Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 16 May 2018
Why it matters
This award is one of the early ICSID decisions on Spain's renewable energy cuts, confirming that Spain's retroactive changes to the feed-in tariff regime breached the ECT's fair and equitable treatment standard. It contributed to the wave of claims against Spain and set a precedent on the protection of legitimate expectations in the context of regulatory changes, though later decisions have varied.
Summary
Masdar, a Dutch company, invested in three concentrated solar power plants in Spain (Gemasolar, Arcosol, Termesol) between 2008 and 2009, relying on Spain's regulatory framework (Royal Decree 661/2007) that offered a special feed-in tariff for renewable energy. In 2010 and 2012, Spain enacted reforms that reduced these incentives, including a cap on operating hours eligible for the tariff and a new tax on electricity generation. Masdar claimed these measures violated the ECT's fair and equitable treatment (FET) standard, arguing they destroyed the stability and predictability of the investment framework. Spain objected to jurisdiction on several grounds, including that Masdar was not a qualifying investor (ratione personae), that the dispute did not involve an investment (ratione materiae), and that the ECT's denial of benefits clause applied. The Tribunal rejected most jurisdictional objections, except for the claim regarding the 7% tax, which it held was a taxation measure excluded under ECT Article 21. On the merits, the Tribunal found that Spain had made specific commitments to Masdar regarding the stability of the regulatory regime, and that the reforms were unreasonable and disproportionate, breaching FET. The Tribunal awarded EUR 64.5 million in damages using a discounted cash flow method, plus interest. The award is notable for its detailed analysis of legitimate expectations and the impact of the Achmea judgment (which the Tribunal held did not affect ECT claims).
The detail
Parties: Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain
Case number: ICSID Case No. ARB/14/1
Outcome: Spain breached fair and equitable treatment under ECT Article 10(1); Spain ordered to pay EUR 64.5 million damages plus interest.
Quantum: EUR 64.5 million
Applicable law: Energy Charter Treaty (ECT), ICSID Convention
Issues in play: The dispute involved the clash between Spain's sovereign right to modify its renewable energy regulatory regime and the investor's legitimate expectations of stability under the ECT's fair and equitable treatment standard.
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