All claims by Isolux Infrastructure Netherlands against Spain are dismissed

Isolux Infrastructure Netherlands B.V. v. the Kingdom of Spain, SCC Case No. V2013/153

An arbitral tribunal administered by the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) dismissed all claims brought against Spain by Isolux Infrastructure B.V. (Isolux). The case was initiated in 2013 based on the Energy Charter Treaty (ECT).

Background and claims

Isolux, a company incorporated in 2012 under Dutch laws, initiated the arbitration as the majority shareholder of several Spanish companies, including Grupo T-Solar Global S.A (T-Solar), which controls T-Solar Global Operating Assets S.L. (TGOA). TGOA and Tuin Zonne Origen S.L.U., in turn, held the majority of the shares in 117 Spanish companies owning photovoltaic solar plants in Spain.

Isolux claimed that Spain attracted its investment with the promise of maintaining a long-term feed-in-tariff (FIT) for the production of photovoltaic energy under a special regime, but later abolished it, thus breaching ECT Article 10 on fair and equitable treatment (FET). Isolux also alleged that Spain breached ECT Article 13 (expropriation) on the grounds that the abolition of the special regime destroyed the economic value of its investment. Isolux asked for compensation of around €80 million.

Tribunal accepts jurisdictional objection based on carve-out for taxation measures

Before examining the merits, the tribunal dismissed all of Spain’s jurisdictional objections, except for one, relating to the introduction of a tax on the value of electricity production (TVEP) by Spain in December 2012. Spain had argued that this measure was excluded from ECT application under the carve-out provision contained in Article 21(1).

To decide whether a tax measure was covered by the carve-out provision, the tribunal established that it was necessary to determine whether the purpose of the tax was actually taxing, that is, whether it was enacted in good faith. The tribunal found that Isolux failed to meet its burden of proving that the TVEP was not promulgated in good faith. Consequently, it concluded that it had no jurisdiction to hear the claim regarding alleged ECT violations due to the introduction of the TVEP.

Spain did not violate its obligation to provide FET to Isolux’s investments

Isolux alleged that Spain created legitimate expectations derived from its regulatory framework regarding the long-term FIT and that it breached those expectations by abolishing and replacing the special regime.

In reaching its decision, the tribunal considered the Perenco v. Ecuador award and stated that “a central aspect of the analysis of an alleged violation of the FET standard is the investor’s reasonable expectations regarding the future treatment of his investment by the host state” (para. 777).

The tribunal established that, to determine whether there was a violation of FET, it first had to determine whether, at the time when the investment was made, the existing regulatory framework created a legitimate expectation for Isolux that it would not be modified, as it ultimately was. The court concluded that it did not, because when Isolux decided to invest in Spain (October 29, 2012), the regulatory framework for renewable energy had already been modified and was undergoing several studies that made its modification inevitable. Consequently, no reasonable investor could expect that this regulatory framework would remain unchanged.

In addition, the tribunal noted that Isolux had specific knowledge that would not allow it to have the legitimate expectation that the FIT would last throughout the life of the plants. In an administrative appeal filed by Isolux Corsan S.A., the parent company of the Isolux Group, before the Spanish Supreme Court, Isolux Corsan S.A., expressly referred to Supreme Court case law establishing that the only limit to the power of the government to modify the regulatory framework is the guarantee of a reasonable return given by the law governing the energy sector. This was ratified by the decision taken by the Supreme Court in that case, notified to Isolux Corsan S.A. in September 2012. The Tribunal found that Spain did not breached its obligation to provide FET to Isolux’s investments since at the time when Isolux made the decision to invest in Spain, it had knowledge of case law allowing the government to modify the regulatory framework while guaranteeing a reasonable return on investment to the investor.

Spain did not indirectly expropriate Isolux’s investment

Isolux alleged that Spain indirectly expropriated its investment, which consisted of its shareholding in T-Solar and the yields from T-Solar’s commercial activities. Spain, on the other hand, argued that Isolux’s investment should be limited to its shareholding in T-Solar and to the indirect ownership that it may have had, through T-Solar’s subsidiaries, of the holding companies of the plants.

The tribunal considered that, pursuant to ECT Article 13, Isolux had an investment and was entitled to protection against any substantial violation by Spain of its shareholding in T-Solar, which implied protection of both the ownership of the shares and their value. To determine whether there was an expropriation, the tribunal established that it had to determine whether Isolux’s yields had suffered, as a result of Spain’s measures, a decrease of such importance as to reflect an indirect expropriation.

The parties agreed to use the test in the case Electrabel v. Hungary to determine the expropriatory effect of the measures taken by Spain. The test states that for an expropriation to occur, there must be “a substantial, radical, severe, devastating or fundamental deprivation of rights or virtual annihilation, effective neutralization or de facto destruction of the investment, its value or enjoyment” (para. 837).

Based on the above, the tribunal held that the impact of measures taken by the host state on the rights or assets of the investor must be of such a magnitude that its investment loses all or a very significant part of its value, amounting to a deprivation of property. Accordingly, the tribunal considered that it had to assess whether Spain’s measures resulted in a loss of profitability of those plants of such magnitude that could substantially affect the investment.

Spain introduced into the record a May 2011 Deloitte report originally presented by both Isolux Corsan S.A. and the companies of the T-Solar Group before the Spanish Supreme Court. The report indicates that the profitability forecast of the plants was of 6.19 per cent, while the profit recorded by Isolux after Spain’s allegedly expropriatory measures was of 7.19 per cent after taxes.

In light of the report, the tribunal concluded that Isolux could not argue that its investment had been expropriated since its current profitability is higher than 6.19 per cent. The tribunal considered that, to prove expropriation, Isolux’s current profitability would have to be lower than 6.19 per cent in such proportion so that the deprivation was substantial and significant.

Based on the above, the tribunal found that there was no expropriation of Isolux’s investment, since there was no severe or radical loss.


The tribunal decided that Isolux would be responsible for the 70 per cent of the arbitration costs and expenses and that Spain would be responsible for the remaining 30 per cent.

Dissenting opinion of arbitrator Santiago Tawil

According to Tawil, a breach of legitimate expectations occurs when an investor complies with all the requirements under the law of the host state to obtain a specific benefit, and the host state subsequently denies such benefit to the investor. He concluded that, even though Spain had the right to modify or suppress the special regime, the elimination of the benefit granted to Isolux under that special regime without payment of adequate compensation breached the investor’s legitimate expectations and, therefore, the FET clause of the ECT.

Notes: The tribunal was composed of Yves Derains (President, appointed by the SCC, French national), Guido Tawil (claimant’s appointee, Argentinian national) and Claus von Wobeser (respondent’s appointee, Mexican national). The award dated July 11, 2016 is available in Spanish at

Claudia Maria Arietti Lopez is a Paraguayan Lawyer and holds an LL.M. from New York University School of Law.