Cube Infrastructure Fund SICAV and others v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 26 Jun 2019
Why it matters
This case is one of many ICSID awards against Spain for retroactive changes to its renewable energy subsidy regime. It is notable for the tribunal's use of a 40% discount on hydro damages to account for regulatory risk, and for its detailed guidance on calculating damages when experts disagree. The award also illustrates the allocation of costs in partially successful claims.
Summary
Cube Infrastructure Fund and other Luxembourg and French investors (Cube and Demeter) brought an ICSID arbitration against Spain under the Energy Charter Treaty (ECT). They claimed that Spain's reforms to its renewable energy support system, including a 2013 law that replaced fixed tariffs with a new remuneration regime, breached the ECT's fair and equitable treatment (FET) standard and amounted to expropriation. The tribunal issued a Decision on Jurisdiction, Liability and Partial Decision on Quantum on 19 February 2019. It upheld Spain's objection that taxation measures under Act 15/2012 fell outside its jurisdiction under ECT Article 21. On liability, it found unanimously that Spain breached FET regarding photovoltaic (PV) plants, and by a majority regarding hydro plants. Other claims, including expropriation, were dismissed. The tribunal awarded €2.89 million for PV losses and directed the parties' experts to calculate hydro damages by reducing the claimed €41.8 million by 40% to reflect regulatory risk. The experts disagreed on how to apply the 40% discount, so the tribunal issued further guidance: the discount applies to equity cash flows, replaces Brattle's regulatory risk haircut, does not apply to pre-June 2014 cash flows, and does not accumulate over time. The supplementary joint report calculated hydro damages at €30.81 million. The final award, dated 15 July 2019, confirmed these amounts plus interest at six-month EURIBOR compounded semi-annually from 20 June 2014. On costs, the tribunal ordered Spain to pay half of the Claimants' costs (€1,545,501.80 plus USD 262,500.00), noting the claim was only partly successful. Each party bore its own costs for the joint expert reports.
The detail
Parties: Cube Infrastructure Fund SICAV and others v. Kingdom of Spain
Case number: ICSID Case No. ARB/15/20
Outcome: Spain breached fair and equitable treatment under ECT; awarded €2.89 million for PV investments and €30.81 million for hydro investments, plus interest and partial costs.
Quantum: €33.7 million (€2.89 million PV + €30.81 million hydro) plus interest and costs
Applicable law: Energy Charter Treaty (ECT), ICSID Convention
Issues in play: The tribunal applied the ECT's fair and equitable treatment standard, rejecting claims on taxation measures under Article 21 ECT. It also addressed regulatory risk in calculating damages for changes to Spain's renewable energy incentives.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.