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Source(s) of the information:

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

Decision on Jurisdiction

I. THE PARTIES

A. The Claimants

1.
The Claimants are RREEF Infrastructure (G.P.) Limited ("RREEF Infra" or the "First Claimant") and RREEF Pan-European Infrastructure Two Lux S.à r.l. ("RREEF Pan-European Two" or the "Second Claimant"), jointly referred as the "Claimants".
2.
[REDACTED]
3.
[REDACTED]
4.
[REDACTED]
5.
For purposes of their submissions the Claimants referred to the above entities [REDACTED] as "RREEF". The Memorial on the Merits explains that "RREEF specialises in infrastructure investments, with extensive experience across different sectors, including the power generation sector. [REDACTED]
6.
The Claimants are represented in these proceedings by the law firm Allen & Overy.

B. The Respondent

7.
The Respondent is the Kingdom of Spain ("Spain" or the "Respondent").
8.
The Respondent is represented in this arbitration by the Abogacía General del Estado of the Ministry of Justice.

II. PROCEDURAL HISTORY

9.
On October 22, 2013, the Claimants submitted a Request for Arbitration to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre").
10.
The Request was filed on the basis of Article 26(4)(a)(i) of the Energy Charter Treaty dated 17 December 1994, which entered into force on 16 April 1998 for Luxembourg, the United Kingdom and the Kingdom of Spain (the "ECT"), Article 36 of 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"), and Article 1 of the of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceeding (the "ICSID Institution Rules").
11.
On 22 November 2013, the Secretary-General registered the Request for Arbitration.
12.
On February 12, 2014, the Claimants appointed Professor Robert Volterra, a Canadian national, as arbitrator. On February 27, 2014, the Respondent appointed Professor Pedro Nikken, a Venezuelan national, as arbitrator. On July 30, 2014 the Chairman of the Administrative Council appointed Professor Alain Pellet, a French national, as the President of the Tribunal pursuant to Article 38 of the ICSID Convention. All three arbitrators accepted their appointments.
13.
The Tribunal was constituted in accordance with Article 37(2)(b) of the ICSID Convention and the proceedings commenced on July 31, 2014. Further, the Centre designated Ms. Natalí Sequeira as Secretary of the Tribunal.
14.
The Tribunal and the parties held a first procedural session in Paris on 29 September 2014.
15.
On 21 October 2014, the Tribunal issued Procedural Order No. 1 setting forth the matters discussed at the first session with the parties, including the procedural timetable and the agreement that the proceedings were to be conducted in accordance with the ICSID Rules of Procedure for Arbitration Proceedings, in force as of April 10, 2006 ("ICSID Arbitration Rules").
16.
On 14 November 2014, the European Commission ("EC") filed an application to intervene as non-disputing party pursuant to ICSID Arbitration Rule 37(2).
17.
On 21 November 2014, the Claimants filed their Memorial on the Merits.
18.
On 5 and 8 December 2014, the Respondent and the Claimants respectively, filed observations on the non-disputing party's application by the EC.
19.
On 9 January 2015, the Respondent filed a request to bifurcate the proceedings. On 23 January 2015, the Claimants filed observation on the Respondent's request.
21.
On 7 February 2015 the Tribunal informed the parties that it granted the Respondent's request for bifurcation of the proceedings. Accordingly, the Respondent's objections to jurisdiction would be addressed as a preliminary question and the proceedings on the merits suspended.
22.
On 18 February 2015, the Tribunal issued Procedural Order No. 3, setting forth the reasoning for its decision on bifurcation. On 4 March 2015, the Tribunal issued Procedural Order No. 4 establishing a new procedural calendar.
23.
On 1 April 2015, the Respondent submitted its Memorial on Jurisdiction.
24.
On 13 May 2015, the Claimants submitted their Counter-Memorial on Jurisdiction.
25.
Pursuant to Procedural Order No. 4 and paragraph 15 of Procedural Order No. 1, the Parties exchanged requests for the production of documents on 20 May 2015. On 27 May 2015, the Parties exchanged responses and objections to their respective requests, agreed to the production of some of the documents and objected to others.
26.
On 8 June 2015, the Parties submitted a Joint Document Production Application and Redfern Schedules, in accordance with sections 15.4.3 and 15.7 of Procedural Order No. 1.
27.
On 19 June 2015, the Tribunal issued Procedural Order No. 5 deciding on the Parties' requests for document production.
28.
On 7 July 2015, the Tribunal issued Procedural Order No. 6 concerning a request for confidentiality of certain documents to be produced by the Parties.
29.
On 21 July 2015, the Respondent submitted its Reply on Jurisdiction.4
30.
On 8 September 2015, the Claimants submitted their Rejoinder on Jurisdiction.
31.
On December 9, 2015, the EC filed a second application for leave to intervene as a nondisputing party pursuant to ICSID Arbitration Rule 37(2). On December 23, 2015, the Parties filed observations on the EC's second application.
33.
The hearing on jurisdiction was held on 1st February 2016 at the World Bank offices in Paris.
34.
On 7 March 2016, the Tribunal informed the Parties of its Decision on the Respondent's objections to jurisdiction, rejecting all objections submitted by the Respondent, "except the one related to Article 10(1) of ECT ("Tax Objection")", which was joined to the merits.

III. THE PARTIES' ARGUMENTS

35.
The Respondent's arguments can be broadly grouped under five headings:

First , the Respondent considers that the ECT is not applicable to disputes concerning intra-EU investments;

Second, the Respondent asserts that the claim on the alleged damages to the renewable energy production plants solely pertains to Spanish companies that own the plants and not to the Claimants;

Third, the Respondent alleges that the Claimants are not investors for the purposes of the ECT and that the Claimants' investment is not an investment according to the ECT;

Fourth, the Respondent considers that pursuant to article 21 of the ECT, tax measures are excluded from the scope of the ECT and that the Tax on the Value of the Production of Electric Energy ("TVPEE") created by Act 15/2012 is such a tax measures;

Fifth, the Respondent alleges that the Claimants failed to submit the dispute to amicable settlement and to respect the three-month cooling-off period prior to the arbitration in accordance with Article 26 of the ECT concerning Act 24/2013, Royal Decree 413/2014 and Ministerial Order IET/1045/2014.5

36.
The Tribunal will deal hereafter with each of these arguments or series of arguments in turn.

IV. THE INTRA-EU OBJECTION

A. The Respondent's Position

(1) The Obligatory Existence of an Investor from "Another Contracting Party"

37.
The Respondent considers that the Second Claimant (RREEF Pan-European Two), is not a protected investor under the ECT on the basis that it is incorporated in Luxembourg which, like the Kingdom of Spain, is a Member State of the European Union ("EU"). The EU is also a Contracting Party to the ECT.
38.
Thus, the Respondent's argument is that the Second Claimant is not deemed to be of "another Contracting Party" as required by Article 26. Therefore, according to the Respondent, the Second Claimant is not authorized to avail itself of arbitration under the ECT as this instrument is not applicable to disputes concerning intra-EU investments.6
39.
Moreover, the Respondent contends that the EU judicial system has exclusive jurisdiction over investment disputes between investors from an EU Member State ("intra-EU investors") and another EU Member State.7

(2) EU Preferential System – Primacy of EU Law

40.
According to the Respondent's reasoning, the EU is an economic integration area which includes, in its internal market regulations, a comprehensive system for promoting and protecting intra-EU investments. This, it says, has primacy over that provided by the ECT.
41.
Moreover, the Respondent contends, the EU internal market contains a comprehensive set of protections for fundamental rights which holds Member States liable for any breaches. Finally, the Respondent asserts that the EU judicial system has a monopoly on the final interpretation of EU Law.8
42.
The Respondent points out that jurisprudence from the EU judicial system precludes Member States from restricting EU nationals from enjoying the freedom of establishment provided for in the EU' constituent documents.9
43.

The Respondent argues that the system of intra-EU investor protection deriving from EU instruments and judicial decisions takes precedent over or displaces that contained in any other international treaty. The Respondent points for support to the specific nature of the EU and also to specific recognition of this within the ECT itself.10 The Respondent relies for support in these arguments upon:

Article 1(2) of the ECT : Definition of the Contracting Parties includes Regional Economic Integration Organisations "REIO". The EU is the only REIO that forms part of the ECT;11

Article 1(3) of the ECT : Defines a REIO as "an organization constituted by states to which they have transferred competence over certain matters a number of which are governed by this Treaty, including the authority to take decisions binding on them in respect of those matters";12

Article 36(7) of the ECT : Provides that a REIO will have the same number of votes as its Member States who are Contracting Parties;13

Article 1(10) of the ECT : Defines the "Territory" of the REIO, referring to the provisions of said organisation, i.e. the EU;14

Art 25 : Recognizes the primacy of EU law;15

44.
The Respondent argues that in applying international law a tribunal should rely on Article 26(6) of the ECT, which requires the settlement of disputes in "accordance with the provisions of the Treaty itself and the applicable standards of International Law". This means that EU law has to be considered equally as any applicable International Law.16
45.
In this context the Respondent cites the case of Electrabel S.A v. The Republic of Hungary :

"‘(…) the Tribunal concludes that Article 307 EC precludes inconsistent pre-existing treaty rights of EU Member States and their own nationals against other EU. Member States; and it follows, if the ECT and EU law remained incompatible notwithstanding all efforts at harmonisation, that EU law would prevail over the ECT's substantive protections and that the ECT could not apply inconsistently with EU law to such a national's claim against an EU Member State."17

46.
The Respondent also refers to Article 344 of the Treaty on the Functioning of the European Union of 17 December 1994 (the "TFEU") which provides that: "Member States undertake not to submit any disputes about the interpretation or application of Treaties to a settlement procedure other than those foreseen therein."
47.
According to the Respondent, this provision prevents the Kingdom of Spain from submitting any matters concerning the internal electricity market to arbitration.18 Accepting this possibility would mean that an arbitral tribunal would decide upon the rights of EU investors in the internal market.19 In this respect, the Respondent notes that the Court of Justice of the European Union ("CJEU") has already ruled that this would be incompatible with EU law, as the CJEU has exclusive jurisdiction to interpret EU law.20
48.
The Respondent further argues that its position is supported by EC which is "one of the most authorised voices to interpret the ECT",21 as it was the EC which, upon a proposal by the European Council of Dublin in June 1990, put forward the idea of the European Energy Charter and negotiated its conclusion.
49.
According to the Respondent, Article 26(6) of the ECT directs the Tribunal to apply both the ECT and any other norms and principles stemming from international law including European law, at the same level. As pointed out by the Electrabel tribunal, in the event of any contradictions between European law and the ECT, EU law should prevail.
50.
The Respondent submits that any other position would be illogical22 as the EU and its Member States have promoted the ECT.23 Furthermore, the ECT emanates from EU law and they both share the same purpose: to establish a common market on the basis of the principle of non-discrimination.24 Thus, it would be contrary to EU Law that a Luxembourg citizen would have different rights than a Spanish citizen.25

(3) Disconnection Clause

51.
The Respondent also invokes the irrelevance of the inexistence of an explicit disconnection clause in the ECT:

"In this context, the notion that the ECT does not contain a disconnection clause, as is asserted by the Claimants in their comments on the Request for Bifurcation, is meaningless. Obviously, and unlike bilateral treaties, which States can sign on their own behalf, in this case no disconnection clause was needed because the ECT was a multilateral treaty signed by the EU, together with the Member States, and obviously the latter could not subscribe to a treaty that was incompatible with EU law."26

52.
At the hearing, the Respondent addressed a question by one of the members of the Tribunal as to why, if this principle was so vital for the EU, the ECT did not include a reserve or contemporary statement showing that the intention of the EU and its Members States was to formally exclude Part 3 of the ECT for application among EU Members. The Respondent replied that:

"So, the Commission asks the Court of Justice if it is adequate to introduce a disconnection clause, and the Court of Justice says no because, if we introduce this kind of provision, we would be admitting implicitly that some parts of the Treaty would bind us, and the ruling said yes, the EU is right, it is useless to introduce a disconnection clause because the Treaty intends to extend this system to other parties or Parties where there is already a harmonization within the European Union."27

(4) Relevance of Previous Awards

53.
The Claimants argue that they are not aware of any case where the Intra-EU objection has been upheld by an arbitral tribunal or a national court28. However, the Respondent notes that the cases cited by the Claimants29 mostly relate to bilateral investment treaties and not ECT, except for Electrabel v. Hungary.30
54.
However, the circumstances of the Electrabel case are different to those of the present proceeding.31 In particular, the Respondent notes that both Spain and Luxembourg (the alleged State of origin of one of the Claimants in the present case) were both Member States of the EU at the time of negotiation and ratification of the ECT,32 while in the case of Electrabel, Hungary was not an EU Member State when the ECT was concluded.
55.
Thus, the issue under discussion in Electrabel was whether the obligations assumed by Hungary towards the EC and its Member States pursuant to the ECT, should be considered overridden by the EU treaties when Hungary joined the EU, as provided for Articles 30 and 59 of the Vienna Convention. The issue in the present case is different as both States (Spain and Luxembourg) were part of the EC when the ECT was signed.
56.
Concerning the Claimants’ reliance on the PV Investors v. Spain case, the Respondent noted during the hearing on jurisdiction [REDACTED]33.

B. The Claimants’ Position

(1) One of the Claimants Is Not an EU Member

57.
The Claimants submit that the Respondent’s objection about the Tribunal’s lack of jurisdiction to hear the claims of the Second Claimant does not extend to the First Claimant, as the latter is incorporated in Jersey, which is not part of the EU.34

(2) EU Preferential System - Primacy of EU Law

58.
The Claimants further argue that the ECT’s recognition of the existence of a regional organisation does not deprive Investors of their rights under Article 26 of the ECT.35 According to the Claimants, the reference to REIOs in Articles 1(2), 1(3) and 1(10) of the ECT serves to ensure that a claim can be brought against a REIO regarding a dispute arising out of an investment made in that area, and it by no means suggests that the multilateral treaty does not apply within the regional organisation absent a disconnection clause.36
59.
With respect to Article 1(3) of the ECT in particular-, the Claimants submit that the Respondent wrongly interprets this provision to provide for the supremacy of EU law in cases where the EU Members States have transferred their competences to the EU. First, the Claimants clarify that energy is shared competence under EU law and thus, the EU does not have exclusive competence on this field.37 Second, the fact that the European Commission has criticized the measures adopted by the Kingdom of Spain suggests that these were not taken at the direction of the European Commission nor were they required by EU law.38
61.
In any event, the Claimants assert that the ECT and EU law do not have the same purpose.44 The ECT is not intended to create any single market,45 and EU Law does not provide for any mechanism for investors to bring arbitration for a neutral forum.46
62.
Article 36(7) of the ECT is not of assistance to the Respondent either. According to the Claimants, the fact that Article 36(7) prevents a REIO from exercising its voting rights when its Member States exercise their own right to vote, confirms the Claimants' position that the EU and its Member States were not intended to be regarded as one Contracting Party.47
63.
Furthermore, Article 26(6) of the ECT does not favour an intra-EU objection either. Although the EU Treaties qualify as international law for the purposes of Article 26(6) of the ECT, this is not the case for the EU secondary legislation, which is essentially equivalent to domestic law.48 Additionally, the Claimants argue that, from a public international law perspective, EU law does not prevail over international law.49 This is further illustrated in the practice of other ECT tribunals that have ruled on this issue before.50
64.
Finally, the Claimants submit that the unilateral interpretation / subjective intention of the European Commission or EU Member States is irrelevant to the interpretation of Article 26 of the ECT.51 Citing multiple sources, the Claimants argue that "what matters is the intention of the parties as expressed in the text".52 The Claimants submit that the ordinary meaning of Article 26 is clear and unambiguous and thus the Respondent wrongly attempts to resort to supplementary means of interpretation.53

(3) Disconnection Clause

65.
According to the Claimants, the Respondent's allegations that an express disconnection clause was not necessary based on the reasoning that, in a treaty where both the EU and its Member States subscribed, the latter could not have become member of a treaty that was incompatible with EU law, are unfounded. This submission is not credible given that (i) prior to the conclusion of the ECT, the EU had used disconnection clauses where they were intended to apply;54 (ii) the ECT contains disconnection clauses where they were intended to apply;55 and (iii) had it been intended, the inclusion of a disconnection clause would have been particularly indispensable given the ordinary meaning of Article 26 of the ECT.56
66.
Accordingly, the Claimants are of the view that "the disconnection clause argument is nothing more than an ex post invention of the European Commission".57 Whatever the case may be, the Claimants submit that such inconsistent practice clearly is not sufficient to establish the correct interpretation of the ECT.58

(4) Relevance of Previous Awards

68.
According to the Claimants, the Respondent's arguments that there are essentially two classes of Contracting Parties under the ECT: the old EU Member States v. the new ones, such as Hungary; and that, accordingly, previous ECT awards since Electrabel do not apply because they involved a non-EU Member State at the time, are not supported by the ECT.60 Old EU Member States were aware at the time they signed the Treaty of both their EU obligations and the obligations they were signing up. They chose not to insert any provision in the Treaty to make it clear that the intra-EU disputes were not to be heard by international tribunals.61
69.
It follows from the above that arbitral tribunals can have jurisdiction between EU Member States. This has been confirmed by a number of tribunals and also by courts of the EU Member States, such as the German Courts, which in dealing with the challenge of the Eureko v. Slovak Republic award62 also rejected the Intra-EU objection.63
70.
The Claimants also point to the PV Investors v. Spain award which concerned specifically the ECT and is relevant in the present case . This tribunal [REDACTED]64. In doing so, it held that [REDACTED]

C. Tribunal’s Analysis

(1) General Principles

(2) Application of the General Principles in the Present Case

(3) Conclusion of the Tribunal on the "Intra-EU" Objection

90.
The Tribunal takes note of the Claimants' argument that EU law is not applicable to RREEF Infrastructure (G.P.) Limited, which is incorporated in Jersey. However, since the Respondent's objection based on EU law is dismissed in its entirety, it answers the argument. There is thus no need for the Tribunal to address this further.

V. THE DAMAGES OBJECTION

A. The Respondent's Position

(1) Illegitimacy of the Shareholders' Claim to be Compensated for Alleged Damage to the Companies in which Shares are Held (Reflected Loss)

91.
According to the Respondent, the Claimants confound their dispute, investment and possible losses with those of the companies owning the plants. Furthermore, the Claimants attribute to themselves rights to receive an income that in fact belong to such companies.84
92.
The Respondent states that while the shareholders have the right to receive returns on their investment in a company through the distribution of profits, they do not have the right to take legal actions for losses suffered by it. Any legal actions should be brought by the company itself.85
93.
The Respondent further argues that the general principle of the non-recognition of shareholder claims, known as the "no reflective loss" is accepted as customary international law and by all advanced national systems of commercial law. According to this principle, any claim for losses should be made by the company and the shareholder's standing is limited to cases of direct damages to the shareholder's own rights (i.e. acts by a State limiting the shareholder's voting rights, rights to profit sharing, etc).86
94.
In the field of international law, this principle was first recognised in the Barcelona Traction case87 and ratified by the International Court of Justice ("ICJ "), citing its previous rulings, in the Diallo case.88
95.
The same principle has been consistently recognised by the European Court of Human Rights ("ECtHR") (see i.e. the Olczak v. Poland case)89 and in arbitration proceedings, such as ST-AD GmbH v. Republic of Bulgaria, in which the Arbitral Tribunal observed that:90

"[...] It has been repeatedly held by arbitral tribunals that an investor has no enforceable right in arbitration over the assets and contracts belonging to the company in which it owns shares. "91

(2) The Jurisdiction of the Tribunal only Extends to the Dispute concerning the Loss of Value of the Shares

96.
The Respondent submits that the above does not mean that shareholders do not have legitimacy to submit claims to an arbitral tribunal but such legitimacy only extends to the loss of value of the shares held by the shareholders as result of measures taken by the host State.92
97.
The Respondent argues that all advanced systems of commercial law include the principle of non-recognition of shareholders' standing to claim compensation for reflected loss so the principle is widely accepted as part of customary international law. Moreover, both the Luxembourg and the Spanish legal systems, also recognize the distinction between shareholders and companies, and between the separate rights and obligations of each of them.93 The principle is also reflected in Article 25(1) and 25(2)(b) of the ICSID Convention and Article 26(7) of the ECT.94
98.
The Respondent further argues that it is completely different to evaluate damages sustained by a company than to evaluate damages sustained by a shareholder.95

"In other words, an investor whose investment consists of shares cannot claim, for example, that the assets of the company are its property and ask for compensation for interference with these assets. Such an investor can, however, claim for any loss of value of its shares resulting from an interference with the assets or contracts of the company in which it owns the shares [...]."96

99.
The Respondent submits that in this case the alleged investment by the two Claimants would be: i) an indirect participation (through Dutch branches) in the shares of Spanish companies owning the plants (Article 1.6 (b) of the ECT); and ii) an indirect shareholding (through its Dutch branches) in the credits of the shareholders in each of the Spanish companies owning the plants (Article 1.6 (b) of the ECT).97
100.
Thus, according to the Respondent, the alleged investment of the Claimants "would not affect":

(i) the facilities or the Plants;

(ii) the credits of the Spanish companies owning the plants;

(iii) the alleged rights granted to the Spanish companies by RD 661/2007; or

(iv) income of any nature from the Spanish companies owning the plants.

101.
The Claimants state that all of the above are assets belonging to the Spanish companies that own the plants.98 Instead, according to the Respondent, the sole "incomes" that the Claimants may obtain from their investments are the dividends or benefits generated by their indirect stake in the Spanish companies and the interest on the shareholders' loans.99
102.
The Respondent further alleges that Claimants have prompted this confusion. On one hand, the Claimants allege that they have incurred in "substantial indebtedness and stake in the projects".100 On the other hand, they define their investment so broadly101 that they mistake their legal personality with that of the Spanish companies, as if the latter were parties in this arbitration.102

(3) "Two Bites of the Apple"

103.
Respondent contends that a claim filled by the plant companies before the Spanish Supreme Court may lead to a double recovery, contrary to good faith.103
104.
Furthermore, according to the Respondent, in the event that the Constitutional Court annuls the challenged measures, the former economic regime would apply and the plants would continue receiving remuneration pursuant to Royal Decree 661/2007. In this scenario the plants wouldn't have sustained any damages and the Claimants would be able to claim for damages that were never sustained.104
105.
The Respondent contends that the Tribunal's jurisdiction must be limited solely to considering the possible loss in value of the shares and credits that the Claimants allegedly hold in the Spanish companies. However, before making that determination it would have to be proved that the Claimants are investors with an investment for purposes of the ECT and that the Respondent has breached the ECT. The Respondent rejects all these allegations.105

B. The Claimants' Position

(1) Legitimacy of the Shareholders' Claims

106.
In response to the Respondent's assertions that the Tribunal has no jurisdiction over claims for "reflective loss", the Claimants counter that international investment law permits such claims.106 According to the Claimants, investment treaty tribunals have consistently recognised the right of a shareholder to bring a claim that is independent from that of the locally incorporated company.107 The Claimants further submit that the Respondent wrongly relies on the Barcelona Traction case, because the latter is relevant only in the context of diplomatic protection and does not extend to treaty-based arbitration.108 With respect to the Respondent's argument on the application of the principle of separation of legal personality between a company and its shareholders, the Claimants argue that the recognition of this principle in the sphere of national law cannot limit the Claimants' legal rights against Spain under the ECT and international law.109 This principle only becomes relevant when a shareholder's claim overlaps with a company's claim, which is not the case.110
107.
Additionally, the Claimants argue that the ECT and the ICSID Convention do not bar claims for reflective loss.111 In the Claimants' view, the Respondent's reading of Article 26(7) of the ECT ignores the plain language of Article 26(7) which provides that a locally-incorporated company, controlled by investors of another Contracting Party, shall "for the purpose of article 25(2)(b) of the ICSID Convention be treated as a ‘national of another Contracting State' and shall for the purpose of article 1(6) of the Additional Facility Rules be treated as a ‘national of another State".112 A good faith interpretation of the ordinary meaning of the terms of Article 26(7) suggests that the latter grants a foreign controlled, locally-incorporated company the possibility to have recourse only to ICSID arbitration or ICSID Additional Facility arbitration, but not to arbitration under the UNCTIRAL or SCC Rules for which no mention is made in the Treaty.113
108.
According to the Claimants, it is unquestionable that a foreign shareholder has standing to bring treaty claims in ICSID against the host State for measures affecting or directed at the locally-incorporated entity in which they invested.114 In support of this proposition, the Claimants rely on several arbitral awards.115
109.
The Claimants note that the Respondent's only complaint appears to be that the Claimants consider their investments to include the underlying assets and rights held by the Project Companies.116 On the contrary, the Respondent does not contest that the Claimants maintain substantial debt and equity interests in the relevant Project Companies, nor does it contest that these assets qualify as the Claimants' investments for the purposes of the ECT or the ICSID Convention.117 In this regard, the Respondent wrongly submits that the Claimants do not hold qualifying investments in "the facilities or the Plants", "the credits…of the Spanish companies owning the plants", "the alleged rights granted by RD 661/2007 to the Spanish companies…" or "income of any nature from the Spanish companies". In arguing so, the Claimants quote Mr Stanimir Alexandrov who states that it is "beyond doubt that a shareholder's interest in a company includes an interest in the assets of that company, including its licenses, contractual rights, rights under law, claims to money or economic performance …".118
110.
The Claimants also refer to the long-standing practice of ICSID tribunals which deny to distinguish between the shareholders' direct ownership of their shares and their indirect rights in the assets of the local company.119 The Claimants particularly point to the Azurix v. Argentina tribunal120 which held that the claimant's investment consisted of both its shareholding interest and the rights held by the concessionaire.121

(2) "Two Bites of the Apple"

111.
In response to the Respondent's allegations, the Claimants clarify that only the Dédalo Companies have commenced proceedings in Spain, notwithstanding RREEF's vote against this decision.122 In any event, the Claimants have a separate cause of action under the ECT with respect to their investments, and therefore, their rights can be asserted independently from the rights that the Project Companies have as a matter of Spanish law.123
112.
Additionally, the Claimants are of the view that this is not a question of jurisdiction, but of computation of damages. However, they hasten to clarify that they do not intend to seek double recovery. Had the Claimants not suffered damages because of the annulment of the decision by the Constitutional Court, they would not seek damages from this Tribunal.124

C. Tribunal's Analysis

113.
Although the Tribunal considers that the present objection is not entirely distinguishable from the one based on the non-existence of an investment, it will examine both in turn since the Parties have discussed them separately.
114.
The "damages objection" is summarized as follows by the Respondent: "Lack of jurisdiction ratione personae of the Arbitral Tribunal to hear the claim for alleged damages to renewable-energy plants, since the legitimacy to make such a claim corresponds exclusively to the companies that own these plants, and these companies are not party to the present arbitration".125 Under this general heading, the Respondent also complains of the Claimants' "fraudulent attempt to obtain ‘two bites of the apple '"126. Although linked, these are two distinct arguments which must be discussed separately.

(1) On the Shareholders' Right to Bring Claims before the Tribunal

115.
The debate between the Parties on the first branch of the objection bears on the most classical question concerning the standing of foreign shareholders to claim compensation.
116.
The Respondent's case is straightforward: "no compensation may be claimed by shareholders of companies for alleged damages to the assets of the same companies".127 However, this first statement must be read in conjunction with the one which immediately follows: "The Kingdom of Spain does not deny that the shareholders of the companies have locus standi to apply to an Arbitral Tribunal for compensation for damages incurred directly to their real investment".128 Quoting the ICJ's position in the Barcelona Traction case, the Respondent asserts that "[s] o long as the company is in existence the shareholder has no right to the corporate assets".129
117.

However, the Respondent accepts that:

"this does not mean that shareholders do not have legitimation to appeal to an Arbitral Tribunal with respect to the case in which an investment has been made. What it means is that in such cases the legitimation of the shareholders and the jurisdiction of the Tribunal only extends to the dispute concerning the loss of value of the shares held by the Claimants as a result of measures taken by the host State with respect to the assets of the company in which the Claimants hold shares".130

And quoting from the Ruling given in the ST-AD GmbH v. Republic of Bulgaria case, the Respondent acknowledges that an investor whose investment consists of shares can claim for any loss of value of its shares resulting from an interference with the assets or contracts of the company in which it owns the shares.131

118.
In the Tribunal's understanding, the Claimants' position is similar as far as the principles are concerned. Commenting on the above-quoted passages of the Respondent's Memorial on jurisdiction, they explain: "This is exactly what the Claimants are doing in this case".132
119.
However, the Parties differ as to the relevance of the ICJ's case-law in respect to the issue under review. The Tribunal does not agree with the Claimants' assertion – in line with a probably majority view in the case-law133 – that the positions taken by the World Court are irrelevant in that they concern diplomatic protection.134 Indeed they do. But there is no reason to set aside the Court's findings when it comes to the definition and scope of such rights. In reality, the two basic principles resulting from the ICJ's jurisprudence remain fully enlightening and applicable:

(i) "So long as the company is in existence the shareholder has no right to the corporate assets"135; but

(ii) "The situation is different if the act complained of is aimed at the direct rights of the shareholder as such."136

120.

In both Barcelona Traction and in Diallo the ICJ adopted a restrictive definition of the shareholder's direct rights.137 This is controversial and has been criticized in the context of the public international law related to investment protection. Thus, as early as 2007, the ad hoc committee in the CMS case held that: "whether the locally incorporated company may itself claim for the violation of its rights under contracts, licenses or other instruments, in particular under Article 25(2)(b) of the ICSID Convention, does not affect the right of action of foreign shareholders under the BIT in order to protect their own interests in a qualifying investment, as recognized again in many ICSID awards".138 And, even more categorically, the tribunal in the RosInvestCo v. Russia case stated unambiguously "that modern investment treaty arbitration does not require that a shareholder can only claim protection in respect of measures that directly affect shares in their own right, but that the investor can also claim protection for the effect on its shares by measures of the host state taken against the company".139 In this perspective, whether the investment treaty is a BIT or the ECT does not change the situation: shareholders have a jus standi to act before arbitral tribunals in their character as shareholders.

121.

In this respect, the position of the ECHR also deserves attention. In the Olczak v. Poland case (invoked by the Respondent), the Court found that "shares in a public company have an economic value and, therefore, are to be regarded as "possessions" within the meaning of Article 1 of Protocol No. 1 to the Convention" (para. 60). Furthermore, the ECtHR concluded, "the value of the shares in real terms was very seriously reduced. The applicant undeniably lost his property as a result of these measures" (para. 61). So "a shareholder in a public company may claim victim status regarding his complaint under Article 1 of Protocol No. 1" (para 61). Additionally, the ECtHR has established that, notwithstanding the juridical persons' ius standi before it according to Protocol 1, a shareholder in a company may claim in her/his own name to be a victim of the alleged violations of the Convention affecting the rights of the company "in exceptional circumstances, in particular where it is clearly established that it is impossible for the company to apply to the Court through the organs set up under its articles of incorporation or – in the event of liquidation or bankruptcy – through its liquidators or trustees in bankruptcy".140 In such circumstances, the shareholders obtain compensation proportionally to their participation in the company, on the basis of the full compensation that could be accorded to the company.141

122.
The Tribunal notes, however, that it would not be uncontroversial to allege that the investment case law is entirely settled in this respect.142 The formula used by the tribunal in Postová Banka v. The Hellenic Republic reflects a more cautious rule. After a careful review of the case-law – including that discussed by the Parties in the present case –143 that tribunal stated:

"a shareholder of a company incorporated in the host State may assert claims based on measures taken against such company's assets that impair the value of the claimant's shares. However, such claimant has no standing to pursue claims directly over the assets of the local company, as it has no legal right to such assets."144

123.

Be that as it may, there is no need for this Tribunal to take position in the abstract on the existence or not of a general rule recognizing the right of action of shareholders, whether generally or conditionally, in contemporary investment law. In the present case, this right stems from Article 1(6) of the ECT, which defines an investment as "every kind of asset, owned or controlled directly or indirectly by an Investor" and including "(b) a company or business enterprise, or shares, stock, or other forms of equity participation in a company or business enterprise, and bonds and other debt of a company or business enterprise". This formula removes any possible doubt concerning the Claimants' jus standi in the present case.145 As noted by the ad hoc Committee in Azurix : "It is the BIT which determines which particular kinds of interests are protected, and it is the BIT and ICSID Convention which determine the persons who may bring proceedings in respect of an alleged violation of the BIT in respect of a particular protected investment".146 In the present case, the ECT clearly includes shares among the protected investments.

124.
For this reason, the Tribunal cannot uphold the second objection of the Respondent to its jurisdiction. This finding does not, of course, deal with the questions of whether the alleged breaches of the ECT have caused damage to the investment and, if so, what is the proper measure of that damage. The Tribunal reserves these questions for the merits and quantum phase.

(2) On the "Two Bites of the Apple" Argument

125.
The same reasoning and solution apply to the issue discussed by the Parties under the heading "two bites of the apple" – that is the reproach made by the Respondent against the Claimants based on the fact that "[t] he same measures challenged in this arbitration by the Claimants are also being challenged before the Spanish Supreme Court by intermediate companies and/or owners of the plants considered in the present Arbitration".147
126.
The avoidance of double recovery or, as the Parties put it, of allowing "two bites of the apple" concerns the amount and the modalities of the compensation (in case a breach of the ECT is found). This is a question for quantum, not of jurisdiction. The Parties may properly address the issue during the next phase of the proceeding.

(3) Conclusion of the Tribunal on the "Damages" Objection

127.
For the foregoing reasons, the Tribunal rejects the Respondent's objection to its jurisdiction based on the lack of "legitimation" of the Claimants to bring before the Tribunal their claims for alleged damages. The Tribunal expressly reserves for the merits and quantum phase the related questions of whether the Respondent has breached the ECT and, if so, what compensation is due to the Claimants in their character as shareholders.

VI. THE RATIONE PERSONAE AND RATIONE MATERIAE OBJECTIONS

128.
The Claimants argue that the Respondent's objections to jurisdiction ratione personae and ratione materiae are not admissible because they were made out of time, on the basis that they were not raised in the Request for Bifurcation. It is true that, under the ICSID Convention and Rules, a respondent must raise objections to jurisdiction at the first possible moment and no later than the Counter-Memorial. The Tribunal recognises that a failure to observe the procedural requirements set out in the ICSID Convention and Rules, or indeed the directions of a tribunal, can be fatal to the admissibility of an argument. In the present case, however, it is the Tribunal's view that the dynamics of the proceedings and the directions of the Tribunal have been such that the Respondent's formulation of its objections to jurisdiction ratione personae and ratione materiae as submitted in its Memorial and Reply on Objections to Jurisdiction are admissible.

A. Ratione personae

(1) The Respondent's Position

(2) The Claimants' Position

135.
The Claimants' position is that they are both investors for the purposes of the ECT and the ICSID Convention. The Claimants have presented a number of arguments to support their position, the principal of which are summarized in the paragraphs 136-141 below.
136.
First, the Claimants argue that each of the Claimants satisfy Article 1(7) of the ECT, which merely requires that the companies are "organized in accordance with the law applicable in [the] Contracting Part [ies]". The Claimants are incorporated under the laws of Jersey and Luxembourg and thus are qualifying investors under the ECT.159 The Respondent's argument that "an entity which simply has stakes or shares in other companies is not a company" has no basis in law.160
137.
Second, the Claimants refute the Respondent's argument that there can only be one indirect owner. There is no such limitation in the ECT.161 The ordinary meaning of Article 1(6) on the protection of indirect owners is clear.162
138.
Indirectly controlled funds and the limited partnership are common forms of investment vehicle. As in the present case, they often own and control investments down through a chain of ownership and control through commonplace corporate mechanisms, such as those that apply to all of the entities in the ownership chain in the present case. According to the Claimants, the fact that, under municipal accounting principles, the ultimate assets in question are not shown on the First Claimant's balance sheet is irrelevant.163
140.
The Claimants add that the limited partnership deed in the present case permits and even requires the General Partner to appoint a manager to run the affairs of the limited partnership.165 The Manager holds a contractual position and is appointed and paid by the General Partner. Under the relevant municipal law, as reflected in the relevant contractual arrangements, the General Partner has the ultimate responsibility for managing the Fund. The limited partnership retains control and supervision over the Manager. The Manager therefore has powers that are delegated to it from the General Partner (the First Claimant). According to the Claimants, it is commonplace in the commercial world for entities to be run and themselves to exercise control through the delegation of authority.

(3) Tribunal's Analysis

B. Ratione materiae

(1) The Respondent's position

(2) The Claimants' Position

151.
As to the Respondent's objection ratione materiae, the Claimants argue that they have made an investment in Spain within the meaning of the ECT and the ICSID Convention. The Claimants have presented a number of arguments to support their position, the principal of which are summarized in paragraphs 152-155 below.
152.

The Respondent’s principal objection ratione materiae is that the First Claimant has not taken on risk and that the limited partners of the RREEF Fund its Manager are the proper claimants. This is merely a reformulation of its objections ratione personae. As with the Respondent’s arguments in relation to that objection, it reflects a fundamental misunderstanding of the facts and law related to the RREEF Fund.176

[REDACTED]

153.
The Claimants recall that the definition of investment is contained in Article 1(6) of the ECT. The definition refers to "Every kind of asset" associated with an "Economic Activity" in the "Energy Sector". The definition is open, general and not restricted.177 The assets that are the subject of the dispute in the present case fit this definition. The Claimants argue that the criteria identified by the Respondent are additional to the definition contained in the ECT.178 They are also additional to Article 25 of the ICSID Convention.179 The Claimants stress that there is no textual or other basis for adding them.
154.
Additionally, the Claimants contend that there is no requirement under the ECT or the ICSID Convention that any funds used in an investment must be imported from abroad or otherwise.180 Nowhere is it required that an investor must finance an investment directly from its own direct resources.181 Therefore, the Respondent's "mere link in the chain" argument has no legal basis.
155.
Alternatively, should the Tribunal decide to consider the additional criteria submitted by the Respondent, it would find that they are present in the investments at issue. Accordingly, the Claimants submit that the duration of the investment was for the operational and financing cycle of the project and it was of no less than 10 years in any event.182 The Claimants also recall that they invested almost EUR 300 million in the Respondent which constitute significant financial contributions.183 Finally, according to the Claimants, there obviously was commercial risk which is reflected in the structuring of the investment.184

(3) Tribunal's Analysis

VII. TAX OBJECTION

A. The Respondent's Position

161.
The Respondent argues that the Tribunal lacks jurisdiction to hear the dispute over the tax measures that the Kingdom of Spain adopted through the enactment of Act 15/2012, which allegedly resulted in the breach of its obligations under Article 10(1) of the ECT.
162.
In particular, the Respondent contends that it has not consented to the dispute being arbitrated, as its consent is limited only to potential violations arising from its obligations under Part III of the ECT.186
163.
The Respondent moves on with a description of the taxes challenged by the Claimants. The Respondent notes that Act 15/2012, in force since January 1, 2013, contains various tax measures relating to the energy sector, including two that are disputed by the Claimants (together referred to as the "tax measures contained in Act 15/2012").
164.
These new tax measures comprise, first, the Tax on the Value of the Production of Electric Energy ("TVPEE")187, which is imposed on the generation and incorporation of electrical energy into the Spanish electricity system. The TVPEE is a tax applied to all generation facilities, both renewable and conventional188 and is calculated on the basis of the total amount paid to the taxpayer for the production of electricity and its incorporation into the electric system during the corresponding taxable period. The applicable tax rate is 7%.189
165.
The second tax measure that is disputed by the Claimants was introduced pursuant to Article 28 of Act 15/2012, which amended Act 38/1992, on Excise Duties ("Excise Duties Act"). Article 28 of Act 15/2012 introduces modifications on the Tax on Hydrocarbons that affect, among other products, natural gas.190
166.
The Respondent makes five different arguments against the jurisdiction of the Tribunal in this matter:

(1) The Respondent's Consent to Submit to Investment Arbitration is limited to Disputes related to Alleged Breaches of Obligations derived from Part III of the ECT191

167.
The Respondent notes that pursuant to Article 26 of the ECT, the jurisdiction of arbitral tribunals is based on the existence of an obligation arising from Part III of the ECT, which a Contracting Party has allegedly breached. According to the Respondent, Part III does not impose any obligations with respect to tax measures adopted by Contracting Parties. Therefore, there can be no breach of obligations under Part III of the ECT with respect to the adoption of tax measures and consequently, the Tribunal lacks jurisdiction as to this issue.192

(2) No Obligations or Rights in the ECT with respect to Tax Measures

168.
The Respondent contends that the ECT does not, in general, create rights nor impose obligations regarding Tax Measures, with certain defined exceptions. This is clearly stipulated in Article 21 of the ECT .193
169.
In view of the above, the Respondent points to the limited exceptions set forth in paragraphs (2) and (5) of Article 21 ECT194 and notes that paragraph (1) of Article 10 of the ECT, on which the Claimants seek to base their allegations, is not concerned by exceptions.195

(3) TVPEE is a Tax Measure for the Purposes of the ECT

170.
The Respondent further argues that the TVPEE's tax nature is evidenced in Article 1 of Act 15/2012:
171.
In determining whether a measure is of tax nature, according to the Respondent, a question arises as to the applicable law.196 In this regard, the Respondent points to the very wording of Article 21(7)(a)(i) of the ECT which refers to "[a] ny provisions relating to taxes of the national legislation of the Contracting Party […]".197 The Respondent argues that arbitral case law has recognised the possibility that in international investment treaties a certain term be defined by reference to the national law of a Contracting Party.198
172.
According to the Respondent, the fact that domestic law is the applicable law to determine the tax nature of a measure may be further supported, by Article 3 of the double taxation Convention between Spain and Luxembourg199
173.
The Respondent further argues that, in any event, even if the applicable law were international law, TVPEE is still a tax200 in accordance with International law.201 The concept of tax under international law as it has been endorsed by arbitral tribunals requires the presence of three characteristics, namely that the tax is set by law, it imposes an obligation on a class of people and that such obligation is a revenue for the State for public purposes. Accordingly, the Respondent notes that the TVPEE was set by national law,202 is levied on all entities that produce and incorporate electrical energy into the Spanish electrical system203 and finally, the revenues from the collection of the TVPEE by the State is intended for public purposes.204

(4) Tax Measures have to be Presumed Bona Fide

174.
The Respondent recalls that arbitral tribunals have held that tax measures should be presumed to be bona fide unless there is conclusive evidence to the contrary.205 In support, the Respondent cites several arbitral awards, including the Yukos v. Russian Federation.206

(5) TVPEE is a Bona Fide Tax Measure of General Application

175.
The Respondent stresses that the TVPEE is a tax of general application applicable to all energy production facilities. According to the Respondent, the State is not obliged to give preferential treatment to producers of renewable energy in configuring the TVPEE. Therefore, the fact that the TVPEE equally applies to conventional producers of electrical energy as well as to renewable producers is not indicative of the mala fide nature of the measure.207
176.
Moreover, in response to the Claimants' argument that the TVPEE is discriminatory because renewable producers, as opposed to conventional producers, are unable to pass the tax to the consumer, the Respondent explains that said tax is a direct tax that is not passed on by taxpayers, whether they are producers of renewable or conventional energy.208
177.
Finally, the Respondent submits that the appeal of unconstitutionality by the Government of Andalucía against the TVPEE and the relevant inquiry by the European Commission with respect to the compatibility of the said tax with EU law do not cast doubts as to the tax nature of the measure. In particular, the Respondent submits that the Spanish Constitutional Court and the European Commission have ratified the taxation nature and the legality of the TVPEE.209
178.
The Respondent also notes that the TVPEE is public revenue of the Kingdom of Spain included in the General State Budget, and that an amount equivalent to the estimated annual collection deriving from the taxes included in Act 15/2012, among them the TVPEE, is destined to the promotion of renewable energies.210

B. The Claimants' Position

(1) Tax Objection Should be Joined to the Merits

179.
The Claimants recall that the definition of investment is contained in Article 1(6) of the ECT. The definition refers to "Every kind of asset" associated with an "Economic Activity" in the "Energy Sector". The definition is open, general and not restricted.211 The assets that are the subject of the dispute in the present case fit this definition. The Claimants argue that the criteria identified by the Respondent are additional to the definition contained in the ECT.212 They are also additional to Article 25 of the ICSID Convention.213 The Claimants stress that there is no textual or other basis for adding them.
180.
Additionally, the Claimants contend that there is no requirement under the ECT or the ICSID Convention that any funds used in an investment must be imported from abroad or otherwise.214 Nowhere is it required that an investor must finance an investment directly from its own direct resources.215
181.
Alternatively, should the Tribunal decide to consider the additional criteria submitted by the Respondent, it would find that they are present in the investments at issue. Accordingly, the Claimants submit that the duration of the investment was for the operational and financing cycle of the project and it was of no less than 10 years in any event.216 The Claimants also recall that they invested almost EUR 300 million in the Respondent which constitute significant financial contributions.217 Finally, there obviously was commercial risk which is reflected in the structuring of the investment.218

(2) Measures are not Tax Measures under Article 21 ECT

182.
The Claimants recall that, for the taxation carve-out to apply, a tax must be bona fide. According to the Claimants, the 7% levy was "a backdoor tariff cut" formed as a tax to strip away and eventually abolish the incentives provided under RD 661/2007.219 Therefore, the 7% Levy was not a tax implemented in good faith, so the tax carve-out does not apply.220
183.
According to the Claimants, the fact that the measure at issue is labelled by the Respondent as a tax is not determinative as to the application of the taxation curve-out. This was made very clear in the Yukos case.221 Additionally, the Claimants assert that a State's characterisation of a measure as a tax under its own internal law is in no way determinative as to whether Article 21 of the ECT is applicable.222
184.
Furthermore, the Claimants contend that the definition of tax under international law is not determinative either as to whether the 7% Levy is bona fide.223 In the Claimants' view, irrespective of whether or not the test advanced by the Respondent correctly reflects the definition of tax under international law, the Respondent's submissions as to whether the measure meets each and every prong of the alleged test are irrelevant to the dispute.224 Finally, the fact that the European Commission has determined that the 7% levy is compatible with EU law is equally irrelevant.225

(3) Taxation Measures have to be Bona Fide

185.
According to the Claimants, the requirement that Taxation measures must be bona fide is a consequence of the central principle of good faith that is broadly recognized under international law.226
186.
Moreover, the Claimants reject the Respondent's assertions that the tax measures "should be presumed bona fide unless there is conclusive evidence to the contrary".227 According to the Claimants, the Tribunal must determine whether a taxation measure is bona fide on the balance of probabilities after reviewing the State's conduct in its totality.228
187.
Accordingly, the Claimants submit that, if there is prima facie evidence that the tax measure is not bona fide, the burden of proof switches to the other party.229

(4) 7% Levy is not a Bona Fide Measure but a Tariff Cut

188.
The Claimants note that the Respondent implemented the 7% Levy amid existing ECT arbitrations, and thus, it must have been aware of its obligations under the Treaty. Accordingly, the inference must be that the 7% tariff cut was labelled as a tax with the intention of avoiding liability for breaching investors' rights under the ECT.230
189.
That the 7% is not a bona fide measure is further evidenced, according to the Claimants, by the fact that the measure doesn't apply equally to everybody. While the conventional producers can pass the extra cost of the tax measure on consumers, since they are free to sell in the open market, the renewable generators have no other option but to absorb it.231 Therefore, the measure de facto affects more the renewable producers.232
190.
The Claimants further argue that the 7% Levy is part of a scheme intended to deprive the Claimants of their rights under the ECT.233
191.
The Claimants further describe the 7% Levy as a sham that targets specifically renewable energy installations.234
192.
Finally, the Claimants argue that the use of the funds from the 7% Levy confirms that it is a tariff cut under the cloak of Taxation.235

C. Tribunal's Analysis

193.

On 27 December 2012, Spain adopted Act 15/2012 "on taxation measures for energy sustainability" creating a new tax on the value of the production of electric energy ("TVPEE"). According to the Claimants, such a measure breaches the Respondent's obligations set out in Article 10(1) ECT.236 The Respondent objects that taxation measures are excluded from the scope of the ECT by Article 21(1), which reads as follows:

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

In the view of the Respondent, the taxes created or modified by Act 15/2012 do not correspond to any of these exceptions and Article 10 ECT is therefore not applicable to these measures.237

194.
The Parties have debated at length the question whether the measures challenged by the Claimants really qualify as taxes.238 In reality, the Claimants do not deny that they are taxes; what they question is whether they are bona fide taxes; if not "the tax carve-out does not apply".239
195.

This allegation is at the very heart of the case which has been submitted to the Tribunal. The consequence of a finding by the Tribunal that the measures included in Act 15/2012 have not been taken bona fide could have two consequences:

■ either the Tribunal would decide that the Respondent cannot avail itself of the exemption provided for in Article 21(1) and find the Application inadmissible in this respect;

■ or it could consider that the institution of the new tax is in violation of the standards guaranteed to the investors under Article 10 of the ECT calling for reparation, as is expressly requested in the Claimants' Memorial.240

196.
In both cases, a careful investigation of the circumstances and of the effects of the challenged measures is needed. Such investigation cannot be made at the present preliminary stage.

(1) Conclusion on the Tax Objection

197.

In view of the foregoing, the Tribunal decides to join the Respondent's objection based on Article 21 ECT to the merits.

198.
This decision does not prejudge any position of the Tribunal as to the admissibility of this objection as a preliminary issue or a question of substance.
199.
The Tribunal also notes that in its Memorial on Jurisdiction, the Respondent had mentioned the amendment of the Excise Duties Act (Act 38/1992) of 28 December 1992 ("Excise Duties Act") by Article 28 of Act 15/2012 and amending a previous Act, Act 38/1992 of 28 December 1992 by introducing modifications concerning the tax on hydrocarbons.241 In a footnote, the Respondent notes that while this measure was mentioned in the Request for Arbitration (at paras 76 and 77) "[t] he Claimants do not develop the reference to it in their Memorial on the merits but the Regulatory Report of the Brattle Group does mention it as one of the disputed measures (Regulatory Report of the Brattle Group, 21 November 2014, paragraph 100 in the Spanish version, paragraph 103 in the English version). Therefore, the Respondent assumes that the Claimants allege that this measure constitutes supposedly a breach of the ECT."242. However, and in a rather contradictory manner, the Respondent also asserts that: "The Claimants do not allege that the amendment to the Excise Duties Act, in particular to the Tax on Hydrocarbons, contained in Act 15/2012, is not a bona fide tax measure. Therefore, the Claimants implicitly acknowledge that it is a bona fid e tax measure."243
200.
In footnote 252 of their Counter-Memorial on jurisdiction, the Claimants note that "Spain also refers to the so-called hydrocarbons tax (see footnote 18 of the Memorial on Jurisdiction) but this is not part of the Disputed Measures". The modification of the tax on hydrocarbons has not been mentioned in the subsequent pleadings, whether in writing or orally. Therefore the Tribunal considers that it is not called to take any position in this respect.

VIII. THE COOLING OFF OBJECTION

201.
The Respondent has raised a fifth objection to the jurisdiction of the Tribunal, based on Article 26 ECT.244

A. The Respondent's Position

(1) The Objection

202.
The Respondent contends that the Claimants have not observed the requirements set out in Article 26 ECT regarding the request to the Kingdom of Spain for an amicable solution, nor have they complied with the required three-month cooling off period before submitting to arbitration the dispute related to: i) Act 24/2013, of 26 December 2013, on the Electricity Sector ("Act 24/2013"); ii) Royal Decree 413/2014, of 6 June 2014, regulating the production of electricity from renewable energy sources, by cogeneration and from the use of waste materials ("Royal Decree 413/2014"); and iii) Ministerial Order IET/1045/2014, of 16 June 2014, approving the remuneration parameters for certain standard installations for the production of electricity from renewable energy sources, by cogeneration and from the use of waste materials ("Ministerial Order IET/1045/2014")."245
203.

In arguing so, the Respondent relies on a number of arbitral awards, including Enron Corporation and Ponderosa Assets, L.P v. Republic of Argentina and on Guaracachi America, Inc. and Rurelec PLC v. Plurinational State of Bolivia where the arbitral tribunals noted that "observance of the cooling off period to seek an amicable solution is a jurisdictional requirement", in the absence of which a tribunal cannot hear the dispute.246 The Respondent also quotes The Oxford Handbook of International Investment Law247 which, with respect to the award rendered in the case Antoine Goetz et consorts v. Republic of Burundi,248 notes that:

"The tribunal found that the waiting period had been satisfied with respect to the investor's primary claim, but not with respect to certain supplementary claims put forward by the claimant. For the tribunal, it followed that the supplementary claims were ‘not in consequence capable of being decided on, and the dispute on which the Tribunal is called to give an award relates exclusively to the [primary claim]'."249

204.
The Respondent argues that no letter has been conveyed to the Kingdom of Spain by the Claimants in order to notify the existence of a dispute or to seek an amicable settlement in relation to the measures incorporated in Act 24/2013, Royal Decree 413/2014 and Ministerial Order IET/1045/2014.250
205.
Finally, with respect to the Claimants' argument about the futility of any attempts to settle amicably the case, the Respondent argues that the requirements set out in Article 26 of the ECT must be observed irrespective of the other party's or the Tribunal's subjective belief as to whether they are necessary.251 In support of its proposition, the Respondent relies on several arbitral awards.252

(2) New Measures are not Part of a Single On-Going Dispute

206.
The Respondent further argues that the New Measures do not form part of a series of measures which fall within a single on-going dispute. According to the Respondent, Act 24/2013 is much broader than RDL 9/2013 and proceeds with a new, complete regulation for the energy sector that replaces the pre-existing old Act 54/1997. Therefore, it is impossible that Act 24/2013 was issued to confirm and develop RDL 9/2013.253 In turn, Royal Decree 413/2014 and Ministerial Order IET/1045/2015 are governmental regulations which complete and develop Act 24/2013.254
207.
In the Respondent's view, the Claimants' assertion that any measure adopted by the Kingdom of Spain, which deviates from the regimen set out in RD 661/2007, forms part of a single arbitration, renders the requirements of Article 26 of the ECT useless on a number of grounds. First, it leaves the object of arbitration indefinitely open; second, it allows the Tribunal to make subjective determinations as to whether subsequent regulatory measures are consistent with the previous regimen; third, it prevents the Arbitral Tribunal from conducting a preliminary analysis of its jurisdiction if it has to consider the content of the regulations; and fourth, it makes the Respondent defenceless, as the Claimants could, at any time, bring new claims against any new measures the Kingdom of Spain may continue to adopt in the regulated electricity sector.255
208.
Finally, the Respondent contends that the reservation contained in the Request for Arbitration to introduce claims pertaining to possible new measures does not supersede the requirements set out in Article 26 of the ECT, because those requirements are necessarily prior to the Request for Arbitration.256

B. The Claimants' Position

(1) Further Measures are Part of a Single On-Going Dispute

209.
The Claimants contend that they have complied with the cooling-off period required under Article 26 of the ECT because all of the Disputed Measures form part of a single on-going dispute between the Parties that was clearly notified to the Respondent.257
210.
In particular, while RDL 9/2013 completely withdrew the RD 661/2007 regime, it did not prescribe the specific economic parameters that would apply to the Claimants' investments thereafter. Those parameters would need to be defined in further legislation which, however, was only enacted after the Claimants put the Respondent on notice of the present dispute and after the Claimants had filed their Request for Arbitration.258
211.

Moreover, the Claimants made it clear in both correspondence with the Respondent and in their pleadings that they would include in this arbitration any additional measures implemented against the CSP and wind sector relating to the RD 661/2007 regime.259 In particular, by letter of 26 April 2013, the Claimants requested negotiations under Article 26(1) of the ECT, followed by a second request on 30 July 2013.260 Additionally, on 17 October 2013, the Claimants expressly provided in their Request for Arbitration that "[t]he New Regime under RDL 9/2013 is to be implemented by way of several royal decrees and ministerial orders. These implementing measures are currently the subject of legislative debate, and likely to be enacted during the coming months".261 Both requests for negotiations expressly concerned measures including but not limited to the initial measures. However, the Claimants never received a response to these requests and therefore commenced this arbitration.262

212.
In support, the Claimants point to an allegedly well-established line of arbitral awards which have held that, where measures introduced by a host State after the investor has requested arbitration are within the scope of the dispute outlined in the request for arbitration, compliance with cooling-off periods is rendered moot.263
213.
The Claimants particularly rely on the Enron tribunal which held that Enron had complied with the cooling-off period in relation to the additional tax assessments, since they, together with the initial tax assessments, formed part of a "single continuing dispute ' that ‘[stemmed] from the same factual background and [involved] the same causes of action under the Treaty".264 The tribunal commented that Enron had expressly reserved its position in the Request for Arbitration and that "… the filing of multiple, subsequent and related actions in this case would lead to a superlative degree of inefficiency and inequity".265
214.
In response to the Respondent's argument that Law 24/2013 was much broader than that of RDL 9/2013 and thus repealed certain aspects of RDL 9/2013, the Claimants argue that the Respondent fails to address the fact that RDL 9/2013 imposed a Transitory Regime on the Claimants' investments which required further implementing measures to define the new economic regime for RE installations.266 The Claimants further counter the Respondent's allegations that the Claimants' approach would result in an open-ended arbitration, by arguing that there is a clear limit on the type of measures that would be considered ‘new elements' to the claim identified in the Request for Arbitration.267 Given that the Further Measures were already announced in RDL 9/2013, separating them from the Initial Measures would be entirely artificial.268
215.
Additionally, the Claimants argue that the long period it took the Respondent to implement the Disputed Measures cannot be a relevant criterion in determining the admissibility of the Claimants' claim.269 In any case, the Respondent adopted these measures while it was on notice since 26 April 2013 of the Claimants' intention to commence an arbitration under the ECT for the measures that modified the remuneration regime for CSP and wind plants as set out in RD 661/2007.270 Finally, the Claimants note that the Respondent's argument is absurd insofar as it appears to suggest that the Respondent would prefer the Claimants to commence a new arbitration for each new measure.271

(2) Attempts to Settle would be Futile

216.
According to the Claimants, tribunals have found that, where negotiations would be futile, even if the cooling-off period has not been observed, a refusal to hear the dispute would not be justified.272 The Claimants recall that they sent a Request for amicable negotiations on 26 April 2013,273 and again on 30 July 2013,274 which however led to no settlement of the dispute. In this regard, the Respondent has not shown any willingness to engage in amicable settlement discussions with the Claimants. Instead, it continued to take further harmful measures against the Claimants and their investments.275
217.
Moreover, the Claimants argue that the cases cited by the Respondent, which purportedly support that the cooling-off period is a jurisdictional question, do not follow the Respondent's position on the relevance of the futility of negotiations.276 In particular, the ICS tribunal noted that futility of negotiations could, in some circumstances, be an exception to jurisdictional prerequisites.277 Similarly, the Murphy tribunal also appeared to accept that, in principle, futility of negotiations could be relevant to excusing compliance with a cooling-off period. However, so long as negotiations had never been attempted in the case before it, the Murphy tribunal held that it could not conclude whether the negotiations were futile.278

(3) The Objection is a Question of Admissibility, not Jurisdiction

218.
In any event, the Claimants say, the cooling-off objection goes to the admissibility and not to the Tribunal's jurisdiction over such claims. According to the Claimants, this is confirmed by: (i) the ordinary and natural meaning of Article 25 of the ICSID Convention where the concepts of "jurisdiction" and "competenc e" clearly do not denote the concept of "admissibility"; (ii) numerous investment treaty decisions which consistently have read these clauses to impose procedural rather than jurisdictional requirements; and (iii) the rationale of cooling-off periods, which is to facilitate settlement, not obstruct arbitrations.279
219.
The Claimants further argue that none of the authorities which the Respondent relies upon support that the observance of the cooling off period is a question of jurisdiction. Enron v. Argentine Republic and Guaracachi, Rurelec v Bolivia and Goetz v Burundi are isolated, specific decisions, and are not representative of the current state of investment treaty jurisprudence.280
220.
In arguing that compliance with the cooling-off period is not a pre-condition to consent, the Claimants also point to the language of Article 26(3) which patently does not condition the initiation of an arbitration on the compliance with the cooling-off period.281 Finally, the Claimants contend that because the cases cited by the Respondent are not ECT decisions, they are not aimed to provide a valid interpretation of Article 26 of the ECT. In any event, they can be distinguished on the facts.282

C. Tribunal's Analysis

221.

Article 26 of the ECT reads, in relevant parts, as follows:

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

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

222.

The Respondent "notes the Claimants' failure to comply with the obligations contained in Article 26 ECT regarding communication of the dispute to the Kingdom of Spain and the implementation of the three-month cooling off period during which to seek an amicable solution before submitting to arbitration the dispute concerning Act 24/2013, Royal Decree 413/2014 and Ministerial Order IET/1045/2014".283

223.
The Tribunal makes three preliminary remarks, set out below.

first, this objection only concerns the disputes between the Parties concerning three specific measures adopted by the Spanish Government (respectively on 26 December 2013, 6 June 2014 and 20 June 2014) after the date of the Claimants' Memorial on the merits (dated 17 October 2013);

second, the Respondent does not submit that the Claimants' omission to comply with the requirements of Article 26 has consequences in respect to the whole Application: "…the Arbitral Tribunal lacks jurisdiction to hear a dispute regarding Act 24/2013, Royal Decree 413/2014 and Ministerial Order IET/1045/2014";284 and

third, this objection is based on two different (if complementary) arguments, even if the Respondent deals with them together: it is reproached to the Claimants first not to have sought for an amicable settlement of these disputes and second not to have allowed a three-month cooling off period to elapse in order to allow for such amicable settlement.

224.
The Claimants' main answer to this objection is that "all of the Disputed Measures [including those decided by the three concerned instruments] are part of a single ongoing dispute between the parties".285
225.
The Claimants stress that this fifth objection "is a question of admissibility, not jurisdiction"286 and that "[a] s a question of admissibility, the Tribunal cannot refuse to exercise jurisdiction on this basis".287 The Tribunal agrees on the first proposition: such an objection bears upon the admissibility of the claim, not on the jurisdiction (or competence) of the Tribunal to deal with it. However, the consequence of an inadmissible submission precisely is that the court or tribunal seized cannot exercise jurisdiction in respect of it – with, it is true, a significant difference when compared with a finding that it has no jurisdiction: when the circumstances at the origin of the inadmissibility of the claim have changed, it can be submitted anew and the court or tribunal concerned may exercise jurisdiction on the new claim. As the Ethyl Corporation UNCITRAL (NAFTA) tribunal put it:

"It is important to distinguish between jurisdictional provisions, i.e., the limits set to the authority of this Tribunal to act at all on the merits of the dispute, and procedural rules that must be satisfied by Claimant, but the failure to satisfy which results not in an absence of jurisdiction ab initio, but rather in a possible delay of proceedings, followed ultimately, should such noncompliance persist, by dismissal of the claim."288

227.
The purpose of the Claimants' claim is summarized in paragraphs 10 and 11 of its Request for Arbitration:

"10. However, once Spain had enticed foreign investors (including the Claimants) to invest substantial sums of capital in the Spanish renewable energy sector, Spain reneged on its commitments. Rather than maintaining the long-term, stable and predictable revenue streams provided under the economic regime, Spain passed a series of laws and regulations, which first modified that regime significantly and to the Claimants' detriment and, ultimately, stripped away that regime entirely. These drastic changes did not apply only to new projects. Rather, they also applied retroactively to existing projects, despite Spain's express promise that any adjustments to the economic regime (or any new regime) would not apply to existing projects. These measures, discussed in Section 6 below, thus altered dramatically the regulatory and economic framework applicable at the time the Claimants made their investments and have caused the Claimants substantial harm.

11. In short, Spain is guilty of the classic ‘bait and switch'. It enticed substantial investment into its renewable energy sector by providing the economic incentives necessary to make such investments feasible in the first place and, once the investments had been made and Spain received the benefits of those investments, it simply withdrew those economic incentives. Spain's unlawful measures mean that the Claimants are left in a position where the very foundation of their investment decisions has been destroyed. For its part, Spain has received already – and continues to receive – the benefit of the substantial capital invested by the Claimants but, on the other hand, the Claimants are no longer entitled to receive the government-guaranteed economic incentives."

228.
More succinctly, the Claimants assert at paragraph 252 of their Counter-Memorial that "the dispute between the parties relates to Spain's failure to honour its commitments to the Claimants under RD 661/2007".
229.
The Royal Decree 661/2007, of 25 may 2007, aims at regulating the activity of electricity production under the special regime and contains various incentives to that end in order to encourage foreign investments by "guaranteeing the owners of facilities under the special regime a reasonable return on their investments…"290 For their part, the "Further Measures" are summarized as follows by the three instruments enunciating them:291

■ the Act 24/2013 of 26 December 2013, on the Electricity Sector, "sets out to establish the regulation of the Electrical Sector with a view to ensuring the supply of electrical energy and to adapt it to the needs of consumers in terms of safety, quality, efficiency, objectivity, transparency and at the minimum cost";292

■ the Royal Decree 413/2014 of 6 June 2014, regulating the production of electricity from renewable energy sources, cogeneration and wastes, regulates "the legal and economic regime of the production of electricity from renewable energy sources, cogeneration and wastes";293 and

■ the Ministerial Order IET/1045/2014 of 20 June 2014, approves the remuneration parameters of standard installations that apply to specific installations for the production of electricity from renewable energy sources, cogeneration, and wastes, which "establish the remuneration parameters for standard installations corresponding to the installations included within the scope of application of this order for the first regulatory semi-period defined in first additional provision of Royal Decree 413/2014".294

230.
The Tribunal considers that these instruments form part of the dispute which is the subject-matter of the Memorial on the merits submitted on 21 November 2014 by the Claimants. The Tribunal therefore has jurisdiction over this part of the dispute. And indeed it would be of no avail and would impose an unreasonable burden on both Parties to oblige the Claimants to request amicable settlement anew and to start new proceedings against the Respondent in relation to these further measures which are a mere factual extension of those initially challenged by the Claimants which announced them.

(1) Conclusion on the Cooling-off Objection

231.
For the foregoing reasons, the Tribunal is of the view that the submissions of the Claimants concerning the measure adopted after their Request for Arbitration are admissible inasmuch since they do not change the general character of the case submitted to the Tribunal. Being mere factual extensions of the same dispute already before the Tribunal, the Tribunal can exercise jurisdiction over them to the same degree.

IX. DECISION OF THE TRIBUNAL

232.
For the foregoing reasons, the Tribunal unanimously decides as follows:

(1) The Tribunal takes note of the Claimants' abandonment of their claim concerning the modification of the Excise Duties Act of 28 December 1992 ("Excise Duties Act") by Article 28 of Act 15/2012.

(2) The Respondent's objection based on Article 21 ECT is joined to the merits. This decision does not prejudge any position of the Tribunal as to the admissibility of this objection as a preliminary issue or a question of substance.

(3) The questions of the composition and value of the compensable rights allegedly breached by the Respondent are joined to the merits.

(4) All other objections are rejected and the Tribunal has jurisdiction for deciding on the dispute submitted by RREEF Infrastructure (G.P.) Limited and RREEF PanEuropean Infrastructure Two Lux S.à r.l. on 18 October 2013, subject to paragraph 232 (1) above.

(5) The submissions of the Claimants concerning the measures adopted after their Request for Arbitration are admissible and the Tribunal can exercise jurisdiction over them.

(6) The Tribunal will take the necessary steps for the continuation of the proceedings toward the merits phase.

(7) The decision regarding the costs of arbitration is deferred to the second phase of the arbitration on the merits.

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