JGC Holdings Corporation (formerly JGC Corporation) v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 9 Sep 2021
Why it matters
This award is one of many ICSID cases against Spain over retroactive cuts to renewable energy subsidies. It confirms that Spain's 2013-2014 regulatory reforms breached the ECT's fair and equitable treatment standard. The decision also clarified the date of valuation (June 21, 2014) and applied a DCF method with specific adjustments (illiquidity discount, minority discount, useful life). It is part of a wave of awards that have consistently found Spain liable, shaping the law on legitimate expectations in the energy sector.
Summary
JGC Holdings Corporation, a Japanese company, invested in two concentrated solar power (CSP) plants in Spain in 2010, relying on a regulatory regime that provided premium tariffs for renewable energy. Between 2012 and 2014, Spain enacted several laws that reduced or eliminated these incentives, including a 7% tax on electricity generation (TVPEE) and a new remuneration system that capped returns. JGC claimed these measures breached the Energy Charter Treaty (ECT), specifically the fair and equitable treatment standard. The tribunal (ICSID Case No. ARB/15/27) issued a Decision on Jurisdiction, Liability, and Certain Issues of Quantum on May 21, 2021, finding that Spain had breached Article 10(1) of the ECT. The tribunal rejected Spain's jurisdictional objection regarding the TVPEE but upheld jurisdiction over the other measures. On damages, the tribunal directed the parties to calculate compensation using a discounted cash flow (DCF) method as of June 21, 2014 (the date of breach), with specific adjustments: a 25-year useful life, 18% illiquidity discount, 5% minority discount, and a projected interest rate of 1.74%. The parties' experts disagreed on two issues: whether the 7% TVPEE should be deducted in the but-for scenario (the tribunal sided with Spain, deducting it) and how to adjust the sale price of shares sold in 2016 back to the valuation date (the tribunal adopted Spain's expert's approach using cost of equity). The final award, issued on November 9, 2021, ordered Spain to pay EUR 23.51 million in damages plus pre-award interest at 2.748% compounded monthly from June 21, 2014, and post-award interest at 1.6%. Spain was also ordered to pay 40% of JGC's legal costs and 75% of the arbitration costs. The award is significant as part of a series of ICSID rulings against Spain for retroactive changes to renewable energy incentives, reinforcing the protection of investors' legitimate expectations under the ECT.
The detail
Parties: JGC Holdings Corporation (formerly JGC Corporation) v. Kingdom of Spain
Case number: ICSID Case No. ARB/15/27
Outcome: Spain breached Article 10(1) of the ECT; Spain ordered to pay EUR 23.51 million plus pre-award interest at 2.748% compounded monthly from June 21, 2014, plus costs.
Quantum: EUR 23.51 million (plus interest and costs)
Applicable law: Energy Charter Treaty (ECT); ICSID Convention; Spanish law
Issues in play: The ECT's fair and equitable treatment standard (Article 10(1)) versus Spain's sovereign right to modify its renewable energy regulatory regime. The tribunal had to determine whether Spain's regulatory changes breached the stability and predictability that the investor legitimately expected.
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.