Spain held liable in another renewable energy case and ordered to pay EUR 22 million in compensation for damages

BayWa r.e. Renewable Energy GmbH and BayWa r.e. Asset Holding GmbH v. Spain, ICSID Case No. ARB/15/16

In a final award, dated January 25, 2021, an ICSID tribunal ordered Spain to pay damages to German investors in compensation for the clawback of a subsidy regime. Although the bulk of  investor’s primary claims under the ECT were dismissed, the tribunal found the clawback provision included in the new regulatory framework was in breach of the obligation of stability under Article 10(1) of the ECT.

Background and claims

Between 2009 and 2012, German company BayWa R.E. Renewable Energy GmbH acquired BayWa R.E. Asset Holding GmbH (collectively, “BayWa”), previously known as Renerco Renewable Energy Concepts AG (“Renerco“). Renerco held shares and other interests in two companies incorporated in Spain, Parque Eólico La Carracha, S.L. and Parque Eólico Plana de Jarreta, S.L. (collectively, the “SPVs”). SPVs own and manage a number of wind farms in northern Spain. Following changes to the Spanish renewables energy regulatory framework, BayWa filed for arbitration under the ECT.

Decision on jurisdiction, liability, and directions on quantum

In a decision on jurisdiction, liability, and directions on quantum, dated December 2, 2019, the tribunal found that Spain’s clawback provision of the new regulatory regime amounted to a breach of FET. Thus, BayWa was entitled to compensation due to a loss in revenue under Article 10(1) of the ECT. The majority of the tribunal explained that it did find a general breach of the FET. However, the claimants were entitled to compensation for the loss in returns of the claimants’ wind plants. The tribunal dismissed claimants’ remaining claims, including Spain’s intra-EU objections. 

In a partial dissent, arbitrator Grigera Naón reasoned that Spain had violated the claimants’ legitimate expectations by imposing a “disproportionate, unreasonable and unexpected economic burden” resulting from the removal of the previous regulatory framework that the claimants relied on at the time of the investment (dissent, paras. 24–29).

The tribunal unanimously indicated, nonetheless, that the relevant date of breach should be July 13, 2013, but left the quantum outstanding, instructing the parties to seek an agreement about the impact of the unlawful retroactive application of the new measures within 3 months (paras. 7–8).

On March 22, 2020, the claimant informed the tribunal that they were unable to reach a final agreement on the amount to be paid and requested the tribunal to determine the outstanding quantum issues. 

Final award – Tribunal’s decision on quantum

Quantification of the award

The tribunal started by explaining that had Spain not enacted the clawback provision, no harm to BayWa’s investment would have occurred. The tribunal further clarified that the claimants were entitled to damages due to the economic impact suffered under the retroactive clawback provision applied to the plants (para. 26).

Tribunal’s methodology

The tribunal laid down four-step set of criteria to calculate the loss caused to the plants from July 13, 2013. This method entailed:

  1. Starting by calculating the standard net asset value of the plants as of July 13, 2013, the date of valuation (Step 1).
  2. Calculating a 7.398% annual target return for all subsequent years, which would represent the plants’ total economic return for each year, and subsequently, subtracting the estimated returns from selling electricity at market value (Step 2).
  3. Translating these losses into damages taking into account taxes, shareholding, and the fact that future losses were being compensated ahead of time (Step 3).
  4. Calculate the interest (Step 4). 

Calculating the 2013 standard net asset value (“NAV”)

The parties had different approaches to the calculation of the NAV. On the one hand, the claimants calculated the NAV not by using market prices but applying a formula that relied on the initial investment for a standard facility and revenue for the period equivalent to a 7.398% return as they considered that the NAV should be calculated from the date the new regulatory regime was introduced (i.e., July 2013). Claimants’ calculation amounted to EUR 73.413 million.

On the other hand, Spain argued for a different valuation date, June 16, 2014, instead of July 13, 2013. It also claimed that to calculate the NAV, the tribunal should rely on the value of the plants, which would result in EUR 40.5 million instead of the EUR 73 million argued by the claimants.

The tribunal rejected Spain’s approach, siding with the claimants. In the tribunal’s view, July 13, 2013, was the correct date for determining the NAV because “the only NAV that matters [was] the NAV calculated per the formula set out in RDL 9/2013,” the new regulatory regime. 

Calculating the harm caused to the plants

The parties also disagreed on whether subsequent events after the breach should be considered in calculating the harm caused to the plants. The tribunal reasoned that when calculating the damages caused, it should not ignore events that occurred after the initial breach (paras. 51–53).

Damages and costs

The tribunal unanimously found that the value of the damages to claimants as of the valuation date amounted to EUR 22.006 million in respect of losses caused to the wind plants. 

The parties also disagreed about the interest rate that should be applied. While BayWa argued that the tribunal should not apply an interest rate lower than 7.398%, Spain objected and proposed using the short-term risk-free rate. The tribunal upheld Spain’s proposal and explained that the rate 7.398% was a pre-tax growth figure of the plant’s investment. Consequently, the tribunal concluded that an interest rate equivalent to the six-month EURIBOR should be accepted. It further explained that the short-term risk-free interest should be calculated from July 13, 2013, up to the date of payment of the Award (para. 62)

In relation to costs, the tribunal stated that since it had both upheld and rejected claims from both parties, it would seem fair to equally split the costs for the proceedings as a result of the “balanced findings” while each party should bear its own costs (para. 75).

Notes: The tribunal was composed of Judge James R. Crawford (President, Australian national),  Horacio A. Grigera Naón (claimant’s appointee, Argentinian national) and Loretta Malintoppi (respondent’s appointee, Italian national). The award of January 25, 2021, is available at 


Maria Bisila Torao is an international lawyer based in London. She holds an LL.M. in investment treaty arbitration from Uppsala University, an LL.M. in international commercial arbitration from Stockholm University, and a bachelor’s degree in law from the University of Malaga.