InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 2 Aug 2019
Why it matters
This award is one of many ICSID cases against Spain for retroactive changes to renewable energy incentives. It reinforces the principle that host states must respect legitimate expectations of foreign investors, particularly where specific commitments were made. The tribunal's detailed analysis of the fair and equitable treatment standard and its rejection of the intra-EU jurisdictional objection contribute to the evolving jurisprudence on investment treaty protection within the EU.
Summary
The case concerns five UK companies (collectively InfraRed) that invested in two concentrated solar power (CSP) plants in Spain, Morón and Olivenza, relying on Spain's regulatory framework offering generous feed-in tariffs and other incentives for renewable energy. Spain enacted a series of measures from 2012-2014 that drastically reduced these subsidies, including a new tax on electricity generation, a cap on operating hours eligible for subsidies, and a shift from feed-in tariffs to a new remuneration system based on standard costs. The claimants alleged these changes violated the Energy Charter Treaty (ECT), specifically the fair and equitable treatment (FET) standard and the prohibition against expropriation without compensation. Spain raised jurisdictional objections, including that the dispute was intra-EU and thus outside ICSID jurisdiction, and that the tax measure was excluded under the ECT's taxation carve-out. The tribunal rejected the intra-EU objection, finding that the ECT remained applicable between EU member states. It upheld the taxation objection, excluding the 2012 tax from its jurisdiction. On the merits, the tribunal found that Spain had made specific commitments to maintain the regulatory regime for the lifetime of the plants, particularly through the 2007 Royal Decree and subsequent statements. The regulatory changes were found to be disproportionate and to have breached the FET standard by frustrating the investors' legitimate expectations. However, the tribunal rejected the expropriation claim, finding that the measures did not deprive the claimants of all value. The tribunal awarded €28.2 million in damages, calculated using a discounted cash flow method, plus interest and costs.
The detail
Parties: InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain
Case number: ICSID Case No. ARB/14/12
Outcome: The Tribunal found Spain breached Article 10 of the Energy Charter Treaty and ordered Spain to pay €28.2 million plus interest and costs.
Quantum: €28,200,000
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, Spanish law (including RD 661/2007, RD 413/2014, Act 24/2013)
Issues in play: The dispute involved the clash between Spain's regulatory changes to renewable energy subsidies and the investors' legitimate expectations of stability under the ECT's fair and equitable treatment standard.
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