Achmea judgment analyzed and FET claim granted in ECT case against Spain

Foresight Luxembourg Solar 1 S.à.r.l., Foresight Luxembourg Solar 2 S.à.r.l., Greentech Energy Systems A/S, GWM Renewable Energy I S.P.A. and GWM Renewable Energy II S.P.A. v. The Kingdom of Spain, SCC Arbitration V (2015/150)

In an award dated November 14, 2018, an SCC tribunal considered ECT-based claims against Spain. The claims were brought by two Luxembourg companies, Foresight Luxembourg Solar 1 S.à.r.l. and Foresight Luxembourg Solar 2 S.à.r.l.; two Italian companies, GWM Renewable Energy I S.p.A. and GWM Renewable Energy II S.r.l.; and one Danish company, Greentech Energy Systems A/S, following legislative and regulatory measures enacted by Spain to address its growing tariff deficit. The tribunal affirmed its jurisdiction over the dispute and granted the FET claim made under ECT Article 10(1), awarding the claimants EUR 39 million in damages.

Background and claims

In 2007, Spain enacted Royal Decree (RD) 661/2007 to attract investments in renewable electricity generation and meet its renewable energy target under EU law. RD 661/2007 established fixed feed-in tariffs (FiTs) to be paid for qualifying photovoltaic (PV) facilities for the lifetime of the facilities and provided priority of access to the electricity grid. Between May 2009 and May 2010, the claimants acquired Spanish companies operating three PV facilities that had been registered under RD 661/2007.

While RD 661/2007 proved successful in gaining renewable energy investments in Spain, and 85 per cent of the target under RD 661/2007 was reached in four months, Spain experienced a corresponding widening of its tariff deficit. In order to eliminate the growing tariff deficit, Spain enacted several measures between 2010 and 2013 (including RD 1565/2010, RDL 14/2010, Law 15/2010 and RDL 2/2013) that modified the incentives given to PV facilities registered under RD 661/2007. From 2013 to 2014, Spain subsequently repealed RD 661/2007 and established a new regulatory regime (including RDL 9/2013, Law 24/2013, RD 413/2014 and MO 1045/2014), which created a new legal framework for the production of renewable energy.

In response to the measures, the claimants brought several ECT claims against Spain, including claims of breaches of the FET, impairment and umbrella clauses under ECT Article 10(1) and a claim of breach of the expropriation clause under ECT Article 13.

Achmea examined in establishing tribunal’s jurisdiction over intra-EU dispute

Before considering the claims, the tribunal considered Spain’s objection to the tribunal’s jurisdiction over the dispute on the grounds that the ECT does not apply to intra-EU disputes in which claimants are nationals of EU member states and the respondent is an EU member state and an ECT contracting party. Spain ultimately argued that the dispute settlement clause under ECT Article 26 excludes arbitration of intra-EU disputes, because it is forbidden under EU law.

In considering Spain’s objection, the tribunal began its analysis by examining the plain language of ECT Article 26 and found no carve-out of intra-EU disputes from the protections of ECT. The tribunal also considered Spain’s argument that the tribunal lacked jurisdiction over the dispute due to the primacy of EU law but found that EU law is not relevant to the question of the tribunal’s jurisdiction.

Of particular significance in the tribunal’s analysis was its consideration of Spain’s jurisdictional objection on the grounds of the judgment in Slowakische Republik v. Achmea. In Achmea, recently decided in March 2018, the European Court of Justice deemed an arbitration clause in an investment agreement between two EU member states to be incompatible with EU law.

In determining whether Achmea applied in this arbitration against Spain, the tribunal agreed with the tribunal in Masdar Solar v. Spain and found that the judgment in Achmea has limited application and does not apply to multilateral treaties such as the ECT. The tribunal further upheld the opinion of Advocate General Wathelet in Achmea, finding that the protections afforded to investments in the ECT, and the ISDS mechanism, apply to EU member states.

Tribunal lacks jurisdiction over TVPEE claim

While the tribunal found that it did have jurisdiction over the dispute, it denied its jurisdiction over the claim that Spain had breached ECT Article 10(1) by introducing a 7 per cent tax on the value of the production of electrical energy (TVPEE) under Law 15/2012. Upon examination of ECT Article 21, the tribunal found that taxation measures, such as the one in question, had been carved out from the application of ECT’s protections for investors and thus did not fall under the tribunal’s jurisdiction.

Spain in breach of FET

In considering the claim that Spain had breached its FET obligation under ECT Article 10(1), the tribunal found that the claimants did not have a legitimate expectation that the regulatory scheme under RD 661/2007 would not be modified at all. At the same time, however, the tribunal did find that they had a legitimate expectation that the tariff regime under RD 661/2007 would not be changed in such a fundamental manner that would ultimately deprive investors of a significant portion of their projected revenues.

In applying these findings, the tribunal concluded that, since the regulations enacted by Spain from 2010 to 2013 merely modified and did not fundamentally change RD 661/2007, they did not breach the FET standard. The tribunal did find, however, that the new regulatory regime enacted by Spain from 2013 to 2014 breached FET. According to the tribunal, the new regulatory regime fundamentally changed the regulatory framework of RD 661/2007 by repealing and replacing it with a new regulatory structure. In this way, Spain’s enactment of the regulations amounted to a compensable breach of the FET standard under ECT Article 10(1).

Impairment and umbrella clause claims dismissed

The claimants argued that Spain had violated the protection of the impairment clause in ECT Article 10(1); however, the tribunal found that such a claim was connected to the same standard as the FET clause and the same factual basis as the FET claim, and thus found it unnecessary to make a separate determination on the claim.

It also dismissed the claim brought under the umbrella clause in ECT Article 10(1), because the clause refers to the obligation of the state to honour any commitments it has entered into with the investor or investment. The tribunal explained that such obligations mentioned in the umbrella clause refer to specific commitments, not general regulations made by the state. Thus, the tribunal found that Spain did not make any such commitments to the claimants and dismissed the claim on these grounds.

Expropriation claim dismissed

In making their expropriation case, the claimants argued that 83 per cent of the value of their equity investment had been destroyed due to Spain’s regulatory measures, resulting in a substantial deprivation of the right to receive the full value of the FiTs under RD 661/2007. Spain countered that expropriation had not occurred since the claimants were still the owners of the PV facilities. The tribunal ultimately found that, while the claimants did suffer serious financial losses resulting from the disputed measures, the measures did not substantially deprive the claimants of value or use and enjoyment of their investment.


Having found that Spain breached its FET obligation under ECT Article 10(1), the tribunal awarded the claimants EUR 39 million in damages plus compounded interest. Spain was also ordered to pay the claimants arbitration costs and other reasonable costs in the amount of EUR 3,900,374.73 and USD 2,997,596.33.

Partial dissent by Vinuesa: EU law is applicable law and applies to the merits

In a partial dissent written by Raúl Emilio Vinuesa, the arbitrator disagreed with the majority of the tribunal on the issue of applicable law, finding that EU law is international law and should be applied to merits of the dispute. Vinuesa also disagreed with the majority’s findings concerning due diligence by the claimants at the time that the investment was made and the claimants’ subsequent liability.

Notes: The tribunal was composed of Michael Moser (chairperson appointed by the SCC), Klaus Sachs (claimants’ appointee) and Raúl Emilio Vinuesa (respondent’s appointee). The award and the partial dissenting opinion by Raúl Emilio Vinuesa are available at

Kirrin Hough is a U.S. attorney based in Washington, D.C., United States.