OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 6 Sep 2019
Why it matters
This award is one of many in the wave of Spanish renewable energy arbitrations. It confirms that Spain's retroactive changes to the regulatory regime breached the FET standard, and it rejected the intra-EU objection, affirming that the ECT applies between EU member states. The decision also clarified the scope of the tax carve-out in the ECT, finding that the TVPEE was a bona fide tax and thus excluded from jurisdiction.
Summary
The case concerns claims by OperaFund Eco-Invest SICAV PLC and Schwab Holding AG, Luxembourg-based investors, against Spain under the Energy Charter Treaty (ECT). The investors owned photovoltaic solar plants in Spain through a Spanish subsidiary. They alleged that Spain's regulatory changes between 2010 and 2014, including the introduction of a 7% tax on electricity generation (TVPEE), the replacement of feed-in tariffs with a new remuneration system, and other measures, violated the ECT's fair and equitable treatment (FET) standard, the umbrella clause, and other protections. Spain objected to jurisdiction on two main grounds: first, that the ECT does not apply to intra-EU disputes (the intra-EU objection), and second, that the TVPEE was a bona fide tax excluded from the ECT's scope. The Tribunal rejected the intra-EU objection, finding that Spain had consented to arbitration under the ECT and that EU law did not override that consent. However, it upheld the tax objection, ruling that the TVPEE was a genuine tax and thus outside the Tribunal's jurisdiction. On the merits, the Tribunal found that Spain's regulatory changes, particularly the elimination of the special regime for renewable energy, breached the FET standard by frustrating the investors' legitimate expectations. The Tribunal held that Spain had made specific commitments to maintain the regulatory framework, and the changes were not proportionate. It awarded USD 29.3 million in damages, plus interest and costs. The award was subject to a partial dissent by Prof. Philippe Sands, who disagreed with the majority's finding on the merits and the quantum. The case is significant for its rejection of the intra-EU objection and its application of the FET standard to regulatory changes in the renewable energy sector.
The detail
Parties: OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain
Case number: ICSID Case No. ARB/15/36
Outcome: Tribunal found Spain breached fair and equitable treatment under ECT Article 10(1) and awarded USD 29.3 million in damages plus interest and costs.
Quantum: USD 29.3 million
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, EU law (as applicable law), Spanish law
Issues in play: The case involved a collision between Spain's regulatory changes to renewable energy subsidies and investors' legitimate expectations under the ECT, as well as the intra-EU objection regarding the applicability of the ECT between EU member states.
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