Spain’s Winning Streak in ECT Arbitration on Renewable Energy Comes to an End as the First ICSID Award is Rendered

By Cees Verburg, PhD Researcher, Groningen Centre of Energy Law

 On 4th May the first ICSID Tribunal rendered its award in a case brought by a British and Luxembourgish investor against Spain.[1] In this case the Spanish winning streak in Energy Charter Treaty (ECT) arbitration, which consisted of victories in the Charanne v. Spain and Isolux v. Spain cases, came to an abrupt end. The Tribunal came to the conclusion that the Spanish measures, which replaced a renewable energy support scheme for a less favourable new one, amounted to a violation of the fair and equitable treatment standard of Art. 10(1) ECT. Consequently, the investors were awarded EUR 128 million in damages.

Like dozens of other, still pending, ECT cases, the Eiser case concerned the measures adopted by Spain between 2010 and 2014, which adversely affected renewable energy producers. In 2007 Spain had adopted a very favourable renewable energy support scheme with generous feed-in tariffs, which lead to a very significant increase of renewable energy investments in the country in the following years. However, in the wake of the financial and economic crises these feed-in tariffs became a heavy burden on the financially struggling electricity companies and the Spanish government. Hence, the Spanish legislator made various changes to the regulatory framework to reduce the so-called ‘tariff deficit’, which is the difference between the feed-in tariffs paid to producers and the consumer price for electricity.[2]

In the proceedings the investors had put forward various claims. Besides a violation of the fair and equitable treatment standard, the investors also invoked Art. 13 ECT concerning expropriation, as well as the non-impairment standard and umbrella clause of Art. 10(1).[3] However, for reasons of judicial economy, the Tribunal restricted its analysis to the fair and equitable treatment claim.[4]

According to the claimants, the decision of the Spanish authorities to replace the regulatory framework adopted in 2007, on the basis of which they had made their investment, with a framework that was based on totally different assumptions violated their legitimate expectations as protected under the ECT.[5] This new regime, adopted in 2014, calculated the remuneration of renewable energy producers on the basis of a hypothetical standard of operating costs of an ‘efficient’ plant, which differed from the power plant of the claimants.[6] As a consequence, the value of their investment was reduced significantly.


In essence, the Tribunal held that Spain’s ‘obligation under the ECT to grant investors fair and equitable treatment’protects investors against a fundamental change in the regulatory regime, in a way that does not take into account the individual circumstances, such as ‘specific financial and operational characteristics’ of existing investments made under a previous regulatory regime.[7] In this regard, the Spanish measures can be distinguished from those adopted by Hungary which also lead to a number of ECT disputes since Hungary did take into account the characteristics of individual power producers.[8]


The conclusion in the Eiser case should, however, not be considered as inconsistent with the decision in the Charanne case. As explained by the Tribunal: ‘The factual and legal situation presented here is fundamentally different from the one which was presented in Charanne v. Spain, in which case the claims of investors were aimed at other changes in Spain’s regulatory regime[…].’[9] However, the Eiser award allegedly does diverge from the outcome in the Isolux v. Spain case, of which the award is not publicly available.[10] It is interesting to note that Spain tried to include the Isolux decision into the case file of the Eiser case as evidence, but that attempt was rejected by the Tribunal.[11]


With regards to the calculation of damages, it is worth noting that the Tribunal considered the discounted cash flow method as ‘an appropriate means for calculating the amount of reparation due in the circumstances of this case.’[12] The Tribunal was persuaded by the argument that ‘[p]ower plants are relatively simple in their activity, the production of electricity, whose demand and long-term value can be analysed and profiled in depth with readily available data. In addition, the costs and operating yields of power plants are easy to predict.’[13]

[1] Currently, the ICSID Award is only available in Spanish. The findings as presented in this blog post are based on a translation of the author. Although I have done everything to safeguard the accuracy of the translation, I do not assume any responsibility for actual or perceived inaccuracies. The Award can be accessed on: <>
[2] For more information on the tariff deficit in Spain, see: Ǻsa Johannesson Linden, Fotios Kalantzis, Emmanuelle Maincent & Jerzy Pieńkowski, Electricity Tariff Deficit: Temporary or Permanent Problem in the EU? (2014). <> accessed on 17/05/2017. Pp. 27-30.
[3] Award, Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, 4 May 2017. Para. 352.
[4] Ibid. Paras. 352-356.
[5] Ibid. Paras. 357-358.
[6] Jarrod Hepburn And Zoe Williams, In Depth: Arbitrators in Eiser Award Deem ECT to Protect Against ‘Total’ and Unreasonable Regulatory Change, but Tax Measures is Excluded; Spain Fails in Bid to Admit Favourable SCC Award into Evidence (2017). <> accessed on 17/05/2017.
[7] Award, Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, 4 May 2017. Paras. 363 & 400.
[8] Ibid. Para. 401. The Tribunal explicitly refers to the AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary case.
[9] Ibid. Para. 367.
[10] See: IAReporter, A Second Arbitral Tribunal at Stockholm Weighs in with an ECT Verdict in a Spanish Renewables Dispute (2016). <> accessed on 17/05/2017.
[11] Award, Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, 4 May 2017. Para. 89.
[12] Ibid. Para. 441.
[13] Ibid. Para. 465.


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