Eiser v. Spain

Eiser Infrastructure Limited and Energia Solar Luxembourg S.à.r.l v. Kingdom of Spain, ICSID Case No. ARB/13/36

(Published in 2018 in International Investment Law and Sustainable Development: Key cases from the 2010s and on this website on October 18, 2018. Read more here.)

The award is available at https://www.italaw.com/cases/5721


Energy transition, feed-in tariffs, legitimate expectations, legal stability

Key Dates

Request for arbitration: December 9, 2013

Constitution of tribunal: July 8, 2014

Award: May 4, 2017

Annulment: pending


John R. Crook(president)

Campbell McLachlan (respondent appointee)

Stanimir A. Alexandrov(claimant appointee)

Forum and Applicable Procedural Rules

International Centre for Settlement of Investment Disputes (ICSID)

ICSID Rules of Procedure for Arbitration Proceedings

Applicable Treaty

Energy Charter Treaty (ECT)

Alleged Treaty Violations

  • Expropriation
  • Fair and equitable treatment
  • Impairment by unreasonable measures
  • Umbrella clause

Other Legal Issues Raised

  • Calculation of damages
  • Jurisdiction – no jurisdiction over taxation measures
  • Jurisdiction – cooling-off period
  • Jurisdiction – objection in amicus curiae brief of the European Commission

1.0 Importance for Sustainable Development

The energy transition from fossil fuels to renewable resources is at the centre of sustainable development. The United Nations Sustainable Development Goal (SDG) 7 calls for an increase in the share of renewable energy worldwide, and most states have adopted legislation to promote its implementation. Foreign direct investment (FDI) is an important tool for the shift to renewable energy production. This typically includes subsidies and fiscal advantages and other incentives for investors. Notwithstanding this general trend, in response to  the economic crises in several countries, a number of governments have revoked or reduced their support to renewable energy and modified the legal regime applicable to renewables.

These regulatory changes have provoked a wave of claims by foreign investors active in the field of renewable energy. The Czech Republic, Italy[1] and Spain are facing most of such claims, which are all based on the Energy Charter Treaty (ECT). The common strand between these cases is that all the three countries adopted ambitious legislation to promote investments in the renewable energy sector. Yet due to the important budgetary implications for the states they subsequently changed the legislation in place and revoked the advantages. (See Section 4for an overview of the cases.)

Spain is facing the largest number of claims, counting 41 as of September 18, 2018.[2] The first case lodged against Spain was in 2011 by PV Investors. The first publicly available award in an energy case against Spain was Charanne, lodged in 2012. In this case, Spain prevailed. However, the cases lodged against Spain after the entry into force of Law 15/2012 in 2013 have tended to have different outcomes because this law arguably had the most severe impacts on foreign investors.

Spain has also prevailed in Isolux v. Spain, the first decision concerning Law 15/2012.[3] The Isolux tribunal concluded that Spain did not breach the fair and equitable (FET) standard because, when Isolux decided to invest in Spain, the regulatory framework for renewable energy had already been modified and was undergoing several studies that made its modification inevitable. In addition, according to the tribunal, Isolux had knowledge of Spanish domestic case law allowing the government to modify the regulatory framework while guaranteeing a reasonable return on investment to the investor. Consequently, the tribunal held that no reasonable investor could expect that this regulatory framework would remain unchanged. Moreover, the tribunal found that there was no expropriation of Isolux’s investment either. By applying the test elaborated in the Electrabel v. Hungary case, the tribunal found that the loss of profitability suffered by Isolux after Spain’s allegedly expropriatory measures was not enough as to constitute a substantial and significant deprivation of the investment. In sum, the Isoluxtribunal dismissed all claims. This result is in contrast to the Eiser case, analyzed here, which was decided in favour of the investor.

In order to compete with other energy sources, renewable energy power plants—including photovoltaic (PV)—sometimes require domestic incentives such as subsidies in the form of feed-in tariffs. These sorts of regimes were novel and in their infancy when Spain constructed its incentives scheme. This raises the issue of whether governments have the policy space to reform and adapt the subsidy schemes—in this case designed with a laudable sustainable development objective in mind—to address other pressing government objectives, i.e., dealing with a financial crisis. In this respect, the common question in all renewable energy cases is the extent to which governments can adapt regulatory regimes to new realities without breaching their obligation to accord FET to foreign investors.

A second question emerges regarding the effects of the renewable energy arbitral outcomes on other types of energy cases, including in areas that are harmful from a sustainable development perspective, such as the fossil fuel industry. The question arises whether cases such as Eiser,in which the investor prevailed, might provoke a regulatory chill, making states reluctant to adopt measures to address climate change and other environmental issues out of fear of getting sued at the international level. There is little doubt that the energy transition will be disruptive for foreign investors and the economy more broadly. With the implementation of the Paris Agreement on Climate Change, such disruptive measures will become more and more frequent.

2.0 Case Summary

2.1 Factual Background

Eiser Infrastructure Ltd. and Eiser Solar Luxembourg (Eiser) invested into three thermosolar plants in Spain in 2007 when Spain had adopted a very favourable renewable energy support scheme though Royal Decree (RD) 661/2007 (para. 108). RD 661/2007 provided for generous feed-in tariffs, especially for PV energy. Under the 2007 legislation tariffs were fixed at EUR 440/MWh. The adoption of RD 661/2007 caught the attention of many PV energy investors, including Eiser (para. 117). Spain did not anticipate the high number of solar developers that would take advantage of the offer and sell electricity to the grid leading to overproduction. The weak point of the Spanish regulation was that no cap was defined on how much capacity Spain would allow to benefit from the feed-in tariffs regime—and this failure imposed a high financial burden on Spain. The situation was further aggravated through the general financial and economic crisis of 2008. Consequently, the government started to adopt legislation that cut and retroactively imposed changes to the support schemes for PV energy.

The most drastic changes for PV energy producers (including Eiser) entered into force between 2012 and 2014. First, the Spanish Parliament adopted Law 15/2012, which imposed a 7 per cent tax on all energy producers. Royal Decree Law (RDL) 9/2013 introduced another important change in July 2013. This legislation repealed RD 661/2007 and thus eliminated the entire regime of fixed tariffs. For the PV energy producers this meant that their remuneration consisted of income from the sale of the energy at market price (para. 146). The definitive end of the RD 661/2007 regime was marked by Ministerial Order IET/1045/2014, which introduced a new remuneration mechanism for renewable energy plants (para. 147). According to Eiser, at the end of 2014 the investment was worth EUR 4 million compared to an investment of EUR 125 million initially made in the establishment of the PV power plants (para. 154).

2.2 Summary of Legal Issues and Award

In addition to a violation of the fair and equitable treatment (FET) standard, the investors also invoked ECT Article 13 concerning expropriation, as well as the non-impairment standard and the umbrella clause of ECT Article 10(1) (para. 352). Yet for reasons of judicial economy, the tribunal decided to limit its analysis to the FET claim since the obligation “to accord investors fair and equitable treatment provides the most appropriate legal context for assessing the complex factual situation presented here” (para. 353). In conclusion, the tribunal found that Spain breached the FET standard as it frustrated Eiser’s legitimate expectations, and awarded the investor damages of EUR 128 million.

2.3 Select Legal Issues

Legitimate Expectation for a Stable Legal Framework

According to Eiser, its decision to invest in Spain was based on RD 661/2007. Yet it argued that Spain’s subsequent decision to replace the regulatory framework adopted in 2007 with a framework based on different assumptions violated its legitimate expectations protected under the ECT. As a consequence, it claimed that the value of its investment was reduced significantly. Spain, in contrast, argued that no investor can expect the “freezing or ‘unmodifiability’” of the 2007 regime. Spain added that it never made any promises or other specific commitments to Eiser that would rise to the level of legitimate expectations protected by the ECT.

The tribunal underlined that the state has the right to regulate and to modify regulatory regimes according to evolving circumstances, and that the FET standard would not lead to a right of investors to regulatory stability (para. 362). However, it found that the ECT protected Eiser “against total and unreasonable change that they experienced here” (para. 363). In the eyes of the tribunal, Eiser was an “experienced and sophisticated” investor, which meant for the tribunal that Eiser “recognized that regulatory regimes for utilities are sometimes adjusted, but within feasible limits” (para. 364).

To substantiate its findings, the tribunal first differentiated the present case from the previous Charannecase, where the RDL 9/2013 was not under scrutiny. Therefore the Charannetribunal had to assess much less “sweeping” changes that had far less drastic economic consequences (para. 369). Second, the Eiser tribunal referred to a number of arbitral cases under the ECT emphasizing that, especially in the context of the ECT, host states were to provide a “stable, transparent legal framework for foreign investors” based on the preamble of the treaty as well as on a political document that was its precursor (paras. 377–380). Third, the tribunal held that the number of regulatory changes was significant and could lead to a breach of FET. Lastly, the fact that the measures at issue transformed the regulatory framework entirely and the important financial losses for the investors were important elements for the tribunal.

In conclusion the tribunal adopted a standard according to which “Article 10(1) of the ECT entitled [Eiser] to expect that Spain would not drastically and abruptly revise the regime, on which their investment depended, in a way that destroyed its value. But this was the result of RDL 9/2013” and the subsequent measures adopted by Spain (para. 387).

Calculation of Compensation

Eiser argued that the appropriate measure to calculate its losses was the reduction of the fair market value of its investment as measures by the present value of past and future cash flows (para. 426). This method of valuation of losses is commonly called discounted cash flow (DCF) analysis. Eiser claimed losses of EUR 13 million (lost cash flows through June 2014) plus EUR 196 million (losses in cash flows projected over 40 years). Spain argued that the DCF method was inappropriate in the present case since the damages claimed by Eiser were “totally and completely speculative” (para. 435).

The tribunal considered the DCF method as “an appropriate means to determine the amount of reparation due in the circumstances of this case” (para. 441). It was persuaded by the argument that “[p]ower stations are relatively simple business, producing electricity, whose demand and long-run value can be analysed and modelled in detail based on readily available data. Moreover, the costs and operating performance of power stations are easy to predict” (para. 465). In conclusion, the tribunal agreed with Eiser that the future losses are of EUR 196 million but reduced this amount by EUR 68 million applying a risk-adjustment factor. Therefore, the final amount of compensation was EUR 128 million. The tribunal underlined that the sum of compensation was reasonable given that the claimant had invested EUR 126 million in its project.

Renewable Energy Cases as of September 18, 2018

Source: UNCTAD Policy Hub, http://investmentpolicyhub.unctad.org/ISDS

Cases against the Kingdom of Spain

  1. The PV Investors v. The Kingdom of Spain, UNCITRAL, pending.
  2. Charanne B.V. and Construction Investments S.A.R.L. v. The Kingdom of Spain, SCC, Arbitration No. 062/2012, Award of December 27, 2016.
  3. Isolux Infrastructure Netherlands B.V. The Kingdom of Spain,SCC, Award of July 11, 2016.
  4. Novenergia v. The Kingdom of Spain, SCC Case No. 063/2015, Award of February 15, 2017.
  5. Abengoa CSP Equity Investment S.à.r.l. The Kingdom of Spain,SCC, pending.
  6. RREEF Infrastructure (G.P.) Limited & RREEF Pan-European Infrastructure Two Lux S.à.r.l The Kingdom of Spain, ICSID Case No. ARB/13/30, pending.
  7. Antin Infrastructure Services Luxembourg S.à.r.l & Antin Energia Termosolar B.V The Kingdom of Spain, ICSID Case No. ARB/13/31, Award of June 15, 2018.
  8. Eiser Infrastructure Limited and Energia Solar Luxembourg S.à r.l. v. The Kingdom of Spain, ICSID Case No. ARB/13/36, Award of May 4, 2017.
  9. Masdar Solar & Wind Cooperatief UA The Kingdom of Spain, ICSID Case No. ARB/14/01, Award of May 16, 2018.
  10. NextEra Energy Global Holdings B.V., NextEra Energy Spain Holdings B.V. The Kingdom of Spain, ICSID Case No. ARB/14/11, pending.
  11. InfraRed Environmental Infrastructure G.P. Limited and others The Kingdom of Spain, ICSID Case No. ARB/14/12, pending.
  12. RENERGY S.à r.l. The Kingdom of Spain, ARB/14/18, pending.
  13. RWE Innogy GmbH, RWE Innogy Aersa S.A.U. The Kingdom of Spain, ARB/14/34, pending.
  14. Stadtwerke München GmbH The Kingdom of Spain, ICSID Case No. ARB/15/01, pending.
  15. STEAG GmbH The Kingdom of Spain, ICSID Case No. ARB/15/04, pending.
  16. 9REN Holding S.a.r.l. v.The Kingdom of Spain, ICSID Case No. ARB/15/15, pending.
  17. BayWa r.e. renewable energy GmbH, BayWa r.e. Asset Holding GmbH v. The Kingdom of Spain, ICSID Case No. ARB/15/16, pending.
  18. Cube Infrastructure Fund SICAV v.The Kingdom of Spain, ICSID Case No. ARB/15/20, pending.
  19. Mathias Kruck v. The Kingdom of Spain, ICSID Case No. ARB/15/23, pending.
  20. KS Invest GmbH, TLS Invest GmbH v. The Kingdom of Spain, ICSID Case No. ARB/15/25, pending.
  21. JGC Corporation v. The Kingdom of Spain, ICSID Case No. ARB/15/27, pending.
  22. Cavalum SGPS, S.A. v. The Kingdom of Spain, ICSID Case No. ARB/15/34, pending.
  23. ON SE, E.ON Finanzanlagen GmbH v. The Kingdom of Spain, ICSID Case No. ARB/15/35, pending.
  24. OperaFund Eco-Invest SICAV PLC, Schwab Holding AG v. The Kingdom of Spain, ICSID Case No. ARB/15/36, pending.
  25. SolEs Badajoz GmbH v.The Kingdom of Spain, ICSID Case No. ARB/15/38, pending.
  26. Hydro Energy 1 S.à.r.l. and Hydroxana Sweden v. The Kingdom of Spain, ICSID Case No. ARB/15/42, pending.
  27. Watkins Holdings S.à r.l. and others v. The Kingdom of Spain, ICSID Case No. ARB/15/44, pending.
  28. Landesbank Baden-Württemberg and others v.Kingdom of Spain, ICSID Case No. ARB/15/45, pending.
  29. Eurus Energy Holdings Corporation v. Kingdom of Spain, ICSID Case No. ARB/16/04, pending.
  30. Alten Renewable Energy Developments BV v. Kingdom of Spain, SCC, pending.
  31. Aharon Naftali Biram, Gilatz Spain SL, Redmill Holdings Ltd and Sun-Flower Olmeda GmbH v. Kingdom of Spain, ICSID Case No. ARB/16/17, pending.
  32. Infracapital F1 S.à r.l. and Infracapital Solar B.V. v.Kingdom of Spain, ICSID Case No. ARB/16/18, pending.
  33. Cordoba Beheer B.V., Cross Retail S.L., Sevilla Beheer B.V., Spanish project companies v. Kingdom of Spain, ICSID Case No. ARB/16/27, pending.
  34. Portigon AG v. Kingdom of Spain, ICSID Case No. ARB/17/15, pending.
  35. FREIF Eurowind v. Kingdom of Spain, SCC Case No. 2017/060, pending.
  36. DCM Energy GmbH & Co. Solar 1 KG, DCM Energy GmbH & Co. Solar 2 KG, Edisun Power Europe A.G., Hannover Leasing Sun Invest 2 Spanien Beteiligungs GmbH, and Hannover Leasing Sun Invest 2 Spanien GmbH & Co. KG v. Kingdom of Spain, ICSID Case No. ARB/17/41, pending.
  37. EDF Energies Nouvelles S.A. v. Kingdom of Spain, UNCITRAL, pending
  38. Green Power K/S and Obton A/S v. Kingdom of Spain, SCC Case No. 2016/135, pending.
  39. Foresight Luxembourg Solar 1 S. Á.R1., Foresight Luxembourg Solar 2 S.Á.R.L., Greentech Energy System A/S, GWM Renewable Energy I S.P.A and GWM Renewable Energy Ii S.P.A v. Kingdom of Spain, SCC Case No. 2015/150, pending.
  40. Itochu Corporation Kingdom of Spain, ICSID Case No. ARB/18/25, pending.
  41. Triodos SICAV II v. Kingdom of Spain, SCC, pending.

Cases against the Republic of Italy

  1. Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award of January 21, 2016.
  2. Ridge Power BV v. Italian Republic, ICSID Case No. ARB/15/37, pending.
  3. Greentech Energy Systems and Novenergia v. Italian Republic, SCC, pending.
  4. Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, pending.
  5. CEF Energia BV v. Italian Republic, SCC, pending.
  6. Belenergia S.A. v. Italian Republic, ICSID Case No. ARB/15/40, pending.
  7. ESPF Beteiligungs GmbH, ESPF Nr. 2 Austria Beteiligungs GmbH, and InfraClass Energie 5 GmbH & Co. KG v. Italian Republic, ICSID Case No. ARB/16/5, pending.
  8. CIC Renewable Energies Italy GmbH, Enernovum Asset 1 GmbH & Co. KG, Enernovum GmbH & Co. KG and others v. Italian Republic, ICSID Case No. ARB/16/39, pending.

Cases against the Czech Republic

  1. Antaris GmbH and Dr. Michael Göde Czech Republic, UNCITRAL, PCA, pending.
  2. WA Investments-Europa Nova Limited v. Czech Republic, UNCITRAL, pending.
  3. C.W. Europe Investments Limited v. Czech Republic, UNCITRAL, pending.
  4. Jürgen Wirtgen, Mr. Stefan Wirtgen, and JSW Solar (zwei) GmbH & Co.KG v. Czech Republic, UNCITRAL, pending.
  5. Natland Investment Group NV, Natland Group Limited, G.I.H.G. Limited, and Radiance Energy Holding S.A.R.L. v. Czech Republic, UNCITRAL, pending.
  6. Photovoltaik Knopf Betriebs-GmbH v. Czech Republic, UNCITRAL, pending.
  7. Voltaic Network GmbH v. Czech Republic, UNCITRAL, pending.
  8. Fynerdale Holdings BV v. Czech Republic, UNCITRAL, pending.
  9. Alcor Holding Ltd v. Czech Republic,


[1] First award against Italy was decided in favour of Italy, see Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, ICSID Case No. ARB/14/3, Award of January 21, 2016. Retrieved from https://www.italaw.com/cases/5739.

[2] UNCTAD, Investment Policy Hub. Retrieved from http://investmentpolicyhub.unctad.org/ISDS.

[3] Isolux Netherlands, BV v. Kingdom of Spain, SCC Case V2013/153. Retrieved from https://www.italaw.com/cases/5893.