■ 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
(1) The Obligatory Existence of an Investor from "Another Contracting Party"
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
"‘(…) 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
"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
"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
"[...] 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
"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
(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.
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
(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
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
"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
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.
(2) On the "Two Bites of the Apple" Argument
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
(1) Tax Objection Should be Joined to the Merits
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."
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
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
(2) New Measures are not Part of a Single On-Going Dispute
(1) Further Measures are Part of a Single On-Going Dispute
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
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]."
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
■ 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.
"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
"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."
■ 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
(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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