RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 18 Dec 2020
Why it matters
This award is one of many ICSID cases against Spain over renewable energy cuts, but it is notable for its nuanced approach to quantum. The tribunal distinguished between a breach for retroactive claw-back and a breach for disproportionate impacts, and adopted a 'but for' analysis capped at a reasonable return threshold. It also addressed res judicata and the scope of damages, influencing subsequent awards in the Spanish renewables saga.
Summary
RWE Innogy GmbH and its Spanish subsidiary RWE Innogy Aersa S.A.U. invested in renewable energy plants in Spain under a regulatory regime (RD 661/2007) that offered attractive feed-in tariffs. In 2013-2014, Spain enacted reforms (RDL 9/2013, Law 24/2013, RD 413/2014, Order IET 1045/2014) that retroactively reduced tariffs and required repayment of sums already paid during an interim period. The claimants brought an ICSID arbitration under the Energy Charter Treaty (ECT), alleging breach of Article 10(1) (fair and equitable treatment). In a prior Decision on Liability (30 December 2019), the tribunal found Spain liable for two specific breaches: (i) procuring repayment of sums paid between July 2013 and June 2014 (the 'claw-back'), and (ii) adopting disproportionate measures that caused excessive losses to six specific plants (Urano, Grisel II, Bancal I and II, Siglos I and II, and Cepeda). The tribunal rejected other claims, including those related to a 7% tax. The present Award (18 December 2020) resolves remaining quantum issues. The tribunal held that the claw-back damages apply to all 21 plants that had to repay sums, not just the 10 plants that made cash payments, rejecting Spain's res judicata argument. For the disproportionate impacts, the tribunal adopted a 'but for' approach: compensation is the difference between actual cash flows and the cash flows that would have existed under a hypothetical non-disproportionate regime, capped at a 7.398% IRR (the threshold of a reasonable return). The tribunal directed the parties to agree on final figures using a detailed spreadsheet, with interest and costs to be decided later. The award confirms that investors are not immune from regulatory changes but are entitled to compensation for retroactive and disproportionate measures.
The detail
Parties: RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain
Case number: ICSID Case No. ARB/14/34
Outcome: Spain breached Article 10(1) ECT by procuring repayment of sums paid under the old regime and by adopting disproportionate measures affecting certain plants; compensation to be determined.
Applicable law: Energy Charter Treaty (ECT); ICSID Convention; Spanish law (RD 661/2007, RDL 9/2013, Order IET 1025/2014); ILC Articles on State Responsibility
Issues in play: The ECT's fair and equitable treatment standard collided with Spain's sovereign right to modify its renewable energy regulatory regime. The tribunal balanced legitimate expectations of investors against the state's regulatory power, finding that retroactive claw-back and disproportionate impacts breached the treaty.
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