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TABLE OF SELECTED DEFINED TERMS
ABV Asset-Based Valuation
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings in force as of 10 April 2006
C-[#] Claimant's exhibit
CJEU Court of Justice of the European Union
CL-[#] Claimant's legal authority
Cl. Mem. or Claimant's Memorial Claimant's Statement of Claim dated 9 September 2016
Cl. PHB Claimant's Post-Hearing Brief dated 31 July 2018
Cl. Rej. or Claimant's Rejoinder Claimant's Rejoinder on Jurisdiction dated 31 January 2018
Cl. Reply or Claimant's Reply Claimant's Reply on the Merits and Counter-Memorial on Jurisdiction dated 10 July 2017
Cl. Sub. Costs Claimant's Submission on Costs dated 10 May 2019
Claimant or SolEs SolEs Badajoz GmbH
CNE or NEC National Energy Commission of Spain (Comisión Nacional de Energía)
DCF Discounted Cash Flow
EC or Commission European Commission
ECT Energy Charter Treaty
FET Fair and equitable treatment
First AMG Report Expert Report of Altran-MaC Group titled "Expert Report Relating to the Arbitration SolEs Badajoz GmbH vs. the Kingdom of Spain, ICSID Case ARB/15/38" dated 27 January 2017, prepared by Grant Greatrex, Jesús Fernández Salguero and Carlos Montojo González
First Brattle Regulatory Report Expert Report of The Brattle Group titled "Changes to the Regulation of Photovoltaic Installations in Spain Since November 2010" dated 9 September 2016, prepared by José Antonio García and Carlos Lapuerta
First Brattle Quantum Report Expert Report of The Brattle Group titled "Financial Damages to Investors" dated 9 September 2016, prepared by Carlos Lapuerta and Richard Caldwell
First Hopp Statement Witness Statement of Thomas Hopp dated 8 September 2016
First Montoya Statement Witness Statement of Carlos Montoya dated 4 January 2017
First Voigt Statement Witness Statement of Markus Voigt dated 8 September 2016
FIT Feed-in tariff
Hearing Hearing on jurisdiction, merits and quantum held in Paris, France, from 26 to 29 June 2018
ICSID Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States dated 18 March 1965
ICSID or the Centre International Centre for Settlement of Investment Disputes
IDAE Instituto para la Diversificación y Ahorro de la Energía
IRR Internal Rate of Return
LSE Act 54/1997 of 27 November 1997, on the Electricity Sector (Ley del Sector Eléctrico)
MINETUR Ministry of Industry, Trade and Tourism of Spain (Ministerio de Industria, Comercio y Turismo)
PV Photovoltaic
R-[#] Respondent's exhibit
RD Royal Decree
RDL Royal Decree Law
Resp. C-Mem. or Respondent's Counter-Memorial Respondent's Counter-Memorial on the Merits and Memorial on Jurisdiction dated 27 January 2017
Resp. PHB Respondent's Post-Hearing Brief dated 10 September 2018
Resp. Rej. or Respondent's Rejoinder Respondent's Rejoinder on the Merits and Reply on Jurisdiction dated 15 September 2017
Resp. Sub. Costs Respondent's Submission on Costs dated 9 May 2019
Respondent or Spain Kingdom of Spain
Rev. Tr. Day [#] (ENG), [page:line] ([Speaker(s)]) Transcript of the Hearing (as revised by the Parties on 25 July 2018)
Request for Arbitration or RfA Request for Arbitration dated 3 August 2015
RL-[#] Respondent's legal authority
Second AMG Report Expert Report of Altran-MaC Group titled "Rebuttal Expert Report Relating to the Arbitration SolEs Badajoz GmbH vs. the Kingdom of Spain, ICSID Case ARB/15/38" dated 15 September 2017, prepared by Grant Greatrex, Jesús Fernández Salguero and Carlos Montojo González
Second Brattle Regulatory Report Expert Report of The Brattle Group titled "Rebuttal Report: Changes to the Regulation of Photovoltaic Installations in Spain Since November 2010" dated 10 July 2017, prepared by José Antonio García and Carlos Lapuerta
Second Brattle Quantum Report Expert Report of The Brattle Group titled "Rebuttal Report: Financial Damages to Investors" dated 10 July 2017, prepared by Carlos Lapuerta and Richard Caldwell
Second Hopp Statement Second Witness Statement of Thomas Hopp dated 10 July 2017
Second Montoya Statement Second Witness Statement of Carlos Montoya dated 13 September 2017
Second Voigt Statement Second Witness Statement of Markus Voigt dated 10 July 2017

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 with respect to the Federal Republic of Germany and the Kingdom of Spain (the "ECT"), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the "ICSID Convention").
2.
The claimant is SolEs Badajoz GmbH ("SolEs" or "Claimant"), a company incorporated under the laws of the Federal Republic of Germany.
3.
The respondent is the Kingdom of Spain ("Spain" or "Respondent").
4.
Claimant and Respondent are collectively referred to as the "Parties." The Parties' representatives and their addresses are listed above on page (i).
5.
This dispute relates to various legislative and regulatory measures implemented by Spain that modified the regulatory and economic regime applicable to producers of electricity from photovoltaic ("PV") energy sources, which allegedly negatively impacted Claimant's investment in two PV plants located in the Autonomous Community of Extremadura.
6.
In particular, Claimant alleges that Spain has breached its obligation under (i) Article 10(1) of the ECT concerning fair and equitable treatment ("FET") and compliance with obligations entered into with investors or investments (umbrella clause); and (ii) Article 13 of the ECT by means of the indirect expropriation of its investment. Claimant submits that it is entitled to receive compensation for damage caused as a result of Respondent's violations of the ECT amounting to EUR 95.8 million.

II. PROCEDURAL HISTORY

7.
On 3 August 2015, ICSID received a request for arbitration from SolEs against Spain, accompanied by exhibits C-0001 to C-0041 and legal authorities CL-0001 to CL-0015 (the "Request for Arbitration").
8.
By letter of 14 August 2015, ICSID requested additional information from SolEs concerning its Request for Arbitration, which was provided on 21 August 2015, accompanied by legal authorities CL-0016 to CL-0023.
9.
On 24 August 2015, the Secretary-General of ICSID registered the Request for Arbitration, as supplemented on 21 August 2015, in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID's Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.
10.
The Parties agreed to constitute the Tribunal in accordance with Article 37(2)(a) of the ICSID Convention as follows: the Tribunal would consist of three arbitrators, one to be appointed by each Party, and the third, presiding arbitrator to be appointed by agreement of the Parties. Pursuant to the Parties' agreed method of constitution, failing an agreement of the Parties on the presiding arbitrator, she or he would be appointed by the Secretary-General of ICSID, without limitation to the ICSID Panel of Arbitrators.
11.
The Tribunal was composed (until 24 October 2017) of Judge Joan E. Donoghue, a national of the United States of America, President, appointed by the Secretary-General; Dr. Stanimir A. Alexandrov, a national of Bulgaria, appointed by Claimant; and Mrs. Anna Joubin-Bret, a national of France, appointed by Respondent.
12.
On 16 February 2016, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "Arbitration Rules"), 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. Mr. Gonzalo Flores, ICSID Team Leader/Legal Counsel, was designated to serve as Secretary of the Tribunal. On 8 August 2016, the Centre informed the Parties that Mrs. Ana Constanza Conover Blancas, ICSID Legal Counsel, would replace Mr. Flores as the Secretary of the Tribunal.
13.
On 8 April 2016, in accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties by teleconference.
14.
Following the first session, on 22 April 2016, the Tribunal issued Procedural Order No. 1 embodying the Parties' agreements on procedural matters and the Tribunal's decisions on the disputed issues. Procedural Order No. 1 established, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, that the procedural languages would be English and Spanish, and that the place of proceeding would be Paris, France. Procedural Order No. 1 also set out the procedural calendar applicable to this arbitration.
15.
On 18 April 2016, the European Commission (the "Commission" or "EC") filed with ICSID an application for leave to intervene as non-disputing party, pursuant to Arbitration Rule 37(2), concerning the question whether the Tribunal had jurisdiction to hear the case (the "First EC Application"). The Secretary of the Tribunal transmitted a copy of the application to the Tribunal and the Parties on the same date.
16.
On 6 May 2016, in response to an invitation to provide comments from the Tribunal, each Party filed observations on the First EC Application.
17.
On 23 May 2016, the Tribunal issued Procedural Order No. 2 "On the European Commission's Application for Leave to Intervene as a Non-Disputing Party of April 18, 2016". In its order, the Tribunal dismissed the First EC Application on the ground that it was premature. The Tribunal observed that the Commission sought to address the Tribunal's alleged lack of jurisdiction at a time in which Respondent had not yet indicated whether it intended to object to the Tribunal's jurisdiction. The Tribunal noted that it would be "unable to determine the existence or the extent of any disagreement between the Parties […] regarding the jurisdiction of the Centre or of this Tribunal" until it received Claimant's memorial and Respondent's counter-memorial.1 The Tribunal indicated that its decision was without prejudice to its consideration of any application to intervene by the Commission to be filed at a later stage, and it mentioned the date in which Respondent's counter-memorial (including preliminary objections, if any) was to be filed.
18.
On 9 September 2016, Claimant filed a Statement of Claim ("Claimant's Memorial"), with exhibits C-0042 to C-0181 and legal authorities CL-0024 to CL-0106. The pleading was also accompanied by two witness statements and two expert reports, as follows: (i) Witness Statement of Thomas Hopp dated 8 September 2016 ("First Hopp Statement"); (ii) Witness Statement of Markus Voigt dated 8 September 2016 ("First Voigt Statement"); (iii) Expert Report of The Brattle Group ("Brattle") titled "Changes to the Regulation of Photovoltaic Installations in Spain Since November 2010" dated 9 September 2016, prepared by José Antonio García and Carlos Lapuerta, with exhibits BRR-0001 to BRR-0127 ("First Brattle Regulatory Report"); and (iv) Expert Report of The Brattle Group titled "Financial Damages to Investors" dated 9 September 2016, prepared by Carlos Lapuerta and Richard Caldwell, with exhibits BQR-0001 to BQR-0086 ("First Brattle Quantum Report").
19.
On 18 January 2017, the Commission filed with ICSID a second application for leave to intervene as a non-disputing party (the "Second EC Application"). The Secretary of the Tribunal transmitted a copy of the application to the Tribunal and the Parties on the same date.
20.
On 27 January 2017, Respondent filed a Counter-Memorial on the Merits and Memorial on Jurisdiction ("Respondent's Counter-Memorial"), with exhibits R-0001 to R-0232 and legal authorities RL-0001 to RL-0076. The pleading was also accompanied by a witness statement and an expert report, as follows: (i) Witness Statement of Carlos Montoya dated 24 January 2017, with 60 supporting exhibits "W-", their numbering ranging from W-0005 to W-0453 ("First Montoya Statement"); and (ii) Expert Report of Altran-MaC Group ("AMG") titled "Expert Report Relating to the Arbitration SolEs Badajoz GmbH vs. the Kingdom of Spain, ICSID Case ARB/15/38" dated 27 January 2017, prepared by Grant Greatrex, Jesús Fernández Salguero and Carlos Montojo González, with supporting documents 1 to 40 ("First AMG Report").
21.
On 9 February 2017, in response to an invitation to provide comments from the Tribunal, each Party filed observations on the Second EC Application.
22.
On 21 February 2017, the Tribunal issued Procedural Order No. 3 "On the European Commission's Second Application for Leave to Intervene as a Non-Disputing Party of 18 January 2017". In its order, the Tribunal authorized the Commission to file a written non-disputing party submission no later than 31 March 2017, under certain procedural directions and subject to a condition. The Tribunal noted that while "[i]t would be premature for the Tribunal to decide whether any costs attributable to the participation of the Commission should be borne by the Commission […] the Commission shall include in its submission an undertaking that it will comply with any decision on costs to be issued by the Tribunal."2
23.
On 2 March 2017, the Commission filed with ICSID a "Request to Alter Procedural Order No. 3 of 21 February 2017 on the European Commission's Second Application for Leave to Intervene as a Non-Disputing Party of 18 January 2017", by which it requested the Tribunal to remove the condition to provide an undertaking to comply with any decision on costs to be issued by the Tribunal. The Secretary of the Tribunal transmitted a copy of the request to the Tribunal and the Parties on the same date.
24.
On 9 March 2017, in response to an invitation to provide comments from the Tribunal, each Party filed observations on the Commision's request to alter Procedural Order No. 3.
25.
By letter of 17 March 2017, the Tribunal declined the Commision's request to alter Procedural Order No. 3. The Tribunal indicated the following:

The Tribunal wishes to express that the procedural directions laid out in Procedural Order No. 3 (including paragraph 47(d), related to the allocation of costs) are not included in order to deter participation by the Commission. Rather, they are intended to ensure that the Commission's participation does not unduly burden or unfairly prejudice either Party, consistent with ICSID Arbitration Rule 37(2).

Having considered the Commission's Request and the views of the Parties, the Tribunal declines to alter Procedural Order No. 3. The Tribunal emphasizes that it has made no decision that any costs should be allocated to the Commission, as was stated in Procedural Order No. 3. In addition, the Tribunal offers the following clarifications in response to the Commission's Request, which may be of assistance to the Commission:

(a) Paragraph 47(d) does not contemplate any order that would allocate to the Commission costs other than those arising from its participation in this case;

(b) If the Commission intervenes as a Non-Disputing Party, the Tribunal will seek the views of the Commission (in addition to those of the Parties) in respect of the possible allocation of costs to the Commission, prior to any decision on the allocation of those costs.3

26.
On 21 March 2017, the Commission submitted a communication informing the Tribunal that it would not provide the requested undertaking on costs. The Commission did not file a non-disputing party submission in this proceeding.
27.
On 3 April 2017, following exchanges between the Parties, and in accordance with Procedural Order No. 1, the Parties submitted their document production applications in the form of Redfern Schedules for decision by the Tribunal.
28.
On 14 April 2017, the Tribunal issued Procedural Order No. 4 on document production.
29.
On 10 July 2017, Claimant filed a Statement of Reply on the Merits and Counter-Memorial on Jurisdiction ("Claimant's Reply"), with exhibits C-0182 to C-0187 and legal authorities CL-0107 to CL-0118. The pleading was also accompanied by two witness statements and two expert reports, as follows: (i) Second Witness Statement of Thomas Hopp dated 10 July 2017 ("Second Hopp Statement"); (ii) Second Witness Statement of Markus Voigt dated 10 July 2017 ("Second Voigt Statement"); Second Expert Report of The Brattle Group titled "Rebuttal Report: Changes to the Regulation of Photovoltaic Installations in Spain Since November 2010" dated 10 July 2017, prepared by José Antonio García and Carlos Lapuerta, with exhibits BRR-0128 to BRR-0196 ("Second Brattle Regulatory Report"); and (iv) Second Expert Report of The Brattle Group titled "Rebuttal Report: Financial Damages to Investors" dated 10 July 2017, prepared by Carlos Lapuerta and Richard Caldwell, with exhibits BQR-0087 to BQR-0120 ("Second Brattle Quantum Report").
30.
On 17 July 2017, Respondent requested disclosures from Dr. Alexandrov concerning his relationship with The Brattle Group ("Brattle"), Claimant's expert in this case. Dr. Alexandrov provided his observations concerning Respondent's request on 26 July 2017.
31.
On 4 August 2017, Respondent requested further disclosures from Dr. Alexandrov concerning his relationship with Brattle. Dr. Alexandrov provided his observations concerning Respondent's request on 18 August 2017.
32.
On 15 September 2017, Respondent filed its Rejoinder on the Merits and Reply on Jurisdiction ("Respondent's Rejoinder"), with exhibits R-0233 to R-0359 and legal authorities RL-0077 to RL-0095. The pleading was also accompanied by a witness statement and an expert report, as follows: (i) Second Witness Statement of Carlos Montoya dated 13 September 2017, with 50 supporting exhibits "W-", their numbering ranging from W-0005 to W-1029 ("Second Montoya Statement"); and (ii) Second Expert Report of Altran-MaC Group titled "Rebuttal Expert Report Relating to the Arbitration SolEs Badajoz GmbH vs. the Kingdom of Spain, ICSID Case ARB/15/38" dated 15 September 2017, prepared by Grant Greatrex, Jesús Fernández Salguero and Carlos Montojo González, with supporting documents 41 to 113 ("Second AMG Report").
33.
On 18 September 2017, Respondent proposed the disqualification of Dr. Alexandrov, in accordance with Article 57 of the ICSID Convention and ICSID Arbitration Rule 9 (the "Disqualification Proposal"). On the same date, the Centre informed the Parties that the proceeding was suspended until the Disqualification Proposal was decided, pursuant to Arbitration Rule 9(6). The Parties were also informed that the Disqualification Proposal would be decided by the other Members of the Tribunal, in accordance with Article 58 of the ICSID Convention and Arbitration Rule 9(4).
34.
By letter of 19 September 2017, the Parties were informed of the applicable schedule for the filing of written observations on the Disqualification Proposal.
35.
On 25 September 2017, Claimant submitted its observations on the Disqualification Proposal. On 28 September 2017, Dr. Alexandrov furnished his explanations, as envisaged by Arbitration Rule 9(3). On 6 October 2017, the Parties filed simultaneous observations.
36.
On 10 October 2017, the non-challenged arbitrators invited Dr. Alexandrov to provide additional explanations and fixed a date by which the Parties could submit an additional simultaneous round of observations on the Disqualification Proposal.
37.
On 12 October 2017, in response to the invitation of the non-challenged Members of the Tribunal, Dr. Alexandrov furnished additional explanations. On 17 October 2017, the Parties filed an additional simultaneous round of observations.
38.
On 18 October 2017, Claimant requested the non-challenged Members of the Tribunal to exclude from consideration certain pages from Spain's observations of 17 October 2017 and accompanying annexes. In the alternative, Claimant requested to be given a minimum of fifteen days to file a responsive submission. On 19 October 2017, Respondent requested the dismissal of Claimant's request of 18 October 2017.
39.
On 19 October 2017, the Parties were notified that Judge Joan E. Donoghue and Mrs. Anna Joubin-Bret were equally divided and that the Disqualification Proposal would be decided by the Chairman of the Administrative Council (the "Chairman"), in accordance with Article 58 of the ICSID Convention and Arbitration Rule 9(4).
40.
By communications of 20 October 2017, Claimant requested the Chairman to decide on its request of 18 October 2017, and Respondent maintained its objection to Claimant's request.
41.
On 24 October 2017, the Centre informed the Parties that Dr. Alexandrov had submitted his resignation as an arbitrator in this case.
42.
On that same date, Mrs. Joubin-Bret advised the Centre that she had decided to step down as arbitrator in this case, having accepted the position of Director of the International Trade Law Division in the Office of Legal Affairs of the United Nations and ex officio Secretary of the United Nations Commission on International Trade Law, and the Centre so informed the Parties.
43.
Also on 24 October 2017, each Party was invited to appoint a new arbitrator, in accordance with ICSID Arbitration Rule 11.
44.
On 10 November 2017, following appointment by Claimant, Mr. Jonathan Schiller, a national of the United States of America, accepted his appointment as arbitrator.
45.
On 15 November 2017, following the resignation of arbitrator Jonathan Schiller, the Centre notified the Parties of the vacancy on the Tribunal.
46.
On 28 November 2017, following appointment by Claimant, Sir David A R Williams KNZM, QC, a national of New Zealand, accepted his appointment as arbitrator.
47.
On 8 December 2017, following appointment by Respondent, Professor Giorgio Sacerdoti, a national of Italy, accepted his appointment as arbitrator.
48.
On 12 December 2017, the Tribunal was reconstituted. Its members are: Joan E. Donoghue, a national of the United States of America, appointed by the Secretary-General; David A R Williams, a national of New Zealand, appointed by Claimant; and Giorgio Sacerdoti, a national of Italy, appointed by Respondent. On the same date, the proceeding was resumed pursuant to Arbitration Rule 12.
49.
On 27 December 2018, the Parties were informed of the applicable procedural calendar following the reconstitution of the Tribunal.
50.
On 31 January 2018, Claimant filed a Statement of Rejoinder on Jurisdiction ("Claimant's Rejoinder"), accompanied by exhibit C-0188 and legal authorities CL-0119 to CL-0122.
51.
On 15 February 2018, following exchanges between the Tribunal and the Parties, the Parties were informed that the hearing on jurisdiction, merits and quantum (the "Hearing") was to be held in Paris, France, from 25 June to 29 June 2018.
52.
On 9 March 2018, following consultations with the Parties, the Tribunal informed the Parties that a pre-hearing organizational meeting was to be held by telephone conference on 30 May 2018. On the same date, and in preparation for the meeting, the Tribunal circulated a draft agenda to facilitate the Parties' discussions on the organization of the Hearing.
53.
On 12 April 2018, Claimant requested leave from the Tribunal to file five new factual exhibits. On 13 April 2018, the Tribunal invited Respondent to submit observations on Claimant's request. On 19 April 2018, Respondent submitted its observations. On 27 April 2018, the Tribunal invited Claimant to present additonal observations concerning its request and also invited Respondent to comment on Claimant's observations. On 2 May 2018, Claimant submitted additional observations, followed by Respondent's comments on 4 May 2018.
54.
On 9 May 2018, the Parties informed the Tribunal of the expert and factual witnesses that they wished to call for cross-examination at the Hearing.
55.
On 11 May 2018, the Tribunal granted Claimant's request of 12 April 2018. The Tribunal requested Claimant to submit the factual exhibits admitted into the record by 18 May 2018.
56.
On 18 May 2018, Claimant submitted factual exhibits C-0189 to C-0193.
57.
On 25 May 2018, Claimant requested leave from the Tribunal to introduce a new legal authority into the record, namely the award of 16 May 2018 rendered in Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1. On 1 June 2018, the Tribunal informed the Parties that, unless it received an objection from Respondent on or before 8 June 2018, Claimant's request of 25 May 2018 would be considered granted.
58.
On 30 May 2018, the Tribunal held a pre-hearing organizational meeting with the Parties by telephone conference.
59.
On 4 June 2018, Respondent informed the Tribunal that it did not object to Claimant's request of 25 May 2018, and requested leave from the Tribunal to introduce nine new documents into the record, including the award of 27 December 2016 rendered in Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3 ("Blusun v. Italy" or "Blusun"), the Final Award of 11 October 2017 rendered in Jürgen Wirtgen, Stefan Wirtgen, Gisela Wirtgen and JSW Solar (zwei) GmbH & Co. KG v. Czech Republic, PCA Case No. 2014-03 ("Wirtgen v. Czech Republic"), and the Judgment of the Court of Justice of the European Union ("CJEU") of 6 March 2018 in Case C-284/16, Slowakische Republik v. Achmea BV ("Achmea" or "Achmea v. Slovakia").
60.
On 5 June 2018, the Tribunal issued Procedural Order No. 5, on the organization of the Hearing. On the same date, the Tribunal invited Claimant to submit observations on Respondent's request of 4 June 2018.
61.
On 11 June 2018, Claimant submitted observations on Respondent's request of 4 June 2018.
62.
On 15 June 2018, the Tribunal granted in part Respondent's request of 4 June 2018.
63.
On 22 June 2018, pursuant to Procedural Order No. 5, Respondent submitted legal authorities RL-0096 through RL-0099, together with an updated consolidated list of legal authorities.
64.
On 23 June 2018, pursuant to Procedural Order No. 5, Claimant submitted legal authorities CL-0123 and CL-0124, together with an updated consolidated list of legal authorities.
65.
The Hearing was held in Paris, France, from 26 to 29 June 2018. The following persons were present throughout the Hearing:
Tribunal :
Judge Joan E. Donoghue President
Professor Giorgio Sacerdoti Arbitrator
Sir David A R Williams KNZM, QC Arbitrator
ICSID Secretariat :
Mrs. Ana Conover Secretary of the Tribunal
For Claimant :
Counsel
Mr. Charles Kaplan Orrick Herrington & Suttcliffe (Europe) LLP
Mr. Tunde Oyewole Orrick Herrington & Suttcliffe (Europe) LLP
Ms. Agnès Bizard Orrick Herrington & Suttcliffe (Europe) LLP
Ms. Lorna Maupilé Orrick Herrington & Suttcliffe (Europe) LLP
Ms. Federica Re Depaolini Orrick Herrington & Suttcliffe (Europe) LLP (intern)
Ms. Lucille Coulon Orrick Herrington & Suttcliffe (Europe) LLP (intern)
Ms. Marie Chereau Orrick Herrington & Suttcliffe (Europe) LLP (intern)
Ms. Mahalkita Guiberd Orrick Herrington & Suttcliffe (Europe) LLP (intern)
Mr. Fernando Bedoya Pérez-Llorca
Ms. Sara Martín Pérez-Llorca
Parties
Mr. Thomas Hopp Voigt & Collegen
Witness
Mr. Markus Voigt Voigt & Collegen
Experts
Mr. Carlos Lapuerta The Brattle Group
Mr. Richard Caldwell The Brattle Group
Ms. Claudia Cuchi The Brattle Group
Mr. Jose Antonio García The Brattle Group
Ms. Ying-Chin Chou The Brattle Group
For Respondent :
Counsel
Mr. Roberto Fernández Castilla Abogacía General de Estado
Mr. Antolín Fernández Antuña Abogacía General de Estado
Ms. Patricia Fröhlingsdorf Nicolás Abogacía General de Estado
Mr. Javier Torres Gella Abogacía General de Estado
Ms. María José Sánchez Ruiz Abogacía General de Estado
Mr. Alberto Torró Molés Abogacía General de Estado
Parties
Ms. Raquel Vázquez Meco IDAE

Witness
Mr. Carlos Montoya Rasero IDAE
Experts
Mr. Grant Greatrex Mr. Jesús Fernández Salguero Mr. Carlos Montojo González Mr. David Pérez López Mr. Antonio Sanchis Boscá ALTRAN-Mac Group ALTRAN-Mac Group ALTRAN-Mac Group ALTRAN-Mac Group ALTRAN-Mac Group
Court Reporters : Mr. Trevor McGowan Ms. Luciana Sosa Ms. Elizabeth Cicoria D. R. Esteno D. R. Esteno
Interpreters : Mr. Jesús Getan Bornn Ms. Amalia Thaler-de Klemm Ms. Anna-Sophie Chapman

66.
The following persons were examined during the Hearing:

On behalf of Claimant :
Mr. Thomas Hopp Mr. Markus Voigt Mr. José Antonio García Mr. Carlos Lapuerta Mr. Richard Caldwell Voigt & Collegen Voigt & Collegen The Brattle Group The Brattle Group The Brattle Group
On behalf of Respondent :
Mr. Carlos Montoya Mr. Grant Greatrex Mr. Jesús Fernández Salguero Mr. Carlos Montojo González IDAE ALTRAN-Mac Group ALTRAN-Mac Group ALTRAN-Mac Group

67.
On 29 June 2018, as agreed on the first day of the Hearing, Claimant submitted legal authority CL-0125, together with an updated consolidated list of legal authorities.
68.
On 2 July 2018, the Tribunal issued Procedural Order No. 6 concerning the filing of post-hearing briefs.
69.
On 4 July 2018, Claimant filed a request for the Tribunal to decide on the admissibility of a new document.
70.
On 9 July 2018, Respondent filed observations on Claimant's request of 4 July 2018.
71.
On 13 July 2018, the Tribunal issued Procedural Order No. 7 concerning the introduction of documents and legal authorities in the proceeding.
72.
On 19 July 2018, Claimant filed a request for the Tribunal to decide on the admissibility of twenty-one new documents.
73.
On 25 July 2018, the Parties submitted their agreed revisions of the hearing transcripts.
74.
On 26 July 2018, Respondent filed observations on Claimant's request of 19 July 2018.
75.
On 27 July 2018, the Tribunal granted in full Claimant's request of 19 July 2018.
76.
On 31 July 2018, Claimant filed a post-hearing brief, accompanied by legal authorities CL-0126 through CL-0150 and a list of legal authorities.
77.
On 14 August 2018, Respondent filed a request (a) for Claimant to translate legal authority CL-0128, which was submitted with Claimant's post-hearing brief; (b) to suspend Respondent's deadline to submit its post-hearing brief; and (c) to introduce a new legal authority, namely the "Communication from the [European] Commission to the European Parliament and the Council: Protection of intra-EU Investment" dated 19 July 2018.
78.
On 20 August 2018, Claimant filed observations on Respondent's requests of 14 August 2018.
79.
On 21 August 2018, the Tribunal (a) requested Claimant to produce a fuller translation of legal authority CL-0128 to be made available to Respondent more than ten days before the due date for its post-hearing brief; (b) rejected Respondent's request to suspend the deadline for the filing of its post-hearing brief; (c) and granted Respondent's request to introduce an additional document into the record.
80.
On 10 September 2018, Respondent filed a post-hearing brief together with legal authority RL-0100 and an updated consolidated list of legal authorities.
81.
On 19 September 2018, Claimant requested leave from the Tribunal to make a submission of no more than three pages concerning the difference between two documents in the record, in response to Respondent's post-hearing brief. On the same date, in view of the reasons given for the request, the Tribunal granted Claimant's request and invited observations from both Parties. Claimant filed its observations on 24 September 2018 and Respondent filed its observations on 27 September 2018.
82.
On 28 January 2019, Respondent filed a request to introduce an additional legal authority into the record, namely the "Declaration of the Representatives of the Governments of the Member States, of 15 January 2019, on the legal consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union", together with a written submission commenting on the relevance of such document.
83.
On 4 February 2019, Claimant filed observations requesting the Tribunal to reject Respondent's request of 28 January 2019, or alternatively to grant an equal opportunity to Claimant to submit and comment on other documents, including two related declarations of European Union ("EU") Member States of 16 January 2019.
84.
On 11 February 2019, the Tribunal granted Respondent's request of 28 January 2019 and admitted into the record the additional documents referred to by Claimant in its communication of 4 February 2019.
85.
On 18 February 2019, Respondent filed legal authorities RL-0101 through RL-0103 together with a submission commenting on the relevance of these documents and an updated consolidated list of legal authorities.
86.
On 25 February 2019, Claimant filed a submission concerning the documents introduced by Respondent into the record on 18 February 2019.
87.
On 18 March 2019, Respondent filed a request to introduce an additional legal authority into the record, namely the "Decision on Responsibility and on the Principles of Quantum" of 30 November 2018 issued in RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30 ("RREEF Decision"), together with a written submission commenting on the relevance of such document.
88.
On 21 March 2019, Claimant filed observations requesting the Tribunal to reject Respondent's request of 18 March 2019, or alternatively to grant an equal opportunity to Claimant to submit and comment on the partial dissent to the RREEF Decision and the Final Award of 14 November 2018 rendered in Foresight Luxembourg Solar 1 S. Á.R1., et al. v. Kingdom of Spain, SCC Case No. 2015/150 ("Foresight Award").
89.
On 10 April 2019, the Tribunal granted the Parties' requests to introduce the RREEF Decision and the Foresight Award into the record, together with the dissenting opinions accompanying these rulings. The Tribunal invited the Parties to simultaneously submit by 17 April 2019 short submissions commenting on those documents.
90.
On 17 April 2019, each Party provided its comments concerning the documents admitted into the record on 10 April 2019. Respondent's submission was accompanied by legal authorities RL-0104 and RL-0105. Claimant's submission was accompanied by legal authority CL-0151.
91.
On 18 April 2019, the Tribunal declared the proceeding closed.
92.
On 9 and 10 May 2019, the Parties filed their respective submissions on costs. Pursuant to instructions from the Tribunal, each Party was allowed to provide comments on the other Party's costs by 17 May 2019.
93.
On 21 May 2019, the Tribunal took note of a communication from Claimant of 17 May 2019 indicating that it had no comments on the Respondent's submission on costs, and noted that no comments to Claimant's costs submission had been filed by Respondent by the due date of 17 May 2019.
94.
On 11 June 2019, Respondent filed with ICSID comments on Claimant's submission on costs of 10 May 2019, noting that it had not been able to submit them by the deadline established by the Tribunal. On the same date, Claimant objected to the introduction into the record of Respondent's submission. On 12 June 2019, the Tribunal noted that Respondent had submitted its document nearly one month after the deadline established by the Tribunal for such filing and, having considered all relevant circumstances, the Tribunal declined to accept Respondent's submission into the record of the proceeding.

III. FACTUAL BACKGROUND

95.
This case arises out of Claimant's investments in Spain in PV plants, which use one of several technologies that produce renewable energy. As background, the Tribunal sets out below the key developments in the regulatory framework governing investments in renewable energy in Spain, focusing on those developments of greatest relevance to this proceeding. It then describes Claimant and its investment.

A. Regulatory Framework

(1) General Background and Description of the "Special Regime" in Place when Claimant Invested

96.
The 1978 Spanish Constitution is the supreme law of Spain.4 The Parliament enacts legislation ("Laws" or "Acts").5 Royal Decree Laws ("RDL"s) are adopted by the government in emergency situations and require subsequent legislative approval.6 Royal Decrees ("RD"s) are promulgated by the Council of Ministers to complement or develop legislation,7 and ministries issue ministerial orders and resolutions.8
97.
Law No. 54/1997, known by its Spanish acronym "LSE" (Ley del Sector Eléctrico), was enacted in 1997 to regulate the activities involved in the supply of power, including generation, transmission, distribution and retailing. It liberalized the energy sector and set out two regimes for energy production, an Ordinary Regime and a Special Regime that encouraged the production of energy from renewable sources. Under the Special Regime, remuneration was supplemented by a premium. The LSE stated:

To work out the premiums, the voltage level on delivery of the power to the network, the effective contribution to environmental improvement, to primary energy saving and energy efficiency, the generation of economically justifiable useful heat and the investment costs incurred shall all be taken into account so as to achieve reasonable profitability rates with reference to the cost of money on capital markets.9

98.
From enactment of Law 54/1997 through 2004, Spain adopted successive regulations designed to regulate and to encourage energy production from renewable sources, which provided additional details regarding the Special Regime, including the remuneration of producers of renewable energy.10 Under RD 436/2004, PV plants participating in the Special Regime were entitled to receive (i) a regulated tariff (consisting of a single, flat rate) or (ii) either the price resulting in the organized market or the price freely negotiated by the plant operator supplemented by an incentive and by a premium.11 The regulated tariff and the premium were calculated as a percentage of an annual average or reference electricity tariff.12 The tariffs and the premiums were payable during the useful life of the plants, but the rates were reduced after the first twenty-five years from their commissioning.13
99.
In 2005, Spain adopted the 2005-2010 Renewable Energy Plan (the "2005-2010 PER").14 It noted that overall growth in renewable energy had been lower than expected and referred to national indicative targets for renewable energy that had been set by the EU in 2001. The 2005-2010 PER concluded that, in order to meet Spain's target for the year 2010, Spain needed to revise its 2000-2010 Plan for Promotion of Renewable Energies.15 The 2005-2010 PER addressed PV facilities in particular:

Production of electricity directly through photovoltaic sources presents undeniable energetic, industrial, environmental and social, etc. advantages. Among them, the implementation of photovoltaic solar energy as widely as possible will contribute to boosting future technological development, which will cause this power generating process to be increasingly competitive compared to other generation methods.16

100.
The 2005-2010 PER proposed to increase the capacity target for PV plants from 135 megawatts ("MW") to 400 MW.17 It identified public support as "an essential factor to drive growth of different renewable sectors"18 and stated that public aid to achieve the proposed increases in PV capacity would amount to €499.4 million (for 2005-2010).19
101.
In February 2007, the National Energy Commission ("CNE" or "NEC")20 of Spain issued a report on a proposed royal decree regulating energy production under the Special Regime ("2007 CNE Report ").21 It set out the criteria that, in the opinion of the CNE, should apply to the special regime: (a) reaching the planning targets; (b) minimizing regulatory uncertainty; (c) facilitating operation of the system; and (d) incentivizing voluntary integration in the market.22 As to the criterion of minimizing regulatory uncertainty, the 2007 CNE Report stated:

The NEC understands that transparency and predictability in the future of economic incentives reduces regulatory uncertainty, incentivising investments in new capacity and minimizing the cost of financing projects, thus reducing the final cost to the consumer. The regulation must offer sufficient guarantees to ensure that the economic incentives are stable and predictable throughout the service life of the facility. In each case, regulation must provide both transparent annual adjustment mechanisms, associated to robust trend indexes (such as the average or reference tariff, the CPI, ten-year bonds, etc.) and regular reviews that only affect new facilities (e.g. every four years) with regard to investment costs, which could also affect the reduction of operating costs at existing facilities.23

102.
The 2007 CNE Report also noted that the facilities subject to the Special Regime are capital-intensive, with a long period for capital recovery.24
103.
In May 2007, Spain adopted RD 661/2007, which replaced the framework for the Special Regime that had been specified in RD 436/2004.25 As stated in its preamble:

Spanish society today, in the context of reducing dependence on foreign energy, better use of available energy sources, and a greater awareness of the environment, is increasingly demanding the employment of renewable sources of energy and efficiency in the generation of electricity as basic principles in the achievement of sustainable development from an economic, social, end environmental point of view.

[…]

The creation of the special regime for the generation of electricity meant an important milestone in the energy policy of our country. The targets in respect of the promotion of renewable energy and combined heat and power are covered in the Renewable Energy Plan 2005-2010 and in the Strategy for Energy Saving and Efficiency in Spain (E4), respectively. In view of the above, it can be seen that although the growth seen overall in the special regime for electricity generation has been outstanding, in certain technologies the targets posed are still far from being reached.

From the point of view of compensation, the business of the production of electrical energy under the special regime is characterized by the possibility that the compensation system can be supplemented by the receipt of a premium under the terms and conditions established in the regulations, in order to determine which such factors as the voltage level of the energy delivered into the grid, the contribution to the improvement in the environment, primary energy saving, energy efficiency, and the investment costs incurred, may all be taken into account.

[…]

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.26

104.
Under RD 661/2007, two options were available for producers participating in the Special Regime, a premium relative to market prices and a "regulated tariff" (i.e., a feed-in tariff, or "FIT").27 Whereas the FIT under RD 436/2004 had been set with reference to prevailing market prices, the FIT under RD 661/2007 was "a fixed sum which shall be the same for all scheduling periods and shall be determined as a function of the Category, Group, [or] Sub-Group to which the facility belongs, and the installed power, and where applicable the length of time since the date of commissioning […]"28
105.
RD 661/2007 set out formulae for calculating the FITs for three categories of plants (which depended on the capacity of the plant), and specified a reduced rate after the first twenty-five years of operation.29 The applicable FIT was to be updated annually using a consumer price index ("CPI").30 In order to participate in the Special Regime, installations were required to be registered on the Administrative Registry of Production Installations under the Special Regime ("RAIPRE").31
106.
Article 44(3) of RD 661/2007 also provided for the review of tariffs:

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.32

107.
On 29 September 2007, the General Energy Secretary, having been advised that 85% of the PV target defined in RD 661/2007 had been reached in September 2007,33 issued an order specifying that only PV facilities registered before 30 September 2008 could benefit from the FITs established in RD 661/2007.34
108.
In July 2008, the CNE issued a report (CNE Report 30/2008) with respect to a proposed Royal Decree that would govern PV facilities that were registered after the 29 September 2008 deadline that had been set by the General Energy Secretary. Noting the unexpected growth in what it described as an "over-incentivized market,"35 the CNE expressed its agreement with the objective of the proposed Royal Decree, i.e., the establishment of a "system of tariffs that guides the reduction of costs of technology, so that by moderating its expansion, cost reductions are progressively transferred to the owners of the facilities, and ultimately to the consumer."36 As in the 2007 CNE Report,37 CNE Report 30/2008 summarized the four criteria in the CNE's methodology, including the following:

b) Legal certainty and the protection of legitimate expectations.

Stability and predictability of economic incentives (tariffs and premiums) reduce regulatory uncertainty, which encourages investments in new capacity to address their projects, while minimizing the cost of financing and thereby reducing the final cost to the consumer. The current regulation has established annual updates of economic incentives, based on robust indexes (such as the IPC, ten-year bonds, etc.), and periodic reviews every four years, which in this case only affect the new facilities.

Certainly, the principles of legal certainty and the protection of legitimate expectations (Article 9.3 EC) do not constitute insurmountable obstacles to the innovation of the legal system and cannot therefore be used as instruments to petrify the legal framework in force at any given time. In this sense, these principles do not prevent the dynamic innovation of the regulatory frameworks, nor of new normative provisions which can be applied pro-future to situations initiated before it comes into force. But these principles do require that regulatory innovation - especially if it is abrupt, unforeseeable or unexpected - is carried out with certain guarantees and cautions (transitional periods to adapt to the new regimes, where appropriate compensatory measures, etc.) that dampen, moderate and minimize, as far as possible, the disappointing of any expectations generated by the previous regulations.38

109.
Analyzing the proposed Royal Decree in light of its four criteria, the CNE stated:

5.2 On the criterion of minimizing regulatory uncertainty

Special-regime production facilities are often capital-intensive and have long recovery times. The regulation of the generation facilities under the special regime established in Royal Decree 661/2007, has tried to minimize the regulatory risk of this group, providing security and predictability to economic incentives during the useful life of the facilities, by establishing transparent mechanisms to update them annually, and by exempting existing installations from the four-year review, since the new incentives that are being set out only affect the new installations.

The guarantees included in this regulation allow for better financing, with lower project costs and less impact on the electricity tariff finally paid by the consumer.39

110.
Royal Decree 1578/2008, regarding remuneration for PV power plants that obtained their permanent registration after 29 September 2008, was adopted on 26 September 2008.40 The preamble recalled that RD 661/2007 had established a new compensation framework for renewable energy for the purpose of meeting the goals in the 2005-2010 PER, and that the growth of installed capacity in the PV sector had been greater than expected. To avoid excessive compensation that would have repercussions for the costs of the system and would create disincentives for investing in research and development, the new Royal Decree stated that it would "modify the economic regime downward, following the expected evolution of the technology, with a long-term perspective."41 RD 1578/2008 raised the goals for installed capacity that had been set in RD 661/2007 and set out a "new economic regime that stimulates technological evolution and the competitiveness of photovoltaic facilities in Spain over the medium and long term."42
111.
To guarantee a minimum market for the development of the PV sector and to ensure continuity of the support system, RD 1578/2008 established a compensation mechanism whereby installations were pre-registered at the beginning of development of a project (a pre-assignment registry), "which will provide the necessary legal security to promoters with respect to the return that the facility will earn once it is put into operation."43 The specific FIT assigned to a facility depended on the pre-registration date.44 On a quarterly basis, the FIT adjustable to newly-registered plants was adjusted.45 The applicable FIT applied to a facility for a "maximum period of twenty-five years."46 RD 1578/2008 specified that the tariffs would be adjusted for inflation using the mechanism specified in RD 661/2007.47
112.
The Fifth Additional Provision of RD 1578/2008, entitled "Modification of the compensation for generation by photovoltaic technology," stated: "During the year 2012, based on the technological evolution of the sector and the market, and the functioning of the compensatory regime, compensation for the generation of electric power by photovoltaic solar technology may be modified." The Parties disagree about the meaning of this provision.
113.
Claimant refers to the laws and regulations up to and including RD 1578/2008, which was in effect at the time of Claimant's investment, as the "Original Regulatory Regime."

(2) The Disputed Measures

114.
Claimant's case arises out of regulatory changes subsequent to RD 1578/2008, which it describes as the "Disputed Measures." For convenience, the Tribunal divides the Disputes Measures into two sets of measures.
115.
Before describing the two sets of Disputed Measures, the Tribunal provides background information regarding the tariff deficit, i.e., the gap between the revenue of the Spanish Electricity System ("SEE") and the costs of regulated activities in the electricity sector.
116.
The tariff deficit in the SEE began in the year 2000.48 It increased during the global economic crisis, which led to reduced demand for energy as compared to expectations. The 2005-2010 PER had forecast an increase in energy demand of 4% during that period,49 which was adjusted to an annual increase of 3.72% in the PER 2011-2020.50 Energy demand fell short of both forecasts. Spain's Energy Secretary stated in 2013 that growth in energy demand over the period 2005-2012 was 2%, while generation capacity had increased by 39%.51 A 2014 Report by the European Commission stated that the tariff deficit in Spain amounted to €28.5 billion at the end of 2013, "almost 3% of GDP."52
117.
The growth of the tariff deficit was addressed in a report prepared by the CNE in March 2012.53 That report stated that from 2006 to 2010, average revenues from access tolls had increased by 70% in accumulated terms, while the increase in access costs was 140%. The three most significant access costs items were Special Regime premiums (representing 40.3% of total costs in 2010), network costs (39.8%) and the cost of financing the accumulated deficit (10.5%).54
118.
The 2012 CNE Report forecast that the tariff deficit would continue to increase (with the precise figures dependent on the scenario that was used) and stated that the tariff deficit would be "unsustainable" unless measures were introduced either on revenues or regulated costs.55 The 2012 CNE Report also stated that prices paid by household consumers and industrial consumers in Spain were higher than the EU average.56
119.
As indicated below, in the summary of Party positions with respect to liability, the Parties disagree on many points with respect to the tariff deficit, such as the contribution that PV subsidies made to the tariff deficit and the extent to which Spain could have taken measures other than the Disputed Measures in order to address the tariff deficit.

a. The First Set of Disputed Measures

120.
The First Set of Disputed Measures are:

(1) RDL 14/2010 of 23 December 2010, which imposed a cap on the number of hours per year during which PV installations could sell electricity under the FIT;57

(2) Law 15/2012 of 27 January 2012, imposing a seven percent tax on electric energy production;58 and

(3) RDL 2/2013 of 1 February 2013, which changed the inflation index used to update FITs.59

121.
RDL 14/2010 of 23 December 2010,60 entitled "on the Establishment of Urgent Measures for the Correction of the Tariff Deficit in the Electricity Sector," referred to the need to address the tariff deficit. It stated that, since the adoption of RDL 6/2009 in April 2009, "there have been a series of supervening circumstances that have had a direct impact on the anticipated tariff deficit." It observed that the global crisis had led to a decline in demand for energy, while there had also been increased energy production. Producers in the Ordinary Regime had seen a reduction in hours and wholesale prices, but those in the Special Regime had received preferential rates. The preamble of RDL 14/2010 provided:

In formulation of these measures, care has been taken to ensure the safeguard of the supply of electricity, in terms of universality, quality, safety and continuity and to ensure the protection of consumer rights for electrical power supply, under equitable terms, as well as to ensure compliance of the targets regarding energy efficiency and the promotion of renewable energies. In parallel, special attention and care has been taken not to affect the economic-financial balance of companies within the sector, and not solely for large companies, preserving the principles of a free market, which are governed under Law 54/1997, of 27 November, on the electricity sector, but also for sets of power generation facilities, monitoring such, because, especially in the case of power generation companies under the special regime, these have secured adequate and reasonable compensation.

[…]

[I]t is deemed reasonable that producers under the special regime also make a contribution to mitigate the additional costs on the system, and such contribution must be proportionate to the characteristics of each technology, to the degree of participation in the generation of such additional costs and to the current extent for compensation, whose reasonable return, nonetheless, is guaranteed. Thus, for the same purpose, there has been Government approval, over recent months, for regulatory measures directed at producers of wind, solar thermal and co-generation electricity.

Thus, in consideration of the rate of growth of photovoltaic installations, and for safeguarding the principle of sufficiency for compensation, due to the special impact that the deviations in the forecast generation of this energy source have caused to the tariff deficit, it is established, in general terms, the possibility for limiting the recognised equivalent operating hours entitled by the prevailing economic system.61

122.
Accordingly, RDL 14/2010 imposed a cap on the number of hours per year for which a PV installation could sell electricity at the FIT, after which it could sell electricity at the prevailing market rate.62
123.
Law 15/2012,63 the Law on Tax Measures for Energy Sustainability, imposed energy-related taxes, including a tax on the value of energy production. This tax, set at the rate of seven percent, applied, inter alia, to the remuneration received pursuant to the Special Regime under RD 1578/2008.
124.
RDL 2/2013 of 1 February 2013,64 on Urgent Measures in the Electricity System and in the Financial Industry, changed the CPI that had been used for annual adjustments of FITs and replaced it with an adjusted CPI that excluded energy products, food prices and the effects of tax changes.

b. The Second Set of Disputed Measures

125.
Subsequent changes in Spanish law and regulations (in 2013 and 2014) led to the abolition of the Special Regime, including the FITs. The Tribunal refers to these measures (RDL 9/2013 (12 July 2013), Law 24/2013 (26 December 2013), RD 413/2014 (6 June 2014) and Ministerial Order IET/1045/2014) as the Second Set of Disputed Measures.
126.
RDL 9/2013 (12 July 2013)65 amended Law 54/1997 and abrogated RD 661/2007 and RD 1578/2008. It set forth "urgent measures to ensure the financial stability of the electricity system."66 Its preamble stated that the "Spanish electricity system has generated a tariff deficit for a decade." It indicated that between 2004 and 2012, revenues from consumer toll fees had increased by 122%, whereas regulated costs had increased by 197%. It cited special regime premiums as having contributed in particular to this gap. It described the situation as unsustainable, thus requiring urgent measures, and stated that past measures had proven insufficient.
127.
RDL 9/2013 amended Article 30(4) of the LSE, replacing it with the following text:

4. Additionally, and in the terms determined legally by Royal Decree of the Council of Ministers, for the remuneration for the sale of the energy generated, valued at market price, the facilities shall be able to receive a specific remuneration made up of one term per power unit installed, that covers, when appropriate, the investment costs of standard facility that cannot be recovered by the sale of energy and an end to the operation that covers, as applicable, the difference between the operating costs and revenue by participation in the market of such standard facility.

For purposes of calculating this specific remuneration, the Law shall consider the following for any standard facility throughout its useful life and in reference to the business activity carried out by an efficient and well-managed company:

a) The standard revenue for the sale of the energy generated, valued at the production market price.

b) The standard operating costs.

c) The standard value of the initial investment.

For these purposes, this shall never include the costs or investments determined by regulations or administrative acts which are not applicable across the entire Spanish territory. In the same way, this will only take into account those costs and investments that respond exclusively to the field of production of electricity.

As a result of the unique characteristics of the insular and extra-peninsular electricity systems, standard facilities may be defined exceptionally for each one of them.

This remuneration scheme does not exceed the minimum level necessary to cover the costs that allow for the facilities to compete equally with the rest of technologies in the market and that would lead to a reasonable rate of return by reference to the standard facility applicable in each case. Notwithstanding the foregoing, exceptionally the remuneration scheme may also include an incentive for investment and the execution within a specific time period when the facility in question involves a significant reduction of costs in the insular and extra-peninsular systems.

This reasonable rate of return shall focus, before tax, on the average yield in the secondary market of the Obligations of the State within ten years by applying the appropriate differential.

The parameters of the remuneration scheme may be revised every six years.67

128.
RDL 9/2013 directed MINETUR to approve a Royal Decree applicable to existing facilities receiving feed-in tariff remuneration, effective on the date of RDL 9/2013 (12 July 2013).68
129.
Law 24/2013 eliminated the distinction between the Ordinary Regime and the Special Regime and confirmed the changes contained in RDL 9/2013.69 It authorized the establishment of a "Specific Regime" for remuneration of renewable energy facilities. Under the Specific Regime (which applies to Claimant's plants), remuneration for each category of installation type is premised on the standard income, standard operating costs and standard initial investment figure of an efficient, well-managed facility of that category.70 Law 24/2013 also states:

The remuneration regime will not exceed the minimum level required to cover costs which allow production installations from renewable energy sources, high-efficiency and waste cogeneration to compete on an equal footing with the other technologies on the market and which allows a reasonable return to be earned on the installation type in each applicable case. This reasonable return will refer, before tax, to the mean yield on the secondary market for Ten-Year State Bonds, applying the appropriate differential.71

130.
As contemplated by RDL 9/2013, in June 2014 Spain adopted two measures providing greater details regarding the new remuneration scheme applicable to renewable energy facilities. These measures (RD 413/2014 and IET/1045/2014)72 set out detailed parameters for various categories of "model facilities" on which remuneration was based. Consistent with RDL 9/2013, these remuneration parameters were effective as of the date of RDL 9/2013 (i.e., 12 July 2013). The remuneration parameters may be amended.73
131.
Under these provisions, the target return at the beginning of 2020 will be set with reference to the average yield of 10-year Spanish State bonds for the 24-month period prior to the month of May of the year preceding the beginning of each regulatory period, increased by a to-be-specified spread. However, prior to 2020, the target return is instead based on the average yield of ten-year bonds in the 120-month period prior to July 2013. For facilities whose remuneration was recognized prior to enactment of RDL 9/2013 (which includes Claimant's facilities) this initial rate is 7,398%.74

B. Claimant and its Investment

(1) Claimant SolEs Badajoz

132.
Claimant, a company incorporated in 2009 under the laws of Germany, is a "GmbH that acts as an investment vehicle (a 'special purpose vehicle' or SPV) or holding company for other investors."75 It is owned by SolEs XXI Projekt GmbH and SolEs XXII Projekt GmbH. Each of these two entities is owned by a closed-end fund organized as a limited partnership under the laws of Germany for the purpose of investing in certain assets (PV plants in Spain).76 These funds (and others) were organized by the closed-end fund initiator Voigt & Coll GmbH, which had been established in 2005 for the purpose of investing in renewable energy and which manages the investments.77 Each of these funds has approximately 2,000 investors who are limited partners who hold almost all of the equity in those funds. Voigt & Coll. GmbH markets the shares on the basis of an investment prospectus and acts as managing partner, maintaining a small ownership share in the investment.78 It owns 0,054% of the equity in SolEs XXI Projekt GmbH and 0,011% of the equity in SolEs XXII Projekt GmbH.79
133.
Claimant filed witness statements by Mr. Marcus Voigt, managing partner at Voigt and Coll. GmbH, and Mr. Thomas Hopp, legal counsel at Voigt and Coll. GmbH, both of whom also testified at the Hearing.

(2) The Establishment of Fotones de Castuera and the Construction of the PV Plants Badajoz I and II

134.
Fotones de Castuera ("Fotones"), currently owned by Claimant, was incorporated under Spanish law in 2007 for the purpose of constructing, installing and operating PV plants in the Autonomous Region of Extremadura, Spain.80 Fotones operates the two PV plants at issue in this case: Badajoz I and Badajoz II.81
135.
Between November 2007 and December 2009, Fotones followed the administrative processes at the municipality, regional and national level related to the establishment and operation of the "La Verilleja" PV plant, which corresponds to present-day PV plants Badajoz I and II. Construction of the plants was authorized on 2 April 2008.82 On 29 October 2008, Fotones submitted its first applications for registration of Badajoz I and Badajoz II in the Pre-allocation Tariff Registry.83 The resolution registering Badajoz I was issued on 10 December 2009 and the resolution registering Badajoz II was issued in February 2010. These dates determined the FIT applicable to each plant.84
136.
Meanwhile, in September 2009, a Spanish firm called Assyce Fotovoltaica, S.L ("Assyce") acquired all the shares in Fotones.85 In December 2009, FS Solar Farms Spain GmbH ("FS Solar") purchased Fotones from Assyce and entered into an engineering, production and construction contract with Assyce for the turnkey construction of the power plants.86
137.
Construction of Badajoz I was completed on 12 July 2010 and construction of Badajoz II was completed on 14 January 2011.87 Claimant states that Badajoz I began producing and selling energy "by the end of August 2010 at the latest" and that Badajoz II began producing and selling energy "by 8 February 2011 at the latest."88

(3) Claimant's Acquisition of Fotones

138.
On 25 March 2010, Claimant and FS Solar entered into an agreement for the purchase and sale of all shares of Fotones.89 Some details regarding the acquisition and financing, as described by Claimant, follow:

In connection with this acquisition […] SolEs Badajoz paid EUR 18,678,523 for the transfer to it of (i) a profit participating loan of EUR 2,517,671, (ii) an intercompany loan of EUR 15,987,197, which FS Solar had previously provided to the Company and (iii) the reimbursement of an amount of EUR 173,655 under the agreement on remuneration and reimbursement of expenses with the [Landesbank Baden-Württemberg].

In May 2010, SolEs Badajoz began the re-financing of Fotones de Castuera which included the execution of the following agreements:

- (i) a new intercompany loan agreement entered into on 11 May 2010 by and among SolEs Badajoz and Fotones de Castuera for an amount of EUR 17,000,000 (the "IC Loan Agreement");

- (ii) a credit facility agreement dated 25 May 2010 in relation to the erection and operation of Badajoz I and Badajoz II between Fotones de Castuera, as borrower and two German banks (the "Credit Facility Agreement"). Under this agreement Fotones de Castuera was extended over EUR 93,475,000 in credit. This agreement was amended a number of times. […]90

139.
Claimant also describes agreements between Fotones and two German banks governing hedging transactions and a December 2012 participative loan agreement between SolEs Badajoz and Fotones de Castuera.91
140.
Claimant states in summary that "SolEs Badajoz thus obtained third party debt funding in the amount of EUR 93,475,000 and itself invested EUR 35.68 million (EUR 18,678,523 paid in accordance with [a share purchase agreement] and the IC Loan in the amount of EUR 17,000,000)."92
141.
According to Claimant's witness Thomas Hopp, the mix of equity provided by the investor and third party financing to effect the acquisition "was a typical debt financing model for the Spanish PV sector. The project had a leverage of 72%, meaning that 72% of the initial capital was provided by loans and the remaining 28% was provided by equity. Based on my discussions with other investors and banks at the time, this was in the low range of leveraging for projects in the Spanish PV sector, where leverage was frequently closer to 80% debt financing".93

IV. THE PARTIES' CLAIMS AND REQUESTS FOR RELIEF

142.
In its Rejoinder, Claimant requests that the Tribunal:

- Declare:

that it has jurisdiction to hear this dispute;

that the Kingdom of Spain has breached Article 13 of the ECT by unlawfully expropriating SolEs Badajoz;

that the Kingdom of Spain has breached Article 10(1) of the ECT by failing to accord fair and equitable treatment to SolEs Badajoz's investment;

that the Kingdom of Spain has breached Article 10(1) of the ECT by violating the umbrella clause of the Treaty.

- Order the Kingdom of Spain:

to compensate SolEs Badajoz for damage caused as a result of its violations of the ECT amounting to €81.8 million, including the necessary tax gross-up, which when adjusted for pre-Award interest as at July 2018 should result in an Award of €95.8 million;

to pay interest at the rate of 5.94% compounded with quarterly rests on all compensation for damages awarded by the Tribunal until full payment of the Award;

to reimburse SolEs Badajoz for any damage that may occur in the future as a result of its violations of the ECT; and

to pay all of the costs and expenses of this arbitration, including SolEs Badajoz's legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, the fees and expenses of the Tribunal, and ICSID's other costs.94

143.
In its Rejoinder, Respondent requests that the Tribunal:

(a) declare its lacks of jurisdiction to hear the claims of the Claimant, or if applicable their inadmissibility, in accordance with what is set forth in Section III of the present Memorial, referring to Jurisdictional Objections; and

(b) Subsidiarily, in the event that the Arbitral Tribunal decides that it has jurisdiction to hear this dispute, to dismiss all the Claimant ['s] claims regarding the Merits, as the Kingdom of Spain has not breached the ECT in any way, pursuant to Sections IV and V herein, referring to the Facts and the Merits, respectively;

(c) Secondarily, to dismiss all the Claimant's claims for damages as the Claimant has no right to compensation, in accordance with Section V herein; and

(d) Order the Claimant to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators' fees, and the fees of the legal representatives of the Kingdom of Spain, their experts and advisors, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred until the date of their actual payment.95

V. THE APPLICABLE LAW

144.
The Tribunal next addresses the applicable law, a matter to which the Parties devoted considerable attention in their post-hearing briefs. The Parties recognize that the applicable law includes the ECT.96
145.
Both Parties have relied on the law of treaties, as reflected in the Vienna Convention on the Law of Treaties ("VCLT"), to which both Germany and Spain are parties.97 For convenience, the Tribunal sets out below certain provisions of the VCLT:

Article 30. APPLICATION OF SUCCESSIVE TREATIES

RELATING TO THE SAME SUBJECT-MATTER

1. Subject to Article 103 of the Charter of the United Nations, the rights and obligations of States parties to successive treaties relating to the same subject-matter shall be determined in accordance with the following paragraphs.

2. When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail.

3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.

4. When the parties to the later treaty do not include all the parties to the earlier one:

(a) As between States parties to both treaties the same rule applies as in paragraph 3;

(b) As between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations.

5. Paragraph 4 is without prejudice to article 41, or to any question of the termination or suspension of the operation of a treaty under article 60 or to any question of responsibility which may arise for a State from the conclusion or application of a treaty the provisions of which are incompatible with its obligations towards another State under another treaty.

Article 31. GENERAL RULE OF INTERPRETATION

1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) Any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;

(b) Any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

3. There shall be taken into account, together with the context:

(a) Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) Any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) Any relevant rules of international law applicable in the relations between the parties.

4. A special meaning shall be given to a term if it is established that the parties so intended.

Article 32. SUPPLEMENTARY MEANS OF INTERPRETATION

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) Leaves the meaning ambiguous or obscure; or

(b) Leads to a result which is manifestly absurd or unreasonable.

[…]

Article 41. AGREEMENTS TO MODIFY MULTILATERAL TREATIES BETWEEN CERTAIN OF THE PARTIES ONLY

1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:

(a) The possibility of such a modification is provided for by the treaty; or

(b) The modification in question is not prohibited by the treaty and:

(i) Does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;

(ii) Does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.

2. Unless in a case falling under paragraph l(a) the treaty otherwise provides, the parties in question shall notify the other parties of their intention to conclude the agreement and of the modification to the treaty for which it provides.

146.
The central disagreement between the Parties is the question whether EU law is applicable law in respect of the Tribunal's jurisdiction and in respect of the merits.

A. The Parties' Positions

(1) Claimant's Position

147.
According to Claimant, Article 42 of the ICSID Convention indicates that the applicable law is the rules of law agreed by the parties to the dispute. In this case, the agreed rules of law are those of the ECT. Article 26(6) of the ECT states that a tribunal "shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law." Thus, "the applicable law is first and foremost the ECT."98 Claimant also invokes the law of treaties and the law of State responsibility.99
148.
Claimant maintains that provisions of EU law (including rules regarding State aid) are not applicable law because those provisions are not "principles of international law." It states that the European legal order is autonomous and is distinct from "general public international law and from the ECT."100 Claimant considers that the CJEU has made clear that "EU law and international law are radically separate." It states that there is no room for the applicability of EU law to an ECT dispute.101
149.
Claimant addresses the awards in Electrabel v. Hungary and Blusun v. Italy, on which Respondent relies. Claimant asserts that the key holding in Electrabel was that "EU law as a whole is part of the international legal order," which the tribunal in Electrabel stated in the context of rejecting claimant's argument that only EU treaties were part of international law. According to Claimant, the tribunal in Electrabel did not consider the distinct nature of the EU legal order within the international legal order and did not take proper account of the characterization of the European legal order by the CJEU itself. Claimant asserts that the tribunal in Blusun failed to offer any explanation for applying EU law in that case.102
150.
For these reasons, Claimant considers that "EU law is simply not applicable to a dispute governed by the ECT, whether regarding jurisdiction, or the merits."103 EU law is also inapplicable as domestic law, according to Claimant. Under Article 27 of the VCLT, a State cannot rely on domestic law as an excuse for failing to comply with treaty obligations.104 "EU law can only be relevant at most as fact since it is part of a legal order which is distinct from the ECT and the general public international order."105

(2) Respondent's Position

151.
Respondent recognizes that the ECT is applicable law. Like Claimant, Respondent also relies on the law of treaties as applicable law. It has raised no objection to Claimant's reliance on the law of State responsibility.
152.
Respondent asserts that EU law is applicable law. It states that EU law has a triple nature, as international law, as domestic law and as fact.106 It maintains that the Treaty on the Functioning of the European Union ("TFEU") sets out rules that have priority over other rules. As an international treaty, the TFEU is international law between Germany and Spain, according to public international law. The Tribunal is bound by ECT Article 26(6) to apply "applicable rules of and principles of international law."107 Respondent also relies on a November 2017 decision of the European Commission that states that "Union law provides for a complete set of rules on investment protection" and that EU law is part of the applicable law in an intra-EU dispute.108
153.
Respondent maintains that applicable EU laws "are not only the TFEU but also the relevant rules on energy matters of EU," such as directives.109 Respondent states that this has been the conclusion of tribunals in Electrabel, Blusun and Wirtgen v. Czech Republic.110 It considers that Claimant's observations regarding Electrabel and Blusun are nothing more than a disagreement with the conclusions of those tribunals. According to Respondent, the body of EU law applicable to this case includes the case law of the CJEU.111
154.
Respondent also asserts that EU law is applicable as domestic law, as a relevant fact. It maintains that Claimant was aware of the applicability of EU law regarding state aid112 and of the "binding nature of EU Laws in the Spanish framework."113 Spain considers that Claimant distorts Respondent's position on "the relevance of EU law as internal Spanish law." Respondent does not invoke the applicability of EU law as an excuse for failing to comply with the ECT. Instead, "[t]he relevance of its application as a fact is that the EU state aid rules are essential to assess the objective and reasonable Expectations of the Claimant."114

B. The Tribunal's Analysis

155.
In articulating their positions with respect to applicable law, both Parties invoke Article 26(6) of the ECT, which states that a tribunal "shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law." They disagree on whether EU law is part of "international law."
156.
The positions of both Parties are premised on the view that Article 26(6) governs not only the law applicable to the merits, but also the law that governs the Tribunal's jurisdiction. Thus, the Tribunal first considers whether the phrase "issues in dispute" in Article 26(6) has a scope that extends beyond the dispute on the merits to determine the law that governs the Tribunal's jurisdiction.
157.
Paragraph (6) of Article 26 of the ECT must be interpreted in its context, i.e., in light of other provisions of the Treaty,115 including the other paragraphs of Article 26, entitled "Settlement of Disputes between and Investor and a Contracting Party". Article 26(1) states that "[d]isputes between a Contracting Party and an Investor of another Contracting Party […] which concern an alleged breach of an obligation of […] Part III" of the ECT "shall, if possible, be settled amicably".116 Part III of the ECT contains the substantive standards of investment treatment, including those on which Claimant relies in this case. Paragraph (2) is the first of a series of paragraphs of Article 26 that address the circumstances in which "such disputes can not be settled according to the provisions of paragraph (1)." Absent an indication to the contrary, the phrase "issues in dispute" in paragraph (6) of Article 26 can be expected to have the same scope as paragraph (1), which refers to disputes that "concern an alleged breach of an obligation […] under Part III," in other words, to the merits of a dispute. If the drafters of the ECT had intended the scope of Article 26(6) to extend beyond Part III of the ECT, such that it governed the law to be applied by Tribunal to decide whether it had jurisdiction over a dispute, they could have so indicated. Article 16 of the ECT, which addresses the relationship between the ECT and other treaties, for example, refers both to Part III and Part V (Dispute Settlement).117
158.
Claimant asserts jurisdiction on the basis of Article 25 of the ICSID Convention and Article 26 of the ECT. For purposes of arbitration within the framework of the ICSID Convention, the Tribunal considers that Article 26(6) operates as a choice of law provision, as contemplated by Article 42(1) of the ICSID Convention, which provides:

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. (Emphasis added).

159.
Thus, Article 26(6) contains the agreement of the disputing parties as to the law to be applied to the dispute that concerns an alleged breach of an obligation of a Contracting Party under Part III of the ECT and states the law applicable to the merits. It does not assist the Tribunal in addressing the effect of EU law on its jurisdiction. This matter will be considered when the Tribunal addresses Respondent's objections to jurisdiction.
160.
Turning to the law applicable to the merits, Article 26(6) requires the Tribunal to decide the dispute in accordance with the ECT and "applicable rules and principles of international law." These applicable rules and principles unquestionably include the law of treaties, and, where applicable, the law of State responsibility. The Tribunal focuses here on Claimant's contention that EU law is not "international law" for purposes of Article 26(6).
161.
Respondent has asserted that EU law has a "triple nature," as international law, as domestic law and as fact. The ECT does not identify domestic law as a source of applicable law. The Tribunal therefore considers that, when EU law is understood to operate as Spain's domestic law, it operates as fact.118 For purposes of determining the applicable law, the Tribunal sets aside Respondent's invocations of EU law as domestic law or fact (to be considered when the Tribunal reaches the merits) and addresses the question whether EU law provides "applicable rules and principles of international law," pursuant to ECT Article 26(6).
162.
Claimant alleges breaches of the ECT, which, as the Parties recognize, is to be interpreted and applied pursuant to the law of treaties. In the interpretation and application of the ECT, the ECT itself and the law of treaties can call for examination of other treaties. A clear example of this possibility is found in Article 16 of the ECT, pursuant to which the substantive protections of another "international agreement" cannot derogate from the investor protections contained in Part III of the ECT if the provisions of the ECT are more favorable to the Investor or the Investment than are the provisions of the other international agreement. More generally, when the ECT is interpreted and applied pursuant to the VCLT, treaties other than the ECT could also play a role as applicable law in a variety of ways, e.g., as agreements relevant to the interpretation of the ECT (pursuant to Article 31 of the VCLT) or as agreements that modify the ECT (pursuant to VCLT Article 40). Thus, under both the ECT and the law of treaties, there are circumstances in which the provisions of a treaty other than the ECT could have an impact on the substantive law to be applied in a dispute in which a breach of Part III of the ECT is alleged and thus can play a role as applicable law.
163.
Under Claimant's approach, however, EU treaties would not be "international agreements" that fall with within the scope Article 16 of the ECT, nor would they be considered "treaties" or "agreements" under the VCLT. The VCLT defines a treaty as "an international agreement concluded between States in written form and governed by international law […]"119 In the view of the Tribunal, EU treaties are clearly "international agreements" under ECT Article 16 and "treaties" and "agreements" under the VCLT. Accordingly, the Tribunal considers that EU treaties cannot be excluded as potential sources of "applicable rules and principles of international law" within the meaning of ECT Article 26(6).
164.
However, under Article 16 of the ECT, a provision of another treaty can only operate as the rule of decision that supplants the investment protection provisions of Part III of the ECT if that other treaty provides substantive protections that are more favorable to investors than are the investment protection provisions of Part III of the ECT. Claimant has not invoked any such provision in an EU treaty, nor does the Tribunal find one to exist.
165.
A fortiori, even assuming that an EU instrument that is derived from an EU treaty (such as a decision of the European Commission) could be regarded as international law for purposes of Article 26(6) of the ECT, it follows from Article 16 of the ECT that the provisions of an EC decision could replace an investor protection provisions of the ECT as a rule of decision only if the EC decision contained investor protection provisions that were more favorable to investors than are the provisions of Part III of the ECT. No such provision has been identified in this proceeding.
166.
Respondent asserts that European Commission decisions on State aid are binding, referring in particular on a 2017 decision in which the European Commission concluded that Spain's current regime for remuneration of renewable energy providers meets EU requirements for State aid.120 Respondent points to the finding of the tribunal in Electrabel that EU law was applicable law (in a case arising under the ECT), including the EU "droit dérivé", such as decisions of the European Commission.121 The tribunal in Electrabel made this observation in a case in which the claimant's "principal claim" was that the respondent had violated the ECT by terminating an agreement "following a legally binding order of the European Commission," which the claimant did not dispute was legally binding on the respondent under EU law.122 By contrast, even assuming that some statements in the 2017 decision could be "binding" on Spain under EU law, the 2017 decision invoked by Respondent could not have operated as law governing Respondent's imposition of the Disputed Measures on Claimant and other investors in 2010-2013.
167.
For the forgoing reasons, the Tribunal concludes that the applicable law in this case is the Energy Charter Treaty, interpreted pursuant to the law of treaties and supplemented by the customary international law of State responsibility. For the reasons stated in the preceding paragraphs, EU law is not part of the law applicable in this case.

VI. PRELIMINARY OBJECTIONS TO JURISDICTION AND ADMISSIBILITY

168.
Claimant asserts jurisdiction on the basis of Article 25 of the ICSID Convention and Article 26 of the ECT. It maintains that all requirements of Article 25 of the ICSID Convention are met.123 Respondent has not disputed that the jurisdictional requirements of the ICSID Convention have been met.
169.
The Tribunal is satisfied that the requirements of Article 25 of the ICSID Convention are met:

• Spain has been an ICSID Contracting State since 17 September 1994.

• Claimant is a company incorporated in Germany, which has been an ICSID Contracting State since 18 May 1969, and thus is a "national of another Contracting State" within the meaning of Article 25(2)(b) of the ICSID Convention.

• Claimant's shareholding, interests and other rights in Fotones constitute an "investment" for purposes of Article 25(1) of the ICSID Convention.

• There is a legal dispute between Claimant and Respondent arising directly out of Spain's alleged acts and omissions with respect to Claimant's investment in Spain which, according to Claimant, violate Respondent's obligations under the ECT.

170.
Jurisdiction pursuant to Article 25 of the ICSID Convention also depends on the Parties' consent to the jurisdiction of the Centre. Claimant maintains that Spain has given its consent pursuant to Article 26 of the ECT. However, Respondent has lodged two objections to the Tribunal's jurisdiction, which can be understood as a contention that it did not consent to the Tribunal's jurisdiction pursuant to Article 25 of the ICSID Convention and Article 26 of the ECT:
171.
First, Respondent maintains that the Tribunal lacks jurisdiction to decide this case. It argues that Claimant is not a protected investor since Article 26 of the ECT does not apply to disputes between a national of the EU and an EU member State and asserts that EU law takes precedence over the ECT and bars the Tribunal's jurisdiction.124 Claimant opposes this objection and submits that the Tribunal has jurisdiction.125
172.
Second, Respondent maintains that Spain's 7% tax on the value of the production of electrical energy through the enactment of Law 15/2012 (the "TVPEE"), is a taxation measure that is excluded from the scope of ECT Article 10(1) (which includes the FET standard and the umbrella clause), by virtue of ECT Article 21. Accordingly, the Tribunal lacks jurisdiction over Claimant's claim of alleged breaches of Article 10(1) of the ECT based on the adoption of the TVPEE.126 Claimant opposes this objection and submits that the Tribunal has jurisdiction to decide alleged violations of Article 10(1) of the ECT in relation to the enactment of Law 15/2012.127
173.
Respondent also submits an admissibility objection. It argues that Claimant cannot submit at the present time claims concerning an alleged breach of Article 13 of the ECT on expropriation related to Respondent's adoption of the TVPEE. Respondent acknowledges that taxation measures are applicable to Article 13 of the ECT; however, Article 21(5) of the ECT requires Claimant (or the Tribunal, as applicable) to first refer the issue to the competent national tax authorities for a six-month period.128 Claimant opposes this objection and submits that its claim on expropriation based on the enactment of Law 15/2012 is admissible.129
174.
Before setting out the Parties' positions in respect of Respondent's preliminary objections, the Tribunal makes three preliminary points.
175.
First, although the main thrust of each Party's position on the preliminary objections has remained constant, there has been considerable variation in the precise formulations used by the Parties in support of their positions. A number of awards relating to the renewable energy sector have been issued or made public during the pendency of this case, and the Parties understandably have taken into account those awards as they have become available. The summary of Party positions that appears below is intended to set out their positions, without capturing each and every point made by a Party. The Tribunal has considered the various arguments presented by each Party in support of its positions, including the arguments not summarized below.
176.
Second, Respondent took note in the written pleadings of a case that was then pending before the CJEU, which presented the question of the compatibility between a bilateral investment treaty and EU law.130 The CJEU delivered its Judgment in that case, Achmea v. Slovakia,131 after the Parties had completed their written submissions and prior to the Hearing. The Parties presented their respective views on the implications of the Achmea Judgment at the Hearing. For the convenience of the reader, the Tribunal will summarize that Judgment in paragraphs 190-198 below before it sets out the Parties' positions on the Judgment.
177.
Third, as noted in Procedural Order No. 6, the Parties agreed at the Hearing that their post-hearing briefs would not address questions of jurisdiction and admissibility. The summary of Party positions on these matters is based on positions taken by the Parties in their written pleadings and at the Hearing.

A. Lack of Jurisdiction Ratione Personae in view of an Intra-EU Dispute

(1) The Parties' Positions

a. Respondent's Position

178.
Among the various arguments that Respondent has presented in support of its jurisdictional objection ratione personae, there are two main strands.
179.
First, Respondent maintains that the ECT should be interpreted such that there is no jurisdiction over a dispute brought by an Investor of one ECT Contracting Party against another Contracting Party if both Contracting Parties are also Member States of the European Union. It advances an implied exception to Article 26 of the ECT for these "intra-EU disputes,"132 which it supports with reference to the text of various ECT provisions and the purposes of the ECT. It maintains that the ECT was negotiated against the backdrop of a principle of primacy of EU law, which must be taken into account in interpreting the Treaty.
180.
The second strand of Respondent's jurisdictional objection, which would apply even if the Tribunal rejected Respondent's interpretation of the ECT, is the contention that EU law has priority over other treaty obligations of EU Member States and, in particular, that the TFEU takes precedence over the dispute settlement provisions of the ECT. At the Hearing, it placed particular emphasis on the Judgment of the CJEU in Achmea v. Slovakia.133

(i) The Contention that there is an Implied Exception from Article 26(1) of the ECT for Intra-EU disputes

181.
Respondent notes that the dispute resolution mechanism set forth in Article 26(1) of the ECT requires the dispute to be between a Contracting Party and an investor of another Contracting Party.134 Respondent argues that this provision "inevitably implies" the exclusion from Article 26 of disputes between EU nationals and EU member States, in relation to intra-EU disputes and investments made within the EU ("intra-EU investments").135
182.
Respondent explains that Germany (Claimant's country of nationality) and Spain are member States of the EU, as was the case at the time of their respective ratifications of the ECT. As such, they were unable to contract obligations between themselves within the framework of the EU internal energy market. In turn, according to Respondent, the EU, as the organization to which its member States had granted their sovereignty with regard to the internal energy market, became a Contracting Party to the ECT.136 Claimant is therefore not an Investor of another Party, nor is it from the "area" of another Contracting Party, as required by Article 26(1) of the ECT.137 Respondent concludes that Article 26 of the ECT cannot generate any obligations between EU member States,138 and Claimant cannot therefore be considered as "an Investor of another Contracting Party", as required under this provision.
183.
Respondent considers that there is "literal recognition in the ECT itself"139 that the ECT does not apply to intra-EU investments and intra-EU disputes. The conclusion follows from the interpretation, purpose and context of the ECT.140 In Respondent's view, from a literal interpretation of provisions such as Articles 1(2), 1(3), 25 and 26(6) of the ECT, the following can be observed:

Article 1(2) : Regional Economic Integration Organisations ("REIOs") are included in the definition of Contracting Parties, and the EU is the only REIO that is a party to the ECT.141

Article 1(3) : The definition of REIOs explicitly recognizes their authority to take decisions binding on their member States in respect of certain matters a number of which are governed by the ECT. If the ECT had not wanted to consider that part of the matters comprised by it were exclusively decided by the EU, such formulation would not have been adopted.142

Article 25 : This provision excludes from the application of the ECT's most favored nation clause the preferential treatment applicable between parties to an economic integration agreement, thereby preventing the intra-EU investment promotion and protection system from extending to ECT signatory States that are not EU member States.143

Article 26(6) : This provision sets forth that disputes shall be decided in accordance with the ECT "and applicable rules and principles of international law." In this case, EU law is applicable international law and its rules and principles must be applied with the same hierarchy as the ECT itself. Therefore, the initiation of arbitration proceedings under the ECT by an EU investor against an EU member State would be contrary to EU law and incompatible with the content of Article 26(6).144

184.
According to Respondent, to consider that intra-EU disputes are covered by the ECT would defeat the purpose of the ECT. The intention of the EU and its member States in concluding the ECT was not to cover the area of intra-EU investments, which had been already covered by EU law.145 Respondent relies on the preamble of the ECT to indicate that its purpose was to promote industrial cooperation between the East and the West, and to speed up the economic recovery of Eastern Europe through cooperation in the energy sector.146
185.
In support of its proposed interpretation of the ECT, Respondent asserts that the primacy of EU law is "the essential Principle" upon which its jurisdictional objection ratione personae rests.147 The ECT must be interpreted in light of the jurisprudence of the CJEU that was in effect when the ECT was concluded. Respondent explains that the principle of primacy was first established by the CJEU in the Costa v. ENEL judgment of 1964 and means that EU law has preference and prevails over the application of any other law (national or international) when regulating internal EU relations.148 It also invokes a 1991 Opinion in which the CJEU found the draft Agreement to Create a European Economic Area to be incompatible with the exclusive jurisdiction of the Court of Justice, in light of Article 219 of the European Economic Community (EEC) Treaty (the predecessor of Article 344 of the TFEU), pursuant to which Member States undertook not to submit disputes concerning interpretation or application of the EEC Treaty to any method of dispute settlement not provided by the EEC Treaty.149
186.
Respondent considers that the principle of primacy of EU law is explicitly recognized in Article 25 of the ECT as it refers to 'preferential treatment'.150 The European Communities made an explicit declaration in relation to Article 25 to the effect that its application would only allow those derogations necessary to safeguard the preferential treatment resulting from the European Communities.151
187.
Respondent claims that the principle of primacy of EU law should be respected because the present dispute affects essential elements of EU Law (such as State aid, free movement of capital and freedom of establishment), which fall under the competence of the EU's own judicial system and, ultimately, of the CJEU.152
188.
Respondent also considers that to uphold jurisdiction in this case would be contrary to the principle of non-discrimination between EU investors. This would allow Claimant to resort to a dispute settlement mechanism outside the EU's judicial system to resolve what is an intra-EU dispute, to which Spanish investors have no access.153
189.
Respondent also recalls that the European Commission has concluded that the ECT does not apply to intra-EU disputes; that the ECT should be interpreted in harmony with EU law to avoid treaty conflict, and that in case of conflict, EU law prevails.154 Respondent also refers to the writings of certain commentators and asserts that its position is supported by doctrine.155

(ii) The Effect of the Treaty on the Functioning of the European Union (Including the Implications of Achmea v. Slovakia)

190.
Before setting out Respondent's position, the Tribunal summarizes the relevant parts of the Judgment of the CJEU in Achmea v. Slovakia.
191.
In Achmea, the CJEU considered a request from the Federal Court of Justice of Germany for a preliminary ruling:

(1) Does Article 344 TFEU preclude the application of a provision in a bilateral investment protection agreement between Member States of the European Union (a so-called intra-EU BIT) under which an investor of a Contracting State, in the event of a dispute concerning investments in the other Contracting State, may bring proceedings against the latter State before an arbitral tribunal where the investment protection agreement was concluded before one of the Contracting States acceded to the European Union but the arbitral proceedings are not to be brought until after that date?

If Question 1 is to be answered in the negative:

(2) Does Article 267 TFEU preclude the application of such a provision?

If Questions 1 and 2 are to be answered in the negative:

(3) Does the first paragraph of Article 18 TFEU preclude the application of such a provision under the circumstances described in Question 1?156

192.
Article 267 TFEU provides in its relevant part:

The Court of Justice of the European Union shall have jurisdiction

to give preliminary rulings concerning:

(a) the interpretation of the Treaties;

(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union;

Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon.

Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court.

193.
Article 344 of the TFEU provides that: "Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein."157
194.
The request of the Federal Court of Justice was made in the context of a proceeding to enforce an award against Slovakia issued by a tribunal constituted pursuant to the Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, to which Slovakia succeeded in 1993 (the "Netherlands-Slovakia BIT"). As the CJEU noted, Slovakia acceded to the EU in 2004.158
195.
In Article 8 of the Netherlands-Slovakia BIT, the Contracting Parties consent to arbitration of "disputes between one Contracting Party and an investor of the other Contracting Party concerning an investment of the latter" if the dispute has not been settled amicably within a period of six months.159 Article 8(6) of the BIT also addresses the applicable law:

The arbitral tribunal shall decide on the basis of the law, taking into account in particular though not exclusively:

- the law in force of the Contracting Party concerned;

- the provisions of this Agreement, and other relevant Agreements between the Contracting Parties;

- the provisions of special agreements relating to the investment;

- the general principles of international law.160

196.
In respect of the first and second questions of the Federal Court of Justice, related to Articles 267 and 344 TFEU, the CJEU framed the issues as follows:

[T]he referring court essentially asks whether Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the BIT, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.161

197.
According to the CJEU, an arbitral tribunal convened pursuant to the Netherlands-Slovakia BIT "may be called on to interpret or indeed to apply EU law," pursuant to Article 8(6) of the BIT.162 However, because such an arbitral tribunal is not a court or tribunal of a Member State, it is not entitled to seek a preliminary ruling from the CJEU. In addition, an award rendered by such a tribunal is subject only to limited review in the courts of EU Member States.163

Consequently, having regard to all the characteristics of the arbitral tribunal mentioned in Article 8 of the BIT […], it must be considered that, by concluding the BIT, the Member States parties to it established a mechanism for settling disputes between an investor and a Member State which could prevent those disputes from being resolved in a manner that ensures the full effectiveness of EU law, even though they might concern the interpretation or application of that law.164

198.
The CJEU therefore ruled:

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.165

199.
In its written pleadings, Respondent maintained that the EU legal system for the protection of EU investors prevails over the protection of investors that is provided by the ECT. In the present case, Claimant's investment was made within the framework of the Internal Market in Electricity of the EU. It follows that the dispute should be resolved within the EU legal system, per Article 344 of the TFEU.166 Otherwise, if the Tribunal were to resolve the dispute presented in this arbitration, it would have to deliver an opinion on the rights of EU investors in the framework of the Internal Market in Electricity, which would interfere with the competence of the EU judicial system.167
200.
Thus, Respondent submits that EU law precludes recourse to any dispute settlement mechanism other than that established by its treaties, which may interfere with its Internal Market (i.e., an area without internal borders that ensures the free movement, inter alia, of services and capital).168 Such market includes an Internal Market in Electricity, which is regulated, inter alia, through a number of directives.169 Spain asserts that the promotion of investment that it made in renewable energies was enshrined in the obligations that it undertook, as an EU member State, to achieve the aims established by these EU directives.170 Respondent argues that, because the EU jurisdictional system has the exclusive competence to interpret EU Law, and one of the main aims of the aforementioned directives is to protect investors, the institutional and judicial framework of the EU provides the appropriate means and legal remedies in case the rights of EU nationals are violated.171
201.
According to Respondent, although the Judgment in Achmea involved a bilateral investment treaty, the reasoning of the CJEU in Achmea applies equally to the ECT. Respondent points out that the CJEU interpreted the TFEU to preclude an investor-State arbitration provision in "an international agreement concluded between Member States… [s]uch as" the BIT at issue in that case, and thus is not limited to an agreement between two Member States.172 The jurisprudence on which the CJEU relies in Achmea includes prior decisions in which the CJEU addressed multilateral treaties.173 Respondent maintains that the ruling of the CJEU in Achmea confirms the case law since CJEU Opinion 1/1991 regarding the European Economic Area.174
202.
Respondent states that the "prerequisites" set out in Achmea are met in the present case: The Tribunal has to interpret and apply EU law. The CJEU cannot exercise its powers through a preliminary ruling, and, under the ICSID Convention, the review of the award rendered by the Tribunal "cannot be made by the European Court of Justice totally." As a result, the Tribunal lacks jurisdiction.175
203.
Respondent also states that:

The Achmea case ruling affirms that the principle of primacy of the European Union law precludes that intra-European Union disputes regarding investments could be solved by arbitral tribunals. This is admitted under the international law, because Article 41(b) of the Vienna Convention allows that two or more of the parties of a multilateral treaty may modify a multilateral treaty when it affects only procedural rules.

So the international law allows that in 2008 the Member States of the European Union modified between them the priority of the methods to resolve disputes between the Member States.176

204.
Respondent cites in support of its position the November 2017 decision communicated by the European Commission to Spain.177 In that communication, the Commission referred to the pendency of "investor-State arbitration against Spain on the basis of the Energy Charter Treaty against the changes brought by the Royal Decree 413/2014 to beneficiaries of the premium remuneration scheme it replaces."178 It stated, in relevant part:

The Commission considers that any provision that provides for investor-State arbitration between two Member States is contrary to Union law; in particular, this concerns Article 19(1) TEU, the principles of the freedom of establishment, the freedom to provide services and the free movement of capital, as established by the Treaties (in particular Articles 49, 52, 56, and 63 TFEU), as well as Articles 64(2), 65(1), 66, 75, 107, 108, 215, 267 and Article 344 TFEU, and the general principles of Union law of primacy, unity and effectiveness of Union law, of mutual trust and of legal certainty.

[…] Union law provides for a complete set of rules on investment protection (in particular in Articles 49, 52, 56, and 63 TFEU, as well as Articles 64(2), 65(1), 66, 75 and 215 TFEU). Member States are hence not competent to conclude bilateral or multilateral agreements between themselves, because by doing so, they may affect common rules or alter their scope. As the two sets of rules on investment protection potentially applicable between an EU Member State and an investor of another State (i.e. the Treaties and intra-EU bilateral investment treaties (BITs) or the ECT in an intra-EU setting) are not identical in content and are applied by different adjudicators, there is also a risk of conflicts between the international investment treaty and Union law.

[…] The resulting treaty conflict is to be solved, in line with the case-law of the Court, on the basis of the principle of primacy in favour of Union law. For those reasons, ECT does not apply to investors from other Member States initiating disputes against another Member States.179

b. Claimant's Position

205.
Claimant opposes Respondent's jurisdictional objection ratione personae. In its view, the ECT applies to intra-EU investments and intra-EU disputes and provides jurisdiction over its claims.
206.
Claimant submits that it is a protected investor under Article 26 of the ECT and that there is no implied exception to the ECT for intra-EU investments or intra-EU disputes. It also opposes Respondent's argument that the EU legal system prevails over the investor protections of the ECT and disagrees with the conclusions that Respondent draws from the Achmea Judgment.

(i) The ECT contains no implied exception for intra-EU investments

207.
Claimant states that the Tribunal has jurisdiction to decide this case since there exists a dispute between a "Contracting Party" and an "Investor of another Contracting Party", as required under Article 26 of the ECT.
208.
Claimant indicates that the Parties satisfy the definitions of these terms, as set out in Articles 1(2) and 1(7)(a)(ii) of the ECT, respectively. Spain qualifies as a "Contracting Party" as it is a "state […] which has consented to be bound by [the ECT] and for which the Treaty is in force."180 Claimant is "a company [] organized in accordance with the law applicable in [a] Contracting Party" (in this case, a company organized under the laws of Germany). Therefore, Claimant is an Investor of a Contracting Party.181 By extension, Claimant's investments in Spain qualify as "an Investment of [an Investor of a Contracting Party] in the Area of [another] Contracting Party" under Article 26(1) of the Treaty.182
209.
Accordingly, because Spain is a Contracting Party and SolEs Badajoz is an Investor from the Area of another Contracting Party, according to the terms of the ECT, Claimant concludes that the Tribunal has jurisdiction ratione personae in this case.183
210.
Claimant also disputes the conclusions that Respondent draws from various provisions of the ECT. In Claimant's view, from a reading of provisions such as Articles 1(2), 1(3), 25 and 26(6) of the ECT, which have been invoked by Respondent to imply that the Tribunal lacks jurisdiction, the following can be observed:

Article 1(2) : Claimant agrees with Respondent that this provision provides the definition of a REIO, the EU being the only REIO that is a party to the ECT.184 Claimant argues that, as a REIO, the EU is a party to the ECT, and the member States of the EU are also parties to the ECT and are each bound by the ECT, in their own capacity. Claimant submits that the ECT makes no exception to jurisdiction as to a dispute between State that is a party to the ECT and an investor of another State party to the ECT on the basis that both States are also members of the same REIO. Accordingly, there cannot be an exception to jurisdiction for intra-EU disputes under the ECT.185

Article 1(3) : Claimant disagrees with Respondent's interpretation of this provision. Claimant notes that Spain cannot establish that the EU (then the European Economic Community ("EEC")) member States transferred competence over energy investments and their protection to the EEC at the time they signed the ECT. In fact, the Lisbon Treaty, which transferred to the EU exclusive competence over investment protection, was not signed until 2007.186

Article 25 : Claimant indicates that Respondent has failed to establish why and how this provision impacts the arbitration clause of the ECT. Claimant explains that the fact that the benefits extended among EU member States do not automatically extend to non-EU signatories of the ECT "does not exclude the fact that EU Member States are bound by other obligations under a different treaty regime, in this case, the arbitration clause of the ECT."187

Claimant also considers that the EC's declaration under Article 25 of the ECT mentioned by Respondent is a limited carve-out from the ECT that allows EU Member States to extend benefits between themselves without an obligation to extend them to non-EU Members and in fact suggests that outside the "necessary" "derogations" from the ECT rules, the ECT provisions will prevail.188

Article 26(6) : Claimant recalls that, pursuant to this provision, tribunals established under the ECT shall decide the issues in dispute in accordance with this treaty and applicable rules and principles of international law. Claimant argues that the primary applicable law in this case is the ECT itself (as the dispute concerns breaches of the FET, expropriation and the umbrella clause contained in the ECT), and not EU law.189

211.
In addition, Claimant rejects Respondent's assertion that the inclusion of intra-EU disputes within the ECT would defeat the purpose of the ECT. Claimant relies, inter alia, on the findings of the Eiser tribunal, which found nothing in the ECT to justify the exclusion of a large category of investors and potential disputes from its scope.190 That is, nothing in the ECT allows a disparity of treatment that would result in "a mandatory and unjustified twofold dispute regime" (i.e., intra-EU disputes being submitted to national courts, while non-EU disputes being resolved through the ECT's dispute settlement mechanisms).191 On the contrary, Claimant notes that the purpose of ECT Article 26 is to provide investors with a choice of dispute settlement fora, and that such free choice constitutes an integral part of the guarantees that are provided by the ECT.192
212.
Claimant refutes Spain's reliance on a "principle of primacy of EU law" to contest Claimant's argument that there is no requirement or justification to apply EU law in this case.193 It rejects Respondent's contention that provisions of the ECT such as Article 25 explicitly recognize EU primacy.194
213.
Contrary to Respondent's assertion, Claimant submits that the EU legal system does not confer particular protections upon EU investors which are preferable to the protection conferred by the ECT. The ECT provides investors with a wide range of protections, including guarantees against discrimination and the FET standard under international law.195
214.
Claimant considers Respondent's assertions to be irrelevant in view of Article 16(2) of the ECT, which provides that if ECT Contracting Parties enter into international agreements addressing matters covered by Parts III ("Investment Promotion and Protection") or V ("Dispute Settlement") of the ECT, any provision which is more favorable to the investor or investment shall prevail.196 Under Part V, Article 26(1) and (2) of the ECT, an investor may choose to submit a dispute for resolution (a) to the courts or tribunals of the Contracting Party that is a party to the dispute, (b) in accordance with another previously agreed procedure or (c) to international arbitration or conciliation in accordance with Article 26. The ECT's option of giving investors access to international arbitration is more favourable than litigation before Spanish courts, pursuant to EU law.197
215.
Thus, according to Claimant, pursuant to Article 16(2) of the ECT, provisions of subsequent EU agreements (including the TFEU, on which Respondent relies) cannot prevail over more favorable protections granted to investors by the ECT, such as the right to dispute settlement under Part V of the ECT.198

(ii) The TFEU and the Achmea Judgment have no effect on the Tribunal's jurisdiction

216.
Claimant submits that the present case does not involve the interpretation and application of EU law and, even if it did, that would not preclude the Tribunal's jurisdiction over this dispute.199
217.
Claimant dismisses Respondent's reliance on Article 344 of the TFEU to conclude that such provision impedes Spain from referring matters relating to the Internal Market in Electricity to arbitration as it would require the Tribunal to rule on the rights of an EU investor and to apply EU law.200 Claimant notes that this case does not involve the interpretation and application of EU Law. It concerns violations of certain provisions of the ECT. Therefore, the primary applicable law is the ECT itself.201 Claimant refers to the findings of the tribunals in Eiser, Charanne, and Isolux in support of this assertion.202
218.
In its Rejoinder, Claimant notes that the ECT and EU law are two distinct regimes under international law, and such autonomy is reinforced by the fact that Claimant's claim is brought under the ECT and not under EU law.203 Claimant highlights that a foreign investor cannot be precluded from exercising its choice of dispute settlement forum under Article 26 of the ECT (which explicitly includes the option to resort to ICSID arbitration rather than domestic courts or administrative tribunals).204
219.
Claimant cites the Charanne award to the effect that there is no rule of EU law that prevents an arbitral tribunal from applying EU law to resolve a dispute between an EU investor and an EU member State.205 Claimant further reasons that, because the Tribunal is not an EU institution, it is "not bound by EU rules according to which only European Courts are competent to pass upon the meaning and content of EU law."206
220.
In its Rejoinder, Claimant elaborates on its arguments that there is no competing jurisdiction between an ECT based tribunal and the CJEU.207 Claimant also considers that Respondent's arguments on whether an award could constitute State aid are irrelevant for determining the Tribunal's jurisdiction.208 Among other arguments, Claimant notes that: this Tribunal's award would not be binding on an EU Court or legislator;209 the absence of conflict is evidenced in the fact that this Tribunal is called upon to decide claims of violations of Articles 10 and 13 of the ECT while an EU judge has a distinct jurisdiction, which includes the examination of State aid as a matter of EU regulation;210 while the principle of loyalty to EU institutions may be an obligation of Respondent as an EU member State, it is "of no concern to an international tribunal constituted pursuant to the provisions of the ECT and principles of international law";211 and the ECT offers a distinct regime by virtue of which an EU investor may seek relief that it might not obtain under EU law.212
221.
Claimant maintains that the reasoning of the CJEU in Achmea does not apply to the ECT, because the ECT is not a bilateral treaty, but instead is a multilateral treaty to which "the EU is itself a party."213 Claimant also maintains that, even if Achmea did apply to multilateral treaties, there would be no clash between the ECT and EU law because the ECT, as a treaty concluded by the EU, is part of EU law.214 Claimant also states that, even if there were a clash between the ECT and EU law, it would be resolved pursuant to Article 27 of the VCLT, which provides that a party may not invoke its internal law as justification for its failure to perform a treaty. Thus, Respondent may not invoke EU law to justify a failure to meet its obligations under the ECT.215
222.
With respect to the November 2017 decision of the European Commission cited by Respondent, Claimant takes the view that this decision merely reiterates positions that the EC has taken in other arbitrations, which were not taken into account by those tribunals.216 It also states that the Tribunal is not bound by the content of the decision "since EU law is not applicable to the resolution of this dispute."217

(2) The Tribunal's Analysis

a. The Contention that the ECT Contains an Implied Exception for "Intra-EU Disputes"

223.
The contention that the ECT does not apply to intra-EU investments and intra-EU disputes calls for the interpretation of the ECT. Consistent with Article 31(1) of the VCLT, the Tribunal interprets the ECT in accordance with the ordinary meaning of its terms, in their context and in light of the object and purpose of the treaty.
224.
The starting point is an examination of definitions in Article 1 of the ECT of terms that are used in the jurisdictional article (Article 26). A company incorporated under the laws of a Contracting Party (such as Claimant, incorporated under the laws of Germany) fits within the definition of "Investor" in Article 1(7)(a)(ii). Respondent is a State that is a Contracting Party of the ECT as defined in ECT Article 1(2). The dispute that is the subject of this case arises out of Claimant's investment in the land territory of Spain and thus in the "Area" of Respondent, as defined in ECT Article 1(10)(a).
225.
Article 26, entitled "Settlement of Disputes between an Investor and a Contracting Party," applies to a dispute between a Contracting Party and an Investor of another Contracting Party "relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III."218 Claimant has exercised the choice of procedure available to it under Article 26(2) of the ECT by initiating arbitration pursuant to the ICSID Convention. By becoming a Contracting Party to the ECT, the Kingdom of Spain has consented unconditionally to the submission of such a dispute to arbitration (ECT Article 26(3)). Taking into account the ordinary meaning of Articles 1 and 26, the present case concerns a dispute over which this Tribunal has jurisdiction.
226.
According to Respondent, however, the Tribunal lacks jurisdiction ratione personae because "[b]oth Germany, the country of the Claimant, and the Kingdom of Spain are member States of the European Union [, which is a] Contracting Party of the ECT and therefore the Claimant does not originate from 'another Contracting Party', as demanded by Article 26 of the ECT to be able to resort to arbitration."219 To similar effect is Respondent's assertion that Claimant is not from the "area" of another Contracting Party.220 On Respondent's theory, Article 26(1) refers to a dispute between a Contracting Party and an Investor of "another" Contracting Party and thus requires diversity of nationality and Area. However, if two Contracting Parties are also member States of a REIO, there is no diversity of nationality or of Area.
227.
It would be highly unusual for a court or tribunal to interpret a treaty to contain an implied exception to its terms. The implied exception proposed by Respondent is not a small tweak of the Treaty. If established, it would mean that the negotiators concluded a treaty that was largely inoperable as between EU investors and other EU Member States, but did not indicate that exception in the text.
228.
It is necessary to consider whether Respondent's proposed interpretation of the ECT finds support in "context,"221 in particular, in the provisions that address the particular situation of the European Community, which was an active participant in the negotiation of the ECT.222 The Treaty permits a REIO, as defined in Article 1(3), to become a Contracting Party. The European Community signed the treaty and became a Contracting Party in that capacity.
229.
The definition of the "Area" in Article 1(10) contains a definition of the term "Area" that is tailored to the situation of a REIO; the Area of a REIO is defined as the Areas of its member States. Having set out a specialized definition of "Area" that applies to a REIO, negotiators also could have specified that the "Area" of a Contracting Party that is also a Member State of a REIO is deemed to be the entire Area of the REIO. They did not do so, nor did they indicate that a State cannot be "another Contracting Party," as that phrase is used in Article 26, if the two States in question are also Member States of a REIO.
230.
Respondent points to Article 25 of the ECT in support of the claimed intra-EU exception. That provision expressly allows derogation from the ECT's most-favored nation provision by permitting States parties to an Economic Integration Agreement ("EIA") to accord preferential treatment to each other without extending the same treatment to other ECT Contracting Parties. Had the drafters of the ECT intended an additional derogation denying to intra-EU investors the protections and dispute settlement options that would otherwise apply, they could have done so. They did not.
231.
In the view of the Tribunal, the various provisions of the ECT that refer to REIOs and EIAs demonstrate that negotiators used express language to address the circumstances of the EU when they decided that differentiation from the situation of other Contracting Parties was necessary.
232.
As noted by the Tribunal in Eiser, "[t]reaty law and practice provide familiar mechanisms for treaty makers wishing to limit or exclude application of particular provisions in particular situations."223 The ECT "includes multiple limiting decisions and understandings [...] Yet the EEC sought no similar clarifying provisions regarding what Respondent now contends is a major exclusion in the ECT's coverage."224 Of particular relevance is Decision 1 of the ECT, which provides that the Svalbard Treaty prevails in the event of any conflict between that treaty and the ECT and that any dispute about the existence or extent of such a dispute is excluded from Part V of the ECT (Dispute Settlement).225 Had there been an intention to state any special rules for EU treaties or REIO treaties more generally, or for intra-REIO investments and intra-REIO disputes, another decision could have been included. That was not done.
233.
It might also be suggested that the primacy of EU law over inconsistent obligations in non-EU treaties was so firmly established at the time that the ECT was being negotiated that no express exception for intra-EU investments and intra-EU disputes was necessary. Respondent points to Opinion 1/91 of the European Court of Justice to support the asserted primacy of EU law. In that Opinion, the Court concluded that the proposed European Economic Area ("EEA") Court was incompatible with the Treaty Establishing the European Economic Community because the EEA Court could be required to interpret and apply EU law.226 It stated that the "exclusive jurisdiction of the Court of Justice is confirmed by Article 219 of the EEC Treaty, under which Member States undertake not to submit a dispute concerning the interpretation or application of that treaty to any method of settlement other than those provided for in the Treaty."227
234.
The Tribunal does not find in this Opinion and other authorities cited by Respondent a principle of EU primacy over non-EU treaties that was so obvious in the early 1990s that there was no need for an express exclusion of intra-EU disputes from the investor-State arbitration provisions of the ECT. Even decades later, a number of arbitral tribunals and the Advocate General of the ECJ have concluded that Article 344 of the TFEU (which is identical in substance to former Article 219 of the EEC Treaty) does not even address the same subject matter as the investor-State provisions of an investment treaty and thus that EU law does not conflict with the investment treaty at issue.228 It cannot be the case that the opposite conclusion was so obvious to participants in the negotiations of the ECT that no express exception was needed.
235.
Respondent does not convince the Tribunal that the object and purpose of the ECT calls for an interpretation of the Treaty that implies an exception for intra-EU disputes. Respondent is no doubt correct that increased East-West cooperation was one objective of the ECT, but the preamble makes clear that the object and purpose of the treaty was much broader, to include the catalysation of economic growth through measures to liberalise investment and trade in energy.
236.
Respondent has not pointed to any supplementary means of interpretation of the ECT (such as the travaux préparatoires) that would call into question the ordinary meaning of Article 26.
237.
Taking into account the ordinary meaning of Articles 1 and 26 of the ECT, in light of the other provisions of the ECT and its object and purpose, the Tribunal concludes that there is no implied exception to the ECT that excludes intra-EU investments and intra-EU disputes from the Treaty.

b. The Claim that the TFEU Excludes the Tribunal's Jurisdiction, Taking into Account Achmea v. Slovakia

238.
Having concluded that the ECT applies to intra-EU investments and intra-EU disputes, the Tribunal must now consider whether the TFEU operates to change the meaning or validity of the ECT for those ECT Contracting Parties that are also EU Member States. The Tribunal, which is not an institution of the European Union, approaches this question from the vantage point of a tribunal established pursuant to the ICSID Convention and the ECT. It focuses in particular on the Parties' arguments as updated by the Judgment of the CJEU in Achmea.
239.
Respondent maintains that the investor-State provisions of the ECT are inconsistent with the TFEU and that the TFEU takes precedence over the ECT. It considers that the reasoning of the CJEU in Achmea applies equally to the ECT. Thus, the Tribunal does not have the jurisdiction that it would otherwise have under Article 26 of the ECT. The position advanced by the European Commission229 is to the same effect.
240.
Claimant considers that the reasoning in Achmea involved a bilateral investment treaty and that its reasoning does not apply to the ECT, a multilateral treaty to which the EU is also a party.
241.
The Tribunal addresses three questions regarding the relationship of the ECT to the TFEU. First, does Article 344 of the TFEU address the same subject matter as Article 26 of the ECT? Second, if so, is there an inconsistency between the two treaties? Third, if there is an inconsistency, which treaty takes priority?
242.
As to the question whether Article 344 of the TFEU addresses the same subject matter, the Tribunal notes that some past tribunals have concluded230 that Article 344 of the TFEU does not address investor-State arbitration. On this reasoning, Article 344 of the TFEU has a different subject-matter from that of Article 26 of the ECT, so there is no conflict between the two provisions and no need to decide whether one treaty takes precedence over the other. This was the logic of the opinion of the Advocate General in Achmea, which stated that arbitration between an investor and a Member State of the EU does not come under Article 344 of the TFEU.231
243.
The CJEU did not agree with the Advocate General. It found instead that the obligations of The Netherlands under Article 3 of the BIT (in which The Netherlands had consented to investor-State arbitration) were inconsistent with the TFEU. It concluded that the TFEU (in particular, Articles 267 and 344) had primacy over the BIT.
244.
The Tribunal in Masdar, writing after the Judgment of the CJEU in Achmea, concluded that the reasoning of that Judgment, which involved a bilateral treaty between EU Member States, did not apply to the ECT, a multilateral treaty to which the EU itself is a party.232 However, the Tribunal sees reason to doubt that the bilateral nature of the treaty at issue in Achmea was critical to the reasoning of the CJEU. Respondent is correct in pointing out that the Court in Achmea relied on past jurisprudence that did not address bilateral agreements, such as Opinion 1/91, which addressed a treaty to which non-EU States, EU Member States and the European Community were to be parties.233 The Tribunal also notes that the European Commission has taken the position that the "ECT does not apply to investors from other Member States initiating disputes against another Member States."234
245.
This Tribunal considers it prudent to proceed, arguendo, on the assumption that a provision of a non-EU treaty in which treaty parties agree to investor-State dispute settlement does fall within the scope of Article 344 of the TFEU, even if the investment treaty is a multilateral treaty to which the EU itself is a party, such as the ECT. Assuming that this is the case, it would follow from the reasoning in Achmea that the consent of EU Member States to investor-State arbitration pursuant to Article 26 of the ECT is in conflict with Article 344 of the TFEU, as the TFEU has been interpreted by the CJEU. The Tribunal must therefore determine which treaty takes precedence.
246.
When a treaty does not expressly address possible inconsistencies between that treaty and prior or subsequent treaties on the same subject-matter, Article 30 of the VCLT (entitled "Application of Successive Treaties Relating to the Same Subject-Matter") provides residual rules that can be used to determine which treaty has primacy. As to Part V of the ECT (concerning Dispute Settlement), however, no resort to these residual rules is necessary, because Article 16 of the ECT expressly addresses the relationship between the dispute settlement chapter of the ECT and the provisions of another treaty on that subject matter. It does so in clear terms and comprehensive terms, as follows:

Where two or more Contracting Parties have entered into a prior international agreement, or enter into a subsequent international agreement, whose terms in either case concern the subject matter of Part III or V of this Treaty,

(1) nothing in Part III or V of this Treaty shall be construed to derogate from any provision of such terms of the other agreement or from any right to dispute resolution with respect thereto under that agreement; and

(2) nothing in such terms of the other agreement shall be construed to derogate from any provision of Part III or V of this Treaty or from any right to dispute resolution with respect thereto under this Treaty, where any such provision is more favourable to the Investor or Investment.

247.
Pursuant to Article 16, if (as the Tribunal has assumed above) the "right to dispute settlement" provided in Part V of the ECT is in conflict with Article 344 of the TFEU, the provisions of the TFEU can derogate from an Investor's right to dispute resolution under Part V of the ECT only if the provisions of the TFEU are more favourable to the Investor than is Part V of the ECT.
248.
Part V of the ECT provides a right to dispute settlement that is additional to those otherwise available to an investor in respect of an intra-EU dispute, i.e., the right to initiate investor-State arbitration. Part V of the ECT also expressly preserves the right of an Investor to pursue resolution of a dispute in "the courts or administrative tribunals of a Contracting Party" or another previously agreed dispute settlement procedure. Because the ECT adds the mechanism of investor-State dispute settlement to the mechanisms that would otherwise be available to an investor, the Tribunal finds that the provisions of the TFEU are not more favourable to an investor than is Part V of the ECT, and thus that the TFEU cannot derogate from the rights of an investor of Part V of the ECT.235
249.
Article 16 of the ECT has a comprehensive temporal scope; it applies both to treaties that are subsequent to the ECT (such as the TFEU) and prior EU and European Community treaties.
250.
Bearing in mind that the task of this Tribunal is to determine its own jurisdiction, pursuant to the ICSID Convention and the ECT, and that the Tribunal is not an institution of the EU, the Tribunal concludes that, if the ECT and the TFEU address the same subject matter, Article 16 of the ECT means that the TFEU may not derogate from the dispute settlement provisions of the ECT and thus that the TFEU does not detract from the Tribunal's jurisdiction.
251.
The Tribunal also notes that Respondent suggested at the Hearing that the EU and its Member States had modified the ECT in 2008, referring to Article 41 of the VCLT, which allows two or more parties to a multilateral treaty to modify the treaty as between them, under defined conditions.236 Respondent does not specify the terms of such modification. It does not address the conditions in Article 41 to have been met here (i.e., that the modification does not affect the enjoyment of other parties of their rights and does not relate to a provision derogation from which is incompatible with the effective execution of the treaty's object and purpose). Moreover, Article 41 requires notification of any intended modification to the other parties to the treaty. No such notification was provided. Accordingly, there is no basis to conclude that the ECT has been modified to include an intra-EU exception to jurisdiction.
252.
On the basis of the above analysis, and having considered fully the Parties' many assertions in relation to jurisdiction over intra-EU disputes (including those not specifically addressed in this Award), the Tribunal rejects Respondent's objection to its jurisdiction in respect of intra-EU disputes.
253.
On 11 February 2019, the Tribunal granted Respondent's request to file as an additional legal authority the Declaration of the Representatives of the Governments of the Member States of 15 January 2019 on the legal consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union (signed by twenty-two EU Member States) and Claimant's request to file two related documents, the Declaration of Governments of the Member States of 16 January 2019, signed by five EU Member States and the Declaration of the Government of Hungary of 16 January 2019.237 The Parties were invited to submit brief observations on these declarations. Rather than reprising the Parties' observations in detail, the Tribunal notes that each Party sought to make use of these declarations to reinforce positions that it had previously taken in these proceedings. Having considered those observations, as well as the three Declarations, the Tribunal considers that these Declarations do not affect the reasoning that the Tribunal has used in addressing the objection to its jurisdiction. As stated at paragraphs 245-249 above, even assuming, arguendo, that the "right to dispute resolution" provided in Part V of the ECT is seen to conflict with Article 344 of the TFEU, Article 16 of the ECT provides that the TFEU can derogate from Part V of the ECT only if the TFEU is more favorable to investors than is Part V of the ECT. The Tribunal has found that this is not the case.

B. Lack of Jurisdiction Ratione Materiae over Taxation Measures

(1) The Parties' Positions

254.
Respondent maintains that, pursuant to the exception for tax measures contained in Article 21 of the ECT, it has not consented to the Tribunal's jurisdiction to hear alleged breaches of ECT Article 10(1) related to the TVPEE, a 7% tax on the value of energy production that was imposed in Act 15/2012. Claimant responds that the Tribunal has jurisdiction to decide whether the TVPEE violates ECT Article 10(1) because the Article 21 applies only to genuine tax measures and the TVPEE is not a bona fide tax measure.

a. Respondent's Position

255.
Article 26 of the ECT limits the Contracting Parties' consent to arbitration to "an alleged breach of an obligation of [a Contracting Party] under Part III [of the ECT]."238 Article 10(1) of the ECT is located in Part III of the ECT. However, Article 21(1) of the ECT provides:

Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties. In the event of any inconsistency between this Article and any other provision of the Treaty, this Article shall prevail to the extent of the inconsistency.239

256.
Respondent points out that the exceptions contained elsewhere in the ECT do not apply to an alleged breach of Article 10(1)240 and that this conclusion has been confirmed by the ECT Secretariat and previous arbitral jurisprudence.241
257.
Respondent notes that, pursuant to Article 21(7)(a)(i) of the ECT, the term "taxation measure" includes "[a]ny provision relating to taxes of the domestic law of the Contracting Party […]"242 Respondent maintains that the TVPEE fits within this definition. Act 15/2012 was passed by the Spanish Parliament in accordance with Article 133 of the Spanish Constitution, which grants the State the authority to establish taxes.243 The TVPEE is levied on the performance of the activities of production and incorporation into the SEE of electric energy. Act 15/2012 explicitly refers to the taxation nature of the TVPEE244 and the TVPEE satisfies the definition of tax set forth in Spanish Act 58/2003 on General Taxation.245 The self-assessment and payment to the Public treasury of the TVPEE is made through a tax form, in accordance with a ministerial order which has been deemed to be compliant with domestic law by the Spanish High Court.246 The Spanish Constitutional Court has confirmed the taxation nature of the TVPEE and its conformity with the Spanish Constitution.247
258.
Respondent also considers that the TVPEE is a tax under international law.248 It relies, inter alia, on prior decisions of arbitral tribunals to support its contention that the concept of tax in international law has a number of defining characteristics which the TVPEE fulfills, as follows: (a) the tax is established by law;249(b) such law imposes an obligation on a class of people (in this case, the TVPEE is levied on all persons who produce and incorporate energy into the SEE);250 and (c) this obligation involves paying money to the State for public purposes. Respondent also notes that the European Commission has confirmed the TVPEE's taxation nature and its consistency with EU law.251
259.
Accordingly, the TVPEE is a tax within the meaning of Article 21(7)(a)(i) of the ECT.
260.
Respondent maintains that the Tribunal should reject Claimant's contention that the TVPEE is not a bona fide taxation measure.252 It submits that only "extraordinary circumstances" could exempt a taxation measure from the protection of the taxation carve-out in Article 21(1), such as a tax with a purpose that is "entirely unrelated" to the purpose of raising revenue for the State (e.g., the destruction of a company or the elimination of a political opponent).253
261.
Respondent also contends that the good faith analysis proposed by Claimant implies examining the economic effects of such tax. Respondent recalls the tribunal's conclusion in EnCana that the determination of what constitutes a tax measure "is primarily a question of its legal operation, not its economic effect" and that, while the economic effects or impacts of a tax "may be unclear and debatable [,] nonetheless a measure is a taxation measure if it is part of the regime for the imposition of a tax."254 The legal operation of the TVPEE is that of a taxation measure; it is not appropriate to examine its economic effect in order to determine that it constitutes a taxation measure for purposes of the ECT.255
262.
Moreover, Respondent disputes Claimant's assertion that the TVPEE is not a bona fide taxation measure because it allegedly discriminates against renewable producers in comparison to conventional producers and is a disguised tariff cut.256 The TVPEE applies to all energy producers (both renewable and conventional) and its impact is neutralised as it is a recoverable cost by renewable producers under the current remuneration scheme.257 Respondent also notes that its position is aligned with that of the tribunals of the Isolux and Eiser cases.
263.
Based on the above, Respondent concludes that Article 10(1) of the ECT does not generate obligations for Contracting States with respect to the TVPEE. As a consequence, the Tribunal lacks jurisdiction with regard to Claimant's claim of an alleged breach of Article 10(1) of the ECT through the adoption of the TVPEE.258

b. Claimant's Position

264.
Claimant submits that the Tribunal has jurisdiction over the claim that the TVPEE violates Article 10(1) of the ECT. Article 31(1) of the VCLT obligates Respondent to interpret the ECT in good faith. Thus, a measure that is not a bona fide tax cannot fall within the exception in Article 21(1). The TVPEE is not a bona fide tax measure, but is instead a measure with the purpose and effect of reducing the remuneration to which Claimant was entitled pursuant to the Original Regulatory Regime, in a manner designed to avoid liability under the ECT. Moreover, the Tribunal cannot isolate the TVPEE from the rest of the Disputed Measures.
265.
Claimant disputes Respondent's "formalistic interpretation" of the definition of "Taxation Measures" under Article 21(7)(a)(i) of the ECT and the alleged main characteristics of the concept of tax under international law. If the observance of formal aspects sufficed to qualify a measure as legitimate tax measure, a State would be able to impose a draconian tax as long as it observed basic formalities, thereby circumventing the protections of the ECT. The Tribunal's analysis should privilege substance over form, taking into account the context in which Law 15/2012 was implemented and Respondent's motivations.259
266.
Claimant considers that the standard indicated by Respondent (under which the analysis of the good faith of taxation measures is justified only in extraordinary circumstances) sets the threshold too high. The TVPEE was the product of an act of bad faith and satisfies Respondent's suggested criterion of destruction of a company, given that it contributed to the dismantling of the Original Regulatory Regime and brought Claimant "to the brink of ruin."260
267.
In support of its contention that the TVPEE is not a bona fide tax, Claimant asserts that the fact that the TVPEE is of general application is irrelevant, because PV investors are de facto discriminated against because they are unable to pass on the cost of the tax on to their customers (i.e., since conventional energy producers did not benefit from the same FIT incentives, even if the TVPEE was applied to both conventional and renewable energy producers, only the latter were subject to a reduction of FITs).261 Because the cost of the TVPEE cannot be passed to consumers, Claimant's investment lost value directly corresponding to the amount levied, amounting to disguised deprivation of Claimant's investment.262
268.
Claimant asserts that the TVPEE is a tariff cut framed as a taxation measure "to reduce revenue streams without appearing to modify the fixed, regulated prices established by the FITs" to "avoid overtly breaching investors' rights and thereby limit its exposure to liability under the ECT."263 It argues that the TVPEE was an initial step towards the destruction of a regulatory system based on fixed FITs.264 Respondent "necessarily knew" that the FITs provided for in RD 661/2007 and RD 1578/2008 were fixed and they could not be modified. Respondent therefore must have known that the cost of a tax such as the TVPEE could not be passed on by the energy producer. In both intent and in effect, the TVPEE "was a deliberate and substantial reduction of the FITs, by indirect means."265
269.
Claimant concludes that the introduction of the TVPEE through Act 15/2012 was an attempt to circumvent the protections of the ECT. Therefore, it should not fall within the scope of Article 21 of the ECT.266
270.
Claimant also considers that the TVPEE cannot be isolated from the other Disputed Measures by the Tribunal as "[t]hey have a cumulative damaging effect and they have all contributed to Spain's breaches of the ECT."267
271.
Based on the above, Claimant concludes that the Tribunal has jurisdiction to hear its claim that the introduction of the TVPEE breaches Spain's obligations under ECT Article 10(1).

(2) The Tribunal's Analysis

272.
The TVPEE imposes a 7% tax on a large class of persons that includes Claimant. Its provisions, as noted by Respondent, are consistent with a tax measure, as is the method of its adoption (enactment by the Spanish Parliament in accordance with Spain's Constitution and its law regarding taxation measures). The TVPEE generates revenue for the State, which is included in the State General Budget. The Tribunal considers that it has the characteristics of a "taxation measure" within the scope of ECT Article 21(1)(7)(a)(i).
273.
Article 21(1) of the ECT contains an explicit exception from jurisdiction in respect of alleged breaches of Article 10(1). The Tribunal agrees with Respondent that this explicit tax carve-out could only be overridden in extraordinary circumstances.
274.
Claimant asserts that, rather than being a bona fide tax measure, the TVPEE is the "tariff cut which dares not speak its name."268 Claimant's contention is that Respondent styled the measure as a tax, rather than a reduction in applicable tariffs, in response to the initiation of arbitration by investors that claimed that Respondent's changes to remuneration under RD 661/2007 violated the ECT, and did so in order to reduce the remuneration of producers of renewable energy without appearing to reduce tariffs.269 Claimant maintains that such a measure runs afoul of Respondent's obligation to perform its obligations under the ECT in good faith.270
275.
Even assuming that Respondent took into account the provisions of the ECT in deciding to impose the TVPEE, the fact that a State's legislation is informed by its treaty obligations would not be sufficient to establish that the State had failed to perform its obligations under that treaty in good faith. During the period when Respondent enacted the TVPEE (2010-2012), it took other measures (e.g., the change in inflation index and the cap on hours) that were not subject to the tax carve-out and thus could be challenged as violations of Article 10(1). It has defended the legality of all of those measures in this proceeding.
276.
The Parties refer to the conclusions of other tribunals that have addressed the question whether a measure constitutes a bona fide tax. In Yukos, the tribunal found that the respondent State had launched a "full assault" on the investor and its beneficial owners in order to bankrupt the investor and to appropriate its assets while, at the same time, removing its chief executive officer "from the political arena".271 No extraordinary conduct of this sort is alleged by Claimant, nor is it established by the record before the Tribunal.
277.
Thus, the Tribunal concludes that the TVPEE is a taxation measure within the scope of Article 21(7) of the ECT and that the Tribunal does not have jurisdiction to decide Claimant's claim that the TVPEE violates Article 10(1) of the ECT.

VII. LIABILITY

A. The Alleged Breach of the Fair and Equitable Treatment Obligation (Article 10(1))

278.
In its relevant part, Article 10(1) of the ECT reads as follows:

ARTICLE 10 PROMOTION, PROTECTION AND TREATMENT OF INVESTMENTS

(1) 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. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. [N]o Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal.

(1) Overview of the Parties' Positions

a. Claimant's Position

279.
The thrust of Claimant's fair and equitable treatment allegation is that Respondent violated Claimant's legitimate expectations. As stated in Claimant's Reply:

Spain's commitment to the Claimant's investment must be judged according to an objective standard, understood in the light of Spain's past commitments (in the present case, RD 661/2007 and RD 1578/2008, and indeed Law No. 54/1997). On the basis of such previous legislation, SolEs Badajoz and other investors who qualified under RD 1578/2008 were entitled to expect that a "reasonable return" under the Spanish PV regime would (1) remain at a level consistent with the return provided by the regulatory scheme up to that point; (2) remain at a broadly secure, fixed rate (rather than the variable rate now offered by the New Regulatory Regime); and (3) at most, be subject to reasonable and limited amendments which would nevertheless leave the core features of the regime intact. Spain, of course, chose to disregard these expectations.272

280.
Claimant emphasizes in particular that the "essential feature" of the Original Regulatory Regime was "a guaranteed FIT for a period of 25 years, which allowed any investor to calculate the estimated income derived from the investment, providing certainty to investors."273 The FITs applicable to Claimant's plants were based on production, without a cap, and provided priority of dispatch (i.e., access to the electrical grid).274 Claimant considers that Spain "annihilated the economic foundation of the Original Regulatory Regime when it enacted the new Regulatory Regime, starting in 2013 (notably RDL 9/2013 and Order IET 1045/2013)."275
281.
Claimant also maintains that the changes introduced by the Disputed Measures were disproportionate and unreasonable.276 It states that there were alternative measures that Spain could have chosen to address the tariff deficit. Instead, Respondent adopted the Specific Regime, which employs an unreasonable "one size fits all" approach, using arbitrarily-determined hypothetical costs. The Disputed Measures are irrational because there were other, less drastic means of addressing the tariff deficit.277
282.
According to Claimant, the Disputed Measures were disproportionate in two senses. First, the Disputed Measures suddenly and unexpectedly removed essential features of the regulatory regime in place.278 Second, Claimant maintains that the burden that the Disputed Measures imposed on PV investors was not commensurate with the economic rationale or public interest.279

b. Respondent's Position

283.
Respondent submits that Claimant was not induced to believe that the Original Regulatory Regime would remain immutable, and that the Disputed Measures have maintained the economic and regulatory foundation which induced SolEs to invest. Respondent submits that Claimant, in the absence of a specific commitment, could not hold a legitimate expectation that the regime established by RD 661/2007 and RD 1578/2008 would not be subject to modification, a possibility that Spanish law clearly admitted.280 In Respondent's view, and as indicated by the Isolux tribunal, investors in renewable energy projects should have known that, pursuant to Spain's legislation, the limit to any regulatory change is the reasonable return for the investment, which has been respected in this case.281 Respondent requests the Tribunal to apply this criterion in determining whether there has been a breach of the FET standard.282
284.
In the alternative, Respondent (referring to the Charanne award), requests the Tribunal to find that the "essential elements" of its regulatory regime have been respected following the enactment of the Disputed Measures.283 Respondent disagrees with Claimant's characterization of the essential elements of the regulatory regime. According to Respondent, the essential elements, which have always been maintained, are the methodology of using standard installations to set remuneration, the principle of a reasonable rate of return and the priority of dispatch.284
285.
Respondent also opposes Claimant's contention that the Disputed Measures were unreasonable and disproportionate. It maintains that the measures were based on the need to guarantee the sustainability and balance of the SEE which was being affected by (1) the economic crisis that had brought about a reduction in electricity demand; (2) the increase of the tariff for consumers; (3) the existence of over-compensation in the renewable energy sector ("RE sector"); and (4) the expectation of an increase of the tariff deficit.285
286.
Respondent also submits that the adoption of the Disputed Measures must be placed within the context of international commitments deriving from the collapse of the Spanish financial system. This collapse gave rise to the Memorandum of Understanding signed with the European Union on 20 July 2012. In this Memorandum, Spain undertakes to adopt macroeconomic measures to deal with the specific imbalance: "address the electricity tariff deficit in a comprehensive way".286 According to Respondent, statements of the European Union, the International Monetary Fund ("IMF") and the International Energy Agency in 2014 and 2015 recognized that the measures it had adopted, including the Disputed Measures, had resolved the macroeconomic problem derived from the tariff deficit.287
287.
According to Respondent, the Disputed Measures were carried out respecting the principle of reasonable return in accordance with the cost of money in the capital market.288 Respondent disputes Claimant's contentions about the effect that the Disputed Measures had on Claimant's return. It maintains that Claimant's pre-tax return under the Specific Regime is in the range of 8.03%289 to 8.11%,290 which is higher than the 7,398% target under the Specific Regime. According to Respondent, based on calculations by its experts, Claimant is currently receiving project returns that exceed the reference rate of return when Claimant invested ("'around' 7% after taxes").291

(2) The Legal Standard

a. Claimant's Views on the Legal Standard

(i) Legitimate Expectations

288.
Claimant asserts that the obligation to provide fair and equitable treatment includes, as "an integral component of FET" the stability of the legal system. It submits that this obligation is "reinforced in the ECT", noting that "Article 10(1) provides that the Contracting States are under the obligation to 'encourage and create stable, equitable, favourable and transparent conditions for Investors'."292 Claimant further asserts that FET encompasses the protection of investors' legitimate expectations.293 Those legitimate expectations may arise not only from commitments made directly to a particular investor, but also from legislative and regulatory acts. Claimant submits that, while States retain a right to modify their legislation, investors are "entitled to believe that regulatory changes would not 'come to unforeseeably and abruptly suppress the essential characteristics of the existing regulatory framework.'"294 A State cannot radically alter the legal framework upon which an investment is based without breaching the FET standard.295
289.
Claimant states that an investor's legitimate expectations are to be evaluated as of the date of its investment.296 This is an objective standard, taking into account not only what an investor knew (its subjective expectations) but also the expectations of a prudent investor as of the date of the investment.297
290.
Claimant rejects as "artificial" certain limitations on the scope of the FET standard suggested by Respondent.298 In particular, Respondent cannot avoid liability by establishing that it has met national treatment and non-discrimination standards, on which Claimant does not rely.299 Claimant also maintains that the FET standard is an obligation that is distinct from and goes beyond the minimum standard of treatment under international law.300
291.
Claimant supports its assertion on the applicable legal standard under the ECT, in particular as to the import of the protection of investors' legitimate expectations, by reference to a host of arbitral awards and commentaries, with an emphasis on the stability of the legal and business framework on which an investor relied in making its investment. Claimant refers to the statement in Biwater Gauff that:

the purpose of the fair and equitable treatment standard is to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment, as long as these expectations are reasonable and legitimate and have been relied upon by the investor to make the investment.301

292.
Claimant recognizes that a State "always retains its right to modify its legislation," but it asserts, relying on Eiser, that it cannot do so in a manner that radically alters the legal framework upon which an investment is based without breaching the FET:

Taking account of the context and of the ECT's object and purpose, the Tribunal concludes that Article 10(1)'s obligation to accord fair and equitable treatment necessarily embraces an obligation to provide fundamental stability in the essential characteristics of the legal regime relied upon by investors in making long-term investments. This does not mean that regulatory regimes cannot evolve. Surely they can. "[T]he legitimate expectations of any investor [...] [have] to include the real possibility of reasonable changes and amendments in the legal framework, made by the competent authorities within the limits of the powers conferred on them by the law." However, the Article 10(1) obligation to accord fair and equitable treatment means that regulatory regimes cannot be radically altered as applied to existing investments in ways that deprive investors who invested in reliance on those regimes of their investment's value […]302

(ii) Disproportionate and Unreasonable Measures

293.
Claimant also alleges that the Disputed Measures were disproportionate and unreasonable. As to disproportionality, it invokes two legal standards. First, it cites the statement of the Tribunal in Charanne that modifications to a regulatory regime that are not random or unnecessary meet the proportionality requirement "provided that they do not suddenly and unexpectedly remove the essential features of the regulatory regime in place."303 Second, the Disputed Measures imposed on PV investors such as Claimant, resulted in "huge losses" that were "not commensurate with the alleged economic rationale and 'public interest' put forward by Spain."304
294.
Claimant disagrees with Respondent's contention that the Tribunal should consider whether the Disputed Measures were unreasonable under what Respondent has described as the "EDF v. Romania test." Claimant states that this test enquires into whether measures are discriminatory, whereas Claimant's FET case does not require any showing that the measures were discriminatory.305
295.
Claimant also addresses Respondent's observations regarding the "AES test." Claimant states that it "agrees that per the 'AES Test', as Respondent identifies it, '[a] challenged measure must also be reasonable. That is, there needs to be an appropriate correlation between the State's public policy objective and the measure adopted to achieve it. This has to do with the nature of the measure and the way it is implemented.'"306

b. Respondent's Views on the Legal Standard

296.
Respondent observes that Claimant's FET case is broken into two alleged violations, the legitimate expectations claim, which Claimant links to stability, and the claim that Respondent enacted disproportionate and irrational measures.307 Respondent "shares with the Claimant that the following duties should be examined within the FET standard of the ECT: (i) not to violate the reasonable and objective expectations of the investor, (ii) to create stable and transparent conditions and (iii) not to adopt irrational and disproportionate measures in detriment of the investor."308 Respondent responds separately to each of these violations and refers to the legitimate expectations claim as the "main structuring element" of the claim.309
297.
Respondent does not deny Claimant's assertion that "[t]he Precedents that apply the ECT incorporate within the Fair and Equitable Treatment standard both the guarantee of respecting the reasonable and objective Expectations of the investors and of creating stable conditions."310

(i) Legitimate Expectations

298.
Respondent submits that the principle of legitimate expectations does not amount to "a requirement for the host State to freeze its legal system for the investor's benefit", over and above the needs of the State's general interest. Instead, "a reasonable evolution of the host State's law is part of the environment with which investors must contend".311 Respondent states that arbitral precedents applying the standard of legitimate expectation have established that:

the ECT is not a type of insurance policy for investors against the risk of changes in the regulatory framework and, therefore:

a) There must be specific commitments made to an investor that the regulations in force will remain unchanged [; and]

b) The investor's expectations have to be reasonable and justified in relation to any changes to the laws of the host country.312

299.
Respondent, quoting the Award in Plama, recognizes that stable and equitable conditions are part of the fair and equitable treatment standard under the ECT.313 However, Respondent states that the "'stable conditions' referred to in the ECT clearly allow the adoption of reasonable and proportionate macroeconomic control measures, provided these are adopted as a result of a reasonable cause. This principle has been stated by many previous awards."314
300.
Respondent stresses that stability is not equal to "petrification" of the regulation in place when the investment was made. Respondent quotes with approval the statement of Electrabel that:

The host State is not required to elevate unconditionally the interests of the foreign investor above all other considerations in every circumstance. […] even assuming that Electrabel had an expectation that it would be awarded the maximum compensation [...], once weighed against Hungary's legitimate right to regulate in the public interest, such an expectation does not appear reasonable or legitimate. [Emphasis and ellipsis added by Respondent]315

301.
Respondent further refers in the same vein to the Charanne award's statement that

To convert a regulatory standard into a specific commitment of the state, by the limited character of the persons who may be affected, would constitute an excessive limitation on power of states to regulate the economy in accordance with the public interest.

[…] 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. [Emphasis and ellipsis added by Respondent]316

302.
Respondent agrees with Claimant that it is appropriate to assess the legitimate expectations that an investor had at the time of its investment to determine whether there has been a violation of the FET standard and that legitimate expectation must be evaluated with reference to an objective standard, i.e., with reference to the information regarding the regulatory regime that a prudent investor should have known.317 Respondent also asserts that an investor in a highly regulated sector such as renewable energy must have engaged in exhaustive due diligence.318

(ii) Disproportionate and Unreasonable Measures

303.
Respondent maintains that the measures that it took were reasonable and non-discriminatory.319 As many awards have recognized, the ECT allows the adoption of reasonable and proportionate macroeconomic control measures.320
304.
Respondent states that arbitral case law contains three tests that Spain applies to establish that the Disputed Measures were "not abusive or disproportionate, by meeting the FET objectives and standards established in the ECT:

(a) The EDF Test v. Romania, which allows us to examine whether Spain has fulfilled the main objective of the ECT, adopting non-discriminatory measures against the Claimant;

(b) The AES Summit test v. Hungary, accepted by the Claimant as relevant, which allows us to examine whether the Kingdom of Spain has respected the FET standard of 10(1) ECT; and

(c) The Test Total v. Argentina that allows us to examine whether the Kingdom of Spain has respected the minimum protection standard guaranteed by International Law for long-term investments, as happens in the Energy Sector."321

305.
As to the "EDF Test" and non-discrimination, Respondent asserts that the main objective of the ECT was "to achieve the introduction of a free market in order to carry out energy-related activities without discrimination on account of the investor's nationality"322 and that the "best standard of protection afforded by the ECT" is national treatment.323
306.
In respect of the legal standard that Respondent describes as the "test of AES Summit" Respondent states:

The test set out in the AES SUMMIT case is used to determine whether or not an abusive (unreasonable) or disproportionate measure exists that does not comply with the FET standard laid down by the ECT. This Award has been invoked by the Claimant, so that the parties agree on the decision criterion applicable in respect of this Award. The Tribunal of the Case Aes Summit v. Hungary established:

'There are two elements that must be analysed to determine whether a State's act was unreasonable: the existence of a rational policy; and the reasonableness of the act of the State in relation to the policy.

A rational policy is taken by a State following a logical (good sense) explanation and with the aim of addressing a public interest matter.

(…) A challenged measure must also be reasonable. That is, there needs to be an appropriate correlation between the State's public policy objective and the measure adopted to achieve it. This has to do with the nature of the measure and the way it is implemented.'324

307.
With respect to Total v. Argentina, Respondent states that "[t]he Arbitration Tribunal in the Total Case assessed whether the Principle of economic equilibrium that allows a long-term investor to recover costs and to obtain a return on their investment was respected."325 Respondent states that this test has been met because Claimant recovers investment costs necessary for construction and operation of the plants. It bases this conclusion on the assertion that, since 1989, the costs that Respondent has used to set remuneration for renewable energy plants have not included costs outside of construction and operating costs, such as financing.326

c. The Tribunal's Analysis

308.
As stated in Electrabel v. Hungary, "the obligation to provide fair and equitable treatment comprises several elements, including an obligation to act transparently and with due process; and to refrain from taking arbitrary or discriminatory measures or from frustrating the investor's reasonable expectations with respect to the legal framework adversely affecting its investment."327 The tribunal in Blusun v. Italy observed that a State has no obligation to grant subsidies such as feed-in tariffs. However, if it does so "and if it becomes necessary to modify them, this should be done in a manner which is not disproportionate to the aim of the legislative amendment, and should have due regard to the reasonable reliance interests of recipients who may have committed substantial resources on the basis of the earlier regime."328
309.
In the present case, Claimant alleges that Respondent violated its FET obligation in two ways. It relies primarily on the alleged failure to respect Claimant's legitimate expectations and secondarily on the contention that the Disputed Measures were unreasonable and disproportionate.

(i) The Legal Standard Applicable to Claimant's Legitimate Expectations Claim

310.
The centrepiece of Claimant's case is the allegation that Spain has failed to meet Claimant's legitimate expectations and thus has violated the FET obligation contained in Article 10(1) of the ECT. Claimant does not allege that Spain has expressly promised Claimant that Spain would maintain the legal regime that was in place when Claimant invested. Instead, Claimant asserts that Respondent, through its laws, regulations and other authoritative pronouncements, made "clear representations" that "the financial support provided would be long lasting and stable, thereby making it attractive to potential investors."329 Claimant says that, having relied on these representations when it made its investment in March 2010,330 it has a legitimate expectation of what it calls a "guaranteed FIT" and other "essential" or "core" features of the regulatory regime in place when it invested, for the twenty-five year period specified in RD 1578/2008. It asserts that the Disputed Measures annihilated those expectations by eliminating the "fixed" FIT and "other core components" that determined the remuneration of PV plants.331 Claimant maintains that the Disputed Measures drastically reduced the value of its investment.
311.
Respondent answers Claimant's legitimate expectations claim by asserting that its regulatory regime gave Claimant no legitimate expectations beyond that of a reasonable return with reference to the cost of capital, as specified in the governing Spanish legislation, and that Claimant continues to receive a reasonable return under the Specific Regime. Alternatively, Respondent states that Claimant's legitimate expectations have been met because the essential features of the regulatory regime on the basis of which Claimant invested have been retained in the Special Regime. Respondent states that the Disputed Measures were enacted to correct a macroeconomic imbalance, i.e., the tariff deficit, exacerbated by the economic crisis. It also maintains that Claimant's investment has not been impaired.
312.
The Parties agree on several well-established points on which there is no need for the Tribunal to dwell. First, they concur that the ECT should be interpreted in accordance with the law of treaties.332 Second, they agree that legitimate expectations are to be evaluated as of the date of Claimant's investment. Third, they recognize that, in order for an investor to establish "legitimate" expectations, it is not sufficient for the investor to demonstrate its subjective expectations. The evidence must establish the legitimacy of its expectations on an objective basis, i.e., with reference to the expectations of a prudent investor.
313.
The Tribunal does not accept Respondent's assertion that "specific commitments made to an investor" are necessary to an FET claim.333 As has been widely recognized, an investor's legitimate expectations can also arise from provisions of law and regulations and from statements made by or on behalf of the State for the purpose of inducing investment by class of investors.334
314.
The Parties have addressed the implications of the reference to stability in the first sentence of Article 10(1) of the ECT ("Each Contracting Party shall […] encourage and create stable […] conditions"). Respondent regards this sentence to be "soft law."335 Claimant maintains that this sentence contains a specific obligation to create stable investment conditions. However, Claimant does not ask the Tribunal to find that Respondent has breached a stability obligation that is independent of the FET obligation. Instead, it identifies a stable and predictable business environment as an aspect of Respondent's FET obligation.336 Claimant states that a host State's regulatory regime is subject, "at most […] to reasonable and limited amendments which would nevertheless leave the core features of the regime intact."337