|TABLE OF [SELECTED] ABBREVIATIONS/DEFINED TERMS|
|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings |
|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|
|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|
|IDEA||Instituto 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|
|RAIPRE||Registro 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|
■ 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.
"(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."
■ 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.
■ 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.
■ 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.
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;
Ms. Amalia Thaler de Klem
Mr. Mark Viscovi
Mr. Jesús Getan Bornn
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.
"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."
"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
"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
"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
- 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
"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
• 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.
"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."
"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 , 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."
"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."
• 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
"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
"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
"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."
"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."
"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."
"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."
"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. [...]."
"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. [...]."
"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."
"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
"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."
"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
"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
• 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.
• 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.
"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
"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
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
"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
(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.
- 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
"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
- 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.
"(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
"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'. 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
"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'. 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"
"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".
"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
"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
"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
"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
"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."
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.
"[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
"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.
- 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.
"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."
- 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".
"[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
"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."
- 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
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
"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
"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
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
"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
"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
"[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
- 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.
■ 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
- 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
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.