(a) I agree with the determination of our tribunal's jurisdiction.4 In particular, I agree with the finding that we do not have jurisdiction over the taxation issue arising from the TVPEE,5 but that we do otherwise have jurisdiction pursuant to Article 26 of the ECT to hear and resolve this dispute;
(b) I agree that Claimant's expropriation claim must be dismissed;6
(c) I disagree that RD 661/2007 and RD 1578/2008 did not contain specific promises and guarantees on which Cavalum reasonably and legitimately relied when making its investments. In this regard, I do not question Spain's constitutional authority subsequently to regulate in the public interest, but when such authority was invoked to destroy the vested rights Cavalum acquired when it was induced to invest by the explicit promises and guarantees in RD 661/2007 and RD 1578/2008, then in my opinion the FET standard under the ECT was breached and Spain thereby became liable for damage caused to Cavalum;
(d) I disagree that Claimant should be denied recovery on the basis of either an alleged lack of due diligence or any decisions of the Spanish Supreme Court pre-dating Claimant's investments. I further disagree that registration in RAIPRE was merely an administrative step with no legal significance;
(e) I agree a distinction can reasonably be drawn between the Spanish regulator's 2010 changes and the subsequent changes in the form of RDL 1/2012 and the New Regulatory Regime, introduced in 2013 and 2014, and further agree that Claimant cannot recover for its claims in respect of the 2010 changes;
(f) I do not disagree that a reasonable rate of return was a "cornerstone" of the Law 54/1997 regime, but would find that the incentives offered to and relied upon by the investor in this case were explicitly those in RD 661/2007 and RD 1578/2008, that these were confirmed by Spain to provide a reasonable rate of return and that in relation to the feed-in tariffs set out in Article 36, Table 3, the second part of Article 44.3 expressly assured investors such as Claimant that these feed-in tariffs would not be revised. Moreover, the text of RD 661/2007 expressly confirmed that the incentives created by it conformed with Law 54/1997 and provided reasonable rates of return;
(g) I disagree with several of the basic findings in the RREEF7 case and, contrary to the views of my colleagues, I would not follow that tribunal's conclusions;
(h) Instead, I am persuaded by the decision in the Novenergia8 case that the New Regulatory Regime changes were radical and unexpected and fundamentally altered what the Claimant reasonably and legitimately expected based on RD 661/2007 and RD 1578/2008 and other conduct of Spain. Moreover, I am similarly persuaded by the reasoning and conclusions set out in the Eisei9 case, the Antin10 case, the Masdar11 case, the 9REN v. Spain12 case, and the SolEs Badajoz13 case, to similar effect;
(i) I agree that the so-called "claw back" imbedded in the implementation of the target rate of return set out in MO IET/1045/2014, Annex III, is inconsistent with Spain's obligation of stability and therefore contrary to Article 10(1) of the ECT;
(j) I disagree that we should be embarking on assessing the reasonable rate of return under the New Regulatory Regime in order to determine whether, as measured against that standard, there has been an actual impact on Claimant and, if so, to what extent;
(k) Instead, I would award damages to Claimant based on the opinions offered by Claimant's experts pursuant to their DCF analysis, based on the difference in value of the investments under the RD 661/2007 and RD 1578/2008 regimes (as revised in 2010) and their value after the introduction of RDL 1/2012 and the New Regulatory Regime;
(l) I would also find in favour of the claim for wasted expenditure in the total amount of EUR 1.8 million, all in relation to the three Abandoned Projects (Fotovoltaica Lobon, Solar Lobon, and Solar Botoa) as a result of the suspension of the RD 1578/2007 regime under RDL 1/2012;14
(m) Out of regard for arbitral economy, I do not need to develop my views on other claims such as a lack of transparency, although I think there was arguably such a lack. I would agree, however, that there was no discrimination.
523. In the view of the majority of the Tribunal, irrespective of the differing interpretations, RD 661/2007 (and RD 1578/2008) did not contain the type of specific commitments (or, as it is sometimes put, a stabilisation clause) which gives rise to legitimate expectations under the FET standard that there will be no adverse change.15
I propose to focus first on RD 661/2007, which covered five different plants of the Claimant.16 Based on a plain reading of this Royal Decree, I would construe it to include the following meanings and applications in this case:
(a) The economic framework established in "this decree develops the principles provided in Law 54/1997" and guarantees the owners of facilities under the special regime "a reasonable rate of return on their investments" (Recital).
(b) Incentives are provided and play a part in the electricity market, "since it is considered that in this manner lower government intervention will be achieved in the setting of prices, together with better, more efficient, attribution of costs of the system" (Recital).
(c) In order to safeguard the security and quality of the supply of electricity and to minimise the restrictions on production in those "technologies which are today considered not manageable", certain installed capacity targets are established. These coincide with the targets of the Renewable Energy Plan 2005-2010 and the Strategy for Energy Saving and Efficiency in Spain (E4). The compensation system in this Royal Decree shall apply to these targets (Recital).
(d) The purpose of this Royal Decree is to replace Royal Decree 436/2004 and establish a legal and financial framework for the business of producing electrical energy under the special regime (Article 1a).
(e) This Royal Decree applies to facilities classified pursuant to Article 27.1 of Law 54/1997, depending on the "primary energy employed, the production technologies employed and the energy yield obtained." Such facilities may avail themselves of the special regime established under this Royal Decree (Article 2.1).
(f) Sub-group b.1.1 covers facilities "which use solar radiation alone as their primary energy by means of photovoltaic technology" (Article 2.1b). All of Claimant's facilities fell into this sub-group.
(g) Facilities for the production of electrical energy under the special regime "shall be subject to compulsory registration" in RAIPRE (part of the Ministry of Industry, Tourism and Trade), as provided in Article 21.4 of Law 54/1997. (Article 9.1). The registration procedure consists of an initial registration phase and a final registration phase (Article 9.2).
(h) The initial registration application authorizes the assignment of an identification number in RAIPRE. Notification of this information is given to the National Energy Commission and the competent Autonomous Community (Article 11.4).
(i) Final registration in RAIPRE contemplates compliance with various requirements set out in Article 12 and can be presented simultaneously with the application for the deed of entry into service of the facility (Article 12.1e).
(j) A facility has status under the Special Regime from the date of the decision to grant it such status by a competent authority. Even so ("notwithstanding"), the final registration of the facility in the RAIPRE "shall be a necessary requirement for the application of the economic regime regulated under this Royal Decree" (Article 14.1). Cavalum's first five facilities were finally and timely registered in RAIPRE before 28 September 2008.17
(k) Under Article 17, producers under the Special Regime were to enjoy certain rights, including:
(i) the right to connect their generating unit in parallel with the grid and transfer to the system their net production of electrical energy (if technically possible to be absorbed by the grid);
(ii) the further right to receive for the total or partial sale of their net electrical energy generated under any of the options appearing in Article 24.1, the compensation provided in the economic regime set out by this Royal Decree.
(l) Once again, the regulator states that, "The right to receive the regulated tariff or if appropriate the premium, shall be subject to final registration of the facility" in RAIPRE by the date fixed under Article 22 (Article 17.c).
(m) The economic regime set up under this Royal Decree is further described and defined in Chapter IV. Article 24 provides that producers are permitted to elect to sell their net production either pursuant to a regulated tariff (Article 24.1.a) or sell in the electrical energy production market (Article 24.1.b). These options may be selected for periods of not less than one year, meaning, in practical terms, that a producer could make an annual election (Article 24.4).
(n) The regulated tariff is a fixed sum which shall be the same for all scheduling periods and shall be determined according to whichever group or sub-group the facility belongs (Article 25).
(o) Pursuant to Article 36, the tariffs and premiums for category b).1.1, (covering Claimant's facilities,) "shall be as provided in Table 3, below". The portion of Table 3 applicable to Claimant's facilities shows as follows:
Article 36 - Table 3 - at 22862-63 BOE no. 126
(p) A plain reading of this table shows that, depending on the sizes of its facilities in the b.1.1 subgroup, Cavalum was entitled to certain specific tariffs for the first 25 years and slightly reduced tariffs thereafter. In my opinion, this plain language contemplates that these tariffs would apply, effectively, for the operational lifetime of such plants.
(q) Due to its central importance in this case, I quote extensively from Article 44, as follows:
Article 44. Updating and review of tariffs, premiums, and supplements.
The values of the tariffs, premiums, supplements, and lower and upper limits to the hourly price of the market as defined in this Royal Decree, for Category b)... shall be updated on an annual basis using as a reference the increase in RPI (Consumer Price Index) less the value set out in this decree.
3. During the year 2010, on sight 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 special regime in covering the demand and its impact upon the technical and economic management of the system, and a reasonable rate of profitability shall always be guaranteed with reference to the cost of money in the capital markets. Subsequently a further review shall be performed every four years, maintaining the same criteria as previously.
The revisions to the regulated tariff and the upper and lower limits indicated in this paragraph shall not affect facilities for which the deed of commissioning shall have been granted prior to 1 January of the second year following the year in which the revision shall have been performed (bolding added).
(r) Broadly speaking, Article 44.3 contemplates the sort of four-year review that was typical of Spain's electricity regulations at that time. What was open to review in 2010 under this article were "tariffs, premiums, supplements and lower and upper limits", as defined in this decree, the degree of participation of the Special Regime in covering the demand and its impact on the technical and economic management of the system and a reasonable rate of profitability, which was always to be guaranteed with reference to the cost of money in the capital markets.
(s) The second part of Article 44.3 applies directly to Claimant's b.1.1 facilities which were registered in RAIPRE before 28 September 2008. In other words, those facilities obtained their deeds of commissioning prior to 1 January of the second year following the year in which the revision shall have been performed.
(t) The language in the second part of Article 44.3 is perfectly clear that the revisions arising from the four-year review "shall not affect" the regulated tariff and upper and lower limits of such facilities. It follows that there would be no revisions to the regulated tariff prescribed in Article 36, Table 3 for Cavalum's facilities. This language is an express promise of stability for the feed-in tariffs for these facilities.
(u) Before leaving the matter of construing RD 661/2007, I would note that what is not excluded from review in the language of Article 44.3 is the RPI (or consumer price index), taxes, access to the grid or the amount of production by a producer. In other words, in my opinion, this paragraph, in the case of Claimant's facilities, to this extent did not expressly exclude Spain's right to further regulate such matters as long as that was done proportionally.
(v) Accordingly, I would find that Cavalum was entitled reasonably to act in full reliance on Spain's express promise in the second part of Article 44.3 that it would not revise the regulated feed-in tariffs for Claimant's facilities as prescribed in Article 36, Table 3.
665. The Tribunal considers that Law 54/1997 and RD 661/2007 were clearly enacted with the objective of ensuring that the Kingdom of Spain achieved its emissions and RE targets. In order to achieve that objective the Kingdom of Spain created a very favourable investment climate for RE investors, and the nucleus of such investment climate was the Special Regime. The requirements placed on the PV plants to qualify for the Special Regime were limited to registration with the RAIPRE, a requirement which all of the PV Plants had met within the prescribed cut-off date [internal footnotes omitted].
666. In the Tribunal's view, a number of relevant statements or assurances were made by the Respondent with respect to the Special Regime, as initially introduced through Law 54/1997 and further developed by RD 661/2007 and legislation in-between:
(e) In Law 54/1997, it was stated that RE facilities admitted to the Special Regime would be authorized to incorporate "all the energy produced by them into the system" and would "obtain reasonable rates of return" as set by the government.
(f) RD 436/2004 was enacted as expressly aiming at "provid[ing] those who have decided or will decide in the near future to opt for the special regime with a durable, objective, and transparent framework."
(g) Under RD 436/2004, PV plants were entitled to incorporate into the grid all of the electric energy produced in exchange for a FIT or premium for the lifespan of the PV plants.
(h) Under RD 661/2007, which replaced RD 436/2004, PV plants enrolled in the RAIPRE before the cut-off date would be entitled to
(i) incorporate all of their net production into the grid; (ii) a FIT that would only be updated in accordance with the national CPI, and (iii) receive a fixed FIT for the lifespan of the PV plants.
667. These were the legal sources in force in the Kingdom of Spain when the Claimant made its investment and the Tribunal agrees with the Claimant that the above statements and assurances were indeed aimed at incentivising companies to invest heavily in the Spanish electricity sector and that the Claimant made its investment in reliance of (sic) the terms provided in RD 661/2007. The commitment from the Kingdom of Spain could not have been clearer. A considerable number of RE companies also invested in reliance on these statements and assurances.18
The State guaranteed the stability of the benefits, if the investors fulfilled a certain number of conditions, both procedural and substantial, during a certain window of time. Specifically, the State undertook that it would offer to investors the possibility to continue to enjoy the existing benefits, provided that within a certain window of time, they did everything necessary to enable them to register in the RAIPRE. This was a very specific unilateral offer from the State, which an investor would be deemed to have accepted, once it had fulfilled the substantial condition of construction of the plant and the formal condition of registration within the prescribed window.19
This fast-track evolution has resulted in numerous industrial investments in the solarvoltaic technology, [...] and, as a result, the entire elements of a solar photovoltaic installation can be currently produced in Spain.
This makes it necessary to provide these investments with continuity and expectations, and also to determine a progressive pattern for the implementation of this technology, which can in addition contribute to the fulfillment of targets in the 2005-2010 Renewable Energy Plan, and of those to be fixed in the 2011-2020 Renewable Energy Plan, in accordance with targets set forth for Spain under the new Directive on Renewable Energy. Therefore, [it has been considered appropriate] to raise the current 371 MW target of installed capacity connected to the grid, provided in Royal Decree 661/2007 of May 25.
While insufficient remuneration would render investments non-viable, excessive compensation may impact significantly the costs of electrical system, and discourage research and development, thus reducing the excellent prospects in the medium and long-term for this technology. Therefore, the rationalization of retribution is deemed necessary and, consequently, the royal decree issued hereby adjusts downwards the financial regime, in line with the forecasted evolution of this technology, from a long-term perspective.
In order to guarantee a minimum market [level] for the photovoltaic sector's development, and at the same time, [to guarantee] the continuity of the support scheme, [the royal decree establishes] a mechanism for allocation of remuneration through registration in a registry of allocation of remuneration, at an early stage of the project development, in order to provide the necessary legal certainty for promoters in relation to the remuneration to be obtained by the facility, once it [will be] commissioned.
5. The applicable regulated tariff to a facility, in accordance with this royal decree, shall be maintained for a maximum duration of twenty-five years, as from either the date of commissioning or the date of registration in RAIPRE. It adds, such compensation shall never be applicable prior to the date of such registration.
Fifth Additional Provision Amendment to the Retribution of the Activity Electricity Generation from Photovoltaic Technology
In the course of 2012, in the light of technological developments in the sector and in the market, and of performance of the remunerative framework, the compensation for electricity power generation with solar photovoltaic technology may be amended.
669.... There must be a promise, assurance or representation attributable to a competent organ or representative of the state, which may be explicit or implicit. The crucial point is whether the state, through statements or conduct has contributed to the creation of a reasonable expectation, in this case, a representation of regulatory stability. It is irrelevant whether the state in fact wished to commit itself; it is sufficient that it acted in a manner that would reasonably be understood to create such an appearance. The element of reasonableness cannot be separated from the promise, assurance or representation, in particular if the promise is not contained in a contract or is otherwise stated explicitly. Whether a state has created a legitimate expectation in an investor is thus a factual assessment which must be undertaken in consideration of all the surrounding circumstances.31
It will be in 2010 that the tariffs and premiums set out in the proposal will be revised in accordance with the targets set in the Renewable Energies Plan 2005-2020 and in the Energy Efficiency and Savings Strategy and in line with the new targets included in the following Renewable Energies Plan for the period 2011-2020.
The revisions carried out in the future of the tariffs will not affect those installations already in operation. This guarantee provides legal safety for the producer, affording stability to the sector and fostering its development32 (bolding added).
668. Moreover, the investors were provided with the following information:
(a) In the prospectus 'The Sun Can Be All Yours', the IDAE, an organ of the Kingdom of Spain, wrote with respect to investments in the PV sector that "[t]he return on the investment is reasonable and can sometimes reach up to 15%" and offered "significant financing of the investment" [The Sun Can Be All Yours, Reply to all the Key Questions, 24 May 2005].
(b) In [PER] 2005-2010, with respect to the Special Regime, the Kingdom of Spain declared that "the proper functioning of these mechanisms must be guaranteed [...] to maintain investor's confidence" and that it should maintain "investors' confidence [...] through a stable and predictable support scheme." [PER] 2005-2010.
(c) In the new prospectus in the "The Sun Can Be All Yours" series in June 2007, the IDAE wrote that investors in the PV sector would "obtain  a maximum return on the investment" throughout the lifespan of the facility, namely through the FIT in RD 661/2007. [IDAE, The Sun Can Be All Yours, Reply to all the Key Questions, June 2007].36
669. In the Tribunal's view, the above statements were also aimed at incentivising companies to invest heavily in the Spanish electricity sector and formed part of the basis for the Claimant's investment.
The Claimant has argued that legitimate expectations arise naturally from undertakings and assurances made by, or on behalf of, the state and that such undertakings and assurances need not be specific. The arbitral tribunal in Electrabel, acknowledged that '[w]hile specific assurances given by the host State may reinforce the investor's expectations, such an assurance is not always indispensable'. The Tribunal agrees. A multitude of arbitral tribunals have established that undertakings or assurances can be explicit or implicit.37
Spanish legislation does contain a general commitment to investors investing in renewables in Spain, but it is not the commitment that Claimant claims.
The Commitment that Spanish legislation contained at the time of Claimant's investment and that is maintained in the Spanish legislation currently in force, after the disputed measures, is that investors obtain a reasonable return to their investment in accordance with the cost of money in the capital markets.51
The power of the host State to amend its legislation at any time is not under discussion, as no one has a vested right to the maintenance of laws and regulations. The host State can always modify a legal regime of general or specific scope for reasons of public interest. However, this does not prevent the recognition of the fact that if such legitimate action affects acquired rights or legitimate expectations, it is appropriate to compensate for the damages caused. This is a typical case of state liability for lawful activity, widely recognized in comparative doctrine and case law and in relation to which Spanish law has deservedly transformed, since at least the mid-twentieth century, into a source of knowledge of particular value.53
674.... As regards these sources, the Tribunal is unpersuaded by the Respondent's arguments. Neither one of the documents could have given the Claimant the expectation that a 'reasonable rate of return' would be limited to 7%, that stability and predictability could not be expected in the SES, that the Special Regime could be abolished, or any of the other arguments that the Respondent appears to make. In fact, the sources referenced by the Respondent includes wording that gives investors the impression that the Spanish regulator was eager to incentivise investors to invest heavily in the RE sector and that it was committed to creating a stable and predictable framework for investors to attain such investment. The overwhelming impression created by these sources is rather the exact opposite of that claimed by the Respondent; they constitute a bait rather than a deterrent.54
673. As regards statements in relation to 'economic sustainability' and 'reasonable rate of return' the Tribunal finds the Respondent's arguments unconvincing, since these principles were still generally vague and insufficiently defined at the time of the Claimant's investment [internal foot note omitted]. Precise content was given to these principles through the introduction of Law 15/2012 and RDL9/2013, which were enacted long after the Claimant had already made its investment. Accordingly, they cannot be considered apposite for the assessment of the reasonability of the Claimant's expectations at the time of the investment, as the Respondent suggests.55
To work out the premiums, the voltage level on delivery of the power to the network, the effective contribution to environmental improvement, to primary energy saving and energy efficiency, the generation of economically justifiable useful heat and the investment costs incurred shall all be taken into account so as to achieve reasonable profitability rates with reference to the cost of money on capital markets.
318. The crucial regulation in the present case, the legal text essentially invoked by the Claimants, is RD 661/2007. No more than the ECT itself, this document contains a stability clause guaranteeing the immutability of the conditions of the investments. Article 44(3) of RD 661/2007 provides as follows:....59
315. Stability is not an absolute concept; absent a clear stabilization clause, it does not equate with immutability. In this respect the Tribunal notes that the Claimants do not take such an extreme view [internal footnote omitted]. However, the obligation to create a stable environment certainly excludes any unpredictable radical transformation in the conditions of the investments. The question therefore is whether the obligation of stability thus defined has been violated by the Respondent to the detriment of the Claimants.
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.60
395. However, as with all other advantages recognized in the Royal Decree, this did not imply an everlasting exemption of any revision of the regulated tariff. Simply (but importantly) the changes to be adopted in the future could not significantly modify the legal framework applicable to investors [internal foot note omitted] - including the pledge not to put into question the commitment concerning the reasonable return, a criterion which must be assessed globally, taking into account the object and purpose of RD 661/2007 as expressed in its Preamble [internal foot note omitted].62
387. The Claimants cannot prevail (sic) themselves of a fixed rate of return for their investment. However, the Arbitral Tribunal is of the view that, whatever the means chosen by the Respondent, the Claimants could legitimately expect a return for their investment at a reasonable rate which implies significantly above a mere absence of financial loss, the precise average rate taking into account the actual cost of money on capital markets for such investments as well as other objectives.
399... the Claimants had, when they made their investments, a legitimate expectation to get a reasonable return on their investments. Such expectation did not include a guarantee to have the legal regime in place unchanged until the end of the operation of the plants, but it did include to have any modifications reasonable and equitable. Whether such a legitimate expectation was violated can only be assessed by way of a global view of the situation that resulted from the modifications introduced by the Respondent after the date of the investment. It is only in case the answer to this question is in the affirmative that compensation is due to the Claimants under this head of claim.
695. Taking into account the Kingdom of Spain's statements and assurances prior to and in connection with the implementation of RD 661/2007, the legitimate expectations of the Claimant, and the changes introduced through RDL 9/2013, the Tribunal considers these challenged measures as radical and unexpected. The manner in which the Kingdom of Spain adopted the measures including and subsequent to RDL 9/2013 fell 'outside the acceptable range of legislative and regulatory behaviour' and 'entirely transform[ed] and alter[ed] the legal and business environment under which the investment was decided and made.' Moreover, the challenged measures adopted in 2013 and 2014 had a significant damaging economic effect on the Claimant's investments as evidenced by the Claimant's invoked expert reports and the Claimant's opening statement during the Hearing. [...] Consequently, the Tribunal considers the Kingdom of Spain's actions as drastic and unexpected in a manner that is contrary to the Kingdom of Spain's obligation to provide FET to investors [internal footnotes omitted].68
In other words, PV Investors, Novenergia, Cube, 9Ren, and OperaFund all have involved the same technology, close timing of investments, the same incentives, the same compliance with the RAIPRE registration deadline, the same assurances, the same regulations, the same investment treaty, the same host State, and the same measures in dispute.
11. The Claimants made their investment based on the regulatory regime launched by RD 661/2007. The legal and financial analyses performed by Claimants, and by financial institutions and investors involved in the project, as well as by retained consultants, were based on this regulatory regime. In addition to the expectations created by the RD 661/2007 regime itself, representatives of Spain made statements and presentations which explained the benefits of investing in the Spanish renewable sector at the time. Such statements and representations form part of the Claimants' legitimate expectations.
14. Based on the foregoing, i.e. the RD 661/2007 regime itself and the statements of and conduct by representatives of Spain, I find that the Claimants' reasonable expectations at the time of their investment were that there would not be any fundamental and radical changes to the RD 661/2007 regime and that Claimants relied on these expectations when making their investments.74
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