584. For all of the foregoing reasons, the Claimants respectfully request that the Tribunal enter an award in their favour and against the Kingdom of Spain as follows:
(a) DECLARING that Spain has breached Article 10(1) of the ECT; and
(b) ORDERING that Spain:
(i) provide full restitution to the Claimants by re-establishing the situation which existed prior to Spain's breaches of the ECT, together with compensation for all losses suffered before restitution; or
(ii) pay the Claimants compensation for all losses suffered as a result of Spain's breaches of the ECT; and
in any event:
(iii) pay the Claimants pre-award interest at a rate of 2.07% compounded monthly; and
(iv) pay post-award interest, compounded monthly at a rate to be determined by the Tribunal on the amounts awarded until full payment thereof; and
(v) pay the Claimants the costs of this arbitration on a full-indemnity basis, including all expenses that the Claimants have incurred or will incur in respect of the fees and expenses of the arbitrators, ICSID, legal counsel, experts and consultants; and
(vi) any such other and further relief that the Tribunal shall deem just and proper.
1075. In light of the arguments expressed in this Document, the Kingdom of Spain respectfully requests the Arbitral Tribunal:
b) To dismiss all the claims of the Claimant's Memorial because the Kingdom of Spain has not breached the ECT in any way, in accordance with section III of this Document, on the substance of the matter.
c) Secondarily, to dismiss all the Claimant's claims for damages as said claims are not entitled to compensation, in accordance with section IV of this Document; and
d) To sentence the Claimant to pay all costs and expenses derived from this arbitration, including ICSID administrative expenses, arbitrators' fees and the fees of the legal representatives of the Kingdom of Spain, their experts and advisers, as well as any other cost or expense that has been incurred, all of this including a reasonable rate of interest from the date on which these costs are incurred and the date of their actual payment.
[N.B., alpha-numerics as presented in the English translation of the Counter-Memorial.]
1174. In view of the arguments set forth in this Document, the Kingdom of Spain respectfully requests the Arbitral Tribunal to:
a) Declare its lack of jurisdiction to hear the claim concerning an alleged infringement by the Kingdom of Spain of Article 10 (1) of the EC Treaty by introducing the Tax on the Value of Electric Power Production (IVPEE) By Act 15/2012.
b) Dismiss all the claims of the Claimant regarding the other contested measures, since the Kingdom of Spain has not in any way failed to comply with the ECT, in accordance with what is stated in Sections (A) y (B) of section II and III of this Statement.
c) Subsidiarily, all claims for compensation of the Claimant should be dismissed as they are not entitled to compensation in accordance with Section IV of this Statement and
d) Order that the Claimant pays all costs and expenses arising from this arbitration, including administrative expenses and the fees of the Court's Arbitrators, as well as the fees of the legal representation of the Kingdom of Spain, its experts and advisers, and any other costs or expenses that may have incurred, all of which include a reasonable interest rate from the date these costs are incurred until the date of their actual payment.
600. For the reasons set forth above, the Tribunal decides as follows:
(1) Unanimously: The Tribunal does not have jurisdiction to decide on the 7% levy;
(2) Unanimously: The Respondent is in breach of its obligations under the ECT for the retroactive application of the new regime; this breach concerns both the Wind plants and the CSP plants belonging to the Claimants;
(3) By majority: With respect to each of the CSP Plants, the Respondent is in breach of its obligation to insure a reasonable return to the Claimants' investment insofar as this return per plant is lower than the WACC + 1% as defined by the Tribunal;
(4) By majority: All other claims and requests of the Parties are dismissed;
(5) By majority: The Parties are directed to attempt to reach an agreement on the amount of compensation to be paid by the Respondent to the Claimants in respect of its breaches of its obligations as defined in paragraphs (3) an (4) above, in accordance with the Tribunal's findings;
(6) By majority: Absent an agreement within the period specified in conformity with paragraph (7) below, the Tribunal will proceed to the nomination of an independent expert to assist it in the calculation of the final amount of damages;
(7) By majority: The Parties are directed to find an agreement within ten days following the notification of the present decision on a reasonable schedule for the implementation of paragraph (5) above; failing an agreement on this point, the Tribunal will fix a schedule to this end.
(8) By majority: The decisions on interest, tax and costs are reserved and will be fixed in the final Award.
Against this background, Spain made efforts to encourage investments in RE by promoting itself as an attractive destination for renewable energy investments. These efforts appear to have been carried out by the Ministry of Industry, Tourism and Commerce (the "Ministry"), in conjunction with a State-owned company for the Promotion and Attraction of Foreign Investment, known as InvestInSpain. [Footnotes omitted.]
The Decision also notes at paragraph 386 that the Respondent achieved this:
through particular means designed at attracting investments in a sector which was unattractive at market prices; hence the various advantages granted to the producers under the special regime (including the Claimants), notably the FIT that generated important revenue streams and other advantages like the unconditional right of priority of grid access and priority of dispatch.
On 20 July 2012, Spain signed a Memorandum of Understanding with the European Union, regarding among others, Spain's 2012-2015 financial stability and the adoption of certain measures of macroeconomic control. Under this MoU Spain committed to "address the electricity tariff deficit in a comprehensive way." [Footnotes omitted.]
The Respondent decided to address these factors, inter alia, by altering the subsidies received by renewable energy producers.
the regime under RD 661/2007 had to be modified not only due to the need to reduce the costs of the SES but also because of the obligation to put an end to situations of over-remuneration.
The challenged measures put an end to the unsustainable situation of the SES and also to the over-remuneration situations detected.
In so pleading, the Respondent admits - indeed it argues affirmatively - that one of its two objectives in changing the subsidisation of its renewable energy sector, which led to the dispute in the present case, was to reduce the profit levels of investors. The Respondent presents this objective as being separate to the objective of reducing the costs of the SES. This admission is notable. Indeed, it is fatal to the Respondent's case-theory on this point.
the Respondent attracted investments in the renewable energy sector by raising hope of above-average profits. (Decision, paragraph 587)
The so-called "gap" between the production cost and the market price is not eliminated because the new system continues to provide a great amount of public subsidies to the facilities in which the Claimants invested...
The "gap" persists but what has changed is the over-remuneration above and beyond the reasonable rate of return …
The Respondent thus admits that its actions have not eliminated its tariff deficit but that its actions have extinguished the hopes of investors in the renewable energy sector for above-average profits. It bears repeating that these are the profits that the Tribunal has found that the Respondent deliberately raised hopes of, in its efforts to entice investors to invest in its renewable energy sector. It is difficult to see how the Respondent's focus on eliminating what it considers to be over-remuneration (the "switch"), which according to the Respondent was caused by its original subsidy regimes (the "bait"), supports the Respondent's case-theory and the Decision's conclusions on this issue.
It can certainly be said in the present case that the State's conduct and representation gave rise to legitimate expectations, regardless of the "umbrella clause" in the last sentence of Article 10(1) ECT...
My fellow arbitrators and I agree about that.
... insofar as the Claimants were entitled to expect that the Respondent would not significantly modify the legal framework applicable to the investors as provided for in its domestic law at the time when the investments were made. [Footnote omitted.]
My fellow arbitrators and I agree about that. I disagree with my fellow arbitrators, however, that this is the only legitimate expectation that the Claimants had.
The Tribunal has already ruled that the Claimants had no legitimate expectation that the regime provided for in RD 661/2007 would remain unchanged throughout the term of the investment. The only - but crucial - question is therefore whether the challenged modifications introduced after 2012 constitute "a drastic and radical change" - as the Claimants put it - affecting unexpectedly the conditions of the investments.
This last position would be illogical in the present case since the Tribunal accepted that the Claimants were not immune from reasonable changes in the regime applicable to its investment; therefore, it is only to the extent that the modifications would have exceeded the limits of what is reasonable that compensation would be due and should be calculated.
As the Tribunal already stressed, the Respondent has the possibility to modify this return as long as it remains reasonable. The Tribunal then considers that this return is not fixed and may evolve, depending on the cost of money in the capital market. In other words: (1) what could have been considered as reasonable in 2007 might not be reasonable anymore in 2012 or 2014 and (2) "reasonable" is not an absolute notion and a reasonable return does not correspond, even at a given date to a fix number; but rather to a range of possible numbers.
I am unable to agree with this conclusion, in the context of the evidence before the Tribunal in the present case. It is one thing to conclude that the Claimants did not have a right for the regime not be changed. This is correct, in law. It is quite another to conclude from that that the Respondent was reasonable in altering the regime so as to eliminate what it considers to be "over-remuneration" to the Claimants, in the circumstances where the evidence on the record confirms that the Respondent had attracted investments in its renewable energy sector by raising hope of above-average profits and, furthermore, that the Respondent's own, self-identified reference point for a standard of measurement as to profit (the cost of money in the capital market) had not changed. The evidence on the record of this case does not support this conclusion.
Considering that the reasonable return provided by the Respondent is allocated to the project, it seems logical to take into consideration the financial structure of the whole project.
It is logical - and also necessary as a matter of law - to take into consideration the financial structure of the whole projects, the whole of the investments, made by the Claimants in the present case. My fellow arbitrators and I are thus agreed about the proposition contained in the above quotation, as a matter of business and economics and law. However, if this proposition is accepted in the abstract, when applied to the case at hand it militates for a more global assessment of the damage on the Claimants' investments caused by the Respondent's breaches of the ECT than that which is provided in the Decision. This observation applies to the Wind Assets but also to the other investments.
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