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

Decision on Responsibility and on the Principles of Quantum

TABLE OF [SELECTED] ABBREVIATIONS/DEFINED TERMS
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings [2006]
BDO First Report BDO Group Expert Economic-Financial Report on the RREEF Solar Thermal Plants and Wind Farms, dated 14 July 2016
BDO Report duplicating Brattle's Rebuttal Report BDO Group Expert Report Duplicating Brattle's "Rebuttal Report: Financial Damages to RREEF", dated 8 February 2017
BDO Report on Tribunal Requests BDO Group Report on Tribunal Requests, dated 5 March 2018
BDO Working Papers Working papers accompanying BDO Report duplicating Brattle's Rebuttal Report, dated 8 February 2017
Brattle Memorandum Brattle Group Response to Tribunal Requests, 5 March 2018
C-[#] Claimants' Exhibit
CJEU Court of Justice of the European Union
CL-[#] Claimants' Legal Authority
Claimants' Observations on Additional Documents Claimants' Observations on Additional Documents, 26 March 2018
Claimants' Response to Spain's Comments on State Aid Decision Claimants' Response to the Respondents Comments on the European Commission's Decision, 5 February 2018
CM Claimants' Memorial on the Merits dated 21 November 2014
CNE National Energy Commission
CPHB Claimants' Post Hearing Brief dated 5 May 2017
CPI Consumer Price Index

CR Claimants' Reply on the Merits dated 22 December 2016
CRR Claimants' Response to Respondent's Submission on Tribunal's Information Request, dated 26 March 2018
CS Claimants' Submission on Tribunal Request, dated 5 March 2018
CSP Concentrated Solar Power
DCF Discounted Cash Flow
Decision on Jurisdiction The Tribunal's Decision on Jurisdiction of 6 June 2016
ECT Energy Charter Treaty
FIT Feed in Tariffs
Hearing Hearing on the Merits held on 20-24 March 2017
ICSID Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States dated 18 March 1965
ICSID Institution Rules ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceeding
ICSID or the Centre International Centre for Settlement of Investment Disputes
IDEAInstituto para la Diversificación y Ahorro de la Energía
IRR Internal Rate of Return
MITYC Ministry of Industry, Tourism and Commerce
MOA Margin of Appreciation
PEIF RREEF Pan-European Infrastructure Fund L.P.

PER Renewable Energy Plan
PFER Renewable Energy Promotion Plan
R-[#] Respondent's Exhibit
RAIPRERegistro Administrativo de Instalaciones de Producción de Energía Eléctrica [en régimen especial]
RCM Respondent's Counter-Memorial on the Merits dated 15 July 2016
RE Spain's Renewable Energy power generation sector
REEF Infra RREEF Infrastructure (G.P.)
Respondent's Comments on State Aid Decision Respondents Comments on European Commission Decision on the State Aid, 30 January 2018
Respondent's Observations on Additional Documents Respondent's Observations on Additional Documents, 26 March 2018
RL-[#] Respondent's Legal Authority
RPHB Respondent's Post Hearing Brief dated [date]
RR Respondent's Rejoinder on the Merits dated 3 February 2017
RREEF Pan-European Two RREEF Pan-European Infrastructure Two Lux S.á r.l.
RRR Respondent's Response to Tribunal Request for Additional Information, 05 March 2018
RRS Respondent's Reply to Claimants' Submission to Tribunal's Request for Additional Information, 26 March 2018
SES/SEE Spanish Electricity Sector
Tr. Day [#] [Speaker(s)], [page:line] Transcript of the Hearing

Treaty Energy Charter Treaty
Tribunal Arbitral tribunal constituted on 31 July 2014
TVPEE Tax on the Value of the Production of Electric Energy
VCLT Vienna Convention on the Law of Treaties
WACC Weighted Average Cost of Capital
YBILC Yearbook of the International Law Commission

I. INTRODUCTION AND PARTIES

1.
This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") on the basis of the Energy Charter Treaty which entered into force on 16 April 1998 (the "ECT" or "Treaty") and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 18 March 1965, which entered into force on 14 October 1966 (the "ICSID Convention").
2.
The Claimants are RREEF Infrastructure (G.P.) Limited ("RREEF Infra" or the "First Claimant") and RREEF Pan-European Infrastructure Two Lux S.á r.l. ("RREEF PanEuropean Two" or the "Second Claimant"), jointly referred as "the Claimants" or "RREEF."
3.
RREEF Infra is a private limited liability company incorporated in 2005 under the laws of Jersey. RREEF Pan-European Two is a private limited liability company (Société a responsabilité limitée) incorporated in 2006 under the laws of Luxembourg.
4.
As set forth under the Tribunal's Decision on Jurisdiction, RREEF specialises in infrastructure investments, with experience across different sectors, including the power generation sector. RREEF is a member of the Deutsche Bank Group, and in 2013, RREEF was re-branded and now operates together with Deutsche Bank's asset and wealth management divisions, under the unified name Deutsche Asset & Wealth Management.
5.
The First Claimant is the general partner of RREEF Pan-European Infrastructure Fund L.P. ("PEIF"). PEIF holds 100% of the share capital in RREEF Pan-European Infrastructure Lux S.á r.l. ("RREEF Pan-European") and an indirect 100% equity stake, through RREEF PanEuropean, in the Second Claimant.
6.
The Respondent is the Kingdom of Spain ("Spain" or "the Respondent").
7.
The Claimants and the Respondent are collectively referred to as the "Parties". The Parties' representatives and their addresses are listed above on page (i).
8.
This dispute relates to renewable energy generation installations in Spain.

II. OVERVIEW OF THE DISPUTE AND REQUESTS FOR RELIEF

9.
At its core, the dispute concerns allegations by the Claimants that the Respondent, through acts and omissions of its organs, agencies and entities, has caused substantial losses to the Claimants' investment in the Spanish Electricity System ("SES") and violated its international obligations under the ECT. The SES comprises power generations, transportation, distribution and marketing of electrical energy. This case relates to power generation through renewable energy, and in particular, wind and CSP.
10.
According to the Claimants, they invested in Spain's Renewable Energy power generation sector ("RE") attracted by the stable economic regime available to investors, governed, among others, by Royal Decree 661/2007, Royal Decree Law 6/2009 and Royal Decree 1614/2010. Thereafter, Spain modified the regulatory framework for the SES, by adopting a series of measures that changed the conditions for the investors' remuneration of their investments in the wind and Concentrated Solar Power ("CSP") sectors. These measures included Law 15/2012, RDL 2/2013, RDL 9/2013, Law 24/2013, RD 413/2014 and the Ministerial Order IET/1882/2014 of 14 October 2014, jointly referred to hereinafter as the "disputed measures".

III. PROCEDURAL HISTORY

14.
On 22 October 2013, ICSID received a request for arbitration from RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.á r.l. against the Kingdom of Spain.
15.
The Request was filed on the basis of Article 26(4)(a)(i) of the Energy Charter Treaty (the "ECT") dated 17 December 1994, which entered into force on 16 April 1998 for Luxembourg, the United Kingdom and the Kingdom of Spain, Article 36 of the ICSID Convention, and Article 1 of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceeding (the "ICSID Institution Rules").
16.
On 22 November 2013, the Secretary-General of ICSID registered the Request in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration.
17.
In the absence of an agreement between the Parties on the method of constituting the Tribunal, the Tribunal was constituted in accordance with Article 37(2)(b) of the ICSID Convention.
18.
The Tribunal is composed of Professor Alain Pellet, a national of France, President, appointed by the Chairman of the ICSID Administrative Council in accordance with Article 38 of the ICSID Convention; Professor Robert Volterra, a national of Canada, appointed by the Claimants; and Professor Pedro Nikken, a national of Venezuela, appointed by the Respondent.
19.
On 31 July 2014, the Secretary-General notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings ("Arbitration Rules"). Ms. Natalí Sequeira, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.
20.
In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 29 September 2014 in Paris.
21.
On 21 October 2014, the Tribunal issued Procedural Order No. 1 setting forth the matters discussed at the first session, including the procedural timetable and the agreement that the proceedings were to be conducted in accordance with the ICSID Arbitration Rules in force as of April 10, 2006.
22.
On 14 November 2014, the European Commission filed an Application for leave to intervene as non-disputing party pursuant to ICSID Arbitration Rule 37(2).
23.
On 21 November 2014, the Claimants filed their Memorial on the Merits, accompanied by

■ Witness Statements of:

- Mauricio Bolaña dated 20 November 2014,

- Harold D'Hauteville dated 19 November 2014,

- Walter Manara dated 19 November 2014, and

- Andrew M. Morris dated 21 November 2014;

■ Expert Reports by:

- Brattle Group Regulatory Report dated 21 November 2014, with exhibits BRR-0001to BRR-0059, and

- Brattle Group Quantum Report dated November 2014, with exhibits BQR-0001 to BQR-0101;

■ Exhibits C-0016 to C-0177;

■ Legal Authorities CL-0001 to CL-0090;

■ Appendix 1 - Table of Defined Terms,

■ Appendix 2 - Dramatis Personae.

24.
On 9 January 2015, the Respondent filed a request to bifurcate the proceedings. On 23 January 2015, the Claimants filed observations on the Respondent's request.
25.
On 5 February 2015, the Tribunal issued Procedural Order No. 2 concerning the European Commission's Application to file a written submission as a non-disputing party pursuant to ICSID Arbitration Rule 37(2), after giving each party an opportunity to file observations. The Tribunal found that "that the European Commission's Application for leave to intervene [was] inadmissible".
26.
On 7 February 2015, the Tribunal 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 suspended the proceedings on the merits.
27.
On 18 February 2015, the Tribunal issued Procedural Order No. 3, setting forth the reasoning for its decision on bifurcation.
28.
On 4 March 2015, the Tribunal issued Procedural Order No. 4 establishing a new procedural calendar to address the Respondent's objections to the jurisdiction of the Tribunal.
29.
On 19 June 2015, the Tribunal issued Procedural Order No. 5 deciding on the Parties' requests for document production.
30.
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.
31.
On 14 January 2016, after receiving the Parties' observations, the Tribunal issued Procedural Order No. 7 rejecting the European Commission's second application to intervene as a nondisputing party, which had been filed on 9 December 2015.
32.
On 7 March 2016, the Tribunal issued a decision on the Respondent's jurisdictional objections.
33.
On 24 March 2016, the Tribunal fixed the procedural calendar for the merits phase.
34.
On 6 June 2016, the Tribunal issued its Decision on Jurisdiction setting forth the reasoning for its determination of 7 March 2016 (the "Decision on Jurisdiction"). The Decision on Jurisdiction is incorporated to this Decision and constitutes integral part hereof. In its Decision, the Tribunal decided that:

"(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 Pan-European Infrastructure Two Lux S.á 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."

35.
A detailed description of the procedural steps leading to the Decision on Jurisdiction are included in Section II, thereof.
36.
On 15 July 2016, the Respondent filed its Counter-Memorial on the Merits, accompanied by the following:

■ Witness Statement of:

- Carlos Montoya dated 14 July 2016, with exhibits4;

■ Expert Report by:

- BDO Economic and Financial Report dated 14 July 2016, with exhibits B-0001 to B-0079;

■ Exhibits R-0085 to R-0277;

■ Legal Authorities RL-0060 to RL-0094.

37.
On 29 July 2016, the Parties filed a request for production of documents. On 12 August 2016, the Parties filed responses and objections to the request for production of documents. On 2 September 2016, the Parties filed applications to the Tribunal to decide on the production of documents.
38.
On 21 September 2016, ICSID informed the Parties and the Tribunal that, due to a reorganization of the Centre's workload, Ms. Mairée Uran Bidegain, ICSID Team Leader/Legal Counsel, would act as Secretary of the Tribunal.
39.
On 23 September 2016, the Tribunal issued Procedural Order No. 8 concerning objections to a request for production of documents.
40.
On 22 December 2016, the Claimants filed their Reply on the Merits, accompanied by:

■ Second Witness Statements of:

- Mauricio Bolaña dated 15 December 2016,

- Harold d'Hauteville dated 22 December 2016,

- Walter Manara dated 22 December 2016, and

- Andrew Morris dated 22 December 2016;

■ Expert Reports by:

- Dr. Thomas Mancini dated 16 December 2016, with exhibits TRM-0001 to TRM-0130,

- Brattle Group Rebuttal Regulatory Report dated 22 December 2016, with exhibits BRR-0060 to BRR-0148,

- Brattle Group Rebuttal Quantum Report dated 22 December 2016, signed 22 November 2016, with exhibits BQR-102 to BQR-0140.1-14, BQR-0141;

■ Exhibits C-0216 to C-0297;

■ Legal Authorities CL-0216 to CL-0237.

41.
On 8 February 2017, the Respondent filed its Rejoinder on the Merits, accompanied by the following:

■ Witness Statements of:

- Daniel LaCalle dated 7 February 2017, with exhibits LC-0001 to LC-0004.

- Carlos Montoya (Second), dated 3 February 2017, with exhibits;5

■ Expert Reports by:

- BDO Financial Damages Rebuttal Report dated 8 February 2017, with exhibits B-0080 to B-0124,

- Professor Jesús Casanova Kindelán dated 7 February 2017, with exhibits JCK-0001 to JCK-0016,

- Dr. Jorge Servert dated January 2017, with exhibits JSR-0001 to JSR-0010 and JSRC-0001 to JSRC-0035;

■ Exhibits R-0278 to R-0417;

■ Legal Authorities RL-0095 to RL-0114.

42.
On 7 March 2017, the Tribunal held a Pre-Hearing Conference, by telephone, with the Parties, and the Secretary of the Tribunal.
43.
On 12 March 2017, the Tribunal issued Procedural Order No. 9, deciding on certain organizational issue for the hearing on the merits as well as on the incorporation of additional documents into the record.
44.
A hearing on the Merits was held in Paris from March 20-24, 2017 (the "Hearing"). The following persons were present at the Hearing:

Tribunal :

Alain Pellet President

Robert Volterra Arbitrator

Pedro Nikken Arbitrator

ICSID Secretariat :

Mairée Uran Bidegain Secretary of the Tribunal

For the Claimants :

Ms. Judith Gill QC Allen & Overy LLP

Mr. Jeffrey Sullivan Allen & Overy LLP

Ms. Marie Stoyanov Allen & Overy LLP

Mr. Ignacio Madalena Allen & Overy LLP

Ms. Lauren Lindsay Allen & Overy LLP

Mr. Tomasz Hara Allen & Overy LLP

Ms. Stephanie Hawes Allen & Overy LLP

Ms. Amy McMullen Allen & Overy LLP

Mr Mauricio Pizarro Ortega Allen & Overy LLP

Mr. Alejandro Matus RREEF Infrastructure;

For the Respondent :

Mr. Diego Santacruz Descartín State's Attorney Office. Ministry of Justice

Ms. Mónica Moraleda Saceda State's Attorney Office. Ministry of Justice

Mr. Javier Torres Gella State's Attorney Office. Ministry of Justice

Mr. Antolín Fernández Antuña State's Attorney Office. Ministry of Justice

Ms. Amaia Rivas Kortázar State's Attorney Office. Ministry of Justice

Ms. Raquel Vázquez Meco IDAE

Mr. Juan Ramón Ayuso Ortiz IDAE

Mr. Alfonso Olivas la Llana IDAE

Court Reporters :

Mr. Trevor McGowan The Court Reporter Ltd

Mr. Paul Pelissier D-R Esteno

Ms. Luciana Sosa D-R Esteno;

Interpreters :

Ms. Amalia Thaler de Klem

Mr. Mark Viscovi

Mr. Jesús Getan Bornn

45.
During the Hearing, the following persons were examined:

On behalf of the Claimants :

Mr Walter Manara

Mr Andrew Morris

Mr Harold Hauteville

Dr Thomas Mancini TR Mancini Consulting

Mr Carlos Lapuerta The Brattle Group

Mr Richard Caldwell The Brattle Group

Dr José Antonio García The Brattle Group

Mr Jack Stirzaker The Brattle Group;

On behalf of the Respondent :

Mr Carlos Montoya

Mr Daniel Lacalle

Dr Jorge Servert

Dr Jesús Casanova Kindelán

Mr Manuel Vargas González BDO

Mr Eduardo Pérez Ruiz BDO

Mr David Mitchell BDO

Ms Susan Blower BDO.

46.
On 3 April 2017, each Party filed the list of questions that it considered to be before the Tribunal for purposes of Article 48 of the ICSID Convention.
47.
On 6 April 2017, the Tribunal issued Procedural Order No. 10, in which it directed the Parties (a) to submit post-hearing briefs in which they were asked to also answer several questions posed by the members of the Tribunal at the end of the Hearing and recorded in Procedural Order No. 10, and (b) to agree on a procedure and deadline for the filing of transcript corrections and costs statements.
48.
On 5 May 2017, the Parties filed simultaneous post-hearing briefs. The Claimants posthearing brief was accompanied by legal authorities CL-238 to CL-241.
49.
On 11 May 2017, the Claimants filed a request for leave to introduce the award issued on 4 May 2017 in EISER Infrastructure Limited and Energía Solar Luxembourg S.a r.l. v. Kingdom of Spain (ICSID Case No. ARB/13/36) (the "Eiser Award"), as a new legal authority on the record. On that same day, the Respondent objected to its introduction, and requested an opportunity to provide comments on the Eiser Award, in accordance with Section 16.3 of Procedural Order No. 1 in case the Claimants' request was granted.
50.
On 22 May 2017, the Tribunal granted the Claimants' request to introduce the Eiser Award and invited the Parties to consult and agree on a method for the introduction of the Eiser Award and a timetable for the Parties' respective simultaneous observations.
51.
On 24 May 2017, the Parties provided the Tribunal with their agreement on the issues identified in the preceding paragraph.
52.
On 30 May 2017, the Eiser Award was introduced into the record, as legal authority CL-242.
53.
On 2 June 2017, in accordance with the Parties' agreed upon procedure and timeline, the Claimants submitted their observations on the Eiser Award.
54.
On 6 June 2017, the Parties filed simultaneous submissions on costs.
55.
On 9 June 2017, the Respondent filed its observations on the Eiser Award.
56.
On 13 July 2017, the Claimants requested the admission of a new document in the record.
57.
On 21 July 2017, the Parties agreed on the admission of new documents in the record.
58.
On 25 July 2017, the Tribunal confirmed the Parties' agreement.
59.
On 7 August 2017, the Claimants and the Respondent submitted comments on the new documents.
60.
On 23 November 2017, the Respondent filed an application to introduce a decision issued by the European Commission on the "State Aid Framework for Renewable Sources" of the Kingdom of Spain (the "State Aid Decision"). The Claimants' filed their response to the Respondent's Application on 30 November 2017. On 2 January 2018, the Tribunal denied the Respondent's request.
61.
On 10 January 2018, the Respondent filed a request for reconsideration of the Tribunal's decision of 2 January 2018. On 16 January 2018, the Claimants filed their objection to the Respondent's request.
62.
On 16 January 2018, the Tribunal requested additional information from the Parties regarding their investments, namely:

"1. Their respective calculations of the anticipated total return on the investments, both taking into account and not taking into account the disputed measures, over the lifetime of the investment;

2. Updated information from the submissions of the Reply and Rejoinder of any events such as sales of the investments or others, affecting the Claimants' investments in the Andasol and Arenales Plants or the Dédalo Project;

3. A breakdown of the valuation offered by each Party, divided by head of claim and disputed measure, of the damages allegedly resulting from the Respondent's purported violation of the ECT, including the alleged retroactivity of the new regime."

63.
On 18 January 2018, the Respondent filed its observations to the Tribunal's request, including various requests regarding (i) time and dates for the submission of the additional information; (ii) the holding of a hearing to present the new information; and (iii) to order the Claimants to provide the Respondent with all the documents relating to the sale of the Plants and related information.
64.
On 24 January 2018, the Tribunal reconsidered its decision of 2 January 2018 and granted the Respondent's request to introduce the State Aid Decision into the record, also setting up a schedule for the Parties to submit their observations.
65.
On 29 January 2018, the State Aid Decision was introduced into the record [as legal authority RL-115].
66.
On the same date, the Claimants filed their observations to the Tribunal's request of 16 January 2018 and on the Respondent's observations and requests of 18 January 2018.
67.
On 30 January 2018, the Respondent filed its comments on the State Aid Decision. On 5 February 2018, the Claimants filed their response to the Respondent's comments on the State Aid Decision.
68.
On 12 February 2018, the Tribunal decided on the Respondent's request regarding the Tribunal's letter of 16 January 2018, confirming the schedule for the submission of the additional information and the type of information to be disclosed by the Claimants. The Tribunal further rejected the remainder of the Respondent's request.
69.
On 13 February 2018, the Respondent filed a request for reconsideration of the Tribunal's communication of 12 February 2018. On 16 February 2018, the Claimants filed their observations to the Respondent's request.
70.
On 28 February 2018, the Tribunal decided on the Respondent's request of 13 February 2018.
71.
On 2 March 2018, the Claimants filed a request for leave to introduce into the record, the award issued on 15 February 2018 in Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. Kingdom of Spain (SCC Arbitration (2015/063)) (the "Novenergia Award").
72.
On 5 March 2018, the Parties filed their first round of submissions in response to the Tribunal's request for additional information of 16 January 2018.
73.
On 9 March 2018, the Respondent filed its observations on the Claimants' request. The Respondent did not object to the introduction of the Novenergia Award and requested the admission of three additional documents, including the Judgment of the CJEU of 6 March 2018, Slovak Republic v. Achmea BV, C-284/16, ("Achmea"), Blusun S.A. v. Italian Republic (ICSID Case No. ARB/14/3), Award, 27 December 2016 ("Blusun"); Mr. Jürgen Wirtgen, Mr. Stefan Wirtgen, Mrs. Gisela Wirtgen and JSW Solar (swei) GmbH & Co. KG v. The Czech Republic, Award, 11 October 2017, ("Wirtgen").
74.
On 14 March 2018, the Claimants submitted their objections to the Respondent's request of 9 March 2018.
75.
On 20 March 2018, the Tribunal granted both the Claimants and the Respondent's request for leave to introduce into the record the documents mentioned in their respective requests of 2 March 2018, and 9 March 2018.
76.
On 22 March 2018, the Claimants submitted the Novenergia Award, which was introduced into the record, as legal authority CL-243. On the same date, the Respondent submitted the three documents mentioned in the 9 March 2018 request, which were introduced into the record as legal authorities RL-116, RL-117 and RL-118.
77.
On 26 March 2018, both Parties submitted their individual observations on legal authorities CL-243, RL-116, RL-117 and RL-118.
78.
On that same dates, the Parties submitted their final submission in response to the Tribunal's Request of 16 January 2018 regarding additional information.
80.
On 9 July 2018, the Respondent, on invitation from the Tribunal, replied to the Claimants' request indicating that it did not object to the introduction of the Masdar and Antin awards into the record.
81.
On 13 August 2018, ICSID informed the Parties and the Tribunal that Mr. Gonzalo Flores, Deputy Secretary-General of ICSID, would act as Secretary of the Tribunal.
82.
On 13 August 2018, the Tribunal took note of the parties' agreement and invited the Claimants to introduce the Masdar and Antin awards on the case record.
83.
In accordance with the Tribunal's directions, the Claimants submitted copies of the Masdar and Antin awards and provided comments on these two new documents on 21 August 2018. The Respondent submitted its observations on the awards on 28 August 2018.

IV. FACTUAL BACKGROUND

84.
The Tribunal provides below a general overview of the factual background that has led to this dispute, to the extent it is substantiated and is material for the determinations in this Decision. In doing so, it will adopt a chronological timeline when possible, referring to the evidence presented by the Parties and describing the Parties' positions with regard to disputed facts.
85.
This section is not intended to be an exhaustive description of all facts underlying this dispute. Some facts will also be addressed, to the extent relevant or useful, in the context of the Tribunal's legal analysis of the issues in dispute. The Tribunal has nonetheless considered the evidence in full, as adduced by the Parties in this arbitration.
86.
On the basis of the materials adduced by the Parties, the Tribunal describes below: (A) the SES and the applicable regulatory framework, and (B) the Claimants' investments in the Respondent.

A. The Spanish Electricity System

(a) Spain's Energy Policy and the Relevant International Framework

87.
In 1992, Spain signed the United Nations Framework Convention on Climate Change ("UNFCCC").6 In 1998 the European Union and Spain, as a Member State, signed the 1997 Kyoto Protocol, an international instrument negotiated to implement the UNFCCC.7 Under this international framework, Spain, with many other nations, committed to a reduction of greenhouse emissions, through among others, the allocation of important resources to that effect.
88.
To participate fully in this international effort to reduce greenhouse emissions, the European Union ("EU") adopted Directive 2001/77/EC "on the promotion of electricity produced from renewable energy sources in the internal electricity market" ("2001 Directive").8 The 2001 Directive set obligations for the EU Member States, including the obligation to set indicative targets for future consumption of electricity produced from renewable energy sources.9 The Respondent's national indicative targets "for the contribution of electricity produced from renewable energy sources to gross electricity consumption by 2010" was 29.4%.10 The Directive also recognized that Member States may use support schemes to contribute to the achievement of national indicative targets and promote the use of renewable energy resources.11
89.
It is undisputed between the Parties that, compared to conventional power generation technologies, RE projects are not cost-competitive, at either the whole sale or retail level.12 Moreover, renewable energy investments are, at the outset capital-intensive, and the ongoing operating costs are relatively low.13
90.
For this and other reasons, to attract investments, many States put in place regulatory incentives to level the playing field amongst energy investors in the conventional and the renewable energy sector. This includes for example, the Feed-in-Tariff ("FIT") mechanism, implemented in Spain to, among others, achieve the "indicative targets" referred to in paragraph 88 above and at issue in this arbitration. The FIT can take the form of a fixed tariff (set at a rate above normal electricity market prices) or a premium (paid on top of market prices for the sale of each unit, or kilowatt hour (kWh) of energy produced and fed into the power grid).14
91.
In August 2005, and considering, among others, its obligations under the international instruments mentioned above, Spain approved its 2005-2010 the Plan de Energías Renovables ("PER" by its Spanish acronym) (Renewable Energy Plan).15 The PER was prepared by the Instituto para la Diversificación y Ahorro de la Energía ("IDAE") and constituted an amendment to the 2000-2010 Renewable Energy Promotion Plan ("PFER" by its Spanish acronym).16 Like the PFER, the PER established a series of targets by technological area, to promote the use of renewable energy sources and were an indication of the future development of the different renewable technologies. Thus, the PER contained the underlying economic data used by the government to determine its regulatory framework. The purpose of the renewable planning documents and their place in the Respondent's regulatory process is explained as follows by one of the Claimants' advisors at the time of the making of the investments:

"In order to comply with the Kyoto target and the EU 202020 scheme, the Spanish Government drafts medium to long term planning documents (5 to 10 years) aimed at identifying the technologies that have the potential (both technical and economic) to contribute significantly to achieving the aforementioned targets. The renewable energy planning documents - Plan de Energías Renovables (PER) - set out the specific growth projections for each technology and breaks it down by autonomous region. Based on the documents, the Government sets a tariff (published in the form of a Royal Decree) for each technology depending on the level of growth that is required from each technology.

Renewable energy planning documents are the best indicators of the future development of the different renewable technologies".17

92.
The PER indicated that there had been an important growth on energy consumption, "a significant increase, although insufficient to achieve the ambitious targets that had been set. At end-2004, an accumulated fulfilment of 28.4% had been achieved on the global target of increasing renewable sources, anticipated for 2010."18
93.
The PER further acknowledged that to boost investments in RE, economic profitability of the investments and access to finance, were important components.19 With regard to the profitability or return on investments of the "project types" the PER estimated a "Internal Rate of Return (IRR), measured in current currency values and for every project type" at "around 7%, with own resources (prior to funding) and post-tax."
94.
With regard to the access to finance, the PER estimated that 77.1 % of the overall financing required for its implementation would be debt finance (18,198 billion), while public aid and equity investment would be the source for the remaining 2.9% (680,939) and 20% (4,720 billion), respectively.20 The financing needs were calculated taking into consideration the different technologies, as well as "the technical and economic parameters for each one of them, giving rise to the formulation of corresponding project types by technologies."21 In addition, with regard to the project types, the PER indicated that:

"4.5 Project types by technology

Starting from the proposed energy goals, we have determined the funding needs for every technology based on its profitability, defining a number of project types for our calculation model.

These project types are characterised by technical parameters related to their size, equivalent working hours, cost per unit, periods of operation, service life, operating and maintenance costs and final sale prices per unit of energy. Furthermore, we have applied a number of assumptions on funding and a series of financial aids or measures designed according to the requirements of every technology.

Below are the files for each one of the project types considered in the different technological sectors and whose figures have served as the basis for the financial and economic calculations of the Plan for the 2005-2010 period."22

95.
Against this background, Spain made efforts to encourage investments in RE by promoting itself as an attractive destination for renewable energy investments.23 These efforts appear to have been carried out by the Ministry of Industry, Tourism and Commerce (the "Ministry"), in conjunction with a State-owned company for the Promotion and Attraction of Foreign Investment, known as InvestInSpain.24
96.
On 23 April 2009, the EU approved Directive 2009/28/EC on the promotion of the use of energy from renewable sources (the "2009 Directive").25 Articles 3(1) and (3)(4) of the 2009 Directive set a new target whereby by 2020 the European Community would seek to obtain 20% (instead of 12%) of its total gross final energy consumption requirements from renewable sources and a minimum target of 10% for each Member State. Under Article 4 of the 2009 Directive, each Member State was required to adopt a National Action Plan for the implementation of the Directive and its targets (or PANER for its Spanish acronym).
97.
On 30 June 2010, Spain adopted its PANER and confirmed a target of 20% of gross final energy demand being generated through renewable sources by 2020.26 The PANER indicated, in relevant part:

"The economic framework, currently implemented by Royal Decree 661/2007 of 25 May 2007 regulating electrical energy production under the Special Regime, and Order ITC/3519/2009 of 28 December 2009 reviewing access fees as from 01 January 2010 along with the tariffs and premiums corresponding to special regime installations, provide for electricity generation remuneration levels that afford a reasonable return on investment. In determining those levels, account is taken of the specific technical and economic aspects of each technology, installed capacity and the date operation commenced, in all cases using criteria of system economic sustainability and efficiency.

[...]

Review of remuneration

Royal Decree 661/2007 provides for reviews of remuneration amounts every four years, which may be modified on the basis of technological developments within the sectors, market behaviour, degree of compliance with renewable energy targets, percentage of demand covered by special regime facilities and their effect on the technical and economic management of the system, while always guaranteeing reasonable rates of return. In any event, these reviews take account of cost trends associated with each technology with three objectives in mind: to see that renewable technologies become as competitive as possible with Ordinary Regime generation, to foster a technological development balance and to see that the remunerative scheme moves in the direction of minimising socioeconomic and environmental costs.

[...]

Future developments in support schemes for electricity generation from renewable energies

Electrical energy production under the special procedure is founded on three basic principles, namely legal certainty, feasibility and regulatory stability.

Any present or future economic remuneration system to support the generation of electricity from renewable sources will be based on the aforementioned principles, and the necessary mechanisms will be devised to dovetail technological improvements and market developments with incentives for electricity generation from renewable sources in order to meet the targets and objectives by the established deadlines.

Technical parameters and investment costs incurred will be considered in determining remuneration with a view to providing a reasonable rate of return referenced to the cost of money on the capital market in accordance with the provisions of the Electricity Sector Act.

Also, effective administrative supervision is required to assure that gains from the development of these technologies in terms of relative cost competitiveness are passed on to society, thus minimising the speculative risks posed in the past by excessive rates of return, which not only hurts consumers but is also damaging to the industry in general in terms of the perception people have of it. Therefore, it will be necessary to devise sufficiently flexible and transparent systems that permit the issue and reception of economic and market signals so as to minimise the risks associated with investment and its remuneration and those caused by fluctuations in the energy markets."27

98.
From 2010 onwards, there was a drop in electricity demand.28 According to the Respondent, SEE revenues at that time came exclusively from the Spanish consumer. Accordingly, the reduction in demand resulted in a substantial reduction in income available to the SEE to address its costs, including the remunerations regimes provided under the FIT model, as subsidies.29
99.
By the end of 2011, the electricity deficit represented over EUR 3,000 million and an accumulated tariff debt of more than USD 22 billion and electricity tariff for consumers were some of the highest in Europe.30 That amount had reached 26 billion by 2013.31
100.
According to the Respondent, relying on sources unverified by the Tribunal but uncontested by Claimants, the price of electric bills for consumers has increased considerably in the past 10-15 years: a consumer paid on their electric bill EUR 370 per year in 2003 and went on to pay in 2012 a total of EUR 669. Between 2007 and 2014, the electricity in a household in Spain has increased by 61.55% while the increase in price for the European Union reached 21.99%.32
101.
On 7 March 2012, the CNE issued report 2/2012, recommending certain measures to address the evolution of the tariff deficit and ensure the economic and financial stability of the Electricity System, at the request of the Ministry of Energy.33
102.
On 20 July 2012, Spain signed a Memorandum of Understanding with the European Union, regarding among others, Spain's 2012-2015 financial stability and the adoption of certain measures of macroeconomic control. Under this MoU Spain committed to "address the electricity tariff deficit in a comprehensive way."34

(b) The National Legal and Regulatory Framework

103.
In light of Spain's Energy policy and the international framework set forth above, the Respondent adopted a series of measures, applicable to the RE sector in Spain. Some of those measures are at issue in this proceeding and thus will be described in some detail below in two parts. First, the Tribunal provides a non-exhaustive list of the regulatory measures adopted by the Respondent prior to the enactment of the disputed measures (i). Second, the Tribunal provides a short description of the disputed measures, to the extent relevant to its analysis (ii).
104.
Before doing so, the Tribunal describes herein its understanding of the hierarchical relationship between the norms described below, as this may prove relevant to its analysis of the Claimants' claims, in Section VI below.

- Under the Spanish Legal System, the 1978 Spanish Constitution is supreme.

- Subordinated to the Constitution are the Laws, which are either Organic (approved by Congress by absolute majority and concern certain matters set forth in the Constitution not relevant for this dispute) or Ordinary (approved by simple majority and relating to all other matters). Of the same rank as the Laws are Royal-Decree-Laws ("RDL"). These are regulations that may be enacted by the executive branch in situations of extraordinary need or urgency, and are subject to parliamentary validation.

- Subordinated to the Laws and RDLs, are the Royal-Decrees ("RD"). RD implement matters regulated by Law (or by RDL). They emanate from the executive power, are inferior in rank to Laws and may not contravene the terms of the Law they seek to implement, and must be interpreted within the context of the Law being implemented.

- Finally, the Spanish legal system includes Ministerial Orders, emanating from one or more ministries, and further below are Resolutions, emanating from lower administrative bodies, relating to technical issues.35

1. The Initial Measures

105.
On 27 November 1997, Spain adopted Law 54/1997 (the "1997 Electricity Law"), reforming the framework of the electricity sector in Spain, which had been, until that point, a government priced-controlled regulated system.36 The 1997 Electricity Law deregulated the transmission, distribution, generation and supply of electricity, introducing competition in some of these activities with the aim of enhancing the efficiency of the SEE.
106.
With respect to electricity generation, a 1994 Law had established a distinction between two regulatory remuneration regimes. First, the Ordinary Regime, applicable to conventional power generators, such as coal-fired power plants. Second, a Special Regime applicable to generators producing energy from other sources.37 The 1997 Electricity Law continued with this distinction and determined that all generators "with an installed power capacity that does not exceed 50MW," producing electricity from "the non-consumable renewable energy" shall be subject to the Special Regime.38 Under the Ordinary Regime, remuneration derived from the wholesale market price of electricity. Under the Special Regime, generators were subsidized with a premium above the wholesale market price. Article 30(4) of the 1997 Electricity Law read:

"In order to establish premium quotas the following factors shall be considered: the tension level of delivery to the grid, the actual contribution to the improvement of the environment, the saving on primary energy and energy efficiency as well as the costs incurred from investment, in order that reasonable remunerative tariffs may be established related to the cost in assets on the capital market."39

107.
The 1997 Electricity Law, also determined that all energy generators, under both the Ordinary and the Special Regime, needed to be registered before a Registro Administrativo de Instalaciones de Producción de Energía Eléctrica ("RAIPRE"), created under Article 21(4) of the Law. In addition, the application of the Special Regime was subject to the approval of the authorities of the relevant Autonomous Region in Spain.
108.
The 1997 Electricity Law was implemented through a series of Royal Decrees, including Royal Decree 2818/1998 of 23 December 1998 ("RD 2818/1998"), Royal Decree 436/2004 of 12 March 2004 ("RD 436/2004"), and Royal Decree 661/2007 ("RD 661/2007") of 25 May 2007, which further defined the remuneration scheme for generators qualifying for the Special Regime under Article 27 of the 1997 Electricity Law. In particular:

• RD 2818/1998, recognized that generators qualifying under the Special Regime had the right to be connected to and to supply electricity to the national grid.40 It also fixed the mechanism to calculate the premium41 which was subject to revisions every four years.42 This Royal Decree also confirmed that renewables needed to register on a subsection of the administrative register created by the 1997 Electricity Law.

• RD 436/2004, further defined the FIT Regime by repealing RD 2818/1998 and setting forth a new methodology to calculate the economic regime for electric power generation under the Special Regime. Pursuant to RD 436/2004, qualifying installations could choose between a regulated fix tariff or a premium payment per kWh of energy produced over and above the wholesale market price.43 The values of the fixed tariff and the premium were calculated by reference to a percentage of the tarifa eléctrica media o de referencia (average rate or reference rate) fixed by the government, subject to change on an annual basis and tied to market fluctuations.44 Moreover, the levels of the regulated tariff and premium varied depending on the type of technology (i.e., renewable energies, biomass or other kind of bio fuel). Pursuant to RD 436/2004 all incentives and supplements provided under Section 3 of RD 436/2004, "shall apply solely to the plants that commence operating subsequent to the date of the entry into force referred to in the paragraph above and shall not have a backdated effect on any previous tariffs and premiums."45

• RD 661/2007, superseded RD 436/2004, and implemented the amendments to the 1997 Electricity Law, ordered by Royal Decree Law 7/2006 (as explained below). In accordance with PER 2005-2010, RD 661/2007 provided for increased installed capacity targets for the different technologies, including a target of 500 MW for CSP and 20,155 for wind technologies.46 The Preamble underscored certain goals:

"In view of the behaviour of the prices in the market, where certain variables which were not considered in the cited compensation system for the special regime have, over recent times, acquired greater importance, the economic circumstances established by Royal Decree 436/2004, of 12 March, make it necessary to modify the compensation system and de-link it from the Mean Electricity Tariff, or Reference Tariff, which has been used to date.

[...]

The economic framework established in the present Royal Decree develops the principles provided in Law 54/1997, of 27 November, on the Electricity Sector, guaranteeing the owners of facilities under the special regime a reasonable return on their investments, and the consumers of electricity an assignment of the costs attributable to the electricity system which is also reasonable, although incentives are provided to playing a part in this market since it is considered that in this manner lower government intervention will be achieved in the setting of prices, together with better, more efficient, attribution of the costs of the system, particularly in respect of the handling of diversions and the provisions of supplementary services."47

Given the importance of this Royal Decree to the issue here at stake, paragraphs 109 to 114 below further explain the content of this regulation.

109.
With regard to the incentives, RD 661/2007, maintained the generators' option of choosing between a Fixed Tariff and a Premium on an annual basis,48 but it also established limits on the maximums and minimums for such Premiums (cap and floor),49 and expressed the tariffs in actual amounts per kWh, adjusted for inflation on a yearly basis in accordance with the consumer price index.50 According to the Respondent, the level of these tariffs and remunerations schemes were set forth on the basis of the calculations set forth on the PER 2005-2010.51
110.
In addition, RD 661/2007, provided for the possibility to combine solar energy and fossil fuels, by permitting qualifying CSP installations subject to the Special Regime to employ equipment which uses natural gas. It set a limit on the percentage of fuel that could be used, whether under the Fixed-tariff option (up to 12% of the annual production could be electricity generated with fuel) or the Premium option (limit set to 1 5%).52
111.
Articles 4 to 15 further defined the administrative requirements to be included in the Special Regime and confirmed the obligation to be registered under the RAIPRE before the authorities of the Autonomous Communities where the plant was located. The RAIPRE registration, consisted of two phases: an initial registration and a final registration.53
112.
Article 17 enunciated the rights of producers under the Special Regime to receive either fixed tariffs or premiums, depending on their choice, subject to obtaining a final RAPIRE registration before the final dates set forth in Article 22.
113.
For its part, Article 22 indicated that once certain RE technologies, including CSP and wind technologies, reached 85% of Spain's target capacity, a time limit of at least 12 months would be fixed within which installations would need to obtain its RAIPRE registration to enjoy the benefit of RD 661/2007's economic regime. Thereafter, new installations would be unable to access the tariffs and incentives established under RD 661/2007.
114.
Article 44(3) regulated the updates and reviews of tariffs as follows:

"During the year 2010, on sight of the results of the monitoring reports on the degree of fulfilment of the Renewable Energies Plan (PER) 2005-2010, and of the Energy Efficiency and Savings Strategy in Spain (E4), together with such new targets as may be included in the subsequent Renewable Energies Plan 2011-2020, there shall be a review of the tariffs, premiums, supplements and lower and upper limits defined in this Royal Decree with regard to the costs associated with each of these technologies, the degree of participation of the special regime in covering the demand and its impact upon the technical and economic management of the system, and a reasonable rate of profitability shall always be guaranteed with reference to the cost of money in the capital markets. Subsequently a further review shall be performed every four years, maintaining the same criteria as previously.

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

115.
On 23 June 2006 (i.e., before the adoption of RD 661/2007), Royal Decree Law 7/2006 had set forth "urgent measures for the energy sector" ("RDL 7/2006"). "Article 1. Twelve" of. RDL 7/2007, amended Article 30 of Law 54/1997, by affording qualifying installations receiving remuneration under the Special Regime, priority of access to the transmission and distribution networks.54 Its second transitory provision also specified that:

"Application of previous dispositions and of the review of the average rate.

Until that which is foreseen in sections one to twelve of article 1 can be developed, in accordance with that established in the penultimate dispositions of this Royal Decree-law:

1. Electrical energy production installations with an installed power that is equal to or less than 50MW, that when Act 54/1997 entered in force, on November 27, were accepted by the scheme foreseen by Royal Decree 2366/1994 on December [9], on production of electrical energy by hydraulic installations, of cogeneration and others stored by renewable sources or resources, as well as those referred to in the second additional disposition to the mentioned Royal Decree, shall maintain the mentioned scheme.

2. The review of the average rate made by the Government shall not be applied to the prices, bonuses, incentives and rates that are part of the compensation for the electrical energy production activity in the special scheme."

116.
By 2009, Spain had enhanced the development of renewal energy investments.55 The system had also created a Tariff Deficit which exceeded EUR 20 billion by 2009. The Tariff Deficit is a shortfall of revenues in the electricity system which arises when the income generated by the SEE is insufficient to cover the costs associated to the system.56
117.
Against this background, on 30 April 2009, Spain adopted Royal Decree Law 6/2009 ("RDL 6/2009") further amending certain provision of the 1997 Electricity Law.57 RDL 6/2009, was aimed primarily at tackling Spain's tariff deficit and sought to establish a path to eliminate the tariff deficit by 1 January 2013.58 Pursuant to Article 1 of RDL 6/2009, the government set up a "securitisation fund", known as the Fondo de Titulización del Déficit del Sistema Eléctrico (Fund for the Securitisation of the Electricity System Deficit), in charge of financing payments made to satisfy collection rights (invoices) arising from unpaid electricity settlements, and addresses thereby the tariff deficit.59 Article 4 of RDL 6/2009, established a "Pre-Assignment Registration" requirement, for all installations intending to qualify for the RD 661/2007 economic regime and that fulfilled certain conditions. Once registered in the Pre-Assignment Registration, the installation had 36 months to obtain its final RAIPRE registration and start selling electricity in accordance with Article 4(8).60 RDL 6/2009 did not modify the economic and regulatory regime put in place by RD 661/2007.
118.
RDL 6/2009 authorized the State to introduce annual restrictions on the number of registered installations that could start operating if Spain's RE targets were exceeded:

"If to the contrary, the power associated with the registered projects were to be greater than the envisaged objective, the economic regime established in the aforementioned Royal Decree 661/2007, of 25 May shall apply and shall be extinguished with the registered facilities. In this case, by agreement of the Council of Ministers, at the behest of the Minister of Industry, Tourism and Trade, annual restrictions may be established to the execution and entry-into-service of the registered facilities and the prioritisation thereof so as not to compromise the technical and economic sustainability of the system, conveniently extending, as the case may be, the maximum deadline established in article 4.8 of this Royal Decree-Law.

2. A new legal-economic framework shall be approved by Royal Decree for facilities registered in the Remuneration Pre-assignment Administrative Registry, once the remunerative regime currently in force is exhausted. The objectives of this new Royal Decree will be to establish a sufficient and adequate economic regime to encourage the entry-into-service of this type of facility, promoting research and development in the industry which make it possible to reduce the costs of the facilities, improve their operations and contribute to the increase of the industry's competitiveness."

119.
Such restrictions were introduced on 19 November 2009 by a Resolution of the Secretary of State for Energy ("November 2009 Resolution").61 The November 2009 Resolution provided, among others, a staggering timeline for the entry into operation of wind and CSP facilities that were pre-registered and thus a staggering connection of the installations to the electricity grid on an annual basis.62 The installations would be given access to the grid on a deferred basis, in January 2011, January 2012, and January 2014, depending on the date at which they had obtained the final RAIPRE registration.63
120.
The November 2009 Resolution indicated that, at that point, the power generated by RE facilities registered by RAIPRE under RDL 6/2009, far exceeded the objectives delineated in the PER 2005-2010 and reflected in Articles 37 and 38 of RD 661/2007. In particular, 104 applications were submitted for thermoelectric solar technology for a total power of 4,499 MW (compared to the 500 MW objective), and 536 applications for wind technology, for a power of 13,462 MW (compared to the 20,155 MW objective).64 Thus, the power requested for the thermoelectric solar and wind technologies, added to the already installed power, exceeds the power targets contained in RD 661/2007.
121.
On 19 November 2010, the Government adopted Royal Decree 1565/2010, regulating energy generated from solar photovoltaic and wind technology.65
122.
On 7 December 2010, the Respondent introduced Royal Decree 1614/2010 ("RD 1614/2010").66 RD 1614/2010 defined the application of the FITs to CSP and wind installations by:

• Limiting the number of hours per year, during which wind and CSP were entitled to receive payment subject to the FIT. All electricity produced above the operating hour limit would not benefit from the subsidy but instead could sell the electricity at market price (Article 2).

• Specifying that for CSP plants, the Premium option was only available after the first 12 months of operation (with fixed-tariff becoming the only available during that year), and requiring operating plans under the premium regime to switch to a fixed tariff for 12 months (Article 3).

• Confirming that CSP and wind installations that had obtained the definitive registration in the RAIPRE on or before 7 May 2009, and CSP and wind installations that at the time of entry into force of RDL 6/2009 met the requirements for registration in the PreAssignment Register, shall not be affected by the revisions of tariffs, premiums and upper and lower limits referred to in Article 44(3) of RD 661/2007. (Article 4 (CSP), Article 5(3) (wind)).67

123.
On 23 December 2010, Spain adopted Royal Decree Law 14/2010 ("RDL 14/2010"), establishing certain urgent measures to correct the tariff deficit.68 The Parties are in dispute as to whether wind and CSP plants were also covered by this measure. The Respondent alleges that this RDL meant a reduction of the remuneration to be received by all generators, including CSP and wind, as they were all obliged to contribute to address the tariff deficit through a toll for access to the transmission and distribution networks.69 This, according to the Respondent, meant a reduction in the profitability or return on investments of CSP plants.70 The Claimants allege that this regulation affected mainly photovoltaic generators71 and in any case, even if it affected CSP and wind technology, the impact was minimal.72
124.
On 4 March 2011, the government issued Law 2/2011 on Sustainable Economy, confirming among others its 20% national goal for participation of renewable energies in gross energy consumption for the year 2020. The text (issued the same year the Claimants invested in Spain) describes some of the underlying policies and actions to be taken by the government to reform the energy sector as a whole, including the Special Regime.73
125.
On 27 January 2012, Spain enacted Royal Decree Law 1/2012, eliminating the economic incentives for new power generators plants, including those using renewable energy sources and suspending the "remuneration pre-assignment procedures".74
126.
The Spanish Supreme Court has rejected the assumption "that the legal situation outlined by Royal Decree 661/2007 must remain virtually unmodified or unchanged over the 30 following years".75 Moreover, the judges "do not consider, in effect, that the above Royal Decree considers a tariff regime for ever, nor that the Government, when exercising their legal power of authority, or the legislator, using their legislative authority, may not adapt or modify this regime to new circumstances (economic, productive, technological or of any other nature) that may arise in such an extended period of time".76 The Constitutional Court of Spain endorsed the case-law from the Supreme Court.77

2. The Disputed Measures

127.
On 27 December 2012, Spain enacted Law 15/2012 on Tax Measures for Energy Sustainability ("Law 15/2012"). This legislation imposed a 7% levy on all income obtained by all generators, renewable or otherwise.78 The "nature" of this "Tax on the Value of the Production of Electric Energy" ("TVPEE"), was described in Article 1, as follows:

"The tax on the value of the production of electricity is a levy of a direct and real nature which taxes the production of electricity and its incorporation into the electricity system, measured at the power station bus bars, through each of the facilities featured in article 4 of this Law".79

128.
Law 15/2012 also modified Article 30 of Law 54/1997, by suppressing the premium for electricity produced by CSP plants using fossil fuel such as natural gas, as follows:

"The electricity that is attributable to the use of a fuel in a generation facility that uses as its primary energy any of the non-consumable renewable energies shall not be subject to the premium economic regime, other than in the case of hybrid facilities which use non-consumable and consumable sources of renewable energy, in which case the electricity attributable to the use of the consumable source of renewable energy is subject to the bonified [sic] economic regime.

To this end, by order of the Minister of Industry, Energy and Tourism, the methodology for calculating the electricity attributable to the fuels used shall be published."80

129.
Finally, Law 15/2012, introduced measures to enlarge the source of financing of the SEE. Thus, thereafter, those sources included not only the revenue from the access fees and other regulated prices paid by consumers, but also certain earmarks of the Respondent's National Budget.
130.
On 1 February 2013, the government adopted Royal Decree Law 2/2013 (the "RDL 2/2013") concerning "urgent measures within the electricity system and the financial sector".81 The Preamble explained the background of this Decree Law as follows:

"Data made public by the National Energy Commission in its report 35/2012, of 20 December, [...] made manifest the appearance of new deviations in the cost and revenue estimates caused by different factors, both for the closure of 2012 and for 2013 which, in the current economic context, would make it almost unfeasible to fund such costs with the electricity fees and the elements expected to derive from the General State Budget.

To a great extent these deviations are due to a greater increase in the cost of the special regime on account of an increase in operating hours which was greater than expected, to an increase in remuneration values due to their being indexed to the Brent price, and to a decrease in revenue from fees due to a very marked fall in demand which was consolidated during this tax year.

The alternative that was raised would be a new increase in the access fees paid by consumers of electricity. This measure would directly affect household economies and company competitiveness, both in a delicate situation given the current economic situation."

131.
Articles 1 to 3 of RDL 2/2013 further scaled back the FIT available to RE generators. In particular, Article 1 reduced the inflation adjustments for the FIT by delinking the adjustments to the consumer price index, and instead linking it to the "Consumer Price Index (CPI) at constant taxes excluding unprocessed foods or energy products." Article 2 reduced to "0" the value of the Premium set forth under RD 661/2007, and Article 3 left current and new CSP and wind plants with the possibility to sell the electricity either at the wholesale market price or subject to the Fixed Tariff option.
132.
On 12 July 2013, Royal Decree Law 9/2013 on the adoption of urgent measures to "guarantee the financial stability of the electricity system" was enacted ("RDL 9/2013").82 RDL 9/2013, expressly derogated RD 66 1 /2007.83 It also eliminated the FIT available under the Special Regime and provided instead a specific remuneration ("Special Payment") calculated in accordance with certain criteria, measured from the perspective of allowing a "standard installation" to obtain a "reasonable return". Moreover, RDL 9/2013 changed the remuneration regime which was previously calculated on the basis of production (rate per kW produced) to a regime based on efficiency criteria (investment costs, operating costs, revenues). Article 1 of RDL 9/2013 amended Article 30(4) of the 1997 Electricity Law, as follows:

"Additionally, subject to the terms that the Council of Ministers might adopt pursuant to Royal Decrees, in relation to the remuneration for the generation of electricity calculated according to market price, installations may receive a specific remuneration ['the Special Payment'] composed of an amount per unit of installed capacity. Such amount shall cover, as appropriate, the investment costs of a standard installation that cannot be recovered through the sale of energy, as well as an amount for the operation of the installation to cover, as the case may be, the difference between exploitation costs and the revenues obtained from the participation of such a standard installation in the market.

For the calculation of that specific remuneration, the following elements shall be considered, based on the installation's regulatory operational life and by reference to the activities carried out by an efficient and well administered business:

a) The standard revenues for the sale of generated energy valued at market price of production;

b) The standard exploitation costs;

c) The standard value of the initial investment.

To that effect, the costs or investments determined by laws or administrative regulations that do not apply to the Spanish territory shall not be considered in any case. In the same manner, only those costs and investments related to the activity of electric energy generation can be taken into account.

[...]

This remuneration regime shall not exceed the minimum required level to cover the costs that are necessary for installations to compete on an equal footing with the rest of the technologies in the market in order to allow those installations to obtain a reasonable return, by reference to the standard installation, as the case may be. Notwithstanding the above, exceptionally the remuneration regime might also include an incentive to investments and timely execution of an installation, if this was going to result in a significant cost reduction for the Spanish islands or the extra-peninsular territories' electricity systems.

Such reasonable return will be based on, before taxes, the average returns in the secondary market of the State's ten-year bonds plus the adequate differential.

The parameters of the remuneration regime can be revised every six years."

133.
With regard to the "reasonable return" the First Additional Provision, also stated:

"For the purposes of that which is envisaged in the penultimate paragraph of article 30.4 of Law 54/1997, of 27 November, for installations which on the date on which this Royal Decree-Law were to be entitled to a premium economic regime, the reasonable return shall be referenced, before tax, to the average yield during the ten years prior to this Royal Decree-Law coming into effect from ten-year Government Bonds in the secondary market, increased by 300 base points. All of which is without prejudice to the review envisaged in the last paragraph of the aforementioned article."

134.
On 17 October 2013, Spain adopted Law 15/2013, charging to the General State Budget certain costs of the SES, including those resulting from the economic incentives put in place to promote electrical energy production from renewable energy sources. On this basis, an extraordinary credit was granted for the sum of EUR 2,200,000,000 in the budget of the Ministry of Industry, Energy and Tourism.84 This is not one of the measures that form the basis of the Claimants' claim, and thus is not covered under the definition of "disputed measures." It is included herein in chronological order, for the sake of completeness.
135.
On 26 December 2013, Law 24/2013 ("Law 24/2013") was enacted as the new electricity law, superseding Law 54/1997. The principle of economic and financial sustainability of the electricity system was described as being "a guiding principle in the action of the public administrations" under this law. Law 24/2013 eliminated the distinction between the Ordinary and Special Regimes, deciding instead that given the level of penetration of electricity generated from renewable technologies in the SES, renewables producers were on the same footing as conventional power generators, save to the extent that express provision was made. The Preamble explained as follows the reasons for adopting a new electricity law:

"The causes of this imbalance lie in the excessive growth of certain costs' items owing to energy policy decisions without ensuring their correlative income from the system. This has all been exacerbated by the lack of growth in electrical demand, essentially the consequence of the economic crisis.

Despite the fact that tolling increased by [one hundred and] twenty two percent between 2004 and 2012, positioning the electricity price in Spain well above the European Union average, this was not enough to cover the system's costs. This imbalance has reached the point where the accumulated debt of the electrical system is currently in excess of twenty six billion Euros, the structural deficit of the system stands at ten billion per annum and the failure to correct the imbalance has introduced the risk of the bankruptcy of the electrical system.

Law 54 enacted on November 27th 1997 has proven insufficient to ensure the financial balance of the system, amongst other reasons because the remuneration system for regulated activities has lacked the flexibility required for its adaptation to major changes in the electrical system or in the evolution of the economy.

Hence, the experience of the last decade has made it clear that the economic and financial instability of the electrical system, brought about by the tariff deficit, has prevented the assurance of a stable regulatory framework which is necessary for the smooth carrying out of an activity like the electrical business which is very capital intensive.

[...]

The widespread awareness of the tariff deficit situation and the consequent threat to the very feasibility of the electrical system has led to the need to make major changes to the remuneration regime for regulated activities. In view of the progressive deterioration in the sustainability of the electrical system, the legal entities in the latter could no longer legitimately trust the maintenance of the parameters which had degenerated into the situation described and any diligent operator could anticipate the need for these changes.

For activities with regulated remuneration, the Law reinforces and clarifies the principles and criteria for establishing the remuneration regimes to which end the necessary costs will be considered to carry out activity by an efficient, well-managed company through the application of homogeneous criteria throughout Spain. These economic regimes will allow appropriate returns to be obtained with regard to the activity risk."

136.
In addition, the law confirmed and further developed the principles set out in RDL 9/2013, including the Special Payment remuneration scheme subject to revisions every six years, with the base line predictions reviewed every three years.85 Law 24/2013 also provided renewable installations priority of dispatch over non-renewable generators where electricity was offered at the same price "without prejudice to the requirements pertaining to the maintenance of system reliability and safety, under the terms determined in the regulations by the Government".86
137.
On 6 June 2014, Spain adopted Royal Decree 413/2014 (the "RD 413/2014"),87 implementing the regime adopted under RDL 9/2013 and confirmed by Law 24/2013. Thus, this decree developed the mechanism to implement the priority of dispatch for renewable sources generators88 as well as the Special Payment, among other features.89 In particular, Article 11 of RD 413/2014 describes some of the characteristics of this Special Payment as follows:

"2. This remuneration regime shall apply to the production installations that use renewable energy sources, high-efficiency cogeneration and wastes that do not reach the minimum level necessary to cover the costs which would allow them to compete at an equal level with the rest of the technologies in the market and to obtain a reasonable return regarding the standard installations applicable for each case.

3. The granting of this specific remuneration regime shall be established through procedures of competitive concurrence which will be adjusted to the principles of transparency, objectivity and non-discrimination.

4. For the determination of the specific remuneration regime applicable for each case, every installation, depending on its characteristics, shall be assigned a standard installation.

5. The specific remuneration for each installation shall be obtained from the remuneration parameters of the standard installation that corresponds to it and the characteristics of the installation itself. [...]."

138.
Moreover, the specific remuneration regime is set considering a standard installation with an operational life of 25 years, being "efficient" and "well-managed", as already indicated in RD 413/2014.90 Each installation was assigned a corresponding standard installation according to its characteristics.91 Furthermore, tariff payments received prior to the inception of the new regime are counted towards the total remuneration that an installation might receive over its deemed operational life, to determine whether the plant has received a reasonable return. If the installation has surpassed the "reasonable return" marker (i.e., 7,398%), it will not receive further subsidies. Its owner will not be asked to return the funds surpassing this marker either.92 Article 19 reads in relevant part:

"1. The value on which the reasonable return of the standard installation shall hinge will be calculated as the average yield of ten-year Treasury Bonds in the secondary market of the 24 months prior to the month of May of the year prior to the start of the regulatory period increased in a differential.

The reviews of the value on which reasonable return shall hinge will be applicable in what is left of the regulatory useful life of the standard installation.

2. Before 1 January of the last year of the corresponding regulatory period, the Ministry of Industry, Energy and Tourism shall present to the Council of Ministers a draft bill that will include a proposal for the value of the differential indicated in the previous section during the next regulatory period, pursuant to the criteria established in Article 14.4 of Act 24/2013 dated 26 December. [...]."

139.
A few days later, on 16 June 2014, Ministerial order IET/1045/2014 (the "June 2014 Order"), approved the remuneration parameters for "standard installations" engaged in the production of electricity from renewable energy sources.93 The Preamble explained:

"This order finalizes the changes to the remuneration model for renewable energy, co-generation and wastes, granting financial stability to the system in a definitive manner, at the same time as it guarantees a reasonable return on the installations. These installations will continue to receive additional revenue over and above what they receive from the market until the end of their operational life, as long as they have not obtained this level of return. Furthermore, the importance of this order resides in the fact that it concerns the determination of useful operational life and the quantification of the initial value of the investment, insofar as it concerns parameters that may not be revised."

140.
On 16 October 2014, Ministerial Order IET/1882/2014 dated 14 October 2014 entered into effect. It established the methodology for calculating the electrical energy attributable to the use of fuels in solar thermoelectric power plants and confirmed the obligation to repay the remuneration that had resulted from the production of energy with natural gas, between 1 January 2013 and 12 July 2013 (i.e., date of entry into force of RDL 9/2013), as already set forth under RD 413/2013.94
141.
The new regime provides revenues which are no longer correlated only to the actual production of the installation. It becomes less profitable for significant installations like the Claimants' CSP plants but can sometimes generate more revenue stream in certain conditions.95

B. The Claimants' Investment in Spain

142.
RREEF first invested in Spain in February 2011, in a project known as the "Dédalo Project" by indirectly acquiring an equity interest in three project companies with activities in the wind power sector. Subsequently, in July 2011, RREEF indirectly invested in a project for the development of a 49.9 MW CSP Plant, in Andalucía, known as the "Arenales Plant." Also in June 2011, RREEF indirectly invested in two other CSP plants, also in the south of Spain. The plants, referred to by the Claimants as the "Andasol Plants" were already operational at the time of the investment.
143.
The Tribunal briefly describes below the due diligence and information gathering processes for the making of the investments (1), to then describe the particulars of each investment, to the extent relevant for the Tribunal's Decision (2).

(a) Pre-investment Phase and Due Diligence

144.
In 2007, RREEF was approached for the first time by Deutsche Bank Madrid, in connection with the Dédalo Project, as identified below.96 The project was put on hold in 2008 due to lack of financing available and considering the financial crisis.97 Negotiations resumed in March 2010, and RREEF started looking again at potential business opportunities in the renewable energy sector in Spain.
145.
In mid-2010, RREEF assessed again its possibility of investing in the Dédalo Project and the Arenales Plants,98 and engaged in discussions with financial advisors, investment bankers and developers.99 According to the Claimants, "although RREEF was engaged in three different projects, with three different project teams and different advisors running them, essentially the information was all pooled."100 They are thus described here below together in chronological order.
146.
One of these advisors was Poyry Energy Consulting ("Poyry"), a global consulting and engineering company, who issued a report in July 2010, commissioned by the Claimants. The focal point of the report was the "forecasts of wholesale electricity and gas prices, and individual capture price projections for Arenales and Casablanca projects for the period up to 2035 under the existing RD 661/2007 tariffs structure."101 The report contains a brief analysis of Spain's PER 2005-2010 and the PANER 2011-2020, as well as the regulatory framework under RD 661/2007 and RDL 6/2009.102 Poyry considered that while the global financial crisis had created some uncertainty in the industry, the FIT remuneration scheme provided "sound project economics."103 It also acknowledged the difficulties arising from Spain's Tariff Deficit, which it described as "one of the major problems that has haunted the Spanish energy industry since 2001 [...]."104
147.
In 2010, prior to the issuance of RD 1614/2010, the Ministry of Industry, Tourism and Commerce (the "Ministry") held consultations with the CSP and wind industry associations in which it discussed potential regulatory changes. The Parties disagree on the characterization of these consultations. According to the Claimants, the discussions were negotiations that meant to appease CSP and wind technology investors, after important regulatory changes had affected the photovoltaic industry.105 For the Respondent, these consultations were part of the mandatory process for the enactment of regulations set forth under Law 50/1997, where different stakeholders, including industry associations, are invited to give their views before the regulation is issued in final form.106 The Respondent further alleges that the Claimants are not part of either of the two associations which concluded the agreement and thus it is unclear why they believe to be bound by it.107
148.
On 2 July 2010, the Government issued a press release reflecting the outcome of the discussions (the "July 2010 Agreement").108 The document reads in relevant part:

"The wind power technology subsidies prescribed in RD 661/2007 will be reduced by 35% until 1 January 2013. On their part, solar thermal plants will be deprived of access to the market price + subsidy option for one year of operation, in which they can only access the regulated rate as prescribed in RD 661/2007, whichever is smaller.

It has also been agreed to delay the entrance into operation of the solar thermal plants with regards to the date foreseen in the ordination of the projects presented as of the pre-registration of Royal Decree Law 6/2009.

Furthermore, the number of hours to which they have the right to compensation over the market price is limited for wind power and solar thermal plants, taking into account the different technologies and the provisions of the Renewable Energies Plan 2005-2010 for the calculation of the profitability of the facilities.

[...]

This agreement furthermore assumes the reinforcement of the visibility and stability of the regulation of these technologies in the future, guaranteeing the current incentives and rates of RD 661/2007 for the facilities in operation (and for those included in the pre-registration) starting in 2013."109

149.
On 27 July 2010, SJ Berwin LLP ("SJB") rendered a "preliminary due diligence report" regarding RREEF's potential investment in the Arenales Project, in which it made a brief summary of the applicable regulatory regime, considering the pre-assignment register under RDL 6/2009, as well as the terms of the July 2010 Agreement.110 SJB issued a second report on 16 November 2010 ("Second SJB Report"), assessing, among others, the regulatory regime for wind-generated energy from the viewpoint of the Dédalo project.111 With regard to the "developments of the legal regulatory framework" the Second SJB Report stated the following:

"In 2009, the Spanish Government started a restructuring process of the renewable energy sector, with the objective of the preservation of the technical and economic stability of the system. This process, which has not been completed yet, has resulted in restrictions on the development of new projects as well as in a reduction of economic rights (tariffs).

[…] Said draft legislation may make it possible to get an idea of what the outcome of amendments to current legislation will be, though, it is difficult to provide an accurate picture of how the regulatory regime for renewable energies is going to finally look due to the strong lobbying that is taking place on this issue.

[...] Further to the report from the CNE, even though is not binding, the MITYC may make additional amendments to the draft. As such, it could be possible that any change as regards the reductions of the subsidies to wind and solar thermoelectric energy, as well as to the limitation of the number of hours of energy produced that will have access to the current economic regime of Royal Decree 661/2007, will not be included in this draft and will be processed afterwards by the MITYC."

150.
Sometime before the issuance of the Second SJB Report, the Government of Spain made available - first to Deutsche Bank Madrid ("DBM")112 (RREEF's holding entity) and then to the public at large - a draft of a Royal Decree, which mirrored some of the agreements reflected in the July 2010 Agreement. Subject to very few modifications, the draft, became Royal Decree 1614/2010, discussed in detail in Section IV(A)(b)(1), above.
153.
In March 2011, Poyry provided an additional report on "Current State and Future Trends of Solar Power in Spain." In the section analysing the sustainability of the SES, Poyry concludes:

"In 2007 the Government changed RD436/2004, which involved the Special Regime, with the introduction of RD 661/2007. At that time the retroactivity measure was also a matter of debate. Despite the fact that some feel that RD 661/2007 already introduced retroactivity, we feel that this Royal Decree also complied with the need to provide a stable framework. It is true that the new scheme affected existing plants (i.e., Wind farms), but it is also true that the actual impact of the retroactivity was left to the generators' will. Due to the fact that RD 661/2007 provided the right to remain under the fixed tariff set in the prior RD 436/2004 for the rest of the operating life of the project, the Government again showed its commitment to keep the legal framework, providing stability and fair play towards investor's past decisions.

It should be noted that the subsequent legal changes that occurred to the Spanish renewable industry have not changed the fact that the Government has always declared that one of the key parameters to change the premium would be the cost incurred by investors.

The recently approved Royal Decrees introduce for the first time retroactive changes to the legal framework clearly reducing the investor confidence. [...]

Poyry is of the opinion that [...] the zero tariff deficit target is unlikely to be met by the end of 2012. We foresee that a more realistic scenario is the one in which this target is be met by 2014-2015 through yearly TPA increases in the range of 10%.

If the zero tariff deficit target by end of 2012 is postponed, it will open up the opportunity to more deficit generation. Considering the Government behaviour, it is likely that future changes might be implemented if considered needed. RDL 14/2010 is aimed at tackling the lack of funds in the electricity system, reducing the revenue of renewable generators as well as introducing additional revenue sources (i.e., grid tolls). We feel that the Government is in a position to continue with the same energy policy, if considered a requirement, including implementation of further reductions in remuneration to renewables and non-renewable technologies ."118

154.
On 11 May 2011, Poyry issued an additional report, this time analysing the question of the Tariff Deficit, at RREEF's request.119 The document noted, inter alia, that "it is interesting to realise that the electricity system has allowed a lot of different subsidies to influence the market but what it seems clear is that the trend is for these subsidies to be reduced or disappear."120
155.
The Parties' disagree generally on whether the due diligence reports mentioned in the abovereferenced confirmed the stability of the FIT regime put in place thorough RD 661/2007 (Claimants) or whether they demonstrated that changes to the regulatory changes were foreseeable and should have been foreseen by the Claimants among others in light of the situation of the Respondent's Tariff Deficit (Respondent)121.
156.
In May 2011, representatives of DBM, RREEF and Antin (a separate investor, who was considering investing in the Andasol Plants, alongside RREEF), met with an official of the Ministry's legal department, Mr. Miguel Vizcaino,122 as well as with various government officials of the Comisión Nacional de Energía ("National Energy Commission") (the "CNE"), seeking information regarding the regulatory regime applicable to RE.123
157.
The Claimants have submitted to this arbitration contemporary accounts of RREEF's takeaways from that meeting, including through the witness statement of Mr. Bolaña, the Antin representative present at the meeting.124 These memoranda analyses the opportunity to invest in the SES (1); the conduct of due diligence operations (2); the valuation of the investment(3); and the mounting of investment projects, for various projects including Dédalo125 and Arenales (4).126
158.
According to this evidence, the government official had provided "[c]onfirmation that the current decree provides a long term, stable regulatory framework [...] [although], this has to be taken with some caution, ('nothing is written in marble') but any changes/adjustments in the future would not be to the detriment of current investors."127

(b) The Claimants' investments in Renewable Energy

1. The Dédalo Wind Project

159.
RREEF Pan-European Two, the second claimant in this case, acquired - through its wholly owned subsidiary, Plateau Green Energy B.V. - a 49% equity interest in 3 project companies (the "Dédalo companies"), for a total consideration of EUR 96.8 million.128 The Dédalo companies developed five wind power parks with a total installed capacity of 216 MW.129
160.
On 11 December 2009, before RREEF's investment in this project and before the parks' construction work was finalized, the Dédalo wind parks got registered in the Pre-Assignment Register.130 The Dédalo wind parks achieved final registration with the RAIPRE on 28 December 2010131.
161.
The documents produced for RREEF's Investment Committee to make its final decision suggest that it might have been RREEF's intention to sell its investment in the wind farms by 2017.132

2. The Arenales CSP Plant

162.
In July 2011, the Claimants invested in a project for the development and final construction of an installation located in Morón de la Frontera, Sevilla, Andalucía. The installations were not yet operational at the time of the investment.133
163.
RREEF's indirect investment in the Arenales project consisted of the acquisition through the Second Claimant's wholly-owned Dutch subsidiary, Fronterasol B.V., of a 49% equity stake in Arenales Solar. The other 51% was owned by OHL Industrial, S.L., a Spanish contractor, and by Solar Millennium AG, which would retain 25% and 26% shareholdings in Arenales Solar, respectively.134 The cost of the acquisition was EUR 12.9 million (with an associated commitment to invest up to EUR 56.1 million to fund the construction of the Arenales Plant).135
164.
Before RREEF's investment, the Arenales Project had gone through the required steps in the registration process.
165.
First, the Arenales Project was listed in the Pre-Assignment Register from 11 December 2009.136
166.
Second, on 2 December 2010, before the Government passed RD 1614/2010, Arenales Solar addressed a communication to the Directorate General of Energy Policy and Mines: (i) waiving its right to commence to supply electricity into the grid before 1 April 2013; (ii) accepting the hour-based limitation under the Draft decree that became RD 1614/2010; and (iii) requesting confirmation of the economic regime that would be applying during the installations' "operational lifetime."137
167.
Third, on 1 March 2011, the Ministry of Industry, Tourism and Commerce issued a Resolution accepting the waiver mentioned in the preceding paragraph in respect of the Arenales Plant (the "March 2011 Resolution").138
168.
Pursuant to the Pre-Registration resolution, and the assigned classification, the Arenales Plant could not start operations until 2013 and had to be registered with RAIPRE by 31 December 2013 to qualify for the RD 661/2007 economic regime.
169.
On 25 September 2013, the Arenales Plant obtained definitive registration with RAIPRE.139 It became operational in October 2013.
170.
The installed capacity of the Arenales Plant is in dispute between the Parties. In particular, the Respondent contends that the Arenales Plant has an installed capacity that is higher than 50 MW (in particular, it claims a nominal installed capacity of 55 MW),140 which the Claimants reject.141 Only plants with an installed capacity of 50 MW could be awarded the Special Regime under RD 661/2007.142
171.
The Parties are also in dispute as to the reasonability of the investments costs of the Arenales Plants. The Respondent points out that they exceed the costs of the Andasol Plants by EUR 80 million, even though they were built much later in time, and are thus unreasonable.143 The Claimants argue that they were reasonable and caused by factors that led to higher fixed costs than the Andasol Plants, such as the need to find costly water and gas provision solutions, complicated civil works and so on.144

3. The Andasol CSP Plants

172.
The Andasol Plants are two CSP plants located in Granada, Andalucía in the south of Spain. Each has an installed capacity of 49.9 MW (Andasol-1 and Andasol-2). They were already operational at the time of the Claimants' investments and according to Mr. Hauteville, one of the Claimants' witnesses, they are able to supply solar electricity for up to 170,000 people.145
173.
The Andasol Plants were planned, and their financing secured, under the scheme of RD 436/2004.146 They became operational in 2008.147
174.
On 30 June 2011, REEFF executed a Share Purchase Agreement for a 45% equity stake of Andasol-1 and Andasol-2 through RREEF's wholly own subsidiary, Guadisol B.V.. RREEF's purchase price for the shares was EUR 86 million. Antin also acquired another 45% of the Andasol Plants. In addition, RREEF agreed a purchase price for the subordinated shareholders' loans of EUR 49 million.148
175.
The Andasol Plants were duly registered with RAIPRE by December 2009, before the Claimants' investment in the project. In particular, Andasol-1 was registered with RAIPRE on 24 April 2009.149 Given the timing of the registration, it needed not fulfil any preregistration requirements. Andasol-2 was registered with the Pre-Assignment Register on 15 October 2009150 and with RAIPRE on 22 December 2009.151
176.
RREEF undertook a due diligence process, including on the technical, financial, tax, accounting, legal and regulatory aspects, of both the Arenales and the Andasol Projects. This was conducted in parallel. The information acquired in one project was applied to the other.152
177.
RREEF planned to sell153 and did sell its stake in the Andasol Plants on 26 July 2017 for 77.7M.154

V. JURISDICTION: THE TAX OBJECTION

178.
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").
179.
In the jurisdictional phase of these proceedings, the Parties debated at length whether the TVPEE may be considered a taxation measure, and as such, excluded from the scope of Article 10 of the ECT by application of Article 21(1) of the Treaty. As the Tribunal put it, what is in dispute between the Parties is whether the measures included in Law 15/2012 are bona fide taxes; if not "the tax carve-out does not apply".155
180.
In its Decision on Jurisdiction the Tribunal decided to join the Respondent's objections based on ECT Article 21, to the merits. The Tribunal will thus rule on this objection in the present Decision.

a. The Decision on Jurisdiction

181.
In its Decision on Jurisdiction, the Tribunal held the following:

"195. [...] 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 156 avail itself of the exemption provided for in Article 21(1) [of the ECT] and find the Application [of the taxation carveout] 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.

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." 157

b. The Parties' Positions

182.
The Tribunal lists below the main arguments raised by the Parties with regard to the Tax Objection. The Parties' arguments have been summarized in detailed in Section VII of the Tribunal's Decision on Jurisdiction, which constitutes an integral part of this Decision.

i. The Respondent's Position

183.
The Respondent considers that the Tribunal lacks jurisdiction to hear the Claimants' claims arising out of the "Taxation Measures" adopted under Law 15/2012 because the Respondent has not consented to dispute relating to taxation measures being arbitrated. In particular, the Respondent contends that:

• The consent of the Kingdom of Spain is limited to potential violations arising from its obligations under Part III of the ECT. Since Part III does not impose any obligations with respect to Tax Measures adopted by Contracting Parties, the Tribunal lacks jurisdiction ratione voluntatis to decide the claim arising out of Law 15/2012.

• The ECT does not create rights nor impose obligations regarding Tax Measures, except for particular circumstances defined in Article 21 of the ECT. Article 10 of the ECT, on which the Claimants seek to base their allegations, is not concerned by the exceptions.

• The TVPEE is a "Tax Measure" for the purposes of the ECT.

• Tax Measures have to be presumed bona fide.

• TVPEE is a bona fide Tax Measure of general application.

ii. The Claimants' Position

184.
For their part, the Claimants consider that the measures implemented through Law 15/2012 are not "Tax Measures" under Article 21. In particular:

• 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. This is because "[a]lthough on its face the 7% levy applied to both the ordinary regime producers, the conventional producers, and the special regime renewable energy producers, the effect of the measure was not equal between them. The ordinary regime producers could pass that additional 7% levy cost on to consumers by raising electricity prices. The special regime producers couldn't, and the reason they couldn't is because they were largely dependent upon payments that were independent of the market price [...] those were fixed amounts; they could not be adjusted to effectively pass on the 7% levy."158

• Since the 7% levy was not a tax implemented in good faith, the ECT tax carve-out does not apply.

• Taxation Measures have to be bona fide and may not be presumed bona fide. Moreover, if there is prima facie evidence that the tax measure is not bona fide, the burden of proof switches to the other party.

• 7% levy is not a bona fide measure but a tariff cut intended to deprive the Claimants of their rights under the ECT.

c. The Tribunal's Analysis on the Tax Objection

185.
In the view of the Tribunal, there can be no doubt that the 7% levy is clearly a tax. This is true, whether taking account of the definition given in Article 21, paragraph 7, of the ECT or giving it the usual meaning of the word in domestic laws. In this respect, the Tribunal shares the view expressed by the Novenergia tribunal:

"519. For the Tribunal there is no doubt that the provisions of Law 15/2012 are provisions relating to a tax of the domestic law of a Contracting Party as set out by Article 21, section (7)(a)(i) of the ECT. Consequently, the Tribunal is convinced that Law 15/2012 is indeed a taxation measure in its nature, which on its face is subject to the carve-out from the protection of the ECT."159

186.
The Tribunal accepts that, as explained by the Isolux tribunal, "the presumption that the IVPEE can be contemplated within the 'carve out' provided by ECT Article 21(1) would remain destroyed if the tax measure was not promulgated in good faith."160 However, as noted by the Novenergia tribunal:

"the starting point, or the assumption, should always be that the taxation measure was in fact adopted in good faith.161 The consequence of this assumption is that the Claimant bears the burden of proving to the Tribunal that Law 15/2012 was not enacted for the purpose of raising general revenue for the state, but for a different purpose, i.e. that the measure therefore was enacted mala fide."162

187.

It is generally accepted that in international, litigation including in investment disputes:

"the applicant must establish its case and that a party asserting a fact must establish it; as the [International] Court [of Justice] observed in the case of Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), 'it is the litigant seeking to establish a fact who bears the burden of proving it' (Jurisdiction and Admissibility, Judgment, I.C.J. Reports 1984, p. 437, para. 101)".163

188.
Therefore, the question is not whether there exists a presumption that a tax is or is not promulgated bona fide but whether this precise tax was or not established bona fide. After having examined the arguments exchanged by the Parties in this respect, the Tribunal sees no reason to assume that, in the circumstances, the 7% levy is not a bona fide tax. The 7% levy is part of Spain's global policy concerning the protection of the environment. As explained in paragraph 3 of the Preamble of Act 15/2012, "[o]ne of the bases of this tax reform [is] the internalization of environmental costs arising from the production of electric energy [...]" and, in effect, besides the "tax on the value of the production of electrical energy" levied in Title I, the "tax measures for energy sustainability" provided for in Law 15/2012 concern the regulation of two other new taxes respectively on production and on storage of spent nuclear fuel and radioactive waste (Title II) and Title III modifies Law 38/1992 on special taxes concerning natural gas supplies.164 Moreover, as provided for in Article 4, the tax applies indiscriminately to all electricity producers.165
189.
Finally, the Respondent submits that the Government of Andalucía's unconstitutionality appeal 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.166
190.
It might be true that the Respondent could have used other means than a fixed tax levy to achieve its policy objective. But it is not for the Arbitral Tribunal to substitute itself to the Government of Spain in this respect. As noted by the Eiser tribunal:

"The power to tax is a core sovereign power that should not be questioned lightly. The ECT Article 21(1) tax 'carve-out' and the corresponding provisions in many other bilateral and multilateral investment treaties reflect States' determination that tax matters not become a subject of investor-State arbitration, save perhaps in carefully limited circumstances. (ECT Article 21(5)(a) thus allows claims for expropriation effected through taxation, but subject to limiting procedures requiring consideration of the claim by national tax authorities.) The present case does not on the facts reach a situation where the tax enforcement measures are found to have been used as part of a pattern of behavior aimed at destroying Claimants and therefore the Tribunal does not reach a view on the availability of such an exception, were such a case to be made out."167

191.
The Tribunal recognizes that Article 21(1) is a carve-out from the Tribunal's jurisdiction. The Tribunal does not, therefore, take a decision over the legality of the levy, in the framework of the ECT, as such. However, this Tribunal considers that the levy is a cost impacting the return to the Claimants, in relation to their investments, and so it must be taken into consideration for the global assessment of the reasonable return to which the Claimants are entitled.

VI.RESPONSIBILITY

192.
The Claimants assert that the measures taken by the Kingdom of Spain resulted in several breaches of its obligation under the ECT, including: (a) the obligation to accord to the Claimants' investments fair and equitable treatment; (b) the obligation not to impair by unreasonable or discriminatory measures the use, enjoyment or disposal of the Claimants' investment; and (c) the obligation to respect the obligations previously entered into with respect to the Claimants' investments. The Tribunal examines, in turn, each of the Claimants' claims. To do so, it will examine in general the law applicable to the dispute and the general framework of the dispute (namely the object and purpose of the ECT, the State's regulatory power and the applicability of a margin of appreciation). It will then examine the applicable standard of each of the substantive protections allegedly infringed by the Respondent's measures, before examining the merits of each claim.

A. APPLICABLE LAW

1. Article 42 of the ICSID Convention

193.
The relevant provisions for determining the law applicable to the merits of this dispute are Article 42(1) of the ICSID Convention and Article 26(6) of the ECT.
194.
Article 42 of the ICSID Convention provides:

Article 42

(1) The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.

(2) The Tribunal may not bring in a finding of non liquet on the ground of silence or obscurity of the law.

(3) The provisions of paragraphs (1) and (2) shall not prejudice the power of the Tribunal to decide a dispute ex aequo et bono if the parties so agree.

195.
Article 26(6) of the ECT provides that a tribunal shall "decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law".
196.
In the present case, the Parties have not authorized the Tribunal to decide ex aequo et bono. The Tribunal is therefore bound to decide on the basis of Articles 42 of the ICSID Convention and 26(6) of the ECT and of relevant "rules and principles of international law" when treaty rules are silent.
197.
The Tribunal has been made aware by the Parties of awards given in cases with similarities with the present case.168 While according them due attention, the Tribunal has formed its own opinion on the legal issues before it and has applied the applicable legal rules in light of the particular circumstances of the present case without feeling bound by any of the decisions of previous tribunals.

2. Relevance of EU Law

198.
As noted above,169 on 29 January and 22 March 2018,170 the Parties, with leave granted by the Tribunal, have produced five new documents on which they have offered further comments.171 All of these comments mainly relate to the degree of relevance of EU law in the present case.

a. The Parties' position

i. The Respondent's Position

199.
The Respondent notably bases itself on the State Aid Decision172 and the Achmea Judgment.
200.
In its Comments on the State Aid Decision, the Respondent's main arguments are as follows:

- The State Aid Decision is binding on Spain;

- EU law prevails over general international law rules;

- In particular, as stated in paragraph 164 of the State Aid Decision, "the principle of fair and equitable treatment cannot have a broader scope than the Union law notions of legal certainty and legitimate expectations in the context of a State aid scheme".173

- The new regime must be considered as a State aid within the meaning of Article 107(1) TFEU;174

- According to the Decision, referring to the case law of the CJEU, "a recipient of State aid cannot, in principle, have legitimate expectations in the lawfulness of aid that has not been notified to the Commission" and "no investor could have, as a matter of fact, a legitimate expectation stemming from illegal State aid";175

- Therefore, the Claimants' alleged expectations in the present case are not legitimate, and "no investor could have objective and reasonable expectations to [the] preservation [of the Spanish support scheme] or to have an acquired right to an ummodifiable [sic] FIT over time, all along 40 years."176

201.
In essence, the Respondent's position in respect to the Achmea Judgment was submitted in its letter of 9 March 2017 requesting the introduction of that Judgment into the record:

"The Ruling of the EUCJ on the C-284/16 (Achmea Case) constitutes a decisive factor in the present Arbitral Procedure to be assessed and applied by the Arbitral Tribunal, as it affects not only to a Jurisdictional objection raised by the Respondent, already decided by the Tribunal, but also to the grounds of the present Case. In this regard, as the Kingdom of Spain has argued, international Law to be applied by the Arbitral Tribunal includes the appropriate Rules of International Treaties applicable either in Netherlands [sic] and Spain, as the Treaty on the Functioning of the European Union. This applicable International Law is interpreted by the Court of Justice of the European Union (hereinafter "CJEU"), whose Case Law is binding on Netherlands [sic] and Spain (Article 267 TFEU)."177

202.
Commenting on all the new documents put into the record by the Parties on 26 March 2018,178 the Respondent first explains that "European Union Law and principles constitute International Law that shall be applied by the Tribunal to decide all the issues in dispute in this proceeding" "with preference over any other international or national Law" since it "is an Intra-EU dispute"179 in accordance with the case-law, notably the Achmea Judgment and the Electrabel, Blusun and Wirtgen Awards.180 According to the Respondent, it is all the more indispensable for the Tribunal to apply EU law, including the legal acts of EU institutions,181 in the present case that the dispute affects "a key institution of EU Law" regulated by EU Directive 2001/77/CE and Community guidelines on State Aid for environmental protection 2001/C 837/03.182
203.
Returning to the alleged incompetence of the Tribunal, the Respondent contends that "the application of EU Law and principles to the present dispute determines the lack of jurisdiction of the Arbitral Tribunal to hear the present dispute"183 since the ECT is an "international agreement concluded between Member States",184 disputes over which can only be settled by the CJEU under Articles 267 and 344 TFEU.
204.
On the substance, the Respondent maintains that it "is also important to determine the Legitimate Expectations of Investors who claim that a specific amount of State Aid is maintained immutable more than 30 years"185 and that "EU Law shall be applied to assess the proportionality and reasonability of the disputed measures precisely because the Respondent had to respect the limits established by EU Law".186 Moreover, referring, e.g., to Total v. Argentina,187 the Respondent states that EU Law cannot be ignored by the Tribunal since it "reflects the common tradition of 28 States".188

ii. The Claimants' Position

205.
In their response to Spain's Comments on the State Aid Decision, the Claimants' position is the following:189

- The State Aid Decision does not concern the original regime, but only the new regime;

- Only the operative part of the State Aid Decision is binding;

- The jurisdiction objection is irrelevant since the Tribunal already decided on jurisdiction;

- In any case, EU Law does not impose on Spain to repeal the original regime;

- The State Aid Decision has no bearing on the Claimants' legitimate expectations and is not relevant to proportionality or transparency issues.

206.
As for the Achmea Judgment, the Claimants consider that it is irrelevant since:

"(a) the judgment makes it clear that it applies only to a treaty where the EU is not itself a Contracting Party, which is not the case of the ECT;190

(b) there can be no incompatibility between the ECT (a treaty to which the EU is a Contracting Party) and EU law. As this Tribunal has already decided, should there ever be an inconsistency, the ECT would prevail;191

(c) the ECT is binding on the EU and provides for arbitration of disputes concerning violations of the ECT as a result of EU measures that EU institutions might adopt. In other words, if a treaty claim can be brought against the EU under the ECT, and that is by definition not incompatible with EU law, it follows that the investor-State arbitration mechanism under the ECT is also not incompatible with EU law; and

(d) unlike the Netherlands-Slovakia BIT, the ECT provides that investorState disputes shall be decided in accordance with this Treaty (the ECT) and public international law, not the law of the host State (and EU law)."192

207.
Furthermore, the Claimants criticize the Achmea Judgment on the ground that:

"the ECJ draws an erroneous distinction between commercial and investment-treaty arbitration to explain that commercial arbitrations 'originate in the freely expressed wishes of the parties' while the latter 'derive from a treaty by which Member States agree to remove from the jurisdiction of their own courts disputes which may concern the application or interpretation of EU law'.[193] This is clearly wrong. It reveals a serious lack of understanding of the very principle on which arbitration is grounded: the parties' consent to submit their disputes to individuals whose judgment they are prepared to trust. Arbitration clauses in investment treaties are as freely entered into as they are in commercial arbitration. The source of the Tribunal's jurisdiction in investment-treaty arbitration is, as in commercial arbitration, based on the consent of all parties to the disputes, claimantinvestor and respondent-State."194

b. The Tribunal's Analysis

208.
The Tribunal notes that it has already dealt at some length with the issues raised again by the Respondent in respect with the relevance of EU law, when commenting on the documents brought into the record on 30 January and 22 March 2018. These issues were dealt with in the Tribunal's Decision on jurisdiction of 6 June 2016. Most notably, it considered in that Decision that:

"74. However, this Tribunal has been established by a specific treaty, the ECT, which binds both the EU and its Member States on the one hand and non-EU States on the other hand. As for the latter, EU law is res inter alios acta and it cannot be upheld that, by ratifying the ECT, those non-EU States have accepted the EU law as prevailing over the ECT. The ECT is the 'constitution' of the Tribunal and, to use the terminology of the UNCITRAL tribunal in PV Investors v. Spain, 'Article 26 of the ECT [...] s ets out the parameters of the Tribunal's jurisdiction'.[195] This is what the Parties to the ECT agreed amongst themselves; it is not within the jurisdiction of the Tribunal to alter this.

75. Therefore, in case of any contradiction between the ECT and EU law, the Tribunal would have to insure the full application of its 'constitutional' instrument, upon which its jurisdiction is founded. This conclusion is all the more compelling given that Article 16 of the ECT expressly stipulates the relationship between the ECT and other agreements - from which there is no reason to distinguish EU law. It follows from this that, if there must be a 'hierarchy' between the norms to be applied by the Tribunal, it must be determined from the perspective of public international law, not of EU law. Therefore, the ECT prevails over any other norm (apart from those of ius cogens - but this is not an issue in the present case). In this respect, this Tribunal fully agrees with the position of the tribunal in Electrabel.196"

209.
Although these findings do not appear in the operative part of the Decision on Jurisdiction, they constitute the necessary support for it and are therefore res judicata.197 The Tribunal therefore considers that, as regards the relevance of EU law with regard to its jurisdiction, the discussion is closed and the relating issues will not be reopened at this stage.198
210.
The Tribunal's reasoning on jurisdiction also has consequences in respect of the merits of the case itself: if there is an incompatibility or discrepancy between the ECT on the one hand and EU law on the other hand, the former must prevail.199 This being said, the Tribunal also noted in its Decision on Jurisdiction that "to the extent possible, in case two treaties are, equally or unequally, applicable, they must be interpreted in such a way as not to contradict each other."200 Moreover, the present Tribunal agrees with the Respondent that "EU Law reflects the common understanding of 28 countries in such an important matters as legitimate expectations [and, more generally, the interpretation of the ECT], that cannot be disregarded by the Tribunal [...]"201
211.
With this in mind, the Tribunal notes that the Achmea Judgment, which is at the centre of the debate between the Parties concerning the role and relevance of EU law, is inapposite in the present case: the applicable law in that case was the bilateral investment treaty concluded in 1991 between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, that is an intra-EU instrument exclusively concluded between two EU Member States. This is not the case of the ECT which, as recalled above, "binds both the EU and its Member States on the one hand and non-EU States on the other hand"202. It would be highly improper to impose a sweeping modification of the ECT on EU non-member States using the pretext that it was eventually considered as being incompatible with EU law.
212.
The Tribunal also recalls that when States (or, for that matter, international organisations) enter into incompatible commitments, the law of treaties does not offer any solution in terms of hierarchy between the treaties at stake: the issue must be dealt with on the ground of the law of State (and international organisation) responsibility203. Such an issue is beyond the jurisdiction of this Tribunal and could only been settled by means of negotiations or other means of peaceful settlement of dispute. If the EU or any of its Member States have violated the laws of State responsibility because it is a party to treaties that contain incompatible commitments, that is a matter for it to resolve.

B. GENERAL FRAMEWORK: THE OBJECT AND PURPOSE OF THE ECT, THE STATE'S REGULATORY POWER AND THE APPLICABILITY OF A MARGIN OF APPRECIATION

a. The Parties' Positions

i. The Claimants' Position

214.
The Claimants assert that, as required by the Vienna Convention on the Law of Treaties ("VCLT"), the Tribunal must interpret the ECT in good faith and in accordance with the ordinary meaning given to its terms.205
215.
In particular, the Respondent must act in accordance with the ECT's object and purpose, as presented in its Article 2 which states, in relevant part, that the Treaty:

"establishes a legal framework in order to promote long-term co-operation in the energy field, based on complementarities and mutual benefits, in accordance with the objectives and principles of the [European Energy] Charter".

216.
The Claimants contend that the fundamental objective of the ECT is to facilitate transactions and investments in the energy sector by reducing political and regulatory risks.206 The Claimants further identify the following "sub-objectives" which namely provide for: (a) operation of energy investments within a stable and equitable legal framework; (b) provision at national level for a transparent legal framework; and (c) minimisation of non-commercial risks for energy investments in so far as possible.207
217.
Energy investments differ from other types of investments, in the sense that they "tend to involve high-value and long-term financial commitments in projects that cannot adapt their cost and financing structures to short-term changes in investment conditions and that are, therefore, particularly sensitive to legal and political changes and other associated risks."208 Accordingly, the Claimants continue, in order to address the specific sectoral needs and achieve its goals, the ECT offers a "higher" or more robust level of protection than most bilateral treaties, and thus one "cannot equate the provisions of the ECT with just any other investment treaty or investment chapter in a free trade agreement."209
218.
In response to Spain's argument that the ECT is not an insurance policy, the Claimants allege that "[i]t is precisely because the energy sector is strategic [...] and highly regulated, precisely because the contracting parties knew that states may want to interfere or use their regulatory powers, that the ECT had to provide very extensive protections indeed."210
219.
The ECT provides additional legal protections - at the international level - which would reduce, to the greatest extent possible, "non-commercial risks" of political and regulatory natures, thereby ensuring that legal frameworks remain stable for investors.211 This interpretation, they allege, is supported by multilateral organisations and fora, as well as by the Energy Charter Secretariat's Reader's Guide to the ECT.212
220.
The Claimants' further contend that the particular needs of the energy sector also justify that the latitude of regulatory action accorded to the States under the ECT is extremely limited, and much narrower than under BITs. This is reflected, they contend, in the very few express exceptions to the application of the treaty, in general, and to the substantive investment protections, in particular, that the text of the ECT itself recognizes.213
221.
On the question of the State's right to regulate, the Claimants submit the following:

"The 'right' to regulate refers to the extent to which a state can take decisions (including passing laws) without incurring international liability and the obligation to pay damages. A state does not renounce its right to regulate by becoming a Contracting Party to ECT. Rather, a state is free to regulate, even in violation of its international obligations, but it must pay any affected investors compensation for those violations. The question for the Tribunal, therefore, is whether the ECT contains any exceptions which allow Spain to avoid liability (and the obligation to pay compensation for adverse regulatory actions)."214

222.
The Claimants further contend that the ECT contains no exceptions applicable to this case since (a) Article 10 of the ECT, unlike Article 13 (Expropriation) does not provide for the so-called police powers defence and (b) the Contracting Parties to the ECT deliberately restricted their ability to regulate in the public interest without incurring liability. On this latter question, the Claimants points to Article 24(2)(b)(i) where it is specified that measures "necessary to protect human, animal, or plant life or health" will nevertheless incur an obligation to pay compensation, when those changes violate inter-alia Article 10 of the ECT.215 In particular, it is the Claimants' position that "the contracting parties to the ECT decided that investor protections would trump the need to protect human, animal or plant life or health."216
223.
Thus, the Claimants conclude that the Contracting States to the ECT "deliberately chose to restrict significantly the regulatory space preserved for signatories." and carefully circumscribed their right to regulate, save for six express exceptions to the application of the Treaty found in Article 24 of the ECT.217
224.
With regard to the applicability of the "margin of appreciation" the Claimants posit that:

"The MOA [Margin of Appreciation] relates to the appropriate standard of deference to be given, or the level of scrutiny to be applied, to a state's decisions. It is a concept that has been developed primarily in the context of applying the protections found in the European Convention on Human Rights. It may be relevant when a tribunal or court is scrutinising a decision over which the state has particular technical or constitutional competence. The MOA comprises a spectrum, with high deference (low scrutiny) at one end, and low deference (high scrutiny) at the other end. The MOA is not a legal standard, but an analytical tool that can be adapted to the particular circumstances."218

225.
The Claimants further contend that "the ECT does not expressly provide for a [Margin of Appreciation] analysis and neither party has suggested that it falls within an applicable rule of international law." On this basis, they conclude that "applying the [Margin of Appreciation] as an additional standard of review is neither 'necessary nor appropriate'".219
226.
Finally, referring to a question posed by one of the Members of the Tribunal, the Claimants note that Spain not only failed to raise a necessity defence, but they also failed to prove that the disputed measures responded to a "pressing social need" or that "Spain amended its laws and regulation to serve 'basic governance requirements for the public interest'". In addition, the Claimants contend that even assuming arguendo that the Tariff Deficit could be considered a "pressing social need", this is not sufficient to avoid liability.220

ii. The Respondent's Position

227.
The Respondent agrees with the Claimants that in order to interpret the substantive protections of the ECT, the Tribunal must rely on Article 31 of the VCLT and thus analyse the ECT in accordance with the common meaning of its terms in their context, and in light of the objective and aim of the Treaty.221
228.
According to the Respondent, the context refers to the moment the ECT was negotiated and signed, and its aim was and remains to liberalize and promote a free energy market between Western countries and the countries of the so-called "Eastern bloc" after the fall of the Berlin Wall, based on the principle of non-discrimination and market-oriented price formation.222 Consequently, the Respondent contends, "the principal objective of the ECT regarding investor protection is to attain the implementation of a free market to be able to perform energy activities without discrimination on the grounds of the investor's nationality."223 The Respondent rejects the Claimants' characterization of the ECT, as a treaty seeking to mainly protect investments. Only 7 of 50 articles are devoted to investment, and the protection of investments is simply a means to achieve the overall goal of an efficient energy market throughout Europe, based on market rules and non-discrimination.224
229.
According to the Respondent:

"The reluctance of states to limit their regulatory power in a sector as strategically important as energy leads the signatories of the ECT to differentiate between two moments: 1) the so-called 'making-investment process' (paragraphs (2) and (3) of article 10 of the ECT), in which the conditions for guaranteeing the objective of national treatment and most-favoured nation treatment were reserved for the signing of a 'supplementary treaty', that has still not been signed and 2) the moment after the realization of the investment, in which the guarantee of national treatment and the most-favoured nation clause apply to the foreign investor, albeit with certain limitations."225

230.
The Respondent thus argues that once the investment is made, the best protection granted by the ECT to the investor and to the foreign investment is "national treatment" since the Treaty's ambition, as reflected in Article 2 of the Treaty, is to remove barriers to non-discrimination.226 This is not to say however, that the Respondent is alleging that the Fair and Equitable Treatment ("FET") clause only protects investors against non-discrimination. It only alleges that this is one of the ECT's primary objectives, together with favouring market-led pricing.227
231.
Moreover, for the Respondent, considering the context also entails a consideration of the subject matter. In this case, the subject matter of the ECT is investments in the energy sector, which is a highly strategic and well-regulated sector. As such, it would be unreasonable to consider that, by signing the ECT, the Contracting Parties accepted to provide investors with a kind of "insurance policy" that would prevent them from taking regulatory reforms in a strategic sector, and that would provide international investors better protection than national investors.228 On this question, they reject the Claimants' allegations that the ECT offers a higher level of protection in comparison for example of BITs because of the nature of the investments being protected.229
232.
In addition, the Respondent states that the guarantee of national treatment to investments reflected in Article 10(7) of the ECT is subject to a significant exception, embodied in ECT Article 10(8) of the Treaty, in the case of subsidies or public aid. This exception reads as follows:

"The modalities of application of paragraph (7) in relation to programmes under which a Contracting Party provides grants or other financial assistance or enters into contracts, for energy technology research and development, shall be reserved for the supplementary treaty referred to in paragraph (4)."230

233.
According to the Respondent, this exception applies to the case since the Claimants claim the payment of subsidies or State aid for the production of electricity. Since the supplementary treaty referred to in the paragraph has not been signed yet, the Respondent concludes that there is still no obligation by the signatory States of the ECT to grant the investor "national treatment" for programs related to grants or financial assistance from the host State to the investor.231
234.
The Respondent further contends that the "ECT does not set out any limits on the regulatory power of the States other than the minimum standards of international law, with an objective of non-discrimination. And it is even reiterated that such treatment does not prevail in matters of subsidies or public aid."232 Accordingly, while the ECT establishes limits on the regulatory power to achieve the aforementioned level of protection for investments and for investors, it does not annul or even limit its regulatory authority.233
235.
To the contrary, the Respondent contends, the State maintains its power to amend the relevant regulatory framework and exercise its power of macroeconomic control for reasons of public interest. This has been specifically recognized in the Guide to the Energy Charter Treaty, which is part of the official version of the ECT in Spain.234
236.
The Respondent also asserts that the State retains "a certain margin of discretion" to modify both the remuneration system for renewables and the amount of the subsidy. This has been confirmed by judgments of the Supreme Court of Spain handed down between 2005 and 2009, on record in these proceedings.235

b. The Tribunal's Analysis

237.
The Tribunal takes note of the Parties' agreement on the applicability of the "General Rule of Interpretation" embodied in Article 31 VCLT. It will apply this "general rule" in the present Decision when appropriate.
238.
The "Purpose of the Treaty" is exposed in Article 2 which refers to "the objectives and principles of the [European Energy Charter adopted in the Concluding Document of The Hague Conference on the European Energy Charter signed at The Hague on 17 December 1991]". The object and purpose of the ECT must therefore be assessed in light of this instrument which is part of its context since it was made by the Parties in connection with the conclusion of the Treaty and accepted by them as an instrument related to the treaty.236 The objectives of the Charter are expressed in Title 1 which articulates the following principles:

"Within the framework of State sovereignty and sovereign rights over energy resources and in a spirit of political and economic co-operation, [the signatories] undertake to promote the development of an efficient energy market throughout Europe, and a better functioning global market, in both cases based on the principle of non-discrimination and on market-oriented price formation, taking due account of environmental concerns. They are determined to create a climate favourable to the operation of enterprises and to the flow of investments and technologies by implementing market principles in the field of energy."

240.
Although the Tribunal recognizes energy investments are special as a matter of fact, in that they have commonalities and differences with other investments and in that there are economic, commercial, infrastructural, financial, market and other particularities that distinguish energy investments from other investments, the Tribunal is of the view that these peculiarities are taken into consideration and reflected in the relevant treaties in so far as is deemed appropriate by the negotiators. In the present case, the Tribunal must interpret the ECT by taking stock of the particular rules the Parties have deemed necessary to include into the Treaty in view of the specificity of the energy market.
241.

This does not mean, however, that the ECT regulates fully and integrally all matters which can be relevant in the present case. As recalled above,237 in conformity with Article 26(6) ECT and Article 42(1) of the ICSID Convention, in case the Treaty is mute, the Tribunal must decide the issues in dispute in accordance with other applicable rules and principles of international law as may be applicable. Hence, it is indeed not because the ECT does not expressly provide for the States' right to regulate, or because it does not formally recognize a margin of appreciation in their favour, that it must, nor can, be interpreted as excluding them.

245.
The Blusun tribunal gave a clear and complete assessment of the issue:

"[T]ribunals have so far declined to sanctify laws as promises. For example, [...] the tribunal in Charanne was clear:

under international law... in the absence of a specific commitment toward stability, an investor cannot have a legitimate expectation that a regulatory framework such as that at issue in this arbitration is to not be modified at any time to adapt to the needs of the market and to the public interest."240

The El Paso tribunal made a similar distinction, as follows:

"Under a FET clause, a foreign investor can expect that the rules will not be changed without justification of an economic, social or other nature. Conversely, it is unthinkable that a State could make a general commitment to all foreign investors never to change its legislation whatever the circumstances, and it would be unreasonable for an investor to rely on such a freeze."241

246.
The Tribunal will rely on these very general principles inasmuch as necessary in deciding on the various questions in dispute between the Parties.
247.
However, before entering into the core legal and factual issues raised in the present case, a last preliminary point must be dealt with.
248.
Article 10(7) ECT provides that:

"Each Contracting Party shall accord to Investments in its Area of Investors of other Contracting Parties, and their related activities including management, maintenance, use, enjoyment or disposal, treatment no less favourable than that which it accords to Investments of its own Investors or of the Investors of any other Contracting Party or any third state and their related activities including management, maintenance, use, enjoyment or disposal, whichever is the most favourable."

However, with regard to "programmes under which a Contracting Party provides grants or other financial assistance", Article 10(8) reserves the modalities of application of this special treatment for the supplementary treaty to be concluded between the Parties in accordance with paragraph 4 of Article 10.

249.
In the view of the Tribunal, there can be no doubt that the present case bears, at least in part, upon the payment of subsidies or State aid. Therefore, in the view of the Tribunal, Article 10(8) ECT applies in principle - or, more exactly, it would apply, had the "supplementary treaty" envisaged in paragraph 4 of Article 10 been concluded. But this is not the case. The Respondent draws from the non-conclusion of the "supplementary treaty" the radical conclusion that "there is still no obligation by the signatory States of the ECT to grant the foreign investor the 'national treatment' in the matter of programmes" concerned by such payments.242 The Tribunal disagrees: absent modalities expressly regulated by a treaty, general international law applies.

C. LEGAL STANDARDS OF PROTECTION (THE FET AND THE UMBRELLA CLAUSE)

250.
It is the Claimants' position that, by taking various wrongful measures, the Respondent has caused substantial losses to their investments in Spain in violation of Article 10(1) of the ECT regarding FET. In particular, the Claimants allege that by enacting Law 15/2012, RDL 2/2013, RDL 9/2013, Law 24/ 2013, RD 413/2014 and the June 2014 Order, the Respondent has fundamentally altered the applicable legal and regulatory regime encompassed in RD 661/2007, upon which the Claimants relied on when investing in the Spanish RE sector.243
251.
According to the Respondent, the Kingdom of Spain has always fulfilled its obligations and has not violated the standard of FET under the ECT. It is the Respondent's view that the new regulatory economic framework has been adjusted in compliance with Spanish law. Moreover, the new legal and economic frameworks have been enacted in a predictable, reasonable and proportionate manner in accordance with Spanish law in order to serve the public interest and through the use of the State's regulatory power.244 It also states that the Claimants' full restitution claim fails since the new measures respect the principle of reasonable return245 of renewable energy plants. The primary objectives of the measures are the sustainability and balance of the Spanish Electricity System, to the extent that they guarantee no over-remuneration of investors in the form of State subsidies, after the drop of electricity demand in 2010. Finally, the Respondent highlights that it never committed to freeze a particular remuneration model in the favour of the Claimants.246

(a) The Legal Standard

1. Scope of the FET

a. The Parties' positions

i. The Claimants' Position

252.
According to the Claimants, the FET standard is an autonomous and independent standard. In particular, they consider that it is "additional" to the minimum standard of protection to be found under customary international law. They consider this interpretation to be consistent with the wording of Article 10 of the ECT, as well as with the ECT travaux préparatoires. In support of this latter statement, they note that an earlier draft of the ECT stated that FET shall be "in accordance with the principles of international law and the relevant international obligations" but the italicised words were removed in the final version.247
253.
This becomes evident, so the Claimants contend, by applying the maxims of treaty interpretation contained in Articles 31 and 32 of the VCLT. If we look at the ordinary meaning of "fair" this is defined as "just, unbiased, equitable, impartial, legitimate," while "equity" is defined as "fairness; impartiality; even-handed dealing".248 With regard to the context of the provision, the FET standard, when compared to other provisions, is an absolute standard that provides a fixed reference point regardless of the treatment others receive. The Claimants assert, that therefore "the FET standard in the ECT is violated even if the Claimants have received the same treatment as companies of Spanish nationality or from third-party States."249 They rely for this proposition on the interpretations put forward by the tribunals in Tecmed v. Mexico, Saluka v. Czech Republic, Azurix v. Argentina and Kardassopoulos v. Georgia.250
254.
The Claimants further submit that even if, arguendo, FET is equated to the minimum standard of treatment, Spain has still breached the FET, as the minimum standard has been said to require a "reasonably well-organised modern state" committed to "good governance."251 According to the Claimants, the disputed measures fail to satisfy the levels of good governance to be expected of a reasonably well-organised modern State because the disputed measures were (a) unannounced, abrupt, retroactive, unprecedented in nature; (b) contrary to EU and international regulatory practice and good governance principles; and (c) were not the least harmful measures available to Spain.252

ii. The Respondent's Position

255.
The Respondent rejects the Claimants' assertion that the ECT's FET standard goes beyond the minimum standard of treatment under customary international law.253
256.
The Respondent further explains that since the main objective of the ECT is to guarantee non-discrimination of foreign investors, if a State's national treatment does not respect the minimum standard of treatment, then it is at this point that the protections of the Treaty pursuant to international law, kick-in.254
257.
The Respondent further rejects the Claimants' contention that the ECT guarantees a higher level of protection and that the ECT contains an autonomous FET standard.255

b. The Tribunal's Analysis

258.
The Parties have discussed at length the relationship between the FET, the minimum standard of protection and national treatment. Interesting as it may be, this discussion remains rather academic. Concretely, the Tribunal's position must be based primarily on Article 10 of the ECT. This provision guarantees FET to foreign investors, with the precision that this treatment will not be "less favourable than that required by international law" (an expression which can be assimilated to imposing the minimum standard of protection) (paragraph 1) together with national treatment (paragraph 3). In other words, the minimum standard as applied traditionally in international law is included in the FET which adds to it in favour of the investor.
259.
Therefore, the Tribunal considers that the removal of the precision that the FET shall be "in accordance with the principles of international law and the relevant international obligations" from the final version256 has no special significance: in any case: (1) the wording of the Treaty prevails on general principles and (2) the ECT being a treaty is anchored into international law and must be interpreted in accordance with that law.
262.
Just because an investor may have an expectation of immutability of the conditions of an investment does not necessarily mean that such an expectation is objectively legitimate in any given circumstance. In order to appreciate the legitimacy (or illegitimacy) of the Claimants' expectations in the present case, it must be kept in mind that it is generally recognized that States are in charge of the general interest and, as such, enjoy a margin of appreciation in the field of economic regulations. As a result, the threshold of proof as to the legitimacy of any expectation is high and only measures taken in clear violation of the FET will be declared unlawful and entail the responsibility of the State.
263.
To summarize, the Tribunal considers that:

- The FET principle includes, but goes beyond, the traditional "minimum standard" as conceived in the Neer Case ;257

- It also includes the protection of the legitimate expectations of the investor at the time of the investment;

- An investor cannot legitimately expect that the conditions of its investment will necessarily be maintained immutable;

- As will be seen below,258 the main criterion to be applied for the interpretation of the FET standard is that of reasonableness.

2. The Umbrella Clause

264.
Article 10(1) of the ECT provides that:

"Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party."

265.
The Parties disagree on the purpose and scope of protection of the umbrella clause as encompassed in Article 10(1) of the ECT.259

a. The Parties' Positions

266.
According to the Claimants, the purpose of an umbrella clause is to bring the host State's compliance with commitments assumed vis-a-vis investors under the protective "umbrella" of the ECT.
267.
While the Claimants argue that the umbrella clause covers not only contractual obligations but also obligations that the host State assumes through unilateral acts such as legislative or regulatory undertakings as well as any Spanish laws or regulations relating to the Claimants' investments,260 the Respondent asserts that the umbrella clause covers obligations arising out of a contractual basis only and does not extend to other forms of commitments between the investors and the host State, except investment authorizations, licenses and permits. The Respondent further underlines that there are no specific commitments between the Kingdom of Spain and the Claimants or their investments.261
268.
The Claimants disagree with the interpretation of arbitral cases and authorities cited by the Respondent regarding the fundamental meaning of the umbrella clause and consider them as misinterpretations and misleading analyses.262 According to the Claimants, even if the umbrella clause were limited in its scope to encompass only contractual commitments, which they reject, the Claimants did obtain a bilateral administrative licence through the RAIPRE registrations issued to each plant by Spain.263 The Claimants contend that, through the RAIPRE, Spain entered into a specific and binding bilateral contract vis-a-vis the Claimants and has clear obligations with regard to each of their investments.264
269.
Conversely, the Respondent relies on a more restricted interpretation of the umbrella clause of Article 10(1) of the ECT in order to deny the existence of its violation vis-a-vis the Claimants' investment. In its submission, the Respondent invokes three different arguments to deny that it has breached the umbrella clause of the ECT.265 First, the interpretation made by the Claimants contradicts the literal sense of Article 10(1) of the ECT and the interpretation thereof by doctrine and arbitral case-law.266 Second, the Respondent is not bound "vis-a-vis" the Claimants or their investment through unilateral acts. And finally, the obligations the Claimants claim to be protected by the umbrella clause do not exist under Spanish law.

i. The Claimants' Position

270.
The Claimants submit that by enacting RD 661/2007 (and in particular Article 44(3)), RD 1614/2010 (in particular Articles 4 and 5(3)), issuing the RAIPRE certificates to each and all of the Project Companies and rendering the March 2011 Resolution addressed to Arenales Solar, the Respondent entered into binding obligations towards Claimants' investments, which it must now honour.267
271.
In particular, pursuant to Article 17 of RD 661/2007, by signing, stamping and issuing the RAIPRE, the Respondent was qualifying the Andasol and Arenales Plants, and the Dédalo Wind Parks installations, for the Special Regime and confirming thereby that the Claimants had the right to those tariffs. The Claimants stress that the RAIPRE "is a favourable administrative act that contains an obligation on the [Kingdom of Spain] that is more binding than an obligation contained in a bilateral contract between an investor and the State". These are, so the Claimants contend, clear obligations with regard to each of its investments.268
272.
Moreover, the Claimants highlight that the obligations of the Respondent towards the Project Companies can be traced back to RD 661/2007, which contained strong stabilisation commitments.269 While the Claimants concede that RD 661/2007 contemplated adjustments to the FIT every four years, the measure had nevertheless expressly provided that such changes would not affect duly registered existing facilities.270 The Claimants further note that, in the March 2011 Resolution, the Ministry reiterated its commitment to the Arenales Solar by recognizing that the RD 661/2007 regime would be applied for the operational lifetime of the plant.271
273.
While the Respondent argues that the March 2011 Resolution was a mere communication, the Claimants contend that it was a "favourable administrative act" binding on the government and subject to revocation under limited circumstances.272
274.
As a result, the Claimants assert that by disregarding the obligations it entered into through inter alia RD 661/2007 (and in particular Article 44(3)), the July 2010 Agreement, RD 1614/2010 (in particular Articles 4 and 5(3)), the RAIPRE certificates and the March 2011 Resolution addressed to Arenales Solar, the Respondent breached the Umbrella Clause.

ii. The Respondent's Position

275.
Citing various authorities and arbitral precedents to support its argument, the Respondent advances a more restrictive interpretation of the umbrella clause of the ECT. It considers that the umbrella clause covers merely contractual obligations or specific commitments undertaken by the State with the investor or investment, within the framework of a contract or similar bilateral instruments (administrative contract, concession or licence).273 This is confirmed by the cases quoted by the Claimants.274
276.
The Respondent denies that, in the present case, an obligation between the host State and the investor exists, since no direct contractual relationship exists between the Claimants and the Respondent via a contract, concession or licence. In addition, the Respondent considers that any alleged commitment (including the July 2010 Agreement, the RAIPRE registration or the March 2011 Resolution), should have been entered into with the Plants and not with the Claimants, as RREEF only has an indirect equity interest participation in the Plants.275 The Respondent's rebuttal of the Claimants' umbrella clause allegations are threefold.
277.
First, neither RD 661/2007 nor RD 1614/2010 created a "commitment" or "relationship" or "specific obligation" between the Respondent and the Claimants or with respect to any other foreign investors or investments. The Respondent relies for this proposition on the Charanne v. Spain and Isolux v. Spain awards.276 Moreover there was no obligation to freeze the RD 661/2007 economic regime, a fact that was confirmed in the Charanne Award and which was not altered by Articles 4 and 5 of RD 1614/2010.277
278.
Second, the July 2010 Agreement has no bearing on the interpretation of RD 1614/2010 and the Asociación Empresarial Eólica (the Spanish Wind Energy Association, AEE) and Protermosolar (CSP Association) did not consider RD 1614/2010 as providing for an immutable regime for existing installations. Moreover, the July 2010 Agreement was not breached with regard to either the Claimants or their investment.278
279.
Third, for the Respondent, the so-called obligations under Spanish law, as alleged by the Claimants, do not exist.279 The Respondent contends that the measures on which the Claimants rely are merely acts of information or communications; they cannot generate "petrification" of obligations over the remuneration regime.280 As a result, the Respondent concludes that since no obligations arise from domestic law they cannot be covered by international law.281
280.
In particular, they deny that the registry in RAIPRE could be considered a "license", reiterating that the RAIPRE is a mere administrative manifestation that does not generate commitments, as already declared by the Charanne v. Spain case.282 The Respondent emphasizes that all facilities, including those under the Ordinary and the Special Regime, are registered in the Administrative Registry and the RAIPRE is simply a section of that Administrative Register.283 RE installations have been registered under the RAIPRE's special section since RD 2818/1998 and this did not preclude subsequent decrees from being applicable to those installations; they have been subject to all regulatory changes since then.284
281.
As to the March 2011 Resolution, the Respondent contends that it is not an administrative act but a mere communication to the Arenales Plant, confirming the application of the regulatory regime in force in its entirety (not only to two regulations as the Claimants assert), at that point in time.285
282.
Neither the March 2011 Resolution nor the alleged statements from government employees could unilaterally generate the specific "obligations" or "commitments" referred to under the umbrella clause in Article 10(1). Thus, all the Claimants claim should be dismissed.

b. The Tribunal's Analysis

283.
Here again the Tribunal will not enter in the intellectually interesting but practically fruitless discussion concerning the definition and scope of an umbrella clause in the abstract. Two things are clear in the present case and result directly from the terms of the ECT itself:

- the Respondent has a duty to comply with Article 10(1) ECT;

- this duty relates to the "any obligations it has entered into with an Investor".

284.
On the one hand, the expression "any obligations" calls for a broad interpretation but, on the other hand, the phrase "it has entered into" seems to refer exclusively to bilateral relationships existing between the Respondent and the Claimants, to the exclusion of general rules; and the Spanish ("las obligaciones que haya contraído con los inversores") or French ("les obligations qu'elle a contractées vis-a-vis d'un investisseur") lead to the conclusion that the last sentence of Article 10(1) ECT only applies to contractual obligations. As noted in the award of 12 October 2005 in Noble Ventures, Inc. v. Romania, in respect to a very similar clause in Article II(c) of the Bilateral Treaty between the United States and Romania dated 28 May 1992:

"[C]onsidering the wording of Art. II (2)(c) which speaks of 'any obligation [a party] may have entered into with regard to investments', it is difficult not to regard this as a clear reference to investment contracts. In fact, one may ask what other obligations can the parties have had in mind as having been 'entered into' by a host State with regard to an investment. The employment of the notion 'entered into' indicates that specific commitments are referred to and not general commitments, for example by way of legislative acts."286

285.
In the present case, the Tribunal accepts the Respondent's view according to which the RAIPRE do not add anything to the contractual relations entered by the Spanish Government with each of them; as accepted by the Respondent itself, these certificates "only manifest the registry of the installations in an administrative register that does not generate specific commitments".287 As provided for in Article 14(1) of RD 661/2007, "the final registration of the facility in the Public Authority Register of production facilities under the special regime shall be a necessary requirement for the application of the economic regime regulated under this Royal Decree to such facility." However, this "requirement" does not constitute a commitment falling under the umbrella clause. It certainly implies that the investment is regulated by RD 661/2007 but not that the Respondent has entered into the obligations contained therein with the Claimants. Mutatis mutandis the same reasoning applies to RD 1614/2010.
286.
But this is not the end of the question. Even if the rules enunciated in RD 661/2007 and RD 1614/2010 are not covered by the umbrella clause under the last sentence of Article 10(1) ECT, they are essential components of the domestic legal environment of the investment and the Claimants could legitimately expect the State would observe and enforce them in conformity with general rules of international law .
287.
By way of conclusion on this point, the Tribunal is of the view that the umbrella clause contained in the last sentence of Article 10(1) ECT has no particular role to play in the present case but that the Respondent was expected nonetheless to observe and enforce domestic law as a part of the FET standard and basis for legitimate expectations.

(b) The Alleged Violations of the Claimants' Rights

1. Stability and Predictability

288.
Article 10(1) of the ECT, first sentence, provides in relevant part:

"Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area."

a. The Parties' Positions

i. The Claimants' Position

289.
The Claimants contend that, in addition to a State's obligation to provide a stable and predictable legal framework for investments, the first sentence of Article 10(1) of the ECT provides an independent and autonomous free-standing obligation to provide investments and investors stable conditions. In particular, the Claimants contend that there is an obligation to maintain a stable legal framework once the investment is made. This obligation sits independently of the FET standard.288
290.
The Claimants explain that their argument is based on the ordinary meaning of Article 10(1) while noting that no tribunal has determined before whether the stability commitment is freestanding.
291.
The Claimants contend that:

- The New Regime represented a complete overhaul of the regulatory regime that was in place at the time the Claimants made their investments.289

- The Respondent's allegation that the New Regime complies with the principle of reasonable return, in and of itself confirms that Spain has not respected the stability and predictability of the legal framework, representing a breach of Spain's obligations to provide transparent conditions, as the Claimants did not base their investments on the notion of reasonable return.290

- The New Regime was not only implemented abruptly, through a lengthy and opaque transition, but it was also applied retroactively. This means that the New Regime applies to existing installations for the remainder of their useful life. Even if the regime did not affect the results or activities resulting from the pre-existing situation, which it does, (i.e., the electricity already produced and sold on the market), the regulation would still be considered "retroactive" in accordance with the ordinary meaning of the word, and as provided under Spanish law.291

292.
The Claimants reject the interpretation of "retroactivity" advanced by the Respondent. In particular, they contend that the New Regime "applies to existing installations and removes the right for the Installations to receive the RD661/2007 FIT for their operational lifetime in breach of Spain's promises." They further contend that "[t]he New Regime is also retroactive because it seeks to claw-back past remuneration: it takes into account past earnings to calculate an investor's remuneration going-forward" and retroactively reduces the projectlevel return.292 Thus, the Claimants' conclude, the disputed measures affect the Claimants "acquired rights" given the existence of the claw-back under the New Regime, thereby violating its international law obligations.293 The Claimants further state that even if the New Regime did not affect the energy it had already sold, it affected the energy that was projected to be sold in the future and thus it affected the Claimants expectations as recognized by the Respondent in a report from the CNE.294

The Claimants' position is that the changes made to the original legal framework resulting in an on-going uncertainty constitute a breach of the Respondent's obligations under the ECT and must be assessed in light of Spain's stabilization guarantees under Article 44(3) of RD 661/2007 and Articles 4 and 5.3 of RD 1614/2010, as the decision to invest is in large part based on assessments of the state of the law and the overall business environment.295

293.
According to the Claimants' submissions, the Respondent not only made continuous changes to the legal framework on which they relied on when making the investments, but it also left them not knowing what regime they will be subject to.296 The uncertainty the Claimants experienced results from a shift from the stable regime they relied on to an ambiguous regime, which impacts have not been fully measured yet.297
294.
In particular, the Respondent wrongfully subjected the Claimants to a "'roller-coaster' of constant and drastic changes in the applicable legal and regulatory framework" by modifying the RD 661/2007 in the first place and then by applying the changes retroactively to the Claimants' investments in 2012 and 2013, ultimately wiping out the RD 661/2007 economic regime in its entirety in July 2013.298 This constitutes a breach of the FET standard.
295.
Finally, the Claimants distinguish their case from the Wirtgen case:

"in JSW Solar, Article 2(1) of the Germany-Czech Republic BIT merely obliges the contracting parties to 'accord investment fair and equitable treatment'. It does not contain the same provision as in the ECT expressly requiring the Contracting Parties to encourage and create 'stable' conditions for Investors"299

ii. The Respondent's Position

296.
The Respondent asserts that Article 10(1) does not contain a free-standing standard.300 Relying on the award in Plama v. Bulgaria, the Respondent submits that the stable and predictable conditions must be assessed within the FET standard of the ECT.301 The Respondent further considers Claimants arguments inapposite as they are based on seven awards that do not apply the ECT standard.302
297.
Moreover, the Respondent relies on the Isolux v. Spain award to support its conclusion that the Article 10(1) of the ECT does not contain an autonomous standard.303
298.
The Respondent alleges that the disputed measures were macroeconomic control measures adopted in compliance with international commitments and for legitimate reasons, including (a) preventing over-remuneration of investors consistent with the principle of a reasonable rate of return; (b) ensuring the sustainability of the SES; (c) preventing that consumers assume the burden of paying higher prices to compensate for economic imbalances.304
299.
Furthermore, the Respondent contends that the contested measures are not retroactive, since they do not affect acquired rights and only have effects towards the future. The Respondent alleges that "the contested measures are not retroactive (1) neither according to International arbitral Case Law, neither for the European Commission, (2) nor in accordance to Spanish Case Law, nor according to scientific doctrine, (3) nor according to the criteria the RE sector Associations nor for other investors, like Iberdrola, whose criterion is invoked by the Claimant[s]."305
300.
According to the Respondent, for a regulation to be retroactive under international law, it must affect acquired rights. It further contends that the Claimants have no acquired rights to a future remuneration306 because "under no circumstances do [the measures] require RE producers to return the subsidies previously received."307 Instead, the New Regime:

"allows taking into account the remuneration already received from the beginning of the operation of the facility, for the purpose of calculating the future subsidies to receive, apart from the incomes of the market, without therefore incurring retroactivity. With that it avoids the perception of overretribution that could (i) distort the energy market and (ii) constitute State Aids contrary to European Union Legislation." 308

301.
The Respondent's position is that the only certainty a diligent investor could have is that the Respondent would take necessary measures to ensure the sustainability of the SEE and avoid over-remuneration situations, while respecting the principle of a reasonable rate of return.309
302.
The Respondent further contends that the "reasonable rate of return" is a two-way mandate: the remuneration for the investor must be reasonable but the cost allocation that the said return represents for the consumer must also be reasonable, as set forth in the Preamble to RD 661/2007.
303.
In this regard, the Respondent explains that the reasonable rate of return "cannot be infinite as its aim is to guarantee a level playing field for renewable energy producers but it cannot place them in a more competitive position than non-subsidised producers." Therefore, the Government's discretional power was in fact limited by the 1997 Electricity Law. This is "a rule with the force of law that allowed the Government to adapt the remuneration to changing circumstances by means of hierarchically inferior measures that are easily amended: the regulations."310
304.
The Respondent further affirms that the disputed measures were adopted respecting the principles set forth in the 1997 Electricity Law, including the need to ensure sustainability and balance of the SES. Since the essential nature of the regulatory framework in which the Claimants invested has been maintained, the Respondent argues that it has not breached its obligation to provide "stable conditions" for the Claimants' investments.311
305.
In this regard, the Respondent points to the reform of 2013, which maintained "the subsidies and the priority of dispatch, by allowing the following investments in RE to be recovered, [for] 'standard installations' [based on]: (i) investment costs, (ii) operation costs and also, (iii) to be obtained according to the cost of money on capital markets."312
306.
Comparing the remuneration model established by the current regulation and the model in force when the Claimants made their investment, the Respondent concludes that the measures maintain the essential elements of the previous system and cover the investment costs of all the Claimants' investments, except for the Arenales plant, where the deviation in investment costs is due to the fact that the plant was "blatantly cost-inefficient."313
307.
The Respondent further concludes the following:

a. "It has maintained the concept of efficiency pursued by the SEE since 1997, which consists of providing electricity to Spanish consumers at the lowest possible cost.

b. It has maintained the subsidies to renewable energies as a cost of the SEE and, therefore, linked to its economic sustainability.

c. It has maintained and improved the priority of access and dispatch for REs [installations].

d. It has maintained the basic structure of the Spanish remuneration model, consisting of allowing RE plants to reach a Reasonable Return by combining two elements: market price (pool) and a subsidy.

e. It has maintained the characteristic attributes of the principle of Reasonable Return: its equilibrium and dynamism.

f. It has restored the equilibrium of the SEE by eliminating situations that generated unjustifiable remunerations, such as the indexation of all the elements that integrate the subsidy or CPI or the adjustments arising from the pool plus premium option.

g. It has maintained the dynamic character of Reasonable Return [which makes it possible to protect the value of the investment over time, consequently endowing it with greater stability]. Therefore, the reasonability of the return continues to be assessed in accordance with the price of money on the capital market (the price of the Spanish ten-year bond). [...]

h. It has maintained and improved the methodology historically followed by the SEE to establish the Reasonable Return, consisting of the determination of types of facilities and standards.

i. It continues to provide RE plants with Reasonable Return. The return provided by the Spanish remuneration model is better than the discount rate (opportunity cost) of the sector and, specifically, better than the discount rate (opportunity cost) of the Claimant. Consequently, the return that continues to be provided by the Spanish system is reasonable."314

308.
The Respondent then examines, and rejects, the Claimants' allegations regarding the purported retroactivity of the measures.315 In this sense, the Respondent distinguishes between the immediate application of a regulation and its retroactive application affecting acquired rights. The Respondent submits that for a regulation to be retroactive it must affect acquired rights. This differs from regulations that apply to future events "in relation to legal situations under way" but that do not affect rights already acquired, as any remuneration previously received is intangible and not susceptible to any claim.
309.
To advance its interpretation of "retroactivity", the Respondent relies on the cases Nations Energy v. Panama, Charanne v. Spain and Isolux v. Spain, as well as decisions from the Spanish Supreme Court.316 The Respondent further refers to rulings of the Spanish Supreme Court handed in 2015 and 2016 declaring that the measures adopted on the basis of RD Law 9/2013 are not retroactive.317
310.
In further support of this submission, the Respondent points to decisions of the Spanish Supreme Court on the legality of RD 413/2014 and Order IET/1045/2014 which analysed the possible infringement of the ECT. The decision claims that the new legal regime retains the essential lines of the previous legal regime.318
311.
The Respondent asserts that the Claimants have never had an acquired right to a future remuneration by means of a fixed and unchanging FIT. In particular, the Respondent submits that it "had the discretional power, pursuant to [Law] 54/1997, to modify the economic regime of RE producers in order to adapt it to the changing economic and technical circumstances. Therefore, the RE producers could not have had an acquired right to the maintenance of the economic regime contained in a specific regulation."319 In addition, "[t]he inexistence of an acquired right to the maintenance of the economic regime under RD 661/2007 was already discussed by the Supreme Court prior to the time the Claimants made their investment, and all the operators in the SES knew this."320
312.
Thus, in the Respondent's view, no retroactive measures in relation to the framework of the RD 661/2007 have been adopted.321 Moreover, the Respondent contends that taking into consideration Claimants' investments past cash flows to determine the project's reasonable return does not render the New Regime retroactive. The Respondent explains that to determine a project's total return one must consider all the present and future cash flows throughout the entire regulatory lifespan of the assets. Thus, even if past cash flows must be taken into account, it is "only for the purposes of calculating all the cash flows accrued and, under no circumstances, to require that income earned in the past be returned or to necessarily reduce income for the future."322
313.
For that reason, the Respondent has not violated the duty of creating stable and predictable conditions.323

b. The Tribunal's Analysis

i. General considerations on the applicable law

315.
Stability is not an absolute concept; absent a clear stabilization clause, it does not equate with immutability. In this respect the Tribunal notes that the Claimants do not take such an extreme view.326 However, the obligation to create a stable environment certainly excludes any unpredictable radical transformation in the conditions of the investments. The question therefore is whether the obligation of stability thus defined has been violated by the Respondent to the detriment of the Claimants.327
317.
As the ICSID tribunal in Blusun aptly noted:

"362. A breach of an obligation to 'encourage and create stable, equitable, favourable and transparent conditions for Investors' including 'to accord at all times... fair and equitable treatment' could be breached by a single transformative act aimed at an investment, or by a program of more minor measures, or by a series of measures taken without plan or coordination but having the prohibited effect.

363. But the fair and equitable treatment standard which, by virtue of the second sentence [of Article 10(1) ECT], is at the core of the obligation of stability under the first sentence has a relatively high threshold. The El Paso tribunal spoke of 'a total alteration of the entire legal setup for foreign investments', and added that 'all the different elements and guarantees just mentioned can be analysed as a special commitment of Argentina that such a total alteration would not take place.'329 The tribunal in LG&E spoke of 'completely dismantling the very legal framework constructed to attract investors. '330 The emphasis is on the subversion of the legal regime."331

323.
In a case similar to the present, an arbitral tribunal stated:

"Claimants could not reasonably expect that there would be no change whatsoever in the RD 661/2007 regime over three or four decades. As with any regulated investment, some changes had to be expected over time.334 However, Article 10(1) of the ECT entitled them to expect that Spain would not drastically and abruptly revise the regime, on which their investment depended, in a way that destroyed its value. But this was the result of RDL 9/2013, Law 24/2013, RD 413/2014 and implementation of the new regime through Ministry implementing Order IET/1045/2014.335 As it was put in Parkerings : 'any businessman or investor knows that laws will evolve over time. What is prohibited however is for a State to act unfairly, unreasonably or inequitably in the exercise of its legislative power.'336."337

324.
In the opinion of this Tribunal, the question whether or not the Respondent exercised its legislative power unfairly, unreasonably or inequitably in the present case cannot be answered at this stage of the reasoning: the answer depends (i) on the scope and content of the legitimate expectations of the Claimants when they made their investments and (ii) on whether or not the changes can be held as being reasonable and proportionate.

ii. On the retroactivity of the challenged measures

2. The Claimants' alleged legitimate expectations

a. The Parties' Positions

i. The Claimants' Position

331.
Claimants contend that even if the ECT does not contain a stabilization clause, and Spain was permitted to make changes to its regime under the ECT, those changes must have been predictable and in line with investor's expectations.344
332.
Moreover, the Claimants clarify that they do not consider that the obligation to accord FET means that a host State must completely freeze its regulatory regime. Instead, they consider that, pursuant to its obligation to accord fair and equitable treatment, the State accepts certain limitations on its power to alter the regulatory framework applicable to investments. This includes, inter alia, not enacting measures that would be unfair, unreasonable, and inequitable, or that would undermine an investor's legitimate expectations.345 The Claimants rely on the findings by the tribunals in CMS v. Argentina, Occidental v. Ecuador, LG&E v. Argentina and PSEG v. Turkey, for the proposition that "one particularly important element of legitimate expectations is the protection from State action that threatens the stability of the legal and business framework upon which an investor reasonably relied on making its investment."346
333.
For the Claimants, that legal framework typically consists of legislation, treaties and assurances contained in decrees or licenses, even if there is no specific undertaking to individual investors.347 Accordingly, the Claimants submit that legitimate expectations may be based on general rules and host-State's laws can give rise to legitimate expectations, even absent a specific commitment.348
334.
In the Claimants' view, "Spain's responsibility for its violation of the FET standard arises regardless of its motives, and irrespective of any showing of bad faith" and conversely "a showing of good faith or legitimate cause on Spain's part does not excuse a violation of the FET standard."349
335.
Moreover, the Claimants submit that:

"[I]t is not disputed that a State can change its laws if it chooses to. The question is whether it was reasonable for RREEF to expect that Spain would not make severe and harmful changes to the FIT for existing investments in breach of the clear and repeated promises it made to RREEF. This is the notion of could versus would, which Spain has failed to address in this arbitration."350

336.
According to the Claimants, the analysis of legitimate expectations is a "fact specific enquiry," which comports determining the following questions: first, whether the State's conduct and representation gave rise to expectations; second, whether the expectations are legitimate and reasonable; third, the investor must show that it relied on the State's conduct and representations; and, fourth, its expectations were frustrated by the measures in dispute.
337.
First, with regard to their expectations, the Claimants allege that they were twofold and relate to: (a) the nature, amount and duration of the FIT offered under RD 661/2007 and RD 1614/2010; and (b) with respect to the stability of the RD 661/2007 economic regime.351
338.
Regarding the nature, amount and duration of the FIT, the Claimants expected to be subject to the FIT regime at the time they made their investments, since the installations complied with the registration requirements. For Arenales Solar, their expectations that the FIT would apply for the operational lifetime of the installation was even confirmed, so the Claimants contend, by a direct resolution from the Ministry.352 Accordingly, the Claimants allege to have expected that:353

- The Project Companies would have a choice between selling electricity at a Fixed Tariff or at the Premium;

- The FIT would apply to all of the electricity produced, without any limitations on production;

- The FIT would apply for the entire operational life of the Installations;

- The CSP Plants would be able to employ equipment that uses natural gas to produce electricity and the electricity using natural gas would be subject to the FIT, with the threshold limitations set out in RD 661/2007;

- The CSP Plants would have priority of dispatch; and

- The FIT would be subject to inflation adjustments in accordance with the CPI.

339.
On the stability of the regime, the Claimants expected that any changes to RD 661/2007 would only apply prospectively, i.e., to the new installations, while existing installations would remain unaffected. They further assert that RD 661/2007 guaranteed that any review of the Fixed Tariff would not apply to existing installations and that in the case of the Premium option, although the amount of the Premium could change, the minimum revenue would not change, as any modification of the cap and floor would not apply to existing installations.354
340.
Second, the Claimants consider that the legitimacy of their expectations is proved by international practice on FITs,355 as well as by Spain's own internal documentation,356 including:

■ Documents prepared by the Ministry and the CNE;357

■ Presentations prepared by InvestInSpain made to third party investors;358

■ RAIPRE certificates issued to the Installations and the March 2011 Arenales Resolution;359

■ In-person meetings between senior Spanish government officials and RREEF (and other RE investors) prior to RREEF making its investments. According to Claimants, at the time of the investments Spain's public officials provided specific assurances that the regime would remain unchanged for existing CSP and wind installations. In the course of several meetings, officials also stated that any future changes or adjustments "would not be to the detriment of current investors" and that the "protection given under Article 4 is unique in Spanish regulatory history" and only the CSP and wind technologies would benefit from this support.360

341.
Third, the Claimants further assert that without the FIT stability commitments and "express promises and representations" made by Spain's public officials, they would not have invested in the Spanish RE sector.361
342.
The Claimants reject Spain's argument that in accordance with Article 30.4 of the 1997 Electricity Law, referring to the concept of reasonable profitability, RREEF should have expected potential changes to the RD 661/2007, on the basis of a so-called concept of "dynamic" reasonable return on the investments. This would have required accepting that Spain could make changes if it determined that the installations profits were unreasonable as a result of changes in the cost of money on capital markets.362 Moreover, the Claimants clarify that they "don't deny that in setting tariffs in a feed-in-tariff regime, a regulator has in mind a standard installation and a reasonable return. What [they] do deny is that if the cost of money in the capital markets goes down, you can change the remuneration for the new projects."363
343.
The Claimants also submit that even if the concept of "reasonable profitability" is incorporated in the 1997 Electricity Law, this is not a concept directed to the investors but to the regulator when setting the specific tariffs. This stems from the preamble of RD 661/2007, which was the legal instrument setting forth the economic framework that guarantees a reasonable return.364
344.
To the contrary, the Claimants consider "legitimate" and "reasonable" their expectations on the application of the RD 661/2007 economic regime to the entirety of the production and the lifetime of the CSP plants and wind parks, for various reasons, including that: (a) the FIT regime had been offered under a "royal decree"; (b) the RD 661/2007 economic regime was part of a wider international and domestic policy to develop RE power generation infrastructure; (c) the expectations that such regime would apply for the remaining of the lifetime of the investment was further confirmed with Spain's own conduct in 2008, 2009, 2010 (with the July 2010 Agreement and RD 1614/2010) and 2011 (specific oral and written commitments to RREEF); (d) RREEF conducted a thorough due diligence process confirming the applicability of the economic regime under RD 661/2007, for the operational lifetime of the installations.365
345.
The Claimants contend that not only would the Claimants not invest in such circumstances but also that Spain has failed to prove that (a) Spain's "dynamic" reasonable return theory has evidential basis, (b) that RREEFs earnings were unreasonable, thus justifying a change in remuneration, or (c) that the cost of money on capital markets had changed between 2007 and 2013.366
346.
Fourth, it is also the Claimants' positions that their expectations were frustrated through a process extending over two years and comprising several measures, including:

- Spain's withdrawal of the FIT for electricity production using natural gas under Law 15/2012 frustrate the expectations that the Project Companies would be entitled to payment under the FIT for all the electricity produced.

- The 7% levy measure constitutes a disguised cut to the FIT and is in contradiction with the level of FIT the Project Companies would be entitled to under RD 661/2007.

- The elimination of the Premium under RDL 2/2013 frustrates the Claimants' expectations to have a choice between selling at Fixed Tariff or at the market prices plus Premium.

- The replacement by the CPI-linked updated mechanism for the FIT by a lower index, via RDL 2/2013 frustrates the expectations that the FIT would be updated during the life of the FIT as to reflect variations of the general CPI.367

347.
As a result, according to the Claimants, the Respondent has eviscerated the key characteristics of RD 661/2007 and the legal framework it had previously guaranteed, entitling Claimants to reparation for breach of its obligation to respect Claimants legitimate expectations and provide FET.368
348.
In opposition to the Respondent's submissions, the Claimants further allege that "exhaustive due diligence" is not necessary to make a claim of legitimate expectations and such a standard is not supported by the Charanne v. Spain or Isolux v. Spain awards. They further consider that, even if a particular standard of due diligence were part of the analysis, RREEF would satisfy a high standard of due diligence, which included face-to-face meetings with high level officials who confirmed that RREEFs due diligence was correct.369

ii. The Respondent's Position

349.
The Respondent relies on findings by the tribunals in Plama v. Bulgaria, AES v. Hungary, Electrabel v. Hungary and Charanne v. Spain to assert that "in the absence of a specific commitment to stability, an [i]nvestor cannot have an expectation that a regulatory framework such as the one discussed in this arbitration will not be amended."370
350.
The Respondent, however, agrees with the Claimants that to establish a FET violation, the investors must demonstrate that the expectations allegedly frustrated are legitimate, by showing that they are reasonable and objective as regards the existing regulatory framework.371 The Parties also agree that such legitimate expectations must be assessed at the time the investment is made, and thus limited to the period of February to August 2011.372
351.
According to the Respondent, the Arbitral Tribunal needs to analyse whether the foreign investors had knowledge about the general regulatory framework at the time of the investment, i.e., the regulatory framework per se, how it is applied and then how it affects its investment. These expectations are to be reasonable, justified and objective following the appropriate due diligence by the investors. In addition, the investors must be aware of potential risks with respect to their investments.373 The Respondent relies on the award of Charanne v. Spain to indicate that an investor's legitimate expectations must be assessed via an objective standard or analysis and that "[a] mere subjective belief that the investor could have had at the time of making the investment does not suffice".374
352.
Hence, for the Respondent, all investors that invest in Spain have an inexcusable obligation to know about the general regulatory framework which governs investments and includes the standards and case-law applicable to their investments.
353.
The Respondent considers that the Claimants' expectations, as expressed during the proceedings, consist of (a) the immutability of the economic rights and the remuneration regime established by RD 661/2007 for existing installations and (b) a right to receive future regulated tariffs over the whole useful life of the Plants.375
354.
With regard to the CSP sector, the Respondent posits that the expectations are based on the Claimants' incorrect and cursory analysis of the Spanish legal framework and the erroneous interpretation of the disputed measures. In support of this position, it relies on several reports issued by legal and financial advisors to the Claimants during the pre-investment phase, including the Poyry and SJB reports and the Herbert Smith Memorandum.376
355.
With regard to the Claimants' investment in the wind farm, the Respondent asserts that the Claimants failed to perform the necessary due diligence after significant changes to the regulatory framework took place in 2009 and 2010. The lack of due diligence means that the expectation alleged by the Claimants cannot be deemed real and objective or legitimate.377
356.
Accordingly, in the Respondent's view, the Claimants' lack of understanding of the legal framework setting forth the remuneration regime and the regulated tariffs, or the absence of a comprehensive analysis thereof, justify characterizing the Claimants' expectations as "unreasonable" and thus the Claimants' claim must be dismissed. The Respondent further clarifies that investors in a highly-regulated sector, such as the energy one, are expected to perform a "high level" of due diligence, including a diligent analysis of the applicable legal framework.378
357.
Even if, arguendo, the Claimants performed a proper due diligence, the Respondent insists that the disputed measures do not violate the objective legitimate expectations of the Claimants. Relying on prior cases, including Plama v. Bulgaria and Charanne v. Spain, the Respondent states that to have valid legitimate expectations, it would be necessary for it to have made specific commitments to the investors, guaranteeing an immutable regulation. Only such commitments could give rise to reasonable and justified expectations.379
358.
The Respondent insists that RD 661/2007 did not contain any promise or specific commitment to the Claimants and their investments, regarding the future immutability of the framework. The Respondent further asserts that neither RD 436/2004, RD Law 6/2009 nor RD 1614/2010 contain any guarantee or promise to "petrify" the remuneration conditions contained in RD 611/2007, or in the aforementioned regulations.380 According to the Respondent, no diligently informed investor could expect these regimes to be the petrified in their favour only because they fulfilled the regulatory requirements to obtain subsidies.381 Nor could they expect that these conditions would be maintained indefinitely or improved at any rate.382
359.
Further developing this statement, the Respondent considers that "it is impossible that any investor could see in article 44.3 of RD 661/2007 or in articles 4 and 5.3 of RD 1614/2010 a stabilising clause, when all of them were mere copies of article 40.3 of RD 436/2004, derogated years earlier by the same RD 661/2007." The Respondent further provides a chart comparing the provisions to prove its point.383
360.
In addition, the Respondent argues that in the absence of specific petrification commitments, the Claimants' alleged expectations must be considered unreasonable and unjustified. The Tribunal should further consider the regulatory framework that was actually in place, including the Supreme Court case-law, which further asserts that no investor could have had a legitimate expectation of freezing the regulatory framework.384 The Respondent also points to myriad statements by the relevant business associations, including APPA and AAE, for CSP and wind, indicating their understanding that the economic regime of the installations operating under the Special Regime, including the premiums, could be modified, and had actually suffered detrimental modifications for existing installations when RD 436/2004 was derogated by RD 661/2007.385 The Respondent further underlines that during the transitional period offered by RD 661/2007, where they could pick between the 436 and 661 regimes, none of the wind farms switched, demonstrating thereby that the economic regime of RD 436/2004 was more beneficial and profitable.
361.
The Respondent then asserts that there are eight essential principles governing the Spanish regulatory framework:386

1. The regulatory system is governed by the principle of regulatory hierarchy and this results in specific procedures, legally stipulated, to draft and implement regulations.

2. The regulatory framework is not limited to RD 661/2007 and RD 1614/2010 as claimed by the Claimants. It is configured on the basis of Law 54/1997 and any regulatory standards that have implemented it, including RD 2818/1998, RD 436/2004, RD 1578/2008, RD 1565/2010, RD 1614/2010 as interpreted by Case-law.

3. The fundamental principle that RE subsidies are a cost of the SES, subject to the principle of economic sustainability of the same.

4. Right to priority of access and dispatch of electricity production.

5. The remuneration of the RE consists of a subsidy which, once added to the market price, provides RE Plants with reasonable rate of return, in the context of its useful life, according to capital markets, which has a dynamic and balanced nature within the SES. This profitability was linked exclusively to the cost made in the construction and operation of the plants.

6. The subsidies were determined according to developments in demand and other basic economic data, expressed in the Renewable Energy Plans (including to investment and operational costs of standard installations), to ensure that these installations are able to reach a reasonable rate of return during their useful lives.

7. The regulatory changes to the remuneration regime of the RE have been motivated since 2004 (i) to correct situations of over-remuneration, or (ii) by the strong variation in the economic data that served as the basis for the estimation of subsidies.

8. Neither RD 661/2007, nor RD 1614/2010, which apparently created the expectations of the Claimants, contain any guarantee or promise to petrify their regime in favour of the Claimants.

362.
It is the Respondent's position that the above principles constitute objective legitimate expectations of a diligent investor. On the contrary, expectations that the Respondent would not adopt measures to resolve any deficit or economic imbalance that affected the sustainability of the SES, and rectify a situation of over-remuneration, are unreasonable.387 In addition, expectations that go against the understanding of renewable energy producers' associations in Spain,388 or contrary to consolidated interpretations of the law by the Spanish courts, cannot be considered reasonable either.389
363.
Additionally, the Respondent affirms that the expectations that the Claimants alleged to have had, based on purported statements of the Respondent's authorities are unreasonable. The disputed statements are (i) a presentation created by InvestInspain in November 2008; (ii) the alleged agreement of July 2010 and a related press release; (iii) various verbal and written statement of the Respondent; and (iv) the RAIPRE registrations.390
364.
First, it is the Respondent's position that the InvestInspain presentation is not relevant since the Claimants did not see it before their investment - as they recognized.391
365.
Second, the press release is said by the Respondent to merely report the consultation procedure prior to RD 1614/2010 which does not contain petrification commitment of RD 661/2007. It only demonstrated that the situation required changes to the economic regime established by RD 661/2007, that both the Government and system operators were aware of that requirement and that nothing could have prevented the adoption of new adjustment measures in 2013.392 Moreover, neither the Claimants' advisors, nor the RE sector associations, granted the alleged agreement a binding character.393
366.
Third, regarding a series of verbal and written statements which supposedly led to legitimate expectations, the Respondent states: (a) as to the emails with several investors summarizing meetings held at the Ministry of Industry, they expressly stated that "nothing is written in marble" in relation to the possibility of making regulatory changes, and constitute accounts of a meeting by a third party and not statements attributable to the Kingdom of Spain394; (b) regarding the alleged statements by the National Energy Commission (CNE), these are reflected in a power point presentation which can hardly be attributed to the CNE and cannot be said to have been reviewed by the Claimants;395 (c) as to the Andasol Plant Assessment Memorandum, it summarizes contacts between the Claimants and officials of the Spanish Government, at a time where the investment was already made and thus could hardly constitute the basis of expectations leading to invest,396 and (d) the March 2011 Resolution 2011, cannot be considered a commitment or even an administrative act, but instead a mere act informing Arenales Solar of the remunerations conditions "currently" in force.397
367.
In this respect, the R