Stadtwerke München GmbH, RWE Innogy GmbH, and others v. Kingdom of Spain
ICSID · Investment (ICSID and treaty) · Spain · 2 Dec 2019
Why it matters
This award is one of many in the 'Spanish renewables saga' where investors challenged Spain's retroactive cuts to feed-in tariffs. It reinforces the principle that fundamental and radical changes to a regulatory regime, which frustrate legitimate expectations, violate the FET standard under the ECT. The dissenting opinion provides a detailed analysis of the FET standard and legitimate expectations, contributing to the development of investment treaty law.
Summary
The case concerns claims by nine German and Spanish investors (collectively 'Claimants') against Spain under the Energy Charter Treaty (ECT). The Claimants invested in a concentrated solar power plant (Andasol 3) in southern Spain, relying on the regulatory framework established by Royal Decree 661/2007 (RD 661/2007), which provided stable feed-in tariffs and other incentives for renewable energy producers. Between 2010 and 2014, Spain enacted several measures that fundamentally altered this regime, culminating in Royal Decree Law 9/2013 (RDL 9/2013) and subsequent regulations. These measures replaced the feed-in tariff system with a new remuneration scheme based on hypothetical costs of a standard efficient plant, limited the duration of support to 25 years, and effectively clawed back past remuneration. The Claimants argued that these changes violated the Fair and Equitable Treatment (FET) standard under Article 10(1) of the ECT, as well as other protections. Spain raised objections, including that the dispute was intra-EU and thus outside ICSID jurisdiction, and that the measures were a legitimate exercise of regulatory power. The Tribunal (by majority) rejected Spain's jurisdictional objections and found that Spain had breached the FET standard by frustrating the Claimants' legitimate expectations of regulatory stability. The Tribunal held that the changes introduced by RDL 9/2013 were fundamental and radical, and that Spain's statements and conduct had created reasonable expectations that the RD 661/2007 regime would not be fundamentally altered. The Tribunal awarded damages to the Claimants, though the quantum was not specified in the award. One arbitrator dissented, agreeing on liability but not assessing damages. The award is significant in the context of numerous similar claims against Spain for changes to its renewable energy regime.
The detail
Parties: Stadtwerke München GmbH, RWE Innogy GmbH, and others v. Kingdom of Spain
Case number: ICSID Case No. ARB/15/1
Outcome: The Tribunal found Spain violated the Fair and Equitable Treatment standard under Article 10(1) of the Energy Charter Treaty by fundamentally and radically changing the regulatory regime for renewable energy investments. The majority awarded damages to the Claimants; the dissenting arbitrator agreed on liability but did not assess quantum.
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, international law
Issues in play: The case involved a collision between Spain's sovereign right to regulate its economy and the investors' legitimate expectations of regulatory stability under the FET standard of the ECT. The key issue was whether Spain's retroactive changes to the renewable energy subsidy regime breached the FET standard.
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.