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Triodos v. Spain

Triodos SICAV II v. Kingdom of Spain, SCC Case No. 2017/194
Nature of the proceedings:
International
Type of case:
Investor-State
Economic sector:
Electricity, gas, steam and air conditioning supply (energy)
Electricity, gas, steam and air conditioning supply (energy)
Date of introduction:
21 Dec 2017
Status of the case:
Decided in favor of investor
Claimant’s country of origin:
Luxembourg
,
Netherlands
Respondent:
Spain
Institution:
SCC (Stockholm Chamber of Commerce)
Rules of arbitration:
Seat of arbitration:
Stockholm
Applicable treaties:
The Energy Charter Treaty...

Documents of the case

profile picture Alejandro A. Escobar President
profile picture Christophe Bondy Appointed by the State
profile picture Oscar M. Garibaldi Appointed by the investor

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

Final Award

I. THE DISPUTE, THE PARTIES AND THEIR COUNSEL

A. The Dispute

1.
This case concerns a dispute submitted to arbitration under the 2017 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (the "SCC Rules") on the basis of the Energy Charter Treaty (the "ECT"), which entered into force on 16 April 1998 for the Grand Duchy of Luxembourg and the Kingdom of Spain.
2.
The dispute concerns certain measures adopted by the Kingdom of Spain which allegedly affected the legal framework of renewable energies and allegedly impacted the investments of the Claimant in the photovoltaic sector.

B. The Claimant

3.
The Claimant in this arbitration is TRIODOS SICAV II ("Triodos" or the "Claimant"), an open-ended investment fund, duly formed under the laws of the Grand Duchy of Luxembourg and listed in the Luxembourg Commercial Register under registration number B115771. The Claimant filed this arbitration on behalf of one of three sub-funds, Triodos Renewables Europe Fund ("TREF"), whose identification number in the Luxembourg Financial Sector Supervisory Commission is 4213-01. The corporate address of the Claimant is at 11-13 Boulevard de la Foire, 1528 Luxembourg.
4.
The Claimant was represented by Mr. Kenneth R. Fleuriet, Ms. Amy Roebuck Frey, Ms. Héloïse Hervé, Ms. Isabel San Martín (until 17 September 2021), Mr. Reginald R. Smith, Mr. Kevin D. Mohr, and Ms. Violeta Valicenti of King & Spalding LLP, and by Ms. Verónica Romaní Sancho, Mr. Gonzalo Ardila Bermejo (until 29 March 2021), Mr. Luis Gil Bueno, Ms. Inés Vázquez García, Ms. Inés Puig-Samper, Ms. Cristina Matia, Ms. Teresa Gutiérrez, and Ms. Celia Altable of Gómez-Acebo & Pombo.

C. The Respondent

5.
The Respondent in this arbitration is the Kingdom of Spain ("Spain" or the "Respondent"). The contact details of the Respondent, for the purposes of this arbitration, are as follows: Abogacía General del Estado, Dirección del Servicio Jurídico del Estado, Calle Ayala n° 5, 28001 Madrid, Spain.
6.
The Respondent was represented by Mr. Diego Santacruz, Mr. Antolín Fernández, Mr. Roberto Fernández, Ms. Patricia Froehlingsdorf, Ms. Mónica Moraleda, Ms. Amaia Rivas, Mr. Pablo Elena Abad (all the foregoing until 12 June 2019), Ms. Elena Oñoro, Ms. María José Ruiz Sánchez, Ms. Gloria de la Guarda Limeres, Ms. Ana María Rodríguez, Mr. Alberto Torró Molés, Mr. Rafael Gil Nievas, Mr. José Manuel Gutiérrez Delgado, Ms. Alicia Segovia Marco, Ms. Gabriela Cerdeiras Megias, Ms. Lourdes Martínez de Victoria Gómez, Ms. Lorena Fatás Pérez and Ms. Ana Femández-Daza Álvarez.

D. Intervention of the European Commission as a non-disputing party

7.
On 25 January 2019, the Tribunal issued Procedural Order No. 2, by which it granted the European Commission’s application to intervene in the present arbitration as a non-disputing party, in the terms and conditions set out at Section 3.8 of Procedural Order No. 2. The contact details of the European Commission, for the purposes of this arbitration, are as follows: Legal Service of the European Commission, Greffe Contentieux, BERL 1/169, 1049 Brussels.
8.
The European Commission was represented by Mr. Nicolaj Kuplewatzky, Ms. Petra Nemeckova, Mr. Luigi Malferrari and Mr. Tim Maxian Rusche, Members of its Legal Service, as Agents.

II. PROCEDURAL HISTORY

A. Commencement of the Arbitration and Constitution of the Tribunal

9.
On 21 December 2017, the Claimant submitted its Request for Arbitration pursuant to Article 26(4)(c) of the ECT and Article 6 of the SCC Rules. On the basis of Articles 16 and 17 of the SCC Rules, and in view of the size and complexity of the case, the Claimant proposed that the Tribunal was constituted with three arbitrators. It appointed Mr. Oscar M. Garibaldi as an arbitrator. It then proposed that the President of the Tribunal were selected by the two party-appointed arbitrators, with the agreement of the Parties. It additionally proposed English as the procedural language and Stockholm, Sweden, as the seat of the arbitration.
10.
On 29 January 2018, the Respondent submitted its Answer to the Request for Arbitration. It agreed with the Claimant’s proposal that the Tribunal be constituted with three arbitrators. It disagreed, however, with the methodology proposed by the Claimant for the appointment of the President of the Tribunal. It rather submitted a counterproposal, which consisted of the appointment of the President through an exchange of lists of candidates between the Parties (the "list procedure"). It also considered that the President had to be able to use Spanish as a working language. It further rejected the Claimant’s proposals regarding the procedural language and the seat of the arbitration. It proposed, instead, Spanish to be the procedural language and Paris, France, to be the seat of the arbitration.
11.
On 31 January 2018, Mr. Oscar M. Garibaldi accepted its appointment, by the Claimant, to serve as an arbitrator.
12.
On 1 February 2018, the Arbitration Institute of the Stockholm Chamber of Commerce (the "SCC") requested the Respondent to inform the name of its appointed arbitrator by 7 February 2018. It also requested the Parties to agree on the procedure for the appointment of the President of the Tribunal, and to notify the SCC thereupon, by 10 February 2018.
13.
On 6 February 2018, the Claimant submitted its comments to the Respondent’s Answer to the Request for Arbitration. It accepted the list procedure proposed by the Respondent for the appointment of the President of the Tribunal. It disagreed, however, with the Respondent’s position that the President had to be able to use Spanish as a working language. It further rejected the Respondent’s proposal regarding the seat of the arbitration.
14.
On 7 February 2018, the Respondent informed the SCC that it appointed Mr. Christophe Bondy as an arbitrator.
15.
On 8 February 2018, the Respondent submitted a letter to the SCC, by which it reiterated its position that the President of the Tribunal had to be able to use Spanish as a working language. On the other hand, it accepted the Claimant’s proposal to designate Stockholm as the seat of the arbitration.
16.
On 8 February 2018, Mr. Christophe Bondy accepted its appointment, by the Respondent, to serve as an arbitrator.
17.
On 24 April 2018, the SCC confirmed that Mr. Alejandro Escobar was appointed as President of the Tribunal, via the list procedure previously agreed by the Parties. Mr. Escobar accepted its appointment on 18 April 2018.
18.
On 19 August 2020, the SCC Board dismissed a request for the disqualification of the President of the Tribunal which was submitted by the Respondent. The reasons for the decision of the SCC Board were notified to the Parties and the arbitrators the following day.

B. First Procedural Conference and Procedural Order No. 1

19.
On 27 April 2018, the Tribunal confirmed to the Parties that it had received the referral of the case from the SCC.
20.
On 8 May 2018, following consultation, the Tribunal invited the Parties to hold the First Procedural Conference by telephone conference on 12 June 2018. To that end, the Tribunal proposed and sent to the Parties a draft Procedural Order No. 1.
21.
On 6 June 2018, the Parties submitted to the Tribunal their agreed draft Procedural Order No. 1. They noted their points of disagreement on the draft.
22.
On 12 June 2018, the First Procedural Conference was held by telephone.
23.
On 15 June 2018, the Tribunal issued Procedural Order No. 1. It provided that the seat of the arbitration was fixed at Stockholm, Sweden; that the Tribunal shall decide the issues in dispute in accordance with the ECT and applicable rules and principles of international law; that the arbitration shall be governed by the SCC Rules, except as modified by the provisions of Article 26 of the ECT; that the Tribunal’s communications, procedural orders, and other decisions could be issued in either English or Spanish, and that its award or awards shall be issued in both English and Spanish; that the Parties could submit written communications, pleadings or other submissions, fact witness statements, and expert reports in either English or Spanish; and that oral proceedings shall be conducted in English or Spanish. Procedural Order No. 1 also set out the Procedural Calendar and noted the Parties agreement that this was to amend and replace the time limit for making the final award provided by Article 43 of the SCC Rules.
24.
On 28 September 2018, the Tribunal approved an agreement by the Parties to extend the time limit for the submission of the Claimant’s Statement of Claim by one week, until 12 October 2018. The Tribunal invited the Parties to seek further agreement on the adjusted dates for the subsequent submissions.
25.
On 2 October 2018, the Tribunal wrote to the SCC and requested an extension of the time limit for rendering the Final Award, which was set for 25 October 2018. The reasons for the request, as set out in the Tribunal’s letter, referred to the Procedural Calendar agreed with the Parties. The Procedural Calendar provided for the Hearing on the Merits to take place within 24 months from the date of the First Procedural Conference, and for the Tribunal to render its Final Award within approximately six months from the likely date of the last submission of the Parties.
26.
On 8 October 2018, the SCC granted the Tribunal’s request, after it had given the Parties an opportunity to submit their comments. The time limit for rendering the Final Award was extended until 1 February 2021.
27.
On 6 January 2021, the Tribunal wrote to the SCC and requested a second extension of the time limit for rendering the Final Award. The reasons for the request, as set out in the Tribunal’s letter, referred to the rescheduling of the Hearing on the Merits, following the Respondent’s request for disqualification of the President of the Tribunal.
28.
On 8 October 2018, the SCC granted the Tribunal’s request, after it had given the Parties an opportunity to submit their comments. The time limit for rendering the Final Award was extended until 30 November 2021.
29.
On 22 November 2021, the Tribunal wrote to the SCC and requested a third extension of the time limit for rendering the Final Award.
30.
On 30 November 2021, the SCC granted the Tribunal’s request, after it had given the Parties an opportunity to submit their comments. The SCC extended the time limit for rendering the Final Award until 31 March 2022.
31.
On 29 March 2022, the SCC extended the time limit for rendering the Final Award until 30 September 2022.
32.
On 28 September 2022, the SCC extended the time limit for rendering the Final Award until 14 October 2022; and then until 21 October 2022.

C. Pleadings and Production of Documents

33.
On 12 October 2018, the Claimant submitted its Statement of Claim,1 along with supporting lists of exhibits and legal authorities, witness statements, and regulatory and quantum expert reports.
34.
On 15 November 2018, the European Commission submitted an Application for Leave to Intervene as a Non-Disputing Party.2 It sought authorization from the Tribunal to intervene in the arbitration in order to comment on two points:

(a) Article 26 of the Energy Charter Treaty does not apply intra-EU, so that the Arbitral Tribunal lacks jurisdiction; and

(b) European Union law on State aid is relevant as a matter of law for the interpretation of the substantive investment protection provisions of the Energy Charter Treaty and precludes in the present case the awards of damages against Spain.3

35.
The application of the European Commission relied on the general power of the Tribunal to allow intervention by a third party, rather than on any specific rule. It also requested that the Tribunal:

... allow the Commission access to the documents filed in the case, to the extent necessary for its intervention in the proceedings'4 and 'allow the Commission to attend hearings in order to present oral argument and reply to the questions of [the Tribunal] at those hearings, should the Tribunal and the parties deem that useful.5

36.
On 22 November 2018, the Tribunal transmitted to the Parties the application submitted by the European Commission and invited them to comment on the procedural implications of such application.
37.
On 7 December 2018, the Parties submitted their comments.
38.
The Claimant opposed to the application submitted by the European Commission and asked the Tribunal to deny it on three grounds, with reference to Article 3(3), Annex III, of the SCC Rules. First, that the European Commission’s intervention would not assist the Tribunal by offering a perspective, particular knowledge or insight that was distinct from or broader than that of the Respondent and which the Respondent could not advance for itself. Secondly, that the European Commission did not have a valid, significant interest in the proceeding but only a political and self-serving interest. Thirdly, that the intervention of the European Commission was premature since the Respondent had not yet raised objections to jurisdiction or contested liability.6
39.
In the event that the Tribunal accepted the application submitted by the European Commission, the Claimant asked the Tribunal to implement certain restrictions that, in the Claimant’s view, were necessary to protect its rights. Those restrictions included the following:

(i) Limiting the Commission’s involvement to a single submission that is narrow in scope and length and that would be filed immediately, so as to avoid delaying the procedural calendar;

(ii) providing Claimant ample opportunity to respond in accordance with SCC Rules Appendix III Article 3(8);

(iii) rejecting the Commission’s request to attend any hearing that is a part of this proceeding;

(iv) rejecting the Commission’s request to have access to the case file; and

(v) requiring the Commission to post security for the additional costs imposed upon the Claimant as a result of the Commission’s intervention in accordance with SCC Rules Appendix III Article 3(10).7

40.
The Respondent supported the application submitted by the European Commission. It relied on Article 19 of the 2010 SCC Rules and, as guidance, on Article 37(2) of the ICSID Arbitration Rules.8 It stated that "the Commission should be allowed to endow the Tribunal with all its special knowledge on the issue without limitation,"9 but conceded that the Tribunal could direct the European Commission to file a single submission followed by comments by the Parties.10 The Respondent also supported the granting of access to the European Commission to all documents in the proceeding and its intervention at the hearing.11
41.
On 25 January 2019, the Tribunal issued Procedural Order No. 2. It granted the application of the European Commission under Article 4(1), Appendix III, of the SCC Rules in the terms and conditions set out at Section 3.8 of Procedural Order No. 2.12
42.
Procedural Order No. 2 established, inter alia, that the submission by the European Commission shall contain a precise statement of its positions on the following issues of treaty interpretation, to the extent they were material to the outcome of the case:

(i) Whether Article 26 of the ECT applies to a dispute between a Contracting Party and an Investor of a Contracting Party where both Contracting Parties are EU Member States; and

(ii) Whether and to what extent the rules of EU law on State aid are relevant to the interpretation of the substantive provisions of Part III of the ECT, including Article 16 of the ECT.13

43.
Procedural Order No. 2 also provided that the statement of the European Commission shall deal only with the scope and meaning of the provisions of the ECT, and that the European Commission shall refrain from making arguments with respect to the existence or extent of liability of any of the Parties.14
44.
The Tribunal denied, however, the application of the European Commission under Article 4(2), Appendix III, of the SCC Rules in the terms and conditions set out at Sections 3.9 to 3.13 of Procedural Order No. 2. It also denied to the European Commission access to any of the supporting evidence or documentation in the proceeding, other than the redacted Memorial and Counter-Memorial. The Tribunal further reserved its decision on whether to permit the European Commission to attend the hearing or any part of it.15
45.
On 5 February 2019, the Tribunal approved an amendment to the Procedural Calendar which had been jointly communicated by the Parties. The time limit for the submission of the Respondent’s Counter-Memorial was extended until 2 April 2019. The Document Production Phase was adjusted to commence on 17 April 2019, and to conclude on 5 August 2019.
46.
On 12 February 2019, the Respondent submitted a letter to the Tribunal. It informed that the Claimant had sold two of the photovoltaic plants which were subject of its claim in the present arbitration. The Respondent considered that the conditions of the sale and the profits allegedly obtained were decisive, at least, for the clarification of the legitimate expectations of the Claimant in the present arbitration, and for the correct fixing of the quantum, if any. The Respondent requested that the Tribunal order the Claimant to clarify the sale and its scope, and, if applicable, to submit all related documentation. The Respondent also requested the suspension of the time limit for the submission of its Counter-Memorial.
47.
On the same day, the Tribunal invited the Claimant to submit its comments on the Respondent’s letter.
48.
On 20 February 2019, the Claimant submitted its formal response to the Respondent’s letter of 12 February 2019. The Claimant concurred with the Respondent that the disclosure of some documents related to the sale of the photovoltaic plants could be appropriate. It, however, disagreed with the contention that the Procedural Calendar should be modified. The Claimant suggested, instead, a procedure for the disposition of the Respondent’s request for disclosure.
49.
On 25 February 2019, the Tribunal issued directions to the Parties regarding the Respondent’s request for disclosure. The Claimant would immediately disclose to the Respondent the documents identified by the Tribunal, upon an appropriate undertaking of confidentiality by the Respondent. The Tribunal invited the Parties to agree on the terms of, and to execute, such undertaking by 4 March 2019. Requests for production or for disclosure of other documents were to be made in accordance with Procedural Order No. 1 and the steps foreseen in the Procedural Calendar.
50.
On 7 March 2019, the Respondent informed the Tribunal that it agreed to the confidentiality undertaking proposed by the Claimant and that, consequently, the Claimant proceeded with the disclosure. In addition, the Parties informed the Tribunal of their agreement to extend the time limits for the submission of the Respondent’s Counter-Memorial on the Merits, until 12 April 2019, and of the Parties’ Requests for production, until 26 April 2019.
51.
On 8 March 2019, the Tribunal confirmed the Parties’ agreed changes to the Procedural Calendar.
52.
On 12 April 2019, the Respondent submitted its Counter-Memorial on the Merits and Memorial on Jurisdictional Objections,16 along with supporting lists of factual exhibits and legal authorities, and an expert report.
53.
On 12 June 2019, in accordance with the Procedural Calendar, the Parties submitted their respective Requests to Produce Documents, in the format of the Model Redfern Schedule for Document Requests adopted as Annex 2 of Procedural Order No. 1.
54.
On 19 June 2019, in accordance with Section 3.8.6 (iii) of Procedural Order No. 2, the Parties transmitted to the Tribunal the redacted versions of their Pleadings, as agreed between them, to be transmitted to the European Commission.
55.
On 10 July 2019, the Tribunal issued Procedural Order No. 3. It decided on the Parties’ respective Requests to Produce Documents. The decisions on the Claimant’s requests were set out in the Redfern Schedule at Annex I of Procedural Order No. 3. The decisions on the Respondent’s requests were set out in the Redfern Schedule at Annex 11 of Procedural Order No. 3.
56.
On 9 August 2019, the European Commission submitted its Observations as a Non-Disputing Party.17
57.
On 25 October 2019, the Claimant submitted its Reply on the Merits and Counter-Memorial on Jurisdiction,18 along with supporting factual exhibits and legal authorities, a rebuttal regulatory expert report and a rebuttal quantum expert report.
58.
On 10 February 2020, the Respondent submitted its Rejoinder on the Merits and Reply on Jurisdictional Objections,19 along with supporting lists of factual exhibits and legal authorities, and a quantum expert report.
59.
On 24 February 2020, the Respondent submitted the English version of an expert legal opinion by Professor Marcos Vaquer Caballería (the "Vaquer Report").20
60.
On 25 February 2020, the Claimant wrote to the Tribunal and asked it to direct the Respondent to clarify the status of the Vaquer Report in the proceeding.
61.
On the same day, the Respondent wrote to the Tribunal and explained that if the Spanish version of the Vaquer Report was not attached to its Rejoinder on the Merits and Reply on Jurisdiction was due to a "clerical error". It stated that such error did not affect the admission of the document, as said document was quoted several times in its Rejoinder on the Merits and Reply on Jurisdiction.
62.
On 4 March 2020, the Claimant submitted its comments on the Vaquer Report at the Tribunal’s direction. It objected to the timeliness and the scope of the Vaquer Report and requested that the Tribunal rejected it and instructed that it not was not to be relied upon in the proceeding.
63.
On the same day, the Respondent submitted its response to the Claimant’s comments of 4 March 2020. It pointed out, inter alia, that paragraph 53 of its Rejoinder on the Merits and Reply on Jurisdictional Objections expressly referred to the Vaquer Report as part of the submission, and that several other paragraphs quoted passages from the Vaquer Report.
64.
On 25 March 2020, the Claimant submitted its Rejoinder on Jurisdiction,21 along with supporting lists of exhibits and legal authorities.
65.
On 8 June 2020, the Tribunal issued Procedural Order No. 5. It confirmed that the Vaquer Report was admitted into the record in full. Procedural Order No. 5 also granted the Claimant an opportunity to submit its observations on the Vaquer Report.22
66.
On 19 June 2020, the Claimant submitted its comments on the Vaquer Report.23

D. The Hearing and Post-Hearing Submissions

67.
The Procedural Calendar contemplated a Hearing on the Merits to commence on 25 May 2020 and to conclude on 29 May 2020. On 25 March 2020, the Tribunal proposed to the Parties that, in light of the COVID-19 pandemic, the Hearing were held remotely on the dates scheduled.
68.
On 3 April 2020, the Parties submitted their respective responses to the Tribunal’s proposal. While the Claimant agreed with the proposal, the Respondent held the view that the dates of the Hearing should be reconsidered.
69.
On 6 April 2020, the SCC addressed a letter to parties and tribunals in SCC cases in face of the COVID-19 pandemic. The letter stated that, when travel and in-person meetings were discouraged or impossible, arbitral tribunals were encouraged to use alternative digital meeting facilities. It further noted that arbitral tribunals were expected to observe timetables previously established, and that parties were asked to make efforts in the same regard.
70.
On 23 April 2020, following further comments from the Parties, the Tribunal communicated its intention to hold the Hearing on the original dates and by means of a digital platform. It asked the Parties to confer on the appropriate arrangements.
71.
On 27 April 2020, the Respondent submitted a request for reconsideration of the Tribunal’s directions of 23 April 2020. It requested that the Hearing were postponed until the lifting or easing of restrictions to movement resulting from the COVID-19 pandemic.
72.
On 30 April 2020 and 11 May 2020, the Tribunal held telephone conferences with the Parties to discuss the request for reconsideration submitted by the Respondent, as well as alternative dates for the Hearing and the resort to a digital platform.
73.
On 30 May 2020, the Tribunal issued Procedural Order No. 4. It ruled on the request for reconsideration submitted by the Respondent on 27 April 2020. Procedural Order No. 4 provided that the Hearing was to be held during the week of 6 July 2020 and by means of a digital platform. It also instructed the Parties to seek agreement on a protocol for the purposes of the Hearing.
74.
On 1 June 2020, the Respondent submitted a request to set aside Procedural Order No. 4. It requested that the Tribunal either conducted an in-person hearing on the dates set out in Procedural Order No. 4 or on new dates to be determined. In the event that those requests were denied, the Respondent requested that the Tribunal identified which of its members supported the Tribunal’s decision.
75.
On 8 June 2020, the Tribunal issued Procedural Order No. 5. It observed that the Respondent’s submission of 1 June 2020 presented neither new legal arguments nor new legal factual circumstances that would justify amending Procedural Order No. 4. It confirmed Procedural Order No. 4. On the same day, the Tribunal invited the Parties to hold a Pre-Hearing Conference on 15 June 2020.
76.
On 8 June 2020, in accordance with Procedural Order No. 4, the Parties submitted to the Tribunal their agreed draft Virtual Hearing Protocol. The Parties noted that they were still discussing two specific points, which were marked on the draft, and that they would attempt to reach an agreement during the course of the week.
77.
On 10 June 2020, the Respondent wrote to the Tribunal and raised objections to Procedural Order No. 5.
78.
On 11 June 2020, the Tribunal considered and rejected the Respondent’s position on holding a virtual hearing.
79.
On 20 October 2020, the Tribunal communicated to the Parties its directions to reschedule the Hearing. The Hearing was set to take place from 3 to 7 May 2021. Also, 2, 8 and 9 May 2021 were left in reserve for eventual sessions with the Tribunal.
80.
On 10 March 2021, the Tribunal wrote to the Parties and confirmed that the Hearing was to be held remotely via a digital platform. It directed the Parties to make the appropriate arrangements, to confer with each other as necessary, and to inform the Tribunal of those arrangements by 29 March 2021.
81.
On 29 March 2021, the Parties informed the Tribunal about the arrangements agreed between them for the Hearing. They further clarified that they would inform the Tribunal about any agreed proposals on additional matters by 9 April 2021. The Tribunal approved the Parties’ agreement on arrangements for the Hearing.
82.
On 6 April 2021, the Parties informed the Tribunal about their agreement to exchange on that same date the names of the witnesses and experts they wished to call for cross-examination, in order to reach an agreement on the schedule for the Hearing. The Parties sent their respective lists to the Tribunal only, which then forwarded the submissions to the respective opposite Party.
83.
On 9 April 2021, the Claimant submitted to the Tribunal the Parties’ agreed Hearing Protocol and Hearing Schedule. The Claimant noted that the Parties were unable to agree on two specific points, which were marked in track changes on both documents. One point of disagreement related to the time afforded for the presentations of the following experts: Brattle Regulatory, Brattle Quantum, and BDO. The Claimant disagreed with the Respondent’s contention that BDO (whose reports were submitted by the Respondent) should be allowed the same amount of time as both Brattle Regulatory and Brattle Quantum (whose reports were submitted by the Claimant) combined. The Claimant considered that each set of experts should be afforded 45 minutes to present its respective reports.
84.
On 10 April 2021, the Respondent wrote to the Tribunal and explained its position concerning the disagreement on the time afforded for the presentations of the experts. It considered that the time should be equal for each Party’s team of experts.
85.
On 14 April 2021, in accordance with the schedule agreed by the Parties at Section 5 of the draft Hearing Protocol, the Parties submitted to the Tribunal a list containing the documents that they had agreed to admit to the record. In addition, the Respondent submitted a letter by which it requested leave to introduce into the record new factual and legal exhibits. The Respondent enclosed the list of documents that the Claimant had not accepted to admit to the record.
86.
On the same day, the Claimant also submitted a letter to the Tribunal. It noted that the Respondent had not called the Claimant’s witness Mr. Jaume Margarit for cross-examination. The Claimant manifested its willingness to make Mr. Margarit appear at the Hearing, should the Tribunal decided to call him on its own initiative.
87.
On 15 April 2021, the Tribunal noted that, in accordance with the Parties’ agreement communicated on 9 April 2021, the Claimant should submit by 16 April 2021 its comments to the Respondent’s request of 14 April 2021, and the Tribunal should decide on such request by 19 April 2021. As to the letter submitted by the Claimant on 14 April 2021, the Tribunal reserved its discussion for the Pre-Hearing Conference to take place on 19 April 2021.
88.
On 16 April 2021, the Claimant submitted its comments to the Respondent’s request for leave to introduce into the record new factual and legal exhibits. For the reasons described in its submission, the Claimant requested that the Tribunal reject the Respondent’s request.
89.
On 19 April 2021, the Pre-Hearing Conference was held. Following the conference, the Parties submitted their agreement regarding the revised Hearing Schedule. They further informed the Tribunal and sought to coordinate with it on the technical and operative matters of the Hearing.
90.
On 20 April 2021, the Tribunal replied to the Parties with regard to the technical and operative matters of the Hearing. It also proposed to be assisted at the Hearing by Ms. Fiorella Badin.
91.
On 21 April 2021, the Parties confirmed that they had no objection to Ms. Fiorella Badin assisting the Tribunal during the Hearing.
92.
On 28 April 2021, the Parties submitted the updated Hearing Schedule, where they agreed on a modification in the order of the examination of witnesses.
93.
On 3 May 2021, the Tribunal issued Procedural Order No. 6, which addressed the organization of the Hearing. The Hearing was to be held from 3 through 7 May 2021, via Zoom hearing platform.
94.
From 3 through 7 May 2021, the Hearing on Jurisdictional Objections and the Merits was held via a remote digital platform.
95.
The following persons attended the Hearing:

Tribunal

Mr. Alejandro A. Escobar President
Mr. Oscar M. Garibaldi Co-Arbitrator
Mr. Christophe Bondy Co-Arbitrator

Administrative Secretary to the Tribunal

Ms. Fiorella Badin

For the Claimant

Counsel:

Mr. Kenneth R. Fleuriet King & Spalding LLP
Mr. Kevin D. Mohr King & Spalding LLP
Ms. Amy Roebuck Frey King & Spalding LLP
Ms. Isabel San Martin King & Spalding LLP
Ms. Violeta Valicenti King & Spalding LLP
Ms. Inés Vázquez García Gómez-Acebo & Pombo
Ms. Inés Puig-Samper Gómez-Acebo & Pombo
Ms. Cristina Matia Gómez-Acebo & Pombo
Ms. Celia Altable Gómez-Acebo & Pombo

Witnesses:

Mr. Daniël Povel Former Chair of TREF’s Investment Committee
Mr. Hans Schut One of TREF’s founders
Mr. Carlos Bendito Former Deputy Managing Director of Triodos Investment Management in Spain

Experts:

Mr. José Antonio García The Brattle Group
Mr. Carlos Lapuerta The Brattle Group
Mr. Richard Caldwell The Brattle Group
Mr. Andrés Child The Brattle Group
Mr. Jaume Margarit Former Director of Renewable Energy at IDAE and former Director General at APPA

For the Respondent

Counsel:

Mr. José Manuel Gutiérrez Delgado Abogacía General del Estado
Mr. Rafael Gil Nievas Abogacía General del Estado
Ms. Ana Fernández Daza Álvarez Abogacía General del Estado
Ms. Gabriela Cerdeiras Megias Abogacía General del Estado
Ms. Lorena Fatás Pérez Abogacía General del Estado
Mr. Alberto Tono Molés Abogacía General del Estado
Ms. Gloria de la Guardia Limeres Abogacía General del Estado
Mr. Javier Comeron Herrero Abogacía General del Estado

Experts:

Mr. Gervase MacGregor BDO
Mr. Eduardo Pérez Ruiz BDO
Mr. Francisco Javier Espel Sesé BDO
Mr. David Mitchell BDO
Mr. Manuel Vargas BDO
Ms. Susana Campos BDO
Ms. Leticia Pérez BDO
Mr. Adam Cuthbertson BDO
Ms. Susan Blower BDO
Mr. Marcos Vaquer Caballería Professor of Administrative Law at University Carlos III of Madrid

Interpreters

Mr. Jesus Gaetan Bornn
Ms. Amalia Thaler-De Klemm
Ms. Anna Sophia Chapman

Court Reporters

Mr. Trevor McGowan
Dante Rinaldi, D-R Esteno

96.
The Parties examined the following witnesses and experts at the hearing:

Mr. Hans Schut One of TREF’s founders
Mr. Daniel Povel Former Chair of TREF’s Investment Committee
Mr. Carlos Bendito Former Deputy Managing Director of Triodos Investment Management in Spain
Mr. Jaume Margarit Former Director of Renewable Energy at IDAE and former Director General at APPA
Mr. Richard Caldwell The Brattle Group
Mr. Carlos Lapuerta The Brattle Group
Mr. Marcos Vaquer Caballería Professor of Administrative Law at University Carlos III of Madrid
Mr. Francisco Javier Espel Sesé BDO
Mr. Eduardo Pérez Ruiz BDO

97.
On 31 May 2021, the Tribunal issued Procedural Order No. 7,24 with directions to the Parties with respect to their post-hearing submissions.
98.
On 9 June 2021, the Parties informed the Tribunal of their agreed Post-Hearing Schedule:

(a) To submit to the Tribunal by 15 July 2021 the final version of the transcripts underlining the potential disagreements (if any, adding that the Parties did not envision any major disagreements as to the transcripts); and

(b) To have a single round of post-hearing briefs to be filed on 17 September 2021, confirming the directions to Procedural Order No. 7 with respect to the scope, format, and extension of the post-hearing submissions.

99.
On 9 June 2021, the Tribunal confirmed the Parties’ agreed Post-Hearing Schedule.
100.
On 15 July 2021, the Parties submitted an agreed corrected version of the Hearing transcript.
101.
On 4 August 2021, the Tribunal issued Procedural Order No. 8,25 with additional questions to the Parties in accordance with Section 2.5 of Procedural Order No. 7.
102.
On 10 September 2021, the Respondent submitted a request to introduce the CJEU’s judgment in Komstroy v. Moldova.
103.
On 17 September 2021, the Claimant submitted its observations opposing the Respondent’s request.
104.
On 21 September 2021, the Parties submitted their respective post-hearing briefs.
105.
On 1 November 2021, the Parties filed their respective submission on costs.
106.
On 21 February 2022, the Respondent submitted a copy of the award and dissenting opinion in Sevilla et al. v. the Kingdom of Spain,26 together with a three-page comment,
in accordance with section 15.5 of Procedural Order No. 1.
107.
On 1 March 2022, at the invitation of the Tribunal, the Claimant submitted its comments on the Sevilla award.
108.
On 10 May 2022, the Respondent submitted a request to introduce into the record, in connection with its first jurisdictional objection: (i) the judgment of the CJEU of October 26, 2021, issued in the Case C-109/20: PL Holding v. Poland; (ii) the Order of November 12, 2021, issued by the Svea Court of Appeal regarding the preliminary ruling requested from the CJEU on the compatibility of ECT arbitration clause with EU Treaties; (iii) ruling of the CJEU in Case C638-19 P, European Food y others vs. European Commission, dated January 25, 2022; (iv) the referral by the Commission of the United Kingdom to the Court of Justice of the European Union in relation to a Judgment of its Supreme Court of 19 February 2020; (v) the judgement of the Paris Court of Appeal n° 48/2022, dated April 19, 2022 and (vi) the judgement of the Paris Court of Appeal n° 49/2022, dated April 19, 2022.
109.
On 16 May 2022, the Claimant submitted its comments on the Respondent’s request, opposing the same.
110.
On 23 June 2022, the Respondent submitted a copy of the award in Green Power v. Kingdom of Spain,27 together with a three-page comment, in accordance with section 15.5 of Procedural Order No. 1.
111.
Also on 23 June 2022, the Respondent submitted a request to introduce into the record CJEU Opinion 1/20 dated 16 June 2022.
112.
On 2 July 2022, the Claimant submitted its comments on the Green Power award.
113.
Also on 2 July 2022, the Claimant submitted its comments on the Respondent’s request to introduce CJEU Opinion 1/20, opposing the same.
114.
On 7 July 2022, the Claimant submitted 10 additional arbitral awards,28 in accordance with section 15.5 of Procedural Order No. 1.
115.
On 11 July 2022, the Tribunal granted leave for the Respondent to introduce into the record the CJEU’s judgment in Komstroy v. Moldova and the CJEU’s Opinion 1/20.
116.
On 18 July 2022, the Respondent submitted its comments on the additional arbitral awards submitted by the Claimant and introduced the above CJEU documents into the record.

III. FACTUAL BACKGROUND

117.
The following factual background illustrates the most relevant aspects of the factual record, which is mostly uncontested. The Arbitral Tribunal has in addition taken into account all the evidence submitted by the Parties.

A. Overview

118.
The Claimant’s claims concern certain legislative and regulatory measures introduced by Spain to support investment in renewable electricity generation. Spain’s measures were intended to enable Spain to meet national and EU targets for electricity generation from renewable energy. The broader context of the EU’s and Spain’s renewable energy generation targets was the international effort to reduce greenhouse gas emissions. These efforts included notably the Kyoto Protocol 1997, pursuant to which signatories, including the EU and Spain, accepted ambitious targets for emissions reductions.
119.
Directive 2001/77/EC of the European Parliament and Council of 27 September 2001 (Directive 2001/77/EC) set Spain an indicative target for electricity energy generation from renewables at 29.4% of total electricity consumption by 2010.29 The purpose of Directive 2001/77/EC was "to promote an increase in the contribution of renewable energy sources to electricity production in the internal market for electricity and to create a basis for a future Community framework thereof."30 The indicative targets include a statement that, in taking these targets into account, "Member States make the necessary assumption that the State aid guidelines for environmental protection allow for the existence of national support schemes for the promotion of electricity produced from renewable energy sources."31
120.
The preamble of Directive 2001/77/EC referred to national support mechanisms for renewable energy as follows:

Member States operate different mechanisms of support for renewable energy sources at the national level, including green certificates, investment aid, tax exemptions or reductions, tax refunds and direct price support schemes. One important means to achieve the aim of this Directive is to guarantee the proper functioning of these mechanisms, until a Community framework is put into operation, in order to maintain investor confidence.32

121.
Directive 2009/28/EC of the European Parliament and Council of 23 April 2009 (Directive 2009/20/EC), replaced Spain’s indicative target by a mandatory target for renewable energy consumption, set at 20% of Spain’s total energy consumption by 2020.33 The preamble of Directive 2009/20/EC states in part as follows:

Member States have different renewable energy potentials and operate different schemes of support for energy’ from renewable sources at the national level. The majority of Member States apply support schemes that grant benefits solely to energy from renewable sources that is produced on their territory. For the proper functioning of national support schemes it is vital that Member States can control the effect and costs of their national support schemes according to their different potentials. One important means to achieve the aim of this Directive is to guarantee the proper functioning of national support schemes, as under Directive 2001/77/EC, in order to maintain investor confidence and allow Member States to design effective national measures for target compliance. This Directive aims at facilitating cross-border support of energy from renewable sources without affecting national support schemes.34

122.
Directive 2009/20/EC, like its predecessor, acknowledges the relevance of EU rules on State aid for renewable energy support mechanisms. Article 3(3) provides in relevant part: "Without prejudice to Articles 87 and 88 of the Treaty, Member States shall have the right to decide, in accordance with Articles 5 to 11 of this Directive, to which extent they support energy from renewable sources which is produced in a different Member State." Under Article 22(1)(b) of Directive 2009/20/EC, Member States are required to report to the EU on, among other things, "the introduction and functioning of support schemes and other measures to promote energy from renewable sources". Article 24 of Directive 2009/20/EC call for a transparency platform for such support schemes.
123.
These EU directives were transposed by Spain into its domestic law. Three instruments of Spain’s regulatory framework for renewable energy are the most relevant to this case. The first is Royal Decree 661/2007 ("RD 661/2007"),35 adopted under Law 54/1997. The second is Royal Decree 1578/2008 ("RD 1578/2008"),36 also adopted under Law 54/1997. The third is Royal Decree-Law 9/2013 ("RDL 9/2013"),37 in combination with Law 24/2013, which replaced Law 54/1997.
124.
Law 54/1997 liberalized and updated the general regulatory framework for the Spanish electricity system ("SES"), both for conventional energy generation (termed the "Ordinary Regime") and for renewable energy production and supply (the "Special Regime"). Under the Ordinary Regime, remuneration derived solely from the wholesale market price of electricity. Under the Special Regime, generators benefitted from a premium set by the Spanish Government over and above the wholesale market price. Of particular relevance to the Parties’ dispute, Law 54/1997 also provided that investors under the Special Regime would receive a remuneration set by the Government by reference to certain stated criteria, with the overall objective of providing the investors with a reasonable rate[] of return with regard to the cost of money in the capital markets". However, Law 54/1997 did not specify what this reasonable rate of return should be. That was left to regulations such as RD 661/2007.
125.
RD 661/2007 was a renewables support scheme enacted to achieve its renewable electricity target under Directive 2001/77/EC. Two salient features of RD 661/2007 were that it established fixed Feed in Tariffs ("FiTs") for qualifying photovoltaic ("PV") facilities - ostensibly to be paid in full over an initial period of 25 years, followed by a reduced amount for the remaining lifetime of the facility — and priority of access and dispatch to the electricity grid.
126.
RD 661/2007 succeeded in attracting substantial investment in renewables. Within just four months of its enactment, installed PV capacity reached 85% of the target set by RD 661/2007. But RD 661/2007 also coincided with - and indeed exacerbated - a widening gap between regulated electricity access charges (i.e., the amount retail customers paid for their electricity) and the regulated costs of the SES (which includes the costs of renewables support schemes). This shortfall is known as the "tariff deficit".
127.
RD 1578/2008 introduced new support parameters once access to RD 661/2007 was no longer available under its terms. RD 1578/2008 offered an indexed FiT over a 25-year period.
128.
Between 2010 and 2013, Spain modified the incentives available to PV facilities registered under RD 661/2007 and under RD 1578/2008, purportedly to eliminate the tariff deficit. The Claimant takes issue with these measures and contends that they materially reduced the returns on their investments.
129.
Among other measures, Spain repealed and replaced both RD 661/2007 and RD 1578/2008 with what the Claimant terms the "New Regulatory Regime", which replaced the fixed FiTs for PV facilities with remuneration designed to achieve a "reasonable rate of return" for a "standard plant" of the relevant type, as defined by Spain. The "reasonable rate of return" was initially set by Spain at the ten-year average of Spanish Government bond yields plus 3%, which was 7.398% (pre-tax). However, the Respondent contends that the New Regulatory Regime in fact maintained the essential characteristics of RD 661/2007, including the payment of a "subsidy" and priority of access to the grid.
130.
Sections B and D below describe the background to these measures, as well as their broader regulatory framework. Section E below describes the measures themselves in detail.

B. The Regulatory Framework Prior to the Claimant’s Investments

1. The Hierarchy of Regulatory Measures Under Spanish Law

131.
The SES is regulated under Spanish law by the following instruments, in order of hierarchy: (i) the Spanish Constitution of 1978; (ii) Laws of the Spanish Parliament; (iii) Royal Decree-Laws, which have the force of a Law and may be enacted by the Government in situations of extraordinary need or urgency; (iv) Royal Decrees, which are regulations issued by the Government to give effect to statutory provisions pursuant to its constitutional and statutory powers; (v) Ministerial Orders, which are issued by ministerial departments (such as the Ministry of Industry, Energy and Tourism) to implement Royal Decrees; and (vi) Resolutions, which are issued by Government to also implement Royal Decrees. Finally, in the context of the SES, there are renewable energy plans, which are regulatory standard-setting instruments drawn up by the regulator.

2. The Evolution of Spain’s Regulatory Framework Prior to the Disputed Measures

132.
Spain has a longstanding commitment to the promotion of renewable energy. In 1994, Spain enacted RD 2366/1994 creating the Special Regime.
133.
The Tribunal summarizes below the relevant key legislative and regulatory developments that occurred prior to the disputed measures, including the RD 661/2007 and RD 1578/2008 support schemes under which the Claimant’s PV facilities were registered.

(i) Law 54/1997

134.
In November 1997, Spain enacted Law 54/1997 to transpose into Spanish law EU Directive 96/92/EC on the internal market in electricity. Law 54/1997 liberalized Spain’s electricity sector - particularly energy generation and distribution — and committed Spain to produce 12% of its total energy demand from renewables by 2010.
135.
Law 54/1997 established the essential characteristics of Spain’s regulatory framework governing the electricity sector, as well as the limits of the regulatory power of the Spanish Government. Notwithstanding the creation of a free market system, Law 54/1997 provided that incentives would be offered to promote investment in renewable energy facilities.38 Under Law 54/1997, remuneration of electricity producers under the Special Regime would be supplemented by a "premium" to be established in subsequent regulations in accordance with stated criteria with the overall objective of achieving "reasonable rates of return with regard to the cost of money in the capital market."39 In December 1998, implementing this provision, Royal Decree 2818/1998 ("RD 2818/1998") introduced an option for renewable electricity producers to elect to receive a FiT for each kWh produced instead of a premium over the market price.
136.
In order to achieve its 12% renewables target by 2010, Law 54/1997 called for the drawing up of a renewable energies promotion plan that would be one of the factors for the setting of the premiums for renewable energy producers.

(ii) The Plan for the Promotion of Renewable Energies in Spain 2000-2010 ("1999 PER")

137.
Pursuant to Law 54/1997, in December 1999 the Institute for Energy Diversification and Savings ("I DAE"), an agency of the Spanish government, prepared the 1999 PER, a renewable energies promotion plan for the 2000-2010 period. The 1999 PER proposed that a remuneration scheme be developed through regulations in order to meet the EU’s indicative target that Spain produce 12% of its total energy demand from renewables by 2010. On 30 December 1999, Spain’s Council of Ministers approved the 1999 PER.

(iii) Royal Decree 436/2004 ("RD 436/2004")

138.
On 27 September 2001, the European Parliament and Council adopted Directive 2001/77/EC, which set Spain an indicative target for renewable energy generation at 29.4% of total electricity consumption by 2010.
139.
The RD 2818/1998 support scheme had failed to attract a sufficient level of investment in renewable energy for Spain to meet its targets. By 2004, Spain had achieved only 56.2% of its 2006 objective for renewable electricity production, and only 28.4% of its target for 2010.
140.
In February 2003, the Renewable Energies’ Producers Association ("APPA"), which represents over 500 Spanish renewable energy companies, published a report that recommended improvements to the RD 2818/1998 support scheme. APPA recommended that: (i) incentives for certain technologies, including solar PV, be increased in order to guarantee an adequate return on investment; and (ii) incentives be explicitly guaranteed for the life of the investment.
141.
In April 2003, Spain’s energy regulator, the National Energy Commission ("CNE"), concluded that it was necessary to increase remuneration and to guarantee incentives throughout the facilities’ useful life, in order to encourage sufficient investment and reach Spain’s renewables targets.
142.
In March 2004, Spain enacted RD 436/2004, a new renewables support scheme that addressed several perceived shortcomings of RD 2818/1998. The purpose of RD 436/2004, as articulated in its preamble, was to provide "security and stability and to establish a "long-lasting, objective, transparent regulatory framework in order to promote investment in renewable electricity generation.
143.
As its predecessor RD 2818/1998, RD 436/2004 gave eligible electricity producers the option to elect to receive either: (i) a FiT; or (ii) the market price plus an incentive for participating in the market and premium. RD 436/2004 continued to guarantee that producers would receive a "reasonable remuneration".40
144.
In order to incentivize investors, RD 436/2004 revised the rate scale for FiTs, premiums and incentives. For example, PV facilities of 100kW or smaller received an almost 95% increase in FiT rates. However, the FiT rates were not fixed but were set as percentages of the "Average Electricity Tariff’ (AET), which was an index determined annually by Spain based on a complex set of variables affecting the cost of the electricity system. These variables included the cost of the renewables support scheme itself. Spain subsequently realised that the linking of the FiTs to this index created a "feedback loop" whereby growth in renewable energy generation led to an increase in the AET, which in turn led to an increase in the FiTs even if the cost per kWh produced did not increase.
145.
RD 436/2004 provided that any future revisions to the FiTs, premiums and incentives would not apply to facilities already registered and in operation under the support scheme.41

(iv) The Plan for the Promotion of Renewable Energies in Spain 2005-2010 ("2005 PER")

146.
In August 2005, the Council of Ministers approved the 2005 PER prepared by IDAE. The 2005 PER revised the 1999 PER and acknowledged the insufficient growth of Spain’s renewable electricity capability.42 In order to meet Spain’s target of 29.4% share of renewables in total electricity consumption by 2010 in light of a projected growth in energy demand, the 2005 PER increased Spain’s installed PV capacity target for 2010 from 144 MW to 400 MW. The 2005 PER projected that PV electricity generation would require €1.875 billion in total capital investment, of which amount nearly 80% would be debt financed.

(v) Royal Decree 661/2007

147.
Just as its predecessor RD 2818/1998, RD 436/2004 failed to attract the level of investment in renewable energy necessary for Spain to meet its 2010 targets.
148.
The shortfall in PV investment was pronounced: whereas the 2005 PER targeted a PV capacity of 400 MW by 2010, Spain’s installed PV capacity as of 2006 was 84 MW.
149.
In the light of this shortfall, Spain decided to reform the RD 436/2004 support scheme. In February 2007, the CNE published a report on the draft regulations that would later become RD 661/2007. The CNE observed inter alia that economic incentives were necessary to promote the development of renewables and that "[i]n certain cases, differentiated incentives are justified that lead to higher returns, so that the objectives set in the planning can be achieved." The CNE also called for the draft regulations to be amended to include "sufficient guarantees to ensure that the economic incentives are stable and predictable throughout the entire life of the facilities...."
150.
On 27 May 2007, Spain enacted RD 661/2007, which repealed and replaced RD 436/2004.
151.
RD 661/2007 introduced several changes to the incentives available to qualifying renewable electricity producers under the Law 54/1997 general regulatory framework. In contrast with the RD 2818/1998 and RD 436/2004 support schemes, PV facilities registered under RD 661/2007 were entitled only to a FiT and were not given the option to receive a premium. In addition, whereas incentives under RD 436/2004 were based on the AET index — which was determined annually by Spain - RD 661/2007 fixed the FiT in absolute numbers (€/kWh), based on the total electricity generation capacity of the facility, for its entire operating life.
152.
Annex V of RD 661/2007 contains the following table setting out the FITs offered to qualifying PV facilities ("Category b 1.1 "), sub-grouped by power output of the facility.

Grupo Subgrupo Potencia Plazo Tarifa regulada c€/kWh Prima de referencia c€/kWh Limite Superior c€/kWh Limite Inferior c€/kWh
b.1 b.1.1 P≤100 kW primeros 25 años 44,0381
a partir de entonces 35,2305
100 kW primeros 25 años 41,7500
a partir de entonces 33,4000
10 primeros 25 años 22,9764
a partir de entonces 18,3811
b.1.2 primeros 25 años 26,9375 25,4000 34,3976 25,4038
a partir de entonces 21,5498 20,3200

153.
For each sub-group, there is a fixed FiT that applies for the first 25 years of a PV facility’s operations, which is then reduced to 80% of the original tariff for the remaining life of the facility. The fixed FiT was to be adjusted annually for inflation based on the Consumer Price Index ("CPI"). RD 661/2007 does not explain the methodology used to determine the fixed FiTs.
154.
For PV facilities with a power output of between 100 kW and 10 MW, the fixed FiT rate in RD 661/2007 represented an almost 82% increase as compared to the corresponding FiT under RD 436/2004. By contrast, the value of FiTs for PV facilities producing either less than 100 kW or more than 10 MW of power remained virtually unchanged under RD 661/2007.
155.
RD 661/2007 granted renewable producers, including PV facilities, priority of dispatch and grid access, meaning that they could sell and transmit electricity whenever it was produced.
156.
RD 661/2007 provided that Spain would review the fixed FiT rates in 2010 and every four years thereafter. As its predecessor RD 436/2004, RD 661/2007 required that any revisions to the FiT rates would guarantee a reasonable rate of return by reference to the cost of money in the capital markets and would not apply to facilities already enrolled in the support scheme. In full, the relevant provision of RD 661/2007, Article 44.3, read as follows:

During the year 2010, [in view] of the results of the monitoring reports on the degree of fulfillment 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 [S]pecial [R]egime in covering the demand, and its impact on 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.

157.
In a press announcement on RD 661/2007, Spain stated that:

The tariff revisions carried out in the future will not affect those installations already operating. This guarantee affords legal safety to the producer, providing stability to the sector and promoting its development. The new regulations will not be of a retroactive nature.

158.
To be eligible to receive the fixed FiT under the RD 661/2007 support scheme, PV facilities were required to obtain a "Final Commissioning Certificate" and be registered in the regional Administrative Registry for Special Regime Generation Facilities ("RAI PRE").
159.
In June 2007, IDAE released a new version of its promotional material titled "The Sun Can Be All Yours" highlighting the remuneration regime under RD 661/2007.43
160.
Private investors responded enthusiastically to RD 661/2007. In September 2007, four months after enactment, Spain reached 85% of the target set in RD 661/2007, which was to have 371 MW of installed PV capacity by 2010. Reaching this threshold triggered the twelve-month sunset clause under RD 661/2007, pursuant to which RD 661/2007 became closed to entrants not registered by 29 September 2008. Spain did not amend this twelve-month sunset provision.

(vi) Royal Decree 1578/2008

161.
On 26 September 2008, Spain enacted RD 1578/2008, which created a new support scheme for PV facilities that were not registered by the deadline for enrolment under RD 661/2007. RD 1578/2008 retained the essential features of RD 661/2007 but reduced the FiTs available to PV facilities. RD 1578/2008 applied only prospectively and did not affect the incentives offered to those PV facilities already registered under RD 661/2007.44

(vii) Spain’s Photovoltaic Capacity Following RD 661/2007

162.
Spain far surpassed the target specified in RD 661/2007, which had been to achieve an installed PV capacity of 371 MW by 2010. Between 2006 and 2007, Spain’s installed PV capacity in fact increased from approximately 167 MW to 690 MW. By 2008, it had grown to over 3,000 MW. In 2008, Spain accounted for half of all the solar power installed globally.
163.
By 2010, Spain had achieved an aggregate installed PV capacity of over 3,960 MW. This meant that renewable energy supplied 13.2% of Spain’s total energy consumption and 29.2% of its electricity, close to Spain’s 2010 target of 29.4%.

C. The Claimant’s Investments

164.
The Claimant’s fund, TREF, made four investments in Spain’s photovoltaic generation industry, as relevant for these proceedings. Each is described below.
165.
The GSI Investment On 7 April 2008, TREF acquired 51% of the shares in the Spanish holding company Generación Solar Investment, S.L. ("GSI"). All of the GSI plants secured RAIPRE registrations between April and August 2008 and therefore qualified for the RD 661/2007 feed-in tariff.45
166.
The Lucentum Investment On 30 October 2009, TREF acquired a 50% stake in the holding company Piraenergy Solar I, S.L.46 Its plants were entitled to RD 661/2007 tariffs given that they had secured final RAIPRE registrations on 24 September 2008.47 Aznalcollar and Los Cabezos
167.
On 30 December 2009, TREF acquired 50% of the shares in the local companies of the Aznalcollar project, Mysolar Proyectos 1-20, S.L., and on 15 April 2010, it acquired 50% of Los Cabezos through the 20 local companies, Plantas Fotovoltaicas Los Cabezos I-XX.48 The plants had secured RAIPRE registrations, and therefore were entitled to received RD 661/2007 tariffs.49

The El Carpio Investment

168.
In 2009 the Claimant’s fund looked into investing in a project named El Carpio, involving plants that had not yet been built.
169.
In April and May 2010, Triodos Bank Spain informed TREF of rumours circulating in Spain regarding a potential reduction to the feed-in tariffs Spain had granted to existing plants, due to high electricity prices for consumers and the fact that there had been many instances of fraud in the PV sector. As a result, [REDACTED].
170.
The plants were completed and received final registration in the RAIPRE on 9 March 2011, thereby securing their right to the tariff of 0.290857 €/kWh.51

D. Strains on the Regulatory Framework Leading Up to the Dispute

171.
After enacting RD 661/2007, Spain became increasingly concerned by its growing tariff deficit. In short, the SES did not generate enough revenue to cover the costs of FiTs and other remuneration.
172.
Spain’s tariff deficit was attributable to several factors. These include the fact that actual electricity consumption in Spain fell below forecasts in the 2005 PER as a result of the global financial crisis and subsequent recession in Spain. However, the tariff deficit had emerged several years earlier and is not therefore exclusively the product of the financial crisis.
173.
As illustrated in the first report of Dr Grunwald of FTI, Spain’s annual tariff deficit first materialized in 2000 and subsequently grew to over €6 billion for the year 2008, before returning to surplus in 2014.
174.
On an accumulated basis, Spain’s tariff deficit exceeded €40 billion by 2013 (approximately 4% of GDP), an increase of 271% from 2007, when the accumulated deficit stood at approximately €10.8 billion.
175.
In April 2009, Spain enacted Royal Decree-Law 6/2009 (RDL 6/2009), which adopted certain measures to address the tariff deficit. The preamble to RDL 6/2009 explains that:

The increasing tariff deficit [...] is causing serious problems which in the current context of international financial crisis, is profoundly affecting the system and endangering, not only the financial situation of the companies in the electricity sector, but the system's sustainability itself This imbalance is unsustainable and has serious consequences by deteriorating the security and investment financing capacity necessary to supply electricity in the quality and safety levels demanded by Spanish society. [...] by its increasing incidence on the tariff deficit, mechanisms are established with regard to the remuneration system of the facilities under the special regime. The trends followed by these technologies could put at risk in the short term, the sustainability of the system, both from the economic point of view due to their impact on the electricity tariff, and from a technical point of view, further compromising the economic viability of the already completed facilities, whose operation depends on the proper balance between manageable and non-manageable generation.

176.
In addition to RDL 6/2009, Spain adopted several other measures to address the tariff deficit, including the Disputed Measures defined and discussed below in the following section.
177.
The tariff deficit became a political issue in Spain. In his inaugural speech on 19 December 2011, the newly elected prime minister of Spain, Mariano Rajoy, stated:

Another essential structural reform concerns our energy system. Energy policy must aim to pursue an adequate balance between its objectives: competitiveness, security of supply and environmental impacts [...]. Energy is a key factor in the competitiveness of Spanish companies. It is important for us to realise Spain has a major energy) problem, especially in the electricity sector, with an annual deficit in excess of 3,000 million Euros, and an accrued tariff deficit of more than 22,000 million.

Electricity tariffs for domestic consumers are the third most expensive in Europe, and the fifth highest for industrial consumers.

[...] If reforms are not made, the imbalances will be unsustainable, and increases in prices and tariffs will place Spain at the greatest disadvantage in terms of energy) costs in the entire developed world. We must therefore introduce policies based on putting a break on and reducing the average costs of the system, take decisions without demagoguery, employ all the technologies available, without exception, and regulate with the competitiveness of our economy as our prime objective.

178.
On 27 January 2012, Spain enacted Royal Decree Law 1 ("RDL 1/2012"), which eliminated the economic incentives for new production installations. In March 2012, in response to a request from the Secretary of State for Energy, the CNE published a report proposing regulatory adjustment measures to address the tariff deficit. The CNE report stated that:

[T]he current situation is unsustainable. The introduction of regulatory measures, as requested by the document of the [Secretary of State for Energy], is called for with immediate effect in the short term, in order to eliminate the deficit of the system, mitigate the cost of funding the yet unsecuritised debt and clearly define the access costs that will be assumed by electricity customers, in order to determine their access tariffs in a satisfactory and stable manner.

179.
Among the short-term measures proposed by the CNE was the removal of annual CPI indexing for FiTs, and the elimination of FiTs at the end of the economic (or useful) life of a facility (as opposed to its operating life).

E. The Disputed Measures

180.
The Claimant argues that the Respondent’s six measures described below (the "Disputed Measures"), individually and together breached the Respondent’s ECT obligations.

1. Royal Decree 1565/2010

181.
In November 2010, Spain enacted Royal Decree 1565/2010 ("RD 1565/2010"), which cancelled the right of PV facilities to receive the FiTs specified in RD 661/2007 after the first 25 years of their operation.
182.
In response to criticism, however, Spain promptly extended the initial FiT period to 28 years by RDL 14/2010, and then to 30 years by Law 2/2011.

2. Royal Decree-Law 14/2010

183.
In December 2010, Spain enacted Royal Decree-Law 14/2010 ("RDL 14/2010"), which concerned urgent measures to address the tariff deficit.
184.
RDL 14/2010 capped the annual operating hours (i.e., the total quantity of electricity produced) for which PV facilities could receive FiTs under RD 661/2007 and RD 1578/2008. The applicable operating hour limit depended on the type of PV technology and geographic location. PV facilities in locations with higher solar radiation had a higher cap. Once a PV facility reached the applicable cap, additional electricity could only be sold at market prices.
185.
RDL 14/2010 also established a new 0.5 EU/MWh "access toll" on all electricity a producer delivered to the grid.

3. Law 15/2012

186.
In December 2012, Spain enacted Law 15/2012, which introduced a 7% "energy production value tax" on all revenues (including FiT revenues) derived from the production of electricity ("TVPEE"). Article 4.1 of Law 15/2012 defined the "taxable event" as "the production of electricity and its incorporation into the electricity system measured at power station bus bars. The tax base consists of the total amount received by the taxpayer for the production and incorporation of power into the electric energy system, "in all economic regimes" under Law 54/1997.

4. Royal-Decree Law 2/2013

187.
In February 2013, Spain enacted Royal Decree-Law 2/2013 ("RDL 2/2013"), which introduced an "amended CPI" that excluded price changes in food, energy products and certain tax effects for the purposes of calculating annual FiT inflation revisions under RD 661/2007 and RD 1578/2008. Initially, the amended CPI was lower than the general CPI. From late 2014, however, the amended CPI was higher than the general CPI.

5. Royal Decree-Law 9/2013

188.
In July 2013, Spain enacted Royal Decree-Law 9/2013 ("RDL 9/2013"), concerning the tariff deficit and "urgent measures to guarantee the financial stability of the electricity system. RDL 9/2013 abolished the RD 661/2007 and RD 1578/2008 support schemes — including the FiT regime - and authorized the government to approve a new legal framework for renewable energy production.
189.
Pursuant to Article 1(2) of RDL 9/2013, Article 30.4 of Law 54/1997 was modified as follows:

4. Additionally, and in the terms set forth in the regulations by royal decree of the Board of Ministers, for the compensation of the sale of generated energy valued at market price, the facility can receive a specific compensation composed of one period by unit of installed power that covers, when applicable, the investment costs of a typical facility that cannot be recovered by the sale of energy and one period of operation that covers, in any case, the difference between the exploitation costs and the income for the market share of said typical facility.

For the calculation of said specific remuneration, the following aspects shall be considered, taking into account a standard facility throughout its legal service life, according to the activity performed by an efficient, well-managed business:

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

(b) The standard exploitation cost.

(c) The standard value of the initial investment.

To these effects, in no case will the costs and investments that come determined by norms or administrative actions that are not applicable in all the Spanish territory be considered. In the same manner, only those costs and investments are taken into account that respond exclusively to the electrical energy production activity.

As a consequence of the peculiar characteristics of the electrical systems internal and external to the Iberian Peninsula, specific type installations can be exceptionally defined for each one of them.

This compensation regime will not surpass the minimum level necessary to cover the costs that will allow the installations to compete on an equal level with the rest of the technologies in the marketplace and that permit the possibility of obtaining a reasonable profit in reference to the installation type in each applicable case. Notwithstanding the foregoing, the compensating regime can also exceptionally incorporate an investment and execution incentive within a determined period of time when its installation supposes a significant cost reduction in the insular and extra-peninsular systems.

This reasonable profitability will be based, before taxes, on the average yield in the secondary market of the Obligations of the State to ten years applying the adequate differential.

190.
The essence of the new framework envisaged by RDL 9/2013 - the precise details of which were left to subsequent legislation and regulations — was that all renewable energy facilities would be required to sell electricity on the wholesale market. Instead of FiTs, producers would receive the market price plus remuneration designed to achieve a "reasonable rate of return" for a "standard" facility over a defined regulatory life period. RDL 9/2013 set the target rate of return at 300 points above the ten-year average yield of Spanish government ten-year bonds (approximately 7.4%).
191.
RDL 9/2013 provided that PV facilities would temporarily continue to receive remuneration under the RD 661 /2007 and RD 1578/2008 support schemes until the new legal framework was enacted. However, any such payments (i.e., from July 2013 onwards) would be subject to a "true-up" adjustment (or claw back) once the new framework was in force (which occurred in 2014 as discussed below).

6. Law 24/2103, Royal Decree 413/2014 and MO IET/1045/2017

192.
In December 2013, Spain enacted Law 24/2013 to implement the new renewable energies framework envisaged by RDL 9/2013. Law 24/2013 eliminated the distinction between the Ordinary and Special Regimes under Law 54/1997. Law 24/2013 provided that remuneration under the new renewables support scheme would be "compatible with the economic stability of the electric system" and would:

"not exceed the minimum level required to cover the costs which allow the production installations from sources of renewable energies ... to compete on an equal footing with the other technologies on the market and which allows a fair return to be obtained pertaining to the standard installation applicable in each case.

193.
Following the enactment of the new general framework for renewables under Law 24/2013, a new support scheme was established by RD 413/2014 and supplemented by Ministerial Order IET/1045/2014 (MO 1045), which detailed precisely how remuneration for PV facilities would be calculated.
194.
In sum, remuneration of renewable energy facilities under the new support scheme was comprised of the following elements:

(a) Market remuneration from the sale of electricity in the wholesale market (€/MWh); and

(b) "specific remuneration", which was based on "standard" (not actual) costs of a PV facility and consisted of:

(i) an "operating incentive" (or "Return on operation"), calculated per unit of electricity produced (€/MWh), to compensate facilities for operating expenses not covered by the wholesale price of electricity; and

(ii) an "investment incentive" (or "Return on investment"), calculated per unit of installed capacity (€/MWh), to enable investors to cover their investment (capital) costs and receive a "reasonable rate of return" over a defined regulatory life period, which was set at 30 years for PV facilities. The "reasonable rate of return" prescribed by Spain was initially the 10-year average of Spanish 10-year treasury bonds, plus 300 basis points, which was 7.398% pre-tax for 2013-2018.

195.
MO 1045, a 1,761-page document, sets the "remuneration parameters" for 1,517 different "standard facilities", including 578 different "standard" PV facilities, resulting in the formula for calculating the "specific remuneration" that a given PV facility receives.
196.
Pursuant to MO 1045, each PV facility is assigned one of 578 "standard" facility codes (known as "IT codes") on the basis of several factors, including technology type, capacity, date of installation and location. Within each IT code, MO 1045 sets out the parameters of compensation applicable to that standard facility, including: an imputed investment cost; estimated current operating costs; estimated future operating costs; estimated hours of operation; estimated daily and intraday market prices of electricity; and net asset value of the facility.
197.
MO 1045 also set a minimum operating hours threshold for a PV facility to receive the operating incentive and investment incentive, as well as a maximum operating hours threshold to receive the operating incentive.
198.
The parameters used to set the operating incentive were subject to revision every three years. The parameters for the investment incentive and the level of the "reasonable rate of return" were subject to revision every six years. Although the initial target "reasonable rate of return" (7.398% pre-tax) was based on the ten-year average yield of ten-year Spanish treasury bonds, the periodic review would be based on a two-year average of the ten-year bond, taking into account "the cyclical state of the economy, the electricity demand and an appropriate remuneration."

F. The European Commission’s Decision of 10 November 2017

199.
On 10 November 2017, the Commission issued Decision SA.40348, concerning State Aid measures in Spain, titled "Support for electricity generation from renewable energy sources, cogeneration and waste" (the "EC Decision"). The EC Decision rules on the lawfulness of the specific remuneration scheme for the photovoltaic solar industry governed by RDL 9/2013, Law 24/2013, RD 413/2014, MO 1045/2014 and Order 1ET/1459/2014 of 1 August 2014 ("MO 1459.2014") (together, the "Remuneration Scheme"). The EC Decision holds that the Remuneration Scheme is compatible with the common market. The EC Decision considers that the introduction of the Remuneration Scheme does not contravene principles of legitimate expectations or legal certainty as a matter of EU law. The EC Decision also contains statements concerning allegations by affected investors that the Remuneration Scheme breaches investment provisions of the ECT.

IV. JURISDICTION

A. Introduction

200.
The Claimant commenced this proceeding under the ECT, including ECT Article 26 on investor-State dispute settlement. The Respondent has raised objections to jurisdiction. The Parties agreed to hear the Respondent’s objections concurrently with the merits.

B. The Respondent’s Objections to Jurisdiction

201.
The Respondent raises the following objections to the jurisdiction of the Tribunal:

(i) Lack of jurisdiction ratione personae and ratione materiae to hear the dispute, on the grounds that, in accordance with the provisions of Article 26(6) of the ECT, EU law and principles are applicable international law for the resolution of the dispute, and EU regulations prevent that the dispute be submitted to arbitration (the "Intra-EU Objections"); and

(ii) Lack of jurisdiction of the Tribunal to hear the dispute on an alleged breach of Article 10(1) of the ECT through the introduction of the TVPEE by Law 15/2012, of 27 December, on fiscal measures for energetic sustainability, on the ground that the Kingdom of Spain has not given its consent to submit this issue to arbitration (the "Taxation Measure Objection").

202.
The following sections set out a summary of the Parties’ respective positions on each of the objections, followed by the Tribunal’s analysis and conclusion thereon.

C. The Intra-EU Objections

1. The Respondent’s Position

203.
The objections raised by the Respondent against the Tribunal’s jurisdiction ratione personae and ratione materiae, based on the alleged application of EU law to the dispute, follow a single sequence of arguments.
204.
The Respondent objects to the Tribunal’s jurisdiction ratione personae by arguing that the arbitration clause under Article 26(4) of the ECT is not applicable to cases between an investor of an EU Member State and another EU Member State regarding an investment in the latter Member State. In the Respondent’s position, the requirement under Article 26(1) of the ECT, that the dispute takes place between a 'Contracting Party' and an investor of another Contracting Party’, is not met.52
205.
The Respondent objects to the Tribunal’s jurisdiction ratione materiae on the same basis. The Tribunal summarizes the Respondent’s arguments below.

(i) EU law is applicable to the present dispute

206.
Article 26(6) of the ECT provides as follows: 'A tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law.’
207.
The Respondent states that, when dealing with an intra-EU dispute, a tribunal established under Article 26(4) must apply EU law as the 'applicable rules and principles of international law'. The Respondent offers two reasons for its statement.
208.
The first reason is that, in the Respondent’s view, fundamental freedoms are affected in any intra-EU investment. The Respondent specifically refers to free movement of goods, capital, workers, services, [and] freedom of establishment’.53
209.
The second reason is that, in the Respondent’s position, the present dispute affects an essential EU institution, which is State aid.54 The Respondent asserts that the Claimant requires the payment of compensation derived from a subsidy scheme that the European Commission has already qualified as State aid.55
210.
The Respondent observes that the EU State aid system is reserved for the exclusive competence of the European Commission.56 It further asserts that EU regulations on State aid, insofar as they are aimed at one of the basic objectives of the EU, which is the creation of the Internal Market, constitute imperative and public-order standards. In that vein, the Respondent cautions that an award that did not respect EU regulations on State aid could be annulled.57

(ii) The decision in Achmea embraces the present case

211.
As the Respondent argues that EU law is international law applicable to the present dispute, it submits that the decision of the Court of Justice of the European Union ("CJEU") in Achmea58 is applicable to the present case. The Respondent then argues that Achmea confirms that Article 26 of the ECT is not applicable to intra-EU disputes.59
212.
The Respondent recalls the CJEU’s interpretation in Achmea that an arbitration clause in a Bilateral Investment Treaty (a "BIT") concluded between EU Member States was incompatible with EU law and the autonomy of the EU legal system.60
213.
The Respondent cites the following passage from the decision:

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States [...], 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.61

214.
The Respondent considers that the principles and underlying reasoning of Achmea apply to the present case.62 More specifically, it holds that the conclusion in Achmea can be extended to Article 26 of the ECT both from a literal and a substantive point of view.
215.
From a literal point of view, the Respondent points to the fact that Achmea did not refer to 'Bilateral Investment Treaties’ but rather to an 'international agreement concluded between Member States'. In the Respondent’s understanding, the ETC would fall under the second category.63
216.
From a substantive point of view, the Respondent holds that Achmea established three main prerequisites to reach its conclusion, all of which are met in the present case:

(1) [T]hat in order to resolve the dispute, the Arbitral Tribunal must be called on to interpret and/or applicate of EU law; (2) that the Principle of EU Autonomy is not respected because the CJEU cannot exercise its function of ensuring the full application of EU regulation in all Member States and ensuring judicial protection of the rights of the people under that law"; and (3) that the Award issued by the Arbitral Tribunal is not subject to be reviewed by a Court of any Member State.64

217.
The Respondent summarizes its position on the relevance of Achmea to the present dispute as follows:

... the Achmea Judgment confirms that, precisely because of articles 267 and 344 of the TFEU, article 26 of the ECT is not applicable to intra-EU disputes due to the fact that this would not be compatible with the Principles of primacy, autonomy, sincere cooperation and mutual trust of the European Union, and even less so if the issue is related to State Aid, as in the present case, which is excluded from the ECT under article 10(8) of the ECT.65

218.
The Respondent further supports its thesis by resorting, inter alia, to three documents issued, respectively, by the European Commission, the Governments of 22 EU Member States, and the CJEU. The Respondent additionally supports its arguments on the judgement of the CJEU of 2 September 2021, issued in the Case C-741/19, Republic of Moldova v. Komstroy, The Tribunal refers to those documents and decisions below.

(a) The European Commission’s Communication of 19 July 2018

219.
The Respondent refers to the European Commission’s Communication to the European Parliament and the Council, of 19 July 2018, on the protection of Intra-EU investment.
220.
In this Communication, the European Commission stated that Article 26 of the ECT, if interpreted correctly, did not provide for an investor-State arbitration clause applicable between investors from EU Member States and other EU Member States. The Commission considered that, if that was the case, the clause would be incompatible with EU primary law and thus inapplicable. The Commission further emphasized that the reasoning in Achmea applied to the intra-EU application of such a clause.66

(b) The Declaration of the Governments of 22 EU Member States after Achmea

221.
The Respondent also refers to the Declaration, of 15 January 2019, issued by the Representatives of the Governments of 22 EU Member States on the legal consequences of the Achmea judgment and on investment protection (the "2019 Declaration", as opposed to other Member States’ declarations on the issue, also referred to by the Respondent).
222.
The 2019 Declaration stated that arbitration proceedings between investors from one EU Member State and another EU Member State under the ECT are incompatible with EU law. In the Respondent’s view, the 2019 Declaration constitutes a fundamental element in the interpretation of the ECT in accordance with Article 31(3)(a) of the Vienna Convention on the Law of Treaties (the "VCLT"). In the Respondent’s view, the 2019 Declaration reflects an agreement of the signatory Member States, parties to the ECT, regarding the interpretation to be made of Article 26 of the ECT.67
223.
In its Reply on Jurisdictional Objections, the Respondent rejects the Claimant’s contention that the interpretative force of the 2019 Declaration is limited by the fact that it has not been signed by all signatory parties to the ECT. Instead, the Respondent observes that Article 31(3)(a) of the VCLT merely refers to an agreement between parties, without further indication.68
224.
The Respondent notes that the two States relevant to the present dispute (Luxembourg and Spain) are signatories of the 2019 Declaration. It holds that they unequivocally stated their desire for their investors to be unable to submit any dispute with another Member State, signatory to the 2019 Declaration, to arbitration under the ECT.69

(c) The CJEU’s Opinion 1/17, of 30 April 2019

225.
In its Reply on Jurisdictional Objections, the Respondent refers to the Opinion 1/17, of 30 April 2019, issued by the CJEU on the compatibility of EU law and the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States ("CETA").70 In the Respondent’s view, the CJEU underlined the validity of the principles of autonomy and primacy of EU law and confirmed that Achmea is applicable to any international agreement, even to those to which the EU is a party.71
226.
The Respondent also contends that the Eskosol decision,72 to which the Claimant refers in support of its arguments, is flawed because it did not take into account the aforementioned Opinion of the CJEU, even when it came before the Ekosol decision.73

(d) The CJEU’s decision in Komstroy

227.
In its submission of 10 September 2021, the Respondent refers to the judgement issued by the CJEU on 2 September 2021 in Republic of Moldova v. Komstroy.74
228.
The Respondent states that, since the Komstroy decision was issued by the Grand Chamber of the CJEU, it expresses the final view of the CJEU on the matters at issue.75 The Respondent considers that such issues go to the core of its objection that the Tribunal lacks jurisdiction to hear an intra-EU case.76
229.
First, The Respondent asserts that, in Komstroy, the CJEU declares the applicability of the holding in Achmea to the dispute settlement mechanism provided for in Article 26 of the ECT.77
230.
Secondly, the Respondent refers to the question of the compatibility of intra-EU arbitration under the ECT and the EU Treaties. The Respondent cites the CJEU’s conclusion that "Article 26(2)(c) ECT must be interpreted as not being applicable to disputes between a Member State and an investor of another Member State concerning an investment made by the latter in the first Member State.78
231.
Furthermore, in its submission of 23 June 2022, the Respondent argues that the CJEU’s Opinion 1/20, of 16 June 2022,79 confirmed the relevance and binding nature of the Komstroy decision regarding Article 26(2)(c) of the ECT.80

(e) The award rendered in Green Power

232.
In its second submission of 23 June 2022, the Respondent refers to the award rendered in Green Power and SCE Solar Don Benito v. Spain.81
233.
The Respondent asserts that the tribunal in Green Power held that it lacked jurisdiction to hear a dispute involving European law "such as is the case of a claim based on the ECT (...) brought by a European investor against a European State regarding subsidies to the renewable energy producers which are according to EU Law state aid."82
234.
The Respondent argues that the tribunal in Green Power conducted its analysis both from the perspective of Articles 31 and 32 of the VCLT and EU Law. The Respondent refers to the tribunal’s interpretation of the ECT "following criterions laid down in the VCLT but as they are not conclusive it continues its exercise by analysing the Achmea and Komstroy rulings... ".83
235.
The Respondent refers to three grounds identified by the Green Power tribunal in favour of the application of the Achmea holdings: (i) that in Achmea the CJEU clarified that EU Law was to be applied to address the validity of offers to arbitrate intra-EU disputes; (ii) that Achmea explained that Articles 267 and 344 of the TFUE were incompatible with intra-EU arbitration clauses; and (iii) that Achmea highlighted the relevance of the "rationale behind its holdings which was the autonomy of EU Law.84
236.
The Respondent also contends that, in the view of the Green Power tribunal, after the Komstroy decision there should be no doubt regarding the lack of jurisdiction of arbitral tribunals to hear intra-EU disputes under the ECT.85
237.
Moreover, the Respondent asserts that the Green Power tribunal took account of the 2019 Declaration issued by the Representatives of the Governments of 22 EU Member States on the legal consequences of the Achmea judgment and on investment protection.86
238.
In addition, the Respondent states that the line of interpretation found in Komstroy and Green Power is likely to be followed by the Svea Court of Appeal when faced with setting aside proceedings.87

(iii) An effective interpretation of the ECT upholds the lack of consent for intra-EU arbitration

239.
The Respondent maintains that a literal interpretation of the ECT according to its purpose and context leads to the conclusion that, when signing the ECT, EU Member States were not making an arbitration offer to investors from other EU Member States.88
240.
In the Respondent’s understanding, the conflict resolution mechanisms under Article 26 of the ECT only refer to disputes concerning alleged breaches of obligations derived from Part Ill of the ECT, regarding investor and investment protection. In the Respondent’s position, since EU Member States cannot obligate each other under Part III, the dispute resolution mechanisms laid down in Article 26 do not apply to intra-EU disputes.89
241.
The Respondent points to other provisions of the ECT which, in its view, support its thesis.
242.
It argues, for instance, that Article 1(3) of the ECT, which defines a "Regional Economic Integration Organisation (an "REIO"),90 expressly recognizes that some matters governed by the ECT should be negotiated by the EU because its Member States do not have competence over them. The Respondent considers that among said matters, whose negotiation is reserved to the EU, are fundamental freedoms and State aid.91
243.
The Respondent also refers to Article 25 of the ECT, which defines an "Economic Integration Agreement (an "EIA"),92 and considers that it expressly recognizes the principle of primacy of EU law.93
244.
Although the Respondent denies, in principle, the existence of a conflict between the ECT and EU law, it entertains it as a hypothesis and examines possible solutions.
245.
The Respondent considers, first, that such a conflict would be resolved not by Article 16 of the ECT but by Articles 30 and 59 of the VCLT. It holds that the rules of the VCLT would lead to the application of EU law. It considers that if the aim and purpose of the ECT were compared with those of the EU Treaties, and even more of the Treaty of Lisbon, the EU Treaties would prevail.94
246.
The Respondent observes that even if it were understood that the hypothetical conflict should be resolved on the basis of Article 16 of the ECT,95 the ECT should prevail. Article 16 of the ECT prevents the derogation of a provision that is more favourable to the investor or the investment. The Respondent asserts, however, that neither the ECT introduces substantive rights that are more favourable than EU law, nor does Article 26 of the ECT provide for arbitration as the sole dispute resolution mechanism nor does it say that this mechanism is more favourable than the others.96
247.
The Respondent takes notice of the Claimant’s contention that the ECT terms are more preferable for investors and investments, both from a substantive and a procedural point of view. In its Reply on Jurisdictional Objections, the Respondent suggests that the Claimant’s interpretation of Article 16 of the ECT is seriously flawed. In the Respondent’s view, Article 16 of the ECT is narrow and reduced-scope, and will apply to treaties the terms of which refer to the matters of Parts III (investment protection) and V (dispute settlement) of the ECT itself. In that regard, the Respondent argues that Article 16 is directed at investment treaties and does not discipline EU law.97
248.
Secondly, the Respondent observes that, by virtue of Article 26(6) of the ECT, tribunals must apply EU law and the ECT under equal conditions. In this vein, it considers that any hypothetical conflict of those 'international rules' is resolved in Article 25 of the ECT which, in the Respondent’s view, recognizes the principle of primacy of EU law in intra-EU relations.
249.
Thirdly, and alternatively, the Respondent holds that if we turn to the rules of conflict in Article 30 of the VCLT, the hypothetical conflict must also be resolved in favour of EU law. The Respondent contends that the rule 'lex posterior derogat legi priori', under Article 30(4) of the VCLT, compels the application of the later rule, which is the principle of primacy of EU law.98

(iv) The "disconnection" of EU law from international treaties

250.
The Respondent submits that it was not necessary to introduce a disconnection clause into the ECT with regard to intra-EU disputes. It holds that any hypothetical conflict is resolved by Article 25 of the ECT which, in its view, recognizes the principle of primacy of EU law in intra-EU relations.99
251.
In its Reply on Jurisdictional Objections, the Respondent elaborates further on the possibility of EU law to 'disconnect' from international treaties. It states that, by virtue of the principles of autonomy and primacy of EU law, in the relations between EU Member States or between EU Member States and the EU, EU law disconnects from the international treaties.100
252.
In that context, the Respondent considers that the Eskosol decision101 erred in more than one respect. For instance, the Respondent rejects that for EU law to disconnect from international treaties a disconnection clause is needed. The Respondent also argues that the manifestation of the autonomy and primacy of EU Law with regard to international conventions must not be understood in a purely hierarchical manner, since it operates intra-EU solely.102
253.
The Respondent further submits that both the autonomy and primacy of EU law, and the consequence of disconnecting from international treaties, find support in all sources of international law.103
254.
First, the Respondent asserts that the principles of autonomy and primacy of EU law, and the possibility of 'disconnecting', exist as customary international law, since they have been accepted by the international community.104 The Respondent also submits that customary international law pertaining to the autonomy and primacy of EU law works bidirectionally: that is, in relation to previous and future international treaties.105 The Respondent also observes that the determination of when there is a disconnection in favour of EU law is exclusively an EU decision.106
255.
Secondly, the Respondent states that the primacy of EU law over any national or international legal regime must be respected even from a strict perspective of Treaty Law. It supports such statement by reference to Declaration 17 of the Treaty of Lisbon, on the primacy of EU legislation.107
256.
Thirdly, the Respondent holds that the principles of autonomy and primacy of EU law, together with the consequence of 'disconnecting', fall under the category of general principles of law. The Respondent refers to 'pacta sunt servanda It contends that, with the ratification of the Treaty of Lisbon, EU Member States accepted the commitment to respect the exclusive competence of the EU over foreign investment, the primacy of EU law, the jurisdictional system of the EU, and the CJEU’s decisions.108
257.
The Respondent summarizes its argumentation by stating that Article 26 of the ECT has not been applicable to conflicts within the EU since the ratification of the ECT. Alternatively, the Respondent submits that the Treaty of Lisbon replaced Article 26 of the ECT and made it inapplicable to intra-EU disputes.109 The Tribunal observes that both contentions of the Respondent are based on the alleged possibility of EU law to 'disconnect' from international treaties for intra-EU affairs.
258.
The Tribunal further notes the Respondent’s assertion that, if it were understood that the EU and its Member States did not previously disconnect from Article 26 of the ECT for intra-EU affairs, they would, in any case, have done so through the 2019 Declaration of the 22 EU Member States, after the Achmea decision.110

2. The Claimant’s Position

259.
The Claimant’s arguments address both the objection ratione personae and the objection ratione materiae raised against the jurisdiction of the Tribunal.
260.
With regard to the Tribunal’s jurisdiction ratione personae, the Claimant contends that the Claimant is a proper 'investor' with the requisite nationality under the ECT, and that the dispute concerns its substantial 'investments’ in Spain.111 In its Rejoinder on Jurisdiction, the Claimant further notes that the Respondent has contested neither the Claimant’s nationality nor the nature of its investments.112
261.
The Claimant states that no tribunal has ever accepted the position that the ECT does not apply to disputes between an investor of an EU Member State and another EU Member State. It points out that the Respondent has consented unconditionally to the jurisdiction of this Tribunal.113 In that respect, the Claimant recalls that the tribunal in Eskosol concluded that "nothing in the text of Article 26 itself suggests its scope was intended to be restricted to disputes involving either an investor or a Contracting Party outside the EU.114 The Claimant notes that the Eskosol tribunal reached the same conclusion as at least 24 other ECT tribunals.115
262.
With regard to the Tribunal’s jurisdiction ratione materiae, the Claimant rejects the arguments presented by the Respondent. The Tribunal summarizes below the sequence of counterarguments presented by the Claimant.

(i) EU law is not applicable to the present dispute

263.
The Claimant argues that the Respondent misreads the ECT’s governing law clause and misconstrues EU law. The Claimant argues that the ECT, and not EU law, applies to the Tribunal’s jurisdiction. In the Claimant’s view, Article 26(6) of the ECT applies to the merits and not to the Tribunal’s jurisdiction. It further asserts that, in any event, the reference to 'rules and principles of international law’ in Article 26(6) of the ECT does not include EU law, which is not international but regional law.
264.
Consequently, the Claimant rejects the Respondent’s argument that, because EU law is applicable, EU State aid law removes the dispute from the Tribunal’s jurisdiction. The Claimant additionally maintains that, even if EU State aid law were relevant to the dispute, it would apply only to the merits and not to the Tribunal’s jurisdiction.
265.
In its Rejoinder on Jurisdiction, the Claimant also denounces the lack of evidence that either the Respondent or the European Commission considered RD 661/2007 and RD 1578/2008 as State aid when such measures were in force.116

(ii) The decision in Achmea does not embrace the present case

266.
The Claimant rejects the Respondent’s argument that the Achmea decision extends to the ECT. It maintains, on the contrary, that neither the conclusion nor the reasoning in Achmea are relevant to the dispute.117
267.
The Claimant observes that Achmea concerned an intra-EU BIT and, therefore, it does not extend to multilateral treaties to which the EU is a party.118 It also recalls that the dispute settlement mechanism in the BIT at issue (the Netherlands-Slovakia BIT) was found incompatible with EU law because it potentially required a tribunal to interpret and apply EU law, although such a tribunal did not constitute a 'tribunal or court' for the purposes of Article 267 of the Treaty on the Functioning of the European Union ("TFEU"). The Claimant warns that this is not the case of the ECT.119 In addition, the Claimant points out that the Achmea decision express carves out treaties to which the EU is a party, such as the ECT.120
268.
The Claimant also observes that no ECT tribunal has held that the Achmea decision extends to the ECT, and that at least 15 ECT tribunals have held the contrary.121
269.
The Tribunal notes the Claimant’s additional counterargument regarding Achmea. The Claimant holds that, even if Achmea extended to the ECT, that would not impact or preclude the Tribunal’s jurisdiction. In the Claimant’s view, a decision of an EU court under EU law is not binding on an international investment tribunal empanelled under a different legal instrument.122 The Claimant invokes the International Law Commission (the "ILC") 2006 Report on Fragmentation of International Law, which provides that "when conflicts emerge between treaty provisions that have their home in different regimes, care should be taken so as to guarantee that any settlement is not dictated by organs exclusively linked with one or the other of the conflicting regimes."123 The Claimant maintains that this conclusion is consistent with the rulings in many recent intra-EU ECT cases decided by experts on international law.124
270.
In addition, the Claimant rejects that Achmea is likely to have an impact upon enforcement of ECT awards. It, nevertheless, considers that matters related to the enforcement of an eventual award are of no relevance to the current task before the Tribunal which simply is to decide the merits of the dispute.125
271.
The Tribunal notes that the Claimant refers, inter alia, to three documents to which the Respondent resorts to in its submissions: the European Commission’s Communication to the European Parliament and the Council, of 19 July 2018, on the protection of Intra-EU investment; the 2019 Declaration of the Governments of EU Member States on the legal consequences of the Achmea decision; and CJEU’s Opinion 1/17, of 30 April 2019, on the compatibility between EU law and CETA. The Tribunal summarizes the Claimant’s views below.

(a) The European Commission’s Communication of 19 July 2018

272.
In its Rejoinder on Jurisdiction, the Claimant refers to the European Commission’s Communication to the European Parliament and the Council, of 19 July 2018, on the protection of intra-EU investment, noted by the Respondent.
273.
The Claimant considers that, while the European Commission discussed, to considerable extent, substantive rights under EU law, it did not attempt to link or compare those rights to the rights afforded by any investment treaty, including the ECT.126
274.
On this ground, the Claimant rejects the Respondent’s suggestion that the substantive rights afforded by EU law to investors and investments could be superior to the rights and protections enshrined in the ECT.127

(b) The Declaration of the Governments of 22 EU Member States after Achmea

275.
In its Counter-Memorial on Jurisdiction, the Claimant rejects that the 2019 Declaration of the Governments of EU Member States on the legal consequences of the Achmea decision are relevant to the Tribunal’s evaluation of its jurisdiction under the ECT. It contends that those declarations are political statements with no legal weight regarding the applicability of the ECT to the present dispute.128
276.
In its Rejoinder on Jurisdiction, the Claimant states that numerous tribunals have recently confirmed that the EU Member States’ various Declarations are not EU legal instruments and do not have an interpretive effect regarding EU law.129

(c) The CJEU’s Opinion 1/17, of 30 April 2019

277.
In its Rejoinder on Jurisdiction, the Claimant refers to the CJEU’s Opinion 1/17, of 30 April 2019, on the compatibility between EU law and CETA.

According to the Claimant, the Respondent severely mischaracterizes the CJEU’s Opinion when it claims that it shows that Achmea applies to multilateral treaties. The Claimant further notes that the CJEU found no conflict between the dispute resolution framework envisioned for CETA and EU law, despite the lack of an ability for potential tribunals constituted under CETA to refer questions of EU law to European courts.130

(d) The CJEU’s decision in Komstroy

278.
In its submission of 16 May 2022, the Claimant opposes the Respondent’s reliance on the CJEU’s decision in Komstroy to support its objection to the jurisdiction of the Tribunal.
279.
In the Claimant’s view, the Komstroy decision is irrelevant to the issues before this Tribunal, which is bound by the terms of the ECT. The Claimant notes that seven ECT tribunals and three ICSID annulment committees found that Komstroy was irrelevant to the analysis of whether the ECT applies to intra-EU disputes.131
280.
Moreover, the Claimant rejects the Respondent’s argument that, in light of the Komstroy decision, the Svea Court of Appeal will not confirm the jurisdiction of SCC tribunals to hear intra-EU disputes regarding the ECT. The Claimant observes that neither the Svea Court of Appeal nor any other court situated within the EU and subject to EU had invoked Komstroy to set aside any intra-EU ECT award.132
281.
In its submission of 1 July 2022, the Claimant considers that the CJEU’s Opinion 1/20, of 16 June 2022, is irrelevant to any issue this Tribunal is called upon to decide. In the Claimant’s view, this Opinion does not develop the current state of EU law, but simply confirms that the original ECT has not been modified.133

(e) The award rendered in Green Power

282.
In its second submission of 1 July 2022, the Claimant refers to the Green Power award, on which the Respondent relies to support its objection to the jurisdiction.
283.
In the Claimant’s view, the tribunal in Green Power erred when it found that matters of EU law were relevant as part of the governing law by virtue of an EU seat of the arbitration.134
284.
The Claimant argues that Green Power is unpersuasive for two reasons.
285.
First, the Claimant asserts that the Green Power tribunal adopts "an extreme view of the relevant factual and legal issues, which has not been adopted by any other arbitral tribunal.135
286.
Second, the Claimant contends that the reasoning in Green Power is "faulty and illogical. The Claimant considers that the Green Power tribunal: (i) "misapplied international law on treaty interpretation, since it concluded that a treaty may have different meanings depending on different facts; (ii) incorrectly interpreted and applied the so-called principle of EU 'primacy', assuming that "primacy" means that EU law can be superior to international law, which is incorrect; (iii) "failed to take appropriate account of the drafting history of the ECT, which includes the Contracting Parties’ decision not to include a disconnection clause for intra-EU disputes; (iv) incorrectly conflated its mandate to determine a dispute under the ECT with the [European Commission]'s competence to determine the compatibility of state aid regimes, when, in the Claimant’s view, there is no conflict between the European Commission’s competence to determine the compatibility of state aid schemes and an arbitral tribunal’s assessment of the relevance of that determination, if any; and (v) based its "entire conclusion [] on an assumption that Swedish courts will apply Komstroy to 'disapply' the ECT to intra-EU disputes and that the courts will do so retroactively, adding that it is a well-settled international legal rule that the tribunal’s jurisdiction must be assessed as of the date the arbitration commenced.136

(iii) The interpretation of the ECT does not uphold a lack of consent for intra-EU arbitration

287.
The Claimant rejects the Respondent’s position that EU law and the dispute resolution provision in the ECT are incompatible.137 It rejects the contention that EU law would prevail under Article 16 of the ECT and under the lex posterior rule of the VCLT.
288.
According to the Claimant, when two international agreements between the same Contracting Parties are in force, Article 16 of the ECT gives preference to the more favourable provisions for investors and investments. In the Claimant’s view, the predominance of the more preferable ECT terms is preserved both from a substantive and a procedural point of view: by explicitly referring only to the ECT Parts III (Investment Promotion and Protection) and V (Dispute Settlement). The Claimant considers that, to prevail on its argument, the Respondent would have to establish that the EU treaties offer more favourable provisions than the substantive protections afforded in Part III of the ECT and the access to arbitration granted under Part V of the ECT.138
289.
As to the Respondent’s lex posterior argument under the VCLT, the Claimant asserts that Articles 30(3) and 30(4) of the VCLT are only applicable where the treaties at issue share the same subject matter and are incompatible. In the Claimant’s view, that is not the case between the ECT and the EU treaties.139
290.
Furthermore, in its Rejoinder on Jurisdiction, the Claimant recalls that Article 30 of the VCLT provides that the parties to a treaty are free to determine the hierarchy of norms through special agreements or 'leges speciales'. The Claimant considers that the Parties to the ECT agreed to a 'lex specialis' in Article 16 of the ECT, where they agreed on the relationship between the ECT and any other prior or subsequent agreements. In the Claimant’s view, the 'conflict of treaties rules' in Article 16 of the ECT would trump the principle of primacy.
291.
What is more, the Claimant observes that, under Articles 31 and 32 of the VCLT, only if the interpretation of the relevant treaty language leaves a meaning that is 'ambiguous or obscure’ or 'manifestly absurd or unreasonable’ may recourse be had to supplementary means of interpretation.140 The Claimant insists on the plain meaning of the terms of Article 24(3) of the ECT, which provide that every Contracting Party to the ECT gave its 'unconditional consent' to investor-State dispute resolution in accordance with the provision. The Claimant denies any ambiguity in the language.141
292.
The Claimant then recalls the Eskosol tribunal’s conclusion in the sense that nothing in the context of the ECT indicates an intent to exclude intra-EU disputes from the scope of application of Article 26 of the ECT.142 The Claimant maintains that the Eskosol tribunal reached the same conclusion as "every other tribunal that has addressed the issue.143

(iv) A disconnection clause is not 'unnecessary’

293.
The Claimant rejects the Respondent’s argument that a disconnection clause was unnecessary to carve-out intra-EU arbitration from the ECT.
294.
The Claimant notes that the text of the ECT provides no limitations or exceptions that would indicate that investors from certain Contracting Parties may not resolve their disputes against certain other Contracting Parties under the ECT. The Claimant further denies the possibility of such a reservation because Article 46 of the ECT provides that '[n]o reservations may be made to this treaty '.144
295.
In addition, the Claimant observes that the ECT’s travaux préparatoires demonstrate that the European Economic Community unsuccessfully attempted to introduce a disconnection clause into the ECT.145 The Claimant observes that no ECT Contracting Party has taken any step to amend the provisions of this Treaty afterwards.146
296.
In its Rejoinder on Jurisdiction, the Claimant also submits that no ECT tribunal has ever accepted the Respondent’s contention that disconnection clauses are unnecessary to render international treaties that EU Member States have ratified ineffective between them. The Respondent asserts that such scenario 'flies in the face of the [VCLT] and the established practice of the EU and its Member States'.147
297.
The Claimant also rejects the Respondent’s contention that the principle of primacy of EU law was codified in Declaration 17 to the Lisbon Treaty. The Claimant observes, first, that the Respondent points to no authority in support of its argument. Secondly, the Claimant asserts that the plain text of the Treaty of Lisbon demonstrates that the ECT fully applies. The Claimant specifically refers to Article 188(N) of the Treaty of Lisbon, which provides that '[a]greements concluded by the Union are binding upon the institutions of the Union and on its Member States Thirdly, the Claimant argues that EU law does not prevail over the ECT.148
298.
Moreover, the Claimant criticizes the Respondent’s argument that the principles of autonomy and primacy, and the implied 'disconnection’ of EU law, amount to customary international law. In the Claimant’s view, the Respondent fails to demonstrate the existence of an international custom.149

3. The submission by the European Commission

299.
Under Procedural Order No. 2, the Tribunal granted the European Commission’s application to intervene in the present arbitration as a non-disputing party. The Tribunal authorized the European Commission to submit a precise statement of its positions on the following issues of treaty interpretation, to the extent they were material to the outcome of the case:

(i) Whether Article 26 of the ECT applies to a dispute between a Contracting Party and an Investor of a Contracting Party where both Contracting Parties are EU Member States; and

(ii) Whether and to what extent the rules of EU law on State aid are relevant to the interpretation of the substantive provisions of Part III of the ECT, including Article 16 of the ECT.150

300.
On 9 August 2019, the European Commission submitted its observations, which the Tribunal summarizes below.

(i) Whether Article 26 of the ECT applies to a dispute between a Contracting Party and an Investor of a Contracting Party where both Contracting Parties are EU Members

301.
First, the European Commission recalls that Article 19(1) of the Treaty on European Union ("TEU") obliges Member States to provide sufficient remedies to ensure effective legal protection in the fields covered by EU law. The Commission states that the integrity of the EU legal order is protected via a comprehensive judicial system.151
302.
The Commission then refers to Articles 267 and 344 of the Treaty on the Functioning of the European Union ("TFEU"). It explains that Article 267 describes the preliminary ruling procedure, which is the keystone of uniform interpretation and application of EU law. Article 344, the Commission continues, prohibits Member States from creating, in relation to any matter implicating EU law, dispute settlement mechanisms other than those set out in the EU Treaties. The Commission states that by virtue of this arrangement the specific characteristics and the autonomy of the EU legal order are preserved.152
303.
The Commission also points to two principles: primacy of EU law and mutual trust.
304.
With regard to primacy of EU law, the Commission asserts that EU law is an integral part of, and takes precedence over, the legal order applicable in the territory of each of the Member States.153
305.
As to mutual trust, the Commission contends that this principle may be called into question if a system of dispute resolution is introduced in a situation covered by EU law but is set up outside the EU system of effective legal protection.154
306.
Secondly, the European Commission refers to the Achmea decision. It recalls that the CJEU confirmed that the TFEU prohibits the Member States from offering to resolve intra-EU investor-State disputes before international arbitral tribunals.155
307.
The Commission observes that the question before this Arbitral Tribunal is how to apply the interpretation of Articles 267 and 344 of the TFEU handed down by the CJEU in Achmea to the arbitration clause in the ECT.156
308.
The Commission holds that the considerations set out by the CJEU in Achmea apply equally to an intra-EU application of Article 26 of the ECT, in the following manner:

(i) EU law is international law applicable between all EU Member States;

(ii) EU law is covered by the term 'applicable rules and principles of international law' under Article 26 of the ECT and is explicitly recognized as binding in an intra-EU context under Article 1(3) of the ECT;

(iii) Arbitral tribunals are not 'national courts or tribunals' within the meaning of Article 267 of the TFEU; and

(iv) There is no full review of the award by a court in an EU Member State.157

309.
Thirdly, the Commission considers that in any situation concerning both the ECT and EU law, the former would, pursuant to Article 30(4)(a) of the VCLT, only apply to the extent that it is compatible with the latter. It concludes that the dispute settlement mechanisms under Article 26 of the ECT are not compatible with EU law when dealing with intra-EU disputes.158

(ii) Whether and to what extent the rules of EU law on State aid are relevant to the interpretation of the substantive provisions of Part III of the ECT, including Article 16 of the ECT

310.
First, the European Commission recalls that the EU Treaties charge the Commission with the enforcement of EU competition law and that this includes the investigation and control of State aid. The Commission observes that it has exclusive competence to declare State aid compatible with the EU Treaties, subject to review by the CJEU.159