Galvez Pascual




Unquestionably Spain captures the highest percentage of arbitration procedures for cuts applied to renewable energies, accumulating almost thirty ongoing lawsuits from foreign investors, with claims pending in the ICSID, in the Arbitration Court of the Stockholm Chamber of Commerce and before the ICC arbitration courts. Indeed between the first lawsuit filed in 2011, against the reform of the sector carried out by the conservative Spanish Government, until to date, only six of the total number of arbitrations filed against Spain have been resolved: four favourable to the claimants with two favourable to Spain.

Admittedly Spain as the respondent was successful in the first two arbitrations (Isolux Netherlands B.V vs. Spain), but these were unique cases and not extendable to the other claims. The current amount set by the arbitrators to compensate the four successful claimants is far from the aspirations of Spain which has defended its right to change the premiums for renewables, but also far from the claimants demands whereby they have been awarded less than the amount initially claimed.

In a nutshell, arbitrators appear to be accepting the cuts that the Spanish government introduced in 2011 (among others, limitation of hours, plant life to 25 years, etc.) and endorse the 7% tax on electricity generation. However, other premium cuts, such as those that were subsequently adopted in 2014, are not accepted as these cuts were in breach of ‘legitimate investor confidence’ under the Energy Charter Treaty.

The main problem for previous investors who have subsequently become claimants is to try and project with a high degree of confidence how the awards can be enforced, since Spain is trying to use the recent Achmea ruling by the Court of Justice of the European Union (ECJ) . In this sense, the European Commission has informed Spain that Spain cannot pay out any awards in respect of its renewable incentive scheme because that action would constitute illegal state aid. Furthermore, any attempt to enforce an ICSID award against Spain before any EU Member State courts will probably be met by the response that the Achmea judgment renders intra-EU investor-state arbitration illegal under EU law.

Clearly Spain is shielding its position by using the Achmea Judgement to avoid the enforcement of awards before any EU national court. In this sense, Sweden has already suspended the enforcement of Novaenergía’s award. However, the arbitral Courts of the ICSID and the Stockholm Chamber of Commerce maintain their competence to rule. Hence it appears that the arbitrations brought by investment funds against Spain by are becoming the foundations for a major conflict between the EU and the international arbitration system, especially the World Bank’s ICSID, with a subsequent impact for the claimants who obtain a favourable award.

Whilst the Spanish government continues to avoid the payment of awards by using the Achmea judgement, claimants are also entitled to enforce their award outside of the EU. It is well known that some plaintiffs are filing precautionary measures requests before some US Courts to obtain injunction orders over Spanish sovereign assets. However there is no current confirmation of any Spanish sovereign asset freeze.

Mediation: a new hope in a post-Achmea judgement era?

Certainly, tension between Spain and international funds and companies that suffered cuts due to their investments in renewables continues to rise. According to the Spanish Government the global figure of 7.5 billion euros has been updated to over 8.2 billion euros, representing nearly a 10% increase in the financial damages sought, and a potential threat to the financial balance of the Spanish electricity system.

The Government recently accounted that financial amounts of 16 relevant claims against Spain were even higher than the sum initially reported to the Parliament in November 2017. The score is dramatic: after four arbitration awards against the country and only two in favour of Spain, the total sums claimed continue to rise day by day . In addition, the awards are also generating a spirally of costs and accruing interest that is already exceeds 20 million euros. The Spanish Government appears to be of the view that these increases in the amounts claimed are because plaintiffs have detected that the awards granted in favour of plaintiffs have been between 30% and 50% of what was initially demanded. The claimants have therefore increased the amounts being sought.

In this scenario, which is complicated for both Spain and claimants, it is worth considering if the recent change of government in Spain might also lead to a change in attitudes towards this subject. Following a vote of no confidence in the Spanish Parliament on 1 June, Spain has a new Prime Minister and a new Socialist government. Although the new government is currently and understandably silent on this matter within the public domain, Galvez Pascual lawyers are of the view that the new government would welcome a solution to significant financial issue that also affects the image and reputation of Spain in the international investment community. The alternative is not really appealing: to defend the previous conservative government’s reform in 2014 before the international arbitration courts, as has been the stance of the conservative government up until now. Defending the position of the opposition is something more akin to a sports event when fair play is considered, rather than national and international politics.

In fact, the fourth ICSID’ award against Spain was awarded at a time when the new socialist government had replaced the previous conservative government, the award being in favour of the investment fund Antin, which had bought two solar thermal plants in Spain and claimed 238 million euros for the premium cuts approved by the previous cabinet. Spain’s new government is facing a problem that is increasing in scale. It is well known that several law firms and litigation fund managers are considering the possibility of raising new arbitrations given the latest court rulings, the consequences of which could be severe for Spain. But can a Sovereign state allow itself to be put in a position where the amount of time spent trying to defend itself does nothing but increase as more and more arbitration claims are being considered?

It is our opinion that in the current uncertain scenarios, mediation between the investors and the current Spanish government appears to be a viable and less time-consuming solution. Moreover, exploring the possibilities of an agreement could be very well received in the international markets and perceived as a significant success for the new cabinet, improving the reputation of Spain whilst removing the current mentality on all sides of “them vs. us”.

This situation would be very similar to the settlement of 15-year bonds battle by Argentina’s new government in February 2016 . The agreement was a clear victory for President Mauricio Macri, who was sworn in as Argentina’s president in December 2015. During 2016 President Macri reversed the non-payment stance taken by his predecessor and signed an agreement with US hedge funds to settle a protracted dispute over its failure to repay billions of dollars’ worth of bonds. The previous cabinet of Cristina Fernandez de Kirchner had approved a ‘lock law’ which forbade Argentina from paying hedge funds in the terms that were finally negotiated. It is also relevant to note that after the agreement announcement was made, the Buenos Aires Stock Exchange’s benchmark Merval Index was up by 3%.

In a similar way, if settlements could be reached that were acceptable to both claimants and the respondent, Pedro Sánchez’s government could achieve a goal of seeing the arbitration proceedings against Spain withdrawn whilst simultaneously solving some of the perceived problems mainly created by the previous cabinet. Within Galvez Pascual we are of the view that, although the ruling by the Court of Justice of the European Union has invalidated this type of intra-EU arbitration, this not only supposes a new economic setback for Spain, but also could open a mediation opportunity for all parties involved in this matter. If mediation results in investors receiving return of capital sooner rather than later, with extended and prolonged arbitration hearings in the ICSID resulting in a longer period of pay-back even if the claimant is successful, with a return of capital occurring sooner via mediation hence increasing the projected Internal Rate of Return for the investor, and the Spanish government improves its image in the international investment community whilst reducing the number of hours that have to be dedicated to fighting its legal position and also reducing the financial amounts to be paid, then why would mediation not be a possible solution for all sides, rather than each side running the risk of high value “winner takes all” arbitration? Casino bankers was a term used frequently in the aftermath of the 2008 financial crisis, but “Casino speculators” could almost apply to those seeking an “all or nothing” approach rather than exploring the possibility of alternative dispute resolution.

We endorse the idea of mediation, especially when considering the context in which the new Spanish Minister of State for Energy, Mrs. Teresa Ribera has publicly acknowledged the issues for regaining investor confidence in Spain. At the recent Parliament’s Extraordinary Session no. 11, held on July 11, 2018, Mrs. Ribera, stated that “we must recover investors’ confidence in our country” and insisted on easing “safe perspectives for investors, particularly in renewables”. Likewise, and according to Mrs. Ribera’s statements, the legal framework preventing the development of renewables must be reviewed sooner rather than later.

The new cabinet’s strategy indicates that among the concrete measures that will be included, the inclusion of investment guidelines should be facilitated to help build future stable, predictable and competitive scenarios, with special emphasis on green technologies with respect to what will be the needs of the future. In this sense, an energy transition in Spain should probably include open dialogue with affected investors who claimed before international arbitration courts and avoid an embarrassing process of embargoes.


Following the ECJ’s Achmea judgment, the situation for claimant investors against Spain has become significantly more complex than prior to the Achmea judgement, as even with a favourable award, the chances of obtaining a rapid payment without additional costs are severely hampered.

For investors, the award enforcement actions outside the EU is also a viable option, but at the same time costly and involve a prior search for sovereign assets property of the Kingdom of Spain, as was the case in Argentina in 2012, for example. For many investor funds, Internal Rate of Return is used as the relevant benchmark, not Net Present Value which could lead to fund managers waiting longer for return of capital which is subsequently deployed to their investors. IRR as a benchmark would favour a quicker solution.

However, a conflict outside of the EU does not present better options for Spain either, as it has been repeatedly losing before international arbitration courts, including additional costs and interest arising from an important number of proceedings that continues to increase. Accordingly, the Spanish government can no longer continue to accumulate awards against the country, nor procedures that seriously endanger the country’s image internationally, with obvious consequences for the economy and for the new cabinet of Mr. Pedro Sánchez.

Therefore, we are of the view that all parties should be encouraged to initiate dialogue that may lead, through mediation by a third party outside of the arbitration process, to an agreement that may finally settle the dispute. In this way, for the new Spanish government it will mean a clear victory over its predecessor in office, allowing the current government to move forward and carry out the legal reforms of energy transition envisaged by the ministry Mrs. Ribera. On the other hand, claimants will be able to obtain a quicker payment and probably under better conditions than by trying to enforce the award outside the EU or even by selling the award to third parties, given the complex scenario outlined in this article.

Josep Galvez

Partner (Galvez Pascual SLP)

Former Judge

International Private Law Professor & Mediator (Universitat de Barcelona)

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