Mathias Kruck and others v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 6 Oct 2023
Why it matters
This award is a landmark in the wave of Spanish renewable energy arbitrations, confirming that Spain's retroactive reduction of feed-in tariffs breached the ECT. It clarifies the calculation of damages based on the difference between actual and promised tariffs, rejecting Spain's proportionality defense and setting a precedent for similar claims under the ECT.
Summary
The case concerns 73 German investors (DSG Claimants) who built photovoltaic plants in Spain in 2008 under Royal Decree 661/2007, which guaranteed a fixed feed-in tariff for 25 years (later extended to 30 years). In 2014, Spain introduced a New Regulatory Regime that drastically reduced these tariffs. The investors brought an ICSID arbitration under the Energy Charter Treaty. The Tribunal upheld jurisdiction over the DSG Claimants but dismissed claims related to a 7% tax and claims of 43 other investors (TS Claimants) for procedural reasons. On liability, the Tribunal found that Spain's repudiation of the tariff commitment breached the fair and equitable treatment standard under ECT Article 10. The majority rejected Spain's argument that the modification was proportionate and that investors still earned a reasonable return. Damages were calculated as the difference between the actual payments and the payments that would have been made under the original regime (as modified by 2010 reforms), valued as of the breach date (21 June 2014). The Tribunal awarded €15,019,540 plus compound interest at 1.16% from the breach date, and ordered Spain to pay three-fifths of the Claimants' costs. One arbitrator dissented on liability, arguing for a fault-based standard and a different damages model, but joined the majority on quantum calculations.
The detail
Parties: Mathias Kruck and others v. Kingdom of Spain
Case number: ICSID Case No. ARB/15/23
Outcome: The Tribunal found Spain liable for breaching the Energy Charter Treaty by repudiating the feed-in tariff regime and awarded €15,019,540 in compensation plus interest and partial costs.
Quantum: €15,019,540
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, Spanish law (RD 661/2007, New Regulatory Regime)
Issues in play: The case involved a collision between Spain's sovereign right to modify its regulatory regime and the investors' legitimate expectations under the ECT's fair and equitable treatment standard, specifically regarding the stability of feed-in tariffs.
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