The European Commission (EC) said Monday it had launched an “in-depth investigation” to decide whether a EUR-101-million arbitration award imposed on Spain to pay to renewable energy investor Antin breaches the EU rules on state aid.
The award is one of many slapped on Spain for gutting its 2007 financial support scheme for renewable energy installations in 2013, an act that investors said frustrated their investment activities and expected returns, and later triggered a wave of disputes under the Energy Charter Treaty (ECT).
In 2018, the International Centre for Settlement of Investment Disputes (ICSID) sided with Luxembourg-incorporated Antin Infrastructure Services Luxembourg S.a.r.l. and its Netherlands-based wholly-owned entity Antin Energia Termosolar BV, who invested in two concentrated solar power (CSP) plants in Spain, in that the Spanish government significantly modified its regulatory regime causing the companies to lose entitlement to an expected feed-in-tariff (FIT).
Antin Infrastructure and Antin Termosolar operated under the umbrella of French private equity firm Antin Infrastructure Partners, which used the entities to invest in the Spanish renewable energy sector.
Antin Infrastructure Partners and UK-based RREEF Pan European Infrastructure Fund, which is run by Deutsche Alternative Asset Management, bought stakes in the 50-MW Andasol 1 and 2 CSP plants in Granada in 2011. The partners sold their interests to Cubico Sustainable Investments in 2017, while Antin’s dispute with Spain before ICSID was still ongoing.
THE COMMISSION’S VIEW
The EC said that Spain’s 2007 support scheme for renewables “was not notified to the Commission for approval under State aid rules”, but the 2013 revision was determined to be in line with EU rules.
ICSID’s EUR-101-million award, plus interest and proceedings costs, to Antin could constitute undue state aid in the Commission’s preliminary view. The EC says the award “grants Antin an advantage equivalent to those provided for by the non-notified 2007 Spanish scheme”.
The Andasol plants benefited from the 2007 support regime and later from the 2013 EC-approved scheme, the EU executive argues.
Whether the additional support in the form of the arbitration award “is necessary for the development of an economic activity, has an incentive effect and is proportionate” will be the target of the EC’s investigation. The EC will also examine whether the award discriminates investors based on nationality and on their ability to access international arbitration, since Spanish investors cannot mount such legal challenges for the changes to the 2007 scheme, the Commission adds.
FURTHER DOWN THE RABBIT HOLE
In its statement, the EC brought up the so-called Achmea case -- the dispute between Slovakia and Dutch insurance company Achmea, and the decision rendered by the Court of Justice of the European Union (CJEU) on the matter of the award.
When the Slovakian government partially reversed its decision to liberalise the insurance market, hurting Achmea’s investment predicated upon the market privatisation, the Dutch company initiated an arbitration procedure against the country.
Slovakia was found to be in breach of its bilateral investment treaty (BIT) with the fellow EU member Netherlands by an ad-hoc arbitral tribunal, and ordered to compensate Achmea. Slovakia then appealed with the courts in Germany, arguing that the investor-state dispute settlement provision in the BIT was incompatible with EU law.
A court in Frankfurt rejected the argument, but the German Federal Court of Justice requested a preliminary ruling from the CJEU to learn the answer. In 2018, the CJEU ruled that the provision in the BIT was incompatible, but more importantly, called into question an international tribunal’s jurisdiction in matters related to interpretation and application of EU laws, finding that such tribunals operate outside of the EU’s judicial system.
When invoking the Achmea judgment, the EC said the CJEU ruling in that case established “that investor-to-State arbitration, when applied in an intra-EU context, undermines the system of legal remedies foreseen in the EU Treaties for resolving such disputes”.
As legal experts pointed out, Achmea should have sued Slovakia in Slovakian courts so that the full scope of the arbitration proceedings and the award can be reviewed within the EU’s judicial system.
The EC further said that the investor-State arbitration clause in the ECT does not apply intra-EU.
“[T]he ECT has only created rights and obligations between the EU and third countries and has not affected the relations between the EU Member States”, the Commission explained.
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The Andasol II CSP plant, Granada, Spain. Image courtesy of Cubico Sustainable Investments.
