Infracapital F1 S.à r.l. and Infracapital Solar B.V. v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 2 May 2023
Why it matters
This award is part of a wave of ICSID cases against Spain over retroactive cuts to solar feed-in tariffs. It clarifies that while investors do not have a legitimate expectation that specific tariff levels remain unchanged for 25 years, Spain breached the ECT by clawing back past remuneration and failing to ensure a reasonable rate of return. The decision on quantum, reached after extensive expert analysis, provides a methodology for calculating damages in similar renewable energy disputes.
Summary
Infracapital, two Luxembourg and Dutch companies, invested in photovoltaic plants in Spain under Royal Decree 1578/2008, which offered attractive feed-in tariffs. Between 2012 and 2014, Spain enacted measures that reduced these tariffs and introduced a claw-back of past payments. The investors brought an ICSID claim under the Energy Charter Treaty. In a 2021 decision on liability, the tribunal found that Spain breached Article 10(1) of the ECT by clawing back past remuneration and by failing to ensure a reasonable rate of return, but rejected the claim that investors had a legitimate expectation that the original tariff would remain for 25 years. The tribunal also dismissed Spain's jurisdictional objections, including those based on intra-EU arguments. After the parties failed to agree on quantum, the tribunal issued this final award on 2 May 2023. The tribunal, assisted by expert reports from Brattle and BDO, calculated damages of EUR 24.9 million, representing the shortfall in reasonable return and the clawed-back amounts, plus pre-award interest at 1.2973% from 30 June 2014. Spain was also ordered to pay 60% of Claimants' legal fees and costs. The award is notable for its detailed analysis of the reasonable rate of return and the discount rate, and for rejecting Spain's multiple reconsideration requests based on subsequent EU court decisions.
The detail
Parties: Infracapital F1 S.à r.l. and Infracapital Solar B.V. v. Kingdom of Spain
Case number: ICSID Case No. ARB/16/18
Outcome: Spain ordered to pay EUR 24.9 million plus pre-award interest and costs to Claimants for breaching the Energy Charter Treaty.
Quantum: EUR 24.9 million
Applicable law: Energy Charter Treaty (ECT), ICSID Convention
Issues in play: The dispute involved the clash between Spain's regulatory changes to renewable energy subsidies and investors' legitimate expectations under the ECT's fair and equitable treatment standard.
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