.E. Mariano Rajoy gave an inaugural address to Congress as reelected Prime Minister. Referring to an accumulated tariff deficit of EUR 22,000 million, and observing that "[e]lectricity tariffs for domestic consumers are the third most expensive in Europe, and the fifth highest for industrial consumers," Prime Minister Rajoy stated that:

"[…] If reforms are not made, the imbalances will be unsustainable, and increases in prices and tariffs will place Spain at the greatest disadvantage in terms of energy costs in the entire developed world. We must therefore introduce policies based on putting a brake on and reducing the average costs of the system, take decisions without demagoguery, employ all the technologies available, without exception, and regulate with the competitiveness of our economy as our prime objective."137

143.
On 28 December 2011, the CNE issued a press release concerning "the review of grid access fees and certain tariffs and premiums for facilities operating under the special regime."138 The CNE referred to:

" […] the need to immediately implement, amongst other measures, proposals for the regulation of activities, aimed at getting rid of the system's structural deficit and mitigating debt financing costs. Notwithstanding, to attain sufficiency it would be necessary to make larger scale additional adjustments to the costs of the activities regulated and to the tolling paid by consumers. An analysis could also be carried out of the introduction of measures to finance the costs of activities regulated externally to the access tolling."139

c. RDL 1/2012

144.
On 27 January 2012, Spain adopted Royal Decree-Law 1/2012 ("RDL 1/2012"), which "suspend[ed] the procedure for the pre-assignment of payment and remov[ed] the financial incentives for new electricity generating facilities generating using cogeneration, renewable energy sources and waste."140 RDL 1/2012 applied to facilities that had not been registered in the Pre-Assignment Registry by the time RDL 1/2012 entered into effect, namely, 28 January 2012.141
145.
On that same day, the Ministry of Industry, Energy and Tourism issued a press release stating that, the decree had been adopted "to temporarily suspend" the Pre-Assignment Registry procedures and the economic incentives for new renewable energy installations, "until a reform in the electric system is implemented that avoids the tariff deficit from being generated [...]."142
146.
On 27 April 2012, Spain approved its National Reform Program for 2012, which included a section discussing "measures directed towards solving the existing imbalance between revenue and costs of the electricity system."143
147.
In 2012, Spain undertook a series of additional reforms to the legal and economic regime for renewable energy investments.

(4) Regulatory Framework II

a. Law 15/2012

148.
On 27 December 2012, Spain enacted Law 15/2012 "On Tax Measures for Energy Sustainability," which entered into effect on 1 January 2013.144 This Law adopted the following measures:
149.
First, it amended Article 30 of the Electricity Law, to provide that production based on natural gas would now only receive the pool price.145
150.
Second, it created and regulated a Tax on the Value of the Production of Electrical Energy ("TVPEE").146 It imposed a 7% rate on "the total amount that the taxpayer receives for the electric power production and its incorporation into the electricity system, measured at the power station busbars, for each installation, during the tax period."147

b. RDL 2/2013

151.
On 1 February 2013, Spain enacted Royal Decree-Law 2/2013 ("RDL 2/2013"), adopting "urgent measures in the electricity system and in the financial sector."148 RDL 2/2013, adopted the following measures:
152.
First, it amended the inflation index applicable under the Special Regime, from the Consumer Price Index to the "Consumer Price Index at constant rates without unprocessed food or energy products."149
153.
Second, it amended Article 36 of RD 661/2007 (Table 3), such that the reference premium for renewable energy under the Special Regime was set at zero (0).150
154.
Third, Article 3 provided that Special Regime facilities that as of the effective date of RDL 2/2013 (i.e. 2 February 2013)151 had opted for the pool + premium option under Article 24(1)(b) of RD 661/2007 could not subsequently change that option.152 Further, (i) Special Regime facilities which between 1 January to 2 February 2013 had sold energy under the pool + premium option of Article 24(1)(b) of RD 661/2007 would "be paid the premium by the National Energy Commission, taking into consideration the energy produced during that period as if they had invoked [the feed-in- tariff option];" and (ii) Special Regime facilities which as of 2 February 2013 were selling under the pool + premium option of Article 24(1)(b) of RD 661/2007 would "automatically" be switched to the feed-in-tariff option in Article 24(1)(a) of RD 661/2007 "effective January 1, 2013, unless they expressly advise[d] the General Directorate of Energy and Mining policy of their desire to remain under [...] option b) [pool + premium] prior to February 15, 2013." If they did so, however, they would have to "adhere to said option under the conditions regulated in [RDL 2/2013]" and in consequence could not change that option thereafter.153
155.
On 19 February 2015, the Spanish Constitutional Court dismissed a constitutional challenge against RDL 2/2013;154 and on 26 March 2015, the Spanish Supreme Court also dismissed a petition asking it to bring a motion for unconstitutionality of RDL 2/2013 before the Constitutional Court.155

(5) Regulatory Framework III

a. RDL 9/2013

156.
On 12 July 2013, Spain enacted Royal Decree-Law 9/2013 ("RDL 9/2013") on "emergency measures to guarantee the financial stability of the electrical system."156 RDL 9/2013 repealed RD 661/2007, and certain provisions of RDL 6/2009.157
157.
RDL 9/2013 substituted the prior remuneration regime for renewable energy facilities for a new one, applicable both to new and existing installations.
158.
Under the new regime, renewable energy producers receive: (i) a payment of the wholesale market price for the electricity produced ("Market Payment"); (ii) a payment per Mwh of electricity produced to compensate operating costs not covered by the market price ("Operating Payment"); and (iii) and a payment per MWh of installed capacity on the basis of the net investment costs of a "standard" reference plant, also referred to as an "installation type" ("instalación tipo") ("Investment Payment").158 The remuneration would be calculated on the basis of standard income for the sale of electricity, standard exploitation costs and a standard value of the initial investment.159 RDL 9/2013 also provided that the parameters of the regime could be revised every six years.160
159.
According to RDL 9/2013, the "reasonable profitability" for facilities that as of the effective date of RDL 9/2013 "had a right to a premium economic regimen […] shall, before taxes, be in function of the mean yield on State Bonds on the secondary market for the ten years preceding the effective date of this royal decree-law plus 300 basis points" and "without prejudice to the revision provided in the last paragraph of" Article 30(4) of Law 54/1997.161
160.
RDL 9/2013 entered into effect on 14 July 2013.162 At that time, however, neither the standard reference plant categories, nor the values of the Investment Payment and the Operating Payment for each category had been determined. As a result, the feed-in-tariff regime of RD 661/2007 (but not the pool + premium option already abolished by RDL 2/2013) continued operating until June 2014, when further regulatory measures (RD 413/2014 and Ministerial Order IET 1045/2014, discussed further below) were published. The payments received during this transitional period were made, however, as a "payment on account" of the payments that would be received under the new regime.163
161.
On 17 December 2015 and 18 February 2016, the Spanish Constitutional Court dismissed constitutional challenges against certain provisions of RDL 9/2013.164

b. Law 24/2013

162.
On 12 September 2013, the Spanish Council of State issued an opinion (Dictamen) on the draft of a new Electricity Law.165
163.
On 26 December 2013, Spain adopted Law 24/2013 on the Electricity Sector, which eliminated the distinction between the Ordinary and the Special Regimes.166 It reaffirmed and developed the regime set forth in RDL 9/2013.
164.
Article 14(4) provided that the "payment parameters" for renewable energy projects under the new regime were set for regulatory periods of six-years, which could be revised before the start of the next regulatory period. It set forth certain guidelines for the "modification of the payment parameters" applicable to renewable energy facilities, including that (i) in each regulatory period revision "modifications may be made to all payment parameters ;" and between those periods "the value on which reasonable profitability will depend" can also be modified; (ii) once established, "the regulatory useful life or the standard value of the initial investment of a facility" cannot be modified; (iii) estimates of income for the sale of energy will be revised every three years, and the payment parameters adjusted in response to market price fluctuation vis-à-vis the prior three year estimate; and (iv) annual revisions of payment values for technologies whose operating costs depended on fuel prices.167
165.
Article 14(7) of Law 24/2013 provided for the creation of a specific remuneration regime under which remuneration would be calculated on the basis of standard income from the energy produced, standard operating costs and a standard initial investment figure, and will provide a reasonable return for the installation type in each applicable case.168
166.
In addition, Article 19 of Law 24/2013 established that "deviations occurring between electricity system income and costs" that are "not offset positively via the access tariffs and charges, will be financed by participants in the payment system, in direct proportion to the corresponding remuneration for their generation."169

c. RD 413/2014 and Ministerial Order IET/1045/2014

167.
In 2014 Spain adopted two further implementing regulations for the new framework. On 6 June 2014, Spain adopted Royal Decree 413/2014 ("RD 413/2014").170 A few days later, on 16 June 2014, the Ministry of Industry, Energy and Tourism issued Order IET/1045/2014 ("Ministerial Order IET/1045/2014").171

C. Claimants’ Investment

168.
The involvement of the NextEra companies with solar energy in Spain began with the agreements entered into in 2007, by a subsidiary of NextEra, relating to land easements, water rights and the development of up to four 49.9 MW CSP plants in Extremadura.172 In 2008, the Claimants were incorporated.173 Between 2008 and 2009, the Claimants devoted their efforts to development activities.174

IV. THE PARTIES’ CLAIMS AND REQUEST FOR RELIEF

180.
Claimants initially asked the Tribunal to:

"[...] [R]ender an Award:

(1) Declaring that the Tribunal has jurisdiction over the claims presented in this Memorial and in the Request for Arbitration;

(2) Declaring that the Respondent has breached its obligations under Articles 10(1) and 10(7) of the Energy Charter Treaty;

(3) Determining that each such breach has caused damages to the Claimants;

(4) Ordering the Respondent to pay to the Claimants damages based on the principle of full reparation, as determined by the Tribunal based on the expert report of Dr Manuel A. Abdala and Professor Pablo T. Spiller of Compass Lexecon, estimated in their report at €393.6 million (subject to any updating in their Reply Report, at the merits hearing and in any post-hearing submissions that may be directed by the Tribunal);

(5) Ordering the Respondent to pay pre-award interest, where applicable, as well as ordering post-award interest on the all [sic] sums awarded to the Claimants at the rate of 7.62%, EURIBOR +3.5%, or such other rate as the Tribunal deems appropriate, from the date of the Award until the date of full payment;

(6) Ordering the Respondent to pay the Claimants the full costs of this arbitration, including, without limitation, arbitrators' fees, the ICSID administrative costs, attorneys' fees, expert fees, and all other costs associated with these proceedings, together with interest on all sums so awarded; and

(7) Ordering any such other relief as the Tribunal may deem appropriate."191

181.
In their Reply on the Merits, Claimants updated their request for relief, asking the Tribunal to:

"[…] [R]ender an Award:

(1) Dismissing the Respondent's Preliminary Objections;

(2) Dismissing the Respondent's defences to liability and declaring that the Respondent has breached its obligations under Art. 10 of the ECT;

(3) Ordering the Respondent to pay the Claimants, in full reparation, damages in an amount to be determined by the Tribunal, based on the but for scenario or alternative but-for scenarios presented in the Second Expert Report of Compass Lexecon dated 9 August 2016;

(4) Ordering the Respondent to pay post-award interest on the above sums to the Claimants at an appropriate commercial rate, 6.84%, or alternatively, EURIBOR + 3.5%;

(5) Ordering the Respondent to pay the Claimants the full costs of this arbitration, including, without limitations, arbitrator's fees, administrative costs of the Centre, counsel fees, expert fees, and all other costs associated with these proceedings, together with post-award interest on all such sums so awarded at the rates specified in sub-paragraph (4) above; and

(6) Ordering any such other relief as the Tribunal deems appropriate."192

182.
As to jurisdiction, Claimants have asked the Tribunal to:

"[…] [D]eny each of Spain's preliminary objections; uphold its jurisdiction over the Claimants' claims; and render the relief requested in Part VII of the Claimants' Memorial and Part IX of the Reply Memorial."193

183.
Respondent, in turn, has asked the Tribunal:

"[…] [T]o render an Award:

a) Declaring that the Tribunal lacks jurisdiction over the claims of the Claimant or, where applicable, their inadmissibility, pursuant to the provisions of the Statement of Objections to Jurisdiction of the Kingdom of Spain dated 9 September 2015;

b) Additionally, should the Arbitral Tribunal decide that it has jurisdiction to hear this dispute, dismissing all of the intentions [sic] of the Claimant insofar as the merits, as the Kingdom of Spain has in no way been in breach of the ECT, as indicated in Section III of this Memorial, referring to the Merits;

c) Additionally, dismissing all of the claims regarding reparation of damages of the Claimant, as it is not entitled to compensation, pursuant to the provisions of Section IV of this Writ; and

d) Ordering the Claimant to pay all costs and expenses arising from this arbitration, including the ISCID [sic] administrative expenses, the arbitrators' fees and the attorneys' fees of the Kingdom of Spain, its experts and advisers, as well as any other cost or expenses incurred, including a reasonable rate of interest as of the date on which said costs were incurred to the date of their effective payment."194

184.
As to jurisdiction, Respondent asks that the Tribunal:

"[...] b) Declare that it lacks jurisdiction to hear the whole present arbitration or, in the alternative exclude from the scope of this arbitration the taxation and legislative measures to which D, E and F Objections refer to.

c) Directing the Claimants to pay all the costs and expenses incurred that arise from the present arbitration, including the administrative expenses incurred by ICSID, the fees of the Arbitrators and the fees of the legal representation of the Kingdom of Spain, as well as any other cost or expense incurred."195

185.
In the Reply on Jurisdiction, Respondent formulated its request for relief in slightly different terms, asking the Tribunal to:

"a) declare its lack of jurisdiction to hear the claims of the Claimants, or if applicable their inadmissibility, in accordance with what is set forth in Section III of this Memorial, referring to Jurisdictional Objections; and

d) Sentence [sic] the Claimants to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators’ fees, and the fees of the legal representatives of the Kingdom of Spain, their experts and advisors, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred and the date of their actual payment."196

186.
The Parties’ positions are summarized in the various sections below. At the outset, the Tribunal emphasizes that it has considered the entirety of the Parties’ arguments in their written and oral submissions, irrespective of whether an argument is mentioned expressly in the summaries of the Parties’ respective positions included in this Decision.

V. JURISDICTION

187.
In the Memorial on Jurisdiction, Respondent raised six objections to jurisdiction (one of which was ultimately withdrawn). The order in which these objections were presented was explicitly adjusted later in the Reply on Jurisdiction.197 In the sequence presented in the Reply on Jurisdiction, the objections are:

First, that the Tribunal lacks jurisdiction ratione materiae and ratione personae, because Claimants do not own or control directly or indirectly the claimed investments in this case, and therefore there is no "Investment" for purposes of Article 1(6) of the ECT; nor are Claimants "Investors" under the definition in Article 1(7) of the ECT, and in consequence, there is no "Investment" under the ECT either.198

Second, that the Tribunal lacks jurisdiction ratione voluntatis, because pursuant to Article 17 of the ECT, in the Memorial on Jurisdiction Respondent denied the application of Part III of the ECT to Claimants.199

Third, 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 a European Union ("EU") Member State, and nationals of another EU Member State ("intra-EU" disputes).200

Fourth, that the Tribunal lacks jurisdiction ratione voluntatis to hear Claimants' claim for breach of Article 10(1) of the ECT regarding a tax measure established in Law 15/2012, i.e., the TVPEE, because pursuant to Article 21 of the ECT, Article 10(1) does not apply to taxation measures.201 This is a partial objection.202

Fifth, that the Tribunal lacks jurisdiction to hear Claimants' claims for breach of Article 10(7) of the ECT regarding the TVPEE, because (i) pursuant to Article 21(3) of the ECT, Article 10(7) does not apply to this measure; and (ii) in any event, Article 10(7) cannot apply to impose most-favored-nation obligations.203 This is a partial objection.204

A. First Objection: Lack of Jurisdiction Ratione Materiae and Ratione Personae- Lack of an Investment and an Investor

(1) The Parties’ Positions

a. Respondent’s Position

(i) Lack of an "Investment" Under Article 1(6) of the ECT

188.
Respondent contends that the requirement of an "Investment" as the term is defined in Article 1(6) of the ECT is lacking in this case.205 Observing that according to this provision, "'Investment’ means every kind of asset, owned or controlled directly or indirectly by an Investor [...]," Spain initially argued that Claimants had neither ownership nor control over the assets claimed to constitute the investment in this case,206 namely: (i) a 100% of the shares of NEE España, the Spanish company that in turn owns three other Spanish companies: PTE, PTE2, and NEEOS; and (ii) a bridge loan granted to the Termosol Plants by Claimants.207 According to Spain, the alleged investment included the indirect participation in PTE, PTE2 and NEEOS.208
189.
Respondent’s initial position was that Claimants’ connection to these assets was "indirect,"209 and that the notion of indirect ownership in Article 1(6) of the ECT required finding the "real and ultimate possession of the asset."210 That, according to Spain, corresponded to NextEra Energy Inc., Claimants’ U.S. parent company.211 Therefore, neither Claimant owned the above-mentioned assets either directly or indirectly.212 In addition, Respondent argued, the assets were not controlled by Claimants directly or indirectly as required by Article 1(6) of the ECT and its corresponding Understanding 3, because the actual control fell again on NextEra Energy Inc., the U.S. parent company.213
190.
Respondent’s position was, however, amended in the Reply on Jurisdiction. There, Respondent asserted that it had been "able to effectively confirm that by means of certain internal asset transfer operations, the Claimants currently, formally and indirectly 'own’ the shares in the Termosol Power Plants," and stated that, as a result, Respondent was no longer "maintain[ing] that the Claimants do not 'own’ the assets."214

(ii) Lack of an "Investor" Under Article 1 (7) of the ECT

191.
This said, Respondent argues that the conceded indirect ownership is insufficient, because for there to be an "Investment" under Article 1(6) of the ECT, the asset must be owned or controlled by an "Investor" in the sense of Article 1(7).215 Absent an "Investor," there is no "Investment" either.216
192.
According to Spain, there is no "Investor" under Article 1(7) of the ECT, because Article l(7)(a)(ii) refers to "a company or other organization organized in accordance with the law applicable in that Contracting Party," and neither Claimant qualifies as a "company or other organization."217
193.
In Spain’s view, the terms "company or organization" should not be equated with "legal entity," as confirmed by, the ordinary meaning of those words, EU Law and Netherlands Law, and a "systematic interpretation" of the ECT.218
194.
According to Respondent, in their ordinary meaning the terms company or organization refer to "associations established according to, or for the performance of an end or purpose" that "require the disposition or order of personal and material resources in order to achieve an end."219 Claimants do not meet this ordinary meaning, Spain contends, because they have no workers, material or technical resources, and are pure holding companies.220
195.
Respondent also observes that, pursuant to Article 1(7) of the ECT, Claimants must be a company or organization in accordance with the law applicable in the country where they are established, i.e. the Netherlands. In the Netherlands, EU Law is applicable and prevails over internal law,221 or must be considered part of the national law.222 Referring to EU notions in the fields of small and medium size enterprises, tax law, competition law, state aid law and jurisprudence of the Court of Justice of the European Union ("CJEU") Respondent ultimately contends: "for an entity to be a company under EU Law, there must be an organisation whose purpose is to provide services or produce goods on the market. And an entity that simply has shares or stakes in other companies is not a company. EU Law does not accept that shell companies are undertakings."223 Accordingly, Spain argues, Claimants are not a company or other organization established under the applicable law.224
196.
Spain further maintains that the ECT distinguishes between the notions of "company" or "organization," and those of "legal entity" or "enterprise,"225 noting that: (i) Article 17 of the ECT uses only the expression "legal entity ;" and (ii) Article 26(7) of the ECT is drafted as it is to avoid the use of the expression "legal person" in Article 25(2)(b) of the ICSID Convention.226
197.
Finally, the object and purpose of the ECT also support this objection, given that "the Charter and the ECT aspire to promote the investment activity of companies that are actively involved in the energy market, which cannot be achieved by means of mere holding companies."227

b. Claimants’ Position

198.
Claimants contend that (i) the dispute concerns Claimants’ "Investments" as defined in Article 1(6) of the ECT;228 and (ii) Claimants are qualifying "Investors" under Article 1(7) of the ECT.229 Claimants point out that Respondent conflates two separate concepts ("Investment" and "Investor") within the overall concept of jurisdiction ratione materiae.230

(i) Claimants Have an "Investment" Under Article 1(6) of the ECT

199.
Answering Respondent’s initial contentions in the Memorial on Jurisdiction, Claimants argued that they do own protected "Investments" in the territory of Spain.231 According to Claimants, their investments were precisely identified in their initial submissions, which referred to "Claimants’ 100% equity shareholding in NEE España." Claimants explained that "[t]o the extent that NEE Espana itself owns assets (such as their 100% ownership of the PTEs and NEEOS) [...] "these are qualifying investments under [...] the ECT [...] but they are ultimately reflected in the value of the Claimants’ shareholding in NEE España and the Claimants do not seek double-recovery for those investments."’232 In Claimants’ view, that 100% equity interest in NEE España, directly owned by NextEra Spain (Claimant 2) and indirectly owned by NextEra Global (Claimant 1), unquestionably qualifies within Article 1(6)(b) of the ECT.233 It also settled law that an investor can "claim for harm to the value of its shareholding if the assets of the company in which it owns shares suffer harm by reason of a State's unlawful conduct."234 For Claimants, "Spain has not disputed that the Claimants directly or indirectly own 100% of the issued share capital in NEE España" the "Investment" identified since the Request for Arbitration.235
200.
Claimants also opposed Respondent’s interpretation of Article 1(6) of the ECT, on the ground that: (i) it was contradicted by the ordinary meaning of the text, and it would require reading into the provision a criterion of "ultimate ownership" that was not there;236 (ii) the discussion of "control" was irrelevant because the express wording of Article 1(6) refers to two deliberate alternatives ("owned or controlled");237 (iii) Article 17 of the ECT did not assist Spain, because that provision necessarily presupposes that an investor who is not the ultimate owner is prima facie protected until a denial is validly exercised;238 and (iv) the case law invoked by Spain did not support its position, and in fact tribunals have routinely accepted claims by intermediary subsidiaries.239
201.
Given Respondent’s amendment of its position, in the Rejoinder on Jurisdiction Claimants merely observed that "Spain [...] admits that Claimants’ indirect participation in the capital of the Termosol Plants" is an "Investment" under Article 1(6) of the ECT, and focused on the contentions relating to Article 1(7) of the ECT.240

(ii) Claimants Are "Investors" Under Article 1(7) of the ECT

202.
Observing that Article 1 (7)(a)(ii) of the ECT defines "Investor" as "a company or other organization organized in accordance with the law applicable in that Contracting Party," Claimants argue that, by its plain terms this provision imposes no further requirements;241 adding that ECT tribunals have consistently rejected attempts to alter the scope of this definition.242 Claimants assert that the definition is satisfied here because "each of the Claimants is a company organised in accordance with the laws of the Netherlands" and the Netherlands is an ECT Contracting Party.243
203.
In Claimants’ view, Spain’s contentions on the basis of the economic theory of organizations and concepts in EU tax, competition and state aid law and in the EU regulations for small and medium enterprises are "inapposite," "irrelevant," and "unconvincing," and cannot alter the treaty text.244 Moreover, Claimants argue that Article 17(1) of the ECT does not assist with the interpretation of Articles 1(6) and 1(7) of the ECT; and further point out that there has been no argument of fraud or malfeasance in the ownership structure to trigger a debate over veil piercing.245

(2) The Tribunal’s Analysis

a. Lack of an "Investment" under Article 1(6) of the ECT

204.
Article 1(6) of the ECT provides that an "Investment" means "every kind of asset, owned or controlled directly or indirectly by an Investor," including "a company or business enterprise."246
205.
Initially Respondent argued that in order to have an investment an investor must own the assets on which the investment was based, and it was not sufficient just to have a 100% ownership of the shares of the investment. Respondent also argued that Claimants did not control the investment. Ownership and control, in Respondent’s view, rested with the American parent.247 Respondent ultimately accepted that Claimants owned the Spanish companies and did not pursue the argument that Claimants did not own the investment, and argued only that since Claimants are not "Investors" within the meaning of Article 1(7) of the ECT, then they cannot have an "Investment" within the meaning of Article 1(6) of the ECT.248 In the light of the conclusion below relating to Article 1(7) of the ECT on the meaning of "Investor," this argument fails.
206.
Thus, the Tribunal rejects Respondent's objection that the condition of Article 1(6) of the ECT has not been met.

b. Lack of an "Investor" under Article 1(7) of the ECT

207.
Article 1(7) defines an "Investor" of a Contracting Party to include: "a company or other organization organized in accordance with the law applicable within that Contracting Party."249
208.
It is not disputed that Claimants, NextEra Global and NextEra Spain are incorporated in accordance with the law of the Netherlands. Respondent argues, nonetheless, that the words "company" and "organization" in Article 1(7) have a meaning different from legal entity. According to Spain, a company must be understood in economic terms and this means it must be engaged in economic activity itself and not just be a shell company. Thus, pure holding companies do not meet the requirements of Article 1(7). Respondent refers to EU Law and the law of the Netherlands in support of its position on the particular meaning of "company" and "organization."
209.
However, cases involving Article 1(7) of the ECT have been fairly consistent in interpreting that provision on the basis of the ordinary meaning of the words, and treating as decisive the fact that the company is organized within the territory of a Contracting Party. This was the view adopted in Yukos250 and in Charanne.251 The same view was reiterated in Saluka252 in respect of a similar provision in the Netherlands-Czech Republic BIT.
210.
Moreover, in RREEF, Spain advanced similar arguments about the nature of a company in order to show that the alleged shell company in that case was not an investor within the meaning of Article 1(7) of the ECT.253 That argument was rejected.
211.
The Tribunal sees no ground for concluding that Article 1(7) of the ECT must be interpreted on the basis of a particular meaning under EU or Netherlands law. The ECT is a treaty and must be interpreted in accordance with the principles of treaty interpretation set out in Article 31-33 of the Vienna Convention on the Law of Treaties ("VCLT"). Under Article 31(1) of the VCLT, treaties are to be given their ordinary meaning in their context and in light of the object and purpose of the treaty. Applying that rule, Claimants are companies that are organized under the law of the Netherlands and thus are "Investors" within the meaning of Article 1(7) of the ECT.
212.
Thus, the Tribunal rejects Respondent’s objection that the condition of Article 1(7) of the ECT has not been met.

B. Second Objection: Lack of Jurisdiction Ratione Voluntatis - Denial of Benefits

(1) The Parties’ Positions

a. Respondent’s Position

213.
Respondent argues that the Tribunal does not have jurisdiction ratione voluntatis as a result of Respondent’s exercise in the Memorial on Jurisdiction of its right under Article 17 of the ECT to deny the benefits of Part III to Claimants.254 This is a matter of jurisdiction, Spain says, because the consent to arbitration given in Article 26(1) of the ECT refers to disputes that "concern an alleged breach of an obligation [...] under Part III."255 In turn, the consequence of a denial of benefits under Article 17 is the "nonapplication of Part III," when the conditions set for in the provision are met, as they are here.256 Since there can be no obligation under Part III due to the denial of benefits, it follows that there can be no breach thereof, and consequently there is no consent to arbitration under Article 26.257

(i) The Requirements of Article 17 of the ECT Are Met

214.
Respondent explains that the requirements of Article 17 of the ECT for exercising a denial of benefits are met because:258 (i) each Claimant is a legal entity incorporated in the territory of an ECT Contracting Party other than Spain;259 (ii) each Claimant is owned and controlled by citizens or nationals of the United States, a third State not party to the ECT;260 and (iii) neither Claimant performs any business activity in the Netherlands or in any other country.261
215.
Legal Entity Incorporated in the Netherlands. Respondent explains that, should the Tribunal dismiss the intra-EU objection (infra, § V.C) and instead conclude that the Netherlands and Spain are separate ECT Contracting Parties, then it should find that Claimants are legal entities incorporated in the territory of an ECT Contracting Party (the Netherlands), different from Spain.262
216.
Owned and Controlled by U.S. Citizens or Nationals. Respondent argues that NextEra Spain (Claimant 2) is 100% owned by NextEra Global (Claimant 1), in turn 100% owned by NextEra Energy Global Holdings Cooperative U.A., in turn 99% owned by NextEra Energy Inc. (formerly known as FPL Group International Inc.), a U.S. company, and 1% by High Group Investments LLC, a Gibraltar company.263 Further, according to Respondent, the certificates of the Dutch Registry reflect that NextEra Energy Global Holdings Cooperative U.A. administers NextEra Global (Claimant 1); while NextEra Global (Claimant 1) administers NextEra Spain (Claimant 2).264 It follows, Spain says, that NextEra Energy Inc. is not only the owner, but also the controller of both Claimants.265 This is underscored by the fact that it was the President of NextEra Energy Inc., Mr. F. Mitchell Davidson, who handled all communications on behalf of the NextEra Group with the Spanish Government during the investment process.266
217.
This said, in Spain's view, it is incorrect to assert that the requirements of ownership and control by nationals of a third State in Article 17 of the ECT are cumulative.267 It is sufficient that one of them is satisfied.268 Moreover, Respondent argues, when referring to "citizens or nationals of a third state," Article 17 is looking for the "natural persons" who own or control the legal person, for the ultimate or beneficial owner.269 And in this case, Spain argues, the "citizens or nationals" who own and control Claimants are in the United States.270
218.
As to the notion of "control" in Article 17 of the ECT, Spain argues that it must be interpreted in accordance with Understanding 3 relating to Article 1(6) of the ECT. Pursuant to that Understanding, "control of an Investment means control in fact, determined after an examination of the actual circumstances in each situation."271 Spain also maintains that the burden of proof to establish control is on Claimants;272 and argues that it is incorrect to simply attribute control of NextEra Spain to NextEra Global, and control of NextEra Global to NextEra Energy Global Holdings Cooperative U.A, since the relevant test is "control in fact."273 In any event, Spain contends that it has been established that Claimants are controlled by "American citizens," namely NextEra Energy Inc. and the staff in the companies in the NextEra Group in the United States, in particular the U.S. citizens serving as Directors in category A of Claimants' boards of directors.274 This is underscored by the fact that the communications relied upon as the basis for Claimants' alleged legitimate expectations were exchanged with senior management of NextEra in the United States.275
219.
Lack of Any Business Activity. According to Spain, Claimants do not have "any" business activity in the Netherlands or elsewhere.276 Pursuant to their certificates of registration they are merely "financial holding" companies, classified under a category that refers to holdings not engaged in management, strategic planning or decision making of the company they hold.277 Holding shares, Spain argues, is not a business activity under EU Law, which is applicable law by virtue of Article 26(6) of the ECT, and it is also part of the national law of the Netherlands and Spain.278
220.
Moreover, Respondent argues, Claimants (i) have no employees of their own, as shown by their own Commercial Registers at the Chamber of Commerce;279 (ii) have a registered office that: corresponds to the address of an entity dedicated to the creation and maintenance of companies (Intertrust Group B.V.), is shared with over 1,000 other companies, and has no footprint of Claimants in it;280 (iii) have financial statements typical of holding companies, that are short, not audited, without management or board of directors reports, with the total assets being the holdings in the NextEra Group subsidiaries, with limited liabilities and no income or cash flow statements;281 (iv) have two categories of directors in their boards (A and B), with only the U.S. directors (category A) having decision making power;282 and (v) have no footprint online, or in the NextEra Group SEC filings.283 For Spain, they are mere "shell companies" through which funds flow from the United States to Spain.284
221.
Respondent objects to Claimants’ allegation (based in Amto) that the term "substantial" in Article 17 of the ECT should be analysed from a qualitative point of view, as opposed to a quantitative one. In Respondent’s view, this interpretation is in tension with the Spanish version of Article 17, which uses the term "important" ("importantes") when referring to the activities.285 It is also contrary to the decision in Plama, which considered the term "substantial" as a quantitative one.286 In any event, Respondent says, Amto does not assist Claimants because the finding of substantial activities there was based on facts that are not met in this case, namely, the existence of two full time employees, an office permanently leased, and investments in other countries following instructions from within the country; while the holding of a bank account was not found determinative.287

(ii) The Denial of Benefits Was Timely and the Effects Can Be Retroactive

222.
Respondent argues that its denial was timely,288 because (i) there are no provisions in the ECT regarding timing for the exercise of Article 17;289 (ii) the right can only be exercised when it is known that it is being invoked, and when Respondent is made aware of the arbitration and the exact characteristics of the alleged investor;290 and (iii) Spain could only verify whether the requirements of Article 17 of the ECT were met after receiving and analysing the Memorial.291
223.
It is Spain’s position that the denial of benefits "may be exercised from the moment there is knowledge of the dispute being submitted, without any prior obligation to communicate said denial at the beginning of the arbitration or at the time of pre-investment."292 Respondent observes that Plama relied on Article 1113 of NAFTA, which contains a requirement of prior communication and prior notification in connection with a denial of benefits, but has no equivalent in the ECT and it is thus not applicable.293 The absence of this provision in the ECT, Spain says, must mean that the intention of the ECT Contracting Parties was that the denial of benefits could be exercised at any time, given that other ECT provisions do contain express notice or consultation requirements.294 The position is also supported by the negotiating history of the ECT, Spain argues. According to Respondent, during the negotiations the United States had reserved the right to deny benefits at the time of the arbitration, and it was the United States' proposal that ultimately prevailed.295
224.
Respondent argues that the dispute in this case arose in 2014, as the first trigger letter was sent in February 2014 and the Request for Arbitration was filed in May 2014.296 Prior to that, Spain says, the "only and first" communication sent to Spain revealing the existence of the Claimants was a letter of 15 March 2012, which for Spain only shows the "opacity in the business structure of the real investor, NextEra Energy Inc."297 Respondent waited for the Request for Arbitration, it alleges, in order to have a correct picture of the structure used by NextEra Energy Inc., all in good faith and in accordance with the ICSID Arbitration Rules.298 And Spain did not have all the information to determine whether Article 17 of the ECT could be triggered until the Memorial was studied.299
225.
In Respondent's view, both Article 41(1) of the ICSID Convention and ICSID Arbitration Rule 41(1), together with arbitral case law support the proposition that the denial of benefits was validly exercised in the Memorial on Jurisdiction.300 That is because under ICSID Arbitration Rule 41(1), objections to jurisdiction "shall be made as early as possible [...] no later than the expiration of the time limit fixed for the filing of the counter-memorial [..,]."301
226.
Spain further objects to the conclusion in Plama that a denial of benefits must be prospective. Relying on the decisions in Ulysseas and Guaracachi, Spain argues that Plama has been superseded by subsequent decisions that have allowed the exercise of the denial of benefits with retroactive effect.302 For Respondent, limiting the effects of a denial of benefits to the future amounts to introducing a restriction that is not reflected in the text of Article 17 of the ECT.303
227.
Finally, Spain opposes Claimants' contention that the form of the denial of benefits in this case is defective, observing that the form in which the denial was activated here (an express statement in the Memorial on Jurisdiction) was completely different from that in Plama, the case on which Claimants rely.304

b. Claimants' Position

228.
Claimants' first argument is that the question of application of Article 17 of the ECT is not a matter of jurisdiction, but one for the merits. By its express terms, they say, the provision is limited to the benefits in Part III of the ECT, and has no impact on the consent in Part V.305
229.
In addition, Claimants argue, the objection fails for various reasons: (i) Article 17 of the ECT was not timely invoked; (ii) Spain was aware of Claimants’ corporate structure several years before this arbitration begun; (iii) Claimants engage in substantial business activities in the Netherlands; and (iv) Claimants are Dutch owned and controlled.306

(i) The Exercise of Article 17 of the ECT Is Untimely and Procedurally Improper

230.
In Claimants’ view, the unanimous body of ICSID awards in ECT cases prevents the State from denying the benefits of the ECT to an investor after an investment has been made and a dispute has arisen;307 and the non-ECT awards relied upon by Spain are inapposite.308 Recognizing that the Tribunal is not bound by earlier decisions, Claimants observe that stability and predictability are very important in this area.309 In addition, Claimants argue, their position is supported by the ordinary meaning and context of Article 17(1) of the ECT, and the object and purpose of the ECT of promoting "long term-cooperation in the energy field."310
231.
Quoting from the decision in Khan, Claimants argue that the position adopted by the uniform body of cases makes "eminent sense," as "[i]t is difficult to imagine that any Contracting Party [...] would refrain from exercising its right to deny the substantive protections of the ECT to an investor who has already commenced arbitration [...]" and "[a] good faith interpretation does not permit the Tribunal to choose a construction of Article 17 that would allow host States to lure investors by ostensibly extending to them the protections of the ECT, to then deny these protections when the investor attempts to invoke them [...]."311
232.
Furthermore, Claimants contend, Spain cannot argue that it only recently acquired knowledge of the relevant facts giving rise to the denial, because: (i) Spain has known "[a]t all times" that the ultimate owner of this investment was a U.S. corporation; (ii) since 2008 prior to the construction of the Termosol Plants, it has been a matter of public record that NEE España was owned by NextEra Spain (Claimant 2), a Dutch corporation; and (iii) after NextEra officials in the United States notified Spain of a potential ECT claim by the Dutch Claimants in 2012, Spain did not invoke its right under Article 17 of the ECT, and instead, continued to encourage the investments.312 In particular, Claimants point out that:

• Claimants never sought to conceal the link between the U.S. Group and the Spanish investments, as also shown in the initial correspondence with high Spanish Government officials in July 2009, December 2009, April 2010 and March 2012, which involved U.S. interlocutors.313 Spain received these letters and responded to some in September 2009, January 2010 and April 2012.314 NEE España's consolidated accounts also show that its ultimate principal entity was NextEra Energy Inc., as seen in the consolidated financial statements of 2008, 2009, 2010 and 2013.315

• Spain cannot claim to have been unaware of the Dutch Claimants. A letter of 15 March 2012 to Spain explicitly invoked the Dutch ownership and the ECT.316 In addition, NEE España notified Spanish authorities that NextEra Spain was its sole shareholder, as shown by the extracts of the Spanish Mercantile Registry since May 2008, NEE España's annual financial statements filed annually with that Registry, and notarized deeds also filed with that Registry documenting NextEra Spain's corporate actions as sole shareholder of NEE España.317 And NextEra Global's ownership interest was publicly available to Spain in notarized deeds filed with the Spanish Mercantile Registry, and Claimants' Dutch accounts are publicly available.318

• On 25 August 2009, the PTEs made filings with the Ministry of Industry, laying out the full structure of the investment.319

• Claimants' registration as Dutch holding companies, in which Respondent relies now, has been a matter of public record since 2008.320

233.
As a legal consequence of the foregoing: (i) Spain cannot claim that the information needed to trigger a denial of benefits is new; and (ii) Spain has "acquiesced" in the facts it now seeks to challenge, which prevents it from raising the denial ex post facto. Acquiescence, Claimants argue, is a principle of international law linked to the principle of good faith.321
234.
Finally, Claimants argue, the facts of this case are distinguishable from those relied upon by Respondent (Guaracachi, Ulysseas and PacRim), where there was no evidence that the State was aware of the ownership and control before the dispute arose. Indeed, Claimants say that they are not aware of any decision upholding the validity of a denial of benefits exercised during the course of an arbitration on the basis of information made available to the State beforehand.322

(ii) The Form of the Denial is Deficient

235.
Relying on Plama, Claimants argue that the denial ought "necessarily be associated with publicity or other notice," either through "a general declaration in a Contracting State’s official gazette [...]; or a statutory provision in a Contracting States’ investment or other laws; or even an exchange of letters with a particular investor or class of investors."323 Plama rejected the State’s exercise of the denial via two communications to the ICSID Acting Secretary General expressly indicating the intention to exercise Article 17 of the ECT, and this is analogous to Respondent’s actions in the present case. It follows that the denial here is invalid as a matter of form.324
236.
In response to Respondent’s contention that the text of Article 17 of the ECT does not require any prior notification, publication or consultation, Claimants contend that " [t]he text of Art [icle] 17 of the ECT presupposes that the right reserved therein be expressly and unambiguously exercised outside the context of an existing arbitration with the relevant investor, which can only be done through some form of notification, publication or communication."325

(iii) The Conditions of Article 17 of the ECT Are Not Met

237.
Claimants contend that Respondent has the burden to prove the two cumulative conditions of Article 17 of the ECT.326 Dismissing Respondent’s attempt to shift the burden to Claimants, they argue that as Article 17 is being raised as an exception to the applicability of Part III of the ECT, it falls on Respondent to establish that all of the elements of the exception are met.327 In Claimants' view, this burden has not been discharged, as in fact: (i) Claimants have substantial business activities in the Netherlands; and (ii) each Claimant is owned by another Dutch entity, and that ownership confers control in the ordinary way.328
238.
Substantial Business Activities. Claimants argue that there is no check-list of mandatory factors, and the inquiry is qualitative, rather than quantitative, i.e. the decisive question is the "materiality, not the magnitude of the business activity."329
239.
Respondent's attempt to rely on the different adjectives used in the English and the Spanish version of the ECT ("substantial" and "importantes") is irrelevant, because both are met. That said, Claimants argue that as both the English and Spanish texts are equally authentic, pursuant to Article 33(3) of the VCLT they should be presumed to have the same meaning. That meaning would be the meaning endorsed by Amto, which is the common denominator in the various other authentic languages of the ECT.330 Claimants add that, if the Tribunal is not satisfied, and considers that the authentic texts disclose a difference of meaning, pursuant to Article 33(4) of the VCLT, the Tribunal must (i) remove the difference applying Article 31 and 32 of the VCLT, or (ii) should that fail, adopt the meaning that "best reconciles the texts, having regard to the object and purpose of the treaty."331 The analysis under either of those steps, Claimants contend, also leads to the meaning adopted in Amto.332
240.
Claimants argue that they "exceed the standard for 'substantial business activities,'"333 and have activities in the Netherlands that are quantitatively and qualitatively substantial.334 This, they say, is demonstrated by the witness statement of Mr. George Nicolai and documentary evidence, showing that Claimants: (i) are incorporated in the Netherlands; (ii) have a registered office in Amsterdam, which they have use of, and have hired a company named Intertrust to provide secretarial and communication facilities; (iii) hold the vast majority of their board meetings in the Netherlands; (iv) make decisions within the Netherlands, as the board of NextEra Energy Global Holdings Cooperative U.A. can only pass resolutions if adopted by majority of both A and B directors present, and the B directors are Dutch nationals; (v) convene annual general shareholder meetings in the Netherlands; (vi) have bank accounts in the Netherlands; (vii) are Dutch residents for tax purposes; (viii) prepare and file statutory annual accounts in the Netherlands; (ix) have adopted significant business decisions concerning the investments in Spain, including purchase of equipment, equity injections, causing NextEra Spain to subscribe the shares in NEE España, reviewing operations summaries of the Termosol Plants, appointing auditors, prosecuting claims in this arbitration by hiring counsel, overseeing, assessing and assisting with the potential sale of NEE España, reviewing debt restructurings, and dealing with the potential liquidation of NEE España.335 In addition, Claimants' administrative costs for conducting business in the Netherlands exceed approximately EUR 37,000 per year and the management and corporate secretarial costs exceed EUR 85,000 per year.336 Furthermore, NextEra Global is also the holding company for large renewable energy investments in Canada, which is part of the factual matrix for determining whether this company has substantial business activities in the Netherlands.337
241.
None of the factors referred to by Spain detract from the above substantial business activities. Many of Spain's contentions have already been rejected by other arbitral tribunals.338 There is no rule in investment treaty arbitration against the bona fide use of holding companies.339 There is a distinction between holding companies - which could in principle have substantial business activities - and shell companies, and even if the Tribunal concluded that Claimants are shell companies, there would be no basis to deprive them of protection, as held in RREEF.340 It is also irrelevant that Claimants' Dutch annual accounts are abbreviated, because they qualify as small companies under Dutch law and are thus not required to include cash flows or board statements or audit their accounts.341 Respondent's reliance only on the filed accounts is misleading, as the accounts produced for the shareholders include more detailed information; and Claimants do hire Dutch auditors.342 Finally, the code used in the Dutch registry has the sole purpose of describing the main object of the company at the time of registration; it has no legal consequences and does not restrict the activities of the entity.343
242.
Dutch Ownership and Control. Claimants contend that Dutch ownership is demonstrated because each Claimant is owned by a Dutch national: NextEra Global (Claimant 1) owns 100% of NextEra Spain (Claimant 2); and a Dutch cooperative owns 100% of NextEra Global (Claimant 1).344 Dutch control is also showed by the fact that no voting arrangements prevent these owners from "exercising control over their immediate subsidiary, in the normal way."345 Moreover, contrary to Spain's contentions, Claimants' board of directors is not dominated or controlled by U.S. citizens, as each director has a free vote and neither of the categories (A or B) plays a more important role.346
243.
Claimants also observe that, by contrast with Article 1(6) of the ECT - concerning the definition of "Investment" - Article 17 does not include any reference to indirect ownership or control. Accordingly, they say, the ordinary meaning and the context of Article 17 refer to direct ownership and direct control.347 Spain's reliance on Understanding 3 relating to Article 1(6) of the ECT is a red herring, because, had the ECT Contracting Parties wished to include within the ambit of Article 17(1) indirect ownership or control, they could have easily transposed the language from Article 1(6), and they did not.348 In addition, Claimants say, Spain’s view is inconsistent with the functions of Article 1(6) and Article 17 of the ECT: the first one provides a broad definition of "Investment," while the second one provides limited exceptions to the general applicability of the ECT to those "Investments."349

(iv) The Denial Can Only Produce Effects to the Future

244.
Finally, Claimants argue that, even if the conditions of Article 17 were met, the denial could only have effect as of 9 September 2015 (date of the Memorial on Jurisdiction), when it was raised for the first time; and all the challenged measures in this case occurred prior to that date.350

(2) The Tribunal’s Analysis

245.
Article 17 was invoked by Respondent as a preliminary objection and argued that way. The Tribunal notes Claimants’ argument that this objection is not really a jurisdictional objection since it is a challenge only to the application of Part III of the ECT. However, since the matter has been argued as a preliminary objection, the Tribunal will deal with it on this basis.
246.
Article 17(1) of the ECT provides:

"Each Contracting Party reserves the right to deny the advantages of this Part to:

(1) a legal entity if citizens or nationals of a third state own or control such entity and if that entity has no substantial business activities in the Area of the Contracting Party in which it is organized; [....]."351

247.
Respondent argues that Claimants are owned and controlled by the American company NextEra Energy Inc. and do not have substantial business activities in the Netherlands. It argues that it exercised its right under Article 17(1) to deny the benefits of Part III of the ECT to Claimants in its Memorial on Preliminary Objections.352
248.
The Tribunal will deal first with the question whether Claimants are owned or controlled by the citizens or nationals of a third State, second with whether they have substantial business activities in the Netherlands, and third with whether Respondent has exercised effectively a denial of the advantages of Part III of the ECT under Article 17(1).

a. Are Claimants Owned or Controlled by the Citizens or Nationals of a Third State?

249.
Claimants argue that they are 100% owned by a Dutch cooperative and control follows that ownership. The second Claimant, NextEra Spain, is registered in the Netherlands and is 100% owned by the first Claimant NextEra Global, also registered in the Netherlands, which in turn is 100% owned by NextEra Energy Global Holdings Cooperative U.A, which, too, is registered in the Netherlands. On that basis, Claimants are not controlled by the nationals of a non-ECT State. Nor, Claimants argue, do the voting arrangements prevent the Dutch owners from exercising control. In any event, Claimants argue, since there is no reference to "indirect" ownership or "indirect" control in Article 17(1) of the ECT, the word control in Article 17(1) is limited to "direct" control.
250.
The Tribunal sees no basis for concluding that control in Article 17(1) of the ECT is limited to direct control. It is control in fact that counts, just as control in fact is what is meant in respect of Article 1(6) (Understanding 3). It makes no sense to say that the test for control in determining whether an investment is controlled by the nationals of another Contracting Party is different from the test for determining whether an investment is controlled by the nationals of a third State.
251.
NextEra Energy, Inc., a U.S. corporation is the ultimate principal entity in the NextEra group and notwithstanding the formal provisions on voting, the reality is that the Dutch companies are controlled by the American company and the principal activities of Claimants in respect of the investments in Spain are conducted by the American company. It was officials of the American companies who dealt with the Spanish authorities in making the investment and, as will be discussed later, all of the representations by the Spanish authorities on which Claimants rely for their legitimate expectations claim in this case were made to those officials. In short, the reality of control is with U.S. nationals.
252.
In light of this, the Tribunal concludes that Claimants are controlled by the citizens or nationals of a third State and thus the first criterion in Article 17(1) is met.

b. Do Claimants Have "Substantial Business Activities" in The Netherlands?

253.
Respondent argues that Claimants do not have any business activities in the Netherlands. They are essentially holding companies whose function is to hold shares not to conduct business activities. Claimants argue that there is no barrier to holding companies meeting the test of having substantial business activities and list a variety of activities which it claims show that they meet this test, including having a bank account in the Netherlands, holding meetings there, providing annual accounts and taking decisions on such matters as equipment and funding of the Spanish subsidiaries. The question according to Claimants is the materiality of the business activities not the magnitude.
254.
The question of what constitutes "substantial business activities" has been dealt with in several cases, although not all related to Article 17(1) of the ECT. In Pac-Rim,353 a case brought under the Central American Free Trade Agreement ("CAFTA"), the tribunal concluded that there were no "substantial business activities" of the claimant in the United States. It simply held the shares of other companies. Apparently, it had no board of directors and no bank account in the U.S. The tribunal did say that a "traditional holding company" could be engaged in "substantial business activities." Such a company in its view would have "a board of directors, board minutes, a continuous physical presence and a bank account."354
255.
In Amto,355 the tribunal decided that since investment activities were conducted from premises in Latvia and the claimants had a small permanent staff, they met the test of having "substantial business activities" there.356 The company also had a bank account in Latvia and paid taxes.357
256.
In the present case, the claimed "substantial business activities" of the Claimants are more substantial than those in PacRim, where there was no board of directors and no bank accounts in the United States. The Claimants in this case would also meet the requirements set out in PacRim for a "traditional holding company" in that it had"a board of directors, board minutes, a continuous physical presence and a bank account."358
257.
The facts of Amto bear some similarity to the present case, but there are differences. The principal difference is that the NextEra Claimants have no permanent employees; they contract with Intertrust, which conducts Claimants' business in the Netherlands. However, this does not seem an important distinction. Whether one operates a business through permanent employees or contracts that work out to someone else is simply a business decision about how to operate. In either case, substantive work is being done for the company. The question is whether that work constitutes substantial business activities. In this regard, the Tribunal does not give any weight to the fact that the Spanish version of the treaty refers to "important" rather than "substantial" business activities. Since it is the quality and not just the quantity of the activities that is relevant, whether the term "important" or the term "substantial" is used does not make a difference.
258.
Amto provides a useful test, in that it looked to see if "investment activities" were being conducted by the Latvian claimant. Applying that approach to the present case involves asking whether Claimants were engaged in investment activities from the Netherlands. In this regard, the meetings of the Board of Directors in the Netherlands are significant. In their Counter Memorial on Jurisdiction, Claimants argue that in fact "significant" business decisions relating to their investments were taken by Claimants, including purchasing equipment for the Termosol Plants in 2008, equity injections of EUR 209 million, appointing auditors in the Netherlands, hiring counsel for these arbitration proceedings, and hiring liquidators to oversee the liquidation of NEE España in 2013.359 They also refer to reviewing operation summaries of the Termosol Plants, and reviewing proposed debt restructuring.
259.
In short, Claimants' argument is that they are not shell companies in the Netherlands; through their Board of Directors they play an active role in making decisions for their investments and have been engaged in reviewing the activities of their investments.
260.
The Tribunal notes that although there has not been a significant jurisprudence on the question of "substantial business activities," the tribunals that have found such activities to exist have been prepared to do so on the basis of a relatively small number of activities both in terms of quantity and quality. And that is true of the claim to having substantial business activities in the Netherlands in the present case. As pointed out earlier, the investment activities in respect of the Spanish investment are those of the U.S. parent and Claimants have a very limited role.
261.
However, in view of the decision that the Tribunal reaches in respect of denial of benefits below, it does not have to decide whether Claimants' business activities in the Netherlands were substantial. Even if they were not substantial, Respondent still failed to exercise its right to deny benefits in accordance with Article 17(1) of the ECT.

c. Assuming that Respondent Had the Right to Deny Benefits Did It Exercise that Right in a Timely Fashion?

262.
Article 17 of the ECT provides no guidance on the time at which the right to deny benefits must be exercised and the cases seem to be divided on this.
263.
In the present case, the denial was asserted by Spain on 9 September 2015 in its Memorial on Jurisdiction.360 The question is whether that is too late. Although there has been some controversy over when the right to deny benefits must be exercised, recent cases have suggested that the right must be exercised no later than the time the benefits are claimed (Ulysseas and Guaracachi). On that basis, by denying benefits in its Memorial on Jurisdiction, Respondent was responding to the attempt by Claimants to exercise ECT rights in bringing this claim.
264.
However, the filing of the claim was not the first time that Respondent was aware of a potential ECT claim by NextEra. As set out above, NextEra had engaged with the Spanish authorities on its plan to invest in the solar industry as early as July 2009, both in person and through correspondence. It was clear to the government that it was dealing with an American corporation, but it was also made clear that this investment was operated through a Dutch company.361 The details of Claimants' ownership were available in public registers and Respondent must be taken to be aware of the status of Claimants. The contacts between the NextEra Energy group and the Spanish government both written and in person were extensive, up to and including the prime ministerial level. Encouragement and reassurances were provided to NextEra without any suggestion that Spain would invoke Article 17(1) of the ECT and deny the benefits of the treaty to Claimants.
265.
More specifically, in a letter dated 15 March 2012 from John W. Ketchum, Vice President, NextEra Energy Resources LLC to the Minister for Industry, Energy and Tourism and the Secretary of State for Energy, the Spanish authorities were advised that the Dutch company which owned the NextEra investment in Spain was the "beneficiary of the protective provisions set forth in the Energy Charter Treaty" and that NextEra would defend their rights including through international arbitration.362
266.
Thus, by 15 March 2012, Respondent was aware that the NextEra Spanish investment was owned by a Dutch company, which regarded itself as having rights under the ECT, and that NextEra was willing to enforce those rights through international arbitration. The Spanish government gave no indication that it would deny those rights. Indeed, following this letter, the Spanish government made further assurances to NextEra and Claimants went ahead and completed the building of the Termosol Plants.363
267.
In light of this, can Respondent then deny the benefits of Part III of the ECT once a claim has formally been made? In Khan the tribunal said:

"A good faith interpretation does not permit a tribunal to choose a construction of Article 17 to allow host states to lure investors by ostensibly extending to them the protections of the ECT, to then deny them these protections when the investor attempts to invoke them in international arbitration."364

268.
In the view of the Tribunal, once Spain became aware not just that it had a right to deny benefits but that Claimants were relying on Spain's statements and actions and were reserving a right to invoke the provisions of the ECT, it was put on notice of a potential exercise of ECT rights by NextEra. To delay until its Memorial on Jurisdiction on 9 September 2015, more than three years later, to exercise its right to deny benefits under Article 17(1) of the ECT is hardly a good faith exercise of its right as contemplated by the Khan tribunal. During that period Spain gave assurances about the protection the NextEra investment would receive in full knowledge that it was an investment that, in Claimants' view, was proceeding under and with the protections of the ECT. As a result, Claimants were justified in proceeding on the assumption that Spain would not exercise its right to deny benefits under Article 17 of the ECT.
269.
Respondent was confronted on 15 March 2012 with a clear assertion that NextEra's international Dutch investment company had rights under the ECT and that NextEra planned to exercise such rights. Faced with such an assertion, and knowing that it had the right to deny the benefits that Claimants were asserting, Respondent could not stay silent, but it did. Its conduct can only be viewed as acquiescence in Claimants’ assertion of ECT rights precluding Respondent from later seeking to assert a right to deny benefits when it filed its Memorial on Jurisdiction on 9 September 2015.
270.
In light of this, the Tribunal concludes that even if Claimants did not have "substantial business activities'" in the Netherlands, Respondent failed to exercise its right to deny benefits under Article 17(1) in a timely fashion.
271.
Accordingly, the Tribunal rejects the second preliminary objection.

C. Third Objection: Lack of Jurisdiction Ratione Personae - Intra-EU Objection

(1) The Parties’ Positions

a. Respondent’s Position

272.
Spain objects to the Tribunal’s jurisdiction arguing that Claimants are not protected investors under the ECT, because the dispute resolution mechanism set forth in Article 26 of the ECT does not apply to controversies arising between an investor of a EU Member State and a EU Member State ("intra-EU").365
273.
As both the Netherlands and Spain were EU Member States at the time they entered into the ECT, and the EU is a Contracting Party to the ECT, Respondent contends, Claimants are not investors of "another Contracting Party" as required by Article 26 of the ECT.366 The requirement of diversity in the Contracting Party "inevitably implies" the exclusion of intra-EU disputes.367
274.
Spain has observed, however, that it does not contend that the ECT contains "an express or implied disconnection clause."368 Relying on the EC’s opinion, Respondent argues that the introduction of such clause was "entirely without relevance" "given that the agreement envisaged coverfed] areas for which a complete harmonisation ha[d] been carried out.'"369

(i) The Principle of Primacy of EU Law

275.
In support of this objection, Respondent contends that:

• Being both EU Member States at the time of their ratification of the ECT, Spain and the Netherlands could not deviate from their obligations in the EU internal market.370

• The EU system already grants EU citizens an "integraF system of "specific and preferential protection" for their investments, which applies over the ECT; prohibits dispute resolution mechanisms different from those established in the EU Treaties that could interfere with the internal EU market;371 and offers the appropriate legal resources for the protection of investors’ rights before national courts.372

• Given this "integral" system of protection, within the EU, there is no distinction between investors of a EU Member State and those of another Member State, and therefore the category of foreign investor exclusively refers to investors from non-EU Member States.373

• EU Law - which is also applicable international law - prevails over the ECT in the event of conflict.374

276.
Respondent emphasizes that underlying this objection is the essential principle of primacy of EU Law in intra-EU relations, pursuant to which EU Law must be applied over any other national or international law,375 regardless of whether EU Law is more favourable or not.376 It follows for Spain that "it is the [law] of the EU and not the ECT which must be applied to resolve this dispute."377
277.
For Spain, the preferential application of the EU system between EU Member States is recognized by the ECT's text, context and purpose.378
278.
With respect to the text of the ECT, Respondent points out:

• First, that Article 1(2) of the ECT includes Regional Economic Integration Organizations ("REIO"), such as the EU, within the definition of a "Contracting Party," and the definition of REIO in Article 1(3) recognizes that certain competences have been conferred to the EU by its Member States irrevocably and with binding nature, including on certain matters governed by the ECT.379 Moreover, the definition of "Contracting Party" in Article 1(2) recognizes that ECT Contracting Parties need to have agreed to be bound to one another, which neither Spain or the Netherlands could do, because they no longer had the competence to do so.380

• Second, that Article 36(7) of the ECT reaffirms the conclusions above, in providing that EU Members States and the EU cannot vote simultaneously.381 This means, Respondent says, that the EU and each of its Member States can only vote in the areas within the scope of their competences, and it is for the CJEU -not for the Tribunal - to determine who is the competent Contracting Party in each subject matter.382

• Third, that the regulation of the relation between the ECT and other agreements (including the EU Treaties) in Article 16 of the ECT recognizes that, in intra-EU relations, the EU Treaties prevail over the ECT.383

• Fourth, that pursuant to Article 25 of the ECT, the EU integral system of promotion and protection of investments cannot be applied to other ECT Contracting Parties that are not EU Member States via the Most Favored Nation ("MFN") clause,384 which is an "explicit recognition" of the principle of primacy of EU Law in intra-EU relations.385

• Fifth, that Article 26(1) of the ECT allows submission to arbitration of disputes only between a "Contracting Party" and "an Investor of another Contracting Party ;" and cannot give rise to obligations among EU Member States, because at the time the ECT was entered into, EU Member States had already given over their sovereignty in connection with the internal market to the EU and could not assume inter-se obligations concerning that market.386 As the consent in Article 26 of the ECT is limited to disputes arising out of alleged breaches of obligations of Part III, and EU Member States could not contract obligations among themselves under Part III, Article 26 cannot apply to intra-EU disputes.387 Further, in addition to arbitration, Article 26 provides for conciliation and recourse to national courts, without establishing an order of preference or indicating that arbitration is more favourable.388

• Finally, that Article 26(6) provides that the Tribunal shall decide the issues in dispute "in accordance with this Treaty and applicable rules and principles of international law," thereby recognizing that EU Law must be applied "on an equal level [...] as applicable international law"389 Accordingly, any conflict between the ECT and EU Law must be resolved pursuant to Article 25 of the ECT, which recognizes both the primacy of EU Law in intra-EU relations, and that the process of economic integration of the EU is more advanced than the ECT and therefore more favorable.390

279.
Respondent dismisses Claimants' interpretation of the above-mentioned provisions, arguing that it is "literal and completely out of context."391 Instead, Respondent urges that an effective interpretation of the ECT leads to the conclusion that the ECT recognizes the primacy of EU Law in intra-EU relations and excludes arbitration.392
280.
According to Respondent, the ECT's object and purpose also support its position. That is, Spain says, because admitting the intra-EU application of the ECT would dispense with the ECT's object and purpose, as (i) it would mean that the EU and its Member States promoted the ECT to cover an area (intra-EU investments) already covered by EU Law in an exhaustive and superior manner; (ii) it would take away competences from the CJEU; and (iii) it would reflect a lack of trust in the EU system.393

(ii) Intra-EU Arbitration Contravenes EU Law

281.
It is Spain’s position that Article 26(6) of the ECT prevents intra-EU disputes, because that would contravene EU Law, which is applicable international law.394 Article 344 of the Treaty on the Functioning of the European Union ("TFEU") prohibits the submission of questions relating to the internal electricity market to arbitration, and in this arbitration the Tribunal is being called upon to decide on the rights of a EU investor in the internal market.395 That is, Spain argues, because "the EU Directives in the area of renewable energies are the framework of [the] Spanish legislation in which the Claimants allegedly rely on making an investment" and as such "the question must be resolved in light of the interpretation of the EU law."396 Moreover, for Spain, the dispute affects essential elements and pillars of EU Law, namely, the notions of State Aid, competition law, free movement of capital and freedom of establishment, and as such the Tribunal does not have jurisdiction to resolve it, as this power is reserved to the EU’s judicial system.397
282.
For Respondent, it is significant that the objection is backed by the EC - "one of the most authorised voices on interpreting the ECT' and an ECT negotiator; and by legal doctrine.398 The EC has recognized the "incompatibility of the Investment Treaties signed between EU Member States and EU Law," and of the arbitration provisions in the ECT and EU Law, when applied to intra-EU disputes.399
283.
Spain also draws significant support for this objection from the CJEU judgment in Achmea, of 6 March 2018.400 Spain contends that pursuant to this judgment "an arbitration clause in an International Agreement concluded between EU Member States (intra-EU BIT) is incompatible with EU law and, in particular, the autonomy of the EU legal order."401
284.
Respondent first highlights that the Achmea judgment endorses the principles that: (i) the judicial system established in the EU Treaties is intended to ensure consistency and uniformity in the interpretation of the EU Law; (ii) pursuant to Article 19 of the TFEU, it falls on national courts and tribunals and on the CJEU to ensure the application of EU Law in the EU Member States; (iii) the preliminary ruling system established in Article 267 of the TFEU is intended to ensure uniformity in the interpretation of EU Law; (iv) EU Law is both part of the law of each EU Member State and also derives from an international agreement.402
285.
Spain then explains that the CJEU has concluded that the above principles are not fulfilled through the establishment of an investment tribunal because: (i) the tribunal might be called to interpret or apply EU Law, without being part of the EU judicial system; (ii) not being a court or tribunal of a EU Member State within the meaning of Article 267 of the TFEU, such tribunal cannot refer a matter to the CJEU; (iii) the tribunal's decision is final and judicial review limited by national law; (iv) investment arbitration involves disputes that may concern the application or interpretation of EU Law, but that system does not allow disputes to be resolved in a way that ensures the full effectiveness of EU Law.403
286.
For Spain, the above-mentioned conclusions also apply in the context of the ECT. In that regard, Respondent observes that Achmea refers to an "international agreement," which the ECT is, and not exclusively to bilateral investment treaties.404 Spain further contends that the Achmea judgment's reasoning is fully applicable here because: (i) under Article 26(6) of the ECT tribunals are required to interpret and apply EU Law to decide all the issues in dispute, "not only as International Law, but also as internal law and as a fact;"405 (ii) EU Law applies to this dispute because the controversy affects a key institution of EU Law: State Aid;406 (iii) an ICSID tribunal "does not form part of the judicial system of EU Law" and therefore cannot request a preliminary ruling from the CJEU under Article 267 TFEU,407 and (iv) there is no certainty that in enforcement proceedings the CJEU would have full knowledge and control over the EU Law applied by the tribunal.408

(iii) The Decisions Relied Upon by Claimants are Not Dispositive or Persuasive

287.
Finally, Respondent dismisses Claimants’ reliance on prior decisions of other arbitral tribunals, arguing that aside from those in cases against Spain, those decisions are not dispositive of the matters at issue in this case because they: (i) "refer to Bilateral Investment Treaties which have nothing to do with a multilateral and mixed treaty promoted and signed by the EUf or (ii) refer to States that were not EU Member States when they entered into the ECT.409 As to the cases involving Spain, Respondent contends that the decisions did not embark in a proper analysis of the principle of primacy of EU Law;410 did not consider various of the arguments made by Respondent;411 or incorrectly concluded that EU Law was not relevant.412
288.
In any event, Respondent takes the view that the application of the principles set forth in the cases relied upon by Claimants, in particular those referring to intra-EU BITs and the decision in Electrabel,413 supports the conclusion that EU Law must be applied.414
289.
In this context, Spain has argued that:

• A comparison of the object and purpose of the ECT and the EU Treaties leads to the conclusion that the latter prevail, by virtue of Articles 30 and 59 of the VCLT.415 For Respondent, especially after the 2007 Treaty of Lisbon, which "expressly gathers competence in favour of the EU over foreign investment," it is unquestionable that EU Law prevails over the ECT in application of the lex posteriori principle in Article 59 of the VCLT.416

• It is "impossible" to sustain that the rights afforded to investors under Article 10(1) of the ECT are "different or superior" or "in addition" to those granted to them under EU Law.417

• The contention that the ECT offers investors an additional right not afforded by EU Law, namely, arbitration of investment disputes, overlooks that Article 26 of the ECT also refers to national courts as a suitable dispute resolution mechanism and assumes without evidence that arbitration is superior. The argument, Respondent says, reflects a complete lack of confidence in the EU judicial system incompatible with EU Law.418

• While the tribunal in Electrabel did not find any inconsistency between the ECT and EU Law, such inconsistency does exist if Article 26 of the ECT is extended to intra-EU disputes. This is more serious in the ICSID context, Spain argues, because an ICSID award is not subject to appeal, which prevents the CJEU from weighing in on matters that are within its strict powers.419

b. Claimants' Position

290.
Claimants oppose Respondent's objection.

(i) The Text of the ECT Contradicts the Objection

291.
For Claimants, the ordinary meaning of Article 26 of the ECT unambiguously demonstrates that Spain consented to arbitration of disputes with investors of all other Contracting Parties, including EU Member States.420 By its express terms, Claimants say, Article 26 permits arbitration of claims of an Investor of one Contracting Party (the Netherlands), against another Contracting Party (Spain).421
292.
The plain wording of the ECT contradicts the contention that the EU and its Member States are a single Contracting Party for purposes of Article 26 of the ECT.422 The ECT is a "mixed agreement" that was entered into by the EU and its Member States, and it is binding on both; and when EU Member States become parties to a mixed agreement they enter into relations inter se.423 The competence of EU Member States to enter into the ECT was expressly recognized by the EU in 1997.424 Moreover, under EU Law, citizenship of the EU is not intended to replace national citizenship;425 Claimants are Dutch nationals under Dutch Law;426 and Claimants plainly meet the definition of "Investor' in Article l(7)(a)(ii) of the ECT, which is deliberately different from the definition of REIO in Article 1(3).427
293.
Each of the Netherlands and Spain is a distinct Contracting Party occupying its own area for purposes of the ECT; each is a State that executed and ratified the ECT in its own name and right; each is a separate subject of international law different from the EU; and each would continue to be an ECT Contracting Party even if it left the EU.428
294.
The definition of "Area" in the Article 1 of the ECT is clear, and it means for each Spain and the Netherlands "the territory under its sovereignty, it being understood that territory includes land, internal waters and the territorial sea ;" and it is undisputed that the plants and measures at issue in this case are located or took place in Spain.429 As the decisions in PV Investors and Charanne held:

"The phrase 'in the Areas of the former [Contracting Party]' in Article 26(1) of the ECT refers to a particular dispute initiated by the investor. If the investor commences arbitration against a member state of the EU (rather than against the EU itself) then 'Area' means 'with respect to a state that is a Contracting Party' the territory of that particular member state, in accordance with the first sentence of Article 1(10). In other words, the relevant area is that of the Contracting Party that is party to the dispute."430

295.
Therefore, Claimants argue, there is no question that the Netherlands or Spain can be conflated with the EU for Article 26(1) of the ECT purposes.431 To the contrary, the ordinary meaning of Article 26 of the ECT leads clearly and unambiguously to the opposite conclusion.432
296.
As to Respondent's attempt to rely on other provisions of the ECT to support this objection, Claimants argue that:

• The contentions based on the definitions of REIO Article 1(3) and of "Area" in Article 1(10) are a "detour."433 Claimants submit that (i) recognizing the "Area" of the EU as a REIO does not negate the existence of the "Areas" of each of the EU Member States;434 (ii) Article 1(3) does not define the extent of the EU's competence;435 (iii) Article 1(3) in fact affirms the primacy of the ECT, as it recognizes that matters under the treaty "are governed by" the ECT;436 (iv) "the natural and most straightforward interpretation of Arts. 1(2), 1(3) and 1(10) of the ECT, which gives them full effet utile, is that a claim under Art. 26 of the ECT can be brought against a REIO such as the EU or the applicable Member State, depending on the circumstances," and it is in fact Spain’s position that would render nugatory the text of Article 26(1).437

Article 16 of the ECT is a conflict of laws provision that "has nothing to do with the effectiveness of the right to arbitrate under Art. 26 of the ECT,"438 and it is unnecessary to reach Article 16 because there is no conflict between the ECT and EU Law.439

Article 25 of the ECT is a routine provision in investment treaties only intended to prevent the extension to non-EU Member States of the benefits of EU membership, and it does not concern intra-EU disputes.440

• The voting provisions established in Article 36(7) of the ECT pursuant to which each the EU and the Member States vote in accordance with their competences, are simply a reflection of the fact that the ECT is a mixed agreement, and have nothing to do with the effects of the ECT between EU Member States.441 For Claimants, Article 36(7) "does no more, and no less, than regulate the Contracting Parties’ voting rights under the ECT' and it "says nothing about the allocation of competences between the EC (now the EU) and its Member States."442

(ii) The ECT Does Not Have a Disconnection Clause

297.
In Claimants’ view, there is no basis in the text of the ECT to contend that it does not apply intra-EU, because that would have required a reservation or an unequivocal disconnection clause.443 But the ECT contains no disconnection clause of the type Spain seeks to imply into it,444 and nothing suggests that this was inadvertent.445 The ordinary wording of the ECT should thus put an end to this argument.446
298.
That said, Claimants add, the EU treaty practice, the ECT drafting history and unanimous holdings of prior ECT tribunals also contradict the theory of an implied disconnection clause.447 Claimants point out that: (i) the EU had used disconnection clauses in over 20 occasions to ensure that a treaty did not apply in the intra-EU context, including in treaties signed prior to the ECT or that were being negotiated in parallel with the ECT;448 (ii) when the ECT Contracting Parties wished to restrict the effect of the ECT they did so expressly, for example in the declarations relating to the Svalbard Treaty, and in the EU statement in the context in Article 26(3)(b)(ii) restricting its consent in a "fork-in-the-road" situation when the dispute had already been submitted to the CJEU;449 (iii) the EC considered including a disconnection clause in the ECT and this proposal was ultimately not accepted;450 and (iv) the tribunals in Charanne and RREEF have rejected the existence of an implicit disconnection clause.451
299.
Claimants contend that the EC Written Submission in this case provides no answer on these points,452 and argued in the Rejoinder on Jurisdiction that neither the EC, nor Spain had been able to produce any contemporaneous evidence or a subsequent agreement showing that the intent of the ECT was to exclude intra-EU disputes.453
300.
As to Spain's assertion that its argument is not that the ECT contains a disconnection clause, because such clause was superfluous, Claimants observe that the issue remains the same whether the question is the existence of a disconnection clause, or the lack of necessity of one: had the ECT Contracting Parties sought to carve out intra-EU disputes from Article 26, they would have included express language, and they did not.454
301.
Responding to the contention that a disconnection clause is only needed where the application of EU Law between EU Member States affects third parties' rights or obligations, or where derogation from a provision would be incompatible with the object and purpose of the treaty, Claimants submit that "derogating to such an enormous extent from Parts III and V of the ECT would be incompatible with the ECT’s object and purpose of promoting long-term cooperation in the energy field."455
302.
Claimants finally point out that none of the ECT Contracting Parties entered any reservation, and in fact Article 46 of the ECT excludes reservations to the ECT.456 As held in PV Investors, the consent by EU Member States expressed in Article 26 of the ECT is "unconditional" and subject only to two exceptions contained in Article 26(3), which are irrelevant for the issue at hand.457

(iii) Neither the Context of the ECT nor Supplementary Means of Interpretation Support the Objection

303.
According to Claimants, the EC Written Submission invites the Tribunal to disregard the text of the ECT on the basis of the alleged treaty "context;" but such context cannot displace the treaty text and, in any event, it does not support the objection.458 In particular, referring to the principles in Article 31(3) of the VCLT, Claimants observed in the Rejoinder on Jurisdiction that:

• There is no subsequent agreement between the ECT Contracting Parties, or subsequent practice in the application of the ECT supporting the EC’s interpretation.459

• While Article 3 l(3)(c) of the VCLT provides that in treaty interpretation "[t]here shall be taken into account, together with the context'. [...] relevant rules of international law applicable in relations between the parties," (i) the word "rules" suggests a certain degree of specificity not met by reliance on the "Union legal order" and "multilateral agreements to which both the Union and its Member States are a party under Union Law;"460 (ii) the rules must be "relevant," i.e. must relate to the same subject matter of the treaty under interpretation, and also applicable in the relations between all the treaty parties;461 (iii) the rules "must always be considered within the context of the terms of the treaty under interpretation,"462 (iv) since Claimants are seeking to benefit from Article 26 of the ECT (Part V) and to invoke the substantive protections of Part III, which they consider more favourable to them than EU Law, pursuant to Article 16 of the ECT "nothing in EU Law 'shall be construed to derogate from' these provisions of the ECT."463

304.
For Claimants, the arguments advanced by Respondent and the EC on the basis of the object and purpose of the ECT, and the circumstances of its conclusion are also unconvincing.464
305.
Relying on Article 32(a) of the VCLT, Claimants first contention is that because the text of the ECT is clear, and it does not lead to manifestly absurd or unreasonable results, there is no room to resort to supplementary means of interpretation "including the preparatory work of the treaty and the circumstances of its conclusion."465
306.
As to the object and purpose, while Claimants acknowledge that Article 31(1) of the VCLT provides that the ECT must be interpreted "in the light of its object and purpose," they argue that (i) such object and purpose must rest on more than speculation; and (ii) the VCLT makes a choice in favor of an objective and textual interpretation over a subjective one based on the intention of the parties.466 Moreover, for Claimants, nothing in Article 2 of the ECT (on the object and purpose of the treaty), suggests that the ECT provisions are waived intra-EU.467 In fact, Claimants argue, the application of the ECT intra-EU facilitated the ECT's object and purpose, as it offered companies investing in Eastern Europe continuity of protection for investments in that region, as many of those countries acceded to the EU later.468
307.
Claimants also argued in the Rejoinder on Jurisdiction that there was no evidence showing that EU Member States share the position that the ECT did not produce effects intra-EU; a position that Spain adopted opportunistically in the face of numerous treaty claims against it, and it never expressed between 1994-2014.469 And the arguments based on the historical context of the ECT’s conclusion and those based on the negotiating history of the WTO should not serve as supplementary means of interpretation.470

(iv) Article 26 of the ECT is Not Affected by the Transfer of Competences to the EU

308.
Claimants further oppose the contention that the provisions in Part III of the ECT and Article 26 fall within the competence of the EU, such that when entering into the ECT the EU Member States did not have competence to enter into inter-se obligations on the matter of investment protection.471
309.
Article 25 of the ECT lends no support to the proposition that EU Law must prevail in case of conflict between the ECT and EU Law.472 For Claimants, this article is not a conflict rule giving primacy to EU Law over the ECT. It simply clarifies that the preferential treatment that applies inter-se among EU Member States cannot be extended to non-EU States via the MFN clause.473
310.
Claimants equally consider "flatly irrelevant" the EC’s reference to the alleged principle of international law of "liability follows competence."474 This is a secondary rule of international law, concerning attribution for purposes of determining an international organization’s responsibility for wrongful acts, and has nothing to do with the creation or extent of positive international obligations.475
311.

Instead, Claimants argue that the relevant body to determine whether valid treaty obligations were entered into is the VCLT, and rely on the finding in CSP that jurisdiction "would not necessarily be affected by a finding that EU law barred the EU and/or EU member states from entering into a treaty which provides for arbitration over intra-EU investments."476

(v) There is No Ground to Invalidate Spain’s Consent in Article 26 under the VCLT

312.
Claimants contend that Spain’s offer to arbitrate in Article 26 is valid and effective, and reject the view that such offer is invalid because (i) it would violate EU Law which must prevail over the ECT in the event of conflict, or (ii) it was modified or superseded pursuant to Articles 41 (1)(b) or Article 30(4)(a) of the VCLT.477
313.
Claimants explain that: (i) the sole grounds for invalidating a State’s consent to be bound by a treaty are in the VCLT, and are not applicable in the present instance; (ii) even if EU Law were relevant to determining the validity of Spain’s consent - which it is not - EU Law does not prohibit arbitration of intra-EU investor State disputes; (iii) arguments about the alleged primacy of EU Law substantive provisions over the ECT are irrelevant for the jurisdictional analysis, and implausible in light of Article 16 of the ECT; (iv) Articles 41 (1)(b), 30(4)(a) or 59 of the VCLT do not apply here.478
314.
Recalling that under Article 42(1) of the VCLT the validity of a treaty or the consent to be bound by it can only be impeached by application of the VCLT, Claimants conduct an analysis under Articles 46 and 45 of the VCLT.479 Claimants contend that EU Law forms part of Spain’s domestic law, and therefore, in application of Article 46 of the VCLT "Spain may not invoke, in support of its plea of invalidity, the fact that its consent to be bound by a treaty was expressed in violation of a provision of EU law unless that violation was manifest and concerned a rule of EU law of fundamental importance."480
315.
As the ECT was negotiated and concluded by the EU and its Member States, it is implausible to argue that Spain was not competent under EU Law to conclude the treaty; and in any event, the alleged lack of competence would not be manifest, as shown by the lack of evidence to that effect contemporaneous with the negotiation and conclusion of the ECT.481 Moreover, even if there was any ground under Article 46, it would have been waived under Article 45(b) of the VCLT because Spain never questioned the validity of its consent in Article 26 of the ECT until the recent arbitrations, and has not event sought to terminate intra-EU BITs.482
316.
Contrary to Spain's contentions, Claimants further argue that "nothing in EU law prohibits EU Member States from consenting to arbitrate disputes with EU investors under an investment treaty," and that is so "even where those cases involve questions of EU law."483
317.
Noting that Spain's argument rests on Article 344 of the TFEU, Claimants point out that prior arbitral tribunals have already concluded that "Article 344 TFEU, [...] applies only to disputes involving two or more EU member states but does not prohibit the submission of disputes between other actors to a different method of settlement not contemplated in the EU treaties ;"484 "[t]he scope of Article 344 TFEU cannot be so broad as to prevent Member States from submitting any dispute concerning the interpretation of EU treaties to a dispute settlement procedure different from those provided in EU legislation ;"485 "it cannot be reasonably maintained that Article 344 TFEU sets up an 'interpretative monopoly' in favour of the CJEU ;"486 there is no inconsistency between the ECT and EU Law, and the exclusive jurisdiction of the CJEU does not prevent other courts or tribunals from applying EU Law.487 These conclusions were not altered by the jurisprudence of the CJEU;488 nor can the EC's own self-serving declaration in the context of the International Energy Charter Treaty in May 2015 provide any evidentiary support to this objection, as it was issued 20 years after the ECT's conclusion.489
318.
Moreover, Claimants point out that Spain and the EC accept that national courts and arbitral commercial tribunals apply EU Law without violating Article 344 of the TFEU, and there is no reason to treat investment treaty arbitration differently.490
319.
According to Claimants, all the arguments based on the alleged primacy of EU Law over the substantive protections of the ECT are, at best, relevant to the analysis of the merits, but have no bearing on jurisdiction.491 In any event, they are misplaced because there is no conflict in this regard between the ECT and EU Law, and should there be one, the ECT would prevail.492 The conflict of law rule in Article 351 of the TFEU (former Article 307 of the TEC) does not give priority to EU Law over the ECT, because the ECT is the later in time treaty: Article 351 only concerns rights and obligations in agreements concluded prior to 1 January 1958 or for acceding States, prior to their accession to the EU, and the ECT was concluded in 1994 and in force in 1998 after Spain acceded to the EU in 1986.493 Instead, should the Tribunal find a conflict, it should resolve it by straight application of Article 16 of the ECT.494
320.
Lastly, Claimants assert that "the ECT, and in particular its Art [icle] 26, has been neither modified nor superseded by the provisions of later EU Treaties under either of Art[icles] 41 or 30 of the VCLT; nor did the Treaty of Lisbon lead to the termination of the ECT pursuant to Art [icle ] 59 of the VCLT."495 Claimants explain that:

Article 41 (1)(b) of the VCLT refers to amendment of a treaty by a later treaty, and it does not apply here as none of the Treaties of Amsterdam, Nice and Lisbon are agreements to modify the ECT between EU Member States.496 In any case, since Spain did not rely on this provision the Tribunal does not need to address it.497

Article 30(4)(a) of the VCLT only applies to "successive treaties relating to the same subject-matter," which the EU Treaties and Article 26 of the ECT are not, since the EU Treaties are silent on investor-State arbitration.498 Further, the principle in Article 30(3) of the VCLT, pursuant to which the later in time rule applies in the event of incompatibility, requires (i) that there is a true incompatibility between the ECT and the EU Treaties, and (ii) that the provisions of the EU Treaties deemed incompatible are in fact the latter in time, as opposed to pre-existing provisions when the ECT was concluded in 1998; and neither has been demonstrated.499

• Even if the ECT and the EU Treaties related to the same subject matter and were mutually incompatible, quad non. Article 16 of the ECT is lex specialis that should be applied. Accordingly, in the event of conflict between Part III or Part V of the ECT and an earlier or later treaty between ECT Contracting Parties, the ECT prevails to the extent more favorable to investors.500 Thus the ECT prevails over any "incompatible" provision in the EU Treaties.

Article 59 of the VCLT (concerning termination of a treaty implied by conclusion of another treaty) does not apply, because (i) it only concerns a situation where "all the parties" to the treaty allegedly terminated conclude a later treaty, and not all the ECT Contracting Parties concluded the Treaty of Lisbon; (ii) the ECT and the EU Treaties do not relate to the same subject matter, and are not "so far incompatible" or "not capable of being applied at the same time'," and (iii) there is no evidence that all the ECT Contracting Parties intended the matter to be governed by the Treaty of Lisbon.501

(vi) The Objection Has Been Rejected by Prior Tribunals and Legal Doctrine,502 and the Achmea Judgment Does Not Apply

321.
Throughout their pleadings Claimants emphasize that " [e]very tribunal to have analysed the objection has unanimously rejected it,"503 including in other ECT cases, in cases against Spain,504 and in cases involving intra-EU BITs.505 Claimants also rely on a number of commentators supporting the view that the ECT does apply between EU Member States.506 Lastly, Claimants observe that, despite its position in this case, the EC has not been uniform in opposing the jurisdiction of tribunals hearing intra-EU disputes.507
322.
As to the Achmea judgment of 6 March 2018 relied upon by Spain,508 Claimants contend that: (i) it concerns a different treaty, a bilateral investment treaty concluded prior to the accession of one of the States to the EU and not the ECT which is a multilateral treaty to which the EU is a Contracting Party,509 and (ii) it concerns different applicable law - the host State law and other agreements between the State parties to the BIT were part of the governing law according to the underlying BIT, and the ICSID Convention did not apply.510 These distinctions, Claimants say, have an important bearing on the analysis under the ECT, for various reasons:511

• As the ECT was concluded by the EU and the EU Member States, it was a conscious decision by them to assume binding treaty obligations, it does not undermine the EU Law principle of mutual trust, and it is binding on them as a matter of international law and EU Law.512

• The Achmea judgment does not apply to treaties to which the EU is a Contracting Party, such as the ECT.513

• The CJEU interpreted that the BIT at issue in Achmea required the application of the EU Treaties, because the governing law clause included "any other relevant Agreements between the Contracting Parties" and the host-State law. By contrast, Article 26(6) of the ECT expressly requires the Tribunal to resolve the dispute according to international law and the ECT; and it does not require the Tribunal to interpret the EU Treaties or EU Law.514 In addition, the claims in this case concern violation of Article 10(1) of the ECT, not whether Spain violated EU Law provisions;515 and the legal character of the claims is not altered even if incidental points of EU Law might arise.516

• Both Spain and the Netherlands were part of the EU when they entered into the ECT. The two provisions of the EU Treaties which form the basis of the Achmea judgment (Articles 267 and 344 of the TFEU) had their origin in the 1957 Treaty of Rome, and were already binding on Spain and the Netherlands when they entered into the ECT. Neither is new, nor do they amount to a treaty subsequent to the ECT. While the Lisbon Treaty changed the title of the EU Treaty to the TFEU and amended some aspects of it, that does not make it lex posteriori to the ECT.517 Thus, when entering into the ECT: the EU and its Member States did not consider themselves in contravention of now Article 344 of the TFEU; in the event of inconsistency, according to Article 16(2) of the ECT, the ECT prevails over the EU Treaties; and since Article 344 of the TFEU is not a new treaty conflicting with an earlier treaty, the ECT is the lex posteriori.518

323.
But, Claimants argue, even if Spain had demonstrated an inconsistency between EU Law and the ECT in light of the Achmea judgment, the ECT would prevail.519 The alleged principle of primacy of EU Law is an internal EU Law principle reflecting supremacy of EU Law over the law of the EU Member States, and it does not alter the hierarchy of the ECT over EU Law established by virtue of Article 16(2) of the ECT and customary international law.520 If the Tribunal concludes that the ECT and the TFEU cover the same subject matter, Article 16(2) of the ECT must be applied; if the Tribunal concludes that they do not cover the same subject matter, there is no conflict and no predicate to apply Article 30 or 59 of the VCLT.521
324.
Finally, "[t]he CJEU itself recognised the EU law is not to be treated as international law, but instead as a body of law which is 'autonomous’ and 'independent’ of both international law and the national law of each Member State, and binding domestically in (and not just on) each Member State - in contrast to the plane occupied by international law."522 And it is a basic principle of international law recognized in Articles 7 and 32 of the International Law Commission Articles on State Responsibility ("ILC Articles on State Responsibility") that "a State cannot invoke its own breach of its domestic law as an excuse for violating its international obligations," and in Article 46 of the VCLT, which "prevents a State from pleading domestic law requirements to honour its international treaty commitments."523

(2) The Non-Disputing Party’s Written Submission

a. Spain’s Offer to Arbitrate in the ECT Does Not Cover Investors from EU Member States

325.
The EC takes the view that the ECT does not create inter se obligations and does not apply in the relationship between EU Member States that were EU Members when the ECT was ratified.524 This, it says, follows from the text of the ECT, the nature of multilateral agreements, and the object and purpose of the ECT:

• The Text. Articles 1(2), 1(3) and 36(7) of the ECT recognize that the EU Members transferred competences to the EU on matters governed by the ECT.525 Similarly, the definition of "Area" in Article 1(10), contains an express reference to the provisions of the EU Treaties, and recognizes that the relationships of the Members to a REIO are governed by the agreements establishing that REIO. Further, the definition of "Area" of the EU comprises all the Areas of the EU Member States, such that intra-EU there is no diversity of Area.526 A different interpretation deprives Article 1(3) and 1(10) of effet utile, and encourages "respondent shopping," prohibited by ECT.527

• The Nature of Multilateral Agreements. A multilateral agreement to which both the EU and its Member States are a party is EU Law, and the CJEU is in general competent to interpret it, except if the provision is exclusively within the competence of the EU Member State.528 In negotiating these agreements, the EU and its Member States are bound by the principle of unity of EU Law,529 and in the case of the ECT they acted like a single block.530

• The Object and Purpose. The historical process that led to the ECT makes clear that its objective was to create an international framework for cooperation in the energy sector between the EU, and Russia, the CIS and Central and Eastern Europe. Also, when created, the ECT was perceived as a part of the EU external energy policy and was never intended to influence the internal energy policy.531 The object and purpose of the ECT reflect that all the ECT Contracting Parties understood that the EU Member States did not intend to create inter se obligations in areas for which they retained competence.532

• Disconnection clauses were used in international treaties where the EU would not become a Contracting Party, to serve as a "reminder" of its existence. But that is completely different in international treaties where EU is a party, and is explicitly recognized in its role as REIO, such as the ECT. There, all Contracting Parties were fully aware of the specificities of the EU legal order.533 Further, Claimants' argument on the disconnection clause relies on academic articles unsupported by the sources that they cite.534

326.
But even if the ECT had created intra-EU obligations, which the EC denies, such obligations would not comprise the provisions on investment protection in Part III of the ECT or the dispute settlement provision in Article 26, because EU Member States had transferred to the EU competence on those subjects.535 Pursuant to Article 64 of the ILC Articles on Responsibility of International Organizations and case law, the principal law applicable for determining the extent of the international obligations and international liability of EU Member States is "liability follows competence."536 For the EC, "protection and promotion of investments in other Member States, as well as energy, fall into the external competence of the Union."537 Further, an inter-se investment protection treaty between EU Member States "might affect common rules or alter their scope," that is, the EU system of investment protection.538 As such, pursuant to Article 3(2) of the TFEU, EU Member States did not have the external competence to conclude such type of treaty.539
327.
EU Member States are presumed to be aware of the rules governing distribution of competences; and the ECT recognizes that the EU Member States had transferred competences to the EU on matters covered by ECT. Accordingly, all the ECT Contracting Parties were aware of the existence of the distribution of liability.540 As a result, the ECT provisions on investment promotion and protection bind the EU, but not the EU Member States inter-se.541
328.
Should the Tribunal consider that the ECT is ambiguous with respect to the question of intra-EU obligations, the EC argues, it should favour an interpretation that does not conflict with EU Law, namely, that the ECT does not apply between EU Member States at all, or at least that Part III and Article 26 do not apply between them.542

b. Spain's Offer to Arbitrate Is Not Valid

329.
According to the EC, even if Spain had made an offer to arbitrate to intra-EU Investors, that offer would not be valid because: (i) it would violate EU Law, which prevails over the ECT in the event of conflict pursuant to Article 351 of the TFEU;543 and (ii) that offer would have been modified or superseded pursuant to Articles 41(1)(b) or 30(4)(a) of the VCLT.544
330.
According to the EC: (i) the intra-EU application of the substantive protections of the ECT would violate Article 3(2) of the TFEU, because EU Law provides a complete set of rules on investment protection, and the EU Member States did not have competence on those matters;545 and (ii) treaty-based investor-State arbitration of intra-EU disputes violates Articles 19(1) of the TEU and Articles 267 and 344 of the TFEU, and the general principles of effectiveness and unity of EU Law.546 Pursuant to those provisions, the EC argues, disputes concerning the application of the EU Treaties are to be resolved before the CJEU - for disputes involving two Member States, or the national courts - for disputes between a private party and EU Member State.547 Thus, when EU Member States create a separate body for dispute resolution that is required to apply EU Law, such as Article 26 of the ECT does, they violate Article 344 of the TFEU.548 Further, for the EC, the decisions by investment tribunals holding that Article 344 only applies to disputes between EU Member States overlook that national courts are part of the EU legal order and can therefore apply EU Law, and miss distinctions between commercial arbitration and investment arbitration.549
331.
The EC goes on to add that, having identified a conflict with EU Law, the applicable conflict rule would be Article 351 of the TFEU, pursuant to which the ECT provisions incompatible with EU Law (i.e. Part III and Article 26) would become inapplicable.550 But even if the matter were to be analyzed under the general rules of conflict in the VCLT, intra-EU obligations were superseded by virtue of Articles 30(4)(a) and 41 (1)(b) of the VCLT.551 The EC argues in particular:

• Article 41 (1)(b) of the VCLT on the amendment of a treaty by a later treaty would operate here because the Treaties of Amsterdam, Nice and Lisbon "re-affirmed" the EU rules on investment protection, competences and the system of judicial protection.552 And the conditions of Article 41 (1)(b) of the VCLT are met because (i) suppressing inter se obligations between EU Member States only concerns EU Member States; and (ii) suppressing the provision at issue (investor-State arbitration in Article 26) would not be incompatible with the object and purpose of the ECT as a whole.553

• If no amendment took place, Article 30 of the VCLT would operate as the rule to resolve a conflict between an earlier treaty and a later treaty relating to the same subject matter; pursuant to which the earlier treaty applies only if compatible with the later treaty.554 The ECT and the EU Treaties relate to the same subject matter.555 And given that in the Treaties of Amsterdam, Nice and Lisbon, EU Member States "re-affirmed" their commitment to EU Law, then the ECT (concluded in 1994) is the earlier treaty.556 As the provisions of the ECT on investment protection (Part III and Article 26) are incompatible with EU Law if applied intra-EU, they are not applicable pursuant to Article 30(4)(a) of the VCLT.557